LR-N23-0045, And Peach Bottom Atomic Power Station, Units 2 and 3 - Notice of Proposed Amendment to Decommissioning Trust Agreement

And Peach Bottom Atomic Power Station, Units 2 and 3 - Notice of Proposed Amendment to Decommissioning Trust Agreement

ML23252A001
Person / Time
Site:	Peach Bottom, Salem, Hope Creek
Issue date:	09/08/2023
From:	David Mannai Public Service Enterprise Group
To:	Office of Nuclear Reactor Regulation, Document Control Desk
References
LR-N23-0045
Download: ML23252A001 (1)

Text

10 CFR 50.75(h)(1)(iii)

LR-N23-0045 September 8, 2023 U. S. Nuclear Regulatory Commission ATTN: Document Control Desk Washington, DC 20555-0001 Salem Generating Station, Units 1 and 2 Renewed Facility Operating License Nos. DPR-70 and DPR-75 NRC Docket Nos. 50-272 and 50-311 Hope Creek Generating Station Renewed Facility Operating License No. NPF-57 NRC Docket No. 50-354 Peach Bottom Atomic Power Station, Units 2 and 3 Renewed Facility Operating License Nos. DPR-44 and DPR-56 NRC Docket Nos. 50-277 and 50-278

Subject:

Notice of Proposed Amendment to Decommissioning Trust Agreement

Reference:

PSEG Nuclear LLC letter to NRC, Report on Status of Decommissioning Funding for Reactors and Independent Spent Fuel Storage Installations, LR-N23-0006, dated March 24, 2023 (ML23083A089).

PSEG Nuclear LLC (PSEG) is providing this thirty (30) working day notice regarding a proposed amendment to the PSEG Master Decommissioning Trust Agreement (Trust Agreement) that it relies upon to provide reasonable assurance that adequate funds will be available for decommissioning the facilities listed above, in accordance with 10 CFR 50.75(h)(1)(iii) and Section 10.06 of the Trust Agreement. The proposed amendment is associated with subaccounts established within the nuclear decommissioning trust (NDT), as noted in the referenced letter. Funds accumulated in the subaccounts are not intended to be dedicated to decommission the facilities as defined in § 50.2. Accordingly, the proposed changes would amend the Trust Agreement to clarify that funds in the subaccounts will not be relied upon for providing decommissioning financial assurance required by § 50.75. provides the text of the proposed amendment to the Trust Agreement, pursuant to

§ 50.75(h)(1)(iii). Attachment 2 provides supplementary information. Attachment 3 provides the existing Trust Agreement for reference, marked up to show the proposed changes. As this is PSEG Nuclear LLC P.O. Box 236, Hancocks Bridge, New Jersey 08038-0236 0 PSEG NuclearLLC

LR-N23-0045 10 CFR 50.75(h)(1)(iii)

Page 2 intended to be a simple amendment, the existing text has not been updated except to reflect a previous amendment, dated October 31, 2020, that consisted of non-material changes to Sections 2.02, 2.05, 4.01, and 10.06.

The proposed amendment to the Trust Agreement will not take effect until at least 30 working days from the date of this notification, provided that no written notice of objection from the NRC is received.

There are no regulatory commitments contained in this letter.

If there are any questions or additional information is needed, please contact Mr. Michael Wiwel at 856-339-7907.

Sincerely, David J. Mannai Executive Director - Regulatory Affairs and Nuclear Oversight PSEG Nuclear LLC Attachments 1.

Proposed Amendment 2.

Supplementary Information 3.

Mark-up of the PSEG Nuclear LLC Master Decommissioning Trust Agreement cc:

Administrator, Region I, NRC Mr. J. Kim, Project Manager, NRC NRC Senior Resident Inspector, Hope Creek NRC Senior Resident Inspector, Salem Ms. A. Pfaff, Manager, NJBNE PSEG Corporate Commitment Tracking Coordinator Site Commitment Tracking Coordinator Mannai, David Digitally signed by Mannai, David Date: 2023.09.08 19:01:32 -04'00'

LR-N23-0045 Proposed Amendment

LR-N23-0045 1

Proposed Amendment to the PSEG Nuclear LLC Master Decommissioning Trust Agreement for Hope Creek Generation Station, Salem Nuclear Generating Station, and Peach Bottom Atomic Power Station 1.

The following definition shall be added to Section 1.0.1, Definitions:

(54)

Non-50.75 Subaccount shall mean a subaccount established within a Fund, which is intended to accumulate funds for decommissioning costs other than those amounts having once been dedicated pursuant to 10 CFR 50.75 for decommissioning of the Plants as defined by the NRC in its regulations and issuances. Funds in a Non-50.75 Subaccount are not subject to the requirements of 10 CFR 50.75(h)(1)(iv), and are not subject to the restrictions on the use of funds in 10 CFR 50.82(a)(8).

2.

The first sentence of Section 2.02, Use of Assets, shall be restated and a new sentence added to read as follows:

The use of assets in both the Qualified Funds and Nonqualified Funds, excluding assets in a Non-50.75 Subaccount, shall be limited to expenses related to decommissioning of the Plants as defined by the NRC in its regulations and issuances, and as provided in the units' licenses and any amendments thereto. The use of assets in a Non-50.75 Subaccount shall be limited to expenses related to decommissioning costs as defined by the Treasury Department in its regulations and issuances.

3.

The first sentence of Section 4.01, Payment of Decommissioning Costs, shall be restated to read as follows:

Except for withdrawals being made under 10 CFR 50.82(a)(8) as exempted, as applicable,by NRC approved site-specific exemptions, withdrawals being made from a Non-50.75 Subaccount, or for payments of expenses of administration pursuant to Section 4.02, no disbursements or payments from the trust shall be made by the Trustee until the Trustee has first given the NRC Director, Office of Nuclear Reactor Regulation, or Director, Office of Nuclear Material Safety and Safeguards, as applicable, at least 30 working days notice of payment.

LR-N23-0045 Supplementary Information

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Introduction As stated in the cover letter, the proposed amendment to the Trust Agreement accommodates the use of subaccounts to separately identify funds in the Nuclear Decommissioning Trust (NDT) that are not intended to be dedicated to decommission the facilities as defined in 10 CFR 50.2 (radiological decommissioning).

When funds in the NDT are not distinctly identified, the NRC considers all of the funds to be dedicated for radiological decommissioning. However, with respect to the decommissioning trust provisions in § 50.75(h), the NRC has stated it does not object to commingling funds for radiological decommissioning with non-radiological decommissioning funds in the NDT as long as licensees are able to provide a separate accounting of the amounts dedicated for radiological decommissioning.1 NRC Regulatory Issue Summary (RIS) 2001-07, Revision 1, and Regulatory Guide 1.159, Revision 2, likewise indicate that commingled funds in the NDT are generally acceptable as long as the licensee can separately account for the NRC-required decommissioning funds.2 A number of power reactor licensees have created separate subaccounts in their NDTs for funding activities that do not fall within the definition of decommission in § 50.2, as noted in a regulatory basis published by the NRC staff in 2017 to support rulemaking to amend the decommissioning regulations.3 As of the end of 2022, PSEG has similarly established subaccounts in the NDT to segregate funds to pay for all activities that are part of the larger decommissioning process.4 Starting in 2023 and going forward, certain earnings from NDT investments are accumulated in the subaccounts. The amount of NDT funds dedicated for radiological decommissioning are as most recently reported under § 50.75(f)(1). Until the next § 50.75(f)(1) report, this amount determines the minimum level above which certain earnings would be available to accumulate in the subaccounts, taking into account NRC-allowed expenses.

This attachment provides supplementary information on the following topics:

NDT structure with Non-50.75 Subaccounts Accumulation of certain earnings in Non-50.75 Subaccounts No transfer of NRC-required radiological decommissioning funds Use of funds in Non-50.75 Subaccounts Decommissioning funding assurance (DFA) history 1 Federal Register notice - Final Rule, Decommissioning Trust Provisions, dated December 24, 2002, 67 FR 78332; 78339.

2 NRC Regulatory Issue Summary 2001-07, Revision 1, 10 CFR 50.75 Reporting and Recordkeeping for Decommissioning Planning, dated January 8, 2009 (ML083440158); NRC Regulatory Guide 1.159, Revision 2, Assuring the Availability of Funds for Decommissioning Nuclear Reactors, October 2011; Regulatory Position 2.1.7 (ML112160012).

3 Regulatory Basis, Regulatory Improvements for Power Reactors Transitioning to Decommissioning, dated November 27, 2017, 82 FR 55954; Appendix F, Decommissioning Funding Assurance (ML17215A010).

4 PSEG letter to NRC, Report on Status of Decommissioning Funding for Reactors and Independent Spent Fuel Storage Installations, LR-N23-0006, dated March 24, 2023 (ML23083A089).

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NDT Structure with Non-50.75 Subaccounts Section 2.06 of the Trust Agreement specifies that the NDT is segregated into a qualified fund and a nonqualified fund for each unit (reactor). Qualified funds meet the requirements to be considered a nuclear decommissioning reserve fund under Section 468A of the Internal Revenue Code. Each fund also comprises an account identifying the Federal Energy Regulatory Commission (FERC)-jurisdictional amounts and a separate account identifying the non-FERC-jurisdictional amounts, with the exception that Hope Creek does not have a FERC account in its nonqualified fund. PSEG does not distinguish FERC-jurisdictional and non-FERC-jurisdictional amounts for reporting the amount of funds accumulated for radiological decommissioning in accordance with 10 CFR 50.75(f)(1).5 For each of these accounts within the NDT, an associated Non-50.75 Subaccount has been established to separately identify funds that are not intended to be dedicated for radiological decommissioning. Section 2.06 of the Trust Agreement requires the trustee to maintain each fund separately from each other fund, and this requirement extends to the accounts and subaccounts within the funds.

Funds in a Non-50.75 Subaccount remain subject to the applicable terms and conditions of the Trust Agreement. The proposed amendment does not affect the overarching requirement stated in the Trust Agreement that the trust must be used for the exclusive purpose of providing funds for the decommissioning of the plants, to pay the administrative costs and other incidental expenses of the trust funds, and to make certain investments. A Non-50.75 Subaccount in a qualified fund is subject to the same restrictions that apply to the associated qualified fund under Section 468A of the Internal Revenue Code. Similarly, a Non-50.75 Subaccount in a nonqualified fund is subject to the same tax considerations as the associated nonqualified fund.

In addition, funds held in a Non-50.75 Subaccount associated with a FERC account remain FERC-jurisdictional funds.

Accumulation of Certain Earnings in Non-50.75 Subaccounts Based on the discussion in NUREG-1221 section D.3.3.4 Prepayment, the accumulation of certain earnings from trust investments in Non-50.75 Subaccounts is consistent with the prepayment method in § 50.75(e)(1)(i).6 The following discussion provides supporting information for this basis.

In 1988, the NRC promulgated § 50.75 as a new section with requirements to assure that adequate funds will be available for the decommissioning of licensed facilities.7 For power reactors, the final rule established prepayment as an acceptable method for providing decommissioning funding assurance (DFA), which does not include the costs of spent fuel management, site restoration, and other costs not related to termination of the NRC license.

5 For comparison, the total amount of FERC account funds for all five plants is approximately 1 percent of the total amount of funds accumulated in the NDT as of December 31, 2022.

6 NUREG-1221, Summary, Analysis, and Response to Public Comments on Proposed Amendments to 10 CFR Parts 30, 40, 50, 51, 70, and 72 Decommissioning Criteria for Nuclear Facilities, June 1988 (ML18073A149).

7 Federal Register notice - Final Rule, General Requirements for Decommissioning Nuclear Facilities, dated June 27, 1988, 53 FR 24018.

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In the proposed rule,8 the prepayment method for power reactors was presented in proposed

§ 50.33(k)(2)(i):

Prepayment. Prepayment is the deposit prior to the start of operation into an account segregated from licensee assets and outside the licensees administrative control of cash or liquid assets that will retain their value over the projected operating life of the facility and that are in such amount that the principal plus accumulated earnings would be sufficient to pay decommissioning costs. Prepayment may be in the form of a trust, escrow account, government fund, certificate of deposit, or deposit of government securities.

In the final rule,9 the prepayment method for power reactors was promulgated in § 50.75(e)(1)(i), replacing the underlined text as shown below:

Prepayment. Prepayment is the deposit prior to the start of operation into an account segregated from the licensee assets and outside the licensees administrative control of cash or liquid assets such that the amount of funds would be sufficient to pay decommissioning costs. Prepayment may be in the form of a trust, escrow account, government fund, certificate of deposit, or deposit of government securities.

Although the statement of considerations for the final rule does not explicitly describe this change, the Supplementary Information states that the detailed responses to individual public comments are documented in NUREG-1221. A change in the rule resulting from a comment on proposed § 50.33(k)(2)(i) is discussed in NUREG-1221 Section D.3.3.4 Prepayment as follows:

Comment Summary One commenter stated that if a licensee uses the prepayment method the accumulated earnings in the decommissioning fund will reach a level larger than required to reflect the annual adjustment for inflation because the proposed rule does not recognize that the accumulated earnings will consist of an inflation adjustment component, a pure interest rate component, and a premium-associated-with-risk component. The commenter recommended that the proposed rule be modified to permit a licensee to withdraw the pure interest rate component and the premium-associated-with-risk component periodically from the prepayment fund.

Comment Analysis and Response The amendments indicate that in prepayment, at the time of decommissioning, the funds are in such amount that the principal plus accumulated earnings would be sufficient to pay decommissioning costs. There is nothing in these requirements which is intended to prevent a licensee from making sure that the fund does not reach a level higher than required. Measures which licensees may take to prevent that occurrence are outside the scope of this rule. The rule has been modified to clarify this.

8 Federal Register notice - Proposed Rule, Decommissioning Criteria for Nuclear Facilities, dated February 11, 1985, 50 FR 5600; 5618.

9 53 FR 24050.

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By replacing principal plus accumulated earnings with the amount of funds, the NRC did not specify in § 50.75(e)(1)(i) that earnings on trust fund investments must be contributed to the amounts accumulated for radiological decommissioning. Later amendments to the prepayment method added the option for licensees to take credit for certain earnings to show funding assurance for decommissioning.

The proposed rules description of the prepayment method is substantially similar to the description in NUREG-0584, Revision 3, a report referenced in the proposed rule that was published to be used as background information by the NRC staff in the formulation of recommendations on financial assurance policy.10 Regarding prepayment, the report considered the concept of setting aside less than the full amount required for radiological decommissioning in expectation that the interest earned will exceed inflation such that the correct amount will be available at the expected end of facility life. The report also contemplated returning to the utility as earnings any interest earned on deposited funds, taking into account inflation, which would presumably cause the amount on deposit to exceed, at any time, the amount necessary to cover the estimated radiological decommissioning costs.11 With respect to trust investment returns, the § 50.75 regulations should make no distinction between returning certain excess earnings to the company and accumulating them in a separate NDT subaccount for funds not dedicated for radiological decommissioning. From a point of view within the Non-50.75 Subaccounts, the accumulation of excess earnings may be considered analogous to a cash contribution or infusion, since the earnings derive from investing a principal amount of funds external to the subaccounts (although still within the NDT).

From the above, PSEG concludes that the prepayment method as originally promulgated in

§ 50.75(e)(1)(i) did not necessarily require that all earnings on prepaid funds must be contributed to the amounts being accumulated for radiological decommissioning. The specific wording in the rule that appears to have been changed as a direct result of the comment resolution documented in NUREG-1221 Section D.3.3.4 continues to exist in the current

§ 50.75(e)(1)(i). This supports the conclusion that the accumulation of certain excess earnings in the Non-50.75 Subaccounts for purposes other than dedicated for radiological decommissioning is consistent with the § 50.75(e)(1)(i) prepayment method.

Subsequent NRC rulemaking amended the regulations to address a number of issues related to decommissioning funding, but did not impact the specific language in § 50.75(e)(1)(i) regarding the amount of funds accumulated to pay radiological decommissioning costs:

In 1996, the NRC established the regulations in § 50.82 for withdrawals of decommissioning trust funds, provided more flexibility by allowing licensees limited early use of funds, and continued the same degree of decommissioning financial assurance that was previously required.12 The statement of considerations stated that the final rule does not prohibit licensees from having separate subaccounts for other activities in the 10 NUREG-0584, Revision 3, Assuring the Availability of Funds for Nuclear Power Plant Decommissioning, Robert S. Wood, March 1983; Section 1.3.1.1 Prepayment of Decommissioning Costs (ML060950475).

11 NUREG-0584, Revision 3, Section 1.4.1.1 Assurance.

12 Federal Register notice - Final Rule, Decommissioning of Nuclear Power Reactors, dated July 29, 1996, 61 FR 39278.

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decommissioning trust fund if minimum amounts specified in the rule are maintained for radiological decommissioning.13 In 1998, financial assurance requirements for decommissioning reactors were added in

§ 50.75 to address rate deregulation of the electric utility industry.14 For licensees that are no longer able to collect funds from ratepayers for decommissioning costs, the rule required up-front financial assurance for the full estimated cost of radiological decommissioning,15 and accordingly restricted the use of external sinking funds. The rule added new DFA methods to provide increased flexibility, established the reporting requirements in § 50.75(f)(1) to allow the NDT funds to be monitored, and reserved the NRCs right to modify a licensees schedule for accumulating decommissioning funds.

The requirement that decommissioning funds must be available when needed was not changed.

In addition, the NRC relaxed the § 50.75(e)(1)(i) prepayment method by allowing licensees the option to take credit for certain earnings on funds in the NDT, stating this option provides licensees relief from current requirements with no adverse impact on public health and safety, licensees, or NRC resources.16 The amended rule allowed licensees to use up to a 2 percent annual real rate of return, which the NRC considered to be as close to a risk free return as possible that can be consistently achieved.17 Licensees were also provided the option to use actual earnings on existing NDT funds to calculate future fund needs.

In 2002, the NRC added decommissioning trust provisions in new § 50.75(h) to increase the assurance that adequate funds for radiological decommissioning will be available when needed.18 § 50.75(h) sets out the specific trust fund terms and conditions necessary to fully protect the NDT funds dedicated for radiological decommissioning.19 Revisions to § 50.75(e)(1)(i) defined prepayment to include deposits made in connection with a § 50.80 license transfer, added requirements for the prepayment agreement (e.g.,

trust agreement), and clarified the options for licensees to take credit for earnings on NDT funds through the decommissioning period.

Supplementary information for the 2002 final rule delineated the NRCs position that withdrawals of commingled funds in the NDT that do not affect the remaining amount of funds dedicated for radiological decommissioning are not covered by the rule, provided 13 61 FR 39285.

14 Federal Register notice - Final Rule, Financial Assurance Requirements for Decommissioning Nuclear Power Reactors, dated September 22, 1998, 63 FR 50465.

15 For example, up-front DFA could be met with a partial deposit of prepaid funds in the NDT, taking credit for anticipated future earnings to meet the required amount of DFA. If the earnings credit is inadequate, then another method, such as a parent company guarantee, could be used in combination in accordance with § 50.75(e)(1)(vi).

16 Federal Register notice - Proposed Rule, Financial Assurance Requirements for Decommissioning Nuclear Power Reactors, dated September 10, 1997, 62 FR 47588; 47599.

17 63 FR 50476.

18 Federal Register notice - Decommissioning Trust Provisions, dated December 24, 2002, 67 FR 78332.

19 SRM-SECY-00-0002, Staff Requirements - SECY-00-0002 - Part 50 Rulemaking Plan for Decommissioning Trust Provisions, February 9, 2000.

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that a licensee has established subaccounts in the NDT to appropriately identify the separate funds.20 NRC regulatory oversight of the accumulation of funds in the NDT for radiological decommissioning is maintained through review of the periodic reports submitted under

§ 50.75(f)(1). The proposed amendment to the Trust Agreement does not impede the authority of the NRC under § 50.75(e)(2) to take appropriate actions to ensure PSEG is adequately accumulating funds.

No Transfer of NRC-required Radiological Decommissioning Funds In the DFS report for 2022, PSEG identified that subaccounts had been established for commingled funds in the NDT not intended to be dedicated for radiological decommissioning.

However, no funds had been accumulated in the Non-50.75 Subaccounts as of EOY 2022, therefore the entire amount was effectively reported. Going forward, the process for accumulating certain earnings in the Non-50.75 Subaccounts ensures that no funds are transferred from NRC-required radiological decommissioning funds to the Non-50.75 Subaccounts, as follows.

PSEG utilizes the § 50.75(e)(1)(i) prepayment method to provide reasonable assurance that sufficient funds will be available to pay radiological decommissioning costs at the time permanent cessation of operations is expected. NDT funds (including Non-50.75 Subaccounts) are invested in accordance with the terms of the Trust Agreement. The amount of funds dedicated for radiological decommissioning must be adjusted annually in accordance with

§ 50.75(b) and (c) to account for escalation rates for radiological decommissioning costs (inflation), and must be covered by one or more of the methods described in § 50.75(e)(1). If not needed to meet NRC funding assurance requirements, certain earnings from the NDT investment returns may be accumulated in Non-50.75 Subaccounts. These excess earnings correspond to the interest rate and risk premium components. Measures taken to manage the accumulation of excess earnings are consistent with the prepayment method, as described in NUREG-1221 Section D.3.3.4 Prepayment.

Conversely, if the amount of NDT funds accumulated for radiological decommissioning to be reported under § 50.75(f)(1) has decreased compared to the previous report, accounting for withdrawals to pay for NRC-allowed expenses, then no additional earnings would be available to accumulate in a Non-50.75 Subaccount. The proposed Non-50.75 Subaccount definition in Section 1.01 of the Trust Agreement clarifies this by stating that funds accumulated in the subaccount may not include funds allocated for radiological decommissioning once - meaning most recently - reported under § 50.75(f)(1), even if those amounts exceed NRC requirements.

In other words, a decrease in NDT funds dedicated for radiological decommissioning between two consecutive § 50.75(f)(1) reports would be entirely due to withdrawals for NRC-allowed expenses and any losses from trust funds investments for the overall interval between the reports. Thus, accumulation of excess earnings in a Non-50.75 Subaccount does not involve the transfer or reallocation of the amounts previously reported as dedicated for radiological decommissioning.

20 67 FR 78332; 78340.

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Use of Funds in Non-50.75 Subaccounts Funds in a Non-50.75 Subaccount are intended to be available to pay for activities related to the definition of decommissioning costs in 26 CFR 1.468A-1(b)(6) of the Treasury Department regulations implementing Section 468A of the Internal Revenue Code. The Treasury Departments definition includes costs for radiological and non-radiological decommissioning activities, and certain activities in connection with the independent spent fuel storage installations (ISFSI), whether the plant will continue to produce electric energy or after permanent cessation of operations. The Treasury Department regulations apply to NDT funds that qualify for special tax treatment as nuclear decommissioning reserve funds under Code Section 468A, including the funds for the facilities, and allow use of funds for more than radiological decommissioning. Thus, the Treasury Departments definition is appropriate for costs for decommissioning activities that are not limited to the NRCs definition.

"Decommissioning Costs" as defined in Section 1.01 of the Trust Agreement means the expenses incurred in decommissioning the plants. This term, as used in the Trust Agreement and given the stated purpose of the NDT, aligns with decommissioning costs defined in 26 CFR 1.468A-1(b)(6).

Funds in a Non-50.75 Subaccount are intended to be available if necessary, but not dedicated, for radiological decommissioning, and therefore would not be subject to § 50.82(a)(8), which governs the use of funds that are dedicated for radiological decommissioning. This is clarified in the proposed Non-50.75 Subaccount definition in Section 1.01 of the Trust Agreement and the proposed change to Section 2.02 of the Trust Agreement that excludes funds in a Non-50.75 Subaccount from being limited to pay for NRC-allowed expenses. Accordingly, funds in a Non-50.75 Subaccount are not to be included in the amount of funds accumulated for radiological decommissioning required by § 50.75, consistent with RIS 2001-07, Revision 1.

The NRC has stated that the decommissioning trust provisions in § 50.75(h) do not apply to withdrawals of commingled funds held in the NDT that do not affect the amount of radiological decommissioning funds remaining in the NDT, provided the licensee can separately account for the funds.21 PSEG is not an electric utility as defined in § 50.2, therefore the requirements in

§ 50.75(h)(1) must be included in the terms of the Trust Agreement, as applicable to the funds dedicated for radiological decommissioning. For these reasons, the proposed Non-50.75 Subaccount definition in Section 1.01 of the Trust Agreement and change to Section 4.01 of the Trust Agreement exclude the requirements in § 50.75(h)(1)(iv) from applying to the use of funds in a Non-50.75 Subaccount.

DFA History This section provides a history of the DFA provided for each plant PSEG owns or co-owns.

PSEG acquired ownership in the nuclear plants in 2000 and 2001, and subsequently took possession of the NDT funds. Initially, funds continued to be collected from the nuclear decommissioning component of a non-bypassable Societal Benefits Charge and were contributed annually to the NDT, as had been authorized by the New Jersey Restructuring Act 21 67 FR 78340.

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and accepted by the New Jersey Board of Public Utilities (BPU) in 1999. To provide DFA, PSEG utilized the external sinking fund method, and relied on the annual amounts to be collected and a rate of return on trust investments based on rates authorized by the BPU.

As part of a settlement accepted by the BPU in July 2003, the non-bypassable charge component was eliminated, customers no longer had any claim on NDT funds, and PSEG assumed the responsibility for nuclear decommissioning. Without a non-bypassable charge providing the estimated funds for decommissioning, PSEG transitioned to utilizing the prepayment method. At that time, the NDT was adequately funded to provide DFA in accordance with § 50.75, and no amounts have since been contributed to the NDT. For these reasons and for the purpose of showing historical trends for providing DFA using the prepayment method, the decommissioning funding status (DFS) reports submitted pursuant to

§ 50.75(f)(1) for 2004 and later years were selected as providing a reasonably consistent source of information.

Table 1 (below) shows the amounts of funds dedicated for radiological decommissioning accumulated in the NDT to the end of the calendar year (EOY) and NRC minimum formula amounts (MFA) for the reactors determined in accordance with § 50.75(b) and (c), as provided in the DFS reports submitted for years from 2004 to 2022. For trending, the MFA is used as the minimum NRC funding requirement, whether DFA was certified to the MFA or site-specific decommissioning cost estimates (SSDCEs), therefore amounts based on SSDCEs for the units (reactors) and the ISFSIs are not included.22 For Table 1, credit for earnings on NDT funds up to the expiration date of the facility operating license (EOL) and pro-rata credit for earnings during the assumed immediate dismantlement period (first 7 years after shutdown) are calculated using a 2 percent annual real rate of return as allowed by § 50.75(e)(1)(i).23 In 2022, the NRC directed that the Peach Bottom Units 2 & 3 subsequently renewed licenses remain in effect with the expiration dates reverted to the 60-year terms until completion of the National Environmental Policy Act (NEPA) analysis.24 Accordingly, the DFS report for 2022 used the expiration dates for 60-year terms. However, for trending purposes, both the 60-year and 80-year terms are used.

In Table 1, the amount of projected NDT funds at EOL plus the pro-rata credit represents the total DFA for comparison to the MFA (PSEG owner share). Any excess indicates adequate DFA is shown. The amounts are considered reasonably accurate for showing long-term trends for informational purposes. Specific observations:

From 2006 to 2008, the significant decrease in NDT funds was due to poor market returns (trust investment losses) associated with the financial market downturn circa 2008 to 2009. However, by certifying as necessary to SSDCEs greater than the MFA, taking credit for earnings through the safe storage periods described in the SSDCEs as 22 As of December 31, 2022, estimated ISFSI decommissioning costs were approximately $10 million for Hope Creek and $3 million each for the other units (PSEG share).

23 Consistent with NRC Office of Nuclear Reactor Regulation (NRR) Office Instruction LIC-205, Revision 6, "Procedures for NRCs Independent Analysis of Decommissioning Funding Assurance for Operating Nuclear Power Reactors and Power Reactors in Decommissioning," April 20, 2017 (ML17075A095).

24 Exelon Generation Company, LLC (Peach Bottom Atomic Power Station, Units 2 and 3), Docket Nos. 50-277-LSR and 50-278-SLR, NRC Memorandum and Order CLI-22-04, dated February 24, 2022 (ML22055A557).

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allowed by § 50.75(e)(1)(i), PSEG did not experience a shortfall in DFA for the plants.

As of EOY 2020, all of the plants were fully funded - meaning that the amount of radiological decommissioning funds accumulated in the NDT for each unit met or exceeded the NRC MFA. Hypothetically, if the plants had been prematurely shut down in 2020, the funds would have been sufficient, based on the NRC formulas, to complete radiological decommissioning.

From 2020 to 2022, the significant decrease in NDT funds was again due to trust investment losses experienced during the period - as stated before, no funds had been accumulated in the Non-50.75 Subaccounts as of EOY 2022. Despite the impact on NDT funds, adequate DFA was shown and the majority of the plants remained fully funded.

Figures 1 through 5 (below) show DFA versus MFA trends for each unit, using the amounts in Table 1. For Peach Bottom Units 2 & 3, Figures 4 and 5 show the difference in 2022 between using 60-year terms and 80-year terms for license expiration dates.

Up to this point in the discussion, the DFA historical trends have been based on comparisons to the MFA. However, the regulations in § 50.75 provide licensees the option of certifying DFA to the NRC MFA or SSDCEs greater than the MFA. For EOY 2022 only and to compare with the DFA provided in the DFS report for EOY 2022 that certified to the MFA, NDT cash flow analyses based on recently updated SSDCEs were used to project NDT fund balances after completion of radiological decommissioning. As shown in Table 2 (below), the estimated radiological decommissioning costs in the SSDCEs are greater than the MFA for EOY 2022 in Table 1, and radiological decommissioning is projected to be completed within 60 years of expected permanent cessation of operations. Starting with the amount of NDT funds accumulated as of EOY 2022, credit was taken for projected earnings up to expected permanent cessation of operations (license expiration date) and through the decommissioning period using a 2 percent annual real rate of return.

Table 2 (second column from the right) summarizes the results. The large reserve (surplus) of projected NDT funds at the completion of radiological decommissioning for each plant is a substantial increase in the DFA provided as compared with certifying to the NRC MFA (Table 1).

When using SSDCEs, the funds have the remaining years of operations and up to 60 years after shut down to accrue earnings to cover the estimated costs and complete radiological decommissioning. The inherent assumption is that the earnings will exceed the escalation rates in decommissioning costs during this timeframe. The long-term trends (almost 20 years) shown in Figures 1 through 5 support this assumption. The cash flow analyses are not meant to identify any specific amount of projected NDT funds in excess of the amounts required for radiological decommissioning, merely to show significant excess for informational purposes.

Therefore, only the summary information is provided.

In order to provide insight into the sensitivity of the results to the assumed earnings rate during operations, the cash flow analyses previously described were modified to take credit for projected earnings up to the license expiration date using a zero percent (vice 2 percent) annual real rate of return. Projected earnings from shut down through the decommissioning period continued to use a 2 percent annual real rate of return. Table 2 (last column) summarizes the

LR-N23-0045 10 results for the modified analyses, and again shows a large reserve of projected NDT funds at license termination for each plant. The NRC has stated that the assumption of a zero rate of return is too conservative and not supported by the data, and considered a 2 percent real rate of return to be as close to a risk free return as possible that can be consistently achieved with confidence.25 Thus, the results further indicate there is no significant risk, due to inadequate earnings or premature shut down, that sufficient NDT funds will not be available for radiological decommissioning when needed.

In conclusion, PSEG has consistently shown significant excess DFA for the plants utilizing the prepayment method.

25 Federal Register notice - Proposed Rule, Financial Assurance Requirements for Decommissioning Nuclear Power Reactors, dated September 10, 1997, 62 FR 47588; 47599.

LR-N23-0045 11 Table 1. Summary of DFA versus NRC MFA from 2004 to 2022 (Dollars in year reported, thousands)

End of Calendar Year (EOY) 2004 2005 2006 2008 2010 2012 Unit PSEG DFS Report ML050960381 ML061390202 ML070960252 ML091000650 ML110900521 ML13085A284 (PSEG share %)

LR-N05-0140 LR-N06-0249 LR-N07-0067 LR-N09-0074 LR-N11-0086 LR-N13-0059 (Notes 1, 2)

(Note 3)

(Note 4)

Hope Creek NRC MFA (100% share) 459,964 465,476 472,414 587,108 628,252 691,487 (100%)

PSEG NDT Funds at EOY 324,441 338,920 375,461 301,865 390,030 437,528 Funds with projected earnings credit to EOL 494,438 506,383 549,987 424,999 527,819 845,637 Projected Funds at EOL plus pro-rata credit 534,537 547,866 597,502 424,999 527,819 921,282 Salem 1 NRC MFA (57.41% share) 215,314 201,636 204,368 243,734 276,730 304,545 (57.41%)

PSEG NDT Funds at EOY 212,158 221,154 246,113 187,371 251,954 288,471 Funds with projected earnings credit to EOL 267,033 272,902 297,750 217,875 281,603 460,479 Projected Funds at EOL plus pro-rata credit 291,146 298,911 327,287 217,875 303,346 507,014 Salem 2 NRC MFA (57.41% share) 215,314 201,636 204,368 243,734 276,730 304,545 (57.41%)

PSEG NDT Funds at EOY 195,349 203,848 224,841 175,853 230,825 262,897 Funds with projected earnings credit to EOL 264,462 270,560 292,576 219,938 277,489 451,377 Projected Funds at EOL plus pro-rata credit 288,189 296,218 321,336 219,938 298,613 496,545 Peach Bottom 2 NRC MFA (50% share) 235,085 242,049 265,486 293,554 314,225 345,744 (50%)

PSEG NDT Funds at EOY 178,108 185,808 206,965 159,382 212,694 242,056 Funds with projected earnings credit to EOL 313,811 320,963 350,504 259,432 332,775 363,998 Projected Funds at EOL plus pro-rata credit 343,480 351,189 383,426 259,432 359,418 392,990 Peach Bottom 3 NRC MFA (50% share) 235,085 242,049 265,486 293,554 314,225 345,744 (50%)

PSEG NDT Funds at EOY 180,641 188,421 209,467 162,546 215,347 244,769 Funds with projected earnings credit to EOL 323,985 331,316 361,106 269,329 342,971 374,682 Projected Funds at EOL plus pro-rata credit 355,181 363,097 395,620 269,329 371,145 405,278

LR-N23-0045 12 Table 1 (continued)

(Dollars in year reported, thousands)

End of Calendar Year (EOY) 2014 2016 2018 2020 2022 Unit PSEG DFS Report ML15090A640 ML17088A165 ML19084A192 ML21084A801 ML23083A089 (PSEG share %)

LR-N15-0047 LR-N17-0043 LR-N19-0014 LR-N21-0015 LR-N23-0006 (Notes 1, 2)

(Notes 5, 6)

Hope Creek NRC MFA (100% share) 693,640 636,441 682,967 697,459 821,502 (100%)

PSEG NDT Funds at EOY 519,996 536,295 548,048 709,710 626,865 Funds with projected earnings credit to EOL 966,027 957,593 940,605 1,170,732 993,944 Projected Funds at EOL plus pro-rata credit 1,059,589 1,054,133 1,031,142 1,294,744 1,082,207 Salem 1 NRC MFA (57.41% share) 305,823 269,076 287,989 294,439 346,411 (57.41%)

PSEG NDT Funds at EOY 356,575 374,602 377,660 510,046 461,633 Funds with projected earnings credit to EOL 547,104 552,430 535,327 694,889 604,525 Projected Funds at EOL plus pro-rata credit 606,550 615,402 594,329 777,369 669,580 Salem 2 NRC MFA (57.41% share) 305,823 269,076 287,989 294,439 346,411 (57.41%)

PSEG NDT Funds at EOY 315,279 327,104 332,811 437,012 389,223 Funds with projected earnings credit to EOL 520,307 518,846 507,413 640,391 548,229 Projected Funds at EOL plus pro-rata credit 575,730 576,777 562,224 714,688 604,831 Peach Bottom 2 NRC MFA (50% share) 346,820 333,382 349,651 347,081 362,429 (50%)

PSEG NDT Funds at EOY 297,767 311,970 315,179 423,253 382,017 Funds with projected earnings credit to EOL 430,399 433,407 420,873 807,208 700,294 Projected Funds at EOL plus pro-rata credit 469,281 473,737 458,114 902,644 778,539 Peach Bottom 3 NRC MFA (50% share) 346,820 333,382 349,651 347,081 362,429 (50%)

PSEG NDT Funds at EOY 298,542 311,663 315,709 420,575 377,884 Funds with projected earnings credit to EOL 439,262 440,749 429,145 816,492 705,145 Projected Funds at EOL plus pro-rata credit 479,474 482,181 467,628 913,322 784,118

LR-N23-0045 13 Notes for Table 1

1.

Amounts shown are based on information in PSEG DFS reports submitted under 10 CFR 50.75(f)(1), which includes the NDT funds accumulated to the as of date in the report, and the minimum formula amounts (MFA) determined in accordance with § 50.75(b) and (c). For the purpose of this table, estimated ISFSI radiological decommissioning costs reported under § 72.30 are not included.

Credit for projected earnings on the accumulated NDT funds up to expected permanent cessation of operations and pro-rata credit during the immediately dismantlement (7-year) period use a 2 percent annual real rate of return, as allowed by § 50.75(e)(1)(i). No pro-rata credit is taken if a cash flow analysis indicates funds would be completely drawn down before the end of the 7-year period. No earnings credit is taken after the immediate dismantlement period.

Assumes no future amounts of funds to be collected.

2.

Expected permanent cessation of operations is the expiration date of the facility operating license (EOL):

In 2003, Peach Bottom Units 2 & 3 renewed facility operating licenses were issued for 60-year terms.

In 2011, Hope Creek and Salem Units 1 & 2 renewed facility operating licenses were issued for 60-year terms.

In 2020, Peach Bottom Units 2 & 3 subsequently renewed facility operating licenses were issued for 80-year terms.

Unit 40-year term 60-year term 80-year term Hope Creek April 11, 2026 April 11, 2046 Salem 1 August 13, 2016 August 13, 2036 Salem 2 April 18, 2020 April 18, 2040 Peach Bottom 2 August 8, 2013 August 8, 2033 August 8, 2053 Peach Bottom 3 July 2, 2014 July 2, 2034 July 2, 2054

3.

DFS report for 2010 was revised by Request for Additional Information (RAI) response letter dated August 1, 2011 (LR-N11-0240, ML112130558).

4.

DFS report for 2012 was revised by RAI response letters dated June 26, 2013 (LR-N13-0133, ML13177A148) and August 28, 2013 (LR-N13-0170, ML13241A196).

5.

DFS report for 2022 showed a significant decrease in accumulated NDT funds due to market performance (losses) from trust fund investments. No funds had been accumulated in Non-50.75 Subaccounts as of December 31, 2022, therefore the entire NDT amounts were effectively reported.

6.

For Peach Bottom Units 2 & 3, DFS report for 2022 used 60-year license expiration dates. The subsequently renewed licenses issued in 2020 remain in effect with the expiration dates reverted to the 60-year terms until completion of the National Environmental Policy Act analysis, as directed by NRC Memorandum and Order CLI-22-04 dated February 24, 2022 (ML22055A557). This table uses 80-year license expiration dates. For trending purposes both the 60-year and 80-year terms are used.

LR-N23-0045 14 Note: Figures show DFA versus NRC MFA trends from 2004 to 2022, using the amounts in Table 1 (thousands of dollars in year reported).

Figure 1. Hope Creek Figure 2. Salem Unit 1 Figure 3. Salem Unit 2

LR-N23-0045 15 Figure 4. Peach Bottom Unit 2 60-year License Expiration Date for 2022*

80-year License Expiration Date for 2022*

Figure 5. Peach Bottom Unit 3 60-year License Expiration Date for 2022*

80-year License Expiration Date for 2022*

• Refer to Table 1, Note 6.

LR-N23-0045 16 Table 2. Summary of Annual SAFSTOR Decommissioning Fund Cash Flows (December 2022 dollars, thousands)

Unit (PSEG share %)

Radiological Decommissioning Costs - Total (Note 1)

Expected Permanent Cessation of Operations (Note 2)

Completion of Decommissioning -

License Termination Projected Radiological Decommissioning Funds Remaining in the NDT at License Termination 2% annual RROR during Operations (Note 3) 0% annual RROR during Operations (Note 4)

Salem 1 (57.41%)

$ 494,665 8/13/2036 2096 (60 years)

$ 1,168,588

$ 715,375 Salem 2 (57.41%)

487,728 4/18/2040 2096 (56 years) 928,580 446,932 Hope Creek (100%)

1,166,376 4/11/2046 2106 (60 years) 1,463,429 254,090 Peach Bottom 2 (50%)

452,182 8/8/2033 2093 (60 years) 792,113 512,315 Peach Bottom 3 (50%)

478,176 7/2/2034 2093 (59 years) 742,903 441,355 80-year License Expiration Dates (Note 5)

Peach Bottom 2 (50%)

$ 452,182 8/8/2053 2113 (60 years)

$ 1,549,443

$ 512,315 Peach Bottom 3 (50%)

478,176 7/2/2054 2113 (59 years) 1,492,037 441,355 Notes

1.

Unit (reactor) and ISFSI radiological decommissioning costs (PSEG share) from site-specific SAFSTOR radiological decommissioning cost estimates completed in December 2021, escalated to December 2022. Annual radiological decommissioning expenses assumed to occur at the beginning of each year, before calculating earnings on NDT fund balance.

2.

Expected permanent cessation of operations is the renewed facility operating license expiration date.

3.

Credit for 2 percent annual real rate of return on NDT radiological decommissioning funds accumulated as of December 31, 2022, up to expected permanent cessation of operations and through the projected decommissioning period, as allowed by 10 CFR 50.75(e)(1)(i).

4.

Credit for 0 percent annual real rate of return on NDT radiological decommissioning funds accumulated as of December 31, 2022, up to expected permanent cessation of operations, then credit for 2 percent annual real rate of return through the projected decommissioning period, as allowed by 10 CFR 50.75(e)(1)(i).

5.

Refer to Table 1, Note 6.

LR-N23-0045 Mark-up of the PSEG Nuclear LLC Master Decommissioning Trust Agreement (39 pages including this page)

LR-N23-0045 1

PSEG NUCLEAR LLC MASTER DECOMMISSIONING TRUST AGREEMENT FOR HOPE CREEK GENERATING STATION, SALEM NUCLEAR GENERATING STATION, AND PEACH BOTTOM ATOMIC POWER STATION THIS MASTER DECOMMISSIONING TRUST AGREEMENT, dated as of August 21, 2000 between PSEG Nuclear LLC, a limited liability company duly organized and existing under the laws of the State of Delaware, having its principal office at 80 Park Plaza, Newark, New Jersey 07101 (the Company), and Mellon Bank, N.A., as Trustee, having its principal office at One Mellon Bank Center, Pittsburgh, Pennsylvania 15258 (the Trustee);

WITNESSETH:

WHEREAS, Public Service Electric and Gas Company (PSE&G) owned a 95 percent undivided interest in Hope Creek Nuclear Generating Station (Hope Creek), a 42.59 percent undivided interest in Unit One of the Salem Nuclear Generating Station (Salem One) and Unit Two of the Salem Nuclear Generating Station (Salem Two) each and a 42.49 percent undivided interest in Unit Two of Peach Bottom Atomic Power Station (Peach Bottom Two) and Unit Three of Peach Bottom Atomic Power Station (Peach Bottom Three) each.

WHEREAS, PSE&G established a master trust under the laws of the Commonwealth of Pennsylvania with Mellon Bank, N.A. as trustee (the Trustee), for the purpose of holding funds it collected from its ratepayers to provide for the future decommissioning costs of Salem One, Salem Two, Hope Creek, Peach Bottom Two and Peach Bottom Three (collectively, the Plants).

WHEREAS, PSE&G as the result of electric utility deregulation legislation in New Jersey and as the result of an order by the New Jersey Board of Public Utilities sold its interests in the Plants to the Company.

LR-N23-0045 2

WHEREAS, PSE&G transferred all the assets held in the PSE&G Qualified Funds and all assets held in the PSE&G Nonqualified Funds to the Funds, respectively (the terms Qualified Funds, Nonqualified Funds and Funds defined below).

WHEREAS, PSEG Power LLC (Power) executed the Purchase Agreements on September 27, 1999 to purchase a 5 percent undivided interest in Hope Creek from Atlantic City Electric Company (ACE), a 7.41 percent undivided interest in Salem One and Salem Two, each from ACE and Delmarva Power & Light Company (Delmarva), individually, and 50 percent of a 7.51 percent undivided interest in Peach Bottom Two and Peach Bottom Three, each, from ACE and Delmarva, individually.

WHEREAS, Power assigned its rights under the Purchase Agreements to the Company on May 12, 2000.

WHEREAS, as a result of such purchases from ACE and Delmarva, the Company will own 100 percent of ACE and Delmarva's interests in Hope Creek, Salem One and Salem Two and will own 50 percent of ACE and Delmarva's undivided interests in Peach Bottom Two and Peach Bottom Three, each.

WHEREAS, the Company desires to appoint the Trustee to maintain pursuant to this Agreement its funds which qualify as nuclear decommissioning reserve funds under Code Section 468A and those funds that do not qualify as nuclear decommissioning reserve funds under Code Section 468A.

NOW, THEREFORE, THIS AGREEMENT WITNESSETH, that to provide for the maintenance of the decommissioning Funds and the making of payments therefrom and the performance of the covenants of the Company and the Trustee set forth herein, the Company does hereby sell, assign, transfer, set over and pledge unto the Trustee, and to its successors in the trust and its assigns, all of the Company's right, title and interest in and to any and all cash and property herewith and hereafter contributed to the decommissioning Funds.

LR-N23-0045 3

TO HAVE AND TO HOLD THE SAME IN TRUST for the exclusive purpose of providing funds for the decommissioning of the Plants in order to satisfy the liability in connection therewith, to pay the administrative costs and other incidental expenses of the Funds, and to make certain investments, all as hereinafter provided.

I. DEFINITIONS 1.01 Definitions. As used in this Master Decommissioning Trust Agreement, the following terms shall have the following meanings:

(1)

"ACE" shall mean Atlantic City Electric Company.

(2)

"Agreement" shall mean this Master Decommissioning Trust Agreement as the same may from time to time be further amended, modified or supplemented.

(3)

"Authorized Representative" shall mean any officer of the Company as shall be designated in writing to the Trustee by the President of PSEG Power LLC or by a member of the NDT Investment Committee of PSEG Nuclear.

(4)

"Certificate" shall mean a document properly completed and executed by the individuals duly authorized by the Company and substantially in the form of Exhibit A hereto.

(5)

"Code" shall mean the Internal Revenue Code of 1986, as the same may be amended, or any corresponding section or sections of any future United States internal revenue statute.

(6)

"Company" shall have the meaning set forth in the first paragraph of this Agreement.

(7)

"Contribution" shall mean any contribution, cash or otherwise, acceptable to the Trustee, made to the Funds, including the transfer of assets from the Sellers' Qualified Funds, including any Final Tax Refunds, and Nonqualified Funds into the Company's Qualified Funds and Nonqualified Funds, respectively.

(8)

"Decommissioning Costs" shall mean the expenses incurred in decommissioning the Plants.

LR-N23-0045 4

(9)

"Delmarva" shall mean Delmarva Power & Light Company.

(10)

"Excess Contribution" shall have the meaning set forth in Section 3.02 hereof.

(11)

"FERC" shall mean the Federal Energy Regulatory Commission, an agency of the United States government created and existing pursuant to 42 U.S.C. 7134 and 7171.

(12)

"Final Tax Liabilities" shall mean any and all tax liabilities determined to be owing but not paid out of the assets of any of the Sellers' Qualified Funds prior to the transfer of the assets of the Sellers' Qualified Funds to the Qualified Funds.

(13)

"Final Tax Refunds" shall mean any and all tax refunds determined to be receivable but not collected by any of the Sellers' Qualified Funds prior to the transfer of the assets of the Sellers' Qualified Funds to the Qualified Funds.

(14)

"Former Trustee" shall mean Mellon Bank, N.A. acting in its capacity as trustee on behalf of Sellers and their Funds.

(15)

"Funds" shall mean the Qualified Funds and the Nonqualified Funds collectively.

(16)

"Hope Creek" shall mean the Hope Creek Nuclear Generating Station.

(17)

"Hope Creek Nonqualified Fund" shall consist of Contributions for decommissioning Hope Creek (but only to the extent such Contributions are not deposited and maintained in the Hope Creek Qualified Fund) plus earnings and appreciation thereon less any payments, transfers or other distributions which at the time of reference shall have been made by the Trustee as authorized herein.

(18)

"Hope Creek Qualified Fund" shall mean the nuclear decommissioning reserve fund established for Hope Creek for purposes of Section 468A of the Code, and shall consist of Contributions by the Company for decommissioning Hope Creek plus earnings and appreciation thereon, which Contributions are specified in a Schedule of Ruling Amounts with respect to Hope Creek less any payments, transfers or other distributions which at the time of reference shall have been made by the Trustee as authorized herein.

(19)

"Investment Account" shall have the meaning set forth in Section 7.01 hereof.

LR-N23-0045 5

(20)

"Investment Manager(s)" shall mean the investment counselor(s), if any, designated from time to time by the Company.

(21)

"Investment Manager Agreement(s)" shall mean the agreement(s) between the Company and one or more investment counselors which agreement governs the investment of all or a portion of the Master Trust.

(22) "Master Trust" shall consist of all Contributions to the Funds, together with the proceeds and reinvestments thereof less any payments, transfers or other distributions which at the time of reference shall have been made by the Trustee as authorized herein.

(23) "Nonqualified Funds" shall mean the funds which do not satisfy Code Section 468A, including Hope Creek Nonqualified Fund, the Peach Bottom Two Nonqualified Fund, the Peach Bottom Three Nonqualified Fund, the Salem One Nonqualified Fund and the Salem Two Nonqualified Fund.

(24)

"NRC shall mean the Nuclear Regulatory Commission, an agency of the United States government created and existing pursuant to 42 U.S.C. 5841.

(25)

"Order" shall mean any order of the FERC or NRC issued in connection with decommissioning the Plants.

(26)

"Peach Bottom Three" shall mean Unit Three of the Peach Bottom Atomic Power Station.

(27)

"Peach Bottom Three Nonqualified Fund" shall consist of Contributions for decommissioning Peach Bottom Three (but only to the extent such Contributions are not deposited and maintained in the Peach Bottom Three Qualified Fund) plus earnings and appreciation thereon less any payments, transfers or other distributions which, at the time of reference, shall have been made by the Trustee as authorized herein.

(28)

"Peach Bottom Three Qualified Fund" shall mean the nuclear decommissioning reserve fund established for Peach Bottom Three for purposes of Section 468A of the Code, and shall consist of Contributions by the Company for decommissioning Peach Bottom Three plus

LR-N23-0045 6

earnings and appreciation thereon, which Contributions are specified in a Schedule of Ruling Amounts with respect to Peach Bottom Three less any payments, transfers or other distributions which, at the time of reference, shall have been made by the Trustee as authorized herein.

(29)

"Peach Bottom Two" shall mean Unit Two of the Peach Bottom Atomic Power Station.

(30)

"Peach Bottom Two Nonqualified Fund" shall consist of Contributions by the Company for decommissioning Peach Bottom Two (but only to the extent such Contributions are not deposited and maintained in the Peach Bottom Two Qualified Fund) plus earnings and appreciation thereon less any payments, transfers or other distributions which, at the time of reference, shall have been made by the Trustee as authorized herein.

(31)

"Peach Bottom Two Qualified Fund" shall mean the nuclear decommissioning reserve fund established for Peach Bottom Two for purposes of Section 468A of the Code, and shall consist of Contributions by the Company for decommissioning Peach Bottom Two plus earnings and appreciation thereon, which Contributions are specified in a Schedule of Ruling Amounts with respect to Peach Bottom Two less any payments, transfers or other distributions which, at the time of reference, shall have been made by the Trustee as authorized herein.

(32)

"Plant" shall mean Hope Creek, Peach Bottom Two, Peach Bottom Three, Salem One and Salem Two, individually.

(33)

"Plants" shall mean Hope Creek, Peach Bottom Two, Peach Bottom Three, Salem One and Salem Two, collectively.

(34)

"Power" shall mean PSEG Power LLC.

(35)

"Prudent Investor Standard" shall mean the standard as sets forth by the FERC in 18 C.F.R. 35.32(a)(3).

(36)

"PSE&G" shall mean Public Service Electric and Gas Company.

LR-N23-0045 7

(37)

"PSE&G Qualified Funds" shall mean those trusts established by PSE&G that qualified as nuclear decommissioning reserve funds under Code Section 468A and corresponding Treasury Regulations related to its interests in the Plants.

(38)

"PSE&G Nonqualified Funds" shall mean those trusts established by PSE&G that did not qualify as nuclear decommissioning reserve funds under Code Section 468A and corresponding Treasury Regulations related to its interests in the Plants.

(39)

"Purchase Agreements" shall mean the Purchase Agreement By and Among Atlantic City Electric Company, PECO Energy Company and PSEG Power LLC Dated September 27, 1999 for the purchase of the undivided interest in Peach Bottom Unit Two and Peach Bottom Unit Three; the Purchase Agreement By and Among Delmarva Power & Light Company, PECO Energy Company and PSEG Power LLC Dated September 27, 1999 for the purchase of the undivided interest in Peach Bottom Unit Two and Peach Bottom Unit Three; the Purchase Agreement By and Between Atlantic City Electric Company and PSEG Power LLC Dated September 27, 1999 for the purchase of the undivided interest in Salem Unit One and Salem Unit Two; the Purchase Agreement By and Between Delmarva Power & Light Company and PSEG Power LLC Dated September 27, 1999 for the purchase of the undivided interest in the Salem Unit One and Salem Unit Two and the Purchase Agreement By and Between Atlantic City Electric Company and PSEG Power LLC Dated September 27, 1999 for the purchase of the undivided interest in Hope Creek, collectively.

(40)

"Qualified Funds" shall mean the funds which satisfy Code Section 468A, including, the Hope Creek Qualified Fund, the Peach Bottom Two Qualified Fund, the Peach Bottom Three Qualified Fund, the Salem One Qualified Fund and the Salem Two Qualified Fund, collectively.

(41)

"Salem One" shall mean Unit One of the Salem Nuclear Generating Station.

(42)

"Salem One Nonqualified Fund" shall consist of Contributions for decommissioning Salem One (but only to the extent such Contributions are not deposited and

LR-N23-0045 8

maintained in the Salem One Qualified Fund) plus earnings and appreciation thereon less any payments, transfers or other distributions which, at the time of reference, shall have been made by the Trustee as authorized herein.

(43)

"Salem One Qualified Fund" shall mean the nuclear decommissioning reserve fund established for Salem One for purposes of Section 468A of the Code, and shall consist of Contributions by the Company for decommissioning Salem One plus earnings and appreciation thereon, which Contributions are specified in a Schedule of Ruling Amounts with respect to Salem One less any payments, transfers or other distributions which, at the time of reference, shall have been made by the Trustee as authorized herein.

(44)

"Salem Two" shall mean Unit Two of the Salem Nuclear Generating Station.

(45)

"Salem Two Nonqualified Fund" shall consist of Contributions by the Company for decommissioning Salem Two (but only to the extent such Contributions are not deposited and maintained in the Salem Two Qualified Fund) plus earnings and appreciation thereon less any payments, transfers or other distributions which, at the time of reference, shall have been made by the Trustee as authorized herein.

(46)

"Salem Two Qualified Fund" shall mean the nuclear decommissioning reserve fund established for Salem Two for purposes of Section 468A of the Code, and shall consist of Contributions by the Company for decommissioning Salem Two plus earnings and appreciation thereon, which Contributions are specified in a Schedule of Ruling Amounts with respect to Salem Two less any payments, transfers or other distributions which, at the time of reference, shall have been made by the Trustee as authorized herein.

(47)

"Schedule of Ruling Amounts" shall have the meaning set forth in Section 468A(d) of the Code.

(48)

"Sellers" shall mean Public Service Electric and Gas Company, Atlantic City Electric Company and Delmarva Power & Light Company or any other entity that the Company purchases or receives any interest in the Plants therefrom.

LR-N23-0045 9

(49)

"Sellers' Funds" shall mean the assets of the Qualified Funds and Nonqualified Funds related to Hope Creek, Peach Bottom Unit Two, Peach Bottom Unit Three, Salem Unit One and Salem Unit Two, collectively, held by Sellers.

(50)

"Sellers' Qualified Funds" shall mean the assets of the Qualified Funds related to Hope Creek, Peach Bottom Unit Two, Peach Bottom Unit Three, Salem Unit One and Salem Unit Two, collectively, held by Sellers.

(51)

"Service" shall mean the Internal Revenue Service.

(52)

"Trustee" shall mean Mellon Bank, N.A. or any substitute entity subsequently appointed as a Trustee pursuant to Section 6.01 hereof.

(53)

"Valuation Date" shall have the meaning set forth in Section 6.05 hereof.

(54)

Non-50.75 Subaccount shall mean a subaccount established within a Fund, which is intended to accumulate funds for decommissioning costs other than those amounts having once been dedicated pursuant to 10 CFR 50.75 for decommissioning of the Plants as defined by the NRC in its regulations and issuances. Funds in a Non-50.75 Subaccount are not subject to the requirements of 10 CFR 50.75(h)(1)(iv), and are not subject to the restrictions on the use of funds in 10 CFR 50.82(a)(8).

II. MASTER TRUST PURPOSES, NAME, FUNDS AND RELATED MATTERS 2.01 Master Trust Purposes. The purposes of this Master Trust are to hold funds for the contemplated decommissioning of the Plants, to constitute qualified and nonqualified decommissioning funds therefor (the Qualified Funds being established pursuant to Section 468A of the Code, any applicable successor provision and the regulations thereunder) and to comply with any Order. The Qualified Funds shall comply in all respects with Code Section 468A and the regulations thereunder.

2.02 Use of Assets. The use of assets in both the Qualified Funds and Nonqualified Funds, excluding assets in a Non-50.75 Subaccount, shall be limited to expenses related to

LR-N23-0045 10 decommissioning of the Plants as defined by the NRC in its regulations and issuances, and as provided in the units' licenses and any amendments thereto. The use of assets in a Non-50.75 Subaccount shall be limited to expenses related to decommissioning costs as defined by the Treasury Department in its regulations and issuances. However, upon completion of decommissioning the assets may be used for any purpose authorized by law. Except for investments tied to market indexes or other non-nuclear sector common trust funds or collective, commingled, or mutual funds, and provided further that no more than 10 percent of trust assets may be indirectly invested in securities of any entity owning or operating one or more nuclear power plants: (1) the assets of the Funds shall not be invested in the securities or other obligations of Public Service Enterprise Group Incorporated or any other owner or operator of any nuclear power reactor or affiliates thereof, or their successors or assigns, or in a mutual fund in which at least 50 percent of the fund is invested in the securities of a licensee or parent company whose subsidiary is an owner or operator of a foreign or domestic nuclear power plant; (2) the assets of the Funds shall not be invested in the securities of any entity owning one or more nuclear power plants, as identified by the Nuclear Energy Institute or other sources deemed necessary by the Trustee.

2.03 Appointment of Trustee. By execution of this Agreement, the Company appoints Mellon Bank, N.A. as Trustee of the Master Trust.

2.04 Acceptance of Appointment. By execution of this Agreement and upon the terms and conditions expressly set forth herein, Mellon Bank, N.A. accepts the appointment as Trustee of this Master Trust and each of the Funds. The Trustee shall receive any assets of the Master Trust transferred to it from the Company and shall hold, manage, invest, reinvest and administer such assets and Contributions, together with earnings and appreciation thereon as provided for in this Agreement.

2.05 Name of Master Trust. The assets received by the Trustee from the Sellers or Contributions from the Company plus earnings thereon less any payments, transfers or other

LR-N23-0045 11 distributions which, at the time of reference, shall have been made by the Trustee as authorized herein shall constitute the "PSEG Nuclear LLC Master Decommissioning Trust." The tax entities maintained under this Agreement shall be known as the PSEG NUCLEAR LLC NON-QUALIFIED DECOMMISSIONING TRUST, a grantor trust, and PSEG NUCLEAR LLC MASTER DECOMMISSIONING TRUST.

2.06 Segregation of Master Trust. The Master Trust shall be segregated by the Trustee into the Funds as follows:

(a)

Hope Creek Qualified Fund; (b)

Hope Creek Nonqualified Fund; (c)

Peach Bottom Two Qualified Fund; (d)

Peach Bottom Two Nonqualified Fund; (e)

Peach Bottom Three Qualified Fund; (f)

Peach Bottom Three Nonqualified Fund; (g)

Salem One Qualified Fund; (h)

Salem One Nonqualified Fund; (i)

Salem Two Qualified Fund; and (j)

Salem Two Nonqualified Fund.

The Trustee shall maintain such records as are necessary to maintain each Fund separately from each other Fund.

2.07 Designation of Funds. Upon (i) any Contribution to the Master Trust pursuant to Section 3.01; (ii) any adjustment to the Nonqualified Funds or Qualified Funds pursuant to Section 3.02; or (iii) any withdrawal from the Master Trust for Decommissioning Costs pursuant to Section 4.01, or for administrative expenses pursuant to Section 4.02, the Company shall designate the Fund(s) which is to be credited or debited by such contribution, addition, adjustment, or withdrawal and the Trustee shall credit or debit the Fund(s) in accordance with such designation and as directed by the Company.

LR-N23-0045 12 2.08 Authorized Representatives. The Company shall provide the Trustee with a written statement setting forth the names and specimen signatures of the Authorized Representative(s). Until otherwise notified in writing by the Company, the Trustee may rely upon any written notice, instruction, direction, certificate or other communication believed by it to be genuine and to be signed or certified by any one or more Authorized Representatives, and the Trustee shall be under no duty to make any investigation or inquiry as to the truth or accuracy of any statement contained therein. If the Company designates more than one Authorized Representative, the Authorized Representatives may act on behalf of the Company as a group or may designate one among themselves to act on behalf of the Company.

2.09 No Authority to Conduct Business. The purposes of this Master Trust are limited to the matters set forth in Section 2.01 above, specifically, and there is no objective to carry on any business unrelated to the Master Trust purposes set forth in Section 2.01 above hereof, or divide the gains therefrom.

2.10 No Transferability of Interest in Master Trust. Except with respect to a disposition of all or a portion of the Company's interest in the Plants, the interest of the Company in the Master Trust is not transferable, whether voluntarily or involuntarily, by the Company nor subject to the claims of creditors of the Company; provided, however, that any creditor of the Company as to which a Certificate has been properly completed and submitted to the Trustee may assert a claim directly against the Master Trust in an amount not to exceed the amount specified on such Certificate.

2.11 Construction. The provisions of this Agreement, and the definitions contained herein, are intended to be construed in accordance with and consistent with applicable laws and regulations.

III. CONTRIBUTIONS 3.01 Contributions. From time to time prior to the termination of this Master Trust, the Company may make or so direct, and the Trustee shall accept, Contributions to the Master Trust to satisfy the purposes of this Master Trust as set forth in Section 2.01, which

LR-N23-0045 13 Contributions may be to a Qualified Fund or to a Nonqualified Fund. The Trustee shall not be responsible for the collection of Contributions from the Company to the Master Trust nor shall the Trustee have any responsibility for the timing, computation of deductibility or amount of contributions or for the adequacy of the Funds or the funding standards adopted by the Company to meet or discharge any Decommissioning Costs or other liabilities.

3.02 Subsequent Adjustments. The Trustee and the Company understand and agree that the Contributions made by the Company to a Qualified Fund from time to time may exceed the amount permitted to be paid into such Fund pursuant to Section 468A of the Code and any regulations thereunder based upon changes in estimates, subsequent developments or any other event or occurrence which could not reasonably have been foreseen by the Company at the time such contribution was made (Excess Contribution). Upon the written certification of the Company to the Trustee setting forth the amount of the Excess Contribution and stating that such Excess Contribution should be transferred to a different Fund or to a particular person or entity (including the Company), the Trustee shall transfer or pay such Excess Contribution, as the case may be, to such different Fund, or to such person or entity (including the Company) specified by the Company in the written certification.

In all cases, the Trustee shall not distribute any Excess Contribution unless it receives an opinion of legal counsel to the Company stating that such distribution will not lead to disqualification of the Qualified Fund(s) from the application of Section 468A of the Code and that such distribution will not constitute a violation of any Order.

The Trustee and the Company further understand and agree that a transfer of assets among the Funds may be necessary to effectuate the purposes of this Master Trust. However, the Trustee shall not effectuate any such transfer until it has received a written Certification from the Company authorizing such transfer.

IV. DISTRIBUTIONS 4.01 Payment of Decommissioning Costs. Except for withdrawals being made under

LR-N23-0045 14 10 CFR 50.82(a)(8) as exempted, as applicable, by NRC approved site-specific exemptions, withdrawals being made from a Non-50.75 Subaccount, or for payments of expenses of administration pursuant to Section 4.02, no disbursements or payments from the trust shall be made by the Trustee until the Trustee has first given the NRC Director, Office of Nuclear Reactor Regulation, or Director, Office of Nuclear Material Safety and Safeguards, as applicable, at least 30 working days notice of payment. In addition, no disbursements or payments from the trust shall be made if the Trustee receives prior written notice of objection from the NRC Director, Office of Nuclear Reactor Regulation, or Director, Office of Nuclear Material Safety and Safeguards, as applicable, during such 30 working day notice period. The Trustee shall make payments of Decommissioning Costs, only to the extent of assets held in the Master Trust for such Plant to any person (including the Company) for goods provided or labor or other services rendered in connection with the decommissioning of the Plants only upon receipt of a Certificate.

The Company shall be solely responsible for ensuring that the assets of the Master Trust are disbursed hereunder solely for the purpose of paying Decommissioning Costs all in accordance with applicable laws and regulations.

4.02 Payment of Expenses of Administration. Upon receipt of a Certificate, the Trustee shall make payments, only to the extent of assets held in the Master Trust for such Plant, for administrative costs (including taxes, reasonable out-of-pocket expenses and trustee's fees) and other incidental expenses of the Master Trust (including legal, accounting and actuarial expenses) in connection with the administration of the Master Trust pursuant to this Agreement from the Qualified or Nonqualified Funds, but only to the extent that such amounts may be incurred and paid from the Qualified Fund(s) without causing the Qualified Fund(s) to become disqualified from the application of Section 468A of the Code or any applicable successor provisions, and only to the extent such payments of administrative costs and other incidental expenses from the Qualified Fund(s) are not made to the Company in violation of Code Sections 468A(e) or 4951 relating to self-dealing. The Company shall be

LR-N23-0045 15 solely responsible for ensuring that the assets of the Master Trust are disbursed hereunder solely for the purpose of paying administrative costs and expenses all in accordance with applicable laws and regulations. Such administrative costs and incidental expenses shall constitute a lien on the Master Trust until paid in full by the Master Trust. The Company agrees to pay the Trustee for any administrative costs or incidental expenses of the Master Trust if the assets of the Master Trust are insufficient to pay such costs or expenses or if for any reason the same are not withdrawable from the Master Trust. All such administrative costs and other incidental expenses shall be charged pro rata to the Funds (based on the fair market value of each Fund) in accordance with Section 6.05 hereof unless otherwise directed by the Company.

4.03 Fees. The Trustee shall charge the Master Trust for the amount of compensation for its services as specified in the fee schedule as may from time to time be agreed upon in writing by the Trustee and the Company. The Company shall be obligated to pay promptly any such compensation to the extent such compensation is not paid from the Master Trust. Such compensation shall constitute a lien on the Master Trust until paid in full.

4.04 Taxes. All taxes, including any Final Tax Liabilities, of any and all kinds whatsoever that may be levied or assessed under existing or future laws, domestic or foreign, upon any Fund or the income thereof shall be paid from the Fund in the same manner as provided for expenses of administration in Section 4.02.

4.05 Reliance on Company. The Trustee shall not be responsible for the form or content of any Certificate delivered to it under any provision of the Agreement. The Trustee shall take such action with respect to such of the Funds as the Certificate shall direct. Each direction to the Trustee in a Certificate shall constitute a certification by the Company that such direction is in accordance with applicable laws and regulations, the terms of this Agreement, and all requisite consents, waivers, or approvals of the FERC, the NRC or any other person have been duly and validly obtained, given or waived as the case may be. The Trustee may rely

LR-N23-0045 16 conclusively on any such Certificate and shall have no duty to make any independent inquiry or investigation before acting upon any direction contained herein.

4.06 Liquidation of Investments. Except as otherwise provided in Article IX, at the direction of the Company or any Investment Manager, the Trustee shall sell or liquidate such investments in the Master Trust as may be requested or required in order to make payment or distribution and shall until disbursement, retain the proceeds in the Master Trust.

V. TERMINATION 5.01 Termination of Master Trust. This Master Trust shall terminate upon the substantial completion of the nuclear decommissioning of the Plants (as defined in Treasury Regulations promulgated under Code Section 468A). The Company shall notify the Trustee in writing of the substantial completion of the nuclear decommissioning of any Plant.

Notwithstanding the foregoing, the applicable portion of a Qualified Fund shall terminate upon the earlier of:

(a) its disqualification from the application of Section 468A of the Code, whether pursuant to an administrative action on the part of the Service or the decision of any court of competent jurisdiction, but in no event earlier than the date on which all available appeals have been either prosecuted or abandoned and the period of time for making any further appeals has elapsed; or (b) the disposition by the Company of any interest in a Plant, to the extent provided in Treasury Regulations promulgated under Code Section 468A.

5.02 Distribution of Master Trust or Qualified Fund(s) upon Termination. Upon termination of this Master Trust or a Qualified Fund, the Trustee shall liquidate the assets of the Master Trust or such Qualified Fund, in accordance with written directions of the Company or an Investment Manager and shall distribute the then-existing assets of the Master Trust or such Qualified Fund (including accrued, accumulated and undistributed net income of the Master Trust or such Qualified Fund) less final Master Trust or Qualified Fund administration expenses

LR-N23-0045 17 (including compensation and reimbursable expenses of the Trustee as provided in this Agreement and including accrued taxes) to the Company; provided, however, that no such direction shall be given by the Company unless it has determined that an Order by the appropriate regulatory authorities has been issued which specifically authorizes such distribution or the Trustee has received an opinion of legal counsel to the Company to the effect that no such Order is necessary to authorize such distribution.

VI. TRUSTEES 6.01 Designation and Qualification of Trustee(s). By this Agreement the Company has appointed the Trustee to act as trustee to the Master Trust. At any time during the term of this Master Trust, the Company shall have the right to remove the Trustee (at the Company's discretion) acting hereunder and appoint another Trustee upon thirty (30) days notice in writing to the Trustee, or upon such shorter notice as may be acceptable to the Trustee..Any Trustee shall have all the rights, powers, duties and obligations herein specified. In the event that any Trustee shall (i) become insolvent or admit in writing its insolvency; (ii) be unable or admit in writing its inability to pay its debts as such debts mature; (iii) make a general assignment for the benefit of creditors; (iv) have an involuntary petition in bankruptcy filed against it; (v) commence a case under or otherwise seek to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law, statute, or proceeding; or (vi) resign, the Trustee shall cease to act as a fiduciary of this Master Trust and the Company shall appoint another Trustee within a reasonable period of time. In the event of any such removal or resignation, the Trustee shall have the right to have its accounts settled as provided in Section 6.05 hereof. Any successor to the Company, as provided herein, shall have the same right to remove and to appoint any Trustee as provided herein.

6.02 Exoneration from Bond. No bond or other security shall be exacted or required of any Trustee appointed in any jurisdiction.

LR-N23-0045 18 6.03 Resignation. Any Trustee hereof may resign and be relieved as trustee at any time (without prior application to or approval by or order of any court) by a duly acknowledged instrument, which shall be delivered to the Company by the Trustee not less than sixty (60) days prior to the effective date of the Trustee's resignation or upon such shorter notice as may be acceptable to the Company. The foregoing sentence in no way precludes any Trustee from applying for an appropriate order of any court to facilitate its resignation.

6.04 Reserve for Expenses. The Trustee is authorized to reserve such amount as to it may seem advisable for payments of its fees and expenses in connection with the settlement of its account or otherwise, and any balance of such reserve remaining after the payment of such fees and expenses shall be paid over in accordance with the direction of the Company.

6.05 Valuation of Master Trust. The Trustee shall value the Master Trust as of the close of business at the end of each year, or as may be agreed upon by the Company and the Trustee (hereinafter referred to as "Valuation Dates"), and all charges and credits (between Valuation Dates) shall be considered as being made immediately after the next ensuing valuation. Assets will be valued at their market value at the close of business on the Valuation Date, or, in the absence of readily ascertainable market values at such values as the Trustee shall determine in accordance with methods consistently followed and uniformly applied. Anything in this Agreement to the contrary notwithstanding, the Trustee may rely for all purposes of the Agreement on the latest valuation and transaction information submitted to it by the Investment Manager responsible for the investment of such assets even if such information predates the Valuation Date. On the basis of such valuation as of a Valuation Date, the beneficial interests of the Funds shall be adjusted to reflect the effect of income, collected and accrued, realized and unrealized gains and losses, expenses, and all other transactions during the period. Such valuations and adjustments shall be made so as to preserve for each Fund its beneficial interest in the Master Trust. The Trustee shall maintain

LR-N23-0045 19 such records as are necessary to reflect the allocation of all charges and expenses in accordance with this Section 6.05.

6.06 Accounts and Reports. The Trustee shall keep accurate and detailed accounts of all investments, receipts and disbursements and other transactions hereunder, and all accounts, books and records relating thereto shall be open to inspection and audit at all reasonable times by any person designated by the Company. Within 30 days following the close of each month, the Trustee shall file with the Company a written report setting forth all investments, receipts and disbursements and other transactions effected by it upon its own authority or pursuant to the directions of the Company or any Investment Manager during the month and containing an exact description of all securities contributed, purchased, sold or distributed and the cost or net proceeds of sale, and showing all cash, securities and other investments held at the end of such month and the cost and fair value of each item thereof as carried on the books of the Trustee. Such accounts and reports shall show the portion of the assets applicable to each Fund and shall also identify all disbursements made to pay for expenses of administration of the Master Trust.

Upon the expiration of one year from the date of the filing of such written reports with the Company, the Trustee shall be forever released and discharged from all liability or accountability to any one with respect to all acts and transactions shown in such written report, except such acts or transactions as to which the Company shall take exception by notice to the Trustee within such one year period; provided, however, that nothing contained herein shall be deemed to relieve the Trustee of any liability which may be imposed pursuant to Section 6.07 hereof. In the event that any exception taken by the Company cannot be amicably adjusted, the Company or the Trustee may file the written report in a court having jurisdiction and upon the audit thereof any and all such exceptions which may not have been amicably settled shall be heard and adjudicated.

LR-N23-0045 20 All records and accounts maintained by the Trustee with respect to the Master Trust shall be preserved for such period as may be required under any applicable law. Unless the Company requests in writing that the records and accounts be preserved, the Trustee shall have the right to destroy such records and accounts upon the expiration of any such required retention period.

6.07 Tax Returns and Other Reports. The Trustee shall prepare and timely file all Federal, state and local income or franchise tax returns or other reports (including estimated tax returns and information returns) as may be required from time to time with respect to the Qualified Funds, and the Company agrees to provide the Trustee in a timely manner with any information within its possession, and to cause the Former Trustee and the Investment Manager(s) to provide the Trustee with any information in its possession, which is necessary to such filings. The Trustee may rely upon such information provided by the Company, the Former Trustee or an Investment Manager and shall be fully protected in so relying. The Trustee shall prepare and submit to the Company in a timely manner all information reasonably requested by the Company regarding the Master Trust, the Qualified Funds and the Nonqualified Funds required to be included in the Company's Federal, state and local income tax returns or other reports (including estimated tax returns and information returns).

Subject to the limitations contained in Section 8.03 hereof, the Trustee may employ independent certified public accountants or other tax counsel to prepare or review such returns and reports. The Trustee agrees to sign any tax returns or other reports where required by law to do so or arising out of the Trustee's responsibilities hereunder, and to remit from the Master Trust appropriate payments or deposits of Federal, state and local income or franchise taxes directly to the taxing agencies or authorized depositaries in a timely manner. Notwithstanding Section 6.08 hereof, any interest or penalty charges assessed against the Master Trust or a Qualified Fund pursuant to Chapters 67 or 68 of the Code, or pursuant to any similar state or local tax provisions, as a result of the Trustee's

LR-N23-0045 21 failure to comply with this Section 6.07 shall be borne by the Trustee and not the Master Trust or a Qualified Fund, unless such payment would, based upon opinion of counsel acceptable to the Company, be impermissible under Code Section 468A in which event such Trustee shall reimburse the Company. The Trustee agrees to notify the Company in writing within ten days of the commencement of any audit of a Qualified Fund's Federal, state, or local tax returns, and to participate with the Company on behalf of the Qualified Fund in such audits and related inquiries. The Trustee further agrees to provide the Company with any additional information in its possession regarding the Qualified Funds or Nonqualified Funds which may be requested by the Company to be furnished in an audit of the Company's Federal, state, or local tax returns.

6.08 Liability. The Trustee shall not be liable for any acts, omissions or defaults of the Company, or an agent of the Company, or an Investment Manager, or a depositary, or any agent (other than its officers and employees) appointed or selected by the Trustee with reasonable care. The Trustee shall be liable only for such Trustee's own acts or omissions (and those of its officers and employees) occasioned by the negligence of such Trustee (and that of its officers and employees). Except as provided in Section 6.07, the Trustee shall not be liable in regard to the exercise or nonexercise of any powers and discretions properly delegated pursuant to the provisions of the Agreement. The Trustee shall not be responsible or liable for any losses or damages suffered by the Fund arising as a result of the insolvency of any Foreign custodian, subtrustee or subcustodian, other than the Trustee or an affiliate serving in that capacity, except to the extent the Trustee was negligent in its selection or continued retention of such entity.

6.09 Indemnity of Trustee. The Company agrees to indemnify and hold harmless the Trustee, in its individual capacity and in its capacity as Trustee, from any and all liability including any loss, costs, damages, excise taxes or expenses (including reasonable attorneys' fees) arising out of this Master Trust and this Agreement excepting

LR-N23-0045 22 only such liability as may be imposed on the Trustee pursuant to Section 6.08 hereof. The undertaking made in this Section 6.09 shall be binding on the Company, its successors and assigns and shall survive termination, amendment or restatement of this Agreement or the resignation or removal of the Trustee.

VII. INVESTMENTS 7.01 Appointment of Investment Manager(s). It is contemplated that the Company will appoint one or more Investment Managers to direct the investment of all or part of the Master Trust. The appointment of an Investment Manager shall be made in accordance with any procedures specified by the Company. Any such investment manager(s) or other person directing investments made in the trust shall adhere to the Prudent Investor Standard as specified in 18 C.F.R. 35.32(a)(3) of the FERC's regulations. Whenever such appointment is made, the Company shall certify to the Trustee in writing that such appointment has been made, shall specify the portion of the Master Trust with respect to which an Investment Manager has been designated and shall instruct the Trustee to segregate into a separate account (Investment Account) those assets with respect to which that specific Investment Manager has been designated. To the extent that the Company authorizes an Investment Manager to direct the investment of an Investment Account, the Trustee shall be released and relieved of all investment duties, responsibilities and liabilities customarily or statutorily incident to a trustee with respect to the Investment Account, and as to such Investment Account, the Trustee shall act as custodian. The Trustee shall be under no duty to question any direction of an Investment Manager with respect to an Investment Account, nor to review any securities or property held in an Investment Account, nor to make any suggestions with respect to the investment of an Investment Account, nor to evaluate the performance of any Investment Manager and the Trustee shall be fully protected in acting in accordance with the directions of an Investment Manager or for failing to act in the absence of such directions. An Investment Manager shall certify in writing to the Trustee that it is

LR-N23-0045 23 qualified to act in the capacity provided under an Investment Manager Agreement, shall accept its appointment as Investment Manager, shall identify the person(s) authorized to give instructions or directions to the Trustee on its behalf including specimen signatures, and shall undertake to perform the duties imposed on it under an Investment Manager Agreement. The Trustee may rely upon and continue to rely upon all such certifications unless otherwise notified in writing by the Company or an Investment Manager, as the case may be.

7.02 Direction by Investment Manager(s). An Investment Manager designated by the Company to manage an Investment Account shall have authority to manage, acquire and dispose of the assets of the Master Trust, or a portion thereof as the case may be in accordance with the written investment guidelines established by the Company and provided to the Investment Manager. The Trustee shall exercise the powers set forth in Article IX hereof only when, if and in the manner directed by the Investment Manager, or in the event that no Investment Manager has been appointed, as directed by the Company in writing, and shall not otherwise be under any obligation to invest or otherwise manage any assets in the Investment Account. An Investment Manager shall have the power and authority, exercisable in its sole discretion at any time and from time to time, to issue and place orders for the purchase or sale of securities directly with qualified brokers or dealers. The Trustee, upon notification from an Investment Manager, shall execute and deliver in accordance with the appropriate trading authorizations. Written notification of the issuance of each such authorization shall be given promptly to the Trustee by an Investment Manager, and such Investment Manager shall cause the execution of such order to be confirmed in writing to the Trustee, and to the Company, by the broker or dealer. Such notification shall be proper authority for the Trustee to pay for securities purchased against receipt thereof and to deliver securities sold against payment therefor, subject to standard settlement practices in the market in which such securities are traded. All directions to the Trustee by an

LR-N23-0045 24 Investment Manager shall be in writing and shall be signed by a person who has been certified by such Investment Manager pursuant to Section 7.01 hereof as authorized to give instructions or directions to the Trustee.

Should an Investment Manager at any time elect to place security transactions directly with a broker or dealer, the Trustee shall not recognize such transaction unless and until it has received instructions or confirmation of such fact from an Investment Manager.

Should an Investment Manager direct the Trustee to utilize the services of any person with regard to the assets under its management or control, such instructions shall be in writing and shall specifically set forth the actions to be taken by the Trustee as to such services. In the event that an Investment Manager places security transactions directly or directs the utilization of a service, such Investment Manager shall be solely responsible for the acts of such persons. The sole duty of the Trustee as to such transactions shall be the settlement of the transactions incident to its duties as custodian.

The authority of an Investment Manager and the terms and conditions of the appointment and retention of such Investment Manager shall be the responsibility solely of the Company, and the Trustee shall not be deemed to be a party to or to have any obligations under any agreement with an Investment Manager. Any duty of supervision or review of the acts, omissions or overall performance of an Investment Manager shall be the exclusive responsibility of the Company, and the Trustee shall have no duty to review any securities or other assets purchased by an Investment Manager, or to make suggestions to an Investment Manager or to the Company with respect to the exercise or nonexercise of any power by an Investment Manager.

Unless the Trustee knowingly participates in, or knowingly undertakes to conceal an act or omission of an Investment Manager knowing such act or omission to be a breach of the fiduciary responsibility of an Investment Manager, the Trustee shall be under no liability for any loss of any kind which may result by reason of any action taken by it in accordance with

LR-N23-0045 25 any direction of an Investment Manager, or for failing to act in the absence of any direction of an Investment Manager. In any event, the Trustee shall be under no liability for any loss of any kind by reason of investments purchased, sold, or retained by an Investment Manager, nor for the risk or diversification of the portfolio, nor for the turnover of the investments, nor for any other aspect of a portfolio for which an Investment Manager has been appointed.

VIII. TRUSTEE'S GENERAL POWER The Trustee shall have, with respect to the Master Trust, the following powers, all of which powers are to be exercised in the best interests of this Master Trust and the purposes hereof; namely:

8.01 Registration of Securities. To hold any stocks, bonds, securities and/or other property of the Master Trust in the name of a nominee, in a street name, or by other title-holding device, without indication of trust and to deposit any securities or other property of the Master Trust in a depository or a clearing corporation.

8.02 Cash Sweep Function. To the extent that the assets of the Master Trust have not been invested by an Investment Manager on any given day, to invest any uninvested assets of the Master Trust on a short-term basis, (including investments in the Trustee's time deposits or short-term investment funds), subject to the limitations contained in Article IX hereof and in accordance with any written guidelines provided to the Trustee by the Company.

The Trustee hereby agrees to receive and hold all cash so transferred to it pursuant to this Agreement, IN TRUST, upon all of the terms and conditions herein set forth for the exclusive benefit of the beneficiaries of the Master Trust and shall not divert any such assets to any other purposes. Such cash, together with any income or earnings thereon which the Trustee shall be directed to reinvest (the Trust Fund), shall be invested by the Trustee in accordance with investment objectives and guidelines prescribed herein and in furtherance of such purpose, may be invested in the sole discretion of the Trustee, in any common, collective or commingled investment fund maintained by it for the collective investment

LR-N23-0045 26 assets of eligible participating trusts (hereafter generally referred to as Common Fund) meeting such investment objectives and guidelines. To the extent that any assets of the Master Trust are transferred to a Common Fund, they shall be held and invested in such Common Fund subject to all of the provisions of the Declaration of Trust creating such Common Fund and shall be compiled with the assets of the other trusts participating therein.

To the extent of the participation of the Master Trust in the Common Fund, the instrument establishing such Common Fund shall be part of the Master Trust. To the extent that the Master Trust is invested in the Common Fund, Mellon Bank, N.A. shall be hereunder vested with all of the powers, authorities, responsibilities, privileges and immunities vested in it as Trustee of the Common Fund, to the same extent and effect as though the Declaration of Trust establishing the Common Fund were restated in its entirety herein.

8.03 Retention and Removal of Professional and Employee Services. To employ accountants, custodians, clerks, and agents as necessary to carry out the purposes of this Master Trust and to employ attorneys for the Master Trust, upon prior notification to the Company.

8.04 Delegation of Ministerial Powers. To delegate to other persons such ministerial powers and duties as the Trustee may deem to be advisable.

8.05 Powers of Trustee to Continue until Final Distribution. To exercise any of such powers after the date on which the principal and income of the Master Trust shall have become distributable and until such time as the entire principal of, and income from, the Master Trust shall have been actually distributed by the Trustee. It is intended that distribution of the Master Trust will occur as soon as possible, upon termination of the Master Trust, subject, however, to the limitations contained in Article V hereof.

8.06 Duty to Enforce Claims. The Trustee shall have no duty to commence or maintain any action, suit or legal proceeding on behalf of the Master Trust or any Fund unless the Trustee has been directed to do so by the Company and unless the Trustee is either in

LR-N23-0045 27 possession of assets sufficient for such purpose or unless it has been indemnified by the Company to its satisfaction, for counsel fees, costs and other expenses and liabilities to which it, in its sole judgment may be subjected by beginning or maintaining such action, suit or legal proceeding.

IX. TRUSTEE'S INVESTMENT POWERS The Trustee recognizes the authority of an Investment Manager to manage, invest and reinvest the assets in an Investment Account pursuant to an Investment Management Agreement and as provided in Article VII of this Agreement, the Trustee agrees to cooperate with any Investment Manager as deemed necessary to accomplish these tasks.

Notwithstanding the foregoing, to the extent that the assets of the Master Trust have not been allocated to an Investment Account under the investment control of an Investment Manager, upon the written direction of the Company, the Trustee shall have the following investment powers, all of which are fiduciary powers to be executed in a fiduciary capacity and in the best interest of this Master Trust and the purposes hereof, and which are to be exercised as the Trustee, acting in such fiduciary capacity, in its discretion (but subject to any investment guidelines imposed by the Company), shall determine and, except as otherwise provided, which are intended in no way to limit the powers of the office, namely:

9.01 Preservation of Principal. To hold, manage and invest the assets of this Master Trust in a manner designed to maximize and preserve the income and principal of this Master Trust for the purposes of this Master Trust, except as provided in Sections 9.02 and 9.03.

9.02 Investment of Master Trust. To invest and reinvest all or any part of the Master Trust, including any undistributed income therefrom, provided, however, that no such investment or reinvestment of the assets of the Qualified Funds may be made by the Trustee:

LR-N23-0045 28 (a) in any bank, savings and loan association or other financial institution whose deposits are not insured by the Federal Deposit Insurance Corporation, the Federal Savings & Loan Insurance Corporation, or other comparable federal or state agency, but the amount of such investment may exceed the amount covered by insurance; or (b) which would contravene any instructions issued by the Company.

In all cases, however, the total investments by the Trustee must be sufficiently liquid or short-term in nature (as provided in guidelines to the Trustee from the Company) so as to enable the Master Trust to fulfill the purposes of this Master Trust and to satisfy obligations and contemplated payments from the Master Trust as such obligations and payments become due. Nothing in this Section 9.02 shall be construed as authorizing the Trustee to carry on any business or to divide the gains therefrom.

9.03 Pooled Investments. Upon written consent of the Company, assets of a Qualified Fund relating to a Plant may be pooled, but only with the assets of the Qualified Fund relating to another Plant, and assets of a Nonqualified Fund relating to a Plant may be pooled, but only with the assets of the Nonqualified Fund relating to another Plant, provided that the following conditions are satisfied: (i) the Trustee of each Fund must separately account for the contributions, earnings, expenses, and distributions of such Fund; (ii) the earnings and expenses must be reasonably apportioned among such Funds; (iii) the books and records of such Funds must enable the Service to verify that the requirements of Section 468A of the Code and the regulations thereunder are satisfied. Any pooling arrangement undertaken as permitted in this Section 9.03 can be terminated at any time by any Fund. No Fund in such a pooling arrangement may substitute for itself in such arrangement any person that is not a member of the pooling arrangement. Notwithstanding the foregoing, the provisions of this Section 9.03 shall not limit the Trustee's authority to invest in permissible common or collective trust funds.

9.04 Management of Master Trust. To sell, exchange, partition or otherwise dispose of all or any part of the Master Trust at public or private sale, without prior application to or approval

LR-N23-0045 29 by or order of any court, upon such terms and in such manner and at such prices as the Trustee shall determine; to modify, renew or extend mortgages, bonds, notes or other obligations or any installment of principal thereof or any interest due thereon and to waive any defaults in the performance of the terms and conditions thereof; to adjust, settle, compromise and arbitrate claims or demands in favor of or against the Master Trust, including claims for taxes, upon such terms as the Trustee may deem advisable; and to execute and deliver any and all bills of sale, assignments, bonds or other instruments in connection with these powers, all at such times, in such manner and upon such terms and conditions as the Trustee may deem expedient to accomplish the purposes of this Master Trust as set forth in Section 2.01 hereof. To hold uninvested cash in its commercial bank or that of an affiliate, as it shall deem reasonable or necessary; to execute proxies for any securities held in the Fund; to lend the assets on behalf of the Fund; to settle investments in any collective investment fund, including a collective investment fund maintained by the Trustee or an affiliate; provided that to the extent that any investment is made in any such collective investment fund, the terms of the collective trust indenture shall solely govern the investment duties, responsibilities and powers of the trustee of such collective investment fund and that the Company expressly understands and agrees that any such collective investment fund may provide for the lending of its securities by the collective investment fund trustee and that such collective investment fund trustee will receive compensation for the lending of securities that is separate from any compensation of the Trustee hereunder, or any compensation of the collective investment fund trustee for the management of such fund, and the collective fund may invest in Mellon Financial Corporation stock in accordance with the terms and conditions of the Department of Labor Prohibited Transaction Exemption 95-96 (the "Exemption") granted to the Trustee and its affiliates and use a cross-trading program in accordance with the Exemption and the Company acknowledges receipt of the notice entitled "Cross-Trading Information", a copy of which is attached as Exhibit B and has been provided to the Company; to invest in open-end and closed-end investment companies, including those for which the Trustee or an affiliate provides services for

LR-N23-0045 30 a fee, regardless of the purposes for which such fund or funds were created, and any partnership, limited or unlimited, joint venture and other forms of joint enterprise created for any lawful purpose; to purchase, enter, sell, hold, and generally deal in any manner in and with contracts for the immediate or future delivery of financial instruments of any issuer or of any other property; to grant, purchase, sell, exercise, permit to expire, permit to be held in escrow, and otherwise to acquire, dispose of, hold and generally deal in any manner with and in all forms of options in any combination and to take any and all actions, including the appointment of agents, necessary to settle transactions in futures and/or options contracts, short-selling programs, foreign exchange or foreign exchange contracts, swaps and other derivative investments.

Notwithstanding anything else in this Agreement to the contrary, including, without limitation, any specific or general power granted to the Trustee and to the Investment Managers, including the power to invest in real property, no portion of the Fund shall be invested in real estate. For this purpose "real estate" includes direct interests in real property, leaseholds or mineral interests. Settlements of transactions may be effected in trading and processing practices customary in the jurisdiction or market where the transaction occurs. The Company acknowledges that this may, in certain circumstances, require the delivery of cash or securities (or other property) without the concurrent receipt of securities (or other property) or cash and, in such circumstances, the Trustee shall not be responsible for nonreceipt of payment (or late payment) by the counterparty.

9.05 Borrowing. To borrow money in such amounts and upon such terms, acceptable to the Trustee, as the Company may direct in writing as necessary to carry out the purposes of this Master Trust, and to pledge any securities or other property for the repayment of any such loan as the Company may direct.

9.06 Advances and Assessments. If the Trustee advances cash or securities for any purpose or in the event that the Trustee shall incur or be assessed interest, charges, expenses, assessments, or other liabilities in connection with the performance of this

LR-N23-0045 31 Agreement, except such as may arise from its own negligent action, negligent failure to act or willful misconduct, any property at any time held for the Fund or under this Agreement shall be security therefor and the Trustee shall be entitled to collect from the Fund sufficient cash for reimbursement, and if such cash is insufficient, upon 3 days written notice to the Company, dispose of the assets of the Company held under this Agreement to the extent necessary to obtain reimbursement. To the extent the Trustee advances funds to the Fund for disbursements or to effect the settlement of purchase transactions, the Trustee shall be entitled to collect from the Fund either (i) with respect to domestic assets an amount equal to what would have been earned on the sums advanced (an amount equal to the "federal funds" interest rate on the date of payment) or (ii) with respect to nondomestic assets, the rate applicable to the appropriate foreign market.

X. MISCELLANEOUS 10.01 Headings. The section headings set forth in this Agreement and the Table of Contents are inserted for convenience of reference only and shall be disregarded in the construction or interpretation of any of the provisions of this Agreement.

10.02 Particular Words. Any word contained in the text of this Agreement shall be read as the singular or plural and as the masculine, feminine or neuter as may be applicable or permissible in the particular context. Unless otherwise specifically stated, the word "person" shall be taken to mean and include an individual, partnership, association, trust, company or corporation.

10.03 Severability of Provisions. If any provision of this Agreement or its application to any person or entity or in any circumstances shall be invalid and unenforceable, the application of such provision to persons and in circumstances other than those as to which it is invalid or unenforceable and the other provisions of this Agreement, shall not be affected by such invalidity or unenforceability. If any provision of this Agreement relating to the Qualified Funds is in violation of Code Section 468A that

LR-N23-0045 32 provision will be invalid, unenforceable and have no effect.

10.04 Form and Content of Communications. The name of any person authorized to act hereunder on behalf of the Company or to execute a Certificate shall be certified, with the specimen signature of such person, to the Trustee by the Company. Until appropriate written evidence to the contrary is received by the Trustee, it shall be fully protected in relying upon and acting in accordance with any written notice, instruction, direction, certificate, resolution or other communication believed by it to be genuine and to be signed and/or certified by any proper person, and the Trustee shall be under no duty to make any investigation or inquiry as to the truth or accuracy of any statement contained therein. Until notified in writing to the contrary, the Trustee shall have the right to assume that there has been no change in the identity or authority of any person previously certified to it hereunder.

The Trustee shall incur no liability under this Agreement for any failure to act pursuant to any notice, instruction or any other communication from the Company or any Investment Manager unless and until it shall have received such notice, instruction or other communication in form satisfactory to it.

10.05 Delivery of Notices Under Agreement. Any notice required by this Agreement to be given to the Company or the Trustee shall be deemed to have been properly given when received, provided the notice is mailed, postage prepaid, by registered or certified mail, to the person to be notified as set forth below:

If to the Company:

PSEG Nuclear LLC 80 Park Plaza, T6B Newark, New Jersey 07101 Attention:

Morton A. Plawner Treasurer If to the Trustee:

MELLON BANK, N.A.

One Mellon Bank Center Pittsburgh, Pennsylvania 15258 Attention:

Jerry McDermott Vice President

LR-N23-0045 33 The Company and the Trustee may change the addresses above by delivering notice thereof in writing to the other party.

10.06 Alterations and Amendments. The Trustee and the Company understand and agree that modifications or amendments may be required to this Agreement from time to time to effectuate the purpose of this Master Trust and to comply, with any order, any changes in tax laws, regulations or rulings (whether published or private) of the Service and any similar state taxing authority, and any other changes in the laws applicable to the Company or the Plants. The Trustee and the Company may alter or amend this Agreement to the extent necessary or advisable to effectuate such purposes, to comply with such Order or changes, or for any other reason; provided however, that no amendment which affects the rights, duties, or responsibilities of either party to this Agreement may be made without the consent of both parties to this Agreement. Any amendment shall become effective only upon receipt by the Company and the Trustee of the instrument of amendment. Notwithstanding the foregoing, the Agreement cannot be amended to violate Section 468A of the Code or the regulations thereunder. Notwithstanding any provision herein to the contrary, this Agreement cannot be modified in any material respect without first providing 30 working days prior written notice to the NRC Director, Office of Nuclear Reactor Regulation, or Director, Office of Nuclear Material Safety and Safeguards, as applicable.

10.07 Successors and Assigns. Subject to the provisions of Sections 2.09 and 6.01, this Agreement shall be binding upon and inure to the benefit of the Company, the Trustee and their respective successors, assigns, personal representatives, executors and heirs.

10.08 Governing Jurisdiction. This Master Trust and all questions pertaining to its validity, construction and administration shall be determined in accordance with the laws of the Commonwealth of Pennsylvania to the extent not superseded by Federal law.

10.09 Accounting Year. The Master Trust shall operate on an accounting year which coincides with the calendar year, January 1 through December 31.

LR-N23-0045 34 10.10 Notwithstanding anything in this Agreement to the contrary, the Trustee shall not be responsible or liable for its failure to perform under this Agreement or for any losses to the Fund resulting from any event beyond the reasonable control of the Trustee, its agents or subcustodians, including but not limited to nationalization, strikes, expropriation, devaluation, seizure, or similar action by any governmental authority, de facto or de jure; or enactment, promulgation, imposition or enforcement by any such governmental authority of currency restrictions, exchange controls, levies or other charges affecting the Fund's property; or the breakdown, failure or malfunction of any utilities or telecommunications systems; or any order or regulation of any banking or securities industry including changes in market rules and market conditions affecting the execution or settlement of transactions; or acts of war, terrorism, insurrection or revolution; or acts of God; or any other similar event. This Section shall survive the termination of this Agreement.

10.11 In performing its duties under this agreement, the Trustee shall exercise the same care and diligence that it would devote to its own property in like circumstances.

10.12 The Company and the Trustee hereby each represent and warrant to the other that it has full authority to enter into this Agreement upon the terms and conditions hereof and that the individual executing this Agreement on its behalf has the requisite authority to bind the Company and the Trustee to this Agreement.

IN WITNESS WHEREOF, the Company and the Trustee have set their hands and seals to this Agreement as of the day and year first above written.

LR-N23-0045 35 Exhibit A CERTIFICATE The undersigned Authorized Representative of PSEG Nuclear LLC, a New Jersey limited liability company (the Company), being duly authorized and empowered to execute and deliver this Certificate, hereby certifies to the Trustee of the PSEG Nuclear LLC Master Decommissioning Trust (Master Trust), pursuant to Article IV of the Master Decommissioning Trust Agreement, dated as of

_,2000 (Agreement), between the Trustee and the Company as follows:

(1) there is due and owing to each payee listed in Exhibit 1 hereto (Payees) (all/a portion of) the invoiced cost to the Company for:

(a) goods or services provided in connection with decommissioning the Plant; provided, however, the Trustee has given the Director, Office of Nuclear Reactor Regulation 30 days prior written notice as set forth in Section 4.01 of the Agreement, or (b) administrative costs of the Master Trust (excluding costs arising from the Company's furnishing of goods, services, or facilities to the Master Trust and excluding compensation which is excessive or unnecessary to carry out the purposes of the Master Trust) as evidenced by the Invoice Schedule (with supporting exhibits) attached as Exhibit 1 hereto; (2) all such amounts due and owing to the Payees constitute Decommissioning Costs or Administrative Expenses as described in Article IV of the Agreement; and (3) all conditions precedent to the making of this withdrawal and disbursement set forth in any agreement between such Payees and the Company have been fulfilled.

Accordingly, the Trustee is hereby authorized and directed to withdraw $_______ from the [Hope Creek/Peach Bottom Two/Peach Bottom Three/Salem One/Salem Two]

[Qualified/Nonqualified Fund] [Fund(s) specified in Exhibit 1] in order to permit payment of

LR-N23-0045 36 such sum to be made to the Payees. The Trustee is further directed to disburse each sum, once withdrawn, directly to such payees in the following manner: [Describe: Check, Wire Transfer, etc.] on or before, 20.

Witness my hand this day of, 20.

PSEG Nuclear LLC By:

Authorized Representative

LR-N23-0045 37 Exhibit B CROSS-TRADING INFORMATION As part of the cross-trading program covered by the Exemption for the Trustee and its affiliates, the Trustee is to provide to each affected Trust the following information:

I.

The existence of the cross-trading program The Trustee has developed and intends to utilize, wherever practicable, a cross-trading program for Indexed Accounts and Large Accounts as those terms are defined in the Exemption.

II.

The "triggering events" creating cross-trade opportunities In accordance with the exemption three "triggering events" may create opportunities for cross-trading transactions. They are generally the following (see the Exemption for more information):

A.

A change in the composition or weighting of the index by the independent organization creating and maintaining the index; B.

A change in the overall level of investment in an Indexed Account as a result of investments and withdrawals on the account's opening date, where the Account is a bank collective fund, or on any relevant date for non-bank collective funds; provided, however, a change in an Indexed Account resulting from investments or withdrawals of assets of the Trustee's own plans (other than the Trustee's defined contribution plans under which participants may direct among various investment options, including Indexed Accounts) are excluded as a "triggering event"; or C.

A recorded declaration by the Trustee that an accumulation of cash in an Indexed Account attributable to interest or dividends on, and/or tender offers for, portfolio securities equal to not more than 0.5 percent of the Account's total value has occurred.

III.

The pricing mechanism utilized for securities purchased or sold Securities will be valued at the current market value for the securities on the date of the crossing transaction.

Equity securities - the current market value for the equity security will be the closing price on the day of trading as determined by an independent pricing service; unless the security was added to or deleted from an index after the close of trading, in which case the price will be the opening price for that security on the next business day after the announcement of the addition or deletion.

LR-N23-0045 38 Debt securities - the current market value of the debt security will be the price determined by the Trustee as of the close of the day of trading according to the Securities and Exchange Commission's Rule 17a-7(b)(4) under the Investment Company Act of 1940.

Debt securities that are not reported securities or traded on an exchange will be valued based on an average of the highest current independent bids and the lowest current independent offers on the day of cross-trading. The Trustee will use reasonable inquiry to obtain such prices from at least three independent sources that are brokers or market makers. If there are fewer than three independent sources to price a certain debt security, the closing price quotations will be obtained from all available sources.

IV.

The allocation methods Direct cross-trade opportunities will be allocated among potential buyers or sellers of debt or equity securities on a prorata basis. With respect to equity securities, please note the Trustee imposes a trivial share constraint to reduce excessive custody ticket charges to participating accounts.

V.

Other procedures implemented by the Trustee for its cross-trading practices The Trustee has developed certain internal operational procedures for cross-trading debt and equity securities. These procedures are available upon request.