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{{#Wiki_filter:NOTICE  
{{#Wiki_filter:~.;ZTZ            NOTICE
--'t 7 P.l/f5() I De> THE ATTACHED FILES ARE OFFICIAL RECORDS OF THE INFORMATION  
~/~/q7 -                 -
& RECORDS MANAGEMENT BRANCH. THEY HAVE BEEN CHARGED TO YOU FOR A LIMITED TIME PERIOD AND MUST BE RETURNED TO THE RECORDS & ARCHIVES SERVICES SECTION, TS C3. PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAIL. REMOVAL OF ANY PAGE(S) FROM DOCUMENT FOR REPRODUCTION MUST BE REFERRED TO FILE PERSONNEL.  
't 7 P.l/f5() I De>
-NOTICE -
THE ATTACHED FILES ARE OFFICIAL RECORDS OF THE INFORMATION &
success Letter to Shareholders 2 Investing for Growth 14 Directors and Officers 23 Ata Glance 4 Operational Highlights 18 Stockholder Information 24 Getting the Rules Right 6 Consolidated Financial Statistics 19 www.pseg.com 25 Operational Excellence 10 Condensed Consolidated Financials 20 92 93 94 95 96 (dollars in milli.ons)
RECORDS MANAGEMENT BRANCH.
Enterprise Net Income Financial Highlights Dollars in thousands where applicable 1996 Total Operating Revenues $ 6,041,249 Total Operating Expenses $ 4,984,290 Net Income $ 611,596 Common Stock Shares Outstanding-Year-end (Thousands) 233,470 Shares Outstanding-Average (Thousands) 242,401 Earnings per Average Share $ 2.52 Dividends Paid per Share $ 2.16 Book Value per Share -Year-end $22.33 Market Price per Share -Year-end $27.25 Ratio of Earnings to Fixed Charges -ENTERPRISE( A) 2.68 Ratio of Earnings to Fixed Charges -PSE&a(A) 2.62 Gross Additions to Utility Plant $ 602,783 Gross Utility Plant $17,327,635 (A) Includes Preferred Securities Dividend Requirements.  
THEY HAVE BEEN CHARGED TO YOU FOR A LIMITED TIME PERIOD AND MUST BE RETURNED TO THE RECORDS & ARCHIVES SERVICES SECTION, TS C3. PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAIL. REMOVAL OF ANY PAGE(S) FROM DOCUMENT FOR REPRODUCTION MUST BE REFERRED TO FILE PERSONNEL.
$ $ $ $
          - NOTICE -
>.D ::£ ::£ ::£ NN N N N N -92 93 94 95 96 (dollars)
 
Enterprise Annual Earnings and D ivUlend Payout per Share 1995 5,893,662 4,798,472 662,323 244,698 244,698 $ 2.71 $ 2.16 $22.22 $30.63 2.78 2.77 686,150 Earnings per Share Annual Dividend Payout % Change 3 4 (8) (5) (1) (7) (11) $16,925,280 (12) 2 Th e detailed consolidated financial statements and related discussi.on appear in Appendix A of the Proxy Statement.
success Letter to Shareholders   2 Investing for Growth             14 Directors and Officers 23 Ata Glance               4 Operational Highlights           18 Stockholder Information 24 Getting the Rules Right 6 Consolidated Financial Statistics 19 www.pseg.com           25 Operational Excellence 10 Condensed Consolidated Financials 20
1 I n 1996, we produced solid financial results, despite the ongoing expenses associated with the refurbishment of the Salem nuclear units. 1996 earnings reflect the benefits of our ongoing cost management efforts, the strong New Jersey economy and a good contribution from our off-system gas sales that helped offset relatively flat electric sales caused by cool summer weather. We also experienced a sharp increase in earnings at our utility investment company, Public Service Resources Corporation (PSRC). Public Service Enterprise Group (Enterprise) dated earnings for the year were $611.6 million , or $2.52 per common share. That compares with earnings of $662.3 million, or $2.71 per share in 1995. Results for 1996 reflect two one-time gains recorded during the year -$18 million, or seven cents per share, from the repurchase of preferred stock, and $13.5 million, or six cents per share, resulting from the sale of our Houston-based oil and gas sidiary, Energy Development Corporation (EDC).
 
                                                                                                                                                          -
                                                                                                                          ~::£      >.D    ::£      ::£  ::£ NN        N      N        N    N 92   93     94   95     96                  92    93    94      95    96 (dollars in milli.ons)                                (dollars)
Enterprise Net Income                   Enterprise Annual Earnings and DivUlend Payout per Share Earnings            Annual per Share          Dividend Payout Financial Highlights Dollars in thousands where applicable                                                           1996                   1995                    % Change Total Operating Revenues                                                             $ 6,041,249               $ 5,893,662                                    3 Total Operating Expenses                                                             $ 4,984,290               $ 4,798,472                                    4 Net Income                                                                           $     611,596             $    662,323                                  (8)
Common Stock Shares Outstanding- Year-end (Thousands)                                             233,470                 244,698                                  (5)
Shares Outstanding-Average (Thousands)                                               242,401                 244,698                                  (1)
Earnings per Average Share                                                             $ 2.52                 $ 2.71                                  (7)
Dividends Paid per Share                                                               $ 2.16                  $ 2.16 Book Value per Share - Year-end                                                       $22.33                 $22.22 Market Price per Share - Year-end                                                     $27.25                 $30.63                              (11)
Ratio of Earnings to Fixed Charges - ENTERPRISE(A)                                             2.68                   2.78 Ratio of Earnings to Fixed Charges - PSE&a(A)                                                   2.62                   2.77 Gross Additions to Utility Plant                                                     $     602,783             $    686,150                              (12)
Gross Utility Plant                                                                 $17,327,635               $16,925,280                                    2 (A) Includes Preferred Securities Dividend Requirements.
The detailed consolidated financial statements and related discussi.on appear in Appendix A of the Proxy Statement.
1


==Dear Shareholder,==
==Dear Shareholder,==
The 1996 results also reflect a one-time charge of$59 million , or 25 cents per share , stemming from customer refunds required by Public Service Electric and Gas Company's (PSE&G) resolution of outstanding Salem tory issues. Financial Outlook Looking ahead, we have established a target of five percent compound annual growth in ings per share. We intend to grow income in both our utility and non-utility businesses through effective cost ment and development of new revenue streams. We are further strengthening our capital ture by applying our strong cash flow to the retirement of maturing long-term debt and also are using internally ated funds to provide financial support to our more rapidly growing companies, Energis Resources Incorporated (Energis Resources) and Community Energy Alternatives Incorporated (CEA). Through continued ment to our core utility ness, and establishing new non-regulated businesses, such as Energis Resources, we aim to enhance the value of your pany and continue our record of paying dividends annually for nine decades. 2 Freedom of Choice For the past five years, I've talked to you in our annual and quarterly reports about the matic changes facing our try and about the ways we have been preparing for that new era. This year the new era begins. In January 1997, the New Jersey Board of Public Utilities (BPU) issued its proposed findings and recommendations for restructuring the electric power industry in New Jersey. This proposed Energy Master Plan requires our principal subsidiary, PSE&G, and the state's other electric utilities, to develop posals that allow customers to choose electric suppliers.
It sets an aggressive timetable ing that customer choice be provided to a minimum of five percent of customers beginning in October 1998 and progressing to full competition for 100 cent of customers no later than April 2001. Freedom of choice is coming and we are ready for it. We welcome it and believe we are in position to succeed in this new marketplace.
We have been preparing for this change by doing what cessful competitors must do: redesign and refocus operations; concentrate on cost containment; emphasize a strong customer focus; forge strong, productive partnerships with employees and suppliers; participate actively and decisively in the shaping of public policies related to governing our industry; and seek new sources of revenue. Three Goals We intend to prosper in this new marketplace by advancing the three goals we set in 1996: getting the rules right; achieving operational excellence; and investing for growth. In our efforts to get the rules right, we continue to provide leadership at the state and eral levels where we are working aggressively to establish rules for competition that will be fair to our customers, our employees and our shareholders.
We are working to ensure that the new rules on industry restructuring provide customer choice and lower cost without endangering service reliability or compromising air quality and environmental progress.
Working to achieve tional excellence means concentrating on what we do best and striving to do even better. We are creating partnerships with suppliers to increase efficiency and reduce costs; recognizing employees, individually and in teams, whose best practices, in the form of their ideas and actions, are serving as role models for the entire corporation; and imp l ementing new tion technology to help manage work more efficiently across t h e corporation.
We remain committed to the reliability and quality of our service. This commitment continues to grow in significance as customers gain freedom in choosing suppliers.
PSE&G tinues to offer pioneering moneyback service guarantees.
If we fail to keep our service promises to customers, they can request and receive direct bill credits. It is no longer enough to satisfy customers; the standard for tomer service has been raised and will be raised ever higher in the years ahead. Our commitment to tional excellence, and success in the new deregulated environment resulted in our decision in 1995 to take the nearly twenty-year-old A key Enterprise objective is to keep its co=on stock dividend secure, as it has been over the last five decades. 2.50 2.00 I.SO 1.00 0.50 0.00 111111I11111111I11111111111111111 1946 1956 Salem nuclear units out of service and make fundamental changes necessary to improve performance of the station to the end of its 40-year license. Salem Unit 2 is expected to return to service in the second quarter of this year and Salem Unit 1 is expected to return in the fall. In any case , the units will be restarted only when we are certain they are ready for reliable operation over the long term. The Hope Creek nuclear plant, meanwhile, has achieved outstanding performance since its return from a refueling and maintenance outage in early 1996. Safety has been, and will tinue to be, the first priority in operations of all our nuclear units. Investing for growth is our third goal. A key component of this strategy is our international independent power company, CEA. The demand for new electric generation in the national market will exceed 800 gigawatts over the next 10 years. That's the equivalent of 800 very large generating stations.
CEA will continue to pursue financially attractive opportunities here in the United States, but because of the tremendous demand seas, it will emphasize tional markets. We have also launched a new total energy services subsidiary, Energis Resources, which tions Enterprise to compete for market opportunities spawned by deregulation
-both within 1966 1976 1986 1996 (dolln.rs) Dividend History, Adjusted for Stock Split s and outside our traditional service territory. We plan for it to be an engine of growth in the future and to be a billion dollar business in five years. On the utility side, we have expanded our portfolio of tional products and services by expanding our appliance ness to include several new competitive service offerings , as well as off-system electric and gas sales. Worki n g Smarter In addition, six-year contracts ratified by our unions utilized mutual gains bargaining and enhanced our ability to compete in the future by removing some of the constraints that ously hindered our operational flexibility.
The contracts allow our gas and electric employees to do crossover work , which translates to a faster response to tomers, increases the efficiency of our work force and helps us find better ways to satisfy customers.
Continued investment in the professional growth of our 11 , 000 employees also contributes to our long-term health. We are ted to establishing an tion that fosters an environment of continuous learning; we have made a major investment in employee development and nical training, as well as tuition reimbursement for college and post-graduate studies. We realize working smarter demands uous learning by all of us, and that for Enterprise to be successful in a changing environment, 3 our work force skills must be well-matched with the new requirements demanded by a competitive market.
Our associates are also an invaluable resource that can help us recognize the needs of the marketplace.
Harnessing their life experiences and spectives to help shape business decisions will ultimately help us satisfy the energy service needs of an expanding range of customers. We are committed to creating a work environment of mutual respect, where ates are empowered to unleash their many, cliverse talents and insights to the fullest. In this annual report, you will find some excellent ples of how we are working towards getting the rules right, achieving operational excellence and meeting our vision for investing for growth. I am grateful to you for your continued support. As freedom of choice continues to evolve, I assure you that all of us at Enterprise are dedicated to ering to you the results of our hard work in the years ahead. E. James Ferland Chairman of the Board , President and Chief Ex ecutive Offi cer, Publi c Service Enterprise Group Incorporat ed Februar y 14 , 1997 Allocati,on of Assets at December 31, 1996 Enterprise
'lbtal Assets -$16.9 billion PSE&G O Electric 74% 0 Gas 14% EDHI 0 PSRC 9% CEA 2% 0 EGDC 1% Sources of Consolidated Earnings p e r Shar e Enterprise Earnings per A verage Share -$2.52 Earnings per Share PSE&G 0 Electric Gas EDC* CEA EGDC $1.79 $ .40 $ .23 $ .10 $ .04 $ (.01) Energis Resources$
(.03) (*Discontinued Gain on Sale-$.06; In come from Operations-$.04)
PSE&G serves the intensely developed corridor between New York City and Philadelphia.
Community Energy Alternatives has power plant interests in the Americas , Asia , the Pacific Rim and Europe. Public Service Enterprise Group Incorporated Public Service Electric and Gas Company Enterprise Diversified Holdings Incorporated 4 Enterprise PSE&G EDHI Energis Resources Community Energy Alternatives Public Service Resources Corporation
-"------u-r*na..
E. James Ferland Chairman of the Board, President and Chief Executive Officer PO. Box570 80 Park Plaza, T4B Newark , NJ 07101 (201) 430-7000 www.pseg.com Lawrence R. Codey President and Chief Operating Officer PSE&G PO. Box 570 80 Park Plaza, T4B Newark, NJ 07101 (201) 430-7000 www.pseg.com Robert J. Dougherty , Jr. President and Chief Operating Officer EDHI The Legal Center One Riverfront Plaza 9th Floor Newark, NJ 07102 (201) 596-6760 Frank Cas s idy President and Chief Executive Officer Energis Resources Incorporated 499 Thornall Street 5th Floor Edison , NJ 08837 (888 1-3-ENERGIS www.energisresources
.com Michael J. Thomson Pr e sident and Chief Executive Officer Community Energy Alternatives Incorporate0 1200 East Ridgewood Avenu e Ridgewood , NJ 07450 (201) 612-2772 Eileen A. Moran President Public Service Re s ources Corporation The Legal Center On e Riverfront Plaza 9th Floor Newark, NJ 07102 (201) 596-6710 I I I I I I P ub licly-trade d dive r s i fie d ene r gy and ene r gy se r vices company l ocated i n New Jersey with annual reve n ues of more t h an $6 b i mon, cons i st i ng of two main subsidiar i es: Pub l ic Service E l ectr i c and Gas Company and E n terp r ise Diversified Ho l dings Incorporated.
Se r ves more than 5.5 million New Je r sey res i dents in mo r e than 300 urban, suburban and r ural communit i es wit h e l ect ri c i ty, gas an d e n ergy alte r natives in a 2,600 square-mile diago n al co r ridor ac r oss the state. Operates Enterp ri se's non-u ti l jty bus i nesses seeking to mai n tai n a n d expand its energy services in the world. Consists of three primary subsidiaries:
Energis Resources , Community Energy Alternatives, and Pub l ic Service Resources Corporation.
Provides a full menu of energy management solutions for nesses in the Northeast.
Deve l ops, acquires, owns and ates cogeneration and independent powe r facilities in the U.S., Asia, t h e Pacific Rim, Europe , and Sout h Ame r ica. Enhances EDHI's financial strength with a strong, diverse portfolio of more than 60 separate investments across a wide spectrum of industry sectors and asset types, including leveraged and direct financing leases , project financing, venture capital funds, l eve r age d buy-outs, real estate l imited partne r ships and secu ri ties. Collectively, PSE&G and Community Energy Alternatives, a subsidiary of EDHI, have more than 90 years of power plant operating experience with active investments in 40 powe r p l ants fue l ed by coal, natural gas, oil, petroleum coke and nuclear. PSE&G provides the lowest cost, most reliable electric and gas service of any New Jersey utility. It maintains a staff of over 600 highly trained service technicians on cal I 24 hours a day, 365 days a year to repair a broad range of gas and electric appliances and HVAC equipment and backs up its performance with nine guarantees of service. Through its Sunburst Customer So l utions product offuring, PSE&G provides meter reading , bi I ling and collection services.
EDHI bui l ds on the near l y 100-year tradit i on of Enterprise by seeking out and developing additional energy-related services as lation of the industry progresses.
In addition to offering several n e w services, Energis Resources brings the expertise off unctions ous l y performed by a number of Enterprise subsidiaries to Northeast markets which it knows well. More than 200 experts in project development and financing, neering , and plant operations and maintenance create effective teams that understand the dynamics of t h e areas they serve. PSRC's well-balanced portfolio provides diversification , earrungs stability and continued incremental earn.i ngs growth to shareholders. 5 -... 'II I I *Electricity and Gas *Industrial and Commercial Gas *Industrial, Commercial and Residential Electric *En e rgy Consulting and Planning *I ntegrated Energy Management Services *Operations and Maintenance Support *Residential Gas Product s and Services *Electricity and Gas *Industrial and Commercial Electric *Energy Consulting and Planning *Industrial and Commercial Gas *Residential Gas Products and Services *Sunburst Customer Solutions
*'frade l illk export assistance program *Business Enhancement Program *Residential Electric *Electricity and Gas *Industrial and Commercial Gas *Energy Consulting and Planrung *Integrated Energy Manag eme nt Services *Operations and Maintenance Support *Electricity and Gas *Energy Consulting and Planning *Integrated Energy Management Services *Operations and Maintenance Support *Financing Solutions
*Electric Generation Solutions
*Investments in assets which vide fund s for future growth and incremental ear nings Success in meeting our strategic objectives will be measured in terms of earnings per share growth. The objective for the Enterprise portfolio is a compound growth rate of five percent annually over the next five years. While new business ventures will play a vital role in the long-term growth and strength of Enterprise , PSE&G remains Enterprise's core business and currently comprises mately 97 percent of total Enterprise revenues. EDHI will enter new markets in the energy arena where its ence and knowledge can be brought to bear and when market needs and opportunities can be pursued on a sound and profitable basis. Energis Resources will serve industrial and commercial tomers in the New England and Mid-Atlantic region through three product platforms:
energy supply, consulting, engineering and ations services, and financing solutions.
As the opportunities for growth in the domestic generation business shrink due to overcapacity and potentially low profit margins, CEA will pursue investments in intern a tional generation in strategic markets. PSRC plan s to build on its expertise in risk management and mitigation, transaction analysis and closing and investment management to exploit new opportunities that arise from industry deregulation. 


" Getting the Rules Right Many of the rules governing our industry were written at a time when the utility franchise was the best way to ensure universal, safe and reliable service. However, now that the infrastructure has been built and as economic conditions change, we need to make sure all energy providers operate on a level playing field. We are working to foster rules Master Plan would require rate reductions of five to ten the high level of service relia-that are fair to our customers , utilities to develop plans to percent for customers. We are bility that exists today. shareholders, the State of offer retail competition to five committed to working toward A significant issue in the New Jersey and its economy. percent of all customers by that target rate reduction in a restructuring process is the Enterprise has dramati-October 1998. This would manner that protects the envi-recovery of transition costs. cally increased its efforts to increase incrementally until ronment and our investors, 'fransition costs result from affect the deregulation debate full competition for all con-without creating a category of the utilities' historical legal in both New Jersey and sumers is reached by April second-class consumers who obligation to serve all cus-Washington, D.C. Getting the 2001. The state's electric utili-do not share in the benefits of tomers. Utilities have been rules right is of crucial impor-ties have until July 15 to file competition.
n 1996, we produced          The 1996 results also reflect    Freedom of Choice I    solid financial results,  a one-time charge of$59 million,    For the past five years, I've In our efforts to get the rules right, we continue to provide despite the ongoing        or 25 cents per share, stemming    talked to you in our annual and    leadership at the state and fed-expenses associated with the    from customer refunds required      quarterly reports about the dra-    eral levels where we are working refurbishment of the Salem      by Public Service Electric and      matic changes facing our indus-    aggressively to establish rules nuclear units.                  Gas Company's (PSE&G) resolu-      try and about the ways we have      for competition that will be fair 1996 earnings reflect the   tion of outstanding Salem regula-   been preparing for that new era. to our customers, our employees benefits of our ongoing cost    tory issues.                           This year the new era begins. and our shareholders.
required to plan, build and tance if Enterprise is to com-their own restructuring plan s. While dedicated to imple-maintain generation and a pete effectively in the evolving PSE&G shares the BPU's menting the Energy Master delivery infrastructure to reli-energy market. broad objectives in the restruc-Plan, we are also urging the ably meet customer needs. In turing process and will work BPU to provide utilities with exchange for this obligation, Energy Master Plan vigorously toward the goal of flexibility to propose benefi-utilities have been allowed a In January 1997, the BPU opening the New Jersey mar-cial changes, as different unveiled its blueprint for ketplace to competition, with utilities face different circum-introducing customer choice stances and challenges in into New Jersey's electricity restructuring.
management efforts, the                                                 In January 1997, the New            We are working to ensure Financial Outlook strong New Jersey economy                                           Jersey Board of Public Utilities    that the new rules on industry Looking ahead, we have estab-and a good contribution from                                        (BPU) issued its proposed find-     restructuring provide customer lished a target of five percent our off-system gas sales that                                      ings and recommendations for       choice and lower cost without compound annual growth in earn-helped offset relatively flat                                      restructuring the electric power    endangering service reliability ings per share. We intend to electric sales caused by cool                                      industry in New Jersey. This        or compromising air quality and grow income in both our utility summer weather. We also                                            proposed Energy Master Plan        environmental progress.
We are also market. The proposed Energy stressing the need to maintain 7 PSE&G Net Utility Plant In-Servic e Fossil 18.6% Nucle a r 40.0% Tr a nsm i ss i on & D i str i but i on 38.8% }othe r T he net e/,ectric and gas plant in-seruice arrwunted to $10. 7 bi llw n at D ecember 31, 1996. 2.6% 8 reasonable opportunity to recover investments through regulated rates. As rates become competitive, they may no longer be sufficient to mit recovery of all such costs, which then become "stranded." Considerations of fairness, efficiency and law warrant recovery of these costs. Restructuring and the environment Lower cost electric power A significant amount of the pollution transported into the Northeast is produced by burning power plants in the Midwest and Ohio Valley, plants that are allowed to operate with minimal mental controls.
and non-utility businesses experienced a sharp increase                                        requires our principal subsidiary,      Working to achieve opera-through effective cost manage-in earnings at our non-                                             PSE&G, and the state's other        tional excellence means concen-ment and development of new utility investment company,                                        electric utilities, to develop pro- trating on what we do best and revenue streams. We are further Public Service Resources                                            posals that allow customers to      striving to do even better. We strengthening our capital struc-Corporation (PSRC).                                                 choose electric suppliers. It sets  are creating partnerships with ture by applying our strong Public Service Enterprise                                      an aggressive timetable requir-    suppliers to increase efficiency cash flow to the retirement of Group (Enterprise) consoli-                                        ing that customer choice be        and reduce costs; recognizing maturing long-term debt and dated earnings for the year                                        provided to a minimum of five      employees, individually and in also are using internally gener-were $611.6 million, or $2.52                                      percent of customers beginning      teams, whose best practices, ated funds to provide financial per common share. That                                              in October 1998 and progressing    in the form of their ideas and support to our more rapidly compares with earnings of                                           to full competition for 100 per-   actions, are serving as role mod-growing companies, Energis
An electric industry restructuring plan that encourages increased duction of this cheap, dirty Midwest electric power will, as a result, send hundreds of thousands of tons of addi-must not come at the expense tional pollution drifting into of environmental quality or our region. so u nd public health policy. Our concern over this issue New Jersey and the Northeast is shared by officials at the are burdened by the impact highest levels of state govern-of air pollution created to the West and South, which is transported by prevailing wind currents.
$662.3 million, or $2.71 per                                        cent of customers no later than    els for the entire corporation; Resources Incorporated (Energis share in 1995.                                                      April 2001.                        and implementing new informa-Resources) and Community Results for 1996 reflect                                            Freedom of choice is coming    tion technology to help manage Energy Alternatives two one-time gains recorded                                        and we are ready for it. We wel-    work more efficiently across the Incorporated (CEA).
ment, as well as statehouse and congressional members of both parties throughout the Northeast.
during the year - $18 mil-                                          come it and believe we are in      corporation.
We have worked hard to increase their tion of the strong link between I energy and the environment and there are encouraging indications that the message is being heard. Vice President Al Gore has clearly stated that environmental tion should not be the price the nation pays for lower energy costs. The Federal Energy Regulatory Commission , the Environmental Protection Agency and the White House Council on Environmental Quality have also edged the potential negative environmental impact of restructuring. We are aged by this support and are working to translate it into appropriate action. Energy taxes After a year of study, a BPU/ New Jersey 'freasury Department joint task force has recommended a major overhaul of the Gross Receipts and Franchise Tux (GRFT) paid by all customers of New Jersey utilities. Because customers of non-utility energy providers do not pay this tax, utilities are at a competitive disadvantage.
Through continued commit-lion, or seven cents per share,                                     position to succeed in this new        We remain committed to the ment to our core utility busi-from the repurchase of pre-                                        marketplace.                       reliability and quality of our ness, and establishing new ferred stock, and $13.5 mil-                                            We have been preparing for      service. This commitment con-non-regulated businesses, such lion, or six cents per share,                                       this change by doing what suc-      tinues to grow in significance as as Energis Resources, we aim to resulting from the sale of our                                      cessful competitors must do:        customers gain freedom in enhance the value of your com-Houston-based oil and gas sub-                                      redesign and refocus operations;    choosing suppliers. PSE&G con-pany and continue our record of sidiary, Energy Development                                        concentrate on cost containment;    tinues to offer pioneering money-paying dividends annually for Corporation (EDC).                                                  emphasize a strong customer        back service guarantees. If we nine decades.
A new tax plan that treats all e nergy providers equally -giving utilities and new market entrants the same ties to compete for business -has been recommended. 9 The proposal calls for the 13 percent GRFT to be replaced by existing sales and corporate taxes and a rary new tax that would be phased out over seven years, causing a 45 percent reduction in taxes paid by consumers.
focus; forge strong, productive    fail to keep our service promises partnerships with employees        to customers, they can request and suppliers; participate          and receive direct bill credits. It actively and decisively in the      is no longer enough to satisfy shaping of public policies related  customers; the standard for cus-to governing our industry; and      tomer service has been raised seek new sources of revenue.       and will be raised ever higher in the years ahead.
Energy tax reform is long due and essential if New Jersey is to compete with other states for business and jobs. It's also good news for New Jersey consumers, who currently pay among the est energy taxes in the nation. 
Three Goals Our commitment to opera-We intend to prosper in this new tional excellence, and success in marketplace by advancing the the new deregulated environment three goals we set in 1996:
resulted in our decision in 1995 getting the rules right; achiev-to take the nearly twenty-year-old ing operational excellence; and investing for growth.
2
 
A key Enterprise objective is to keep its co=on stock dividend secure, as it has been over the last five decades.
2.50 2.00 I.SO 1.00 0.50 0.00  111111I11111111I11111111111111111 1946              1956                1966                  1976              1986              1996 (dolln.rs)
Dividend History, Adjusted for Stock Splits Salem nuclear units out of service      and outside our traditional serv-            our work force skills must be and make fundamental changes            ice territory. We plan for it to            well-matched with the new necessary to improve perfor-            be an engine of growth in the                requirements demanded by a mance of the station to the end of       future and to be a billion dollar            competitive market.
its 40-year license. Salem Unit 2        business in five years .                        Our associates are also an is expected to return to service in          On the utility side, we have            invaluable resource that can            Allocati,on of the second quarter of this year          expanded our portfolio of tradi-             help us recognize the needs of              Assets at and Salem Unit 1 is expected to          tional products and services by              the marketplace. Harnessing          December 31, 1996 Enterprise 'lbtal Assets -
return in the fall. In any case,        expanding our appliance busi-               their life experiences and per-
                                                                                                                                $16.9 billion the units will be restarted only        ness to include several new                 spectives to help shape business when we are certain they are            competitive service offerings, as            decisions will ultimately help us      PSE&G ready for reliable operation over       well as off-system electric and              satisfy the energy service needs    O Electric        74%
the long term.                          gas sales.                                   of an expanding range of cus-      0 Gas              14%
The Hope Creek nuclear                                                            tomers. We are committed to            EDHI Workin g Smarter plant, meanwhile, has achieved                                                        creating a work environment of      0 PSRC              9%
In addition, six-year contracts                                                      CEA              2%
outstanding performance since                                                        mutual respect, where associ-ratified by our unions utilized                                                  0 EGDC              1%
its return from a refueling                                                          ates are empowered to unleash mutual gains bargaining and and maintenance outage in                                                            their many, cliverse talents and enhanced our ability to compete early 1996.                                                                          insights to the fullest.
in the future by removing some Safety has been, and will con-                                                        In this annual report, you of the constraints that previ-tinue to be, the first priority in                                                    will find some excellent exam-ously hindered our operational operations of all our nuclear units.                                                  ples of how we are working flexibility. The contracts allow Investing for growth is our                                                      towards getting the rules right, our gas and electric employees to third goal. A key component of                                                        achieving operational excellence do crossover work, which trans-                                                        Sources of this strategy is our interna-                                                        and meeting our vision for              Consolidated lates to a faster response to cus-                                              Earnings p er Share tional independent power com-                                                        investing for growth.
tomers, increases the efficiency                                                  Enterprise Earnings pany, CEA. The demand for new                                                            I am grateful to you for your of our work force and helps us find                                              per Average Share -
electric generation in the inter-                                                    continued support. As freedom                $2.52 better ways to satisfy customers.
national market will exceed                                                          of choice continues to evolve, Continued investment in the                                                  Earnings per Share 800 gigawatts over the next                                                          I assure you that all of us at professional growth of our 11,000 10 years. That's the equivalent                                                      Enterprise are dedicated to deliv-      PSE&G employees also contributes to our of 800 very large generating                                                          ering to you the results of our    0 Electric        $1.79 long-term health. We are commit-stations. CEA will continue to                                                        hard work in the years ahead.          Gas          $ .40 ted to establishing an organiza-pursue financially attractive tion that fosters an environment opportunities here in the of continuous learning; we have                                                                    $ .23 United States, but because of                                                                                                EDC*          $ .10 made a major investment in the tremendous demand over-                                                                                                  CEA          $ .04 employee development and tech-seas, it will emphasize interna-                                                                                              EGDC          $ (.01) nical training, as well as tuition                                                  Energis tional markets.                                                                      E. James Ferland reimbursement for college and                Chairman of the Board, President        Resources$ (.03)
We have also launched a new                                                      and Chief Executive Officer, post-graduate studies. We realize total energy services subsidiary,                                                    Public Service Enterprise Group working smarter demands contin-              Incorporated                        (* Discontinued operations-Energis Resources, which posi-                                                        February 14, 1997                  Gain on Sale-$.06; Income uous learning by all of us, and                                                  from Operations-$.04) tions Enterprise to compete for that for Enterprise to be success-market opportunities spawned ful in a changing environment, by deregulation - both within 3
 
Public Service            Enterprise            E. James Ferland Enterprise Group                                Chairman of the Board, Incorporated                                    President and Chief Executive Officer PO. Box570 80 Park Plaza, T4B Newark, NJ 07101 (201 ) 430-7000 www.pseg.com Public Service Electric  PSE&G                  Lawrence R. Codey PSE&G serves the intensely developed corridor between        and Gas Company                                  President and Chief Operating Officer New York City and Philadelphia.                                                    PSE&G O PS~G PO. Box 570 80 Park Plaza, T4B Newark, NJ 07101 (201 ) 430-7000 www.pseg.com Enterprise                EDHI                  Robert J. Dougherty, Jr.
President and Chief Operating Officer I
Diversified Holdings                                                                        I Incorporated                                    EDHI The Legal Center One Riverfront Plaza 9th Floor Newark, NJ 07102 (201 ) 596-6760 Energis Resources      Frank Cassidy President and Chief Executive Officer Community Energy                                                                  Energis Resources Incorporated Alternatives has power                                    E~RGIS                499 Thornall Street plant interests in the Americas,                                                  5th Floor Asia, the Pacific Rim                                                            Edison , NJ 08837 and Europe.                                                                      (8881-3-ENERGIS www.energisresources .com Community Energy      Michael J . Thomson Alternatives          President and Chief Executive Officer Community Energy Alternatives Incorporate0 1200 East Ridgewood Avenue Ridgewood, NJ 07450 (201 ) 612-2772 Public Service        Eileen A. Moran Resources Corporation  President Public Service Resources Corporation
                                                            -"-----
The Legal Center One Riverfront Plaza
                                                            -u-r*na..              9th Floor Newark, NJ 07102 (201 ) 596-6710 4
 
                                                                                    - ...
                                                                                    'II  I I Publicly-traded diver s ified energy    Collectively, PSE&G and
* Electricity and Gas                Success in meeting our strategic and energy services company            Community Energy Alternatives, a
* Industrial and Commercial Gas      objectives will be measured in located in New Jersey with annual      subsidiary of EDHI, have more than
* Industrial, Commercial and        terms of earnings per share revenues of more t han $6 bimon,        90 years of power plant operating            Residential Electric              growth. The objective for the consisting of two main subsidiaries:    experience with active investments
* Energy Consulting and Planning    Enterprise portfolio is a compound Public Service Electric and            in 40 power plants fueled by coal,        *Integrated Energy Management        growth rate of five percent Gas Company and Enterpr ise            natural gas, oil, petroleum coke and        Services                          annually over the next five years.
Diversified Holdings Incorporated.      nuclear.
* Operations and Maintenance Support
* Residential Gas Products and Services I
I Ser ves more than 5.5 million New Jer sey residents in more than PSE&G provides the lowest cost, most reliable electric and gas service of any
* Electricity and Gas
* Industrial and Commercial While new business ventures will play a vital role in the long-term 300 urban, suburban and r ural        New Jersey utility. It maintains a            Electric                          growth and strength of I communities with electricity, gas      staff of over 600 highly trained service
* Energy Consulting and Planning    Enterprise, PSE&G remains I and energy alter natives in a          technicians on cal I 24 hours a day,
* Industrial and Commercial Gas      Enterprise's core business and 2,600 square-mile diagonal              365 days a year to repair a broad
* Residential Gas Products and      currently comprises approxi-cor ridor across the state.            range of gas and electric appliances        Services                          mately 97 percent of total and HVAC equipment and backs up its
* Sunburst Customer Solutions        Enterprise revenues.
performance with nine guarantees          * 'fradelillk export assistance of service. Through its Sunburst              program Customer Solutions product offuring,
* Business Enhancement Program PSE&G provides meter reading,
* Residential Electric bi Iling and collection services.
Operates Enterprise's non-utiljty      EDHI bui lds on the nearly 100-year
* Electricity and Gas              EDHI will enter new markets in businesses seeking to maintain a nd    tradition of Enterprise by seeking
* Industrial and Commercial Gas    the energy arena where its experi-expand its energy services in the      out and developing additional
* Energy Consulting and Planrung    ence and knowledge can be brought world. Consists of three primary      energy-related services as deregu-
* Integrated Energy Management      to bear and when market needs and subsidiaries: Energis Resources,      lation of the industry progresses.            Services                          opportunities can be pursued on a Community Energy Alternatives,
* Operations and Maintenance        sound and profitable basis.
and Public Service Resources                                                          Support Corporation.
Provides a full menu of energy        In addition to offering several new
* Electricity and Gas                Energis Resources will serve management solutions for busi-        services, Energis Resources brings
* Energy Consulting and Planning    industrial and commercial cus-nesses in the Northeast.              the expertise offunctions previ-
* Integrated Energy Management      tomers in the New England and ously performed by a number of                Services                          Mid-Atlantic region through three Enterprise subsidiaries to Northeast
* Operations and Maintenance          product platforms: energy supply, markets which it knows well.                  Support                            consulting, engineering and oper-
* Financing Solutions                ations services, and financing solutions.
Develops, acquires, owns and oper-      More than 200 experts in project
* Electric Generation Solutions    As the opportunities for growth in ates cogeneration and independent      development and financing, engi-                                                the domestic generation business power facilities in the U.S., Asia,    neering, and plant operations                                                  shrink due to overcapacity and t he Pacific Rim, Europe, and          and maintenance create effective                                                potentially low profit margins, South Amer ica.                        teams that understand the                                                      CEA will pursue investments dynamics of t he areas they serve.                                              in international generation in strategic markets.
Enhances EDHI's financial strength    PSRC's well-balanced portfolio
* Investments in assets which pro-  PSRC plans to build on its expertise with a strong, diverse portfolio of    provides diversification, earrungs            vide funds for future growth and in risk management and mitigation, more than 60 separate investments      stability and continued incremental          incremental earnings              transaction analysis and closing and across a wide spectrum of industry    earn.i ngs growth to shareholders.                                              investment management to exploit sectors and asset types, including                                                                                    new opportunities that arise from leveraged and direct financing leases,                                                                                industry deregulation.
project financing, venture capital funds, leveraged buy-outs, real estate limited partner ships and securities.
5
 
Getting the Rules Right Many of the rules governing our industry were written at a time when the utility franchise was the best way to ensure universal, safe and reliable service. However, now that the infrastructure has been built and as economic conditions change, we need to make sure all energy providers operate on a level playing field.
We are working to foster rules  Master Plan would require          rate reductions of five to ten  the high level of service relia-that are fair to our customers,  utilities to develop plans to      percent for customers. We are    bility that exists today.
shareholders, the State of      offer retail competition to five    committed to working toward          A significant issue in the New Jersey and its economy.      percent of all customers by        that target rate reduction in a  restructuring process is the Enterprise has dramati-      October 1998. This would            manner that protects the envi-  recovery of transition costs.
cally increased its efforts to  increase incrementally until        ronment and our investors,      'fransition costs result from affect the deregulation debate  full competition for all con-      without creating a category of  the utilities' historical legal in both New Jersey and          sumers is reached by April          second-class consumers who      obligation to serve all cus-Washington, D.C. Getting the    2001. The state's electric utili-  do not share in the benefits of  tomers. Utilities have been rules right is of crucial impor- ties have until July 15 to file    competition.                    required to plan, build and tance if Enterprise is to com-  their own restructuring plans.          While dedicated to imple-    maintain generation and a pete effectively in the evolving    PSE&G shares the BPU's          menting the Energy Master        delivery infrastructure to reli-energy market.                  broad objectives in the restruc-    Plan, we are also urging the    ably meet customer needs. In turing process and will work        BPU to provide utilities with    exchange for this obligation, Energy Master Plan              vigorously toward the goal of      flexibility to propose benefi-  utilities have been allowed a In January 1997, the BPU        opening the New Jersey mar-        cial changes, as different
" unveiled its blueprint for      ketplace to competition, with      utilities face different circum-introducing customer choice                                          stances and challenges in into New Jersey's electricity                                        restructuring. We are also market. The proposed Energy                                          stressing the need to maintain 7
 
PSE&G Net Utility Plant In-Service Fossil        18.6%
Nuclear        40.0%
reasonable opportunity to          A significant amount of the recover investments through    pollution transported into the regulated rates. As rates      Northeast is produced by coal-become competitive, they may    burning power plants in the no longer be sufficient to per- Midwest and Ohio Valley, mit recovery of all such costs, plants that are allowed to which then become "stranded."  operate with minimal environ-Considerations of fairness,    mental controls. An electric efficiency and law warrant      industry restructuring plan recovery of these costs.        that encourages increased pro-Transmission
                                                & Distribution 38.8%                                  duction of this cheap, dirty Restructuring and the          Midwest electric power will, environment                    as a result, send hundreds Lower cost electric power      of thousands of tons of addi-must not come at the expense    tional pollution drifting into of environmental quality or    our region.
sound public health policy.        Our concern over this issue 2.6%
New Jersey and the Northeast    is shared by officials at the
                                          } o t h er are burdened by the impact      highest levels of state govern-of air pollution created to the ment, as well as statehouse The net e/,ectric and gas plant in-seruice arrwunted to $ 10. 7 billwn at December 31, 1996.                      West and South, which is        and congressional members of transported by prevailing      both parties throughout the wind currents.                  Northeast. We have worked hard to increase their recogni-tion of the strong link between 8
I
 
energy and the environment    working to translate it into          The proposal calls for the and there are encouraging      appropriate action.                13 percent GRFT to be indications that the message                                    replaced by existing sales and is being heard. Vice President Energy taxes                      corporate taxes and a tempo-Al Gore has clearly stated    After a year of study, a BPU/    rary new tax that would be that environmental degrada-    New Jersey 'freasury              phased out over seven years, tion should not be the price  Department joint task force      causing a 45 percent reduction the nation pays for lower      has recommended a major          in taxes paid by consumers.
energy costs. The Federal      overhaul of the Gross Receipts    Energy tax reform is long over-Energy Regulatory              and Franchise Tux (GRFT)          due and essential if New Commission, the                paid by all customers of          Jersey is to compete with Environmental Protection      New Jersey utilities. Because    other states for business and Agency and the White House    customers of non-utility          jobs. It's also good news for Council on Environmental      energy providers do not pay      New Jersey consumers, who Quality have also acknowl-    this tax, utilities are at a      currently pay among the high-edged the potential negative  competitive disadvantage. A      est energy taxes in the nation.
environmental impact of        new tax plan that treats all restructuring. We are encour-  energy providers equally -
aged by this support and are  giving utilities and new market entrants the same opportuni-ties to compete for business -
has been recommended.
9
 
*'
Operational Excellence Achieving operational excellence doesn't happen overnight. It means questioning tradition, finding smarter ways to serve customers, streamlining work processes, and keeping an unblinking eye on the bottom line.
In 1996, Enterprise employees    Aviation Agency bid out to        Taking time a t Hope Creek      Redu ction, r ecovery, continued their commitment        replace 30,000 feet of cable      Our Hope Creek nuclear sta-    recycling to excellence. As we transform    snaking under a runway at        tion in Salem, New Jersey, got  A major corporate initiative, ourselves into a global energy    Newark International Airport -    back to the business of making  driven by the need to improve services company, their ideas    one of the nation's busiest -      electricity following an outage our bottom line as well as our and actions remain critical to  PSE&G's Metropolitan electric      early in 1996. The refueling    commitment to the environ-our success.                    distribution division did the      outage was expected to last    ment, was the establishment of Here are some examples of    work. The work might be            30 days; but station manage-    a materials management how individuals, teams and      considered traditional , but      ment expanded the original      process. The process empha-organizations are helping to    PSE&G's approach wasn't.          work scope to include more      sizes not only the recovery of set a standard of excellence for Project leaders and repre-        than 13,500 individual work    usable waste, but also the the entire corporation.          sented employees planned out      activities, all aimed at ensur- reduction of waste by design-a schedule that would not          ing safe and reliable long-term ing out as much as possible Shared vis ions,                interfere with high air traffic    operations at the plant.        from the start. The results shared rewards                  periods. Much of the work was      Hope Creek has enjoyed an      have been gratifying: waste Replacing underground distri-    done on weekends. Despite the      extremely reliable period      disposal costs have fallen more bution cable and splicing is the scheduling complications, the      of operation since its return  than $5 million, more than type of work on which PSE&G      job was completed on time.        to service.                    90 percent of our non-haz-has built its reputation for    The project marked a new                                          ardous solid waste is being excellence. When the Federal    approach to generating rev-                                        recycled and PSE&G was for-enue and helped increase our                                      mally honored by the federal employees' awareness of the                                        Environmental Protection importance of meeting cus-                                        Agency (EPA) as one of 280 tomer needs as we face the                                        Fortune 1000 companies new reality of competition.                                        named charter members of the EPA's WasteWi$e program.
11
 
87  88  89  90  91  92  93    94    95    96                              92    93  94  95  96 PSE&G supplies electricity at the lowest cost                          Th e ratio of customers to PSE&G permanent per kwh of all the utilities in                                    employees, a measure of efficiency, N ew Jersey, and intends to continue the trend.                          has g rown 23% over the past fiv e years.
(Average revenue per kwh adj usted for inflation.
Base year 1995- 1996. Cents per kwh.)
New perspectives,                      Meeting monthly, the council      system will allow for quicker new energy                            has formulated recommenda-        accessing of information and PSE&G gained recognition for          tions to increase minority sup-    improved capabilities for plan-its promotion and support of          plier participation in high-dollar ning and management of work minority and women-owned              volume and strategic products      in providing energy services.
business development when it            and services. PSE&G's supplier    But Business Integration was named 1996 Corporation of          diversity process is a customer-  must be more than just jar-the Year by the minority busi-          driven business strategy. Just    gon. PSE&G will be joining ness members of the New York/          as success requires a workforce  some 6,000 companies world-New Jersey Minority Purchasing          that is reflective of the society wide who are using an infor-Council. PSE&G's efforts in            we serve, we also need suppliers  mation system known as SAP this area include establishing          who can provide insights and      - Systems, Applications and a Supplier Diversity Council            new ideas to help us better      Products in Data Processing -
comprised of employees and              meet our customers' needs.        to achieve major gains in representatives from minority                                            performance. The rollout of businesses to advise the com-          Making the power of              Business Integration starts pany on its supplier diversity          information work for us          with Fossil Generation in 1998.
policies and results, and to fos-      Business Integration is a cor-ter communications between              poratewide effort to improve PSE&G and its suppliers.                our operating efficiencies through the use of integrated business software. An inte-grated internal information 12
 
Customer service:                A residential customer in            for good jobs with fair wages ,
a hallmark of success            South Jersey, for example, was      benefits and working condi-Customers today are becoming    dissatisfied with the service        tions. The new agreements more sophisticated - and        she received from a competi-        address the requirements of a demanding - consumers.          tor of our appliance service        fast-changing industry head-on, With the coming of customer      business. This competitor            including provisions that allow choice, building a relationship  tried to use unethical tactics      gas and electric employees to with our customers has never    to sell a major repair job that      work in each other's areas.
been more critical. At PSE&G    wasn't needed. When the cus-        Other provisions address cut-we hear from our customers      tomer called PSE&G for a            ting non-productive time and daily through regular surveys,  second opinion, our service          reducing costs. Mutual-gains feedback and personal interac-  technician quickly discovered        bargaining, a process of tions . We listen, then improve  the problem to be simply a          side-by-side problem-solving, our products and services        clogged pilot light. Daily inter-    allowed the unions and based on what we hear. As        actions such as these help          company to help each other part of this constant feedback,  build customer loyalty and          recognize shared interests.
we've learned that the exper-    awareness.                          A united front of employer and tise and integrity of our work-                                      employees is essential for pre-force have been major factors    A pact for the 21st century          serving customers and jobs.
in maintaining customer loyalty. PSE&G's five unions signed contracts in 1996 that extend to the year 2002. These agree-ments balance the needs of the company in an emerging com-petitive marketplace with the needs of employees and unions 13
 
Investing For Growth In 1996, Enterprise reorganized to take maximum benefit of the opportunities arising out of the deregulation of the electric and gas industries. This reorganization also results in a clearer division between Enterprise's regulated and unregulated businesses.
Bob Dougherty now serves        Going global                        standards, and is delivering      CEA also enjoys a well-as president and chief operat-  Business plans for CEA target      electricity to the country's    established reputation in the ing officer of an expanded      new investments of approxi-        power grid. The second unit is  U.S. The JFK Energy Center, Enterprise Diversified Holdings  mately $700 million over a          scheduled to go on-line in late which is owned and operated Incorporated (EDHI). In addi-    five -year horizon. Plans for      1997; both units will supply a  by CEA and Gas Energy, Inc. ,
tion to PSRC, which will con-    1997 call for closure on several    substantial amount of electric- a wholly-owned subsidiary of tinue to search for passive,    projects, among them a 220-        ity to this rapidly-developing  Brooklyn Union Gas Company, energy-related investments to    megawatt simple-cycle plant in      rural area.                    completed its first full year of add to its portfolio, Dougherty  Colombia, South America.              Last year CEA and its        commercial operation. The will manage and develop CEA,    This plant will burn natural        partner AES, a developer and    center is a 105-megawatt plant Enterprise's independent        gas and sell its electrical out-    operator of power plants, suc-  that supplies electricity and power company, and a new        put on the Colombian spot          cessfully closed project        hot and chilled water for business, Energis Resources,    market. The project is part of      financing for Central Termica  New York's Kennedy which provides a full range of  a joint venture formed with        San Nicolas, a 650-megawatt    International Airport. Addi-energy-management solutions. Amoco Power Resources. The          plant located in Argentina. tional electrical capacity is I
I .*
Through these unregulated    project is intended to enter        The ability to refinance with a sold to the local utility, companies, and by expanding a    construction during the first      $60 million non-recourse loan  Consolidated Edison.
number of traditional products  quarter of 1997 and be in com-      in the Argentine market            CEA has investments in and services found in our reg-  mercial operation by late 1997. demonstrates a high degree of  22 cogeneration and power ulated utility, Enterprise seeks    The year 1996 was one of        bank confidence in Argentina's  plants around the world to increase shareholder value. progress. CEA holds a minority      power sector reforms and in    totalling 2,400 megawatts of interest in two 300-megawatt        San Nicolas' viability as a key electric generation capacity.
coal-fired units located in the    energy producer.                Operating from offices in interior province of Gansu,                                        Hong Kong, Argentina, China. The first unit success-                                      Thailand, India and the U.S.,
fully passed its first perfor-                                      CEA professionals are pursu-mance test in 1996, meeting                                        ing nearly 70 potential projects all national environmental                                          in more than twelve countries.
15
 
EDHI's net income reached a record high in 1996.
Net income from continuing operations increased 28.5%
as compared to 1995 primarily due to a strong performance by Puhlic Service Resources Corporation.
                                            *Without EGDC impairment of $(50.4) million.
92      93    94  95      96 (dollars in millions)
Income from      Income from Continuing      Di scontinu ed Operations      Operations Smarter energy*M                        Enterprise Strategic Energy      Market restaurants through-Drawing on Enterprise's depth            Solutions, which provided con-  out the Northeast, as well as of experience and financial              sulting, engineering and        more than 40 branch offices of strength, Energis Resources,            repair services. In addition,    a major Manhattan-based bank.
our newest subsidiary, pro-              the financing of energy-savings,    Similarly, deregulation of vides a single source for reli-          or demand-side management        electricity is proceeding able, top-quality service                projects, formerly offered      throughout the U.S. and at a focused on customer needs .              by the utility subsidiary,      particularly fast clip in the The company is concentrating            Public Service Conservation      Northeast - Energis on industrial and commercial              Resources Corporation,          Resources' home territory.
customers throughout the                  will now be supplied by        New Jersey customers will Northeast and Mid-Atlantic                Energis Resources.              begin gaining the ability to states.                                      Energis Resources offers an choose their electricity sup-Energis Resources offers              impressive array of products    plier in October 1998. Retail customers a wide range of                and services, beginning with    customers in Rhode Island and services to improve business              the sale of natural gas. In    Pennsylvania will be able to operations and performance                1996, U.S. Energy Partners      choose in 1997. Since the fed-through more cost-efficient              sold more than $67 million of  eral Energy Policy Act of 1992 energy utilization, energy                gas to some 3,600 customers    deregulated the wholesale elec-process redesign, optimized              in New Jersey, New York and    tricity market, Enterprise has energy investment strategies              states as far south as the      been one of the most active and unique financing options              Carolinas. New Jersey has      and aggressive participants in for energy-related projects.              been a pioneer in the deregu-  that market. Energis Resources The company has absorbed              lation of natural gas sales,    will draw on this expertise to two Enterprise companies                  allowing the customer to buy    serve retail markets afforded with proven track records:                the gas itself from suppliers  freedom of choice.
U.S. Energy Partners, which              like Energis Resources, with sold natural gas, and                    delivery arranged through the local utility.
The company is already marketing natural gas to a number of customers, includ-ing more than 50 Boston 16
 
Along with energy supply,  billing, payment processing        within its service territory Energis Resources provides      and collection services to          and a well-trained staff of consulting, engineering and    municipalities and other            service technicians, the appli-operations services and financ- investor-owned utilities.          ance service business has ing solutions. The ultimate    Municipalities and other utili-    expanded its traditional port-objective is to successfully    ties can reduce costs and          folio of service offerings. These provide total energy manage-    increase efficiencies by utiliz-    new services create added ment to customers in the        ing PSE&G's sophisticated          opportunities for bringing in Northeast, allowing them to    customer service operations        additional revenues. The busi-completely outsource their      and extensive meter reading        ness has also gained efficien-energy functions.              experience. As of January          cies and sharpened its Energis Resources is        1997, seven municipalities and      competitive advantage with already working on energy      two regional water utilities        the introduction ofhome-projects with a number of      have signed on.                    based reporting, which allows major customers. It is              PSE&G's appliance service      service technicians to report installing and maintaining      business is the only region-        directly to their first job in the power supply equipment for a    wide provider of premium            morning instead of stopping major telecommunications        service and service contracts      first at the office.
company's fiber optic network. for all major appliance brands          In addition, PSE&G, with For a national food processor,  with 24-hour service. 365-days-    its long-established rights-of-the company is financing        a-year availability. Banking on    way, extensive network of third-party installation of    a strong name awareness            wires, and long-term customer high-efficiency lighting at 200                                    relationships, is also exploring of its locations.                                                  the possibility of adding wire and wireless telecommunica-Expanding a traditional                                            tions services to its broad por t-portfolio                                                          folio of products and services.
PSE&G, through its Sunburst Customer Solutions program, offers its meter reading, 17
 
Public Service Enterprise Group continues to pursue a strategy of enhancing stockholder value through retention and reinvestment of earnings and payment of an annual dividend .
                                              .
g    ..
                ~                  *
* I
                            \
i I
                            !
91    92    93    94  95  96                    92      93    94      95    96 (dollars)                                            (percent)
This shows the value on December 31                Return on Average Common Equity of each year of $100 invested in                  for 1996 was 11.3%, which reflects Enterprise on December 31, 1991                      various one-time adjustments, as (assumes reinvested dividends).                    discussed in the Chairman's letter of tlus annual report.
g        8      g      g    g
                                                                                                        ...-
0 I
                      '              '
l                    r I
I                    I I
I              I I                                  CD
                                                                          ...-
I
                                                                                                              'I
                      !        I 95      96      97"    98'  99'                        95      96    97*    98*  99*
9    PSE&G    n    EDHI                              Common Equity Preferred Securioes 11 Long-Term lJ Debt
                          *Projected
* Projected (dollars in milliorm)                                            (percent)
Declining utility capital expenditures                One of our key objectives, as reflected are expected to be funned through                          in Enterprise'.~ capitalization internally generated cash, while growing                ratio, is to strengthen the bal.ance sheet EDHI needs are expected to be met by                          by delet*eraging PSE&G.
additional debt and internally generated cash.
 
Consolidated Financial StatisticsrAJ Dollars in thousands where applicable                              1996              1995              1994              1993          1992 Selected Income Information Operating Revenues:
Electric                                                  $ 3,944,362        $ 4,020,842      $ 3,739,713        $ 3,696,114  $ 3,407,830 Gas                                                          1,880,994          1,686,403        1,778,528          1,594,341    1,586,181 Nonutility Activities                                          215,893            186,417          177,082            137,069      112,268 Thtal Operating Revenues                                  $ 6,041,249        $ 5,893,662      $ 5,695,323        $ 5,427,524  $ 5,106,279 Income from Continuing Operations                          $    587,358        $    627,287      $  666,521        $  549,178  $  475,150 Cumulative effect of change in accounting for income taxes                                                -                  -                -              5,414            -
Income from Discontinued Operations                              24,238              35,036          12,512            46,341        28,967 Net Income                                                $    611,596        $    662,323      $  679,033        $  600,933  $  504,117 Earnings per Average Share:
From Continuing Operations                                $ 2.42              $ 2.57          $ 2.73            $ 2.29        $ 2.05 From Cumulative effect of change in accounting for income taxes                              -                  -                -                .02            -
From Discontinued Operations                                  .10                .14              .05                .19          .12 Thtal Earnings per Average Share                                $ 2.52              $ 2.71          $ 2.78            $ 2.50        $ 2.17 Dividends Paid per Share                                        $ 2.16              $ 2.16          $ 2.16            $ 2.16        $ 2.16 Payout Ratio                                                          86%                80%              78%                86%        100%
Rate of Return on Average Common Equity(BJ                        11.28%            12.32%          12.94%            11.91%        10.69%
Ratio of Earnings to Fixed Charges                                  2.68              2.78              2.84              2.57          2.33 Book Value per Common Share(CJ                                  $22.33              $22.22          $21.68            $21.07        $20.32 Gross Utility Plant                                        $17,327,635        $16,925,280      $16,566,058        $15,861,484  $15,081,907 Accumulated Depreciation and Amortization of Utility Plant                        $ 6,148,482        $ 5,737,849      $ 5,467,813        $ 5,057,104  $ 4,610,595 Thtal Assets                                              $16,915,331        $16,816,491      $16,312,734        $15,995,433  $14,543,696 Consolidated Capitalization Common Stock                                              $ 3,626,792        $ 3,801,157      $ 3,801,157        $ 3,772,662  $ 3,499,183 Retained Earnings                                            1,586,256          1,636,971        1,505,010          1,361,018    1,282,931 Common Equity                                                5,213,048          5,438,128        5,306,167          5,133,680    4,782,114 Preferred Stock Without Mandatory Redemption                                      113,392            324,994          384,994            429,994      429,994 Preferred Stock With Mandatory Redemption                                      150,000            150,000          150,000            150,000        75,000 Monthly Guaranteed Preferred Beneficial Interest in PSE&G's Subordinated Debentures                                  210,000            210,000          150,000                  -            -
Quarterly Guaranteed Preferred Beneficial Interest in PSE&G's Subordinated Debentures                                  208,000                  -                -                  -            -
' Long-Turm Debt                                                4,580,231          5,189,791        5,110,022          5,100,228    4,962,884 Thtal Capitalization                                      $10,474,671        $11,312,913      $11,101,183        $10,813,902  $10,249,992 (A) The dewikd consolidated financial swtements and related discussion appear in Appendix A of the Proxy Statement.
(BJ Net Income for a twelve-rrwnth period divided by the thirteen-mnnth a verage of Commnn Equity.
(CJ 1hta1 Comrrwn Equity divided by end-of-period Comrrwn Shares outswnding.
19
 
Condensed Consolidated Statements of Income
                                                                                                                                                ~
l In thousands (except per share data) for the years ended December 31,                          1996                      1995            1994 Operating Revenues Electric                                                                              $3,944,362                $4,020,842      $3,739,713 Gas                                                                                      1,880,994                  1,686,403      1,778,528      I
                                                                                                                                                ~
Nonutility Activities                                                                      215,893                    186,417        177,082 Total Operating Revenues                                                                6,041,249                  5,893,662      5,695,323 Operating Expenses Fuel for Electric Generation and Interchanged Power                                        918,514                    891,782        695,763 Gas Purchase d Operation and Maintenance 1,117,716 1,371,800 961,539 1,320,345 1,023,956 1,323,886 l
1:
Depreciation and Amortization                                                              607,293                    596,966        555,461 Taxes                                                                                      968,967                  1,027,840        974,418      I Total Operating Expenses                                                                4,984,290                  4,798,472      4,573,484    l Operating Income Allowance for Funds Used During Construction and Capitalized Interest 1,056,959 18,155 1,095,190 38,163 1,121,839 42,588 l
Other Income - Net Interest Charges (1,920) 453,111 8,041 464,207 6,430 462,189 II' Preferred Securities Dividend Requirements and Premium                                      32,725                    49,900          42,147      I Income from Continuing Operations                                                          587,358                    627 ,287        666,521    II Income from Discontinued Operations                                                          24,238                    35,036          12,512  -
                                                                                                                                                    !
Net Income                                                                            $ 611,596                  $ 662,323      $ 679,033 Shares of Common Stock Ou tstanding End of Period Average for Period 233,470,291 242,400, 755 244,697,930 244,697,930 244,697,930 244,4 70, 794 lI Earnings per Average Share:
From Continuing Operations From Discontinued Operations
                                                                                              $2.42
                                                                                                  .10
                                                                                                                          $2.57
                                                                                                                            .14
                                                                                                                                          $2.73
                                                                                                                                            .05
                                                                                                                                                -
l Total Earnings per Average Share                                                              $2.52                      $2 .71          $2.78 Dividends Paid per Share of Common Stock                                                      $2.16                      $2.16          $2.16 The detail.ed consolidated financial statemenls and related discussion appear in Appendix A of the Proxy Statement.
Condensed Consolidated Statements of Cash Flows i
In thousands for the years ended December 31,                                                  1996                      1995            1994
                                                                                                                                                -'
Net Income                                                                            $    611 ,596              $ 662,323      $    679,033 Adjustments to net income, primarily depreciation                                                                                                  I and amortization                                                                    822,864                    872,550        564,745 Net cash provided by operating activities                                        1,434,460                  1,534,873      1,243,778 Net cash used in investing activities, primarily additions to utility plant (offset by the net proceeds from the sale                                                                                            1' of Discontinued Operations in 1996)                                              (9,225)                (935,305)    (1,010,420)  -
Net cash used in financing activities                                            (1,208,296)                  (603,093)      (237,200)    i Net increase (decrease) in Cash and Cash Equivalents                                      216,939                      (3,525)        (3,842)
Cash and Cash Equivalents at Beginning of Period                                            61,964                    65,489          69,331 Cash and Cash Equivalents at End of Period                                            $    278,903                $    61,964    $    65,489 The detail.ed consolidated financial statements and related discussion appear in Appendix A of the Proxy Statement.
1 20
 
I Condensed Consolidated Balance Sheets In thousands at December 31,                                                                                              1996                      1995 I
Assets I
Utility Plant:
r    Utility Plant (including Nuclear Fuel)                                                                          $16,858,348              $16,532,232 Less: Accumulated Depreciation and Amortization                                                                    6,148,482                  5,737,849
.
I I
Net Utility Plant in Service Construction Work in Progress (including Nuclear Fuel) 10,709,866 445,321 10,794,383 369,082 Plant Held for Future Use                                                                                              23,966                    23,966 I
Net Utility Plant                                                                                                11,179,153                11,187,431 Investments and Other NoncurrentAssets                                                                            2,351 ,984                2,242,744 Current Assets                                                                                                    1,744,427                  1,828,477 I
I    Deferred Debits                                                                                                    1,639,767                  1,557,839 I
Total                                                                                                            $16,915,331              $16,816,491
'
Capitalization and Liabilities Capitalization:
Common Equity                                                                                                    $ 5,213,048              $ 5,438,128 Subsidiaries' Preferred Securities:
Preferred Stock Without Mandatory Redemption                                                                  113,392                  324,994 Preferred Stock With Mandatory Redemption                                                                      150,000                  150,000 Monthly Guaranteed Preferred Beneficial Interest in PSE&G's Subordinated Debentures                                                                                  210,000                  210,000 Quarterly Guaranteed Preferred Beneficial Interest in PSE&G's Subordinated Debentures                                                                                  208,000                          -
Long-Turm Debt                                                                                                    4,580,231                  5,189,791 Total Capitalization                                                                                              10,474,671                11,312,913 Other Long-Turm Liabilities                                                                                          184,769                  199,832 Current Liabilities                                                                                                2,271,754                  1,548,026 Deferred Credits                                                                                                  3,984,137                  3,755,720 Total                                                                                                            $16,915,331              $16,816,491 The detailed consolidated financial statements and related discussion appear in Appendix A of the Proxy Statement.
Condensed Consolidated Statements of Retained Earnings In thousands for the years ended December 31,                                                  1996                    1995                      1994 Balance January 1                                                                      $1,636,971                $1 ,505,010              $1 ,361,018 Add Net Income                                                                            611,596                    662,323                  679,033
  -.
Total                                                                                    2,248,567                2,167,333                  2,040,051 Deduct Dividends on Common Stock                                                                  522,565                    528,548                  528,071 Retirement of Common Stock                                                                133,047                          -                        -
Preferred Securities Issuance Expenses                                                        6,699                    1,814                    6,970 Total Deductions                                                                          662,311                    530,362                  535,041 Balance December 31                                                                    $1,586,256                $1,636,971                $1,505,010 The detailed consolidated financial statements and related discussion appear in Appendix A of the Proxy Statement.
Notes to Consolidated Financial Statements For full text of Organization and Summary of Significant Accounting Fblicies refer to Note 1 to Consolidated Financial Statements in Appendix A of the Proxy Statement.
For full text of Commitments and Contingent Liabilities refer to Note 13 to Consolidated Financial Statements in Appendix A of the Proxy Statement.
21
 
Financial Statement of Responsibility To the Stockholders of Public Service Enterprise Group Incorporated:
The condensed financial statements in this Summary Annual Report were derived from the consolidated financial statements included in the Public Service Enterprise Group Incorporated (the "Company") Proxy Statement for the 1997 Annual Meeting of Stockholders, which has been enclosed in the same mailing as this Summary Annual Report. The integrity and objectivity of the financial information presented in the Proxy Statement and this Summary Annual Report are the responsibility of the Company's management. The financial statements report on management's accountability for corporate operations and assets. Tu this end, management maintains a highly developed system of internal con-trols and procedures designed to provide reasonable assurance that the Company's assets are protected and that all transactions are accounted for in conformity with generally accepted accounting principles. The system includes documented policies, guidelines and self-assessments, aug-mented by a comprehensive program of internal and independent audits conducted to monitor overall accuracy of financial information and com-pliance with established procedures. The consolidated financial statements included in the Proxy Statement were audited by Deloitte & Thuche LLP, independent auditors, whose report on the condensed consolidated financial statements appears herein.
E. James Ferland We~~
Robert C. Murray                                    Patricia A. Rado Chairman of the Board,                                        Vice President and                                  Vice President and Controller, President and Chief Executive Officer                        Chief Financial Officer                              Principal Accounting Officer February 14, 1997 Independent Auditors' Report To the Stockholders and the Board of Directors of Public Service Enterprise Group Incorporated:                                    Deloitte&
ToucheLLP We have audited the consolidated balance sheets of Public Service Enterprise Group Incorporated and its subsidiaries 0
(the "Company") as of December 31, 1996 and 1995, and the related consolidated statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1996. Such consolidated financial statements and our report thereon dated February 14, 1997, expressing an unqualified opinion (which are not presented herein) are included in Appendix A of the Proxy Statement for the 1997 Annual Meeting of Stockholders. The accompanying condensed consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on such condensed consolidated financial statements in relation to the complete consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed consolidated balance sheets as of December 31, 1996 and
                                                                                                                                                  ,.
1995 and the related condensed consolidated statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1996 is fairly stated in all material respects in relation to the basic consolidated financial statements from which it has been derived.
j)~ ~ I~                              LL/'
February 14, 1997 Parsippany, New Jersey 22


*' Operational Excellence Achieving operational excellence doesn't happen overnight.
Lawrence R . Codey                    E. James F erland                          the Organization and Compensation      Richard J . Swift l
It means questioning tradition, finding smarter ways to serve customers, streamlining work processes, and keeping an unblinking eye on the bottom line. In 1996, Enterprise employees continued their commitment to excellence.
has been a clirector since 1991. Has  has been a clirector since 1986.          Committee and member of the Auclit    has been a clirector since 1994.
As we transform ourselves into a global energy services company, their ideas and actions remain critical to our success. Here are some examples of how individuals, teams and organizations are helping to set a standard of excellence for the entire corporation.
been President and Chief Operating    Has been Chairman of the Board,           Committee, Finance Committee and       Has been Chairman of the Officer of PSE&G since September      President and Chief Executive              Nuclear Committee. Director of        Board, President and Chief 1991. Member of Executive              Officer of Enterprise since July 1986,    PSE&G, Humana, Inc., Sequana          Executive Officer of Foster I                                                                                  Therapeutics, Inc. and Medarex Inc. Wheeler Corporation, of Clinton, Committee and Finance Committee.      Chairman of the Board and Chief Director of PSE&G, Sealed Air          Executive Officer of PSE&G since                                                  New Jersey, a firm provicling design, Corporation, The 'frust Company of    September 1991, and Chairman of the       Mar ilyn M. Pfa ltz                    engineering, construction, manu-New Jersey, United Water Resources    Board and Chief Executive Officer of       has been a clirector since 1980. Has  facturing, management, plant oper-Inc. and Blue Cross & Blue Shield of  EDHI since June 1989. Chairman of          been a partner of P and R Associates  ations and environmental services, New Jersey.                            Executive Committee. Director of          of Summit, New Jersey, a communica-    since May 1994. Member of PSE&G, EDHI, and EDHI's principal          t ions firm, since 1968. Chair of      Finance Committee, Nominating Ern est H . Drew                      subsicliaries, and of Foster Wheeler      Auclit Committee and member of        Committee and Nuclear has been a clirector since 1993. Has  Corporation and The Hartford Steam        Nominating Committee and              Committee. Director ofEDHI, been a member, Board of Management    Boiler Inspection and Insurance            Organization and Compensation          Foster Wheeler Corporation and ofHoechstAG, Frankfurt, Germany,      Company.                                  Committee. Director of EDHI and        Ingersoll-Rand Company.
Shared vi s i on s, shared rewards Aviation Agency bid out to replace 30,000 feet of cable snaking under a runway at Newark International Airport -one of the nation's busiest -PSE&G's Metropolitan electric distribution division did the work. The work might be considered traditional , but PSE&G's approach wasn't. Project leaders and sented employees planned out a schedule that would not interfere with high air traffic periods. Much of the work was Taking time a t Hope Creek Our Hope Creek nuclear tion in Salem, New Jersey , got back to the business of making electricity following an outage early in 1996. The refueling outage was expected to last 30 days; but station ment expanded the original work scope to include more than 13,500 individual work activities, all aimed at ing safe and reliable long-term operations at the plant. Hope Creek has enjoyed an Replacing underground distri-done on weekends.
a manufacturer of pharmaceuticals,                                                AAA National Association.
Despite the extremely reliable period bution cable and splicing is the scheduling complications, the of operation since its return type of work on which PSE&G job was completed on time. to service. has built its reputation for excellence. When the Federal The project marked a new approach to generating enue and helped increase our employees' awareness of the importance of meeting customer needs as we face the new reality of competition.
chemicals, fibers, film, specialities  R aymon d V. Gilmartin                                                            Jos h S. Weston and advanced materials, since          has been a clirector since 1993. Has      James C. Pitney                        has been a clirector since 1984.
11 Red u ction, r ecovery , recyc lin g A major corporate initiative, driven by the need to improve our bottom line as well as our commitment to the environment, was the establishment of a materials management process. The process sizes not only the recovery of usable waste , but also the reduction of waste by ing out as much as possible from the start. The results have been gratifying:
January 1995. Was Chairman of the     been Chairman of the Board,                has been a clirector since 1979. Has  Has been Chairman of the Board Board and Chief Executive Officer of   President and Chief Executive Officer      been a partner in the law firm of     of Automatic Data Processing, Inc.,
waste disposal costs have fallen more than $5 million, more than 90 percent of our ardous solid waste is being recycled and PSE&G was mally honored by the federal Environmental Protection Agency (EPA) as one of 280 Fortune 1000 companies named charter members of the EPA's WasteWi$e program.
Hoechst Celanese Corporation of        of Merck & Co., Inc. of Whitehouse,        Pitney, Harclin, Kipp & Szuch of      of Roseland, New Jersey, since Somerville, New Jersey from May        New Jersey, a global pharmaceutical        Morristown, New Jersey, since 1958. April 1986 and was Chief 1994 until January 1995 and was        firm that discovers, develops, produces    Member of Executive Committee,         Executive Officer of Automatic President and Chief Executive Officer  and markets human and animal health        Auclit Committee, Finance              Data Processing, Inc. from from January 1988 to May 1994.        products, since November 1994. Was        Committee and Nominating              January 1983 to August 1996.
87 88 89 90 91 92 93 94 95 96 92 93 94 95 96 PSE&G s uppli e s e le c tri c ity at th e low es t cos t p er k w h o f all th e utiliti es i n Th e ratio o f c ust ome r s to PSE&G p e rmanent e mp loyees, a me a s ur e o f e ffi cie n cy, N ew J e r sey, and int e nd s to c ontinue th e tr e nd. (A verage revenue per kwh ad j usted for inflation.
Member of Executive Committee,        President and Chief Executive Officer      Committee. Director of PSE&G,          Member of Executive Committee, Auclit Committee and Finance          of Merck & Co., Inc. from June 1994        '!Ti-Continental Corporation, sixteen  Nuclear Committee and Committee. Director ofEDHI and        to November 1994. Was Chairman of         funds of the Seligman fami ly of funds Organization and Compensation Thomas & Betts Corporation.            the Board, President and Chief            and Seligman Quality, Inc.            Committee. Director ofEDHI, Executive Officer of Becton Dickinson                                            Automatic Data Processing Inc.,
has g r o wn 2 3% o v e r th e p as t fiv e ye ars. B ase year 1 995-1 996. Cents per kwh.) New perspectives, new energy PSE&G gained recognition for its promotion and support of minority and women-owned business development when it was named 1996 Corporation of the Year by the minority n e s s members of the New York/ New Jersey Minority Purchasing Council. PSE&G's efforts in this area include establishing a Supplier Diversity Council comprised of employees and representatives from minority businesses to advise the pany on its s upplier diversit y policies and results, and to ter communications between PSE&G and its suppliers. 1 2 M e eting monthly , the council ha s formulated tion s to incr e ase minority pli e r participation in high-dollar volume and strategic products and services. PSE&G's supplier div e rsity process is a driv e n business strategy.
T. J. Der mot Dunphy                  and Company from November 1992 to         F or r est J . R emick                Olsten Corporation, Vanstar has been a clirector since 1980. Has  June 1994. Chairman of Nominating          has been a clirector since 1995. Has  Corporation and Shared Meclical been Chairman of the Board and        Committee and member of Finance            been an engineering consultant since  Systems Corporation.
Just as success requires a workforce that is reflective of the society we s erve , we also need suppliers who can provide insights and new ideas to help us better meet our customers' needs. Making the power of information work for us Bu s iness Integration is a poratewide e ffort to improv e our operating effici e ncie s through the use of integrated bu s iness softwar e. An grated internal information system will allow for quicker accessing of information and improved capabilities for ning and management of work in providing energy services.
Chief Executive Officer of Sealed Air  Committee and Organization and             July 1994. Retired Commissioner of Corporation, a Saddle Brook,          Compensation Committee. Director          the United States Nuclear Regulatory New Jersey manufacturer of protec-    of PSE&G, Merck & Co., Inc. and           Commission. Was Associate Vice tive packaging products and systems,  Proviclian Corporation.                    President - Research and Professor of since November 1996. Was President                                                Nuclear Engineering at Pennsylvania and Chief Executive Officer of Sealed  Irwin Lerner                              State University, from 1985 to 1989.
But Business Integration must be more than just gon. PSE&G will be joining some 6,000 companies wide who are using an mation system known as SAP -Systems, Applications and Products in Data Processing
Air Corporation from 1971 to          has been a clirector since 1981.          Chairman of Nuclear Committee and November 1996. Chairman of Finance    Retired Chairman, President                member of Auclit Committee and Committee and member of the Auclit    and Chief Executive Officer of             Nominating Committee. Director Committee and Organization and         Hoffmann-La Roche Inc., of Nutley,         ofPSE&G.
-to achieve major gains in performance.
Compensation Committee. Director      New Jersey, a manufacturer of pre-of EDHI , Sealed Air Corporation,      scription pharmaceuticals, vitamins Summit Bancorp and Summit Bank.       and fine chemicals, and cliagnostic products and services. Chairman of Executive Officers of Enterprise E . J ames Ferla nd                    Leon R . Eliason                          Robert C. Murray                      Fra nk Cassidy Chai rman of the Board, President      Chief Nuclear Officer and President-      Vice President and Chief Financial    President and Chief Executive and Chief Executive Officer;          Nuclear Business Unit of PSE&G.           Officer; Senior Vice President and     Officer of Energis Resources.
The rollout of Business Integration starts with Fossil Generation in 1998.
Chairman of the Board and                                                        Chief Financial Officer of PSE&G.
Customer serv i ce: a hallmark of success Customers today are becoming more sophisticated
Chief Executive Officer ofPSE&G;      Robert J. Dou gh erty, Jr.                                                        Patricia A. Rad o Chairman of the Board and              President and Chief Operating Officer      R . Edwin Selover                      Vice President and Controller; Chief Executive Officer ofEDHI.        ofEDHI.                                    Vice President and General Counsel;    Vice President and Controller Senior Vice President and General      ofPSE&G.
-and demanding
Lawren ce R . Codey                    Alfred C. Ko eppe                          Counsel of PSE&G.
-consumers.
President and Chief Operating Officer  Senior Vice President-Corporate                                                  Michael J . Thoms on ofPSE&G.                               Services and External Affairs                                                    President and Chief Executive ofPSE&G.                                                                         Officer of CEA.
With the coming of customer choice, building a relationship with our customers has never been more critical. At PSE&G we hear from our customers daily through regular surveys, feedback and personal tions. We listen, then improve our products and services based on what we hear. As part of this constant feedback, w e've learned that the tise and integrity of our forc e have been major factors in maintaining customer loyalty. A residential customer in South Jersey, for example, was dissatisfied with the service she received from a tor of our appliance service business.
23
This competitor tried to use unethical tactics to sell a major repair job that wasn't needed. When the tomer called PSE&G for a second opinion, our service technician quickly discovered the problem to be simply a clogged pilot light. Daily actions such as these help build customer loyalty and awareness. A pact fo r the 2 1st c entury PSE&G's five unions signed contracts in 1996 that extend to the year 2002. These ments balance the needs of the company in an emerging petitive marketplace with the needs of employees and unions 13 for good jobs with fair wages , benefits and working tions. The new agreements address the requirements of a fast-changing in d ustry head-on, including provisions that allow gas an d electric employees to work in each other's areas. Other provisions address ting non-productive time and reducing costs. Mutual-gains bargaining, a process of side-by-side problem-solving, allowed the unions and company to help each other recognize shared interests.
A united front of employer and employees is essential for serving customers and jobs. 


I I .* Investing For Growth In 1996, Enterprise reorganized to take maximum benefit of the opportunities arising out of the deregulation of the electric and gas industries.
Stockholder Information Stock Exchange Listings                    Transfer Agents                        Security Analysts and New York (Enterprise common                The transfer agents for the com-      Institutional Investors and PSE&G preferred)                        mon and preferred stocks are:          For information contact:
This reorganization also results in a clearer division between Enterprise's regulated and unregulated businesses.
Philadelphia (Enterprise common)                Stockholder Services                  Director - Investor Relations Trading Symbol: PEG                            Department                            201-430-6564 Public Service Electric Annual Meeting                                  and Gas Company                    Available Publications Please note that the annual                    P.O. Box 1171                      Form 10-K: A copy of Enterprise's meeting of stockholders of                      Newark, NJ 07101-1171              1996 Annual Report to the Public Service Enterprise                                                          Securities and Exchange First Chicago Trust Group Incorporated will be                                                        Commission, filed on Form 10-K, Company of New York held at Newark Symphony Hall,                                                     may be obtained by calling P.O. Box 2506 1020 Broad Street, Newark,                                                         201-430-6503 or writing to:
Bob Dougherty now serves as president and chief ing officer of an expanded Enterprise Diversified Holdings Incorporated (EDHI). In tion to PSRC, which will tinue to search for passive, energy-related investments to add to its portfolio, Dougherty will manage and develop CEA, Enterprise's independent power company, and a new business, Energis Resources , which provides a full range of Going global Business plans for CEA target new investments of mately $700 million over a five-year horizon. Plans for 1997 call for closure on several projects, among them a 220-megawatt simple-cycle plant in Colombia, South America. This plant will burn natural gas and sell its electrical put on the Colombian spot market. The project is part of a joint venture formed with standards, and is delivering electricity to the country's power grid. The second unit is scheduled to go on-line in late 1997; both units will supply a substantial amount of ity to this rapidly-developing rural area. Last year CEA and its partner AES , a developer and operator of power plants , cessfully closed project financing for Central T er mica San Nicolas, a 650-megawatt CEA also enjoys a established reputation in the U.S. The JFK Energ y Center , which is owned and operated by CEA and Gas Energy , Inc., a wholly-owned subsidiary of Brooklyn Union Gas Company, completed its first full year of commercial operation. The center is a 105-megaw att plant that supplies electricity and hot and chilled water for New York's Kennedy International Airport. Addi-energy-management solutions.
Jersey City, NJ 07303-2506 New Jersey, on Tuesday,                                                              Director - Investor Relations April 15, 1997 at 2 p.m.                                                              Public Service Electric and Enterprise Direct -
Amoco Power Resources.
Gas Company T6B Stock Purchase and Stockholder Services                                                                  P.O. Box 570 Dividend Reinvestment Plan Stockholder inquiries about stock                                                    Newark, NJ 07101 Enterprise offers Enterprise transfer, dividends, dividend rein-Direct, a Stock Purchase and vestment, clirect deposit, missing                                                The copy so provided will be with-Dividend Reinvestment Plan. For or lost certificates, change of                                                    out exhibits. Exhibits may be pur-adclitional information, inclucling a address notification and other                                                    chased for a specified fee.
The Th rough these unregulated project is intended to enter plant located in Argentina.
prospectus and enrollment form, account information should be contact us through Internet e-mail directed to: Stockholder Services                                                  Financial and Statistical Review:
tional electrical capacity is The ability to refinance with a sold to the local utility , com p anies, and by expanding a construction during the first $60 million non-recourse loan Consolidated Edison. number of traditional prod u cts quarter of 1997 and be in com-in the Argentine market CEA has investments in and services fo u nd in our reg-mercial operation by late 1997. demonstrates a high degree of 22 cogeneration and power ulated utility, Enterprise seeks The year 1996 was one of bank confidence in Argentina's plants around the world to increase shareholder value. progress. CEA holds a minority power sector reforms and in interest in two 300-megawatt San Nicolas' viability as a key coal-fired units located in the energy producer. interior province of Gansu, China. The first unit success-fully passed its first perfor-mance test in 1996, meeting all national environmental 15 totalling 2 ,400 megawatt s of electric generation capacity.
at stkserv@pseg.com or Department, Public Service                                                        A comprehensive statistical report call 800-242-0813.
Operating from offices in Hong Kong , Argentina , Thailand, India and the U.S., CEA professionals are ing nearly 70 potential projects in more than twelve countries.
Electric & Gas Company, P.O.                                                       containing historical financial Box 1171, Newark, NJ 07101-1171.                                                   and operating data may also be Dividends Please include your account num-                                                  obtained from the Director -
EDHI's net income r eached a record high in 1996. Net in come from conti nuing operations increased 28.5% as compa r ed to 1995 primarily due to a strong p e rforman ce by Puhli c Service Resources Corporation.  
Dividends on the common stock ber or social security number.                                                     Investor Relations.
*Without EGDC impairment of $(50.4) million. 92 93 94 95 96 (dollars in millions) Income from Continuing Operations Income from Di sco ntinu ed Operations Smarter energy*M Drawing on Enterprise's depth of experience and financial st rength, Energis Resources , our n ewes t subsidiary, vides a single source for able, top-quality service focused on customer needs. The company is concentrating on industrial and commercial customers throughout the Northeast and Mid-Atlantic sta tes. Energis Resources offers customers a wide range of services to improve business operations and performance through more cost-efficient energy utilization, energy proc ess redesign, optimized e nerg y investment strategies a nd unique financing options for energy-related projects.
of Enterprise, as declared by the Board of Directors, are generally Stockholders can also phone our payable on the last business day toll -free number 800-242-0813, of March , June, September and Monday through Friday, with December of each year. Regular questions about stock transfer and quarterly dividends on PSE&G's registration, shares held in preferred stock are payable on the Enterprise Direct and our other last business day of March, June, stockholder services. Hours are:
The company has absorbed two Enterprise companies with proven track records: U.S. Energy Partners, which so ld natural gas, and Enterprise Strategic Energy Solutions , which provided sulting, engineering and repair services.
September and December of 10 a.m. to 3:30 p.m. Eastern time.
In addition, the financing of energy-savings , or demand-side management projects, formerly offered by the utility subsidiary , Public Service Conservation Resources Corporation , will now be supplied by Energis Resources. Energis Resources offers an impressive array of products and services , beginning with the sale of natural gas. In 1996, U.S. Energy Partners sold more than $67 million of gas to some 3,600 customers in New Jerse y, New York and states as far south as the Carolinas.
each year.
New Jersey has been a pioneer in the lation of natural gas sales, allowing the customer to buy the gas itself from suppliers like Energis Resources, with delivery arranged through the local utility. The company is already marketing natural gas to a number of customers, ing more than 50 Boston 16 Market restaurants out the Northeast, as well as more than 40 branch offices of a major Manhattan-based bank. Similarly , deregulation of electricity is proceeding throughout the U.S. and at a particularly fast clip in the Northeast
The telephone number for the hearing impaired with special Direct Deposit of Dividends equipment is TDD 800-732-3241.
-Energis Resources' home territory.
No more dividend checks delayed Please have your account number in the mail. No waiting in bank or Social Security number ready                                                    Common Stock- Market Price and Dividends per Share lines. Your quarterly common and when you call.
New Jersey customers will begin gaining the ability to choose their electricity plier in October 1998. Retail customers in Rhode Island and Pennsylvania will be able to choose in 1997. Since the eral Energy Policy Act of 1992 deregulated the wholesale electricity market, Enterprise has been one of the most active and aggressive participants in that market. Energis Resources will draw on this expertise to serve retail markets afforded freedom of choice.
preferred stock dividend payments                                  1996                  1995 can be deposited electronically to Stockholders can reach us by                                                                          High      Low    Div. High    Low      Div.
Along with energy supply , Energis Resources provides consulting, engineering and operations services and ing solutions. The ultimate objective is to successfully provide total energy ment to customers in the Northeast, allowing them to completely outsource their energy functions.
your personal checking or savings Internet e-mail at:
Energis Resources is already working on energy projects with a number of major customers.
account. To use this free service, stkserv@pseg.com                                                                  First Quarter    $32\il  $25Y.   $.54  $29Ys  $26      $.54 call us at 800-242-0813.
It is installing and maintaining power supply equipment for a major telecommunication s company's fiber optic network. For a national food processor , the company is financing third-party installation of high-efficiency lighting at 200 of its locations.
Stockholders can also reach us Second Quarter 27%
Expanding a traditional portfolio PSE&G, through its Sunburst Customer Solutions program , offers its meter reading, billing, payment processing and collection services to municipalities and other investor-owned utilities.
Third Quarter      27%
Municipalities and other utilities can reduce costs and increase efficiencies by ing PSE&G's sophisticated customer service operations and extensive meter reading experience.
25\il 25%
As of January 1997, seven municipalities and two regional water utilities have signed on. PSE&G's appliance service business is the only wide provider of premium service and service contracts for all major appliance brand s with 24-hour service. 365-daysa-year availability.
                                                                                                                        .54
Banking on a strong name awareness 17 within its service territory and a well-trained staff of service technicians, the appliance service business ha s expanded its traditional folio of service offerings.
                                                                                                                        .54 30Y.
These new services create added opportunities for bringing in additional revenues. The business has also gained efficiencies and sharpened its competitive advantage with the introduction ofhomebased reporting, which allows service technicians to report directly to their first job in th e morning instead of stopping first at the office. In addition, PSE&G , with its long-established right s-ofway, extensive network of wires, and long-term custom er relationships, is also exploring the possibility of adding wire and wireless telecommunications services to its broad po rfolio of products and servic es.
29%
Public Service Enterprise Group continues to pursue a strategy of enhancing stockholder value through retention and reinvestment of earnings and payment of an annual dividend . g ..
26%
* I \ i I ! ..
26%
* 91 92 93 94 95 96 (dollars)
                                                                                                                                                .54
This shows the value on December 31 of each year of $100 invested in Enterprise on December 31, 1991 (assumes reinvested dividends).
                                                                                                                                                .54
I ' l I I I ! I ' I I I 95 96 97" 98' 9 PSE&G n EDHI *Projected (dollars in milliorm) r I I 99' Declining utility capital expenditures are expected to be funned through internally generated cash, while growing EDHI needs are expected to be met by additional debt and internally generated cash. 92 93 94 95 96 (p e rcent) Return on Average Common Equity for 1996 was 11.3%, which reflects various one-time adjustments, as discussed in the Chairman's letter of tlus annual report. g 8 g g g CD ...-95 96 Common Equity 0 ...-97* 98* 99* Preferred 11 Long-Term Securioes lJ Debt *Projected (percent) One of our key objectives, as reflected in capitalization ratio , is to strengthen the bal.anc e sh ee t by delet*eraging PSE&G. 'I 
                                                                                                                                                      .j by FAX at: 201-824-7056                                                            Fourth Quarter 29            26%    .54    30%    28%      .54 The number of holders ofrecord of Public Service Enterprise Group Incorporated common stock as of December 31, 1996 was 167,205.
-Consolidated Financial Statistics rAJ Dollars in thousands where applicable 1996 1995 1994 1993 1992 Selected Income Information Operating Revenues:
@Printed on recycled paper, using soy ink.
Electric $ 3,944,362
24
$ 4,020,842
$ 3,739,713
$ 3,696,114
$ 3 , 407 , 830 Gas 1,880,994 1,686,403 1,778,528 1,594,341 1 , 586,181 Nonutility Activities 215,893 186 , 417 177,082 137 , 069 112 , 268 Thtal Operating Revenues $ 6,041,249 $ 5 , 893,662 $ 5,695 , 323 $ 5,427,524
$ 5 , 106 , 279 Income from Continuing Operations
$ 587,358 $ 627,287 $ 666,521 $ 549,178 $ 475 , 150 Cumulative effect of change in accounting for income taxes ---5,414 -Income from Discontinued Operations 24,238 35,036 12,512 46,341 28 , 967 Net Income $ 611,596 $ 662,323 $ 679,033 $ 600 , 933 $ 504,117 Earnings per Average Share: From Continuing Operations
$ 2.42 $ 2.57 $ 2.73 $ 2.29 $ 2.05 From Cumulative effect of change in accounting for income taxes ---.02 -From Discontinued Operations
.10 .14 .05 .19 .12 Thtal Earnings per Average Share $ 2.52 $ 2.71 $ 2.78 $ 2.50 $ 2.17 Dividends Paid per Share $ 2.16 $ 2.16 $ 2.16 $ 2.16 $ 2.16 Payout Ratio 86% 80% 78% 86% 100% Rate of Return on Average Common Equity(B J 11.28% 12.32% 12.94% 11.91% 10.69% Ratio of Earnings to Fixed Charges 2.68 2.78 2.84 2.57 2.33 Book Value per Common Share (C J $22.33 $22.22 $21.68 $21.07 $20.32 Gross Utility Plant $17 , 327 , 635 $16 , 925 , 280 $16 , 566 , 058 $15 , 861 , 484 $15 , 081 , 907 Accumulated Depreciation and Amortization of Utility Plant $ 6 , 148 , 482 $ 5 , 737 , 849 $ 5 , 467 , 813 $ 5 , 057,104 $ 4 , 610 , 595 Thtal Assets $16,915,331
$16 , 816 , 491 $16 , 312 , 734 $15 , 995,433 $14 , 543 , 696 Consolidated Capitalization Common Stock $ 3,626,792 $ 3 , 801,157 $ 3 , 801 , 157 $ 3 , 772 , 662 $ 3 , 499 , 183 Retained Earnings 1,586 , 256 1,636,971 1 , 505,010 1 , 361,018 1 , 282 , 931 Common Equity 5,213,048 5 , 438,128 5 , 306,167 5,133,680 4,782,114 Preferred Stock Without Mandatory Redemption 113,392 324,994 384,994 429 , 994 429 , 994 Preferred Stock With Mandatory Redemption 150 , 000 150 , 000 150 , 000 150 , 000 75 , 000 Monthly Guaranteed Preferred Beneficial Interest in PSE&G's Subordinated Debentures 210 , 000 210 , 000 150 , 000 --Quarterly Guaranteed Preferred Beneficial Interest in PSE&G's Subordinated Debentures 208 , 000 ----' Long-Turm Debt 4,580,231 5 , 189 , 791 5,110 , 022 5,100,228 4,962 , 884 Thtal Capitalization
$10,474,671
$11 , 312,913 $11,101,183
$10 , 813 , 902 $10 , 249 , 992 (A) Th e dewikd consolidat e d finan c ial s wt e ments and r e lat e d di sc us s ion app e ar i n App e ndix A of th e Proxy Stat e ment. (B J N e t In c ome for a twel ve-rrwnth p e r io d di v i ded b y t he thirt een-mnnth a ve r age o f Co mmnn Eq uity. (C J 1hta1 C omrrwn Equity d i vi ded b y e nd-o f-period C o mrrwn Sha res o utsw nding. 19 
--Condensed Consolidated Statements of Income In thousands (e xcept per share data) for the years ended December 31 , 1996 1995 1994 l Operating Revenues Electric $3,944,362
$4,020,842
$3,739,713 Gas 1 ,88 0,994 1,686,403 1 , 778,528 I Nonutility Activities 215,893 186,417 177,082 Total Operating Revenues 6,041,249 5,893,662 5,695,323 Operating Expenses Fuel for Electric Generation and Interchanged Power 918,514 891,782 695,763 l Gas Purch ase d 1,117,716 961,539 1,023 , 956 Operation and Maintenance 1,371,800 1 , 320,345 1,323 , 886 1: Depreciation and Amortization 607,293 596 , 966 555,461 Taxes 968,967 1 , 027 , 840 974,418 I Total Operating Expenses 4 , 984,290 4,798,472 4,573,484 l Operating Income 1,056,959 1,095 , 190 1,121,839 l Allowance for Funds Used During Construction and Capitalized Interest 18,155 38,163 42,588 I Other Income -Net (1,920) 8,041 6,430 Interest Charges 453,111 464,207 462,189 ' I Preferred Securities Dividend Requirements and Premium 32 , 725 49 , 900 42,147 I Income from Continuing Operations 587,358 627 , 287 666,521 I I Income from Discontinued Operations 24,238 35,036 12 , 512 -Net Income $ 611 ,5 96 $ 662 , 323 $ 679 , 033 ! Shares of Common Stock O u tsta ndin g l End of Period 233 , 470 , 291 244,697 , 930 244,697,930 Average for Period 242,400, 755 244,697,930 244,4 70, 794 I Earnings per Average Share: From Continuing Operations
$2.42 $2.57 $2.73 l From Discontinued Operations
.10 .14 .05 Total Earnings p er Ave r age S har e $2.52 $2.71 $2.78 -Dividends Pa i d per S h are of C om mo n Stoc k $2.16 $2.16 $2.16 Th e detail.ed conso lidat ed finan c ial s tatemenls and relat e d discussion appear in Appendix A of the Prox y Stat ement. Condensed Consolidated Statements of Cash Flows i ' -In thousands for the years e nded D ece mber 31, 1996 1995 1994 Net Income $ 611 , 596 $ 662,323 $ 679,033 I Adjustm e nt s to net income , primarily depreciation and amortization 822,864 872 , 550 564 , 745 Net cash provided by operating activities 1,434,460 1 , 534,873 1 , 243 , 778 Net cash used in investing activities, primarily additions to utility plant ' (offset by the net proceeds from the sale 1 of Discontinued Operations in 1996) (9,225) (935 ,3 05) (1 , 010,420) -Net cash used in financing activities (1,208,296)
(603,093) (237,200) i N et increase (decrease) in Cash and Cash Equivalents 216 , 939 (3,5 25) (3, 842) Cash and Cash Equivalents at Beginning of Period 61,964 65 , 489 69,331 Cash an d Cash Equivalents at End of Period $ 278 , 903 $ 61,964 $ 65 , 489 Th e detail.ed conso lidat ed financial statements and r elated discussion appear in Appendix A of the Proxy Stat ement. 1 20 
--I Condensed Consolidated Balance Sheets I In thousands at December 31, 1996 1995 I Assets r Utility Plant: Utility Plant (including Nuclear Fuel) $16,858,348
$16,532,232 I Less: Accumulated Depreciation and Amortization 6,148,482 5,737,849 . Net Utility Plant in Service 10 ,709,866 10 , 794,383 I Construction Work in Progress (including Nuclear Fuel) 445,321 369,082 Plant Held for Future Use 23,966 23,966 I Net Utility Plant 11,179,153 11,187,431 Investments and Other NoncurrentAssets 2 , 351 , 984 2,242,744 Current Assets 1 ,744,427 1 , 828 , 477 I Deferred Debits 1,639,767 1 , 557 , 839 I I Total $16,915,331
$16 , 816 , 491 ' Capitalization and Liabilities Capitalization:
Common Equity $ 5,213,048
$ 5,438,128 Subsidiaries' Preferred Securities:
Preferred Stock Without Mandatory Redemption 113,392 324,994 Preferred Stock With Mandatory Redemption 150,000 150 , 000 Monthly Guaranteed Preferred Beneficial Interest in PSE&G's Subordinated Debentures 210,000 210,000 Quarterly Guaranteed Preferred Beneficial Interest in PSE&G's Subordinated Debentures 208 , 000 -Long-Turm Debt 4,580,231 5,189,791 Total Capitalization 10,474,671 11,312,913 Other Long-Turm Liabilities 184,769 199 , 832 Current Liabilities 2,271,754 1 , 548 , 026 Deferred Credits 3,984,137 3,755,720 Total $16,915,331
$16,816,491 Th e detailed conso lidated financial s tatements and r elate d discussion appear in Appendix A of the Prox y Statement. Condensed Consolidated Statements of Retained Earnings In thousands for the years ended December 31, 1996 1995 1994 Balance January 1 $1 , 636 , 971 $1 , 505 , 010 $1 , 361,018 Add Net Income 611,596 -. 662 , 323 679,033 Total 2,248,567 2,167,333 2,040 , 051 Deduct Dividends on Common Stock 522,565 528,548 528,071 Retirement of Common Stock 13 3,047 --Preferred Securities Issuance Expenses 6 , 699 1,814 6,970 Total Deductions 662,311 530,362 535,041 Balance December 31 $1 , 586 , 256 $1 , 636,971 $1,505,010 Th e d e tailed conso lidat e d financial statements and relat e d discussion appear in Appendix A of th e Proxy Statement.
Notes to Consol idated Financial Statements For full text of Organization and Summary of Signifi ca nt Accounting Fbli c i es refer to Not e 1 to Consolidated Finan cial Stat eme nts in App endix A of the Proxy Statement. For full t ext of Commitments and Contingent Liabiliti es refer to Note 13 to Consolidated Financial Statements in Appendix A of the Proxy Stat ement. 21 Financial Statement of Responsibility To the Stockholders of Public Service Enterprise Group Incorporated:
The condensed financial statements in this Summary Annual Report were derived from the consolidated financial statements included in the Public Service Enterprise Group Incorporated (the " Company") Proxy Statement for the 1997 Annual Meeting of Stockholders, which has been enclosed in the same mailing as this Summary Annual Report. The integrity and objectivity of the financial information presented in the Proxy Statement and this Summary Annual Report are the responsibility of the Company's management.
The financial statements report on management's accountability for corporate operations and assets. Tu this end, management maintains a highly developed system of internal trols and procedures designed to provide reasonable assurance that the Company's assets are protected and that all transactions are accounted for in conformity with generally accepted accounting principles.
The system includes documented policies, guidelines and self-assessments, augmented by a comprehensive program of internal and independent audits conducted to monitor overall accuracy of financial information and pliance with established procedures. The consolidated financial statements included in the Proxy Statement were audited by Deloitte & Thuche LLP , independent auditors, whose report on the condensed consolidated financial statements appears herein. E. James Ferland Chairman of the Board , President and Chief Executive Officer February 14 , 1997 Robert C. Murray Vice President and Chief Financial Officer Independent Auditors' Report To the Stockholders and the Board of Directors of Public Service Enterprise Group Incorporated:
Patricia A. Rado Vice President and Controller, Principal Accounting Officer Deloitte&
ToucheLLP We have audited the consolidated balance sheets of Public Service Enterprise Group Incorporated and its subsidiaries (the " Company") as of December 31, 1996 and 1995, and the related consolidated statements of income , retained earnings 0 and cash flows for each of the three years in the period ended December 31, 1996. Such consolidated financial statements and our report thereon dated February 14, 1997 , expressing an unqualified opinion (which are not presented herein) are included in Appendix A of the Proxy Statement for the 1997 Annual Meeting of Stockholders. The accompanying condensed consolidated financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on such condensed consolidated financial statements in relation to the complete consolidated financial statements.
In our opinion , the information set forth in the accompanying condensed consolidated balance sheets as of December 31, 1996 and 1995 and the related condensed consolidated statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1996 is fairly stated in all material respects in relation to the basic consolidated financial statements from which it has been derived. LL/' Februar y 14 , 1997 Parsippany , New J e rsey 22 ,.
l I Lawren ce R. Co d ey has been a clirector since 1991. Has been President and Chief Operating Officer of PSE&G since September 1991. Member of Executive Committee and Finance Committee. Director of PSE&G , Sealed Air Corporation , The 'frust Company of New Jersey, United Water Resources Inc. and Blue Cross & Blue Shield of New Jersey. Er n est H. Dr ew has been a clirector since 1993. Has been a member , Board of Management ofHoechstAG, Frankfurt , Germany , a manufacturer of pharmaceuticals , chemicals , fibers, film , specialities and advanced materials , since January 1995. Was Chairman of the Board and Chief Executive Officer of Hoechst Celanese Corporation of Somerville, New Jersey from May 1994 until January 1995 and was President and Chief Executive Officer from J anuary 1988 to May 1994. Member of Executive Committee, Auclit Committee and F i nance Comm i ttee. Director ofEDHI and Thomas & Betts Corporation.
T. J. De r m o t Dunp hy has been a clirector since 1980. Has been Chairman of the Board and Chief Executive Officer of Sealed Air Corporation , a Saddle Brook, New Jersey manufacturer of protective packaging products and systems, since November 1996. Was President and Chief Executive Off i cer of Sealed Air Corporation from 1971 t o November 1996. Chairman of Finance Committee and member of the Auclit Committee and Organizat i on and Compensation Committee. Director of EDHI , Sealed Air Corporation, Summit Bancorp and Summit Bank. E. J am es Fe rl a nd Chai r man of the Board , Presid e nt and Chief Executive Officer; Chairman of the Board and Chief Executive Officer ofPSE&G; Chairman of the Board and Chief Executive Officer ofEDHI. La wr e n ce R. C od ey President and Chief Operating Officer ofPSE&G. E. Jame s F e rland has been a clirector si n ce 1986. Has been Chairman of the Board , Pres i dent and Chief Executive Officer of Enterprise since July 1986, Chairman of the Board and Chief Executive Officer of PSE&G since September 1991 , and Chairman of the Board and Chief Executive Officer of EDHI since June 1989. Chairman of Executive Committee.
Director of PSE&G , EDHI, and EDHI's principal subsicliar i es , and of Foster Wheeler Corporation and T h e Hartford Steam Boiler Inspect i on and Insurance Company. R aym o n d V. Gi lm art in has been a clirector since 1993. Has been Chairman of the Board, Pres i dent and Chief Executive Officer of Merck & Co., Inc. of Whitehouse, New Jersey , a global pharmaceutical firm t h at discovers , develops, produces and markets human and animal health prod u cts, s i nce November 1 994. Was Presi d ent an d Chie f Execut i ve Officer o f Merck & Co., I nc. fro m June 1994 to November 1994. Was C h airman of the Board, President an d Chief Executive Officer of Becton Dickinson and Company from November 1992 to June 1994. Chairman of Nominating Committee and member of Finance Committee and Organization and Compensation Committee. Director of PSE&G , Merck & Co., Inc. and Proviclian Corporation.
Irwin L e rn er has been a clir ecto r since 1981. Retired C h airman , President and Chief Execut i ve Officer of Hoffmann-La Roche Inc., of Nutley , New Jersey , a manufacturer of scription pharmaceuticals , vitamins and fine chemicals , and cliagnostic products and services.
Chairman of the Organizat i o n and Compensat i on Committee and member of the Auclit Committee, Finance Committee and Nuclear Committee. Director of PSE&G , Humana , Inc., Sequana Therapeutics, Inc. and Medarex Inc. Ma r ilyn M. Pf a l tz has been a clirector since 1980. Has been a partner of P and R Associates of Summit, New Jersey , a t i ons firm, since 1968. C h air of Auclit Committee and member of Nominating Committee and O r ganization an d Compensation Committee.
D i rector of E D HI and AAA National Association.
Jam es C. Pitn ey has been a clirector since 1979. Has been a partne r in the law firm of Pitney , Harclin, Kipp & Sz u ch of Morristown , New Jersey, since 1958. Member of Executive Committee , Auclit Committee , Finance Committee and Nominat in g Committee. D i r ector of P SE&G, '!Ti-Co n tinental Corporat i on, sixteen funds of the Seligman fami l y of fun d s and Seligman Quality, Inc. F o r r est J. R e mi ck has been a clirector since 1995. Has been an engineering consultant since July 1994. Retired Commissioner of the United States Nuclear Regulatory Commission.
Was Associate Vice President
-Research and Professor of Nuclear Engineering at Pennsy l vania State University, from 1985 to 1989. Chairman of N u c l ear Committee and member of Auclit Committee and Nominating Comm i ttee. Director ofPSE&G. Executive Officers of Enterprise Leon R. E lia so n Chief Nuclear Officer and Pre s identNuclear Business Unit of PSE&G. Robert J. Do u g h erty, Jr. President and Chief Operating Officer ofEDHI. Alfre d C. Ko e pp e Senior Vice President-Corporate Services and External Affairs ofPSE&G. 2 3 Robert C. M urr ay Vice Pre s ident and Chief Financial Officer; Senior Vice President and Chief Financial Officer of PSE&G. R. E d win Se l o v er Vice President and General Counsel; Senior Vice President and General Counsel of PSE&G. Richard J. Swift has been a clirector since 1994. Has been Chairman of the Board , President and Chief Executive Officer of Foster Wheeler Corporation , of Clinton , New Jersey, a firm provicling design, engineering, construction , facturing, management , plant ations and environmental services , since May 1994. Member of Finance Committee , Nominating Committee and Nuclear Committee. Director ofEDHI , Foster Whee l er Corporation and Ingersoll-Rand Company. Jo s h S. Weston has bee n a cli rector since 1984. Has been C h airman of the Board of Automat i c Data Processing, Inc., of Rose l an d , New Jersey, since April 1 986 and was Chief Executive Officer of Automat i c Data Process i ng, Inc. from Ja n uary 1983 to August 1996. Me m ber of E xec ut ive Committee, Nuc l ear Co mmi ttee an d Organization and Compe n sation Committee. D ir ector ofEDHI , Automat i c Data Processing Inc., Olsten Corporation, Vanstar Corporation and Shared Meclical Systems Corporation.
Fr a nk Ca ss idy President and Chief Executive Officer of Energis Resources. Patricia A. Ra d o Vice President and Controller; Vice President and Controller ofPSE&G. M ichael J. Th om s on President and C h ief Executive Officer of CEA.
Stock Exchange Listings New York (Enterprise common and PSE&G preferred) Philadelphia (Enterprise common) Trading Symbol: PEG Annual Meeting Please note that the annual meeting of stockholders of Public Service Enterprise Group Incorporated will be held at Newark Symphony Hall , 1020 Broad Street, Newark, New Jersey , on Tuesday , April 15 , 1997 at 2 p.m. Stockholder Services Stockholder inquiries about stock transfer, dividends , dividend vestment, clirect deposit , missing or lost certificates , change of address notification and other account information should be directed to: Stockholder Services Department , Public Service Electric & Gas Company , P.O. Box 1171, Newark , NJ 07101-1171.
Please include your account ber or social security number. Stockholders can also phone our toll-free number 800-242-0813 , Monday through Friday, with questions about stock transfer and registration, shares held in Enterprise Direct and our other stockholder services.
Hours are: 10 a.m. to 3:30 p.m. Eastern time. The telephone number for the hearing impaired with special equipment is TDD 800-732-3241.
Please have your account number or Social Security number ready when you call. Stockholders can reach us by Internet e-mail at: stkserv@pseg.com Stockholders can also reach us by FAX at: 201-824-7056
@Printed on recycled paper , using soy ink. Stockholder Information Transfer Agents The transfer agents for the mon and preferred stocks are: Stockholder Services Department Public Service Electric and Gas Company P.O. Box 1171 Newark, NJ 07101-1171 First Chicago Trust Company of New York P.O. Box 2506 Jersey City, NJ 07303-2506 Enterprise Direct -Stock Purchase and Dividend Reinvestment Plan Enterprise offers Enterprise Direct, a Stock Purchase and Dividend Reinvestment Plan. For adclitional information , inclucling a prospectus and enrollment form, contact us through Internet e-mail at stkserv@pseg.com or call 800-242-0813. Dividends Dividends on the common stock of Enterprise, as declared by the Board of Directors , are generally payable on the last business day of March , June , September and December of each year. Regular quarterly dividends on PSE&G's preferred stock are payable on the last business day of March , June , September and December of each year. Direct Deposit of Dividends No more dividend checks delayed in the mail. No waiting in bank lines. Your quarterly common and preferred stock dividend payments can be deposited electronically to your personal checking or savings account. To use this free service, call us at 800-242-0813. 24 Security Analysts and Institutional Investors For information contact: Director -Investor Relations 201-430-6564 Available Publications Form 10-K: A copy of Enterprise
's 1996 Annual Report to the Securities and Exchange Commission, filed on Form 10-K, may be obtained by calling 201-430-6503 or writing to: Director -Investor Relations Public Service Electric and Gas Company T6B P.O. Box 570 Newark , NJ 07101 The copy so provided will be out exhibits. Exhibits may be chased for a specified fee. Financial and Statistical Review: A comprehens iv e statist ical report containing historical financial and operating data may also be obtained from the Director -Investor Relations.
Common Stock-Market Price and Dividends per Share 1996 1995 High Low Div. High Low First Quarter $32\il $25Y. $.54 $29 Ys $26 Second Quarter 27% 25\il .54 30 Y. 26% Third Quarter 27% 25% .54 29% 26% Fourth Quarter 29 26% .54 30% 28% Div. $.54 .54 .54 .54 The number of holders ofrecord of Public Service Enterprise Group Incorporated common stock as of December 31, 1996 was 167,205. .j 


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Revision as of 08:26, 21 October 2019

Public Svc Enterprise Group Inc,Summary Annual Rept 1996.
ML18102A961
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Site: Salem, Hope Creek  PSEG icon.png
Issue date: 12/31/1996
From: Ferland E
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success Letter to Shareholders 2 Investing for Growth 14 Directors and Officers 23 Ata Glance 4 Operational Highlights 18 Stockholder Information 24 Getting the Rules Right 6 Consolidated Financial Statistics 19 www.pseg.com 25 Operational Excellence 10 Condensed Consolidated Financials 20

-

~::£ >.D  ::£  ::£  ::£ NN N N N N 92 93 94 95 96 92 93 94 95 96 (dollars in milli.ons) (dollars)

Enterprise Net Income Enterprise Annual Earnings and DivUlend Payout per Share Earnings Annual per Share Dividend Payout Financial Highlights Dollars in thousands where applicable 1996 1995  % Change Total Operating Revenues $ 6,041,249 $ 5,893,662 3 Total Operating Expenses $ 4,984,290 $ 4,798,472 4 Net Income $ 611,596 $ 662,323 (8)

Common Stock Shares Outstanding- Year-end (Thousands) 233,470 244,698 (5)

Shares Outstanding-Average (Thousands) 242,401 244,698 (1)

Earnings per Average Share $ 2.52 $ 2.71 (7)

Dividends Paid per Share $ 2.16 $ 2.16 Book Value per Share - Year-end $22.33 $22.22 Market Price per Share - Year-end $27.25 $30.63 (11)

Ratio of Earnings to Fixed Charges - ENTERPRISE(A) 2.68 2.78 Ratio of Earnings to Fixed Charges - PSE&a(A) 2.62 2.77 Gross Additions to Utility Plant $ 602,783 $ 686,150 (12)

Gross Utility Plant $17,327,635 $16,925,280 2 (A) Includes Preferred Securities Dividend Requirements.

The detailed consolidated financial statements and related discussi.on appear in Appendix A of the Proxy Statement.

1

Dear Shareholder,

n 1996, we produced The 1996 results also reflect Freedom of Choice I solid financial results, a one-time charge of$59 million, For the past five years, I've In our efforts to get the rules right, we continue to provide despite the ongoing or 25 cents per share, stemming talked to you in our annual and leadership at the state and fed-expenses associated with the from customer refunds required quarterly reports about the dra- eral levels where we are working refurbishment of the Salem by Public Service Electric and matic changes facing our indus- aggressively to establish rules nuclear units. Gas Company's (PSE&G) resolu- try and about the ways we have for competition that will be fair 1996 earnings reflect the tion of outstanding Salem regula- been preparing for that new era. to our customers, our employees benefits of our ongoing cost tory issues. This year the new era begins. and our shareholders.

management efforts, the In January 1997, the New We are working to ensure Financial Outlook strong New Jersey economy Jersey Board of Public Utilities that the new rules on industry Looking ahead, we have estab-and a good contribution from (BPU) issued its proposed find- restructuring provide customer lished a target of five percent our off-system gas sales that ings and recommendations for choice and lower cost without compound annual growth in earn-helped offset relatively flat restructuring the electric power endangering service reliability ings per share. We intend to electric sales caused by cool industry in New Jersey. This or compromising air quality and grow income in both our utility summer weather. We also proposed Energy Master Plan environmental progress.

and non-utility businesses experienced a sharp increase requires our principal subsidiary, Working to achieve opera-through effective cost manage-in earnings at our non- PSE&G, and the state's other tional excellence means concen-ment and development of new utility investment company, electric utilities, to develop pro- trating on what we do best and revenue streams. We are further Public Service Resources posals that allow customers to striving to do even better. We strengthening our capital struc-Corporation (PSRC). choose electric suppliers. It sets are creating partnerships with ture by applying our strong Public Service Enterprise an aggressive timetable requir- suppliers to increase efficiency cash flow to the retirement of Group (Enterprise) consoli- ing that customer choice be and reduce costs; recognizing maturing long-term debt and dated earnings for the year provided to a minimum of five employees, individually and in also are using internally gener-were $611.6 million, or $2.52 percent of customers beginning teams, whose best practices, ated funds to provide financial per common share. That in October 1998 and progressing in the form of their ideas and support to our more rapidly compares with earnings of to full competition for 100 per- actions, are serving as role mod-growing companies, Energis

$662.3 million, or $2.71 per cent of customers no later than els for the entire corporation; Resources Incorporated (Energis share in 1995. April 2001. and implementing new informa-Resources) and Community Results for 1996 reflect Freedom of choice is coming tion technology to help manage Energy Alternatives two one-time gains recorded and we are ready for it. We wel- work more efficiently across the Incorporated (CEA).

during the year - $18 mil- come it and believe we are in corporation.

Through continued commit-lion, or seven cents per share, position to succeed in this new We remain committed to the ment to our core utility busi-from the repurchase of pre- marketplace. reliability and quality of our ness, and establishing new ferred stock, and $13.5 mil- We have been preparing for service. This commitment con-non-regulated businesses, such lion, or six cents per share, this change by doing what suc- tinues to grow in significance as as Energis Resources, we aim to resulting from the sale of our cessful competitors must do: customers gain freedom in enhance the value of your com-Houston-based oil and gas sub- redesign and refocus operations; choosing suppliers. PSE&G con-pany and continue our record of sidiary, Energy Development concentrate on cost containment; tinues to offer pioneering money-paying dividends annually for Corporation (EDC). emphasize a strong customer back service guarantees. If we nine decades.

focus; forge strong, productive fail to keep our service promises partnerships with employees to customers, they can request and suppliers; participate and receive direct bill credits. It actively and decisively in the is no longer enough to satisfy shaping of public policies related customers; the standard for cus-to governing our industry; and tomer service has been raised seek new sources of revenue. and will be raised ever higher in the years ahead.

Three Goals Our commitment to opera-We intend to prosper in this new tional excellence, and success in marketplace by advancing the the new deregulated environment three goals we set in 1996:

resulted in our decision in 1995 getting the rules right; achiev-to take the nearly twenty-year-old ing operational excellence; and investing for growth.

2

A key Enterprise objective is to keep its co=on stock dividend secure, as it has been over the last five decades.

2.50 2.00 I.SO 1.00 0.50 0.00 111111I11111111I11111111111111111 1946 1956 1966 1976 1986 1996 (dolln.rs)

Dividend History, Adjusted for Stock Splits Salem nuclear units out of service and outside our traditional serv- our work force skills must be and make fundamental changes ice territory. We plan for it to well-matched with the new necessary to improve perfor- be an engine of growth in the requirements demanded by a mance of the station to the end of future and to be a billion dollar competitive market.

its 40-year license. Salem Unit 2 business in five years . Our associates are also an is expected to return to service in On the utility side, we have invaluable resource that can Allocati,on of the second quarter of this year expanded our portfolio of tradi- help us recognize the needs of Assets at and Salem Unit 1 is expected to tional products and services by the marketplace. Harnessing December 31, 1996 Enterprise 'lbtal Assets -

return in the fall. In any case, expanding our appliance busi- their life experiences and per-

$16.9 billion the units will be restarted only ness to include several new spectives to help shape business when we are certain they are competitive service offerings, as decisions will ultimately help us PSE&G ready for reliable operation over well as off-system electric and satisfy the energy service needs O Electric 74%

the long term. gas sales. of an expanding range of cus- 0 Gas 14%

The Hope Creek nuclear tomers. We are committed to EDHI Workin g Smarter plant, meanwhile, has achieved creating a work environment of 0 PSRC 9%

In addition, six-year contracts CEA 2%

outstanding performance since mutual respect, where associ-ratified by our unions utilized 0 EGDC 1%

its return from a refueling ates are empowered to unleash mutual gains bargaining and and maintenance outage in their many, cliverse talents and enhanced our ability to compete early 1996. insights to the fullest.

in the future by removing some Safety has been, and will con- In this annual report, you of the constraints that previ-tinue to be, the first priority in will find some excellent exam-ously hindered our operational operations of all our nuclear units. ples of how we are working flexibility. The contracts allow Investing for growth is our towards getting the rules right, our gas and electric employees to third goal. A key component of achieving operational excellence do crossover work, which trans- Sources of this strategy is our interna- and meeting our vision for Consolidated lates to a faster response to cus- Earnings p er Share tional independent power com- investing for growth.

tomers, increases the efficiency Enterprise Earnings pany, CEA. The demand for new I am grateful to you for your of our work force and helps us find per Average Share -

electric generation in the inter- continued support. As freedom $2.52 better ways to satisfy customers.

national market will exceed of choice continues to evolve, Continued investment in the Earnings per Share 800 gigawatts over the next I assure you that all of us at professional growth of our 11,000 10 years. That's the equivalent Enterprise are dedicated to deliv- PSE&G employees also contributes to our of 800 very large generating ering to you the results of our 0 Electric $1.79 long-term health. We are commit-stations. CEA will continue to hard work in the years ahead. Gas $ .40 ted to establishing an organiza-pursue financially attractive tion that fosters an environment opportunities here in the of continuous learning; we have $ .23 United States, but because of EDC* $ .10 made a major investment in the tremendous demand over- CEA $ .04 employee development and tech-seas, it will emphasize interna- EGDC $ (.01) nical training, as well as tuition Energis tional markets. E. James Ferland reimbursement for college and Chairman of the Board, President Resources$ (.03)

We have also launched a new and Chief Executive Officer, post-graduate studies. We realize total energy services subsidiary, Public Service Enterprise Group working smarter demands contin- Incorporated (* Discontinued operations-Energis Resources, which posi- February 14, 1997 Gain on Sale-$.06; Income uous learning by all of us, and from Operations-$.04) tions Enterprise to compete for that for Enterprise to be success-market opportunities spawned ful in a changing environment, by deregulation - both within 3

Public Service Enterprise E. James Ferland Enterprise Group Chairman of the Board, Incorporated President and Chief Executive Officer PO. Box570 80 Park Plaza, T4B Newark, NJ 07101 (201 ) 430-7000 www.pseg.com Public Service Electric PSE&G Lawrence R. Codey PSE&G serves the intensely developed corridor between and Gas Company President and Chief Operating Officer New York City and Philadelphia. PSE&G O PS~G PO. Box 570 80 Park Plaza, T4B Newark, NJ 07101 (201 ) 430-7000 www.pseg.com Enterprise EDHI Robert J. Dougherty, Jr.

President and Chief Operating Officer I

Diversified Holdings I Incorporated EDHI The Legal Center One Riverfront Plaza 9th Floor Newark, NJ 07102 (201 ) 596-6760 Energis Resources Frank Cassidy President and Chief Executive Officer Community Energy Energis Resources Incorporated Alternatives has power E~RGIS 499 Thornall Street plant interests in the Americas, 5th Floor Asia, the Pacific Rim Edison , NJ 08837 and Europe. (8881-3-ENERGIS www.energisresources .com Community Energy Michael J . Thomson Alternatives President and Chief Executive Officer Community Energy Alternatives Incorporate0 1200 East Ridgewood Avenue Ridgewood, NJ 07450 (201 ) 612-2772 Public Service Eileen A. Moran Resources Corporation President Public Service Resources Corporation

-"-----

The Legal Center One Riverfront Plaza

-u-r*na.. 9th Floor Newark, NJ 07102 (201 ) 596-6710 4

- ...

'II I I Publicly-traded diver s ified energy Collectively, PSE&G and

  • Electricity and Gas Success in meeting our strategic and energy services company Community Energy Alternatives, a
  • Industrial and Commercial Gas objectives will be measured in located in New Jersey with annual subsidiary of EDHI, have more than
  • Industrial, Commercial and terms of earnings per share revenues of more t han $6 bimon, 90 years of power plant operating Residential Electric growth. The objective for the consisting of two main subsidiaries: experience with active investments
  • Energy Consulting and Planning Enterprise portfolio is a compound Public Service Electric and in 40 power plants fueled by coal, *Integrated Energy Management growth rate of five percent Gas Company and Enterpr ise natural gas, oil, petroleum coke and Services annually over the next five years.

Diversified Holdings Incorporated. nuclear.

  • Operations and Maintenance Support
  • Residential Gas Products and Services I

I Ser ves more than 5.5 million New Jer sey residents in more than PSE&G provides the lowest cost, most reliable electric and gas service of any

  • Electricity and Gas
  • Industrial and Commercial While new business ventures will play a vital role in the long-term 300 urban, suburban and r ural New Jersey utility. It maintains a Electric growth and strength of I communities with electricity, gas staff of over 600 highly trained service
  • Energy Consulting and Planning Enterprise, PSE&G remains I and energy alter natives in a technicians on cal I 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> a day,
  • Industrial and Commercial Gas Enterprise's core business and 2,600 square-mile diagonal 365 days a year to repair a broad
  • Residential Gas Products and currently comprises approxi-cor ridor across the state. range of gas and electric appliances Services mately 97 percent of total and HVAC equipment and backs up its
  • Sunburst Customer Solutions Enterprise revenues.

performance with nine guarantees * 'fradelillk export assistance of service. Through its Sunburst program Customer Solutions product offuring,

  • Business Enhancement Program PSE&G provides meter reading,
  • Residential Electric bi Iling and collection services.

Operates Enterprise's non-utiljty EDHI bui lds on the nearly 100-year

  • Electricity and Gas EDHI will enter new markets in businesses seeking to maintain a nd tradition of Enterprise by seeking
  • Industrial and Commercial Gas the energy arena where its experi-expand its energy services in the out and developing additional
  • Energy Consulting and Planrung ence and knowledge can be brought world. Consists of three primary energy-related services as deregu-
  • Integrated Energy Management to bear and when market needs and subsidiaries: Energis Resources, lation of the industry progresses. Services opportunities can be pursued on a Community Energy Alternatives,
  • Operations and Maintenance sound and profitable basis.

and Public Service Resources Support Corporation.

Provides a full menu of energy In addition to offering several new

  • Electricity and Gas Energis Resources will serve management solutions for busi- services, Energis Resources brings
  • Energy Consulting and Planning industrial and commercial cus-nesses in the Northeast. the expertise offunctions previ-
  • Integrated Energy Management tomers in the New England and ously performed by a number of Services Mid-Atlantic region through three Enterprise subsidiaries to Northeast
  • Operations and Maintenance product platforms: energy supply, markets which it knows well. Support consulting, engineering and oper-
  • Financing Solutions ations services, and financing solutions.

Develops, acquires, owns and oper- More than 200 experts in project

  • Electric Generation Solutions As the opportunities for growth in ates cogeneration and independent development and financing, engi- the domestic generation business power facilities in the U.S., Asia, neering, and plant operations shrink due to overcapacity and t he Pacific Rim, Europe, and and maintenance create effective potentially low profit margins, South Amer ica. teams that understand the CEA will pursue investments dynamics of t he areas they serve. in international generation in strategic markets.

Enhances EDHI's financial strength PSRC's well-balanced portfolio

  • Investments in assets which pro- PSRC plans to build on its expertise with a strong, diverse portfolio of provides diversification, earrungs vide funds for future growth and in risk management and mitigation, more than 60 separate investments stability and continued incremental incremental earnings transaction analysis and closing and across a wide spectrum of industry earn.i ngs growth to shareholders. investment management to exploit sectors and asset types, including new opportunities that arise from leveraged and direct financing leases, industry deregulation.

project financing, venture capital funds, leveraged buy-outs, real estate limited partner ships and securities.

5

Getting the Rules Right Many of the rules governing our industry were written at a time when the utility franchise was the best way to ensure universal, safe and reliable service. However, now that the infrastructure has been built and as economic conditions change, we need to make sure all energy providers operate on a level playing field.

We are working to foster rules Master Plan would require rate reductions of five to ten the high level of service relia-that are fair to our customers, utilities to develop plans to percent for customers. We are bility that exists today.

shareholders, the State of offer retail competition to five committed to working toward A significant issue in the New Jersey and its economy. percent of all customers by that target rate reduction in a restructuring process is the Enterprise has dramati- October 1998. This would manner that protects the envi- recovery of transition costs.

cally increased its efforts to increase incrementally until ronment and our investors, 'fransition costs result from affect the deregulation debate full competition for all con- without creating a category of the utilities' historical legal in both New Jersey and sumers is reached by April second-class consumers who obligation to serve all cus-Washington, D.C. Getting the 2001. The state's electric utili- do not share in the benefits of tomers. Utilities have been rules right is of crucial impor- ties have until July 15 to file competition. required to plan, build and tance if Enterprise is to com- their own restructuring plans. While dedicated to imple- maintain generation and a pete effectively in the evolving PSE&G shares the BPU's menting the Energy Master delivery infrastructure to reli-energy market. broad objectives in the restruc- Plan, we are also urging the ably meet customer needs. In turing process and will work BPU to provide utilities with exchange for this obligation, Energy Master Plan vigorously toward the goal of flexibility to propose benefi- utilities have been allowed a In January 1997, the BPU opening the New Jersey mar- cial changes, as different

" unveiled its blueprint for ketplace to competition, with utilities face different circum-introducing customer choice stances and challenges in into New Jersey's electricity restructuring. We are also market. The proposed Energy stressing the need to maintain 7

PSE&G Net Utility Plant In-Service Fossil 18.6%

Nuclear 40.0%

reasonable opportunity to A significant amount of the recover investments through pollution transported into the regulated rates. As rates Northeast is produced by coal-become competitive, they may burning power plants in the no longer be sufficient to per- Midwest and Ohio Valley, mit recovery of all such costs, plants that are allowed to which then become "stranded." operate with minimal environ-Considerations of fairness, mental controls. An electric efficiency and law warrant industry restructuring plan recovery of these costs. that encourages increased pro-Transmission

& Distribution 38.8% duction of this cheap, dirty Restructuring and the Midwest electric power will, environment as a result, send hundreds Lower cost electric power of thousands of tons of addi-must not come at the expense tional pollution drifting into of environmental quality or our region.

sound public health policy. Our concern over this issue 2.6%

New Jersey and the Northeast is shared by officials at the

} o t h er are burdened by the impact highest levels of state govern-of air pollution created to the ment, as well as statehouse The net e/,ectric and gas plant in-seruice arrwunted to $ 10. 7 billwn at December 31, 1996. West and South, which is and congressional members of transported by prevailing both parties throughout the wind currents. Northeast. We have worked hard to increase their recogni-tion of the strong link between 8

I

energy and the environment working to translate it into The proposal calls for the and there are encouraging appropriate action. 13 percent GRFT to be indications that the message replaced by existing sales and is being heard. Vice President Energy taxes corporate taxes and a tempo-Al Gore has clearly stated After a year of study, a BPU/ rary new tax that would be that environmental degrada- New Jersey 'freasury phased out over seven years, tion should not be the price Department joint task force causing a 45 percent reduction the nation pays for lower has recommended a major in taxes paid by consumers.

energy costs. The Federal overhaul of the Gross Receipts Energy tax reform is long over-Energy Regulatory and Franchise Tux (GRFT) due and essential if New Commission, the paid by all customers of Jersey is to compete with Environmental Protection New Jersey utilities. Because other states for business and Agency and the White House customers of non-utility jobs. It's also good news for Council on Environmental energy providers do not pay New Jersey consumers, who Quality have also acknowl- this tax, utilities are at a currently pay among the high-edged the potential negative competitive disadvantage. A est energy taxes in the nation.

environmental impact of new tax plan that treats all restructuring. We are encour- energy providers equally -

aged by this support and are giving utilities and new market entrants the same opportuni-ties to compete for business -

has been recommended.

9

  • '

Operational Excellence Achieving operational excellence doesn't happen overnight. It means questioning tradition, finding smarter ways to serve customers, streamlining work processes, and keeping an unblinking eye on the bottom line.

In 1996, Enterprise employees Aviation Agency bid out to Taking time a t Hope Creek Redu ction, r ecovery, continued their commitment replace 30,000 feet of cable Our Hope Creek nuclear sta- recycling to excellence. As we transform snaking under a runway at tion in Salem, New Jersey, got A major corporate initiative, ourselves into a global energy Newark International Airport - back to the business of making driven by the need to improve services company, their ideas one of the nation's busiest - electricity following an outage our bottom line as well as our and actions remain critical to PSE&G's Metropolitan electric early in 1996. The refueling commitment to the environ-our success. distribution division did the outage was expected to last ment, was the establishment of Here are some examples of work. The work might be 30 days; but station manage- a materials management how individuals, teams and considered traditional , but ment expanded the original process. The process empha-organizations are helping to PSE&G's approach wasn't. work scope to include more sizes not only the recovery of set a standard of excellence for Project leaders and repre- than 13,500 individual work usable waste, but also the the entire corporation. sented employees planned out activities, all aimed at ensur- reduction of waste by design-a schedule that would not ing safe and reliable long-term ing out as much as possible Shared vis ions, interfere with high air traffic operations at the plant. from the start. The results shared rewards periods. Much of the work was Hope Creek has enjoyed an have been gratifying: waste Replacing underground distri- done on weekends. Despite the extremely reliable period disposal costs have fallen more bution cable and splicing is the scheduling complications, the of operation since its return than $5 million, more than type of work on which PSE&G job was completed on time. to service. 90 percent of our non-haz-has built its reputation for The project marked a new ardous solid waste is being excellence. When the Federal approach to generating rev- recycled and PSE&G was for-enue and helped increase our mally honored by the federal employees' awareness of the Environmental Protection importance of meeting cus- Agency (EPA) as one of 280 tomer needs as we face the Fortune 1000 companies new reality of competition. named charter members of the EPA's WasteWi$e program.

11

87 88 89 90 91 92 93 94 95 96 92 93 94 95 96 PSE&G supplies electricity at the lowest cost Th e ratio of customers to PSE&G permanent per kwh of all the utilities in employees, a measure of efficiency, N ew Jersey, and intends to continue the trend. has g rown 23% over the past fiv e years.

(Average revenue per kwh adj usted for inflation.

Base year 1995- 1996. Cents per kwh.)

New perspectives, Meeting monthly, the council system will allow for quicker new energy has formulated recommenda- accessing of information and PSE&G gained recognition for tions to increase minority sup- improved capabilities for plan-its promotion and support of plier participation in high-dollar ning and management of work minority and women-owned volume and strategic products in providing energy services.

business development when it and services. PSE&G's supplier But Business Integration was named 1996 Corporation of diversity process is a customer- must be more than just jar-the Year by the minority busi- driven business strategy. Just gon. PSE&G will be joining ness members of the New York/ as success requires a workforce some 6,000 companies world-New Jersey Minority Purchasing that is reflective of the society wide who are using an infor-Council. PSE&G's efforts in we serve, we also need suppliers mation system known as SAP this area include establishing who can provide insights and - Systems, Applications and a Supplier Diversity Council new ideas to help us better Products in Data Processing -

comprised of employees and meet our customers' needs. to achieve major gains in representatives from minority performance. The rollout of businesses to advise the com- Making the power of Business Integration starts pany on its supplier diversity information work for us with Fossil Generation in 1998.

policies and results, and to fos- Business Integration is a cor-ter communications between poratewide effort to improve PSE&G and its suppliers. our operating efficiencies through the use of integrated business software. An inte-grated internal information 12

Customer service: A residential customer in for good jobs with fair wages ,

a hallmark of success South Jersey, for example, was benefits and working condi-Customers today are becoming dissatisfied with the service tions. The new agreements more sophisticated - and she received from a competi- address the requirements of a demanding - consumers. tor of our appliance service fast-changing industry head-on, With the coming of customer business. This competitor including provisions that allow choice, building a relationship tried to use unethical tactics gas and electric employees to with our customers has never to sell a major repair job that work in each other's areas.

been more critical. At PSE&G wasn't needed. When the cus- Other provisions address cut-we hear from our customers tomer called PSE&G for a ting non-productive time and daily through regular surveys, second opinion, our service reducing costs. Mutual-gains feedback and personal interac- technician quickly discovered bargaining, a process of tions . We listen, then improve the problem to be simply a side-by-side problem-solving, our products and services clogged pilot light. Daily inter- allowed the unions and based on what we hear. As actions such as these help company to help each other part of this constant feedback, build customer loyalty and recognize shared interests.

we've learned that the exper- awareness. A united front of employer and tise and integrity of our work- employees is essential for pre-force have been major factors A pact for the 21st century serving customers and jobs.

in maintaining customer loyalty. PSE&G's five unions signed contracts in 1996 that extend to the year 2002. These agree-ments balance the needs of the company in an emerging com-petitive marketplace with the needs of employees and unions 13

Investing For Growth In 1996, Enterprise reorganized to take maximum benefit of the opportunities arising out of the deregulation of the electric and gas industries. This reorganization also results in a clearer division between Enterprise's regulated and unregulated businesses.

Bob Dougherty now serves Going global standards, and is delivering CEA also enjoys a well-as president and chief operat- Business plans for CEA target electricity to the country's established reputation in the ing officer of an expanded new investments of approxi- power grid. The second unit is U.S. The JFK Energy Center, Enterprise Diversified Holdings mately $700 million over a scheduled to go on-line in late which is owned and operated Incorporated (EDHI). In addi- five -year horizon. Plans for 1997; both units will supply a by CEA and Gas Energy, Inc. ,

tion to PSRC, which will con- 1997 call for closure on several substantial amount of electric- a wholly-owned subsidiary of tinue to search for passive, projects, among them a 220- ity to this rapidly-developing Brooklyn Union Gas Company, energy-related investments to megawatt simple-cycle plant in rural area. completed its first full year of add to its portfolio, Dougherty Colombia, South America. Last year CEA and its commercial operation. The will manage and develop CEA, This plant will burn natural partner AES, a developer and center is a 105-megawatt plant Enterprise's independent gas and sell its electrical out- operator of power plants, suc- that supplies electricity and power company, and a new put on the Colombian spot cessfully closed project hot and chilled water for business, Energis Resources, market. The project is part of financing for Central Termica New York's Kennedy which provides a full range of a joint venture formed with San Nicolas, a 650-megawatt International Airport. Addi-energy-management solutions. Amoco Power Resources. The plant located in Argentina. tional electrical capacity is I

I .*

Through these unregulated project is intended to enter The ability to refinance with a sold to the local utility, companies, and by expanding a construction during the first $60 million non-recourse loan Consolidated Edison.

number of traditional products quarter of 1997 and be in com- in the Argentine market CEA has investments in and services found in our reg- mercial operation by late 1997. demonstrates a high degree of 22 cogeneration and power ulated utility, Enterprise seeks The year 1996 was one of bank confidence in Argentina's plants around the world to increase shareholder value. progress. CEA holds a minority power sector reforms and in totalling 2,400 megawatts of interest in two 300-megawatt San Nicolas' viability as a key electric generation capacity.

coal-fired units located in the energy producer. Operating from offices in interior province of Gansu, Hong Kong, Argentina, China. The first unit success- Thailand, India and the U.S.,

fully passed its first perfor- CEA professionals are pursu-mance test in 1996, meeting ing nearly 70 potential projects all national environmental in more than twelve countries.

15

EDHI's net income reached a record high in 1996.

Net income from continuing operations increased 28.5%

as compared to 1995 primarily due to a strong performance by Puhlic Service Resources Corporation.

  • Without EGDC impairment of $(50.4) million.

92 93 94 95 96 (dollars in millions)

Income from Income from Continuing Di scontinu ed Operations Operations Smarter energy*M Enterprise Strategic Energy Market restaurants through-Drawing on Enterprise's depth Solutions, which provided con- out the Northeast, as well as of experience and financial sulting, engineering and more than 40 branch offices of strength, Energis Resources, repair services. In addition, a major Manhattan-based bank.

our newest subsidiary, pro- the financing of energy-savings, Similarly, deregulation of vides a single source for reli- or demand-side management electricity is proceeding able, top-quality service projects, formerly offered throughout the U.S. and at a focused on customer needs . by the utility subsidiary, particularly fast clip in the The company is concentrating Public Service Conservation Northeast - Energis on industrial and commercial Resources Corporation, Resources' home territory.

customers throughout the will now be supplied by New Jersey customers will Northeast and Mid-Atlantic Energis Resources. begin gaining the ability to states. Energis Resources offers an choose their electricity sup-Energis Resources offers impressive array of products plier in October 1998. Retail customers a wide range of and services, beginning with customers in Rhode Island and services to improve business the sale of natural gas. In Pennsylvania will be able to operations and performance 1996, U.S. Energy Partners choose in 1997. Since the fed-through more cost-efficient sold more than $67 million of eral Energy Policy Act of 1992 energy utilization, energy gas to some 3,600 customers deregulated the wholesale elec-process redesign, optimized in New Jersey, New York and tricity market, Enterprise has energy investment strategies states as far south as the been one of the most active and unique financing options Carolinas. New Jersey has and aggressive participants in for energy-related projects. been a pioneer in the deregu- that market. Energis Resources The company has absorbed lation of natural gas sales, will draw on this expertise to two Enterprise companies allowing the customer to buy serve retail markets afforded with proven track records: the gas itself from suppliers freedom of choice.

U.S. Energy Partners, which like Energis Resources, with sold natural gas, and delivery arranged through the local utility.

The company is already marketing natural gas to a number of customers, includ-ing more than 50 Boston 16

Along with energy supply, billing, payment processing within its service territory Energis Resources provides and collection services to and a well-trained staff of consulting, engineering and municipalities and other service technicians, the appli-operations services and financ- investor-owned utilities. ance service business has ing solutions. The ultimate Municipalities and other utili- expanded its traditional port-objective is to successfully ties can reduce costs and folio of service offerings. These provide total energy manage- increase efficiencies by utiliz- new services create added ment to customers in the ing PSE&G's sophisticated opportunities for bringing in Northeast, allowing them to customer service operations additional revenues. The busi-completely outsource their and extensive meter reading ness has also gained efficien-energy functions. experience. As of January cies and sharpened its Energis Resources is 1997, seven municipalities and competitive advantage with already working on energy two regional water utilities the introduction ofhome-projects with a number of have signed on. based reporting, which allows major customers. It is PSE&G's appliance service service technicians to report installing and maintaining business is the only region- directly to their first job in the power supply equipment for a wide provider of premium morning instead of stopping major telecommunications service and service contracts first at the office.

company's fiber optic network. for all major appliance brands In addition, PSE&G, with For a national food processor, with 24-hour service. 365-days- its long-established rights-of-the company is financing a-year availability. Banking on way, extensive network of third-party installation of a strong name awareness wires, and long-term customer high-efficiency lighting at 200 relationships, is also exploring of its locations. the possibility of adding wire and wireless telecommunica-Expanding a traditional tions services to its broad por t-portfolio folio of products and services.

PSE&G, through its Sunburst Customer Solutions program, offers its meter reading, 17

Public Service Enterprise Group continues to pursue a strategy of enhancing stockholder value through retention and reinvestment of earnings and payment of an annual dividend .

.

g ..

~ *

  • I

\

i I

!

91 92 93 94 95 96 92 93 94 95 96 (dollars) (percent)

This shows the value on December 31 Return on Average Common Equity of each year of $100 invested in for 1996 was 11.3%, which reflects Enterprise on December 31, 1991 various one-time adjustments, as (assumes reinvested dividends). discussed in the Chairman's letter of tlus annual report.

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! I 95 96 97" 98' 99' 95 96 97* 98* 99*

9 PSE&G n EDHI Common Equity Preferred Securioes 11 Long-Term lJ Debt

  • Projected
  • Projected (dollars in milliorm) (percent)

Declining utility capital expenditures One of our key objectives, as reflected are expected to be funned through in Enterprise'.~ capitalization internally generated cash, while growing ratio, is to strengthen the bal.ance sheet EDHI needs are expected to be met by by delet*eraging PSE&G.

additional debt and internally generated cash.

Consolidated Financial StatisticsrAJ Dollars in thousands where applicable 1996 1995 1994 1993 1992 Selected Income Information Operating Revenues:

Electric $ 3,944,362 $ 4,020,842 $ 3,739,713 $ 3,696,114 $ 3,407,830 Gas 1,880,994 1,686,403 1,778,528 1,594,341 1,586,181 Nonutility Activities 215,893 186,417 177,082 137,069 112,268 Thtal Operating Revenues $ 6,041,249 $ 5,893,662 $ 5,695,323 $ 5,427,524 $ 5,106,279 Income from Continuing Operations $ 587,358 $ 627,287 $ 666,521 $ 549,178 $ 475,150 Cumulative effect of change in accounting for income taxes - - - 5,414 -

Income from Discontinued Operations 24,238 35,036 12,512 46,341 28,967 Net Income $ 611,596 $ 662,323 $ 679,033 $ 600,933 $ 504,117 Earnings per Average Share:

From Continuing Operations $ 2.42 $ 2.57 $ 2.73 $ 2.29 $ 2.05 From Cumulative effect of change in accounting for income taxes - - - .02 -

From Discontinued Operations .10 .14 .05 .19 .12 Thtal Earnings per Average Share $ 2.52 $ 2.71 $ 2.78 $ 2.50 $ 2.17 Dividends Paid per Share $ 2.16 $ 2.16 $ 2.16 $ 2.16 $ 2.16 Payout Ratio 86% 80% 78% 86% 100%

Rate of Return on Average Common Equity(BJ 11.28% 12.32% 12.94% 11.91% 10.69%

Ratio of Earnings to Fixed Charges 2.68 2.78 2.84 2.57 2.33 Book Value per Common Share(CJ $22.33 $22.22 $21.68 $21.07 $20.32 Gross Utility Plant $17,327,635 $16,925,280 $16,566,058 $15,861,484 $15,081,907 Accumulated Depreciation and Amortization of Utility Plant $ 6,148,482 $ 5,737,849 $ 5,467,813 $ 5,057,104 $ 4,610,595 Thtal Assets $16,915,331 $16,816,491 $16,312,734 $15,995,433 $14,543,696 Consolidated Capitalization Common Stock $ 3,626,792 $ 3,801,157 $ 3,801,157 $ 3,772,662 $ 3,499,183 Retained Earnings 1,586,256 1,636,971 1,505,010 1,361,018 1,282,931 Common Equity 5,213,048 5,438,128 5,306,167 5,133,680 4,782,114 Preferred Stock Without Mandatory Redemption 113,392 324,994 384,994 429,994 429,994 Preferred Stock With Mandatory Redemption 150,000 150,000 150,000 150,000 75,000 Monthly Guaranteed Preferred Beneficial Interest in PSE&G's Subordinated Debentures 210,000 210,000 150,000 - -

Quarterly Guaranteed Preferred Beneficial Interest in PSE&G's Subordinated Debentures 208,000 - - - -

' Long-Turm Debt 4,580,231 5,189,791 5,110,022 5,100,228 4,962,884 Thtal Capitalization $10,474,671 $11,312,913 $11,101,183 $10,813,902 $10,249,992 (A) The dewikd consolidated financial swtements and related discussion appear in Appendix A of the Proxy Statement.

(BJ Net Income for a twelve-rrwnth period divided by the thirteen-mnnth a verage of Commnn Equity.

(CJ 1hta1 Comrrwn Equity divided by end-of-period Comrrwn Shares outswnding.

19

Condensed Consolidated Statements of Income

~

l In thousands (except per share data) for the years ended December 31, 1996 1995 1994 Operating Revenues Electric $3,944,362 $4,020,842 $3,739,713 Gas 1,880,994 1,686,403 1,778,528 I

~

Nonutility Activities 215,893 186,417 177,082 Total Operating Revenues 6,041,249 5,893,662 5,695,323 Operating Expenses Fuel for Electric Generation and Interchanged Power 918,514 891,782 695,763 Gas Purchase d Operation and Maintenance 1,117,716 1,371,800 961,539 1,320,345 1,023,956 1,323,886 l

1:

Depreciation and Amortization 607,293 596,966 555,461 Taxes 968,967 1,027,840 974,418 I Total Operating Expenses 4,984,290 4,798,472 4,573,484 l Operating Income Allowance for Funds Used During Construction and Capitalized Interest 1,056,959 18,155 1,095,190 38,163 1,121,839 42,588 l

Other Income - Net Interest Charges (1,920) 453,111 8,041 464,207 6,430 462,189 II' Preferred Securities Dividend Requirements and Premium 32,725 49,900 42,147 I Income from Continuing Operations 587,358 627 ,287 666,521 II Income from Discontinued Operations 24,238 35,036 12,512 -

!

Net Income $ 611,596 $ 662,323 $ 679,033 Shares of Common Stock Ou tstanding End of Period Average for Period 233,470,291 242,400, 755 244,697,930 244,697,930 244,697,930 244,4 70, 794 lI Earnings per Average Share:

From Continuing Operations From Discontinued Operations

$2.42

.10

$2.57

.14

$2.73

.05

-

l Total Earnings per Average Share $2.52 $2 .71 $2.78 Dividends Paid per Share of Common Stock $2.16 $2.16 $2.16 The detail.ed consolidated financial statemenls and related discussion appear in Appendix A of the Proxy Statement.

Condensed Consolidated Statements of Cash Flows i

In thousands for the years ended December 31, 1996 1995 1994

-'

Net Income $ 611 ,596 $ 662,323 $ 679,033 Adjustments to net income, primarily depreciation I and amortization 822,864 872,550 564,745 Net cash provided by operating activities 1,434,460 1,534,873 1,243,778 Net cash used in investing activities, primarily additions to utility plant (offset by the net proceeds from the sale 1' of Discontinued Operations in 1996) (9,225) (935,305) (1,010,420) -

Net cash used in financing activities (1,208,296) (603,093) (237,200) i Net increase (decrease) in Cash and Cash Equivalents 216,939 (3,525) (3,842)

Cash and Cash Equivalents at Beginning of Period 61,964 65,489 69,331 Cash and Cash Equivalents at End of Period $ 278,903 $ 61,964 $ 65,489 The detail.ed consolidated financial statements and related discussion appear in Appendix A of the Proxy Statement.

1 20

I Condensed Consolidated Balance Sheets In thousands at December 31, 1996 1995 I

Assets I

Utility Plant:

r Utility Plant (including Nuclear Fuel) $16,858,348 $16,532,232 Less: Accumulated Depreciation and Amortization 6,148,482 5,737,849

.

I I

Net Utility Plant in Service Construction Work in Progress (including Nuclear Fuel) 10,709,866 445,321 10,794,383 369,082 Plant Held for Future Use 23,966 23,966 I

Net Utility Plant 11,179,153 11,187,431 Investments and Other NoncurrentAssets 2,351 ,984 2,242,744 Current Assets 1,744,427 1,828,477 I

I Deferred Debits 1,639,767 1,557,839 I

Total $16,915,331 $16,816,491

'

Capitalization and Liabilities Capitalization:

Common Equity $ 5,213,048 $ 5,438,128 Subsidiaries' Preferred Securities:

Preferred Stock Without Mandatory Redemption 113,392 324,994 Preferred Stock With Mandatory Redemption 150,000 150,000 Monthly Guaranteed Preferred Beneficial Interest in PSE&G's Subordinated Debentures 210,000 210,000 Quarterly Guaranteed Preferred Beneficial Interest in PSE&G's Subordinated Debentures 208,000 -

Long-Turm Debt 4,580,231 5,189,791 Total Capitalization 10,474,671 11,312,913 Other Long-Turm Liabilities 184,769 199,832 Current Liabilities 2,271,754 1,548,026 Deferred Credits 3,984,137 3,755,720 Total $16,915,331 $16,816,491 The detailed consolidated financial statements and related discussion appear in Appendix A of the Proxy Statement.

Condensed Consolidated Statements of Retained Earnings In thousands for the years ended December 31, 1996 1995 1994 Balance January 1 $1,636,971 $1 ,505,010 $1 ,361,018 Add Net Income 611,596 662,323 679,033

-.

Total 2,248,567 2,167,333 2,040,051 Deduct Dividends on Common Stock 522,565 528,548 528,071 Retirement of Common Stock 133,047 - -

Preferred Securities Issuance Expenses 6,699 1,814 6,970 Total Deductions 662,311 530,362 535,041 Balance December 31 $1,586,256 $1,636,971 $1,505,010 The detailed consolidated financial statements and related discussion appear in Appendix A of the Proxy Statement.

Notes to Consolidated Financial Statements For full text of Organization and Summary of Significant Accounting Fblicies refer to Note 1 to Consolidated Financial Statements in Appendix A of the Proxy Statement.

For full text of Commitments and Contingent Liabilities refer to Note 13 to Consolidated Financial Statements in Appendix A of the Proxy Statement.

21

Financial Statement of Responsibility To the Stockholders of Public Service Enterprise Group Incorporated:

The condensed financial statements in this Summary Annual Report were derived from the consolidated financial statements included in the Public Service Enterprise Group Incorporated (the "Company") Proxy Statement for the 1997 Annual Meeting of Stockholders, which has been enclosed in the same mailing as this Summary Annual Report. The integrity and objectivity of the financial information presented in the Proxy Statement and this Summary Annual Report are the responsibility of the Company's management. The financial statements report on management's accountability for corporate operations and assets. Tu this end, management maintains a highly developed system of internal con-trols and procedures designed to provide reasonable assurance that the Company's assets are protected and that all transactions are accounted for in conformity with generally accepted accounting principles. The system includes documented policies, guidelines and self-assessments, aug-mented by a comprehensive program of internal and independent audits conducted to monitor overall accuracy of financial information and com-pliance with established procedures. The consolidated financial statements included in the Proxy Statement were audited by Deloitte & Thuche LLP, independent auditors, whose report on the condensed consolidated financial statements appears herein.

E. James Ferland We~~

Robert C. Murray Patricia A. Rado Chairman of the Board, Vice President and Vice President and Controller, President and Chief Executive Officer Chief Financial Officer Principal Accounting Officer February 14, 1997 Independent Auditors' Report To the Stockholders and the Board of Directors of Public Service Enterprise Group Incorporated: Deloitte&

ToucheLLP We have audited the consolidated balance sheets of Public Service Enterprise Group Incorporated and its subsidiaries 0

(the "Company") as of December 31, 1996 and 1995, and the related consolidated statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1996. Such consolidated financial statements and our report thereon dated February 14, 1997, expressing an unqualified opinion (which are not presented herein) are included in Appendix A of the Proxy Statement for the 1997 Annual Meeting of Stockholders. The accompanying condensed consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on such condensed consolidated financial statements in relation to the complete consolidated financial statements.

In our opinion, the information set forth in the accompanying condensed consolidated balance sheets as of December 31, 1996 and

,.

1995 and the related condensed consolidated statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1996 is fairly stated in all material respects in relation to the basic consolidated financial statements from which it has been derived.

j)~ ~ I~ LL/'

February 14, 1997 Parsippany, New Jersey 22

Lawrence R . Codey E. James F erland the Organization and Compensation Richard J . Swift l

has been a clirector since 1991. Has has been a clirector since 1986. Committee and member of the Auclit has been a clirector since 1994.

been President and Chief Operating Has been Chairman of the Board, Committee, Finance Committee and Has been Chairman of the Officer of PSE&G since September President and Chief Executive Nuclear Committee. Director of Board, President and Chief 1991. Member of Executive Officer of Enterprise since July 1986, PSE&G, Humana, Inc., Sequana Executive Officer of Foster I Therapeutics, Inc. and Medarex Inc. Wheeler Corporation, of Clinton, Committee and Finance Committee. Chairman of the Board and Chief Director of PSE&G, Sealed Air Executive Officer of PSE&G since New Jersey, a firm provicling design, Corporation, The 'frust Company of September 1991, and Chairman of the Mar ilyn M. Pfa ltz engineering, construction, manu-New Jersey, United Water Resources Board and Chief Executive Officer of has been a clirector since 1980. Has facturing, management, plant oper-Inc. and Blue Cross & Blue Shield of EDHI since June 1989. Chairman of been a partner of P and R Associates ations and environmental services, New Jersey. Executive Committee. Director of of Summit, New Jersey, a communica- since May 1994. Member of PSE&G, EDHI, and EDHI's principal t ions firm, since 1968. Chair of Finance Committee, Nominating Ern est H . Drew subsicliaries, and of Foster Wheeler Auclit Committee and member of Committee and Nuclear has been a clirector since 1993. Has Corporation and The Hartford Steam Nominating Committee and Committee. Director ofEDHI, been a member, Board of Management Boiler Inspection and Insurance Organization and Compensation Foster Wheeler Corporation and ofHoechstAG, Frankfurt, Germany, Company. Committee. Director of EDHI and Ingersoll-Rand Company.

a manufacturer of pharmaceuticals, AAA National Association.

chemicals, fibers, film, specialities R aymon d V. Gilmartin Jos h S. Weston and advanced materials, since has been a clirector since 1993. Has James C. Pitney has been a clirector since 1984.

January 1995. Was Chairman of the been Chairman of the Board, has been a clirector since 1979. Has Has been Chairman of the Board Board and Chief Executive Officer of President and Chief Executive Officer been a partner in the law firm of of Automatic Data Processing, Inc.,

Hoechst Celanese Corporation of of Merck & Co., Inc. of Whitehouse, Pitney, Harclin, Kipp & Szuch of of Roseland, New Jersey, since Somerville, New Jersey from May New Jersey, a global pharmaceutical Morristown, New Jersey, since 1958. April 1986 and was Chief 1994 until January 1995 and was firm that discovers, develops, produces Member of Executive Committee, Executive Officer of Automatic President and Chief Executive Officer and markets human and animal health Auclit Committee, Finance Data Processing, Inc. from from January 1988 to May 1994. products, since November 1994. Was Committee and Nominating January 1983 to August 1996.

Member of Executive Committee, President and Chief Executive Officer Committee. Director of PSE&G, Member of Executive Committee, Auclit Committee and Finance of Merck & Co., Inc. from June 1994 '!Ti-Continental Corporation, sixteen Nuclear Committee and Committee. Director ofEDHI and to November 1994. Was Chairman of funds of the Seligman fami ly of funds Organization and Compensation Thomas & Betts Corporation. the Board, President and Chief and Seligman Quality, Inc. Committee. Director ofEDHI, Executive Officer of Becton Dickinson Automatic Data Processing Inc.,

T. J. Der mot Dunphy and Company from November 1992 to F or r est J . R emick Olsten Corporation, Vanstar has been a clirector since 1980. Has June 1994. Chairman of Nominating has been a clirector since 1995. Has Corporation and Shared Meclical been Chairman of the Board and Committee and member of Finance been an engineering consultant since Systems Corporation.

Chief Executive Officer of Sealed Air Committee and Organization and July 1994. Retired Commissioner of Corporation, a Saddle Brook, Compensation Committee. Director the United States Nuclear Regulatory New Jersey manufacturer of protec- of PSE&G, Merck & Co., Inc. and Commission. Was Associate Vice tive packaging products and systems, Proviclian Corporation. President - Research and Professor of since November 1996. Was President Nuclear Engineering at Pennsylvania and Chief Executive Officer of Sealed Irwin Lerner State University, from 1985 to 1989.

Air Corporation from 1971 to has been a clirector since 1981. Chairman of Nuclear Committee and November 1996. Chairman of Finance Retired Chairman, President member of Auclit Committee and Committee and member of the Auclit and Chief Executive Officer of Nominating Committee. Director Committee and Organization and Hoffmann-La Roche Inc., of Nutley, ofPSE&G.

Compensation Committee. Director New Jersey, a manufacturer of pre-of EDHI , Sealed Air Corporation, scription pharmaceuticals, vitamins Summit Bancorp and Summit Bank. and fine chemicals, and cliagnostic products and services. Chairman of Executive Officers of Enterprise E . J ames Ferla nd Leon R . Eliason Robert C. Murray Fra nk Cassidy Chai rman of the Board, President Chief Nuclear Officer and President- Vice President and Chief Financial President and Chief Executive and Chief Executive Officer; Nuclear Business Unit of PSE&G. Officer; Senior Vice President and Officer of Energis Resources.

Chairman of the Board and Chief Financial Officer of PSE&G.

Chief Executive Officer ofPSE&G; Robert J. Dou gh erty, Jr. Patricia A. Rad o Chairman of the Board and President and Chief Operating Officer R . Edwin Selover Vice President and Controller; Chief Executive Officer ofEDHI. ofEDHI. Vice President and General Counsel; Vice President and Controller Senior Vice President and General ofPSE&G.

Lawren ce R . Codey Alfred C. Ko eppe Counsel of PSE&G.

President and Chief Operating Officer Senior Vice President-Corporate Michael J . Thoms on ofPSE&G. Services and External Affairs President and Chief Executive ofPSE&G. Officer of CEA.

23

Stockholder Information Stock Exchange Listings Transfer Agents Security Analysts and New York (Enterprise common The transfer agents for the com- Institutional Investors and PSE&G preferred) mon and preferred stocks are: For information contact:

Philadelphia (Enterprise common) Stockholder Services Director - Investor Relations Trading Symbol: PEG Department 201-430-6564 Public Service Electric Annual Meeting and Gas Company Available Publications Please note that the annual P.O. Box 1171 Form 10-K: A copy of Enterprise's meeting of stockholders of Newark, NJ 07101-1171 1996 Annual Report to the Public Service Enterprise Securities and Exchange First Chicago Trust Group Incorporated will be Commission, filed on Form 10-K, Company of New York held at Newark Symphony Hall, may be obtained by calling P.O. Box 2506 1020 Broad Street, Newark, 201-430-6503 or writing to:

Jersey City, NJ 07303-2506 New Jersey, on Tuesday, Director - Investor Relations April 15, 1997 at 2 p.m. Public Service Electric and Enterprise Direct -

Gas Company T6B Stock Purchase and Stockholder Services P.O. Box 570 Dividend Reinvestment Plan Stockholder inquiries about stock Newark, NJ 07101 Enterprise offers Enterprise transfer, dividends, dividend rein-Direct, a Stock Purchase and vestment, clirect deposit, missing The copy so provided will be with-Dividend Reinvestment Plan. For or lost certificates, change of out exhibits. Exhibits may be pur-adclitional information, inclucling a address notification and other chased for a specified fee.

prospectus and enrollment form, account information should be contact us through Internet e-mail directed to: Stockholder Services Financial and Statistical Review:

at stkserv@pseg.com or Department, Public Service A comprehensive statistical report call 800-242-0813.

Electric & Gas Company, P.O. containing historical financial Box 1171, Newark, NJ 07101-1171. and operating data may also be Dividends Please include your account num- obtained from the Director -

Dividends on the common stock ber or social security number. Investor Relations.

of Enterprise, as declared by the Board of Directors, are generally Stockholders can also phone our payable on the last business day toll -free number 800-242-0813, of March , June, September and Monday through Friday, with December of each year. Regular questions about stock transfer and quarterly dividends on PSE&G's registration, shares held in preferred stock are payable on the Enterprise Direct and our other last business day of March, June, stockholder services. Hours are:

September and December of 10 a.m. to 3:30 p.m. Eastern time.

each year.

The telephone number for the hearing impaired with special Direct Deposit of Dividends equipment is TDD 800-732-3241.

No more dividend checks delayed Please have your account number in the mail. No waiting in bank or Social Security number ready Common Stock- Market Price and Dividends per Share lines. Your quarterly common and when you call.

preferred stock dividend payments 1996 1995 can be deposited electronically to Stockholders can reach us by High Low Div. High Low Div.

your personal checking or savings Internet e-mail at:

account. To use this free service, stkserv@pseg.com First Quarter $32\il $25Y. $.54 $29Ys $26 $.54 call us at 800-242-0813.

Stockholders can also reach us Second Quarter 27%

Third Quarter 27%

25\il 25%

.54

.54 30Y.

29%

26%

26%

.54

.54

.j by FAX at: 201-824-7056 Fourth Quarter 29 26% .54 30% 28% .54 The number of holders ofrecord of Public Service Enterprise Group Incorporated common stock as of December 31, 1996 was 167,205.

@Printed on recycled paper, using soy ink.

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