ML18106A457

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Public Svc Enterprise Group Inc,Annual Rept for 1997.
ML18106A457
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Site: Salem, Hope Creek  PSEG icon.png
Issue date: 12/31/1997
From: Ferland E
PUBLIC SERVICE ENTERPRISE GROUP
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NUDOCS 9804170233
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Public Service Enterprise Group Incorporated

  • Countdown to Choice /

Summary Annual Report 1997 9804170233 980413 PDR ADOCK 05000272 I PDR

The countdown to choice has begun.

  • In 1998, electric utility deregulation and restructuring will move from conjecture to reality. In New Jersey, customers may begin choosing their energy supplier by the fall of 1998, joining residents and businesses in other states that have already participated in customer choice pilot programs.

In the international energy sector and in New Jersey's natural gas marketplace, customers are already making choices. In response, Public Service Enterprise Group Incorporated (Enterprise) has expanded to bring service and quality to new markets and new customers. Industry restructuring in the United States and abroad is bringing new and promising opportunities.

We are convinced that being the company our customers can count on is a key advantage whether we serve regions of the world where reliable energy is at a premium or where it is a necessary, but taken for granted, part of life.

As the countdown continues in New Jersey, customers, while looking for reduc-tions in their energy costs, are also demanding that they continue to receive the same quality service they've enjoyed from regulated utilities. As New Jersey's premier electric utility, Public Service Electric and Gas Company (PSE&G) is committed to continue meeting that expectation: providing energy services our customers can rely on .

Whatever opportunities arise, the people of Enterprise will continue their customer-focused approach to providing quality energy and energy services, with an eye at all times on increasing value to our shareholders.

Dollars in millions where applicable Financial Highlights 1997 1996 %Change

  • Total Operating Revenues $ 6,370 $ 6,041 5 Total Operating Expenses $ 5,255 $ 4,984 5 Net Income $ 560 $ 612 (8)

Common Stock Shares Outstanding - Average (Thousands) 231,986 242,401 (4)

Earnings per Average Share $ 2.41 $ 2.52 (4)

Dividends Paid per Share $ 2.16 $ 2.16 Book Value per Share - Year-end $22.47 $22.33 1 Market Price per Share - Year-end $31.81 $27.25 17 Ratio of Earnings to Fixed Charges - ENTERPRISE(AJ 2.61 2.68 Ratio of Earnings to Fixed Charges - PSE&G(AJ 2.70 2.62 Gross Additions to Utility Plant $ 557 $ 603 (8)

Total Gross Utility Plant $17,815 $17,327 3 IAJ Includes Preferred Securities Dividend Requirements.

The detailed consolidated financial statements and related discussion appear in Appendix A to the Proxy Statement.

<l Cover Photo: (clockwise from bottom) Jo Ann Dow, Manager - Community Affairs; Gene Hernandez, Senior Project Engineer, CEA; Bob Sutphin, Boiler Repair Mechanic, SMD; Debbie Smith, Inbound Collection & Credit Representative; Jim Kirwin, Jr., Electric Lineman; Debra Aschenbach, Service Specialist

  • Chairm*an's Letter index of 26 electric utilities and about three percent above the Dow Jones Utilities, an index of 15 electric and gas com-panies. This performance was in the face of the regulatory uncertainty accompanying the advanced stage of industry restructuring in New Jersey - one of the nation's leaders in this transition process. Our stock price is likely, however, to remain volatile through this period of uncertainty.

Industry restructuring In response to New Jersey's mandate for industry restructur-ing, our utility business, Public Service Electric and Ga s Company (PSE&G}, filed a plan to give electric customers the opportunity to choose their own energy provider beginning in January 1999, while providing a discount of 5 to 10 percent off current rates . Also, as a result of 1997 changes in New Jersey's utility tax policy, an additional reduction of up to 6 percent in customers' bills will be phased in during the next

Dear Shareholder,

several years - without an impact on Enterprise's earnings.

During 1997, good progress was made on many fronts as Our restructuring plan also includes a number of provi-we positioned your company to enter tomorrow's competi- sions that we believe will protect your interests as sharehold-tive marketplace. We expect, by year-end 1998, that the ers and enhance the economic well-being of the state of rules which will govern our role in this new business environ- New Jersey. While much work has yet to be done , including ment will have been largely determined. the passage of enabling legislation , we envision an orderly Financially, Enterprise reported consolidated earnings of process leading to the introduction of competition by the

$2.41 per share in 1997, a decline of 11 cents compared to beginning of 1999 .

reported earnings of $2.52 per share in 1996. However, With competition just around the corner, our focus excluding certain nonrecurring items described below, on growth to improve the future value of our company is Enterprise's 1997 earnings on an operating basis were $2.68 greater than ever. PSE&G continued in 1997 to enhance its per share, an increase of 4 cents, compared with operating portfolio of activitie s, from the marketing of appliance earnings of $2.64 per share in 1996. service contracts to the trad-Operating earnings are calculated by excluding non- ing of electricity and natural Revenue per kwh recurring items and more accurately reflect Enterprise's fun- ga s. Under the umbrella of damental, ongoing strength. In addition, they serve as a our other major subsidiary, better basis to gauge future performance. Enterprise Diversified Hold-In 1997, these one-time events included a charge of ings Incorporated (EDHI} ,

27 cents per share resulting from the settlement of lawsuits our nonregulated businesse s related to the refurbishment outage of our Salem Nuclear concentrated on developing Generating Station. In 1996, these one-time events included a energy services in the north-charge of 25 cents per share due to the resolution of regulatory eastern United States, pursu-issues including the used and usefulness of the Salem station. ing selected investments in 88 89 90 91 92 93 94 95 96 97 The good news is, of course , that the extensive refur- generation and distribution (Average revenue per kwh adjusted for inflation.

bishment of the Salem units is complete. Salem Unit 2 has facilities on a global basis, Base year 1996. Cents per kwh.J performed well since being returned to service in the late and building a portfolio summer of 1997 and Salem Unit 1, with its new steam gen- of passive energy-re lated PSE&G supplies electricity at the lowest cost erators installed, is completing start-up testing and will return investments that provide a per kwh of all the major utilities in New Jersey, and intends to continue the trend.

to service shortly. consistent earnings and On Wall Street, Enterprise's common stock finished cash flow.

1997 on a strong note , closing on the New York Stock Exchange at $31.81 , the high point for the year. The appreci- Reshaping PSE&G

  • ation of our stock price from $27.25 at the close of 1996, Historically, PSE&G ha s managed the generation, delivery, combi ned with reinve stment of our annual dividend of metering and billing of electricity for its customers as a sin-

$2 .16 per share , resulted in a total return of just under gle, bundled service. It now appears likely that generation will 27 percent. We did very well, compared to two respected be separated or unbundled from other activities, giving cu s-benchmarks - about half a percent above Standard & Poor's tomers the freedom to buy electricity as a commodity from 1

any number of providers , including utilities, independent power producers and power marketers .

Due to recent technological improvements affecting the reliability and efficiency of combustion turbine-powered generating stations, many of our older power plants will not be able to compete effectively in the new marketplace. A key From New Jersey's and PSE&G's perspective, we have embraced tighter air pollution limits and have reduced our emissions. These standards and the related costs should not put us at a competitive disadvantage, especially since much of New Jersey's air quality level is the result of pollution blown into our state by prevailing westerly winds.

  • concern is the legislative and regu latory treatment of our We encourage you to join us in supporting federal anti-investment in these facilities . The difference between our pollution legislation that both addresses the fact that the investment in these facilities and their value in a competitive electric power industry is a major contributor to air quality generation marketplace is problems and establishes emissions rules that will support Enterprise Annual Earnings and D1v1dend Payout per Share referred to as "stranded costs." environmental comparability among all producers.

Dealin g with stranded We also believe that we must look at the full range 00 costs is perhaps the thorniest of solutions when resolving environmental issues . Mecha-0 U") "....; "....; N U")

....; ..;- aspect of industry restruc- nistic controls may not always be the best approach.

....; ....; ~

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....; ....; ....; ....; ....; turing. In past years, PSE&G Emission trading on the air side and habitat restoration on

~ r-invested billions of dollars the water side may be more effective solutions to environ-Ii in generating facilitie s to mental issues because they produce longer-lasting results assure reliability of service and cost less.

~ to our customers and , with L:: ~

regulatory approval, we Pursuing nuclear excellence 93 94 95 96 97 were allowed to recover these In my letter to you last year, I emphasized our commitment e Earnings per Share e Annual Dividend Payout investments over time. to an improved nuclear program . I am pleased to report to We believe our restruc- you this year that our lengthy investment of time and turing plan deals with stran- resources to the refurbishment of the Salem station is pay-

  • ded costs, among other issues, in a reasonable manner. A ing off. Unit 2 has performed extremely well since its return fair regulatory outcome is achievable through a combination to full service late last summer. Unit l's fuel has now been of supportive legislation that will permit refinancing (securiti- reloaded and the station is on the verge of resuming opera-zation) of certain generation facilities, an acceptable transi- tion as I write this letter.

tion period and an appropriate reduction of customer rates in Meanwhile, our Hope Creek Nuclear Generating Station line with New Jersey's Energy Master Plan and , within the had an extraordinary operating cycle before undergoing a co mpany itself, an ongoing strategy to contain costs and successful refueling last September. The unit operated grow revenues . 99 percent of the time from completion of its prior refueling While the extent of our participation in tomorrow's com- in March 1996 to its most recent outage.

petitive generation markets cannot yet be fully determined, it The turnaround in our nuclear operations was led by Leon is clear to us that the distribution of electricity and natural Eliason, whom we recruited three years ago from a highly gas, which will likely remain a regulated activity, will continue regarded nuclear generation program at Northern States to be an attractive business segment for Enterprise . Power. During his tenure at PSE&G, he attracted, developed PSE&G is one of the largest electric and gas distribution and directed a strong team of proven nuclear professionals in companie s in the United States - one in which the quality making sweeping changes and improvements designed to of operations is as good as any throughout the country. enable our nuclear units to achieve safe, reliable and long-term We expect to improve the value of this business through performance. In the process, he rebuilt our nuclear credibility efficiency gain s under rate-cap pricing following the transi- with regulators on state and federal levels and with investors tion period. and security analysts in the key financial markets.

As we reshape PSE&G , there is another element of Leon will retire from PSE&G on April 30 and be replaced by restructuring on which we are firmly focused, and that is envi- Harold Keiser, another highly regarded nuclear leader. Leon is ronmental reform . We have strongly endorsed federal legisla- leaving a legacy of nuclear excellence that I am confident will tion that would establish uniform air pollution standards for be carried on by Harry.

all electric producers in the United States as a key compo-nent of industry restructuring. Investing for growth

  • While we have long been an advocate for opening mar- In striving to enhance the future value of Enterprise , we kets to competition, we have stressed that it be done only if made significant strategic moves in 1997 through the standards are in place to ensure that the ability to pollute is considerable international expansion of Community Energy not a competitive advantage in a restructured industry. Alternatives (CEA), our nonregulated generation and 2

Allocation of Assets at December 31, 1997 1997 Sources of Consolidated Earnings per Share Enterprise Total Assets - $17 .9 billion Enterprise Earnings per twrage Share - $2.41

  • distribution business, and the establishment of Energis Re sources to provide a wide array of energy services from Maine to Maryland.

CEA has vastly improved its developmental capability throughout the world, building a good backlog of projects intended to produce noteworthy earnings growth well into the next century. In pursuing opportunities, CEA draws on Enterpri se's long history of expertise in distribution and gen- Earnings per Share PSE&G 83% PSE&G $2.21 eration. In addition, it recruits experienced personnel from r~

PSRC 9% $ .25 various countries and cultures and seeks business partners EDHI CEA 7% EDHI CEA $ .06 with strong local abilities and knowledge.

  • Other 1% EGDC $ (.03)

In 1997, CEA was successful in expanding operations in Energis $ (.081 its various targeted regions in South America , particularly Brazil and Argentina . CEA's assets increa sed to about

$1.2 billion, bringing the level of its portfolio at year end to 28 generation and distribution projects around the world. stream of earnings and predictable cash flow. Its focus is on Energis Resources, our new entry in the burgeoning energy-related investments.

energy services industry, is targeting industrial and com mer-cia l cu stomers in the Northeast, offering program s designed Outlook for 1998 to help them reduce costs, find innovative energy solution s, Our cha llenges for the new year are abundant but by no and assure ongoing reliability. means in surmountable . We remain firmly committed to pur-suing our three key strategies : an orderly restructuring of the Reducing NOx Em1 ss1ons electric utility in New Jersey, achievement of operational excellence throughout all segments of Enterpri se and invest-

  • 16 ing in a manner that will foster growth of future earnings.

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Our desire is to achieve an earnings level in 1998 that will

10 20 ~ again demonstrate the fundamental strength of our opera-
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x 8 40 ;o tions locally and globally. Our objective throughout this tran-

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70 g sition to a com petitive industry is to focus on creating 80 ~

90 additional value in our company.

100 We firmly believe that the underlying strength in all facets 1990 1992 1994 I 996 I 998 2000 of our business is our excellent work force. In particular, we

  • Actual see corporate attention to two human areas as critical to our
  • Proposed NOx Plan 2000
  • One MWHR is the amount of energy required to light 10,000 hundred*watt light bulbs for 1 hour1.157407e-5 days <br />2.777778e-4 hours <br />1.653439e-6 weeks <br />3.805e-7 months <br /> future success. First, the health and safety of our employees is paramount, which is why we are engaged in an ongoing Nitrogen oxide (NOxl emissions from PSE&G's fossil plants fall well below program to improve our work processes to reduce injuries the 1995 Corporate Target. and create an accident-free workplace . And , second, we are striving to make Enterprise a company that truly values diver-sity and where all associates support each other, customers Last October, Energis secured some 800 new customers and vendors in ways that their unique characteristics become under Pennsylvania's electricity competition pilot program, enablers of, rather than barriers to, corporate success and bringing the total throughout the 11-state region to well over increa sed shareholder value.

5,000. In early 1998, Energis acquired a contractor that We especia lly appreciate your continued support in thi s provides a wide range of HVAC and other contracting and time of dramatic change and profound opportunity. Be maintenance services to industrial and commercial buildings assured that we at Enterprise are clear about our obligations in Pennsylvania, New Jersey and Delaware . In addition, it to you - as well as to our customers, employees, suppliers announced a strategic alliance with AlliedSignal Inc . to market and the communities and countries in which we do business -

and service a new energy technology called a TurboGenerator, as we negotiate the transition to a competitive marketplace .

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which provides an economical power source option for small commercial bu sinesses, institutions and light industry.

Standing as solid support for these growing businesses is Public Service Resources Corporation, our passive investment E. James Ferland I

Chairman of the Board , President and Chief Executive Officer, company, which for a dozen years has produced a steady Public Service Enterprise Group Incorporated, February 13, 1998 I

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I 3

Entity Group Leadership Public Service Enterprise Enterprise E. James Ferland

  • Public Service Group Incorporated Chairman of the Board, President and Chief Executive Officer Enterprise Group 80 Park Plaza, T48 Newark, NJ 07101 Incorporated 973-430-7000 At a Glance www.pseg.com Public Service Electric PSE&G Lawrence R. Codey and Gas Company President and Chief Operating Officer 80 Park Plaza, T4B O PS~G Newark, NJ 07101 973-430-7000 www.pseg.com Allocation of Assets at December 31, 1997 EDHI Total Assets (in billions)- $2.91 2 Enterprise EDHI Robert J. Dougherty, Jr.

Diversified Holdings President and Chief Operating Officer.

Incorporated 80 Park Plaza, T48

-"---***

  • u--=un1 Newark, NJ 07101 973-430-77 50 Energis Resources Frank Cassidy PSRC 55%

President and Chief Executive Officer

499 Thornall Street

  • EGDC 3%

5th Floor

  • Energis 2%

Edison, NJ 08837 888-3-ENERGIS www.energisresources.com Allocation of Assets at December 31 , 1996 EDHI Total Assets (in billions)- $2.002 Michael J. Thomson Community Energy Alternatives President and Chief Executive Officer 1200 East Ridgewood Avenue Ridgewood, NJ 07450 20 1-652-2772 Public Service Resources Eileen A. Moran Corporation President

  • 80 Park Plaza, T22 PSRC 72% Newark, NJ 07101
  • CEA 14% 973-456-3560 EGDC 6%
  • Energis 2%
  • Other 6%

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Profile Business Scope Products/ Services Market Outlook licly-traded diversified energy and Collectively, PSE&G and Community

  • Electricity and Gas Success in meeting our strategic y services company located Energy Alternative s, a subsidiary of
  • Industrial and Commercial Gas objectives will be measured in terms w Jersey with annual revenues of EDHI , have more than 90 years of
  • Industrial, Commercial and Residential of earnings per share growth.

more than $6 billion, consisting of power plant operating experience with Electric The objective for the Enterpri se two main subsidiaries: Public Service active investments in 40 power plants

  • Energy Consulting and Planning portfolio is a compound growth rate Electric and Gas Company and fueled by coal, natural gas, oil, petro-
  • Integrated Energy Management Services of fi ve percent annually over the next Enterprise Diversified Holdings leum coke and nuclear.
  • Operations and Maintenance Support five years.

Incorporated.

  • Re sidential Ga s Products and Services Serves more than 5.5 million PSE&G provides the lowest cost, most
  • Electricity and Gas While new business ventures will play New Jersey residents in more than reliable electric and gas service of any
  • Industrial and Commercial Electric a vital role in the long-term growth 300 urban, suburban and rural com- major New Jersey utility. It maintains a
  • Energy Consulting and Planning and strength of Enterprise, PSE&G munitie s with electricity, gas and staff of over 600 highly trained service
  • Industrial and Commercial Ga s remains Enterpri se's core busine ss energy alternatives in a 2,600-square- technicians on call 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> a day, 365
  • Residential Gas Products and and currently comprises more than mile diagonal corridor across days a year to repair a broad range of Services 90 percent of total Enterprise the state. gas and electric appliances and HVAC
  • Sunburst Customer Solutions revenues.

equipment and backs up its perfor-

  • Tradelink export assistance program mance with nine guarantees of service.
  • Business Enhancement Program Through its Sunburst Customer
  • Residential Electric Solutions product offering, PSE&G provides meter reading, billing and collection services.

Operate s Enterpri se's nonutility EDHI build s on the nearly 100-year tra-

  • Electricity and Gas EDHI will enter new markets in the esses see king to maintain and dition of PSE&G by seeking out and
  • Industrial and Commercial Gas energy arena when its experience and nd its energy services in the developing additional energy-related
  • Energy Consulting and Planning knowledge can be brought to bear and

. Consists of three primary services as deregulation of the indus-

  • Integrated Energy Management when market needs and opportunities subsidiaries: Energis Resources, try progresses. Services can be pursued on a sound and prof-Community Energy Alternatives, and
  • Operations and Maintenance Support itable basis.

Public Service Resources Corporation.

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

  • Electricity and Gas Energis Resources serves industrial agement solutions for businesses in services, Energis Re sources brings
  • Energy Consulting and Planning and commercial customers in the the Northeast. the expertise of functions previously
  • Integrated Energy Management New England and Mid-Atlantic region performed by a number of Enterprise Services through three product platform s:

subsidiaries to northeastern markets

  • Operation s and Maintenance Support energy supply; consulting, engineer-which it knows well.
  • Financing Solutions ing and operations services; and financing solutions.

Develop s, acquires, owns and oper- Nearly 300 experts in project develop-

  • Electric Generation Solutions CEA pursue s investments in genera-ates independent power production ment and financing, engineering and
  • Distribution Services tion and di stribution in strategic and distribution facilities in the United facility operations and maintenance markets.

State s, Asia, the Pacific Rim , the create effective teams that understand Middle Ea st, Europe and South the dynamics of the areas they serve.

America.

Enhances EDHl's financial strength with a PSRC's well-balanced portfolio

  • Investments in assets which provide PSRC plans to build on its expertise in strong, diverse portfolio of more than 60 provides diversification, earnings funds for future growth and incre- risk management and mitigation, trans-rate investments across a wide spec- stability and continued incremental mental earnings action analysis and closing and invest-4 of industry sectors and asset types, ding leveraged and direct financing es, project financing, venture capital funds, leveraged buyouts, real estate lim-ited partnerships and securities.

earnings growth to shareholders. ment management to exploit new opportunities that arise from energy industry deregulation.

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Shaping the future of our industry PSE&G has taken a strong position on electric industry restructuring in New Jersey through our July 1997 response to the Board of Public Utility's Energy Master Plan. Our proposal reflects exten-sive customer research revealing that New Jersey energy users want deregulation to provide fair, simple rules for competition to ensure customers will continue to receive the same quality of service they have historically enjoyed.

  • Our customers have always counted on PSE&G to provide the quality service that New Jersey's residents and businesses need, while remaining true to our obligations as a responsible corporate citizen. Under our proposal, PSE&G would offer all of its electric customers a choice to be serviced by an alternate energy commodity supplier by January 1, 1999. This accelerates by 18 months the full choice timetable suggested by the BPU and avoids a phase-in approach that could create an unfair price advantage for some customers.

PSE&G's ability to reach the BPU-mandated 5 to 10 percent rate reduction, plus a multiyear rate cap, depends on several factors; most importantly, resolution of the stranded costs issue.

PSE&G's restructuring proposal includes the refinancing , through securitization, of approximately Frank Delany - $2 .5 billion in stranded costs associated with our generation assets. PSE&G strongly believes that Vice President and shareholders alone should not be held financially responsible for investments incurred as a result Corporate Rate Counsel of the company's legally mandated obligation to serve its customers. If legislation allowing "Many parties are reviewing the details of for securitization is not enacted, our restructuring proposal and the potential rate reduction our response to the Energy Master Plan.

will be jeopardized.

Numerous associates throughout the company are working diligently as Under the proposed rate cap, PSE&G would absorb fuel risks for the next seven years, witnesses and resource persons to as well as increases in costs associated with the operation and maintenance of its facilities. PSE&G also will take the risk of mitigation and absorption of nonsecuritized

  • support our proposal before the BPU.

The company is proud of generation assets.

their effort. " In addition to selling electric energy, PSE&G would hold capacity and reserves to meet peak demand and provide for contingencies, such as a temporary loss of an energy supply. In order to back up the generation reliability of the system, we will ini-tially continue to maintain capacity for the usage of customers who choose other sup-pliers. Customers who choose an alternate supplier for energy will receive an energy credit on their bills. Once a viable market develops that allows for capacity to be sold at market prices, we would also provide a market credit to the bills of customers who purchase capacity elsewhere .

PSE&G will continue to be responsible for the reliability of the transmission and distribution system, the wires that deliver electricity to customers' homes and businesses. Electric service would also continue to be provided by PSE&G.

On the regulatory side, our proposal is being reviewed by the BPU and Office of Administrative Law and will require the passage of legislation prior to enactment.

Enabling legislation for securitization and energy restructuring is expected to be considered in 1998.

Deregulation will touch the lives of every New Jersey resident and affect the operations of every business. PSE&G has undertaken an active public outreach, media relations and advertising campaign to inform and educate New Jerseyans about the Energy Master Plan and our commitment to the state's people, economic development and environment.

PSE&G's represented work force is also actively advocating a responsible approach to industry restructuring before the BPU and state legislature, particularly on the issues of

  • jobs and the environment.

<l Photo on previous page: Deregulation is the topic of discussion for Ray Woodrow, left, chief of engineering for the New Jersey State Aquarium, and Ed Zazzali, Energis Resources account manager. The changing natural gas marketplace has led to substantial reductions in energy expenses for the aquarium, which has a natural gas contract with Energis.

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  • PSE&G serves the intensely developed corridor between New York City and Philadelphia.

Equal footing among competitors PSE&G's long-time efforts culminated this year in reform of the Gross Receipts and Franchise Tax (GRFT) paid by all customers of New Jersey utilities . Because customers of nonutility energy providers did not pay this tax, utilities would have been at a competitive disadvantage if such taxation were to continue in a competitive market.

In January 1998, the GRFT was replaced by existing sales and corporate business taxes and a temporary assessment that will be phased out over 5 years .

Ultimately, this arrangement will result in a reduction of up to 45 percent in energy taxes paid by consumers .

This new tax structure evens the competition for providers by ensuring that cus-tomers pay the same tax on energy whether it is purchased from a utility or a non-utility generator. It will also account for an overall customer tax reduction of up to 6 percent by January 2003.

Restructuring and the environment Participating in the rules-setting process also gives Enterprise the opportunity to take a stand on issues that affect society. PSE&G firmly believes that lower-cost power should not come at the expense of clean air or environmental quality.

  • Nor should unevenly implemented environmental standards create a competitive advantage for some industry members at the expense of public health.

Industries in the Northeast strive to comply with strict federal and state emis-sions standards, yet the people of New Jersey and neighboring states continue to be burdened by the air pollution created by coal-burning power plants in the Midwest and South that operate under less strict environmental standards. Their emissions are transported here by prevailing wind currents, creating a significant societal, eco-nomic and ecological impact on New Jersey and the rest of the Northeast. At the same time, these plants operate more cheaply.

The BPU's restructuring report clearly emphasized a commitment to the environment. PSE&G's Energy Master Plan filing calls for environ-mental comparability, a requirement for all power generators selling energy in New Jersey to operate under the same stringent environ-mental standards as we do. Several Northeast state governments and power companies have joined our call to help ensure the region's air quality and effectively eliminate the cost advantages of operating inefficient, dirty coal-fired power plants. Plus, Enterprise has Laura Manz -

been publicly recognized by noted environmental opinion Principal Engineer -

leaders like the Natural Resources Defense Council for our Interconnection Planning leadership in the environmental arena. "In 199 7, we gained federal

  • value for the electncity we provide."

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Tom Verdecchio - Senior Live Line Coordinator "Maintaining transmission lines while they are still

- energized means a total focus on safety - watching out not only for myself, but for those I work with as well. Each of us wants to leave the job the same

.Mll;*!~lf~ way we arrived: healthy and alive. "

Mainta ining a questioning attitude During its most recently completed operating cycle, Hope Creek operated 99 percent of the time from March 1996 to its most recent outage, including consecutive runs of 222 and 307 days. Salem Unit 2 was successfully returned to service in August 1997 after more than two years of refurbish-ment and Salem Unit 1, at publication time of this report, was preparing to resume operation. The ratio of customers to Much of this success is, in part, the result of a new attitude in operations and PSE&G permanent process. Management is stressing individual accountability and teamwork, as well as employees, a measure of creating an environment where employees are expected to raise concerns. efficiency, has grown Nuclear Business Unit (NBU) employees are encouraged and expected to main- 25 percent over the past tain a questioning approacll to their work habits, constantly staying alert for potential five years.

problems and correcting them as they are identified, well before they have the potential Customer to Employee Ratio to threaten plant safety and operations. Proactive thinking such as this is making our nuclear program a high-quality performer.

00 0 The successful restart of Salem Unit 2 has also provided the NBU with a 00 0

M number of critical lessons learned that will not only apply to the restart of Salem "'

Unit 1, but the entire nuclear program.

Learning lessons from deregulation Supplier choice in the natural gas marketplace has been in effect in New Jersey for more than two years, and about 17,000 of PSE&G's 180,000 93 94 95 96 industrial and commercial customers have become transportation-only customers. PSE&G's earnings, however, have been unaffected by whether a customer remains or converts to transportation service. To respond to the decline in load, PSE&G is undertaking a comprehensive review of its gas supply and capacity portfolio in an attempt to develop the most economical portfolio to meet the changing marketplace .

We've also responded to market transformation by changing the way we obtain gas supplies, trading on a monthly or even daily basis and by mak-ing off-system sales of surplus gas or capacity. Customers get 80 percent of the margin the utility makes on such sales, while PSE&G keeps the remaining 20 percent.

Facing the future with technology on our side Success in a competitive marketplace relies on an information technology infrastructure that enables the business to handle customer choice quickly and efficiently.

Customer information, billing and metering systems in support of customer choice are being created to function well before January 1, 1999, the day PSE&G proposes that customer choice start in New Jersey.

Internally, we are also finding ways to make the power of information work for us. Enterprise is deploying SAP R/ 3 software, an advanced tool that will help us change the way we do business. SAP operates on a single database, surrounded by different business systems, including financ ial re porting, supply cha in

  • management, plant maintenance, accounting and payroll and a common work management system . The effort is well under way, with the first stage of implementation operating in Fossil Generation. Enterprise has positioned itself as an early entry in the SAP energy services market and created a strategic alliance between itself and the SAP company.

<J Photo on previous page: PSE&G employees at the Bergen Generating Station go over maintenance schedules. Investments in the station have produced improvements in efficiency, as well as reductions in nitrogen oxide emissions.

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  • Enterprise is tackling the Year 2000 challenge facing corporations and major institutions worldwide. We have assembled a team to correct existing computer systems to recognize dates beyond 1999, before the risk of malfunc-tion or failure becomes an issue. The Enterprise-wide team is taking inventory of all affected systems and applications, assessing potential impact and identifying solutions.

Customer focus knows no boundaries Our union employees understand the competitive pressures faced by the electric and gas utility industries. Several coop-erative efforts from our unions have created a strong partnership that benefits labor, management and our customers.

One of the outcomes of the 1996 union contract negotiations was a letter of agreement between PSE&G and its two largest unions, the International Brotherhood of Electrical Workers and Local 855 of the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry, that allows gas and electric employees to work in each other's areas. Crossover work is currently being performed in parts of the state and mixed crews of gas and electric employees are now excavating, installing and backfilling in electric and gas facilities in new residential developments. This approach has helped reduce costs by limiting outside contractor costs.

Our gas distribution business' commitment to providing quality service to customers was recognized by Quality New Jersey for outstanding results in system reliability - a strong acknowledgement of the processes and systems used to monitor and maintain the safety of the underground gas piping throughout our service territory.

Safety - the only choice

  • Working to meet customer demands in a competitive environ-ment offers significant challenges in reinforcing the importance of safe working practices and the well-being of our workforce and customers . PSE&G's Recordable Case Incidence Rate, which shows the number of occupational illnesses and serious injuries per 100 employees per year, has fallen 27 percent through the third quarter of 1997 compared with the year before. Although many areas of PSE&G have greatly improved their safety records, two PSE&G employees died following accidents in 1997.

To emphasize our commitment to safety, a team comprising representatives from each operating division and all five unions is implementing stronger safety practices and processes, as well as establishing a philosophy of achieving an accident-free workplace through trust, commitment, improved training and communications. Employees are encouraged to look out for the safety of each other and to spend extra time to ensure that all safety precautions are met before the job starts.

Susan Hogan - Supplier Development Manager (with Larry Glover and John Curtis of J. Curtis and Company, awarded the PSEG Supplier Excellence Award in the category of Supplier Diversity for 1997)

"From 1996-1997, Enterprise increased the amount of expenditures with minority and women-owned firms by 26 percent by establishing aggressive goals and initiatives that support the needs of our increasingly diverse customer base."

CEA has power generation and

distribution assets in North and South America and Asia, as well as development activities worldwide.

13

Eileen Moran - President- Public Service Resources Corporation "With the onset of competition, virtually every dollar we invest will have to be earned.

At PSRC, we've been competing and doing transactions - with a sharp

  • rnnrnm'1!tmn"'!"d!!'!:ll1r1!!':'"fmmo1erlel'lr:t!' - - - - - - - - * * -

Smart investments Public Service Resources Corporation (PSRC) manages a portfolio of more than 60 separate investments across a wide spectrum of industries and continues to be a steady contributor through investments that leverage Enterprise's expertise in energy-related technologies.

PSRC's portfolio is diverse and includes investments in domestic and international generation, a gas storage limited partnership, as well as a portfolio of securities held via limited partnership investments. Investments in 1997 included leveraged leases of generating stations located in the Netherlands and the United Kingdom.

CEA keeps pace with global demands Community Energy Alternatives Incorporated (CEA) is one of the world's fastest growing independent power companies, with a 77 percent growth in megawatt (MW) ownership over the past two years. By establishing strategic partnerships with other companies, CEA grew in scope and stature as a developer and operator of electric generation projects, as well as an operator of distribution systems.

CEA's assets are now invested approximately 70 percent in South America, 8 percent in the Asia-Pacific region and 22 percent in North America . CEA is also actively pursuing projects in Africa, Europe, India and the Middle East.

  • In 1997, CEA and its partner began construction of a 216 MW natural gas-fired plant in Colombia. One of its two units began operating before year end . CEA also acquired an interest in a 180 MW cogeneration plant that provides power for nearly 20 percent of the Hawaiian island of Oahu and began commercial operation of the second of two 300 MW, coal-fired power plants in Gansu Province in China. In addition, CEA was selected as the winning bidder with two partners to develop the 471 MW Rades Project, Tunisia's first greenfield private power development project.

To complement its generation successes, CEA made its first investments in power distribution in 1997 by winning, together with major international and local partners, distribution privatization bids in Argentina and Brazil. Now serving about five million people in Latin America, CEA is poised to benefit from opportunities in some of the world's fastest-growing power markets.

CEA's consortium won concessions to own and operate two distribution systems, Empresa Distribuidora de Energia Norte S.A. (EDEN) and Empresa Distribuidora de Energia Sur S.A. (EDES). privatized by the Province of Buenos Aires in Argentina. Together, EDEN and EDES serve 1. 7 million people in an area seven times the state of New Jersey.

CEA was part of a three-member consortium that won the concession to own and operate the Companhia Norte-Nordeste de Distribuivao de Energia Eletrica in southern Brazil, another recently privatized distribution company. The company, now called Rio Grande Energia, has a service territory of 37,000 square miles and provides service to a population of 3.2 million.

Creating business solutions Launched in January 1997, Energis Resources Incorporated provides business solutions to industrial and commercial energy customers. Energis Resources focuses on each customer's specific needs and cus-tomizes a package of energy services - energy consulting and planning, integrated energy management services, operations and maintenance support, financial solutions, natural gas and electricity - for

  • more than 5,000 industrial and commercial customers in the northeast region .

Under the terms of a strategic alliance with AlliedSignal Power Systems, Energis Resources has the exclusive right to sell and service AlliedSignal's TurboGenerator throughout the Northeast, as well as parts of Canada and the country of Argentina. The TurboGenerator is a compact, portable

<J Photo on previous page: Framed by the steeples of a cathedral located in San Nicolas, Argentina, Jorge Luis Mosto, a lineman for the EDEN electric distribution company, works on a concrete electric distribution pole.

16

  • generator that can create enough power to meet the energy needs of small businesses more efficiently and cost-effectively.

Energis Resources is benefiting from the deregulation of New Jersey's natural gas market by supplying natural gas to some of the state's largest facilities, including Newark International Airport, the New Jersey State Aquarium and the Meadowlands sports and entertainment complex.

Similarly, Energis Resources is taking advantage of the deregulation of electricity. In Pennsylvania, a pilot program marked the nation's largest retail electricity competition initiative. Five percent of the state's electricity consumers were selected to participate in the pilot and 43 energy suppliers, including Energis Resources, were licensed to participate.

During the pilot, Energis Resources secured 800 business customers, more than tripling its sales projections .

These new customers, all of which were formerly served by other Pennsylvania electric suppliers, translate to more than 350 million kilowatt hours in sales - equal to the energy use of more than 60,000 residential customers.

To strengthen and expand Energis Resources' energy services platform, it has acquired Philadelphia-based Fluidics, Inc., a $60 million diversified mechanical/service contractor, which provides a wide range of mechanical contracting, HVAC and maintenance services for industrial and commercial customers in the Middle Atlantic region.

WorryFree sM Service One of the promises of deregulation is a burst of new products and services to meet the needs of consumers. In 1997, PSE&G's appliance service business - which provides premium repair, maintenance and service for residential and business customers - obtained regulatory approval to expand its service contract business to residential central air conditioning systems, dryers and ranges. The approval allows PSE&G to compete head-on with national companies which have targeted the $1 billion New Jersey appliance service market.

Under the WorryFreesM Service brand, the appliance service business boasts a strong name awareness within its service territory and a well-trained work force of service technicians. Those factors, along with new product offerings, led to the business selling nearly twice the projected number of service contracts in

  • 1997, while exploring opportunities to expand throughout New Jersey and in bordering regions.

Buying tomorrow's power today Deregulation wil l place an even greater emphasis on lower electricity prices. Very often, even the largest utility can purchase electricity for less than it costs to generate . That market reality was a driver behind the development of Enterprise's wholesale energy market trading organization.

While the company's generation assets will continue to be a primary supplier, electricity trading gives PSE&G an extra option when it comes to acquiring energy for sale to customers. Currently, PSE&G is mainly focused on trading within the PJM power grid, of which PSE&G is a member.

PSE&G intends to expand its trading with contiguous power pools to the north, west and south in 1998, as well as merge its electric and gas trading organiza-tions. Managing risk and increasing earnings in this area will be accom-plished using best practice controls recommended by an organization comprising 30 central banks and major commercial financial institutions.

Using such tools as weather reports and advanced computer networks, electricity traders are expanding our role in develop-ing trading strategies that reduce costs, increase profits and manage both com-modity and financial risks.

  • The Kaufmanns - Customers "Since our honeymoon days, we've been able to count on PSE&G's reliable energy. It's great to know that you can make our appliances just as worry free!"

17

  • ~

~

Operational Highlights

  • '

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.,_, 'i'!if~\if;llil!('11.lll'O: Return on Average (X) on December 31 0 a- Common Equity for

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on December 31 ,1992 a-(assumes reinvested dividends).

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94

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  • PSE&G EDHI "Projected Declining utility capital expenditures are expected to be funded through internally generated cash, while growing EDHI needs are expected to be met by additional debt and equity, and internally generated cash.
  • 18

Con so Iid ate d Finan ciaI St at is tics IAJ

. l iars in millions where applicable 1997 1996 1995 1994 1993 Selected Income Information Operating Revenues Electric $ 4,188 $ 3,944 $ 4,02 1 $ 3,740 $ 3,696 Gas 1,937 1,881 1,686 1,778 1,595 Nonutility Activities 245 216 186 177 137 Total Operating Revenues $ 6,370 $ 6,041 $ 5,893 $ 5,695 $ 5,428 Income from Continuing Operations $ 560 $ 588 $ 627 $ 667 $ 549 Cumulative effect of change in accounting for income taxes 6 Income from Discontinued Operations 24 35 12 46 Net Income $ 560 $ 612 $ 662 $ 679 $ 601 Earnings per Average Share (Basic and Diluted)

Income from Continuing Operations $ 2.41 $ 2.42 $ 2.57 $ 2.73 $ 2.29 Income from Cumulative effect of change in accounting for income taxe s .02 Income from Discontinued Operations .10 .14 .05 .19 Total Earning s per Average Share $ 2.41 $ 2.52 $ 2.71 $ 2.78 $ 2.50 Dividends Paid per Share $ 2.1 6 $ 2.16 $ 2.1 6 $ 2. 16 $ 2. 16 Payout Ratio 90% 86% 80% 78% 86%

Rate of Return on Average Common EquitylBJ 10.8% 11 .3% 12.3% 12.9% 11.9%

Ratio of Earnings to Fixed ChargeslCJ 2.61 2.68 2.78 2.84 2.57 Book Value per Common SharelDJ $22.47 $22.33 $22 .22 $2 1.68 $2 1.07

. ass Utility Plant $17,815 $17 ,327 $16 ,925 $16,566 $15,861 cumulated Depreciation and Amortization of Utility Plant $ 6,765 $ 6,148 $ 5,738 $ 5,468 $ 5,057 Total Assets $17 ,943 $16,915 $16,816 $16,3 13 $15,995 Consolidated Capitalization Common Stock $ 3,603 $ 3,627 $ 3,801 $ 3,801 $ 3,773 Retained Earnings 1,623 1,586 1,637 1,505 1,36 1 Foreign Currency Tran slation Adjustment (15)

Common Stockholders' Equity 5,211 5,2 13 5,438 5,306 5,134 Subsidiaries' Preferred Securities 683 682 685 685 580 Long-Term Debt 4,873 4,580 5,190 5,110 5,100 Total Capitalization $10,767 $10,475 $11,3 13 $11 ,101 $10,814 (AJ The detailed Consolidated Financial Statements and related discussion appear in Appendix Ato the Proxy Statement.

!BJ Net Income for a twelve-month period divided by the thirteen-month average of Common Equity.

(CJ Includes Preferred Securities Dividend Requirements.

(DJ Total Common Equity divided by end-of-period Common Shares outstanding.

  • 19

Condensed Consolidated Statements of Income In millions of dollars (except per share data) for the years ended December 31, 1997 1996 1995 Operating Revenues Electric $4,188 $3,944 $4,021 Gas 1,937 1,88 1 1,686 Nonutility Activitie s 245 216 186 Total Operating Revenues 6,370 6,041 5,893 Operating Expenses Fuel for Electric Generation and Interchanged Power 1, 179 919 892 Gas Purchased 1,101 1,118 962 Operation and Maintenance 1,364 1,371 1,321 Depreciation and Amortization 630 607 597 Taxes 981 969 1,028 Total Operating Expenses 5,255 4,984 4,800 Operating Income 1,115 1,057 1,093 Settlement of Salem Litigation - Net of Applicable Taxes of $29 (53)

Other Income - Net 7 (2) 13 Interest Expense and Preferred Dividends (509) (467) (479)

Income from Continuing Operations 560 588 627 Income from Discontinued Operations - Net of Taxes 24 35 Net Income $ 560 $ 612 $ 662 Average Shares of Common Stock Outstanding (OOO's) 23 1,986 242,401 244,698 Earnings per Average Share (Basic and Diluted)

Income from Continuing Operations $2 .41 $2.42 $2.57 Income from Discontinued Operations .10 .14 Total Earnings per Average Share $2 .41 $2.52 $2 .71 Dividends Paid per Share of Common Stock $2. 16 $2.16 $2.16 The detailed Consolidated Financial Statements and related discussion appear in Appendix A to the Proxy Statement.

Condensed Consolidated Statements of Cash Flows In millions of dollars for the yea rs ended December 31, 1997 1996 1995 Net Income $ 560 $ 612 $ 662 Adjustments to net income, primarily depreciation and amortization 535 858 856 Net cash provided by operating activities 1,095 1,470 1,5 18 Cash flows from investing activities Additions to Utility Plant, excluding AFDC (542) (586) (650)

Net (increase) decrease in Long-Term Investments and Real Estate (914) 5 (66)

Other (158) (81) (106)

Net proceeds from the sale of discontinued operations 704 Change in net assets - discontinued operations (51) (113)

Net cash used in investing activities (1 ,614) (9) (935)

Net cash provided by (used in) financing activities 323 (1,244) (586)

Net (decrease) increase in Cash and Cash Equivalents (1 96) 217 (3)

Cash and Cash Equivalents at Beginning of Period 279 62 65 Cash and Cash Equivalents at End of Period $ 83 $ 279 $ 62 The detailed Consolidated Financial Statements and related discussion appear in Appendix A to the Proxy Statement.

20

Condensed Consolidated Balance Sheets

  • millions of dollars at December 31, 1997 1996 Assets Utility Plant:

Utility Plant (including Nuclear Fuel) $17,465 $16,858 Less : Accumulated Depreciation and Amortization 6,765 6,148 Net Utility Plant in Service 10,700 10,710 Construction Work in Progress (including Nuclear Fuel) 326 445 Plant Held for Future Use 24 24 Net Utility Plant 11 ,050 11.179 Investments and Other Noncurrent Assets 3,532 2,352 Current Assets 1,663 1.744 Deferred Debits 1,698 1,640 Total $17,943 $16,9 15 Capitalization and Liabilities Capitalization :

Common Stockholders' Equity $ 5,211 $ 5,213 Subsidiaries' Preferred Securities 683 682 Long-Term Debt 4,873 4,580 Total Capitalization 10,767 10,475 Other Long-Term Liabilities 168 185 Current Liabilities 2,827 2,272 Deferred Credits 4, 181 3,983 Total $17,943 $16,9 15

. e detailed Consolidated Financial Statements and related discussion appear in Appendix A to the Proxy Statement.

Consolidated Statements of Common Stockholders ' Equity Foreign Currency Common Retained Translation In millions of dollars Stock Earnings Adjustment Total Balance as of January 1, 1995 $3 ,801 $1,505 $ - $5,306 Net Income 662 662 Cash Dividends on Common Stock (528) (528)

Preferred Securitie s Issuance Expenses (2) (2)

Balance as of December 31 , 1995 3,801 1,637 5,438 Net Income 612 612 Cash Dividends on Common Stock (523) (523)

Retirement of Common Stock (174) (133) (307)

Preferred Securities Issuance Expenses (7) (7)

Balance as of December 31 , 1996 3,627 1,586 5,213 Net Income 560 560 Cash Dividends on Common Stock (501) (501)

Retirement of Common Stock (24) (19) (43)

Currency Translation Adju stment (15) (15)

Preferred Securities Issuance Expenses (3) (3) alance as of December 31 , 1997 .___ S3_._60_3_ _ _ _ _ _s_1_,6_2_3 _ _ _ _ _ _S _(_

l 5_l _ _ _ _ _S_5_,2_1_1__,

  • e detailed Consolidated Financial Statements and related discussion appear in Appendix A to the Proxy Statement.

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

For the full text of Commitments and Contingent Liabilities refer to Note JO to Consolidated Financial Statements in Appendix A to 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 1998 Annual Meeting of Stockholders, which has been enclosed in the same mailing as thi s 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 finan-cia l statements report on management's accountability for corporate operations and assets. To this end, management maintains a highly developed system of internal controls 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 include s documented policies, guideline s and se lf-assessments, augmented by a comprehensive program of internal and indepen-dent audits conducted to monitor overall accuracy of financial information and compliance with established procedures. The consoli-dated financial statements included in the Proxy Statement were audited by Deloitte & Touche LLP, independent auditors, whose report on the condensed consolidated financial statements appears herein.

E. James Ferland 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 13, 1998 Independent Deloitte&

ToucheuP 0

  • Auditors' Report To the Stockholders and the Board of Directors of Public Service Enterprise Group Incorporated:

We have audited the consolidated balance sheets of Public Service Enterprise Group Incorporated and its subsidiaries (the "Company") as of December 31 , 1997 and 1996, and the related consolidated statements of income, common stockholders' equity and cash flows for each of the three years in the period ended December 31 , 1997. Such consolidated financial statements and our report thereon dated February 13, 1998, expressing an unqualified opinion (which are not pre sented herein) are included in Appendix A of the Proxy Statement for the 1998 Annual Meeting of Stockholders. The accompanying condensed consolidated finan-cial 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 financ ial statements.

In our opinion, the information set forth in the accompanying condensed consolidated balance sheets as of December 31, 1997 and 1996 and the related condensed consolidated statements of income, common stockholders' equity and cash flows for each of the three years in the period ended December 31, 1997 is fairly stated in all material respects in relation to the basic consolidated financial statements from which it has been derived .

})~

February 13, 1998

-r Parsippany, New Jersey f ~ LL/'

  • 22

Board of Directors a wrence R. Codey

. .s been a director since 1991. Has E. James Ferland has been a director since 1986. Has Conrad K. Harper has been a director since May 1997.

Richard J. Swift has been a director since 1994. Has been President and Chief Operating been Chairman of the Board, Pre sident Has been a partner in the law firm of been Chairman of the Board, President Officer of PSE&G since September 1991. and Chief Executive Officer of Enterprise Simpson , Thatcher and Bartlett of New and Chief Executive Officer of Foster since July 1986, Chairman of the Board York City since October 1996 and from Wheeler Corporation, of Clinton, Ernest H. Drew and Chief Executive Officer of PSE&G 1974 to May 1993. Was Legal Advisor, New Jersey, a firm providing design, engi-has been a director since 1993. Was since September 1991, and Chairman of U.S. Department of State from May 1993 neering, construction, manufacturing, Chief Executive Officer of Industries and the Board and Chief Executive Officer of to June 1996. management, plant operations and envi-Technology Group, Westinghouse EDHI since June 1989. ronmental services, since May 1994.

Electric Corporation, from July 1997 to Irwin Lerner December 1997. Was a member, Board Raymond V. Gilmartin has been a director since 1981. Was Josh S. Weston of Management of Hoechst AG, Frankfurt, has been a director si nce 1993. Ha s Chairman, President and Chief Executive has been a director since 1984. Has Germany, a manufacturer of pharma* been Chairman of the Board, President Officer of Hoffmann-La Roche Inc ., of been Chairman of the Board of Automatic ceuticals and chemicals, from January and Chief Executive Officer of Merck & Nutley, New Jersey, a manufacturer of Data Processing, Inc ., of Roseland, 1995 to June 1997. Was Chairman of Co., Inc. of Whitehouse, New Jersey, a prescription pharmaceuticals, vitamin s New Jersey, since April 1986 and was the Board and Chief Executive Officer global pharmaceutical firm that discov- and fine chemicals, and diagnostic prod- Chief Executive Officer of Automatic of Hoechst Celanese Corporation of ers, develops, produces and markets ucts and services, from January 1993 to Data Processing, Inc. from January 1983 Somerville, New Jersey from May 1994 human and animal health products, since September 1993 and President and Chief to August 1996.

until January 1995 and was President November 1994. Was President and Executive Officer from 1980 to and Chief Executive Officer from January Chief Executive Officer of Merck & Co., Inc. December 1992.

1988 to May 1994. from June 1994 to November 1994.

Was Chairman of the Board, President Marilyn M. Pfaltz T. J. Dermot Dunphy and Chief Executive Officer of Becton has been a director since 1980. Ha s has been a director since 1980. Has Dickinson and Company from November been a partner of P and R Associates of been Chairman of the Board and 1992 to June 1994. Summit, New Jersey, a communications Chief Executive Officer of Sealed firm , since 1968.

Air Corporation, a Saddle Brook, New Jersey manufacturer of protective Forrest J. Remick packaging products and systems, has been a director since 1995. Ha s since November 1996. Was President been an engineering consultant since and Chief Executive Officer of Sealed July 1994. Was Commissioner of the Air Corporation from 19 71 to United States Nuclear Regulatory

. ovember 1996. Commission from December 1989 to June 1994. Was Associate Vice President -

Research and Professor of Nuclear Engineering at Pennsylvania State University, from 1985 to 1989.

Executive Officers E. James Ferland Robert J. Dougherty, Jr. Eileen A. Moran R. Edwin Selover Chairman of the Board, President President and Chief Operating Officer President of PSRC; President of EGDC. Vice President and General Counsel; and Chief Executive Officer; of EDHI. Senior Vice President and General Chairman of the Board and Robert C. Murray Counsel of PSE&G.

Chief Executive Officer of PSE&G; Leon R. Eliason Vice President and Chief Financial Officer; Chairman of the Board and Chief Nuclear Officer and President - Executive Vice President - Finance Michael J. Thomson Chief Executive Officer of EDHI. Nuclear Business Unit of PSE&G. of PSE&G. President and Chief Executive Officer of CEA.

Lawrence R. Codey Harold W. Keiser Patricia A. Rado esident and Chief Operating Officer Executive Vice President - Vice President and Controller; PSE&G. Nuclear Business Unit of PSE&G. Vice President and Controller

  • of PSE&G.

Frank Cassidy Alfred C. Koeppe President and Chief Executive Senior Vice President - Corporate Officer of Energis Resources. Services and External Affairs of PSE&G.

23

Stockholder Information Stock Exchange Listings Enterprise Direct - Stock Purchase and Dividend Reinvestment Plana New York (Enterprise common Enterprise offers Enterprise Direct, a Stock Purchase and Divide.

and PSE&G preferred) Reinvestment Plan. For additional information, including a prospectus and Philadelphia (Enterprise common) enrollment form, contact us through Internet e-mail at stkserv@pseg.com Trading Symbol: PEG or call 800-242-0813.

Annual Meeting Dividends Please note that the annual meeting of stock- Dividends on the common stock of Enterprise, as declared by the Board holders of Public Service Enterpri se Group of Directors, are generally payable on the last business day of March, Incorporated will be held at the New Jersey June, September and December of each year. Regular quarterly dividends Performing Arts Center (NJPAC), One Center on PSE&G's preferred stock are payable on the last business day of Street, Newark, New Jersey, on Tuesday, March, June, September and December of each year.

April 21, 1998 at 2 p.m.

Direct Deposit of Dividends Stockholder Services No more dividend checks delayed in the mail. No waiting in bank lines.

Stockholder inquiries about stock transfer, div- Your quarterly common and preferred stock dividend payments can be idends, dividend reinvestment, direct deposit, deposited electronically to your personal checking or savings account. To missing or lost certificates, change of use this free service, call us at 800-242-0813.

address notification and other account infor-mation should be directed to: Stockholder Security Analysts and Institutional Investors Services Department, Public Service Electric For information contact:

& Gas Company, P.O. Box 1171 , Newark, NJ Director - Investor Relations 973-430-6564 07101-1171. Please include your account number or social security number. Available Publications Form 10-K: A copy of Enterprise's 1997 Annual Report to the Securities Stockholders can also phone our toll-free num- and Exchange Commission, filed on Form 10-K, may be obtained by call-ber 800-242-0813, Monday through Friday, ing 973-430-6503 or writing to:

with questions about stock transfer and regis- Director - Investor Relations tration, Enterprise Direct transactions and our Public Service Electric and Gas Company

  • other stockholder services. Hours are: 80 Park Plaza, T6B 10 a.m. to 3:30 p.m . Eastern time . The tele- Newark, NJ 07101 phone number for the hearing impaired with special equipment is TDD 800-732-3241. The copy so provided will be without exhibits . Exhibits may be purchased Please have your account number or social for a specified fee .

security number ready when you call.

Financial and Statistical Review: A comprehensive statistical report con-Stockholders can reach us by Internet .e-mail taining historical financial data may also be obtained from the Director -

at: stkserv@pseg.com Investor Relations.

Stockholders can also reach us by fax at:

973-824-7056 Common Stock - Market Price and Transfer Agents Dividends per Share The transfer agents for the common and pre-ferred stocks are: 1997 1996 Stockholder Services Department Public Service Electric and High Low Div. High Low Div.

Gas Company P. 0. Box 11 71 First Quarter $29 1!. $26Ys $.54 $32 Ys $25 1!. $.54 Newark, NJ 071 01-11 71 Second Quarter 26Y, 22Ys .54 27Ys 25 Ys .54 First Chicago Trust Third Quarter 26Yi. 241/i. .54 27Ys 25% .54 Company of New York P.O. Box 2506 Fourth Quarter 31 1Yi. 24% .54 29 26% .54 Jersey City, NJ 07303-2506 The number of holders of record of Public Service Enterprise Group Incorporated common shares as of December 31, 1997 was 154,478 .*

Printed on recycled paper, using environmentally friendly inks.

24

Public Responsibility

  • The power of commitment Since its earliest days, PSE&G's commitment to support the well-being of New Jersey communities has extended beyond providing energy. It remains a committed resource to the state, its people and busi-nesses and includes support for a number of effective community-oriented programs.

PSE&G is working with community leaders, residents and other partners to revitalize parts of Newark through the South Ward Neighborhood Partnership, a broad-based community renewal endeavor. As part of the initiative, ground was broken in 1997 for the South Ward Industrial Park, a $6.8 million, 100,000-square-foot light industrial complex expected to attract labor-intensive businesses and create more than 300 new jobs. Expected to be com-pleted in September 1998, the project received funding from several state and federal agencies. PSE&G has committed to market the park aggressively and create a package of utility incentives to help attract business. The White House recently awarded PSE&G honorable mention in its Ron Brown Award for Corporate Leadership program, which recognizes businesses that contribute to the areas they serve .

As another part of PSE&G's urban initiatives, the company is donating more than $1 million in used computer equipment for schools in New Jersey's urban centers during the next three years.

Those are two ways in which PSE&G dedicates its volunteer, in-kind

  • and intellectual resources to fulfill its corporate citizenship obligations .

PSE&G is also a sponsor of programs such as Seton Hall University's Project 2000 , which introduces urban youth to positive male role models who can influence attitudes toward school and academic achievement. PSE&G volunteers serve as teaching assistants, allow-ing them to interact with at-risk youngsters.

PSE&G has also launched a $30 million New Millennium Economic Development Fund to help attract new businesses to New Jersey and to encourage the growth of exist-ing businesses. While the fund is available throughout New Jersey, it targets funding for projects in the state's urban centers. For the first New Millennium project, PSE&G agreed to provide a loan guarantee that allowed Lightcom lnternational's move to a vacant building in Camden. Lightcom, the largest African-American-owned long-distance tele-phone company, will create 150 new jobs in Camden during the next two years .

  • Public Service Enterprise Group 80 Park Plaza Newark, NJ 07102 973-430-7000 www.pseg.com
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