01—Abstract
Summary
Summary of the 10-K filed February 23, 1996. Cited figures are marked; the original filing is the authoritative source.
Public Service Enterprise Group Incorporated (Enterprise) is a public utility holding company whose principal subsidiary, Public Service Electric and Gas Company (PSE&G), provides electric and gas service in New Jersey.
PSE&G comprised 85% of Enterprise's assets at December 31, 1995 and produced 93% of its 1995 revenues and 88% of its net income. Enterprise reported 1995 net income of $662.3 milliona, or $2.71 per share, down from $2.78 in 1994, with the decrease attributed principally to increased operating expenses and lower gas sales from PSE&G, partly offset by improved electric sales and EDC gains. Enterprise has announced its intention to divest Energy Development Corporation (EDC) during 1996.
The most significant near-term risk is the nuclear fleet. Both Salem units have been out of service since mid-1995, and Salem 1 steam generator inspections revealed degradation, so its restart, previously planned for the second quarter of 1996, will be delayed for a substantial period. The filing states that the inability to return these units to safe, continuous operation could have a material effect on financial position, results and cash flows.
The 1995 aggregate capacity factor of 62% fell below the BPU's 65% standard, producing a penalty of about $3.5 millionb, and the filing projects a 1996 penalty of $11 to $12 million. On January 16, 1996, PSE&G filed its "New Jersey Partners in Power" Alternative Rate Plan with the BPU. The plan would shift fuel and replacement power risk from customers to PSE&G, discontinue the Levelized Energy Adjustment Clause and Nuclear Performance Standard, and include a $50 million electric rate reduction upon approval.
The company also outlined a deleveraging plan to retire more than $1 billionc of debt over five years while funding its five-year construction program from internally generated cash. The filing notes that PSE&G cannot predict the outcome of the BPU proceeding.
02—Key points
Key Highlights
- Net income of $662.3 million in 1995 ($2.71 per share), compared with $679.0 million ($2.78 per share) in 1994.
- Total operating revenues of $6.16 billion in 1995; PSE&G's revenues were $5.7 billion, with electric operations 70% and gas 30%.
- Both Salem nuclear units remain out of service; Salem 1 steam generator degradation has extended its outage for a substantial period, and Salem 2 is targeted to return in the third quarter of 1996.
- 1995 aggregate nuclear capacity factor of 62% fell below the BPU's 65% minimum, resulting in an approximately $3.5 million penalty; 1996 penalty is projected at $11 to $12 million.
- PSE&G filed the Alternative Rate Plan on January 16, 1996, proposing a seven-year price-cap framework and a $50 million electric rate reduction, and eliminating LEAC and the Nuclear Performance Standard.
- Enterprise announced in December 1995 its intent to divest EDC during 1996, and its total assets were $17.17 billion at year-end 1995.
- Forecast construction expenditures of about $2.8 billion for 1996 through 2000 for PSE&G, with the company expecting to fund them internally and reduce debt by about $1 billion.
03—Questions
Frequently Asked Questions
Why did Enterprise's earnings decline in 1995?
The filing states that Enterprise earnings decreased principally due to increased operating expenses and lower gas sales from PSE&G. These effects were partially offset by improved electric sales and EDC revenues from the settlement of a take-or-pay litigation and gains on property sales.
When will the Salem nuclear units return to service?
Salem 1 has been out of service since May 16, 1995, and its restart, originally planned for the second quarter of 1996, will be delayed for a substantial period pending steam generator analysis. Salem 2 has been out of service since June 7, 1995, and is still scheduled to return in the third quarter of 1996, though the filing states that no assurance can be given the date will be met.
What is the Alternative Rate Plan and how would it affect customers?
The New Jersey Partners in Power Plan, filed January 16, 1996, is a seven-year proposal that would replace rate base/rate of return regulation with an indexed price-cap approach, discontinue the LEAC and the Nuclear Performance Standard, and make a $50 million electric rate reduction upon approval. The filing states that it would substantially shift business and financial risks from customers to PSE&G. PSE&G cannot predict what action the BPU may take.
What is the status of the EDC divestiture?
Enterprise announced on December 6, 1995 that EDHI is pursuing the divestiture of EDC and anticipates divesting it during 1996, subject to certain conditions. The filing states that no formal plan of divestiture has been approved.
How much debt is outstanding and what are the financing plans?
Consolidated long-term debt was $5.19 billion at December 31, 1995. PSE&G expects to fund its five-year construction program internally and reduce its debt outstanding by approximately $1 billion over five years, assuming adequate and timely cost recovery. PSE&G had $449 million of short-term debt outstanding at year-end 1995.
04—Continue