PSEG Announces 2009 Third Quarter Results

$0.96 PER SHARE FROM CONTINUING OPERATIONS
$0.92 PER SHARE OF OPERATING EARNINGS
RESULTS REFLECT IMPACT ON DEMAND FROM WEATHER AND ECONOMIC CONDITIONS

• Press Release
• Source: Public Service Enterprise Group (PSEG)
• On 8:45 am EDT, Wednesday October 28, 2009

NEWARK, N.J., Oct. 28 /PRNewswire-FirstCall/ -- Public Service Enterprise Group (PSEG) (NYSE: PEG - News) reported today third quarter 2009 Income from Continuing Operations of $488 million or $0.96 per share as compared to Income from Continuing Operations for the third quarter of 2008 of $476 million or $0.94 per share. Net Income for the third quarter 2009 was the same as Income from Continuing Operations. Including the effect of gains on the sale of discontinued operations of $180 million or $0.35 per share, PSEG reported Net Income for the third quarter of 2008 of $656 million, or $1.29 per share. Operating Earnings for the third quarter of 2009 were $464 million or $0.92 per share compared to the third quarter of 2008 Operating Earnings of $477 million or $0.94 per share.

PSEG believes that the non-GAAP financial measure of "Operating Earnings" provides a consistent and comparable measure of performance of its businesses to help shareholders understand performance trends. Operating Earnings exclude the impact of the sale and/or impairment of certain non-core assets and the impact of returns/(losses) associated with Nuclear Decommissioning Trust (NDT) investments and Mark-To-Market (MTM) accounting. The table below provides a reconciliation of PSEG's Net Income to Operating Earnings (a non-GAAP measure) for the third quarter. See Attachment 12 for a complete list of items excluded from Income from Continuing Operations in the determination of Operating Earnings.

                        PSEG CONSOLIDATED EARNINGS (unaudited)
                          Third Quarter Comparative Results
                                    2009 and 2008

                                     Income                  Diluted Earnings
                                  ($millions)                    Per Share
                                 2009       2008              2009        2008
                                 ----       ----              ----        ----
    Net Income                   $488       $656             $0.96       $1.29
    ----------                   ----       ----             -----       -----
      Less:  Income
        from
       Discontinued Ops            --        180                --        0.35
      -----------------           ---        ---               ---        ----
    Income From
     Continuing Ops              $488       $476             $0.96       $0.94
    ---------------              ----       ----             -----       -----
      Less: Excluded
       Items                       24         (1)             0.04          --

    Operating
     Earnings
     (Non-GAAP)                  $464       $477             $0.92       $0.94
    -----------                  ----       ----             -----       -----
                                           Avg. Shares       507M         508M

"We faced challenging market conditions in the third quarter. Cooler than normal weather and continued weak economic conditions combined to reduce demand and lower pricing," said Ralph Izzo, chairman, president and chief executive officer. He went on to say, "We were able to offset most of the decline in demand through our hedging strategy resulting in recontracting at higher prices, our asset mix, our employees' focus on cost reduction and sales in our lease portfolio, which were undertaken at favorable terms to reduce our tax risk. These factors, however, as we noted last quarter, continue to make it difficult to meet the upper end of our 2009 earnings guidance range of $3.00-$3.25 per share. Although impacted by weather and a weaker economy, we are also positioning ourselves to meet our long-term objectives with a focus on profitable investment, an increase in operating efficiency and a strong balance sheet."

PSEG's operating company guidance reflects the transfer of the Texas gas-fired generating assets from Holdings to Power which was effective on October 1, 2009. In addition, guidance reflects the impact of the Holdings debt exchange with Power which resulted in a premium payment of $20 million after-tax ($0.04 per share). The premium was charged against Holdings results, but deferred at the Parent level, as this transaction was treated as a debt refinancing.

Updated Operating Earnings guidance by subsidiary for 2009 is shown below:

            2009 Operating Earnings Guidance
                      ($millions)
                       ----------
    PSEG Power                      $1170-$1245
    ----------                      -----------
    PSE&G                               315-335
    -----                               -------
    PSEG Energy Holdings                  25-45
    --------------------                  -----
    PSEG Parent                           10-15
    -----------                           -----
    Operating Earnings               $1520-1640
    ------------------               ----------
    Earnings Per Share               $3.00-3.25
    ------------------               ----------

Operating Earnings Review and Outlook by Subsidiary

See Attachment 6 for detail regarding the quarter-over-quarter reconciliations for each of PSEG's businesses.

PSEG Power

PSEG Power reported operating earnings of $339 million ($0.67 per share) for the third quarter of 2009 compared with operating earnings of $360 million ($0.71 per share) for the third quarter of 2008. PSEG Power's results in the third quarter of 2009 were hurt by a decline in demand ($0.08 per share) and a migration of customers away from full requirements contracts in a period of low commodity pricing ($0.04 per share). Earnings were also affected by trading ($0.01 per share), which will reverse in the fourth quarter. Generation in the third quarter declined by 10% as a result of a contraction in economic activity and cooler than normal weather. This decline in demand and period of lower commodity pricing was partially offset by lower cost to serve ($0.05 per share) as well as a reduction in operating and maintenance expense ($0.03 per share) and lower financing costs ($0.01 per share).

Power met its load obligations with higher output from its nuclear fleet including strong summer generation from the nuclear units. Salem 2 completed a record 515-day run before entering a refueling outage. Nuclear generation increased 1.4% during the quarter and supplied 56% of Power's obligations compared with 49% in the year-ago quarter. During the quarter, our nuclear fleet operated at an average capacity factor of 94.6%, bringing the capacity factor for the nine months ended September 30, 2009 to 93.8% (versus 93.1% for the first nine months of 2008). A reduction in the cost of gas allowed the combined cycle fleet to hold its volume at the displacement of the coal-fired stations. The operation of our diverse generating fleet supported Power's gross margins during the quarter.

Power's gross margins for the full year are benefiting from higher contracted prices, a decline in fuel costs and stronger performance from the nuclear fleet than originally forecast. Based on performance of the nuclear fleet during the first nine months of the year, the nuclear fleet's full year capacity factor could advance to 92%-93% versus a forecasted capacity factor of 91-92% and 2008's capacity factor of 92.6%. The improvement in gross margin is expected to offset a forecasted decline in fossil generation for the full year. We are, as a result, maintaining our forecast of Power's full year operating earnings of $1,170-$1,245 million. At year-end, Power's operating results will reflect the full-year earnings impact of the October 1, 2009 transfer of the 2,000 MW of gas-fired assets in Texas from Holdings to Power as well as interest expense associated with newly issued debt resulting from the exchange of Holdings' debt in September.

PSE&G

PSE&G reported operating earnings of $87 million ($0.17 per share) for the third quarter of 2009 compared with operating earnings of $97 million ($0.19 per share) for the third quarter of 2008.

Electric revenues declined during the third quarter by $0.02 per share. The results were equally affected by a decline in economic activity and cooler than normal weather. The reduction in electric revenue was offset by an increase in transmission rates effective on October 1, 2008 ($0.02 per share). Operating and maintenance expense associated with higher pension costs increased $0.02 per share.

Electric and gas demand in 2009 have been heavily influenced by the weather and continued impact of economic conditions. Winter weather was favorable earlier this year with heating degree days above normal; however, the Temperature Humidity Index has been 27% below normal and 22% below 2008 levels, reducing air-conditioning loads and electric demand. We experienced only 40 hours during the summer of 2009 when temperatures were equal to or greater than 90 degrees compared with a normal expectation for approximately 125 hours. We continue to forecast a decline in weather normalized electric sales of 1.5%-2.0%. However, expectations are for the decline to be closer to the upper end of the range as sales to the residential sector are forecast to decline slightly compared with our prior forecast of flat year-over-year sales to this customer segment.

We are maintaining our forecast of PSE&G's 2009 operating earnings of $315-$335 million. The forecast continues to reflect an increase in pension expense as well as higher levels of depreciation expense.

On September 25, 2009 PSE&G updated its previous filing with the New Jersey Board of Public Utilities (BPU) to request an increase in electric ($147 million) and gas ($106 million) revenues. This updated request reflects actual results for the six months ended June 30, 2009 as part of the forecast 2009 test year and represents an increase in electric ($13 million) and gas ($9 million) revenues over the original request.

PSEG Energy Holdings

PSEG Energy Holdings reported operating earnings of $18 million ($0.04 per share) for the third quarter of 2009 versus operating earnings of $25 million ($0.05 per share) during the third quarter of 2008.

Holdings' quarterly earnings comparisons were affected by several items. The operating profit from the generating capacity in Texas (2000 MW) declined by $0.02 per share. A decline in energy prices (in comparison to very strong pricing in the year ago period) was the primary reason for the reduction in operating earnings. Lower prices more than offset a reduction in operating and maintenance expense and the absence of financing costs following the redemption of the Texas project debt earlier in the year.

Earnings comparisons were aided by the recognition of gains on the successful termination of three cross-border leveraged leases in the quarter ($0.03 per share). Total proceeds for the sales were approximately $219 million in the quarter. Since December 2008, we have terminated 11 of these types of leases bringing in cash of approximately $675 million and reducing our cash tax potential liability by approximately $525 million. Results were also improved by a reduction in operation and maintenance expenses and a lower tax rate ($0.02 per share). We consider a recent court decision in favor of another taxpayer, with a similar lease portfolio, a positive development in the on-going management of our lease exposure.

During the quarter, an aggregate principal amount of 74% of Energy Holdings' 8.5% Senior Notes due 2011 ($368 million) were exchanged for $404 million of cash and newly issued notes from PSEG Power. The $20 million premium, after-tax, was expensed against Holdings' third quarter operating earnings ($0.04 per share). After the completion of the debt exchange, Holdings' transferred the Texas gas-fired assets to Power on October 1, 2009. The transfer will result in the movement of operating earnings associated with the Texas generating assets from Holdings' to Power for the full year. We are, as a result, reducing our forecast of Holdings' operating income for 2009 to $25-$45 million from $40-$65 million.

The following attachments can be found on www.pseg.com:

Attachment 1 - Operating Earnings and Per Share Results by Subsidiary

Attachment 2 - Consolidating Statements of Operations

Attachment 3 - Consolidating Statements of Operations

Attachment 4 - Capitalization Schedule

Attachment 5 - Condensed Consolidated Statements of Cash Flows

Attachment 6 - Quarter-to-Quarter EPS Reconciliation

Attachment 7 - Year to Date EPS Reconciliation

Attachment 8 - Generation Measures

Attachment 9 - Retail Sales and Revenues

Attachment 10 - Retail Sales and Revenues

Attachment 11 - Statistical Measures

Attachment 12 - Reconciling Items Excluded from Continuing Operations to Compute Operating Earnings

FORWARD-LOOKING STATEMENT

Readers are cautioned that statements contained in this presentation about our and our subsidiaries' future performance, including future revenues, earnings, strategies, prospects and all other statements that are not purely historical, are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance they will be achieved. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current expectations include, but are not limited to:

• Adverse changes in energy industry, law, policies and regulation, including market structures and rules, and reliability standards.
• Any inability of our energy transmission and distribution businesses to obtain adequate and timely rate relief and regulatory approvals from federal and state regulators.
• Changes in federal and state environmental regulations that could increase our costs or limit operations of our generating units.
• Changes in nuclear regulation and/or developments in the nuclear power industry generally, that could limit operations of our nuclear generating units.
• Actions or activities at one of our nuclear units that might adversely affect our ability to continue to operate that unit or other units at the same site.
• Any inability to balance our energy obligations, available supply and trading risks.
• Any deterioration in our credit quality.
• Availability of capital and credit at reasonable pricing terms and our ability to meet cash needs.
• Any inability to realize anticipated tax benefits or retain tax credits.
• Changes in the cost of or interruption in the supply of fuel and other commodities necessary to the operation of our generating units.
• Delays or cost escalations in our construction and development activities.
• Adverse investment performance of our decommissioning and defined benefit plan trust funds, and changes in discount rates and funding requirements.
• Changes in technology and increased customer conservation.

For further information, please refer to our Annual Report on Form 10-K, including Item 1A. Risk Factors, and subsequent reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission. These documents address in further detail our business, industry issues and other factors that could cause actual results to differ materially from those indicated in this presentation. In addition, any forward-looking statements included herein represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if our internal estimates change, unless otherwise required by applicable securities laws.

Public Service Enterprise Group (NYSE:PEG - News) is a publicly traded diversified energy company with annual revenues of more than $13 billion, and three principal subsidiaries: PSEG Power, Public Service Electric and Gas Company (PSE&G) and PSEG Energy Holdings.

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