[Letterhead of PSE&G]
June 6, 2003
AGREEMENT BY VARIOUS PARTIES IN PSE&G ELECTRIC RATE
PROCEEDINGS WOULD RESULT, IF APPROVED,
IN MODEST 3.7% INCREASE FOR CUSTOMERS
Rates for all major customer classes
would be lower than 1999 levels
PSE&G signed an agreement today with various parties that provides for
$170 million in additional electric distribution revenues to settle the
company's electric base case proceeding.
The agreement was filed today with the Office of Administrative Law. It
must be approved by the administrative law judge assigned to the case and, if
approved, sent to the Board of Public Utilities (BPU) for its own review and
decision. In addition to PSE&G, the agreement was signed by Independent Energy
Producers of New Jersey, New Jersey Transit and Gerdau Ameristeel. The agreement
was not signed by the staff of the BPU and the Ratepayer Advocate.
The settlement among the parties also includes decreases of $238
million in various components of a customer's bill. Associated with these
decreases, under terms of the settlement, PSE&G would write off approximately
$31 million after taxes, which represents the resolution of various issues
associated with the four-year restructuring of the energy industry in New
Jersey. The majority of this one-time charge would not impact income from
continuing operations.
The net effect of these two aspects of the agreement would be a rate
decrease of 1.8 percent on customer bills.
However, if approved, these changes would coincide with the August 1st
expiration of bill discounts that customers received as a result of New Jersey's
Electric Discount and Energy Competition Act (EDECA). The expiring bill
discounts - which were phased in since 1999 - are a primary reason rates would
rise from current levels on August 1st.
As a result of these rate changes, if approved, and the expiring
discounts, customer bills on August 1, 2003 would increase 3.7 percent under the
terms of the settlement.
This increase does not reflect new rates for Basic Generation Service
(BGS) energy supply, which were established through a competitive auction in
February, as mandated by
EDECA. Even when combined with charges for BGS, the proposed electric rates
would result in average customer bills slightly lower than 1999 levels.
PSE&G last May had filed for $250 million in additional distribution
revenues primarily to recover the substantial investment in its electric system
since 1993, the last time the company received approval to raise base rates. The
company's last update in the current case supported an increase of $298 million.
"On balance, today's agreement would resolve the outstanding issues
resulting from the four-year transition period," said Xxxxxx X. X'Xxxxx, chief
financial officer of Public Service Enterprise Group (PSEG), the parent of
PSE&G. "However, this agreement - if approved by the BPU -- would challenge us
to find additional efficiencies while maintaining our high reliability
standards."
PSE&G's ability to minimize deferred energy supply costs during the
transition has enabled the company to keep rates at levels below what they were
in 1999. "There are not many goods or services that cost less today than in
1999," X'Xxxxx said. "That's a reasonable outcome for consumers." In the four
years since deregulation began, PSE&G customers also have received $1.4 billion
in bill discounts.
X'Xxxxx said other key components of the agreement include:
o New rates would be effective August 1, 2003, coincident with the
expiration of 13.7 percent customer discounts.
o Return on equity is set at 9.75 percent.
o Depreciation is set at 2.75 percent.
o An annual rate credit of $64 million due to the amortization of
excess depreciation reserves will expire on December 31, 2005.
o Electric customers will no longer pay $30 million annually in
nuclear decommissioning charges. This responsibility will now be
assumed by nuclear plant operators.
o The company will petition the BPU to securitize approximately
$143 million in after-tax deferred BGS costs, incurred in the
fourth year of restructuring, over a 15-year period -- minimizing
the impact on customer bills.
o The average residential customer who uses 580 kwh of electricity
a month will pay about $8 more per month, including charges for
BGS energy supply, on August 1 than they do today.
o The company has agreed not to file a petition to increase base
rates before January 1, 2006.
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FORWARD-LOOKING STATEMENT
Readers are cautioned that statements contained in this press release
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,
among other things: the effects of weather; the performance of generating units
and transmission systems; the availability and prices for oil, gas, coal,
nuclear fuel and electricity; changes in the markets for electricity and other
energy-related commodities; changes in the number of participants and the risk
profile of such participants in the energy marketing and trading business; the
effectiveness of our risk management and internal controls systems; the effects
of regulatory decisions and changes in law; changes in competition in the
markets we serve; the ability to recover regulatory assets and other potential
stranded costs; the outcomes of litigation and regulatory proceedings or
inquiries; the timing and success of efforts to develop domestic and
international power projects; conditions of the capital markets and equity
markets; advances in technology; changes in accounting standards; changes in
interest rates and in financial and foreign currency markets generally; the
economic and political climate and growth in the areas in which we conduct our
activities; and changes in corporate strategies. For further information, please
refer to our Annual Report on Form 10-K 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
release. 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 estimates change, unless otherwise required by
applicable securities laws.
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