Regulatory Assets And Liabilities

12 Months Ended

Dec. 31, 2012

Regulatory Assets and Liabilities

PSE&G prepares its financial statements in accordance with GAAP accounting for regulated utilities. A regulated utility is required to defer the recognition of costs (a Regulatory Asset) or the recognition of obligations (a Regulatory Liability) if it is probable that, through the rate-making process, there will be a corresponding increase or decrease in future rates. Accordingly, PSE&G has deferred certain costs, which will be amortized over various future periods. These costs are deferred based on rate orders issued by the BPU or the FERC or PSE&G’s experience with prior rate cases. Most of PSE&G’s Regulatory Assets and Liabilities as of December 31, 2012 are supported by written orders, either explicitly or implicitly through the BPU’s treatment of various cost items.

Regulatory Assets are subject to prudence reviews and can be disallowed in the future by regulatory authorities. PSE&G believes that all of its Regulatory Assets are probable of recovery. To the extent that collection of any Regulatory Assets or payments of Regulatory Liabilities is no longer probable, the amounts would be charged or credited to income.

PSE&G had the following Regulatory Assets and Liabilities:




	As of December 31,
	2012		2011		Recovery/Refund Period
	Millions
Regulatory Assets
Current:
Underrecovered Electric Energy Costs—Basic Generation Service (BGS)	$	—	$	28	Various (1) (2)
Societal Benefits Charges (SBC)	74		87		Annual filing for recovery (1) (2)
Solar and Energy Efficiency Recovery Charges (RRC)	33		6		Annual filing for recovery (1) (2)
Solar Pilot Recovery Charge (SPRC)	14		4		Annual filing for recovery (1) (2)
Capital Stimulus Undercollection	34		21		Annual filing for recovery (1) (2)
Weather Normalization Clause (WNC)	30		2		Annual filing for recovery (2)
New Jersey Clean Energy Program	154		—		Annual filing for recovery (1) (2)
Other	10		19		Various
Total Current Regulatory Assets	$	349	$	167
Noncurrent
Stranded Costs To Be Recovered	$	1,112	$	1,460	Through December 2016 (1) (2)
Manufactured Gas Plant (MGP) Remediation Costs	588		635		Various (2)
Pension and Other Postretirement	1,550		1,280		Various
Deferred Income Taxes	405		393		Various
Remediation Adjustment Charge (RAC) (Other SBC)	88		92		Through 2019 (1) (2)
New Jersey Clean Energy Program	—		253		Through February 2013 (1) (2)
Mark-to-Market (MTM) Contracts	107		110		Various
Unamortized Loss on Reacquired Debt and Debt Expense	89		96		Over remaining debt life (1)
Conditional Asset Retirement Obligation	110		84		Various
Gas Margin Adjustment Clause	7		29		Through July 2015 (2)
RRC	142		140		Various (2)
WNC Deferral	27		—		Annual filing for recovery (2)
Storm Damage Deferral	244		68		To be determined
Other	74		90		Various
Total Noncurrent Regulatory Assets	$	4,543	$	4,730
Total Regulatory Assets	$	4,892	$	4,897




	As of December 31,
	2012		2011		Recovery/Refund Period
	Millions
Regulatory Liabilities
Current:
Market Transition Charge (MTC) Refund, net	$	—	$	23	Through June 2012 (2)
Deferred Income Taxes	32		39		Various
Overrecovered Gas and Electric Costs—Basic Gas Supply Service (BGSS) and Basic Generation Service (BGS)	21		30		Annual filing for recovery (1) (2)
FERC Formula Rate True-up	5		1		Annual filing for recovery (1) (2)
Non-Utility Generation Charge (NGC)	9		5		Annual filing for recovery (1) (2)
Other	—		2		Various
Total Current Regulatory Liabilities	$	67	$	100
Noncurrent:
Electric Cost of Removal	$	166	$	222	Reduced as cost is incurred
MTM Contracts	40		—		Various
Other	13		15		Various
Total Noncurrent Regulatory Liabilities	$	219	$	237
Total Regulatory Liabilities	$	286	$	337


(1)	Recovered/Refunded with interest.


(2)	Recoverable/Refundable per specific rate order.

All Regulatory Assets and Liabilities are excluded from PSE&G’s rate base unless otherwise noted. The Regulatory Assets and Liabilities in the table above are defined as follows:


•	Underrecovered Electric Energy Costs: These costs represent the underrecovered amounts associated with BGS, as approved by the BPU.

•

SBC: The SBC, as authorized by the BPU and the New Jersey Electric Discount and Energy Competition Act (Competition Act), includes costs related to PSE&G's electric and gas business as follows: 1) the USF; 2) Energy Efficiency and Renewable Energy Programs; 3) Social Programs (electric only) which include electric bad debt expense; and 4) the RAC for incurred MGP remediation expenditures. All components accrue interest on both over and underrecoveries.


•	RRC: These costs are amounts associated with various renewable energy and energy efficiency programs. Components of the RRC include: Carbon Abatement, Energy Efficiency Economic Stimulus Program, Energy Efficiency Economic Extension Program, the Demand Response Program, Solar Generation Investment Program (Solar 4 All) and Solar Loan II Program.

•

SPRC: This charge is designed to recover the revenue requirements associated with the PSE&G Solar Pilot Program (Solar Loan I) per the BPU Order, less the net proceeds from the sale of associated Solar Renewable Energy Certificates (SRECs) or cash received in lieu of SRECs. The net recovery is subject to deferred accounting. Interest at the two-year constant maturity treasury rate plus 60 basis points will be accrued monthly on any under- or over-recovered balances.


•	Capital Stimulus Undercollection: PSE&G has received approval from the BPU for programs that provide for accelerated investment in utility infrastructure. The goal of these accelerated capital investments is to improve the reliability of PSE&G's infrastructure and New Jersey's economy through job creation.


•	WNC Deferral: This represents the over or under collection of gas margin refundable or recoverable under the BPU's weather normalization clause. The WNC requires PSE&G to calculate, at the end of each October-to-May period, the level by which margin revenues differed from what would have resulted if normal weather had occurred.


•	New Jersey Clean Energy Program: The BPU approved future funding requirements for Energy Efficiency and Renewable Energy Programs through the first half of 2013. Once the rates are measured, they are recovered through the SBC.

•

Stranded Costs To Be Recovered: This reflects deferred costs, which are being recovered through the securitization transition charges authorized by the BPU in irrevocable financing orders and being collected by PSE&G, as servicer on behalf of Transition Funding and Transition Funding II, respectively. Collected funds collected are remitted to Transition Funding and Transition Funding II and are used for interest and principal payments on the transition bonds and related costs and taxes.

Transition Funding and Transition Funding II are wholly owned, bankruptcy-remote subsidiaries of PSE&G that purchased certain transition property from PSE&G and issued transition bonds secured by such property. The transition property consists principally of the rights to receive electricity consumption-based per kilowatt-hour (kWh) charges from PSE&G electric distribution customers, which represent irrevocable rights to receive amounts sufficient to recover certain of PSE&G's transition costs related to deregulation, as approved by the BPU.


•	MGP Remediation Costs: Represents the low end of the range for the remaining environmental investigation and remediation program cleanup costs for manufactured gas plants that are probable of recovery in future rates. Once these costs are incurred, they are recovered through the RAC in the SBC.

•

Pension and Other Postretirement: Pursuant to the adoption of accounting guidance for employers' defined benefit pension and OPEB plans, PSE&G recorded the unrecognized costs for defined benefit pension and other OPEB plans on the balance sheet as a Regulatory Asset. These costs represent actuarial gains or losses, prior service costs and transition obligations as a result of adoption, which have not been expensed. These costs are amortized and recovered in future rates.


•	Deferred Income Taxes: These amounts represent the portion of deferred income taxes that will be recovered or refunded through future rates, based upon established regulatory practices.


•	RAC (Other SBC): Costs incurred to clean up manufactured gas plants which are recovered over seven years.


•	MTM Contracts: The estimated fair value of long-term standard offer capacity agreements (SOCAs), gas hedge contracts and gas cogeneration supply contracts. The regulatory asset/liability is offset by a derivative asset/liability and, with respect to the gas hedge contracts only, an intercompany receivable/payable on the Consolidated Balance Sheets.


•	Unamortized Loss on Reacquired Debt and Debt Expense: Represents losses on reacquired long-term debt, which are recovered through rates over the remaining life of the debt.


•	Conditional Asset Retirement Obligation: These costs represent the differences between rate regulated cost of removal accounting and asset retirement accounting under GAAP. These costs will be recovered in future rates.


•	Gas Margin Adjustment Clause: PSE&G defers the margin differential received from Transportation Gas Service Non-Firm Customers versus bill credits provided to BGSS-Firm customers.


•	Storm Damage Deferral: Costs incurred in the cleanup of 2012, 2011 and 2010 storms, as approved by the BPU under an Order received in December 2012 authorizing the deferral of incremental costs.


•	MTC Refund, net: These costs represent the overrecovered amounts associated with MTC.


•	Overrecovered Gas and Electric Costs: These costs represent the overrecovered amounts associated with BGSS and BGS, as approved by the BPU. Interest is accrued on overrecovered balances.


•	FERC Formula Rate True-up: Overcollection or undercollection of transmission earnings calculated using a FERC approved formula.


•	NGC: Represents the difference between the cost of non-utility generation and the amounts realized from selling that energy at market rates through PJM and ratepayer collections.


•	Electric Cost of Removal: PSE&G accrues and collects for cost of removal in rates. The liability for non-legally required cost of removal is classified as a Regulatory Liability. This liability is reduced as removal costs are incurred. Accumulated cost of removal is a reduction to the rate base.

Significant 2012 orders and pending rate filings are as follows:

•

Storm Damage Deferral—In December 2012, the BPU granted PSE&G's request to defer on its books actually incurred, uninsured, incremental storm restoration costs to its gas and electric distribution systems associated with extraordinary storms, including Hurricane Irene and Superstorm Sandy. In February 2013, the BPU announced that it would initiate a generic proceeding to evaluate the prudency of extraordinary, storm-related costs incurred by all of the regulated utilities as a result of the natural disasters experienced in New Jersey in 2011 and 2012 and in this proceeding will consider the manner in which such prudent costs shall be recovered.


•	Transmission Formula Rates—PSE&G's 2012 Annual Formula Rate Update with the FERC provided for approximately $94 million in increased annual transmission revenues effective January 1, 2012. PSE&G filed its 2013 Annual Formula Rate Update with FERC in October 2012, which provides for approximately $174 million in increased annual transmission revenues effective January 1, 2013.


•	SBC/NGC—In March 2012, PSE&G made an annual SBC/NGC filing requesting a $5 million electric increase and a $29 million gas increase. PSE&G updated the filing with actual data through August 31, 2012, resulting in a decrease of $77 million for electric customers while the gas increase remained unchanged. A Stipulation signed by the Parties was approved by the BPU effective February 1, 2013.

•

Universal Service Fund (USF)/Lifeline—The USF is an energy assistance program mandated by the BPU to provide payment assistance to low income customers. The Lifeline program is a separate mandated energy assistance program to provide payment assistance to elderly and disabled customers. In June 2012, New Jersey's electric and gas utilities, including PSE&G, filed requests to reset the statewide rates for the USF and the Lifeline program. The filed USF rates were set to recover approximately $230 million on a statewide basis. Of this amount, the statewide electric rates are set to recover $173 million with the remaining $57 million recovered through gas rates. The rates for the Lifeline program were set to recover $66 million, $46 million for electric and $20 million for gas. The filed rates were subsequently updated and approved effective October 1, 2012. PSE&G earns no margin on the collection of the USF and Lifeline programs resulting in no impact on Net Income.


•	Capital Infrastructure Programs (CIP I and CIP II)—In December 2012, the BPU approved stipulations regarding our CIP I and CIP II filings resulting in a combined increase of $40 million and $23 million for electric and gas customers, respectively effective January 1, 2013.

•

WNC— In June 2012, PSE&G filed a petition and testimony with the BPU, including eight months of actual and four months of forecasted data, which sought BPU approval to recover $41 million in deficiency revenues from its customers during the 2012-2013 Winter Period (October 1 to May 31) and a carryover deficiency of $16 million to the 2013-2014 Winter Period. In September 2012, an Order approving the stipulation for provisional rates was signed. In December 2012, PSE&G made a supplemental filing incorporating twelve months of actual financial data, which would, if approved by the BPU, result in no change to customer rates during the 2012-2013 Winter Period. The supplemental filing would, however, result in an increase of the carryover deficiency to the 2013-2014 Winter Period from $16 million to $24 million. PSE&G is awaiting a final Order.

•

RAC—In November 2011, PSE&G filed a RAC 19 petition with the BPU requesting a decrease in electric and gas RAC revenues on an annual basis of $9 million and $10 million, respectively. In October 2012, PSE&G received the Administrative Law Judge's (ALJ) Initial Decision allowing full recovery of RAC 19 costs including costs of the Passaic River and Newark Bay Superfund (CERCLA) matters and the Occidental litigation that were allocated to PSE&G and included in this request. In October 2012, the BPU issued a final Order approving the ALJ's Initial Decision.


•	RRC—In July 2012, PSE&G filed a petition with the BPU requesting an increase in the RRC seeking to recover approximately $62 million in electric revenue and $8 million in gas revenue on an annual basis. The discovery phase of this proceeding is underway.


•	SPRC—In July 2012, the BPU approved a Stipulation regarding our March 2010 SPRC (Solar Loan I) filing authorizing an increase in rates of $3 million for PSE&G's electric customers effective August 1, 2012. In July 2012, PSE&G filed a petition with the BPU for an annual increase in the electric SPRC of $17 million. The discovery phase of this proceeding is underway.

PSE&G [Member]

Regulatory Assets And Liabilities

Regulatory Assets and Liabilities

PSE&G had the following Regulatory Assets and Liabilities:




	As of December 31,
	2012		2011		Recovery/Refund Period
	Millions
Regulatory Assets
Current:
Underrecovered Electric Energy Costs—Basic Generation Service (BGS)	$	—	$	28	Various (1) (2)
Societal Benefits Charges (SBC)	74		87		Annual filing for recovery (1) (2)
Solar and Energy Efficiency Recovery Charges (RRC)	33		6		Annual filing for recovery (1) (2)
Solar Pilot Recovery Charge (SPRC)	14		4		Annual filing for recovery (1) (2)
Capital Stimulus Undercollection	34		21		Annual filing for recovery (1) (2)
Weather Normalization Clause (WNC)	30		2		Annual filing for recovery (2)
New Jersey Clean Energy Program	154		—		Annual filing for recovery (1) (2)
Other	10		19		Various
Total Current Regulatory Assets	$	349	$	167
Noncurrent
Stranded Costs To Be Recovered	$	1,112	$	1,460	Through December 2016 (1) (2)
Manufactured Gas Plant (MGP) Remediation Costs	588		635		Various (2)
Pension and Other Postretirement	1,550		1,280		Various
Deferred Income Taxes	405		393		Various
Remediation Adjustment Charge (RAC) (Other SBC)	88		92		Through 2019 (1) (2)
New Jersey Clean Energy Program	—		253		Through February 2013 (1) (2)
Mark-to-Market (MTM) Contracts	107		110		Various
Unamortized Loss on Reacquired Debt and Debt Expense	89		96		Over remaining debt life (1)
Conditional Asset Retirement Obligation	110		84		Various
Gas Margin Adjustment Clause	7		29		Through July 2015 (2)
RRC	142		140		Various (2)
WNC Deferral	27		—		Annual filing for recovery (2)
Storm Damage Deferral	244		68		To be determined
Other	74		90		Various
Total Noncurrent Regulatory Assets	$	4,543	$	4,730
Total Regulatory Assets	$	4,892	$	4,897




	As of December 31,
	2012		2011		Recovery/Refund Period
	Millions
Regulatory Liabilities
Current:
Market Transition Charge (MTC) Refund, net	$	—	$	23	Through June 2012 (2)
Deferred Income Taxes	32		39		Various
Overrecovered Gas and Electric Costs—Basic Gas Supply Service (BGSS) and Basic Generation Service (BGS)	21		30		Annual filing for recovery (1) (2)
FERC Formula Rate True-up	5		1		Annual filing for recovery (1) (2)
Non-Utility Generation Charge (NGC)	9		5		Annual filing for recovery (1) (2)
Other	—		2		Various
Total Current Regulatory Liabilities	$	67	$	100
Noncurrent:
Electric Cost of Removal	$	166	$	222	Reduced as cost is incurred
MTM Contracts	40		—		Various
Other	13		15		Various
Total Noncurrent Regulatory Liabilities	$	219	$	237
Total Regulatory Liabilities	$	286	$	337


(1)	Recovered/Refunded with interest.


(2)	Recoverable/Refundable per specific rate order.

All Regulatory Assets and Liabilities are excluded from PSE&G’s rate base unless otherwise noted. The Regulatory Assets and Liabilities in the table above are defined as follows:


•	Underrecovered Electric Energy Costs: These costs represent the underrecovered amounts associated with BGS, as approved by the BPU.

•


•	RRC: These costs are amounts associated with various renewable energy and energy efficiency programs. Components of the RRC include: Carbon Abatement, Energy Efficiency Economic Stimulus Program, Energy Efficiency Economic Extension Program, the Demand Response Program, Solar Generation Investment Program (Solar 4 All) and Solar Loan II Program.

•


•	Capital Stimulus Undercollection: PSE&G has received approval from the BPU for programs that provide for accelerated investment in utility infrastructure. The goal of these accelerated capital investments is to improve the reliability of PSE&G's infrastructure and New Jersey's economy through job creation.


•	WNC Deferral: This represents the over or under collection of gas margin refundable or recoverable under the BPU's weather normalization clause. The WNC requires PSE&G to calculate, at the end of each October-to-May period, the level by which margin revenues differed from what would have resulted if normal weather had occurred.


•	New Jersey Clean Energy Program: The BPU approved future funding requirements for Energy Efficiency and Renewable Energy Programs through the first half of 2013. Once the rates are measured, they are recovered through the SBC.

•


•	MGP Remediation Costs: Represents the low end of the range for the remaining environmental investigation and remediation program cleanup costs for manufactured gas plants that are probable of recovery in future rates. Once these costs are incurred, they are recovered through the RAC in the SBC.

•


•	Deferred Income Taxes: These amounts represent the portion of deferred income taxes that will be recovered or refunded through future rates, based upon established regulatory practices.


•	RAC (Other SBC): Costs incurred to clean up manufactured gas plants which are recovered over seven years.


•	MTM Contracts: The estimated fair value of long-term standard offer capacity agreements (SOCAs), gas hedge contracts and gas cogeneration supply contracts. The regulatory asset/liability is offset by a derivative asset/liability and, with respect to the gas hedge contracts only, an intercompany receivable/payable on the Consolidated Balance Sheets.


•	Unamortized Loss on Reacquired Debt and Debt Expense: Represents losses on reacquired long-term debt, which are recovered through rates over the remaining life of the debt.


•	Conditional Asset Retirement Obligation: These costs represent the differences between rate regulated cost of removal accounting and asset retirement accounting under GAAP. These costs will be recovered in future rates.


•	Gas Margin Adjustment Clause: PSE&G defers the margin differential received from Transportation Gas Service Non-Firm Customers versus bill credits provided to BGSS-Firm customers.


•	Storm Damage Deferral: Costs incurred in the cleanup of 2012, 2011 and 2010 storms, as approved by the BPU under an Order received in December 2012 authorizing the deferral of incremental costs.


•	MTC Refund, net: These costs represent the overrecovered amounts associated with MTC.


•	Overrecovered Gas and Electric Costs: These costs represent the overrecovered amounts associated with BGSS and BGS, as approved by the BPU. Interest is accrued on overrecovered balances.


•	FERC Formula Rate True-up: Overcollection or undercollection of transmission earnings calculated using a FERC approved formula.


•	NGC: Represents the difference between the cost of non-utility generation and the amounts realized from selling that energy at market rates through PJM and ratepayer collections.


•	Electric Cost of Removal: PSE&G accrues and collects for cost of removal in rates. The liability for non-legally required cost of removal is classified as a Regulatory Liability. This liability is reduced as removal costs are incurred. Accumulated cost of removal is a reduction to the rate base.

Significant 2012 orders and pending rate filings are as follows:

•


•	Transmission Formula Rates—PSE&G's 2012 Annual Formula Rate Update with the FERC provided for approximately $94 million in increased annual transmission revenues effective January 1, 2012. PSE&G filed its 2013 Annual Formula Rate Update with FERC in October 2012, which provides for approximately $174 million in increased annual transmission revenues effective January 1, 2013.


•	SBC/NGC—In March 2012, PSE&G made an annual SBC/NGC filing requesting a $5 million electric increase and a $29 million gas increase. PSE&G updated the filing with actual data through August 31, 2012, resulting in a decrease of $77 million for electric customers while the gas increase remained unchanged. A Stipulation signed by the Parties was approved by the BPU effective February 1, 2013.

•


•	Capital Infrastructure Programs (CIP I and CIP II)—In December 2012, the BPU approved stipulations regarding our CIP I and CIP II filings resulting in a combined increase of $40 million and $23 million for electric and gas customers, respectively effective January 1, 2013.

•


•	RRC—In July 2012, PSE&G filed a petition with the BPU requesting an increase in the RRC seeking to recover approximately $62 million in electric revenue and $8 million in gas revenue on an annual basis. The discovery phase of this proceeding is underway.


•	SPRC—In July 2012, the BPU approved a Stipulation regarding our March 2010 SPRC (Solar Loan I) filing authorizing an increase in rates of $3 million for PSE&G's electric customers effective August 1, 2012. In July 2012, PSE&G filed a petition with the BPU for an annual increase in the electric SPRC of $17 million. The discovery phase of this proceeding is underway.