8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) December 10, 2008

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

(Exact name of registrant as specified in its charter)

New Jersey
(State or other
jurisdiction of incorporation)

001-09120
(Commission File Number)


22-2625848
(I.R.S. Employer
Identification No.)

80 Park Plaza, P.O. Box 1171

Newark, New Jersey 07101-1171

(Address of principal executive offices) (Zip Code)

973-430-7000

(Registrant’s telephone number, including area code)

http://www.pseg.com

PSEG POWER LLC

(Exact name of registrant as specified in its charter)

Delaware
(State or other
jurisdiction of incorporation)

000-49614
(Commission File Number)


22-3663480
(I.R.S. Employer
Identification No.)

80 Park Plaza, T-25

Newark, New Jersey 07102-4194

(Address of principal executive offices) (Zip Code)

973-430-7000

(Registrant’s telephone number, including area code)

http://www.pseg.com

PUBLIC SERVICE ELECTRIC AND GAS COMPANY

(Exact name of registrant as specified in its charter)

New Jersey
(State or other
jurisdiction of incorporation)

001-00973
(Commission File Number)


22-1212800
(I.R.S. Employer
Identification No.)

80 Park Plaza, P.O. Box 570

Newark, New Jersey 07101-0570

(Address of principal executive offices) (Zip Code)

973-430-7000

(Registrant’s telephone number, including area code)

http://www.pseg.com

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

The information contained in Item 7.01 Regulation FD Disclosure in this combined Form 8-K is separately furnished, as noted, by Public Service Enterprise Group Incorporated (PSEG), PSEG Power LLC (Power) and Public Service Electric and Gas Company (PSE&G). Information contained herein relating to any individual company is provided by such company on its own behalf and in connection with its respective Form 8-K. Power and PSE&G each makes representations only as to itself and makes no other representations whatsoever as to any other company.

Item 7.01 Regulation FD Disclosure

On December 10, 2008, PSEG participated in the New York Investor Meetings in New York City. A copy of the discussion materials used at the meetings is furnished as Exhibit 99 to this Form 8-K.

Item9.01 Financial Statements and Exhibits

Exhibit 99 Discussion Materials for the New York Investor Meetings

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED (Registrant)
By:	/s/ Derek M. DiRisio
	Derek M. DiRisio Vice President and Controller (Principal Accounting Officer)

Date: December 10, 2008

3

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

PSEG POWER LLC (Registrant)
By:	/s/ Derek M. DiRisio
	Derek M. DiRisio Vice President and Controller (Principal Accounting Officer)

Date: December 10, 2008

4

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

PUBLIC SERVICE ELECTRIC AND GAS COMPANY (Registrant)
By:	/s/ Derek M. DiRisio
	Derek M. DiRisio Vice President and Controller (Principal Accounting Officer)

Date: December 10, 2008

5

EX-99

Exhibit 99

Public Service Enterprise Group

New York Investor Meetings

New York, New York

December 10, 2008

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 ssumptions, 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, policies and regulation, including market rules that may adversely affect our operating results.

Any inability of our energy transmission and distribution businesses to obtain adequate and timely rate relief and/or regulatory approvals from
federal and/or state regulators.

Changes in federal and/or 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 successfully our energy obligations, available supply and trading risks.

Any deterioration in our credit quality.

Availability of capital and credit markets at reasonable pricing terms and ability to meet cash needs.

Any inability to realize anticipated tax benefits or retain tax credits.

Increases 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 capital market performance of our decommissioning and defined benefit plan trust funds.

Changes in technology and/or 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 estimates change, unless otherwise required by applicable securities laws.

2

GAAP Disclaimer

PSEG presents Operating Earnings in addition to its Net Income reported in accordance with accounting principles generally accepted in the United States (GAAP). Operating Earnings is a non-GAAP financial measure that differs from Net Income because it excludes the impact of the sale of certain non-core domestic and international assets and material impairments and lease-transaction-related charges. PSEG presents Operating Earnings because management believes that it is appropriate for investors to consider results excluding these items in addition to the results reported in accordance with GAAP. 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.  This information is not intended to be viewed as an alternative to GAAP information. The last slide in this presentation includes a list of items excluded from Net Income to reconcile to Operating Earnings, with a reference to that slide included on each of the slides where the non-GAAP information appears.  

3

PSEG Strategic Overview

Ralph Izzo                                                                 
Chairman, President and Chief Executive Officer

Tom O’Flynn

Executive Vice President and Chief Financial Officer

PSEG’s diverse asset mix, operational excellence and strong
balance sheet …

… position it to provide value and benefit from multiple growth
opportunities.

Stable electric and gas
distribution and electric
transmission company
rated top quartile for
reliability, providing
service in mature
service territory in New
Jersey.

Major merchant
generation company with
13,487 MW* of base-
load, intermediate and
load-following capability
operating in attractive
Northeast markets with
operating control of
additional 2,000 MW of
capacity in Texas.

Redeployment of capital
through the sale of
international assets.  
Focused on managing
Texas assets, lease
portfolio, modest
domestic PPA capacity
and potential investment
in renewable energy
development.

2007 Operating
Earnings:

$949M**

$115M**

$376M**

2008 Guidance:

$1,010M - $1,110M

$75M – $90M

$350M – $370M

** See page 54 for Items excluded from Net Income to reconcile to Operating Earnings

* Includes recent uprates at Hope Creek (150MW) and Salem 2 (23MW)

5

Our strategic objective is to maximize the value of our existing assets …

… while building a strong platform for future growth.

Produce and
deliver safe,
reliable,
economic
and clean
energy.

Support
competitive
market
structures
through
strong
regulatory
relationships.

Maintain
strong
balance
sheet to
support
disciplined
investment.

Operational
Excellence

Regulatory and
Market Environment

Meet
shareholder
expectations
for growth
with
reasonable
risk.

Growth with
Manageable Risk

6

PSEG is well-positioned …

Regulatory contract for new peaking capacity in CT (in-service date 2012)

Potential to leverage existing brownfield sites

Compressed Air Energy Storage (CAES)

Garden State Offshore Energy exploring development of 350MW offshore                    
wind farm (could be fully operational in 2013)

Capacity
Needs

Significant new transmission capital program to improve reliability

FERC approved request for cost of service formula rates for existing and
future transmission investments effective October 1, 2008

Capital investment in coal fleet to meet environmental requirements
maintains critical infrastructure and expands capability

Infrastructure
Requirements

PSEG Power’s base-load nuclear assets well situated in carbon                  
constrained environment

RGGI auction provides guide for eventual Federal action

NJ releases Energy Master Plan (EMP)

PSE&G pursuing investments in energy efficiency and renewables

Climate
Change

… to capitalize on the challenges of the current business environment.

7

PSEG – 2008 Highlights

$3.35 billion of available liquidity; capital needs funded from
internal cash

Responding to challenging credit markets – capital expenditures
for 2009 reduced by $275 - $325 million

Strong balance
sheet

SAESA and Bioenergie sale closed; reserve established for
potential lease liability

Ratings outlook for PSEG, PSE&G, and Holdings moved from
Negative to Stable

Improved risk
profile

NJ releases Energy Master Plan

FERC Transmission rate order effective October 1, 2008

FERC endorses Reliability Pricing Model

RGGI auction in September 2008 – price for carbon at $3.07/ton

Supportive
regulatory
environment

  PSE&G honored as America’s Most Reliable Electric Utility

  PSEG Power – Nuclear capacity factor at 93% YTD September 30

                      – Nuclear uprates yield 173MW of new capacity

Strong operating
performance
maintained

  Maintaining 2008 guidance of $2.80 - $3.05 per share

  Supporting lower half of 2009 earnings of $3.05 - $3.35 per share

Solid earnings
performance

8

2007 Operating Earnings*

2008 Guidance

2009 Guidance

$2.71

$2.80 - $3.05

On track to meet 2008 earnings guidance…

* See page 54 for Items excluded from Net Income to reconcile to Operating Earnings

9 Months YTD
Operating
Earnings:
$2.43*

$3.05 - $3.35

… but, potential increases in coal prices and pension / financing
costs may limit growth in 2009 to lower half of forecast range.

9

PSEG Power – Business Drivers

2009E

2010E+

2008E

$1,010M - $1,110M

Operating Earnings
2007A: $949M*

                  
Operations

                           
Markets

               
Financial

* See page 54 for Items excluded from Net Income to reconcile to Operating Earnings

Full year of RPM

Recontracting

Strong nuclear
operations
including uprates

Planned fossil and
nuclear outages

Continued strong
cash flow

Dividend to PSEG
of $475M

Recontracting
improvements continue

RGGI begins

Full year of
nuclear uprates

Improvement in
CC capacity
utilization

Higher coal costs

Strong cash flow
supports higher
leverage

Attractive liquid
markets leveraged to
carbon

Supply and Demand
dynamic tightens

Installation of BET at
Hudson and Mercer
could affect availability
in 2010 with
improvement thereafter

Coal supply flexibility
improves

Significant reduction
in capital
expenditures with
completion of BET

10

Low-cost portfolio

Strong cash generator

Regional focus in competitive,
liquid markets

Assets favorably located

Many units east of PJM constraints

Southern NEPOOL/Connecticut

Near customers/load centers

80% of fossil capacity has dual-fuel
capabilities

Integrated generation and portfolio
management optimizes asset-
based revenues

… with numerous competitive advantages over the long-term.

PSEG Power - right set of assets in right markets …

18%

46 %

8 %

27 %

Fuel Diversity – 2008

Coal

Gas

Oil

Nuclear

Pumped

Storage

1%

Energy Produced - 2007

54%

25%

19%

Oil 1%

Pumped
Storage
1%

Nuclear

Coal

Gas

Total GWh: 53,200**

Total MW: 13,487*

* Includes recent uprates at Hope Creek (150MW) and Salem 2 (23MW)                                                                          
** Excludes 2,000MW of combined cycle generation in Texas under PSEG Power’s operating control.

11

0%

25%

50%

75%

100%

2008

2009

2010

2011

$0

$50

$100

$150

0%

25%

50%

75%

100%

2008

2009

2010

2011

$40

$50

$60

$70

$80

Power’s hedging program provides near-term stability from market
volatility …

… while remaining open to long-term market forces.

Estimated EPS
impact of $10/MWh
PJM West around the
clock price change*

Contracted Capacity

% sold

(left

scale)

Estimated EPS
impact of $30/MW-
day capacity price
change*

Price

(right
scale)

* As of October 2008; Assuming normal market commodity correlations

Power has
contracted for a
considerable
percentage of its
output over the
next two years at
attractive prices.

The pricing for
most of Power’s
capacity has been
fixed through May  
2012, with the
completion of
auctions in PJM
and NE.   

% sold

(left

scale)

$0.25 - $0.65

$0.10 - $0.40

$0.01 - $0.10

$0.01 - $0.02

$0.00 - $0.02

$0.00 - $0.01

$0.00 - $0.01

$0.00 - $0.01

Contracted Energy

Price
(right
scale)

12

Natural gas spark spreads are trading in line with rising
historical averages.

Dark spreads have improved with recent decline in coal prices.

Forward prices as of 11/25/08

($10)

$0

$10

$20

$30

$40

$10

$20

$30

$40

$50

$60

Annual Average

Historical

Forecast

Western Hub Spark Spread (On-Peak Henry Hub * 7.5 Heat Rate)

Western Hub Dark Spread (RTC Central Appalachian Coal * 10 Heat Rate)

13

PSE&G – Business Drivers

* See page 54 for Items excluded from Net Income to reconcile to Operating Earnings

FERC rate order
effective 10/1/08
supports formula rate
treatment on
transmission

Modest decline in
electric sales with
slowdown in economy

National ReliabilityOne
Excellence Award –
third time in four years

Strong operations hold
cost growth to less
than inflation

Reasonable ROE

Credit metrics
achieved

Rate of electric sales
growth expected to
decline

NJ BPU rate case to
be filed mid-year

I-Power customer
system in service
1Q 2009

Decline in sales
and increased
investment could
lower ROE for
E&G to 8.5 – 9.0%

Responding to NJ
EMP goals: energy
efficiency, carbon
abatement and
renewables

Managing O&M
growth below rate of
inflation

Investment in
transmission grows

Recovery under formula
rate treatment

NJ rate order provides
for normalized ROE

                  
Operations

Markets

               
Financial

2009E

2010E+

2008E

$350M - $370M

Operating Earnings
2007A: $376M*

14

Through its highly skilled workforce and disciplined capital
investments …

2008 National ReliabilityOne Award winner
– Winner in three of the last four years

Solid regulatory relationships on traditional
utility matters

NJ is ranked 2^nd nationally in personal
income per capita

(0.2%)

1.6%

Historical Annual
Sales Growth

2003 - 2007

3,397M Therms

44,354 GWh  

Electric Sales and  Gas Sold
and Transported

LTM 9/30/08

0.2%

1.7 Million

Gas

0.5%

2.1 Million

Electric

Projected Annual
Sales Growth

2008 - 2012

Customers

1.3%

Historical Annual Peak Growth

2003-2007

10,654

Billing Peak (MW)

1,429

Network Circuit
Miles

1.4%*

Projected Annual Peak Growth

2008 - 2012

Electric and Gas Distribution Statistics (9/30/08)

Transmission Statistics (9/30/08)

… PSE&G has become a nationally recognized leader in delivering
safe and reliable service.

* to be updated in December, preliminary estimate of update is ~1.0%

15

Regulated electric transmission, electric and gas distribution system

Characteristics

FERC regulation for electric transmission (formula rates)

NJ BPU regulation for electric and gas distribution

Managing recovery lag on electric and gas distribution investments

PSE&G’s investment plan and expected fair regulatory treatment …

Equity Ratio ~ 48%

… create a solid foundation for projected annual earnings growth
of 7 to 8% between 2008 and 2011.

EMP

1%

Gas

Distribution

28%

Electric

Transmission

25%

Electric

Distribution

46%

Electric

Distribution

52%

Electric

Transmission

13%

Gas

Distribution

35%

2007 Actual

Rate Base = $6.4B

2011 Projected

Rate Base = $9.1B

PSE&G Rate Base

16

PSEG Energy Holdings – Business Drivers

* See page 54 for Items excluded from Net Income to reconcile to Operating Earnings

Global: 2,000MW of
combined cycle
capacity influenced
by gas price and
congestion

Addition of wind
resources in west TX
affected availability of
CC availability

Sale of Latin
American assets
concluded

Reserve for potential
tax liability reduced
return on lease
portfolio

Anticipate more
normal spark spreads
versus strong 2008
market

Increase in wind
resources in west TX
could affect capacity of
Odessa

Focused on managing
small domestic  PPA
portfolio

Global: Reversal of MTM gain ($58M pre-tax) booked
on TX assets begins in 2009 and ends in 2010

Plans to pursue
development of renewable
resources

Anticipate normal spark
spreads in TX market

Additional transmission in
TX could aid availability

Focused on
maintaining long-term
operating capability of
CC generation and
small PPA portfolio

Anticipate sale of remaining international investments by year-end 2010

LILO/SILO tax payment

2009E

2010E+

2008E

$75M - $90M

Operating Earnings
2007A: $115M*

Operations

Markets

Financial

Plan is to limit exposure
to LILO/SILO lease tax
liability

LILO/SILO tax payment

17

With the sale of international assets, Holdings is now focused …

… on its domestic generation assets, leveraged lease portfolio and
potential renewables development.

PSEG
Resources
47%

Chile & Peru
Distribution

Texas
Merchant
Generation

Other US
Generation

2007 Operating Earnings*

86% of the portfolio is
in energy-related
leveraged leases

2008 Guidance - Operating Earnings

13%

23%

17%

Texas
Merchant
Generation

67%

PSEG
Resources   
15%

Other US
Generation

18%

~390MW owned  in
CA, HI, NH
fully contracted

$ 115M

$ 75M - $90M

Two companies sold
and SAESA in Disc
Ops. in 2007

Two 1,000 MW CCGTs                 
1 in Central Texas (South Zone)     
1 in West Texas

* See page 54 for Items excluded from Net Income to reconcile to Operating Earnings

18

PSEG – Business Drivers

2009E

2010E+

2008E

$1,420M - $1,560M

Operating Earnings
2007A: $1,377M*

Operations

Markets

Financial

* See page 54 for Items excluded from Net Income to reconcile to Operating Earnings

19

•   Hedging and
    recontracting at Power
    provide stability in
    volatile markets

•   Improved
    performance from
    nuclear fleet

•   PSE&G recognized at
    national level for
    reliability

•   Credit metrics achieved

•   Risk reduced with sale
    of international assets

•   Recognition of potential
    lease tax liability

•   Dividend increased

•   Market mechanisms
    and recontracting
    support liquidity

•    RGGI in place

•   Focus on operating
    efficiency measures
    to contain growth in
    costs, including coal

Power uprates

•   PSE&G installs new
    customer system

•   Disciplined
    approach to
    capital spending

•   Pension expense

•   Responding to EMP
    goals and need for
    transmission

•   Tightening markets
    leveraged to carbon

•   PSE&G rate
    programs in place

•   Maintain strong
    nuclear fleet
    operating levels

•   Fossil plant flexibility
    improves with BET

•   Strong cash flow
    supports capital
    program

•   Plan is to limit exposure to LILO/SILO lease tax
    liability

PSEG Liquidity as of October 31, 2008

Expiration

Total

Primary

Usage at

Available

Company

Facility

Date

Facility

Purpose

10/31/2008

10/31/2008

PSEG

5-year Credit Facility

Dec-12

$1,000

1

CP Support/Funding/LCs

$13

$987

Bilateral Credit Facility

Jun-09

100

CP Support/Funding

0

100

Uncommitted Bilateral Agreement

N/A

N/A

Funding

0

N/A

PSE&G

5-year Credit Facility

Jun-12

600

2

CP Support/Funding/LCs

116

484

Uncommitted Bilateral Agreement

N/A

N/A

Funding

0

N/A

Energy

5-year Credit Facility

Jun-10

136

Funding/LCs

21

115

Holdings

Power

5-Year Credit Facility

Dec-12

1,600

3

Funding/LCs

205

1,395

Bilateral Credit Facility

Jun-09

100

Funding/LCs

0

100

Bilateral Credit Facility

Mar-09

150

Funding/LCs

48

102

Bilateral Credit Facility

Sep-09

50

Funding

50

0

Bilateral Credit Facility

Mar-10

100

Funding/LCs

24

76

Total

$3,836

$3,359

1

PSEG Facility reduces by $47 million in 2012

2

PSE&G Facility reduces by $28 million in 2012

3

Power Facility reduces by $75 million in 2012

($ millions)

20

PSEG’s share repurchase program is a means of returning cash to
shareholders …

$658 million remaining of $750 million program
authorized by the Board to be executed over 18 month
period effective August 1, 2008.

Program halted in late September to preserve liquidity
in the face of instability in the credit markets.

Resumption of program dependent on re-opening of
the credit markets.

…  in the absence of financially attractive investment opportunities.

21

$1.12

$1.14

$1.29

$1.17

2005

2006

2007

2008

2009E

Our recent 10% dividend increase continues 100-year history of paying common dividends.

A payout objective of 40 – 50% provides opportunity for growth
with earnings.

* Indicated annual dividend rate

*

44%

Payout
Ratio

40 – 50%

43%

66%

63%

?

Dividends per Share

22

PSEG Value Proposition

PSEG is well-positioned in current business environment

Operational excellence efforts support:

Asset mix provides opportunities in attractive markets

Strengthened balance sheet supports capital investment

•  $3.35 billion available liquidity to support business

Return of cash to shareholders through dividends and share
repurchase provides discipline to investment process

•  maintaining reliability

•  controlling costs

•  providing value to the customer

23

PSEG Power

Operated by PSEG Nuclear

PSEG Ownership: 100%

Technology:Boiling Water Reactor

Total Capacity: ~1,211MW

Owned Capacity: ~1,211MW*

License Expiration: 2026

Operated by PSEG Nuclear

Ownership: PSEG - 57%,
Exelon – 43%

Technology:

Pressurized Water Reactor

Total Capacity: ~2,345MW

Owned Capacity: ~1,346MW*

License Expiration: 2016 and
2020

Operated by Exelon

PSEG Ownership: 50%

Technology:

Boiling Water Reactor

Total Capacity: ~2,224MW

Owned Capacity: ~1,112MW

License Expiration: 2033
and 2034

Hope Creek

Salem Units 1 and 2

Peach Bottom Units 2 and 3

Our five-unit nuclear fleet with recent uprates …

… is a critical element of Power’s success.

* Includes recent uprates at Hope Creek (150MW) and Salem 2 (23MW)

25

Total Power Output(GWh)

… as we maintain our focus on achieving operational excellence.

The output of our generation fleet is increasing …

0

10,000

20,000

30,000

40,000

50,000

60,000

2004

2005

2006

2007

Year

Nuclear

Coal

CC

Peaking/Steam

Strong Performance

• Continued growth in output

• Improved fleet performance

3,669

Nuclear

4,314

Peaking / Steam

3,156

Combined Cycle

2,348

Coal

A Diverse 13,487 MW Fleet*

* Includes recent uprates at Hope Creek (150MW) and Salem 2 (23MW)

26

Power’s eastern coal units are in attractive markets …

… and after capital investments, should experience improved capacity
factors.

System Interface

Power is also making considerable
investments beyond the pollution
control facilities for its coal assets.

Power’s New Jersey coal units are
mid-merit, with capacity factors
averaging 50% to 60%.

Mercer 1&2
(648MW)

Hudson 2
(558MW)

Bridgeport Harbor 3
(372MW)

27

Understanding recent power market volatility …

PJM market - slight tightening in reserve margins forecast over next
5 years; FERC remains supportive of RPM capacity mechanism.

Financial market volatility has adversely affected liquidity in
commodity markets, particularly in out years.
–PSEG Power carefully screening credit capability of trading
partners.

Coal and gas prices have come off recent historical highs to more
traditional values

Recent vacating of CAIR has depressed forward energy prices, and
uncertainty remains around prospective treatment.

28

PJM RTO Summer Peak Forecasted Reserve Margin

18

19

20

21

22

23

2008

2009

2010

2011

2012

PJM Market Overview

Source: PJM, Sept. 26, 2008 (based on PJM’s January 2008 load forecast, using 1.7% load growth rate)

• PJM forecasts tightening RTO-wide reserve margins

• MAAC, and especially Eastern MAAC, have tighter reserve margins than RTO-wide

• Current financial and economic crisis will impact both demand and new supply:

• Demand – Recent signs of slowing growth (not reflected in PJM’s forecast)

• Supply additions – Slowdown in construction due to financial uncertainty, counteracting
      effect of demand slow-down

29

$/mmbtu

$/MWh

… are benefiting Power’s coal and nuclear fleet.

The impact of fossil fuels on energy prices …

$20

$30

$40

$50

$60

$70

$80

2003

2004

2005

2006

2007

2008

2009

Fwd

2010

Fwd

$0

$3

$6

$9

$12

Natural Gas Henry Hub

(right scale)

Coal*

(right
scale)

Electricity

(left scale)

**

**

* Central Appalachian Coal

** Forward prices as of November 25, 2008

30

$20

$30

$40

$50

$60

$70

$80

$90

2003

2004

2005

2006

2007

2008

2009

Fwd

2010

Fwd

Zonal prices in the eastern portions of PJM have
historically been higher than the Western Hub…

… allowing Power to realize higher prices due to its assets’ favorable
location.

* Average of 11 historical months and 1 forward month.

** Forward prices as of November 25, 2008

Historical spot basis

Forward basis

PS Zone Basis

*

**

**

31

Through the new capacity constructs, and repricing at market prices …

… Power expects to maintain strong margins.

Power’s capacity is located in three Northeast markets.

Delivery Year ($/MW-Day)

** Majority of Power’s assets            
(a) – includes APS

Total Capacity 13,487MW*

(~ 1,000 MW under RMR)

The RPM Auction to date has provided strong price signals in PJM.

$174.29

$174.29

$174.29

2010 / 2011

$110.00

$110.00

$110.00

2011 / 2012

$102.04

    $191.32 ^(a)

$191.32

2009 / 2010

$111.92

---

$148.80

2008 / 2009

2007 / 2008

Zones

$40.80

Rest of Pool

---

MAAC

$197.67

Eastern MAAC**

NY

NE

PJM

* Includes recent uprates at Hope Creek (150MW) and Salem 2 (23MW)

32

2003

2004

2005

2006

2007

2008

Ancillary services

Capacity

Congestion

Load shape

RECs

Transmission

Risk premium         
(commodity,
credit, collateral)

Full Requirements

Round the Clock
PJM West
Forward Energy
Price

$33 - $34

$36 - $37

$55.59

$55.05

$65.41

$44 - $46

~ $21

~ $18

~ $21

$102.51

$67 - $70

~ $32

$98.88

~ $41

$58-$60

$68 - $71

~ $43

$111.50

Increase in Full Requirements Component Due to:

Increased Congestion (East/West Basis)

Increase in Capacity Markets/RPM

Volatility in Market Increases Risk Premium

Power’s fleet diversity and location ...

Market Perspective – BGS Auction Results

… has enabled successful participation in each BGS auction and
cushioned customer impacts.

Note: BGS prices reflect PSE&G Zone

33

0

4,000

8,000

12,000

16,000

2008

2009

2010

2011

Contracted

Coal

Total Output

95-100%

70-80%

50-60%

Power has contracts for supply of its coal …

… and after installation of pollution control equipment, Power
anticipates added flexibility in fuel choices.

Coal Output

Note: Percent coal hedged as of October 2008

15-25%

34

Historical and Contracted Nuclear Fuel Cost

Power’s contracting strategy for nuclear fuel has mitigated market
price increases.

100% of PSEG Nuclear’s fuel needs are contracted through 2011.

Contracted

$0

$2

$4

$6

$8

$10

2004

2005

2006

2007

2008

2009

2010

2011

35

ME

NY

NH

VT

MA

NJ

PA

MD

CT

RGGI
States

Cooperative effort by Northeast
states to design a regional cap-and-
trade program to reduce carbon
dioxide (CO₂) emissions

Timeline

First RGGI allowance auction
September 2008

Clearing price of $3.07/ton on 12.57M
allowances

Quarterly auctions scheduled

Next auction – December 17, 2008

31.5M allowances to be offered

January 1, 2009 – Implementation

The Regional Greenhouse Gas Initiative (RGGI) …

Participating

Observer

… has the potential to influence both market prices and the adoption
of a national program.

36

The RGGI cap on CO₂ emission shows that headroom exists …

… compared to historical emission levels.

Affected Sources

Fossil-fired electric generating
units with a capacity of 25MW
and larger

Targets and Timing

Three-year compliance periods
with the first running from
2009-2011

Stabilization of CO₂ emissions
at recent levels through 2015
(~188 million tons per year)

Achieve a 10% reduction of
CO₂ emissions below recent
levels by 2019

This translates into ~13%
reduction below 1990 levels or
~35% reduction from Business
as Usual (BAU) levels by 2020

CO

2

Emissions vs. RGGI Cap

(Actuals through 2007)

130

140

150

160

170

180

190

200

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

RGGI Cap

Projected

Actual &

Forecast CO

2

Actual

37

The implementation of federal carbon legislation …

$14.4

100%

Total

$0.0

$0.0

0%

Nuclear

$3.2

$8.0

40%

Gas CC

$1.2

$12.0

10%

CTs

$10.0

$20.0

50%

Coal

Impact

($/MWh)

$/MWh

On margin
(Illustrative)

Dispatch curve implication @ $20/ton**

By Fuel Type

$12.0

$18.0

$30.0

@$30/ton

$8.0

$12.0

$20.0

@$20/ton

$4.0

$6.0

$10.0

@$10/ton

Price ($/MWh)

0.4

0.6

1.0

Carbon tons/MWh

CC

CTs

Coal

PSEG Power Generation by Fuel

54%

25%

19%

Oil 1%

Pumped
Storage
1%

Nuclear

Coal

Gas

2007 Total GWh: 53,200*

… will put additional pressure on energy prices.

** For illustrative purposes – potential impact of CO₂ on power prices with current dispatch; $20/ton improves EBITDA by $400 million/year; relationship of carbon price and EBITDA is not linear.

* Excludes 2,000MW of combined cycle generation in Texas under PSEG Power’s operating control.

38

Power Pricing Assumptions

~ $40M

  $1/MWh

~ $60 - $63/MWh

(PJM-West)

Energy

~ $12M

~ $15M*

$1 spark

$1 dark

Gas ~$7.40 to $7.90/MB

Coal ~ $4.00 to $5.00/MB

Fuel

~ $1.1B – $1.2B

O&M

Capacity

~ $120M

$10/kW-yr

~ $64 - $68/kW-yr

EBITDA
Impact

Sensitivity

Assumption

55

2008

Volume Forecast (GWh)

61

56

56

2011

2010

2009

* PSEG Power consumes approximately 150 MMBtu of coal annually; $0.25/MMBtu = $25MM Net Income

39

PSE&G

PSE&G’s capital program is focused on reliability investments that can
earn a fair return.

2008

2009

2010

2011

Sept 2008 10-Q

2009 capital program reduced by $125M

91

-

EMP

$9,146

$6,371

TOTAL

4,183

3,362

Electric

2,549

2,213

Gas

2,323

796

Transmission

2011 Base Plan

2007 Actual

PSE&G Rate Base ($ millions)

The near-term capital program has been adjusted to ensure fair returns
without significant regulatory delay. Longer-term, we assume capital
markets return to normal.

2007 10-K

4-year capital program: $4.1B

41

Investments focused on improving customer support,
enhancing efficiency and upgrading infrastructure.

Expect to file electric and gas rate case in 2009 with rates
effective in mid-2010.

Future investment associated with meeting State energy
efficiency and renewable goals dependent on receiving
regulatory support before committing new capital.

BPU approved $105M investment in solar in April 2008 and $46M
Carbon Abatement program in November 2008. Both are earning
WACC with contemporaneous recovery.

Rate base growth supported by investment in new 500kV lines
and upgrade of sub-transmission system to improve reliability.

Fully-forecasted formula rates beginning October 1, 2008.  
Allowed ROE of 11.68%.  Received FERC approval for CWIP in
rate base on approved projects and 12.93% ROE on
Susquehanna line.

PSE&G’s investments and regulatory profiles:

Transmission

Electric and
Gas
Distribution

New
Programs

42

By 2018, NJ’s load is expected to grow by 4,000MW while net import
capability decrease by 1,300MW …

Projects to NY

The Neptune HVDC project (685 MW)
connecting Sayreville to Long Island

The Linden VFT project (330 MW)
connecting Linden to Staten Island

The Bergen O66 project (670 MW)
connecting Bergen to ConEd’s West
49th Street substation

The Bergen Q75 project (1,000 MW)
connecting Bergen to ConEd’s West
49th Street substation

U2-046 project (660MW) originating at
Roseland 500kV

U2-047 project (672) connecting Deans
500kV with Long Island

U2-077 project (300MW) originating at
Linden 230kV

U2-100 project (1,000MW) originating
at Bergen 230kV

Projects to NJ

PSEG’s evaluation of the
proposed backbone
transmission projects:

Northern 500kV route
into Jefferson and
Roseland

Southern 500kV route
into Salem

… indicating the need for additional generation, DSM or transmission
investments.

Total Import
Capability

~ 4,000 MW

Total Export
Capability

~ 5,317 MW

2008-2018 NJ Summer Peak
Annual Growth Rate = 1.8%

Sources: Imports: PSE&G Estimates; Exports:  PJM 2008 Regional Transmission Expansion Plan; and Load Growth: PJM 2008 Load Forecast Report

Projects within NJ

Branchburg to
Roseland

Roseland to Hudson

43

FERC’s recent transmission formula rate order grants an 11.68%
ROE and fully-forecasted cost of service …

… creating an attractive investment environment for PSE&G’s
Transmission Capital Program.  

Branchburg

Roseland

Jefferson

New Freedom

Smithburg

Deans

MAPP

Hope Creek

Salem

Project

Transmission Growth

Effective October 1, 2008, PSE&G is operating under
fully forecasted transmission formula rates

PJM approval was received for the Susquehanna to
Roseland line in October 2007

Siting and permitting process underway

FERC approved Incentive rate filing:

125 BPS adder to ROE

100% CWIP in Rate Base

Current cost estimate $750 million

FERC approval of Sub-Transmission to Transmission system reliability investments represents about $375 million through 2012, post-2012 ~$60 million/year

Other approved RTEP projects ~$250 million also contribute meaningfully to improved reliability and earnings growth

Backbone projects are in various stages of consideration/approval, but present real opportunity to improve reliability throughout the state, with the potential investment of ~ $1.5B through 2015

Hudson

44

The New Jersey Energy Master Plan released on October 22, 2008 …

2020 Goals:

20% reduction in peak demand

20% reduction in energy consumption

30% of energy requirements supplied by renewables

EMP, to help achieve its goals, calls for:

Redesign and transition of the State’s current energy efficiency programs

Expanded utility company participation in demand response programs,  
procurement of demand-side resources through BGS Process and direct load
control and the piloting of different technologies (including AMI) and rate
structures to determine the best way to achieve peak demand reductions

Energy Institute of NJ that will focus on energy technology developments

Development of 1,500 MW of new cogeneration capacity in New Jersey by 2020

new commissions/committees that include an advisory stakeholder group (a
possible sub-group to examine nuclear issues), an Offshore Wind Planning
Group  and the Energy Institute of New Jersey

Governor Corzine also announced immediate action on an energy
efficiency investment program for 2009 designed to increase job
growth and stimulate the State’s economy

... provides blueprint for State’s energy future and potential
opportunities for PSE&G to invest for growth.

45

PSE&G’s customers pay delivery rates lower than the regional
average and ...

6.8

5.4

5.1

0.00

4.00

8.00

2007

2011

2007

Regional

Average

Note: 2007 Rates are based on tariff rates in effect on December 31, 2007; Regional Average may not include Electric Transmission for all firms

… even with the planned investments, are expected to grow less
than the rate of inflation.

Electricity

0.48

0.44

0.42

0.00

0.20

0.40

0.60

2007

2011

2007

Regional

Average

Gas

2007-2011 Growth = 1.5%

Inflation = 2.3%

2007-2011 Growth = 1.3%

Inflation = 2.3%

Distribution

Transmission

Source: Rates from PSE&G, NYPSC and PAPUC; Inflation from Moody’s Economy.com, October 2008

46

PSEG Energy Holdings

The performance of the Texas assets drives PSEG Global’s results.

Two 1,000MW combined cycle facilities

-   Highly efficient gas-fired plants, on-line in 2001

-   Forced outage rate less than 2%

Market Characteristics:

Bilateral forward market

Day ahead balancing and ancillary services bid
market

No capacity payments…margins derived from
energy and ancillary services

Nodal market transition likely in 2010

Natural gas units on the margin over 90% of
the time

40%

5,703

4,257

1,446

1.7%

4,083

West

Odessa

-10%

19%

Reserve
Margin
2008*

1.7%

1.7%

Annual
Growth

15,365

20,170

Total

Gas

Nuclear,
Coal, Wind**

Hydro

Load

Zone

12,218

3,147

17,116

Houston

12,068

8,102

16,943

South

Guadalupe

* Reserve Margins calculated on data provided by ERCOT                                                      
** Wind is based on 8.7% of installed capacity (ERCOT Peak reliability % as of August 2008)   

Odessa

Midland

Guadalupe

Austin

San Antonio

48

Strong 2008 performance from favorable market in Spring 2008

Looking forward to 2009:

Uncertainty on gross margin impact from new wind additions

Operations and maintenance costs approximately $20M higher in 2009 than 2007

Mark-to-Market:

Earnings in 2009 – 2010 will be affected by the reversal of prior mark-to-market gains

Longer-term:  

Continued uncertainty from wind

Positive impact from transmission build-up

The Texas market has been very dynamic.

75 – 85

30 – 40%

150 – 160

16%

7.42

2009

PSEG

Market

210 – 220

162

$186

Gross
Margin ($M)

135 – 145

45 – 47%

14%

8.90

2008

104

48.7%

15%

6.94

2007

$130

54.4%

16%

$6.74

2006

EBITDA*

($M)

Capacity
Factors

Reserve
Margin

Nat. Gas
Henry Hub Spot

PSEG Global’s EBITDA reflects higher maintenance costs and
market uncertainty.

* Excluding Mark-to-Market Accounting effects

49

As renewable opportunities emerge …

… Global will focus on developing a renewable presence.

Emerging aggressive RPS targets create an opportunity

PSEG is well-positioned to participate

– Familiarity with infrastructure development, asset management, energy policy,    project financing and power markets

– Experience with domestic and international renewable assets

PSEG Global is pursuing potential development of renewable projects

– In October 2008, the New Jersey Office of Clean Energy (OCE) awarded a $4    million grant to a joint venture owned equally by a subsidiary of Global and an    unaffiliated private developer, to advance the development of a 350MW wind    farm approximately 16 miles off the shore of southern New Jersey.

– Joint Venture established to market and deploy Compressed Air Energy
   Storage (CAES)

50

-40

-20

0

20

40

60

80

2007

2008E

2009E

2010E

2011E

PSEG Resources is managing its current investment portfolio …

… and earnings reflect potential resolution of tax matters.

PSEG Resources - Earnings Profile

Most of exposure related to cross border leases dealt with in 2^nd quarter
2008.

$355 million charge to reflect potential changes to timing of tax cash flow.

$135 million increase to interest reserve.

$58

$15 -$20

($20) –
($30)

$15 - $25

(Net Income)

($20) –
($30)

51

PSEG Resources – Traditional lease investments

* Includes booked residual

Reliant

Power Plant

Aug-00

2026 & 2034

Y

423

305.4

Dynegy

Power Plant

May-01

2031 & 2035

Y

362.3

264.2

EME 2

Power Plant

Aug-00

2030 & 2034

Y

332.6

215.9

Merrill Creek

Reservoir

Jun-88

2032

N

327

123.3

Grand Gulf

Nuc. Plant

Dec-88

2015

N

133.5

103.5

Qwest

Real Estate

Dec-91

2012

Y

130.9

86.9

Dutch Rail

Rail Cars

Oct-92

2010

Y

48.7

48.6

Renaissance Ctr

Real Estate

Apr-88

2021

Y

62.5

38.3

Wal-Mart

Real Estate

Sep-91

2011-2023

Y

54.0

35.5

E-D Centers

Real Estate

Jun-90

2020 & 2021

Y

29.6

24.9

Whitehorn

Power Plant

Feb-00

2009

Y

17

15.0

Wal-Path

Real Estate

Apr-91

2021

Y

15.6

11.4

TOTAL

1,936.7

1,272.9

50%

55%

$671

$525

Discounted Value @ 6%

Discounted Value @ 8%

% Total Lease Portfolio

Average Life: 18.5 Years

Residual

2008-2035 Pre-tax

Cash Flow*                  

($ million)

Book Investment  

as of 10/31/08         

($ million)

Agreement

Property

Type

Start

Lease

Termination

52

Impact of Lease Reserves

2008 results include a charge of $490 million:

$135 million after-tax increase to the interest reserve recorded in Income Tax
Expense during 2Q 2008.

$355 million after-tax charge reflecting a change in assumptions relating to the
amount paid and timing of cash flow for certain leases in the portfolio.  This charge
will be recognized in income over the remaining terms of the affected leases.

Reserves represent our view of most of the book exposure related to the
leases under challenge.

In addition, our forecast of cash available includes potential cash outflows of $900 -
$950 million over 2 – 3 years.

Based on status of discussions with IRS, PSEG has made an $80M deposit in
2008 (in addition to $100 million deposited in 2007) to defray potential interest
costs associated with this disputed tax liability.

PSEG anticipates paying between $230 - $360 million in tax, interest and
penalties for tax years 1997 -2000 in first half 2009, with a possible additional
$270 - $550 million in late 2009.

Declined IRS August 5^th Global settlement offer in October.

53

Items Excluded from Net Income to Reconcile to Operating Earnings

Please see Slide 3 for an explanation of PSEG’s use of Operating Earnings as a non-GAAP financial measure and how

it differs from Net Income.

Nine Months

Nine Months

Ended

Year Ended

Ended

Year Ended

September 30,

September 30,

2008*

2007**

2008*

2007**

Lease Transaction Reserves:

(490)

$        

-

$              

(0.96)

$     

-

$        

Impact of Asset Sales:

Chilquinta & Luz Del Sur

(23)

-

(0.05)

Write down of Turboven

(7)

-

(0.01)

Premium on bond redemption

(1)

(28)

-

(0.06)

Total Impact of Asset Sales

(1)

$            

(58)

$         

-

$        

(0.12)

$     

Discontinued Operations:

208

$         

16

$           

0.41

$      

0.03

$      

*

As stated in Form 10-Q for the quarterly period ended September 30, 2008.

**

As stated in 2007 Form 10-K .

December 31,

December 31,

($ millions)

(EPS)

54