Public Service Enterprise Group Incorporated (PEG, NYSE)
Industry: Utilities - Regulated Electric
Annual report, fiscal year 2014


GROWING
A BRIGHTER
ENERGY
FUTURE

RESPONSIBLY
RELIABLY
AND
EFFICIENTLY



## 2014 financial highlights

<table><tr><td>Dollars in Millions, Where Applicable</td><td>2014</td><td>2013</td><td>% Change</td></tr><tr><td>Total Revenues</td><td>$10,886</td><td>$9,968</td><td>9</td></tr><tr><td>Pro Forma Operating Earnings (Non-GAAP)</td><td>$1,400</td><td>$1,309</td><td>7</td></tr><tr><td>Net Income</td><td>$1,518</td><td>$1,243</td><td>22</td></tr><tr><td>Earnings per Share - Diluted</td><td></td><td></td><td></td></tr><tr><td>Pro Forma Operating Earnings (Non-GAAP)</td><td>$2.76</td><td>$2.58</td><td>7</td></tr><tr><td>Net Income</td><td>$2.99</td><td>$2.45</td><td>22</td></tr><tr><td>Weighted average common stock shares outstanding - (millions)</td><td></td><td></td><td></td></tr><tr><td>Diluted</td><td>508</td><td>508</td><td>0</td></tr><tr><td>Dividends Paid per Share</td><td>$1.48</td><td>$1.44</td><td>3</td></tr><tr><td>Book Value per Share - Year-end</td><td>$24.09</td><td>$22.95</td><td>5</td></tr><tr><td>Market Price per Share - Year-end</td><td>$41.41</td><td>$32.04</td><td>29</td></tr><tr><td>Total Assets</td><td>$35,333</td><td>$32,522</td><td>9</td></tr></table>

Note: Pro Forma Operating Earnings in 2014 exclude the net after-tax gains for NDT Fund related activity of $68 million, or $0.13 per share, net after-tax mark-to-market gains of $66 million, or $0.13 per share, and net after-tax costs of $16 million, or $0.03 per share, related to storm restoration at PSEG Power LLC. Operating Earnings in 2013 exclude the net after-tax gains for NDT Fund related activity of $40 million, or $0.08 per share, net after-tax mark-to-market losses of $74 million, or $0.14 per share, and net after-tax costs of $32 million, or $0.07 per share, related to storm restoration at PSEG Power LLC.



# Letter from the
CHAIRMAN



RALPH IZZO
Chairman, President and
Chief Executive Officer

## PSEG has long pursued a vision based on safe, reliable, economic and greener energy.

I am pleased to report that 2014 was a year in which we continued to make progress on our path – with our dedicated employees again contributing in countless ways to our efforts.

To cite some of the year’s highlights:

• We added to the reputation that we have built over more than 100 years for highly reliable service.

• We embarked on a major new effort to improve the resiliency of our electric and gas systems against extreme storms.

• We completed major projects on time and on budget as we continued to implement our large transmission investment program which is essentially rewiring New Jersey – supporting reliable service long into the future, giving an important boost to New Jersey’s economy and creating thousands of jobs.

• We further enhanced our financial strength, with a balance sheet that has remained one of the strongest in our industry.

• We again delivered substantial savings to our customers and low-cost fuel to our power plants through the access we enjoy to shale gas.

• We had a terrific first year managing the electric system of the Long Island Power Authority – with our PSEG Long Island team achieving customer satisfaction scores showing the biggest improvement of any utility in the nation.

• And, we continued to demonstrate that utilities can be instrumental in expanding access to the benefits of energy efficiency and solar energy in ways that promote a sustainable future.

In 2014, we provided our shareholders with attractive returns – in keeping with a long-established PSEG objective. We completed 2014 with operating earnings of $2.76 per share, compared to $2.58 in the prior year.

## Our strong financial position has allowed us to

meaningfully increase our dividend. In February 2015, we raised our quarterly dividend by 5.4 percent, bringing our indicative annual dividend rate to $1.56 per share. This was the 11th increase in our dividend in the last 12 years.

PSEG has a long history of paying dividends. We see the potential for our shareholders to continue to benefit from consistent and sustainable growth in our dividend, given our business mix, continued positive cash flow from our generation business and our strong balance sheet.

We are determined to maintain a relentless focus on operational excellence, financial strength and disciplined investment. These pillars of our strategy will remain basic to how we run the business. Our goal is to sustain a cycle of continuously improving performance, in keeping with our long-standing commitments to our customers, our employees and not least, our shareholders.

## Operational Excellence

Reliability is fundamental to excellence in our industry. In 2014, PSE&G was named the Mid-Atlantic region’s most reliable electric utility for the 13th consecutive year by an industry-benchmarking group. While proud of this recognition, we are even prouder of our employees who have a strong tradition of being there for our customers – day in and out – and in storms and emergencies.



PSE&G performs well in customer satisfaction when compared to other utilities, and we have continued working hard to improve how our customers experience us. PSE&G recently received J.D. Power’s awards in our region and peer group for highest customer satisfaction for both electric and gas business service.

In addition to enjoying the benefits of reliability, PSE&G’s residential customers have reaped substantial savings from low-cost gas supplies and the astute management of our natural gas storage and transportation contracts. In October 2014, our customers’ annual gas bills were reduced by 9 percent, the latest in a series of reductions that have lowered bills 44 percent over the last five years, resulting in annual savings of $741 for PSE&G’s typical residential gas-heating customer. We followed this by providing bill credits each month from November through March, saving the typical customer $210 for this five-month period and helping keep winter heating bills affordable.

Increasingly, our customers are online – and we are, too, in our ongoing efforts to better serve them. Based on lessons from our experience during Superstorm Sandy, we have increased messaging across all channels to better communicate with customers before, during and after storms. PSE&G is the number-one utility on Twitter, with more than 80,000 Twitter followers. We are using tools like Facebook to alert customers about project work being done in their communities.

Whether using new or traditional channels, we strive to become even more responsive to our customers’ needs. PSEG Long Island has a similar focus and in its first year made significant improvements to its operations.

Reliability at PSEG is also about having power plants that are available to run as needed. Our fossil fueled power plants exceeded their generation targets for the year and increased year-over-year electricity output. Our combined-cycle fleet produced at record levels. And, given the overriding importance of safety, we are especially proud that for the second consecutive year, our fossil fleet achieved a safety performance in the top ten percent of its industry.

PSEG Power, our large wholesale generation business, has a diverse, low-cost portfolio of generation assets located near load centers in attractive markets in the Northeastern United States. Our generation fleet uses a range of fuels and technologies, and our facilities span the spectrum from base load to load following and peaking. This diversity improves our ability to meet market demand around the clock from season to season, as was evident during last winter’s polar vortex as well as throughout the summer. Some of our generating units have dual-fuel capability, providing us with additional flexibility in responding to various market conditions.

Our nuclear fleet remains critical to our success and a major provider of reliable, emissions-free energy for New Jersey and the wider region. In 2014, our nuclear capacity factor was 89.3 percent, following nine consecutive years in which we achieved a nuclear capacity factor in excess of 90 percent. We are working hard to improve on this past year’s performance while maintaining a paramount safety-first focus at all times. We have added to our existing nuclear capacity through various plant improvements in recent years, and we expect to add another 130 megawatts of capacity through an uprate at the Peach Bottom nuclear facility, which we jointly own with Exelon.

We believe our environmental profile is a growing source of competitive advantage. Older generating units across the country are expected to retire in light of increasingly strict environmental requirements. We are ahead of many of our peers in having already made extensive environmental improvements across our fleet.

## Financial Strength

Over many years we have emphasized the importance of financial strength as a key differentiator in our business. We have been proactive in taking a broad range of measures to maintain and further enhance our strong financial position.

We didn’t sit back when we saw lower energy prices on the horizon five years ago. Since 2009 we reduced risk by selling non-core assets, and we have repeatedly found ways to get more out of our existing assets and reduce costs without compromising safety or reliability. Our financial strength enables us to pursue our growth program without needing to issue equity. We have expanded investments to meet customer requirements, while at the same time increasing our dividend. Our strong balance sheet anchors all of our efforts.



We have continued to benefit from strong cash flows, substantial liquidity and desirable investment-grade credit ratings. We are determined to maintain a solid financial profile capable of meeting our growth objectives and continuing our track record of returning cash to shareholders.

## Disciplined Investment

Our robust five-year $13 billion capital investment program is largely dedicated to growth-oriented utility investments. More than 70 percent of PSE&G’s $10.8 billion planned capital spending through 2019 is eligible for contemporaneous returns.

Transmission investment is the largest single part of this effort. In 2014, we completed construction of the $390 million North Central reliability line and placed into service the $400 million Burlington-Camden line, as well. These two 230-kilovolt lines will make an important contribution to system reliability. Also, in 2014, we passed an important milestone by completing construction of the New Jersey portion of the 500-kilovolt Susquehanna to Roseland line, which is expected to go into service this year when the Pennsylvania portion of the line is completed.

We have an outstanding team working on our transmission investment program. We have achieved strong results and developed valuable expertise that we are eager to apply where there are good opportunities to do so.

For more than 100 years we have been investing in our system to support safe, reliable service. Yet it shouldn’t be overlooked that as we continue to do so, we are creating thousands of good jobs, providing business for many local firms and contributing to economic vibrancy.

In 2014, PSE&G received approval for a new, three-year $1.22 billion program – our Energy Strong initiative – which will begin to build the more resilient energy infrastructure that New Jersey will need for the future. Work is well under way to replace and modernize 250 miles of gas pipes in or near flood-prone areas. This year, work will begin in earnest to upgrade 29 substations affected by Superstorm Sandy or Hurricane Irene. And, along with other improvements, we are adding smart technology to help us monitor our system and speed restoration when there are outages. Our Energy Strong program will bolster New Jersey's economy by creating 2,000 jobs each year over the next three years. By improving resiliency, this effort will enhance the health, safety and well-being of our customers and communities while having a minimal impact on customers' bills.

We are promoting sustainability through our focus on clean energy solutions. Since 2009, PSE&G has invested more than $700 million to directly develop or help finance over 160 megawatts of clean solar power. We have used innovative approaches to bring the benefits of renewable energy to all of our customers. We installed solar units on more than 174,000 utility poles – an effort that recently earned recognition for being a creative and practical way to integrate solar energy into the grid while preserving open space. More recently, we have been turning landfills and brownfields green by developing large, grid-connected solar projects on these underutilized properties.

Meanwhile, we have continued to successfully grow PSEG Solar Source’s portfolio of solar projects across the country. In 2014, we added utility-scale solar projects in Vermont, Texas, and Maryland. With these projects, PSEG’s Solar Source’s portfolio has increased to 123 megawatts of clean, renewable energy – with 11 facilities in 9 states. We continue to explore opportunities to expand our solar portfolio.

Energy efficiency is a key to a sustainable future. Our energy efficiency programs, in which we have invested about $300 million, have been highly successful in helping customers reduce their energy bills. For example, PSE&G’s energy efficiency program for hospitals has helped these healthcare institutions save more than $8 million a year in energy costs. Our ultimate goal is to help all of our customers achieve the benefits of energy efficiency. We have proposed investing approximately $100 million in programs that would extend PSE&G’s existing energy efficiency offerings.

PSEG Long Island is also focused on meeting the needs of its customers in an environmentally responsible way. Our “Utility 2.0” proposal would spend up to $345 million in increased investment in energy efficiency, demand resources and renewable energy. In January 2015, PSEG Long Island proposed a three-year rate plan that will allow it to make further vital improvements consistent with its goal of being a best-in-class electric utility.



We are actively investing to enhance the competitiveness of our environmentally well-positioned generation business. In 2014, we completed the installation of equipment to increase the output and improve the efficiency of our Linden gas fired combined-cycle plant and we are planning to install similar equipment at our Bergen 2 and Bethlehem Energy Center combined-cycle units.

Our access to shale gas from the nearby Marcellus region is benefiting our customers and our low-cost fleet operations while providing us with additional market opportunities. To further improve access to this key resource, this past year we acquired an equity interest with an expected investment of $100 million to $120 million in the proposed PennEast pipeline to transport natural gas from eastern Pennsylvania to New Jersey.

In summary, we have many opportunities in front of us to extend the growth associated with our existing $13 billion capital program. All of our investments are focused on what we do best as a company dedicated to providing safe, reliable, economic and greener energy. This is the case whether we are investing to provide our customers with access to low-cost gas, deploying cost-effective technologies to reduce emissions, or improving system reliability and resiliency.

We continue to benefit from having two complementary businesses. In PSE&G we have a leading utility that has continued on a strong growth course, expanding its investments in projects that provide reasonable, risk-adjusted returns in ways that meet customer needs and help New Jersey achieve important goals. And, in PSEG Power we have a regionally competitive generation business with a strong focus on getting the most value from its diverse, low-cost and environmentally advantaged asset base. We have performed well over many years and believe we are positioned for a successful future.

## Building on Good Strong, Values

Our values – starting with a bedrock commitment to safety and integrity – continue to guide us. PSEG’s success for more than 100 years has been based on putting our energy to work in many ways that benefit our customers, our shareholders and the larger society around us. In 2014, PSEG was named for the seventh consecutive year to the Dow Jones Sustainability North America Index, which recognizes leading companies for their commitment to economic, environmental and social responsibility.

PSEG is not only an energy leader but a deeply engaged corporate citizen, involved in strengthening communities where we operate. In 2014, the PSEG Foundation launched a new partnership with Sesame Street that makes available educational tools and other resources to help families with young children prepare for emergencies.

Our employees have a long and proud Public Service tradition of volunteering for many worthy causes. I would like to thank them for all of their continued support and hard work.

We remain as dedicated as ever to growing a brighter energy future responsibly, reliably and efficiently. We thank you, our shareholders, for your loyalty and support. We will continue working hard to maintain your confidence and trust.

Sincerely,



Ralph Izzo

Chairman, President and Chief Executive Officer
Public Service Enterprise Group

February 25, 2015



## BOARD OF DIRECTORS

Albert R. Gamper, Jr. is the retired Chairman of the Board and Chief Executive Officer of CIT Group, Inc., Livingston, N.J., a commercial finance company.

William V. Hickey is the retired Chairman of the Board and Chief Executive Officer of Sealed Air Corporation, Elmwood Park, N.J., which manufactures food and specialty protective packaging materials and systems.

Ralph Izzo is Chairman of the Board, President and Chief Executive Officer of PSEG.

Shirley Ann Jackson is President of Rensselaer Polytechnic Institute, Troy, N.Y.

David Lilley is the retired Chairman of the Board, President and Chief Executive Officer of Cytec Industries Inc., Woodland Park, N.J., which is a global specialty chemicals and materials company.

Thomas A. Renyi is the retired Executive Chairman of The Bank of New York Mellon Corporation, New York, N.Y., a provider of banking and other financial services to corporations and individuals.

Hak Cheol (H.C.) Shin is the Executive Vice President, International Operations of 3M Company, St. Paul, Minnesota, a diversified technology company.

Richard J. Swift is the retired Chairman of the Financial Accounting Standards Advisory Council and retired Chairman of the Board, President and Chief Executive Officer of Foster Wheeler Ltd., Clinton, N.J., which provides design, engineering, construction, manufacturing, management, plant operations and environmental services.

Susan Tomasky is the retired President — AEP Transmission of American Electric Power Corporation, Columbus, Ohio, an electric utility holding company with generation, transmission and distribution businesses.

Alfred W. Zollar is the retired General Manager – Tivoli Software division of International Business Machines Corporation, a worldwide information technology and consulting company, and served in various leadership roles, including senior management positions, in every IBM software group division.

## STOCKHOLDER INFORMATION

Stock Exchange Listings
New York (PSEG Common Stock) Trading
Symbol: PEG

## Annual Meeting

Please note that the annual meeting of stockholders of Public Service Enterprise Group Incorporated will be held at the Robert Treat Hotel, 50 Park Place, Newark, N.J., on Tuesday, April 21, 2015 at 1 p.m.

## Stockholder Services

Please include your shareholder account number in any inquiry you may have about stock transfer, dividends, dividend reinvestment, direct deposit, missing or lost certificates, change of address requests, or for any other account specific request.

## Stockholder Services on the Internet

Please visit the Wells Fargo Shareowner Services site: www.shareowneronline.com. The Wells Fargo Shareowner Online website offers online access and transaction processing to shareholders.

How to Contact Shareowner Services
Toll free: 800-242-0813
(weekdays, 8 a.m. – 8 p.m. ET)
Web: www.shareowneronline.com

## Mailing Address:

Wells Fargo Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0874

## Security Analysts and Institutional Investors

For information contact:
Vice President – Investor Relations
973-430-6565

## Transfer Agent

The transfer agent for the Common Stock is: Wells Fargo Bank, N.A.
Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0874

## Enterprise Direct

PSEG offers Enterprise Direct, a stock purchase and dividend reinvestment plan. For additional information, including a plan prospectus and an enrollment form, call or send us an e-mail with your current mailing address.

## Dividends

Dividends on the common stock of PSEG, as declared by the Board of Directors, are generally payable on the last business day of March, June, September and December of each year.

## Direct Deposit of Dividends

No more dividend checks delayed in the mail. No waiting in bank lines. Your quarterly common stock dividend payments can be deposited electronically to your personal checking or savings account. More information, including instructions and a downloadable form, is available on the Wells Fargo Shareowner Services website www.shareowneronline.com or by contacting Wells Fargo Shareowner Services by phone. It’s a free service.

## Deposit of Certificates

To eliminate the risk and cost of loss, shareholders can deposit their certificates with Wells Fargo Shareowner Services, or take advantage of DRS, a convenient service for holding and tracking your shares and still receive a paid dividend. For more information, contact Wells Fargo Shareowner Services on the web or by phone.

## Go Green With Electronic Delivery

Sign up to receive future proxy statements and related documents such as the Annual Report and Form 10-K by electronic delivery. It will help PSEG fulfill its commitment to reduce our environmental impact. Log on to the appropriate site listed below, depending on the nature of your ownership:

• If you are a stockholder of record, please go to www.proxyconsent.com/peg

• For shares held in the ESPP, go to https://enroll.icsdelivery.com/peg

• For shares held in Employees Benefit Plans, go to www.proxyconsent.com/peg

• If your shares are held by a bank or broker, go to https://enroll.icsdelivery.com/peg

Forward-Looking Statements: The statements contained in this communication about our and our subsidiaries' future performance, including, without limitation, future revenues, earnings, strategies, prospects, consequences 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 information currently available and on reasonable assumptions, we can give no assurance they will be achieved. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements made herein. A discussion of some of these risks and uncertainties is contained in 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 (SEC), and available on our website: http://www.pseg.com. 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 communication. In addition, any forward-looking statements included herein represent our estimates only as of the date hereof 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.












On our cover: Reed, one of our youngest electric and gas customers, lives with his family in New Jersey. He graces the cover of PSEG's 2014 Annual Report to remind us how important what we do today is in shaping the future of our energy company.

Reed also happens to be one of PSEG's biggest fans. We first learned about Reed and his passion for everything PSEG upon seeing a poster he created for school. The poster read: "to have a happy life, I want to make renewable sources of energy," a goal inspired by the PSE&G linemen who, during the spring of 2014, befriended Reed while making improvements to the electric system in his neighborhood.

With all Reeds in mind, PSEG is ever committed to growing our energy business responsibly, reliably and efficiently – and striving to make the future brighter for generations to come.

(Photo courtesy of Reed’s mom, Fawn.)



PSEG
We make things work for you.

Public Service Enterprise Group Incorporated
80 Park Plaza
Newark, New Jersey 07102
973.430.7000
www.pseg.com