Public Service Enterprise Group Incorporated (PEG, NYSE)
Industry: Utilities - Regulated Electric
Annual report, fiscal year 2015


Modernizing our system to provide

more reliable, resilient, cleaner and affordable energy.




In the early part of the 20th century, our employees built an intricate gas system to address growing demand. Today, PSE&G's aggressive gas modernization program will ensure that gas delivery service will remain safe, reliable and affordable for generations to come.

The forward-looking statements about PSEG's expectations made throughout this report are based on information currently available and on reasonable assumptions. As noted in our Forward-Looking Statements disclaimer on the inside back cover of this report, we face a number of risks and uncertainties. Actual results could be materially different, as historical results are not necessarily indicative of future earnings. For more information, please refer to PSEG reports that are filed periodically with the Securities and Exchange Commission.

Public Service Enterprise Group (PSEG), a diversified energy holding company with more than $37 billion in assets, is one of the nation’s leading wholesale energy producers and most reliable electric and gas delivery utilities.

## 2015 HIGHLIGHTS

## PSEG

3 Increased operating earnings for the third consecutive year despite a difficult energy market.

3 Maintained our strong financial position, supporting our investment program and dividend growth.

3 Named to the Dow Jones Sustainability North America Index for the eighth consecutive year.

## PSE&G

Recognized as the most reliable utility in our region for the 14th consecutive year, while continuing to execute well on our large investment program, enhancing reliability and resiliency for customers and creating thousands of jobs.

3 PSE&G Gas System Modernization Program marks the beginning of a long-term process designed to enhance the safety, reliability and resiliency of our gas main system for years to come.

## PSEG Power

3 Increased year-over-year electricity production and continued to benefit from the diversity and location of our environmentally advantaged fleet.

3 Continued to add new, clean and efficient capacity to our existing fleet, announced plans to build three new gas-fueled plants in New Jersey, Maryland and Connecticut, and further grew our solar portfolio to 12 states.

## PSEG Long Island

3 Continued to make significant improvements in line with long-term performance objectives.




RALPH IZZO
Chairman, President and Chief Executive Officer
Public Service Enterprise Group

I am pleased to report that in 2015 we made excellent progress on our objectives for growing our business – with our dedicated employees again contributing in countless ways to our efforts.
In 2015, we increased earnings for the third consecutive year despite a difficult energy market. We completed 2015 with operating earnings of $2.91 per share, compared to $2.76 per share in the prior year.

Our strong financial condition has allowed us to steadily increase our dividend. In February 2016, we raised our indicative annual dividend rate to $1.64 per share from $1.56 per share. This was the 12th increase in our dividend in the last 13 years. PSEG has one of the longest records in corporate America for paying dividends, extending over 109 consecutive years. We remain well positioned to finance our capital program without the need to issue equity while still having the opportunity for consistent and sustainable growth in our dividend.
Our strategy – based on the three pillars of operational excellence, financial strength and disciplined investment – has served our customers and shareholders well for many years. We are determined to keep a relentless focus on these essentials of our business.

## Operational Excellence

Reliability is fundamental to excellence in our industry. In 2015, PSE&G was named the Mid-Atlantic region’s most reliable electric utility for the 14th consecutive year by an industry-benchmarking group. PSE&G was also recognized with an outstanding outage response award for restoring customers 30 percent faster than any other large investor-owned utility.

DIVIDEND
PER SHARE

EARNINGS
PER SHARE






In addition to enjoying the benefits of reliability, PSE&G’s residential customers reaped substantial savings from low-cost gas supplies and the effective management of our natural gas storage and transportation contracts. Since 2009, PSE&G has been able to reduce residential gas heating bills by 55 percent, for $916 in annual savings for the typical customer.

We are reaching out to our customers in new ways. PSEG has more than 90,000 Twitter followers and a considerable Facebook presence as well. 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 second year continued to make significant improvements to its processes, operations and storm response – yielding a 52-point increase and a 70-point increase, respectively, in residential and business customer satisfaction compared to a year ago according to J.D. Power.

Reliability at PSEG is also about having power plants that are available to run as needed. 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 Northeast and the Mid-Atlantic regions of the United States. Our diverse fuel mix and dispatch flexibility support our ability to respond to various market conditions around the clock and throughout the year.

During 2015, we improved the performance of both our nuclear and fossil operations, with continued upgrades in efficiency and output. Our combined-cycle fleet increased year-over-year electricity output by 11 percent, with our Linden 1 and 2 and Bethlehem Energy Center units achieving record performance. Our nuclear fleet remains critical to our success and a major provider of reliable, carbon-free energy for New Jersey and the wider region. In 2015, our total nuclear fleet achieved an average capacity factor of 90 percent. We have added to our existing nuclear capacity through various plant improvements in recent years, and this past year completed a power uprate at the Peach Bottom nuclear facility, which we jointly own with Exelon.

## FINANCIAL HIGHLIGHTS

<table><tr><td>Dollars in millions, where applicable</td><td>2015</td><td>2014</td><td>2013</td></tr><tr><td>Total Revenues</td><td>$10,415</td><td>$10,886</td><td>$9,968</td></tr><tr><td>Pro Forma Operating Earnings (Non-GAAP)</td><td>$1,476</td><td>$1,400</td><td>$1,309</td></tr><tr><td>Net Income</td><td>$1,679</td><td>$1,518</td><td>$1,243</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>$2.91</td><td>$2.76</td><td>$2.58</td></tr><tr><td>Net Income</td><td>$3.30</td><td>$2.99</td><td>$2.45</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>508</td></tr><tr><td>Dividends Paid per Share</td><td>$1.56</td><td>$1.48</td><td>$1.44</td></tr><tr><td>Book Value per Share - Year-end</td><td>$25.86</td><td>$24.09</td><td>$22.95</td></tr><tr><td>Market Price per Share - Year-end</td><td>$38.69</td><td>$41.41</td><td>$32.04</td></tr><tr><td>Total Assets</td><td>$37,535</td><td>$35,287</td><td>$32,480</td></tr></table>

Note: Pro Forma Operating Earnings in 2015 exclude the net after-tax gains for NDT Fund related activity of $8 million, or $0.01 per share, net after-tax mark-to-market gains of $93 million, or $0.18 per share, and net after-tax benefits of $102 million, or $0.20 per share, related to storm restoration costs, net of insurance recoveries, at PSEG Power LLC. 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 costs, net of insurance recoveries, 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 costs, net of insurance recoveries, at PSEG Power LLC.



## Financial Strength

Financial strength is 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 have transformed our business mix toward one with a growing component of more stable, regulated earnings. PSE&G has grown to represent more than half of our operating earnings, while our power generation business continues to provide strong cash flow. We have repeatedly found ways to get more out of our 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 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 capital investment program has increased to approximately $16 billion, with our regulated utility investments representing more than 70 percent of our planned capital expenditures. Transmission investment is the largest single part of this effort. In the last two years we have completed four major transmission projects that have improved the flow of power across New Jersey and made an important contribution to system reliability. In effect, we are re-wiring New Jersey to support reliability long into the future, and as we do so, we are also creating thousands of jobs.

We continue to invest on many fronts to support safe, reliable service. In 2015, we obtained approval to invest $905 million over a three-year period in our Gas System Modernization program, which would enable us to start accelerated replacement of our aging system of cast iron gas pipes. In addition to enhancing safety and reliability, this initiative will create 500 jobs and boost New Jersey's economy – and our timing couldn't be better with natural gas prices at their lowest levels in decades. Meanwhile, we completed many projects and moved ahead with others as part of our three-year $1.2 billion Energy Strong program, which is designed to harden and improve the resiliency of our electric and gas systems against extreme storms.

We are promoting sustainability through our focus on clean energy solutions. Since 2009, PSE&G has invested more than $800 million to directly develop or help finance 200 megawatts of clean solar power.



PSE&G recently completed its 28th grid-connected community solar facility and the eighth built on a landfill or brownfield site, feeding green energy to all of our customers across New Jersey.

Meanwhile, we have continued to successfully grow PSEG Solar Source's portfolio of solar projects across the country. In 2015, we completed projects in California and Maryland and recently acquired projects to be built in Utah, Colorado and North Carolina. All of these projects are under long-term contracts with creditworthy customers. PSEG Solar Source's portfolio now comprises 277 megawatts, with 16 utility-scale projects in 12 states. We continue to explore opportunities to expand and optimize our solar fleet.

Energy efficiency is a key to a sustainable future. In 2015, we received approval to invest an additional $95 million in programs that will extend PSE&G's existing energy efficiency offerings. Our ultimate goal is to help all of our customers achieve the benefits of energy efficiency.



PSEG PLANS TO INVEST MORE THAN
$16 BILLION
OVER FIVE YEARS

We are actively investing to enhance the competitiveness of our environmentally well-positioned generation business. In addition to ongoing plant improvements, we are significantly increasing our investment in new, clean and efficient gas-fired capacity. Within the past seven months we announced plans to construct and operate three new combined-cycle gas plants: a 755-megawatt facility at the Keys Energy Center in Maryland; a 540-megawatt facility on our existing Sewaren station site in New Jersey; and a 485-megawatt facility on our existing Bridgeport Harbor station site, in Bridgeport, Connecticut. The new Keys and Sewaren facilities are expected to be operational in 2018 and the new Bridgeport Harbor plant in 2019. Together, these three plants represent an investment of approximately $2 billion.

In summary, we have many opportunities in front of us to extend the growth associated with our existing capital program. We continue to benefit from having two complementary businesses. In PSE&G we have a leading utility that has sustained a strong growth course, expanding its investments in projects that provide reasonable, risk-adjusted returns in ways that meet customer needs and advance the state of New Jersey's policy 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 well positioned for the future.

## Building on Good, Strong Values

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 2015, PSEG was named for the eighth consecutive year to the Dow Jones Sustainability North America Index, which recognizes leading companies for their commitment to economic, environmental and social responsibility. Our focus on sustainability is reflected in a $250,000 grant by the PSEG Foundation to the Stevens Institute of Technology in Hoboken, New Jersey, helping fund the construction of a net-zero, solar powered home built by students and entered into the U.S. Department of Energy’s Solar Decathlon competition.

In addition to all they do in their jobs, our employees have a long and proud Public Service tradition of volunteering on behalf of many worthy causes. I would like to thank them for all of their continued support and fine work.

We remain as dedicated as ever to long-term leadership in providing safe, reliable, economic and greener energy. 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, 2016



## BOARD OF DIRECTORS

Willie A. Deese is Executive Vice President of Merck & Co., Inc, Kenilworth, NJ, which develops, manufactures and distributes pharmaceuticals.

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

William V. Hickey is the retired Chairman of the Board and Chief Executive Officer of Sealed Air Corporation, Elmwood Park, NJ, 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, NY.
David Lilley is the retired Chairman of the Board, President and Chief Executive Officer of Cytec Industries Inc., Woodland Park, NJ, 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, NY, 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, MN, a diversified technology company, with product lines in consumer and office, healthcare electronics, industrial, graphics, transportation, safety and telecommunications markets.

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, NJ, 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, OH, 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, Armonk, NY, 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 on Tuesday, April 19, 2016 at 1 p.m. at the Newark Museum, 49 Washington St., Newark, NJ.

## 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, NA
Shareowner Services
PO 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




## PSEG
We make things work for you.



Public Service Enterprise Group Incorporated
80 Park Plaza
Newark, New Jersey 07102

www.pseg.com