Public Service Enterprise Group Incorporated (PEG, NYSE)
Industry: Utilities - Regulated Electric
Annual report, fiscal year 2013


# WE
FOCUS
OUR ENERGY
TODAY...
to meet
tomorrow's needs

I
PSEG



Public Service Enterprise Group (PSEG), a diversified energy holding company with more than $30 billion in assets, is one of the nation’s leading wholesale energy producers and most reliable electric and gas transmission and delivery utilities.

## 2013 FINANCIAL HIGHLIGHTS

<table><tr><td>Dollars in Millions, Where Applicable</td><td>2013</td><td>2012</td><td>% Change</td></tr><tr><td>Total Revenues</td><td>$9,968</td><td>$9,781</td><td>2</td></tr><tr><td>Pro Forma Operating Earnings (Non-GAAP)</td><td>$1,309</td><td>$1,236</td><td>6</td></tr><tr><td>Net Income</td><td>$1,243</td><td>$1,275</td><td>-3</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>$2.58</td><td>$2.44</td><td>6</td></tr><tr><td>Net Income</td><td>$2.45</td><td>$2.51</td><td>-3</td></tr><tr><td>Weighted average common stock shares outstanding - (thousands)</td><td></td><td></td><td></td></tr><tr><td>Diluted</td><td>507,525</td><td>507,086</td><td>0</td></tr><tr><td>Dividends Paid per Share</td><td>$1.44</td><td>$1.42</td><td>1</td></tr><tr><td>Book Value per Share - Year-end</td><td>$22.95</td><td>$21.31</td><td>8</td></tr><tr><td>Market Price per Share - Year-end</td><td>$32.04</td><td>$30.60</td><td>5</td></tr><tr><td>Total Assets</td><td>$32,522</td><td>$31,725</td><td>3</td></tr></table>

Note: Pro Forma 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. Operating Earnings in 2012 exclude the net after-tax gains for NDT Fund related activity of $52 million, or $0.10 per share, net after-tax mark-to-market losses of $10 million, or $0.02 per share, after-tax gains of $36 million, or $0.07 per share, for lease related activity, and net after-tax costs of $39 million, or $0.08 per share, related to storm restoration at PSEG Power LLC.



# Letter from the
CHAIRMAN

I am pleased to report that PSEG had a strong year in 2013, both operationally and financially. The fact that we did so in the year following Superstorm Sandy is a tribute most of all to the hard-working men and women who have helped make PSEG a leader for safe, reliable, economic and greener energy. That same dedication continues to drive us as we strive to sustain our success – focusing our energy today for a better tomorrow.

We had many notable achievements in 2013. To cite a few:

• We continued to deliver highly reliable service – a cornerstone of our fine reputation and the basis for the outstanding opportunity we now have to bring that same level of performance to Long Island.

• Our power plants had superb summer operations – providing further testimony to our reliability and the remarkable restoration efforts of our employees following Superstorm Sandy.

• We protected and further improved our financial condition, as evidenced by our strong balance sheet and solid cash flows.

• We executed well on our disciplined investment strategy, including our multi-billion dollar transmission investment program to further improve reliability for our customers.

• With the lessons of Superstorm Sandy in mind, we put forward our Energy Strong plan to build the more resilient energy infrastructure that New Jersey needs for the future.

• And with our access to low-cost natural gas we provided savings for customers and low-cost fuel for our power plants.

In short, we made progress on many fronts.

Our strategy is yielding results. We had operating earnings of $2.58 per share in 2013, compared to $2.44 in the prior year. This growth in earnings was achieved despite continued declines in wholesale electric energy prices.

We added to one of the longest records of paying dividends among U.S. public companies. In February 2014, we raised our indicated annual dividend rate to $1.48 per share from $1.44 per share. This was the tenth increase in our dividend in the last 11 years.
More broadly, we continue to reap benefits from our robust business mix, which includes one of America’s leading wholesale energy producers and most reliable electric and gas delivery utilities. We have repeatedly found ways to get more out of our assets and reduce costs without compromising safety or reliability. And with our financial strength, we have been able to seize opportunities that serve our customers and shareholders well.



We are 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.

The energy landscape is constantly changing. We chart our course for the long term. We will continue to emphasize sound fundamentals in executing our proven strategy based on operational excellence, financial strength and disciplined investment.

## Focusing Our Energy
on Operational Excellence

Operational excellence remains the key to generating the revenues that result in financial strength, which in turn allows us to invest in a disciplined way to create additional value for our customers and shareholders. It means, most of all, continued dedication to providing our customers with safe, reliable energy and maximizing the value of our generation assets. This focus plays to our core strengths.

Our New Jersey utility PSE&G is a perennial safety and reliability leader in our industry. In 2013, PSE&G was recognized as the Mid-Atlantic region’s most reliable electric utility for the 12th consecutive year by PA Consulting, a national industry-



benchmarking firm. PSE&G has received similar recognition as the nation’s most reliable electric utility in five of the last nine years.

Our reputation for reliability has opened new business opportunities. On January 1, 2014, our family of companies welcomed a new member, PSEG Long Island, as we began operating the electric system of the Long Island Power Authority (LIPA). PSEG Long Island has an outstanding team of experienced professionals with the same, strong commitment to quality customer service that is our hallmark in New Jersey. With the addition of LIPA's 1.1 million customers, we are now serving more than 3.6 million customers.

We have a proud tradition of being there for our customers when they need us most. PSE&G was commended this past year by the Edison Electric Institute, which represents utilities nationwide, for excellence in responding to Superstorm Sandy – the worst storm in our history and a defining event with implications for the future. In the ten days following Superstorm Sandy, which struck New Jersey on October 29, 2012, we restored more customers than any American utility had ever done before.

Meanwhile, our employees at PSEG Power, our large wholesale energy supply business, ensured the power was there every time a circuit was restored in Sandy’s aftermath. They did a superb job bringing back into service a number of our generating units that had suffered storm damage in time for summer to help keep our customers cool and comfortable all season long. Topping off a remarkable comeback, our fossil fleet had its best year ever from a safety standpoint and our Linden combined-cycle generating station achieved record electricity output in 2013.

Operational excellence is basic to our ongoing efforts to optimize the value of our diverse set of generation assets in the competitive marketplace. PSEG Power has a well-run base load and load-following fleet that is geographically well positioned and environmentally responsible.

Most of our generation units are located near population centers. This locational advantage has been further enhanced by our access to abundant Marcellus shale gas from Pennsylvania. Our gas transportation, storage and management capabilities have been put to good use – helping us deliver substantial savings to our residential gas customers, supporting our low-cost fleet operations and providing additional market opportunities. Since January 2009, we have been able to reduce bills substantially for our residential gas customers, resulting in savings of more than $800 for a typical customer.

Our fleet’s diversity helps us meet market needs by providing us with more options as well. Indeed, our generation fleet is one of the most diverse by fuel mix and dispatch capability among all major power producers in the United States. Our combined-cycle combustion turbine units had one of their best years ever as measured by the amount of electricity produced in 2013, while our coal units increased their electricity production compared to the prior year.

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 2013, we achieved a nuclear capacity factor in excess of 90 percent for the ninth year in a row, and our Salem 2 nuclear unit set a new plant record for electricity output.

Energy markets can be highly volatile. It has been our practice for years to hedge a significant portion of our anticipated energy output. These forward sales of electricity have helped to mitigate market risk while the dispatch flexibility of our fleet provides us with the opportunity to respond to various market conditions – and we have continued to respond well.

## Focusing Our Energy
on Financial Strength

Financial strength is fundamental for us. In the difficult economy of recent years, our financial strength has become even more important as an anchor and key differentiator. It would be impossible to overemphasize our determination to remain financially strong.

Our strong financial condition was affirmed by Standard & Poor’s upgrade of the credit ratings for each of PSEG’s principal subsidiary companies as well as the company’s consolidated creditworthiness.

Our financial strength gives us the wherewithal to pursue our growth objectives without needing to issue equity. And we are making use of our financial strength to invest primarily in our stable regulated business through projects that offer reasonable, risk-adjusted returns while meeting our customers’ needs and supporting New Jersey’s policy goals.



PSE&G’s investment program involves more than $5.8 billion in capital spending through 2016. Roughly 80 percent of this planned expenditure is eligible for sensible contemporaneous returns. Our forecast of double-digit earnings growth at PSE&G is based on already approved programs.

## Focusing Our Energy
on Disciplined Investment

PSE&G’s $3.4 billion transmission investment program is the largest single part of our capital spending. We are constructing five major transmission lines, all of which are well underway and scheduled to be operational during 2014 through 2015. We are proceeding with this work in ways that help minimize environmental impacts, including the use of helicopters to aid construction in remote areas. These projects have already created thousands of jobs and will provide long-term benefits for our customers by further improving reliability.

On another front, we have been active building a greener energy future. In 2013, PSE&G was recognized for the fourth consecutive year as one of the top three utilities nationwide for the amount of solar capacity added to its service territory. PSE&G has invested more than $700 million to develop nearly 160 megawatts of solar capacity, helping New Jersey to become a leader in solar energy development.

In 2013, the New Jersey Board of Public Utilities approved extensions of our solar energy programs, totaling $446 million of additional investments to help finance or develop directly more than 142 megawatts of clean solar power. We plan to develop additional solar energy facilities on landfills and brownfields, making these areas productive again. Early in 2014, we were proud to shine a bright light on these efforts by providing green energy for Super Bowl XLVIII.

In 2013, we continued to grow our solar energy business beyond our utility service area, as well. During the year, we brought on line our 19 megawatt Badger 1 Solar Farm in Arizona and our 15 megawatt Milford Solar Farm, the largest solar facility in Delaware. In addition, we acquired two solar facilities in Shasta County, California. PSEG Solar Source entered 2014 with seven utility-scale solar projects in its portfolio, while continuing to explore attractive opportunities to further grow this business.

Energy efficiency is another key to sustainability. PSE&G has invested more than $300 million in energy efficiency programs that are helping the environment and helping our customers to reduce their energy bills. In 2013, two of our energy efficiency initiatives – respectively serving hospitals and multi-family residences – received awards for outstanding effectiveness and innovation from the American Council for an Energy Efficient Economy. We have shown that hurdles to energy efficiency investments in urban areas and in high energy-use sectors can be overcome.

The work of a highly reliable utility is never done. Although electric demand is not growing to the extent it did historically, people have become more dependent on electricity as they pursue their busy lives. At the same time, extreme storms have revealed the vulnerability of our existing infrastructure.

Our Energy Strong plan would dedicate $3.9 billion over 10 years to fortify critical installations against storm surges, strengthen distribution lines and deploy technologies to help us restore customers more quickly and improve communications. These improvements will significantly benefit all of our customers and can be made with little impact on their bills because of certain expiring charges, low interest rates and low prices for natural gas. In addition, Energy Strong would create thousands of jobs and contribute to New Jersey’s long-term economic vibrancy.

There is widespread appreciation that resiliency investments are important for a sustainable future. We are encouraged by the support that Energy Strong has received across the state, including official endorsements from more than 90 New Jersey municipal and county governments, representing approximately five million people.

We are hopeful that a regulatory decision will be reached soon that allows us to move forward with the building of a more resilient infrastructure. Our Energy Strong plan is not an isolated initiative, but in keeping with what PSEG has done for more than 100 years to support a bright future for New Jersey.

While most of our growth investments are concentrated at our regulated utility, we are pursuing select opportunities to add incremental generation capacity at PSEG Power.



In recent years, we have added nuclear capacity through various plant improvements. We expect to add another 130 megawatts of nuclear capacity from 2015 to 2016 through an uprate at the Peach Bottom nuclear facility, which we jointly own with Exelon. Also, we have a four-year effort underway to install advanced gas path technology at several of our existing power plants to support an additional 150 megawatts of combined-cycle generation. Such investments reflect our continuing focus on getting the most value from our generation fleet.

Our environmental profile is also important to our competitive positioning. We have invested substantially in state-of-the-art systems to dramatically reduce emissions at our facilities. This distinguishes us from many of our peers, and favorably positions us in a climate of increasingly strict environmental rules and regulations. Our efforts show it is possible to reduce emissions and power the economy at the same time.

Competitive markets have contributed to many improvements in our industry. In 2013, we were pleased by U.S. District Court rulings in Maryland and New Jersey that preserved competitive wholesale generation markets. We believe a competitive market remains the best approach for ensuring there is sufficient energy supply to meet customer demand at the lowest possible cost.

## Focusing Our Energy
to Build on Our Success

While proud of our accomplishments, we are not resting on our laurels. Our unrelenting, daily focus on operational excellence remains the foundation of our ongoing efforts to better serve our customers and deliver increased value to our shareholders over the long term. And we are determined to safeguard PSEG's good name and precious reputation for integrity in everything we do.

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 2013, PSEG was named for the sixth consecutive year to the Dow Jones Sustainability North America Index, which recognizes leading companies for their commitment to economic, environmental and social responsibility.

We have a longstanding commitment to the communities we serve. Our civic engagement focuses on community and the environment, education and safety in alignment with our business goals. For example, we have expanded our support for educational programs in science, technology, engineering and mathematics (the STEM subjects) to help prepare our future workforce. And we have a strong employee engagement program through which employees and their families participate as volunteers in many community activities that make a difference.

I would like to thank our employees for all their contributions. They have continued to show why we are a company defined by people who from one generation to the next give special meaning to the words “Public Service.”

In closing, I would like to thank you, our shareholders, for your continued loyalty and support. We will continue working hard to warrant your trust and confidence every day.

Sincerely,



Ralph Izzo

Chairman, President and Chief Executive Officer

Public Service Enterprise Group

February 25, 2014



## 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 New Jersey Performing Arts Center (NJPAC), One Center Street, Newark, New Jersey, on Tuesday, April 15, 2014 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
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.



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