Ladies and gentlemen thank you for standing by, welcome to the Public Service Enterprise Group Fourth Quarter 2005 Earnings Conference Call and webcast. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session for members of the financial community. At that time if you have question, you will need to press “1” followed by the “4” on your telephone. As a reminder this conference is being recorded, Thursday February 2nd, 2006 and will be available for telephone replay for 24 hours beginning at 1’ O’clock PM Eastern Time today until 1’ O’clock PM Eastern Time on February 3rd 2006. It will also be available as an audio webcast on PSEGs corporate website at www.pseg.com. I would now like to turn the conference over to Sue Carson, Director of Investor Relations, please go ahead.

Thank you and good morning. We appreciate you listening in today, either by telephone or over our website. I will be returning the call over to Thomas O’Flynn PSEG Chief Financial Officer for review of our fourth quarter 2005 results and a discussion of key issues, but first I need to make a few quick points. We issued our earnings release this morning, Incase you have not seen it the copy is posted on our website www.pseg.com. We expect to file our 10-K with the Securities and Exchange Commission later this month, which will contain additional information. In today’s webcast Tom will discuss our future outlook in his remark and so I must refer you to our forward looking disclaimer. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance they will be achieved. The results or events forecast in our statements today may differ materially from actual results or events. A last word on of our businesses is contained in the various reports that we filed with the SEC. As a reminder our guidance speaks as of the date it is issued, any confirmation or updating guidance will only be done in a public manner, generally in a form of a press release, a webcast such as this, or in 8K or other SEC filings. PSEG may or may not confirm or update guidance with every press release, as a matter corporate policy we will not comment on questions regarding guidance during one on one meetings or individual phone calls. In the body of our earnings release we provided tables that reconciled net incomes to operating earnings for both the quarterly and year to date results. We’ve adopted this format to improve the readability of the release and provide the required reconciliation’s between…

Thank you. Ladies and Gentlemen we will now begin the question and answer session for the members of the financial community. If you have a question please press the number “1” followed by the number “4” on your telephone, you will hear three tone prompt acknowledging your request. If your question has been answered and you wish to withdraw your polling request you may do so by pressing the “1” followed by the “3”. If you are on a speaker phone, please pickup your handset before entering your request, one moment please our first question. Our first question comes from the line of Ashar Khan from SAC Capital, please proceed with your question. Q – Ashar Khan: Good morning. A – Thomas M O’Flynn: Good morning Q – Ashar Khan: Tom, could you just mention to us, what is the average in the ‘06 forecast for power, what kind of that average PGS implied prices there for the BGS market that you will be serving in New Jersey. Could you share something, previously you guys had provided as part of your presentation, what the average embedded price was in the context , could you share, what the average embedded price is right now for 2006, based on which the power forecast is based on? A – Thomas M O’Flynn: Yeah. Ashar, I say it no.1 on any commentary on the BGS, the price or any market there, I think, it’s with the auction, the FP auction starting on Monday, I won’t need to stay away from any market commentary. In general, I think, it’s part of that, we just want to need quantify or specify what ever assumptions were, I tell you that, when we put out our guidance, it was griping end of 2005, so it was generally a…

Okay, and Tom previously you had indicated that you would based on where you were last year, I guess there was language that you expected double digit earnings growth going forwards?

Yes.

Is just, I am just trying to is that is to reaffirm Greg, you are seeing double digit earnings growth beyond ’06 for the next two or three years going forward, is that a better statement?

Yeah, what we said is, we put our guidance growth ’06, it was so good with 3.45 to 3.75 and then we said the expected earnings per share growth in each of ’07 and ’08 to be 10% or more of that base. Yes, we still go ahead.

Okay, and then can I just ask you went through the power guidance for ’06 and you said the impact were positive were the higher prices and the rolling nature and the negative toward the high depreciation, the O&M and the nuclear NDT. Could you quantify any of these either on the negative or on the positive, so we can do the offsets, what you are facing?

Yeah, I have just couple of thing right now and then I should talk to that question, but in general the NDT, the net contribution of that, this year is going to be around $0.16, $0.17 range. That’s above consistent with where it was in ’04, but on a normal year, we just release balancing from realignment of some of that funds and in normal year we expect it to be a few penny.

Okay.

So, that’s a $0.14, $0.15 differential or reduction from ’05 to ’06. The other plant there is Linden and that’s going, we expect that to come online in April or May. And just ballpark numbers, the cost of that. The asset cost about $1 billion, and so if you can see fairly easily figure out that we’ve got depreciation that about 40 year period and there is also got IDC on that reflects 7%. So, that’s going to cause an increase in depreciation and relevant interest cost. Those are the big pieces other pieces BEC will be online for full year. Obviously those plants we can see margin, at least the gas fire powered plant increase the gas prices, energy margin is minimal in the nearly years, they will buy those plants within capacity in, and we expect that our profitability as our RTM is more firmly in place.

Okay, thank you.

Thanks.

Thank you. Our next question comes from line of Paul Fremont from Jefferies. Please proceed with your question.

Thanks, just quickly can you go through the guidance for each of the segments again, I guess, I heard power 4.75 so 5.25 Holdings is 1.65 to 1.75?

Yes.

So, PSE&G and other would be what?

You said for Holdings you said 1.55 to 1.75?

I thought, I had I heard 1.65 to 1.75?

Yeah. normally you still do. Power you are right 4.75 to 5.25, E&G is 3.15 to 3.35 and then Holdings is 1.55 to1.75.

1.55 to 1.75

1.55 to 1.75 and then we got up an offset at the parent and yes, it was up year shares outstanding, we need to put in that offset for the parent, its in the 70, 80 offset negative range, which is expenses and financing cost.

Okay, and …

It is laid out on, you know in the press release its laid out on the second, third page.

Okay, and in terms of potential reaching a settlement in New Jersey, I guess in the past both Public Service and Exelon has indicated that they were optimistic about potentially being able to reach a settlement rather than having a go to a litigated decision, would you, would that sort of remain the case today as well?

Yeah, we something catch up, that’s a reasonable expectation, Paul, it is consistent with how we manage things in the past, if you look at the year ’04 (phonetics) rate case, we had as the major restructuring, we had back then 5, 6 years ago that’s consistent. I would say that for the next few weeks Dr. Bowring the market monitor for PJM, is scheduled to put some information forward to the BPU and I believe it will be public to the PJM, that will be over next few days, he is on the – he will be providing some testimony next week and then we will back, late in February. So, during that process we will obviously be adhering to the schedule, after that point of time, there will be an opportunity, we have had some discussions in December, but obviously the last since the start of the year there has been very active and productive schedule. But, after that point of time there will be an opportunity, we have, try to atleast welcome us if it possible.

And the last question from me is, any update on DOJ from the conversation in the Exelon conference call?

No, we continue to have a dialogue. We have no material updates, obviously continue to have interaction and dialogue with those folks, it is taking longer than we had initially, potentially anticipated but we continue to have fruitful dialogue and I think we are making progress. Right in that, I should stay away from these specific playback, right Paul.

Thanks.

Thank you, our next question comes from line of Stephen Long from Citigroup. Please proceed with your question?

Hi, good morning. Had a question here on in Q4 for, in the power segment, you guys reported $41 million in other income, how much of that was NDT related or it was something else there?

Yeah I’d say the lions share, that would be the NDT. Of the $0.15, $0.17 that I mentioned I think they are our share that was largely third quarter and fourth quarter. Q – Stephen Long: Largely in the third and fourth quarter.

Yes, if I can remember. Q – Stephen Long: When you guys gave out your 2006 guidance, you guys talked about PJ and after revising a $3 per kilowatt year. Has that changed much since you guys came out with that rate last year I means that seems to even below what you guys talked about in 2005 and going into 2005. Any near indications there Tom.

No we’ve not seen need for changes in ‘06 capacity prices. The real discussion on capacity prices would be in the development of the RPM that would impact ‘07, ‘08 obviously thereafter. So there hasn’t been material changes to ‘06. Q – Stephen Long: And in regards to the Energy Holdings and the repatriation, how much money did you guys bring back because of the job back then did any of that report as a gain in earnings that we might to look to strip that?

Now it’s 242 we pay tax and that costs us $11 million. So those actually is an offset because we paid a modest 5% tax on, those 242 I think is in our press release. Q – Stephen Long: Okay, and then deprecation, can you just remind on the BEC side and how much more additional deprecation would you expect there, what was the total cost of the plan?

It a $500 million plant and it came in roughly in the middle of the year. Q – Stephen Long: Okay

So it would you ever have a full year opposed to half year. Q – Stephen Long: Okay and then the last question I have was on a 64 million depreciation, what you guys are saying is that it you guys won’t be able to deal with this until atleast into the first quarter so that’s more than less employing that there is $15 million at the pre tax is going away is that embedded in that guidance that you gave or this is sort of everything is going to be incremental.

No it’s not. I think the guidance we put out last October, November contemplated that we would get reasonable resolution of that effective January 1st but obviously a headwind if I call it, this fortune tend to grow up the organization. Q – Stephen Long: Okay. And just one more thing, In the old days you guys, in 2004 you guys just talked about the trading in BGSS items in your power division to generating about a $150 maybe $200 million of gross margin, now that everything is going on is that still the case or is that a number that is now sort of changed.

It’s till a change, I think it’s come down if you look at year-over-year it’s probably come down about $30 million if you look at overall activity which would include BGSS, it would include other assets activities we have like FTR and AR it would also include a modest amount of trading that we do. I think I’d say our trading ‘05 to ‘04 is not been a substantial part of that business but it was a lower number. Some of that market activities and then also we have had some attrition of folk to be honest as the merger is pending is not easy on people frankly as this anxiety and we had some attrition that has caused us to bow down activities. Q – Stephen Long: So when we are thinking of the modeling aspect at least for now we should think of that as a sort of a run rate of the lower end of that like the 150 and then but going forward with merger of Exelon do you anticipate that ramping back up to more that 200 range.

Yeah I think that a strategic discussion with ourselves and Exelon we have not done joint business planning if you will, you need to be careful with DOJ and other things out there but having some modest increase is not unreasonable. Q – Stephen Long: Okay great thank you.

Thank you. Our next question come for the line of Michael Goldenberg from Luminus Management please proceed with your question.

Good morning guys. Just wanted to ask a couple of questions, couple of confirmations. Now, I know Oyester Creek is run by Exelon but could you give us more updates on what’s happening there lately. I know there’s been a couple of reports about Oyster Creek, I just wanted to -?

I ask you to stay away from that, that part of plan would speculation sure, the Exelon folks would happy to address any question.

But given that you jointly operation most of the plants now wouldn’t you be purviewed to what’s happening there?

No, We really in fact, we need to be very careful about information sharing from a regulatory standpoint so, no. We are obviously doing a great job Bill Lader and his team, they are at the island, where our three plants are, two Salems and Hope Creek, they are obviously doing a great job for us. So that is really where I am going to comment on.

And secondly I wanted to ask you about the 630 projected merger closing date. Could you outline the top two things or maybe the top one thing that could delay the merger also top one or two things that could speed up the merger.

I think the major piece, the two outstanding things are DOJ and BPU. I think the we are just thought that, general thought that the BPU would be the critical path that schedule the month of January was productive in terms of we had a lot of witness up, got through the schedule, Dr. Bowring was the market monitor for PJM, and is a very important person, we in late December, filed on two scenarios on the 4000 megawatt to divesture that we think is consistent with work. It (phonetics) consistent while it seems that we had to date we did put more, look at two scenarios out there, Dr. Bowring has in his evaluating notes, he will make that information available and then there will be some additional hearings at the BPU and he will have an opportunity to talk about those and have some Q&A so that’s going to be February. That is on next week and then they’ll come back in late February. After that then there will be the proceedings will still go along but there would an opportunity to have the settlement discussions. The current date for the BPU to reach a settlement is May 15th as I think in my prepared remark said we would expect that to be delayed and that there is no specific timeline but Dr. Bowring scheduled pushes things out four, five weeks. So that could cause a delay as much as of that period of time in the form of schedules. But as we said before we hope to have an opportunity to have some reasonable settlement discussions and I think that is going to be the major determinant of time.

Gotcha. I mean would you say the probability of your closedown time is greater than say 70%.

Yeah, I would rather stay away from that as well as there from the typical?

Yeah. Understood, thanks a lot.

Thank you.

Q – Clark Orsky: Yeah, I had a couple questions on holdings. The proceeds from the Polish plant sales, what is the plan there, are you going to take out more debts that Holdings, that hold any hope?

Yeah, we have not made any firm determinations at this point, obviously if you look at ‘05 we paid up about $400 million upto PSEG, paid off $320 million or so including the premium in terms of debt retirement. As there is been in the general practice we look at general full in coverage ratios. Look to provide some fairness to the PSEG bondholders but also look to buy some cash upstairs, so the closings are not expected for number of months, it was just announced a couple of days ago. The center of agreements isn’t expected for a number of months, we will accept that as we go along but no firm plan to this time. Q – Clark Orsky: Okay, can you tell us what the total debt at holdings was at the end of the year?

I think it was $1.7 billion, that was the full or the 300s so the 300 GAAP redeemed a couple of days ago so $1.4 billion in about that range. Q – Clark Orsky: Okay and I guess just on Just on the Texas plants, I think you said you entered into some contracts or whatever I was wondering what the hedge position for ‘06 is.

We generally are with our project finance, we are project financings down there in both, definitely while we are looping we generally 50% or more like with 75% hedge on our one year basis. Q – Clark: Okay and your saying

If you look out we are generally on the 50% range Q – Clark: Okay. And you were saying stronger pricing there?

Yes we had a Texas was a good pick up from ‘05 to ‘04 we are seeing a good pick up in parts spreads and in the contract we had talked about we did sign a multi year contract generally multi year contracts we are able to get normal hedge accounting on for a variety of accounting reasons we were not able to get a hedge accounting, it makes senses for us and it is only a penny now the reason that we are bring it up is just that it may increase, we are likely to do it getting mark-to-marketing issues going up going forward. Q – Clark: Okay. I appreciate you thanks

Thank you our next question comes from Greg Schultz from SAB Capitals, please proceed with your questions.

Hi. just a couple of questions, how much power do you generate for the year? and what do you expect for you know, I know your guidance, what are you sort of assuming, I know you gave me the-?

I think, our generation is about 49, 50 megawatt hours if I guess, I remember it was-

Yep. 50 gigs and then next year what are you sort of looking at?

The same kind of range.

Okay. And then your guiding, If look at this right for PSE&G your guiding operating earnings down a little bit.

Yes, it is mostly weather.

Yes, it is largely weather.

As I said Its down 10 to 30 and weather was 17 so.

And my last question is just how much debt you had at the end of the year at the parent please?

Unconsolidated. I mean they have to circle back again that number its probably about $1.5 billion so we may circle back you in, including taxes, but we are preferred to note, things of that nature.

Thank you and follow up questions from the line of Stephen Long from CitiGroup. Please proceed with your questions?

Thanks, Tom on parent and looking out into ‘07, ‘08 are we still going to see 78, 80 a year

For this year we will, we shook them down over time in cash generation to page down debt over 2 years.

Okay and then what did you guys talk about in terms of stated strategy that you had in Connecticut, once the contract ends at the end of this year, with the power prices that you guys are getting out there right now but the step up is quite significant depending on what you guys plan to do with that?

We haven’t specifically addressed our market strategy, we obviously aware of what is out there in the markets and there is liquid market out there, so we don’t give hedge ratio’s market by market.

Right.

But, as you know there was obviously the opportunities for us to use the market to look things beyond, to look at opportunities beyond the expirations of our contract at the end of this year. Just in terms of lie cap, we have been involved in lie cap discussions, the recent settlement we have not signed on to, we think there is some improvement that could be done, we continue to be in active participant in that process we think that number of constructive pieces of it.

Okay and then was there environment issues with Bridgeport? I thought there was something that you needed to look at.

There are some and that would be some CapEx, will be consistent with our, generally consistent with our CapEx that we provide on a five year basis. I think it’s a ‘07, ‘08 generally in the plan we provide a CapEx, how do you look forward every K, we would be doing that in our K that we be filing at the end of the month.

And then was there anything down about, I believe is it Hudson that you guys were looking at any update on that?

No update on that from what was in our Q with our settlement there are issues with us running that after the end of this year it is a very valuable plant for PJM and we have been some discussions as out lined in our Q with environmentally, it is largely the New Jersey authorities on thinking about managed way to continue that had that plants available but there is no material updates from our Q, I mean its pretty well online.

Okay but the CapEx is often not embedded in there, right?

That’s correct. That at this point if I am clear the lifecycle of Hudson it’s very clear on our minds its Bridgeport is an extremely valuable plant it here to stay there is some CapEx we need to deal with it, generally consistent with our table, Hudson is more subject to discussion.

Okay great thank you.

Thank you. We have another follow up question from the line of Ashar Khan from SAC Capital

Tom, could you just provide, I believe there is some upgrades on the nuclear coming up could you just provide us the timeline of those upgrades or they have been done I thought they were ‘06, ‘07 timeframe.

It’s more ‘07, ‘08. It’s been, the nuclear industry has had some other issues with a couple of other plants that have upgrades and that’s slow down approval process.

Could you remind us that, the amount in climbing down in the planning?

If we created a 170 megawatts and it is in the ‘07, ‘08 timeframe. Q – Ashar Khan: ‘07 and ’08 timeframe. Okay and then just going back to what you said, you said it was the output for about 50000 and if I heard you said same output in ‘06 and in the beginning part of the call you said nuclear and coal is about 80% correct?

Yes. Q – Ashar Khan: Okay. Thank you.

Assume one of our tables, the nuclear call was- Q – Ashar Khan: Just about 40,000?

I think it is a little over, I think it is about 85% this year. Q – Ashar Khan: Okay is that what you are expecting next year in ‘06

Yes. Q – Ashar Khan: So 84%, 85% of the 50.

Yes. Q – Ashar Khan: Okay.

It’s actually it is 85 its 86 I am sorry 85 nuclear is 55% and coal is 31%. Q – Ashar Khan: Ok that’s what you expect again 2006?

Yes that’s an indication our facilities are running well and we continue to expect that to continue. Q – Ashar Khan: Okay

Thank you.

Thanks. The next follow up question comes from the Greg Schultz from SAB Capitals, please proceed.

Hi, a couple of follow ups. The fuel costs, are those expected to go, it would sort of go next year I don’t know how your coal, how you are hedged on coal, just a general?

In general we did see fuel cost to be, we asked the question before but fuel cost ton for ton, we thought it was going to be in a 13% to 15% increase ‘04 to ‘05 it would be probably more like 20% increase, there is some deliverability issues and other things or these-.

Are you paying sort of full market on that at this point?

We’d expected to be more the increase, probably more about 10%.

Okay and just back on.

That’s what I think 20% that ton for ton you’ll find the total of coal is larger good news cause plants are doing more.

Sure, sure and then just on your – on the sales that you make and it prices you hedged when the BGS comes up whatever price you get is the price get and you don’t’ and so all your hedge sales are just on the, on what you don’t call, BGS is that, how it works, we knew it’s at 85%.

The numbers that I threw out, I think Ashar asked me, I threw out the hedge ratios, they were in our EEI presentation 85, 96, 75, 35, 50 that’s on our expected total coal in nuclear output, which is the lion share obviously the margin, in large we have shown pieces of them in our IR stuff in the past, we had to get CGF contracts that we are through that, to the extent that doesn’t do all the full hedging that we want then we look at other contracts that, the contracts that just the counter part is a general contract that within PJM or various liquid markets.

But you don’t. I am just confused, you don’t hedge the BGS piece before indeed?

We generally I don’t want to go into BGS capacity but we generally have capacity here and we are, we have facilities that are in New Jersey generally situated in goods parts relative to load and we generally have BGS contract coming often then we would have generation available, that could be used.

Priceless. Right so, whatever, you generated 50 gigs of what is chunk of it, a portion of that be BGS, some price we will find out and then the large remaining stuff you sold last I guess some point last year and what point at throughout the year you sort of a the hedge out remaining piece.

I mean, generally I mean if you assume the hedge ratio that I talked about and time aggressive then things will allow other things were added, sometimes BGS contract sometime the general market contracts, we generally think that kind of forward look is low forward that we want try to maintain some have a little more head, sometimes a little less hedge depending on variety of factors.

And I guess that problem that I am having is your, may be you guys are very constructive but on the guidance, like if I sort of take it, so what I think to be genesis kind of look like and sort of our prices were last surely, you hedged that sort of hard to get the numbers you to talking you about.

For big centers if you look at ’06 price, ’06 price is quite good. But as we said in November we are 85% or 90% hedge.

No but I may be unfaking though, even faking sort of those lower sort of mid ’05 prices and then throwing in something for the BGS seem like I am missing something.

Like you mean that there should be more margin?

Yeah that’s a right.

Actually, I said should be $18 million of after tax incremental margin for prices and amounts about, by then it is offset, as I said is up so that you are right, there is some probable assets other than it offsets and I mean, O&M, NDT and Linden, where you will see depreciation. And ITC, so happy I threw it off.

Okay. Thank you for the detail.

Thank you, Mr. O’Flynn, there are no further questions at this time please continue with your presentation or closing remarks. Thomas. O’Flynn, Chief Financial Officer: Okay thanks everybody for joining in, we are also very pleased with our year end results, we think we got a business model with balances and earnings growth, and proven risk management and we are pleased that we had some very good numbers coming out of all our businesses and also look forward to continue progress, and in terms of the merger with Exelon.

Thank you ladies and gentlemen, that conclude your conference call for today, you may disconnect and thank you for participation.