Ladies and gentlemen, thank you for standing by. Welcome to the Public Service Enterprise Group second quarter 2006 earnings call. (Operator Instructions). I would now like to turn the conference over to Sue Carson, Director of Investor Relations. Please go ahead, ma'am.

Thank you and good morning. We appreciate your listening in today either by telephone or over our website. I will be turning the call over to Tom O'Flynn, PSEG's Chief Financial Officer, for a review of our second quarter 2006 results. Jim Ferland will then join us to discuss the status of our pending merger with Exelon. But first, I need to make a few quick points. We issued our earnings release this morning. In case you have not seen it, a copy is posted on our website, www.pseg.com. We expect to file our 10-Q with the Securities and Exchange Commission shortly, which will contain additional information. In today's webcast, Tom will discuss our future outlook in his remarks 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 may differ materially from actual results or events. The last word on any of our businesses is contained in the various reports that we file with the SEC. As a reminder, our guidance speaks as of the data it is issued. Any confirmation or update in guidance will only be done in a public manner, generally in the form of a press release, a webcast such as this or an 8-K or other SEC filing. PSEG may or may not confirm or update guidance with every press release. As a matter of corporate policy, we do not comment on questions regarding guidance during one-on-one meetings or individual phone calls. In the body of our earnings release, we've provided a table that reconciles net income to operating earnings. We have adopted this format to improve the readability of the release and provide the required…

Thanks, Tom. Good morning, everyone. I'm going to make the assumption that most of you probably listened to the Exelon conference call yesterday, and to the extent some of you didn't and you would like additional details, I will try and deal with that in the Q&A section. I would like to give our view of this thing and maybe with some special emphasis on how we think the proposal we have put forth would benefit the state since it's really the BPU and the BPU staff that is one of the most important players moving head. Just quickly, some of the components that John described in some detail yesterday. The enhanced offer that we've put forth provides $600 million of cash for any number of customer benefits. That could be for conservation, the economic development, lowering bills. So the $600 million cash is pretty easy to understand from the standpoint of the benefits to the state. Additionally, the proposal would have us deferring our electric rate case, which we have had under consideration for sometime, for an additional four years. It will have us also completing a settlement of our gas case at a substantial reduction from its filed level. Just delaying those rate cases for some period of time into the future we think clearly has a value to the state. Somebody could easily get to $200 million or $250 million over the next three or four-year time period. So that's another significant benefit to the state. I think in addition to those more obvious factors are a couple of others that really provide significant benefits to the state which we really haven't elaborated on a lot. One is that, after the merger and as a result of the merger, the state is going to benefit, we estimate…

Operator, can you please provide the instructions for the Q&A?

(Operator Instructions) Our first question comes from Paul Fremont - Jeffries & Co. Paul Fremont - Jeffries & Co.: Thank you. Yesterday, we heard John Rowe indicate that he was hoping to get a response from the other intervener parties in the negotiations over a period that sounded to be one or two weeks. Can you indicate whether the other parties seem willing to negotiate on an expedited time schedule, or have you been able to gauge any type of reaction to the deadline that was put forward by John Rowe? Tom O’Flynn: Well, clearly, some of these parties are willing to negotiate on these type of terms because we've made significant progress with certain of them. The group that we just don't know currently where they are and probably the most important single group we have to deal with Paul, is the BPU staff. And at this time, we're continuing to have discussions with them. We just don't know at this time, we can't be certain what their willingness to accommodate that kind of a deadline is. Paul Fremont - Jeffries & Co.: Thank you.

Our next question comes from Ed Kressler - Angelo Gordon & Co. Ed Kressler - Angelo Gordon & Co. : Thank you. Just a quick question on the up offering. What period of time expired between when you actually made the up offer to the BPU staff and the decision to go public? The only thing that was disturbing yesterday about Mr. Rowe's comments and about yours today are that, why are we even hearing this? Why isn't this just going on kind of behind the scenes? Are things that bad at the BPU staff? Tom O’Flynn: I think that in part, first of all, I don't know how long, I guess ten days or something, a week, something like a week, that has been available. It appeared that -- there are many parties to this proceeding and a lot of people got copies of this material. It appeared to us that this stuff was leaking out from somewhere and the information was finding its way selectively into the financial community. We felt that we had to say something about that. We don't like the situation, but if some of this stuff is getting out, we felt that from a fair disclosure consideration, we had to get the information out. So that's why it came out and the timing was driven largely by when it appeared, elements of this were showing up in the financial community. Ed Kressler - Angelo Gordon & Company: Thank you.

Our next question comes from Louis Sarkes - Chesapeake Partners.

Thank you. Are there ongoing discussions this week with the staff? Is it a question of really no response from them, or is it an issue of they have rejected? Because this offer as you describe it, at least from what we had seen and heard, what New Jersey wanted, it seems to either meet or exceed the outlines of what they wanted. So is it a question of them just getting that and then refusing it, or is it just a question of just no response? Tom O’Flynn: It's not either. Nobody has refused anything yet, and we do have ongoing discussions with them.

Okay. But just to characterize it, is my characterization a correct one? I heard a rumor that the ask, I guess, from the state was something on the order of $1.2 billion or so, and you had a much smaller reported offer out there. Is this something that you believe responds to what they described as they wanted? Tom O’Flynn: First on the $1.2 billion number, I have heard all kinds of numbers, but nobody has come to us with a proposal that says we need $1.2 billion. That's just not there. I have described this proposal to you. It's beyond me how someone could look at this and say -- keep in mind, there's standards that they're judging this thing against, are there positive benefits for the state for customers? How somebody can look at that collection of data and information and reach a conclusion that there is not is beyond me.

Thank you.

(Operator Instructions). Our next question comes from Ashar Khan - SAC Capital.

Jim, can I just ask you, I am assuming is the market power issue totally resolved, so it's all about the number right now? What is a satisfactory number, which is it coming down to?

I would like to think it's there, but I'm not sure that the Commission would fully agree. As you know, FERC is done with this thing, they have signed off on it. DOJ is done with it, they've signed off on it after looking at it for over a year. The BPU staff has surfaced a couple additional questions to the market monitor, Joe Bowring at PJM, and they've indicated they would like to have us address a few of these things. It looks like any remaining concerns, I don't think they are legitimate, but it doesn't matter. If somebody thinks they are, we need to deal with them. It looks like any additional concerns could be dealt with the behavioral changes of changing bidding practices and so forth in a way which would not affect the economics of the transaction.

Can I ask you, with your offer which is pretty generous, what is the response? We will take our time and come back to you? Is that what the response was you got? I'm just trying to understand what the other side's response was when you presented your new revised offer?

With regard to the timing issue, I don't think they've gotten back to us. They haven't said anything yet about it being acceptable or not. That is the issue here. That's what we're dealing with. We've put a proposal out there and we know that some of the fine details in a 60 to 70 page stipulation is going to take some time to work out. But frankly, the framework of this offer that we've put on the table, they can move parts around inside of it and the rest, but the economic effects on the Company cannot be any greater than that. Frankly, unless we can get some kind of assurances that we're working within that envelope, it doesn't make any sense to continue pursuing this because if a month from now or two months from now, they're going to conclude, well, we cannot settle this within these boundaries, all we've done is waste another couple of months.

I agree. Are there any further meetings scheduled in the next week or two weeks where we move forward towards?

The meetings never stop. The meetings have been going on hour by hour, day after day. This is nothing that somebody is dealing with from time to time, there are people dealing with this every minute of the day.

Okay, I appreciate it.

Our next question comes from Clark Orsky - KDP Investments.

Can I just ask a question about holdings? I think you said the decision about dividends or debt repayment would be based on some sort of financial parameters for holdings. Can you tell us what those goals are?

Sure. We've generally talked about FFO to interest coverage at the holdings being three times or greater. It's a target that we've had in place for some period of time. As you look at our performance over the last number of years, we have generally been there or exceeded that. That's generally a guideline, but we look at other credit ratios. As we monetize assets and get cash and obviously reduce the asset size of the business, we generally look to maintain the credit quality of holdings as we determine use of proceeds. On a short term, we may use that within PSEG as we're doing now. Actually, Holdings is loaning some money out to PSEG. But on a longer-term basis, we obviously look to Holdings' longer-term debt and potential dividends from Holdings up.

Can you tell me what the debt is at the end of the quarter at Holdings?

I think it's $1.4 billion.

$1.4 billion?

Yes. I will remind you that we bought back 310, something like that, the first month of this year. The end the year was 175 or something. I think 1450, something in that ballpark.

Thanks.

That's on a gross. On a net debt basis, it would be cash that Holdings got, that number would be under $1 billion.

Okay, thank you.

(Operator Instructions). Mr. O'Flynn, there are no further questions at this time. Tom O’Flynn: Okay, well thanks all for joining us. Just in summary, I think we've had a good quarter. Jim has is obviously told you what we know about the merger and we'll provide updates as they go forward. But our base businesses continue to do well, Power is a very good operation, super on the nuclear side. The rolling nature of our escalating prices that we realize in Power, we're realizing that with good margin improvements. Holdings is generating cash, enjoying benefits of Texas and stability in our other businesses. PSE&G continues to operate very well, safely, reliably and has a couple of rate cases stuck with the broader merger proceedings. But other than that, the broad business is doing well. So thanks all for joining us today.

Ladies and gentlemen, that does conclude your conference call for today. You may disconnect and thank you for your participation.