Ladies and gentlemen, thank you for standing by. Welcome to the Public Service Enterprise Group First Quarter 2007 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 (Operator Instructions). As a reminder this conference is being recorded Friday, May the 4th, 2007. And will be available for telephone replay beginning at 1 PM Eastern today until 1 PM Eastern on May the 8th, 2007. It will also be available as an audio webcast on PSEG's corporate website at www.pseg.com. I would like now to turn the conference over to Kathleen Lally. Please go ahead.

Thank you Mara. Thank you very much and good morning to all of you who are listening in to our conference call today either by phone or over our website. I will be turning the call over to Ralph Izzo, PSEG's Chairman, CEO and President for comments on the company's results and outlook. Also participating in today's call will be Tom O'Flynn, PSEG's Executive Vice President and Chief Financial Officer. Tom will provide a more detailed review of the company's operating and financial results and our forecast for 2007. Before we begin, however, I just need to make a few points. We did issue our earnings release this morning. In case you haven't seen it a copy is posted on our website. We have also posted a series of slides that detail the operating results for the quarter and allow you to follow along with the comments made by management today. We expect to file our first quarter 10-Q with the SEC later today. In today's webcast we will discuss our future outlook and I must refer you to our forward-looking disclaimer. Although, we believe our forecasts are based on reasonable assumptions, we can give you no assurance that they will be achieved. The results or events forecast in our statement today may differ materially from actual results or events. The last word on any of our businesses is contained in the various reports we file with the SEC. As a reminder our guidance speaks as of the date 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 or webcast such as this. PSEG may or may not confirm or update guidance with every press release. As a matter of policy, we will not comment on guidance during any one-on-one meeting or individual phone calls. In the body of our earnings release we provided a table that reconciled net income to operating earnings. We've adopted this format to improve the readability of the release and to provide the required reconciliation between the GAAP terms "net income" and "income from continuing operations" to the non-GAAP term "operating earnings". The attachments for the press release provide the reconciliation to each of our major businesses. Operating earnings exclude merger-related costs and the net impact of certain asset sales during the period presented. Operating earnings is our standard for comparing 2001s first quarter results to the first quarter results for 2006 for all of our businesses. We exclude such costs so that we can better compare our current period results with prior or future periods. Finally, at the end of our prepared remarks Ralph and Tom will take your questions. And we ask that you limit yourself to one question and one follow-up. I would now like to turn the call over to Ralph.

Thank you, Kathleen. Good morning and let me join Kathleen in thanking you for taking the time to participate in this conference call. I'm pleased to report that operating earnings for PSEG for the first quarter of 2007 rose 55% to $1.32 per share, from $0.85 per share in the first quarter of 2006. Our two largest businesses are performing extremely well. Let me begin with PSEG Power, which delivered exceptional results. Our nuclear fleet has sustained top quartile performance operating at a 97% capacity factor during the quarter. Most recently Salem 1 completed its 18th refueling outage in under 24 days, a record for this unit and that after 383 days of continuous performance. This exceptional performance, the roll off of below market contracts and a return to more normal conditions for the BGSS. Supply contract versus last year's disappointing results for that same contract have all contributed to the earnings improvement at PSEG Power. Our regulated utility PSE&G was also an important contributor to the earnings improvement reported for the quarter. Utility was aided by more normal weather conditions versus last year and the receipt of much needed gas puts a great relief in the fourth quarter of 2006. PSEG Energy Holdings recorded lower earnings for the quarter. Part of the decline in earnings was due to scheduled maintenance at our 21,000-megawatt gas-fired combined cycle units in Texas. And even larger shift of the decline in earnings was due to stronger markets that produced negative mark-to-market effects on the multiyear contract we have in our Texas generation. Elsewhere our international distribution assets are performing at strong levels. Most importantly the markets in which we operate across our system remained very attractive. Power, given the diversity of its generating fleet was a successful participant in the BGS auction conducted…

Thanks, Ralph. Good morning to all. As Ralph said, we are very pleased that PSEG reported a 55% increase in operating earnings for the first quarter to $1.32 per share, up $0.85 per share from the first quarter of 2006. As you can see on slide 13, the improvement was led by an 81% improvement in powers operating earnings, to $0.87 per share from $0.81 per share. Followed by a 68% increase that PSE&G's operating earnings to $0.52 per share from $0.31 per share. Holdings reported operating earnings for the quarter of $0.01 per share compared with $0.12 per share of a year ago. We are providing you with a waterfall chart taking you through the net changes in year-over-year earnings by major operating business. I will discuss each in more detail. PSE&G reported operating earnings of $0.52 per share compared with $0.31 per share from a year ago. The improvement was driven by higher gas and electric margins, facilitated with the rate settlement implemented in November of '06 of $0.09 per share and a return to normal weather conditions in 2007 versus the relatively warm conditions from a year ago. PSE&G results also benefits from increased electric usage and higher transmission revenues. A recent Federal Energy Regulatory Commission ruling, supporting a more reasonable allocation of transmission costs across PJM should provide further support to our transmission business. PSE&G’s earnings during the remainder of the year should continue to benefit from the factors that led to improved earnings in the first quarter, a full year of rate relief and normal weather. PSE&G has begun to implement some of the capital spending associated with these growth initiatives. During the quarter, PSE&G announced that it would proceed with investing $150 million to $175 million, over a two-year period, to install a new…

Thanks, Tom. In closing, I'm extremely pleased with our results for the first quarter. It puts us well on our way of meeting our full year objectives and at the same time positioning a company to meet the challenges, which face our industry and provide the opportunity for your company’s growth. And we are ready for your questions now.

Operator, if you can queue the questions.

(Operator Instruction) Our first question comes from the line of Greg Gordon from Citigroup.

Thank, good morning.

Thanks, good morning. Gordon.

The results from BGSS to what extent did they sort of outperform your expectations given the sort of the uniquely positive market conditions and demand?

I think they were generally within the range of our expectation. Greg, I think last year they were up meaningfully from last year, but last year as we talked about was a very disappointing quarter. They were within the band of our expectations and are quite request tent with our performance in '04 and '05. The things that help is a more normal relationship of inventories versus intra month prices, those are the prices at which we sell to our commercial and industrial customers, and also just more normal weather cause there is a demand or a volume component to it.

Thanks.

The balance sheet continues to improve, as we would expect, perhaps maybe a little bit faster than forecasted.

Where if you were going to start using the balance sheet more aggressively, where would you we say you start to sort of expense some of that on store value, is it incremental capacity announcements in PJM, is Texas a growth market for you? Are you becoming more comfortable with the concept of potentially recapitalizing the power business? Where do you stand in your thinking on those issues?

You just covered.

Let me go over the resources and little uses and then Ralph can certainly expand upon that. I think to the extent we've got some leverage capacity, we’re most comfortable tapping that in the near term within holdings. And we mentioned some incremental leverage we’re putting on -- one of our Latin American discos, improvement in markets there, there may be other things we can do, we could do a back levering about $50 million of the QF. The other big piece within holdings on increasing some asset base leverage would be Texas. Texas has 2,000 megawatt; I think the debt to kilowatt is about 180, $185 a kilowatt, which I think would you characterize as quite conservative. So, we could tap that and are actively looking at tapping incremental leverage at our Texas generation. The second part Dan, if I put the other bucket, how can we use that? Clearly we could accelerate debt retirement plans. I think most notably, we would look to our core markets that would in the Northeast, especially PJM and Eastern Mack, but also the ePool where we've got 1,000 megawatts doing well, potentially New York, the south easternly part of the state and then Texas. Those are all markets that we have reasonable positions in, that we feel are growing and may have some opportunities.

And I would just add to that, Tom, the investment needs of the utility both in terms of reliability issues, most of them transmission side and also the opportunities that are opening up from climate change and issue that we started to propose.

Thank you, gentlemen.

Thanks, Greg.

Our next question comes from the line of Ashar Khan from SAC Capital. Please proceed.

Good morning, congrats on earnings. Could you just elaborate, I know you mentioned you could invest $100 million on 30 megawatts of solar. Could you, if this goes through and received well, could you just talk about what is the maximum that you could invest under the solar program for PSE&G?

On the statewide renewable portfolio standard, we would call for 1,500 megawatts by 2020. We are looking here at a new program that has a two-year horizon, but clearly we are doing it with the expectation that we would be successful and then expand upon it.

So how fast can this expansion -- because that expansion can be huge? How fast can this expansion work from just 30 megawatts, how fast can it move up to say 100 or 200 or 300 megawatts?

A lot depends upon the capacity of the solar industry to meet the project demand. And that's what we intend to learn through the next year.

Okay. Thank you.

Sure.

Our next question comes from the line of Paul Paterson from Glenrock Associates. Please proceed.

Good morning, guys.

Good morning.

The, I know that you guys are going to wait to see what the results of the remaining RPM auctions are with respect to new build and what have you, but I was wondering if you could just give us a little bit of idea of what you're thinking what reserve margin equilibrium, or market dynamics you think in the long run would play out. In terms of, what kind of capacity pricing you would probably have to see in order to get new CT build or something of the sort?

Paul, we are certainly encouraged by the first round of the RPM. As Ralph said, it's right at the PJM cost and new entry cone. So it's certainly got ourselves and presumably others sharpening the pencil on some new build. I'd say, we are still cautious and going to take a look at what's going to happen over the next few periods and obviously, we’ll be giving you a lot more information over the next nine months. In of itself the cone new entry is a reasonable number. I would say it's been pressured by some increased costs in that sector and also just the fact that it's for a relatively short timeframe. Even when we get all the RPM innings out there, there will only be a three to four-year visibility than at any one point in time. So, we still say that 72 is on the thin side, but certainly got us, us and others looking. I say looking, that's primarily CT’s speakers. And we do think about not just on a specific single asset basis, but on overall portfolio approach. So we may look at it in conjunction with obviously which size we’ve got with our longer-term strategy and with some replacement we may do overtime with some older capacity. I would also say that as PJM progresses and the RPM, they’re going to break into more zones, when we ultimately go to zones in the low 20s. Some of the areas we are in we would expect to have; particularly, we would expect the RPM to indicate some tight constraints.

Okay. So what kind of reserve margin, I mean is this, I don't know if this is the way to look at it, but what kind of reserve margin, as you mentioned once you get the data point they are only going to be for a pretty short period of time for a pretty long-lived asset. What kind of reserve margin outlook are you guys thinking about in terms of what would be necessary for the new build if you follow me?

It's a function of more than just one variable, all right, Paul? I mean it's a function of the transmission transfer capability. It's a function of the reserve margin. And as you said, you want more than one data point because from one data at a time point you can extrapolate in any direction you feel free to want to do stuff.

Okay. We will just have to wait and see, I guess?

Yes, I think that's fair Paul. If you're asking for one specific number, the math is never that easy.

I know. I realize that. Okay, I appreciate the help. Thanks.

Our next question comes from the line of Shalini Mahajan from UBS Securities. Please proceed.

Thank you. A follow up on the capacity auction prices. Now the February BGS auction embedded at capacity price of $11 per Megawatt hour and the Eastern Mack clearing price indicates that on $16.50 per Megawatt hour. I was just curious to know why the results of the two auctions were so different in such a short time frame?

Well, I'd say just a couple things to maybe elaborate. The BGS auction doesn’t specifically break out the products. No that’s a fair point. At the time of the BGS auction, the one-year forward was around that $11 range. So that's reasonable. But what was actually incorporated by bidders, that's all in the combined, in the combined, too. I would say that, there was somewhat of a distinction; the Eastern Mack capacity value is 197 with the cost to serve low is 177. So that's called a $2.50 difference.

Okay.

So there's a slight - The increase was slightly less at least than you suggested. I think it is - I would say that the price did move up meaningfully from the January time frame up until the time of the RPM. It has fallen back somewhat. But it is a market that is pricing a lot of capacity with some thin trading. So you can have some movement around that market.

Okay. That's helpful. And then separately on solar, I just want to do clarify if this was going to be a rate based investment and who keeps the upside of the prices of Solar X-rays?

The customer and that was a developer.

Okay.

He is the owner of the asset.

Okay. But you would get paid in solar enabled energy certificates or in cash. Now if the market prices of these X rise you are not going to keep the upside on that?

No, we would not, surely no. That stays with the equity holder of the asset.

Okay. Okay, great. Thank you.

Our next question comes from the line of Paul Ridzon from KeyBanc. Please proceed.

Could you, you talked about leveraging up some of the international assets. What's your latest thinking on just disposition of assets beyond electrical and when do you think you could finalize that decision?

Something we've, we continue to review, we have nothing further to add than what we discussed in the past. Clearly we are mindful that the markets in Latin America are doing well in terms of our distribution businesses, about three quarters of those investments are in Chile, the rest in Peru, but Chile and Peru are both doing well, multiples are doing well, currencies are doing fine and the electro process is indicative that we are aware of some unsolicited interest, but we have certainly been aware of much more as we've gotten outer there. So I would say those are factors that we are certainly aware of but it is something we continue to utilize internally.

What returns are you earning on electro at this point?

Yeah, in the -- on a ROE basis, high single digits, eight, nine, I think our earnings for the year, I think I said our book investment of equity is about 160. I think our expectations for earnings this year were in the low teens.

Thank you.

Our next question comes from the line of Rudy Tolentino from Morgan Stanley. Please proceed.

Hi, good morning. Can you just remind me what your plans are for leverage lease investment and also just an update on what's going on with the tax issue?

The leverage lease investments are once we've had in our portfolio for some period of time we don't like to question on some of the global assets. To sell those is generally difficult to just for cash recapture issues build out. So we haven't made new investments of material amounts since, about five years, maybe a little more. Our Q will disclose similar to higher language the amount of tax benefits we've taken to date, what our total exposure is, that’s in the $800 million range. We have as a part of FIN 48 and FAS-132, we will record a reserve effective 1,1 of this year I guess combined that will be in the Q, it's over 100 or in the range of 100. In terms of next steps, we continue to be careful with our position in terms of the legal basis under which we did them. They are largely energy related facilities that is close to our business, obviously. And we generally would expect it to be a long process that to go forward and some of the indicators maybe what happens in other, other cases that come before us.

So, okay, so internally you intend to hold them and you don't expect, try to sell them or monetize them.

That's generally hard to do. I won't say we won't keep our eyes open but that's generally hard to do.

Okay. Thank you very much.

Our next question comes from the line of Paul Fremont from Jeffries & Company. Please proceed. Paul Fremont - Jeffries & Co.: With respect to the $0.10 to $0.15 of upside that you see at the utility, would that also be potentially upside on your annual guidance for 2007, assuming that the other businesses come in at the high-end of their ranges?

Paul, we are trying to decide for the specific reference you're making, the $0.10 to $0.15 was that. Paul Fremont - Jeffries & Co.: I'm sorry; in the press release I guess there is a discussion in the PSE&G section. Where…

Paul, that's, the impact of last year is below normal weather on the gas company and that reserving itself out assuming normal weather this year.

But all that's baked into the guidance.

That's baked into the guidance. Yes Paul Fremont - Jeffries & Co.: Okay. I just wanted to make sure that that wasn’t. Okay. And then, in terms of the Texas contracts, it looks like the contracts currently are out of the money. Can you give us a sense of when those contracts ultimately come off in Texas?

Paul, it's a five-year contract with three and three quarter years left. But the negative mark-to-market is actually a good thing. The market has moved up. They moved up about six, eight weeks ago. One of the moves with the withdrawal of the expectation of a number of coal plants associated with another transaction. So that did have a positive longer-term market move. So despite the $0.06 for the quarter it's actually quite full assigned for the state and our investment longer term. It's 350 megawatts. We have got 2,350 of the two is under contract for the next, through 2010, I guess it is. Paul Fremont - Jeffries & Co.: Right. Thank you.

(Operator Instructions) The next question comes from the line of David Frank (ph) from Catapult Partners. Please proceed.

Hi, guys. It's actually Steve Fleishman. Can you hear me?

Yes.

I know I saw you about a week ago but I think you talked about the '08, '09 RPM trade. Currently trading in like the 120 area, is that still, since it’s so liquid, I am curious is that still roughly where it is? And then, I think we are going to check if the '09, '10 is trading tall at this point? I don't know if that's trading?

Yeah, Steve, it's a relatively thin market but the range of 120, maybe a shade less is still reasonable. Our understanding is that the next year that would be with that nine, ten, is still the extended quotes are available in that zone. And that's also roughly the zone it was at, at around the time of the BGS. And you are using some round numbers and those are. And as we said, we were using at least into our planning assumption, as we talked in our investor conference a few wheels ago, we were using a number around that zone on a dollar per kilowatt year in the low to mid 40-buck range.

Okay. And on the energy master plan, which I guess will address both the solar and broader initiatives. When will that likely be kind of down to more detail, is it sometime later this year?

The plan itself is scheduled to be published in October of this year. There are drafts that working groups that we are participating in ready to exchange. But the solar initiative, while it's perfectly consistent with the goals and objectives of the plan. We've already submitted a filing on that, Steve, and we are trying to operate ahead of the plan, quiet candidly. And we’re are going to speak about some other initiatives later in the year that we won't feel constrained by the timing of the master plan either as long as there is complete clarity and consistency with the goals and objectives of the plan and the filings we intend to make.

Okay. Thank you.

Our next question comes from the line of Zachary Schreiber from Duquesne Capital Management. Please proceed.

I am from Duquesne, thanks for taking the call.

Hey, Zach.

Just a question on just sort of RPM. And the cone structure and given that the prices at least for the first auction came out either at or slightly above the cone, is the cost of new entrant calculation in the RPM. you’re seeing, is it a stale number? And how and can it be updated, I understand it can be updated, once a year, but even more often? Will it be updated given increased yield cost, increased component cost, pricing power from the E&Cs and so sort of, first question is just on the RPM. structure will the cone be updated? And then generally what do you see given all the thing I just mentioned, I mean, are those right? Are there offsetting factor there? What is the cost avenue entrant and given all that the markets, which you're in, when are they going to see scarcity and what kind of pricing signals if they have to function appropriately need to be sent to innocent advised new build. And the last part of this question is will the value of that be captured in the heat rate or will it be captured in capacity price, i.e. is there some, any way, I’ll stop there. Sorry.

You went to great school of asking one question.

Sorry about that. I mean, generally the whole issue is RPM. cost of new entrant whether the value flows through the heat rate or the capacity?

Yeah, I think Zach, in general since the column was developed we think there is more numbers that have pressured that upwards rather than downward and the most notable thing you mentioned is just cost of new entry, pure construction building whether it's steel, whether it's pressure on the resources to get stuff done, pricing power, whatever, but there have been pressures in that number which was adjusted column could be reassessed potentially. In terms of…

$600 a kilowatt now.

Sorry.

$600 a kilowatt, excuse me, to call now. That’s $600 a kilowatt.

Well, 72 bucks a kilowatt year.

Right.

I believe the number that they use, but it's a level lived $72 per kilowatt year for 20 years in terms of the reference plant that they used, it was a peaker, that sounds a little bit higher than the number they use. But it's all detailed in the PJM respects.

Okay.

In terms of what the process is to review that, the reason one, I am not sure how formally it's been communicated. I would have to talk to our market people to really understand the specifics. There’s some other things in it. During the development we had suggested a somewhat more gradual decline, a ramp, let's say, so we’ll see over time and after this is done a few times, I'm sure PJM will listen to participants and assess whether there should be some modifications.

You say a more gradual ramping in which component of its term?

In terms of the ram down between the one and a half times cone.

I got it.

We thought there was some merits to having a more gradual ram to reduce volatility in prices from one auction to the next.

That's why the RPM was created. This is essentially our liability-pricing model; it's an attempt to send somebody to builder their combustion administrative time to the peaking unit. So it's not intended to the next load fall unit or base load unit. And you would have to looked beyond capacity margins and energy margins to look for the right pricing.

We do it's just that you, a broad question though that we can address. Yes, if the cone alone does not upset new bills and certainly as Ralph said, it would be a meaningful distance from sending a new bill on a more base load facility, then you would look to heat rate expansion. We do see some heat rate expansion especially off peak longer-term. Some of that may be partially due to some pressure in coal, may be due to gradual tightening market and could even be partly due to carbon.

And which year, is it beyond 2010 that you are seeing that, or are you seeing that more near term?

It's more sort of ten and out a couple years.

Got it. Thanks so much, congratulations.

Thanks.

Thanks Zach.

Are there any other questions, operator?

Mr. O'Flynn, there are no further questions at this time. Please continue with your presentation or closing remarks.

Well, with that we want to thank you for joining us and, again, we’re delighted with the first quarter results and even more delighted with the platform for the future. Thanks for your attention. Hope we’ll see you all soon.

Thank you.

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