Ladies and gentlemen, thank you for standing by. My name is Shelby and I am your event operator today. I would like to welcome everyone to today's conference, Public Service Enterprise Group Fourth Quarter 2017 and Year End Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded today, February 23, 2018 and will be available for telephone replay beginning at 2 o'clock P.M. Eastern Time today until 11:30 P.M. Eastern Time on Friday, March 2, 20178. It will also be available as an audio webcast on PSEG's corporate website at www.pseg.com. I would now like to turn the conference over to Kathleen Lally. Please go ahead.

Thank you, Shelby. Good morning, everyone. Thank you for participating in our earnings call. As you are aware, we released our fourth quarter and full year 2017 earnings results earlier today. The release and attachments as mentioned are posted on our website at www.pseg.com under the Investors section. We also posted a series of slides that detail operating results by company for the quarter and year. Our 10-K for the period ended December 31, 2017 is expected to be filed early next week. I'm not going to read the full disclaimer statement or the comments we have on the difference between operating earnings and GAAP results. But I do ask that you all read those comments contained in our slides and on our website. The disclaimer statement regarding forward-looking statements details the number of risks and uncertainties that could cause actual results to differ materially from forward-looking statements made there in. And although we may elect to update forward-looking statements from time-to-time, we specifically disclaim any obligation to do so, even if our estimates change unless required by applicable securities laws. We also provide commentary with regard to the difference between operating earnings and adjusted EBITDA and net income reported in accordance with Generally Accepted Accounting Principles in the United States. PSE&G believes that the non-GAAP financial measures of operating earnings and adjusted EBITDA provide a consistent and comparable measure of performance to help shareholders understand operating and financial trends, but should not be considered an alternative to our corresponding GAAP measure net income. I'm now going to turn the call over to Ralph Izzo, Chairman, President and Chief Executive Officer of Public Service Enterprise Group. And joining Ralph on the call is Dan Cregg, Executive Vice President and Chief Financial Officer. At the conclusion of their remarks, there will be time for your questions. We ask that you limit yourself to one question and one follow-up question, and we hope to get to everyone's questions. Thank you.

Thank you, Kathleen and thanks everyone for joining us today. This morning we reported non-GAAP operating earnings for the fourth quarter of 2017, a $0.57 per share versus non-GAAP operating earnings of $0.54 per share earned in the fourth quarter of 2016. Non-GAAP operating earnings for the full year of $2.93 per share versus 2016 non-GAAP operating earnings of $2.90 per share were above the midpoint of our guidance range which was $2.80 to $3 per share. Our GAAP results for the full year of $3.10 per share included onetime non-cash benefits associated with the revaluation of deferred tax liabilities at enterprise and PSEG Power associated with a reduction in the federal tax rate and expenses associated with our decision to retire the Hudson & Mercer coal fire generating stations in June of '17. Details on the results for the quarter and the full year can be found on Slides 5 and 6. Successful execution of our capital program at PSE&G, an increased output coupled with strong cost control at PSEG Power offset earnings weakness experienced earlier in the year from abnormal weather conditions. Non-GAAP operating earnings from our regulated utility business grew 8.6% in 2017 as PSE&G's investment program expanded rate base by 12.5% to $17 billion at the end of the year. The utilities earnings have grown at an annual rate of approximately 13% over the past five years which is in line with its growth in rate base over this timeframe. While the growth in earnings occurred with PSE&G maintaining cost discipline -- I'm sorry, the growth in earnings occurred with PSE&G maintaining cost has been while was successfully implementing infrastructure programs that upgraded its electric and gas systems to make them both, more reliable and resilient. Importantly, PSE&G has achieved these results as customer bills have…

Thank you, Ralph and good morning, everyone. As Ralph said, PSEG reported non-GAAP operating earnings for the fourth quarter of $0.57 per share versus $0.54 per share for the fourth quarter of 2016. Our earnings in the quarter brought non-GAAP operating earnings for the full year to $2.93 per share, a 1% increase over 2016's non-GAAP operating earnings of $2.90 per share and at the upper end of our non-GAAP operating earnings guidance for 2017 of $2.80 to $3 per share. And on Slide 5 we have provided you with a reconciliation of non-GAAP operating earnings to net income for the quarter. We've provided you with information on Slide 11 regarding the contribution to non-GAAP operating earnings by business for the quarter. Slides 12 and 14 contain waterfall charts that take you through the quarter-over-quarter and year-over-year net changes in non-GAAP operating earnings by major business. I will review each company in more detail starting with PSE&G. PSE&G reported net income for the fourth quarter of 2017 of $0.43 per share compared with $0.38 per share for the fourth quarter of 2016. PSE&G's full year 2017 net income was $973 million or $1.92 per share compared with net income of $889 million or $1.75 per share in 2016. Non-GAAP operating earnings for the full year were $963 million or $1.90 per share, an 8.5% increase over 2016 non-GAAP operating earnings of $1.75 per share. As shown on Slide 16, PSE&G's net income in the fourth quarter continue to benefit from a return on its expanded investment in transmission and distribution infrastructure which more than offset an increase in O&M. Growth in PSE&G's investment in transmission improved quarter-over-quarter net income comparisons by $0.03 per share, and recovery in investment made in gas distribution under PSE&G's energy strong and gas system modernization…

[Operator Instructions] And your first question comes from Julien Smith of Bank of America Merrill Lynch.

I just was wondering, could you provide a little bit of commentary on your outlook of ongoing PBM price commission reform discussion, as well as the potential for comprehensive energy legislation in New Jersey?

As you know there is due date -- I believe it's sometimes in the first week of March where each RTO was supposed to get back to FERC with respect to the FERC decision to close the DOE [ph] and to ask the question about fuel diversity and resiliency of the grid. There have very public conversations and statements by PJM that they believe in particular inflexible unit challenges are things that need to be corrected in the market, these showed up in abundance during -- it's not called a pole vortex [ph], there is some other name for this past January, some sort of a cold bond. We're in the odd testified in front of the Senate Energy and Natural Resources Committee that there had to be $4 million to $5 million in daily uplift payments. So without having control [indiscernible], I fully expect PJM management to submit comments to FERC that they have some improvements to make in their current tariff if prices in fact going to be the way in which the market is reliably dispatched because there continues to be out of marketing moments that are relied upon to achieve that. Switching gears on and moving over to New Jersey; we've had some very good conversations, we had a good day yesterday with a comprehensive energy bill which included our nuclear concerns reported out of the Senate Budget Committee in the Assembly Telecommunications and Utilities Committee getting further reference in the assembly to its budget committee, it's appropriations committee if you will. And I think the encouraging news there is that everyone who has testified and we now had four hearings on this thing I think with the exception of our competitors have said they don't want to see those plants closed. And our competitors obviously want to see those plants closed because that means higher prices. I just have a high degree of confidence that New Jersey policymakers understand the value of those plants and will do the right thing, but of course, one cannot guarantee any outcome.

You talked about roughly $80 million benefit from tax reform at Power but increased guidance by only $50 million. Are there any headwinds that limit the ability to fully recognize that tax reform benefit?

I think if you think about the overall impact year-over-year, we referenced the $0.16 related to tax reform but of course there is other impact as you step from year-to-year. What we'll see changes in capacity prices which will help but we also have a reduction in the average price that we sold our power. So that's a headwind that we have been fighting, and as you mentioned that we're [indiscernible] per megawatt hour, so you think about that across the fleet and then you compare that to an uplifting capacity and a benefit from tax reform, those are your biggest pieces.

Your next question comes from [indiscernible].

I understand that you have a pending rate case for your utility but your guidance for '18 imply relatively low pick up in earnings power of the utility versus what we have seen in the past. Is this just because you are waiting for your rate to be shoot up in the rate case?

If you think about the timing of the rate case, we are essentially saying that we would intend to see rates at the end of the year; I think we referenced fourth quarter in our prepared remarks. So I think a big part of it is just related to the rate relief on the distribution side being -- coming at the end of the rate case which was really towards the end of the year.

But how about your at previous expectations that there would be a rate based growth of around -- let's look at 8% or 9% and a commensurate increase in earnings. Is that -- does this still hold? I mean, that we're still waiting for the outcome of the rate base.

Yes, I think -- if you think about the two sides of the business; the transmission side, that's going to move along by virtue of the formula rate which is always the norm. But when we take a look at the utility side of the business, I wouldn't expect to see anything different. We have 6% increases to the midpoint of the range and with the rate case following on later in the year. And as we move into '19, I think that would bridge the gap for you.

On the Power side; it seems like you've marginally reduced your expectations of volumes for the VGS auction, there has been also some news or press coverage of your interest in the retail business. How should we think about it? How you are actually trying to shape up the merchant power earnings given the weakness of the fuller curves?

We've been pretty consistent that the reach of our business is defensive play; it's primarily targeted at improving the negativity and basis differentials that we've experienced. We're looking at it as a nice supplement if you will to diminish of the BGS load contract that we have seen occurring over the years. What did change probably about a year or so ago was our recognition that we would not find an acquisition opportunity just kind of step into a New Jersey focused PJM centric opportunity; so we're building it organically and that's going fine but when you do something organically, it's a little bit more gradual than just stepping into it. So no change in strategy there at all.

And as we step from year to year, we will have a BGS auction roll-off, so the state goes out to auction, a third of the load each year; so over three years they auction everything, and so as we step from year to year to year there could be some modest differences within volumes of the number of tranches that we would have as we go from auction to auction to auction.

I want to supplement something the Dan mentioned before. So the rate base growth; we're still saying 7% to 9% and comfortable with the midpoint. But remember, we had a fair amount of capital that was deployed coming at the back end of GSMP1 and energy strong, that is part of the rate case proceeding we are in now. So the 12% growth in rate base that you saw last year by necessity is then correctly pointed out is awaiting rate relief at the end of the year and when you get at the end of the year, you just -- and now Dan and I repeating ourselves, it doesn't give you the full 12 months of impact.

Your next question comes from Praful Mehta of Citi Investments.

I wanted to just clarify in terms of tax reform, what is exactly built into the forecast? I know on the back power side it sounds like you've incorporated the lower taxes. On the utility side, the DTA refund the unprotected didn't sound like it was; so I just wanted to clarify specifically what is currently built in tax reform and what is more left in terms of regulatory outcomes than you're waiting to see?

I think if you think about the utility side of the ledger, it's much more a cash story especially right away. So it's about the pass back of taxes because frankly, you're not going to end up paying taxes. So if you think about what we did, we proactively in January went to FERC knowing that there was going to be a rate change and we knew we were going to pay less tax in 2018; so we proactively want to FERC to get that money back in customers hands; revenues come down, taxes come down, end up being a wash. There will be some modest benefit as we step through time because if you have less deferred taxes on your books and you pass that back to customers, you know deferred taxes as a reduction in rate base, so your rate base will grow as you step through time with that reduction in rate base but that will grow overtime and does not have really much of a P&L impact as you look at 2018 in particular for the utility.

I was -- again, more focused on the cash impact specifically; like for example, the DDL refund, is that currently incorporated within the forecast or no?

Yes. And further to the prepared remarks as well, you think about some of those are protected deferred taxes, that's the lion share of our deferred taxes; and that will get passed back over what's called the average rate assumption method, that's over the remaining life of the asset and I think it's a true statement to say that we are still passing back some deferred taxes from the 1986 Tax Act when it happened because we have such a long lived property. So that will go on for a period of time as those different lives end up turning. But yes, we've incorporated what we know and estimates of what we don't know into our numbers.

And then secondly, in terms of the New Jersey bill; it's helpful and yes, the conversations say you were productive from what we heard yesterday. How do you see that playing out from here in terms of timing? And when does it reach the governor's desk? And all of that; how do you see that playing out from here?

My high degree of confidence in the ultimate outcome is matched by mild certainty over timing. I mean what I can tell you is the bill is posted for a vote Monday in the State Senate. The assembly doesn't have a voting session, I don't think at present scheduled until the end of March. So we're 140 year old company Praful, Salem is 40 years old, Oak Creek is 30 years old; I'm not going to sweat a couple of weeks one direction or another but I feel pretty good about the nature of the conversation and clearly, earnest desire in the part of all stakeholders to preserve those plans but timing is not something I can predict.

Your next question comes from Jonathan Arnold of Deutsche Bank.

My question has to do with -- on tax reform and your comments; Dan, I think you said obviously that you're not planning any equity but you said you also still have access balance sheet capacity. And I think you don't normally update till the Analyst Day but if I recall, at EEI [ph] you gave us a slide which showed something like $1.8 billion reduction or roughly halving of what it had been without tax reform. So I guess, my question is that still a good number or as you further refined your inputs and outputs, is this -- are we somewhere else?

No, I think you're still at very much in that range, Jonathan. I think that what we tried to do at that point is highlight that -- a number that we have provided was based on large part on FFO to debt and there was a lot of FFO that came from bonus depreciations. So by either the passage of time or by tax reform because at EEI we had not had tax reform at that point in time. Unless bonus was extended the FFO was going to come down; and so that was kind of a temporal aspect and what we tried to do to your good memory was to give some indication that that was going to come down. So the order of magnitude numbers was about $3 billion at that point and we were highlighting that about $1.8 billion or so would go away with bonus depreciation; so that's still in the right ballpark and I think the right way to think about it. And when I referenced before the strength of balance sheet and the ability to fund further investments, it's still that order of magnitude.

And so, that was -- if I remember the math was like $300 million FFO divided by your 18% target, and effectively that's how you got that. So presumably that means you're sort of -- as you've put all this together, you see FFO degradation roughly in that $300 million range.

Yes, as you step out into -- I think our number were target around 2020 or so timeframe, right. So you're kind of come off of the bonus years but that's -- you're thinking about it exactly right.

Holdings is on the increase in '18 over '17; is that all tax reform related or is this -- and I guess some uptick in the Long Island contract or is anything else driving that?

No, it's not a lot. If you have a little bit lower taxes, you'll have a little bit higher income and that's not -- the $35 million we threw out is kind of a normal range; last year we had some tax issues coming through and we had made a contribution to the foundation. So I think you can look at '18 as being a more normal year.

So it's more that '17 was a little skewed low and '18 is more normal?

That's exactly right.

Your next question comes from Greg Gordon of Evercore ISI.

A lot of my questions have been answered, and this one you may not be able to answer but I'll try. In terms of your observation from the outside looking in at how PJM gets to the answer on implementing their price reform initiatives?

It appears that there is a bit of a cart-horse [ph] issue here and that one path is to wait for the FERC to potentially order a 206 proceeding and say that their rates are unjust and unreasonable. So my first question is, are we on a path in the current FERC docket where you believe at the end of the initial filings and the responses that the FERC could look at the evidence that PJM files to show that their rates are not appropriate? Can they actually get to a place at the end of this proceeding where they could legally say, yes, you've proven your rates are unjust and unreasonable and allow them to go ahead and change the rate? Or are we realistically on a path here where they have to make a decision on whether they're going to go through stakeholder process; and then it's whether they go through a truncated process with a Board vote or a more elongated process with a stakeholder vote knowing -- understanding that the former was what they used when they did capacity performance. It's a long question but hopefully, you get the gist.

Yes, that was just a jist but you we're right at the start; Greg, I'm sorry, there is no way to predict that. I would point out to you though that there is multiple things going off at FERC that matter right from PJM there is the capacity market reform as fast stock pricing as price formation So there is multiple issues, there is multiple degrees of freedom, is it 205, 206 or is it a truncated process. So it just -- I think we're all visiting with the commissioners and telling them how important and I think we're all seeing the same comments come out of PJM. So I don't know what else to say at this point in time.

Your next question comes from Christopher Turnure of JP Morgan Securities.

The only question that I have left is on New Jersey in nuclear support. You've answered a couple questions on it already of course, but I'm wondering if there is a couple of potential hurdles to getting across the finish line this session that you're concerned about it seems like the governor could potentially further his environmental kind of effort and the emission free our efforts long-term through this and there the some other stakeholders that seem to have come in-line here but what might we be missing that could start all the entire operation?

Chris, it's always nice to have quarterly calls where we're trying to explain the past but now you guys are really pushing us to predict the future, it is so hard. I mean the good news is, the Governor has publicly stated on numerous occasions that those plans have to continue to operate as a bridge to long-term renewables future. And as I said before, everyone has testified other than our competitors have begun their testimony by saying we don't want these plants to close but -- and they each have but that they put in there. So are there hurdles? Yes there are but I stay grounded on the support -- the articulated support of consumer groups, environmental groups, and the Governor, and the legislature itself and we have made progress in terms of schedule and in terms of going through the committee process. So we'll just keep making sure people know what it means if they go away. And then of course, the risk of stating obvious, all of our shareholders know that we will do what is right by our fiduciary responsibility in terms of [indiscernible] regardless of New Jersey's action.

Your next question comes from Michael Lapides of Goldman Sachs.

On PSE&G, I just want to make sure I understand the puts and takes in rates or revenue requirements that are happening this year. So on a year-over-year basis, is what you're saying is that transmission is actually down year-over-year and that's just all tax related.

From a pure revenue perspective, but completely neutral from an earnings perspective.

And then the distribution revenue reduction for tax is going to happen in April of this year?

Correct.

And that's not a full year number, that's an annualized number; so it says if they were able this year through March of next year?

Right.

And then the rate increase won't happen -- well, I'm going to rephrase that; anything tied to rate changes tied from the rate case won't happen until the end of the year?

That's right.

What about like tracker or GSMP1 or even GSMP2 related revenue changes or are you still getting those in 2018 or do the things we've talked about kind of supersede that or incorporate?

The only thing that ends up superseding that Michael is when the rate case is done. And so they roll in as we work our way forward, they'll be done I think by the time we get to the rate case and so that kind of wrap up at about the same time. But until then we'll have roll-ins as we always have.

So in 2018 you'll have the transmission revenue decline, obviously offset by tax. You'll have the distribution revenue decline offset by tax; and then whatever you'll have in the rate case, none of the other trackers or anything will flow in 2018 but they will kick back in 2019?

Yes. You'll have our continuing roll-ins as they are from the standpoint of energy strong and GSMP. And then we'll have the rate case as it comes in at the end of the year. So I don't think it's any different than the norm; the only thing different than the norm the way to think about it really is the two tax return actual rate -- the return of the taxes at both, the distribution and the transmission side which has no P&L impact, revenues go down and taxes go down. Also I think our solar and energy efficiency filings are not part of rate case proceedings, they will continue to have their trackers.

And then finally, what the tax rate are you assuming at both, E&G and Power this year? Like, what's in guidance?

If statutory moves to '21 and then we'll have some modest moves like we normally do. So for instance the update to taxes has eliminated a production deduction, a manufacturing deduction that Power would take to the tune of a couple pennies but other than that it's still modest adjustments off of the statutory rate.

And no significant state tax level added on top of that?

True but no different and other than the fact that the federal benefit you get from states is going to change by virtue of the federal tax rate change.

[Operator Instructions] Your next question comes from Paul Fremont of Muziho [ph].

Does your GRC filing and the rate base numbers that are in there, does that reflect the rate base numbers after-tax reform or would there be a further adjustment that we need to make?

What we have filed within the rate case -- assume that we did have the tax rate, the tax changes come through. We had also within our base rate case filing, had a pass back of some deferred taxes within that rate case; and we will continue to do so as we make our prospective filings. Now what may end up happening in our prospective filings is some of the pass back of deferred taxes that were embedded within the filing may get swapped out compared to some of the excess taxes that we will ultimately pass back to customers. So part of the -- I guess I would say the -- as we step through the next steps of this rate case, we will have overlaid on top of it the BPU order to provide back the tax rate change which was in our base rate case. So we will adjust the base rate case in our next filing to adjust for the fact that a separate filing will be made by virtue of the BPU order outside of the rate case.

And then can you at all discuss what the retail contribution was in 2017?

We don't break that out. It would have been very, very modest at this point.

I mean, can you give us maybe a metric like how many megawatt hours did you sell and…

I just don't have that number. I don't think we're -- we were really -- we'd like to tell you so many people we were hiring to get going but not in megawatts we sold.

So when would be sort of the first year that you would expect any type of material contribution out of that business?

Depends on your definition of material really. We don't break out a lot of the sub-numbers in Power, and we don't power plant by power plant; we don't give you gas versus electric. So I don't think you should expect us to break out something that is purely an organically grown defensive mechanism. There can be some changes in revenue recognition portrayals and SEC documents that may be a little more illuminating.

And your final question comes from [indiscernible].

You kind of referred to it that utility growth is a little bit muted this year but then can we expect -- what the inference I got from your comments is that we make it up in '19 because of the back end loaded nature of the rate case. That's my one question. And the second question I had was that you mentioned the 7% to 9% growth rate in the utility rate base; and that's the same number you mentioned at your Analyst Day but now you also mentioned that you have an additional $1 billion of rate base because of the tax reform. Is that $1 billion rate base included in that 7% to 9% or no? Just a clarification on those two issues.

I think the way to think about it is that we jump off as we do every year from a higher base by virtue of the prior year's investment in rate base. So as rate base steps up, the ability to grow at the same rate kind of presupposes an incremental increase to rate base from a pure dollar amount. And if you take a look at the incremental rate base by virtue of the lower deferred taxes, and if you take a look at the bump up in the starting point year-over-year; it's a bit of an offset. So I think that you think about as going from 7% to 9% on a lower basis, 7% to 9% on a higher base. Basically, it's tougher to do but some of the deferred tax of tax reform provides that offset and leave us at comparably the same place.

And what base are you using; can you just mention.

End of '17.

And then on the utility earning question?

I think it it's essentially what we referenced before; if we have incremental spend that Ralph reference from both GSMP and Energy strong and that was going to roll into the rate case and we have rates that come in towards the end of the year, you would anticipate seeing maybe a little bit of a modest shave-off of rate of growth. What comes in 2019 will end up giving you the details on it this time next year from the standpoint of total '19 earnings guidance.

So I guess that was our last question. Thank you, all. Dan and Kathleen will be on the road, hopefully seeing many of you next week. Three of us will be on the road a couple of weeks after that, maybe we will see many of you then. One thing that's little different this year, you may have noticed that we moved our Analyst and Investor Conference to June; please read nothing into that other than bad scheduling on my part that required some coordination of family calendars and business calendars but nonetheless, I think we have some good things to talk to about and we'll know a lot more than about the New Jersey nuclear situation, we'll know a lot more about RPM, comments will be into FERC from PJM and other folks. So I think we have a lot of opportunities ahead of us in the next few months. With that, thank you for participating in the call and we look forward to seeing you soon. Take care.

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