Ladies and gentlemen, thank you for standing by. Welcome to the Public Service Enterprise Group First Quarter 2006 Earnings Conference Call and Webcast. (Operator Instructions). As a reminder, this conference is being recorded, Monday May 1, 2006 and will be available for telephone replay for 48 hours, beginning at 1 PM Eastern Time today until 1 PM Eastern Time on May 1, 2006. 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 Sue Carson. Please go ahead.

Thank you and good morning. We appreciate your listening in today either by telephone or over our website. I’ll be turning the call over to Tom O’ Flynn, PSEG’s Chief Financial Officer for review of our first quarter 2006 results. Jim Ferland, PSEG’s Chairman and Chief Executive Officer will also join us this morning to discuss our pending merger with Exelon and other key events. 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-Q with the Securities and Exchange Commission later today, which will contain additional information. In today’s webcast Tom and Jim will discuss our future outlook in their 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 today may differ materially from actual results or events. The last word on any 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 update in guidance will only be done in a public manner, generally in a form of a press release, a webcast such as this, or an 8-K or other SEC filings. PSEG may or may not confirm or update guidance with every press release. As a matter of 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 income to operating earnings. We’ve adopted this format to improve…

Hey thanks Tom and good morning everyone. Before getting to the, on the merger front, I’d like to say just a couple of things about nuclear operations. Tom has already discussed the performance Salem and Hope Creek in terms of plant output and the financial effects of improved operations which are obviously very important. I’d like to report to you that those are not the only indicators we’ve got and well, how things are going down at nuclear. Now without exception, the feedback with the Nuclear Regulatory Commission, INPO (Institute of Nuclear Power Operations) special review team we’ve employed our own internal quality assurance folks, all now are meaningful improvements across all aspects of our nuclear operations. But we’re not, not the earnings perfectly and these reports don’t say that, but all of us have work to do. Power from the trends are extremely positive and they made me feel real good about, we can, are being able to look forward to some very strong performance from these facilities in the upcoming years. I may hope out now to the, to the merger for a little bit. I suspect many, if not most of you participated in the Exelon teleconference last Wednesday. And as you heard from John and the Exelon folks were the two key remaining regulatory proceedings, we have to deal with, The Department of Justice and then here in New Jersey, the BPU. The Jury hearings concluded sometime ago, now at the end of March, the initial briefs were all filed last Wednesday and the final briefs, I’ll do by May 10th, that’s next Wednesday. So we’re reaching the end of that process. And we feel very good about it, (indiscernible) established and we believe that our arguments that will be persuaded. I suspect many of you,…

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

Thank you. Ladies and Gentlemen we will now begin the question and answer session for the members of the financial community. (Operator Instructions). One moment please, for the first question. The first question is from Gregory Gordon from Citigroup Investment Research, please proceed.

Thanks, I’ve got a couple of much in both questions on the quarter and then a larger question on the merger. First on the, on the new guidance for the utility the $270 million to $290 million operating earnings guidance, what type of ROEs at the electric and gas business does that infer? Thomas O’ Flynn: Greg its Tom, we usually don’t give specific ROEs for each of our segment which are electric gas and of course, our transmission business. I’d say the gas business is materially under earning to 10% it got in this last case of 2002. It’s in the, it’s materially under earning it’s in the, it’s currently in the 6% to 7% ROE kind of range. So we certainly need a rate increase. The electric has been earning on historical basis somewhat higher than the 975 it got back in its August ’03 case. So on a rolling basis, we will over the next quarter or so, come down to that level and ultimately below that level and I feel to get the kind of credit recognition that that we need in the transmission business to go better.

Yeah and then the other question before I get to the larger is, strategic issues is on the, that transmission the PGSS, it appears that you guys are well aware that there is a structural mismatch there that can happen because the pricing is based on NYMEX but you obviously take positions in terms of storage for gas. So I would like to, I want to understand how you wouldn’t hedge some of that financial risk, sort of near-term fluctuations in NYMEX versus the gas that you have in storage, the NYMEX is a liquid financial product, to lose $0.11 because the gas price is falling sort of month-to-month versus the basis you had in storage is sort of, doesn’t make any sense to me that you wouldn’t somehow try to hedge that risk? Thomas O’ Flynn: Yeah it’s a fair point Greg. Let me just put in context the $0.11 was versus first quarter of last year which is the very strong quarter versus that normalized year was about $0.07 below that. So, of the $0.11 but $0.04 was, comparing to a strong quarter last year and then $0.07 was a more was versus expectations of our internal plan. Of this $0.07, about a four of that number is just plain volumes. There is a general volume based kind of number, so we’re talking about $0.04 or $0.05. Historically, this has been very solid stable business frankly we talk about a lot because it’s quite solid and reliable. And generally, we find some, in a normal, continual as I guess you call it curved, it has upward sloping curve generally our inventory cost compared reasonably favorably with our cost during the season. This year as you know prices were quite high, quite high and then sell-off dramatically over a very short period of time, we do, do some hedging. It varies from period-to-period, we do, do some hedging of course we can’t hedge, everything as you know always volumes are going to be. This year volumes were down materially but we did do some hedging this year, in hind side, we probably wished we would have hedged a little more back in fall, but I would say over time, over the last number of years we’ve done very well. In fact the first quarter of ’05 we would be testament to that.

Great thank you. And then the larger question is for Jim. Its sounds like your confidence as you are making headway now on both fronts both at the DOJ and then the New Jersey BPU, I guess my question for you is, is the June 20th, date in the merger document, after which either company come to the unilaterally choose to no longer pursue the merger, a significant deadline in your mind in terms of getting these agreements done or not? And can you say in terms of that a little bit?

Yeah the short answer for your last question is no. But let me elaborate on it, a little bit. First of all, as for as engagement, it has been frustrating to get everybody engaged but at this time, the source and the process was Department of Justice, they worked on this for but something like north of a year and until they were completing with all their work and they are now simply are not willing to tell us anything. And that was frustrating, for such an extended period of time, well now they are willing to start to say some ideas and thoughts and they are willing to share those with us and we are actively engaged with them and the same thing now at the BPU. On the June 20th, let me comeback for that after a minute. No, I don’t view that is a particularly important date at this time for a variety of reasons first just to remind everyone, what avails when we sign this merger agreement back in 2004, we didn’t want the merger agreement to be outstanding forever so we have, let’s take a data out there somewhere where if we can get all the approvals, we can walk away and I can remember thinking, its time, My God! That could never be as late as you know June of 2006, what as I know, as an effort that date was created for and it does give the parties the ability to walk away. The reason I don’t like that’s going to be, of any particular relevance is, I suspect, by the time they get to the end of this month, we’re going to have a pretty good idea about what this transaction will look like and what we are going to be achieve at both Justice and with the, and with the BPU. Now, half of that time before we can reach a settlement with either of these parties, both are respected companies, they’re have to agree that these agreements and settlements make sense. Now if we reach agreements with those parties and they make sense to both companies, the June date becomes not, no particular relevant it is like the, either that we can successfully reach settlement agreements with these two organizations, the papering of those in a various approvals could extend and will past the June 20th day and John and I has talk about that, and if we think it was beneficial of that time, we’d probably just move it ahead.

Okay thanks guys.

Thank you. Just to remind everyone, we’ve got a number of calls queued up so please limit yourself to one question. Thank you. Let’s go to next question please.

Our next question comes from Paul Patterson of Glenrock Association. Please proceed with your question.

Good morning guys. Thomas O’ Flynn: Hi Paul.

Just the follow up here, I am not sure, I completely understood the answer to the, to the electric ROE that you guys expected to get this year. Could you just elaborate a little bit on that and also on the weather versus normal, I think you said it was $0.07 on the gas side versus 2005, what would have been normal. And was there any impact on electric at all?

Yeah Paul, let me try to do this one at a time, the gas number I think I said was in the 6 or 5, close to the 5% range. The electric and I am comparing these two what our latest allowed was, the electric the latest slab was 9.75 which is in summer 2003, we’re currently a point or two, above that on a rolling historical basis, the request for making an offset to depreciation credit on a look forward basis as well as historical basis. And as the year progresses, we’re going to fall at or through that 9.75% range without the credit.

You fall below the 9.75

Yes.

Okay that’s nice go ahead.

Towards, towards, towards end of the year, yes. So in another words, we, that’s something we mainly and we think it’s appropriate to be getting. Just on, on the rate impacts, PSE&G was down for the quarter-to-quarter about $0.07, the 90% of that was gas, that’s the PSE&G. And the PGSS, it’s the contract between Power and PSE&G for gas supply that was half about $0.07 versus a normal year, our expectations result $0.11 versus last year which was an unusually strong year, strong quarter.

Okay but the, but the $0.07 of PSE&G versus normal would have been, would have been what, I mean, if you look at the first quarter, it says weather is $0.07 that’s gas is at the same as what, what it would have been versus the, versus the normal year?

Actually, the, yeah the seven is versus a strong year last year. So versus normal, it’s about 5.

Okay thanks.

It was a, it is a cold winter first quarter 2005, which help both PSE&G and the PGSS. The PSE&G is half about $0.07 versus first quarter about 5 versus normal and the PSEG Powers is half about $0.07 versus normal about an 11 versus last year.

Great thank you.

The next question is from (indiscernible). Please proceed with your question.

Hi actually it’s Andy Lewis, how you doing? I guess only got one question. Let me go with this one, can you just comment on John Rowe’s, (indiscernible) Exelon’s press release are related to earnings and just your comment or their phase of using economic sense…

Yeah Jim Ferland here I’m in.

What you’re thinking…

I think that’s, I could make that chain comment. See, the figure remaining uncertainties in this issue and in this, in this combination, what we are going to have to give up if any thing at The Department of Justice and the BPU and obviously those are important outcomes and if we give away too much then we could bow away the economics of the transaction. And that’s going to be a very important to both of us. And we are both going to be looking at that. But the, we’ve got away, we’re pulling that, we are going to be forced to be over that in reaching settlements with these various organizations. So we’ll, once we’ve done that, we’ll obviously, we won’t get in to those agreements unless they produce a satisfactory outcome.

Are you two both on the same page, with the two companies or is there a little differing of opinion on…

I don’t confuse it; I don’t think there is a inch of space between John and I. We are talking all the time; we know what’s going on. Frankly, people ask how do guys get along in this kind of thing frankly, we could be a better person or made do be doing this transaction with, then John Rowe I don’t know where you will find him. This guy has been incredibly flexible, reasonable; we are communicating all the time and I don’t think there is a space at all between the two of us when it is to how we look this transaction.

I received that’s a bit of extra question but yeah you both good guys I agree thank you.

Yeah.

The next question is from Leslie Rich of Columbia Management Advisors please proceed.

Hi I wondered if I could just ask some question on attachment for which is your cash flow statement. You have a big positive swing in sort of, other cash flow come Ops with no breakdown I assume, about $200 million of that its depreciation just wondered what else or causing a $500 million positive swing? And then also in financing activities negative $750 million approximately I thought you paid down from debt I just wondered what else was, sort of the big drivers in those two buckets? Thomas O’ Flynn: Okay Leslie, we are filing our Q, we expect by the terms of business today so obviously the full cash flow statements in it. The biggest up was really margining as prices came up somewhat and I think we said in our K, that our margin-posted, collateral-posted came down by about which got basically in half during February and we did continue to see that now some of that’s in letters of credit some of that’s in cash. Those were the, those are the biggest pieces, there were some other pieces in terms of pension in some other pieces but there was no collateral and, collateral was the largest. In terms of debt coming down, the biggest piece is Power had a maturity, I think it was a five year from initial deal that was done, $500 million maturity we paid that up with short-term debt.

Okay thank you.

The next question is from Ashar Khan, SAC Capital. Please proceed with your question.

Just with two short question how much did the PGSS make last year and how much are you expecting to make on that this year? Thomas O’ Flynn: Yeah, I’m sorry rather we don’t report that as a separate segment. And I think in the past we’ve shown some large numbers for over all ER&T numbers, I’d rather get away from specific numbers that’s what I talked all about it all in terms of differentials.

Okay but Tom, is it fair to say that for the rest of the year are you expecting further negative variance or the negative variance is the only one in the first quarter? Thomas O’ Flynn: Well PGSS just like our PSE&G gas business is largely pretty 4-month season. And certainly January and February are the biggest piece and that’s probably about, first quarters’ by 50% of our send out the rest would be Novembers some on close December.

Okay if I can just end up, you mentioned end of May on both agreements I can rely to New Jersey but can I just ask why would it take the end of May at Department of Justice just trying to get a sense of the timing your anticipated timing?

Well I would like to think it wouldn’t take that long but it, but it may obviously, we are going to make this time further short as we possibly can. And I can say that all are taken the Department of Justice so long time that it’d be willing to talk towards they have been very forth-coming and very responsive since they have provided their first feedback to us.

Jim, can I just ask you when that first feedback was provided?

I don’t remember the exact day but that was a not longer, maybe of a week or two.

Okay, thank you.

The next question is Paul Ridzon of Key Banc Capital Markets. Please proceed.

Good morning, throughout the balance of the year, is it tax rate that holdings are going to be a headwind or it was, was just a particularly owners quarter? Thomas O’ Flynn: This is a, a little more honest but, but we should have somewhat of our higher tax rate during the years we said, some of that is just an increase percentage of US based contribution. But that’s all cooked into the guidance that we gave you.

Can you, just back on this PGSS because it is initially the kind of the first time referred about it. Is there kind of a sense to stay in the course and kind of try to almost outcast the market or do you want to put more maybe you can just ride the market more? Thomas O’ Flynn: Yeah I just, this is been a very good business for us. It continues to be good business, it is doing something we’ve done for many and many years which is procure gas on behalf of customers for PSE&G. Obviously, it, the residential costs are pass through. I think it was in our third quarter earnings call, where we talked about the inventory costs that the PGSS had based upon our ADBs or sell store generates about 30% below the market. So that’s, its obviously doing good things for customers. This is one year when there was a dramatic decline of prices and that and that took about $0.04 or $0.05 off of the margins just on that price to decline if you will, keep in mind also when we look at this, we look at this in the context, the Powers overall risk return relative to gaps, it just because we’re we have to look at this is part of the overall portfolio. So we don’t want to suggest that we will only expose to Gas, there were some hedges on, difficult for hedge given volumes with complete certainty, but also we look at this on a portfolio basis for Power.

Given the uncertainty on volumes is this inventory mark-to-market or it is or do you, is it you think qualifies hedge counting. Thomas O’ Flynn: It’s largely normal. Anyway, next question.

Okay Paul.

The next question comes from John Ali of Zimmer Lucas Partners. Please proceed with your question.

Good morning and just a quick question on the utility guidance. You said weather it’s about $0.07 which is like $17 million over that $45 million. How much you’re now including in guidance of the $64 million depreciation credit? And then, how much of any of the gas rate increase? Thomas O’ Flynn: I don’t want to go into these specifics on outcome of rate increases, I think on the gas side we’ve said that decision has been put off until December so obviously we are not.

Okay. Thomas O’ Flynn: That’s the humble expectation, the 64 which is ruining out 68 technically on the electric side, we expect to get that during the year. But obviously, we were, we didn’t get a last quarter but we think as the year goes along, we should get some reasonable piece of that.

Okay great, thank you very much.

The next question is from Daniele Seitz of Dahlman Rose and company. Please proceed with your question.

Actually it’s just a follow up on one before. I was wondering you kind of really covered that $0.04. So, whatever the cost of the delay, it’s going to be on the depreciation issue.

That’s right Daniele, it is fine to us.

Okay, so and okay I’ll speak to that question, I’ll come back later.

Next question.

Our next question comes from the line of (indiscernible) from Deutsche Investment Management. Please proceed.

Well, thank you, a question for Jim regarding the two discussions you are having with New Jersey and DOJ. But is the public benefit, is the primary criteria for department for the New Jersey as well as how does the DOJ defer from first review of the same issues?

Well, it was a great question on New Jersey, the BPU they have separate area that describes the one of that is supposed to consider when they look at a merge like this is a product yet demonstrates pulses of benefits to the state of New Jersey and the customers and then you’ve got a group a lot of parties and that going to held at least been different that cant stop any losses in those significant number of those. On the, with regard to the DOJ, I think maybe some people might have thought at one time that DOJ would simply differ up to further on these issue, some scrap leads to conclusion quite soon and they, and they choose not to, and they have been working this issue and enormous detail for an extended period of time, in the last numbers I’ve saw, we have produced something in the order 10 million documents for their review and dozens and dozens of interviews in sale-force and I really went after this is a very, very federal way and they are obviously not simply going to take whatever, whatever, whatever friction, so we’re kind of, workout with them and we know we can work something out here as we work our way to the rest of this month.

Okay thank you.

That will conclude the Q&A session. Mr. O’ Flynn I will turn the call back to you. Please continue. Thomas O’ Flynn, Chief Financial Officer: I think just one thing Leslie, I was really confused on the debt maturity the one we had was after the quarter. The biggest piece of the fiber of the large debt decrease was the call we enhanced a few days before the end of 2005 were holdings for about $309 million, $310 million and then so the other meets our demand, so that’s was, that was the biggest chance that therefore let PSE&G (indiscernible). But the, the Power maturity half in the first, a few weeks to second quarter, I think right, folks thanks all for joining. We will start the quarter we expect it would continue to, see yourselves getting the guidance and see some good improvements especially in the latter part of the year at Power. Again we continue to like our business model; I think we’ve got a good balance of earnings growth and prudent risk management and thanks all again for joining.

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