Ladies and gentlemen, thank you for standing by. My name is Jennifer, and I'm your event operator today. I would like to welcome everyone to today's conference call, Public Service Enterprise Group Fourth Quarter 2013 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded today, February 20, 2014, and will be available for telephone replay beginning at 1:00 p.m. Eastern Standard today until 11:30 p.m. Eastern Standard on February 28, 2014. It will also be available as a 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, operator. Good morning, everyone. We appreciate your participating in our call today. As you are aware, we released our fourth quarter and full year 2013 results earlier this morning. The release and attachments, as mentioned, are posted on our website, www.pseg.com, under the Investors section. We have also posted a series of slides that detail the operating results by company for the quarter. Our 10-K for the period ended December 31, 2013 is expected to be filed shortly, usually by the end of February. 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 read these comments contained in our slides and on our website. The disclaimer statement regards forward-looking statements detailing the number of risks and uncertainties that could cause actual results to differ materially from forward-looking statements. 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 law. We also provide commentary with regard to the difference between operating earnings and net income reported in accordance with generally accepted accounting principles in the United States. PSEG believes the non-GAAP financial measure of operating earnings provides a consistent and comparable measure of performance to help shareholders understand trends. I am 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 Caroline Dorsa, Executive Vice President and Chief Financial Officer. And at the conclusion of their remarks, there will be time for your questions. [Operator Instructions] With that, Ralph?

Thanks you, Kathleen, and thanks, everyone, for joining us. This is a great day for us following a great 2013 and even better 2014 and beyond. So let's get into the details. This morning, we reported operating earnings for the full year of 2013, and operating earnings for the fourth quarter were $0.49 a share versus $0.41 a share in 2012, which brought results for the full year to $2.58 per share or 5.7%, almost 6%, greater than 2012's operating earnings of $2.44 per share, and actually was above our guidance range of $2.40 to $2.55 per share. I hope you'll agree that PSEG delivered outstanding results in 2013 on many levels, and let me tell you about a few of them. What made this success particularly notable is that we did it in the wake of the damage to our equipment and facilities that we sustained from Superstorm Sandy just a year earlier. Well, first of all, PSEG was recognized for the 12th consecutive year as the mid-Atlantic region's most reliable electric utility, and was specifically recognized by EEI for excellence in its storm response during Sandy. It seems that we're tested every year and we excel in our response each and every time. We maintained that focus on improving reliability throughout the year, not just after the storm. PSE&G invested $1.7 billion over the past year to uprate its transmission network. The investment is part of a long-term program that has resulted in transmission growing to represent approximately 36% of PSE&G's rate base at the end of 2013. Let me remind you that it had been only 28% of the rate base at the end of 2012. And this work includes work on 5 major transmission lines, each of which is scheduled to be operational during the course…

Thanks, Ralph, and good morning, everyone. As Ralph said, PSEG reported operating earnings for the fourth quarter of $0.49 per share, versus operating earnings of $0.41 per share in last year's fourth quarter. Our earnings for the fourth quarter brought operating earnings for the full year to $2.58 per share, versus operating earnings for 2012 of $2.44 per share. On Slide 4 of our deck, we have provided you with a reconciliation of operating earnings, income from continuing operations and net income for the quarter. As you can see on Slide 11, PSE&G provided the largest contribution to earnings for the quarter. PSE&G reported operating earnings of $0.29 per share, compared to $0.15 per share last year. For the quarter, Power reported operating earnings of $0.23 per share, compared with $0.25 per share last year. PSEG Enterprise and Other reported a loss in operating earnings of $0.03 per share, compared with operating earnings of $0.01 per share in the year ago quarter. We've provided you with waterfall charts on Slide 12 and Slide 14 to take you through the net changes in quarter-over-quarter and year-over-year operating earnings by the major businesses. So I'll now go into more detail on each company, starting with Power. As shown on Slide 16, PSEG Power reported operating earnings for the fourth quarter, $0.23 per share, compared with $0.25 per share a year ago. The results for the quarter brought Power's full year operating earnings to $710 million or $1.40 per share, compared to 2012's operating earnings of $663 million or $1.31 per share. Power's full year operating earnings exceeded the upper end of our guidance, even if we exclude the operating earnings associated with the asset transfer we undertook at year end from Holdings to Power, which I'll discuss a bit later. The earnings…

[Operator Instructions] And your first question comes from Travis Miller with Morningstar.

Just wondering, real quick, if you could give some thoughts on that dividend policy. You've obviously got a strong balance sheet, you've got some pretty good visibility into earnings, at least certainly for next year and perhaps the following year, good cash flow generation, I was wondering what the thought is in terms of using some more of that cash flow capacity to perhaps increase dividend at a faster rate?

So Travis, as you know, we don't have a target number in terms of a percentage payout or percentage growth rate. It's a variety of factors. It's where are the earnings coming from? How stable are they? How predictable are they? Where are we in the commodity cycle? So the word that we continue to hold on to is that looking at all of that, where power prices are, where the market predictions should be, where our capital program is at the utility, that investors do have the opportunity for consistent and sustainable growth in the dividend, and I'd rather not be held to a specific number at this point.

Okay, I understand. And real quick, what's the LIPA contribution for the 2014 guidance?

It's $0.02 to $0.03 for '14, then it steps up in basically $0.02 increments, until we get to '16, where it's about $0.07 or $0.08.

Your next question comes from Brian Chin with Merrill Lynch.

Just a clarification on the ongoing pension question. The $110 million number you referenced, that's the year-over-year benefit from '13 into '14, that's included in guidance, is that right?

That's a great question, Brian. Let me clarify that. So the $110 million was our net of capitalization, so therefore, what impacts the P&L. That was our pension expense in 2013. So in 2014, you're actually going to see pension income, instead of having $110 million in expense, you're going to see pension income, and the turnaround on a year-on-year basis is a $0.15 improvement from the impact of pension going from expense last year of $110 million, to income in the teens that you're going to see in this year's numbers, spread evenly between the businesses. So a $0.15 year-on-year improvement. We expect to see pension income as we forecast out during the business plan. So you're going to see continuation of value driven from pension as opposed to the history we've had in the last few years of significant pension expense.

So just to add to that, Caroline. So Brian, it's not a step up and then a step back down in subsequent years, it's just a resetting of the level of pension. In this case, no longer burdened on the income statement, but benefit, but we'll incorporate that in all of our other O&M forecasts in our March 7 meeting.

Okay, understood. And I understand that you're going to give more quantitative color on the ongoing effect of that at the Analyst Meeting. But in terms of just qualitatively what's going on beyond '14, the reason why there's an ongoing effect there is because, assumably, some degree of asset returns and adjustment in your discount rate, that could cause an ongoing pension income in future years, is that sort of the right way to think about that? Or is there an amortization effect that's taking place?

So the right way to think about this, Brian, is we make long-term assumptions for returns on our investment portfolio, right? We make the same long-term assumptions going forward that we've made prior, right? You know from our disclosures, we assume an 8% return on our asset investments. We just continue to assume that same return. We look at the discount rate from the forward curve, that's why -- the way everybody looks at it, right? So you set it from wherever you land and when we look at it going forward, we're just looking at the forward curves. So the discount rate went up for this year from last year, right? Last year was 4.2%, this year, it was 5%. That's pretty -- just taken right off the curves at the end of 2013. So it's a really steady-as-she-goes set of assumptions about rate of return, which we've set at 8%, and the discount rate, which we just use from the forward curve. Very significant turnaround we see between '13 and '14 comes from the fact that in 2013, our trust returned 20%, and that comes from having that sustained equity-oriented allocation, about 70% equities, and you'll see, if you look at our historical, that's been the same for the past few years. We really take a long-term view. And because we don't smooth the year end asset values, so you remember there's 2 types of smoothing in pension, right? There's the gain and loss smoothing, everybody does that. But the ending assets, most companies smooth the ending asset value. In other words, what value you apply that 8% return to in your current year. Most companies use a 5-year average. We use the actual value at the end of the prior year. So the fact that we had 20% return gives us that benefit as we come into 2014, purely from where the market put our assets at the end of 2013.

Your next question comes from Kit Konolige from BGC.

So it would appear, if I heard this correctly, that the 2014 guidance benefits relative to 2013 actual by $0.15 from the pension, correct?

That's correct.

Okay. So in other words, basically, all of the improvement in, let's say, the midpoint of '14 versus '13 is due to that pension improvement?

Well, there are a lot of, obviously, different dynamics going on in the businesses as well though, so I wouldn't want you to just focus on one item and not focus on the others, right? We've got significant increases assumed in PSE&G, part of which comes from the year-on-year from pension, but it's much more than that, right?

And we're also have huge benefit from the transmission investment offset by the decline in the hedge prices. So we just need to be careful, Kit, that we don't just pick one thing that looks like a $0.15 change, and say that's the only thing that isn't washing out.

Right. Absolutely, understood. A lot of moving parts. And the transmission improvement was $0.14 '13 versus '12, is that, did I get that down right?

Yes, that's correct.

Yes, that's correct.

Okay. And for -- can you give us a sense of at PSE&G '14 versus '13, is the transmission improvement going to be similar to that? And what should we think of in terms of the benefit from the solar investment year-over-year?

What we've always told you so far is that we have a $171 million increase in transmission revenues, now the piece that you're missing is -- was the increase in transmission O&M. We'll give a little bit more information on March 7. The Solar 440 is a 3-year program and you should assume that, that's pretty evenly distributed over the 3 years. And that brings us return at a 10% ROE and a 51% equity ratio.

Okay, great. And then my final question, on Energy Strong, there was an article in New Jersey Spotlight about, I guess their indication was that there seemed to be a bid-ask of about $1 billion from the staff and $1.9 billion that you guys had come down to. Are you in a phase -- let me just ask it this way, are you in a phase of negotiating about a number for Energy Strong at this point? And are other issues basically settled?

So Kit, when that article appeared, there was an appropriate and very stern letter that came out of the presiding officer of the BPU chastising all participants, but in particular, whoever was responsible for that leak, which was not us, that such conversations in public would not be tolerated and sanctions unnamed would be enforced afterwards. So I really don't want to even come close to answering your question, other than to say, yes, there was an article.

I knew that already.

I know you did.

Let me just follow up on that. Ralph, you've been saying all along that you expect a settlement in Energy Strong. Are you still confident that there will be a settlement rather than a full proceeding on Energy Strong?

Yes, I am. But I was clearly wrong on the date, right? I thought we'd have it done by the end of January, and I obviously missed that timeframe. I'm still optimistic everyone recognizes the importance of the work that's being proposed, but the devil is in the details.

Your next question comes from Paul Patterson with Glenrock Associates.

Just to sort of follow up on the transmission, this Bergen to Linden line and just all the improvements that you guys have been doing there, should we think about any potential risk to the LDA breakout?

No, Paul. So most of the transmission work that does have impacts you've seen already in the way they've reflected in the RPM auctions. So the 2 biggest projects that had an effect were Susquehanna-Roseland in terms of its transfer capability from Eastern MAAC into PS Zone, and then the -- the overall PS Zone, and then the Northeast Grid and its transfer capability between PS Zone and PS North. I forgot the exact number. I think SR was about 1,500 megawatts and I think Northeast Grid was 400 megawatts or 500 megawatts. I don't remember. 200 megawatts to 300 megawatts, Kathleen's telling me. So those projects have had an effect and that's fully reflected in the price. This latest project is pretty much wholly within PS North and the NYISO seam. So this is a stability issue across the PJM and New York ISO seam.

So no QTU [ph] or anything else that you see out there as being a problem?

No, I don't.

Okay. And then just finally on taxes for the 2014 guidance, could you just tell us what we should be expecting there?

I hope Caroline can.

So we haven't given a specific effective tax rate, but I think it's fair to assume you'll see tax rate kind of similar to what we've seen in Power over the past period, close to 40%. In the utility, obviously, as solar installations go into effect, you have a little bit of an ITC. So there's a little bit of a tax rate benefit, won't be quite as high as Power. But pretty much steady, nothing really dramatically different going on there.

Your next question comes from Jonathan Arnold with Deutsche Bank.

Can you -- just first on the hedging, I noticed that the pricing on the 2015 had gone up a little bit, can you give us some sense on, is that primarily BGS, or is there something else going on in there? Is it peak weighted or just whatever you could give me there? And then any flavor on what the composition of the '16 hedges on the base load?

Sure. So you're right, Jonathan. On 2015, a big driver here from our prior disclosure is the impact of BGS. So BGS goes in at about a low teens impact on the total hedge book for 2015, because the most recent auction, of course, puts a full year of BGS in there. And so that's the biggest driver of the change in the hedge percentage and the change in the hedge price, because remember, we put BGS in there at about -- at the BGS price less capacity. So it has an impact as you go into 2015 on a full year basis and then raised the price from $48 to $51 per our last quarter disclosure. For 2016, BGS has an impact in there as well and the book for 2016, per your question, is about 1/3 BGS and about 2/3 West Hub hedges. As we go out further, BGS is a heftier piece of the total hedge book than it is near term, because it tends to be what you can really do on a long-term basis.

Okay, great. And then secondly on -- can you give us any insight how the portfolio behaved in this January and early February pricing blowout? Was it a net positive? Was it neutral? And how you've thought about that in the context of guidance?

So we did not factor that into the guidance we've just given you for '14, Jonathan, but I can tell you this, the units performed well. Our gas team was able to get the fuel we needed. There were times when we were running on kerosene and not on natural gas, but the assets were up and running. We had Linden down, I think, for a few days because we were finishing out the AGP, the advanced gas path, but we had solid operational performance, managed the fuel situation very well and did not factor that into our '14 guidance. We have -- Kathleen reminded me this morning, I forgot already, it's only 51 days gone so far, 314 to go. So she didn't want me to get ahead of myself.

So you've just basically done it as of year end?

That's correct. That's exactly right.

That's right, which is where we've been at.

Okay. And then just short of finally, as we think about this sort of '14 number and the pension and the other moving parts, I don't know if this is something you'll talk about now or not, but do you see '15 and '16 as going to flat to up type of trajectory, netting everything together? Or is there's still kind of hedge roll-off headwind, et cetera, kind of offsetting some of the positives you have on the upside of the business?

So Jonathan, we're not going to give guidance for the out years. We will at the conference remind folks, and I'll just do it at a high-level here, of what the utility rate-base growth will be and how that translates into earnings. We'll present to you data that I think most of you know about RPM, because that does us carry us, certainly, through '16. We'll update -- we will discuss the hedge book to the extent that further detail is needed. So what we don't do is try to outguess the forward price curve, and that's the part that keeps us from giving you precision in the out years. We're going to give you an O&M growth rate. I don't -- so other than the changes in the forward price curve and how we're able to dynamically hedge, which is something that I think we're all learning to understand is a real advantage Power, those 2 limitations keep us from giving you even a plus or minus for the out years. And we'll -- we're going to give you 5 years of utility capital at this time around as well.

But if you use, I mean, not asking you to second guess the curve, but if you assume the curve, can you go there?

Well, the reason why I wouldn't want to do that is I think that limits us to a bias of understating our potential. Our naturally long position with our diverse asset fleet, both in terms of fuel and in terms of dispatchability, has allowed us to benefit from the volatility quite nicely. And the greater that volatility, the greater the benefit for us and that's a theme we've been trying to educate the investor community about for the past 18 months or so, and I think we want to make sure we don't shortchange ourselves by simply saying the curve prediction is a spark of x and therefore that's all you should bake into our numbers.

Your next question comes from Ashar Khan with Visium.

Can I just -- what we should expect at the conference here? Would you be in a position at that time to give us, Ralph, I guess, this is a question in terms of Energy Strong, would that be done by then or not done by then or I'm just trying to see how you're going to address, what is in rate base for the utility for the next 5 years?

So Ashar, I obviously, did a mea culpa already on predicting it by the end of January, so I'm not going to invite a second opportunity to be wrong or beat my chest over being right by predicting a date and then not living up to it. We're in active negotiations, the hearings begin on Tuesday or Monday, I forget, the 25th. So believe me, there's no one on this call who wants that done sooner, but not without the right terms and conditions for our shareholders and our customers. So I can't predict we will have more details for you. Suffice to say that we will do what we've done in the past. We will tell you here is what has been approved and what is definitely happening and to the extent that there are open questions, we'll tell you what those additional open questions could yield.

Okay. And then, Caroline, just based on what you had provided early and I know pension has provided an uplift, but you had still said that going up to '16 year-over-year, even starting from '14 the way I understood it, that the utility company could still show double-digit EPS growth without Energy Strong. And if I am understanding that right, that should still be the case, right, from a '14 to '16 timeframe?

Yes. That's correct.

Your next question comes from Julien Dumoulin-Smith with UBS.

So quick first question, I'll try. In terms of at least the first 60 days here of the year...

51 days, Julien.

I mean, first couple of months, can you give us any ballpark in terms of what that means for you versus plan?

Caroline, I tried to say no, your turn.

I tried it, I swear.

We can't give you a ballpark, Julien, because obviously, we just put out the guidance at all. But I think as Ralph said, we performed well and we've had other periods where opportunities present themselves, we captured them, and we captured what was available to us here. But we'll be on the phone with you not too long from now doing the first quarter, it seems, right, in April. But I think you should expect that we're able to do the kinds of things that our terrific ER&T group is able to do, which is take advantage of opportunities when they present themselves, because our operations and our assets run really well. But beyond that, I think we'll just wait for the first quarter results.

Yes, Julien, I do respect the desire for that information. We have 2 nuclear refueling outages ahead of us. We have a summer season that is at least as important as the winter season. So there's a lot of territory ahead of us before we start taking something to the bank.

Yes, let me just jump onto the last question a little bit and ask you, in terms of -- you have the $1 billion, you have the $2 billion, in terms of aggregate CapEx at the utility, you talked about earnings growth, but for the next few year period, is there an ability to accelerate other spend that you would have otherwise put into Energy Strong? Should it come out at the lower end, if you get what I'm saying? Is there some level of flexibility? And maybe let me just hit at it a little bit differently. How are you thinking about Energy Holdings spending in the context of perhaps greater balance sheet latitude and getting more involved on, let's say, more contracted assets on that side?

So we do continue to invest on contracted assets on the Energy Holdings side, but that is -- it is modest compared to what's going on in the utility. And while I do want Energy Strong for all the reasons we've articulated in the past, the critical issue in the utility has been and continues to be transmission. So whether it's the Bergen, Linden, 345 kV line, that was a $1.2 billion add, now that's a gross number. We will detail for you the net impact of that because some projects have been canceled, whether it's the possibility of the Artificial Island that we've made, along with 6 other bidders, so we don't know if we'll win that. The fact that PJM is going to have an open window in April on FERC Order 1000 project. So there are -- there has continues -- we have consistently been able to find important reliability-based investments to deploy our balance sheet in the utility, and I just think given the uncertainty in the market about where assets get built -- power generation assets get built and where they get shut down, that those opportunities will continue to appear before us. And Caroline, you want to add to that?

Yes, and one other thing, Julien. I think we have a robust capital program. We talked about a lot going on, including the potential for Energy Strong is filed, and the other thing that we will talk about in March as we always do and you would expect from our results on our cash and balance sheet position, is everything we've talked about has the potential for going forward, including Energy Strong. None of that takes away our entire investment capacity. So there's more investment capacity to put to work on either good projects at the utility, additional transmission, things like uprates at Power, there's opportunity to do even more because we've run the balance sheet and have so much free cash flow coming from both businesses. So even the things that you know, we'll still have more room to do more things as these opportunities that Ralph identified come -- potentially come forward to us.

So I'll take that as a general yes.

Yes, [indiscernible].

Your next question comes from Neel Mitra from Tudor, Pickering. Neel Mitra - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: In the past, you guys have detailed a slide with the amount of exports that you have from New Jersey to New York. And I think the last time you put one out, it was about 2,500 megawatts. Ralph, can you kind of talk about maybe how that number has changed and maybe more specifically over the last year? And what projects are perhaps in the backlog that could increase the exports out of New Jersey?

Neel, we haven't broken that number out in a number of years, so I'm kind of trying to remember when the last time was that we did break that out. I know we have some -- it's been at least 3 years, I've been told. I know we have some energy and capacity sales over a VST line that goes over to New York. We do some spot transactions, but I don't know that we break out our Power book to that level of specificity. Neel Mitra - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: I'm guessing more kind of on the utility side, you talked about...

On the utility side. Utility isn't building any transmission into New York City. The -- perhaps, I hope I didn't misspeak before. The 345 kV is a reliability issue that affects the seam, but it's all inside New Jersey. Neel Mitra - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: It's all inside New Jersey, okay, great. And then second, with the uprates, the 150 megawatts, are you considering any other kind of expansions at Power? I know in the past, you've kind of talked about, maybe Sewaren or Essex brownfield additions, are those off the table right now, are you kind of happy with the 150 megawatts?

Yes, right now, we have 2 major projects underway. We have an uprate, about 140 megawatts at Peach Bottom, and we have the advanced gas path. And right now, that's all that we have planned. So yes. So thanks everyone for participating in the call. We had a terrific 2013. I mean it was terrific operationally, financially, meeting the needs of the New Jersey Energy Master Plan and we firmly expect that we're going to build on that in '14 and beyond. So we'll share some more details with you on March 7. We hope you're able to join us then in New York. I'm told by Kathleen, in celebration of the winter, we may actually have some sleigh rides and hot chocolates for people, but hopefully we'll have the beginning of some spring weather when we see you on March 7. So thanks for being here today, and we'll see you soon.

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