(Newark, N.J. -  August 1, 2006) – Public Service Enterprise Group (PSEG) announced today that second quarter 2006 Net Income was 83 cents per share.  Operating Earnings for the quarter, which exclude the gain from the sale and operations of assets in Poland (88 cents per share), the loss on the sale of RGE (70 cents per share), and 1 cent per share of costs associated with the pending merger with Exelon, were 66 cents per share for the quarter.

For the year-to-date, PSEG reported Net Income of $1.64 per share.  Operating Earnings were $1.47 per share, which exclude the gain from the sale and operations of assets in Poland (90 cents per share), the loss from the sale of RGE (70 cents per share), and 3 cents per share of costs associated with the pending merger with Exelon. 

The table below provides a reconciliation of PSEG’s Net Income to Operating Earnings for the second quarter and year-to-date.

PSEG believes that the non-GAAP financial measure of “Operating Earnings” provides a consistent and comparable measure of performance of its businesses to help shareholders understand performance trends.

“During the second quarter, PSEG achieved several significant milestones”, said E. James Ferland, chairman and chief executive officer. A significant regulatory hurdle was achieved late in the quarter when the Department of Justice reached a settlement resolving all “competition” issues and allowing the proposed merger with Exelon to proceed. The agreement, which was reached after an exhaustive review by the Department of Justice, requires the combined company to divest six fossil plants with a combined capacity of about 5,600 MW shortly after the merger is completed.  Approval from the New Jersey Board of Public Utilities (BPU) remains the final step in completing the merger.

“We recently provided a materially enhanced settlement offer to the BPU and related parties that will provide substantial positive benefits to customers and the State.  The comprehensive offer provides cash to be used for a variety of customer and state benefits, primarily immediate rate reductions.” Ferland said. The State of New Jersey will benefit from increased corporation business tax revenues, and residents would continue to benefit from Exelon’s strong nuclear operations of the PSEG fleet. PSE&G’s capital program would also continue and strict service and reliability standards will be established as part of the settlement. 

Both companies indicated that it is essential to reach a settlement promptly. Once a settlement is reached, it will need to be reviewed by the NJBPU Administrative Law Judge and would need approval by the NJBPU.  Although it is possible that this process could be completed in time for a third quarter closing, Ferland noted that there is currently no established timetable for NJBPU action on the merger and it is possible the closing could slip to the fourth quarter. The final decision to proceed with the merger will rest with the boards of both Exelon and PSEG after the terms and conditions of regulatory requirements are known. 

Ferland noted that PSE&G currently has two pending rate requests at the BPU – $64 million in annual rate relief for electric distribution and $133 million for gas distribution.  “Activities at the BPU are focused on the merger request and settlement discussions.  Therefore, any rate relief, while justifiable, is not expected until a resolution is reached in the merger,” said Ferland.  As a result, PSE&G has lowered its 2006 earnings expectations by an additional $20 million.  Since the beginning of the year, PSE&G has reduced its expected earnings range by $65 million.  

Second Quarter Overview

“Hope Creek, our 1,059 MW nuclear unit in southern New Jersey completed a scheduled refueling outage in 29 days, returning to service on May 6.  The amount of work that was accomplished during this outage was significant – a direct result of the operational influence the Exelon team has brought to the site,” said Ferland. For the five-unit PSEG fleet, the year-to-date capacity factor was 96% - a significant improvement over the 87% reported for the first half of 2005.

“2006 Earnings for Energy Holdings are expected to be $20 million higher than our prior expectations, the result of the strong Texas market,” said Ferland.  “Spark spreads in Texas have increased significantly and we anticipate that we will continue to benefit from that robust market for the remainder of the year.” 

Ferland noted “The improved expectations at Energy Holdings should be sufficient to offset the lack of rate relief at PSE&G. We are comfortable reaffirming our 2006 operating earnings guidance of $3.45 to $3.75 per share, based upon the current operating earnings ranges by company.”

 PSE&G                                      $250 - $270 million
 PSEG Power                              $500 - $550 million
 PSEG Energy Holdings               $185 - $205 million
 PSEG Parent Expense                $(60) - $(70) million

Attachments to this release provide a reconciliation of Net Income to Operating Earnings and other summary exhibits for the second quarter and year-to-date 2006 and 2005 for PSEG’s principal subsidiaries – PSE&G, PSEG Power and PSEG Energy Holdings.

PSE&G Results

PSE&G reported operating earnings of $34 million or 13 cents per share for the second quarter, 35% lower than comparable 2005 results of $48 million or 20 cents per share. For the quarter, weather was below normal and below last year, for a combined reduction of 3 cents per share.

The elimination of the depreciation credit in December 2005 reduced earnings by 4 cents for the quarter.  “The elimination of the depreciation credit is the primary driver in the reduction of our earnings expectations for the utility,” said Thomas M. O’Flynn, chief financial officer.

O’Flynn noted that PSE&G continues to work with the BPU on the gas base rate filing that was made last September, requesting a 3.8% increase in gas distribution rates.  “We continue to experience disappointing returns from our gas business – the result of mild weather earlier this year and decreased usage from our customers.  The trailing 12 month return-on-equity is now less than 4%, far below the 10% allowed in our last rate case,” O’Flynn said. 

Increased O&M expense resulting from higher wage and benefit costs of 2 cents per share were offset by increased transmission revenues.  Transmission revenues are based on the highest usage during the prior year.  Since last year’s peak usage was higher than 2004, we expect 2006 revenues to be slightly higher than last year, assuming comparable volume.

PSEG Power 

PSEG Power reported operating earnings of $78 million, or 31 cents per share, an increase of $15 million, or 5 cents per share from the second quarter of 2005. 

Higher realized prices from forward sales contracts, the result of recontracting, added 18 cents to Power’s earnings for the quarter. “Most of this increase resulted from the rolling nature of our hedge contracts, including 6 cents related to the BGS contracts that went into effect on June 1st,” O’Flynn said.  The continued benefits of the market-priced contracts from the 2006 BGS auction will be realized during the second half of the year, and are reflected in our earnings expectations for 2006,” O’Flynn noted. Increased nuclear output added another 4 cents per share for the quarter.

“The impact of new assets at Power – Linden in May of this year and the Bethlehem Energy Center (BEC) in July of last year – resulted in a reduction of 8 cents over the second quarter of 2005,” said O’Flynn. This impact predominately reflects the higher interest and depreciation costs.  Finally, O&M expenses were 6 cents higher than last year, the effect of planned nuclear refueling outage costs and planned fossil plant maintenance. 

PSEG Energy Holdings

Energy Holdings reported operating earnings of $72 million, or 29 cents per share, an increase of $61 million or 24 cents per share.  The absence of the 6 cent loss on the sale of the United Airlines airplanes last year accounted for some of the comparative improvement; however the bulk of the improvement was the result of a 40% increase in spark spreads in the Texas market during the second quarter compared to the previous year. The absence of a maintenance shutdown in 2005 combined with the improved spark spreads added 7 cents per share for the quarter.  “Spark spread projections for the remainder of the year are 25% higher than we planned, resulting in a $20 million increase in expected 2006 operating earnings for Energy Holdings”, said O’Flynn.

PSEG Global’s Texas plants entered into long-term contracts last fall for a portion of their output that is subject to mark-to-market accounting treatment.  For the quarter, the mark-to-market added another 5 cents per share.  About a penny of the 3 cent year-to-date benefit is expected to reverse during the current year.

Finally, Energy Holdings reported lower interest expense for the quarter.  Proceeds from asset sales in Poland and Brazil have been received and are currently invested with PSEG.  Interest received on the inter-company loan, combined with the absence of the 2007 bonds that were redeemed in January of this year, reduced interest expense by 3 cents per share.

Corporate Profile

Public Service Enterprise Group (PSEG) (NYSE:PEG) is a publicly traded diversified energy company with annual revenues of more than $12 billion, and three principal subsidiaries: PSEG Power, one of the largest independent power producers in the U.S.; Public Service Electric and Gas Company (PSE&G), New Jersey’s oldest and largest energy distribution utility company; and, PSEG Energy Holdings, a holding company for other non-regulated energy businesses.

 “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
This filing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements include, but are not limited to, statements about the benefits of the business combination transaction involving Public Service Enterprise Group Incorporated and Exelon Corporation, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions and other statements that are not historical or current facts.  Such statements are based upon the current beliefs and expectations of Public Service Enterprise Group Incorporated’s and Exelon Corporation’s management, are subject to significant risks and uncertainties and may differ materially from actual future experience involving any one or more of such matters.  Actual results may differ from those set forth in the forward-looking statements.  The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the timing of the contemplated merger and the impact of any conditions imposed by regulators in connection with their approval thereof; the risk that the businesses will not be integrated successfully; failure to quickly realize cost-savings from the transaction as a result of technical, logistical, competitive and other factors; the effects of weather; the performance of generating units and transmission systems; the availability and prices for oil, gas, coal, nuclear fuel, capacity and electricity; changes in the markets for electricity and other energy-related commodities; changes in the number of participants and the risk profile of such participants in the energy marketing and trading business; the effectiveness of our risk management and internal controls systems; the effects of regulatory decisions and changes in law; changes in competition in the markets we serve; the ability to recover regulatory assets and other potential stranded costs; the outcomes of litigation and regulatory proceedings or inquiries; the timing and success of efforts to develop domestic and international power projects; conditions of the capital, equity and credit markets; advances in technology; changes in accounting standards; changes in interest rates and in financial and foreign currency markets generally; the economic and political climate and growth in the areas in which we conduct our activities; and changes in corporate strategies.  While we believe that our forecasts and assumptions are reasonable, we caution that actual results may differ materially.  We intend the forward-looking statements to speak only as of the time first made and we do not undertake to update or revise them as more information becomes available.  Additional factors that could cause Public Service Enterprise Group Incorporated’s and Exelon Corporation’s results to differ materially from those described in the forward-looking statements can be found in the 2005 Annual Reports on Form 10-K and Current Reports on Form 8-K, of Public Service Enterprise Group Incorporated and Exelon Corporation, respectively, as such reports may have been amended, each filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission’s website, www.sec.gov.