(January 31, 2007 – Newark, N.J.) - Public Service Enterprise Group (PSEG) reported today 2006 Income from Continuing Operations of $752 million or $2.98 per share as compared to $886 million or $3.63 per share for 2005. Operating Earnings for the year 2006 were $938 million or $3.71 per share compared to 2005 Operating Earnings of $918 million or $3.77 per share.  Including charges associated with the sale of RGE ($178 million or $0.70 per share), merger related costs ($8 million or $0.03 per share), and discontinued operations ($13 million or $0.05 per share), PSEG reported Net Income for the full year 2006 of $739 million or $2.93 per share.

PSEG also reported Income from Continuing Operations for the fourth quarter of 2006 of $173 million or $0.69 per share.  This compared to fourth-quarter 2005 results of $227 million or $0.92 per share.  Operating Earnings for the fourth quarter of 2006 were comparable to Income from Continuing Operations.  The discontinuation of operations at the Lawrenceburg Energy facility, in December 2006, resulted in a charge of $220 million ($0.87 per share) creating a Net Loss for the quarter of $47 million or $0.18 per share.

E. James Ferland, Chairman and Chief Executive Officer of PSEG, said the overall results reflect the continued strength of PSEG Power including the strong performance of PSEG Power’s Nuclear Generating fleet, and excellent profitability in PSEG Energy Holdings’ two generating stations in Texas.  Operating Earnings exclude the impact of the sale of certain non-core domestic and international assets and costs stemming from the terminated merger agreement with Exelon Corporation.   The table below provides a reconciliation of PSEG’s Net Income to Operating Earnings (a non-GAAP measure) for the full year and fourth quarter.

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. 

“Despite the merger termination, 2006 proved to be an especially strong year for PSEG on a stand-alone basis,” Ferland said.  “We benefited from excellent operations at our Salem and Hope Creek plants and robust performance at our Odessa and Guadalupe stations in Texas.   Because of this, we were able to take advantage of a favorable pricing environment in the energy marketplace, enhancing our profitability for the year.”

Ferland noted several key highlights for the year:

-PSE&G, the company’s New Jersey energy delivery business, successfully completed three regulatory proceedings and, for the second year in a row, won PA Consulting’s national ReliabilityOne award for superior electric utility reliability.

- PSEG Power’s nuclear facilities achieved an all-time record for electric production and operated at an overall capacity factor for the year of approximately 96%.  We also experienced strong performance from our fossil fleet, and greater margins due to recontracting.

- PSEG Energy Holdings realized its most profitable year and made significant progress in reducing its exposure to risks from international investments through the sale of non-core assets in Poland, Brazil, Oman and other smaller investments.

Ralph Izzo, president and chief operating officer, said that PSEG met or exceeded the operating and financial goals it set for itself.  In 2006, lower operating earnings from PSE&G, caused by weather and regulatory delays, were offset by record levels of operating earnings from PSEG Power and PSEG Energy Holdings.  During the quarter, PSEG can point to accomplishments in the four operational areas it established for itself: the company extended the Nuclear Operating Service Agreement (NOSA) with Exelon, reached an environmental consent decree providing for the continued operation of Hudson Unit 2, gained approval of its electric and gas rate agreements and began the process of reorganizing the corporation.  He reinforced the corporation’s commitment to the safe, reliable and clean operation of its facilities as well as supporting the firm’s financial goals.

“A major development at year-end was our decision to resume direct management of the Salem and Hope Creek facilities before the expiration of our Nuclear Operating Services Agreement with Exelon,” Izzo said.  “This was an important step toward assuring Salem and Hope Creek continue on their path to sustained excellence under the guidance of one of the most capable and experienced management teams in the industry. We must also compliment Exelon for the professionalism exhibited by their team during the entire process, and for their commitment to excellence in operations as part owner of Salem.”

The senior leaders from Exelon – William Levis, Thomas Joyce and George Barnes -- who had been in place at Salem and Hope Creek since the inception of the NOSA in January 2005 became PSEG employees on January 1, 2007.  “We are pleased to have these talented leaders on board at PSEG and are confident that they and their strong workforce will continue building on the success they have achieved to date,” Izzo said. “The performance of our nuclear fleet is a primary ingredient in our overall success, and this move reinforces our long-term commitment to nuclear power.”

In discussing PSEG’s outlook for 2007, Izzo reaffirmed operating earnings guidance of $4.60 to $5.00 per share, approximately one-third higher than 2006 guidance, and projected earnings growth in excess of 10% in 2008.  “Strong operations, a period of high energy prices and an improving picture for energy capacity markets are contributing to a very positive trajectory for PSEG over the next couple of years,” he said.  “In addition to being solidly positioned for earnings growth in 2007 and 2008, we continue to benefit from the stability provided by a strong, balanced mix of energy businesses.” 

Izzo added that he anticipates strong earnings and cash flow from PSEG’s operating companies.  “This positive outlook enabled us to increase our dividend on January 16 of this year to $2.34 per share on an indicated annual basis,” he said.  “We expect to consider modest annual increases in the dividend on an annual basis as our financial condition allows.”

Operating Earnings Review and Outlook by Operating Subsidiary

See Attachments 7 and 8 for detail regarding the quarter-over-quarter and year-over-year earnings reconciliations for each of PSEG’s businesses.

PSE&G

PSE&G reported a slight decline in operating earnings for the fourth quarter of 2006 to $64 million ($0.25 per share) from $66 million ($0.26 per share) in 2005.  The results for the quarter brought full year operating earnings to $262 million ($1.04 per share) as compared with 2005 results of $347 million ($1.42 per share).

PSE&G’s quarterly and full year operating earnings were dampened by abnormal weather conditions and the absence of rate relief.  A warmer than normal December reduced earnings by $0.06 per share for the fourth quarter of 2006.  The winter months of 2006 were all substantially warmer than 2005 while the summer months were only slightly warmer, hurting earnings by $0.19 per share. (See Attachment 10 for details on electric and gas sales and weather comparisons.)  Quarterly results were also impacted by the absence of rate relief and higher levels of depreciation expense.  These items were offset by higher levels of transmission revenues, and a lower effective tax rate.

The BPU’s November approval of rate agreements resolving rate treatment for the expiration of the electric depreciation rate credit as well as providing new residential gas supply rates provides the opportunity for the distribution company to earn its authorized return in 2007.

The gas base rate agreement approved by the BPU provides for an additional $79 million of margin consisting of a $40 million rate increase and lower non-cash depreciation and amortization expenses of $39 million.  The settlement in the electric distribution financial review reduced the $64 million rate credit to $22 million, which with volume growth represents additional revenue of $47 million.  Under the agreement, electric and gas base rates will be frozen until mid-November 2009. 

PSEG Power

PSEG Power reported operating earnings of $102 million ($0.40 per share) for the fourth quarter of 2006 bringing full year operating earnings to $515 million ($2.04 per share), a record year for Power.  On a comparative basis, PSEG Power reported operating earnings of $113 million ($0.45 per share) and $446 million ($1.83 per share) for the fourth quarter and full year 2005 respectively.

PSEG Power’s fourth quarter and full year operating earnings include a charge for the impairment of turbines to be sold in 2007 amounting to $44 million pre-tax, or $0.10 per share after tax. 

PSEG Power’s margins in the fourth quarter benefited from higher contracted pricing ($0.13 per share), and the continued strong performance of the corporation’s nuclear fleet ($0.02 per share).  During the quarter, the nuclear fleet operated at a 96.0% capacity factor (versus 93.2% a year ago) resulting in a full year capacity factor of 96.0%.  The fleet’s performance improved Power’s full year operating margins by $0.20 per share.

Strong electric power pricing and generating unit performance more than offset a decline in margins on the BGSS gas contract for the quarter ($0.11 per share) and the full year ($0.22 per share).  A decline in gas market prices in 2006 coupled with high inventory costs impacted margins associated with supplying this contract.  The decline in margins appears particularly acute given comparisons against periods in 2005 that benefited from rising prices and low inventory costs.

Earnings comparisons during the quarter and year were also affected by higher depreciation and interest expense associated with the second quarter start up of Linden, and the absence of nuclear decommissioning trust fund gains of $0.05 per share and $0.13 per share recognized during the fourth quarter and the full year 2005 respectively. (See Attachment 8 for a detailed look at items affecting year over year earnings comparisons.)

PSEG Power’s forecast operating earnings for 2007 are expected to continue to benefit from higher electric power pricing with the expiration of below market contracts in New Jersey and Connecticut, strong operations and the absence of the earnings drag from Lawrenceburg.  In addition, we expect margins in 2007 associated with servicing the BGSS gas contract to approximate a little more than half of the shortfall in earnings experienced between 2005 and 2006.

PSEG Energy Holdings

PSEG Energy Holdings reported operating earnings for the fourth quarter of 2006 of $24 million ($0.10 per share) versus $72 million ($0.30 per share) earned during 2005’s fourth quarter.  The results for the fourth quarter brought full year 2006 operating earnings to a record level for Energy Holdings of $227 million ($0.89 per share) compared with 2005’s full year operating earnings of $196 million ($0.81 per share). 

Regarding the fourth quarter results, the decline in PSEG Energy Holdings’ operating earnings primarily reflects the absence of a $0.18 per share gain recorded by PSEG Resources during the prior year from the sale of the Seminole leveraged lease.  Results for the quarter were also hurt by a decline in margins at TIE as well as a small charge ($0.02 per share) associated with the impairment of Global’s Venezuelan investment.

The lower earnings guidance for 2007 relative to 2006’s record results is influenced by a forecasted decline in spark spreads in Texas compared to high margins experienced in 2006 as well as the adoption of the new accounting standard regarding uncertain tax positions.

Overall, Izzo stated that he is very proud of the focus shown by the PSEG team during 2006, and that the company is well positioned for record earnings in the upcoming year.

Forward-Looking Statements
The statements contained in this communication about our and our subsidiaries’ future performance, including, without limitation, future revenues, earnings, strategies, prospects and all other statements that are not purely historical, are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance they will be achieved. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements made herein. A discussion of some of these risks and uncertainties is contained in our Annual Report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission (SEC). These documents address in further detail our business, industry issues and other factors that could cause actual results to differ materially from those indicated in this communication. In addition, any forward-looking statements included herein represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While 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 otherwise required by applicable securities laws.