(May 4, 2007 – Newark, N.J.) - Public Service Enterprise Group (PSEG) reported today (May 4, 2007) income from continuing operations for the first quarter of 2007 of $335 million or $1.32 per share as compared to $208 million or $0.83 per share for the comparable period in 2006.  Excluding merger-related costs of $5 million or $0.02 per share, PSEG reported operating earnings of $213 million or $0.85 per share for the 2006 first quarter.  Losses on discontinued operations of $6 million or $0.02 per share reduced net income for the first quarter of 2007 to $329 million or $1.30 per share and lowered net income for the first quarter of 2006 by $5 million or $0.02 per share to $203 million or $0.81 per share.

“Our two largest businesses are performing very well,” said Ralph Izzo, chairman, president and chief executive officer of PSEG.  “Earnings at PSEG Power during the quarter are the result of continued strong nuclear operations, an improvement in realized prices and the BGSS supply contract returning to more normal margins versus last year’s disappointing results.  Public Service Electric and Gas Company’s (PSE&G) earnings benefited from more normal weather conditions and the impact of the gas and electric rate settlement effective in the fourth quarter of 2006.”  He went on to mention that “the PSEG group of companies continue to focus on maintaining safe and reliable operations as the foundation for success.”

Operating earnings exclude the impact of the sale of certain non-core domestic and international assets and costs stemming from the termination in September, 2006 of the 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 first 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 financial trends.

Izzo noted several key highlights during the first quarter:

• PSEG Power’s Salem 1 nuclear unit entered a refueling outage at the end of March after a record 383 consecutive days of operation.  The performance is a testament to the effectiveness of the outage-related work being performed at Power’s three units – Salem 1 and 2 and Hope Creek.

• PSEG has largely completed the effort to put in place a highly qualified and capable new management team, including the hiring of the Exelon senior leadership team at its nuclear facilities as well as the recent hiring of Richard P. Lopriore as president of PSEG Fossil.

• Initiated construction on the back-end technology at the Mercer Station as part of a commitment to environmental stewardship.

• PSEG Energy Holdings announced that it was exploring the sale of Electroandes, a hydro-electric generation and transmission company in Peru.

Ralph Izzo indicated that the strong results for the first quarter place the company on “the right path” for achieving its recently increased 2007 operating earnings guidance of $4.90-$5.30 per share.  The mid-point of the guidance represents a 37% increase over 2006’s operating earnings of $3.71 per share. Higher prices for contracted power and the successful completion of the Pennsylvania-New Jersey-Maryland (PJM) regional transmission organization’s first capacity auction provide support for projected growth in 2008 of 15% to $5.60-$6.10 per share.

Forecasted operating earnings ranges by subsidiary for 2007 are as follows:

Also during the first quarter, PSEG Power paid a dividend to PSEG of $125 million.  PSEG Energy Holdings continued its practice of returning capital to PSEG with a distribution of $145 million.

Izzo said that PSEG, as much as it remains focused on maintaining its strong operational and financial performance, is also committed to addressing the environmental challenges that face the industry.  PSE&G, as part of a program to meet the State of New Jersey’s Energy Master Plan goals for energy efficiency and renewable resources, unveiled a regulatory initiative designed to spur development of solar power. This is the first of a number of initiatives it intends to announce this year to combat climate change.

Operating Earnings Review and Outlook by Operating Subsidiary

See Attachment six for detail regarding the quarter over quarter earnings reconciliations for each of PSEG’s businesses.

PSEG Power

PSEG Power reported operating earnings of $219 million ($0.87 per share) for the first quarter of 2007.  On a comparative basis, PSEG Power reported operating earnings of $121 million ($0.48 per share) for the first quarter of 2006.

PSEG Power’s first-quarter margins reflect the benefits of many factors – strong markets (particularly PJM), favorable operations, and more normal margins associated with supplying the BGSS contract.  Higher contracted power prices added $0.28 per share to earnings.  The continued strong performance of PSEG Power’s nuclear fleet allowed it to realize the full benefit of higher prices.  The nuclear fleet operated at a 97% capacity factor during the quarter compared with a slightly stronger operating record in the first quarter of 2006.

PSEG Power continues, however, to forecast the nuclear fleet will operate at a capacity factor for the full year lower than that recorded in the first quarter due to plans for three refueling outages.  More favorable prices in the natural gas market also aided margins realized on the BGSS contract, which contributed $0.11 per share to earnings.  Reported results for the quarter also benefited from recognition of mark to market gains of $0.04 per share.

These factors more than offset a decline in availability of the fossil fleet as a result of the environmental consent decree for the Hudson and Mercer coal stations signed at the end of the year 2006 as well as small increases in operating and financing expenses.

PSEG Power’s operating earnings for 2007 are expected to continue to reflect higher electric power prices with the expiration of below market contracts in New Jersey and Connecticut, the successful auction of capacity in PJM, and improved margins associated with servicing the BGSS contract.

PSE&G

PSE&G reported operating earnings in the first quarter of 2007 of $131 million ($0.52 per share) versus $78 million ($0.31 per share) for the first quarter of 2006.

PSE&G’s quarterly operating earnings benefited from a number of factors.  The November 2006 settlement of PSE&G’s gas and electric rate issues added $0.09 per share to earnings and restored reasonable equity returns at the utility.  The effect of the rate agreements can be seen in higher electric and gas revenues and lower depreciation expense.  Improved weather conditions for the quarter added $0.06 per share to earnings compared to warmer than normal weather experienced in the first quarter of 2006.  PSE&G is also experiencing higher demand for electricity compared to the first quarter last year.  This increase in volume represented a $0.03 per share improvement in earnings. 

PSE&G’s 2007 operating earnings should continue to benefit from a full year of rate relief.  Normal weather during the remainder of the year could also provide an additional $0.10-$0.15 per share of uplift to earnings as the company’s operating results during the fourth quarter of 2006 were negatively impacted by warmer than normal weather.  Results for the remainder of the year will be affected by forecast increases in operating and maintenance expenses.

PSEG Energy Holdings

PSEG Energy Holdings reported operating earnings in the first quarter of 2007 of $3 million ($0.01 per share) versus $28 million ($0.12 per share) recorded in the first quarter of 2006.

The decline in PSEG Energy Holdings’ operating earnings was due to lower results at both of its subsidiary companies, PSEG Global and PSEG Resources, and was also driven by an increase in projected spark spread relative to a fixed-price contract.  The results at Global were affected by the recognition of mark to market losses associated with a contract at our Texas generation facilities, which accounted for $0.06 per share of the year over year reduction in earnings.  The projections in future spark spreads are expected to benefit Global’s Texas operations in the coming years. In addition, major maintenance at the two 1,000 MW gas-fired, combined-cycle generating units in Texas completed during the quarter resulted in $0.04 per share of expense in the quarter.  This activity prepares the units for operation during the typically heavy summer demand period.

Global’s first quarter earnings comparisons were also affected by a loss of production at its 85% owned generation facility in Italy ($0.02 per share) and the sale of RGE in 2006 ($0.03 per share).  These items were partially offset by improved operations at SAESA ($0.02 per share), a one time gain associated with the sale of the Tracy biomass facility ($0.02 per share), and a contractual settlement associated with Konya-Ilgin ($0.02 per share).

The operations at the balance of Global’s domestic generation and international distribution properties continue to perform well and provide the opportunity for excellent growth.

The earnings contribution from Resources reflects the implementation of a new accounting policy effective January 1, 2007.  This change in accounting reduced lease income by $0.02 per share in the quarter.  The full-year earnings contribution from PSEG Energy Holdings will continue to be affected by the implementation of the new accounting policy.

PSEG Energy Holdings also announced during the quarter that it was exploring the potential sale of Electroandes, a hydro-electric generation and transmission company in Peru.  PSEG Energy Holdings has hired JP Morgan to evaluate unsolicited interest in the property.  If sold, it would reduce PSEG Energy Holdings’ exposure to the more risky International generation business.

PSEG

The parent company recorded a net expense of $18 million ($0.08) for the quarter compared with net expense of $14 million ($0.06) recognized during the first quarter of the prior year.  The difference is associated with a charitable contribution made to the PSEG Foundation.  Losses at the parent company level are expected to decline during the remainder of the year due to a planned reduction in debt levels and interest expense.

The following attachments can be found on www.pseg.com.

Attachment 1 - Reconciliation of Operating Earnings to Reported Earnings by Subsidiary
Attachment 2 - Operating Earnings and Per Share Results by Subsidiary
Attachment 3 - Consolidating Statement of Operations
Attachment 4 - Capitalization Schedule
Attachment 5 - Condensed Consolidated Statements of Cash Flows
Attachment 6 - Quarter-to-Quarter EPS Reconciliation
Attachment 7 - PSEG Global L.L.C. – Investment Results
Attachment 8 - Public Service Electric & Gas – Sales and Revenues to Customers
Attachment 9 - PSEG Power – Generation Measures
Attachment 10 - Statistical Measures
Attachment 11 – Non-Trading Mark-to-Market
Attachment 12 - PSEG Liquidity

FORWARD-LOOKING STATEMENT

Readers are cautioned that statements contained in this press release about our and our subsidiaries’ future performance, including 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.  The results or events predicted in these statements may differ materially from actual results or events.  Factors which could cause results or events to differ from current expectations include, among other things: 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 markets and equity 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.  For further information, please refer to 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.  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 release. 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.