PSEG Confidential Energy Prices
Yesterday Today Tomorrow
Fritz Lark Vice President ­ Business Analysis
September 18, 2006
0 PSEG Confidential arrel $75/B OIL Natur al Gas $14/M M BTU Nigeria
urr H can i ita eR HURRICANE KATRINA EC OP
Gasoline $3.50/gallon
1 Re fin eri es PSEG Confidential Electric Power Supply and Delivery Charges
Electric Supply includes the costs for the generation of the electric power and any transmission costs. Basic Generation Service is the supply service available from PSE&G. Electric Power or Energy Transmission PSE&G will continue to perform the delivery function regardless of the entity supplying electric power. Electric Delivery includes the costs for transporting the electricity within the PSE&G service territory. Other components of the delivery portion of the bill include other listed distribution-related charges. Electric delivery costs remain fully regulated by the BPU. Electric Delivery 2 PSEG Confidential Gas Supply and Delivery Charges
Gas Supply includes the costs for natural gas, balancing costs, and any costs to move the gas from well head to NJ "city gate." Basic Gas Supply Service is the supply service available from PSE&G. Natural Gas Commodity Balancing Transmission
Gas Delivery includes the costs for transporting gas within the PSE&G service territory. Other components of the delivery portion of the bill include other listed distribution-related charges. Gas Delivery 3 PSEG Confidential New Jersey Average Residential Electricity Rates 1990 ­ 2006E
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 20 18 16 14 12
10.4 11.2 11.5 11.8 11.54 10.2 12.0 11.98 10.3 12.3 12.6 12.9 13.3 13.5 13.8 14.1 14.5 Nominal (What You Pay) Real (Adjusted for Inflation) CPI Tracking (if kept up with Inflation)
14.9 15.2 Unit Rate (cents/KWh) 12.7 10.8 10.8 10.3 12.93 11.99 12.08 11.39 10.1 10.0 9.3 9.1 8.0 7.8 7.8 7.8 8.0 8.2 11.40 10.27 10.21 10.38 10.67 11.23 11.75 10.8711.41 10.1 10.3 10 8 6 4 2 8.8 Notes: (1) Assume 10% increase between 2005 and 2006 (2) Includes all NJ Residential Customers (i.e. IOUs and Munis) (3) Not weather normalized Source: PSE&G, Northern NJ/NY CPI Index
0 Adjusted for inflation, New Jersey's 2006 average residential price is expected to be about 1.5 cents/KWh below 1990's rate. 4 PSEG Confidential PSE&G BGSS Residential Gas Commodity Rates 1990 - 2006E
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 1.6 Nominal (What You Pay) Real (Adjusted for Inflation) CPI Tracking (if kept up with Inflation)
1.48 1.4 1.2
1.20 Unit rate ($/therm) 1.12 1.0
0.93 0.95
0.81 1.07 1.01
0.85 0.88 0.89 0.8
0.64 0.66 0.68 0.69 0.71 0.73 0.74 0.75 0.83 0.76 0.78 0.80 0.6 0.61 0.67 0.61 0.59 0.55 0.66 0.57 0.71 0.66 0.56 0.59 0.73 0.73 0.75 0.71 0.59 0.79 0.71 0.80 0.84 0.6 0.58 0.59 0.58 0.4 0.44 0.41 0.2 - Source: PSE&G, Northern NJ/NY CPI Index Adjusted for inflation, PSE&G's 2006 BGSS residential price is 40 cents/therm above 1990's price. 5 $/therm
0.2 0.4 0.6 0.8 1.2 1.4 1.6 1.8 0
01/01/98 07/01/98 01/01/99 07/01/99 01/01/00 07/01/00 01/01/01 07/01/01 1 Firm Gas Commodity Prices 1998-Present RSG Comm, CS-RSG, BGSS-RSG
01/01/02 07/01/02 CS-GS/BGSS-F
01/01/03 07/01/03 01/01/04 CS-LV/BGSS-F 07/01/04 Refund 01/01/05 07/01/05 01/01/06 07/01/06 09/01/06 PSEG Confidential 6 PSEG Confidential NJ BGS Auction Structure Residential, Small C&I Customers 9,000 6.5¢
MW Load 6,000 5.5¢
3,000 5.5¢
2003 10.2¢
2006 2007 2008 2009 2004 2005 Year 7 PSEG Confidential Average Monthly Spot Energy Market Prices 2005 (Large Customers)
$100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0
Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 8 PSEG Confidential Where are electric and gas prices going ? · No one knows for sure ... · Futures markets are the basis
for how experts value electric and gas prices. · Prices in futures markets are greatly affected by the current price and interest rates. · PSE&G's electric and gas commodity rates for residential (BGS-FP and BGSS) are affected by these markets.
9 PSEG Confidential Gas and Electric Futures Prices 12 Month Strip (September 2006)
120 100 90.15 ¢ 86.16 ¢ 80 $73.33 61.38 ¢ 60 53.88 ¢ $48.17 $50.56 $83.25 87.86 ¢ 82.22 ¢ $79.65 74.96 ¢ $70.45 $72.06 77.68 ¢ 40 20 0 2003 2004 2005 2006 2007 2008 2009 2010 NYMEX (¢ per therm) PJM West ($ per MWh ­ on peak) 10 PSEG Confidential PJM Pricing Environment 11 PSEG Confidential Thank You 12