Temperatures in Albany New York regularly dip be-low freezing during the win-ter months creating chal-lenges for equipment opera-tions. The clarifier, an impor-tant component of the water treatment process at the station, had a tendency to freeze up when tempera-tures plunged.

A costly problem to fix, Joe Ruggiero, senior environ-mental engineer, came up with a workable solution. He recommended that heated blow down water from the plant Heat Recovery Steam Generator (HRSG) units be recycled and used to warm the clarifier to prevent freeze-up.

At BEC, about 1.5 million gallons of water is drawn from the Hudson River daily and processed through the clarifier and other water treatment systems to supply necessary make-up water

mendation would benefit both station operations and the environment.

“There were multiple bene-fits to implementing this ap-proach,” said Ruggiero. “By re-using the blow down wa-ter, we would considerably reduce our discharge to the

(Continued on page 7)

E n v i r o n m e n t a l O u t l o o k

Reusing and recycling at BEC

March 4, 201 0 A bi -weekly publ icat ion for the people of PSEG Fossi l , l i ke … Jim Cacciot t i—BEC Rel ief Operator

P S E G V I S I O N

Being a recognized leader for:

People providing

Safe, reliable

Economic and

G reen Energy

PSEG Financial Outlook 2

Energy Insights 3

Generation Engineers 4

Fossil Scorecard 6

Coal Plants Hot Streak 8

I N S I D E O U T L O O K

Plant Engineer Denis Cote (Left) and Senior Environmental Engineer Joe Ruggiero (Right) worked collaboratively on the Clarifier Freeze Protection System at BEC.

Caroline Dorsa, PSEG Executive Vice President & Chief Financial Officer, discussed PSEG’s and Power’s financial outlook during an all hands meeting held in Newark on March 2.

Similar presentations will be given at locations throughout PSEG. For more information on her presentation, turn to story on page 2.

for the HRSG units and cooling tower used in the production of electricity. Heated blow down water –classified as waste water – was regularly discharged from these three HRSG units to a settling pond to remove solids before being returned to the Hudson River. Ruggiero’s recom-

P S E G F o s s i l O u t l o o k 2

Power Faces Significant Revenue Reduction

Power hedges, or sells in advance most of its output. This strategy creates price certainty and reduces the risks posed by price fluctuations.

The average hedge price (BGS and non-BGS) for energy and energy related components (not capacity) is down $6, from $78 in 2009 to $72 in 2010.

Each dollar decrease in the price of energy represents $40 million in reduced revenues.

Fossil hosted its first presentation on PSEG’s Financial Outlook for 2010 at an all hands meeting held in Newark on March 2. Caroline Dorsa, PSEG Executive Vice President & Chief Financial Officer, gave a detailed review of PSEG’s finances and the challenges ahead.

Much of her presentation focused on the impact of decreased demand and lower prices on Power’s revenues. Power accounts for more than two-thirds of PSEG’s profits. The challenges facing Power, and other unregulated power producers, have led financial analysts to project PSEG’s profits will decline in the next several years.

The presentation is the first in a series that will be given throughout the company including Fossil & ER&T. Executive officers within each line of business will be delivering the same presentation to help employees better understand PSEG’s financial cir-cumstances. Improving employees’ understanding of PSEG’s financial performance drivers is a key strategic objective for 2010.

Power to face declining prices for the next several years

Half of PSEG Power nuclear and coal output is hedged, or sold in advance, through the New Jersey annual Basic Generation Service auction. Each February, the Board of Public Utilities auctions 1/3 of the supply for each of the next three years. The BGS price changes in June; the new price is the average of the three previous auctions.

As the bar chart explains, Power now faces three years of declining prices.

This June the roll off will be about $3; this February’s price of roughly $96 will replace 2007’s price of roughly $99.

The roll off next year is expected to be much greater, assuming flat prices, when 2008’s price of $111.50 -- the highest auction price ever -- will roll off.

PSEG financial outlook

P S E G F o s s i l O u t l o o k

The article below provides an overview of PSEG's financial performance for 2010. Compared to 2008, PSEG's 2009 operating earnings rose 3% to $3.12 per share. This was within our guidance of $3.00 - $3.25.

Our 2009 performance was driven by strong operating performance at Nuclear, Fossil and ER&T; the contribution of one-time sale of leases at Holdings; and hindered by abnormal weather, the sluggish economy and expenses at PSE&G. 2009 was a challeng-ing year, yet our results were well received by investors.

2010 is going to be another challenging year. Power prices set through the BGS auction declined for the second consecutive year. In addition to lower BGS prices, our all-in hedge prices are also down in 2010, which are challenging Power's margins. This means that O&M cost control will be critical to our 2010 performance.

As we proceed into 2010, PSEG will be investing in the Utility and in unregulated renewables, which will allow us to get an immedi-ate return on our investments. These investments, coupled with continued cost control, an up-tick in the economy and normal weather, have enabled PSEG to keep guidance for 2010 at $3.00 - $3.25 per share.

E n e r g y I n s i g h t s … U p d a t e s o n t h e c h a l l e n g e f a c i n g P o w e r

PSEG financial perfor mance B y J i m B e n s c o t e r , D i r e c t o r F i n a n c e F o s s i l

Dow Jones Newswire By Mark Peters

Feb 18 - Public Service En-terprise Group Inc (PEG) fourth-quarter earnings rose 49% after write-downs had weighed down the prior year, while operating results for the New Jersey power company were flat.

PSEG, like many other U.S. utilities, has struggled with slowing demand and slump-ing wholesale power prices during the economic down-turn. PSEG’s utility opera-tion, Public Service Electric & Gas, posted an 11% de-cline in earnings as power consumption dropped. Earn-ings for PSEG’s generation business, which sells power at market prices rather than regulated rates, fell 1.6% as weaker wholesale prices

offset increased output and lower fuel costs.

Overall, PSEG reported a fourth-quarter profit of $349 million, or 69 cents a share, up from $234 million, or 46 cents a share, a year ear-lier. Operating earnings were flat at 62 cents while revenue decreased 12% to $2.89 billion. The fourth quarter of 2008 included a large nonrecurring charge for declines in the nuclear decommissioning fund, which wasn’t factored into operating returns.

Analysts surveyed by Thom-son Reuters expected earn-ings of 60 cents a share on $3.66 billion in revenue.

For 2010, PSEG forecast operating income of $3 to $3.25, bracketing analysts; average estimate of $3.18.

PSEG didn’t release its pro-jected power sales for 2010, but forecasts an increase of less than 1% in electricity demand at its utility on a weather-normalized basis.

The outlook isn’t getting worse, but "we are seeing some mixed indicators" of a recovery, said Ralph Izzo, chairman and chief executive of PSEG, during a media conference call Thursday.

In the year ahead, the power and natural gas utility busi-ness is seeking $222 million in additional revenues from New Jersey regulators. It expects a decision in late spring, with new rates effec-tive by midyear.

Interest in merger-and-acquisition activity is being watched more closely in the power sector following

PSEG 4Q Profit Climbs After 2008 Wr ite-Downs; Power Demand Down

FirstEnergy Corp. (FE) $4.7 billion bid for Allegheny En-ergy Inc. (AYE) last week. But Izzo said PSEG isn’t interested at this point in consolidation because of a variety of uncertainties that can affect the value of a company, particularly the lack of clarity from the fed-eral government on green-house gas emissions linked to global climate change. Credit market conditions and new regulations expected on coal-fired power plants raise additional questions.

"I am not a big believer that it is easily doable right now," Izzo said.

3

P S E G F o s s i l O u t l o o k

Three Fossil associates who joined the company upon gradu-ating college in 2008 successfully completed the requirements of the Fossil Generation Engineer Program in January. Ac-cepting permanent assignments as Reliability Engineers are Shivani Malhotra, Shivam Sharma and Dan Bennett. They have been assigned to Peaking, Linden and System Engineer-ing, respectively.

The Fossil Generation Engineer Program is designed to attract new engineers who are motivated to work in the power gen-eration industry. Managed by Sonia Zacher-Martini, Manager – Fossil Support Services, the 1.5 to 2-year program helps build bench strength for future leadership posi-tions within Fossil.

All three candidates attested to the value of the program and the opportunity it pro-vided for hands-on opera-tions experience. During the program, the new engineers spent time in different rota-tional assignments and loca-tions enabling them to learn the various components of generation technology.

Shivani Malhotra, a NJIT graduate with a BS in me-chanical engineering, wanted a position that of-fered practical field experi-ence. She discovered that internships in the automotive and other industries did not provide this opportunity. Malhotra was surprised and pleased by the depth of exposure to technical work obtainable through the Fossil Generation Engineer Program.

“I wanted to take the theoretical knowledge I learned in school and apply it. This program offered real world experience from the beginning,” she said. Malhotra was assigned two rotations within Fossil, first at Bergen and then Hudson generating sta-tion. She also supported outages at the Texas stations.

At Bergen, Malhotra got involved with a variety of jobs and was tasked with coordinating and executing the change out of lube oil on Bergen Unit 1 gas turbines. She had the opportu-nity to interface with station resources: safety, environmental, operations, engineering, as well as outside contractors to help rectify issues as they arose. “There was no room for error; it was a great learning experience,” she said.

Having supported outages in New Jersey, Malhotra was well-versed in the application of the Outage Control Center (OCC) in accordance with the OEM model. She shared this experience with the Texas team and brought back valuable maintenance and operations prac-tices from Texas that she helped implement at Bergen.

Generation Engineers complete program

4

Malhotra’s rotational assignments included combined cycle and coal generation. Her permanent assignment within Peaking will expose her to a different side of the business and gas turbine technology. “The practical knowledge that I gained from the station personnel at each site was invalu-able. These experiences will help me drive the OEM initia-tives in my new assignment.”

Shivam Sharma served as a summer intern prior to signing on to the Fossil Generation Engineer Program. He had a taste of what was to come and liked it. A graduate from NJIT with a

BS in mechanical engineering, he was first assigned to Hud-son and then moved to Bergen generating station. He also supported the Guadalupe outage.

At Hudson, Sharma worked as a night shift issues manager during the spring 2009 outage. He learned outage norms and procedures and how the OCC operates. “This was a challeng-ing assignment; there was a lot to absorb and then apply real time,” he said.

Sharma found good support from graduates of the Fossil Gen-eration Engineer Program and station personnel. “It’s easier to learn more in a positive working environment. The culture at PSEG was easy to fit into,” he said.

Sharma believes the program structure offered good expo-sure to different technologies and departments and provided a better understanding of the overall energy industry. In op-erations, he learned how plants work; maintenance provided exposure to planning and scheduling, technical operations helped to bolster his engineering skills and plant outage work

(Continued on page 5)

Shivam Sharma and his manager, Dominick Sarullo, examine parts for the spring outage at Linden.

P S E G F o s s i l O u t l o o k

G e n e r a t i o n E n g i n e e r s c o n t i n u e d

5

demonstrated how preven-tative maintenance and repairs can foster opera-tional excellence. “I feel well prepared for the chal-lenges ahead in my new assignment at Linden gen-erating station,” he said.

Dan Bennett had experi-mented with generators and motors at Lehigh Uni-versity. When he gradu-ated with a BS in electrical engineering and came to PSEG, he was excited by the sheer magnitude of the equipment at Mercer gen-erating station, his first rotational assignment.

“Working in power genera-tion was always my intent. I knew immediately I would love it here. The rotational opportunities offered were ex-actly what I was looking for,” he said.

After Mercer, Bennett supported the Central Maintenance Shop (CMS) where he gained experience with outage support at combined cycle, peaking and coal stations.

With so much to learn in a short span of 18 months, Bennett found the people at the stations and within the service depart-

(Continued from page 4)

ments to be incredibly helpful. “I was impressed with how will-ing they were to stop and take the time to share their knowl-edge and experience with me,” he said “I learned that it takes a lot of people with the same goals and commitment to keep plants up and running.”

Bennett’s last rotation to System Engineering became his permanent assignment. When new engineers finish the

Fossil rotational program they are asked about their interests; these are consid-ered when matching up candidates with the needs of the business.

“Everything lined up nicely for me,” said Bennett. “System Engineering fits with what I wanted to do going forward. As a young engineer, I will keep learn-ing and developing as I work on projects from site to site.”

In 2010, Fossil will bring on board three new genera-tion engineers to the pro-gram. Fossil’s recent graduates will be available to offer their insight and a helping hand.

In his permanent assignment within System Engineering, Dan Bennett will work on projects from site to site. He is pictured at the Mercer BET project.

Shivani Malhotra reviews the two minute drill card with two contract workers prior to beginning electrical prep work for the Kearny 121 outage.

P S E G F o s s i l O u t l o o k

The financial targets on the Scorecard for 2010 have not been finalized. SAP is still open. In addition, the ethics measure is still under devel-opment. We expect all is-sues to be resolved shortly.

In the meantime, we have to maintain our focus. While we have been moving in the right direction for the past few years, to reach Top Decile/Top Quartile perform-ance will require continuous dedication in our commit-ment to excellence in best practices and behaviors.

The measures for January show three areas where we need to sustain a watchful eye.

(A) Fossil Commercial Availability is currently yel-low. This was due to sev-eral operating issues im-pacting the availability of Hudson 2 and Bergen 2. Hudson 2 was unavailable when the LMP prices were high, driving its commercial availability to 45.9 percent. Bergen Unit 2 had a failed transmitter. Both units had an impact on this measure.

(B) Peaking Equivalent Forced Outage Rate de-mand is yellow. This meas-ure was negatively impacted due to control problems with the voltage regulator on Kearny 10 and the Burling-ton 121 clutch. As the hours of operation increase, it is anticipated that Peaking’s EFORD will improve.

(C) Waste – Percent Land-fill Disposal is yellow. We have set a very aggressive goal and need all employees to commit to reducing waste. Aggressively ensure that all

Fossil Scorecard update & recover y action plans

items that should be recy-cled reach the correct dump-ster, and integrate the topic of waste control into all pre and post job discussions. If we encourage each other to find ways to reduce the amount of waste we gener-ate, it will move us forward.

6

2009YTD

2010Target

Year-EndForecast

YTDPlan Fossil CO ST CC PK CON EOS 2009

Month2010

TargetMonthPlan

MonthlyStatus Fossil CO ST CC PK CON EOS

OSHA Recordable Incidence Rate 8.30 1.26green

1.26 2.86 8.8 0.0 0.0 0.0 0.0 0.0 OSHA Recordable Incidence Rate 8.30 1.26 1.26 - 2.86 8.8 0.0 0.0 0.0 0.0 0.0

OSHA Days Away From Work Rate 10.79 0.55green

0.55 0.00 0.0 0.0 0.0 0.0 0.0 0.0 OSHA Days Away From Work Rate 10.79 0.55 0.55 + 0.00 0.0 0.0 0.0 0.0 0.0 0.0

Employee Development - MAST Goal (Job qualifications training) - 97% green - - - - - - - - 1 - Data Not Available until March

Ethics (Quarterly) TBD green - - - - - - - -

Line Management Observations (LMOs) 95% green 95% 96.7%

2009YTD

2010Target

Year-EndForecast

YTDPlan Fossil CO ST CC PK CON EOS 2009

Month2010

TargetMonthPlan

MonthlyStatus Fossil CO ST CC PK CON EOS

Fossil Commercial Availability (%) 88.9% 95.7%yellow

95.2% 80.3% 74.3% 95.9% 89.5% 88.8% Fossil Commercial Availability (%) 88.9% 95.7% 95.2% - 80.3% 74.3% 95.9% 89.5% 88.8%

Fossil Operating Heat Rate (Coal) 10,501 10,475green

10,475 10,192 10,192

Fossil Operating Heat Rate (CC) 7,482 7,464 green 7,464 7,498 7,498

Summer EFOR (Coal and CC) - 3.0%green

- - - -

2009YTD

2010Target

Year-EndForecast

YTDPlan Fossil CO ST CC PK CON EOS 2009

Month2010

TargetMonthPlan

MonthlyStatus Fossil CO ST CC PK CON EOS

O&M Budget Controllable ($M) $32 $348 green $20.8 $20.3 $7.2 $1.1 $6.5 $2.4 $0.2 -$0.5 O&M Budget Controllable ($M) $32 $348 $21 + $20.3 $7.2 $1.1 $6.5 $2.4 $0.2 -$0.5

O&M Joint Owned Units $M) $1.9 $37 green $2.1 $1.6 O&M Joint Owned Units $M) $1.9 $37 $2.1 + $1.6

Total Generation (GWh) (NJ/CT Coal) 604 7,151 green 834 780 780 Total Generation (GWh) (NJ/CT Coal Only) 604 7,151 834 - 780 780

Capital Plan Versus Actual $29 $394 green $22.0 $21.6 Capital Plan Versus Actual $29 $394 $22.0 + $21.6

Capital Project Results (Quarter + 1 month lag) - 95.0% green - - 2 - Sub categories do not add to Fossil Total (Fossil Support)

Unit Testing Optimization $0.6 $6.0green

$0.3 $0.1

Fringe Cost (Quarterly) - $56.3green

- - - - - - - -

Coal Equivalent Forced Outage Rate Demand (EFORd) 4.0% 4.2% green 4.2% 4.2% 4.2%

CC Equivalent Forced Outage RateDemand (EFORd) 1.0% 0.8%

green0.8% 1.0% 1.0%

Peaking Equivalent Forced Outage RateDemand (EFORd) - LM 6000 & 7EA 1.8% 2.5% yellow 2.5% 5.7% 5.7%

2009YTD

2010Target

Year-EndForecast

YTDPlan Fossil CO ST CC PK CON EOS 2009

Month2010

TargetMonthPlan

MonthlyStatus Fossil CO ST CC PK CON EOS

Environmental VOM per MWH $1.41 $1.33 green $1.59 $1.05 $1.81 $0.64 $0.22 $1.81 Environmental VOM per MWH $1.41 $1.33 $1.59 + $1.05 $1.81 $0.64 $0.22 $1.81

Air, Water, Spills (All Incidents) 1 9 green 1 0 0 0 0 0 Air, Water, Spills (All Incidents) 1 9 1 + 0 0 0 0 0

Waste - Percent Landfill Disposal 6.4% 5.7% yellow 5.7% 9.6%

Legend: Year-End Forecast: Expected to meet goal Achievement of Goal not yet assured Not expected to meet goal N/A

Monthly Status: + Better than plan o On Plan - Worse than plan N/A

PEOPLE PROVIDING PEOPLE PROVIDINGFossil

GREEN ENERGY Fossil

ECONOMIC Fossil

GREEN ENERGY Fossil

Fossil 2010 Balanced Scorecard January

Fossil

ECONOMIC Fossil

SAFE, RELIABLE FossilSAFE, RELIABLE

Fossil

January YTD Month of January

1 1 1 1 1 1 1

*

*

*

*

*

*

*

*

*

*

*

*

*

*

2 2

DRAFT *Financial Plan Not Locked, Subject to Change

A

B

C

P S E G F o s s i l O u t l o o k

river, an environmental plus. Plant availability would also improve. The costs associ-ated with thawing the clari-fier could also be avoided.”

Work began on the Clarifier Freeze Protection System in June 2009. The challenge was to implement the new system as cost-efficiently as possible. Initial estimates came in at $250,000.

That’s when Denis Cote, plant engineer, and a team of BEC craft personnel were brought in to do the job. Cote was responsible for leading the design, me-chanical and electrical lay-out and installation of the system. Bringing the work in house saved on labor costs. The team also looked for ways to econo-mize on material costs by recommissioning existing retired equipment at the Albany steam station.

“A 40,000 gallon condensate storage tank from the retired station was used to store the blow down water at consid-erable savings. Pre-existing piping systems were also reused,” said Cote.

As a result of these ef-forts, the Clarifier Freeze Protection System was completed last December at a cost of $55,000.

Running the new system has had positive results; there have been no clari-fier freeze-ups to date. The system has also re-used over 5 million gallons of water to date (approximately 115K per day) that would have been discharged as waste wa-ter. BEC is considering using the system year-round to continuously re-cycle water.

(Continued from page 1)

E n v i r o n m e n t a l O u t l o o k c o n t i n u e d

7

Ice formation along tank walls

Clarifier rake ice build-up Ice formation along tank walls

B E C C l a r i f i e r F r e e z e U p J a n u a r y 2 0 0 9

C l a r i f i e r F r e e z e P r o t e c t i o n S y s t e m

System Commissioned Dec 2009 No clarifier freeze-ups to date YTD - 5.8 million gallons water reused 40,000 Gal. Condensate Tank from Albany Steam Station Re-commissioned to receive BEC blowdown water Reused existing piping systems BEC Craft labor & Operations support

140°F blowdown water pumped to Clari-fier via underground Raw Water Line from Hudson River

P S E G F o s s i l O u t l o o k 8

Submit News

Submit news via the Power Communications Mailbox in Outlook or to the Fossil Outlook publication team.

Editor Nancy Tucker-Datrio 973-430-6097 Nancy.Tucker-Datrio@pseg.com

Design & Layout David DiDonato 856-339-3848 David.DiDonato@pseg.com

Writer Mike Jennings 973-430-6406 Michael.Jennings@pseg.com

Writer Roland (Bogg) Boggio 973-430-8193 Roland.BoggioJr@pseg.com

Fossil Vision

We will be recognized as the industry leader in producing and delivering safe, reliable, eco-nomic and clean energy by em-ployees, customers, investors and the communities we serve.

Fossil Mission

We Pledge to:

Exhibit true passion to achieve Safety Excellence

Conduct all our activities in an environmentally clean and responsible manner

Treat our associates with respect, promote diversity and inclusion, foster growth and development and be recog-nized as an employer of choice

Be the electric generator of choice

Maximize shareholder value through cost control and dis-ciplined investment

Maintain open and honest communication with our asso-ciates and stakeholders

Foster a culture that is self-critical and strives for continu-ous improvement to drive operational excellence

It seems that coal stations have been on a good run, why?

Performance at Fossil’s coal stations has noticeably improved during the past several months, demonstrating the power of our Operational Excellence Model. Across the board – safety, envi-ronment and operations – there have been better results, which is a tribute to the work of the plants’ staffs and leaders.

For the first time during my two years with PSEG, I am very comfortable with each plant’s lead-ership team – the leadership teams have the right standards to assure that we continuously im-prove. We have the right people in the right spots. Previously, at each site there have been peo-ple resistant to the OEM, who did not agree with it and did not want it to succeed. Now there is alignment at each station. The leaders and crews are taking ownership and accepting account-ability for implementing the OEM.

The trends in the critical areas used to judge our work, safety, environment and operational per-formance have improved, showing how a self-critical and proactive approach improves every aspect of performance.

The coal plants’ safety performance has turned around in the past five months. Safety perform-ance improved after last spring’s safety intervention training sessions, but people were still get-ting hurt too often. The past five months have been very successful with no significant injuries. Safe operations are fundamental to operational excellence, short cuts that put people at risk compromise operational performance in the long run, when the inevitable injuries occur and be-come the focus of attention.

Coal’s environmental performance has also been exceptional, with no incidents due to human error or plant equipment failure in the past five months. The need to operate our coal stations in an environmentally responsible manner cannot be overstated. There are people who want to shut down our coal stations and are waiting to pounce if we fail to meet our environmental com-mitments. Environmental excellence is operational excellence.

Our coal station’s EFORd rate was 4.5 % in 2009, down from 10.1% in 2008, vs. the 6.3% goal for 2009. We have set a target of being in the top quartile in 2010. In 2009, our coal fleet also ranked in the top quartile for EFORd due to boiler tube failures. These improve-ments are the result of employees at each plant identifying issues and taking action to head off potential problems.

The improved results at the coal stations show that the OEM has us on the road to being top quartile performers.

Coal plants on a hot streak A s k t h e D i r e c t o r w i t h D o n G a s t o n , D i r e c t o r o f G e n e r a t i o n – C o a l