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Financing Receivables | 6 Months Ended
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Jun. 30, 2018
Schedule of Financial Receivables [Line Items] |
Financing Receivables | Financing Receivables PSE&G PSE&G sponsors a solar loan program designed to help finance the installation of solar power systems throughout its electric service area. Interest income on the loans is recorded on an accrual basis. The loans are generally paid back with solar renewable energy certificates (SRECs) generated from the installed solar electric system. In the event of a loan default, the basis of the solar loan would be recovered through a regulatory recovery mechanism. None of the solar loans are impaired; however, in the event a loan becomes impaired, the basis of the loan would be recovered through a regulatory recovery mechanism. A substantial portion of these amounts are noncurrent and reported in Long-Term Investments on PSEG’s and PSE&G’s Condensed Consolidated Balance Sheets. The following table reflects the outstanding loans by class of customer, none of which are considered “non-performing.”
| Outstanding Loans by Class of Customer |
|  |  | As of |  | As of |
| Consumer Loans |  | June 30, 2018 |  | December 31, 2017 |
|  |  | Millions |
| Commercial/Industrial |  | $ | 169 |  |  | $ | 158 |  |
| Residential |  | 9 |  |  | 10 |  |
| Total |  | $ | 178 |  |  | $ | 168 |  |
Energy Holdings Energy Holdings, through several of its indirect subsidiary companies, has investments in domestic energy and real estate assets subject primarily to leveraged lease accounting. A leveraged lease is typically comprised of an investment by an equity investor and debt provided by a third-party debt investor. The debt is recourse only to the assets subject to lease and is not included on PSEG’s Condensed Consolidated Balance Sheets. As an equity investor, Energy Holdings’ equity investments in the leases are comprised of the total expected lease receivables over the lease terms plus the estimated residual values at the end of the lease terms, reduced for any income not yet earned on the leases. This amount is included in Long-Term Investments on PSEG’s Condensed Consolidated Balance Sheets. The more rapid depreciation of the leased property for tax purposes creates tax cash flow that will be repaid to the taxing authority in later periods. As such, the liability for such taxes due is recorded in Deferred Income Taxes on PSEG’s Condensed Consolidated Balance Sheets. During the first quarter of 2017, due to continuing liquidity issues facing NRG REMA, LLC (REMA), economic challenges facing coal generation in PJM, and based upon an ongoing review of available alternatives as well as certain discussions with REMA management, Energy Holdings recorded a $55 million pre-tax charge for its current best estimate of loss related to the lease receivables. Additional pre-tax charges of $22 million (including $7 million related to residual value impairment) were recorded in the quarter ended June 30, 2017. Subject to the terms of the Credit Support Forbearance and Rent Payment Forbearance described below, lease payments and adjustments to qualifying credit support on the REMA leases are due semiannually in January and July of each year. B ased on an ongoing review of (i) the liquidity challenges facing REMA and (ii) available alternatives, Energy Holdings recorded an additional $20 million pre-tax charge in the quarter ended June 30, 2018 for its current best estimate of loss related to lease receivables. Pre-tax charges were reflected in Operating Revenues in the first half of 2018 and 2017 and are included in Gross Investment in Leases as of June 30, 2018. Certain subsidiaries of Energy Holdings, REMA, certain holders of the pass-through certificates and other parties have entered into a forbearance agreement (Credit Support Forbearance) relating to REMA’s obligation to procure additional qualifying credit support for the Conemaugh facility. In addition, certain subsidiaries of Energy Holdings, REMA, certain holders of the pass-through certificates and other parties have entered into forbearance agreements (Rent Payment Forbearance) relating to the Keystone, Conemaugh and Shawville facilities. The parties to the Rent Payment Forbearance have agreed to permit REMA to enter into agreements with third parties relating to certain energy management, operation and maintenance and other services and have agreed to temporarily forbear from exercising rights and remedies related to certain events of default relating to certain periodic lease rent payments required to be made by REMA in July 2018. The Credit Support Forbearance will remain effective until the earlier of (i) two weeks following the date on which Energy Holdings subsidiaries, REMA and/or the consenting certificate holders provide written notice to REMA of its intention to terminate the Forbearance, and (ii) the date on which any event of termination as specified in the Credit Support Forbearance occurs. The Rent Payment Forbearance for each facility will remain effective until the earlier of (i) August 17, 2018 and (ii) the date on which any of the following events occur: (a) a new event of default occurs and is continuing under the operative documents governing the respective facilities; (b) REMA commences a case under title 11 of the United States Bankruptcy Code or (c) REMA terminates discussions with Energy Holdings and/or the consenting pass-through certificate holders regarding a potential restructuring by REMA. PSEG cannot predict the outcome of GenOn’s restructuring process or the possible related impact on REMA. PSEG continues to monitor any changes to REMA’s and GenOn’s status and potential impacts on Energy Holdings’ lease investments. If lease rejections or foreclosures were to occur, Energy Holdings could potentially record additional pre-tax write-offs up to its gross investment in these facilities and may also be required to accelerate and pay material deferred tax liabilities to the Internal Revenue Service (IRS). Also, if energy markets continue to deteriorate, it is possible that additional write-downs, including residual value impairment, could occur. The following table shows Energy Holdings’ gross and net lease investment as of June 30, 2018 and December 31, 2017.
|  | As of |  | As of |
|  | June 30, 2018 |  | December 31, 2017 |
|  | Millions |
| Lease Receivables (net of Non-Recourse Debt) | $ | 525 |  |  | $ | 546 |  |
| Estimated Residual Value of Leased Assets | 326 |  |  | 326 |  |
| Total Investment in Rental Receivables | 851 |  |  | 872 |  |
| Unearned and Deferred Income | (299 | ) |  | (307 | ) |
| Gross Investment in Leases | 552 |  |  | 565 |  |
| Deferred Tax Liabilities | (500 | ) |  | (480 | ) |
| Net Investment in Leases | $ | 52 |  |  | $ | 85 |  |
The corresponding receivables associated with the lease portfolio are reflected as follows, net of non-recourse debt. The ratings in the table represent the ratings of the entities providing payment assurance to Energy Holdings.
|  |  | Lease Receivables, Net of Non-Recourse Debt |
| Counterparties’ Credit Rating Standard & Poor’s (S&P) as of June 30, 2018 |  |  |
|  | As of June 30, 2018 |
|  |  | Millions |
| AA |  | $ | 14 |  |
| BBB+ — BBB- |  | 316 |  |
| BB- |  | 133 |  |
| CCC- |  | 62 |  |
| Total |  | $ | 525 |  |
The “BB-” and the “CCC-” ratings in the preceding table represent lease receivables related to coal and gas-fired assets in Illinois and Pennsylvania, respectively. As of June 30, 2018, the gross investment in the leases of such assets, net of non-recourse debt, was $315 million ($(112) million, net of deferred taxes). A more detailed description of such assets under lease is presented in the following table.
| Asset |  | Location |  | Gross Investment |  | % Owned |  | Total MW |  | Fuel Type |  | Counterparties’ S&P Credit Ratings |  | Counterparty |
|  |  |  |  | Millions |  |  |  |  |  |  |  |  |  |  |
| Powerton Station Units 5 and 6 |  | IL |  | $ | 132 |  |  | 64 | % |  | 1,538 |  |  | Coal |  | BB- |  | NRG Energy, Inc. |
| Joliet Station Units 7 and 8 |  | IL |  | $ | 85 |  |  | 64 | % |  | 1,036 |  |  | Gas |  | BB- |  | NRG Energy, Inc. |
| Keystone Station Units 1 and 2 |  | PA |  | $ | 10 |  |  | 17 | % |  | 1,711 |  |  | Coal |  | CCC- |  | REMA (A) |
| Conemaugh Station Units 1 and 2 |  | PA |  | $ | 10 |  |  | 17 | % |  | 1,711 |  |  | Coal |  | CCC- |  | REMA (A) |
| Shawville Station Units 1, 2, 3 and 4 |  | PA |  | $ | 78 |  |  | 100 | % |  | 596 |  |  | Gas |  | CCC- |  | REMA (A) |
(A) | GenOn and certain of its subsidiaries (which did not include REMA) filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. GenOn is currently engaged in a balance sheet restructuring, which will take an undetermined time to complete. Certain subsidiaries of Energy Holdings, REMA, consenting holders of the pass-through certificates and other parties have entered into a Credit Support Forbearance relating to the Conemaugh facility and the Rent Payment Forbearance relating to the Keystone, Conemaugh and Shawville facilities, as described above.
The credit exposure for lessors is partially mitigated through various credit enhancement mechanisms within the lease structures. These credit enhancement features vary from lease to lease. Upon the occurrence of certain defaults, indirect subsidiary companies of Energy Holdings would exercise their rights and seek recovery of their investment, potentially including stepping into the lease directly to protect their investments. While these actions could ultimately protect or mitigate the loss of value, they could require the use of significant capital and trigger certain material tax obligations which could wholly or partially be mitigated by tax indemnification claims against the counterparty. A bankruptcy of a lessee would likely delay and potentially limit any efforts on the part of the lessors to assert their rights upon default and could delay the monetization of claims. Failure to recover adequate value could ultimately lead to a foreclosure on the assets under lease by the lenders. Additional factors that may impact future lease cash flows include, but are not limited to, new environmental legislation and regulation regarding air quality, water and other discharges in the process of generating electricity, market prices for fuel, electricity and capacity, overall financial condition of lease counterparties and their affiliates and the quality and condition of assets under lease.
PSE And G [Member] |
Schedule of Financial Receivables [Line Items] |
Financing Receivables | Financing Receivables PSE&G PSE&G sponsors a solar loan program designed to help finance the installation of solar power systems throughout its electric service area. Interest income on the loans is recorded on an accrual basis. The loans are generally paid back with solar renewable energy certificates (SRECs) generated from the installed solar electric system. In the event of a loan default, the basis of the solar loan would be recovered through a regulatory recovery mechanism. None of the solar loans are impaired; however, in the event a loan becomes impaired, the basis of the loan would be recovered through a regulatory recovery mechanism. A substantial portion of these amounts are noncurrent and reported in Long-Term Investments on PSEG’s and PSE&G’s Condensed Consolidated Balance Sheets. The following table reflects the outstanding loans by class of customer, none of which are considered “non-performing.”
| Outstanding Loans by Class of Customer |
|  |  | As of |  | As of |
| Consumer Loans |  | June 30, 2018 |  | December 31, 2017 |
|  |  | Millions |
| Commercial/Industrial |  | $ | 169 |  |  | $ | 158 |  |
| Residential |  | 9 |  |  | 10 |  |
| Total |  | $ | 178 |  |  | $ | 168 |  |
Energy Holdings Energy Holdings, through several of its indirect subsidiary companies, has investments in domestic energy and real estate assets subject primarily to leveraged lease accounting. A leveraged lease is typically comprised of an investment by an equity investor and debt provided by a third-party debt investor. The debt is recourse only to the assets subject to lease and is not included on PSEG’s Condensed Consolidated Balance Sheets. As an equity investor, Energy Holdings’ equity investments in the leases are comprised of the total expected lease receivables over the lease terms plus the estimated residual values at the end of the lease terms, reduced for any income not yet earned on the leases. This amount is included in Long-Term Investments on PSEG’s Condensed Consolidated Balance Sheets. The more rapid depreciation of the leased property for tax purposes creates tax cash flow that will be repaid to the taxing authority in later periods. As such, the liability for such taxes due is recorded in Deferred Income Taxes on PSEG’s Condensed Consolidated Balance Sheets. During the first quarter of 2017, due to continuing liquidity issues facing NRG REMA, LLC (REMA), economic challenges facing coal generation in PJM, and based upon an ongoing review of available alternatives as well as certain discussions with REMA management, Energy Holdings recorded a $55 million pre-tax charge for its current best estimate of loss related to the lease receivables. Additional pre-tax charges of $22 million (including $7 million related to residual value impairment) were recorded in the quarter ended June 30, 2017. Subject to the terms of the Credit Support Forbearance and Rent Payment Forbearance described below, lease payments and adjustments to qualifying credit support on the REMA leases are due semiannually in January and July of each year. B ased on an ongoing review of (i) the liquidity challenges facing REMA and (ii) available alternatives, Energy Holdings recorded an additional $20 million pre-tax charge in the quarter ended June 30, 2018 for its current best estimate of loss related to lease receivables. Pre-tax charges were reflected in Operating Revenues in the first half of 2018 and 2017 and are included in Gross Investment in Leases as of June 30, 2018. Certain subsidiaries of Energy Holdings, REMA, certain holders of the pass-through certificates and other parties have entered into a forbearance agreement (Credit Support Forbearance) relating to REMA’s obligation to procure additional qualifying credit support for the Conemaugh facility. In addition, certain subsidiaries of Energy Holdings, REMA, certain holders of the pass-through certificates and other parties have entered into forbearance agreements (Rent Payment Forbearance) relating to the Keystone, Conemaugh and Shawville facilities. The parties to the Rent Payment Forbearance have agreed to permit REMA to enter into agreements with third parties relating to certain energy management, operation and maintenance and other services and have agreed to temporarily forbear from exercising rights and remedies related to certain events of default relating to certain periodic lease rent payments required to be made by REMA in July 2018. The Credit Support Forbearance will remain effective until the earlier of (i) two weeks following the date on which Energy Holdings subsidiaries, REMA and/or the consenting certificate holders provide written notice to REMA of its intention to terminate the Forbearance, and (ii) the date on which any event of termination as specified in the Credit Support Forbearance occurs. The Rent Payment Forbearance for each facility will remain effective until the earlier of (i) August 17, 2018 and (ii) the date on which any of the following events occur: (a) a new event of default occurs and is continuing under the operative documents governing the respective facilities; (b) REMA commences a case under title 11 of the United States Bankruptcy Code or (c) REMA terminates discussions with Energy Holdings and/or the consenting pass-through certificate holders regarding a potential restructuring by REMA. PSEG cannot predict the outcome of GenOn’s restructuring process or the possible related impact on REMA. PSEG continues to monitor any changes to REMA’s and GenOn’s status and potential impacts on Energy Holdings’ lease investments. If lease rejections or foreclosures were to occur, Energy Holdings could potentially record additional pre-tax write-offs up to its gross investment in these facilities and may also be required to accelerate and pay material deferred tax liabilities to the Internal Revenue Service (IRS). Also, if energy markets continue to deteriorate, it is possible that additional write-downs, including residual value impairment, could occur. The following table shows Energy Holdings’ gross and net lease investment as of June 30, 2018 and December 31, 2017.
|  | As of |  | As of |
|  | June 30, 2018 |  | December 31, 2017 |
|  | Millions |
| Lease Receivables (net of Non-Recourse Debt) | $ | 525 |  |  | $ | 546 |  |
| Estimated Residual Value of Leased Assets | 326 |  |  | 326 |  |
| Total Investment in Rental Receivables | 851 |  |  | 872 |  |
| Unearned and Deferred Income | (299 | ) |  | (307 | ) |
| Gross Investment in Leases | 552 |  |  | 565 |  |
| Deferred Tax Liabilities | (500 | ) |  | (480 | ) |
| Net Investment in Leases | $ | 52 |  |  | $ | 85 |  |
The corresponding receivables associated with the lease portfolio are reflected as follows, net of non-recourse debt. The ratings in the table represent the ratings of the entities providing payment assurance to Energy Holdings.
|  |  | Lease Receivables, Net of Non-Recourse Debt |
| Counterparties’ Credit Rating Standard & Poor’s (S&P) as of June 30, 2018 |  |  |
|  | As of June 30, 2018 |
|  |  | Millions |
| AA |  | $ | 14 |  |
| BBB+ — BBB- |  | 316 |  |
| BB- |  | 133 |  |
| CCC- |  | 62 |  |
| Total |  | $ | 525 |  |
The “BB-” and the “CCC-” ratings in the preceding table represent lease receivables related to coal and gas-fired assets in Illinois and Pennsylvania, respectively. As of June 30, 2018, the gross investment in the leases of such assets, net of non-recourse debt, was $315 million ($(112) million, net of deferred taxes). A more detailed description of such assets under lease is presented in the following table.
| Asset |  | Location |  | Gross Investment |  | % Owned |  | Total MW |  | Fuel Type |  | Counterparties’ S&P Credit Ratings |  | Counterparty |
|  |  |  |  | Millions |  |  |  |  |  |  |  |  |  |  |
| Powerton Station Units 5 and 6 |  | IL |  | $ | 132 |  |  | 64 | % |  | 1,538 |  |  | Coal |  | BB- |  | NRG Energy, Inc. |
| Joliet Station Units 7 and 8 |  | IL |  | $ | 85 |  |  | 64 | % |  | 1,036 |  |  | Gas |  | BB- |  | NRG Energy, Inc. |
| Keystone Station Units 1 and 2 |  | PA |  | $ | 10 |  |  | 17 | % |  | 1,711 |  |  | Coal |  | CCC- |  | REMA (A) |
| Conemaugh Station Units 1 and 2 |  | PA |  | $ | 10 |  |  | 17 | % |  | 1,711 |  |  | Coal |  | CCC- |  | REMA (A) |
| Shawville Station Units 1, 2, 3 and 4 |  | PA |  | $ | 78 |  |  | 100 | % |  | 596 |  |  | Gas |  | CCC- |  | REMA (A) |
(A) | GenOn and certain of its subsidiaries (which did not include REMA) filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. GenOn is currently engaged in a balance sheet restructuring, which will take an undetermined time to complete. Certain subsidiaries of Energy Holdings, REMA, consenting holders of the pass-through certificates and other parties have entered into a Credit Support Forbearance relating to the Conemaugh facility and the Rent Payment Forbearance relating to the Keystone, Conemaugh and Shawville facilities, as described above.
The credit exposure for lessors is partially mitigated through various credit enhancement mechanisms within the lease structures. These credit enhancement features vary from lease to lease. Upon the occurrence of certain defaults, indirect subsidiary companies of Energy Holdings would exercise their rights and seek recovery of their investment, potentially including stepping into the lease directly to protect their investments. While these actions could ultimately protect or mitigate the loss of value, they could require the use of significant capital and trigger certain material tax obligations which could wholly or partially be mitigated by tax indemnification claims against the counterparty. A bankruptcy of a lessee would likely delay and potentially limit any efforts on the part of the lessors to assert their rights upon default and could delay the monetization of claims. Failure to recover adequate value could ultimately lead to a foreclosure on the assets under lease by the lenders. Additional factors that may impact future lease cash flows include, but are not limited to, new environmental legislation and regulation regarding air quality, water and other discharges in the process of generating electricity, market prices for fuel, electricity and capacity, overall financial condition of lease counterparties and their affiliates and the quality and condition of assets under lease.

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- Definition The entire disclosure for financing receivables. Examples of financing receivables include, but are not limited to, loans, trade accounts receivables, notes receivable, credit cards, and receivables relating to a lessor's right(s) to payment(s) from a lease other than an operating lease that is recognized as assets. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -URI http://asc.fasb.org/topic&trid=2196771 + Details
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