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Financing Receivables | 6 Months Ended
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Jun. 30, 2020
Schedule of Financial Receivables [Line Items] |
Financing Receivables | Financing Receivables PSE&G PSE&G’s Solar Loan Programs are 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 paid back with SRECs generated from the related installed solar electric system. PSE&G uses collection experience as a credit quality indicator for its Solar Loan Programs and conducts a comprehensive credit review for all prospective borrowers. As of June 30, 2020, none of the solar loans were impaired; however, in the event of a loan default or if a loan becomes impaired, the basis of the solar loan would be recovered through a regulatory recovery mechanism. As of June 30, 2020, none of the solar loans were delinquent and no loans are currently expected to become delinquent in light of the payment mechanism. Therefore, no current credit losses have been recorded for Solar Loan Programs I, II and III. 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 would be considered “non-performing.”
| Outstanding Loans by Class of Customer |
|  |  | As of |  | As of |
| Consumer Loans |  | June 30, 2020 |  | December 31, 2019 |
|  |  | Millions |
| Commercial/Industrial |  | $ | 154 |  |  | $ | 156 |  |
| Residential |  | 7 |  |  | 8 |  |
| Total |  | $ | 161 |  |  | $ | 164 |  |
| Current Portion (included in Accounts Receivable) |  | (29 | ) |  | (28 | ) |
| Noncurrent Portion (included in Long-Term Investments) |  | $ | 132 |  |  | $ | 136 |  |
The solar loans originated under three Solar Loan Programs are comprised as follows:
| Programs |  | Balance as of June 30, 2020 |  | Funding Provided |  | Residential Loan Term |  | Non-Residential Loan Term |
|  |  | Millions |  |  |  |  |  |  |
| Solar Loan I |  | $ | 24 |  |  | prior to 2013 |  | 10 years |  | 15 years |
| Solar Loan II |  | 77 |  |  | prior to 2015 |  | 10 years |  | 15 years |
| Solar Loan III |  | 60 |  |  | largely funded as of December 31, 2019 |  | 10 years |  | 10 years |
| Total |  | $ | 161 |  |  |  |  |  |  |  |
The average life of loans paid in full is seven years, which is lower than the loan terms of 10 to 15 years due to the generation of SRECs being greater than expected and/or cash payments made to the loan. Payments on all outstanding loans were current as of June 30, 2020 and have an average remaining life of approximately four years. Energy Holdings Energy Holdings, through several of its indirect subsidiaries, 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. In the second quarter of 2020, Energy Holdings completed its annual review of estimated residual values embedded in domestic energy leveraged leases and determined no impairments were necessary. During the second quarter of 2019, the outcome of Energy Holdings’ annual review indicated that the updated residual value estimate of the coal-fired Powerton lease was lower than the recorded residual value and the decline was deemed to be other than temporary as a result of expected future adverse market conditions. As a result, a pre-tax write-down of $58 million was reflected in Operating Revenues in the quarter ended June 30, 2019, calculated by comparing the gross investment in the leases before and after the revised residual estimates. On July 22, 2020, wholly owned subsidiaries of PSEG Energy Holdings L.L.C. (the Sellers) entered into a Purchase Agreement with Midwest Generation, LLC (the Buyer) relating to the sale by Sellers of their ownership interests in the Powerton and Joliet generation facilities and related assets, including the assumption by the Buyer of related liabilities. The transaction is targeted to close during the second half of 2020, subject to customary closing conditions and regulatory approvals. PSEG will reclassify approximately $160 million of assets as Assets Held for Sale on its Condensed Consolidated Balance Sheet in the third quarter of 2020. Any gain or loss, net of taxes, resulting from the transaction is anticipated to be immaterial. Leveraged leases outstanding as of June 30, 2020 commenced in or prior to 2000. The following table shows Energy Holdings’ gross and net lease investment as of June 30, 2020 and December 31, 2019.
|  | As of |  | As of |
|  | June 30, 2020 |  | December 31, 2019 |
|  | Millions |
| Lease Receivables (net of Non-Recourse Debt) | $ | 470 |  |  | $ | 498 |  |
| Estimated Residual Value of Leased Assets | 198 |  |  | 202 |  |
| Total Investment in Rental Receivables | 668 |  |  | 700 |  |
| Unearned and Deferred Income | (192 | ) |  | (203 | ) |
| Gross Investments in Leases | 476 |  |  | 497 |  |
| Deferred Tax Liabilities | (323 | ) |  | (328 | ) |
| Net Investments in Leases | $ | 153 |  |  | $ | 169 |  |
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' Standard & Poor's (S&P) Credit Rating as of June 30, 2020 |  |  |
|  | As of June 30, 2020 |
|  |  | Millions |
| AA |  | $ | 9 |  |
| A- |  | 54 |  |
| BBB+ to BBB |  | 237 |  |
| BB |  | 132 |  |
| NR |  | 38 |  |
| Total |  | $ | 470 |  |
The “BB” and the “NR” ratings in the preceding table represent lease receivables related to coal and gas-fired assets in Illinois and Pennsylvania, respectively. As of June 30, 2020, the gross investment in the leases of such assets, net of non-recourse debt, was $235 million ($(25) 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 |  | $ | 75 |  |  | 64 | % |  | 1,538 |  |  | Coal |  | BB |  | NRG Energy, Inc. |
| Joliet Station Units 7 and 8 |  | IL |  | $ | 85 |  |  | 64 | % |  | 1,036 |  |  | Gas |  | BB |  | NRG Energy, Inc. |
| Shawville Station Units 1, 2, 3 and 4 |  | PA |  | $ | 75 |  |  | 100 | % |  | 596 |  |  | Gas |  | NR |  | Shawville Power, LLC |
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. The existing leveraged leases are either with counterparties with strong credit ratings, or with counterparties that are supplying parent guarantees or other credit support. PSEG believes no credit losses are necessary for the leveraged leases existing on June 30, 2020. Upon the occurrence of certain defaults, indirect subsidiaries 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, for certain leases, 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. 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.
Public Service Electric and Gas Company [Member] |
Schedule of Financial Receivables [Line Items] |
Financing Receivables | Financing Receivables PSE&G PSE&G’s Solar Loan Programs are 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 paid back with SRECs generated from the related installed solar electric system. PSE&G uses collection experience as a credit quality indicator for its Solar Loan Programs and conducts a comprehensive credit review for all prospective borrowers. As of June 30, 2020, none of the solar loans were impaired; however, in the event of a loan default or if a loan becomes impaired, the basis of the solar loan would be recovered through a regulatory recovery mechanism. As of June 30, 2020, none of the solar loans were delinquent and no loans are currently expected to become delinquent in light of the payment mechanism. Therefore, no current credit losses have been recorded for Solar Loan Programs I, II and III. 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 would be considered “non-performing.”
| Outstanding Loans by Class of Customer |
|  |  | As of |  | As of |
| Consumer Loans |  | June 30, 2020 |  | December 31, 2019 |
|  |  | Millions |
| Commercial/Industrial |  | $ | 154 |  |  | $ | 156 |  |
| Residential |  | 7 |  |  | 8 |  |
| Total |  | $ | 161 |  |  | $ | 164 |  |
| Current Portion (included in Accounts Receivable) |  | (29 | ) |  | (28 | ) |
| Noncurrent Portion (included in Long-Term Investments) |  | $ | 132 |  |  | $ | 136 |  |
The solar loans originated under three Solar Loan Programs are comprised as follows:
| Programs |  | Balance as of June 30, 2020 |  | Funding Provided |  | Residential Loan Term |  | Non-Residential Loan Term |
|  |  | Millions |  |  |  |  |  |  |
| Solar Loan I |  | $ | 24 |  |  | prior to 2013 |  | 10 years |  | 15 years |
| Solar Loan II |  | 77 |  |  | prior to 2015 |  | 10 years |  | 15 years |
| Solar Loan III |  | 60 |  |  | largely funded as of December 31, 2019 |  | 10 years |  | 10 years |
| Total |  | $ | 161 |  |  |  |  |  |  |  |
The average life of loans paid in full is seven years, which is lower than the loan terms of 10 to 15 years due to the generation of SRECs being greater than expected and/or cash payments made to the loan. Payments on all outstanding loans were current as of June 30, 2020 and have an average remaining life of approximately four years. Energy Holdings Energy Holdings, through several of its indirect subsidiaries, 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. In the second quarter of 2020, Energy Holdings completed its annual review of estimated residual values embedded in domestic energy leveraged leases and determined no impairments were necessary. During the second quarter of 2019, the outcome of Energy Holdings’ annual review indicated that the updated residual value estimate of the coal-fired Powerton lease was lower than the recorded residual value and the decline was deemed to be other than temporary as a result of expected future adverse market conditions. As a result, a pre-tax write-down of $58 million was reflected in Operating Revenues in the quarter ended June 30, 2019, calculated by comparing the gross investment in the leases before and after the revised residual estimates. On July 22, 2020, wholly owned subsidiaries of PSEG Energy Holdings L.L.C. (the Sellers) entered into a Purchase Agreement with Midwest Generation, LLC (the Buyer) relating to the sale by Sellers of their ownership interests in the Powerton and Joliet generation facilities and related assets, including the assumption by the Buyer of related liabilities. The transaction is targeted to close during the second half of 2020, subject to customary closing conditions and regulatory approvals. PSEG will reclassify approximately $160 million of assets as Assets Held for Sale on its Condensed Consolidated Balance Sheet in the third quarter of 2020. Any gain or loss, net of taxes, resulting from the transaction is anticipated to be immaterial. Leveraged leases outstanding as of June 30, 2020 commenced in or prior to 2000. The following table shows Energy Holdings’ gross and net lease investment as of June 30, 2020 and December 31, 2019.
|  | As of |  | As of |
|  | June 30, 2020 |  | December 31, 2019 |
|  | Millions |
| Lease Receivables (net of Non-Recourse Debt) | $ | 470 |  |  | $ | 498 |  |
| Estimated Residual Value of Leased Assets | 198 |  |  | 202 |  |
| Total Investment in Rental Receivables | 668 |  |  | 700 |  |
| Unearned and Deferred Income | (192 | ) |  | (203 | ) |
| Gross Investments in Leases | 476 |  |  | 497 |  |
| Deferred Tax Liabilities | (323 | ) |  | (328 | ) |
| Net Investments in Leases | $ | 153 |  |  | $ | 169 |  |
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' Standard & Poor's (S&P) Credit Rating as of June 30, 2020 |  |  |
|  | As of June 30, 2020 |
|  |  | Millions |
| AA |  | $ | 9 |  |
| A- |  | 54 |  |
| BBB+ to BBB |  | 237 |  |
| BB |  | 132 |  |
| NR |  | 38 |  |
| Total |  | $ | 470 |  |
The “BB” and the “NR” ratings in the preceding table represent lease receivables related to coal and gas-fired assets in Illinois and Pennsylvania, respectively. As of June 30, 2020, the gross investment in the leases of such assets, net of non-recourse debt, was $235 million ($(25) 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 |  | $ | 75 |  |  | 64 | % |  | 1,538 |  |  | Coal |  | BB |  | NRG Energy, Inc. |
| Joliet Station Units 7 and 8 |  | IL |  | $ | 85 |  |  | 64 | % |  | 1,036 |  |  | Gas |  | BB |  | NRG Energy, Inc. |
| Shawville Station Units 1, 2, 3 and 4 |  | PA |  | $ | 75 |  |  | 100 | % |  | 596 |  |  | Gas |  | NR |  | Shawville Power, LLC |
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. The existing leveraged leases are either with counterparties with strong credit ratings, or with counterparties that are supplying parent guarantees or other credit support. PSEG believes no credit losses are necessary for the leveraged leases existing on June 30, 2020. Upon the occurrence of certain defaults, indirect subsidiaries 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, for certain leases, 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. 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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