TEXT-Fitch raises PSE&G rating to 'A-', outlook is stable

July 27 - Fitch Ratings has upgraded to 'A-' the long-term Issuer Default
Rating (IDR) on Public Service Enterprise Group's (PSEG) regulated
utility subsidiary, Public Service Electric and Gas Company (PSE&G). Fitch has
also affirmed the 'BBB+' long-term IDRs on PSEG and its merchant electric
generation subsidiary PSEG Power LLC (Power).

The 'F2' short-term IDR and commercial paper rating on PSEG and PSE&G were
affirmed. A detailed list of rating actions is shown at the end of this release.

The Rating Outlook for PSEG, Power, and PSE&G is Stable.

These rating actions affect approximately $7.4 billion of bonds at PSE&G and
Power and all borrowings under the revolving credit facilities.

PSE&G Upgrade:

The upgrade to PSE&G's ratings reflects the benefits of recent and planned
capital investments combined with consistently strong financial metrics. The
utility's recent infrastructure projects and expected strong EBITDA growth from
transmission projects in progress that earn a FERC formula rate return will
significantly diversify the utility's future cash flows. These transmission
projects provide increased cash flow predictability at a strong return on
equity, with timely recovery of capital deployed.

Furthermore, the regulatory environment in New Jersey remains constructive.
PSE&G was able to implement a weather normalization clause at its natural gas
utility in 2010, which stabilized cash flows during the abnormally mild winter
earlier this year. Fitch does not expect the need for PSE&G to file another rate
case during the next few years, given the recent 2010 rate case and the
likelihood of the utility being able to continue to earn its authorized rate of
return.

Despite the end of bonus depreciation this year, which will negatively affect
cash flows in future years, Fitch expects financial metrics to remain strong and
to benefit in terms of increased stability due to the aforementioned qualitative
enhancements.

PSEG's ratings are supported by the strong credit profile of its two principal
subsidiaries: Power and PSE&G, the largest regulated electric and natural gas
distribution utility in New Jersey. In addition, PSEG does not have any
long-term parent level debt.

Key Rating Factors:

--A constructive regulatory environment in New Jersey;
--Fuel diversification and limited exposure to environmental regulation at
Power;
--Power's multi-year hedging program;
--Power's exposure to price volatility in the competitive generation market;
--Robust financial metrics at all three entities;
--An increased capital expenditure budget at PSE&G.

Constructive Regulatory Environment:

PSE&G's ratings largely reflect the balanced regulatory oversight of the New
Jersey Board of Public Utilities (BPU). The BPU permits PSE&G to use several
regulatory mechanisms to recover costs in a timely manner, and it also has
implemented a weather normalization clause at the natural gas utility. These
regulatory mechanisms enhance the predictability of utility cash flows by
mitigating the effect of exogenous factors.

The latest authorized return on equity (ROE) of 10.3% for both the electric and
natural gas utility operations is roughly the nationwide average for the sector.

Fuel Diversification and Limited Environmental Exposure:

Power has a relatively diverse source of fuel for its generating plants, which
limits the impact associated with any negative shock to a particular fuel
source. In 2011, 56% of Power's generation was from its interest in five nuclear
plants, with 28% from natural gas and 15% from coal.

Power's coal-fired generating fleet already has the bulk of its necessary
environmental control equipment in place. This mitigates the need for future
expenditures or the shutdown of plants in order to comply with environmental
regulations.

The company's diverse fuel sources result in Power's assets being placed all
along the dispatch curve, enabling the company to benefit from different
electric generation market conditions. Power's baseload units have had a solid
operating record, with its nuclear plants having achieved an aggregate capacity
utilization factor of greater than 90% in each of the past five years. The
strong performance of these baseload units gives Power a favorable competitive
position in its wholesale markets.

Multi-Year Contract Profile:

Power's ratings benefit from the company's pro-rata multi-year hedging program.
The company locks in prices three years in advance through participation in the
Basic Generation Services (BGS) auction in New Jersey and in capacity auctions
held by the PJM Regional Transmission Organization (PJM) and the Independent
System Operator New England (ISO-NE).

As of March 31, 2012, Power's nuclear and baseload coal generation, which
accounted for 71% of the company's total generation in 2011, was fully hedged
for 2012 at $59/Megawatt hour (MWh), 85%-90% hedged for 2013 at $53/MWh, and
35%-40% hedged for 2014 at $55/MWh. Power's intermediate load and peaking
facilities generally have a lower percentage of their expected volumes hedged in
the current year and are unhedged in the outer years.

Volatility of Power Prices:

The primary credit concern for Power is the company's exposure to price
volatility in the merchant power market. Power only contracts its power sales
out a few years, and it will generally have up to a quarter of its expected
annual power generation unhedged at the beginning of each year.

Due to Power's merchant exposure, it is important that management continues to
keep leverage at a modest level to enable the company to absorb periods of weak
cash flows without too much strain on the balance sheet.

Strong Financial Metrics:

The ratings on PSEG, Power, and PSE&G are bolstered by strong financial metrics,
aided by management's relatively conservative use of debt. Power's EBITDA will
likely continue to trend downward through 2014, due to higher-priced electricity
hedges rolling off and continued pressure on power prices as a result of weak
demand and low natural gas prices.

However, Power's financial metrics are expected to continue to have sufficient
cushion for the ratings, and Fitch anticipates cash flows remaining robust
enough to retire debt as needed to maintain appropriate strength. Fitch expects
Power's funds from operations (FFO) to debt ratio to average more than 35% over
the 2012-14 period, and its EBITDA to interest coverage ratio to remain greater
than 6.0 times (x).

PSE&G is undergoing a relatively large capital spending program over the next
few years. However, the spending is primarily on BPU-authorized infrastructure
projects and FERC-regulated transmission projects, both of which include timely
recovery of costs and attractive returns.

These infrastructure projects should provide significant growth to EBITDA
through the forecast period. Fitch expects PSE&G's FFO to debt ratio to average
more than 20% and its EBITDA to interest coverage ratio to remain greater than
6.0x over the 2012-14 period.

Fitch's expectations for continued strong financial performance at Power and
PSE&G should provide similarly strong consolidated financial metrics at PSEG.
Over the 2012-14 forecast period, Fitch expects PSEG's FFO to debt ratio to
average more than 25% and its EBITDA to interest coverage ratio to remain
greater than 6.0x.

Adequate Liquidity:

PSEG, Power, and PSE&G all have good liquidity. PSEG and PSE&G each has its own
commercial paper program to meet short-term liquidity requirements, with PSEG
using its program to also meet the short-term liquidity needs of Power.

The companies have an aggregate $4.3 billion in bank credit facilities. This
includes a total of $2.1 billion of five-year revolving credit facilities that
were recently renewed and mature in March 2