PSE&G’s Renewables and Energy Efficiency Initiatives

1. PSE&G’s Renewables and Energy Efficiency Initiatives FDU – Reinventing Energy in the 21st CenturyAlfredo Z. MatosVice President Renewables & Energy SolutionsNovember 21, 2008

2. PSE&G’s Commitment San Rafael Glacier, southern Chile PSE&G is committed to providing energy efficiency services and renewable energy. We believe that society must begin to decarbonize the electric system and, as it continuously cleans up energy, it should electrify the transportation sector. We believe that global climate change represents a real environmental threat and significant business challenge, as well as the opportunity for visionary companies.

3. NJ Energy Master Plan and RGGI Law Meaningful Opportunities for Green Value

4. 20% reduction in energy consumption by 2020 By 2020 30% of energy supply will come from renewable sources Reduce Peak demand by 5,700 MW by 2020 Energy Efficiency Renewables Demand Response NJ Energy Master Plan and RGGI Law Meaningful Opportunities for Green Value State: 5,900 MW by 2020 PSE&G Load: 3,175 MW by 2020 Solar Carve Out: State: 1,800 MW (2120Gwh) PSE&G: 950 MW State: 20,000 Gwhr by 2020 PSE&G: 12,000 Gwhr by 2020 State: 1,040 million therms by 2020 PSE&G: 676 million therms by 2020 State: 5,700 MW by 2020 PSE&G: 3,420 MW by 2020 To achieve success we must move from pilots to aggressive initiatives and invest in facilities and systems in ways that demonstrate our commitment to a sustainable future. It will take a paradigm shift!

5. 20% reduction in energy consumption by 2020 Energy Efficiency PSE&G’s Carbon Abatement Filing ($46MM) • Residential customers in Urban Enterprise Zones • Tune-Up Program in targeted neighborhoods: • Energy audit, thermostat, weather stripping, CFLs • Attic insulation, duct sealing and/or insulation • Install programmable thermostats and provide CFLs as part of routine utility-related gas service calls • Small business customers in UEZs – audit and direct installation of energy efficiency measures • Large Customer Technology Demonstration • Hospital Efficiency – audit and financial incentives • Expected lifetime energy saving: 76.4M Therms & 458M kWh Targets underserved urban areas

6. Reduce Peak demand by 5,700 MW by 2020 Demand Response PSE&G’s Demand Response Filing ($93MM) • Residential Customers • Central Air Conditioner Cycling • Replace existing equipment • Increase program enrollment • Pool Pump Load Control • Small Commercial A/C Cycling • C&I Curtailment Services – investments in installation of infrastructure to enable demand response • Load Shifting Demonstrations • Expected demand saving by 2014 is 392MW Reduces peak demand

7. Pilot Solar Loan Program By 2020 30% of energy supply will come from renewable sources Renewables • Two-year pilot program limited to 30MW • PSE&G will provide ~ $105MM in secured loans to qualified borrowers • PSE&G provides 40-60% of total capital for system • Borrower can pay back in SRECs with secured SREC pricing • Call option price is 75% of then current market value of SRECs if loan is prepaid • Since mid-April, received applications totaling 45% of available non-residential solar capacity (24MW) • Program opened to residential applications - July (6MW) Program provides universal access to capital to invest in solar systems

8. By 2020 20% of energy supply will come from renewable sources Renewables NJ Solar RPS: 1800 MW Total PV Capacity Identified in PSE&G Service Area to Meet 1800MW State Goal Actual Solar capacity installed = 29MW in PSE&G area, 59.6MW in NJ. An aggressive schedule of solar build out is required

9. By 2020 20% of energy supply will come from renewable sources Renewables I&C Example:Pilot Solar Loan Program Solar Installation Assumptions: • 20KW system • $6.50/watt installed cost • 13% Capacity Factor • 13 cents/kWh electricity savings escalating at 3% per year • $475 per SREC floor price • 11.11% interest rate on loan—15 Year term Financial Results: • $130,000 total investment by solar owner • $75,393 total loan (58% of total investment) • Repaid over 15-years by SRECs generated • $54,607 of C&I customer’s equity capital required • Payback in less than 2 years • Payback is via: • 30% ITC ($39,000) • Tax Savings driven by accelerated tax depreciation ($16,705 in the first 2 years alone) • Operating cost savings from reduced electricity off-set by O&M on system ($4,626 in the first 2 years alone) The structure and incentives provides a basis for making a solar installation, thus creating jobs and reducing carbon generating capacity

10. PSE&G’s Growing Hybrid Fleet • Replacing 1,300 cars and trucks • Reduction of 8,500 tons of CO2 and 850,000 gallons of gasoline over the next 10 years • Installing 450 hybrid aerial lifts • Reduction of and 73,000 tons of CO2 and 6.5 million gallons of fuel over the next 10 years

11. Investing in Green Requires Timely Action Initiatives PSE&G is investigating: • $290MM Carbon Abatement Phase II • Complements OCE & provides for NJ Economic Stimulus and jobs • Solar Loan Program Phase II • Expand existing program • Solar Infrastructure Investment • Pole-attached solar generation • Centralized solar generation • Distributed solar generation on government roofs & brownfields • Longer Term • Urban wind turbines • Biomass • AMI enabled PHEV • Fuel cells

12. Investing in Green Drives Demand For Skilled Workers in NJ • ~2,500 construction jobs • ~500 operations jobs New Nuclear Energy Efficiency Renewables New Nuclear • 1,800 MW solar (~60,000 installations) • 3000 MW offshore wind • 200 MW onshore wind • 900 MW Biomass • Efficiency upgrades on 3.7 million existing buildings Clean energy policies will generate a significant number of new green jobs.

13. Innovative Energy Solutions www.pseg.com/solarloan