Strong basic generation service (BGS) auction results for the past five years; No significant opposition, either legislative or regulatory, to supply procurement; Fairly robust capacity pricing in eastern Mid-Atlantic Area Council/PSEG North zone despite weakness elsewhere in the pool; and Large portion of expected gross margin is under contract through 2012. Supply fundamentals have weakened due to significant development of shale natural gas and weak economic conditions; Exposure to market price volatility as contracts expire and must be renewed at prevailing market prices; Some of current contracts place load-following, volume, and price risk on PSEG Power; Proposed capital spending program is significant; Large spending by the utility is predicated on continuing free cash flow generation by Power; and Meaningful open
