Kathleen Lally - VP, IR Ralph Izzo - President and COO Tom O'Flynn - CFO

Ashar Khan - SAC Capital Paul Ridzon - Keybanc Capital Markets Andrew Levy - Frankfort Advisors Paul Patterson - Glenrock Associates Zachary Schreiber - Duquesne Capital Danielle Seitz - Dahlman Rose & Company Viswanath Khaitan - Deutsche Investment Management Clark Orsky - KDP Investment Advisors

Ladies and gentlemen, thank you for standing by. Welcome to the Public Service Enterprise Group Fourth Quarter 2006 Earnings Call and web cast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session for members of the financial community. (Operator Instructions). As a reminder, this conference is being recorded Wednesday, January 31st, 2007 and will be available for telephone replay for 48 hours beginning at 1 pm Eastern Time today until 1 pm Eastern Time on February 2, 2007. It will also be available as audio webcast on PSEG's corporate website at www.pseg.com. I would now like to turn the conference over to Kathleen Lally. Please go ahead.

Thank you very much, and good morning to everyone. We appreciate your listening in today either by telephone or over our website. I will be turning the call over to Ralph Izzo, PSEG's President and Chief Operating Officer for comments on the company’s results and outlook. Also participating in today's call will be Tom O'Flynn, PSEG's Chief Financial Officer. Tom will provide a more detailed view of the company's operating and financial results and the forecast for 2007. Before we begin, however, I just need to make a few points. We issued our earnings release this morning. In case you have not seen it, a copy is posted on our website. We expect to file our Form 10-K with the SEC at the end of February. In today's webcast, we will discuss our future outlook and I must refer you to our forward-looking disclaimer. Although we believe our forecasts are based on reasonable assumptions, we can give you no assurance that they will be achieved. The results or events forecast in our statements today may differ materially from actual results or events. The last word on any of our businesses is contained in the various reports we file with the SEC. As a reminder, our guidance speaks as of the date it is issued. Any confirmation or update in guidance will only be done in a public manner, generally in the form of a press release or webcast such as this. PSEG may or may not confirm or update guidance with every press release. As a matter of policy, we will not comment on guidance during any one-on-one meeting or individual phone calls. In the body of our earnings release we provided a table that reconciled net income to operating earnings. We've adopted this format to improve the readability of the release and to provide the required reconciliation between the GAAP terms “net income” and "income from continuing operations" to the non-GAAP term “operating earnings”. The attachments for the press release provide the reconciliation to each of our major businesses. Operating earnings exclude merger-related costs and the net impact of certain asset sales during the period presented. Operating earnings is our standard for comparing 2006 results to 2005 for all of our businesses. We exclude such costs so that we can better compare our current period results with prior or future periods. Finally, at the end of the prepared remarks Ralph and Tom will take your questions. I would now like to turn the call over to Ralph.

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Thank you, Kathleen, and good morning. I too appreciate the time you've taken today in listening to our call and I hope you've been able to review the earnings release distributed this morning. I am pleased with the results we reported in that release. As you can see, our operating earnings of $3.71 a share came in at the upper end of guidance for the year. Although we spent much of the year working to complete the merger with Exelon, we kept a close eye on maintaining strong go-it-alone capabilities. As a result, we not only ended the year with operating earnings at the high end of our guidance but also with our strongest outlook in sometime. PSEG has been a successful company for over a hundred years through many changes in markets and in the industry, and we are equally upbeat about our future. Operational excellence is the foundation for success in our business and in 2006 we demonstrated excellence across the Board. This is a tribute to the hard work of our talented and dedicated employees. Our Salem and Hope Creek nuclear stations generated more electricity than in any single year prior to 2006, and the Fossil component of the PSEG Power also had its best year of electric production. Strong nuclear and fossil operations enabled us to benefit more fully from a favorable energy pricing environment and enabled PSEG Power to achieve a record level of operating earnings. PSE&G, our New Jersey energy delivery business continued to operate with best-in-class reliability. Both electric and gas operations have never been stronger. PSE&G also received an important measure of rate relief in November of 2006 that will help its long term financial picture. In addition, to providing a fair return for investors the rate relief provided the resources needed to support our ability to provide safe reliable service. PSEG Energy Holdings had its most profitable year due in large measure to outstanding performance from its two Texas generating stations. We also reduced international exposure by selling investments in Poland and Brazil in keeping with our long-term strategy for that business. I am pleased to report that the remaining assets are performing on a more predictable basis. As for the future, we have a positive earnings trajectory based on a combination of strong operations, the prices we've contracted for our anticipated energy supply, and an improving picture for energy capacity markets. Tom will provide more details on this in a moment. In addition to the results I just described, we've made progress with our most important near-term objective. I already mentioned the rate relief that we received towards the end of the year that will clearly be helpful. We've also completed the redesign of our organization and have most of the senior management team now in place. We're continuing to address staffing needs while working to preserve many of the efficiency savings achieved during the merger process. We anticipate hiring back only 60% of the staff loss during the merger review process. This is exactly the stretch goal we had set for ourselves. We have also taken steps to make sure our nuclear progress continues, as you probably know, we'll resume direct management of the Salem and Hope Creek facilities before the exploration of our nuclear operating services agreement with Exelon. The three cheerleaders managing Salem and Hope Creek are now employees of PSEG. We have great confidence in them, the stations and the future of our nuclear assets. I would be greatly [remised] however, if I did not recognize and extend out some serious thanks to John Rowe, Jack Skolds, Chris Crane, and the entire Exelon team for their co-operation and support during this process. I cannot say enough positive things about the support being provided by Exelon management during this transition. We look forward to continuing the improvements and excellence in operations that they started at our sites and with Bill Levis, Tom Joyce and George Barnes' leadership, we are confident about their future success. Over the past year, you also saw the continued reshaping of our portfolio of assets. The changes made during the year were designed to improve our returns, strength in the balance sheet and sharpen our focus on core operating areas. We remained committed to improving the balance sheet by further reducing debts and as our financial strength improves, we'll be able to pursue options for future growth. The actions taken over the past year, coupled with higher energy prices, support our forecast improvement in 2007 operating earnings, to a $4.60 to $5 per share, with growth in 2008 in excess of 10%. Power prices have declined since we made this forecast in the fall of 2006, but significant forward head ratios, the sale of Lawrenceburg and a reduction in financing costs continue to provide us with confidence in our forecast. We are in the process of developing our long run business growth strategy and we will provide you with an update on March 26, when we host the meeting for the financial community, at [Philadelphia Storey] in New York. Now Tom will review the fourth quarter and our outlook for 2007. Tom O'Flynn: Thanks Ralph. Good morning. Let me first extend our welcome to Kathleen Lally, our new Vice President of Investor Relations. We know Kathleen from her former roles and you will be happy to know she continues to have a lot of tough questions for us and keep us on our toes. PSEG reported operating earnings for the fourth quarter of $174 million or $0.69 per share, versus $233 million or $0.94 per share for the 2005 fourth quarter. The strong results for the recent quarter overcame a charge of $0.10 per share, Power, related to impairment of turbines to be sold in 2007. And I also want to remind you that last year's results include a gain of $0.18 from the sale of the Seminole lease. The year, PSEG reported operating earnings of $938 million or $3.71 per share compared to 2005 amounts of $918 million or $3.77 per share. The results for '06 are based on 252 million shares outstanding, a 3.3% increase over 2005. PSEGs results for the quarter and the year are defined in large parts by strong performance from our generation fleet and higher power prices, offset by warmer weather. For the fourth quarter, Power reported operating earnings of $102 million or $0.40 and 11% decline in the 113 million or $0.45 from a year ago. As you know, a number of our strategic activities were reviewed in a different context during the merger process. Shortly after the termination of the merger, Power took a close at two assets in its portfolio that had uncertain long-term value for us. Namely Lawrenceburg and 4EA Turbines. Lawrenceburg is a 1100 megawatt combined cycle gas unit in Indiana that did not integrate well into our PJM eastern based portfolio. During 2006, it produced an operating loss of over $0.10 and although we anticipated improvements in the future, we believe that the unit may be worth more in the hands of another owner. Early in January, we announced the sale to American Electric Power recorded an after-tax loss of $210 million and the unit was moved to discontinued operations in the fourth quarter. With our completion of the sale, we expect to receive approximately $425 million of after-tax cash flow. As for the turbines, Power has no immediate use for these units and with the passage of time. Our evaluation is that newer technology proved be more flexible and efficient in new projects. This analysis coupled with interest by a number of potential buyers caused us to decide to monetize these assets and recognize an impairment of $44 million or $0.10 in the fourth quarter. This loss is included in our operating earnings for the quarter and the year. For the year, Power reported record operating earnings of $515 million worth $2.04 per share, an 11% improvement over '05's operating earnings of $446 million worth $1.83 per share. Power saw an improving margin during the quarter and the year as a result of higher prices for our contracted output and other market hedging activities. Given our strategy of contracting for a few years into the future, we generally experience market prices on a lag basis. Higher pricing added $0.22 to earnings for the quarter and $0.84 to the year. The continuation of strong operations via nuclear fleet also supported margins for the quarter. Nuclear units operated at a capacity factor of 96% in the fourth quarter resulting in a full year capacity factor also of 96%, which included a record refueling outage at Salem 2 of under 22 days. This performance added $0.02 per share to Power's earnings for the quarter. Earnings were improved by $0.20 per share for the full year as a result of the fleet's year-over-year improvement. Higher prices and increased output more than offset the effective higher depreciation expense in 2006. The operation of new assets and the absence of Nuclear Decommissioning Trust Fund gains of $0.05 per share recognized in last year's fourth quarter. Power's fourth quarter earnings for the BGSS were also down $0.11 versus an unusually strong fourth quarter 2005 that benefited from very high post-hurricane gas prices in normal weather. In contrast, fourth quarter '06 was hurt by warm weather and a lingering effect in the inventory costs of last year's gas price run up. This $0.11 impact during the quarter brought the full year impact to $0.22 per share lower than we saw in 2005. Looking forward to 2007, our inventory position is better balanced and with some more normal weather, we would expect the BGSS contribution to improve in 2007 by approximately $0.10 to $0.15 over 2006. Operating earnings for Power in 2007 are expected to be in the range of $770 million to $850 million. The midpoint of this range represents a $295 million increase, a greater than 50% improvement over our '06 operating earnings. The key drivers to this increase are the higher prices for our nuclear in Poland output that are realized because of the rolling nature of our forward hedge positions. The exploration of our contract with United Illuminating in Connecticut, the sale at Lawrenceburg, and our projected improvements in margins on serving the BGSS contract. In addition to the improvement in energy markets the redesign of capacity markets will also provide reasonable signals for reliability and is expected to enhance Power's margins. There were positive steps in December related to capacity design. First, the transitional period began for the forward capacity market in New England. Capacity prices in New England are approximately $3 per kilowatt [a month]. Second, the FERC approved reliability pricing model for PJM with implementation in June of 2007. Those market changes are expected to be accretive to Power and are forecasted at approximately $100 million to $115 million Power's 2007 margins. Overall, our gross margin per megawatt hour has increased from approximately $33 per megawatt hour in 2005 to approximately $38 per megawatt hour in '06 and is forecasted to expand in '07 by approximately another $10 per megawatt hour. As you recall, we are pleased to announce during the fourth quarter that we received approval to extend the in-service date of pollution control facilities at Hudson Unit 2 for four years beyond 2006 under an agreement with Federal and State Environmental Authorities. The agreement requires PSEG fossils undertaking number of plant modifications and operating changes to meet targeted reductions in the missions of NOx, SO2, particulate matter and mercury. We also need to notify the authorities by the end of 2007 when we will install the additional pollution controls the Hudson Unit 2 by the end of 2010 or plan for the early shutdown of the unit. We are in the midst of concluding detailed engineering work and updating our projection of our environmental capital cost for our 2006 Form 10-K. As many of you are aware, the markets for major environmental and construction projects are tight. We may see some increase in our current estimate of environmental capital cost of $400 million to $500 million for Hudson and $300 million to $450 million for Mercer. PSE&G, our electric and gas utility company reported operating earnings for the quarter of $64 million or $0.25 per share compared with $66 million or $0.26 per share from a year ago. The challenge with PSE&G in the quarter and for the year has been weather and extended delay in receiving rate relief. For the fourth quarter, warmer than normal weather reduced PSE&G's earnings by $0.06 per share versus prior results, and also, versus normal. For the full year, warmer than normal weather reduced PSE&G's earnings by $0.12 per share versus normal and by $0.19 per share versus 2005 reported earnings. Higher transmission revenues, reduction in operating expenses, and true up of taxes in the quarter allowed PSE&G to almost offset the negative effect of weather. For the year, PSE&G reported operating earnings of $262 million or $1.04 per share, a 27% decline over '05's operating earnings of $347 million or $1.42. Decline reflects the abnormal weather conditions and the delayed rate relief. Operating earnings for PSE&G are forecasted to improve in 2007 to $330 million to $350 million, and accordingly this range represents a 30% improvement over '06's operating results. The full year effect of the gas and electric rate agreements approved in November, coupled with more normal weather are the primary drivers behind this forecasted improvement. PSEG Energy Holdings reported earnings for the fourth quarter of $24 million or $0.10 per share compared to $72 million or $0.30 per share from the fourth quarter of '05. The quarter-over-quarter results primarily reflect the absence of $0.18 per share gain at resources from the sale of the Seminole lease and some other items as illustrated in the attachment 7. For the year, Holdings reported operating earnings of $227 million or $0.89 per share, a 10% improvement over '05's operating earnings of $196 million or $0.81 per share. These results for '06 include a mark-to market gain of $0.11 per share. Holdings 2006 earnings are noteworthy considering Global has reduced the invested capital in its portfolio by over $500 million over the past three years, as shown in attachment 9. This decrease was driven by over $900 million of sales of non-strategic international investments, and an after-tax gain of $50 million over this timeframe. As a result, over 90% of Global's portfolio consists of its investments in Chile and Peru, primarily stable distribution companies and our US generation business. The sale of assets and reduction in recourse debt by Holdings [throughout] the subsidiary, contributed $95 million to PSEG in the fourth quarter. Operating earnings for Holdings have forecasted a decline '07 to $130 million to $145 million. The largest reduction from '06 to '07 is our Texas assets. Due to a variety of factors, including the absence of '06's mark-to-market gain. A large decrease in spark spreads year-over-year and additional plant maintenance outages. We also anticipate that the implementation of the new accounting standard for uncertain tax positions, FIN-48, will reduce Holding's earnings, particularly with respect with some leases at resources. Finally, I'd like to make some comments regarding our consolidated cash flow and liquidity. In 2006, cash flow from operations was very strong, generating $1.9 billion. This represents improvement than the $925 million from last year. The improvement was largely due to reduced cash collateral postings by Power and approved receivables. [Absent] changes in working capital, cash from operations improved by $100 million year-over-year. In addition to meaningful excess cash from operations during 2006, the after-tax cash proceeds from the sale of assets and Holdings contributed more than $600 million of additional cash flow. This primarily reflects the sale of our interest in RGE and two generating facilities in Poland. In total, excess cash to pay down recourse debt was about $950 million. We have available liquidity at yearend 2006 exceeding $3 billion. In the fourth quarter, we refinanced $3.2 billion of credit facilities, (inaudible) Enterprise grew $1 billion, Power for $1.6 billion and Utility for $600 million. All three Power facilities mature in 2011. Debt reduction has materially strengthened our balance sheet, in conjunction with refinancing our credit facilities, our covenant calculations were relaxed by our lenders. Normalizing for changes to our covenant calculations, we reduced our financial leverage by about 4 percentage points during 2006. 00:17 15th file pro forma -- with the anticipated proceed from the sale of Lawrenceburg, we will have reduced our leverage to about 50%. This reduction leverage is expected to reduce operating expenses at the Holding Company level, to a range of $50 million to $60 million in '07 versus $66 million. In summary, we are pleased with our performance for 2006 and believe we are well positioned for 2007. Highlights include, as Ralph went through, earnings are expected to grow by one-third from $4.60 to $5 per share. Our capital structure is improving, operating risk has been reduced, improved operations, strong forward hedge portfolio and reduced international risk. Now Ralph and I would be pleased to take questions.

Operator?

Ladies and Gentlemen we will now begin the question-and-answer session for members of the financial community. (Operator Instructions). And the first question is coming from the line of Ashar Khan with SAC Capital. Please proceed. Ashar Khan - SAC Capital: Good morning. Tom, could you just go over what the hedges are? Could you update your hedge information, the last information I had was that EEI, could you update what the hedges stand currently for '07, '08 and '09? Tom O'Flynn: Sure. Those are generally still reasonable numbers, still reasonable ranges for those folks who don't have the information there at the EEI presentation we said in '07, we are about 85% to 95% hedged, '08 was 65% to 80%, and '09 was 10% to 40%. Those are still reasonable ranges. When we talk about hedge ratios, we generally talk about our forward nuclear and coal as that represents about 85% of our megawatt hours, a higher percentage of our margin. We also would expect to update those in the K to the extent there is any material changes. Ashar Khan - SAC Capital: Okay. I guess this PJM auction will move those hedges upwards, is that a fair assumption? Tom O'Flynn: The BGS auction does commence next week. As you probably know, we are not able to comment on that even to the extent that we are participating in it, just for confidentiality reason. So, yes, there is BGS auction next week. Yes, it does allow all generators an opportunity including ourselves if they participate to move those hedges up. Ashar Khan - SAC Capital: Okay. And if I can just end up, could you just give us what is -- I know you mentioned a $10 margin improvement in '07 gross margin, could you tell us roughly what it would be in '08, which is an excess of 10% the guidance? Tom O'Flynn: Yeah, we are still -- and also this is your last first question. It would not be as -- we would still see margin improvement from '07 to '08. It would not be in the magnitude of 10 bucks per megawatt hour, but it would support an overall earnings increase for PSEG of 10% and more from '07 to '08. Ashar Khan - SAC Capital: Okay. Thank you.

The next question is from Paul Ridzon with Keybanc Capital Markets. Please proceed. Paul Ridzon - Keybanc Capital Markets: Ralph, is your strategic review of Holdings complete or could we see some more divestitures?

Paul, that's still a work in progress. We were looking at the whole portfolio there and we may be able to say modestly more things in the March timeframe at the analyst conference, but right now I just simply leave it at that. Paul Ridzon - Keybanc Capital Markets: And Tom, just more granularity around the $4.60 to $5, has the pullback towards the top end of that pretty much out of range at this point? Tom O'Flynn: We generally, Paul, don't comment on ranges within ranges. I'd say since the EEI prices have come down a little bit 2 to 4 bucks depending upon where you are in the curve. At the same time, there have been some offsets. I think we mentioned that Lawrenceburg had been an operating drag. That won't be there in '07, so we're still very comfortable with our $4.60 to $5 range. Paul Ridzon - Keybanc Capital Markets: But the previous -- the $4.60 to $5 had about a 10% loss from Lawrenceburg? Tom O'Flynn: Yes. Paul Ridzon - Keybanc Capital Markets: Thank you very much. Tom O'Flynn: Right there, yeah.

Your next question is coming from the line of Andrew Levy with [Frankfort Advisors]. Please proceed with your question. Andrew Levy - Frankfort Advisors: Hey, guys. Tom O'Flynn: Hi. Andrew Levy - Frankfort Advisors: Hiring Kathleen is like letting the fox in the henhouse, but congratulations. Hey, Kathleen. Tom O'Flynn: Well, I would rather hear for (inaudible). Andrew Levy - Frankfort Advisors: No, it's a smart fox, a very smart fox. So, it works so well. Hey, just a quick question. Is there any political pressure that you guys are seeing just relating to electric rates?

I think that there is always political pressure to keep electric rates under control, Andrew. But the reality is, if you look at the retail rates that New Jersians are seeing and how they have moved relative to other states nearby, it's a real tribute to the intelligence of the design of the BGS auction. So it's been a -- I think it's been a regulatory success here. Andrew Levy - Frankfort Advisors: Thanks.

Your next question comes from Paul Patterson with Glenrock Associates. Please proceed. Paul Patterson - Glenrock Associates: Good morning guys.

Good morning. Paul Patterson - Glenrock Associates: Just the Energy Holdings, it would be -- I guess you guys are not expecting mark-to-market gain and that sort of explains about a third of the decrease that you are expecting for ’07. How does the other, the new accounting standard and the spark spreads breakout after that? Tom O'Flynn: I think in general, if we take Texas, first of all, Paul, this year our net income after tax contribution in Texas was about $80 million to $85 million. As you see in one of the attachments, almost $30 million of that was mark-to-market, I think the number is 28 to 29. So, you it kind of back into a mid 50s -- a mid 50s type of number excluding the mark-to-market, we are not anticipating mark-to-market this year. And we expect Texas to be down about $20 million, probably the biggest piece that is sparks coming from last year realized sparks were 19 to 20. We've got no forecast right now, but 15 to 16. And then -- so that brings you down about two-thirds of that decrement and then the other piece would be some maintenance outage as we do expense those as they come along. So that's the biggest -- that's kind of the waterfall if you will, on Texas.

With respect to FIN-48 caution ate that we are (inaudible 00:13 19 file) units, it's a very detailed and a cumbersome thing to work through. We have been talking about this for a few months. I think in general, our guidance would contemplate a FIN-48 headwind if you will, a reduction to earnings in the mid-20s. Paul Patterson - Glenrock Associates: Okay. And then just on the nuclear capacity factor for '07 and '08. I think you said it was 96% for the year in '06? What do you guys think it's going to be with refueling and everything, the schedule on just to --, your expectation for '07 and '08 going forward? Tom O'Flynn: I think 96% was a good number, we certainly wouldn't count that, but it would be a number in low 90's. Paul Patterson - Glenrock Associates: Low 90's. Tom O'Flynn: Yeah. Paul Patterson - Glenrock Associates: Okay. Thanks a lot. Tom O'Flynn: 90 to 92, something that kind of range.

Your next question is from Zachary Schreiber with Duquesne Capital. Please proceed with your question. Zachary Schreiber - Duquesne Capital: Hi its Zach Schreiber from Duquesne. Congratulations Kathleen.

Thank you, Zach. Zachary Schreiber - Duquesne Capital: Just say a quick question, Tom, on the RPM, the $100 million to $150 million. Is that a year-over-year number or is that an absolute number? Tom O'Flynn: No, it is a year-over-year. It is in '06 versus '07. Consistent Zach, I think we talked about November, at the EEI. The PJM-RPM as you all know has generally come through as anticipated. Zachary Schreiber - Duquesne Capital: Okay. Tom O'Flynn: The '06 is obviously smaller, so you would expect another increase from '07 to '08, even if the dollars per kilowatt year don't change, just because the PJM-RPM, we really don't get a lot for the first five months of '07. Zachary Schreiber - Duquesne Capital: Okay. And then on the CapEx, on the environmental side, is there anything you can just sort of put some parameters around the digit. Since I got from your comments was, may be its a little bit higher, but not a huge amount, but can you just cooperate if it is higher, how much higher and just put some parameters around that? Tom O'Flynn: Yeah I [advise], stay away from that. We are, as I said doing detail engineering estimates, and we are also in the middle of some negations, discussions with some outsiders. It will be in the K. I'd say -- Zach, we generally see it as a manageable number, but I think the purpose was to just remind people as you are probably seeing from other folks in the sector. Zachary Schreiber - Duquesne Capital: Yeah Tom O'Flynn: That there was some pressure and you may see some movement. It's a manageable amount, but its certainly enough, that's -- we are working our best to manage it. Zachary Schreiber - Duquesne Capital: Okay. Can you just remind us on the number of megawatts that you would be scrubbing and rest of the things, so we would just have some benchmark whether its -- you are assuming $300 a kilowatt, or $200 a kilowatt or $600, so we shouldn't know what kind of --? Tom O'Flynn: Yeah, Hudson is six, in Mercer is the same. Zachary Schreiber - Duquesne Capital: Hudson is six. Tom O'Flynn: So you get it. Yeah. Zachary Schreiber - Duquesne Capital: Okay. Tom O'Flynn: So the other dam -- Hudson you can -- adjust about the simple number, we talked about four to five, which is moving. You can still see that they (inaudible) 600 megawatts of coal, Hudson is located in a very attractive place, almost constrained area of load pocket, to stop the [ballasting skyway] from driving in your city. And it's steadily -- and attractive facility in a very key location. Zachary Schreiber - Duquesne Capital: Okay. And on this Connecticut lawsuit -- is there -- to us, it doesn’t seem like the Attorney General would have any way to do what he is proposing to do and [singling] on the FERC Regulation and EWG and [Federal Fund] Rate Adoption is that the proper way to think about this or is there any way that there is some sort of wrinkle in which that Connecticut can try and impose its regulatory jurisdiction over apparently deregulated generation? Tom O'Flynn: Yes Zach, we don't think we will be giving legal views over the -- on the wire (inaudible) --currently, there has been some press up there, I'd just say that there was certainly a sale out there that was fully competitive with the plants. There is a good competitive market, that energy prices, SCM in there. I think from our own standpoint, if you just look at the total (inaudible) acts, we expect to do well in '07, but we did not do well. So in '06 and '05, if you look at the full package, just given that we signed a three year contract with UI in late 2003, if you look at the full package of our profitability in that period, it has actually been quite marginal until the last couple of weeks. But any way we think all the pieces that bill into market make sense, but there is no detailed piece available of legislation we are going to look at right now, it's really more a thing throughout the press. Zachary Schreiber - Duquesne Capital: Last question, on the coal cost, are you guys getting helped by lower coal costs? Tom O'Flynn: May be two of them, (inaudible) we tend to hedge pretty far forward. So that if we did it, it would really be more out in the '09-'10 timeframe. Zachary Schreiber - Duquesne Capital: Got it. Tom O'Flynn: Our coal buy tends to be equal to or may be even a shade longer than our forward hedging. Zachary Schreiber - Duquesne Capital: Got it. Thanks so much guys and congratulations, Kathleen.

Thank you, Zach.

(Operator Instructions). Your next question is from Danielle Seitz with Dahlman Rose & Company. Please proceed with your question. Danielle Seitz - Dahlman Rose & Company: Thank you. I just wanted to clarify the $100 to $150 million is just for RPM or is it includes also New England? Tom O'Flynn: That would be all capacity. Danielle Seitz - Dahlman Rose & Company: Okay. And it includes New England as well? Tom O'Flynn: It includes New England and it also includes New York to the extent that our best line energy facility gets something. Danielle Seitz - Dahlman Rose & Company: Okay, okay. And may I ask, do you feel that you have pretty much done with the assets sales you wanted to do at Holdings? Tom O'Flynn: Danielle, I'll go back to Ralph's question -- I mean response that I think we've… Danielle Seitz - Dahlman Rose & Company: I mean you seems to be reaching a steady state there? Tom O'Flynn: Yeah, I think we've sold the assets that are the largest in an area that we don't have a regional mass of assets. Certainly the U.S. assets have a lot of fit towards its Texas and then some smaller IPPs in California plants that are all consistent with our strategy. There are lot of assets in Latin America. I think as Ralph said, we are doing some reassessment of those, nothing at this point to report we may have some more discussion of those at our analyst session in late March. But sorry, I think we just say that consistent with what we've done in last couple of years from time to time with those opportunistic things for us to pursue, but nothing specific at this time. Danielle Seitz - Dahlman Rose & Company: Great. Thanks.

Your next question is from Viswanath Khaitan with Deutsche Investment Management. Please proceed with your question. Viswanath Khaitan - Deutsche Investment Management: Hello and thank you. Nobody has said Vishwanath before, so I am glad to here somebody say that. Bigger question for Ralph or Tom, strategic question that '07, '08 may be catch-up years for you as you show some improvement in earnings, so when do you see the normalization of earnings? Is it at the end of '08 or do you think there are more drivers in '09 and beyond to grow beyond the normal growth rate? Tom O'Flynn: We'll achieve that after '08.

You are asking -- Viswanath Khaitan - Deutsche Investment Management: What I am asking is that, when do you reach the normalized earnings level, is it in '08 or there are other drivers in '09 or '10 to continue to grow beyond normal growth rate? Tom O'Flynn: Yeah, -- [breaking] channel, I would say we've talked about some growth from '07 to '08. As you look out after '08, very much of it gets into the markets driven by Power and PSE&G and Holdings are relatively stable. PSE&G is, if you think about in '07 has got to a normalized earnings level. Holdings businesses are reasonably stable. So, the growth to come from Power, as we said, it takes a couple of years for us -- couple of few years for us to lag into the forward curve that's happening over '07, '08. We do have one meaningful contract that drops off at the end of '08. That’s a primary megawatt around a clock sale. That's a number of years old, but for last of our older contracts. So, that will be a nice embedded pop form '08 to '09. But after that, it's in -- it's looking at the forward capacity and energy curves, and also with some growth initiatives that we are thinking to at this time.

And Vish, clearly just to follow-up on what Tom said, I mean the whole reason for positioning the balance would be to take advantage of opportunities that will exist 18 to 24 months from now, and just being able to play in that market, fulfill it forcefully, and with growth in mind. Viswanath Khaitan - Deutsche Investment Management: Right. And what about the carbon legislation, will that also give you some kickers?

Yeah, we are part of the Clean Energy Group. We have supported several of the proposals discussed in Washington, clearly carbon constraint future is a positive future for our shareholders. So, no doubt which position we will be speaking out in that arena. Viswanath Khaitan - Deutsche Investment Management: Right. Okay. Thank you. Tom O'Flynn: Thanks Vish.

Your next question is from Clark Orsky with KDP Investment Advisors. Please proceed. Clark Orsky - KDP Investment Advisors: Yeah, I had a couple more on Holdings. Can you tell me what cash at Holdings was at the end of the year and what cash flow from operations was there in the fourth quarter? Tom O'Flynn: You're saying cash flow from operations or cash on hand? Clark Orsky - KDP Investment Advisors: Both. Tom O'Flynn: Cash on hand I think was reasonably modest, because I think I said that we paid $95 to $90 dividend in December and [our complete] cash is in $30 million range at the end of the year. Clark Orsky - KDP Investment Advisors: Okay Tom O'Flynn: And cash from operations for the year was in the 150 million range. Clark Orsky - KDP Investment Advisors: Okay. And was debt pretty much the same, as it was at 930, at that level of Holdings? Tom O'Flynn: Yes, George, there was no material. Holdings we have a bank line that we use very-very frequently. It's a $150 million $200 million line. But there was 1.15 billion of Holdings bonds outstanding and those were still outstanding. Clark Orsky - KDP Investment Advisors: Okay Tom O'Flynn: Yeah we made purchases on those obviously over the last couple of years, but 930 to 1230, [we had] no change. Clark Orsky - KDP Investment Advisors: Okay. And then, just a couple on the guidance for Holdings, is there a tax rate we can use for Holdings for next year? Tom O'Flynn: We have to get back to you with more details, it does move around a little bit, especially some of the tax rate is a function of consolidation, especially with some of the resource leases. Clark Orsky - KDP Investment Advisors: Right. Tom O'Flynn: In general the US business is -- our tax before rate 40% or so international businesses, we book at lower rates. So may be number is in the 20s. Clark Orsky - KDP Investment Advisors: Okay and I guess -- I was just wondering about equity and earnings next year and sort of what's baked into the -- your forecast?

For Holdings? Clark Orsky - KDP Investment Advisors: Yeah. Sort of similar to this year, I think it was about 120 for the year or something?

Well, we said 125 to 140 is that line of release. I think the way to think about it is that the business is down and Chile and Peru are quite stable. The Texas, I think I went through that with an earlier caller. Okay. That we see coming down both the mark-to-market and at about $20 million after-tax and net income for sparks and some maintenance. And then the other businesses are smaller contributors. And on the other piece, it's a non-cash piece, but its book [accrual] is under FIN-48 and its related FAS-132, for leases, its in the mid-20s. There is a drain. Clark Orsky - KDP Investment Advisors: Okay. Okay I appreciate it.

Mr. Izzo, Mr. O'Flynn, there are no further questions at this time. Please continue with your presentation or closing remarks.

Okay, thank you very much. I would again like to thank you all for participating in the call and if you have any further questions, please feel free to call us. I can be reached on 973-430-6565 and I would myself or any member of the IR team will be happy to help. Thank you.

Ladies and gentlemen, that does conclude your conference call for today. You may disconnect and thank you for participating.

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