Kathleen A. Lally - VP, IR Ralph Izzo - Chairman, President and CEO Thomas M. O'Flynn - EVP and CFO

Daniel Eggers - Credit Suisse Greg Gordon - Citigroup Ashar Khan - SAC Capital Paul Fremont - Jefferies & co. Paul Patterson - Glenrock Associates Rudy Tolentino - Morgan Stanley

Ladies and gentlemen, thank you for standing by. My name is Valerie and I am your event operator today. I would like to welcome everyone to today's conference; Public Service Enterprise Group's, Third Quarter Earnings Conference Call and Webcast. 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 remainder, this conference is being recorded Friday, October 31, 2008 and will be available for telephone replay beginning at 2'o clock PM Eastern Time today until 2'o clock PM Eastern Time on November 10, 2008. It will also be available as an 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. Kathleen A. Lally - Vice President, Investor Relations: Thank you, Valerie. Good morning, everyone. Thank you for participating in our call this morning. As you aware we released our third quarter 2008 earnings statement earlier today. The release and attachments are posted on our website at www.pseg.com under the investor section. We have also posted a series of slides that detail the operating results by company for the quarter. Our 10-Q for the period ended September 30, 2008 is expected to be filed later today. I am not going to fully read the disclaimer statements or the comments we have on the difference between operating earnings and GAAP results. But I do ask that you all read those comments as they are posted on our website. Disclaimer statement regards forward-looking statements detailing the number of risks and uncertainties that could cause actual results to differ materially from forward-looking statements made therein. And although we may elect to date forward-looking statements from time-to-time, we specifically disclaim any obligation to do so, even if our estimate changes, unless required by applicable Securities laws. We also present a commentary with regard to the difference between operating earnings and net incoming reported in accordance with generally accepted accounting principles in the United States. PSEG believes that the non-GAAP financial measure of operating earnings provides a consistent and comparable measure of performance of its business to help shareholders understand performance trends. I think with that, I would now like to turn the call over to Ralph Izzo, Chairman, Chief Executive Officer and President of Public Service Enterprise Group. Joining Ralph on the call will be Tom O'Flynn, Executive Vice President and Chief Financial Officer. At the conclusion of their remarks there will be time for your questions and we ask that you limit yourself to one question and one follow-up. Ralph? Ralph Izzo - Chairman, President and Chief Executive Officer: Thank you, Kathleen and thank you for joining us today. We realize how busy everyone is, given all of the volatility in the market place and I would be remiss if I didn't take a moment to simply say Happy Halloween to all. We reported operating earnings for the third quarter of $0.94 a share, compared to $0.97 per share report a year ago. Our operating results include the impact on earnings from a decline in the value of our NDT Fund that power our Nuclear Decommissioning trust fund. The results for the quarter were [ph] operating earnings for the nine months ended September 30 2008 to $2.43 a share and this is compare to $2.19 a share earned in the same period a year ago. We are experiencing some unprecedented turmoil in financial market as you are quite aware but despite the turmoil surrounding us, PSEG's work force continues to excel. This was demonstrated time and time again during the quarter. I'll give you some example of that PSE&G, our regulated utility was recognized for the third time in four years as America's most reliable electric utility. PSEG Power's employees also continue to exceed our expectation. Some examples of that is affecting [ph] our nuclear fleet performed at a 98% capacity factor in third quarter. As well as turbine replacement projects we conducted that hopefully we can [indiscernible] we hope even higher than anticipated levels of output. In addition, to these operating achievements the quarter was also characterized by progress in the regulatory and policy... in some regulatory and policy matters. First of all, the Federal Energy Regulatory Commission supported PSE&G's rate request for its transmission investment program. Secondly, FERC remains supportive of PJM's reliability pricing model as a means of securing new capacity. Third, the Regional Greenhouse Gas Initiative commonly referred to is RGGI, held the first of what we believe will be many successful auction of carbons in September with a clearing price just north of $3 per ton. Lastly, on a local level that State of New Jersey released its energy master plan and as the name suggests the plans sets the State's energy related goals through 2020. Perhaps, most important the plan delineates a leading role for utilities to play in energy efficiency and expands the opportunities for both our regulated and competitive businesses to grow in renewable offerings. Now that the goals have been established, we are advocating for new rules that establish a more predictable environment for energy investments in that state, akin to FERC's formula rates. The focus and dedication of PSEG's employees on operational excellence provides the foundation that allows us to comfortably support our 2008 earnings guidance of $2.80 to $3.05 per share. PSEG's operational performance and our energy markets continue to support growth and earnings per share for 2009 over 2008. Stresses in the financial markets are expected to result in some headwinds, regarding both pension and interest expense. Tom will have little bit more information on this in his remarks. And we also faced some challenges relative to one of our coal contracts We're working hard to mitigate this question, for example both capital and operating budgets for 2009 have been adjusted and the net affect of all these factors is that we currently expect earnings for 2009 under current market conditions to come in at the lower half of our previously stated range of $3.05 to $3.35 per share. We've the financial strength to manage through this period in the markets and we work hard to build a strong operating and financial base through a commitment to operational excellence and prudent financial management, also aided by a reduction in debt with proceeds from the sale of our international assets. The company is facing these unprecedented times with $3.3 billion of available liquidity and very modest financing requirements over the next 15 months. I think I'll stop there and I'll turn the call over to Tom and come back in the Q&A. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Thanks Ralph. Good morning all. As Ralph said PSEG reported third quarter operating earnings for 2008 of $0.94 per share versus operating earnings of $0.97 per share in last year's third quarter. As you see in slide 10, PSEG Power provides the largest percentage of our earnings. Power reported operating earnings of $0.65 per share compared to $0.66 per share last year. PSE&G reported operating earnings of $0.19 per share compared to $0.21 last year, and PSEG Energy Holdings reported operating earnings of $0.11 per share compared with $0.12 per share over a year ago. The reduction in debt at the parent level during 2007 reduced parent company related expenses in the quarter to $0.01 per share from $0.02 per share of a year ago. We provide you with a waterfall chart on slide 30, taking you through the net changes in quarter-over-quarter operating earnings for each major business for the quarter. I will now go into each company in more detail. As I said Power reported operating earnings for the third quarter of $0.65 per share compared with $0.60... $0.66 per share a year ago. Power's results were aided by recontracting and stronger energy prices, particularly in PJM. Higher prices added $0.12 per share to Power's year-over-year earnings. We're also helped by strong performance of our generation fleet. And overall increasing output of 1.5% was led [ph] by 3% improvement in generation by nuclear fleet. Power's New Jersey fleet operated at 98% capacity factor during the quarter raising its capacity factor through September to 90.9%. Including Power's ownership interest in Peach Bottom the fleet operated at a capacity factor of 94.6% during the quarter and 93.1% for the nine months ended September 30. The performance was aided by the increase in capacity and the uprate and turbine replacement work at Hope Creek in Salem. This work resulted in a net increase in normal [ph] capacity of 173 megawatts compared with our original estimate of increase of... for 140 megawatts. We continue to forecast a capacity factor in the nuclear fleet of 91%. Peach Bottom returns may refueling outage in October and Salem 1 is expected to return from its current refueling outage in early November. The combined cycle fleet continues to respond well to market conditions. Output increased 2.4% with the fleet operating at capacity factors in excess of 50% during the quarter. Generation from our coal fleet declined during the quarter. Results versus last year were impacted by scheduled outage work at several fossil fuel stations to improve long-term reliability. This work as well as the costs associated with the refueling outages resulted in an increase in operating and maintenance expense of $0.06 per share during the quarter. The increase is evenly spread between nuclear and fossil. Earnings comparisons were also affected by the reversal of mark-to-market gains on positions taken in natural gas earlier this year to hedge our fuel cost exposure. They are now at $0.05 per share of the $0.08 per share recognized during the second quarter, leaving about $0.02 per share roll off during the remainder of the year. Earnings comparisons were also affected by the market related declines in the value of some securities held by Power Nuclear Decommissioning Trust fund. This was about $0.02 a share. Power's margin from megawatt hour represents an important means of evaluating operating results. As you see on slide 16, gross margin improved in the third quarter to $58 per megawatt hour from $56 per megawatt hour in last years third quarter. Bringing margins for the nine months September 30 to $55 per megawatt hour and keeping us on track to achieve an improvement in margins during 2008. Power's EBITDA for the quarter improved to $647 million bringing EBITDA for the nine months to $1.68 billion. Higher prices for energy compared to last year are expected to support Power's fourth quarter and full year 2008 margins and operating earnings. This improvement in pricing is expected to be offset by an increase of fuel cost and higher O&M expenses. The Mercer Station is in the mid of the lengthy plant outage related for the addition of back-end technology to meet environmental requirements. The capital markets obviously remain volatile and as you all aware continue to experience a decline in value during the month of October. We have factored these results into our forecast of returns on Power's NDT funds for the full year. The NDT is a $1 billion fund. Just to remind you unrealized losses flow through the income statement. Gains only flow through when they are realized. The markets for power have been extremely volatile. Credit issues and uncertain macroeconomic outlook as well as questions on environmental standards had an effect on commodity prices. The moving commodity prices maybe exaggerated by decline in liquidity as some traditional participants limit their market activity. This could also lead to an increase in the risk premium placed on products that PSEG Power is very well equipped to provide. Power entered 2008 with hedges covering, its anticipated coal and nuclear generation for the year. Including additional hedges put in place this year, Power currently has hedges in place for 2009 representing about 85% to 95% of its anticipated coal and nuclear generation with approximately 45% to 55% of its coal and nuclear generation hedged in 2010. Power largely remains open [ph] to the market in 2011 with hedges in place representing 15% to 25% of anticipated coal and nuclear generation. Of course the hedging has typically provided more stability to our cash and earnings then would dependence on short-term market pricing. Now moving over to PSE&G. PSE&G reported operating earnings for the third quarter of $0.19 per share compared with $0.21 per share for the third quarter of '07. Results for the quarter were primarily affected by a modest decline in electric sales impacting about a $0.01 a share and increase in miscellaneous expenses, $0.01. FERC granted PSE&G's request for formula rate treatment on its existing and future transmission investment with a small increase in transmission rates effective on October 1, 2008. The order provides for a return on equity of 11.68% on transmission any forward-looking rate design. The first year rate is from October 1 2008 to December 31 2008 with subsequent rate years running from January 1 to December 31. The new reset true-up of rates will take effect on January 1 of each year. As you can see in attachment 10 of our earnings release, electric sales year-to-date have declined by about 1% with some of that's been explained by weather. We don't expect the decline to have a material impact on PSE&G's result during remainder of the year. We have however adjusted our forecast long-term sales growth to about 0.5% a year from our prior forecast which looked at annual growth of approximately 1%. Lastly, moving on to Energy Holdings. Energy Holdings reported operating earnings of $56 million or $0.11 per share for the third quarter of 2008 compared with operating earnings of $53 million or $0.12 per share during the third quarter of '07. Holdings' Global subsidiary recorded a $0.4 per share improvement in earnings. The improvement was a result of stronger production and increased spot spreads from Global's 2000 megawatts of gas-fired Texas generating capacity, coupled with mark-to-market gains of $0.4 per share. These items more than offset the absence of income from Chilquinta and Luz del Sur which result in the fourth quarter of 2007. Global's result also benefited from a net decrease in financing cost, which more than offset a higher tax rate. Holdings' Resources subsidiary recorded a $0.5 per share decline in quarter-over-quarter earnings. Reduction in earnings was result of lower income as a result of its decision to recognize a substantial charge in the second quarter related to the IRS challenge and a higher tax rate on its lease portfolio. Holdings operating earnings were expected to decline in 2008. However, the full year forecast of operating earnings has been adjusted to reflect stronger than anticipated markets in Texas. Results during the fourth quarter will reflect a loss of income from the sale of Chilquinta and Luz del Sur as well as the decline on Resources leased portfolio. PSEG has worked hard to build a strong operational base through our commitment to performance, reduction in debt and a tighter business focus resulting from the sale of our international assets. Moreover, as shown on slide 29, we have $3.3 billion of available liquidity and modest financing requirements over the next 15 months. We are also proactively responding to changes in marketplace with a reduction in our forecasted of capital expenditures for 2009 by $275 million to $325 million from previously disclosed amounts. Now just a couple of minutes on '09. The fundaments of the business are good and continue to support growth in earnings in 2009 versus 2008. The outlook takes into account issues of that we have know of and planned for such as forecasted decline of PSEG's earnings as well as the decline in income from Holdings. I'd like briefly review the impact on new issues on our outlook for 2009. Distresses in the financial markets are likely because we still [ph] experience some increase in pension and financing cost. We estimate these items could result in an increase in pension expense of about $0.08 per share and an increase in increase in financing costs of about $0.02 per share. The primary driver for earnings in 2009 is an anticipated improvement in Power's margins and EBITDA. We are however facing higher coal costs resulting from the potential renegotiation of the contract with the key supplier. We're currently in negotiations with the Indonesians supplier of coal to our Bridge Port and [indiscernible] station. The contract which expires over 2011 represents 2.7 million tons on an annual basis, that declined by about 50% in 2011. We had a long and a good relationship with our supplier since we entered into our first contract with them in late 2002. At that time coal was trading at about $30 to $35 per ton. The market for Indonesian coal is currently trading in the mid to high 60s per ton, so prices have been falling. We're obviously in discussions with them and working towards where we hope will be a constructive resolution. Just to remind you, at PSE&G our forecast takes into account an expected reduction in return on equity invested in our State regulated business to about 8.5% to 9%. We currently expect the file for change in rates in New Jersey by mid year 2009. Holdings as we've anticipated in our guidance will be pressured by a decline in lease related income as well as the need to begin to reverse the mark-to-market gains of about 58 million it has accumulated under contract with expires at the end of 2010. Summing up, we continue to see growth in 2009 and we're focused on achieving our previously stated guidance and have efforts underway to mitigate the impact with some of these pressures. However as Ralph said, as we see things today we expect earnings for 2009 to come in to the lower half our previously stated range of $3.05 to $3.35 per share. Lastly, just a brief update on share repurchase; we have $658 million remaining under our share repurchase program which is authorized by the Board to be executed over an 18 month period beginning August 1 of 2008. We've not made any purchases since late September giving the instability in the capital markets. We look to reenter the market once there is more stable environment. With that operator, we'll now open up for questions. Question And Answer

Ladies and gentlemen, we will now begin the question-and-answer session for members of the financial community. [Operator Instructions]. The first question is from Dan Eggers with Credit Suisse. Daniel Eggers - Credit Suisse: Hey, good morning. Tom I wonder if you could just expand a little bit more on the end around the Indonesian coal contract conversation. What are the alternatives that you guys see out there? Can you switch to a domestic coal and how do you see pricing comparisons between the $60 range pricing and what you could replace the coal with it if that's an option? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes, Dan I'd say the Indonesian coal has been good for us. We may have some flexibility... that flexibility would expand and be a Hudson once we finish our back-end at Hudson in late 2010 we will have a very broad flexibility to use lower grade coals specifically and that will be our expectations at Hudson. As we currently see it, there is still value in that coal. Prices have moved up. Let me try to kind of bracket that for you. So expectations is to work towards a resolution with our supplier over there that may result in some cost pressures and we want to make sure the people were aware of at least what the range of those could be. Daniel Eggers - Credit Suisse: Any idea, when resolution could come on that contract? Ralph Izzo - Chairman, President and Chief Executive Officer: We are having discussions, I think it would be certainly, during this quarter, it's probably hard to put a final point out in that. Daniel Eggers - Credit Suisse: Okay. And then you talked about lowering the CapEx for 2009. Any commentary kind of on expectations for O&M cost inflation '9 versus '8 both utilities and the generation business in kind of in [indiscernible] mode.? Ralph Izzo - Chairman, President and Chief Executive Officer: The utility has consistently, last five years respectively been seeing O&M increases at or below CPI. We had to make a few more investments on our fossil fleet. So that's has been slightly above, but next year we are targeting all business to be at about 3% levels. Daniel Eggers - Credit Suisse: And now the CapEx reductions. Is there any allocation between where those dollars has been pulled away right now between utility and generation? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Right across the board. Ralph Izzo - Chairman, President and Chief Executive Officer: It probably about 60% of utility. And we are focusing on the state gas and electric loss of the transmission business, obviously the formula rate helps give the support for financing coverage there. Daniel Eggers - Credit Suisse: Okay. Thank you, guys.

Our next question comes from Greg Gordon with Citi. Greg Gordon - Citigroup: Good morning. Ralph Izzo - Chairman, President and Chief Executive Officer: Good morning. Greg Gordon - Citigroup: Okay. Just the CapEx reduction number was $750 million? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: No, the CapEx is the reduction is 275 Greg Gordon - Citigroup: Oh, 275. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: To 325. Greg Gordon - Citigroup: So I was... I got surprised for a moment I apologize. And that's the 60% at the utility? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes. Greg Gordon - Citigroup: Okay. The $58 million of reversal of mark to market as holdings for 2010 in that online predominantly in '9 as it unwinds sort of relatively across the two years. How does that...? Ralph Izzo - Chairman, President and Chief Executive Officer: It's pretty spread between 9 and 10. Greg Gordon - Citigroup: Okay and then the 587 expense, should we assume for modeling purposes that that's sort of pro rata across the business? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes, and just to be clear the mark to market that holding that was the pre tax numbers. Greg Gordon - Citigroup: Okay. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: And based upon where we see the forward curve actually at this time. Pension expense yes, generally the overall pension is about 60%, utility about 30% Power and 10% other Holdings and other allocated cost. Some of the utility numbers are capitalized so, net-net utility cost fees just a shade less and half of that. Greg Gordon - Citigroup: Great. The funding needs for the pension is that going to be incremental cash out flow next year? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Modestly, I mean we're expecting yes, year ago we saw we put $30 million to $50 million into the pension on annual basis at this point, be that numbers up by $75 million something like that. Greg Gordon - Citigroup: Up $275 million or up to more like $125 million? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: It's probably now in the $125 million range, $100 million to $125 million range. So a year ago, so our pension contribution numbers next year we're still looking through it obviously but and it depends on where you end up at the end of the year, but my guess is to be about a $100 million to $125 million total for the company for the year and that will be a run rate that we'd expect there. That's obviously furnished on what the... on the markets behaving in a reasonably normal fashion to the next couple of months. And it does taking our account the expectation there will be a higher discount rate at the end of the year. Greg Gordon - Citigroup: And one last thing when I think about your exposure to this coal contract negotiation. I mean it seems pretty simple 2.7 million tons. And if you were to be forced to replace that contract with a market based contract that would be a doubling of the cost on 2.7 million tons. Which looks like its works out to after tax impact of just under 9? Ralph Izzo - Chairman, President and Chief Executive Officer: That's amount. Yes, we'll obviously want to have good relation with these guys for number of years with this folks. We're looking towards the constructive resolution but we laid those numbers out so you can understand what the worst case would be. Greg Gordon - Citigroup: Thank you, take care. Ralph Izzo - Chairman, President and Chief Executive Officer: Okay.

The next question is from Ashar Khan with SAC Capital. Ashar Khan - SAC Capital: Good morning Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Hi. Ashar Khan - SAC Capital: Just wanted to... Tom just going back to what you are saying regarding '9, you expect utility earnings to be down versus '8 is that correct? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes, we've said that consistently. The utility probably in the state, are probably a bit north of their 10% kind of target return. We've some modest O&M escalation like any business I think that upline its 2.5% to 3%. We do have a new customer information system that goes live in January that would have some incremental expenses including depreciation. So net-net as we see we think in the state we are going to earn 8.5 to 9 and we expect to file our rate case sometime next year. That would then be outstanding through let's say the middle of '10. Ashar Khan - SAC Capital: Middle of '10, Okay. And so the new rates will come in the middle of '10. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: That's right, that our base planning, obviously there is ways that we can look around and potentially improve that. But that's our base planning. Ashar Khan - SAC Capital: And that includes and you have taken into regard the slower growth and everything in this forecast? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes, that number would look at a sales growth electric at about 0.5% and gas flat to maybe modestly down. Ashar Khan - SAC Capital: Okay. And then you mentioned holding is going be down. What... to the levels which you are projecting this year in the beginning. I was trying to get a sense? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes, we haven't really looked at... we haven't put out let say subsidiary '09 guidance as we normally do that on our next call at year-end. The biggest things that have changed over the year, one is obviously the reduction in lease income that we took fully into accounts when we did that in the second quarter. The Texas market is down somewhat the spot's are a little bit backward dated '9 versus '8. So having said that Texas is materially above the result of this year versus what we had thought a year ago. So, it seems like a forward Texas spots are a little hard to accurately predict. But the unwind [ph] of the mark-to-market would be an incremental piece. Ashar Khan - SAC Capital: Okay. And than if I rate the hedging numbers that you gave did you hedge anything in the last three months, among any of the curves '8, '9 and '10? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Little bit not material. Those numbers are pretty consistent. We did a little bit in the summer, but those are pretty consistent with what we've done. Ashar Khan - SAC Capital: Okay. Thank you, sir. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Okay.

The next question is from Paul Fremont with Jefferies. Paul Fremont - Jefferies & co.: Yes, just going back to the share repurchase, given sort of what's going on in recent credit markets; have you guys at all thought about your target debt to total capitalization ratio. I think in the past it's been about 55% and does that change in the current environment or does stay the same? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Paul, we feel good about where we are. Paul, our debt to cap came down. I think it was... as we calculated in bank test its gone to about 50 to 48 end of year last year to end of Q3. So, and our credit scores were all improving. We think we've got incremental debt capacity and we'd look to potentially move forward on that once the markets settle down. So we're not, we'll continue at a same target. That being said we have to be mindful that it's a cautious environment. Some companies in other sectors in particular have had some credit related issues. So when we get into a more defense environment, I think you just have to be sensitive that you need to be attuned to potential changes in credit metrics let say. We're not aware of any, we're still keeping our eyes focused on the same metrics that we've been looking at for last couple of years. Paul Fremont - Jefferies & co.: And one other question relating to, I guess power prices in New Jersey. I guess in the past you guys had talked about potential short term buying [ph] in parts of the state particularly the northern part of the state. Does the new transmission lines relieve a lot of those bottle necks and should we or should we still view certain parts of the state as potentially short supply? Ralph Izzo - Chairman, President and Chief Executive Officer: Paul this is Ralph. The new transmission lines that we are in a process of building are strictly borne out of PJM's, RTEP Regional Transmission Expansion Plan, which is solely related to reliability calculation and not driven by the desire or need to change the economics of wholesale power market. Paul Fremont - Jefferies & co.: So should I take that to mean that the northern part of the State still potentially either need incremental build or...? Ralph Izzo - Chairman, President and Chief Executive Officer: We'll look to the RPM to decide that but as we pointed out in past we bid some new capacity to RPM in the northern part of the state. And I would safely say that our plans to do that in the coming months [ph] are likely to be the same. So we plan to bid new capacity, incremental capacity for northern areas in the mail [ph] option. Paul Fremont - Jefferies & co.: Thank you.

Your next question is from Michael Goldenberg with Luminus Management [ph].

Good morning Ralph Izzo - Chairman, President and Chief Executive Officer: Hi.

I want to get a couple of numbers down, the pension expense increase that you expect in 2009 how much will be a hit to the income statement from all the units, utility, power and power holding [ph] Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Michael, all $0.08.

Okay. So it would be a hit to the income statement. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Right, $0.08 plus portion that's capitalized but that's a different bucket, right.

Correct Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Okay, the full amount... the rough numbers is close to $90 million I think it is. And than part of that, that 25% of that capitalized that's for utility capital work. And than so the remainder is a direct expense to O&M. Now obviously, when we go in for the rate case, part of that rate case would be cost of service at the utility and that would pick up incremental pension cost numbers. So we would expect to then and we any hope if you will for that incremental expense when the rate case get resolved in '10.

So as rates will be affect when beginning of 2010 and that should include high expenses or...? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: More likely the middle of 2010, Michael. Ralph Izzo - Chairman, President and Chief Executive Officer: It should take about a one year to process the rate case in this State.

Okay. And the CapEx cuts that you are making are they generally on the power side, not on the utility but on the power side. Are they usually are they joined to the growth projects or are you doing or pushing back some environmental, what exactly are doing with CapEx? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Well it's mostly maintenance CapEx spread over variety of places. And as we said about 60% of the capital is in the teen... is in the distribution business in the utility. And then reductions in plan, growth investments in holdings that makeup the balance. Ralph Izzo - Chairman, President and Chief Executive Officer: Okay. Just to go back to you power question, I just want to emphasize that all of the headwinds that Tom describe these add to pension expense? The Indonesian Coal renegotiations as well as some of the ones that we previously talked about that are all factored into the lower half of the guidance for the next year. So those are not in addition to earnings growth?

And the mark-to-market stuff at Holdings as well others, used because commodity is down, that will hit you in 2009. How has been increased versus your previous expectations of mark-to-market hit? As you stated correctly you expect that some mark-to-market hit in '09 because of really good '08 and '7. But how much of that increase versus previous expectations and that's bringing down your 2009 number? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes. As I say Power the mark-to-market is very all into a year. So, as we talked about our last call we had some positive numbers, that was $0.08 up and then we had $0.05 down and then $0.02 also go up and come down. So I think we are basically back to where you stated. And now just quickly obviously when we enter into DGS, some uptake on our gas trends that implies [ph] gas forwards we just hedge work some option to manage our gas to be able to manage our risk. So some of that was mark-to-market. Especially all the options are mark-to-market. On the Holdings slide if you look at attachment twelve for 2008 you can see that the Holdings mark-to-market for this year is about $0.04 and much of that would be mark-to-market that we had not expected.

What about 2009? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Well that now would... in other words that as... most of that we had not expected... obviously the markets were where they where at the end of the year. And by definition you don't expect there to be futures. So we've got more the $0.04 and that would largely then reverse itself out over '9 and '10 in ratable fashion.

Okay. So simply for we can take $0.08 and $0.04 that's the $0.12 that are primarily the reasons for you to point to lower-end of 2009 guidance versus our previous communication with investors? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Well no Michael. I think the major things on that are new is one the financing cost, the pension financing that's $0.10 we... obviously no one predicted kind of markets that we've seen. going in the year we said our pension expense would be pretty flat. So, in the financing cost is all, we've got a lot of new financing but when financing moves by couple on a basis points then that adds up. So the financial numbers are about $0.10, direct impact as a result of the last six, eight weeks. The Indonesian issue is something that we have talked about, it was discussed in second quarter Q, but it's becoming I guess more of a front burner issue for us?

On the Indonesian, I am sorry I've taken up a lot of time. Are you saying that those cost should double, I think given the sliding commodity, coal commodity with last couple of weeks, do you really think it will still be doubled, if you had to recontract that? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: So, we're not... we don't want to get in the middle of speculating where we might go with discussions, I'll just say that the current Indonesian comparable coal index to get adjust a little bit that's mid 60, it had come down meaningfully. If you had asked us a couple of months ago, that number would be meaningfully higher and it does, it is coming down. So I might argue the time's on its side.

Okay, your current contract as of 60,000 ton delivered? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: No, the current contract was negotiated at a time the market was in the 30 to $35 range.

Delivered. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Commodity freight we deal with separately with finance rate. But there is our supplier in conjunction with the government has brought forward the fact that the current market price is meaningfully higher and as I said mid 60s is a reasonable estimate of that. You are absolutely right, that number has been coming down, and coming down quite dramatically over the last six weeks.

And of course freights also moved in your favor considerably over the last? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Somewhat that we've got our freight set in the next couple of years.

Got it. Thank you, very much.

[Operator Instructions]. The next question is from Paul Patterson with Glenrock Associates. Paul Patterson - Glenrock Associates: Good morning, guys. Ralph Izzo - Chairman, President and Chief Executive Officer: Morning. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Good morning, Paul. Paul Patterson - Glenrock Associates: Just to sort of clarify few things, to get a region [ph] contract impact, if I understood you correctly, that is in 2009 guidance correct? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: It is as we say, we're sitting here today looking at the lower half of the 3.05 to 3.35 that would contemplate a renegotiation of the Indonesian contract. Ralph Izzo - Chairman, President and Chief Executive Officer: As well as the pension expansion in the financing cost and the slower growth in the utility et cetera, et cetera. Paul Patterson - Glenrock Associates: Okay. Ralph Izzo - Chairman, President and Chief Executive Officer: Really I didn't get a chance to finish the question of Michael. Many of these things were already in our guidance such as our lower ROE at PSE&G something we really talked about all year. I Think the three things that are new that will lead us to the lower half, we want to make sure we're responding to information as we get it is about $0.10 for financing cost, potential adjustment with respect to our Indonesian contract and forward markets have comedown, we largely hedge for '09 but we do have some modest open position that impact us as a forward. Paul Patterson - Glenrock Associates: Okay. Great. The second thing is the buyback which hope you might touched on. I'm just wondering did you guys did you guys have any activity with the lower stock price opportunity that was out there in last month or so. Or I mean you guys gave it as a September 30, I'm just wondering whether or not... you mentioned on the one hand that you guys still saw that as... I think you guys plan on executing but on the other hands you guys are being a little bit more cautious because of the credit environment we have? Could you just elaborate a little more on that? Ralph Izzo - Chairman, President and Chief Executive Officer: Sure, sure. We obviously we're in the market. I think Tom just gave the numbers that 658 millions of the originally 750 authorizations were available to us. And good any self respecting company believes its stock is under priced we do to. But since late September we haven't in there because the market just became so unstable and liquidity become as such as premium even though we had $3.3 billion available we thought discretion was the better part of valor for that period. Paul Patterson - Glenrock Associates: Okay. But now you guys fell a little more comfortable, right? Ralph Izzo - Chairman, President and Chief Executive Officer: As the authorization remains in place and we discussed that internally overtime and I just sort of leave it at that but we promise to all of you that we will continue to look better promises with that what we did when did it at every quarterly call. Paul Patterson - Glenrock Associates: Okay. And then what are adjusted sales growth for year-to-date in Q3, I am sorry I missed it what noted that has been [ph]? Ralph Izzo - Chairman, President and Chief Executive Officer: If adjust for weather which was 2% lower in THI, temperature humidity index. If you just to that we're about 0.5% lower on a weather normalized basis. You understand the accuracy of theses models right so we're talking about 2% weather effect backing that out including that we had 0.5% weather normalize effect. So I would and want to get to you carried away with the precision of being able to separate those two phenomenon. Paul Patterson - Glenrock Associates: But you guys haven't seen negative sales growth... Ralph Izzo - Chairman, President and Chief Executive Officer: We had being seeing that on the gas side. This is the first time we're seeing it on the electric side. Paul Patterson - Glenrock Associates: Didn't you guys see it on the electric side in the second quarter, I thought you did? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: I'm sorry. Yes, I was thinking more year-over-year, yes that's correct. Paul Patterson - Glenrock Associates: Okay. So, now that brings me to my final question, the energy master plan had these pretty ambitious goals of a 20% reduction in peak and consumption by 2020. I mean can you comment on this I mean like and I guess 30% renewable, I mean whatever and these are the obviously goals but what does that do to the long-term outlook of PSEG Power? I mean if you really actually have... do you think it's a sustainable when do you start seeing those reductions happen, what is that due to demand and supply I think what that mean? Ralph Izzo - Chairman, President and Chief Executive Officer: What we've been saying to policy makers is that the market is not going to achieve those goals, and the only... any of these goals. Not the renewable goals, not the energy efficiency goal. The only way that's going be achieved is with the prominent role of the utility. So you may see if we actually achieve those 30% renewable goals like 2020 and the others that you articulated. A shift in the earnings power of the PSEG [ph] subsidiary some power to the utility. But surprise to say that I find it hard to believe that left to its own devices that people favorably investing in onshore wind in New Jersey or in some of the other things that are anticipated in energy master plan. Paul Patterson - Glenrock Associates: Then also with this consumption reduction I guess what I'm wondering is I mean, there's different way that's could be done and one might be actual opportunities for you guys to reduce demand and return on it. But others might be things like appliance efficiency standard and stuff like that, relatively this might create a reduction in demand. This won't give you guys money. Just how do we think about that. and do you think that's when do you start to think these reductions in demand might actually happen, if they do happen? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Well meaningful long-term reductions in demand require capital investment. And I would maintain that's likelihood of our customers making those capital investments on a broad scale unassisted by utility programs is very, very low. So we just need to think about the roll of the utility in the future may not simply be a prevail of electrons and molecules of gas, but someone who is permitted to invest in those energy consuming devices that customers left won't in invest in themselves. In other words, have much different and expanded definition of rate base, otherwise I just not see it happening. Paul Patterson - Glenrock Associates: So in other words, you feel that the utility would basically get the earnings that would be coming... it will be basically be shifting from a one bucket to other so just you can because that is actually having... Ralph Izzo - Chairman, President and Chief Executive Officer: Yes, and in fact with that all utilities available [ph] with some potential upside. But what you are talking about here is that the lion's share of any utility customer's bill in its integrated form including the supply component is to pay fossil fuels and PSEG is not a fossil fuel business. We're in the business to converting that and delivering that. And if we can make money by helping people, by investing on behalf of people in assets that help them consume less fossil fuel, then this thing potential at what is less going to Power could be more and than some going to the utility, now obviously that's a case by case basis. Paul Patterson - Glenrock Associates: Okay. Great. Ralph Izzo - Chairman, President and Chief Executive Officer: What else we do. Paul Patterson - Glenrock Associates: I appreciate it.

Thank you, Paul. The next question is from Rudy Tolentino with Morgan Stanley. Rudy Tolentino - Morgan Stanley: Hi, good morning. Can you give us an update on the leverage lease issue, I know that if we recall last quarter you talked about potential settlements or at least that discussions about settlements, if you can just a give an update please? Ralph Izzo - Chairman, President and Chief Executive Officer: Yes, Ruddy. It was a broad based settlement offered by the service to all people who had entered into these types of transactions, and there was a date to accept that was earlier this month. We did not accept that. The cost of that was quite high. I should say a shade higher than the economics that underpinned the reserve that we talk in June, is that make sense. So we're accessing our options that we may well pursue a litigation path as we talked about in second quarter is not lot new, there is we continue to think that our transactions were fair and based upon good tax lot of time we think that our fact [ph] is that owner of utility assets gives us a much better in fact better than some other financial parties that we're also offered this settlement. So what, the only thing I would say is that we did make another $80 million deposit which is to a voluntary deposit. So our voluntary deposits we see it service are about $180 million and that's just as we said in June that we are going to take the reserve, we're going to run our company from a financial perspective as if that was going to be an ultimate cost. So we're mindful of that and finance the business on a quarterly basis in that fashion, same time we are quite likely pursue a litigation pattern. Rudy Tolentino - Morgan Stanley: And as far as I presume litigation you have no timeline I think or do you have timeline or is... Ralph Izzo - Chairman, President and Chief Executive Officer: No specific, I mean without going to much on the details it something we would pursue over the next three to six months that we initiate over the next few three to six months. It is generally a two to three year path ultimately towards, those out of one other case that's some that may we'll reach a final decision in our industry. So when we'll have a better fact pattern in our industry, so have some news on that end of this year, first quarter next year. Rudy Tolentino - Morgan Stanley: Okay. Thanks. Thanks so much for you updates. Ralph Izzo - Chairman, President and Chief Executive Officer: Yes.

Mr. Izzo, Mr. O'Flynn, there are no further questions at this time. Please continue with your presentation or closing remark. Ralph Izzo - Chairman, President and Chief Executive Officer: Thank you all for participating again. We are feeling quite confident about our operational performance throughout the business at our nuclear plans, at our combined cycle plans, we're pleased with the construction schedule and the cost control of our major back-end technology projects at our coal units and we're delighted again to receive the recognition we've received in Utility, these are difficult markets. We're not sitting back we're adjusting our spending patterns, we're adjusting them both at the capital and O&M level. And we think we have our risk under control and we're looking forward to a strong fourth quarter and some growth in 2009. And we'll see you here. Thanks for your attention.

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