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

Paul Patterson - Glenrock Associates Daniel Eggers - Credit Suisse Ashar Khan - SAC Capital Paul Fremont - Jefferies & Co. Rudy Tolentino - Morgan Stanley Leslie Rich - Columbia Management Shalini Mahajan - UBS Raymond Leung - Goldman Sachs

Ladies and gentlemen, thank you for standing by. Welcome to the Public Service Enterprise Group, one quarter 2008 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. At that time, if you have a question, you will need to press the one followed by the four on your telephone. As a remainder, this conference is being recorded Tuesday, May 6th of 2008 and will be available for telephone replay beginning at 1 PM Eastern Time today until 1 PM Eastern Time on May 13th, 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, operator. Good morning everyone. Thank you for participating in our earnings conference call this morning. Just want to take care of a few items before we begin. As you know, we released our first quarter 2008 earnings statement this morning. They can be found, both the release and the attachments on our website www.pseg.com under the investor section. We have also posted a series of slides that detail the operating results for the quarter. Our Form 10-Q for the period ended March 31st, 2008 will be filed today. Let me briefly review our disclaimer statement with regard to our earnings guidance. Then I will turn the call over to Ralph Izzo and Tom O'Flynn. Statements contained in this communication about our and our subsidiaries’ future performance including without limitation, future revenues, earnings strategies, prospects, and all other statements that are not purely historical are forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Although, we believe that our expectations are based on information currently available and on reasonable assumptions we can give no assurance they will be achieved. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements made here in. A discussion of some of these risks and uncertainties is contained in our Annual Report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission and available on our website. These documents address in future detail our business, industry issues and other factors that could cause actual results to differ materially from those indicated in this communication. In addition, any forward-looking statements included herein, represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so even after our estimates change unless otherwise required by applicable securities laws. In the body of our earnings release, we provide a table that reconciles net incomes, 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 to the press release provide the reconciliation to each of our major businesses. Operating earnings exclude the net impact of certain asset sales during the periods presented. Operating earnings is our standard for comparing results for all of our businesses and we exclude such items so that we can better compare our current period results with prior or future periods. We would also like to point out that the results for 2007 now reflect discontinued operations as well as the two-for-one stock split that was effective earlier this year on February 4, 2008. With that, I would like to turn the call over to Ralph Izzo and Tom O'Flynn and at the conclusion of their remarks there will be time for your questions. We do ask that you limit yourself to one question and one follow up. Thank you. Ralph? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Thank you Kathleen. Good morning everyone, and thanks for participating in our call this morning. We have good news to report. Operating earnings for the first quarter of 2008 increased to $0.85 per share from $0.63 per share reported for the first quarter last year. The results for the quarter were driven by strength in PSEG Power and the benefits of lower taxes and lower financing costs. PSEG Power continues to benefit from recontracting at high prices and have focused on operations. Power was able to maintain strong generating unit performance at nuclear and across the fleet at a time when considerable work was being performed associated with the Salem number 2 refueling and steam generator replacement outage. Our mix of well-run assets continues to yield strong results in a rising commodity price environment. In addition to our healthy earnings performance, the quarter was characterized by progress in the regulatory and policy arenas. The New Jersey Board of Public Utilities approved PSE&G petition to offer $105 million in loans to help finance the installation of solar energy systems on homes, businesses and municipal buildings throughout the PSE&G service territory. This program will support the addition of 30 megawatts of solar capacity over a two year period and represents the start of what could be a larger program as the BPU establishes the guidelines under recently enacted Regional Greenhouse Gas Initiative legislation for utility company investments in energy efficiency, conservation, and renewable energy resources. Governor Corzine released the draft in the state of New Jersey energy master plan in April. The draft report addresses the state's energy related goals through 2020. As we have said, we are committed to helping meet New Jersey's energy objectives by providing energy efficiency services and renewable energy on a large scale over the long-term. In addition, we are pleased that the plan acknowledges the need to consider new nuclear generation as the source of carbon-free energy to meet the state's carbon reduction goals. A final energy master plan is expected by year-end. We also saw progress on our transmission related regulatory initiatives. The Federal Energy Regulatory Commission supported PSE&G's incentive rate making request for its $600 million to $650 million investment in the 500kV Susquehanna to Roseland transmission line and approved with the concurrence of the BPU, PSE&G's request to transition lower voltage distribution assets to higher voltage transmission investments. These decisions will support the capital commitments being made by PSE&G to reinforce system reliability. The year 2008 is off to a good start and we are maintaining our full year guidance of $2.80 to $3.05 per share. The mid-point of this range represents an 8% increase over 2007's operating earnings of $2.71 per share. The execution of our operating and investment programs will help assure that we meet our long-term earnings targets calling for 8% to 9% growth per year through 2011. I will now turn the call over to Thomas O'Flynn. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Thanks, Ralph and thanks to all of you joining us this morning. As Ralph said, we are very pleased to report that PSEG recorded first quarter 2008 operating earnings of $0.85 per share versus $0.63 per share for the first quarter of 2007. As you can see in slide 8, the improvement was led by PSEG Power, which reported operating earnings of $0.54 per share compared to $0.43 per share of last year. PSE&G reported operation earnings of $0.26 per share equal to that of last year's result. Energy Holdings reported operating earning of $0.06 per share, compared to a loss of $0.02 per share from a year ago. Reduction in debt at the parent level during 2007 reduced parent company related expenses in the quarter to $0.01 per share from $0.04 per share from a year ago. We have provided you with a waterfall chart on slides 9, taking you through the net changes in year-over-year operating earnings by major business for the quarter. I'll now go through each company in more detail, starting with PSEG Power. As I said, Power reported operation earnings for the first quarter of $0.54 per share compared with $0.43 per share from a year ago. Improvement in earnings was driven by solid operations and recontracting. Improvement from the first quarter of last year included increased pricing under the February 2007 PGS generation or BGS service contract effective on June 1, 2007. Increased pricing on other hedging of our generation output as well as the introduction of PGM's [ph] reliability pricing model or RPM for capacity. We've also seen benefits and performance of our combined cycle gas generating units. Higher pricing was supplemented by a 6% increase in volume. These items amounted to $0.15 per share. The improvement in volume was experienced by PSEG power’s fossil fleet. Generation of our fossil fleet increased 18% during the first quarter. Nuclear fleet posted slow and slight decline in output. Salem number 2, 57% owned and operated by Power, began a combined refueling and steam generator replacement outage on March 11th. In spite of this outage, the nuclear fleet operated at a 94% average capacity factor during the quarter. Salem 2 is expected to return to service this month and in fact we are now targeting later this week. The unit’s operating capacity will increase by 15 megawatts upon its return to service. As a result to work associated with steam generator replacement. Power is also nearing completion of an operate [ph] at Hope Creek. The work is complete, and the approvals are in advanced stages. We expect an incremental 125 megawatts from the unit before the end of the second quarter. The improvement in pricing and volume as well as control on operating expenses more than offset the impact of higher fuel costs. Power experienced higher coal contract costs during the quarter as a result of disruptions in delivery. Tight coal market dynamics are expected to result in a 20% increase in coal costs for the full year. This level of increase is in line with the cost structure we laid out during our March 20th meeting with the financial community. Overall strong power market dynamics and operations resulted in a 16% expansion of Power's operating margins for the quarter to $51 per megawatt hour from $44 per megawatt hour. Utilization of our combined cycle fleet has improved in response to the market's pricing signals. Slide 13 provides a breakdown of production by fuel for the quarter. We're of course participating in PGM's current RPM capacity auction for the 2011, 2012 delivery year, which began yesterday. The introduction of RPM has had a positive impact on the market, forced outage rates have declined, retirements of older facilities have been delayed, and more demand side management is being bid into the market. As we move to the last of the transitional options there is an increasing opportunity for new capacity to be constructed to meet anticipated reliability requirements. And as in January, we anticipate bidding new capacity into this auction. We'll know in a couple of weeks the results of the auction including whether our new generating capacity has cleared. The improvement in Power's operating performance during the quarter was somewhat offset by difficult financial markets, which reduced the value of securities held by Power's nuclear decommissioning trust fund. This impairment in value reduced Power's earnings by $0.03 per share. Results in the quarter were also impacted by a slight decline in margin under the BGSS contract against very strong results reported in the year ago period. Warm weather, reduced demand, which more than offset the positive effect of higher natural gas prices. This resulted in a $0.01 per share decline in earnings for the quarter. The decline was offset by a mark-to-market gain of $0.01 per share. Power markets remained strong in the first quarter. There was evidence of this in New Jersey's February 2008 BGS auction. Pricing effective for the three-year period, beginning June 1, 2008, rose 12%… 12.8% to $111.50 per megawatt hour from about $99 per megawatt hour established in last year's auction. Market prices have increased since that auction. BSEG Power’s output is substantially hedged for 2008 and 2009, and remains more open to the market in 2010 and 2011. Power's EBITDA improved to $547 million for the first quarter of 2008 versus $423 million in 2007's first quarter. For the year, we continue to forecast EBITDA for Power of $2.05 billion to $2.25 billion and remain comfortable with forecasted improvement in margins through 2009. Now turning to PSE&G, PSE&G reported operating earnings for the first quarter of $0.26 per share similar to last year's level. Results were influenced by a number of factors. Weather conditions during the quarter were mild relative to both normal conditions and also those of a year ago. Degree days were 6.6% warmer than normal during the first [ph] quarter versus almost 2% colder than normal last year. Mild weather conditions hurt demand for gas and reduced earnings comparisons by $0.02 per share versus both normal and last year. PSE&G's results were also affected by an increase in operating and maintenance expenses of 2.3%, which reduced earnings comparisons by $0.01 a share. Various other items combined to reduce earnings in the quarter by another $0.01 per share. All these items were fully offset by a decline in tax rate during the quarter. PSE&G's tax rate was lower during the quarter as a result of an IRS approved refund claim for PSEG for earlier tax years. This adjustment added $0.04 per share to PSE&G's earnings. PSE&G's strong credit position enabled us to weather difficult financial markets in the first quarter. PSE&G acquired and removed from the balance sheet $494 million of tax exempt auction-rate securities as well as redeemed other higher cost debt through the issuance of short and long-term financings. As Ralph discussed, during the quarter the Federal Energy Regulatory Commission, FERC, approved PSE&G's incentive rate request on its planned $600 million to $650 million [ph] investment in the 500 KV Susquehanna to Roseland transmission line. The approval came only four months after PSE&G filed its request. FERC, as part of its order, approved an increase in base return equity of 50 basis points for PSE&G’s participation in a regional transmission organization. They also approved 125 basis point incentive related increase in return on equity for the project, supported inclusion of a 100% of construction work in progress or CWIP in rate base during construction and provided the opportunity for recovery of prudently incurred capital costs if the project is canceled for reasons outside of PSE&G's control. Spending on this line we will begin the second half of 2009 with the projected in-service state of 2012. PSE&G also recently received approval from the New Jersey BPU for its $105 million solar initiative. This program will support the installation of 30 megawatts of solar capacity over two-year period. PSE&G is allowed to earn a 9.75 return on equity invested in this program. PSE&G's progress during the quarter on its regulatory and rate initiatives supports its capital programs in long-term opportunities for growth. Now finally moving on to Energy Holdings, Holdings reported operating earnings of $29 million, $0.06 per share versus a loss of $11 million or $0.02 per share during the first quarter of ‘07. Operating earnings exclude the results from SAESA, which as you know was discontinued for accounting purposes during the fourth quarter of 2007, given our announced intention to sell. The improvement in operating earnings for the quarter was largely driven by Holdings’ global subsidiary. Holdings recorded a modest mark-to-market gain in Texas of $2 million in the first quarter of 2008 as compared to a loss of $19 million in the first quarter 2007. This item improved earnings by $0.04 per share. The operating performance for the Texas generating facilities excluding the impact of mark-to-market results were in line with year ago results. Global’s earnings comparisons were also affected by asset sales, which occurred during 2007. The absence of this income in '08 reduced earnings comparisons by about $0.03 per share. Global also recorded a $0.01 per share gain in the first quarter of 2007 related to a settlement, which did not repeat itself in 2008. Also improving earnings results was a decline in interest expense of $0.02 per share. In addition, Global also experienced a one-time benefit from a reduction in taxes resulting from an IRS approved refund claim for PSEG in earlier tax years. This reduction in taxes improved Global's earnings comparisons by $0.06 per share. Earnings from Holdings’ resources subsidiary were flat against last year's results. A decline in taxes of $0.01 a share was offset by the absence of settlement related gain of an equal $0.01 a share. Holdings continues to move forward on plans to exit international businesses. As you recall, plans for the intended sale of Global's investment in the SAESA Group were announced in December 2007. We are targeting the sale to close in the third quarter of this year. Upon closing, Holdings’ international investment portfolio will be limited to three small holdings with an equity value of about $125 million. I would now like to update you on the tax situation with our leveraged leases. PSEG has been in discussion with the Office of Appeals of the IRS concerning the deductions that have been allowed for resource lease transactions that are under challenge. There have been two recent court decisions involving other entities. One case, which was on appeal, has been decided in favor of the government. The other case involves a jury verdict that is currently in dispute. Based on these developments, PSEG anticipates that absent reaching an agreement with the IRS to resolve the issue, a decision to proceed to litigation may occur in 2008. It is also possible that we'll revisit our reserve levels for these transactions in the near term and record a material change or charge to earnings. We substantially improved our financial position over the past two years through the sale of assets and a reduction in debt levels. We expect we could have $3 billion of cash available through the end of 2011 to pursue disciplined growth of our businesses through acquisition, construction of other development projects or the repurchase of common stock. It is possible, however, that the amount of cash flow required to pursue resolution of Holdings tax claims may occur sooner and may be larger than initially contemplated in our long range forecast of cash available through 2011. Management believes that any financing activity that may be required to pursue resolution of these claims can occur with a manageable impact on PSEG’s key credit measures assuming no other changes in our financing plans. Our forecast for cash available through the end of 2011 is dependent on numerous factors, which can have both positive and negative effects on the timing and the amount of cash available. These include but are not limited to the continued liquidity and strength of energy and capacity markets, the strength of markets where we're selling assets, the potential resolution of income tax claims, and the ability to deploy discretionary capital for growth. For instance, forecasted capital spending for 2008 to 2011 of $7.3 billion includes in excess of $1 billion of capital that could be labeled discretionary over this timeframe, as it may depend on regulatory support and/or our success in submitting economic proposals for new development. My last comment on cash flow will be that during the first quarter of 2008 cash from operations improved by approximately $100 million over the same period last year. The improvement is driven by our strong earnings. Excluding changes in working capital, cash from operations is approximately $140 million higher than the first quarter of 2007. A brief mention on liquidity, as of March 31, we had approximately $3.5 billion in committed credit facilities with available liquidity of approximately $2.7 billion. We continually monitor our available liquidity and believe we have sufficient capacity to meet our short-term funding and collateral requirements. Last comment I will make before I turn it over to questions, is I have seen a couple of research flash reports that have come up from this morning. As you know we don't pro forma earnings with the exception of major items, most notably sales of assets. That being said, there are three items that I would say we would not generally expect to see on a normal operating basis, and those going in both positive and negative directions. In the positive direction would be the tax issue that was, as we stated, a tax item at PSEG that produced $0.04 of benefit at PSE&G and $0.06 of benefit at Holdings. That's a positive dime in our favor. On the other side of the ledger, there is two items. One is a loss in the NDT fund. The NDT fund has generally been quite stable, but as all of you know it was a tough first quarter in the markets, so to the extent that that fund recognizes losses both unrealized as well as realized, that was a $0.03 loss or impairment in the NDT fund that's something we normally not expect to see and the other more typical utility business is $0.02 of weather. So, in terms of items that we would normally potentially not expect to see in our ongoing business, $0.10 positive for taxes offset by a nickel on the negative NDT in weather. So, net-net a positive nickel. With that I think I will open up to questions. Kathleen A. Lally - Vice President, Investor Relations: Great. Operator? Question and Answer

Thank you ladies and gentlemen we will now begin the question and answer session for members of the financial community. [Operator Instruction]. One moment please for the first question. And our first question comes from line of Paul Patterson with Glenrock Associates. Please go ahead. Paul Patterson - Glenrock Associates: Good morning guys. Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Good morning. Paul Patterson - Glenrock Associates: On the LILO and SILO levers leased issue, could you give us a feel for what the total exposure is and how much you guys have reserved for? And then just in general what the two court cases were that have caused you guys to sort of look at this in someway? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Paul, it's Tom speaking. The total exposures of, well over a $1 billion as we disclosed in our 10-Ks and 10-Qs on a regular basis, I believe it’s $1.1 billion $900 million for taxes on a couple of hundred in interest. And that's as we have done in our Qs and Ks for some period of time, we update that each Q or K. In terms of our reserve, we did take a modest reserve and I would got to not go into more description other than that, but when FIN 48 was adopted in the first quarter of 2007, there were tax reserves at Holdings. Some of those were international items, some of those were leasing related items at resource when you go back and see that in the first quarter of 2007. I would rather not get into too much discussion of characterizing other cases or providing editorial line, but at least the two I referenced, the one appeal was the BB&T appeal in the fourth circuit and that they have lost on a… they have lost the case, they had appealed it and a panel of judges, three judges I believe recently ruled in favor of the government. That was we can have two weeks ago, something like that. And the other one on the BB&T... BB&T, Bill, Bill and Tom. Paul Patterson - Glenrock Associates: Okay. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: That's a South Eastern bank I believe. And then the other is Fifth Third a Midwestern bank that was a jury trail and that was actually quite a confusing verdict, the jury was asked three questions and their answers at least in one case supported the tax payer and the other supported the government apparently in a contradictory fashion, but beyond that I shouldn't get into legal characterization, but that was much more confusing. We continue to think that our cases are based upon sound tax opinion at the time the fact that they are energy related facilities that we do have an ability to earn on and we feel we have some of the good facts in our case, but nevertheless we need to take note of things that are happening in the environment around us. Paul Patterson - Glenrock Associates: Okay. Thank you.

Thank you. Our next question comes from the line of Dan Eggers with Credit Suisse. Please go ahead. Daniel Eggers - Credit Suisse: Good morning. Tom just a follow-up on that real quick. As you guys look at the potential reserve, will that be the kind of the $1.1 billion of liability net whatever you reserved so far, could all... potentially all that cash would have to be set aside at some point in time this year or is that cash reserving still an '09 event [inaudible]? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yeah, Dan. I'd say that's the maximum, that's the maximum exposure. As I said, we believe that we have good facts on our side. If we went to court, we would generally go to court for the years that have been through audit. And we're not too far away from closing out our '03 audit. Right now, we've got, up to '01 is closed. So we are... probably in mid-summer, we will close in on our '03. So to the extent that any specific issue would be on years that had been through audit. To the extent that there were settlement discussions you may've broaden those tax years, but the number that we've always provided in our Ks and Qs are maximum exposure. Daniel Eggers - Credit Suisse: So the $1.1 billion would be... that's the entire life of assets, not just the audit years? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes. No, that's up to this point for tax benefits we've have taken, sorry. Daniel Eggers - Credit Suisse: So that would be up to current or up to 2001, sorry? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: The $1.1 billion is up to first quarter of 2008. If you look back at our Qs, it grows each Q. Daniel Eggers - Credit Suisse: Okay. I just want to make sure I understood that. Thank you. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yeah, I am sorry it wasn’t clear. Daniel Eggers - Credit Suisse: One more just on the tax rate, what should we think about for the full-year tax rate for the next three quarters in kind of a normalized rate given the help in the first quarter? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yeah, I think that the dime as we said is something related to refund from prior years. Going forward we expect it to be in the normal 38%, 40%. Daniel Eggers - Credit Suisse: Okay. Thank you guys. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yeah.

Thank you. Our next question comes from the line of Ashar Khan with SAC Capital. Please go ahead. Ashar Khan - SAC Capital: Good morning. Tom, I just wanted to go a little bit on the hedging for Power. If I am right, the gross margin was equal to what it was in the fourth quarter of last year. So, am I correct, we should expect this number to creep up, is the creeping up going to happen more in the last half of the year versus the first half? I am just trying to follow, if I am right, you have a margin for the year of 56, 57 or something around that range... how the average will move up over the year? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: That's fair Ashar if you look at what we showed in our presentation on March 20, we did show it increasing. It is generally stronger in the second part of the year. The biggest move is obviously the BGS [inaudible] comes in on June 1 and that replaces a $65, $66. So that's the biggest step change. Other than that, we... for Power that we've sold outside of the BGS will have a rolling program to sell forward and those generally committed modestly higher prices just as the markets expanded over the last couple of years. But the biggest one-time piece is the BGS on 11 versus 65, 66 that starts June 1. Ashar Khan - SAC Capital: Okay. And then any if I can just follow-up on the next question, the up rate at February [ph], is it Hope Creek which was to be the summer effective, is that still on track? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Yes it is, Ashar. This is Ralph. We've been through the NRC’s, ACRS committee and received their approval. We are expecting NRC action sometime this month, we've done the physical testing required to actually execute that. We would have a fuel rate adjustment pattern that we would need to execute, but we are still expecting it to be complete by the end of the second quarter. Ashar Khan - SAC Capital: Okay. Thank you.

Thank you. Our next question comes from the line of Paul Fremont with Jefferies. Please go ahead. Paul Fremont - Jefferies & Co.: Hi, thanks. Two questions, one, you said I guess, in your presentation that you would decide whether or not to proceed with litigation with the other alternative be a potential settlement with the IRS in that proceeding? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes Paul, that's fair. We maybe we went through quickly, but we did say that we have had... we've been having some discussions with the services. Paul Fremont - Jefferies & Co.: Okay. And then the second question is… the state I think still has an outstanding issue on the water discharge permit for Salem. Can you give us a sense of the timing of any decisions that the state would make with respect to basically specifying any conditions that they would require as part of the discharge permit, in other words would you expect that to happen in 2008 or could that happen periodically over the next several years? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Paul there has been a development in that area. This is Ralph. That's makes it difficult to give you a timeframe. And you are maybe aware that within the last six weeks, the US Supreme Court did agree to hear the appeal of the Riverkeeper decision and I believe that the appeal will be more than likely to hit sometime in the fall. And so at this point I would rather not project a timing as to what that means for 316 (b) rulemaking at EPA or DEP. Paul Fremont - Jefferies & Co.: But you, I guess, like… so would you expect that to result in a delay in the state or do you... would you expect the state to sort of continue down whatever path they would have continued anyway? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: No, I would expect that's the result of the delay in the state. Paul Fremont - Jefferies & Co.: Okay. Thank you very much. Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: You are welcome.

Thank you. Our next question comes from the line of Rudy Tolentino with Morgan Stanley. Please go ahead. Rudy Tolentino - Morgan Stanley: I know on the press you have talked about building 400 megawatts of peakers in New Jersey, is that still on track and can you just kind of give me an idea of what the go no-go decisions [inaudible] RPM auction or you are going to just build it? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Rudy, it is Tom. It is very much on track, the 300 to 400 megawatt range, we look to the RPM auctions as the center point of the go-no-go decision with the RPM auction for a 11, 12 going on as we speak. We are making proposals submitting or bidding new capacity, I guess is the right term, we are bidding new capacity from at least one site into the current RPM auction. So, see how we do. Rudy Tolentino - Morgan Stanley: All right. And with regard to the nuclear decommissioning thought, the $0.03, I take it that’s unrealized and that every quarter any changes of the fund will be reflected in earning. Is that correct or is it wrong? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: That's correct. It is… the accounting rules changed last year and so any unrealized losses get flow through immediately, prior before that there is a window six or nine months that we had. But is now instantaneous and so with the toughest quarter that you all know better than I do in the market is generally we had a $0.03 decline. That being said, there is still a positive unrealized net position in the fund of little over 100 million bucks. So that as you look at tracking it in the future, we would still expect that the NDT fund in normal markets to be positive to be neutral or maybe a couple of cents positive. Rudy Tolentino - Morgan Stanley: Okay thanks very much.

Thank you. Our question comes from the line of Leslie Rich from Columbia Management. Please go ahead. Leslie Rich - Columbia Management: Good morning. Tom, can we go back to a comment you made about CapEx, as you look at your 2008 to 2011 CapEx budget of $7.3 billion you said? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes. Leslie Rich - Columbia Management: You said… you said that some of that was discretionary or perhaps I just wanted to elaborate on what you meant there, did you mean you could choose not suspended or delay the spending or you had flexibility around that? What did you mean? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: It's a little of both, and just a fair question, the 7.3 is consistent with what we have had before in our industrial presentation. The billion... if you think about the large chunks, there is about $500 million in there. This is capital between now and ‘11, but $500 million in there for at Power and that's our 300 megawatts to 400 megawatts of peakers in New Jersey and I guess [inaudible] worthy in terms of our… whether we are successful in RPM. And I think it's public that we are pursuing a peaker in Connecticut as part of a Utility Commission bid up there. So, that would be about $500 million. That would be empowering. That's all conditioned upon success in RPM and or the Connecticut process, would take the process quite competitive. The other piece then would be at Holdings. We do have a little over $300 million net of investments and therefore renewable. That's away from any renewable to be done at utility, that’s solar and perhaps some win that's obviously a business we are building and we are only going to make those investments if they are in our strategic areas in a core way we are comfortable and obviously that they have good financial returns. So, that's obviously in the discretionary basket and then the last is part of our investments at the utility. Certainly few hundred million, AMI is the largest and I think as we outlined, [inaudible] did our investor presentation large discretionary investment such as that at the utility we will only invest in if we are comfortable that we get fair and timely great relief on that. So, there is probably $0.5 billion at the utilities, would fall on that basket. Leslie Rich - Columbia Management: Okay and if you do on the leases if you do decide to litigate, is that something that likely would take years or because there is some President in terms of legal decision or is it impossible to handicap? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: The President out there... and there is actually… I have mentioned a couple of President of folks who have... who had news out recently, there is a President... a case that may get heard later this year from some within our sector. That being said even with President it's probably about two or three years. Leslie Rich - Columbia Management: Okay. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: If we were to go on litigation our case would probably be as just as you walk you through the court system is probably about two to three years. Leslie Rich - Columbia Management: Okay. Thank you.

Thank you. Our next question comes from the line of Shalini Mahajan from UBS. Please go ahead. Shalini Mahajan - UBS: Thanks and good morning. Tom, just quick question for you, the [inaudible] from tax refunds of a dime in first quarter, was this anticipated in your guidance? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: We had anticipated something. This would be a larger… a larger number than we had anticipated. Shalini Mahajan - UBS: Okay. And another question for Ralph, one of the ideas that New Jersey's draft Energy Master plan has floated is... that for State Power Authority or some kind of a public private partnerships to build some new power plants in New Jersey. Could you give your thoughts on that as to what form or shape that can take? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: I think that, as we read the current draft, Shalini, the Power Authority appears to be significantly downplayed in it. And there is in conversations with policy makers in the state, I think an increased amount of emphasis being placed upon, what are the existing authority... what are the existing capabilities of state agencies to affect some of the climate change and energy goals of the Governor. So, there is... my sense is there is much greater dialog nowadays about coordination of policy across agencies and the agencies working together and more consistently to line up environmental and energy goals rather than going to a brand new entity. Shalini Mahajan - UBS: Okay. Do you think it can take a form like in Connecticut where utilities could be allowed to... on kicking [ph] asset, is that part of the discussion mix at all? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: I guess what I am saying is candidly as I can is I don't think it's a high probability of taking any form. Shalini Mahajan – UBS: Okay. Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: I think there is more of a probability of the BPU, and the EBA, and DEP, working in tandem to fund energy efficiency through existing programs or low interest loans and there is really an effort underway to steer clear of adding to state budgetary responsibilities or creation of new agencies. Shalini Mahajan - UBS: Okay. And when do you expect the final energy master plan, did you give a timeframe on that? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Sure. The current schedule cost were to be made final in the fourth quarter of this year. Shalini Mahajan - UBS: Okay, great. Thank you so much. Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: You are welcome.

[Operator Instruction]. We do have a follow up question from the line Paul Patterson with Glenrock Associates. Please go ahead. Paul Patterson - Glenrock Associates: Hi guys. Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Hi. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Hi, Paul. Paul Patterson - Glenrock Associates: The... just to go back to the new build question. If I understood your answer, it seems like it's depended on what happens actually at the RPM auction whether or not you guys go forward in audits, is that correct? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes. We look at new... we look at new peakers. We assess what's a reasonable… our RPM level for them and we bid in that number accordingly. But obviously our RPM gives you a year, but it's an asset with 20, 30 years of life, so there is somewhat of a mismatch there, but at least that's the primary thing we look to for go-no-go decisions. Paul Patterson - Glenrock Associates: Okay, is it possible that you guys could tell us what the… what you are looking for in terms of that number? Or just any sort of general market outlook because [inaudible] decision with respect to became leading and perhaps those units being bid into it, what have you or for is it more or less the situation? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes, I should stay away Paul from anything that would reflect our numbers. I would say that just in general our position relative to some other people, we are well positioned due to we are bidding [inaudible] sites. They are in good locations where power would be needed, to the extent that PJM would be having sub pockets, which is not the case this time, but to the extent they would be smaller focused pockets. We would be in the right spot, but there are still escalating costs as you all know in the sector for new bill for hardware and transmission cost to be able to connecting in the PJM system can still provide some incremental cost. So, with that being said, I would rather not get into specific market clearing numbers that we have bid, the overall market I believe is down a little bit I think it's down more into the 150 area, something like that area but we are not... I am not sitting on the desk on a day-to-day basis but, it is down somewhat from the last clear as I understand it, some of may be some issues around the [inaudible], we generally stayed away from trying to predict the RPM on a year-to-year basis and our confidence and belief in the market is based on the long-term fundamentals that got the right assets in a right place and we continue to see it tightening of supply and demand and at premium on our environmental. Paul Patterson - Glenrock Associates: So, it's a critical issue, but it isn't necessarily the only issue that you are looking at terms to make your determination? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: I said we look at new peakers and we think they are needed and we got the right spot to put them. In terms of whether we do it this year or next year I say that timing decision is primarily based upon the RPM outcome. If we got them ready there we got numbers in the bidding, if they clear, we are happy to build them, the team is ready . If they don't clear, we would except to not build them and then bid again next year. Paul Patterson - Glenrock Associates: Okay, then just a follow up on the heat rate decline that we have seen I was just wondering if you guys -- any comments from sort of market perspective, what you are seeing there, what your thoughts are in terms of the… be it the follow up that we saw in the last couple months, just any thoughts at all? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: No it’s hard to… it’s hard to understand it frankly when you look at the fundamentals. I mean gas has gone up a lot . Gas has gone up a couple of bucks. We have seen coal prices come up too. But, of course from our standpoint 75%, 80% of our output is coal and nuke, so our long-term value our open EBITDA is largely driven by gas versus nuke and coal. Spark has come down I'm not sure we could fully explain it, but we would expect from a fundamental standpoint it took trend back up. Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Yeah Paul, I think that while we know there is a good correlation between gas and power prices it is not perfect. And we've had some pretty rapid movement in gas prices. So, it remains to be seen whether or not energy prices having kept up or whether or not gas prices have over shot and there will be an adjustment to turn back to more fundamentals as Tom said supply and demand is... it will ultimately dictate what that spread looks like. Paul Patterson - Glenrock Associates: And just any feeling on the economy in New Jersey, just generally speaking very briefly just sort of what you're... what we are seeing there? I know industrial sales were down, but just anything out there? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: We've seen electric sales in the first quarter to be as expected. Gas sales were slightly off, the models try to weather normalize, I don't want to pretend that we have that down to an exact science. So it's a little tough to say how much of that was the weather and how much was the economy. But I look... so I don't think we're seeing it in sales volumes per say, but we are beginning to see it from customer payment patterns. So we are just seeing a little bit of an increase in working capital needs as day sales outstanding increases at the utility level. Paul Patterson - Glenrock Associates: Thanks a lot. Kathleen A. Lally - Vice President, Investor Relations: Any other questions Operator?

Yes. Our next question comes from the line of Jack Travor from Ducane [ph]. Please go ahead.

Hi, Tom. Hi Ralph and Kathleen. Just a question on a slide 13, especially as it relates to the heat rate discussion. We looked in the quarter your gas fired generation what I can tell is up 466,000 mega... 466 gigawatt hours and just trying to understand if that is, with a counter for that I think you mentioned that weather was actually down year-over-year, what is the utilization that you've got historically out of your gas plants and what is the utilization that you expect going forward and are the actual heat rates that you're seeing in the spot market and the actual spark spreads where these assets are clearing in line with this compressed deferred forward curve or not? Thank you. Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Jack, I will take a crack at least part of that. We have generally seen our gas asset, the capacity factor on our gas assets moving up. And the two big benchmarks we look at is Bergen. It's just north of Giants Stadium in Linden. It's also probably in the North and probably in Central New Jersey at least from a connection standpoint. So we've seen those move up. Bergen gets to a higher dispatch [ph] we have seen moving up from a 30% range up into the 40%, 45% range. And I think that's just a demand growth, they are on the margin, they're in the right locations and those would be the assets, they are both a few years old, those would be the assets that we would expect to get dispatched more, in fact when we built them that was our expectation.

And that 30% to 45%, is occurring over the last couple of years or is that? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Yes. I think if we look back two years ago, I would probably say it was 20% to 30%, it's now in the... probably 40-ish, 30% to 50% zone and we expect it to move up probably 5% to 10% a year. Linden has been the one that we've seen move up the most, frankly with Linden has been on line now, about two or three years. When it started out it was probably around 20% and that's now moving probably up into the 35%, 40%. So that's the one that is that's got the most notable move. In terms of spark spreads, Jack, it’s a little hard because as you know it’s... during this part of the season, it’s not a big spark season. I would say that last year in the fourth quarter we did see a nice move up in realized spark. We saw spark holding up, we did see it coming down, especially came down in the last month but gas shot up 2 bucks. So it's a little hard to assess whether there's an absolute pricing that’s driving some of that. We have seen it move up a little bit again over the last few weeks. But it’s quite volatile, as you look over the last couple of months, it probably moved from mid-teens to low-20s.

Given the math and how it works, can the markets still clear on a fundamental basis at a lower heat rate, which given the relationship to gas can still equate to a healthy enough spark to sort of dispatch business i.e., should there naturally be some almost inverse relationship between heat rate and spark and natural gas i.e., if gas goes to 12 or 13 whatever you can create a fat enough spark at a lower heat rate or the heat rate [inaudible] and that’s what we ought to focus on, you seem them settling? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Yeah, there is a lot of moving parts. Don’t forget there are fuels that can be competitive and other demand side management pieces they can move in when gas really gets up there. So it's probably longer.

Okay. Just second question just on coal, you had mentioned some contract issues, I wasn't sure if that was anything worth delving into or not, or was it small? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: They were things that we had awareness of and that we factored into our discussions on March 20th. It was really two things, it was a domestic mine that had a forced measure issue that was down in Appalachia. That's now being resolved, because it was an issue for coal deliveries for us in the first quarter. And then there was some importation of coal that we did have some issues with that caused the price in fact. It was manageable but meaningful enough that they moved us up to that 20% number. We are already in the teens, but those two moved us up in the 20% number in terms of escalation of coal costs from last year to this.

Okay. Is they're anything going forward or do you think it was all encapsulated in '08? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: I think as far as we... the mine is back in our... the coal we are importing is comfortably flowing. So we are comfortable where we are, but coal is a volatile commodity. So you got to keep your eye on it.

Okay. And then last question, just on the leases, what is... can you remind me what the significance is of the investments, the assets, underlying the leases being energy related, is it the assets that have to be energy related or is it the company, the tax payer that has to be within the energy industry or...? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: It's more of the latter, there is economic substance, there is business purpose and there is... yes, there is fundamental rational for our involvement in those assets that we believe, a) it was probably the reason why we went into them. But it also would give us a stronger case we believe.

So there is nothing specific to the energy industry, it's whether or not if there is economic substance to investment, whether it's consistent with your overall business? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: That's correct. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: That's correct. If you are investing in investments that are part that are related to your core business.

Can you just remind me there was, are all your investments are energy related or some transportation related, they are all energy related right? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Yes, that's Kathleen is going to say your last question. All of the issues that would be subject to question are energy related.

Great. Thank you, so much. Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: And 95% plus of resources portfolio is energy related.

Thank you, so much. Kathleen A. Lally - Vice President, Investor Relations: Thanks, Jack. Operator next question.

Our next question comes from the line of Andrew Levy [ph] with Bancorp. Please go ahead.

Hi, good mornings guys. Can you hear me? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Good morning, Andy.

Just a couple of questions, just back on this whole tax issue that people have been discussing, how quickly does that number grow, can you say it has been growing and it grows every quarter. Can you give us any idea... how quickly that grows? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Probably, yes, 150 to 200 a year.

A year, so, conceivably yet to grow and if you were actually in a...court dispute does that number grow as well or is it or do they put a freeze on it? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: No, of course over time, it’s a passage of time. Now it really grows because you have taken it as options.

Okay, and then on the accounting side of it I assume your accountants have some type of opinion that's why you are talking about taking a reserve, is there a rule of thumb that we can kind of gauge then type of reserve that you have to take based on what your accountants have told you? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: No, if it gets into some details, flow chart for FIN 48. So it gets into a sequence of expectations of events and events based upon events. And actually that you get a headache. But I think the point we are trying to make is that we continue to believe in the strength of our cases, but given a couple of events that have happened in two other places that causes us to go back and will cause us to go back and reassess the level of our reserves. Other than that Andy it’s very hard to characterize, generalize and I should really stay away from that.

Okay, and just based on your statement in your press release, you talked about the $3 billion that you have, possibly you earmarked to a stock buy back or new investments or whatever. But you also make a caveat that this could lower that amount, is that the way to read that is that, am I understanding that correctly? That's the way I read it but I don't know I am reading or interpreting it correctly? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes, I think the way to read that is that there is a number of things that go into that $3 billion. Obviously we have got our normal operations, the strength of the markets, the energy and capacity markets. The $3 billion is after a fair amount of CapEx, some of that is quite mandatory or required as part of the ongoing business. But as I clarified for Leslie over a $1 billion of that is discretionary. So the extent we did not pursue some of that billion then the $3 billion would be larger. If we did have a material settlement or reason to pay taxes in the near term that in and of itself would reduce the three. That because of our strong position from a credit standpoint, such funding could be part of the three, could also be from some incremental financing given the strength of our balance sheet. That being said, not they want to comment at that $3 billion number is one that we feel strongly about and to the extent that leasing does put pressure on that we will work to find other recovery plans around the company. Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: I think Tom hit it right on the head. I mean we just want to make sure the folks were aware that there have been some activity on these cases outside of our firm and that was a change, but we have substantial flexibility within our financing capability going forward and we don't want every quarter, redo the whole full year business plan. There are a variety of puts and takes that one has to look at including strength of markets in which we are engaged in asset sales, strength of markets in which we are bidding BGS supply and various other things. So...

In that full-year business plan, what are the things that you are looking at again just looking at, possibly the brake up of the utility and the power generation part of the company or not? Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: We look at those strategic options on a regular basis, but it's not the first question I ask myself when I come in the morning, if...

Got it. Okay. Thanks a lot guys. Kathleen A. Lally - Vice President, Investor Relations: Thank you, Andy. Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Thank you, Andy.

Our next question comes from the line of Raymond Leung with Goldman Sachs. Please go ahead. Raymond Leung - Goldman Sachs: Hi guys. You touched upon this a little bit about deploying some of your cash going forward for funding the reserve. Can you sort of elaborate a little bit more on if you were to tap financing needs for external financing, where would you do it in terms of debt financing, [inaudible]? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yeah, you are going ahead of us a little bit. I would say that the extent to our tax issues that largely... I was looking [ph] from investment and holdings, we can holdings as good value. Most notably we expect to be… SAESA has a book value around the $500 million range and that process that’s in the second round is going quite well. And beyond that there is obviously other… this leverage capacity at Holdings and we have talk about before most notably taxes, whether that be optimal place to do, whether we would look to other place around the company that's something that we haven't... we are a long way from having any conclusive thoughts. Raymond Leung - Goldman Sachs: Okay. And just to confirm, you do it consistent with some of the metrics that any funding you do would be consistent with your targets that you laid out in your March presentation? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes. We are in terms… yes. Raymond Leung - Goldman Sachs: Yes. Thanks. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: That’s fair.

Our next question comes from the line of Lenwen Lindrof with Pinko [ph]. Please go ahead.

Hi. I have another question on this IRS tax liability. If there is an obligation ultimately would you expect Energy Holdings to manage on own or would you expect the rest of the company to help support any kind of liability that might come due? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Yes. I would probably go back to what I said I think that we would look to Holdings as being the primary funder of it and that's size of value, this equity value in the company it has a leverage capacity. Whether that’s the optimal place to do it at the end of the day. We have to see that's... we are far from that point, we are far from having a... any kind of strong view of timing and a number. Really our purpose here is to make sure that folks are aware that to the extent we have said before that this is more likely to be many years. There is a chance it could be near term. So, we look to Holdings and beyond that it’s in the.. more structural questions [inaudible] at this point. Kathleen A. Lally - Vice President, Investor Relations: Operator we have any…

And you referred back to the $3 billion of cash available. I guess that portion that you are thinking, might go towards the obligation is coming from Energy Holding. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: That's fair, part of the cash flow that would come, that would roll up to that 3 would be value at holdings, the most notable piece is the size of proceeds or at least the proportion of the size of proceeds. Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: And a portion of the discretionary. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: And yes. And the ongoing discretionary piece.

And could you please just lay out what is your cash and liquidity at Energy Holdings? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: We have that in our... in our Q at the end, that we have a facility of $150 million. It’s only modestly drawn, we have a couple of LC on it, but we have got very, generally good liquidity at Holdings for the normal basis, I think we got $20 million drawn out of the $150 million. And cash is generally around the $50 million to $100 million range. I haven't got the quarter end number with me.

Okay. Thank you very much. Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: Thanks. Kathleen A. Lally - Vice President, Investor Relations: Operator, we have time for one more question this afternoon.

Perfect. We will go to the line of Lisa Hadeful with Polygram Investments [ph]. Please go ahead.

Thank you. Sorry to be on this again, but just wanted to clarify with the tax issue, the balance the $1billion balance has nothing do with finishing out audits post 2003. Is this an going trend to correct the total exposure and has nothing to do with completing any more audits? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: That's true. The $1.1 billion would be for tax benefits taken to date, to date being March of 2008. We have been through, and that’s that we have taken. We have been through audits and will have been through audits. And not in the too distant future for ’03. So that would be a smaller number.

Okay. And just finally, any major changes to your open EBITDA guidance? I guess you guys refreshed it in March, any update to that? Thomas M. O'Flynn - Executive Vice President and Chief Financial Officer: No, other than we gave you, I think some numbers in there that were reflected back in our presentation. Energy markets are generally stronger, capacity markets will see what comes out of the RPM in a week or so. Ralph Izzo - Chairman of the Board, President and Chief Executive Officer: Yes. We stated with the assumption where we gave you rule of thumb of what changes would imply.

Thank you, very much. Kathleen A. Lally - Vice President, Investor Relations: Thank you, operator. I think that will conclude. We have little bit past noon and I don’t want to interfere with any one else in this call today.

Thank you ladies and gentlemen. That does conclude your conference call for today, you may disconnect and thank you for participating. Kathleen A. Lally - Vice President, Investor Relations: Thank you.