PUBLIC SERVICE ELECTRIC & GAS CO

The following discussion of our liquidity and capital resources is on a consolidated basis, noting the uses and contributions, where material, of our two direct major operating subsidiaries.

Financing Methodology

We expect our capital requirements to be met through internally generated cash flows and external financings, consisting of short-term debt for working capital needs and long-term debt for capital investments.

PSE&G’s sources of external liquidity include a $1 billion multi-year revolving credit facility. PSE&G uses internally generated cash flow and its commercial paper program to meet seasonal, intra-month and temporary working capital needs. PSE&G does not engage in any intercompany borrowing or lending arrangements. PSE&G maintains a back-up credit facility in an amount sufficient to cover the commercial paper and letters of credit outstanding. PSE&G’s dividend payments to/capital contributions from PSEG are consistent with its capital structure objectives which have been established to maintain investment grade credit ratings. PSE&G’s long-term financing plan is designed to replace maturities, fund a portion of its capital program and manage short-term debt balances. Generally, PSE&G uses either secured medium-term notes or first mortgage bonds to raise long-term capital.

PSEG, PSEG Power, Energy Holdings, PSEG LI and Services participate in a corporate money pool, an aggregation of daily cash balances designed to efficiently manage their respective short-term liquidity needs, which are accounted for as intercompany loans. Servco does not participate in the corporate money pool. Servco’s short-term liquidity needs are met through an account funded and owned by LIPA.

PSEG and PSEG Power have access through sub-limits to a revolving Master Credit Facility, which provides for $2.75 billion of multi-year credit capacity. The current PSEG sub-limit is $1.5 billion and current PSEG Power sub-limit is $1.25 billion. Sub-limits can be adjusted subject to the terms of the Master Credit Facility.

PSEG’s available sources of external liquidity may include the issuance of long-term debt securities and the incurrence of additional indebtedness through our commercial paper program back-stopped by our credit facility. Our current sources of external liquidity include the Master Credit Facility. This facility is available to back-stop PSEG’s commercial paper program, issue letters of credit and for general corporate purposes. PSEG’s Master Credit Facility and the commercial paper program are available to support PSEG’s working capital needs and are also available to make equity contributions or provide liquidity support to its subsidiaries. Additionally, from time to time, PSEG enters into short-term loan agreements designed to enhance its liquidity position.

PSEG Power’s sources of external liquidity include the Master Credit Facility and PSEG Power’s letter of credit facilities and may include the issuance of long-term debt securities and entering into short-term loan agreements. Credit capacity is primarily used to provide collateral in support of PSEG Power’s sales and purchases of electricity and natural gas as the market prices for energy and fuel fluctuate, and to meet potential collateral postings in the event that PSEG Power is downgraded to below investment grade by Standard & Poor’s (S&P) or Moody’s. PSEG Power’s dividend payments to PSEG are also designed to be consistent with its capital structure objectives which have been established to maintain investment grade credit ratings and provide sufficient financial flexibility.

Operating Cash Flows

We continue to expect our operating cash flows combined with cash on hand and financing activities to be sufficient to fund planned capital expenditures and shareholder dividends.

For the year ended December 31, 2025, our operating cash flow increased $1,165 million, as compared to 2024. The net increase was primarily due to a net change at PSE&G, as discussed below, combined with an inflow of $22 million in net cash collateral postings in 2025 as compared to a $131 million outflow in 2024 at PSEG Power, and an $89 million decrease in payments to counterparties at PSEG Power.

PSE&G

PSE&G’s operating cash flow increased $643 million from $1,725 million to $2,368 million for the year ended December 31, 2025, as compared to 2024. The increase was due primarily to a decrease in net regulatory deferrals, a decrease in materials and supplies inventory, lower tax payments, and the timing of vendor payments, partially offset by an increase in accounts receivable.

Short-Term Liquidity

PSEG meets its short-term liquidity requirements, as well as those of PSEG Power, primarily through the issuance of commercial paper and, from time to time, short-term loans. PSE&G maintains its own separate commercial paper program to meet its short-term liquidity requirements. Each commercial paper program is fully back-stopped by its own separate credit facility.

Each of our credit facilities is restricted as to availability and use to the specific companies as listed below; however, if necessary, the PSEG facilities can also be used to support our subsidiaries’ liquidity needs.

In March 2025, PSEG, PSEG Power and PSE&G executed a one year extension to their existing $3.75 billion revolving credit facilities, extending the maturity through March 2029 and PSEG Power amended certain provisions in the Master Credit Facility including removal of subsidiary guarantees of PSEG Power. The PSEG Power letter of credit facilities and term loans were also amended to be consistent with the Master Credit Facility, and the $150 million uncommitted credit facility at a subsidiary of PSEG Power was terminated.

In December 2025, PSEG Power amended its existing $400 million 364-day variable rate term loan, which increased the balance to $500 million and extended the maturity to December 2026.

In February 2026, PSEG entered into a 364-day variable rate term loan agreement for $500 million.

PSEG Power has uncommitted credit facilities totaling $425 million, which can be utilized for letters of credit. As of December 31, 2025, PSEG Power had $243 million in letters of credit outstanding under these uncommitted credit facilities.

PSE&G has an uncommitted credit facility totaling $30 million, which can be utilized for letters of credit. As of December 31, 2025, PSE&G's letters of credit outstanding were immaterial under this uncommitted credit facility.

Our total committed credit facilities and available liquidity as of December 31, 2025 were as follows:

For additional information, see Item 8. Note 13. Debt and Credit Facilities.

We continually monitor our liquidity and seek to add capacity as needed to meet our liquidity requirements, including to satisfy any additional collateral requirements. As of December 31, 2025, our liquidity position, including our credit facilities and access to external financing, was expected to be sufficient to meet our projected stressed requirements over our 12-month planning horizon. PSEG analyzes its liquidity requirements using stress scenarios that consider different events, including changes in commodity prices and the potential impact of PSEG Power losing its investment grade credit rating from S&P or Moody’s, which would represent a two-level downgrade from its current Moody’s and S&P ratings. In the event of a deterioration of PSEG Power’s credit rating, certain of PSEG Power’s agreements allow the counterparty to demand further performance assurance. The potential additional collateral that we would be required to post under these agreements if PSEG Power were to lose its investment grade credit rating was approximately $703 million and $618 million as of December 31, 2025 and 2024, respectively. See Item 8. Note 12. Commitments and Contingent Liabilities for additional discussion of PSEG Power’s agreements.

Long-Term Debt Financing

During the next twelve months,

•

PSE&G has $450 million of 0.95% Secured Medium-Term Notes Series N, due March 2026, and

•

PSE&G has $425 million of 2.25% Secured Medium-Term Notes Series L, due September 2026.

For additional information, see Item 8. Note 13. Debt and Credit Facilities.

Debt Covenants

Our credit agreements contain maximum debt to equity ratios and other restrictive covenants and conditions to borrowing. We are currently in compliance with all of our debt covenants. Continued compliance with applicable financial covenants will depend upon our future financial position, level of earnings and cash flows, as to which no assurances can be given.

In addition, under its First and Refunding Mortgage (Mortgage), PSE&G may issue new First and Refunding Mortgage Bonds against previous additions and improvements, provided that its ratio of earnings to fixed charges calculated in accordance with its Mortgage is at least 2 to 1, and/or against retired Mortgage Bonds. As of December 31, 2025, PSE&G’s Mortgage coverage ratio was 3.9 to 1 and the Mortgage would permit up to approximately $10.2 billion aggregate principal amount of new Mortgage Bonds to be issued against additions and improvements to its property.

Default Provisions

Our bank credit agreements and indentures contain various, customary default provisions that could result in the potential acceleration of indebtedness under the defaulting company’s agreement.

In particular, PSEG’s bank credit agreement contains provisions under which certain events, including an acceleration of material indebtedness under PSE&G’s and PSEG Power’s respective financing agreements, a failure by PSEG, PSE&G or PSEG Power to satisfy certain final judgments and certain bankruptcy events by PSEG, PSE&G or PSEG Power, would constitute an event of default under the PSEG bank credit agreements. Under the PSEG bank credit agreements, it would also be an event of default if, in certain circumstances, either PSE&G or PSEG Power ceases to be wholly owned by PSEG. The PSE&G and PSEG Power bank credit agreements include certain similar default provisions; however, such provisions only relate to the respective borrower under such agreement and its subsidiaries and do not contain cross default provisions to each other. The PSE&G and PSEG Power bank credit agreements do not include cross default provisions relating to PSEG. Each of PSEG's, PSE&G’s and PSEG Power’s bank credit agreements also contain limitations on the incurrence of liens by it and certain of its subsidiaries and PSEG Power’s bank credit agreements contain restrictions on the incurrence of certain subsidiary debt.

PSEG’s senior notes include a cross acceleration provision that may be triggered upon the acceleration of more than $75 million of indebtedness incurred by PSEG. Such provision does not extend to an acceleration of indebtedness by any of PSEG’s subsidiaries. PSEG Power’s senior notes contain a similar provision with respect to the acceleration of more than $75 million of indebtedness incurred by PSEG Power but such provision does not extend to an acceleration of indebtedness by any of PSEG Power’s subsidiaries. Under PSE&G’s medium-term note indenture, an event of default under PSE&G’s mortgage indenture and acceleration of the mortgage bonds would constitute an event of default.

Ratings Triggers

Our debt indentures and credit agreements do not contain any material “ratings triggers” that would cause an acceleration of the required interest and principal payments in the event of a ratings downgrade. However, in the event of a downgrade, any one or more of the affected companies may be subject to increased interest costs on certain bank debt and certain collateral requirements. In the event that we are not able to affirm representations and warranties on credit agreements, lenders would not be required to make loans.

In accordance with BPU requirements under the BGS contracts, PSE&G is required to maintain an investment grade credit rating. If PSE&G were to lose its investment grade rating, it would be required to file a plan to assure continued payment for the BGS requirements of its customers.

Fluctuations in commodity prices or a deterioration of PSEG Power’s credit rating to below investment grade could increase PSEG Power’s required margin postings under various agreements entered into in the normal course of business. PSEG Power believes it has sufficient liquidity to meet the required posting of collateral which would result from a credit rating downgrade to below investment grade by S&P or Moody’s at today’s market prices.

Common Stock Dividends

On February 24, 2026, our Board of Directors approved a $0.67 per share common stock dividend for the first quarter of 2026. This reflects an indicative annual dividend rate of $2.68 per share. We expect to continue to pay cash dividends on our common stock; however, the declaration and payment of future dividends to holders of our common stock will be at the discretion of the Board of Directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our businesses, alternate investment opportunities, legal requirements, regulatory constraints, industry practice and other factors that the Board of Directors deems relevant. For additional information related to cash dividends on our common stock, see Item 8. Note 21. Earnings Per Share (EPS) and Dividends.

Credit Ratings

If the rating agencies lower or withdraw our credit ratings, such revisions may adversely affect the market price of our securities and serve to materially increase our cost of capital and limit access to capital. Credit ratings shown are for securities that we typically issue. Outlooks are shown for the credit ratings at each entity and can be Stable, Negative, or Positive. There is no assurance that the ratings will continue for any given period of time or that they will not be revised by the rating agencies, if in their respective judgments, circumstances warrant. Each rating given by an agency should be evaluated independently of the other agencies’ ratings. The ratings should not be construed as an indication to buy, hold or sell any security.

(A)

Moody’s ratings range from Aaa (highest) to C (lowest) for long-term securities and P1 (highest) to NP (lowest) for short-term securities.

(B)

S&P ratings range from AAA (highest) to D (lowest) for long-term securities and A1 (highest) to D (lowest) for short-term securities.

Other Comprehensive Income

For the year ended December 31, 2025, we had Other Comprehensive Income of $42 million on a consolidated basis. The Other Comprehensive Income was due primarily to $34 million of net unrealized gains related to available-for-sale debt securities, $20 million related to pension and other postretirement benefits, partially offset by $12 million of unrealized losses on derivative contracts accounted for as hedges. See Item 8. Note 20. Accumulated Other Comprehensive Income (Loss), Net of Tax for additional information.