Public Service Enterprise Group Inc. (PEG) second-quarter profit dropped 28% on hedging and other impacts, but adjusted earnings beat expectations while revenue continued to fall.

New Jersey's largest utility has seen revenue decline amid stagnant demand. Like peers, it struggled with back-to-back years of declining purchases as well as slumping prices for the power its wholesale generation business sells at market-driven rates. The sector has seen signs of improvement but faces a considerable climb to pre-recession conditions.

The in-service date for the Susquehanna-Roseland transmission line, which will extend from Pennsylvania to New Jersey, has been delayed by two years because of ongoing environmental permit reviews, PSEG said. The eastern portion of line is expected to be operational in 2014, while the western portion should enter service in 2015, the company said. PPL Corp. (PPL) is building the Pennsylvania portion of the line, while PSEG is developing the New Jersey section.

Environmental groups are challenging New Jersey regulators' approval of the line, and the National Park Service is holding public hearings on possible alternatives to the line.

"We are disappointed by the delay, but look forward to meeting the region's reliability requirements in partnership with our regulators and PJM," PSEG Chief Executive Ralph Izzo said in a statement.

PSEG posted a profit of $224 million, or 44 cents a share, down from $311 million, or 61 cents a share, a year earlier. Excluding impacts from nuclear decommissioning fund-related activity and hedging impacts, earnings rose to 65 cents from 63 cents even as revenue dropped 4.1% to $2.46 billion.

Analysts polled by Thomson Reuters most recently forecast earnings of 64 cents on $2.86 billion in revenue.

The utility business, Public Service Electric & Gas, saw operating earnings jump 74% as weather conditions drove demand. But sales to industrial customers remained weak.

At the generation segment, PSEG Power, operating profit dropped 5.5% on lower prices, though generation rose 20%.

Shares of PSEG, which affirmed its current-year earnings target, were recently down 2.7% at $32.92.

-By Matt Jarzemsky and Christine Buurma, Dow Jones Newswires; 212-416-2240; matthew.jarzemsky@dowjones.com
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