Public Service Electric & Gas Co. won approval from New Jersey regulators Wednesday for $190 million in efficiency projects.

The subsidiary of Public Service Enterprise Group Inc. (PEG) will spend the money on a range of projects, with the largest slice going to cut energy use at hospitals. PSE&G's initial return on equity it invests is 10%, the company said.

The efficiency program is part of nearly $1.7 billion in spending planned by Public Service Enterprise Group to expand its utility investment amid weak power demand and slumping market prices for electricity. The Newark company operates New Jersey's largest electric and natural gas utility and a merchant generation business that sells the output from its power plants at market prices.

The efficiency plan, which will result in a slight rate increase for PSE&G customers, is one of three programs the utility has proposed to boost earnings. The utility won approval for $694 million in new infrastructure projects in April and awaits a decision on nearly $800 million in solar projects.

PSE&G's proposals came in response to a request by New Jersey Gov. Jon Corzine for public works projects to stimulate the economy and boost employment. The utility estimates the efficiency projects will add about 700 jobs during the next two years. PSE&G estimates the $190 million in new spending will add $2.60 and $3.10 to the annual bill of a typical electricity and natural gas customer, respectively.

A company spokeswoman said PSE&G's investment in the efficiency projects will be recovered over a 60-month period and start contributing to earnings later this year.

The efficiency projects are an expansion of a $46 million program PSE&G won approval for last fall. The projects will include residential customers, but a majority of the money will go to business and government projects. A $68 million slice will be spent on making hospitals more efficient, including changes in heating and air conditioning systems.

PSE&G expects a decision on its final solar proposal by the end of the year. The utility's President Ralph LaRossa said at an industry conference last month that state regulators have given PSE&G positive feedback on more than half of the proposal, including the installation of solar panels on up to 200,000 utility poles and larger-scale solar projects, while struggling with projects to install solar panels on government buildings and at affordable housing complexes.

Public Service Enterprise shares were recently up 37 cents, or 1.1%, at $33 apiece.

-By Mark Peters, Dow Jones Newswires; 212-416-2457; mark.peters@dowjones.com