UPDATE 1-PSEG posts higher 1st-quarter profit

(Adds forecast, share price)

NEW YORK May 6 (Reuters) - U.S. power company Public Service Enterprise Group (PEG.N) on Tuesday said first-quarter earnings rose, as higher prices for electricity boosted profits at its unregulated power production unit.

Net income in the quarter rose to $448 million, or 88 cents a share, from $329 million, or 65 cents a share, a year before.

Excluding one-time items, PSEG said it earned 85 cents a share in the quarter. Analysts, on average, had expected the company to earn 75 cents a share.

The company still expects full-year earnings in the range of $2.80 to $3.05 a share.

The company's trading unit is currently in a tax dispute with the IRS over some of its leveraged lease investments. PSEG said lawsuits over the leases could start in 2008, which may prompt it to take a material charge to adjust its reserves for the investments.

The company's shares fell $1.45, or 3.3 percent, to $42.70 in early New York Stock Exchange trading. (Reporting by Michael Erman, editing by Maureen Bavdek)