Q2 2024 Summary
Published Jan 6, 2025, 8:15 PM UTC- PSEG is experiencing significant growth in data center demand, with several hundred megawatts moving into the firm stage, representing new capital investment opportunities.
- Progress on nuclear business upsides is on track with no issues, including fuel cycle changes at Hope Creek, upgrades at Salem, and long-term license extensions, supporting earnings growth.
- Strong outlook for EV adoption and electrification initiatives, with investments in infrastructure modernization and energy efficiency, and no anticipated election-related risks to EV investments.
- Uncertainty in Advancing Co-located Data Centers at Artificial Island: PSEG indicated that they are not yet at the stage of discussing an Interconnection Service Agreement (ISA) for co-located load at Artificial Island, suggesting potential delays or uncertainties in their data center expansion plans at this site.
- Limited Contribution of Capacity Market to Earnings Growth: PSEG acknowledged that the upcoming PJM capacity auction results are not expected to significantly impact their 5% to 7% earnings growth forecast, indicating limited upside potential from capacity markets for their generation assets.
- Noncommittal Stance on FERC Policy Developments: When asked about their position on the FERC docket affecting PJM, PSEG executives stated that they do not have enough details to weigh in and are focusing on supporting local economic development plans, potentially reflecting a passive approach to policy matters that could impact their operations.
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Data center and AI-related load growth | Emphasized behind-the-meter data center opportunities and direct power sales in prior calls. | Seeing good momentum; multiple hundred megawatts in firm development. | Consistent; ongoing strong interest with potential for significant load growth. |
Electric vehicle adoption | Previously highlighted capital plan impact, time-of-use rates, and alignment with state policy. | Confident in steady adoption; no interconnection denials, expecting future system investments. | Stable focus; remains a key driver of future load growth. |
Nuclear fleet expansions and license renewals | Discussed thermal uprates (up to 200 MW) and subsequent 20-year renewals in earlier quarters. | On track with expansions and license extensions; no red flags. | Consistent progress; nuclear remains core to strategy. |
Regulatory and policy uncertainties (PJM, FERC, PTC, IRA) | Previously monitored nuclear PTC guidance, IRA rules, and PJM market shifts. | Aligning with PJM and FERC processes; leveraging PTC; waiting for IRA updates. | Ongoing; remains a central consideration for planning. |
Offshore wind and renewable energy projects | Prior bids for prebuilt infrastructure; emphasis on transmission and state policy alignment. | No slowdown; NJ Board of Public Utilities may reevaluate a second solicitation in Dec 2024. | Consistent focus; timeline adjustments but still a priority. |
Potential strain on customer bills | Brief references to rate increases but not as a major concern. | PSEG remains mindful of rate impacts; sees stable income share allocated to utilities. | Newer emphasis on managing and mitigating potential bill strain. |
Capital constraints and equity funding concerns | Same stance previously; ample liquidity without asset sales or new equity. | No equity issuance needed; free cash from nuclear funds utility growth. | Stable; financial strategy unchanged. |
Storm-related O&M costs | Increased in Q1 from severe storms; not a major Q4 focus. | Higher due to June heat wave; distribution O&M rose by $0.04/share. | Recurs; weather events continue to drive O&M spikes. |
Labor agreements and rising wage expenses | Q4 featured a 4-year labor agreement with structured wage increases. | Not mentioned in Q2. | No update this quarter. |
Expiration of Zero Emission Credits | Prior mention that ZECs remain in place through 2025. | Not discussed this quarter. | No current mention of any changes. |
Hydrogen-related initiatives for nuclear plants | Q1 discussed potential electrolyzer near nuclear units; Q4 tied to state plans. | No mention in Q2. | No recent update. |
Sentiment shift on data center contract opportunities | Q1 maintained optimism; Q4 noted early-stage activity. | No direct shift reported; ongoing uncertainty and deals pending. | Stable interest; awaiting concrete contracts. |
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Data Center Co-Location Opportunities
Q: When will you finalize a co-location data center deal?
A: We haven't set a time frame yet, but we're carefully considering potential deals to ensure alignment with state policies and economic development goals. We're seeing significant interest, with several hundred megawatts of data centers moving forward in New Jersey. -
Impact on Capital Expenditure Plans
Q: How will data centers affect your CapEx plans?
A: We're seeing steady growth in data center requests and EV charging, which may require system investments. We'll update our capital plan at the end of the year, but we're pleased with the positive developments and the potential opportunities they present. -
Assumptions for PJM Capacity Auctions
Q: Are you assuming higher capacity payments in your forecast?
A: Our long-term plan includes some assumptions, but capacity revenues are not a significant part of our overall mix. Our 5% to 7% growth rate isn't highly sensitive to capacity prices, and we don't expect the upcoming auction results to materially impact our outlook. -
Regulatory Perspective on Co-Located Load
Q: Will FERC proceedings delay your co-location deals?
A: We don't anticipate any delays. Each deal is specific, and we believe in following existing PJM rules. If FERC sees challenges, they'll step in, but we're committed to supporting New Jersey's economic development without holding up our plans. -
Nuclear Operations and Uprates
Q: Any progress on nuclear uprates and license extensions?
A: Everything is on track with no red flags. We're moving forward with fuel cycle changes at Hope Creek, upgrades at Salem, and pursuing long-term license extensions for our nuclear units. -
EV Growth and Investment
Q: Any election risks to EV uptake and investments?
A: We don't see any significant risks. Regardless of political changes, we expect continued EV adoption due to our compressed service territory, and we're investing accordingly in distribution infrastructure to support growth. -
Rate Case Process and Stakeholder Engagement
Q: Any issues in your current rate case proceedings?
A: The process is progressing efficiently with no red flags. Our team is executing well, and we appreciate the thoughtful approach of the Public Utilities commission. -
Potential Impact on Customer Bills
Q: Will higher prices crowd out rate base investments?
A: We don't foresee higher capacity or power prices impacting our investments. Customer income has been strong, and the share of wallet for utility bills remains consistent. Required utility investments will continue as planned.