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    PUBLIC SERVICE ENTERPRISE GROUP INC (PEG)

    Q4 2023 Earnings Summary

    Reported on Jan 10, 2025 (Before Market Open)
    Pre-Earnings Price$60.57Open (Feb 26, 2024)
    Post-Earnings Price$60.57Open (Feb 26, 2024)
    Price Change
    $0.00(0.00%)

    What went well

    • PSEG's nuclear fleet increased its capacity factor from 92% to 93% this year, enhancing predictability and revenues, allowing the company to avoid issuing equity and continue growth on the utility side.
    • PSEG filed a $3.1 billion Energy Efficiency II investment program, which, if approved, will contribute to future rate base growth through 2028.
    • Positive regulatory environment in New Jersey, with recent favorable outcomes, suggests that PSEG's rate case is expected to proceed smoothly, supporting future earnings stability.

    What went wrong

    • Uncertainty surrounding the nuclear Production Tax Credit (PTC) guidance is impacting PSEG's risk management and hedging strategies, potentially affecting future earnings. The company is awaiting guidance from the Treasury without a clear timeline, complicating their ability to minimize overall risk in their hedging positions (as per Daniel Cregg).
    • Limited incremental growth opportunities beyond the existing $18-$21 billion capital expenditure plan, with PSEG not anticipating significant additional investments to drive growth above their current projections, potentially limiting future rate base expansion (as stated by Ralph LaRossa).
    • Potential regulatory risks and delays in key filings, including the $3.1 billion Energy Efficiency II investment program, with the decision not expected until October, and the distribution base rate case, which may not conclude until later in 2024, creating uncertainty in recovering investments and implementing new rates (as per Ralph LaRossa's comments).

    Q&A Summary

    1. Nuclear PTC Guidance Timeline
      Q: When will you receive nuclear PTC guidance?
      A: We're still waiting for Treasury to issue guidance on the nuclear PTCs, and they haven't provided a date yet. We've prepared extensively for various outcomes and will act promptly once we have the final rules.

    2. Nuclear Earnings Upside Beyond 2025
      Q: Is there further earnings upside from nuclear beyond 2025?
      A: We see potential upside from nuclear through PPAs or similar opportunities, depending on state economic development. The ZECs are in place through 2025, and once PTC rules come out, we'll plan to optimize revenues from our plants.

    3. Hedge Program Amid PTC Uncertainty
      Q: How will you manage hedging without PTC guidance?
      A: We're moderating our hedges to minimize overall risk while awaiting PTC guidance. We're preparing for various outcomes and adjusting our hedge positions accordingly.

    4. Data Center Load Growth
      Q: How is data center activity impacting load growth?
      A: We're starting to see data centers emerge, with 50 to 100 megawatts of potential load so far. This creates opportunities for infrastructure investments and spreads costs over more customers, benefiting residential bills.

    5. CapEx Opportunities from Data Centers
      Q: Will data centers drive incremental CapEx?
      A: While we're investing in last-mile infrastructure, we don't currently see data center growth pushing us beyond our existing CapEx plans. We would signal any significant changes if they arise.

    6. Rate Case Expectations
      Q: What lessons have you learned from recent rate proceedings?
      A: New Jersey's regulatory process is consistent and effective. We're not anticipating our upcoming rate case to be contentious. Our case isn't as big as others, and we've provided affordable service over a period of inflation.

    7. O&M Outlook for 2024
      Q: Any O&M pressures for 2024?
      A: We don't see significant O&M pressures. We have labor certainty with a 4-year union deal at 4% increase, then 3%, 3%, and 3% in subsequent years. Nuclear fuel costs are a small part of O&M and shouldn't materially impact us.

    8. Energy Efficiency Filing Clarification
      Q: Can you clarify the $3.1 billion energy efficiency filing?
      A: The $3.1 billion spending will occur over a 5- to 6-year period, though commitments are made during a 2.5-year triennial period from '25 to '27. We expect a decision from the commission by October this year.

    9. Affordability and Rate Headroom
      Q: What rate headroom do you see looking forward?
      A: We focus on maintaining affordable bills rather than headroom. With ZECs rolling off in May 2025, about $200 million will come off PSEG customers and around $300 million across the state.

    10. Time-of-Use Rates and EV Adoption
      Q: Are time-of-use rates being considered to attract data centers?
      A: Time-of-use rates are more relevant for encouraging EV adoption. We anticipate addressing this in the rate case to help customers with EVs.

    11. Nuclear Opportunities Time Frame
      Q: Any particular time frame for nuclear opportunities?
      A: No specific time frame. Once we're a couple of years out and with ZECs in place through '25, we'll be able to look at plans.

    12. Energy Efficiency Process Independence
      Q: Is the energy efficiency process separate from the rate case?
      A: Yes, the energy efficiency filing is separate and independent from the rate case.

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