Q1 2023 Public Service Enterprise Group Incorporated Earnings Call
During 2022 PSEG also hired over 1000, new employees and maintains and created thousands of essential good paying jobs for the New Jersey economy.
<unk> award, winning clean energy jobs training program, which was focused on employment opportunities for underserved communities.
Turning to Governor Murphy's three executive orders issued in February to combat climate change and power the next New Jersey.
We are developing proposals to help support and advance the state's updated and expanded energy policy goals.
Which we also believe can represent a $3 billion to $7 billion incremental investment opportunity for PSC LNG through 2032.
Btu is expected to be the primary implementation agency for all three executive orders over the next 12 months to 18 months.
We anticipate that the BPA, we'll update the energy Master plan with specific short and long term proposals to achieve the state's accelerated target of 100% of electricity sold into state coming from carbon free resources by 2035.
<unk> strategic roadmap with strategies to achieve our goals of having 400000 homes.
20000, commercial properties and an additional 10% of all low to moderate income properties electrification ready by 2030.
And convenience stakeholder process for the future of natural gas utilities aimed at reducing emissions all consistent with the state goals, while also considering impacts on cost and jobs.
On the ESG front Forbes recently added PSEG to its 2023 list of America's best employers for diversity and.
In addition, PSEG continues to work towards developing and submitting for validation our emissions targets for scope, one two and three to the UN backed science based target initiative. This fall.
So we are off to a solid start in 2023, we are on track with Pseg's full year 2023, non-GAAP operating earnings guidance of $3 40 to $3 50 per share.
And with <unk>, three 5 billion planned capital spend for 2023.
The five year capital spending program over 2023 to 2027, $15 5 billion to $18 billion drives our 6% to seven 5% compound annual growth rate in rate base over that same five year period.
These utility investments and the cash generation from our nuclear fleet position us to continue supporting growth in our common dividend.
Which we've recently raised by 12 to.
To the indicative annual rate of $2 28 per share.
It enables funding our capital investment program through 2027.
Without the need to issue new equity or sell parts of our company in order to grow.
The month of May March for 120, <unk> anniversary of public service.
Thank our 12000 dedicated employees and the ones before us for carrying forward the company's proud legacy of safe and reliable service.
As we look to the next 120 years I see a long runway of opportunity in the energy transition.
We are seeing trends like the new business request trickle in for behind the charger infrastructure work.
Policymakers pushing ahead on the next phase of offshore wind transmission.
And future investment opportunities in New Jersey has accelerated and expanded clean energy policy goals.
In fact, just last week, the btu and keeping with their stated intention.
Open the next solicitation window for offshore wind transmission solutions in 2024.
The board staff and PJM recommended the PSV EOG deemed 500 kv substation is the preferred interconnection point to facilitate the additional injection of 3500 megawatts of power.
Of new Jersey's goal of adding 11000 megawatts of offshore wind resources.
We fully intend to continue pursuing regulated offshore wind transmission investment opportunities both at our utility and separately at PSEG power and other.
This ongoing investment in the New Jersey economy, and its energy infrastructure improves the reliability of our networks as well as the predictability of the business, which we hope our stakeholders find to be a compelling value proposition.
I'll now turn the call over to Dan for more details on the operating results and will be available for your questions. After his remarks.
Yes.
Good morning, everybody and thank you Ralph as Ralph mentioned for the first quarter of 2023 TCG.
<unk> reported net income of $1 $287 million or $2 58 per share.
Compared to a net loss of $2 million or less than a penny per share for the first quarter of 2022.
non-GAAP operating earnings for the first quarter of 2023 were $695 million or $1 39 per share.
Compared to $672 million or $1 33 per share.
For the first quarter of 2022.
We have provided you with information on slide nine regarding the contribution to non-GAAP operating earnings per share by business for the first quarter of 2023 and slide 10 contains a waterfall chart that takes you through the net changes quarter over quarter.
And the non-GAAP operating earnings per share by major business.
Starting with <unk>.
<unk> reported first quarter 2023, net income of $487 million for 98 per share.
Compared to $509 million up $1 two per share.
In the first quarter of 2022.
First quarter 2023, non-GAAP operating earnings were $492 million or <unk> 99 per share.
Compared with $509 million or $1 one per share.
In the first quarter of 2022.
The main drivers for the quarter with a rate base additions from transmission and our gas system modernization investment programs.
Which were offset by the lower pension credits and the timing of taxes.
Compared to the first quarter of 2022 transmission was a penny per share higher.
Gas margin was a penny per share higher driven by <unk> <unk> per share.
<unk> GSM investment return that was partly offset by a penny per share of lower non ship demand.
Due to the warm weather and other margin items.
Electric margin was flat compared to the first quarter of 2022.
Also reflecting the absence of favorable.
True up in the year earlier quarter.
Partly offset by growth in the number of customers.
Other electric and gas margin added a penny per share.
Reflecting both the earnings impact of the tax the tax adjustment credit and appliance service results.
Lower distribution O&M expense added <unk> <unk> per share compared to the first quarter of 2022.
Primarily reflecting reduced weather related corrective maintenance and gas maintenance costs.
Both depreciation and interest expense increased by one penny per share compared to the first quarter of 2022, reflecting continued growth and investment.
Lower pension credits, reflecting 2020 two's investment returns resulted in the four penny per share unfavorable comparison to the year earlier quarter.
The impact of Pseg's $500 million share repurchase program completed in May 2022, and a penny per share benefit in the first quarter of 2023.
Lastly, the timing of an effective tax rate adjustment and other flow through taxes had a net unfavorable impact of <unk> <unk> per share compared.
Compared to the first quarter of 2022.
But we will reverse over the remainder of the year.
Driven by the use of an annual effective tax rate.
The Sip mechanism in effect since 2021 limits the impact of weather and other sales variances positive or negative.
On electric and gas margins, while enabling <unk> to promote the widespread adoption of its energy efficiency programs.
Winter weather in the first quarter of 2023 was the warmest first quarter in <unk> Records.
Measured by heating degree days, the first quarter of 2023 was 23% warmer than the first quarter of 2022.
And 23% warmer than normal.
ZIP mechanism allowed us to recover the impact of this extreme weather on sales.
Growth in the number of electric and gas customers. The driver of margin under the <unk> mechanism continues to be positive and were each up 1% during the trailing 12 months period.
<unk> invested $800 million during the first quarter and is on track to execute its plan 2023 capital investment program of $3 5 billion.
That includes infrastructure upgrades to its transmission and distribution facilities.
Energy strong II investments.
Last milestone in the infrastructure Advancement program and the continued rollout of the clean energy future investments in energy efficiency, and the energy and cloud, including smart meters.
For the full year 2023, <unk> forecast of non-GAAP operating earnings is unchanged.
At $1.500 billion to $1.525 billion.
Moving on to PSEG power and other which includes our nuclear fleet gas operations long island, and parent activities, including interest expense.
For the first quarter of 2023 power and other reported net income of $800 million or $1 60 per share.
non-GAAP operating earnings of $203 million or <unk> 40 per share.
This compares to first quarter 2022, net loss of $511 million or $1 <unk> per share.
And non-GAAP operating earnings of 163 million or <unk> 32 per share.
We previously mentioned that PSEG power would benefit from an approximate $4 per megawatt hour increase in the average price of our 2023 hedged output.
Which rose to approximately $31 per megawatt hour.
The majority of this annual price improvement was realized during the first three months of the year.
With higher winter pricing driving most of the increase.
And as a result.
Gross margin for the quarter rose by a total of <unk> 10 per share drew.
Driven primarily by <unk> 17 per share increase from re contracting eight four terawatt hours of generation and market impacts from the step up in power prices.
The gross margin increase also includes the lower capacity revenues at <unk> <unk> per share.
And lower gas operations of <unk> <unk> per share, reflecting lower capacity and natural gas prices during the first quarter of 2022.
First quarter cost comparisons improved by a penny per share in 2023.
Selecting lower nuclear costs and reduced spend on offshore wind activity versus 2022.
Our interest expense covering PSEG power and parent financings were <unk> <unk> per share unfavorable compared to the year ago quarter from refinancing maturing debt at higher rates.
Lower pension credits from 2022 investment returns were <unk> <unk> per share unfavorable versus the first quarter of 2022.
Taxes in other words <unk> per share favorable compared to the first quarter of 2022, reflecting the use of a lower effective tax rate in the quarter that will reverse over the balance of 2023.
Partly offset by lower investment income.
On the operating side the nuclear fleet produced approximately eight four terawatt hours during the first quarter of 2023 similar to the first quarter of 2022.
And ran at a capacity factor of 100%.
For the full year 2023, pseg's forecasting generation output of 30% to 32 Terawatt hours and.
And has hedged approximately 95% to 100% of this production at an average price of $31 per megawatt hour.
For 2024.
<unk> is again forecasting nuclear baseload output of 30% to 32 Terawatt hours.
I said, 75% to 80% of this output.
And an effective price of $37 per megawatt hour.
Our forecasted non-GAAP operating earnings for PSEG power and others unchanged.
At 200 million to $225 million for the full year.
This forecast reflects the realization of a majority of the expected increase in the average 2023.
Annual hedge price in.
In the first quarter of the year with minimal incremental pricing improvement compared to the prior year expected over the balance.
Of 2023.
Moving on our recent financing activity.
As of March 31, 2023, <unk> had available credit capacity of $3 9 billion.
Including $1 billion at EOG.
In addition, PSEG had total cash and cash equivalents on hand of approximately $1 2 billion.
PSEG power had net cash collateral postings of 700 million at March 31.
Primarily related to out of the money hedge positions, resulting from higher energy prices.
As these historical lower price trades continue to settle through 2023 and into 2024.
Collateral was returned as PSEG power satisfies its obligations under those contracts.
Thus far in 2023 collateral postings have been below the high levels experienced during 2022 and.
It remains subject to market moves.
Early in the first quarter, we prepaid $750 million of the $1 5 billion $3 64 to a variable rate term loan due in April .
Subsequent to the end of the quarter the remaining $750 million of the April 2023 term loan matured.
And was replaced by a new $750 million 364 day variable rate term loan maturing in April 2024.
As of March 31, 2023 <unk>.
<unk> had outstanding a total of $1 25 billion, a 364 day variable rate term loans expiring April and May of 2023 to support PSEG Power's collateral needs.
And PSEG power had outstanding a $125 billion variable rate term loan expiring in March 2025.
In total $1 5 billion of power and other is variable rate debt has been swapped from variable rate to fixed as of March 31 2023.
With an additional 175 million swapped in April .
Also in March <unk> issued a total of $900 million of Green bonds.
A listing of $500 million of secured medium term notes due 2033.
And $400 million of secured medium term notes.
2053.
As Ralph mentioned, we are reaffirming Pseg's 2023, non-GAAP operating earnings guidance of $3 40 to $3 50 per share.
With regulated operations at peace EOG forecasted to contribute $1 5 billion to $1 $525 million.
And PSEG power, another forecasted at $200 million to $225 million.
Noting that PSEG power and other has realized the majority of the expected annual price increase and re contracting during the first quarter of 2003.
Yes.
That concludes our formal remarks.
And operator, we are ready to begin the question and answer session.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session from members of the financial community.
If you have a question. Please press the star and the number one on your telephone keypad.
If your question has been answered or you wish to Australia, you're pulling our quest you may do so by pressing the star and the number two.
If you're on a speakerphone please pick up your handset before entering your request.
One moment please for the first question.
Yeah.
Thank you and our first question is from the line of sharp Theresa with Guggenheim Partners. Please proceed with your question.
Hey, guys. Good morning, good morning Shah.
Good morning.
So first question is on just looking at maybe opportunities to efficiently finance I know, obviously interest rate risk has been a headwind recently, but it's embedded in the plan you don't need equity, but do you feel like you have some opportunities for maybe financing efficiencies on the debt side, especially as we kind of see a very attractive.
Cash paid convert market unfolding.
Five year terms low 3% costs.
And could that benefit be accretive to that 5% to seven you guys reiterated today, especially since you do embed a higher interest rate cost step up.
Yes, sure thanks for that and I will give it to Dan in a second here.
We're never going to work.
Walk away from an opportunity.
To save a few dollars, which is what you're referring to there and so we wouldn't do that I also think there's a fine line. There that you have to watch from being too cute too big.
Inc, folks thinking that youre actually issuing equity so.
I guess every one of those deals are different and we look at it and how it's structured but we don't need to issue equity and I just wanted to be certain that anything that we did to look at that would not be done in that light. So Dan do you want to add.
Yes, I think thats the right Fame sure.
Obviously, youre going to consider all options and we do on a regular basis when we try to look at how we finance the business.
But I think it probably is a better fit for somebody who has an equity need.
Coming up but obviously, we would look at it the same way that we would look at anything else to make sure we're financing efficiently.
Perfect that was.
Very clear and then just lastly on the strategic side.
Obviously, maybe a small upside, but do you have any sort of efficient ways to allocate proceeds for the lease sales if those occur I mean, there's been some activity on that front across the offshore wind players. So I wonder if you think it could be more accretive to hold onto some of those leases for a more competitive process and maybe more.
Stable capital market environment there. Thanks.
Yes, I don't know that you can perfectly timed the market I do know that acreage that we do have is off the coast of Maryland, Maryland, just upsized their targeted offshore wind New Jersey has done the same those are I think probably the two markets that those acres would serve the best and so I think you'd look at it from an.
Operating perspective.
From a market perspective, I should say as to when you were going to execute on that sale.
And when they come in I think it's just kind of any part of general corporate funds.
Probably the most the quickest and most efficient way to use those funds would be.
Pay down some debt and then just redeploying capital.
As we've seen it and it sounds like we're going to I.
I guess embedded within Ralph comments or not selling parts of the business. In addition to not issuing equity for what we need to do and so it's not like that's going to be required from a timing perspective to do what we need to do to fund the capital plan I think that's all us out.
I think it's just going to go back and be part of the overall financing plan.
Got it fantastic guys kudos and today, we'll see you soon thanks sure Havent gone.
The next question is from <unk> Chopra with Evercore. Please proceed with your question.
Hey, good morning, Thanks for giving me just.
Dan quick clarification on the <unk>.
On the proceeds from the leaves that that would be all incremental to the current Capex plan right I just wanted to be clear on that.
Yes.
And look we shouldnt.
Overplay, the magnitude of what Thats going to look like it's going to be great, but it's not going to be.
Life changing for the company as we go forward. It is a transaction that would be around the edges and we'll do it when it makes the most sense for make it the most efficient.
Makes sense okay.
Here, you mentioned the lift out.
The pension on the call sorry, if I missed it can you just talk to that what are the latest developments developments Darrin is that is that still sort of something you are considering.
Yes.
Yes.
So I guess you didn't really hear anything because there really isn't nothing new to report, which is not to imply nothing is going on.
Diligence does continue its something that were continuing to explore.
With the same purpose to dampen the volatility that we have within the pension.
And I think things are continuing productively.
But theres nothing new to report.
But don't take the absence as if.
It's off the table it remains soft number for selling.
Got it that's very clear and then just one last one for me can you comment on how did the quarter shake out.
Versus your expectations and how does that position you for 2023 with respect to your guidance range.
Yes.
<unk> shook out exactly the way we expected it to.
So we are.
That's why we're so excited about reaffirming guidance I think.
What you also heard in a bunch of the answers that Dan just gave you was flexibility that we have.
No no none of the things that you are talking about our opportunities we have require us to thread the needle to the X.
The plan that we have in front of us in.
That confidence I hope it comes across.
And both the way that we're answering in with the Optionality that we have.
He does well done guys. Thanks, so much thanks guys.
The next question comes from Julien Dumoulin Smith with Bank of America. Please proceed with your question.
Hey, good morning. Thank you guys for the time, just following up on hedging and hedging strategy here post IRA It seems like there's been a pretty nice step up here in hedge prices versus the fourth quarter deck 37 Bucks a megawatt hour versus 32 can you talk about that what drove the significantly higher price is there a change in our commercial activities are being <unk>.
Characterize doors is that actually a real step up and economic value that you're showing there just to make sure we're clear about that.
I'll give it to Dan to give you because he's got that trading operation.
Just do want to reinforce that.
Still some uncertainty out there in the out years until we get to the <unk>.
Rules back from Treasury. So what we are describing there though is what we expect to have in that you could fill some more details in there yes Julien.
What you are describing is not some kind of dramatic shift in what we're doing we've always worked within a range.
Ross a ratable period.
Their balance within that range, it's not a perfectly scientific range. So you could see some movement within a fairly bounded range for what we do.
The quarter started with some higher prices ended with.
An uptick in in the Middle has had a drop off and so I think that.
We did a nice job of capturing some decent pricing.
The thing I would say, though that you don't want to lose sight of is that not.
Not everything is robotically across the year as well. So you could have some on peak some off peak had just come on you can ask them what their hedges some seasonal hedges some calendar hedges come on and that can make a little bit of a difference as you go through quarter to quarter, it's a little bit of a of a granular look so to your question I do think that we.
Did a nice job in moving forward and capturing some value, but I think some of the other things that I described also could come into play in any quarter, frankly, I say that more generically as we go quarter to quarter and you look at it granularly through time.
And just to clarify that commentary. So basically this is more about hedging on feed resource peak.
Then it is anything tied to IRI or otherwise and again you did a nice job commercially hedging, but you wouldn't necessarily say that this is anything in terms of a change in methodology.
Okay.
You got that last part is the most important point that we said that we are kind of continuing on our path similar methodologies to already done in the past.
Pending the real update that is when we will get that from Treasury and understand my only comment is.
You can't take too much of a five point because there are some nuances with the timing of hedges, whether they are off peak.
And seasonal versus calendar hedges and things of that nature, but but on balance.
Definitely a good quarter from a value perspective, as we step through time.
Got it and then Super Greg If I, Ken you alluded to these plans that youre developing proposals for around but electrification. When do you expect that to come I know we've talked about this a bit in the past just whats the timeline, there and then especially any thoughts about a parallel higher load forecast with that and the timeline there.
So Julien I think youre going to all of that is going to play out over the next 12 to 18 months.
On multiple fronts first we have to get agreement on our load forecast as you said I continue to believe that the current load forecast that we see from PJM is light.
Big impact us again, because we are decoupled.
We've seen the benefit of this year, but I think that it will drive additional investments for us both potentially at the transmission level and at the distribution level is dependent upon.
What.
Were those forecasts.
Liberalize off that there is a gap between our internal forecast and what PJM as we provide that information, but PJM is the ultimate.
Mission authority from a planning standpoint, so we build in our system out to that I think there, though as we get alignment on.
Rates of EV turnover and the state of New Jersey, as we get alignment on the electrification plans of the governor.
And then as we get more alignment on this clean energy transition as a whole and specifically as it regards to the offshore wind transmission I think we'll be able to give you a little more guidance on that over the next 12 to 18 months.
Excellent. Good luck guys speak soon thanks, Julian Thanks, Julie.
Okay.
The next question is from Travis Miller with Morningstar. Please proceed with your questions.
Good morning, everyone and thank you Hey, Travis Travis.
I know, it's really early in the process, but wondering if you could characterize the discussion and issues that might come up on the GSM <unk> III.
Billings, so far sure Travis I think.
You said the key though which is it's so early in the process right now.
But we still don't have any red flags as far as what we've seen and in the conversations that we've had with the regulators so.
We're confident at the end of the day that we'll get.
At similar run rate to what we have.
Currently with our GSM Pete to filing and I think.
I think you've heard and seen in all of the comments made.
The administration and specifically the Governor's office that there is no intent to stop.
Stop.
Any gas installations, there's no intent at this point to stop stopes from being tied into gas. So it's a little bit different environment that we have in.
I think that the lack of attention that has had is also a very good indicator for for all of us as to where policy will be heading in the state.
So youre not taking anybody stopes.
I mean, there is no plan on that.
We got to be careful on all of this because you know that process is confidential right. So yes.
Yes.
I think you can see from the <unk>.
Newspaper articles and so on that.
Theres really no.
No challenge to us on a replacement of.
Of our facilities.
Just joking on that one.
Perhaps I should have asked this first but how early is it in.
In the process, what kind of timeline are you thinking about.
Yes, we usually talk about those things in the 12 months plus there timeline for filing like that and I think we're only a couple months into it yet so just.
Just named.
Deciding officer at the Btu for that for this.
Dialing in so I think.
We're 12 months plus away for early any decision early innings for sure.
Okay, great. Thanks, so much appreciate it.
The next question is from the line of Andrew Weisel with Scotiabank. Please proceed with your questions.
Hi, good morning, everyone.
Hey, Andrew.
First question on the new four year Labor agreement first of all I'm glad you had more success in the Hollywood writers did.
All right.
My question is given the inflationary pressures how does the cost structure as compared to prior deals and how will that affect customer bills.
Yes so.
Andrew a couple of things, Eric let me start with backwards with the customer bills I think theres been a few reports out.
I just would encourage everybody to take a look at new Jersey.
'twenty one to 'twenty two.
I think the fourth lowest state.
In the U S as far as residential electric rate increases. So the process here is working it's not just what we do in the T&D business, but it's also the way they are.
Sure power and we've talked about that a bunch of time, so kudos to the <unk> and the process has been put in place and so we because of that rolling nature.
Any kind of increase that we would have us.
Going to be minimal to start with that said labor.
Labor is a large component of our O&M and the largest component of our own O&M expenses within the utility.
So it will be a piece that goes into our rate case filing that we have but the 4% increase that we were able to negotiate and three in the out years.
Just.
It's just a good indication.
The relationship that we have the strong relationship that we have with our unions all of our unions in the state and the fact that in prior years, where we had a 3% labor increase in.
Inflation was that.
At one 2% the.
The unions recognize that and the unions recognized now on inflation is higher than the three to four.
They.
We had some benefit in prior years so.
I think the.
The outcome is pretty flat and its flat from a growth standpoint for our folks because the good working relationships that we have and the way it plays out at the end of the day.
I don't think this will have a major impact on the rates again because of a number of different factors. So exactly what we expected and should give you some confidence and others on the call as to our O&M projections in the out years because it is the biggest component of our core expenses.
Great. That's very helpful and I know those negotiations are never easy. So congrats next question is on electric vehicles can you talk a little bit about how soon you expect to see the impact in terms of both infrastructure investment and higher residential demand and then just remind me under the CIP decoupling mechanism would you benefit with higher <unk>.
News as easy as pick up or would that be kind of more of an affordability sorry, yeah. So so a whole bunch in there first of all as far as timing goes we are starting to see some new business requests come in.
We see it in some of the Garden State Parkway.
Breast stops were seeing in the New Jersey Turnpike rest stops were seeing in some of the large commercial.
Organizations that were just granted.
Proven by the Btu, the install the charging infrastructure.
Those that activity has started.
We're going to keep an eye on that and see about what it what kind of capital is required for each one of those installations on a standalone basis to help us and projections going forward, but.
It's just the start.
As far as load increases.
And the individual residences.
We'll know more about that as we deploy Ami.
In my role.
Rollout going very well in new Jersey, and we'll have a lot more details that we can talk about I would say 12 months from now as far as when we start to see.
Folks connecting their or their evs that we.
Yes.
In engineered it that it worked here for just retired after about 60 years and he said that you see as this transition is the transition when we went to central Air conditioners.
Back to the $19 50, so it will happen, though happens sporadically and then it will take off just like that.
That deployment took place so.
We are.
We'll have more to say about it as we go forward, but I'm just I'm just really excited.
Excited about the fact that we're starting to see it take place already in this first set of brands getting out from the Btu last week.
No.
And on the affordability side of things Andrew too I think.
There will be infrastructure improvements that will need to be made that last mile of our system is.
Pretty data and Theres a lot of work that will need to be done, but I think part of what youre going to see is a shift where a piece of the wallet that you end up at the gas station is going to end up on the electric Bill.
That helps thanks, as well and Thats only for the commodity because again as you as you mentioned from the Sip where we're not.
Collect anymore for the pipes are the wires other than from what we deploy additional capital in.
Okay. Thank you very much.
Thanks, Andrew.
The next question is from the line of Paul Patterson with <unk>. Please proceed with your question.
Sure.
Hey, good morning.
Wonderful.
You mentioned the selection of the.
The offshore wind injection point.
I was just wondering if you could elaborate a little bit more what that was.
What that actually might mean for you.
<unk>.
If you could just elaborate a little America, yes, sure Paul So it wasn't a selection that was a recommendation by the by the Btu to PJM.
To look at our themes switching.
Switching station as the entry point.
So what that could mean.
It means for US certainly is that PJM does agree with with the board of public utilities into select that any of the work inside defense will be the responsibility of PFS EMG the complete inside the fence.
The work outside the fence will still follow on to that state agreement approach and be a competitive solicitation.
However.
What I am encouraged by is the fact that.
<unk> is in our service territory, we know our service territory and we should be.
Very knowledgeable about the routes to get from from the shore to that being substation that wouldn't go beyond that at this point, but.
I just.
I'm happy to see that that dangerous selective.
Also we would tell you that I'm very happy about the work that we've done on our transmission system because the indication that that gives us is that our transmission system is robust enough to take that injection of offshore wind generation into it. So we've done a nice.
Our engineering team has done a really nice job already in the system.
For what might come in here it is.
Is there any potential I guess, when we talk about inside the fence.
Do you have any number about how much that might be.
I Wouldnt know, we won't know until we actually see the size and magnitude of what comes in there versus.
Down to the area of JCB Enel, just is rebuilding and maybe even some debt in the electricity electric territory. So a lot of flows to be figured out by PJM between now and then.
That's something to watch.
Yes.
Then with respect to the going from an 18 month fuel cycle to a 24 month fuel cycle can you tell us what the.
With the potential impact of that might be I guess, starting in 2020 plus.
Well from a capital expenditure standpoint, we I think we thought it was going to be around $30 million or so it's about that same amount. So it's a very small.
Number one what the impact will be as there will be some savings in O&M that will have as a result of that.
And we'll also obviously going to get additional megawatts, we have not I don't think we've published that anywhere yet so.
That's to stay away from disclosing any of that information until we get the engineering completed which is what that $30 million theres really not a lot of work to do to actually.
Reddy of nuclear plant for this what really has to be done as the engineering on the fuel rods and and how theyre going to interact with each other and as that is completed then we are going to tell what additional power was going to get out of the unit.
Okay, great. Thanks, so much.
Yeah.
The next question is from the line of Ryan Levine with Citi. Please proceed with your questions Hey, Ryan.
How are you.
Couple of follow up questions as the organization continues to evaluate the pension lift out opportunities do you think.
The company will be in a position to make a decision later this year or has the timeline changed as we continue to work through the mechanics and details of how that would all work you'll give them with them.
Right.
Theres really no change in schedule I think.
We think about it as being a 23 of that but we will continue to watch what's going on we'll continue to watch the what the market looks for is a large deal announced today on that front. So we'll make sure that as we do move forward.
First and foremost.
Continuation of benefits and uncertainty around all of that and all of that intelligence that we're going to do and then everything works well, it's going to be Super important, but we're also keeping an eye on what on what the overall market conditions are to move forward on that.
I appreciate the color and then the ads.
In terms of the Salem.
The remaining process.
To extend the fueling cycle, there and are there any other capacity additions or changes to maintenance of refueling that you're contemplating in the near term.
Yes, well, we referred to in the script was that.
Several.
<unk>.
Plants that are looking at changing Erik fuels from 18 to 24 months. So we're monitoring that.
We had discussed in the past and what we're going to we're continuing to look at is the official operates which are different than the fuel cycle down itself. So.
To come on that we have not disclosed anything further than what we talked about at the <unk>.
Esther meeting.
Okay. Appreciate the color. Thank you. Thank you.
Our next question comes from the line of Anthony <unk> with Mizuho. Please proceed with your questions.
Hey, good morning, Ralph Good morning, Dan.
Are you is your first comment going to be congratulations Devils.
It was congratulations tableau.
Yeah.
Hey, good win last night congratulations.
Little said, but my Rangers, but most of my questions are answered just one super quick one following up on <unk> question earlier on I think the thought of maybe using a hybrid maybe for financing I guess.
Are you guys forecasting additional debt at the parent to fund.
Capex, either repower or <unk>.
The utility.
Yes, we gave a little bit of a vacation in March on that Anthony.
<unk> will see some debt levels come down.
The existing collateral cycle kind of works off down to a more baseline amount of collateral but that over time, we do expect.
As we continue to fund that capital plan that we have.
We do anticipate some incremental financing over time and so once you are as to the question is it something that we think are first and foremost as regard advance no. We don't have equity needs as we go through the capital plan, but is it something that we would look at it just to make sure we're not missing anything I think that answers yet.
Great. That's all I had thanks, so much thanks, Jeff Thanks Anthony.
The next question is from the line of Ross <unk> with UBS. Please proceed with your question.
Good morning.
I'll Echo that.
I'll Echo the congratulations Devils.
Broadway the big egg so they cleared the way for us for sure.
Okay.
So most of it most of my questions have been answered just maybe a couple for you Dan.
So customer growth came in pretty good in the quarter tracking around 1% can you just kind of remind us.
What you've assumed for customer growth in your in your go forward earnings guidance.
Yes, less than what between zero and 1% is kind of the range that we've assumed.
Customer growth.
Overtime.
And then again that's in the number of customers that's the important element for us right.
Right right.
And then there was this 10 cents.
Expected tax carry back.
In your walk from 20% to 23, but that ended up coming in in 2020 Q.
What other things are now sort of in 2023, given the absence of that 10% that gets you back just wanted to be twenty-three guidance range.
Yes, it's a great question and it further.
That <unk> was not entirely the carry back that was the biggest chunk of it and so that didn't come in early.
We are seeing in 'twenty, three really then offset some of that without going through a whole bunch of puts and takes with respect to the guidance which is still.
In the same place it was last quarter.
Some of the lower collateral driving lower interest, which is a little bit of a tailwind or.
The headwind from the former of a tailwind from the ladder and we're still in the same place from an overall guidance perspective right.
Alright, perfect. That's all I had thank you. Thanks, Ron Thanks, Ross and affiliated Amas Panthers connection later.
Thank you. The next question is from the line of Michael Sullivan with Wolfe Research. Please proceed with your questions Hey, Michael.
Hey, Ralph how are you.
Just wanted to circle back to the offshore wind transmission opportunity and solicitation next year.
I guess like how.
Should we think about the read through from the first go around and I think the fact that it came on.
Sure and <unk> territory, and the fact that they got most of the opportunity there should should we take that as a read through.
Sure.
And the teams subsidy, yes, no Michael I think.
The.
The fact that that work was awarded to JC P&L.
Just indicated that they had some work to do to make that system more robust to catch the power coming in to use an analogy there.
You're hearing now is that the work that we have been doing <unk> has readied our system already so we're going to run a little better place from a readiness standpoint at <unk> and I think that you are now seeing the BP executing on what they had originally said from the beginning which was hey, we want to come into the southern part of the state.
Central part of the state in the northern part of the state and our <unk> substation switching station.
Allows them to execute on that plan.
Okay. That's very helpful. And then just in terms of the timeline for any spend related to this solicitation.
Yes.
And a decade, Michael we've been saying from the beginning.
I will go through the solicitation process again, they are still waiting for treasury as well.
To figure out the tax rules once they get there.
We will determine what's going to be.
Mission, one is going to be generator leads and will be.
We'll be off to the races at that point, but that still puts us at the end of the decade before anyone deploying capital on us.
Okay. That's very helpful. One quick one back to the quarter on the electric and gas margin I just wanted to make sure I understood correctly the impact that was not.
Covered by the Sip what was that related to.
Oh.
So I think we said in March is about 95% of our overall.
Revenue is covered by the safe and there is some component that is not.
And so we do have some variability, albeit much more on the smaller and I think the variance were talking about was a penny.
So it was not a significant amount of it but there is some element that falls outside of that some of the larger customers. That's all <unk>.
It's a small piece of the IMC customers right.
Understood. Thanks, Thanks, guys I appreciate it.
Sure.
Our next question is from the line of Angie <unk> with Seaport Global. Please proceed with your questions.
Thank you. So I know you guys covered this in detail during the analyst day, but I still wanted to ask a question about the future of your nuclear plants and so you talked about.
The assets being an important source of cash to finance the growth of the utility that you wanted to do upgrades at the asset.
And you are waiting for more guidance.
Someday IRS.
Nuclear Ptc's.
So my question is is it just a question of timing in the sense that you are not ready yet to separate these assets or maybe there is no.
Z wave to separate these assets without any tax leakage.
Could still come in the future or is it just.
Our long term strategy that you plan to stick with these assets and you hope that investors will value them at least out of the PTC back earnings regulated Tonight, Yeah Angie.
I always try to be as clear as possible at that Investor meeting, we want to and expect to keep those assets in our portfolio.
I don't see any scenario.
We've been presented with that would make us waiver from that.
And so I just want to be as is.
As clear as I can Christmas I can beyond that you laid out exactly.
Front all of the reasons, why we articulated and I stand by that.
As to why we're keeping those plants they are a great cash flow.
They have been run really really well and they continue to be run really well and so when you have that operating excellence combined with the cash flow.
It does it does create a very unique utility like revenue stream for us that we think differentiates us from.
Some of our peers and hopefully.
Across the board today, Youre seeing that differentiation.
Hard to think of a more valuable asset in these times.
Yes.
I don't statistically.
And then lastly, so we're waiting for that guidance on nuclear PTC. So it sounds like its only going to come in the fourth quarter do you have any like what is the main question Mark here.
What is that is it.
Sure.
Is it about below market hedges don't getting if those are going to get recognized and thats true up associated with the nuclear PTC.
Just wondering what is it that we're really waiting for yes, I'll give it to Dan to give you. Some more details on this but look that's a very high level.
The definition of revenues.
And then how that's going to be treated by by Treasury, but Dan can give you a lot more yes.
The mechanics of how it works out.
I'm sure. You know is there is a calculation of grocery seeing some kind of comparison to what the PTC threshold is an extra credit kind of fills that gap and so how that definition is determined in USS exactly some of the areas that I would reference it how do you treat hedges as at a spot price is it some kind of an assumption around what hedges have happened is it <unk>.
Fuel hedges.
It's unclear exactly how they will define the gross receipts in order to figure out how you move from that amount to the PTC threshold and so.
That's that's what we're waiting on I think that at the end of the day.
We'll get a reasonable answer.
Think that there is a.
A significant support for what they are and I think we just got to work that Treasury has got to work their way through what's going to make sense across units.
That are in various situations across the country.
Okay, and then lastly.
So even though we've heard some.
Pennsylvania for example that they are thinking about replacing some of the state support for their nuclear plans with that with those subtle.
Subsidy.
In your case I'm, just thinking about it so.
The 20, <unk> nuclear Ptc's would accrue in 2024.
<unk> them on lease.
In 'twenty five.
Jersey Zacks expire.
May of 'twenty five so isn't it thank you assume that.
It's unlikely that there would be any changes in the current structure given that again the payments that's roughly coincide with.
The exploration team Mitch Zacks.
I think those mechanics are still ahead of us to be worked out but I do think look I think that.
All along one of the things that we were saying that was so so important is that we had a long term solution for nuclear and I think that.
We were very happy to see that the Ptc's did create that and honestly did create that at the federal level and so if you think about most of the other elements that support renewable energy or the types of things through ITC and PTC is that.
Ultimately our funded at the federal level and so.
That's another element that I think is very important within this and thats helpful.
End up moving towards once this PTC amount start to start to kick in.
So operator, we're going to conclude the Q&A session at this time and I'll turn it over to Ralph was just a closing comment yes.
Thanks, So listen I appreciate everyone getting on I appreciate the robust questions.
Just leave you again with what we've been saying.
Nauseum at this point, but.
Predictability and stability.
Confidence and I think that all three of those things have come across again today.
In both our results and hopefully in our Q&A.
We're proud of the organization and we've got here, we're proud of the.
Our results that we've been able to achieve and.
We're just trying to build on 120 years.
<unk>.
Great history that we've been able to inherit.
As we've said multiple multiple times and we want to leave a better than we found it. So thank you for calling in and I appreciate the time.
Ladies and gentlemen. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Okay.
Yes.
Thank you for your participation.
Okay.