Q1 2025 Public Service Enterprise Group Inc Earnings Call
Ladies and gentlemen, thank you for standing by my name is Molly and I am your event operator today I would like to welcome everyone to today's conference Public service Enterprise group's first quarter 2025 earnings conference call and webcast. At this time all participants are in a listen only mode.
Later, we will conduct a question and answer session for members of the financial community at that time. If you have a question you will need to press the star and the number one on your telephone keypad.
To withdraw your question Please press star and the number two.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded today April 30 between 25 and will be available for replay at an audio webcast on P. S. <unk> Investor Relations website at Investor that P. S E G Dot com.
I would now like to turn the conference over to Carlotta Carlotta Chan. Please go ahead.
Carlotta Chan: Good morning, and welcome to <unk> first quarter 2025 earnings presentation on today's call are Ralph Lovaza Chair, President and CEO, and Dan Craig Executive Vice President and CFO, Our press release attachments and slides for today's discussion are posted on our IR website.
Carlotta Chan: That's your dock PSEG Dot com and our 10-Q will be filed later today P.
Carlotta Chan: Pseg's earnings release, and other matters discussed during today's call contains forward looking statements and estimates that are subject to various risks and uncertainties. We will also discuss non-GAAP operating earnings which differs from net income as reported in accordance with generally accepted accounting principles or GAAP in the United States.
Carlotta Chan: We include reconciliations of our non-GAAP financial measures and a disclaimer regarding forward looking statements on our IR website and in today's materials.
Speaker Change: Following our prepared remarks, we will conduct a 30 minute question and answer session I will now turn the call over to Ralph La Rosa.
Speaker Change: Thank you for a lot of and thank you for joining US. This morning to review <unk> first quarter 2025 results and discuss the outlook for the business.
Speaker Change: PSEG delivered a solid operating and financial performance at both our utility PSE and G in our nuclear units.
Speaker Change: Overall results for the first quarter benefited from a full quarter of regulatory recovery of and on our invested capital approved in October 2020 for base rate case settlement as well as the seasonality of gas revenues, which are concentrated in the first quarter.
Speaker Change: Results also reflected the positive impact of our consistent and reliable nuclear generation performance, which realized higher prices, primarily driven by weather.
Speaker Change: Our service territory experienced multiple cold spells in January and February with temperatures remaining below 20 degrees Fahrenheit for several days in a row, which prompted our highest winter peak load for both gas and electric in the last six years.
Speaker Change: During these challenging conditions <unk> maintained high levels of reliability and efficient customer response times.
Speaker Change: PSEG nuclear generated and supply the grid with approximately eight four terawatt hours of 24 by seven carbon free power.
Speaker Change: Pseg's focus on increasing the predictability of our results continues to benefit both customers and the company aided by our conservation incentive program, which decoupled revenues from volumes and deferral mechanisms for pension and storms from the recently concluded rate case.
This predictability combined with PSP and Gs predominantly residential and commercial customer profile also reinforces our stability as a utility investment with defensive characteristics in a turbulent equity markets.
We consistently manage our cost structure to keep those as low as possible, while maintaining pseg's financial flexibility to deliver safe and reliable service.
Speaker Change: The domestic concentration of our supply chain also limits the amount of tariff related cost pressure on our O&M and bonds with our multiyear labor agreements with all of our New Jersey unions extending into 2027 provides stability for our largest operating costs.
Speaker Change: As we've discussed previously the basic generation service or Bgs default rate is scheduled to increase our residential electric bills by 17% starting June one.
Speaker Change: As a reminder, bgs is a pass through cost for energy supply. The P. S. E N G does not earn a profit on.
Speaker Change: The increase is largely due to the July 2024 base residual auction result of $270 a megawatt day that was reflected in the latest bgs update.
As well as a true up for the prior two years of Bgs auction, which had included proxy prices for capacity.
Speaker Change: Last week, the New Jersey Board of public utilities, directed the state's electric companies to submit proposals to mitigate the customer bill impacts of the Bgs increase.
Speaker Change: <unk> continues to work with the Btu and state policymakers to develop a solution.
Speaker Change: We understand the real kitchen table difficulties. These PJM related increases will have on our electric customers.
Speaker Change: However, until new generating supply is added to the grid given the existing resource adequacy imbalance upward pressure on energy prices will persist.
Speaker Change: While these discussions are ongoing PSC and GE continues to offer an enviable record of reliability affordability and customer satisfaction.
Speaker Change: <unk> combined electric and gas Bill still compares favorably to all other utilities in New Jersey.
Speaker Change: Our reliability metrics continue to differentiate our service and our customer satisfaction rankings are second to none.
Speaker Change: I would add that this last metric measures us against all of our larger peers in the east not just in New Jersey.
Speaker Change: Our regulated capital investment plan for 2025 remains focused on infrastructure replacement and monetization to ensure safe and reliable service and to meet growing customer demand.
Speaker Change: These efforts are on track and on budget.
Speaker Change: <unk> also began rolling out the second phase of its clean energy future energy efficiency, two program, which will help customers save energy lower their bills and reduce carbon emissions, while supporting job training and economic growth here in New Jersey.
Speaker Change: In February we mentioned that 12 fold increase in inquiries from large load or data center customers into P. S. <unk>, new business pipeline, which has grown from 400 megawatts in early 2024 to 40 to 700 megawatts.
Speaker Change: These numbers include both mature applications and initial leads.
Speaker Change: Our latest update now shows <unk> experienced another quarterly increase in large loaded inquiries for new service connections.
Speaker Change: And this pipeline now exceeds 6400 megawatts of capacity requested as of March 31.
Speaker Change: Our engineers have been responded to these inquiries on a timely basis still averaging about four months.
Speaker Change: Speed to response is supportive of the state objected to spur economic development.
Speaker Change: To the extent these large load prospects convert into new utility customers in the future.
Speaker Change: Fixed costs are spread over a larger user base, which can help for lower existing customer bills.
Speaker Change: Turning now to PSEG power another our nuclear operations generated the supply the grid was approximately eight four terawatt hours of clean and reliable Baseload power and achieved a fleet capacity factor of 99, 9%.
Speaker Change: Over the past quarter, there's been a lot of discussion in new Jersey about the need or potential for new generation in the region and potentially in the state.
Speaker Change: Specifically legislation was introduced this past February that proposes to change the current New Jersey law that prohibits regulated utilities from building and owning new generation.
Speaker Change: We remain open to this possibility and we continue to work with New Jersey policymakers about this and other solutions to meet New Jersey energy needs.
Speaker Change: Regarding the ongoing discussion around the appendix datacenter proceeding FERC, we recently submitted Pseg's comments in support of co location with.
Speaker Change: With the position that the behind the meter data centers should pay for their actual use consistent with the treatment of other behind the meter customers on our system, such as rooftop solar and universities.
Speaker Change: Several other large generators in data center developers have requested a 90 day settlement process, which could be a path towards timely establishment of rules for co location.
Speaker Change: To recap we are reiterating pseg's full year non-GAAP operating earnings guidance of $3 94 to $4 <unk> per share, which is up by approximately 9% at the $4 midpoint over our 2024 reported results.
Speaker Change: We are also reiterating <unk> updated five year capital spending program at 21% to $24 billion, which supports an expected rate base CAGR of six to seven 5% through 2029.
Speaker Change: This in turn drives pseg's, 5% to 7% non-GAAP operating earnings CAGR using the nuclear production tax credit as a reference price per power.
Speaker Change: Before I conclude let me again, thank our 13000 employees across PSE and G. Nuclear P is long island and that services for their dedication and positive difference. They make every day for our customers our company and the communities, where we live and work.
Speaker Change: I'll now turn the call over to Dan who will walk you through the results for the quarter and our outlook for the remainder of 2025, and then rejoined the call for Q&A.
Dan Craig: Thank you Ralph Good morning, everybody PSEG reported net income of $1 18 per share for the first quarter of 2025.
Speaker Change: As compared to $1.06 per share in 2024.
Speaker Change: non-GAAP operating earnings were $1 43 per share in the first quarter of 2025 compared to $1 31 per share in 2024.
Speaker Change: We've provided you with information on slide eight regarding the contribution to net income and non-GAAP operating earnings by business for the first quarter.
Speaker Change: Slide nine contains a waterfall chart that takes you through the net changes quarter over quarter.
Speaker Change: And non-GAAP operating earnings per share also by major business.
Speaker Change: Starting with <unk>, which reported first quarter net income and non-GAAP operating earnings of $546 million for 2025.
Speaker Change: Compared to $488 million in 2024.
Speaker Change: Utility results were driven by the implementation of new electric and gas base distribution rates that went into effect October 15th 2024.
Speaker Change: And as Ralph mentioned recovery of previous capital investments totaling more than $3 billion.
Ralph Lovaza: Starting with the waterfall on slide nine.
Ralph Lovaza: Compared to the first quarter of 2020 for transmission margin was a penny per share lower due to the timing of expense recovery.
Ralph Lovaza: First quarter distribution margin increased by 20 cents per share compared to the year ago period.
Ralph Lovaza: And largely reflects the impact of the rate case.
Ralph Lovaza: Recovering a return on and of our capital investments.
Ralph Lovaza: And in particular gas revenues is approximately half of our annual gas revenues are realized in the first quarter.
Ralph Lovaza: The margin also benefited from recovery of energy efficiency investments.
Ralph Lovaza: Distribution O&M expense with five cents per share unfavorable compared to the first quarter of 2024 with a year over year increase driven primarily by timing.
Ralph Lovaza: As well as higher distribution operational costs due to inflation and the cold weather in January and February.
Depreciation and interest expense rose by a penny per share in two cents per share respectively compared to the first quarter of 2024, reflecting growth and investment and higher interest expense.
Ralph Lovaza: Weather during the first quarter as measured by heating degree days was 4% warmer than normal.
Ralph Lovaza: But 13% colder than the first quarter of 2024.
Speaker Change: As a reminder, weather variations have a minimal impact on P. S. Amg's utility margin because of the conservation incentive program or sitting mechanism.
Speaker Change: This decoupling mechanism limits the impact of weather and other sales variance is positive or negative on electric and gas margins.
P S. A N G promote the widespread adoption of energy conservation, including energy efficiency and solar programs.
Speaker Change: Under this set the number of electric and gas customers is what drives margins in each segment grew by approximately 1% over the past year.
Speaker Change: Our capital spending as Ralph mentioned <unk> invested approximately $800 million during the first quarter.
Speaker Change: And we remain on track to execute on our 2025 regulated capital investment plan of $3 8 billion.
Speaker Change: Focused on infrastructure modernization energy efficiency and meeting growing demand.
Speaker Change: We've maintained our five year regulated capital investment plan of 21% to $24 billion through 2029.
Speaker Change: Representing a $3 billion increase from our previous plan.
Speaker Change: Driven by reliability and resiliency investments.
Speaker Change: Our expanded energy efficiency programs and demand growth.
Speaker Change: As mentioned we commenced this next phase of our energy efficiency program in the first quarter and we anticipate investing a total of $2 $9 billion over a six year period.
Speaker Change: The energy efficiency program totals include approximately $1 billion of odd bill repayment options to help customers finance their energy efficiency equipment and appliances.
Speaker Change: Moving to power and other.
Speaker Change: For the first quarter of 2025.
Speaker Change: Power other reported net income of $43 million compared to 44 million in the first quarter of 2024.
Speaker Change: non-GAAP operating earnings were $172 million in the first quarter.
Compared to $169 million in the first quarter of 2024.
Speaker Change: Referring to the waterfall slide nine for the first quarter of 2025 net energy margin rose by two cents per share.
Speaker Change: And by higher nuclear generation performance, coupled with higher realized prices due to the cold weather mentioned earlier.
Speaker Change: The weather conditions also contributed to a higher margin in our gas operations for the quarter.
Speaker Change: O&M increased by three cents per share compared to the first quarter of 2024, mostly driven by higher nuclear costs and interest expense rose by two cents per share reflecting incremental debt.
Speaker Change: Our higher interest rates.
Speaker Change: Lastly, the timing of taxes recorded through an annual effective tax rate, which nets to zero over a full year.
Speaker Change: In other items equally combined to have a net favorable impact of four cents per share.
Speaker Change: In the quarter compared to 2024.
Speaker Change: Touching on some recent financing activity as of the end of March.
Speaker Change: P. C. G. You had total available liquidity of $4 6 billion, including approximately $900 million of cash on hand.
Speaker Change: <unk> had significant available liquidity and the year end 2024.
Speaker Change: At $2 6 billion.
Speaker Change: This represents a significant improvement as we access the bond markets at both P. F E N G N P. S E G. During the first quarter.
Speaker Change: In total this quarter, we issued $1 $9 billion of long term debt.
Speaker Change: Which reduced commercial paper outstanding and increased cash on hand.
Speaker Change: Our liquidity position was further enhanced during the first quarter by extending the exploration of our existing $3 75 billion revolving credit facilities by one year to March of 2029.
Speaker Change: He said he is variable rate debt at the end of March was that PSEG power consisting of a $1.25 billion term loan.
Speaker Change: Which matures this coming June.
Speaker Change: And the 364 day term loan for $400 million, which matures in December of 2025.
Speaker Change: As of March 31st we continue to have a low level of variable rate debt.
Speaker Change: Representing approximately 7% of our total debt.
Speaker Change: On the financing front in early March P. S. E N G issued a total of $900 million of secured medium term notes.
Speaker Change: Consisting of 400 Million% to 5.05% medium term notes due March 2035.
Speaker Change: And $500 million of five 5% medium term notes due March of 2055.
Speaker Change: A portion of the proceeds will be used to repay $350 million up 3% medium term notes due may 15.
Speaker Change: Later in March.
Speaker Change: PSEG issued $1 billion of senior notes, consisting of $600 million of four 9% notes due March 2030.
Speaker Change: And $400 million of five 4% notes due March 2035.
Speaker Change: A portion of these proceeds will be used to repay $550 million of 8% senior notes due August 15th.
Speaker Change: Looking ahead, our solid balance sheet supports the execution of Pseg's five year capital spending plan.
Speaker Change: Dominated by regulated Capex without.
Speaker Change: Without the need to sell new equity or assets and provides the opportunity for consistent and sustainable dividend growth.
Speaker Change: In closing, we delivered a solid operating and financial performance to begin the year.
Speaker Change: We are on track to deliver Pseg's full year 2025, non-GAAP operating earnings guidance of $3.94 to $4 six per share.
Speaker Change: And we are also reaffirming our long term forecast of 5% to 7% compounded annual growth.
Speaker Change: For non-GAAP operating earnings through 2029.
Speaker Change: Based upon the execution of our capital investment programs.
Speaker Change: And the use of the nuclear PTC threshold as a reference price.
Speaker Change: That concludes our formal remarks.
Speaker Change: And operator, we are ready to begin the question and answer session.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session for 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 and you wish to withdraw your polling request you may do so by pressing the star and the number itself.
Speaker Change: If you are on speakerphone, please pick up your handset before answering your request one.
Speaker Change: One moment please for the first question.
Speaker Change: Our first question.
Speaker Change: It comes from the line of Shar Parisian with Guggenheim Partners. Please proceed with your question.
Shar Parisian: Hi, Good morning team is actually often theme here for sure. Thank you for taking the question.
Constantine: Hey, Constantine gossiping.
Shar Parisian: Good morning, maybe.
Speaker Change: Maybe just starting off on the 6400 megawatts of large load ins or connection that you've noted in the prepared remarks, you see a timeline starting to form on the potential load inflection.
Speaker Change: And how does new Jersey thinking about resource adequacy would that load potential you mentioned the legislative potential, but do you envision a potential shift from gastro <unk> passu or anything else.
Speaker Change: Yeah, you broke up a little bit at the end of their constant team, but I think what I heard was when do we see that load coming in at 6400 and also the Oh, how resource adequacy is being thought about in New Jersey as a result of that is that there's some yeah. Okay. Great. So look we have always said.
Speaker Change: You take that 6400, and you apply a factor 10% to 20% and we'll leave that to you all to <unk>.
Speaker Change: With the right amount is again remembering for us where from an earnings standpoint, we are decoupled.
Speaker Change: So the way we think about it is more from a good news for customers. If we can spread any costs across additional megawatt hours and that that would certainly be be a positive from a customer standpoint.
Speaker Change: For for the timing of it I think it's happening.
Speaker Change: Current stages, we are seeing some interconnections take place already obviously the ones that are a little bit larger than a couple of hundred megawatts requests we have they still seem to be some folks that have been shopping for the best location for their particular application that they might have.
Speaker Change: But we just see that the state's economic development plan.
Speaker Change: He is taking hold and are happy to see the amount of additional megawatts of requests that we've we've had come in.
Speaker Change: As it relates to resource adequacy.
Speaker Change: That's a big conversation, that's taking place across the entire RTL footprint right now and we just saw some new planning numbers come out from PJM that we have some questions about there's an upcoming <unk> meeting, we're going to be asking some questions that at that T Act meeting regarding somebody.
Speaker Change: Actions that are in there and the one thing that we heard from our legislators over the last week or two was to be more vocal about that and you can certainly expect us to be more vocal with our questions as we move forward.
Speaker Change: Yeah. The only other part of your question got some pain as.
Speaker Change: Proposed legislation in New Jersey.
Speaker Change: We had some hearings last week there is discussion of it so I would say right now it's at the discussion point as opposed to certainly being active but we are here and remain available as a resource to the state if they decided to take resource adequacy into their own hands through some legislation.
Speaker Change: Okay.
Speaker Change: Understood I appreciate that and on the FERC tools with.
Speaker Change: The comments that were filed last week and you have a view on settlement process versus outright or any any preferred route.
Speaker Change: From your perspective and have that FERC process come up in your commercial discussions at all in artificial island would you be able to kind of mitigate any of that.
Speaker Change: But they didn't.
Speaker Change: Sure.
Speaker Change: Walking step by step.
Speaker Change: Yeah. So.
Speaker Change: I'll, let Dan I think you were asked a little bit about specific conversation. So I've always given us Dan and I'll I'll do that again.
Speaker Change: That is being led by his team but generically.
Speaker Change: Generically as it relates to the.
Speaker Change: Proceeding down at FERC.
Speaker Change: We would always like to see a settlement right I mean that to me is always the best solution I would love to see the industry come together and find solutions to help the tech industry out it's pretty clear based upon.
Speaker Change: Some information that I continue to see.
Speaker Change: <unk> needs for generation and continue to grow.
Speaker Change: And we as an industry need to find a common solution to meet that.
Ralph Lovaza: I certainly think that in doing that we need to make sure that we're not discriminatory and one customer class versus the other and that has been the single concern that we've had since this process started but then you want to talk a little bit about that yeah, no I agree with Ralph and and that's I think the non discriminatory aspect is really important.
Speaker Change: I think I'd just leave the commercial aspect to just a single comment that yes.
Speaker Change: I think that the Counterparties are looking for the flexibility. The most flexibility is that they can have a right now there is some uncertainty related to how much they will happen. So there are waiting on this answer whether settlement.
Speaker Change: Can get us the best answer, which it seems like it's got to be more representative of what the parties are looking for I think that that would be ideal.
Speaker Change: But they are never easy to get so time will tell whether we can but it will have one of those.
Speaker Change: Excellent I appreciate that.
Speaker Change: Thanks.
Speaker Change: Taking the questions. Thanks Scott.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of <unk> Chopra.
Speaker Change: Chopra with Evercore ISI. Please proceed with your question.
Speaker Change: Gosh.
Speaker Change: Ralph.
Speaker Change: Morning. Thank you for taking my question Good morning, Dan Hey, just on the on the commercial arrangements related to nuclear just you know understand there's a lot of moving pieces in the timeline is.
Speaker Change: It's uncertain, but just from a demand perspective, and it's gone from your large customer perspective has that changed over the last few months maybe since February when we spoke last in earnings how does that change obviously, there's a lot of news in the market. There's parents you know we've seen Microsoft Amazon when somebody out of hyper.
Speaker Change: Oh, you know sort of.
Speaker Change: Pull off some of their contracts, they're seeing so we're seeing any softness there.
Speaker Change: No I would definitely would not call. It softness I think there's still a demand for power and I think there's still a demand for that type of power I think theres also a desire to have answers to some of the questions that remain outstanding but.
Speaker Change: I would say there continues to be interest in the nature of the power and the scarcity of the power of that nuclear provides.
Speaker Change: And through cash overall.
Speaker Change: That's why we included those numbers that we did in the new business activity that we're seeing.
Speaker Change: You know it has not slowed down and again, maybe it's the same person, calling 50 locations and asking the same question, but I don't I don't see that as is the case. These are unique because at least for us they're unique requests that are coming in and.
Speaker Change: I continue to be.
Speaker Change: I'm impressed by the amount that we're that we're seeing.
Speaker Change: Okay.
10000 megawatt peak there gastro 6400 is not all coming out in me Ralph talked about some lower percentage of that but but the requests do continue.
Speaker Change: Okay.
Speaker Change: Got it that's very helpful color.
Speaker Change: Switching gears quickly on Libra.
Speaker Change: What to expect there I believe there are some meetings here end of May.
Speaker Change: You expect a decision then or what are kind of the data points are that we need to track.
Speaker Change: They make the decision on whether youre going to provide services there are not.
Speaker Change: So I guess I got to take a half a step back for you I don't know if you're aware of the meetings that just took place at light bulb.
Speaker Change: On this subject are you up to speed on that.
Speaker Change: The one the first I think there was a what I'm up to speed on it is there was the first Oh I guess you weren't awarded the first portion of the contract and then there's the bigger contract.
Speaker Change: Yeah, No there was actually so over the last 24 hours, but a lot of activity on this front. So let me just try to summarize for everybody on the call Whats taken place there was a recommendation made by life of management to select a.
Speaker Change: Different service provider.
Speaker Change: That recommendation was just voted down by the board.
Speaker Change: That took place within the last half hour or maybe within the last hours better way to say that after.
Speaker Change: We started this call so.
Speaker Change: We are we're just Doug.
Speaker Change: We were happy to see that we're still in consideration, but I don't know anything more than that and all I can promise two.
Speaker Change: Anyone who's on the call who loses on long island are there any customers on long Island, we will continue to do the right thing and provide high quality service to the customers on long Island.
Speaker Change: As long as we can so there was a.
Speaker Change: Flurry of activity over the last 24 hours.
Speaker Change: And that culminated in within the last hour as I said with a no vote from the.
Speaker Change: From the life of board on the management recommendation to select a different service provider.
Speaker Change: Got it I'm, sorry, I missed that so what do we know what the next step as you heard today, we're back to the drawing board or <unk>.
Speaker Change: It gets right back to what you said on May 22nd Theres going to be a next board meeting and I expect it will we'll hear some next steps they went into executive session. After.
Speaker Change: The public session. So I would imagine that that among other things are being addressed.
Speaker Change: No.
Speaker Change: Perfect. Okay, I'll leave it there and get back into queue. Thanks, So much alright, thanks guys.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of David Arcaro with Morgan Stanley.
Speaker Change: What's your question.
Speaker Change: Hey, good morning, Thanks, so much.
Speaker Change: Hey, David.
Speaker Change:
Speaker Change: Maybe on on New Jersey, and affordability I was just curious if you could elaborate on your your strategy or approach to managing affordability just given some of the concerns I think stemming from PJM capacity pricing, but what are approaches that you could take to manage some of the concerns that are part of popped up from.
Speaker Change: Both the governor and the commission.
Speaker Change: No I appreciate that question certainly there has been a hot topic here.
Speaker Change: Look our are our concern is trying to reach some consensus that helps customers over this this peak that came in.
Speaker Change: We are loosening.
Speaker Change: Loosening to recommendations that have come from the board of public utilities.
Speaker Change: They have a couple of ideas about how they can help mitigate.
Speaker Change: Through some some deferral of charges to customers that are under consideration from all the electric distribution companies here in New Jersey.
Speaker Change: We would certainly be supportive of of anything that comes out from the from the board.
Speaker Change: There are legislators that have proposed a number of different bills I think the most significant one would be the one that would be addressing the core problem here, which is supply.
Speaker Change: And another way to procure supply in the state.
Speaker Change: If suddenly Lindsay Angelo put a bill in two to look to bring generation into the state and to open it back up to regulated utilities to have that opportunity again, Dan mentioned it a little bit in the beginning we would certainly be willing to participate in that and help find solution.
Speaker Change: But the state we think we have some unique sites that could be could be helpful. In meeting that the ones that have pipes and wires already to it and then obviously we'd have to see.
Speaker Change: Take some different actions on the site to generate there but.
Speaker Change: To everyone.
Speaker Change: It is a it's an issue that is going to face customers and as I mentioned in the prepared remarks, it's going to hit every customer in.
Speaker Change: We want to help our customers as best we can through this time, it's one piece of the affordability challenges they're facing.
Speaker Change: And then any other things that are going on in the background. David There is a lot of customer assistance like why heap and we're making sure that customers are aware of the programs that are out there to help those in need.
David: Probably will be the toughest from the standpoint of some of these increases so there's a lot of activity at the company and a lot of activity outside the company all addressing this particular issue and that as I mentioned, the timing of our rollout of the energy efficiency program, which again I mentioned in the prepared remarks. It was very helpful on that front as well because if we can help customers use less as I said.
Speaker Change: Charles to an earlier question from a decoupled.
David: We can help the customer and <unk>.
David: And be supportive without any financial impact to us as a result.
David: Excellent Okay. That's helpful. Thanks.
Speaker Change: And then on I guess on your efforts to contract nuclear capacity with data centers I was just curious where do.
Speaker Change: Do things now stand like are your discussions and negotiations contingent on the FERC process.
Speaker Change: And figuring out behind the meter colocation arrangements and frameworks or.
Speaker Change: Such that that timeframe is going to be important and then may be critical to getting over the finish line here or are there. Other approaches that are that may not have to wait for the full first process and a.
Speaker Change: Potential settlement to play out yeah, no I get I'm going to give that Dan to give you any details. He wants I think he addressed a bunch of what you said.
Speaker Change: Four but look we think the FERC process is helpful to show that the industry as a whole is meeting the needs and again I would encourage us to reach a settlement on upfront. So that we can we can show of solidarity in meeting the customers' needs here and that customer being the technology companies that are.
Dan Craig: Or so thirsty for for generation, but Dan do you want to anything specific is the simple answer is no. It is not contingent upon that.
Speaker Change: I think it is helpful to have that move forward, but the simple answer is no.
Dan Craig: Yeah.
Speaker Change: Okay got it thanks, so much I'll leave it there thanks David.
Dan Craig: Thank you.
Speaker Change: Our next question comes from the line of Nick Campanella with Barclays. Please proceed with your question.
Speaker Change: Good morning, Nick.
Nick Campanella: Hey, good morning, Thanks for that real time update on LIFO that was impressive.
Speaker Change: Hey, I just wanted to follow up on the.
Nick Campanella: The prior line of questioning just in regards to the commercial agreement and.
Nick Campanella: We kind of talked about this prior just being maybe a more realistic opportunity for 25, and just given everything that transpired can you I just wanted to be clear like do you still see executing on nuclear deal in 25 is still on the table before the Governor leaves office in your mind.
Nick Campanella: Yeah, No no change like we are still what we've been saying with respect to how we are progressing and what we're doing is still where we are today.
Nick Campanella: Yeah, and I don't have a real time update for you other than to tell you. The following from the Governor standpoint is on another economic development mission and the Middle East and is.
And as talking about you know continued attraction of technology jobs to the state.
Nick Campanella: Uh huh.
Nick Campanella: I'll give you an update on that as that progresses and there are some news reports about what he is doing but he is a.
Nick Campanella: He's working until his last day here and one of the topics is to continue to attract technology companies.
Nick Campanella: Okay.
Nick Campanella: Okay. That's helpful.
Speaker Change: And then just maybe remind us unlike the quantum of megawatts that could potentially be.
Nick Campanella: Part of our commercial agreement.
Nick Campanella: Would you be open to doing more than.
Nick Campanella: More than a third of it at this point just trying to take your temperature on that yeah.
Nick Campanella: Yes.
Nick Campanella: Not a target number but I would say that there's no restriction on anything that we have within the portfolio to the extent that there is interest related to our to some kind of a commercial agreement.
Nick Campanella: Alright, Thanks, <unk> do that.
Nick Campanella: Okay.
Nick Campanella: Thank you.
Speaker Change: Our next question comes from the line of Jeremy Tonet with J P. Morgan. Please proceed with your question.
Speaker Change: Hey, Jeremy Hi.
Speaker Change: Hi, good morning, good morning.
Speaker Change: Just maybe.
Speaker Change: Building a little bit on prior comments here and I. Appreciate I appreciate pjm's collar for the next capacity auction. How do you think about the potential capacity price outcome in the next auction as it relates to customer Bill gross at this point.
Speaker Change: Do you see the price floor carries enough substance to incent, our ongoing investments in capacity supply and just any other thoughts on the market there well look all al.
Speaker Change: We'll tag team. This one again I would say a couple of things.
Speaker Change: Turnaround and make the comment I've seen a bunch of reports that.
Speaker Change: Would indicate that the price that we could expect would be.
Speaker Change: On the northern side of that that collar.
Speaker Change: And from a range standpoint somewhere between the midpoint and the top I think is what we continue to see it in the consensus of of documents that I've read.
Speaker Change: We have an internal opinion, we really don't talk about that but I would say turn it back around and had mentioned what I've read from others.
Speaker Change: Hum.
Speaker Change: Good news from that standpoint for our customers. If there is good news in this is that the because we have rolled in three years' worth of it of of capacity increases because we had that proxy price in the bgs auction before.
Speaker Change: We would not expect to see a large increase for customers.
Speaker Change: In forward years.
Speaker Change: Result, so that's a positive or negative as the prices are not coming down if that if those projections are right. It would kind of keep it in that in that same range, some percentage up or down, but not not not the double digit increases that.
Speaker Change: We've all seen here in New Jersey, and again that is a combination of delays at PJM and the capacity market as well as a lack of generation, which gets to your second question, which is do we think that those prices and Jeremy I'd be way in front of my skis on that since we're not in the merchant generation business at the moment here.
Speaker Change: And don't expect to be ever again to the merchant generation business.
Speaker Change: We are.
Speaker Change: We have not done a lot of homework on on costs and how that would how that would wind up playing out and with tariff increases and so on so look if we have an opportunity to do something to rate base be able to answer that question a lot more detail, but Dan you want it and they say no I would just add two things on the on your last point.
Speaker Change: The concept of bullet prompt incremental generation at.
Speaker Change: Honestly, it's less about price and more about the duration and the timeframe that you're talking about so given the periods that the auction covers and given the timeframe that it takes to build something new at a price that they are putting out is not something that youre going to get if it prompts you to build a new unit. So I think the the timing continues to be the challenge of P. J.
Speaker Change: Yeah.
Speaker Change: And then just kind of maybe pilonidal, Ralph talked about before with respect to the overall pricing and customer Bill.
Speaker Change: The Btu setup, a good process, so that you could gradually see changes overtime.
Speaker Change: Is that good process was kind of lost some of its benefits by virtue of pjm's delays in the capacity auction so that proxy price.
Speaker Change: To amplify the effect of a price move because if there was a catch up.
Speaker Change: Still not caught up with respect to timing of capacity auctions, and so that proxy price, which was in the last go round the previous auction as we move forward is currently the previous auction. So that proxy priced is the 270 price. We saw last time and so for US as we don't expect to see a big move.
Speaker Change: Move.
Speaker Change: By virtue of whatever happens within this auction, it's because we're sitting at that higher proxy price. So there could be smaller moves, but nothing of the magnitude of what we've seen.
Speaker Change: And the caller.
Speaker Change: Surrounds that to 70, so but as Ralph said it probably leaves you closer to where we are now but without another jump like we are addressing right now within the state.
Speaker Change: Got it that's helpful context, thank you for that.
Speaker Change: And maybe pivoting to offshore wind and fully appreciating that peg has exited offshore wind.
Speaker Change: But maybe just you know any thoughts as far as you know recent frictions offshore wind that were seeing.
Speaker Change: Today, and how do you think that impacts maybe the transmission planning opportunity set or are there any knock on effects to you guys that we should think about while no knock on effects for us are to the east of New Jersey, because we did not have anything in the plan as we had we've spoken about quite a bit.
Speaker Change: Maybe opportunities now to the west depending upon how we solve for the resource adequacy concerns in the capacity.
I think look we again I am going to be a little bit repetitive here, we have to be very loud about any concerns that we have regarding that process and the parameters that.
Speaker Change: That exists because five years from now we'll be dealing with the with the results of it so.
Speaker Change: It's pretty clear to us to help customers, we need to either build more wires or build some generation in the state.
Speaker Change: And it's important to have.
Speaker Change: The accurate.
Speaker Change: <unk> built into the PJM process now so now we get it right in the out years.
Speaker Change: Okay.
Speaker Change: Got it that's helpful I'll leave it there. Thank you thanks Jeremy.
Thank you.
Speaker Change: Our next question comes from the line of Julien Dumoulin Smith with Jefferies. Please proceed with your question.
Speaker Change: Hey, good morning team good to chat with you guys again Hello Julien.
Speaker Change: All right pleasure, Hey, so just following up on this affordability and I'd love to hear a little bit more specifically I know you guys alluded to kind of guiding customers what's out there, but just want to make sure I am hearing from you guys right, especially as you think about proposals and trying to assuage concerns out there I mean, what would you say specifically you all bring to the table or wood.
Speaker Change: Does he bring to the table and the long term and short term sense here I mean, I'm just wondering if in the scope of how far this affordability narrative is going in the state and what Youre hearing from the stakeholders, whether it's the governor with Btu, Yes look again this is.
Speaker Change: I think what we're hearing Julian is what the whole country singer and affordability is a concern.
Speaker Change: And it goes from X to energy.
Speaker Change: So from our standpoint, we want to do our part.
Speaker Change: And the conversation here in New Jersey was magnified quite a bit by everything we just talked about with the inadequacy of the PJM capacity market process.
Speaker Change: Delayed as long as it was in and having this compounding effect.
Speaker Change: No we can't change that that's some governance issued a PJM needs to deal with in and they'll they'll do what they need to do but what we can do is what we've been trying to do with PJM, which is advocate for some stability. So we don't have this happen again, that's a long term solution.
Speaker Change: Another long term solution is to get more generation.
Speaker Change: More supply that could show up as new generation in the state.
Speaker Change: We've talked a lot about the fact that we'd be more than willing to do it in rate base.
Speaker Change: If if we can play a role there and be helpful. We will certainly do that.
Speaker Change: Or it could show up by new wires being built in and bringing in generation from another location, but I hear from.
Speaker Change: From policymakers in the state is that they would like to have more control over their destiny and that would lead me to believe that we would want to have more generation in the state, but those conversations are ongoing and you've seen some of that and in the press. When we can do in the short term is three things right. We can help from an affordability standpoint, providing customers with access.
Speaker Change: To some of these.
Speaker Change: Programs that are out there assistance programs.
Speaker Change: We can we can help with energy efficiency and I'll just continue to help people to use less and we've talked about that quite a bit over the years.
Speaker Change: And the new thing that I did was put forth by the CPU was to try to get more people on a on a plan that would level is the cost over a 12 month period, we have a program called equal payment plan this would be a little bit different than that but but not very different as I can.
Speaker Change: Currently read it and would be more of a short term solution. So that customers are still incentives to lose use less electricity in the long term.
Speaker Change: And that count on an on an equal payment plan. So.
Speaker Change: That's a policy decision that will be continue to be discussed with the board, but we have said and we want to be part of the solution and we've always been that way in the state and I don't see that being any different so whether it's the long term the rules.
Speaker Change: Fly for the short term, what we're trying to help.
Speaker Change: Customers out in the three ways that we mentioned, where we're gonna be here as best we can and not that short term item to kind of an obvious statement Julian but our energy year starts June 1st So you'll see volume increases at the same time, you're starting to see that price increase and so part of that design and part of that thinking is to take this thing out of the summer months.
Speaker Change: Yeah.
Speaker Change: Yes, absolutely.
Speaker Change: Just to clarify here real quickly. Unlike you you guys have.
Speaker Change: Did that you see offsetting potentially this this headwind to the extent to which you may or may not get it.
Speaker Change: Would that be effective here as soon as the start of next year as far as your ability to offset the full ramp rate the six to eight cents ballpark that we're talking about here.
Speaker Change: Well, it's not that high I think we've been saying five to six bucks.
Speaker Change: I won't I won't get into the back and forth on that I think did look first of all it's immediate we would have to manage costs.
Speaker Change: Any of the costs that were associated with LIFO, we would we'd have to remove those costs and theres multiple ways to do that and then on the revenue side. We're always looking for other opportunities and we always we always have horizontal water on that front and I would hope that we could bring one or two of those opportunities. We're looking at to fruition in a timely enough.
Speaker Change: And to offset it so.
Speaker Change: That's the goal here and that's why we're confident that we'd be able to offset it and remain with our earnings projections that we've put out there to five to seven.
Speaker Change: Got it all right excellent guys. Thank you so much appreciate it thanks Julien.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from the line of Carly Davenport with Goldman Sachs. Please proceed with your question.
Carly Davenport: Hey, good morning, Thanks for taking the questions correctly.
Carly Davenport: Maybe just a follow up on the large loan pipeline comments from earlier any indications you can share on the breakdown of that 6400 megawatts in terms of what are more geared towards initial applications versus those that are more mature in the process.
Carly Davenport: Yeah currently we.
Carly Davenport: It continues to morph as you go through time right, you'll have some drop off you'll have some come on and but we've generally characterized the number as try to do two things. The first thing we're trying to do is give an indication of.
Speaker Change: Total interest that has come forward while at the same time also tried to bring some reality to it because we've said that's a 10000 megawatt peaking system. We don't expect 6400 megawatts to come on in and so Ralph mentioned earlier, 10% to 20% I think it is.
Speaker Change: We continue to try to do some guesswork, obviously, you don't know when someone starts to initiate an interest exactly where they're going to go but as time goes on their continued interest.
Speaker Change: How far they go on the process, how often they communicate and what they're doing it gives us some sign that we can get some kind of a gauge as to which are going to be more likely and which are not.
Speaker Change: And so I don't know if you're in that 10 to 20% to 25% somewhere within there I think is a reasonable expectation as to what's going to come forward and that's also used for planning purposes. We don't play in our system around 6400 megawatts coming onto the system. We plan for a subset of that based upon that experience and so it's probably in that ballpark is it dependent.
Speaker Change: Liked estimate.
Speaker Change: But it is an estimate.
Speaker Change: Got it okay very clear that's helpful. Thank you and then maybe just as you think about the current five year capital plan any color you can provide in terms of where you see potential exposure on on the tariff front.
Speaker Change: At any risk mitigation tactics that you see as necessary there.
Speaker Change: Currently I don't want to I don't want to completely dismiss it because what we don't know we don't know, but I am I'm very comfortable that we do not have any any real problems around a corner because of the type of work.
Speaker Change: We are planning over the near term right. It's it's kind of the the very straightforward replacement activities that we have in that last mile.
Speaker Change: We are not planning on large transmission projects and are in this cycle, we're not planning on that you'll have a little bit of a substation in switching station work to do but no major efforts like we had after superstorm Sandy so since that major work is behind US large project risk is behind us and we're really.
Speaker Change: <unk>.
Speaker Change: On this last mile activity. The only project that we have of any magnitude as the Maryland project.
Speaker Change: And I have had no indications yet do we have any supply chain concerns.
Speaker Change: Right.
Speaker Change: Great. Thank you so much thanks Charlie.
Speaker Change: Thank you. Our next question comes from the line of Michael Sullivan with Wolfe Research. Please proceed with your question.
Ralph Lovaza: Hey, Michael Hey, Ralph.
I know you kind of just hit this in one of the recent questions. Just in terms of short term and long term solutions, but.
Ralph Lovaza: Do you think the short term solutions are sufficient enough to kind of tamped down some of the.
Ralph Lovaza: Political rhetoric here, just given like the long term solution. How long term are we talking like if you were able to bring regulated.
Ralph Lovaza: Generation online, how how long would that take.
Speaker Change: Yeah, Michael I don't want to I don't want to front run something that isn't there yet so it's so big.
Ralph Lovaza: For us to just to say that I was I would simply be.
Speaker Change: I'm thinking about.
Speaker Change: Got it this way, we're seeing five to six year lead times on on.
Speaker Change: Some of the turbines and you could you could.
Speaker Change: Call out for you could call it eight depending on who you talk to but I'll say five to six on that front. So.
Speaker Change: So what we need is we need the decisions made by law, we cannot move into this area right now because of a decade.
Speaker Change: And and if the law is changed in the state of New Jersey, we will be we will be there for the customers.
Speaker Change: For the policymakers so.
It's a little bit of the chicken NDA when as log it changed and then when do we actually get the place orders to try to find some solutions.
Speaker Change: That's.
Speaker Change: So to give you a timeline when we could actually have additional supply on the system would be disingenuous on my part to do that so so I think what we're doing in the near term is is the best we can do with the cards or with Delta and I say, we as the state of New Jersey, We're all working together on this part.
Speaker Change: LC makers in the companies.
Speaker Change: Okay understood and just kind of tied to that just wanted to get your thoughts on the Governor's challenge of the previous PJM auction results and how that factors into the dynamic.
Speaker Change: Yeah look I think.
Speaker Change: Policymakers are rightfully concerned about despite that they saw.
Speaker Change: And so I think youre seeing questions get asked in a number of different ways by a number of different policy leaders. We've had some assembly leaders' some Senate leaders here in the states asking those questions.
Speaker Change: Either public hearings or by sending letters as well so it's not a surprise.
Speaker Change: This is.
Speaker Change: This is something you would expect leadership to do is to ask some questions. When you have.
Speaker Change: Something like this take place and what took place here as I think we've said multiple times as we've had this.
Speaker Change: Governance challenge that has caused a three year.
Speaker Change: All three of these.
Speaker Change: Auctions to pile up on top of each other and and as a result, the customers are seeing the spike.
Speaker Change: Yeah, I mean, they're going to have Michael Theyre going to do their investigation theyre going to find out what they find out we're not aware of anything that's problematic, but I think there's nothing wrong with that check going on just to validate what has happened.
Speaker Change: Okay, and just last one just back to the long term solutions is rare.
Speaker Change: Our regulated generation in New Jersey, the only solution, that's being considered or are there any other things we should be okay. No no. No I think look I think theres three solutions right, we've talked about and I I say generation without picking a source or a technology.
You could the first is you could have rate base, which I mentioned the second is you could have you could somehow incent.
Speaker Change: A competitive generator.
Speaker Change: To sit here and a third is you can import.
Speaker Change: That is the simple way, we think about it any imports were going to probably need some bigger wires were more wires. If we go that route again, we'd be in the state. If we if we if we come up with a solution for.
Speaker Change: Competitive generator, we will be there from an interconnection standpoint.
Speaker Change: We've been very vocal about the fact that we've been very responsive to those types of requests as they come in regardless of the technology.
Speaker Change: And if it becomes a regulated solution. We think we have a couple of sites that might make some sense for us so.
Speaker Change:
Speaker Change: We just look forward to continuing the conversation and try to push it. So we can we can avoid this cant get kicked to four.
Speaker Change: Very helpful. Thank you. Thanks.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Bill.
Speaker Change: Epithelial with UBS. Please proceed with your question.
Speaker Change: Hey, good morning.
Speaker Change: Hi, guys. Just one one quick question here, just going back to something Dan said earlier about.
Speaker Change: The commercial opportunities and flexibility being key I mean, just maybe a little bit more color around what that means is that flexibility around being being on grid War.
Speaker Change: You know the timeline of how quickly things can ramp I mean, what exactly is sort of the flexibility aspect, they're looking for while so this is a follow up on something Dan said I'll, let Dan answer.
Speaker Change: [laughter] yeah.
Speaker Change: Yeah look I, just think about trying to strike a commercial deal when there is uncertainty around rules that.
Speaker Change: Are gonna be met urgently.
Speaker Change: And that work continues to go on and on and on and and so I think really just try to get in line and how this is going to work and how it can work on what the Optionality is with respect to how you would interconnect. It it's nothing more complicated than that and we've said before given where we are and given the transmission rates.
Speaker Change: Where we are it is not as critical as it is in some other areas.
Speaker Change: But I think all parties would prefer a situation where they have all the rules and they know exactly what they are dealing with I think it's just it's taken us a long time as an industry and as the regulators within the industry to come to that final answer.
Speaker Change: Now we had a question before about the settlement.
Speaker Change: And I think that would be a great answer because it'll be the participants that are actually devising where things are gonna go that would ultimately get approved.
Speaker Change: But that doesn't happen overnight either.
Speaker Change: So I think there is there's a general desire to move more quickly and get this done but it has lingered for a while so that's that.
Speaker Change: That's really all it is bill is trying to solidify exactly what the landscape is that that we're working on it yeah and Bill I would just I would just add look if you think about where we have our generation right now.
Speaker Change: We can we can satisfy a bunch of a bunch of things whether it's redundancy.
Speaker Change: <unk> ability extra.
Speaker Change: Extra capacity.
Speaker Change: Location.
Speaker Change: And I could go on and on so we still feel very very good about the opportunity set that's in front of us.
Speaker Change: Okay.
Speaker Change: And then just lastly on what are you guys seeing on the adoption for demand response rate that's obviously been.
Speaker Change: Something that's got more attention here is the price signals has gone up.
Speaker Change: That something youre seeing an increasing level of interest in from from your customers.
Speaker Change: Yeah, I think you see it in a couple of different ways right, but we don't have as much as that as you might.
Speaker Change: Here from other companies because of the low industrial load that we have.
Speaker Change: From a residential standpoint, we do see it we see it show up mostly in that case from a thermostat standpoint and from some.
Speaker Change: You know Paul pools that are not running and so on it's at certain times and and that has continued in our energy efficiency programs that we talk about all the time address exactly that issue for mostly again, mostly to residential customers.
Speaker Change: Okay, alright, great. Thanks, very much thanks Bill.
Speaker Change: Thank you.
Speaker Change: And there are no further questions at this time I would like to turn the floor back to Mr. Larue for closing comments.
Speaker Change: Well. Thank you so much listen I think the conversation is rightfully been a lot today around affordability and and what customers are facing and again and again, we are not a desk to that issue. We know what's going on around kitchen tables, and thats because of the 13000 employees that we have here who are not.
Speaker Change: Only doing the job that they do day in and day out but or are those people that are having those same conversations around the table.
Speaker Change: <unk> of the pause of the affordability challenges they might be have and so we're very well aware of that we're gonna be here to be a solution provider to the state.
Speaker Change: And we hope to continue to be a solution provider to the people of long island as well as we've discussed so we appreciate all of your interest and we will see you at <unk> in may thanks for calling in.
Speaker Change: And ladies and gentlemen. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Speaker Change: [music].
Speaker Change: Yeah.
Yeah.
Speaker Change: [music].