Public Service Enterprise Group Incorporated

We'll conduct a question and answer session for members of the financial community. At that time, if you have a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. As a reminder, this conference is being recorded today, Thursday, May 2, 2019, and will be available for telephone replay today. beginning at 2 p.m. Eastern today until 11.30 p.m. Eastern on May 10, 2019. It will also be available as an audio webcast on PSG's corporate website at www.psg.com. I will now turn the conference over to Carlotta Chan. Please go ahead.

Thank you, Christa. Good morning, and thank you for participating in our earnings call. PSEG's first quarter 2019 earnings release attachments and slides detailing operating results by company are posted on our website at investor.pseg.com, and our 10-Q will be filed shortly. The earnings release and other matters discussed during today's call contain forward-looking statements and estimates that are subject to various risks and uncertainties. We also discussed non-GAAP operating earnings and non-GAAP-adjusted EBITDA, which differ from net income as reported in accordance with generally accepted accounting principles in the United States. Reconciliations of our non-GAAP financial measures and a disclaimer regarding forward-looking statements are posted on our IR website and are included in today's earnings period. I'll now turn the call over to Ralph Izzo, Chairman, President, and Chief Executive Officer of Public Service Enterprise Group. Joining Ralph on today's call is Dan Craig, Executive Vice President and Chief Financial Officer. At the conclusion of their remarks, there will be time for your questions, and we ask that you limit yourself to one question and one follow-up.

Thank you, Carlotta, and thank you all for joining us. Earlier today, PSEG reported non-GAAP operating earnings for the first quarter of 2019 of $1.08 per share. versus $0.97 per share in last year's first quarter. Our gap results for the first quarter were $1.38 per share compared with $1.10 per share in last year's first quarter, thereby demonstrating the growing contribution from our regulated operations, as well as solid operating results from both businesses. Details on the results for the quarter can be found on slide 6 of the earnings presentation. These results reflect the benefits from our continued investments in New Jersey energy infrastructure and a full quarter of new rates based upon PSE&G's 2018 distribution rate case settlement. At PSE&G, we continue to align our business objectives with New Jersey's energy and environmental policy goals. As a reminder, over the coming five years, PSE&G plans to invest approximately $11 to $16 billion dollars on programs which are expected to provide annual rate-based growth of 7% to 9%, starting from a 2018 year-end base of approximately $19 billion. In addition to investments that improve electric system reliability and resiliency, we recently began the second phase of the $1.9 billion gas system modernization program that will replace approximately 875 miles of gas mains over the next five years and make other improvements to reduce methane leaks and ensure critical energy infrastructure is available to support New Jersey's economy. Turning to operations, the first quarter of 2019 had slightly colder temperatures in comparison to the first quarter of 2018. At PFDG Power, total generating output increased by 11% over Q1 2018, driven mainly by the additions of keys, and Sea Warren 7 in mid-2018, which have added to power's increasingly efficient and clean fleet, allowing us to reliably supply the market with flexible, dispatchable generation. Our fleet of nuclear generating plants also performed well in the quarter, evidenced by a 98% capacity factor. Notably, Salem 1 just completed its first ever uninterrupted operating run between refueling outages. delivering a reliable source of carbon-free energy in support of New Jersey's clean energy goals. As we recently celebrated Earth Week, I want to recognize that it was less than a year ago that New Jersey Governor Phil Murphy signed two environmentally progressive bills into law, the Clean Energy Act and the Zero Emission Certificates Program, and the state has made much progress since then. The New Jersey Board of Public Utilities, the BPU, was tasked with establishing and implementing the state's energy policy around the goals outlined in the Clean Energy Act. These efforts include updating the state's energy master plan by the end of this year, setting important targets for utilities to reduce energy usage, developing the basis for New Jersey's first offshore wind solicitation for 1,100 megawatts in mid-2019, establishing a transition to a more cost-effective approach for solar energy, and carrying out the legislature's intent to preserve a major source of the state's carbon-free electricity through the Zero Emission Certificates Program, a vital step in reaching the state and Governor Murphy's clean energy goals. As you know, on April 18th, the BPU Commission has voted to award Zero Emission Certificates, and I'm going to start calling them ZECs just for simplicity, to all three of PSEG's New Jersey nuclear power plants, Hope Creek, Salem 1, and Salem 2. The BPU order closely followed the legislation that established the ZEC program, and power began accruing the ZEC payments on April 18th. The decision preserves over 90% of New Jersey's carbon-free generation, saves thousands of direct and related jobs in Salem County and around the state, prevents a significant rise in environmentally damaging air emissions, helps preserve fuel diversity, and make no mistake, saves New Jersey electricity customers hundreds of millions of dollars in what would have been even higher energy costs. Another way to keep bills as low as possible is by continuing to return the benefits of tax reform to customers, and there is good news on this front. PSE&G's combined electric and gas residential customer bills are already 30% below where they were a decade ago and 40% lower when adjusted for inflation. In 2019, PSE&G will return an additional $380 million of tax reform savings, primarily related to excess accumulated deferred income taxes in transmission and distribution rates. This is over and above the $262 million of annual rate reductions from the change to the corporate income tax rate from the 2017 Federal Tax Act. These tax flowbacks reduce customer bills as the utility continues to improve the reliability and resiliency of its T&D system, modernizing an aging infrastructure and advancing the state's clean energy goals in a low interest rate environment. As I said, we continue to align our business objectives with New Jersey's energy and environmental policy goals. Our current capital spending plan and proposed investments in Clean Energy Future and Energy Strong II are perfect examples of that alignment. The second phase of Energy Strong will further strengthen and enhance the system reliability and resiliency, and the energy efficiency portion of the Clean Energy Future filing addresses the requirements in the Clean Energy Act to reduce electricity usage by 2% and natural gas usage by 0.75%. We consider our energy efficiency proposal to be the best and most cost-effective way to achieve the state's energy efficiency savings targets because it accomplishes these targets while limiting growth in the customer bill and providing broad-based access to such benefits. Both of these important proposals are being evaluated by the VPU, and we expect to resolve them sometime during the third quarter. At Power, construction at Bridgeport Harbor is approaching completion, and the anticipated mid-2000 in-service will add another highly efficient, clean, and dispatchable combined-cycle gas turbine to Power's fossil fleet. The Keys and SeaWarm stations have continued to operate well since coming into service and drove a 63% increase in combined cycle output in Q1 2019. The completion of our 1,800 megawatt combined cycle construction program will transform Power's fossil fleet and bring an improvement to Power's free cash flow generation as its ongoing capital needs decline. With respect to energy markets, FERC recently issued a ruling directing PJM and the New York ISO to change their fast start pricing practices so that they reflect the marginal cost of serving loads. The FERC is directing PJM to make a series of tariff revisions to allow fast start resources to set prices, including restricting eligibility to fast start resources that have a startup time of one hour or less and a minimum run time of one hour or less. PDM is required to make a compliance filing by July 31st, along with tariff change information by August 30th. FERC also directed the New York ISO to modify its pricing logic to allow the startup costs of Fast Start resources to be reflected in prices. The New York ISO must make its compliance filing by year-end 2019 and implement the tariff changes by December 31st of next year, 2020. We continue to watch the broader package of price formation reforms as they wind their way through the FERC process. An interim order expected from the FERC to reform the PJM capacity auction process toward a, quote, just and reasonable construct remains pending. If PJM's proposal is approved, and with the receipt of ZECs, our New Jersey nuclear units will likely be subject to PJM's revised minimum offer price rule, or MOPR as I'll refer to it, In the interim, PJM has proposed a two-stage auction process, and we continue to believe that either of FERC's suggested alternatives or the PJM approach can accommodate nuclear units receiving ZECs in the capacity auction process. As you know, PJM has asked FERC to approve holding the 2022-2023 RPM auctions in August of this year based on existing rules. BSEG continues to participate in this case, and we are awaiting further guidance and certainty from the FERC with respect to the auctions. On a related note, on April 19th, following the BP-ZEC decision, we withdrew our must-offer exception filings and deactivation notices for the New Jersey nuclear units that we had submitted in compliance with the PJM auctions timeline. So given our first quarter results, we are affirming the full-year forecast of PSEG's non-GAAP operating earnings at $3.15 to $3.35 per share. At the midpoint of our guidance, this represents over 4% growth in earnings over 2018's full-year non-GAAP results of $3.12 per share. A higher contribution from regulated earnings at PSEG, which is approximately 75%, is driving this increase and offsetting the challenging power market conditions. In addition, the benefit from a partial year of ZEC payments covering all three of our New Jersey nuclear plants has been reflected in our 2019 guidance. The focus and commitment of PSEG's 13,000 employees to operational excellence supported our first quarter results and enables me to affirm our earnings guidance. I will now turn Nicole over to Dan for more details on our operating results, and we'll be available for your questions after these remarks.