Public Service Enterprise Group Incorporated

ladies and gentlemen thank you for standing by my name is julia and i will be your event operator today i would like to welcome everyone to today's conference public service enterprise group fourth quarter and full year 2021 earnings conference call and webcast at this time our participants are in a listen-only mode later we will conduct a question and answer session for members of the financial community at this time If you have a question, you will need to press star, then the number one on your telephone keypad. To withdraw your question, please press the pound key. As a reminder, this conference is being recorded today, February 24th, 2022, and will be available as an audio webcast on PSEG's Investor Relations website at https://investor.com. I would now like to turn the conference over to Carlotta Chan. Please go ahead.

Thank you, Julia. Good morning, and thank you for participating in our earnings call. PSEG's fourth quarter and full year 2021 earnings release, attachments and slides detailing operating results by company are posted on our IR website located at investor.pseg.com, and our 10-K 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 will also discuss 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. We include reconciliations of our non-GAAP financial measures and a disclaimer regarding forward-looking statements on our IR website and in today's earnings materials. I will now turn the call over to Ralph Izzo, Chairman, President, and Chief Executive Officer of PSEG. 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. Ralph?

Thank you, Carlotta. Good morning, everyone. Sadly, the events of today do warrant a slight deviation from our normal beginning remarks. And let me just offer our thoughts and prayers from everyone at PSEG to those of you who are more deeply and personally affected by the events in Eastern Europe. And of course, we pray for a rapid diplomatic resolution of matters. Let me proceed, however, with the review of our 2021 performance and our outlook for 2022 and beyond. We are in fact pleased to report strong operating and financial results for 2021, which marked the 17th year in a row that PSEG has delivered results within management's original, or in some cases, our raised non-GAAP operating earnings guidance. So PSEG's GAAP results were 88 cents per share for the fourth quarter of 21 compared to 85 cents per share in the fourth quarter of 2020. For the full year, PSEG reported a 2021 net loss of $1.29 per share driven by charges related to the sale of PSEG fossil. Now this compares to net income of 376 per share in 2020. PSEG reported non-GAAP operating earnings for the fourth quarter of 69 cents per share compared to 65 cents per share in the fourth quarter of the prior year. Non-GAAP results for the full year 2021 rose to $3.65 per share compared to $3.43 per share in 2020. For 2021, PSEG net income increased by 9% above 2020 results and contributed approximately 80% of PSEG's consolidated non-GAAP operating earnings. Slides 15 and 17 detail these results for the quarter and the full year. So, we're pleased to report that PSEG has completed the sale of the fossil portfolio. We closed on the PJM assets on February 18th, and the New York and New England assets closed yesterday, having received all required regulatory approvals from the Federal Energy Regulatory Commission and regulators in Connecticut and New York. I extend my heartfelt thanks to the PSEG Fossil employees for their professionalism throughout the sale process, which resulted in impressive 2021 operating statistics that actually were among the best in our history. PSEG Fossil's commitment to operational excellence and continuous improvement will continue to inspire all of us at PSEG going forward. The closing of both Fossil sales along with other key priorities achieved during 2021 will support our pursuit of a robust set of regulated and contracted opportunities. PSEG is focused on clean energy and infrastructure investments to drive regulated utility growth with a vision toward powering a future where people use less energy and it's cleaner, safer, and delivered more reliably than ever. PSEG's improved business mix further enhances an already compelling environmental, social, and governance profile and will help us achieve that powering progress vision. Let me take a minute to recap a few significant accomplishments from last year. PSE&G initiated investments in its $2 billion Clean Energy Future program that has expanded the traditional definition of rate base while helping New Jersey to achieve its clean energy goals. and importantly, will provide customers with options to lower their bills. PSE&G also settled a potential challenge to the return on equity in its FERC transmission formula rate last July, resulting in reduced rates for customers and eliminating a regulatory overhang. In addition, our energy-strong investments proved their value in the aftermath of a devastating tropical storm Ida last August. Despite floodwaters approaching five feet in height in parts of New Jersey, all of the energy-strong hardened substations remained operational and helped to minimize customer outages across our system. PSEG Power secured a second three-year term of zero-emission certificates, which will carry us through May of 2025, and help to preserve the state's carbon-free nuclear generating resource. We detailed these and other accomplishments at last September's Investor Day, which highlighted a company built around a 2022 business mix that is projected to be 90% regulated. This more predictable and visible earnings platform has enabled PSEG to provide a multi-year earnings growth rate of 5% to 7% from the 2022 guidance midpoint to 2025. PSEG also announced that last year's Investor Day that we would pursue a $500 million share repurchase program and raise the 2022 annual dividend by nearly 6% to $2.16 per share. We have completed half of that repurchase program and will be executing the remaining $250 million in the near future. In addition, our Board of Directors recently declared a $0.54 per share first quarter 2022 dividend at the indicative $2.16 per share annual rate. Supporting our strong financial capabilities is our commitment to operational excellence and continuous improvement. I'm proud to report that for 2021, PSE&G achieved better than top decile rankings in OSHA scores for safety and SADIE scores, which is an industry standard for reliability, as shown on slide 8. The utility's J.D. Power customer satisfaction scores improved in both its electric and gas areas, and in each of the residential and business customer segments. These results were our highest cumulative scores to date, achieving a top quartile ranking in the eastern group in three of the four studies. In addition, for the 20th year in a row, PA Consulting recognized PSE&G with its Reliability I award as the most reliable electric utility in the Mid-Atlantic region. After a sustained period of low natural gas prices, New Jersey and the rest of the country is experiencing increases in energy prices. This has resulted in PSE&G implementing two 5% gas rate increases for this winter's heating season. Yet, following these adjustments, our typical gas residential customer bills are still the lowest among our regional peers. On the electric side, Monthly residential bills remain below our peer group average, and default supply rates will actually decline this coming June, based on the results of New Jersey's basic generation service auction earlier this month. This will result in a decrease in the average PSE and geologic bill of about 2.8%. Including the BGS rate reduction in June and other requested changes, the combined bill of a typical residential customer will be at least 20% lower compared to more than a decade ago, and 35% to 40% lower when you take into account inflation. Next month, in March, the statewide moratorium on shutoffs for residential electric and gas service, which began in March of 2020, is set to be lifted. And PSE&G, in partnership with the New Jersey Board of Public Utilities and several community groups, is helping customers enroll in several payment assistance programs. Now turning to our 2022 earnings guidance on slide 9, we have narrowed the range of full-year guidance for non-GAAP operating earnings to $3.35 to $3.55 per share from the $3.30 to $3.60 per share initiated last September. The subsidiary guidance ranges for 2022 are narrower also. with a slightly higher midpoint at PSE&G that is 6% above 2021 results and reflects a more predictable earnings profile and improved business mix overall. The narrowed range reflects the benefit of a full year impact of the Conservation Incentive Program and finalizing 2022 pension drivers updated for our December 31st performance measurement date. Last September, we introduced PSEG's five-year 2021 through 2025 capital investment program of $15 to $17 billion, with approximately 90% or $14 to $16 billion allocated to the utility. This plan is expected to produce 6.5% to 8% compound annual growth in rate base over that same five-year period. Recall that we added the infrastructure advancement program, I'll refer to that as IAP, to our 21 to 25 capital plan with an investment to be made over four years to improve the reliability of the last mile or the lower voltage of our electric distribution system. This will also address aging substations and gas metering and regulating stations and allow us to invest in electric vehicle charging infrastructure at our facilities to support the electrification of the utilities vehicle fleet. We remain in discussions with the BPU with regard to our IAP proposal, and based on current status of the proceeding, we anticipate BPU action in the autumn of this year. With respect to financing our capital spending program, I will reiterate that we expect our strong cash flow, enhanced financial flexibility and solid investment grade ratings to enable funding this $15 to $17 billion program, as well as our planned investment in Ocean Wind 1, without the need to issue new equity. Now, before moving to Dan's financial review, I would like to touch upon some of the exciting new initiatives for future growth. These range from the new clean energy future investments, which enable opportunities for rate-based growth behind the meter to supporting electrification of transportation and a growing mix of renewables into the distribution system, to expanding the aging infrastructure replacement programs that have been the hallmark of our growth this past decade. During 2021, we advanced our regional offshore wind efforts by acquiring a 25% equity interest in Ocean Wind 1 and submitting several onshore and offshore solutions. into the New Jersey PJM competitive transmission solicitation with Orsted, our regional offshore wind partner, as well as through standalone PSE&G bids for onshore upgrades. We submitted nine solutions into this state agreement approach proposal window, being pursued by the BPU with technical assistance from PJM. Seven of those proposals were jointly made with Orsted under our partnership, which we've named Coastal Wind Link. These solutions are designed to deliver thousands of megawatts of offshore wind energy into New Jersey, drawing from PSEG's extensive transmission experience and Orsted's expertise in offshore wind energy. These projects range from single collectors at various landing points to a linked transmission network out in the ocean, with total project costs ranging from $2 to $7 billion. We continue to expect the third or fourth quarter 2022 decision from the BPU on this matter. We're also in discussions with Orsted regarding near-term opportunities and options to expand our offshore wind investments in the Mid-Atlantic by way of our joint ownership of the Garden State Offshore Energy Site and Orsted's recent award of the Skip Check II project. Turning to our climate advocacy efforts, we are continuing our active dialogue with federal and state regulators PJM, and other stakeholders to develop regulatory and market mechanisms that appropriately recognize the value of carbon-free nuclear generation over the long term. As a top 10 producer of carbon-free energy in the United States with a coal-free fuel mix, we're especially supportive of the nuclear production tax credit and clean energy incentives proposed in previous legislative efforts and are hopeful that the broad support for the clean energy measures will result in new legislative proposals in coming months. Let us move to our updated environmental, social, and governance summary on slide 11, where you can see our comprehensive and growing list of action items, as well as an equally impressive list of recognition. In 2021, we not only accelerated and expanded PSEG's climate vision by 20 years to net zero 2030, covering scopes one and two for our entire operations, We also made a significant commitment by signing on to the United Nations-backed Race to Zero campaign that will validate science-based targets for all three scopes of our emission reduction goals. We're fully engaged in meeting this commitment and look forward to updating you on our progress. PSEG was recently named to Just Capital's 2022 Just 100 ranking of America's Most Just Companies. That's a lot of just in there. And we were headed to the 2022 Bloomberg Gender Equality Index as well. Among the many ESG accomplishments and recognition we attained in 2021, I'm gratified that our corporate strategy grounded in sustainability is one that is appealing to ESG investors more and more. Finally, I thank the 13,000 strong PSEG workforce contributing to our solid operating and financial results in 2021. The Board of Directors' recent dividend declaration is the 18th annual increase in the last 19 years. Our 2022 dividend marks 115 consecutive years that PSEG has paid a common dividend to shareholders, one of only a very few companies that can make such a claim. This year's 12 cents per share increase reflects our confidence in the durability of our growth strategy as well as an ongoing commitment to returning capital to our shareholders. In summary, with the fossil sale now behind us, we look forward to executing on our robust set of opportunities to grow both the regulated and contracted areas of our business. Solid alignment with the state of New Jersey's energy policy goals and a cost-conscious focus on the customer bill continue to underpin our approach to regulated growth investments that power progress in New Jersey. which has been our core mission for the last 119 years and counting. I'll now turn the call over to Dan for more details on our operating results, and we'll be available for your questions after his remarks.

Thank you, Ralph. Good morning, everybody. As Ralph mentioned, the full year and fourth quarter 2021 PCG reported a net loss of $1.29 per share related to the fossil sale charges and mark-to-market impacts and net income of $0.88 per share, respectively. PCG also reported full year and fourth quarter 2021 non-GAAP operating earnings of $3.65 per share and 69 cents per share respectively. We've provided you with information on slides 15 and 17 regarding the contribution to non-GAAP operating earnings by business for the fourth quarter and for the full year of 2021. And slide 16 and 18 contain waterfall charts that take you through the net changes quarter over quarter and year over year in non-GAAP operating earnings by major business. And I'll now review each company in more detail. For the full year, PSE and GNET income increased by $119 million, or approximately 9%, compared to 2020 results. This improvement reflects a 10% increase in rate base to $24.5 billion at year-end 2021, driven by our investment programs focused on infrastructure replacement, resiliency, and beginning our clean energy future investments. We also note on slide 32 approximately $1.2 billion of construction work in progress, or CWIP, mostly transmission, not included in that year-end 2021 rate-based number. For the fourth quarter of 2021, PSE&G's net income was $0.53 per share compared to the net income of $0.58 per share for the fourth quarter of 2020. As shown on slide 20, transmission margin was a penny per share lower compared to the year-earlier quarter, reflecting the formula rate settlement implemented earlier in 2021, partly offset by growth in rate base and a benefit from O&M timing. Gas margin was $0.03 per share favorable, reflecting GSMP roll-ins and the implementation of the Conservation Incentive Program, or SIP, compared to last year's fourth quarter. And electric margin was a penny per share higher compared to the fourth quarter of 2020, also reflecting ongoing investments and the adoption of the SIP. O&M expense was a penny unfavorable versus the year earlier quarter. Higher distribution depreciation expense reduced results by a penny per share, reflecting higher plant and service. Lower pension expense added $0.02 per share versus the year-ago quarter. And as we signaled last quarter, flow-through taxes and other were $0.08 per share unfavorable, reflecting the expected reversal of similar positive impacts in taxes in the second and third quarter 2021 net income. The New Jersey economy continued to recover from COVID-related restrictions throughout 21, as more people returned to work outside the home and commercial activity stabilized. For the full year, weather normalized electric sales were flat versus 2020, and weather normalized gas sales were slightly higher, up 0.3% over 2020. I should note with the SIP now in effect for electric and gas, growth in the number of customers, not sales, will drive net income for the utility. The number of electric and gas customer rose by approximately 1% each in 2021. PSE&G invested over $770 million during the fourth quarter of 2021 and fully executed on its planned full year $2.7 billion electric and gas infrastructure capital spending program in 2021 to upgrade transmission and distribution facilities, enhance reliability and increase resiliency, and launch its clean energy future programs. We're on track to meet our higher $2.9 billion capital plan for 2022. And while we're seeing pockets of delays affecting certain equipment procurement, we are managing our work accordingly and do not expect that conditions will affect the overall capital plan. As detailed on slide 31, approximately $865 million of our 2022 capital plan is allocated to transmission. $840 million to electric distribution, which includes over $200 million in Energy Strong II, $940 million to gas distribution, which includes over $400 million for GSMP II, and $275 million for award-winning energy efficiency programs. Of these amounts, the vast majority, about 90%, receives contemporaneous or near-contemporaneous regulatory treatment, either through the FERC formula rate, clause recovery mechanisms, or are recovered in base rates as replacement spend or new business. As a reminder, the conservation incentive program is now in effect for both electric and gas sales, with the implementation for the electric side of the business last June and for gas last October. This mechanism removes the variations of weather, economic activity, efficiency, and customer usage from our financial results, resetting margins to a baseline level per customer. The mechanism supports PSE&G's ability to promote maximum customer participation in energy efficiency programs without the loss of margin from lower sales and retains earnings impacts based on the number of customers. And as a reminder, PSE&G suspended its gas weather normalization charge in October 2021 when the gas sip began. We continue to expect the remaining balance of PSE&G's clean energy future filings, which includes energy storage and the remaining EV programs, will be addressed in future stakeholder proceedings. Moving on to power, for the full year 2021, PCG Power reported a net loss of $4.09 per share and non-GAAP operating earnings of 86 cents per share, respectively. For the fourth quarter of 2021, PCG Power had net income of 40 cents per share and an increase of 10 cents per share compared to the fourth quarter of 2020, Power also reported fourth quarter non-GAAP operating earnings of 21 cents per share, an increase of 11 cents per share over the year earlier quarter. In both instances, the quarterly improvement mainly reflected the cessation of depreciation expense related to the fossil sale and lower interest expense following the redemption of PCG Power's remaining long-term debt in October of 2021. Non-GAAP adjusted EBITDA totaled $179 million for the quarter, and $896 million for the full year 2021. This compares to non-GAAP adjusted EBITDA of $182 million and $990 million for the fourth quarter and full year 2020, respectively. Non-GAAP adjusted EBITDA excludes the same items as our non-GAAP operating earnings measure, as well as income tax, interest expense, depreciation, and amortization. The earnings release and slide 25 provide you with a detailed analysis of the items having an impact on PCG Power's non-GAAP operating earnings relative to net income quarter over quarter from changes in revenue and cost. And we've also provided you with added detail on generation for the fourth quarter and the full year on slide 26. First margin for both the fourth quarter and full year 2021 was $30 per megawatt hour. A decline of $2 per megawatt hour over the fourth quarter and full year of 2020 mainly reflecting prior recontracting at lower prices. As we turn to powers operations, total generation output for the fourth quarter of 13.3 terawatt hours was 9% higher than the fourth quarter of 2020. The nuclear fleet operated at an average capacity of 88.5% during the quarter, producing 7.6 terawatt hours, which represented 57% of total generation. The combined cycle fleet produced 5.7 terawatt hours of output and operated at a 49.4% capacity factor. For the full year, 2021 generation totaled 54 terawatt hours, up 2% over 2020. And the nuclear fleet operated at an average capacity factor of 91.9% for the full year and produced over 31 terawatt hours of carbon-free baseload power, representing 58% of total generation. PCG is forecasting total base load nuclear generation of 31 terawatt hours for the full year 2022, hedged 95 to 100% at an average price of $29 per megawatt hour, representing an approximate $3 per megawatt hour decline from 21. For 2023, nuclear generation is forecasted to be 31 terawatt hours and is 85 to 90% hedged at an average price of $28 per megawatt hour. And for 2024, The total nuclear generation is forecasted to be 30 terawatt hours and is hedged 45 to 50% at an average price of $31 per megawatt hour. For 2022, PGM capacity prices determined in previous auctions are expected to provide approximately $150 million of revenue for our nuclear units. This is based on EMAC pricing of $166 per megawatt day for the first five months, followed by a scheduled decline to $98 per megawatt day for the last seven months of 2022. The next PGM capacity auction for the 2023 to 2024 delivery year is expected to be held in June of 2022. Now, let me briefly address results of Enterprise and Other, where we reported a net loss that increased by two cents per share compared to the fourth quarter of 2020 as a result of higher contributions to the PCG Foundation and interest expense, partly offset by lower taxes. PCG ended 2021 with approximately $2.9 billion of available liquidity, including cash on hand of $818 million and debt representing 57% of our consolidated capital. During 2021, PCG issued $750 million of senior notes at 84 basis points due November 2023 and $750 million of 2.45% senior notes due 2031. and we also retired $300 million of senior notes at maturity. As Ralph mentioned earlier, PSCG redeemed all remaining outstanding senior notes of PSCG power in connection with the sale of power's fossil generating units. The receipt of the fossil sale proceeds supports the share repurchase program and provides cash to help repay funds borrowed from the parent for the power debt redemption. We're providing 2022 non-GAAP operating earnings guidance for PSE&G with an updated description for the remaining businesses for nuclear, offshore wind, gas operations, Long Island, and other investments, as well as power financing costs to be described as carbon-free infrastructure and other. For the full year of 2022, PSE&G's net income is forecasted at $1,510,000,000 to $1,560,000,000, and reflects the benefit of contemporaneously recovered investments and the full-year benefit of the SIPP. Non-GAAP operating earnings for carbon-free infrastructure and other is forecast at $170 million to $220 million. PCG's 2022 operating earnings will exclude results from the fossil assets, and the free cash flow previously generated from the fossil units translates into an adjustment in the purchase price. PCG also raised its common dividend by $0.12 per share to the indicative annual level of $2.16, a 5.9% increase over 2021. The 2022 indicative rate represents a 63% payout ratio of consolidated earnings at the midpoint of our 2022 guidance, and utility earnings alone are expected to cover 140% of the dividend at the midpoint of 2022 guidance. That concludes our formal remarks. To summarize, the non-GAAP results for the quarter were $0.69 per share. For the full year, were $3.65 per share. And for 2022, We've narrowed our guidance to $3.35 to $3.55 per share, with regulated operations contributing about 90%. The narrowing of our guidance reflects the setting of our 2022 pension expense, which incorporates strong investment returns through year-end 2021, offset by a more conservative portfolio composition given a strong year-end funded status. As Ralph mentioned, our strong cash flow, improved financial flexibility, And solid investment grade profile will enable us to fund PSCG's five-year, $15 to $17 billion capital program, as well as our planned ocean wind one investment, without the need to issue new equity. And with that, Ralph and I are ready to take your questions.

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 star then the number one on your telephone keypad. If your question has already been answered or you wish to withdraw your question from the polling request, you may do so by pressing the pound key. If you are on a speakerphone, please pick up your handset before entering your request. One moment please for the first question. Your first question comes from the line of Jeremy Toney from JP Morgan.

Just wanted to start with, given the significant attention on offshore projects and cost increases here, just wanted to get your latest thoughts on this part of the business and if there's any color you could provide on kind of return expectation.

Hi, Jeremy. Yeah, I think our message has been pretty consistent on this, that we look at the returns that could come from these projects and insist upon them being above our regulated opportunities. The nature of the relationship with the state is that the commercial risk is minimized by virtue of the fixed price with escalators. But there's clearly operational construction risk that would exceed what we're normally accustomed to in utilities. So we look at the earnings accretion potential and those returns. And we haven't given a specific number except to say that they have to be higher than the utility. And we're pleased. We think it's a regional opportunity for us. committed to going forward. I will say there's been a lot of discussion around this topic of late, and it just feels like some of the enthusiasm and exuberance for this that we questioned early on has been tempted down a bit. But over that period of time, we've learned a lot more about the capabilities and skills of our partner, and we've learned a lot more about the commitment of other states in the development of the supply chain, some of the regulatory hurdles that have been eased by virtue of some state actions and some federal actions. So our initial early caution has actually been diminished, and it feels like the lines are converging in terms of what the return expectations are from these projects. But suffice to say that we do have an internal set target and we'll be disciplined about making sure that we exceed that.

Got it. That's very helpful. Thank you for that. And then just wondering, as you look into D.C., if there's any thoughts you could share with regards to not maybe Build Back Better itself, but the energy policy elements there. And if you see hope for that moving forward in some fashion.

I do. I mean, I think we're all right now in a little bit of a holding pattern. Clearly, there are current events that are superseding Build Back Better and issues around energy policy. I do think, however, though, that current events are going to motivate additional conversation around energy policy and how comfortable are we as a nation with sort of the increased globalization of gas prices, right? Gas markets used to be very, very regional, very tightly priced, and clearly some of the dependency that our allies in Europe have on Russian gas is going to be a factor in LNG exports, which is going to be a factor in prices here in the U.S. So I think we have a new dynamic that over the long term has a positive read-through to our nuclear fleet and to renewable energy. The near term is going to be a little bit tougher to predict, but I think in general I'm optimistic that the provisions that were first motivated by climate change and now I think can also be motivated by energy security are both positive forces for us.

Great. Thank you for that.

Your next question comes from the line of Shards. Parisi from Guggenheim Partners.

Hi, can you hear me? Hey. Ralph, I just wanted to get your perspective on the value of nuclear to sort of PSEG and more broadly kind of in the market. I mean, obviously, you envision some sort of a policy change at the federal level in And as a follow-up, just given the recent public mark for the asset, how do these sort of factors play into the value proposition for long-term ownership of the nuclear assets? I guess sum it all up, do you see value to transitioning to a pure distribution business, single-state pure distribution business?

So, hi, Char. It's good to hear from you. I'm going to ask you to have a little bit of patience with us as we focus on that question. Yes. And the reality is we're going to let our investors determine who the logical owner of nuclear is in the future. Our priority is right now the continued outstanding operations that we've realized. Dan talked about a 92% capacity factor. I guess it was 91.9. Why can't we round those numbers up? And we just talked to Jeremy about the importance of nuclear from a climate change and energy security point of view. I think if I'm confident we can resolve those issues, if not at the federal level, certainly at the New Jersey state level, within the calendar year. And once that's done, if PSE&G doesn't get the kind of recognition that it deserves, that I believe it deserves from the market, co-located with nuclear, then I think the market will really be signaling us that maybe we're not the natural owners of it. But there's a couple of things that I want to get done before we jump to any conclusions, because it is a well-run operation that contributes to earnings and is a fairly steady earnings producer. I mean, we're not hedging the spark spread here. We're not following full requirements of load contracts. We're a base load generator that can be hedged pretty comfortably over a three-year period and be part of a fairly stable earnings stream. But as is often the case with us, we pay very careful attention to what the market and our investors are telling us. And I will give you a more definitive answer to that in the not-too-distant future, but right now we've got just a couple of tasks ahead of us that I want to resolve.

Now, that's helpful, and that's pretty consistent to what you've been saying, so thank you for that. And then maybe just a CapEx question here. The current plan remains at around $17 billion top end. what level of spending, if any, just remind us, is embedded for offshore wind, the transmission proposals, and any supporting infrastructure? And do you have an update around ocean wind, too? Sorry if you highlighted that, but I had to jump on late. Thank you.

Maybe we're following accounting a little bit, but if you think about what's in that $15 to $17 billion, you do not have the ocean wind one investment in there. That's going to be accounted for as an equity interest in a joint venture, so it is separate and apart from that $15 to $17 chart. I would say the same with the ocean wind link. There's some modest dollars you could think about from the standpoint of the onshore infrastructure that would be that would be necessary that is going to support offshore wind more generally. But the ocean wind link, think about offshore wind as being outside of that 15 to 17.

Got it. Got it. And any just ocean wind, too? Is there any sort of updates there at all?

Nothing brand new there, Shaw. I think it's safe to say, though, that we have a series of conversations underway that – are related to Ocean Wind 2, Skipjack, potential further upside in Ocean Wind 1, and they all fall into this notion of what are the return expectations that can be derived from each of those.

Terrific. Thank you guys so much. Appreciate it.

Thank you, Sean.

Your next question comes from the line of Paul Peterson from Glenrock Associates.

Good morning. How are you doing?

Good, Paul. How are you?

All right. So just to sort of follow up on offshore wind and you guys, you know, with a history of being conservative and looking at risk-adjusted rate of returns and mentioning that there is quite a bit of excitement out there among parties looking to get into the business. Is there any potential of, you know, obviously it depends on on what you see out there, but I'm wondering if you've been approached or is there any potential for potentially monetizing it if, in fact, you know, you guys see more opportunity? You know, the risk-adjusted rate of return compared to other things and what people are offering, you know, looks like you can maybe monetize it.

Yeah, I mean, there's always that opportunity, right? Paul, you never say never. I just said never. I mean, we monetized the solar assets that we had, 400-plus megawatts. So that could be something. I think it's premature to monetize something that still has a pretty robust growth trajectory and is right in our regional wheelhouse and has some enormous potential from a transmission point of view. But, yeah, I mean, we would always be open to that. I mean, our core business – is the regulated utility. It's beyond core. It's the dominant part of our business, right, 90%. But folks always know we're open to inquiries that can enhance shareholder value.

Okay. And then with respect to the – you mentioned the PGM and BPU selection for transmission associated with offshore wind in the Q3 and Q4. I'm just curious, is that just going to be an announcement of – do you think there will be any short list that will be provided sort of in the interim, or do you think it's just going to be sort of a selection of the winners, so to speak, or the winners when it's finalized?

The short answer to that is I don't know. I mean, the BPU has always prided itself on transparency and visibility and public outreach, so that wouldn't lead me to say yes. But I think so little will be known just coming out of PJM in terms of the other criteria that the BPU may want to apply that that would lead me to say no, that it would be too premature. But the most accurate answer is we just don't know. We have some vague dates that have been given to us. We do know that the BPU wants to get this done before the next solicitation, which goes out I think in the third quarter, and so if you want people to to bid an offshore wind farm based upon knowledge of what they might have by way of transmission assets, then that would argue for a Q3 result from the BPU. But there's a lot of flexibility built into the SAA approach that allows the BPU to take advantage of the transmission proposals or not, depending upon what the ultimate wind farm winner is that gets proposed.

Okay, great. And then just finally on electric efficiency and and that you guys are big on making a big effort in that. I'm just sort of, and I realize the way the investment works and what have you, but I'm just sort of wondering, given COVID and everything, it looks like essentially growth was sort of flat this year. Over the next several years or next three to four years, what do you expect sales growth to sort of be in your region given COVID and of course the energy efficiency efforts that you guys are making a big effort on?

Yeah, so I mean, I think we have a less than 1% projected growth rate for electric sales. And we're going to do our best to turn that into a negative number. Because again, our business is not predicated on electric sales. It's predicated on electric value. And with an aging infrastructure that cannot meet the challenges of today's weather patterns or today's customer expectations, we have a huge task ahead of us of replacing that aging infrastructure And the customer side of the meter is a huge opportunity set forth from the point of view of customer bills and climate change impact. And, again, this isn't foo-foo dust. I mean, the way in which we continue to make money off these infrastructure investments is by basically sharing the fuel cost savings with our customers. But we're not in the fuel business, so that's a real win-win for us and our customers.

Yeah, Paul, just what Ralph is referencing is as we went into this upsize of the energy efficiency program in conjunction with the state, I mean, it's about a tenfold increase in our investment amount. And so it was increasingly important at that point to ensure that lost revenues from those sales did not create a disincentive with respect to the program. So that's when this conservation incentive program went in place that essentially separated the sales volumes, and the revenue that we see from the volume of the product that we sell. And so that all made sense to get all of the incentives aligned, but it also dampened the implications to us from the standpoint of what sales are. It's more about numbers of customers than it is about actual sales volumes.

Absolutely, and it helps our customers too. So thanks so much. Appreciate it.

Your next question comes from the line of Jonathan Arnold from Vertical Research.

Hello.

Hi, Jonathan.

Yeah, just checking you can hear me. So one quick question. You gave a stat on the bill impact from BGS. I think I heard 2.8%, something like that. Was that the supply rate or is that the average bill and just maybe a a quick headline on how that's working.

That's the bill, in fact, Jonathan, the whole bill, not just the supply department.

Okay, and that's based on the auction that just happened, effectively.

Yeah, that was driven by, you may recall, because of the delays in PGM capacity auctions, there was an assumed capacity price that was in prior BGS auctions that ended up being much higher than what the actual capacity price turned out to be.

Great, okay, that's great, thank you. And then I did, can you maybe, sorry if I missed this, but could you maybe just talk, Ralph, about where you are on your efforts with the state to turn out your nuclear?

Yep, yep, yep, yep, yep, yep, yep, yep. So, and by the way, that 2.8% bill impact, just by way of reminder, that's a residential number. It obviously varies by rate class. You know, I think we've now had three spirited conversations about the importance of nuclear in New Jersey in the last four years. We had the creation of the legislation for the ZECs, and we had two rounds of ZECs. And my sense from policy leaders, both elected officials, regulators, key staff members, is we need these plants to run at least until 2050, which is actually beyond their current license. And asking ourselves that question every three years is tantamount to just sort of being masochists, and nobody really has that in them. So there's very much a strong desire to expand the duration of the support. There's an equally strong desire to see what happens at the federal level, however, before one acts on that. Just a simple thing to think about, Jonathan, I won't take long with this, is right now the New Jersey legislation says if there's federal money for the carbon attributes of nuclear, then the state ZEC support goes down. Well, if you were to take the proposed production tax credit as it was originally envisioned and build back better, what that would mean is that as power prices went up, the state ZEC dollars would go down, would go up, I'm sorry, because the federal money goes down as power prices go up. So power prices rise, state increases its ZEC contribution. Power prices go down, state decreases its ZEC contribution. That's exactly the opposite of good public policy, right? So hopefully I didn't confuse you with that, but I'm sure that we can clarify that further if need be. The point is that the state policy should be working in partnership with whatever the federal policy is, and that's not been established as yet.

So just in terms of, you know, how, because if it takes us a while now, if federal issues are sort of pushed off to the right, like is there some chance we could have action in the state, you know, this year, or just any thoughts about timing?

Yeah, no, we've already started those conversations, and we would, Of course, we would follow the lead of our legislators and our governor, but we would encourage action sometime this year to certainly begin in anticipation of what a federal outcome might look like, but hopefully we would be able to initiate that action based upon federal resolution. It's just tough to estimate what a federal calendar might look like in light of the very complex set of issues facing us in Washington right now.

And just to tie things together, if I hear you right, you're not inclined to sort of make a strategic decision about nuclear until these things have sort of had time to work out. But you did say you would be planning to give us an update relatively soon. So just trying to square those two statements.

That's exactly right. Look, you know, the reality is people have already expressed an interest in our nuclear plants. And they're outstanding assets. The issue is how do you firm up the longer-term economic treatment beyond a three-year time frame? And I think we're the ones who are best positioned to do that, whether we're the natural owner or somebody else is. And that's what we're hard at work to resolve right now.

Yeah, and, Josh, another thing maybe to think a little bit about is that there's been – Number one, I think that the support for nuclear, as we've gone through these various stages that Ralph talked about, has grown over time. And what support was there is cemented, and I think others have come on to be more supportive. And it founded its way through the ZEC Law, ZEC I, ZEC II. Well, the ZEC III process that I think is a little bit torturous to work our way through, and everybody involved has commented on that, frankly starts fairly early on within 23. And so I think that not wanting to go through another one of those shorter term determinations and trying to go to a longer term solution could inspire some action before that starts. And that starts at the end of the first quarter of 23, if I'm not mistaken. There is an outside data out there with respect to trying to get something done before to avoid the next cycle of the three years X and moving on to a longer term solution.

Great. Thank you. Maybe just one housekeeping item. You said you've done half of the 500 million. How much of that was done before year end? And then I guess we'll get this in the K, but any chance of a year end share count just to help us with modeling? Sure.

Not having that precise number in front of you, I'll make you wait for that, but you can think of it more as being a 22 than a 21 event. Okay.

Thank you, guys.

You got it, John.

Your next question comes from the line of Paul Zimbardo from Bank of America.

It's actually Julian on for Paul. Good morning, everyone. Thanks for the time. I just wanted to come back to the nuclear – good morning. Good morning. Just quickly wanted to come back to the nuclear conversation, and apologies to do it. With respect to credit metrics, you know, obviously, would you anticipate your credit metrics to be further relaxed to the extent to which you were to divest? I just want to understand some of the incremental latitude to the extent to which you see that. And then separately, how do you think about, like, a litmus test on earnings accretion or, you know, given the degree of thing that would be involved, could it be value accretive to divest without earnings? I'm just sort of thinking conceptually without asking that timeline, how do you think?

Julian, I think on the – we haven't given a precise number with respect to where things would go. I think if you think about where the credit metrics moved from the standpoint of with and without fossil, I think that there's probably increment in that same direction with respect to nuclear. And so I think there has not been a firm number that we've put out, but I think you would become uh even more regulated and that would be positive from a credit perspective uh and i don't think there's a there's an accretion dilution answer to give you necessarily i mean we would take a look at the overall value um the accretion dilution on the ground but also the valuation of the company that ralph was talking about before so we look at both of those aspects with respect to what we would do in that in that situation right but the point is it doesn't necessarily need to be earnings accreted

in order to move forward, given, as you all think about the risk wave or whatever.

Value that matters, right? All the earnings, multiple expansion. Yep, yep.

Got it. Excellent. And then just a quick follow-up here on the IEP. How have conversations with stakeholders progressed on the remaining infrastructure program here? I mean, do you see the opportunity to achieve a constructive stipulation before the autumn timeline that you talked about a moment ago?

You know, we'll – We've had a pretty good track record of resolving these issues through settlement process, and that would be my prediction here again, Julian, but you can never guarantee that. But we're proposing to do things that are completely consistent with the State Energy Master Plan. There's a huge social justice component associated with it in terms of job creation for underemployed members of our community. So I really think it's a perfect fit for things that the state has said it wants to do. So I would be very surprised if we couldn't settle something eventually, but I can't guarantee it.

Got it. So look for something in the summer or something like that.

I think so. Early autumn.

Got it. Excellent. We'll leave it there. Thank you.

Thanks.

Thanks, Joey.

Your next question comes from the line of David Adler. Akaro from Morgan Stanley.

Hi, good morning. Thanks for taking my questions. Let's see, it's been a thorough call, but maybe just one question I had was thoughts on customer growth going forward after posting 1% growth in both electric and gas this past year. Wondering if that's in the ballpark that you would expect going forward.

Yeah, I think that's a reasonable number to use on a go-forward basis. If we look back over time and forward, you're kind of in that ballpark. That's a reasonable assumption, Dave.

Okay, great. And then maybe just any thoughts on the timing of the remaining $250 million in buybacks?

We haven't put a firm date out there, but I think our language that we said was in the near future, and so I would think about it fairly near term.

Okay, great. Thanks. That's all I had. Thanks, Dave.

Julia, we'll take one more question.

Your next question comes from the line of Sophie Karp from KeyBank.

Hi. Good morning. Thank you for the name here at the end of the call. Just one question, if I may. Could you comment on kind of like the recent spike in energy prices, what impact you've seen on your customer bills? And, you know, I appreciate the comments that you're not in the energy business, right, but your customers are nonetheless. presumably seeing some spikes in the overall bills and how bad is it right now? And do you expect that these increases will somehow inform some future proceedings with the BPU or elsewhere?

Yeah, Sophie, I think that the mechanisms that New Jersey uses leaves us in pretty good stead with respect to what you're seeing here. And it works both ways. So we've seen commodity prices come down over time and the mechanisms had a slower kick in of some of those reductions, which they have seen. And when you see spikes in time, the impacts similarly are going to be slower to find their way to the bill. And frankly, the duration of those spikes might be such that they don't find their way on the bill. What I mean by that one is, if you think about the BGS auction that we referenced earlier that just happened, that was a re-up of one-third of the obligation to customers for three years with the other two-thirds being based upon the last two-year auctions and so those auctions happen once a year in February starting in June so the depending upon what you see from a pricing impact and how long it lasts you'll either see one-third of the supply side move through over time and increase or to the extent that you have shorter term perturbations that don't get bit into that February auction you won't see it at all so we talked about an overall reduction in from the most recent auction. And again, that was driven by the update to the capacity prices going from using a prior price to using what the actual prices actually were. And that was a big driver in bringing that bill down. On the gas side, we can implement 5% increases to the bill, and we have done that as we have stepped through time. But in the overall scheme of things, those are limited in how they get moved through. You don't see spikes on customer bills. You tend to see things get moderated by virtue of the mechanisms that have been put in place, which I think are very helpful from that perspective. And if you do see longer-term changes in prices, that's when you're going to start to see things move its way through the bill.

Terrific. Thank you. Very helpful call. Appreciate it.

Thanks, Sophie.

That is all the time that we have for questions. Please continue with your presentation or closing remarks.

Okay. Well, thanks, everyone, for joining us. Hopefully, you've gotten the information you need, but I know from Carlotta and Dan that we'll be on the road at a couple of major conferences coming up in the next few days, and we'd be more than happy to meet with folks and provide greater clarity. But at the end of the day, I just can't help but overemphasize that we are well on track to deliver on what we promised we would deliver last September. The dividend increase is in place. The share repurchase program is well underway. The growth rate is intact. And we are 90% regulated utility. Another 10% is basically a contract on Long Island, strong nuclear operations, and an ongoing gas supply contribution. So we're excited about the opportunities and prospects going forward in terms of the utility capital program being the underlying driver of our growth, but the additional augmented opportunities that may come from regional offshore wind, all under a very, very strong balance sheet that is, as far as the eye can see, not in need of additional equity. So we can provide more color when we see you in person, and we look forward to that opportunity. Thank you all, and have a safe and good day.

Ladies and gentlemen, that concludes your conference call for today. You may now disconnect, and thank you for participating.