Public Service Enterprise Group Incorporated

Ladies and gentlemen, thank you for standing by. My name is Rob, and I am your event operator today. I would like to welcome everyone to today's conference, Public Service Enterprise Group's Second Quarter 2023 Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. Later, we'll 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. If 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, August 1st, 2023, and will be available for replay as an audio webcast on PSEG's Investor Relations website at investor.pseg.com. I would now like to turn the conference over to Carlotta Chan. Please go ahead.

Good morning, and welcome to PSEG's second quarter 2023 earnings presentation. On today's call are Ralph LaRosa, Chair, President, and CEO, as well as Dan Craig, Executive Vice President and CFO. The press release, attachments, and slides for today's discussion are posted on our IR website at investor.pseg.com, and our 10-Q will be filed shortly. PSEG's 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, which differs from net income or net loss as reported in accordance with generally accepted accounting principles, or GAAP, 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 materials. Following Ralph and Dan's prepared remarks, we will conduct a 30-minute question and answer session. I will now turn the call over to Ralph LaRosa.

Thank you, Carlotta. Good morning, everyone, and thanks for joining us to review PSEG's second quarter results. This morning, PSEG reported second quarter 2023 net income of $1.18 per share, compared to net income of 26 cents per share for the second quarter of 2022. Non-GAAP operating earnings for the second quarter were 70 cents per share compared to 64 cents per share for the second quarter of 2022. And non-GAAP results for the second quarter of 2023 and 2022 exclude items shown in attachments eight and nine provided with the earnings release. Results for the second quarter and year to date align with our full year 2023 non-GAAP operating earnings guidance of $3.40 to $3.50 per share, which we reaffirmed along with our outlook for 5% to 7% long-term earnings growth through 2027 in this morning's earnings announcement. Dan will also discuss our financial results in greater detail, but this was a relatively straightforward quarter for both PSE&G and PSEG Power & Other results fully meeting our planning expectations and supporting full-year segment guidance. We are focused on proving out the execution of our plans at Rural PSEG while also increasing the predictability of our business. During the quarter, we completed PSEG's exit from offshore wind generation through the sale of our 25% equity stake in Ocean Wind 1 back to Ersted, recovering our investment in the project. We also continue to implement the solutions we outlined to address pension variability. PSDG recently executed an agreement for a pension lift-out to further reduce prospective earnings variability. This transaction covers approximately 2,000 retirees and will transfer approximately $1 billion of related obligations and associated plan assets to the insurer. The transaction, expected to be completed this month, will result in no changes to the amount of benefits payable to the retirees and have no material impact on PSEG's non-GAAP operating earnings in 2023. Turning now to PSEG's capital spending plans, the utility portion of $15.5 billion to $18 billion remains focused on system modernization of our aging distribution infrastructure, last-mile support, and preparation for EV and building electrification, climate mitigation aligned with New Jersey's energy policies, and our clean energy investments. TSE&G's investment program drives our expected compound annual growth rate in rate base of 6 to 7.5% from year end 2022 to year end 2027. The low end of this rate base CAGR assumes an extension of our gas system modernization program and our clean energy investments at their current average annual levels, while the upper end includes an extension of our Energy Strong II program, which is scheduled to conclude in 2024 as well as the remaining portion of our proposal for medium and heavy duty EVs and energy storage programs, as well as a potentially higher amount of investment for GSMP and energy efficiency above current levels. With this robust capital program, we are ever mindful of customers' affordability. And on this front, PSE&G continues to compare well to peers on a share wallet basis, both in the region as well as nationally. I mentioned last quarter that our 2023 utility capital spending budget of $3.5 billion was the largest single-year plan in our history. During the second quarter, we invested approximately $900 million, bringing us to $1.7 billion year-to-date and mid-year. We are on schedule and on budget. In fact, PSE&G just installed its $1 million smart meter out of $2.3 million that we have planned. and we continue to notice higher spend on electric new business related to electric vehicles and strong demand for our energy efficiency solutions. Speaking of energy efficiency, the New Jersey Board of Public Utilities recently approved its second energy efficiency framework for the next three-year cycle that will begin in July of 2024 and run through June of 2027. This past May, the BPU approved a $280 million nine-month extension of PSEG's first energy efficiency program to sync us up with the completion of the state's first cycle in June of 2024. You may recall that PSEG started its energy efficiency programs earlier than the other New Jersey utilities did. The BPU's new framework sets out guidelines for the next round of energy efficiency problems, which are now due this October for implementation in July of 2024. The energy efficiency annual reduction goals of 0.75% for gas and 2% for electric for program years 26 and 27 remain unchanged. The BPU also approved the performance incentive mechanism to drive energy efficiency above the preset goals. On the gas side of the utility, PSE&G filed the third phase of its gas system modernization program during the first quarter of 2023. which remains pending with the BPU. Through our gas system monetization program, we reduced methane leaks by approximately 22% system-wide. And assuming the extension at similar to current levels, we expect to achieve an overall reduction in methane emissions of at least 60% over the 2011 to 2030 period. There is also good news for customer bills for this coming winter. Following two basic gas supply service commodity charge reductions this past heating season, our recently filed BGSS rate proposes a reduction from 47 cents to 40 cents per therm. If approved by the VPU, the new rate will keep PSE&G's monthly bill for typical residential gas customers among the lowest in the region for the upcoming 2024 heating season. The VPU's Future of Natural Gas Stakeholder Proceeding will also start this month, and we expect to participate in the upcoming technical conference and on follow-up meetings as New Jersey achieves its emission reduction targets, which will also be considering the impact on costs and jobs. Tim Hahnemann, president of PSE&G, is already actively involved in the state's Clean Buildings Working Group that is considering various approaches to building electrification, including the development of a clean heat standard. Our overall approach to energy transition is to continue advocating for practical expansion of electrification in a manner which protects customer affordability, safety, and reliability. We are having impactful conversations with PJM, our regional grid operator, and our New Jersey stakeholders to increase the coordination and understanding of our relative perspectives on future load growth and the investment needed in existing T&D infrastructure to meet even a diluted version of New Jersey's energy transition. Now turning to nuclear operations, the PSEG nuclear fleet continues to safely generate the majority of New Jersey's carbon-free base load electricity. During the first half of 2023, our nuclear units generated over 16 terawatt hours of electricity and operated a capacity factor of 95.8%. Jasmine Feeders, who many of you met at our March Investor Conference, was promoted to Chief Nuclear Officer during the quarter in a seamless and well-planned transition that included the Salem 2 refueling outage completed on schedule and on budget. The power and elder portion of PSEG's five-year capital program is a significantly smaller amount of PSEG's total, mainly reflecting basic nuclear capital spending, but does include several low-cost high-impact projects, like the Hope Creek transition from 18-month to 24-month refueling cycles. So, just to wrap up what I believe is a quarter that delivers on what we have committed to you, we are reiterating our full-year non-GAAP operating earnings guidance of $3.40 to $3.50 per share. We continue to make progress on building our earnings growth platform by keeping our largest ever capital program on track, financed with a strong balance sheet without the need for new equity or asset sales through 2027. And this financial strength gives us confidence in our long-term 5% to 7% growth rate in non-GAAP operating earnings through 2027 and supports our ability to pay a competitive and growing dividend as we have for 116 years. Third, We increased the predictability of our financial results by streamlining the business with the completed offshore wind sale and delivering progress on reducing pension variability with the lift out. Finally, we are working to keep our customer bills affordable during the energy transition with help from stringent cost controls and a culture of continuous improvement. Moving out the execution of our strategy and maintaining a safe and reliable LEPRA operations, that is what you can expect from this team. I'll now turn the call over to Dan for more details on the operating results, and I will be available for your questions after his remarks.