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Operator
Ladies and gentlemen, thank you for standing by. My name is Rob, and I am your operator today. I would like to welcome everyone to today's conference, Public Service Enterprise Group's third 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'll 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, October 31st, 2023, and will be available for replay as an audio webcast on PSEG's Investor Relations website at https colon forward slash forward slash investor dot PSEG.com. I would now like to turn the conference over to Carlotta Chan. Please go ahead.
Rob
Good morning, and welcome to PSEG's third quarter 2023 earnings presentation. On today's call are Ralph LaRosa, Chair, President, and CEO, and 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 10Q 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, 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 material. 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 La Rosa.
Ralph LaRosa
Thank you, Carlotta. Good morning to everyone, and thanks for joining us to review PSEG's third quarter results. Earlier today, PSCG reported third quarter 2023 net income of $0.27 per share compared to net income of $0.22 per share for the third quarter of 2022. Non-GAAP operating earnings for the third quarter were $0.85 per share compared to $0.86 per share in the third quarter of 2022. Our non-GAAP results exclude items shown in attachments 8 and 9, which we provided with the earnings release. We are very pleased with the results of both PSE&G and PSEG Power & Other, which are continuing to fully meet our planning expectations. Through the first nine months, PSEG is on track to achieve our full year 2023 non-GAAP operating earnings guidance of $3.40 to $3.50 per share. This morning, we also reaffirmed both PSEG's full year 2023 earnings guidance and our long-term 5% to 7% earnings growth outlook with the announcement of our third quarter results, which Dan will discuss in greater detail following my remarks. We had a very constructive quarter on several fronts. Our utility, PSE&G, invested approximately $1 billion in energy infrastructure during the third quarter, bringing the year-to-date spend to $2.7 billion. For the full year of 2023, capital spend is now expected to total $3.7 billion, slightly higher than our original plan of $3.5 billion. ahead of scheduled execution on our clean energy future energy efficiency and our infrastructure advancement programs. On the advanced metering front, TSE&G has completed the installation and placed into service just over half or $1.3 million of the $2.3 million planned smart meter replacements. Overall, we remain on schedule and within our cost parameters. We have seen strong demand for PSE&G's energy efficiency solutions, which is helping our customers save energy and lower their bills. To give you some perspective on how strong the demand for energy efficiency is, consider that PSE&G now sells more energy efficiency solutions in a single month than we did in an entire year just a few years ago. In addition, we continue to support the energy transition and decarbonization of the New Jersey economy by upgrading the last mile of our distribution system, as well as adding new electric infrastructure due in part to an increase in electric vehicle penetration. These critical New Jersey energy investments also support our rate-based growth trajectory of six to seven and a half percent through 2027. The low end of PSEG's rate-based CAGR assumes an extension of our investment programs at their current annual levels. Within the upper end of their rate-based range is a potentially higher amount of infrastructure investment and upcoming filings for energy efficiency above their current run rates. Last week, the BPU reset the start date for the second three-year energy efficiency period to begin January 1, 2025, and run through June 30, 2027, for a total term of two and a half years. while adding a six-month extension to the current three-year period. The BPU requested updated utility filings to be aligned with this new period. The BPU's updated framework outlines a robust continuation of EE in the state and includes utility-specific net annual energy reduction targets for the upcoming filings. It also directs utilities to propose quantitative performance indicators aligned with the updated net annual energy reduction targets. in the compressed two and a half year timeframe. The prior EE annual reduction goals of 0.75% for gas and 2% for electric during the program years of 2026 and 2027 remain unchanged. Earlier this month, the BPU approved the settlement to extend our current GSMP2 program through December 2025 and provided for $900 million of investment to replace a minimum of 400 miles of cast iron and unprotected steel main at a modestly higher run rate than our previous programs. For the $900 million investment provided in the settlement, $750 million will be recovered through three periodic rate update clauses with the balance addressed in the future rate case. Through GSMP2, we reduced methane lease by approximately 22% system-wide from 2018 levels. This extension enables us to remain on track to achieve our long-term reduction target in methane emissions of at least 60% over the 2011 through 2030 period. GSEG's broader GSM-P3 filing is being held in abeyance. We expect that this filing, which also includes pilot projects to introduce renewable natural gas and hydrogen blending into our existing distribution system, will restart after the future of natural gas utility stakeholder proceedings conclude. The GSMP 2 extension approval provides for restarting the GSMP 3 filing by January 2025 with the intent of beginning the next phase of this work in January of 2026. While we make these investments, we remain focused on customer affordability and continue to diligently manage our O&M expense. We recently completed new four-year labor agreements with all of our New Jersey unions. I want to underscore the importance of this in relation to our costs, as labor is one of our largest expenditures. Having four years of labor cost certainty helps us keep customer bills affordable and provides our represented employees with wage predictability. PSE&G continues to compare very well to peers on a shared wallet basis, both in the region as well as nationally. Monthly bills for typical residential natural gas customers remain among the lowest in the region. Beyond that, for the upcoming 2024 heating season, the BPU approved PSE&G's request to lower the gas commodity charge to approximately 40 cents per term effective October 1st. This gas commodity charge, which is simply a pass-through for the utility, has declined by a total of 38% since January 1st, 2023. Turning to our nuclear operations, the PSEG nuclear fleet operated at 95.8% capacity factor during the year-to-date period ended September 30th, producing 24.3 terawatt hours of carbon-free baseload energy. Our 57% on Salem Unit 1 just completed another breaker-to-breaker run and entered its scheduled fall refueling outage after operating for 508 continuous days between refueling. Our efforts to transition our boiling water reactor at Hope Creek from an 18 month to 24 month refueling cycle through lower capital cost projects is ongoing. Related to our competitive transmission proposal submitted to PJM as part of its 2022 Window 3 solicitation, their Transmission Expansion Advisory Committee staff recently recommended that a PSEG project be included as part of a comprehensive solution. PSEG's project outlines a $447 million investment with an expected in-service date of 2027. The PJM Board will announce their final decision in December. This is another example of regulated opportunities that we are pursuing, and we intend to leverage our considerable transmission skills in similar opportunities that arise. Switching topics for a moment to sustainability, you will recall that we committed to the United Nations Back Race to Zero campaign in September of 2021 with the intention of submitting proposed targets, encompassing Scopes 1, 2, and 3 emissions to the Science-Based Targets Initiative. We made our submission in September and it is now under review as part of SBTI's validation process. I'd like to conclude by recapping some of the progress we've made towards our goal of streamlining and improving the predictability of our business. We now have a lower business risk profile following the sale of the fossil business and our exit from offshore wind generation. February and August, we successfully reduced a significant amount of pension variability on future results with the regulatory accounting order and the lift out, and we'll consider pursuing additional mitigation on our upcoming rate case. And we have helped them secure the financial viability of critical important New Jersey energy assets with the decision to retain our carbon-free base-flow nuclear fleet, enhanced by the revenue stability of a production tax credit that begins in January of 2024. These actions help to extend our track record of executing our PSEG's improved business strategy. Having a decade-long visibility of cash flows from the nuclear PTC will help us to maintain a solid financial profile that does not require us to issue any new equity or sell any assets to fund our five-year capital investment program. It supports our ability to pay a competitive and growing dividend. In closing, I want to share our plans for providing 2024 earnings guidance and other important financial updates. As you know, we will file our electric and gas distribution base rate case this December, and we'll update you with the parameters once that is public. We expect to complete our normal business planning in mid-December, so you can expect us to provide 2024 non-GAAP operating earnings guidance shortly after that business plan is completed. In early December, we intend to update our existing 2023 to 2027 CAPEX and rate-based projections to reflect the recent GSMP2 extension through 2025 and two upcoming energy efficiency filings, one to extend the current EE program out through the end of 2024, followed by a new filing covering the next round of EE programs through 2027. These updates will inform our longer-term assumptions for capital and rate-based projections, and we expect to post a full roll-forward of the capital plan, rate-based, and long-term earnings CAGR in the January 2024 investor update. I will now turn the call over to Dan for more details on the operating results, and we'll be available for your questions after his remarks.
Dan
Thank you, Ralph, and good morning, everybody. As Ralph mentioned earlier, PCG reported net income of $139 million or $0.27 per share for the third quarter of 2023 compared to net income of $114 million or $0.22 per share for the third quarter of 2022. Non-GAAP operating earnings for the third quarter of 2023 were $425 million or $0.85 per share compared to $429 million or $0.86 per share for the third quarter of 2022. We've provided you with information on slides 9 and 11 regarding the contribution to non-GAAP operating earnings per share by business for the third quarter and year-to-date of 2023. Slides 10 and 12 contain waterfall charts that take you through the net changes for the quarter-over-quarter and year-to-date periods in non-GAAP operating earnings per share by major business. Starting with PSE&G, which reported third quarter 2023 net income of $401 million or $0.80 per share compared with $399 million or $0.80 per share in the third quarter of 2022. CSC&G had non-GAAP operating earnings of $403 million or $0.80 per share for the third quarter of 2023 compared to $399 million or $0.80 per share in the third quarter of 2022. The main drivers for both GAAP and non-GAAP results for the quarter were growth in transmission and distribution margins resulting from continued investment in infrastructure replacement and clean energy programs, as well as lower OAM expenses. These favorable items were offset by our anticipated lower pension income and OPEB credits, along with higher depreciation and interest expense resulting from incremental investments since the year earlier quarter. Compared to the third quarter of 2022, transmission was $0.03 per share higher. Electric margin was $0.02 per share higher, reflecting investment returns from Energy Strong II. Gas margin was a penny per share higher, primarily driven by the clause recovery of our GSMP investment. Lower distribution O&M expense added a penny per share compared with the third quarter of 2022, and depreciation and interest expense increased by a penny and two cents per share respectively compared to third quarter 2022, reflecting continued growth in investment. Lower pension income resulting from 2022's investment returns combined with lower OPEB credits scheduled to end in 2023 resulted in a five cent per share unfavorable comparison to the year earlier quarter. Lastly, The timing of taxes recorded through an effective tax rate, which nets to zero over a full year, and other flow-through taxes had a net favorable impact of a penny per share in the quarter compared to the third quarter of 2022. Weather during the third quarter, as measured by the Temperature Humidity Index, was 11% warmer than normal but 5% cooler than the third quarter of 2022. As we've mentioned, the SIP mechanism, in effect since 2021, limits the impact of weather and other sales variances, positive or negative, on electric and gas margins, while enabling PSE&G to promote the widespread adoption of its energy efficiency programs. Growth in the number of electric and gas customers, the driver of margin under the SIPP mechanism, continues to be positive and will reach up by approximately 1% year-to-date. On capital spending, PSE&G invested approximately $1 billion during the third quarter and is on track to execute in a single year. The program includes upgrades and replacements to our T&D facilities, Energy Strong II investments, last mile spend in the infrastructure advancement program, our ongoing GSMP II program, continued rollout of the clean energy investments in energy efficiency and the energy cloud, including smart meters, and adding new electric infrastructure to accommodate an increase in EV penetration. During 2023, we've taken actions to limit the impact of our pension on earnings and increase the predictability of our financial results. In February of 2023, the BPU approved an accounting order authorizing PSE&G to modify its method for calculating the amortization of the net actuarial gain or loss component for rate-making purposes. This change is effective for the calendar year 2023 and forward. For the full year 2023, PSE&G's forecast of non-GAAP operating earnings is unchanged. at $1,500,000 to $1,525,000. Moving to PCG Power and Other for the third quarter of 2023, PCG Power and Other reported a net loss of $262,053 per share, largely reflecting the pension settlement charge associated with the lift out transaction. This compares to net loss of $285,058 per share for the third quarter of 2022. The one-time non-cash settlement charge of $332 million, $239 million net of tax, was related to the approximately $1 billion of PSG Power and other pension obligations and associated plan assets transferred to the Prudential Insurance Company. After providing for the effect of the lift-out, our pension plans remain well-funded and there is no material impact on our non-GAAP operating earnings in 2023. Non-GAAP operating earnings were $22 million or $0.05 per share for the third quarter of 2023, compared to non-GAAP operating earnings of $30 million or $0.06 per share in the third quarter of 2022. We previously mentioned that during the first quarter of 2023, PCG Power realized the majority of the approximate $4 per megawatt hour increase in the average price of our 2023 hedged output, which rose to approximately $31 per megawatt hour, with higher winter pricing driving most of that increase. For the third quarter of 2023, gross margin rose by a total of $0.03 per share, primarily reflecting the roll-off of certain full requirement BGS load contracts that had a higher cost to serve, resulting in a $0.04 per share benefit compared to the prior year. The gross margin improvement also included higher generation, which added a penny per share, resulting from the absence of a Hope Creek refueling adage that started at the end of last year's third quarter. These positive variances were partially offset by lower capacity revenues of $0.02 per share compared with the year-ago quarter, consistent with prior year capacity auctions. OAM cost comparisons in the third quarter improved by $0.03 per share driven by the absence of Hope Creek refueling adage expenses that were partly incurred in 2022's third quarter. Lower depreciation expense was a penny per share favorable compared with the year-ago quarter, while higher interest expense was one penny unfavorable. Lower pension income from 2022 investment returns and OPEB credits from the lower amortization benefit were 3 cents per share unfavorable versus third quarter 2022. And taxes and other were 4 cents per share unfavorable compared to the third quarter of 2022, reflecting a partial reversal of the effective tax benefit from the first quarter of 2023. On the operating side, the nuclear fleet produced approximately 8.1 terawatt hours during the third quarter and 24.3 terawatt hours for the year-to-date period in 2023, running at a capacity factor of 95.3% and 95.8% for the quarter and year-to-date periods, respectively. For the full year 2023, PSEG is forecasting generation output of 30 to 32 terawatt-hours and has hedged approximately 95 to 100% of this production at an average price of $31 per megawatt-hour. For 2024, the nuclear fleet is forecasted to produce 30 to 32 terawatt-hours of baseload output and it's hedged 85% to 90% of this generation at an average price of $38 per megawatt hour. The forecast of non-GAAP operating earnings for PSEG Power & Other is unchanged at $200 million to $225 million for the full year. This forecast reflects the realization of a majority of the expected increase in the average 2023 annual hedge price in the first quarter of 2023 as we previously discussed. For the balance of the year, higher interest expense largely captured in our November 22 update, is expected to reduce PCG Power and other results. Touching on some recent financing activity, as of September 30th, PCG had total available liquidity of $3.8 billion, including $57 million of cash on hand. PCG Power had net cash collateral postings of approximately $350 million at September 30th, which is substantially below the elevated level seen last year. In August, PSE&G issued $500 million of 5.2% secured medium-term notes due August 2033 and issued $400 million of 5.45% secured medium-term notes due August 2053. In September, PSE&G retired $325 million of 3.25% secured medium-term notes at maturity. Subsequent to the end of the third quarter, PSE&G issued $600 million of 5.88% senior notes due October 2028, and $400 million of 6.13% senior notes due October 2033. Prior to pricing these notes, $800 million of Treasury locks were executed, which had a positive fair value of $14 million. And this benefit will be amortized over the life of the senior notes, partially offsetting interest Proceeds from the sale of the senior notes will be used for general corporate purposes, including the repayment of $750 million of PSEG debt maturing this November. As of September 30, 2023, PSEG had $500 million outstanding of a 364-day variable rate term loan maturing in April 2024, and PSEG Power had $1.25 billion outstanding of a variable rate term loan maturing March of 2025. As of the end of the quarter, PSEG had swapped $900 million of the power term loan from a variable to a fixed rate, serving to mitigate the impact of higher interest rates. As of September 30th, reflecting our swaps, approximately 5% of our total debt was at a variable rate, which is down by half since year end 2022. We continue to maintain a solid financial position with limited exposure to variable rate debt given the improvement in our collateral position, a staggered maturity schedule, and PSEG Power cash generation to support funding our regulated business. In closing, we are reaffirming PSEG's full year 2023 non-GAAP operating earnings guidance of $3.40 to $3.50 per share. PSEG is forecasted to contribute between $1,500,000 to $1,525,000 and PSEG Power and others forecasted at $200,000 to $225,000. That concludes our formal remarks. And operator, we are ready to begin the question and answer session.
Operator
Thank you. Ladies and gentlemen, we 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 two. If you're on a speakerphone, please pick up your handset before entering your request. One moment please for the first question. The first question is from Nicholas Campanella with Barclays. Please proceed with your question.
Nicholas Campanella
Hey, good morning. Thanks for taking the question. Good morning, Nick. Wow. Hey, so I just, you know, I wanted to ask on, you know, looking forward to 24, if the broad market kind of underperforms here, that could maybe affect your pension headwind, but also kind of understanding that you've done a lot of de-risking this past year to take the volatility out. You had to lift out. You have the accounting order. Could you just give us any sense how we should think about kind of pension contribution as a percentage of earnings for 24 or just even relative to the drag you've had year to date? Is there a drag that we should be thinking about for 24 and any detail on how pension is performed year-to-date versus your expectations as well would be helpful. Thanks.
Ralph LaRosa
Yeah, Nick, sure. So listen, first of all, I appreciate you recognizing the work that Dan and his team and the regulatory team did already here. And we're seeing the benefits of it, right? We had, I'll talk in engineering terms, we've reduced the sign of the sign wave and there's less volatility. So there's nothing that we've seen or expect that is going to become problematic versus we look at 24. But I'll let Dan give you any more details he wants to provide on that, but just the results of some good work that we've accomplished this year.
Dan
Yeah, and Nick, that's really what we set out to do. It doesn't eliminate the effect of markets moving because we still do have a tension, but we've been able to minimize the magnitude of what we would see. As we step through the year, markets have moved. They've been off a little bit the last few months. We've got another couple months to go till we see where we land. I think that we're not immune to some of those movements, but I think the work that we've done will lessen that effect. And as we're looking at it now, the magnitude of what we intend to see or what we anticipate seeing as we move through year-end is something we can still manage through the overall O&M budget.
Nicholas Campanella
Okay, that's helpful. Nice to see that you're ahead of plan on the CapEx. Obviously, there's a bias higher here as you roll forward, and I guess we'll get more of those details in January, but as we kind of think about putting higher CapEx through the model, just how are you thinking about equity proceeds, if at all?
Dan
No, there is no, there has been no, and there is no intention to have any equity issuance as we go through the capital plan that we have in front of you. So, we've had $15.5 to $18 billion for the utility through 27 all year. We're still within that range. As you look across the five years, that $3.7 billion is great performance, and we've been able to continue to move forward on that. But, you know, what you're seeing there is great and is helpful, but it is still within our overall range, and there is no equity that we're going to need to fund even high into that range.
Ralph LaRosa
And, Nick, let me just double down on that, right? We've been saying to everyone that we can. No equity, no kind of equity, and no sale of assets.
Nick
Thank you.
Operator
Thank you. The next question is from the line of Char Parisa with Guggenheim Partners. Please proceed with your questions.
Char Parisa
Hey, good morning, guys. Morning, Char. Good morning, Char. Morning, morning. So let me just slightly tweak Nick's question around 24. I mean, obviously, it's going to be a big year for PSEG with the rate case filing and your PTC guidance for nuclear and then the ZEXs unsetting, right? I guess, how do you plan to sort of embed the various scenarios into 24 guidance when you roll forward at 4Q, even if you're thinking about this directionally? I mean, obviously, a swift resolution of the GRC could be part of this. I guess, so how do we think about your base assumptions there? And any changes to the interest rate assumption and 30 cents under-earning headwind for PSG&G that was presented a year ago? Any incremental puts and takes on regulatory lag in the preceding year? Thanks.
Ralph LaRosa
Yeah, Shark, all great questions. And again, I'll give Dan some chance to answer details here. But you hit on all the moving parts that we're considering and A lot of that has to do with the driving for what our timeframe is that we're going to come out with our earnings in December. So, Dan, you just give any more on some of those items.
Dan
Yeah, sure. We'll finalize where we're heading and let you know. And I think, you know, there's always some assumptions you're going to make as you step forward. I think on the rate case, we will file that at some point during this quarter. We've said that it usually takes, you know, somewhere between 9 to 12 months to move through, so we'll make our assumptions around that. I would love to be able to tell you that we're going to have PTC guidance in hand and we're going to know exactly where things land. But I think that there's a reasonable set of assumptions that you can make within that uncertainty until we get those regulations and we'll do that. And our guidance on interest rates really will be driven by what we see in the market. captured the moves that we've seen over the last year or so. And so all of those will come into play, and I think we'll still be able to speak with confidence with respect to an overall guidance range for 24, and we'll do that soon.
Char Parisa
And again, I don't want to put you in a corner, but it seems like there's probably more tailwinds and tail risks as we're thinking about that shift from 23 to 24. Is that a fair assessment?
Dan
Well, look, I think what we'll put forth is a balanced view. I think that both from Nick's question before and some of the things that you referenced, those are the kinds of things that will come into play as we put the estimate together. But I still think the way that the business is set up, we're not going to have to worry about weather movements because of our decoupling. We've got a smaller pension variability that Ralph just mentioned. We've captured most of the interest rate moves. I think the work that we have been doing over the last year, year and a half or so is really going to pay off to enable us to be able to speak with confidence on that range when we put it out.
Char Parisa
Got it. And then just lastly, I guess what are you hearing on the nuclear PTC guidance? And I guess how do you plan a business case around it? I mean, you have a refueling cycle. You've had some modest capex improvements on the back burner for nuclear. Are those plans getting closer to a decision now?
Ralph LaRosa
point especially with the guidance yeah so sure I'd say a couple things on that front you know we just to reinforce again the stability that we introduced last year you know we said it on on the PTC floor right so we're not we're not count on anything above or beyond that and and that's the way our plan is set so that should be pretty clear for you all and pretty transparent on that front and then on the capex we have said a couple times we're moving ahead very well on the refueling cycle at hope creek that work is progressing as we expected and and those surprises there and you'll probably be hearing something in 24 from us a little bit more on the upgrades we plan for salem and the timing of that okay perfect big effects on cal 24 though those those will pay dividends as we go down got it and again sorry just getting hit with a lot of questions from one of my questions um when do you plan on giving 24 guidance We have said that we're going to give it after we finish our business planning process. We have a review of our board that we do in December, so we'll be doing it in December.
Char Parisa
Okay, fantastic. Thank you guys so much. Have a great morning.
Ralph LaRosa
Appreciate it.
Operator
Our next question is from the line of Dagesh Chopra with Evercore ISI. Please proceed with your question.
spk10
Hey, Dagesh. Hey, Ralph. Good morning. Thanks for giving me time. Hey, just a finer point on equity. I think this is going to be Dan's wheelhouse, but you showed this slide in the June investor deck, which kind of talked to the $4 billion in balance sheet capacity. How does that look now? Obviously, there's the puts and takes. How does that look now? And then part two, just to be clear, as you roll forward the plan, there's energy efficiency, There's obviously the transmission opportunity. Should we expect no equity as well as you roll forward to 2028?
Ralph LaRosa
Yeah, so look, I'll give it to Dan again, give you some details. But both of those things are very good news for us, the transmission opportunity as well as the energy efficiency growth that we see from the triennial that the BPU put forth. But Dan's answer, I believe, is going to be exactly the same to you. We do not need equity or anything that looks like it.
Dan
Yeah, I guess Ralph is right. So, you know, we are still moving forward with that same capital range that we talked about earlier.
Dan
We will be providing an update. Ralph referenced that in his earlier remarks, both from what we've heard back from PJM and from what the state is looking at on energy efficiency and this next triennium this next three-year period and so we will do that update as we go forward but that will be the exact the way that that will roll through is we have a range of capital we will update that range and on the other side of that we will have what remains from the standpoint of that debt capacity but I think you should still look with us look to us with confidence that we will be able to fund that without the need for incremental
spk10
Excellent. Thank you. Very clear there. And then just maybe just on the topic of nuclear PTCs, I saw you've increased hedges for 2024, the percentage of output hedged. How are you thinking about 25? I mean, obviously, we are still awaiting guidance here. But are you like, as you roll forward to 2025, are you going to be less hedged than before, you know, anticipating some clarity on nuclear PTC? Or what is the thought process there?
Dan
Yeah, so I guess what we've said to folks is that we don't have the exact calculation that's going to be made. And what we've tried to do is think through what may come to us, right?
Dan
So when you have some of that uncertainty, you try to think through the ultimate answer that will come. and then tried to think through the viability of those solutions and where they may land. And we've kind of reacted to that thinking against the background of some of that uncertainty. And so that doesn't mean that we would not be doing any hedges. That means that we would be continuing to move forward a pace, thinking about how that PTC may come out. Those rules will come out at some point, we hope, sooner than later for that exact reason. It should shape how you're thinking about it. but I'd say don't think terribly different from what we had been doing with our hedging versus what we're doing now within 25 as a general rule.
spk10
I appreciate that color, Dan, and congrats to you and the team for the quarter.
Dan
Thanks, Dugas.
Operator
Our next question comes from the line of David Acaro with Morgan Stanley. Please proceed with your questions.
Nick
Hey, Ralph. Hey, Dan. Good morning. Hey, David. Let's see. Wondering if you could touch on your latest expectations for the rate case. Just has anything changed around your thinking for the revenue requirement, anything on the capital or O&M side that would shift your expectations as to what you file coming up this quarter?
Ralph LaRosa
Yeah, no, there's nothing really that I've said yet. You know, we've been saying all along what our plans are. I think the only thing that you'll see is that what this rate case gives us is the opportunity to roll in a lot of the other things that people have been asking about, whether it be interest rates or pensions, right, and the impact that pension expenses might have on us. So those are the only two real updates I would say that we have, and we're keeping an eye on the CapEx. But most of those items that we talked about, whether it's GSMP, which we closed on, the transmission opportunity that exists, which would not be with the state of New Jersey, or energy efficiency would be a clause mechanism. So nothing really that I would say is driving a big change to us. Dan, anything you want to add?
Dan
No, just one thing. David, the one thing that I think we could lose sight of and shouldn't is that with all of the focus on a higher interest rate environment, we've got some questions about what might be the implications to any kind of an impact on the rate case as we go forward. And I've reminded folks, this is the first rate case filing we'll do since 2018. And so, the early part of that period between rate cases, we saw lower interest expense. And so, yes, what we're seeing in this current environment is higher, and so there could be some costs that would move through the overall revenue requirement for the Wayhouse Cost of Capital. um thinking about stepping through years where interest rates were lower and now we're in a higher rate environment net net that does not uh calculate into a considerable rate increase because of interest rates and so that's not a rate pressure as we go into this just as a as a reminder yeah got it okay great that's helpful um and then you know we've got um
Nick
new leadership at the commission i was just wondering if you could give perspectives on you know if you think the overall kind of priorities um of the commission and um you know how they're going to treat uh maybe settlements or just overall views on um you know your your opportunities to work with them now uh going forward under under you know new leadership in a different uh set of commissioners thanks yeah yeah david sure look i i would
Ralph LaRosa
Opinions really don't matter as much as results. And I have to tell you, I could not be more pleased with the board and the action they took on our gas system modernization program. That quick action and decisive action to move that forward shows a couple of things. One is the work that we're doing and how it's helping the environment from a methane reduction standpoint is aligned with the policies of the state. Um, and I would also say the, the desire for the board to continue to reach settlement was exhibited there as well. Right? So both of those things are, are real positives and, uh, just should reinforce that for only us and our opinion, but for you all that, um, we are, we are in the same space that we were before.
Nick
Okay. Excellent. Uh, great. Thanks so much. I appreciate it.
Operator
Our next question is from the line of Jeremy Toney with JP Morgan. Please proceed with your question.
Jeremy Toney
Hi, good morning. Hey, Jeremy. Hey, just wanted to kind of, I guess, build a little bit on some of the points you laid out there. With the GSMP2 extension, Can you frame the settlement versus capital plan assumptions and versus the longer-term goals of GSMP3? Are the state's ongoing energy transition discussions factoring into the settlement, just kind of looking at this more holistically?
Ralph LaRosa
Yeah. So, look, here's the way I would frame it. The two years that we agreed upon are at a higher run rate than they would have otherwise been based upon our filing. So that's a real positive. I think when you look at the two areas that were of concern in the conversation, they were minimal from an investment standpoint. One was the renewable natural gas piece of our filing and the other was the hydrogen blending. And those are fair policy conversations that need to take place. So the board wanted to move ahead from a commitment standpoint to get the work done to continue the methane reductions. So we're completely aligned there. The run rate was higher. And I think we just participate and see where policy wants to go on those other two items and make a decision on that. But from a long-term strategy standpoint, Our commitment to reduce the cast iron in our system remains, and it's supported at this time by the commission. So I see nothing really changing from that standpoint.
Dan
Yeah, I think against the backdrop of the capital plan, Jeremy, we had talked about the low end of the range being consistent with where we were and the high end of the range being more like what we had for this particular, more like what we had filed for GSMP3. And so we were above our run rate but not as high as we had filed, so we're firmly within that capital plan range.
Jeremy Toney
Got it. That's very helpful there. And then following up with hydrogen, if I could, what's the latest messaging progress behind the hydrogen hub evaluation in the Northeast Mid-Atlantic there? And how should we think about the hydrogen opportunity across local industry, Peg's nuclear fleet, gas and blending, regional renewable electrification overall? What can you share there?
Ralph LaRosa
Yeah, so Jeremy, first of all, we participated on two of the hub applications. One was the Northeast hub and the second was the Mach 2. The Mach 2 hub was the one that was selected by the DOE in this area. And we're really happy and proud of being part of that solution. I think it's going to provide us with a lot of long-term growth opportunities in the region. And I say that from an economic development standpoint for the state. I think we'll have a real opportunity to place an electrolyzer somewhere in South Jersey. I think we'll have an opportunity to make use of some pipelines that exist in South Jersey and some storage that exists in South Jersey for hydrogen, as well as some end users that are in that area, both in the Delaware and across the river in southern Pennsylvania from a refinery standpoint. That's from the generic perspective. economic standpoint. I think our play here will be really determined when we see what the rules come out from the IRA and how the PTC is going to interact with both the nuclear PTC and what you might think of as pancaking hydrogen credits on top of that or not. So we'll look at that. We don't have any of that baked into our plan. I think that's the key for you to take away. It's upside for us I will also tell you that we have no expectation of being part of anything that's going to create any commodity risk for us on the hydrogen front. So we'll look at this. We'll help the state achieve some economic growth that they have down in that depressed part of our state, and then we'll see what role we specifically play within it as an enterprise.
Jeremy Toney
Got it. That's very helpful. And I think you guys have been pretty, pretty clear on no equity. So I will fully refrain from that part.
Ralph LaRosa
I could say it again if you like, Jeremy.
Jeremy Toney
No, we heard you loud and clear. But just, I guess, in December, you know, any updates to get there? I mean, will we be getting kind of a CapEx update in December? And then would that be updated kind of later on, 24, as some of the incremental items come through and just clarity comes through on some of the different items, and if so, how does the expected EE filing match up with how you're thinking about it at last year's CapEx update?
Ralph LaRosa
Yeah, so, Jeremy, so we are going to give you a partial update on CapEx through 27, and then we will give you more in January from a capital roll forward standpoint, so that's kind of the rhythm. The December update will be A little bit of the run rate that we talked about for GSMP and the EE filings that we have to file, which will be in the beginning of December for the BPO. That said, what we've been indicating is that that filing will, if you look at the triennial, you would expect it to be a little bit more than we have seen in the past from a run rate standpoint. We're still assessing it. I personally have not seen the final product from our team, so I couldn't give you any more details even if I wanted to. But, you know, the indication from everyone who has looked at that order that came out from the BPU is that there will be more opportunity for us there.
Jeremy Toney
Got it. Super helpful. I'll leave it there. Thanks.
Operator
Our next question is from the line of Julian de Leon Smith with Bank of America. Please proceed with your question.
Julian de Leon Smith
Hey, good morning, team. Thank you very much. Appreciate it. Hey, Julian. Hey, howdy, guys. Thank you. So just trying to bring the call together here, tie it up a little bit. Look, you talk about December and then January. You guys have a lot of different moving pieces coming together, right? And so you've got this GSMP. You've got the energy efficiency. You have the Raycase proposal. You have the PJM transmission. I think in your comments you said December. Presumably, and again, you comment on this new load growth update from PJM, December, January as well. I just want to maybe just to ask it more directly, how do you think about that rate-based CAGR? You said specifically in your remarks again today about being, you know, that run rate being the low end of that. You commented just now to Jeremy amongst others about seeing a new elevated run rate. How do you think about that 6% plus rate-based outlook? How does that fit into the 5% to 7% And what pieces are we missing here to that culmination, if you will, in January here? It seems like a lot of positives, no equity, low end of rate-based CAGR, clearly seeing a higher run rate. I'm trying to tie this together if I can.
Ralph LaRosa
I'm going to give Dan a crack at some of this, too, but I just want to reinforce, I apologize if I said we were at the low end. I definitely did not mean to say that. If I said it earlier, it was not my intention. So We're within the range. We've said that, and I would agree with you that there's a lot of positive momentum here, but nothing is firmed up yet. And so that's why we're where we are, and we will give you that information when we get later in December for the two items that I mentioned, the EE and GSMP, and then we'll give you some more in January. But Dan, you want to add anything to that?
Dan
No, I think that says it, Joey. There was not an update with respect to those numbers today. We have reaffirmed those numbers today. As we do step forward, it has and it continues to be a range. And so we've gotten some indication from PJM that there could be some incremental transmission spend. It's in the $400 million range. We've gotten some indication by going through that BPU triennial that EE could see a little bit of a lift. Frankly, the GSMP was a higher run rate, but was not as much as GSMP3 was filed for. So there's going to be puts and takes. And I think what we're saying is that you're going to see that update in full and some of those ranges having a little bit more color around them because we've stepped through another series of months as we approach the end of the year and move into year-round.
Julian de Leon Smith
Got it. A couple of clarifications there, if you don't mind. I was saying earlier six to seven and a half, at least the low end of 6% seems like it needs to come up through 27. Would you be rolling forward the plan to 28? And then even more specifically within that, how do you think about the linearity, if we're going to bring up this term again, in terms of earnings, you know, not just off of 23, but maybe off of a 24 baseline, if you will, if you don't mind.
Dan
Yeah, look, Julian, we said six to seven and a half, and that is where we still are. So if you're talking me up from that number, we're at the six to seven and a half. What we're trying just to do is as we do step forward, we will give the indication as to what these things start to look like. The filing for E has not been made, and we don't have that final answer from PJM with respect to that transmission. So I think Those will follow, and as we do step forward, that base will move up, and some incremental capital as we extend the years of our forecast will need to come up a little bit. These are the kind of things that will do that. So I think you ought to think about it as exactly how we presented it, that we're affirming those numbers as we step forward. We'll give you a little bit more color on 24 come December, and then we'll move into a longer-term update on the other side of our overall finalization of our plan.
Julian de Leon Smith
Excellent. All right, guys, we'll talk to you then. Good luck. See you soon. Thanks, Joey. Thanks, Julian.
Operator
Our next question comes from the line of Michael Sullivan with Wolf Research. Pleased to see you with your questions. Hello, Michael. Hey, everyone. Hey, how's it going?
Michael Sullivan
Hi, Michael. Hey, sorry to belabor, but just to tie it up on the year-end call update, so fair to say that the earnings tagger will be 2024 to 2028? Is that right?
Ralph LaRosa
That'll be in the January timeframe. That's what we said in the prepared remarks. We would be giving that update at that time. Exactly.
Michael Sullivan
Okay. And kind of consistent with how you laid it out at the analyst day, on the nuclear side of things, we should assume the nuclear PTC4 level with, you know, anything else being up? Okay. Right. Okay. And then last, just on the credit side of things, so I think I saw earlier this week movies took a favorable action or outlook on the power side of things. Any potential research into the consolidated view there and how they might be thinking about your metrics and thresholds?
Ralph LaRosa
Yeah, nothing that we're aware of on the parent level. But I will tell you, you know, again, some good work by Dan and his team. Treasury Department to explain what's what's gone on in our on the power side and we were very happy and I appreciate you recognizing Moody's Moody's letter it went out.
Dan
So so thanks on that front. Yeah, I think what they did Michael made sense, right if you think about What nuclear has been and what it is now that PTC does provide that exact floor that you're referencing and so we do intend to continue to to talk about that within our numbers and nothing beyond that, but certainly that stabilization is supportive of exactly what Moody's did.
Michael Sullivan
Okay, great. Thank you very much.
Operator
Next question comes from the line of Carly Davenport with Goldman Sachs. Please proceed with your question.
spk08
Hey, good morning. Thanks for taking the questions. Most might have been answered, but just two quick sort of housekeeping questions on nuclear if I could. The first one, are there any updates in terms of nuclear PTC in terms of your view on when we might get clarity there? And then the second one is just, is there anything to flag so far on the Salem 1 refueling outage in terms of how that's been progressing from both a timing and a budget perspective?
Ralph LaRosa
Yeah, look, I'll take the last one. The team continues to perform excellent work there, and there's nothing that we have there to discuss other than a normal outage consistent with our business plan. Just a great opportunity for me to give kudos to the team down there, so thank you for that, and Dan will give you the PTC piece.
Dan
Yeah, I presume Treasury is also doing excellent work down there, but they're not reporting out to us on exactly when, so we don't have any particular color on timing other than to continue to reinforce that sooner is better than later, but we've not heard anything back yet.
spk08
Great. I appreciate that color. I'll leave it there.
Dan
Thanks, Carly.
Operator
Our next question comes from the line of Travis Miller with Morningstar. Please receive your question.
Travis Miller
Hello, everyone. Thank you.
Dan
Hello, Travis.
Travis Miller
Real quick to go just touch on CapEx. That $200 million, could you characterize that as new projects? Is that inflation on existing projects, pull forwards? I wonder if you could clarify that real quick.
Dan
yeah i think what that really is is the team's been doing a great job of knocking out the work that we have in front of us and they're ahead on a couple things that that is um think of it as just getting some of the work done a little bit quicker than or than anticipated and we'll follow up with a with a more fulsome update as we go forward okay so would that pull out of 2024 at all or not a relationship there No, well, I would argue that you may be able to think about it that way, but as we give you an update, you'll be able to see what happens because some 25 could get pulled back into 24. It's a little bit fluid as they go forward, and if they're ahead on where they are right now, you could see some other things coming back into 24. So I wouldn't think about it as a reduction in 24. I think about it as just getting a little bit more work done early, and we'll continue to true that up as we go forward.
Ralph LaRosa
And the only thing I would add, there's the comments I made also just indicate there's a lot of interest on the energy efficiency front, and we've been able to continue to expand there. So it's all consistent with what I indicated on the triennial and the support we're getting from the BPU.
Travis Miller
Okay, perfect. That's helpful. And then I have a question, Officer Wynn. I know you're not involved in that anymore, but obviously a lot of stuff coming out in New York. Anything? you're hearing in regulatory discussions, you know, political halls, anything you're hearing in terms of New Jersey's offshore winds?
Ralph LaRosa
No, yeah, no, I mean, look, we're just, we're reading what you're all reading, and again, just happy with the decision we made at this point.
Travis Miller
Okay, very good. That's all I have. Thanks. Thanks, Jeff.
Operator
Our next question is from the line of Anthony Crowdle with Mizuho. Please proceed with your questions.
Anthony Crowdle
Hey, good afternoon, Ralph. Good afternoon, Dan.
Dan
Hey, Anthony.
Anthony Crowdle
Happy Halloween, Ralph. Happy Halloween. Just apologies to housekeeping on cadence. Rate filing December, then we get 2024 guidance, earnings guidance in December, a little CapEx update, and then on the 4Q call, we get an update on rate-based CAGR, earnings growth CAGR. Did I hear that correctly?
Ralph LaRosa
That's about the rhythm we expect. I don't want to be tied into an hour a day, but yes, that's the rhythm we expect.
Anthony Crowdle
Yep. Great. And then just... Easy question. You talked about the financing, maybe interest rate hedges earlier in the call. There's a bond that's due, I guess, November. You guys have taken care of that. There's also one due, I guess, in June of next year. It was an attractive rate at 2.9%. Has that been included in your interest rate hedges, or what are the plans for that maturity?
Dan
Yeah, so we'll take that out and step forward. And actually, I think the important element is that last November, as we gave that update, we presumed rates, including spreads, that were pretty comparable to where we are. We didn't capture every single dollar of it, but I think that the delta between what we thought it was going to be at and where we are currently from a market perspective is within the range. So I think we've done a nice job of getting ahead of it, and we will take that out. And like a lot of our refinancings, we will see some higher rates as we flip them, but they're a category within our forecast.
Anthony Crowdle
Great. And then, Lance, if I could jump in up to Mike's question earlier about the PEG power outlook change, I guess, at Moody's. I mean, any thoughts to maybe potential changes at the parent company? I believe BWA2, PEG power, you know, stronger balance sheet there. The utility, you know, strong balance sheet. Any read-through on, you know, or your interest in moving PEG power, I'm sorry, the parent up to a BWA1 company?
Dan
Yeah, I mean, if you take a look at it, they didn't move the rating on power. It's just a positive outlook there. And so I think that ripple effect would be lesser as you look at the parent. But I think on balance, just if you think about the overall business mix and reflective of PTCs and what we've done from an overall strategic set of decisions, I think we're in a better position going forward.
Anthony Crowdle
Great. Thanks for taking my questions.
Dan
Thanks, Anthony.
Rob
Operator, we'll take our last question.
Operator
That is all the time we have for questions today. I'll turn the floor back to Mr. LaRosa for closing comments.
Ralph LaRosa
Thank you very much. Sorry, we had so much interest, but sorry we had to move on. Hey, listen, I just want to thank you all for your continued interest. The work that our team continues to produce amazes me. I'm really happy with the stability that we've created here and the certainty. We put out some internal information earlier today, and it's just amazing the amount of things that we continue to execute on. And I'll just highlight a few of them here. One was this gas system monetization plan and the work that we completed. We've continued to be recognized in awards, different things that have come out of best employers and best companies to work for. We lowered our gas bills again for customers effective October 1st. And we refreshed our board of directors. So things that a lot of people sometimes struggle with, we just seem to be executing time and time again. So a big thanks to our team. Hopefully you hear that not only in our voices, but from others that we're a company you can count on and we're executing on the work that we said we would. I'll just leave with this. Anthony said it, but happy Halloween to everyone. I hope you all have a safe and healthy Halloween, and that's not just for yourselves but also for your families. Enjoy the day. Take care.
Operator
Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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