Public Service Enterprise Group Incorporated

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.

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.

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.