Public Service Enterprise Group Incorporated

Ladies and gentlemen, thank you for standing by. My name is Shamali, and I am your event operator today. I would like to welcome everyone to today's conference, Public Service Enterprise Group's first quarter 2025 earnings conference call and webcast. At this time, all participants are in a listen-only mode. Later, we will 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, April 30th, 2025, 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 first quarter 2025 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 10-Q will be filed later today. 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, 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 material. Following our 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, and thank you for joining us this morning to review PSEG's first quarter 2025 results and discuss the outlook for the business. PSEG delivered a solid operating and financial performance at both our utility, PSE&G, and our nuclear units. Overall results for the first quarter benefited from a full quarter of regulatory recovery of and on our invested capital approved in the October 2024 base rate case settlement, as well as the seasonality of gas revenues, which are concentrated in the first quarter. Results also reflected the positive impact of our consistent and reliable nuclear generation performance, which realized higher prices primarily driven by weather. Our service territory experienced multiple cold spells in January and February, with temperatures remaining below 20 degrees Fahrenheit for several days in a row, which prompted our highest winter peak load for both gas and electric in the last six years. During these challenging conditions, PSEG maintained high levels of reliability and efficient customer response times, while PSEG Nuclear generated and supplied the grid with approximately 8.4 terawatt hours of 24x7 carbon-free power. PSE&G's focus on increasing the predictability of our results continues to benefit both customers and the company, aided by our Conservation Incentive Program, which decouples revenues from volumes and deferral mechanisms for pension and storms from the recently concluded rate case. This predictability, combined with PSE&G's predominantly residential and commercial customer profile, also reinforces our stability as a utility investment with defensive characteristics in a turbulent equity market. We consistently manage our cost structure to keep bills as low as possible while maintaining PSEG's financial flexibility to deliver safe and reliable service. The domestic concentration of our supply chain also limits the amount of tariff-related cost pressure on our own end. Combined with our multi-year labor agreements with all of our New Jersey unions extending into 2027 provides stability for our largest operating costs. As we've discussed previously, the Basic Generation Service, or BGS, default rate is scheduled to increase our residential electric bills by 17% starting June 1st. As a reminder, BGS is a pass-through cost for energy supply that PSE&G does not earn a profit on. The increase is largely due to the July 2024 base residual auction result of $270 a megawatt day that was reflected in the latest BGS update, as well as a true-up for the prior two years of BGS auction, which had included proxy prices for capacity. Last week, the New Jersey Board of Public Utilities directed the state's electric companies to submit proposals to mitigate the customer bill impacts of the BGS increase. PSE&G continues to work with the BPU and state policymakers to develop a solution. We understand the real kitchen table difficulties these PGM-related increases will have on our electric customers. However, until new generating supply is added to the grid, given the existing resource adequacy and balance, upward pressure on energy prices will persist. While these discussions are ongoing, PSE&G continues to offer an enviable record of reliability, affordability, and customer satisfaction. PSCNG's combined electric and gas bill still compares favorably to all other utilities in New Jersey. Our reliability metrics continue to differentiate our service, and our customer satisfaction rankings are second to none. I would add that this last metric measures us against all of our large peers in the East, not just in New Jersey. A regulated capital investment plan for 2025 remains focused on infrastructure replacement and modernization to ensure safe and reliable service and to meet growing customer demand. These efforts are on track and on budget. PSE&G also began rolling out the second phase of its Clean Energy Future Energy Efficiency II program, which will help customers save energy, lower their bills, and reduce carbon emissions while supporting job training and economic growth here in New Jersey. In February, we mentioned a 12-fold increase in inquiries from large load or data center customers into PSE&G's new business pipeline, which had grown from 400 megawatts in early 2024 to 4,700 megawatts. These numbers include both mature applications and initial leads. Our latest update now shows PSE&G experienced another quarterly increase in large load inquiries for new service connections, and this pipeline now exceeds 6,400 megawatts of capacity requested as of March 31st. Our engineers have been responding to these inquiries on a timely basis, still averaging about four months, and our speed to response is supportive of the state objective to spur economic development. To the extent these large load prospects convert into new utility customers in the future, fixed costs are then spread over a larger user base, which can help to lower existing customer bills. Turning now to PSEG power and other, our nuclear operations generated and supplied the grid with approximately 8.4 terawatt hours of clean and reliable base load power and achieved a complete capacity factor of 99.9%. Over the past quarter, there has been a lot of discussion in New Jersey about the need and potential for new generation in the region and potentially in the state. Specifically, legislation was introduced this past February that proposes to change the current New Jersey law that prohibits regulated utilities from building and owning new generation. We remain open to this possibility and we continue to work with New Jersey policymakers about this and other solutions to meet New Jersey energy needs. Regarding the ongoing discussion around the pending data center proceeding at FERC, we recently submitted PSEG's comments in support of co-location with the position that the behind-the-meter data centers should pay for their actual use consistent with the treatment of other behind-the-meter customers on our system, such as rooftop solar and universities. Several other large generators and data center developers have requested a 90-day settlement process, which could be a path towards timely establishment of rules for co-location. To recap, we are reiterating PSE&G's full-year non-GAAP operating earnings guidance at $3.94 to $4.06 per share, which is up by approximately 9% at the $4 midpoint over our 2024 reported results. We are also reiterating PSE&G's updated 5-year capital spending program at $21 to $24 billion which supports an expected rate-based CAGR of 6% to 7.5% through 2029. This, in turn, drives PSEG's 5% to 7% non-GAAP operating earnings CAGR using the Nuclear Production Tax Credit as our reference price per hour. Before I conclude, let me again thank our 13,000 employees across PSE&G, nuclear, PS Long Island, and at services for their dedication and positive difference they make every day for our customers, our company, and the communities where we live and work. I'll now turn the call over to Dan, who'll walk you through the results for the quarter and our outlook for the remainder of 2025, and then rejoin the call for our Q&A.

Thank you, Ralph. Good morning, everybody. PCG reported net income of $1.18 per share for the first quarter of 2025, That's compared to $1.06 per share in 2024. And non-GAAP operating earnings were $1.43 per share in the first quarter of 2025 compared to $1.31 per share in 2024. We've provided you with information on slide eight regarding the contribution to net income and non-GAAP operating earnings by business for the first quarter. And slide nine contains a waterfall chart that takes you through the net changes quarter over quarter and non-GAAP operating earnings per share, also by major business. Starting with PSE&G, which reported first quarter net income and non-GAAP operating earnings of $546 million for 2025, compared to $488 million in 2024. Utilities results were driven by the implementation of new electric and gas-based distribution rates that went into effect October 15, 2024, And as Ralph mentioned, the recovery of previous capital investments totaling more than $3 billion. Starting with the waterfall on slide 9, compared to the first quarter of 2024, transmission margin was a penny per share lower due to the timing of expense recovery. First quarter distribution margin increased by 20 cents per share compared to the year-ago period and largely reflects the impact of the rate case, recovering a return on and of our capital investments. And in particular, gas revenues, as approximately half of our annual gas revenues are realized in the first quarter. And margin also benefited from recovery of energy efficiency investments. Distribution O&M expense was $0.05 per share unfavorable compared to the first quarter of 2024, with the year-over-year increase driven primarily by timing, as well as higher distribution operational costs due to inflation and the cold weather in January and February. Depreciation and interest expense rose by a penny per share and two cents per share, respectively, compared to the first quarter of 2024, reflecting growth in investment and higher interest expense. Weather during the first quarter, as measured by heating degree days, was 4% warmer than normal, but 13% colder than the first quarter of 2024. As a reminder, weather variations have a minimal impact on PSE&G's utility margin, because of the Conservation Incentive Program, or SIP, mechanism. This decoupling mechanism limits the impact of weather and other sales variances, positive or negative, on electric and gas margins while helping PSE&G promote the widespread adoption of energy conservation, including energy efficiency, and solar programs. Under the SIP, the number of electric and gas customers is what drives margin, and each segment grew by approximately 1 percent over the past year. On capital spending, as Ralph mentioned, PSE&G invested approximately $800 million during the first quarter, and we remain on track to execute on our 2025 regulated capital investment plan of $3.8 billion, focused on infrastructure modernization, energy efficiency, and meeting growing demand. We've maintained our five-year regulated capital investment plan of $21 to $24 billion through 2029, representing a $3 billion increase from our previous plan, driven by reliability and resiliency investments, our expanded energy efficiency program, and demand growth. As mentioned, we commenced this next phase of our energy efficiency program in the first quarter, and we anticipate investing a total of $2.9 billion over a six-year period. The energy efficiency program totals include approximately $1 billion of odd bill repayment options to help customers finance their energy efficiency equipment and appliances. Moving to Power & Other, for the first quarter of 2025, Power & Other reported net income of $43 million compared to $44 million in the first quarter of 2024. Non-GAAP operating earnings were $172 million in the first quarter compared to $169 million in the first quarter of 2024. Referring to the waterfall on slide 9, For the first quarter of 2025, that energy margin rose by 2 cents per share, driven by higher nuclear generation performance, coupled with higher realized prices due to the cold weather mentioned earlier. The weather conditions also contributed to a higher margin in our gas operations for the quarter. O&M increased by 3 cents per share compared to the first quarter of 2024, mostly driven by higher nuclear costs, and interest expense rose by 2 cents per share, reflecting incremental debt higher interest rates lastly the timing of taxes recorded through an annual effective tax rate which nets to zero over a full year and other items equally combined to have a net favorable impact of four cents per share in the quarter compared to 2024. touching on some recent financing activity as of the end of march tcg had total available liquidity of 4.6 billion dollars including approximately $900 million of cash on hand. While PSEG had significant available liquidity in the year-end 2024 at $2.6 billion, this represents a significant improvement as we access the bond markets at both PSEG and PSEG during the first quarter. In total this quarter, we issued $1.9 billion of long-term debt, which reduced commercial paper outstanding and increased cash on hand. Our liquidity position was further enhanced during the first quarter by extending the expiration of our existing $3.75 billion revolving credit facilities by one year to March of 2029. PCG's variable rate debt at the end of March was at PCG Power consisting of a $1.25 billion term loan, which matures this coming June, and a 364-day term loan for $400 million, which matures in December of 2025. As of March 31st, we continue to have a low level of variable rate debt, representing approximately 7% of our total debt. On the financing front, in early March, PSE&G issued a total of $900 million of secured medium term notes, consisting of $400 million of 5.05% medium term notes due March 2035, and $500 million of 5.5% medium term notes due March of 2055. A portion of the proceeds will be used to repay $350 million of 3% medium-term notes due May 15. Later in March, CSEG issued $1 billion of senior notes consisting of $600 million of 4.9% notes due March 2030 and $400 million of 5.4% notes due March 2035. A portion of these proceeds will be used to repay $550 million of 0.8% senior notes due August 15th. Looking ahead, our solid balance sheet supports the execution of PSUG's five-year capital spending plan, dominated by regulated capex, without the need to sell new equity or assets, and provides the opportunity for consistent and sustainable dividend growth. In closing, we delivered a solid operating financial performance to begin the year, And we are on track to deliver PECG's full year 2025 non-GAAP operating earnings guidance of $3.94 to $4.06 per share. And we are also reaffirming our long-term forecast of 5% to 7% compounded annual growth for non-GAAP operating earnings through 2029 based upon the execution of our capital investment programs and the use of the nuclear PTC threshold as our reference price. That concludes our formal remarks. And operator, we are ready to begin the question and answer session.

Thank you. 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 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 are on a speakerphone, please pick up your handset before entering your request. One moment, please, for the first question. Our first question comes from the line of Char Perez with Guggenheim Partners. Please proceed with your question.

Hi, good morning, team. It's actually Constantine here for Char. Thanks for taking the question.

Hey, Constantine. Hey, Constantine.

Good morning. Maybe just starting off on the 6400 megawatts of large load interconnection that you've noted in the prepared remarks. Do you see a timeline starting to form on the potential load inflection? And how is New Jersey thinking about resource adequacy with that load potential? You mentioned the legislative potential, but do you envision a potential shift on gas generation policy or anything else?

yeah you broke up a little bit at the end there constantine but i i think uh what i heard was you know when we see that load coming in the 6400 and also the uh how resource adequacy is being thought about in new jersey as a result of that is that some yeah okay great so look we have always said take that 6400 and you you apply a factor 10 20 and we'll leave that to you all to to think what the right amount is again remembering for us we're from an earning standpoint we're decoupled so the way we think about it is more from this good news for customers if we can spread any costs across additional megawatt hours and that that would certainly be be a positive from a customer standpoint for for the timing of it I think it's happening at different stages we are seeing some interconnections take place already. Obviously, the ones that are a little bit larger in the couple hundred megawatt requests we have, they still seem to be some folks that have been shopping for the best location for their particular application that they might have. But, you know, we just see that the state's economic development plan is taking hold and, you know, happy to see the amount of additional megawatts of requests that we've had come in. As it relates to resource adequacy, that's a big conversation that's taking place across the entire RTO footprint right now. And we just saw some new planning numbers come out from PJM that we have some questions about. There's an upcoming TEAC meeting. We're going to be asking some questions at that TEAC meeting regarding some of the assumptions that are in there. And the one thing that we heard from our legislators over the last week or two was to be more vocal about that. And you can certainly expect us to be more vocal with our questions as we move forward.

Daniel, your other part of your question, Constantine, is proposed legislation in New Jersey. We had some hearings last week. There's discussion of it. So I would say right now it's at the discussion point as opposed to certainly being active. But we are here and remain available. as a resource to the state if they decide to take resource adequacy into their own hands through some legislation.

Understood. Appreciate that. And on the FERC Tool 6, with the comments that were filed last week, do you have a view on settlement process versus outright order? Any preferred route from your perspective? And has that FERC process come up in your commercial discussions at all in artificial islands? and would you be able to kind of mitigate any of that through any kind of continued provisions, or are we kind of walking step-by-step there?

Yeah, so I'll let Dan – I think you were asking a little bit about specific conversations, so I've always given that to Dan, and I'll do that again as that is being led by his team. But generically, as it relates to the proceeding down at FERC, We would always like to see a settlement, right? I mean that that to me is always the best solution I would love to see the industry come together and And find solutions to help the tech industry out. It's pretty clear based upon some information I continue to see tech needs for generation continue to grow and We as an industry need to find a common solution to meet that I certainly I think that in doing that, we need to make sure that we're not discriminatory in one customer class versus the other, and that has been the single concern that we've had since this process started. But, Dan, you want to talk a little bit about it?

Yeah, no, I agree with Ralph, and I think the non-discriminatory aspect is really important. I think I'll just leave the commercial aspect to just a single comment that I think that the counterparties are looking for the flexibility, the most flexibility that they can have, right now there's some uncertainty related to how much they will have and so they're they're waiting on this answer whether settlement uh can get us the best answer which it seems like it's going to be more representative what the parties are looking for i think that that would be ideal uh but they're never easy to get so time will tell whether we can we'll have one of those excellent appreciate that thanks for taking the questions thanks guys thank you thank you

Our next question comes from the line of Derges Chopra with Evercore ISI. Please proceed with your question.

Hey, Derges. Ralph, good morning. Thank you for taking my question. Good morning, Dan. Hey, just on the commercial arrangements related to nuclear, just understand there's a lot of moving pieces and the timeline is uncertain. But just from a demand perspective and the tone from your large load customer perspective, Has that changed over the last few months, maybe since February when we spoke last in earnings? Has that changed? Obviously, there's a lot of news in the market. There's tariffs. We've seen Microsoft, Amazon, some of the other hyperscalers sort of pull off of some of their contracts. Just seeing if you're seeing any softness there.

No, I definitely would not call it softness. I think there's still a demand for power, and I think there's still a demand for that type of power. I think there's also a desire to have answers to some of the questions that remain outstanding, but I would say there continues to be interest in the nature of the power and the scarcity of the power that nuclear provides.

And, Durgesh, overall, that's why we included those numbers that we did in the new business activity that we're seeing. You know, it has not slowed down. And again, maybe it's the same person calling 50 locations and asking the same question. But I don't see that as the case. These are unique, at least for us, they're unique requests that are coming in. And I continue to be surprised and impressed by the amount that we're seeing.

10,000 megawatt peak, so 6,400 is not all coming in. I mean, Ralph talked about some lower percentage of that, but the requests do continue.

Got it. That's very helpful, caller. Just switching gears quickly on LIPA, just what to expect there. I believe there are some meetings here end of May. Do you expect a decision then, or what are kind of the data points or dates we need to track throughout the year as they make the decision on whether you're going to provide services there or not.

So, Dagesh, I got to take a half a step back for you. I don't know if you're aware of the meeting that just took place at LIPA on this subject. Are you up to speed on that?

The one, the first, I think there was a, what I'm up to speed on is there was a first, uh, I guess you weren't awarded the first portion of the contract, and then there's the bigger contract that .

Yeah, no, there was actually, so over the last 24 hours, there's been a lot of activity on this front, so let me just try to summarize for everybody on the call what's taken place. There was a recommendation made by LIPA management to select a different service provider. That recommendation was just voted down by the board. That took place within the last half hour, or maybe within the last hour is a better way to say it, after we started this call. So we're happy to see that we're still in consideration, but I don't know anything more than that. And all I can promise to anyone who's on a call who lives on Long Island or to any customers on Long Island, we will continue to do the right thing and provide high-quality service to the customers on Long Island. as long as we can. So there was a flurry of activity over the last 24 hours, and that culminated within the last hour, as I said, with a no vote from the LIPO board on the management recommendation to select a different service provider.

Got it. Sorry, I missed that. So do we know what the next step is here? Do they go back to the drawing board?

Yeah, it gets right back to what you said. On May 22nd, there's going to be a next board meeting, and I expect that we'll hear some next steps. They went into executive session after the public session, so I would imagine that that, among other things, are being addressed. So.

Perfect. Okay. I'll leave it there. Get back in the queue. Thanks so much.

All right. Thank you, Zagash.

Thank you. Our next question comes from the line of David Arcaro with Morgan Stanley. Please proceed with your question.

Hey, good morning. Thanks so much. Hey, David. Maybe on New Jersey and affordability, I was just curious if you could elaborate on your strategy or approach to managing affordability, just given some of the concerns, I think, stemming from PGM capacity, pricing. But what are approaches that you could take to manage some of the concerns that have popped up from both the governor and the commission?

yeah no I appreciate that question certainly has been a hot topic here we look our our concern is trying to reach some consensus that helps customers over this this peak that came in we are listening to recommendations that come from the Board of Public Utilities they have a couple of ideas about how they can help mitigate by through some some deferral of charges to customers that is under consideration from all the electric distribution companies here in New Jersey. We would certainly be supportive of anything that comes out from the board. There are legislators that have proposed a number of different bills. I think the most significant one would be the one that would be addressing the core problem here, which is supply. And another way to procure supply in a state, Assemblyman DeAngelo put a bill in to look to bring generation into the state and to open it back up to regulated utilities to have that opportunity. Again, Dan mentioned it a little bit in the beginning. We would certainly be willing to participate in that and help find solutions for the state. We think we have some unique sites that could be helpful in meeting that, ones that have pipes and wires already to it, and obviously we'd have to have to take some different actions on the site to generate there. But we're listening to everyone. It's an issue that is going to face customers. And as I mentioned in the prepared remarks, it's going to hit every customer. And we want to help our customers as best we can through this time. It's one piece of the affordability challenge that they're facing.

And the other things that are going on in the background, David, there's a lot of customer assistance like LIHEAP, and we're making sure that customers are aware of the programs that are out there to help those in need that probably will be hit toughest from the standpoint of some of these increases. So a lot of activity at the company and a lot of activity outside the company all addressing this particular issue.

And not to mention the timing of our rollout of the energy efficiency program, which, again, I mentioned in the prepared remarks earlier. is very helpful on that front as well, because if we can help customers use less, as I said to an earlier question, as we're decoupled, we can help the customer and be supportive without any financial impact to us as a result.

Yeah, excellent. Okay, that's helpful. Thanks. And then I guess on your efforts to contract nuclear capacity with data centers, I was just curious. Do things now stand, like are your discussions and negotiations contingent on the FERC process and figuring out, you know, behind the meter co-location arrangements and frameworks or such that that time frame is going to be important and maybe critical to getting over the finish line here? Or are there other approaches that may not kind of have to wait for the full FERC process and potential settlement to play out?

Yeah, no, again, I'm going to give that to Dan to give you any details he wants. I think he addressed a bunch of what you said before. But, look, we think deferred process is helpful to show that the industry as a whole is meeting the needs. And, again, I would encourage us to reach a settlement on that front so that we can show solidarity in meeting the customer's needs here and that customer being the technology companies that are – or so thirsty for generation, but then you want anything specific?

The simple answer is no. It is not contingent upon that. I think it's helpful to have that move forward, but the simple answer is no.

Okay, got it. Thanks so much. I'll leave it there. Thanks, David.

Thank you. Our next question comes from the line of Nick Campanella with Barclays. Please proceed with your question.

Morning, Nick. Hey, good morning. Thanks for that real-time update on LIPA. That was impressive. Hey, I just wanted to follow up on the prior line of questioning just in regards to the commercial agreement. And, you know, we kind of talked about this prior just being maybe a more realistic opportunity for 25. And just given everything that's transpired, I just wanted to be clear, like, do you still see executing on a nuclear deal in 25 as still on the table before the governor leaves office, in your mind?

Yeah, no change, Nick. We are still, what we've been saying with respect to how we are progressing and what we're doing is still where we are today.

Yeah, and I don't have a real-time update for you other than to tell you the following from the governor's standpoint. He is on another economic development mission in the Middle East and is talking about, you know, continued attraction of technology jobs to the state. I'll get an update on that as that progresses. And there's some news reports about what he's doing. But he's working until his last day here. And one of the topics is to continue to attract technology companies.

OK. That's helpful. And then just maybe remind us on the quantum of megawatts that could potentially be part of a commercial agreement. Would you be open to doing more than a third of it at this point, just trying to take your temperature on that?

Yeah, there's not a target number, but I would say that there's no restriction on anything that we have within the portfolio to the extent that there's interest related to some kind of a commercial agreement.

All right. Thanks. See you at AGA. See you then.

Thank you. Our next question. comes from the line of Jeremy Toney with JP Morgan. Please proceed with your question.

Hey, Jeremy. Hi. Hi. Good morning. Morning. Just maybe building a little bit on prior comments here and appreciating PJM's collar for the next capacity auctions. How do you think about the potential capacity price outcome in the next auction as it relates to customer bill growth at this point in Do you see the price floor carries enough substance to incent ongoing investments in capacity supply, or just any other thoughts on the market there?

Well, look, we'll tag team this one again. I would say a couple of things. I'll turn around and make the comment. I've seen a bunch of reports that would indicate that the price that we could expect would be on the northern side of that collar, and from a range standpoint, somewhere between the midpoint and the top, I think is what we continue to see in the consensus of documents that I've read. We have an internal opinion. We really don't talk about that, but I would say to turn it back around and mention what I've read from others. The good news from that standpoint for our customers, if there is good news in this, is that the Because we have rolled in three years worth of capacity increases because we had that proxy price in the BGS auction before, we would not expect to see a large increase for customers in the forward years as a result. So that's a positive. What's a negative is the prices are not coming down if those projections are right. It would kind of keep it in that same range, some percentage up or down, but not not the double-digit increases that we've all seen here in New Jersey. And, again, that was a combination of delays at PJM and the capacity market as well as a lack of generation, which gets to your second question, which is do we think at those prices – and, Jeremy, I'd be way in front of my skis on that since we're not in the merchant generation business at the moment here and don't expect to be ever again in the merchant generation business. We – we have not done a lot of homework on costs and how that would wind up playing out and with tariff increases and so on. So, look, if we have an opportunity to do something to rate base, be able to answer that question in a lot more detail. But, Dan, you want to add anything?

No, I'll just add two things. On your last point, you know, the concept of bullet prompt incremental generation, honestly, it's less about the price and more about the duration and the time frame that you're talking about. So, Given the periods that the auction covers and given the timeframe that it takes to build something new, the price that they're putting out is not something that you're going to get if it prompts you to build a new unit. So I think the timing continues to be the challenge at PJM. And then just kind of maybe pile on what Ralph talked about before with respect to the overall pricing and customer bill. The BPU set up a good process so that you could gradually see changes over time. That good process kind of lost some of its benefits by virtue of PJM's delays in the capacity auctions. So that proxy price amplified the effect of a price move because there was a catch up. We're still not caught up with respect to timing of capacity auctions. And so that proxy price, which was in the last go round, the previous auction as we move forward is currently the previous auction. So that proxy price is the 270 price we saw last time. And so Ralph says, we don't expect to see a big move by virtue of whatever happens within this auction. It's because we're sitting at that higher proxy price. So there could be smaller moves, but nothing, the magnitude of what we've seen and the collar, surrounds that 270. So, as Ralph said, it probably leaves you closer to where we are now, but without another jump like we are addressing right now within the state.

Got it. That's helpful context there. Thank you for that. And maybe pivoting to offshore wind and fully appreciating that Peg has exited offshore wind, but maybe just, you know, any thoughts as far as, you know, recent frictions offshore wind that we're seeing uh, today and how you think that impacts maybe the transmission planning opportunities set, or are there any knock on effects to you guys that we should think about?

Well, no knock on effects for us, uh, to the east of New Jersey, because we did not have anything in the plan as we had, we've spoken about quite a bit. Um, maybe opportunities now to the west, depending upon how we solve for the resource adequacy concerns and the capacity. I think, look, we, again, I'm going to be a little bit repetitive here. We have to be very loud about any concerns that we have regarding that process and the parameters that exist because five years from now, we'll be dealing with the results of it. So it's pretty clear to us to help customers, we need to either build more wires or build some generation in the state. And it's important to have... at the accurate parameters built into the PJM process now so that we get it right in the out years.

Got it. That's helpful. I'll leave it there. Thank you. Thanks, Jeremy.

Thank you. Our next question comes from the line of Julian Smith with Jefferies. Please proceed with your question.

Hey, good morning, team. Good to chat with you guys again.

Hello, Julian.

Hey, pleasure. Hey, so just following up on this affordability narrative, I'd love to hear a little bit more specifically. I know you guys alluded to kind of guiding customers with what's out there, but I just want to make sure I'm hearing from you guys right, especially as you think about proposals and trying to assuage concerns out there. I mean, what would you say specifically you all bring to the table or would potentially bring to the table in a long-term and short-term sense here? I mean, I just want to understand the scope of how far this affordability narrative is going in the state. and what you're hearing from the stakeholders, whether it's the governor, the BPU, all this?

Yeah, look, again, this is, I think what we're hearing, Julian, is what the whole country's hearing. Affordability is a concern, and it goes from eggs to energy. So from our standpoint, we want to do our part, and the conversation here in New Jersey was magnified quite a bit by everything we just talked about with the inadequacy of the PGM capacity market process. being delayed as long as it was and having this compounding effect. So we can't change that. That's a governance issue that PJM needs to deal with, and they'll do what they need to do. But what we can do is what we've been trying to do at PJM, which is advocate for some stability so we don't have this happen again. That's a long-term solution. Another long-term solution is to get more generation, more supply. That could show up as new generation in the state. We've talked a lot about the fact that we'd be more than willing to do it in rate base. If we can play a role there and be helpful, we will certainly do that. Or it could show up by new wires being built and bringing in generation from another location. What I hear from policymakers in the state is that they would like to have more control over their destiny. And that would lead me to believe that we would want to have more generation in the state. But those conversations are ongoing, and you've seen some of that in the press. What we can do in the short term is three things, right? We can help from an affordability standpoint, providing customers with access to some of these programs that are out there, assistance programs. We can help with energy efficiency, you know, just continue to help people use less. And we've talked about that quite a bit over the years. And the new thing that was an idea that was put forth by the BPU was to try to get more people on a plan that would levelize the cost over a 12-month period. We have a program called the Equal Payment Plan. This would be a little bit different than that, but not very different as I currently read it. It would be more of a short-term solution so that customers are still incented to use less electricity in the long term. and that count on an equal payment plan. So that's a policy decision that will continue to be discussed at the board. But we have said, and we want to be part of the solution, and we've always been that way in the state, and I don't see that being any different. So whether it's the long term, the rules, the supply, or the short term where we're trying to help customers out in the three ways that we mentioned, we're going to be here as best we can.

And on that short-term item too, kind of an obvious statement, Julian, but our energy year starts June 1st. So you'll see volume increases at the same time you're starting to see that price increase. And so part of that design and part of that thinking is to take this thing out of the summer month.

Yeah, absolutely. And guys, just to clarify here real quickly, on LIPA, you guys have commented that you see offsetting potentially this headwind to the extent to which you may or may not get it. Would that be effective here as soon as, you know, the start of next year as far as your ability to offset the full ramp, right, the six to eight cents ballpark that we're talking about here?

Yeah, well, it's not that high. I think we would say five to six, but I won't get into back and forth on that. I think that, look, first of all, it's immediate. We would have to manage costs. and any of the costs that were associated with LIPA, we would have to remove those costs, and there's multiple ways to do that. And then on the revenue side, we're always looking for other opportunities, and we always have oars in the water on that front, and I would hope that we could bring one or two of those opportunities we're looking at to fruition in a timely enough fashion to offset it. So that's the goal here, and That's why we're confident that we'd be able to offset it and remain with our earnings projections that we've put out there to five to seven.

Got it. All right. Excellent, guys. Thank you so much. Appreciate it.

Thanks, Julian.

Thank you. Our next question comes in the line of Carly Davenport with Goldman Sachs. Please proceed with your question.

Hey, good morning. Thanks for taking the questions.

Hi, Carly.

Hey, maybe just a follow-up on the large load pipeline comments from earlier. Any indications you can share on the breakdown of that 6400 megawatts in terms of what are more geared towards initial applications versus those that are more mature in the process?

Yeah, Carly, it continues to morph as you go through time, right? You'll have some drop off, you'll have some come on in. We've generally characterized the number as trying to do two things. The first thing we're trying to do is give an indication of total interest that has come forward, while at the same time also trying to bring some reality to it because we've said as a 10,000th megawatt peaking system, we don't expect 6400 megawatts to come on. And so Ralph mentioned earlier 10 to 20 percent. I think we continue to try to do some guesswork. Obviously, you don't know when someone starts to initiate an interest exactly where they're going to go. But as time goes on, their continued interest, how far they go in the process, how often they communicate and what they're doing gives us some sign that we can get some kind of a gauge as to which are going to be more likely and which are not. And so, I don't know if you're in that 10 to 20, 25%, somewhere within there I think is a reasonable expectation as to what's going to come forward. And that's also used for planning purposes. We don't plan our system around 6400 megawatts coming onto the system. We plan for a subset of that based upon that experience. And so, it's probably in that ballpark. It's an imperfect estimate, but it is an estimate.

Got it. Okay, very clear. That's helpful. Thank you. And then maybe just as you think about the current five-year capital plan, any color you can provide in terms of where you see potential exposure on the tariff front and any risk mitigation tactics that you see as necessary there?

You know, Carly, I don't want to completely dismiss it because what we don't know, we don't know. But I am very comfortable that we do not have any – real problems around the corner because of the type of work that we are planning over the near term, right? It's kind of the very straightforward replacement activities that we have in that last mile. We are not planning on large transmission projects in this cycle. We're not planning on that. We have a little bit of substation and switching station work to do, but no major efforts like we had after Superstorm Sandy. So since that major work is behind us, large project risk is behind us, and we're really focused on this last mile activity. The only project that we have of any magnitude is the Maryland project, and I have had no indications yet that we have any supply chain concerns on that front.

Great. Thank you so much.

Thanks, Carla.

Thank you. Our next question comes from the line of Michael Sullivan with Wolf Research. Please proceed with your question.

Hey, Michael. Hey, Ralph. I know you kind of just hit this in one of the recent questions just in terms of short-term and long-term solutions, but do you think the short-term solutions are sufficient enough to kind of tamp down some of the political rhetoric here, just given, you know, like the long-term solutions How long-term are we talking? Like, if you were able to bring regulated generation online, how long would that take?

Yeah, Michael, I don't want to front-run something that isn't there yet, so it'd be hard for us to say that. I would simply be thinking about that this way. We're seeing five- to six-year lead times on on some of the turbines and you could, you could call that four, you could call it eight, depending on who you talk to, but I'll say five to six on that front. Um, so what we need is we need the decision base, you know, by law, we can not move into this area right now because of a DECA. And, and if the law has changed in the state of New Jersey, we will be, we will be there for the customers and for the policymakers. So, You know, it's a little bit of the chicken and the egg. When does the law get changed, and then when do we actually get to place orders to try to find some solutions? So to give you a timeline when we could actually have additional supply on the system would be, I think, disingenuous on my part to do that. So I think what we're doing in the near term is the best we can do with the cards that were dealt. And I say we as the state of New Jersey. We're all working together on this. the policymakers and the companies.

Okay, understood. And just kind of tied to that, just wanted to get your thoughts on the governor's challenge of the previous PJM auction results and how that factors into the dynamic.

Yeah, look, I think policymakers are rightfully concerned about the spike that they saw. And so I think you're seeing questions get asked in a number of different ways by a number of different policy leaders. We've had some assembly leaders, some Senate leaders here in the state asking those questions either in public hearings or by sending letters as well. So it's not a surprise. You know, this is something you would expect leadership to do is to ask some questions when you have something like this take place. And what took place here as I think we've said multiple times, is we've had this governance challenge that has caused all three of these auctions to pile up on top of each other. And as a result, the customers are seeing the spike.

Yeah, I mean, Michael, they're going to do their investigation. They're going to find out what they find out. We're not aware of anything that's problematic, but there's nothing wrong with that check going on just to validate what has happened.

Okay. Last one, just back to the long-term solutions. Is regulated generation in New Jersey the only solution that's being considered, or are there any other bills out there that we should be watching?

No, no, no. I think, look, I think there's three solutions, right, we've talked about. And I say generation without picking a source or technology. The first is you could have rate-based, which I mentioned. The second is you could have – you could somehow incent – a competitive generator to site here. And the third is you can import. I mean, that is the simple way we think about it. Any imports, we're going to probably need some bigger wires or more wires if we go that route. Again, we being the state, if we come up with a solution for a competitive generator, we'll be there from an interconnection standpoint. We've been very vocal about the fact that We've been very responsive to those types of requests as they come in, regardless of the technology. And if it becomes a regulated solution, we think we have a couple of sites that might make some sense for us. So we just look forward to the continuing conversation and try to push it so we can avoid this can't get kicked too far.

Very helpful. Thank you.

Thanks.

Thank you. Our next question comes from the line of Bill. Apicelli with UBS. Please proceed with your question.

Hey, Bill. Hi, good morning. Hi, guys. Just one quick question here. Just going back to something Dan said earlier about, you know, the commercial opportunities and flexibility being key. I mean, just maybe a little bit more color around what that means. Is that flexibility around being on grid or... You know, the timeline of how quickly things can ramp. I mean, what exactly is sort of the flexibility aspect they're looking for?

Well, this is a follow-up on something Dan said. I'll let Dan answer it.

Yeah, look, just think about trying to strike a commercial deal when there is uncertainty around rules that are going to be met urgently. And that work continues to go on and on and on. And so I think really just trying to get in line how this is going to work and how it can work and what the optionality is with respect to how you would interconnect. It's nothing more complicated than that. We've said before, given where we are and given the transmission rates where we are, it is not as critical as it is in some other areas. But I think all parties would prefer a situation where they have all the rules. and they know exactly what they're dealing with. And I think it's taken us a long time as an industry and as the regulators within the industry to come to that final answer. Now we had a question before about settlement, and I think that would be a great answer because it would be the participants that are actually devising where things are going to go that would ultimately get approved. But that doesn't happen overnight either. And so I think there is a general desire to move more quickly and get this done, but it's lingered for a while. That's really all it is, Bill, is trying to solidify exactly what the landscape is that we're working in.

Yeah, and Bill, I would just say, look, if you think about where we have our generation right now, we can satisfy a bunch of things, whether it's redundancy, accessibility, extra capacity, location, and I could go on and on. So we still feel very, very good about the opportunity set that's in front of us.

Okay. And then just lastly, what are you guys seeing on the adoption for demand response, right? That's obviously been something that's gotten more attention here as the price signals have gone up. Is that something you're seeing an increasing level of interest in from your customers?

Yeah, I think you see it in a couple different ways, right? But we don't have as much as you might hear from other companies because of the low industrial load that we have. From a residential standpoint, we do see it. We see it show up mostly in that case from a thermostat standpoint and from some pools that are not running and so on at certain times. And that has continued in our energy efficiency programs that we talk about all the time address exactly that issue for mostly, again, mostly the residential customers.

Okay. All right, great. Thanks very much.

Thanks, Bill.

Thank you. And there are no further questions at this time. I would like to turn the floor back to Mr. La Rosa for closing comments.

Well, thank you so much. Listen, I think the conversation has rightfully been a lot today around affordability and what customers are facing. And again, we are not deaf to that issue. We know what's going on around kitchen tables. And that's because of the 13,000 employees that we have here who are not only doing the job that they do day in and day out, but are those people that are having those same conversations around the table, regardless of the cause of the affordability challenges they might be having. So we're very well aware of that. We're going to be here to be a solution provider to the state, and we hope to continue to be a solution provider to the people of Long Island as well, as we've discussed. So we appreciate all of your interest, and we will see you at AGA in May. Thanks for calling in.

And ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.