Public Service Enterprise Group (NYSE:PEG) (PSEG) continues to align its business objectives with New Jersey’s energy and environmental policy goals, PSEG Chairman, President, and CEO Ralph Izzo said during the company’s May 2 1Q19 earnings call, adding that over the coming five years, Public Service Electric and Gas (PSE&G) plans to invest about $11bn to $16bn on programs that are expected to provide annual rate base growth of 7% to 9%, starting from a 2018 year-end base of about $19bn.
As noted in a May 2 PSEG statement, PSE&G’s capital program remains on schedule, with PSE&G expected to invest $2.7bn in electric and gas infrastructure upgrades to its transmission and distribution facilities in 2019 to maintain reliability and increase resiliency.
PSE&G continues to pursue its Energy Strong II (ES II) investment program before the New Jersey Board of Public Utilities (BPU), PSEG said, adding that the ES II infrastructure plan outlines $2.5bn of capital spend over the coming five years. The energy efficiency component of PSE&G’s Clean Energy Future filing is also pending before the BPU, PSEG said, noting that that filing is designed to achieve the electricity and gas energy savings goals outlined in the 2018 Clean Energy Act, which requires the state’s utilities to implement energy efficiency programs to achieve annual savings of 2% and 0.75% for electric and gas usage, respectively.
During the call, Izzo said that in addition to investments that improve electric system reliability and resiliency, the company also recently began the second phase of the $1.9bn gas system modernization program that will replace about 875 miles of gas mains over the next five years and make other improvements to reduce methane leaks, as well as ensure critical energy infrastructure is available to support the state’s economy.
Discussing operations, he noted that 1Q19 had slightly colder temperatures in comparison to 1Q18.
“At PSEG Power, total generating output increased by 11% over [1Q18], driven mainly by the additions of Keys and Sewaren 7 in mid-2018, which has added to Power’s increasingly efficient and clean fleet, allowing us to reliably supply the market with flexible dispatchable generation,” Izzo said. “Our fleet of nuclear generating plants also performed well on the quarter, evidenced by a 98% capacity factor. Notably, Salem 1 just completed its first ever uninterrupted operating run between refueling outages.”
Izzo also highlighted legislation signed last year by New Jersey Gov. Phil Murphy involving clean energy and the zero emission certificate (ZEC) program, noting that the BPU was tasked with establishing and implementing the state’s energy policy, with those efforts including updating the “state’s energy master plan by the end of this year, setting important targets for utilities to reduce energy usage, developing the basis for New Jersey’s first offshore wind solicitation for 1,100 MW in mid-2019, establishing a transition to a more cost-effective approach for solar energy, and carrying out the Legislature’s intent to preserve a major source of the state’s carbon-free electricity through the zero emissions certificate program.”
Izzo noted that the BPU in April voted to award ZECs to all three of PSEG’s nuclear power plants, Oak Creek, Salem 1, and Salem 2, adding, “Power began accruing the ZEC payments on April 18.”
He also noted that “construction at Bridgeport Harbor’s approaching completion,” and that “the Keys and Sewaren stations have continued to operate well since coming into service, and drove a 63% increase in combined cycle output in” 1Q19.
Izzo said, “The completion of our 1,800-MW combined cycle construction program will transform Power’s fossil fleet and bring an improvement to Power’s free cash flow generation as its ongoing capital needs decline.”
Among other things, Izzo discussed energy markets, noting that FERC recently issued a ruling directing PJM Interconnection and the New York ISO (NYISO) “to change their fast start pricing practices so that they reflect the marginal cost of serving load.”
PJM is required to make a compliance filing by July 31, along with tariff change information by Aug. 30, while the NYISO must make its compliance filing by year-end 2019, and implement the tariff changes by Dec. 31 of 2020, Izzo said.
In its May 2 statement, PSEG reported net income for 1Q19 of $700m, or $1.38 per share as compared to net income of $558m, or $1.10 per share, in 1Q18. Non-GAAP operating earnings for 1Q19 were $547m, or $1.08 per share, compared to non-GAAP operating earnings for 1Q18 of $492m, or 97 cents per share, PSEG said.