PSEG (PEG) Q3 2026 Earnings Call Transcript

Our financial results for the third quarter and year-to-date period aligned with our expectations for the full year and we are reaffirming PSEG's guidance for 2020 non-GAAP operating earnings in the range of $4.28 to $4.40 per share. Continuing investments in PSE&G's energy efficiency programs and transmission were the main contributors of growth in utility margin and were offset by higher depreciation and interest costs. As well as the timing of taxes. In the PSEG Power and Other, the absence of Last Fall's Hope Creek refueling outage resulted in lower O&M, which, combined with an increase in realized market prices, higher nuclear generation and gas operations, drove the improvement in PSEG's power's results. Turning to our third quarter operations.

PSE&G's faced severe weather throughout the third quarter. Which highlighted our best in class storm response. Our commitment to service excellence, and the customer value of our investments in resilience, reliability, and the modernization of our electric and gas systems. A nor'easter hit our service territory in September, bringing severe wind gusts and heavy rain and affected approximately 70 thousand PSE&G electric customers. Despite widespread tree damage and challenging conditions, nearly all affected customers were efficiently restored within 24 hours. Our gas operations also remained stable throughout this multi day event, with no storm related customer outages.

I am also pleased to report that PSEG Long Island is on track for its most reliable year on record since life has started the operating service management model. And customer satisfaction metrics are all continuing to move in the right direction. Back in New Jersey, PSE and G filed its clean energy future EE 2.5 proposal in late September in response to the BPU's recently adopted framework for a 1-year extension of the EE2 triennium. Our filing highlights success and efficacy of our EE programs which generate over $1 billion in annual customer savings, having helped nearly 525 thousand residential and business customers save energy and lower utility bills since the program began in October 2020.

PSE&G's EE investments have also supported approximately 9.3 thousand jobs statewide. Over the past 6 years. And we continue to expand the use of union labor in these EE roles. And an update on some good news for customers is that PJM has prospectively reduced wholesale transmission rates for PSE and G customers. This was due to our collaboration with the state which resulted in a FERC ruling earlier this year on transmission cost allocation. Favorable to our customers, and we expect to file an early 2027 to credit the dollars back to those retail customers.

Also on the state level, we note several constructive regulatory actions the BPU has taken over the past quarter that include 1, the BPU's approval of our gas filing to lower residential gas bills by 5% effective 10/01/2026. Second was the approval of our GSMP 2 extension petition to recover investments made through May 2026, which was also effective on October 1, 3rd was the approval of our clean energy future electric vehicle recoveries for investments made through year end 2025. And 4th was the approval of our infrastructure advancement program or IAP request to recover the remaining investments through the year end 2025.

For these last 2 items, a reduction in another filing was used to offset the bill impacts of these recoveries. During our second quarter call, we mentioned that PSE and G was planning to file for updated base rates by year end 2026. Over the past several months, we have worked constructively with the federal administration to help meet the goals of the 2 executive orders issued earlier this year. In line with the spirit of those executive orders, and the Governor's affordability agenda, we anticipate filing a proposal with the New Jersey BPU to address the regulatory lag of capital investments made since our last distribution rate case. We look forward to providing you with more details shortly.

Also at the BPU, the ongoing study on modernizing New Jersey's electric utility business model has progressed to its second phase. And we are actively participating in the board stakeholder proceedings. This initiative is focusing on cost discipline, financing modernization, targeted incentives and shared savings, and staged performance based rate making. We believe these and other options mentioned in the phase 1 report including multiyear rate plans, performance based rates, performance incentive metrics, earnings sharing mechanisms, decoupling, and shared saving mechanisms offer constructive paths to strengthen the connection between customer value cost accountability, and timely recovery of prudent investment. Now turning to PSEG Power.

At PSEG Nuclear, we supply the regional grid with 8.2 TWh of reliable, carbon free baseload energy during the third quarter. operating at a capacity factor of 95.5%. Salem Unit 1 recently entered its fall refueling following a 491-day breaker to breaker run. Matching Salem Unit 2's back-to-back breaker-to-breaker posted earlier this year. PSEG Power continues to generate stable cash flows that help fund our regulated investments while pursuing high value regional growth opportunities. Turning briefly to our regional power market, PJM continues to have a significant resource adequacy problem. And will require both existing and new generation to meet ever increasing electric demand in the region.

We are following the activity at FERC and PJM regarding PJM's reliability backstop procurement and interim resource adequacy service filings. And considering how these developments interplay with our nuclear contracting efforts. In September, FERC accepted certain aspects of the RPP, but rejected others. Resulting in an anticipated delay of the RPP auction to March 2027 or later. The FERC orders did not disturb the bilateral matchmaking process to match new generation with new large load customers which has presented opportunities for us. FERC's rejection of PJM's IRAS filing reinforces that the focus has shifted to the states to address retail curtailment and cost issues associated with large load customers.

We look forward to continuing to work with New Jersey as it implements these rules. PSCG Power is continuing to develop terms with large load entities for contracting arrangements involving existing nuclear production, future nuclear upgrades, and other generation opportunities. Similar to recently announced power purchase agreements in the PJM region and specifically in New Jersey. Which we believe can produce tangible benefits for PSEG supply certainty for large loads, and create economic development opportunities for our state and the regional economy. In early October, PSEG Nuclear, in the first meeting of the governor's nuclear task force outlined the initial work plans to establish the process evaluating new nuclear development in the state.

We continue to support and enable development at our site in Salem County. We are reaffirming both our full year 2026 non GAAP operating earnings guidance and PSEG's 5-year growth outlook of 6% to 8% through 2030. In summary, our teams continue to execute our business plan. We are delivering solid results and customer value, we are making steady progress on the regulatory front. I will now turn the call over to Daniel J. Cregg, who will review the financial results and then I will rejoin the call for the Q&A session.

Daniel J. Cregg:Thank you, Ralph, and good morning, everybody. PSEG recorded net income of $0.76 per share for the third quarter of 26. Compared to $1.24 per share in 2025 and non GAAP operating earnings were $1.15 per share in the third quarter of 26, compared to $1.13 per share in 2025. These quarterly results bring our year-to-date 2026 net income to $2.91 per share and non GAAP operating earnings to $3.56 per share. We have provided you with information on slides 7 and 9 regarding the contribution to net income and non GAAP operating earnings by business for the third quarter and 9 months ended September 30, 2026.

Slides 8 and 10 contain waterfall charts to take you through the net changes. For the quarter and year-to-date periods. Over the prior year. And non GAAP operating earnings per share. Also by major business. Starting with PSE and G, reported third quarter of $506 million in for 2026 compared to $515 million in 2025. Referring to the quarter over quarter waterfall on slide 8, transmission margin increased by $0.02 per share driven by higher investments. Our distribution margin increased by $0.03 per share compared to the year ago period. Partially reflecting higher investment in distribution and energy efficiency. And an increase in the number of customers.

On the expense side, distribution O&M was up. $0.01 per share compared to the third quarter of 2025. Depreciation and interest each rose by $0.01 per share due to ongoing capital investments. Incremental debt, and the replacement of maturing debt at higher long term interest rates. Taxes and other had a net unfavorable impact of $0.04 per share, driven mostly by the timing of taxes which is recorded through an annual effective tax rate and that is to zero over a full year. Weather conditions during the third quarter as measured by the temperature humidity index, were 3% cooler than normal but 2% warmer than the third quarter of 2025.

As a reminder, the conservation incentive program or SIP mechanism decouples weather and other economic sales variances from a significant portion of our distribution margin. While helping PSE and G promote the widespread adoption of energy conservation including energy efficiency and solar programs. Under the SIP, it is the number of electric and gas customers that drives margin, And residential customer growth for electric was about 1% and gas was flat over the past 12 months. The SIP also benefits customers as higher revenues from last year's warmer than normal summer weather will continue to be refunded to electric customers.

And this past October 1, PSE&G implemented a 5% decrease for residential gas customers driven by higher revenues from a colder than normal winter in early 26. On the capital front, PSE and G invested approximately $1.1 billion during the third quarter and we are on track to execute our full year 2026 regulated capital investment plan of approximately $4.2 billion focused on continued investments in infrastructure modernization like the third phase of our gas system modernization program energy efficiency, electrification initiatives, and load growth. We are also maintaining our 5-year regulated capital investment plan of $22.5 billion to $25.5 billion through 2030.

For our customers, the value of these investments means fewer interruptions, faster restoration times, and more tools to manage their energy use. During the third quarter, the BPU approved an annual revenue increase of $14 million for investments under our infrastructure advancement program, and approved an annual increase of $8 million for investments under our clean energy future electric vehicles program. Both roll ins took effect on October 1. Moving on now to PSEG Power and other.

For the third quarter, PSEG Power and Other reported a net loss of $130 million in 2026, compared to net income of $107 million in 2025 and non GAAP operating earnings were $68 million in the third quarter of 26 compared to $50 million in the third quarter of 2025. Referring to the waterfall on Slide 8, for the third quarter of 26, versus 2025, net energy margin rose by $0.04 per share driven by higher generation and capacity prices and gas operations partly offset by the absence of PSEG Long Island's fuel and energy management fees. O&M declined by $0.02 per share from the year earlier quarter.

Benefiting from the absence of last fall's refueling and fuel cycle extension work at our 100% owned Hope Creek nuclear unit. Depreciation and interest expense were both flat and taxes and other items had a net unfavorable impact of $0.02 per share in the third quarter compared to 2025. On the operating side, nuclear fleet produced approximately 8.2 TWh during the third quarter, and reached 23.9 TWh for the 9 months ended September 30. Capacity factors for the nuclear fleet were 95.5%, 94.3% for the same quarter and 9 month periods, respectively.

We previously noted that PSEG Power cleared approximately 3.6 thousand MW of existing capacity in PJM's July 2026 base residual auction at $325 per MW-day for the energy year beginning June 2028 through May 2029. As you know, the existing price collar of a $175 to $325 per MW-day will continue in effect for this December's capacity auction. Covering the 2029, 2030 energy year. As we have stated in the past, our realized energy price for our 5-unit nuclear fleet is historically aligned with the PECO Zone, and has traded at about a 20% discount to the more liquid PJM Western hub.

Recently, the basis differential between these 2 hubs has widened to about a 30% discount, but our hedge position has limited near term exposure to this pricing move. As of September 30, PSEG power had approximately 70 TWh. Of expected generation output sold forward. We have previously mentioned that we were more than 95% hedged for 2026. And have a high percentage of assets sold forward for 2027, and less for 2028 and beyond.

On the nuclear PTC front, similar to 2026, we expect that our current portfolio position for 2027 will result in the realized value of our nuclear generation output being above the level at which we would receive a nuclear production tax credit, which, as you know, is adjusted annually for inflation. Touching on some recent financing activity, PCG had strong available liquidity totaling $3.9 billion as of the end of September. This includes over $830 million of cash on hand, primarily related to net PSE and G financing activity during the quarter. On the financing front this past August, PSE and G issued $1 billion of secured medium term notes.

Comprised of $650 million of 10-year notes at a rate of 5.4% and 350 million of 30 year notes at 6.05%. A portion of the proceeds was used to redeem $425 million of 2.25% secured MTNs at maturity in September. With the balance used to provide cash on hand to support our capital spending plan. And also in September, PSEG Power issued $400 million of 5-year senior notes at a rate of 5.55%. PSEG's level of variable rate debt represented approximately 3% of our total debt. As of the end of September.

Our variable rate debt consisted of the unhedged portion, about $250 million of the $500 million 364-day term loan at PSEG Power, maturing in December 2026 and commercial paper. Looking ahead, our solid balance sheet supports the execution of PSEG's predominantly regulated 5-year capital spending plan, without the need to issue new equity or sell assets and provides the opportunity for consistent and sustainable dividend growth. In closing, we delivered solid operating and financial performance in the third quarter and year-to-date period enabling us to maintain PSEG's full year 2026 non GAAP operating earnings guidance of $4.28 to $4.40 per share. Earnings through 2030.

Based on our confidence in executing our 5-year regulated capital investment plan, that also supports a 6% to 7.5% rate base CAGR over the same period. We continue to pursue nuclear revenue opportunities and believe recently announced agreements combining capacity upgrades with existing generating output provide wins for all parties including the economic development interests of our region. And other opportunities such as competitive transmission projects and incremental utility infrastructure projects including system investments to connect solar and battery storage resources to the grid to meet new demand, also provide upside to our current growth outlook through 2030.

Finally, we expect to introduce PSEG's 2027 non GAAP operating earnings guidance roll forward our capital investment plan update our rate base and long-term earnings CAGRs, and discuss this outlook all during our 26 year end call in February 2027. That concludes our formal remarks. And we are now ready to begin the question and answer session.

Operator:Ladies and gentlemen, we will now begin the question-and-answer session for members of the financial community. Press *1 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 2. If you are on a speakerphone, please pick up your handset before entering your request. 1 moment, please, for the first question. The first question comes from the line of Shahriar Pourreza with Wells Fargo. You may proceed with your question.

Shahriar Pourreza:Hey, guys. Good morning. Hey, Shar. How are you? Hey, Ralph. How are you doing? We are good. Excellent. Excellent. Just on Ralph, on the hedge strategy for Power as we are thinking about kind of the risks emerging, it sounds like the impact is more modest than people gave it credit for. I just. Are you assuming it normalizes in a couple of years? What instruments are you using? Is it FTRs? And just any way to quantify what proportion of the forward sold power could be impacted from basis changes maybe on an annual basis? Thanks.

Ralph A. LaRossa:Yeah. Well, I am gonna let Daniel give you a few more details. Let me just give you a high level on the whole thing, and there was a ton in your question. So we have not been given a lot on the on the hedge details. But just think about it this way, Shar. The entire PJM grid has the prices have gone up. Right? And so I think we have been saying for many years to take a look at the price at the Pico hub. And so the Pico hub has gone up. It has not gone up as quickly as the West hub has gone up.

So where we hedge has gone up, maybe not as much as some folks have been thinking for our power business, but that is where we hedge, and that is what we have been articulating for quite some time. The basis differential between the 2 shows up if you do not you are not covered in both places, and I will let Daniel give a little more detail for you from there.

Daniel J. Cregg:Yeah. So especially as you look at this year and into next year, we are at a very balanced hedge position given the ability to move things to PICO. I think that, you know, another thing to put things in context is, if you think about what we had said for a long time was that we were hedging on a fairly strict ratable approach When the PTC came in, we described that as a put option that we had, and it essentially had us thinking more about the overall position and stepping a little bit away from the pure ratable approach. And I think that same thinking goes into where we are now and how we have approached it.

We are taking a look at what the market is. As we are moving into our hedges. And with respect to products, think, which is another part of your question, You have got the ability to put on direct hedges where we are at that PECO zone as well as FTRs, but also some swaps and some options. And so there is a host of products that we utilize to try to manage the overall position ultimately, we will get paid at that at that PECO hub.

Shahriar Pourreza:Got it. Okay. that is perfect. And then just lastly on the recent PJM deals, I mean, obviously, it seems like the scarcity value for nuclear electrons is getting higher even though the last deal did not come with clean energy attributes. Maybe just elaborating on your prepared. Just updated thoughts on Pennsylvania, or New Jersey contract potential. And is it even possible to do a deal in New Jersey with the optics there? Thanks.

Ralph A. LaRossa:Yeah. I think you have seen a deal recently that talked about New Jersey. To some degree. I think the last Constellation deal talked about some of the upgrades that are going on at our Salem plant that we have been enabling. And I think that you saw that the governor, applauded that as a way to bring the tech companies to the table to pick up their fair share of some of the costs that are being incurred in the grid and in the energy market as a whole. So I think there is possibility to do things, certainly with that incremental power that you are seeing at that location.

I think the question about how much we are gonna see data centers showing up here in New Jersey remains an open item. We thought about that for quite some time. And even, I think, this election season, we have some municipalities that are that are voting on it, at that level because the governor has said she's leaving many of the decisions up to the local municipalities to decide as far as what. Whether or not they wanna embrace data center industry or not. And I think her plan is a good 1 and is kind of putting that at the place where folks have to make that decision and deal with the data centers directly.

So I think there is a possibility, but I am not-- and I know Daniel would want to give a little more color on progress in that area. I think.

Daniel J. Cregg:Sure. Just the way to think about it is that there remains some strong interest. I think these things do not happen overnight, but you have started to see some incremental deals get done. I think Ralph's take on it from a New Jersey perspective is spot on. I think there was an appreciation and an acknowledgment for what that was. And so conversations continue and advance, and I think we feel pretty good about where they are, but do not have anything to announce right now.

Shahriar Pourreza:Got it. No. Perfect. Super helpful color, guys. See you in about a week. Appreciate it. Thank you.

Operator:Our next question comes from the line of Richard Sunderland with Truist Securities. You may proceed with your question.

Richard Sunderland:Hey, Richard. Good morning. Thanks for the time today. Thanks for calling.

Ralph A. LaRossa:Ralph, I wanted to pick up some of the language around your upcoming PSE and G filing, Is that sort of a shift away from a full rate case as you spoke to on 2Q? And is this focused on rate changes or more of accounting efforts around you know, how that lag is built into the business since the last rate changes? Any sort of bigger picture on that would be helpful. Yes, Richard. I would try to keep it at a very high level now because we, you know, and I appreciate the question, as we articulated on the call. We are looking for a solution that supports the governor's initiative. We have for the last.

We talked about it ad nauseam on these calls and then other interactions about how we are aligned with the state's policy, and that goes back you know, 2, 3, 4 administrations here. We have always been successful in doing that. And we think that there might be an opportunity here in a filing to do just that, stay aligned, and still address the regulatory lag that exists. So we expect that we will be making a filing. that is what I said in the prepared remarks. And as soon as we make that filing, we will communicate the details of that to you. But it is all about staying aligned and enabling the governor's policy.

Richard Sunderland:Okay. Okay. Understood. I guess, you know, maybe it is from this to the bigger picture and, you know, the BPU Phase 2 efforts. Anything out of there that is informing how you are viewing, you know, the potential around this filing or anything you can speak to around just kind of the overall backdrop in the state and how that is informing your strategy around this filing and presumably others thereafter?

Ralph A. LaRossa:Yes. I think, look, the timing of all of those recommendations that will come out of. I think it is E3 as the consultant that is been working on that with the BPU that will come out and be made.

I think you know, if we were to make a filing, that could be aligning continuing the alignment for our standpoint with level setting our rates as the state rolls out new regulatory policies but I think if you take a hard look at what is there and what E3 has been talking about, are things that the governor has said in the past and things that the company has said in companies have said in the past here in New Jersey. So we continue to look forward to that. We continue to participate in those proceedings.

But I do not think our filing that we are doing here is all about staying aligned with the governor's goals to keep rates flat for as long as and we will see what we can do to be aligned there.

Richard Sunderland:Understood. Sounds like a lot more to come. I will leave it there. Thank you. Thank you.

Operator:Our next question comes from the line of Matt Petit with Barclays.

Nicholas Campanella:Hey, it is Nick Campanella on for Matt. Hope you can hear me okay. Hey, Nick. Hey. Thanks for the time. Yes. Thanks. Thank you for all the disclosures. I really appreciate it. Maybe we should follow up there on the basis. You know, you said that you are gonna be above PTC level in 2027 still despite the widening basis, maybe just to confirm that. And then how do you see that case playing out for 2028?

Daniel J. Cregg:Yes. So we have said that, and that is the case. To confirm your question is confirmatory to what we said. And I think, you know, look. We can look to the forwards for where markets are right now. I think we have got know, over a year before we start to get into 2020. I am not gonna predict where markets are gonna go. I think what we look for more fundamentally is what the supply demand balance is. And I think continuing to watch what is coming online, both from a generation and a demand standpoint, is ultimately what is going to drive that.

But I think what we have seen is increasing announcements about demand more so than what generation is coming on and generation continues to be a little bit of a struggle to see stuff coming on quickly other than maybe some solar and storage. So I think you are probably gonna continue to see some upward pressure, but that. That will manifest itself in the forwards as we go forward.

Nicholas Campanella:Great. And then a lot of moving pieces as we kind of get ready for your next full fourth quarter update. You know, when we kind of take into account, it seems like you can absorb the basis and you are also maybe getting kind of a true up and lag at the utility, but I guess we will see what the filing looks like. Just how do you kind of frame the 6% to 8% 27 and beyond? Can you be outside of the range? In any given year? Do you still see yourself kind of growing inside of that range? Any comments there would be helpful.

Ralph A. LaRossa:Yeah. Nick, I cannot emphasize enough the reaffirmation that we have made of the. Of our 6 day growth rate. And take a lot of time and a lot of pride in going through that. We stand by it, and that is where we think we are gonna be. So why we came out and reaffirmed it.

Nicholas Campanella:Thank you very much. Good day. Thank you.

Operator:Our next question comes from the line of Nicholas Amicucci with Evercore ISI. You may proceed with your question.

Nicholas Amicucci:Hey, Ralph. Hey, Daniel. How are you? Nick, I guess we call you. Yes. I have been called a lot worse. Sorry. I just wanted to. I am kind of following up on Nick's previous question too. Just as we kind of think about the roll forward and kind of as we think about the next capital update, I guess, what are kind of the what are the near term items that we could kind of see creep into that if we think about, like, competitive transmission wins potentially the nuclear contracting, obviously, that is, you know, up. You know, that. that is pretty fluid. But. Or we think about, is it gonna be more solar and storage type deals?

Yeah.

Ralph A. LaRossa:Nick, we have been. I do not I do not I think things have changed all that much for us from a projection standpoint of what we have been talking about for the last few quarters. Think we have that opportunity as the policies continue to ripen here in New Jersey for us to do more on the solar and support for solar and batteries through our enabling of the grid readiness. there is some real focus on VPP, the virtual power plants here in New Jersey. It would be a small opportunity set for the utilities, but we are all gonna participate in that. Some of it will be IT activities and so on to enable it.

I think you will see some additional transmission continuing to be built in the PJM region. Everyone talks about this basis differential between the West and many of the other hubs. Here at PJM. it is not just PECO. That differential exists in. And I Think that is Going To Create Opportunities As Well Through Different Ways That PJM comes up with its plans, whether it is market driven solutions or what they normally do in the RTEP process. So I think you are going to see more of that. I do not want to front run what that is. See what PJM comes out with.

And we have been a participant in a successful participant in some of those proceedings in the past, and that is that Maryland project that we have ongoing. So it is more of the same for us, but continued clarity in our line of sight. Right. That makes sense. Perfect. Thanks, Rob.

Nicholas Amicucci:Then if I could just follow-up with somewhat of a cleanup item I just wanna make sure I understand it. The, the Salem operates under development. Is there any of that earnings contribution within the current outlook, or is that something that is going to be longer dated?

Daniel J. Cregg:Yeah. that is within our 5 year plan, Nick. So that is-- that will be online by the time we get to the end of our 5 year period.

Nicholas Amicucci:Perfect. Thanks, guys. Fair enough. Thank you.

Operator:Our next question comes from the line of Carly Davenport with Goldman Sachs. Your line is now open.

Carly Davenport:Good morning, Carly. Good morning. Thanks so much for taking the questions. Maybe just wanted to get your views on PJM's sort of latest response to the FERC on the RPP last week. You have mentioned you have submitted some projects into the RBP process. So just curious if you could expand a little bit on how you are thinking about that process versus perhaps pursuing opportunities just in the bilateral market.

Ralph A. LaRossa:Well, I think it is really both, Carly. I think that I still think that the effort that is been put forth has been helpful to try to make something happen. I think it has been a little bit bumpy with the back and forth with FERC. And I think that is that is understandable. But I think what it what it probably has done more than anything else is just broaden the opportunity set to try to get some generation built for all this load that we are seeing projected to come online as we step through the next number of years.

And so they have gone back and forth with FERC, and I think there is been a little bit of frustration from timing and from where things have landed that it is a little bit of a do loop. But net, I still applaud the concept to try to get some generation built we are gonna need it. And I think it has. If nothing else, it has expanded the potential for some bilateral deals as well.

Carly Davenport:Got it. Okay. Great. that is helpful. Thank you. And then you highlighted some of the financing activity during the quarter. I guess, with the move in interest rates and the capital plan needs, how should we be thinking about the impacts to perhaps 2027 guidance or any earning sensitivities with the move that we have recently seen in rates?

Ralph A. LaRossa:that is. I just-- I think Daniel and his team continue to do a great job in managing that. We are through most of the 2026 financing that we needed. And, I, you know, I think we are in fine shape as we move into 2027.

Daniel J. Cregg:If you look forward to 2027, it is. Our activity will not be at the same level it was at in 2026. I think that, you know, we do look for opportunities to hedge in into next year, Carly. I think that, you know, we are all facing a little bit of an increasing interest rate environment. We have got the regulatory construct that helps with some of that, especially given the magnitude of our transition business. And so, you know, we are through our 2026 plan, and we will move into the 2027 plan. In that environment, but with a little bit of a.

Of an eye towards what is going on in '7 that we are looking to right now in 2020 Thank you for the time.

Carly Davenport:Yep. Thank you.

Operator:Our next question comes from the line of David Arcaro with Morgan Stanley. You may proceed with your question.

David Arcaro:Hey. Thanks. Good morning. Hey, David. Long time. How are you? Good. Good. Was wondering how you are thinking about solar and storage investments from a regulated utility perspective, utility owned investments in that area? Yes, David.

Ralph A. LaRossa:We would love to. We have in the past just to refresh everyone's memory, we had our Solar for All program that we had here in New Jersey for quite some time. I was focused mainly on some of the landfill opportunities that existed, and we executed on that. And those plants are still in and running. You all know about some of the work that we did putting some solar on poles here. We have done that in the past. And on the battery front, we were the first utility to put in a filing over 5 years ago now on that front. And so we continue to look for those opportunities.

I think the policy is not yet certain here in New Jersey as to whether or not it will move in a regulated direction or stay solely competitive. And so we are monitoring it, and we are gonna participate. We have the knowledge and the skills here to do that. But we do not wanna front run the policy of the state. We want to align with that state policy. So as that becomes clearer, we will participate. We will do so in a way that is wanted by the state of New Jersey.

David Arcaro:Yep. Got it. Understood. that is helpful. And then I was just wondering, you mentioned just thinking through how to address regulatory lag, was wondering what types of proposals might you be supportive of or considering as you think about going forward now. If it is something besides trackers how you manage or propose new structures around regulatory lag?

Ralph A. LaRossa:Yes, David. Again, I do not want to front-run the discussions that were having. it is all constructive. And, again, it is all it is all aligned with trying to keep rates flat, but stay tuned, and we will communicate as quickly as we possibly can.

David Arcaro:Okay. Got it. Thanks so much. I will leave it there. Appreciate it. Thank you.

Operator:Our next question comes from the line of Michael Sullivan with Wolfe Research. Please proceed with your question.

Michael Sullivan:Hey. Wanted to ask on your thoughts on the future of the capacity auction in PJM and where you. that is going, and then just as you get ready for this roll forward, how you come up with assumptions for 2031, given we are gonna be on kind of the current construct out there?

Ralph A. LaRossa:Yeah. Michael, that crystal ball sometimes it gets clear and sometimes it gets a little cloudier. You know, last week, New Jersey had a pretty big conversation about energy here that was hosted by New Jersey business and Industry Association. And at that conference, and discussion, PJM was represented, and they talked a lot. And there is some good press that was written up about it in the. That discussed, you know, where PJM really wants to be the residual auction. They reinforced that they are looking for the states to pick up the capacity, issues and deal with what they need to from a generation standpoint in the states.

So I think you have got to triangulate so many different things here. You have gotta triangulate conversations like that gotta comp. Triangulate the RPP that Dan was talking about before, the bilateral contracts that you see taking place, some of the mandates in individual states to bring your own generation you are going to build a certain-sized load in those states. Some of that here, some of that in other places.

And I cannot give you a specific answer on what is going to-- where we are gonna be sitting in 2031, but I know what we are doing. that is continuing to look at all of those inputs and trying to come up with the best way that we can participate and be part of that growth opportunity.

Michael Sullivan:Okay. Great. And then I think there is a, you know, another annual PJM open window coming up here. Maybe if you could just give us a sense of your expectations there for the opportunity set. Yeah. You are talking about the transmission open window, right? Exactly. Yep.

Ralph A. LaRossa:Yes. Yes. So, look, I alluded to that a little bit earlier. I think that this basis conversations that we are talking about. And, again, it is not just PECO to the West. it is many of the other hubs as well. We will create opportunities for RTEP type solutions in that open window. So we will we will see. We will monitor. I think it will be more the if our crystal ball on that is right, there will be more opportunities than there was in the in the most recent open window.

Michael Sullivan:Very helpful. Thank you. Thanks, Michael.

Operator:Thank you. Our next question comes from the line of Jeremy Tonet with JPMorgan. You may proceed with your question.

Jeremy Tonet:You there, Jeremy? Hey. Good morning. This is actually Aiden Kelly on Jeremy. Can you guys hear me now? We can, Ian. How are you? Good. Good. Thanks for the time today. Just 1, like, small question on my end. Can you provide any update on PSE&G's large load inquiries Any thoughts or color on where the total count stands at this point in time, which back in the past, was probably around 11.8 gigawatts as of December 25? You kind of still see that as the same level or any kind of shift in any inquiries to date? We have been staying at about that level. I do not have the number right in front of me.

We have been staying at about that level. And I think that what we are seeing continues to be what many people refer to as edge computing opportunities. Rather than the large you know, mega data centers that are that are out there, the hyperscaler types. So you know, that is consistent with some of the financial industries that are supported here in New Jersey. Great. Thanks for the color there. that is that is it for me. So I will leave it there.

Operator:Thank you. Our next question comes from the line of Julien Patrick Dumoulin-Smith with Jefferies. You may proceed with your question.

Julien Patrick Dumoulin-Smith:Hey. Good morning, team. Thank you guys for the time. I appreciate it. Hey, Julien. I wanted to come hey. Great. Thanks for the time, guys. Appreciate it. So look, I wanted to follow up, less so in the spirit of long-term, but just in the near term. What about tightening the guidance range here, guys? Anything that you are seeing in the near term that is driving some ambiguities?, as I hear you guys talk about hedging that is not a 2026 dynamic. As I hear you talk about rates, it is a longer dated look, is there anything on the regulatory front that is sort of impeding I know your typical cadence.

And, you talk about, like, setting a record or a, you know, a trend here. that is why I am asking if you will.

Ralph A. LaRossa:No. Julien, do not-- I would not read too much into it. I mean, we reaffirmed where we are. We have not kind of pushed you higher or lower. You should still be thinking somewhere around the midpoint of where we are. We just kinda left it at where it is from because it is been consistent with us executing against the entire year.

Julien Patrick Dumoulin-Smith:Alright. Well, we will always nitpick if we can. And then if I can. During-- no. But with that said, look, how do you think about 2027 here? And so Nick zeroed in on it. I am gonna double down on it a little bit. How do you think about where you are hedged on 2027-2028? And, again, I know that it is commercially sensitive to a certain point, but you know, PTC floor. Okay. that is a given. How do you think about where you are hedged on 2026, and is it an uptick here pricing? because I get that there is a question of, like, where and when you hedge that is important to consider here.

And, again, maybe the same is relevant for 2028 here too, but really zeroing on even on 2027. How do think about just what you have had? I imagine a lot of it established at this point. Is it act. Is there a net increase just given the overarching trend from the last 3 years and given the ratable hedging program?

Ralph A. LaRossa:Net it. it is just be clear on 1 thing there, Julien. The net increase in the hedging, is that what you are asking? Well, a net increase in hedge value, I. E, the dollar per megawatt hour rate that you are getting? Right? Or is there some other offset because of how and where you-- more importantly, where you hedge, Or basis could be an offset to that. I just wanna make sure I am hearing you clearly. Because, otherwise, you would think that the multiyear trend we have seen regardless of the basis, may very well provide an uptick in overall realized price? Tell me how you put that again.

Because I get the PTC floor is kind of a baseline statement without giving too much specificity here. Right. Look, I will try to give Daniel a little bit of air cover here for 30 seconds, and he can add some more if he would like. But I will not I will not get that. The end of the day, I think Julien, what we were alluding to there in many of these conversations, and you just hit on it, is where are you assuming the hedge is taken, is made, And where is it being executed at?

And if and if folks are assuming it is all at the West, they may have a different value as you asked in the hedge value going higher. Versus somebody who was thinking it was gonna be at PECO. And so we have been reinforcing with folks that our hedge has been executed in the past and is currently, as we have talked about ad nauseam here, is at PECO? So we. You know, it has not. The. Everything has gone up, but PECO has not gone up as much as the West.

Daniel J. Cregg:Yeah. And I think, we. We have seen some people kinda jump on the West price increasing and implied that for where we are necessarily going to be and our units are priced at PECO and not out there. But we also have taken care to ensure that we are putting on positions that are closer to where our price is actually going to land. And so I do not want to give partial guidance to the guidance we have not given yet, which is kind of where your question goes to.

But I think that we are in a pretty good spot related to what prices look like against the backdrop of the movement that you have seen over the year. I will kind of leave it at that.

Ralph A. LaRossa:Yeah. Again, Julien, we are trying to be respectful of the question but not go into details when we happen to have not provided.

Julien Patrick Dumoulin-Smith:Thank you.

Operator:Our next question comes from the line our next question comes from the line of Steve Fleishman with RBC Capital Markets. You may proceed with your question.

Analyst:Hey, Ralph and Daniel. Good morning. Hey, Steve. Just a quick 1 on new nuclear. I think you guys have been very clear about your appetite for nuclear new nuclear. But as a large operator and a holder of the early site permit, can you just talk about how those conversations are progressing in the US? Maybe like a quarter or 2 ago, it felt like there was a lot of focus on this, and it seems like it is quieted down a little bit. And there is more of a focus even from the administration on up rates just interested to hear kind of what is going on behind the scenes. Yeah.

Look, I think, again, alignment with our governor is all about enabling new nuclear here. She has been very vocal about the fact that she sees that as a long term solution. For the state and beyond, the nuclear industry that is. So we have been we have been participating where we can, And again, we think our site based upon location, based upon the early site permit, And when I say location, not just where it sits within PJM, but where it also sits as far as access to ports, and ability to move large pieces of equipment easily gives us a real advantage. And so we are out advocating as strongly as we can with the.

With those conversations that you are alluding to. We are within those conversations that you are alluding to. Any real visible data points that we should be watching for in the New Jersey process or more broadly?

Ralph A. LaRossa:I know you said there was an October meeting, but like what came out of that? Yes. I think New Jersey continues to have the conversations. And again, they are focus of the New Jersey policy conversations have been about educating and transparency for, the public. About you know, what the industry is and what it might mean for energy prices here in New Jersey. So I think that is been. You know, that first meeting was the start of that. there is a website and a few other things that have been put up by the state of New Jersey to focus on it.

But I think from a data point standpoint in New Jersey, the first real action will be when the Board of Public Utilities holds its auction for new nuclear, which was called for by the legislation that was passed last year. So that will be the first thing here in New Jersey. Obviously, the, the federal government, could be doing many things to help enable the nuclear and I certainly am not gonna front-run the federal government on that. Yeah.

Daniel J. Cregg:Steve, I mean, the only thing I would add, and it is not anything that you do not know, but it is-- I think it is a very complicated multiparty thing that folks are working on. And so that kind of becomes the challenge. And I think in instances where things may be a little quiet, there is. it is it my sense is activity, but it is kind of tough to finalize anything or get to an announcement stage. So I think that is suffering just from the nature of what it is and what people are trying to get done.

Analyst:Okay. that is very helpful. Thanks, guys. Appreciate the time. Thanks, Steve.

Operator:Thank you. Our last question comes from the line of Anthony Crowdell with Mizuho. Please proceed with your question.

Anthony Crowdell:Good morning, Anthony. Good morning. what is going on? I was in Newark all day yesterday. It was a beautiful day in Newark. Beautiful day. I guess just to maybe 1 question or follow-up. Just. You talked about the potential that maybe getting a large load customer on either uprates or existing nuclear I guess, does that change your hedging strategy that maybe you would go more open as those conversations are going on? And then I have a follow-up.

Daniel J. Cregg:Yeah. I think the way to think about it is that whatever is in place will be a contract for a portion of what you are looking to sell more broadly. So you would definitively have to take that into account as you. As you are looking at your overall position.

Anthony Crowdell:Got it. And then this may be more of a EEI 101 question just given the time. So just throw the flag if necessary. If we think about how hedging works, is it I think everyone's concern is that maybe you are you are short the basis at PJM West and you are long the PECO zone, which you guys are very clear. that is where you price your units. They have this, like, exposure that you are kind of short the PJM West price, I guess. Is that how the hedging works or is that how you go about hedges And if this is better just to pick up at EEI, let me know.

Daniel J. Cregg:No. I mean, I think PJM West is a product that is available for you, but there is other ways to move those positions closer to your actual unit. And we do utilize those products to do exactly that.

Ralph A. LaRossa:Yeah. And, Anthony, it is not-- it is just there are other people that trade in those products to listen to these calls like anybody else. So we are purposefully describing the best we can right now.

Anthony Crowdell:Great. that is all I had. I will see you guys in Phoenix. Thanks, Anthony. Thanks, Anthony.

Operator:Thank you. And that is all the time we have for questions. And I would like to turn the floor back to Mr. LaRossa for closing comments.

Ralph A. LaRossa:Thank you very much. Thank you all for calling in. We appreciate the ongoing interest I just want to kind of tie out a couple things. it is been a long summer, many storms, many activities that have gone on here that were challenges for the company beyond what we have talked about, on this call. And I just wanna thank the employees at Nuclear for the ongoing performance there. I think just completed another breaker to breaker run at Salem 1. Our t and d operations both in Long Island and in New Jersey had outstanding years in a summer that was full of Friday night storms. And have continued to perform very well.

And we will continue to have further conversations about the topics that we discussed today and look forward to it at EEI next week. So thanks for calling in and 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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PSEG (PEG) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool