Public Service Enterprise Group, Inc. Q3 FY2026 earnings call

• Financial Results & Guidance:

  • Reported Q3 2026 EPS of $0.76 (Net Income) and $1.15 (Non-GAAP Operating Earnings).
  • Year-to-date Net Income: $2.91/share; Non-GAAP Operating Earnings: $3.56/share.
  • Reaffirmed full-year 2026 Non-GAAP Operating Earnings guidance of $4.28–$4.40 per share.
  • Reaffirmed five-year growth outlook of 6%–8% through 2030.

• Operational Excellence & Resilience:

  • Nuclear fleet produced 8.2 TWh in Q3 with a 95.5% capacity factor. Salem Unit 1 completed a 491-day breaker-to-breaker run.
  • Demonstrated best-in-class storm response during September nor’easter, restoring ~70,000 customers within 24 hours.
  • PSEG Long Island on track for its most reliable year on record.

• Regulatory & Strategic Initiatives:

  • Filed Clean Energy Future EE2.5 proposal in NJ, highlighting programs that generate >$1B in annual customer savings.
  • BPU approved several recoveries: Gas bill reduction (5%), GSMP2 extension, EV program recoveries, and Infrastructure Advancement Program (IAP).
  • Anticipating filing for updated base rates to address regulatory lag, aligned with Governor’s affordability agenda.
  • PJM resource adequacy issues persist; FERC accepted some aspects of Reliability Pricing Model (RPM) but rejected others, delaying auction to March 2027 or later.

• Capital Investment:

  • Invested ~$1.1 billion in Q3 2026.
  • On track for full-year regulated capex of ~$4.2 billion, focused on infrastructure modernization, energy efficiency, and electrification.
  • Maintaining five-year capex plan of $22.5–$25.5 billion through 2030.

• Nuclear & Large Load Opportunities:

  • Active participation in bilateral contracting with large load entities (data centers) for existing nuclear output and future upgrades.
  • Supported development at Salem County site; participated in Governor’s Nuclear Task Force.
  • Strong interest from tech companies; local municipalities deciding on data center adoption.

The transcript does not provide explicit revenue contribution percentages for distinct product segments. However, financial performance by business unit is as follows:

• Utility (PSE&G & PSEG Long Island):

  • Contributed positively to non-GAAP operating earnings growth. Distribution margin increased by $0.03 per share year-over-year, driven by higher investment and customer growth. Conservation Incentive Program (CIP) decoupled weather variances from a significant portion of the margin.
  • Operating expenses were partially offset by efficiency gains; however, distribution O&M rose $0.10 per share due to storm response and resilience investments.

• PSEG Power and Other:

  • Reported a net loss of $130 million in Q3 2026, compared to net income of $107 million in Q3 2025.
  • Non-GAAP operating earnings improved to $68 million in Q3 2026 from $50 million in Q3 2025.
  • Growth was driven by higher generation/capacity prices, gas operations, and lower O&M (due to the absence of Hope Creek refueling outage). This was partially offset by unfavorable tax timing impacts ($0.02/share) and the absence of PSEG Long Island’s fuel/energy management fees.

• Full-Year 2026 Non-GAAP Operating Earnings: Reaffirmed range of $4.28 to $4.40 per share.
• Long-Term Growth Outlook: Reaffirmed five-year (through 2030) rate-based earnings CAGR of 6% to 8%.
• Capital Investment Plan: Maintained five-year regulated capital investment plan of $22.5 to $25.5 billion through 2030.
• Future Guidance: Will introduce 2027 Non-GAAP Operating Earnings Guidance, roll forward capital plan, and update CAGRs during the February 2027 year-end call.

• Regulatory Lag & Rate Cases: Potential delays or uncertainties in recovering investments through base rate filings; alignment with state policy goals adds complexity.
• PJM Market Uncertainty: Resource adequacy problems and FERC/PJM back-and-forth regarding reliability mechanisms (RPP/IRAS) create uncertainty for new generation procurement and pricing.
• Basis Risk: Widening basis differential between PECO zone and PJM Western hub (~30% discount) poses risk if hedging positions are not adequately managed, though current hedges limit mid-term exposure.
• Interest Rate Environment: Higher long-term interest rates increase depreciation and interest costs; rising rates impact financing costs for ongoing capital plans.
• Weather Variability: While CIP decouples some variance, extreme weather events (storms) drive higher O&M and restoration costs, impacting short-term margins.
• Nuclear Policy & Competition: Dependence on favorable state/federal policies for nuclear viability (PTC, new nuclear development); competition from other generation sources and potential curtailment risks associated with large load customers.

Q: Analyst asked about power hedging strategy given widening basis differentials between PECO and West hubs, and quantifying impact on forward sales. / A: Management clarified that hedges are primarily executed at the PECO hub, where prices have risen less than the West hub. They utilize various instruments (direct hedges, FTRs, swaps) to manage position. The hedge is balanced, and realized value remains above the PTC floor. No specific proportion of forward sales impacted was disclosed, but the strategy mitigates basis risk by aligning hedges with actual pricing locations.

Q: Analyst inquired about the nature of the upcoming PSE&G rate filing, whether it replaces a full rate case, and how it addresses regulatory lag while aligning with state policy. / A: CEO explained the filing aims to address regulatory lag while staying aligned with the Governor’s affordability agenda to keep rates flat. It is not a shift away from standard rate cases but a constructive solution to close the gap since the last case. Details will be shared upon filing. The approach supports the BPU’s modernization study outcomes, focusing on cost discipline and shared savings.

Q: Analyst asked about the future of PJM capacity auctions, specifically the RBA, and expectations for 2031 assumptions amidst shifting federal/state roles. / A: CEO noted PJM wants states to handle capacity issues, creating a complex landscape involving bilateral contracts, state mandates, and market solutions. While specific 2031 predictions are difficult, PSEG monitors all inputs (FERC actions, bilateral deals, state policies) to participate in growth opportunities. Transmission open windows may offer more RTEP-type solutions due to basis differentials.

Q: Analyst sought views on solar/storage utility-owned investments and how the company manages regulatory lag beyond trackers. / A: CEO stated PSEG has past experience with solar (landfill sites) and batteries but waits for clearer NJ policy on regulated vs. competitive models. They aim to align with state policy rather than front-run it. Regarding regulatory lag, they are exploring constructive proposals aligned with keeping rates flat, but no specific structures were detailed yet.

Q: Analyst asked about the progress of new nuclear conversations, noting a perceived quiet period, and visible data points for NJ. / A: CEO emphasized strong alignment with the Governor on new nuclear as a long-term solution. PSEG advocates for its Salem site due to location/port access. Visible data points include the first meeting of the Governor’s Nuclear Task Force and the upcoming BPU auction for new nuclear mandated by legislation. Federal support is also being monitored.