公共服務電力與天然氣 (PEG) 2025 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. My name is Rob, and I am your event operator today. I'd like to welcome everyone to today's conference, Public Service Enterprise Group's fourth quarter and full year 2025 earnings conference call and webcast. (Operator Instructions) As a reminder, today's conference is being recorded today, February 26, 2026, and will be available for replay as an audio webcast on PSEG's Investor Relations website at https://investor.pseg.com.

I would now like to turn the call over to Carlotta Chan. Please go ahead.

Good morning, and welcome to PSEG's fourth quarter and full year 2025 earnings presentation. On today's call are Ralph LaRossa, Chair, President and CEO; and Dan Cregg, 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-K 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 materials. Following our prepared remarks, we will conduct a 30-minute question-and-answer session.

I will now turn the call over to Ralph LaRossa.

Thank you, Carlotta, and thank you all for joining us to review PSEG's fourth quarter and full year 2025 financial and operating results, our financial outlook for the year ahead and our long-term projections through 2030. But before I dive in, I'd like to thank our employees who once again this past week, prepared and restored our system from yet another intense combination of winter weather that brought over 2 feet of heavy snow, single-digit temperatures and 60 mile per hour winds to our service areas in New Jersey and Long Island. I can't say enough about our crew's dedication throughout this entire winter season, working in freezing conditions to keep the lights on and our customers warm. Now starting with our financial results. PSEG reported net income of $0.63 per share for the fourth quarter and $4.22 per share for the full year of 2025.

Our non-GAAP operating earnings were $0.72 per share for the fourth quarter and $4.05 per share for the full year of 2025. Also earlier today, we announced our dividend declaration for the first quarter of 2026, setting the indicative annual rate at $2.68 per share. This is a $0.16 per share increase, an increase of approximately 6% over last year's dividend and higher than last year's increase of $0.12 per share, all reinforced by our confidence in our long-term projection. Starting with operations. On February 7, 2026, we hit a seasonal gas send-out peaks when temperatures dipped below 10 degrees Fahrenheit, registering the fifth highest send-out in our history.

During that same cold snap, PSE&G's appliance service business responded to nearly 2,000 no heat calls per day compared to an average of 600 calls on a typical winter day. And our electrical systems also performed well with a comparatively small group of customers affected and PSE&G was able to restore service to virtually all customers within 24 hours. Beyond the storm seen in 2026 to date, PSEG's full year results for 2025 were achieved while facing multiple severe storms and extreme weather events throughout the year that stressed our electric and gas systems. PSE&G's response guided by our operational excellence model achieved excellent results in safety, reliability and customer satisfaction measures. I'm also very proud of the work PSEG is doing in support of New Jersey's efforts to minimize utility bill increases.

Last July, we implemented several summer relief initiatives in cooperation with New Jersey regulators to help our customers manage the impact of PJM-related electric supply costs that PSE&G passes through to customers. The latest example of our efforts occurred on February 1 when PSE&G held its residential gas rate flat for the remainder of the winter 2025 through 2026 heating season.

Extending the stability of our gas rates further highlights PSE&G's favorable residential gas build profile which is not only the lowest cost in the state, but also the lowest in the region. And there's more good news to report on the customer front. Earlier this month, the New Jersey Board of Public Utilities approved the results of the latest electric supply auction, known as the Basic Generation Supply Auction or BGS, which will result in a 1.8% reduction in the average monthly bill for PSE&G residential electric customers starting June 1 when seasonal electrical use is at its highest.

Over the next several months, we will introduce even more ways to help our customers manage and save on their utility bills with increased budget billing education, new time of use rates and more energy-efficiency solutions. PSE&G also received approval to extend its three year GSMP III program, which will continue our efforts to reduce methane emissions of powerful greenhouse gas.

We note that our cumulative progress from these programs has reduced our methane emissions by over 30% system-wide from 2018 levels. And recent winter weather has validated how effective our gas system investments have been by reducing both the number of pipe breaks and low-pressure issues compared to similar low-temperature events in the past. Our operating performance continues to be a positive differentiator in the state and the region.

PSE&G received the 2025 ReliabilityOne Awards outstanding system resiliency, outstanding customer engagement and for the 24th year in a row, outstanding reliability performance in the Mid-Atlantic region. PSE&G ranked number one in customer satisfaction among large electric utilities in the East region according to the J.D. Power 2025 US Electric Utility Residential Customer Satisfaction Study, marking the fourth consecutive year PSE&G has earned the top position in this segment.

And PSEG Long Island, yes, PSEG Long Island ranked number one in customer satisfaction among large electric utilities in the East region according to the J.D. Power 2025 US Electric Utility Business Customer Satisfaction Study, capping an 11-year rise from the bottom of the ranking since PSEG Long Island took over the operation of the electric grid on Long Island.

And by the way, PSE&G was number two in that same study. Finally, PSEG Long Island was awarded a five year contract extension to continue as the electric transmission and distribution operator on Long Island and the Rockaways through 2030. We look forward to continuing our constructive partnership with LIPA that has enabled us to become the best-performing overhead electric service provider in New York State and like PSE&G in New Jersey, a top performer nationally for reliability and safety.

2025 was a successful year for our company, both operationally and financially. PSE&G executed on its capital plan, investing approximately $1 billion in the fourth quarter and approximately $3.7 billion in total for the year in regulated capital spend. On the generating side, PSEG Nuclear posted a 91.2% capacity factor for the full year, producing approximately 30.9-terawatt hours of 24/7 carbon-free baseload power for the grid, including during the intense June 2025 heat wave when New Jersey needed it most. PSEG's non-GAAP operating earnings for 2025 were at the high end of our narrowed guidance range of $4 to $4.06 per share, extending management's track record of delivering results that either met or exceeded our earnings guidance for the 21st consecutive year. Turning to our outlook for 2026.

First, we initiated a non-GAAP operating earnings guidance in the range of $4.28 to $4.40 per share, an increase at the midpoint of 7% over 2025 results. Our 2026 guidance is based on our investment program at PSE&G and expected nuclear output realizing market prices that exceed the nuclear PTC threshold, and we are approximately 95% hedged for the remainder of 2026. We will also keep to our long-standing practice of stringent cost control and continuous improvement to support affordability and benefit our customers. Second, we updated PSEG's capital program to $24 billion to $28 billion for the 2026 to 2030 period, with over 90% focused on regulated investments. Regulated capital spending is forecasted in the range of $22.5 billion to $25.5 billion and supports a rate base CAGR of 6% to 7.5% over the same period.

And our solid balance sheet supports execution of this robust five year capital plan, still without the need to issue equity or sell assets. With these updates, we are raising PSEG's long-term non-GAAP earnings growth outlook to 6% to 8% through 2030. This higher growth rate is supported by our best-in-class utility operations executing on a customer-focused infrastructure modernization and energy efficiency investment programs. This regulated growth is supported by nuclear generation ownership, a significant cash flow generator and therefore, a differentiator among our peers. Potential growth beyond our forecasted 6% to 8% CAGR range could be achieved through opportunities to contract existing and additional generating output and through incremental regulated capital investments.

The supply-demand dynamic we are seeing in New Jersey has prompted executive orders to be issued to explore supply options, including the development of an additional 3,000 megawatts of community solar and battery storage. We have been cooperatively working with policymakers since last November, and we look to help New Jersey achieve the high priority goals of these executive orders, which include the exploration of regulatory reform. The executive orders also direct the BPU to provide for residential universal bill credits to again offset electricity supply rate increases. We look forward to constructive dialogue with the BPU on these issues. Now turning to the legislative front.

In the past few days, a bill was reintroduced in the state legislature to establish a new natural gas power plant procurement program at the BPU and incentivize the development of new natural gas power plants in the state. This gas bill pairs with an earlier bill that establishes a new nuclear procurement program also within the BPU that was introduced at the start of this legislative session. We look forward to working with policymakers to advance energy strategies and resources that secure affordable, reliable and diverse energy supplies and support legislation that would increase competition for generation supply should New Jersey decide to pursue new in-state generation. And as we have previously mentioned, we are well positioned to help meet that need. We have sites with grid connection capability and pipeline supplies as well as the in-house expertise to build new supply here in New Jersey with prevailing wage labor.

I will now turn the call over to Dan, who will walk you through our 2025 financial results and the outlook for 2026 and then rejoin the call for Q&A.

Thank you, Ralph, and good morning, everyone. PSEG reported net income of $4.22 per share for the full year of 2025 compared to net income of $3.54 per share for 2024. Non-GAAP operating earnings for the full year of 2025 were $4.05 per share compared to $3.68 per share for 2024. For the fourth quarter of 2025, net income was $0.63 per share compared to $0.57 per share in 2024 and non-GAAP operating earnings were $0.72 per share in the fourth quarter of 2025 compared to $0.84 per share in 2024. Slides 8 and 10 detail the contribution to non-GAAP operating earnings per share by business segment for the fourth quarter and full year of 2025.

Slides 9 and 11 contain waterfall charts that take you through the net changes for the quarter-over-quarter and full year periods in non-GAAP operating earnings per share by major business. Starting with PSE&G, which reported fourth quarter net income and non-GAAP operating earnings of $352 million for 2025 compared to $378 million in 2024. For the full year, PSE&G had net income and non-GAAP operating earnings of $1.75 billion in 2025 compared to $1.55 billion in 2024.

Utilities results for the full year were driven by the implementation of new electric and gas base distribution rates that took effect in mid-October 2024 to recover a return of and on previous capital investments totaling more than $3 billion and higher working capital balances. Compared to the fourth quarter of 2024, distribution margin increased by $0.07 per share, mostly reflecting incremental gas margin from the third quarter GSMP 2 roll in, an increase in the number of customers and higher gas demand.

Higher investment in energy efficiency also contributed to distribution margin in the quarter. On the expense side, distribution O&M increased $0.04 per share compared to the fourth quarter of 2024, primarily due to higher reserves and operational costs. Depreciation and interest expense rose by $0.02 per share compared to the fourth quarter of 2024, reflecting higher levels of depreciable plant investment and long-term debt at higher interest rates. And lastly, distribution-related taxes were $0.05 per share higher due to plant-related taxes and lower write-offs related to bad debt compared to 2024. Weather during the fourth quarter, as measured by heating degree days, was 9% colder than normal and 23% colder than the fourth quarter of 2024.

And as a reminder, the Conservation Incentive Program or CIP mechanism decouples weather and other economic sales variances from a significant portion of our distribution margin, all while helping PSE&G promote the widespread adoption of energy conservation, including energy efficiency and solar programs. Under the CIP, the number of electric and gas customers drives margin and the residential customer growth for both segments was approximately 1% in 2025. On the capital front, as Ralph mentioned, PSE&G invested approximately $1 billion during the fourth quarter. And for the full year 2025, our capital spending totaled approximately $3.7 billion with continued investments in infrastructure modernization, energy efficiency and supporting growing customer demand. For 2026, our planned capital investment program for the regulated business is approximately $4.2 billion.

We also rolled forward our five year regulated capital investment plan through 2030, amounting to $22.5 billion to $25.5 billion, and that compares to our prior plan of $21 billion to $24 billion. The $1.5 billion increase in regulated investments is primarily driven by anticipated load growth due to data centers and other new customers plus other incremental distribution reliability and resiliency investments. Our 2026 to 2030 regulated capital investment plan is expected to produce a compounded annual growth in PSE&G's rate base of 6% to 7.5%, starting from a year-end 2025 balance of approximately $36 billion, which includes construction work in progress.

These investments help us maintain our best-in-class reliability and customer service as well as meet New Jersey's energy savings goals. Earlier this month, the BPU certified the results of the annual New Jersey BGS auction that was held to secure electricity for customers that have not selected a third-party supplier.

And based on the competitive auction results, the cost of electricity supply on PSE&G residential electric bills will decline by 1.8% starting June 1, 2026. This decrease reflects the net impact of a lower overall 2026 BGS price that will replace the 2023 auction result that contained higher energy costs. Moving to PSEG Power and Other. For the fourth quarter of 2025, PSEG Power and Other reported a net loss of $37 million compared to a net loss of $92 million in the fourth quarter of 2024. Non-GAAP operating earnings were $10 million for the fourth quarter compared to non-GAAP results of $43 million for the fourth quarter of 2024.

For the full year, PSEG Power and Other reported net income of $366 million in 2025 compared to $225 million in 2024, and non-GAAP operating earnings were $284 million in 2025 compared to $292 million in 2024. Referring to the fourth quarter waterfall on slide 9, net energy margin was flat compared to the prior year quarter as higher gas operations were offset by the absence of zero emission certificates and lower generation volume due to the scheduled refueling at our 100% owned Hope Creek nuclear plant.

O&M was $0.04 per share higher compared to the fourth quarter of 2024, mostly driven by that Hope Creek refueling outage. As Ralph mentioned, PSEG Nuclear also completed work during the Hope Creek refueling outage to transition the unit from an 18-month to a 24-month refueling cycle going forward, which will yield additional megawatt hours as well as O&M savings over the long term. Depreciation expense was $0.01 per share favorable and interest expense rose by $0.04 per share, reflecting incremental debt at higher interest rates.

Nonoperating expenses were $0.02 per share higher, driven by a contribution to the PSEG Foundation and taxes and other were $0.01 per share favorable compared to the year earlier quarter. On the operating side, the nuclear fleet produced approximately 7.2 terawatt hours during the fourth quarter of 2025 compared to approximately 7.3 terawatt hours in the fourth quarter of 2024. And for the full year 2025, nuclear generation was approximately 30.9 terawatt hours, up slightly from 30.6 terawatt hours in 2024. Capacity factors for the nuclear fleet were 83.7% and 91.2% for the quarter and full year of 2025, respectively. Touching on some recent financing activity.

As of the end of December, PSEG total available liquidity remains strong at $2.8 billion, including approximately $130 million of cash on hand. Liquidity was supported by solid cash from operations during 2025. On the financing front, in December, PSEG Power amended its existing $400 million 364-day variable rate term loan, which increased the balance to $500 million and extended its maturity to December of 2026. PSEG's variable rate debt at the end of December consisted of the 364-day term loan at Power for $500 million, which matures in December this year and commercial paper. As of December 31, our level of variable rate debt represents approximately 6% of our total debt.

Looking ahead, our balance sheet supports the execution of PSEG's five year capital spending plan through 2030, which is dominated by regulated CapEx without the need to sell new equity or assets and provides the opportunity for continued dividend growth. Funds from operation to debt is projected to be in the mid-teens through 2030, comfortably above our minimum threshold. Now before I conclude my remarks, let's review some earnings drivers for 2026 as outlined on slide 5. First, we're starting with higher rate base of approximately $36 billion at year-end 2025, and that's up about 7% over year-end 2024. In addition, clause-based recoveries for investments in distribution infrastructure and CEF Energy Efficiency II are expected to contribute to utility margin.

And as we discussed on the third quarter call, PSE&G's annual FERC transmission formula filing was implemented on January 1 with an $82 million increase in annual transmission revenue subject to true-up. On the distribution side of the business, electric base rates for 2026 are projected to be stable. At PSEG Power & Other, our expected generation output for 2026 is approximately 95% hedged. Like last year, we do not expect to book nuclear PTCs in 2026 due to the higher price environment. And just as a reminder, the zero emission certificate amounts earned by our New Jersey nuclear units concluded in May of last year.

Our nuclear refueling cycle for 2026 includes a spring refueling at Salem Unit 2 and fall refuelings at Salem Unit 1 and Peach Bottom Unit 2. Hope Creek is scheduled for its next refueling in the fall of 2027, following the completion of fuel cycle extension work in the fourth quarter of 2025 and a shift to a 24-month refueling outage schedule. As we continue to stringently manage our controllable costs, we will see interest and depreciation expense that will rise with a higher investment balance at PSE&G and higher interest expense at PSEG Power and parent related to refinancing maturities at higher current interest rates.

In closing, we are proud to have delivered on our 21st year in a row of meeting or exceeding our earnings guidance, and we carry that confidence forward to our full year 2026 non-GAAP operating earnings guidance of $4.28 to $4.40 per share, 7% higher at the midpoint over 2025 results. We increased our dividend by over 6% and updated our long-term non-GAAP operating earnings CAGR to 6% to 8% using a higher baseline for the second year in a row.

Earnings growth beyond our forecast is achievable through opportunities to contract our existing output and planned upgrades as well as from incremental regulated capital investments.

That concludes our formal remarks, and we are ready to begin the question-and-answer session.

(Operator Instructions)

Shar Pourreza, Wells Fargo.

Ralph, just on the legislative side, I mean, you've been kind of front and center around this for some time around new gas. Can you just maybe talk about the timing of the bill, so next steps? Will there be like an IRP process? Could there be like a PPA structure where you earn a return on the PPA, assuming a generator wins the RFP? And how do we like work through things like air permits and kind of turbine queue backlogs? I guess, just how do you think about this whole process?

Boy, there's a lot there. But you also answered your own question a little bit as you went through it, Shar. Much of it's in play, right, as you said. And many of those variables that you laid out are the exact variables that policymakers need to come to grips with. right?

So there's a couple of bills that are floating down in Trenton right now that will help enable new nuclear and potentially new gas. I think the governor already has the ability to move on a lot of solar and potentially battery storage. So the way we've been thinking about it is trying to help policymakers think through and then enable the opportunities for gas or for new nuclear, right? And we've talked about that in quite a few different settings. And that's really what we've been trying to do is help them think through that at this point.

But all the items you mentioned, whether it be turbine backlogs, air permits, so on and so forth, all of those items are still variables that are out there that policymakers have to work through the challenges they may face on any of them.

And you can structure an IRP process relatively quickly for this?

Yeah. I mean, look, we can help out with an IRP for PSEG. We can help out with an IRP for New Jersey. But I think that process, again, just informs the output. It doesn't drive the output because the policymakers will be the ones that really kind of own that as they go forward. The IRP will make recommendations as we do all the time on Long Island, but they're not going to be definitive decisions. They don't carry the weight of the law, right?

Got it. And then just lastly, can you just maybe help us quantify like what level of hedges and upside versus the PTC you're kind of embedding in that 6% to 8%? Is the bottom end of that CAGR kind of anchored in PTC level assumptions? And is there kind of an expectation of future updates to include above PTC earnings?

Yeah. I'm going to give it to Dan to walk you through that. I talked about where we are for '26 in the prepared remarks, but Dan can give you a little bit more about that and be consistent with what he has spoken to before.

I think the way to think about it, we talked about the prompt year being about 95% hedged, and we're pretty well hedged through the next couple of years, but certainly less so in the out years. And so I think you're looking more at a market view to try to get you to what that out year looks like. I think that, that market view is supported by some of the fundamentals that you're seeing out there. And if and as that moves over time, which we would expect that it would, we'll take that into account as we're making our comments and updating what's going on. But I think that's the way to think about it.

Nick Campanella, Barclays.

So I guess in the past, when you had a 5% to 7%, you kind of talked about it being nonlinear and now you have the 6% to 8%, which is great to see. And I just recognize you have things like refueling outages and timing of rate case outcome at some point in this plan. So just maybe can you kind of talk to whether this CAGR is linear or not and where you may fall within the CAGR '27, '28 and just the kind of critical drivers that people should be paying attention to here?

Yeah. So I think we -- look, we have talked about for the last three years about being more predictable. So with that is our effort to be as linear as possible. That doesn't mean we won't be 100% linear, but we work really hard to do that, right? There will be structural changes that happen where we have to modify. And right now, I think the structural change has been the supply-demand curve, and we've seen that, and it's taken us above the PTC floor pretty clearly as we look forward.

So we adjust it. But I think our goal remains the same is to be a predictable investment for folks. And I think we've been able to achieve that by delivering the results that we said we were going to deliver. So we feel confident in the plan that we put forth today. And yes, our goal remains to be as linear as possible.

And I recognize that you forecasted the base off a higher midpoint of '26 as well. Maybe just -- you also kind of talked about nuclear contracting -- you talked about nuclear contracting to kind of put you above that range. Just maybe what's the latest thoughts on that at this point? I know the prior state administration was very focused on bringing data centers to the state. How is that kind of looking under this new administration? And just maybe anything you can kind of offer and what your conversations have kind of been with customers on that?

Yeah, I think the story is fairly consistent. I think that, obviously, the most near-term things that you ought to be able to think about as this administration comes in and settles in on their views on this is the facilities that we do have in Pennsylvania, where I think there's been a more firm view over time and more stability with respect to who has been in the governor's office there as well as some of the smaller opportunities that we have more locally within New Jersey.

And we've talked about a lot of the applications that the utility has seen. And so there's, I think, less opportunity for something of a sizable scale in New Jersey just from the standpoint of where the administration has been. To the extent that, that changes and the receptivity has increased there, there could be incremental opportunity. But I think for the time being, the more fertile ground right now would be Pennsylvania for something larger and some of the smaller New Jersey locations. And I think those discussions have progressed well.

Yeah. And I would just add just from a normal rhythm of transition for an administration like this, the way it works in New Jersey, there'll be -- there's a real focus now. First of all, let's staff up. And I think the governor has done a great job of getting a number of people in place, not just in our industry, but in other areas that matter to the state running well. And I think the second thing they need to do is really focus on the budget for New Jersey.

And so that's where my understanding from conversations we've had is the focus of the governor right now. Once she gets through that process, I think economic development will be right behind that as an area of focus. And we are already having conversations on that organization that I chair choose New Jersey about the role we'll play and the areas of focus, but that has not been finalized yet.

Okay. And then if I could just throw in one follow-up on Shar's question regarding kind of the nuke assumptions. I understand that this RBA process is going on right now and there's discussions around extending the RPM collar for another two years. And a week or two ago, a 420 per megawatt day number was kind of thrown out there. Just what are your kind of thoughts on extending at the current cap rate through 2030? And then what's kind of embedded in the plan right now?

Yeah. Look, I think embedded within your question is the fact that you've got a market out there where you can see what things are looking like, but it will remain somewhat dynamic as you step through time. And that's the best information that we have as well. And so what we're doing is trying to look at what that looks like. I think that arguably, you could have stayed at 5% to 7%, been at the PTC and been more firm, but I honestly think you'd be less realistic.

And so what we're trying to do is take a realistic view as to what things will look like as we step out over the longer term. I think we feel good about where we are and how it all fits together within the plan. But I think it's those same market signals that we see that you're seeing out there. I mean, as a reminder, I would highlight the fact that the location of our facilities is in the PECO zone. So if you're thinking about pricing and trying to do math to figure out what this means in the out years, that zone is most highly correlated to the actual generator buses where we run.

So West Hub trades north of that. We said it trades about 20% above what we would be seeing from where our generator bus is. And so it's those market points that we look at to try to drive where we're headed within the plan and what we put forth to you. And so I think we're in a really good place against that backdrop, but that's what we look at as we go forward.

Bill Appicelli, UBS.

Rob, maybe you want to go to another one and see if Bill rejoins.

Tanner James, Jefferies.

It's Julien Dumoulin-Smith. Look, let me follow -- and by the way, nicely done on the CAGR increase. I got to hand it to you guys. If I can follow up on the gist of what Shar and Nick were asking us about here. Let's talk about the overlap between the BPU here and legislative process just a bit here in terms of what next steps are from both and how they might overlap, right? Because clearly, there's a certain degree of mutual alignment between the two in theory. Can you comment a little bit on -- maybe even more oriented towards time line? I know Shar was kind of pressing at that as well here.

Yeah. Look, I think that you're going to have a little bit of give and take that will continue as people find their footing in this new administration, right? And not from the administrations finding their footing, but how the legislator is going to work, legislative area is going to work and how the regulator is going to work. So these two bills that were introduced recently kind of direct the BPU to do certain things. The BPU has the ability to do certain things today, go out and procure gas, could go out and procure new nuclear, right?

We had the ZEC process in the past, but they are limited in what they can do. So they need some more -- they could use a little more direction to make the process a little cleaner for them by some legislative changes. So I think that's just an open process that exists out there. It's something that's going to be -- I can't tell you it's going to happen in the next 30 days, and I can't tell you it's going to happen in the next 6 months. But the level of interest and the engagement by folks is pretty high.

And it all comes out of the back end of the last 12 months of discussions about higher electricity costs from a supply standpoint and the need for us to change that balance somehow. The scarcity is there, and we've got load increases that have taken place across PJM, even if we don't have a data center in New Jersey, and we do have. We have the smaller ones as we've been talking about. But the load increases are happening right across the river, and it's impacting the pricing here in New Jersey. So I think the BPU has recognized that they do not want to be in the same level of import that they are.

I think policymakers feel the same way, and they want a little more control over the pricing of the product that ultimately, the residents of New Jersey hold us all accountable for.

Got it. And if I can zero in a little bit, guys, on the '26 guide here, and thanks again for your help earlier. How do you think about what the breakdown is between the regulated utility side of that year over year increase versus what's reflected in power? And then even within power, can you comment a little bit about where you guys are hedged? I know you said you're 95% for this year. Just comment a little bit about where you are relative to that floor, if you will, just as a starting point, I just want to make sure we're all on the same page here.

Yeah. I mean, obviously, we're north of it because that's how we described it and how we put it out there. I think to go much beyond that, we would start to kind of break down the pieces beyond what our overall guidance is. And so I think just maybe repeating a little bit what I said before, Julien, if you think about what the market signals are that are out there, that's what we're leaning on. I would say that '26, we gave you a 95% hedged, '27, I think we're -- fair to say that we are largely hedged for that year.

And in '28, I think -- if you think about a ratable approach over three years that we've talked about, mainly, we would say that because the most liquid part of that curve is over those three years. And so we have leveraged that liquidity to be able to hedge up a fair bit of '27 and '28, but '29 and 2030 remains more subject to market forces as we go forward.

Or let me try this differently. How do you think about earned returns in the current year here for the utility and/or kind of what's implied year over year growth on an EPS basis?

Yeah. Look I think we've been pretty clear about the fact that where there are structural changes, we'll make changes. And when the changes aren't structural, we'll look at what opportunity sets we have for maintenance activities that might be in a four year cycle and try to look at that from a predictability standpoint for the investment community. So we look at our plans every year. We adjust to that.

And again, I just want to reinforce that really happy with the top end of the 5% to 7% that we've been running for the last couple of years, but we thought it was struck the scarcity issue of power was enough to structurally change our thought process to be in that 6% to 8% based upon where prices are driven by both the capacity and the energy side. So it is -- I know you're trying to push us into a little bit of a conversation about ROEs in the utility and that. And we just feel comfortable talking right now about that predictable pattern that we've talked about from an earnings standpoint.

Yeah. No, but I hear you. The increase here is principally predicated on the power side of the business for sure in future years.

Bill Appicelli, UBS.

Apologies for that technical problem. Just maybe building on some of these other incremental regulated capital investments, and forgive me if you already addressed it and I missed it, but I guess where in the spectrum would those fall? And what types of projects are we talking about there?

I think they come in really two buckets, right? There's incremental transmission in the PJM region. We've been active in that process, and we're successful as we've talked about a bunch of times in Maryland. And we continue to look at those opportunities when they present themselves. There's a very specific effort going on in the state of New Jersey right now about being ready for solar and the need for us to make sure that our distribution system is ready.

That's been an ongoing process down at the Board of Public Utilities, and there were comments received on that in the last couple of weeks down there, if I recall correctly, that we submitted and others did. So that could drive some incremental investment for us as we continue to make sure that this focus on solar and batteries can be enabled by the distribution system that they're going to be interconnecting to. And then the third bucket is the opportunity for us to participate on the generation side, again, depending upon where policymakers land on that front. So I would say all three of those are the areas that we talk about around the table on a regular basis.

And then on top of that, I would just add that embedded within kind of the base plan that we have in front of us, which the things that Ralph mentioned could add to that. I would still characterize what we put out as the updated capital forecast as there's nothing in there that's a single project that's a huge part of the capital. It's going to require a whole bunch of permits to be able to get done. It's all stuff that sits in front of us and is shorter term in nature, and we can kind of knock out without a whole lot of red tape that we got to get through or challenges we got to get through. It's just kind of a basic set of capital that we know we can achieve.

Yeah. No, it's a really good point that Dan is saying. I mean everything I just said is above and beyond. We're not building in a percentage of any one of those buckets as we put out this capital forecast. These are small projects that are really 90% of them are being based upon end of life on the regulated side.

So we -- I kind of -- I've been telling my family anyway, if you think about what we do every day in replacing the infrastructure, it's just like the portal bridge for those of you that are in the New Jersey region and see New Jersey transit delays right now as they upgrade that. The infrastructure in New Jersey is old, and we have an opportunity to make upgrades as a result of that.

All right. That's very helpful. And then just one other one. On the O&M side, I guess what's embedded in the plan in the 6% to 8% on that front, just at the utility level?

Yeah. As we build our plan, and Ralph has often described it this way, we take a look at what's in front of us and whatever kind of an inflationary assumption we have there, and then we look to the to the businesses to try to pull back on that to end up in a more reasonable place from a cost-cutting perspective and overall cost management perspective. So if you've got a 3% inflationary assumption, you can pull that back down to 2% to 2.25% as everybody is looking for opportunities within those budgets to try to move to a better place. So that's kind of how we structure and how we move forward on it. We know that we do have our labor agreements that are running out through '27 and those will get re-upped and that will have an effect as well. But we kind of lay out a baseline plan and then pull back some efficiencies to get to where our final plan land.

I mean relatively flat with some inflation and then we back it off, as Dan said. I know some people think we were -- we talk about finding pennies in the couches, which is -- which I actually like. My wife and I still have a little bucket that we put our pennies in. So it's not the worst thing in the world to go looking for them because they all add up at some point.

Okay. But some assumption on the re-upping of those labor agreements is reflected in this plan.

Yeah. That's all in there. There are no expectations of major dislocation there.

Michael Sullivan, Wolfe Research.

Ralph, I think for a while now, you all have had in your slide deck over the forecast period, 90% regulated earnings. Is that still true under this updated plan? Or any sense you can give us of what the mix is?

No. I mean what I would tell you is I hope that number goes down a lot because that means power prices are going to go up, we're going to do better. I would think about the utility side of the business continuing to do what it does. And to the extent that we see some movement up from a power price perspective, given the demand supply dynamic that you're seeing, you might see a modest shift there. And again, my kind of tongue-in-cheek way of saying it is I hope it goes down a lot because that means that we're doing better on the other side of the business. But I wouldn't think about any major shifts that compared to what we've seen in the past. It's going to be more modest as we step through time.

I may even be a little bolder than that. I almost -- and we've said this also for many -- long time in our decks. The PTC floor is a regulated type return. And so when we think about it from that perspective, you could argue that the merchant is only above the PTC floor, right? Because the federal government has regulated that PTC floor as the return for the nuclear plants. So I know it's not traditional regulated, but when we think about it from a risk profile standpoint, it sure feels a lot like that.

Okay. No, that's totally fair. But it just sounds like you're not going to tell us what your merchant assumption is above the PTC floor out in time.

We're going to tell you what our earnings projections are, and we're going to meet them as we have done.

Okay. Okay. And then on the utility side, I just think historically, the rate base kind of rebase of the CAGR has been a bit higher than we saw this past year. Anything to make of that? Or what's kind of driving that? I think last year, and the year before might have been double digits and then you grew 6% to 7.5% off of that.

You're talking about from the standpoint of the baseline. Look, I would think about that rate base as growing the 6% to 7.5% that we've put out for the past couple of years. And I think that, that's still consistent. I would say, to our credit, that has been on a growing base that for some years has been above that. And so continuing to grow, I guess, it embedded within your question, 6% to 7.5% has been a consistent CAGR growth to the extent that what you're implying is correctly that, that rate base has grown more than that the last few years. We've continued to grow 6% to 7.5% off of that higher base, which implies a little bit higher growth.

Anthony Crowdell, Mizuho Securities.

Ralph, you were at the Devil game last night. I hear the opening ceremony is really exciting.

We did not make it down there last night, but our esteemed CFO did.

It was fantastic.

Was he the fan applauding in the beginning? I know there was some booing going on of some of the elected officials.

All I heard was USA chants and they were deafening. It was fantastic.

That's awesome. I just have a cleanup question. I believe that BPU is in an 180-day pause right now coming from the Governor's executive order. If you could talk about, one is maybe thoughts of what happened at the end of the 180-day pause, maybe some of the outcomes you think. But -- and then also, I believe it's an 180-day pause of no increase in rates. Just curious if that includes any of the rate riders.

No. So the pause that they put in place was on regulations that were passed from the prior administration. And so they paused them. I don't know if it's 180 days or 90 days, but they basically said, hey, listen, if we were going to change the speed limit on the turnpike, and that was a change that was put in place by the prior administration. That won't go into effect for another 90 or 180 days.

And so there were a few things there that were on the fringes to our business, but nothing after we did the review that would impact our business. And I mean that from a labor wage standpoint, from a benefit standpoint, from any of the above. So no impact on that as a change. But those regulations were regulations that were changed by the prior administration in the months leading up to the election.

And I think that was a 90-day time frame.

I didn't want to correct.

No, that's fine. I know you're looking for pennies in a couch, but do you know when the 90-day ends?

Yeah. No, it's 90 days after she took office. So I want to say it's -- I think she took office on the January 12, if my memory serves me right.

Jeremy Tonet, JPMorgan.

Just one last question for me. As we think about future generation in the state of New Jersey, you've talked about the ability to host SMRs in the past. I'm just wondering any updated thoughts you might be able to provide on how likely that is to, I guess, come to fruition or just thoughts on the topic in general?

Yeah. I would put our -- look, if we were advocating, we're advocating for -- on the nuclear front for big nuclear. We think that, that makes the most sense based upon our property and our footprint. But there could be other places where the -- it makes sense for people to put small SMRs and to try that technology out. I think also from a gas facility standpoint, we've said that we have a site that makes a ton of sense where we have pipes and wires ready to it as well.

So yes, I would -- SMRs from our standpoint would not be the highest and best use of our property, but one that we would be open to if people -- if that was really what folks wanted us to enable. Remember, our early site permit is technology agnostic. So we could go in any direction on that.

Nick Amicucci, Evercore ISI.

I would hold on to those pennies because there's probably some scarcity value associated with them.

Exactly, exactly. They get added up. They add up.

So I actually wanted to kind of continue down the nuclear rabbit hole here, if we could, for a little bit. Just as we think about kind of the nuclear fuel availability and how you guys are hedged out through -- over the course of the capital plan and just knowing that Russia is kind of going offline in 2028, how are you guys kind of -- are you guys kind of front-loading or kind of prebuying any type of nuclear fuel just to ensure that affordability kind of doesn't go too haywire?

Yeah. We -- look, when I start thinking about nuclear fuel, the first thing I think about is the fuel in the reactor because that's most of what we're going to be using for the next couple of years. Then I look to where we have contracted and we're contracted out for the next few years for most of what we're going to need. And it's only when you get to the tail end of that five year period when things are going to change. I also think just not to get too deep into world markets, but I think conceptually, the fuel that's being produced is the fuel that's going to be produced.

And if Russian fuel doesn't come here, Russian fuel will go somewhere, and that will displace what's going to be purchased from places where we're going to purchase from. And so you could see some modest movements with respect to supply-demand pricing, but I don't think anything that's going to be all that dramatic. And if I think about prices that sit somewhere around $50 and fuel that sits somewhere around $7, $8 on the overall scheme of things, it's -- the availability is a critical aspect for us, and I have no question that we're going to continue to see availability of fuel, and you could see some modest movement in prices, but I think we're hedged out for the next couple of years in pretty good shape.

Got it. Great. And then if I just -- if I could as well, I know, Ralph, you've been kind of a big proponent on more large nuclear relative to SMRs. But I think if I understand correctly, Governor Sherrill is more -- just given our naval background, more in tune with SMRs. But is there anything -- any kind of, I guess, appetite from her just given that we did have the -- a couple of months ago, the Brookfield Westinghouse DOE type of procurement of the 10 AP1000s. I mean, is there any opportunity for you guys to partake in those allocations?

Yeah. Look, I think we have said probably ad nauseam now that we want to help enable exactly that. And so we will continue to educate and advocate on behalf of the state for something like an AP1000. I don't want to predetermine that selection. I think that's one that it appears that DOE has firmed up on, but I also hear that all the I's are being dotted and T's crossed. So we'll be there advocating, but that's as far as we're going right now. And I think the education that's ongoing for the incoming administration is something that we're also trying to help with.

David Arcaro, Morgan Stanley.

This is Amanda on for Dave. So maybe lastly, just on the executive orders, how are you thinking about the scope of the current BPU study? And are there any financial impacts currently contemplated in the long-term plan based on any potential changes? Or do you think it's still too early to assess those changes?

Yeah. I think it's too early right now. There's a lot of conversations going on. But I know we have looked at a number of different ways that things have changed from a regulatory standpoint and how utilities have been compensated. You can look across the country and see many of those.

And I think many of those at the end of the day have worked out for the utilities that have been involved. It's just a different way of thinking about things and providing those returns for those utilities. So we have not changed -- we haven't put any different regulatory process in place in the projections that we've made. But we fully expect that the outcome is going to be an outcome that makes sense for both us and for the customers.

Great. And maybe just a quick follow-up. With the two new commissioners in the BPU, any, I guess, initial comments on conversations with them just based on the first few months of their appointment?

Yeah. No, our team has continued to meet with folks, but our conversations have been limited to, I would -- best way to put it, meet and greets at this point.

That is all the time we have for questions. I would like to turn the floor back to Mr. LaRossa for closing comments.

Thank you, Rob. So I had a couple of comments prepared, but I actually started this call, as you heard, talking about the great work of our team during the last storm. And our facilitator here today, Rob, actually started our morning off by thanking us for the work that was done and the way that we responded and communicated during the storm. So I just want to reinforce the thank you to the team. We could talk all we want about finances and the outcomes that we have here.

But if we don't deliver on our operational mandate's day in and day out, no regulatory construct is going to matter for us, and our plants won't run. So I thank the employees every day. And when I get comments like we just received from Rob when we opened up this call, it makes it all worthwhile. So Rob, thank you, not only for facilitating the call but for reinforcing for all of us that what matters is the work that's being done day in and day out by our employees in the field. And with that -- thank you, Rob.

And with that, I'm going to close and look forward to seeing you. We're going to be out quite a bit over the next 1.5 months and look forward to the in-person conversations.

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