filings.toolsItem 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
63K characters. Original on sec.gov · Markdown
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
MANAGEMENT’S DISC****USSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
This combined MD&A is separately filed by Public Service Enterprise Group Incorporated (PSEG) and Public Service Electric and Gas Company (PSE&G). Information contained herein relating to any individual company is filed by such company on its own behalf.
PSEG’s business consists of two reportable segments, PSE&G and PSEG Power LLC (PSEG Power) & Other, primarily comprised of our principal direct wholly owned subsidiaries, which are:
PSE&G—which is a public utility engaged principally in the transmission of electricity and distribution of electricity and natural gas in certain areas of New Jersey. PSE&G is subject to regulation by the New Jersey Board of Public Utilities (BPU), the Federal Energy Regulatory Commission (FERC), and other federal and New Jersey state regulators. PSE&G also invests in regulated solar generation projects and energy efficiency (EE) and related programs in New Jersey, which are regulated by the BPU, and
PSEG Power—which is an energy supply company that is comprised of the operations of merchant nuclear generating assets and fuel supply functions engaged in competitive energy sales via its principal direct wholly owned subsidiaries. PSEG Power’s subsidiaries are subject to regulation by FERC, the Nuclear Regulatory Commission (NRC) and other federal regulators and state regulators in the states in which they operate.
The PSEG Power & Other reportable segment also includes amounts related to the parent company as well as PSEG’s other direct wholly owned subsidiaries, which are: PSEG Long Island LLC (PSEG LI), which operates the Long Island Power Authority’s (LIPA) transmission and distribution (T&D) system under an Operations Services Agreement (OSA); PSEG Energy Holdings L.L.C. (Energy Holdings), which primarily holds legacy lease investments and competitively bid, FERC regulated transmission; and PSEG Services Corporation (Services), which provides certain management, administrative and general services to PSEG and its subsidiaries at cost.
Our business discussion in Item 1. Business of our 2024 Annual Report on 10-K (Form 10-K) provides a review of the regions and markets where we operate and compete, as well as our strategy for conducting our businesses within these markets, focusing on operational excellence, financial strength and making disciplined investments. Our risk factor discussion in Item 1A. Risk Factors of Form 10-K provides information about factors that could have a material adverse impact on our businesses. The following supplements that discussion and the discussion included in the Executive Overview of 2024 and Future Outlook provided in Item 7 in our Form 10-K by describing significant events and business developments that have occurred during 2025 and changes to the key factors that we expect may drive our future performance. The following discussion refers to the Condensed Consolidated Financial Statements (Statements) and the Related Notes to Condensed Consolidated Financial Statements (Notes). This discussion should be read in conjunction with such Statements, Notes and the Form 10-K.
EXECUTIVE OVER****VIEW OF 2025 AND FUTURE OUTLOOK
We are a public utility holding company that, acting through our wholly owned subsidiaries, is a predominantly regulated electric and gas utility and a nuclear generation business. Our business plan focuses on achieving growth by allocating capital primarily toward regulated investments in an effort to continue to improve the sustainability and predictability of our business and realizing the value of the consistent and reliable carbon free generation from our nuclear units. We are focused on investing to meet growing energy demand, modernize our energy infrastructure, improve reliability and resilience, increase EE and deliver clean energy to meet customer expectations and be well aligned with public policy objectives. With these investments and higher working capital recovery approved in the distribution rate case, our regulated rate base increased from approximately $30 billion as of December 31, 2023 to approximately $34 billion as of December 31, 2024. In addition, our nuclear facilities retain the downside price protection of a production tax credit (PTC) from 2024 through 2032.
For the years 2025-2029, our regulated capital investment program is estimated to be in a range of $21 billion to $24 billion. We expect these capital investments to result in a compound annual growth rate in our regulated rate base in a range of 6% to 7.5%. The regulated capital investments represent the majority of PSEG’s total capital investment program of $22.5 billion to $26 billion. The low end of the range includes an extension of our Gas System Modernization Program (GSMP) and Clean Energy Future (CEF)-EE program at their current average annual investment levels plus inflation, as these programs are expected to continue beyond their currently approved timeframes. The upper end of our capital investment range includes potential incremental investments to address continued demand growth and other investments to meet infrastructure needs and support New Jersey's clean energy goals.
PSE&G
At PSE&G, our focus is on investing capital in T&D infrastructure and clean energy programs to meet growing demand, enhance the reliability and resiliency of our T&D system, meet customer expectations and support public policy objectives.
In October 2024, the BPU approved our CEF-EE II filing authorizing approximately $2.9 billion for energy efficiency projects committed between January 1, 2025 through June 30, 2027, and completed over an expected six-year period. The Order approved a program investment budget of approximately $1.9 billion, net of administrative expenses, and approximately $1 billion to continue our customer on-bill repayment program. This EE filing is a significant increase from our prior filings, driven by an increase in the savings targets required under the BPU Energy Efficiency Framework and higher costs to achieve those targeted savings.
In 2023, the BPU approved a two-year extension of our current GSMP II program to replace at least 400 miles of cast iron and unprotected steel mains and services in our gas system. The GSMP II program extension provides for main replacement through December 2025 plus trailing services replacement and paving costs into 2026 and totals approximately $900 million of investment. Of the $900 million, $750 million is recovered through three periodic rate updates with the balance recovered through a future distribution base rate case. PSE&G has re-started discussions regarding the GSMP III program with the objective of beginning the new program in 2026.
In October 2024, the BPU issued an Order approving the settlement of PSE&G's distribution rate case with new rates effective October 15, 2024. The Order provided for a $17.8 billion rate base, a 9.6% return on equity for PSE&G’s distribution business and a 55% equity component of its capitalization structure. In addition, the Order approved mechanisms beginning January 1, 2025 associated with the recovery of future storm costs as well as the recovery of annual pension and OPEB expenses.
PSEG Power
At PSEG Power, we seek to produce low-cost electricity by efficiently operating our nuclear generation assets, mitigate earnings volatility through the PTC mechanism and hedging, and support public policies that preserve these existing carbon-free base load nuclear generating plants. During the first six months of 2025, our nuclear units generated approximately 15.9 terawatt hours and operated at a capacity factor of 94.3%. Effective April 2025, PSEG Power revised the estimated useful lives for the Salem 1, Salem 2 and Hope Creek nuclear plants due to our expectation that a 20-year license extension will be approved for these facilities. Our hedging strategy continues to incorporate an estimated range of risk reduction impacts from the PTCs on our nuclear generation portfolio while retaining the ability to benefit when market pricing exceeds the phase out threshold. As of June 30, 2025, we expect that our hedged position for 2025 in conjunction with the PTC and market price variability will result in the realized value of our nuclear generation output being at, or above, the PTC phase out. Our strategy will continue to evolve given PTC guidance uncertainty, and potential incremental changes upon final U.S. Treasury guidance. In addition, we are exploring opportunities for the potential sale of power and/or emission credits from our nuclear facilities pursuant to long-term agreements.
Climate Strategy and Sustainability Efforts
For more than a century, our purpose has been to provide safe access to an around-the-clock supply of reliable, affordable energy. Today, our vision is to power a future where people use less energy, and it is cleaner, safer and delivered more reliably than ever. We have established a net zero greenhouse gas (GHG) emissions by 2030 goal that includes direct GHG emissions (Scope 1) and indirect GHG emissions from operations (Scope 2) across our business operations, assuming advances in technology, public policy and customer behavior, which goal supports New Jersey's clean energy and climate goals.
PSE&G has undertaken a number of initiatives that support the reduction of GHG emissions, including our implementation of New Jersey's EE and related programs that are intended to support New Jersey’s Energy Master Plan (EMP) and Gubernatorial Executive Orders through programs designed to help customers use energy more efficiently, reduce GHG emissions, support the expansion of the EV infrastructure in New Jersey, install energy storage capacity to supplement solar generation and enhance grid resiliency, install smart meters and supporting infrastructure to allow for the integration of other clean energy technologies and to more efficiently respond to weather and other outage events.
We continue to assess physical risks of climate change and adapt our capital investment program to improve the reliability and resiliency of our system in an environment of increasing frequency and severity of weather events. PSE&G is committed to the safe and reliable delivery of natural gas to approximately 1.9 million customers throughout New Jersey and we are equally committed to reducing GHG emissions associated with such operations. The GSMP is designed to improve safety and reliability and significantly reduce natural gas leaks in our distribution system, which would reduce the release of methane, a potent GHG, into the air. Through GSMP II, from 2018 through 2024 we reduced reported methane emissions by over 30% system wide.
We also continue to focus on providing cleaner energy for our customers by working to preserve the economic viability of our nuclear units, which provide over 85% of the carbon-free energy in New Jersey. These efforts include reducing market risk by advocating for state and federal policies, such as the PTC established by the IRA, and capacity market reform and related generator interconnection policies at PJM Interconnection, L.L.C. (PJM) that recognize the value of our nuclear fleet’s carbon-free generation and its contribution to grid reliability and resource adequacy, and potential long-term contracts that recognize the value of its consistent and reliable carbon-free energy.
Competitively Bid, FERC Regulated Transmission Projects
PSEG continues to evaluate additional investment opportunities in regulated transmission. In December 2023, PJM awarded us an approximately $424 million project to address increasing load and reliability issues in Maryland and northern Virginia as part of its 2022 Window 3 competitive solicitation. PJM has directed that the project be placed in service in 2027.
In April 2024, PSE&G submitted bids to the BPU for what the BPU has termed the Pre-Build Infrastructure (PBI) project, which is a combination of onshore and near-shore underwater infrastructure. It is unclear when the BPU may take action on this initiative, or parallel processes it has considered for transmission projects to support New Jersey’s offshore wind goal.
PSEG will continue to evaluate opportunities to participate in transmission solicitation processes and may decide to submit bids for these opportunities, some of which could be material investments.
PSEG LI
PSEG's current contract as operations service provider for LIPA's electric transmission and distribution system runs through December 31, 2025. At a recent LIPA board meeting, the LIPA board of trustees voted to begin negotiations to extend our current contract, however, the ultimate outcome remains uncertain.
Financial Results
The results for PSEG, PSE&G and PSEG Power & Other for the three and six months ended June 30, 2025 and 2024 are presented as follows:
| Three Months Ended | Six Months Ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||
| Millions, except per share data | ||||||||||||||||||
| PSE&G | $ | 332 | $ | 302 | $ | 878 | $ | 790 | ||||||||||
| PSEG Power & Other (A) | 253 | 132 | 296 | 176 | ||||||||||||||
| PSEG Net Income | $ | 585 | $ | 434 | $ | 1,174 | $ | 966 | ||||||||||
| PSEG Net Income Per Share (Diluted) | $ | 1.17 | $ | 0.87 | $ | 2.35 | $ | 1.93 | ||||||||||
(A)
Other includes after-tax activities at the parent company, PSEG LI, and Energy Holdings as well as intercompany eliminations.
PSEG Power’s results above include the Nuclear Decommissioning Trust (NDT) Fund activity and the impacts of non-trading commodity mark-to-market (MTM) activity, which consist of the financial impact from positions with future delivery dates.
The variances in our Net Income attributable to changes related to the NDT Fund and MTM are shown in the following table:
| Three Months Ended | Six Months Ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||
| Millions, after tax | ||||||||||||||||||
| NDT Fund and Related Activity (A) (B) | $ | 65 | $ | 8 | $ | 71 | $ | 65 | ||||||||||
| Non-Trading MTM Gains (Losses) (C) | $ | 136 | $ | 114 | $ | 1 | $ | (72 | ) | |||||||||
(A)
NDT Fund activity includes gains and losses on NDT securities which are recorded in Net Gains (Losses) on Trust Investments. See Item 1. Note 6. Trust Investments for additional information. NDT Fund activity also includes interest and dividend income and other costs related to the NDT Fund recorded in Net Other Income (Deductions), interest accretion expense on PSEG Power’s nuclear Asset Retirement Obligation (ARO) recorded in Operation and Maintenance (O&M) Expense and the depreciation related to the ARO asset recorded in Depreciation and Amortization (D&A) Expense.
(B)
Net of tax (expense) benefit of $(43) million and $(5) million for the three months and $(49) million and $(43) million for the six months ended June 30, 2025 and 2024, respectively.
(C)
Net of tax (expense) benefit of $(54) million and $(45) million for the three months and $(1) million and $27 million for the six months ended June 30, 2025 and 2024, respectively.
Our Net Income variance for the three and six months ended June 30, 2025 versus the comparable period in 2024 was driven primarily by higher earnings due to continued investments in T&D clause programs and settlement of the distribution base rate case in October 2024 at PSE&G combined with changes related to MTM and NDT Fund activity, as discussed above.
Regulatory, Legislative and Other Developments
We closely monitor and engage with stakeholders on significant regulatory and legislative developments.
Transmission Rate Proceedings and Return on Equity (ROE)
Under current FERC rules, PSE&G continues to earn a 50 basis point adder to its base ROE for its membership in PJM as a transmission owner. However, certain regulatory or legislative actions could potentially lead to the loss of this adder which, if eliminated, would prospectively reduce PSE&G’s annual Net Income and annual cash inflows by approximately $40 million.
New Jersey Clean Energy Stakeholder Proceedings
In February 2023, the governor of New Jersey issued executive orders (EOs) that establish or accelerate previously established 2050 targets for clean-sourced energy, building decarbonization, and EV adoption goals, with new target dates of 2030 or 2035, as applicable. The EOs direct the BPU and other state agencies to collaborate with stakeholders to develop plans to reach the targets and the BPU has convened a stakeholder proceeding to develop a plan for gas distribution utilities to reach the target of 50% natural gas emissions reductions over 2006 levels by 2030. The BPU commenced proceedings to update the State’s EMP in 2024 that are continuing. We are unable to predict the outcomes of this proceeding, but it could have a material impact on our business, results of operations and cash flows.
Environmental Regulation
We are subject to liability under environmental laws for the costs and penalties of remediating contamination of property now or formerly owned by us and of property contaminated by hazardous substances that we generated. In particular, the historic operations of PSEG companies and the operations of numerous other companies along the Passaic and Hackensack Rivers are alleged by federal and state agencies to have discharged substantial contamination into the Passaic River/Newark Bay Complex in violation of various statutes. In addition, PSEG Power has retained ownership of certain liabilities excluded from the sale of its fossil generation portfolio, primarily related to obligations under New Jersey and Connecticut state laws to investigate and remediate the sites. We are also currently involved in a number of proceedings relating to sites where other hazardous substances may have been discharged and may be subject to additional proceedings in the future, and the costs and penalties of any such remediation efforts could be material.
For further information regarding the matters described above, as well as other matters that may impact our financial condition and results of operations, see Item 1. Note 8. Commitments and Contingent Liabilities.
Nuclear
In May 2025, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants zero emission certificate (ZEC) sales concluded. Pursuant to a process established by the BPU, ZECs were purchased from these nuclear plants by the electric distribution companies (EDCs) in New Jersey. As previously noted, the Federal government established a PTC for electricity generated using existing nuclear energy, which began January 2024 and continues through 2032 and impacted PSEG Power's decision not to apply for the next ZEC three-year eligibility period starting June 2025. The expected PTC rate is up to $15/MWh subject to adjustment based upon a facility’s gross receipts. The PTC rate and the gross receipts threshold are subject to annual inflation adjustments. ZEC revenue recorded has been reduced by the estimated PTCs generated from these nuclear plants. The PTC amounts recorded to date are subject to change based on several factors, including but not limited to, adjustments to estimated market prices and generation and the issuance of authoritative guidance by Treasury/the Internal Revenue Service, including clarification of the definition of “gross receipts” used to determine the phase out. Any adjustments to amounts previously recorded could be material. We continue to analyze the impact of the PTC, including any future guidance from the U.S. Treasury to assess any impact of PTCs on expected ZEC payments and/or any future ZEC application periods.
Demand, Supply and Energy Costs
An increasing demand for power and a lack of sufficient new generation resources in PJM and in New Jersey, has raised resource adequacy concerns and is resulting in higher electricity costs for our customers this year. Prices from the July 2024 PJM annual capacity market auction, which were approximately 10 times higher than prices from the 2023 auction and which is impacting customer bills, have provoked concern from state regulators and legislators and could create regulatory uncertainty. Per direction to EDCs from the BPU, PSE&G filed a petition that provided proposals to mitigate bill impacts to customers. In June 2025, the BPU approved a settlement providing that for July 2025 and August 2025, PSE&G will apply a credit to each residential electric customer’s monthly bill, with offsetting charges on monthly bills for September 2025 through February 2026. PSE&G agreed to waive carrying costs on the outstanding credit amount. In addition, PSE&G agreed to: extend protections precluding the shut-off of eligible residential customers, normally available during the winter months, to the period from July 1, 2025 through September 30, 2025; offer residential customers deferred payment arrangements with terms of up to twenty-four months for the payment of overdue billed amounts; and waive all reconnection fees for residential customers during the period from July 1, 2025 through September 30, 2025. In July 2025, the New Jersey Legislature passed a law, that is currently pending signature by the governor of New Jersey, prohibiting disconnection for non-payment during the
period June 15 through August 31, beginning in 2026, and for such period annually thereafter, for certain qualified electric and gas customers. This new requirement for a summer shutoff moratorium and the extended deferred payment arrangements are likely to increase our Accounts Receivable and bad debt expense in the future.
Interest Rate Matters
PSEG’s long-term financing plan is designed to replace maturities and support funding its capital program. Given our financing needs, the prevailing interest rate environment will be a key factor in determining interest expense on variable-rate debt and long-term rates on future financing plans. In order to increase the predictability of interest expense, we may use interest rate hedges to help limit our exposure to fluctuating interest rates. In addition, from time to time, we may enter into interest rate hedges to fix a portion of our interest rate exposure for anticipated long-term financing plans at PSEG and PSEG Power. PSE&G’s interest rate risk is moderated due to annual transmission rate filings and distribution recoveries through base rate filings and clause-based investment programs.
Federal Executive Orders and State Legislative Activity
There have been a number of federal executive orders over the recent months, including but not limited to orders addressing power generation in the energy industry and orders imposing widespread and substantial tariffs on imports. We are continuing to monitor the federal executive orders, certain of which will require the enactment of regulations to implement, and their impacts on our supply chain, business, cash flow, results of operations and financial condition. Further, since early 2025, New Jersey state legislative activity focused on addressing energy affordability has accelerated. Legislation has been proposed on various energy policy and regulatory topics, the impacts of which are uncertain at this time but, if enacted, could have a material impact on us.
Tax Legislation
The enactment, amendment or repeal of federal or state tax legislation and/or the clarification of previously enacted tax laws could have a material impact on our effective tax rate and cash tax position.
In July 2025, “An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14” (the Act) was signed into law. The Act made no material changes to the PTC for existing qualified nuclear generation facilities. The Act permanently extends 100% bonus depreciation to qualified business property retroactive to January 19, 2025. The impact of the Act on PSEG’s and PSE&G’s financial statements is subject to continued evaluation.
In April 2023, the U.S. Treasury issued Revenue Procedure 2023-15 that provides a safe harbor method of accounting to determine the annual repair tax deduction for gas T&D property. The impact, if any, that this may have on PSEG and PSE&G’s financial statements has not yet been determined.
In August 2022, the IRA enacted a 15% corporate alternative minimum tax (CAMT), which is based on adjusted financial statement income, and a PTC for existing qualified nuclear facilities. These provisions remain unclear; therefore, the issuance of authoritative guidance can materially impact PSEG’s and PSE&G’s results of operations, financial condition and cash flows.
Future Outlook
Our future success will be influenced by our ability to continue to maintain strong operational and financial performance, address regulatory and legislative developments that impact our business and respond to the issues and challenges described below. In order to do this, we will seek to:
obtain approval of and execute on our utility capital investment program to meet increasing customer demand, modernize our infrastructure, improve the reliability and resilience of the service we provide to our customers, and align our sustainability and climate goals with New Jersey’s energy policy;
obtain a fair return for our T&D investments through our transmission formula rate, existing rate incentives, distribution infrastructure and clean energy investment programs and periodic distribution base rate case proceedings;
focus on controlling costs while maintaining safety, reliability and customer satisfaction and complying with applicable standards and requirements;
manage the risks and opportunities in federal and state policies related to energy;
advocate for appropriate regulatory guidance on the PTC to ensure long-term support for New Jersey’s largest carbon-free generation resource, and adapt our hedging program accordingly, and realize the value of our consistent and reliable, carbon-free nuclear output;
engage constructively with our multiple stakeholders, including regulators, government officials, customers, employees, investors, suppliers and the communities in which we do business or are seeking to do business; and
deliver on our human capital management strategy to attract, develop and retain a high-performing diverse workforce.
In addition to the risks described elsewhere in this Form 10-Q for 2025 and beyond, the key issues and challenges we expect our business to confront include:
regulatory and political uncertainty with regard to transmission planning and rates policy, the role of distribution utilities and decarbonization impacts, future energy policy, tax regulations, design of energy and capacity markets, and environmental regulation, as well as with respect to the outcome of any legal, regulatory or other proceedings;
performance of the financial markets, including the impact on our pension funding requirements and interest rates on our future financing plans;
continuing to manage costs and maintain affordable customer rates, which could impact customer collections;
the increasing frequency, sophistication and magnitude of cybersecurity attacks against us and our respective vendors and business partners who may have our sensitive information and/or access to our environment, and the increasing frequency and magnitude of physical attacks on electric and gas infrastructure;
future changes in federal and state tax laws or any other associated tax guidance; and
the impact of changes in energy demand, natural gas and electricity prices and PJM’s challenge to ensure resource adequacy to meet demand growth amidst efforts to decarbonize several sectors of the economy.
We continually assess a broad range of strategic options to maximize long-term shareholder value and address the interests of our multiple stakeholders. We consider a wide variety of factors when determining how and when to efficiently deploy capital, including the performance and prospects of our businesses; returns and the sustainability and predictability of future earnings streams; the views of investors, regulators, public policy initiatives, rating agencies, customers and employees; our existing indebtedness and restrictions it imposes; and tax considerations, among other things. Strategic options available to us include:
investments in PSE&G, including T&D facilities to enhance reliability, resiliency and modernize the system to meet the growing needs and increasingly higher expectations of customers, and clean energy investments, particularly our EE programs;
continued operation of our nuclear generation facilities that are expected to be supported by the PTC through 2032, nuclear capacity uprates, such as our planned Salem power uprate supported by a clean energy PTC, as well as obtaining license extensions, transition from an 18-month to 24-month refueling cycle at our Hope Creek facility and energy and/or emission credit sales with potential customers seeking consistent and reliable carbon-free power;
investments in competitive, regulated transmission investments through PJM processes and BPU solicitations that provide revenue predictability and reasonable risk-adjusted returns; and
acquisitions, dispositions, development and other transactions involving our common stock, assets or businesses that could provide value to customers and shareholders.
There can be no assurance, however, that we will successfully develop and execute any of the strategic options noted above, or any additional options we may consider in the future. The execution of any such strategic plan may not have the expected benefits or may have unexpected adverse consequences.
RESULTS OF OP****ERATIONS
PSEG
Our results of operations are comprised of the results of operations of our reportable segments, PSE&G and PSEG Power & Other, excluding charges related to intercompany transactions, which are eliminated in consolidation. For additional information on intercompany transactions, see Item 1. Note 17. Related-Party Transactions.
| Three Months Ended | Increase/ | Six Months Ended | Increase/ | |||||||||||||||||||||||||||||||
| June 30, | (Decrease) | June 30, | (Decrease) | |||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 vs. 2024 | 2025 | 2024 | 2025 vs. 2024 | |||||||||||||||||||||||||||||
| Millions | Millions | % | Millions | Millions | % | |||||||||||||||||||||||||||||
| Operating Revenues | $ | 2,805 | $ | 2,423 | $ | 382 | 16 | $ | 6,027 | $ | 5,183 | $ | 844 | 16 | ||||||||||||||||||||
| Energy Costs | 826 | 732 | 94 | 13 | 2,012 | 1,729 | 283 | 16 | ||||||||||||||||||||||||||
| Operation and Maintenance (A) | 854 | 824 | 30 | 4 | 1,773 | 1,607 | 166 | 10 | ||||||||||||||||||||||||||
| Depreciation and Amortization | 308 | 285 | 23 | 8 | 628 | 580 | 48 | 8 | ||||||||||||||||||||||||||
| Income from Equity Method Investments | — | 1 | (1 | ) | (100 | ) | — | 1 | (1 | ) | (100 | ) | ||||||||||||||||||||||
| Net Gains (Losses) on Trust Investments | 95 | 7 | 88 | N/A | 103 | 102 | 1 | 1 | ||||||||||||||||||||||||||
| Net Other Income (Deductions) | 46 | 47 | (1 | ) | (2 | ) | 83 | 82 | 1 | 1 | ||||||||||||||||||||||||
| Net Non-Operating Pension and OPEB Credits (Costs) | 16 | 18 | (2 | ) | (11 | ) | 32 | 37 | (5 | ) | (14 | ) | ||||||||||||||||||||||
| Interest Expense | 248 | 218 | 30 | 14 | 489 | 423 | 66 | 16 | ||||||||||||||||||||||||||
| Income Tax Expense (Benefit) | 141 | 3 | 138 | N/A | 169 | 100 | 69 | 69 | ||||||||||||||||||||||||||
(A)
Includes amortization of EE programs regulatory expenditures of $41million, $30 million, $79 million and $57 million for the three and six months ended June 30, 2025 and 2024, respectively.
The following discussions for PSE&G and PSEG Power & Other provide a detailed explanation of their respective variances.
PSE&G
| Three Months Ended | Increase/ | Six Months Ended | Increase/ | |||||||||||||||||||||||||||||||
| June 30, | (Decrease) | June 30, | (Decrease) | |||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 vs. 2024 | 2025 | 2024 | 2025 vs. 2024 | |||||||||||||||||||||||||||||
| Millions | Millions | % | Millions | Millions | % | |||||||||||||||||||||||||||||
| Operating Revenues | $ | 2,031 | $ | 1,863 | $ | 168 | 9 | $ | 4,695 | $ | 4,196 | $ | 499 | 12 | ||||||||||||||||||||
| Energy Costs | 760 | 683 | 77 | 11 | 1,854 | 1,611 | 243 | 15 | ||||||||||||||||||||||||||
| Operation and Maintenance (A) | 504 | 466 | 38 | 8 | 1,080 | 931 | 149 | 16 | ||||||||||||||||||||||||||
| Depreciation and Amortization | 275 | 247 | 28 | 11 | 555 | 504 | 51 | 10 | ||||||||||||||||||||||||||
| Net Other Income (Deductions) | 16 | 16 | — | — | 32 | 32 | — | — | ||||||||||||||||||||||||||
| Net Non-Operating Pension and OPEB Credits (Costs) | 18 | 19 | (1 | ) | (5 | ) | 35 | 38 | (3 | ) | (8 | ) | ||||||||||||||||||||||
| Interest Expense | 161 | 141 | 20 | 14 | 318 | 279 | 39 | 14 | ||||||||||||||||||||||||||
| Income Tax Expense | 33 | 59 | (26 | ) | (44 | ) | 77 | 151 | (74 | ) | (49 | ) | ||||||||||||||||||||||
(A)
Includes amortization of EE programs regulatory expenditures of $41 million, $30 million, $79 million and $57 million for the three and six months ended June 30, 2025 and 2024, respectively.
Three Months Ended June 30, 2025 as Compared to Three Months Ended June 30, 2024
Operating Revenues increased $168 million due to changes in delivery, commodity, clause and other operating revenues.
Delivery Revenues are primarily derived from revenues recovered on our regulated investments in rate base and costs through periodic filings of distribution rate cases, approved distribution investment recovery programs and the annual filing of transmission formula rates. Due to PSE&G’s electric and gas distribution CIP decoupling mechanism, there is minimal impact from sales volumes on most distribution delivery revenues. Also included in delivery revenues are revenue credits to customers to flowback tax benefits realized by PSE&G. These revenue credits are offset in Income Tax Expense.
Delivery revenues increased $110 million due primarily to a $160 million increase in electric and gas revenues as a result of the settlement of the 2024 distribution base rate case, $19 million from increased GPRC revenues, a $16 million increase in transmission revenues due primarily to higher rate base investments and a $15 million increase from higher electric delivery prices. These delivery revenue increases were offset by a $47 million decrease in CIP decoupling revenue, $36 million due to an increase in credits flowed back to customers as part of our TAC mechanism and a $19 million decrease from 2024 collections of Energy Strong II.
Clause Revenues are revenues from various pass-through regulatory programs for which PSE&G earns no margin. These revenues are entirely offset by the amortization of related costs in O&M, D&A and Interest and Income Tax Expense, which were originally recognized as regulatory assets.
Clause Revenues decreased $24 million due primarily to a $34 million decrease in TAC and GPRC deferrals, offset by a $10 million increase in Societal Benefits Clause (SBC) collections
Commodity Revenues are revenues from customers choosing default electric (basic generation service or BGS) and gas supply (basic gas supply service or BGSS) from PSE&G. PSE&G procures the BGS and BGSS on behalf of these retail customers and earns no margin on this service as all costs are passed back to the BGS and BGSS customers. The changes in Commodity Revenues for both electric and gas are entirely offset by changes in Energy Costs.
Commodity Revenues increased $95 million primarily due to higher electric BGS revenues from $129 million due to higher prices partially offset by $35 million of lower sales volumes.
Other Operating Revenues are primarily comprised of revenues derived from various GPRC programs including Transition Renewable Energy Certificates (TREC) revenues, Community Solar collections and the Successor Solar Incentive Program (SuSI). The revenues from these programs offset costs included in Energy Costs. In addition, other operating revenues include revenues from our Appliance Service Business (ASB) which offers various appliance protection and repair plans to customers.
Other Operating revenues decreased $13 million due primarily to a decrease in Zero Emission Certificates (ZECs) sales in other operating revenues.
Operating Expenses
Energy Costs increased $77 million. This is entirely offset by changes in Commodity Revenues and Other Operating Revenues.
Operation and Maintenance increased $38 million due primarily to a $31 million increase in clause and renewable costs, a $4 million increase in net distribution and transmission expenditures and a net increase in other operational expenses.
Depreciation and Amortization increased $28 million due primarily to an increase in depreciation due to higher plant placed in service and increased amortization of Regulatory Assets.
Interest Expense increased $20 million due primarily to incremental debt and the replacement of maturing debt at higher rates.
Income Tax Expense decreased $26 million due primarily to an increase in the flowback of previously realized distribution-related mixed service cost deductions.
Six Months Ended June 30, 2025 as Compared to Six Months Ended June 30, 2024
Operating Revenues increased $499 million due to changes in delivery, commodity, clause and other operating revenues.
Delivery Revenues are primarily derived from revenues recovered on our regulated investments in rate base and costs through periodic filings of distribution rate cases, approved distribution investment recovery programs and the annual filing of transmission formula rates. Due to PSE&G’s electric and gas distribution CIP decoupling mechanism, there is minimal impact from sales volumes on most distribution delivery revenues. Also included in delivery revenues are revenue credits to customers to flowback tax benefits realized by PSE&G. These revenue credits are offset in Income Tax Expense.
Delivery revenues increased $260 million due primarily to a $323 million increase in electric and gas revenues as a result of the settlement of the 2024 distribution base rate case, a $45 million increase from higher gas volumes, $42 million from increased GPRC revenues, a $40 million increase from higher electric delivery prices and a $20 million increase in transmission revenues due primarily to higher rate base investments. These delivery revenue increases were offset by a $100 million decrease in CIP decoupling revenues, a decrease of $92 million due to an increase in credits flowed back to customers as part of our TAC mechanism and a $20 million decrease from 2024 collections of Energy Strong II.
Clause Revenues are revenues from various pass-through regulatory programs for which PSE&G earns no margin. These revenues are entirely offset by the amortization of related costs in O&M, D&A and Interest and Income Tax Expense, which were originally recognized as regulatory assets.
Clause Revenues decreased $17 million due primarily to a $76 million decrease in TAC and GPRC deferrals, offset by a $58 million increase in SBC collections.
Commodity Revenues are revenues from customers choosing default electric (basic generation service or BGS) and gas supply (basic gas supply service or BGSS) from PSE&G. PSE&G procures the BGS and BGSS on behalf of these retail customers and earns no margin on this service as all costs are passed back to the BGS and BGSS customers. The changes in Commodity Revenues for both electric and gas are entirely offset by changes in Energy Costs.
Commodity Revenues increased $259 million due primarily to higher electric BGS revenues of $201 million from higher prices and higher gas BGSS revenues of $58 million primarily from higher volumes.
Other Operating Revenues are primarily comprised of revenues derived from various GPRC programs including TREC revenues, and SuSI. The revenues from these programs offset costs included in Energy Costs. In addition, other operating revenues include revenues from our ASB which offers various appliance protection and repair plans to customers.
Other Operating revenues decreased $3 million due primarily to a decrease in ZECs sales partially offset by an increase in ASB revenues.
Operating Expenses
Energy Costs increased $243 million. This is entirely offset by changes in Commodity Revenues and Other Operating Revenues.
Operation and Maintenance increased $149 million due primarily to a $96 million increase in clause and renewable costs, $18 million in higher service company costs, a $15 million increase in net distribution and transmission expenditures and a net increase in other operational expenses.
Depreciation and Amortization increased $51 million due primarily to an increase in depreciation due to higher plant placed in service and increased amortization of Regulatory Assets.
Interest Expense increased $39 million due primarily to incremental debt and the replacement of maturing debt at higher rates.
Income Tax Expense decreased $74 million due primarily to an increase in the flowback of previously realized distribution-related mixed service cost deductions.
PSEG Power & Other
| Three Months Ended | Increase/ | Six Months Ended | Increase/ | |||||||||||||||||||||||||||||||
| June 30, | (Decrease) | June 30, | (Decrease) | |||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 vs. 2024 | 2025 | 2024 | 2025 vs. 2024 | |||||||||||||||||||||||||||||
| Millions | Millions | % | Millions | Millions | % | |||||||||||||||||||||||||||||
| Operating Revenues | $ | 920 | $ | 685 | $ | 235 | 34 | $ | 2,012 | $ | 1,557 | $ | 455 | 29 | ||||||||||||||||||||
| Energy Costs | 212 | 174 | 38 | 22 | 838 | 688 | 150 | 22 | ||||||||||||||||||||||||||
| Operation and Maintenance | 350 | 358 | (8 | ) | (2 | ) | 693 | 676 | 17 | 3 | ||||||||||||||||||||||||
| Depreciation and Amortization | 33 | 38 | (5 | ) | (13 | ) | 73 | 76 | (3 | ) | (4 | ) | ||||||||||||||||||||||
| Income from Equity Method Investments | — | 1 | (1 | ) | (100 | ) | — | 1 | (1 | ) | (100 | ) | ||||||||||||||||||||||
| Net Gains (Losses) on Trust Investments | 95 | 7 | 88 | N/A | 103 | 102 | 1 | 1 | ||||||||||||||||||||||||||
| Net Other Income (Deductions) | 31 | 33 | (2 | ) | (6 | ) | 53 | 53 | — | — | ||||||||||||||||||||||||
| Net Non-Operating Pension and OPEB Costs | (2 | ) | (1 | ) | (1 | ) | (100 | ) | (3 | ) | (1 | ) | (2 | ) | N/A | |||||||||||||||||||
| Interest Expense | 88 | 79 | 9 | 11 | 173 | 147 | 26 | 18 | ||||||||||||||||||||||||||
| Income Tax Expense (Benefit) | 108 | (56 | ) | 164 | N/A | 92 | (51 | ) | 143 | N/A | ||||||||||||||||||||||||
Three Months Ended June 30, 2025 as Compared to Three Months Ended June 30, 2024
Operating Revenues increased $235 million due primarily to changes in generation and gas supply and other operating revenues.
Generation Revenues increased $175 million due primarily to
a net increase of $63 million due primarily to higher average realized prices and volumes sold in 2025,
a net increase of $28 million due to increased MTM gains in 2025 as compared to 2024. Of this amount, there was a $61 million increase due to positions reclassified to realized upon settlement, partially offset by a $33 million decrease due to changes in forward prices in 2025 as compared to 2024, and
a net increase of $21 million in capacity revenue due primarily to higher capacity prices.
Gas Supply Revenues increased $45 million due primarily to
a net increase of $34 million in sales under the BGSS contract due primarily to $33 million from higher sales prices, and
a net increase of $7 million related to sales to third parties due primarily to $15 million from higher sales prices, partially offset by $8 million from lower sales volumes.
Operating Expenses
Energy Costs represent the cost of generation, which includes fuel costs for generation as well as purchased energy in the market, and gas purchases to meet PSEG Power’s obligation under its BGSS contract with PSE&G. Energy Costs increased $38 million due to
Gas costs increased $35 million due primarily to
a net increase of $31 million related to sales under the BGSS contract due primarily to higher average cost of gas, and
a net increase of $5 million related to sales to third parties due primarily to $12 million from higher average cost of gas, partially offset by $7 million due to lower volumes sold.
Generation costs increased $4 million due primarily to increased fuel costs at nuclear.
Operation and Maintenance decreased $8 million due primarily to decreased planned refueling outage costs, partially offset by a net increase in other operational expenses.
Depreciation decreased $5 million due primarily to revised estimated useful lives in April 2025 for the Salem and Hope Creek nuclear plants based on the expectation that a 20-year license extension will be approved for these facilities.
Net Gains (Losses) on Trust Investments increased $88 million due primarily to NDT investments with $79 million in net unrealized gains in 2025 as compared to $23 million of net unrealized losses in 2024 on equity securities, partially offset by a $14 million decrease in net realized gains in 2025.
Interest Expense increased $9 million due primarily to incremental debt.
Income Tax Expense (Benefit) increased $164 million due primarily to higher pre-tax income and the absence of the benefit from nuclear PTCs in 2025.
Six Months Ended June 30, 2025 as Compared to Six Months Ended June 30, 2024
Operating Revenues increased $455 million due primarily to changes in generation and gas supply and other operating revenues.
Generation Revenues increased $256 million due primarily to
a net increase of $105 million due primarily to higher average realized prices and volumes sold in 2025,
a net increase of $88 million due to MTM gains in 2025 as compared to MTM losses in 2024. Of this amount, there was a $105 million increase due to positions reclassified to realized upon settlement, partially offset by a $17 million decrease due to changes in forward prices in 2025 as compared to 2024, and
a net increase of $20 million in capacity revenue due primarily to higher capacity prices.
Gas Supply Revenues increased $180 million due primarily to
a net increase of $129 million in sales under the BGSS contract due primarily to $65 million from higher sales prices, and $64 million from higher sales volumes,
a net increase of $35 million related to sales to third parties due primarily to $67 million from higher sales prices, partially offset by $32 million from lower sales volumes, and
a net increase of $16 million due primarily to MTM gains in 2025 as compared to MTM losses in 2024 from positions reclassified to realized upon settlement.
Operating Expenses
Energy Costs represent the cost of generation, which includes fuel costs for generation as well as purchased energy in the market, and gas purchases to meet PSEG Power’s obligation under its BGSS contract with PSE&G. Energy Costs increased $150 million due to
Gas costs increased $146 million due primarily to
a net increase of $119 million related to sales under the BGSS contract, of which $67 million was due to higher average cost of gas, and $52 million was due to higher send out volumes, and
a net increase of $24 million related to sales to third parties due primarily to $43 million from higher average cost of gas, partially offset by $19 million due to lower volumes sold.
Generation costs increased $5 million due primarily to increased fuel costs at nuclear.
Operation and Maintenance increased $17 million due primarily to a net increase in other operational expenses, partially offset by decreased planned refueling outage costs.
Interest Expense increased $26 million due primarily to incremental debt and the replacement of maturing long-term debt at higher rates.
Income Tax Expense (Benefit) increased $143 million due primarily to higher pre-tax income and the absence of the benefit from nuclear PTCs in 2025.
LIQUIDITY AND CAPIT****AL RESOURCES
The following discussion of our liquidity and capital resources is on a consolidated basis, noting the uses and contributions, where material, of our two direct major operating subsidiaries.
Operating Cash Flows
We continue to expect our operating cash flows combined with cash on hand and financing activities to be sufficient to fund planned capital expenditures and shareholder dividends.
For the six months ended June 30, 2025, our operating cash flow increased $384 million, as compared to the same period in 2024. The net increase was primarily due to a net change at PSE&G, as discussed below, combined with higher earnings at PSEG Power and tax refunds in 2025 as compared to tax payments in 2024.
PSE&G
PSE&G’s operating cash flow increased $215 million from $739 million to $954 million for the six months ended June 30, 2025, as compared to the same period in 2024. The increase was due primarily to a net increase related to materials and supplies inventory, regulatory deferrals, and timing of vendor payments, partially offset by an increase in accounts receivable and unbilled revenues.
Short-Term Liquidity
PSEG meets its short-term liquidity requirements, as well as those of PSEG Power, primarily through the issuance of commercial paper and, from time to time, short-term loans. PSE&G maintains its own separate commercial paper program to meet its short-term liquidity requirements. Each commercial paper program is fully back-stopped by its own separate credit facility.
Each of our credit facilities is restricted as to availability and use to the specific companies as listed below; however, if necessary, the PSEG facilities can also be used to support our subsidiaries’ liquidity needs.
In March 2025, PSEG, PSEG Power and PSE&G executed a one year extension to their existing $3.75 billion revolving credit facilities, extending the maturity through March 2029 and PSEG Power amended certain provisions in the Master Credit Facility including removal of subsidiary guarantees of PSEG Power. The PSEG Power letter of credit facilities and term loans were also amended to be consistent with the Master Credit Facility, and the $150 million uncommitted credit facility at a subsidiary of PSEG Power was terminated.
Our total committed credit facilities and available liquidity as of June 30, 2025 were as follows:
| As of June 30, 2025 | ||||||||||||||
| Company/Facility | Total Facility | Usage | Available Liquidity | |||||||||||
| Millions | ||||||||||||||
| PSEG | $ | 1,500 | $ | 64 | $ | 1,436 | ||||||||
| PSE&G | 1,000 | 225 | 775 | |||||||||||
| PSEG Power | 1,325 | 82 | 1,243 | |||||||||||
| Total | $ | 3,825 | $ | 371 | $ | 3,454 | ||||||||
PSEG Power has uncommitted credit facilities totaling $275 million, which can be utilized for letters of credit. As of June 30, 2025, PSEG Power had $95 million in letters of credit outstanding under these uncommitted credit facilities.
We continually monitor our liquidity and seek to add capacity as needed to meet our liquidity requirements, including to satisfy any additional collateral requirements. As of June 30, 2025, our liquidity position, including our credit facilities and access to external financing, was expected to be sufficient to meet our projected stressed requirements over our 12-month planning horizon. PSEG analyzes its liquidity requirements using stress scenarios that consider different events, including changes in commodity prices and the potential impact of PSEG Power losing its investment grade credit rating from S&P or Moody’s, which would represent a two-level downgrade from its current Moody’s and S&P ratings. In the event of a deterioration of
PSEG Power’s credit rating, certain of PSEG Power’s agreements allow the counterparty to demand further performance assurance. The potential additional collateral that we would be required to post under these agreements if PSEG Power were to lose its investment grade credit rating was approximately $671 million and $618 million as of June 30, 2025 and December 31, 2024, respectively.
For additional information, see Item 1. Note 9. Debt and Credit Facilities.
Long-Term Debt Financing
During the next twelve months,
PSEG has $550 million of 0.80% Senior Notes maturing in August 2025, and
PSE&G has $450 million of 0.95% Secured Medium-Term Notes Series N, due March 2026.
PSEG, PSEG Power, Energy Holdings, PSEG LI and Services participate in a corporate money pool, an aggregation of daily cash balances designed to efficiently manage their respective short-term liquidity needs, which are accounted for as intercompany loans. Servco does not participate in the corporate money pool. Servco’s short-term liquidity needs are met through an account funded and owned by LIPA.
For additional information see Item 1. Note 9. Debt and Credit Facilities.
Common Stock Dividends
On July 21, 2025, our Board of Directors approved a $0.63 per share common stock dividend for the third quarter of 2025. This reflects an indicative annual dividend rate of $2.52 per share. We expect to continue to pay cash dividends on our common stock; however, the declaration and payment of future dividends to holders of our common stock will be at the discretion of the Board of Directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our businesses, alternate investment opportunities, legal requirements, regulatory constraints, industry practice and other factors that the Board of Directors deems relevant. For additional information related to cash dividends on our common stock, see Item 1. Note 15. Earnings Per Share (EPS) and Dividends.
Credit Ratings
If the rating agencies lower or withdraw our credit ratings, such revisions may adversely affect the market price of our securities and serve to materially increase our cost of capital and limit access to capital. Credit Ratings shown are for securities that we typically issue. Outlooks are shown for the credit ratings at each entity and can be Stable, Negative, or Positive. There is no assurance that the ratings will continue for any given period of time or that they will not be revised by the rating agencies, if in their respective judgments, circumstances warrant. Each rating given by an agency should be evaluated independently of the other agencies’ ratings. The ratings should not be construed as an indication to buy, hold or sell any security.
| Moody’s (A) | S&P (B) | |||||
| PSEG | ||||||
| Outlook | Stable | Stable | ||||
| Senior Notes | Baa2 | BBB | ||||
| Commercial Paper | P2 | A2 | ||||
| PSE&G | ||||||
| Outlook | Stable | Stable | ||||
| Mortgage Bonds | A1 | A | ||||
| Commercial Paper | P2 | A2 | ||||
| PSEG Power | ||||||
| Outlook | Stable | Stable | ||||
| Senior Notes | Baa2 | BBB | ||||
(A)
Moody’s ratings range from Aaa (highest) to C (lowest) for long-term securities and P1 (highest) to NP (lowest) for short-term securities.
(B)
S&P ratings range from AAA (highest) to D (lowest) for long-term securities and A1 (highest) to D (lowest) for short-term securities.
CAPITAL RE****QUIREMENTS
We expect that all of our capital requirements over the next three years will come from a combination of internally generated funds and external debt financing. There were no material changes to our projected capital expenditures as compared to amounts disclosed in our 2024 Form 10-K.
PSE&G
During the six months ended June 30, 2025, PSE&G made capital expenditures of $1,279 million, primarily for T&D system reliability. In addition, PSE&G had cost of removal, net of salvage, of $72 million associated with capital replacements, and expenditures for EE programs of $318 million, which are included in operating cash flows.
PSEG Power & Other
During the six months ended June 30, 2025, PSEG Power & Other made capital expenditures of $87 million, excluding $80 million for nuclear fuel, primarily related to various nuclear projects at PSEG Power and various information technology projects at Services.
Previous: Cover and table of contents · Next: Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK