PSEG nears final investment decision on offshore wind project, provides nuclear update

Investor-owned utility Public Service Enterprise Group is closer to making a final investment decision regarding its 25% equity stake in the 1.1-GW Ocean Wind 1 offshore wind project and updated analysts on its 3,770-MW nuclear power fleet, during the company's Oct. 31 third quarter earnings call.

Subsidiary Public Service Electric and Gas' investments in transmission and distribution infrastructure "continue to produce rate base growth consistent with our long-term expectations," Ralph LaRossa, PSEG's president and CEO, said during the earnings conference call.

This was LaRossa's first earnings call as CEO since taking over from Ralph Izzo in September.

"Our new Infrastructure Advancement Program, which launches investment in the critical 'Last Mile' of our distribution system, and the Clean Energy Future investments, are also supporting wide-ranging decarbonization priorities -- driven by energy efficiency, electric vehicles, solar investments, and creating clean energy jobs and training opportunities," LaRossa said.

Regarding the Ocean Wind 1 offshore project in New Jersey, PSEG's continuation as an equity owner is subject to its final investment decision, which represents the decision to proceed to the project's construction phase, according to a statement.

The company is reviewing its options regarding the status of PSEG's 25% equity investment in the joint venture in which Danish company Ørsted holds the remaining 75%. Last week, the New Jersey Board of Public Utilities completed its review of potential offshore wind transmission solutions and awarded several onshore projects including $40 million of system upgrade work to PSE&G needed to accommodate offshore wind power generation into central New Jersey.

However, the NJBPU also indicated that it may conduct an additional solicitation to consider the state's increased offshore wind generation target, which recently increased from 7.5 GW to 11 GW.

"We remain optimistic that the Coastal Wind Link's emphasis on reliability and resiliency will keep it as a strong contender for any future transmission solicitations to bring regional offshore wind projects on-shore," LaRossa said.

PSEG also has an option to purchase a 50% interest in Ørsted's 846-MW Skipjack 2 offshore wind project in Maryland which is expected to be completed in 2026.

Asked about potential future offshore wind opportunities, LaRossa said the southern part of New Jersey has a lot of takeaway capacity on the transmission system because the Oyster Creek nuclear power plant retired "so that transmission system is pretty well set up to take offshore generation."

The northern part of the state also has a "pretty robust transmission system," while the central part of the state could require some further onshore transmission upgrades to handle offshore wind generation, he said.

"We think our offshore mesh network is absolutely the most resilient and robust" and to accommodate the full 11 GW New Jersey is targeting will require such a robust solution, he said.

Nuclear fleet update

Passage of the US Inflation Reduction Act of 2022 this past summer "will have important revenue visibility and price stabilizing benefits for our 3,770-megawatt nuclear fleet, starting in 2024," LaRossa said.

The federal government through the IRA established a decade-long commitment to preserving existing nuclear power generation by creating a production tax credit, "which will extend the visibility and stability of cash flows into the next decade," according to the statement.

For Q3 2022, electric gross margin declined by 29 cents/share, which includes re-contracting approximately 8 TWh of nuclear generation at a $3/MWh lower average price, Daniel Cregg, PSEG's Chief Financial Officer, said.

Nuclear generating output declined to approximately 8 TWh in Q3, reflecting the ramp down of Hope Creek and Peach Bottom 2 into Q4 refueling outages, according to the statement. PSEG forecasts nuclear generation output of about 7 TWh for Q4 2022 and has hedged approximately 95% to 100% of this production at an average price of $27/MWh, the company said, adding that for 2023, PSEG is forecasting nuclear baseload output of 30 TWh to 32 TWh and has hedged 95% to 100% of this output at an average price of $30/MWh.

PSEG reported net income of $114 million, or 22 cents/share for Q3 2022, compared to a net loss of $1,564 million, or a loss of $3.10/share, in Q3 2021 related to an impairment associated with the divestiture of PSEG's fossil fuel assets.