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New PSEG CEO sees US climate law providing stability for nuclear fleet


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New PSEG CEO sees US climate law providing stability for nuclear fleet

CEO looks to keep Public Service Enterprise Group Inc., or PSEG, on track toward decarbonization.

Inflation Reduction Act removes "uncertainty" in running nuclear fleet.

➤ PSEG plans to be key player in New Jersey offshore wind ambitions.

Public Service Enterprise Group Inc. has a new CEO guiding the New Jersey natural gas and power provider through an energy transition in which customers and investors expect companies to provide cleaner, more reliable energy. Former COO Ralph LaRossa took over the helm of PSEG on Sept. 1, replacing longtime CEO Ralph Izzo.

In a recent interview with S&P Global Commodity Insights, LaRossa explained how his outlook aligns with the one Izzo has mapped out over the past 15 years, including the "Powering Progress" vision, which includes a future where the company's customers use less energy. PSEG is also working to achieve net-zero emissions by 2030, modernize its infrastructure and incorporate electric vehicles, energy storage and new technologies.

This is an edited transcript of the interview.

SNL Image
Ralph LaRossa took over as PSEG's president and CEO on Sept. 1.
Source: Public Service Enterprise Group Inc.

S&P Global Commodity Insights: What is your near-term strategic vision for PSEG?

Ralph LaRossa: A lot depends on the exact timing of things. We have three issues that we face right now and that we've been pretty vocal about. One is, in the very short term, [20]23 pension earnings headwinds that we've been addressing. There are some regulatory solutions that we've put out, and there is obviously some cost cutting that you do internally. ... There may be different ways to actually fund our pension and how we go about that.

We have to make some decisions about offshore wind and our role in that partnership with Ørsted A/S. Depending on where we land on that as a partnership, we will have some decisions to make and some announcements to make on that front.

Companies like Eversource Energy have made decisions to monetize their assets. We've talked openly about the fact that we [will] look at that process and determine whether or not that is something that makes sense for us or not.

One of the other decisions we have, the big one that people ask us about all the time, is nuclear and what role do [we] plan to play in the nuclear industry.

I just was so happy to see the work that was done on the Inflation Reduction Act, that we've got now a real, stable base for that asset from a revenue standpoint. We're going to get that [production tax credit] that will be there for us from an industry standpoint. That takes out a lot of uncertainty in running that asset.

When PSEG rolls out its next five-year capital plan, what types of investments will the company target?

We spend 90% of the time talking about the 10% I just did, but at the end of the day, this is a company that puts pipe in the ground to keep houses warm, and [we] put wires in the air to keep the lights on. So, we will continue to make those investments. That is where the bulk of our investments have been and where they will continue to be.

New Jersey Gov. Phil Murphy in late September said the state will target 11,000 MW of offshore wind capacity by 2040. Is there potential for PSEG to assume a larger role in New Jersey's offshore wind space through owned generation or transmission projects?

We certainly hope so. That is a decision the [New Jersey Board of Public Utilities] will have in front of it in the upcoming months. What we have put forth is a very robust [transmission] solution.

It is really up to us to continue to advocate for that same level of reliability and resiliency from other generators that are onshore that we've put in place since the 2003 blackout. ... The best way for us to manage that is to make sure we build anything offshore that looks just like and feels just like everything that is onshore. ... It's really important from an intermittency standpoint that that generation has a place to go and it's done in a reliable way.

Would PSEG consider expanding its offshore wind presence to other states?

We know New Jersey. We want to help New Jersey achieve its policy goals. ... We want to make sure that we're providing our shareholders with the right projects at the right return level. I don't know what those projects will look like long term. It depends upon the opportunities in each state.

If those returns come down a lot lower than they are today, that becomes a concern for me personally. I'm not going to chase a project just to get growth for growth's sake. We have to get growth that makes sense.

How valuable is the Inflation Reduction Act to PSEG's decarbonization efforts and the nation's energy transition?

We have been all about energy efficiency. Ralph Izzo and I are completely aligned on the fact that the cheapest electron to make is the one you don't need.

The other thing that I think over time will be a game-changer is hydrogen. ... There is the generation of hydrogen [using offshore wind or nuclear plants]. There is the delivery to some industrial and commercial users, [or the] direct use of hydrogen.

As important, I think the creation and enabling of that legislation to create generation of hydrogen should really help us on gas distribution. There are a lot of studies that have been done that show you can mix about 10% to 15%, maybe a little bit higher, of hydrogen into the natural gas system.

Do you see any untapped opportunities for growth at PSEG, especially in buying other businesses?

We never say never [to M&A]. But there have been some very high multiples paid for utilities, and I don't want anyone thinking I'm going to go out and pay two- or three-times rate base to get that growth when I can take care of our customers here in New Jersey … and get that same growth pattern.

I'm not in a rush to go chase that next dollar, but I am in a rush to make sure we're giving good returns to shareholders for what we're making that capital investment in. I would much rather invest in a direct investment here than pay two or three times for that same opportunity someplace else.

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