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What changed in Public Service Enterprise Group's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Public Service Enterprise Group's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+469 added−523 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-22)

Top changes in Public Service Enterprise Group's 2023 10-K

469 paragraphs added · 523 removed · 357 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

101 edited+56 added−78 removed67 unchanged
Biggest changeAs a result, electric gas sales volumes and demands are no longer a driver of our margin and over 90% of our Electric and Gas Distribution margin will only vary based upon the number of customers. 3 Table of Contents Investment Clause Programs The following table lists our major approved investment clause programs that are in progress: Program Investment Approval Date Term of Investment Year Started Gas System Modernization Program II (GSMP II) $1.9 billion 2018 5 years 2019 Energy Strong II (ES II) Program $842 million 2019 4 years (A) 2019 CEF-EE $1 billion 2020 3 years (B) 2020 CEF-Energy Cloud (EC) $707 million 2021 4 years 2021 CEF-EV $166 million 2021 ~6 years 2021 Infrastructure Advancement Program (IAP) $511 million 2022 4 years 2022 (A) The program has a small amount of trailing costs expected to be spent in year 5.
Biggest changeWhile there has been a recent decrease in load due to a decline in larger industrial customers, greater EE and other factors, PJM’s most recent forecast indicates an increase in load over the next several years due to the increasing adoption of EVs, the expansion of data centers and other large users in our area, ongoing growth in the number of customers, other sources of electrification and other factors, which will collectively drive the need for increased system investment in the future. 3 Table of Conte n t s Investment Clause Programs The following table lists our major approved investment clause programs that are in progress: Program Investment Approval Date Term of Investment Year Started Gas System Modernization Program II (GSMP II) Extension $902 million 2023 2 years (A) 2024 Energy Strong II Program $842 million 2019 4 years (B) 2019 CEF-EE $1 billion 2020 5 years (C) 2020 CEF-EE Extension $280 million 2023 9 months 2023 CEF-Energy Cloud (EC) $707 million 2021 4 years 2021 CEF-EV $166 million 2021 ~6 years 2021 Infrastructure Advancement Program (IAP) $511 million 2022 4 years 2022 (A) The program has a small amount of trailing costs expected to be spent in year 3.
Effective June 1 and October 1, 2021 for electric and gas, respectively, as part of the BPU’s approval of the Clean Energy Future-Energy Efficiency (CEF-EE) filing, we implemented the Conservation Incentive Program (CIP) that trues up PSE&G’s margin to a baseline per customer from our 2018 base rate case for the majority of our customers.
Effective June 1 and October 1, 2021 for electric and gas, respectively, as part of the BPU’s approval of the Clean Energy Future-Energy Efficiency (CEF-EE) filing, we implemented the Conservation Incentive Program (CIP) that trues up PSE&G’s margin to a baseline per customer from our 2018 distribution base rate case for the majority of our customers.
These contracts provide for: • purchase of uranium (concentrates and uranium hexafluoride), • conversion of uranium concentrates to uranium hexafluoride, • enrichment of uranium hexafluoride, and • fabrication of nuclear fuel assemblies. We expect to be able to meet the fuel supply demands of our customers and our operations.
These contracts provide for: • purchase of uranium (concentrates and uranium hexafluoride), • conversion of uranium concentrates to uranium hexafluoride, • enrichment of uranium hexafluoride, and • fabrication of nuclear fuel assemblies. We expect to be able to meet the nuclear fuel supply demands of our operations.
REGULATORY ISSUES In the ordinary course of our business, we are subject to regulation by, and are party to various claims and regulatory proceedings with FERC, the BPU, the Commodity Futures Trading Commission (CFTC) and various state and federal environmental regulators, among others. For information regarding material matters, other than those discussed below, see Item 8. Note 15.
REGULATORY ISSUES In the ordinary course of our business, we are subject to regulation by, and are party to various claims and regulatory proceedings with FERC, the BPU, the Commodity Futures Trading Commission (CFTC) and various state and federal environmental regulators, among others. For information regarding material matters, other than those discussed below, see Item 8. Note 13.
These auctions take place annually in February. Once validated by the BPU, electricity prices for BGS service are set. Approximately one-third of PSE&G’s total BGS-RSCP eligible load is auctioned each year for a three-year term. For information on current prices, see Item 8. Note 15. Commitments and Contingent Liabilities.
These auctions take place annually in February. Once validated by the BPU, electricity prices for BGS service are set. Approximately one-third of PSE&G’s total BGS-RSCP eligible load is auctioned each year for a three-year term. For information on current prices, see Item 8. Note 13. Commitments and Contingent Liabilities.
We provide distribution service to 2.3 million electric customers and 1.9 million gas customers in a service area that covers approximately 2,600 square miles running diagonally across New Jersey. We serve the most densely populated, commercialized and industrialized territory in New Jersey, including its six largest cities and approximately 300 suburban and rural communities.
We provide distribution service to 2.4 million electric customers and 1.9 million gas customers in a service area that covers approximately 2,600 square miles running diagonally across New Jersey. We serve the most densely populated, commercialized and industrialized territory in New Jersey, including its six largest cities and approximately 300 suburban and rural communities.
In a rulemaking proceeding issued in 2021, FERC has proposed to eliminate the existing 50 basis point adder for RTO membership, which is currently available to PSE&G and other transmission owners in RTOs. Elimination of the RTO adder for RTO membership would reduce PSE&G’s annual Net Income and annual cash inflows by approximately $30 million-$40 million.
In a rulemaking proceeding issued in 2021, FERC proposed to eliminate the existing 50 basis point adder for RTO membership, which is currently available to PSE&G and other transmission owners in RTOs. Elimination of the RTO adder for RTO membership would reduce PSE&G’s annual Net Income and annual cash inflows by approximately $40 million.
See Item 8. Note 13. Asset Retirement Obligations (AROs) for additional information. State Regulation Our principal state regulator is the BPU, which oversees electric and natural gas distribution companies in New Jersey. We are also subject to various other states’ regulations due to our operations in those states.
See Item 8. Note 11. Asset Retirement Obligations (AROs) for additional information. State Regulation Our principal state regulator is the BPU, which oversees electric and natural gas distribution companies in New Jersey. We are also subject to various other states’ regulations due to our operations in those states.
Under the OSA, PSEG LI acts as LIPA’s agent in performing many of its obligations and in return (a) receives reimbursement for pass-through operating expenditures, (b) receives a fixed management fee and (c) is eligible to receive an incentive fee contingent on meeting established performance metrics.
Under the OSA, PSEG LI acts as LIPA’s agent in performing many of its obligations and in return (a) is prefunded for pass-through operating expenditures, (b) receives a fixed management fee and (c) is eligible to receive an incentive fee contingent on meeting established performance metrics.
Our proposed Energy Storage program is for a $109 million investment that encompasses solar smoothing, whereby a battery energy solar system is used to neutralize fluctuations in solar output to facilitate its entry into the grid, distribution investment deferral, outage management, microgrids and peak reduction for municipal facilities.
Our proposed ES program is for a $109 million investment that encompasses solar smoothing, whereby a battery energy solar system is used to neutralize fluctuations in solar output to facilitate its entry into the grid, distribution investment deferral, outage management, microgrids and peak reduction for municipal facilities.
For additional information related to environmental matters, including proceedings not discussed below, as well as anticipated expenditures for installation of compliance technology, hazardous substance liabilities and fuel and waste disposal costs, see Item 1A. Risk Factors and Item 8. Note 15.
For additional information related to environmental matters, including proceedings not discussed below, as well as anticipated expenditures for installation of compliance technology, hazardous substance liabilities and fuel and waste disposal costs, see Item 1A. Risk Factors and Item 8. Note 13.
While current costs and relative emission savings would limit any substantial change in the near term, technological advances for heat pumps, actions by certain jurisdictions in our service territory and other factors could accelerate these potential changes, resulting in a slowing in the growth of our gas distribution and an increase in the growth of our electric T&D business.
While current costs and relative emission savings would limit any substantial change in the near term, technological advances for heat pumps, actions by certain jurisdictions in our service territory and other factors could accelerate these potential changes, which could result in a slowing in the growth of our gas distribution and an increase in the growth of our electric T&D business.
The BPU retained a consultant that gathered detailed and comprehensive information from the State’s EDCs, including PSE&G, regarding resource issues and policy changes needed to interconnect the clean energy capacity required under state policy. In June 2022, the BPU’s consultant issued a draft report with its findings and recommendations to update the BPU’s interconnection regulations and processes.
The BPU retained a consultant that gathered detailed and comprehensive information from New Jersey’s EDCs, including PSE&G, regarding resource issues and policy changes needed to interconnect the clean energy capacity required under state policy. In June 2022, the BPU’s consultant issued a draft report with its findings and recommendations to update the BPU’s interconnection regulations and processes.
In addition, the PJM capacity market imposes rigorous performance obligations and non-performance penalties on resources during times of system stress. These rules provide an opportunity for bonus payments or require the payment of penalties depending on whether a unit is available during a performance interval.
Note 2. Revenues. In addition, the PJM capacity market imposes rigorous performance obligations and non-performance penalties on resources during times of system stress. These rules provide an opportunity for bonus payments or require the payment of penalties depending on whether a unit is available during a performance interval.
Although we enter into these hedges to provide price certainty for a large portion of our anticipated generation, there is variability in both our actual output as well as in the effectiveness of our hedges. Our hedging practices help to manage some of the volatility of the merchant power business.
Although we enter into these hedges to provide price certainty for a large portion of our anticipated generation, there is variability in both our actual output as well as in the effectiveness of our hedges. Our hedging practices help to manage some of the volatility of the nuclear generation business.
Commitments and Contingent Liabilities. In addition, information regarding PSE&G’s specific filings pending before the BPU is discussed in Item 8. Note 7. Regulatory Assets and Liabilities.
Commitments and Contingent Liabilities. In addition, information regarding PSE&G’s specific filings pending before the BPU is discussed in Item 8. Note 6. Regulatory Assets and Liabilities.
We principally conduct our business through two direct wholly owned subsidiaries, PSE&G and PSEG Power LLC (PSEG Power), each of which also has its principal executive offices at 80 Park Plaza, Newark, New Jersey 07102. We are an energy company consisting primarily of a regulated electric and gas utility and a nuclear generation business.
We principally conduct our business through two direct wholly owned subsidiaries, PSE&G and PSEG Power LLC (PSEG Power), each of which also has its principal executive offices at 80 Park Plaza, Newark, New Jersey 07102. We are a public utility holding company consisting primarily of a regulated electric and gas utility and a nuclear generation business.
Rostiac 52 SVP - Human Resources, Chief Human Resources and Chief Diversity Officer - Services January 2020 to present SVP - Human Resources and Chief Human Resources Officer - Services September 2019 to January 2020 VP - Talent, Development and Diversity October 2012 to September 2019 Richard T.
Rostiac 53 SVP - Human Resources, Chief Human Resources and Chief Diversity Officer - Services January 2020 to present SVP - Human Resources and Chief Human Resources Officer - Services September 2019 to January 2020 VP - Talent, Development and Diversity October 2012 to September 2019 Richard T.
Cregg 59 Executive Vice President (EVP) and Chief Financial Officer (CFO) - PSEG October 2015 to present EVP and CFO - PSE&G October 2015 to present EVP and CFO - PSEG Power October 2015 to present Kim C.
Cregg 60 Executive Vice President (EVP) and Chief Financial Officer (CFO) - PSEG October 2015 to present EVP and CFO - PSE&G October 2015 to present EVP and CFO - PSEG Power October 2015 to present Kim C.
Typically, the bid price of the last unit dispatched by PJM establishes the energy market-clearing price. 5 Table of Contents This method of determining supply and pricing creates a situation where natural gas prices often have a major influence on the price that generators will receive for their output, especially in periods of relatively strong or weak demand.
Typically, the bid price of the last unit dispatched by PJM establishes the energy market-clearing price. 5 Table of Conte n t s This method of determining supply and pricing creates a situation where natural gas prices often have a major influence on the price that generators will receive for their output, especially in periods of relatively strong or weak demand.
Formula rates provide a method of rate recovery where the transmission owner annually determines its revenue requirements through a fixed formula that provides for a recovery of our operating costs and a return of and on our capital investments in the system, net of depreciation expense and deferred taxes (also known as rate base) using an approved return on equity (ROE) in developing the weighted average cost of capital.
Formula rates provide a method of rate recovery where the transmission owner annually determines its revenue requirements through a fixed formula that provides for a recovery of our operating costs and a return of and on our capital investments in the system, net of accumulated depreciation and deferred tax liabilities (also known as rate base) using an approved return on equity (ROE) in developing the weighted average cost of capital.
The BPU noted that its consultant’s analysis supports the argument against the need for additional interstate pipeline capacity and also supports the BPU’s aggressive policy approach to reduce the State’s overall reliance on fossil fuels, and achieve the Governor’s goal of 100% clean energy by 2050.
The BPU noted that its consultant’s analysis supports the argument against the need for additional interstate pipeline capacity and also supports the BPU’s aggressive policy approach to reduce New Jersey’s overall reliance on fossil fuels and achieve the New Jersey governor’s goal of 100% clean energy by 2050.
BPU regulation can also have a direct or indirect impact on our power generation business as it relates to energy supply agreements and energy policy in New Jersey. New Jersey Energy Master Plan (EMP) —In January 2020, the State of New Jersey released its EMP.
BPU regulation can also have a direct or indirect impact on our power generation business as it relates to energy supply agreements and energy policy in New Jersey. New Jersey Energy Master Plan (EMP) and Future of Gas Stakeholder Proceeding —In January 2020, the State of New Jersey released its EMP.
The second type provides default supply for larger customers, with energy priced at hourly PJM real-time market prices for a contract term of 12 months (BGS-Commercial Industrial Energy Pricing). 4 Table of Contents We procure the supply to meet our BGS obligations through auctions authorized by the BPU for New Jersey’s total BGS requirement.
The second type provides default supply for larger customers, with energy priced at hourly PJM real-time market prices for a contract term of 12 months (BGS-Commercial Industrial Energy Pricing). 4 Table of Conte n t s We procure the supply to meet our BGS obligations through auctions authorized by the BPU for New Jersey’s total BGS requirement.
While the EMP does not have the force of law and does not impose any obligations on utilities, it outlines current expectations regarding the State’s role in the use, management, and development of energy.
While the EMP does not have the force of law and does not impose any obligations on utilities, it outlines current expectations regarding the New Jersey’s role in the use, management, and development of energy.
Thigpen 62 SVP - Corporate Citizenship - Services July 2018 to present VP - State Government Affairs - Services March 2007 to July 2018 Rose M.
Thigpen 63 SVP - Corporate Citizenship - Services July 2018 to present VP - State Government Affairs - Services March 2007 to July 2018 Rose M.
IAP —fashioned to improve the reliability of the “last mile” of our electric distribution system and address aging substations and gas metering and regulation stations. See Item 7. MD&A—Executive Overview of 2022 and Future Outlook for additional information.
IAP —designed to improve the reliability of the “last mile” of our electric distribution system and address aging substations and gas metering and regulation stations. See Item 7. MD&A—Executive Overview of 2023 and Future Outlook for additional information.
We cannot predict the impact on our business or results of operations from the EMP or any laws, rules or regulations promulgated as a result thereof, particularly as they may relate to PSEG Power’s nuclear generating stations and PSE&G’s electric transmission and gas distribution assets.
We cannot predict the impact on our business or results of operations from these stakeholder proceedings, or any laws, rules, or regulations promulgated as a result thereof, particularly as they may relate to PSEG Power’s nuclear energy generating stations and PSE&G’s electric transmission and gas distribution assets.
PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants have been awarded Zero Emission Certificates (ZECs) by the BPU through May 2025. These nuclear plants are expected to receive ZEC revenue from the electric distribution companies (EDCs) in New Jersey, which is equivalent to approximately $10 per megawatt hour (MWh) in payments to selected nuclear plants.
PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants have also been awarded zero emission certificates (ZECs) by the BPU through May 2025. These nuclear plants are expected to receive ZEC revenue from the electric distribution companies (EDCs) in New Jersey, which is equivalent to approximately $10/MWh.
They authorize the EPA, the NJDEP and private parties to commence lawsuits to compel clean-ups or seek reimbursement for such remediation. The clean-ups can be more complicated and costly when the hazardous substances are in or under a body of water.
They authorize the EPA, the New Jersey Department of Environmental Protection (NJDEP) and private parties to commence lawsuits to compel clean-ups or seek reimbursement for such remediation. The clean-ups can be more complicated and costly when the hazardous substances are in or under a body of water.
We are continuing to analyze the impact of the IRA on our nuclear units, including additional future guidance from the U.S. Treasury, potential impacts on hedging strategies and the impact of PTCs on expected ZEC payments. Our fuel strategy is to maintain certain levels of uranium in inventory and to make periodic purchases to support such levels.
We are continuing to analyze the impact of the IRA on our nuclear units, including additional future guidance from the U.S. Treasury, potential impacts on hedging strategies and overall financial support. Our fuel strategy is to maintain certain levels of uranium in inventory and to make periodic purchases to support such levels.
The NERC Critical Infrastructure Protection standards do not apply to nuclear facilities which are instead governed by the NRC for purposes of physical and cyber security. NRC has a number of risk-informed, performance-based security programs in place to effectively protect U.S. commercial nuclear facilities.
PSE&G is obligated to comply with the NERC Critical Infrastructure Protection standards. NERC Critical Infrastructure Protection standards do not apply to nuclear facilities which are instead governed by the NRC for purposes of physical and cyber security. NRC has a number of risk-informed, performance-based security programs in place to effectively protect U.S. commercial nuclear facilities.
Our CIP reduces the impact on our distribution revenues from changes in sales volumes and demand for most customers. The CIP, which is calculated annually, provides for a true-up of our current period revenue as compared to revenue thresholds established in our most recent distribution base rate proceeding.
Our CIP reduces the impact on our distribution revenues from changes in sales volumes and demand for most customers. The CIP, which is calculated annually, provides for a true-up of our current period revenue as compared to revenue 7 Table of Conte n t s thresholds established in our most recent distribution base rate proceeding.
The OSA contract term continues through 2025, but can be extended for five years subject to a mutual agreement of the parties.
The OSA contract term continues through 2025, but can be extended subject to a mutual agreement of the parties.
(PJM) which is an Independent System Operator (ISO) and Regional Transmission Organization (RTO) that operates the electric transmission system in the Mid-Atlantic Region, including 2 Table of Contents New Jersey and the surrounding states.
(PJM) which is an Independent System Operator (ISO) and Regional Transmission Organization (RTO) that operates the electric transmission system in the Mid-Atlantic Region, including 2 Table of Conte n t s New Jersey and the surrounding states.
Additionally, there are on-site storage facilities for Salem, Hope Creek and Peach Bottom, which we believe have the capacity for at least five years of temporary storage for each facility. 16 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS (PSEG) Name Age as of December 31, 2022 Office Effective Date First Elected to Present Position Ralph A.
Additionally, there are on-site storage facilities for Salem, Hope Creek and Peach Bottom, which we believe have the capacity for at least five years of temporary storage for each facility. 15 Table of Conte n t s INFORMATION ABOUT OUR EXECUTIVE OFFICERS (PSEG) Name Age as of December 31, 2023 Office Effective Date First Elected to Present Position Ralph A.
Hanemann 59 President and COO - PSE&G June 2021 to present Senior Vice President (SVP) and COO - PSE&G January 2020 to June 2021 SVP - Electric Transmission and Distribution - PSE&G September 2018 to January 2020 SVP - Delivery, Projects and Construction - PSE&G July 2014 to September 2018 VP - Delivery, Projects and Construction - PSE&G December 2010 to July 2014 Tamara L.
Hanemann 60 President and COO - PSE&G June 2021 to present Senior Vice President (SVP) and COO - PSE&G January 2020 to June 2021 SVP - Electric Transmission and Distribution - PSE&G September 2018 to January 2020 SVP - Delivery, Projects and Construction - PSE&G July 2014 to September 2018 Tamara L.
However, the ability to maintain an adequate fuel supply could be affected by several factors not within our control, including changes in prices and demand, curtailments by suppliers, severe weather, environmental regulations, and other factors. For additional information and a discussion of risks, see Item 1A. Risk Factors, Item 7. MD&A—Executive Overview of 2022 and Future Outlook and Item 8.
However, the ability to maintain an adequate fuel supply could be affected by several factors not within our control, including changes in prices and demand, curtailments by suppliers, severe weather, environmental regulations, war and hostilities, and other factors. For additional information and a discussion of risks, see Item 1A. Risk Factors, Item 7.
In addition to energy sales, we earn revenue from capacity payments for our generating assets. These payments are compensation for committing our generating units to PJM for dispatch at its discretion. Capacity payments reflect the value to PJM of assurance that there will be sufficient generating capacity available at all times to meet system reliability and energy requirements.
These payments are compensation for committing our generating units to PJM for dispatch at its discretion. Capacity payments reflect the value to PJM of assurance that there will be sufficient generating capacity available at all times to meet system reliability and energy requirements.
At present, all units, including those owned by PSEG, within a delivery zone receive a clearing price based on the bid of the marginal unit (i.e. the last unit that must be dispatched to serve the needs of load) which can vary by location. Capacity Market Issues PJM operates a capacity market that has been approved by FERC.
At present, all units, including those owned by PSEG, within a delivery zone receive a clearing price based on the bid of the marginal unit (i.e., the last unit that must be dispatched to serve the needs of load) which can vary by location.
Under this formula, rates are put into effect in January of each year based upon our internal forecast of annual expenses and capital expenditures. Rates are subsequently trued up to reflect actual annual expenses and capital expenditures.
Under this formula, rates are put into effect in January of each year based upon our internal forecast of annual expenses and capital expenditures. Rates are subsequently trued up to reflect actual annual expenses and capital expenditures. Our transmission revenues are not impacted by sales volumes.
Commitments and Contingent Liabilities. 15 Table of Contents Air Pollution Control Our facilities are subject to federal, state and local regulation that requires controls of emissions from sources of air pollution and imposes recordkeeping, reporting and permit requirements.
Commitments and Contingent Liabilities. 14 Table of Conte n t s Air Pollution Control Our facilities are subject to federal, state and local regulation that requires controls of emissions from sources of air pollution and imposes recordkeeping, reporting and permit requirements.
Among other issues, FERC is considering whether transmission competitive solicitations are working as intended, whether interconnection queue rules for new generation should dramatically change and whether some type of transmission monitor construct to oversee costs should be imposed. FERC’s consideration of many of these issues is still in its early stages.
Among other issues, FERC is considering whether transmission competitive solicitations are working as intended, whether interconnection queue rules for new generation should dramatically change and whether some type of transmission monitor construct to oversee costs should be imposed.
In July 2021, the BPU issued an order formally establishing the Successor Solar Incentive (SuSI) Program, heavily drawing upon the predecessor TREC program, to serve as the permanent program for providing solar incentives to qualified solar electric generation facilities.
N ew Jersey Solar Initiatives —In July 2021, the BPU issued an order formally establishing the Successor Solar Incentive (SuSI) Program, heavily drawing upon the predecessor Transition Renewable Energy Certificates program, to serve as the permanent program for providing solar incentives to qualified solar electric generation facilities.
Our load requirements are split among residential, C&I customers, as described in the following table for 2022: % of 2022 Sales Customer Type Electric Gas Commercial 57% 37% Residential 34% 59% Industrial 9% 4% Total 100% 100% Our customer base has modestly increased since 2018, with electric and gas loads changing as illustrated in the following table: Electric and Gas Distribution Statistics Number of Customers as of December 31, 2022 Historical Annual Customer Growth 2018-2022 Electric Sales and Firm Gas Sales as of December 31, 2022 (A) Historical Annual Load Growth 2018-2022 Electric 2.3 Million 0.9 % 40,816 Gigawatt hours —% Gas 1.9 Million 0.7 % 2,567 Million Therms 1.4% (A) Excludes sales from Gas rate classes that do not impact margin, specifically Contract, Non-Firm Transportation, Cogeneration Interruptible and Interruptible Services.
Our load requirements are split among residential, C&I customers, as described in the following table for 2023: % of 2023 Sales Customer Type Electric Gas Commercial 58% 38% Residential 33% 58% Industrial 9% 4% Total 100% 100% Our customer base has modestly increased since 2019, with electric and gas loads changing as illustrated in the following table: Electric and Gas Distribution Statistics Number of Customers as of December 31, 2023 Historical Annual Customer Growth 2019-2023 Electric Sales and Firm Gas Sales as of December 31, 2023 (A) Historical Annual Load Decline 2019-2023 Electric 2.4 Million 0.9 % 39,085 Gigawatt hours (1.4)% Gas 1.9 Million 0.6 % 2,282 Million Therms (2.8)% (A) Excludes sales from Gas rate classes that do not impact margin, specifically Contract, Non-Firm Transportation, Cogeneration Interruptible and Interruptible Services.
We cannot predict the impact on our business or results of operations from this Grid Modernization plan or any laws, rules or regulations promulgated as a result thereof, particularly as they may relate to PSE&G’s electric distribution assets.
The BPU is currently considering revising its interconnection rules to speed up the interconnection of renewable resources to the distribution grid. We cannot predict the impact on our business or results of operations from this Grid Modernization plan or any laws, rules or regulations promulgated as a result thereof, particularly as they may relate to PSE&G’s electric distribution assets.
Over the past few years, our investments resulted in a higher percentage of earnings contribution by PSE&G. The sale of the fossil generating portfolio further simplified our business mix, resulting in an even higher percentage of earnings contribution by PSE&G going forward and provides more financial flexibility. Our operations are located primarily in the Mid-Atlantic United States.
Over the past several years, our investments resulted in a higher percentage of earnings contribution by PSE&G. The sale of the fossil generating portfolio in 2022 further simplified our business mix, resulting in an even higher percentage of earnings contribution by PSE&G going forward and provides more financial flexibility.
The rules are intended to reduce systemic risk, increase 11 Table of Contents transparency and promote market integrity within the financial system by providing for the registration and comprehensive regulation of swap dealers and by imposing recordkeeping, data reporting, margin and clearing requirements with respect to swaps.
The rules are intended to reduce risk, increase transparency and promote market integrity within the financial system by providing for the registration and comprehensive regulation of swap dealers and by imposing recordkeeping, data reporting, margin and clearing requirements with respect to swaps. We are currently subject to recordkeeping and data reporting requirements applicable to commercial end users.
Under this formula, rates are put into effect in January of each year based upon our internal forecast of annual expenses and capital expenditures. Rates are subsequently trued up to reflect actual annual expenses and capital expenditures.
We currently have FERC-approved formula rates in effect to recover the costs of our transmission facilities. Under this formula, rates are put into effect in January of each year based upon our internal forecast of annual expenses and capital expenditures. Rates are subsequently trued up to reflect actual annual expenses and capital expenditures.
These companies, which include PSEG Energy Resources & Trading LLC, PSEG Nuclear LLC and PSE&G must file at FERC every three years to update their market power analyses.
These companies, which include PSEG Energy Resources & Trading LLC, PSEG Nuclear LLC and PSE&G must file at FERC every three years to update their market power analyses. At the end of 2022, PSEG filed such a market power update at FERC, which remains pending.
Forward prices are volatile and there can be no assurance that current forward prices will remain in effect or that we will be able to contract output at these forward prices. Nuclear Fuel Supply We have long-term contracts for nuclear fuel.
Forward prices are volatile and there can be no assurance that current forward prices will remain in effect or that we will be able to contract output at these forward prices. The PTC is expected to mitigate our exposure to this volatility and provide support for the nuclear units. Nuclear Fuel Supply We have long-term contracts for nuclear fuel.
See Item 7. MD&A—Executive Overview of 2022 and Future Outlook—Wholesale Power Market Design. In PJM the market design for capacity payments provides for a structured, forward-looking, capacity pricing mechanism through the Reliability Pricing Model (RPM). For additional information regarding FERC actions related to the capacity market construct, see Regulatory Issues—Federal Regulation.
In PJM the market design for capacity payments provides for a structured, forward-looking, capacity pricing mechanism through the Reliability Pricing Model (RPM). For additional information regarding FERC actions related to the capacity market construct, see Regulatory Issues—Federal Regulation.
EV Activity —Consistent with the policy set forth in New Jersey’s EMP, the BPU has supported electrification of the transportation sector. EDCs in New Jersey, including PSE&G, are making investments, approved by the BPU for recovery in rates, initially focused on light duty vehicles, such as preparatory work to deliver infrastructure to the EV charging point.
EDCs in New Jersey, including PSE&G, are making investments, approved by the BPU for recovery in rates, initially focused on light duty vehicles, such as preparatory work to deliver infrastructure to the EV charging point.
Linde 58 EVP and General Counsel - PSEG July 2014 to present EVP and General Counsel - PSE&G July 2014 to present EVP and General Counsel - PSEG Power July 2014 to present Sheila J.
Linde 59 EVP and General Counsel - PSEG July 2014 to present EVP and General Counsel - PSE&G July 2014 to present EVP and General Counsel - PSEG Power July 2014 to present Charles V.
LaRossa 59 President and Chief Executive Officer (CEO) -PSEG (A) September 2022 to present Chair of the Board (COB) and CEO - PSEG Power September 2022 to present Chief Operating Officer (COO) - PSEG January 2020 to August 2022 COB and CEO - PSE&G September 2022 to present COB and CEO - PSEG Power September 2022 to present COB and CEO - Energy Holdings September 2022 to present COB and President - Services September 2022 to present President and COO - PSEG Power October 2017 to August 2022 President and COO - PSE&G October 2006 to October 2017 COB - PSEG Long Island LLC December 2020 to August 2022 Eric Carr 48 President and COO - PSEG Power September 2022 to present President and Chief Nuclear Officer - PSEG Nuclear LLC July 2019 to present Vice President (VP) Hope Creek Generating Station - PSEG Nuclear LLC September 2016 to July 2019 Daniel J.
LaRossa 60 Chair of the Board (COB), President and Chief Executive Officer (CEO) - PSEG January 2023 to present President and CEO -PSEG September 2022 to present Chief Operating Officer (COO) - PSEG January 2020 to August 2022 COB and CEO - PSE&G September 2022 to present COB, President and CEO - PSEG Power May 2023 to present COB and CEO - PSEG Power September 2022 to May 2023 COB and CEO - Energy Holdings September 2022 to present COB, CEO and President - Services September 2022 to present President and COO - PSEG Power October 2017 to August 2022 President and COO - PSE&G October 2006 to October 2017 COB - PSEG Long Island LLC December 2020 to August 2022 Daniel J.
Conversely, an increase in EV adoption and other factors could lead to an increase in system usage, require incremental investments to meet higher peak demands and result in a larger customer usage base.
Conversely, an increase in EV adoption and other factors could lead to an increase in system usage, require incremental investments to meet higher peak demands and result in a larger customer usage base. There is also an expected shift toward greater electrification and less gas usage in the coming decades.
(Energy Holdings), which holds our legacy portfolio of lease investments and interests in offshore wind ventures; PSEG Long Island LLC (PSEG LI), which operates the Long Island Power Authority’s (LIPA) electric transmission and distribution (T&D) system under a contractual agreement; and PSEG Services Corporation (Services), which provides us and our operating subsidiaries with certain management, administrative and general services at cost. 1 Table of Contents OPERATIONS AND STRATEGY PSE&G Our regulated T&D public utility, PSE&G, distributes electric energy and natural gas to customers within a designated service territory running diagonally across New Jersey where approximately 6.5 million people, or about 70% of New Jersey’s population resides.
(Energy Holdings), which primarily holds our legacy lease investments and competitively bid, FERC regulated transmission; and PSEG Services Corporation (Services), which provides us and our operating subsidiaries with certain management, administrative and general services at cost. 1 Table of Conte n t s OPERATIONS AND STRATEGY PSE&G Our regulated T&D public utility, PSE&G, distributes electric energy and natural gas to customers within a designated service territory running diagonally across New Jersey where approximately 6.8 million people, or about 74% of New Jersey’s population resides.
Gas Capacity Review —In September 2019, the BPU formally opened a stakeholder proceeding to explore gas capacity procurement service to all New Jersey natural gas customers. The BPU retained a consultant and in June 2022 accepted the consultant’s key finding that, through 2030, New Jersey’s firm gas capacity can meet firm demand under normal design day conditions.
The BPU retained a consultant and in June 2022 accepted the consultant’s key finding that, through 2030, New Jersey’s firm gas capacity can meet firm demand under normal design day conditions.
Such expenditures could materially affect the continued economic viability and/or cost to construct one or more such facilities. Water Pollution Control The Federal Water Pollution Control Act prohibits the discharge of pollutants from point sources to water, except pursuant to a duly issued permit. These permits must generally be renewed every five years.
Water Pollution Control The Federal Water Pollution Control Act prohibits the discharge of pollutants from point sources to water, except pursuant to a duly issued permit. These permits must generally be renewed every five years.
We are currently subject to recordkeeping and data reporting requirements applicable to commercial end users. The CFTC finalized new rules establishing federal position limits for trading in certain commodities, such as natural gas. Entities such as PSEG began complying with the rules on January 1, 2022.
The CFTC finalized new rules establishing federal position limits for trading in certain commodities, such as natural gas. Entities such as PSEG began complying with the rules on January 1, 2022.
Under FERC-approved market rules, bids are subject to price caps and mitigation rules applicable to certain generation units. FERC rules also govern the overall design of these markets.
Energy Clearing Prices Energy clearing prices in the markets in which we operate are generally based on bids submitted by generating units. Under FERC-approved market rules, bids are subject to price caps and mitigation rules applicable to certain generation units. FERC rules also govern the overall design of these markets.
Further, since January 2015, PSEG Power provides fuel procurement and power management 7 Table of Contents services to LIPA under separate agreements. It is uncertain whether the OSA and the separate agreements will be renewed on terms acceptable to us or at all.
Further, since January 2015, PSEG Power provides fuel procurement and power management services to LIPA under separate agreements that expire at the end of 2025. It is uncertain whether the OSA and the separate agreements will be renewed on terms acceptable to us or at all. Energy Holdings Energy Holdings maintains our portfolio of legacy lease investments. See Item 8.
FERC also regulates RTOs/ISOs, such as PJM, and their regional transmission planning processes as well as their energy and capacity markets. Transmission Regulation FERC has exclusive jurisdiction to establish the rates and terms and conditions of service for interstate transmission. We currently have FERC-approved formula rates in effect to recover the costs of our transmission facilities.
FERC also regulates RTOs/ISOs, such as PJM, and their regional transmission planning processes as well as their energy and capacity markets. 9 Table of Conte n t s Transmission Regulation FERC has exclusive jurisdiction to establish the rates and terms and conditions of service for interstate transmission.
In PJM, owners of power plants specify prices at which they are prepared to generate and sell energy based on the marginal cost of generating energy from each individual unit.
Performance is generally measured by the unit’s “capacity factor,” or the ratio of the actual output to the theoretical maximum output. In PJM, owners of power plants specify prices at which they are prepared to generate and sell energy based on the marginal cost of generating energy from each individual unit.
We strive for a fair, equitable and transparent approach to human capital management. The Organization and Compensation Committee of the PSEG Board of Directors is responsible for oversight of PSEG’s human capital management practices and is updated regularly on matters related to diversity, equity and inclusion (DEI), workforce development and succession planning.
The Organization and Compensation Committee of the PSEG Board of Directors is responsible for oversight of PSEG’s human capital management practices and is updated regularly on matters related to executive leadership succession and development, culture, and DEI.
The current operating licenses of our nuclear facilities expire in the years shown in the following table: Unit Year Salem Unit 1 2036 Salem Unit 2 2040 Hope Creek 2046 Peach Bottom Unit 2 (A) 2033 Peach Bottom Unit 3 (A) 2034 (A) Depreciation Expense and the Asset Retirement Obligation assume these units will operate through 2053 and 2054, respectively, given our expectation that previously approved operating license expiration dates will be restored by the NRC.
We are unable to predict the final outcome of these reviews or the cost of any actions we would need to take to comply with any new regulations, including possible modifications to the Salem, Hope Creek and Peach Bottom facilities, but such costs could be material. 11 Table of Conte n t s The current operating licenses of our nuclear facilities expire in the years shown in the following table: Unit Year Salem Unit 1 2036 Salem Unit 2 2040 Hope Creek 2046 Peach Bottom Unit 2 (A) 2033 Peach Bottom Unit 3 (A) 2034 (A) Depreciation Expense and the Asset Retirement Obligation assume these units will operate through 2053 and 2054, respectively, given our expectation that previously approved operating license expiration dates will be restored by the NRC.
PSEG Power also sells wholesale natural gas, primarily through a full-requirements BGSS contract with PSE&G to meet the needs of PSE&G’s customers. In 2022, the BPU approved an extension of the long-term BGSS contract to March 31, 2027, and thereafter the contract remains in effect unless terminated by either party with a two-year notice.
In 2022, the BPU approved an extension of the long-term BGSS contract to March 31, 2027, and thereafter the contract remains in effect unless terminated by either party with a two-year notice. PSEG Power supplies PSE&G’s peak daily gas requirements through its balanced portfolio of firm gas transportation capacity, storage contracts, contract peaking supply, and liquefied natural gas and propane.
Base load units run the most and typically are called to operate whenever they are available. Variable operating costs are low due to the combination of highly efficient operations and the use of relatively lower-cost fuels. Performance is generally measured by the unit’s “capacity factor,” or the ratio of the actual output to the theoretical maximum output.
Generation Dispatch Our nuclear generation is considered to be base load. Base load units run the most and typically are called to operate whenever they are available. Variable operating costs are low due to the combination of highly efficient operations and the use of relatively lower-cost fuels.
Department of Homeland Security (DHS), has issued three security directives since May 2021 designed to mitigate cybersecurity threats to natural gas pipelines.
The Transportation Security Administration, an agency of the U.S.DHS, has issued multiple security directives since May 2021 designed to mitigate cybersecurity threats to natural gas pipelines.
The team evaluates whether an identified threat could impact licensed facilities and makes recommendations for NRC actions and communications to the licensees. Furthermore, the NRC has established liaison relationships with the intelligence and law enforcement communities to include the National Counterterrorism Center, the DHS’s U.S. Computer Emergency Response Team, and the Federal Bureau of Investigation.
Furthermore, the NRC has established liaison relationships with the intelligence and law enforcement communities to include the National Counterterrorism Center, the U.S. Department of Homeland Security’s ( DHS) Computer Emergency Response Team, and the Federal Bureau of Investigation.
The NRC has existing requirements, effective processes, and the expertise to regulate and inspect cybersecurity to ensure the federal requirements are met. NRC requires operating nuclear power plant licensee and license applicants to ensure that digital computer and communication systems associated with a nuclear power plant’s safety, security, and emergency preparedness functions are protected from cyberattacks.
NRC requires operating nuclear power plant licensee and license applicants to ensure that digital computer and communication systems associated with a nuclear power plant’s safety, security, and emergency preparedness functions are protected from cyberattacks. As a result, computer systems at operating power plants that monitor and control safety systems and help the reactor operate are isolated from external communications.
For information regarding recent actions by FERC relating to capacity market design, see the discussion in Regulatory Issues—Federal Regulation.
PJM has a capacity market that has been approved by FERC. FERC regulates this market and continues to examine whether this market design is working optimally. For information regarding recent actions by FERC relating to capacity market design, see the discussion in Regulatory Issues—Federal Regulation.
Additionally, under NERC’s supply chain standard approved by FERC in 2018, PSEG has developed security controls for supply chain management associated with the procurement of industrial control system hardware, software, and services related to grid operations. These standards implement the Critical Infrastructure Protection standards that are already in place and that establish physical and cybersecurity protections for critical systems.
As a result of physical attacks in 2022 to electric infrastructure, NERC is studying whether the physical security standard should be revised. Moreover, under NERC’s supply chain standard approved by FERC in 2018, PSEG has developed physical and cybersecurity controls for supply chain management associated with the procurement of industrial control system hardware, software, and services related to grid operations.
Our current approved rates provide for a base ROE of 9.90% and a 50 basis point adder for our membership in PJM as an RTO. See Item 7. MD&A—Executive Overview of 2022 and Future Outlook. We continue to invest in transmission projects as part of PJM’s FERC-approved transmission expansion planning process.
Our current approved transmission rates provide for a base ROE of 9.90% and a 50 basis point adder for our membership in PJM as an RTO. See Item 7. MD&A—Executive Overview of 2023 and Future Outlook. Distribution PSE&G distributes electricity and natural gas to end users in our respective franchised service territories.
We have documented procedures and implemented new processes to comply with these standards. The NERC continues to examine revising criteria for low-impact cyber systems, which could result in expanding the Critical Infrastructure Protection standards to a larger set of applicable cyber assets.
NRC has existing requirements, effective processes, and the expertise to regulate and inspect cybersecurity to ensure the federal requirements are met. NERC continues to examine revising criteria for low-impact cyber systems, which could result in expanding the Critical Infrastructure Protection standards to a larger set of applicable cyber assets.
NRC’s Office of Nuclear Security and Incident Response established the Cyber Security Branch (CSB) to strengthen internal governance of the agency’s regulatory activities. The CSB plans, coordinates, and manages agency activities related to cybersecurity for NRC applicants and licensees, such as security programs’ development and policy enhancements to prevent malevolent cyber acts against NRC-licensed facilities.
The CSB plans, coordinates, and manages agency activities related to cybersecurity for NRC applicants and licensees, such as security programs’ development and policy enhancements to prevent malevolent cyber acts against NRC-licensed facilities. The CSB’s cybersecurity-related responsibilities include developing rules and guidance, reviewing licensing actions, developing policy enhancements, and overseeing NRC-licensed facilities.
Transmission Planning Proceedings —During 2022, FERC issued several rulemakings and notices that examine current transmission planning proceedings to determine whether the rules as currently implemented will facilitate the integration of renewable resources onto the grid and whether there is sufficient oversight over transmission costs to protect customers.
Transmission Planning Proceedings —Through rulemaking proceedings, FERC continues to determine whether changes are needed to current transmission and interconnection planning rules to facilitate the integration of renewable resources onto the grid. FERC is also examining whether there is sufficient oversight over transmission costs to protect customers.
We believe this hedging strategy increases the stability of earnings. Generally, we seek to hedge our output through sales at PJM West or other nodes corresponding to our generation portfolio.
Treasury guidance. 6 Table of Conte n t s Generally, we seek to hedge our output through sales at PJM West or other nodes corresponding to our generation portfolio.
The CSB’s cybersecurity-related responsibilities include developing rules and guidance, reviewing licensing actions, developing policy enhancements, and overseeing NRC-licensed facilities. NRC regularly monitors the threats associated with cybersecurity, including potential threats against NRC-licensed facilities. Within the CSB there is a cyber assessment team that assesses real-world cyber events at NRC-licensed facilities.
NRC regularly monitors the threats associated with cybersecurity, including potential threats against NRC-licensed facilities. Within the CSB there is a cyber assessment team that assesses real-world cyber events at NRC-licensed facilities. The team evaluates whether an identified threat could impact licensed facilities and makes recommendations for NRC actions and communications to the licensees.
Under the RPM, generators located in constrained areas within PJM are paid more for their capacity as an incentive to ensure adequate supply where generation capacity is most needed. The mechanics of the RPM in PJM continue to evolve and be refined in stakeholder proceedings and FERC proceedings in which we are active.
Capacity Market Issues PJM operates a capacity market called the Reliability Pricing Model (RPM), the rules for which are approved by FERC. RPM incorporates a forward auction for installed capacity. Under the RPM, generators located in constrained areas within PJM are paid more for their capacity as an incentive to ensure adequate supply where generation capacity is most needed.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeNew Jersey utilities are experiencing increased usage by customers and third parties of distributed energy resources, such as on-site solar generation, energy storage, fuel cells, EE, and demand response technologies. These developments will require modernization of the electric distribution grid to, among other things, accommodate two-way flows of electricity, increase the grid’s capacity, and interconnect distributed energy resources.
Biggest changeIn addition, in order to enable the New Jersey clean energy economy, sustained grid modernization will be required to accommodate increased EE, EV infrastructure, increased penetration of distributed energy resources on the electric system, such as on-site solar generation and also anticipated increased deployment of energy storage, fuel cells, and DR technologies.
We may be adversely affected by asset and equipment failures, critical operating technology or business system failures, accidents, natural disasters, severe weather events, acts of war or terrorism or other acts of violence, sabotage, physical attacks or security breaches, cyberattacks, or other incidents, including pandemics such as the coronavirus pandemic, that impact our ability to provide safe and reliable service to our customers and remain competitive and could result in substantial financial losses.
We may be adversely affected by asset and equipment failures, accidents, critical operating technology or business system failures, natural disasters, severe weather events, acts of war or terrorism or other acts of violence, sabotage, physical attacks or security breaches, cyberattacks, or other incidents, including pandemics such as the coronavirus pandemic, that impact our ability to provide safe and reliable service to our customers and remain competitive and could result in substantial financial losses.
Higher collateral requirements reduce available short-term liquidity and increase working capital costs. We may be unable to obtain an adequate fuel supply in the future. We obtain substantially all of our nuclear fuel supply from third parties pursuant to arrangements that vary in term, pricing structure, firmness and delivery flexibility.
Higher collateral requirements reduce available short-term liquidity and increase working capital costs. We may be unable to obtain an adequate nuclear fuel supply in the future. We obtain substantially all of our nuclear fuel supply from third parties pursuant to arrangements that vary in term, pricing structure, firmness and delivery flexibility.
Failure to comply with these regulations could have a material adverse impact on PSE&G’s ability to operate its business and could result in fines, penalties or sanctions. The retail rates for electric and gas distribution services are established in a base rate proceeding and remain in effect until a new base rate proceeding is filed and concluded.
Failure to comply with these regulations could have a material adverse impact on PSE&G’s ability to operate its business and could result in fines, penalties or sanctions. The retail rates for electric and gas distribution services are established in a distribution base rate proceeding and remain in effect until a new distribution base rate proceeding is filed and concluded.
Our business plan calls for extensive investment in capital improvements and additions, including the construction of T&D facilities, modernizing existing infrastructure pursuant to investment programs that provide for current recovery in rates, and our CEF programs, which include providing incentives for customers to install high-efficiency equipment at their premises, constructing EV infrastructure, and implementing our smart meter program.
Our business plan calls for extensive investment in capital improvements and additions, including the construction of T&D facilities, modernizing and expanding existing infrastructure pursuant to investment programs that provide for current recovery in rates, and our CEF programs, which include providing incentives for customers to install high-efficiency equipment at their premises, constructing EV infrastructure, and implementing our smart meter program.
If the programs that PSE&G may file from time to time are only approved in part, or not at all, or if the approval fails to allow for the timely recovery of all of PSE&G’s costs, including a return of, or on, its investment, PSE&G will have a lower than anticipated rate base, thus causing its future earnings to be lower than anticipated.
If the projects or programs that PSE&G may file from time to time are only approved in part, or not at all, or if the approval fails to allow for the timely recovery of all of PSE&G’s costs, including a return of, or on, its investment, PSE&G will have a lower than anticipated rate base, thus causing its future earnings to be lower than anticipated.
There may be periods when PSEG Power generation output may not be able to meet its commitments under forward sale obligations and PJM rules at a reasonable cost or at all. A substantial portion of PSEG Power’s nuclear generation output has been sold forward under fixed price financial power sales contracts.
There may be periods when PSEG Power generation may not operate and/or may not be able to meet its commitments under forward sale obligations and PJM rules at a reasonable cost or at all. A substantial portion of PSEG Power’s nuclear generation output has been sold forward under fixed price financial power sales contracts.
If our regulators do not allow us to recover all or a part of the cost of capital investment or the O&M costs incurred to comply increasingly rigorous regulatory mandates, it could have a material adverse effect on our results of operations, financial condition or cash flows.
If our regulators do not allow us to recover all or a part of the cost of capital investment or the O&M costs incurred to comply with increasingly rigorous regulatory mandates, it could have a material adverse effect on our results of operations, financial condition or cash flows.
The Progress Report found that it is in New Jersey’s best interest to pursue a voluntary independent clean energy market and Staff sought the BPU’s authorization to evaluate various options that would serve as alternatives to the PJM capacity market or work in conjunction with it.
The Progress Report found that it is in New Jersey’s best interest to pursue a voluntary independent clean energy market and the BPU Staff sought the BPU’s authorization to evaluate various options that would serve as alternatives to the PJM capacity market or work in conjunction with it.
The continued development of subsidized, competing on-site power generation and storage technologies and significant development of DSM and EE programs could alter the market and price structure for power generation and could result in a reduction in load requirements, negatively impacting our financial condition, results of operations and cash flows.
The continued development of competing on-site power generation and storage technologies and significant development of DSM and EE programs could alter the market and price structure for power generation and could result in a reduction in load requirements, negatively impacting our financial condition, results of operations and cash flows.
PSE&G began receiving a 50 basis point adder for RTO membership in 2008. Elimination of the adder for RTO membership would reduce PSE&G’s annual Net Income and annual cash inflows by approximately $30 million-$40 million.
PSE&G began receiving a 50 basis point adder for RTO membership in 2008. Elimination of the adder for RTO membership would reduce PSE&G’s annual Net Income and annual cash inflows by approximately $40 million.
If the markets, PTC and/or the ZEC program do not provide sufficient revenue, or, in the case of the Salem nuclear plants, decisions by the EPA and state environmental regulators regarding the implementation of Section 316(b) of the CWA and related state regulations, or other factors, PSEG Power may take all necessary steps to cease to operate all of these plants and will incur associated costs and accounting charges in the event that the financial condition of the plants is materially adversely impacted in the future.
If the markets, PTC and/or the ZEC program do not provide sufficient financial support, or, in the case of the Salem nuclear plants, decisions by the EPA and state environmental regulators regarding the implementation of Section 316(b) of the CWA and related state regulations, or other factors, PSEG Power may take all necessary steps to cease to operate all of these plants and will incur associated costs and accounting charges in the event that the financial condition of the plants is materially adversely impacted in the future.
Any of the issues described above, if experienced at our facilities, or by others in our industry, could adversely impact our revenues; increase costs to repair and maintain our systems; subject us to potential litigation and/or damage claims, fines or penalties; and increase the level of oversight of our utility and generation operations and infrastructure through investigations or through the imposition of additional regulatory or legislative requirements.
Any of the issues described above, if experienced at our facilities or otherwise in our business, or by others in our industry, could adversely impact our revenues; increase costs to repair and maintain our systems; subject us to potential litigation and/or damage claims, fines or penalties; and increase the level of oversight of our utility and generation operations and infrastructure through investigations or through the imposition of additional regulatory or legislative requirements.
Our market positions can also be adversely affected by the level of volatility in the energy markets that, in turn, depends on various factors, including weather in various geographical areas, short-term supply and demand imbalances, customer migration and pricing differentials at various geographic locations. These risks cannot be predicted with certainty.
Our market positions can also be adversely affected by the level of volatility in the energy markets that, in turn, depends on various factors, including weather in various geographical areas, short-term supply and demand imbalances, and pricing differentials at various geographic locations. These risks cannot be predicted with certainty.
Also, seeking recovery of higher costs in future rate cases could pressure customer rates, resulting in a potentially adverse outcome of such proceedings, or in other proceedings, including the proposal of certain investment programs or other proceedings that impact customer rates. Covenants in our debt instruments and credit agreements may adversely affect our business.
Also, seeking recovery of higher costs in future distribution base rate cases could pressure customer rates, resulting in a potentially adverse outcome of such proceedings, or in other proceedings, including the proposal of certain investment programs or other proceedings that impact customer rates. Covenants in our debt instruments and credit agreements may adversely affect our business.
In 2021, FERC approved a settlement agreement effective August 1, 2021 that we reached with the BPU and the New Jersey Rate Counsel about the level of PSE&G’s base transmission ROE and other formula rate matters. The settlement reduces PSE&G’s base ROE from 11.18% to 9.9% and made changes to recovery of certain costs.
In 2021, FERC approved a settlement agreement effective August 1, 2021 that we reached with the BPU and the New Jersey Rate Counsel about the level of PSE&G’s base transmission ROE and other formula rate matters. The settlement reduced PSE&G’s base ROE from 11.18% to 9.9% and made changes to recovery of certain costs.
The amount and scope of insurance we maintain against losses that result from cybersecurity incidents may not be sufficient to cover losses or adequately compensate for resulting business disruptions. For a discussion of state and federal cybersecurity regulatory requirements and information regarding our cybersecurity program, see Item 1.
The amount and scope of insurance we maintain against losses that result from cybersecurity incidents may not be sufficient to cover losses or adequately compensate for resulting business disruptions. For a discussion of state and federal cybersecurity regulatory requirements and information regarding our cybersecurity program, see Item 1C. Cybersecurity.
Further, our business is subject to policy, regulatory, technology and economic uncertainties and contingencies, including regulatory approvals required for various of our clean energy initiatives, many of which are beyond our control and may affect our ability to implement our clean energy strategy and initiatives and achieve our goal of net zero GHG emissions by 2030, or other GHG emissions reduction or climate-related goals that we may set from time to time, in a cost-effective manner or at all.
Further, our business is subject to policy, regulatory, technology and economic uncertainties and contingencies, including regulatory approvals required for various of our clean energy initiatives, many of which are beyond our control and may affect our ability to implement our clean energy strategy and initiatives and achieve our goal of net zero GHG emissions by 2030 for Scopes 1 and 2 emissions, or other GHG emissions reduction or climate-related goals that we may set from time to time, in a cost-effective manner or at all.
Our generation business frequently involves the establishment of forward sale positions in the wholesale energy markets on long-term and short-term bases. To the extent that we have produced or purchased energy in excess of our contracted obligations, a reduction in market prices could reduce profitability.
Our generation business currently involves the establishment of forward sale positions in the wholesale energy markets on long-term and short-term bases. To the extent that we have produced or purchased energy in excess of our contracted obligations, a reduction in market prices could reduce profitability.
Note 15. Commitments and Contingent Liabilities. In addition, PSE&G procures the supply requirements of its default service BGSS gas customers through a full-requirements contract with PSEG Power. Government officials, legislators and advocacy groups are aware of the affiliation between PSE&G and PSEG Power.
Note 13. Commitments and Contingent Liabilities. In addition, PSE&G procures the supply requirements of its default service BGSS gas customers through a full-requirements contract with PSEG Power. Government officials, legislators and advocacy groups are aware of the affiliation between PSE&G and PSEG Power.
While the CIP protects margin variances against changes in customer usage of gas and electricity, customer demand for natural gas could decrease as a result of changing customer preferences favoring electrification and advanced technologies that offer energy efficient options.
While the CIP protects PSE&G’s margin variances against changes in customer usage of gas and electricity, customer demand for natural gas could decrease as a result of changing customer preferences favoring electrification and advanced technologies that offer energy efficient options.
Actions by state and federal government agencies could also result in reduced reliance on natural gas and could potentially result in stranding natural gas assets owned and operated by PSEG Power and PSE&G, which could materially adversely affect our business, financial condition and results of operations.
Actions by state and federal government agencies could also result in reduced reliance on natural gas and could potentially result in stranding natural gas assets owned and operated by PSE&G, which could materially adversely affect our business, financial condition and results of operations.
While Order 1000 retains limited carve-outs for certain projects that will continue to default to incumbents for construction responsibility, including immediately needed reliability projects, upgrades to existing transmission facilities, projects cost-allocated to a single transmission zone, and projects being built on existing rights-of-way, increased competition for transmission projects could decrease the value of new investments that would be subject to recovery by PSE&G under its rate base, which could have a material adverse impact on our financial condition and results of operations.
While Order 1000 retains limited carve-outs for certain projects that will continue to default to incumbents for construction responsibility, including immediately needed reliability projects, upgrades to existing transmission facilities, and projects cost-allocated to a single transmission zone, increased competition for transmission projects could decrease the value of new investments that would be subject to recovery by PSE&G under its rate base, which could have a material adverse impact on our financial condition and results of operations.
For further discussion of environmental laws and regulations impacting our business, results of operations and financial condition, including the impact of federal and state laws and regulations relating to remediation of environmental contamination, see Item 8. Note 15. Commitments and Contingent Liabilities.
For further discussion of environmental laws and regulations impacting our business, results of operations and financial condition, including the impact of federal and state laws and regulations relating to remediation of environmental contamination, see Item 8. Note 13. Commitments and Contingent Liabilities.
Some or all of these factors could result in a lack of growth or decline in customer demand for electricity or number of customers, and may cause us to fail to fully realize anticipated benefits from significant capital investments and expenditures, which could have a material adverse effect on our financial position, results of operations and cash flows.
Some or all of these factors could result in a lack of growth or decline in customer demand for electricity or natural gas or of customers, and may cause us to fail to fully realize anticipated benefits from significant capital investments and expenditures, which could have a material adverse effect on our financial position, results of operations and cash flows.
We may not receive necessary licenses, permits and siting approvals in a timely manner or at all, which could adversely impact our business and results of operations. We must periodically apply for licenses and permits from various regulatory authorities, including environmental regulatory authorities, and abide by their respective orders.
We may not receive necessary licenses, permits and siting approvals in a timely manner or at all, which could adversely impact our business and results of operations. We must periodically apply for licenses and permits from various regulatory authorities, including environmental regulatory authorities, and siting/permitting approvals for our transmission investments, and abide by their respective orders.
The occurrence of such challenges may subject PSEG Power to a level of scrutiny not faced by other 26 Table of Contents unaffiliated competitors in those markets and could adversely affect retail rates received by PSE&G in an effort to offset any perceived benefit to PSEG Power from the affiliation.
The occurrence of such challenges may subject PSEG Power to a level of scrutiny not faced by other unaffiliated competitors in those markets and could adversely affect retail rates received by PSE&G in an effort to offset any perceived benefit to PSEG Power from the affiliation.
GENERAL OPERATIONAL AND FINANCIAL RISKS Inability to successfully develop, obtain regulatory approval for, or construct T&D, and other generation projects could adversely impact our businesses.
GENERAL OPERATIONAL AND FINANCIAL RISKS Inability to successfully develop, obtain regulatory approval for, or construct T&D, and our nuclear generation projects could adversely impact our businesses.
These events could result in increased political, economic, financial and insurance market instability and volatility in power and fuel markets, which could materially adversely affect our business and results of operations, including our ability to access capital on terms and conditions acceptable to us.
These events could result in increased political, economic, financial and insurance market instability, a lack of available insurance and volatility in power and fuel markets, which could materially adversely affect our business and results of operations, including our ability to access capital on terms and conditions acceptable to us.
The ability to arrange financing and to refinance existing debt and the costs of such financing or refinancing depend on numerous factors including, among other things: • general economic and capital market conditions, including but not limited to, prevailing interest rates; • the availability of credit from banks and other financial institutions; • tax, regulatory and securities law developments; • for PSE&G, our ability to obtain necessary regulatory approvals for the incurrence of additional indebtedness; • investor confidence in us and our industry; • our current level of indebtedness and compliance with covenants in our debt agreements; • the success of current projects and the quality of new projects; • our current and future capital structure; 20 Table of Contents • our financial performance and the continued reliable operation of our business; and • maintenance of our investment grade credit ratings.
The ability to arrange financing and to refinance existing debt and the costs of such financing or refinancing depend on numerous factors including, among other things: • general economic and capital market conditions, including but not limited to, prevailing interest rates; • the availability of credit from banks and other financial institutions; • tax, regulatory and securities law developments; • for PSE&G, our ability to obtain necessary regulatory approvals for the incurrence of additional indebtedness; • investor confidence in us and our industry; 19 Table of Conte n t s • our current level of indebtedness and compliance with covenants in our debt agreements; • the success of current projects and the quality of new projects; • our current and future capital structure; • our financial performance and the continued reliable operation of our business; and • maintenance of our investment grade credit ratings.
Severe weather or acts of nature, including hurricanes, winter storms, earthquakes, floods and other natural disasters can stress systems, disrupt operation of our facilities and cause service outages, production delays and property damage that require incurring additional expenses.
Severe weather or acts of nature, including hurricanes, winter storms, earthquakes, floods, wildfires and other natural disasters can stress systems, disrupt operation of our facilities and cause service outages, and property damage that require incurring additional expenses.
PSEG’s and PSE&G’s fixed income debt instruments contain events of default customary for financings of their type, including cross accelerations to other debt of that entity.
PSEG’s and PSE&G’s debt instruments contain events of default customary for financings of their type, including cross accelerations to other debt of that entity.
Although our fuel contract portfolio provides a degree of hedging against these market risks, such hedging may not be effective and future increases in our fuel costs could materially and adversely affect our liquidity, financial condition and results of 24 Table of Contents operations.
Although our fuel contract portfolio provides a degree of hedging against these market risks, such hedging may not be effective and future increases in our fuel costs could materially and adversely affect our liquidity, financial condition and results of operations.
These technologies could also result in further declines in commodity prices or demand for delivered energy. Several states, cities and other stakeholders are also considering bans on new natural gas customers and transitioning away from natural gas in the future. Such actions could have a material adverse effect on our business.
These technologies could also result in further declines in commodity prices or demand for delivered energy. Several states, cities and other stakeholders are also considering bans on natural gas connections to new buildings and transitioning away from natural gas in the future. Such actions could have a material adverse effect on our business.
Factors that may cause market price fluctuations include: • increases and decreases in generation capacity, including the addition of new supplies of power as a result of the development of new power plants, expansion of existing power plants or additional transmission capacity; • severe weather conditions; • power supply disruptions, including power plant outages and transmission disruptions; • climate change and weather conditions, particularly unusually mild summers or warm winters in our market areas; • seasonal fluctuations; • economic and political conditions that could negatively impact the demand for power; • changes in the supply of, and demand for, energy commodities; 23 Table of Contents • development of new fuels or new technologies for the production or storage of power; • incurring penalties due to generation performance failure when called on by PJM during emergency situations; • federal and state regulations and actions of PJM and changing PJM market rules; and • federal and state power, market and environmental regulation and legislation, including financial incentives for new renewable energy generation capacity that could lead to oversupply and price suppression.
Factors that may cause market price fluctuations include: 22 Table of Conte n t s • increases and decreases in generation capacity, including the addition of new supplies of power as a result of the development of new power plants, expansion of existing power plants or additional transmission capacity; • severe weather conditions; • power supply disruptions, including power plant outages and transmission disruptions; • climate change, and weather conditions, particularly unusually mild summers or warm winters in our market areas; • seasonal fluctuations; • economic and political conditions that could negatively impact the demand for power or PTCs on our nuclear generation units; • changes in the supply of, and demand for, energy commodities; • development of new fuels or new technologies for the production or storage of power; • incurring penalties due to generation performance failure when called on by PJM during emergency situations; • federal and state regulations and actions of PJM and changing PJM market rules; and • federal and state power, market and environmental regulation and legislation, including financial incentives for new renewable energy generation capacity that could lead to oversupply and price suppression.
Increased regulation of GHG emissions could impose significant additional costs on our electric and natural gas operations, and our suppliers.
Increased regulation of GHG emissions could impose significant additional costs on our electric and natural gas operations, our suppliers and ultimately, our customers.
The successful construction and development of these projects will depend, in part, on our ability to: • obtain necessary governmental and regulatory approvals; • obtain environmental permits and approvals; • obtain community support for such projects to avoid delays in the receipt of permits and approvals from regulatory authorities; • obtain customer support for investments made at their premises; • obtain property/land rights in property-constrained areas and at a reasonable cost; • complete such projects within budgets and on commercially reasonable terms and conditions; • complete supporting IT upgrades; • obtain any necessary debt financing on acceptable terms and/or necessary governmental financial incentives; • ensure that contracting parties, including suppliers, perform under their contracts in a timely and cost effective manner; and • recover the related costs through rates.
The successful construction and development of these projects will depend, in part, on our ability to: • obtain necessary governmental and regulatory approvals; • obtain environmental permits and approvals; • obtain community support for such projects to avoid delays in the receipt of permits and approvals from regulatory authorities; • obtain customer support for investments made at their premises; • obtain property/land rights in property-constrained areas and at a reasonable cost; • complete such projects within budgets and on commercially reasonable terms and conditions; • complete supporting information technology (IT), cybersecurity and physical security upgrades; • obtain any necessary debt financing on acceptable terms and/or necessary governmental financial incentives; • ensure that contracting parties, including suppliers, perform under their contracts in a timely and cost-effective manner; and • timely recovery of these investments through rates.
The agreement provides that the settling parties will not seek changes to our transmission formula rate for three years. We have implemented the terms of the agreement . In April 2021, FERC issued a supplemental notice of proposed rulemaking to eliminate the incentive for RTO membership for transmitting utilities that have already received the incentive for three or more years.
The agreement provided that the settling parties will not seek changes to our transmission formula rate for three years. In April 2021, FERC issued a supplemental notice of proposed rulemaking to eliminate the incentive for RTO membership for transmitting utilities that have already received the incentive for three or more years.
Under these rules, generators located in constrained areas are paid more for their capacity so there is an incentive to locate in those areas where generation capacity is most needed. PJM’s capacity market design rules continue to evolve, including in response to efforts to integrate public policy initiatives into the wholesale markets.
Under these rules, generators located in constrained areas are paid more for their capacity so there is an incentive to locate in those areas where generation capacity is most needed. PJM’s capacity market design rules continue to evolve, including in response to efforts to integrate public policy initiatives into the wholesale markets, and recent extreme weather events in PJM.
We cannot predict whether the BPU will ultimately take any measures in the future that will have an impact on the capacity market or our generating stations. Our ownership and operation of nuclear power plants involve regulatory risks as well as financial, environmental and health and safety risks.
We 27 Table of Conte n t s cannot predict whether the BPU will ultimately take any measures in the future that will have an impact on the capacity market or our generating stations. Our ownership and operation of nuclear power plants involve regulatory risks as well as financial, environmental and health and safety risks.
Failure to maintain MBR authorization, or the effects of any severe mitigation measures that would be required if market power was evaluated differently in the future, could have a material adverse effect on our business, financial condition and results of operations.
Failure to maintain MBR authorization, or the effects of any severe mitigation measures that would be required if market power was 26 Table of Conte n t s evaluated differently in the future, could have a material adverse effect on our business, financial condition and results of operations.
Some issues that could impact the operation of our facilities are: • breakdown or failure of equipment, IT, processes or management effectiveness; • disruptions in the transmission of electricity; • labor disputes or work stoppages; • fuel supply interruptions; • transportation constraints; • limitations which may be imposed by environmental or other regulatory requirements; and • operator error, acts of war or terrorist attacks (including cybersecurity breaches) or catastrophic events such as fires, 25 Table of Contents earthquakes, explosions, floods, severe weather or other similar occurrences.
Some issues that could impact the operation of our facilities are: • breakdown or failure of equipment, IT, processes or management effectiveness; • disruptions in the transmission of electricity; • labor disputes or work stoppages; • fuel supply interruptions; 24 Table of Conte n t s • limitations which may be imposed by environmental or other regulatory requirements; and • operator error, acts of war or terrorist attacks (including physical or cybersecurity breaches) or catastrophic events such as fires, earthquakes, explosions, floods, severe weather or other similar occurrences.
We may not be able to obtain waivers, amendments or alternative financing, or if obtainable, it could be on terms that are not acceptable to us. Any of these events could adversely impact our financial condition, results of operations and cash flows.
We may not be able to obtain waivers, amendments or alternative financing, or if obtainable, it could be on terms that 21 Table of Conte n t s are not acceptable to us. Any of these events could adversely impact our financial condition, results of operations and cash flows.
We are subject to comprehensive federal regulation that affects, or may affect, our businesses. We are subject to regulation by federal authorities. Such regulation affects almost every aspect of our businesses, including management and operations; the terms and rates of transmission services; investment strategies; the financing of our operations and the payment of dividends.
We are subject to regulation by federal authorities. Such regulation affects almost every aspect of our businesses, including management and operations; the terms and rates of transmission services; investment strategies; the financing of our operations and the payment of dividends.
Transmission projects are subject to a FERC-approved transmission expansion planning process while distribution and clean energy projects are subject to approval by the BPU. The costs of PSE&G’s transmission projects are subject to prudency challenge at FERC and PSE&G’s rates themselves may also be challenged at FERC.
Transmission projects are subject to a FERC-approved transmission expansion planning process while distribution and clean 25 Table of Conte n t s energy projects are subject to approval by the BPU. The costs of PSE&G’s transmission projects are subject to prudency challenge at FERC and PSE&G’s rates themselves may also be challenged at FERC.
We may be subject to climate change lawsuits that may seek injunctive relief, monetary compensation, and punitive damages, including but not limited to, for liabilities for personal injuries and property damage caused by climate change. An adverse outcome could require substantial capital expenditures and possibly require payment of substantial penalties or damages.
We may be subject to climate change lawsuits that may seek injunctive relief, monetary compensation, penalties, and punitive damages, including but not limited to, for liabilities for damages related to mitigate harm caused by climate change. An adverse outcome could require substantial capital expenditures and possibly require payment of substantial penalties or damages.
Electric usage could also be impacted by greater adoption of EVs, installation of distributed energy resources, such as behind the meter solar, installation of 18 Table of Contents more energy efficient equipment, flexible load and/or energy storage, and other advances in technology.
Electric usage could also be impacted by greater adoption of EVs, installation of distributed energy resources, such as behind the meter solar, 17 Table of Conte n t s installation of more energy efficient equipment, flexible load and/or energy storage, and other advances in technology.
Changes in prevailing market prices could have a material adverse effect on our financial condition and results of operations.
Changes in prevailing market prices below the PTC threshold could have a material adverse effect on our financial condition and results of operations.
An increase in our congestion costs may adversely affect our financial results. REGULATORY, LEGISLATIVE AND LEGAL RISKS PSE&G’s revenues, earnings and results of operations are dependent upon state laws and regulations that affect distribution and related activities. PSE&G is subject to regulation by the BPU. Such regulation affects almost every aspect of its businesses, including its retail rates.
REGULATORY, LEGISLATIVE AND LEGAL RISKS PSE&G’s revenues, earnings and results of operations are dependent upon state laws and regulations that affect distribution and related activities. PSE&G is subject to regulation by the BPU. Such regulation affects almost every aspect of its businesses, including its retail rates.
Management evaluates long-lived assets for impairment whenever events or changes in circumstances, such as significant adverse changes in regulation, including a disallowance of certain costs, business climate or market conditions, including prolonged periods of adverse commodity and capacity prices, could potentially indicate an asset’s or group of assets’ carrying amount may not be recoverable.
Management evaluates long-lived assets for impairment whenever events or changes in circumstances, such as significant adverse changes in regulation, including a disallowance of certain costs, a potential sale or disposition of an asset significantly before the end of its useful life, business climate or market conditions, including prolonged periods of adverse commodity and capacity prices, could potentially indicate an asset’s or group of assets’ carrying amount may not be recoverable.
Long-lived assets represent approximately 74% and 82% of the total assets of PSEG and PSE&G, respectively, as of December 31, 2022.
Long-lived assets represent approximately 75% and 82% of the total assets of PSEG and PSE&G, respectively, as of December 31, 2023.
The enacted legislation established a PTC for electricity generation using nuclear energy set to begin in 2024 through 2032. 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 cap are subject to annual inflation adjustments. The U.S.
The enacted legislation established a PTC for electricity generation using nuclear energy which begins January 1, 2024 and continues through 2032. 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. The U.S.
In 28 Table of Contents September 2022, the BPU issued a Progress Report expanding on the recommendations contained in the 2021 report.
In September 2022, the BPU issued a Progress Report expanding on the recommendations contained in the 2021 report.
Cybersecurity attacks or intrusions or other disruptions to our IT, operational or other systems could adversely impact our businesses. Cybersecurity threats to the energy market infrastructure are increasing in sophistication, magnitude and frequency, particularly since the coronavirus pandemic and the resulting shift to virtual operations began.
Cybersecurity attacks or intrusions or other disruptions to our IT, operational or other systems could adversely impact our businesses. Cybersecurity threats to the energy market infrastructure are increasing in sophistication, magnitude and frequency, particularly with the regularity of virtual operations.
Advances in distributed generation technologies, such as fuel cells, micro turbines, micro grids, windmills and net-metered solar installations, may reduce the cost of alternative methods of producing electricity to a level that is competitive with that of most central station electric production. Large customers, such as universities and hospitals, continue to explore potential micro grid installation.
Advances in distributed generation technologies, such as fuel cells, micro turbines, micro grids, windmills and net-metered solar installations, coupled with subsidies, may reduce the cost of alternative methods of delivering electricity to customers to a level that is competitive with that of most central station electric production.
Inability to obtain fair or timely recovery of all our costs, including a return of, or on, our investments in rates, could have a material adverse impact on our results of operations and cash flows.
Inability to obtain fair or timely recovery of all our costs pursuant to the distribution base rate case and/or these clause recovery mechanisms,, including a return of, or on, our investments in rates, could have a material adverse impact on our results of operations and cash flows.
Our and third-party operational and IT systems and products may be vulnerable to cybersecurity attacks involving fraud, malice or oversight on the part of our employees, other insiders or third parties, whether domestic or foreign sources. A successful cybersecurity attack may result in unauthorized use of our systems to cause disruptions at a third party.
Our and third-party operational and IT systems and products may be vulnerable to cybersecurity attacks involving fraud, malice or oversight on the part of our employees, other insiders or third parties, whether domestic or foreign sources.
Failure to comply with applicable NERC standards could result in penalties or increased costs to bring such facilities into compliance. Such penalties and costs could materially adversely impact our business, results of operations and cash flows.
Failure to comply with applicable NERC standards could result in penalties or increased costs to bring such facilities into compliance. Such penalties and costs could materially adversely impact our business, results of operations and cash flows. Adverse audit findings and/or penalties for non-compliance also pose reputational risk to us.
Any delays, cost escalations or otherwise unsuccessful construction and development could materially affect our financial position, results of operations and cash flows.
Failure to obtain regulatory or other approvals, delays, cost escalations or otherwise unsuccessful construction and development could materially affect our financial position, results of operations and cash flows.
MD&A—Executive Overview of 2022 and Future Outlook, in April 2019, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded ZECs by the BPU through May 2022. In April 2021, these nuclear plants were awarded ZECs for the three-year period starting June 2022.
MD&A—Executive Overview of 2023 and Future Outlook, in April 2019, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded ZECs by the BPU through May 2022. In April 2021, these nuclear plants were awarded ZECs for the three-year period starting June 2022. In August 2022, the IRA was signed into law expanding incentives promoting carbon-free generation.
Technological advances driven by federal laws mandating new levels of EE in end-use electric devices or other improvements in, or applications of, technology could also lead to declines in per capita energy consumption.
Federal or state laws mandating higher levels of efficiency in end-use electric devices or other improvements in, or applications of, technology could also lead to declines in per capita energy consumption.
If these programs are not approved, that could also adversely affect our service levels for customers. Further, the BPU could take positions to exclude or limit utility participation in certain areas, such as renewable generation, EE, EV infrastructure, energy storage, renewable natural gas or hydrogen projects, which would limit our relationship with customers and narrow our future growth prospects.
Further, the BPU could take positions to exclude or limit utility participation in certain areas, such as renewable generation, EE, EV infrastructure, or energy storage programs, renewable natural gas or hydrogen projects, which would limit our relationship with customers and narrow our future growth prospects. We are subject to comprehensive federal regulation that affects, or may affect, our businesses.
PSE&G’s proposed investment programs may not be fully approved by regulators, which could result in lower than desired service levels to customers, and actual capital investment by PSE&G may be lower than planned, which would cause lower than anticipated rate base.
PSE&G’s proposed investment projects or programs may not be fully approved by regulators and actual capital investment by PSE&G may be lower than planned, which would cause lower than anticipated rate base.
A shortfall could require PSEG to post parental guarantees or make additional cash contributions to ensure that the NDT Fund continues to satisfy the NRC minimum funding requirements.
A shortfall could require PSEG to post parental guarantees or make additional cash contributions to ensure that the NDT Fund continues to satisfy the NRC minimum funding requirements. As a result, our financial position or cash flows could be significantly adversely affected.
Moreover, new or updated security laws or regulations or unforeseen threat sources could require changes in current measures taken by us and our business operations, which could result in increased costs and adversely affect our financial statements.
Moreover, new or updated security laws or regulations , including laws and regulations that respond to evolving application of AI, or unforeseen threat sources could require changes in current measures taken by us and our business operations, which could result in increased costs and 20 Table of Conte n t s adversely affect our financial statements.
Certain states, such as Massachusetts and California, are also considering mandating the use of power storage resources to replace uneconomic or retiring generation facilities.
Large customers, such as universities and hospitals, continue to explore potential micro grid installation. Certain states are also considering mandating the use of power storage resources to replace uneconomic or retiring generation facilities.
We are exposed to the risk of asset and equipment failures, gas explosions, accidents, natural disasters, severe weather events, acts of war or terrorism or other acts of violence, including active shooter situations (such as the shooting incident involving an employee and a former employee which occurred in February 2023 outside of a PSE&G field facility in Somerset County, New Jersey), sabotage, physical attacks or security breaches (as have been experienced recently by certain other utilities), cyberattacks or other incidents, which could result in damage to or destruction of our substations or other facilities or infrastructure, or damage to persons or property and to electric and gas supply interruptions.
We are exposed to the risk of asset and equipment failures, gas explosions, accidents, natural disasters, severe weather events, acts of war or terrorism or other acts of violence, including active shooter situations, sabotage, physical attacks or security breaches, cyberattacks or other incidents, which could result in damage to or destruction of our substations or other facilities or infrastructure, or damage to persons or property and to electric and gas supply interruptions.
While there has been no material impact on our business or operations from these attacks to date, we may be unable to prevent all such attacks in the future from having such a material impact as such attacks continue to increase in sophistication and frequency.
However, we may be unable to prevent all such attacks in the future from having such a material impact as such attacks continue to increase in sophistication and frequency.
Adverse audit findings and/or penalties for non-compliance also pose reputational risk to us. 27 Table of Contents MBR Authority and Other Regulatory Approvals —Under FERC regulations, public utilities that sell power at market rates must receive MBR authority before making power sales, and the majority of our businesses operate with such authority.
MBR Authority and Other Regulatory Approvals —Under FERC regulations, public utilities that sell power at market rates must receive MBR authority before making power sales, and the majority of our businesses operate with such authority.
Certain events such as an aging workforce looking to retire without an opportunity to transfer knowledge to a successor, inadequate workforce plans and replacements, lack of skill set to meet current and evolving business needs, a culture that does not foster inclusion leading to turnover, a workforce strike resulting from a failure to successfully negotiate new collective bargaining agreements with our labor unions on mutually acceptable terms or at all, unavailability of resources due to the coronavirus pandemic, acts of violence in the workplace and a workforce that is not engaged may lead to operating challenges and increased costs.
Certain events such as an aging workforce looking to retire without an opportunity to transfer knowledge to a successor, inadequate workforce plans and replacements, lack of skill set to meet current and evolving business needs, a culture that does not foster inclusion leading to turnover, acts of violence in the workplace, inadequate training and a workforce that is not engaged may lead to operating challenges, safety concerns and increased costs.
Inflation has recently increased across the economy and is impacting portions of our business. Higher costs from suppliers of equipment and materials, fuel, services and labor costs to attract and retain our workforce, could lead to increased costs, which 22 Table of Contents could reduce our earnings.
Higher costs from suppliers of equipment and materials, fuel, services and labor costs to attract and retain our workforce, could lead to increased costs, which could reduce our earnings.
The vast majority of our total generation output each year is provided by our nuclear fleet. For this reason, we are exposed to risks related to the continued successful operation of our nuclear facilities and issues that may adversely affect the nuclear generation industry.
We are exposed to risks related to the continued successful operation of our nuclear facilities and issues that may adversely affect the nuclear generation industry.
Any of these risks could cause our return on these investments to be lower than expected or they could cause these facilities to operate below intended targets, which could adversely impact our financial condition and results of operations through lost revenue and/or increased expenses.
Any of these risks could cause the amounts of our investments and/or our return on these investments to be lower than expected, which could adversely impact our financial condition and results of operations through lower investment opportunities and/or lower returns.
The markets, PTC and/or ZEC program may not provide sufficient revenue for our New Jersey nuclear plants or the PTC and/or ZEC program could be materially adversely modified through legal proceedings, either of which could result in the retirement of all of these nuclear plants. As further described in Item 7.
Failure to obtain these approvals on a timely basis could materially adversely affect our results of operations and cash flows. The markets, PTC and/or ZEC program may not provide sufficient financial support for our New Jersey nuclear plants which could result in the retirement of all of these nuclear plants. As further described in Item 7.
Treasury is expected to clarify the definition of gross receipts prior to when the eligibility period begins in 2024. The ZEC payment may be adjusted by the BPU at any time to offset environmental or fuel diversity payments that a selected nuclear plant may receive from another source.
Treasury is expected to clarify the definition of gross receipts. The ZEC payment may be adjusted by the BPU to offset environmental or fuel diversity payments that a selected nuclear plant may receive from another source. Until additional guidance is issued by the U.S. Treasury, we are unable to fully determine the impacts of the PTC.
RISKS RELATED TO OUR GENERATION BUSINESS Fluctuations in the wholesale power and natural gas markets could negatively affect our financial condition, results of operations and cash flows.
Further, inaccurate results generated as a result of our employees’, contractors’ or vendors’ use of generative AI technologies could lead to operational interruptions or reputational harm. RISKS RELATED TO OUR GENERATION BUSINESS Fluctuations in the wholesale power and natural gas markets could negatively affect our financial condition, results of operations and cash flows.
Further, these industry changes, costs associated with complying with new regulatory developments and initiatives and with technological advancements could materially affect our financial condition, results of operations, liquidity, and cash flows. Our financial condition and results of operations could be adversely affected by the coronavirus pandemic.
Further, these industry changes, costs associated with complying with new regulatory developments and initiatives and with technological advancements could materially affect our financial condition, results of operations, liquidity, and cash flows. If the above changes occurred, that would also require investment in the electric T&D system to accommodate higher loads.
It will require multiple years and comprehensive environmental sampling to understand the extent of and to carry out the required remediation. The full remediation costs are not estimable, but will likely be material. Environmental laws and regulations have generally become more stringent over time, and this trend is likely to continue.
It will require multiple years and comprehensive environmental sampling to understand the extent of and to carry out the required remediation. At this stage of the remediation process, the full remediation costs are not estimable, but given the number and operating history of the facilities in the portfolio, the full remediation costs will likely be material in the aggregate.
These actions have negatively affected customer payment patterns, leading to an elevated aged accounts receivable balance. Our ability to manage our accounts receivable balance, recover its carrying costs and any associated bad debts could have a material impact on our business.
Our ability to manage our accounts receivable balance, and obtain recovery in rates for our carrying costs and any associated bad debts could have a material impact on our business.
Our nuclear units have a diversified portfolio of contracts and inventory that provide a substantial portion of our fuel raw material needs over the next several years. However, each of our nuclear units has contracted with a single fuel fabrication services provider, and transitioning to an alternative provider could take an extended period of time.
However, each of our nuclear units has contracted with a single fuel fabrication services provider, and transitioning to an alternative provider could take an extended period of time. This could have a material adverse impact on our business, the financial results of specific plants and on our results of operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePSEG Power Generation Facilities As of December 31, 2022, PSEG Power’s share of installed nuclear generating capacity is shown in the following table: Name Location Total Capacity (MW) % Owned Owned Capacity (MW) Principal Fuels Used Nuclear: Hope Creek NJ 1,173 100% 1,173 Nuclear Salem 1 & 2 NJ 2,295 57% 1,318 Nuclear Peach Bottom 2 & 3 (A) PA 2,549 50% 1,275 Nuclear Total Nuclear 6,017 3,766 (A) Operated by Constellation Energy Generation, LLC.
Biggest changePSEG Power Generation Facilities As of December 31, 2023, PSEG Power’s share of installed nuclear generating capacity is shown in the following table: Name Location Total Capacity (MW) % Owned Owned Capacity (MW) Nuclear: Hope Creek NJ 1,174 100% 1,174 Salem 1 & 2 NJ 2,287 57% 1,312 Peach Bottom 2 & 3 (A) PA 2,549 50% 1,275 Total Nuclear 6,010 3,761 (A) Operated by Constellation Energy Generation, LLC.
For a discussion of nuclear insurance, see Item 8. Note 15. Commitments and Contingent Liabilities. PSE&G Primarily all of PSE&G’s property is located in New Jersey and PSE&G’s First and Refunding Mortgage, which secures the bonds issued thereunder, constitutes a direct first mortgage lien on substantially all of PSE&G’s property.
For a discussion of nuclear insurance, see Item 8. Note 13. Commitments and Contingent Liabilities. PSE&G Primarily all of PSE&G’s property is located in New Jersey and PSE&G’s First and Refunding Mortgage, which secures the bonds issued thereunder, constitutes a direct first mortgage lien on substantially all of PSE&G’s property.
PSE&G also owns one liquefied natural gas and three liquid petroleum air gas peaking facilities. The daily gas capacity of these peaking facilities (the maximum daily gas delivery available during the three peak winter months) is approximately 2.8 million therms in the aggregate.
PSE&G also owns one liquefied natural gas and three liquid petroleum air gas peaking facilities. The daily gas capacity of these peaking facilities (the maximum daily gas delivery available during the three peak winter months) is approximately 2.9 million therms in the aggregate.
Gas Property and Facilities As of December 31, 2022, PSE&G’s gas system included approximately 18,000 miles of gas mains, 12 gas distribution headquarters, two sub-headquarters, and one meter shop serving all of its gas territory in New Jersey.
Gas Property and Facilities As of December 31, 2023, PSE&G’s gas system included approximately 18,000 miles of gas mains, 12 gas distribution headquarters, two sub-headquarters, and one meter shop serving all of its gas territory in New Jersey.
Solar As of December 31, 2022, PSE&G owned 158 MW dc of installed PV solar capacity throughout New Jersey.
Solar As of December 31, 2023, PSE&G owned 158 MW dc of installed PV solar capacity throughout New Jersey.
Electric Property and Facilities As of December 31, 2022, PSE&G’s electric T&D system included approximately 25,000 circuit miles, and 864,000 poles, of which 64% are jointly-owned. In addition, PSE&G owns and operates 55 switching stations with an aggregate installed capacity of 39,653 megavolt-amperes (MVA) and 235 substations with an aggregate installed capacity of 9,735 MVA.
Electric Property and Facilities As of December 31, 2023, PSE&G’s electric T&D system included approximately 25,000 circuit miles, and 866,000 poles, of which 64% are jointly-owned. In addition, PSE&G owns and operates 56 switching stations with an aggregate installed capacity of 39,953 megavolt-amperes (MVA) and 235 substations with an aggregate installed capacity of 10,382 MVA.
Removed
As of December 31, 2022, PSEG Power owned a 50% interest (104 MW) in a generation facility in Hawaii.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS We are party to various lawsuits and environmental and regulatory matters, including in the ordinary course of business. For information regarding material legal proceedings, see Item 1. Business—Regulatory Issues and Environmental Matters and Item 8. Note 15. Commitments and Contingent Liabilities. 31 Table of Contents ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS We are party to various lawsuits and environmental and regulatory matters, including in the ordinary course of business. For information regarding material legal proceedings, see Item 1. Business—Regulatory Issues and Environmental Matters and Item 8. Note 13. Commitments and Contingent Liabilities. 33 Table of Conte n t s ITEM 4. MINE SAFETY DISCLOSURES Not applicable.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table indicates the securities authorized for issuance under equity compensation plans as of December 31, 2022: Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in column (a)) (c) Equity Compensation Plans Approved by Security Holders — $ — 9,085,980 Equity Compensation Plans Not Approved by Security Holders — — — Total — $ — 9,085,980 The number of shares available for future issuance includes amounts remaining under our 2021 Long-Term Incentive Plan (2021 LTIP) and 2021 Equity Compensation Plan for Outside Directors and ESPP and reflect a reduction for non-vested restricted stock units and performance share units (PSUs) (assumed at target payout).
Biggest changeWe 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. 34 Table of Conte n t s The following table indicates the securities authorized for issuance under equity compensation plans as of December 31, 2023: Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in column (a)) (c) Equity Compensation Plans Approved by Security Holders — $ — 8,162,450 Equity Compensation Plans Not Approved by Security Holders — — — Total — $ — 8,162,450 The number of shares available for future issuance includes amounts remaining under our 2021 Long-Term Incentive Plan (2021 LTIP) and 2021 Equity Compensation Plan for Outside Directors and the Employee Stock Purchase Plan and reflect a reduction for non-vested restricted stock units and performance share units (PSUs) (assumed at target payout).
The number of shares available for future issuance may be increased or decreased depending on actual payouts for the PSUs based on achievement of targets and is increased by the number of shares that are forfeited, canceled or otherwise terminated without the issuance of shares. For additional discussion of specific plans concerning equity-based compensation, see Item 8. Note 20.
The number of shares available for future issuance may be increased or decreased depending on actual payouts for the PSUs based on achievement of targets and is increased by the number of shares that are forfeited, canceled or otherwise terminated without the issuance of shares. For additional discussion of specific plans concerning equity-based compensation, see Item 8. Note 18.
This reflects an indicative annual dividend rate of $2.28 per share.
This reflects an indicative annual dividend rate of $2.40 per share.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange, Inc. under the trading symbol “PEG.” As of February 17, 2023, there were 50,146 registered holders.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange, Inc. under the trading symbol “PEG.” As of February 16, 2024, there were 47,943 registered holders.
The following graph shows a comparison of the five-year cumulative return assuming $100 invested on December 31, 2017 in our common stock and the subsequent reinvestment of quarterly dividends, the S&P Composite Stock Price Index, the Dow Jones Utilities Index and the S&P Electric Utilities Index. 2017 2018 2019 2020 2021 2022 PSEG $ 100.00 $ 104.67 $ 122.55 $ 125.47 $ 148.47 $ 140.91 S&P 500 $ 100.00 $ 95.61 $ 125.70 $ 148.81 $ 191.48 $ 156.77 DJ Utilities $ 100.00 $ 101.99 $ 129.82 $ 132.01 $ 155.06 $ 158.23 S&P Utilities $ 100.00 $ 104.11 $ 131.54 $ 132.23 $ 155.60 $ 158.03 On February 14, 2023, our Board of Directors approved a $0.57 per share common stock dividend for the first quarter of 2023.
The following graph shows a comparison of the five-year cumulative return assuming $100 invested on December 31, 2018 in our common stock and the subsequent reinvestment of quarterly dividends, the S&P Composite Stock Price Index, the Dow Jones Utilities Index and the S&P Electric Utilities Index. 2018 2019 2020 2021 2022 2023 PSEG $ 100.00 $ 117.08 $ 119.88 $ 141.85 $ 134.62 $ 139.49 S&P 500 $ 100.00 $ 131.47 $ 155.65 $ 200.29 $ 163.98 $ 207.04 DJ Utilities $ 100.00 $ 127.30 $ 129.44 $ 152.04 $ 155.15 $ 146.94 S&P Utilities $ 100.00 $ 126.35 $ 127.01 $ 149.46 $ 151.79 $ 141.05 On February 13, 2024, our Board of Directors approved a $0.60 per share common stock dividend for the first quarter of 2024.
Removed
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.
Removed
In September 2021, PSEG announced a $500 million share repurchase program authorized by the Board of Directors.
Removed
Under this authorization, during January and through mid-February 2022, PSEG purchased approximately 3.8 million shares of 32 Table of Contents common stock pursuant to an open market share repurchase plan and during March through mid-May, PSEG purchased an additional 3.6 million shares pursuant to an accelerated share repurchase agreement. See Item 8. Note 24.
Removed
Earnings Per Share (EPS) and Dividends for additional information. From time to time, PSEG may repurchase shares to satisfy obligations under equity compensation awards and repurchase shares to satisfy purchases by employees under the Employee Stock Purchase Plan (ESPP).
Removed
In December 2022, for such purposes, we entered into a share repurchase plan that complies with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. There were no common share repurchases in the open market during the fourth quarter of 2022.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeAsset Retirement Obligations (AROs) 105 Note 14. Pension, Other Postretirement Benefits (OPEB) and Savings Plans 106 i Table of Contents TABLE OF CONTENTS ( continued) Note 15. Commitments and Contingent Liabilities 115 Note 16. Debt and Credit Facilities 122 Note 17. Schedule of Consolidated Capital Stock 126 Note 18. Financial Risk Management Activities 127 Note 19.
Biggest changeCommitments and Contingent Liabilities 111 i Table of Conte n t s TABLE OF CONTENTS ( continued) Note 14. Debt and Credit Facilities 117 Note 15. Schedule of Consolidated Capital Stock 121 Note 16. Financial Risk Management Activities 121 Note 17. Fair Value Measurements 126 Note 18. Stock Based Compensation 129 Note 19. Net Other Income (Deductions) 132 Note 20.
Item 6. [Reserved] 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Executive Overview of 2022 and Future Outlook 34 Results of Operations 39 Liquidity and Capital Resources 45 Capital Requirements 49 Critical Accounting Estimates 50 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 54 Item 8.
Item 6. [Reserved] 35 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35 Executive Overview of 2023 and Future Outlook 36 Results of Operations 41 Liquidity and Capital Resources 45 Capital Requirements 49 Critical Accounting Estimates 50 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 54 Item 8.
Financial Statements and Supplementary Data 55 Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 56 Consolidated Financial Statements 60 Notes to Consolidated Financial Statements Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies 72 Note 2. Recent Accounting Standards 77 Note 3. Revenues 79 Note 4.
Financial Statements and Supplementary Data 55 Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 56 Consolidated Financial Statements 60 Notes to Consolidated Financial Statements Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies 72 Note 2. Revenues 77 Note 3. Asset Dispositions and Impairments 82 Note 4. Variable Interest Entity (VIE) 82 Note 5.
Fair Value Measurements 131 Note 20. Stock Based Compensation 134 Note 21. Other Income (Deductions) 137 Note 22. Income Taxes 138 Note 23. Accumulated Other Comprehensive Income (Loss), Net of Tax 144 Note 24. Earnings Per Share (EPS) and Dividends 146 Note 25. Financial Information by Business Segment 147 Note 26. Related-Party Transactions 150
Income Taxes 133 Note 21. Accumulated Other Comprehensive Income (Loss), Net of Tax 140 Note 22. Earnings Per Share (EPS) and Dividends 142 Note 23. Financial Information by Business Segment 142 Note 24. Related-Party Transactions 145
Early Plant Retirements/Asset Dispositions and Impairments 84 Note 5. Variable Interest Entities (VIEs) 85 Note 6. Property, Plant and Equipment and Jointly-Owned Facilities 86 Note 7. Regulatory Assets and Liabilities 87 Note 8. Leases 93 Note 9. Long-Term Investments 96 Note 10. Financing Receivables 97 Note 11. Trust Investments 98 Note 12. Intangibles 104 Note 13.
Property, Plant and Equipment and Jointly-Owned Facilities 83 Note 6. Regulatory Assets and Liabilities 84 Note 7. Leases 89 Note 8. Long-Term Investments 93 Note 9. Financing Receivables 93 Note 10. Trust Investments 95 Note 11. Asset Retirement Obligations (AROs) 100 Note 12. Pension, Other Postretirement Benefits (OPEB) and Savings Plans 102 Note 13.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

138 edited+36 added−64 removed66 unchanged
Biggest changeGeneration Revenues decreased $1,300 million due primarily to • a net decrease of $807 million due primarily to lower volumes sold in the PJM, New England (NE) and New York (NY) regions primarily due to the sale of the fossil generating plants in February 2022, coupled with lower average realized prices in the PJM region, partially offset by higher average realized prices in the NE and NY regions, • a net decrease of $234 million in capacity revenue due primarily to the sale of the fossil generating plants coupled with lower capacity prices in the PJM region, partially offset by decreases in capacity expenses due to lower load volumes served, • a net decrease of $216 million due primarily to lower volumes of electricity sold under the BGS contracts, partially offset by less transmission services under the BGS contracts that were transferred from the BGS suppliers to the 42 Table of Contents Electric Distribution Companies (EDCs) in February 2021, • a net decrease of $37 million in ancillary revenues due primarily to the sale of the fossil generating plants, and • a net decrease of $24 million in solar revenues due to the sale of the solar plants in June 2021, • partially offset by a net increase of $16 million due to lower MTM losses in 2022 as compared to 2021.
Biggest changeOf this amount, there was a $1,539 million increase due to changes in forward prices in 2023 as compared to 2022 coupled with a $484 million increase due to positions reclassified to realized upon settlement, and • a net increase of $99 million due primarily to higher average realized prices and volumes sold in 2023 in the PJM region, partially offset by volumes sold in the New England and New York regions in 2022 related to the fossil generating plants sold in February 2022 and lower ZEC revenue, • partially offset by a net decrease of $190 million due primarily to electricity sold under the BGS contracts, which ended in May 2023, and lower volumes of other load contracts, and • a net decrease of $57 million in capacity revenue due primarily to the sale of the fossil generating plants coupled with lower capacity prices in the PJM region, partially offset by decreases in capacity expenses due to lower load volumes served.
PSEG Power determines its AROs for its nuclear units by assigning probability weighting to various discounted cash flow outcomes for each of its nuclear units that incorporate the assumptions above as well as: • financial feasibility and impacts on potential early shutdown, • license renewals, • SAFSTOR alternative, which assumes the nuclear facility can be safely stored and subsequently decommissioned in a period within 60 years after operations, • DECON alternative, which assumes decommissioning activities begin after operations, and • recovery from the federal government of assumed specific costs incurred for spent nuclear fuel.
PSEG Power determines its AROs for its nuclear units by assigning probability weighting to various discounted cash flow outcomes for each of its nuclear units that incorporate the assumptions above as well as: • license renewals, • SAFSTOR alternative, which assumes the nuclear facility can be safely stored and subsequently decommissioned in a period within 60 years after operations, • DECON alternative, which assumes decommissioning activities begin after operations, • recovery from the federal government of assumed specific costs incurred for spent nuclear fuel, and • financial feasibility and impacts on potential early shutdown.
Accounting for Pensions and Other Postretirement Benefits (OPEB) The market-related value of plan assets held for the qualified pension and OPEB plans is equal to the fair value of these assets as of year-end.
Accounting for Pensions and Other Postretirement Benefits (OPEB) The market-related value of plan assets held for PSEG’s qualified pension and OPEB plans is equal to the fair value of these assets as of year-end.
For additional information related to cash dividends on our common stock, see Item 8. Note 24. 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.
For additional information related to cash dividends on our common stock, see Item 8. Note 22. 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.
Our 2023 net periodic pension amounts include the impact of the accounting order approved by the BPU authorizing PSE&G to modify its pension accounting for ratemaking purposes. See a discussion in Item 7. MD&A—Executive Overview of 2022 and Future Outlook for further details .
Beginning in 2023, our net periodic pension amounts include the impact of the accounting order approved by the BPU authorizing PSE&G to modify its pension accounting for ratemaking purposes. See a discussion in Item 7. MD&A—Executive Overview of 2023 and Future Outlook for further details .
We also 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, notably through our investments in our Energy Strong program and Infrastructure Advancement Program.
We also 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, notably through our investments in our Energy Strong program and Infrastructure Advancement Program and our investments in transmission infrastructure upgrades.
Effect if Different Assumptions Used : A change in the above assumptions may result in a material impact on our results of operations or our cash flows. See Item 8. Note 7. Regulatory Assets and Liabilities for a description of the amounts and nature of regulatory balance sheet amounts.
Effect if Different Assumptions Used : A change in the above assumptions may result in a material impact on our results of operations or our cash flows. See Item 8. Note 6. Regulatory Assets and Liabilities for a description of the amounts and nature of regulatory balance sheet amounts.
For one of PSEG’s qualified pension plans, the excess would be amortized over the average remaining expected life of inactive participants, which is approximately eighteen years. For PSEG’s other qualified pension plan, the excess would be amortized over the average remaining service period of active employees, which is approximately fourteen years.
For one of PSEG’s qualified pension plans, the excess would be amortized over the average remaining expected life of inactive participants, which is approximately eighteen years. For PSEG’s other qualified pension plan, the excess would be amortized over the average remaining service period of active employees, which is approximately fifteen years.
EXECUTIVE OVERVIEW OF 2022 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.
EXECUTIVE OVERVIEW OF 2023 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.
As of December 31, 2022, 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.
As of December 31, 2023, 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.
The plan assets are comprised of investments in both debt and equity securities which are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Plan 50 Table of Contents assets also include investments in unlisted real estate which is valued via third-party appraisals.
The plan assets are comprised of investments in both debt and equity securities which are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Plan assets also include investments in unlisted real estate which is valued via third-party appraisals.
Quantitative and Qualitative Disclosures About Market Risk for additional information. 51 Table of Contents Derivative Instruments The operations of PSEG, PSEG Power and PSE&G are exposed to market risks from changes in commodity prices, interest rates and equity prices that could affect their results of operations and financial condition.
Quantitative and Qualitative Disclosures About Market Risk for additional information. Derivative Instruments The operations of PSEG, PSEG Power and PSE&G are exposed to market risks from changes in commodity prices, interest rates and equity prices that could affect their results of operations and financial condition.
The ratings should not be construed as an indication to buy, hold or sell any security. 48 Table of Contents 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 Issuer Rating 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.
The ratings should not be construed as an indication to buy, hold or sell any security. 48 Table of Conte n t s 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 Positive Stable Issuer Rating 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.
Significant inputs may include, but are not limited to, forward power prices, expected PTC payments, ZEC payments for the New Jersey nuclear assets, fuel costs, other operating and capital expenditures, the cost of borrowing and asset sale prices and probabilities associated with any potential sale prior to the end of the estimated useful life or the early retirement of assets .
Significant inputs may include, but are not limited to, forward power prices, expectation of PTCs, ZEC payments for the New Jersey nuclear assets, fuel costs, other operating and capital expenditures, the cost of borrowing and asset sale prices and probabilities associated with any potential sale prior to the end of the estimated useful life or the early retirement of assets .
Debt and 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.
Note 14. Debt and 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.
PSE&G’s projected expenditures for the various items reported above are primarily comprised of the following: • Transmission—investments focused on reliability improvements and replacement of aging infrastructure. • Electric and Gas Distribution—investments for new business, reliability improvements, flood mitigation, and 49 Table of Contents modernization and replacement of equipment that has reached the end of its useful life. • Clean Energy—investments associated with customer EE programs, infrastructure supporting EVs and grid-connected solar.
PSE&G’s projected expenditures for the various items reported above are primarily comprised of the following: • Transmission—investments focused on reliability improvements and replacement of aging infrastructure. 49 Table of Conte n t s • Electric and Gas Distribution—investments for new business, reliability improvements, flood mitigation, and modernization and replacement of equipment that has reached the end of its useful life. • Clean Energy—investments associated with customer EE programs, infrastructure supporting EVs and grid-connected solar.
A remaining component of our CEF-EV program related to medium and heavy duty charging infrastructure has been the subject of a stakeholder process that the BPU began in 2021 and we expect that this effort will result in PSE&G submitting a filing targeting infrastructure investments for the medium and heavy duty EV market in 2023.
A remaining component of our CEF-Electric Vehicle (EV) program related to medium- and heavy-duty charging infrastructure has been the subject of a stakeholder process that the BPU began in 2021 and we expect that this effort will result in PSE&G submitting a filing targeting infrastructure investments for the medium-and heavy-duty EV market in 2024.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on February 24, 2022 for information related to the year ended December 31, 2021 as compared to 2020, which information is incorporated herein by reference.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on February 22, 2023 for information related to the year ended December 31, 2022 as compared to 2021, which information is incorporated herein by reference.
As previously noted, in August 2022, the IRA was signed into law expanding incentives promoting carbon-free generation. The enacted legislation established the PTC for electricity generation using nuclear energy set to begin in 2024 through 2032. The expected PTC rate is up to $15/MWh subject to adjustment based upon a facility’s gross receipts.
As previously noted, in August 2022, the IRA was signed into law expanding incentives promoting carbon-free generation. The enacted legislation established the PTC for electricity generation using existing nuclear energy set to begin January 1, 2024 and continue through 2032. The expected PTC rate is up to $15/MWh subject to adjustment based upon a facility’s gross receipts.
For additional information regarding Derivative Financial Instruments, see Item 8. Note 1. Organization, Basis of Presentation and Significant Accounting Policies, Note 18. Financial Risk Management Activities and Note 19. Fair Value Measurements. Long-Lived Assets Management evaluates long-lived assets for impairment and reassesses the reasonableness of their related estimated useful lives whenever events or changes in circumstances warrant assessment.
For additional information regarding Derivative Financial Instruments, see Item 8. Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, Note 16. Financial Risk Management Activities and Note 17. Fair Value Measurements. Long-Lived Assets Management evaluates long-lived assets for impairment and reassesses the reasonableness of their related estimated useful lives whenever events or changes in circumstances warrant assessment.
The table below does not reflect any anticipated cash payments for pension and OPEB or AROs due to uncertain timing of payments. See Item 8. Note 14. Pension and Other Postretirement Benefits (OPEB) and Savings Plans and Note 13. Asset Retirement Obligations (AROs) for additional information.
The table below does not reflect any anticipated cash payments for pension and OPEB or AROs due to uncertain timing of payments. See Item 8. Note 12. Pension, Other Postretirement Benefits (OPEB) and Savings Plans and Note 11. Asset Retirement Obligations (AROs) for additional information.
Other Material Cash Requirements The following table reflects our other material cash requirements which include debt maturities and interest payments, operating lease payments and energy related purchase commitments in the respective periods in which they are due. For additional information, see Item 8. Note 16. Debt and Credit Facilities, Note 8. Leases and Note 15. Commitments and Contingent Liabilities.
Other Material Cash Requirements The following table reflects our other material cash requirements which include debt maturities and interest payments, operating lease payments and energy related purchase commitments in the respective periods in which they are due. For additional information, see Item 8. Note 14. Debt and Credit Facilities, Note 7. Leases and Note 13. Commitments and Contingent Liabilities.
The low end of this range includes an extension of our Gas System Modernization Program (GSMP) and Clean Energy Future (CEF)-EE program at their average annual investment levels plus inflation, as these programs are expected to continue beyond their currently approved timeframe of 2023.
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.
PSE&G is subject to regulation by the New Jersey Board of Public Utilities (BPU) and the Federal Energy Regulatory Commission (FERC).
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.
We calculate pension and OPEB costs using various economic and demographic assumptions. Assumptions and Approach Used : Economic assumptions include the discount rate and the long-term rate of return on trust assets. Demographic pension and OPEB assumptions include projections of future mortality rates, pay increases and retirement patterns, as well as projected health care costs for OPEB.
We calculate pension and OPEB costs using various economic and demographic assumptions. Assumptions and Approach Used : Economic assumptions include the discount rate and the expected rate of return on plan assets. Demographic pension and OPEB assumptions include projections of future mortality rates, pay increases and retirement patterns, as well as projected health care costs for OPEB.
NDT Fund Income (Expense) also includes interest and dividend income and other costs related to the NDT Fund recorded in 39 Table of Contents Other Income (Deductions), interest accretion expense on PSEG Power’s nuclear Asset Retirement Obligation (ARO) recorded in Operation & Maintenance (O&M) Expense and the depreciation related to the ARO asset recorded in Depreciation and Amortization (D&A) Expense.
NDT Fund Income (Expense) 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 & Maintenance (O&M) Expense and the depreciation related to the ARO asset recorded in Depreciation and Amortization (D&A) Expense.
(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. Other Comprehensive Income For the year ended December 31, 2022, we had Other Comprehensive Loss of $200 million on a consolidated basis.
(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. Other Comprehensive Income For the year ended December 31, 2023, we had Other Comprehensive Income of $371 million on a consolidated basis.
The variances in our Net Income attributable to changes related to the NDT Fund and MTM are shown in the following table: Years Ended December 31, 2022 2021 2020 Millions, after tax NDT Fund and Related Activity (A) (B) $ (174) $ 108 $ 137 Non-Trading MTM Gains (Losses) (C) $ (457) $ (446) $ (58) (A) NDT Fund Income (Expense) includes gains and losses on NDT securities which are recorded in Net Gains (Losses) on Trust Investments.
The variances in our Net Income (Loss) attributable to changes related to the NDT Fund and MTM are shown in the following table: Years Ended December 31, 2023 2022 2021 Millions, after tax NDT Fund and Related Activity (A) (B) $ 109 $ (174) $ 108 Non-Trading MTM Gains (Losses) (C) $ 959 $ (457) $ (446) (A) NDT Fund Income (Expense) includes gains and losses on NDT securities which are recorded in Net Gains (Losses) on Trust Investments.
As of December 31, 2022, PSE&G’s Mortgage coverage ratio was 3.4 to 1 and the Mortgage would permit up to approximately $7.8 billion aggregate principal amount of new Mortgage Bonds to be issued against additions and improvements to its property.
As of December 31, 2023, PSE&G’s Mortgage coverage ratio was 3.8 to 1 and the Mortgage would permit up to approximately $9.3 billion aggregate principal amount of new Mortgage Bonds to be issued against additions and improvements to its property.
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 $878 million and $1,151 million as of December 31, 2022 and 2021, respectively. See Item 8. Note 15. Commitments and Contingent Liabilities for additional discussion of PSEG Power’s agreements.
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 $751 million and $878 million as of December 31, 2023 and 2022, respectively. See Item 8. Note 13. Commitments and Contingent Liabilities for additional discussion of PSEG Power’s agreements.
Because of this, differences between the actual measure realized versus the estimate can have a material impact on results of operations, financial position and cash flows. We have determined that the following estimates are considered critical to the application of rules that relate to the respective businesses.
Because of this, differences between the actual measure realized versus the estimate can have a material impact on results of operations, 50 Table of Conte n t s financial position and cash flows. We have determined that the following estimates are considered critical to the application of rules that relate to the respective businesses.
In order to do this, we will continue to: • obtain approval of and execute on our utility capital investment program to 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, • seek 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 clean energy policies, which is an integral part of our long-term strategy, • successfully manage our obligations and re-contract our open positions in response to changes in prices and demand, • advocate for appropriate regulatory guidance on the federal nuclear PTC to ensure long-term support for New Jersey’s largest carbon-free generation resource, and adapt our hedging program accordingly, • engage constructively with our multiple stakeholders, including regulators, government officials, customers, employees, investors, suppliers and the communities in which we do business, and • deliver on our human capital management strategy to attract, develop and retain a diverse, high-performing workforce.
In order to do this, we will continue to: • seek approval of and execute on our utility capital investment program to 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, 39 Table of Conte n t s • seek 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 clean energy policies, • advocate for appropriate regulatory guidance on the federal nuclear PTC to ensure long-term support for New Jersey’s largest carbon-free generation resource, and adapt our hedging program accordingly, • engage constructively with our multiple stakeholders, including regulators, government officials, customers, employees, investors, suppliers and the communities in which we do business, and • deliver on our human capital management strategy to attract, develop and retain a diverse, high-performing workforce.
The changes in SBC collections and TAC and GPRC deferrals were entirely offset by the amortization of related costs (Regulatory Assets) in O&M, D&A and Interest and Tax Expenses. PSE&G does not earn margin on SBC collections or TAC and GPRC deferrals. Commodity Revenues increased $551 million due to higher Gas revenues and Electric revenues.
The changes in TAC and GPRC deferrals and SBC collections were entirely offset by the amortization of related costs (Regulatory Assets) in O&M, D&A and Interest and Income Tax Expenses. PSE&G does not earn margin on TAC and GPRC deferrals or on SBC collections. Commodity Revenues decreased $289 million due to lower Gas revenues and Electric revenues.
(Gains) Losses on Asset Dispositions and Impairments The $123 million loss in 2022 reflects an impairment loss of $50 million due to the sale of the fossil generating plants in February 2022, partially offset by a $5 million gain on a land sale at PSEG Power and pre-tax impairments of $78 million at Energy Holdings related to one of its domestic energy generating facilities and its real estate assets.
The $123 million loss in 2022 reflects an impairment loss of $78 million at Energy Holdings related to one of its domestic energy generating facilities and its real estate assets, and a $50 million impairment loss due to the sale of the fossil generating plants in February 2022, partially offset by a $5 million gain on a land sale at PSEG Power.
This reflects an indicative annual dividend rate of $2.28 per share.
This reflects an indicative annual dividend rate of $2.40 per share.
Through GSMP II, from 2018 through 2023 we expect to reduce methane leaks by approximately 22% system wide and assuming a continuation of GSMP, we expect to achieve an overall reduction in methane emissions of approximately 60% over the 2011 through 2030 period.
Through GSMP II, from 2018 through 2023 we reduced methane leaks by approximately 22% system wide and assuming continuation of GSMP, we expect to achieve an overall reduction in methane emissions of at least 60% over the 2011 baseline through 2030 period.
Nuclear In April 2021, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded ZECs for the three-year eligibility period starting June 2022 at the same approximate $10 per megawatt hour (MWh) received during the prior ZEC period through May 2022.
Note 13. Commitments and Contingent Liabilities. Nuclear In April 2021, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded zero emission certificates (ZECs) for the three-year eligibility period starting June 2022 at the same approximate $10 per megawatt hour (MWh) received during the prior ZEC period through May 2022.
Sub-limits can be adjusted subject to the terms of the Master Credit Facility. PSEG’s available sources of external liquidity may include the issuance of long-term debt securities and the incurrence of additional indebtedness through our commercial paper program back-stopped by our credit facilities. Our current sources of external liquidity include the Master Credit Facility.
The current PSEG sub-limit is $1.5 billion and current PSEG Power sub-limit is $1.25 billion. Sub-limits can be adjusted subject to the terms of the Master Credit Facility. PSEG’s available sources of external liquidity may include the issuance of long-term debt securities and the incurrence of additional indebtedness through our commercial paper program back-stopped by our credit facilities.
Effect if Different Assumptions Used : As part of the business planning process, we have modeled future costs assuming an 8.10% expected rate of return and a 5.20% discount rate for 2023 pension costs/credits and a 5.16% discount rate for 2023 OPEB costs/credits.
Effect if Different Assumptions Used : As part of the business planning process, we have modeled future costs assuming an 8.10% expected rate of return and a 5.02% discount rate for 2024 pension costs/credits and a 4.96% discount rate for 2024 OPEB costs/credits.
See Item 8. Note 11. Trust Investments for additional information.
See Item 8. Note 10. Trust Investments for additional information.
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 year ended December 31, 2022, our operating cash flow decreased $233 million.
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 year ended December 31, 2023, our operating cash flow increased $2,303 million.
Accumulated Other Comprehensive Income (Loss), Net of Tax for additional information. CAPITAL REQUIREMENTS 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. Projected capital construction and investment expenditures, excluding nuclear fuel purchases, for the next three years are presented in the following table.
CAPITAL REQUIREMENTS 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. Projected capital construction and investment expenditures, excluding nuclear fuel purchases, for the next three years are presented in the following table.
In February 2023, New Jersey Governor Murphy issued three executive orders that establish targets, or accelerate previously established 2050 targets, for clean-sourced energy, building electrification, and EV adoption goals, with new target dates of 2030 or 2035, as applicable.
New Jersey 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 filings at FERC are pending and we cannot predict the outcome. 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.
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.
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 such as CEF-EE, CEF-EV, CEF-ES and Solar, • continued operation of our nuclear generation facilities that are supported through the PTC through 2032 and can enable certain enhancements to the units as well as potential license extensions, • investments in regional offshore wind regulated transmission, should New Jersey pursue the development of an offshore network, with returns 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.
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 such as CEF-EE, CEF-EV, CEF-ES and solar, • continued operation of our nuclear generation facilities that are expected to be supported through the PTC through 2032 and can enable certain investments to increase the capacity of the units as well as potential license extensions, • 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.
Debt and Credit Facilities. NDT Fund Obligation The NRC requires a biennial filing of the NDT fund balances against the decommissioning liability estimate. Any funding shortfalls are required to be cured prior to the next NDT reporting period.
For additional information, see Item 8. Note 14. Debt and Credit Facilities. NDT Fund Obligation The NRC requires a biennial filing of the NDT fund balances against the decommissioning liability estimate. Any funding shortfalls are required to be cured prior to the next NDT reporting period.
Assumption 2022 2021 2020 Pension Discount Rate 5.20 % 2.94 % 2.61 % Expected Rate of Return on Plan Assets 7.20 % 7.70 % 7.70 % OPEB Discount Rate 5.16 % 2.82 % 2.46 % Expected Rate of Return on Plan Assets 7.20 % 7.69 % 7.70 % The discount rate used to calculate pension and OPEB obligations is determined as of December 31 each year, our measurement date.
Assumption 2023 2022 2021 Pension Discount Rate 5.02 % 5.20 % 2.94 % Expected Rate of Return on Plan Assets 8.10 % 7.20 % 7.70 % OPEB Discount Rate 4.96 % 5.16 % 2.82 % Expected Rate of Return on Plan Assets 8.10 % 7.20 % 7.69 % The discount rate used to calculate PSEG’s pension and OPEB obligations is determined as of December 31 each year, our measurement date.
PSE&G’s approved CEF-EE, CEF-Energy Cloud and CEF-EV programs and the proposed CEF-ES program are intended to support New Jersey’s Energy Master Plan through programs designed to help customers increase their EE, support the expansion of the EV infrastructure in the State, 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.
PSE&G’s approved CEF-EE, CEF-Energy Cloud and CEF-EV programs and the proposed CEF-ES and CEF-EE II programs are intended to support New Jersey’s Energy Master Plan and recent 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.
Our business discussion in Item 1. Business 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.
Business 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 provides information about factors that could have a material adverse impact on our businesses.
(B) Net of tax (expense) benefit of $97 million, $(70) million and $(94) million for the years ended December 31, 2022, 2021 and 2020, respectively. (C) Net of tax benefit of $178 million, $174 million and $23 million for the years ended December 31, 2022, 2021 and 2020, respectively.
(B) Net of tax (expense) benefit of $(74) million, $97 million and $(70) million for the years ended December 31, 2023, 2022 and 2021, respectively. (C) Net of tax (expense)benefit of $(376) million, $178 million and $174 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Common Stock Dividends Years Ended December 31, Dividend Payments on Common Stock 2022 2021 2020 Per Share $ 2.16 $ 2.04 $ 1.96 in Millions $ 1,079 $ 1,031 $ 991 On February 14, 2023, our Board of Directors approved a $0.57 per share common stock dividend for the first quarter of 2023.
Common Stock Dividends Years Ended December 31, Dividend Payments on Common Stock 2023 2022 2021 Per Share $ 2.28 $ 2.16 $ 2.04 in Millions $ 1,137 $ 1,079 $ 1,031 On February 13, 2024, our Board of Directors approved a $0.60 per share common stock dividend for the first quarter of 2024.
Nuclear Decommissioning AROs AROs related to the future decommissioning of PSEG Power’s nuclear facilities comprised approximately 74% or $1,105 million of PSEG’s total AROs as of December 31, 2022.
Nuclear Decommissioning AROs AROs related to the future decommissioning of PSEG Power’s nuclear facilities comprised approximately 72% or $1,057 million of PSEG’s total AROs as of December 31, 2023.
Financial Results The financial results for PSEG, PSE&G and PSEG Power for the years ended December 31, 2022 and 2021 are presented as follows: Years Ended December 31, 2022 2021 Millions, except per share data PSE&G $ 1,565 $ 1,446 PSEG Power & Other (534) (2,094) PSEG Net Income (Loss) $ 1,031 $ (648) PSEG Net Income (Loss) Per Share (Diluted) $ 2.06 $ (1.29) For a detailed discussion of our financial results, see Results of Operations.
Financial Results The financial results for PSEG, PSE&G and PSEG Power & Other for the years ended December 31, 2023 and 2022 are presented as follows: Years Ended December 31, 2023 2022 Millions, except per share data PSE&G $ 1,515 $ 1,565 PSEG Power & Other 1,048 (534) PSEG Net Income $ 2,563 $ 1,031 PSEG Net Income Per Share (Diluted) $ 5.13 $ 2.06 For a detailed discussion of our financial results, see Results of Operations.
These investments have shown benefits in recent severe weather events, including Tropical Storm Ida in August 2021, which brought significant flooding to our service territory but did not result in the loss of any of our electric distribution substations. We also continue to focus on providing cleaner energy for our customers.
These investments have shown benefits in recent severe weather events, including Tropical Storm Ida in 2021, which brought significant flooding to our service territory but did not result in the loss of any of our electric distribution substations.
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 operations, assuming advances in technology, public policy and customer behavior. Scope 1 emissions include power generation, methane leaks, vehicle fleet emissions, and sulfur hexafluoride and refrigerant leaks.
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.
Many aspects of the IRA remain unclear and in need of further guidance; therefore, we cannot determine the impact the IRA will have on PSEG’s and PSE&G’s results of operations, financial condition and cash flows.
Many aspects of the IRA remain unclear and in need of further guidance; therefore, we continue to analyze the impact the IRA will have on PSEG’s and PSE&G’s results of operations, financial condition and cash flows, which could be material.
In addition to the risks described elsewhere in this Form 10-K for 2022 and beyond, the key issues and challenges we expect our business to confront include: • regulatory and political uncertainty, both with regard to transmission planning and rates policy, the role of distribution utilities and decarbonization impacts, future energy policy, design of energy and capacity markets, and environmental regulation, as well as with respect to the outcome of any legal, regulatory or other proceedings, • the current inflationary environment and associated volatility in the financial markets, including the impact on our pension fund performance and interest rates on our future financing plans, • increases in commodity prices and customer rates, which may adversely affect customer collections and future regulatory proceedings, • 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 demand, natural gas and electricity prices, and expanded efforts to decarbonize several sectors of the economy. 38 Table of Contents We continually assess a broad range of strategic options to maximize long-term shareholder value and address the interests of our multiple stakeholders.
In addition to the risks described elsewhere in this Form 10-K for 2023 and beyond, the key issues and challenges we expect our business to confront include: • regulatory and political uncertainty, both 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 and interest rates on our future financing plans, • continuing to manage costs and maintain affordable customer rates in an inflationary environment, which could impact customer collections and future regulatory proceedings, • 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 demand, natural gas and electricity prices, and expanded efforts to decarbonize several sectors of the economy.
Based upon these assumptions, we have estimated a net periodic pension expense in 2023 of approximately $21 million, or a net periodic pension credit of $16 million, net of amounts capitalized, and a net periodic OPEB credit in 2023 of approximately $43 million, or $44 million, net of amounts capitalized.
Based upon these assumptions, we have estimated a net periodic pension expense in 2024 of approximately $21 million, or a net periodic pension credit of $19 million, net of amounts capitalized, and a net periodic OPEB expense in 2024 of approximately $6 million, or $5 million, net of amounts capitalized.
PSEG Power & Other results in 2021 include an after-tax impairment loss and other associated charges, including debt extinguishment costs, of $2,158 million related to the sale of PSEG Power’s fossil generation assets.
PSEG Power & Other results in 2021 include an after-tax impairment loss and other associated charges, including debt extinguishment costs of $2,158 million related to the sale of PSEG Power’s fossil generation assets. See Item 8. Note 3. Asset Dispositions and Impairments for additional information.
Default Provisions Our bank credit agreements and indentures contain various, customary default provisions that could result in the potential acceleration of indebtedness under the defaulting company’s agreement. 47 Table of Contents In particular, PSEG’s bank credit agreements contain provisions under which certain events, including an acceleration of material indebtedness under PSE&G’s and PSEG Power’s respective financing agreements, a failure by PSE&G or PSEG Power to satisfy certain final judgments and certain bankruptcy events by PSE&G or PSEG Power, would constitute an event of default under the PSEG bank credit agreements.
In particular, PSEG’s bank credit agreements contain provisions under which certain events, including an acceleration of material indebtedness under PSE&G’s and PSEG Power’s respective financing agreements, a failure by PSE&G or PSEG Power to satisfy certain final judgments and certain bankruptcy events by PSE&G or PSEG Power, would constitute an event of 47 Table of Conte n t s default under the PSEG bank credit agreements.
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.
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.
PSE&G’s dividend payments to/capital contributions from PSEG are consistent with its capital structure objectives which have been established to maintain investment grade credit ratings. PSE&G’s long-term financing plan is designed to replace maturities, fund a portion of its capital program and manage short-term debt balances. Generally, PSE&G uses either secured medium-term notes or first mortgage bonds to raise long-term capital.
PSE&G’s dividend payments to/capital contributions from PSEG are consistent with its capital structure objectives which have been established to maintain investment grade credit ratings. PSE&G’s long-term financing plan is designed to replace maturities, fund a portion of its capital program 45 Table of Conte n t s and manage short-term debt balances.
Our CEF-ES program is being held in abeyance. In September 2022, the BPU released a draft Storage Incentive Program proposal and is currently undertaking a stakeholder process to receive comments. PSE&G is active in the proceeding.
In September 2022, the BPU released a draft Storage Incentive Program proposal and is currently undertaking a stakeholder process to determine the details of the program. In the meantime, our CEF-Energy Storage (ES) program is being held in abeyance.
Servco’s short-term liquidity needs are met through an account funded and owned by LIPA. 45 Table of Contents PSEG and PSEG Power have access through sub-limits to a revolving Master Credit Facility, which provides for $2.75 billion of multi-year credit capacity. The current PSEG sub-limit is $1.5 billion and current PSEG Power sub-limit is $1.25 billion.
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. PSEG and PSEG Power have access through sub-limits to a revolving Master Credit Facility, which provides for $2.75 billion of multi-year credit capacity.
PSEG Increase / (Decrease) Increase / (Decrease) Years Ended December 31, 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Millions Millions % Millions % Operating Revenues $ 9,800 $ 9,722 $ 9,603 $ 78 1 $ 119 1 Energy Costs 4,018 3,499 3,056 519 15 443 14 Operation and Maintenance 3,178 3,226 3,115 (48) (1) 111 4 Depreciation and Amortization 1,100 1,216 1,285 (116) (10) (69) (5) (Gains) Losses on Asset Dispositions and Impairments 123 2,637 (123) (2,514) (95) 2,760 N/A Income from Equity Method Investments 14 16 14 (2) (13) 2 14 Net Gains (Losses) on Trust Investments (265) 194 253 (459) N/A (59) (23) Other Income (Deductions) 124 98 115 26 27 (17) (15) Non-Operating Pension and OPEB Credits (Costs) 376 328 249 48 15 79 32 Loss on Extinguishment of Debt — (298) — 298 N/A (298) N/A Interest Expense 628 571 600 57 10 (29) (5) Income Tax (Benefit) Expense (29) (441) 396 412 (93) (837) N/A The 2022, 2021 and 2020 amounts in the preceding table for Operating Revenues and O&M costs each include $516 million, $511 million and $520 million, respectively, for PSEG LI’s subsidiary, Long Island Electric Utility Servco, LLC (Servco).
Related-Party Transactions. 41 Table of Conte n t s PSEG Increase / (Decrease) Increase / (Decrease) Years Ended December 31, 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Millions Millions % Millions % Operating Revenues $ 11,237 $ 9,800 $ 9,722 $ 1,437 15 $ 78 1 Energy Costs 3,260 4,018 3,499 (758) (19) 519 15 Operation and Maintenance 3,150 3,178 3,226 (28) (1) (48) (1) Depreciation and Amortization 1,135 1,100 1,216 35 3 (116) (10) Losses on Asset Dispositions and Impairments 7 123 2,637 (116) (94) (2,514) (95) Income from Equity Method Investments 1 14 16 (13) (93) (2) (13) Net Gains (Losses) on Trust Investments 189 (265) 194 454 N/A (459) N/A Net Other Income (Deductions) 172 124 98 48 39 26 27 Net Non-Operating Pension and OPEB (Costs) Credits (218) 376 328 (594) N/A 48 15 Loss on Extinguishment of Debt — — (298) — N/A 298 N/A Interest Expense 748 628 571 120 19 57 10 Income Tax Expense (Benefit) 518 (29) (441) 547 N/A 412 (93) The 2023, 2022 and 2021 amounts in the preceding table for Operating Revenues and O&M costs each include $533 million, $516 million and $511 million, respectively, for PSEG LI’s subsidiary, Long Island Electric Utility Servco, LLC (Servco).
Non-Operating Pension and OPEB Credits (Costs) increased $17 due primarily to a $51 million decrease in amortization of the net actuarial loss, partially offset by a $21 million decrease in the expected return on plan assets and a $13 million increase in interest cost.
Net Non-Operating Pension and OPEB Credits decreased $167 million due primarily to an $86 million increase in interest cost, a $63 million decrease in the expected return on plan assets and a $62 million decrease in the amortization of service credits, partially offset by a $47 million decrease in amortization of the net actuarial loss.
The executive orders direct the BPU and other state agencies to collaborate with stakeholders to develop plans, including the new 2024 Energy Master Plan, to reach the targets and convene a stakeholder proceeding to develop a new plan for gas distribution utilities to reach the target, previously established in a 2021 executive order, of 50% natural gas emissions reductions over 2006 levels by 2030.
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.
Other PSEG’s other projected expenditures are primarily comprised of investments to maintain and enhance current nuclear operations and opportunities to increase nuclear generation at PSEG Power and to purchase software and office equipment at Services. In 2022, PSEG’s other capital expenditures were $105 million, excluding $193 million for nuclear fuel, primarily related to various nuclear projects at PSEG Power.
PSEG Power & Other PSEG’s other projected expenditures are primarily comprised of investments to maintain and enhance current nuclear operations and opportunities to increase nuclear generation at PSEG Power and to purchase software and office equipment at Services.
Of this amount, there was a $42 million increase due to positions reclassified to realized upon settlement in 2022 as compared to 2021, coupled with a $15 million increase due to changes in forward prices.
Of this amount, there was a $29 million decrease due to positions reclassified to realized upon settlement, coupled with a $27 million decrease due to changes in forward prices.
In February 2023, PSE&G received an accounting order from the BPU authorizing PSE&G to modify its method for calculating the amortization of the net actuarial gain or loss component of pension expense for ratemaking purposes.
Treasury to assess any impact of PTCs on expected ZEC payments and/or any future ZEC application periods. Pension and Interest Rate Matters In February 2023, PSE&G received an accounting order from the BPU authorizing PSE&G to modify its method for calculating the amortization of the net actuarial gain or loss component of pension expense for ratemaking purposes.
The current market downturn associated with inflation and rising interest rates is not currently expected to result in any supplemental required funding of the NDT Fund. Debt Covenants Our credit agreements contain maximum debt to equity ratios and other restrictive covenants and conditions to borrowing. We are currently in compliance with all of our debt covenants.
We do not currently expect to be required to provide supplemental funding of the NDT Fund. Debt Covenants Our credit agreements contain maximum debt to equity ratios and other restrictive covenants and conditions to borrowing. We are currently in compliance with all of our debt covenants.
For additional information, see Item 8. Note 4. Early Plant Retirements/Asset Dispositions and Impairments. 53 Table of Contents Accounting for Regulated Businesses PSE&G prepares its financial statements to comply with GAAP for rate-regulated enterprises, which differs in some respects from accounting for non-regulated businesses. In general, accounting for rate-regulated enterprises should reflect the economic effects of regulation.
Accounting for Regulated Businesses PSE&G prepares its financial statements to comply with GAAP for rate-regulated enterprises, which differs in some respects from accounting for non-regulated businesses. In general, accounting for rate-regulated enterprises should reflect the economic effects of regulation.
The assumptions used by management incorporate inherent uncertainties that are at times difficult to predict and could result in impairment charges or accelerated depreciation in future periods if actual results materially differ from the estimated assumptions utilized in our forecasts. In addition, long-lived assets are depreciated under the straight-line method based on estimated useful lives.
The assumptions used by management incorporate inherent uncertainties that are at times difficult to predict and could 52 Table of Conte n t s result in impairment charges or accelerated depreciation in future periods if actual results materially differ from the estimated assumptions utilized in our forecasts.
The Other Comprehensive Loss was due primarily to $132 million of net unrealized losses related to Available-for-Sale Debt Securities, and a decrease of $71 million related to pension and other postretirement benefits, partially offset by $3 million of unrealized gains on derivative contracts accounted for as hedges. See Item 8. Note 23.
The Other Comprehensive Income was due primarily to $324 million related to pension and other postretirement benefits, $41 million of net unrealized gains related to available-for-sale debt securities, and $6 million of unrealized gains on derivative contracts accounted for as hedges. See Item 8. Note 21. Accumulated Other Comprehensive Income (Loss), Net of Tax for additional information.
Had the following assumptions been applied, our estimates of the approximate impacts on the Nuclear ARO as of December 31, 2022 are as follows: • A decrease of 1% in the discount rate would result in a $41 million increase in the Nuclear ARO. • An increase of 1% in the inflation rate would result in a $329 million increase in the Nuclear ARO. • If the federal government were to discontinue reimbursing us for assumed specific spent fuel costs as prescribed under the Nuclear Waste Policy Act, the Nuclear ARO would increase by $161 million. • If we would elect or be required to decommission under a DECON alternative at Salem and Hope Creek, the Nuclear ARO would increase by $557 million. • If PSEG Power were to increase its early shutdown probability to 100% and retire Salem and Hope Creek starting in 2032, which is significantly earlier than the end of their current license periods, the Nuclear ARO would increase by $102 million.
Had the following assumptions been applied, our estimates of the approximate impacts on the Nuclear ARO as of December 31, 2023 are as follows: • A decrease of 1% in the discount rate would result in a $43 million increase in the Nuclear ARO. 53 Table of Conte n t s • An increase of 1% in the inflation rate would result in a $303 million increase in the Nuclear ARO. • If the federal government were to discontinue reimbursing us for assumed specific spent fuel costs as prescribed under the Nuclear Waste Policy Act, the Nuclear ARO would increase by $139 million. • If we would elect or be required to decommission under a DECON alternative at Salem and Hope Creek, the Nuclear ARO would increase by $497 million.
Clause Revenues increased $4 million due primarily to $35 million in higher Societal Benefits Clause (SBC) collections, partially offset by a $30 million decrease in Tax Adjustment Credits (TAC) and Green Program Recovery Charge (GPRC) deferrals.
Clause Revenues decreased $80 million due primarily to a $48 million net decrease in Tax Adjustment Credits (TAC) and Green Program Recovery Charge (GPRC) deferrals and $33 million in lower Societal Benefits Clause (SBC) collections.
In December 2022, the IRS approved our carry back claim, providing a $28 million tax benefit. Future Outlook Our future success will depend on our ability to continue to maintain strong operational and financial performance to capitalize on or otherwise address regulatory and legislative developments that impact our business and to respond to the issues and challenges described below.
Future Outlook Our future success will depend on 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.
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. During the second half of 2021 and continuing throughout 2022, forward energy prices have demonstrated considerable price volatility and have increased dramatically.
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.
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. Long Island Electric Utility Servco, LLC (Servco) does not participate in the corporate money pool.
Generally, PSE&G uses either secured medium-term notes or first mortgage bonds to raise long-term capital. 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.
These amounts represent the O&M pass-through costs for the Long Island operations, the full reimbursement of which is reflected in Operating Revenues. See Item 8. Note 5. Variable Interest Entities for additional information.
These amounts represent the O&M pass-through costs for the Long Island operations, the full reimbursement of which is reflected in Operating Revenues. See Item 8. Note 4. Variable Interest Entity for additional information. The following discussions for PSE&G and PSEG Power provide a detailed explanation of their respective variances.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2022, a hypothetical 10% change in the equity market would impact the value of the equity securities in the NDT Fund by approximately $110 million. We use duration to measure the interest rate sensitivity of the fixed income portfolio. Duration is a summary statistic of the effective average maturity of the fixed income portfolio.
Biggest changeWe use duration to measure the interest rate sensitivity of the fixed income portfolio. Duration is a summary statistic of the effective average maturity of the fixed income portfolio. The benchmark for the fixed income component of the NDT Fund currently has a duration of 6.24 years and a yield of 4.53%.
Note 18. Financial Risk Management Activities for a discussion of credit risk. Interest Rates We are subject to the risk of fluctuating interest rates in the normal course of business. We manage interest rate risk by targeting a balanced debt maturity profile which limits refinancing in any given period or interest rate environment.
Note 16. Financial Risk Management Activities for a discussion of credit risk. Interest Rates We are subject to the risk of fluctuating interest rates in the normal course of business. We manage interest rate risk by targeting a balanced debt maturity profile which limits refinancing in any given period or interest rate environment.
The MTM VaR calculation does not include market risks associated with activities that are subject to accrual accounting, primarily our generating facilities and some load-serving activities. 54 Table of Contents The VaR models used are variance/covariance models adjusted for the change of positions with 95% and 99.5% confidence levels and a one-day holding period for the MTM activities.
The calculation does not include market risks associated with activities that are subject to accrual accounting, primarily our generating facilities and some load-serving activities. The VaR models used are variance/covariance models adjusted for the change of positions with 95% and 99.5% confidence levels and a one-day holding period for the MTM activities.
As of December 31, 2022, a hypothetical 10% increase in market interest rates would result in an additional $6 million in pre-tax annual interest costs related to either the current or the long-term portion of long-term debt, and term loan agreements.
As of December 31, 2023, a hypothetical 10% increase in market interest rates would result in an additional $2 million in pre-tax annual interest costs related to either the current or the long-term portion of long-term debt, and term loan agreements.
Debt and Equity Securities As of December 31, 2022, we had $5.3 billion of net assets in trust for our pension and OPEB plans.
Debt and Equity Securities As of December 31, 2023, we had $4.6 billion of net assets in trust for our pension and OPEB plans.
MTM VaR Years Ended December 31, 2022 2021 Millions 95% Confidence Level, Loss could exceed VaR one day in 20 days Period End $ 122 $ 71 Average for the Period $ 152 $ 36 High $ 365 $ 113 Low $ 70 $ 7 99.5% Confidence Level, Loss could exceed VaR one day in 200 days Period End $ 191 $ 112 Average for the Period $ 239 $ 57 High $ 572 $ 178 Low $ 110 $ 11 See Item 8.
MTM VaR Years Ended December 31, 2023 2022 Millions 95% Confidence Level, Loss could exceed VaR one day in 20 days Period End $ 48 $ 122 Average for the Period $ 56 $ 152 High $ 127 $ 365 Low $ 24 $ 70 99.5% Confidence Level, Loss could exceed VaR one day in 200 days Period End $ 75 $ 191 Average for the Period $ 87 $ 239 High $ 198 $ 572 Low $ 38 $ 110 See Item 8.
Commodity Contracts The availability and price of energy-related commodities are subject to fluctuations from factors such as weather, environmental policies, changes in supply and demand, state and federal regulatory policies, market rules and other events. To reduce price risk caused by market fluctuations, we enter into supply contracts and derivative contracts, including forwards, futures, swaps and options with approved counterparties.
Commodity Contracts The availability and price of energy-related commodities are subject to fluctuations from factors such as weather, environmental policies, changes in supply and demand, state and federal regulatory policies, market rules and other events.
As of December 31, 2022, a hypothetical 1% increase in interest rates would result in a decline in the market value for the fixed income portfolio of approximately $71 million.
The portfolio’s value will appreciate or depreciate by the duration with a 1% change in interest rates. As of December 31, 2023, a hypothetical 1% increase in interest rates would result in a decline in the market value for the fixed income portfolio of approximately $76 million.
These contracts, in conjunction with physical sales and other services, help reduce risk and optimize the value of owned electric generation capacity. Value-at-Risk (VaR) Models VaR represents the potential losses, under normal market conditions, for instruments or portfolios due to changes in market factors, for a specified time period and confidence level. We estimate VaR across our commodity businesses.
Value-at-Risk (VaR) Models VaR represents the potential losses, under normal market conditions, for instruments or portfolios due to changes in market factors, for a specified time period and confidence level. We estimate VaR across our commodity businesses. 54 Table of Conte n t s MTM VaR consists of MTM derivatives that are economic hedges.
The NDT Fund is comprised primarily of fixed income and equity securities. As of December 31, 2022, the portfolio included $1.1 billion of equity securities and $1.1 billion in fixed income securities. The fair market value of the assets in the NDT Fund will fluctuate primarily depending upon the performance of equity markets.
The NDT Fund is comprised primarily of fixed income and equity securities. As of December 31, 2023, the portfolio included $1.3 billion of equity securities inclusive of $0.3 billion of investments in listed real assets, and $1.2 billion in fixed income securities.
Removed
MTM VaR consists of MTM derivatives that are economic hedges.
Added
To reduce price risk caused by market fluctuations, we enter into supply contracts and derivative contracts, including forwards, futures, swaps, treasury locks, and options with approved counterparties. These contracts, in conjunction with physical sales and other services, help reduce risk and optimize the value of owned electric generation capacity.
Removed
The benchmark for the fixed income component of the NDT Fund currently has a duration of 6.17 years and a yield of 4.68%. The portfolio’s value will appreciate or depreciate by the duration with a 1% change in interest rates.
Added
The fair market value of the assets in the NDT Fund will fluctuate primarily depending upon the performance of equity markets. As of December 31, 2023, a hypothetical 10% change in the equity market would impact the value of the equity securities in the NDT Fund by approximately $131 million.

Other PEG 10-K year-over-year comparisons