By Rory D. Sweeney
Public Service Enterprise Group has received approval to operate as a third-party supplier of retail electric energy in New Jersey and eastern Pennsylvania, company officials said during its report on earnings for the fourth quarter and full year of 2016.
“The forecast for 2017 doesn’t assume meaningful contribution from retail sales, but Power’s team will begin its marketing efforts,” CFO Dan Cregg said.
“This is primarily a defensive move on our part,” said CEO Ralph Izzo. “We’ve opted to pursue this organically, building the capability in-house. We still are targeting between 5 and 10 TWh at its maturity. … We have a head of the operation onboard that we’ve hired and a couple support folks and are talking to people about some of the back-office fundamentals that we don’t want to build on our own.”
The business would be in addition to its requirement to provide power to default customers within its footprint that don’t shop around — about 11 of the company’s 50 annual terawatt-hours of production, Izzo said.
“What we’re looking to do here is to basically claw back some of the [customers who purchased elsewhere] that over years had gone away either by some combination of migration or changing of thresholds for the [basic-service] customer. We think that it will help us capture some lost margin and improve our management of basis differentials,” Izzo said.
PSEG reported income of $887 million ($1.75/share) for 2016 compared to $1.68 billion ($3.30/share) for 2015. For the fourth quarter, the company reported a loss of $98 million (-$0.19/share) compared to income of $309 million ($0.60/share). Expenses associated with the early retirement of coal-gas units at the Hudson and Mercer generating stations and reserves for a leveraged lease impairment accounted for the difference in year-end results, company officials said. The fourth-quarter loss reflects the impact of depreciation and other expenses associated with the plant retirements.
Operating earnings for the year were $1.48 billion ($2.90/share), virtually unchanged from the $2.91/share earned in 2015. Operating earnings were $279 million ($0.54/share) for the quarter compared to $255 million ($0.50/share) for the same period last year.
Company officials and analysts largely shrugged off the quarterly losses, noting annual operating results came solidly within its guidance of $2.80 to $2.95/share.
“The board’s recent decision to increase the common dividend by 4.9% to the indicative annual level of $1.72/share represents confidence in our firm’s investment strategy and an acknowledgment of our strong financial condition,” Izzo said.