Public Service Enterprise Group (NYSE:PEG) should get a boost from New Jersey’s second solicitation for offshore wind transmission upgrades and the state’s deepening embrace of electric vehicles, CEO Ralph A. LaRossa said during a first-quarter earnings call Tuesday.

Of particular benefit to the company could be a recommendation by the state Board of Public Utilities (BPU) that cables running from offshore projects pass through the utility’s 500-kV Deans substation in Northern New Jersey, LaRossa told analysts.

The BPU made the recommendation to PJM, which can choose whether to accept it as the best strategy. (See NJ BPU Backs Plan for 2nd Grid Upgrade Process with PJM.)

“What it means for us certainly is that if PJM does agree with the Board of Public Utilities and selects that, any of the work inside the fence will be the responsibility of [PSEG utility subsidiary] PSE&G,” he said. “Outside the fence will still follow under that state agreement approach and be competitive solicitation.”

“What I’m encouraged by is the fact that Deans is in our service territory; we know our service territory; and we should be very knowledgeable about the routes to get from the shore to that substation,” he said.

PSE&G was among 13 developers that submitted 80 proposals in the state’s first solicitation, made under the FERC State Agreement Approach rules, which resulted in last October’s awarding of contracts totaling $1.07 billion. PSEG submitted several proposals, some with Danish OSW developer Ørsted, which is developing two of the three approved projects off the Jersey shore under the name Coastal Wind Link. (See NJ BPU OKs $1.07B OSW Transmission Expansion.)

Despite PSEG’s anticipation that it could see up to $3 billion in business from the solicitation, the BPU awarded the utility only two small contracts totaling $40.3 million. (See PSEG Sees Potential $3B OSW Transmission Spending.)

LaRossa said he was “very happy” the utility had upgraded its transmission network because BPU’s recommendation to use Deans indicated “that our transmission system is robust enough to take that injection of offshore wind generation into it.”

“Our engineering team has done a really nice job of readying the system for what might come, and here it is,” he said.

One analyst on the call noted that a major part of the business awarded in the first solicitation went to FirstEnergy’s Jersey Central Power and Light, which was contracted to build a new substation next to its existing Larrabee substation. The analyst suggested that might happen with PSEG and its Deans substation.

But LaRossa said only that the work already done has improved the utility’s “readiness” for the future.

Growing EV Use

LaRossa said the utility also is “developing proposals to help support and advance” New Jersey’s updated and expanded clean energy policy, which PSEG expects will be primarily implemented by the BPU. The utility is paying particularly close attention to three climate change-related executive orders signed by Gov. Phil Murphy in February, including one to bring about electrification of 400,000 homes by 2035 and to require all electricity sold in the state to be derived from clean sources by the same year.

Another measure would end the sale of gas-powered cars and light-duty trucks by 2035.

LaRossa said the company is seeing signs that the state is turning to EVs.

“We are starting to see some new business requests come in,” he said. “We see it in some of the Garden State Parkway rest stops. We’re seeing it in the New Jersey Turnpike rest stops. We’re seeing it in some of the large commercial organizations that were just granted approval by the BPU, that will install the charging infrastructure.”

“We’re going to keep an eye on that and see about what kind of capital is required for each one of those installations on a standalone basis to help us in projection going forward. But it’s just the start,” he said.

LaRossa added that he expects more information will become available over the next 12 months as the company deploys more advanced metering infrastructure, which uses smart meters to collect and communicate energy use data, and as “we start to see folks connect their EVs.”

He said he was “really excited” by the apparent interest in EVs, especially after the BPU on April 24 announced the recipients of the first round of grants under its Electric Vehicle Tourism Program and opened a second round of grant applications. The program provides funding to support the installation of EV charging stations at tourist sites around the state. In the first round it awarded $755,000 to 16 applicants who together will install 43 chargers.

Cash Flow from Nuclear

LaRossa said PSEG is looking to evaluate how it might boost the capacity of its three South Jersey nuclear plants in the second half of this decade.

Asked by an analyst about the future of the nuclear fleet, LaRossa said, “We want to and expect to keep those assets in our portfolio. I don’t see any scenario that we’ve been presented with that would make us waver from that.

“They are a great cash flow. They’ve been run really, really well. And they continue to be run really well,” he said. “And so, when you have that operating excellence, combined with the cash flow, it does create a very unique utility-like revenue stream for us that we think differentiates us from some of our peers.”

Company officials said they are awaiting direction from the U.S. Treasury Department about how to handle different aspects of the nuclear Production Tax Credit (PTC) approved under the Inflation Reduction Act. When that becomes clear, the utility can work out how that will affect the economics of its three plants and the future of the subsidies they receive under the state’s Zero-Emission Certificate program. (See NJ Nukes Awarded $300 Million in ZECs.)

“One of the things that we were saying that was so, so important is that we have a long-term solution for nuclear,” said PSEG CFO Dan Cregg.

He said the company was “happy” that the PTC created a long-term solution for profitably operating nuclear plants.

Earnings

PSEG reported first-quarter net income of $1,287 million, ($2.58/share) compared to a loss of $2 million ($0.01/share) for the first quarter of 2022. Non-GAAP operating earnings for the first quarter were $695 million ($1.39/share) compared with non-GAAP earnings of $672 million ($1.33/share).

LaRossa said the results show the company “delivered solid operating and financial performance to begin the year, and we are on track to achieve our full-year 2023 non-GAAP Operating Earnings guidance.

“We are executing our plan to grow PSEG while also increasing its predictability,” he said.