PUBLIC SERVICE ENTERPRISE GROUP INC

Previous wording

•PSEG Power—which is an energy supply company that integrates the operations of its merchant nuclear generating assets with its fuel supply functions through competitive energy sales via its principal direct wholly owned subsidiaries. PSEG Power’s subsidiaries are subject to regulation by FERC, the Nuclear Regulatory Commission (NRC) and other federal regulators and state regulators in the states in which they operate.

Current wording

PSEG Power—which is an energy supply company that is comprised of the operations of merchant nuclear generating assets and fuel supply functions engaged in competitive energy sales via its principal direct wholly owned subsidiaries. PSEG Power’s subsidiaries are subject to regulation by FERC, the Nuclear Regulatory Commission (NRC) and other federal regulators and state regulators in the states in which they operate.

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EXECUTIVE OVERVIEW OF 2024 AND FUTURE OUTLOOK

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EXECUTIVE OVER VIEW OF 2024 AND FUTURE OUTLOOK

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In 2023, the BPU approved a $280 million nine-month extension of our CEF-EE program through June 2024 and in May 2024 the BPU approved another approximate $300 million extension covering a commitment period from July 2024 through December 2024. In December 2023, we filed for our CEF-EE II program, which proposed a $3.1 billion investment for a second program cycle covering commitments from January 2025 through June 2027, with investments being made over a six-year period. This EE filing is a significant increase from our prior filings, driven by an increase in the savings targets required under the BPU Energy Efficiency Framework and higher costs to achieve those targeted savings. The filing also includes demand response programs and building decarbonization programs. The EE II filing is expected to be resolved later in 2024.

Current wording

In 2023, the BPU approved a $280 million nine-month extension of our CEF-EE program through June 2024 and in May 2024 the BPU approved another approximate $300 million extension covering a commitment period from July 2024 through December 2024. In October 2024, the BPU approved our CEF-EE II filing authorizing a total spend of approximately $2.9 billion for energy efficiency projects committed between January 1, 2025 through June 30, 2027, and completed over an expected six-year period. The Order approved a program investment budget of approximately $1.9 billion, net of administrative expenses, and approximately $1 billion to continue our customer on-bill repayment program. This EE filing is a significant increase from our prior filings, driven by an increase in the savings targets required under the BPU Energy Efficiency Framework and higher costs to achieve those targeted savings. The filing also includes demand response programs and building decarbonization programs.

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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. We expect that this effort will result in PSE&G submitting a filing targeting infrastructure investments for the medium-and heavy-duty EV market after the BPU finalizes its program and filing requirements. In September 2022, the BPU released a draft Storage Incentive Program proposal and is undertaking a stakeholder process to determine the details of the program. Our proposed CEF-Energy Storage (ES) program for a $109 million investment is being held in abeyance until the BPU concludes its proceedings.

Current wording

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. In October 2024, the BPU released an Order that provided program guidance and minimum filing requirements for electric utility operated medium- and heavy-duty charging incentive programs, The Order caps PSE&G’s program investment at $30 million and requires electric utilities to submit program filings by February 20, 2025. In September 2022, the BPU released a draft Storage Incentive Program proposal and is undertaking a stakeholder process to determine the details of the program. Our proposed CEF-Energy Storage (ES) program for a $109 million investment is being held in abeyance until the BPU concludes its proceedings.

Previous wording

At PSEG Power, we seek to produce low-cost electricity by efficiently operating our nuclear generation assets, mitigate earnings volatility through the PTC mechanism and hedging, and support public policies that preserve these existing carbon-free base load nuclear generating plants. During the first six months of 2024, our nuclear units generated approximately 15.2 terawatt hours and operated at a capacity factor of 89.8%. PSEG Power hedged approximately 90% to 95% of its expected generation output for 2024. Beginning in 2024, our hedging strategy has incorporated an estimated range of risk reduction impacts from the PTCs with potential incremental changes upon final U.S. Treasury guidance. In addition, we are exploring opportunities for the potential sale of power from our nuclear facilities pursuant to long-term agreements to supply large power users, such as data centers and hydrogen producers.

Current wording

At PSEG Power, we seek to produce low-cost electricity by efficiently operating our nuclear generation assets, mitigate earnings volatility through the PTC mechanism and hedging, and support public policies that preserve these existing carbon-free base load nuclear generating plants. During the first nine months of 2024, our nuclear units generated approximately 23.3 terawatt hours and operated at a capacity factor of 91.4%. PSEG Power hedged approximately 90% to 95% of its expected generation output for 2024. Beginning in 2024, our hedging strategy has incorporated an estimated range of risk reduction impacts from the PTCs with potential incremental changes upon final U.S. Treasury guidance. In addition, we are exploring opportunities for the potential sale of power from our nuclear facilities pursuant to long-term agreements to supply large power users, such as data centers and hydrogen producers.

Previous wording

PSE&G has undertaken a number of initiatives that support the reduction of GHG emissions and the implementation of EE initiatives. 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 (EMP) and 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.

Current wording

PSE&G has undertaken a number of initiatives that support the reduction of GHG emissions and the implementation of EE initiatives. PSE&G’s approved CEF-EE and EE II, CEF-Energy Cloud and CEF-EV programs and the proposed CEF-ES program are intended to support New Jersey’s Energy Master Plan (EMP) and 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.

Previous wording

In addition, PSE&G is committed to the safe and reliable delivery of natural gas to approximately 1.9 million customers throughout New Jersey and we are equally committed to reducing GHG emissions associated with such operations. The GSMP is designed to significantly reduce natural gas leaks in our distribution system, which would reduce the release of methane, a potent GHG, into the air. Through GSMP II, from 2018 through 2023 we reduced reported methane emissions by approximately 27% 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. We 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.

Current wording

In addition, PSE&G is committed to the safe and reliable delivery of natural gas to approximately 1.9 million customers throughout New Jersey and we are equally committed to reducing GHG emissions associated with such operations. The GSMP is designed to significantly reduce natural gas leaks in our distribution system, which would reduce the release of methane, a potent GHG, into the air. Through GSMP II, from 2018 through 2023 we reduced reported methane emissions by approximately 27% system wide. We 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.

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PJM opened the 2024 Regional Transmission Expansion Plan (RTEP) Window 1 solicitation in July 2024, which includes the impacts of higher load growth forecasts on the 2029 to 2032 planning horizon.

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PJM opened the 2024 Regional Transmission Expansion Plan (RTEP) Window 1 solicitation in July 2024, which includes the impacts of higher load growth forecasts on the 2029 to 2032 planning horizon. PSEG submitted a proposal into Window 1 for approximately $375 million.

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PSEG will continue to evaluate the BPU and PJM solicitations and may decide to submit bids for these opportunities, some of which could be material investments.

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PSEG will continue to evaluate opportunities to participate in transmission solicitation processes and may decide to submit bids for these opportunities, some of which could be material investments.

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In May 2024, LIPA issued requests for proposal for a service provider to operate its electrical transmission and distribution system and for power supply and fuel management services, respectively, upon expiry of the current service contracts with PSEG LI which run through December 31, 2025. PSEG intends to submit proposals to continue as operations service provider for LIPA’s electrical transmission and distribution system, and to continue to provide power supply and fuel management services to LIPA, in each case after the current contracts expire.

Current wording

In May 2024, LIPA issued requests for proposal for a service provider to operate its electrical transmission and distribution system and for power supply and fuel management services, respectively, upon expiry of the current service contracts with PSEG LI which run through December 31, 2025. PSEG has submitted proposals to continue as operations service provider for LIPA’s electrical transmission and distribution system, and to continue to provide power supply and fuel management services to LIPA, in each case after the current contracts expire.

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The results for PSEG, PSE&G and PSEG Power & Other for the three and six months ended June 30, 2024 and 2023 are presented as follows:

Current wording

The results for PSEG, PSE&G and PSEG Power & Other for the three and nine months ended September 30, 2024 and 2023 are presented as follows:

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(A)Other includes after-tax activities at the parent company, PSEG LI, and Energy Holdings as well as intercompany eliminations.

Current wording

Other includes after-tax activities at the parent company, PSEG LI, and Energy Holdings as well as intercompany eliminations. Includes a $239 million after-tax pension charge due to the settlement of a portion of the qualified pension plans for the three and nine months ended September 30, 2023. See Item 1. Note 8. Pension and Other Postretirement Benefits (OPEB) for additional information.

Previous wording

(A)NDT Fund Income (Expense) includes gains and losses on NDT securities which are recorded in Net Gains (Losses) on Trust Investments. See Item 1. Note 7. Trust Investments for additional information. 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 and Maintenance (O&M) Expense and the depreciation related to the ARO asset recorded in Depreciation and Amortization (D&A) Expense.

Current wording

(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 and Maintenance (O&M) Expense and the depreciation related to the ARO asset recorded in Depreciation and Amortization (D&A) Expense.

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(B)Net of tax (expense) benefit of $(5) million and $(23) million for the three months and $(43) million and $(40) million for the six months ended June 30, 2024 and 2023, respectively.

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Net of tax (expense) benefit of $(36) million and $15 million for the three months and $(79) million and $(25) million for the nine months ended September 30, 2024 and 2023, respectively.

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(C)Net of tax (expense) benefit of $(45) million and $(84) million for the three months and $27 million and $(301) million for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Net of tax (expense) benefit of $(6) million and $8 million for the three months and $21 million and $(293) million for the nine months ended September 30, 2024 and 2023, respectively.

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Our Net Income for the three months and six months ended June 30, 2024 decreased as compared to the comparable period in 2023 driven primarily by changes in the MTM and NDT Fund as shown in the table above.

Current wording

Our Net Income for the three months and nine months ended September 30, 2024 variances versus the comparable periods in 2023 were driven primarily by changes in the MTM and NDT Fund and the pension settlement charge recorded in 2023, as discussed above.

Previous wording

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. Pursuant to a process established by the BPU, ZECs are purchased from selected nuclear plants and recovered through a non-bypassable distribution charge in the amount of $0.004 per kilowatt-hour used (which is equivalent to approximately $10 per MWh generated in payments to selected nuclear plants (ZEC payment)). As previously noted, in August 2022, the IRA was signed into law expanding incentives promoting carbon-free generation. The enacted legislation established a PTC for electricity generated using existing nuclear energy, which began 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 establishment of the PTC impacted PSEG Power’s decision not to apply for the next ZEC three-year eligibility period starting June 2025. We continue to analyze the impact of the IRA on our nuclear units, and will analyze any future guidance from the U.S. Treasury to assess any impact of PTCs on expected ZEC payments and/or any future ZEC application periods.

Current wording

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. Pursuant to a process established by the BPU, ZECs are purchased from selected nuclear plants and recovered through a non-bypassable distribution charge in the amount of $0.004 per kilowatt-hour used (which is equivalent to approximately $10 per MWh generated in payments to selected nuclear plants (ZEC payment)). As previously noted, in August 2022, the IRA was signed into law expanding incentives promoting carbon-free generation. The enacted legislation established a PTC for electricity generated using existing nuclear energy, which began January 1, 2024 and continues through 2032 and impacted PSEG Power's decision not to apply for the next ZEC three-year eligibility period starting June 2025. 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 PTC amounts recorded to date are subject to change based on several factors, including but not limited to, adjustments to estimated market prices and generation and the issuance of authoritative guidance by Treasury/the Internal Revenue Service, including clarification of the definition of “gross receipts” used to determine the phase out. Any adjustments to amounts previously recorded could be material. We continue to analyze the impact of the IRA on our nuclear units, and will analyze any future guidance from the U.S. Treasury to assess any impact of PTCs on expected ZEC payments and/or any future ZEC application periods.

Previous wording

Federal Reserve policy to reduce inflation has resulted in a higher interest rate environment which may persist as the Federal Reserve continues to assess the economic outlook. If it persists, higher interest rates on borrowings will contribute to higher interest expense on variable-rate debt and long-term rates on future financing plans. As of June 30, 2024, PSEG had entered into floating-to-fixed interest rate swaps totaling $1.25 billion in order to reduce the volatility in interest expense related to PSEG Power’s variable rate term loan due March 2025. PSE&G’s interest rate risk is moderated due to annual transmission rate filings and distribution recoveries through base rate filings and clause-based investment programs. In addition, from time to time, we may enter into interest rate hedges to fix a portion of our interest rate exposure for anticipated long-term financing plans at PSEG and PSEG Power.

Current wording

PSEG’s long-term financing plan is designed to replace maturities and support funding its capital program. Given our financing needs, the prevailing interest rate environment will be a key factor in determining interest expense on variable-rate debt and long-term rates on future financing plans. In order to increase the predictability of interest expense, we may use interest rate hedges to help limit our exposure to fluctuating interest rates. As of September 30, 2024, PSEG had entered into floating-to-fixed interest rate hedges totaling $1.25 billion in order to reduce the volatility in interest expense related to PSEG Power’s variable rate term loan due March 2025. In addition, from time to time, we may enter into interest rate hedges to fix a portion of our interest rate exposure for anticipated long-term financing plans at PSEG and PSEG Power. PSE&G’s interest rate risk is moderated due to annual transmission rate filings and distribution recoveries through base rate filings and clause-based investment programs.

Previous wording

The IRA enacted a new 15% corporate alternative minimum tax (CAMT), a PTC for existing nuclear generation facilities and allows energy tax credits to be transferable. The U.S. Treasury has issued several Notices pertaining to the CAMT and final regulations pertaining to the prevailing wage requirements and transferability rules of energy tax credits. 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.

Current wording

The IRA enacted a new 15% corporate alternative minimum tax (CAMT), which is based on adjusted financial statement income, a PTC for existing nuclear generation facilities and allows energy tax credits to be transferable. The U.S. Treasury has issued a notice of proposed rulemaking pertaining to the CAMT and final regulations pertaining to the prevailing wage requirements and transferability rules of energy tax credits. Many aspects of the IRA, including the CAMT proposed regulations, 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.

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•performance of the financial markets, including the impact on our pension and interest rates on our future financing plans,

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performance of the financial markets, including the impact on our pension funding requirements and interest rates on our future financing plans,

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•the impact of changes in energy demand, natural gas and electricity prices, PJM’s ability to ensure resource adequacy to meet demand growth, and expanded efforts to decarbonize several sectors of the economy.

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the impact of changes in energy demand, natural gas and electricity prices, PJM’s challenge to ensure resource adequacy to meet demand growth, and expanded efforts to decarbonize several sectors of the economy.

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•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, and offtake contracts with potential customers such as data centers and hydrogen producers, and others seeking reliable, around-the-clock carbon-free power,

Current wording

continued operation of our nuclear generation facilities that are expected to be supported by the PTC through 2032 and can enable certain investments to increase the capacity of the units as well as potential license extensions, transition from an 18-month to 24-month refueling cycle at our Hope Creek facility and offtake contracts with potential customers such as data centers and hydrogen producers, and others seeking reliable, around-the-clock carbon-free power,