Public Service Enterprise Group Incorporated

Company Overview

Business Model: Public Service Enterprise Group Incorporated is a public utility holding company operating primarily through two wholly owned subsidiaries: Public Service Electric and Gas Company and PSEG Power LLC. Public Service Electric and Gas Company is a predominantly regulated electric and gas utility, generating revenue from electric transmission and electric and natural gas distribution services, appliance services, regulated solar generation projects, and energy efficiency programs in New Jersey. PSEG Power LLC is a nuclear generation business, earning revenue from nuclear generation and the marketing of power and natural gas, along with contractual arrangements and gas storage facilities. The company has strategically focused its capital allocation towards Public Service Electric and Gas Company, which now contributes the majority of its earnings, enhancing predictability.

Market Position: Public Service Electric and Gas Company is a franchised public utility in New Jersey, serving approximately 6.8 million people, or about 74% of New Jersey’s population, across a 2,600 square mile service territory. It acts as the provider of last resort for gas and electric commodity service in its densely populated, commercialized, and industrialized service area. Public Service Electric and Gas Company is a transmission owner within PJM Interconnection, L.L.C. PSEG Power LLC operates 3,758 MW of nuclear generation capacity in New Jersey and Pennsylvania, which is considered base load with low variable operating costs. Public Service Electric and Gas Company's Conservation Incentive Program ensures that over 90% of its Electric and Gas Distribution margin varies primarily with the number of customers, rather than sales volumes. The customer base has shown modest growth since 2020, with electric customers increasing by 0.9% annually and gas customers by 0.7% annually.

Recent Strategic Developments: Public Service Enterprise Group Incorporated completed the sale of its 6,750 MW fossil generation portfolio in February 2022, marking a significant step in its strategy to focus on regulated investments. The company is committed to a regulated capital investment program of $21 billion to $24 billion for 2025-2029, aiming for a 6% to 7.5% compound annual growth rate in its regulated rate base. Key approvals include Public Service Electric and Gas Company's Clean Energy Future-Energy Efficiency II filing in October 2024, authorizing approximately $2.9 billion for energy efficiency projects from January 2025 through June 2027. The Gas System Modernization Program II Extension, approved in 2023, involves a $900 million investment to replace gas mains. A distribution base rate case settlement for Public Service Electric and Gas Company, approved in October 2024, established a $17.8 billion rate base with a 9.6% return on equity. PSEG Power LLC's nuclear fleet benefits from the production tax credit established by the Inflation Reduction Act of 2022, effective January 2024, providing downside price protection. In December 2023, PJM Interconnection, L.L.C. awarded Public Service Enterprise Group Incorporated an approximately $424 million project to construct a 500 kV transmission line in Maryland and northern Virginia, expected in service by 2027.

Geographic Footprint: Public Service Enterprise Group Incorporated is headquartered in Newark, New Jersey. Public Service Electric and Gas Company's operations are concentrated in its New Jersey franchised service territory. PSEG Power LLC's nuclear generation assets are located in New Jersey and Pennsylvania. PSEG Long Island LLC operates in Long Island, New York. The company is also expanding its transmission footprint with a new project in Maryland and northern Virginia.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 67.0%
• Operating Margin: 22.9%
• Net Margin: 17.2%

Investment in Growth:

• R&D Expenditure: Not explicitly stated as a separate line item.
• Capital Expenditures: $3,380 million (2024)
• Strategic Investments:
  • Public Service Electric and Gas Company's regulated capital investment program for 2025-2029 is estimated to be $21 billion to $24 billion.
  • Public Service Electric and Gas Company's Clean Energy Future-Energy Efficiency II program: $2.9 billion authorized spend.
  • Public Service Electric and Gas Company's Gas System Modernization Program II Extension: approximately $900 million investment.
  • PJM Interconnection, L.L.C. awarded Public Service Enterprise Group Incorporated an approximately $424 million project for a 500 kV transmission line.

Business Segment Analysis

Public Service Electric and Gas Company

Financial Performance:

• Revenue: $8,449 million (+8.2% YoY)
• Operating Margin: 27.1%
• Key Growth Drivers: Revenue growth was primarily driven by a $170 million increase from the recently settled distribution base rate case, a $99 million increase in transmission revenues due to higher rate base investments, and a $26 million increase from Energy Strong II and Infrastructure Advancement Program distribution rate roll-ins. Increased Green Program Recovery Charge revenues contributed an additional $42 million, and a $9 million reduction in revenue credits flowed back to customers also supported growth. The regulated rate base increased from approximately $30 billion in 2023 to $34 billion in 2024.

Product Portfolio:

• Major product lines and services include electric transmission, electric and natural gas distribution, appliance services and repairs, regulated solar generation projects (158 MW dc installed PV solar capacity), and regulated energy efficiency programs (Clean Energy Future-Energy Efficiency, Clean Energy Future-Energy Efficiency Extension, Clean Energy Future-Energy Efficiency II).
• New product launches or major updates include the Clean Energy Future-Energy Cloud program for smart meters and grid management, Clean Energy Future-Electric Vehicle program for charging infrastructure, Gas System Modernization Program II Extension for gas main replacement, and the Energy Strong II Program and Infrastructure Advancement Program for system hardening and reliability.

Market Dynamics:

• Public Service Electric and Gas Company serves 2.4 million electric customers and 1.9 million gas customers. Electric sales for 2024 were 40,651 Gigawatt hours, and firm gas sales were 2,371 Million Therms.
• The Conservation Incentive Program decouples distribution margin from sales volumes for most customers, with over 90% of Electric and Gas Distribution margin varying only by the number of customers.
• The approved transmission rates provide a base Return on Equity of 9.90% with a 50 basis point adder for PJM Interconnection, L.L.C. membership. The distribution business has an approved Return on Equity of 9.6% with a 55% equity component.
• Significant load growth is anticipated from electric vehicle adoption, data centers, and other electrification trends, necessitating increased system investment.

Sub-segment Breakdown:

• Electric Customer Type (2024 Sales): Commercial: 57%, Residential: 34%, Industrial: 9%.
• Gas Customer Type (2024 Sales): Residential: 58%, Commercial: 38%, Industrial: 4%.

PSEG Power LLC & Other

Financial Performance:

• Revenue: $2,807 million (-38.1% YoY)
• Operating Margin: 2.4%
• Key Growth Drivers: The production tax credit for nuclear energy, effective January 1, 2024, through 2032, is a significant driver, offering up to $15 per megawatt hour subject to inflation and gross receipts adjustments. Nuclear units generated approximately 31 terawatt hours and operated at a capacity factor of approximately 90% in 2024. Zero emission certificates, awarded by the New Jersey Board of Public Utilities through May 2025, provide approximately $10 per megawatt hour. A $424 million competitively bid transmission project awarded by PJM Interconnection, L.L.C. is also a future growth driver.
• Key Performance Drivers (2024 vs 2023): Revenue decreased primarily due to a $1,559 million net decrease from mark-to-market losses in 2024 compared to gains in 2023. Lower zero emission certificate revenue related to production tax credits resulted in a $136 million net decrease, and lower capacity prices led to a $29 million decrease in capacity revenue. Gas supply revenues decreased $153 million due to lower prices under the basic gas supply service contract. Operation and Maintenance expenses increased $100 million, mainly due to a refueling outage at Hope Creek nuclear plant in 2024 compared to Salem 2 nuclear plant in 2023, and higher PSEG Long Island LLC operating costs.

Product Portfolio:

• Major product lines and services include nuclear generation assets (3,758 MW capacity), wholesale natural gas supply (primarily through a full-requirements basic gas supply service contract with Public Service Electric and Gas Company), and the Operations Services Agreement of PSEG Long Island LLC with Long Island Power Authority.
• New product launches or major updates include the production tax credit for nuclear energy and ongoing evaluation of long-term power sale agreements with large power users.

Market Dynamics:

• Revenue is primarily derived from energy, capacity, and ancillary services sold to PJM Interconnection, L.L.C. in spot markets, or through exchange markets and bilateral contracts.
• Nuclear generation is base load, with performance measured by capacity factor (approximately 90% in 2024). Natural gas prices significantly influence wholesale electricity prices.
• The production tax credit is expected to mitigate downside exposure to market volatility for nuclear units.
• Nuclear fuel commitments cover approximately 100% of estimated uranium, enrichment, and fabrication requirements through 2027 and a significant portion through 2028.
• The hedging strategy incorporates estimated risk reduction from production tax credits, aiming for realized value at or above the production tax credit phase out.
• The Operations Services Agreement of PSEG Long Island LLC with Long Island Power Authority expires on December 31, 2025, and its renewal is uncertain.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $0 million (2024), $0 million (2023), $500 million (7.4 million shares) (2022).
• Dividend Payments: $1,196 million (2024), $1,137 million (2023), $1,079 million (2022).
• Dividend Yield: Not explicitly stated. The Board of Directors approved a $0.63 per share common stock dividend for the first quarter of 2025, reflecting an indicative annual dividend rate of $2.52 per share.
• Future Capital Return Commitments: The company expects to continue paying cash dividends on its common stock, subject to Board discretion and various financial and operational factors.

Balance Sheet Position:

• Cash and Equivalents: $125 million (2024)
• Total Debt: $21,114 million (2024)
• Net Cash Position: -$20,989 million (2024)
• Credit Rating:
  • Public Service Enterprise Group Incorporated: Baa2 (Moody’s, Stable), BBB (S&P, Stable)
  • Public Service Electric and Gas Company: A1 (Moody’s, Stable), A (S&P, Stable)
  • PSEG Power LLC: Baa2 (Moody’s, Stable), BBB (S&P, Stable)
• Debt Maturity Profile:
  • 2025: $2,150 million (Public Service Enterprise Group Incorporated: $550 million, Public Service Electric and Gas Company: $350 million, PSEG Power LLC: $1,250 million)
  • 2026: $875 million (Public Service Electric and Gas Company: $875 million)
  • 2027: $1,125 million (Public Service Enterprise Group Incorporated: $700 million, Public Service Electric and Gas Company: $425 million)
  • 2028: $1,300 million (Public Service Enterprise Group Incorporated: $600 million, Public Service Electric and Gas Company: $700 million)
  • 2029: $1,125 million (Public Service Enterprise Group Incorporated: $750 million, Public Service Electric and Gas Company: $375 million)
  • Thereafter: $14,686 million

Cash Flow Generation:

• Operating Cash Flow: $2,133 million (2024)
• Free Cash Flow: Not explicitly stated.
• Cash Conversion Metrics: Not explicitly stated.

Operational Excellence

Production & Service Model: Public Service Electric and Gas Company operates as a regulated electric transmission and electric and natural gas distribution utility. Its revenue model for transmission is based on FERC-approved formula rates, while distribution rates are subject to periodic rate cases approved by the New Jersey Board of Public Utilities. The Conservation Incentive Program decouples distribution margin from sales volumes for most customers. PSEG Power LLC operates its nuclear generation assets as base load units, with revenue primarily derived from energy, capacity, and ancillary services sold to PJM Interconnection, L.L.C. and through bilateral contracts. It also manages natural gas supply operations, including a full-requirements contract with Public Service Electric and Gas Company. PSEG Long Island LLC operates the Long Island Power Authority’s electric transmission and distribution system under a contractual agreement.

Supply Chain Architecture: Key Suppliers & Partners:

• Nuclear Fuel Suppliers: Public Service Enterprise Group Incorporated relies on long-term contracts for the purchase of uranium, conversion to uranium hexafluoride, enrichment, and fabrication of nuclear fuel assemblies. While raw material supply is diversified, each nuclear unit contracts with a single fuel fabrication services provider.
• Gas Supply: PSEG Power LLC procures gas for Public Service Electric and Gas Company's basic gas supply service customers through a full-requirements contract.
• Transmission System Operator: PJM Interconnection, L.L.C. is an Independent System Operator and Regional Transmission Organization that operates the electric transmission system in the Mid-Atlantic Region, including New Jersey.
• Co-owned Nuclear Facilities: Constellation Energy Generation, LLC operates the Peach Bottom nuclear plants, in which PSEG Power LLC holds a 50% ownership interest.

Facility Network:

• Manufacturing: Not applicable (utility and generation).
• Research & Development: Public Service Enterprise Group Incorporated invests in Clean Energy Future programs (Energy Efficiency, Energy Cloud, Electric Vehicle) and regulated solar generation projects.
• Distribution: Public Service Electric and Gas Company's electric transmission and distribution system includes approximately 25,000 circuit miles, 869,000 poles (64% jointly-owned), 57 switching stations (40,000 megavolt-amperes capacity), and 234 substations (10,750 megavolt-amperes capacity). Its gas system comprises approximately 18,000 miles of gas mains, 54 natural gas metering and regulating stations, and one liquefied natural gas and three liquid petroleum air gas peaking facilities with an aggregate daily capacity of approximately 2.9 million therms.
• Generation: PSEG Power LLC's nuclear generation facilities include Hope Creek (1,172 MW, 100% owned, New Jersey), Salem 1 & 2 (1,311 MW, 57% owned, New Jersey), and Peach Bottom 2 & 3 (1,275 MW, 50% owned, Pennsylvania). Public Service Electric and Gas Company also owns 158 MW dc of installed photovoltaic solar capacity.

Operational Metrics:

• Public Service Electric and Gas Company serves 2.4 million electric customers and 1.9 million gas customers as of December 31, 2024.
• Electric sales for 2024 were 40,651 Gigawatt hours, and firm gas sales were 2,371 Million Therms.
• PSEG Power LLC's nuclear units generated approximately 31 terawatt hours and operated at a capacity factor of approximately 90% during 2024.
• Through its Gas System Modernization Program II, Public Service Electric and Gas Company reduced reported methane emissions by over 30% system-wide from 2018 through 2024.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Public Service Electric and Gas Company directly provides electric and gas distribution services to residential, commercial, and industrial customers within its franchised service territory in New Jersey.
• Channel Partners: Not explicitly detailed.
• Digital Platforms: The Clean Energy Future-Energy Cloud program includes the implementation of digital customer engagement platforms.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: Public Service Electric and Gas Company serves a significant portion of New Jersey's population, including its six largest cities and numerous commercial and industrial customers.
• Strategic Partnerships: PSEG Long Island LLC operates the electric transmission and distribution system for the Long Island Power Authority under a contractual agreement. PSEG Power LLC supplies wholesale natural gas to Public Service Electric and Gas Company through a full-requirements contract.
• Customer Concentration: Public Service Electric and Gas Company's 2024 electric sales were distributed as 57% Commercial, 34% Residential, and 9% Industrial. Gas sales were 58% Residential, 38% Commercial, and 4% Industrial. The Conservation Incentive Program mitigates revenue impact from changes in customer usage for most distribution customers.

Geographic Revenue Distribution:

• New Jersey: Primary market for Public Service Electric and Gas Company's regulated utility operations and PSEG Power LLC's nuclear generation.
• Pennsylvania: PSEG Power LLC has nuclear generation capacity.
• Long Island, New York: PSEG Long Island LLC operates the electric transmission and distribution system for the Long Island Power Authority.
• Growth Markets: A competitively bid transmission project was awarded in Maryland and northern Virginia.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The regulated utility market in New Jersey, where Public Service Electric and Gas Company operates, is characterized by franchised service territories and rates approved by the Federal Energy Regulatory Commission for transmission and the New Jersey Board of Public Utilities for distribution. The Conservation Incentive Program minimizes the impact of sales volume changes on distribution revenue. Growth is driven by infrastructure investments and clean energy initiatives. The wholesale energy market, where PSEG Power LLC competes, is dynamic with various participants, and energy clearing prices are heavily influenced by natural gas prices. PJM Interconnection, L.L.C. operates a forward capacity market. The broader energy industry is undergoing a clean energy transition, driven by climate change, legislative mandates (e.g., New Jersey's Energy Master Plan), and evolving customer preferences towards electrification, energy efficiency, and renewable sources.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Wholesale Energy Market: PSEG Power LLC competes with merchant generators, utility generators, energy marketers, retailers, private equity firms, and other financial entities in transacting in wholesale energy markets and bilateral contracts.
• Commodity Supply: Public Service Electric and Gas Company's customers have the option to choose alternate electric or gas suppliers, though this does not affect Public Service Electric and Gas Company's transmission and distribution business margins.
• Transmission Development: Changes by the Federal Energy Regulatory Commission and PJM Interconnection, L.L.C. to eliminate "right of first refusal" provisions mean third-party developers can compete for new transmission projects in Public Service Electric and Gas Company's service territory.

Emerging Competitive Threats:

• Distributed Energy Resources: The development and operation of renewable sources like wind, solar, and commercial-sized power storage, along with distributed generation technologies (fuel cells, micro turbines, micro grids, net-metered solar), could reduce demand for centrally generated electricity.
• Demand Side Management and Energy Efficiency: Programs promoting reduced energy consumption can impact demand requirements for electricity and natural gas.
• Electrification and Decarbonization: A material shift away from natural gas due to customer preference or regulatory initiatives could reduce gas usage and impact gas distribution growth.
• Artificial Intelligence: New types of cyberattacks or enhanced existing ones, potentially generated or enhanced through AI, pose an increasing threat to operational and information technology systems.

Competitive Response Strategy: Public Service Enterprise Group Incorporated's strategy involves significant capital investments in Public Service Electric and Gas Company's transmission and distribution infrastructure to enhance reliability, resiliency, and modernize the system to meet growing customer needs and clean energy goals. This includes Clean Energy Future programs and the Gas System Modernization Program. PSEG Power LLC focuses on efficiently operating its nuclear generation assets, mitigating earnings volatility through the production tax credit and hedging, and advocating for policies that recognize the value of carbon-free nuclear generation. The company also evaluates opportunities in competitive, regulated transmission projects. A comprehensive cybersecurity program, including technical safeguards, training, and incident response plans, addresses evolving cyber threats.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Climate Change Risks: The company faces physical risks from severe weather events (hurricanes, winter storms, floods, wildfires, extreme heat, drought) which can damage infrastructure, disrupt operations, and increase costs. Transition risks include increased legislative and regulatory burdens, changing customer preferences towards electrification, and potential lawsuits related to climate change, all of which could impact demand, investment needs, and cost recovery.
• Technology Disruption: Advances in distributed generation (fuel cells, micro turbines, micro grids, net-metered solar) and energy storage, coupled with subsidies, could reduce demand for traditional electricity delivery, potentially making existing transmission and distribution facilities obsolete or reducing anticipated growth.
• Customer Concentration: Not explicitly detailed as a material risk.
• Demand Volatility: Increasing demand for power from data centers, manufacturing reshoring, and electric vehicle adoption, if it outpaces firm generation capacity additions, could lead to reliability issues, higher customer costs, and regulatory scrutiny on utility investments.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: The nuclear fuel supply chain has limited suppliers for certain aspects, and each nuclear unit relies on a single fuel fabrication services provider, posing risks of delivery delays or cost increases. Broader supply chain disruptions (sanctions, tariffs, labor shortages, shipping constraints, raw material shortages) could impact costs and operations.
• Geographic Concentration: Nuclear generation assets are concentrated in New Jersey and Pennsylvania.
• Capacity Constraints: Failure to successfully develop, obtain regulatory approval for, or construct transmission and distribution, and nuclear generation projects could adversely impact the business. Plant outages or reduced capacity could prevent PSEG Power LLC from meeting forward sale obligations and PJM Interconnection, L.L.C. rules, leading to substantial penalties.

Financial & Regulatory Risks

Market & Financial Risks:

• Demand Volatility: Fluctuations in wholesale power and natural gas markets, driven by supply/demand imbalances, weather, and market rules, can negatively affect financial performance. Hedged positions could be out-of-the-money, increasing collateral requirements.
• Foreign Exchange: Not explicitly detailed as a material risk.
• Credit & Liquidity: Inability to maintain sufficient liquidity or access capital on commercially reasonable terms due to general economic conditions, interest rates, regulatory approvals, or investor confidence. A downgrade of PSEG Power LLC's credit rating to below investment grade could trigger significant additional collateral requirements (approximately $618 million as of December 31, 2024).
• Pension/OPEB Funding: Adverse performance of defined benefit plan trust funds and the Nuclear Decommissioning Trust Fund could necessitate significant additional funding.
• Contract Renewal: Uncertainty exists regarding the renewal of PSEG Long Island LLC's Operations Services Agreement with Long Island Power Authority and PSEG Power LLC's basic gas supply service contract with Public Service Electric and Gas Company.

Regulatory & Compliance Risks:

• Industry Regulation:
  • Federal Energy Regulatory Commission (FERC): Potential elimination of the 50 basis point RTO membership adder could reduce Public Service Electric and Gas Company's annual Net Income by approximately $40 million. Changes in transmission planning rules (e.g., Order 1000, interconnection queue) and oversight of transmission costs could impact investment opportunities and returns.
  • New Jersey Board of Public Utilities (BPU): Public Service Electric and Gas Company's revenues and earnings are highly dependent on state regulation. Inability to obtain fair or timely recovery of costs through base rates or clause mechanisms, or rejection/delay of new program filings, could negatively impact growth. Stakeholder proceedings on the future of gas and grid modernization introduce further uncertainty.
  • Nuclear Regulatory Commission (NRC): Nuclear operations are subject to extensive NRC regulation, with risks including new requirements, license modifications/revocations, civil penalties, or plant shutdowns. Uncertainty regarding the Peach Bottom license expiration dates could have a material adverse effect.
• Environmental Regulation: Extensive federal, state, and local environmental laws (air, water, hazardous substances, wildlife) impose significant compliance costs, capital expenditures, and potential liabilities. Specific material risks include remediation obligations for the Passaic River ($66 million accrued, potential for material additional costs), Newark Bay, Hackensack River, Manufactured Gas Plant sites ($210 million liability), and legacy fossil generation sites (Industrial Site Recovery Act, Connecticut Transfer Act, Coal Combustion Residuals Rule). The Clean Water Act Section 316(b) rule could require material cooling water system modifications at Salem.
• Tax Laws: Changes in federal or state tax legislation, including U.S. Treasury guidance on the 15% corporate alternative minimum tax and the nuclear production tax credit, could materially impact the effective tax rate and cash tax position.

Geopolitical & External Risks

Geopolitical Exposure:

• Acts of War/Terrorism: Acts of war or terrorism, including physical or cybersecurity breaches, could damage facilities, disrupt service, and increase costs.
• Pandemics: Could lead to service disruptions, project delays, or impair the ability to provide timely service or recover costs.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas: Public Service Enterprise Group Incorporated's innovation efforts are primarily channeled through its Clean Energy Future programs at Public Service Electric and Gas Company. These include:

• Energy Efficiency (EE): A suite of ten programs targeting residential, commercial and industrial customers, including low-income and small businesses, to achieve mandated energy consumption reductions.
• Energy Cloud (EC): Focused on implementing "smart meters" and developing new software and product solutions to enhance electric grid management and operational processes.
• Electric Vehicle (EV): Concentrated on preparatory infrastructure work for residential smart charging, Level-2 mixed-use charging, and direct current fast charging.
• Energy Storage (ES): A proposed program to invest in energy storage capacity to complement solar generation and improve grid resiliency, currently held in abeyance pending regulatory proceedings.
• Solar Generation: Ongoing investments in utility-owned solar photovoltaic grid-connected systems.
• Grid Modernization: Initiatives to update interconnection regulations and processes and develop integrated distribution planning for distributed energy resources.
• Nuclear Technology: Focus areas include power uprates for Salem Unit 1 and Unit 2, and pursuing second license renewals for Salem and Hope Creek units to extend operating licenses through 2056, 2060, and 2066, respectively.

Innovation Pipeline: The company's strategic direction includes evaluating opportunities to expand into related clean energy areas such as renewable natural gas, hydrogen, additional solar and renewables, and broader energy efficiency investments, contingent on regulatory approval and market design evolution.

Intellectual Property Portfolio: Not explicitly detailed in the filing.

Technology Partnerships: Not explicitly detailed in the filing beyond collaborations with PJM Interconnection, L.L.C. for transmission planning and market design.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The company conducts regular talent reviews and succession discussions for leadership and critical positions to build a strong internal pipeline.

Board Composition: The Public Service Enterprise Group Incorporated Board of Directors holds ultimate responsibility for risk management, including cybersecurity risks. The Governance, Nominating and Sustainability Committee reviews key enterprise risks. Cybersecurity risk is primarily overseen by the Industrial Operations Committee, with additional oversight from the Audit Committee for financial reporting and internal controls. The Industrial Operations Committee receives regular cybersecurity updates from the Chief Information and Digital Officer and/or Chief Information Security Officer.

Human Capital Strategy

Workforce Composition: Sixty percent of Public Service Enterprise Group Incorporated's workforce is represented by six unions under various collective bargaining agreements, which are in place until 2027. As of December 31, 2024, women constituted approximately 27% of non-represented employees and 19% of the total workforce. People who are racially/ethnically diverse constituted approximately 34% of non-represented employees and 30% of the total workforce.

Talent Management: Acquisition & Retention: The recruitment strategy focuses on hiring a workforce to meet business objectives, particularly critical skilled trade roles. This includes a comprehensive workforce planning strategy, hiring ahead of attrition for skilled trades, community outreach, workforce development, and strategic sourcing with external partners such as trade schools, colleges, and non-profit organizations.

• Employee Value Proposition: The company offers a comprehensive total rewards program, including competitive compensation and benefits designed to support emotional, physical, and financial well-being.

Diversity & Development: The "Inclusion for All" program embraces a broad definition of diversity, supported by Employee Business Resource Groups and Local Inclusion Teams. The company offers opportunities for community outreach, volunteerism, mentorship, recognition, and professional development. Talent reviews and succession discussions are held regularly for leadership and critical positions to build a strong internal pipeline. There is a focus on upskilling skilled trade roles to adapt to evolving technologies and digital advancements.

Environmental & Social Impact

Environmental Commitments: Climate Strategy: Public Service Enterprise Group Incorporated has set a net zero greenhouse gas emissions goal by 2030 for Scope 1 (direct) and Scope 2 (indirect from operations) emissions across its business operations. This goal assumes advances in technology, public policy, and customer behavior, aligning with New Jersey's clean energy and climate objectives.

• Emissions Targets: The net zero greenhouse gas emissions by 2030 goal includes Scope 1 and Scope 2 emissions. Public Service Electric and Gas Company's Gas System Modernization Program II reduced reported methane emissions by over 30% system-wide from 2018 through 2024.
• Renewable Energy: Public Service Electric and Gas Company invests in regulated solar generation projects. PSEG Power LLC's nuclear units provide over 85% of the carbon-free energy in New Jersey, and the company works to preserve their economic viability.

Supply Chain Sustainability: Not explicitly detailed in the filing.

Social Impact Initiatives:

• Community Investment: The company engages in community outreach and volunteerism.
• Product Impact: Public Service Electric and Gas Company's Clean Energy Future-Energy Efficiency programs are designed to help customers use less energy and reduce greenhouse gas emissions. The Clean Energy Future-Electric Vehicle programs support the expansion of electric vehicle infrastructure in New Jersey.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Public Service Electric and Gas Company's basic generation service for residential and smaller commercial and industrial customers is priced at seasonally-adjusted fixed rates.
• Economic Sensitivity: The company acknowledges that reduced economic and consumer activity in its service areas could lead to lower demand for electricity and gas.
• Industry Cycles: Wholesale power and natural gas markets are subject to volatility driven by factors such as weather, changes in supply and demand, and global liquefied natural gas market impacts.

Planning & Forecasting: Public Service Electric and Gas Company estimates unbilled revenues monthly based on daily usage, unbilled days, estimated seasonal loads, and deviations from expected norms. PJM Interconnection, L.L.C. adjusts its regional load forecast annually, which is a critical input for transmission planning.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• Federal Energy Regulatory Commission (FERC): Regulates the interstate transmission of electric energy and natural gas, and wholesale sales. Public Service Enterprise Group Incorporated's subsidiaries are subject to FERC approval for asset sales/acquisitions, rate changes, and certain corporate reorganizations. FERC also oversees Regional Transmission Organizations/Independent System Operators like PJM Interconnection, L.L.C.
• New Jersey Board of Public Utilities (BPU): The principal state regulator for Public Service Electric and Gas Company, overseeing retail electric and gas distribution rates, service, and compliance. The BPU approves investment clause programs (e.g., Clean Energy Future, Gas System Modernization Program) and energy policy in New Jersey.
• Nuclear Regulatory Commission (NRC): Provides comprehensive regulation for the operation of nuclear generating facilities, ensuring public health, safety, and environmental protection. This includes testing, evaluation, and modification of plant operations, and requires continuous demonstration of compliance.
• Commodity Futures Trading Commission (CFTC): Exercises regulatory oversight over swap and futures markets, including energy trading, and imposes recordkeeping, data reporting, margin, and clearing requirements.
• North American Electric Reliability Corporation (NERC): Establishes and enforces Reliability Standards for the security and reliability of the North American Bulk Electric System, to which Public Service Enterprise Group Incorporated is obligated to comply, including cybersecurity and physical security protections.

Trade & Export Controls: Not explicitly detailed as a material risk.

Legal Proceedings:

• Passaic River (Lower Passaic River Study Area): Designated as a "Superfund" site by the U.S. Environmental Protection Agency. Public Service Electric and Gas Company and PSEG Power LLC are Potentially Responsible Parties. Public Service Enterprise Group Incorporated has accrued approximately $66 million for this matter, but additional costs could be material.
• Newark Bay Study Area: An extension of the Passaic River site, where Public Service Electric and Gas Company and PSEG Power LLC have been notified of potential liability, but are unable to estimate their portion of any loss.
• Hackensack River: Designated as a federal Superfund site. Public Service Electric and Gas Company and PSEG Power LLC have agreed to participate in a $55 million technical study, with future costs potentially material.
• Manufactured Gas Plant Remediation Program: Public Service Electric and Gas Company is remediating 38 former sites, with estimated costs ranging from $210 million to $234 million (undiscounted). A liability of $210 million is recorded with a corresponding regulatory asset.
• Legacy Environmental Obligations at Former Fossil Generating Sites: PSEG Power LLC retained certain environmental liabilities from its 2022 fossil generation portfolio sale, primarily under the New Jersey Industrial Site Recovery Act and the Connecticut Transfer Act. Full remediation costs are not estimable but are likely material.
• Clean Water Act Section 316(b) Rule: A challenge by the Delaware Riverkeeper Network to Salem's permit conditions could require Public Service Enterprise Group Incorporated to incur additional, potentially material, costs for cooling water system modifications.
• FERC Investigation (Roseland-Pleasant Valley transmission project): Public Service Electric and Gas Company reached an agreement with FERC Enforcement Staff, including a $6.6 million civil penalty.
• New Jersey Board of Public Utilities Audit of Public Service Electric and Gas Company: A comprehensive affiliate and management audit was initiated in 2020, with the final report submitted in June 2023. The outcome of the recommendations is uncertain.
• Sewaren 7 Construction Litigation: PSEG Power LLC is involved in a dispute with a contractor, Durr Mechanical Construction, Inc., seeking $68 million in damages. PSEG Power LLC has accrued for outstanding invoices, but the outcome is uncertain.
• Nuclear Insurance Coverages and Assessments: PSEG Power LLC is a member of American Nuclear Insurers (providing primary liability coverage) and Nuclear Electric Insurance Limited (providing property, decontamination, and decommissioning liability insurance). It is subject to potential retroactive assessments (maximum aggregate of $522 million per incident) and retrospective premiums (maximum aggregate annual of $52 million).

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: Public Service Enterprise Group Incorporated's effective tax rate was 2.9% in 2024, 16.8% in 2023, and -2.9% in 2022.
• Geographic Tax Planning: Public Service Enterprise Group Incorporated and its subsidiaries file a consolidated federal income tax return. Public Service Enterprise Group Incorporated and Public Service Electric and Gas Company also file state income tax returns, some of which are combined or unitary.
• Tax Reform Impact:
  • Inflation Reduction Act of 2022 (IRA): Enacted a 15% corporate alternative minimum tax (Public Service Enterprise Group Incorporated determined it is not subject for 2023 and 2024) and established a production tax credit (PTC) for existing nuclear generation facilities, effective from 2024 through 2032. The IRA also introduced transferability of energy tax credits.
  • Nuclear Production Tax Credit (PTC): For 2024, Public Service Enterprise Group Incorporated recorded an income tax benefit of approximately $350 million associated with PTCs. However, an $89 million unrecognized tax benefit exists due to uncertainties in the U.S. Treasury's definition of "gross receipts," which could materially impact the net PTC recorded.
  • Tax Adjustment Credit (TAC): Public Service Electric and Gas Company flows back excess deferred income taxes and previously realized and current period deferred income taxes (related to tax repair and mixed service cost deductions) to its customers.
  • Revenue Procedure 2023-15: Issued by the U.S. Treasury, this provides a safe harbor method for determining the annual repair tax deduction for gas transmission and distribution property; its impact on financial statements is still being analyzed.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Public Service Enterprise Group Incorporated and its subsidiaries maintain adequate insurance coverage for plants and properties, subject to certain exceptions and deductibles. Nuclear liability insurance is provided through American Nuclear Insurers, with $500 million in primary coverage per site and an industry self-insurance pool for excess liability up to $15.8 billion. Property, decontamination, and decommissioning liability insurance, along with replacement power coverage, is provided by Nuclear Electric Insurance Limited.
• Risk Transfer Mechanisms:
  • Commodity Hedging: PSEG Power LLC utilizes a variety of derivative and non-derivative instruments, including financial options, futures, and swaps, to manage commodity price risk and optimize the value of its expected generation and gas supply obligations.
  • Interest Rate Hedging: Public Service Enterprise Group Incorporated employs interest rate hedges, designated as cash flow hedges, to manage exposure to variability in cash flows related to variable-rate debt and anticipated future long-term debt issuances.
  • Credit Risk Management: The company has established credit policies to minimize counterparty credit risk, including evaluating financial condition, requiring collateral under certain circumstances, and using standardized agreements for netting exposures. Over 95% of PSEG Power LLC's net credit exposure for wholesale operations is with investment-grade counterparties.
  • Mutual Aid: Historically, the company has benefited from voluntary and reciprocal mutual aid arrangements with other utilities, providing access to a trained labor force for outage restoration during severe weather events.