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Text: pseg.com, and our 10-K will be filed shortly.
We will also discuss non-GAAP operating earnings and non-GAAP adjusted EBITDA, which differ from net income as reported in accordance with Generally Accepted Accounting Principles in the United States.
At the conclusion of their remarks, there will be time for your question.
PSE&G reported non-GAAP operating earnings for the fourth quarter of $0.65 per share.
Non-GAAP operating earnings for the full year rose by 4.6% to $3.43 per share, and mark the 16th year in a row that PSE&G delivered results within our original earnings guidance.
PSE&G GAAP results were $0.85 per share for the fourth quarter of 2020 compared with $0.86 per share for the fourth quarter of 2019.
In addition for the full year PSE&G reported 2020 net income of $3.76 per share compared with $3.33 per share in 2019.
Details on the results for the quarter and the full year can be found on slides 12 and 14.
I am pleased to report that the PSE&G's fourth quarter and full year results reflected solid contributions from both PSE&G and PSEG Power.
And I'm particularly proud of the achievements of our employees during this past year as it was one of the most challenging in recent memory.
Their efforts have kept our customers connected to essential energy services to power their homes, businesses, and vitally important institutions.
We have also made steady progress in several key business priorities, the most important of which is our transition to becoming primarily a regulated utility, with contract and generation comprise about zero carbon nuclear fleet and future investments in regional offshore wind.
In the past six months, we've announced the exploration of strategic alternatives for PSEG Power's 7,200 plus megawatts of non Nuclear Generating assets, and received initial indications of interest for both the fossil and solar source assets.
PSE&G successfully initiated its landmark clean energy future program, securing approval to spend nearly $2 billion in energy efficiency, smart meter installations and electric vehicle charging infrastructure, all of which will enhance New Jersey's environmental profile for years to come.
In addition, the New Jersey Board of Public Utilities, I'll refer to them as the BPU recently concluded public hearings regarding PSE&G nuclear application to extend the zero-emission certificate.
I think I'll shorten that to ZEC from now on through May 2025.
Our service area experience milder than the normal weather during the fourth quarter, book ending the week heating season of the first quarter in 2020.
Regarding whether normalized sales for the year, while total electric sales volume declined by 2%.
Gas sales rose by 1%.
In both the electric and gas businesses higher residential usage of approximately 5% largely offset declines in commercial and industrial sales resulting in stable margins overall.
Working with COVID-19 health and safety protocols since last March, PSE&G was able to execute on its plan $2.7 billion capital spending program in 2020.
These capital programs provide a critical investment to support the New Jersey economy, particularly in the early months of the pandemic, and preserve essential jobs while replacing vitally important energy infrastructure, and generating customer benefits of improved reliability and resiliency, as well as methane reduction.
In January of 2021, the BPU approved two settlements with PSE&G and other parties in the clean energy future energy, cloud and electric vehicle proceedings.
The energy cloud investment program is estimated to be approximately $707 million over the next four years, and will result in the replacement of over 2 million electric meters with smart meters.
The electric vehicle program will direct $166 million into EV charging infrastructure over the next six years.
With these recent settlements, the BPU has constructively addressed the vast majority of the clean energy future filings and has approved nearly $2 billion of investment to help realize New Jersey's energy goals.
The Energy Efficiency Program will also be established clean energy job training for over 3,200 direct jobs, while enabling the avoidance of 8 million metric tons of carbon emissions through the year 2015.
Investing in energy efficiency programs is the most cost-effective solution to reducing carbon emissions.
Importantly, the conservation incentive of the settlement encourages the broad adoption of energy efficiency, with certain programs focusing on low- and moderate-income customers that will lower bills for participating customers.
We expect the balance of the clean energy future filing, which includes our request to spend under $200 million on energy storage, and a few remaining EV programs will be addressed following future stakeholder proceeding.
PSE&G continues to engage with the BPU staff and re counsel to advance confidential discussions toward a settlement of the return on equity related to PSE&G formula rate for transmission overseen by the Federal Energy Regulatory Commission.
The annual update under PSE&G existing formula rate filed last October was implemented this past January and together with cost reallocations of our revenue requirements for certain transmission projects, candidly to customers outside of our zone.
This resulted in a net reduction in PSE&G customer costs.
For 2020, PSE&G, once again achieved top quartile OSHA scores.
We also achieve the top quarter of JD Power ranking in the eastern large company category for both residential electric and gas companies.
And PSE&G posted its best ever JD Power scores for electric and gas customer satisfaction outpacing the average industry results on metrics that consider total monthly cost, bill clarity, fairness of pricing and options and ability to manage monthly usage among residential customers.
Also for the 19th year in a row PA consulting recognized PSE&G with its reliability one award as the most reliable electric utility in the Mid-Atlantic region and for the first time with our 2020 outstanding customer engagement award.
New Jersey has recently made solid progress in lowering its COVID-19 positivity rates, and continues to face the reopening of businesses, schools and other activities.
We have a long history of partnering with the state to support the economy.
And we continue to work with them on investment programs that can spur economic development and employment recovery, all while being quite thoughtful about managing customer rate impacts.
Regarding collection activities, the moratorium on shut offs residential electric and gas services currently scheduled to conclude in March, recognizing the economic hardship that many of our customers continue to face PSE&G in partnership with the BPU and community groups is working hard to enroll customers and customer payments support programs, such as light heap and deferred payment rate.
When the moratorium is lifted, we will work closely with the BPU other stakeholders and our customers to ensure a collections process that supports our customer's individual situations.
Turning now PSEG Power, we're continuing all activities related to the exploration of strategic alternatives we announced last July.
In the fourth quarter of last year, we launched the formal sales processes of the 1,467 megawatt solar source, and over 6,750 megawatt thoughtful portfolios.
We are currently evaluating indications of interest, and believe we are on track to announce an outcome in the second half of 2021.
As we launched the strategic alternatives initiative last year, and throughout the process thus far, PSEG Power has continued to deliver on expectations for non-GAAP operating earnings and adjusted EBITDA.
Last year PSEG fossil posted one of its best operational performance records ever, and completed its entire maintenance outage schedule without any OSHA safety violations.
In addition, PSE&G nuclear completed to complex refueling outages in 2020, with new COVID-19 safety protocols, and continue its overall outstanding operating performance.
These achievements speak volumes about the professionalism of our dedicated workforce that exemplifies our focus on safety and operational excellence.
PSE&G nuclear Zero Mission certificate application and the extension of the current ZEC is currently under consideration at the BPU.
Last month, the BPU staff consultant released their preliminary findings.
The consultants found that all three of our New Jersey units were eligible, recognizing that each unit had a financial need for next.
There were other aspects of the preliminary findings that we view as inconsistent with the ZEC law.
And we look forward to upcoming hearings where we will have the opportunity to address those items.
It is clear that New Jersey recognizes the need for nuclear power in order to achieve its short and long-term clean energy goals, as laid out in states on an energy master plan and DEP'S 80 by 60 report.
The recent weather-related power and market values in Texas and California further underscore the importance of maintaining New Jersey's reliable resource mix.
Over the next few weeks, you will hear as mentioned that our confidential filings show that these units are actually in need of more than $10 per megawatt hour, partly due to the fact that PGM forward market prices are lower versus 2018, which was the year that first ZEC application.
As stated in the 2018 ZEC law, nuclear operating risk and market risk must be recognized as a cost in any economic determination and ZEC eligibility.
We have responded to all information requests and share confidential financial information with rate council and PJM independent market monitor.
In order to support transparency around this important proceeding.
And the actions and expansion of the current ZEC, we would not continue to operate the plant.
While the direction of public policy both in New Jersey, Jersey and in the nation is the increased recognition of carbon free energy to mitigate climate change.
That realization in the form of a future price on carbon is highly uncertain at best.
With the final decision on the ZEC application expected on April 27, we are hopeful that the BPU will act to extend the $10 per megawatt hour attribute payment to preserve nuclear units and their 3,400 megawatts of zero carbon base load generation through May of 2025.
The BPU is also moving forward with its investigation of resource adequacy, and the potential for the creation of fixed resource requirements service area within New Jersey, I'm just going to call that FRR in future.
We've maintained a neutral stance on the potential of an alternative capacity procurement paradigm, but remain supportive of accommodations that enable state supported resources to qualify as capacity that can satisfy both the state's capacity obligations, and its clean energy goals.
As we've previously stated, the current minimum offer floor prices are not expected to prevent either our nuclear or gas part of units from clearing in the upcoming PJM capacity auction scheduled for this May.
Now let me turn my attention to 2021 guidance.
We are introducing non-GAAP operating earnings guidance of $3.35 to $3.55 per share with the utility expected to contribute between one $1,410 million and $1,470 million.
PSEG Power between $280 million and $370 million and parent others expected to post a loss of $15 million.
This year we expect PSE&G to contribute just over 80% of consolidated non-GAAP operating earnings at the midpoint of guidance.
Going forward, we expect that the utility earnings will represent 80% to 90% of PSE&G non-GAAP results, with the remaining balance expected to be comprised of long-term agreements for zero carbon offshore wind generation, and as ZEC supported New Jersey nuclear units.
For PSEG Power, over 70% of its 2021 gross margin has been secured by the way of energy hedges, capacity revenues established prior auctions, zero emission certificates, and ancillary service payments.
However, for 2021, recontracting at lower market prices, higher costs tied to a hope Creek refueling outage, and the absence of tax benefits realized in 2020 results in the lower non-GAAP operating earnings guidance for 2021.
Our PSE&G five-year capital spending forecast has been updated to $14 billion to $16 billion for 2021 through 2025 and includes approximately $2 billion of clean energy future investments, as well as the expected extension of the gas system modernization program and Energy Efficiency Program at their average annual run rates for the last two years of the period that being 2024 and 2025.
Consistent with test years approximately 90% or $13 billion to $15 billion this capital program will be directed to grow regulated operations at PSE&G.
This ongoing investment in essential energy infrastructure and clean energy programs is expected to produce 6.5% to 8% compound annual growth and rate base over the five-year period starting from $22 billion at year-end 2020.
On slide 10, we've provided you with an alternate view of our updated capital program for 2021 through 2025.
We've classified it by investments in decarbonization, energy transition, climate adaptation for resilience and reliability and methane reduction.
As a sidebar, any spend for offshore wind will be incremental to these totals and is not included in the $14 billion to $16 billion capital plan.
We also expect that our strong cash flow will enable us to fund our entire five-year capital spending program, as well as our planned offshore wind investments during the 2021 and 2025 period, without the need to issue new equity.
As we continue to plan for the responsible reentry to our offices and facilities currently targeted for this July.
Whether responding to a myriad of COVID-19 challenges, or their excellent injury free response to the nor'easter that we just experienced this past month, employees across our organization has embodied operational excellence, as they provide our New Jersey, New York, Connecticut and Mid-Atlantic customers with reliable essential energy services.
Before moving to Dan's financial review, I will summarize the new initiatives in place of future growth and areas of our continued strategic focus.
These range from the new clean energy future investments behind the meter to infrastructure opportunities supporting electrification of transportation, and a growing mix of renewables in the distribution system to expanding the existing aging infrastructure replacement programs to assist the New Jersey economic recovery.
In addition, we are advancing the strategic alternatives of exploration through a robust bidding process, pursuing near term opportunities to expand offshore wind investments in the Mid-Atlantic and are engaged in ongoing efforts to preserve the New Jersey nuclear fleet, the most cost effective and most reliable source of base load supply to reduce emissions.
Each of these actions serves to further PSE&G's already strong ESG leadership position, which we continuously strive to improve.
In 2020, we move to decarbonize our generating fleet, announced an investment in New Jersey offshore wind, and initiated a landmark energy efficiency investment to bring universal access to a broad range of clean energy opportunities.
In 2021, we joined the company network of the series organization at CERS to advance our climate advocacy.
We will achieve a coal free generating fleet in June.
And we recently published our first ESG Performance Report.
PSEG is getting recognized for our ESG initiatives by Standard and Poor's was included us in their 2021 sustainability yearbook.
And by the Dow Jones Sustainability Index was named PSE&G to the North American index for 13 years in a row.
We're also gratified to be named to the 2021 listing of America's most responsible companies by Newsweek magazine, and the Forbes list of best employees for diversity in 2020.
And best employers and veterans in 2020.
The Board of Directors recent decision to increase the company's common dividend to the indicative annual level of $2.04 per share is the 17th increase in the last 18 years, and reflects our ongoing commitment to returning capital to our shareholders to enhance our total return profile as we also pursue growth.
There is no lack of opportunity for PSE&G.
As we continue the transformation to a primarily regulated electric and gas utility, focused on clean energy infrastructure, complemented with contracted zero carbon generation, we are working toward a sustainable future where customers universally use less energy, the energy they use is cleaner, and its delivery is more reliable and more resilient.
We are confident that pursuing this strategy will enhance our ability to provide our customers with essential energy services, which has been our core mission for the last 118 years.
As Ralph said, PSE&G reported non-GAAP operating earnings for the fourth quarter of 2020 of $0.65 per share.
And we provided you with information on slides 12 and 14 regarding the contribution of non-GAAP operating earnings by business for the fourth quarter, and for the full year of 2020.
Slide 13 and 15 contained waterfall charts that take you through the net changes quarter-over-quarter and year-over-year, and non-GAAP operating earnings by major business.
I'll now review each company in more detail starting with PSE&G.
PSE&G's net income for the fourth quarter of 2020 increased by $0.04 to $0.58 per share, compared with net income of $0.54 per share for the fourth quarter of 2019 as shown on slide 17.
For the full year PSE&G's net income increased by $0.16 per share, or 6.5% compared to 2019 results.
This improvement reflects an 8% increase in rate base at year end 2020 to just over $22 billion, which as we note on slide 22 does not include approximately $1.8 billion of construction work in progress or see what that's mostly a transmission.
The continued growth in utility earnings resulting from investments in transmission added $0.2 per share versus the fourth quarter of 2019.
Gas margin was $0.02 favorable, reflecting GS&NT roll in and higher weather normalized volume.
Electric margin was flat compared to the fourth quarter of 2019.
As higher were the normalized volumes will offset by lower demand?
Mild temperatures during the quarter had a negative $0.03 per share impact, mostly reflecting recovery limitations under the earnings test of the gas weather normalization clause.
O&M expense was flat versus the fourth quarter 2019.
Higher distribution depreciation expense of a $0.01 per share offset lower pension expense of a $0.01 per share in the quarter.
Taxes and other were $0.03 per share favorable, partly reversing the negative $0.07 per share impact that the timing of taxes had on third quarter of 2020.
Recall in the third quarter flow through taxes and other items lower net income by $0.07 per share compared to the third quarter of 2019.
And we indicated at that time that about half of the $0.07 would reverse in the fourth quarter.
The balance is related to bad debts which we anticipate reversing in the future based upon the timing of actual write-offs.
Early winter weather in the fourth quarter as measured by the heating degree days was 9% milder than normal and 14% milder than in the fourth quarter of 2019.
The full year PSE&G weather-normalized residential electric sales increased by 5.6% due to the COVID-19 work from home impact, but a larger decline in commercial sales resulted in total electric sales declining by 2%.
Total weather-normalized gas sales were up 1.2% for 2020 by a 4.9% increase in residential use partially offset by a smaller decline in the commercial and industrial segment.
For both electric and gas sales, higher residential uses largely offset declines in commercial and industrial sales, resulting in stable margins overall.
PSE&G invested $700 million in the fourth quarter as part of its 2020 Capital Investment Program of approximately $2.7 billion directed to infrastructure upgrades of transmission and distribution facilities to maintain reliability, increase resiliency, make lifecycle replacements and clean energy investments.
PSE&G updated five-year capital spending plan includes investing $2.7 billion in 2021.
And as detailed on slide 21, approximately $960 million is allocated to transmission; $700 million to electric distribution, which includes approximately $200 million for Energy Strong Two, $875 million to gas distribution, which includes over $400 million for GSMP2 and $200 million for new clean energy future EV programs and the beginning of the AMI rollout.
The clean energy future EV investment will ramp up to approximately $125 million in 2021 before reaching a full annual run rate of about $350 million in 2023.
As Ralph mentioned the BPU approved two CF settlements in January, totaling approximately $875 million covering energy cloud and electric vehicle investments.
The capital and operating costs of these programs will begin to be recovered in PSE&G next rate proceeding, expected to be filed in the second half of 2023.
From the start of the programs until the commencement of new base rates estimated in late 2024, the return on other non-capital will be included for recovery in these rates as well as operating costs and stranded costs associated with retirement of the existing leaders.
Of these amounts, the vast majority about 90% received contemporaneous or near contemporaneous regulatory treatment either through the first formula rate, or clause recovery mechanisms or recovered and rates as replacement spend or new business.
As Ralph also mentioned, we continue settlement discussions with the BPU staff and recounsel regarding our FERC transmission return on equity.
Although our forecast for 2021 as soon as the resolution effective in the near term, those discussions remain confidential and ongoing.
PSE&G net income for 2021 is forecasted at $1,410 million to $1,470 million which reflects an assumed reduction of our transmission formula rate, as well as incremental investment in EV infrastructure and energy efficiency.
So moving to power, PSEG Power reported non-GAAP operating earnings of $0.10 per share in the fourth quarter unchanged from the non-GAAP results in the fourth quarter of 2019.
Results for the quarter brought Power's full year non-GAAP operating earnings to $430 million or $0.84 per share.
Compared with 2019 non-GAAP results of $09 million or $0.81per share.
Non-GAAP adjusted EBITDA total to $182 million for the quarter and $990 million for the full year of 2020.
And this compares to non-GAAP adjusted EBITDA of $198 million, and $1,035 million for the fourth quarter and full year 2019 respectively.
Non-GAAP adjusted EBITDA excludes the same items as our non-GAAP operating earnings measure, as well as income tax expense, interest expense, depreciation and amortization expense.
We've also provided you with added detail on generation for the fourth quarter and full year on slide 26.
PSEG Power's fourth quarter non-GAAP operating earnings were aided by the scheduled increase in PSEG Power's average capacity prices in PJM, covering the second half of 2020 and higher gas operations, which resulted in improved non-GAAP operating earnings comparisons of $0.04 and $0.01 per share respectively, compared to the fourth quarter of 2019.
However, lower generation output and recontracting at lower market prices reduced non-GAAP operating earnings by a total of $0.08 per share versus the year ago quarter.
The decline in O&M expenses in the quarter improve results by a $0.01 per share and reflects the absence of the Hope Creek refueling outage that occurred in the fourth quarter of 2019.
The extension of the Peach Bottom Nuclear operating licenses contributed to lower depreciation expense of a $0.01 per share and lower taxes improve non-GAAP operating earnings by a $0.01 over the year ago quarter.
Gross margin for the quarter was $32 a megawatt hour, a $1 per megawatt hour improvement over the fourth quarter of 2019, mainly reflecting the scheduled increase in capacity prices that began June 1, 2020 and remain in place through May of 2021.
For the full year 2020 gross margin was flat at $32 per megawatt hour compared to full year 2019.
Mild fall temperatures and holiday related spikes and COVID-19 positivity rates dampen market demand in New Jersey and kept our prices and natural gas prices lower than the quarter and year ago comparisons.
So let's turn to Power's operations.
Total output from Power's generating facilities declined 9% in the fourth quarter of 2020, compared to the fourth quarter of 2019.
Unplanned outages at fossil and an extended outage at the sale of one nuclear unit reduced fourth quarter generation levels compared to the fourth quarter in 2019.
However, full year 2020 output of 53 terawatt hours came in above our 50 to 52 terawatt hour forecast.
The nuclear fleet operated at an average capacity factor of 78.9% in the quarter, and 90.3% for the full year, producing nearly 31 terawatt hours of zero carbon base load power.
The combined cycle fleet operated an average capacity factor of 46.2% in the quarter, and 48.3% for the full year, generating approximately 22 terawatt hours in 2020.
The three new combined cycle generating units, Keys, Sewaren and Bridgeport Harbor five posted an average capacity factor of over 75% for the full year 2020.
And this coming June PSEG Power will complete the planned early retirement of the 383 megawatt coal fired Bridgeport Harbor three generating station, eliminating the last coal unit in power's fleet.
For 2021, Power has hedged approximately 90% to 95% of its expected output of 48 to 50 terawatt hours, at an average price of $32 per megawatt hour, which represents an approximately $2 per megawatt hour decline from 2012.
In addition 2021 average hedge prices no longer include cost-based transmission charges for New Jersey's basic generation service contracts due to a change in how they are billed and collected.
This change further reduces revenues by approximately $3 per megawatt hour starting on February 1 of 2021.
And is often on the cost side so there's no P&L impact as a result.
We're forecasting 2021 non-GAAP operating earnings and non-GAAP adjusted EBITDA PSEG Power to be $280 million to $370 million and $850 million to $950 million, respectively.
Power segment guidance reflects a full year of fossil and solar operations, lower expected generation volume and lower market prices, as well as the absence of a one-time tax benefit realized in 2020.
Now, let me briefly address operating results from enterprise and other which reported a net loss that increased by $0.03 per share, compared to the fourth quarter of 2019.
And reflects lower tax benefits compared with the fourth quarter of 2019 and lower results from KCG Long Island.
Regarding PSEG Long Island, following several challenges related to our response to tropical storm Isaias.
We've made significant improvements in our outage management to lessening business continuity and other systems and processes.
The Long Island Power Authority filed a complaint against PSE&G Long Island in New York State court last December, alleging multiple breaches of the operating services agreement or OSA in connection with PSE&G Long Island's preparation and response to tropical storm Isaias.
We are in discussions with LIPA to address their concerns, which could include potential amendments to our OSA with LIPA and to resolve all claims.
As a reminder, our 12-year contract is scheduled to run through 2025.
We are committed to addressing the identified performance issues and to continue our strong track record of performance for Long Island customers since taking over operations.
For 2021, PSEG Enterprise and other are forecasted to have a net loss of $15 million as parent financing and other costs exceed earnings from PSEG volume.
PSEG ended 2020 with approximately $3.8 billion of available liquidity, including cash on hand of $543 million, and debt representing 52% of our consolidated capital.
In December PSEG issued $96 million of 8.63% senior notes due April 2031, in exchange for like amount of 8.63% senior notes due April 2031, originally issued at Power, which were cancelled following the completion of the exchange.
PSEG also retired a $700 million term loan at maturity.
Power's debt as a percentage of capital declined to 27% on December 31 from 28%, at September 30.
To summarize non-GAAP results for the quarter was $0.65 per share; full year non-GAAP operating earnings were $3.43 per share.
And as we move into 2021, our guidance for the year is $3.35 to $3.55 per share, with regulated operations expected to contribute over 80% of consolidated results, arranged for 2021 reflects incremental investment in our T&D infrastructure, and a ramp up of a new clean energy future programs, as well as an assumed reduction return on equity of our transmission formula rate during the year at PSE&G.
And a full year of fossil and solar operations at PSEG family.
PSE&G also raised its common dividend by $0.08 per share for the indicative annual level of $2.04, a 4% increase over 2020.
The 2021 indicative rate continues to represent a conservative 59% payout of consolidated earnings at the midpoint of 2021 guidance and utility earnings alone are expected to cover 140% of the dividend at the midpoint of 2021 guidance.
We still expect our strong cash flow will enable us to fully fund PSE&G's five year $14 million to $16 billion capital investment program, as well as our plan to offer when investment during the 2021 to 2025 period without the need to issue new equity.
That concludes my comments.
And Shelby we're now ready to take questions.

user
compname reports qtrly earnings per share $0.85.
public service enterprise group - qtrly earnings per share $0.85.
non-gaap 2021 operating earnings guidance $3.35 - $3.55 per share.
strategic alternatives review of non-nuclear generation assets on track.
has updated its 5-year capital spending forecast to $14 billion - $16 billion for 2021-2025 period.
public service enterprise group - expect that strong cash flow will enable us to fund entire $14 - $16 billion, 5-year capital spending program.

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