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Business Context and Reporting Period

Company: Public Service Enterprise Group Inc (PSEG) and its wholly-owned subsidiary, Public Service Electric and Gas Company (PSE&G).

Reporting Period: Quarterly Report (Form 10-Q) for the period ended June 30, 2026.

Business Overview: PSEG operates two primary reportable segments: PSE&G, a regulated electric and gas utility in New Jersey, and PSEG Power, a merchant nuclear generation and fuel supply business. The company focuses on regulated infrastructure investments, nuclear generation, and energy efficiency programs.

Key Financial Metrics (Six Months Ended June 30, 2026)

Material Changes vs. Prior Period

• Revenue Growth: Consolidated operating revenues increased 6% year-over-year, driven primarily by PSE&G's higher delivery volumes, increased Green Program Recovery Charge (GPRC) revenues, and higher commodity prices for Basic Generation Service (BGS).
• Net Income Decline: Consolidated net income decreased 8% to $1,075 million. This decline was primarily driven by significant mark-to-market (MTM) losses in the PSEG Power segment ($215 million after-tax loss for the six months) compared to gains in the prior year. PSEG Power's net income dropped from $296 million in 2025 to $156 million in 2026.
• Expense Increases: Energy costs rose 18% due to higher commodity prices. Interest expense increased 11% due to incremental debt and refinancing at higher rates.
• Trust Investments: Net gains on trust investments (primarily the Nuclear Decommissioning Trust) increased 23% to $127 million, providing a partial offset to operating losses in the power segment.

Guidance, Outlook, and Risks

• Capital Investment: PSEG estimates its regulated capital investment program for 2026-2030 will range from $22.5 billion to $25.5 billion, with a total capital investment program of $24 billion to $28 billion. This is expected to drive a 6.0% to 7.5% compound annual growth rate in the regulated rate base.
• Nuclear Strategy: The company continues to rely on the Production Tax Credit (PTC) for nuclear generation through 2032. Management expects current portfolio positions to result in realized values above PTC levels for 2026.
• Regulatory Risks:
  • RTO Membership: New Jersey legislation requires mandatory Regional Transmission Organization (RTO) membership by January 1, 2027, which could result in the loss of a 50 basis point Return on Equity (ROE) adder, potentially reducing annual net income by approximately $40 million.
  • Energy Efficiency: The New Jersey Board of Public Utilities (BPU) issued a final framework for the extension of energy efficiency programs, adjusting budget calculations and ROE targets. Petitions are due September 30, 2026.
• Environmental Liabilities: Significant contingent liabilities exist regarding the Newark Bay Complex and Lower Passaic River Superfund sites. PSEG has accrued approximately $66 million for these matters but notes that ultimate costs could be material and are currently not fully estimable.
• Dividends: The Board approved a quarterly dividend of $0.67 per share for the third quarter of 2026, indicating an annualized rate of $2.68.

Investor Verification Checklist

• Mark-to-Market Volatility: Verify the sensitivity of PSEG Power's earnings to forward energy price changes, as MTM losses significantly impacted Q2 2026 results.
• Regulatory ROE Impact: Monitor the outcome of the New Jersey legislation regarding mandatory RTO membership and the potential $40 million annual reduction in PSE&G net income.
• Environmental Accruals: Review updates on the Lower Passaic River and Newark Bay Complex remediation costs, as the company states ultimate costs could exceed current accruals.
• Debt Refinancing: Assess the impact of rising interest rates on future interest expense, given the company's strategy to replace maturing debt.
• PTC Guidance: Track U.S. Treasury guidance regarding the definition of "gross receipts" for the Nuclear Production Tax Credit, as changes could materially impact revenue recognition.