Public Service Enterprise Group Incorporated (PSEG) — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; this is an annual report, not a standalone fourth-quarter report. The combined filing covers PSEG and its wholly owned regulated utility subsidiary, Public Service Electric and Gas Company (PSE&G).
Business context
PSEG’s principal businesses are PSE&G, a New Jersey electric transmission and electric and gas distribution utility, and PSEG Power, primarily a merchant nuclear-generation and energy-supply business. Following the 2022 sale of its fossil-generation portfolio, PSEG’s earnings mix is increasingly weighted toward regulated utility operations. PSE&G serves approximately 2.4 million electric and 1.9 million gas customers.
Key financial metrics
| Metric | PSEG consolidated, 2023 | Prior comparable period |
|---|---|---|
| Operating revenue | $11.237 billion | $9.800 billion in 2022; up 15% |
| Net income | $2.563 billion | $1.031 billion in 2022 |
| Diluted earnings per share | $5.13 | $2.06 in 2022 |
| Operating cash flow | $3.806 billion | $1.503 billion in 2022 |
| Capital expenditures | $3.325 billion | $2.888 billion in 2022 |
| Long-term debt, including current maturities | $19.284 billion carrying amount | $18.070 billion at year-end 2022 |
PSEG’s approximate consolidated net margin was 22.8% in 2023, calculated as net income divided by operating revenue; results include substantial commodity mark-to-market effects. Cash and cash equivalents were $54 million at year-end, and committed facilities provided $3.365 billion of available liquidity. Management said liquidity was expected to cover stressed needs over its 12-month planning horizon. PSEG was in compliance with debt covenants.
PSE&G reported revenue of $7.807 billion, down 2% from $7.935 billion, and net income of $1.515 billion, down from $1.565 billion. Its operating cash flow declined to $1.540 billion from $2.028 billion; utility capital expenditures were $2.998 billion. PSE&G’s distribution rates are subject to BPU regulation and transmission rates to FERC regulation.
Material changes and unusual items
- PSEG’s net income increased by $1.532 billion year over year. The filing attributes the change principally to non-trading mark-to-market results, which contributed $959 million after tax in 2023 versus a $457 million after-tax loss in 2022, and improved NDT fund results. Higher PSE&G clause-program earnings also contributed.
- Operating cash flow rose by $2.303 billion, principally reflecting a $1.408 billion net cash-collateral inflow in 2023 versus a $677 million outflow in 2022, plus lower tax payments. The cash-flow increase therefore includes significant collateral timing effects.
- A pension lift-out transferring approximately $1 billion of obligations and related plan assets for about 2,000 retirees generated a $239 million after-tax settlement charge.
- PSEG Power’s nuclear fleet generated approximately 32 TWh and achieved an approximately 93% capacity factor. It had hedged about 90%–95% of expected 2024 generation at year-end 2023.
- PSE&G’s December 2023 distribution rate-case filing seeks approximately $826 million in annual revenue increases, including recovery of about $3 billion of investment since its 2018 rate case. The filing proposes an overall 9% revenue increase and a 12% increase for a combined typical residential electric and gas customer; the case was pending at filing.
Outlook, risks and contingencies
- For 2024–2028, PSEG projects $18 billion–$21 billion of regulated capital investment and $19 billion–$22.5 billion of total capital investment. It forecasts regulated rate-base compound annual growth of 6%–7.5% from year-end 2023 to year-end 2028. These are plans, subject to approvals and execution.
- The federal nuclear production tax credit (PTC), effective 2024–2032, is expected to provide support of up to $15/MWh, subject to gross-receipts thresholds and other conditions. Management said Treasury guidance was needed to determine the full effect. New Jersey ZEC awards for Salem and Hope Creek run through May 2025.
- Major risks include regulatory approval and recovery of utility investment, evolving New Jersey decarbonization and gas-policy proceedings, wholesale power and gas-price volatility, nuclear operating and licensing risks, higher financing costs, supply-chain and workforce constraints, severe weather, cyber and physical security threats, and potential customer affordability pressures.
- Environmental obligations remain uncertain. PSEG accrued approximately $66 million for the Passaic River matter; additional costs could be material but could not be estimated. PSE&G estimated total MGP remediation costs of $199 million–$219 million and recorded $199 million, with a corresponding regulatory asset. Remediation costs for retained former fossil-generation sites are not yet estimable and are expected to be material in aggregate.
- Auditors issued unqualified opinions on PSEG’s and PSE&G’s financial statements. Deloitte also concluded PSEG’s internal control over financial reporting was effective; management reported effective controls for both registrants.
Important facts for investors to verify
- How much of 2023’s earnings increase reflects repeatable operating performance versus mark-to-market and trust-investment gains, and how those positions settle or reverse.
- The outcome and timing of PSE&G’s rate case, including the approved return and recovery of capital spending and the proposed customer bill impacts.
- Final Treasury guidance and realized PTC eligibility, gross-receipts phase-down, and interaction with ZEC support for the nuclear fleet.
- Funding needs and refinancing costs against $1.5 billion of 2024 debt maturities, planned capital investment, and the volatility of collateral requirements.
- Updates to environmental contingencies, particularly the Passaic River claims and retained fossil-site remediation liabilities, as estimates develop.