PSEG CEO On Hedge Worries: 'Everything Has Gone Up, But PECO Has Not Gone Up As Much'
Executives defended the nuclear hedge book as the price gap to PJM West widened to about 30%, and held 2026 guidance of $4.28 to $4.40.
Public Service Enterprise Group, the New Jersey utility and nuclear power holding company, spent much of its third-quarter earnings call on Monday defending its nuclear hedges against a widening price gap, while reaffirming 2026 guidance of $4.28 to $4.40 a share.
The PECO discount widens
Chair, President and CEO Ralph LaRossa told analysts on the call that prices across the PJM grid have risen, but the PECO hub, where the company hedges, has lagged the West hub. "Everything has gone up, but PECO has not gone up as much as the West," he said.
Executive Vice President and CFO Dan Craig said the five-unit nuclear fleet's realized energy price has historically tracked the PECO zone, at about a 20% discount to the more liquid PJM Western hub. That gap has recently widened to about a 30% discount, he said, though hedges have limited mid-term exposure.
As of September 30, PSEG Power had about 70 terawatt hours of expected output sold forward, Craig said. The company was more than 95% hedged for 2026, with a high percentage sold for 2027 and less in 2028 and beyond.
Craig said the company expects 2027 realized value to stay above the level at which it would receive the nuclear production tax credit.
Analysts press on the basis risk
A Mizuho analyst asked whether the company is effectively short the West price and long PECO. Craig said the West hub is one available product, but others move positions closer to the units, and the company uses them. LaRossa added that other traders listen to these calls, so management is describing its approach as far as it can.
A Wells Fargo analyst asked about instruments. Craig listed direct PECO hedges, financial transmission rights, swaps and options.
An analyst at Jefferies asked why guidance was not tightened. Craig answered, "I wouldn't read too much in," and said investors should still think about the midpoint of the range.
Quarter, capital plan and next steps
PSEG reported third-quarter non-GAAP operating earnings of $1.15 a share, against $1.13 a year earlier, and net income of 76 cents, against $1.24. Through nine months, operating earnings were $3.56 and net income $2.91. The company also reaffirmed its 6% to 8% growth outlook through 2030 and a five-year regulated capital plan of $22.5 billion to $25.5 billion.
PSEG Power and Other earned $68 million on an adjusted basis, up from $50 million, helped by higher realized prices and the absence of last fall's Hope Creek refueling outage. PSEG Power cleared about 3,600 megawatts of existing capacity in PJM's July auction at $325 per megawatt day, the top of a $175 to $325 collar that also applies to December's auction.
PSEG said it expects to file a proposal with New Jersey regulators to address regulatory lag on capital invested since its last distribution rate case. In Monday trading, shares were $73.38, down 1.22% from the prior close.
PSEG plans to give 2027 earnings guidance and a rolled-forward capital plan on its year-end call in February 2027.
Sources
- Compared to Estimates, PSEG (PEG) Q3 Earnings: A Look at Key Metrics — Yahoo Finance
- PEG Q3 Earnings Miss Expectations, Revenues Decrease Y/Y — Yahoo Finance
- Public Service Non-GAAP EPS of $1.15 misses by $0.04, revenue of $3.02B misses by $230M (PEG:NYSE) — seekingalpha.com
- PSEG ANNOUNCES THIRD QUARTER 2026 RESULTS – Company Announcement - FT.com — Financial Times
- PSEG: Q3 Earnings Snapshot — Associated Press
