Dive Brief:

• Initial and advanced interconnection requests from data centers and other large loads jumped to 4.7 GW from 400 MW a year ago at Public Service Electric & Gas, according to Ralph LaRossa, chair, president and CEO of Public Service Enterprise Group, the utility’s parent company.
• The projects are on average about 100 MW, which can often fit within PSE&G's “robust” transmission system, LaRossa said Tuesday during a quarterly earnings conference call.
• PSEG is also in talks with potential data center customers that are interested in buying electricity directly from the Hope Creek and Salem nuclear power plants in southern New Jersey, according to LaRossa. PSEG Power owns 2,483 MW in the power plants. 

Dive Insight:

PSEG is “constructively positioned” going into 2025, according to Guggenhoim Securities analysts, led by Shahriar Pourreza. “Among utility peers, we believe [PSEG] offers potential earnings upside from data center commercial agreements, higher PJM regional load growth driving transmission investments, a constructive regulatory environment and no need for equity financing during a time of major equity issuance for the utility sector, driven by incremental growth and balance sheet repair,” the analysts said in a note Tuesday.

However, the potential large load growth comes amid uncertainty surrounding the future of the PJM Interconnection’s capacity market.

“I don't know if there is a PJM market anymore,” LaRossa said, noting that some states in the grid operator’s footprint are exploring alternative approaches to ensuring they have adequate power supplies.

“My concern there is mostly from a reliability standpoint,” LaRossa said. “Are we going to be able in this construct, to attract generation to the PJM region as a whole, and if so, is it going to be in a timely enough fashion?”

New Jersey is at a crossroads, according to LaRossa. “We're all trying to figure out the best way to move forward. I don't think there's a clear answer on it.”

Customer affordability is also a major issue, according to LaRossa. Driven by the results of PJM’s most recent capacity auction, the New Jersey Board of Public Utilities expects electric bills for PSE&G’s residential customers will jump 17.2% on average for the 12-month period starting June 1. The utility, which has about 2.4 million electric customers, makes no money on the default supply of electricity.

Pending action at the Federal Energy Regulatory Commission on rules for colocating load at power plants hasn’t slowed discussions with potential customers, according to LaRossa. “They seem to have understood the urgency in what they said, even though we didn't get complete clarity,” he said.

FERC could approve colocation rules for PJM as soon as late June, according to Morgan Stanley analysts.

PSEG raised its capital spending plan for 2025 to 2029 to $22.5 billion to $26 billion, up $3.5 billion from its previous plan, LaRossa said. The Newark, New Jersey-based company expects that all of its capital requirements over the next three years will come from internally generated funds and debt financing, PSEG said Tuesday in its annual report filed with the U.S. Securities and Exchange Commission.

As part of the overall increase, PSE&G increased its five-year capital investment plan about 15% to $21 billion to $24 billion for 2025 through 2029, with a focus on infrastructure modernization, energy efficiency and load growth, the company said.

As a result, PSEG said it expects the utility’s rate base will grow at a 6% to 7.5% compound annual rate over the next five years.

PSEG’s income fell to $1.8 billion, or $3.54/share, in 2024 from $2.7 billion, or $5.13/share the year earlier, the company said in a press release. Revenue dipped to $10.3 billion in 2024, from $11.2 billion in 2023. Not counting one-time items, PSEG’s operating earnings increased to $1.8 billion last year from $1.7 billion in 2023.