Ladies and gentlemen, thank you for standing by. My name is Christie, and I’m your event operator today. I would like to welcome everyone to today’s conference, Public Service Enterprise Group First Quarter 2020 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session for members of the financial community. As a reminder, this conference is being recorded today, May 4, 2020 and will be available for telephone replay beginning at 1:00 PM Eastern Time today until 11:30 PM Eastern Time on May 13, 2020. It will also be available as an audio webcast on PSEG’s corporate website at www.pseg.com.

Thank you, Christie. Good morning. PSEG released first quarter 2020 earnings results earlier today. The earnings release attachments and slides detailing results are posted on PSEG’s IR website and our 10-Q will be filed shortly. The earnings release and other matters we will discuss on today’s call contain forward-looking statements and estimates that are subject to various risks and uncertainties. We also discuss non-GAAP operating earnings and non-GAAP adjusted EBITDA, which differ from net income as recorded in accordance with Generally Accepted Accounting Principles in the United States. Reconciliations of our non-GAAP financial measures and a disclaimer regarding forward-looking statements are posted on our IR website and included in today’s earnings materials. I will now turn the call over to Ralph Izzo, Chairman, President, and Chief Executive Officer of Public Service Enterprise Group. Joining Ralph on today’s call is Dan Cregg, Executive Vice President and Chief Financial Officer. At the conclusion of their remarks, there will be time for your questions.

Thank you, Carlotta, and thank you all for joining us today. Before we begin our review of this quarter’s results, let me take a moment to express my sincere condolences to anyone on the call who has been personally affected by COVID-19. I also extend my gratitude to the healthcare and emergency first responders. For these frontline heroes in New Jersey, PSEG recently donated 50,000 N95 masks and 200,000 pairs of gloves to help replenish personal protective equipment. I’ll refer to that as PPE from now on. The PSEG Foundation has also made a $2.5 million commitment to provide grants to regional food banks and health and social service organizations in our communities. PSEG’s first and foremost responsibility has always been to provide safe and reliable delivery of electric and gas service to our 3.7 million customers in New Jersey and on Long Island. As part of the New York Metropolitan area, New Jersey and Long Island have been among the hardest hit areas by COVID-19, but are showing signs of improvement. Confirmed COVID-19 incident rates among PSEG employees remain below those of the New Jersey and Long Island general populations. Approximately 1% of our employees are currently self-monitoring. So, personal availability continues to be strong and attests to the effectiveness of the safety protocols we put in place early on. This will become even more important as the summer storm season begins and access to mutual aid resources may be limited.

Okay. I’ll go back to the beginning of my remarks prior to the technical difficulties. As Ralph mentioned, PSEG reported non-GAAP operating earnings for the first quarter of 2020 of $1.03 per share versus $1.08 per share in last year's first quarter. We are providing you with information on Slide 10 regarding the contribution to non-GAAP operating earnings by business for the quarter, and Slide 11 contains a waterfall chart that takes you through the net changes quarter-over-quarter in non-GAAP operating earnings by major business. I’ll start to review each company in more detail with PSE&G. PSE&G, as shown on Slide 13, reported net income for the first quarter of 2020 of $0.87 per share, compared with $0.79 per share for the first quarter of 2019, up 10% versus last year. PSE&G results were driven by revenue growth from ongoing capital investment programs in transmission and distribution, which more than offset the impact of unfavorable winter weather on electric and gas margin. As a reminder, our gas distribution business has a weather normalization clause that moderates the impact of weather-related sales variances versus normal weather. First in transmission rate base which added $0.06 per share to first quarter net income includes approximately $0.02 per share of items that will reverse over the second and third quarters of 2020 due to timing of expenses in 2019 true-ups. Gas margin, which includes the recovery of investments made under the gas system monetization program or GSMP II, as well as higher weather-normalized gas sales margins, improved quarter-over-quarter net income comparisons by $0.04. Winter weather, as measured by heating degree days, was 19% warmer than normal and 19% warmer than the first quarter of 2019. The negative impact of unfavorable weather on gas margin quarter-over-quarter was largely offset by the gas weather-normalization clause. However, the decline in electric sales and revenue as a result of the large difference in weather reduced quarter-over-quarter earnings comparisons by $0.02 per share. For the trailing 12 months ended March 31, weather-normalized electric and weather-normalized firm gas sales were each down by approximately 1%, led by declines in Commercial and Industrial usage. Residential sales were flat with customer growth just below 1% offset by increases in energy efficiency and solar net metering. PSE&G’s capital program remains on schedule as mentioned earlier with essential work continuing on the majority of our critical reliability and infrastructure replacement projects at our transmission and distribution facilities. PSE&G invested approximately $0.6 billion in the first quarter and is on track to meet its full year planned capital investment program of $2.7 billion. Progress continues on several important projects, including the Metuchen-Trenton-Burlington Project, which energized its second phase, and the Aldene-Linden project that recently energized an upgraded circuit connecting Aldene and Linden. Both projects are on plan and on budget. Customer bill affordability remains a key consideration as we invest in the system and PSE&G remains well-positioned on this metric with its combined electric and gas bills under 3% of New Jersey median household income as of January 1, 2020. In March, PSE&G temporarily suspended all non-safety-related service shut-offs for non-payment during the COVID-19 crisis recognizing the financial hardship that many of our customers are currently experiencing. We will be advising them of available payment assistance programs and bill management tools. As a reminder on the electric side, we will recover our bad debt expense through the societal benefits charge, which is trued up periodically. We are reaffirming PSE&G’s net income forecast for 2020 at $1.310 billion to $1.370 billion. Now, I’ll move to Power. PSEG Power reported non-GAAP operating earnings of $0.17 and non-GAAP adjusted EBITDA of $201 million. This compares to operating earnings of $0.29 per share and adjusted EBITDA of $304 million reported for the first quarter of 2019. Net income for the first quarter was $13 million or $0.02 per share and a pre-tax charge of $20 million to reflect a lower cost for market adjustment to oil inventory was recognized in the first quarter and excluded from our non-GAAP measures. The earnings release and Slide 18 provide you with a detailed analysis of the items having an impact on Power’s non-GAAP operating earnings and non-GAAP adjusted EBITDA relative to net income quarter-over-quarter. We’ve also provided you more detail on generation for the quarter on Slide 19. PSEG Power’s first quarter results were negatively affected by extremely mild winter weather conditions compared to the first quarter of 2019. A scheduled decline in PJM capacity revenue reduced non-GAAP operating earnings comparisons by $0.11 per share compared to Q1 2019. The addition of ZEC revenues to first quarter results added $0.07 per share. Lower generation output for the quarter reduced comparisons by $0.01 per share and re-contracting reduced results by $0.01 per share, reflecting an approximate $1 per megawatt-hour decline in the average hedge price versus the year-ago quarter. The weather related decline in total gas send out to commercial and industrial customers reduced results by $0.04 per share. Higher O&M expense from an unplanned outage at Salem Unit 1 lowered results by $0.01 per share and higher interest expense lowered comparisons by $0.01 per share versus the year-ago quarter. Gross margin for the first quarter declined slightly to $30 per megawatt-hour compared to $0.31 per megawatt-hour in the year ago period. Power prices were weaker across PJM, New York, and New England compared to the year earlier quarter as winter temperatures were 16% higher on average versus the first quarter of 2019. PSEG Power’s average capacity prices in PJM are set to rise in the second half of 2020 and beginning on June 1, the average PJM capacity price will rise to $168 per megawatt-day, up from $116 per megawatt-day. I saw New England capacity prices are scheduled to decline, but the impact on our capacity revenue will be moderated by the addition of Bridgeport Harbor 5 and its seven-year capacity lock at $232 per megawatt-day. Now let’s turn to Power’s operations. Total generation output declined by 6.5% to 13.2 terawatt-hours, reflecting the sale of the Keystone and Conemaugh units last fall. PSEG Power’s Combined Cycle fleet produced 5.1 terawatt-hours of output, up 16%, reflecting the addition of Bridgeport Harbor 5, which was placed into operation in June 2019. The three newest combined cycle units—Key, Cone, and Bridgeport—combined to post a strong average capacity factor of 81% in the quarter. The nuclear fleet operated at an average capacity factor of 94.9% for the first quarter, producing 8 terawatt-hours, representing 61% of total generation. Higher output from Hope Creek and Salem Unit 2 partly offset a month-long repair outage at Salem Unit 1, resulting in a 2% decrease in nuclear output for the quarter. Salem 2 entered its 24th refueling outage on April 11 and the outage has been scaled back to complete a core set of essential tasks, which is expected to reduce the duration and cost of the outage. PSEG Power continues to forecast annual output for the years 2020 through 2022 at 50 terawatt-hours to 52 terawatt-hours. For the remainder of 2020, Power has hedged approximately 95% to 100% of production at an average price of $36 per megawatt-hour. 2021, Power has hedged 55% to 60% of forecasted production at an average price of $35 per megawatt-hour, and for 2022, Power has hedged 25% to 30% of forecasted output at an average price of $35 per megawatt-hour. More than 70% of PSEG Power’s expected gross margin in 2020 is secured by our higher hedge position of energy output, capacity revenue set in previous auctions, the opportunity to earn a full year of ZEC revenues and certain ancillary service payments such as reactive power. We are reaffirming our forecast of PSEG Power's non-GAAP operating earnings for 2020 at $345 million to $435 million and non-GAAP adjusted EBITDA at $950 million to $1,050 million. Adjusted EBITDA for the first quarter of 2020 includes pre-tax expenses of $35 million related to the purchase of New Jersey tax credits, and the benefit from this program is included below EBITDA in the Income Tax expense and combines for a net benefit for the quarter of $5 million; there were no similar transactions in Q1 of 2019. Now, let me briefly address results from PSEG Enterprise and other. For the first quarter of 2020, Enterprise and other reported a net loss of $5 million or $0.01 per share, compared to net income of $1 million flat on a per share basis in the year earlier quarter. The net loss for the first quarter reflects higher interest and tax expenses at the parent, partially offset by ongoing contributions from PSEG Long Island. For 2020, we are reaffirming that the forecast for PSEG Enterprise and other remains unchanged at a net loss of $5 million. PSEG ended the quarter with $799 million of cash on the balance sheet. In March of this year, PSEG closed on a $300 million variable rate loan due March of 2021. As of March 31, PSEG had access to $3.2 billion under its $4.2 billion credit facility with a $4 billion revolver extended by a year to March of 2024. Debt at the end of March stood at 52% of our consolidated capital, and debt at PSEG Power represented 32% of its capital at the end of the quarter. During the first quarter, PSE&G issued $300 million of ten-year, 2.45% secured medium-term loans and $300 million of 30-year 3.15% secured medium-term loans. In addition, we retired $406 million of 5.13% notes at PSEG Power that matured in April. Also in April, PSEG closed two additional term loans totaling $500 million. For the balance of the year, we have approximately $260 million of PSE&G maturities that come due in August and a $700 million parent maturity in November. Our solid balance sheet and credit metrics keep us in a position to internally fund our 2020 to 2024 capital investment program without the need to issue directly. As Ralph mentioned earlier, we are reaffirming our forecast of non-GAAP operating earnings for the full year 2020 of $3.30 to $3.50 per share. That concludes my remarks, and now, I'll turn the call back for questions.

Hi, good morning. Congratulations on holding everything together here.

Thanks, Julien.

Absolutely. So, I wanted to dig a little bit further on the Power and PSE&G 2020 reaffirm, when you think about the cost control that you’ve embedded, and I appreciate it's a dynamic situation, so it's hard to put your finger on it, what’s the order of magnitude that you all are contemplating and reaffirming here today, especially as it relates to the power side of the business just because, obviously – you know that is hedged largely, but not entirely? So, I’m just trying to understand the order of magnitude that you all are contemplating in your guidance here when you take out the puts and takes here against what is, obviously, moving target expectations for full-year load and average pricing?

So Julien, rather than give you piece parts with specific numbers attached to each piece part, well, first of all, it’s good to hear your voice, hope you and your family are well and that you’re managing in these challenging times as well. You know some of the things that we've done, for instance, is we recalibrated our nuclear refueling outage, and we took a bunch of days off. I can't give you that number because I don't think we’ve posted it on Oasis. We didn't have the original number of days, and so therefore, I don’t want to give you the new number of days. While O&M goes up given the work rules we have to put in place for an outage, and therefore, we only saved a modest amount of O&M by shortening the outage, we increased a lot of the revenue expectations for things like ZEC payments and things of that sort by abbreviating the outage. You mentioned the hedge position, and even though the hedges aren’t perfect, we were about 95% hedged for this year. There’s been some fairly modest O&M reductions just in terms of support services that we’ve been able to capture just because of the change in work practices. So, those are the types of things over power in utility because we're only doing the essential work for customers. There has been some reduction in O&M associated with some of the appliance repair work and things of that nature that the Governors asked us to not do. In the meantime, we’re still full speed ahead on the capital program, which as you know, gets at 90% clause recovery. So, it's been a combination of things and the team is working 24/7 to make sure that we’re constantly adjusting, and Dan please feel free to add to if you would like.

I think that’s a good summary, and you know, I also think you will see some benefit come through as well to the extent that you see a lower cost to serve on some of our hedges as well. So, to the extent that we’ve got a lower market that we can work to support some of the hedges, you could see some benefits coming through there, and some of those contracts tend to lean a little bit more on the smaller side or on the residential side, so there can be some uptick there as well Julien.

Got it. Excellent. And then, if I can quickly follow-up on the second piece here. The offshore wind arrangement, how are you thinking about coming to terms on that? And ultimately, is the timing of this ultimately drawn into a broader conversation at FRR and election and thought processing the State? And do we need to see some kind of resolution from the State in order for you to feel comfortable to participate in whatever form?

No, that’s – thank you, Julien. Good question. Let me be more explicit than I've been in the past because Ørsted is just a terrific company and a very valuable partner, but time is our friend, so we are just – I don't mean to upset my colleagues at Ørsted if they are listening, but it is to our advantage to take every day to learn as much as we possibly can about this business and maximize the timeframe that they’ve granted us to make that decision, because we started from a position of relative ignorance. So really it’s just making use of every day to get smarter and smarter about what is entailed in developing that project. The state is absolutely committed to building that project. It would appear the federal agencies are as well. There have been well-publicized delays in different projects around the company. Ørsted themselves have talked about some of the delays in getting through the federal permits. So it’s really not a question of the FRR at all. The BPU order is quite clear on what the commercial terms of that project will be – are and will be, and we just now need to understand given that very well-established topline, what does the middle of the income statement look like in terms of their ongoing operational costs, and then, make a decision sometime in the fall. So, it's just the – I’m going to repeat myself, time is our friend in terms of collecting more and more information and getting smarter and smarter.

Got you, excellent. And then no update on the timeline for FRR resolution as far as you’re concerned?

I don't mean to sound presumptuous by putting the educated guess out there that it's probably at the earliest end of the year, more likely spilling into Q1 of next year. Remember, the State really doesn't have to worry about paying double for capacity now that the nuclear units are covered or at least for the foreseeable future until offshore wind comes online, and that's not going to happen until 2024, so you have to worry about the 2021 auction before you have to kick in your FRR to avoid duplicate payment for capacity.

Excellent. Thank you all very much. All the best. Stay safe.

Thanks, Julien.

Hi, good morning, guys. Sure has a jump, so I'm taking some questions here. It’s great to hear the update on everyone staying safe and work going on. You mentioned the kind of 5% to 7% load impact that you're seeing. And so, if we consider an extended lockdown in New Jersey saying kind of full second quarter, what does that mean in terms of sensitivities for EPS understanding that there’s some offsetting dynamics having only a quarter of the margin on really C&I? Can you talk about the magnitude versus that sensitivity?

Yes, Constantine, so, it's been a little challenging as Ralph referenced in his original remarks that without AMI, the granularity that we would like to have we don't have. So, we know for a fact that in the aggregate when we take a look at what reductions are, we’re in that 5% to 7% range on a weather normalized basis, and by all indications, we’re going to see an uptick on the residential side and we’re going to see more challenges on the C&I side just knowing what's going on. So, we basically have taken a look at that kind of trajectory and presumed that we would continue to see that through the balance of the year now. It's going to have varied effects as you go through the year. You’re going to have different seasonality; you’re going to have different effects moving through the year, but that’s what we used to try to gauge what things would look like and if you take a look at both from a power and a utility business combined and you try to take a look at what that's going to do from an EPS perspective, it ranges in the order of about $0.01 a month from the standpoint of impact from an enterprise earnings perspective through the summer periods. When you get into the fall into more of a shoulder period, you could see a little bit less of an impact just because you've got a different dynamic with respect to what overall loads are. So, that’s a – admittedly rough estimate given the data that we do have and how we’ve been able to forecast, and as we go through time, we’ll continue to get more data and more data on a customer segment perspective and be able to refine that, but that’s the order of magnitude that we’ve seen from the standpoint of losses to date and where we think it may end up coming out, that’s a gross margin number. So, we’re going to take that, and then, you would tax affect that and then you’re going to work your way through on the cost side, and you know, there are some basic things that are fairly obvious if you think about the cost structure of the business and things like travel. You could think about that, we’re going to strip some of the outages down too. So, some work may be more expensive to do, but there will be some of it that will not be done during this period which will lead to some savings. So, we will continue to manage this as we go through the balance of the year, and I think from taking all this and looking at it, that's what gives us confidence to be able to reaffirm guidance.

Okay, that makes sense: offsetting on both sides. Another one for Ralph, you talked about both NJBPU and kind of engaging stakeholders on ROE, is there any kind of advancements in what sort of conversation there can be had at this stage?

Yes, Constantine. I’d echo what I had mentioned a moment ago. Glad to hear your voice and hope you and your family are well in addition. So, I don't want to go into details on what the conversations with the BPU on transmission ROE, but suffice to say that we still are in conversation and the motivation for that really is the fact that the New Jersey economy is in a tough state right now and I think the BPU realizes that this is a great opportunity for possibly refunding to customers many, many dollars as a result of a reduction in our allowed ROE, rather than enter into a protracted litigated case at FERC, which would take many years to have that rate relief occur, now is a good time to do it, and we would agree with. Having said that, we’ve been very clear with the BPU as to what we think is a fair return and we’re not going to settle on something unless it matches what we think is a fair return, and I'm sure they feel the same way. The good news is, we are still in conversation and we both recognize that there could be a win-win if we can narrow the gap that continues to exist between us. So, I’m sorry for not giving you a specific number or an answer right now, Constantine, but just the nature of that dialogue doesn't allow me to do that, but all parties realize that it would be a great benefit to many folks to reach resolution, and if we can, and then, we – so be it and it will be decided elsewhere. We had technical difficulties before; I’m hoping that we didn’t just go silent again.

No. Sorry about that. I just happened to be on mute. Just one real quick one for Dan, are there any kind of volume metric risks remaining with the hedges on power for the remainder of the year, or is that kind of pretty hedged out?

There’s volumetric aspects on some of our hedges. There are volumetric aspects on some of our generation as well, and that's how I would have you think about it, Constantine. So, the nuclear units are going to run like nuclear units, and then, our gas units with pretty significant capacity factors will still follow load. Similarly, we will have some blockages that will be on it. We will have some good deals that will be on them that make up the aggregate of our hedge portfolio. So, I think you’ve got the ability for some of your generation to flex based upon changes in load and I think you’ve got some of your hedges that will do the same. There will not be an absolute lockstep, but I think that those hedges will work well for the fleet that we have, and you’ll see some of them working in approximate tandem.

Perfect. Thanks for that, guys. Stay safe out there.

Thanks Constantine.

Your next question is from Stephen Byrd with Morgan Stanley. Mr. Byrd, your line is open.

Christie, let’s go to the next question.

Yes, hi. Good morning. Hopefully you can hear me?

Yes, we can, yes. We can hear you.

I’ve seen you nearly as much as – hi – I think I’ve seen you, Ralph, nearly as much as my family on TV for the last few weeks, so it’s been nice. Good to see your face. So, a couple of things, just on the, you know, guidance for 2020, you mentioned that you just continued strong operations and cost control, is that just kind of to say that there are pressures and you don’t have as much cushion as normal or what are you trying to kind of emphasize there?

Nothing more than what we said there, Steve. And so, the kind of flexibility you have is outage duration, and that helps both in terms of the costs associated with the outage, as well as the opportunity for margin acquisition. And the utility type of thing that you have is if you do less O&M and more capital, you can both benefit from the clause recovery associated with the capital and benefit from the reduced O&M. By eliminating some of the non-essential services there are some reductions in overtime. So it’s really a combination of things like that. There’s not one specific item. By the way, that TV spot that you saw was recorded by my wife on an iPhone, so we saved money there, if you’re curious. We almost incurred some expense with the divorce attorney, but that was okay; we managed with that. So, you know, I know that everybody wants to – okay, so what are we doing to get $0.05; what are we doing to get $0.03, but it just doesn’t work that way. It’s really a never-ending focus on a bunch of small things that add up. In terms of the guidance range, as Dan said, you know, we are going to be swimming against about a $0.01 a share if this current trend in demand reduction continues with a lesser amount after the summer. So, that’s the bogey that we're fighting against. So obviously, when we give a $0.20 range, we have enough flexibility in there with that kind of a headwind with some of the offsets to reaffirm.

Great. And then just on the New Jersey capital program outside of the base rate case, just based on the schedules we have now, how are you feeling good about, you know, some meaningful amount of those investments starting to be made or being made in 2021?

Well, I feel good about it. Let me tell you why, because that is something you’ve heard me say before, despite phenomenally good management on the part of Governor Murphy, New Jersey has been dealt a really tough hand here. You know we are a densely populated state and therefore, as a result of that population density, we are being hit harder than any other state other than New York in terms of COVID-19 that is having huge social impacts, self-impact, as well as economic impact, and we are, as a company, probably best positioned to help in regard to those economic impacts. The energy efficiency filing that we have made has huge benefits in terms of up to 5,000 jobs that could be created as a result of that and the bill reductions for customers and shareholder benefits. I mean, that’s nothing that you can point to that has that kind of multiple benefits. In the past, I’m not saying this will be repeated now, but in the past, in 2008, when we had an economic downturn, it was a desire on the part of the BPU to accelerate some of the aging infrastructure replacement as a form of economic stimulus. We’ll certainly remind them of that and we do have bandwidth to do more, I mean electric distribution side than we’re doing now, which is useful stuff to do while recognizing some of the economic impacts that we’re experiencing as a state. So, I do think we are generally viewed as someone that can help with the economic recovery, and right now, as you well know, we’re expecting to resolve the energy efficiency component by September this year.

Okay, great. Thank you. Be well.

Thank you too.

Thanks, Steve.

Hi, good morning, guys, and it’s good to hear from you.

Same, John.

A quick one on just – am I hearing you right, Ralph, I think what you’re saying is that pretty much all of the capital work you're currently doing is continuing under an essential header, but it’s really more, you know, O&M type activities that you’re having to curtail, is that correct? Or are there some elements to the capital program that are also going to need to catch up a little bit when things start to normalize?

Well, that’s correct, Jonathan. You heard me correctly.

Okay, that was one. And then, you mentioned, Ralph, in your prepared remarks that you have some concerns about mutual aid and how that will work as we get into the year and storm season. Can you maybe talk about some of the things you're doing or thinking about as you try to address that?

First of all, I’m surprised if you can tell if those are prepared remarks. I thought you realized that I just – yes, that was – so we had a little bit of a taste of this, Jonathan, about two weeks ago. We had a significant storm roll through, but it was high winds and lots of rain, but it happened before the trees all leafed out. So we dodged a bit of a bullet, but normally what you do when you see a storm coming is you arrange for contractors and all the utilities will not likely to be affected because they’re not in the path of the storm to stage our workforce. It might just be getting them ready to leave from where they are or might actually get them to New Jersey and have them in place. We were able to secure about 40% of what we asked for, and it was a combination of — candidly, utilities not willing to risk their own employees in terms of their exposure to jobs and travel limitations put on some of the contractors. So, if we have that experience when the trees all have leaves on them and the wind blows then we will have to communicate extensively with customers about some of the likely delays that they will experience in being restored.

Okay, great. So, you're really pointing out the issue as opposed to that being, you know, a way of addressing here at this point.

Right.

Good morning, thanks for having me.

You’re welcome, Jeremy.

Just want to go back to FRR if I could, how do you see the near-term cost dynamics of an FRR versus the PJM capacity auction influencing the BPU, the valuation of the long-term issue of double payment for capacity?

So, there are multiple factors that we're exploring with the BPU as they are exploring with many other people. I didn't mean to suggest that we’re the only folks that they are talking to; that’s not the case. They have a formal proceeding that they've announced. One possibility is that you could be seeing a different price in New Jersey than you would see in PJM writ large, but the fact that you only need to secure a 15% or 16% reserve margin as opposed to the larger reserve margin that's in the broader PJM could allow the total amount of money that is paid by customers to be less likely whether you have a case where you pay a higher price in New Jersey, but you buy less of it. So, the unit cost is more, but the number of units is less, so the product of the two terms has got to be less expensive for the state. If you were to just look at offshore wind aspirations of the state and then take a look at what typical Eastern MAC capacity prices have been and then you factor in what the capacity value of the offshore wind might be granted by PJM, you quickly get to eight, if not nine figures in just a few years in terms of extra payments on the part of New Jersey customers for not having offshore wind be able to clear the auction. So, you have those two potential savings; one is the avoidance of paying twice, that’s the eight to nine figures of offshore wind capacity that won’t be granted recognition on the part of PJM and would not be able to clear the auction at the ACRs that have been proposed. The second is just the mere fact that by virtue of New Jersey having to secure only a 15% or 16% reserve margin, it could save there as well. So, you have this double benefit that the state could realize if it designs the FRR in a competitive way that recognizes the carbon-free resources that it is committed to securing.

Great, that’s really helpful. Thank you for that. And just one more if I could, if you have any thoughts you could share on when you think settlement discussions could begin on the CEF proceeding?

Well, so we've had good conversations with the board staff. They know what's important to us and we’ve been very clear. It's been to invest in different energy efficiency investments. You know, we hope that the Board would incentivize us, if I may have just created a verb, but at least we should be indifferent whether we invest in a circuit or meter or energy efficiency and that's worked in states. We need to have fixed cost recovery because the profitability of energy efficiency is much smaller than the fixed cost loss if you avoid a kilowatt-hour sale, and that's been recognized by other leading states. Last but not least, we want to make sure that the state recognizes the importance of having the useful life of the asset be matched up with the depreciable life of the asset, which is just sort of good ratemaking practice that we apply to our $30 billion in rate base throughout the system. I think those are the three critical items. Then, you have much more latitude about how much of this do you want to do? We’ve sized the program to achieve the targets of the Clean Energy Act. We could do more, but as the state doesn't want to achieve the targets of the Clean Energy Act or wants to phase that in more slowly, it may ask us to do less. I am encouraged by the fact that the state gave us $110 million bridge in just these next six months, while we wait to resolve the settlement discussions, and you know, if you look at a $110 million over six months and you compare it to the $40 million a year we’ve been averaging, that’s certainly a nice step in the right direction. I’m not trying to signal anything with that other than obviously growing enthusiasm for energy efficiency. So, we’ll know more by September, and that's a lot sooner than you may think. Hope that helps, Jeremy. I note once again in confidential settlement discussions, I have to just be careful about how much detail I share because I don’t think that’s fair to the other party.

Hi, good morning.

Paul, hope you’re well.

I’m managing, thank you. Just as a follow-up on the FRR discussion, it sounds like that given everything you’re saying and what the commission and what have you’re saying, it’s very likely that they probably will go for the FRR option, is that the way we should be thinking?

You know, look, they are the final decider of that, but I think that that is the logical thing for the state to do why New Jersey would want to pay twice for capacity in what is obviously an extremely ambitious carbon-free energy agenda would boggle my mind. You know, new solar and offshore wind are not going to clear the auction at these ACRs.

Okay.

So, you know, I would think that the state would be greatly incented to do an FRR.

Okay, that makes sense. And so, I guess what I was also wondering so to follow up on, you mentioned the stimulus benefit and of infrastructure development that you guys have been – that you guys have produced in the past and you also mentioned the ROE transmission discussion that you’re having with the commission. So I’m sort of wondering, you know, how should we think about - I think probably maybe you would disagree, there probably is going to be substantial budget pressure even with Federal assistance in New Jersey, how should we think about sort of just the potential financial problems that the state is going to be facing and weighing the two issues that you mentioned, which is one perhaps not wanting to see big rate impacts and then two wanting to probably see economic activity stimulated? You follow what I’m saying, how should we?

I do. I mean, if it were me and I were writing the script, which I don’t, but certainly what we’re telling policymakers is that an adjustment to transmission ROE to a reasonable level would still be a very attractive annual give back of rates to customers. Significant investments in energy efficiency also puts more money into customers’ pockets by virtue of bill reductions. Infrastructure investments help us to employ contractors and other folks and do work that gets paid back over 40 and 60 years because that’s how long these assets last. So, you have both expense savings through transmission ROE reset and energy efficiency as well as payroll increases through energy efficiency and payroll increases through infrastructure investment, the latter of which gets paid over many decades because that is the life of the asset. So, all that if done properly, results in net reductions in bills and creations of thousands of jobs, and that's not alchemy, that's just the hard reality and benefits associated with energy efficiency rate relief and infrastructure investment. So, I would do that in a heartbeat. And we are having those kinds of conversations; I know that that will be up to the BPU, though, to decide.

Awesome, thanks so much. I really appreciate it. Hang in there.

Take care, Paul. So, I think we're at the appointed hour. I just want to conclude with three thoughts for you. I know it's a bit of a cliché at this point, but I must tell you, I couldn't be more proud of our employees, whether it's managing a nuclear outage safely with de minimis impact on health and safety, and being able to get the work done on time or the storm response to what I mentioned before in terms of that rain event. Our call center stats are even better than they were; we've closed the books on time, our communications personnel are working from home by keeping our employees apprised of what's going on, and a shout out as Steve Fleishman mentioned to my wife for her superior cameraman skills in getting our commercial on the air. And by the way, folks are not working five days a week anymore. They are 24/7 during this, and somehow managing to get all of this done. So, I couldn't be more proud of them. I really want to thank the policymakers and decision-makers at the BPU and in New Jersey government. They have recognized the essential nature of the work we've done. They've allowed us to keep our capital work on track with the right social distancing and with the right precautions. We’ve taken that trust that they've given us quite seriously, and our exposure rates are lower than the population at large despite the fact that about half of our employees are out there in the field doing work on a regular basis and the BPU working remotely has kept their procedural schedules on track not only now do we have procedural schedules for all of CES, not only for energy efficiency, but for AMI, and for electric vehicles and battery storage, but they've also taken on the challenge of resolving an FRR. They’ve engaged us in an ROE discussion for transmission. So, folks at the state government are just doing tremendous things in terms of meeting these challenges that we all feel personally, while at the same time, keeping the trains running on time and adding a few trains to the schedule. So, despite these tough times, I'm just in awe of what people are doing everywhere, in terms of rising to the challenge, and to all of you on the call, if you have friends or family members who are in healthcare services or providing those services to the rest of the population, please express our thanks to them on our behalf and our respect and admiration for all that they are doing. So, we'll see some of you virtually I'm told in various meetings and conferences and we'll Zoom or WebEx or do whatever works and then hope to see you in person in the not a very distant future. Thank you. Be well and stay safe. Take care.

Ladies and gentlemen, that does conclude your conference for today. You may disconnect and thank you for participating.