Ladies and gentlemen, thank you for standing by. My name is Rob and I am your event operator today. I would like to welcome everyone to today's conference, Public Service Enterprise Group's Third Quarter 2022 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded today, October 31, 2022, and will be available for replay as an audio webcast on PSEG's Investor Relations website. I'd now like to turn the conference over to Carlotta Chan. Please go ahead.

Thank you, Rob. Welcome to PSEG's third quarter 2022 earnings presentation. Joining us on the call today are Ralph LaRossa, President and Chief Executive Officer of PSEG; and Dan Cregg, Executive Vice President and Chief Financial Officer. Our press release attachments and slides for the discussion today are posted on our website, and our 10-Q will be filed shortly. The earnings release and other matters discussed during today's call contain forward-looking statements and estimates that are subject to various risks and uncertainties. We will also discuss non-GAAP operating earnings, which differ from net income or loss as reported in accordance with generally accepted accounting principles in the United States. We include reconciliations of our non-GAAP financial measures and a disclaimer regarding forward-looking statements on our IR website and in today's material. Following Ralph and Dan's prepared remarks, we will conduct a 30-minute question-and-answer session. I will now turn the call over to Ralph.

Thank you, Carlotta, and thank you all for joining us today. As you may know, this is my first earnings call since becoming CEO in September. If you've met with us over the past few months, you've heard me lay out my initial action plan for PSEG to deliver value to our investors. The focus is clear and simple: continue to grow the company through investments with appropriate risk-adjusted returns and increase the predictability of our business by reducing the variability in both financial and operating results. PSEG has a solid utility operation, a constructive regulatory and policy environment, and now a federal tax incentive for a nuclear fleet that stabilizes its cash flows for a decade. These attributes make PSEG a compelling investment. Earlier today, we reported net income of $0.22 per share for the third quarter of 2022, compared to a net loss of $3.10 per share in the third quarter of 2021 that was related to the announced sale of our fossil assets. We also reported non-GAAP operating earnings of $0.86 per share for this third quarter, compared to $0.98 per share in the third quarter of 2021. Results for the 9 months ended September 30 of $2.83 per share place us squarely within our guidance range. We are narrowing our 2022 non-GAAP operating earnings guidance to $3.40 to $3.50 per share, assuming normal operations over the remaining 2 months of 2022. We remain highly confident in the growth potential of our regulated investments and are committed to cost discipline needed to minimize the impact of current economic conditions. We also reaffirm a 5% to 7% multiyear EPS CAGR to 2025, with the understanding that this CAGR is nonlinear. We fully intend to deliver on our earnings guidance expectations, as we've done for the last 17 years and counting. PSE&G's investments in transmission and distribution infrastructure continue to produce rate base growth consistent with our long-term expectations. Our new infrastructure advancement program, which launches investment in a critical last mile of our distribution system, and the clean energy future investments are also supporting a wide range of decarbonization priorities, driven by our programs to expand energy efficiency, electric vehicles, solar investments, and create clean energy jobs and training opportunities. Now, turning to our offshore wind ventures, we are approaching a final investment decision on Ocean Wind 1 in New Jersey to determine if we will proceed to the construction phase. We are reviewing our options related to our 25% equity investment in Ocean Wind 1, as well as our option to purchase 50% of Ørsted's Skipjack 2 project and options regarding PSEG's interest in the remaining Garden State Offshore Energy lease area. Last week, the BPU completed its review of offshore wind transmission competitive proposals and awarded several onshore-only projects. PSE&G was awarded $40 million of system upgrade work needed to accommodate the injection of offshore wind generation in Central New Jersey. However, the BPU also indicated it will consider additional solicitation to address the state's increased offshore wind generation targets. We remain optimistic that our emphasis on reliability and resiliency will keep us as a strong contender for any future offshore transmission solicitations to bring regional offshore wind projects onshore. Our Energy Strong investments in the aftermath of Sandy lifted and hardened PSE&G substations against future storms. With similar foresight, the BPU has recognized for the infrastructure advancement program that attention is needed to address the last mile of our distribution system and proactively replace critical components in advance of electrification. Safe and reliable operations will always be the core of our customer focus mindset. This is the focus of our team of over 12,000 dedicated employees every day in providing safe and reliable service to over 3 million customers in New Jersey and Long Island. As a result of these efforts, I am pleased to report that both PSE&G and our nuclear operations are trending at above top quartile metrics on several key measures. In addition, PSE&G continues to receive some of its highest ever customer satisfaction ratings from J.D. Power. The 2022 hurricane season has been relatively quiet in New Jersey and Long Island, which enabled PSE&G to provide mutual aid to Florida to assist with hurricane restoration. Our thoughts and prayers, in addition to our support, went out to all those impacted by Ian. I mention this cooperation because it is unique in our industry, and we all benefit from it. On this 10-year anniversary of Superstorm Sandy, we remain acutely aware of how a single powerful storm rolling up the Atlantic Coast can permanently affect lives, destroy homes, businesses, and livelihoods for extended periods of time. And we remember how grateful we were for the support we received then. I’m also proud to announce that MSCI has raised PSEG's corporate environmental, social and governance ratings to AAA from AA, placing us at its highest rating. PSEG has also improved its score within the top tier of the 2022 CPA-Zicklin Index of corporate political disclosure and accountability. I've met and listened intently to many of you these past few months, and I recognize the importance of maintaining our financial strength, preserving our ability to grow without needing to dilute our existing shareholder base, and rewarding our shareholders with a compelling common dividend yield. As we approach several critical decisions in the weeks and months ahead, I will be guided by the approach that I mentioned at the very beginning: prioritizing predictability and increasing shareholder returns. I look forward to meeting with many of you at the EEI Financial Conference over November 13 through November 15, where we will announce PSEG's 2023 full-year earnings guidance, provide more detail around our estimate of the pension impact on 2023 financials, as well as a longer-term EPS growth rate. I'll now turn the call over to Dan, who will provide you with the financial review and outlook.

Thanks, Ralph. Good morning, everybody. As Ralph mentioned, for the third quarter of 2022, PSEG reported net income of $0.22 per share and non-GAAP operating earnings of $0.86 per share. We provided you with information on Slides 8 and 10 regarding the contribution to non-GAAP operating earnings by business for the third quarter and year-to-date periods ended September 30. Slides 9 and 11 contain waterfall charts that take you through the net changes quarter-over-quarter and year-to-date for 2022 and 2021, and non-GAAP operating earnings by major business. I will now discuss results starting with PSE&G. PSE&G's results were $0.03 higher compared to the third quarter of 2021, driven by continued capital investments in transmission, distribution, and clean energy. Compared to the third quarter of 2021, transmission margin was flat as growth and rate base of $0.02 per share was offset by the combination of the August 2021 formula rate settlement, which included a lower return on equity, and the timing of O&M expense first recovery. For distribution, electric margin was $0.02 favorable compared to the third quarter of 2021, driven by investments in Energy Strong II and the impact of the conservation incentive program or CIP mechanism. Gas margin improved by $0.01 per share over the third quarter of 2021, reflecting recoveries of our Gas System Modernization II investments and other margin primarily related to our appliance service business, which also added $0.01 per share compared with the third quarter of 2021. O&M expense was $0.01 per share unfavorable compared with the third quarter of 2021, and interest expense was $0.01 per share unfavorable, reflecting higher investment. Flow-through taxes and other items had a net unfavorable impact of $0.01 per share compared to the third quarter of 2021, driven by the use of an annual effective tax rate. For the year to date, unfavorable flow-through taxes of $0.07 per share year-over-year will reverse in the fourth quarter of 2022. Lower shares outstanding had a $0.01 per share benefit on third-quarter 2022 results versus the year earlier quarter, reflecting the impact of the completed $500 million share repurchase program. In addition, non-operating pension expense was $0.01 per share favorable compared with the third quarter of 2021. Weather during the third quarter, as measured by the temperature-humidity index, or THI, was 19% warmer than normal, but similar to conditions during the third quarter of 2021. With the CIP in effect, variations in weather, both positive and negative, have a limited impact on electric and gas margins, while enabling the widespread adoption of PSE&G's energy efficiency programs. PSE&G's system peak load exceeded 10,000 megawatts for a second summer in a row on August 9. Growth in the number of electric and gas customers has continued to track at approximately 1% for the trailing 12-month period ended September 30. Regarding our capital spending program, PSE&G invested approximately $795 million during the third quarter and $2.2 billion year-to-date through September 30. PSE&G now expects a revised capital spending forecast of $3 billion for 2022, up from the planned 2022 capital program of $2.9 billion. The 2022 capital spending program includes transmission investment, the continued rollout of the Gas System Modernization Program II, Energy Strong II, Clean Energy Future investments, and the Infrastructure Advancement Program focused on our distribution system’s last mile. On the regulatory front, in September of 2022, PSE&G filed a petition with the BPU requesting an accounting order with an effective date of January 1, 2023, to authorize PSE&G to modify its method for calculating pension expense for ratemaking purposes, which would partly reduce future variability in pension expense. Also in September, PSE&G filed a petition with the BPU requesting a $320 million, 9-month extension of its Clean Energy Future - Energy Efficiency program, which would serve to align future program timing with the other New Jersey electric and gas utilities. And in October, PSE&G filed its annual Transmission Formula Rate update with FERC, which increases its annual transmission revenue requirement by $69 million effective January 1, 2023. Now, turning to Carbon-Free Infrastructure & Other, which reported a net loss of $285 million or $0.58 per share for the third quarter of 2022, compared with a net loss of $1,953 million or $3.87 per share in the third quarter impacted by the Fossil sale process. Non-GAAP operating earnings were $0.15 per share lower in the third quarter of 2021, driven by lower margin related to the Fossil divestiture, lower capacity prices for the remaining nuclear fleet, and re-contracting at lower prices. For the third quarter of 2022, electric gross margin declined by $0.29 per share, which includes re-contracting approximately 8 terawatt hours of nuclear generation at a $3 per megawatt hour lower average price. In addition, higher off-system sales at gas operations from heightened commodity volatility added $0.01 per share to total gross margin versus the third quarter of '21, with customers also benefiting from a longstanding sharing mechanism in place. Cost comparisons for the third quarter of 2022 improved by $0.09 per share from the year-earlier period, driven by lower O&M, depreciation, and interest expense related to the Fossil divestiture. Taxes and other were $0.04 per share favorable versus the third quarter of 2021. During '21, the Solar Source sale was reflected in June, cessation of Fossil depreciation began in August onward as the assets were held-for-sale, and the retirement of PSEG Power’s outstanding debt occurred in October. Thus, the majority of the favorable cost comparisons related to the Fossil divestiture occurred in the first half of 2022. Nuclear generating output declined slightly to approximately 8 terawatt hours in the third quarter of 2022, reflecting the ramp down of Hope Creek and Peach Bottom 2 into the fourth quarter refueling outages. The capacity factor of the nuclear fleet for the year-to-date period through September 30 was 94.3%. PSEG forecasts generation output of approximately 7 terawatt hours for the fourth quarter of 2022 and has hedged approximately 95% to 100% of this production at an average price of $27 per megawatt hour. For '23, PSEG is forecasting nuclear baseload output of 30 to 32 terawatt hours and has hedged 95% to 100% of this output at an average price of $30 per megawatt hour. For 2024, PSEG is forecasting nuclear baseload output of 29 to 31 terawatt hours and has hedged 55% to 60% of this output at an average price of $32 per megawatt hour. As of September 30, 2022, our total available credit capacity was $3.4 billion, including $1 billion at PSE&G. PSEG Power had net cash collateral postings of $2.2 billion at September 30 related to out-of-the-money hedge positions as a result of higher energy prices, and that amount was $1.7 billion through last Friday. The majority of this collateral relates to hedges in place through the end of '23 and is expected to be returned as PSEG Power satisfies its obligations under those contracts or if market prices decline in the interim. In July of 2022, PSEG repaid a $1.25 billion short-term loan that was due in August. Following the repayment of this term loan, PSEG had outstanding a total of $2 billion of 364-day term loans expiring in April and May of 2023 to support power collateral needs. PSEG Power had an outstanding of $1.25 billion term loan expiring March of '25. Combined, these term loans comprise $3.25 billion of variable rate debt. During September and October, we entered into interest rate swaps from floating to fixed for $1.05 billion of our outstanding term loans, reducing variable rate debt exposure. Moody's recently published updated credit opinions for PSEG, PSE&G, and PSEG Power with credit ratings and outlooks remaining unchanged. Regarding the potential headwinds of the pension impact on 2023 costs, we continue to monitor several items that will influence the pension calculations when we take the actual measure on December 31. We will assess the net impact of various factors including the decline of financial markets year-to-date, updating the discount rate and interest component, setting the expected return on planned assets for 2023, and the inclusion of the impact of the petition filed with the BPU earlier this year. We will include an estimate of the impacts of pension on our 2023 earnings guidance, which as Ralph said, we will provide at EEI. As Ralph also mentioned earlier, we've narrowed our 2022 non-GAAP operating earnings guidance to $3.40 to $3.50 per share, with regulated operations contributing approximately 90% of the total. For the full year, PSE&G's forecast of 2022 net income is narrowed to $1,545 million to $1,575 million, reflecting strong transmission and distribution margin growth in the year-to-date period. 2022 non-GAAP operating earnings for CFIO are now forecasted at $160 million to $180 million, reflecting higher interest costs. PSEG's 2022 earnings guidance excludes financial results from the divested fossil assets. That concludes our prepared remarks. So we can now open up the line to begin the question-and-answer session.

Just as a reminder, before we go to Q&A, I'd ask you to state your name and your firm, and that we ask you to limit your questions to one and one follow-up, so that we can get to as many of you as possible. Rob, you can start the queue. Thanks.

Our first question comes from the line of Shar Pourreza with Guggenheim Partners. Please proceed with your question.

Hi, Shar.

Hey, guys. Good morning. How are you doing?

Hey, Shar. Good.

Excellent. So, again, Ralph, as we are getting closer to year-end and we still see continued turbulence in the market, what are some of the moving pieces around offsetting pension headwinds? Is it your regulatory filing? Is that enough to cushion some of the drag as we're thinking about '23? And is that kind of a contributing factor for the removal of that 5% to 7% language, which I think caused a lot of investor confusion this morning, even though you just verbally reiterated? Can you just elaborate on this and kind of what you mean by nonlinear for modeling purposes? Thanks.

Certainly, Shar. There are a few key factors we are considering to mitigate the impacts of the pension and the market challenges you've mentioned. First, our filing with the BPU accounts for about 20% of the pension impact. Secondly, the lift-out initiative that Dan has been overseeing also falls within the 20% to 30% range. Lastly, we are exploring O&M offsets internally, which we've discussed for quite a while. We aim to identify sustainable O&M offsets that will remain effective even after we submit our rate case in 2023, which is set to take effect in 2025. These three elements are what we are focusing on to counterbalance the pension challenges. Additionally, the 5% to 7% figure we previously mentioned is inherently nonlinear, a point we've clarified on earlier calls. We have a test year from 2022 that we will be filing in 2023, with rates expected to take effect in 2025. This will inherently include an uplift and influences the nonlinear aspect we discussed.

Got it. But just to reiterate, you have not removed the language around 5% to 7%.

We have not. We are committed to the 5% to 7% through '25.

Perfect. Great. And then just lastly, I guess, Ralph, as we're sort of thinking about your offshore wind segment and sort of the remaining nuclear assets in a sale or retention scenario. We could see some interesting public marks on both fairly soon from some of your Eastern peers. I mean, Ralph, you've been at the helm now for a few months. What's your latest thinking here? Are you waiting for public signals to decide what you want to do and where the value is? Is the Analyst Day the right podium to announce any strategic paths? If any, I guess, how are you sort of thinking about the non-distribution business as you've taken your seat, right?

Yes, so Shar, split those into two pieces, right. First, from a wind standpoint, we've been pretty uneven. We've mentioned it in my prepared remarks that we are looking at the FID on Ocean Wind 1, that's the project in New Jersey. So one of the things we're looking at there is where the costs come in and what that project looks like from an investment standpoint. That's pretty straightforward. For our Skipjack and other projects, we're certainly looking at what might be out there from a mark, as you said, whether it's from some of our peers or from some other entities. I think the offshore wind is pretty straightforward. Transmission, as we talked about, again, very happy to see what the BPU did. That decision, I think, is the right thing to do for the ratepayers in New Jersey. There's some uncertainty around the tax treatment of the copper that will be in the water, and the BPU kind of kicking the can and moving that decision later makes sense. So that kind of ties together everything from an offshore standpoint. For nuclear, there's a lot of details to be worked out in the treasury rates. When those are worked out and we see some marks in the marketplace, we should be in a very good position to tell whether we are the natural owners, as my predecessor Ralph Izzo said multiple times.

Got it. Perfect. Congrats, Ralph, on your first earnings call. And we'll see you guys in a couple of weeks.

Looking forward to it.

See you, Shar.

Thank you. Our next question is from the line of David Arcaro with Morgan Stanley. Please proceed with your question.

Hey, David.

Hey, good morning. Thanks so much for taking my questions. Maybe on the pension first, I think you can clarify or give a little bit more color around the lift-out approach that you mentioned could be pursued for a portion of the pension. And I was just curious if there are any other regulatory approaches that could be pursued as a kind of follow-on to what you've already requested with the BPU?

Yes, so Dan is going to give you more on the lift-out. Just the other obvious regulatory solution we could pursue is when we file for the rate cases to put in a pension tracker, which we fully expect to be doing in our rate filing, but I will give Dan the mic to talk a little more about the lift-out.

Yes. And David, really, there’s — I think the easiest way to think about that is if the pension is giving us some variability within results, then having it smaller would give us less variability. And in that same vein, we continue to have a pension that is well funded. Yet we have seen assets decline as I think every pension fund in the country has, but we've also seen discount rates come down. As they come down in parallel, the fund stays pretty well funded. But you can do a lift-out, which essentially would be taking some of the assets and taking some of the obligations and moving them to an appropriate creditworthy entity and have that be housed elsewhere. It would shrink the size of the pension, and we are beginning down a path of that exploration. To the extent that we find that to be a successful way to go, we would inform you at that time, but it would also have the effect of reducing the overall pension and therefore, the overall variability of it. We will continue to keep you posted as we continue to go down that path.

Okay, got it. Great. That's helpful. And then, Ralph, you mentioned a little bit on the offshore wind transmission opportunity, but I was just curious, given what you saw with the BPU's decisions and elections within this first solicitation and how the other bidders approached it. Any thoughts on how you might look at future opportunities, whether you still think you can be competitive and how you might respond in terms of setting up other future project designs for offshore bidding?

Sure. The selection that the BPU made was, again, focused onshore. I'd like to just think about the state. The northern part of New Jersey has a lot of takeaway capability already on the transmission system because of the Oyster Creek and Bill England retirements in the southern part of the state. So that onshore transmission system was pretty well set up to take on offshore generation. The northern part of the state also has a pretty robust transmission system because of a lot of the work we've done at PSEG over the past 10 to 15 years after we started to get approval from projects post the 2003 blackout. What we've learned, both us and our competitors, is what others are thinking about and how they're designing the offshore grid from both a financial and engineering standpoint. We think our Mesh network is absolutely the most resilient and robust solution. For all 11,000 megawatts, I'm absolutely convinced that you need that robust solution to be in place. So looking forward to future bidding rounds, but I am confident that our design will meet the reliability and resiliency needs the state demands.

Okay. Appreciate that. Thanks so much.

Thanks, David.

Our next question is from the line of Julien Dumoulin-Smith with Bank of America. Please proceed with your question.

Hey, good morning, team. Thanks for the time and the opportunity. Hope you guys are well.

Looking forward to seeing you soon. Thank you. Just to follow up on Shar's question, could you clarify your expectations regarding the update versus your reaffirmation of the 5% to 7% guidance for 2022 through 2025? Is the information you're planning to release in the coming weeks more about projecting that forward? Will 2022 remain the baseline? I understand that due to this nonlinearity, there's likely to be a significant focus on this aspect. Or does this include the non-utility businesses in the EPS guidance as well? Can you provide more insight on how you're approaching this in relation to what was reaffirmed on the call?

Yes. Well, Julien, I won't front run what we're going to do in EEI much, but I will tell you that we think about the business we have in front of us at the moment, and we'll look at it from that direction. We'll give you '23 guidance, and then we will extend the guidance beyond that. So that's the way we are thinking about it and the way you should be prepared for EEI.

Got it. And just to clarify, would that be based off of '23? And then also, are you assuming 2024 here has the PTC in effect versus the hedge in terms of an uplift?

Well, think about what you just asked me from a PTC and a hedge standpoint. That exactly is the core issue that I was raising earlier, which is treasury regulations and how that's going to come out. We will pick one of those and give you some guidance based on that. For '22, '23, Julien, you can use '21 as the baseline. You have all that data. Whatever CAGR you decide to use going forward, we will talk to you about '23 and future years.

Got it. Okay. But you feel covered off of using baseline of '21 and '22 still?

You can use '20 or go back to '19, however you want to go, Julien. We will give you the CAGR going forward.

Wonderful. Thank you guys very much. See you then. Good luck.

The next question comes from the line of Nicholas Campanella with Credit Suisse. Please proceed with your question.

Hi, Nick.

Hey, how are you? Thanks for taking the questions. I wanted to ask about the hedges. I think your hedge percentages are unchanged for '24. So, why not do more? Can you provide an update on your general hedging strategy for the nuclear assets?

Yes. And I'm going to ask Dan to give you a little more color on this. But again, I will point everyone back to the regulations that are needed out of treasury and some of the guidance there. It's a balance in terms of how we are going to be looking at this from both a PTC standpoint and our ZEC process. Dan, if you want to give a little more?

Yes. I think, Nick, if you take a look at 2022 and 2023, we're essentially fully hedged for those years, and really where there's some open is into those years where the PTC comes about. We're trying to make sure we understand the backdrop of the PTC. By the same token, we've seen some decline in markets in the near term, but those declines really have been mostly focused on '22 and '23, and we've seen the back end hold up fairly well. We're keeping an eye on what happens down in treasury as well as keeping an eye on markets. That’s how we are approaching things as we go forward.

Thanks a lot. Thanks a lot. So I guess just on the lift out as it pertains to the pension, I think you said potentially can mitigate 20% to 30% of the impact. Is that something that we should have clarity on by year-end, or is that something that you're continuing to work through? Maybe it's more of an Analyst Day item. And then just as I think about transacting on that lift out and the overall contribution to EPS, is it a headwind, like i.e., a step-down headwind to the 5 to 7 CAGR? Or is it just one more one-time in nature and reduces volatility going forward? Just trying to think through how a decision like that could impact '23 and '24? Thanks.

Yes. I think Analyst Day is probably the right approximate time for that. It's going to depend upon how our analysis has gone for us to give you a little bit more detail about it. One of the ways to think about what happens from the pension perspective is you determine an estimated return on your assets and you have a discount rate for your liabilities. Those comparisons and that gap determine what you see coming out of it. A smaller pension while having less volatility would also have less of a contribution. We would certainly include that in whatever guidance we were to give. But as we've seen interest rates come up, we've seen discount rates rise, there's not a whole lot of daylight between those two. Whatever we give you will be based upon our plans at that time and our calculations at that time. Analyst Day is when we will be able to firm that up for you.

Yes, that would be my expectation that could be around Analyst Day.

All right. Thanks so much. Really appreciate it. See you in a few weeks.

Yes.

Our next question is from the line of Durgesh Chopra with Evercore ISI. Please proceed with your question.

Hey, good morning, team. Thanks for giving me time here. Just on the pension discussion, can you remind us what the regulated versus non-regulated mix of pension is? Is it still around 80% regulated toward pension?

It's closer to 70, Durgesh.

Got it. 70%. And so when we think about the lift-out, are we thinking — I'm just trying to see if the 20% — could you lift out the regulated portion of the pension too? Or is it just the non-regulated portion? I'm just wondering if there's any state opposition or regulatory opposition to lifting out the regulated portion of the pension?

Durgesh, I think it would be premature for us to get into that level of detail at this point. We have some work to be done. I think our expectation is that we will have those kinds of details at Analyst Day.

Understood. Thanks, guys. Appreciate it.

Thanks, Durgesh.

The next question is from the line of Jeremy Tonet with JPMorgan. Please proceed with your question.

Hi. Good morning.

Good morning, Jeremy.

How are you?

Good. Just wanted to start off with offshore wind, if I could here. How do you view offshore wind risk currently, particularly given some of the high-profile development or other projects that have kind of implied a degradation of returns in this inflationary environment?

Jeremy, I think where these projects are is no different from others you've been reading about. We've been steadfast in that front running our partner who holds a 75% stake in this. Ørsted had their call coming up in the future, and I will let them talk to that level of detail. What you've been seeing with others is consistent with what we're seeing with our projects.

Got it. That makes sense there. And I was just wondering as it relates to power, if you could walk us through the return of your collateral postings on power hedges. Is it kind of fair to think of these financings as the incremental drag in the current environment? And are there any kind of offsets looking versus that?

Yes, I think if you think about our overall hedging picture at our percent hedge, 2022 is mostly behind us. 2023 is where most of the hedges are, so you would see most of that collateral come back as we go through 2023. As that cash comes back to us, frankly, there are two ways that it could happen. You could see market moves, which could move it up or down. But over time, as you deliver on those contracts, you see that coming back to you. What that's going to do is lessen the overall cash needs that we have and ultimately reduce some of those borrowings.

If you look at the second to last paragraph in our release, we've dropped from $2.2 billion to $1.7 billion, and that's a reflection of the moves in the market over that time frame, listed there since the end of September into the end of October. Dan's explanation is aligned with what we have in that release.

Got it. That’s helpful. Thank you.

Thanks, Jeremy.

The next question is from the line of Steve Fleishman with Wolfe Research. Please proceed with your question.

Yes. Hi, good morning. Thanks, and Ralph, congratulations on your first call.

Thank you, Steve. Good to have you on.

I've been looking forward to this for a long time. You mentioned that you will provide guidance for 2023 at EEI and reaffirmed the 5% to 7% target for 2025. Will you offer some sort of roadmap showing how you plan to transition from the 2023 guidance to that 5% to 7% goal in 2025, so we can have clarity on that process?

Yes, we absolutely will.

Okay. That would be very helpful. And then secondly, given the pension impact in '23 as well as going into the rate case test year, is it fair to assume that you may be kind of under-earning in 2023?

Yes, I wouldn't usually like you to point to that, but I would not make an assumption one way or the other on that about how we're entering that test year.

Okay. Lastly, just on nuclear, Ralph, you've talked about the kind of better visibility of nuclear, but also trying to reduce volatility. Obviously, at the floor price, there’s super visibility and a lot of certainty. But at higher prices, in theory, there are great news, great returns, but more variability. Just any thoughts on how that fits into your framework that you've talked about?

Yes. No, 100%. A lot of that gets back to the hedging strategy and what makes sense from a treasury rate standpoint. I think we need to see that visibility, understand what potential volatility is down the road and also look at what growth we potentially have from that business and put all three of those pieces together and determine whether or not it fits. That's exactly what we've been talking about, and it's not going to happen tomorrow, but we need those regulations in place. We need to understand what those growth opportunities are, and we need to see what these marks are.

Growth being stuff like hydrogen, you mean, or something else?

We've talked a little bit about some growth opportunities that we now have in front of us because the revenue stream is more certain, right? Simple things like fuel cycles. There are a couple of those things out there as well that we mentioned in the past. We would not have pursued based upon a 3-year ZEC cycle, but now with a much longer runway out of the PTC, we have those opportunities in front of us.

Got it. Thank you.

So, Steve, I mean, I think implied in your question is you do have that floor, which is helpful from a variability standpoint. If you're above it, you're happy to be above it because you have a higher value location. The challenge, though, is trying to manage whatever variability does happen there. But frankly, it's a better place to be if you're above that floor.

Agree. Thank you very much.

The next question comes from the line of Travis Miller with Morningstar. Please proceed with your question.

Thanks for taking my question.

Hey, Travis.

Hi. When you think back to the offshore winds discussion, if you weren't to go forward with that or if you were to sell out of that, how do you think about capital allocation over the next 4 to 5 years?

Yes. I think, frankly, Travis, right now that is one of the options that's there. We've talked a little bit about some transmission work. We've referenced that as being somewhere in the $2 billion to $7 billion range for our 50-50 partnership. There is still a degree of capital that, I think, as Ralph alluded to before, with the state's target of 11,000 megawatts, we will still continue to look for whether that solution does make sense. Beyond that, predominantly, capital would be going to the utility part of the business. I think there continues to be areas to invest within the utility, and that would be the number one place where we deploy capital.

And again, we are still hopeful about that offshore transmission and a full Mesh network. I think there's an opportunity there in addition to the core utility activities. All of this, though, as we've been teeing up, will come together at the investor conference.

Okay. And I think you answered my second question, but on your update on the opportunity set in terms of dollars for that transmission, the offshore-related transmission, is that the $2 billion to $7 billion?

Yes, based on the selection made by the BPU, which focused on the onshore work, a significant portion of that opportunity still lies ahead of us.

Okay. And so that would be both the onshore and the, say, under the sea?

Most of what's needed and most of what we were in our bids were offshore. There's a little piece of onshore work that could be done up in the northern part of the state, as I kind of laid out earlier, think about those three doors or entry points into New Jersey for offshore wind. The largest amount of work that was needed was in the central part of the state, in Jersey Central Power & Light territory, but a little bit for us up in the North if that entry point is selected.

Okay. Perfect. Thanks so much.

Thanks, Travis.

Our next question comes from the line of Paul Patterson with Glenrock Associates. Please proceed with your question.

Hey. Good morning, guys.

Hey, Paul.

Hi, Paul.

I apologize if I missed it, but when do you expect the BPU to act on the pension accounting order?

Yes. Our petition had requested a response by year-end. We have some discovery and there’s been activity on it, but they will act on their own time. Our request was to see if we could get that in place by year-end. Potentially if we get something modestly after that, it could still be effective as of year-end, but that was the anticipation and that's where things stand.

Okay. Regarding the wind project and the economic factors you mentioned, how should we approach the Final Investment Decision? What steps should we anticipate regarding the possibility of requesting a change in the contract? Will there be a need for rebidding? I’m curious about how we should view the timeline for your review process and the Final Investment Decision considering the updated economic conditions.

Yes. So, Paul, again, our FID decision is our decision to invest in the joint venture. The joint venture's decision as to whether or not they want to talk to the state or customers, or however they want to do that, that's with the joint venture. I leave it to our partners Ørsted to discuss it if they so choose. There’s no set timeline, and we've talked about that on prior calls. That is a decision the joint venture will make based upon what contracts they choose to enter into and in what timeframe. No set timeline in any of our contracts as to the next date, there will be a decision.

It's not a calendar date, Paul. It's just really FID moves you to the construction phase of the project. It's when things are ready to move to that phase.

Okay. Fair enough. Thanks so much.

The next question is from the line of Ryan Levine with Citi. Please proceed with your question.

Hey, Ryan.

Good morning. Hi, everybody, and thanks for taking my question. Given the EPS growth guidance through 2025, the new PTC through 2032 and the decision around transacting the nuclear decision, how are you thinking about managing the 2025 Power debt maturities to be able to continue your EPS growth rate under various scenarios?

Yes. I think, Ryan, it will depend on overall cash needs and overall revenue picture. We will determine what the best magnitude of debt would be at that entity based on what the overall economics that can be supported there, what makes sense. We don't have an absolute number, but we do have in place is a 3-year term loan that sits at Power and runs to '25. We will be looking at all that to make that determination as we get closer to that date.

Is there any consideration to amend and extend the duration to provide more earnings smoothness or keep things more visible?

Yes. We will do what makes sense as we approach that maturity or even before if it makes sense.

I appreciate it. Thank you.

Thank you. There are no further questions at this time. I would like to turn the floor back to Mr. LaRossa for closing comments.

Okay. Thanks. Thank you for participating in the first call I've had. I appreciate the interest and the opportunity to talk to all of you. I also want to reiterate in this forum, my thanks to our Board and to my predecessor, Ralph Izzo for this opportunity. I am internally grateful and humbled by what's in front of us, but at the same time, excited and look forward to continuing the conversations and providing more clarity and what we are trying to do to remove some of the volatility that has been a concern for some of you at EEI. I can't wait to have those conversations. Again, I appreciate you all calling in.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.