10-Q: PSEG Reports Strong Q3 Earnings Amid Strategic Investments

Public Service Enterprise Group (PSEG) reports significant increases in net income and operating revenues for Q3 and the first nine months of 2025, driven by regulated investments and higher energy prices, while navigating complex regulatory and market challenges.

Summary

• PSEG's consolidated net income for the three months ended September 30, 2025, increased to $622 million ($1.24 diluted EPS) from $520 million ($1.04 diluted EPS) in the prior year period.
• For the nine months ended September 30, 2025, consolidated net income rose to $1,796 million ($3.59 diluted EPS) from $1,486 million ($2.97 diluted EPS) in the comparable period of 2024.
• Consolidated operating revenues grew by 22% to $3,226 million for the three months and 18% to $9,253 million for the nine months ended September 30, 2025, compared to the prior year periods.
• Operating cash flow for the nine months ended September 30, 2025, increased by $811 million to $2,577 million, primarily due to regulatory deferrals, inventory changes, vendor payment timing, and tax refunds at PSE&G, combined with higher earnings at PSEG Power.
• PSEG plans a regulated capital investment program of $21 billion to $24 billion for 2025-2029, targeting a 6% to 7.5% compound annual growth rate in its regulated rate base.
• PSE&G's regulated rate base increased from approximately $30 billion as of December 31, 2023, to approximately $34 billion as of December 31, 2024.
• The BPU approved PSE&G's CEF-EE II filing, authorizing approximately $2.9 billion for energy efficiency projects from January 1, 2025, through June 30, 2027.
• PSEG Power's nuclear units generated approximately 23.8 terawatt hours and operated at a 93.7% capacity factor during the first nine months of 2025.
• The LIPA board of trustees approved a five-year extension of PSEG LI's Operations Services Agreement in September 2025, subsequently approved by the New York State Attorney General in October 2025, pending New York State Comptroller approval.

Sentiment

Score: 7

Explanation: The company demonstrates strong financial performance and a clear strategic direction focused on regulated growth and clean energy. However, significant regulatory uncertainties, ongoing litigation, and market volatility introduce notable risks that temper an otherwise very positive outlook.

Positives

• Consolidated net income increased by $102 million (20%) for the three months and $310 million (21%) for the nine months ended September 30, 2025, year-over-year.
• Diluted EPS increased by $0.20 (19%) for the three months and $0.62 (21%) for the nine months ended September 30, 2025, year-over-year.
• Operating revenues saw substantial growth, up $584 million (22%) for the three months and $1,428 million (18%) for the nine months ended September 30, 2025.
• Operating cash flow significantly improved, increasing by $811 million to $2,577 million for the nine months ended September 30, 2025.
• PSE&G's distribution rate case settlement in October 2024 resulted in a $17.8 billion rate base, a 9.6% return on equity, and new rates effective October 15, 2024, contributing to higher electric and gas revenues.
• The BPU approved a $2.9 billion Clean Energy Future-Energy Efficiency II program for PSE&G, signaling continued investment in regulated clean energy initiatives.
• PSEG Power's nuclear units demonstrated strong operational performance with a 93.7% capacity factor for the first nine months of 2025.
• The NRC reinstated the 2053 and 2054 license expiration dates for the Peach Bottom nuclear units in September 2025, providing long-term operational clarity.
• PSEG's Board of Directors approved a $0.63 per share common stock dividend for Q3 2025, reflecting an indicative annual rate of $2.52 per share.
• The company successfully extended its $3.75 billion revolving credit facilities through March 2029, enhancing short-term liquidity.

Negatives

• Net Gains (Losses) on Trust Investments decreased by $27 million (30%) for the three months and $26 million (14%) for the nine months ended September 30, 2025, primarily due to lower net unrealized gains on equity securities in the NDT fund.
• PSEG Power & Other's net income decreased by $34 million (24%) for the three months ended September 30, 2025, compared to the prior year, despite overall consolidated growth.
• Interest expense increased by $26 million (11%) for the three months and $92 million (14%) for the nine months ended September 30, 2025, due to incremental debt and replacement of maturing debt at higher rates.
• Income tax expense for PSEG increased significantly by $59 million (N/A%) for the three months and $128 million (92%) for the nine months ended September 30, 2025, partly due to the absence of nuclear PTC benefits in 2025.
• The PJM awarded $424 million transmission project in Maryland/Northern Virginia, directed for a 2027 in-service date, is not believed to be reasonably achievable due to procedural timelines.
• A competitor has filed litigation against LIPA challenging the bidding process for the PSEG LI contract extension, creating uncertainty.
• New Jersey's increasing demand for power and lack of sufficient new generation resources have led to higher electricity costs for customers and regulatory uncertainty.
• The new New Jersey law prohibiting disconnection for non-payment during summer months (June 15-August 31, starting 2026) and extended deferred payment arrangements are likely to increase Accounts Receivable and bad debt expense in the future.

Risks

• Inability to successfully develop, obtain regulatory approval for, or construct transmission and distribution, and nuclear generation projects.
• Physical, financial, and transition risks related to climate change, including increased legislative and regulatory burdens, changing customer preferences, and lawsuits.
• Equipment failures, accidents, critical operating technology or business system failures, natural disasters, severe weather events, acts of war, terrorism, sabotage, physical attacks, security breaches, or cyberattacks.
• Inability to recover the carrying amount of long-lived assets.
• Disruptions or cost increases in the supply chain, including labor shortages.
• Inability to maintain sufficient liquidity or access sufficient capital on commercially reasonable terms.
• Impact of cybersecurity attacks or intrusions or other disruptions to information technology, operational, or other systems.
• Increasing demand for power and load growth, potentially compounded by a shift away from natural gas toward increased electrification.
• Failure to attract and retain a qualified workforce.
• Increases in the costs of equipment, materials, fuel, services, and labor.
• Impact of covenants in debt instruments and credit agreements on the business.
• Adverse performance of defined benefit plan trust funds and Nuclear Decommissioning Trust Fund and increases in funding requirements.
• Inability to enter into or extend certain significant contracts.
• Development, adoption, and use of Artificial Intelligence by the company and third-party vendors.
• Fluctuations in, or third-party default risk in wholesale power and natural gas markets, including potential impacts on the economic viability of generation units.
• Ability to obtain adequate nuclear fuel supply.
• Changes in technology related to energy generation, distribution, and consumption and changes in customer usage patterns.
• Third-party credit risk relating to the sale of nuclear generation output and purchase of nuclear fuel.
• Inability to meet commitments under forward sale obligations and Regional Transmission Organization rules.
• Impact of changes in state and federal legislation and regulations on the business, including PSE&G's ability to recover costs and earn returns on authorized investments.
• PSE&G's proposed investment projects or programs may not be fully approved by regulators, and its capital investment may be lower than planned.
• Ability to receive sufficient financial support for New Jersey nuclear plants from markets, production tax credit, and/or zero emission certificates program.
• Adverse changes in and non-compliance with energy industry laws, policies, regulations, and standards, including market structures and transmission planning and transmission returns.
• Risks associated with ownership and operation of nuclear facilities and third-party operation of co-owned nuclear facilities, including increased nuclear fuel storage costs, regulatory risks, and operational, financial, environmental, and health and safety risks.
• Changes in federal, state, and local environmental laws and regulations and enforcement.
• Delays in receipt of, or an inability to receive, necessary licenses and permits and siting approvals.
• Changes in tax laws and regulations, including the impact of the Corporate Alternative Minimum Tax (CAMT) and Production Tax Credit (PTC) guidance uncertainty.
• Potential loss of the 50 basis point adder to PSE&G's base ROE for PJM membership, which could reduce annual Net Income and cash inflows by approximately $40 million.
• Uncertain outcome of New Jersey Clean Energy Stakeholder Proceedings, which could materially impact the business, results of operations, and cash flows.
• Significant environmental liabilities related to the Passaic River, Newark Bay, Hackensack River, MGP Remediation Program, and Legacy Environmental Obligations at Former Fossil Generating Sites, with potential for material additional costs.
• Increased Accounts Receivable and bad debt expense in the future due to new state laws prohibiting disconnection for non-payment during summer months and extended deferred payment arrangements for residential customers.
• Uncertainty regarding federal executive orders and increased New Jersey state legislative activity concerning energy affordability, resource adequacy, and regulatory topics.
• Litigation risks, including a $68 million claim from Durr Mechanical Construction, Inc. and a class action antitrust complaint alleging compensation fixing for nuclear generation workers.

Future Outlook

PSEG's future success hinges on maintaining strong operational and financial performance, effectively addressing regulatory and legislative developments, and responding to market challenges. The company plans to continue allocating capital primarily towards regulated investments, aiming for a 6% to 7.5% compound annual growth rate in its regulated rate base through 2029. Key initiatives include modernizing energy infrastructure, improving reliability and resilience, expanding energy efficiency programs, and supporting New Jersey's clean energy goals. PSEG will advocate for appropriate regulatory guidance on the Production Tax Credit (PTC) to support its nuclear generation and explore long-term power sale agreements. The company expects to confront regulatory and political uncertainty, financial market performance impacts (pension funding, interest rates), cost management challenges, increasing cybersecurity and physical attack risks, changes in tax laws, and the impact of energy demand shifts and PJM's resource adequacy efforts.

Management Comments

• Our business plan focuses on achieving growth by allocating capital primarily toward regulated investments in an effort to continue to improve the sustainability and predictability of our business and realizing the value of the consistent and reliable carbon free generation from our nuclear units.
• We are focused on investing to meet growing energy demand, modernize our energy infrastructure, improve reliability and resilience, increase EE and deliver clean energy to meet customer expectations and be well aligned with public policy objectives.
• Our future success will be influenced by our ability to continue to maintain strong operational and financial performance, address regulatory and legislative developments that impact our business and respond to the issues and challenges described below.
• We continually assess a broad range of strategic options to maximize long-term shareholder value and address the interests of our multiple stakeholders.

Industry Context

The utility sector, particularly in New Jersey and the PJM Interconnection region, is experiencing increasing demand for power coupled with a lack of sufficient new generation resources, leading to higher electricity costs for customers. This has prompted state regulators to intervene with mitigation measures like customer credits and shut-off moratoriums. The industry is also heavily influenced by evolving clean energy policies, with New Jersey setting ambitious net-zero greenhouse gas emissions targets by 2030 and significant natural gas emissions reductions goals. Federal executive orders and FERC proceedings are shaping market rules for large load customers, such as data centers, and transmission grid interconnections. Companies like PSEG are adapting by focusing on regulated infrastructure investments, energy efficiency, and leveraging federal incentives like the Production Tax Credit for nuclear generation, while navigating complex environmental regulations and market reforms.

Comparison to Industry Standards

• PJM capacity auction prices for the 2025/2026 auction year were approximately 10 times higher than prices from the 2023 auction, indicating significant market volatility and cost pressures impacting all participants in the PJM region.
• PSE&G's approved 9.6% return on equity for its distribution business and 55% equity component of its capitalization structure are specific to its regulated environment in New Jersey, reflecting a regulatory framework designed to support utility investments.
• PSEG Power's nuclear units operating at a 93.7% capacity factor for the first nine months of 2025 demonstrates strong operational efficiency, which is a key performance indicator for nuclear generation assets across the industry.

Legal Proceedings

• Occidental Chemical Corporation has filed two lawsuits against PSE&G and others to recover costs associated with the Lower Passaic River Study Area cleanup and to obtain a declaratory judgment of parties' shares of future costs. PSEG cannot predict the outcome.
• An EPA settlement with 82 parties for $150 million to resolve LPRSA CERCLA liability is being appealed. PSE&G and PSEG Power are not included in this settlement.
• The EPA has notified PSEG and 21 other Potentially Responsible Parties (PRPs) of potential liability for the Newark Bay Study Area, but PSE&G and PSEG Power are unable to estimate their respective portions of any loss.
• New Jersey and federal regulators have alleged that PSE&G, PSEG Power, and 56 other PRPs may be liable for natural resource damages within the LPRSA, with studies assessing potential damages ongoing.
• The EPA identified PSE&G and four other parties as PRPs for Operable Unit 2 of the Lower Hackensack River and requested a voluntary technical study, in which PSE&G and PSEG Power have agreed to participate.
• In September 2025, the EPA identified PSE&G and three other parties as PRPs for Operable Unit 3 of the Lower Hackensack River and requested a voluntary technical study; PSE&G and PSEG Power are considering the request.
• The BPU audit staff submitted the final audit report for PSE&G's comprehensive affiliate and management audit in June 2023; the BPU is considering public comments and has not yet determined which recommendations to implement.
• A complaint was filed in June 2018 against PSEG Fossil LLC by Durr Mechanical Construction, Inc. regarding the Sewaren 7 project, seeking $68 million in damages after partial dismissal of claims. PSEG Power intends to vigorously defend against these allegations.
• A putative class action complaint was filed in July 2025 against 26 nuclear generation power companies, including PSEG, alleging violations of federal antitrust laws by conspiring to fix compensation and exchange information regarding compensation for nuclear generation workers, seeking treble damages.
• An intervenor has raised objections related to the recovery of costs for the Roseland-Pleasant Valley (RPV) transmission project in connection with PSE&G's true-up filing for rate year 2024, following a previous FERC order declining action on a similar objection.

Related Party Transactions

• PSE&G has a requirements contract with PSEG Power for gas supply services (BGSS) to meet PSE&G's customer needs.
• PSEG Power sold Zero Emission Certificates (ZECs) to PSE&G from its nuclear units under the ZEC program, which concluded effective June 1, 2025, with the final payment settled in August 2025.
• PSEG Power and PSE&G provide certain technical services for each other generally at cost, in compliance with FERC and BPU affiliate rules.
• PSEG Services Corporation (Services) provides and bills administrative services to PSE&G at cost, and PSE&G has other payables to Services for common costs.
• PSEG pays net wages and payroll taxes and receives reimbursement from its affiliated companies for their respective portions.
• PSEG and its subsidiaries file a consolidated federal income tax return, and PSEG and PSE&G file state income tax returns, with income taxes allocated on a stand-alone basis.
• PSE&G has advanced working capital to Services, included in Other Noncurrent Assets on PSE&G's Consolidated Balance Sheets.
• PSEG Power's wholesale operations' net credit exposure with PSE&G is eliminated in consolidation.

Stakeholder Impact

• Shareholders: Benefit from increased net income, EPS, and dividends, as well as a clear strategy for regulated growth and capital allocation. However, they face risks from regulatory uncertainties, litigation, and potential market volatility.
• Customers: Experience higher electricity costs due to PJM capacity auction prices, but benefit from mitigation efforts such as bill credits, extended shut-off protections, and deferred payment arrangements. They also benefit from ongoing investments in energy efficiency and T&D infrastructure improvements aimed at reliability and clean energy.
• Employees: No direct impact on employment or compensation changes were noted, but the Sherman Act Antitrust matter alleges past compensation fixing for nuclear generation workers, which could have implications.
• Regulators (BPU, FERC, NRC, EPA): Actively engaged in numerous rate filings, environmental matters, and market reform discussions, indicating a high level of oversight and influence on the company's operations and financial outcomes.
• Creditors: The company's strong operating cash flows and extended credit facilities provide confidence in its ability to meet short-term liquidity requirements. However, increased long-term debt and potential credit rating downgrades for PSEG Power could impact borrowing costs and access to capital.
• Suppliers and Contractors: The company's significant capital investment program creates opportunities for suppliers and contractors, but ongoing litigation with Durr Mechanical Construction, Inc. highlights potential disputes.

Next Steps

• PSE&G will self-implement a BGSS rate increase to approximately 36 cents per therm effective December 1, 2025.
• PSE&G's annual BGSS rate increase request to approximately 36 cents per therm, effective October 1, 2025, is pending BPU approval.
• PSE&G's annual gas CIP petition seeking $97 million recovery is pending BPU approval.
• PSE&G's 2025 GPRC cost recovery petition requesting $207 million electric and $24 million gas revenue increases is pending BPU approval.
• PSE&G's GSMP II Ext cost recovery petition seeking a $28 million annual revenue increase effective February 1, 2026, is pending BPU approval.
• PSE&G's CEF-EV cost recovery petition to recover $9 million annually in electric base rates effective April 1, 2026, is pending BPU approval.
• PSE&G's IAP cost recovery petition seeking $14 million electric and $4 million gas annual revenue increase effective April 1, 2026, is pending BPU approval.
• PSE&G's annual 2025 TAC filing request to increase annual electric and gas revenues by approximately $15 million and $10 million, respectively, is pending BPU approval.
• PSE&G's annual transmission formula rate update with FERC, resulting in an approximate $82 million increase effective January 1, 2026, is subject to true-up.
• PSE&G will refund $5.5 million in ZEC overcollection to customers in 2026, pending BPU approval of the petition.
• PSEG will continue discussions regarding the GSMP III program with the objective of beginning the new program in 2026.
• The PSEG LI contract extension requires approval by the New York State Comptroller.
• PSEG will continue to monitor the outcome of litigation challenging the PSEG LI contract extension.
• PSEG will continue to evaluate opportunities to participate in transmission solicitation processes and may submit bids for material investments.
• PJM is currently exploring reforms to its market that are anticipated to be filed at FERC by the end of the year.
• FERC has commenced a rulemaking process to establish rules for timely, orderly, and non-discriminatory interconnection of large load customers by April 30, 2026.
• PSEG will continue to monitor federal executive orders and New Jersey state legislative activity for impacts on its business.
• PSEG will continue to analyze the impact of the PTC, including any future guidance from the U.S. Treasury, and assess any impact on expected ZEC payments and/or future ZEC application periods.
• PSEG is exploring opportunities for the potential sale of power and/or emission credits from its nuclear facilities pursuant to long-term agreements.

Key Dates

Recommendation

PSEG has demonstrated strong financial performance with significant increases in net income, EPS, and operating cash flow, driven by strategic regulated investments and favorable rate case outcomes. The company's commitment to clean energy and infrastructure modernization aligns with long-term industry trends. However, the regulatory landscape is complex and dynamic, presenting material uncertainties regarding future rate approvals, environmental liabilities, and market reforms (e.g., PJM capacity market, clean energy mandates). Ongoing litigation, including a class-action antitrust suit and challenges to a key contract extension, also introduces unquantifiable risks. While the core business is robust, these external factors warrant a cautious approach. A 'hold' recommendation allows investors to benefit from current performance and dividends while monitoring the resolution of these significant uncertainties before making further investment decisions.

Keywords

Utility, Electric, Gas, Nuclear Power, Energy Efficiency, Transmission, Distribution, SEC Filing, 10-Q, PSEG, PSE&G, New Jersey, Financial Results, Capital Investment, Regulatory, Climate Change, ESG, Production Tax Credit, PJM, Rate Base, Dividends