Public Service Enterprise Group

Overview

Public Service Enterprise Group is a Newark-based holding company operating through two principal subsidiaries: PSE&G, the regulated electric and gas utility serving New Jersey, and PSEG Power, which owns the three nuclear units at the Salem and Hope Creek stations in Salem County and holds a 50% interest in the two-unit Peach Bottom station in Pennsylvania that Constellation operates. CEO Ralph LaRossa has led the company since September 2022. PSEG is one of the largest investor-owned utilities in the northeastern United States by customer count and, after selling its entire fossil fleet in early 2022, is a straightforward utility-plus-nuclear business with no meaningful commodity-exposed generation.

The fossil divestiture was deliberate and took years. PSEG Power had operated a 6,750-megawatt portfolio of coal, gas, and oil units across New Jersey, Maryland, Connecticut, and New York. In 2021 the company agreed to sell all of it to subsidiaries of ArcLight Capital Partners for approximately $1.92 billion, completing in February 2022. The logic was to remove earnings volatility, eliminate the capital obligations of aging fossil plants, and become a regulated utility pure-play, a profile investors tend to value at a premium against more complex merchant businesses.

The nuclear fleet was kept. It is now the company's only non-regulated generation and has grown more valuable since the fossil exit. The IRA's nuclear Production Tax Credit, effective from 2024, provides up to 1.5 cents per kilowatt-hour for zero-emission nuclear generation through 2032, partly displacing New Jersey's own Zero Emission Certificate program as the primary financial backstop. PTC support, rising PJM wholesale prices, and growing data center demand have turned Salem and Hope Creek into assets management is investing in rather than managing toward closure.

Business operations

New Jersey nuclear and the ZEC program

Salem and Hope Creek came close to early retirement. In 2018, PSEG warned that the plants were losing money in the PJM wholesale market, where abundant cheap natural gas and federally subsidized wind and solar had suppressed prices below all-in operating costs, and that it would shut Salem 2 and Hope Creek without state support. The threat was credible: Illinois had already lost the Quad Cities and Clinton plants to merchant economics before enacting its own rescue program, and New Jersey faced losing the source of nearly half its electricity.

The legislature responded with the Nuclear Energy Transition and Economic Development Act in May 2018, creating the Zero Emission Certificate program. Electric distribution companies must purchase certificates from qualifying nuclear plants, with revenue flowing to operators. PSEG received roughly $10 per megawatt-hour, about $300 million a year across the three units. The NJBPU awarded the initial three-year tranche in April 2019 and voted to extend for another three years.

The program drew criticism from competing generators and ratepayer advocates who argued payments exceeded what was needed to keep the plants economical, particularly as wholesale prices recovered. PSEG countered that without revenue certainty it could not plan long-term capital investment. The debate became largely moot when the IRA created the federal nuclear Production Tax Credit, applying from 2024, which provides up to 1.5 cents per kilowatt-hour through 2032 and functions as a federal earnings floor similar to the ZECs but funded through the tax code rather than ratepayer charges. The July 2025 tax law left the credit's value and end date intact, adding foreign-entity restrictions that do not affect PSEG.

Data center load growth

PSE&G's large-load interconnection pipeline reached 9.4 gigawatts by mid-2025, up 47% in a single quarter, with more than 90% attributable to data centers. New Jersey's siting advantages are real: fiber density, proximity to New York financial markets, available industrial land in central and northern New Jersey, and access to a high-density urban transmission system. AI data centers accounted for approximately 70% of new state power demand growth in 2025, contributing to residential electric bills rising roughly 20% over the year.

PSEG expects 10% to 20% of the pipeline to reach commercial operation, which would still be 940 megawatts to 1.9 gigawatts of incremental large load, material against a system sized to serve 2.3 million primarily residential and commercial customers. Contracted or filed projects include a 1.4-gigawatt Oracle data center under construction and a 1-gigawatt Google project in regulatory review. The legislature has begun considering a requirement that data centers use clean power, which would directly favor PSEG's nuclear fleet as one of the few large sources of firm zero-carbon electricity in the mid-Atlantic. The policy backdrop shifted in 2026: after public discussions between Governor Mikie Sherrill and PSEG's CEO about nuclear expansion, Sherrill signed laws in April 2026 easing approval of new nuclear at the Salem and Hope Creek site and in July 2026 launching a state nuclear procurement, both of which PSEG endorsed. No specific new-build decision has been made.

Financial performance

PSEG reported FY2025 revenue of $12.16 billion, up from $10.29 billion. GAAP net income was $2.111 billion, or $4.22 per share. Non-GAAP operating earnings, the primary metric management uses, which excludes certain mark-to-market adjustments and other items, were $2.029 billion, or $4.05 per share, up approximately 10%. PSEG Power contributed higher nuclear output of 30.9 terawatt-hours, with realized prices above the production tax credit floor. PSE&G results reflected new electric and gas base distribution rates in effect for the full year after the October 2024 settlement.

For 2026, PSEG guided to non-GAAP operating EPS of $4.28 to $4.40, roughly 7% growth at the midpoint, and in the first quarter reported $1.55 on that basis, up 8.4%, reaffirming the full-year range. The annual dividend rose about 6% to $2.68 per share. Long-term guidance targets 6% to 8% compound annual growth in non-GAAP operating earnings through 2030, rebased higher for the second consecutive year. Rate base of approximately $36 billion at year-end 2025 is projected to grow at 6% to 7.5% a year through 2030, driven by a $22.5 billion to $25.5 billion regulated capital program within $24 billion to $28 billion of total 2026 through 2030 investment.

Strategy & outlook

The investment case rests on two compounding assets: PSE&G's regulated rate base growing at 6% to 7.5% a year, and a nuclear fleet whose economics have materially improved since 2018. The utility capital program spans transmission hardening, distribution modernization, GSMP III gas replacement, EV charging buildout, and the grid upgrades needed to interconnect incoming data center load. The relatively predictable New Jersey regulatory environment, where the October 2024 rate case was the first since 2018 and settled, provides a stable backdrop.

The nuclear uprate and license renewal program is the other major commitment. If the Salem uprate of nearly 200 MW proceeds and all three renewals are approved, PSEG Power would operate roughly 3.8 gigawatts through the mid-2060s, making PSEG one of the largest nuclear operators in the country on a per-company basis and positioning the fleet for what could be decades of tight zero-carbon firm capacity in the mid-Atlantic. New Jersey's 2026 nuclear laws reflect a policy environment more willing to back new nuclear than at any point in three decades, and the economics of new builds remain challenging, with PSEG making no formal commitment to construction.

Key considerations

The nuclear PTC cliff is the sharpest near-term risk. The Section 45U credit runs through 2032, and the July 2025 tax law left its value and end date intact. After 2032, unless Congress extends it or New Jersey renews ZEC support at adequate levels, PSEG Power's nuclear revenue depends entirely on PJM wholesale prices. Those have risen substantially on data center load growth, and forward curves reflect expectations that tightness persists, and wholesale markets are volatile and PJM capacity price signals have historically been inconsistent. A prolonged period of low prices after 2032 without federal or state support could again call the fleet's economics into question, particularly for Salem 1, which has the earliest license expiration and the smallest capacity.

On the utility side, data center load growth is real but lumpy. PSEG expects only 10% to 20% of the 9.4-gigawatt pipeline to interconnect, and even committed projects are subject to permitting, equipment delivery, and customer construction schedules. The capital required to serve that load, new substations, transmission upgrades, and distribution capacity, is recoverable through rates and raises customer bills in the interim. New Jersey residential rates already rose roughly 20% in 2025, generating political pressure that could complicate future recovery filings. GSMP III faces a structural headwind of its own: if the state accelerates building electrification policy, the rationale for continued gas distribution investment comes under increasing challenge at each successive rate case.

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