Ralph LaRossa: Thanks Rich.
Operator: Our next question comes from the line of Durgesh Chopra with Evercore ISI. Please proceed with your question.
Durgesh Chopra: Hey, good morning team. Thanks for taking my questions. Good morning, guys. Just on the bench in front, I just want to reconcile and make sure we have this accurately captured the accounting order from the BPU last week that roughly mitigates about 20% to 30% of the pension expense volatility. So if you can confirm that, Dan, if that’s still the right number, and then maybe you can update us on the sort of the lift out approach that you had highlighted you were considering just any updates that you can share there as well.
Dan Cregg: Yes. I guess I’m the first question. I think that’s a reasonable way to think about it, although you will see as you step through time, some of the components elements under changing. So it’s not a I think it’s a fair way to think about where we sit today. But as we step through time, some of that could move as some of the component elements end up changing. I think with respect to the list that we’ve talked about a little bit in the past, we are continuing to explore that as a potential. Again, as a reminder really what that does is just shrink the overall size of the pension for us. And I think that potential still exists for us we’re still doing diligence on it and we’re working our way through the process. And we’ll have some more information for you as we go through the year. But I wouldn’t expect anything to be imminent but I would hope to see something happen this year Durgesh.
Ralph LaRossa: We might have lost him.
Operator: Durgesh are you on mute? Not sure he’s still connected but —
Carlotta Chan: Shamali we can move to the next question. And if Durgesh comes back, we’ll continue with him.
Operator: Sure. No problem. Our next question comes from the line of David Arcaro with Morgan Stanley. Please proceed with your question.
David Arcaro: Hey, Ralph and Dan. Good morning. Thanks for taking my question.
Ralph LaRossa: Hey Dave.
David Arcaro: Let’s see. I was curious on nuclear. So many of your peers recently announced higher levels of nuclear O&M heading into 2023. Curious if you would expect a similar dynamic in terms of upward O&M pressure on your nuclear units? And then separate but somewhat related on nuclear fuel. They also, we’re taking a more conservative approach in terms of building inventory and lowering risk of any kind of Russian supply interruptions that could occur in the future. Wondering if you have considered a similar strategic approach in terms of sourcing nuclear fuel.
Ralph LaRossa: Yes. So a couple of things on that front, on the just from an O&M standpoint, as you recall, the inflation reduction act required anyone who wanted to participate in the PTC or not participate, but fully participate in the PTC to pay prevailing wages at the sites. And we have been doing that for years here at PSEG. So no awkward O&MM impact for us. I don’t know if there’s anything beyond that the others are talking about, but specifically for us, I don’t see anything that would be driving additional O&M expenses at those plants. And then on a fuel supply. We were not as dependent on Russian fuel supply, as at all for our fuel supply. So it’s not an issue for us that we needed to get in front of, and I think we’ll talk a little bit more about that at the, at our investor meeting.
But I just it’s, again, that’s something that was forefront for us or something that we had to proactively address. Because we’re not, we’re just not in that marketplace. I think there’s an impact on the entire market. There’ll be an impact for everyone. But that’s something we are trying to jump in front of right now.
Dan Cregg: Yes, I think we got pretty good line of sight in the near term on nuclear fuel, David just given from the standpoint of the fuel in the reactor, and then you’ve got your upcoming fuel reloads and those that as you kind of go through the years, the near term is pretty well-hedged and known, and that’s on top of the fuel that’s in the reactor. So I think we’re in pretty good shape for the pursuit for the foreseeable future.
David Arcaro: Got it. Got it. Thanks. That’s helpful. And then I just wanted to clarify on the collateral postings. It’s great to see that they’ve come down maybe sooner than expected. I was wondering if you could just remind us of how the collateral kind of falls off through the year and is that earlier than you had previously anticipated I think $800 million that you were able to pay down earlier? Is that helpful for EPS in terms of taking some of the short term debt off the balance sheet for this year?
Ralph LaRossa: Yes, David, we’ve said before, if you think about most of the price differential and most of the period that we do have hedged, a lot of what we would expect to see is that those positions would roll off through ’23 and into the winter of ’24 was where the bigger element of the totals were. And so that timing is fairly consistent. I think, to the extent that you saw prices come down, you’re going to see a lower overall balance to the extent that they go back up that’ll continue to move. So it will continue to be dynamic, but to the extent that that stays a little bit lower as we run through these next 12 months, we would have less overall collateral posted and that would be a benefit.
David Arcaro: Okay, great. Thanks so much.
Ralph LaRossa: Yes.
Operator: Our next question comes from the line of Durgesh Chopra with Evercore ISI. Please proceed with your question.
Ralph LaRossa: Are you back?
Durgesh Chopra: I am. Can you hear me now?
Ralph LaRossa: We can.
Durgesh Chopra: Okay, sorry about that. It was actually my headset. So Dan, thank you. I heard all of that. I appreciate it. Just the lift that was roughly another 20% to 30% that would reduce the pension volatility by and so if you were able to get that successfully, the uplift successfully executed that would essentially basically kind of the 50% of the pension expense volatility would have been taken care of includes order last week. Am I thinking about that correctly?
Dan Cregg: Yes. I think you mean the list out. Right.
Durgesh Chopra: Yes. That’s right.
Dan Cregg: So I think that’s a good way to think about if you think about building blocks, you’ll have an element related to the utility with respect to the unrecognized losses, and then you would have another element which would be of comparable size. I think the way you’re thinking about the math is right. There is the only caveat is again, as you do go through times, you’ll see the different cost components and return components changed a little bit. So you could see some of them, but I think that’s a fair way to think about it there.
Durgesh Chopra: Okay, perfect. And just one last one again in terms of timing, you might have said that, expect an update sometime this year. So by Analysts Day or Investor Day in March, we shouldn’t be expecting that you get a you get a bench and lift out, right. That’s coming later in the year?
Dan Cregg: That’s the right way to think about it. Yes.
Durgesh Chopra: Thank you so much. I appreciate it again, guys. And thank you for bringing me back in time to ask my questions.
Ralph LaRossa: Anytime Durgesh.
Ralph LaRossa: Take care of the headset.
Operator: And our next question comes from the line of Michael Sullivan with Wolfe Research. Please proceed with your question.
Ralph LaRossa: Hey, Michael.
Michael Sullivan: Hey, Ralph, how are you. Great. Yes, I didn’t want to like front run the hour, say too much here. But just can you maybe give us a little preview of what else to expect just in terms of new disclosures? I mean, I imagine the growth rate and all that is kind of set. But in terms of like some of the nuclear things you alluded to, or we get some more flavor there. And then I guess on offshore wind side, it sounds like that timings not really tied to the analyst day?
Ralph LaRossa: Yes. No, that’s not. Look I would say this The Michael, if you walk out of that meeting with even more confidence in our ability to execute on the things that we’ve been talking about that would be my goal for that investor meeting. We’ve done that over the last year in some crazy turbulent times. And I think that you’ll see more of that. And I want you to walk out of that meeting with more confidence. So more than doubling down on some of the things that we’ve got planned in the utility. And that should be the real highlight of the conversation a little more about our thoughts about how to respond to the governor’s call for action.
Michael Sullivan: Okay, great. And then I think this kind of got asked a little bit, but just on the offshore wind proceeds. So it sounds like the $200 million you already got back is not a big needle mover. But when you stack that on top of what you could potentially get for GSOE. I’d imagine that’s a little more material. So kind of as we think about where those proceeds could go.
Ralph LaRossa: Yes, and just so we are 100% clear, we have not received the $200 million back yet, right? That’s in the process with our partner, and we’re going through dotting the I’s and crossing the T’s in that whole conversation. So more to come on that front. But I think the materiality of the GSOE is a TBD. And we’ll see what the market gives us on that front. And then Dan, and the team will do what Dan and the team have done for many years and put it to the best use.
Michael Sullivan: Sorry. So are you suggesting that it could end up being in material like is there a reason that no actually worth anything?
Ralph LaRossa: No, I just don’t want to, we’re not building a plan that’s built that’s based on getting some New York bight multiples on it. So I don’t want people to walk away with some inflated opinion on what those acres are going to be worth. We’ll see what the market comes back with.
Michael Sullivan: Okay, fair enough. Okay. Thanks very much.
Ralph LaRossa: Yes.
Operator: Our next question comes from the line of Julien Dumoulin-Smith with Bank of America. Please proceed with your question.
Julien Dumoulin-Smith: Hey, good morning team. Thanks for the time. Appreciate it. Good to chat with you guys.
Ralph LaRossa: It’s been a while.
Julien Dumoulin-Smith: It’s been a second year. Absolutely. I’m so just with respect to how you guys want to come back to this real quickly. A couple different moving pieces. First off, if I heard right in the comments, BGS here, you guys are moving away from that seems like a slightly more important strategic decision after years of benefiting there. Can you talk about that a little bit here, again, obviously not a big contribution. But then also related here, probably more critical and looking forward here what’s your latest interpretation of the PTC and how that interplays with your 24 hedges and ultimately how you think about hedging right now, considering what IRS may or may not do?
Ralph LaRossa: I want to give that to Dan to give you details on it. But that is not a recent move on our part. We have been moving away over time on the BGSS and I think we’ve BGS and we’ve talked about that for a while on that BGSS for BGS and we’ve been we’ve been doing that if it’s a different product, right? It’s more of a shape product than a than a baseball product that are nuclear plants with support but Dan will give you a lot more details on that and the GMP.
Dan Cregg: Yes, just to just to be super clear, Julian if you think about it, the BGS product is a default product in New Jersey on the electric side of the business. And so PCG power has used that as a hedge for a long time and PCG power had nuclear and fossil units and had a very shaped output, seasonality by virtue of having both nuclear and fossil generation. And as we sold the fossil units, and we still had some BGS obligations you think about those are three years at a time that was not an ideal fit for nuclear, which is more shaped in a more of a block power. And so really don’t take too much from the sale of the BGS. It just those remaining legacy tranches were not a good fit for a nuclear output that looks more like block shape power.
What is not is related to the BGSS, which is basic gas supply service that we provide to PSE&G Ng, and actually can leverage some of that excess capacity in a way that we’ve done for many years and will continue to do that. So the move away is for just the small remaining legacy tranches that we had on BGS on the electric side, that were taken on three years at a time and unrelated to BGSS. With respect to the interpretations, I would love to have more of an interpretation than I do right now. But we don’t have guidance from Treasury related to how they will define grocery seats in determining what the PTC will be based upon. And so we are still a little bit at the mercy of what Treasury will do. I think the outcome of the PTC’s is going to be positive and supportive.
But the exact dynamics of exactly what numbers you would use to figure out what that’s going to be is undetermined by that I mean to the other part of your question how they will account for hedges in their calculation. And so that’s the guidance we’re still waiting upon. I think that the outcome will influence how we will end up hedging the nuclear units. We will try to align with how they will define grocery seats so that ultimately the PTC that we get will kind of fit the overall mechanism as it’s supposed to work. And we can end up with that steady ultimate result at the PTC threshold or above if the markets are higher and so we’re still a little bit of a waiting game. And I don’t even have a date to tell you when Treasury is going to come out with it.
The PTC has come into play for the first time in Cal 24. Obviously, companies like ours hedge in advance of that. So I’d love to have information sooner rather than later. But other elements of the IRA do kick in 2023. So we have not heard back from Treasury, any guidance with respect to how they’re thinking about that exact definition.
