Public Service Enterprise Group Incorporated (PEG) Q2 2010 Earnings Call Transcript July 30, 2010 11:00 am ET Executives Kathleen Lally – VP, IR Ralph Izzo – Chairman, President and CEO Caroline Dorsa – EVP and CFO Analysts Jonathan Arnold – Deutsche Bank Andrew Levy – Tudor, Pickering Dan Eggers – Credit Suisse Paul Patterson – Glenrock Associates Paul Fremont – Jefferies Shah Khan [ph] – BGM [ph] Neel Mitra – Simmons & Co. Presentation Operator
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» Public Service Enterprise Group Inc. Q2 2009 Earnings Call Transcript
As you know, the earnings release and other matters that we will discuss in today’s call contain forward-looking statements and estimates that are subject to various risks and uncertainties. Although we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so even if our estimate changes unless required to do so.Our release also contains adjusted non-GAAP operating earnings. Please refer to today’s 8-K or other filings for a discussion of factors that may cause results to differ from management’s projections, forecast, and expectations as well a reconciliation of operating earnings to GAAP results. I would now like to turn the call over to Ralph Izzo, Chairman, President, and Chief Executive Officer of Public Service Enterprise Group. Joining Ralph on the call is Caroline Dorsa, Executive Vice President and Chief Financial Officer. At the conclusion of their remarks, there will be time for your questions. We ask that you limit yourself to a one question and one follow-up. Ralph Izzo Thank you, Kathleen, and thank you everyone for joining us today. Earlier this morning, we reported operating earnings for the second quarter of 2010 of $0.65 per share compared with operating earnings of $0.63 per share earned in 2009’s second quarter. Our operating earnings for the quarter include $0.04 per share of somewhat unusual charges at PSE&G and Power, which Caroline will discuss in greater detail. Overall, operating earnings in the quarter benefited from extremely warm weather conditions and the availability of our generating facilities to respond to the change in demand. Notwithstanding national GDP growth statistics, the economy does appear to be in a trough. We experienced the small increase in weather normalized electric sales, but as you know from my constant harping on this issue, weather normalized sales data is as much art as it is science, so it’s too early to be excited about growth.
I do want to recognize the important contribution made by our employees to our results. Their focus on cost control and operational efficiency provides significant support to our earnings.O&M levels at PSE&G, excluding the one-time charge in the quarter and those of Power, were lower than a year ago as our employees continued to perform at the top of their field. Perhaps the most significant development in the second quarter was that we reached a settlement of PSE&G’s rate case with an increase in rates effective before the start of the critical summer period for electric demand. The New Jersey Board of Public Utilities approved the settlement of our electric and gas rate case, which provided PSE&G with an annual increase in revenue of $100 million. The agreement provides for a 10.3% return on equity and a 51.2% common equity ratio. The return agreed upon in this case will also be applied to the capital programs approved in 2009 for contemporaneous returns. Those were the capital stimulus, Solar 4 All, and energy efficiency programs, all of which are still underway. As part of the settlement, we agreed to refund $122 million to electric customers over a 24-month period to resolve an issue held over from electric fee regulation. The rate agreement didn’t provide for the trackers on capital and pension costs, that were part of our request, but the agreement represents a reasonable balance of our needs for an improvement in return and the desire by our customers for a limit on price increases during a still difficult economic period. We intend to operate within the parameters of the rate agreement, we’ll more closely align our capital and O&M budgets with revenue to ensure our ability to earn the authorized return. As a result, PSE&G will be reducing its distribution related capital expenditures, the portion that is subject to the usual regulatory lag by $140 million a year over 2010, ‘11 and ‘12. Read the rest of this transcript for free on seekingalpha.com