NJ Remains Challenged While PJM Powers Higher: Maintain Hold.

Research evidence excerpt

NJ Remains Challenged While PJM Powers Higher: Maintain Hold.

ficiency (EE) order cuts ROEs -150bp for lower risk spending and introduces an

earnings test. Electric utilities will shift to a Lost Revenue Adjustment Mechanism (LRAM) with an Yet further cautious datapoints drive EPS

earnings test; PSE&G described the earnings test as "obviously inappropriate". The EE proceeding lower - offset by Power outlook improving.

has largely flown under-the-radar from our investor discussions but was a troubling update. The direct Expect shares to be further pressured as NJ

impact of the EE Order are notable but the implications are potentially more meaningful. The BPU remains remains near epicenter of the affordability

hyper-focused on affordability and there is now evidence of a lower ROE for lower risk investment which debate nationally. All is not resolved as

could spread to other areas. new BPU leadership coupled with emerging

scrutiny of spend and returns in legislationWe cut 2029/2030 PSE&G utility EPS -3%: -$0.14 and -$0.17. This represents ~$0.08 impact

leave yet further avenues of scrutiny.for lower transmission ROE and ~$0.07 for reduced energy efficiency investments at a -150bp

lower assumed ROE. Our new $4.42 2029 utility EPS is essentially the same as our prior $4.41 2028, Exhibit 1 - New Jersey Energy Efficiency: Plan

highlighting that the regulated utility effectively lost a year of EPS growth. Year (PY) 7 Performance Incentive Mechanism

PaulThe EnergyZimbardoEfficiency* | EquityOrderAnalystis a directly

We increase Power and other EPS +13-21%: +$0.12 and +$0.16. Blended power prices have +1negative(212) 778-8497update |forpzimbardo@jefferies.comearnings power and has

adverse implications on prospective regulation.