NYSE: PEG

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PSEG Power—A Delaware limited liability company formed in 1999 as a result of the deregulation and restructuring of the electric power industry in New Jersey. PSEG Power earns revenues primarily by selling energy and capacity from its nuclear generation units and from the sale of wholesale natural gas through a full-requirements contract with PSE&G. PSEG Power also enters into bilateral contracts for energy, gas and other energy-related contracts to optimize the value of its portfolio of generating assets and its gas supply obligations.

Our other direct wholly owned subsidiaries are: PSEG Long Island LLC (PSEG LI), which operates the Long Island Power Authority’s (LIPA) electric transmission and distribution (T&D) system under a contractual agreement; PSEG Energy Holdings L.L.C. (Energy Holdings), which primarily holds our legacy lease investments and competitively bid, FERC regulated transmission; and PSEG Services Corporation (Services), which provides us and our operating subsidiaries with certain management, administrative and general services at cost.

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OPERATIONS AND STRATEGY

PSE&G

Our regulated T&D public utility, PSE&G, distributes electric energy and natural gas to customers within a designated service territory running diagonally across New Jersey where approximately 6.8 million people, or about 74% of New Jersey’s population resides.

Products and Services

Our utility operations primarily earn margins through:

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Transmission—the movement of electricity at high voltage from generating plants to substations and transformers, where it is then reduced to a lower voltage for distribution to homes, businesses and industrial customers. Our revenues for these services are based upon tariffs approved by the Federal Energy Regulatory Commission (FERC).

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Distribution—the delivery of electricity and gas to the retail customer’s home, business or industrial facility. Our revenues for these services are based upon tariffs approved by the New Jersey Board of Public Utilities (BPU).

The commodity portion of our utility business’ electric and gas sales is managed by basic generation service (BGS) and basic gas supply service (BGSS) suppliers. Pricing for those services is set by the BPU as a pass-through, resulting in no margin for our utility operations.

In addition, we continue to invest in and pursue opportunities in regulated clean energy programs, including EE, electric vehicle (EV) make-ready charging infrastructure and other potential investments.

We also earn margins through competitive services, such as appliance repair, in our service territory.

How PSE&G Operates

We are a transmission owner in PJM Interconnection, L.L.C. (PJM) which is an Independent System Operator (ISO) and Regional Transmission Organization (RTO) that operates the electric transmission system in the Mid-Atlantic Region,

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including New Jersey and the surrounding states. We provide distribution service to 2.4 million electric customers and 1.9 million gas customers in a service area that covers approximately 2,600 square miles running diagonally across New Jersey. We serve the most densely populated, commercialized and industrialized territory in New Jersey, including its six largest cities and approximately 300 suburban and rural communities.

Transmission

We use formula rates for our transmission cost of service and investments. Formula rates provide a method of rate recovery where the transmission owner annually determines its revenue requirements through a fixed formula that provides for a recovery of our operating costs and a return of and on our capital investments in the system, net of accumulated depreciation and deferred tax liabilities (also known as rate base) using an approved return on equity (ROE) in developing the weighted average cost of capital. Under this formula, rates are put into effect in January of each year based upon our internal forecast of annual expenses and capital expenditures. Rates are subsequently trued up to reflect actual annual expenses and capital expenditures. Our transmission revenues are not impacted by sales volumes. Our current approved transmission rates provide for a base ROE of 9.90% and a 50 basis point adder for our membership in PJM as an RTO. See Item 7. MD&A—Executive Overview of 2025 and Future Outlook for additional information.

Distribution

PSE&G distributes electricity and natural gas to end users in our respective franchised service territories. Our distribution rates are subject to periodic rate cases approved by the BPU. In October 2024, the BPU issued an Order approving the settlement of PSE&G’s electric and gas distribution base rate case with new rates effective October 15, 2024. The Order provided for a $17.8 billion rate base, a 9.6% return on equity for PSE&G’s distribution business and a 55% equity component of its capitalization structure. For additional information, see Item 8. Note 5. Regulatory Assets and Liabilities.

The BPU has also approved a series of PSE&G infrastructure, EE, EV and renewable energy investment programs with cost recovery through various clause mechanisms. For a discussion of proposed and approved programs, see Investment Clause Programs as follows and Item 7. MD&A—Executive Overview of 2025 and Future Outlook.

Our load requirements are split among commercial, residential and industrial customers, as shown in the following table for 2025:

% of 2025 Sales

Customer Type

Electric

Gas

Commercial

57

%

38

%

Residential

34

%

58

%

Industrial

9

%

4

%

Total

100

%

100

%

Our customer base has modestly increased since 2021, with electric and gas loads changing as illustrated in the following table:

Electric and Gas Distribution Statistics

Customers as of December 31, 2025

Historical Annual

Customer Growth

2021-2025

Electric Sales and

Firm Gas Sales for the Year Ended December 31, 2025 (A)

Historical Annual

Load Increase

2021-2025

Electric

2.4 million

0.9%

40,561 Gigawatt Hours

0.4%

Gas

1.9 million

0.7%

2,633 Million Therms

2.1%

(A)
Excludes sales from Gas rate classes that do not impact margin, specifically Contract, Non-Firm Transportation, Cogeneration Interruptible and Interruptible Services.

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As part of the BPU's approval of the Clean Energy Future-Energy Efficiency (CEF-EE) filing in 2021, we implemented the Conservation Incentive Program (CIP) that trues up PSE&G’s distribution margin to a rate case-approved baseline per customer for the majority of our customers. As a result, electric and gas sales volumes and demands are no longer a driver of our margin and over 90% of our Electric and Gas Distribution margin will only vary based upon the number of customers. While load has modestly decreased in the past due to a decline in larger industrial customers, greater EE and other factors, a significant increase in load is anticipated due to the increasing adoption of EVs, the expansion of data centers and other large users in our area, ongoing growth in the number of customers, other sources of electrification and other factors, which will collectively drive the need for increased system investment.

Investment Clause Programs

The following table lists our major approved investment clause programs that are in progress:

Program

Investment

Approval

Date

Term of

Investment

Year Started

CEF-EE II

$2.9 billion

2024

6 years

2025

CEF-EE

$1.6 billion

2020

5 years

(A)

2020

Gas System Modernization Program (GSMP) III

$1.4 billion

2025

3 years

(B)

2026

GSMP II Extension

$902 million

2023

2 years

(C)

2024

Infrastructure Advancement Program (IAP)

$511 million

2022

4 years

2022

CEF-EV

$166 million

2021

~6 years

2021

(A)
Rolling three-year program with over 80% of spending within 5 years, with limited spending thereafter.

(B)
The program has a small amount of trailing costs expected to be spent in year 4.

(C)
The program has a small amount of trailing costs expected to be spent in year 3.

To date, we launched three of the four components of our CEF:

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EE—designed to achieve EE targets required under New Jersey’s Clean Energy Act through a suite of ten programs for residential, C&I programs, including low-income, multi-family, small business and local government.

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Energy Cloud (EC)—driven by the implementation of “smart meters,” and new software and product solutions to improve our processes and better manage the electric grid. This project was completed in 2024.

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EV—primarily relating to preparatory work to deliver infrastructure to the charging point for three programs: residential smart charging; Level-2 mixed use charging; and direct current (dc) fast charging.

Our CEF-Energy Storage (ES) program, which was filed with the BPU in October 2018, is being held in abeyance.

GSMP III—designed to replace at least 600 miles of cast iron and unprotected steel mains and services in our gas system.

GSMP II Extension—designed to replace at least 400 miles of cast iron and unprotected steel mains and services in our gas system.

IAP—designed to improve the reliability of the “last mile” of our electric distribution system and address aging substations and gas metering and regulation stations.

See Item 7. MD&A—Executive Overview of 2025 and Future Outlook for additional information.

Solar Generation

We have also undertaken solar initiatives at PSE&G, which primarily invest in utility-owned solar photovoltaic (PV) grid-connected solar systems installed on PSE&G property and third-party sites with our economics driven by our net investment in solar, with a contemporaneous return on that rate base.

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Supply

We make no margin on the default supply of electricity and gas since the actual costs are passed through to our customers.

All electric and gas customers in New Jersey have the ability to choose their electric energy and/or gas supplier. Pursuant to BPU requirements, we serve as the supplier of last resort for two types of electric and gas customers within our service territory that are not served by another supplier. The first type provides default supply service for smaller C&I customers and residential customers at seasonally-adjusted fixed prices for a three-year term (BGS-Residential Small Commercial Pricing (RSCP)). These rates change annually on June 1 and are based on the average price obtained at auctions in the current year and two prior years. The second type provides default supply for larger customers, with energy priced at hourly PJM real-time market prices for a contract term of 12 months (BGS-Commercial Industrial Energy Pricing).

We procure the supply to meet our BGS obligations through auctions authorized by the BPU for New Jersey’s total BGS requirement. These auctions take place annually in February. Once approved by the BPU, electricity prices for BGS service are set. Approximately one-third of PSE&G’s total BGS-RSCP eligible load is auctioned each year for a three-year term. For information on current prices, see Item 8. Note 12. Commitments and Contingent Liabilities.

PSE&G procures the supply requirements of its default service BGSS gas customers through a full-requirements contract with PSEG Power. The BPU has approved a mechanism designed to recover all gas commodity costs related to BGSS for residential customers. BGSS filings are made annually by June 1 of each year, with a targeted effective date of provisional rates by October 1. PSE&G’s revenues are matched with its costs using deferral accounting, with the goal of achieving a zero cumulative balance by September 30 of each year. In addition, we have the ability to put in place two self-implementing BGSS increases on December 1 and February 1 of up to 5% and also may reduce the BGSS rate at any time and/or provide bill credits. Any difference between rates charged under the BGSS contract and rates charged to our residential customers is deferred and collected or refunded through adjustments in future rates. C&I customers that do not select third-party suppliers are also supplied under the BGSS arrangement. These customers are charged a market-based price largely determined by prices for commodity futures contracts.

PSEG Power & Other

PSEG Power & Other is predominantly comprised of its nuclear generation assets, its natural gas supply operations, the Operating Services Agreement (OSA) of PSEG LI with LIPA, and other legacy investments. PSEG Power is a public utility within the meaning of the Federal Power Act (FPA) and the payments it receives and how it operates are subject to FERC regulation.

PSEG Power

Products and Services

As a nuclear generation owner and operator, our revenue has been derived primarily from energy, capacity and ancillary services sold to PJM in the spot markets. These products and services may also be hedged through exchange markets or bilaterally.

PSEG Power also sells wholesale natural gas, primarily through a full-requirements BGSS contract with PSE&G to meet the needs of PSE&G’s default service customers. In 2022, the BPU approved an extension of the long-term BGSS contract to March 31, 2027, and thereafter the contract remains in effect unless terminated by either party with a two-year notice.

PSEG Power supplies PSE&G’s peak daily gas requirements through its balanced portfolio of firm gas transportation capacity, storage contracts, contract peaking supply, and liquefied natural gas and propane. Based upon the availability of natural gas beyond PSE&G’s actual daily needs, PSEG Power sells gas to other customers and shares these proceeds with PSE&G’s customers.

How PSEG Power’s Nuclear Generation Operates

As of December 31, 2025, PSEG Power had 3,758 MW of nuclear generation capacity. All of our nuclear generation capacity is located in New Jersey and Pennsylvania.

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Our nuclear generation is considered to be base load. Base load units run the most and typically are called to operate whenever they are available. Variable operating costs are low due to the combination of highly efficient operations and the use of relatively lower-cost fuels. Performance is generally measured by the unit’s “capacity factor,” or the ratio of the actual output to the theoretical maximum output.

Nuclear Fuel Supply

We have long-term contracts for nuclear fuel. These contracts provide for:

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purchase of uranium (concentrates and uranium hexafluoride),

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conversion of uranium concentrates to uranium hexafluoride,

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enrichment of uranium hexafluoride, and

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fabrication of nuclear fuel assemblies.

We expect to be able to meet the nuclear fuel supply demands of our operations. However, there are limited suppliers for certain aspects of this supply chain and the ability to maintain an adequate fuel supply could be affected by several factors not within our control, including changes in prices and demand, tariffs, curtailments by suppliers, severe weather, environmental regulations, war and hostilities, and other factors. For additional information and a discussion of risks, see