Former Chairman, President & Chief Executive Officer, Public Service Enterprise Group
Public Service Enterprise CEO talks coronavirus impact on business
Public Service Enterprise Group CEO Ralph Izzo discussed energy efficiency, coronavirus response and the company's latest quarterly results.
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About Ralph Ph.d.
Ralph Izzo, chairman, president and CEO of Public Service Enterprise Group (PSEG), has discussed the company's approach to carbon emissions and energy policy. In a 2019 presentation, Izzo stated that the reduction in carbon emissions over the previous decade was largely driven by the economic shift from coal to low-cost natural gas, rather than policy alone. He said that without a price on carbon or other environmental incentives, carbon emissions would likely rise, and that continued progress would require changing the cost structure of commodities. Izzo also noted that PSEG had shut all its coal plants and described the company's efforts to improve transparency around environmental, social, and governance (ESG) ratings, while cautioning that he prefers to be judged by actions rather than statements. In a 2008 lecture, Izzo discussed the need for investment in a range of energy technologies, including energy efficiency, nuclear, solar, and wind, and said that some options would require higher energy costs to implement but would yield benefits in mitigating climate change and improving air quality. He also addressed the electrification of transportation, stating that PSEG aimed to assist with fleet purchases and public charging infrastructure, and noted that he had spoken with General Motors chairman Rick Wagoner about supporting the company's electric vehicle efforts.
Transcript (17 segments)
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Jim Cramer0:04
And normal slow down, but we did well backed by some high quality utilities, nice consistent companies. Big difference by settling this slowdown is different. With vast swaths of the economy simply shut down, there's substantially less demand for actual power, which puts real pressure on utilities. Instead, in the case of Public Service Enterprise Group, that's a power generation and transmission business in the Northeast, mid-Atlantic, a lot of Jersey. Last Monday, PSE&G reported a mixed quarter. It's a big revenue miss, but enough cost savings to generate a modest earnings beat, while the company was able to reaffirm its full-year guidance. Management talked about a five to seven percent reduction in electric load, of course thanks to COVID-19, after following the March slowdown, the stock now is pulled back from $54 to $45 over the past few weeks, including 4% decline. Now at these levels, it gives you a yield of 4.4 percent. So has it been punished enough? Let's take a closer look with Ralph Izzo, he's the chairman, president, and CEO of Public Service Enterprise Group, to get a better sense of how US companies hold up. Missions are? Welcome to Mad Money. Nice to be.
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Ralph Izzo1:08
Here, thank you for the invitation.
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Jim Cramer1:09
Well, I'd say sir, to have a five to seven percent decline, that is the normalized electric load, is pretty incredible.
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Ralph Izzo1:18
Hey, I have to believe that most of the people in our area are working from home. Well, they are, so remember now, that's a decline in sales volume, that's not the same as a decline in margin. Now, where we're better insulated from a margin decline because our residential customers who are using a little more are a higher margin group than our commercial and then an industrial, we're using a little less, so it's the arbitrage positive for PSEG. Not on a net basis, but it's not as negative as the five to seven percent. We suggest we've only had one month of data, and we're unfortunate in New Jersey we don't have automated meter reading, so we haven't given out details on the trade-off between customer groups, and so we get at least another cycle of information.
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Jim Cramer2:09
All right, I know you're passionate about the environment. I will say that I have never seen so much wildlife in our area. I didn't know it existed. I thought it all had been extinct. You are? It was Earth Day fiftieth anniversary. Your company is very committed to the environment.
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Ralph Izzo2:25
We are, Jim. And actually, I've seen some wild turkey in the background, like fly. Really, you know, if there's one thing that may be COVID-19 has shown us, it's the complexity associated with worldwide challenges. And I think the biggest worldwide challenge we face and have yet to fully face it is climate change. So we have a fully integrated five-part plan that begins with energy efficiency, renewable energy, preservation of nuclear, getting a price on carbon, and then electrifying the economy as a way to make sure that we stem off the worst impacts of climate change in the future.
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Jim Cramer3:04
Do you think they will ever build another nuclear power plant?
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Ralph Izzo3:08
The Salem plant is a great plant, and I know, I'm just, I've been pro-nuke forever, and it just seems like it's just too hard to build in this country, but it's the cleanest power in the world. Well, as you know, there is a company, Southern Company, that's building a new nuclear plant, but they are a fully regulated business. I don't think you'll see a large nuclear plant built by a competitive business such as ours. There's a chance that small modular reactors in the future could get built, but even that would require some recognition that carbon costs money to emit, and therefore the need for a price on carbon.
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Jim Cramer3:45
Would you prefer offshore wind, as you mention your conference call?
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Ralph Izzo3:46
Well, so offshore wind is less expensive than a new nuclear plant is today, but I'm telling you, the cheapest thing we could do by far to help mitigate against climate change is energy efficiency. Offshore wind in New Jersey, its first charge is gonna be about ninety-eight dollars per megawatt hour. That's against the current market price of about twenty dollars a megawatt hour, so it's a lot more expensive. Usually it's worth it given the fact that it's carbon-free, but energy efficiency can actually be done while reducing the customer bill.
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Jim Cramer4:20
Okay, so I have a place in Summit and a place in Ocean Grove, so you know these areas in New Jersey. And we have villages, sir. And you know that I'm worried about hurricane season and I'm worried about COVID. I'm worried if you're gonna have enough people to be able to fix the outages.
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Ralph Izzo4:35
Well, you should be worried about that. I'm worried about that too, probably more than you are. We have enough people from the point of view of our employees. We're actually doing a terrific job of staying safe and healthy. But as you know, during a major storm, we don't rely only on our own people. We have to rely on people from other utilities and other contractors who are not affected by that particular storm. And right now, there is a reluctance on the part of others to move their personnel and subject them to possible health consequences of COVID-19. So I am worried that if a big storm comes, our outage restoration times will be longer than what customers are accustomed to.
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Jim Cramer5:15
At the same time, for your work at home, you say that the customer service, even your customer service, is pretty darn good. It almost made me feel like maybe everybody should be staying at home all the time.
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Ralph Izzo5:24
You know, I'm always in awe of what our employees will do. But that's true, our call center statistics are improved with people working from home. That's a little unfair because we were one of the first, if not the first utility, to promise to not shut any customers off, so we're not getting some of the call volume that we would normally get because we're not getting billing disputes or customers asking us to restore power. We haven't had a major storm, so call volumes are down in general. But that doesn't take away from the fact that our employees are doing a great job.
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Jim Cramer5:55
Do you think that this? I know you've gotten more than you, Jersey. I don't want to just limit to Jersey, but do you think that the governor is being too slow in opening Jersey, or is it the right pace, as far as you're concerned?
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Ralph Izzo6:10
I think he's on the right pace. This is every jurisdiction that has opened up prematurely has had a second spike. And just look at what happened in South Korea last week. One 29-year-old decides to go to five different restaurants or nightclubs in one evening, and then 2100 bars and restaurants have to reclose. So, and you heard Dr. Fauci yesterday that if we open too early, not only are there health consequences, but there would be ramifications for the economy yet again, maybe worse than what we're facing. So I think the governor's doing a stellar job and he's on the right pace.
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Jim Cramer6:42
Excellent. By the way, I would be remiss if I didn't say thank you to all the healthcare providers who are just doing yeoman's work in protecting us, and extend my condolences to anybody who's been affected by this horrible, horrible virus. They have just been amazing, unsung and amazing. I want to thank Ralph Izzo, first-time chairman, president, and CEO of Public Service Enterprise Group, my utility. Obviously they have money back yet to the break. Don't miss a second of Mad Money. Follow at Jim Cramer on Twitter. Have a question? Tweet Cramer hashtag mad tweets. Send Jim an email to [email protected] or give us a call at 1-800-743-CNBC. Miss something? Head to MadMoney.CNBC.com.