Public Service Enterprise Group Inc Earnings Call Nuggets: Tax Benefits, Weather Normalization
Paul Fremont – Jefferies: Just to clarify then, when you originally gave guidance for 2012, you were expecting the tax benefits to be roughly $0.14 per share, so that was already incorporated into the original guidance that you gave for this year, right?
Caroline Dorsa – EVP and CFO: Thanks, Paul, for the question. So, let me just clarify how to think about that relative to guidance. So, as I mentioned when we talked about the holdings and enterprise guidance, as you may recall, we gave that guidance that’s higher than the guidance we’ve given in the prior year even though we’ve done some things obviously to terminate some leases. So, that was effectively reflecting a range of our expectations of possible overall settlements with the IRS for the tax years, including LILO/SILO and everything else in that period. Related to the remainder that I talked about, related to PSE&G, which is where most of the rest of the tax related events occurred, we forecast a range of things from many things, whether it’s tax or O&M. Certainly, we had some thoughts relative to where I think stood with the ten years of open audits, but I would say you should think about it, not as explicitly incorporating a particular number. It’s really a range of things as we think about tax versus everything else. Keep in mind when you go into PSE&G’s numbers, that $0.06 that ended up occurring for PSE&G for taxes, $0.03 of that if it hadn’t happened for tax, would have been there for you through the weather normalization clause. So, one just substitute for the other for the same bottom line. So, when I pull that apart I look at Enterprise and Holdings and say there was a range of what we hopefully would see in the final tax settlement. When you go into PSE&G, $0.03 of those $0.06 would have been there with weather normalization. So, you’re really only looking at what we were trying to range around $0.03 maybe a little less as we were thinking about guidance that was different from what you would have expected. We’re actually quite happy frankly to have 10 years of audits closed at this point and earlier in the year than we thought it might have occurred.
A Closer Look: Public Service Enterprise Earnings Cheat Sheet>>
Paul Fremont – Jefferies: My second question would be, just based on the types of margins that we’ve seen out of New England and New York recently, is the Company – should we assume that the Company is currently losing money on the New York and the New England investments?
Ralph Izzo – Chairman, President and CEO: Carol and I are staring at each other (forcing) that’s our knowledge, no, that’s not the case.
Daniel Eggers – Credit Suisse: To make sure I understand the weather normalization correctly, it affects the first quarter results. Do they look at a full year number also so that if you’re under-running over the course of the year, maybe some of that tax benefit gets spread out over more quarters or is it just a quarter specific adjustment either $0.03 of loss tax benefit is effective lost for good?
Caroline Dorsa – EVP and CFO: Right. So, we just described a little bit how the weather normalization clause works, Dan, thanks for the question. The weather normalization clause looks at the earnings over a winter season, so it starts late in the prior year and goes through may of this year, and so what you look at is the total amount of how the weather is in terms of being above or below normal and then you either accrue if you are below normal in terms of what your earnings would have been. In other words, it’s warmer than normal or you defer recognition if you’ve collected in access if the weather is significantly colder than normal. So when you look at that, you look at it over a period over a season and you true up as you go through the season which starts in October of the prior year and goes through May of the current year. So, as we’ve looked at what we were accruing relative to weather normalization, we were accruing a little bit. We have accrued a little bit under the weather-normalization clause to-date during this season because the weather has been milder than normal all the way through the winter season starting in October. So, we’ve accrued a few pennies year-to-date through the weather normalization clause. Now, because we have the tax settlement, it would – it basically did not allow us to accrue all of the amount we would have been able to accrue because the first quarter was so warm. So, there is a little bit of accrual that occurred late last year, a little bit of accrual but not as much as we would have otherwise been able to accrue because the weather was so warm. The other piece to keep in mind that I mentioned in my remarks is when you do all this math, and I you have, for example, a warmer than normal season., you get to accrue, but you don’t always get to accrue a 100% to normal weather, you are stopped by earning of to 10.3%. So, when I describe kind of where we were, I mentioned that we didn’t accrue $0.03 that we would have otherwise accrued, because of the tax settlements, because that helped us get to the 10.3% sooner. If we hadn’t had tax, we would have accrued $0.03 and we would have stopped because we would have been at the 10.3%. So it is a full season test, starts in the – really the way they think about is the late fall, goes through May and then any true ups that you need in terms of whether if you are collecting, get collected in cash in the subsequent periods as do any returns of cash if you over collect them.
Daniel Eggers – Credit Suisse: Thank you for clarifying that. I guess, just looking at the coal generation fleet and kind of the sustained low performance and the huge amount of commodity price move that would have to happen to make those plants economic seemingly. Where are you guys on a coal – purchase obligation perspective, where the inventories sit. Is there more restructuring that needs to be done from a dispatch or a cost perspective as you kind of look at the forward curve right now/
Caroline Dorsa – EVP and CFO: We certainly have plenty of coal on-site and off-site storage. We, you may recall, we restructured the Adaro contract last year, so that it no longer has a fixed commitment. It has a calculated price which will always be effectively a little bit below market that goes out through 2016, but we no longer have a penalty for canceling shipments. So, we no longer have to actually take coal. We do have some purchase commitments for coal and related transportation that go through 2013 and we are in the process of trying to renegotiate some of those.
Daniel Eggers – Credit Suisse: Is there going to be – should we – if you look out at the curve is this the right expectation both from a cost structure perspective, the cost you have taken out from the coal fleet and the dispatch perspective for the rest of this year and maybe ’13 as you lookout.
Ralph Izzo – Chairman, President and CEO: So we have tried to give the total generation numbers for ’13, Dan. I think what Caroline was trying to find out before that the $0.04 that we had in Q1 we should not think of that as $0.16 for the year. But by (indiscernible) it wasn’t all $0.04 of timing and we think we’ll be able to retain most, if not all, of those savings.
Caroline Dorsa – EVP and CFO: And of course, folks have been looking out as they think about the longer term in terms of trying to make permanent some of these kinds of operational changes.