PSEG Lowers Migration Forecast for New Jersey

PSEG has revised downward its forecast of electric migration in New Jersey as a result of lower Basic Generation Service (BGS) prices which took effect June 1, and an increase in market prices for power.

Specifically, PSEG lowered its full-year estimate of electric customer migration to an average of 32% to 33% from the prior estimate of 34%. This updated estimate also assumes year-end customer migration levels of about 33% to 35% versus the previous forecast of 37% to 39%

Customer migration represented an estimated 33% of BGS volumes at the end of the third quarter of 2011, compared to about 26% at the end of September 2010. However, versus the quarter ending June 30, 2011, PSEG reported that migration is essentially flat.

PSEG reported that headroom is "so much lower than it was."

Headroom is, "lower than last year and in fact, it's only about a quarter of the level it was when we first saw migration really take hold in the summer of 2009," reported PSEG CFO and Executive Vice President Caroline Dorsa.

As a result of slowing migration, as well as the reduced delta between BGS prices and the prices PSEG earns for selling generation to third party suppliers to serve migrated customers, PSEG did not report an incremental negative impact from customer migration for the third quarter, when compared to the year-ago quarter. This is the first quarter in several quarters that PSEG has not reported a negative incremental impact from migration.

PSEG Power, the competitive generation unit, reported lower operating earnings of $258 million for the quarter, versus $338 million a year ago, on lower capacity prices in PJM, and lower pricing under the new BGS contracts that took effect June 1, 2011. Each of these factors accounted for about $35 million in decreased earnings.