PSEG's Strategic Position in the Evolving U.S. Utility Sector Amid Energy Transition and Affordability Pressures

The U.S. utility sector stands at a crossroads. Aging infrastructure, the imperative to decarbonize, and rising consumer expectations for affordability and resilience are reshaping the industry. Against this backdrop, Public Service Enterprise Group (PSEG) emerges as a model of strategic foresight. By aligning its capital deployment, nuclear fleet optimization, and affordability initiatives with the energy transition, PSEG is not merely adapting to change—it is engineering a path to long-term value creation.

Capital Deployment: Building the Grid of the Future

PSEG's $21–$24 billion capital investment plan (2025–2029) is a masterclass in infrastructure modernization. At its core is PSE&G's $3.8 billion 2025 infrastructure program, which targets grid resilience, outage reduction, and renewable integration. These investments are critical in a sector where the average age of U.S. power infrastructure exceeds 30 years. By prioritizing grid hardening and digital upgrades, PSEG is future-proofing its operations against climate-driven disruptions and regulatory demands.

The company's disciplined capital allocation is already paying dividends. In Q2 2025, PSE&G reported a 34.5% year-over-year surge in net income to $1.17 per share, driven by rate approvals and returns on prior investments. This underscores the utility's ability to convert capital into earnings, a rare strength in a sector often plagued by regulatory lag.

Nuclear Fleet Optimization: A Pillar of Clean Reliability

Nuclear energy remains a contentious topic, yet PSEG's approach to its fleet—Salem and Hope Creek—demonstrates how this technology can be both economically and environmentally viable. In Q2 2025, the nuclear segment generated 7.5 terawatt-hours (TWh), a 0.5 TWh increase year-over-year, driven by improved plant availability and the absence of refueling outages.

The segment's financial performance is equally compelling. Net income rose by $121 million to $253 million, supported by a 22% increase in capacity revenues after securing 3,500 MW in the PJM 2026/2027 auction at $329 per megawatt-day. Federal incentives, including the nuclear production tax credit and 100% bonus depreciation, further amplify the economic case for nuclear. PSEG's planned 24-month fuel cycle extension at Hope Creek and a power uprate at Salem are low-cost, high-impact projects that extend the life of these assets while reducing emissions.

Affordability as a Strategic Imperative

Affordability is no longer a peripheral concern for utilities—it is a core component of their social license to operate. PSEG's initiatives, including summer bill deferrals, expanded customer assistance programs, and shutoff protections, are designed to mitigate regulatory risks and preserve customer trust. With 2.4 million electric and 1.9 million gas customers in New Jersey, the company's ability to balance profitability with community support is a competitive advantage.

These efforts are paying off. PSEG has seen a 1% increase in residential electric and gas customers year-over-year, a rare feat in a sector where customer churn is often a silent killer. The company's J.D. Power award for service quality and its 99% storm service restoration rate during a June 2025 heatwave further reinforce its reputation as a reliable partner.

Financial Resilience and Policy Tailwinds

PSEG's capital structure—65% debt-to-capital ratio and an A- credit rating from S&P—ensures access to low-cost financing while minimizing dilution risks. This financial discipline, combined with a 5–7% compound annual growth rate (CAGR) in non-GAAP operating earnings through 2029, positions the company to outperform peers.

The company's environmental progress, including a 30% reduction in system-wide methane emissions since 2018, aligns with regulatory priorities and enhances its long-term viability. Meanwhile, a forward P/E of ~14x and a 2.8% dividend yield as of August 2025 suggest the stock is undervalued relative to its growth prospects.

Investment Implications

For investors, PSEG represents a rare convergence of policy-driven growth, operational excellence, and affordability innovation. The company's nuclear assets provide a stable, low-carbon baseload, while its infrastructure investments future-proof its regulated operations. Affordability initiatives, meanwhile, insulate it from regulatory headwinds and customer attrition.

In a sector grappling with infrastructure decay, decarbonization, and affordability crises, PSEG's strategy is a blueprint for success. While risks such as regulatory delays or nuclear cost overruns exist, the company's disciplined capital allocation and alignment with energy transition goals make it a compelling long-term holding. For those seeking exposure to the U.S. utility sector's transformation, PSEG offers a resilient, high-conviction opportunity.