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PSEG CEO talks energy security, remote work energy consumption, and environmental justice

PSEG CEO Ralph Izzo joins Yahoo Finance Live to discuss how the Russia-Ukraine war will affect the energy market, how energy consumption has changed as more people work remotely from home, high utility bills, and addressing social equity disparities in energy.

Video Transcript

BRAD SMITH: Welcome back, everyone. Significant focus on the global energy market amid the Russian invasion of Ukraine, prompting a critical question of how prices may rise for individuals, households, and businesses at a national level down to the local scale. Joining us now, we've got Ralph Izzo, who is the PSEG CEO joining us here today. Ralph, thanks for taking the time here with us.

The international conflict certainly putting pressure on energy prices all during the early build out of a clean energy transition. What net effects do you believe the crisis between Ukraine and Russia has on the push towards sustainable energy?

RALPH IZZO: I think it's going to have a different effect over different time scales. Certainly, over the shorter term, you'll see some upward pressure on gas prices in Europe that will result in additional LNG exports from the United States to our European allies. And that will put some modest upward pressure on gas prices here in the US.

I think over the longer term, though, it's going to have a lot of people rethinking their energy security plans. You'll see a greater shift towards renewable energy. You'll see some rethinking of the existing nuclear fleet. Some decisions that were made in Europe to retire nuclear plants may be reconsidered. I hope they are. Certainly, the United States has learned some lessons from 40 and 50 years ago about not having sufficient energy diversity and being overly reliant on nations that don't always have our best interests at heart.

BRAD SMITH: And so let's talk a little bit more about that because first and foremost, can you quantify for us the capital allocation that PSEG has enacted to build a safe grid while mitigating security risks and other cyber threats?

RALPH IZZO: Sure. We've been averaging about $3 billion a year for well over the past decade, primarily investing in the grid, preserving our nuclear plants, investing in energy efficiency, and often overlooked aspect of energy security. There's just basically allowing people to live their lives while using less electricity or less natural gas. So it's a whole myriad of things that we've been putting our money towards from our transmission grid to our distribution system to our substations, and, as I said, to the supply equation.

Our most recent commitments have been to invest about 25% of the capital needed to develop one gigawatt of offshore wind. The equivalent of a very, very large natural gas plant or a nuclear plant.

BRAD SMITH: President Biden is going to be addressing energy in his State of the Union address as well, particularly how the Department of Energy is going to be taking some steps $140 million demonstration facility for extraction of rare earth elements to produce sustainably materials that are key to the next generation clean energy technologies. There's also $3 billion earmarked by the Department of Energy as well. I want to get your reaction to kind of what the White House needs to do to actually move this forward, considering the number of agreements that would be necessary to take place. And what companies, like PSEG, are also doing to ensure that even despite any public sector pushback, that would be what the private sector is able to enact in the near term?

RALPH IZZO: Sure. So the Build Back Better bill had some terrific enhancements for the Department of Energy's research program, to touch upon some of the technologies you just mentioned. I think sadly, though, the Build Back Better climate provisions that did not get enacted are desperately needed. The production tax credits, the investment tax credits for carbon free energy, from nuclear to solar to offshore wind and onshore wind.

Our own vision for the future, as a private company, is one in which people use less energy, the energy they use is cleaner than ever before, and candidly we make the investments in the grid so that the power can be delivered with greater resiliency and reliability than it's ever been realized before. And we're hard at work in all three of those fronts on energy efficiency, on preserving nuclear investing in offshore wind, and making that grid more resilient as I mentioned a moment ago.

But an instrumental piece of that would be the climate provisions of Build Back Better. We just heard from the Intergovernmental Panel on Climate Change today about the fact that some of the worst concerns that we have about exceeding 1 and 1/2 degrees C temperature rise are unfortunately already baked into our atmospheric conditions. So it's not too soon to act now and to act with vigor.

BRAD SMITH: Charlie Munger said a couple of weeks back that we're never going to go back to a traditional five-day in office work week, acknowledging the virtual employee reality that is here to stay in a larger percentage than pre-pandemic levels. How does this change your forecast for energy consumption and pricing quite frankly, too, as New York Attorney General Letitia James is calling out one of your competitors in Con Ed to try and explain the unexpected spike in bills for the month of January?

RALPH IZZO: Yeah, this is an issue that's really underappreciated. I'm glad you asked the question. Look, the reality is utilities like ours made significant investments into commercial downtowns, commercial centers, the downtown of the city. But we don't put the same level of effort into that last mile of service that goes to the suburban home, the single family home. Because in the past when you lost power in that home, certainly it was a nuisance an annoyance for the customer who came home and had to reset their clocks, but you could not have the same expectations in the home as you would have in the commercial office building, in the airport, in the town center, in the schools.

But now, if the home becomes a place of business, loss of power is more than an inconvenience. It means if that power's out for several hours, the inability to charge that phone, to tell anyone why I'm not online on my computer, and in the future means that customer won't be able to get in their vehicle to drive-through a place where they can access that power. So the last mile of reliability to the home is something that's going to draw increased attention from companies like ours.

We've been named the most reliable electric utility in the mid-Atlantic region for the last 20 years in a row, but that's not an area where we've spent a large part of that $3 billion a year that I mentioned before. We have been investing that money mostly in our substations and our transmission system because there's just a lot more customer benefit associated with that. But we're going to have to be paying a lot more attention to that last mile as we move ahead in the future.

BRAD SMITH: Certainly, I have to hustle to my finish, I only have about 30 seconds. But studies have found that communities of color incur disproportionate energy prices further exacerbating the household wealth disparity. What is PSEG doing to mitigate this burden among customers who are in the most heavily impacted markets?

RALPH IZZO: So we had a little bit of a technical challenge there. Can we have that one more time?

BRAD SMITH: Certainly. Certainly. So studies finding communities of color, they're incurring disproportionate energy prices, which is exacerbating the household wealth disparity. For PSEG, what are you doing to mitigate this burden among those customers?

RALPH IZZO: No, that is a critically important issue. One of the things we pride ourselves on and what we call our ESG credentials, we've talked a little bit about the environment in terms of energy efficiency and carbon-free energy. We're quite proud of our governance capabilities in terms of our disclosures and the way in which we manage our company. But the S component, in particular the environmental justice component, is increasingly important to us.

So that is why we've been talking about the importance of what we call universal access. That is not OK to simply have rooftop solar on those homes that are above the median income. It's not OK to have access to energy efficient appliances only for those folks who are once again have the disposable income to pay that initial upfront cost.

So all of our programs are geared towards multifamily dwellings, lower income customers. We have retired facilities, power plants that were located in highly industrialized parts of the state and ceased their operations. So there's no question that environmental justice is a critical component of how we mitigate climate change going forward. From the point of view of simply paying the bill, yes, there's no doubt that lower income populations have to pay a higher proportion of their household income to their energy bill. And that's why we have public assistance programs, we have payment programs, and we have a variety of ways to help those customers.

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