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Yahoo Finance’s Brian Sozzi and Julie Hyman speak with PSEG President, CEO & Chairman, Ralph Izzo, about what the company is doing to provide leadership in the energy sector.
JULIE HYMAN: Welcome back to Yahoo Finance Live. As we talk about this Earth Day and the various plans that the Biden administration is rolling out, of course, the power industry, the utility industry, has to be a part of that. Ralph Izzo is joining us now. He's Chairman, CEO, and President of PSEG, which is the primary utility company in the state of New Jersey, where I happen to be. I think that also covers parts of Long Island, where Brian Sozzi is a customer as well.
Ralph, thank you for being here. You and a number of other power company CEOs actually sent a letter to the administration where you said the cut to your industry's emissions should be 80%. I think by 2030 is the year you're talking about. So, talk me through that goal. And are you all going to set that as an industry goal, even if it is not one imposed by the administration?
RALPH IZZO: Thanks for having me, Julie. Of course, I can't speak for the entire industry. But I was proud to sign on to that letter. PSEG has consistently been a low carbon emitter. We actually were part of President Clinton's carbon reduction aspirations back during his administration. And I do think that there are several things that can be done to achieve that 80% reduction by 2030 from 2005 levels.
As a matter of fact, at the end of this year, we won't be a carbon emitter at all in terms of our power production capability. You know, 20% of our electricity still comes from coal. And yet, our natural gas plants, which yield only half of the carbon emissions of coal, are operating at about 60% of capacity. So they can clearly ramp that up.
The nation, by any metric, is an energy hog. There's so much more that can be done in terms of energy efficiency to lower the overall demand for electricity. And of course, the cost reductions associated with on-land wind, on-land solar, soon offshore wind, can all help mitigate this.
But I would be remiss if I didn't point out the importance of preserving the existing nuclear fleet. Right now, that nuclear actually produces over 50% of the nation's carbon-free energy. So it really is an all of the above approach that we can take between energy efficiency, preserving existing nuclear, increasing the use of current natural gas compared to coal among the existing fleet, and of course, investing in renewable energy that can help us achieve that goal.
JULIE HYMAN: And Ralph, when we head up your energy mix, as you said, you guys are phasing out coal. And you all have the generation business, but you also have the business where you take fuel from or take energy power from other sources that you don't generate yourself. So how much of that is from solar and wind at this point in the state of New Jersey?
RALPH IZZO: So right now in the state of New Jersey, very little-- it's under 5%-- comes from renewable energy sources in New Jersey. I think the big development opportunity for mid-Atlantic states and East Coast states will come in the form of offshore wind. Our solar impingement levels are not very high. Our access to swaths of land is not very strong. So the on-land resources really are more a function of the Southwest and the Great Plains states. So the natural resource that's most proximate to our load, as I said a moment ago, will be more in the offshore area.
Having said that, because of our prominence of nuclear power, we are a very low carbon emitting company-- in fact, a very low carbon emitting region. The nation only recently saw transportation eclipse power production as the number one source of carbon. Transportation has been the number one source of carbon in New Jersey for decades because of our reliance on nuclear power.
BRIAN SOZZI: Ralph, we've been talking to a lot of CEOs and CFOs this week. And they have all said their costs of business are going up pretty dramatically because of commodities inflation. Considering that and the fact we're all still working from home, this summer, how much will the average electric bill probably be up?
RALPH IZZO: Oh, that's a tough question to answer, Brian. So what we have seen is that there's been a reduction in commercial use of power. People are not reporting to the office. There's been an increase in residential use of power. The increase in residential use of power has been less than the decrease in commercial use of power from a financial point of view because the margins are stronger from residential. It's been pretty much a wash. I know your question seems like a simple one. But if you could tell me what the weather will be this summer--
BRIAN SOZZI: It's going to be hot.
RALPH IZZO: --I'll have a better shot. It's going to be hot. If it's a normal summer, residential bills will be higher, and commercial bills will be lower. That's about all I can predict at this point.
JULIE HYMAN: Ralph, speaking of the weather, I have to ask about grid resiliency, which was really thrown into sharp relief, of course, by the storms in Texas. But, you know, it seems like everywhere has issues, right? In New Jersey, you get flooding. You do get some hurricane effects. Most of the power lines here, as far as I can see when I look out my windows, they're not buried, right? They're above ground. So are you guys making investments in those kinds of improvements and updating? And how much is that going to cost, if so?
RALPH IZZO: Yeah, so the answer to that is emphatically yes. We have a three-part vision for the future. Part number one begins with people using less energy, and not changing their lifestyle, but just switching to more efficient appliances, programmable thermostats, more efficient air conditioning and heating systems. Nobody wakes up in the morning saying, I can't wait to use a kilowatt hour. So if you could be comfortable in your house and use less energy, I think you're a happier customer.
Second step is that you can't conserve your way to zero. So what we supply needs to be cleaner than ever before. We talked about that a minute ago. Third piece is exactly what you just said, that we are becoming so dependent on electricity. And the more we work from home, the more that reliable electricity to the home becomes a necessity, as opposed to a convenience. We'll be in a future where if you lose power at the home, not only can't you work, not only can't you communicate, but you won't be able to get in your car to go to a location where you could do all of the above.
So we are literally investing every year billions of dollars in replacing an aging infrastructure. I sadly joke about the fact that if Alexander Graham Bell were alive today, he would not recognize information and communication technologies. Sadly, if Thomas Edison were walking the streets today, he'd see some of the power plants and poles that were put in place when he was first bringing electricity to Americans. So, yes, we are investing-- that is our number one area of investment-- more grid resilience, a smarter grid, a more flexible grid, one that can adapt to challenging weather conditions.
JULIE HYMAN: That is an astonishing point, given some of the advances we've seen in other industries and a good one. Ralph, thank you so much for being here. Ralph Izzo is Chairman, CEO, and President of PSEG.