Public Service Enterprise Group is getting into the retail energy business.
The Newark energy company is quietly setting up an unregulated business called PSEG Energy Solutions to sell electricity and gas to commercial and industrial customers.
The venture, expected to be launched early next year, is similar to businesses already set up by energy conglomerates, including by affiliates of the owners of the three other electric utilities in New Jersey, all of which have retail subsidiaries.
PSEG Energy Solutions is initially focused on providing a hedge to its PSEG Power, which owns more than 12,000 megawatts of generating capacity. With power prices slumping, the new venture can assure all of its generation assets are maximized.
“Our intention is to help hedge the power portfolio,’’ said Tom Chamberlin, the newly hired managing director of PSEG Solutions. The company will not market to residential customers, unlike other retail businesses set up by competitors.
Since the state deregulated the energy marketplace, utilities have gotten out of the generation business, making a profit only on delivering electricity and gas to their customer through their poles, wires and pipes. Unregulated companies, largely energy companies with power plants, and suppliers that buy the electricity and gas and sell it directly to customers, have taken their place.
Exelon, which recently acquired Atlantic City Electric, owns Constellation, one of the largest retail energy businesses in the country, with 2 million customers. PSEG Solutions’ ambitions appear to be much more modest.
In an earnings call earlier this summer, Ralph Izzo, the chairman, CEO, and president of PSEG, used that term when describing the new company’s aims.
“We remain interested in retail for our defensive purposes managing basis risk and not as a significant growth opportunity by any stretch of the imagination,’’ Izzo said, when asked about the issue.
With power prices depressed, PSEG has relied on its utility, Public Service Electric & Gas, in the past couple of years to earn the bulk of its profits, primarily by investing heavily in a multibillion dollar capital construction program.
A lot of energy companies are getting involved in the retail energy business, according to Paul Patterson, an energy analyst with Glenrock Associates. “It’s a way of hedging their output,’’ he said.
Initially, PSEG Energy Solutions will focus primarily on the electricity sector in areas where its generation assets are located (primarily New Jersey and Pennsylvania), but it also wants the option to provide customers with gas. The company recently applied to the New Jersey Board of Public Utilities for licenses to sell electricity and gas.
The new company will probably be based in Newark, and is currently looking to fill two or three new positions, according to Chamberlin.