Public Service Enterprise Group is continuing to rely on its gas and electric utility to drive its profits, with its work on transmission lines accounting for a big share of that money.
In an earnings call this past Friday, the Newark company said its transmission lines now make up 39 percent of its rate base, according to Ralph Izzo, chairman, chief executive officer, and president of PSEG.
The investment has led the utility, Public Service Electric & Gas, to account for 52 percent of the company’s consolidated earnings, Izzo told analysts. That is keeping with a recent trend by the company to plow most of its capital investments into the utility — rather than the large fleet of power plants it operates in New Jersey and neighboring states.
Over the next three years, the company plans to invest $2.4 billion in capital expenditures, half of which will be spent on transmission projects for PSE&G, according to Caroline Dorsa, executive vice president and chief financial officer of PSEG.
The utility’s strategy reflects that of others in the sector, who are plowing big bucks into new transmission projects or upgrades to existing lines, in part because they earn a higher rate of return on investment from the Federal Energy Regulatory Commission than state regulators allow to maintain the poles and wires that deliver electricity to homes and businesses.
For the utility’s customers, however, costs related to transmission lines typically are spread among ratepayers in the region outside its franchise territory, lessening the impact on their utility bills.
The big new transmission project involves the Bergen-Linden proposal, Izzo said. That initiative involves transmission lines between its Bergen and Linden power plants and includes ties to Newark airport, its Hudson power plant, and New York City.
In addition to the transmission projects, PSE&G is engaged in a $1.2 billion, three-year program to harden its energy infrastructure by replacing old gas mains and protect utility substations from flooding — a large source of power outages during Hurricane Sandy.
The utility also is in negotiations with the New Jersey Board of Public Utilities, seeking approval of a more than $100 million investment to help hospitals, multifamily units, and government buildings.
“We are encouraged by the discussions,’’ Izzo said in a call with the media. In recent months, he has argued that the utility would like to invest much more in such energy-efficiency projects, but would not do so unless the regulatory structure would allow it to recover from ratepayers the revenue the company loses by reducing energy consumption.
Some of those projects have proven popular with facilities, particularly hospitals where there is a long waiting list of applicants for funding.
Other states have adopted such changes, but not New Jersey. Izzo and others say even though rates may go up for customers, costs would go down by not using electricity and gas they would otherwise rely on.