Transcript of Interview with Daniel Cregg, CFO, PSEG
Andrew Zezas:
Permit me to introduce you to my friend Daniel Craig. Daniel Craig, Daniel J Craig has been executive vice president and chief financial officer for Public Service Enterprise Group, inc, known as PSE and G and its subsidiaries since October, 2015. Mr. Craig is responsible for all financial functions including internal audit services, investor relations, and corporate development. Given the array of financial instruments which serve as the primary means of selling wholesale energy to customers Mr. Craig is also responsible for the risk management function which provides independent oversight of the PSE and G power trading organization. In addition to finance, Mr. Craig is responsible for the strategy and planning function at PSE and G. He is a member of PSE and G’s executive officer group.
Prior to his current position Mr. Craig was vice president of finance for Public Service Electric and Gas company the role he assumed in June, 2013. In 2006 Mr. Craig was named vice president of finance for PSEG Power. In that capacity and in previous financial rules for PSEG Power Mr. Craig held leadership positions related to financial reporting and forecasting, investor communications, financings, rating, agency interactions, external reporting, cash forecasting, financial evaluations, competitive intelligence, and fundamental market modeling with critical responsibilities in PSEG Power’s development and strategic planning activities.
Previously, Mr. Craig was director of PSEG corporate development. He joined PSEG in 1991 with overall responsibility for tax planning, strategy and compliance for PSEG energy holdings including domestic and international tax structure and work for PSEG Global and PSEG Resources. Before joining PSEG Mr. Craig spent five years with the accounting and consulting firm of Deloitte and Touche providing consulting services to a wide range of clients with an emphasis on the energy industry. Mr. Craig received his master of business administration degree from the Wharton School of the University of Pennsylvania and his bachelor’s degree in accounting from Lehigh University. Craig is co-chair of the Edison Electric Institute of Finance executive advisory board. In addition, he’s a member of the board for the community food bank of New Jersey. NJBIZ named Mr. Craig 2018 CFO of the year for public companies.
Now a little bit about PSE and G. Public Service Enterprise Group Inc, PSEG, is a diversified energy company headquartered in Newark, New Jersey. Established in 1903 the company has long had a key role in fueling New Jersey’s economy and supporting the state’s quality of life. Public Service Electric and Gas Company is New Jersey’s largest provider of electric and natural gas service serving 2.3 million electric customers and 1.9 million gas customers. PSEG Power owns and operates a diverse fleet of power plants located primarily in the Mid-Atlantic and Northeast regions and has solar energy facilities throughout the United States. Another member of the PSEG family of companies PSEG Long Island operates the electric transmission and distribution system with the Long Island power authority with 1.1 million customers. PSEG is a Fortune 500 company included in the S and P 500 Index and has been named to the Dow Jones Sustainability Index for North America for 12 consecutive years.
PSEG has approximately 13,000 employees who are carrying forward a proud tradition of dedicated service that has continued over more than 100 years today. Today, Dan Craig will share his insights as to the effects of the current global business climate on PSEG’s business, its industry, its ability to deliver products to customers and its employees, business development and more. And his discussion today is entitled Energy and Evolution, PSEG’s Focus During the COVID Health and Business Crisis. It gives me great pleasure to introduce you to my friend today CFO studio live interviewee Daniel J Craig, Executive Vice President and Chief Financial Officer of Public Service Enterprise Group Incorporated.
Dan, so nice to see you this morning, this afternoon, welcome. So, we’re going to have an interesting discussion today. We’ve got a bunch of folks online listening to us. I’m sure we’ll have some questions from the audience over time. You and I have spent a little bit of time with our respective staffs and we put together a list of questions. So, why don’t we jump into our discussion?
Andrew Zezas:
Great. Great. So, let’s talk about the energy services industry at the beginning of our chat. How has that industry fared in this health and business crisis and then specifically how has PSEG fared?
Daniel Craig:
So, it’s a great question because if you look across all the different industries there have been so many different ways that the companies have been affected and frankly so many different ways people have been affected. And there have been a lot of people that have been very, very seriously affected by this. So first off my heart goes out to them and I thank everyone from the bottom of my heart those that are actually on the front line that are actually taking care of everybody during this crisis.
So, we are I think a little bit on the more fortunate side of the ledger if you’re thinking about industries and different industries and how they have been impacted by what’s been going on. We’ve been deemed by the state an essential service for I think obvious reasons. I imagine being in where you’ve been in the last couple of months and not having access to the internet or television or anything that can work off of electronics I would say we’ve gone from a period where it’s being colder in winter months, we’re moving into summer months. And so, just comforts of home because most of us are home, super, super important. So we’ve been deemed an essential service so that basically has allowed us to continue to operate. And in some ways maybe even operate a little bit better and maybe we’ll touch on that as we go forward because the outside world has not been as out and about so there has been better access to things.
But in addition I think, so you asked about the company, I think we are fairing well. We have our challenges that we’re working through but we’re fairing well. And an industry I think we’re fairing well also when probably a differentiating effect is what kind of regulation you are under. If you think about electric utilities and gas utilities we are a delivery service into your house you don’t have a choice as to where it’s coming from so we are price regulated. And so, from a CFO standpoint financially we are impacted to the extent that the way that our revenue streams come in and the way that our rates are set will protect us in different ways from what’s going on in the outside world. So, I think overall you’ve got a spectrum in the industry of how companies are impacted but I would say all of them are on the better end if you compare them to industries like airlines and lodging and some industries really have been hurt more than others.
Andrew Zezas:
Okay. Well that makes sense. And I would agree with you I mean we all know that this is a most unusual time for people, for business, not only here in New Jersey but around the nation and certainly around the globe. I think we’ve all been figuring it out as it occurs. Thankfully at least from a business perspective it’s much better than anyone could have imagined. And so, I certainly don’t mean to diminish the negative effects of people who have fallen ill and those who have passed and the people who have been affected by that and certainly frontline workers. We applaud the people who have supported us through this. And that starts with not only the doctors and the nurses but people who have just been going to work and keeping the machine well-oiled so that those of us could stay safe and stay happy. So let’s talk about economic impact. What do you see as to the effects of this health crisis, the COVID-19 crisis, and the economic impact of that and PSE and G’s ability to continue to service its customers?
Daniel Craig:
Well, I think it stems again back to that essential service the nature of the business. We are very much if you think about it an infrastructure company and keeping the lights on I would put our employees in that same group of folks who are taking care of everything that’s going on in this current situation. And I can’t say enough about how they have performed in this situation. But you also said that it’s an evolving situation and for us in the back half, the second half of March if you think about one of the things that was evolving it was the rules and they eventually became clear to everybody that we were all going to the extent that you were not an essential service stay at home was the order. But that started honestly town by town in New Jersey.
And so, our crews if you think about it once they crossed the town’s border they might’ve been facing a different set of rules as they go from town toe town two. And so, come out and put out statewide rules as to how things were going to be handled that frankly helped us a lot. And it helps streamline our operations, help us understand what we needed to do everywhere. And we’ve got one set of rules to work by, that was usually helpful. We being an infrastructure company have a lot of aging infrastructures.
So, if you think about things like other gas pipes in ground that have been there for decades and decades and it’s time to replace them that means we’re digging up roads. And so, I can tell you it’s a lot easier to dig up a road when there isn’t a ton of traffic on it than there is in times like now. So, that became really important and in some ways there are particular aspects of our job that have gotten a little bit easier because there are more and more people staying at home and it enables us to be efficient and do the things that we need to do without disrupting what would be the norms of society of commuting and everything else.
Andrew Zezas:
Very interesting. I would imagine with people staying home the demand profile of the service that you have to deliver is probably more predictable, more consistent.
Daniel Craig:
It is but it’s shifted too. So the big office building that was using a lot of energy isn’t. Homes where people aren’t there all day because they’re in those office buildings we’ve seen a shift. We’ve seen a shift from the commercial side to the residential side. In New Jersey but that shift between residential and commercial has been pretty significant.
Andrew Zezas:
Very interesting. Very interesting. So, as the crisis recovers, as we recover both from a health and a business crisis simultaneously are there specific challenges that the energy service, energy delivery industry expects to have to contend with?
Daniel Craig:
Yeah, I think from a pure financial standpoint a lot of that, there’s a lot of operating issues, but from a pure financial standpoint a lot of the focus really is on aggregate volume sold and what those empty office buildings are doing. In a more industrial area what it’s doing to overall load from industrial usage coming down. But in aggregate volumes coming down we’ve seen somewhere between five to 7% of aggregate volume reduction. On the other side, one of the things that we have done is we are not at this point in time with everything that’s going on going to do shutoffs to the extent that folks aren’t paying their bill. And it’s going to be harder and harder based upon just the overall economic backdrop for people to pay the bills. So, has been coming in slowly because we’re only a couple of months into this. But how much is usage down? Where is it down and what kind of payment patterns are we going to end up seeing over time based upon the usage people have and what they are able to do from a payment perspective?
So, there’s mechanisms within the regulatory backdrop where we tend to deal with this on an ongoing basis. We work with customers with respect to payment patterns. But that’s usually when we see a sizable recession, that decline in collections it takes a long time to work your way through the other side of that and really know what the aggregate. So, we’re in the very early stages of that and in addition to seeing demand come down the payments follow the demand so we’re in even earlier stages on that front. But that’ll be a challenge that the industry as a whole is concerned about from the overall financial strength of what’s coming in the door.
Andrew Zezas:
Wow, understood. That makes sense. Now, PSE and G has always been a very customer centric, customer focused organization and it’s certainly got a reputation for that as well. I would imagine that in a similar fashion as to how the company focuses on its customers it also focuses on its employees. Have there been any particular steps that PSE and G has taken during the crisis to support its employees?
Daniel Craig:
Absolutely. And they’ve been, I mean honestly the employees are the differentiator. A turbine is a turbine and a wire is a wire but it’s the people that really make the company tick. And first and foremost, no different than any other time Andy obviously there’s different things that folks are concerned about but safety is at the core of everything we do. And if you think about the products we deal with first and foremost with everything we do with.
And so, New Jersey has been among one of the higher hit areas from the COVID-19 situation from a health perspective and we are in the populated part of New Jersey. So, the importance of ensuring that our essential workers that are still out there and doing the job they’re doing remain safe is absolutely vital. And so, the messaging, the communication, obviously the DP and everything else that we have trying to manage in this new different dynamic timeframe has been top of mind across the board.
We have had calls every single day among our senior leadership team looking at what we’re doing the numbers. We’re honestly extremely proud that our employees had a positive rate for COVID-19 that’s about half of what state has. And again, we’re in the more populated part of the state. So, driving that message home and the culture that we have around safety has been an absolutely important. Population that’s working from home.
And so, managing the issues that the folks are dealing with, some serious, some comical literally as folks are having video calls and what happens in the background. So, there’s a host of issues we’ve been trying to deal with and trying to also deal with benefits and making sure we have given people incremental time to take care of those that may have come down with COVID-19 and if they have responsibilities there. And we’re also proud that we have not done layoffs or furloughs or anything of that nature. So, both from the continued existence of the workforce, from the benefits we’re providing to the workforce and ensuring that everything they’re doing is safe there’s been a lot of attention and activity on that front.
Andrew Zezas:
So, in that same vein how are you finding PSEG’s ability to attract new employees and actually to hire them when no one’s in the, well few people are in the office?
Daniel Craig:
Yeah it’s interesting it hasn’t been that long of period of time but there has been some hiring that’s been going on. Initially something basic like background checks that are part of what you do just weren’t, we couldn’t get through that part of the process. So, some of those bumps our way through. And honestly, I would tell you that we probably will be stronger on that front when we come out the other side. I think the flexibility with which we do our work, I think just the talent pool that we can draw from as a result of that will expand a little bit. And we’re largely a New Jersey business. But I think those things are going to actually come out better on the other side for having gone through what we’ve gone through.
Andrew Zezas:
Very interesting. So, as things continue because we’re seeing states reopen on a slow rolling basis and even when everything reopens there’s still going to be a climb where everything’s not going to be fixed on a Tuesday. I think we all recognize that unfortunately. So, as things evolve as the crisis, the health crisis, hopefully subsides and never comes back as we all hope but we all fear there could be something different. And as things begin to increase what changes do you think PSE and G and maybe your industry will experience on an operating basis?
Daniel Craig:
Well, I think some of that honestly we’re trying to figure out right now. And if you think about what we need to deal with obviously we need to do what we think makes sense but we’re going to have to work within the construct of what the state is putting out from the rules. Like you said the state is not going to open everything Tuesday but there’s going to be rules and ways that will need to be followed as we go back. So, we’re going to need rules that aren’t written yet so I can’t answer your question in full for that reason.
I do think it is interesting we have people that are working on electric lines that are out all over the state. We have a trading floor for our electricity trading and fuel trading and things of that nature up in Newark where we operate. We have a call center dealing with customers. And so, you think about what you traditionally think about for trading floor it’s a lot of people working in close conditions so how will we manage going back? Our call centers the way that we have been working that is remotely and it’s been working extremely well. So, are there different ways that we think we will end up coming back? So, I think we’re going to learn from that. Our objective in going back is not to go where we were. In some instances we will but go back to smarter having learned from what we’re doing.
There’s another area which is really of vital importance to the industry as a whole and it’s known as mutual aid and mutual aid is if you think about a big storm that comes through such as Sandy or a hurricane. The utilities will call on their fellow utilities to come in and send their crews to help get everybody back. And so, if there is not a problem in Ohio and there is a problem in New Jersey an Ohio crew may come out and work in New Jersey. Well, think about that against the backdrop of everything we’re facing within the existing COVID-19 situation. So all the PP, all the rules are going on. So, that’s something from an industry perspective that we’re trying to work our way through and fully understand how to best work to get everybody back in after a storm.
Andrew Zezas:
In your comment a moment ago you said that the company is going to have to learn from this. What in particular do you expect that PSE and G will learn from what we’re going through?
Daniel Craig:
I think I’m as safety oriented as we are I think we’re learning safety in this new environment so I think we’re supplementing a very strong knowledge base from the safety side. I think the logistics aspects that we have dealt with and had to manage in this new world and a lot of the learning is going to be how to apply it to what’s going to happen going forward because the world is not going to be the same when we go back. I think have strengthened during all this. And even so maybe harken back to 9-11. If you think about taking a flight plane before 9-11 and you think about taking a flight and getting through the airport post 09-11 it’s different.
And so, I think we’re going to have some of this, we’ve even seen airport, the airport, getting through airports changing. And we have nuclear facilities in New Jersey, we have the three nuclear generating plants. And so, when we have nuclear outages we bring people in, a bunch of contractors in nuclear plants are on 24-7, they’re on all the time. They’ll shut down for a period of weeks, they’ll put more fuel in and then they’ll run again. So you only have those short windows to do that maintenance work. And so, you’re bringing a lot of people into a lot of work in a compressed time and a compressed space. So, we a lot of the things that the airlines did after 9-11 and we’ve continued to do that. So, as the construction crews have come in and the contractors have come in they’ve gotten temperature tested as they come through. And a lot of the same protections that have gone on are happening in nuclear as well.
Andrew Zezas:
I remember taking my first flight after 9-11 and it was pretty scary. And I remember sitting in my seat and before I sat down, I’m not exactly a small human being so I remember turning back and looking around. I don’t know what I was looking for but I was trying to look intimidating in case it mattered to anybody. And I noticed I wasn’t the only one doing that. So it was a very interesting dynamic and I think your analogy was appropriate. So, you talked about trading floor, you talked about customer service, we’re coming back, we’re coming out of this, slowly but we’re coming out of this. And companies are bringing employees back to the workplace those employees who were sent home and not in all cases.
Some companies, a lot of companies are asking themselves, “Can we reduce our footprint? Can we become more efficient by keeping certain numbers of employees at home permanently?” I would imagine that unless we’re talking about very small companies most companies of any size like a PSE and G certainly wouldn’t be able to send all of its employees home permanently but certainly more than before March 1st. But there will be changes because those employees that will come back will have expectations. They’ll have expectations of in facility social distancing. They’ll want to know that air conditioning systems are not blowing germs around. They’ll want plexiglass and they’ll want sanitized facilities and so on. So what kind of expectations does PSE and G have as it relates to… We could talk about the trading floor customer service but the office employees corporate employees and folks in the field what do you think those employees expect from the company going forward as it relates to their environment?
Daniel Craig:
Well, I think they expect to be safe and I think they deserve to be safe and I think that is our responsibility to ensure that absolutely does happen. And a lot of what we are working through is to still make those determinations but some basic tenets as to where I think we’re going to end up I think we’re going to have much more flexibility. I think you’re going to see situations where schools and childcare and camps during the summer and things of that nature they’re going to create different challenges. And I think it’s going to make us be more flexible, it’s going to make us be just more aware of the challenges that all of our employees are facing as they go through it. Whether that means that we won’t have five day weeks in the office and we’ll be splitting time, whether that means that some functions will remain outside of the office for a period of time or until there is a medical solution that’s better than where we are right now.
Those are still things that we’re figuring out. We have said that to the extent that you are working from home at this point nobody is going to go back or our anticipation is that the date where people will start to go back would be after Labor Day. Now also put out dates that were in June and in July. We have moved ourselves forward a little at a time but we’ve also told our employees, “I don’t know if that’s going to be the date necessarily.” So it’s a little bit frustrating to not be able to give them all the answers but by the same token until we have them we can’t do that. But there are folks that are fully dedicated to make sure that when we do send people back they’re back safe. The way that they get back, think about public transportation. In our offices in Newark I take the train going up to work every day. And so how is that going to work out? How is New Jersey transit dealing with it?
So, there’s other elements. How do our vendors deal with things? How do our customers see us as we come into the house? So, there’s a lot of different that we’re working our way through and using with others in the industry in unison with others in the state. Because as an industry the same thing but in the same types of challenges. But in the state we’re facing a more acute situation from COVID-19. So, we’re leveraging all of the knowledge and are going to have a very, very thoughtful… It’s not the folks initially returning to work, we’re not returning to work we’ve been working and we’ve been working fairly effectively and very effectively but it’s a responsible re-entry is how we’ve categorized it as to how people are going to go back.
Andrew Zezas:
I like the idea of responsible reentry and I thought your first answer was very meaningful. You said they expect to be safe and they will be safe. I think that’s a great way to be focused on the company’s employees. So, Dan let’s talk about changes in customer relationship management and business development and selling. I mean PSE and G is certainly not, it doesn’t have pressed hard driving used car sales types in its organization. But in terms of how you do open accounts and how you service your customers and we can actually talk about PSE and G or the industry at large what do you expect will be the evolution of that going forward?
Daniel Craig:
Well, I think there’s a period of time now when we’re still in the midst of everything there was a period of time where non-essential service inside of the house. So, if you smell gas in your house we’re going to be completely, we’ll have all of our PPE on, have a series of questions we’ll talk to the customer about as we go to address that but that’s got to be addressed.
To the extent that you have a refrigerator that’s not running efficiently that’s not something that we would need to deal with immediately so for a period of time that work was ceased. But either of those interactions, a person, an outsider is coming into a customer’s house. And so, ensuring that interaction is safe for the customer, ensuring that interaction is safe for the employee. And as that whole dynamic has changed not to say that there aren’t instances historically where somebody walking into a house there may be a dog in the yard or dog in a house that could create a safety concern. So, we just have incremental things to think about that we didn’t have before. I mean, we’ve worked sort of all that.
I think as we think about going forward we have a very sizable energy efficiency program that we have in front of the state that we want to move our way through. And I think that a company with the dedication to safety of the customer, of the employee is what the state is going to need and expect as we go down that path. And even there’s been a lot of talk about telemedicine, you can get on a phone and you can talk to a doctor about what you’re feeling and have an appointment that way, we’ve done the same with some of our appliances. So I guess I call it tele-tech and be able to get on the phone and talk a customer through what’s going on and what can be done. So we’re adapting and I think that, I think that’s been appreciated by both the employees as well as our customers.
Andrew Zezas:
Well, you mentioned technology so are there new technologies that PSE and G or your industry competitors are deploying as a result of what we’re experiencing now that will either enhance delivery or enhance the customer experience?
Daniel Craig:
Far and way what I would point to there Andy is AMI, Automated Metering Infrastructure. So, if you were to go around the country of people’s houses from the standpoint of an electric meter.
Andrew Zezas:
Can you say that one again Dan? I think you cut out a little bit. Can you say that again?
Daniel Craig:
Yeah. Automated metering infrastructure. So, your house and you take a look at how your electricity is metered it’s an old style meter and somebody who’s going to come and look at it once a month and you’re going to know you went from X to Y and that’s your usage and that’s what goes on your bill and that’s how we operate. 47 states in the country have moved to something much closer to an iPhone sitting out on the side of a house and it’s capturing real time data and it’s sending data and we can understand. We will know you’re out of power before you’ll know you’re out of power because you may not be home but we’ll see it from the meter.
Frankly, think about this situation we talked early on in our conversation about aggregate volumes that are being used by customers. Well, until we have that one time read we don’t know and if we had automated metering infrastructure we would know immediately what’s being used and be able to track that data and understand how you can end up saving, what can be done from an energy efficiency standpoint. So, there is a dialogue for a long time and I think this is just one more, very, very strong example of how that can really be helpful to customers and to us to provide more efficient services frankly.
Andrew Zezas:
So, I do have a question from one of the audience, one of our guests. As a country is the industry prepared for the next episode is the question, the way the question was written? Is the energy industry prepared for the next episode?
Daniel Craig:
Yeah, I think that answer is absolutely yes. And if I think about what we have been through I’m honestly impressed as to how well the infrastructure managed everything. One of my bigger concerns was if everybody went home and everybody’s doing Zoom calls and kids are on the scene not only does your house wifi need to be strong enough but the outside infrastructure needs to be strong enough too. I knew that our connections to our employees, our IT connections were going to be strong enough but I worried about the broader systems. The broader system held up well. If I have a concern honestly it’s around storms and this whole concept of mutual and as different companies come to help work through these challenges is there sufficient comfort to get there. Now, fortunately for us this happened in March and hurricane season tends to come later and there’s been a lot of dialogue in the industry and I think the industry will be ready. There may well be somewhat longer times afterwards because of some of the things that are going on but I think the industry will be ready.
Andrew Zezas:
Dan your comments have been well thought out and transparent and I can’t thank you enough for permitting us to participate with you today in this discussion. PSE and G is one of the stalwarts, one of the brands that when people think about New Jersey they think about PSE and G respecting that you’re not only in New Jersey. Founded in 1903 it’s been around for awhile. You’re doing wonderful things in financial leadership and strategy of the company. And you’ve certainly been a good friend to CFO studio and I appreciate your personal friendship as well.
I want to thank you for permitting us to interview with you today and for sharing your thoughts. I’m sure you’ll be hearing from some of our guests who may have questions directly for you. And I want to thank our guests as well for joining us and for sticking around while we dealt with some technical issues. As I said, technology is only good when it works. I’ll invite all of our guests to watch Dan’s interview again when we post it at cfostudio.com/podcast. And visit us again when we interview our next guests on CFO Studio Live. To all of our guests thank you very much. Dan, thank you very much. Everyone stay safe, stay healthy, enjoy the summer, and God bless.
Speaker 1:
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