Daniel J. Cregg
Chief Financial Officer and Executive Vice President at Public Service Enterprise Group
Thank you, Ralph, and good morning, everybody.
As Ralph mentioned earlier, PSEG reported net income of $139 million or $0.27 per share for the third quarter of 2023 compared to net income of $114 million or $0.22 per share for the third quarter of 2022.
Non-GAAP operating earnings for the third quarter of 2023 were $425 million or $0.85 per share compared to $429 million or $0.86 per share for the third quarter of 2022. We've provided you with information on Slides 9 and 11 regarding the contribution to non-GAAP operating earnings per share by business for the third quarter and year-to-date of 2023. Slides 10 and 12 contain waterfall charts that take you through the net changes for the quarter-over-quarter and year-to-date periods, and non-GAAP operating earnings per share by major business.
Starting with PSE&G, which reported third quarter 2023 net income of $401 million or $0.80 per share compared with $399 million or $0.80 per share in the third quarter of 2022. PSE&G had non-GAAP operating earnings of $403 million or $0.80 per share for the third quarter of '23 compared to $399 million or $0.80 per share in the third quarter of 2022. The main drivers for both GAAP and non-GAAP results for the quarter were growth in transmission and distribution margins resulting from continued investment in infrastructure replacement and clean energy programs as well as lower O&M expense.
These favorable items were offset by our anticipated lower pension income and OPEB credits, along with higher depreciation and interest expense resulting from incremental investments since the year earlier quarter. Compared to the third quarter of 2022, transmission was $0.03 per share higher. Electric margin was $0.02 per share higher, reflecting investment returns from Energy Strong II.
Gas margin was $0.01 per share higher, primarily driven by the clause recovery of our GSMP investment. Lower distribution O&M expense added $0.01 per share compared with the third quarter of 2022, and depreciation and interest expense increased by $0.01 and $0.02 per share, respectively compared to third quarter 2022, reflecting continued growth in investment. Lower pension income resulting from 2022's investment returns, combined with lower OPEB credits scheduled to end in 2023, resulted in a $0.05 per share unfavorable comparison to the year earlier quarter.
Lastly, the timing of taxes recorded through an effective tax rate, which nets to zero over a full year and other flow-through taxes had a net favorable impact of $0.01 per share in the quarter compared to third quarter of 2022. Weather during the third quarter, as measured by the temperature-humidity index, was 11% warmer than normal, but 5% cooler than the third quarter of 2022. As we've mentioned, the SIP mechanism in effect since 2021, limits the impact of weather and other sales variances positive or negative on electric and gas margins while enabling PSE&G to promote the widespread adoption of its energy efficiency program.
Growth in the number of electric and gas customers, the driver of margin under the SIP mechanism, continues to be positive and were each up by approximately 1% year-to-date. On capital spending, PSE&G invested approximately $1 billion during the third quarter, and is on track to execute its largest-ever investment program of $3.7 billion in a single year. The program includes upgrades and replacements to our T&D facilities, Energy Strong II investments, last mile spend in the infrastructure advancement program, our ongoing GSMP II program, continued rollout of the clean energy investments in energy efficiency and the energy cloud, including smart meters and adding new electric infrastructure to accommodate an increase in EV penetration.
During 2023, we've taken actions to limit the impact of our pension on earnings and increase the predictability of our financial results. In February of 2023, the BPU approved an accounting order authorizing PSE&G to modify its methods for calculating the amortization of the net actuarial gain or loss component for ratemaking purposes. This change is effective for the calendar year 2023 and forward. For the full year 2023, PSE&G's forecast of non-GAAP operating earnings is unchanged at $1.500 billion to $1.525 billion.
Moving to PSEG Power & Other. For the third quarter of 2023, PSEG Power & Other reported a net loss of $262 million or $0.53 per share largely reflecting the pension settlement charge associated with the lift-out transaction. This compares to a net loss of $285 million or $0.58 per share for the third quarter of 2022. The one-time non-cash settlement charge of $332 million, $239 million net of tax was related to the approximately $1 billion of PSEG Power and other pension obligations and associated plant assets, transferred to the Prudential Insurance Company.
After providing for the effect of the lift-out, our pension plans remain well-funded, and there is no material impact on our non-GAAP operating earnings in 2023. Non-GAAP operating earnings were $22 million or $0.05 per share for the third quarter of 2023 compared to non-GAAP operating earnings of $30 million or $0.06 per share in the third quarter of 2022. We previously mentioned that during the first quarter of 2023, PSEG Power realized the majority of the approximate $4.00 per megawatt hour increase in the average price of our 2023 hedged output which rose to approximately $31 per megawatt hour with higher winter pricing driving most of that increase.
For the third quarter of 2023, gross margin rose by a total of $0.03 per share, primarily reflecting the roll-off of certain full requirement BGS load contracts and had a higher cost to serve, resulting in a $0.04 per share of benefit compared to the prior year. The gross margin improvement also included higher generation which added $0.01 per share, resulting from the absence of a Hope Creek refueling outage that started at the end of last year's third quarter. These positive variances were partially offset by lower capacity revenues of $0.02 per share compared with the year ago quarter, consistent with prior year capacity auction.
O&M cost comparisons in the third quarter improved by $0.03 per share, driven by the absence of Hope Creek refueling outage expenses that were partly incurred in 2022's third quarter. Lower depreciation expense was $0.01 per share favorable compared with the year ago quarter, while higher interest expense was $0.01 unfavorable. Lower pension income from 2022 investment returns and OPEB credits from the lower amortization benefit were $0.03 per share unfavorable versus third quarter 2022, and taxes and other were $0.04 per share unfavorable compared to the third quarter of 2022, reflecting a partial reversal of the effective tax benefit from the first quarter of 2023.
On the operating side, the nuclear fleet produced approximately 8.1 terawatt hours during the third quarter and 24.3 terawatt hours for the year-to-date period in 2023, running at a capacity factor of 95.3% and 95.8% for the quarter and year-to-date periods, respectively. For the full year 2023 PSEG is forecasting generation output of 30 terawatt hours to 32 terawatt hours and has hedged approximately 95% to 100% of this production at an average price of $31 per megawatt hour.
For 2024, the nuclear fleet is forecasted to produce 30 terawatt hours to 32 terawatt hours of baseload output and has hedged 85% to 90% of this generation at an average price of $38 per megawatt hour. The forecast of non-GAAP operating earnings for PSEG Power & Other is unchanged at $200 million to $225 million for the full year. This forecast reflects the realization of a majority of the expected increase in the average 2023 annual hedge price in the first quarter of '23, as we previously discussed. For the balance of the year, higher interest expense largely captured in our November 22 update is expected to reduce PSEG Power & Other results.
Touching on some recent financing activity, as of September 30th, PSEG had total available liquidity of $3.8 billion, including $57 million of cash on hand. PSEG Power had net cash collateral postings of approximately $350 million at September 30th, which is substantially below the elevated levels seen last year. In August, PSE&G issued $500 million of 5.2% secured medium-term notes due August 2033 and issued $400 million of 5.45% Secured Medium-Term Notes due August 2053.
In September, PSE&G retired $325 million of 3.25% Secured Medium-Term Notes at maturity. Subsequent to the end of the third quarter, PSEG issued $600 million of 5.88% senior notes due October 2028 and $400 million of 6.13% senior notes due October 2033.
Prior to pricing these notes, $800 million of treasury locks were executed, which had a positive fair value of $14 million, and this benefit will be amortized over the life of the senior notes, partially offsetting interest expense. Proceeds from the sale of the senior notes will be used for general corporate purposes, including the repayment of $750 million of PSEG debt maturing this November.
As of September 30th, 2023, PSEG had $500 million outstanding of a 364-day variable rate term loan maturing in April 2024 and PSEG Power had $1.25 billion outstanding of a variable rate term loan maturing March of 2025. As of the end of the quarter, PSEG had swapped $900 million of the power term loan from a variable to a fixed rate serving to mitigate the impact of higher interest rates.
As of September 30th, reflecting our swaps, approximately 5% of our total debt was at a variable rate, which is down by half since year-end 2022. We continue to maintain a solid financial position with limited exposure to variable rate debt given the improvement in our collateral position, a staggered maturity schedule and PSEG Power cash generation to support funding our regulated business.
In closing, we are reaffirming PSEG's full year 2023 non-GAAP operating earnings guidance of $3.40 per share to $3.50 per share. PSE&G is forecasted to contribute between $1.500 billion to $1.525 billion and PSEG Power & Other is forecasted at $200 million to $225 million.
That concludes our formal remarks. And operator, we are ready to begin the question-and-answer session.
