Question-and-Answer Session
Operator
(Operator Instructions). Your first question is from Paul Fremont with Jefferies.
Paul Fremont - Jefferies
I am not sure I am understanding PSEG Power. It looks like in the first quarter you have pretty much made it all the way to the bottom end of the PSEG Power guidance of $1.210 billion. If I factor in the type of prices or gross margin that you were projecting of $57 to $58 for the remainder of the year, there should be another $70 million or so of gross margin improvement which should take you to the top end of that guidance range.
Am I missing something that is a potential offset that would put you at the higher end of that range? Also, given the fact that you are 100% hedged, I am not sure I understand why there is such a wide range to begin with in terms of the low end and the high end.
Caroline Dorsa
Sure. So, let's just talk a little bit about the dynamics of this quarter related to the dynamics for the full year. As we pointed out, the quarter was unusual given the fact that we were able to displace a lot of our coal with gas, and given the low gas prices, as we noted, you see a dramatic drop in the total cost of fuel and therefore a strong margin.
As we come into the warmer weather and into the summer season, what you should expect is those coal units that really were quite reduced for this quarter would come back online and of course you know that the higher price of coal relative to gas would have an impact on our margin going forward. That being said, that is why we are still comfortable with our full year margin, even given the results we saw this quarter were somewhat unusual, but we will go back to putting in coal in the forward period.
Paul Fremont - Jefferies
I guess I am using your numbers of $57 to $58 for gross margin on the rest of the year which is still improved from last year's second, third and fourth quarter numbers of $54 and like $56. I guess the only one that is sort of comparable is the third quarter.
Ralph Izzo
Paul, this may help a little bit. Don't forget, when we talk about our hedging, we are talking only about the baseload units. It is actually our nuclear and all of our coal which includes some of the mid-merit coal. So, gas is not sold into just to remain long for some of the peaks and valleys particularly of the summer months, and with lower gas prices, we are seeing spark spreads that are not at the high end of what we have seen in the past. So, I am not following all your arithmetic, but I think the combination what Caroline offered and I offered should help you get to the confidence we feel with the existing range of Power's full year performance.
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