The operator welcomed the participants to Exelon's second quarter earnings call and introduced Andy Plenge, the Vice President of Investor Relations. Calvin Butler, the President and Chief Executive Officer and Jeanne Jones, the Chief Financial Officer, will be leading the call. The presentation, earnings release, and other financial information can be found on the company's website. The presentation includes forward-looking statements and non-GAAP measures, with reconciliations available in the appendix. Calvin Butler also mentioned ComEd's milestone of reaching the end of the three-year deferred prosecution agreement with the Department of Justice.

The government moved to dismiss a charge against the company in a court status hearing due to their compliance with a DPA. The company welcomed Anna Richo to their Board of Directors, who has experience as an attorney and business leader. The company earned $0.34 per share on a GAAP basis and $0.41 per share on a non-GAAP basis, which was in line with expectations. They have 6 active base rate cases underway and recently filed a multiyear plan for Pepco Maryland that includes $150 million of climate solution programs.

Exelon recently filed their proposed Pepco Maryland multiyear rate plan and have received intervenor testimony in their BGE and ComEd multiyear rate plans. The Public Service Commission of the District of Columbia has also set its schedule for the Pepco D.C. multiyear plan. Exelon expects to be at the midpoint or better of their 2021 to 2025 and 2022 to 2026 6% to 8% annualized earnings growth ranges and to grow the dividend in line with those earnings. They anticipate investing over $31 billion to support the energy transformation over the next 4 years and are also pursuing grants under the Infrastructure Investment and Jobs Act to support their investment programs.

PJM recently voted to proceed with transmission upgrades to address reliability challenges in Eastern Maryland with an investment of $850 million. Exelon has published its 12th Sustainability Report, showing that they have connected over 200,000 customers with over 3 gigawatts of renewable energy resources, saved close to 25 million megawatt hours in 2022 with their energy efficiency programs, and spent $2.9 billion with diverse suppliers, 62% of which are in the communities they serve.

This paragraph provides an update on the operational performance of Exelon's utilities in the first half of the year. All four utilities operated in the top quartile, and ComEd, PECO, and PHI achieved best on record outage frequency and system outage duration performance. BGE also operated in the top quartile. Exelon's three gas utilities also achieved top decile levels for gas odor response. Customer satisfaction scores remain in line with those reported in the first quarter call. Exelon is preparing to meet the increasing demands on the grid, such as the growth in electric cars and data centers.

ComEd announced that it won several recognitions in the 20th Annual Best Practices awards by Chartwell, including recognition for its community energy assistance ambassador program, which was designed to help income-eligible customers pay their electric bills and create local employment opportunities. ComEd is also focusing on reducing its own operating costs and pursuing customer-focused initiatives. However, safety performance was lower this quarter due to low-impact OSHA recordables, so each of the operating companies have action plans underway to address areas of needed improvement.

Calvin discussed the company's safety plans and initiatives to improve safety performance. Jeanne then provided a financial update for the second quarter of 2023, including lower earnings than the same period in 2022 due to higher interest expense, unfavorable weather, and higher distribution and transmission rates. Despite mild weather, the company delivered earnings results in line with expectations.

Exelon expects to see lower earnings in the third quarter of 2023 due to higher interest and some timing of O&M and taxes. They anticipate year-over-year earnings growth in the fourth quarter due to the absence of proactive derisking, reversal of O&M and tax timing, and onetime impact of BGE's reconciliation for 2021 and 2022. They are continuing to affirm their 2023 EPS guidance range of $2.30 to $2.42 per share.

Pepco Maryland recently filed a 3-year multiyear plan application with the Maryland Public Service Commission, requesting a $213.6 million revenue increase over the April 2024 to December 2027 period. The filing outlines investments the company plans to make to support a climate-ready grid and enable cleaner energy programs and technologies, including $150 million of climate solution programs for customers transitioning to cleaner technologies like heat pumps. The filing also proposes an ROE of 10.5%.

Pepco has reported the best reliability performance of any electric distribution utility in the state of Maryland and is focused on keeping affordability front and center for customers. The multiyear plan includes acceleration of tax benefits and efforts to increase participation in energy assistance and energy efficiency programs. Delmarva Power Delaware has revised a revenue request for a $41.8 million increase and ACE revised their revenue request for a $93.6 million increase, with decisions expected in the second and first quarters of 2024, respectively.

The New Jersey Board of Public Utilities approved a 4-year capital tracker at ACE, and ComEd and BGE have both surpassed two key milestones in their multiyear plan rate cases. Pepco has also received a procedural schedule from the Public Service Commission of the District of Columbia in its second multiyear rate plan filing. Relationships between the jurisdictions and regulators remain constructive, and the rate cases are expected to be resolved by next year with a clear path forward to supporting clean energy and climate goals in an affordable and equitable manner.

PECO is investing $130 million in a new 69-13kV substation in Philadelphia to increase distribution and transmission reliability, relieve low constraints, and supply additional capacity to the University City area. This insulated substation will take up less land than traditional open-air substations, reducing the required land use by 60-70%. It is expected to be fully energized by the second quarter of 2024.

PECO has taken steps to ensure construction of the Civic substation has minimal impact on the city of Philadelphia, the surrounding customers, and the environment. As an Exelon utility, PECO is committed to operational excellence. PECO has a strong balance sheet and has raised nearly $1.3 billion in debt financing for BGE and PECO in the second quarter, demonstrating investor confidence. PECO is planning to issue $425 million of equity at the holding company by 2025.

Calvin Butler is reminding the investment community of their goals for 2023, which include operational excellence, supporting the energy transformation, efficiently investing $7.2 billion of capital, and earning ROEs in the 9-10% range to meet their 2023 earnings guidance. They are also partnering with the Exelon Foundation to invest $20 million in the 2c2i climate change investment initiative fund to support solutions to the challenges of climate change. Five companies have been selected to receive investments this year in areas such as software analytics, non-recyclable plastic reuse, and EV charging solutions.

Calvin Butler is discussing the addition of Colette Honorable to the team as the Executive Vice President of Public Policy and Chief External Affairs Officer. He also acknowledges the retirement of Bridget Reidy, Executive Vice President and Chief Operating Officer of the business services company, for her leadership in diversity, equity and inclusion and other corporate support groups. Butler is confident that the team's commitment to leading the energy transformation will make them the premier transmission and distribution utility. He then turns the conversation to Gigi for questions, specifically asking about the progress of the BGE rate cases.

Calvin Butler and Carim Khouzami, Presidents and CEOs of ComEd and BGE respectively, provide an update on the rate case process. The ICC staff and interveners have not changed their initial positions in May, and their challenges center on certain IT projects, fiber, and proposed private LTE communications networks. BGE's requests have been met with 90% approval from the staff and OPC. The case is proceeding as expected.

Calvin Butler and David Arcaro discussed the hearings and the expected orders for both companies by the end of the year. Butler added that they are expecting to see the process through and that the stakeholder process is critical to the reconciliation process in Maryland and the 4-year multiyear plan in Gil. James Kennedy asked if the $870 million for brand insurers is purely incremental, to which Butler responded that it is.

Calvin Butler and David Velazquez discuss potential opportunities to reinforce the transmission grid due to the retirement of brands insurers and the potential for offshore wind. Velazquez outlines four proposals submitted to PJM, ranging from $300 million to over $1 billion, as well as a Maryland legislation requiring a report and solicitation for offshore wind reinforcements by July 2025. All of these reinforcements are necessary to ensure the reliability of the grid.

ComEd's existing franchise agreement is still in effect and the team is working closely with the new Mayor to create a new franchise agreement that is tailored to his administration's priorities. Gil Quiniones has been named to the Environmental Justice Transition Subcommittee for the new Mayor and has been having initial conversations with them in order to restart negotiations for a new franchise in Chicago.

Calvin Butler and Jeanne Jones discussed the ongoing SEC investigation that began in 2019 in response to Paul Zimbardo's question. Butler then went on to discuss the company's efforts to combat higher parent costs such as realigning their real estate portfolio, creating flexible work arrangements, and automating work processes to become more efficient.

Exelon is focused on reducing their operating and maintenance costs and increasing organizational efficiencies. They have seen a 1.7% CAGR since 2016, and a 1% year-over-year growth in 2023. Jeanne Jones adds that reducing costs and preserving cash is important to minimize the amount of investments needed, and that interest rates are locked in ahead of time with reinsurance hedging.

Jeanne Jones explains that the current credit metrics are at 13%, and the downgrade threshold is 12%. She also notes that their low-risk platform of diversity, scale, forward-looking rate mechanisms, and 75% decoupled revenues contributes to this. She states that if the corporate alternative minimum tax is mitigated, they will still do the 425 remaining equity sometime between now and 2025. Moody's and S&P have different calculations, with the former trending at 13% over the time horizon and the latter having cash timing differences that result in a lower end in '23 and '24 and a higher end in the back end.

Calvin Butler and Jeanne Jones discussed how they manage O&M costs to stay below the rate of inflation. They have been successful in meeting their objectives, and they have offsets across their platform, mostly at PECO, BGE, and PHI, due to ComEd's formula rate true-up on O&M. They will continue to manage costs and not take their foot off the gas.

Exelon is offsetting $0.07 of weather-related losses by taking advantage of labor vacancies, lower T&E and contracting spend, favorable depreciation from PECO, and the interest deposit rate on the reg asset from the ICC, which was reset to 5% this year. There are ongoing discussions regarding the corporate minimum tax and the tax repair deduction.

The ComEd rate case is still ongoing, and the staff has yet to update their ROE calculation. ComEd is still pushing for an ROE that reflects current market conditions and takes into account the sunset of the formula rate. The company remains hopeful that more clarity on the issue will be provided by the end of the year.

BGE executives Calvin Butler and Jeanne Jones report that they have not experienced any shortages in transformers, labor, or other equipment necessary to complete their planned capital projects. They attribute this success to their large scale and platform, which allows them to access current and new suppliers. They also note that the size of their capital plan, $31 billion, allows them to manage any potential issues in bite sized chunks.

Calvin Butler, Exelon's President and CEO, thanked everyone for joining the conference and concluded the presentation by saying that the company is focused on delivering on plan. He then thanked all the participants and concluded the call, telling everyone to have a good day.

This summary was generated with AI and may contain some inaccuracies.