$EXC Q3 2024 AI-Generated Earnings Call Transcript Summary

EXC

Oct 30, 2024

The paragraph is from Exelon's Third Quarter Earnings Call, introduced by an operator named Gigi. Andrew Plenge, the Vice President of Investor Relations, welcomes participants and mentions that Calvin Butler, Exelon's President and CEO, and Jeanne Jones, the CFO, will lead the call. Other senior management members are present to answer questions after the presentation. The materials for the call, including presentations and earnings releases, are available on Exelon's website. The presentation contains forward-looking statements and non-GAAP measures with risks and uncertainties highlighted. Calvin Butler then reports that Exelon had a solid quarter with GAAP earnings of $0.70 per share and operating earnings of $0.71 per share, surpassing previous expectations.

The company reported strong operational performance in the face of July storms, with low outage levels and progress on regulatory matters for 2024. ComEd received a positive proposed order for its multiyear rate plan in Illinois, and settlements were reached in PECO's gas and electric rate cases, recommended for approval. The company anticipates a regulatory order in Washington, D.C. by year-end to support grid investment for clean energy goals. In Maryland, hearings on multiyear plans concluded, with support from various stakeholders, showcasing their effectiveness in addressing modern grid demands.

The paragraph discusses the company's commitment to transparency and accountability to address stakeholder concerns and align investment plans with state energy goals. It highlights strong performance in safety, reliability, and customer satisfaction, despite challenges from record-breaking storms and a tough hurricane season. The company, including ComEd, Pepco Holdings, BGE, and PECO, achieved top performance levels and provided significant assistance in storm recovery efforts. The author expresses gratitude to employees for their dedication and hard work.

The paragraph discusses several updates from a utility company. It highlights the company's efforts to improve reliability and resiliency in response to extreme weather, achieving top quartile safety performance across its four utility operating companies. Customer satisfaction has improved, with initiatives such as better communication and streamlined processes. Jeanne Jones then provides a financial and regulatory update, noting a Q3 2024 earnings increase compared to Q3 2023, primarily due to improved distribution earnings at ComEd. Additionally, a transmission project at Delmarva Power is mentioned for grid modernization and cost savings for customers.

The paragraph discusses Exelon's financial performance and guidance, emphasizing its ability to achieve strong results despite challenges like mild weather and storm activity. Exelon earned $0.03 per share from higher distribution and transmission rates, offset by increased interest expenses, and maintained earnings within previous guidance. The company anticipates achieving its fourth-quarter earnings target of $2.40 to $2.50 per share, assuming certain regulatory and weather conditions are met. It reaffirms long-term growth targets of 5% to 7% annualized operating earnings per share through 2027. The paragraph also outlines progress in distribution rate cases across various jurisdictions, including recent filings such as Delmarva Power's request for a $35.6 million gas distribution rate increase in Delaware, excluding certain charges.

The paragraph outlines the recent activities and planned investments by Delmarva Power and Pepco Holdings to improve customer reliability and service safety through infrastructure upgrades, like inspecting gas mains and replacing aging pipes. Delmarva Power has also proposed a weather normalization rider to stabilize customer bills amid volatile temperatures. Pepco has submitted a final brief on its climate-ready multiyear plan designed to create a resilient and secure energy grid and enhance affordability while supporting D.C.'s goal of carbon neutrality by 2045. Meanwhile, in Pennsylvania, administrative law judges have recommended the approval of settlements in PECO's gas and electric rate cases, which propose revenue requirement increases, although a weather normalization adjustment is still under review.

The paragraph discusses recent developments in utility rate adjustments and grid modernization efforts. Pennsylvania gas utilities, including PECO, have approved adjustments to reduce volatility in customer bills and recover distribution revenue, with final orders expected by December. At ComEd, a proposed order recommends approving a revised grid plan with a significant revenue and rate base increase, with new rates effective by January 2025. The plan allows recovery of investments up to 105% of the approved requirement, excluding certain categories. ComEd, PECO, and Pepco DC's final orders are anticipated by year-end, establishing rates through 2026/2027 for most of the rate base, enabling a focus on execution and strategic discussions for electrification and clean energy expansion. Further details are available in the appendix slides. The discussion continues to Slide 8, highlighting transmission system modernization.

Delmarva Power is upgrading a 14-mile transmission line from Vienna, Maryland to Nelson, Delaware, replacing old wooden structures with new steel poles and upgrading to 230 kV standards. The project will enhance system resilience, withstand extreme weather, and is progressing ahead of schedule for completion in December. It will allow for the retirement of the Indian River coal unit, saving customers $100 million and improving system reliability. The effort includes significant investment in diverse suppliers to bolster local economic growth, aligning with state decarbonization goals and demonstrating Delmarva's commitment to modernizing the energy grid and enhancing customer value.

The paragraph outlines a company's capital investment plan of $9.7 billion in electric transmission through 2027, emphasizing the potential opportunities for customer support. It mentions maintaining strong credit metrics with a 100 basis point cushion above downgrade thresholds set by S&P and Moody’s. The company has completed all planned long-term debt financing for the year, raising $575 million through PECO and $150 million in equity issuances for 2024. Strong investor demand and effective hedging strategies are cited as key to financing energy transformation efficiently.

The company's guidance to issue $1.6 billion in equity from 2024 to 2027 remains unchanged to support a $34.5 billion capital plan. They aim to issue approximately $475 million annually from 2025 to 2027. Calvin Butler highlights the company's progress on 2024 priorities, emphasizing continued execution and operational excellence despite significant storm activity. They are nearing final orders for ComEd and PECO, covering about 50% of the rate base, with another 40% covered by established processes through 2027. In Maryland, they are working collaboratively to align investment with the state's energy goals. They're on track to invest $7.4 billion in 2024, targeting a 9% to 10% return on equity, with planned financings complete. They aim to meet their operating earnings guidance of $2.40 to $2.50 per share while maintaining a commitment to customer affordability through cost-saving measures and effective legislative and regulatory efforts.

The paragraph discusses the primary mission of a large utility company, which is to provide reliable, resilient, and affordable power equitably. It emphasizes the importance of investing in the electrical grid to meet increasing demands from severe weather, electrification, and artificial intelligence growth, citing an increase in data center load from 6-gigawatts to 11-gigawatts. Grid investments not only enhance reliability but also contribute to affordability, with the transmission project mentioned as an example of creating customer savings. The paragraph highlights the need for coordinated investment, policy advocacy, and collaboration with peers and policymakers to ensure a reliable and affordable energy supply. It also mentions recent recognitions: ComEd and PECO being named top utilities for economic development and Pepco being awarded business of the year by the District of Columbia’s Chamber of Commerce.

In the paragraph, Exelon Utilities received three additional awards from the Department of Energy’s grid resilience and innovation partnership program, totaling $330 million in funding. They serve over 10.5 million customers and aim to provide safe, resilient, and affordable power. During a Q&A session, Nick Campanella from Barclays asked about the company's financial guidance for 2024. Jeanne Jones confirmed their aim to achieve the midpoint or better of their guidance range, as they have done in the past two years. Nick also inquired about the PJM auction and legislative solutions for new generation as Exelon focuses on strategic initiatives for 2025.

Calvin Butler discusses the growing concerns over the rising electricity prices at PJM and the need for reform. He appreciates PJM's efforts in suggesting interconnection and market reforms, acknowledging that the current stakeholder process is ineffective. As a company without its own generation, they have a unique perspective and are actively working with governors and regulatory bodies to address the issue. Butler emphasizes the importance of reliable, resilient, and affordable energy and commits to being part of the solution to ensure equitable energy access for all customers.

The paragraph discusses the need for investment in the energy grid to achieve reliable, resilient, and affordable energy, particularly in light of increased weather-related challenges and decarbonization goals. While acknowledging the complexity and time required to build new infrastructure to meet higher demand, Calvin Butler emphasizes the necessity of smart transmission investments. He argues that the cost of not making these investments outweighs the expense involved, and stresses the importance of proactive collaboration with regulatory bodies to ensure effective planning and implementation.

The paragraph discusses the importance of multiyear plans and continued grid investments to ensure cost-effectiveness and effective energy delivery. Colette Honorable, EVP of Public Policy and Chief External Affairs Officer, highlights the company's status as the largest utility focused solely on transmission and distribution. This position allows them to collaborate effectively with policymakers and stakeholders to address customer needs, particularly in clean energy transformation. The company is actively involved in the PJM process, focusing on reforms to expedite project development and improve pricing strategies. The effort to address capacity issues is emphasized as a priority. Colette and Calvin Butler, the speakers, stress the importance of partnerships and proactive communication in achieving these goals.

The paragraph is a portion of a discussion involving Calvin Butler, Colette Honorable, and others responding to questions about their engagement with PJM meetings. Calvin Butler and Julien Dumoulin-Smith discuss the impact of Maryland's multiyear plan (MYP) on operations, noting that although the MYP was only implemented in 2020, the company successfully operated under traditional rate-making methods before that. Calvin asserts that the MYP is preferable due to its transparency and affordability, allowing for effective collaboration with stakeholders to meet everyone's goals.

The paragraph discusses the company's approach to rate-making and capital allocation across different jurisdictions. While the company prefers a modern approach to rate-making, they are prepared to continue with traditional methods if required. They are adept at reallocating capital, as demonstrated by their recent adjustments in Illinois. Jeanne Jones mentions the benefits of the company's size and scale in managing investments across various proceedings, such as ComEd's plan and their order in DC. They focus heavily on transmission work, reflected in their substantial investment increase. Julien Dumoulin-Smith seeks further clarification on transmission projections, suggesting that the current estimates might be significantly exceeded based on various indicators.

The paragraph discusses the increasing need for transmission investment due to various factors. Jeanne Jones highlights three main themes: the necessity for core work across jurisdictions to ensure reliability and resiliency in response to volatile weather, the impact of a changing generation mix which includes both retiring and new generation like offshore wind, and the emergence of new load demands. Efforts include modernizing systems to withstand extreme weather and ensuring security at substations, as well as investing in transmission to support both retiring and new energy sources.

The paragraph discusses a capital plan update involving $3 billion, with 90% allocated to transmission and $700 million to ComEd, which is experiencing significant data center growth. It highlights efforts to accommodate high-density loads in ComEd and across PJM regions, mentioning a $1 billion investment in Northern Virginia data centers. The text notes additional opportunities in PJM and MISO regions, indicating potential investments not yet in the plan. The investments could save customers money compared to alternatives. The conversation then shifts to a dialogue between Calvin Butler and Shar Pourreza about Calvin's late August 205 filings related to clarifying the tariff treatment of network load in service territories and discussing procedural paths forward.

The paragraph discusses a regulatory issue involving a dispute over the classification of co-located loads in the Talen ISA amendment. AEP and another entity raised concerns that these loads were not being considered part of the network load, which would exempt them from sharing grid service costs. This led to FERC initiating a technical conference to clarify policy, as they believe it should not be dictated by individual contracts. The entity involved filed 205 requests with FERC for clarity by December to ensure grid reliability and avoid cost shifting. Colette Honorable acknowledges the intervention's progress but notes the process's timing remains uncertain.

The paragraph discusses the need for clarity and guidance from FERC regarding technical conferences impacting large load customers at utilities like PECO. Both Calvin Butler and Jeanne Jones emphasize the importance of obtaining guidance by early December to confidently move forward and establish clear regulations. Jeanne highlights ongoing efforts to secure affordable and reliable energy generation in Illinois, noting that challenges with capacity auctions have prompted earlier conversations to address these issues.

The paragraph discusses the issue of resource adequacy within the wireless industry, highlighting that while there is a consensus on the importance of reliability, resiliency, and affordability, there is less agreement on how to address resource adequacy. Calvin Butler emphasizes that although some peers are advocating for regulated generation, he believes it is only one potential solution, and the industry is engaged in ongoing discussions to find practical and timely options. He highlights the importance of working with stakeholders to ensure the grid meets its obligations during peak demands.

The paragraph discusses the involvement of various stakeholders, including industry participants like ADI, in addressing issues related to different jurisdictions and the need for tailored solutions. Calvin Butler and Steve Fleishman discuss the positions of Governors of Pennsylvania and Illinois on co-location deals, with a focus on reliability and affordability for their states. Governor Shapiro of Pennsylvania is highlighted as being proud of achievements such as the Three Mile Island and co-location deal with Susquehanna. Mike Innocenzo, the Chief Operating Officer, is mentioned as being involved in the discussions.

The paragraph discusses the positive impacts of the Susquehanna deal, specifically highlighting economic development and job creation. It acknowledges concerns about cost shifting and emphasizes the importance of fair grid usage. The focus is on ensuring reliable and affordable power while promoting economic growth. Mike Innocenzo adds that their position supports safety, reliability, and economic development. Jeanne Jones and Steve Fleishman discuss the PJM transmission and recent filings, mentioning potential incremental opportunities related to utilities' filings and the company's significant footprint.

The paragraph involves a discussion between Calvin Butler and Ross Fowler about PJM capacity and the legislative actions needed to address it. Butler mentions that current discussions, including those spearheaded by governors, will be crucial in determining the legislative efforts that might be pushed forward in the 2025 sessions. He acknowledges the urgency of the matter and suggests that developments over the next 60 days will indicate how seriously governors will address this issue. Furthermore, Fowler shifts the focus to ISA and its process at FERC, highlighting two main issues as they move towards the 205s.

The paragraph discusses the issues related to cost allocation and reliability in the context of grid infrastructure. It highlights the concern over cost allocation, which involves paying for necessary grid upgrades when new facilities are co-located with substations. There's also a discussion on the distinction between capacity studies, conducted by organizations like PJM, and reliability studies. The paragraph suggests the need for incorporating reliability considerations, as taking plants off the grid raises concerns about maintaining reliability. Mike Innocenzo, the Chief Operating Officer, adds that these concerns fall into three categories: reliability, resource adequacy, and rate design, emphasizing the impact of investments on the grid, including the need for ancillary services and potential upgrades.

The paragraph discusses the importance of co-locating new projects with existing power grid infrastructure to support growth while ensuring reliability, transparency, and appropriate cost management. Jeanne Jones emphasizes that their stance has always supported co-location and the necessity for thorough studies on reliability, rate design, and resource adequacy. She stresses collaboration with regulatory bodies like FERC and acknowledges the need for new generation and transmission to meet increased loads. Calvin Butler adds that the company regularly communicates with major data center developers to support these efforts.

The paragraph discusses the collaborative efforts to ensure the reliability and resilience of the electrical grid in the U.S., emphasizing the importance of working with utilities nationwide. It highlights the progress made with six gigawatts of power and a potential increase to 11 gigawatts in Illinois and related areas, indicating significant development in energy infrastructure. The conversation transitions to the roles of FERC and PJM, with FERC overseeing reliability under the Federal Power Act and PJM acting like an air traffic controller for grid management. It explains that FERC is responsible for wholesale, transmission, and generation interconnection agreements, taking a lead in managing grid policy issues.

The paragraph discusses the multi-layered regulatory framework involving the Federal Energy Regulatory Commission (FERC), PJM (a regional transmission organization), and state-level regulations concerning energy generation and grid reliability. It explains that although large industrial and commercial customers have unique arrangements through riders, they still rely on and are connected to the grid, necessitating a comprehensive policy approach. Calvin Butler expresses appreciation for the engagement and support of stakeholders and highlights Exelon's leadership in energy transformation. He looks forward to further discussions at an upcoming EEI event.

The operator thanked the participants for joining the presentation, announced its conclusion, and instructed them to disconnect, wishing them a good day.

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