Exelon Corp (EXC) — Q2 2024 Earnings Call Transcript

Thank you, Gigi. Good morning, everyone. We're pleased to have you with us for our 2024 second quarter earnings call. Leading the call today are Calvin Butler, Exelon's President and Chief Executive Officer; and Jeanne Jones, Exelon's Chief Financial Officer. Other members of Exelon's senior management team are also with us today, and they will be available to answer your questions following our prepared remarks. Today's presentation, along with our earnings release and other financial information can be found in the Investor Relations section of Exelon's website. We would also like to remind you that today's presentation and the associated earnings release materials contain forward-looking statements, which are subject to risks and uncertainties. You can find the cautionary statements on these risks on Slide 2 of today's presentation or in our SEC filings. In addition, today's presentation includes references to adjusted operating earnings and other non-GAAP measures. Reconciliations between these measures and the nearest equivalent GAAP measures can be found in the appendix of our presentation and in our earnings release. It is now my pleasure to turn the call over to Calvin Butler, Exelon's President and CEO.

Thank you, Andrew, and good morning, everyone. We appreciate you joining us for the call and are pleased to be reporting a solid second quarter earnings and operational performance, keeping us on track to deliver consistent and stable performance once again. We expect to deliver within our guidance range of $2.40 to $2.50 with the goal of being at the midpoint or better, and we are reaffirming all of our long-term guidance. That includes investing $34.5 billion to grow rate base at 7.5%, resulting in annualized earnings growth of 5% to 7%. For the quarter, we delivered $0.47 per share of adjusted operating earnings, above our expectations, driven primarily by favorable weather in our non-decoupled jurisdictions, along with timing of spending and ComEd distribution revenues. We also performed at operationally high levels, achieving top quartile or top decile reliability performance across the board. We have also continued to make progress on the regulatory front. Our revised Grid Plan process in Illinois is on track and approval by the end of the year is a top priority. Since our last earnings call, we have gone through two rounds of testimony from staff and intervenors, and we have narrowed open issues with many interveners and staff. We will continue to work with parties to address open items in advance of the evidentiary hearings. We are encouraged that we've been able to reach agreements with key parties like the City of Chicago, the Building Owners and Management Association, and the environmental coalition, JNGO. Each has recognized the progress made in our revised plan and its compliance with the Climate Equitable and Jobs Act, a key focus of the commission. These affirmations are good examples of what differentiates the process this year. Approval of the plan will ensure that Northern Illinois will receive the investment needed to maintain an affordable, resilient, reliable, and clean grid for its customers and will support the state's success in attracting new business. In addition, the process for our PECO rate cases remains on track for orders by the end of the year, and Pepco DC's rate case continues, where we await a final decision in its second multiyear plan following the completion of the briefing schedule on August 30. Finally, we received an order in PECO Maryland's second multiyear plan rate case filing, which adopted a one-year framework, with the ability to refile for new rates while we await the outcome of a lessons-learned process in the state. Now the short rate plan maintains some of the positive elements of multiyear rate-making, such as a reconciliation and the ability to update rates next spring offers an opportunity to keep rates more current with costs. All stakeholders, including Exelon, are interested in making sure the investments we make keep us on track to meet the goals of Maryland's Climate Solutions Now Act while appropriately balancing interest across stakeholders. There are many ways to strike that balance, and rate-making constructs are a key tool to do that. We think multiyear plans provide a great foundation offering unparalleled transparency, accountability, and alignment, including a reconciliation process that allows all stakeholders to understand how we performed against the approved plan. But alignment on an agreed-upon path forward that works for everyone is critical, particularly since the need to invest in the grid is only growing with increased electrification, diverse and sophisticated power supply and demand technologies, and the increased strain on our grid caused by severe weather. The broken investment has only accelerated as the proliferation of artificial intelligence has significantly boosted data center development, as Jeanne will discuss in her remarks. The stakes are simply too high to lack confidence that we are prioritizing the investments most important to our customers. Multiyear plans can provide that confidence and transparency to customers and when done right, ensure alignment with all stakeholders. We are refining our regulatory strategy to follow the lead provided in the final quarter. Importantly, we stand ready to engage in a lessons-learned process to ensure we can find common ground on any adjustments to address stakeholders' areas of focus. In the meantime, given the deviation from the approach used by the commission since 2021, we are taking action on the current order and seeking more clarity, as Jeanne will discuss in her remarks. Now turning to our operational performance on Slide 5, you can see that our performance through the first half of the year remained strong. ComEd and PECO Holdings are performing at top decile levels despite ComEd experiencing four times the amount of storm activity in the second quarter compared to last year. I just want to pause and say how incredibly grateful I am for the committed employees that serve on the front lines during these increasingly challenging storm seasons. Just in the past few weeks, our ComEd crews headed down to the Gulf region to provide mutual assistance after Hurricane Beryl, only to come back to respond to four waves of back-to-back storms in Illinois, which included 41 confirmed tornadoes, impacting 500,000 customers. ComEd experienced the most severe storm in its territory in more than 15 years. And yet, within two days, we restored 80% of the impacted customers, which is a true testament to the importance of prudent grid investment and our employees’ relentless dedication to our customers. We can’t thank our employees and those providing mutual assistance enough for their commitment to serving all of our customers. This operational excellence is matched on the gas side as well. Now on the safety front, I’m pleased to report that BGE, PECO, and Pepco Holdings are all now top decile, with PECO improving from the second quartile into the first quartile. Our utilities continue to leverage our new safety observation platform to take action before an incident occurs, with over 1,000 supervisors and safety professionals trained on our new tools. ComEd is continuing to build upon this focus with the goal of moving into the top quartile, and we look forward to sharing more on its progress in our next earnings call. Lastly, our customer satisfaction scores remained consistent with the prior quarter, with ComEd and PECO in the top quartile, Pepco Holdings in the second quartile, and BGE in the third quartile. Pepco Holdings and BGE have both made progress toward improving their performances by implementing actions based on the findings from their customer experience working groups and data analytics. Actions taken by ComEd include enhanced accuracy for time to restore communications, greater self-service options for new business and interconnections, and customer assistance campaigns targeted at newer groups such as moderate-income customers. We look forward to the second half of the year, bringing continued operational excellence and delivering industry-leading value to our customers. I will now turn the call over to Jeanne to cover our financial and regulatory update. Jeanne?

Thank you, Calvin. And good morning, everyone. Today, I will cover our second quarter financial update, along with the outlook for the second half of 2024 and our progress on the rate schedule, and highlight two projects that demonstrate the breadth of our opportunities associated with growing load and infrastructure demand. Starting on Slide 6, we show our quarter-over-quarter adjusted operating earnings lock. As Calvin mentioned, Exelon earned $0.47 per share in the second quarter of 2024 versus $0.41 in the second quarter of 2023, reflecting higher results of $0.06 per share over the same period. Earnings are higher in the second quarter relative to the same period last year, driven primarily by $0.06 of higher distribution and transmission rates associated with incremental investments and completed rate cases, net of associated depreciation, and $0.03 of favorable weather, partially offset by $0.03 of higher interest expense due to higher levels of debt and increased interest rates. As Calvin mentioned, we delivered earnings results above the guidance we provided in our prior quarter call due to favorable weather conditions, early execution of our weather and storm recovery plan, and timing of ComEd’s distribution revenues. Operating earnings of $1.16 per share through the first quarter of 2024 reflect 47% projected full-year earnings, which is in line with how we’ve affirmed through the first half of 2023. As we look ahead to next quarter, we expect a relative EPS contribution in the third quarter to be largely in line with the prior year, at approximately 27% of the midpoint of our projected full-year earnings guidance range. Our outlook for the second half of 2024 assumes a fair and reasonable outcome for Pepco DC’s multiyear plan rate case and the BGE and ComEd reconciliation, and it incorporates July weather and storm activity with the same geothermal conditions for the balance of the year. On a full-year basis, we remain on track for operating earnings of $2.40 to $2.50 per share in 2024, and we reaffirm our long-term annualized operating earnings per share guidance range of 5% to 7% through 2027, with the expectation to be at the midpoint or better of that growth range. Turning to Slide 7, as Calvin highlighted, there have been some important regulatory developments across our utilities that I will review, beginning with ComEd. Coming out of two rounds of staff and intervener testimony, we are encouraged by the support that ComEd's revised grid plan is compliant with the requirements of the Climate and Equitable Jobs Act and that it represents an appropriate balance between affordability and supporting the state’s clean energy goals. Our proposal represents an average annual increase to the total residential customer bill of only 1.8% through 2027 relative to December’s final order. ComEd filed its Solar Parties testimony with the Illinois Commerce Commission on July 31, marking the end of rebuttal testimony and another key milestone in the procedural process. The company and parties to the case head into evidentiary hearings in mid-August, followed by the briefing process in September and a proposed ALJ order in mid-October. A final order is expected in December 2024 for rates that will take effect by the start of 2025. Turning to Pennsylvania, on July 16, PECO filed its rebuttal testimony with the Pennsylvania Public Utility Commission in support of both its electric and gas distribution rate cases ahead of the hearings in early August. The cases are following the expected schedule, with orders anticipated from the PAPUC before the end of 2024. Moving on to Pepco Holdings, on July 30, the DC Public Service Commission held a legislative-style hearing to rehear oral arguments from key stakeholders and Pepco DC on its pending multiyear re-plan filing. We are committed to working with DC towards their goals to meet their energy transformation aspirations, having at the commission’s direction provided an extensive lessons-learned from the first MYP and supplemental testimony detailing each of the benefits as well as enhancements and modifications to improve the MYP framework. Based on the latest procedural schedule, which concludes with the post-hearing brief in late August, we anticipate a final order in the fourth quarter of this year. I'll close by providing an update on the Pepco Maryland final order we received on June 10, which adopted a one-year plan with a total revenue increase of $44.6 million and a 9.5% ROE. We appreciate the ability to file for new rates effective at the end of the one-year plan and the ability to reconcile eligible costs in excess of those approved. While we were disappointed not to receive rates over the full period requested, we remain committed to engaging with the Maryland Public Service Commission on its lessons-learned process, which we anticipate will commence next year. As Calvin noted, we believe strongly in the merits of the multiyear plan framework, and we embrace the opportunity to discuss ours and other stakeholders' learnings after 3.5 years of operating under that construct, where we've consistently delivered above-average reliability under below-average rates. In the meantime, Pepco is requesting that the commission rehear and reconsider certain aspects of their decision, including some that were proposed for removal from the plan. As always, we advocate for transparency, accountability, and alignment in the rate-making constructs in our jurisdictions and are prepared to work with each to ensure just and equitable energy transformation for all. More details on the rate cases can be found on Slides 20 to 30 of the appendix. On Slide 8, we highlight two projects that showcase the power of our footprint and platform to attract and meet a variety of load growth opportunities. This growth is driven by continued momentum around AI-driven data center demand, onshoring of energy-intensive industries, and overarching economic development, electrification, and decarbonization trends. In June, ComEd joined Compass Datacenters to launch one of the largest data center projects in Illinois, bringing over 1,000 construction jobs to the nearly 200-acre former Sears headquarters campus. The project helps ComEd further advance economic development in the area and is a great illustration of why Northern Illinois ranks within the top five in the nation for data centers and is a top attraction for other high-density load customers. ComEd has 25 years of experience working with data center customers and was recognized for its best-in-nation reliability last year. Companies in energy-intensive industries are drawn to the region due to strong infrastructure, ideal climate conditions, access to talent, and affordable rates for all customers, supported by our ability to deploy investment in an efficient manner. This growth in high-density load, not just in data centers, but also in solar panel production, EV battery manufacturing, hydrogen production, quantum computing, and other industries is one of several drivers for why our transmission spend increased by 45% in our four-year plan, as discussed in the Q4 call and shown again on Slide 13 of the appendix. It also drove a significant update in new business in our refiled grid plan, with final spend eligible for full reconciliation under the multiyear plan framework. Supporting this development ensures the economic vibrancy of our communities. Last year alone, ComEd secured 15 new commercial projects that are set to add over 4,000 jobs and more than $8.6 billion of local investments. Shifting the focus to Maryland, BGE is playing a crucial role in transforming the Baltimore Peninsula into the city's newest and largest mixed-use community. The area will benefit from multiple new or rebuilt substations to help release capacity constraints and provide grid resilience to both new and existing customers, accommodating 100 megawatts of load and supporting the connection of distributed solar and EV charging stations. The 235-acre project will result in new and redeveloped mixed-use and residential buildings and host the new Under Armour global headquarters, playing a central role in the revitalization of South Baltimore. As the largest transmission and distribution utility in the country by customer count, we are an integral partner to areas like Baltimore City for revitalization and economic development, addressing aging infrastructure challenges, the need for new development and electrification, and the capacity constraints from increased load. These two projects highlight how we are uniquely positioned to support our jurisdictions to meet load growth demands in an equitable manner, no matter where the load is located. We operate in six utilities across seven jurisdictions, including FERC, are a leader and operator in the sector, and provide a world-class customer experience with bills and rates below national averages. Beyond our size, scale, and operational excellence, we have one Exelon platform to unify our utilities that allows us to support customers at a national level, identifying attractive locations to support incremental load in states with progressive clean energy policies. The momentum around new business in our jurisdictions continues to be very strong, a testament to the power of Exelon's platform. I will conclude with a review of our balance sheet activity on Slide 9. As a reminder, we continue to project approximately 100 basis points of cushion on average for our consolidated corporate credit metrics above the downgrade thresholds of 12% specified by S&P and Moody's, demonstrating our commitment to maintaining a strong balance sheet. While we await specific guidance on the implementation of the corporate alternative minimum tax, I'll remind you that our plan incorporates the assumption that the regulations will not allow for repairs. If implemented in a way that mitigates the cash impact, we'd expect an increase of approximately 50 basis points to our consolidated credit metrics on average over the plan, likely putting us in the higher end of our targeted 100 to 200 basis points of cushion. From a financing perspective, we successfully raised $1.6 billion for ComEd and BGE in the second quarter, now having completed 90% of our planned long-term debt financing needs for the year. The activity to date, along with our pre-issuance hedging program, positions us well for the balance of the year and beyond. We continue to see strong investor demand for our debt relative to the sector, which is proof of the strength of our balance sheet and our value proposition as the premier T&D utility with low-risk attributes. There has been no change in our guidance to issue $1.6 billion of equity from 2024 to 2027 to fund our estimated $34.5 billion capital plan in a balanced manner. We continue to expect to issue approximately $150 million this year, and the balance rapidly over 2025 to 2027, approximating $475 million annually. We will update you as we make progress on that plan. Thank you. I’ll now turn the call back to Calvin for his closing remarks.

Thank you, Jeanne. I’ll conclude by bringing it back to our priorities this year listed on Slide 10. As always, safely achieving industry-leading operational excellence is our first priority. Keeping customers online, no matter the weather, is increasingly important. We also remain highly focused on being responsive to our customers’ increasing engagement with the grid, whether it’s accommodating new solar, performing efficiency audits, or supporting their transition to electric vehicles. Reaching fair and balanced rate case outcomes that allow us to invest with the benefit of our customers is another critical focus. As you heard from Jeanne, we have a number of proceedings we expect to conclude in the second half of the year, and we’re optimistic about the clarity that will bring for the next several years of our plan. Building a reliable and modern grid requires reliable and modern rate-making, and we’ll continue to work with stakeholders to ensure that we are all aligned as we work to meet each state's energy goals. Next, we are focused on executing on the financial guidance we laid out, including investing $7.4 billion of capital with a balanced funding strategy and earning a consolidated 9% to 10% return on equity, allowing us to deliver in our earnings guidance range of $2.40 to $2.50 per share. And as always, we’re focused on ensuring all customers benefit from the generational energy transformation that’s just getting underway. In late June, many of you saw that we joined a FERC proceeding to raise concerns about the way co-located customers share some of the cost of the grid that they rely on. Exelon and AEP may have been the first to share those concerns, but many others have now echoed similar perspectives. There’s no question that co-location offers a unique opportunity for our jurisdictions to attract business in an exciting emerging industry, and we welcome supporting our customers in this work. Serving more customers than any other utility in some of the largest, most critical cities in the country, we are a leader in investing in the energy transformation and supporting economic development. As Jeanne shared, there is no shortage of work that the energy transformation requires of the grid, regardless of where the load shows up or what sort of generation serves it. In fact, just a week ago, PsiQuantum announced a partnership with the State of Illinois, the County, and the City of Chicago to be the anchor tenant in the massive quantum computing development, the first of its kind in the nation, housing a utility-scale quantum computer in an operation center the size of five football fields. So we will lead in investments, but we will also lead in affordability, with rates and bills that are currently below national averages, and we’re committed to continue to do so to ensure we can maintain the service our customers expect while making the necessary progress in the energy transformation. Accordingly, you can expect us to advocate for policies that continue to support investment in a grid that we all rely on and that ensure these investments can be made as affordably and equitably as possible. We will continue to monitor the FERC ISA proceeding in which action by the commission is expected by August 3 and stand ready to help advance solutions to the benefit of all customers. Gigi, we are now ready for any questions from the audience.

Good morning, Shar.

Good morning, Calvin. Hey, Jeanne. Good morning, Jeanne. So Calvin, just coming off sort of this blowout PJM capacity print, we’ve heard some of your peers yesterday highlighting that they’re talking to their state policymakers on solving this resource adequacy issue. I guess, what conversations are you having either in Illinois, Maryland, or Pennsylvania on the backdrop at this point? And do you think we can see merchant new entry in all states stepping in? Thanks.

Thank you, Shar. As you know, we’ve discussed resource adequacy in previous settings, but let me assure you that we, PJM, and a number of other stakeholders have been signaling concerns about resource adequacy for some time. Policy has continued to drive a turnover in the generation stack, as you know, with base load being replaced by renewables. In the past, it has brought huge advances in the power requirements with AI-driven data centers. Onshore of intensive manufacturing has further contributed to the pressures. But this, of course, poses real challenges regarding providing reliable, resilient, and affordable power. It relates to my comments that we have to ensure that the new rate-making systems align with the new constraints being put on the energy that’s being provided for all customers. The price signals that we saw clearly indicate a need for infrastructure investments in our footprint, particularly in BGE, both generation and transmission. Obviously, we’re doing that today, including the work on brand insurance retirement to address the types of price pressures that this auction showed. We regularly participate in meetings, and you should be assured we’re not going to step away from this. It’s an industry-wide issue because at the end of the day, what they’re going to look to utilities for is reliability and a resilient grid. All the other aspects are fine, but if those lights don’t come on, that’s when they’ll turn to us, and we focus on that each day. I’ll now turn it to Jeanne for further remarks.

Yes. I would reiterate, right, it signals, to your point, Shar, the need for more generation. We’ll see what happens on the merchant side, but there’s also the need for more transmission. Calvin talked about the work we’re doing on brand insurance. We’re going to continue to lean into that; we think there are some cost-effective solutions there. But there’s also an expansion of our programs to help our customers manage their affordability. For example, energy efficiency—we’ve been doing energy efficiency in ComEd since 2008, and we hit a milestone this year where we marked $9 billion in customer savings since 2008. That's remarkable; this work needs to continue to expand and improve as more demand comes on the grid, and we're leaning into that. We also hit a milestone of hitting 1 gigawatt of distributed generation under our rebate program in Illinois this year. We will continue, as mentioned, to have discussions with our policymakers on what else we can do—good for customers, good for investment—bringing down and addressing the competing demand because we want to encourage that demand. We just need to manage the other side of it, which we're excited to do, and we've done in the past, and we'll keep doing. We're also focused on controlling our O&M costs, which have historically been around 2%, projecting to remain at that level while our customers are facing power price increases well above that and normal inflation. So we're doing a good job in that regard. We’re excited about the meaningful opportunities this presents and look forward to providing solutions.

And Shar, if I can add on to Jeanne's comments, the reality is that none of this operates in a silo. It’s all interconnected. So when one lever is being pulled, you can't ignore the other pieces, and that’s why the ratemaking process is so critical and discussions must continue to be ongoing.

Got it. And then I think some of us have covered the space long enough to remember LCAP, MCAP, 11 years ago. And that obviously was struck down by the courts. Are you looking at a state mechanism to potentially own peaking assets in rates? Is that what you're referring to?

I would tell you that we're working with our commissions on all types of scenarios; we shouldn't take anything off the table because we need to address this issue and ensure affordability and equity are at the forefront of all discussions.

Okay. Perfect. And then just on the Susquehanna protest, just lastly here. It's obviously a focus, FERC is slated to act shortly. I guess, assuming the amendment is not set for a paper hearing, how do you want FERC to resolve the broader issue—kick it back to the RTO, start an NOI for an eventual process?

Yes. Let me just tell you, and thank you for the question. I know this issue has gotten a lot of attention, and for some reasons, rightly so. We're on the cusp of a major new source of load, and it's a critical emerging industry that holds a lot of promise for us in the U.S. economy. Let me add some additional color to my prepared remarks, though I'm mindful that we have an open proceeding with FERC, and we should learn more about that soon. Our protest to the Talent ISA is not because we're against co-location; we’ve made it very clear in the initial protest that we are not. We believe co-location offers benefits and allows our jurisdictions to compete successfully for this business. As I talked about, we have proven that we're an attractive partner for data centers, as evidenced by Chicago being a top five market for economic development. Our participation in the accept Window 3 at $850 million was due to data center growth in Northern Virginia. For us, Shar, this is about rate design. Users of the grid should pay their fair share. While there may be unique opportunities to leverage land and equipment at generation plants to get data centers online quickly, they are still connected to the grid and benefit from a host of services that the grid provides to serve the load connected to it. You should expect us to continue to remain focused on economic development and affordability, as we can do both and drive growth across our jurisdictions without neglecting the other.

Got it. All right, perfect. Thank you, guys. Much appreciated. Talk to you soon.

Thank you.

Good morning, David.

Hey, good morning. Hey, thanks for taking my questions. Wondering if you could give a broad perspective on what you're seeing in terms of state support for attracting data centers. It sounds like you had some encouraging things to say. Just are you seeing any evidence of pushback in any areas or the opposite? Are there incremental signs that some of the key states, I'm thinking Illinois and Pennsylvania, continue to be supportive of bringing that industry to the state?

Yes, David, this is Calvin. Directly to your question, we're seeing a lot of momentum. In fact, our states have passed legislation to provide tax benefits to attract data centers. Mike Innocenzo, our COO, works across all our jurisdictions with each of the CEOs to ensure we're set up from an operational standpoint to meet the demands and expectations of those customers. Mike, do you have anything you'd like to add?

Yes. I think we've seen no shift. Our states across all our jurisdictions continue to see the opportunities created by data centers for jobs and economic development and continue to be very supportive and engaged in the process to ensure it’s done in a thoughtful way that’s fair and equitable.

Okay. Excellent. I appreciate that color. And then in terms of your specific pipeline of data center projects, could you provide additional color on what you've been seeing in terms of momentum? Has it been largely focused in your ComEd service territory, or what are you seeing in other states at the moment?

Not to take away from what I have our CEO to say, but I think we see the most activity right now—as you alluded to, it's happening in Illinois. I’m going to ask Gil Quiniones, ComEd President and CEO, to provide more context. For Carim, David Velazquez, and Tyler Anthony, feel free to add any further insights.

Thank you, Calvin. It's been a robust market for data centers here in Illinois. We have over 5 gigawatts in what we call the engineering phase where data centers have paid us to start engineering their projects. Some of them have made deposits so that we can order large equipment like transformers and breakers. Behind that, we have another 13 gigawatts in what we call prospects, which are not yet in engineering but are expressing interest in coming to our jurisdiction. We’re one of the states where there is a specific tax incentive passed in 2019 to support the development and location of data centers in our state.

Any other CEOs that would like to add something?

And in Maryland, Calvin, I’ll just add that we remain committed to supporting data centers as they come. To date, we've seen a number of data centers that are up and operational—not the hyperscale that many are discussing today—but we remain committed to driving that transition, assuming the data centers come to Maryland.

Yes. Tyler Anthony here for Pepco Holdings. I would say the same—whether it's New Jersey, Delaware, or the District of Columbia, and our portion of Maryland with Carim, the interest level has been significant. All major players are assessing different sites and criteria.

And I’m Dave Velazquez for PECO in Pennsylvania. We’re beginning to see increased interest with some projects ranging from a couple of hundred to several hundred megawatts. Several of those are already in engineering studies, and more are expected to enter studies in the coming months.

So David, what you hear from the team is that we’re actively engaged in that process. To date, we continue to ensure that from an operational and reliability standpoint, we're ready to meet the expectations of those large customers.

Okay, great. Thanks for the input across the board. Very helpful.

You’re welcome.

Good morning, Steve.

Hey, good morning, thanks. So just on—I guess, first on Illinois. You mentioned these agreements with some parties in the grid plan. Could you talk about what aspects of the grid plan they have been agreed upon? Also, could you clarify the difference between having agreements versus just views? Does it make a difference if there are actual settlements?

No, Steve, thank you for the question. As you and I have discussed, we’ve shared very publicly that when we got that order in December, it was important to level set. At that point in December, we hadn’t had a chance to engage with these new commissioners about what their expectations were. We had been actively engaged with staff and stakeholders leading up to that point. We thought we had about 85% to 90% agreement on a plan and then the commission said it wasn't what they were looking for. Since then, we took their feedback and went directly to those stakeholders to develop a plan that would meet their expectations. The difference here is that it's aligned with what the commission wanted. To your point, while the commission will have the final say, these agreements are key because they reflect ongoing collaboration.

No, I think you've correctly mentioned that these agreements signify progress toward the specific items that the commissioners cited in their final order. There are areas complying with policy issues that these agreements essentially codify.

To conclude, we much prefer having agreements than not having agreements as we proceed. So to me, that’s a significant step in the process.

Okay. Just one clarification. So there's—if I recall, there are about 11 metrics that need to be met. Could you tie in your answer about what has been agreed upon to those metrics? Is there an agreement on the 11 metrics, or is it more broad?

Yes, you’re referring to the commissioner’s compliance point, right Steve? We created a specific chapter in our refiled grid plan to ensure each area cited by them is addressed. Additionally, we engaged with staff and stakeholders to make sure that their compliance and policy requirements are also met.

Okay. And I guess one other question related to the co-location issue. Some of the other distribution utilities, including PPL, support the filing as it is. Did you attempt to resolve this issue directly before making your filing to see if a win-win scenario was possible?

Yes. When we found out about the issue in Pennsylvania, it was about public policy. We didn’t have an existing opportunity to enter into a higher rate agreement or similar, but our concern was public policy, which was why we intervened. Once our filing was made, we learned more about discussions in other jurisdictions taking place, and we are open to dialogue. My perspective on PPL’s concerns relates to public policy and coordination.

We are open to working with anyone on these ratemaking issues. The reason we got involved was due to the broader policy implications. We prefer to work collaboratively to provide guidance important for all parties involved.

Okay. Thank you.

Thank you, Steve.

Good morning, Paul.

Hey, Paul.

Hi. Good morning team. Thank you for focusing so much on affordability. I want to continue a bit on that. Just after the PJM auction, do you have a rough view on what the customer bill impacts could be across the footprint, like BGE, in particular? And do you plan to use this to advocate for acceleration of transmission procurement in the region?

Hey, Paul. It's Jeanne. We're still finalizing calculations, but you can think of it as in some of our jurisdictions, including BGE, it could result in year-over-year increases in the double digits. It depends on the jurisdiction's current capacity constraints and contracts in place, but that’s how we're viewing it. It’s meaningful, likely double digits in BGE and other jurisdictions. But you're right; we have been leaning into the affordability discussion, which we've already been doing, and I think this just accelerates the need for solutions—whether it's more generation, transmission, which we already are proactively doing. Also, expanding our current programs helps customers manage their bills.

Okay, great. And I know everyone's focused on co-location. I was hoping to touch on a related but different topic in Maryland, like Senate Bill 1, the co-location study. What are your legislative priorities there, and can you provide any additional context, especially with the strong comments filed by parties?

Yes. On Senate Bill 1, it’s about leaning into the affordability discussion and its impact on all customers. We believe the General Assembly's process will be very public, with all stakeholders engaged. We'll adhere to what the assembly lays out; we want all customers to have a voice because if you do it in a vacuum, you end up reacting to past issues, which makes it harder to create effective policy. So we will engage in the SB1 process alongside everyone else.

Great. No, thank you very much, and thank you for keeping us all on the edge during the dog days of summer.

You’re welcome.

Welcome back, Paul.

Good morning, Anthony.

Hey, good morning team. Just a couple of quick ones. I guess, if I could follow up on Steve's question regarding FERC, the ISA proceeding. Do you have any idea if the commission wanted to hold hearings? What would the timing look like before a decision?

Hi, Anthony, it's Colette. FERC has several options concerning how to address the issues raised by various stakeholders in that docket. One option is to hold hearings if they find there are outstanding issues of fact or law that need to be resolved before ruling. Should it go to hearing, it could take a year and allow for administrative lodging to hear various perspectives.

Got it. The filing was made in conjunction with AEP. Could you explain how they signed on? Did you solicit other utilities and some decided to sign while others did not? Or is it a matter of timing?

At the end of the day, there’s a timeline for responses. We responded quickly because we said we would be a leader in investment. Key questions include that demand is coming either way, whether it's co-located or not, requiring investment. Our focus is on ensuring the investment is made to meet customer needs while ensuring a fair cost allocation.

Great. And switching gears, my last question refers to Slide 8. You discuss the opportunity in Illinois. Given the low ROE you received from the last rate case, would most of your investment or all your investment be focused on transmission? Is there reluctance to consider doing distribution investment in Illinois, given the lower returns they’re awarding?

Yes, there’s a mix of distribution and transmission investments. We have an obligation to serve those new customers, even if the ROE is low. The incoming demand can help spread the cost they're generating.

Thank you, Anthony.

Thank you, Anthony.

Thank you, Gigi. As always, thank you for your interest and participation in our earnings call. We remain open to answering any questions and getting feedback throughout the day or any follow-up to this. I just wanted to express my appreciation from the team at Exelon for your interest in the company and engaging with us. With that, Gigi, this concludes the call.