Q1 2021 Exelon Corp Earnings Call
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Ladies and gentlemen, this is the operator today's call is scheduled to begin momentarily until that time, you guys will give me place you on a brief. Hold, thank you for your patience.
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Bath bath bath. Hello and welcome to exelon's, first quarter earnings call. My name is Amanda, and I'll be your event specialist today. All lines have been placed on mute to prevent any background noise. Please know that today's conference is being recorded during the presentation will have a question.
Answer session, you can ask a question by pressing star one on your telephone keypad. If you would like to view the presentation in full screen view, click the full-screen button by hovering over your computer mouse over the Powerpoint screen. Press the Escape key on your keyboard to return to the original View and finally shoot you need technical assistance as best practice. We suggest you first refresh your browser page that does not resolve the issue please. Click on the help option in the upper right hand corner of your screen for online troubleshooting. It is now my pleasure to turn today's program over to Dan eggars senior vice president of corporate finance before is yours. Thank you, Amanda. Good morning everyone and thank you for joining our first quarter 2021 earnings conference. Call leading the call today or Chris crane Exelon president and chief executive officer and Joe Nigro, Exelon, Chief Financial Officer. They're joined by other members of Excellence, management team will be available to answer your questions during our F. Following our prepared remarks, you should our earnings release birth,
Good morning. Along with the presentation, all of which can be found in the investor relations section of exelon's website, the earnings release and other matters, which we discussed. During today's call contains forward-looking statements and estimates that are subject to various risks and uncertainties actual results. Could differ from our forward-looking statements based on factors and assumptions discussed in today's material and comments made during this call, please refer to today's date K and Excellence other SEC filings for discussions of risk factors and other factors, including uncertainties surrounding the plan separation that may cause results Management's projections, forecasts and expectations. Today's presentation also includes references to adjusted operating earnings and other non-gaap measures. Please refer to the information contained in appendix of our presentation and our earnings release for reconciliation between the non-gaap measures and the nearest equivalent Gap measures. I'll now turn the call over to Chris crane Exelon CEO month.
Thanks Dan and good morning.
Thank everybody, and thanks for joining us as you've seen from our earlier releases and notifications. We had mixed results in the first quarter, we performed well across our businesses outside of the challenges. From five days in February, due to the Texas weather event. Overall, our first quarter, gaap loss was Thirty cents. A share in our non-gaap loss was six cents. Per share, Exelon utilities performed. Well, operationally and financially during the quarter, delivering, 72 cents per share, which is 11 cents better than the first quarter last year, at exgen we lost fifty-eight cents per share. Overall, with the February weather event, boxing ninety cents per share in the first quarter. The event was unprecedented. We continue to investigate, the multiple complex flag factors that led to our plant outages dead.
And we're working with regulators and other state stakeholders to ensure an event like this does not happen again. As you saw on our page last week, we updated our full-year losses at a hundred and fifty million due to the updated load. Metered data in ercot, default payments that differed from our original estimate. In addition, we reaffirmed our full-year, guidance of $2.60 to $3 per share. We continue to work on mitigating this month approximately billion dollar loss and expect to offset the loss by 410 to $490 million after taxes through a combination of mostly one-time reductions and deferral, non-essential maintenance, in Revenue opportunities. Joe's going to go and much more detail on that in his presentation, turning to the operation.
Despite the extreme cold Winters in the winter storms. The pandemic conditions are utilities had a strong operational. Performance, delivering, reliability, affordable, electricity, and gas for our consumers. All the utilities achieve first quartile operating performance in outage duration, and frequency PGE, damn h. I r in top decile in outage duration. Customer operations metrics remain strong across the utilities Pico and customer. Satisfaction levels were top dog style ComEd was top, quartile mph? I just missed top quartile but improved year-over-year on the generation front in life. In the face of extreme temperatures. Winter storms are nuclear plants, provide a 37 terawatt-hours of reliable resilient and cleaned to the grid of the citizens wage.
Of Illinois, Pennsylvania.
Park in Maryland, the fleet capacity factor of 95.3% was what we reached for the quarter. This spring has been active switching a policy, the spring has been active on the policy front with momentum building, at both federal and state levels for policies that recognize the value of existing nuclear and would suck the country on a path to a net zero future, both exgen and the utilities are well, positioned to benefit from these policies and the transition to a clean energy economy, took the federal level, the bite Administration is set out an ambitious goal to reduce greenhouse gas emissions by 50 to 52% by 2030 nuclear provides more than half of the carbon free admission electricity in the US with excellent plants. Providing 12% of all the carbon free energy in the United States. The administration
His clear that preserving the existing nuclear Fleet is key. And meeting the goals that they have set. The administration's infrastructure proposal. The American jobs plan would enact policies to help reach the goal. It includes a clean electricity standard that would require a hundred percent clean electricity by. 2035 with the existing nuclear qualifying is clean incentives. To build 500,000 EV charging stations by 2030 in for 20. Gigawatts of high-voltage. Transmission lines to be built to support the renewable buildup. We're encouraged that the administration and members of Congress, recognized the importance of preserving, the nuclear asleep to meet the country's clean energy, and climate goals. The timing in the outcome of the federal legislation is highly uncertain and in any case, it will be too late to reverse the wage.
Parliament decisions for Byron and Dresden, our states are also advancing clean energy policies in Illinois, six, energy policy reform bills have been introduced that would drive the transition to clean energy and address climate change. The legislative leaders are meeting to craft a package from the various bills that can be considered this session. We're encouraged by the expression of support the continued for the continued operation of the nuclear plants. However the details really matter with a bill needs to pass before the end of the regular session and it needs to provide adequate support for continuing to invest in the Illinois. Fleet current market prices, do not continue to me that do not allow us to continue to meet our payroll, paying our property taxes and covering other significant costs and risks of operating these assets without wage
I quit policy as I've
Stated to you that we will retire. Uneconomic plants, beginning this fall. If you take a look at what happened in New Jersey, last week, the board concluded that the financial challenges faced by nuclear plants. They're Justified a maximum zec of ten dollars per megawatt-hour. The same voices that are arguing in Illinois that are plants able were overruled in New Jersey's decision. The Commission in New Jersey emphasized that maintaining the existing nuclear plants was critical to achieving the states and Mission goals found significantly less costly than replacing nuclear with other zero free Carbon generation. This is true in Illinois. Keeping the nuclear plants running is better option for the customers and then trying to replace them with all Renewables in storage at twelve times. The cost of higher cost than preserving the new age.
Air plants it would cost the Illinois consumers over eighty billion dollars, more to achieve the same admissions. We've been advocating for policy changes in Illinois, for more than two years because I feel that we have a duty to our customers to. Preserve every opportunity to correct flawed policies and keep these critical energy resources, running off what we're almost out of time. And we'll prematurely retire these assets in the fall of the policy report reforms are not passed in this session turning to clean a policy in Pennsylvania. This Senate is moving forward on a bill that would set a state goal for transportation electrification in authorized electric utilities to develop the infrastructure and plans authorize the recovery for these Investments. We support these federal and state policy efforts and stand ready to in Georgia.
Enable this important transition to a clean energy future Joe will talk about what our utilities are doing currently on Evie's. Moving on to the separation update, our team is working to get the separation done. We filed our applications for regulatory approval, at the NRC, New York Public Service Commission in February.
The inner city has indicated their application is complete, and they expect to rule by November 30th in New York, comments are due on May 24th and we requested that the commission rule no later than their December 16th meeting. We're on track to get the necessary approvals so that we can close in the first quarter of next year with that. I'll turn it over to Joe to go into the financial details in. Good morning, everyone. Today, I will cover our first quarter results, quarterly Financial updates page disclosures turning first to slide 9. As Chris mentioned, we recorded a loss of $0.06 per share on a non-gaap basis for the first quarter drink by the lawsuits from the February weather event.
Our utility.
East performed ahead of plan for the quarter, delivering a combined, seventy two cents per share this year, which was eleven cents per share higher than the first quarter of 2026 was primarily driven by strong, operational performance, as well as the impacts of distribution rate cases.
Exgen reported a loss of $0.58 per share for the quarter, excluding the five-day weather event. In February exgen would have earned 32 cents per share. As we had anticipated, however, specific to the weather event, we occurred, we incurred a loss in the first quarter of ninety cents per share. A portion of this loss is due to some penalty charges associated with our natural gas business that we ultimately expect to be reduced through waivers and or recovered from customers later in this year.
As we disclosed in Rak last week, we estimate our full-year loss, from the weather event, to be approximately 900 million to 1.1 billion pre-tax or $670 million to eight hundred twenty million after-tax. We also continue to expect to offset between 550 million, and 650 million tax, or 410 million, and 490 million. After tax for the full year 2021, these offsets will occur primarily at exgen off through a combination of enhanced Revenue, opportunities, deferral of selected, non-essential maintenance and primarily one-time cost Savings in are mostly expected in the second half of this year.
Old car recorded. A loss of twenty cents per share for the quarter, which was a larger loss than is typical in the first quarter, and was driven by a tax adjustment, required by gaap to partially offset the tax benefit recorded at exgen due to the Texas losses. This amount will reverse over the next three quarters and ultimately will not have an impact on full results.
As Chris stated we are, reaffirming our guidance range of $2.60 a share to $3 per share and you can see the details on slide sixteen in the appendix. Am moving on to slide 10, looking at our utility Returns on a Consolidated basis are trailing-twelve-month, are we, as of the first quarter, I moved to 8.9% from 8.7% last quarter. The 20 basis point increase was primarily due to higher earnings across the operating companies in the first quarter as a reminder, that calculation is backward-looking. So you should continue to see some pressure on our oh, he's over the next couple of quarters as we work off the impact, COVID-19 low, interest rates are ComEd and the twenty-twenty storms. We do expect to be in our targeted range of 9 to 10% by year-end.
and looking into the
Future. We remain focused on delivering strong learned returns after Utilities in supporting our growth targets. Turning to the next slide. Eleven since Thursday last call, there were some important developments on the regulatory, front 1st on March 30th Pico filed, an electric distribution case with the Pennsylvania. Public Utility Commission Pico is Seeking a revenue increase of 246 million dollars for continued investments in electric distribution infrastructure, which may make the local energy grid stronger and more resilient enhance service and help the company deliver, safe reliable and clean energy for consumers.
In addition, the filing proposes customer relief offerings for eligible, residential, and small-business customers. And we expect an order in December of this year.
Second ComEd file, annual distribution formula rate update with the Illinois Commerce Commission on April 16th. Seeking a $51,000 increase to Electric distribution base rates, this year's formula rate update filing Mark's comments first request for a distribution rate, increase in four years, the filing will support Investments to expand access to clean energy through private and Community solar and support the growing demand for electric vehicles. Additionally, we continue to make investment, and make the power grid more resilient to severe storms such, as those experienced in Northern Illinois. Last year, we expect to receive an order by early December, we also have several rate case is still in progress including orders, in multi-year plans for home.
Pepco DC and Pepco Maryland which are expected in the second quarter. We continue to have constructive regulatory relationships across our jurisdictions and are working with our Regulators States and communities to support their clean energy, and climate goals. More more details, on our way, cases can be found on page twenty-three twenty-eight of the appendix.
Flight 12 provides one example of how excellent utilities are working with our regulators and states to make investments that will address the climate crisis and help customers are utilities play. A critical role advancing electric vehicles in our communities. This includes both the installation of publicly-owned not charging stations and investment in the system to support this infrastructure. Exelon utilities have been leaders in this rapidly growing Space by expecting charging infrastructure, offering rebates and incentives, and Innovative rates while electrifying public transportation to deliver convenient, affordable and equally accessible, clean Transportation options.
Are clean, electric transportation programs, aimed to support nearly a hundred thousand Current Electric Vehicle drivers across our service, territories aligned with State club, and improve overall, air quality for all our customers and communities to date electric vehicle programs, have been approved in Maryland, Delaware and New Jersey with approval pending from Pennsylvania as part of Pecos recent rate, case violent ComEd, also has several ongoing educational Outreach initiatives. And several of the bills, Chris spoke about would provide incentives for Eevee in infrastructure.
The transportation sector currently represents about a third of total greenhouse gas. Emissions, urban areas like many of our service. Territories are disproportionately affected by air pollution and the negative effects of climate change. One way we aim to help address, this is by advocating for and helping you in cleaner. Zero-emission Transportation, particularly in underserved communities, are programs are designed to reduce common barriers to Electric Co-op adoption, including range, anxiety, total cost of vehicle ownership and lack of education and awareness among consumers off.
Clean our vehicles on the road, help our cities and states meet their environmental goals, reduce their carbon footprint. Bring cleaner are two communities and create Economic Opportunity, through job creation and reduced energy cost. Additionally, excellent, utilities are leading, by example, in setting an aggressive goal to electric bulb. Electrify our Fleet including both light and heavy duty of Duty Vehicles. We have committed to Electrify 30% of our Fleet by 2025 off and 50% by 2030. Electrifying, 50% of the fleet could avoid more than 65,000 metric. Tons of emissions, cumulatively out from 2020 to 2030. That's the equivalent to the to the carbon removed by 1 million trees planted and grown for ten years.
On slide 13, we provide a gross margin update for 2021 total gross. Margin is down $150 million dollars versus the fourth quarter, due to the increase, in the estimated impact of the February weather event. The midpoint of our current estimate of the gross margin impact from this event is 950 million long this number is lower than the mid-point of our loss range of 1 billion dollars because it does not include bad debt, which is, which is captured in o&m,
Excluding.
Impacts of the February weather event gross, margin is flat to last quarter. Open gross margin is up three hundred million dollars relative to our prior disclosure off Platte primarily due to higher prices. In my Hub and west of are marked-to-market of Hedges. We're down two hundred million dollars due to our hedge position. Offsetting the lounge, staying open. Gross margin partially offset by the execution of a hundred million dollars of power new business. We also executed fifty million dollars in on Thursday, our new business during the quarter. Thank you. And I will now, turn back the call to Chris for his closing remarks. Thanks, Joe turning to slide 14, I'll close on our properties in commitments, we will deliver or exceed, our financial commitments delivering earnings within our guidance range and maintain strong balance sheet.
Milken, we will complete preparations to separate the businesses, including the regulatory approvals at Exelon utilities, we will prudently and effectively deploy. Nearly six point. Six billion of capital to benefit our customers and help meet the needs of our state's energy policy goals will work with Regulators to ensure timely recovery on these investments will continue to advocate for clean energy, and climate policies with the new Administration Congress in our state's, to put our country on a path. To meeting a carbon reduction goals and will continue to partner with the support of our customers and our communities that we serve. So I thank you all for joining us and with that will open it up for questions.
If you would like to ask a question simply press star, the number one on your telephone keypad, if you would like, like to withdraw your question, press the pound key.
And your first question comes from Stephen bird with Morgan Stanley.
Hey, good morning. Thanks for taking my question. Hey, Steve. I wanted to just get your latest thoughts on in Market design. We've certainly seen a lot of activity in and y'all gave us some prepared remarks on that, but just just curious it, it strikes me, it looks like it's a little less likely that the state may go in the direction of sort of fixed, resiliency, or capacity, like payments. I'm just curious. What, what, your sort of scene and, and what direction do you think we may take in terms of Market design? Yeah, let me have Kathleen cover that. Good morning, Stephen. Yeah, I think there are a number of ideas under discussion in the legislature and I guess I wouldn't say that it's it's less likely that the state will ultimately choose to go down the path of upsetting or reliability standard, that took that idea does have some support and is being discussed openly as our other changes. For example, to the ordc curve to sort of lengthen it and lower the cap off.
you know, and then there are other other
Ideas out there as well. So I think there's there's active discussion in both the house and the Senate over whether and when the legislature should act, there are some who think it should, it should move forward and, and took some expectations, and let the puct work on a market design, over the balance of the Year. Whereas, others are are thinking maybe, they'll wait and do it later in the year. So, you know, it's a little bit early to tell how those conversations are going to land. But I think that the concept of of setting as all the other markets, do a reliability suggested and letting the the market operator design a market-based way to get. There is still under active discussion
That's really helpful and then maybe going to pjm and for you know we seen a lot of activity around the the treatment of mopr and just curious them as well. Your latest thinking on sort of where we may be headed and kind of broader implications give, it looks like it looks like we may see a reversal
Yeah, there are two Avenues where that's being discussed first, at the shows themselves and as you know, PGM has a stakeholder process to work through how to do for Mopar, they have direction from their board that they should reform it. But the question is how, and they played out a proposal and they'll be taking comments and working towards towards it for filing, and the summer to, to express their view of how it should be reformed. And then ultimately, of course, it will be up too far. You have two Commissioners who, who are open that they think mopr should be reformed other three less transparent in terms of how they would vote. So, you know, I think there there's certainly going to be an effort on his part to make a change and then the question will be, you know, how the votes line up the commission once that filing is made.
Great. Thanks. I'll pass on the others. Appreciate it.
And your next question comes from Steve Fleischman with wolf research.
Yeah. Hi, good morning, Merry Christmas. So couple questions I guess for focused on the Nuclear. So first choice and Illinois. I know there's been several proposals, the most recent, I think was from the governor related also to the audit that he set up, could you give your views whether that proposal would be sufficient?
To keep the Dresden and Byron open.
Yeah. I mean you know all of you have written on the economics of the plants and the reality of what the billing starting app. I think it's from what we've heard. It's open to negotiation but just going from you know, the the the street analysts opinion and what we've seen a it's starting point is not adequate to keep the plants continued operations going.
Okay. And then just to be clear in Illinois in the event that maybe they just can't get a bill done this session and it, and they try to go to The veto session. Obviously, you're targeting to shut the plants before then. So can you just confirm clearly whether if they just don't get something else on this session? The plants will shut dress. Yeah. We we've we've been real clear about that but we're still optimistic. You know, most state or legislative bodies the work comes to an end towards the end of the the session. There's a lot of stake holders involved here. There's a lot of voices that are in putting into it and the legislature has a tough job of of building a single bill out of six on Thursday.
Two bills and making sure that they take care of their constituents as well as all the way other stakeholders involved in the process. So, you know, how long we're, we're not giving up. We're we're confident that we've got adequate support within the administration and within the legislature and we'll see how it goes. That said we have been clear for a couple of years and it's, it's it's just the reality. We cannot continue to run an economic plants life and challenged the balance sheets of the Genco or the hold KO. We've got commitments. As I said earlier, we going to make payroll, we got to pay pensions. We got to pay our bill. We have to have an investment-grade credit rating that we can access Capital markets. And when you have plants that are uneconomic and pulling you down, you know? Yep.
It's it's a tough decision but it's one that we made and we will continue to be optimistic that we can work with the stakeholders and legislative body in the administration. But short of getting something done. You know we'll have to start to proceed. What we are already doing? The planting of seeds for the shutdown. You can't order fuel. You can't do Capital Improvements, you can't do a lot of stuff in the face of uncertainty, which causes you to spend, hundreds of millions to billions of dollars on plants that just aren't going to support themselves.
Okay, one final question on nuclear, just the there was a story I think in on Bloomberg this morning, talking about a nuclear issue being discussed in the Biden, uh, with the bite Administration and legislators. Could you talk about what you're hearing on that wage whether we're seeing momentum in that as part of the of the Biden infrastructure plan?
Hey, Steve, this is Kathleen. I can take that one. You know, as Chris mentioned the the Biden proposal is for a clean energy standard that's inclusive of existing nuclear and is technology neutral. That is what their proposal is. That's on the table. We saw the story this morning as well, but of course they are planned. Is not currently include a PTC for existing nuclear bomb. Nuclear nor has one been introduced in either chamber. So it's obviously helpful that there is a growing focus on the fact that the existing nuclear Fleet is integral to be getting to any of the carbon targets that have been set. And you know we welcome that sort of change in focus and and the growing understanding, but the challenge remains that they, you know, we're not yet. Even to the point was what where we know is Congress, going to move forward on a bipartisan basis. Does a bill need to be drafted? That would be consistent with birth.
Conciliation and and the timing and the outcome is just it's just far too uncertain for us to make any decisions here based on that. Obviously you know, to the extent that happens in Congress. That's a long-term positive for the company but you know, just one Reuters story is is not enough to, you know, we have to make decisions based on current economics and policy.
Great. Thank you. Thanks.
And your next question comes from James thalacker, with BMO Capital markets.
Good morning, and thank you for taking my question. Good morning. Sure. I just wanted to touch briefly on the governor's legislative proposal and I guess his proposal for an application of an eight dollar ton carbon mechanism. I know it's early and as you, but as you think about the final Market structure and the a pretty clean generation stack in Illinois, already. How do you see the pastor of this potential tax on power prices? I know in New York you've seen about a thirty five, twenty-five or Thirty 5% pastor but it's not clear to me how you can sort of tax out of state Supply from Wisconsin Illinois. So where do you guys kind of see the potential of faith in our presidents? Early stages, understanding the final Market structures you have to be determined, you know it's a difficult I'm going to let Kathleen get into the technical details, but it's difficult for single states, that is an island surrounded by other states without the same policy, not to have leakage coming in. So, you know, as we point wage
We shut down those four reactors that were talking about, they will be replaced by leakage. They the energy coming in, so we will go backwards in that area. How you monitor that, and how you tax on. It is a very difficult thing in an island Kathleen. I don't know. If you want to go into more technical wage, I think you covered it. I mean, I think the issue is you have a national carbon price. You would see a, a high pass through rate, given the amount of fossil that's still in the stack. But when it's a single state it just you know, our estimates are that they would be a very small impact on car, Energy. Prices. Due to out-of-state plants running more frequently.
Okay, great. And I just wanted to see if you could kind of give me a quick update on the outage, at the South plant, and what's your outlook for the cost of the timing for its return.
Hey, Brian Hanson yes. Our CEO of generation. You want to cover that. Yeah, thanks James. You have you had 2 reactor was on a service for an extra 30 for 30 days. When we found through maintenance activities, higher-than-expected deterioration of two thousand, the reactor recirculation system. And because of the size and location of these valves, we had to design a deployed special welding and machining tools to make the necessary repairs which were required prior prior to return that unit to service. It involves several hundred people given the difficulty of that work, that unit has since been returned to service. The the cost was a significant impact for that particular plant and these types of risk are the kinds of things that we have to take into account when we are assessing the financial viability of each of those plans, but that unit has been returned to service and ready for us on the Run.
Okay, great. Thank you guys for for all the help. Thanks.
Andrew, next question comes from Charles Parisa.
Hey, good morning guys. Have you had any conversations with the agencies kind of a, you know, about the spinco syndrome. The Fallout we sell in Texas, just trying to get a bit of a sense. If this is more of a structural risk going forward as we're thinking about sort of the general business model for the ipps or just kind of an anomalous situation. I mean especially as we're sort of thinking about, you know, the Standalone, exgen entity and you know maintaining IG waiting supposed Spin. And obviously we understand that you know, the metrics are extremely wealthy but I'm just kind of curious how they're thinking about the business grows profile. Maybe a little bit more qualitative factors supposed to weather event and some follow-up. Yeah, sure. Good morning long as you could imagine, we've had numerous contacts with the agencies.
Since the event in in February and and you saw, you know, after the announcement on our fourth quarter call of Separation, they all you know the mood he's in S&P published some preliminary thoughts on both generation and on on, you know, the remainco Exelon on the 29th of April, came out and updated some commentary on exgen and affirm their investment-grade rating and the stable Outlook. And it's important to note that they've also delinked them from the corporation, effectively from the standpoint of the fact that we have announced separation. So we continue to have dialogue with each of the agencies. All three of them have generation revolved rated investment-grade currently and you know, we continue to expect that to happen in the future as we manage our business.
Okay.
Thank you for that. And tips are accustomed to that is managing the business and managing the risk and understanding the risk with an unprecedented. Well, that was beyond potentially the design basis of the plants and we have to take that into consideration, as we look at our risk profile going forward, we will not continue to whether risk like that that could challenge the balance sheet and the investment-grade ratings.
Got it. Thank you for that Chris and then just lastly, there's been some noise building on the Chicago franchise agreement. Is there sort of a path forward? There is any sense on timeline anything on expectations? You can share. I mean, I just were curious if this is going to turn into a San Diego situation or not Joe Dominguez a.m. let cover that I believe he's on. Yeah. Hi Charles. How are you? Good morning. Yeah. First of all, Chicago's a world-class City and we're privileged to serve it off and we want to continue that relationship and we've been working with the city for some time in terms for a new franchise agreement. As you know, the franchise agreement continues until New Choi proved or until a new franchise or is or franchisees selected. They are going to explore all their options and I think they are going to follow a blueprint like San Diego wage.
Just to solicit ideas. We have an RFI that's been issued, will participate in at Arif. I will see if others do and we'll see what. Ideas, come out of that process, that's expected to close on May 28th. In the meantime, We are continuing with the discussions around the new franchise agreement and you know, we're pretty confident that comment is going to be successful at the end. We have a lot to offer, we're leaning in on the city's priorities, around Energy Efficiency, jobs support for low income, families clean and renewable energy and more, you know, I think the most important thing for the city, and I'm very clear about this is making the city reliable and resilient against some of the storms. We, we have talked on these calls about some of the storms we've experienced. We had a great show in August where we had a hundred and ten miles per hour. Hurricane-force winds across our service territory, 15 tornadoes landed. It was the second most expensive storm in the club.
This year and you know unfortunately that that event has not been an anomaly. We saw unprecedented flooding coming off the wake in the in the summer and just you know, maybe twelve months earlier, we saw polar vortex that brought with it -30 degree weather. So the city I think is rightfully concerned about the changing weather from the club, the crisis. And, you know, notwithstanding in these weather events, Chris reviewed early or some of our performance. We're not only top decile and safety and Katie, but I I think I'm in class in both categories. First time for this company to achieve that and we've been able to make the Investments keep residential rates, low, and so on. So, I think we're, we're, we're doing what we need to do. We're investing philanthropic, we in the city and I think, you know, it's important to note. I think we all know this that serving cities alone is a pretty expensive proposition wage.
Infrastructure is expensive.
Doing any work in the city is expensive, just because of the density of existing infrastructure. You tend to have more of a concentration of low-income customers in the city for a variety of reasons. It's more expensive when the city is part of a broader Chicago system in the city accounts for about a third of ComEd, we have the ability to use the horsepower and the talent, not only within ComEd, but the Exelon family of companies that come in repair the system when it's damaged as a result of weather. But also, we have the financial wherewithal of the palm tree and the businesses and the people that live outside of Chicago in the suburbs, the cover, some of the costs for for the city's more economically challenged citizens. So we we think the whole package is going to be valuable you mentioned the San Diego process. We've we've followed that for some time, I don't think there was at the end of the day. Anyone who actually compete wage
For the franchise there. But it is a process and it's a transparent process that we need to go through and, you know, we appreciate that. And the meantime, as I said we're going to lean into it. If the city decides to go into in a different direction, they would have to pay ComEd upwards of seven billion dollars for the system, depending on the timing of the transaction. And because these systems were built in an interconnected way, we anticipate that there would be about five billion or more dollars in separation costs that would take upwards of a decade to complete new substations control center, home computer platforms. A like so is this is going to be a long road. If the city goes in that direction, we understand this move within the fabric of the negotiations that we've been having with the city and I'm confident that the proposal we're going to offer is going to allow us to continue this long-standing relationship. And and and we we will be very fortunate to be able to continue to serve
Great city. Thank you guys for all the detailed answers. Appreciate it.
And your next question comes from Michael Weinstein was credits, please?
Hey guys, question. Hey, on electric vehicle charging infrastructure. This is still pretty early days. I understand that. But is there a point to this? Become a significant portion of capex opportunity? Do you think that that opportunity is and when do you think it really starts to kick in?
Hey Michael, this is Calvin. I would say we continue to look at the answers infrastructure and partner with all of our jurisdictions on how we go about it and Chris I think I know Joe outlined in detail what we're doing in each of our jurisdictions in terms of the adoption charging infrastructure and the light right now. It is not a significant piece of our Capital plan Chris alluded to the 6.6 billion that we will actually cute this year and it's just scratching the surface but at the end of the day it is part of our business priorities. Moving forward. As you laid out, 50% of our Fleet will be electrified internally by 2030. And we continue to look at working with each of our jurisdictions to encourage them in that way in investing in infrastructure. So the bottom line is that it's a small portion of our total capital investment, but it is on our plan to continue to grow.
and kind of,
But the infrastructure investment beyond the EV charging States stations is something that our engineering units are working on between TV and distributed generation. Upgrading lines, changing voltage levels at that, that gets into a lot more complicated. But it's it's a it's a bigger part of the investment.
Yeah, that's what I was thinking of. Is there a Tipping Point or, you know, a point where the curve starts to really kick in gear? And what year do you think that approximately happens in Iraq is a 2030 S-Type opportunity or more of a maybe late 2020s you know it's it's yeah it's something we're working on now more for the distributed generation. You know there's analysis that goes into the circuits to make sure that we're not overloading them and we're upgrading them as we see the demand go up wage and so I think you know we're investing now a Tipping Point. I think it's going to be a gradual investment over a ten-year period. It's not going to all of a sudden hit immediately one day and I'll give you an example of Philadelphia Electric in BGE.
Are upgrading their voltages under Distribution Systems from 4160 to 13/8 in anticipation of more distributed generation but that will also offer support e v. So it gives us more capacity on the circuits to allow the customers to get the services they want.
Gotcha. Hey, just one. Last question on the New York New York Public Service Commission. You know, filing for separation. Is there any reason why you think it might take longer than the end of the month to get your approval there?
This is Kathleen. Michael, I can take that. I mean, we, we, we have even seen comments yet on the New York application. They're due at the end of the month, we have asked for Action by the end of the year, and we think the agency is capable of acting in that. But of course, we need to see what the comments are. And, you know, we'll have a better sense. Once we do, we have targeted close in the first quarter of next year or if we need a little bit, extra time weather in the New York case or at the NRC, you know, we had accounted for that. But again, we think that acting by the end of the year is doable in New York.
Gotcha, thank you very much.
And our final question comes from Michael lapides with Goldman Sachs.
Hey, two questions for you actually unrelated one, some of the potential draft Illinois. Legislative approaches have pretty decent changes to how, Madison's rate making process would work. Could you just give an update on what you think, the puts and takes our what? What are the things that could actually be a benefit to comments? Earnings power. What are the things in there? That could be a month if implemented the comments earnings.
Joe.
De Minas. You want to cover that? Yeah, there's there's a lot of different proposals at this point. Michael. I think the common thread in all of them is that we would reach out of the formula rate. And so as you know, the formula rate historically for the last ten years really throughout and the entirety of FEMA has produced an hour away that is significantly lower than the national average and that's resulted in billions of dollars of savings for our customers. Over that period of time as we emerge from the formula. And we come to a more normalized Roa, there will be an opportunity for expanded earnings at, at at the same time, you know, one of the things we very much liked about the formula is our ability to plan work for years in advance. You know, we don't ma'am.
As you, well know, we don't do radically different things here year to year. We kind of continue to invest in polls, wires, smart devices. Those sorts of things over the course of years, the formula had given us some certainty that we were going to be able to continue those Investments and that allowed us to kind of make arrangements with our vendors. So that wage is efficiencies. They're both from a from a supply standpoint, as well as from the labor standpoint. So, one of the things I worry about coming out of the formula is that planning process. So we're going to continue to see volatility from rate case to re case. So, uh, some of the ideas that have been proposed are aimed at looking at a longer-term, in a transparent investment Direction, coming out of the company and being reviewed by the commission. For example, the labor proposals would have us produce wage
Ports, every four years, showing all of the Investments that we're going to make and it would give stakeholders and opportunity to take a look at that. We wouldn't necessarily get an approval from that, but it would give people a good understanding of what we're trying to do. What we're trying to invest in the system as we integrate Renewables and build on the resilience of of the system. So that would be I think helpful. So that we have some clarity in the process about where we're going next. It's clear to me that to continue the level of reliability. That would we've been able to obtain and meet the challenge of these storms integrated doubles and a great, you know, fleets of electric cars trucks and buses. We're going to need to continue to invest in the system. The way we have been investing in those Technologies, the formula gave us a clear pact out if we're doing that. And one of the concerns I have about just returning to traditional ratemaking is we don't have that year-over-year Clarity and you could get the volatility and rate outcomes and wage
And that turns into volatility.
In terms of your Workforce, while until it in terms of your suppliers and the loss of efficiency there. So, I think those are the puts and takes, you know, at least as I see the legislation right now, and I think that's Chris said, the policymakers have been meeting routinely on that, and I think those are the issues they're worried about as well. Got it? And then one quick, follow-up. Unrelated on taxes. Can't necessarily rely on T. Quickly. And, and make Market design changes often. They've been very reticent to do. So, is there anything you're thinking about doing either from a Contracting standpoint or something physical at the plan? AKA maybe backup generation on site, with storage tanks or something like that tourist. All potential risk, like wage just played out happening in the future.
You know, right now the design of ercot does not compensate for a reliability availability. It's a pure energy Market. Only way we would have to take into consideration as her cot and the commission continues to deliberate on what the design could be, is what we could afford not to invest into those plans for that resiliency, you know, in pjm, it's a very it's a very resilient Market we're compensated. And we're penalized if we don't produce, that is not the structure that has taken in the past. And so it leaves the generators competing against significant amounts of wind suppressing, the prices during the shoulder months, especially and then you have to look at your return on Capital to make the involved.
It's for that. So you know, going to a dual fuel going to a different design basis for temperatures can be an expensive proposition. If you're not getting rewarded for that in the market doesn't prioritize that it would be difficult to do.
Got it. Okay, I was just thinking, is it materially expensive to add things like, you know, fuel, oil tanks, to some of the gas plants, that could store a couple of days for use in. Emergency only way you know, is that prohibitively expensive relative, I guess, if I were to compare it to what just happened. Now, it is, it is expensive, but it's more complicated than just had an oil on site. You know, the plants are designed for a gradient of temperatures and we're starting to see those temperatures often expand in, in the, in the variance. And so, you know, you have to do more than just put oil tanks on and dual fire, make the modifications on the five digits in the in the, in the turbines, excuse me. In the, in the, the, the generators and so you would it is, it is much more complicated.
Then the just a couple oil tank.
Thanks to to make sure that the resilience he's there and then you've got to make sure that you're being compensated, like pjm does for those Investments and and wage, we stand up. We made those investments in pjm and we also know that will be penalized if we don't produce some pjm. So if in when ercot decides that availability and reliability of of the fleet is a priority which thus far they have not, we would be able to walk participate in that market and make whatever modifications make economic sense to whether to weather the storm.
Pretty bad cliche there. Got it. Thank you, sir, much appreciated. All right. Okay, thanks everybody for joining the call today. I hope you all stay home and your family, stay safe and healthy. And with that, I'll close out the call.
That does conclude today's call. You may now disconnect. Thank you for your participation.
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