Q2 2021 Exelon Corp Earnings Call
Hello, and welcome to Exelon second quarter earnings call. My name is Danny and I will be your event specialist today.
All lines have been placed on mute to prevent any background guidance.
Please know that today's webcast is being recorded during the presentation. We will have a question and answer session. You can ask questions by pressing star 1 on your telephone keypad.
I would like to view the presentation in a full screen view click the full screen button by hovering your computer mouse, Chris there over the Powerpoint screen Presby escape key on your keyboard theory turnkey our original volume and finally should you need technical assistance as a best practice, we suggest you.
First refresh your browser.
Is 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 Eggers Senior Vice President of corporate finance the floor is yours.
Thank you Dan and good morning, everyone and thank you for joining our second quarter 2021 earnings conference call, leading the call today are Chris Crane, <unk>, President and Chief Executive Officer, and Joe Nigro, Exelon, Chief Financial Officer, they're joined by other members of Exelon Senior management team will be available to answer your questions. Following our prepared remarks, we issued our earnings release.
This morning, along with the presentation all of which can be found on the Investor Relations section of Exelon website.
The earnings release, and other matters, which we discussed during today's call contain 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 8-K and Exelon as other SEC filings for a discussion.
The risk factors and other factors, including uncertainties surrounding the planned separation. They may cause results to differ from 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 the appendix of our presentation.
Our earnings release for reconciliations between the non-GAAP measures and the nearest equivalent.
GAAP measures I'll now turn the call over to Chris Crane, Exelon CEO, Thanks, Dan and good morning, everybody and thanks for joining us this morning.
Good quarter financially and operationally.
Made progress on our regulatory and policy objectives, as we stated our desire as last quarter.
We earned 41 cents per share on a GAAP basis and 80.
9 cents per share on a non-GAAP basis, and Joe will go through those details when we get to this part of the presentation.
As you know we've been working with our regulators and policymakers across our 6 jurisdictions on regulatory mechanisms that would allow us to prudently invest in critical infrastructure to the benefit of our consumers on.
Earning an appropriate return on that use of capital as part of those efforts the D C, Maryland PSC.
Approve multiyear plans for Pepco.
New Jersey, <unk> approved Aces electric rate settlement, and we received an order in the Pico gas rate case, it's the first in 10 years.
Yes.
PJM held the first capacity auction in 3 years results were disappointing, but were slightly better than we had anticipated or expected com.
Universe and the administration continue to work on the infrastructure package and there is momentum building to preserve the existing nuclear fleet to meet the country's energy and climate goals.
This budget includes support for existing nuclear plants, and Senator cotton and representative.
S. Thrill introduced legislation to provide $15 per megawatt hour production tax credit to existing nuclear power plants.
This legislation would help ensure that the existing nuclear fleet, which provides more than 50% of the nation's carbon free power remains an operations and available to meet the country's energy needs, while preserving and achieving climate goals. This progress as incurred.
If the PTC is included in the legislation that passed is later this year and will make an enormous difference for climate and for our nuclear plants. Unfortunately, though that will be too late for the buyer and the Dresden nuclear facilities, which brings me to Illinois.
After many months of very tough negotiations.
We're able to reach agreement with the Governor and his administration.
Would provide support to the buyer interest in Embraer wood.
Facilities, allowing them continued operation and Lasalle would also be preserved on.
Unfortunately.
State leaders and other stakeholders are at an impasse at this point on provisions related to the nuclear.
Regulation or excuse me the nuclear issues in the legislation there has been no progress towards enacting legislation.
Since the recession ended and the retirement dates for the plants are now only weeks away we.
We don't want to close these plants, but we cannot make decisions based off a hope of legislation being passed in the future. We've been doing that since 2016, well significant losses have been incurred we must act on the economic facts as they exist today.
There were no legislation has been passed by the general Assembly or signed into law by the Governor.
Absent legislation closing the plants is the right economic decision, but not an easy the.
On the talented and dedicated employees that work at these plants, our colleagues and our friends.
Their jobs are support their families and the communities premature retirement of these plants is also a loss for the citizens of Illinois.
The 4 plants, Ed buyer interest in Brentwood, and Lasalle, which are 8 reactors provide 28000 direct and indirect jobs $3.5 billion annually to the Illinois economy.
$150 million in Illinois taxes. This support the schools public safety and other critical services in the communities that they reside in <unk>.
2 thirds of Illinois carbon free electricity is greatly at risk with these shutdowns.
Once buyer in Dresden retire it will take many years under the proposed legislation to add enough renewable energy intermittent renewable energy to get back to where Illinois is in terms of clean energy production in the meantime, more than a 100 million.
Metric tons of additional Corp will be admitted over the next decade.
As a result.
I remain hopeful that the outstanding differences can be resolved and the bill will be passed very soon that would allow the plants.
To continue to deliver the carbon free power to the grille grid, but time is really running out on that becoming achievable.
Moving to operations on slide 6 reliability performance remained strong despite the frequent storms and the heat across our service areas.
Service territories, all utilities achieved first quartile operating performance and outage duration and frequency as you can see by the charts commented delivered top decile performers in outage duration and frequency well BG and ph.
Top decile outage duration customer operation metrics remained strong across the utilities, BG Comed and peco achieved top decile performers and the customer satisfaction indices.
On the generation front, our generation fleet performed well during the quarter, our nuclear plants provided 36.6 terawatt hours of zero carbon generation to the grid.
Avoiding approximately 20 metric million metric tons of carbon dioxide the fleet at a capacity factor of 93, 7% for the quarter, our fossil and renewable fleet operated above plan with power dispatch match at 99, 5% and wind.
Solar energy capture at 96% are Texas plants are running as expected helping to meet summer moments.
Turning to the separation on slide 7 we're making progress against our execution plan and remain on track for first quarter close the team is working on deep organizational and cost structures of each company debt.
Set each business up for long term success on the regulatory front, we received comments in each of the dockets for approval and the process is moving forward as expected we remain on track to get the necessary approvals. We will continue to update you on our work.
As it progresses.
Turning to slide 8.
We all are very excited at exelon to announce at Exelon utilities.
<unk> set a goal to reduce their operations driven admission by 50% by 2030, and reaching net zero by 2050.
Since our founding Exelon has been dedicated to being part of the solution for climate prices and a leader in providing clean energy to the grid.
We were 1 of the first companies in our industry to commit to reducing greenhouse gas emissions, even though our emissions for already 10 times lower than our peers.
We have met or exceeded our previous 3 previous calls and Exelon utilities, new <unk> builds upon our longstanding commitment to reduce our greenhouse gas emissions ambitions well meet these goals through continued modernization of our gas systems electrifying our light duty.
<unk> fleet and exploring.
Electric electricity and others Europe carbon alternatives for medium and heavy duty fleet are focused on energy efficiency and clean electricity for our operations is clearly part of the plan.
Investing in equipment and processes to reduce our S. F..6 insulating gas from our lag large breakers from our system exploring.
Piloting low carbon fuels.
New grid technologies, and advocating for affordable grid de carbonization and.
In addition, we remain focused on how we can help our customers and communities Decarbonize in an equitable way.
The utilities will continue to invest in the EV infrastructure across our service territories enjoying the electric highway coalition, which will create a seamless network of charging stations on highway systems covering most of the country.
We will invest in robust energy efficiency programs in each of our utilities. This is a continuing in Denver, which will enable customers to have lower emissions profile use less energy and save money.
In 2020 alone these programs avoided $8.1 million metric tons of carbon in minutes.
<unk>.
Advocate for policies that will put our stake we will continue to advocate for policies that will put our states and our communities on a path to a clean energy future, while ensuring equitable transitions that's benefit everyone in our communities.
Before I turn it over to Joe on Slide 9 I want to highlight the work we're doing to help transform our communities through our workforce development programs, which.
You can see on narrated on slide <unk>.
Diversity.
Equality and inclusion is a core value at Exelon, and we're growing a diverse and inclusive high performing workforce.
Operating some of the most diverse cities in the country and we have a responsibility to help address the and equities in our communities. We have more than 100 workforce development programs spanning from middle schools high schools and throughout colleges as well as programs for work ready.
Underemployed adults. These programs have already reached more than 22000 participants.
We recently launched the stem leadership academies scholarships that are open to graduates of the probe.
Graham.
Insurers that the graduates.
Our debt free and guaranteed internships with exelon throughout their college.
Have I recently awarded scholarships to 7 young women and see their faces on how life changing this was for them and their families. It was quite emotional.
Not only for the young women, but for myself on the rest of the leadership here at Exelon.
We're committed to supporting our communities by investing in education job training programs, and giving the underserved populations opportunities to grow and succeed.
I'll turn it over to Joe now.
Take our financial update.
Thank you, Chris and good morning, everyone today I'll cover our second quarter results, our quarterly financial update and our hedge disclosures.
First turning to slide 10, we earned 89 cents per share on a non-GAAP basis for the quarter. This favorability was driven by O&M and tax timing as well as some realized and unrealized gains we forecast for later this year.
Exelon utilities delivered a combined 49 per share net on holding company expenses.
This was primarily driven by strong operational performance.
Impact of distribution rate cases.
Ex January 40 cents per share in the second quarter and we've begun to make progress on levers we identified to mitigate the Texas loss, but as we've said before we expect it will take a full year to realize all the savings.
Additionally, unrealized and realized gains from the constellation technology ventures portfolio and realized gains from our nuclear decommissioning trust funds contributed a favorable quarter.
At Holdco, we benefited from expected income tax favorability in the second quarter.
As a reminder, holdco, we incurred <unk> <unk> per share drag in the first quarter associated with consolidated full year tax expense as our booked due to the impacts on losses incurred at Nextgen in Texas during Q1.
The remainder of the first quarter handful reverse over the course of the year and not impact on full year results.
There's still a lot of work to be done this year on your cost of pocketing, we will deliver earnings within our guidance range of $2.60.
$3 per share and you can see the details on slide 17 in the appendix.
On slide 11, we show our quarter over quarter earnings call.
The 89 per share in the second quarter of this year was 34 cents per share higher than the second quarter of 2020.
Exelon utilities less Holdco earnings were up 20 per share compared with last year.
The increase was driven primarily by the absence of storm costs from last year's record setting storm season that pickup and new rates associated with our completed rate cases.
And the impact of higher treasury rates on.
On <unk> distribution Roe.
The partial reversal of <unk>.
First quarter tax expense on corporate also drove favorability relative to last year's results.
X Gen Z earnings were up <unk> 14 per share compared with last year and the increase was due to unrealized and realized gains on our constellation technology venture investments.
Realized gains in our nuclear decommissioning trust funds.
Planned nuclear outage days and higher net revenue from increased volume index pricing equal.
As a reminder, the constellation technology venture investments will be mark to market every quarter and since the quarter end, we have seen some declining prices.
Moving on to slide 12, looking at our utility returns on a consolidated basis, our trailing 12 month on ROE.
The second quarter has improved to $9.
And in fact within our 90 day, 10% targeted range.
The 50 basis point increase from last quarter was primarily due to higher second quarter earnings across the utilities and the roll off of this forms that I mentioned that occurred last year.
Looking forward, we remain focused on delivering stronger returns on utilities and supporting our growth targets.
Now turning to slide 13.
As Chris mentioned briefly in his remarks, there were some important developments on the regulatory front.
Notably we received orders to multiyear plans at Pepco D C and the mirror.
Multiyear plan to provide our customers with great predictability and reduce the administrative costs caused by frequent filing on traditional rate case to recover our costs.
We are pleased that we have now received orders in our first 3 multiyear replacements.
Which will provide timely and predictable recovery for capital investments for the benefit of all our customers.
And now moving on to the details of the recent rate case developments.
First on Q&A.
D C Public service Commission approved Pepco multiyear plan for the 18 months spanning the remainder of 'twenty 1 through 2022 with on.
Wow.
$9 to 75%.
Our revenue increase of $108.6 million along with the acceleration of tax.
Partially mitigate rate impacts for customers through 2022.
Additionally, the water allows for 2 way reconciliation.
Leading the ability to request recovery of cost.
That exceed the forecasted cost at the end of appointment.
The commission on also approved tracking performance incentive mechanisms.
That are focused on the district's climate.
He calls, including Ghd emission reduction energy savings.
<unk> reduction and distributed energy resources deployed.
Second on the 2008 to June the Maryland Public Service Commission approved Pepco 3 year multiyear plan for April 1.2021 through March 31.2024.
The order approved a cumulative revenue requirement of $52 million over the period as well as in 955% Roe.
Acceleration of tax benefits to offset customer.
Were improved for the first year, we're approved for the first year with years, 2 and 3 to be determined later.
COVID-19, and electric vehicle regulatory assets were also approved for recovery.
Third on the 22nd Q.
The Pennsylvania public utility Commission.
Order approving increasing <unk> annual natural gas distribution revenues of $29 million, reflecting an ROE of 10.2 4%.
And fourth on July 14th in New Jersey Board of public utilities unanimously approved acis set on meaning both the electric distribution rate case, as well as our Ami metering network deployment and cost recovery.
The rate case settlement was a $41.41 million revenue increase and a 9.6% Roe.
There will be no rate impact to customers until January 1.2022, due to improved offsets from celebration taxable expense.
We are excited about the <unk> decision and will allow us to bring the benefits of this technology to our customers in chapters.
We've also had several rate cases still in progress, including Delmarva, Delaware Electric case, where we expect to achieve in the third.
Third quarter.
Pico electric case in the fourth quarter and comments annual formula rate filing in.
In December.
And overall, we're very pleased with the progress in advancing progressive regulatory designs.
It benefited our customers, while easing regulatory burden and improving visibility for our utilities.
As a reminder, we expect nearly 100 percentage of our rate base growth will be covered by alternative mechanisms by the end of our cleaning period.
Differentiator for our utilities when compared to our peers.
And more details on the rate cases can be found on slides 21 through 28.
Of the appendix.
And before discussing our gross margin update on slide 14.
I want to remind you that we will not be providing any X X 10 disclosures beyond 2021 at this time.
And given the separation, we expect to provide the 2020 hedge disclosures closer to completion.
When we give our full financial picture.
Spun off company.
Turning to the table on gross margin there is no change to the 2021 gross margins since last quarter.
In 2021 open gross margin is up $750 million relative to the first quarter, primarily due to the impact of higher prices across all regions and the execution of 50 million power new business.
Our mark to market hedges were down 600 volume.
Due to our highly hedged position.
Should we offset by the execution of power units.
We executed $150 million.
On the quarter Ed.
<unk> million dollars as non towers.
Yes.
I'll stop there. Thank you and I'll now turn the call back to Christopher.
Thanks, Joe.
Appreciate it.
Turning to slide 15, I'll close on our priorities and commitments.
We will meet or exceed our financial commitments delivering earnings within our guidance range and maintaining a strong balance sheet.
We will complete preparations to separate the business, including obtaining the regulatory approvals at Exelon utilities, we will prudently and effectively deploy nearly $6.6 billion of capital to the benefit of our customers.
And to help meet our states.
Energy policy goals.
And we will work with our regulators to ensure timely recovery recovery of these investments.
We will continue to advocate for clean energy and climate policies.
With the New administration Congress and our states to put the country on the path to meeting the carbon reduction goals that all desire.
And we will continue to partner and support our customers and the communities that we serve thank you and I'll now open it up for questions before I.
Do that though I have 1 era.
Mike.
Pre.
Oh my.
Third reading.
As you said, we're at impasse on the nuclear issues on the Bill and that's not where the Impasses. We've resolved the nuclear issues. We are working with all the constituents on other elements. So I just wanted to make sure that my Blender there didn't go too far down.
Down the path of what the Hell is going on but with that I'll open it up for questions.
If you would like to ask a question simply press Star then the number 1 on your telephone keypad.
He would like to withdraw your question press the pound key.
The first question will be from Julien Dumoulin Smith of Bank of America. Your line is open go ahead.
Hey, good morning, thanks for the opportunity.
Good morning.
Okay.
So I'll, let the legislative comment on Illinois, B I know, it's dynamic and it's probably not too much where you can comment on there.
But I wanted to spend a moment if you can talk more high level with respect to the federal efforts.
And perhaps outside of Illinois can you speak a little bit to the ability to potentially tap into this.
T programs, specifically in other states, like Maryland, and Pennsylvania, as well as the ability perhaps in some of that debt.
We have various programs.
Shall we say.
<unk> future pressures should those debt proved insufficient against.
Pressures on power power, Chris from renewables into the future.
I'm going to add a little bit more color onto Illinois, and then I'll, let Kathleen talk about the federal side.
The governor and his administration the leaders in the legislature have a really tough job to do.
They are bringing together.
Coalitions.
Debt half and cases different priorities.
And.
As a.
A member of.
And inputting into these coalitions.
We're at a point that.
We need to figure out how to best support our leaders. So they are able to execute on legislation that supports.
It supports all within the right timing within the right economics.
But.
We're here to support and we recognize the tough job ahead of our leaders.
Especially in the legislature the committee leaders.
Being able to bring something to fruition so.
I just want to make sure that we're clear on that point with that I'll turn it over to gasoline to talk about the federal.
Sure Good morning Julien.
So while we are certainly very grateful for the attention in Washington in Washington to the importance of continuing the operation of the existing fleet in order to achieve climate goals. What's going on is there are a number of policy tools that are under discussion Ed.
I'll sort of take them in order, while there as Chris mentioned has been a production tax credit for nuclear introduced.
Got it.
Discussions of a clean energy standard potentially being developed for the for the reconciliation now and you asked about CMC is I think what you mean ramp.
Grant program that has.
Dan discussed for potential inclusion in the infrastructure Bill. So those are 3 very different kinds of policy solution is the first to being far more comprehensive and once that.
As you mentioned and in Maryland, and Pennsylvania and other states.
In the existing nuclear.
Essentially seeing a significant amount of support interest debt, providing a real benefit to the climate.
The grant program.
More challenging and more limited given the limited amount of funding that will be available under that program at least as it's currently.
Drafted.
The real point, though is that all of these programs are just that they're just sort of proposed programs.
He has been enacted as you know so well.
We're watching it very closely and again very grateful for the growing amount of.
Support for preserving nuclear fleet through federal legislation.
The reality is that as Chris said, we need to make decisions based on laws that have actually been enacted Ed and nothing has yet come to fruition in D C as of yet.
Yes, no I appreciate that very much.
If I can pivot the business or the attention to the other side of it.
The business a bit more.
Do you think about opportunities described with some of your peers on carbon free attribute and specifically some of the new novel off takers, but like miners.
Can you speak to the willingness with some of your Counterparties, especially considering the extent of your C&I relationships already perhaps pay a premium.
Contract directly with somebody nuclear assets, if you don't mind.
I'll, let Joe start and then Jim can jump in making sure. We've got your question right here.
Julien if I understand your question I think you're asking with some of the what some of these larger companies and customers are looking for is there an opportunity with our carbon free generation to married to them.
And if there is any I'm sorry go ahead.
No no yes, exactly yes.
I think there is and that's something that the constellation team is looking at.
We've created some products already when you look at renewable off takes that we've got to third party customers large third party commercial industrial customers and we had some success in different areas doing that as well as some of these things you mentioned with these large mining companies on <unk>.
Crypto currency tech companies and I'll, let Jean totaling complaints on there.
Yes, Thanks, Joe Hi, Julien, Yes, we definitely had a lot of demand from our customers for multiple multiple areas of interest rate and in order for them to hit their sustainability targets they're interested in.
Carbon free energy renewable energy, both and we've had some success in selling.
Emission free energy credits and other renewable type products to some of our largest C&I customers. There are also interested in just on.
Sustainability information and data around the energy usages and how to be more efficient. So there's there's kind of this burgeoning suite of different products and services that we're working through with our team and with our customers that they're very interested in and we certainly have also seen the demand for direct off takes and below.
Large energy purchases for.
Both data centers and mining as well as also people that are interested in the hydrogen business. So we have a pipeline of activity in the different products and services that we're talking to our.
About <unk>.
I'll have more to come on that as that develops.
Excellent well I wish you all best of luck and we'll speak to you soon.
Thanks.
The next question will be from Stephen Byrd of Morgan Stanley You May ask your question.
I wanted to just focus on the Texas assets for a little bit there's been a lot of.
Movement in terms of market design in and a lot of those moves being constructed the forward curve has moved up on a lot I was just curious your latest thoughts on terms of.
How satisfied are you with the improvements in market design I know I think it was a question in terms of whether those assets would be a good unless there were improvements what's your general take on the progress on the taxes.
I'll, let Kathleen start and then I'll finish on the actual.
<unk> themselves on what we're doing.
And what we see as a potential new market design.
Good morning, Steven.
I think that the.
The progress is.
Little bit slow the debt.
ERCOT leadership on the PUC has really been focusing on how to react to what happened in <unk>.
In February and Theres been as you know a lot of work.
Associated with that so the changes looking forward I think are in.
Some ways helpful. In that we have finally seen at proposals for how to address weatherization, but on the broader questions on market design.
There's a lot of discussion, but we do not yet at this point have some solid proposals that have been.
Either filed or approved so well there are a number of stakeholders working on ways to address changes to the already seeker, who are introducing new products into the market.
In my view, there is not enough progress yet to evaluate.
Whether we're going to see the kinds of changes that will be necessary to prevent it and know that like February from happening again.
So on the plant side, which should help inform what we need from the market side, Bryan Hanson, who is our chief operating officer who's on the phone for the Genco.
As a team.
Technical team.
Working through what the design basis temperature would be that we would have to install capital to be able to reach that the plants in Texas were never designed for the wherever there that we saw.
And.
Especially the duration of the weather that we saw.
If we go to something much lower in temperatures a design basis, we have to look at what adequately would preserve.
Piping is it traces of installation is in other type of barriers and whats the most economic way to get there and Brian I don't know if you want to add anything but.
That team is well underway.
At this point.
Hey, Chris I would just Ed we built the model that has some certain assumptions on temperature wind speed prolonged jeopardy of the weather event that will calculate the engineering changes, we need to make to the plant, there, which case and we'll be able to price that out and then once the weatherization standards are published or accepted in ERCOT. We can then.
Net model to come up with our final outcomes and then establish the price points for those plants and that will definitely have to feed into what our cuts doing on market design.
Just as we saw on PJM some years back on the reliability standards that they were looking for.
There was an expense to that.
We all were willing or many of us were willing to invest.
Debt into that reliability, but we have to have some assurance that we're going to get a return on net invested capital.
Thanks, Paul very helpful. On its fair that you know, we still have to wait and see how the rules develop to figure out sort of what you what your sponsors with those assets on that.
That's all very fair.
I wanted to shift over to the utility you gave a very good thorough update on on the utility I wanted to just step back at a high level utilities already on an above average grower, but I was just curious are there what are the biggest categories up sort of upside potential in terms of growth of the utility business that you're most excited about over really.
A multi year period, not so much in the near term, but sort of longer term.
Let me turn it over to Calvin Butler.
Thanks, Steve and good morning, I would sit back and say our opportunities is really partnering with each of our jurisdictions to understand what their needs are and how we're really hardening the system and building resiliency throughout as you sit back and look I think our efforts around our path to clean as Chris talked about Joe talk.
On earlier is really understanding where they're taking us and electrifying our entire distribution system also and really setting up our gas distribution system for the future and replacing that infrastructure is also a key ingredient in several of our jurisdictions. In addition to that around the 6.
<unk> of the overall system as well so when we look at where we're going to electrify our vehicle fleet electrification of our system.
Replacement of our gas system and also ensuring that it's secure our really our opportunities across each of our jurisdictions.
Thanks, Scott, but thats all I have I appreciate it.
The next question will be from Steve Fleishman at Wolfe Research. Your line is open you may ask your question.
Thank you good morning.
My questions are focused on Illinois.
Just we have seen a.
Decent move up in power prices recently.
Particularly I guess in the nearer term just any sense on is there any chance that that could.
Could be enough to wait this out longer with the plants.
Yes.
I can't give you the beginning which is the end.
Joe can fill on the blanks.
No.
It doesn't give us what we need but Joe Thank you, Chris and good morning.
Good morning, Steve It really isn't that simple I think certainty is very important.
As you know the plant space near term financial challenges and as Chris said in his script absent legislation closes on price plans the right economic decision and obviously not an easy 1.
I would tell you we've seen an uptick in energy prices, many times before and never ever held.
When you look at it as a front end of the power curve is up more materially in the backend of the power curve in terms of price.
In addition, we've seen capacity prices decline.
The stability and certainty provided by a contract better address clearly better address the financial challenges of these plants without being exposed to all this market volatility in addition.
Term on the contract helps with things like capital planning and the efficiency of that obviously, our workforce and personnel planning and we just think it's a much more certain outcome.
Chris.
I mean is there any appreciation that.
Flip side.
You know the.
The law has proposed at least would actually.
Be below where current price levels are in the near term.
You know Ed.
Saying that we see 2 day.
We've seen this before.
Something happens in the market and near term rises.
It's flat or lower in the back side.
As we drift into the out years, we come right back down.
So we really have to focus on the long term viability of the economics versus the cyclical nature of the markets the loads and all the variables were.
We're agreeing to support.
A significant renewable build out within that legislation.
We know that that will have.
<unk>.
But depressing factor on prices.
As.
Low demand periods.
Excess generation.
We'll bring the prices down and that will drop to not only the forwards but.
The back years so.
There is a consumer protection in the legislation that ensures we don't.
Over earn but.
The to bet on the Com that these forwards are going to maintain and eventually lift.
The out years.
Gamble that we're not willing to take.
I guess my other question just on the law is.
It doesn't seem like anyone as you mentioned is debating the nuclear provisions.
On the issue as I guess, the Governor said is that.
The debt because he kind of commented on the labor unions debt.
There you know preventing potential job loss in 2045.
Over certain job loss in 2021.
Can you maybe do the Union group not believe you're shutting the plants.
R.
Are they just willing to.
Potential.
Benefits in 2045 over 2021.
First of all let me, let me make it clear, we're not engaged and involved in that negotiation as far as.
The shutdown on the coal and the <unk>.
<unk> issues that go along with that we understand.
What the Union is asking for we understand what the governor is asking for and it's put on the lap of the legislative body to figure out what's the right thing to meet the state goals continue to have.
Adequate.
Employment certainty.
And so it's.
It's.
A tough situation, but I can say that.
Not a flight that we're involved in and.
We are very dependent on the support for a price.
<unk> plans to be maintained by our Union partners.
Building trades in the IBEW, they're very aware of the dire situation.
For the nuclear plants, so I don't think that their dedication to saving.
The jobs at these plants are in question.
They have some other priorities and other constituents within their organizations that are dealing with issues. So.
I would just leave it at that.
Okay. Thank you.
Yes.
And the next question there I maintain Ed.
J P Morgan.
With your question.
Hi, good morning.
Good morning.
Just wanted to turn to the storm offsets for a second here the $600 million ish that you you were targeting here.
From <unk> to offset rate just wondering if you could.
As far as how that's progressing where you see yourself versus.
What you were targeting how and how.
How much is left to do at this point.
Yes, good morning.
So we did achieve more in the second quarter than when we when we've done our planning originally in Q1, what we would've expected to achieve.
Expected most of it to show up in the back 6 months of the year, we've achieved somewhere between 20 and 25 percentage of the offsets that we expected and we said they would come in a number of areas. When you look at <unk>.
Deferral of costs, and 1 time cost savings opportunities, whether it's things like contracting dollars.
Holding labor vacancies.
Reductions in travel and entertainment expense.
Deferring non critical maintenance capital those types of things.
There were some revenue opportunities when you see the improvement in treasuries, we've talked about our technology ventures investments. So we were ahead of what we expected to do at this point in the year and we're continuing to work hard on delivering on the balance of what the commodity.
Got it that's very helpful. There and then.
Turning towards the utility business as a whole here.
Given the potential moving pieces at Com Ed.
Then some positive outcomes it seems like with the Maryland.
Maryland and D C with the multiyear plans better outlooks in those jurisdictions, how should we think about both the trajectory of utility earned Roe.
How this might impact the 6% to 8% utility growth rate that you guys see.
Hey, this is Calvin I would just sit back and tell you that we are very confident in achieving the.
Stated financial performance for each of our utilities and to you referenced on the multiyear plans that have gone taken place in Maryland and in D. C and Joe outlined in terms of the rate cases across our business. It goes to show you. The partnership that we've established with our jurisdictions and understanding what their needs are and how our investments are meeting.
Those goals.
We are committed to 6.6 billion annual investments in capital and recovery of real time on the capital and the alternative ratemaking that has been taking place across those utilities indicate that we are recovering and returning on their capital and real time, if you think about the jurisdictions in which we operate they have tip.
<unk> been some of the more difficult across the country and we're changing that landscape. So I'm very proud of the team across each of the utilities and really building that partnership and showing that we understand the needs and we're meeting those objectives.
See if Joe wants yes, I would just add 1 thing on top of what Calvin said, which I thought he did a very comprehensive job.
As you know, we target, 9% to 10% or are we using all of our utility and this quarter you saw us jumped 50 basis points back across.
Composite to 9.4% and that factors into our 6% to 8%.
Projections.
Got it that's very helpful. Thank you.
The next question will be from Michael Lapides of Goldman Sachs Go ahead. Please.
Hey, guys couple of Nextgen questions first of all the offsets or the O&M savings Youre trying to realize this year to help offset the winter storm Euro impact how much of that do you think will remain in place as we go out into 2022 or 2023 or should we assume there's a sizable step back up in O&M.
In those years.
Yes, I think what we've said is a lot of that is onetime in nature. When you think about deferring some things that you'll ultimately need to get done.
<unk> talked about things like labor vacancies and contracting travel and entertainment at this point a lot of that is onetime in nature, but what I would add to that is as you know.
Michael we've done a good job across the enterprise.
Why was that X gene and really driving efficiencies in cost here in the last 5 or 6 years and we continue to look at new ways to do that whether it's leveraging technology or the scale of our business. When you look at our supply organization doing a nice job on that area and we will continue to challenge ourselves.
Some of these costs specifically on any 1 time.
I can I can tell you that each cost as we bring it back in 2022.
We will be scrutinized against what is the new workplace of the future whats the productivity, we were able to achieve with with these reductions.
It is not a healthy recipe to forgo capital maintenance or required O&M maintenance and let the system as the case so.
You can buy yourself some time on some of those decisions, but at the end of the day reliability.
On the system is critical and.
We'll watch that but there are other areas that.
Theres teams working on reentry looking at staffing needs.
As we go through the design of the organizations as we look at the split.
There are savings that we're not ready to announce yet but that will be coming into play in each 1 of the companies.
And the design of the future state of 2 entities strong entities working on their own.
Meaning when you think about the 2 entities as separate entities. We should think that there are costs I don't want to call them synergies, but there are cost opportunities as separate entities versus maybe having this center piece on the cost side.
Yeah, that's what you focus on at the start is making sure you attack the synergies and that's what we're doing and then from there when youre attacking the dis synergies it will expose potential business.
Shifts in how we how we perform so.
We're working through that Richard <unk>, our Chief operating officer corporate is leading.
A lot of that as long as long with our project management team that is daily following each 1 of the designers staffing expenses.
And we will continue to report out to the senior team on where we're at on obtaining the first goal is to try to minimize neutralize do away with any dis synergies and then from there what.
New efficiencies can we drive into the business.
Got it.
1 last 1 just on Byron in Dresden.
Yes.
Is there a scenario where you could push out the refueling outages until next year, meaning early next year and keep them on floater keep them operating through the end of this year or is that kind of physically or for safety reasons impossible to date.
Well what happens at the end of cycle, which we're heading towards on these plants.
Here are few.
Becomes less and less effective and the term is close down and so you start.
Power out of the reactor thermal megawatts out of the reactor is reduced which compounds to the electric megawatts produced.
So you get to a point that.
You are running.
And within a month or so period.
You're running inefficient.
Steve paths.
And inefficient operations so.
You make a call as to coach down to start again.
Just shut the facility down.
The 1 thing to reiterate and.
And shutting down a nuclear plant.
Is the goal is.
You shut down to cool down.
Disassemble the reactor.
Offload all of the few into the spent fuel pool and you relinquish the license to the nuclear regulatory Commission and there is no path back from that.
Theres no regulatory.
Ed path back and so what we do is start into the phases of the chosen decommission using the decommissioning Trust fund and it comes out of our expense call on its into pre funded.
Category of the decommissioning trusts so.
It's irreversible.
And in running a year, it's physically impossible running on extra months is very challenging on sales.
<unk> steam supply system.
And maintaining.
Adequate controls on the physics.
Got it thank you Chris much appreciate it guys.
That concludes the Q&A session and I'll turn it back to Chris Crane.
I wanted to thank everybody for the time this morning for joining the call we're working hard to run the business.
Best in class levels.
And taking the necessary steps to set up 2 strong independent companies.
There is quite a focus on both of those goals and we will continue to update you as we go along.
We appreciate your support and with that I'll close the call.
Thanks to all our participants for joining US today. This concludes our presentation you may now disconnect.
Great day.
Okay.
[music].
Okay.
[music].
Okay.
[music].