Q3 2021 Exelon Corp Earnings Call

Okay.

Today's conference is scheduled to begin shortly please continue to standby and thank you for your patience.

[music].

Okay.

Hello, and welcome to excellent third quarter earnings call. My name is Justin and I'll be your then specialist today.

All lines have been placed on mute to prevent any background noise.

Please note that today's webcast is being recorded.

During the presentation, we'll have a question and answer session. You can ask questions by pressing star one on your telephone keypad.

If you would like to view the presentation in a full screen view click the full screen button by hovering your computer mouse cursor over the Powerpoint screen press the escape key on the keypad keyboard to return to your original view.

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 Emily Duncan Vice President Investor Relations the floor is yours.

Thank you Justin good morning, everyone and thank you for joining our third quarter 2021 earnings conference call, leading the call today are Chris Crane, Exelon, President and Chief Executive Officer, and Joe Nigro Excellence, Chief Financial Officer, they're joined by other members of the Exelon Senior management team, who will be available to answer your question.

Following our prepared remarks.

Issued our earnings release this morning, along with its presentation all of which can be found in 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 the call.

Please refer to today's 8-K and Exelon as other SEC filings for discussions of risk factors and other factors, including uncertainties surrounding the planned separation that may cause results to differ from management's projections forecast and expectations. Today's presentation also includes references to adjusted operating or.

Earnings and other non-GAAP measures. Please refer to the information contained in the appendix of our presentation and 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, Emily and good morning, everybody and Emily Thank you for putting a hedge on everything we're about to say.

We had a good quarter financially and operationally and had several very positive developments during the quarter I'm starting on slide five.

We earned a $1 23 per share on a GAAP basis.

In a.

$1 nine.

On a non-GAAP basis, and Joe will get into those details.

Illinois.

Pass at the last minute.

Lindmark clean energy legislation.

Which makes the states and niche.

National leader in clean energy.

Illinois will achieve a 100% carbon free by 'twenty four.

<unk> 45 by preserving.

In adding tens of preserving the plants and adding tens of thousands of jobs.

And we think Kathleen maroon and her team and many others for the work they've done.

As a result, we have reversed the retirement decision on Byron in Dresden.

Our Illinois plants will continue to provide good paying jobs economic support to the communities and zero carbon energy to the citizens of Illinois.

We've begun to fill the 650 vacant positions.

We'll be investing more than $300 million in our plants.

Over the next five years.

To catch up on what we've pulled back from them during the unknown period.

Legislation also includes the provision that would transition to these out of the formula rates into a new multi year performance based.

Great framework.

In August we completed the transaction and acquired Etfs portion of the CMG nuclear plants, adding.

Adding 17 Terawatts 410.

Admitting nuclear generation we.

We did receive a grant from the U S Department of energy to explore the potential benefits of onsite hydrogen production.

And our nine mile points.

In New York.

And we continue to believe that there's a very strong future for hydrogen.

Hydrogen will be key in helping the nation address the climate crisis.

And the nuclear plants can pay.

A vital role in this production with its heat.

And capabilities.

We're partnering with Neil hydrogen and the National labs to demonstrate the integrated production storage and use of hydrogen on site to Peru prove its commercial viability.

Operations are expected to begin in 2022.

On the regulatory front, Delaware PSC issued a constructive order.

In our Delmarva rate case last quarter, we announced.

Our path to clean.

And our net zero goal for the utilities. So we continue to strive to meet what our customers desire and our regulators desire.

Each utility is building upon.

Existing work and supporting a class.

To clean.

That aligns to the goals that are needed for their local jurisdictions and stakeholders. And example is peco's climate solution. It's a five year action plan that will fill.

Pep.

Pepsico's them said peco pepco that will fill with the D. C psc's requests last month.

This filing outlines 62 different programs to help enable the district's roadmap.

Toward de Carbonization. Another example of helping our communities to meet their goals is through our energy efficiency programs, which are some of the nation's largest Joe will talk about them in his remarks.

Yes.

Yeah.

We're committed to serving our communities and helping to drive.

Ah.

Equity and positive change last week, we launched a $36 million ratio equity capital fund to expand access to capital for minority owned businesses.

So they can create jobs and grow their businesses and reinvest in the neighborhoods and the communities that we serve.

It's the first of a kind in our sector.

In addition, we partner with.

The <unk>.

<unk> to launch a $3 million exelon.

Fund for corporate scholarship program to provide scholarships.

Internships.

That create opportunities for students attending historically black colleges and universities that reside in the communities that we serve.

Finally, we are closely watching the work in Washington on the infrastructure build.

Back better agenda.

The legislation will help us address climate change crisis through incentivizing clean technologies and infrastructure investments to make the grid more resilient and ready for clean energy technologies.

It is clear from the proposal that the administration and Congress recognize the critical importance of maintaining the existing nuclear fleet.

To ensure that the nation can cost effectively address climate change and we're confident that when the legislation pass does pass. It will include a production tax credit for existing nuclear.

Moving on to slide six.

Two.

Our operations.

Reliability remains incredibly strong.

All of the utilities are delivering a top decile outage frequencies and first quartile in outage durations.

B G E Pico and ph.

We're top decile for gas odor response is.

Which is very critical for us.

As we continue to defend gas as a source of bridge source for the future.

Customer services topnotch with BG, he come at Pico, achieving top decile and PHH top quartile.

The generation front, our generation fleet performed well during the quarter, even in the face of uncertainty in Illinois.

Our nuclear plants produced 45 terawatts of zero carbon generation.

Avoiding approximately 21 million tons of carbon dioxide that would be generated otherwise.

<unk> had a 96% capacity factor.

Over that period of time.

And we're very proud of their operations with the uncertainty.

Base.

On slide seven.

The progress and separation.

We continue to make progress on separating the businesses into two independent fortune 200 companies.

First approved the separation in August.

And in September we received a private letter ruling from the IRS confirming the tax free nature of the separation.

Process for the NRC in New York PSC approvals are moving forward as expected and remain on track.

Last week, the New York PSC staff held the first meeting of settlement negotiations.

This is an important step in the process and we've asked for authorization from the commission by December 16th.

On their scheduled meeting date.

We have named the CEO of each company as well as their direct reports and we will continue the staffing program.

Says over the course of the next few weeks and months.

To be ready for the close in the first quarter of next year.

<unk> and I are both excited to lead our companies into the next chapter.

Exelon will continue to be one of the nation's premier customer focused.

Energy delivery companies with more than 10 million customers chose the right person to lead constellation will be.

Americas, leading clean energy company, producing 12% of the nation's clean energy and nearly two times more than any other clean energy company.

Out there we remain focused on setting each business to be successful for the long term.

Joel I'll turn over to use it for the financial update.

Thank you, Chris and good morning, everyone.

Today I'll cover our third quarter results, our quarterly financial updates and our hedge disclosures I will also provide an update on our full year 2021 guidance.

Turning to slide eight first we earned $1 nine per share on a non-GAAP basis for the quarter.

Exelon utilities delivered a combined 66 cents per share net of holding company expenses.

And this was primarily driven by above normal summer weather and our non decoupled jurisdictions, along with strong operational performance and the impacts of distribution rate cases.

Next Gen earned <unk> 44 per share in the third quarter.

Generation and constellation both performed well during the quarter.

We continue to make progress on levers, we identified to mitigate the Texas loss.

And we expect it will take the full year to realize all the savings realized gains in our decommissioning trust funds, partially offset the unrealized losses from our constellation technology venture investments, which are mark to market every quarter until realized.

At our holding company, we benefited from expected income tax favorability in the third quarter and as a reminder, our holding company incurred 12 cents per share drag in the first quarter associated with how consolidated full year tax expenses are booked due to the impact of the losses incurred at X Gen in tech.

The remainder of the first quarter drag is expected to reverse in the fourth quarter and is not expected to impact our full year results.

Turning to guidance, we are narrowing our 2021 EPS guidance range to $2 70.

To $2 90 per share from $2 60 to $3 per share previously.

Our updated guidance considers reversal of the retirements of the Bahrain in Dresden nuclear stations as well as execution of the EDF put and our continued additional a disciplined approach to cost management.

We are delivering on our financial commitments and are confident we will be within our revised range at year end.

On slide nine we show our quarter over quarter earnings walk the dollar per $9 nine per share in the third quarter of this year was <unk> <unk> per share higher than the third quarter of 2020.

Exelon utilities inclusive of holding company earnings were <unk> <unk> per share higher compared to last year. The earnings growth was driven primarily by higher transmission and distribution rates associated with completed rate cases relative to the third quarter of 2020 and <unk>.

Higher treasury rates on <unk> distribution Roe.

This was partially offset by costs related to the remnants of hurricane Ida that swept through the Pico service territory in early September.

The partial reversal of the first quarter tax expense at corporate also drove favorability relative to last year's results.

X Gene's earnings were down <unk> <unk> per share compared with last year and the decrease was due to net unrealized and realized losses on constellation venture investments lower capacity revenues, primarily in PJM and more planned nuclear outage days.

This was partially offset by realized gains in our nuclear decommissioning trust funds.

And higher Zec revenue due in part to increased volumes, resulting from fewer planned refuel outages and Zach pricing in New York.

Moving to slide 10.

Looking at our utility returns on a consolidated basis.

We continue to meet our consolidated 9% to 10% target with a nine 3% trailing month trailing 12 month ROE as of the third quarter.

Earned ROE dipped modestly by 10 basis points since last quarter disc.

Despite higher earnings driven primarily by distribution and transmission rates.

Earnings were outpaced by increased equity infusions and cross all four utilities to support capital investments.

Looking forward, we remain focused on delivering stronger returns at the utilities and.

And supporting our growth targets to enable customer benefits.

Turning to slide 11, there were some important developments on the regulatory front since the last call.

First on September <unk>, Delmarva, Maryland filed an electric base rate case, with the Maryland Public Service Commission seeking an approximately $29 million increase in electric distribution rates and reflecting an ROE of 10, 1%.

The case highlight Delmarva power strong record of reliability reporting the second best reliability performance in Maryland in 2019, and 20 behind only pepco.

Delmarva power continues to make significant investments to improve reliability and customer service for our customers and communities.

PPL, Maryland expects to receive an order by March 32022.

Second on September 15th Delmarva, Delaware received a verbal order for its distribution electric rate case.

The Delaware Commission approved approximately $14 million, increasing annual base distribution rates.

Reflecting an ROE of nine 6%.

As permitted by Delaware Law, Delmarva power implemented full allowable rates on October six 2020 subject to refund.

We also have two rate cases pending final orders in the fourth quarter.

On October six the administrative law judge presiding over peak goes electric distribution base rate case recommended the settlement with all parties be approved the settlement provides for an increase of $132 million in annual electric distribution revenues and we expect to receive an order in the fourth.

Quarter.

And then on November 2nd the ALJ presiding over comments 2021 distribution formula rate update issued a proposed order.

There were no adjustments to comments proposed revenue requirement increase of $45 $8 million.

We expect to receive a final order from the Illinois Commerce Commission by early December.

We continue to have constructive regulatory relationships across our jurisdictions and are working with our regulators states and communities to.

To support their clean energy and climate goals.

As a reminder, we expect nearly 100% of our rate base growth will be covered by alternative mechanisms by the end of our planning period, a differentiator for our utilities when compared to peers.

More details on the rate cases can be found on slides 20 through 24 of the appendix.

And as Chris mentioned, our energy efficiency programs highlighted on Slide 12 is one example of how Exelon utilities are helping their customers on the path to Clinton.

Exelon utilities are driving customer driven emissions reductions in our communities through some of the nation's largest energy efficiency programs and conservation efforts.

These programs enable customer savings through home energy audits lighting discounts appliance recycling home improvement rebate equipment upgrade incentives and innovative programs like smart thermostats and combined heat and power programs.

In 2020 through a combination of new and prior year investment our utilities helped customers save over $22 3 million megawatt hours of energy.

This equates to 8 million $8 1 million metric tons of Cotwo emissions avoided.

The equivalent of nearly 932000 homes energy use for one year or the carbon sequestered by $10 5 million acres of U S. <unk> seen one year according to EPA greenhouse gas calculator.

Each of Exelon utilities is building upon existing work and supporting a path to clean that aligns to the goals and needs of their local jurisdictions and stakeholders.

Our approach allowed jurisdictional flexibility such that each utility may respond to their unique regions and markets and employ the strategies and solutions that best address the operational footprint and customer preferences.

Before discussing our gross margin update on slide 13, I want to remind you that we expect to provide 2022 hedged disclosures at analyst day, which will be held closer to the completion of the separation.

However, what I can say now is that we've continued to hedge on our ratable plan for future years and this includes the length from the Byron in Dresden retirement reversals.

Until the carbon mitigation contracts begin and Exelon full ownership of the CMG asset.

Turning to the table total gross margin increased 500 million since last quarter due to the plant retirement reversals in Illinois, and full ownership of the CMG assets beginning on August 7th.

In 2021 open gross margin is up one $6 billion relative to the second quarter, primarily due to higher prices in all regions and higher volumes driven by execution of the EDF put and the decision to reverse firing in dredge things early retirements.

Capacity inject dollars are up $100 million due to full ownership of the CMG assets.

Mark to market of hedges were down $1 billion due to our hedged position, partially offset by the execution of power new business.

We executed $200 million of power, new business and $50 million of non power new business during the third quarter.

The non gross margin impacts of the Illinois plant reversals and full ownership of CMG or incorporated on page 32 of the appendix.

You and I will now turn the call back to Chris for his closing remarks.

Thanks, Joe turning to slide 14, I'll close on our ongoing priorities and commitments.

As we've said in the past and we will continue we will meet or exceed our financial commitments delivering earnings with our.

Our guidance range and maintaining a strong balance sheet and that goes for both companies as we split theres a commitment on both sides to do that.

We will complete the preparations to separate the businesses included in the organization the cost structure for each company that will set each company up for long term success.

A strong investment grade at.

At Exelon utilities, we are prudently and efficiently deploying six 6 billion of capital to benefit our customers and to help meet the needs of our jurisdictions energy policy goals.

We're working with our regulators to ensure timely recovery of these investments as Joe discussed in his talking points.

We continue to advocate for clean energy and climate policies with the New administration and Congress.

And our states to put the country on a path to meeting.

Carbon and air pollution reduction goals, there's more here than just carbon.

We have a city and Chicago that is the third highest.

With.

Lung disease and.

It's not only carbon.

The fumes from the industrial sources, and we need to do our part to help.

Lower that and.

And we're partnering and supporting our customers and the communities that we serve so with that I. Thank you for your time today and I'll open up the call.

Two questions.

Thank you.

To ask a question simply press the Star then the one on your telephone keypad. If you would like to withdraw your question press the <unk> and again that is star one if you'd like to ask a question.

And our first question comes from Stephen Byrd from Morgan Stanley. Your line is now open.

Hey, good morning, Thanks, so much for the thorough update.

Thanks, Steve.

I wanted to step back and talk about federal legislation broadly and discuss the impacts less on nuclear I think you all have been very clear on that side I'm thinking more about <unk>.

Everything from tax policy to support for transmission just curious at a high level. What are you thinking in terms about the potential impacts to your business. If this legislation were to pass.

I'll, let kathleen.

Our own speak to it.

We think there is a lot of positives that can be put in play here.

I don't think we're looking for.

Any handouts.

We'd rather make the investments ourselves.

Between Kathleen and Calvin Butler.

Ham and egg.

Hey, Joe May want to jump in.

On the tax question good morning, Stephen.

As you pointed out I think we're we're very heartened by the support for the nuclear stations and a recognition that there are continued operation is essential to meeting the climate goals, but the bill goes way beyond nuclear as you pointed out in terms of the extensive support for electric vehicles.

First of all.

Vehicles and electric buses in transit transmission as you pointed out and then significant funding on resiliency.

For hardening and Weatherization.

All of which we think are essential for the communities that we serve as Chris pointed out.

The transmission program.

That's always been a challenging issue.

As you know.

Given that it's not just about funding, but it's also about siding.

So we do expect that to continue to be a challenging area, but.

Obviously essential to that clean energy build out.

So I'll stop there, let Carl jump in our job as I said on tax.

Good morning, Steve and I'll, just add a couple of things to piggyback off of what Kathleen said, if you think about some of the specifics that the federal government is looking to partner with the states think about the $7 5 billion earmarked for charging infrastructure.

The $5 billion going towards zero emission and clean buses.

Electrification when you think about port electrification for our city of Baltimore, and Philadelphia, what that would mean.

For them.

<unk> been talking about the different grants that they are proposing where utilities could partner to do different things and creative and all of this is good for the customers. If that was that those moneys are coming directly to the state and there is a partnership we will continue to invest.

On reliability and resiliency and then take these moments that keeps the customer build down and that is a concern of ours just to keep affordability at the forefront of everything we do so that's that partnership and how we see it playing out.

Yeah, and I'll pick up Steven on the tax question and we're studying the potential implications across our business and as you know, we obviously have very large capital plans at our utilities for the benefit of the cost to our customers and they also helped drive the local economies and May help meet the climate and clean energy goals of our communities many of the <unk>.

<unk> of those same goals are shared by this build back better plan.

I think he is driving the tax question and you've heard others in the industry say the minimum tax could increase customer bills and potential potentially impact investment of the capital that we deploy we are communicating with policymakers about that fact and the impacts it may have on the on the on the on the.

The capital planning process, and we're continuing to work through that.

Very helpful. Thank you and then maybe just.

Separately, just thinking about the utility business.

You already have excellent growth. So I suppose this question is going to come across as somewhat greedy, but I am thinking about sort of other areas of upside potential there and I was just curious maybe for Calvin and Chris just sort of as we think about categories of growth upside beyond the excellent base plan that is resulting in above average growth, but what are some of the categories.

Sort of additional upside as we think about the utilities' growth prospects going forward.

I'll just start off and then pointed to Calvin there are many case studies being done on voltage requirements.

On.

<unk> Flo voltage requirements.

What do we use to harden ourselves from an internet exposure, which would be our own wires.

Our own fiber, but kal.

You captured it it really goes around building the reliability and resiliency of our system and I think as we lay out our multiyear plans.

And across our jurisdictions is understanding and really diving in Stephen in terms of what the customers want and our jurisdictions, but the hardening and resiliency of our system is coming in the forefront in addition to fighting.

Climate change that's a big part of what we're doing in along with the security related issues as Chris outlined so those are opportunities in the areas, but it's that partnership and really understanding what the jurisdictions are wanting.

Very good. Thank you very much Oh go ahead, we can't run a system.

On the distribution side any longer at a 41 60 voltage level.

We got to get up to 13, eight and Thats going to take a significant investment to do that and that's to support the distributed.

Generation so there.

There's a lot more work to be done.

Thank you very much.

And thank you and our next question comes from Steve Policeman from Wolfe Research. Your line is now open.

Hi, good morning.

Thank you.

So I guess.

Two questions first on the.

The build back better and.

And for Bell.

Just thoughts on on the likelihood that that passes and if some reason it does not.

How how do you feel about opportunities to address.

Nuclear PTC is in other.

Bill if we somehow got there.

Kathleen is earning a paycheck to ensure that it gets done so I'll, let her answer the question.

Morning, gasoline, maybe even make it to make it too far too.

Thanks, Steve.

We're still feeling very confident about the Democrats ability to get both infrastructure and build back better across the finish line.

There.

As you know a strong proposal put out by the president that had that support last week around a topline number that that.

Group is apparently coalesced around they have continued to work to flesh out the meat on the bones that they can move. This this packaged quickly et cetera mentioned is assured that he thinks that's doable indeed, even signing agreement with the Senate majority leader that it is possible this could get done by Thanksgiving. So.

I think there is there is a broad consensus that action as needed and.

And in particular on the clean energy tax package.

There is sufficient support for the provisions that well get the country to a place where I can come close to meeting the 2030 carbon reduction goals.

If for some reason that does not occur as you know there is regularly.

<unk> at the end of the year on a bipartisan basis to look at.

Tax extenders, and and we're again hopeful given the amount of support that we've seen for.

Support for the existing fleet that the nuclear provision could be considered as part of an end of the year bipartisan package, if if the Democrat BBB Bill doesn't.

Get across the finish line.

Okay. My other question related to that is just I know, there's a ton of detail on this but just high level how.

Does the PTC interact with your existing state.

Commitments for for the different units or <unk>.

Subsidies are laws.

And and also your.

Youre hedging and retail and all that.

As well.

And then we will.

Yes, I'll start off and pass it to Jim on the hedging question, but the short answer is that under the nuclear PTC as drafted.

Revenues from our state program or not.

Included at the state program would adjust to reflect that the existence of the federal support and.

Almost all of our programs have some explicit reference to the fact that if there is subsequent federal support after the state program takes effect that it will be reflected in this in the state calculation of the support.

Under the program so.

They are clearly we will need to be further proceedings to evaluating and have the state adjudicated how that federal support will be reflected but.

No.

That the PTC passes we would expect each of the states to take a look at that in <unk>.

And for it to be reflected in and the level of the state support.

Yes, Steve I think on the hedging the best.

The details of implementation are going to really matter, but the like for now I think the right way to think about it is this effectively will serve as a hedge for a significant portion of our of our generation right. If you take our nuclear fleet and we kind of reconcile what this what the PTC program will do and then kind of a.

Flexible Kathleen just said about its impact on the state programs. The net result is you have a pretty highly hedged portfolio.

And in the with the PTC now we'll get it to the details about then.

You know the exact settlement all that and exactly how it.

Implementation plan will be settled all the way through.

The prices in the spot all the way through to the spot market. The best way to think on the retail business for us as well.

We will be able to.

Still when our customer business.

We'll have a portfolio that's a little bit more hedged to begin with we'll have purchases in the market to help us where we need to go make additional purchase to help us serve the load portfolio that will continue to serve.

Great. Thank you.

Yeah.

And thank you.

And our next question comes from Julien Dumoulin Smith from Bank of America. Your line is now open.

Hey, good morning, Tim Congrats on the continued progress across all your various efforts here, so kudos again to Kathleen and her team.

But perhaps just just to focus on one of the other topical issues of late uranium prices have been seeing a pretty sharp uptick of late.

I suspect it's not two subsidiary for you all but I just want to make sure I understand how you all are thinking about that impacting sort of longer term hedging and procurement activities.

Similarly impact back to the core business.

I think we're very well hedged through this period and it's not like we haven't seen it before but I'll have Bryan Hanson.

Are ahead of the generating company.

Operations at the generating company answer Thanks, Chris Good morning, Julien, We think today's market fundamentals are much improved from the last uranium bull market that we saw in 2008 2010 period demand is lower primary mining supply has increased and utility inventories are higher we had exelon, we hedge with a diverse.

<unk> portfolio of fuel contracts that include varying pricing mechanisms or varying horizons with a diverse group of qualified and reliable suppliers, we maintain a strategic inventory both to ensure security of supply for our reactors and to provide flexibility and purchase timing in the event of a market disruption.

We are seeing today, we even maintain or keep our uranium inventory and different materials states, such as yellow cake or uranium hexafluoride gas so.

So we think we're well hedged and well ready for this.

Current bull market, we are looking in the forward part of the <unk> RFP for any opportunities and they are all well within our expectations that we see today.

That would be excellent six uff's six very good Chris.

Excellent. Thank you guys for affirming that I appreciate it and then just on the hydrogen side I heard the comment about partnering with now here scaling into our commercial opportunities to the extent available in 22 can you talk a little bit more about what that opportunity means for you. All I mean is this just about having a firm off taker.

Or is this about having some portion of the economics over time and I know, it's early days, but I'm just curious to hear at least as best you understand it what that opportunity may be especially considering the credits at hand here as well yeah. I don't think were ready to give a full business model on it right now.

Think we've got a good partnership with the Doe.

Exelon like other <unk>.

<unk> companies sees.

Great.

Use for hydrogen if it's mixing it with natural gas to cut down the carbon loads.

Or other ways.

There is our strategy organization is still looking at the transportation methodology.

And they're doing some metallurgical reach research with other labs.

To make sure that we if we were replacing natural gas pipelines with hydrogen pipelines.

<unk> problem doesn't become.

Severe.

So what we need to do first is predict or perfect and efficient technology, using our heat and steam to develop the hydrogen.

Then from there.

Continue to work with other stakeholders on where we put the hydrogen does it go in a mixed form with natural gas at first.

Does it become what was thought about 10 years ago, the hydrogen economy and I don't think we're there yet.

I think theres a lot of work to be done before we get there, but just having the grants and working with the labs and the government to start using a nuclear plant for something more than electricity, because you've got all of that waste heat and steam that can be redirected into the development of very efficient Hydra.

Origin, and then continue to move on from there.

Got it.

Sorry, just to clarify this I imagine you wouldn't touched on the subject of capital allocation given the rise in commodity prices here and so Phil stated equity needs still too early right.

Too early.

Fair enough, we will leave it there. Thank you guys best of luck here alright. Thanks.

And thank you and our next question comes from Shar <unk> from Guggenheim Partners.

Your line is now open.

Hey, guys good morning.

Good morning.

Can you just maybe further unpack.

I guess the level of details and additional disclosures around the retail business that you kind of plan to talk about at the analyst day now that it's obviously a lot more in focus.

And then the interim maybe just further elaborate and how we should think about.

<unk> think about the prompt year.

And year to hedge profile, just given kind of the lack of disclosures and significant moves in the curves appear.

Appeared didn't obviously take as much advantage as expected. So maybe just a better sense here would help even if it's directionally.

Yeah, Let me let me answer the first question Charles and good morning, and then I'll turn it over the hedge question to Jim Mchugh.

<unk>.

As I've said previously as we get closer to actual separation date, we plan to have an analyst day for both companies, where we will update all of the financial variables say you have a complete picture of both companies and Youll get insight into on the Exelon site, all the things that we normally provide including earning trajectory.

And rate base growth and so on and on the constellation side will give you the details with the updated hedge disclosures and all the other associated information that allows you to do your modeling, but that's not going to happen, obviously until we get much more certainty and much closer to the to.

To the actual execution of separation itself.

And with that Jim I'll, let you answer the hedge sure I'll talk about hedging.

The.

The outer years, where we have less hedged we've always talked about our radar ratable hedge program.

Still following that right, we're not we're not deviating a large deal from what we've historically talked about I think the change for 2022.

Has to be in relation to what we saw develop over the course of this quarter with the.

With the legislation right we had.

Assets that we had previously said we're going to retire and then the legislation passed and we on retired and what that effectively meant for 2022 is that.

Before the contract goes into effect it created a position that added extra generation linked to our portfolio that we've been able to since then hedge but beyond that and beyond may or June when the contract starts effectively those megawatts are hedged through the CMC contract. So.

The 2022 is just a little bit in a different.

Beginning of the year end of your story because effectively the contracts are providing the hedge in the long run.

We hedged the legs that got added back to the book largely speaking in the beginning of the year. During this price action that we saw this quarter so thats been a.

Generally good development and then in the outer years, we would still other than the contracted assets, we would still be following along our ratable hedge program. So there's.

Further out in time you go the more open position areas is we've always had historically.

Got it that's actually a pretty interesting points. Thank you for that and then.

And then just lastly.

I know you guys are still working through the details, but can we just touch on maybe just how youre thinking about the spin co capital allocation, just even briefly right I mean, your IPP peers have been very specific is this something we should we could see from constellation just maybe some high level thoughts on how you.

And the board are thinking about approaching growth versus returning capital to shareholders.

We're going through that modeling right now.

As Joe Dominguez takes over and he puts his financial team together.

They will be evaluating the best use of capital and what the opportunities are.

Having a good investment grade.

It gives us a little bit more opportunity and maybe what would somebody would call. Our peers that we don't think that they are our peers because of the hedged portion of.

The nuclear plants, but.

They.

We will continue to evaluate that in the best way to create shareholder value and Joe Dominguez do you want to add.

Anymore.

I don't think I really can't add at this point, we're looking at it pretty carefully as Chris said, we think we have some unique opportunities in this business around co location of assets.

Hydrogen and other things that.

We will depend on how the legislation plays out.

And we've covered that I think we'll have a lot more to say on analyst day, but at this point, we're really just studying options pretty excited about the opportunities in front of US one thing I can say is I don't see him building a new nuclear plant anytime soon.

After the fact.

Yes.

Thank you for clarifying that Chris I appreciate it guys.

Congrats.

<unk>.

Right.

Okay.

And thank you.

And our next question comes from <unk>.

Jeremy Tonet from Jpmorgan.

Your line is now <unk> good morning.

Hi, good morning, its actually Ryan on for Jeremy.

Just had one on the regulated business and kind of think you're understanding it's still early days, but the changes in kind of the framework at kind of Illinois, and Comed and how youre kind of thinking at this stage about kind of that those two different options that the multiyear plan versus kind of a traditional rate, making and how that might impact kind of growth kind of customer bill impacts. So you know as we kind of approach that.

That date.

Hey, Ryan this is Calvin Butler.

First and foremost with team is really looking through and analyzing all the metrics and as you know we're operating with the formula rate through the end of 'twenty, two and we will make that decide on early mid year, what that looks like going forward, but we're really making that determination now so we have not decided yet whether it's going to.

A four year multi year plan.

Forward looking test year, we're doing that analysis now.

Okay understood.

And then just.

Maybe just one on extending and I know you guys.

We've been very successful in achieving achieving on the offense laid out beginning of the year.

To offset that kind of a storm.

And just kind of thinking through maybe a little more color on what those also have abandoned.

Any kind of incremental thoughts on relative to sustainability.

Kind of going into the future years.

Brian do you want to talk about what you're doing.

On the nuclear side, where a lot of the offset came from and our capital allocation of our capital maintenance. Many of those items were like big major transformer improvements changes change outs, but we just simply moved those out a year or two.

We bundled them the way, we did because it streamline our efficiencies and use of craft resources, we're able to skip a year or two on those no challenges to reliability from that standpoint, and a number of the other modifications included just a material condition.

<unk> always kept in the plan, but some of the digital upgrades that we had planned for those years.

Move those out a couple of years and reassessing.

The economic viability of some of those improvements would you just bring them back Colorado Bend from hardening for the lessons learned.

In the Texas assets, we have done all the work that's required to address the address the known issues and the acute issues from winter storm Yuri were finishing up at Colorado Bend, which is done our plant by Houston will follow we finished that work up a couple of weeks ago as well as a number of enhancements we've made just to protect.

Ourselves against.

Sustained cold weather event again in Texas temporary improvements that we've made looking for again whats the long term market signals for those plants.

Got it I appreciate the color I'll leave it there. Thank you.

And thank you.

I would now like to turn the call back to President and CEO, Chris Crane for closing remarks.

Thank you for joining the call today.

As you know, we're working hard to run the business at.

Best in class levels, and taking steps to step up.

Two.

Items strong.

Two companies strong independent companies.

And we look forward to seeing you at EI.

Next week.

It's coming quick and with that we'll close the call out in <unk>.

Hello, everybody to be safe.

Thanks to all participants for joining US today. This concludes our presentation. You may now disconnect have a great day.

Okay.

Yes.

Yes.

Okay.

Understood.

Okay.

[music].

Okay.

[music].

Yes.

[music].

Yes.

Yes.

Okay.

[music].

[music].

Hello, and welcome to excellent third quarter earnings call. My name is Justin and I'll be your event specialist today.

All lines have been placed on mute to prevent any background noise.

Please note that today's webcast is being recorded.

During the presentation, we'll have a question and answer session. You can ask questions by pressing star one on your telephone keypad.

If you would like to view the presentation in a full screen view click the full screen button by hovering your computer mouse cursor over the powerpoints grain prices eight key on the keypad keyboard to return to your original deal.

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 Emily Duncan Vice President Investor Relations the floor is yours.

Thank you Justin good morning, everyone and thank you for joining our third quarter 2021 earnings conference call, leading the call today are Chris Crane, Exelon, President and Chief Executive Officer, and Joe Nigro Excellence, Chief Financial Officer, They're joined by other members of Exelon Senior management team, who will be available to answer your question.

Following our prepared remarks.

Issued our earnings release this morning, along with its presentation all of which can be found in 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 <unk>.

Comments made during the call.

Please refer to today's 8-K and Exelon as other SEC filings for discussions of risk factors and other factors, including uncertainties surrounding the planned separation that 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 and 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, Emily and good morning, everybody and Emily Thank you for putting a hedge on everything we're about to say.

We had a good quarter financially and operationally and had several very positive developments during the quarter I'm starting on slide five.

We earned $1 23 per share on a GAAP basis.

In.

$1 nine.

On a non-GAAP basis, and Joe will get into those details.

Illinois.

Pass at the last minute a landmark clean energy legislation.

Which makes the states and niche.

National leader in clean energy.

Illinois will achieve a 100% carbon free by 'twenty four.

<unk> 45 by preserving.

Adding tens of preserving the plants and adding tens of thousands of jobs.

And we think Kathleen Barone and her team and many others for the work they've done.

As a result, we have reversed the retirement decision on Byron in Dresden.

Our Illinois plants will continue to provide good paying jobs economic support to the communities and zero carbon energy to the citizens of Illinois.

We've begun to fill the 650 vacant positions.

We will be investing more than $300 million in our plants.

Over the next five years.

To catch up on what we've pulled back from them during the <unk>.

Period.

Legislation also includes the provision that would transition to these out of the formula rates into a new multi year performance based.

Right framework.

In August we completed the put.

Transaction and acquired Etfs portion of the CMG nuclear plants.

Adding 17 terawatts to our own zero.

Admitting nuclear generation.

We did receive a grant from the U S Department of energy to explore the potential benefits of onsite hydrogen production.

And our nine mile points.

In New York.

And we continue to believe that there's a very strong future for hydrogen.

Hydrogen will be key in helping the nation address the climate crisis.

And the nuclear plants can pay.

A vital role in this production with its heat.

And capabilities.

We're partnering with Neil hydrogen and the National labs to demonstrate the integrated production storage and use of hydrogen on site to Peru prove its commercial viability.

Operations are expected to begin in 2022.

On the regulatory front, Delaware PSC issued a constructive order in our Delmarva rate case last quarter, we announced.

Our path to clean.

And our net zero goal for the utilities. So we continue to strive to meet what our customers desire and our regulators desire.

Each utility is building upon existing work in supporting our class path to clean.

That aligns to the goals that are needed for their local jurisdictions and stakeholders. And example is P codes climate solution. It's a five year action plan that will fill.

Pepsico's them, so Pico Pep codes that will fill with the D. C. P. S sees.

Request last month.

This filing outlines 62 different programs to help enable the district's roadmap.

Towards de Carbonization. Another example of helping our communities to meet their goals is through our energy efficiency programs, which are some of the nation's largest Joe will talk about them in his remarks.

We're committed to serving our communities and helping to drive.

Ah <unk>.

Equity and positive change last week, we launched a $36 million ratio equity capital fund to expand access to capital for minority owned businesses.

So they can create jobs and grow their businesses and reinvest in the neighborhoods and the communities that we serve.

It's the first of a kind in our sector.

In addition, we partnered with.

The <unk>.

<unk> CF to launch a $3 million exelon.

Fund for corporate scholarship program to provide scholarships.

Internships.

That create opportunities for students attending a historically black colleges and universities that reside in the communities that we serve.

Finally, we are closely watching the work in Washington on the infrastructure build.

Back better agenda.

The legislation will help us address climate change crisis through incentivizing clean technologies and infrastructure investments to make the grid more resilient and ready for clean energy technologies.

It is clear from the proposal that the administration and Congress recognize the critical importance of maintaining the existing nuclear fleet.

To ensure that the nation can cost effectively address climate change and we're confident that when the legislation pass does pass. It will include a production tax credit for existing nuclear.

Moving on to slide six.

Two.

Our operations.

Reliability remains incredibly strong.

All of the utilities are delivering a top decile outage frequencies and first quartile in outage durations.

BJ Pico and ph.

We're top decile for gas odor response is.

Which is very critical for us.

As we continue to defend gas as a source of bridge source in the future.

Customer services, topnotch, with BG, Comed, and peco, achieving top decile and PHH top quartile on the generation front, our generation fleet performed well during the quarter, even in the face of uncertainty in Illinois.

Our nuclear plants produced 45 terawatts of zero carbon generation.

Avoiding approximately 21 million tons of carbon dioxide that would be generated otherwise.

<unk> had a 96% capacity factor.

Over that period of time.

And we're very proud of their operations with the uncertainty they face.

On slide seven.

The progress and separation.

We continue to make progress on separating the businesses into two independent fortune 200 companies.

First approved the separation in August.

And in September we received a private letter ruling from the IRS confirming the tax free nature of the separation.

The process for the NRC in New York PSC approvals are moving forward as expected and remain on track.

Last week, the New York PSC staff held the first meeting of settlement negotiations.

This is an important step in the process and we've asked for authorization from the commission by December 16th.

On their scheduled meeting date.

We have named the CEO of each company as well as their direct reports and we will continue the staffing prior process over the course of the next few weeks and months.

To be ready for the close in the first quarter of next year.

Joe Dominguez and I are both excited to lead our companies into the next chapter.

Exelon, who continued to be one of the nation's premier customer focused energy delivery companies with more than 10 million customers chose the right person to lead constellation will be <unk>.

Because leading clean energy company, producing 12% of the nation's clean energy and nearly two times more than any other clean energy company.

Out there we remain focused on setting each business to be successful for the long term.

Joel I'll turn over to you for the financial update.

Thank you, Chris and good morning, everyone.

Today I'll cover our third quarter results, our quarterly financial updates and our hedge disclosures I will also provide an update on our full year 2021 guidance.

Turning to slide eight first we earned $1 nine per share on a non-GAAP basis for the quarter.

Exelon utilities delivered a combined 66 per share net of holding company expenses.

And this was primarily driven by above normal summer weather and our non decoupled jurisdictions, along with strong operational performance and the impacts of distribution rate cases.

X Gen earned <unk> 44 per share in the third quarter.

Generation and constellation both performed well during the quarter.

We continue to make progress on levers, we identified to mitigate the Texas loss.

And we expect it will take the full year to realize all the savings realized gains in our decommissioning trust funds, partially offset the unrealized losses from our constellation technology venture investments, which are mark to market every quarter until realized.

At our holding company, we benefited from expected income tax favorability in the third quarter and as a reminder, our holding company incurred 12 per share drag in the first quarter associated with our consolidated full year tax expenses are booked due to the impact of the losses incurred at X Gen in tech.

The remainder of the first quarter drag is expected to reverse in the fourth quarter and is not expected to impact our full year results.

Turning to guidance, we are narrowing our 2021 EPS guidance range to $2 70.

To $2 90 per share from $2 60 to $3 per share previously.

Our updated guidance considers reversal of the retirements of the Byron in Dresden nuclear stations as well as execution of the EDF put and our continued additional a disciplined approach to cost management.

We are delivering on our financial commitments and are confident we will be within our revised range at year end.

On slide nine we show our quarter over quarter earnings walk the dog.

<unk> $9 nine per share in the third quarter of this year was <unk> <unk> per share higher than the third quarter of 2020.

Exelon utilities inclusive of holding company earnings were <unk> <unk> per share higher compared to last year. The earnings growth was driven primarily by higher transmission and distribution rates associated with completed rate cases relative to the third quarter of 2020 and.

Higher treasury rates on <unk> distribution Roe.

This was partially offset by costs related to the remnants of hurricane Ida that swept through the Pico service territory in early September.

The partial reversal of the first quarter tax expense at corporate also drove favorability relative to last year's results.

X Gene's earnings were down <unk> <unk> per share compared with last year and the decrease was due to net unrealized and realized losses on constellation venture investments lower capacity revenues, primarily in PJM and more planned nuclear outage days.

This was partially offset by realized gains in our nuclear decommissioning trust funds.

And higher Zec revenue due in part to increased volumes, resulting from fewer planned refuel outages and Zach pricing in New York.

Moving to slide 10.

Looking at our utility returns on a consolidated basis.

We continue to meet our consolidated 9% to 10% target with a nine 3% trailing month trailing 12 month ROE as of the third quarter.

Earned ROE dipped modestly by 10 basis points since last quarter.

Despite higher earnings driven primarily by distribution and transmission rates.

The earnings were outpaced by increased equity infusions and cross all four utilities to support capital investments.

Looking forward, we remain focused on delivering stronger returns at the utilities.

And supporting our growth targets to enable customer benefits.

Turning to slide 11, there were some important developments on the regulatory front since the last call first on September one Delmarva, Maryland filed an electric base rate case with the Maryland Public Service Commission.

<unk> and approximately $29 million increase in electric distribution rates and reflecting an ROE of 10, 1% the.

The case highlight Delmarva power strong record of reliability reporting the second best reliability performance in Maryland in 2019, and 20 behind only pepco.

Delmarva power continues to make significant investments to improve reliability and customer service for our customers and communities.

PPL, Maryland expects to receive an order by March 32022.

Second on September 15th Delmarva, Delaware received a verbal order for its distribution electric rate case.

The Delaware Commission approved approximately $14 million, increasing annual base distribution rates.

Reflecting an ROE of nine 6%.

As permitted by Delaware Law, Delmarva power implemented full allowable rates on October six 2020 subject to refund.

We also have two rate cases pending final orders in the fourth quarter.

On October six the administrative law judge presiding over Peco's electric distribution base rate case.

Our recommended the settlement with all parties be approved the settlement provides for an increase of $132 million in annual electric distribution revenues and we expect to receive an order in the fourth quarter.

And then on November 2nd the ALJ presiding over comments 2021 distribution formula rate update issued a proposed order.

There were no adjustments to comments proposed revenue requirement increase of $45 $8 million.

We expect to receive a final order from the Illinois Commerce Commission by early December.

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.

As a reminder, we expect nearly 100% of our rate base growth will be covered by alternative mechanisms by the end of our planning period, a differentiator for our utilities when compared to peers.

More details on the rate cases can be found on slides 20 through 24 of the appendix.

And as Chris mentioned, our energy efficiency programs highlighted on Slide 12 is one example of how Exelon utilities are helping their customers on the path to Clinton.

Exelon utilities are driving customer driven emissions reductions in our communities through some of the nation's largest standard G efficiency programs and conservation efforts.

These programs enable customer savings through home energy audits lighting discounts appliance recycling home improvement rebate equipment upgrade incentives and innovative programs like smart thermostats and combined heat and power programs.

In 2020 through a combination of new and prior year investment.

Our utilities helped customers save over $22 3 million megawatt hours of energy.

This equates to 8 million $8 1 million metric tons of Cotwo emissions avoided.

The equivalent of nearly 932000 homes energy use for one year or the carbon sequestered by $10 5 million acres of use for it in one year. According to EPA greenhouse gas calculator.

Each of Exelon utilities is building upon existing work and supporting a path to clean that aligns to the goals and needs of their local jurisdictions and stakeholders.

Our approach allowed jurisdictional flexibility such that each utility may respond to their unique regions and markets and employ the strategies and solutions that best address the operational footprint and customer preferences.

Before discussing our gross margin update on slide 13, I want to remind you that we expect to provide 2022 hedged disclosures at analyst day, which will be held closer to the completion of the separation.

However, what I can say now is that we have continued to hedge on our ratable plan for future years and this includes the length from the Byron in Dresden My retirement reversals.

Until the carbon mitigation contracts begin an excellent full ownership of the CMG assets.

Turning to the table total gross margin increased 500 million since last quarter due to the plant retirement reversals in Illinois, and full ownership of the CMG assets beginning on August 7th.

In 2021 open gross margin is up one $6 billion relative to the second quarter, primarily due to higher prices in all regions and higher volumes driven by execution of the EDF put and the decision to reverse firing in dredge things early retirements.

Capacity inject dollars are up $100 million due to full ownership of the CMG assets.

Mark to market of hedges were down $1 billion due to our hedged position, partially offset by the execution of power new business.

We executed $200 million of power, new business and $50 million of non power new business during the third quarter.

The non gross margin impacts of the Illinois plant reversals and the full ownership of CMG or incorporated on page 32 of the appendix.

You and I will now turn the call back to Chris for his closing remarks.

Thanks, Joe turning to slide 14, I'll close on our ongoing priorities and commitments.

As we've said in the past and we will continue we will meet or exceed our financial commitments delivering earnings with our.

Our guidance range and maintaining a strong balance sheet and that goes for both companies as we split theres a commitment on both sides to do that.

We will complete the preparations to separate the businesses included in the organization the cost structure for each company that will set each company up for long term success.

A strong investment grade at.

At Exelon utilities, we are prudently and efficiently deploying six 6 billion of capital to benefit our customers and to help meet the needs of our jurisdictions energy policy goals.

We're working with our regulators to ensure timely recovery of these investments as Joe discussed in his talking points.

We continue to advocate for clean energy and climate policies with the New administration and Congress.

And our states to put the country on a path to meeting.

Carbon and air pollution reduction goals, there's more here than just carbon.

We have a city and Chicago that is a third highest with.

Lung disease, and it's not only carbon it's the fumes from the industrial sources and we need to do our part to help.

Lower that and.

And we're partnering and supporting our customers and the communities that we serve so with that I. Thank you.

For your time today, and I'll open up the call.

Two questions.

Thank you.

Like to ask a question simply press. The Star then the one on your telephone keypad. If you would like to withdraw your question press the pound key and again that is star one if you'd like to ask a question.

And our first question comes from Stephen Byrd from Morgan Stanley. Your line is now open.

Good morning, Thanks, so much for the thorough update.

Thanks Sue.

I wanted to step back and talk about federal legislation broadly and discuss the impacts less on nuclear I think you all have been very clear on that side I'm thinking more about <unk>.

Everything from tax policy to support for transmission just curious at a high level. What are you thinking in terms about the potential impacts to your business. If this legislation were to pass.

I'll, let kathleen.

Our own speak to it.

We think there is a lot of positives that can be put in play here.

I don't think we're looking for.

Any handouts.

We'd rather make the investments ourselves.

And between.

Between Kathleen and Calvin Butler <unk>.

Ham and egg.

Yeah, Hey, Joe May want to jump in.

On the tax question Beth good morning, Stephen.

As you pointed out I think we're we're very heartened by the support for the nuclear stations and the recognition that their continued operation is essential to meeting the climate goals, but the Bill goes way beyond nuclear as you pointed out in terms of the extensive support for electric vehicles.

First of all.

Vehicles and electric buses in transit transmission as you pointed out and then then significant funding on resiliency.

For hardening and Weatherization all of which we think are essential for the communities that we serve as Chris pointed out.

The transmission program.

That's always been a challenging issue.

As you know.

Given that it's not just about funding, but it's also about siding.

So we do expect that to continue to be a challenging area, but.

Obviously essential to that clean energy build out.

So I'll stop there, let Carl jump in our job as I said on tax.

Good morning, Steve and I'll, just add a couple of things to piggyback off of what Kathleen said, if you think about some of the specifics that the federal government is looking to partner with the states think about the $7 5 billion earmarked for charging infrastructure.

The $5 billion going towards zero emission and clean buses.

In electrification when you think about port electrification for our city of Baltimore, and Philadelphia of what that would mean.

For them in that.

<unk> been talking about the different grants that they are proposing where utilities could partner to do different things and creative and all of this is good for the customers. If that was that those moneys are coming directly to the state and there is a partnership we will continue to invest.

On reliability and resiliency and then take these moments that keeps the customer build down and that is a concern of ours just to keep affordability at the forefront of everything we do so that's that partnership and how we see it playing out.

Yeah, and I'll pick up Steven on the tax question and you know we're studying the potential implications across our business and as you know, we obviously have very large capital plans at our utilities for the benefit of the cost to our customers and they also helped drive the local economies and may help meet the climate and clean energy goals of our communities.

Many of the goals of those same goals are shared by this build back better plan.

Which I think is driving the tax question and you've heard others in the industry say the minimum tax could increase customer bills and potential potentially impact investment of the capital that we deploy we are communicating with policymakers about that fact and the impacts it may have on the bill on the Ami.

The capital planning process, and we're continuing to work through that.

Very helpful. Thank you and then maybe just.

Separately, just thinking about the utility business.

You already have excellent growth. So I suppose this question is going to come across as somewhat greedy, but I am thinking about sort of other areas of upside potential there and I was just curious maybe for Calvin and Chris just sort of as we think about categories of growth upside beyond the excellent base plan that is resulting in above average growth, but what are some of the categories.

Sort of additional upside as we think about the utilities' growth prospects going forward.

I'll just start off and then pointed to Calvin there are many case studies being done on voltage requirements.

On.

Dual flow voltage requirements.

What are we use to harden ourselves from an internet exposure, which would be our own wires.

Our own fiber, but kal.

You captured it it really goes around building the reliability and resiliency of our system and I think as we lay out our multiyear plans.

And across our jurisdictions, it's understanding and really diving in Stephen in terms of what the customers want and our jurisdictions, but the hardening and resiliency of our system is coming in the forefront and addition to fighting.

Climate change that's a big part of what we're doing in along with the security related issues as Chris has outlined so those are opportunities in the areas, but it's that partnership and really understanding what the jurisdictions are wanting.

Very good. Thank you very much Oh go ahead, we can't run a system.

On the distribution side any longer at a 41 60 voltage level.

We got to get up to 13 eight and.

And thats going to take a significant investment to do that and that's to support the distributed.

Generation.

So there's a lot more work to be done.

Alright, Thank you very much.

And thank you and our next question comes from Steve Policeman from Wolfe Research. Your line is now open.

Hi, good morning.

Hi, So I guess.

Two questions first on the.

The build back better.

And for Bell.

Just thoughts on on the likelihood that that passes and if some reason it does not.

How how do you feel about opportunities to address.

Nuclear ptc's in other.

Bill if we somehow got there.

Kathleen is earning a paycheck to ensure that it gets done so I'll, let her answer the question.

Morning, Steve ethylene make it.

To make it to two.

[laughter].

Thanks, Steve Yes, I think we're still feeling very confident about the Democrats ability to get both infrastructure and build back better across the finish line.

There.

As you know a a strong proposal put out by the president that had that support last week.

Around a topline number that that.

The group is apparently coalesced around they have continued to work to flesh out the meat on the bones that they can move. This this packaged quickly et cetera mentioned is assured that he thinks that it's doable indeed.

Signing agreement with the Senate.

Any leader that is possible this could get done by Thanksgiving. So.

I think there is there is broad consensus that action as needed and and in particular on the clean energy tax package.

That there is sufficient support for the provisions that well get the country to a place where I can come close to meeting the 2030 carbon reduction goals.

If for some reason that does not occur as you know there is regularly.

At the end of the year on a bipartisan basis to look at tax.

Tax extenders, and we're again hopeful given the amount of support that we've seen for.

Support for the existing fleet that the nuclear provision could be considered as part of an end of the year bipartisan package, if if the Democrat BBB Bill doesn't.

Get across the finish line.

Okay. My other question related to that is just.

I know, there's a ton of detail of this but just high level, how does the PTC interact with your existing state.

Commitments for for the different units or <unk>.

Subsidies are laws.

And and also your.

Youre hedging and retail and all that.

As well.

Yeah, I'll start off and pass it to Jim on the hedging question, but the short answer is that under the nuclear PTC as drafted.

Revenues from our state program or not.

Included at the state program would adjust to reflect that the existence of the federal support and.

Almost all of our programs have some explicit reference to the fact that if there is subsequent federal support after the state program takes effect that it will be reflected in this in the state calculation of the support.

Under the program so.

They are clearly will need to be further proceedings to evaluate and have the state adjudicated how that federal support will be reflected but.

Sure.

Assuming that the PTC passes we would expect each of the states to take a look at that and and for it to be reflected in the level of the state support.

Yeah, and Steve I think on the hedging the best.

The details of implementation I'm going to really matter, but the like for now I think the right way to think about it is this effectively will serve as a hedge for a significant portion of our of our generation right. If you take our nuclear fleet and we kind of reconcile what this what the PTC program, we'll do it.

And then kind of reflect what Kathleen just at about its impact on the state programs. The net result is you have a pretty highly hedged portfolio.

And the with the PTC now will get in to the details about then.

The exact settlement all that and exactly how it.

The implementation plan will be settled all the way through.

The prices in the spot all the way through to the spot market. The best way to think on the retail business for us as well.

We will be able to still.

When our customer business.

We'll have a portfolio that's a little bit more hedged to begin with we'll have purchases in the market to help us where we need to go make additional purchase to help us serve the load portfolio that will continue to serve.

Great. Thank you.

And thank you and our next question comes from Julien Dumoulin Smith from Bank of America. Your line is now open.

Hey, good morning, Tim Congrats on the continued progress across all your various efforts here. So kudos go to Kathleen and her team.

But perhaps just just to focus on one of the other topical issues of late uranium prices have been seeing a pretty sharp uptick of late.

I suspect it's not two subsidiary for you all but I just want to make sure I understand how you all are thinking about that impacting sort of longer term hedging and procurement activities I'm and ultimately impact back to the core business.

I think we're very well hedged through this period and it's not like we haven't seen it before but Bryan Hanson.

Our head of the generating company.

Operations at the generating company answer the yeah. Thanks, Chris Good morning, Julien, We think today's market fundamentals are much improved from the last uranium bull market that we saw in 2008 2010 period demand is lower primary mining supply has increased and utility inventories are higher.

At Exelon, we hedged with a diverse portfolio of fuel contracts that include varying pricing mechanisms or varying horizons with a diverse group of qualified and reliable suppliers and we maintain a strategic inventory both to ensure security of supply for our reactors and to provide flexibility and purchase timing.

In the event of a market disruption like we're seeing today, we even maintain or keep our uranium inventory and different materials states, such as yellow cake or uranium hexafluoride gas.

So we think we're well hedged and we're already for this.

Current bull market, we are looking in the forward part of the RFP for any opportunities and they are all well within our expectations that we see today.

That would be.

Six <unk> six very good Chris.

Never got excellent. Thank you guys for affirming that I appreciate it and then just on the hydrogen side I heard the comment about partnering with now here scaling into opera commercial opportunities to the extent available in 22 can you talk a little bit more about what that opportunity means for you. All I mean is this just about having a firm off taker.

Or is this about having some portion of the economics over time and I know, it's early days, but I'm just curious to hear at least as best you understand it well what that opportunity may be especially considering the credits at hand here as well yeah. I don't think we're ready to give a full business model on it right now.

Think we've got a good partnership with the Doe.

Exelon like other utility companies sees a great.

Use for hydrogen if it's mixing it with natural gas to cut down the carbon loads.

Or other ways.

There's our strategy organization is still looking at the transportation methodology.

They're doing some metallurgical region research with other labs.

To make sure that if we were replacing natural gas pipelines with hydrogen pipelines.

Brittle mint problem doesn't become.

Severe.

So what we need to do first.

Predict or perfect and efficient technology, using our heat and steam to develop the hydrogen and then from there.

Continue to work with other stakeholders on where we put the hydrogen does it go in a mixed form with natural gas at first.

Does it become what was thought about 10 years ago, the hydrogen economy and I don't think we're there yet.

I think there's a lot of work to be done before we get there, but just having the grants and working with the labs and the government to start using a nuclear plant for something more than electricity, because you've got all of that waste heat and steam that can be redirected into the development of very efficient highly.

Origin, and then continue to move on from there.

Got it.

Just just to clarify this I imagine you wouldn't touched on the subject of capital allocation given the rise in commodity prices here and there.

Stated equity needs still too early right.

Too early.

Fair enough, we will leave it there. Thank you guys best of luck here alright. Thanks.

Yes.

And thank you and our next question comes from Shar <unk> from Guggenheim Partners.

Your line is now open.

Hey, guys good morning.

Good morning.

Joe can you just maybe further unpack.

I guess the level of details and additional disclosures around the retail business that you kind of plan to talk about at the analyst day now that it's obviously a lot more in focus.

And then the interim maybe just further elaborate on how we should think about.

<unk> think about the prompt year.

And year to hedge profile, just given kind of the lack of disclosures and significant moves in the curves appear didn't obviously take as much advantage as expected. So maybe just a better sense here would help even if it's directionally yes.

Yes, let me let me answer the first question, Charlie and good morning, and then I'll turn it over the hedge question to Jim Mchugh.

As I've said previously as we get closer to actual separation date, we plan to have an analyst day for both companies, where we'll update all of the financial variables say you have a complete picture of both companies and Youll get insight into on the Exelon side, all the things that we normally provide including.

Earning trajectories and rate base growth and so on and on the constellation side will give you the details with the updated hedge disclosures and all the other associated information that allows you to do your modeling, but that's not going to happen, obviously until we get much more certainty and much closer to the.

To the actual execution of separation itself and.

And with that Jim I'll, let you answer the hedge sure I'll talk about hedging.

The.

The outer years, where we have less hedge we've always talked about our radar ratable hedge program.

Still following that right, we're not we're not deviating a large deal from what we've historically talked about I think the change for 2022 has.

It has to be in relation to what we saw develop over the course of this quarter with that.

With the legislation right we had.

Assets that we had previously said we're going to retire and then the legislation passed and we on retired and what that effectively meant for 2022 is that.

Before the contract goes into effect it created a position that added extra generation linked to our portfolio that we've been able to since then hedge but beyond that and beyond may or June when the contract starts effectively those megawatts are hedged through the CMC contract. So.

The 2022 is just a little bit in a different.

Beginning of the year end of your story because effectively the contracts are providing the hedge in the long run.

We hedge the length that got added back to the book largely speaking in the beginning of the year. During this price action that we saw this quarter so thats been a.

Generally good development and then in the outer years, we would still other than the contracted assets, we would still be following along our ratable hedging program. So there is further.

Further out in time, you go to the more open position areas is we've always had historically.

Got it that's actually a pretty interesting points. Thank you for that and then.

And then just lastly.

I know you guys are still working through the details, but can we just touch on maybe just how youre thinking about the spin co capital allocation, just even briefly right I mean, your IPP peers have been very specific is this something we should we could see from constellation just maybe some high level thoughts on how you.

And the board are thinking about approaching growth versus returning capital to shareholders.

You know, what we're going through that modeling right now.

As Joe Dominguez takes over and he puts his financial team together.

They will be evaluating the best use of capital and what the opportunities are.

Having a good investment grade.

It gives us a little bit more opportunity and maybe what would somebody would call. Our peers that we don't think that they are our peers because of the hedged portion.

Of the nuclear plants, but.

They.

We will continue to evaluate that in the best way to create shareholder value and Joe Dominguez do you want to add.

Anymore, No I don't think I really can't add at this point, we're looking at it pretty carefully as Chris said, we think we have some unique opportunities in this business around co location of assets.

Hydrogen and other things that.

Well dependent on how the legislation plays out.

And we've covered that I think we'll have a lot more to say on analyst day, but at this point, we're really just studying options pretty excited about the opportunities in front of US one thing I can say is I don't see him building a new nuclear plant anytime soon.

After the fact.

Yes.

Thank you for clarifying that Chris I appreciate it guys.

I can grab that.

<unk>.

Right.

Okay.

And thank you.

And our next question comes from <unk>.

Jeremy Tonet from Jpmorgan.

Your line is now <unk> good morning.

Hi, good morning, its actually Ryan on for Jeremy.

Yeah.

Just had one on the regulated business and kind of think you're understanding it's still early days, but the changes in kind of the framework at kind of Illinois, and Comed and how youre kind of thinking at this stage about kind of those two different options that the multiyear plan versus kind of a traditional rate, making and how that might impact kind of robust kind of customer bill impacts. So you know as we kind of approach that date.

Sure.

Hey, Ryan This is Calvin Butler up first and foremost with team is really looking through and analyzing all the metrics and as you know we're operating with the formula rate through the end of 'twenty, two and we will make that decide on early mid year, what that looks like going forward, but we're really making that determination now.

So we have not decided yet whether it's going to be a four year multi year plan.

Forward looking test year, we're doing that analysis now.

Okay understood.

And then just.

Maybe just one on extending I know you guys have been very successful in achieving achieving out of the offense laid out beginning of the year.

The offset then that kind of storm and just kind of thinking through maybe you can put a little more color on what those also have been in <unk>.

Any kind of incremental thoughts on relative to sustainability.

Kind of going into the future years.

Brian do you want to talk about what Youre doing.

On the nuclear side, where a lot of the offsets came from our capital allocation of our capital maintenance are many of those items were like big major transformer improvements changes change outs, we've just simply move those out a year or two.

We bundled them the way, we did because it streamline our efficiencies and use of craft resources, we're able to skip a year or two on those no challenges to reliability from that standpoint, and a number of the other modifications included just a material condition improvements were always kept in the plan, but some of the digital upgrades that we had planned for those <unk>.

<unk>.

We've moved those out a couple of years and reassessing.

The economic viability of some of those improvements would you just bring them back Colorado Bend from hardening for the lessons learned.

And the Texas assets, we have done all the work that's required to address the address the known issues and the acute issues from winter storm Yuri were finishing up at Colorado Bend, which is done our plant by Houston will follow we finished that work up a couple of weeks ago as well as a number of enhancements we've made just to protect.

Ourselves against.

Sustained cold weather event again in Texas temporary improvements that we've made looking for again whats the long term market signals for those plants.

Got it I appreciate the color I'll leave it there. Thank you.

And thank you that now.

I would now like to turn the call back to President and CEO, Chris Crane for closing remarks.

Thank you for joining the call today.

As you know, we're working hard to run the business at.

Best in class levels, and taking steps to step up.

Two.

Items strong.

Two companies strong independent companies.

And we look forward to seeing you at EI.

Next week.

It's coming quick and with that we'll close the call out in <unk>.

So everybody be safe.

Thanks to all participants for joining US today. This concludes our presentation. You may now disconnect and have a great day.