Q3 2024 Exelon Corp Earnings Call
Jeanne: Hello and welcome to Excellon's third quarter earnings call. My name is Jeanne and I'll be your event specialist today. All lines have been placed on mute to prevent any background noise.
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Speaker Change: It is now my pleasure to turn today's program over to Andrew Plenge, Vice President of Investor Relations. The floor is yours.
Andrew Plenge: Thank you, Gigi. Good morning, everyone. We're pleased to have you with us for our 2024 third quarter earnings call. Leading the call today are Calvin Butler, Excellence President and Chief Executive Officer, and Jeanne Jones, Excellence Chief Financial Officer.
Andrew Plenge: We would also like to remind you that today's presentation and the associated earnings release materials contain forward-looking statements which are subject to risks and uncertainties.
Andrew Plenge: You can find the cautionary statements on these risks on slide 2 of today's presentation or in our SEC filings.
Andrew Plenge: In addition, today's presentation includes references to adjusted operating earnings and other non-GAAP measures. Reconciliations between these measures and the nearest equivalent GAAP measures can be found in the appendix of our presentation and in our earnings release.
Speaker Change: It is now my pleasure to turn the call over to Calvin Butler, Excellence President and CEO.
Calvin Butler: Thank you, Andrew, and good morning, everyone. We appreciate you joining us for the call and are pleased to be reporting a solid quarter of earnings and operational performance.
Calvin Butler: Keeping us on track for another year of consistent and stable performance. We reported gap earnings of $0.70 per share and operating earnings of $0.71 per share above the expectations shared on our second quarter call.
Calvin Butler: We delivered another strong quarter of operations despite significant storm activity in July with top quartile or better outage performance across the board.
Calvin Butler: We have also made considerable progress on our 2024 regulatory calendar since the second quarter call. First, ComEd has now received its proposed order and its refiled multi-year rate plan.
Calvin Butler: The order serves as another positive data point that ComEd has filed a compliant plan that appropriately balances the state's desire to continue to deliver reliable and affordable power while making progress on its ambitious energy goals.
Calvin Butler: We now await the Commission's final order, and we look forward to regaining the momentum in establishing Illinois as a clear leader in the energy transition.
Calvin Butler: We also reached settlements with key parties in our PECO gas and electric rate cases, which were recommended for approval by the administrative law judges presiding over this case.
Calvin Butler: We appreciate the party's interest in advancing the critical investments needed to maintain and improve safe and reliable service for PECOS customers, playing a key role in the state's economic development efforts.
Calvin Butler: In the District of Columbia, we continue to anticipate an order by the end of the year, laying the groundwork for continued investment to support a climate-ready grid and the District's clean energy goals.
Calvin Butler: Finally, in September, Maryland initiated a lessons-learned proceeding on multi-year plans, completing its hearings earlier this month.
Calvin Butler: Chambers of Commerce and contractors filed their support of the construct.
Calvin Butler: But we also acknowledge ways in which we can address certain stakeholder concerns with the goal of continuously improving on the foundation of transparency and accountability on which the framework is built.
Calvin Butler: A grid of the future cannot rely on the rate-making of the past, and ensuring we have alignment and transparency around our investment plans is critical to meeting our state's energy goals, allowing us to execute as efficiently and effectively as possible on behalf of all of our customers.
Calvin Butler: We remain optimistic that we'll find alignment on a solution that can give us all the confidence to keep Maryland moving forward.
Calvin Butler: Let me now turn to our operating highlights for the quarter.
Calvin Butler: On slide 5, you can see that we are achieving first quartile performance across most of our key indicators for safety, reliability, and customer satisfaction.
Calvin Butler: In both outage frequency and outage duration, ComEd and PEPCO holdings continue to perform at top decile levels.
Calvin Butler: And that's despite the powerful storms that swept the Chicago area in July, and the significant mutual assistance extended throughout the quarter for Hurricane Sparrow and to lead, with Hurricane Milton following directly afterwards.
Calvin Butler: The storms that hit Illinois were record-breaking by a variety of measures. In just two days, the Chicagoland area experienced double the number of tornadoes that it sees in an average year.
Calvin Butler: And then some of those same crews, along with those at BGE, PECO, and our PEPCO Holdings Utilities were part of more than 500 field and support personnel to aid in restoring service to customers in Florida, Georgia, and West Virginia after a very challenging hurricane season.
Calvin Butler: I do want to take a moment to personally thank our employees for their continued focus and dedication.
Calvin Butler: The ability of our utilities to keep pace with the increasing severity and frequency of extreme weather events can only happen with the dedication of some of the best in the business, and with the support of our jurisdictions for the critical investments needed to maintain reliability and resiliency.
Calvin Butler: As it pertains to safety, after three quarters of benchmarking against serious injury performance, we now have all four utility operating companies in top quartile.
Calvin Butler: Safety of our employees, contractors and customers is always our highest priority.
Calvin Butler: Finally, on customer satisfaction, performance has improved since last quarter with BTE now operating in second quartile alongside PEPCO holdings.
Calvin Butler: Both utilities remain focused on initiatives to further improve performance, including enhancing customer communications, streamlining new business processes, and additional customer service representative trainings.
Calvin Butler: Now, it's my pleasure to turn the call over to Jeanne to cover our financial and regulatory updates.
Jeanne Jones: Thank you, Calvin, and good morning, everyone. Today, I will cover our third quarter financial update, along with our financial and regulatory outlook for the remainder of 2024.
Jeanne Jones: I will also spend some time highlighting a transmission project at Delmarva Power, which is helping to modernize the grid and accelerate an opportunity to save money for our customers.
Jeanne Jones: Starting on slide 6, we present our quarter-over-quarter Adjusted Operating Earnings Block. For the third quarter of 2024, the fund earned $0.71 per share compared to $0.67 per share in the third quarter of 2023, reflecting higher results of $0.04 per share over the same period.
Speaker Change: Earnings are higher in the third quarter relative to the same period last year, driven primarily by 4 cents of timing at ComEd on its distribution earnings.
Speaker Change: After removing the timing at ComEd, across Exelon, we earned 3 cents of higher distribution and transmission rates, net of associated depreciation, which is offset by 3 cents of higher interest expense.
Speaker Change: After accounting for the timing at ComEd, driven in part by expensive mutual assistance provided to non-Exxon utilities, we delivered earning results in line with the guidance we provided in our prior quarter call.
Speaker Change: Our year-to-date performance underscores our ability to deliver strong financial results despite mild weather and heightened storm activity throughout the year. As we close out the year in the fourth quarter, we remain on track to achieve operating earnings of $2.40 to $2.50 per share.
Speaker Change: Our fourth quarter guidance assumes the reversal of ComEd distribution earnings timing, fair and reasonable outcomes for PEPCO-DC's multi-year rate case, as well as the DGE and ComEd reconciliations, and normal weather and storm activity.
Speaker Change: In addition, we reaffirm our long-term annualized operating earnings first-year guidance range of 5-7% through 2027 with the expectation to be at the midpoint or better of that growth range.
Speaker Change: Turning to slide 7, as Calvin highlighted, we have made meaningful progress in our distribution rate cases across our jurisdictions, approaching the final milestones for ComEd, PCOS, and PEPCO-DC's open rate cases.
Speaker Change: We also filed a historical test year gas distribution rate case in Delaware.
Speaker Change: I'll begin my remarks by providing an update on this most recent filing, followed by status updates on the remaining rape cases anticipated to reach resolution this year.
Speaker Change: On September 20th, Delmarva Power filed its gas distribution rate case seeking approval of a proposed $35.6 million revenue increase.
Speaker Change: Exclusive of the transfer of $6.4 million of the Distribution System Improvement Charges.
Speaker Change: The filing represents Delmarva Power's work since its last gas rate adjustment filing in 2022 and reflects investments that help ensure customer reliability and improve service and safety, including work to inspect and proactively maintain natural gas mains.
Speaker Change: Replacing aging cast iron and bare steel pipes and replace and upgrade equipment at our Wilmington LNG facility.
Speaker Change: The filing also requests the adoption of a weather normalization rider, which will offer customers more bill predictability as seasonal temperatures grow increasingly volatile.
Speaker Change: Continuing with PEPCO holdings, on August 30th, PEPCO and other parties filed final briefs on PEPCO's Climate-Ready Pathway DC multi-year plan, which outlines the investments we will make to support a climate-ready grid and enable cleaner energy programs and technologies.
Speaker Change: The plan also enhances the reliability, resiliency, and security of the local energy grid, and expands affordability assistance for PEPCO's customers across the District of Columbia.
Speaker Change: We now await the D.C. Public Service Commission's final order, which we anticipate before the end of the year, and look forward to continuing the important work needed to enhance customer reliability, advancing economic and work development, and further supporting the district goals to be carbon neutral by 2045.
Speaker Change: According to Pennsylvania, administrative law judges have issued recommended decisions in the PECO gas and electric rate cases.
Speaker Change: and we are pleased with their recommendation that the Pennsylvania Public Utility Commission accept both settlements filed in August.
Speaker Change: The proposal for PECO's electric rate case allows for a $354 million revenue requirement increase, excluding a one-time credit of $64 million in 2025. On the gas side, the ALJs proposed a $78 million revenue requirement increase in 2025.
Speaker Change: While the ALJ has ruled against the addition of a weather normalization adjustment, we have filed an exception to address the adjustment, which will now go for commission review and consideration.
Speaker Change: The adjustment, which has been approved for all other major Pennsylvania gas utilities, is intended to reduce the inherent volatility in customer bills and PECA's recovery of distribution revenue. We expect the Commission to issue its final orders by the end of December.
Speaker Change: Lastly, at ComEd, on October 18, the administrative law judges presiding over the case issued a proposed order on the revised grid plan, for which we expect a final order from the Illinois Commerce Commission in December.
Speaker Change: The proposed order recommends the Commission approve the Revised Grid Plan and associated adjusted revenue requirements for 2024-2027 with a $637 million revenue requirement increase and a $3.9 billion rate base increase.
Speaker Change: with new rates in effect in January 2025.
Speaker Change: As a reminder, this construct allows for the recovery of currently incurred investments up to 105% of the approved revenue requirement and provides that certain investment categories such as storms and new business are excluded from the 105% threshold.
Speaker Change: We are appreciative of the hard work put in by all parties to craft a compliant and balanced grid plan, which has resulted in strong alignment up through the proposed order, and we look forward to the Commission setting the path for the next three years of investments during a critical time in the industry.
Speaker Change: With final orders anticipated to be issued for ComEd, Chicco, and Pepco DC by year-end, approximately 90% of our rate base will have established rates or known rate mechanisms in place through 2026 or 2027.
Speaker Change: Allowing us to focus on plan execution and the strategic discussions required to support growing electrification needs and the necessary expansion of clean, reliable generation in our state.
Speaker Change: As always, additional details on the rate cases can be found on slides 20-30 of the appendix.
Speaker Change: That brings me to Slide 8, where I want to take a moment to highlight an example of the work we've been doing to modernize the transmission system.
Speaker Change: Earlier this year Delmarva Power began work to rebuild the Vienna to Nelson 138 KV transmission line, a 14-mile circuit that extends from the Vienna substation in Georgesburg County, Maryland to the Nelson substation in Sussex County, Delaware.
Speaker Change: The project replaces over 100 wooden 60-year-old structures with steel poles and upgrades our equipment to 230 kV standards.
Speaker Change: The new infrastructure will also be able to withstand winds over 110 mph, is constructed above flood zones, and includes an underground transmission lead-in, enhancing overall system resilience.
Speaker Change: Currently, the project is on track to be placed in service nearly two years ahead of schedule in December.
Speaker Change: Completion of the project will enable the Indian River 410-megawatt coal-filed jet-generating unit to retire, eliminating the collection of the RMR and saving nearly $100 million across 551,000 customers in that two years.
Speaker Change: which is over one and a half times greater than the installed cost of the project that will be collected over decades.
Speaker Change: Alongside lower bills, these customers will also experience better system reliability and resiliency from the elimination of capacity constraints.
Speaker Change: The project also emphasizes our commitment to workforce development, with $13.5 million of the spend on the project with diverse suppliers, supporting local economic growth and partnership with the jurisdiction we serve.
Speaker Change: These efforts highlight our dedication to enhancing customer value while fostering local economic growth, and they are a testament to our strategic efforts to maximize the impact of our investments.
Speaker Change: Modernizing the energy grid while mitigating resource adequacy constraints and supporting state goals to decarbonize. The project also highlights the power of our platform to efficiently execute on capital plans for the benefit of our customers.
Speaker Change: This is just one example of the $9.7 billion we have in our capital plan for electric transmission investment through 2027, and it highlights why transmission will continue to be an area of significant opportunity to support our customers going forward.
Speaker Change: Finally, I will conclude with updates on our financing activity on slide 10.
Speaker Change: We continue to project a cushion of approximately 100 basis points on average over the planning period for our consolidated corporate credit metrics above the downgrade thresholds of 12% specified by S&P and Moody's, demonstrating our commitment to maintaining a strong balance sheet.
Speaker Change: And while we continue to advocate for language that incorporates the Corporate Alternative Minimum Tax in the final Treasury regulations,
Speaker Change: Recall that our plan incorporates the assumption that the final regulations will not allow for repairs, consistent with the proposed guidance released in September.
Speaker Change: It's implemented in a way that mitigates the cash impact, we'd expect an increase of approximately 50 basis points to our consolidated metrics on average over the plan, putting us in the higher end of our targeted 100 to 200 basis points of cushion over the planning period.
Speaker Change: From a financing perspective, we have successfully completed all of our planned long-term debt finance needs for the year with PICO raising $575 million in the third quarter.
Speaker Change: The strong investor demand we continue to see for our debt offerings is supported by the strength of our balance sheet and by the lowest attributes of our platform. Investor confidence in our offerings, along with our pre-issuance hedging program, positions us well as we continue to seek out the most efficient ways to finance the energy transformation for our customers and investors.
Speaker Change: We've also successfully completed our planned $150 million of equity issuances for 2024 via our ATM.
Speaker Change: There has been no change in our guidance to issue a total of $1.6 billion of equity.
Calvin Butler: Thank you, and I'll now turn the call back to Calvin for his closing remarks. Thank you, Jeanne. As you can see, we've come a long way toward delivering on our priorities and commitments for 2024, with the team highly focused on continued execution and operational excellence as we approach the final months of the year.
Calvin Butler: We have maintained top quartile performance despite a tremendous amount of storm activity this year.
Calvin Butler: The bar keeps getting set higher and we keep meeting it.
Calvin Butler: We are approaching final orders for Comet and Pico.
Calvin Butler: with path towards reasonable, supportive outcomes in both, covering approximately 50% of our rate base, with another approximately 40% covered by known or established rate-making processes as far out as 2027.
Calvin Butler: And we appreciate Maryland acting quickly to address its lessons learned process so that we can agree on an approach that allows all stakeholders input into how customer dollars should be invested to meet the state's energy goals.
Calvin Butler: We are on track to invest $7.4 billion of capital in 2024 for the benefit of our customers and earn a fair return on equity in our targeted 9-10% range, with our planned financings for the year already complete.
Calvin Butler: This will allow us to deliver in the $2.40 and $2.50 operating earnings guidance range that we laid out at the beginning of the year.
Calvin Butler: And most importantly, we have maintained our steadfast commitment to customer affordability, both through constant vigilance in developing and adopting cost-saving measures, as well as in our legislative and regulatory advocacy during a very dynamic time in the industry.
Calvin Butler: As the largest utility by customer count, serving some of the largest cities in this country, our primary mission is to provide reliable, resilient, and affordable power to everyone, equitably.
Calvin Butler: The ability to invest in the grid is central to that mission.
Calvin Butler: It, of course, supports reliability, where demands continue to increase due to more severe weather, increased electrification, and an evolving generation supply mix.
Calvin Butler: And those demands have only been amplified by the growth of artificial intelligence.
Calvin Butler: At the beginning of this year, we indicated that we had 6 gigawatts of high probability data center load in our territories. That's now at 11 gigawatts, which is indicative of the incredible opportunity this sector has ahead.
Calvin Butler: But investing in the grid can also contribute to affordability as well. The transmission project that Jeanne highlighted is just one example of many where our grid investments can create savings for our customers.
Calvin Butler: The importance of the grid reinforces the value of coordinated, thoughtful, and efficient investment and thus the benefit of transparent, forward-looking planning and rate making.
Calvin Butler: It also underpins our policy advocacy.
Calvin Butler: It has driven our focus to ensure co-located load arrangements do not compromise reliability or avoid the cost of relying on the grid.
Calvin Butler: All of our actions are focused on enabling the necessary investment in a grid that we all rely on and that is indispensable to the economic vitality of our jurisdictions and the impact of that partnership is clear.
Calvin Butler: In September, Site Selection Magazine named ComEd and PICO the top 20 utilities in economic development in the country, their 10th and 14th time receiving that award, respectively.
Calvin Butler: Two weeks ago, the District of Columbia's Chamber of Commerce, named PEPCO, it's boosting us up a year.
Calvin Butler: And Exeline Utilities were just named as recipients of three more awards under the DOE's Grid Resilience and Innovation Partnership Program, bringing our total direct funding under that program to $330 million.
Calvin Butler: Again, we have the honor and the privilege to serve over ten and a half million customers and they are counting on us to dependably deliver safe, resilient, and affordable power during this energy transformation.
Speaker Change: Gigi, we are now ready for any questions from the audience.
Gigi: Thank you. If you would like to ask a question, simply press star 1 1 on your telephone keypad.
Speaker Change: Our first question comes from the line of Nick Campanella from Barclays.
Nick Campanella: Hey, good morning. Thanks for taking my question. Hey, I just wanted to address up front because I know we've gotten some questions just, you know, you previously said midpoint or above for 24. Is that kind of still the case today and how should we kind of think about that?
Speaker Change: Yeah, Nick, good question. So we, you know, we started that language as part of our long-term guidance when we were, you know, trying to show five to seven.
Speaker Change: and the combination of the years may be different and we give you where we end up in the year. But that over that time period, right? As always, we aim for.
Speaker Change: midpoint or better. And I would say for the current year, that also continues to be our goal, right? When we give you a guidance range, our goal is always to be at the midpoint or better. And so I just, yeah, that's how we're still thinking about it and what we're still working towards. The last two years,
Speaker Change: That's what we've done and we're working hard to make sure that we continue that trend.
Speaker Change: Okay, great. Thanks for that clarification. So, you know, it's been a few months since we've had the PJM auction. I'm sure you've had some more kind of time to digest it.
Speaker Change: There has been kind of discussion potentially in the legislative arena to address solutions for new generations So, you know as you kind of flip the script into 25, I heard your comments on, you know, focusing more on strategic initiatives
Speaker Change: How does this kind of play out in your mind, you know, what would you be kind of advocating for specifically to, you know, fix the bill issue that's that's kind of growing in PJM? Thank you.
Calvin Butler: No, Nick, thank you. This is Calvin. Let me just, I'll approach this a couple of ways, Nick, and you make sure you let me know if I get directly to your question. First off,
Calvin Butler: I do believe, we believe, that PJM's request to delay the capacity auction...
Calvin Butler: does reinforce the concerns over whether increasing prices are efficiently addressing our electricity demand needs and sends a clear message that reform is definitely needed. So that was the first step in an acknowledgment that something has to be different.
Calvin Butler: And I do appreciate PJM's leadership to put forward interconnection and various capacity on market reforms. And it's just another example that the PJM stakeholder process is just not working.
Calvin Butler: And we will continue to support them as well as other federal and regional agencies to get that done. So that's first and foremost.
Calvin Butler: And it would not surprise you that as a T&D-only company, not owning generation, our voice is unique in this discussion.
Calvin Butler: and we've been working with all of our governors and regulatory bodies on how to address this issue and what needs to be done. And I think you've seen the magnification of this issue, Nick, with the letter that the governors most recently sent to PJM stating that something needs to be done, not tomorrow, but today.
Calvin Butler: And we want to be part of that solution, and we will be part of that solution. And one of the things we are always focused on, and I think we start with this, Nick, it's all about reliable, resilient, and affordable energy.
Calvin Butler: What can we do to be part of that mix to ensure that takes place? And as I said in my opening remarks, everything we do is about providing that in an equitable manner to all of our customers across the footprint.
Calvin Butler: And we will continue to work with that. And I think you're seeing that momentum going. Now people are talking about whether you're re-regulating generation and so forth. That's part of the solution. We'll be at the table to figure out how that happens.
Calvin Butler: But we're not advocating for that, what we're advocating for is reliable and affordable energy. And that's our foundation of what we're talking about.
Speaker Change: I certainly appreciate that and I think that's just the direction that we all want to see it going. But I guess people just, you know, I think we all acknowledge it takes a long time to facilitate this new build that could potentially supplement this higher demand outlook.
Speaker Change: I guess just as you look at the bill trajectory, do you still kind of feel comfortable with the rate-based growth that you've outlined, you know, across your jurisdiction, specifically in some of those ones like BGE and otherwise? Thank you. I do. I do because if you want to accomplish that goal...
Speaker Change: of what we were just talking about, a reliable, resilient, and affordable, you can't do it without investing in the grid. Matter of fact, Nick, I would tell you that there's a cost of not making these investments because all of our jurisdictions have a clean decarbonization goal to it.
Speaker Change: And you know you can't get there without investing smartly in transmission.
Speaker Change: and you've seen the weather conditions that all of our jurisdictions are facing. I talked about Illinois with the number of tornadoes. If you even take a look at what Jeanne's transmission project that she highlighted.
Speaker Change: It's the conversion of wooden poles to steel poles because of the wind pressures that all of our system's under. So you can't get there without the investment. What we have to do is make sure it's a smart investment.
Speaker Change: because I believe the cost of not doing it far outweighs the cost of just systematically doing it. But that goes into how we work with those regulatory bodies.
Speaker Change: in ensuring that the conversations are happening up front and not after the fact. And that's why I'm leaning into the multi-year plans because whether you like them or not, if you're not having thoughtful and proactive conversations, it becomes more expensive on the back end. So, to your direct question,
Speaker Change: Yes.
Speaker Change: The grid investments are needed, and yes, they will need to continue. We just have to work with everyone to make sure we're doing it in the right way. Colette, do you have anything you'd like to add to this?
Speaker Change: Thank you, Calvin. And Nick, good morning. Colette Honorable here. I'm ADP of Public Policy and Chief External Affairs Officer.
Colette Honorable: I would add to Calvin's comments that, and you heard him allude to the fact that we are unique. We are the nation's largest utility. We are a pure transmission and distribution energy delivery company, and that gives us a lot of optionality. It gives us the ability to be strong partners.
Colette Honorable: with policy makers, with members of the legislature, with our regulators to help find and support the solutions that our customers need.
Colette Honorable: So while we will continue to be focused on the fundamentals, reliability, affordability, resilience, and being a leader in the clean energy transformation, we also are leaning into PJM, for instance, on fashioning solutions that help us.
Colette Honorable: do this work more efficiently and more quickly, for instance.
Colette Honorable: PJM has been focused on ways to find reforms to help us either get more generation, more transmission. We support a shovel-ready construct.
Colette Honorable: where we are looking at how we can move these projects through the queue more quickly to help with the addition of new generations.
Colette Honorable: We will also continue to be a leader in the PJM stakeholder process.
Speaker Change: elevating the capacity auction issue as one that needs attention from everyone right now and will continue to be a leader in that regard. Thank you Colette and I think Nick to your direct question and how we're engaged with PJM today all of our CEOs of our operating companies
Speaker Change: are participating in the PJM meeting that's taking place right now. And they're engaged in that because we know that their voice matters and they're sitting there representing their jurisdictions in a very proactive way.
Speaker Change: Hey, thanks for all those thoughts, and we'll see you in Florida here shortly. Thank you again.
Speaker Change: Put some gore to it.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Julianne Dumoulin-Smith from Jefferies, LLC.
Speaker Change: Jillian, good morning.
Julianne Dumoulin-Smith: Hey, good morning. Thank you, team. Thank you, operator. Appreciate it. So, a couple things real quickly here. First off, starting with Marilyn here. I mean, I know you gave some commentaries in the prepared remarks, but
Julianne Dumoulin-Smith: Just at the end of the day, you know, even if you didn't have an additional multi-year plan and as it's structured today I mean, how would that change your plan? I mean, it just ultimately falls back to more discreet spending plans But does that change anything in aggregate if you will?
Speaker Change: Yeah, let me jump in there first, Julie, and then I'll turn it over to Jeanne. Let me just be very clear.
Speaker Change: The multi-year plan was only implemented, I think, in 2020. So we've been operating in Maryland with traditional rate making.
Calvin Butler: Well beyond before then and the organization was doing well. When I was CEO of BGE we were filing annual rate cases and we were being effective in getting it done.
Calvin Butler: What we have shared, and I continue to share, is that the NYP is the best way to go because of the transparency and the affordability piece, because what we do well.
Calvin Butler: It's we effectively build things and keep things in line and working with the stakeholder process in a collaborative manner Allows that to happen and ensures everyone's goals are met. So to your direct question
Calvin Butler: We will continue to advocate for it, but we know how to move forward on traditional rate making if that's what they require. It would not be...
Calvin Butler: Something that we will ever say is the best thing for that state to do?
Calvin Butler: But it is something that we're prepared to do, and we will reallocate our capital when it comes to other jurisdictions because we have to continue moving forward. So we're not going to miss a beat, but it will require us to reassess where we go and how we invest capital across our systems. We've demonstrated that we know how to do that. When you look at what happened in Illinois,
Calvin Butler: In 30 days, we've reallocated capital to other parts of the system, and we'll continue to look at those issues. Gene?
Speaker Change: Yeah, I think that's right. I mean, I think if you look at all of these proceedings coming to conclusion here in the in the fourth quarter, whether it's, you know, comments grid plan, the Maryland lessons learned, we're getting our DC order. That's, that's the benefit of having the size and scale right we get to then, you know,
Speaker Change: reflect kind of the new investments related to those orders but then also layering capital where we know we need to invest. When you saw our last...
Speaker Change: We went up $3 billion over a four-year period. I think 90% of that was transmission. There's a lot of transmission work we need to do, so we'll manage all of that. We'll manage the portfolio, and we'll meet our jurisdictions where they are.
Speaker Change: Yep, absolutely. Thank you guys very much for the details there. Appreciate it. And Jeanne and Calvin, can you speak a little bit to the transmission backdrop? I mean, you referenced in the remarks again this 9-7 number, but as I look at it, clearly it seems like there's a number of leading indicators that would suggest that number could go materially higher, right? We've seen some sense of the PGM-RTEP thus far related. We've also got MISO really pushing a much more expensive program, conceivably that could weave into your plan as well.
Speaker Change: Pennsylvania also. Do you want to speak a little bit to each one of those and just how that fits against what you have at least currently stated as last updated at 9-7?
Speaker Change: Yeah, I think I think it's at a high level right you're going to see that trend continue the increasing need for more transmission investment I think there's
Speaker Change: at least three themes there, probably several more, but there is just core work across our jurisdictions that we need to do for reliability, resiliency, we talked about, and Calvin reiterated, right, that even in the Delmarva project we just talked about, the system needs to be modernized against the increasingly volatile weather. So whether it's wood to steel poles, elevating substations for flooding, making sure they can withstand hurricane, you know,
Speaker Change: category four wins. All of that security is becoming increasingly important for substation so that's just core work across our four operating companies we know we have to do and that's continuing to increase. I would say a second key theme is the changing generation mix.
Speaker Change: You've got retirements, we talked about the Indian River RMR today, that transmission was to replace that and save our customers money, where Indian Shores is another one. So you've got retiring generation.
Speaker Change: which needs to have investment and transmission to accommodate that. But then you've got new generations. When you look at them in Atlantic, right, Maryland, New Jersey, Delaware, you add up the goals in the states there, you're looking at, you know, maybe 20 gigawatts of offshore wind.
Speaker Change: We're not going to build that offshore wind, but we will build the transmission to support that new generation, and we're excited about that, right? We all know we need more generation, and we need all types of generation.
Speaker Change: So that's, you know, another key theme, the changing generation mix.
Speaker Change: And then of course, right, the theme of new load.
Speaker Change: When we updated that capital plan that I mentioned, the $3 billion, 90% of it was transmission.
Speaker Change: 700 million was in ComEd, right? And ComEd is where we are increasingly seeing that data center growth. You heard Calvin talk about going from 6 gigawatts of high probability to 11 gigawatts just this year alone. The work we need to do to accommodate that high density load continues, not only in ComEd, but across PJM, right? Last year we talked about the billion dollars for the RTEP window 3 related to Northern Virginia data centers. So I think that increasingly becomes a trend. What's not in our plan, you mentioned PJM's window 1 this year. We think there's opportunity there, probably more in the couple hundred million size.
Speaker Change: But then outside of PJM, MISO is doing its tranche too. That is another potential opportunity for us that's not in the plan. There are pieces of the solutions that cross in our territory and MISO has indicated a willingness to work with PJM operators. So I think no shortage of opportunities, a lot of strong themes which just kind of continue to build that momentum.
Speaker Change: for more investments. And what we love about them is often those investments help save our customer money when you think about the alternatives.
Speaker Change: Completely appreciate it, guys. Thank you so much.
Speaker Change: Thank you, Julie.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Char Purretza from Guggenheim Partners.
Char Purretza: Morning, morning, morning. So Calvin, you guys made a series of 205 filings in late August, sort of seeking to clarify the tariff treatment of network load. Can you just talk a little bit more to what specifically drove those filings?
Char Purretza: within your service territories, and what you see is kind of the pathway forward procedurally. What are the pathways?
Char Purretza: Yeah.
Calvin Butler: absolutely so let me let me just be very precise try to anyway because there's been a lot of activity and
Calvin Butler: to frame it on the why and the what, right? So, first off, as you know,
Calvin Butler: The regulatory conversation was initiated when...
Calvin Butler: AEP and ourselves really jumped in and protest and protest the talent ISA.
Calvin Butler: which is in its most recent amendment.
Calvin Butler: was the first time declaration that the co-located load was not network load.
Calvin Butler: which implies that it will bear no share of the cost of services associated with being part of the grid. Now.
Calvin Butler: We are happy that Burke stepped in.
Calvin Butler: and really initiated a technical conference with the commissioners. As you know, Sharwoods will begin on November 1st.
Calvin Butler: So that's a big step because we do not believe that policy should be determined by one-off contracts. And therefore our voice, even though it was not in our service territory, we saw something beginning and we needed to say we have questions and we need to get clarity.
Calvin Butler: We filed our 205s for each of our utilities with the goal of having guidance from FERC by early December so that the rules of the road going forward are clear.
Calvin Butler: And we needed that because we were being asked to do things that were contrary to the support and the reliability of the grid. And we could not have the cost.
Calvin Butler: potential cost shifting to other customers. So what we were doing in those 205s is saying, hey, give us clarity, answer the question sooner rather than later, so we know how to proceed. And that was the purpose of them, and that's why we did them.
Speaker Change: Thank you. And Sharkey, your question about the 205, the following
Speaker Change: the intervention in the TALEN ISA docket. And now that FERC has set the technical conference, as Calvin said, we certainly applaud that. It's a welcome development, but the outcoming and timing of the process is still uncertain.
Speaker Change: We don't know what will happen as a result of the technical conference and we still need clarity as we engage with a number of
Speaker Change: are large load customers, and to be clear, as Calvin mentioned, comment and
Speaker Change: in PICO in particular and two of the site selection utilities.
Speaker Change: We are seeing a lot of activity, and so we need clarity sooner rather than later that will aid us.
Speaker Change: and Moving Ahead With Confidence.
Colette Honorable: Thank you Collette, as you know in the technical conference chart FERC does not have a timeline in which they must act.
Speaker Change: asking for the summer ruling by December. I believe December was really the catalyst to say, look, let's get that clarity so we can all move forward.
Speaker Change: Got it. Yeah, you're pressing a little bit. Okay, got it. And then just, Calvin, any work in Illinois regarding the CMC roll-off? The curves have come off a bit, which is good, but I guess, is the IPA kind of taking the lead here?
Calvin Butler: So I'll turn it over to Jeanne as the former CFO of ComEd, because she's intimately involved with this. Jeanne? I mean, I think I would just bucket it in the same way I think about all of our jurisdictions, right? The sooner we can get to solutions around securing reliable
Jeanne Jones: generation at affordable prices, the better. And so I think what's been
Jeanne Jones: You know, while the affordability issues from the capacity auction are a bad thing, right, a good thing is that the conversations are starting earlier because of that, right? There's a recognition across all of our states, including Illinois, that we need to come up with solutions to address that. So, we have those through 27, as you mentioned, but those conversations are starting now to make sure that customers have safe, reliable, and affordable generation in the state of Illinois.
Speaker Change: Got it got it and then just real quick real quick one is just on the resource adequacy side Calvin I mean all the wires companies are kind of highlighting this consensus that there's resource adequacy issues But I don't know if there's a lot of alignment on how to solve it. You'll your peers. I mean you're
Speaker Change: Your one peer just a minute ago talked about jet-regulated generation. Your other Pennsylvania peer is talking about regulated generation. They've been talking about it for months. But you're not advocating for it. So I guess timing is kind of tight to get something solved.
Speaker Change: It doesn't appear there's a lot of alignment. I guess, are you aligned with the other wires companies or is there different pathways?
Speaker Change: Now a great question Shara and I would tell you there is alignment around reliability and resiliency
Speaker Change: Yeah, affordability.
Speaker Change: So, resource adequacy, in my view, is a subset of that, because what we're all focused on, we wouldn't be having this conversation if we weren't concerned about the reliability of the grid overall.
Speaker Change: Because when you have a breakdown and...
Speaker Change: Enough generation to provide power on the coldest days or the hottest days, that is the reliability of the system and what we talk about in terms of the wire companies is that we're going to be the ones that our regulators and our legislators come to and say, what's going on? So we have to answer that question.
Speaker Change: So, therefore, when you look at potential solutions, as I stated earlier, is that a possibility? Sure it is.
Speaker Change: But we're having those conversations, and I'm not saying that that's, I don't believe that's the only solution. And we will work with our stakeholders to figure out what the options are, and what can we do sooner rather than later to ensure that the system
Speaker Change: upholds its obligations performing at the peak demands that it's required. And that's how we're approaching. So we are aligned that it's an issue.
Speaker Change: There's multiple scenarios in which it can play out, but we're part of that discussion as an industry, and we're approaching it with all of our stakeholders.
Speaker Change: And just to let you know, at AEI, we've created a working group to really address this issue across the country, because at different jurisdictions, it's different.
Speaker Change: And I can even look at our six jurisdictions. They all have different needs, and I can't pretend that one solution will solve all of their needs. But we have to be at the table, and we are.
Speaker Change: Okay, that is perfect. Thanks guys. I'll see you in a little bit. Appreciate it. Thank you.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Steve Fleischman from Wolfe.
Steve Fleischman: Hey Steve, good morning. Yeah, hi, good morning, thanks. So, just, uh...
Steve Fleischman: I guess just kind of following up on.
Steve Fleischman: A little bit of the co-location debate, so, you know, the governor of Pennsylvania seems pretty proud of both the Three Mile Island and...
Steve Fleischman: The, you know, the co-location deal with Susquehanna when they filed, highlighted that when they filed the letter to FERC.
Steve Fleischman: and so I guess just do you have a sense where the governor of Pennsylvania is on?
Steve Fleischman: on the issue and I guess bringing up Governor's Con of Illinois, too, on this issue.
Steve Fleischman: where they lay out and what happens once we get an outcome.
Speaker Change: Okay, I'll jump in here, Steve. Thank you. And then I have Mike Innocenzo, who's our Chief Operating Officer, former CEO of PECO, if Mike wants to weigh in as well. I will never pretend to speak for either of our governors, Governor Shapiro or Governor Pritzker, but I can tell you the conversations that have been had.
Speaker Change: I think both of them go into reliability and affordability is the utmost concern they have for their states. That's one. Two, when you look at the three months, he should be proud of that.
Speaker Change: We're bringing new generation into the mix to serve within PJM and I think that is a wonderful example of how we can move forward in looking at data center load, bringing that online, bringing new generation online is a wonderful mix.
Speaker Change: What he's also, I've heard him say, is that he's very excited about the economic development and the jobs that will be created from the Susquehanna deal.
Speaker Change: Is he concerned about the cost shifting and the affordability piece for everyone else? Absolutely. And what he is saying, and what I've conveyed to him, and I've shared with you, is that we are not against co-location.
Speaker Change: We just believe everyone should pay their fair share of utilizing the grid. Period.
Speaker Change: And therefore, we believe it's not that they shouldn't do it, it's how they do it that matters. And that is where our conversations was leaning in with each of our governors. But I do know what the premise of them, they want economic development. They want reliable power and they want...
Speaker Change: Affordable power for everyone.
Speaker Change: So now it gets into the details, and that's what we've committed to working with everyone to ensure that it happens. Mike, anything you'd like to add? I think you said it well. I would just, you know, there's nothing in our position that is opposed to where our governor is on that. I think everything that we've done with our position on co-location, our investment in the grid, is supported where he is on safety, reliability, and economic development.
Speaker Change: Okay, thank you. One other question just on the PJM transmission, Jeanne, I think you mentioned maybe a couple hundred million incremental opportunities.
Speaker Change: from the pending, I guess, the filings recently made.
Jeanne Jones: Yeah, we're talking about the R-Test window one.
Jeanne Jones: Yeah.
Speaker Change: There was a group of utilities that made filings together, obviously you have a huge footprint so maybe that is not really needed given your scale, but did you consider that as well?
Speaker Change: Yeah, sure. We always do, right? We're always looking at what is the best way, right? You go back to the pinnacles that Calvin talked about, reliable, resilient, affordable. If there's a way to partner with other utilities to do that for our customers, we're always open to that.
Speaker Change: So
Speaker Change: Okay.
Speaker Change: Okay, thank you.
Steve Fleischman: Thank you Steve.
Steve Fleischman: Thank you.
Steve Fleischman: Thank you. One moment for our next question.
Speaker Change: Our next question comes in the line of Ross Fowler from Bank of America.
Ross Fowler: Morning, Broads.
Ross Fowler: Good morning, Calvin. Good morning, Jeanne. Just a couple for me, not to beat the dead horse here, but to go back to PGM capacity for a second.
Speaker Change: You know, obviously a lot of stakeholder discussions are happening now. PJM, presumably, they've asked to delay the auction until next June. We'll see what Folk says to that.
Speaker Change: Is there enough discussion going on right now? I mean, a lot of the solutions that are being talked about would require legislative change in various states within PJM.
Speaker Change: Should we, or are we at the point, I mean from my perspective time is of the essence, but are we at the point in those discussions where we should see legislative efforts pushed forward in the 2025 legislative sessions, or are we not quite there yet?
Speaker Change: I think the governor's letters identify lost the sense of urgency that needs to take place.
Speaker Change: And I think this, the call today, and what happens, I think, from now to the end of the year will be a key indicator of what the states may take on for the 2025 legislative sessions.
Speaker Change: I don't think, I think it's too early to say the what and the how, but I do believe
Speaker Change: Fire has been lit, and I do believe these discussions over the next 60 days are going to be key as to how the governors continue to lean in on this very important issue.
Julianne Dumoulin-Smith: And thank you for that, Calvin. And then back to the ISA, obviously now we're going to process at FERC, you know, we'll see what they say as you move this forward through the 205s, but I guess...
Speaker Change: The way I see it, there's two issues. One is cost allocation, which I think you've been pretty clear about in your filings.
Speaker Change: The other is reliability. So as you said, you know, you're not protesting the ability to do it. It's just how and how and where and why, like with the mechanics of it. So maybe, maybe give us a little color on what those mechanics look like. Is that
Speaker Change: Is cost allocation really just about paying for grid upgrades around substations and other things to actually co-locate something somewhere, or is it more an argument that they really are on the grid and they need to pay some sort of ancillary services to the grid? And then the second one,
Speaker Change: Part of the question is for PJM, they don't, in my mind, they don't really do a reliability study, right? They do a capacitance study to make sure that if you co-locate something somewhere that
Speaker Change: the amperage and voltage of the grid can stay up so it still works, but that's not the same thing as reliability. So, is there a push in these discussions, from your perspective, to add something around reliability? Because, you know, if we keep taking plants off the grid, one, two, three, four, five, there is a reliability
Speaker Change: issue that is out there somewhere as we continue to do this and maybe contextualize that for us.
Speaker Change: Let me just say this, Ross, I think you said it well.
Ross Fowler: I'm going to turn it over to Mike, who is our Chief Operating Officer, and then he and Jeanne will answer this in more depth for you. Yeah, I think you captured it really well. I mean, it really falls in three buckets. It's reliability.
Mike Innocenzo: That's resource adequacy and it's rate design. These investments, whether you put them before the meter or you put them behind the meter, are going to have an impact on the grid. They're going to take ancillary services off the grid.
Mike Innocenzo: and they're certainly going to have an impact on...
Mike Innocenzo: As they take power off the grid, they're going to put themselves in a situation where it may require future upgrades for the grid. Our whole position has just been...
Mike Innocenzo: You know, if they can co-locate, if they can get in there quick and get in there doing what they want to do, we support that.
Mike Innocenzo: We just want to make sure that it has the appropriate transparency on what they're doing.
Mike Innocenzo: We want to make sure that we have the appropriate
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: And this is what we've laid out, right? We've laid it out in the proceedings. Our position hasn't changed.
Speaker Change: We've never been against co-location. We are excited about the opportunity for all of this growth in our sector. Reliability should be studied the same way any other large loads are or loss of generation. All of that gets studied for reliability of the grid.
Speaker Change: Great design. We've already laid out the costs associated. It's not zero, right? It's not zero.
Speaker Change: So that's clear, and so getting clarity for working with our states, we have riders today we could use for high-density load.
Speaker Change: that could be used tomorrow. And then the third is resource adequacy, which again, it doesn't matter where it's located, right? We all know we need more generation and we need more transmission to accommodate all this new load, but we're ready to move forward. We have processes today that address all of those three buckets.
Speaker Change: Let's use those processes, let's move forward, and let's continue to grow this economy and grow jobs. And, you know, let's move forward. That's what we're looking to do. And Ross, it's important to note that we have conversations on a...
Speaker Change: daily, not weekly basis with all the largest data center developers. And to a T, they have said it's very important to work with our utilities across the country to put mechanisms in place to ensure reliability and resiliency of the grid.
Speaker Change: No one has said anything but that and I just wanted to let you know and others know that we're continuing to have those conversations and work to remove barriers to ensure the economic development in our jurisdictions occur and the fact that
Speaker Change: We've been recognized for that, and we have 6 gigawatts, now potentially 11 gigawatts in Illinois and across our jurisdiction. It's an indicator that we're on the forefront of making this a reality. So I appreciate the question.
Julianne Dumoulin-Smith: I appreciate that Calvin and then just maybe one on the sort of jurisdictional stuff here. Clearly FERC
Julianne Dumoulin-Smith: has a just and reasonable rates mandate which gets into the cost allocation discussion.
Speaker Change: But we've gotten a lot of questions around, you know, reliability is ultimately PJM's responsibility. So how does that interplay of reliability work between FERC and PJM as we walk through the ISA filings?
Colette Honorable: Thank you. Collette, please. Thank you. And, Ross, thanks for the question. And forgive me if I'm going to sound like a lawyer and a technical person here. No, go ahead. That's fine. Under the Federal Power Act,
Colette Honorable: FERC has the mandate to oversee the reliability of the grid.
Colette Honorable: and we think about PJM, they're like the air traffic controller for this region. Yes, they oversee that reliability function, but reliability, we are front lines on reliability and that's why you've seen us.
Colette Honorable: stepping in to lead on these critical issues of policy. We are in an unprecedented time in this sector.
Speaker Change: So FERC has a duty, in particular as it relates to wholesale matters, transmission matters, and FERC has the sole jurisdiction over generation interconnection service agreements.
Speaker Change: So, what's interesting about our framework in the U.S. is there are some aspects of this work and reliability that resides with the federal government and some that resides with the state.
Speaker Change: So we need this policy setting from FERC, and then as you heard Jeanne mention,
Speaker Change: and I hope that wasn't too much in the weeds for you.
Speaker Change: No, no, that's fine. So basically, we're dealing with three layers here. FERC has to set sort of an overall policy position. PJM has to sort out what that means in context. And then we're going down to redesign at the state level to finally sort it out, if that makes sense, if I heard you correctly. Okay. All right. Thank you.
Speaker Change: Thank you. Appreciate you, Rose.
Speaker Change: Thank you. At this time, I would now like to turn the conference back to Calvin Butler for closing remarks.
Calvin Butler: Thank you, Gigi, and just let me begin by just thanking everyone for all of your questions.
Calvin Butler: and your interest in Exelon and also your support. I can't recall a more exciting time in this sector.
Calvin Butler: And I'm just pleased to say that the Exelon team is leading the way. Investing capital in a way that meets all of our stakeholders' shared interests, including yours as investors.
Speaker Change: We look forward to seeing all of you, if not just many of you, at AEI in a couple of weeks and look forward to having more in-depth discussions on where we're going and why we're taking the positions we are and how we're leading this energy transformation. GG with that, that concludes the call.
Speaker Change: Thanks to all our participants for joining us today. This concludes our presentation. You may now disconnect. Have a good day.
Speaker Change: ... ... okay ...
Speaker Change: Thank You!
Speaker Change: Past, Present, Future Maybe I'll love again Maybe I'll be with you again