Exelon Corporation

Good morning. My name is Lindsay, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2019 Q1 Exelon earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during the call, press the red star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Dan Eggers. Senior Vice President, Corporate Finance, you may begin your conference.

Thank you, Lindsay. Good morning, everyone, and thank you for joining our first quarter 2019 earnings conference call. Leading the call today are Chris Crane, Exelon's President and Chief Executive Officer, and Joe Nigro, Exelon's Chief Financial Officer. They're joined by other members of Exelon's senior management team. We'll be available to answer your questions following our prepared remarks. We issued our earnings release this morning along with the presentations. both of which can be found in the investor relations section of Exelon's website. The earnings released and other matters which we discussed during today's call contain forward-looking statements and estimates that are subject to various risks and uncertainties. Actual results could differ from our forward-looking statements based on factors and assumptions discussed in today's material and comments made during this call. Please refer today's AK and Exelon's other SEC filings, for discussions of risk factors and factors 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, Sandy. Good morning, everyone, and thank you for joining us today. During the quarter, we achieved success on several key fronts and reached a couple of milestones. First, the U.S. Supreme Court declined to hear the ZEC cases, clearing the last legal challenge at the federal level for the Illinois and New York programs. The decision affirms that states have the right to protect their citizens by favoring clean energy, and it is a win for the consumers, policymakers, and the regulators. Second, we received credit upgrades. from both S&P and Fitch. These upgrades recognize the successful execution on our utility-driven growth strategy and reduction in business risk while maintaining strong financial metrics. Third, we reached settlements in New Jersey on the ACE rate case and the infrastructure investment program These outcomes reflect the continued positive evolution of our partnership with regulators built on improvement in reliability and customer satisfaction. Finally, turning to slide five, in March we celebrated the seventh anniversary of the Constellation merger and the third anniversary of the PHI merger. Each merger has positively contributed to our strategy of increasing our regulated business mix and providing more stable earnings. Before these mergers, Exelon earned a mix of 28% utilities, 72% generation. In 2021, we project that mix will have flopped with nearly 70% earnings coming from the utilities. Through the Constellation merger, we grew our regulated earnings with the addition of VGE and also benefited from the combination of Exelon and Constellation's competitive business creating an industry leader, integrated business that supports efficiently hedging of our plans while capturing incremental margins and cash flows. The PHI merger further advanced our strategy to become more regulated while creating value for customers and communities we serve. We're meeting or exceeding all of our reliability merger commitments and customers across the PHI service territory and experiencing record reliability. The frequency and duration of outages have improved at each utility. Customers are out of power with less frequency and are restored to service much faster when out of power. In 2018, Delmarva customers had the lowest frequency of outages. At Pepco, customers saw the fastest restoration time. And customer satisfaction is at an all-time high at Ace, Delmarva, and Pepco. We're also delivering on our promise to be a true partner with the communities we serve. The PHI utilities have contributed more than $470 million in total economic impact since the merger closed. In 2018 alone, these utilities spent $313 million with minority and women-owned suppliers, which is between 22% and 29% of each utility's total procurement spending. Each utility has made investments in workforce development programs, including partnering with the District of Columbia to create the DC Infrastructure Academy. We are also an important community partner for hundreds of organizations in the PHI service territory, contributing more than $15 million in financial support and volunteering approximately 85,000 hours since the merger was approved. Because of the improved service and enhanced partnership with our communities, we are building trust in our jurisdictions and are seeing a more positive regulatory environment develop. Since the merger, we have reached constructive settlements in each of the PHI jurisdictions, including Pepco, Maryland, and D.C., and we've had our first settlement since 1980s. Exelon has delivered on the promises we made to our customers and the communities and the shareholders when we merged with PHI in 2016. Turning to our financial results on slide six, we had a strong quarter. On a GAAP basis, we earned $0.93 per share versus $0.60 per share last year. On a non-GAAP operating basis, we earned $0.87 per share versus $0.96 per share last year. Joe will cover the drivers in his remarks. Turning to slide seven, at the utilities we continue and operating metrics. The investments we are making are resulting in improved reliability, which is strengthening the relationship with our customers and the regulators. We remain focused on helping our customers and communities become more energy efficient, saving energy and money. We have been doing this for years, and I'm happy to say, once again, the EPA named all five of our eligible companies, BGE, ComEd, Delmarva, PECO, and PEPCO as 2018 Energy Star Partners of the Year. Generation performed well during the quarter. Nuclear produced 39.2 terawatt hours of zero emission electricity with a capacity factor of 97.1%. The best quarter performance in more than 10 years during the polar vortex where the temperatures were significantly below zero Our fleet ran at full power, keeping families in our market safe and warm. Excellent power and gas and hydro dispatch matched of 97.8% and wind and solar capture of 96.5% exceeding plan. Moving on to slide eight, since the beginning of the year, there has been a number of important developments. The U.S. Supreme Court upheld the clean energy programs Illinois is looking to advance its clean energy goals. Pennsylvania is considering adding nuclear to its alternative energy standard. New Jersey awarded zero emission credits. PGM has made its scarcity filing in March with the request approval date by mid-December and first act on FASTA energy pricing reforms. These actions recognize the importance of preserving existing resources of carbon-free energy. and addressing the underlying deficiencies in the market. In Illinois, legislation was introduced that would require the Illinois Power Authority to procure clean capacity for ComEd customers using the fixed resource requirement mechanism that is currently in the PJM tariff. In addition to supporting a course of truly clean energy future in Illinois, the legislation would also ensure that consumers pay less than they do today. The concept of the FRR has a wide support and has been endorsed by the Illinois CUB, the Clean Jobs Coalition, and Organized Labor. Another piece of legislation has been introduced into Illinois to extend the formula rate. ComEd's formula rate provides tangible benefits to the consumers, as well as certainty we need to make investments and improve reliability and resiliency in customer service while keeping the bills affordable In the nine years the comment is filed to Formula Raid, we have asked for rate decreases four times. It's a busy legislative season as Governor Pritzker and the General Assembly tackle Illinois' significant budget problems. However, we are optimistic these two priorities can get done this year. In Pennsylvania, a bipartisan group in the House and the Senate introduced legislation that would treat nuclear equal to other non-economic to the alternate energy portfolio standard. Several hearings have been held in the House and Senate on the bill, but it's not clear the action will be taken in time to reverse our decision to retire TMI. We also achieved two important milestones for our existing ZEC programs in April. First, as mentioned, the U.S. Supreme Court declined to hear the challenges to the New York and the Illinois ZEC programs consistent with the resounding decision we received from the district and the circuit courts. Second, the New Jersey BPU award execs to all three units in New Jersey, allowing them to continue to provide zero carbon energy to the state. We are pleased to see the state's moving forward with thoughtful energy policy that preserves the rights to chart a clean energy future. Finally, turning to FERC and PJM. We are pleased FERC acted on the fast start reforms that expand the price setting eligibility for block loaded resources. FERC has requested that PJM submit a compliance filing by July 31st and we expect the reforms to be implemented shortly after that. In addition, PJM filed a 206 petition to improve the pricing of reserves, which we have previously referred to as scarcity or ORDC reforms. These reforms, along with baseload price formation, are essential to preserve an effective competitive market in PJM, and we're happy to see the programs being made to address these clear needs. Turning to slide nine, much of the policy work we've engaged in, including preserving zero carbon generation, we have viewed as necessary to bridge a comprehensive carbon policy. In the past time, not just for the government, for every business, most particularly energy business, along with their customers and stakeholders to take action on reducing carbon emissions. For several decades, Exelon has been positioning itself for a carbon-constrained world and acting as a leader advocating for carbon policy at the state and federal level. We have built the cleanest power generation company in the country. We have divested or retired all of our coal generation and invested in renewables and and increasing our output of our nuclear fleet. As a result, Exelon has produced more clean energy than any other company in the United States by a factor of two, and out of nine, every nine clean megawatts in the U.S. comes from an Exelon plant. We've avoided 67.8 million metric tons of greenhouse gas, the equivalent of taking 14.5 million cars off the road through two previous carbon reduction goals. And we are on track to meet the most recent goal of 15% additional reduction of emissions from internal operations. We're a leading voice in supporting policies and regulations that require reduced emissions and encourage technology changes. And across our businesses, we're working to enable clean energy solutions for our customers and communities. In 2018 alone, our energy Efficiency programs save customers 21.9 million megawatt hours of electricity, avoiding 9.9 million metric tons of greenhouse gas emission. We're investing in electric transportation and charging infrastructure at both utilities and Constellation. Exelon is also involved in grid-scale energy storage development to enable faster and greater reliability for the use of renewables. One example of this is through our efforts to launch the Volta Energy, which works with the national labs and research universities to commercialize new technologies. The world is changing in terms of awareness of the scope of climate change and the need for new potential solutions. Our customers, our cities, and our communities, as well as our employees, are demanding clean power, so that is what we intend to provide. We still have a long way to go. But the engagements that we are seeing at the state level affirms our view that these policies will be part of our country's future. With that, now I'll turn it over with Joe to continue the call.