Exelon Corporation

Good morning and welcome to 2019 Second Quarter Excellent Earnings Call. My name is Nora and I'll be facilitating the audio portion of today's interactive broadcast. 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 this time, simply press star then the number one on your telephone keypad. If you'd like to redraw your question, press the pound key. This event also features a streaming audio, which allows you to listen to the show through your PC speakers. For those of you on the stream, please take note of the options available in your event console. At this time, I'd like to turn the show over to Dan Eggers, Excellence Senior Vice President of Corporate Finance. Please go ahead, sir.

Thank you, Nora. Good morning, everyone, and thank you for joining our second 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 who will be available to answer your questions following our prepared remarks. We issued our earnings release this morning along with the presentation, both of which can be found in the investor relations section of Exelon's website. The earnings release and other matters which we discussed during today's call 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 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 earnings release for reconciliations between the non-GAAP measures and nearest equivalent GAAP measures. We've scheduled 45 minutes for today's call. I'll now turn the call over to Chris Crane, Exelon CEO.

Thanks, Dan, and good morning, everyone, and thank you for joining us today. Before I turn to the financial results for the quarter, I'm going to spend a few minutes providing some key updates on a number of positive developments in our businesses over the last three months. First, we continue to move forward on our utility regulatory strategy, filing distribution rate cases at BGE, ComEd, and PEPCO DC, reflecting our safety and reliability investments across those service territories. In DC, we filed our first multi-year rate case. The plan provides the necessary framework to align PEPCO system investments with DC policy goals, including grid modernization, and further improvements to customer service and reliability. Joe will discuss the details in his remark. Second, last week, PEPCO and other parties filed a settlement agreement at PERC for PECO's formula rate transmission rate. The settlement includes a 10.35% ROE inclusive of a 50 basis point ROE adder. PECO made the original filing in 2017, and we expect the final order from FERC in 2020. Third, in June, we issued our annual corporate sustainability report, marking our performance and sustainability goals and priorities. In addition, the benchmarking emissions report that found X1 is the largest generator of zero emissions energy in the U.S., producing 12% of the nation's clean energy. Also, that we have the lowest emissions rate emitting at a rate that is four times less than the next cleanest generator. Fourth, the New Jersey BPU approved ZEC payments for the state nuclear units, including our interest in sale. We appreciate the state's support for the carbon-free power produced by these units. Fifth, We were unable to get legislation done in Pennsylvania in time to reverse the decision to close TMI this fall. Since then, there have been continued discussions on a path forward for the remaining nuclear plants in the state, including consideration of placing a price on carbon through the regional carbon trading. Sixth, we are also pleased the Trump administration decided not to impose quotas on uranium. which would have jeopardized the continued operation of commercial nuclear reactors in the United States. And finally, last week, Burke issued an order directing PJM not to run the capacity auction in August. We agree with Burke's decision to delay the auction until the rules are finalized. The delay provides PJM and the state policymakers time to adjust to the Commission's changes. Before I turn to the financial results, I also want to address two matters you have raised with us recently. First, we've received a number of questions from investors about the impact on our business from a steep decline in power prices. The decline presents a considerable challenge for us, but as you know, our hedging disclosures are a point-in-time estimate. If you have seen them move up and down in the past, we need to be thoughtful and deliberate about our response if these prices persist. and we have a variety of levers that we can pull and decisions we can make if this is the future of energy markets. We are pursuing a number of market reforms addressing the financial challenges many of our plants face. Against this backdrop, I can also again assure you that we will not operate unprofitable or negative free cash flow plants. You've seen us close money losing plants in the past, and you should expect that discipline to continue if reforms are not enacted. The bottom line is that fundamental market reforms are needed in the United States if we want to meet the nation's clean energy climate goals, maintain fuel security and reliable system, we need to sustain and increase electrification, preserving significant economic value through good-paying jobs and property taxes. We'll continue to work at the state level and the national level with BIRC, the Congress, and the administration to make this happen. Second, we've received numerous questions from our investors about the subpoena in Illinois from the U.S. Attorney's Office. We are cooperating fully and providing all information requested by the U.S. Attorney's Office. We simply can't comment further on the investigation and we're not going to speculate on whether it may affect legislative efforts in Illinois this fall. What we do know about this fall session is there are a number of stakeholders who want to see clean energy legislation enacted. Illinois lacks behind other progressive states on clean energy policy. Passing the clean energy legislation is a priority for many stakeholders include in illinois including the citizens utility board labor the clean jobs coalition and the renewable community these stakeholders want to greatly expand the renewable penetration so the state will be able to achieve the 100 clean energy target by 2030. kathleen and her team are working with stakeholders to help craft the legislation legislative package and the informed members of the General Assembly on the benefits of this legislation. It's important to remember that while we are putting a real effort into preserving the value of the generation fleet, our focus remains on the utilities. The bulk of our capital investment and growing majority of our earnings are coming from the regulated business where we continue to see great opportunities to invest and grow to the benefit of our customers and communities. Now I'll turn to the financial results on slide five. We had a good quarter delivering earnings at midpoint range of our guidance. On GAAP basis, we earned 50 cents per share versus 56 last year. On a non-GAAP basis, we earned 60 per share versus 71 last year. Joe will cover these drivers in his remarks. Turning to slide six, operational performance of the utility was mixed during the quarter. We continued to perform at top quartile levels of cost for reliability and customer operations metrics, but our safety performance has slipped. Safety is the highest priority, and we are focused on ways to improve our safety culture and performance. Outage frequency and outage duration performance is in the top quartile for three of our four utilities, with ComEd performing in the top decile. On the customer operations side, all of our utilities perform at top quartile for service level and call abandonment rate. Our relationship with our customers is improving due to the investments we are making to improve reliability and the customer experience. This can be seen in our customer satisfaction scores and in the recent J.D. Power electrical residential customer satisfaction ratings. BG and PECO and ComEd achieved top decile performance in customer satisfaction index. We've improved or maintained our rankings in the JD Power rankings. Delmarva ranked first in the east mid-size region, the first X1 utility to ever be ranked first. BG and PECO maintained their first quartile performance in the east large segment, and ComEd improved in its rankings to the second quartile. Generation performed well during the quarter. Nuclear produced 38.8 terawatts hours of zero emission electricity with a capacity factor of 95.1%. And excellent power and had a gas and hydro dispatch match of 99.7, exceeding our plan. And the wind and solar capture on the plan was 96, was beat the plan of 96%. Now I'll turn it over to Joe.