Exelon Corporation

Good day, and thank you for standing by. Welcome to the Q3 2022 Exelon Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 1 1 on your phone. Please be advised that today's conference is being recorded, and I would now like to hand the conference over to your speaker today, Mr. Andy Plunge, Vice President of Investor Relations. Sir, please go ahead.

Thank you, Chris. Good morning, everyone, and thank you for joining various risks and uncertainties. Thanks, Andy.

Let me turn through first, though, to the operating aspects of that announcement. Calvin Butler, our President and Chief Operating Officer, will become the President and CEO and a member of the Exelon Board upon my retirement. Since Calvin began at model and drive industry-leading operational excellence. Gene is now CFO, which we're very pleased Jean has a very strong background and experience positions her well for the expanded responsibility. You'll hear from Jean momentarily for the financial update. And both Calvin and Jean will join me for the Q&A.

Happy to report, celebrate.

We continue to execute at high operational levels, which I'll speak more about on the next slide. We had a construction rate case outcome this quarter. The Commission in Delaware and Pennsylvania approved settlements on gas distribution rates Delmarva and Montepico. We also reached a settlement on key elements with the first multi-year filing for Delmarva, Maryland. First settlement for the multi-year plan. We expect a final order in December. In Illinois, ComEd received a final in September. That's a big milestone on the transition they're making to a multi-year distribution rate construct and it gives us a good foundation to build upon. As a result, our multi-year integrated grid plan with the final order by the end of 2023. So there's been a lot of good operational financial progress this year and we're on track to close a very strong year.

We know investors are focused on our outlook this

We've always strived for transparency, so last quarter we communicated the potential impact for higher annual cash tax as a result of the IRA. Since passing the bill, we've been working with the industry and the EI, and we remain optimistic that Treasury will implement the guidelines in We have emphasized The legislation alongside the Infrastructure Jobs Act provide more than $550 billion in funding for energy-related infrastructure over the next 10 years, which will generate significant demand for our investments we make. Finally, I'd like to talk about our growth outlook. We told you on Analyst Day we expect invest $29 million of capital to serve our customers and our communities over the next four years, which supports an annual growth rate of 8.1%. That will drive the long-term earnings growth rate. As many of you know, the path below that range and other years that will be above that range. You'll see that more clearly when Jean covers for slide nine. The operational highlights, slide five. We continue to ensure our customers receive safety, affordability, and reliability in cleaning, which underpins everything we do. Excuse me. Reliability remains at top notch. We're again at top quartile for outage duration over all of our jurisdictions. over 100 years. Reliability is 82% better than when ComEd set out on the smart grid improvements in 2011. Our customers have greatly benefited from the investment as reliability on the grid increases.

Through the third quarter, BGE and ComEd A testament to the reliability, I've got a page ahead of myself here.

A testament to the reliability is increased data center growth in the ComEd district in the last few years. The data center additions have aggravated about 500 million watts of new demand each year, approximately nine times the average of the annual amount seen earlier in the prior decade. For safety, ComEd maintains top SIL performance, but the three other utilities continue to fall outside of that level of performance. We expect only the highest safety standards and performance for all utilities. Each utility is dedicated to implementing safety practices developed through lessons learned to minimize the chance of incident odor response across our three gas utilities. For the third quarter in a row, PHI responded to all gas odor reports in less than one hour. Let me turn over to Gene to provide the financial update.

Thank you, Chris, and good morning, everyone. Today, I will cover our third quarter results, completed and upcoming rate case activity, and then, as Chris noted, provide further clarity on our earnings growth trajectory and potential balance sheet implications of the corporate minimum tax. On slide six, we show our quarter-over-quarter adjusted operating earnings. Excellence Continuing Operations earned $0.75 per share in the third quarter of 2022 versus $0.53 per share in the third quarter of 2021. As a reminder, the prior year third quarter reflects an $0.08 per share discontinued operations adjustment for certain corporate and overhead costs previously allocated to generation that are required by accounting rules to be presented as part of ExFund's continuing operations. These costs were paid for by generation and they are not indicative of our corporate overhead post-separation. Excluding this $0.08 adjustment, ExFund's third quarter results were $0.14 per share higher than the third quarter of 2021. The earnings growth was driven primarily by higher distribution rates associated with incremental investments and completed rate cases relative to third quarter 2021. The impact of higher treasury rates on ComEd's distribution ROE, the absence of summer storm activity, and distribution formula rate timing at ComEd. This was partially offset by depreciation and amortization and higher interest expense on debt at the holding company. Here to date results in drivers from the prior year are detailed on Appendix 514. Turning to the full year, we are narrowing our 2022 EPS guidance range to $2.21 to $2.29 per share from $2.18 to $2.32 per share. At Analyst Day, we told you we expected to earn 28% of our full year earnings in the first quarter, 20% in the second quarter, and 32% in the third quarter, or about 80% of full year earnings by the end of the third quarter. Delivering year-to-date earnings of $1.84 per share puts us slightly ahead at 82% of the midpoint of our revised guidance range, which considers the impact of higher treasury rates that comment on the distribution ROE, the absence of storms, and our continued disciplined approach to cost management. These benefits are partially offset by higher financing costs at corporate and the businesses, along with one-time items occurred in the first quarter. We are delivering on our financial commitments and are confident we will be within our revised guidance range at year-end. Moving to slide seven, looking at our utility returns on a consolidated basis, our trailing 12-month ROE as of the third quarter has improved to 9.3% and is back within our 9% to 10% targeted range. The 50 basis point increase from last quarter is in line with expectations as timing of equity infusions from the first half of the year are offset by their earnings growth in the second half of the year. As discussed on previous calls, we expect a trailing 12-month ROE to remain in our 9% to 10% target range at year end. Our focus continues to be delivering strong earned returns at the utilities, which sustain the investment we make on behalf of our customers. Turning to slide eight, there were some important developments in our open distribution rate case proceedings this quarter. Our successful execution builds momentum into 2023 when several jurisdictions expect to file multi-year plans. Let me begin by highlighting key developments in the 2022 rate cases. On October 12th, the Delaware Public Service Commission approved Delmarva Power's settlement agreement without modification for its gas distribution rate case. The settlement was for a $13.4 million increase in distribution rates, which includes the transfer of $5.8 million of revenues from the distribution system improvement charge capital tracker into base distribution rates, reflecting an ROE of 9.6%. As permitted by Delaware law, Delmarva Power implemented full allowable rates on August 14th, subject to refunds. Additionally, on October 27th, the Pennsylvania Public Utility Commission issued an order approving the joint petition for settlement in PECOS gas rate case, including an annual natural gas distribution revenues increase of $54.8 million beginning January 1st, 2023. We also have two rate cases pending final orders. Notably, Delmarva Power reached a settlement on the majority of key elements for its first electric distribution multi-year plan with the Maryland Public Service Commission. including a cumulative revenue increase of $28.9 million beginning in 2023 through 2025, reflecting an ROE of 9.6%. The ability to reach this settlement is a testament of the many benefits of this progressive rate design, including customer rate predictability, ease of regulatory burden, and transparency into future system investments at our utilities. We expect a final order from the Commission by year end. Lastly, we expect a final order on ComEd's final distribution formula rate update in the fourth quarter. More details on the 2022 rate cases can be found on slides 18 through 22 of the appendix. Turning to 2023 rate filing, ComEd continues to prepare for a new rate filing in January of 23. Throughout 22, ComEd has been working with stakeholders on the performance metrics proceeding. On September 27th, the Illinois Commerce Commission issued its order approving the performance and tracking metrics plan. which includes seven performance metrics with a total value of plus or minus 32 basis points. The order paced the way for Comet's first multi-year plan filing in January 23 for rates effective 2024 to 2027. Details of the filing will be shared on our fourth quarter call. The multi-year plans across our East Coast jurisdictions have enabled investments necessary to improve reliability and customer service. They've modernized the distribution system and supported state environmental goals that have served our customers and communities well. Building on this momentum, we anticipate filing second multi-year plans at BGE in the first quarter, at PEPCO Maryland in the second quarter, and at PEPCO DC in the first half of 2023. Additionally, we anticipate filing the first multi-year plan reconciliation with BGE expected to file in the first quarter of 2023. Our first multi-year plan reconciliation is an important milestone that helps us true up variances from the cost we filed as part of the multi-year plans in early 2020. Importantly, this reconciliation process will also provide our first opportunity to understand how the process will be implemented for any potential cost variances in future multi-year plans. As you can see, next year will be busy on the regulatory front, but we are excited for the transparency and stability the multi-year plans will continue to provide our customers and stakeholders. Relationships across our jurisdictions remain constructive, and we are working together with our regulators, states, and communities to support their clean energy and climate goals. As Chris noted, this year's federal legislation only bolsters the support for and the affordability of the transformation of our energy economy. The multi-year plans provide a great structure to align on the pace and the progress of that transformation. As a reminder, we expect nearly 100% of our rate-based growth will be covered by alternative recovery mechanisms such as the multi-year plans by the end of our planning period. Moving to slide 9, as Chris described, we are confident the $29 billion of investments we are making on behalf of our customers will result in expected rate-based growth of 8.1% and 68% annualized earnings growth from 21 through 25. We have noted that our business model does include some variability in year-over-year earnings growth due to the timing of rate cases. largely driven by Pennsylvania, which generates strong returns that support the continued need to invest for the benefit of our customers. In addition, for 2022 and 2023 at ComEd, we're exposed to the 30-year treasury rate before making the transition to a more traditionally set return on equity. We've been tested to provide investors with additional information on the year-over-year availability with the building blocks of our earnings growth trajectory. As defined in the chart, the gray arrows represent the implied 6% to 8% CAGR path, from the 2021 guidance midpoint of 210 per share as disclosed at Analyst Day through 2025, while the TILDOS illustrates expected year-over-year growth percentages from the prior year relative to the 68% range each year. Stepping to the growth drivers, starting with 23, we have already mentioned ComEd and its exposure to the 30-year Treasury rate. Although current forwards imply we should see some good upside to its ROE, we will need to monitor the impacts through 23, which remains fully exposed to market moves. PECO will be in year two of its existing electric distribution rate three-year cycle, and as a result, is expected to have lower year-over-year earnings, assuming normal weather. PECO's earnings should be positively impacted by new gas rates, transmission, and its distribution system improvement charge tracker, which provides a mechanism for recovery on distribution investments made between rate cases. Weather and storm normalization will also be a factor given PECO is not decoupled and we are modestly benefiting from weather to date. Like all companies, we face challenges from higher financing costs and inflation, which we are working hard to offset through productivity initiatives, investments in technology, and by leveraging our size and scale. Reconciliation processes in 23 in Maryland and D.C. will help establish precedents for future cost recovery under the multi-year plan. Lastly, at corporate, we will see increased costs as we continue to refinance our remaining floating rate debt from the separation, as well as financing the investment needs for our utilities at the current higher rates. As we do have the utilities, we continue to challenge our corporate center to reduce costs. For all these reasons, 23 is expected to be below the lower end of the 68% growth range based on our outlook as of September 30th. In 2024, we expect to be in the range as we enter the next cycle of our VGE and PECO multi-year plans, which allows us to align with stakeholders for the next three-year phase of the clean energy transition. PECO is expected to be in its third year of its existing electric distribution rate, impacting year-over-year growth. Then, with an expected rate case filing for Pico Electric in 2025 and the rest of our utilities growing generally in line with their rate-based investments, we expect to be above the upper end of the 68% range in 2025. The combination of growth across these years should put us squarely in the 68% range on an annualized basis for the 21 through 25 planning horizon. You can expect us to initiate 23 guidance and provide the rollboard of CapEx, rate-based, and financing plans as we normally do on our fourth quarter earnings call. Turning to slide 10, Exxon remains committed to maintaining a strong balance sheet and investment-grade credit ratings continue to be a top priority. Our long-term corporate consolidated credit metrics outlook remains strong for both S&P and Moody's, regardless of the outcome of the corporate minimum tax. If the corporate minimum tax is enacted as written in the Inflation Reduction Act, the exposure tax on balance sheet is approximately $200 million per year, as disclosed in our August 8K filing. We are working with the industry and remain optimistic that this impact can be mitigated. Even if unmitigated, as Chris noted, we expect to observe the cash impact on our balance sheet with cushion above our downgrade threshold, and we expect to be in our targeted 13% to 40% average range over the planning horizon without a need for incremental equity beyond the previously announced $1 billion commitment from 22 through 25. As a reminder, we issued $575 million in equity in August through a one-time offering, and we'll complete the remaining $425 million over the 23 through 25 period. Our commitment to a strong balance sheet is a top priority to ensure we can make the investments needed on behalf of our customers. I want to close by reiterating our confidence in investing an estimated $29 billion of capital from 2022 to 2025, driving 68% earnings growth from 2021 to 2025 and a strong balance sheet. This remains the case regardless of whether the corporate minimum tax is mitigated. Thank you. I will now turn the call back to Chris for his closing remarks.

Thanks, Jean. Moving to slide 11. in the energy delivery industry, the economy is making the transition to a cleaner, more resilient energy model a significant I hope so. as I said earlier, totals at 29 million in capital from 22 to 25 and only in the beginning stages of the transition that will take over a few decades. None of our investments represent more than 1% of the 29 billion and they result from cuts So we continue to feel confident in our 8.1% rate-based growth and the projected 6% to 8% rate of growth through 2020. offers low risk to the 9.5% to the 11.5% total return proposition. That brings me to my retirement announcement. As noted in the release yesterday, I'll retire at the end of the year. And as I mentioned, Calvin will assume the role of CEO and member of the Exelon board. have made this decision recently that I running its operations safely and at top-notch levels to serve our customers. We have built an amazing platform over the decades. I want to thank all of our talented employees for what they have done to get us where we are today and recognize the diverse experience and innovative approaches that will get us to where we need to go tomorrow. While I'll miss being part of the team leading this energy industry transformation, I have all the trust in the world of Calvin and his leadership team to rise to the latest challenges and excel in many ways. As always, thank you for your time and support, and we'll now take questions.

Thank you. As a reminder, to ask a question, you'll need to press star 1-1 on your phone. Please stand by as we compile the Q&A roster. One moment, please, for our first question. Our first question will come from Ross Fowler of UBS. Your line is open.

Morning, Chris. Morning, Gene. Chris, best wishes. as you deal with this health issue. I really sincerely hope everything works out okay. So just on slide, let's maybe go back to, Gene, go back to slide nine and just think about what this is communicating. If I kind of look at the 210, which is the midpoint of 21 guidance, that should be my base year for thinking about the the six to eight range. And then you're saying in 23, you're below that. So if I'm thinking about this correctly, if I take the 225 base or midpoint of 22, that's really saying given that that 7% growth off 21, that you're growing maybe at sort of 4%, if I'm thinking about the math correctly, off 22 into 23. But then if I think about what you're saying for 24 and 25, you know, the little squiggle lines here are around 7% and above 8. You've got to kind of get back to that 7% four-year CAGR midpoint off 21 by the time we get out to 25. Is that a fair way to think about this?

Yep, yep. You're thinking about it right, and I'll just reiterate that the tildes represent – year over year growth from the prior year. So the way you've walked through it is right. And then what we've tried to do is not give you a specific number for every year, but sort of narrow the outcomes based on the building blocks below the CAGR line. So you can see the combination of growth over those years puts us squarely in the 68% commitment, 21 through 25. Okay, great.

Perfect. And then maybe on the $200 million of cash tax impact, You said that's unmitigated. Is mitigation here really just about the Treasury rules? And what's the timing of maybe getting a first preliminary look at those Treasury rules? Is that really Q1 since every corporation is going to have to make an estimated tax payment at some point in April? And then if you mitigate that, does that change the equity need at all? Or is that equity need pretty firm regardless of what happens with this $200 million?

Sure. Yeah, so I think three questions there. First, when we think about mitigation, there is working with EEI and the industry on the regulations. So that certainly would be a meaningful mitigation there if the regulations are written in a way that allows for certain deductions that we've previously had. But I would also say, as you know, right, we will look internally to do what we can, you know, to mitigate anything that we can on our end. but that's right, the 60 to 70 basis points that we put on the slide is the unmitigated, whether through the regulations or internally, the most conservative impact. I think your second question, I'm forgetting, but the third question was if the regulations do mitigate it or if the 60 to 70 basis points go away, are we still committed to the 425 million that remains? We are. So we're not, you know, we don't expect to do any more than the billion we announced. As you know, we've already done the 575, and then the remaining 425 will execute between 23 and 25. Got it. Yeah, the second question, the second part of the question.

Yeah, timing.

Yeah. Yeah. So, you know, it would be helpful to have them by the first quarter. Obviously, that would be when we'd make our first payment. That would be helpful, and we, you know, sort of, signal that that would be helpful, but we really can't control. And, you know, we should know more next year, the sooner the better, obviously, but we're still working through that. The Treasury is obviously still working through that.

Okay, great. Thank you. I'll jump back into Q. Thanks.

Thank you. Thanks, Ross. One moment, please, for our next question. Our next question will come from Paul Zimbardo of Bank of America. Your line is open. Hey, good morning.

It's actually Julian here. Thanks for the time. And Chris, my best wishes here. If I may, just with respect to the squiggly lines, as we call them, and your commentary about being squarely within, I don't mean to repeat the last question too much, but to ask you, Does squarely within equate to effectively at the midpoint of the six to eight? Is that a fair way to interpret that specific language you used?

Yeah, I think we always aim to be, you know, solidly within the range, right? But we haven't given you, you know, sort of where within, but what we've tried to do is show you that if you look at the year-over-year growth and you look at the drivers below it, that we are confidently reaffirming our 68% 21 through 25.

Okay, fair enough. Sorry, I don't mean to wordsmith you too much. You used the words. And then related second follow-up, if I may, on balance sheet, I know you talked about uncertainties here, but it sounds as if, if I'm hearing you correctly, the risk of having to make a payment, that payment being unknown, you're confident in the current cumulative billion dollars of capital outlay on equity, right? as being intact almost regardless of the various scenarios. Again, it doesn't sound like it's less than a billion cumulatively, but it also similarly, depending on the scenarios, doesn't sound like it's more than that as best you can tell right now. And then if you can elaborate a little bit, is there any other nuance that we should be aware of that might be an offset to cash flow here to keep metrics intact, or is this just simply a reduction of the FODMET metrics?

Yeah, I think you're thinking about it right. We are affirming we don't need more than the billion that we mentioned. After analyzing the unmitigated impact, again, whether it's unmitigated through EEI or internally, we can absorb that on the balance sheet, stay above our downgrade threshold without incremental equity, and then be within our 13% to 14% over the planning horizon.

Got it. All right. Fair enough. Thank you for the clarification.

Thanks, Julian.

Thank you. One moment, please, for the next question. Our next question will come from Steve Fleischman of Wolf Research. Your line is open.

Hi. Good morning. Chris, I also want to give you the best wishes and congratulations Hope your health gets better. And just recognize, I know we're seeing it more through a different stock right now with CEG, but just the turnaround in nuclear that you help kind of make happen is pretty remarkable. So congrats on that. Just on the, I guess, Gene, just on the first question on the nonlinear growth. I think from the very beginning, when you gave the guide of the new Exelon, you did say that it wasn't going to be linear and may not be in the range each year. So just now that you're giving this incremental information, is it pretty consistent where it would have been if you had just given this at the beginning of the year, just reflecting this PICO rate cycle? for the most part, or are there other, like, big changes that have occurred?

Yeah, I think the trajectory is pretty consistent. There might have been some puts and takes between 23 and 24, but the sort of non-linearity, and I think the fundamental thing is, you know, it's consistent with what we said at Analyst Day in that we're investing $29 billion in which drives the rate-based growth of 8.1%, which drives the earnings growth. But because of the rate case timing, there's some variability in there. And I think what we're hopeful here is that this visual provides more clarity on how those rate cases impact different years.

Okay. Second question is, I think some people are trying to take each year number from the slide nine and kind of taking, you know, even though it's an estimate, kind of adding that up and When you do that by 25, you kind of maybe get to the lower half of the 25 range. Is that not what you should do because there's estimates, or just how should we, you know, take that?

Yeah, I think what I would just say, you know, the combination of growth over the years and then – The TILDAs, I'm laughing because you would laugh at how much we spent over TILDAs versus other things here to show the visual. But what we're trying to show here is that the combination of growth puts you squarely in the range. And so that's what we want to reiterate. Through the investments of the $29 billion, we're confident we're going to be squarely in the range.

Okay. And then just on the – going back to the alternative minimum tax – I think one of the big issues of focus with Treasury is the repairs tax and whether that could get included. If you could get the repairs tax addressed as part of this, would that cover most of this $200 million? Because some companies are actually assuming that it will get fixed, yeah.

Yeah, it would.

Okay.

It would substantially mitigate it, yeah. The one thing Steve's going to do with the IRS – So they march to their own beat. Our tax folks here working with the industry and the EDI are really working on trying to communicate the necessity to move faster. But, you know, there can't be a guarantee it's in the first quarter when you have a good agreement on the approach yet.

Okay. Great. Thank you very much. Thanks, Steve.

Thank you. One moment for our next question. Our next question will come from David Ocaro of Morgan Stanley. Your line is open.

Hey, good morning. Thanks so much for taking my questions, and Chris, best wishes for my end as well. As we look at the upcoming ComEd multi-year plan filing in January, I just wanted to get a sense how comfortable And confident are you in managing that jurisdiction within a four-year plan going forward? Do you anticipate the parameters are going to be manageable to work under over that period?

This is Gil Quinones, CEO of ComEd. You know, we have to have a constructive relationship with stakeholders and other parties here in in our jurisdiction. And what you will see from us is that our plans will squarely align with the goals of the Climate Equitable Jobs Act and generally the energy, environmental, and economic development policies of this state. So that will be our plan. And as was noted in the earlier remarks, the details of such we will share in our next earnings call.

Okay, got it. Thanks. And then as we think about just the picoelectric earnings dynamic here, I was just wondering if as you're planning out longer term, are there opportunities that you're looking for or exploring to smooth out just the EPS contributions, whether it's kind of shifting around expenses and cost-saving opportunities? Are there longer-term ways to smooth out the EPS growth trajectory?

And the constructive regulatory environment within Pennsylvania is something that we've come to build on and have that relationship, collaborative relationship with the regulators. So as we continue to manage across our platform, we will always look at costs within the operating units as well as at the corporate center. So to answer your question directly, yes.

Okay, great. Thanks so much.

David.

Thank you. One moment. Just a second for our next question. Our next question will come from Jeremy Tornet of JP Morgan. Your line is open.

Hi, good morning. Good morning, Jeremy. Just wanted to come back, I guess, to 2325 growth drivers a little bit. And anything else you could say as far as what you're looking to minimize the headwinds for 2325? to operate against the plan and really just wanted to see what 30-year expectation was baked into the guidance there.

Sure. Yes, I'll take that. As Calvin mentioned, I think the first and foremost is our continued focus on cost management, so we continue to do that. I think the other thing is we're also looking to manage interest rate volatility. When you think about our long-term financing, we use tools there like pre-issuance hedging to dollar cost average into the long-term rates before the issuance. On our short-term debt, we've got interest rate caps that protect against the upside but also retain the benefit should rates fall. So we're doing all the things we can to control costs heading into 2023. And then in addition to that, I think you asked about where we marked this as. I think in the footnote it says as of 930. So we marked ComEd to the 930 board rate for 23 there.

Got it. That's helpful. Thanks. And maybe just one more question. If you applied the new Illinois performance metrics historically to ComEd, how would it have scored? And how do you think about the opportunity here going forward?

Yeah, I would say the categories are somewhat consistent, but they're also different enough where I don't think you can back-cast it. But what I would say is under the formula rate, one piece that's very different is there was only downside risk. And so we only had penalties under the formula rate. What's constructive about this new path going forward is we now have the opportunity to do better. And as you heard Chris say, ComEd's performing the best it ever has in its 100 years of operations. And so we're excited about that. I think the other thing about the multi-year plan is the upfront alignment around the investments. And that was also there in the formula rate where we agreed that there would be grid modernization required and smart meters. And when you look at the results of that, ComEd improved the reliability 82%. So we like the ability to align up front, and we like the ability to get recognized should we perform well, which ComEd has done.

And, Jeremy, I would add that keep in mind how those performance metrics were developed. They were done in collaboration and partnership with stakeholders. So it started the process of transparency in which ComMed, as they go in to file their multi-year rate plan, that's the value of working with your customers and your regulators to ensure that the investments that you are making are leading to the increased reliability, resiliency, and meeting the in a constructive regulatory environment.

Got it. That's helpful. I'll leave it there. Thanks.

Thanks, Jeremy. Thank you.

Thank you. One moment for our next question. Our last question will come from Michael Lapides of Goldman Sachs. Your line is open.

Thank you very much. And Chris, obviously, wish you well. Wish you the best physically. A cost question. When you benchmark yourselves, whether benchmarking T&D, O&M, or benchmarking at the corporate center, and I'm sure you still do a lot of that, where do you think you do not score in the first quartile, meaning from a cost management perspective? Where do you think, whether it's transmission, distribution, customer service, customer accounts, or corporate G&A, Where do you think the greatest opportunity set, not in the near term, but over a three-to-five, three-to-seven-year period is to get more efficient? Like, can you just kind of point directionally at where the opportunity sets may lie?

Yeah, I think it operates – we look at it across the board, and we would say there's opportunity everywhere, right? We want to drive to the lowest cost possible while maintaining safety and reliability. I think the where – Where everyone can kind of see what we see is where it shows up in our affordability metrics because O&M is such a lever when you think about driving affordability. And so when you look at our electric, whether it's bills or rates on any metric, we are below the national average, whether it's percent of median income, whether it's average rates. We look at our average rates and they're 20% below the top 20 metropolitan cities. When you look on the gas side, our gas bills are some of the lowest in the states we operate. So I think that that's where you can see our history of continued financial discipline. But, you know, that's important that we look across all areas, whether it's the corporate center or utilities, and I think it shows up best in those metrics.

And, Michael, where that jumps out at you, as a result of that. And we were spending so much of that billing over to the other side of the business. And we ended the year on the split to go back to our commissions, and we met that regulatory compact. And that's what I'm proud to see of the teams and the leadership and how they continue to dive in. And as I said earlier, cost will always remain a focus of ours. And under Chris's leadership, what you've seen is that Exelon has continued to raise the bar and meet that challenge. And I commit to you and we commit to you as a leadership team, we'll continue to do that.

Got it. And I guess one follow-up on the cost side because I was kind of probing for a little more granularity and kind of where when you benchmark performance, you see the opportunity sets within the organization to kind of get the cost performance up. That's kind of the follow-on if you can give a little detail. The other is we're starting to see companies that have formed via years and years of combinations recognize that there's a little bit of hidden value in corporate real estate. And given the fact that you serve a lot of urban markets, just curious how you're thinking about the real estate footprint of the company and whether there's value that maybe not necessarily being the owner or the lessor of all of that real estate. We're seeing companies like one of your T&D neighbors in the Midwest, Mid-Atlantic, and we saw PG&E with their headquarters a year or so ago. Just curious how you're looking at that opportunity set as well to both lower costs to improve the income statement but also to improve customer bills.

Yes, we have and we continue to look at that. We are consolidating our control centers across our fleet. We continue to look at how in this new hybrid work environment in some of our areas, what does that mean for office space? And as part of our real estate portfolio,

You know, I think you're used to us having the nuclear benchmarking book and how every nuclear operator shared their operational data and their cost data. UCG, we got a lot of information from. And so we had very solid benchmarks. is the national rates, affordability rates, and we continue to staple all of those. But you're not going to get the same level of disclosure from every utility like you got from every nuclear plant. So, you know, the team has to work. also finding willing partners that will let us benchmark with them and they benchmark with us. So we have a very high level of confidence, as Gene said, with these affordability metrics and the total cost So we have to depend on our own challenges and depend on some that we can benchmark with and continue to drive these other indicators to ensure we're providing the best services at the cheapest price.

Got it.

Thank you, Chris.

So I think that's the end of the call. I'd like to thank you for joining the call today. The team looks forward to seeing many of you at DEI later this month. And with that, I'll just close everything out and thank you all.

Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.