Exelon Corporation

Hello and welcome to Exelon's second quarter earnings call. My name is Gigi and I'll be your event specialist today. All lines have been placed on mute to prevent any background noise. Please note that today's webcast is being recorded. During the presentation we'll have a question and answer session. You can ask questions by pressing star 1 1 on your telephone keypad. If you would like to view the presentation in a full screen view, click the full screen button by hovering your computer mouse cursor over the PowerPoint screen. Press the escape key on your keyboard to return to your original view. And finally, should you need technical assistance, as a best practice, we suggest you first refresh your browser. If that does not resolve the issue, please click on the help option in the upper right-hand corner of your screen for online troubleshooting. It is now my pleasure to turn today's program over to Andy Plenge, Vice President of Investor Relations. The floor is yours.

Thank you, Gigi, and good morning, everyone. We're pleased to have you with us for our 2023 second quarter earnings call. Leading the call today are Calvin Butler, Exelon's President and Chief Executive Officer, and Jean Jones, Exelon's Chief Financial Officer. Other members of Exelon's senior management team are also with us today, and they'll be available to answer your questions following our prepared remarks. Today's presentation, along with our earnings release and other financial information, can be found in the investor relations section of Exelon's website. 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. You can find the cautionary statements on these risks on slide two of today's presentation or on our SEC filings. 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. It's now my pleasure to turn the call over to Calvin Butler, Exxon's President and CEO.

Thank you, Andy. Good morning, everyone, and thank you for joining us for our second quarter earnings call. We continue delivering on our plan as expected, which is a testament to all of the work put in by our dedicated employees. But before we get into our results and business updates, I'd like to first start by acknowledging a key milestone. In July, ComEd reached the end of the three-year term of the deferred prosecution agreement with the Department of Justice. At the court status hearing, the government moved to dismiss the charge, noting the company fully complied with the DPA, which the court granted in the hearing. We remain committed at all levels of the company to the highest standards of integrity and ethical behavior, and we look forward to building on the trust of our customers as we continue to move forward. In that spirit, I am pleased to welcome Anna Riccio to our Board of Directors. Anna is the General Counsel, Chief Compliance Officer, and Corporate Secretary for Cargill, and she brings highly complimentary experience as an attorney and business leader. Her commitment to operational excellence and compliance will provide invaluable oversight. Now turning to the results for the quarter. As you can see on slide four, we earned 34 cents per share on a GAAP basis and 41 cents per share on a non-GAAP basis. These results are right in line with what we expected this quarter, and we remain on track to earn within our guidance range of $2.30 to $2.42 per share for 2023. We continue performing operationally at a very high level. Three of our four utilities had best on record performance in outage frequency and outage duration, which I will touch on more on our next slide. We have also continued to progress through our rate case calendar with six active base rate cases underway in Illinois, Maryland, Delaware, New Jersey, and the District of Columbia. Most recently, on May 16th, we filed our second multi-year plan for PEPCO Maryland, the Climate Ready Pathway Plan. The filing outlines PEPCO's near-term proposal to advance the state's climate and clean energy goals while taking steps to mitigate the impact of these efforts on customers bills. The proposal includes over $150 million of climate solution programs to help Maryland meet its goals in the areas of transportation electrification, building decarbonization, beneficial electrification, and distributed energy integration. It also includes a proposed performance incentive mechanism to focus on reliability, greenhouse gas emission reductions, and removal of equipment posing health and environmental risk. We look forward to working through the process with stakeholders and the Commission staff toward rates effective in the second quarter of 2024. Beyond PEPCO Maryland, we have now received intervener testimony in our BTE and ComEd multi-year rate plans and filed our rebuttals, and additional milestones await us in those cases in August. along with activity for Delmarva Delaware and Atlantic City Electric. The Public Service Commission of the District of Columbia has also set its schedule for the PEPCO DC multi-year plan. You will hear more from Jean about all the work underway to align with our regulatory stakeholders. Now looking past 2023, we'll also remind you of the guidance we've previously provided on our long-term outlook. We expect to be at the midpoint or better of our 2021 to 2025 and 2022 to 2026 6% to 8% annualized earnings growth ranges and to grow the dividend in line with those earnings. Over the next four years, we anticipate investing over $31 billion to support the energy transformation, which is what's driving that growth. And I'll remind you that we continue finding opportunities to further support the transformation, whether it's increasing affordability for customers are strengthening the durability of our long-term investment plans. For instance, we have talked about our efforts pursuing grants under the Infrastructure Investment and Jobs Act, which support the investment programs we have laid out for the commissions, and we recently announced winning approximately $30 million of grant funding for middle-mile broadband investments at BGE and ComEd. Additionally, you may have also seen that PJM recently voted to proceed with transmission upgrades to address reliability challenges associated with retirement of the Brandon Shores coal plant in Eastern Maryland, with over $850 million of work assigned to our utilities. Now, while most of the incremental spend for that investment occurs beyond our current guidance window, it's a great illustration of how we continue to have opportunities to strengthen and lengthen our expected rate-based growth as the largest pure T&D utility in the United States. Our transmission upgrades ensure customers are able to buy cleaner generation and that they can depend on a reliable, resilient grid to deliver that power. Before I move on to operations, I want to mention that we published our latest Exelon Sustainability Report in mid-July. This is the 12th report in our company's history. We are incredibly proud of the work our organization puts into ensuring we are leading the energy transformation in an affordable and equitable manner. Our purpose, powering a cleaner and brighter future for our customers and communities, really shines through that report. And the progress we continue to make in fulfilling that purpose is meaningful. Here are a few examples. We have connected over 200,000 customers with over 3 gigawatts of renewable energy resources a 16% increase over 2021. We saved close to 25 million megawatt hours in 2022 with our award-winning energy efficiency programs, a 9% increase that avoided 9.5 million metric tons of greenhouse gases and saved customers over 30 million at our average retail rate. Our support for diverse suppliers is now up more than 56% from 2018 levels, having spent $2.9 billion with such suppliers in 2022. Additionally, 62% of our $7.5 billion total supplier spend is with companies in the communities we serve. Our annual sustainability report illustrates all the ways in which our more than 19,000 employees ensure our communities greatly benefit from the work we are doing to support their energy transformation goals. Turning to slide five, I'll provide an update on our operating performance for the first half of the year. As it pertains to reliability, we continue setting the bar for performance. All four utilities operated in at least the top quartile, and ComEd, PECO, and PHI achieved best on record outage frequency performance. That makes it the second quarter in a row for ComMed and PHI for best on record performance. Those three utilities also happen to achieve best on record system outage duration performance, and BGE continues to operate in the top quartile. Their performance illustrates that the investments we are making in the grid provide the footing for this operational excellence, and then it is up to our employees to rise to the challenge of keeping customers online are getting them back online as quickly as possible when outages do occur. Now, that job is getting harder to do with storms growing more frequent and severe, but it's increasingly important to do as society depends more and more on electricity. Nationally, we expect to see 50% annual growth in electric cars and 12% annual growth in data centers, and ComEd in particularly is already seeing sizable opportunity in data centers. The data center growth will only strengthen as industries increasingly rely on cloud services and AI. As the nation's largest T&D company, we must rise to the challenge of meeting these incremental demands on the grid. This operational performance was matched on the gas side, with all three utilities continuing to perform at top decile levels for gas odor response. Our customer satisfaction scores remain in line with those reported in our first quarter call. Our utilities are performing in the second quartile versus the 2021 benchmark. When costs across the board were lower, pandemic relief had not yet rolled off, and customers had not yet been impacted by the escalating interest rates and commodity prices. We are working every day to ensure customers are aware of the options they have to manage their costs, and we have seen increased engagement by our customers through these efforts. In fact, ComEd announced just two weeks ago that it won several recognitions in the 20th Annual Best Practices Awards by Chartwell. These annual Chartwell Awards recognize excellence among electric and gas utilities with respect to customer-oriented projects, programs, and service initiatives. One of these awards included recognition for ComEd's Community Energy Assistance Ambassador Program. This program originally launched in 2020 in response to the economic impacts of the pandemic. It was designed with a community-based organization to increase education and access to financial assistance options that can help income-eligible customers pay their electric bills while creating local employment opportunities for this same vulnerable population. but it is a constant reminder of the importance of focusing on value for our customers as well as affordability. And we are continuously seeking to reduce our own operating costs in addition to pursuing the customer-focused initiatives we have discussed. I will conclude by discussing our safety performance, where we lost ground at three of our four utilities. Ensuring our employees and contractors operate in a safe environment is of paramount importance. Lower performance this quarter largely resulted from low-impact OSHA recordables, like slips and falls, and minor vehicle-related incidents. As a result, each of our operating companies have action plans underway to address areas of needed improvement to ensure that we are operating at our standards. This includes revisiting our safety plans for the year to ensure they are adequately addressing the issues we have observed year to date. Other examples include facility reviews to enhance safety and expanding our simulation-based training to offer more opportunities for employees. We are working hard to drive safety performance to the levels that we expect. I will now turn it over to Jean to discuss our financial performance and provide additional color on our regulatory activity in the second quarter. Jean?