Good morning. My name is Cassandra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Exelon Third Quarter Conference Call. [Operator Instructions] And now I would like to turn the call over to Stacie Frank, Vice President of Investor Relations. Stacie, you may begin.

Thank you, and good morning. Welcome to Exelon's third quarter 2011 earnings conference call. We issued our earnings release this morning. And if you haven't received it, the release is available on the Exelon website. The earnings release and other matters we will discuss in today's call contain forward-looking statements and estimates that are subject to various risks and uncertainties, as well as adjusted non-GAAP operating earnings. Please refer to today's 8-K and Exelon's other filings for a discussion of factors that may cause results to differ from management's projections, forecasts and expectations and for a reconciliation of operating to GAAP earnings. In addition, during the call, we will be discussing the proposed merger of Exelon and Constellation Energy. Today's discussion is not a substitute for disclosures in the definitive joint proxy statement that was mailed to shareholders on or about October 12. For important additional information regarding our proposed merger, including the associated risks and uncertainties, please refer to the earnings release in today's 8-K, as well as the definitive joint proxy statement prospectus. Leading the call today are John Rowe, Exelon's Chairman and Chief Executive Officer; and Matthew Hilzinger, Exelon's Senior Vice President and Chief Financial Officer. They are joined by several other members of Exelon's senior management team, who will be available to answer your questions. And we'll now turn the call over to John Rowe, Exelon's CEO.

Thank you, Stacie. Our operating earnings of $1.12 beat our own expectations in the upper end of the range by a couple of cents and beat your consensus by $0.03. We are very proud of having achieved that because in the third quarter, we were haunted by intense storms. As you all know, we had a hurricane in the East and we had one month with the most severe repetitive storms that I have ever seen at ComEd. Matt will discuss the storm costs and restoration performance in most -- in more detail. But just let me say that at ComEd, Frank and Anne's ability to get the troops out again and again, to get extra troops in to deal with repetitive storms was really remarkable. And the preparation that Denis O'Brien and Craig did for the hurricane was really exceptional. PECO was one of the first utilities to have all of its customers back and did it with absolutely seamless public relations. So it was a tremendous performance. Our nuclear organization continues to expand [ph] at world class levels. We have a capacity factor 95.8% in the third quarter. Now the standout driver, the thing that made our ability to recover all of those storm costs in the same quarter was our strong performance in Texas. Due to the extreme heat, tired men [ph] , we had on peak crisis in the ERCOT north zone of $107 per megawatt hour. We had some hours as high as $3,000 per megawatt hour. Our units generated 2.4 million-megawatt hours of electricity, which was an increase of 20% over last year. Higher prices in the spot and the day-ahead markets, and the open generation link in our portfolio enabled us to gain about $0.10 per share in the third quarter from our…

It is.

We have a settlement with Duke also? Not only does this create an opportunity market for some 70 million-megawatt hours of electricity, I view this as one of the most important step forward for competitive markets in the past decade. As you all know in the late 90s, it seemed like everything would be competitive and then after Enron, things rolled back. So here we have cases of utilities that have been strong advocates of competitive -- of regulated monopolies agreeing to a larger percentage of market participation. I think that's a very good thing indeed and Joe Dominguez and Scott Brown and Delia Stroud of our team just did a tremendous job working on these things in a way that won't possible [ph] for the other utilities but was definitively pro-market. Closer to home in Illinois, we watched Senate Bill 1652 and the accompanying trailer bill on an hourly basis. The trailer bill passed the Senate yesterday by the required majority to overturn the governor's veto. The trailer bill passed out of House committee this morning by about -- I think it was 17:1 or 16:1. We believe both bills will be presented to both houses in the next day or 2 but you'll know when they pass as soon as we do. Frank Clark is on the phone and so is Joe Trpik and they can talk to you with more detail about these. But I think this is a remarkable effort to fund the legislature who both try to improve the electric service in Illinois and to do so in a way that's fair to ComEd and Enron. I'm very pleased about this work. So just to finish off and turn it over to Matt, again, and again we find a way to deliver earnings. And I think we are on track for a very good year at Exelon and there is no part of the company that hasn't made a contribution. As you all know, Tom Terry's tax work has been exceptional this year, but all of the basic units are pulling together and we're giving you results. So with that, Matt?

Thank you, John, and good morning, everyone. This morning I will review the operating results for the quarter in more detail and share a few thoughts on power market performance and cash flow. As John mentioned, Exelon delivered operating earnings of $1.12 per share this quarter, $0.01 per share better than the same period from the prior year. Moving to Slide 9, Generations operating earnings are up $0.04 per share this quarter, compared to last year, largely due to improved portfolio and market conditions. It reflects PECO's transition to market at the beginning of the year and our third quarter of Texas performance. As you can see on Slide 10, we are near our ratable hedge targets for 2012 and '13, although we slowed down the pace of our hedging this quarter, we continue to make sales and able to benefit from the higher pricing we saw periodically through the quarter at the West Hub and NiHub. We attribute the higher pricing primarily to 2 factors: first, the markets' reaction to the Cross-State Air Pollution Rules; and second, additional heat rate expansion at the West Hub and NiHub consistent with historical levels of similar natural gas prices. On the right side of the slide, you can see that prices increased following the release of the Cross-State Air Pollution Rule in early July, the increase began when some limited amount of emission allowances began trading in early September. Those future rates cleared at prices more than double the EPA price of approximately $1,100 per ton. Since then, the EPA has modified the state emissions budgets and we are currently seeing 2012 SO2 emission markets quoted at $700 to $1,100 per ton, which is at or below the EPA's expectations. With respect to heat rates, NiHub heat rates continue to build on…

[Operator Instructions] Your first question comes from the line of Greg Gordon from ISI Group.

Gentlemen, when you look at what happened in Texas, obviously, you had a big benefit from the heat wave, the $0.10. I think it appears that you're open gross margins reflect, I think in part, higher results going forward from Texas just given how tight that market has become. Is that true? And can you give us some sense of whether you think there's a structural repeatability to the type of option value you retain there and how that fits into the industrial logic of the merger?

The -- Stacie and Ruth Ann are not gentlemen, but other than that, I'm going to defer it to Ken, who is a gentleman, to answer that.

Hey, Greg, clearly as you can see in our hedge disclosure, the increase in heat rates in Texas has added value in our open gross margin. In addition and that obviously we picked up the Wolf Hollow, the second half of the Wolf Hollow plant, which we had the first half PPA, and we have a solar facility there picking up some generations. So about half of its increase -- half of the increased generation in our hedge disclosure represents increased dispatch on our plans and half are the new acquisitions in Texas. In the kind of market that is set up for this kind of volatility if you have supply/demand equilibrium driven by either longer-term supply/demand fundamentals or in some part, in this case extreme weather, extreme drought that caused the conditions that we saw in August and somewhat through September. So the heat rates picked up to a point where they represent more value, option value, for peaking assets. I think this is something that can continue obviously driven many of the fundamental long-term drivers which we discussed, as well as weather, but this is an indication that, as you get closer to equilibrium, you will see more power volatility and see higher value for the kinds of assets that we have in Texas. From a retail business perspective, we like the retail business. The retail business is the most effective way for us to find hedges for our portfolio that's designed to serve retail load. We have that, in large part, in the Mid-Atlantic, we have it in Texas with our Mid-American peaking assets, so this in no way changes our perspective on what the value of a retail business and load following in a portfolio can do for you. We just don't like to sell it when it's not valued fairly in the market, and we'll sell it appropriately when it is valued fairly in the market.

I don't think we see any consistency coming out of these Texas prices, but on the other hand, as Ken said, the closer Texas gets to equilibrium, the more frequently we should see these periods of high prices.

I have 2 other questions, the first is, in Maryland, I know you're currently negotiating -- trying to negotiate a mutually beneficial outcome. If feels like the biggest area of dispute is your willingness to build 25 megawatts of renewals and their desire to have several hundred megawatts of renewables, what do you think the most likely -- some mutually constructive outcome there might be?

Well, it's a -- it's add more dimension than that. I think the Public Utility Commission's RFP on capacity suggests that it has some interest in a large number of megawatts produced in the most economic way, whatever that is, and that means probably gas. The governor's office is clearly interested in more renewables and so the negotiation has to be designed to achieve an [indiscernible] optimum efficiency between a number of different perspectives. I do think you have your finger on it. I think an ultimate settlement requires more renewables.

Okay. And my final question, and maybe this is more up yours and Bill Von Hoene's alleys since he's on the board of NEIL but what is your perspective on what's going on at Crystal River 3 with the significant delamination event there as it pertains to sort of introspection on your part on the care and maintenance of your units as they age?

Well that I, you got me, you've got Bill Von Hoene, you've got Joe Grimes. And Joe, I'm going to kick this off but I think you're going to have to pick it up from Bill and I because there are those who do not think 2 lawyers are the best people to opine on containment integrity. But the real message for us is anytime you have to make a hole in the containment, do it with exquisite care and be very, very careful about what you're doing. Also, go into a containment like that as rarely as possible but, Joe, would you pick up on that please?

Yes, John. We have no plans in our near-term planning scope which would have us do any concrete cutting on any of our structures similar to a containment. We are continuing to closely follow the activities associated with the concrete crack indications and we don't currently have any concerns for our facilities.

Bill, you want to add anything to that?

The only thing I would add, Greg, is that, as you know, the claim is under consideration at NEIL currently and there's been no determination as to how we have to handle Metal B forthcoming.

Next question comes from the line of Jay Dobson from Wunderlich Securities.

John, I was hoping I could follow up on the last question regarding Texas and understanding that operationally that was just a fantastic result and the folks that operate deserve a lot of credit, but as we look out to the next year, you would be assuming that Constellation merger has closed, you'd be operating from at least a neutral and probably a short position rather than a long position, and I'm just wondering how, as you look forward, your comments regarding retail, how you're thinking about these tightening markets in a retail context, both strategically but then also as you frame up and prepare for the consummation of the merger. How you think about hedging particularly in Texas, tactically understanding that you will have a large short position you will be taking on your books.

We are strategically somewhat less comfortable with shorts than Constellation has been. We believe one of the great virtues of the merger is it puts their retail marketing capability with our Generations. And we like that in Texas as in other places. Ken Cornew, who will be heading the whole trading shop for the combined company, will be working with both Chris and Mayo to try to come up with a conservative, adequately hedged approach to handling places where we have more load than generation. I think the real difference is that learning, as we all have from the last 9 months, we probably hedged a little sooner than Constellation has historically or a little more completely, in other words, we take the tail out a little further. It was possible to do that, indeed, Ken was able to sell some power at very high prices from our fleet in the wake of the heat and then buy it back a few weeks later at cheaper prices than he can produce it for. So to us, it's a matter of learning from the whole thing. We believe Constellation will turn out to have had some losses in Texas. Ken's last guess is that they're smaller than our gains, but we don't know yet and you'll find that out in the Constellations' earnings call. What's really important here is the 2 things are stronger together than separately and we're going to impose a conservative hedging discipline on the whole. Ken, would you like to add to that?

Just a couple of comments, Jay, to add to that. We do have, when you combine the fleet, a substantial amount of geek load coverage capability in Texas, so from a peak perspective, I don't think we have the situation you're describing. Maybe more from an expected generation situation, is what you're describing, and we've served loads for many, many years. We've served a 23,000-megawatt peak in ComEd, we served almost a 9,000-megawatt peak in PECO for many years with Generation, with certain baseload generation more in the Midwest than having to add a peak into it with a well-rounded portfolio in the East. And we know how to do it, we understand and know how to create a portfolio that will fit our needs in Texas and quite frankly, I think it'll be pretty easy for us to do that once we bring the portfolios together. But I have to say, we haven't brought the portfolios together and we'll be taking a deeper dive when we do.

And just a detailed question on Texas, how long was the Handley plant out in the early third quarter?

The Handley plant was out approximately 7 weeks and the rest of our fleet operated superbly.

That's great. And then, John, on the Mark 1 retrofit, have we gotten our head around what those costs might be? I understand from the second quarter, we do feel they're going to be small but has there been any granularity on what that might cost?

There really isn't yet. Strangely, what the commission is doing on debt hardening, I think will add more cost to the Mark 2s than the Mark 1s, but Joe, and Jeff, would you pick up on that question?

Yes, I mean, at this point in time, John, we again don't see any significant costs in 2012 and we actually expect to continue that the cost for compliance for both the Mark 1s and Mark 2s will be very manageable. We'll have a better estimate on those compliance costs once we get through the technical review process with the industry and the NRC through next year.

That' great. And then, Matt, just one quick detail finance question, I remember from the second quarter you had a tax benefit from the transfer of cash to a qualified nuclear trust and you indicated in the second half of the year you'd have about a $0.01 benefit, did that book in the third quarter? Or is that pushed to the fourth?

No, it came through in third quarter.

Your next question comes from the line of Jonathan Arnold with Deutsche Bank.

Quick question on Texas, I noticed in the release, you mentioned having had this outage at one of the units early in the quarter, which I guess is before the real spike, so I guess I have 2 questions on that. Would we have seen a notice of better result, if that outage hasn't occurred and then how in terms of the way you hedged would that outage have impacted the result had it happened, say, in August?

John, we are aware that the outage was in the middle of the summer. Did happen and it was in July and in part of August, we are aware of our situation operationally staying very close with Sonny Garg and his organization. We decide to expand the length of our portfolio in August to keep our position where we wanted it to be. We got the plant back sometime in August. We got another half of Wolf Hollow sometime in August. Those things went in our favor. If the plant was running full time and market prices stayed the same, we would've made more money. But when more plants come online, you know that impacted prices well, so it's hard to recreate how that will occur but we're very happy with our result. It was executed flawlessly by Wolf Coon [ph] and our sales trading team and the results show it.

And then another -- one other thing I have for you is, it seems I guess in the last -- since the end of the quarter, we've seen the score [ph] of heat rates in PJM and related Hubs, roll over beyond 2012 a little bit, and adding that '13, '15 window, what do you attribute that to -- I mean, is it hedging activity in the market, is it the fact that gas is held up a little better in the out years, 2012, any sense of what's causing that?

Jonathan, my guess is, it's more of the hedging activity that's happened since the quarter's turn. When, I guess, the September 30 prices as you see in our hedge disclosure, reflect higher heat rates than we've seen, a little bit higher than we've seen in the last 20 days, although heat rates have held up really well, anytime you get cycles of hedging activity, you'll see some movement in power price one way or another and I think that some of it I would've told you based on September 30 prices a larger amount of our forward upside from the environmental regulation was in those NiHub and West Hub price and in the last 20 days or so, it's shown me that there still is more upside, particularly in the NiHub levels, so I think heat rates have moved up substantially to reflect the reality in spot prices and the reality of price impact from environmental rules and you will see that cycle a bit as gas price or power price moves with short-term market activity.

Okay. And then if I could just on one other topic on the pension, it looks like that the move into fixed income was very timely. And should we think about this the mix that you shifted to as being static now with that big improvement in the bond portfolio, is it possible we see you rebalance this again?

Well, I think it's directionally static. Doug Brown, who manages it, is here. Do you want to pick up on it, Doug?

We view that as a dynamic allocation that we constantly re-evaluate, so we're very happy where it is right now but if rates were to go lower we could lighten up on the hedge. We're firmly committed to that strategy, we'll always have a hedge but we constantly evaluate, so it could move in the future.

Unless that sounds too much of a debt, Doug has been very firm with our risk management committee on our board. He thinks year in and year out, we actively matching our investments more to our exposure than we were before. And we have been better off 3 years ago, 4 years ago, if we'd started Doug's plan earlier, so while I'm sure he'll change it from time to time, the direction of a larger weighting toward debt I think is a pretty constant Board commitment. Doug, will you agree with that?

Yes, John, I would agree with that. And I think as rates will eventually go up and the funded status will improve, we will actually continue to increase the hedge level and the matching portfolio strategy.

So when you talk about asset allocation and then a liability hedge, is the hedge something different from just increasing the bond waiting or is it basically the same thing?

It will be the same thing. We roughly have about 40% of the assets in what we call the liability hedge portfolio. It's a physical bond portfolio of treasury at high-quality corporates that match the interest rate characteristics of the liability.

Okay. So -- and it's only a hedge in the sense that it's just a higher percentage weighting that you used to have before?

Yes, much higher. We essentially didn't have very much of a hedge at all previously and we moved to a rather high level right at the moment.

The next question comes from the line of Steve Fleishman with Bank of America.

Just, first a question regarding merger approval in Maryland. Could you maybe give us kind of a summary sense of what do you think the main issues are that need to be resolved still with the state of Maryland -- like what are the couple of critical path issues with them?

Well, I think we did that largely, Steve, on an earlier question. The issue is, what does the state as an entity, really want as an adequate demonstration saw [ph] benefits to Maryland? And we put in a package to start with, match to scale, the first energy allocation package. We knew it would be a little different when you're talking about buying the State's largest utility. And the real issue is trying to guess what the commission wants because you can't talk directly to the Commissioner and to work with the Governor in the governor's office as to what they want and as an earlier question explored, the governor's office appears most interested in more renewables. The commissioners may have some interest in accelerating the timing when additional gas capacity comes online. I think those are the nub issues. We hope we have largely made the city happy with the offer to build a new office building in the city, but this is a multiparty negotiation and it can all change a little before it's done.

Okay. I guess just conceptually, the issue of wanting more gas generation is more of a general issue that has a lot of broader implications, as I know you know, than just this merger. So how do you resolve something like that in the context of a merger?

Well, the problem with a merger is you're at a point when you're need to negotiate is at the highest, that's what the prices you pay for the benefits you get. I don't think anyone thinks the whole issue of how much new generation comes on in the East when we solve in the merger proceeding, but there is a public benefits test here and we're going to see what's more important to people directionally. As you know that -- and you know this as well as I do, this issue isn't confined to Maryland, we went through it in one way in New Jersey and at FERC, it comes up in Illinois on the proposed Tenaska plant. Everybody likes markets except when they want something else.

Okay. One other question, totally separate on the EPA rules coming, I guess soon, just what's your perspective on how -- I mean obviously a lot of the industry is pushing for more time, in some cases, kind of like a blanket extension of time. Kind of what's your perspective in how EPA is going to deal with the mix of the more time and the economic worries issue in this? And reliability issue, I guess, it keeps getting brought up in this ruling.

I think we're going to try to make people prove that reliability point. There's a lot of talk about reliability problems that simply don't exist and we're constantly pushing that they announce their shutdown plans and then let FERC and PJM investigate whether there are any reliability issues. We think they will, in fact, be very few and we're being very pugnacious about saying, "If you're going to claim a reliability problem, prove it." EPA has some discretion. We would certainly urge EPA to use its discretion where there are real reliability problems but not phony ones. And from an Exelon economic point of view, it doesn't trouble us much if people get a little more time where they're actually putting on a new scrubber or some other major rehab. But we're adamant that nobody should get more time for a plant they're gonna shut down anyway.

Your next question comes from the line of Julien Smith with UBS.

So I wanted to ask, you commented briefly before on Casper and seeing some of that flow through, I mean, perhaps being a little bit more explicit about it, how much of an uplift do you expect to see into implementation into year-end given where pricing is today and then maybe can you comment a little bit more granularity call it, West Hub versus NiHub on that just to get a kind of...

I'm sorry, I can't answer that but I think the short answer is we think a lot of that effect is already in the market but Ken, go ahead.

We have just [indiscernible] in our modeling scene about a $1 or $2 uplift in prices from the cross-state rule. We think that is largely in the market, both NiHub and West Hub, the $2 is more of a NiHub number and the $1 is more of a West Hub number.

With regards to residential retailing and aggregation, there seems to have been quite a few developments of late in Illinois, it seems like there's this accelerating trend. Perhaps you could comment, somewhat in light of your pending merger, on your own activities and perhaps activities of others in the State to that end and where you anticipate seeing that moving as we look at 2012?

Well, we believe that with what's happened in power markets, what's happening in more regulated jurisdictions, the opportunities for retail marketing are consistently increasing. Most large customers have switched where they can, that's true in both Illinois and Pennsylvania and in other competitive markets, but we're seeing more switching by small commercial customers, the beginnings of serious switching by residential customers, with more in Pennsylvania than in Illinois but the trend is the same and more efforts by municipalities to aggregate and this is one of the reasons why we value the Constellation purchase, because they're further along in developing both the marketing groups and people and the backup IT platform than we are. With that, I'll turn it over to Ken.

And we think assistance in our marketing to commercial and industrial customers in Illinois and that business remains a solid viable business. We focused our attention on industrial and commercial customers in Pennsylvania and have spent most of our time developing those systems and people and capability to market to that segment. We continue to push and move into the Ohio area in the industrial and commercial segment and as John indicated, once we bring together the Constellation retail element, we will be in the residential market. We have no activity in that market right now.

Great. And then the last quick question, you kind of alluded to it previously with regards to Maryland, perhaps just commenting a little bit more broadly, what -- would you feel comfortable participating in the RFP as its proposed currently or any further flavor around the participation in what's been proposed?

I'd like Darryl Bradford to pick that up. My own view is we might participate in the RFP but be more likely to be a nonconforming bid, but Darryl?

Yes, John. The RFP has been extended out now so that responses aren't due until January as you may know, the commission issued an RFP the Maryland Energy Administration had some questions about the shape of the RFP and whether it should be expanded to include renewables. So it's a matter that we're going to continue to watch and evaluate. From our viewpoint, what that RFP looks like yet hasn't been settled, so I wouldn't want to speculate on what we're going to do with it.

A quick clarification there actually there was an allusion to DPL South or [indiscernible] expanding it on that front is -- any comment on that one?

I'm sorry, I didn't understand the precise question.

It seems as if there was a comment in the RFP regarding perhaps extending it to the DPL South region of PJM. Is there any comment around that? Can you comment on the renewable expansion of the RFP.

Yes, I think it just highlights the fact that from our viewpoint at least, this is still forming and what it's going to look like and what it's going to encompass is, from our viewpoint, not yet settled and so we'll look forward to hearing from the State as to how this is shaped, what its requirements are, what other RFPs are going to be there and then we'll look at it wholistically.

Cassandra, I think we're going to turn it back over to John for some closing remarks.

Well, first, thank you, everybody. Second, if Chris Crane and Bill Von Hoene and Darryl Bradford, Calvin Butler are really successful, by the time we get to our next earnings call, we might have closed Constellation and that if that's the case, it would be a very good thing indeed, but if that's the case, this will be the last time you'll hear from me on one of these and so I just want to make some points very crisply about what's going on here. Again and again, over the last several years, we have beaten estimates, we have proven that the machine works across the board as different parts of the company, find the extra at different times. And yes, it's coincidental just which one performs when, with the extra value. But what's not coincidental is we've got a whole lot of hounds hunting and they do it really well and they're not here because they're pretty, they're here because they produce results. And that's true in our nuclear operation, it's true in the 2 delivery companies, it's true with our rate-making people, it's true with Tom Terry's work on taxes, it's true with Joe Dominguez's remarkable work in Ohio with Duke and AEP. I mean, things are working here and Chris Crane will be as absolutely dedicated to value as I am, and this management team will be as dedicated to value without me as it has been with me. And you know and we know because your forecast for the next couple of years aren't much different than ours, that the next couple of years are going to be tougher on an earnings basis. And you know and we know, that there's nobody else with the same upside that we have down the road. And it really is fortunate in my view that we're starting to see glimmers of that upside in power markets already. Energy just isn't going to be free in those markets indefinitely. So I really just want to end this by saying, you have one hell of a team working for you here and they will continue to deliver. Thank you very much.

This concludes today's conference call. You may now disconnect.