Hello, and welcome to Exelon's Third Quarter Earnings Call. My name is Gigi, and I'll be your event specialist today. [Operator Instructions]. It is now my pleasure to turn today's program over to Andrew Plunge, 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 third quarter earnings call. Leading the call today are in Calvin Butler, Exelon's President and Chief Executive Officer; and Jeanne Jones, Exelon's Chief Financial Officer. Other members of Exelon's senior management team are also with us today and they will 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 2 of today's presentation or in our SEC filings. In addition, today's presentation includes references to adjusted operating earnings and other non-GAAP measures. between these measures and the nearest equivalent GAAP measures can be found in the appendix of our presentation and in our earnings release. It is now my pleasure to turn the call over to Calvin Butler, Exelon's President and CEO.

Thank you, Andrew, and good morning, everyone. We appreciate you listening to our third quarter earnings call. Despite historically mild first 9 months of the year and pressures from storms in August and September, we delivered earnings right in line with the expectations laid out in our last earnings call. For the quarter, as you can see on Slide 4, we we earned $0.70 per share on a GAAP basis and $0.67 per share a non-GAAP basis. With the critical summer season behind us, we have narrowed our guidance range to $2.32 to to $2.40 per share for 2023. Jeanne will talk more about our results for the quarter and expected financial performance for the balance of the year. Operational performance across the platform remained very strong in the third quarter. With storms that brought 110-mile per hour wind gust and 29 major event days that impacted almost 1.3 million customers, we not only kept our financial plan on track but we also continued our track record of top quartile reliability performance, and we continue to make progress in safety and customer satisfaction. The third quarter also brought continued execution of key milestones in our 6 active base rate cases underway in Illinois, Maryland, Delaware, New Jersey and the District of Columbia. Beginning with ComEd, we received a proposed order from the ALJ on its multiyear rate and grid plan on October '23. We're encouraged that the proposed order recognizes that meeting the ambitious electrification and decarbonization goals set by Illinois groundbreaking Climate and Equitable Jobs Act will require ComEd to make significant investments and it largely follows an investment plan that has alignment across a broad group of stakeholders. But the order does not recognize a fair cost of financing that investment. It provides a return on equity that…

Thank you, Calvin, and good morning, everyone. Today, I will cover our third quarter financial update, along with the outlook for the balance of 2023 and our progress on the 2023 rate case schedule. I will also highlight a recently completed transmission rebuild project by Delmarva Power & Light designed to further improve reliability for our customers in Eastern Maryland. Starting on Slide 6, we show our quarter-over-quarter adjusted operating earnings. As Calvin mentioned, Exelon earned $0.67 per share in the third quarter of 2023 versus $0.75 in the third quarter of 2022, reflecting lower results of $0.08 per share over the same period. Results of $0.67 in the third quarter represent 28% of our expected full year earnings, which is right in line with the expectations provided on the prior earnings call. Earnings are lower in the third quarter relative to the same period last year, driven primarily by $0.07 from the impact of weather and storms and summer activity returning to normal in '23, $0.04 of higher interest expense due to the rise in interest rates and higher levels of debt at the holding company and at some of our utilities and $0.03 of O&M tax and distribution formula rate timing expected to reverse in the fourth quarter. This was partially offset by $0.05 of higher distribution in transmission rates associated with incremental investments, net of depreciation as well as the $0.01 up carrying costs related to the carbon mitigation credit balance at ComEd. Despite the summer storms and mild weather impacting our nondecoupled jurisdictions, we have delivered year-to-date earnings each quarter in line with indications and we continue to offset the weather headwinds with a combination of O&M levers across the platform, higher treasury rates impacting ComEd's distribution ROE, favorable depreciation of PECO and the full year…

Thank you, Jeanne. With just a couple of months left to go in 2023, I'll conclude with a reminder of our goals and priorities for the year. First, our foundation is operational excellence, which benefits our customers and communities. As I mentioned, our employees rose to the challenges they always do for our summer storms, but we're ready to close out the year strong to prove we have the best operators in the business. Indeed, PA Consulting just awarded ComEd with its 2022 Reliability One National Reliability Award, one of the most prestigious honors in the electric utility industry, recognizing it for sustained leadership, innovation and achievement in the area of electric reliability. This award highlights the value of a committed operating team executing on a sophisticated operating plan and investment strategy provides the customers the grid that they deserve. I now want to take a moment to just recognize Terry Donnelley, COO of ComEd. Terry will be retiring at the end of this year after almost 12 years in that position. Terry thank you for his continued steadfast leadership and also the selection between him and Gil Kionas of David Perez, who is stepping in as a longtime Senior VP into the role of Chief Operating Officer. We have high expectations of date that they will continue to deliver on the operational performance that Illinois customers have come to expect. We are also focused on completing a number of the rate cases we have underway, including BGE's multiyear plan for its gas and electric systems as well as ComEd's multiyear rate and grid investment plans. We continue to believe that parties in both cases have a shared interest in reaching outcomes that align with the state's energy policy and equity goals while ensuring we have the certainty and confidence…

[Operator Instructions]. Your first question comes from the line of James Kennedy from Guggenheim Partners.

So starting off, I guess, with the ALJ order in Illinois. Calvin, you mentioned your expectations that the commission will consider the full record, I guess, is the draft the final order. I realized you've been in a formula construct for a while, but is there any prior precedent for the ICC to make those kind of departures from the ALJ? Just trying to understand the prospects here for vision and your confidence level.

Yes. First off, James, thank you for your question. And there is precedent. The record is going to be considered by the full commission. But the commission definitely has leeway to look at the record separately, taking an advisement what the ALJ has said. But also keep in mind, this is the first time that this commission has come together under a multiyear rate plan and grid plan to consider how ComEd's proposals meet the state's goals. So I do -- they do know there's a difference in opinion on how to approach this. And I think they will take that all in consideration because we have 3 new commissioners And they will lean into this discussion and look at what they need to do to achieve the state's goals, which are very specific. And I have Gil Ciona, the CEO comment with me. Gil, anything you'd like to add?

Yes. I think it's also important to note that this is really -- it's a key milestone in the process, but there are 4 other milestones coming up as both Calvin and Jeanne mentioned, the briefs to the commission and exceptions, replies to those briefs and oral arguments before the final order. As Calvin said, we feel strong conviction that the evidence on record supports ComEd's requests. And based on what the commissioners have done in the past, we anticipate that they will make adjustments and corrections before they issue a final order. We expect the commission will not only consider post order, but the entirety of the record in the case and the policies of the state. It is an historic once-in-a-lifetime opportunity, and we believe the commission will meet the moment in advancing the ambitious goals of the Climate Equitable Jobs Act and the state's economic development aspirations.

Does that answer your question, James?

Yes. And then just, maybe one for Jeanne. Just -- on the remaining equity need in the current plan, I guess, if you don't get the minimum tax clarity you're looking for from the IRS, would you need to accelerate the need into '24? Or does '25 mean '25? Just any additional color on timing?

Yes. No, everything we've given you assumes that we pay, the corporate alternative minimum tax. And so regardless of how that turns out, our commitment is to do the 425 million between now and 2025. So that doesn't change regardless of the outcome here.

Okay. And then just real quickly, the transition spend today, that is purely incremental to the 870 you debuted on the last call related to stores, right?

Yes. There are two similar numbers, but two different projects.

One moment for our next question. Our next question comes from the line of David Arcaro from Morgan Stanley.

Maybe on that same topic, with the transmission projects that has selected. Could you elaborate a bit on which year the CapEx would start to flow into the spending plan? And also, just as you think about PJM and potential competitive opportunities going forward, are there future opportunities that you plan to bid into also?

Yes, David. I'll start, but then I'll turn it over to David Velazquez, who's here with me that has our transmission strategy group reporting up to him and working with all the opcos. As I mentioned, I believe our transmission buildout has tremendous opportunity to not only strengthen what we're doing but also lengthen our earnings growth and doing it in a way that ensures not only reliability but the ability to connect renewables to the grid. And David and his team have put together a robust plan, and I'll let him take a moment to walk you through.

So David, this is Dave So on the transmission projects, like, to give you a sense, we have brand insurers, which was the project we talked about by last quarter, which has an in-service date in the end of 2028. So you think about cash flows there, and again, you have to recognize we're in preliminary engineering yet, so this is liable to move a little bit. But I figure typically like in the last couple of years, '27, '28, you spent somewhere around 40% to 50% of that expenditure. And then leading up to it starting next year, you'd slowly ramp into it. In the first 3 years, you'd spend somewhere again between 50% and 60% of the project. And the Dominion, which has an in-service date part of it in '29, part of it is '30, I think you'd see a similar profile where in the last couple of years, you probably see around 40% to 50% of the expenditures and 3 or 4 years leading up to that. So some of this will be within the current period and some of it will be after the current period. And I think on the broader question, as Calvin has said, there's a lot of opportunities out there. We look at every single competitive window that PJM puts out there and make decisions whether we think we can add value for our customers by presenting proposals and we will continue to do that. I think also there's other opportunities out there. Offshore wind is one. In Maryland, the commission has to issue a solicitation to help bring on some of the additional megawatts by July of next year. We continue to see a lot of load growth in our regions around data centers. There's also some hydrogen hubs that have been awarded grants from the federal government in our territories. We also continue to see some generation retirements PJM recently announced retirement of a Wagner unit -- large Wagner unit in BGE's territory. So there's a lot of different opportunities that we're looking at out there to continue to, again, for our customers and for public policy goals continue to invest in transmission.

Excellent. That's really helpful. And I guess as you think about some of this incremental upside CapEx, it sounds like some of which would hit the current plan, but then also looking ahead to the next 5-year CapEx plan, how do you think about financing the next year of kind of higher CapEx growth and rate base growth, specifically thinking about how you're thinking about equity needs from here?

Yes, it's Jeanne. I think it's how we've always thought about it. We rolled out the $31 billion on our last call. We talked about financing in a balanced approach with internal cash flows and a mix of debt and equity. And so I think to the extent we continue to see more and more work, which we know there will be. We'll finance it in a way that maintains that cushion on the balance sheet that we target, but also ensures that we meet our 6% to 8% earnings growth.

One moment for our next question. Our next question comes from the line of Paul Zimbardo from Bank of America.

And thank you for laying out all those transmission opportunities. Just as we think about the roll forward, not the current plan, you've been very clear, but the roll forward with these incremental opportunities, is there a good way to think about financing those incremental CapEx? Is it kind of like a 50-50 mix? Or should we be thinking of something different?

Yes. I think as I mentioned with David's earlier question, we'll do it in a balanced way. I think we've got a lot that we're pulling together here. We've got some really exciting incremental transmission opportunities. We have incremental investments from the new rate cases that we've been filing. So we're going to pull all that together as we always do in the fourth quarter and give you a full update when all of that is final. We should have some more information again at the end of the year by the corporate alternative minimum tax. We'll embed any additional cost savings that we're finding as we continue to get further out of separation. So we'll -- as I mentioned, we'll fund any new incremental capital with a mix of internal cash flows reinvesting back into the business that and to the extent necessary do what we need to do to make sure we maintain that cushion on the balance sheet but always also hit our earnings target of 6% to 8%. So we'll do it in that balance, thoughtful way.

Okay. Understood. And then shifting topics a little bit. Do you have an estimate for what the Illinois ComEd customer bill CAGR is like the next 5 years -- for your rate case and then I know there's the carbon mitigation credit that rolls off. So just curious how the bill trajectory is.

Yes. On the ask, I believe it was just -- somewhere between 4% and 5% on the bill CAGR that was on ask call. And then the second part of your question was -- what was the second part on the -- as the CMCs roll off?

Yes. Just overall, like, again, you're only part of the bill, like what an overall ComEd customer bill trajectory looks like over the next 5 years?

Yes. Over the next 5 -- again, on the rate case ask, it was, I think, around 4.5%, 5%.

But it's important to note, Paul, that ComEd starts below the national average in terms of overall rates. So as I like to think of the headroom within that utility to invest and move the state forward exists. One, because of the carbon mitigation credits, but also because they start from a position of strength and having some of the lowest rates in the country. I think it's roughly 23% below large city national average. That's where ComEd's in

Our last question -- one moment for our next question. Our last question comes from the line of Jeremy Tonet from JPMorgan Securities, LLC.

It is actually Aidan Kelly on for Jeremy. Just one quick question going back to ComEd. Curious how do you reconcile the differences between the ALJ's 9.28% ROE and staff's 8.91% ROE as well as the proposed equity ratio? And then could you just talk more about where the ultimate return on pension assets debate stands?

Yes. I would tell you that, as we talked about, I'll first start with 1 step, and this is just another step in the process, as Gil laid out, coming off the world series, I think we're in the sixth inning, right? We're in the sixth inning of a long game. And that's just -- it's 1 step. Staff was one, and you saw they came in at 8.9%, talking about the formula rate, and then we get the ALJ, we were able to respond, then we get the ALJ's ruling of 9.28, so we will continue to respond to the evidence as presented and present additional data for this commission to work with. And that includes not only ROE, that includes return on pension assets. As I talked about in my statement, it warrants a return, and we have even come to an agreement with the Attorney General of Illinois, where a minimal getting a debt return. And so we continue to move forward and present the why. And I think that's the powerful part of this, Jeremy, is that when we can articulate the why and frame how it's beneficial for all customers and moving -- having a productive and efficient company that's moving the state's goals, we'll get there. So to get into the details of this -- of any other piece of this early in the process, I think we'd be inserting ourselves deeper before the full commission has a chance to hear the evidence. As Gil has laid out, we have when our next filing deal that we're presenting to them. The brief on exceptions will be on November 8, November 8. And we'll lay it out all fully Jeremy, on November 8 as to the what and the why.

Appreciate the color there. And then just 1 quick question unrelated on the $425 million equity, would you consider ATM or follow-on there?

We have $1 billion ATM in place. And so we can always just leverage that in kind of dollar cost average in as needed.

I would now like to turn the conference back to Calvin Butler, President and CEO, for closing remarks.

CJ, as always, thank you very much, and thank you to everyone for joining us today. We look forward to seeing many of you at the EEI Financial Conference in a week. Jeanne and the team and I, we're looking forward to just engaging with you in a more robust and deep manner at that conference. And with that, that concludes our call. Thank you very much. Have a great day.

Thanks to all our participants for joining us today. This concludes our presentation. You may now disconnect. Have a good day.