Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Exelon Corp (EXC, Financial) delivered $0.47 per share of adjusted operating earnings for the second quarter, exceeding expectations.
- The company reaffirmed its full-year earnings guidance range of $2.40 to $2.50 per share and long-term annualized earnings growth of 5% to 7%.
- Operational performance remained strong, with ComEd and PECO Holdings achieving top decile levels despite increased storm activity.
- Exelon Corp (EXC) made significant progress on regulatory fronts, including the revised Grid Plan process in Illinois and PECO rate cases.
- The company is actively involved in economic development projects, such as the large data center project in Illinois and the Baltimore Peninsula transformation.
Negative Points
- Higher interest expenses due to increased levels of debt impacted earnings by $0.03 per share.
- The company faces challenges with regulatory approvals, particularly in Maryland, where the multiyear plan framework was not fully adopted.
- Customer satisfaction scores for Pepco Holdings and BGE are not as high as ComEd and PECO, indicating room for improvement.
- Exelon Corp (EXC) is dealing with significant storm activity, which has increased operational strain and required extensive recovery efforts.
- The company is navigating complex rate-making processes and regulatory uncertainties, which could impact future financial performance.
Q & A Highlights
Q: What conversations are you having with state policymakers on solving the resource adequacy issue, and do you think we can see merchant new entry, or will states have to step in?
A: (Calvin Butler, CEO) We, PJM, and other stakeholders have been signaling concerns about resource adequacy for some time. Policy has driven a turnover in the generation stack, with baseload replaced by renewables. The price signals indicate a need for infrastructure investments, particularly in BGE, both generation and transmission. We are already engaged in meetings and will continue to focus on reliability and a resilient grid. (Jeanne Jones, CFO) It signals the need for more generation and transmission. We are leaning into energy efficiency and other programs to help manage demand and affordability.
Q: Are you seeing any evidence of pushback or support from states like Illinois and Pennsylvania in attracting data centers?
A: (Calvin Butler, CEO) We are seeing a lot of momentum, with states passing legislation to provide tax benefits to attract data centers. (Mike Innocenzo, COO) Our states continue to see the opportunities created by data centers for jobs and economic development and remain very supportive.
Q: Could you give additional color on your pipeline of data center projects?
A: (Gil Quiniones, CEO, ComEd) We have over 5 gigawatts in the engineering phase and another 13 gigawatts in prospects. Illinois has a specific tax incentive to support data center development. (Other CEOs) We are seeing significant interest across all jurisdictions, including Maryland, New Jersey, Delaware, and Pennsylvania.
Q: Could you talk about the agreements with some parties in the grid plan and their significance?
A: (Calvin Butler, CEO) The agreements signify progress towards the specific items cited by the commissioners in their final order. These agreements are key because they are done in alignment with what the commission wants. (Gil Quiniones, CEO, ComEd) The agreements codify alignment in policy and compliance issues, and we are narrowing differences in investments and cost-benefit areas.
Q: What are your legislative priorities in Maryland regarding Senate Bill 1 and the co-location study?
A: (Calvin Butler, CEO) We will lean into the affordability discussion and the impact on all customers. We want all customers to have a voice in the process to ensure good policy. The working group in SB1 will adhere to a public process and hearings to engage all stakeholders.
Q: What are the potential customer bill impacts after the PJM auction, and will you advocate for acceleration of transmission procurement?
A: (Jeanne Jones, CFO) We are still finalizing calculations, but it could be double-digit increases year-over-year in some jurisdictions, including BGE. We will advocate for more generation and transmission and expand current programs to help customers manage their bills.
Q: How do you want FERC to resolve the broader issue regarding the Susquehanna protest?
A: (Calvin Butler, CEO) Our protest is about rate design, not against co-location. Users of the grid should pay their fair share. We will remain focused on economic development and affordability and await FERC's decision to determine next steps.
Q: How did AEP get involved in the FERC ISA proceeding, and why didn't more utilities sign on?
A: (Colette Honorable, EVP-Public Policy) We responded quickly because of the broader policy implications. The demand is coming either way, and our focus is on ensuring fair and equitable allocation of grid costs. Other utilities may have different perspectives, but we are open to working with anyone on these issues.
Q: Given the low ROE in the last rate case, will most of your investment in Illinois be focused on transmission?
A: (Jeanne Jones, CFO) It is a mix of distribution and transmission. We have an obligation to serve new customers, and while the ROE is low, we need to manage that and get the work done. New business on the multiyear plan is outside the cost cap, and we see more transmission coming to accommodate high-density load.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
