Exelon Stock

Hello, and welcome to Exelon's Second Quarter Earnings Call. My name is Josh, and I will 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. [Operator Instructions]

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It is now my pleasure to turn today's program over to Ryan Brown, Vice President of Investor Relations. The floor is yours.

Great. Thank you, Josh. Good morning, everyone. Appreciate you joining us for our 2026 2nd quarter earnings call. Leading the call today are Calvin Butler, Exelon's President and Chief Executive Officer; and Gene Jones, Exelon's Chief Financial Officer. Other members of Exelon's senior management team are also with us today and 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. 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 is now my pleasure to turn the call over to Calvin Butler, Exelon's President and CEO.

Thank you, Ryan, and good morning, everyone. We appreciate you joining us for our second quarter earnings call. Halfway through 2026, Exelon is delivering where it matters most, performing today and preparing for tomorrow. Our utilities are providing safe, reliable service, driving affordability and investing in the infrastructure that keeps our customers, communities and economies thriving.

This morning, we reported adjusted operating earnings of $0.43 per share, consistent with expectations and are reaffirming our full year guidance of $2.81 to $2.91 per share. Operationally, we continue to lead the industry with all utilities projecting top quartile reliability and ComEd and PHI projected in the top decile. Those of you who are from Chicago and know that this has been quite a year for storms. So far this year, ComEd has experienced 16 major weather events, more than it's seen in over 2 decades, while Illinois has recorded more to our NATOs than any other state. Most recently, Monday, severe storms impacted approximately 530,000 customers [indiscernible] thanks to the extraordinary ethos and support teams power was restored to 90% of affected customers within 48 hours.

These results reflect disciplined investment in grid resilience and is a main focus on delivering safe An annual customer interruptions have declined by nearly $2 million since 2021. And [Audio Gap] and for every $1 million Exelon invest an average of 8 jobs are created 1.7 is generated. We're proud of the indispensable role we play in supporting the communities and businesses that depend on us every day. Now turning to regulatory activity. We remain on track in the Pepco Maryland and DPL Delaware electric rate cases as well as ComEd's grid plan. Earlier this month, we also filed a rate case at BGE with the decision expected in January 2027.

Gene will cover the details, but the filing reflects our approach to balancing affordability with the investments required to maintain a safe and reliable grid. To help manage customer impacts, BGE delayed its filing, deferred select projects and prioritize the maintenance and reliability work most critical to serving customers safely. The work our men and women perform every day is critical to our communities, and we cannot delay any further. If critical work is deferred for too long, customers ultimately pay the price through more outages, more costly repairs and higher long-term costs. As demand grows and weather-related stress increases, the need to maintain and strengthen the grid remains long-term affordability depends on a strong resilient system. Across Exelon, affordability and reliability are being addressed together. We manage expenses carefully, deploy capital where it creates the greatest customer value and support customers through assistance programs and energy savings initiatives. We're also taking steps to ensure growth benefits existing customers rather than burdening them.

As new large load customers connect to our system, we are structuring agreements that require real financial commitments tied to the infrastructure needed to serve them. FERC's recent large load dockets reinforced that approach recognizing the need to protect existing customers while ensuring that large load customers have real commitments behind their projects. This is exactly the principle behind our transmission security agreements, which is helping to protect customers by filtering out speculative requests before significant system investments are made, creating a clear picture of actionable demand. Despite these efforts, the extreme heat and system demand in July made 1 thing very clear.

Affordability cannot be solved through cost discipline alone. It also requires new supply. At the beginning of the month, PJM was pushed to its limits. Demand hit a record peak of 168 gigawatts. PJM activated emergency procedures and called on demand response resources to maintain reliability, while power prices surged tenfold from roughly $80 to $800 per megawatt hour. Now the grid held and our teams did their job, but the system should not have to operate this close to the edge. And this is not a one-off event. This pressure is further evidenced by PJM's most recent capacity auction for the third consecutive auction prices cleared at the FERC approved price cap.

Even so, the market fell short on PJM's reliability requirement by approximately 6.8 gigawatts, larger than the prior 6.5 gigawatt shortfall, which is the equivalent of roughly 7 nuclear reactors of missing supply, even more telling, only about 525 megawatts of new generation on uprates cleared, indicating that even at the highest allowed price, the market is not attracting the level of new supply the system needs. Absent the FERC approved price cap of $330 per megawatt day PJM's own simulation shows prices would have cleared at approximately $555 per megawatt day across the footprint and $777 in ComEd indicating the underlying scarcity is even more severe than the headline price suggests. The July heat vent auction results and market price signals all point to the same conclusion.

Demand is growing faster than supply, and the system is under increasing strain. Our customers should not pay the price of a system that has been allowed to run too thin and they should not have to wait years for solutions that are needed today. That is why Exelon is advocating for an all-of-the-above approach transmission, demand-side solutions, market resources and utility-owned generation where it makes sense. We are continuing the dialogue with our state and participating in FERC and PJM processes to advocate for policies that protect customers and help deliver energy reliably and cost effectively.

This is where the Exelon platform matters. Our scale, experience and relationships across multiple states allow us to move from identifying the problems to advancing real solutions. First, transmission. Exelon continues to lead on transmission expansion because reliability starts with the ability to move power where it is needed most. Transmission helps relieve localized constraints connect new resources and strengthen the grid as demand grows. That momentum continues with the recent submission of 2 additional MISO tranche 2.1 competitive transmission bids in partnership with Invenergy.

We will continue to leverage our scale, expertise and strong development partnerships to pursue transmission opportunities across and beyond our footprint. Second, utility-generated power and storage. We are proposing solutions that give states more control, more certainty and more direct customer benefits. Utility-generated power and storage can add supply, improve reliability and put downward pressure on long-term cost with the accountability and lower cost capital, utilities are uniquely positioned to provide. This is not about ideology. It is about outcomes, reliable service, lower long-term costs and greater energy security for customers.

For example, during the extreme heat and record demand over the July 4 weekend, and ACE battery storage unit serving a New Jersey Beach community was dispatched to support the grid. That 1 asset helped maintain reliability during a period of system stress, demonstrating the practical customer and grid benefits these investments can deliver. We've also seen these benefits play out elsewhere. Earlier this month, PErCOT served a record peak demand of more than 91 gigawatts without emergency actions or curtailment requests. [Audio Gap] while power prices remained relatively stable at roughly $40 per megawatt hour during the peak hour.

Renewables and battery storage played a significant role in meeting that demand while supporting ability and affordability. Building on that momentum, we recently announced a significant new 50-megawatt battery storage project in New Jersey, and we continue to see storage as an important tool for customers because it is fast, flexible and targeted. Our battery project has been operating during the July at our battery project been operating during the July 2 through July 5 Wave ACE customers would have realized approximately $7.5 million of energy cost savings that could have been returned to customers to help offset higher market prices.

Storage solutions can provide peak capacity, improve reliability in constrained areas support affordability and help states meet their energy goals. The benefits are real measurable and already being demonstrated today. Lastly, energy efficiency and virtual power plants. Several of our utilities recently received approval for VPP programs that turn customer-sited resources into grid capacity. That helps reduce peak demand lowers pressure on the system and gives customers a direct role in the solution.

Taken together, these are all practical solutions. They also are areas where Exelon can deploy capital with discipline and there's a clear customer need and strong execution visibility. We are not waiting for the market to solve this on its own. We are bringing forward actionable solutions that strengthen reliability, improve affordability and give our states more tools to shape their energy future. Now with that, I'll turn it over to Gene to walk through our financial performance and provide additional details on our rate case activity and outlook. Jeanne?

Thank you, Kelvin, and good morning, everyone. Today, I will cover our second quarter financial results and key regulatory activity discuss solutions we are advancing to support affordability and resource adequacy and conclude with an update on our balance sheet and financing progress. .

Starting on Slide 5, we present our quarter-over-quarter adjusted operating earnings back. Exxon earned $0.43 per share in the second quarter of 2026 compared to $0.39 per share in the same period in 2025. Results were higher by $0.04 per share year-over-year, primarily driven by $0.04 of distribution and transmission rates, net of depreciation and AFUDC. $0.04 related to last year's customer relief fund and $0.01 of favorable weather at PECO. This was offset by $0.02 of higher credit loss expense at BGE and $0.02 of interest at Corporate and PECO.

Our second quarter performance is in line with expectations we discussed on the first quarter call and continues to demonstrate the value of disciplined execution across the platform. We are delivering on customer-focused investments that support top quartile reliability while managing costs and timing items within the full year plan. Looking ahead to the third quarter, we expect earnings to be approximately 27% of the midpoint of our projected full year earnings guidance range. This expectation contemplates the impact of weather, storms and the PICO employee strike in the beginning of July as well as normal weather and storm activity through the remainder of the quarter.

As with historical practice, our quarterly shaping guidance also assumes anticipated revenue shaping and timing of costs across the utilities. Combined with results for the first half of the year, we anticipate the fourth quarter to benefit from the absence of onetime 2025 distribution and transmission rates, the unwinding of timing and disciplined execution of bad debt and storm recovery efforts. We remain on track to deliver full year operating earnings of $2.81 to $2.91 per share, with the goal to be at the midpoint or better.

Finally, we reaffirm our expectation to deliver annualized earnings growth near the top end of 5% to 7% from 2025 through 2029, supported by 7.9% annualized rate base growth, disciplined cost management, and a balanced financing plan that maintain strong investment-grade credit metrics. Turning to Slide 6. I will review the open base rate cases and other regulatory activity across the platform. These proceedings reflect our continued focus on recovering prudent investments that support safe, reliable service while advancing proposals that are responsive to customer affordability and the policy priorities of our jurisdictions.

Starting with Pepco Maryland, where a final order is expected next month for its traditional electric base rate case. This filing seeks recovery of critical investments that support reliability, accommodate growing customer needs and strengthen the resiliency of the electric system while also reflecting the impact of higher financing costs. Projects such as the White Flint substation are tangible examples of work being done to increase capacity, reduce outage risk and support long-term growth and economic development in the communities we serve. Also in Maryland, BGE filed an electric distribution rate case on July 2, seeking $156.1 million revenue requirement increase to recover investments and costs necessary to maintain a safe and reliable grid under a historic test year.

The filing also reflects revised financing and storm restoration costs and includes proposals to establish the storm recovery mechanism and provide customers with additional payment flexibility. A final order is anticipated in January of 2027. In Delaware, Delmarva Power's electric base rate case continues to progress is seeking a $45.4 million revenue requirement increase to support investments necessary to maintain safe and reliable service, including system upgrades and reliability investments across its service territory. The filing also includes proposals to sign to support affordability, including a new income base rate and a bad dot rider.

As permitted by Galar Law, DPL implemented interim rates effective July 9, subject to refund. Final order is expected in the third quarter of 2027. Finally, at ComEd, the grid plan proceeding continues to move forward with staff and intermedial rebuttal testament filed earlier this month ahead of hearings in August. As a reminder, the plan proposes approximately $15.3 billion of investment from 2028 through 2031 to support reliability, accommodate significant load growth and advance the objectives of Illinois' Energy policy framework. In order is expected by December 15.

Across these proceedings, our approach remains consistent. We are investing to support reliability, resiliency and customer needs while remaining focused on affordability and cost discipline. While our base regulatory filings remain focused on maintaining safe, reliable and affordable service, we continue to advance additional solutions to help address growing affordability and reliability challenges particularly in light of supply constraints highlighted by the recent PJM auction.

Turning to Slide 7, practical and deployable resources such as storage and virtual power plants can provide capacity reduce conjunction and help manage price volatility while supporting each state's energy goals. Today, roughly 10 gigawatts of solar and wind across PJM goes unused on any given day. Storage can capture excess generation and shifted to peak demand periods, turning surplus clean energy into reliable, high-value supply. Unlike many traditional solutions that can take 5 to 10 years or longer to develop, battery storage is a faster scalable and modular option that can often be deployed within approximately 3 years even for large-scale batteries. In New Jersey, Atlantic City Electric partnered with Invenergy has advanced a 500-megawatt battery energy storage system using 4-hour batteries to target roughly 5 peak demand days a year in pit growth.

The project will be large enough to power approximately 400,000 homes and represents the single largest battery storage installation in PJM. The Picor storage project was submitted in PJM Cycle 1 and represents approximately $1 billion in investments, not currently reflected in our plan. Combined with the anticipated PJM market revenues, all of which will be returned entirely to customers, federal tax credits, the mitigation of energy and capacity prices and deferred transmission investment, customers will see over $700 million in net benefits after the project is placed into service Importantly, without seeing any customer bill impact until at least 2035.

Atlantic City Electric filed a request last week for regulatory approval on the mechanism to recover project costs with the final order anticipated in the first half of 2027. In addition, we are pursuing similar opportunities in Maryland, where BGE and Pepco have submitted battery storage projects as part of the state's distribution connected storage solicitation which are currently under commission review. Beyond storage, we are also advancing virtual power plant initiatives across our jurisdictions, which aggregate customer-sited resources to reduce peak demand support grid reliability and lower overall system cost.

At ComEd, the approval to launch its first scheduled dispatch BPP program is expected to increase the amount of battery storage available across Northern Illinois, while providing compensation to participating customers. When paired with existing distributed generation rebates and incentives, the program creates a compelling customer value proposition while helping support the grid.

Maryland also recently approved programs to allow a range of customer-sided assets to active grid assets, and we continue to see momentum in New Jersey and Delaware as policymakers continue advancing distributed energy resource and BPP frameworks. Together with continued transmission and distribution investments, these solutions provide practical tools to address affordability, reliability and resource adequacy needs across our jurisdictions.

Turning to Slide 8. We continue to execute our financing plan in a balanced and disciplined manner, Maintaining a strong balance sheet is core to our strategy and essential to funding the investments needed to deliver safe, reliable and affordable service for our customers. To date, we have completed approximately 86% of our 2026 debt financing needs, including all expected debt issuances at the holding company, Pepco Holdings, ComEd and BGE materially reducing our remaining exposure to interest rate volatility for the year.

In addition, our preissuance hedging strategy continues to provide protection against future rate movements. We have already priced approximately 37% of our planned equity needs through 2029 via forward contracts under our ATM program, having priced all of our needs for 26 and half of our needs for -- our credit metric outlook also remains strong with expected average credit metrics of approximately 14% through 2029, supporting the strategic and financial flexibility needed to advance our capital plan and capture additional customer-driven growth opportunities. We remain confident in our ability to deliver value for our customers and shareholders through disciplined execution, a strong balance sheet and investments that support reliable, resilient and affordable energy service.

I'll now turn the call back to Calvin for closing remarks.

Thank you, Jeanne. I'll close on Slide 9. The story is consistent and straightforward. And as I said, we're performing today and actively preparing for tomorrow. Exelon is built for this moment. We have the scale, diversified footprint, operational excellence and financial discipline to perform in a changing environment. .

In 2026, we remain focused on deploying approximately $10 billion of capital for the benefit of customers, delivering operating earnings of $2.81 to $2.91 per share earning a consolidated operating ROE of between 9% to 10% and maintaining a strong and resilient balance sheet. Just as important, we are pursuing growth where it creates real customer value, strengthens the grid and supports the communities and economies we serve. The environment is changing quickly, but our priorities are steady. We have the people, platform and experience to navigate complexity, deliver on our commitments and advance practical solutions for customers. That is why we remain confident in the path ahead.

Josh, we can now open it up for any questions.

Our first question comes from Shar Purreza with Wells Fargo.

Kevin, PJM walked back from the EDC proposal that had the members committee, super majority in this recent letter. I guess do you feel like like where they landed meaningfully addresses the key issues in PJM. Do you have any plans to intervene further with FERC?

I mean it doesn't seem like you're waiting for an outcome here to step in, you propose the ASP development. assuming that wasn't a one-off. So just kind of curious on the recent development

Thank you, Shar. And you captured it. We are focused on just really providing solutions, but let me first begin by applauding PJM's efforts to address resource adequacy challenges with the sense of urgency and really looking at opportunities to bring new generation onto the system because these are important steps in the right direction, and we do believe that their measures may help address near-term reliability concerns, but they're unlikely to resolve any long-term affordability challenges. .

Ultimately, what we've always said and we're very consistent to really resolve long-term challenges on affordability, you need more generation to be brought online. And we will continue to advocate for several important consumer protections in this effort, and we will continue to engage with PJM. But over the long term, we believe that state should play a central role in resource planning and procurement. And utility-owned generation needs to be part of that mechanism as a cost-effective complement to market-based solutions. And as we've talked about, this is our Exelon promise in action, and we will continue to drive this, but it is going to require a partnership and more active engagement in state with the states.

Jeanne, anything you'd like to add?

Yes. No, I think that covers it. And I think that to your point about Real Solutions, and you noted at Chart, the 500-megawatt battery solution. We've been working on this. We're pleased to see that we got through the filing, and we'll work with the commission there. And to your question, it's no. It's not the only one, and we're working on others. .

Okay. That's perfect. And then your data center growth slide shows combined 36 gig. That's down around 11 gigs from the 43 gigs that you've previously cited. Is that simply like a reclassification refinement of the queue, any read through there with PJM's current dysfunction, maybe causing some attrition or slower conversion in the pipeline? .

Yes. I'll take that one, Chart. So I would say -- you're right, we did update, and I think this will continue to evolve. But I would also say we've always taken, as you know, a measured approach to this data center phenomenon, whether it was our position in the colocation and ensuring fair cost allocation or the development of transmission security agreements, which, as you know, never existed in our regions, right?

And so we developed those agreements and made them part of our process. In addition to that, we also, throughout this, have kept our CapEx increases consistent with historical increases and really only putting in capital that was certain and durable. And I think that this update underscores that, that was the right approach. The TSAs are doing what they should. As you go through our cluster process, we said, we're going to study the clusters, we're going to offer the customer. A sign the TSA and then importantly, put up collateral behind that. And so what this update reflects is we have now readed out speculative projects, and it gives us proactive insight into what is real. And this is what you want management to do.

You want us to provide real and durable growth. And importantly, our $41 billion of capital between now and 2029 remains unchanged due to this update, because we have not put in speculative projects. And as I think about that growth, I would just say a couple of other things. What's sitting in that 11 gigawatts, we have 4 gigawatts that have signed TSAs and importantly, they are backed by $1 billion of collateral. The other 7 gigawatts in that high probability is projects that predated this TSA process but are further along, and we feel very comfortable that they will continue.

And so the 1 gigawatts is significant, and we're going to continue to study the remaining '25 that's on that slide. But there is real growth and it goes back to not just being focused on what is real on the T&D growth side, but how do we provide those solutions on the supply side to support that growth. And that's our first project out the gate is the 500-megawatt battery.

Next question comes from Jeremy Tonet with JPMorgan Securities. .

This is actually Aiden Kelly on for Jeremy today. I appreciate your time. I appreciate the time. I guess maybe just going back to the regulatory front. Now a few months since the tralo of your PECO rate case. How do you think about the filing case going forward? It just seems like we continue to see a lot of constructive data points out of the PaPUC, at this point, are there any inflection points you kind of hope to see before following again, what would encourage you to file at this time.

Yes. Thank you, and I appreciate that. And I think, once again, you captured it well. Let me just begin by saying that we share Governor shippers focus on affordability and we have analyzed his letter and what his framework is, and I'll ask Mike in sino to jump in there. But let me just begin is that we've been having constructive conversations with not only the governor, but his staff since day 1.

And like you said, we're seeing indicators that Pennsylvania is still a solid regulatory framework for us to operate, and they view PICO as an economic partner and job creator in the state. And we recognize also and they've said it that Pennsylvania needs financially strong, viable utilities with sustainable investments to encourage that economic growth, but understanding that we will continue to partner and we believe that investment in our system is required to maintain the reliability and growth that they expect, and we will do that over our long-term planning horizon. So I'm going to give it to Mike to see if he has any detail he wants to share about the governor's conversation.

I would say your point about that data point. Certainly, there's the data points the constructive settlements that have already occurred, constructive discussions on the active rate cases currently underway. And then -- and it's our discussions. It's discussions with key stakeholders in Harrisburg to discussions with the Governor's office. If you looked at the key points that he's looking for and everybody is looking for, it's making sure that our investments are providing customer value and customer benefits, making sure that there's transparency on the ROE and making sure that we're looking at every lever that we can to address affordability. We think we've addressed that in multiple ways under the existing process as well as others in the state are and we're continuing to work with their -- the governor's office to make sure and the PUC and the statutory intervenors like the consumer advocates office, the small Pacific stuff having discussions to make sure that when we file again, we're addressing each of their concerns, and we feel confident that we'll be back in a way that will be very productive.

Great. I appreciate the insight there. And I just want to shift to the transmission front real quick, if I could. To what extent can you tap into your identified $12 billion to $17 billion set opportunity as we kind of think about the next plan, what win rate should we be thinking about as it pertains to upcoming competitive transmission windows for you guys?

Yes. So it's Jeanne. The $12 billion to $17 billion, I'm just going to -- I'll hit on a couple of things I'm going to turn it to Cream, who's head of our transmission and development group. So of the top to $17 billion, it is not dependent on 1 sort of theme. Competitive transmission is 1 of, I would say, probably 5%, right? So what we want to do is give an insight into we're spending roughly that amount in our 4-year period today. And so we see that continuing beyond 2029, driven by existing infrastructure of our 11,000 circuit miles, new business related to the data center pipeline. State policies around additional generation coming online, old-generation retiring, the transmission needed to accommodate that. And importantly, competitive transmission.

And so maybe I'll let Karim speak to kind of how we think about that. .

Yes. Thanks, Jeanne. And I agree with everything Jeanne just said, and I would add on competitive transmission. You've seen us be very active over the last 12 to 18 months in PJM and also in other RTOs such as MISO. We're going to continue to do that. And you saw recently that we filed for 2 projects in MISO to tranche 2.1 in Iowa the MARS and the EASL projects. We expect to hear back from -- from MISO in the fourth quarter.

And what we would say is we think that we are very well positioned to take advantage of some of these opportunities based on our operational excellence and importantly, our experience with 765 kV lines, so high voltage lines. We're 1 of very few transmission operators that own and operate those types of lines today, and that's what increasingly more and more RTOs are seeking in their solutions.

So I would say, I think we are very well positioned to continue to be successful like we were in Western Pennsylvania, this past PJM window, and you'll see us continue to be active.

Our next question comes from Paul Zimbardo with Jefferies.

to follow up on the last 1 a little bit. Focusing on ComEd, that simulated $777 permit date clear in the last auction. Is that a catalyst for kind of unlocking even more incremental transmission and storage investments? Just take a lot more on pencil at that kind of potential price point, if you could share thoughts.

Paul, I think that is probably indicative of what we've been saying, which is we need an all of the above approach. It's probably not just transmission. It's not just battery solutions. It's really all of the above. So transmission, as Calvin mentioned in his prepared remarks, provides the optionality of moving the electrons from where they are being generated to where they're needed, battery storage is very effective in helping to shave off the peaks and avoid transmission avoid peak pricing and help to insulate customers from that.

So from our perspective, you can expect to see us be active in both those fronts as well as others. Really, what we're looking for is wherever there's opportunities for us to serve our customers to help affordability and help reliability. That's what you'll see us be active. And storage and transmission are 2 examples where we see a lot of benefits there.

Yes. And that was contemplated already as part of that 12% to 17% when I mentioned kind of state-focused solution. So definitely an opportunity there. We've seen over the last several planning cycles, 80% to 100% of our 4-year capital increase be in transmission, specifically for these issues. The other thing I would say is the state is well aware of this as well.

If you look at what was passed in legislation last year, the state not only expanded energy efficiency but also our distributed generation rebate program to programs that are meaningfully helpful for customers, but also are treated as regulatory assets that we earn on good for customers and good investments for us. they also are going to run a 3 gigawatt storage procurement this year with, I think, 1,000 of that, 3 gigawatts and 1,000 of that will be this year. And then importantly, they're taking a comprehensive view, right? They're going to do their first integrated resource planning preview in November of this year. So pleased to see the state focused on this and that there's ways for us to lean in, as Carim said, not just in 1 area, but transmission, energy efficiency, DG rebate and supporting through BPPs as well.

Okay. That latter part especially makes sense. And then a higher level question, if I could, I think an important one. Just holistically, it looks like there have been some maybe paper cuts across the jurisdictions, legislation and some regulatory actions. Overall, how would you blame the comfort, conservatism in the plan overall? And I know you had that cost cut update in the first quarter, but just overall comfort and you on the plan would be helpful.

Yes. Thank you, Paul. I would say that comfort is not the word, but focused on execution is the word because we don't actually see it that way because we view that the strength of Exelon's model is that we're not dependent on any single jurisdiction, regulatory outcome or growth opportunity.

As you just alluded to, when you think about what we've been able to accomplish with adverse rulings are in action by some of our commissions. We've met and exceeded expectations that we've shared with you. And that is that diversity of our platform coming to life. I always talk about and you heard me a the power of our platform. and not having 1 jurisdiction outweighing what we're able to accomplish and being able to move capital around and put it in place for the benefit of our customers and the communities.

So yes, there's single paper cuts as you referred to, but that not 1 of them are driving the ultimate outcome of Exelon. So when we pulled the Pennsylvania rate case, the PECO rate case, we reaffirmed our guidance -- we didn't lower our capital in 2023, when ComEd disallowed the grid plan, the team got to work, met and exceeded our numbers because that's what we do, and that's what you should expect us to do. So I appreciate the observation, but we don't see it that way at all.

Thank you. And our final question comes from Andrew Weisel with Scotiabank.

Andrew. Hi, good morning, everyone. I want to first ask you to just elaborate a little bit on the Pennsylvania commentary. I don't expect you to get too ahead of the next rate case filing, but how are you thinking about CapEx levels and categories. Are your conversations pointing toward minimizing spending purely focused on reliability and safety? Or I heard you talk about supporting economic development. What does that look like? And that's specifically related to data centers and AI or -- how are you thinking about that versus affordability other than how can you help other than the deferred spending that you talked about on the first quarterly call. Just any more detailed commentary would be very helpful. .

No, great question. And I'm going to ask Mike, who is serving as the CEO of PICO to really give further clarification and don't hesitate to if you have any follow-up, don't hesitate to ask, okay, if we don't scratch it. .

Thanks, Kevin. Thanks, Andrew. Yes, I would -- back to -- I think you even alluded to it in your question there. it's making sure that we're really clear on areas that have that customer value. And we've heard loud and clear from the folks in the state economic development to be important to the state. So we'll make sure that our investments are supporting that both on the transmission and on the distribution level. safety, reliability and resiliency. It is an area that's seen increased storms and emergencies. We know the value that a reliable grid and a safe grid provides.

As Calvin mentioned in his opening comments, PICO is a top quartile performer nationally and is the top performer in the state. So we'll continue to focus on those investments that are aligned with our long-term infrastructure improvement plans, both on the gas and electric side also taking advantage of the disk and also looking for areas that we can drive affordability through other mechanisms, including just recently, PECO was awarded a rise grant of $50 million for an investment that we'll be making at our gas plant in West Conshohocken. So it's really just making sure that everything that we do is clearly aligned with those key categories is well communicated and justified not only through the rate case process, but prior to the rate case process as we go in.

And Andrew, let me just share, I think Mike captured and I just want to emphasize the point he made communicating with all stakeholders on what and how we're doing it and the value that we're creating. Our #1 priority is always maintaining a reliable and safe system. We're never going to do anything to put that in jeopardy. But we will actively be communicating with all the stakeholders throughout this process. .

Okay. Great. That's helpful. And you mentioned the disc mechanism. Does that seem like something you'll be leaning on a bit more? That seems to be a theme that we're hearing more of...

Yes, we have. We've used it over the years already. So we'll continue to do that. But as part of our going forward conversations with the Chair of the PUC. We'll be looking for other ways that we can leverage that even further, and that will be part of our plan going forward as well.

Okay. Very good. Then 1 more, if I can, in Illinois. I know that there's the IRP process this state is pursuing. Can you talk a bit about that given that the states in PJM, what exactly is the goal here? Clearly, there are issues. You talked about the shortfalls and the high pricing from the auction if they weren't the cap.

As far as I can tell, I don't think it's too likely the state will leave PJM soon. I know there's some talk about it. I've heard the name Erol floated around, which is a great name, but I don't know how likely that is -- so maybe you could just talk about what the goal of this IRP is and what role you might be playing in that?

Yes. I think the goal ultimately is what we meet each of our states to do is just get a better picture of what do they need from a state perspective in terms of demand versus supply, and it gives them the ability at the ICC and the other agencies working with them. the authority to expand programs, right, based on that analysis. Do we need to expand energy efficiency? Do we need to procure more storage? Do we need to do more on the distributed generation? How do we look at our state emission limits, things like that. So -- that is the goal is to say how do we get more control over our own supply and demand situation within the state, which is something we applaud any state doing.

We're seeing Maryland study different procurement models. We're seeing Pennsylvania hire an independent consultant to study resource adequacy across all of our states, Governor Sheryl looking at supply solutions. So this -- I think the goal is all of our states who are working very hard with PJM for a long-term solution and say, "Hey, I got to keep all options on the table. And the first thing I need to do is kind of have a good view on what my specific state needs, and we think that's absolutely the right thing to do.

Thank you. At this time, I would like to turn the conference back over to Calvin Butler for closing remarks. .

As always, I just want to say thank you for taking the time to join us for our Q2 earnings call. We appreciate your continued interest and support, and we look forward to sharing further progress in the months ahead. And with that, Josh, this concludes our call. .

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

Hello, and welcome to Exelon's First Quarter Earnings Call. My name is Michelle, and I'll be your event specialist today. [Operator Instructions] Please note that today's webcast is being recorded. [Operator Instructions] It is now my pleasure to turn today's program over to Ryan Brown, Vice President of Investor Relations. The floor is yours.

Great. Thank you, Michelle. Good morning, everyone. Thank you for joining us for the 2026 First Quarter Earnings Call. Leading the call today are 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 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 on 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. 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, Exelon's President and CEO.

Thank you, Ryan, and good morning, everyone. We appreciate you joining us for our first quarter earnings call. Our message today is straightforward. 2026 performance remains on track, both financially and operationally, and with a disciplined adaptable platform, you can continue to depend on Exelon to navigate change and deliver on our commitments.

This morning, we reported adjusted operating earnings of $0.91 per share, exceeding expectations with outperformance driven primarily by net favorable weather and timing-related items. We are also affirming our 2026 operating earnings guidance of $2.81 to $2.91 per share.

Reliability and operational performance continue to set the standard for the industry. Even as our system faced several high wind storm events this spring, all utilities sustained top quartile and reliability performance with ComEd in top decile. Our men and women on the ground continue to deliver, responding safely, restoring service quickly and keeping customers connected. This quarter also included several important regulatory and legislative developments, most notably in Pennsylvania and Maryland. At PECO, we made the decision to withdraw the recently filed electric and gas rate cases. This was a deliberate timing-based decision grounded in customer affordability considerations and informed by stakeholder feedback. Importantly, this decision does not change our commitment to safety, reliability, our long-term infrastructure investment. It demonstrates our ability to adjust timing and reallocate capital while maintaining the balance between near-term affordability and long-term system needs.

Maintaining that balance requires difficult prioritization decisions and the strong ongoing stakeholder partnerships you've come to expect from Exelon. Looking ahead, we welcome continued close collaboration with all stakeholders across Pennsylvania as we reprioritize certain investments without compromising safety or reliability in the near term.

Before I move on, I also want to highlight a recent leadership update at PECO. Dave Vohos, previously CEO of PICO has transitioned into an advisory role reporting to me. Michael Innocenzo has stepped in as an Interim President and CEO, while continuing to serve as Exelon's Chief Operating Officer. Mike previously served as President and CEO of PECO from 2018 to 2024 and brings deep operational experience, long-standing relationships across Pennsylvania and a strong understanding of PECO's system, workforce and stakeholders. This transition ensures continuity and stability at PECO as we remain focused on operational excellence, affordability and reliable service for our customers.

Turning to Maryland. The Utility Relief Act has passed the legislature and is awaiting Governor More's signature. We know the governor and state leaders share our focus on affordability. However, the legislation does not address the growing imbalance between the energy demand and supply. Residential supply costs in the Mid-Atlantic have increased by up to 80% or more over the past 5 years. Without addressing supply constraints, affordability challenges will persist. Addressing this challenge requires a combination of incremental transmission investment, continued reforms at PJM and critically, the addition of new generation. We're leaning into areas where we have a clear mandate today, light transmission, while also advancing solutions in areas where we currently cannot participate, including utility-owned generation. For example, HB-1561 in Maryland was designed to establish a clear path for utility-owned backstop generation, particularly storage and renewable resources. Given the structural imbalance between supply and demand in the state and Maryland's heavy reliance on imports from neighboring markets, this approach would have meaningfully enhanced energy security and resilience, and ultimately avoid the risk of blackouts, which in 2024, PJM suggested could happen as soon as 2028 due to lack of supply.

In short, affordability and reliability must go hand in hand. We remain committed to working constructively with stakeholders to deliver near-term customer relief while supporting the long-term investments required to keep energy safe, reliable and affordable. As such, we have taken a hard look at our plan and made deliberate adjustments. Let me be clear. This is a different plan for a different moment. We are pulling back on certain projects, reprioritizing capital across our portfolio and delivering $350 million of incremental O&M savings in 2027 tied to work we will no longer pursue. We are actively reshaping the business to best meet the needs of our customers while delivering on the Exelon promise to keep energy bills as low as possible. This includes accelerating the use of new technologies, focusing investment on the highest impact opportunities and maintaining disciplined cost control.

Business as usual is not an option. The energy market has shifted dramatically with significant load growth and a lack of supply to meet the evolving needs of our customers and communities at a reasonable price. While we remain confident in the value of our work and investments, this moment requires us to adapt, to be agile and make changes thoughtfully and purposefully. Our core mission, commitment to safety, reliability, ethics and compliance and service to our customers are not changing.

Now Jeanne will walk through the details in a moment, but with these actions in place, we are reaffirming our 2026 adjusted operating earnings guidance of $2.81 to $2.91 per share, and our long-term operating earnings growth outlook from 2025 to 2029 near the top end of the 5% to 7% range. This is our platform at work. Size, scale diversification and discipline translate directly into execution. As we adjust our plan to reflect current realities, we are also leaning into areas where we see strong visibility and clear need, most notably in transmission. Our scale, multistate footprint and deep operational expertise allows us to step forward where reliability and resiliency investments are increasingly needed especially as low growth and system complexity continue to accelerate.

We've seen that play out in recent periods through our success across multiple competitive and reliability-driven processes. That momentum continues. In February, we submitted competitive bids for 2 Illinois transmission opportunities within the MISO tranche 2.1 window, representing approximately $1.9 billion of total transmission capital spend pursued jointly with Invenergy. While it's too early to comment on potential outcomes, these projects underscore our disciplined approach, deploying capital where RTOs have identified clear need, strong execution visibility and attractive risk-adjusted returns.

You should expect Exelon to continue engaging competitively and with discipline in future transmission windows across PJM and other ISOs, including 2 additional bids expected later this month. However, affordability and energy security cannot be solved by transmission alone. Additional generation is critical. We continue to work closely with federal officials, PJM and state leaders to address elevated supply costs and emerging reliability challenges across the system. Let me reiterate, you cannot have a conversation about affordability without addressing the underlying shortage of generation.

We support measures that bring new generation forward while avoiding market designs that result in unnecessary or excessive payments at the customer's expense. That's why we've been focused on ensuring our data center pipeline is increasingly backed by FERC-approved transmission security agreements, which have now secured approximately $1 billion of collateral. Real affordability depends on careful design from load forecasting and cost allocation to how new resources are integrated into the market framework. There's more work ahead as implementation details continue to take shape, and our team remains closely engaged with PJM, regulators and policymakers to ensure outcomes that protect customers and support a reliable, affordable system.

As we said before, addressing these challenges will require an all-of-the-above approach, including utility-led solutions, demand-side alternatives and merchant investment. While we do not control the supply side, we remain intensely focused on reducing the costs we can control and on actively advocating on behalf of our customers. In the past year alone, we've delivered approximately $1 billion in customer savings through a combination of actions, including our award-winning programs that connect customers to assistance. Our industry-leading customer relief fund, a recently approved gas supply settlement and disciplined cost management that kept costs nearly flat, driven by operational efficiencies.

We're delivering this $1 billion. We've -- while delivering this $1 billion, we've also provided best-in-industry reliability. In contrast, over the last 2 years, customers have paid $32 billion to generators for capacity in PJM, while supply has declined by 1.2 gigawatts over that same period, meaning customers paid more and received less.

The time for action is now. PJM has been warning about 2028 reliability risk since 2024. We're halfway there, and there's been no meaningful progress on new supply.

While recent activity in the PJM interconnection queue is encouraging, it's not enough for projects to simply be in the queue. We need to ensure they are built and come online in time to meaningfully address this reliability need. Had utilities been allowed to build generation for the '28, '29 planning year we would be in a materially stronger position today. As we've highlighted before, Charles Rivers Associates estimated that utility supported generation could have saved PJM customers between $9.6 billion and $20 billion in the '28, '29 delivery year, while reducing outage risk from energy shortages by approximately 85%.

Our customers simply cannot afford to wait any longer.

With that, I'll turn it over to Jeanne to walk through our financial performance and provide additional details on our rate case activity. jeanne?

Thank you, Calvin, and good morning, everyone. In addition to our first quarter financial update and progress on our 2026 regulatory activity, today, I will review several disclosure updates that reinforce our confidence in our path to adjusted operating earnings growth near the top end of the 5% to 7% range beginning on Slide 5.

We recognize that balancing affordability with safety and reliability is critically important, and we remain actively engaged in solutions that put customers first. Our customers are served by some of the most reliable utilities in the nation and continued investment is essential to maintaining that performance in the near term while supporting long-term economic growth. Our revised 4-year capital plan reflects these priorities by rebalancing investment, enabling us to invest nearly $10 billion in 2026 and a total of $41.7 billion over the next 4 years for the benefit of our customers. This reflects $1.1 billion of project deferrals and reductions in PECO and BGE distribution, coupled with $1.5 billion of incremental transmission investment to support project realignment and the interconnection of data center customers that have signed transmission security agreements.

Despite the rebalance of capital, we are maintaining our revised annualized rate base growth of 7.9% over the next 4 years, reflecting the substantial and accelerating transmission growth opportunities we are experiencing across our service territory. The need for additional transmission infrastructure is real, and we are witnessing this growth firsthand, driven by reliability requirements and large load interconnections. We now anticipate transmission rate base growing at 16% through 2029 and are maintaining our previous upside guidance of $12 billion to $17 billion, which doesn't include our recent competitive transmission bids in MISO or potential solar or storage opportunities.

Having executed within 2% of our plan since 2023, we remain confident in our ability to deliver this next phase of growth through disciplined execution, advancing important economic and energy priorities while keeping customer affordability front and center through a continued focus on cost management. We are confident in our ability to drive expense growth well below inflation. In addition to nearly flat expense growth from '24 to '26, we are now targeting no more than 2% adjusted O&M growth through 2029. We remain committed to managing the portfolio as one Exon and are leveraging our dedicated team to identify another $350 million of savings in 2027.

Our revised plan incorporates cost reductions achieved through accelerating AI and technology transformation, prioritizing IT projects with the greatest customer and operational impact, focusing our community investments, reducing the use of outside contractors, implementing a managed hiring process and offering a targeted voluntary separation program later this year.

We also continue to rely on a balanced funding strategy to support this execution. We are committed to ensuring that we maintain financial flexibility and strong credit metrics over the guidance period, targeting approximately 14% at Moody's and S&P. I'll provide additional detail on our balance sheet and financing strategy on a later slide.

Turning to Slide 6, we present our quarter-over-quarter adjusted operating earnings lock. Exelon earned $0.91 per share in the first quarter of 2026 compared to $0.92 per share in the same period in '25. Earnings are lower in the first quarter relative to the same period last year, primarily driven by $0.07 of new distribution and transmission rates net of depreciation and AFUDC and $0.01 of favorable weather at PECO. This favorability was offset by $0.04 of ComEd timing due to revenue shaping in '25, $0.02 of higher interest expense at Corporate and PECO, $0.01 of higher credit loss expense at BGE and $0.01 attributable to the recognition of Pepco Maryland's MYP reconciliation of which a final order was received in March. These results are slightly ahead of our indications on the fourth quarter call, primarily due to favorable weather and timing-related items.

Looking ahead to next quarter, we expect second quarter earnings to be approximately 15% of the midpoint of our projected full year earnings guidance range, which contemplates normal weather and storm activity and anticipated revenue shaping and timing for the quarter. In combination with Q1 results, this would result in recognizing 47% of projected full year earnings in the first half of the year, in line with seasonal shaping in prior years and allowing us to remain on track for full year operating earnings of $2.81 to $2.91 per share, with the goal to be at the midpoint or better.

Turning to Slide 7. We highlight our regulatory activity in 2026. Starting with the Pepco Maryland base rate case, where we have filed a notice with the public -- with the Maryland Public Service Commission to pursue the traditional base rate case we have filed last fall, requesting a revenue requirement of $119.9 million, which primarily request to seek recovery of critical infrastructure investments and incremental financing costs associated with rising interest rates. These investments support system reliability, capacity and long-term growth for our customers, including projects such as the White Plant substation in Montgomery County, which expanded capacity to meet current and future energy needs, reduced outage risk and maintenance needs through removal of more than 16 miles of overhead lines and strengthen system resilience through underground supply lines and modern equipment.

Collectively, this and other investments contributed to Pepco achieving the lowest outage duration in the state. Evidentiary hearings were held last week and a final order is expected in August.

In Delaware, Del Mar Power's electric base rate case continues to progress on schedule, with intervener testimony due at the end of October. The requested revenue increase allows us to better support our customers through targeted programs and essential investments. This includes a new income-based rate and reliability projects such as Basin Road, where 2 transformers originally installed in 1967 were replaced and now reliably serve over 2,500 customers, including Bolmington Airport, the Delaware National Guard and surrounding communities. DPL expects to be able to implement interim rates in effect in July.

Finally, on Slide 8, I will conclude with a review and update of our balance sheet activity. We continue to take advantage of favorable market conditions early in the year and have made substantial progress toward our 2026 capital needs. We have completed approximately 43% or $2.3 billion of our planned long-term debt financing, successfully executing all expected debt transactions both at corporate and Pepco Holdings for the year and materially derisking our go-forward financing plan.

The strong investor demand and attractive pricing for our debt securities continue to be a testament to the strength of our balance sheet and to our value proposition, positioning us well and service to our customers. We also continue to execute our creation hedging strategy to further protect us from interest rate volatility.

Through 2029, we expect to fund the revised $41.7 billion capital plan with about $21.8 billion of internally generated cash flow, $13.1 billion of debt at the utilities and $3.4 billion of holding company debt. The balance will be funded with $3.4 billion of equity, approximately 40% of our incremental capital plan from last year's plan and representing less than 2% of Exelon's annual market cap. We have already made progress on approximately 37% of these equity needs, with all of our $850 million in equity needs for 2026 and over $400 million in 2027 priced using forward contracts under our ATM.

Maintaining a strong balance sheet remains core to our strategy. We continue to identify opportunities to mitigate risk in our plan and expect to maintain financial flexibility above our downgrade thresholds, targeting credit metrics of 14% over the planning period. We remain confident in our ability to deliver value for our customers and our shareholders. Thank you. I'll now turn the call back to Calvin for his closing remarks.

Thank you, Jeanne. I'll close on Slide 9 by reinforcing what matters most as we move forward. Our priorities are clear and unchanged. We are executing our capital plan with discipline, delivering strong operational performance, advancing affordability through prudent investment and pursuing growth where it strengthens the system and creates long-term value. That discipline is supported by a platform built to perform. Our scale, diversified footprint and capital flexibility allow us to adapt as conditions evolve without losing focus or momentum.

In 2026, we expect to deploy approximately $10 billion of capital for the benefit of our customers, earn a consolidated 9% to 10% ROE and deliver operating earnings of $2.81 to $2.91 per share, with a goal of achieving midpoint or better while maintaining a strong and resilient balance sheet.

The infrastructure we operate is foundational to the communities and economies we serve. We take that responsibility seriously, and we meet it every day through consistent execution, high operational standards and a clear focus on the people who rely on us.

Before I close, I also want to recognize the work of our employees across this company. Balancing long-term infrastructure needs with customer affordability is not easy. It requires judgment and discipline at every step. That work extends beyond prioritizing the right investment. It includes constructive regulatory engagement, partnership with local communities and advocacy for policies that promote affordability and reliability even when they're not popular. I'm proud of how our teams managed this balance. Their focus on execution, affordability and customer outcomes is exactly what allows Exelon to deliver today while positioning us for the future.

The world around us continues to change, but our approach remains consistent. We remain focused, disciplined, accountable and confident in our ability to deliver. Michelle, we can now open it up for questions.

[Operator Instructions] Our first question comes from Shar Pourreza with Wells Fargo.

So Calvin, I wanted to start with Pennsylvania. I mean it seems like it's the noisiest in the country right now. I guess what are you getting from Shapiro to make withdrawing the case and weathering this environment worth it? I mean the gas utilities seem to be okay. One of your peers has a black box settlement, which should get approved. So the move is a bit conflicting. I guess, what is it about this case that spooks stakeholders versus your other peers? I guess how should we be thinking about the trade-offs here in the state from your move?

No. Thanks, Shar, and thank you for asking the question. Let me begin by saying what a difference a year makes. And I'll share, Shar. Pennsylvania has always been a jurisdiction in which we leaned into and had strong regulatory backdrop and strong relationships, and we continue to have those. Our decision to -- and timing, our decision to remove the Pennsylvania filing was based on conversations we had with a variety of stakeholders. And those stakeholders said, "Hey, if you could partner with us to address the affordability issue and lean and timing is not the best right now." We're assessing our future rate case filings in Pennsylvania, but all geared to having a strong infrastructure to provide safe, reliable service. So again, I'm not conflating this with any other cases that have been filed by we did what was best and what is best for Exelon and PECO specifically at this time. We believe PECO needs to make investments in the future, and we will do so. But we will work collaboratively with all stakeholders to make sure it's a prudent decision and time appropriately to move forward.

Got it. Perfect. Hopefully, that created the goodwill that you guys needed for that. Just -- and then, Calvin, just on conversations around supporting supply-side solutions and long-term resource adequacy agreements. I guess any movement with House Bill 1272 or Senate Bill 897, I guess how should we be thinking about the catalyst and timing? Is something -- is this something we could see before or after the election? Is Pennsylvania waiting for PJM answers from FERC or the RBA process first? I guess how do we think about resource adequacy and the bills that are out there in light of you just pulling a rate case and creating hopefully some goodwill?

Yes. Shar, you go right to the core issue is that we're not going to adequately address affordability without addressing the supply issue. And that is our conversation, not just in Pennsylvania, but across all jurisdictions. So when you see us show up in advocacy position for bills that allow utilities and to get new generation build, that's what it's all about. And recognizing also right now that Pennsylvania is in an election year, so -- and you have a divided government. So to get anything done this year is going to be a long shot, but I think it's necessary to continue to advocate for utility-owned generation and new generation in the state and across the mid-Atlantic specifically. Because if you don't do that, the same issue that we're talking about today, we'll be talking about in the next 3 to 5 years. And that is what we're communicating with all stakeholders. You can't talk affordability without talking the supply stack. And this is what's obvious, but people want to talk about it in silos. It has to be a holistic approach we have to talk about them generally.

And the bills you mentioned go directly to that issue, and we will continue to partner with other utilities and stakeholders in the state to address them.

Our next question comes from Steve Fleishman with Wolfe.

I guess just following up on Pennsylvania, you really mentioned the Governor's letter. And in terms of kind of focus on, I guess, kind of seemed like a more adverse regulatory structure. Just -- could you just maybe comment on how you interpreted that? Were you hearing -- was that part of what you've been hearing when you pull the case? And how should we think about that when you ultimately do file a case?

Yes. Thank you, Steve. I think the Governor's letter, first and foremost, it all centered on affordability, right? That's kind of what I was just sharing with Shar. Having said that, he brought up 3 specific points: one, making sure that utilities are going after the most cost-effective forms of capital, he want transparency and ratemaking and he used the term justifiable returns. So let me tell you. So it was nothing that we hadn't heard in our conversations with them, and he put it out there to the entire energy portfolio within the state of Pennsylvania, all the utilities and said, future rate cases, future discussions need to be centered on these 3 principles, and we have no concern with that, Steve, really going in. And as I've shared with the governor and others have shared with the governors that there's a 9-month regulatory process within Pennsylvania, and we will continue to operate in a very transparent methodology and work with the commission and the governor and his team to ensure that he understands the what and the why. Why the investments we're making are adding value and safe and reliable and resilient service to Pennsylvania, and also what we are doing on the front end to control our cost. So when we -- when I laid out to you in my opening comments, we're pulling $350 million of cost out of our business, I think that goes right to the governors -- one of his message is that, hey, justifiable returns, are you doing utility? Are you doing your part and ensuring that you're keeping your costs as low as possible? And my response to him is, absolutely. We were doing it before, and we'll do it into the future to manage this business. But at the same time, as we manage this business, we know how economic development is important to you, we know how creating jobs is important to you, and there's no better partner that I can speak in PECO has been doing for not only the last decade but multi-decades in the state of Pennsylvania. So these are the very issues that we're talking about today, and we'll talk about in the future.

Sorry, I have 2 other questions. One is just on the comment on PJM issues and the need for more generation, which clearly clearly agree as a problem. One of the things that did come up recently was the crane restart and the fact that, that -- even when you had something coming back, it's not potentially interconnected until 2031. Is there like things that can be done by PJM or transmission owners to deal with that aspect of getting interconnection done quicker?

Thank you, Steve. And we've been on top of that issue and partnering with PJM to see what we can do and how we can do different routes, what we can do to really secure them and get them on sooner. But the reality of it is, as I've always said, we have a concern with the entire reliability and resiliency of the system. And I would look to collect to see I'm going to phone a friend and ask Colette Honorable if she wants to provide any input into that.

Thank you. Colette Honorable here. Thanks for the question about the interconnection queue. As you know, PJM has been in the midst of evaluating how best to progress the interconnection queue. And last week announced that 811 new generation projects capable of generating 20 gigawatts of electricity have applied to interconnect to the grid. We've also seen that PJM has reopened the queue, and we applied PJM for that action because we understand all too well as we hear from our customers that we need to move that backlog and get the supply through the Q. We also know that we needed to address reliability challenges. So while we are encouraged that there are over 800 projects in the queue, we know that there's still more work to be done because only 19% of the projects that are in the queue reach operation.

We also know 54 gigawatts have been cleared through the interconnection process, but they're delayed by sighting, permitting and supply chain issues. Most of all, to your question, we meet new supply. And so we are -- while we are encouraged by the work at PJM, there's a lot more that needs to be done. So we're pleased to see the new leadership at PJM and David Mailes, and we're hopeful that he can help move this along.

Okay. And just a quick last one. The transmission CapEx increase that you did, I guess if you didn't lower the distribution, would that have kind of happened anyway? And is there more of that coming from the data centers? Or are you kind of managing within a total capital level that you were trying to kind of manage within? I don't know if that makes sense to that question, but yes.

It does. I think it was work that we saw on the horizon. And I think we've always spoken to the diversification of our portfolio, but also not 1 project being greater than 3%. And so having those projects available to pull in within the planning period, it's work that we knew we needed to do, it's also work that was aligned to some of the cluster studies. So I think that's the benefit of Exelon's diversified capital portfolio. We can pivot as needed.

I think our -- with that being said, right, our $12 billion to $17 billion of opportunities outside the planning period, we didn't change that range. We still think that, that's very robust, still driven by the same 4 or 5 themes and we'll continue to kind of manage the portfolio. Now as Calvin said, this is the plan for this moment. There's a -- so we did pull back on distribution, right? But there's a cost to investing and there's a cost to not investing. And so we do believe that we need to -- there's critical work we still need to do in those states, but this is the right plan for this moment. We know through our strong operations on the distribution side we saved our customers $1 billion in avoided outage costs in 2025 alone.

And so the investment needs to be done, but this is the right mix for today, and we'll continue to evaluate and adjust. And again, that brings me back to the benefit of the size, scale diversified portfolio of Exelon.

Our next question comes from Nicholas Campanella with Barclays.

I wanted to just ask 1 follow-up on the letter, if I can, just there was things proposed around the return that would point to a lower ROE and potentially lower equity cap depending on how the mechanics around that work. And it just -- obviously, those would be significantly below the state averages across the U.S. It already has kind of raised the company's implied cost of capital. So just can you kind of talk to just the risk of it if it going there? And my understanding is you do have a GRC penciled into this plan, if you can confirm that? And do you have -- does the company have any view if that would require legislation to go that way? Or is this something the PSC at its discretion could do?

So I think what we would say on not just the ROEs, but the cap structure and the transparency on investments. To Calvin's point, we believe that Pennsylvania has a robust regulatory process that allows us to build an evidentiary record that can pull in all forms of debating what and justifying what is a fair and reasonable return. And so we believe that, that's the right place to have that conversation, it's what we've always done, right? Even in a settlement, right, you still have to justify your returns, you still have to use capital asset pricing models or other things, right, that say, "Hey, based on publicly available data, real data, right, which is what the governor is asking us to pull in, this is the justifiable return. And we know that a healthy and financially sound utility needs to have justifiable returns that are commensurate with the risk that's being taken by the regulated utility. We know that the capital structure has to balance the right risk to make sure that we have appropriate credit ratings that drive lower cost of financing for our customers.

And so we will look to continue to leverage that process to build the evidentiary record that results in the right economics for both a financially sound utility, but one that can continue to invest to create economic development, to drive jobs and to avoid the significant costs that we know are associated with not investing.

Okay. Okay. And then maybe it sounds like you introduced some O&M rationalization here in the plan. You're working towards identifying more. You outlined kind of some of the things there that you're doing, but just how much is I guess, sustainable versus onetime and can be kind of recaptured through a rate case proceeding.

First off, Nick, I would tell you that we're going to run our business in the most efficient manner. And when we talk about pulling out $350 million in cost, it's largely driven by if we're not going to do certain projects, we're going to pull those costs out of the business and manage it. And if an opportunity arises, as we look at future investments to bring back in certain avenues or outlets to get that done, we will, but we will always maintain and run a very efficient business. That's our promise to our customers.

So when we talk about maintaining, I always approach this as most of them, if not all, are going to be sustainable cost savings to deliver this value. And for us to look at through 2029, we're not going to ever make any decisions that will sacrifice the reliability and safety of the system, so therefore, these savings are geared to being an efficient operation overall. They're not geared towards one particular opco, they're geared as a system, but certain opcos will have to make deeper provisions because if you're not investing, you're going to have to make those adjustments. So that's how we're approaching it.

Okay. And then just one more, if I could. Just I guess, you continue to kind of be on stable outlook from my understanding. So just the feedback from the agencies through what's kind of transpired here in Pennsylvania?

Yes. We've had a lot of discussions with the agencies. PECO was already on negative outlook. They're on review for a downgrade. I mean I think that combination of us continuing to vest and -- invest, and we have been leaning on that investment profile. But I do -- I would -- I do think that the regulatory climate factors in there. And so that is something we'll continue to work through. And of course, we want to maintain -- the stronger the credit ratings to lower the cost of financing. And so we'll stay close them as a whole, I think, from an Exelon perspective, though, Pennsylvania is 1 piece. We're managing this as a portfolio, our diversified platform, our ability to kind of pivot around different projects and still deliver and importantly, still maintain that target of 14%. And so when you have that cushion to the credit rating downgrades, I think it's a testament to how we put safe, reliable grid and balance sheet at the forefront of our decisions, and that allows us to continue to deliver, not only for our customers, but for our shareholders, too.

Our next question comes from Paul Zimbardo with Jefferies.

Nice to see the swift adjustments. I know those are easy decisions to make. Just the first one I had was it sounds like kind of more intensity in your prepared remarks every quarter-on-quarter, Calvin. Is there a point where you kind of need to take matters into your own hand and pursue more contracted generation opportunities, advocate for bigger changes with the states and PGM? Just could you kind of gauge where you are on kind of the intensity and more shifting towards being more proactive to the extent you can versus waiting for PJM?

First off, Paul, thank you, and thank you, as always, for the questions and for joining. Let me begin by saying, we are. We are taking things in our own hands. When you look at our transmission organization led by Carim Khouzami, a year ago, we didn't have that. We're going after competitive transmission bids to date. We are also looking at partnerships to go after generation to build generation contracted generation. We're doing all those things to date. But per our process, and who we are as a company, I don't talk about those things which you fall into, I know they're done or until we've got something to talk to you about that is signed and we're delivering for you. And that's just who we are as Exelon when I tell you something we're going to deliver. So that's one.

The second piece is the intensity comes from, it's our job to run this business. And so when we come out and say, to your point, we're taking $350 million of cost out within this year and the $1 billion in savings we've delivered for our customers, that is a very thoughtful process, and we know it impacts people's livelihoods and everything else. So when we talk about less contractors on our system, and we talk about plans and impact our employees, we don't take those lightly. But it's up to us to run a business to ensure that we have a stable environment for our 20,000-plus employees, and we're delivering the value to our communities. So are we being proactive? Absolutely. But I will talk to -- we will talk to you about those when those plans are baked, and we're running through the tape, right? Because speculation doesn't deliver results and we're committed into our earnings results that we provided to you to [indiscernible] deliver. And if that was to adjust, we'll be the first ones to tell you the what and the why. But we are committed to this.

And yes, I am -- we are, not I, we are being very intentional about how we focus our efforts day to day. based on the changing market dynamics that we're facing. And when you're sitting in our market right now, you can hear it across PJM. You don't step into any of our states without the first thing that governors or commissions talk about is affordability. And we're not being toned at. We're listening and we're addressing it. So I'll stop there.

No, no, totally, totally. Now it's good to hear. And then just kind of pulling it to a little put together a bit. Just between the net higher earnings from kind of shifting to transmission, the cost control, would you say this builds more contingency in the plan? Or is this more kind of you're in the same place as you were before, which is the reconfiguration of the rate case timing as well?

I would say this gets us back to plan, Paul. This is -- but of course, as always, like we want to factor in all the risks and opportunities and give you a plan that accommodates a variety of different scenarios. So this is about getting back to the plan that we shared earlier. But as Calvin said, it's a different plan for this moment. And so as a management team, that's what you want us to do. You want us to pivot, leverage the portfolio of Exelon, still deliver, but do it in a way that contemplates a variety of outcomes.

At this time, I would like to turn the conference back over to Calvin Butler for closing remarks.

Thank you, Michelle. And let me begin by thanking everyone once again for joining our Q1 earnings call. I hope what you've taken away today is what you've heard is that you're seeing the power of Exelon at work. Our diversified platform, committed men and women to deliver are going at committed to reaffirm what we've said we're going to do each and every day. We appreciate your continued interest and support, and we hope to see many of you in the months ahead. And so with that, Michelle, that concludes our call.

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

Hello, and welcome to Exelon's Fourth Quarter Earnings Call. My name is Gigi, and I'll be your event specialist today. [Operator Instructions] Please note that today's webcast is being recorded. [Operator Instructions]

It is now my pleasure to turn today's program over to Ryan Brown, Vice President of Investor Relations. The floor is yours.

Great. Thank you, Gigi. Good morning, everybody. Thank you for joining us for our 2025 fourth quarter earnings call. Leading the call today are 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'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.

I'd 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. Reconciliations between these measures and the nearest equivalent GAAP measures can be found in the appendix of our presentation and in our earnings release.

With that, it's now my pleasure to turn the call over to Calvin Butler, Exelon's President and CEO.

Thank you, Ryan, and congratulations on the new role, and good morning to everyone. We appreciate everyone joining us today for our fourth quarter earnings call.

As we reflect on another successful year and celebrate the close of our 25th anniversary, we're proud to once again deliver exceptional results for our customers, employees and investors. Across Exelon, our companies bring more than 800 years of collective experience. Even with that long view, this moment stands out. The industry is changing at a speed and scale rarely seen. With that comes both great responsibility and opportunity. I've never been more confident that Exelon has the people, the discipline and the platform to continue to lead the energy transformation and meet this unprecedented demand.

This is underscored by our recent results. As you saw from this morning's release, we delivered another strong year. For 2025, we reported adjusted operating earnings per share of $2.77, delivering above expectations. This continues our track record of exceeding the midpoint of guidance in each year as a stand-alone utility. And since 2021, we've achieved a 7.4% annual earnings growth rate and 8% rate base growth through 2025, highlighting our ability to navigate changes and consistently execute.

This steady performance is a direct result of the continued focus on affordability and our ability to deliver investments that directly benefit our customers, providing above-average performance at below-average rates.

It was also another exceptional year operation. Exelon continues to set the standard for the industry. Our utilities maintained top-quartile reliability metrics once again and we're ranked 1, 2, 4 and 7 amongst our peers based on 2024 benchmarking data. This level of performance is nothing new. In fact, we've delivered top-quartile reliability for over a decade. It's who we are and center to our mission.

But don't get me wrong, consistency does not come easy. It's the direct result of a culture of continuous improvement, innovation and a steadfast focus on targeted investments that maximize value for our customers. These investments not only prevent outages and deliver best-in-class service, but they directly benefit local economies, with every $1 million invested creating 8 dots or $1.6 million of economic output.

I am truly home by the commitment and sacrifice of our employees that make this level of service possible. Recently, their dedication was on full display during Winter Storm Fern. Despite record low temperatures, our investments withstood heavy snow and icing across our territories, maintaining strong reliability with only minimal disruptions. Fewer than 1% of our customers experienced outages even as an extreme weather impacted our regions. This reflects the tremendous work of our employees over the past decade to invest in the safety, reliability and resiliency of our system.

The performance is remarkable when accounting for the scale of the storm as well as the demand put on the grid. Fern resulted in the PJM RTEP experiencing 5 days in a row of peak load ranging from 135 to 140 gigawatts, reaching 97% of the all-time winter peak. Our investments, combined with our employees around-the-clock dedication, kept nearly 11 million electric and gas customers safe and warm when they needed us most. I'd like to express my gratitude to all of our employees who have supported storm restoration efforts locally and afar. Thank you for all that you do.

Over the last quarter, we also made significant progress on the regulatory front. As Jeanne will detail shortly, it's been an active few months. We've achieved several key milestones, including final settlements for the Atlantic City Electric and Delmarva gas rate cases, reconciliation orders at ComEd and BGE, and the filing of ComEd's second multiyear grid plan. This progress is built on a foundation of hard-earned trust. We work collaboratively with stakeholders and our communities to ensure that our investments align with the specific goals and needs of the states we serve.

Looking ahead, we now expect to invest $41.3 billion of capital to support our customers with more than 70% of the plan [ over-plant ] increase driven by transmission, where we continue to have a unique opportunity and significant momentum. Our size and scale, multistate footprint and operational expertise position our utilities to capitalize on the growing need for transmission investments in reliability and resiliency, accelerated by the pace of new business growth.

This progress is further evidenced by our success in the recent PJM Reliability Winter results, where $1.2 billion of incremental Exelon investment was recommended, including a jointly developed solution with NextEra. This comes on the heels of other recent large-scale transmission awards, including [ Brand Insured], Tri-County and the MISO Tranche 2.1 project. You should expect us to be active in future [ winters ] within PJM and other ISOs, leveraging our competitive advantages where appropriate.

And we continue to see robust demand in our jurisdictions with anticipated load growth exceeding 3% through 2029. This is further reinforced by our large loan pipeline, which is now further supported by an increasing number of signed transmission security agreements or TSAs.

Overall, our pure transmission and distribution capital plan is unique and truly differentiated. It's highly diversified across 7 regulatory jurisdictions, including FERC, with no 1 jurisdiction greater than 30% and no single project comprising more than 3% of the plan.

It's also actionable. We have line of sight to each project that comprises the $41.3 billion with a significant pipeline of incremental projects over the next 5 to 10 years and the size and scale to execute efficiently.

With continued returns on equity in the 9% to 10% range, we expect rate base growth of approximately 8% and annualized earnings growth of 5% to 7% through 2029, with the expectation of being near the top end of that range. We will continue to fund investments in a balanced and disciplined manner that maintains a strong balance sheet. And for 2026, we are initiating operating earnings guidance of $2.81 to $2.91 per share.

Our continued progress is clearly demonstrated by the scorecard on Slide 5, where we can once again -- where we've once again met or exceeded every goal we set at the start of the year. At Exelon, commitments made are commitments met. That discipline and credibility define who we are and shape how our teams operate every day.

In addition to strong operational and financial performance, we continue to lead on customer affordability, which remains a top priority. We continuously drive costs out of the business through efficiency and innovation, maintaining a track record of cost growth well below inflation. In the past year, we executed a $60 million customer relief fund to support low and moderate income customers facing higher supply costs. We advanced innovative TSAs that prioritize large loads while ensuring existing customers remain protected. Our award-winning energy efficiency programs continue to deliver meaningful savings. We expanded connections of distributed resources, giving customers more weight to participate [ and say ]. And we are steadfast in introducing innovative tools and processes to connect customers to low-income assistance. We continue to focus on actions like these that are directly within our control in addition to delivering safe, reliable energy while keeping bills as low as possible.

In the meantime, we are also actively partnering with federal RTO and state leaders to address high supply prices and emerging reliability risks. The supply challenge is real, but not insurmountable. We're encouraged by the growing national focus, including the recent announcement from the White House and our state governors advancing policies to incent new generation and improve affordability.

As we said before, we firmly believe it's going to require an all-of-the-above strategy that includes utility-generated, demand side and merchant solutions. This was further supported by the study released last week by Charles Rivers Associates. The report is an urgent call to action, highlighting the risk of the status quo and the cost and reliability benefits of utility-generated energy. Specifically, they note that utility-generated power could have saved total PJM customers $9.6 billion to $20 billion in the 2028/2029 delivery year, while reducing the risk of potential future outages from energy shortages by approximately 85%. We are committed to continuing to work with all stakeholders to advance policies that strengthen energy security as quickly and cost-effectively as possible.

Finally, I want to take a moment to reiterate why our platform and approach is best positioned for the years to come. As highlighted on Slide 6, our foundation is based upon a customer focus and industry-leading operations. With our size and scale, constructive regulatory frameworks and diversified footprint and capital plan, we have a disciplined and defensive foundation that is resilient. Yet at the same time, we're well positioned to capture credible, meaningful opportunities for sustainable growth.

We're excited about where we're headed. Our platform is designed to deliver an attractive risk-adjusted return and long-term value for all stakeholders. I'll now turn the call to Jeanne to dive deeper into our 2025 results and share more details on our updated long-term plan. Jeanne?

Thank you, Calvin, and good morning, everyone. Today, I will cover our fourth quarter and full year results. key regulatory developments and updates to our financial disclosures, including 2026 guidance.

Starting on Slide 7, as Calvin noted, since becoming a stand-alone utility, we have continued to execute, and 2025 adds to that track record. In 2025, we delivered $2.73 per share on a GAAP basis and $2.77 per share on a non-GAAP basis for the full year, reflecting strong year-over-year growth. For the quarter, Exelon earned $0.58 on a GAAP basis and $0.59 on a non-GAAP basis. Full year earnings above our guidance range primarily benefited from favorable weather and storm conditions and the resolution of certain regulatory proceedings. Throughout the year, we also managed costs well across the platform, ensuring we can accommodate a range of outcomes while monitoring regulatory activity and weather in the fourth quarter. Quarter-to-date and year-to-date drivers relative to prior year can be found on Appendix slides 37 and 38.

Turning to Slide 8, we are initiating 2026 operating earnings guidance of $2.81 to $2.91 per share. With much of our growth aligned with completed rate cases and continued strong cost management, the 2026 implied midpoint relative to the midpoint of our 2025 estimated guidance range is ahead of previous disclosures, reflecting midpoint to midpoint growth above 6%.

Our performance in 2025 underscores our ability to deliver strong financial results amid uncertainty, all while operating at industry-leading levels and innovating to find new and great ways to support our customers. We've executed operational efficiencies, capitalized on our growth opportunities and identify more ways than ever to support our customers. We look forward to furthering this progress in 2026.

Looking ahead to the first quarter, we expect earnings to be approximately 31% at the midpoint of our projected full year earnings guidance range, which is in line with historical averages. This accounts for completed regulatory filings, anticipated revenue shaping and O&M timing as well as normal weather and storm conditions throughout the quarter.

Turning to Slide 9, we executed another busy regulatory calendar in 2025, marking significant milestones and reaching final resolution on open reconciliations and key rate cases, providing cost recovery for the next several years.

Starting with Atlantic City Electric, in November, the New Jersey Board of Public Utilities approved a settlement supporting the recovery of $54 million associated with spread improvements and modernization investments in line with New Jersey's Energy Master Plan and the Clean Energy Act, at a 9.6% ROE. New rates went into effect at the beginning of December 2025.

Also, in December, the Delaware Public Service Commission issued a final order on the Delmarva Power Gas rate case, including a settlement that supports a $21.5 million revenue requirement and 9.6% ROE, recovering various reliability investments and LNG plant upgrades, which protect customers from price volatility during peak periods. Rates went into effect at the beginning of this year.

In addition to closing out base rate case activity, we also received final orders in our open reconciliations at BGE and ComEd in December, now gaining clarity on the recovery of our investments from 2023 and 2024. While we were disappointed to receive about half of the BGE reconciliation, we realigned capital accordingly.

Finally, moving to our current regulatory activity for 2026, the Pepco Maryland base rate case continues to progress according to the procedural schedule, with intervenor testimony filed at the end of last month. A final order is expected in August this year.

In December, Delmarva Power filed an electric base rate case in Delaware, requesting a net revenue increase of $44.6 million to support system reliability investments, storm remediation and storm damage costs. DPL also requested to implement a bill stabilization adjustments, which will offer customers more predictability of seasonal temperatures growing increasingly volatile. DPL expects to be able to implement interim rates in effect on July 9.

Finally, on January 16, ComEd filed its multiyear grid plan in Illinois, requesting an approval of the investment plans covering 2028 through 2031 in support of the priorities laid out in the state's [ CIJA and PDRJA bill]. A final order is expected in December, and the company expects to file its next rate filing in 2027.

On Slide 10, we provide updated utility CapEx and rate base outlook through 2029. We plan to invest almost $10 billion in 2026 and a total of $41.3 billion over the next 4 years, an increase of $3.3 billion or 9% from the prior 4-year planning period. Incremental investments reflect updates to align with recently approved rate cases and jurisdictional priorities and an increase in transmission investments.

Of the overall increase, approximately 70% or $2.3 billion is attributable to incremental transmission investments driven by the structural trends that underpin the energy transformation in our jurisdictions. Increased demand for high-voltage investments and capacity expansion to support large load growth, evolving generation supply and the reliability and resiliency needs of grid customers to withstand increasingly volatile weather. In fact, the majority of the additional transmission relates to continued system performance and capacity expansion across our platform, to put incremental data center load in addition to the gradual replacement of an aging network.

Our plan also includes an additional year of investment of our 2 largest transmission projects, Brand Insured and Tri-County, going into service in 2028 through 2030, along with the early spend of the MISO tranche 2.1 project which goes into service in 2034. Our annualized rate base growth of 7.9% over the next 4 years reflects an increase from the prior year plan, with a projected addition of nearly $23 billion in rate base from '25 to '29. Having executed within 2% of our capital plans since 2023, we are confident we will execute this next stage of growth, driving progress towards economic and energy goals and always prioritizing our customer needs in everything that we do.

Moving to Slide 11. Our size and scale, award-winning reliability and expertise in owning and operating 765 kV lines uniquely position us to capitalize on additional transmission opportunities that enable us to grow our transmission rate base CAGR by over 15% from '25 through the end of the guidance period. Coupled with our strength in execution, we now have line of sight to an additional $12 billion to $17 billion of transmission opportunities over the next decade that strengthen and lengthen our plans, of which over 60% includes projects associated with our existing infrastructure, supporting continued reliability, generator deactivations and providing additional operational flexibility and efficiency.

This upside also includes an estimated $1 billion of transmission associated with high-density load projects with signed TSAs, where we now have a foundation for additional certainty in our pipeline as agreements are presented to customers coming out of our [ Cluster 7 ] process.

We also remain optimistic about the work associated with MISO Tranche 2.1 with over $1 billion of investment in our common service territory, which is now [indiscernible] a cost allocation filing at FERC. Beyond the opportunities, we anticipate additional investment required to support our state's public policy goals, particularly our jurisdictions, assess energy security and economic development needs. For example, achieving [ CIJA's ] goals and the growing economic development in Illinois will likely [indiscernible] transmission investments.

Finally, as we discussed in prior quarters, success in winning competitively bid projects offer additional upside. From our success in winning the Tri-County project to the $1.2 billion in Exelon investment that PJM has recommended in this recent window, our size, scale and expertise positions us well to pursue competitive opportunities outside of our service territories within and outside of PJM.

Our ability to play with $10 billion of capital annually over the next 4 years is only possible with a rigorous focus on cost management and delivering value through those investments, supporting customer rates -- supporting customer bills at rates 19% to 20% below national averages. This focus is saving our customers approximately $580 million in O&M annually relative to what it would have been growing at a standard inflation level over the last decade.

We feel confident we can continue to keep our expense growth well below inflation levels, demonstrating nearly flat expense growth from '24 to '26 and targeting no more than 2.5% adjusted O&M growth through '29.

As we talked about last year, our institutionalized team and our One Exelon culture are committed to delivering value. We have taken advantage of our focused operations, along with our size and scale to continue to standardize and streamline our structure operations. Driving out $580 million in the annual O&M savings is no small task, but it's something our customers and shareholders have come to expect. Exelon's unique platform and industry best practices enable us to build upon these savings with line of sight to additional opportunities.

As investments grow to meet unprecedented load growth and reliability needs, our customers remain our top priority. Since 2021, Exelon's portion of the average customer bill to [indiscernible] median income has remained relatively flat, growing only 10 basis points, while maintaining top-quartile reliability, which saved customers $1 billion in avoided outage costs last year alone. We've reduced annual customer interruptions by nearly $2 million since 2021 and made significant economic impact in our community. Since 2021, we've deployed 20,000 people, sustained 50,000 jobs and have fostered nearly $60 billion in economic activity in our communities. Bringing value to our customers is foundational to what we do, and it's why we invest in the grid. That's why we're committed to keeping our O&M cost relatively flat from '24 to '26, and in partnership with our jurisdictions, have committed to support our customers through nation-leading programs and advocacy efforts.

Conversely, the supply side of the average monthly residential bill in the Mid-Atlantic has increased up to 80% or more over the last 5 years. Customers are now paying more for less. Since July of 2024, PJM customers have paid more than $32 billion as supply in the market declined 1.2 gigawatts. That's why I continue to be at the forefront for advocating for our customers across federal, PJM state levels, ensuring that every dollar customer spend can be tied to additional value they receive. We are pleased that federal discussions proposed the extension of the PJM capacity auction caller, saving customers tens of billions of dollars through 2030.

But our advocacy efforts don't stop there. We are committed to advocating for other policies, such as interconnection queue and rate design reforms that protect customers and support economic development. Our first-of-its-kind transmission security agreement filed at FERC do just that, providing a clear path to interconnection while protecting existing customers.

We believe all solutions are required to support energy security and drive affordability. This includes encouraging [indiscernible] solutions such as utility-generated power, which can bring certainty that the supply will be there, offer our state control and ultimately benefit our customers.

Turning to Slide 14, with prudent O&M spending and $41.3 billion of projected capital spend driving 7.9% rate base growth, along with earnings ROEs of 9% to 10%, we are projecting compounded annual earnings growth near the top end of 5% to 7% from our 2025 guidance midpoint of $2.69 per share through 2029. We continue to build momentum across our jurisdictions as we make progress on Pepco and Delmarva rate cases, the ComEd grid plans and as BGE prepares to file later this year. We look forward to working with our stakeholders to align on the investments that benefit our customers, enable us to maintain and improve upon our operational excellence, all in a fair return.

Maintaining our commitment to transparency, we have provided assumptions associated with our expected annual growth in earnings through 2029 on Appendix Slide 23. As you can see, we expect to deliver the out years near the top end of the 5% to 7% range, aligned for flexibility of rate case timing and keeping us on track to deliver near the top end of our 5% to 7% annualized growth rate from '25 to '29. We're also continuing to project an annual dividend growth at 5% and anticipate paying out a dividend of $1.68 per share in 2026, in line with that growth.

Finally, turning to Slide 15, I will conclude with a review of our balance sheet and financing activity, where we've continued to derisk and secure cost-effective capital to invest for the benefit of our customers. In December, Exelon Corporate issued $1 billion in convertible debt, pulling forward almost over half of our planned long-term corporate debt needs for '26. Through 2029, we expect to fund the $41.3 billion capital plan with $22 billion of internally generated cash flow, $13 billion of debt at the utilities and $3 billion of total debt at the holding company, with the balance funded with a modest amount of equity. As a reminder, our policy is to fund the incremental capital needs with approximately 40% of equity. Specifically, our total equity needs of $3.4 billion over the 4-year plan implies approximately $850 million of annualized equity needs, less than 2% of Exelon's annual market cap. We have already made progress on 20% of these equity needs, having priced $700 million in 2025 using forward contracts under our ATM.

Our financial plan has been designed to accommodate the use of other fixed income securities that receive equity credit [indiscernible] senior debt on our holding company. Identifying opportunities to mitigate risk and maintaining a strong balance sheet continues to be core to our strategy. And in 2025, our average credit metrics of 13.5% exceeded our downgrade threshold of 12% at Moody's by 150 basis points.

With our balanced funding strategy in place, we target credit metrics of 14% over the planning period, providing 100 to 200 basis points of financial flexibility on average over our downgrade thresholds, S&P and Moody's, throughout our guidance period.

We also continue to navigate [indiscernible] that incorporates all tax repairs for calculating the corporate alternative minimum [indiscernible] which is now reflected in our disclosures. As a reminder, without the implementation of tax repair deduction, our anticipated consolidated credit metrics would average over the plan closer to 13%.

Supported by our history of execution, I want to close by reiterating our confidence not only in the plan we are laying out, but also in the broader opportunity we have to deliver value for our customers and our shareholders for another 25 year and beyond. I'll now turn it back to Calvin for his closing remarks.

Thank you, Jeanne. As we look ahead to 2026, our priorities are clear and aligned with what matters most to our customers, communities, policymakers and investors. We have a track record of meeting our commitments, and we will continue to focus on what we do best: executing our capital plan efficiently and maintaining industry-leading operational performance to benefit our customers, driving affordability through disciplined cost management, proven investment and active stakeholder engagement, and pursuing growth and innovative customer solutions. We have the right people, platform and strategy to continue delivering on these commitments.

In 2026, we expect to deploy $10 billion in capital, earning a consolidated 9% to 10% operating return on equity. We anticipate delivering operating earnings of $2.81 to $2.91 per share, with the goal of being midpoint or better. And finally, we will execute a balanced funding strategy that maintains and strengthens our balance sheet.

Serving approximately 11 million customers across some of the largest and most economically vital metropolitan areas in the country is a responsibility we do not take lightly. Our infrastructure is essential to the economic future of the regions we serve, and we honor that responsibility through disciplined execution, operational excellence and a relentless focus on the people who depend on us every day.

We are proud of our track record of execution. The sector continues to evolve at a breakneck pace, but Exelon remains steadfast in its priorities, consistently delivering as a proven leader.

Gigi, we can now open it up to questions.

[Operator Instructions] Our first question comes from the line of Nicholas Campanella from Barclays.

Thanks for the update. Appreciate it. Great to see the 5% to 7% outlook refresh near the upper end here. I think just maybe could you comment quickly on the rate base growth is near 8%. You do have financing lag against that, which maybe would be greater than 1% financing lag between equity needs and debt funding. So just what's the tailwind to the plan to keep you at the high end of the 5% to 7% outlook.

Yes. I think I'll start with kind of what we've done, right, which is if you look back since 2021, we've had actual rate base growth of about 8% and earnings growth of 7.4%. So I think it's really just a continuation of that track record. But if you look at where rate base is at the end of '29 and you kind of assume half equity and then you look at our earned ROEs over the last 4 years, I think you can get to an EPS number that then, to your point, you got to back off financing costs. But I think if you look at kind of the equity needs, the sort of assume an average debt cost, but then I think what you might be missing is the AFUDC associated with transmission capital. And so if you look at that and how much we're growing transmission over that period, that will get you to kind of the near top end, Nick.

Okay. Great. Great. And then I know that you probably are assuming a range of regulatory outcomes here. But maybe you can just kind of comment on, given so much focus on Pennsylvania, how you're thinking about regulatory strategy for '26, whether you'd file in '26 or wait until '27? And then any kind of considerations there for the timing of rate cases and how that can kind of impact where you are within this 5% to 7%?

Yes. No problem, Nick. I will tell you this, is that we are constantly in conversations with all of our stakeholders, and that goes from the governors to the regulatory bodies, to talk about what makes sense for the jurisdictions and our customers. And with affordability at front and center in all of our jurisdictions, we lean into that first. But we also recognize that we have to maintain a reliable and resilient grid.

So to your point, we're looking at what we are going to do in Pennsylvania and what we're going to do in Maryland. And I think in our documents, we've already laid out that we're filing in Maryland this year, and we're considering what is the best approach to action in Pennsylvania. But we will keep you updated on that. But right now, please keep in mind, everything centers on affordability and maintaining a reliable system.

Yes. And to your point, Nick, the disclosure kind of accommodate a variety of scenarios. So looking at a variety of scenarios around rate case timing, we feel confident in that. The 8% rate base growth, the earned ROEs and the sort of manageable amount of equity delivers that 5% to 7% near the top end.

Great. And then just, Calvin, if I could squeeze one more in. You talked about in your prepared remarks just supply being a real challenge. And I know this RBA process is in its early innings at PJM, and we've all seen the comments from the IPPs and what they're looking for. But just maybe what are the [ T&Ds ] advocating for here? And how do you see that process shaping up? Do you expect it to still be on time for a September auction? If you could comment at all there.

Do you want to take that?

Nick, thank you for the question. We've really been focused on engaging not only at PJM, but with our regulators, we're really pleased to see the administration, to Calvin's point, the administration's focus on this issue. We do support the development of this reliability backstop action. And we really endeavored also to bring a bit of clarity to the discourse. That's why we enlisted Charles River Associates' support in helping us crystallize what we're dealing with. We need to focus on supply because we know it will lower customer electric costs. We know that we will also see improved reliability.

To the point on cost, as Calvin mentioned, utility-generated power, which you know is something we are very focused on, because if no one else is going to build, we know that supply costs are an ever-increasing portion of the customer bill. So we really have to be focused on driving more build, and that's the support outlaid utility-generated power could reduce PJM customer costs by between $1.6 billion and $20 billion in the '28, '29 delivery year.

So while we're focused on supporting the RBA, we also have to, in the near-term, focus on extending the [indiscernible] getting more supply on the grid and, as Calvin mentioned, improving reliability. We know that those things will bring greater price stability and ultimately help address affordability, which is an ever-growing concern in each of our jurisdictions.

Nick, I know she doesn't need an introduction, but that's Colette Honorable.

Our next question comes from the line of Shar Pourreza from Wells Fargo.

Just on Colette's -- maybe a quick question for Colette. I mean, obviously, there's a lot of affordability things out there, whether you're looking at Maryland, New Jersey, Pennsylvania, Delaware, saw that in obviously Shapiro's budget speech. There are several bills out there in Pennsylvania, Maryland and New Jersey around resource adequacy. I guess a little bit more specifically, how are the conversations going on the legislative fronts? Like can you strike a middle ground in a state like Pennsylvania with the IPPs around a new generation PPA structure which is currently being proposed under the House and Senate bills? Or are the conversations just too wide apart right now?

Shar, this is Calvin. I'll jump in -- and just say, first and foremost, we understand where Governor Shapiro is coming from because we're all frustrated with the affordability, the limit that's hitting all of our customers and his constituents. So at the forefront, we start from a foundation of alignment, that we all have to do something to get. And you notice our approach has always been an all-of-the-above approach. How can we help deliver solutions that satisfy everyone?

So to your direct question, is there an opportunity to have conversations and engage with [indiscernible]? Absolutely. Because we have never said we are going to do this on our own, but we do believe it must involve everyone. And I think you talked about Shapiro, but's let's -- Governor Moore in his State of the State even talked about an all-of-the-above, it requires everyone to come together to solve this problem. And we are committed to that.

So when you talk about the House and Senate bills, it's always in the details, but please know that we're showing up every day in the Capitol and with the government [indiscernible] to talk about delivering solutions. And you notice from us, it's not one or done. It's everyone coming through and it's an all-of-the-above approach. Colette, anything you'd like to add there?

Shar, I would add, it will help put in better context why we showed up as a company the way we did around colocation issues. Colocation can be a great solution. We knew when we saw this headed our way that we needed to focus on affordability. Now you see others jumping in with us, it's great to see. And we need these discussions because this is how we will solve the problem. We've been very active, to your question, Shar, not only in Pennsylvania, on the ground there, on the ground with the governor. As you know, we joined Governor Shapiro in the filing at FERC on extending the price cut. We'll continue to partner with him, his administration and engage heavily in the legislature. Not only in Pennsylvania, we're having the same discussions in Maryland, in Delaware, in New Jersey.

And I think that, for instance, in the address by Governor Moore, you could see very clearly, he has a view on what needs to happen. Take a look at New Jersey with Governor Sherrill stepping in and really focusing in on the solutions that need to come about in PJM. This is heartening to see, and you will continue to find us engaging in each of our jurisdictions to help solve this issue of affordability.

Let me close by saying we're bringing solutions. We've been focused, as you know, on our customer relief fund that we developed last year and then we further [indiscernible] ahead of the winter season in anticipation of these issues. And then we will continue focusing on low-income discounts in our jurisdictions, we have both well underway, and as well as focusing on longer-term solutions such as utility generation. So we are very active in our jurisdictions, and we'll continue to be active.

And is it fair to just assume that there is some level of collaboration with the generators? Or is that bid ask too wide apart? So I'm just trying to tease that out.

[ Set ] the right price, right? Like I think it's -- we're always going to be our customer advocate. So I think right now, what's -- the problem, right now, our customers are paying more for less. And so we got to get to the right place where there's actual new generation at the right price. If they want to build it at the right price, wonderful, right? But at the end of the day, the [indiscernible] Calvin's comments, the Charles River report was really helpful because it said, if we have been doing this and we have the generation needed for '28 and '29, that costs would have been $10 billion to $20 billion lower. We can't go back in time and build that generation, but we can take action now, and that's what we're focused on, is getting the generation built at the right price.

Got it. And then just last question here, just to tease out Nick's question around the CAGR. There's not a lot of delta between rate base growth and the EPS growth. So that sort of makes sense where you are. But Jeanne, clearly, from the slides this morning, there's plenty of incremental upside, whether you're looking at PJM RTEP, or MISO tranches, data center TSAs, resource adequacy. I guess what's the correct podium to step function change the trajectory, which has been out there for some time? Is it as -- it could be as simple as we need a few more quarters to execute? I guess how do we sort of think about the upsides that are evident on these slide decks, whether -- and it will be incremental to rate base growth, it will be incremental to EPS growth. I guess what do you need to see the step function change that 5% to 7%?

Yes. No, good question. And I think at the end -- we feel like it is kind of progressing, right? So last rate base CAGR was 7.4%. You're sitting at 7.9% now, also that 7.4 we delivered above expectations through '25. So I think we are seeing continued progress there. I think given the deconcentrated plan, in addition to progress, it's really executable.

We, as I mentioned in my prepared remarks, we've delivered within our capital within 2% since separation. And if you look at our rate base this year, within 1%. That's no small task on $64 billion of rate base. So we feel not only is it really executable, you should feel confident in that growth, but it is continuing to progress. Like we're not going to be the flashy, right, it's going to go up double digits? But it's going to -- it's going up and it's highly executable, defensible. And we're not going to give you a number that I can't sit here and say that. So I think that's how we should think about it.

Our next question comes from the line of Paul Zimbardo from Jefferies.

Kudos. Nicely done. To continued the theme a little bit from Nick and Shar, almost asking an inverse. It seems like rate base growth is pretty consistent with historical, the 7.9%, and you did grow at 7.4% despite some headwinds in Illinois and elsewhere and, of course, tailwinds too. What -- why couldn't you not grow at that kind of ZIP code, the same 7.5% growth rate, again, that you're doing even better than the top end? Like is it kind of a conservatism like you're mentioning or just getting more comfort? If you could elaborate a little bit more.

Sure. I mean, I think we're always going to strive to exceed expectations, but I think, again, giving you a number you can count on, I think financing costs are increasing, right? So you've got to account for that. But we are investing more in transmission. And so that gives us confidence in the -- that we can continue with the strong earned ROEs that we've had. So I think it's defensible, it is growing. I think -- but you've got to think about giving a number that's defensible that we can manage, but also account for the associated financing costs. But we're always going to strive to exceed your expectations, Paul.

No, you have been. So if you give a massive cook, I always have to ask for more.

I've noticed that, Paul.

The last one I want to ask, just on the incremental financing costs. So you definitely made a lot of progress on the balance sheet. How should we think about financing incremental capital opportunities as they come? Should we be using kind of that 40% in this roll forward or maybe a lower number?

No, it's the 40%. We want to maintain and keep that cushion we've worked so hard to get on the balance sheet. So what that results in is about the $3.4 billion over the 4-year period. On an annual basis, it's less than 2% of market cap, very manageable. And as you probably saw, we've already made good progress on that. So we've priced $700 million of that $3.4 billion. So on an annual basis for '26, it's a small amount to do. And given our ATM and our trading activities, it's very manageable. But we're going to stick with that 40%.

Our next question will be from the line of Steve Fleishman from Wolfe.

So just maybe just on the -- with the move to more transmission continuing, that 9% to 10% earned ROE range, are we seeing some kind of movement up within that range that helps kind of put all these pieces together on the growth rate?

Yes, I think -- yes. If we go back to, I think, since separation, '22 to '25, our average earned has been somewhere around 9.4%. To your point, as we have been turning the shift towards transmission, I think you can expect that, if not slightly better. But it's going to take some time for some of these transmission projects to close. We've got some longer-dated ones, the big ones. But that's the direction we're headed.

Okay. And then on the [ CAMT ] that you mentioned, just when do you expect to actually have that like full clarity on that? It sounds like sometime this year?

Yes. Yes. We are hopeful that we have a final, final resolution here in the near term.

Okay. And then lastly, just tying up some loose state stuff, are we going to get a Maryland lessons learned at some point or -- yes, is there any chance they just say kind of moved on to -- I don't know.

I hear it in your voice, my frustration. So thank you. it is -- we do believe we're going to get the lessons learned. And I know the team has been talking to the commission and the new chair, who we've worked with as a former state senator, and he understands the need for this. So we do believe we'll get lessons learned. And I wish I could give you a time line, but we do believe it will happen in 2026.

Okay. But you'll file BGE probably before you get it?

Yes. Yes. We're going to file [indiscernible] in the first half, and would love to accommodate whatever is in there, but to Calvin's point, we've been transparent with the commission around the fact that the rates are higher in '27, and so we have to do something here.

And then a last quick one. I know New Jersey is not your -- one of your larger states, but just curious your take so far under the new the new governor.

Absolutely. Not, to your point, not one of our largest, but it's very important. And Tyler Anthony, the CEO of Pepco Holdings has spent time with the other EDCs with Governor Sherrill. Mike Innocenzo, our Chief Operating Officer, spent time. And I'll let Mike elaborate further on New Jersey, if you would like to, Mike.

Yes, I would just say it's certainly got a lot of headlines during the election campaign. But if you look at the content of the executive orders, we think that they're very constructive, the things that we can live with. And I would say, behind scenes, the conversations are focused on the right areas, which is if we're really going to go after affordability, we need to bring more supply in an affordable way, in an efficient way. And we fully support those discussions.

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

Hello, and welcome to Exelon's Third Quarter Earnings Call. My name is Gigi, and I'll be your event specialist today. [Operator Instructions] Please note that today's webcast is being recorded. [Operator Instructions] It is now my pleasure to turn today's program over to Andrew Plenge, Vice President of Investor Relations. The floor is yours.

Thank you, Gigi, and good morning, everyone. Thank you for joining us for our 2025 third quarter quarter earnings call. Leading the call today are 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. 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 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 are happy to have you with us today for our third quarter earnings call. As we reached the last months of 2025, the 25th year since Exelon's founding, our employees continue to execute with excellence, serving our customers, communities and shareholders. We reported earnings of $0.86, which was stronger than anticipated due to slightly warmer weather and a mild storm season along with timing-related drivers. .

We continue to reaffirm our operating earnings guidance for 2025 of $2.64 to $2.74 per share, and we look forward to closing out the year strong. We also continue to deliver some of the best operational performance in the industry. In fact, we now have the final results of our reliability benchmarking for last year. And our 4 utility operating companies are ranked, 1, 2, 4 and 7 out of our peer set, improving upon last year's already stellar 1, 3, 5 and 8 rankings.

I could not be prouder of the way our employees show up every day whether it's selecting, planning and operationalizing the right investments to avoid outages or being the fastest to get customers back online if the power does go out. This performance has real value, particularly when you consider that a typical major storm can cost hundreds of thousands of dollars for the average customer, depending on its size.

Our operational North Star is to continuously improve upon this performance offering above-average performance at below average rates to the communities we have the privilege and honor of serving. Results like that show we're living up to that standard. As it pertains to rate cases, we remain on track for our gas distribution rate case at Delmarva Power and our Atlantic City Electric rate case. We also filed a rate case at Pepco Maryland with the decision required per statute by August of 2026. The filing supports the company's commitment to delivering safe, reliable and resilient service while further preparing the local grid for future clean energy demand.

Our filing also demonstrates true focus on customer value, reflecting strong O&M cost containment and robust projected benefits from specified reliability investments that significantly exceed their cost. Outside of rate cases, we have seen more progress in our states and at PJM when it comes to advancing solutions to meet the growing need for reliable and resilient power.

Last week, Illinois passed the Clean and Reliable Grid Affordability Act, which directly supports resource adequacy by expanding the annual budget for energy efficiency, broadens the types of assets eligible for the distributed generation rebate and creates an energy storage procurement plan. It also requires the commission and other state agencies to develop 4-year integrated resource plans and gives the ICC discretion to facilitate transmission projects that support state goals.

This marks the next chapter in Illinois energy transition, and we look forward to working with policymakers on implementing this next set of programs. In Maryland, the commission initiated a request for merchant generator proposals for up to 3 gigawatts of new energy supply. The process attracted several submissions, though the disclosed capacity levels have fallen short of their target and we will learn in December which of those projects, the Maryland Department of Natural Resource Power Plant research program might recommend.

And PJM is working through its Critical Issue Fast Path process for options to better accommodate new large loads, assisting our states as they navigate unprecedented levels of growth. We are encouraged by the breadth and amount of engagement in that process, and we look forward to finding solutions that ensure customers can rely on cost-effective power supply.

And as we have stated, these efforts are welcomed and necessary, but they are not enough. There is a significant anticipated shortfall in supply and hoping that markets alone [indiscernible] puts too much risk on customers that increasingly depend on affordable supply to power their lives. All states need to leverage all available options to bring control, certainty and customer benefits to securing power. These options help ensure that all customers continue to have reliable access to energy and that the states can participate more fully in the economic development opportunities from artificial intelligence and onshoring.

The supply challenge is real, and we know utilities can be a key partner in helping the state solve it, whether it's supporting investments in the demand side like energy efficiency, distributed and community solar and storage or even owning more traditional generation plants. We stand ready to work with our states as they seek opportunities to address growing energy security needs in a manner that fits their goals.

The demand for power is not slowing down. Our large load pipeline now stands at over 19 gigawatts as we have finalized our cluster study approach and now account for our first transmission security agreement at PECO. The innovative TSA approach ensures we strike the right balance in prioritizing large loads, while ensuring our existing customers are protected. Furthermore, we now have at least 27 gigawatts, either waiting signed TSAs or in active cluster studies with many more behind those. Additional details on our large load outlook can be found in the appendix. Connecting new business is expected to be just one of the drivers of the anticipated growth in transmission investment in our next 4-year plan.

This new business will also drive broader needs for the grid, which get identified in reliability assessments like PJM's open windows, and it helps drive inter-RTO opportunities like MISO Tranche 2.1 segment running through ComEd's territory. We will be monitoring the recommendations coming out of PJM's latest open window over the next 3 months to determine if any of the solutions we have proposed either individually or with partners are selected.

With no project greater than 3% of our 4-year plan, we are focused on bringing all of our customers along at the appropriate pace while also ensuring we can earn a fair return of 9% to 10% on the equity capital provided by our investors. With rate base growth of 7.4% through 2028 and a balanced financing plan, we expect to grow our earnings at an annualized rate of 5% to 7%, with the expectation of always delivering at the midpoint or better of that range. I will now ask Jeanne to cover more details on our regulatory updates and financial performance. Jeanne?

Thank you, Calvin, and good morning, everyone. Today, I will cover our third quarter financial update, along with our financial and regulatory outlook for the remainder of 2025. Starting on Slide 5, we present our quarter-over-quarter adjusted operating earnings block. Exelon earned $0.86 per share in the third quarter compared to $0.71 per share in the third quarter of 2024, reflecting higher results of $0.15 over the same period.

Earnings are higher in the third quarter relative to the same period last year, driven primarily by $0.12 of higher distribution and transmission rates, net of associated depreciation and $0.06 associated with the ability to seek deferral treatment of the PECO extraordinary storms earlier this year and favorable storm conditions at BGE.

This favorability is slightly offset primarily by interest expense. These results are ahead of the expectations noted in our prior quarter call, primarily due to better-than-normal storm conditions, timing of O&M spend and tax timing at PECO. As we close out the year in the fourth quarter, we remain on track to achieve operating earnings of $2.64 to $2.74 per share, with the goal of delivering at midpoint or better.

Our fourth quarter guidance assumes the reversal of timing, including O&M, distribution earnings at ComEd and PECO taxes, fair and reasonable outcomes for open rate case proceedings, including reconciliations at BGE, Pepco Maryland and ComEd, and normal weather and storm activity. Finally, we reaffirm our annualized operating earnings growth rate of 5% to 7% through 2028, with the expectation to be at the midpoint or better of that range.

Turning to Slide 6, I will now review the regulatory activity across our platform. Starting with the base rate case activity, we continue to make progress on the Delmarva Power gas distribution rate case filed last September with the final settlement conferences held in October. As a reminder, the filing seeks to recover reliability investments such as aging pipe replacements and it also seeks recovery of LNG plant upgrades, which would protect customers from price volatility during peak periods.

We anticipate an order in the first quarter of '26. At Atlantic City Electric, settlement discussions continue as we seek recovery for grid improvements and modernization investments in line with New Jersey's Energy Master Plan and the Clean Energy Act. We continue to anticipate an order by the end of the year. Finally, on October 14, Pepco filed an electric base rate case in Maryland, requesting a net revenue increase of $133 million, utilizing a fully forecasted test year. The request supports key infrastructure investments to modernize aging infrastructure and improve reliability while also supporting Maryland's Clean Energy goals.

As part of the filing, Pepco through an independent firm found that $38 million of investments generate nearly $262 million in benefits to customers, through avoided outage and restoration costs as well as avoided O&M expenses over the next 20 years. The filing also offers a suite of programs and resources that help manage rising energy costs, increase awareness of energy usage and provide direct assistance to those who need it most.

[ First statute ] and orders expected from the Maryland Public Service Commission in August of 2026. Beyond base rate cases at ComEd, we remain on track for our first reconciliation under the new multiyear plan framework, where we continue to robustly support the spend submitted for reconciliation throughout the final briefing process. An ALJ proposed order is expected later today, and the ICC will issue a final order by December 20.

In Maryland, we continue to await decisions on our final reconciliations from the first PGE and Pepco Maryland multiyear plans, along with the commission's order on the [ lessons learned ] proceeding to support future filings. We look forward to moving forward with an approach that best aligns stakeholders' interest in balancing affordability, reliability and the state's economic development and energy policy goals. Finally, turning to Slide 7. I will conclude with updates on our balance sheet activity, where we've continued to derisk our financing plan and ensure cost-effective capital to invest for the benefit of our customers.

In September, PECO issued $1 billion in debt, completing all of our planned long-term debt issuances for the year. The strong investor demand and attractive pricing we've achieved in our debt offerings is supported by the strength of our balance sheet and by the low-risk attributes of our platform. We continue to seek opportunities to take advantage of current market dynamics to derisk our plan. This includes utilizing our preissuance hedging strategy and pricing future equity needs to settle through forward agreements under the ATM, reducing interest rate and share price exposure.

Through the third quarter, we have priced nearly half of our equity needs through 2028, including all of our annualized equity needs in 2025 and $663 million or 95% of our 2026 annualized equity needs, which we expect to settle next year. In line with our last earnings call, we continue to project 100 to 200 basis points of financial flexibility on average, over the Moody's downgrade threshold of 12%, approaching 14% at the end of our guidance period.

We also continue to advocate for language that incorporates all tax repairs for calculating the corporate alternative minimum tax. As a reminder, favorably addressing all repairs in the minimum tax calculation would result in an increase of approximately 50 basis points in our consolidated credit metrics on average over the plan. Thank you, and I'll now turn the call back to Calvin for his closing remarks.

Thank you, Jeanne. As we approach the end of our 25th year's Exelon, we are working to add to our legacy of excellence, delivering on our commitments to our customers, our communities and our investors. Many of you may have seen us ringing the opening bell at NASDAQ last month, and I was honored to represent our company alongside some of our longest tenured employees. Standing next to me were just a few of our more than 2,500 employees who have been with us and our local energy companies for 25 years or more. Our operating companies have over 800 years of collective experience, delivering energy to customers provided by dedicated employees who keep the lights on and the gas flowing day in and day out, no matter the conditions. .

And they are the reason our utilities are ranked as the best or among the best in the business for reliability. We also can't do it without smart, targeted investments in our grid. It's why 98% of the net profit earned at our utilities generated with fair returns on the shareholder dollars entrusted with us have been reinvested back into the system over the last 5 years. Those investments not only deliver top-notch service, they also boost local economies with every $1 million creating 8 jobs or $1.6 million of economic output.

So we don't take this performance on the responsibility of supporting our communities for granted, and we know it will take continued discipline to ensure that we can provide high levels of service at below average prices for another 25 years and beyond. We will continue to advocate that our jurisdictions provide fair recovery for our investments with the expectation that service remains high that we treat all users of the grid fairly and equitably and that we put our customers first.

Our priorities this year do just that, ensure we earn that right to provide our customers top-notch value every day. For example, we continue to focus a dedicated team on pulling cost out of our business to keep cost growth below inflation. We push our business lines to work smarter and leverage technology, providing better service at lower cost. We advocate for ratemaking constructs that ensure we can plan, invest and operate as efficiently as possible, benefiting from alignment and forward-looking planning.

We continue to support and leverage customer assistance programs like LIHEAP and to advance rate designs that support the customers who need it most. And we advocate for fair policies that can equitably serve growing load while instilling greater confidence in resource adequacy. That includes developing our innovative TSA approach, which we have filed for our first customer with [ FERC ] and are proposing as part of tariff adjustments at ComEd. And it's why we're increasingly advocating that our jurisdictions take more control over their power supply. They can complement supply induced by better designed markets with solutions like utility-owned generation that regulators oversee giving them control, certainty and cost benefits for customers that markets alone don't offer.

We look forward to closing out 2025 strong, earning an ROE aligned with allowed levels in the 9% to 10% range and delivering against our guidance of $2.64 to $2.74 per share, always with the goal of midpoint or better, while maintaining a strong balance sheet. There would be no better way to celebrate our 25th year's Exelon and further cement our foundation to deliver consistent growth and long-term value for another 25 years.

Kigi, we are now ready for questions on the line.

[Operator Instructions] Our first question comes from the line of Shar Pourreza from Wells Fargo.

Luckily, there's no news flow in the space, and it's been kind of relaxed

So Calvin, just obviously, resource adequacy was very topical in your prepared remarks. Maybe just starting with Maryland, just your broad thoughts around the RFP. I mean you've been out there talking about regulated solutions to solve the needs there and now constellation just came out with their own solutions ironically this morning. Can we just get a sense on how you're thinking about the process, the timing and then your views on sort of these competing options that were proposed this morning.

Yes. Thank you, Shar. And appreciate the question. Let me first begin by saying that we commend the state of Maryland for initiating the process. And while we appreciate that they received some responses, our view is that they fall short of what's needed for the state and for PJM more broadly. Having said that, we're happy to see the several parties stepped up and actually talked about adding supply. Let's be clear, this is all about solving the problem and bringing energy costs under control for our customers.

And that's what we're focused on, affordability and reliability each and every day. Customers have voice very strongly that they're frustrated with high energy costs, and we are frustrated too. But overall, we are encouraged to see a reply to the RFP. And like I said, the disclosed need fell short of the goal and we'll have to see what the Maryland Department of Natural Resources and other stakeholders recommend to the PSC, but we are more than willing to step up.

And as we've said before, Shar, if the competitive market is willing to step up and fill this need to meet us where we are at this time and not relying on the old rules of the past, we're okay, but it's time to move forward and continue to be progressive and aggressive in what we're trying to do for the state.

Got it. That's perfect. That's actually consistent with what you've been saying. And then maybe just, Calvin, shifting to Pennsylvania. There's obviously 2 bills sitting at the House and Senate around resource adequacy. I think they reconvene in November. I guess thoughts there, and more importantly, can the [ wires ] companies kind of strike a middle ground with the IPPs, maybe around the long-term resource agreement, structure that is also being proposed in the legislation versus this kind of push pull around rate basing generation or doing nothing and letting the market dictate [ new bills ]. So I guess how are the discussions in Pennsylvania going? Do you think you could strike a deal there?

First off, we are committed to working with all the parties from the governor's office to the IPPs and of course, with our peers in the state. Mike Innocenzo, our Chief Operating Officer, is here, and I know he's been a former CEO of Peco. He's been very engaged in that discussion as well. Mike, anything to add?

Yes. Sure. Thanks, Calvin. Thanks, Shar, for the question. discussions in Pennsylvania continue to go very well. As you're aware, Pennsylvania is a little different space in that they continue to be an exporter, continue to see the value of being an exporter, leveraging our natural resources in Pennsylvania and continue to see the advantage of being exporter in terms of economic development.

And look, as that is an opportunity to solve that. There are 2 active bills, one in the Senate, one in the house that are being discussed. At the same time, we're talking with the governor's offices about on all of the above solutions, including longer-term PPAs contracts. So I think you'll start to see more activity, probably more likely in the spring, candidly, they're in the middle of budget discussions in Pennsylvania right now, which is taking most of the legislative space.

But we've seen some active discussions with the Governor's office. In addition, I don't know if you saw that the PUC hired a party to do a third-party study on that. And I think that will also inform where we go in the spring.

[Operator Instructions] Our next question comes from the line of Paul Zimbardo from Jefferies.

I was hoping you could unpack the new Illinois legislation a little bit just in terms of what you see the investment opportunities, energy efficiency, transmission for some of these distributed resources. If you could just kind of unpack that a little bit, that would be helpful.

Sure, Paul. I will start, and I will lean to my colleague, Jeanne, to help with that discussion as well. But as you know, on the last night of the [indiscernible] session, Illinois passed what is called Senate Bill 25, the Cleaner, Reliable Grid Affordability Act, and it really focused on 2 things, Paul, around state -- new customer programs as well as state policy and resource adequacy. .

It enhanced the energy efficiency program, which is one of the quickest and most efficient ways to improve resource adequacy and have laid out a target of 3 gigawatts of storage by 2030. That is significant. And it also expanded the opportunities for consumers to leverage distributed generation rebate programs and also advancing virtual power plant approaches and mandating time of use rate offerings, which, by the way, ComEd already offers some time of use rate offering. So this is in furtherance of that and telling people if you're going to come into the market, we're going to evolve into that area.

And finally, it also focuses on the broader role that the state can play in developing that integrated resource plan that I mentioned in my opening comments. So we think this gives the state further opportunity, and this is how they're looking at it to demonstrate leadership in energy policy while also supporting economic development. And let me tell you from ComEd's point of view and Exelon's point of view, any opportunity we can to invest in the grid to keep that #1 spot of reliability and resiliency and to create jobs and economic development in the state, we're leaning in with them. And I know our CEO, Gil Quiniones at ComEd has been in discussions with not only the commission, but the governor on what's next, but we're very actively engaged in that process.

Excellent. And as we all start to think about fourth quarter and maybe a little bit of a sneak peak, I like that transmission slide where you show the large step-up in rate base in 2028. And obviously, that doesn't [indiscernible] let earnings in '28. As we think about 2029 and that roll forward, is it fair to think about the stronger growth year than 2020, you say below the midpoint of the range. Is it fair to think 2029 stronger within the range?

Yes. We'll give formal guidance on the Q4 call. Paul, but I think -- I think you're thinking about it right. We've got a lot of transmission opportunities to drive the solutions necessary as we see all this demand come in. We're very excited about transmission on the competitive side as well. You probably saw that we were active in the open window, both with partners, but also solutions just from an Exelon perspective, and we think we'll have clarity there by the end of the year on some of that, roll that into the update.

None of that is contemplated in our guidance nor is it in the $10 billion to $15 billion of transmission that we talk about outside the window. But what I would also say is a lot of these solutions, all of those solutions are 2030, 2032, so the spend is sort of around the corner outside of the planning period. But what it does is it speaks to sort of the strength and the length of the continued growth in our rate base. We always aim to be at that 7% to 8% to drive the 5% to 7%. And I think this just positions us well to execute in the upper portion of that 7% to 8%.

Okay. Excellent. I ought to try in 2029. See you all soon.

Thanks, Paul. I saw I effort. Thank you .

Our next question comes from the line of Nicholas Campanella from Barclays.

Maybe just -- you kind of mentioned in the prepared remarks around repairs and the CMAT. But just -- is this something that you think you kind of get clarity on by year-end and potentially consideration for the financing outlook as we kind of prepare for the disclosures out to '29? Or just what's the kind of time line there to get that clarification?

Sure. Yes. We're hopeful for the [indiscernible], we know the IRS is working on additional sort of guidance for [ PMT ]. And so hopefully, we get that clarity by the end of the year. We do know some guidance was put out. It's the way -- it was written didn't achieve sort of the full, so we're still working on that. But what I would say, though, is that, as we've talked about, that would be incremental cushion to the balance sheet and would be factored into the full update for our financing plan on Q4.

But pleased to see progress there. I just want to hopefully close it out here in this year.

And I guess like if you had the opportunity to use that cushion, is it less equity needs or accelerate CapEx further? Just cognizant of the different pushes and pulls there?

Yes. We want to stay on that path to 14%, as we mentioned. So this would be good momentum towards that 14% by the end of the planning period. And I think we would -- we've got equity in there, we've got hybrids. We've got additional capital coming in. So we'll put all that together and make sure that we deliver kind of the most efficient plan while we maintain that 14% or better but also driving the 5% to 7% better. So we'll factor that all in, but I would say that, that's just helpful as we think about the cushion towards that 14%.

That's great. And then just if I could really quick. I know it's small, but just the ACE rate case has been going on for a long time. And you're still saying that you're on track to settle this case. And maybe you can kind of talk a little bit about what's kind of informing the view that settlement is still on the table and why this wouldn't just go to a final order in the coming months here.

Thank you, Nick. To your point, that case was filed in November of 2024. And I need to give the Atlantic City Electric team and Tyler Anthony, the CEO of Pepco Holdings, a lot of credit because they've been working with the commission and all stakeholders, including our governor and just making sure that we're being transparent, talking about each and every investment, where it's needed and what the goals, the shared goals of the parties are.

And that's why we're encouraged that we can get to settlement, but it is a process. And we do anticipate that, that will happen by the end of the year. But at the same time, they do have the right to implement the interim rates subject to refund. So I believe that keeps all of the discussions moving forward in the settlement on the table because -- once you implement it, then it's subject. So they're saying, let's get it right out the gate and that's what they've been working on from Day one. And I know we've been talking to both gubernatorial candidates on where we're going and what we're trying to do and that partnership. So that's why we're encouraged.

Our next question comes from the line of Jeremy Tonet from JPMorgan Securities, LLC.

I just want to pivot a little bit here, if we could, towards the Amazon TSA. It seems like there's been some developments there. Just wondering if you could provide us, I guess, your most updated thoughts on this part of the business.

Yes. So what we've started to do for our large load is implement what we're calling a transmission services agreement. And so with that -- the first one that we did was the one that you mentioned with the Peco data center -- the data center in Peco territory. We like this because it does a couple of things. One, it helps really kind of solidify projects, right, and kind of maybe read out any speculative projects, but it also protects the rest of our customer base. .

So it's similar to what we've had historically on the distribution side, where you have deposits and letters of credit and other things that sort of -- that help protect the other customers should the demand that we build for not show up. And we executed our first one there with -- in the PECO territory, but we've now also filed in the ComEd service territory, a large load tariff, which would ask that are all large loads greater than 50 megawatts signed these agreements. And so that, we think, help does the 2 things that I mentioned, right, kind of really firm up the commitments, but also protect other customers should the demand not rise.

And I think what we also tried to do on Slide 13 of the deck is to show you kind of how that pipeline of large load is kind of filtering into the high probability column. You can see in the column of the 47 gigawatts of the ones that we're studying, which ones are still being studied, which ones have already been studied and are awaiting a TSA. Once we get that [ TSA guide ], we would move it into the high probability. So that's the way to kind of keep track of how how different load and different megawatts are moving from one category to the next.

Got it. That's helpful. And just wondering, I guess, any thoughts, I guess, on the $10 billion to $15 billion of transmission CapEx and thinking about probability weighting all this and everything, as you outlined there, we've seen a number of your peers across the space lift their growth outlook. I'm just wondering, I guess, what opportunities excellences to stay kind of competitive with those type of growth rates?

Yes. I think we are like running our -- I think we are running our core business really, really well, right? Transmission and distribution operations, first quartile for all operations, delivering above-average performance with below average rates, continue to have met or actually exceeded all of the guidance, upgraded S&P. So I think the core business is running really, really well.

And as we think about additional growth that comes to your point in the form of transmission and energy security solutions. But you also know us at Exelon, we're not going to put anything in the plan that isn't certain and bankable. And so as we look for transmission, for example, I mentioned earlier, we do have some proposals in front of PJM in the current window, we'll know more about those proposals by the end of the year.

And once we have certainty on those, those will come in. and we'll put them in the plan so that you don't have to speculate or probability weighted -- wait some of them that once they're in, you know that we feel very certain about them. But as I mentioned before, we're focused on delivering really in the high end of what we've committed to. And as we see some of these opportunities materialize, in the back end of our plan, then we can start to think about that. But let's focus on the execution first and getting them in. And of course, we'd always love to be talking to you about more, but we're going to focus on what's executable and build it in and put it into the plan once we know it's certain.

Our next question comes from the line of David Arcaro from Morgan Stanley.

I had a quick question on that large load pipeline that you've laid out on Slide 13. I was just wondering if you could just maybe characterize how you probability weight that 47 gigawatt pipeline. I appreciate the extra detail you provided there. But like in aggregate, are those still less likely to move forward or for some of those, is it just more of a matter of timing where eventually those could become more advanced stage projects.

I think it's more a matter of timing. But what we're really trying to do is before we move it to that column, to do 2 things: one, complete the cluster study. So all of the load is now studied in a cluster approach so that we can give more certainty to the customers on time and time to connect and other associated questions, location, et cetera.

We want to go through that first. And then from there, once we provide that information to customers, have them sign the TSA agreement. So those -- that's kind of a 2-step process, which -- once it goes through that, you can have you and us and our states and our customers can have much more certainty around, this is highly probable, and it will go into that 18-plus column. So that's how we're thinking about it. But I would tell you it's all real.

It continues to grow. If you look at the chart, right, you've got 6 that have already been studied and just awaiting TSA signing, you've got 20 across the Mid-Atlantic and Illinois that is actively being studied and then another 20 that is ready to be in the next cluster study. So we've seen this grow over the last couple of years that we've been talking about this from 6 gigawatts to 18 highly probable and 47 studied or waiting to be studied. And so I think that speaks to there's a lot of certainty around this. But until we tell you -- until we go through those 2 steps, we don't count it highly probable. That's the process we're following now.

And David, I would just add, that is what's significant about that, you've probably heard the discussion around a lot of double counting that may be taking place across the country and the industry. Our process helps eliminate that and really focus on who's real and who's not.

Yes. Absolutely. That makes sense. And I guess on that time to connect, I guess, what is the time to connect that you're seeing for new data center projects that are kind of getting into that 47 gigawatt, getting into the cluster study process. What is the maybe wait time? Or when are you able to offer power in your service territory for new data centers?

I'll start with that general -- it depends. It depends on size, location, the ramp-up period, but Mike Innocenzo, and his CEOs have been involved in this process from day 1, and I'll look to Mike to give any further clarity. .

Yes. I mean I would just say that I would expand on it -- it depends. I would say the things that we do to try to shorten that. We understand the speed is really important. The first thing we start with is where do we have capacity on the grid. So our first discussion with any data center would be where is existing capacity, where is existing infrastructure. You've seen that in -- so for example, the North Point 1 in PECO's territory where we've used the site of a former facility and by -- they signed a TSA agreement just a couple of months ago.

And by the spring, it will be PECO's largest customer on their site. So where we can use existing infrastructure, existing capacity. We're doing everything we can to connect them. We're working with our customers on the ramp-up time so that we can connect them quickly within a year or 2 or even less than that as an example of Northpoint with existing facilities and ramp that up and then working with PJM in terms of expediting the process or any of the long-term investments that are needed for updating the grid for some of the larger loads.

And if I can, David. Let me share with you you've got the back end of what operations takes over. Over 1.5 years ago, we centralized all of our large accounts, our data center accounts to really work with the customers in the strategic planning process. Just last month, we had our 25 largest customers in Chicago and really started talking to them about what you need, where you're going and what is your ramp-up time on certain things across our jurisdictions.

So it's not just one state. We're working with them about what we have across our footprint, which once again elevates the size and scale of Exelon because we're in multiple jurisdictions and we can help meet that need. So we started this process a long time ago, and we get up in the strategic planning process before we even start talking about shovel and ground.

Thank you. At this time, I would now like to turn the conference back over to Calvin Butler for closing remarks.

Well, first off, let me just say thank you. Thank you for taking the time today and for being part of our 25-year journey at Exelon. We appreciate your support, and we look forward to seeing many of you next week at EEI. We're looking forward to the discussion and just the constant dialogue means a lot to us, and I know for our employees to be engaged in. And so with that, Gigi, this concludes the call.

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