EXELON CORP Q3 FY2026 earnings call

• Organizational Restructuring: In August, Exelon centralized engineering, design, and project management, merged technology with customer operations, and aligned utility CEOs directly to the CEO to accelerate decision-making and improve execution accountability.
• Grid Reliability & Storm Response: The company ranked 2nd, 5th, and 6th for electric reliability among U.S. utility peers. Teams responded to ~31 significant weather events, including three major storms in ComEd impacting >400,000 customers each. Grid investments prevented an estimated 6.6 million outages, restoring service to 94% of customers within 48 hours.
• Affordability Metrics: Customer bills remain below national averages, with rates 19% below those in the largest U.S. cities and bill-to-income ratios 20% below the national average.
• Regulatory Progress: Final orders were issued in Maryland (PEPCO base rate case approved with a $50.9M revenue increase; BGE rate case on track for Jan 2027 order; Delmarva Power interim rates expected Dec 2026). In Illinois, ComEd reached a $205M settlement for its annual reconciliation proceeding.
• Investment Plan: The $41.7 billion capital plan is diversified, with no single project exceeding 3% of the total. It drives 7.9% rate-based growth, underpinned by 16% growth in transmission investments aimed at strengthening reliability and addressing grid constraints.
• New Opportunities: Identified incremental opportunities include $12–$17 billion in transmission and $3–$7 billion in regulated storage beyond the current plan. A 500 MW battery project in New Jersey (Atlantic City Electric) is highlighted as the largest in PJM, expected to deliver >$700 million in net customer benefits with no bill impact for five years.

The provided transcript does not break down financial performance by specific product segments (e.g., Generation vs. Distribution) in absolute dollar terms or percentage contribution. The company reports consolidated Adjusted Operating Earnings of 87 cents per share for the third quarter of 2026, compared to 86 cents per share in the prior year period. This $0.01 increase is attributed primarily to approved distribution and transmission rates ($0.06), lower costs ($0.03), AFUDC ($0.01), and weather benefits ($0.01), partially offset by storm activity costs ($0.07) and higher interest/tax expenses ($0.04).

• Full-Year Earnings: Narrowed full-year adjusted operating earnings guidance to $2.85–$2.91 per share, with a goal of delivering at the midpoint or better.
• Long-Term Growth: Reaffirmed expectation of annualized adjusted operating earnings growth near the top end of the 5%–7% range from 2025 through 2029.
• Fourth Quarter Outlook: Assumes approved distribution and transmission rates, absence of one-time items from 2025, fair regulatory outcomes, normal weather/storm activity, and reversal of timing differences.
• Financing: Completed 100% of planned 2026 debt financing. Approximately 30% of $3.4 billion planned equity needs through 2029 have been priced via ATM contracts, including all $850 million for 2026.

• Regional Supply Delays: Progress on regional solutions for supply and reliability remains slow due to FERC concerns regarding cost allocation, credit requirements, and customer protections in PJM’s Reliability Backstop Auction proposals.
• Regulatory Uncertainty: Continued delays in regulatory proceedings could strain the system; however, the company is advancing state-level practical solutions rather than waiting for single regional fixes.
• Storm Activity: While managed effectively, severe weather events (tornadoes, derechos) pose ongoing operational risks and cost pressures, though favorable weather in Q3 helped offset some impacts.
• Interest Rate Volatility: Mitigated for 2026 via completed debt financing, but future exposure exists; hedging strategies limit earnings impact to ~$0.01/share for a 50 bps rate increase.

Q: How do the identified upside opportunities in transmission ($12-17B) and storage ($3-7B) accrete to the growth rate, given the company is already at the top end of its long-term growth target? / A: Management clarified that these opportunities extend the runway rather than immediately boosting the current growth rate. Transmission projects typically take 3-7 years to construct and become operational before accreting to earnings. Battery storage projects have a shorter timeline; for example, the New Jersey project is expected to be operational in under three years after approval. These additions are contingent on securing approvals and cost recovery mechanisms.

Q: What is the status of PJM's reliability backstop auction and what changes are being advocated for? / A: PJM has submitted revised proposals addressing FERC concerns, focusing on tying cost allocation to large load growth, reducing collateral requirements, and adjusting exit fees. Management supports maintaining price caps in the short-to-medium term to protect customers until better processes are established. They emphasize the need for urgency and greater state involvement in ensuring resource adequacy to prevent an projected 11.5 GW shortfall by 2030.

Q: Are hyperscalers willing to provide upfront capital through Transmission Security Agreements (TSAs) to reduce Exelon's equity needs? / A: Yes, large developers actively lean into TSAs, viewing them as beneficial for removing systemic noise and demonstrating community partnership. Collateral received under TSAs has increased with the number of projects, indicating strong developer willingness to secure capacity and protect existing customers from rate increases due to speculative load.

Q: When will Pennsylvania undergo another PECO rate case, and what are the key considerations? / A: Stakeholders acknowledge the necessity of a future rate case within the planning period. Exelon is engaging closely with the Governor’s office, the Commission, and the newly formed Rate Making Working Group. The focus is on demonstrating investments that add value to communities and aligning with the Governor’s outlined expectations for utility responsibility and affordability.

Q: How should investors view the financing path for the incremental $15-24B in upside opportunities? / A: For the existing $41.7B plan, funding comes from cash flow, debt, and equity. For incremental capital, approximately 40% will be funded through equity. Additionally, large battery storage projects may utilize Build-Own-Transfer (BOT) arrangements, which delay capital outlay until later in construction, shortening the gap between investment and rate-base inclusion.