Exelon Reports First Quarter 2022 Results

Source: www.gulfoilandgas.com 5/9/2022, Location: North America

Earnings Release Highlights
- Exelon completed the separation of Constellation Energy Corporation (Constellation), Exelon’s former power generation and competitive energy business, becoming the nation’s premier transmission and distribution utility company
- GAAP Net Income from Continuing Operations of $0.49 per share and Adjusted (non-GAAP) Operating Earnings of $0.64 per share for the first quarter of 2022; Constellation’s results have been reclassified to discontinued operations
- Reaffirming range for full year 2022 Adjusted (non-GAAP) Operating Earnings guidance of $2.18-$2.32 per share
- Continued strong utility operational performance, including ComEd delivering the most reliable service for customers in the first three months of the year for any year on record
- A settlement was approved by the Maryland Public Service Commission (MDPSC) in Delmarva Power Maryland’s electric distribution rate case in March
- PECO filed a gas distribution rate case with the Pennsylvania Public Utility Commission (PAPUC) in March, seeking an increase in base rates to support significant investments in infrastructure to provide safe and reliable natural gas service and reduce methane emissions
- ComEd filed its last annual distribution formula rate update with the Illinois Commerce Commission (ICC) in April seeking an increase in base rates for 2023 to support investments needed to sustain record-level reliability performance and increase the integration of renewable energy into the system

Exelon Corporation reported its financial results for the first quarter of 2022.

“The first quarter was a milestone for Exelon as we successfully completed our separation of the generation business and embarked on our path as the nation’s premier transmission and distribution utility company,” said Exelon’s President and CEO Chris Crane. “At the same time, our focus on the fundamentals of operational and financial execution continued. Beyond delivering reliable and safe energy to our over 10 million customers, we also continued to live our core values. We awarded $2.4 million in scholarships to 24 students attending Historically Black Colleges and Universities, and opened applications for our $36 million Racial Equity Capital Fund to increase access to funding for small, minority-owned businesses in under-served communities.”

“Adjusted (non-GAAP) Operating Earnings of $0.64 per share in the first quarter was driven in part by the recovery of costs associated with ongoing infrastructure investments to improve reliability and resiliency, enhance service for our customers and prepare the grid for a clean energy future,” said Exelon CFO Joe Nigro. “Our grid modernization investments, enabled by constructive regulatory relationships, continue to drive solid operational results and stable earnings across our utilities. For the remainder of the year, we will continue to deliver on our financial commitments and reaffirm our full-year Adjusted (non-GAAP) Operating Earnings guidance range of $2.18 to $2.32 per share.”

First Quarter 2022
Exelon's GAAP Net Income from Continuing Operations for the first quarter of 2022 decreased to $0.49 per share from $0.53 GAAP Net Income from Continuing Operations per share in the first quarter of 2021. Adjusted (non-GAAP) Operating Earnings for the first quarter of 2022 increased to $0.64 per share from $0.55 per share in the first quarter of 2021. For the reconciliations of GAAP Net Income from Continuing Operations to Adjusted (non-GAAP) Operating Earnings, refer to the tables beginning on page 4.

Adjusted (non-GAAP) Operating Earnings in the first quarter of 2022 primarily reflect:
- Higher utility earnings primarily due to higher electric distribution earnings at ComEd from higher rate base and higher allowed electric distribution ROE due to an increase in treasury rates and rate increases at PECO, BGE, and PHI, partially offset by higher depreciation expense at BGE and PHI.
- Higher earnings at the Exelon holding company due to certain BSC costs that were historically allocated to Constellation Energy Generation, LLC (Generation) but are presented as part of continuing operations in Exelon’s results as these costs do not qualify as expenses of the discontinued operations per the accounting rules; one month of costs included in the first quarter of 2022 for the period prior to separation compared to three months of costs included in the first quarter of 2021.

Operating Company Results1

ComEd
ComEd's first quarter of 2022 GAAP Net Income decreased to $188 million from $197 million in the first quarter of 2021. ComEd's Adjusted (non-GAAP) Operating Earnings for the first quarter of 2022 decreased to $193 million from $198 million in the first quarter of 2021, primarily due to the voluntary customer refund related to the ICC investigation of matters identified in the Deferred Prosecution Agreement, partially offset by increases in electric distribution formula rate earnings (reflecting the impacts of higher rate base and higher allowed electric distribution ROE due to an increase in treasury rates). Due to revenue decoupling, ComEd's distribution earnings are not affected by actual weather or customer usage patterns.

PECO
PECO’s first quarter of 2022 GAAP Net Income increased to $206 million from $167 million in the first quarter of 2021. PECO's Adjusted (non-GAAP) Operating Earnings for the first quarter of 2022 increased to $208 million from $170 million in the first quarter of 2021, primarily due to distribution rate increases.

BGE
BGE’s first quarter of 2022 GAAP Net Income decreased to $198 million from $209 million in the first quarter of 2021. BGE's Adjusted (non-GAAP) Operating Earnings for the first quarter of 2022 decreased to $200 million from $211 million in the first quarter of 2021, primarily due an increase in depreciation and various expenses, partially offset by favorable impacts of the multi-year plans. Due to revenue decoupling, BGE's distribution earnings are not affected by actual weather or customer usage patterns.

PHI
PHI’s first quarter of 2022 GAAP Net Income increased to $130 million from $128 million in the first quarter of 2021. PHI’s Adjusted (non-GAAP) Operating Earnings for the first quarter of 2022 increased to $136 million from $130 million in the first quarter of 2021, primarily due to distribution and transmission rate increases, partially offset by an increase in storm costs and depreciation expense. Due to revenue decoupling, PHI's distribution earnings related to Pepco Maryland, DPL Maryland, Pepco District of Columbia, and ACE are not affected by actual weather or customer usage patterns.

Recent Developments and First Quarter Highlights
- ComEd Distribution Formula Rate: On April 15, 2022, ComEd filed its annual distribution formula rate update with the ICC.
- The ICC approval is due by December 2022 and the rates will take effect in January 2023. The filing request includes an increase of $144 million for the initial year revenue requirement for 2023 and an increase of $55 million related to the annual reconciliation for 2021. The revenue requirement for 2023 provides for a weighted average debt and equity return on distribution rate base of 5.94%, inclusive of an allowed ROE of 7.85%, reflecting the average monthly yields for 30-year treasury bonds plus 580 basis points. The reconciliation revenue requirement for 2021 provides for a weighted average debt and equity return on distribution rate base of 5.91%, inclusive of an allowed ROE of 7.78%, reflecting the average monthly yields for 30-year treasury bonds plus 580 basis points less a performance metrics penalty of 7 basis points. This is ComEd's last performance-based electric distribution formula rate update filing, which sunsets at the end of 2022.
- PECO Pennsylvania Natural Gas Distribution Rate Case: On March 31, 2022, PECO filed an application with the PAPUC to increase its annual natural gas rates by $82 million, reflecting an ROE of 10.95%. PECO currently expects a decision in the fourth quarter of 2022 but cannot predict if the PAPUC will approve the application as filed.
- DPL Maryland Electric Base Rate Case: On March 2, 2022, the MDPSC issued an order approving a $13 million increase in DPL's annual electric distribution revenues, reflecting an ROE of 9.60%. The rates were effective on March 2, 2022.

Financing Activities:
- On March 7, 2022, Exelon Corporate issued $2,000 million of notes, consisting of $650 million of its 2.75% notes due March 15, 2027, $650 million of its 3.35% notes due March 15, 2032, and $700 million of its 4.10% notes due March 15, 2052. Exelon used the proceeds to repay existing indebtedness and for general corporate purposes.
- On March 15, 2022, ComEd issued $750 million of First Mortgage Bonds, consisting of $300 million of its First Mortgage 3.15% Bonds, Series 132, due March 15, 2032 and $450 million of its First Mortgage 3.85% Bonds, Series 133, due March 15, 2052. ComEd used the proceeds to repay a portion of outstanding commercial paper obligations and to fund other general corporate purposes.
- On March 24, 2022, Pepco issued $400 million of its First Mortgage Bonds, 3.97% Series due March 24, 2052. Pepco used the proceeds to repay existing indebtedness and for general corporate purposes.


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