Leaders of Exelon Corp. say they are looking at trimming the 2024 investment plans of their Commonwealth Edison Co. subsidiary after Illinois regulators rejected ComEd’s multi-year grid plan and issued an order in the utility’s 2024-2027 rate case that, because of the grid plan denial, approved only about one-third of the company’s requested $1.5 billion in rate increases over four years.
In turning away ComEd’s grid plan (as well as that of Ameren Illinois) by a 4-1 vote, the Illinois Commerce Commission said the utility’s forecast did not comply with parts of the state’s Climate and Equitable Jobs Act, which calls for Illinois to move to a completely carbon-free power sector by 2045.
“Specifically, the Commission’s decisions found that both utilities failed to sufficiently incorporate customer affordability into their proposals and their grid plans did not outline how 40% of plan benefits will be directed to low-income and environmental justice communities, among other shortcomings,” the ICC said in a statement.
In a filing with the U.S. Securities and Exchange Commission, Exelon executives said they are appealing the ICC’s order, laying the foundation for regulators to respond in the first few weeks of next year. They also noted that they’ll need to prune ComEd’s plans in response to this first ruling.
“ComEd will be evaluating its operational and investment plan in 2024 in light of the final order, while maintaining a safe and reliable grid,” the SEC filing said.
In their most recent presentation to investors, Exelon leaders estimated that ComEd—which accounts for 37% of Exelon’s rate base—would spend $2.55 billion on capital projects in 2024, in line with this year’s total. A little more than $2 billion of that figure is set to go toward distribution projects while the remainder is earmarked or transmission work.
Early forecasts call for ComEd’s capex to grow substantially in coming years, to more than $2.9 billion in 2025 and $3.1 billion the year after. It’s not clear how drastically those figures might change because of the ongoing rate and grid plan cases: ComEd officials and their attorneys on Dec. 22 filed an application to have the rate case quickly reheard, claiming that the ICC must “correct serious and fundamental legal and evidentiary errors” in their decision from earlier this month.
ComEd is asking commissioners to revisit several points, including that the rate case order sets an unrealistically low return-on-equity target for ComEd, in part because it used a discounted cash flow model “inconsistent with Commission practice and contrary to the record.” Another point of contention is that the grid plan denial is sidelining all investments above the company’s 2022 year-end rate base.
“This is a drastic outcome, and one not supported by the record or consistent with the law,” ComEd’s application says. “Indeed, parties differed on some programs and investments as might be expected, but no party argued or ever suggested that the Grid Plan should be outright rejected.”
The ICC’s decision requires ComEd and Ameren officials to file new grid plans by mid-March. If the ICC approves those, commissioners also will be able to revisit their rate plan decisions, which today include the impact of not being able to make (and then recover) grid investments.
Exelon isn’t the only publicly traded utility to run into a disappointing regulatory decision of late. The leaders of Evergy Inc. last month lowered their earnings growth projections and investment plans after the Kansas Corporation Commission negotiated a ruling that President and CEO David Campbell said leaves his team with “work to do on the capital structure front.”
Shares of Exelon (Ticker: EXC) tumbled from $41 to $34.45 in the days following the ICC’s order. Since then, they have recovered a little bit of that ground, closing at $35.41 on Dec. 27. The company’s market capitalization is now about $35.2 billion.