Exelon Corp.
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Exelon Outlines Distribution Capex Cuts Due to ComEd Rate Case Decision

Feb. 22, 2024
The company’s total spending outlook through 2027 is still about 10% larger than its 2023-2026 plan had been.

The leaders of Exelon Corp. are trimming the distribution capital spending plans at their Commonwealth Edison Co. unit—which is by far the company’s largest—by $1.25 billion over the next three years in response to a December decision by Illinois regulators to deny a multi-year grid plan.

That Exelon President and CEO Calvin Butler and his team are cutting ComEd’s capex goals isn’t a surprise. They said on the heels of the Illinois Commerce Commission decision that they’d need to re-evaluate their investment plans. But the scale of the cuts is significant: Executives’ plans had called for ComEd to spend a little more than $2 billion on distribution projects this year and then grow that number to more than $2.35 billion in 2025 and $2.45 billion in 2026. The retreat from those targets constitutes a haircut of more than 60%—although overall capex at ComEd will fall by less than that figure because of larger transmission investments.

“Our job is to align with what they are requesting,” Butler said on a conference call following Exelon’s fourth-quarter earnings report, which showed net income of $617 million on operating revenues of $5.37 billion. “We are building a plan to achieve those goals and we will continue to talk with those stakeholders. But […] we are ready to pivot if required.”

The Illinois regulators’ decision also has forced the Exelon executive team to lower their longer-term forecasts for growth in operating earnings and dividend growth by a percentage point to a range of 5% to 7%. This year will likely see growth come in below that range with 2025 being better in that regard, they said.

The ICC’s decision wasn’t the end of this story for ComEd, however. The company has appealed the ruling and an order on revenue requirement increases from that rehearing process is due in June. ComEd officials also have filed with an appeals court seeking a new review of questions around its planned return on equity, capital structure and possible returns on its pension assets.

Despite the ComEd stumble, the capex budget for Exelon as a whole will grow slightly this year to $7.4 billion as transmission projects scale up. Through 2027, Butler and his team plan to put to work $34.5 billion, which is an increase of $3.2 billion from their previous four-year plan spanning 2023 to 2026. Exelon’s rate base is forecast to grow an average of 7.5% annually to $73.9 billion from $55.4 billion last year.

Shares of Exelon (Ticker: EXC) rose more than 4% to $36.21 on the heels of the earnings report and outlook. They are, however, still down about 10% over the past six months, trimming the company’s market capitalization to about $36 billion.

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