10-Q: Exelon Reports Strong Q3 2025 Earnings Amid Rate Hikes

Exelon Corporation and its subsidiaries delivered robust financial performance in Q3 2025, driven by favorable rate adjustments and strategic investments across its utility segments.

Summary

• Exelon's consolidated net income attributable to common shareholders increased by $168 million to $875 million for the three months ended September 30, 2025, compared to $707 million in the same period of 2024.
• Diluted earnings per average common share rose to $0.86 in Q3 2025 from $0.70 in Q3 2024.
• For the nine months ended September 30, 2025, consolidated net income grew by $361 million to $2,174 million, up from $1,813 million in the prior year.
• Consolidated diluted earnings per average common share for the nine months increased to $2.15 in 2025 from $1.81 in 2024.
• Operating revenues for the nine months ended September 30, 2025, reached $18,846 million, an increase from $17,557 million in 2024.
• Cash flows from operating activities for the nine months ended September 30, 2025, were $5,010 million, up from $4,143 million in 2024.
• Capital expenditures for the nine months ended September 30, 2025, totaled $6,095 million, an increase from $5,161 million in 2024, reflecting ongoing infrastructure investments.
• ComEd's net income increased by $13 million for the three months and $80 million for the nine months, primarily due to higher distribution and transmission rate base and regulatory asset returns.
• PECO's net income surged by $133 million for the three months and $296 million for the nine months, benefiting from electric and gas distribution rates, lower storm costs, and tax deductions.
• BGE's net income rose by $37 million for the three months and $45 million for the nine months, driven by distribution and transmission rates and reduced storm costs.
• Pepco Holdings LLC (PHI) saw its net income increase by $13 million for the three months and $25 million for the nine months, largely due to favorable distribution and transmission rates across its subsidiaries.

Sentiment

Score: 8

Explanation: The company reported strong financial results with significant increases in net income and EPS, driven by favorable rate adjustments and strategic investments. While there are ongoing regulatory and legal challenges, these are typical for the industry and appear to be managed with appropriate accruals and appeals. The substantial capital expenditure program and successful debt/equity raises demonstrate continued growth and financial stability, despite some project delays due to federal policy changes.

Positives

• Consolidated net income and diluted EPS showed significant year-over-year growth for both the three and nine-month periods.
• Favorable impacts of approved rates across ComEd, PECO, BGE, and PHI contributed positively to earnings.
• Lower storm costs at PECO and BGE, partly due to deferrals and decreased credit loss expense, improved financial results.
• Higher return on regulatory assets and Allowance for Funds Used During Construction (AFUDC) at ComEd boosted its net income.
• PECO benefited from less unfavorable weather conditions compared to the previous year, aiding revenue growth.
• Maryland's Legislative Energy Relief Refund program provided $49 million to BGE, $21 million to Pepco, and $8 million to DPL, reducing residential customer accounts receivable.
• New Jersey's Summer Rate Mitigation and Residential Universal Bill Credit programs provided bill credits to ACE customers, with ACE receiving $51 million from the NJBPU.
• The FERC audit settlement for ComEd's contested overhead allocation was approved on April 4, 2025, resolving a long-standing issue.

Negatives

• Higher interest expense at PECO, BGE, PHI, and Exelon Corporate partially offset positive gains.
• Exelon Corporate incurred a Customer Relief Fund contribution, impacting its 'Other' segment results.
• Increased depreciation expense at PECO and PHI weighed on their respective net incomes.
• ComEd experienced lower transmission peak load, which partially offset revenue increases for the nine-month period.
• The Next Generation Energy Act in Maryland led to the derecognition of $10 million in regulatory assets and $3 million in regulatory liabilities for BGE, and $0.4 million in regulatory liabilities for DPL, due to the prohibition of future multi-year plan reconciliations.
• The ICC denied ComEd's proposed reconciliation adjustment for Carbon Mitigation Credit (CMC) administrative and interest costs, leading to an appeal by ComEd.

Risks

• Unfavorable legislative and/or regulatory actions could impact future financial outcomes.
• Uncertainty regarding the outcomes and timing of regulatory approval proceedings and/or negotiated settlements.
• Environmental liabilities and remediation costs, particularly for Manufactured Gas Plant (MGP) sites and the Anacostia River projects, could require substantial future expenditures.
• Challenges to tax positions taken, changes in tax law, and difficulties in quantifying potential tax effects of business decisions.
• Negative outcomes in ongoing legal proceedings, including the derivative claims related to the Deferred Prosecution Agreement (DPA) and the Maryland Sales and Use Tax refund claim.
• Adverse impact of past DPA and resolved SEC investigation on Exelon's and ComEd's reputation and relationships with stakeholders.
• Physical security and cybersecurity risks could disrupt operations.
• Extreme weather events, natural disasters, operational accidents, war, acts of terrorism, public health crises, epidemics, or pandemics could significantly impact operations and financial performance.
• Disruptions or cost increases in the supply chain, including shortages in labor, materials, or parts, or significant increases in tariffs.
• Lack of sufficient capacity to meet actual or forecasted demand or disruptions at power generation facilities owned by third parties.
• Emerging technologies could affect or transform the energy industry.
• Instability in capital and credit markets could impact access to financing.
• A downgrade of any Registrant's credit ratings or other failure to satisfy credit standards could increase financing costs.
• Significant economic downturns or increases in customer rates could reduce demand or increase customer defaults.
• Impacts of climate change and weather on energy usage and maintenance and capital costs.
• Impairment of long-lived assets, goodwill, and other assets.

Future Outlook

Exelon and its Utility Registrants anticipate continued capital investments in infrastructure, with estimated capital expenditures for 2025 totaling $8,975 million for Exelon. The company expects to fund these needs through internally generated cash flows, public debt offerings, commercial paper markets, and credit facilities. Regulatory proceedings, including pending base rate cases and appeals related to tax treatment of Net Operating Loss Carryforwards (NOLCs), could materially impact future financial statements. The company is also evaluating opportunities for federal funding under the Infrastructure Investment and Jobs Act (IIJA) despite recent termination notifications for some projects, and will continue to monitor the impact of the One Big Beautiful Bill Act (OBBBA) and Corporate Alternative Minimum Tax (CAMT) regulations.

Management Comments

• Net income attributable to common shareholders increased by $168 million and diluted earnings per average common share increased to $0.86 in 2025 from $0.70 in 2024 primarily due to favorable impacts of rates at ComEd, PECO, BGE, and PHI; lower storm costs at PECO; timing of income tax expenses at PECO; higher return on regulatory assets at ComEd; higher AFUDC at ComEd; and lower storm costs and credit loss expense at BGE.
• The increases were partially offset by timing of distribution earnings at ComEd; higher depreciation expense at PECO; and higher interest expense at PHI and Exelon Corporate.

Industry Context

The utility sector continues to navigate a complex regulatory landscape, with multi-year rate plans and performance-based mechanisms becoming more prevalent, as seen with ComEd's MRP and PECO's rate case approvals. State-level legislation, such as Illinois' CEJA and Maryland's Next Generation Energy Act, is driving decarbonization efforts and energy efficiency investments, while also introducing new rules for cost recovery and reconciliation. Federal initiatives like the IIJA aim to bolster grid reliability and resilience, though funding disbursement can be subject to political shifts. The industry is also grappling with rising interest rates, which increase financing costs, and the ongoing need for significant capital expenditures to modernize infrastructure and meet evolving energy demands. Customer relief programs, like those in Maryland and New Jersey, highlight the pressure on utilities to manage costs and customer bill impacts amidst fluctuating energy supply prices.

Corporate Governance

Legal Proceedings

• ComEd's Deferred Prosecution Agreement (DPA) term ended on July 17, 2023, with the pending charge dismissed. Related derivative lawsuits were settled, including a $40 million payment from insurers and compliance reforms, though preliminary approval was denied without prejudice due to attorneys' fees.
• Maryland Sales and Use Tax refund claims totaling an estimated $100 million are pending, with the Maryland Supreme Court reviewing a ruling that transmission and distribution equipment qualify for a manufacturing exemption.
• ComEd, PECO, BGE, and DPL are involved in environmental remediation at former Manufactured Gas Plant (MGP) sites, with ongoing studies and remediation efforts expected to continue for several years. ComEd's environmental liability increased by $12 million, while PECO's decreased by $2 million in Q3 2025.
• Pepco is undertaking remedial actions at the Benning Road site under a Consent Decree, with landside and waterside feasibility studies approved and public comment periods underway for proposed plans. Potential future remediation liability has been transferred to a non-utility subsidiary of Exelon.
• Pepco agreed to pay $47 million under the Anacostia River Consent Decree to resolve liability for past and future costs related to the riverwide Remedial Investigation/Feasibility Study (RI/FS), with the first $12 million installment paid on April 9, 2025. Incremental exposure for other future response costs and Natural Resources Damages (NRD) is reasonably possible but not estimable.
• Pepco entered into a Consent Order with the District of Columbia to resolve alleged stormwater discharge and waste disposal violations at the Buzzard Point site, including a $10 million civil penalty (last installment paid January 2025) and required environmental assessments and remediation.

Related Party Transactions

• Exelon's subsidiaries receive corporate support services from Exelon Business Services Company (BSC) at cost.
• Pepco Holdings LLC (PHI) subsidiaries (Pepco, DPL, ACE) receive corporate support services from PHI Service Company (PHISCO) at cost.
• Exelon and PHI operate intercompany money pools to provide short-term borrowing options to participating subsidiaries, generally at more favorable terms than external financing.
• Long-term debt to financing trusts exists for ComEd Financing III ($206 million), PECO Trust III ($81 million), and PECO Trust IV ($103 million) as of September 30, 2025.

Stakeholder Impact

• Shareholders: Benefited from increased net income and diluted EPS, and a consistent quarterly dividend of $0.40 per share. The ATM equity distribution program provides flexibility for future capital raises, potentially impacting share dilution.
• Customers: Experienced bill credits through Maryland's Legislative Energy Relief Refund program and New Jersey's Summer Rate Mitigation and Residential Universal Bill Credit programs. However, customers also face increased rates due to approved distribution and transmission rate cases across various jurisdictions.
• Employees: Pension and OPEB plans are managed, with Exelon making significant contributions to qualified pension plans. Severance and reorganization costs related to cost management were noted.
• Regulators: Actively involved in numerous rate case proceedings, reconciliation processes, and environmental compliance oversight, reflecting the highly regulated nature of the business. The DPA settlement also led to compliance and disclosure reforms.
• Creditors: The Registrants maintain investment-grade credit ratings and access to diversified credit facilities, ensuring liquidity and ability to meet financial commitments. New long-term debt issuances indicate continued access to capital markets.

Next Steps

• ComEd expects approval of its new short-term financing authority application by December 31, 2025.
• ComEd expects approval of its $2.8 billion new money long-term debt financing authority application by December 31, 2025.
• PECO expects approval of its new short-term financing authority application by December 31, 2025.
• BGE expects approval of its new short-term financing authority application by December 31, 2025.
• Pepco expects approval of its long-term financing authority application from the DCPSC by December 31, 2025.
• Pepco expects approval of its new short-term financing authority application from FERC by December 31, 2025.
• DPL expects approval of its new short-term financing authority application from FERC by December 31, 2025.
• ACE expects approval of its application to extend short-term financing authority by December 31, 2025.
• ACE expects the closing date of its $150 million First Mortgage Bonds issuance to occur in November 2025.
• An additional disbursement from the state of Maryland for the Legislative Energy Relief Refund program is expected in the first quarter of 2026.
• The remaining funds for ACE's Residential Universal Bill Credit program were disbursed in October 2025.
• The public comment period for the waterside area of the Benning Road site is scheduled to close on October 31, 2025, after which Pepco will submit proposed responses and a Record of Decision (ROD) to the DOEE.
• The Illinois Appellate Court will review ComEd's appeal regarding the ICC's order on CMC reconciliation adjustment.
• The Maryland Supreme Court will continue its review of the Appellate Court's ruling on the Maryland Sales and Use Tax refund claim, with oral arguments heard on October 1, 2025.
• Utility Registrants (except PECO) await Private Letter Rulings (PLRs) from the IRS regarding the treatment of Net Operating Loss Carryforwards (NOLCs) for ratemaking purposes, which could result in a material reduction of regulatory liability.

Key Dates

Recommendation

Exelon's Q3 2025 results demonstrate solid financial performance, with significant growth in net income and EPS driven by successful rate case outcomes and ongoing capital investments in its regulated utility segments. The company maintains a strong liquidity position and continues to access capital markets effectively for its substantial infrastructure projects. While the utility sector offers stability, the ongoing regulatory appeals, environmental remediation costs, and the uncertain impact of federal policy changes (like the IIJA funding pause and NOLC tax treatment) introduce elements of risk. The stock is a reliable income generator with a consistent dividend, making it suitable for long-term investors seeking stability. However, the current valuation and the aforementioned uncertainties suggest a 'hold' position, advising investors to monitor these developments closely before making further investment decisions.

Keywords

Utility, Energy, Electric Distribution, Natural Gas Distribution, SEC Filing, 10-Q, Exelon, ComEd, PECO, BGE, Pepco Holdings, Pepco, Delmarva Power & Light, Atlantic City Electric, Rate Cases, Regulatory Matters, Financial Results, Earnings, Capital Expenditures, Environmental Remediation, Taxation, Credit Ratings, Infrastructure, Renewable Energy