Exelon’s (NYSE:EXC) primary goal in the utility business in 2016 is closing the merger with Pepco Holdings (NYSE:POM) (PHI), Exelon President and CEO Christopher Crane said on Feb. 3 during the company’s 4Q15 earnings call.
At that “point, we’ll begin the important job of integrating PHI to the Exelon family of utilities,” he said. “We will bring our management model to PHI utilities in order to improve the experience of the customers in the region. We’ll work diligently to develop and implement an effective regulatory strategy for PHI. We’ll invest approximately $4bn in our existing utilities to refurbish and modernize the grid to improve service for our customers. That is part of $18bn we’ll invest in our existing utilities over the next five years.”
Of the proposed merger, Exelon said in a Feb. 3 statement that the Hart Scott Rodino Act waiting period expired on Dec. 2, 2015, and as such, no longer precludes the completion of the merger.
The record in the settlement proceedings before the Public Service Commission (PSC) of the District of Columbia closed on Dec. 23, 2015, Exelon said, adding that the companies are currently awaiting a decision from the PSC.
Also, Exelon noted that a Circuit Court judge on Jan. 8 affirmed the Maryland PSC’s order approving the merger and denied the petitions for judicial review filed by the Office of People’s Counsel (OPC), the Sierra Club, the Chesapeake Climate Action Network (CCAN) and Public Citizen, Inc. The OPC on Jan. 19 filed a notice of appeal to the Maryland Court of Special Appeals, and the Sierra Club and CCAN filed a notice of appeal on Jan. 21, Exelon said.
Despite a difficult year in the markets, Exelon delivered earnings of $2.49 per share in 2015, Crane said.
He said that Exelon invested nearly $3.7bn in needed improvements for its customers across the utilities, including advanced metering infrastructure and grid modernization investments, as well as significant gas and electric infrastructure, and innovative technology and customer-oriented systems.
He noted that PECO received unanimous approval by the Pennsylvania Public Utility Commission (PUC) for its $127m electric distribution rate case settlement and its $275m long-term infrastructure improvement plan.
Baltimore Gas and Electric (BGE), he said, “received approval for recovery of more than $200m of energy efficiency and gas infrastructure replacement investments.”
According to the statement, BGE last November filed an application with the Maryland PSC, ultimately requesting an increase in electric and gas distribution base rates of $121m and $79.5m, respectively. Exelon said that BGE requested a return on equity (ROE) for the electric and gas distribution rate cases of 10.6% and 10.5%, respectively. The PSC is expected to issue a final order next June, and if approved, the rates would become effective at that time, Exelon said.
BGE is also proposing to recover an annual increase of about $30m for Baltimore City conduit lease fees through a surcharge, Exelon said, adding that BGE cannot predict how much of the requested increase the PSC will approve or if it will approve BGE’s request for a conduit fee surcharge.
Exelon also noted that BGE last November filed a settlement with FERC relating to two complaints on the authorized ROE for its transmission business. The settlement provides for a 10% base ROE, which will be augmented by the PJM Interconnection incentive adder of 50 basis points, and refunds to BGE customers of $13.7m, Exelon said. The presiding administrative law judge last December submitted a certification of the uncontested settlement to FERC commissioners, Exelon said, adding that the settlement, subject to FERC approval, also provides a moratorium on any change in the ROE until June 1, 2018.
Of ComEd, Crane said, “This year, we filed a rate reduction at ComEd showing our ability to contain costs and limit the impact of capital investments on our customers’ bill[s] even during the current smart grid investment cycle.”
According to the statement, the Illinois Commerce Commission last December issued its final order approving ComEd’s 2015 annual distribution formula rate update. The final order resulted in a reduction to the revenue requirement of $67m, Exelon said, noting that the decrease was set using an allowed return on capital of 7.02% (inclusive of an allowed ROE of 9.14% for 2015 less a reliability performance metric penalty of 5 basis points for the 2014 reconciliation). The rates took effect in January, the company said.
Among other things, the company said that Exelon Generation‘s nuclear fleet, including its owned output from the Salem generating station and 100% of the CENG units, produced 43,832 GWh in 4Q15, compared with 44,533 GWh in 4Q14. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 93.3% capacity factor for 4Q15, compared with 94.8% for 4Q14, Exelon said. The number of planned refueling outage days totaled 103 in 4Q15, compared with 97 in 4Q14, the company said, adding that there were 21 non-refueling outage days in 4Q15, compared with eight days in 4Q14.
Of fossil and renewable operations, Exelon said that the dispatch match rate for Generation’s gas and hydro fleet was 97.3% in 4Q15, compared with 99.1% in 4Q14. The lower performance in the quarter was primarily attributed to a forced outage at Wolf Hollow, Exelon said, adding that energy capture for the wind and solar fleet was 95.3% in 4Q15, compared with 96.4% in 4Q14. Performance was negatively impacted due to an extended outage at one of the wind projects in Missouri, the company said.
Exelon reported adjusted (non-GAAP) operating results of $347m net income, or 38 cents diluted earnings per share, for 4Q15, compared to $421m net income, or 48 cents diluted earnings per share, for 4Q14.
The company said that earnings in 4Q15 primarily reflected such negative factors as unfavorable weather conditions at ComEd and PECO. Those factors were partially offset by higher electric distribution and transmission formula rate earnings at ComEd, as well as high distribution and transmission revenue at BGE, the company said.