Exelon Corporation (EXC) Earnings Call Transcript & Summary

Good afternoon, and thank you for joining today's webcast. I'm Jeanne Jones, Exelon's Senior Vice President of Corporate Finance, and I'm excited to welcome you to Exelon's 2022 Investor and Analyst Day. Today, you'll hear from several members of our leadership team, including Chris Crane, Exelon's President and CEO; Calvin Butler, Senior Executive Vice President and Chief Operating Officer; Melissa Lavinson, Senior Vice President, Federal, Regulatory and Government Affairs and Public Policy. Melissa will lead a panel discussion with our operating companies' CEOs, including Tyler Anthony, President and CEO of Pepco Holdings, Michael Innocenzo, President and CEO of PECO; Carim Khouzami, President and CEO of Baltimore Gas & Electric; and Gil Quiniones, Commonwealth Edison CEO. Finally, you'll hear from Joe Nigro, Exelon's Senior Executive Vice President and Chief Financial Officer. Leadership will be available to answer your questions following their prepared remarks. We issued our presentation today, and it can be found in the Investor Relations section of Exelon's website. The presentation discussed during today's call contains forward-looking statements and estimates that are subject to various risks and uncertainties. Actual results could differ from forward-looking statements based on factors and assumptions discussed in today's presentation and comments made during the webcast. Today's presentation also includes references to adjusted operating earnings and other non-GAAP measures. Please refer to the appendix of the presentation for a reconciliation of non-GAAP measures to the nearest equivalent GAAP measure. As a note for attendees, this event is being streamed live. Should we experience any technical disruptions or if individuals experience any network interruptions, the materials can be accessed on the Exelon Investor Relations site following the scheduled end time of this program. I now have the pleasure of turning the webcast over to Joe Nigro, Exelon's Chief Financial Officer, who is joined by Exelon's CEO, Chris Crane.

Thank you, Jeanne, and good afternoon, everyone. We're excited to share our plans for the new Exelon. As you know, we announced plans to separate Exelon and Constellation 11 months ago, and I'm happy to say we're on track to close February 1. All the necessary regulatory approvals and the SEC filings are in place. And as we stated last February, we didn't feel investors were fully capturing the value of each side of our integrated business model. Our stock performance since the announcement confirms that thesis. So Chris, let's get started. My first question is, why is Exelon such a compelling company to invest in?

As we have said over the last couple of years that simply we're a premier utility company. First, our platform is unparalleled. It's a solid platform. We're the largest by customer count. We have diversity and -- but we're also -- we differentiate ourselves as a pure T&D company. We don't have fossil units. We don't have the distraction of any of that. It's just a pure-play company. Second, the operational excellence is first rate. We run the company as we have put out every quarter in our earnings statement as one of the best utility operations in the industry, keeping the bills lower than average, our utilities operate at top quartile in reliability and our customer satisfaction scores are very high and continue to go up. This sustainable performance is proof that our model is correct. And we'll continue on not only driving the model, enhancing the model, learning more, but continuing to find ways for customer satisfaction, lower rates, higher levels of safety and reliability. And that's what it's all about.

So Chris, with that, you've said a lot there. And from your lens, what's the most exciting thing about the split?

Well, it's going to allow us to really focus on our capital and the investments that we make. Constellation will be talking later to the investor pool about what they're thinking about their capital. But unlocking the two at this point allows us to better prioritize capital, look at investments and make sure that we're keeping the balance sheet strong and the customer is satisfied while keeping the rates down. So I think it's -- we went to the Board in 2017 and said by 2022, we think we'll have the balance sheets in shape to be able to do the split. It required debt reduction, it required capital investment in the utilities. And we managed the cash flows back and forth. And that gave us the opportunity to be able to do what we're doing right now and continue to maintain the highest levels of reliability, customer satisfaction and lower-than-average rates.

Yes, Chris, I think that's important. I think our business model of leveraging generation company cash to grow Exelon was the right thing at the right time. But I think now we're at an inflection point. And so let's talk more about the new Exelon as a stand-alone fully regulated utility. Can you spend a few minutes and maybe just describe the new company, the new Exelon for us?

We're going to be a leader. We are a leader now, but we'll continue to be a leader in ESG as expected by our customers and our policymakers. We've demonstrated a commitment to clean 0 carbon output, and we'll continue to drive policy interactions that support that. We have strengthened our compliance to operate at the highest levels of integrity. So I think we have the platform to differentiate ourselves more than any other utility T&D company in the industry, and we'll take full advantage of that.

Yes. I think that's important, Chris. I think when you look at -- we're in very diverse jurisdictions, large urban areas. We're the largest T&D-only company in the sector. We're the largest company by customer account. And I think those are all important. So when you think about our size, scale and location, what do you think all of those things do for us?

Well, we've got a fantastic opportunity to continue to invest the needed capital that, first of all, satisfies the needs of the customer. If we're not satisfying the needs of the customer, we don't need to be pouring capital into the system. So it's looking at reliability, CAIDI, SAIFI. And then for the investors, the growth, the approximate 8% growth that we can sustain while keeping rates at average or below average is just such a great opportunity for us. And I think we'll be able to capitalize on that.

Yes. I think that piece around customer affordability is important, and you'll hear more about that as other speakers come on later in the program. Chris, you mentioned our diversity of jurisdictions. Can you talk some beyond jurisdictions and more about our products, diversity of products?

Sure. That's one thing that we really do focus on, understanding the split of the products that we provide. We're 65% of our rate bases in distribution assets. And those assets are delivering good returns. 21% is FERC-based power transmission. But the one thing that we leave out of the conversation is 14% of our rate base is gas delivery for our 3 gas delivery companies. Gas is not going away anytime soon. We're making significant investments to upgrade the distribution systems of gas. And the other thing about gas, there's a significant focus on methane and methane leaks, not only from our own system but from our suppliers and working with AGA and internally, cutting down on those methane leaks has got a significant part of our environmental focus. Having multiple jurisdictions with productive regulatory recovery mechanisms, I think it's key as we go forward.

Yes, I think that's right. And I think as you know, the improvement in our operational metrics through time, I think, demonstrate that as well.

It does.

Both on the operations side and the customer service side.

Yes, it does. If you look at our CAIDI and SAIFI numbers, they continued over the years to improve to top quartile to top decile and that's what we need to do. We're going to have outages, but how fast we can bring the customers back on is key, especially when we're driving electrification. If we're telling cities, jurisdictions, it's better to go with electric buses, electric cars, but we can't keep the reliability of the system up, you don't want to wake up one morning and say, "Oh, by the way, we had an outage at this bus barn and the buses can't run." So the typical CAIDI and SAIFI is not going to be the measure that we have to continue to improve to.

Yes, I think that's right, Chris, and thanks for that overview. I know you're still an operator at heart, and you probably always will be. You've talked some about the operating model, but when you think about the customer need for better reliability, more resiliency, obviously, technology continues to improve and the customers embracing that use of technology. Can you talk maybe a little more in detail about the operating model?

Yes. The one advantage that we have gotten over the years from the acquisition of Constellation and then the acquisition of PHI is sharing best practices and standardizing not only those practices for maintenance and operations but also training and safety. And it really gives us an advantage. When we were just 2 separate utilities, PECO and ComEd, there was kind of a mentality of not invented here, and that's gone away. And nobody wants to be the low performer to their peers. So there's this constant, okay, how do I learn from each other, how do I keep driving performance up and the management model that has been put in place in the utilities as the genesis from the nuclear management model, how we have in the past run our nuclear plants to drive them to the best in the world, we're doing the same with the utilities.

Yes. I think that's important. And I think looking at it day to day and seeing it day to day, I think it's a culture that's been instilled and, obviously, will continue to grow. We also talk a lot about progressive rate recovery and how that's part of our operating model. I think we've obviously improved that greatly over the years. And can you talk more about how you think Exelon is doing there?

Yes. I think each utility has been working with their regulatory bodies to give a level of certainty on recovery of investment. You're only going to do that if you can show a 3-year investment plan and what's it going to do to the customer and you have to have proven yourself as a premier operator. And I think we've done that. We're going through transitions in most of our jurisdictions to a multiyear recovery plan. Now what that's going to take is discipline on our side, is to make sure that we've got the capital fully detailed out, preplanned, understand what we're doing on the system and be able to communicate that with the regulators and the consumer advocates that it's a benefit. You get halfway through a 3-year plan and somebody comes up with we need a large investment in this, you're not going to get a recovery. So it's going to drive much more discipline on our planners, our engineers, our operators to make sure we know where we're going over a multiyear path. We'll be transitioning ComEd in a couple of years from the formula rate, and there's work that still has to be done on what the future rate recovery is. But if we can prove that, first, we have got safety, reliability and clean at an affordable price, we should be able to work with any regulator and come up with a recovery mechanism that works for all.

Yes, I think that's right. And I think the predictability of that recovery mechanism is important. And I think they all go hand-in-hand. You talked about the improving scores on the operational side, the customer scores improving, and I think that's all on the back of knowing the predictability of returns and other things help that. Beyond our core operations, though, obviously, the investor community puts a lot of priority on ESG and across sectors and, obviously, it's a big piece of our sector. Can you talk specifically in each of those areas what Exelon is doing?

The future Exelon being a total T&D company has many venues to help contribute to the goals of our states and what our customers want. Energy efficiency is a huge one. Electrification is a huge area down to what gases we use in our breakers, not to get too technical, it's a huge one. And so the utilities have come up with a plan on how they're -- even though they don't have the fossil units, they don't have control over the procurement of the power, it's procured for them in most of our jurisdictions by independent bodies, we can still do a lot on our own for more clean energy. But there's more to ESG than that. What are we doing in the communities we serve? What are we doing around diversity? How are we helping the poorer sectors of the communities that we serve. You look at -- we get Chicago, we get Philadelphia, we've got Wilmington, Delaware. We've got Baltimore, we've got D.C.

Atlantic City.

Atlantic City. All have needs that can't be fully met by the government. Corporate America has a responsibility and a services company like us has a large responsibility. Job programs, creating opportunities. It all falls under the ESG spectrum. Now who's going to finally define ESG, I don't know. Everybody is in the middle of trying to define it. But I think we have the picture where we want to go. And I think we have the infrastructure and the focus on what we think we need to be doing.

You talked about the environmental side and the social side. Could you spend some time on the governance side?

Yes. We have done a lot in the governance area, not only to make sure that we have a greater view on ethical behaviors. Everybody knows about the ComEd issue. I mean that's not -- it's not a secret. It was a disappointment. It will be adjudicated in the courts. But what we know is it didn't meet our code of conduct. And what we really need is, we don't need to be operating at what the base that the law requires. We need to be operating at our code of conduct and the governance that we've put in place for the ethical behavior, I think, is a gold standard.

And I think that all -- I agree, and I think that also, Chris, aligns with our operating principles, not to operate at bare minimums and operates with the way we think about our financial discipline and other things as well. So when we're transitioning now to our financial outlook, and I'll get into more of the detail later in the day, but can you describe what strategy instead of capabilities translates economically? What it translates to economically?

Well, I mean it's prudent use of capital, I mean, is a big part of it. But it also is maintaining the trust and the relationship of the regulators and the stakeholders that we're able to have a seat at the table and talk about the strategies that each individual jurisdiction has to get to their goals that were there at the table, and we're able to contribute our input and also talk about the capital that we can put into it. It's one thing to spend money, it's another thing to have the trust and the concurrence of the stakeholders that you're dealing with to say that we're part of the fix, not the problem.

Yes, that's right. And we'll be spending over $29 billion of capital over the next 4 years here through '25, in turn growing our rate base over 8% a year over that time period, and our earnings 6% to 8%, while issuing very little equity, which is, I think, a positive story. Thanks again, Chris. We're going to turn it over to the team now who's going to explore these concepts in more detail over the next few hours. First, I'm going to turn it over to Calvin Butler, Exelon's Chief Operating Officer. He's going to talk more specifically about some of the types of investments we're making that you teed up. And we'll talk about how we're going to sustain the operational excellence and, most importantly, what it means for our future growth.

Thank you, Joe. This afternoon, I'm going to provide you with an overview of the opportunity created by harnessing the strength and capabilities of our 6 utilities serving more than 10 million customers. As the only pure T&D company with our size and scale, we hope power the economic health and well-being of the diverse communities we serve while advocating for equity, and we continuously strive for best-in-class operations. Given our proven model of operational excellence, customer satisfaction and constructive regulatory relationships, Exelon is best positioned to lead the nation and its customers on the path to clean. We are growing our business through supporting new technologies, electrification and grid modernization investments that are recovered through stable rate mechanisms. I'd like to share more with you about how far we've come, but most importantly, the exciting path that we're on. We are focused on building a smarter, cleaner grid for future generations. As physical and cyber threats to the grid along with more frequent and severe storms have become more prevalent, the bar gets raised every day to maintain our standards of excellence. For instance, in August 2020, a devastating storm [ wrecked ] across the entire ComEd service territory, resulting in nearly 1 in 4 customers losing power. We restored power to 540,000 customers within a day, the fastest restoration of 500,000 customers in the company's history driven by smart grid investments ComEd has made since 2012. These technologies that automatically detect outages and reroute power around problem areas, helped avoid more than 700,000 additional interruptions from the storm. Gil will speak a little bit more about that in the next discussion. You'll see here that our performance gets better every year, and it must. [ Searching ] the lines on the grid from electrification, combined with more challenging operating conditions means that what is top quartile to date will not cut it in the future. We are making significant investments within each of our service territories, the result of continuous, long-term planning and execution against those plans day in and day out to modernize our infrastructure and hardening the grid. Let me just share with you a few examples. First, Pepco and the District Department of Transportation are jointly funding a $500 million power line undergrounding initiative in D.C., affectionately known as DC PLUG. It is expected to improve resiliency and improve reliability by an estimated 95% on selected feeders. It is also attractive for business investments, supports economic growth and upgrades a critical component of the District's infrastructure. ComEd partnered with the American Superconductor Corporation or AMSC to be the first utility in the U.S. to permanently install a superconductor cable technology under the Department of Homeland Security's Resilient Electric Grid or the REG program. The AMC (sic) [ AMSC ] REG system is designed to connect urban substations at distribution voltage enabling urban utilities to share excess station capacity and reroute power to keep electricity flowing in the event of a major grid interruption. This technology was installed at a substation within Chicago's [ urban park ] neighborhood and if proven successful will be considered for a second phase. Phase 1 of the project was energized in 2021, and ComEd continues to test the superconductor cable over its first year of operation, so that lessons learned from the installation and operational aspects of the system can be incorporated into the second phase. You can imagine how much opportunity there would be across our footprint once technology like this become standard. And each year, we are investing more into the company's natural gas system to provide safe and reliable service for customers. Under the strategic infrastructure development and enhancement, our STRIDE program, BGE has invested $864 million through 2020 to replace approximately 300 miles of gas main and more than 32,000 gas service pipes with modern, durable equipment. Like the PLUG initiative in D.C., the STRIDE plan has a tracker recovery mechanism allowing BGE to receive contemporaneous recovery for modernizing the gas system, further reducing regulatory lag. Similarly, since 2015, PECO has replaced 334 miles of gas mains and approximately 27,000 services to ensure the safety and reliability for its customers. Now as you see in the chart to the right, you can see the grid hardening investments at work through our track record of improving reliability metrics. You saw with BGE following the Constellation-Exelon merger in 2012 and here now in the numbers since bringing PHI into the family in 2016. Specifically, BGE and PHI's reliability metrics improved by 34% and 13%, respectively since the mergers. Using best practices and a consistent management model approach, we delivered on our commitments to bring PHI up to our standards. And as Chris pointed out, most recently in 2020, each utility had top quartile reliability results on both the key system interruption reliability metrics, safety and on average minutes of customer interruptions, CAIDI. Beyond reliable service, we know that our customers value clean, affordable and reliable energy. 74% of our residential customers say climate change needs action. Our priorities are aligned. Exelon constantly works to introduce or improve upon clean energy products and services tailored to meet these demands. By investing in the smart grid and innovative new technologies, we enable an integrated energy system and empower customers to participate in the emerging smart energy system in ways that work for them. A few examples include our efforts around energy efficiency. Exelon utilities are driving customer-driven emission reductions in our communities through some of the nation's largest energy efficiency programs. Over the 4-year planning horizon, energy efficiency investments across all of our utilities totals $3.4 billion, of which 89% is included in projected rate base and expected to earn return consistent with what's been approved by our commissions. These programs enable customer savings through home energy audits, lighting discounts, appliance recycling, home improvement rebates, equipment upgrade incentives and innovative programs like smart thermostats and combined heat and power programs. In 2020, our Exelon utilities helped customers save over 22.3 million megawatt hours of energy, the equivalent of powering nearly 1 million average homes for a year. Smart meters. As part of our investment in the energy system in the future, Exelon has installed nearly 9 million electric smart meters and over 1.3 advanced gas meters accounting for 93.4% and 96.6% of our total electric and gas customers, respectively. And we now have approval in New Jersey to install smart meters to bring Exelon to 100% smart metering. These meters have benefited our customers in a wide variety of ways, including faster outage restoration and shorter duration outages, which we've highlighted. They have also empowered customers to make informed decisions concerning their energy usage, and they help us keep costs low by enabling remote service connection and disconnection. Over the 3-year period spanning 2018 through 2020, this remote connecting technology allowed Exelon utilities to avoid over 630,000 truck trips on average, reducing cost and avoiding transportation GHG emissions. Transportation electrification. Our utilities are playing a critical role advancing electric vehicles in our communities. This includes both the installation of publicly available charging stations and investments in the system to support this infrastructure. We have been leaders in this rapidly growing space by expanding charging infrastructure, offering incentives and innovative rates and electrifying public transportation. To date, electric vehicle programs have been approved in Maryland, DC, Delaware, Pennsylvania and New Jersey. ComEd has had several ongoing educational and outreach initiatives that provide incentives for EV infrastructure. You'll hear more about these programs during the next panel. DNR (sic) [ DER ] enablement. We continue to assist customers in connecting local resources to the grid, providing them more choice and allowing them a greater opportunity to participate in transforming the energy sector. As of year-end 2020, our utilities enabled more than 150,000 customers to connect 1,995 megawatts of local renewable generation to the emerging smart grid. As a result of these investments and programs, we have seen our customer satisfaction scores steadily increase over time as the chart on the right shows. Notably, in 2020, a year that required extraordinary creativity and effort to adapt to the COVID-19 pandemic, our utilities achieved best ever performance on our customer satisfaction index. The bottom chart demonstrates that we're able to do this at industry-leading levels of cost. When compared to some of the largest metropolitan areas in the country, customers in our service territories experienced rates 16% below the top 20 cities for which rates are reported. This is a direct reflection of our ability to prudently manage costs and empower customers to manage their bills. Our track record of improving operational performance and customer satisfaction has laid the foundation for improved regulatory outcomes and ROEs in our jurisdictions. Nearly 100% of our rate base growth will be covered by alternative mechanisms through the end of our planning period. These mechanisms include multiyear plans in Maryland and D.C., formula rates for both transmission and distribution, capital and other trackers such as the PLUG and STRIDE mechanisms just noted and forward-looking test years. Compared to where we were just 5 years ago, this represents a shift of 25% of our growth to more progressive recovery mechanisms. We think these alternative rate plans are so valuable because they are beneficial to both us and our customers. They reduce administrative costs caused by the frequent filing of traditional rate cases, provide rate predictability and offer an opportunity to proactively agree upon a future investment strategy versus explaining a set of investment decisions that have already been made. To put this in context, annual capital spend was approximately $600 million for BGE and $1.4 billion for PHI near the time of the mergers in 2012 and 2017, respectively. Their projected annual spend in 2022 reflects 8% and 5% annual growth from those levels. The ability to align on shared goals, provide rate predictability and ensure timely recovery of investment enables this increased investment. A natural outcome of these improved mechanisms is recovery more in line with the compacts we enter into with commissions. We have turned around multiple operationally underperforming utilities, narrowing the gap between the earned and authorized trailing 12-month ROEs by 152 basis points over the 8-year period. This unlocks a tremendous amount of value for our shareholders. For context, that amount of improvement on the $52 billion estimated rate base in 2022 that Chris overviewed in the beginning is equal to approximately $400 million in annual net income. The best example is PHI, which Chris referenced earlier. It was significantly underearning at the time of the merger announcement in 2016. Now not only is it PHI in line with our standards, but they are advancing the ball through constructive multiyear plan structures in D.C. and Maryland. Continuing to look forward and where we see opportunity, Exelon is committed to the fight against climate change. And our path to clean goals rolled out last summer demonstrate how we are forging our own path for a cleaner future. Our path to clean is cutting our operations-driven emissions by half by 2030 and achieving net 0 emissions from operations by 2050 while working with our communities to achieve their clean energy and emission reduction goals. In the near term, we will modernize gas systems and electrify our light-duty fleet and explore electric and other 0 carbon alternatives for our medium and heavy-duty fleet, focused on energy efficiency and clean electricity for our operations and reduce SF6 insulating gas from our systems. As you can see in the detailed examples in this slide, these goals simply build on progress we have already been measuring for years. Over the next 10 years, Exelon anticipates investing nearly $4.8 billion, a portion of which is included in our 4-year plan outlined today. Ultimately, we believe we have line of sight into solutions available today to get us to 80% of our way to our goal. And while moving from 80% toward full net 0 operations will require some technology advancement and continued policy support, we are sitting on the sidelines. We are laying the groundwork by partnering with national labs, universities and research consortia to research, develop and pilot clean technologies. And we are supporting small businesses by actively exploring climate solutions in our communities through our climate change investment initiative of our foundation. As I mentioned, our customers are demanding a cleaner, more resilient grid. And that shows up in policy space with an increasing number of companies, state and local officials and our leaders at the national level setting forth their own clean energy commitments that extend to 2050 and beyond. You'll hear more during the next panel discussion, but the result I'd like to stress is that there is a tremendous amount of opportunity required to transform the energy ecosystem. Exelon will lead the way. The transportation sector currently represents about 1/3 of total U.S. greenhouse gas emissions. Urban areas, like many of our service territories, are disproportionately affected by air pollution and the negative effects of climate change. We are advocating for and helping to usher and cleaner 0 emission transportation, particularly in underserved communities. The step change that is anticipated over the next 2 decades is enormous. Bloomberg New Energy Finance estimates that there will be nearly 28 million EVs on U.S. roads in 2030, a 32% annual growth rate from where we are today. And so the need for infrastructure investment to support electrifying the transportation sector is indisputable. A recent study by the Boston Consulting Group has suggested from $1,700 to $5,800 worth of grid investment per vehicle could be required with sufficient penetration by 2030. This investment comes in the form of upgraded distribution circuitry, substations and ultimately transmission. On the supply side, only 23% of total U.S. electricity generation today comes from renewable sources. Renewable penetration is expected to increase significantly over the coming decades and requires the sector to continue planning and preparing the grid for stronger physical and cybersecurity, robust 2-way communication systems and cutting-edge technology advances, similar to the ComEd superconductor technology that I discussed a while ago. That presents significant opportunity for the sector, but more importantly, Exelon. Due to our structural advantages and industry-leading platform, we think it's clear that Exelon is the premier T&D operator, and we will lead the industry to a cleaner and more resilient grid. We cannot be more excited to be in this position. I just want to thank you for your time. And with that, I'm going to lead us into our intermission. We'll take a 10-minute break. And when we come back, I'll have the pleasure of introducing our panel. [Break]

Welcome back. I now have the pleasure of introducing the members of our next panel. Melissa Lavinson, who will be moderating our panel is Senior Vice President of Federal Government Affairs and Regulatory along with the Public Policy efforts being led by Exelon. She's been with the organization for 4 years. Most recently, Melissa served as Pepco Holdings' Senior VP of Governmental and External Affairs. On the panel with Melissa today will be our CEOs from each of our operating companies. And the first up is Tyler Anthony, who is President and CEO of PHI. Tyler has been with the organization for 34 years. He served most recently as COO of Pepco Holdings since 2016. Prior to joining PHI, he served as Vice President of Distribution Operations and Vice President of Transmission and Substations for ComEd in Northern Illinois. Tyler also served as Vice President of Projects for Exelon Nuclear, executing the largest projects across Exelon's nuclear fleet. Also, Mike Innocenzo, President and CEO of PECO, who has been with the organization for 33 years. Mike previously served as COO of PECO and held a variety of roles for the organization, including leading both its electric and gas operations. Next, Carim Khouzami, President and CEO of BGE. Carim has been with the organization 16 years. Carim previously served as COO of Exelon Utilities, CFO of BGE and Chief Integration Officer during the acquisition of Pepco Holdings. And last but not least, we have Gil Quiniones, CEO of ComEd, who recently joined in November of 2021. Before joining ComEd, Gil served for more than a decade as President and CEO of New York Power Authority, the nation's largest state-owned electric utility. Before joining NYPA in 2007, Gil held several positions in the administration of New York City Mayor, Michael R. Bloomberg, including more than 4 years as Senior Vice President of Energy and Telecommunications. Gil started his career at Con Edison. Now the group today will focus on our partnerships within our jurisdictions and how our customer demands are driving shared policy goals. Our ability to perform at the levels I just shared with you and to drive the improvements in grid performance, customer satisfaction and regulatory recovery doesn't just happen overnight. It's the work that we put in each and every day. What drives our success? There are 3 key factors. The first is our people and our culture. We set high standards of excellence, and we move talent around the company to ensure that the standards permeate every business unit. You will gather a flavor of that hearing from this group today. Second, is our scale. With 6 different utilities that cover more T&D rate base than any other company in the U.S., we can leverage strong corporate governance and oversight to drive best practices originating in one business unit and then implementing across all of them. And lastly, community. As you'll hear in the focus of our discussion between Melissa and our CEOs today, we are deeply engaged in our communities, and our business model reflects the needs of our customers and community stakeholders. This allows us to quickly identify, understand and address the problems facing our customers. Through this discussion, you will gain insight into how we work with our community partners to take on shared challenges and opportunities related to climate change, economic development and improve the quality of life of our customers. With that, I'll turn it over to Melissa and the CEOs to get you started. Melissa?

Thanks, Calvin. I really appreciate the opportunity to join you all today. Before diving into the discussion with our CEOs, I wanted to take a couple of minutes to talk about the policy environment at the federal and jurisdictional level, which are very aligned with each other and our company's overarching strategy. Federally, the Biden administration has made clear its goals to transform our economy to drive decarbonization, expand access to clean and affordable energy, modernize and harden the underlying energy system, including associated communications networks and create new opportunities for under-resourced and underrepresented communities. And we need to look no further than key provisions in the bipartisan infrastructure bill. And just to give a sense of the size of the opportunity and commitment here, of the $550 billion in new spending included in the bill, approximately $100 billion or more than 15% is tied to power and supporting infrastructure and cleaner electric transportation. Similarly, aspects of Build Back Better and executive orders, including Justice40 and the recent sustainability executive order that leverages federal government procurement, they provide clear direction from the administration about what it wants to achieve and how it wants to achieve it. So how much more is going to be accomplished legislatively at the federal level, that's still a question. But that said, we do expect the Biden administration and its agencies to use their full authority to make progress on these areas. And we're not only seeing this convergence of energy and climate policy and action federally, but we're also seeing it in our jurisdictions with several viewing it as an economic development and growth area as do we. And at a macro level, our jurisdictions, they have goals related to decarbonization, advancing renewables and clean energy, transportation, electrification, distributed energy resources and energy efficiency, among others. And they also each provide opportunities for our utilities to make investments and recover costs through various forms of alternative ratemaking, including the use of multiyear plans as well as capital trackers. And in each of our jurisdictions, they're focused on making this transition equitably, inclusively and with an intention to provide opportunities to local businesses and historically marginalized and underresourced communities. So for Exelon utilities, this policy outlook and emphasis, it aligns with our focus on building a smarter, stronger and cleaner energy system and with our overarching strategy and values. And it provides opportunities for us to work at all levels of government and with myriad stakeholders to be a true partner to a more decarbonized, more resilient, more secure and, importantly, a more inclusive energy future. So I'd like to start with a focus on how we're working to help our jurisdictions decarbonize reliably and affordably, and how we're leveraging our platform to connect customers and communities to affordable, clean and resilient solutions while enabling economic growth and local job creation. So Tyler, let's start with you. PHI operates in jurisdictions that are leading on combating the climate crisis. In fact, Pepco recently filed with the D.C. Public Service Commission a comprehensive plan known as a Climate Solutions plan that proposes how the company, in partnership with others, could support the district in meeting its climate and clean energy goals. Can you tell us a little more about this plan, the investments Pepco has proposed? And what do they mean for the electric system?

Yes, thank you for that, Melissa. The District of Columbia has distinguished itself as a national climate leader. It's established goals to reduce emissions by 50% by the year 2032 and to hit carbon neutrality by 2050. And as you stated, in support of these goals, under that climate solution plans, we proposed to the D.C. Public Service Commission 2 proposals: One is a 5-year action plan, and the second is a longer-term 30-year plan that sustains those actions. And the plan is quite extensive. It has 62 different programs. There's 4 key areas that these programs come under: one is electrifying transportation; the second, decarbonizing buildings; third, we have activating the local energy ecosystem; and then, fourth, enhancing infrastructure for climate solutions. And I think I'd underscore what you said, Melissa. The grid leverages its unique nature as a platform and a connector. And basically, these proposals provide these solutions in a very equitable way. And I would like to offer 2 examples of this. Most recently, at our -- we've installed a solar facility at our Benning Service Center here in the District of Columbia that basically is a part of the District's Department of Environment's Solar for All program. And this is to help low to moderate-income families. And this solar facility is going to direct funds from that generation of just under $200,000 annually into the low-to-median income families in the area. Okay? A second example I'd offer surrounds nonwire alternatives. Recently, working with the DC Department of Energy and Environment, we were able to defer installation of large transformers at our new Mount Vernon substation, basically keeping costs lower to the customers in that area for the needed load growth. These nonwire alternatives also provide us a unique opportunity to change the way we approach distribution load growth at PHI and it just asks us to ask different questions about it. So these are just a few examples of that plan, and we're very excited about the unique opportunity that we have.

Thanks, Tyler. And the work at Benning to partner with NHT Ingenuity to install solar, it really speaks to how we can leverage our platform and connections to advance decarbonization and clean energy for everyone. So Mike, I want to turn to you in Pennsylvania. I know several localities in the state have targets for reducing emissions and that you've already started to partner with local officials on innovative ways to achieve these goals such as the Port of Philadelphia. Can you tell us more about that?

Sure. And thanks, Melissa. That's right. Vehicles, appropriately so, capture most of the headlines when we talk about electrification, but we think there's lots of opportunities for benefits through electrification that goes beyond transportation and benefits when you think about it in a more comprehensive manner. And the example you brought up, the Philadelphia Port, is a perfect one of that. It's an example where when you bring in all sector -- when you think about benefits through electrification beyond just transportation, you can bring in other sectors in the economy, you can benefit all socioeconomic classes all along as we transform the energy ecosystem. So for the Port of Philadelphia, several years ago, we partnered with them to install the electric infrastructure that was needed on their part to convert multiple shipping container cranes from diesel to electric. On its surface, the benefits are pretty obvious. You go from diesel to electric, you reduce the noise, you reduce the emissions, carbon emissions and air quality emissions, and you also reduce operational costs. But this was done also in conjunction with a federally and state-funded program to deepen the port -- to dredge the Delaware River and to deepen the port. So our investment that provided additional electric capacity for 5 super Panamax, post-Panamax electric cranes, coupled with the deepening of the port really enabled the Packer Avenue Marine Terminal to bring in more ships, to bring in larger ships and increase their container handling capacity by almost 50%. So in addition to the electric benefits, in addition to the environmental benefits, obviously, it reduced the diesel emissions from port operations. It's in a densely populated neighborhood in South Philadelphia, so it cleaned up the air quality, but it also positively impacted about 6,000 jobs. So it's an energy win. It's -- but it's also an environmental and an economy win. And it doesn't happen if you don't partner and coordinate with our customers and key stakeholders.

Thanks, Mike. So Carim, we just heard from Tyler and Mike about how they're partnering and investing to enable decarbonization through the company's electric delivery platform. At the same time, Exelon operates an extensive natural gas distribution network that also plays a critical role in decarbonizing various sectors of the economy and helping our own company achieve our path to clean. Can you tell us a little bit about the investments you're making at BGE and your gas system to both enable greenhouse gas reductions while enhancing overall system performance?

Sure. And thanks, Melissa, and good afternoon, everyone. One of the most important investments we make in our natural gas business is our STRIDE program. And this is really a program that is targeted at replacing aging gas infrastructure, particularly in urban areas that are disproportionately impacted by heat, poor air quality and other effects of climate change. Calvin touched on this a bit. So I'll just add that. Since 2014, pipe replacements have reduced about 3.9 million pounds of methane gas. And when BGE STRIDE plan is complete, greenhouse gas emissions will have been reduced by 210,000 metric tons per year as compared to 2013 levels. That's the equivalent of taking 44,000 cars off the road. So this is a tremendous program in terms of environmental impact. And similar to what Mike just mentioned, it also has significant reliability and safety benefits and also supports over 1,000 jobs a year in our area. So a tremendous program that we're very proud of.

Thanks, Carim. So we all know we can't get to lower emissions without cleaner energy sources and all the jurisdictions that we serve have clean and/or renewable portfolio standards to reach that goal. And while we don't own generation, our role will be significant in preparing the grid to accommodate more and more renewable and intermittent resources while we face ever-increasing weather volatility. And so to do this, not only is there a need to invest in the hard infrastructure but also communication networks that make the system smarter and reduce latency. So Gil, I want to turn to you because ComEd has improved reliability by 70% since 2012, while preparing the grid for the future. And that's despite an increasingly challenging operating environment. For example, Calvin mentioned that in 2020 and 2021, you had significant derechos come through your service area. Can you tell us a bit about the investments you've made to make the grid more resilient and how much worse would the impacts of this had been if ComEd had not made those investments?

Melissa, you're right. We need to do both, fostering the growth of clean energy while enhancing the reliability and resiliency of the grid. Since 2012, we have installed over 4,600 smart distribution devices to sectionalize the grid. This way, we can isolate damage or fault and avoid cascading blackouts. Also, we can target the repairs and accelerate in making those repairs. We have replaced over 6,100 miles of underground cable to enhance reliability and performance. We have replaced or reinforced 45,000 wood poles and their associated cross arms and treated over 1 million additional ones to improve their strength and longevity, and the results have been clear. ComEd in 2020 became the best utility in the nation in terms of outage duration and outage frequency. And during the derecho of 2020 that you mentioned, that's the time when there were hurricane force winds and gust and approximately 850,000 of our customers experienced a power outage. But because of the improvements that we made, more than 500,000 had their power back within 24 hours and another 700,000 customers would have lost power too, but for the reliability and resiliency investments that we've made. There is no question that these investments provide a tremendous value to our customers and the communities in Chicago and Northern Illinois.

Gil, I would add to that. Unfortunately, Illinois is not the only state that's seeing severe weather. We're seeing similar activity on the East Coast and in PECO's territory. And so I think we're really all seeing volatile weather and more severe weather as time goes on. In light of that, we approached our commission several years ago and recently received approval to accelerate about $1.36 billion of investments over 5 years, that are primarily targeted at adaptation to climate change and severe weather storm hardening. So examples of these types of investments are, we're installing over 30,000 distribution aerial assets like poles, wires, other equipment that can better withstand wind and ice. We're replacing 800 miles of underground cable that have had a history of outages with more reliable cable that's going to help us keep the lights on and also to be able to prevent future outages but also to be able to restore quicker if those outages do occur. And finally, we're retiring over 40 unit substations to modernize our system. And when we do that, we upgrade the associated electrical equipment. We move from a lower distribution voltage to a higher distribution voltage. So the immediate benefits are certainly around adaptation to climate change because it hardens the grid, it makes it more reliable and it helps us to withstand more severe weather and has immediate benefits. But I would also add that it really aids in adapt -- mitigation of climate change because those same investments that improve reliability and resiliency also reduce the constraints. They allow for more customers to increase distributed generation opportunities in solar and also increase capacity on our system, allows for additional electrification.

That's a significant improvement and a good test to those investments, Mike. We can understand why you proactively accelerated them, particularly when you've seen such an increase in the frequency and severity of storms. And you also alluded to the adjacent benefits these investments make to preparing the grid for the future. So Gil, turning back to you. As you invest to make the system more resilient, [ how are you ] innovating to enable and integrate the build-out of local solar and other distributed energy resources to help Illinois meet its clean energy and climate goals?

One example is the launch of our first DERMS platform, Distributed Energy Resources Management System. We did this in Mendota, Illinois, an area with a lot of solar and wind resources. The DERMS sends commands to solar sites equipped with smart inverters to manage output and mitigate additional generation that would exceed the equipment ratings at that substation. This enabled the optimal and seamless connection and integration of solar and wind, which avoided costly additional upgrades to our local transmission and distribution infrastructure, benefiting all of our customers.

Thanks, Gil. So as we discussed, we know that the electric system continues to decarbonize and that beneficial electrification is going to play a key role in achieving future emission reductions. And within that, transportation electrification will be a big part, given that emissions from that sector have surpassed the power sector. Now many of our jurisdictions, they have goals to electrify transit, school buses, government fleets, taxis and ride share, and that's going to exponentially increase the number of electric vehicles on the road. We're also seeing more and more of our large customers transition their fleets to electric, just like we're doing with our Path to Clean. As Calvin highlighted, we could be approaching 30 million EVs on the road nationally by the end of the decade, which means a significant amount of investment in both the underlying electric infrastructure as well as in charging networks to support it. And transportation electrification, it not only helps combat climate change, but it also reduces traditional air pollutants that disproportionately affect economically challenged communities. In fact, right now, the air is literally healthier in wealthier neighborhoods with underserved communities being 61% more likely to breathe the most polluted air. So our companies, we have a large role to play in making this transition happen and making it happen equitably, including connecting more vehicles to the grid, enhancing our energy delivery platform, providing supporting programs or rate designs and pursuing innovative partnerships. And in fact, to date, 4 of our jurisdictions have approved EV programs, including Maryland. So Carim, I want to turn to you because Maryland has a goal of 300,000 EVs on the road by 2025, and the state recognized the important role utilities will play in achieving it. How did you work with stakeholders to advance this? And what is BGE doing to support this equitable transition to a more electrified transportation future?

Sure. Well, the Maryland Commission has always been consistent in its view that the utility should play an important role in promoting electric vehicle adoption for customers, and we fully agree. In the past few years, BGE has taken steps to provide our customers with the education tools they need with rebate programs, charging infrastructure, even a special electric vehicle time-of-use rate. When you look at this in totality, we've targeted more than $25 million of spend to help with this transition. Since rolling this out in July of 2019, BGE has received residential rebate applications for over 1,400 customers and enrolled over 600 customers on the electric vehicle time-of-use rate. We've also rebated 124 EV charger ports at multifamily properties, and BGE is currently in the process of installing 40 BGE owned dual-port stations at multifamily properties, importantly, with a portion of these installed in low-income areas. We understand that we, as the utility, have the ability to ensure that charging stations are accessible to all, that this is one of the keys to wider spread adoption and then we can install these stations in areas that other companies may be less willing to do so. Beyond the passenger car market, BGE is also looking for other ways to promote transportation electrification, and one example is the partnership we have with the Howard County School System, and we partnered and supported in a grant to purchase electric school buses that will be used by its students. This is really an essential first step towards the use of more environmentally friendly vehicles, which will benefit and support the students, the community and, obviously, the environment. We're also going to use these buses to demonstrate bidirectional charging, which -- and the way we'll do that is, we'll get data that is collected from energy use and efficiency, we'll then analyze the vehicle's performance in terms of peak load reduction, grid balancing, battery resiliency and other factors. The last item I want to touch on, on this topic, is to point out that we were awarded 2 Federal Department of Energy grants last year. The first provides funding for a partnership with Lyft to deploy 100 electric vehicles for the Baltimore area and the installation of fast chargers, which we've installed at BWI Airport and throughout Baltimore. The second is a partnership between BGE and PHI's Maryland utilities to demonstrate a large-scale smart change management program for residential and fleet customers. BGE and PHI will demonstrate the ability to manage the EV load on our grid in preparation for the 300,000 electric vehicles that are targeted to be on the road in our area by 2025 and also to demonstrate that we can handle additional load even beyond that.

So thanks, Carim. So Mike, in Pennsylvania, the state and several of our localities, they have goals to replace a portion of their passenger car fleet with EVs and hybrids by 2025. What investments are going to be needed to make this transition? And how is PECO preparing to support it?

Yes. Thanks, Melissa. We are excited about it. You've got a lot -- between the state, municipalities, customers, we're seeing a lot of ambitious goals on the EV front. And one of the biggest ways that we support that is through that charging infrastructure and creative ways that we build our rates to support that. We've been very successful working with a very constructive regulatory environment in Pennsylvania to advance EVs through several customer program offerings, and I'll give you a couple of examples. So on a previous rate case several years ago, we stood up an electric vehicle fast-charging pilot, Rider, for DC fast chargers, also known as Level 3 chargers. These chargers can charge a passenger car battery in about an hour and are also used to charging the heavier commercial vehicles and buses. So a transition, a heavy transition to electric vehicles is really going to require a more prevalent infrastructure for charging and ones that can charge it faster. So the Rider that we offer, offers a 50% discount on demand charges, which can be a significant amount of savings for the first 36 months after installation. And then, in our most recent rate case, we were also approved to launch an EV charging infrastructure pilot incentive for public transit customers and another pilot that focuses on commercial and industrial customers Level 2 charging. The latter program provides additional support for EV investments in low income and underserved communities. So we want to make sure that not only we're building this infrastructure and providing opportunity to make that infrastructure prevalent, but we're making sure that it's inclusive in the communities that it serves. And it certainly focuses on our underserved communities as well. Both of these programs complement the time-of-use program, which we launched earlier this year to encourage off-peak energy usage, which is also supportive of EV charging. So the intent of this program is to shift consumer use from the high afternoon peak rates to lower off-peak and super off-peak time windows. So it provides an economic incentive to charge and use that electricity during the off-peak times. It will reduce our peak load. So it's got a benefit to our distribution system, but it also helps customers save by charging. You figure most customers charge during off-peak times, overnight. So in addition to helping us reduce our peak, it will help them save money as they charge during those off-peak times.

Thanks, Mike. Another area I know that each of you is pursuing and has been for many years is energy efficiency. And energy efficiency, it not only reduces greenhouse gas emissions, but these investments, they also save our customers' money and help them better manage their own energy usage. And across our jurisdictions and our customer segments, we're seeing a proliferation of smart, efficient end-use technologies and energy management systems with more customers asking for energy-saving programs and solutions. And our previous investments in AMI, they were foundational to enabling and leveraging these technologies. For example, I think I heard a statistic that nearly 40% of the energy efficiency programs offered by Pepco, Maryland are enabled by AMI. So in addition to this advance in technology, we're also seeing policies evolve so that more than 3/4 of our load is decoupled and nearly 90% of our energy efficiency programs over the next 4-year planning cycle, they're going to earn a return on rate base, making investment in energy efficiency an opportunity that also drives overall system and customer savings. So Gil, I have a question for you. You have the largest portfolio of energy efficiency spend in the group. And since 2008, ComEd's customers, they've saved more than $6 billion through these investments, and that's enough to power nearly 6.5 million homes for 1 year. Can you tell us more about what you've done and what's next on the horizon?

Melissa, we are extremely proud of what our EE programs have delivered to our customers, both in saving energy and in lowering their bills. ComEd has been investing over $350 million each year. That is almost $1 million a day to help our customers conserve energy and save in their utility monthly bills. Starting this year, we will be investing $1.5 billion in energy efficiency over 4 years as approved by our regulator, the Illinois Commerce Commission. Now with a focus on equity, especially in our frontline communities and support for low-income customers, we will dedicate over $85 million annually for low-income customers, doubling our current spend, an increase of almost 250% over the statutory minimum requirements. What's been unique and, I believe, helpful to our customers is the regulatory treatment that you mentioned about energy efficiency investment as a regulated asset and part of our rate base rather than treating it as a typical pass-through cost. Because of the yield comparable duration and quality to our investments in poles and wires and iron in the ground, we are able to increase these investments over longer periods of time, minimize rate impact and maximize the savings that we can provide our customers.

Thanks, Gil. And that's a great segue. So it's clear from this discussion that the states we operate in, they're driving to clean both on a policy and customer side and that we play a key role in meeting these future needs. But it's also going to require a large transformation of the grid and innovative solutions to do this efficiently, like the DERMS system that Gil mentioned or electrifying ports like you mentioned that you're doing at PECO, Mike. So with all this investment required to meet customer demands, we need to proactively plan for that investment and also trust that we can recover it. So building off that, Carim, Tyler, I want to turn to you. How does the MYP filings in the District of Columbia and Maryland align with this transformation of the grid? And Carim, specifically, how do programs like STRIDE that enable investments in the gas system, how do they both drive down methane emissions and increase overall system performance?

Sure. Well, obviously, no company does capital planning for just 1 to 2 years, and you certainly can't run a grid planning for only 1 to 2 years out, especially not when you're talking about the amount of transportation that we've been discussing here today, which is going to be playing out over several decades. BGE has been working with policymakers for a while now to develop innovative ways to achieve full and timely cost recovery. And a great example of this is the legislative and regulatory support that we got for our STRIDE program, which uses a similar recovery model as the MYP. In fact, it was our positive experience with STRIDE and the benefits of the program, which is greater transparency and predictability, which helps support our discussions with regulators relating to implementing an MYP. We obviously need to be able to plan for our workforce. We need the ability to lock in the right amount of staffing to get our jobs done. Given the long-term nature of things like our STRIDE program, we must have the ability to lock in contracts to be able to support this program. In fact, as I mentioned earlier, approximately 1,000 full-time jobs are needed to be able to execute this program, and that will all be supported by this regulatory recovery mechanism. We'll hear more about our workforce development programs a little later, but we do expect these programs will continue to support our ability to provide optimal staffing. Another piece is the fact that engineering design takes time. You can't start and stop projects based on rate case outcomes. For example, a DER project can take at least 12 to 18 months depending on complexity. This increases our need to be able to plan well in advance to ensure that we are ready to get the job done. As Chris showed earlier, we have a considerable amount of investment across all of our utilities. At BGE alone, we have $2.7 billion planned over the next 3-year period, and we knew that we needed to pivot to a more forward-looking mechanism that will provide more certainty of recovery and the ability to meet our goals and the STRIDE and the MYP programs do just that. Tyler?

Yes. I'll pick up Carim on the multiyear rate plan. I like the way you characterized it, Carim. This process of multiyear rate plans has been a significant step forward in the jurisdictions that we now have. And it all comes down to transparency and alignment of goals. I guess everybody wants a smarter, stronger, cleaner energy grid. However, I would argue equally as important for our customers is the predictability of the future, accountability to the company for execution and then how do we give assistance to those that need help managing your energy costs. Just overall, it just provides a visibility, allows for input. It allows opportunities for key stakeholders to ask questions. And this is all rather than defending investments after what were traditional rate cases. As I point to the areas of PHI that we have multiyear rate plans in both the District of Columbia and Pepco Maryland, we performed extensive stakeholder outreach, whether it was the regulators, DC City Council, neighborhood nonprofits, members chambers of commerce, the feedback overall allowed us to make several enhancements to what we proposed. And overall, I just think, as Carim said, this ability to look forward and be transparent, I think it's invaluable when you think about the opportunities that are in front of us.

Thanks, Carim and Tyler. I really appreciate that conversation. Clearly, making progress on policy requires great stakeholder engagement, education and creating a level of trust and understanding. So knowing our customers and communities and really engaging and partnering with them, that allows us to better understand their needs, concerns and how they view the future. And in 2021, this kind of engagement, it really translated into some positive major announcements and commitments that will have lasting impacts for our customers, communities and local economies because they're based on stated need and alignment. And Calvin touched on some of these previously. They include things like the launch of a $36 million Racial Equity Capital Fund to help build capacity of diverse businesses in our communities and provide access to needed capital, and a $3 million commitment to support students in our service areas that are pursuing degrees at historically black colleges and universities as well as an expanded supplier diversity program that focuses on mentorship and helping these businesses make connections, ensuring that Exelon will be well positioned to meet our goal of achieving 40% diverse supplier spend by 2023. So these commitments, they're in addition to the incredible work that each of you and your teams have done in workforce development and local hiring, including establishing partnerships with our government and contractor partners as well as community and faith-based organizations. And so Tyler, let me start with you and then ask others to touch on a specific program within their utility. Can you talk a bit about what you're doing with regard to education and opportunity and where you think PHI is making a real impact?

Melissa, thank you. The education and providing opportunity, this focus area means a great deal to me personally. We've worked with a variety of sectors to focus on programs. I often think about Calvin and Chris' direction to us frequently about providing programs with tangible results. You mentioned faith-based organization. I'll speak to our work with the Washington Interfaith Network. You mentioned the Exelon Racial Equity Capital Fund, and that was started by the Washington Interfaith Network talking to us about how access to capital for minority businesses in the jurisdictions we serve is just so critical. So that's frankly what led to that fund. And in fact, those conversations just are important. There's just so much we, as the utilities, can do if we just truly listen to the people that we support and how we can help as a utility in these jurisdictions we serve. Another example is, we have -- in the District of Columbia, we have an actual school that specifically focuses on careers in infrastructure work. And I'm proud to say here, I think it may be one of the few in the country where you go through the program and different positions that you apply for, whether it's cable splicer, meter tech, overhead technician, if you get through the program, whether it's with the utility or with one of our contract partners, we guarantee you a job offer. And that's making not only difference in the lives of the individual, but it affects the families in which they come from greatly. Just can't say enough about the success of that program. And relationships with organizations like the Washington Interfaith Network are just the great examples of what we're talking about.

Those are great programs, Tyler. We have a lot of similar efforts here in our region at BGE, but I'm going to focus more on our economic development activities within our local communities. Many of BGE's efforts specifically address economic inequalities in underserved communities characterized by high unemployment, low income levels and wealth gaps. To inform the creation of new programs and initiatives, like Tyler mentioned, we listen to what people need within our communities, but we also use data. We segment target audiences programs into core categories. This allows the team at BGE to help identify and address specific barriers that individuals within these segments may experience because of factors that may be outside of their control. For example, we have seen that having access to reliable transportation and having a driver's license is necessary for living and working in the Baltimore area. Within Baltimore City, we do have a public transit system but access to a car is still necessary. Baltimore continues to face a spatial mismatch between the location of jobs and the homes of low-income residents. Many entry-level jobs are not easy to reach by public transit and many family-supporting jobs require a driver's license. Inadequate transportation and the lack of a driver's license are significant barriers for some to obtaining employment that can support a family. To address this barrier that so many are facing in our community, we included driver's education into our local high school internship program at no cost to the student, and we also fund driver's education programs within Baltimore City Public Schools. In addition, the team developed a partnership with the Maryland Department of Transportation and offered the permit test to any intern who wanted to get a permit providing bus transportation to and from the high school to be able to take the test. We also offer the same support for our workforce collaborative participants and go a step further by matching funds through the partnership that allows participants to acquire vehicles and obtain reasonable car insurance. This is just one example of how the team has used data to identify a barrier and help inform programming decisions within our space. It also shows how much we are willing to lean in and listen and learn to be able to identify what our customers need and help remove the barriers to their advancement. One of the things I hope you hear is that BGE, along with all the utilities at Exelon, are very focused on leaning in and doing what we can to support our local communities. We've done this in the past, we'll continue to do it forward, and we're proud to do this as a utility.

Thanks, Carim. And I think as all of you have heard from my colleagues here, we view social equity across Exelon through a variety of lenses. Like all of our sister utilities, PECO serves a major urban area. We all feel very privileged to serve the great cities that we serve, but we also know that these cities have challenges and opportunities, and we're in a unique position to find creative ways to help lift those communities and to help address those challenges. One of the areas that I'm very passionate about, as each of us are, is the topic of workforce development. And when we talk about workforce development, we're talking more than just filling the talent gap. We've done that for years, but we're really talking about filling the talent gap for a reason and for a purpose. When you have a job in any one of our companies, any one of our vendor partners, any one of our adjacent industries, these are family-changing, life-sustaining jobs that can really change the trajectory of your family when you talk about the wages and the benefits. And we really need to do a better job and continue to work on making sure that those opportunities that we create are shared equitably among the communities that we serve. So when we talk about workforce development, it really boils down into 3 main themes: education, retention and creation. So when we talk about education, it's really around making sure that the community that we serve is, one, is aware of our jobs and the opportunities that we create; and two, is prepared and educated to be successful in those jobs. A couple of examples of those. At PECO, each year, we provide more than $250,000 to students of color for scholarships at local institutions of higher education. We also support clean energy workforce initiatives by sponsoring training programs for unemployed and underemployed adults in Philadelphia. We also have a high school program called the Bright Solar Futures program which provides hands-on training for the solar installers of tomorrow. The program is one of the first of its kind. It's a 3-year high school program at our Frankford High School. It's training 100 high school students in solar installation, energy conservation, auditing, worksite safety, construction basis and job readiness. Another example is our work around retention of jobs. We had a customer, Kimberly-Clark, a major manufacturing firm in Southeastern Pennsylvania right outside the city of Chester. They were at risk of closing the plant. Their parent company was debating about whether or not to invest in a plant that used a coal-fired cogen plant that was poorly operating, was inefficient and, quite frankly, it was polluting. Working in conjunction with Kimberly-Clark, working in conjunction with a partner in the pipeline -- gas pipeline as well as with the City of Chester and local officials, we were able to convince Kimberly-Clark to make the investment to convert their coal-fired cogen plant into a natural gas, a cleaner burning and more efficient natural gas cogen plant. It's cleaner, it's much more efficient, it's much more cost effective. And at the end result, they kept the plant open, and the big home run here was retaining 600 good paying jobs in an area that, quite frankly, could not afford to lose any additional jobs. Our last area we talk about is the creation of jobs, good family-sustaining wages, hiring diverse talent. We know that, that makes our company stronger. We know it uplifts our community, and we know that we've got both an obligation and an opportunity to provide those critical opportunities. At PECO, we recently created a new position. It was a helper pre-apprentice position. It's an entry-level field position, and its goal is twofold. One is to provide additional boots and hands on the street to help our seasoned employees get the work done as we add additional capital spend to our portfolio, but also it's a developmental effect for those new employees so that they can understand a little bit -- more about what these jobs entail, how to be successful in those jobs and provide them with those on-the-job training technical skills to make them successful towards future jobs. All of those that graduate from the PECO helper and pre-apprentice program are guaranteed either an opportunity at a future apprentice school at PECO or with one of our partner employers. And the result of that is they're going to be more prepared and more successful in the -- for those opportunities after the apprentice program. We had a lot of interest in the program. We had 700 people apply for 20 open positions. And I'm very proud that the graduating class of those 20 is 94% diverse, which includes females.

Those are all great examples. And at ComEd, we support similar programs across the board. I'd like to highlight and put a spotlight on recent successes in our supplier diversity programs because they have really made significant impact in light of the challenges to both small and large businesses brought upon by the pandemic. At ComEd alone, we spent $894 million in 2020 on diverse suppliers, an all-time high representing 42% of our total spend. In 2021, we expect to break that 40% rate once again. It is really a big economic development and job creation driver, and it's very synergistic. And let me explain how that happens. Because of the reliability -- top decile reliability of ComEd, our low rates and the clean supply -- electric supply available, we are experiencing businesses locating in our service territory. And we're seeing that load growth happening across the board. We added 17 customers that represent 563 megawatts of new load in 2020 alone. These projects will bring nearly 6,400 jobs and over $2.7 billion in investment in our state. And so when we invest in diverse suppliers, we also help their capacity, and we also help them be able to handle more sophisticated type of work. For example, all the load growth that we are seeing in our service territory necessitated for us to build a new substation in Elk Grove, Illinois. And through a competitive bidding process, we were able to assign this work to a diverse supplier based in Rockford called Ruiz Construction as a prime general contractor, which is a first for a project of this size and of this complexity. That's what I mean on how investing in diverse suppliers actually provides synergistic effects in creating jobs and in fostering economic development.

So thanks, Gil, and thanks to all of you. This has been a great conversation. Before turning it back to Joe, I just want to thank each of you for the discussion. It's clear that all our utilities are committed to not only taking action to combat climate change and build resilience for the future, but to do it in a way that provides tangible benefits to our customers, communities and local economies, whether it be through energy and money-saving programs, increased access to clean and affordable energy and transportation solutions, enhances to performance and reliability or innovative partnerships that provide economic opportunities to both individuals and businesses alike. The examples you provided, they really demonstrate the foundational role our companies play in making this clean energy transition while enabling economic development and growth and just highlight the power of our platform to accelerate this transformation and leverage it to make connections to ensure that the benefits and opportunities associated with this new energy future are equitable and experienced by all of our customers and communities. So I know I speak for so many employees when I say I'm proud of all we've done and all we plan to do with Exelon going forward. Because I know utilities were built to do big things, and we're clearly doing them and succeeding. So thank you all again. And with that, I'll turn it over to Joe to discuss our financial outlook.

Thank you, Melissa, and good afternoon, everyone. Today, you've heard from Chris and other leaders on why our company is best positioned to support customer and stakeholder needs and to lead the nation on the path to clean. Exelon is the premier pure T&D utility business in the sector for a number of reasons. We operate in constructive regulatory jurisdictions with nearly 100% of rate base growth recovered through alternative recovery mechanisms. We prioritize our commitments to our customers through bill affordability and best-in-class operations. We maintain a resolute focus on our ESG initiatives and our disciplined financial policy is underpinned by a strong balance sheet. My remarks today will focus on how all these pieces deliver industry-leading rate base and earnings growth on strong returns on equity, providing financial growth well into the future. On Slide 30, you can see we roll-forward our outlook for utility CapEx and rate base covering 2022 to 2025. In '22, we plan to invest $6.9 billion and a total of $29 billion over the next 4 years, an increase of $2 billion from the prior 4-year planning period. As Calvin mentioned, we are continuously needing to improve our levels of service as customers increasingly rely on the grid and the reliability expectations increase as well, as technology creates new opportunities and challenges and as weather places more strain on our infrastructure. Accordingly, we continue to identify more investment needs across the system and are improving reliability and resiliency, enhancing the service experience for our customers and preparing the grid for a clean energy future. Since February of 2021 earnings disclosures for the '21 to '24 period, we have identified an additional $1.3 billion of planned capital investments to benefit our customers. Of the $1.3 billion incremental capital, we are planning to deploy 51% in distribution, 34% in gas infrastructure and 19% in transmission across our service territories. The result of the increasing level of investment to meet our customer needs is that over the next 4 years, our rate base is expected to increase 8.1% annually to $65 billion, adding approximately $17 billion to rate base from 2022 through 2025, as was referenced by Chris earlier. I'd like to highlight that our capital forecast only reflects identified projects we expect to recover through constructive mechanisms and reflects a disciplined prioritization of potential investments to balance interests and provide the most efficient but reliable service to our customers while maintaining affordability. These support our ability to efficiently invest in our systems while also allowing us to earn a fair and timely return on our capital. As we've said, we don't own any generation supply. The growth in our capital plan is solely related to transmission and distribution investments and is not dependent on any large speculative infrastructure projects. The largest project in our plan is approximately 1.1% of total projected capital spend during the '22 to '25 period, avoiding concentration risk with any particular project. Turning to Slide 31. We continue to forecast strong operating earnings growth of 6% to 8%, in line with our previous utilities' net of holdco guidance. The growth reflects updates to our rate base forecast and our assumptions to fund growth, including debt and $1 billion of equity that I'll detail shortly in our financing plan outlook. Delivering on this strong growth will require the continued commitment on cost management and customer affordability, which I will also cover momentarily. Looking beyond the current year, you can continue to expect some variability in year-over-year growth rates due to the timing of rate cases. We have 6 utilities filing distribution cases on varying schedules. While details of recent filings are provided in the appendix, I'll note what you can expect over the next few years. First, ComEd is currently filing annual cases for rates effective through 2023 under the existing formula rate structure. PECO's future test year is on a 2- to 3-year cadence for both gas and electric, and our East Coast utilities are also generally on the same 2- to 3-year rate case filing schedule. As a reminder, all our utilities file annual formula rate cases for transmission. While year-over-year earnings growth may vary due to this filing schedule, we are confidently committed to delivering on a projected long-term annual 6% to 8% operating earnings growth rate through 2025. Additionally, we expect to target a 60% dividend payout ratio of earnings, implying that the dividend will grow in line with the projected 6% to 8% operating earnings growth through 2025. Based on the midpoint of our guidance for 2022, we expect a dividend of $1.35 per share in 2022, subject to approval by the Board of Directors. On Slide 32, we've worked with stakeholders to establish recovery mechanisms that allow us to prudently and efficiently invest in critical infrastructure for the benefit of our customers while also generating an appropriate return on capital. Looking at our utility returns on a consolidated basis, as of Q3 2021, which was our last earnings call, we delivered within our 9% to 10% targeted range with a 9.3% trailing 12-month return on equity. As a reminder, the trailing 12-month return on equity is impacted by 30-year treasury rates, as ComEd's distribution rate base earns a return equal to the 30-year treasury plus an adder of 580 basis points. ComEd will continue to earn a return on equity on its distribution investments tied to the 30-year treasury through 2023 when it transitions out of the formula rate. Given the decline in average treasury yield over the past couple of years, this has lowered the consolidated return on equity. To put it in context, if ComEd consistently earned the midpoint of our 9% to 10% return on equity target, our utility returns on a consolidated basis as of the third quarter would have improved by 40 basis points to 9.7%, the top end of our target range. And in 2020, the average yield on the 30-year treasury brought down our ROE by about 1% relative to 2019. Looking forward, we remain focused on earning the allowed returns at the utilities, which should keep us in the 9% to 10% range while making the necessary investments to support our customers. Turning to the next slide, 33. One way to ensure that returns on equity remains strong is to continue to commit to managing our costs across our operating companies and delivering affordable rates for our customers. Assuming an average annual 2.5% rate of inflation, based on the Federal Reserve Bank and Global Insight's Consumer Price Indices across the 2016 through 2022 period, our costs would have increased by approximately $600 million. Instead, we are projecting a 1.4% compounded annual growth rate for the same period, which eliminates $275 million of customer rate pressure. Our 2022 adjusted O&M projection of $4.05 billion is $150 million higher than 2021, driven primarily by increased costs associated with investments in IT infrastructure and cybersecurity and onetime impacts related to project deferrals to 2022 that we do not anticipate continuing over the planning horizon. Note that we will continue to expect that we will be able to offset any dissynergies in corporate costs associated with this separation as we reorient our shared services to tailor them to our transmission- and distribution-only business model. As many of you are aware, effects of the pandemic continue to ripple through the worldwide economy, creating volatility in supply chains across many sectors. Our utilities are not insulated from the overall rising prices of goods and services. However, we are prepared to successfully manage inflationary pressures in a variety of ways to minimize the impact to our customers, including continued investment in technology intended to reduce cost to consumers, leveraging economies of scale in many of our supply contracts and sharing best practices across our utilities. And I'll give you one recent example, which is the implementation of OneMDS, a digital platform that Exelon projects will save over 500,000 work hours by optimizing business processes and technology, and reducing paperwork and double entry of data. Throughout the pandemic, we have learned how to be more efficient through our remote work environment that we will leverage and build from as we adapt our business to the new model going forward. Due to care center representatives working from home, they can quickly get online during storms and other events, respond to customers in a timely manner which, in turn, reduces call waiting times, allowing us to address our customer needs more effectively and quickly. In addition, we experienced operational savings on travel costs for commuting to the care center and related to a reduction in overtime expenses and improved efficiencies as calls are handled more effectively. Managing inflationary pressures also requires a strong supply organization that can leverage the economies of scale associated with our industry-leading transmission and distribution platform. We strategically monitor market conditions for all our 90-plus categories of product and services spend, distribution and transmission and substation construction among the largest, and we have been successful in mitigating inflation through leveraging our volume, negotiating long-term contracts with fixed pricing or inflation caps and timing our competitive bids based on market conditions and diversifying suppliers. For example, this past year, we negotiated long-term agreements with our distribution construction contractors of choice, locking in pricing through 2023. As you might expect, this is an area where our scale as the largest transmission and distribution company provides significant benefit. It is important to mitigate the impacts of inflation to deliver on our commitment to provide our customers with affordable and reliable energy across all of our platforms, especially in light of the continued customer and policy demand for investment. As you'll see in the bottom chart, customers' electricity bills as a percentage of median income at each of our utilities continue to be below the national average, a result dependent on our prudent customer-driven investment and disciplined cost management. Our 4-year financing plan on Slide 34 demonstrates the company's ability to fund organic utility growth at levels even higher than our last plan as an integrated company with limited external equity needs. Through the constructive recovery mechanisms in place that reduce lag, we are able to quickly redeploy cash into the business to continue growing. Maintaining approximately 51% equity capital ratios at the utilities over the 4-year period, we expect to issue $14 billion of debt between the utilities and holdco, and we expect to issue $1 billion of equity at the holding company by 2025, which is equivalent for only approximately 3% of our 4-year capital investment plan at the utilities. We are effectively balancing the expected $29 billion of capital investments through debt, minimal external equity and reinvestment of adjusted cash from operations of $14 billion. This is all net of the dividend and the $1.75 billion expected cash payment to Constellation in accordance with the separation agreement. On the whole, taking this $14 billion from the business and the $1 billion of external equity, you can see we are using a mix of debt and equity and internal cash flows, which supports the strength of the anticipated metrics that I'll now talk about. Moving on to Slide 35. As you've heard us say and demonstrate many times, Exelon remains committed to maintaining a strong investment-grade balance sheet, and it is a top priority. Our consolidated credit metrics are anticipated to be well above the expected 12% downgrade threshold published by both S&P and Moody's. The low-risk attributes of a fully regulated transmission and distribution platform, coupled with the benefits of scale and diversification, are anticipated to provide significant flexibility going forward. However, we do not take the rating agency thresholds lightly. As we know, our commitment to a strong balance sheet is just as important to customers, investors and regulatory stakeholders as it is to our team. Furthermore, the importance of a strong balance sheet with sufficient capacity allows us to support our utilities to the extent they require additional investment to meet customer needs, and our balance sheet capacity also affords us the ability to continue to grow while protecting against any downside risks. The strength of our balance sheet is further evidenced by the A ratings at each of our utilities, illustrated on the bottom part of the slide. Finally, I will conclude with our earnings guidance on Slide 36. And starting with 2021, we are providing adjusted operating earnings guidance range of $2.06 a share to $2.14 per share for the utilities net of holding company. Throughout the year, we have realized higher revenue in our decoupled jurisdictions and favorable regulatory outcomes at PHI, offset by degradation in ComEd's distribution return on equity due to declining treasury rates and higher minor storm costs at both PECO and BG&E. Moving on to 2022. We are initiating adjusted operating guidance of $2.18 per share to $2.32 per share for the utilities net of holding company. Relative to 2021's estimate, the year-over-year earnings growth is primarily driven by this continued increase in rate base as we deploy capital for the benefit of our customers as well as the existing favorable regulatory outcomes. And as you think about 2022 earnings, I'd remind you that historically, we have realized approximately 28% of full year earnings during the first quarter, 20% in the second quarter, 32% in the third quarter and finally, 20% in the fourth quarter, consistent with seasonal weather patterns at the utilities and the general cadence of our rate cases. Before I hand the floor back to Chris, I'd like to give you a sense of the disclosures you can expect from Exelon moving forward. Similar to the detail we are providing you today, our fourth quarter earnings calls will roll forward our capital plan, rate base projections and earnings growth target percentage over the 4-year period, alongside a view into the health of our balance sheet. On our Q4 calls, we will also initiate [indiscernible] guidance on adjusted operating earnings per share for the consolidated company along with the expected dividend, consistent with targeting a dividend payout ratio of earnings on the midpoint of our guidance. Earnings results for each of the subsidiaries will continue to be reported on a quarterly basis. And you can expect revisions to guidance on the third quarter call absent any material updates to provide prior to that based on business conditions. And with that, I'll now turn the call back to Chris for his closing remarks. Thank you.

Thanks, Joe. I really appreciate the time. Before we open it up to questions, I want to reinforce what we do at the end of every earnings call and talk about the value proposition that Exelon provides. First, industrial leading scale of T&D-only energy provider is a transition for us. But as I've explained through our conversation, it gives us a clarity on capital allotment and it gives us clarity on the value proposition to the investment. Second, the best operator in this sector is what we continue to strive for. Providing world-class customer service is priority #1, at a below -- or an average or below average rate. So we continue to maintain the customer satisfaction. Third is the strong ESG principles that we've put in place that allow us to continue to grow in an environment where that has become such a focus not only internally in the company but externally with our investors and our customers. And I think it's imperative that we stay on the cutting edge and make sure that we're continuing to grow in the ESG world. Lastly, emerging from the separation with a very strong balance sheet that can support significant organic growth through the LRP period and beyond. We've set up the Exelon utilities individually in the holding company with that balance sheet structure that can weather whatever economic cycles there are going forward. And with that, I invite Joe and Calvin to join me to address the questions that you all may have.

Hello, and welcome to the question-and-answer session of Exelon's Investor and Analyst Day. My name is Olivia, and I'll be your event specialist. [Operator Instructions] Please note that today's session is being recorded. [Operator Instructions] And our first question coming from the line of Stephen Byrd with Morgan Stanley.

Thanks for a really thorough update. Extremely helpful. Just a couple for me. I wanted to start just on the -- can you hear me okay?

Yes, we can hear you fine, Steve.

Great. So just first, thinking about offshore wind and just thinking about the opportunity there. Just curious, sort of, are there particular regulatory filings or processes that we should track? I guess that's part one. And part two is just sort of how should we think about sort of the timing and sort of cadence of CapEx opportunity? I was thinking this would be -- could be significant, but it may take a few years before it really would be material at all. But just curious if you could add a little more color on offshore wind.

I'm going to start with the first part, Joe, and maybe you can take the second part. During the restructuring, reregulation, none of our utilities can own generation. So our investment in offshore wind is the transmission to bring it into the system, and that's what we've been focusing on. So at some point, maybe we can do more on that but have some limitations right now.

Yes, Chris, I would just like to add, and Stephen, this is Calvin. We see offshore wind as a significant opportunity to invest in our transmission business, as Chris has said, but it's really around the resiliency in bringing in that distributive energy into our system. For example, in New Jersey right now, we are engaged in a process where we submitted a couple of bids for major offshore wind projects off the -- in the Atlantic. So we're engaged in this, and we have a couple of proposals out there right now to shore up our system in the ACE service territory.

That's really helpful. And then my next question is just more broadly on your CapEx plan. We're pleased to see the growth outlook that you all laid out. And just curious, at a high level, sort of in terms of the -- a couple of points here, I guess. One would be just sort of the average size of projects and the point that I presume that's a lot of relatively small projects, you just wanted to check and see if anything was sort of lumpier there. And then also, just when you think about the 5-year plan that you've laid out, how much would you consider essentially sort of either formally approved or sort of pretty well-vetted with regulators versus sort of pending? I guess, I think of your overall risk of disapproval as being low, but I'm just trying to think about certain sort of pressure points or sort of areas where you might get a little bit more regulatory review because it's a new asset class or it's just a new filing that they haven't seen before.

Yes. Stephen, this is Calvin again. I would sit back and say we have some significant investments within our system, which is the good piece, is that we have partnered very closely with our regulatory bodies and our customers to understand what their needs are in really driving these investments. To your point, the risk I would say is low in terms of the recovery mechanisms because when you look at the rate -- the recovery mechanisms across our jurisdictions, the multiyear rate plans, the formula rates, the forward-looking test years, we have a system in place where it requires and allows us to be very transparent with our regulatory body about what we're doing it and why we're doing it to really meet the reliable and resiliency of our system as well as meet our customers' expectations. Having said that, there are, to your question, several small projects running under $25 million, but we have significant investments in the hardening of our system. So going to the question, where is the risk? The risk is all around execution. It's not really so much around recovery. And I would say to you, we've demonstrated over the last several years we can meet our capital plan and execute it within a margin of about 2% to 2.5% with -- regarding that number. So when you look at what we're investing across our system, well over $6.5 billion a year, we have come within that 2% range, sometimes under, slightly over each and every year. And that's what we've said to our regulators and how we have put together our plans going forward.

That's very clear. And congrats on a very thoughtful presentation today.

Thank you.

Thank you, Stephen.

And our next question coming from the line of Julien Dumoulin-Smith with Bank of America.

Congrats on getting through the whole process.

Thank you.

Indeed. So maybe just to kick things off here, if I can. I would love to just get a little bit more granular on how you're thinking about the 6% to 8% here, if you can. Can you elaborate a little bit more with respect to the assumptions around Illinois and Pennsylvania through the course of the year through 2025, just high-level observations, what's reflected? Where could there be some wiggle room? Obviously, you got legislation, both in terms of CapEx but also especially on the ROE front in both of those, if you can just close that out.

Yes, Julien. It's Joe. What I would start with is we're very confident in that 6% to 8% growth rate. I mean if you look at our growth '21 to '22 in our earnings at midpoint, it's slightly over 7%. You bring up 2 important points. We have done some modeling, and we have an assumption beginning in '24 as we transition off the formula rate at ComEd and Illinois. I will tell you, we looked at it under a range of scenarios, and we're still very confident in that 6% to 8% growth rate CAGR over the period under a number of different outcomes in Illinois. And as has been the case, historically, we have some variability each year with PECO, and that's dependent upon rate case timing as you see improvements in the year of and the year after the rate case, and we go in every few years, so you see some degradation through time. But when you look at the planning horizon '22 to '25, we're extremely confident in that 6% to 8% CAGR.

Got it. All right. Excellent. And then just on the CapEx front, just with respect to Illinois, I mean I know that you guys provided a pretty fully integrated outlook here, but is it fully updated with respect to some of the still forthcoming elements of the Illinois legislation, potentially?

Julien, if I understand your question, we have outlined exactly what the expectations are within the Illinois legislation. However, there are working groups that continue to take place as we speak in terms of what are the energy efficiency requirements of the state, what are the electrification efforts that are going on in the state, what would be going on over the next several years within the state. And ComEd is committed to meeting those challenges. As Joe said, though, when we get to 2024, we will sit back and lay out exactly how we move forward in filing, making that next rate case once we transition off of that formula rate. And these workshops that are taking place right now will lead directly into it. So if we choose to go to a 4-year multiyear plan, that will be in partnership with the commission as well as our customers and understanding what the needs are in Northern Illinois to meet those. So that capital plan, we still have room to really lay it out, recognizing how we approach it and what these workshops -- what comes out of these workshops in the future.

Got it. Excellent. And just if I can squeeze another one in here. On M&A, let me just ask this. I mean previously, strategically, the company was open to opportunities to diversify itself. I'll leave it at that. Where do we stand today pro forma for the spin and breakup here? I mean, I suspect that weighs in part on how you think about strategic levers. Is M&A and consolidation of utilities still something that we should really be thinking about as a priority?

So Julien, what I would say to that is we just laid out a plan where we're going to be investing $29 billion of capital here over the next 4 years. That's front and center for the benefits of all of our consumers, and that's front and center in what we're doing. Obviously, we spent a lot of time in the last year working on this separation, and we're at the goal line here. We're staring at February 1, and there's still work to be done in the transition there. The industry is always consolidated and has consolidated through time. And I think you've seen us do that successfully in the last 10 years with both Constellation, BG&E and as well as PHI. I think that logically, if opportunity presents itself, we would consider that, but it's got to be driven by a lot of things, right? Value, first and foremost, for all the stakeholders, including our customers and our shareholders. And then in addition to that, there has to be a whole lot of things that happen, whether you talk about it from a social perspective, you talk about it from a regulatory perspective, et cetera. But right now, we're focused on executing the plan that we've laid out for you here today, and we're spending a lot of time on that.

And if I can add to that, Joe, thank you. I would sit back and say, Julien, what you've seen is that over the past several years, we've set the foundation in terms of what we've done with both BGE and Pepco Holdings in terms of best practices, the management model that Chris spoke of earlier today and how we share best practices across the platform because we've set the foundation in this power of the platform, operational excellence and customer satisfaction, where if it was deemed an opportunity for us, they're coming into a group of companies that has a solid footing, and we've learned how to integrate other companies very well.

Our next question coming from the line of Steve Fleishman from Wolfe Research.

So just when I think about Exelon, a lot of the strategic focus, I think the last several years have been dominated by making sure that nuclear got treat -- kind of treated fairly for its carbon-free attributes. And obviously, that's not part of the company anymore. So I'm just kind of curious how you're thinking about now having all that kind of time to focus on other areas of focus in the utilities that maybe give you an opportunity from a strategic perspective.

Well, Steven, I'll start and then Calvin could jump in here as well, but I think you heard a lot of it in our prepared remarks, right? When you think about ESG and the 3 levers there, we're spending a lot of time working to continue to clean up our operations on the utility side and a lot of the investment is focused on that. And you heard the 4 utility CEOs, in particular, talk through some of that. And Chris touched on it, Calvin touched on it in their remarks. I think in addition to that, we talked a lot about social issues and opportunity and driving economic change in the communities in which we live and work. And we've got a lot of programs and things that we're underway working to do that, and we'll continue to really spend a lot of time focused on that and just continuing to be a very good corporate citizen. Obviously, in addition to that, we continue to look ways to grow and make the grid better and better. When you look at the incremental $2 billion that we were putting in the plan that we just laid out for you year-over-year over the horizon for the benefit of investments to the customer and all, we'll continue to focus on those kinds of things as well. So I think a lot of it was laid out in what we talked about in our prepared remarks, and we'll continue to refine that as we move through time.

Yes. And Steve, I'll try to be very succinct with this because Joe nailed it. But I think it's very exciting when you think about Exelon and where we're going as a premier T&D delivery company. I mean you hit it. We've been focused on so many other things, and now the focus being on the operating companies and what we're doing and how we can do it in the jurisdictions that we serve, there's no one else out there that serves such a diversity of jurisdictions than the 6 operating companies of Exelon. And those diverse communities, those urban areas have a lot of need, and we're stepping up each and every day meeting those needs. And so when you think about taking that customer need and meeting it along with our consistency of operational excellence and earnings, and then you sit back and intersect that with all the things taking place in the communities and how we're meeting the social side of it, the environmental piece of it, on our Path to Clean, how we're leading change and not just following it, that's what's exciting to me about this new Exelon.

Great. And I know you talked about focus on keeping customer rates very competitive. Can you just talk about when you look at the $29 billion plan, what's the rough range of customer rate impacts from the current plan?

Yes. Affordability is at the forefront of everything that we think about in this regards because as you know, we've developed strong relationships with our regulators. But there's no easier way to lose that balance than when you start getting out of the confines of affordability. So when we look at that $29 billion investment, our whole goal is to maintain any adjustments under the rate of inflation. And that rate of inflation, as Joe has talked about, we look around that 2% to 2.5% bandwidth, and we are consistently below that. And I think Chris even talked about it earlier in his comments today is that when you look across our jurisdictions in these large urban areas, we're below the midpoint of the cost of our products. And we will continue to drive and maintain that sense of urgency and maintaining our O&M costs to allow us to invest in the right things in terms of our capital investments around reliability, resiliency and customer. So that's how we look at this rate of inflation, maintaining at or below, controlling our O&M spend and investing in the right type of capital.

Yes. And I would add -- Calvin's right there, and I would add to that. We've used some examples in our prepared remarks when we think about things like we're investing in technology, in the OneMDS platform to drive efficiency and savings in labor and other things. It's all with the eye of controlling customer cost to make sure that we're very focused on that.

Our next question coming from the line of Jeremy Tonet with JPMorgan.

You touched on CapEx a bit here, but I wanted to maybe dig in a little bit more, if I could. Just across the plan, other peers, you might see kind of utility CapEx [ plot ] reach a peak over years 2 or 3 and then kind of come down a little bit. But across the plan you introduced here, it just -- it continues to step up sequentially each year across the plan. So just wondering if you might be able to dig in a little bit more on some of the drivers here and line of sight to those investments that continues to have the upward trajectory for CapEx over the plan period.

Sure. This is Calvin, Jeremy. I would sit back and say, first and foremost, we have commitments within our multiyear rate plans in Maryland and D.C. about what our capital investments are today, and we're going to honor those. I think when you see the back end of our capital investments, a lot of that is beyond the MYP, and then also leaning into the electrification efforts of our jurisdictions to say, what other additional investments can we make to meet those goals? So when you see that back-end heavier investments, it's around electrification, resiliency, cyber and physical security, in addition to looking at the opportunities of hardening the system overall. And that's why you see that back-end investment taking place.

And I would add, Jeremy, just that it's important to note that this isn't like we're just plugging numbers on the back end. We have designated projects that we know where that investment is going. And there's no one project that's dominating that spend. It's spend in all those buckets across our jurisdictions that Calvin mentioned.

Got it. That's very helpful there. And then maybe pivoting towards the federal level and while BBB seems very much in flux, if anything happens there, just wondering if there's any expectations Exelon has with regards to federal support that it could impact the business, be it grid investments to support EV or anything else that could affect your outlook.

Well, let me start off and say we see there's a significant opportunity to partner with our jurisdictions in obtaining funds from the federal government because you can imagine, any time we have a jurisdiction that looks in, that gets dollars for EV electrification, transportation electrification upgrades, resiliency, hardening, those are dollars that we can sit back and redeploy other way -- other areas to help support them. So the dollars that we're talking about, you sit back -- there's billions of dollars that have been added -- advanced in this effort, and we are already in discussions with not only -- I'll give you an example, Howard County in terms of transportation electrification, D.C. in terms of hardening and resiliency. And how can we sit back and take our dollars and partner with their dollars to get twice as far and sooner. And that goes back to that question of affordability and really reducing the ultimate cost to the customer. So there's significant potential at the federal level. And it will require some coordination of partnership to get that done. And we are driving that within the utility business to ensure that no stone is uncovered in accessing those dollars in the right way, very similar to what we did around smart meters. That was $1 billion investments in smart meters across our system that was done in partnership with the Department of Energy. So we're looking at doing something similar to that, but we'll be very smart about it.

Got it. That's very helpful. One last one, if I could. Just with regards to Illinois, I think you might have referenced a 40 bp consolidated ROE uptick if it goes back to normal. And just wondering, in your plan, what are the ranges baked into the growth outlook post this new Illinois regulation? Is that kind of a floor and we could expect upside? Or just any color on the ranges would be helpful.

Yes. We haven't said, Jeremy, what those ranges are. But I can tell you, we looked at it under a number of different scenarios. And as I said earlier, we're very confident with the 6% to 8% growth range in earnings during the time period just looking at it under those different scenarios.

And our next question coming from the line of Shar Pourreza with Guggenheim Partners.

Congrats on getting this through on the disclosures.

Thanks, Shar.

So just -- I want to just maybe ask a little bit of a longer-dated question, especially in light of what Calvin is saying and what you've been talking about, Joe and Chris. But as we're sort of thinking about the CapEx opportunity kind of beyond that '25 window, some of your peers provide general guidance out to a decade. Do you think this is something you guys could do in time? I guess with so much visibility in the plan, why stop at '25, especially since some of your regulated peers that you're benchmarking against are providing longer-range trajectories? Is it as simple as you're waiting for the workshops to get through? So just a little bit of a sense there as we're thinking beyond '25.

Yes. I think there's a lot of things that could change through time when you start going beyond the time frame in which we're giving you. I think right now, we've given you the horizon through '25. We've talked through that in detail. Right now, that's about as far as we're going to go. We obviously do some planning beyond that. That's part of what we have to do. But I think to start putting that out there with the uncertainty not only in our business, but the macroeconomic uncertainty, creates a lot of very wide range of outcomes.

So I guess, 6% to 8%, that's pretty -- that's fair, even beyond '25, basically, as we're thinking about [ earnings growth ].

Yes. I'm not saying that, Shar. That's you saying that. I will say we continue to see need for investments in the grid, as Calvin mentioned, in the areas he talked about a few moments ago, as you think about how we're -- reliability, resiliency, the cleaning of the grid and so on, but I'm not committing to that sitting here today.

Okay. Got it. And then just on just O&M, you guys continue obviously to manage O&M really well. Can we just get a general sense on how to think about modeling go forward beyond '22? Is that 1.4% fair? I guess put differently, how many sort of levers do you have from that $4 billion to $4.1 billion run rate, especially as we're thinking about tech improvements and grid transformation?

Yes. We haven't given you a number beyond that time period, so I'm hesitant to sit here and commit. But I will tell you, our culture, as we have done for years, is to continue to focus on driving efficiency. Whether you talk about it from technology investment, whether you talk about it from a process or procedure perspective or a governance perspective, we're always looking for ways to continue to drive efficiency. And I think we've had a culture of that and done a pretty good job with that, and we'll continue to focus on that.

And I would add. You heard from the CEOs of each operating company earlier today, and everything that they were talking about is always centered and -- at the forefront of the affordability question because what you're asking goes directly to that item, and we understand that. So when we sit back and put together a capital plan, it's also in relationship with our O&M spend because we've recognized for every so many dollars, $8 to $10 of O&M we pull out of our system, we're able to invest another $1 or more, even more into our capital. So that's why it's so important to us. And it's at the forefront of everything that they do on their planning stages.

Got it. Got it. And then just -- that's very helpful, Calvin. And then just lastly, just on transmission ROEs, just remind us what you guys are assuming there. Do you guys -- do you believe FERC will press ahead with the cessation of the RTO adder? And how are you sort of thinking about the other items that are currently out there as far as incremental adders that could offset the ROE adder going away?

Yes. We haven't deducted the ROE adder from our financial plan at this point. Obviously, if that comes to fruition, we would take that into account at the appropriate time.

Okay. Perfect. Appreciate, and congrats.

Thank you, Shar.

Okay, Joe. I think we're going to wrap it up from here.

Yes.

So we appreciate everybody's time. We threw a lot at you today. It's an exciting time. I went to the Board in 2017 and said we have to have all the balance sheets ready, our regulatory approval process ready, and the team executed on it. And I think as you heard from all the talks today in the panels, that this team that stays with Exelon is up to the call. We'll continue to focus on our priorities, as I reiterated at the end of the presentation. But it's -- there has to be a strong customer satisfaction for us to make investment that comes with safety and reliability, and we'll continue to drive that. We're a very operational-focused company, and we understand operations is key to recovery and continued customer satisfaction. So we're looking forward to February 1 and February 2 and the 2 companies to be traded separately. And we continue on with this very strong management team that we have to execute on everything we've told you today, and I have full confidence that they will. If you noticed how confident they are, they didn't give me a chance to answer 1 question, but they're fired up and ready to go. But I agree with everything they said. And we look forward to continuing to communicate with you and continue to have your confidence in the directions we're heading. So thanks a lot for your time today, and we'll all talk soon. Thank you.

Ladies and gentlemen, that does conclude the conference for today. Thank you for your participation. You may now disconnect.