Exelon Corporation 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. The combined filing also covers ComEd, PECO, BGE, Pepco Holdings and its utilities. Exelon completed its separation from Generation on February 1, 2022; Exelon is now a regulated electricity and natural gas transmission and distribution company. Generation is reported as discontinued operations. Unless noted, comparisons below are 2022 versus 2021 continuing operations.
Financial results and liquidity
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Operating revenue | $19.078 billion | $17.938 billion | Up 6.4% |
| Operating income | $3.315 billion | $2.682 billion | Up $633 million |
| Net income from continuing operations attributable to common shareholders | $2.054 billion | $1.616 billion | Up $438 million |
| Diluted EPS from continuing operations | $2.08 | $1.65 | Up $0.43 |
| Adjusted operating earnings (non-GAAP) | $2.239 billion; $2.27 per diluted share | $1.791 billion; $1.83 per diluted share | Up $448 million |
| Net cash from operating activities | $4.870 billion | $3.012 billion | Up $1.858 billion |
| Capital expenditures (cash flow statement) | $7.147 billion | $7.981 billion | Down $834 million |
| Long-term debt, net of current portion | $35.272 billion | $30.749 billion | Up $4.523 billion |
Operating margin, calculated as operating income divided by operating revenue, was approximately 17.4% versus 15.0%. Utility revenue includes substantial purchased-energy and other regulatory pass-through amounts, so this margin is not directly comparable to margins in many other industries. Exelon reported $407 million of cash and cash equivalents and $566 million of restricted cash at year-end; short-term borrowings were $2.586 billion and long-term debt due within one year was $1.802 billion. Total bank commitments were $4.0 billion, with about $2.1 billion available to support additional commercial paper.
The cash-flow comparison requires care: Exelon’s 2022 cash flows include one month of Generation activity, while 2021 includes a full year. The statements of cash flows do not segregate Generation as discontinued operations. Exelon reported $6.921 billion of continuing-segment capital expenditures for 2022.
Material changes and segment performance
- Growth in continuing-operations earnings reflected higher distribution and energy-efficiency earnings at ComEd, rate increases at PECO, BGE and PHI, lower storm costs at PECO and BGE, and lower corporate costs retained in continuing operations after separation.
- Continuing results were partly offset by separation-related tax expense, higher depreciation and interest expense, increased credit-loss expense at several utilities, and higher storm costs at PHI. Exelon recorded $148 million of separation-related income tax expense in the first quarter.
- Net income rose at ComEd to $917 million from $742 million, PECO to $576 million from $504 million, and PHI to $608 million from $561 million. BGE net income declined to $380 million from $408 million, primarily reflecting a $48 million impairment and higher depreciation, credit-loss and interest expense. The filing reports net income of $305 million for Pepco, $169 million for DPL and $148 million for ACE.
- ComEd’s reported revenue fell $645 million, largely because lower revenues from regulatory-required programs offset lower purchased-power costs, including carbon mitigation credit-related amounts. At PECO, BGE and PHI utilities, higher commodity procurement revenue was generally matched by recoverable supply costs; reported revenue movements therefore do not necessarily indicate equivalent changes in earnings.
Outlook, risks and unusual items
- Investment and strategy: Exelon anticipates approximately $31 billion of utility infrastructure investment over four years, projected to increase rate base by about $18 billion by the end of 2026. Estimated 2023 capital expenditures are $7.175 billion for Exelon. These plans depend on execution, regulatory approvals and recovery of costs through rates.
- Rates and regulation: ComEd filed a 2024–2027 multi-year rate plan requesting $1.472 billion in revenue requirement increases, with requested ROEs of 10.50%–10.65%; a decision was expected in the fourth quarter of 2023. DPL’s Delaware electric rate case requested a $60 million increase, with a decision expected in the second quarter of 2024. Recoveries and timing remain subject to regulator review.
- ComEd FERC audit: FERC identified potential findings, including ComEd’s allocation of overhead costs to capital. The outcome was not reasonably estimable and could be material to Exelon and ComEd.
- Taxes: Exelon estimated the Inflation Reduction Act could increase cash taxes by approximately $200 million annually beginning in 2023; the company was still assessing the impact. Pennsylvania’s corporate tax-rate reduction produced a one-time $38 million income tax expense at Exelon and PECO, net of federal taxes.
- Legal and reputational matters: The SEC investigation into Exelon and ComEd lobbying activities remained ongoing. ComEd’s 2020 deferred prosecution agreement required a $200 million payment, which was paid; the agreement’s obligations and possible consequences of a breach remain relevant. Separately, the ICC accepted a roughly $38 million customer refund, accrued at year-end and scheduled to be made in 2023. The filing also describes continuing litigation; some potential losses could not be estimated.
- Environmental and other contingencies: Environmental investigation and remediation liabilities totaled $409 million, including $355 million related to former manufactured gas plant sites. Estimated 2023 remediation spending was approximately $52 million, primarily at ComEd. Further costs at certain sites may not be estimable. Exelon also disclosed climate-related physical and transition risks, severe-weather exposure, cybersecurity threats, and possible credit-rating and collateral risks.
- Impairment and pension risks: Exelon and BGE recorded a $48 million pre-tax impairment for a BGE office building. Goodwill of $6.6 billion had no impairment in the 2022 annual assessment, but the filing notes sensitivity to regulatory and valuation assumptions. Pension and OPEB plan asset returns were negative in 2022; future funding needs may change with investment returns and interest rates.
- Dividends: Exelon paid $0.3375 per share quarterly in 2022 and set its 2023 quarterly dividend at $0.36 per share. Subsidiary dividends to Exelon are subject to earnings, credit and regulatory restrictions.
Most important facts for investors to verify
- Review continuing-operations earnings and cash flows separately from discontinued Generation results; account for the differing Generation periods included in the cash-flow statements.
- Track ComEd’s multi-year rate-plan decision, associated performance metrics and reconciliation timing, and the outcome and potential financial effect of the FERC audit.
- Assess whether planned capital spending is completed on schedule and recovered through approved rates, and whether the projected rate-base growth is achieved.
- Monitor liquidity, refinancing needs and borrowing costs, particularly the near-term debt maturities and the effect of higher interest rates or a credit downgrade.
- Follow the SEC investigation, DPA-related obligations, customer refunds, environmental proceedings and other matters for developments that could change recorded liabilities or create additional costs.
- Verify the timing and amount of the projected IRA cash-tax impact, and evaluate the sustainability of the dividend alongside capital requirements and subsidiary dividend restrictions.