Exelon Corporation — FY2023 Form 10-K
Business context and reporting period. Exelon is a regulated electric and natural gas transmission and distribution holding company operating through ComEd, PECO, BGE, and Pepco Holdings’ utilities. It no longer owns generation following the February 2022 separation of Constellation. This annual report covers the year ended December 31, 2023; it is not a standalone fourth-quarter report. Unless noted, figures are consolidated and in U.S. dollars.
Financial performance and position
| Metric | FY2023 | FY2022 |
|---|---|---|
| Operating revenue | $21.727 billion | $19.078 billion |
| Operating income | $4.023 billion | $3.315 billion |
| Net income from continuing operations | $2.328 billion | $2.054 billion |
| Diluted EPS from continuing operations | $2.34 | $2.08 |
| Adjusted operating earnings, non-GAAP | $2.377 billion; $2.38 per diluted share | $2.239 billion; $2.27 per diluted share |
| Cash from operating activities | $4.703 billion | $4.870 billion |
| Capital expenditures | $7.408 billion | $7.147 billion |
Operating margin was approximately 18.5% versus 17.4% in 2022; continuing-operations net margin was approximately 10.7% versus 10.8%. Operating cash flow less capital expenditures was negative approximately $2.7 billion, compared with negative approximately $2.3 billion in 2022.
Revenue growth included a substantial increase in alternative-revenue-program and regulatory-program amounts, including ComEd carbon mitigation credit costs that are largely recovered from customers. As a result, reported revenue growth does not by itself indicate comparable growth in underlying earnings.
At year-end, Exelon reported total assets of $101.5 billion, cash and cash equivalents of $445 million, restricted cash of $482 million, current assets of $7.8 billion, and current liabilities of $9.6 billion. Long-term debt was $39.7 billion, with $1.4 billion due within one year; short-term borrowings were $2.5 billion and debt to financing trusts was $390 million. These debt categories total approximately $44.0 billion. Shareholders’ equity was $25.8 billion. The filing reports $4.0 billion of aggregate credit commitments and approximately $2.4 billion available to support additional commercial paper.
Material changes versus the prior year
- Continuing-operations net income increased $274 million, or about 13%, and diluted EPS rose from $2.08 to $2.34. Adjusted operating earnings increased about 6%.
- Higher allowed returns and rate base at ComEd, utility rate increases, and BGE multi-year-plan reconciliation benefits supported earnings. Higher interest and depreciation expense, unfavorable weather at PECO and parts of PHI, storm and contracting costs, and corporate hedging losses partly offset those gains.
- Operating cash flow declined $167 million to $4.7 billion while capital expenditures rose to $7.4 billion. Long-term debt on the consolidated balance sheet increased from $35.3 billion to $39.7 billion.
- Exelon issued approximately 3.6 million shares through its at-the-market program for $140 million net proceeds. The 2023 common dividend was $0.36 quarterly; the Board set the 2024 quarterly dividend at $0.38.
Outlook, risks, and notable items
- Investment plans: Management anticipates approximately $35 billion of utility infrastructure investment over 2024–2027, projected to increase rate base by approximately $19 billion by the end of 2027. Estimated 2024 capital expenditures are $7.425 billion. Management expects operating cash flows, capital-market access, and credit facilities to fund expected needs; actual recovery depends on regulatory outcomes.
- Rate proceedings: The ICC’s December 2023 ComEd order rejected the proposed Grid Plan and set 2024–2027 revenue requirements below ComEd’s request. Rehearing and appellate proceedings remained underway, and ComEd was required to file a revised plan. The order and resolution may affect future revenues, investment recovery, and credit considerations.
- FERC audit: FERC findings concerning ComEd’s allocation of overhead costs to construction may result in customer refunds or additional losses beyond amounts accrued. The final outcome and a reasonable estimate of potential additional loss were not clear in the filing.
- ACE labor disruption: A November 2023 strike ended after a new agreement was ratified in December. Exelon, PHI, and ACE reported unfavorable net-income impacts of approximately $31 million, $31 million, and $32 million, respectively.
- Environmental and legal matters: Exelon recorded $428 million of environmental investigation and remediation liabilities, including $338 million related to former manufactured-gas-plant sites. The filing also describes environmental proceedings and other claims whose potential additional exposure may not be estimable. Exelon paid a $46.2 million SEC civil penalty in October 2023; ComEd’s deferred-prosecution period ended and the charge was dismissed in July 2023.
- Regulatory accounting: Exelon had $10.9 billion of regulatory assets and $10.0 billion of regulatory liabilities at year-end. Recovery and refund assumptions are significant to reported results; the auditor identified accounting for rate regulation as a critical audit matter.
- Other risks: The filing highlights regulatory and rate-case uncertainty, severe weather and climate-related physical risks, cybersecurity and physical security threats, capital-market and interest-rate exposure, pension funding, and potential changes in customer demand and energy technology. No material cybersecurity event was reported.
- Climate goals: Exelon targets a 50% reduction in operations-driven Scope 1 and 2 greenhouse-gas emissions by 2030 against a 2015 baseline, excluding electric-system line losses, and net-zero operations-driven emissions by 2050.
Investor verification priorities
- Review the ComEd rehearing and revised Grid Plan outcomes, including allowed returns, rate base, and timing of investment recovery.
- Track the FERC audit settlement and whether additional refunds or charges exceed ComEd’s existing accrual.
- Reconcile reported revenue growth with pass-through regulatory-program revenues and assess underlying earnings and cash generation.
- Assess the funding plan for the infrastructure program, debt maturities, interest expense, liquidity, and dividend coverage against capital spending.
- Review environmental and litigation accruals, especially the Benning Road and Anacostia matters, and potential losses that management says cannot presently be estimated.