Jeanne Jones
Executive Vice President and Chief Financial Officer at Exelon
Thank you Calvin, and good morning everyone. Today, I will cover our second quarter financial update along with the outlook for the second half of 2023, our progress on the 23 rate case schedule and I'll also highlight an ongoing project that exemplifies our commitment to delivering sustainable value as the premier T&D energy company by modernizing critical infrastructure in the Philadelphia area.
Starting on Slide 6, we show our quarter-over-quarter adjusted operating earnings. As Calvin mentioned, Exelon earned $0.41 per share in the second quarter of 2023 versus $0.44 in the second quarter of 2022, reflecting lower results of $0.03 per share over the same period. Results of $0.41 in the second quarter were right in line with expectations provided on the prior earnings call. Earnings are lower in the second quarter relative to the same-period last year, driven primarily by $0.04 of higher interest expense due to the rising interest rates and higher levels of debt at the holding company and at some of our utilities as well as $0.03 of unfavorable weather at PECO. This was partially offset by $0.03 of higher distribution and transmission rates associated with incremental investments, net of depreciation, as well as $0.01 of carrying costs related to the carbon mitigation credit balance at ComEd. Despite another quarter of mild weather impacting our non-decoupled jurisdictions, we delivered earnings results exactly where we said.
Through the first half of 2023, operating earnings are $1.11 per share, reflecting 47% of the projected full year earnings. This is in line with how we performed through the first half of 2022. Looking ahead to next quarter, we expect relative EPS contribution in the third quarter to be approximately 28% of the midpoint of our projected 2023 operating earnings guidance range. Recall that Q3 2022 saw strong growth from $0.04 of higher [Indecipherable] with PECO's electric rate case in year one of its current rate cycle, as all $0.03 of realized 30-year treasury rate uplift on ComEd's [Indecipherable] and another $0.03 of distribution formula rate timing at ComEd.
While the fundamentals underpinning the earnings remaining this year, we expect third quarter of '23 results to be lower. Net distribution and transmission growth will be offset by higher interest and we also expect some timing of O&M and taxes. For the fourth quarter of '23, we expect year-over-year earnings growth to benefit from the absence of proactive derisking that occurred in the fourth quarter of '22, the expected reversal of the O&M and tax timing, and the anticipated one-time impact of BGE's reconciliation for the '21 and '22 under recovery of its first multi-year plan. As we do not receive the final order on the reconciliation for BGE until December of '23, we cannot record BGE's earnings associated with the reconciliation until that time. In-line with discussion on the first quarter earnings call, we expect the $0.07 of unfavorable weather experienced year-to-date to be offset with the combination of O&M levers across the platform, favorable depreciation at PECO and full-year earnings impact of the carrying costs associated with the CMC regulatory asset balances.
On a full year basis, we continue to reaffirm our 2023 EPS guidance range of $2.30 to $2.42 per share. Through continued increase in rate base as we deploy capital for the benefit of our customers and strong cost control across the platform, we remain on track to deliver earnings at the midpoint or better of our guidance range. The settlement of weather and storm exposure remaining, you can expect we will managed utility work plans to deliver earnings within expectations. Lastly, we are reaffirming the fully regulated operating EPS compounded annual growth target of 6% to 8% from 2021 and 2022 guidance midpoint through 2025 and 2026 respectively, with the expectation to be at the midpoint or better of that growth range.
Turning to Slide 7, as Calvin mentioned, there have been some important developments on the regulatory front. Since the last earnings call, there was one new rate case filed. So I'll provide a status update on each of the six current open proceeding, starting with the most recent filing. On May 16th, Pepco Maryland submitted its Climate Ready Pathway, three year multi-year plan application to the Maryland Public Service Commission. Pepco is requesting a $213.6 million revenue increase over the April 2024 to December 2027 period, inclusive of a proposed nine month extension, reflecting an ROE of 10.5%. The filing outlines investments the company expects to make to support a climate ready grid and enable cleaner energy programs and technologies that support Maryland's goal to reach net zero emissions by 2045. As an example of the $150 million of Climate Solution programs that Calvin mentioned are included in Pepco proposed plan, more than half are dedicated to incentives for approximately 10,000 equipment electrification conversions for customers transitioning to cleaner technologies like heat pumps in the building sector.
Another key category of spend is dedicated to enhancing reliability, resiliency and grid security through the installation of more modernized equipment that automatically detect system issues, reinforces the grid against more severe weather and protects the grid from potential physical or cyber threats. Overall, these investments are anticipated to inject more than $1.42 billion into the local economy and support more than 11,000 full-time jobs.
For the last three years, spanning 2020 to 2022, Pepco has reported the best reliability performance of any electric distribution utility in the State of Maryland, a true testament to the company's commitment of powering a cleaner and brighter future for its customers and communities. Equally as important as reliability, Pepco is focused on keeping affordability front and center for our customers. The multi-year plan includes the acceleration of tax benefits to serve as a bill offset, as well as efforts to increase participation in energy assistance and energy efficiency programs, which in 2022 alone provided approximately $23 million to Pepco Maryland customers, an order is expected by June of 2024.
Let me also remind you of the other electric distribution rate cases and progress. First, Delmarva Power Delaware has revised the revenue request for $41.8 million increase based on an updated tough period in the electric rate case and as permitted by Delaware law, implemented full proposed rates on July 15, subject to refund. A decision is expected in the second quarter of 2024. Similarly, ACE revised their revenue request for $93.6 million increase based on an updated tough period with the final order expected in the first quarter of '24. Additionally, after an eight month proceeding, the New Jersey Board of Public Utilities approved a four year capital tracker at ACE called Powering the Future, which accelerates the portfolio projects totaling $93 million designed to enhance reliability and resiliency for customers, advance New Jersey's Energy Master Plan goals and sustain economic growth in the region.
Next, ComEd and BGE surpassed two key milestones in their multi-year plan rate cases, having received intervener testimony and filed their rebuttals to support the key elements of the company's initial proposals earlier this year. As discussed on prior earnings calls, both plans outline the investments needed to provide essential service to customers while meeting the clean energy and equity goals of their respective states. In both the ComEd and BGE multi-year plan rate cases, [Indecipherable] hearings are scheduled to begin in late August with briefs to follow before final orders are expected in December.
Lastly, Pepco received procedural schedule from the Public Service Commission of the District of Columbia in its second multi-year rate plan filing. Upcoming milestones include intervenor testimony expected to be filed by the DC Public Service Commission staff on October 16 and evidentiary hearing set to begin in January of 2024 with final briefs in March of '24.
Relationships across our jurisdictions remain constructive and we are working together with our regulators, states and communities through every step of the process to reach our shared goals. As Calvin mentioned, by next year, we expect our resolution on all four of the ongoing multi-year rate plans in Illinois, Maryland and D.C. and a clear path forward to supporting clean energy and climate goals in an affordable and equitable manner. More details on the rate cases can be found on Slides 20 through 26 of the appendix.
Moving to Slide 8. During the second quarter, we continued to invest capital for the benefit of our customers and are on track to meet our $7.2 billion guidance for 2023. These investments in energy infrastructure are vital to maintaining the high standard of service that we have in serving our customers while preparing the grid for the clean energy transformation and increasing levels of electrification.
Today, I'll talk about how PECO is partnering with the community to build a new 6913-kV substation in Philadelphia at the Civic Terminal Yard and neighboring property. PECO's commitment to building the new civic substation began in 2019. This $130 million project includes installation of insulated switchgear and modifications to four 69-kV and transmission lines into civic substations that will allow for the retirement of two 69-kV transmission lines currently running under the Schuylkill River. The new substation is expected to increase distribution and transmission reliability through the reconfiguration of the lines and increased flood resiliency in the low lying areas surrounding the substations, where access has been restricted in the past following heavy thunderstorms. It will also enable PECO to relieve low constraints, supply additional capacity to the University City area and better serve critical customers on the west side of the river.
Once fully energized, which is expected by the second quarter of '24, the civic substation will be PECO's newest and most modern insulated substation. While traditional open-air substation construction would have required five acres to seven acres of land, the upgraded electrical equipment associated with the insulated substation allows PECO to build on less than a two acre plot of land. That represents a 60% to 70% reduction in required land use. Since project inception, PECO has partnered with its customers, government agencies and other local utilities to ensure construction of the civic substation has a minimal impact to the city of Philadelphia, the surrounding customers and on the environment, protecting the nearby waterway and riverbank. With vital customers in the area such as the Children's Hospital of Philadelphia, the University of Pennsylvania Hospital and the Philadelphia Veteran Affairs Medical Center, operational excellence is imperative. As an Exelon utility, PECO is ready to deliver it.
Turning to Slide 9, I will conclude with a review of our balance sheet activity. As a reminder, we continue to project 100 basis points to 200 basis points of cushion on average over our guidance period for a consolidated corporate credit metrics above S&P and Moody's downgrade thresholds of 12%, demonstrating our commitment to maintaining a strong balance sheet. If the corporate alternative minimum tax is not mitigated through an inclusion of repairs in its calculation, we anticipate being at 100 basis points or the lower end of that range. We continue to await specific guidance on the corporate alternative minimum tax implementation and are hopeful to have resolution by year-end. In the meantime, the Department of Treasury issued a notice granting deferral of estimated tax payments associated with the corporate alternative minimum tax until 2024, which points to the appreciation that more guidance is required for implementation.
From a financing perspective, we successfully raised nearly $1.3 billion for BGE and PECO in the second quarter, which completes all of our planned debt financing needs for 2023. The strong investor demand we continue to see for our debt offerings is supported by the strength of our balance sheet and by the low-risk attributes of our platform. In line with the last earnings call, there has been no change in our guidance to issue $425 million of equity at the holding company by '25. We'll continue to update you as we make progress on the plan.
Thank you. And I'll now turn the call back to Calvin for his closing remarks.
