Exelon Corporation (NASDAQ:EXC) Q4 2022 Earnings Call Transcript

Exelon Corporation (NASDAQ:EXC) Q4 2022 Earnings Call Transcript February 14, 2023

Operator: Hello and welcome to Exelon’s Fourth Quarter Earnings Call. My name is Gigi and I’ll be your event specialist today. All lines have been placed on mute to prevent any background noise. Please note that today’s webcast is being recorded. During the presentation, we’ll have a question-and-answer session. It is now my pleasure to turn today’s program over to Andy Plenge, Vice President of Investor Relations. The floor is yours.

Andy Plenge: Thank you, Gigi. Good morning everyone and thank you for joining our fourth quarter 2022 earnings conference call. Leading the call today are Calvin Butler, Exelon’s President and Chief Executive Officer; and Jeanne Jones, Exelon’s Chief Financial Officer. They’re joined by other members of Exelon’s senior management team, who will be available to answer your questions following our prepared remarks. We issued our earnings release this morning along with the presentation, all of which can be found in the Investor Relations section of Exelon’s website. The earnings release and other matters, which we will discuss during today’s call, contain forward-looking statements and estimates that are subject to various risks and uncertainties.

Actual results could differ from our forward-looking statements based on factors and assumptions discussed in today’s material and comments made during this call. Please refer to today’s 8-K and Exelon’s other SEC filings for discussions of risk factors and other factors that may cause results to differ from management’s projections, forecasts and expectations. Today’s presentation also includes references to adjusted operating earnings and other non-GAAP measures. Please refer to the information contained in the appendix of our presentation and our earnings release for reconciliations between the non-GAAP measures and the nearest equivalent GAAP measures. We’ve scheduled 60 minutes for today’s call. I’ll now turn the call over to Calvin Butler, Exelon’s President and CEO.

Calvin Butler: Thank you, Andy, and good morning everyone. I’m excited to be with you for my first earnings call as CEO of Exelon and one that concludes a very successful year for us. When I first joined ComEd in 2008, it was one of two utilities along with PICO under the Exelon umbrella. We recognized that we had an opportunity to take advantage of the power of the Exelon platform in a meaningful way. The company was already known for building world-class operations in the generation business commonly known as our management model. Over the course of the next 14 years, we applied the same principles of best practice sharing and accountability through performance measurement to our energy delivery business. We were building a standard of excellence to deliver improvements in reliability, safety, customer satisfaction and value.

I was fortunate and privileged to be part of guiding this evolution first as the lead to ensure the Constellation merger crossed the finish line in 2012 then in my role as CEO of BGE and eventually as CEO of Exelon Utilities and COO of Exelon. In those positions, the leadership teams and I were able to challenge our talented employees to take our utilities to the next level. We sustained and expanded our operational excellence, improved customer satisfaction, enhanced team diversity and improved earned ROEs from mid single digits to our 9% to 10% target first at BGE and then at PHI. And as you’ll hear today, 2022 gave us a chance to showcase what we’ve built, an ability to execute, push continuous improvement, and achieve a balanced outcome for our customers and investors.

But as proud as I am about what our team has built, I’m more excited about what lies ahead and I want to layout our vision of who we are and what supports our value proposition. Exelon is the premier T&D company in the industry. Our platform is stable with sound fundamentals both operationally and financially. This platform positions us to support our jurisdictions through the multi-decade energy transition that is just starting. We can do it in a manner that supports affordability and equity while driving consistent stable growth for our shareholders, the type of performance that is a hallmark of a top tier utility. What makes our platform unique? Well, we have an extremely diversified investment plan in size, scope, and location. We have no generation.

We have worked with our jurisdictions to operate under forward-looking rate mechanisms that provide value for our customers and predictable results for our investors and almost three quarters of our revenues are decoupled. This leads to a very compelling risk adjusted total return of 9% to 11% built on the foundation of an unmatched platform, operational excellence and strong partnerships with our jurisdictions and communities. The Exelon team has proven its ready to meet the challenge of leading the nation in its energy transformation, powering a cleaner and brighter future for our customers and our communities while creating value for our shareholders. I will now turn to Slide 5 and talk about our key messages for this call. I will start by recapping the strong performance in 2022.

We executed right in line with our expectations, reporting operating earnings results of $2.27 per share. That exceeded the midpoint of guidance by $0.02 and represents 8.1% growth off of the 2021 guidance midpoint. We also had best on record operating performance at three of our four utilities. As for our rate case activity, we had four constructive distribution rate case outcomes, including two gas cases and two electric cases. We’ll look to continue this progress in 2023 with several important rate cases this year. In January, ComEd filed with the Illinois Commerce Commission its first multiyear rate plan and grid plans under the framework established by the Climate and Equitable Jobs Act. The filing follows 15 stakeholder workshops, reaching more than 1,000 attendees as well as 45 stakeholder presentations.

As Illinois progresses towards its decarbonization goals, ComEd is starting from an industry-leading position of strength. In fact, in 2022, ComEd was recognized with the Outstanding System Resiliency Award for U.S. utilities by PA Consulting while also maintaining an average bill that is lower than those in 47 of the 50 states. Beyond the rate case, ComEd and the City of Chicago announced a proposed Chicago franchise agreement and a related energy and equity agreement. Together, these agreements grant ComEd the right to continue providing electric utility services using public waste within Chicago and creates a new non-profit entity to advance energy and energy equity-related projects. These agreements build upon the century-long partnership we have had with the city and demonstrates our alignment around key energy and sustainability goals.

Pending approval by the city and Exelon Board, ComEd continues to operate in the city under the prior franchise agreement. And later this month, BGE will be filing its second multiyear plan for its electric and gas businesses with Pepco D.C. and Pepco Maryland following later in the first half of the year. Like Illinois, Maryland’s Climate Solutions Now Act has set aggressive climate and decarbonization targets, creating an environment where utility action and investment is a key priority and for which multiyear planned frameworks are particularly well suited. Jeanne will cover the rate cases and other regulatory activity in more detail shortly. As to our projected outlook, we have rolled forward our disclosures after adding a year to our guidance window.

We are reaffirming our 2021 to 2025 target of 6% to 8% annualized earnings growth with the expectation that we will reach midpoint or better of that compounded annual growth rate. We are also initiating an identical target for 2022 through 2026 where we expect to deliver 6% to 8% annualized earnings growth over the four-year horizon with the same expectation that we will reach midpoint or better of that compounded annual growth rate by 2026. This is driven by the almost 8% rate base growth from 2022 through 2026, underpinned by deploying $31 billion of capital over 2023 to 2026. That’s over $2 billion more than the prior four-year period. As we balance the required progress on the energy transition with customer affordability, we continue to challenge ourselves to deliver maximum customer value at the lowest cost possible.

We continue to expect some variability in our growth rates from year-to-year, due to our regulatory calendar, but we have maintained the transparency provided in the third quarter around our path to achieving our CAGR commitment. For 2023, we are initiating our projected operating earnings guidance at $2.30 to $2.42 per share, with the midpoint that implies 5% growth off the midpoint of our 2022 guidance. Being slightly below the annualized earnings growth range is in line with the direction we provided on our third quarter call, but we do expect 2023 to be the exception. All other years are expected to grow within the range of 6% to 8%, if not above it. We remain confident in the earnings power of our business. We expect an annualized dividend of $1.44 per share in 2023, reflecting approximately 7% growth off of our $1.35 dividend per share in 2022.

Jeanne will cover more of the specifics of our financial outlook. Moving to Slide 6, I want to spend a moment recognizing last year’s accomplishments. Demonstrating the type of stable, predictable performance that our customers and shareholders expect us to deliver. First, we completed the separation from Constellation, which by any measure was a success and execute it in less than a year after our Board’s decision to proceed. We did not miss a beat operationally, despite this separation. We invested more capital for the benefit of our customers than ever, while achieving the highest ROE since 2019. We were able to attract and retain a talented and diverse workforce in a difficult labor market, a testament to our culture of engaged and purpose-driven employees.

And we didn’t lose sight of the importance of supporting our communities through more than just the investments we’re making in them. Our employees volunteered more than 126,000 hours and connected our customers to almost $600 million of energy assistance, an increase of over $100 million from 2021. We continued to build upon our history of workforce development, launching the Atlantic City Infrastructure Academy in the fall and graduating our first group of 26 students this month with the skills needed to succeed in careers in the energy industry. We achieved our highest percentage spend ever, 39% or $2.8 billion of total spend with diverse suppliers. We gave $22 million to support schools and students in our markets. These programs include learning energy basics in middle schools and our Exelon Foundation STEM Academy that inspires high school girls to pursue careers in the energy field.

And we are doing our part to create a cleaner and brighter future for our customers, making good progress on our path to clean with 112 miles of gas pipe main replacement and 12% of our vehicle fleet now electrified. These are just a few examples of the type of work we do that has led to us being named to the Dow Jones Sustainability Index for 17 years running. Last, we delivered on our earnings commitment for the year. Ultimately, 2022 was about establishing and beginning to prove out the value proposition the new Exelon offers and our team executed well. Before I turn it over to Jeanne, I will review our operating performance for 2022 on Slide 7, which ended as strongly as it began. I’ll start with reliability. We were top decile in outage frequency performance at three of our four utilities, and we were top quartile for outage duration across all utilities.

Achieving performance like this requires sustained focus and effort across our business. First and foremost, it requires our team showing up 24/7, no matter the time or the conditions. For instance, Winter Storm Elliott struck our BGE service territory on December 23, taking out power to 112,000 customers. Our dedicated teams completed over 1,500 repair jobs in sub-zero temperatures and at times to bring just one or two customers back online to restore power completely without any injuries. And it wasn’t just our BGE team. The power of the platform showed up in force with ComEd, PECO, and PHI supporting the restoration efforts. On behalf of the entire leadership team, we want to thank all of our employees on the front lines of storm duty for their dedication.

We will not have this track record of excellence without their commitment. Operational excellence also requires smart and prudent investment that’s compensated fairly, built around alignment with our jurisdictions on shared goals and priorities. Last year, we invested $7.2 billion of capital, earning that 9.4% ROE I mentioned. The ability to execute on this level of investment with the confidence that we’re aligned with our jurisdictions is a key element of our success. We need to perform every day to maintain that trust. On safety, ComEd continues to maintain top quartile performance while we work to get our other three utilities up to our standards. Our efforts to reduce serious injuries have been successful, but we are also focused on implementing safety best practices at our utilities to avoid other incidents that have driven OSHA under performance in 2022.

For the year, BGE, ComEd and PECO sustained top quartile customer satisfaction performance. This reflects our continued investment in technology to create a better customer experience, our top quartile reliability and our commitment to an affordable energy transition. And finally, gas odor response continues to be in the top decile across all three utilities, including with BGE completing the year with its best on record performance. We continue to accelerate the modernization and safety enhancements of the gas system while working with our customers and communities to live and work safely with gas. I will now ask Jeanne to review our financial update. Jeanne?

Jeanne Jones: Thank you, Calvin, and good morning, everyone. I’ll start by sharing my own excitement about closing out our first year as the new Exelon. As proud as I am of what we accomplished in 2022, I’m even more excited about our future. Our utilities serve the homes of more than 10 million customers, customers that include our employees, our families, hospitals, schools, and businesses.

.: As I cover today’s updates, 2022 results, upcoming rate case activity and the roll forward of our financial disclosures, you will find that our focus on execution drives the results that customers and shareholders expect. Starting on Slide 8, we delivered strong financial results in our first year as a new company. For the fourth quarter, Exelon’s continuing operations earned $0.43 per share on a GAAP and non-GAAP basis. For the full year 2022, we earned $2.08 per share on a GAAP basis and $2.27 per share on a non-GAAP basis. Results that are in the upper half of our narrowed guidance range and represent 8.1% growth of the $2.10 per share mid-point of our Analyst Day guidance range for 2021. Throughout the year, we benefited from rising treasury rates impacting ComEd’s distribution ROE as well as favorable weather and storm conditions.

These benefits, along with strong cost control in our core operations, helped to offset higher interest expense at corporate and the businesses, along with the one-time items of discontinued operations and the voluntary customer refund in Illinois. That net favorability provided flexibility to reinvest back in the business and de-risk future years while ensuring we were meeting and exceeding our financial commitments. Quarter-to-date and year-to-date drivers relative to prior year are detailed in the appendix slides 32 and 33. Moving to Slide 9. Looking at our utility returns on a consolidated basis, we delivered within our 9% to 10% targeted range, with a 9.4% ROE for 2022. This is the highest our earned ROE has been since 2019 as we focused on mitigating inflationary pressures to ensure costs aligned with our allowed revenue.

30-year treasury rates improved as well, supporting ComEd’s distribution ROE. Looking forward, we remain focused on earning the allowed returns of the utilities, which we expect will keep Exelon in the 9% to 10% earned ROE range annually throughout the planning period, while investing to maintain reliability and keep pace with our jurisdictions energy transition. Turning to our outlook for 2023. We are initiating adjusted operating earnings guidance of $2.30 to $2.42 per share, reflecting a mid-point that is consistent with the directional guide provided in the third quarter. Relative to the midpoint of our 2022 estimated guidance range, the 5% year-over-year earnings growth is primarily driven by the continued increase in rate base as we deploy capital for the benefit of our customers as well as by increased revenues associated with completed rate cases.

As a reminder, expected year-over-year growth in 2023 is slightly below the 6% to 8% range as PECO enters the second year with its current electric distribution rates and anticipates returning to normal weather and storm activity. 2023 also requires managing against cost increases in our multi-year plans out East as we await their first reconciliations, particularly at BGE and the end of the stay-out provision at Pepco DC. With the de-risking efforts we undertook in 2022, including initiating hedging programs for both our long and short-term debt as well as for Exelon’s exposure to the 30-year treasury, we are confident that our projected earnings will be within the range of $2.30 to $2.42 per share in 2023. Additional detail on our earnings sensitivities reflective of our hedging activity to date is provided on Slide 34 in the appendix.

As you think about the shaping of 2023 quarterly earnings, I will remind you that, historically, we have realized approximately 28% of full year earnings in the first quarter, consistent with seasonal weather patterns at the utilities and the general cadence of completed rate cases. On Slide 11, we provide our updated outlook for utility CapEx and rate base, covering 2023 to 2026. We plan to invest $7.2 billion in 2023 and a total of $31.3 billion over the next four years, an increase of $2.3 billion from the prior four-year planning period. Since the Analyst Day disclosures for the 2023 through 2025 period, we have identified an additional $875 million of planned investments to serve our customers. Updates include refinements to ComEd’s distributional capital plan, which was developed as part of the multi-year integrated grid plans filed this January.

The result is that over the next four years, our rate base is expected to increase 7.9% on a compound annual growth basis to $69.6 billion. This growth adds approximately $18.3 billion to rate base from 2023 through 2026, an amount roughly equal to the size of ComEd’s current rate base. With four multi-year plan rate filings planned for this year, I’d remind you that our capital forecast only reflects identified projects we expect to recover through our constructive recovery mechanisms. The plan reflects a disciplined prioritization of potential investments to balance interest, providing reliable service to our customers and progress on our jurisdictions energy goals while also maintaining affordability. Our plan remains free of any large speculative projects.

In fact, the largest transmission and distribution project in our plan remains the $300 million multi-year Erdman to Summerfield Transmission Expansion project at BGE. This project represents only 1% of our total projected capital spend from 2023 to 2026. And the collective spend on the largest transmission and distribution projects at each of the four operating companies totals only 2.2% of our $31 billion plan. Turning to Slide 12, our ability to deploy $31 billion of capital for our customers over the next four years at affordable rates amidst persistent inflationary pressures would not be possible without a resolute focus on managing costs. At our adjusted O&M costs grown in line with average annual inflation of 3.2% from 2016 through 2023, they would’ve increased by approximately $1 billion.

Instead, we are projecting a 1.7% CAGR for the same period, eliminating over $500 million of customer rate increases that would’ve occurred without our intentional focus on driving efficiencies. This includes leveraging our platform of four operating companies to share best practices and drive economies of scale. It also includes investing in innovative technology and processes such as a recent pilot to conduct vegetation management work with the help of specialized drones, reducing a two-day job for a human crew to 45 minutes of drone deployment. It also cut the material acquired by over 90%. We are particularly proud of keeping O&M growth low after the separation. We committed to our customers that they would not see increased costs because of the separation, and I’m proud to say we achieved that.

From renegotiating key enterprise wide IT contracts to continually reoptimizing the organizational design for the services our utilities need. Our cost discipline culture ensured that we kept that commitment while executing operationally at top-notch levels and delivering earnings in the upper half of our guidance range. In 2023, adjusted O&M at our utilities is projected to be $4.2 billion, representing a 1% or $50 million increase from 2022, a rate well below the expected inflation rate of 4% in 2023 and building on our efficiency efforts in 2022. We will continue to ensure that our business is appropriately designed to efficiently deliver services as a transmission and distribution only energy delivery company. This study discipline around cost has positioned us very well.

In the bottom chart, you can see Exelon’s average electric rates are 23% below the top 20 metropolitan cities in the United States. Beyond cost management, other unique factors contribute to lower bills for our customers, some of which Calvin discussed. But I’d like to highlight the benefit of the carbon mitigation contracts resulting from Illinois’s 2021 Climate and Equitable Jobs Act or CEJA. Based on energy forwards as of January 31, these credits are projected to protect ComEd customers from over $3 billion of additional energy charges between 2022 and 2027. That brings me to Slide 13, where I wanted to take a moment to highlight ComEd’s commitment to decarbonizing the communities in Illinois in the most efficient, affordable, and equitable manner possible.

CEJA put Illinois on a path to a 100% decarbonized energy sector by 2045. It also provides a framework for ComEd to help support the state and make the grid investments necessary to support beneficial electrification, decarbonization, and the energy transformation. In one of its first steps to meeting the challenge of a clean energy economy, ComEd filed its multi-year integrated grid plan and multi-year rate plan covering 2024 through 2027 with the Illinois Commerce Commission. The proposed investment plan includes initiatives such as 4 kV to 12 kVconversions, bus reconfigurations, overhead and underground repairs and support for an anticipated 1 million electric vehicles by 2030. To smooth the transition for customers from the formula rate to the multi-year rate plan, ComEd has filed to defer collection of 35% of the 2024 increase until 2026.

An order is expected from the ICC no later than December 20, 2023. Turning to Slide 14, as Calvin mentioned, BGE anticipates filing its second multi-year plan and first multi-year plan reconciliation with the Maryland Public Service Commission later this month. Proposed investments expected in the filing support the climate and decarbonization goals of Maryland’s Climate Solutions Now Act. As an example of how we are partnering with key stakeholders in Maryland consider the electric school bus program. The new law created a statewide electric school bus program through which BGE will be able to offer $50 million in incentives to school districts we serve to help cover the incremental cost of purchasing electric buses with a focus on access for low income and minority communities, plus BGE will also be able to call on those new electric fleets to provide grid resilient support through vehicle-to-grid technology.

Those types of initiatives are what drive the local economic impact highlighted on the slide, including the support of over 72,000 jobs. BGE’s rate plan will cover electric and gas customer rates from 2024 through 2026 inclusive of a reconciliation on 2021 and 2022 cost from its original multi-year plan filing. Additional details will be available once BGE makes its filing later this month, with a final order expected by December 2023. With Delmarva Power Delaware’s ongoing electric distribution rate case, and Pepco D.C. and Pepco Maryland’s anticipated second multi-year plan filings, you can expect further discussion on these cases on future earnings calls. Turning to Slide 15, with $31 billion of projected capital spend, driving 7.9% rate base growth and with continued focus on earning ROEs of 9% to 10%, we are projecting compounded annual earnings growth of 6% to 8% through 2026 from our 2022 guidance midpoint of $2.25 per share.

Maintaining our commitment to transparency from the third quarter earnings call, we have provided year-over-year drivers contributing to the expected annual growth in our earnings through 2026 on Slide 16. While there is variability in the year-over-year growth over the four-year time period, the business drivers provide transparency into our commitment of 6% to 8% through 2026. As you can see on the slide after 2023, we expect to deliver each year within the 6% to 8% range, if not above. We have reaffirmed our guidance for 2021 through 2025 of 6% to 8% with the expectation of being at midpoint or better. Similarly, we expect our four year CAGR from 2022 to 2026 will be at the midpoint or better of the 6% to 8% targeted growth range. We also continue to project an approximate 60% dividend pay-out ratio of operating earnings with a dividend growing in line with our long-term earnings.

We anticipate an annualized dividend of $1.44 per share in 2023, which is 6.7% higher than the 2022 dividend. I will conclude with a discussion on our balance sheet on Slide 17. The attributes of our fully regulated transmission and distribution platform, including forward-looking recovery mechanisms, majority decoupled rates, de-concentrated investment risk and diversified jurisdictions will continue to provide flexibility going forward. Over our guidance period, we project 100 basis points to 200 basis points of cushion on average for our consolidated corporate credit metrics above Standard & Poor’s and Moody’s downgrade thresholds of 12%, demonstrating our commitment to maintaining a strong balance sheet. While the U.S. Treasury Department works towards implementing the Inflation Reduction Act legislation, our plan fully incorporates the impact of the corporate alternative minimum tax, including reflecting the results in deferred tax assets in each of the utilities rate bases, consistent with the recent rate case filings at ComEd and Delmarva Power.

We have talked previously about how regulations and the inclusion of certain deductions would substantially mitigate the corporate alternative minimum tax impact. Without the ability to include certain deductions, we expect the cushion in our average credit metrics to be on the lower end of the 100 basis points to 200 basis points range. Our metrics would average closer to the higher end of the range over the guidance period if we were able to include those deductions. Consistent with our earnings profile, our credit metrics are expected to strengthen over time as we step into new multiyear plans and finalize the reconciliation processes. As we await clarity on the corporate alternative minimum tax, we continue to maintain the discipline approach to cost and cash management across all areas of the business, ensuring we maintain appropriate cushion above our downgrade threshold of 12%.

I will close by reaffirming our financing plans with the holding company. We continue to affirm the remaining $425 million of our $1 billion equity commitment. We expect to issue this equity sometime between 2023 and 2025. As we work with our jurisdictions and find opportunities for further investment at the utilities, we’ll continue to ensure that our capital structure reflects a balanced funding strategy and a strong balance sheet consistent with the expectations of a premium, transmission and distribution company. Thank you. I’ll now turn the call back to Calvin for his closing remarks.

Calvin Butler: Thank you, Jeanne. Before turning it over for questions, I will end with the focus of what’s ahead for 2023. Operations and safety continue to be foundational. Maintaining reliability for our customers, while operating safely is non-negotiable. We’ll deploy $7.2 billion of capital, ensuring we make the necessary progress to meet the reliability and technology needs of tomorrow’s grid. Indeed, as many of you saw last week, the FBI announced it had interrupted a plot to damage Maryland’s power grid. The need to enhance the physical and cybersecurity of the grid has never been greater. The industry has made it a priority. The partnership between the industry and the government is key to our defences and on behalf of our employees and our customers we greatly appreciate the vigilance and dedication by the FBI and U.S. attorney for the District of Maryland in protecting our nation’s critical infrastructure.

Thank you. Despite the urgency, investing capital efficiently will ensure we are making returns on our investments in line with those allowed by our jurisdictions, earning ROEs in the 9% to 10% range. As a result, we expect to deliver on our earnings guidance for 2023, maintain our focus on a strong balance sheet and execute on a number of rate cases this year to sustain operational and financial performance in the future. As we deliver on this plan, we will continue to focus on the value we are providing our customers. This includes not only continuing to advocate for policies that keep the customers as top priority, but also continuing to evaluate our own business to find efficiencies as a more focused transmission and distribution only utility.

Like 2022, we have a lot we want to accomplish in 2023. But we again, expect to be successful because that’s what we do. And we know that’s what you expect from the premier, transmission and distribution company one that’s deploying $31 billion of capital for our customers with rate-based growth and ROEs resulting in 6% to 8% earnings and dividend growth and a total shareholder return of 9% to 11%. As always, thank you for your time and support. And we’ll now take your questions.

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Q&A Session

Operator: Thank you. Our first question comes from the line of Nick Campanella from Credit Suisse.

Nick Campanella: Hey team. Thanks.

Calvin Butler: Good morning, Nick.

Nick Campanella: Thanks for taking my question here. Good morning. Good morning. I think in your prepared remarks, you said you’re going to include the CMAT as a deferred tax asset. And just €“ can you just give us more color on what’s informing your position on regulatory treatment here? And then separately, it sounds like the CMAT is not included in the FFO to debt metrics. You’re at the bottom of the 13% to 14%, but where did you kind of shake out in 2022? Thanks.

Calvin Butler: Sure, Nick. Thank you. I’ll start, and then as always, I turn to Jeanne because her team is leading this effort with treasury through the efforts of Rob with EEI. But as we continue to assume that the CMAT is implemented in a way that does not allow for repairs treatment, resulting in incremental cash taxes. As Jeanne talked about, we have fully incorporated into our guidance, including recording each utility CMAT on its balance sheet and as part of its rate base and the implied impact will move around as taxable income and book income change. That doesn’t mean that we’re not continuing to work with treasury to get those €“ that repairs language because we believe that is the best thing for our customers. In addition to that, Nick, as we’ve talked about, we have already taken that challenge and offset within our earnings, but we have pushed it down into the utilities where the income is earned and it will move around.

But I’ll let Jeanne clarify, provide any additional information.

Jeanne Jones: Yes. No, I think that’s well said. As Calvin said, we’re still working on the tax repairs deduction and without specific language in the regulations, we continue to assume the higher cash tax burden, but you do €“ by having the deferred tax asset at the operating companies, you do earn on that in rate base. So that provides a little bit of sort of offset over time as that rate base builds. We also, so all of the cash taxes are included in our forward-looking guidance from both an EPS and a credit metric perspective. And we continue to reaffirm the 6% to 8% on the EPS side. And then as it relates to the balance sheet, we are still expecting to be at that 13% to 14%. And so with the inclusion of the higher cash taxes or said another way, without the repairs deduction, we expect to be closer to that 13%.

If we are able to include the tax repairs deduction, we’d be at the higher end of that 13% to 14%. So, we’ll continue to work with treasury on that, and we’ll continue to focus on our cost management and cash management to continue to increase that cushion.

Nick Campanella: Got it. And then, sorry if I missed the disclosure, but where did you kind of end the year out on your credit for 2022?

Jeanne Jones: Yes. So we typically don’t give specific years. The rating agencies will publish that. We ended the year above our downgrade threshold. I think, as you think about credit metrics, the way we look at it and the way the agencies do is over a three-year, four-year time period because of the different moves in cash from a regulatory perspective. So, I’ll give you a couple of examples. What we’ve benefited from the higher ROEs that ComEd on the earnings side, we can recognize that the cash collections on that come through the reconciliation. So for example, in 2022, right, we had the higher earned ROEs, we won’t collect that until 2024. So it’s important for us to look at it on an average basis so that you capture those timing differences.