EXELON CORP (EXC)

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions except per share data, unless otherwise noted)

Exelon

Executive Overview

Exelon is a utility services holding company engaged in the energy transmission and distribution businesses through its six reportable segments: ComEd, PECO, BGE, Pepco, DPL, and ACE. See Note 1 — Significant Accounting Policies and Note 4 — Segment Information of the Combined Notes to Consolidated Financial Statements for additional information regarding Exelon's principal subsidiaries and reportable segments.

Exelon’s consolidated financial information includes the results of its seven separate operating subsidiary registrants, ComEd, PECO, BGE, PHI, Pepco, DPL, and ACE, which, along with Exelon, are collectively referred to as the Registrants. The following combined Management’s Discussion and Analysis of Financial Condition and Results of Operations is separately filed by Exelon, ComEd, PECO, BGE, PHI, Pepco, DPL, and ACE. However, none of the Registrants makes any representation as to information related solely to any of the other Registrants.

Financial Results of Operations

GAAP Results of Operations. The following table sets forth Exelon's GAAP consolidated Net income attributable to common shareholders by Registrant for the three and six months ended June 30, 2026 compared to the same period in 2025. For additional information regarding the financial results for the three and six months ended June 30, 2026 and 2025, see the discussions of Results of Operations by Registrant.

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(a)Other primarily includes eliminating and consolidating adjustments, Exelon’s corporate operations, shared service entities, and other financing and investment activities.

Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025. Net income attributable to common shareholders increased by $5 million and diluted earnings per average common share remained relatively consistent to the prior year at $0.39 primarily due to:

•Favorable impacts of approved rate increases at ComEd, BGE and PHI;

•Absence of Customer Relief Fund contribution at Exelon Corporate;

•Absence of Customer Surcharge Credits at PECO;

•Higher AFUDC at ComEd; and

•Favorable weather at PECO.

Note that rate increases are associated with updated recovery rates for costs and investments to serve customers. The increases were partially offset by:

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•Higher depreciation expense at PECO and PHI;

•Higher interest expense at PECO and Exelon Corporate; and

•Higher credit loss expense at BGE.

Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025. Net income attributable to common shareholders increased by $15 million and diluted earnings per average common share decreased to $1.28 in 2026 from $1.29 in 2025 primarily due to:

•Favorable impacts of approved rate increases at ComEd, BGE and PHI;

•Absence of Customer Relief Fund contribution at Exelon Corporate;

•Absence of Customer Surcharge Credits at PECO;

•Higher AFUDC at ComEd; and

•Favorable weather at PECO;

Note that rate increases are associated with updated recovery rates for costs and investments to serve customers, driving top quartile reliability and avoiding outage costs. The increases were partially offset by:

•Timing of distribution earnings at ComEd;

•Higher interest expense at PECO, PHI, and Exelon Corporate;

•Higher depreciation expense at PECO and PHI;

•Higher credit loss expense at BGE; and

•Unfavorable impacts of the Pepco Maryland multi-year plan reconciliation at PHI.

Adjusted (non-GAAP) operating earnings. In addition to Net income, Exelon evaluates its operating performance using the measure of Adjusted (non-GAAP) operating earnings because management believes it represents earnings directly related to the ongoing operations of the business. Adjusted (non-GAAP) operating earnings exclude certain costs, expenses, gains and losses, and other specified items. This information is intended to enhance an investor’s overall understanding of year-over-year operating results and provide an indication of Exelon’s baseline operating performance excluding items not considered by management to be directly related to the ongoing operations of the business. In addition, this information is among the primary indicators management uses as a basis for evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting of future periods. Adjusted (non-GAAP) operating earnings is not a presentation defined under GAAP and may not be comparable to other companies’ presentations or deemed more useful than the GAAP information provided elsewhere in this report.

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The following table provides a reconciliation between GAAP Net income attributable to common shareholders and Adjusted (non-GAAP) operating earnings for the three and six months ended June 30, 2026 compared to the same period in 2025:

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Note:

Amounts may not sum due to rounding.

Unless otherwise noted, the income tax impact of each reconciling item between GAAP Net income attributable to common shareholders and Adjusted (non-GAAP) operating earnings is based on the marginal statutory federal and state income tax rates for each Registrant, taking into account whether the income or expense item is taxable or deductible, respectively, in whole or in part. The marginal statutory income tax rates for 2026 and 2025 ranged from 24.0% to 29.0%.

(a)Primarily represents severance costs related to cost management program.

(b)Reflects the adjustment to state deferred income taxes due to changes in forecasted apportionment.

(c)Represents the disallowance of certain capitalized costs.

Significant 2026 Transactions and Developments

At-the-Market Program

In the second quarter of 2026, Exelon issued approximately 8.7 million shares of Common stock at a weighted-average net price of $44.03 per share. The net proceeds from the issuance were $382 million, which were used for general corporate purposes. See Note 12 — Shareholders' Equity of the Combined Notes to Consolidated Financial Statements for additional information.

Distribution Base Rate Case Proceedings

The Utility Registrants file base rate cases with their regulatory commissions seeking increases or decreases to their electric transmission and distribution, and gas distribution rates to recover their costs and earn a fair return on their investments. The outcomes of these regulatory proceedings impact the Utility Registrants’ current and future financial statements.

The following tables show the Utility Registrants’ completed and pending distribution base rate case proceedings in 2026. See Note 2 — Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional information.

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Completed Distribution Base Rate Case Proceedings

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Pending Distribution Base Rate Case Proceedings

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions except per share data, unless otherwise noted)

Exelon

Executive Overview

Exelon is a utility services holding company engaged in the energy transmission and distribution businesses through its six reportable segments: ComEd, PECO, BGE, Pepco, DPL, and ACE. See Note 1 — Significant Accounting Policies and Note 4 — Segment Information of the Combined Notes to Consolidated Financial Statements for additional information regarding Exelon's principal subsidiaries and reportable segments.

Exelon’s consolidated financial information includes the results of its seven separate operating subsidiary registrants, ComEd, PECO, BGE, PHI, Pepco, DPL, and ACE, which, along with Exelon, are collectively referred to as the Registrants. The following combined Management’s Discussion and Analysis of Financial Condition and Results of Operations is separately filed by Exelon, ComEd, PECO, BGE, PHI, Pepco, DPL, and ACE. However, none of the Registrants makes any representation as to information related solely to any of the other Registrants. For discussion of the Utility Registrants' year ended December 31, 2024 compared to the year ended December 31, 2023, refer to ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS in the 2024 Form 10-K, which was filed with the SEC on February 12, 2025.

Financial Results of Operations

GAAP Results of Operations. The following table sets forth Exelon's GAAP consolidated Net income attributable to common shareholders by Registrant for the year ended December 31, 2025 compared to the same period in 2024. For additional information regarding the financial results for the years ended December 31, 2025 and 2024, see the discussions of Results of Operations by Registrant.

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(a)Other primarily includes eliminating and consolidating adjustments, Exelon’s corporate operations, shared service entities, and other financing and investing activities.

Year Ended December 31, 2025 Compared to Year Ended December 31, 2024. Net income attributable to common shareholders increased by $308 million and Diluted earnings per average common share increased to $2.73 in 2025 from $2.45 in 2024 primarily due to:

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•Favorable impacts of rate increases at ComEd, PECO, BGE, and PHI;

•Favorable weather at PECO;

•Higher return on regulatory assets at ComEd;

•Higher AFUDC at ComEd;

•Lower income tax expense at PECO;

•Lower storm costs at BGE; and

•Impacts of the multi-year plan reconciliation at BGE.

Note that rate increases are associated with updated recovery rates for costs and investments to serve customers. The increases were partially offset by:

•Higher interest expense at PECO, BGE, PHI, and Exelon Corporate;

•Higher depreciation expense at PECO and PHI;

•Higher contracting costs at PECO and PHI;

•Lower transmission peak load due to lower energy demand at ComEd;

•Absence of the Maryland multi-year plan reconciliations at PHI;

•Charitable contributions at Exelon Corporate;

•Lower AFUDC at PHI; and

•Higher income tax expense at Exelon Corporate.

Adjusted (non-GAAP) operating earnings. In addition to Net income, Exelon evaluates its operating performance using the measure of Adjusted (non-GAAP) operating earnings because management believes it represents earnings directly related to the ongoing operations of the business. Adjusted (non-GAAP) operating earnings exclude certain costs, expenses, gains and losses, and other specified items. This information is intended to enhance an investor’s overall understanding of year-over-year operating results and provide an indication of Exelon’s baseline operating performance excluding items not considered by management to be directly related to the ongoing operations of the business. In addition, this information is among the primary indicators management uses as a basis for evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting of future periods. Adjusted (non-GAAP) operating earnings is not a presentation defined under GAAP and may not be comparable to other companies’ presentations or deemed more useful than the GAAP information provided elsewhere in this report.

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The following table provides a reconciliation between Net income attributable to common shareholders as determined in accordance with GAAP and Adjusted (non-GAAP) operating earnings for the year ended December 31, 2025 compared to 2024:

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Note:

Amounts may not sum due to rounding.

Unless otherwise noted, the income tax impact of each reconciling item between GAAP Net income and Adjusted (non-GAAP) operating earnings is based on the marginal statutory federal and state income tax rates for each Registrant, taking into account whether the income or expense item is taxable or deductible, respectively, in whole or in part. The marginal statutory income tax rates for 2025 and 2024 ranged from 24.0% to 29.0%.

(a)Primarily represents severance and reorganization costs related to cost management.

(b)Represents the disallowance of certain capitalized costs.

(c)In 2024, reflects the adjustment to state deferred income taxes due to change in DPL's Delaware net operating loss valuation allowance. In 2025, reflects the adjustment to state deferred income taxes due to changes in forecasted apportionment.

Significant 2025 Transactions and Developments

At-the-Market Program

During 2025, Exelon issued approximately 16 million shares of Common Stock at a net weighted-average price of $43.24 per share. The net proceeds from the 2025 issuances were $691 million, which were used for general corporate purposes. See Note 17 — Shareholders' Equity of the Combined Notes to Consolidated Financial Statements for additional information.

Distribution Base Rate Case Proceedings

The Utility Registrants file base rate cases with their regulatory commissions seeking increases or decreases to their electric transmission and distribution, and gas distribution rates to recover their costs and earn a fair return on their investments. The outcomes of these regulatory proceedings impact the Utility Registrants’ current and future financial statements.

The following tables show the Utility Registrants’ completed and pending distribution base rate case proceedings in 2025. See Note 2 — Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional information on these and other regulatory proceedings.

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Completed Distribution Base Rate Case Proceedings

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Pending Distribution Base Rate Case Proceedings

Transmission Formula Rates

The following total increases/(decreases) were included in the Utility Registrants' 2025 annual electric transmission formula rate updates. All rates are effective June 1, 2025 to May 31, 2026, subject to review by interested parties pursuant to review protocols of each Utility Registrants' tariff. See Note 2 — Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional information.

ComEd's FERC Audit

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