{ "ticker": "EXC", "company": "Exelon Corporation", "filing_type": "10-K", "year_current": "2025", "year_prior": "2024", "summary": { "added": 1, "removed": 2, "modified": 8, "unchanged": 19, "total_current": 28, "total_prior": 29 }, "source": "SEC EDGAR", "url": "https://riskdiff.com/exc/2025-vs-2024/", "markdown_url": "https://riskdiff.com/exc/2025-vs-2024/index.md", "json_url": "https://riskdiff.com/exc/2025-vs-2024/index.json", "generated": "2026-05-10", "ai_summary": "Exelon removed two risks related to post-separation indemnification obligations to Constellation while adding a new risk focused on third-party generation disruptions affecting transmission and distribution services. Eight material risks were substantively modified, including heightened emphasis on transmission congestion impacts and evolving reputational consequences from the resolved Deferred Prosecution Agreement and SEC investigation. The net effect reflects a shift away from separation-specific financial contingencies toward operational and regulatory risks tied to grid reliability and regulatory relationships.", "risks": [ { "status": "ADDED", "current_title": "Lack of sufficient generation to meet actual or forecasted demand or disruptions at power generation facilities owned by third parties could interrupt transmission and distribution services, impair economic development, cause outages, and result in use limitations or affordability implications for customers. (All Registrants)", "prior_title": null, "current_body": "Exelon does not generate the electricity it delivers. The Utility Registrants purchase, transmit, and distribute electric power obtained from power generation facilities owned by third parties. This power is primarily procured through contracts as directed by the Utility Registrants’ respective state laws and regulatory commission actions from various approved bidders or from purchases on the PJM operated markets. Third-party power generation may be insufficient to meet our customers’ electricity demand in the short- and medium-term because of extreme weather, fuel security, market procurement, regulatory requirements, operational issues, maintenance outages, inflexibility of demand, or financial uncertainty impacting existing or prospective generation facilities. Faster energy demand growth, acceleration of generator retirements, or the limited entry of new generating resources in any of the Utility Registrants’ respective service territories may result in a longer-term power generation capacity shortfall. Exelon has forecast substantial increases in load, driven largely by the increasing use of data processing facilities dedicated to artificial intelligence technologies. If third-party power generation capacity is insufficient to meet any Utility Registrant’s customers’ electricity demand or customers’ electricity demand across PJM over any period, transmission and distribution services may be diminished or interrupted, and results of operations, financial condition, and cash flows could be adversely affected. In the event generation capacity is insufficient to meet demand, the Utility Registrants’ customers may experience greater price volatility, power service outages during peak demand periods or during generation contingencies (e.g., severe storms), and electricity use limits to maintain system balance. Furthermore, the Utility Registrants may be unable to support new economic development should generation constraints last for extended periods." }, { "status": "REMOVED", "current_title": null, "prior_title": "Risks related to market and financial factors primarily include:", "prior_body": "•the demand for electricity, reliability of service, and affordability in the markets where the Utility Registrants conduct their business, •the ability of the Utility Registrants to operate their respective transmission and distribution assets, their ability to access capital markets, and the impacts on their results of operations, financial condition or liquidity/cash flows due to public health crises, epidemics or pandemics, and •emerging technologies and business models, including those related to climate change mitigation and transition to a low carbon economy. Risks related to legislative, regulatory, and legal factors primarily include changes to, and compliance with, the laws and regulations that govern: •utility regulatory business models, •energy, environmental, and climate policy, and •tax policy. Risks related to operational factors primarily include: •changes in the global climate could produce extreme weather events, which could put the Registrant’s facilities at risk, and such changes could also affect the levels and patterns of demand for energy and related services, •the ability of the Utility Registrants to maintain the reliability, resiliency, and safety of their energy delivery systems, which could affect their ability to deliver energy to their customers and affect their operating costs, and •physical and cyber security risks for the Utility Registrants as the owner-operators of transmission and distribution facilities. Risks related to the separation primarily include: •challenges to achieving the benefits of separation and •performance by Exelon and Constellation under the transaction agreements, including indemnification responsibilities. There may be further risks and uncertainties that are not presently known or that are not currently believed to be material that could negatively affect the Registrants' consolidated financial statements in the future." }, { "status": "REMOVED", "current_title": null, "prior_title": "In connection with the separation into two public companies, Exelon and Constellation have agreed to indemnify each other for certain liabilities. If Exelon is required to pay under these indemnities to Constellation, Exelon's financial results could be negatively impacted. The Constellation indemnities may not be sufficient to hold Exelon harmless from the full amount of liabilities for which Constellation has been allocated responsibility, and Constellation may not be able to satisfy its indemnification obligations in the future.", "prior_body": "Pursuant to the separation agreement and certain other agreements between Exelon and Constellation, each party agreed to indemnify the other for certain liabilities, generally for uncapped amounts. Liabilities subject to Exelon’s indemnity obligations to Constellation generally are not subject to caps, may be significant and could negatively impact Exelon’s business. Any amounts Exelon is required to pay pursuant to these indemnity obligations could require Exelon to divert cash that would otherwise have been used in furtherance of its operating business. Further, third parties could seek to hold Exelon responsible for any of the liabilities that Constellation has agreed to retain and for which Constellation is obligated to indemnify Exelon. The indemnities from Constellation for Exelon's benefit may not be sufficient to protect Exelon against the full amount of such liabilities, and Constellation may not be able to fully satisfy its indemnification obligations. Even if Exelon ultimately succeeds in recovering from Constellation any amounts for which Exelon is held liable, Exelon may be temporarily required to bear these losses. Each of these risks could negatively affect Exelon's business, results of operations and financial condition. 30 30 30 Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "The Utility Registrants' respective ability to deliver electricity, their operating costs, and their capital expenditures could be negatively impacted by transmission congestion and failures of neighboring transmission systems (All Registrants).", "prior_title": "The Utility Registrants' respective ability to deliver electricity, their operating costs, and their capital expenditures could be negatively impacted by transmission congestion and failures of neighboring transmission systems (All Registrants).", "similarity_score": 0.91, "confidence": "high", "key_changes": [ "Reworded sentence: \"Also, insufficient availability of electric supply to meet customer demand could jeopardize the Utility Registrants' ability to comply with reliability standards and strain customer and regulatory agency relationships.\"", "Added sentence: \"Additionally, efforts to artificially manipulate power demand on the grid, or even accidental activity that results in sharp fluctuations of demand, could disrupt grid operations.\"" ], "current_body": "Demand for electricity within the Utility Registrants' service areas could stress available transmission capacity requiring alternative routing or curtailment of electricity usage. Also, insufficient availability of electric supply to meet customer demand could jeopardize the Utility Registrants' ability to comply with reliability standards and strain customer and regulatory agency relationships. As is the case for electric utilities generally, potential concerns over transmission capacity or generation facility retirements could result in PJM or FERC requiring the 27 27 27 Table of Contents Table of Contents Utility Registrants to upgrade or expand their respective transmission systems through additional capital expenditures. Delays in siting, permitting, and interconnection could defer the introduction of new generation resources that could address resource adequacy concerns. PJM’s systems and operations are designed to ensure the reliable operation of the transmission grid and prevent the operations of one utility from having an adverse impact on the operations of the other utilities. However, service interruptions at other utilities may cause interruptions in the Utility Registrants’ service areas. Additionally, efforts to artificially manipulate power demand on the grid, or even accidental activity that results in sharp fluctuations of demand, could disrupt grid operations.", "prior_body": "Demand for electricity within the Utility Registrants' service areas could stress available transmission capacity requiring alternative routing or curtailment of electricity usage. Also, insufficient availability of electric supply to meet customer demand could jeopardize the Utility Registrants' ability to comply with reliability standards and 29 29 29 Table of Contents Table of Contents strain customer and regulatory agency relationships. As is the case for electric utilities generally, potential concerns over transmission capacity or generation facility retirements could result in PJM or FERC requiring the Utility Registrants to upgrade or expand their respective transmission systems through additional capital expenditures. PJM’s systems and operations are designed to ensure the reliable operation of the transmission grid and prevent the operations of one utility from having an adverse impact on the operations of the other utilities. However, service interruptions at other utilities may cause interruptions in the Utility Registrants’ service areas." }, { "status": "MODIFIED", "current_title": "The activities associated with the past Deferred Prosecution Agreement and the now resolved associated SEC investigation could have a material adverse effect on Exelon’s and ComEd’s reputation and relationship with legislators, regulators, and customers that could affect their ability to achieve actions and approvals (Exelon and ComEd).", "prior_title": "reputation and relationship with legislators, regulators, and customers that could affect their ability to achieve actions and approvals (Exelon and ComEd).", "similarity_score": 0.903, "confidence": "high", "key_changes": [ "Added sentence: \"24 24 24 Table of Contents Table of Contents\"" ], "current_body": "On July 17, 2020, ComEd entered into a Deferred Prosecution Agreement with the USAO for the Northern District of Illinois to resolve the USAO’s investigation into Exelon’s and ComEd’s lobbying activities in the State of Illinois. Exelon was not made a party to the DPA and no charges were brought against Exelon. Under the DPA, the USAO filed a single charge alleging that ComEd improperly gave and offered to give jobs, vendor subcontracts, and payments associated with those jobs and subcontracts for the benefit of the Speaker of the Illinois House of Representatives and the Speaker’s associates, with the intent to influence the Speaker’s action regarding legislation affecting ComEd’s interests. The DPA provided that the USAO would defer any prosecution of such charge and any other criminal or civil case against ComEd in connection with the matters identified therein for a three-year period. That period expired, and the pending charge was dismissed, in July 2023. In October 2019, the SEC notified Exelon and ComEd that it had opened an investigation into their lobbying activities in the state of Illinois. On September 28, 2023, Exelon and ComEd reached a settlement with the SEC to fully resolve the matter. The DPA and the settlement with the SEC could have a material adverse impact on Exelon’s and ComEd’s reputation or relationships with regulatory and legislative authorities, customers, and other stakeholders. Those impacts could affect, or make more difficult, their efforts to achieve actions or approvals associated with operations. See Note 18 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements for more information regarding the DPA and SEC settlement. 24 24 24 Table of Contents Table of Contents", "prior_body": "On July 17, 2020, ComEd entered into a Deferred Prosecution Agreement with the USAO for the Northern District of Illinois to resolve the USAO’s investigation into Exelon’s and ComEd’s lobbying activities in the State of Illinois. Exelon was not made a party to the DPA and no charges were brought against Exelon. Under the DPA, the USAO filed a single charge alleging that ComEd improperly gave and offered to give jobs, vendor subcontracts, and payments associated with those jobs and subcontracts for the benefit of the Speaker of the Illinois House of Representatives and the Speaker’s associates, with the intent to influence the Speaker’s action regarding legislation affecting ComEd’s interests. The DPA provided that the USAO would defer any prosecution of such charge and any other criminal or civil case against ComEd in connection with the matters identified therein for a three-year period. That period expired, and the pending charge was dismissed, in July 2023. In October 2019, the SEC notified Exelon and ComEd that it had opened an investigation into their lobbying activities in the state of Illinois. On September 28, 2023, Exelon and ComEd reached a settlement with the SEC to fully resolve the matter. The DPA and the settlement with the SEC could have a material adverse impact on Exelon’s and ComEd’s reputation or relationships with regulatory and legislative authorities, customers, and other stakeholders. Those impacts could affect, or make more difficult, their efforts to achieve actions or approvals associated with operations. See Note 18 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements for more information regarding the DPA and SEC settlement." }, { "status": "MODIFIED", "current_title": "The Registrants are subject to physical security and cybersecurity risks (All Registrants).", "prior_title": "The Registrants are subject to physical security and cybersecurity risks (All Registrants).", "similarity_score": 0.844, "confidence": "high", "key_changes": [ "Reworded sentence: \"Threat actors, including sophisticated nation-state actors and criminal groups, exploit potential vulnerabilities in the electric and natural gas utility industry, grid infrastructure, and other energy infrastructures.\"", "Reworded sentence: \"While Registrants and some of the Registrants' vendors have experienced cybersecurity incidents, such incidents have not, to Registrants' knowledge, resulted in material impact to any of the Registrants to date.\"" ], "current_body": "Risks from cybersecurity and physical threats to energy infrastructures are increasing. Threat actors, including sophisticated nation-state actors and criminal groups, exploit potential vulnerabilities in the electric and natural gas utility industry, grid infrastructure, and other energy infrastructures. Attacks and disruptions, which could involve physical, cyber, and hybrid targeting of physical and cyber assets, are increasingly sophisticated and dynamic. The increased implementation of, and reliance on, information technologies and networks to manage business operations, including the operation of technical systems, as well as the Registrants' use of numerous vendors and suppliers, create additional points of vulnerability that could be, and in certain instances have been, exploited by malicious threat actors. Several U.S. government agencies have warned that the energy sector and its supply chains are subject to increasing risks of physical attacks, ransomware attacks and cybersecurity threats, and that the risks may escalate during periods of heightened geopolitical tensions. In addition, the rapid evolution and increased adoption of artificial intelligence technologies may intensify the Registrants' cybersecurity risks. A security breach of the Registrants' physical assets or information systems or those of the Registrants' competitors, vendors, business partners and interconnected entities (including RTOs and ISOs) could materially impact Registrants by, among other things, impairing the availability of electricity and gas distributed by Registrants and/or the reliability of transmission and distribution systems, damaging grid infrastructure, interrupting critical business functions, impairing the availability of vendor services and materials that the Registrants rely on to maintain their operations, or by leading to the theft or inappropriate release of certain types of information, including critical infrastructure information, system data and architecture, sensitive customer, vendor, or employee data, or other confidential data. While Registrants and some of the Registrants' vendors have experienced cybersecurity incidents, such incidents have not, to Registrants' knowledge, resulted in material impact to any of the Registrants to date. If a material physical or cybersecurity breach or disruption were to occur, the Registrants' reputation could be negatively affected, customer confidence in the Registrants could be diminished and the Registrants could be subject to legal claims, regulatory exposure, loss of revenues, and increased costs, including infrastructure repairs or operations shutdown, all of which could materially affect the Registrants' financial condition and materially damage their business reputation. Moreover, the amount and scope of insurance maintained against losses resulting from any such security breaches or disruptions may not be sufficient to cover losses or otherwise adequately compensate for any resulting business disruptions. The continued increase in Federal and state regulatory requirements related to cybersecurity and evolving threat actor-capabilities could require changes to measures currently undertaken by the Registrants or to their business operations and could adversely affect their consolidated financial statements. 25 25 25 Table of Contents Table of Contents", "prior_body": "Risks from cybersecurity and physical threats to energy infrastructures are increasing. Threat actors, including sophisticated nation-state actors, continue to seek to exploit potential vulnerabilities in the electric and natural gas utility industry, grid infrastructure, and other energy infrastructures, and attacks and disruptions, both physical, cyber, and hybrid targeting physical and cyber assets, are becoming increasingly sophisticated and dynamic. Several U.S. government agencies have warned of increased risks related to physical attacks, ransomware attacks and cybersecurity threats related to the energy sector and its supply chains, and that the risks may escalate during periods of heightened geopolitical tensions. Continued implementation of advanced digital technologies increases the potentially unfavorable impacts of such attacks. In addition, the rapid evolution and increased adoption of artificial intelligence technologies may intensify the Registrants' cybersecurity risks. A security breach of the Registrants' physical assets or information systems or those of the Registrants' competitors, vendors, business partners and interconnected entities (including RTOs and ISOs) could materially impact Registrants by, among other things, impairing the availability of electricity and gas distributed by Registrants and/or the reliability of transmission and distribution systems, damaging grid infrastructure, interrupting critical business functions, impairing the availability of vendor services and materials that the Registrants rely on to maintain their operations, or by leading to the theft or inappropriate release of certain types of information, including critical infrastructure information, system data and architecture, sensitive customer, vendor, or employee data, or other confidential data. The Registrants' reliance on vendors to provide services and equipment, and its shared information systems with Constellation pursuant to the Transition Services Agreement between Exelon and Constellation, increases the risk to assets, systems, and data. While some of the Registrants' vendors have experienced cybersecurity incidents, such incidents have not, to Registrants' knowledge, resulted in material impact to any of the Registrants to date. The risk of these events and security breaches occurring continues to intensify. The Registrants have been, and will likely continue to be, subjected to physical and cyber-attacks. While to date none of the Registrants has directly experienced a material breach or material disruption to its network or information systems or operations, as such attacks continue to increase in sophistication and frequency, the Registrants may be subject to a material breach or material disruption in the future. If a significant physical or cybersecurity breach or disruption were to occur, the Registrants' reputation could be negatively affected, customer confidence in the Registrants could be diminished and the Registrants could be subject to legal claims, regulatory exposure, loss of revenues, increased costs including for infrastructure repairs, or operations shutdown, all of which could materially affect the Registrants' financial condition and materially damage its business reputation. Moreover, the amount and scope of insurance maintained against losses resulting from any such security breaches or disruptions may not be sufficient to cover losses or otherwise adequately compensate for any disruptions to business that could result. The continued increase in Federal and state regulatory requirements related to cybersecurity and evolving threat actor-capabilities could require changes to current measures taken by the Registrants or to their business operations and could adversely affect their consolidated financial statements." }, { "status": "MODIFIED", "current_title": "Extreme weather events, natural disasters, operational accidents such as wildfires or natural gas explosions, war, acts and threats of terrorism or sabotage, cyberattacks or compromises, equipment or process failures, public health crises, or other significant events could negatively impact the Registrants' results of operations, ability to raise capital and future growth (All Registrants).", "prior_title": "Extreme weather events, natural disasters, operational accidents such as wildfires or natural gas explosions, war, acts and threats of terrorism, public health crises, epidemics, pandemics, or other significant events could negatively impact the Registrants' results of operations, ability to raise capital and future growth (All Registrants).", "similarity_score": 0.843, "confidence": "high", "key_changes": [ "Reworded sentence: \"The Utility Registrants' infrastructures and/or operations could be affected by extreme weather events, natural disasters, operational accidents such as wildfires or natural gas explosions or equipment or process failures due to aging infrastructure or otherwise, each of which could result in increased costs, including supply chain costs and claims for third-party property damage.\"", "Reworded sentence: \"The Registrants could be significantly affected by public health crises, including epidemics or pandemics.\"", "Reworded sentence: \"In addition, Exelon, on behalf of the Registrants, maintains a level of insurance coverage consistent with industry practices against property, casualty, third party liability, and cybersecurity losses subject to unforeseen occurrences or catastrophic events that could damage or destroy assets or interrupt operations.\"" ], "current_body": "The Utility Registrants' infrastructures and/or operations could be affected by extreme weather events, natural disasters, operational accidents such as wildfires or natural gas explosions or equipment or process failures due to aging infrastructure or otherwise, each of which could result in increased costs, including supply chain costs and claims for third-party property damage. An extreme weather event, natural disaster, wildfire, or operational accident within the Utility Registrants’ service areas can also directly affect their capital assets, causing disruption in service to customers due to downed wires and poles or damage to other operating equipment. The Registrants face a risk that their operations would be direct targets or indirect casualties of attacks or sabotaged by nation-states or their agents, or by foreign or domestic terrorist groups. Responses to such attacks or sabotage, and any resulting retaliatory actions or sustained conflict could affect the Registrants’ operations and finances in unpredictable and material ways. Furthermore, such events could compromise the physical or cybersecurity of the Registrants' facilities, which could adversely affect the Registrants' ability to manage their businesses effectively. Instability in the financial markets as a result of terrorism, war, natural disasters, public health crises, epidemics, pandemics, credit crises, recession, or other significant events also could result in a decline in energy consumption or interruption of fuel or the supply chain. In addition, the implementation of security guidelines and measures has resulted in and is expected to continue to result in increased costs. The Registrants could be significantly affected by public health crises, including epidemics or pandemics. The Registrants have plans in place to respond to such events. However, depending on the severity and the resulting impacts to workforce and other resource availability, a public health crisis, epidemic, or pandemic could adversely affect our vendors, or customers and customer demand as well as the Registrants’ ability to operate their transmission and distribution assets. In addition, Exelon, on behalf of the Registrants, maintains a level of insurance coverage consistent with industry practices against property, casualty, third party liability, and cybersecurity losses subject to unforeseen occurrences or catastrophic events that could damage or destroy assets or interrupt operations. However, such losses may not be covered under applicable insurance policies, or the amount of insurance may be inadequate to cover all such losses.", "prior_body": "The Utility Registrants' infrastructures and/or operations could be affected by extreme weather events, natural disasters, or operational accidents such as wildfires or natural gas explosions which could result in increased costs, including supply chain costs and third-party property damage. An extreme weather event, natural disaster, or operational accident within the Utility Registrants’ service areas can also directly affect their capital assets, causing disruption in service to customers due to downed wires and poles or damage to other operating equipment. The impact that potential terrorist attacks could have on the industry and the Registrants is uncertain. The Registrants face a risk that their operations would be direct targets or indirect casualties of an act of terror. Any retaliatory military strikes or sustained military campaign could affect Registrants' operations in unpredictable ways, such as changes in insurance markets and disruptions of supplies and markets. Furthermore, such events could compromise the physical or cybersecurity of the Registrants' facilities, which could adversely affect the Registrants' ability to manage their businesses effectively. Instability in the financial markets as a result of terrorism, war, natural disasters, public health crises, epidemics, pandemics, credit crises, recession, or other significant events also could result in a decline in energy consumption or interruption of fuel or the supply chain. In addition, the implementation of security guidelines and measures has resulted in and is expected to continue to result in increased costs. The Registrants could be significantly affected by public health crises, epidemics, or pandemics. The Registrants have plans in place to respond to such events. However, depending on the severity and the resulting impacts to workforce and other resource availability, a public health crisis, epidemic, or pandemic could adversely affect our vendors, or customers and customer demand as well as the Registrants’ ability to operate their transmission and distribution assets. In addition, on behalf of the Registrants Exelon maintains a level of insurance coverage consistent with industry practices against property, casualty, and cybersecurity losses subject to unforeseen occurrences or catastrophic events that could damage or destroy assets or interrupt operations. However, there can be no assurance that the amount of insurance will be adequate to address such property and casualty losses." }, { "status": "MODIFIED", "current_title": "The Registrants' performance could be negatively affected if they fail to attract and retain an appropriately qualified workforce (All Registrants).", "prior_title": "The Registrants' performance could be negatively affected if they fail to attract and retain an appropriately qualified workforce (All Registrants).", "similarity_score": 0.815, "confidence": "high", "key_changes": [ "Reworded sentence: \"Certain factors, such as employee strikes, work stoppages, loss of employees, loss of contract resources due to a major event, inability to negotiate future collective bargaining agreements on commercially reasonable terms, an aging workforce, mismatching of skill sets for current and future needs, and failing to appropriately anticipate future workforce needs, could lead to operating challenges and increased costs for the Registrants.\"", "Reworded sentence: \"Such events and other factors could result in increased costs, including costs of replacing lost labor through contractors or new hires, training costs, and costs of lost productivity.\"" ], "current_body": "Certain factors, such as employee strikes, work stoppages, loss of employees, loss of contract resources due to a major event, inability to negotiate future collective bargaining agreements on commercially reasonable terms, an aging workforce, mismatching of skill sets for current and future needs, and failing to appropriately anticipate future workforce needs, could lead to operating challenges and increased costs for the Registrants. Such challenges include lack of resources, loss of knowledge and a lengthy time period associated with skill development. Such events and other factors could result in increased costs, including costs of replacing lost labor through contractors or new hires, training costs, and costs of lost productivity. Such events also could increase operational risks. The Registrants are particularly affected due to the specialized knowledge required of the technical and support employees needed to conduct Registrants' transmission and distribution operations as well as areas where new technologies are pertinent.", "prior_body": "Certain events, such as the separation transaction, an employee strike, loss of employees, loss of contract resources due to a major event, and an aging workforce without appropriate replacements, could lead to operating challenges and increased costs for the Registrants. Such challenges include lack of resources, loss of knowledge and a lengthy time period associated with skill development. As a result of such events, costs, including costs for contractors to replace employees, productivity costs, and safety costs, could rise. The Registrants are particularly affected due to the specialized knowledge required of the technical and support employees needed to conduct Registrants' transmission and distribution operations as well as areas where new technologies are pertinent." }, { "status": "MODIFIED", "current_title": "The Registrants could be negatively affected by federal and state RPS, energy conservation and GHG reduction legislation and regulation, and/or changing customer expectations, along with energy conservation by customers (All Registrants).", "prior_title": "The Registrants could be negatively affected by federal and state RPS and/or energy conservation legislation, along with energy conservation by customers (All Registrants).", "similarity_score": 0.768, "confidence": "high", "key_changes": [ "Added sentence: \"Risks include changes to energy systems due to new technologies, changing customer expectations and/or voluntary GHG goals, as well as local, state, or federal regulatory requirements intended to reduce GHG emissions and/or mandate implementation of energy conservation programs, including through limitation of the use of natural gas.\"", "Reworded sentence: \"Federal and state legislation mandating the implementation of energy conservation programs that require the implementation of new technologies, such as smart grid, DERs and energy efficiency programs, could increase capital expenditures and could significantly impact the Utility Registrants' consolidated financial statements if timely cost recovery is not allowed.\"", "Added sentence: \"The Registrants also periodically perform analyses of potential energy system transition pathways to reduce economy-wide GHG emissions to mitigate climate change.\"", "Added sentence: \"To the extent additional GHG reduction legislation and/or regulation becomes effective at the Federal and/or state levels, the Registrants could incur costs to further limit the GHG emissions from their operations or otherwise comply with applicable requirements and such legislation and/or regulation could otherwise adversely affect the Registrants' businesses.\"", "Added sentence: \"23 23 23 Table of Contents Table of Contents\"" ], "current_body": "Risks include changes to energy systems due to new technologies, changing customer expectations and/or voluntary GHG goals, as well as local, state, or federal regulatory requirements intended to reduce GHG emissions and/or mandate implementation of energy conservation programs, including through limitation of the use of natural gas. Changes to current state legislation or the development of Federal legislation that requires the use of low-emission, renewable, and/or alternate fuel sources could significantly impact the Utility Registrants, especially if timely cost recovery is not allowed. Federal and state legislation mandating the implementation of energy conservation programs that require the implementation of new technologies, such as smart grid, DERs and energy efficiency programs, could increase capital expenditures and could significantly impact the Utility Registrants' consolidated financial statements if timely cost recovery is not allowed. These energy conservation programs, regulated energy consumption reduction targets, and new energy consumption technologies could cause declines in customer energy consumption and lead to a decline in the Registrants' earnings, if timely recovery is not allowed. The Registrants also periodically perform analyses of potential energy system transition pathways to reduce economy-wide GHG emissions to mitigate climate change. To the extent additional GHG reduction legislation and/or regulation becomes effective at the Federal and/or state levels, the Registrants could incur costs to further limit the GHG emissions from their operations or otherwise comply with applicable requirements and such legislation and/or regulation could otherwise adversely affect the Registrants' businesses. See ITEM 1. BUSINESS — Environmental Matters and Regulation — Renewable and Clean Energy Standards and \"The Registrants are potentially affected by emerging technologies that could over time affect or transform the energy industry\" above for additional information. 23 23 23 Table of Contents Table of Contents", "prior_body": "Changes to current state legislation or the development of Federal legislation that requires the use of low-emission, renewable, and/or alternate fuel sources could significantly impact the Utility Registrants, especially if timely cost recovery is not allowed. Federal and state legislation mandating the implementation of energy conservation programs that require the implementation of new technologies, such as smart meters and smart grid, could increase capital expenditures and could significantly impact the Utility Registrants' consolidated financial statements if timely cost recovery is not allowed. These energy conservation programs, regulated energy consumption reduction targets, and new energy consumption technologies could cause declines in customer energy consumption and lead to a decline in the Registrants' earnings, if timely recovery is not allowed. See ITEM 1. BUSINESS — Environmental Matters and Regulation — Renewable and Clean Energy Standards and \"The Registrants are potentially affected by emerging technologies that could over time affect or transform the energy industry\" above for additional information." }, { "status": "MODIFIED", "current_title": "The Registrants are subject to risks associated with climate change (All Registrants).", "prior_title": "The Registrants are subject to risks associated with climate change (All Registrants).", "similarity_score": 0.74, "confidence": "medium", "key_changes": [ "Reworded sentence: \"However, the Registrants’ physical facilities could be at greater risk of damage as changes in the global climate affect temperature and weather patterns, including if 26 26 26 Table of Contents Table of Contents such climate changes result in more intense, frequent and extreme weather events, elevated or decreased levels of precipitation, sea level rise, increased surface water temperatures, wildfires and/or other effects.\"", "Removed sentence: \"Over time, the Registrants are making additional investments to adapt to changes in operational requirements to manage demand changes and customer expectations caused by climate change.\"", "Removed sentence: \"Climate Change risks include changes to energy systems due to new technologies, changing customer expectations and/or voluntary GHG goals, as well as local, state, or federal regulatory requirements intended to reduce GHG emissions, including through limitation of the use of natural gas.\"", "Removed sentence: \"The Registrants also periodically perform analyses of potential energy system transition pathways to reduce economy-wide GHG emissions to mitigate climate change.\"", "Removed sentence: \"To the extent additional GHG reduction legislation and/or regulation becomes effective at the Federal and/or state levels, the Registrants could incur costs to further limit the GHG emissions from their operations or otherwise comply with applicable requirements and such legislation and/or regulation could otherwise adversely affect the Registrants' businesses.\"" ], "current_body": "The Registrants periodically perform analyses to better understand long-term projections of climate change and how those changes in the physical environments where they operate could affect their facilities and operations. The Registrants primarily operate in the Midwest and Mid-Atlantic of the United States, areas that historically have been prone to various types of severe weather events, and the Registrants have well-developed response and recovery programs based on these historical events. However, the Registrants’ physical facilities could be at greater risk of damage as changes in the global climate affect temperature and weather patterns, including if 26 26 26 Table of Contents Table of Contents such climate changes result in more intense, frequent and extreme weather events, elevated or decreased levels of precipitation, sea level rise, increased surface water temperatures, wildfires and/or other effects. In addition, changes to the climate may impact levels and patterns of demand for energy and related services, which could affect Registrants’ operations and business.", "prior_body": "The Registrants periodically perform analyses to better understand long-term projections of climate change and how those changes in the physical environments where they operate could affect their facilities and operations. The Registrants primarily operate in the Midwest and Mid-Atlantic of the United States, areas that historically have been prone to various types of severe weather events, and the Registrants have well-developed response and recovery programs based on these historical events. However, the Registrants’ physical facilities could be at greater risk of damage as changes in the global climate affect temperature and weather patterns, including if such climate changes result in more intense, frequent and extreme weather events, elevated levels of precipitation, sea level rise, increased surface water temperatures, wildfires and/or other effects. Over time, the Registrants are making additional investments to protect their facilities from physical climate-related risks. In addition, changes to the climate may impact levels and patterns of demand for energy and related services, which could affect Registrants’ operations and business. Over time, the Registrants are making additional investments to adapt to changes in operational requirements to manage demand changes and customer expectations caused by climate change. Climate Change risks include changes to energy systems due to new technologies, changing customer expectations and/or voluntary GHG goals, as well as local, state, or federal regulatory requirements intended to reduce GHG emissions, including through limitation of the use of natural gas. The Registrants also periodically perform analyses of potential energy system transition pathways to reduce economy-wide GHG emissions to mitigate climate change. To the extent additional GHG reduction legislation and/or regulation becomes effective at the Federal and/or state levels, the Registrants could incur costs to further limit the GHG emissions from their operations or otherwise comply with applicable requirements and such legislation and/or regulation could otherwise adversely affect the Registrants' businesses. See ITEM 1. BUSINESS — Environmental Matters and Regulation — Climate Change and ITEM 1.A. \"The Registrants are potentially affected by emerging technologies that could over time affect or transform the energy industry\" above for additional information." }, { "status": "MODIFIED", "current_title": "The Registrants’ electricity and natural gas operations are inherently hazardous and involve significant risks to employees, contractors, customers, and the general public (All Registrants).", "prior_title": "The Registrants’ employees, contractors, customers, and the general public could be exposed to a risk of injury due to the nature of the energy industry (All Registrants).", "similarity_score": 0.518, "confidence": "low", "key_changes": [ "Reworded sentence: \"As a result, employees, contractors, customers, and the general public may face, and in the past have experienced, serious injury, including loss of life, damage to or destruction of facilities and residences, business interruptions, and environmental pollution.\"" ], "current_body": "Employees and contractors throughout the organization work in, and customers and the general public could be exposed to, potentially dangerous environments near the Registrants’ operations. As a result, employees, contractors, customers, and the general public may face, and in the past have experienced, serious injury, including loss of life, damage to or destruction of facilities and residences, business interruptions, and environmental pollution. These risks include, among others, gas explosions, uncontrolled release of natural gas and other environmental hazards, fires, pole strikes, and electric contact cases. Further, the location of natural gas pipelines and associated distribution facilities, or electric generation, transmission, substations and distribution facilities near populated areas, including residential areas, commercial business centers and industrial sites, increases the potential damages resulting from these risks.", "prior_body": "Employees and contractors throughout the organization work in, and customers and the general public could be exposed to, potentially dangerous environments near the Registrants’ operations. As a result, employees, 28 28 28 Table of Contents Table of Contents contractors, customers, and the general public are at some risk for serious injury, including loss of life. These risks include gas explosions, pole strikes, and electric contact cases." }, { "status": "UNCHANGED", "current_title": "The Registrants could make acquisitions or investments in new business initiatives and new markets, which may not be successful or achieve the intended financial results (All Registrants).", "prior_title": "The Registrants could make acquisitions or investments in new business initiatives and new markets, which may not be successful or achieve the intended financial results (All Registrants).", "current_body": "The Utility Registrants face risks associated with regulator-mandated or other new business initiatives, such as smart grids and broader beneficial electrification. Such risks include, but are not limited to, cost recovery, regulatory concerns, cybersecurity, and obsolescence of technology. Such initiatives may not be successful, and failures could result in adverse financial or reputational consequences." }, { "status": "UNCHANGED", "current_title": "The impacts of significant economic downturns or increases in customer rates, could lead to decreased volumes delivered and increased expense for uncollectible customer balances (All Registrants).", "prior_title": "The impacts of significant economic downturns or increases in customer rates, could lead to decreased volumes delivered and increased expense for uncollectible customer balances (All Registrants).", "current_body": "The impacts of significant economic downturns on the Utility Registrants' customers and the related regulatory limitations on residential service terminations for the Utility Registrants, could result in an increase in the number of uncollectible customer balances and related expense. Further, increases in customer rates, including those related to increases in Purchased power and natural gas prices, could result in declines in customer usage and lower revenues for the Utility Registrants that do not have decoupling mechanisms. See ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK for additional information on the Registrants’ credit risk." }, { "status": "UNCHANGED", "current_title": "Market performance and other factors could decrease the value of employee benefit plan assets and could increase the related employee benefit plan obligations, which then could require significant additional funding (All Registrants).", "prior_title": "Market performance and other factors could decrease the value of employee benefit plan assets and could increase the related employee benefit plan obligations, which then could require significant additional funding (All Registrants).", "current_body": "Disruptions in the capital markets and their actual or perceived effects on particular businesses and the greater economy could adversely affect the value of the investments held within Exelon’s employee benefit plan trusts. The asset values are subject to market fluctuations and will yield uncertain returns, which could fall below Exelon's projected return rates. A decline in the market value of the pension and OPEB plan assets would increase the funding requirements associated with Exelon’s pension and OPEB plan obligations. Additionally, Exelon’s pension and OPEB plan liabilities are sensitive to changes in interest rates. As interest rates decrease, the liabilities increase, potentially increasing benefit costs and funding requirements. Changes in demographics, including increased numbers of retirements or changes in life expectancy assumptions or changes to Social Security or Medicare eligibility requirements could also increase the costs and funding requirements of the obligations related to the pension and OPEB plans. See Note 14 — Retirement Benefits of the Combined Notes to Consolidated Financial Statements for additional information." }, { "status": "UNCHANGED", "current_title": "The Registrants could be negatively affected by challenges to tax positions taken, tax law changes, and the inherent difficulty in quantifying potential tax effects of business decisions. (All Registrants).", "prior_title": "The Registrants could be negatively affected by challenges to tax positions taken, tax law changes, and the inherent difficulty in quantifying potential tax effects of business decisions. (All Registrants).", "current_body": "The Registrants are required to make judgments to estimate their obligations to taxing authorities, which includes general tax positions taken and associated reserves established. Tax obligations include, but are not limited to: income, real estate, sales and use, and employment-related taxes and ongoing appeal issues related to these tax matters. All tax estimates could be subject to challenge by the tax authorities. Additionally, earnings may be impacted due to changes in federal or local/state tax laws, and the inherent difficulty of estimating potential tax effects of ongoing business decisions. See Note 1 — Significant Accounting Policies and Note 13 — Income Taxes of the Combined Notes to Consolidated Financial Statements for additional information." }, { "status": "UNCHANGED", "current_title": "The Registrants could be subject to adverse publicity and reputational risks, which make them vulnerable to negative customer perception and could lead to increased regulatory oversight or other consequences (All Registrants).", "prior_title": "The Registrants could be subject to adverse publicity and reputational risks, which make them vulnerable to negative customer perception and could lead to increased regulatory oversight or other consequences (All Registrants).", "current_body": "The Registrants could be the subject of public criticism. Adverse publicity could render public service commissions and other regulatory and legislative authorities less likely to view energy companies generally, or the Registrants specifically, in a favorable light, and could cause the Registrants to be susceptible to less favorable legislative and regulatory outcomes, as well as increased regulatory oversight and more stringent legislative or regulatory requirements." }, { "status": "UNCHANGED", "current_title": "The Registrants could incur substantial costs in the event of non-performance by third-parties under indemnification agreements, or when the Registrants have guaranteed their performance (All Registrants).", "prior_title": "The Registrants could incur substantial costs in the event of non-performance by third-parties under indemnification agreements, or when the Registrants have guaranteed their performance (All Registrants).", "current_body": "The Registrants have entered into various agreements with counterparties that require those counterparties to reimburse a Registrant and hold it harmless against specified obligations and claims. To the extent that any of these counterparties are affected by deterioration in their creditworthiness or the agreements are otherwise determined to be unenforceable, the affected Registrant could be held responsible for the obligations. Each of the Utility Registrants has transferred its former generation assets to one or more third parties and in each case the transferee has agreed to assume certain obligations and to indemnify the applicable Utility Registrant for such obligations. In connection with the restructurings under which ComEd, PECO, and BGE transferred their generating assets to Constellation, Constellation assumed certain of ComEd’s, PECO’s, and BGE's rights and obligations with respect to their former generation assets. Further, ComEd, PECO, and BGE have entered into agreements with third parties under which the third-party agreed to indemnify ComEd, PECO, or BGE for certain obligations related to their respective former generation assets that have been assumed by Constellation as part of the restructuring. If Constellation or a transferee of one of the Utility Registrant’s generation assets experienced events that reduced its creditworthiness or the indemnity arrangement became unenforceable, the applicable Utility Registrant could be liable for any existing or future claims. In addition, the Utility Registrants have residual liability under certain laws in connection with their former generation assets. The Registrants have issued indemnities to third parties regarding environmental or other matters in connection with purchases and sales of assets, including several of the Utility Registrants in connection with Constellation's absorption of their former generating assets. The Registrants could incur substantial costs to fulfill their obligations under these indemnities. The Registrants have issued guarantees of the performance of third parties, which obligate the Registrants to perform if the third parties do not perform. In the event of non-performance by those third parties, the Registrants could incur substantial cost to fulfill their obligations under these guarantees." }, { "status": "UNCHANGED", "current_title": "The Registrants could be negatively affected by the impacts of weather (All Registrants).", "prior_title": "The Registrants could be negatively affected by the impacts of weather (All Registrants).", "current_body": "Weather conditions directly influence the demand for electricity and natural gas and affect the price of energy commodities. Temperatures above normal levels in the summer tend to increase summer cooling electricity demand and revenues, and temperatures below normal levels in the winter tend to increase winter heating electricity and gas demand and revenues. Moderate temperatures adversely affect the usage of energy and resulting operating revenues at PECO and DPL Delaware. Due to revenue decoupling, operating revenues from electric distribution at ComEd, BGE, Pepco, DPL Maryland, and ACE and gas distribution at BGE are not intended to be affected by abnormal weather. Extreme weather conditions or damage resulting from storms could stress the Utility Registrants' transmission and distribution systems, communication systems, and technology, resulting in increased maintenance and capital costs and limiting each Utility Registrant's ability to meet peak customer demand. First and third quarter financial results, in particular, are substantially dependent on weather conditions, and could make period comparisons less relevant. Climate change projections suggest increases to summer temperature and humidity trends, as well as more erratic precipitation and storm patterns over the long-term in the areas where the Utility Registrants have transmission and distribution assets. The frequency in which weather conditions emerge outside the current expected climate norms could contribute to weather-related impacts discussed above." }, { "status": "UNCHANGED", "current_title": "The Registrants’ performance could be negatively affected by poor performance of third-party contractors that perform periodic or ongoing work (All Registrants).", "prior_title": "The Registrants’ performance could be negatively affected by poor performance of third-party contractors that perform periodic or ongoing work (All Registrants).", "current_body": "The Registrants rely on third-party contractors to perform operations, maintenance, and construction work. Performance standards typically are included in all contractual obligations, but poor performance may impact capital execution plans or operations, or have adverse financial, regulatory, or reputational consequences." }, { "status": "UNCHANGED", "current_title": "Changes in the Utility Registrants' respective terms and conditions of service, including their respective rates, along with adoption of new rate structures and constructs, or establishment of new rate cases, are subject to regulatory approval proceedings and/or negotiated settlements that are at times contentious, lengthy, and subject to appeal, which lead to uncertainty as to the ultimate result, and which could result in uncertainties in rate case outcomes, and/or introduce time delays in effectuating rate changes (All Registrants).", "prior_title": "Changes in the Utility Registrants' respective terms and conditions of service, including their respective rates, along with adoption of new rate structures and constructs, or establishment of new rate cases, are subject to regulatory approval proceedings and/or negotiated settlements that are at times contentious, lengthy, and subject to appeal, which lead to uncertainty as to the ultimate result, and which could result in uncertainties in rate case outcomes, and/or introduce time delays in effectuating rate changes (All Registrants).", "current_body": "The Utility Registrants are required to engage in regulatory approval proceedings as a part of the process of establishing the terms and rates for their respective services, adoption of new rate structures and constructs or establishment of new rate cases. These proceedings typically involve multiple parties, including governmental bodies and officials, consumer advocacy groups, and various consumers of energy, who have differing concerns but who have the common objective of limiting rate increases or even reducing rates. Decisions are subject to appeal, potentially leading to additional uncertainty associated with the approval proceedings. The potential duration of such proceedings creates a risk that rates ultimately approved by the applicable regulatory body may not be sufficient for a Utility Registrant to recover its costs once the rates become effective. Established rates are also subject to subsequent prudency reviews by state regulators, whereby various portions of rates including recovery mechanisms for costs associated with the procurement of electricity or gas, credit losses, MGP remediation, smart grid infrastructure, and energy efficiency and demand response programs, could be adjusted, subject to refund, or disallowed. In certain instances, the Utility Registrants could agree to negotiated settlements related to various rate matters, customer initiatives, or franchise agreements. These settlements are subject to regulatory approval. The ultimate outcome and timing of regulatory rate proceedings have a significant effect on the ability of the Utility Registrants to recover their costs or earn an adequate return. In addition to potential timing delays, the Registrants also face other uncertainties in rate proceedings that could impact recovery, including not obtaining anticipated allowed rates of return, allowed capital structures, or allowed return on pension assets, and various other factors. See Note 3 — Regulatory Matters of the Combined Notes to the Consolidated Financial Statements for additional information. 22 22 22 Table of Contents Table of Contents" }, { "status": "UNCHANGED", "current_title": "If any of the Registrants were to experience a downgrade in its credit ratings to below investment grade or otherwise fail to satisfy the credit standards in its agreements with its counterparties or regulatory financial requirements, it would be required to provide significant amounts of collateral that could affect its liquidity and could experience higher borrowing costs (All Registrants).", "prior_title": "If any of the Registrants were to experience a downgrade in its credit ratings to below investment grade or otherwise fail to satisfy the credit standards in its agreements with its counterparties or regulatory financial requirements, it would be required to provide significant amounts of collateral that could affect its liquidity and could experience higher borrowing costs (All Registrants).", "current_body": "The Utility Registrants' operating agreements with PJM and PECO's, BGE's, and DPL's natural gas procurement contracts contain collateral provisions that are affected by their credit rating and market prices. If certain wholesale market conditions were to exist and the Utility Registrants were to lose their investment grade credit ratings (based on their senior unsecured debt ratings), they would be required to provide collateral in the forms of letters of credit or cash, which could have a material adverse effect upon their remaining sources of liquidity. PJM collateral posting requirements will generally increase as market prices rise and decrease as market prices fall. Collateral posting requirements for PECO, BGE, and DPL, with respect to their natural gas supply contracts, will generally increase as forward market prices fall and decrease as forward market prices rise. If the Utility Registrants were downgraded, they could experience higher borrowing costs as a result of the downgrade. In addition, changes in ratings methodologies by the agencies could also have an adverse negative impact on the ratings of the Utility Registrants. The Utility Registrants conduct their respective businesses and operate under governance models and other arrangements and procedures intended to assure that the Utility Registrants are treated as separate, independent companies, distinct from Exelon and other Exelon subsidiaries in order to isolate the Utility Registrants from Exelon and other Exelon subsidiaries in the event of financial difficulty at Exelon or another Exelon subsidiary. These measures (commonly referred to as “ring-fencing”) could help avoid or limit a downgrade in the credit ratings of the Utility Registrants in the event of a reduction in the credit rating of Exelon. Despite these ring-fencing measures, the credit ratings of the Utility Registrants could remain linked, to some degree, to the credit ratings of Exelon. Consequently, a reduction in the credit rating of Exelon could result in a reduction of the credit rating of some or all of the Utility Registrants. A reduction in the credit rating of a Utility Registrant could have a material adverse effect on the Utility Registrant. See ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Liquidity and Capital Resources — Credit Matters and Cash Requirements — Security Ratings for additional information regarding the potential impacts of credit downgrades on the Registrants’ cash flows. 29 29 29 Table of Contents Table of Contents" }, { "status": "UNCHANGED", "current_title": "The Registrants could be negatively affected by unstable capital and credit markets (All Registrants).", "prior_title": "The Registrants could be negatively affected by unstable capital and credit markets (All Registrants).", "current_body": "The Registrants rely on the capital markets, particularly for publicly offered debt, as well as the banking and commercial paper markets, to meet their financial commitments and short-term liquidity needs. Disruptions in the capital and credit markets in the United States or abroad could negatively affect the Registrants’ ability to access the capital markets or draw on their respective bank revolving credit facilities. The banks may not be able to meet their funding commitments to the Registrants if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. The inability to access capital markets or credit facilities, and longer-term disruptions in the capital and credit markets because of uncertainty, changing or increased regulation, reduced alternatives, or failures of significant financial institutions could result in the deferral of discretionary capital expenditures, or require a reduction in dividend payments or other discretionary uses of cash. In addition, the Registrants have exposure to worldwide financial markets, including Europe, Canada, and Asia. Disruptions in these markets could reduce or restrict the Registrants’ ability to secure sufficient liquidity or secure liquidity at reasonable terms. As of December 31, 2024, approximately 17%, 11%, and 17% of the Registrants’ available credit facilities were with European, Canadian, and Asian banks, respectively. Additionally, higher interest rates may put pressure on the Registrants’ overall liquidity profile, financial health and impact financial results. See Note 16 — Debt and Credit Agreements of the Combined Notes to Consolidated Financial Statements for additional information on the credit facilities." }, { "status": "UNCHANGED", "current_title": "Long-lived assets, goodwill, and other assets could become impaired (All Registrants).", "prior_title": "Long-lived assets, goodwill, and other assets could become impaired (All Registrants).", "current_body": "Long-lived assets represent the single largest asset class on the Registrants’ statements of financial position. In addition, Exelon, ComEd, and PHI have material goodwill balances. The Registrants evaluate the recoverability of the carrying value of long-lived assets to be held and used whenever events or circumstances indicating a potential impairment exist. Factors such as, but not limited to, the business climate, including current and future energy and market conditions, environmental regulation, and the condition of assets are considered. ComEd and PHI perform an assessment for possible impairment of their goodwill at least annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting units below their carrying amount. Regulatory actions or changes in significant assumptions, including discount and growth rates, utility sector market performance and transactions, projected operating and capital cash flows for ComEd’s, Pepco’s, DPL’s, and ACE’s business, and the fair value of debt, could potentially result in future impairments of Exelon’s, ComEd's, and PHI’s goodwill. An impairment would require the Registrants to reduce the carrying value of the long-lived asset or goodwill to fair value through a non-cash charge to expense by the amount of the impairment. See ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Critical Accounting Policies and Estimates, Note 7 — Property, Plant, and Equipment, Note 11 — Asset Impairments, and Note 12 — Intangible Assets of the Combined Notes to the Consolidated Financial Statements for additional information on long-lived asset impairments and goodwill impairments. 30 30 30 Table of Contents Table of Contents" }, { "status": "UNCHANGED", "current_title": "The Utility Registrants' operating costs are affected by their ability to maintain the availability and reliability of their delivery and operational systems (All Registrants).", "prior_title": "The Utility Registrants' operating costs are affected by their ability to maintain the availability and reliability of their delivery and operational systems (All Registrants).", "current_body": "Failures of the equipment or facilities used in the Utility Registrants' delivery systems could interrupt electric transmission and/or electric or natural gas delivery, which could result in a loss of revenues and an increase in maintenance and capital expenditures. Equipment or facilities failures can occur due to several factors, including natural causes such as weather or information systems failure. Specifically, if the implementation of AMI, smart grid, or other technologies in the Utility Registrants' service territory fail to perform as intended or are not successfully integrated with billing and other information systems, or if any of the financial, accounting, or other data processing systems fail or have other significant shortcomings, the Utility Registrants' financial results could be negatively impacted. In addition, dependence upon automated systems could further increase the risk that operational system flaws or internal and/or external tampering or manipulation of those systems will result in losses that are difficult to detect. Regulated utilities, which are required to provide service to all customers within their respective service territories, have generally been afforded liability protections against claims by customers relating to failure of service. Under Illinois law, however, ComEd could be required to pay damages to its customers in some circumstances involving extended outages affecting large numbers of its customers, which could be material." }, { "status": "UNCHANGED", "current_title": "The Registrants could incur substantial costs to fulfill their obligations related to environmental and other matters (All Registrants).", "prior_title": "The Registrants could incur substantial costs to fulfill their obligations related to environmental and other matters (All Registrants).", "current_body": "The Registrants are subject to extensive environmental regulation and legislation by local, state, and Federal authorities. These laws and regulations affect the way the Registrants conduct their operations and make capital expenditures, including how they handle air and water emissions, hazardous and solid waste, and activities affecting surface waters, groundwater, and aquatic and other species. Violations of these requirements could subject the Registrants to enforcement actions, capital expenditures to bring existing facilities into compliance, additional operating costs for remediation and clean-up costs, civil penalties and exposure to third parties’ claims for alleged health or property damages, or operating restrictions to achieve compliance. In addition, the Registrants are subject to liability under these laws for the remediation costs for environmental contamination of property now or formerly owned by the Registrants and of property contaminated by hazardous substances they generated or released. Remediation activities associated with MGP operations conducted by predecessor companies are one component of such costs. Also, the Registrants are currently involved in several proceedings relating to sites where hazardous substances have been deposited and could be subject to additional proceedings in the future. See ITEM 1. BUSINESS — Environmental Matters and Regulation for additional information." }, { "status": "UNCHANGED", "current_title": "The Registrants' businesses are highly regulated and electric and gas revenue and earnings could be negatively affected by legislative and/or regulatory actions (All Registrants).", "prior_title": "The Registrants' businesses are highly regulated and electric and gas revenue and earnings could be negatively affected by legislative and/or regulatory actions (All Registrants).", "current_body": "Substantial aspects of the Registrants' businesses are subject to comprehensive Federal or state legislation and/or regulation. The Utility Registrants' consolidated financial statements are heavily dependent on the ability of the Utility Registrants to recover their costs associated with the retail purchase, transmission, and distribution of power and natural gas to their customers. Fundamental changes in laws or regulations or adverse legislative or regulatory actions affecting the Registrants’ businesses would require changes in their business planning models and operations. Registrants cannot always predict when or whether legislative or regulatory action will occur and may not be able to influence the outcome of legislative or regulatory initiatives." }, { "status": "UNCHANGED", "current_title": "Legal proceedings could result in a negative outcome, which the Registrants cannot predict (All Registrants).", "prior_title": "Legal proceedings could result in a negative outcome, which the Registrants cannot predict (All Registrants).", "current_body": "The Registrants are involved in legal proceedings, claims, and litigation arising out of their business operations. The material legal proceedings, claims, and litigation arising out of business operations are summarized in Note 18 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements. Adverse outcomes in these proceedings could require significant expenditures, result in lost revenue, or restrict or disrupt business activities." }, { "status": "UNCHANGED", "current_title": "The Registrants are potentially affected by emerging technologies that could over time affect or transform the energy industry (All Registrants).", "prior_title": "The Registrants are potentially affected by emerging technologies that could over time affect or transform the energy industry (All Registrants).", "current_body": "Advancements in power generation technology, including commercial and residential solar generation installations and commercial micro turbine installations, are improving the cost-effectiveness of customer self-supply of electricity. Improvements in energy storage technology, including batteries and fuel cells, could also better position customers to meet their around-the-clock electricity requirements. Improvements in energy efficiency of lighting, appliances, equipment and building materials will also affect energy consumption by customers. Changes in power generation, storage, and use technologies could have significant effects on customer behaviors and their energy consumption. These developments could affect levels of customer-owned generation, customer expectations, and current business models and make portions of the Utility Registrants' transmission and/or distribution facilities uneconomic prior to the end of their useful lives. Increasing pressure from both the private and public sectors to take actions to mitigate climate change could also push the speed and nature of this transition. These factors could affect the Registrants’ consolidated financial statements through, among other things, increased Operating 28 28 28 Table of Contents Table of Contents and maintenance expenses, increased capital expenditures, and potential asset impairment charges or accelerated depreciation over shortened remaining asset useful lives." }, { "status": "UNCHANGED", "current_title": "The Registrants’ businesses are capital intensive, and their assets could require significant expenditures to maintain, are subject to operational failure and could be impacted by lack of availability of labor, materials or parts, which could result in potential liability (All Registrants).", "prior_title": "The Registrants’ businesses are capital intensive, and their assets could require significant expenditures to maintain, are subject to operational failure and could be impacted by lack of availability of labor, materials or parts, which could result in potential liability (All Registrants).", "current_body": "The Utility Registrants’ businesses are capital intensive and require significant investments in transmission and distribution infrastructure projects. Equipment, even if maintained in accordance with good utility practices, is subject to operational failure, including events that are beyond the Utility Registrants’ control, and could require significant expenditures to operate efficiently. Disruptions or cost increases in the supply chain, including shortages in labor, materials or parts, or significant increases in relevant tariffs, could materially impact the timing and execution of capital projects, and the timing of placing assets in service, as well as other aspects of the Registrants' businesses. In recent years, the energy industry has been experiencing shortages of, and long lead times for, critical equipment such as transformers and conductors. The Registrants' consolidated financial statements could be negatively affected if they were unable to effectively manage their capital projects or raise the necessary capital, or if they are deemed liable for operational failure. See ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Liquidity and Capital Resources for additional information regarding the Registrants’ potential future capital expenditures." }, { "status": "UNCHANGED", "current_title": "The Registrants could be subject to higher costs and/or penalties related to mandatory reliability standards, including the likely exposure of the Utility Registrants to the results of NERC compliance requirements (All Registrants).", "prior_title": "The Registrants could be subject to higher costs and/or penalties related to mandatory reliability standards, including the likely exposure of the Utility Registrants to the results of PJM’s RTEP and NERC compliance requirements (All Registrants).", "current_body": "The Utility Registrants as users, owners, and operators of the bulk power transmission system are subject to mandatory reliability standards promulgated by NERC and enforced by FERC. The standards are based on the functions that need to be performed to ensure the bulk power system operates reliably and are guided by reliability and market interface principles. Compliance with or changes in the reliability standards could subject the Registrants to higher operating costs and/or increased capital expenditures. In addition, the ICC, PAPUC, MDPSC, DCPSC, DEPSC, and NJBPU impose certain distribution reliability standards on the Utility Registrants. If the Utility Registrants were found in non-compliance with the Federal or state mandatory reliability standards, they could be subject to remediation costs as well as sanctions, which could include substantial monetary penalties." } ] }