# How Exelon makes money

CXProWealth Business Lens · Exelon (EXC) · Q3 FY2026

Read from the 10-Q for the period 2026-07-01 to 2026-09-30, filed 2026-10-30 with the SEC (accession 0001109357-26-000095): https://www.sec.gov/Archives/edgar/data/1109357/000110935726000095/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $7.3B (+34.9% on the year)
- Operating income: $1.4B (operating margin 18.8%)
- Net income: $729.0M (net margin 10.0%)
- Gross margin: not reported (the company reports expenses by nature: no cost of revenue or gross profit line exists)
- Free cash flow: —
- Cash conversion (operating cash flow / net income): —
- Capital expenditure: — of revenue

## Where the money goes (Q3 FY2026)

- Total operating revenues → Total operating expenses: $5.9B
- Total operating expenses → Cost direct material: $2.9B
- Total operating expenses → Operating and maintenance: $1.6B
- Total operating expenses → Depreciation and amortization: $991.0M
- Total operating expenses → Taxes other than income taxes: $468.0M
- Total operating revenues → Operating income: $1.4B
- Operating income → Total other income and (deductions): $496.0M
- Total other income and (deductions) → Interest expense, net: $587.0M
- Total other income and (deductions) → Interest expense other: $6.0M
- Other, net → Total other income and (deductions): $97.0M
- Operating income → Income (Loss) before income taxes: $883.0M
- Income (Loss) before income taxes → Income taxes: $154.0M
- Income (Loss) before income taxes → Net income: $729.0M

## Where the revenue comes from

### Segments (Segment Information - Reconciliation to Consolidated Financial Statements (Details))

| Member | Value | Share |
|---|---:|---:|
| Commonwealth Edison Co | $2.5B | 33.7% |
| Pepco Holdings LLC | $2.3B | 30.9% |
| Baltimore Gas and Electric Company | $1.4B | 18.6% |
| PECO Energy Co | $1.2B | 16.9% |
| Potomac Electric Power Company | $1.1B | 15.4% |
| Atlantic City Electric Company | $579.0M | 7.9% |
| Delmarva Power and Light Company | $556.0M | 7.6% |

The members do not sum to total revenue.

### ConsolidationItems (Segment Information - Reconciliation to Consolidated Financial Statements (Details))

| Member | Value | Share |
|---|---:|---:|
| Operating Segment | $7.3B | 100.0% |
| Corporate, Non-Segment | $470.0M | 6.4% |
| Intersegment Eliminations | -$484.0M | -6.6% |

The members sum to total revenue.

### LegalEntity (Segment Information - Electric and Gas Revenue by Customer Class (Details))

| Member | Value | Share |
|---|---:|---:|
| Commonwealth Edison Co | $2.5B | 33.7% |
| Pepco Holdings LLC | $2.3B | 30.9% |
| Baltimore Gas and Electric Company | $1.4B | 18.6% |
| PECO Energy Co | $1.2B | 16.9% |
| Potomac Electric Power Company | $1.1B | 15.4% |
| Atlantic City Electric Company | $579.0M | 7.9% |
| Delmarva Power and Light Company | $556.0M | 7.6% |

The members do not sum to total revenue.

### PublicUtilityRegulatedOrUnregulatedStatus (Segment Information - Electric and Gas Revenue by Customer Class (Details))

| Member | Value | Share |
|---|---:|---:|
| Regulated Operation | $2.5B | 33.8% |
| Other Regulated Revenue | -$4.0M | -0.1% |

The members do not sum to total revenue.

## Income statement, as filed

| Line | Q3 FY2026 | Of revenue |
|---|---:|---:|
| Electricity, US Regulated | $7.1B | 97.0% |
| Natural Gas, US Regulated | $251.0M | 3.4% |
| Revenues from alternative revenue programs | -$35.0M | 0.5% |
| **Total operating revenues** | $7.3B | 100% |
| Electricity, US Regulated | $2.9B | 39.1% |
| Natural Gas, US Regulated | $52.0M | 0.7% |
| Operating and maintenance | $1.6B | 21.4% |
| Depreciation and amortization | $991.0M | 13.5% |
| Taxes other than income taxes | $468.0M | 6.4% |
| **Total operating expenses** | $5.9B | 81.2% |
| Gain on sale of assets | $0 | 0.0% |
| **Operating income** | $1.4B | 18.8% |
| Interest expense, net | ($587.0M) | 8.0% |
| Related Party | ($6.0M) | 0.1% |
| Other, net | $97.0M | 1.3% |
| **Total other income and (deductions)** | -$496.0M | 6.8% |
| **Income (Loss) before income taxes** | $883.0M | 12.1% |
| Income taxes | $154.0M | 2.1% |
| **Net income attributable to common shareholders** | $729.0M | 10.0% |
| **Net income** | $729.0M | 10.0% |
| Actuarial losses reclassified to periodic benefit cost | (-$7.0M) | 0.1% |
| Pension and non-pension postretirement benefit plans valuation adjustments | $0 | 0.0% |
| Unrealized gain (loss) on cash flow hedges | $10.0M | 0.1% |
| **Other comprehensive income** | $17.0M | 0.2% |
| **Comprehensive income** | $746.0M | 10.2% |
| Basic average shares of common stock outstanding (in shares) | 1,035,000,000 |  |
| Assumed exercise and/or distributions of stock-based awards (in shares) | 2,000,000 |  |
| Diluted average shares of common stock outstanding (in shares) | 1,037,000,000 |  |
| Earnings Per Share, Basic | $1 | 0.0% |
| Earnings Per Share, Diluted | $1 | 0.0% |

## History

| Period | Revenue | Operating income | Net income | Operating cash flow | Capital expenditure | Free cash flow |
|---|---:|---:|---:|---:|---:|---:|
| FY2008 | $18.9B | $5.3B | $2.7B | $6.6B | $3.1B | $3.4B |
| FY2009 | $17.3B | $4.8B | $2.7B | $6.1B | $3.3B | $2.8B |
| FY2010 | $18.6B | $4.7B | $2.6B | $5.2B | $3.3B | $1.9B |
| FY2011 | $19.1B | $4.5B | $2.5B | $4.9B | $4.0B | $811.0M |
| FY2012 | $23.5B | $2.4B | $1.2B | $6.1B | $5.8B | $342.0M |
| FY2013 | $24.9B | $3.7B | $1.7B | $6.3B | $5.4B | $948.0M |
| FY2014 | $27.4B | $3.1B | $1.8B | $4.5B | $6.1B | -$1.6B |
| FY2015 | $29.4B | $4.4B | $2.3B | $7.6B | $7.6B | -$8.0M |
| FY2016 | $31.4B | $3.2B | $1.2B | $8.5B | $8.6B | -$92.0M |
| FY2017 | $33.6B | $4.4B | $3.9B | $7.5B | $7.6B | -$104.0M |
| FY2018 | $36.0B | $3.9B | $2.1B | $8.6B | $7.6B | $1.1B |
| FY2019 | $34.4B | $4.4B | $3.0B | $6.7B | $7.2B | -$589.0M |
| FY2020 | $16.7B | $2.2B | $2.0B | $4.2B | $8.0B | -$3.8B |
| FY2021 | $17.9B | $2.7B | $1.8B | $3.0B | $8.0B | -$5.0B |
| FY2022 | $19.1B | $3.3B | $2.2B | $4.9B | $7.1B | -$2.3B |
| FY2023 | $21.7B | $4.0B | $2.3B | $4.7B | $7.4B | -$2.7B |
| FY2024 | $23.0B | $4.3B | $2.5B | $5.6B | $7.1B | -$1.5B |
| FY2025 | $24.3B | $5.1B | $2.8B | $6.3B | $8.5B | -$2.3B |

Latest trend (the newest full year against the year before; a reading, not a forecast):

- Revenue: +5.3% (year before +6.0%): steady
- Operating income: +19.2% (year before +7.4%): accelerating
- Net income: +12.5% (year before +5.7%): accelerating
- Free cash flow: — (year before —): too short a history to read

## Operating figures stated in the filing

- PECO electric customers: 1,705,498 customers (as of 2026-09-30). "Total 1,705,498 1,707,802" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- PECO electric customers: 1,707,802 customers (as of 2025-09-30). "Total 1,705,498 1,707,802" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- BGE electric customers: 1,359,079 customers (as of 2026-09-30). "Total 1,359,079 1,349,869" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- BGE electric customers: 1,349,869 customers (as of 2025-09-30). "Total 1,359,079 1,349,869" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- Pepco electric customers in Maryland: 611,690 customers (as of 2026-09-30). "Total 611,690 609,734" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- Pepco electric customers in Maryland: 609,734 customers (as of 2025-09-30). "Total 611,690 609,734" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- DPL electric customers (Maryland and Delaware): 565,493 customers (as of 2026-09-30). "Total 565,493 561,443" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- DPL electric customers (Maryland and Delaware): 561,443 customers (as of 2025-09-30). "Total 565,493 561,443" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- ACE electric customers: 578,756 customers (as of 2026-09-30). "Total 578,756 576,137" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- ACE electric customers: 576,137 customers (as of 2025-09-30). "Total 578,756 576,137" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- BGE natural gas customers: 707,442 customers (as of 2026-09-30). "Total 707,442 704,376" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- BGE natural gas customers: 704,376 customers (as of 2025-09-30). "Total 707,442 704,376" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- PECO electric retail deliveries in the quarter: 10,135 gwh (as of 2026-09-30). "10,135 10,010 1.2 % (1.8) % 27,772 27,768 - % (2.0) %" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- PECO electric retail deliveries in the quarter: 10,010 gwh (as of 2025-09-30). "10,135 10,010 1.2 % (1.8) % 27,772 27,768 - % (2.0) %" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)

## Key insights

### Rate-case write-offs turned rising revenue into falling operating profit

Revenue rose 9.2% to $7.32B, but operating and maintenance expense climbed to 21.4% of revenue from 17.5%, so operating income fell 8.1% to $1.38B.

Operating and maintenance expense was $1.56B in the quarter against $1.17B a year earlier, 21.4% of revenue against 17.5%. Total operating expenses rose 14.1% to $5.94B while revenue rose 9.2%, so the operating margin fell to 18.8% from 22.4%. _(from the filing)_
The filing lists "Higher write-offs associated with Pepco's Maryland Base Rate Case at PHI" first among the reasons earnings fell, then higher storm costs at PECO, where storm cost deferrals recognized a year earlier did not recur, and higher project impairments at BGE. The regulatory charge represents "the disallowance of certain capitalized costs". Pepco produced $1.13B of revenue, 15.4% of the total, yet its Maryland order set the direction of the whole quarter. _(from the filing)_
The company removes regulatory matters and project impairments from its adjusted earnings measure, and on that view earnings rose slightly rather than fell. Readers comparing the two should know the gap is these one-time charges, not a change in the underlying delivery business. _(from the filing)_
Analysis: a disallowance is the sharpest cost in the regulated model. Spending a commission refuses to put into rates is expensed at once, while approved spending earns its return over many years. One order can therefore outweigh a quarter of rate increases elsewhere. _(analysis)_

### Interest now absorbs 42.6% of operating income

Net interest rose to $587M as operating income fell to $1.38B, so financing took 42.6% of operating profit against 35.4% a year earlier.

Net interest expense was $587M against $531M a year earlier, up 10.5%, while operating income fell 8.1%. Pre-tax income therefore fell 14.3% to $883M, a steeper drop than at the operating line. The filing lists higher interest expense at PECO, PHI and Exelon Corporate among the reasons earnings fell, and ties it mainly to more outstanding debt. _(from the filing)_
Other, net income softened the fall: $97M against $68M, which the filing ties mainly to higher AFUDC equity, the return a utility capitalizes on construction in progress. Income taxes were $154M against $155M, 17.4% of pre-tax income against 15.0%, so taxes gave no relief. Net income fell 16.7% to $729M. _(from the filing)_
Analysis: for a utility, debt is part of the business model, since it pays for the assets that earn the allowed return. The ratio matters because allowed returns are reset in rate cases that lag, while the cost of each new bond reflects the market on the day it is issued. _(analysis)_

### Revenue grew on rates and recovered costs, not on customers

BGE's electric customers grew 0.7% and PECO's slipped 0.1%, yet revenue rose 9.2%: approved rates and pass-through costs, not demand, move the top line.

BGE served 1,359,079 electric customers at quarter end against 1,349,869 a year earlier, up 0.7%. PECO served 1,705,498 against 1,707,802, down 0.1%, and its retail deliveries rose 1.2% to 10,135 GWh. Group revenue rose 9.2% to $7.32B over the same period. _(from the filing)_
Purchased power cost $2.87B against $2.65B, 39.1% of revenue against 39.4%, growing in step with revenue because it is billed to customers at cost. Revenues from alternative revenue programs subtracted $35M against $220M a year earlier, 0.5% of revenue against 3.3%, so a smaller regulatory adjustment also lifted the reported line. The filing credits approved rate increases at ComEd, BGE and PHI on the earnings side. _(from the filing)_
Analysis: the 9.2% is mostly a change in price and in recovered cost, not in volume. That makes revenue growth a weak guide to profit for this company: this quarter the top line grew while operating income fell. _(analysis)_

### Spending outruns cash, and new shares dilute per-share earnings

Capital spending was 136.4% of operating cash flow in FY2025, and with 2.4% more shares this quarter, diluted earnings per share fell 18.6% to $0.70.

Capital expenditures were $8.53B in FY2025 against operating cash flow of $6.25B, 136.4%, against 157.5% in FY2023. Free cash flow was negative in every fiscal year from FY2019 through FY2025, at negative $2.28B in FY2025. _(from the filing)_
Basic average shares were 1,035M against 1,011M a year earlier, up 2.4%. Net income fell 16.7% to $729M, and diluted earnings per share fell further, to $0.70 from $0.86, down 18.6%. _(from the filing)_
Caveat: the filing reports cash flow year to date, and the quarter's own cash flow could not be separated from it, so this reading uses full fiscal years for the spending comparison. _(from the filing)_
Analysis: the gap between spending and cash generated is filled with debt at the subsidiaries and equity at the parent. That is normal for a growing utility, but per-share results then depend on new investment earning its allowed return fast enough to cover both the added interest and the added shares. _(analysis)_

### Competitive edge

- **Energy costs pass straight through to customers** Purchased power was 39.1% of revenue against 39.4% a year earlier, because it is recovered at cost, so energy prices barely reach profit.
- **Approved investment keeps lifting the earnings base** Operating income rose 28.0% from FY2023 to FY2025, and the filing ties ComEd's higher earnings to a larger rate base from new investment.
- **No single commission sets most of the revenue** ComEd brought in 33.7% of revenue, PHI 30.9%, BGE 18.6% and PECO 16.9%, spreading rate decisions across several state regulators.

### What to watch

- **Regulators can refuse costs already spent** The filing says recovery of new investment "may be delayed or limited", and the Pepco Maryland write-offs show that risk landing in a single quarter.
- **Lower credit ratings raise the cost of growth** S&P lowered BGE's rating and Moody's lowered PECO's this year, while interest already takes 42.6% of operating income against 35.4%.
- **Affordability is starting to cap investment plans** PECO withdrew its electric and gas rate cases this year and says future investment will be informed by customer affordability considerations.

## Investor view

**Rate-case write-offs and storm costs cut Exelon's operating margin to 18.8% in a quarter of rising revenue**

### How it makes money

Exelon is a holding company for regulated wires utilities: ComEd in northern Illinois, PECO around Philadelphia, BGE in Baltimore, and Pepco, DPL and ACE under Pepco Holdings (PHI). The filing describes it as engaged in "the energy transmission and distribution businesses". Its utilities file rate cases "to recover their costs and earn a fair return on their investments". ComEd brought in $2.47B of the quarter's $7.32B revenue, 33.7%, and PHI $2.26B, 30.9%. _(from the filing)_
About two fifths of revenue passes straight through. Purchased power cost $2.87B in the quarter, 39.1% of revenue, against $2.65B and 39.4% a year earlier. Customers may buy supply from competitive suppliers, and the filing says that case "is treated as a pass through", so "financial results are not impacted". Power bought for customers who stay with the utility is recovered from them through riders. _(from the filing)_
Most distribution revenue is decoupled from usage. For ComEd the filing says operating revenues "are not intended to be impacted by abnormal weather, usage per customer, or number of customers". BGE, Pepco, DPL in Maryland and ACE have similar mechanisms that still move with customer count: BGE served 1,359,079 electric customers at quarter end against 1,349,869 a year earlier. PECO and DPL's Delaware business are the exceptions, where weather still moves revenue. _(from the filing)_
Transmission is the second earnings stream. Under FERC-approved formulas, transmission revenue "varies from year to year based upon fluctuations in the underlying costs and capital investments being recovered", and the filing reports higher transmission revenue at each utility on a larger asset base. Depreciation, the cost of the assets already in rates, was $991M in the quarter against $912M a year earlier. _(from the filing)_

### What shifted

Revenue rose 9.2% to $7.32B but operating expenses rose 14.1% to $5.94B, so operating income fell 8.1% to $1.38B and the operating margin dropped 3.5 points to 18.8%. Operating and maintenance expense did most of it: $1.56B against $1.17B a year earlier, or 21.4% of revenue against 17.5%. _(from the filing)_
The filing names the causes first: "Higher write-offs associated with Pepco's Maryland Base Rate Case at PHI", higher storm costs at PECO because storm cost deferrals recognized a year earlier did not recur, and project impairments at BGE. The Maryland order granted Pepco less than it asked for and disallowed certain capitalized costs. The company removes these items from its adjusted earnings measure as regulatory matters and project impairments. _(from the filing)_
Below operating income the squeeze continued. Net interest expense was $587M against $531M a year earlier, 42.6% of operating income against 35.4%; the filing points to higher rates and more debt at PECO, PHI and the parent. Net income fell 16.7% to $729M, and diluted earnings per share fell to $0.70 from $0.86, spread over 1,037M diluted shares against 1,013M. _(from the filing)_
Part of the revenue gain is a smaller regulatory adjustment, not new demand. Revenues from alternative revenue programs subtracted $35M from revenue against $220M a year earlier. Rider revenue that matches pass-through costs also rose, with purchased power at $2.87B against $2.65B. On the earnings side, the filing credits approved rate increases at ComEd, BGE and PHI, and favorable weather at PECO. _(from the filing)_

### Risks in the filing

Regulatory recovery. The utilities "operate in rate-regulated environments in which the amount of new investment recovery may be delayed or limited", and recovery takes place over an extended period. Rate case outcomes flow straight into current and future results, as the Pepco Maryland write-offs did this quarter. _(from the filing)_
Access to capital. The filing calls the businesses "capital intensive" and says financing on reasonable terms depends on credit ratings and market conditions. S&P lowered BGE's rating and Moody's lowered PECO's this year. A downgrade does not trigger default or prepayment, the filing says, but could raise fees and interest charges and lead counterparties to demand collateral. _(from the filing)_
Legislation and federal rulings. New laws in Maryland, New Jersey and Delaware pause certain rate filings, require membership in a regional transmission organization that invites challenges to a transmission incentive adder, and cap recoverable discretionary spending at DPL. FERC's PJM cost allocation order could be material. IRS rulings on tax loss carryforwards could materially change how deferred taxes are treated in rates at every utility except PECO. _(from the filing)_
Cash flow drivers. The filing says future cash flows "may be affected by the economy, weather conditions, future legislative initiatives, future regulatory proceedings with respect to their rates or operations, and their ability to achieve operating cost reductions". It also lists higher credit loss expense at BGE among the reasons nine-month earnings fell. The quarterly report states its risk factors are unchanged from the annual report. _(from the filing)_
The numbers already show two of these risks: regulatory recovery, in the write-offs behind the operating margin decline, and the cost of capital, in interest growing faster than operating income. Weather, the risk most readers expect from a utility, barely registers, because decoupling and pass-through pricing remove most of it. _(analysis)_

## Founder view: mechanisms

### Capital spent becomes the earnings base

A regulated utility earns an allowed return on its rate base, the value of assets in service that regulators accept. Spending more on wires, poles and substations raises the base and, once approved, the return on it. Profit is set by the amount of prudent investment and the allowed return, not by the price a market would bear. Growth comes from building, and the bill is the constraint. _(analysis)_

### Pass costs through, decouple revenue from volume

Exelon earns on delivery, not on the energy delivered. Power bought for customers is billed at cost, and decoupling mechanisms reset distribution revenue to an approved level whatever the weather or usage. Commodity risk sits with customers and suppliers; the utility keeps a steady fee for running the network. _(analysis)_

### The regulator holds the pricing power

Because prices come from rate cases, the main risk is not competition but disallowance: a commission refusing to put money already spent into rates. When that happens the cost is written off at once, while approved recovery on other spending arrives over years. The relationship with each regulator, and the timing of filings, decide the earnings line. _(analysis)_

### Growth funded by new debt and shares

Because spending runs ahead of the cash the business generates, a regulated utility grows by raising capital continuously: bonds at the subsidiaries, equity at the parent. The allowed return has to exceed the cost of that capital, and each new share dilutes the per-share result until the investment it paid for is earning. _(analysis)_

## Member research

Signed-in members read, on the page: what Exelon's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Exelon 10-Q for the period to 2026-09-30: https://www.sec.gov/Archives/edgar/data/1109357/000110935726000095/ (2026-10-30)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02 · as of 2026-11-02