Exelon CEO: Grid 'Should Not Have To Operate This Close To The Edge' As Demand Surges

Exelon Corporation, the parent company of utilities serving millions across the Midwest and Mid-Atlantic, reported strong second-quarter earnings Thursday while its CEO issued a stark warning about the nation's power grid. Calvin Butler told investors the system is under dangerous strain as demand outpaces supply, a situation he said is driving up costs for customers and threatening reliability.

The Chicago-based energy giant posted adjusted operating earnings of $0.43 per share for the quarter, up from $0.39 a year ago, driven by distribution and transmission rate increases. The company reaffirmed its full-year 2026 guidance of $2.81 to $2.91 per share and its long-term earnings growth target of 5% to 7% annually through 2029.

Why Exelon Says The Grid Is 'Running Too Thin'

Butler pointed to extreme July heat that pushed peak demand on the PJM Interconnection grid to 168 gigawatts, causing power prices to surge tenfold from roughly $80 to $800 per megawatt-hour. PJM, the regional transmission organization covering 13 states including Illinois and parts of the Midwest, activated emergency procedures to keep the lights on.

“The grid held, and our teams did their job, but the system should not have to operate this close to the edge,” Butler said on the company’s earnings call. He noted that PJM’s most recent capacity auction fell short of reliability requirements by about 6.8 gigawatts, the equivalent of roughly seven nuclear reactors of missing supply.

What This Means For Iowa And The Midwest

While Exelon does not operate in Iowa, the company’s warnings carry weight for Midwestern energy markets. Exelon is a major player in transmission development, including recent bids in the MISO (Midcontinent Independent System Operator) region, which covers Iowa and parts of 14 other states. The company submitted two new competitive transmission bids in partnership with Invenergy for MISO’s Tranche 2.1 process, with decisions expected in the fourth quarter of 2026.

Carim Khouzami, Exelon’s executive vice president of transmission and development, highlighted the company’s expertise in high-voltage 765-kilovolt lines, which are increasingly sought by grid operators. “We are one of very few transmission operators that own and operate those types of lines today,” Khouzami said, positioning Exelon to capture more transmission projects across the region.

Data Center Demand: A 36-Gigawatt Pipeline

Exelon refined its data center project pipeline to 36 gigawatts, down from a previous 43 gigawatts, as the company uses new financial tools to filter out speculative projects. CFO Jeanne Jones said the company’s Transmission Security Agreements, which require large-load customers to post collateral, have helped “weed out speculative projects” and provide “proactive insight into what is real.”

Of the 36 gigawatts, 4 gigawatts are already backed by $1 billion in financial collateral. The company’s $41 billion capital plan through 2029 remains unchanged, with about $10 billion budgeted for 2026 alone to support grid reliability and customer growth.

Battery Storage: A $1 Billion Bet On New Jersey

Exelon announced a major new 500-megawatt battery storage project in Pittsgrove, New Jersey, representing a $1 billion investment. The project, developed in partnership with Invenergy, would be large enough to power approximately 400,000 homes and is expected to deliver over $700 million in net benefits to customers through PJM market revenues and deferred transmission investments.

“Had our battery project been operating during the July 2 through July 5 heat wave, ACE customers would have realized approximately $7.5 million of energy cost savings,” Butler said, emphasizing that storage can provide fast, flexible capacity without requiring customers to wait years for new power plants.

Regulatory Activity And Rate Cases

Exelon is pursuing multiple rate cases across its service territories. In Maryland, BGE filed a $156.1 million revenue requirement increase on July 2, with a decision expected in January 2027. Delmarva Power in Delaware is seeking a $45.4 million increase, with interim rates already in effect. ComEd’s proposed $15.3 billion grid plan through 2031 remains under review, with a final order due by December 15.

In Pennsylvania, where Exelon withdrew a rate case for its PECO utility earlier this year, the company said it is in constructive discussions with Governor Josh Shapiro’s office and state regulators. “We believe that investment in our system is required to maintain the reliability and growth that they expect,” Butler said, adding that PECO remains a top performer nationally for reliability.

Financial Strength And Shareholder Value

Exelon has completed 86% of its 2026 debt financing needs and priced 37% of its planned equity needs through 2029 via forward contracts. The company expects average credit metrics of approximately 14% through 2029, supporting its investment-grade ratings and ability to fund growth.

“We are not waiting for the market to solve this on its own,” Butler said. “We are bringing forward actionable solutions that strengthen reliability, improve affordability, and give our states more tools to shape their energy future.”

Photo: The Motley Fool