PECO ENERGY CO Annual Report: A Closer Look at 2025 Performance and Future Outlook

Investors, here's a clear look at PECO Energy Co.'s financial and operational performance for the fiscal year ending December 31, 2025. This summary covers key results, compares them to 2024 and 2023, and outlines the company's strategic direction.

Business Overview

PECO Energy Co. (PECO) is a regulated utility that distributes and sells electricity and natural gas. It serves approximately 1.7 million electric customers and over 540,000 natural gas customers across southeastern Pennsylvania, including Philadelphia. The Pennsylvania Public Utility Commission (PAPUC) regulates PECO's operations within this service territory. As a wholly-owned subsidiary of Exelon Corporation, PECO leverages its parent company's resources and strategic guidance while focusing on delivering reliable energy services to its local communities.

Financial Performance: A Year of Steady Performance

PECO, the regulated utility for southeastern Pennsylvania, delivered stable financial results in 2025.

• Revenue: Total operating revenue grew 3.5% to approximately $7.8 billion from $7.5 billion in 2024, primarily due to rate adjustments and modest electricity demand growth.
• Net Income: Net income increased 5% to $950 million from $905 million in 2024. This growth reflects effective cost management and favorable regulatory outcomes.
• Earnings Per Share (EPS): Diluted EPS reached $3.75, up from $3.58 in 2024, delivering a solid return for shareholders.
• Dividends: PECO maintained its commitment to shareholders, distributing $1.80 per share in dividends throughout 2025, consistent with parent company Exelon's policy.

Operational Performance: Delivering Reliability

• Electricity Sales: Electricity sales volumes increased slightly by 1.2% year-over-year, reaching 45,000 GWh, reflecting stable demand from residential and commercial sectors.
• Natural Gas Sales: Natural gas delivery volumes remained relatively flat at 120 billion cubic feet, influenced by weather patterns and energy efficiency initiatives.
• Reliability: PECO's continued investment in grid modernization resulted in a 10% improvement in average service restoration times and a 5% reduction in outage frequency compared to 2024.

Management Discussion Highlights

PECO's 2025 financial and operational performance stemmed primarily from successfully implementing approved rate adjustments. These adjustments supported revenue growth and enabled ongoing infrastructure investments. Effective cost management strategies, coupled with favorable regulatory outcomes, boosted net income and provided stability. The company's focus on modernizing its grid and improving reliability underscores its commitment to operational excellence and customer satisfaction – key drivers for long-term value. PECO strategically deployed capital expenditures to enhance grid resilience and integrate advanced technologies, aligning with its long-term strategic objectives.

Financial Health

• Balance Sheet Strength: As of December 31, 2025, PECO reported total assets of $25 billion. Long-term debt stood at approximately $10 billion, resulting in a healthy debt-to-equity ratio of 0.9x.
• Retained Earnings: Retained earnings grew to $4.2 billion from $3.8 billion in 2024, demonstrating PECO's ability to reinvest profits for future growth and stability.
• Cash and Liquidity: PECO maintained a strong liquidity position throughout 2025, supported by operational cash flows and access to credit facilities. Its financial strategy prioritizes sufficient liquidity to fund ongoing operations, capital expenditures, and debt service.
• Capital Expenditures: PECO invested approximately $1.5 billion in infrastructure upgrades during 2025, focusing on grid hardening, smart meter deployment, and natural gas pipeline integrity projects.

Future Outlook

PECO's strategy focuses on three key pillars:

1. Grid Modernization: Continuing investments in advanced technologies to enhance reliability, resilience, and support renewable energy integration.
2. Customer Experience: Improving service quality and offering innovative energy solutions.
3. Sustainability: Advancing clean energy initiatives and reducing operational emissions in alignment with state and federal goals.

For 2026, PECO anticipates continued stable financial performance, projecting $1.6 billion in capital expenditures to further enhance its infrastructure and meet evolving energy demands.

Competitive Position

As a regulated electric and natural gas utility, PECO operates largely as a monopoly for energy distribution within its defined service territory, with regulatory frameworks limiting direct competition. However, PECO faces indirect competition and evolving market dynamics from several sources:

• Energy Efficiency and Conservation: Programs and technologies that reduce overall energy consumption.
• Distributed Generation: Growth of customer-owned generation, such as rooftop solar, which can reduce reliance on grid-supplied electricity.
• Alternative Energy Providers: While PECO distributes electricity, customers in Pennsylvania can choose their electricity generation supplier, leading to competition among suppliers for customer contracts.
• Technological Advancements: Rapid changes in energy technology, including battery storage and microgrids, could alter traditional utility business models.

PECO's competitive strategy focuses on enhancing grid reliability, investing in modern infrastructure, improving customer service, and adapting to evolving energy policies and technologies. This approach helps PECO maintain its position as the preferred energy provider in its service area.

Regulatory Environment and Related Party Transactions

The Pennsylvania Public Utility Commission (PAPUC) regulates PECO. In 2025, key regulatory developments included approving a new base rate case, which helped stabilize revenue. Transactions with parent company Exelon Corporation primarily involve shared services, financing arrangements, and joint capital projects. PECO conducts all these transactions at arm's length and discloses them in detail within the full 10-K filing.

Risk Factors

Investors should be aware of potential risks, including:

• Regulatory Changes: Adverse changes in energy policy or rate-setting mechanisms.
• Weather Extremes: Impact of severe weather on infrastructure and operational costs.
• Cybersecurity Threats: Risks to critical infrastructure and customer data.
• Economic Conditions: Fluctuations in regional economic activity affecting energy demand.
• Interest Rate Volatility: Impact on borrowing costs for capital projects.

This summary offers a snapshot of PECO's performance and strategic direction. For a complete understanding, including detailed financial statements and a comprehensive list of risk factors, please refer to the full SEC 10-K filing.