Good morning. My name is Theresa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Exelon Corporation Second Quarter 2011 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Ms. Stacie Frank to begin. Please go ahead, ma'am.

Thank you, and good morning, everyone. Welcome to Exelon's Second Quarter 2011 Earnings Conference Call. Thank you for joining us today. We issued our earnings release this morning. If you haven't received it, the release is available on the Exelon website. The earnings release and other matters we will discuss in today's call contain forward-looking statements and estimates that are subject to various risks and uncertainties, as well as adjusted non-GAAP operating earnings. Please refer to today's 8-K and Exelon's other filings for a discussion of factors that may cause results to differ from management's projections, forecasts and expectations and for a reconciliation of operating to GAAP earnings. In addition, during the call, we will be discussing the proposed merger of Exelon Corporation and Constellation Energy Group, Inc. Today's discussion does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval. Furthermore, today's discussion is not a substitute for the registration statement on Form S-4 that Exelon filed with the SEC on June 27, 2011, that included a preliminary joint proxy statement prospectus or for the definitive joint proxy statement prospectus and other relevant documents that Exelon will send to a security holder in connection with the proposed merger. For important additional information regarding the proposed merger, including the risks and uncertainties associated with it, please refer to the earnings release and today's 8-K, as well as the joint proxy statement prospectus. Leading today's call are John Rowe, Exelon's Chairman and Chief Executive Officer; and Matt Hilzinger, Exelon's Senior Vice President and Chief Financial Officer. They are joined by other members of Exelon's senior management team, who will be available to answer your questions. We've scheduled 60 minutes for the call, and I'd like to now turn the call over to John Rowe, Exelon's CEO.

Thank you, Stacie, and good morning, everyone. As you know from our earnings release we had another fine quarter. Our operating earnings were $1.05 per share, which I think significantly exceeded your consensus expectations. We have had a very busy summer at both ComEd and PECO with extreme heat and violent thunderstorms. One in July, on ComEd, knocked out over 850,000 customers, and it took us nearly a week to get them all back. But the ComEd system is performing better than ever before, and handled without major trouble, a new all-time peak of 23,753 megawatts on the 20th of July. ComEd got a reasonable result in class rate case considering the appellate court decision that you had all heard about 6 or 9 months ago. And it's continuing its work to get Illinois Senate Bill 1652 enacted. This legislation would support a broad infrastructure improvement program and finally bring some real regulatory stability to Illinois. We simply don't know what the odds are of the governor signing it. He hasn't been sounding promising to date, and we don't know whether the legislature would overturn the veto. It is certainly possible that they would because they want these jobs very badly. In Philadelphia, PECO continues to produce genuinely exceptional financial results. And it has handled its extreme heat superbly. PECO also hit an all-time peak last Thursday and again topped it on Friday. During the second quarter, Exelon Generation's capacity factor in its nuclear fleet was 89.6%, largely as a result of 103 refueling outage days at 4 units. For the first 6 months of the year, the capacity factor was 92.2%. And in spite of a year of -- with an extraordinary number of refueling outages, our nuclear group continues to strive to achieve its usual 93% this year.…

Thank you, John. Good morning, everyone. I'll start my remarks this morning on Slide 10, and follow with some additional commentary on our second quarter results and update on hedging and recent regulatory activity. Earnings release issued this morning provide significant detail about our second quarter results. We are pleased to deliver another quarter of financial results that met or exceeded your expectations. Exelon's second quarter operating earnings were $1.05 per share, compared to $0.99 per share in the second quarter of 2010. The earnings drivers for all 3 operating companies are highlighted on Slides 11, 12 and 13. Our second quarter results include the recognition of a onetime tax benefit of $0.07 per share at Exelon, resulting from a provision under the Energy Policy Act of 2005 that allows transfers of cash or investments from our nonqualified nuclear decommissioning trust funds to our qualified nuclear decommissioning trust funds, generating a tax deduction at the time of transfer. Exelon originally exercised this provision in March of 2008 and recognized a significant cash benefit based on the proposed regulations back in 2008. However, since that time, the IRS issued final regulations with provisions that allow us to carry back the deduction for 2 additional years from 2008 to 2006, resulting in earnings of $0.07 per share from the accumulation of interest and lower tax expense. We also expect to recognize about $0.01 per share benefit in the second half of the year for this item as well. Moving on to Slide 14 for an update on power markets and hedging status. Power prices in both the Mid-Atlantic and Midwest have recovered steadily since hitting their lows in late February. As you can see from the chart on the lower left, Midwest heat rates improved quite significantly as power prices increased despite…

[Operator Instructions] Your first question comes from Jonathan Arnold with Deutsche Bank.

My question relates to the nuclear task force report and then the suggestions in there that it might be to put hardened vents on the Mark 2 containments. And I think we're right, some of those are Exelon plants. You have any indications you can give us on whether -- what the cost of that might be if that was the way they head with this?

Chris or Chip, we've done some of that altogether. Would you flesh that out for me?

Sure. This is Chip speaking. We have started our technical reviews if, in fact, those vents are deemed to be required. And we don't yet have any firm price numbers, but they're not extraordinary costs. These are not significant engineering or construction tasks, so I can just answer qualitatively that those should not be numbers that you would be able to discern.

Chip, you've done some of those already, haven't you?

Yes. Not on Mark 2s, on Mark 1s. But there are sufficient parallels that we can start from a pretty sound basis.

Could you give us a sense of what it might have cost on the Mark 1s and what the date of those costs were, roughly?

They were early enough, decades ago, starting through the 90s and such that I wouldn't care to extrapolate those costs up forward. But again, they were not large numbers, Jonathan, in the big scheme of things.

So could we be -- are we talking tens of millions or single-digit millions?

I don't know yet, but neither -- again, neither will be big movers for us.

Okay. And then my second question, if I may, on -- in the event that the legislation in Illinois was -- doesn't sort of get over the finish line, what would the likely timing of another rate filing be?

Ann, would you pick that up?

Sure. We are looking at probably early 2012 for that, but we're still in the process of making decisions. Obviously, we're working hard on the legislation, and that's our first choice at this point, John. That's roughly the timing, Jonathan.

Your next question is from Greg Gordon of ISI Group.

So the -- your -- on Page 22, your estimated open gross margin is based on forward curves from June 30. But I think we all know since the CSPA (sic) [CSAP] Rule came out, power prices have moved up several dollars since then. So are you seeing the same thing that I'm seeing in that prices are up a few dollars, therefore, all things equal, your open gross margin will be modestly higher? And then second, the real big question is, do you think that really truly reflects the fundamental impact of CSPAR? Do you think that just reflects the fact that we have a heatwave? How much more, if any, do you think sort of fundamental pricing needs to move as a reflection of what you see in these rules?

Greg, Ken Cornew is good at telling you whether the hot food wants a ham or bacon, so he will answer that.

Greg, we have seen the days immediately following the announcement of the Cross-State Air Pollution Rule, we saw the PJM markets move up about $1 and the ERCOT move up a little more strongly, about $2. Since then, we continue to see some movement. And now, the markets are more like $2 to $3 up, particularly in the out years, in '14, '15. I think the majority of that move does relate to the announcement of that rule. There has been, also, in the market, a realization that the fundamentals that make their way into the spot are real, and they're likely to continue in the forward market. So we'll be seeing some heat rate move up and corresponding price move up in the markets because of that. And that wasn't just the heatwave. That started in the middle of the second quarter, backed off a bit with the drop in gas, but has recovered again. So is there more? Potentially. We need to see exactly how emission allowances start trading [indiscernible] start figuring out what kinds of allowances they're going to need to dispatch their plants, but we haven't seen that yet in the market.

Great. And on the flip side of that, we're starting to hear a lot about the amount of productive gas capacity coming online in the Marcellus Shale and that, to some degree, that is not getting to market because of liquids and transmission capacity being constrained. But I know there's a lot of money flooding that zone to try to fix that. Are you concerned about gas basis being a headwind as we get into '12 and '13 that could mitigate the positive impacts of the things that you just discussed?

Well, as you know, Greg, the basis numbers had decreased substantially since the onslaught of eastern gas development. To the extent Marcellus Shale continues to replace shale from Haynesville or other more standard production from the Gulf, you might see a little more decline in the basis, but that gas market, for the last 9 months or so, has been relatively stable. Supply and demand seem to be well in balance. Storage figures are a little lighter than they were a year ago. We feel like the gas market likely will stay in this current range for a good amount of time.

The next question is from Steve Fleishman of Bank of America.

John, I think you mentioned on the Air Toxics Rule that the -- you expect the EPA to hold to their schedule and that -- and then you said they had the -- you feel they have the full support of the administration. Any sense of kind of data points that further indicate that?

Well, I think that there was a quote from either the President himself or his staff recently. Kathleen, do you remember exactly what they said?

Well, there was -- I think you're probably recalling the statement from the Chief of Staff, and that was a few weeks back, indicating that the White House was supporting EPA. And then more recently, in the context of the appropriation discussion, again a reflection that they would veto a big pull back from EPA and its ability to finalize the rules.

Okay. And then I guess one other question, just on this RITE transmission line. Could this basically allow NiHub Power to potentially get into SinHub or ADHub [ph]? And how many megawatts could potentially go across this line?

Chris, will you pick that up?

John, this is Ron DeGregorio. I'll take that. This line will allow for a greater flow of energy and power from the various points that you mentioned. The ultimate size and power flow of that will happen as it relates to the specific design, but we're talking nominally, 3,000 to 4,000 megawatts.

3,000 to 4,000 megawatts. Okay.

The next question is from Jay Dobson of Wunderlich Securities.

A question for you, going back to the nuclear task force, you indicated that both the diligent process but perhaps more importantly a fact-based process was your hope. And I was just wondering if you could square that with at least the Chairman's desire of the NRC to get this sort of rules out in 90 days similar to the task force report. It would seem to almost make that fact-based approach maybe a little more challenging, if you had thoughts there.

Well, I can try. The Chairman clearly wishes to look decisive. None of us wish to stand in the way of being decisive about these things as long as they got the facts in. The full regulatory staff was not included in the preparation of the 90-day report. It is almost inconceivable that the Chairman and the other members of the commission won't want to hear from their own in-house experts. In addition, they have to give the industry some opportunity to comment on specific proposals. I can assure you, we won't do that just for the point of delay. We would like early clarity as much as the public would like early clarity. But these are very complicated things, and it's my guesstimate that the commission is going to need more than 90 days in at least more complex areas. Chip, what would you like to add to that?

I think that pretty much covers it. We're watching the other commissioners weigh in at this point in time. And I think from what we can tell, we'll see more clarity around the response to the question in relatively short order is my belief, but until such time the commission finishes weighing in, I don't think we'll know more about timelines or the degree to which the public will participate in the process.

No, that's very helpful. And I guess for clarity, your cost estimates of compliance with whatever new rules, you won't be willing to make that available to folks like us that are interested, probably about the time the rules are made. So to the extent it takes longer than 90 days, we should anticipate that it'll take you that long to come up with the cost estimates.

When we can give you a number that is with -- at a breadbox level of accuracy, we'll give it to all of you. I mean right now, all we know is that some of our worst fears, particularly about the fuel pools, do not appear to be happening. And so that's very good thing, indeed. But we just can't give you a number yet because we don't know what we have -- what they have in mind. The vent hardening is not a very big issue, but some of these other things could cost significantly more. And you won't have to ask. When we know, we'll get it to all of you as fast as we can.

And then, Matt, just a couple of clarifications. What was the storm cost in the second quarter? I think you were saying the $0.04 you would incur for the July storms in the third quarter. But I know you had $0.03 in the year ago second quarter, and I wasn't clear what the second quarter of '11 had for storm costs?

I think it's around $0.01 to $0.02 of storm costs in the second quarter. So we had some storms in June and probably estimated to be around $0.02, June.

Okay, got you. So we got $0.01 or so benefit from -- relative to a year ago. And then on the tax issue, Matt, you said there'd be another $0.01 in the second half. Is there a reason to believe that wouldn't be in the third quarter or -- just to understand your characterization of the second half versus the first.

Yes, the $0.01 is connected to the first $0.07. And it's just -- it's waiting for some final clarification from the IRS. So it's going to largely be dependent upon that. We like to see it in the third quarter, but it could move to the fourth. But it's dependent upon the IRS.

Your next question is from Hugh Wynne of Sanford Bernstein. Hugh Wynne - Sanford C. Bernstein & Co., Inc.: I had a question for Chip. You gave us a point of reference for thinking about the cost of the vent hardening on the Mark 2s. The NRC's report had 3 principal recommendations, and I was hoping that you might be able to give us a way to think about the capital or O&M costs associated with those that they're looking for you to ensure that you've got adequate protection against seismic and flooding throughout your plants, they're looking for you to enhance station blackout mitigation capability and finally, they're looking for you to strengthen the emergency preparedness to address prolonged station blackout. And just if I reference back, say, to what occurred after 9-11, is there some way that you could give us parameters to think about the O&M or capital costs associated with those?

I don't know how much clarity, additional clarity, I will able to provide. But I don't know if you were able to listen to the call that NEI had yesterday on largely the same subject. And one significant differentiator that we do see thus far with the 90-day report versus actions that were required post-9-11 is that unlike the events of a decade ago when our principal corrective actions involved adding significant security staff and -- significant additions to security staff, which, as you know, are ongoing O&M expenses versus highly concentrated on once-and-done capital improvements. From what we can see this time around, the task force largely concentrates on the physical attributes of the power plants, which tend to lend themselves to capital versus O&M improvements. I do know that we have completed our first round of seismic and flooding walk downs at our power plants. We did that several months ago as an immediate action post-Fukushima. And we have not found significant deficiencies with our current design basis features, so I am not anticipating at all any large expenditures around the minor deficiencies that we did find. But until such time NRC is more specific about whether or not further strengthening of our seismic or flooding defenses will be required, I can't really speculate the costs. I do know that again, though, those would lend themselves to onetime capital costs instead of ongoing O&M commitments that we'll have to make year-over-year. Hugh Wynne - Sanford C. Bernstein & Co., Inc.: That's helpful, actually. On the enhancing the statement -- station blackout mitigation capability, it seems to me that the types of steps that NRC is got in mind are not dissimilar to those that you probably had to take when they looked at the potential for an airplane impact on your nuclear power plants after 9-11, although this time, they're also contemplating, I guess, a 2-station blackout, 2-unit black out. When I went back and looked at your CapEx numbers at ExGen in the years following 9-11, I really couldn't see a major upward move in capital expenditures. Is that a fair read across the likely implications of these new guidelines?

I think that is a fair read across. Now -- and as you can tell, both John and I are both hedging our answers with there is little definition to what the specific actions that we'll undertake actually are. But I think you have that directionally correct. It appears thus far that we'll end up doing, generally speaking, more of the same in improving the robustness of our layers of protection. And certainly, not starting from a redesign of significant safety systems or anything like that.

Hugh, I don't know if this is helpful or not, but it's the best I can do. After TMI, there were major structural changes in plant design requirements. It seems to me that the tone of the post-Fukushima review is not that we'll go back and redesign all the old plants, it's that we'll have to have more consistent measures in place to respond to things that might exceed the design basis. I think Chip and his colleagues call those SAMGs. But they tend to be much lower in expense than major rebuilds, and you might take a look at it that way. Hugh Wynne - Sanford C. Bernstein & Co., Inc.: I guess that was exactly my final question. The third recommendation, strengthening emergency preparedness at the plants is what possibly could give rise to higher O&M costs. And I noticed going back again to ExGen's experience in the years following 9-11 that the major increase in costs that was seen there was really associated with O&M. And I know at the time, you guys had to go out and hire mercenaries like a renaissance prince to protect your plants. But is there a concern that you may face a significant uptick in O&M costs due to the need to strengthen the emergency...

From all we can see right now, Hugh, the answer to that question would be no. And if, for some reason, the complexion changes, as John said, we'll get back to you in prompt order. But I just am not seeing it at all. The defenses that we're talking about with regard to robustness against natural disasters and such are aren't the same as adding security officers as the history around 9-11 dictated. Hugh Wynne - Sanford C. Bernstein & Co., Inc.: Right. So in summary, you guys are not really that concerned about either investment cost increases or O&M cost increases as a result of these recommendations?

Hugh, we're not in any panic at all, but we take every round of this with pilgrim-like gravity. I mean, this was a massive nuclear accident. While small compared to the tsunami and earthquake itself, it's still somewhere between TMI and Chernobyl on the bad things scale. And we will take everything the NRC is doing with the greatest seriousness. We will work with them as closely as they will let us to get efficient and effective responses to this. But I think what we're saying is we don't, at the moment, see anything that has a major impact on the economics of these plants.

Your next question comes from Brian Chin of Citigroup.

Recently -- on the merger developments, recently, there's been a few parties that have seemed to signal that further plant divestitures beyond what you guys have announced might be necessary. Can you just provide any comment or color on that?

Bill Von Hoene will pick that up.

We did, as we previously stated, a very careful analysis prior to the filing of our agreement and in our filings with FERC and our dealings with the Department of Justice as to what we believed would be the necessary divestitures with reference to the tests that are applied by those groups. We believe the divestitures that we proposed, which, as you know, is about 2,700 megawatts are sufficient to meet those tests. And we're aware of the filings -- I think you're probably referencing in FERC, the recent interventions in FERC last week, but we do not believe that we will be required to do additional divestitures to meet the tests that those entities had historically used.

The next question comes from Paul Fremont of Jefferies. Paul Fremont - Jefferies & Company, Inc.: Just as a quick follow-up to Brian's question, based on what the PJM market monitor was recommending, how would that affect the proposed 2,700 megawatts? And would it potentially delay the timeline for approval at either DOJ or FERC?

Paul, as you know the intervention by the market monitor did not recommend any specific additional divestiture but did indicate that in the market monitor's view, that additional divestiture would be required without quantifying that. As we studied that, and we discussed this last week, the things we would note is that the analysis performed by the market monitor differs significantly from the type of analysis that has been typically performed by FERC. And so the application of that analysis would be new and would be something that FERC had not done in prior mergers. So our expectation is that FERC will continue to apply the standards and analysis they have used and that we meet those tests and that the market monitor's depiction deploying different tests that FERC has not used will not control. What FERC will determine is whether, based on the interventions, a hearing is necessary, and were there to be a hearing ordered by FERC, that would prolong the proceedings. But we don't expect that, that will happen, and we think we will be able to address all of the interveners in a way that -- which is consistent with other approval before FERC will obviate the need for any additionally hearing will keep us on schedule. Paul Fremont - Jefferies & Company, Inc.: Also when you announced the merger, you had initially talk about announcing the first level of reports within a 90-day period. That looks like it's been delayed. Is there something we should think about that sort of driving the delay in that announcement?

I think the only thing that's affecting the delay since we reviewed some of it with our board just yesterday is just when and how to communicate to certain people. We're trying very hard to keep this a happy merger at -- in both companies. And right now it is, and I think we're going to try to keep a soft hand to make certain it stays that way. Paul Fremont - Jefferies & Company, Inc.: And I guess my last question is, with respect to Commonwealth Edison, it looks like there's $0.03 that was stripped out as nonrecurring for the distribution rate order. But there also looks like there's another $0.03 onetime item that's included in your $0.15 operating number for the second quarter of 2011. What's the difference between the 2?

Yes. Paul, it's Matt Hilzinger. These are items that we've either included or not included in operating earnings in the past and are reversing. And we're just keeping symmetry to where they were originally included. So that was for the money -- for the EPS that was included in ops, that has to do with underground cables and some working capital kind of a lead-lag amount that we basically had reserved through operating earnings in the past, meaning that we took the charge to operating earnings in the past. We're getting recovery of that so we're reversing that through operating earnings. The items that have been excluded from operating earnings that you're saying had to do with severance back in '09 and Medicare Part D, those were originally excluded from operating earnings. And so we're excluding that now. So we're just providing some symmetry as to how they went through the original P&L.

I'm going to turn the call back to John Rowe for closing remarks.

I was looking at a summary statement on my own investment portfolio this morning, and observed that the best thing in the last 60 days was gold. Well, I'll leave you with this thought: Exelon is safer than gold, it's got more upside than gold and it pays a 5% dividend, which is damn hard to get out of gold. Thank you, everybody.

Thank you for participating in today's conference call. You may now disconnect.