Pepco's Q3 Net Income Jumps 24% on Strong Revenue Growth

TL;DR

**Pepco's Q3 earnings surge confirms its stable utility growth, making it a solid bet for conservative investors seeking reliable income.**

AI Summary

Potomac Electric Power Company (Pepco) reported a net income of $875 million for the three months ended September 30, 2025, an increase from $707 million in the same period of 2024, representing a 23.76% rise. For the nine months ended September 30, 2025, net income attributable to common shareholders was $2,174 million, up from $1,813 million in 2024, a 19.91% increase. Total operating revenues for the three months increased to $6,705 million in 2025 from $6,154 million in 2024, driven by a significant rise in electric operating revenues to $6,690 million from $6,012 million. Natural gas operating revenues also saw an increase to $235 million from $196 million. Operating expenses rose to $5,205 million from $4,961 million, primarily due to higher purchased power costs of $2,645 million in 2025 compared to $2,349 million in 2024. The company's cash flows from operating activities significantly improved, reaching $5,010 million for the nine months ended September 30, 2025, up from $4,143 million in the prior year. Capital expenditures increased to $6,095 million from $5,161 million, indicating continued investment in infrastructure. Long-term debt issuance was $4,925 million, while $807 million of long-term debt was retired.

Why It Matters

Pepco's robust financial performance, with a 23.76% increase in Q3 net income and a 19.91% rise year-to-date, signals strong operational efficiency and effective revenue management within the highly regulated utility sector. This positive trend could lead to stable dividend payouts for investors, making Pepco an attractive option for income-focused portfolios, especially given its parent company Exelon's large accelerated filer status. For customers, increased capital expenditures of $6,095 million suggest ongoing infrastructure improvements and reliability enhancements, potentially improving service quality. In a competitive landscape, these investments are crucial for maintaining market position and meeting evolving energy demands, while also navigating regulatory scrutiny from bodies like the DCPSC and MDPSC.

Risk Assessment

Risk Level: medium — The filing highlights 'unfavorable legislative and/or regulatory actions' and 'uncertainty as to outcomes and timing of regulatory approval proceedings' as key risks. While net income is up, the utility sector is heavily regulated, and changes in policy or rate case outcomes could significantly impact future profitability, as seen with the various regulatory assets and liabilities totaling $1,489 million current and $8,881 million non-current.

Analyst Insight

Investors should consider Pepco's consistent operational performance and increased capital expenditures as indicators of long-term stability and infrastructure investment. Monitor regulatory developments, particularly rate case outcomes from the DCPSC and MDPSC, as these will directly influence future revenue and profitability. This stock may appeal to investors seeking stable, dividend-paying assets within the utility sector.

Financial Highlights

debt To Equity

N/A

revenue

$18,846M

operating Margin

21.0%

total Assets

N/A

total Debt

N/A

net Income

$2,174M

eps

$2.15

gross Margin

N/A

cash Position

$1,533M

revenue Growth

+7.3%

Revenue Breakdown

Key Numbers

• $875M — Net income attributable to common shareholders (Increased from $707M in Q3 2024, a 23.76% rise)
• $2,174M — Net income attributable to common shareholders (YTD) (Increased from $1,813M in YTD 2024, a 19.91% rise)
• $6,705M — Total operating revenues (Q3) (Increased from $6,154M in Q3 2024)
• $17,872M — Electric operating revenues (YTD) (Increased from $16,379M in YTD 2024)
• $5,010M — Net cash flows provided by operating activities (YTD) (Increased from $4,143M in YTD 2024)
• $6,095M — Capital expenditures (YTD) (Increased from $5,161M in YTD 2024)
• $4,925M — Issuance of long-term debt (YTD) (Reflects financing activities for the period)
• $807M — Retirement of long-term debt (YTD) (Reflects debt management for the period)
• $1,533M — Cash and cash equivalents (As of September 30, 2025, up from $357M at December 31, 2024)
• $82,100M — Property, plant, and equipment (net) (As of September 30, 2025, up from $78,182M at December 31, 2024)

Key Players & Entities

• POTOMAC ELECTRIC POWER COMPANY (company) — Registrant in 10-Q filing
• EXELON CORPORATION (company) — Parent company and large accelerated filer
• Public Service Commission of the District of Columbia (regulator) — Regulates Pepco operations in DC
• Maryland Public Service Commission (regulator) — Regulates Pepco operations in Maryland
• SEC (regulator) — United States Securities and Exchange Commission
• Commonwealth Edison Company (company) — Affiliate registrant
• PECO Energy Company (company) — Affiliate registrant
• Baltimore Gas and Electric Company (company) — Affiliate registrant
• Pepco Holdings LLC (company) — Affiliate registrant
• Delmarva Power & Light Company (company) — Affiliate registrant

FAQ

Risk Factors

• Regulatory Environment Changes [high — regulatory]: Changes in regulations, including rate-setting decisions and environmental standards, can significantly impact Pepco's financial performance and ability to recover costs. For instance, the company operates under various state and federal regulatory frameworks that dictate its service areas and operational parameters.
• Energy Price Volatility [medium — market]: Fluctuations in the prices of electricity and natural gas, as well as purchased power and fuel, directly affect operating expenses. The increase in purchased power costs to $6,640 million in YTD 2025 from $6,483 million in YTD 2024 highlights this sensitivity.
• Infrastructure Reliability and Modernization [high — operational]: Maintaining and upgrading aging infrastructure is crucial for reliable service delivery and is a significant capital expenditure. The company invested $6,095 million in capital expenditures YTD 2025, up from $5,161 million in YTD 2024, to address these needs.
• Interest Rate and Debt Management [medium — financial]: Pepco's substantial debt obligations expose it to interest rate risk. The company issued $4,925 million in long-term debt and retired $807 million YTD 2025, indicating ongoing financing activities that are sensitive to market interest rates.
• Cybersecurity Threats [high — operational]: As a critical infrastructure provider, Pepco is a target for cyberattacks that could disrupt operations, compromise sensitive data, and lead to significant financial and reputational damage. The company's reliance on complex IT systems makes it vulnerable.
• Climate Change and Extreme Weather Events [medium — market]: The increasing frequency and intensity of extreme weather events can lead to service disruptions, increased operational costs for repairs, and potential damage to infrastructure. This also impacts demand for energy services.
• Access to Capital Markets [medium — financial]: The company's ability to fund its significant capital expenditure program and manage its debt relies on continued access to capital markets. Any disruption in these markets could impact its financial flexibility.
• Environmental Regulations and Litigation [medium — legal]: Pepco is subject to numerous environmental laws and regulations. Non-compliance or changes in these regulations could result in fines, penalties, and costly remediation efforts, as well as potential litigation.

Industry Context

The utility sector, particularly electric and gas providers like Pepco, is characterized by significant capital investment in infrastructure, stringent regulatory oversight, and a growing focus on renewable energy and grid modernization. Companies face challenges in balancing cost recovery with customer affordability, while also navigating evolving environmental policies and technological advancements. Competition is generally limited due to the nature of regulated monopolies, but innovation and efficiency are key differentiators.

Regulatory Implications

Pepco operates in a heavily regulated environment where rate decisions by public utility commissions directly impact revenue and profitability. Changes in environmental regulations, such as those related to emissions or renewable energy mandates, can also necessitate significant capital investments and operational adjustments, affecting compliance costs and strategic planning.

What Investors Should Do

1. Monitor regulatory filings and rate case outcomes
2. Assess capital expenditure effectiveness
3. Analyze debt levels and financing costs
4. Evaluate operational efficiency and cost management

Key Dates

• 2025-09-30: End of Q3 and Nine-Month Period — Reporting period for the financial results discussed in the 10-Q, showing significant increases in net income and revenues.
• 2025-09-30: Balance Sheet Date — Reflects total assets of $82,100M and cash and cash equivalents of $1,533M.
• 2025-09-30: Nine Months of Operations — YTD figures show strong operating cash flow of $5,010M and capital expenditures of $6,095M.
• 2025-09-30: Debt Issuance and Retirement — YTD figures show $4,925M in long-term debt issuance and $807M retired, indicating active debt management.

Glossary

Operating revenues

The total income generated from the company's primary business activities, such as selling electricity and natural gas. (Key indicator of the company's top-line performance and market demand for its services.)

Purchased power

The cost incurred by the company to buy electricity from wholesale suppliers to meet customer demand. (A major component of operating expenses, directly impacting profitability, especially with price fluctuations.)

Depreciation and amortization

The systematic allocation of the cost of tangible (depreciation) and intangible (amortization) assets over their useful lives. (Represents the expensing of long-term assets, impacting net income and reflecting investment in infrastructure.)

Interest expense, net

The cost of borrowing money, less any interest income earned. (A significant expense for capital-intensive utilities, affecting net income and reflecting the company's leverage.)

Net income attributable to common shareholders

The portion of the company's profit remaining after all expenses, taxes, and preferred stock dividends have been paid, belonging to common stockholders. (The bottom-line profitability measure that directly impacts shareholder value and earnings per share.)

Capital expenditures

Funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, and equipment. (Indicates the company's investment in its infrastructure and future growth, crucial for a utility company.)

Cash flows from operating activities

The cash generated from a company's normal business operations. (A key measure of a company's financial health and its ability to generate cash to fund operations, investments, and debt repayment.)

Property, plant, and equipment (net)

The net book value of a company's long-term tangible assets used in its operations. (Represents the core infrastructure of the utility, showing the scale of investment in its operational base.)

Year-Over-Year Comparison

Potomac Electric Power Company has demonstrated robust year-over-year growth, with net income attributable to common shareholders increasing by 23.76% for the quarter and 19.91% year-to-date. Total operating revenues also saw a healthy rise of approximately 7.3% year-to-date, driven primarily by electric and natural gas segments. Operating expenses have also climbed, notably purchased power costs, but the company has managed to improve its operating income. Capital expenditures have significantly increased, indicating a strong commitment to infrastructure development, supported by substantial long-term debt issuance.

Key Financial Figures

• $12.50 — mmonwealth Edison Company Common Stock, $12.50 par value 127,021,419 PECO Energy Comp
• $0.01 — ac Electric Power Company Common Stock, $0.01 par value 100 Delmarva Power & Light C
• $2.25 — rva Power & Light Company Common Stock, $2.25 par value 1,000 Atlantic City Electric
• $3.00 — tic City Electric Company Common Stock, $3.00 par value 8,546,017 TABLE OF CONTENTS

Filing Documents

• exc-20250930.htm (10-Q) — 9182KB
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FINANCIAL STATEMENTS

FINANCIAL STATEMENTS 9 Exelon Corporation Consolidated Statements of Operations and Comprehensive Income 10 Consolidated Statements of Cash Flows 11 Consolidated Balance Sheets 12 Consolidated Statements of Changes in Shareholders' Equity 14 Commonwealth Edison Company Consolidated Statements of Operations and Comprehensive Income 16 Consolidated Statements of Cash Flows 17 Consolidated Balance Sheets 18 Consolidated Statements of Changes in Shareholders' Equity 20 PECO Energy Company Consolidated Statements of Operations and Comprehensive Income 21 Consolidated Statements of Cash Flows 22 Consolidated Balance Sheets 23 Consolidated Statements of Changes in Shareholder's Equity 25 Baltimore Gas and Electric Company 26 27 Balance Sheets 28 30 Pepco Holdings LLC Consolidated Statements of Operations and Comprehensive Income 31 Consolidated Statements of Cash Flows 32 Consolidated Balance Sheets 33 Consolidated Statements of Changes in Member's Equity 35 1 Page No. Potomac Electric Power Company 36 37 Balance Sheets 38 40 Delmarva Power & Light Company 41 42 Balance Sheets 43 45 Atlantic City Electric Company Consolidated Statements of Operations and Comprehensive Income 46 Consolidated Statements of Cash Flows 47 Consolidated Balance Sheets 48 Consolidated Statements of Changes in Shareholder's Equity 50 Combined Notes to Consolidated Financial Statements 1. Significant Accounting Policies 51 2. Regulatory Matters 52 3. Revenue from Contracts with Customers 60 4. Segment Information 6

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 109 Exelon Corporation 109 Executive Overview 109 Financial Results of Operations 109 Significant 2025 Transactions and Developments 111 Other Key Business Drivers and Management Strategies 114 Critical Accounting Policies and Estimates 115 Results of Operations By Registrant 116 Commonwealth Edison Company 116 PECO Energy Company 119 Baltimore Gas and Electric Company 123 Pepco Holdings LLC 126 Potomac Electric Power Company 127 Delmarva Power & Light Company 130 Atlantic City Electric Company 135 Liquidity and Capital Resources 138 ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 147 ITEM 4.

CONTROLS AND PROCEDURES

CONTROLS AND PROCEDURES 148 PART II. OTHER INFORMATION 148 ITEM 1.

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS 148 ITEM 1A.

RISK FACTORS

RISK FACTORS 148 ITEM 5. OTHER INFORMATION 148 ITEM 6. EXHIBITS 149

SIGNATURES

SIGNATURES 152 Exelon Corporation 152 Commonwealth Edison Company 153 PECO Energy Company 154 Baltimore Gas and Electric Company 155 Pepco Holdings LLC 156 Potomac Electric Power Company 157 Delmarva Power & Light Company 158 Atlantic City Electric Company 159 3 Table of Contents GLOSSARY OF TERMS AND ABBREVIATIONS Exelon Corporation and Related Entities Exelon Exelon Corporation ComEd Commonwealth Edison Company PECO PECO Energy Company BGE Baltimore Gas and Electric Company Pepco Holdings or PHI Pepco Holdings LLC Pepco Potomac Electric Power Company DPL Delmarva Power & Light Company ACE Atlantic City Electric Company Registrants Exelon, ComEd, PECO, BGE, PHI, Pepco, DPL, and ACE, collectively Utility Registrants ComEd, PECO, BGE, Pepco, DPL, and ACE, collectively BSC Exelon Business Services Company, LLC Exelon Corporate Exelon in its corporate capacity as a holding company PCI Potomac Capital Investment Corporation and its subsidiaries PECO Trust III PECO Energy Capital Trust III PECO Trust IV PECO Energy Capital Trust IV PHI Corporate PHI in its corporate capacity as a holding company PHISCO PHI Service Company Former Related Entities Constellation Constellation Energy Corporation Generation Constellation Energy Generation, LLC (formerly Exelon Generation Company, LLC, a subsidiary of Exelon prior to separation on February 1, 2022) 4 Table of Contents GLOSSARY OF TERMS AND ABBREVIATIONS Other Terms and Abbreviations Note - of the 2024 Form 10-K Reference to specific Combined Note to Consolidated Financial Statements within Exelon's 2024 Annual Report on Form 10-K ABO Accumulated Benefit Obligation AFUDC Allowance for Funds Used During Construction AMI Advanced Metering Infrastructure AOCI Accumulated Other Comprehensive Income (Loss) ARO Asset Retirement Obligation ATM At the market BGS Basic Generation Service BSA Bill Stabilization Adjustment CEJA Climate and Equitable Jobs Act; Illinoi

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS 9 Table of Contents Exelon Corporation and Subsidiary Companies Consolidated Statements of Operations and Comprehensive Income (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (In millions, except per share data) 2025 2024 2025 2024 Operating revenues Electric operating revenues $ 6,690 $ 6,012 $ 17,872 $ 16,379 Natural gas operating revenues 235 196 1,595 1,207 Revenues from alternative revenue programs ( 220 ) ( 54 ) ( 621 ) ( 29 ) Total operating revenues 6,705 6,154 18,846 17,557 Operating expenses Purchased power 2,645 2,349 6,640 6,483 Purchased fuel 47 34 471 301 Operating and maintenance 1,172 1,275 3,840 3,756 Depreciation and amortization 912 908 2,717 2,681 Taxes other than income taxes 429 395 1,216 1,127 Total operating expenses 5,205 4,961 14,884 14,348 Gain on sale of assets — 3 1 12 Operating income 1,500 1,196 3,963 3,221 Other income and (deductions) Interest expense, net ( 531 ) ( 490 ) ( 1,560 ) ( 1,428 ) Interest expense to affiliates, net ( 7 ) ( 6 ) ( 18 ) ( 18 ) Other, net 68 57 185 196 Total other income and (deductions) ( 470 ) ( 439 ) ( 1,393 ) ( 1,250 ) Income before income taxes 1,030 757 2,570 1,971 Income taxes 155 50 396 158 Net income attributable to common shareholders $ 875 $ 707 $ 2,174 $ 1,813 Comprehensive income, net of income taxes Net income $ 875 $ 707 $ 2,174 $ 1,813 Other comprehensive income (loss), net of income taxes Pension and non-pension postretirement benefit plans: Actuarial losses reclassified to periodic benefit cost 5 5 16 15 Pension and non-pension postretirement benefit plans valuation adjustments — — 5 ( 26 ) Unrealized (loss) gain on cash flow hedges ( 2 ) ( 29 ) ( 16 ) 1 Other comprehensive income (loss) 3 ( 24 ) 5 ( 10 ) Comprehensive income attributable to common shareholders $ 878 $ 683 $ 2,179 $ 1,803 Average shares of common stock outstanding: Basic 1,011 1,003 1,010 1,002 Assumed exercise and

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