Exelon Corporation

Federal Reserve chair Kevin Warsh announced a 25 basis point benchmark interest rate hike, taking the funds rate to 3.75% to 4.00%, the first rate increase since 2023, with Warsh indicating another round of rate hikes before the end of 2026. The Federal Open Market Committee voted 12-0 to raise the key interest rate, citing elevated inflation, the ongoing Middle East crisis and resulting rise in oil prices, a stable U.S. labor market and solid economic activity supported by resilient consumer spending. Higher borrowing costs can be a headwind for the capital-intensive utilities sector, which relies heavily on external financing to fund infrastructure investments, pressuring margins and potentially constraining dividend payouts. Among utilities better positioned to withstand higher rates, Exelon Corporation, PG&E Corporation and Centuri Holdings, Inc. each carry a VGM Score of either A or B and a Zacks Rank of #3 (Hold). Exelon plans to invest $41.7 billion over 2026-2029, PG&E plans to invest $12.4 billion in 2026 and $73 billion over the 2026-2030 period, and Centuri plans to invest $75-$90 million in 2026.

The United States has begun tightening regulations on data center projects after requests for electricity from large users surged past 700 gigawatts (GW), but many projects may be merely "ghost demand" or paper demand. Texas is the first state to suspend new data center connections to the power grid to verify project readiness, while other states are adopting similar measures. According to Reuters, power requests in some areas of the Midwest, Mid-Atlantic, and South combined exceed 700 GW, more than ten times the current estimated electricity consumption of all data centers in the US. In Texas, requests have risen from about 48 GW to over 474 GW since 2023. Outside Texas, requests at ten major utilities total about 270 GW. Regulators have begun stricter scrutiny, leading to a decline in paper demand. For example, Exelon reduced its forecast by 40% to 11 GW, and AEP Ohio found that pipeline demand fell by more than half after Ohio enforced new rules, including a maximum fee of $100,000. This uncertainty creates two-sided risks: underinvestment could threaten stability, while overinvestment could pass costs to electricity consumers. In the PJM system, capacity costs have increased by a total of $29.4 billion over the past four auctions. Texas has also ordered the disclosure of actual project owners, while Pennsylvania has tightened permitting for projects of 25 megawatts or more. Of the more than 100 proposed projects, only 20 have applied for permits.

Twelve of the 16 S&P 500 utility companies that reported quarterly results this week surpassed earnings expectations, while 10 beat revenue forecasts and six missed. CenterPoint Energy raised its 10-year capital investment plan by $1.2 billion to $66.7 billion, citing rising power demand in Houston. FirstEnergy forecast 25 gigawatts of total data center demand and reaffirmed its $36 billion five-year plan. Exelon lowered its high-probability data center pipeline to 11 gigawatts from 18 gigawatts and cut its overall future pipeline through 2027 to 25 gigawatts from 43 gigawatts. American Electric Power missed earnings estimates but raised its full-year 2026 operating earnings guidance, and Dominion Energy reaffirmed its 2026 guidance while targeting the final turbine for its Coastal Virginia Offshore Wind project by the end of 2027 at a cost estimate of $11.65 billion.

ComEd crews are working to restore power after severe storms swept across northern Illinois, with more than 200,000 customers restored and approximately 52,000 still without electricity. The hardest-hit areas include Tinley Park, Burbank, Homewood, and some southern wards of Chicago. The company estimates 80 percent of affected customers will have power back by the evening of July 4, with full restoration expected by Sunday evening. More than 1,300 personnel are deployed, and additional storms are possible over the holiday weekend.

The United States could face power blackouts as soon as 2027 because of growing electricity demand straining the grid, Exelon CEO Calvin Butler told the Financial Times. Butler said Americans could "absolutely" lose power in the coming years due to a shortage of power plants in the northeast and Midwest, noting that the grid operator PJM has predicted a 60-gigawatt supply shortfall over the next decade and reported a 6.5-gigawatt deficit at its last auction. He added that utilities have been made a scapegoat for rising costs, with national electricity prices up 7 percent since last year and even sharper increases in markets Exelon serves, including 17 percent in New Jersey, 16 percent in Maryland, and 13 percent in Pennsylvania. Butler also said pulling a requested rate increase for Exelon's PECO subsidiary will only defer higher costs, arguing that investing in the system requires rate cases.