EXELON CORP

Results of Operations — ComEd

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023. Net income increased by $27 million as compared to the same period in 2023, primarily due to timing of distribution earnings, higher distribution rate base, and higher return on regulatory assets. These were partially offset by a lower allowed distributions ROE, the absence of a return on the pension asset within distribution earnings, and lower carrying cost recovery related to the CMC regulatory asset.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023. Net income increased by $1 million as compared to the same period in 2023, primarily due to timing of distribution earnings, higher distribution rate base, higher return on regulatory assets, and higher transmission peak load. These were partially offset by a lower allowed distribution ROE, the absence of a return on the pension asset within distribution earnings, and lower carrying cost recovery related to the CMC regulatory asset.

Revenue Decoupling. The demand for electricity is affected by weather and customer usage. Operating revenues are not impacted by abnormal weather, usage per customer, or number of customers as a result of revenue decoupling mechanisms.

ComEd

Distribution Revenue. Distribution revenues were under a performance-based formula rate through 2023. Starting in 2024, distribution revenues are under a MRP. Both the performance-based formula rate and the MRP require annual reconciliations of the revenue requirement in effect to the actual costs the ICC determines are prudently and reasonably incurred with certain limitations for the MRP reconciliations. Electric distribution revenue varies from year to year based upon fluctuations in the underlying costs, (e.g., severe weather and storm restoration), investments being recovered, and allowed ROE. Electric distribution revenues increased for the three and nine months ended September 30, 2024 as compared to the same period in 2023, primarily due to differences in the timing of distribution earnings and higher rate base, partially offset by lower allowed ROE and the absence of a return on the pension asset.

Transmission Revenue. Under a FERC-approved formula, transmission revenue varies from year to year based upon fluctuations in the underlying costs, capital investments being recovered, and the highest daily peak load, which is updated annually in January based on the prior calendar year. Transmission revenues increased for the three and nine months ended September 30, 2024 as compared to the same period in 2023, primarily due to higher fully recoverable costs, higher peak load, and the impacts of higher rate base.

Energy Efficiency Revenue. Energy efficiency revenues are under a performance-based formula rate, which requires an annual reconciliation of the revenue requirement in effect to the actual costs the ICC determines are prudently and reasonably incurred in a given year. Energy efficiency revenue varies from year to year based upon fluctuations in the underlying costs, investments being recovered, and allowed ROE. Energy efficiency revenues increased for the three and nine months ended September 30, 2024 as compared to the same periods in 2023, primarily due to increased regulatory asset amortization, which is fully recoverable.

Other Revenue primarily includes assistance provided to other utilities through mutual assistance programs. Other revenues increased for the three and nine months ended September 30, 2023 as compared to the same periods in 2023, which primarily reflects increased mutual assistance revenues associated with storm restoration efforts.

Regulatory Required Programs represents revenues collected under approved riders to recover costs incurred for regulatory programs such as recoveries under the credit loss expense tariff, environmental costs associated with MGP sites, ETAC, and costs related to electricity, ZEC, CMC, and REC procurement. ETAC is a retail customer surcharge collected and remitted to an Illinois state agency for programs to support clean energy jobs and training. The riders are designed to provide full and current cost recovery. The costs of these programs are included in Purchased power expense, Operating and maintenance expense, Depreciation and amortization expense, and Taxes other than income taxes. Customers have the choice to purchase electricity from competitive electric generation suppliers. Customer choice programs do not impact the volume of deliveries as ComEd remains the distribution service provider for all customers and charges a regulated rate for distribution service, which is recorded in Operating revenues. For customers that choose to purchase electric generation from competitive suppliers, ComEd either acts as the billing agent or the competitive supplier separately bills its own customers, and therefore does not record Operating revenues or Purchased power expense related to the electricity. For customers that choose to purchase electric generation from ComEd, ComEd is permitted to recover the electricity, ZEC, CMC, and REC procurement costs without mark-up and therefore records equal and offsetting amounts in Operating revenues and Purchased power expense related to the electricity, ZECs, CMCs, and RECs.

See Note 4 — Segment Information of the Combined Notes to Consolidated Financial Statements for the presentation of ComEd's revenue disaggregation.

The $61 million decrease and $436 million increase in Purchased power expense for the three and nine months ended September 30, 2024 compared to the same periods in 2023, respectively, is offset in Operating revenues as part of regulatory required programs.

ComEd

(a)Primarily reflects an updated rate of capitalization of certain overhead costs.

(b)Primarily reflects the reclassification and increase of the FERC audit liability during the current year and an increase in credit loss expense. See Note 2 — Regulatory Matters for additional information regarding the FERC audit liability.

(c)ComEd is allowed to recover from or refund to customers the difference between its annual credit loss expense and the amounts collected in rates annually through a rider mechanism.

(a)Reflects ongoing capital expenditures.

(b)Includes amortization of ComEd's energy efficiency formula rate regulatory asset.

Effective income tax rates were 9.1% and 22.0% for the three months ended September 30, 2024 and 2023, respectively, and 9.4% and 22.2% for the nine months ended September 30, 2024 and 2023, respectively. See Note 6 — Income Taxes of the Combined Notes to Consolidated Financial Statements for additional information regarding the components of the effective income tax rates.

PECO

Results of Operations — PECO

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023. Net income decreased by $29 million, due to an increase in credit loss expense, interest expense, and depreciation expense.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023. Net income decreased by $54 million, due to an increase in credit loss expense, interest expense, depreciation expense, and storm costs, partially offset by an increase in revenue as a result of less unfavorable weather impact relative to the same period last year.

Weather. The demand for electricity and natural gas is affected by weather conditions. With respect to the electric business, very warm weather in summer months and, with respect to the electric and natural gas businesses, very cold weather in winter months are referred to as “favorable weather conditions” because these weather conditions result in increased deliveries of electricity and natural gas. Conversely, mild weather reduces demand. During the three months ended September 30, 2024 compared to the same period in 2023, Operating revenues related to weather remained consistent in PECO's service territory. During the nine months ended September 30, 2024 compared to the same period in 2023, Operating revenues related to weather increased due to less unfavorable weather conditions in PECO's service territory.

PECO

Heating and cooling degree-days are quantitative indices that reflect the demand for energy needed to heat or cool a home or business. Normal weather is determined based on historical average heating and cooling degree-days for a 30-year period in PECO's service territory. The changes in heating and cooling degree-days in PECO’s service territory for the three and nine months ended September 30, 2024 compared to the same period in 2023 and normal weather consisted of the following:

Volume. Electric volume, exclusive of the effects of weather, for the three months ended September 30, 2024 compared to the same period in 2023, remained relatively consistent. Electric volume, exclusive of the effects of weather, for the nine months ended September 30, 2024 compared to the same period in 2023, increased due to customer load growth. Natural gas volume for the three and nine months ended September 30, 2024 compared to the same period in 2023, remained relatively consistent.

(a)Reflects delivery volumes from customers purchasing electricity directly from PECO and customers purchasing electricity from a competitive electric generation supplier as all customers are assessed distribution charges.

PECO

(a)Reflects delivery volumes from customers purchasing natural gas directly from PECO and customers purchasing natural gas from a competitive natural gas supplier as all customers are assessed distribution charges.

Pricingfor the three and nine months ended September 30, 2024 compared to the same period in 2023 increased primarily due to higher electric DSIC rates in PECO's service territories.

Transmission Revenue. Under a FERC-approved formula, transmission revenue varies from year to year based upon fluctuations in the underlying costs and capital investments being recovered.

Other revenue primarily includes revenue related to late payment charges. Other revenue for the three and nine months ended September 30, 2024 compared to the same period in 2023 remained relatively consistent.

Regulatory Required Programs represents revenues collected under approved riders to recover costs incurred for regulatory programs such as energy efficiency, PGC, and the GSA. The riders are designed to provide full and current cost recovery as well as a return. The costs of these programs are included in Purchased power and fuel expense, Operating and maintenance expense, Depreciation and amortization expense, and Income taxes. Customers have the choice to purchase electricity and natural gas from competitive electric generation and natural gas suppliers. Customer choice programs do not impact the volume of deliveries as PECO remains the distribution service provider for all customers and charges a regulated rate for distribution service, which is recorded in Operating revenues. For customers that choose to purchase electric generation or natural gas from competitive suppliers, PECO either acts as the billing agent or the competitive supplier separately bills its own customers and therefore PECO does not record Operating revenues or Purchased power and fuel expense related to the electricity and/or natural gas. For customers that choose to purchase electric generation or natural gas from PECO, PECO is permitted to recover the electricity, natural gas, and REC procurement costs without mark-up and therefore records equal and offsetting amounts in Operating revenues and Purchased power and fuel expense related to the electricity, natural gas, and RECs.

See Note 4 — Segment Information of the Combined Notes to Consolidated Financial Statements for the presentation of PECO's revenue disaggregation.

The decrease of $25 million and decrease of $84 million for the three and nine months ended September 30, 2024 compared to the same period in 2023, in Purchased power and fuel expenseis offset in Operating revenues as part of regulatory required programs.

PECO

Interest expense, netincreased $6 million and $21 million for the three and nine months ended September 30, 2024, compared to the same period in 2023, primarily due to an increase in interest rates and the issuance of debt in the third quarter of 2024.

Effective income tax rates were (3.5)% and 2.0% for the three months ended September 30, 2024 and 2023, respectively, and 2.5% and 1.9% for the nine months ended September 30, 2024 and 2023, respectively. See Note 6 — Income Taxes of the Combined Notes to Consolidated Financial Statements for additional information regarding the components of the effective income tax rates.

BGE

Results of Operations — BGE

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023. Net Income remained consistent with favorable distribution rates, offset by an increase in credit loss expense, various operating expenses and interest expense.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023. Net Income increased $67 million primarily due to favorable distribution rates, partially offset by an increase in storm costs, credit loss expense, various operating expenses and interest expense.

Revenue Decoupling. The demand for electricity and natural gas is affected by weather and customer usage. However, Operating revenues are not impacted by abnormal weather or usage per customer as a result of a monthly rate adjustment that provides for fixed distribution revenue per customer by customer class. While Operating revenues are not impacted by abnormal weather or usage per customer, they are impacted by changes in the number of customers.

BGE

Distribution Revenue increased for the three and nine months ended September 30, 2024, compared to the same period in 2023, due to favorable impacts of the multi-year plans.

Transmission Revenue. Under a FERC-approved formula, transmission revenue varies from year to year based upon fluctuations in the underlying costs and capital investments being recovered. Transmission revenue increased for the three and nine months ended September 30, 2024, compared to the same period in 2023, primarily due to increases in underlying costs and capital investments.

Other Revenue includes revenue related to late payment charges, mutual assistance, off-system sales, and service application fees. Other Revenue remained relatively consistent for the three and nine months ended September 30, 2024 compared to the same period in 2023.

Regulatory Required Programs represent revenues collected under approved riders to recover costs incurred for regulatory programs such as conservation, demand response, and the POLR mechanism. The riders are designed to provide full and current cost recovery, as well as a return in certain instances. The costs of these programs are included in Purchased power and fuel expense, Operating and maintenance expense, Depreciation and amortization expense, and Taxes other than income taxes. Customers have the choice to purchase electricity and natural gas from competitive electric generation and natural gas suppliers. Customer choice programs do not impact the volume of deliveries as BGE remains the distribution service provider for all customers and charges a regulated rate for distribution service, which is recorded in Operating revenues. For customers that choose to purchase electric generation or natural gas from competitive suppliers, BGE acts as the billing agent and therefore does not record Operating revenues or Purchased power and fuel expense related to the electricity and/or natural gas. For customers that choose to purchase electric generation or natural gas from BGE, BGE is permitted to recover the electricity and natural gas procurement costs from customers and therefore records the amounts related to the electricity and/or natural gas in Operating revenues and Purchased power and fuel expense. BGE recovers electricity and natural gas procurement costs from customers with a slight mark-up.

See Note 4 — Segment Information of the Combined Notes to Consolidated Financial Statements for the presentation of BGE's revenue disaggregation.

The increase of $40 million and $83 million for the three and nine months ended September 30, 2024 compared to the same period in 2023, in Purchased power and fuel expense is fully offset in Operating revenues as part of regulatory required programs.

BGE

(a)Primarily related to capital write-offs.

(b)Increase due to the cost recovery associated with EmPOWER Maryland. Please refer to 2023 10-K Note 3 — Regulatory Matters for additional information.

(a)Decrease due to the cost recovery associated with EmPOWER Maryland. Please refer to 2023 10-K Note 3 — Regulatory Matters for additional information.

Interest expense, netincreased by $10 million and $24 million for the three and nine months ended September 30, 2024 , respectively compared to the same period in 2023, primarily due to an increase in interest rates and the issuance of debt in the second quarter of 2024 and 2023.

Taxes other than income taxes increased by $6 million and $15 million for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023, primarily due to increased property taxes.

Other, netincreased by $5 million and $13 million for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023, primarily due to increased interest income and higher AFUDC equity.

Effective income tax rates were 8.2% and 19.6% for the three months ended September 30, 2024 and 2023, respectively, and 8.3% and 21.0% for the nine months ended September 30, 2024 and 2023, respectively. See Note 6 — Income Taxes of the Combined Notes to Consolidated Financial Statements for additional information regarding the components of the effective income tax rates.

PHI

Results of Operations — PHI

PHI’s Results of Operations include the results of its three reportable segments, Pepco, DPL, and ACE. PHI also has a business services subsidiary, PHISCO, which provides a variety of support services, and the costs are directly charged or allocated to the applicable subsidiaries. Additionally, the results of PHI’s corporate operations include interest costs from various financing activities. All material intercompany accounts and transactions have been eliminated in consolidation. The following table sets forth PHI's GAAP consolidated Net income, by Registrant, for the three and nine months ended September 30, 2024 compared to the same period in 2023. See the Results of Operations for Pepco, DPL, and ACE for additional information.

(a)Primarily includes eliminating and consolidating adjustments, PHI's corporate operations, shared service entities, and other financing and investment activities.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023. Net Income increased by $46 million primarily due to higher ACE and DPL Delaware electric distribution rates, favorable impacts of the Pepco Maryland multi-year plans, higher transmission rates at Pepco, and a decrease in storm costs and various operating expenses, partially offset by an increase in interest expense.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023. Net Income increased by $113 million primarily due to the favorable impacts of the Pepco Maryland multi-year plans including the recognition of the reconciliations, the absence of an increase in environmental liabilities at Pepco, higher ACE and DPL Delaware electric distribution rates, higher transmission rates at Pepco and DPL, and a decrease in storm costs and various operating expenses, partially offset by increases in interest expense and depreciation expense.

Pepco

Results of Operations — Pepco

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023. Net Income increased by $20 million primarily due to higher transmission rates, favorable impacts of the Maryland multi-year plans, customer growth, and decrease in storm costs, partially offset by increases in depreciation expense and interest expense.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023. Net Income increased by $74 million primarily due to the favorable impacts of the Maryland multi-year plans including the recognition of the reconciliations, the absence of an increase in environmental liabilities, higher transmission rates, customer growth, and decrease in storm costs partially offset by increases in depreciation expense and interest expense.

Revenue Decoupling. The demand for electricity is affected by weather and customer usage. However, Operating revenues from electric distribution in both Maryland and the District of Columbia are not impacted by abnormal weather or usage per customer as a result of a BSA that provides for a fixed distribution charge per customer by customer class. While Operating revenues are not impacted by abnormal weather or usage per customer, they are impacted by changes in the number of customers.

Pepco

Distribution Revenue increased for the three and nine months ended September 30, 2024 compared to the same period in 2023 primarily due to favorable impacts of the Maryland multi-year plans and customer growth.

Transmission Revenue. Under a FERC-approved formula, transmission revenue varies from year to year based upon fluctuations in the underlying costs and capital investments being recovered. Transmission revenue increased for the three and nine months ended September 30, 2024, compared to the same period in 2023, primarily due to increases in underlying costs and capital investments.

Other Revenue includes rental revenue, revenue related to late payment charges, mutual assistance revenues, and recoveries of other taxes.

Regulatory Required Programs represent revenues collected under approved riders to recover costs incurred for regulatory programs such as energy efficiency programs, DC PLUG, and SOS procurement and administrative costs. The riders are designed to provide full and current cost recovery as well as a return in certain instances. The costs of these programs are included in Purchased power expense, Operating and maintenance expense, Depreciation and amortization expense, and Taxes other than income taxes. Customers have the choice to purchase electricity from competitive electric generation suppliers. Customer choice programs do not impact the volume of deliveries, as Pepco remains the distribution service provider for all customers and charges a regulated rate for distribution service, which is recorded in Operating revenues. For customers that choose to purchase electric generation from competitive suppliers, Pepco acts as the billing agent and therefore, Pepco does not record Operating revenues or Purchased power expense related to the electricity. For customers that choose to purchase electric generation from Pepco, Pepco is permitted to recover the electricity and REC procurement costs from customers and therefore records the amounts related to the electricity and RECs in Operating revenues and Purchased power expense. Pepco recovers electricity and REC procurement costs from customers with a slight mark-up.

See Note 4— Segment Information of the Combined Notes to Consolidated Financial Statements for the presentation of Pepco's revenue disaggregation.

The increase of $6 million and $58 million for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023, in Purchased power expense is fully offset in Operating revenues as part of regulatory required programs.

Pepco

(a)Primarily reflects the absence of an increase in environmental liabilities for the nine months ended September 30, 2024 compared to the same period in 2023.

(b)See Note 2 — Regulatory Matters for additional information on multi-year plan reconciliations.

(c)Primarily relates to a revenue deferral mechanism approved by the MDPSC to capture rate increases attributable to April 1, 2024 through June 30, 2024.

(d)Increase primarily due to the cost recovery associated with EmPOWER Maryland. Please refer to 2024 10-K Note 2 — Regulatory Matters for additional information.

Taxes other than income taxes increased $5 million and $26 million for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023, primarily due to increases in utility taxes, which are offset in revenues, and property taxes.

Interest expense, net increased by $9 million and $20 million for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023, primarily due to increases in interest rates and the issuance of debt in 2023 and 2024.

Effective income tax rates were 18.6% and 14.9% for the three months ended September 30, 2024 and 2023, respectively, and 18.6% and 14.7% for the nine months ended September 30, 2024 and 2023, respectively. See Note 6 — Income Taxes of the Combined Notes to Consolidated Financial Statements for additional information regarding the components of the effective income tax rates.

DPL

Results of Operations — DPL

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023. Net income increased $12 million primarily due to higher Delaware electric distribution rates, and a decrease in storm costs, partially offset by unfavorable weather conditions at Delaware electric service territories.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2024. Net income increased $28 million primarily due to higher Delaware electric distribution rates, favorable weather conditions at Delaware electric and natural gas service territories, and higher transmission rates, partially offset by an increase in interest expense.

Revenue Decoupling. The demand for electricity is affected by weather and customer usage. However, Operating revenues from electric distribution in Maryland are not impacted by abnormal weather or usage per customer as a result of a BSA that provides for a fixed distribution charge per customer by customer class. While Operating revenues from electric distribution customers in Maryland are not impacted by abnormal weather or usage per customer, they are impacted by changes in the number of customers.

Weather. The demand for electricity and natural gas in Delaware is affected by weather conditions. With respect to the electric business, very warm weather in summer months and, with respect to the electric and natural gas businesses, very cold weather in winter months are referred to as "favorable weather conditions” because these

DPL

weather conditions result in increased deliveries of electricity and natural gas. Conversely, mild weather reduces demand. During the three months ended September 30, 2024 compared to the same period in 2023, Operating revenues related to weather decreased due to unfavorable weather conditions in Delaware electric service territories. During the nine months ended September 30, 2024 compared to the same period in 2023, Operating revenues related to weather increased due to favorable weather conditions in Delaware electric and natural gas service territories.

Heating and cooling degree days are quantitative indices that reflect the demand for energy needed to heat or cool a home or business. Normal weather is determined based on historical average heating and cooling degree days for a 20-year period in the Delaware electric service territory and a 30-year period in the Delaware natural gas service territory. The changes in heating and cooling degree days in the Delaware service territory for the three and nine months ended September 30, 2024, compared to same period in 2023 and normal weather consisted of the following:

Volume, exclusive of the effects of weather, increased for both the three and nine months ended September 30, 2024 compared to the same period in 2023, primarily due to an increase in customer usage and customer growth.

DPL

(a)Reflects delivery volumes from customers purchasing electricity directly from DPL and customers purchasing electricity from a competitive electric generation supplier as all customers are assessed distribution charges.

(b)Reflects the change in delivery volumes assuming normalized weather based on the historical 20-year average.

(a)Reflects delivery volumes from customers purchasing natural gas directly from DPL and customers purchasing natural gas from a competitive natural gas supplier as all customers are assessed distribution charges.

Distribution Revenue increased for the three and nine months ended September 30, 2024 compared to the same period in 2023 primarily due to favorable impacts of the higher electric distribution rates in Delaware that became effective July 2023, and higher natural gas DSIC rates in Delaware that became effective in January 2024, partially offset by lower electric DSIC rates in Delaware that became effective in January 2024.

Transmission Revenue. Under a FERC-approved formula, transmission revenue varies from year to year based upon fluctuations in the underlying costs and capital investments being recovered. During the three months ended September 30, 2024 compared to the same period in 2023, transmission revenue remained relatively consistent. During the nine months ended September 30, 2024 compared to the same period in 2023, transmission revenue increased due to increases in underlying costs and capital investments.

Other Revenue includes rental revenue, service connection fees, and mutual assistance revenues.

Regulatory Required Programs represent revenues collected under approved riders to recover costs incurred for regulatory programs such as energy efficiency programs, DE Renewable Portfolio Standards, SOS procurement and administrative costs, and GCR costs. The riders are designed to provide full and current cost recovery as well as a return in certain instances. The costs of these programs are included in Purchased power and fuel expense, Operating and maintenance expense, Depreciation and amortization expense, and Taxes

DPL

other than income taxes. All customers have the choice to purchase electricity from competitive electric generation suppliers; however, only certain commercial and industrial customers have the choice to purchase natural gas from competitive natural gas suppliers. Customer choice programs do not impact the volume of deliveries as DPL remains the distribution service provider for all customers and charges a regulated rate for distribution service, which is recorded in Operating revenues. For customers that choose to purchase electric generation or natural gas from competitive suppliers, DPL either acts as the billing agent or the competitive supplier separately bills its own customers, and therefore does not record Operating revenues or Purchased power and fuel expense related to the electricity and/or natural gas. For customers that choose to purchase electric generation or natural gas from DPL, DPL is permitted to recover the electricity, natural gas, and REC procurement costs from customers and therefore records the amounts related to the electricity, natural gas, and RECs in Operating revenues and Purchased power and fuel expense. DPL recovers electricity and REC procurement costs from customers with a slight mark-up, and natural gas costs without mark-up.

See Note 4 — Segment Information of the Combined Notes to Consolidated Financial Statements for the presentation of DPL's revenue disaggregation.

The increase of $2 million and $11 million for the three and nine months ended September 30, 2024, compared to the same period in 2023, respectively, in Purchased power and fuel expense is fully offset in Operating revenues as part of regulatory required programs.

(a)Increase primarily due to the cost recovery associated with EmPOWER Maryland. Please refer to 2024 10-K Note 2 — Regulatory Matters for additional information

Interest expense, net increased by $4 million and $16 million for the three and nine months ended September 30, 2024 compared to the same period in 2023, respectively, primarily due to an increase in interest rates and the issuance of debt in 2023 and 2024.

Other, net increased by $1 million and $8 million for the three and nine months ended September 30, 2024 compared to the same period in 2023, respectively, primarily due to higher AFUDC equity.

DPL

Effective income tax rates were 20.3% and 15.7% for the three months ended September 30, 2024 and 2023, respectively, and 20.0% and 16.3% for the nine months ended September 30, 2024 and 2023, respectively. See Note 6 — Income Taxes of the Combined Notes to Consolidated Financial Statements for additional information regarding the components of the effective income tax rates.

ACE

Results of Operations — ACE

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023. Net income increased by $12 million primarily due to higher distribution rates.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023. Net income increased by $11 million primarily due to higher distribution rates partially offset by increases in depreciation expense and interest expense.

Revenue Decoupling. The demand for electricity is affected by weather and customer usage. However, Operating revenues from electric distribution in New Jersey are not impacted by abnormal weather or usage per customer as a result of the CIP which became effective, prospectively, in the third quarter of 2021. The CIP compares current distribution revenues by customer class to approved target revenues established in ACE’s most recent distribution base rate case. The CIP is calculated annually, and recovery is subject to certain conditions, including an earnings test and ceilings on customer rate increases. While Operating revenues are not impacted by abnormal weather or usage per customer, they are impacted by changes in the number of customers.

ACE

Distribution Revenue increased for the three and nine months ended September 30, 2024 compared to the same period in 2023 due to higher distribution rates that became effective December 2023 and the expiration of customer credits related to the TCJA tax benefits.

Transmission Revenues. Under a FERC-approved formula, transmission revenue varies from year to year based upon fluctuations in the underlying costs and capital investments being recovered. Transmission revenue increased for the three and nine months ended September 30, 2024 compared to the same period in 2023 due to increases in underlying costs and capital investments.

Other Revenue includes rental revenue, revenue related to late payment charges, mutual assistance revenues, and recoveries of other taxes.

Regulatory Required Programs represent revenues collected under approved riders to recover costs incurred for regulatory programs such as energy efficiency programs, Societal Benefits Charge, Transition Bond Charge, and BGS procurement and administrative costs. The riders are designed to provide full and current cost recovery as well as a return in certain instances. The costs of these programs are included in Purchased power expense, Operating and maintenance expense, Depreciation and amortization expense, and Taxes other than income taxes. Customers have the choice to purchase electricity from competitive electric generation suppliers. Customer choice programs do not impact the volume of deliveries, as ACE remains the distribution service provider for all customers and charges a regulated rate for distribution service, which is recorded in Operating revenues. For customers that choose to purchase electric generation from competitive suppliers, ACE acts as the billing agent and therefore, ACE does not record Operating revenues or Purchased power expense related to the electricity. For customers that choose to purchase electric generation from ACE, ACE is permitted to recover the electricity, ZEC, and REC procurement costs without mark-up and therefore records equal and offsetting amounts in Operating revenues and Purchased power expense related to the electricity, ZECs, and RECs.

See Note 4 — Segment Information of the Combined Notes to Consolidated Financial Statements for the presentation of ACE's revenue disaggregation.

The increase of $24 million and $64 million for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023 in Purchased power expense is fully offset in Operating revenues as part of regulatory required programs.

ACE

(a)ACE is allowed to recover from or refund to customers the difference between its annual credit loss expense and the amounts collected in rates annually through the Societal Benefits Charge.

Interest expense, netincreased $2 million and $7 million for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023 primarily due to increases in interest rates and the issuance of debt in 2023 and 2024.

Effective income tax rates were 26.5% and 24.5% for the three months ended September 30, 2024 and 2023, respectively, and 26.5% and 24.7% for the nine months ended September 30, 2024 and 2023, respectively. See Note 6 — Income Taxes ofthe Combined Notes to Consolidated Financial Statements for additional information regarding the components of the effective income tax rates.