Chaka Patterson - VP of IR John Rowe - Chairman, President and CEO John Young - EVP Finance and Markets and CFO Frank Clark - ComEd Chairman and CEO

John Kiani - Deutsche Bank Jonathan Arnold - Merrill Lynch Hugh Wynne - Sanford Bernstein Vic Khaitan - Deutsche Asset Management Greg Gordon - Citigroup Paul Fremont - Jefferies Steven Fleishman - Catapult Partners Paul Patterson - Glenrock Associates Ashar Khan - SAC Capital

Thank you. Good morning and welcome to Exelon's second quarter 2007 earnings review and conference call update.

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 at www.exeloncorp.com. Or you can call Diane Sullivan at 312-394-5738 and she will fax or e-mail the release to you.

This call is being recorded and will be available through August 8, by dialing 877-519-4471. The international call-in number is 973-341-3080.

The confirmation code is 8962952. In addition, the call will be archived on the Exelon website.

Before we begin today's discussion, let me remind you that the earnings release and other matters we discuss in today's call contain forward-looking statements and estimates that are subject to various risks and uncertainties. Please refer to our SEC filings for discussions of factors that may cause results to differ from management's projections, forecast and expectations.

In our release and during this call, we will discuss adjusted non-GAAP operating earnings that excludes the earnings impact of the following; mark-to-market adjustments from economic hedging activities; investments in synthetic fuel producing facilities; certain costs associated with the terminated merger with PSEG for 2006 only; significant impairments of intangible assets including goodwill; significant changes in decommissioning obligation estimates; severance and severance related charges for 2006 only. Cost associated with Illinois electric rate settlement including ComEd's previously announced customer, rate relief and assistance initiative and other unusual items including any future changes to GAAP.

We believe these adjusted operating earnings are representative of the underlying operational results of the company. In today's earnings release we provided a reconciliation between reported GAAP earnings and adjusted non-GAAP operating earnings.

With me today are John Rowe, Exelon Chairman, President and CEO; John Young, Exelon's Executive Vice President Finance and Markets and Chief Financial Officer; Frank Clark ComEd Chairman and CEO and other members of Exelon's and ComEd's senior management team who will be available to answer your questions. Today's call will focus on the Illinois Electric Rate Settlement, which was announced yesterday and again this morning, second quarter 2007 financial and operating results, our outlook on the remainder of 2007 and an update on other key issues facing the company.

We have scheduled 90 minutes for this call. We will spend about 40 minutes on prepared remarks and use the remaining time for Q&A.

In order to effectively manage this call, we'd appreciate it if you limit yourself to one question. I will now turn the call over to John Rowe, who will begin his discussion with an overview of the Illinois Settlement.

Thank you, Chaka. Good morning everyone.

I am going to begin by discussing the settlement agreement in Illinois and Frank Clark and [Betsy Moler] the man from Missouri will chip in if need her when we get to your questions. Then John going to do his usual quote on the quarterly earnings and I will comment briefly on that and on some recent statutory and regulatory development, that's me.

But of course the big news today is that we believe we have reached an agreement with the Illinois prices. It comes after two years of defending Exelon and ComEd before the Illinois Commerce Commission, the FERC, in the courts and the legislation.

It is gainfully costly but it protects all the vital interests of the company, its shareholders and its customers. Under the agreement Illinois residential electric consumers, will receive significant rate relief , ComEd will avoid bankruptcy, have the opportunity to return to financial health.

And Exelon Generation will continue to sell its output into competitive market at market based prices. Before getting to the details of the agreement let me give you a little context.

We have passed long and hard for over two years already tens of millions of dollars and tens of thousands of hours into defending both ComEd and Exelon Generation. To date we have one in every forum, but each succeeding victory has required more resources and has driven our opponents to find ever more creative and dangerous ways to harm Exelon including a generation tax.

We have been walking a dangerous stalemate one that increasingly prevented us from pursuing our other business objectives. As a result, we needed a deal its an affordable one as we obtain.

Now that deal is a mix of oral agreements, written agreements and pending legislations. And we will be there to add some comments on things not being over till August.

Nonetheless, I believe that between yesterday's 8-K and the additional details we will be providing today. We have accurately described the state of things to the best of our knowledge.

It is very important that you follow the details. One of you said in a call this week, the devil is always in the detail.

In this case, the protections, you receive as well as the cost you incur. And this we have removed and the ones we have not are all in the detail.

So, let me get to a key term. The agreement provides money for rate release for Illinois residential consumers.

Renewed with still competitive procurement process, renew environmental procurement quality and strategic flexibility for Exelon and its companies. It also protects ComEd an Exelon Generation from rate freeze and generation tax legislation for at least the next four years and terminate the litigation filed by the Illinois Attorney General.

The agreement will become fully effective when the Governor signs the proposed legislation. We expect both houses to take up the legislation this week with the Governor likely to sign it later this week or early next week.

That is our expectation but the matter has dragged week-to-week and its Springfield is a very complicated place these days. Now as to the money, which was the prime motivator for those with whom we were negotiating.

Illinois electric utility and electric generators will contribute $1 billion to a four year rate relief package for Illinois residential electric consumer. The Exelon companies will contribute $800 million with these rate relief programs.

Exelon Generation will contribute $747 million of which $435 million will go to ComEd customers, $307.5 million to the customers of the Ameren utilities and $4.5 million to the Illinois Power Agency Trust Fund. ComEd will contribute $53 million to the rate relief for its own customers in addition to the $11 million it has already set on that effort.

The utilities have worked with legislated leaders and the Illinois Attorney General to design rate relief programs for customers lead the transition to rates that reflect the energy costs resulting from competitive wholesale markets. Programs have been designed to provide benefit to residential customers as well as targeted programs for certain other customers.

While ComEd to release its base on rate credit and preserve exiting rates and rate structures as well as the right to file new rate cases for both delivery charges and future power purchases. Money is contributed to the Illinois Power Agency Trust Fund are intended to generate investment income to fund the IPA operation after 2009.

Procurement as you know the Illinois Attorney General and some other parties have been insistent with the vertical quite option which the commission approved, we continue to believe was a highly efficient way of procuring power with some other mechanism. The new procurement policy both [of plant] and preserve competitive wholesale markets.

First the deal honors Exelon auction contracts. Both contracts run for three years and will provide two-thirds of the power needed to meet customer demands in 2008 and one-third in 2009.

As these contracts terminate they will be replaced by a process managed by the Illinois Power Agency, the creation of which I will address shortly. This will be a horizontal block procurement process.

In addition Exelon generation has entered into a five year market based, base load financial swap arrangement. The contract begins on June 1, 2008 and ends on May 31, 2013, it covers energy only not capacity or ancillary services.

This market based swap provides benefits for customers and investors. And I would urge you to listen closely here.

For customers it provides a significant measure of price stability over the five year period of the contract which is basically six years normally. For investors it removes most of the incentive for interfering with an ordinary wholesale market, from now until at least 2013.

The swap ultimately covers about 60% of the base load power required by residential and small commercial customers. In other words it is my opinion that the swap changes the fundamental incentive for many of those who have intervened in these proceedings from having an incentive to muck up the market in order to get Exelon in changing it to an incentive to make the market really work because it now has an agreement on bulk of residential power to be supplied by us.

Competitive market received additional protection because customers 400 kilowatt hours and above, which is about 43% of ComED flows will be declared competitive by the General Assembly. This will allow and require both customers to procure power for themselves directly from suppliers at market based prices.

While customers from 100 kilowatts and up to 400 kilowatts another 12% of ComEd flows and expedited review processes established for the deferring those customers incentives. In other words more than half of ComEd customers will be shopping directly in the marketplace.

A market price has been adopted for a large part of the remaining load through the spot. To oversee the future procurement process the deal also provides for the creation of the Illinois Power Agency, with a Director to be nominated by the Governor and approved by the Senate.

The agency will now have a procurement bureau and a resource development bureau. Procurement bureau will manage the procurement of power with ICC oversights, while Ameren's and ComED's Residential and small commercial customers through our agreement.

This sort of response will keep it and the lowest prices will be chosen. On ICC approval of the contracts, contracts are equaled in the totally equally directed timeframe.

The Resource Development Bureau will assess power generation needs for municipalities and rural electric power and determine the feasibility of constructing new generation facilities to meet those needs. We will have the authority to build new non-nuclear power plants and use indigenous all renewable resources, but cannot use tax payer money to use that.

The output from generation facilities contracted by the IPA may be supplied at cost to municipal electric systems and rural electric properties. Utilities are not required to purchase power form these generation facilities.

Turning to environmental policy. The agreement calls for aggressive renewable energy and energy efficiency standards.

Fuel needs must be cost effective, energy efficiency resources to meet incremental annual programs savings to all and are required to procure cost effective renewable energy resources from Illinois or adjoining states. Utilities will have procurement responsibility for renewables in the first year and will have shared responsibility for meeting energy efficiency targets in all years.

After the first year the IPA will manage procurement of renewable energy for the utilities. The agreement calls for the purchase of [wind] to the extent that it is available to meet 75% of the renewable resources requirement.

The utilities will be allowed to recover the cost associated with the energy efficiency program and the procurement of renewable resources. There is a safety doubt that allows utilities to reduce the use of energy efficiency of renewable energy resources if the costs either one requires rate increases to customers more than 0.5% for the first year increasing 0.5% each year until it reaches a maximum cap of about 2% in 2011.

The long term goal is a cost effective renewable energy resources be available to supply, 25% of the total electricity that utilities supply to their retail customers by June 01, 2025. It was important for us to see that the demand or the energy efficiency renewable resources was met in this comprehensive package so we did not have -- on that front [Technical Difficulty].

We must revise, submissions of the '97 restructuring act that allows Exelon to forsee strategic transactions and informal [firing at the ICP]. The deal does not require separation of ComEd from Exelon.

I want to address this next point clearly because I know that many of you have different opinions on it. We intend to keep the Exelon companies together.

The ICC has demonstrated that it is a fair and courageous regulatory authority. We expect that ComEd will be treated fairly.

Of course if ComEd cannot receive fair treatment as part of the Exelon family, then we will need to reconsider separating ComEd from the rest of the companies. That option along with other value added M&A transactions or restructuring transactions will be regularly reviewed by the senior management in the Board.

As I mentioned earlier this agreement protects ComEd and Exelon Generation from rate freeze and generation tax legislations for at least the next four years. It terminates all pending litigations related to the reverse-auction including the complaints filed at FERC initiated by the Illinois AG.

The agreement gives the Exelon companies a right to terminate the rate relief monies if the General Assembly virtually enacts rate freeze or generation tax legislation. While political and regulatory risks are facts of life in the utility business, we believe the long-term aspects of this deal will turn those risks to a more normal level.

ComEd will have the right to stay in an RTO or ISO for at least the next 15 years. The Exelon companies are protected from rate freeze and generation tax legislation for at least four years.

The five year market based financial swaps ends into 2013, and Exelon gets strategic flexibility for at least four years. Most aspects of this deal will be product by legislation and are proved by court or government agency I want to take a moment to publicly thanks the ComEd negotiating team, Frank Clark and from Missouri, Bob McDonald, John [Skolds], Brad (Inaudible).

And the Exelon Generation negotiating team led by [Joe Domino]. Each of these teams has worked independently and in far too much time in Springfield.

I am deeply grateful for the commitment and sacrifices they and their families have made. I must also thanks Senate President Emil Jones and our other legislative supporters, especially including the Black and Hispanic caucuses for their very consistent support as we attempted to resolve this very complex issue.

We've received early support from House Republican leader John Cross. I must also say Illinois Commerce Commission for its continued commitments to report to the law.

And finally, I must recognize that while they have been a very good at commerce. In the end I will speak to Michael Madigan and Attorney General Lisa Madigan, we are willing to compromise and reach a practical conclusion and always find the can go ahead.

We appreciate the expressions and support of the Governor indicating that he will sign the legislation. Now people have called Marybeth Flater, JaCee and Chako over the last week saying, is John smiling, is John laughing, is John frowning, is Exelon celebrating, is Exelon fine?

Ladies and gentlemen this is about money and keeping the lights on and not about emotion. Working on this problem it has been two years of absolutely misery but this is a result, as end work.

It preserves the competitive marketplace, which means so much to us and to you and I believe it will work and we shall make it preserve. Now I will turn it over to John Young and I will come back at the very end to pick up on [legislation].

Thank you, John. Good morning everyone.

Exelon announced second quarter 2007 adjusted non-GAAP operating earnings of $700 million or $1.03 per diluted share an increase from second quarter 2006 operating earnings around $577 million or $0.85 per diluted shares. Historically, our operating earnings have excluded significant items that are not directly related to the ongoing operations of the business or are one-time in nature.

And keeping with this philosophy second quarter operating earnings exclude an after tax charge of $14 million or $0.02 per diluted share for the cost of comments rate relief and a systems initiative that were incurred during the second quarter. Likewise, we plan to exclude the financial impact associated with the Illinois settlement from future operating earnings.

We believe these cost reflect a one-time event associated with ComEd's transition to a competitive market. These costs will be expensed as credits are issued overtime.

Please refer to exhibit in the 8-K, which illustrates the sources and recipients of funds overtime. Consistent with prior treatment are second quarter adjusted non-GAAP operating earnings also excluded mark-to-market losses from Exelon Generation’s economic hedging activities and earnings from investments in synthetic fuel-producing facilities.

On a GAAP basis Exelon reported consolidated earnings of $702 million or $1.03 per share for the second quarter of 2007. For a comprehensive reconciliation of GAAP and non-GAAP earnings please see the tables that accompany the earnings release.

I will turn now to earning drivers for the quarter. Exelon's strong performance for the quarter was driven by increased earnings at Exelon Generation, slightly offset by an expected decrease in ComED.

PECO earnings during the quarter were flat when compared to the prior year. Exelon Generation contributed $0.87 of operating earnings per diluted Exelon share for the second quarter of 2007 compared to $0.55 for the same period of 2006.

The major driver of Generation’s operating earnings growth during the quarter was higher wholesale margins as a result of favorable market conditions and portfolio position. The end of the below market PPA with ComED and a contractual price associated with the PECO PPA.

These benefits were partially offset by the impact of an additional nuclear refueling outage later related inflation and increased nuclear security cost and our receipt fees. These costs including the inflation in labor costs were anticipated and included in the guidance we provided earlier this year.

Turning now to ComEd. In the second quarter of 2007, ComEd contributed $0.6 per Exelon share compared to $0.19 during the same period of 2006.

ComEd's decrease in earnings was expected and was primarily due to the impact of the end of the nearly 10 year regulatory transition period in Illinois. ComEd's earnings during the quarter also reflects increased communications cost related to the end of ComEd's rate freeze, increased bad debt expense due to voluntary suspension of customer disconnects.

These unfavorable drivers at ComEd were partially offset by favorable weather, an increase in revenues associated with ComEd's distribution case, and an increase in revenues associated with ComEd's transmission case, which was approved by the FERC and was effective May 1st, 2007. Details on the transmission case are provided in our earnings release.

As expected ComEd's earnings for the quarter were week due to continued regulatory lag or the inability to recover current year costs. ComEd's financial viability and its ability to deliver reliable service continue to be dependant on being able to recover its cost from fair and reasonable rate making.

FERC's approvals of ComEd's transmission rates was a first step in ComEd's regulatory recovery plan. At the next step in this process ComEd plans to file another distribution rate case with the ICC during the third quarter.

Weather during the second quarter of 2007 was $0.02 favorable per share to ComEd's earnings compared to the second quarter of 2006, and a little over $0.01 favorable to normal weather. I'll now wrap up the discussion of quarterly earnings with drivers with PECO.

PECO's contribution to operating earnings for the second quarter of 2007 was $0.14 per share or flat when compared with second quarter of 2006. During the quarter PECO benefited from favorable weather and load growth as compared to last year.

This favorability was offset primarily by the schedule increase in PECO CTC amortization, higher gross taxes and the impacts of a favorable tax settlement. Weather was $0.02 per share favorable to PECO's earnings in the second quarter of 2007 compared to the second quarter of 2006 and about $0.01 favorable to normal weather.

Please refer to the tables that accompany the earnings release for additional detail regarding our second quarter results. Turning now to our outlook for 2007, we are reaffirming Exelon's non-GAAP operating earnings guidance ranges for 2007 of $4.00 to $4.30 per share or a downwardly revising Exelon's GAAP guidance range to $3.70 to $4 per share from $4.10 to $4.40 per share primarily reflecting full year impact of the Illinois settlement.

Both Exelon's operating earnings and GAAP earnings guidance are based on the assumption of normal weather for the balance of the year. Our major drivers of operating earnings for the balance of 2007 for Exelon Generation, ComEd and PECO are essentially the same as we outlined in the beginning of the year.

I would like to draw your attention to a few items that will impact earnings and each of the operating costs. Starting with generation, earnings growth for the remainder of the year at Exelon Generation while continue to be driven by favorable portfolio position as compared to last year.

The exploration of the below market ComEd PPA and the contractual price increase in the PECO PPA. However, subsequent to issuing our original guidance PJM held its first RPM auction for the period June 2007 through May of 2008.

As we discussed in the first quarter call, the RPM auction will have a favorable impact on Generation's earnings for 2007 as a result of rest of market prices being higher than originally expected, benefits are uncommitted capacity in the Midwest. Exelon Generation is also benefiting from capacity transfer rights which partially offset the cost of capacity that will be use to serve the PECO load, load obligation in Eastern MAAC.

Similar offsetting the favorable earnings impact of RPM for the balance of the year is the implementation of marginal-loss dispatch by PJM. On June 1, 2007 PJM revised his methodology for considering transmission line losses in generation dispatch and the calculation of locational marginal prices.

Prior to implementation of marginal-loss dispatch PJM was using average line losses in dispatch and calculation of LMPs. Alternatively marginal-loss dispatch recognizes the varying delivering costs of transmitting electricity from individual generator locations to the places where customers consume the energy.

PJM believe that this approach is more efficient because the cost of energy that is lost in the transmission line is reduced compared with the formal average loss methodology. We are continuing to evaluate the impact of that marginal-loss pricing we have on our operations.

We do expect it to be unfavorable compared to original guidance due to the location of our Midwest generation fleet relative to the load service. Another potential offset to be upside from the RPM auction is the recent decline in power prices driven by a dropping gas prices.

Although, we are 95% financially hedged for the balance of the year due to the size of our generation portfolio, movements in market prices still impact our earnings. Taking into account these three items the upside expected from RPM, the RPM auction and the potential downside related to marginal-losses set by PJM and the recent decline in power prices.

We are reaffirming the operating earnings guidance we gave you for Exelon Generation at $3.40 to $3.60 per share. We are also reaffirming operating earnings guidance for ComEd at $0.10 to $0.20 per share and PECO at $0.60 to $0.65 per share.

Even with the favorable impacts of weather during the first half of the year FERC's approval of ComEd transmission case and strong load growth at PECO. We feel it's too early in the year to revise guidance.

Turning now to the markets and then update on our financial hedge position. Similar to last year, we are providing you with additional information about the commodity markets.

As part of earnings release package, we included a market snapshot showing commodity price movements for the calendar year 2008 corresponding changes in market implied heat rates. We have extended this slide to include the spreads between on-peak and off-peak forward prices in PJM West and Ni-Hub along with market data for ERCOT.

This slide also highlights the results from the latest PJM, RPM auction, which I will discuss in a moment. Feel free to ask questions about the recent commodity prices performance during our Q&A session following our prepared comments.

In May, using our target financial hedge ratios through 2010 which were 90% to 98% for 2008, 70% to 90% for 2009, 50% to 70% for 2010. We are currently at the lower end of our target financial hedge range for 2008 and at the upper end for the target financial hedge ranges for 2009 and 2010.

For now, let's discuss the RPM auction results. Earlier this month PJM conducted the second auction under the new capacity market design called Reliability Pricing Model.

We believe RPM provides a valuable transparent price signals to the market and will compensate generators and demand response providers for investment in long-term reliability in PJM, which benefits our customers. This new capacity design provides a better signal to the market of where and when capacity is needed and better enables resource owners to plan on a forward-looking basis.

In addition to incentivizing new generation, RPM is designed to retain existing generation if needed for reliability purposes. The second auction for the period June 1, 2008 to May 31, 2009 results from the second RPM auction are included in our earnings release.

As mentioned during the first quarter earnings call most but not all of our 9500 megawatt of capacity Eastern MAAC is committed to serve the PECO load, and will not benefit this year from this capacity prices. However, our earning committed capacity in the Midwest will receive rest of market capacity prices for this auction beginning June 1, 2008.

While the earnings impact for this auction for 2008 is somewhat limited even Generation's current contracts and forward sales commitments, the positive earnings impact will increase as these contracts roll off. At the end of Pennsylvania transition period in 2011 Exelon generation will receive full benefit associated with market value of capacity.

We will provide you a view of our open or unhedged EBITDA during the fall. Given our large low cost, low emissions and exceptionally well-run nuclear fleet, Exelon is in a unique, competitive position to benefit from improving power market fundamentals driven by capacity value and higher rebates.

Next I wanted to preview our Investor Relation's calendar for the rest of year. Before wrap up with an annual investor conference in New York on December 19th, go ahead and save that date December 19 in New York.

Details will be coming out soon from Investor Relations. Between now and then we will be participating in a number of investor conferences holding our third quarter's earnings call and attending the Fall EEI Financial Conference.

Similar to what we did last year, we plan to use these meetings to emphasize our key earnings drivers for 2008 through 2012 by operating company and provide you with key assumptions and sensitivities for 2008 through 2012 by operating company and provide you with key assumptions and sensitivities for 2008 including generation supply and sales expectations, revenue net fuel projections and our open EBITDA for Exelon Generation. We are also planning to provide you with additional information about O&M and CapEx trends by operating company over the next five years.

Our intend is to lay the foundation of our earnings and cash flow profile in 2008 in advance of giving you guidance at our December 19 Investor Conference. Before I turn the call back to John Rowe, I will touch based on our value return plan for 2007.

We are evaluating the timing in the exact amount of the 2000 end share repurchase inline of this Illinois settlement, and still plan to update you on our specific action sometime during the third quarter. I'll remind you that any share repurchase program has subject to approval by the Exelon Board of Directors.

I look forward to see many of you in our coming months. I'll now turn the call back to John Rowe.

Thank you, John. I wanted to make my review for the second quarter results a little briefer than what I am just because I know you have questions.

Let me say we had a very fine second quarter, year-over-year operating earnings were up from 28.5 in the second quarter up 2006 to $1.03 in the second quarter this year. We earned $2.10 for the first six months of the year up from $1.48.

The cost of the Illinois settlement will be recognized in GAAP earnings over the next three years but it purely from operating earnings. At least we are firm on operating earnings guidance of $4 to $4.30 this year for the full year.

We are revising our 2007 GAAP earnings estimate reflecting Illinois settlement it was for $1.10 to $4.40 per share it is now $3.74. Our nuclear unit achieved a 93.6% capacity factor for the quarter and reduced the number of non-refueling outage dates from 24 to 18 this quarter.

Our Barcelona Hydro Plant achieved a 93.3% commercial availability factor and a 91% equivalent availability factor reflected. Our team continues to hedge and optimize our portfolio.

Congratulations to Chris Crane and Mark Schiavoni in the claim and each of their excellencies. The generation company results reflect both the state of the conservative marketplace, very good operation and a very practical hedging policy by our unit.

Our delivery company having showing strong operating performance. In ComEd we have had improved outage management and faster service recovery and PECO has done very well in spite of high records.

Efforts from Brian, John Costello, Barry Mitchell in their key continued to be improving our operating performance. Before I touch on Pennsylvania I want to acknowledge two of my colleague have announced their retirement; Jack Skolds, the Executive Vice President of Exelon and President of EED and Exelon Generation has announced his retirement effective September 7.

Jack has played enormous positive role during his years with Exelon we are a much stronger and more efficient group of companies as a result of Jack’s tireless effort. Gary Snodgrass, EVP & Chief Human Resources Operator has helped us with one of the largest national recruiting program in industry and a great many other things we will almost Gary formed out.

I thank them both for everything that they have done. Now let me quickly update you on Pennsylvania.

As we’ve all seen in Illinois and other states when transition periods end and rate caps is higher there is strong pressure for state regulatory in clinical processes to act to reduce the impact of price increases. While PECOs regulatory transition period does not expires until December 31, 2010, transition period has already ended for some other Pennsylvania Electric Bill Commission.

Pennsylvania Governor, Ed Rendell issued an energy independent strategy early this year that included a package to propose legislation. Provisions of that legislation were among other things required to both of higher that of PECO, to procure their electricity for to bolster with customers through a niche cost portfolio approach with preferences for conservation and renewal of policy.

The legislation would also require redoing technology to enable time of new states provide for a phase in of any concrete generation rate after exploration of rate cap. Permit distribution companies to enter into long-term contract with large industrial customers and create a fee and electricity consumption that the state would direct for the conservation and renewable technology.

Approximately two weeks ago, Governor Rendell announced that he has signed an agreement on the state level only certain elements of the proposed package would move forward at this time. Specifically the Governor signed into law out still trouble readjustment to service.

Level 3 have managed the alternative energy portfolio standards by increasing the amount of solar energy required to be purchased by electric distribution and supply companies, and expanding the ability for customers to help generate and sell excess supply back to distribution costs. House Bill 1530 allows distribution and supply companies to negotiate long term contracts for certain retail customers also due [fix rates] in 15 megawatts.

The Bill also allows distribution companies to construct or contract for supply from generation facilities to bill one third contract requirements. This provision is not effect able to PECO.

The deal prohibits distribution companies from placing those costs in rate base and cost subsidizing the entire cost. We expect the other energy related issues to be addressed in the special legislative session planned on September 17, 2007.

On the regulatory fund in Pennsylvania that's the Public Utility Commission issued final regulations that provide guidance and distribution companies such as PECO on acceptable methods of procurement when rate caps expire. The commission's approval of final default service regulation or a provider of last resort or polar regulation provides the framework for utilities to purchase energy for customers who did not seem to receive electric supply from an independent marketer.

These regulations will help in the customer's transition to market base pricing in 2011. The regulations allow distribution companies to purchase energy on behalf of customers in ways that fit each individual service territory, for example securing energy through daggered purchases and competitive auctions with full cost recovery and no hindsight prudent fees.

The regulations also provide options for customers to differ some portion of a rate increase it can achieve 25%. Allow recovery of procurements supplied and funded say by consumer education.

The Pennsylvania Independent Regulatory Review Commission approved the regulations last week. The Pennsylvania Attorney General also has given approval to regulation.

PECO's current electricity supply rates will remain the same until January 1, 2011. PECO's expects to fire this electricity procurement plan for the 12 service customers during the [2008].

Unlike Illinois where we were beginning to fix for how things would proceed in Pennsylvania several such companies are ahead of us. Pennsylvania has approved six interim default service plans since the end of restructuring including those for that came and powered UGI.

Also two days ago PPL held its first post transition auction. We look forward to seeing you at that.

Now just to conclude and even I am entitled to put some emotions since it’s the end. Exelon today has a market capitalization in excess of $50 billion.

The next largest utilities have a capitalization of around $30 billion. That is because, first, we owned about 17000 megawatts of nuclear generation and about 8600 megawatts of non-nuclear average operating in competitive markets.

Second, our operating managers have an unparalleled commitment to regulate the processes and continue improving. Third, we have established our corporate structure and mobilized our legal and political team prospect those market based regulations.

Fourth, our marketing people are suspicious of FAS and hard headed about lifts evolve for markets. Fifth, our plans will become more valuable in a future economy that is constrained both by carbon regulation and after the limitations.

Sixth, we are absolutely committed to the value of your investments both with our passion and with financial discipline, and our own vertical commitment to this company. These reasons are powerful, indeed I think they are all revolving and expect that for the last day and half, so have you.

It should come as no surprise, however that this sort of success reach both in and the desire to hide the real cost of energy trying to effect the finance line. We have defended our value, your value successfully from a incentive tax in Illinois particular the eminent and the participants.

I expect we shall see new attacks in the future, not in Illinois for the next few years but collaterally in Washington or perhaps in Pennsylvania. We shall be as jealous in defending our market value in the future when such a tax occurs as we have been in the past.

We shall also try to reach practical resolutions to protect our interests and public requirements. I have led utilities now for more than 23 years.

I worked through the end of rate base generation regulation in New England through the integrated resource planning years and the onset of retail competition in New England. And now I am defending competitive market value and political forces seeking comprises among regulatory fits.

These transitions have never been easy, they will never be easy. But the settlement we have reached in Illinois preserves the principals for what we fought in most of the value that we set out to protect.

I am confident that we will continue to see succeeded Exelon by both fighting and by adapting. There is no better collection of assets, no better legal and regulatory platform and no better team than ours in the utility business.

I believe we can continue to achieve and meet your expectations and we are now open to questions.

Good morning.

Good morning.

Can you please walk us through the rationale to keep the company together for now when ComED is realizing really only a 3.5% ROE. Is it more timing where it is just too soon to do anything or do you not believe that there is an issue with having ComEd attached to Exelon Generation?

No, we know there are issues that ComEd being attached to Exelon Generation. We also know there are some shrink attached ComEd being attached to Exelon Generation.

We think that with the creation of the Illinois Power Agency, they have resolved the issue that most concern it by having more independent power procurements. We believe that these issues were in value change from year-to-year and there has to be a pretty overwhelming case or you take something apart that has sensitive.

We are always open to it, its kind of just nearly is about value, but when I look at the events the past two years, I see as well as anyone millions of ways in which people try to use ComEd as waiver to get an Exelon Generation. I also see that the relationship that Exelon has because ComEd is part of the corporate family, made a great deal down in the legislation.

And I at least want to be very careful before I stay apart those relationships, so we are watching as all of you what happens with [KKRTHU] we are looking as you with no we would at whether our future expansion opportunities are better, we have integrated companies or perhaps a standalone generation play and we are literally open to each and every one of this fact. But let me say it is, when it comes down to it, among the factors did affect my judgment are, that we are still able to achieve some distinct cost synergy from having the companies together.

Our estimate was on the order of $250 million a year, I suspect that ComEd and PECO after stand more on their own for regulatory purposes those numbers will shrink somewhat but they have not dollars to grow away likely. We also have integrated pensions and while the funding task work where we integrate these companies it maybe if you have your separate companies there might be when we done partial analysis by a cash payment that would be required for ComEd.

The point I am making is we get the argument that pure play generation has a particular value in today's market or at least due to the day before yesterday's market. But you don't think the case has to be very clear and overwhelming and we would get and gotten a better deal in their package by separating ComEd.

If turns out going forward that's the only way ComEd that gets fair check we won't do it. If it turns out going forward then we see very clearly the value of generation is greater in other hands we will deal with that too.

But the key attacks on generation the things that motivated hedge in large generation participate Asian in the settlement. We are not apposing the same through the ComEd rate increase but the other threat amounted cycle hedge too much.

Thank you, and then another separate question, John. As your view on IPP focused M&A changed at all over the last several months, I know you have been busy dealing with the issues in Illinois but can you give us some color on that please?

I can probably give you color as you know our states are far away from mentioning any one specific that all of you get this color and for those of us who prefer Rembrandt picture that have only color of limited value. But yeah, as I said we are constantly looking at those other integrated and at your play IPP and we have a number of value in our valuation spectrum and also as you would expect they are not all consistent.

We want simplicity. We get involved in another transaction.

We want to work, we want to continue to be more green. We think our real advantage here in a carbon constraint work is the extent of low carbon energy that we have.

We would like to grow in a way that keeps us at the green low carbon end of the spectrum. We value participation in the competitive marketplace.

We are already big enough in at least two other competitive markets. So, we have a number of factors and they don’t lead to one clear and simple answer, just go back to our basic vision statement, we want to be bigger, we want to be more profitable, we want to be more green, we want to be adaptable to the widest providing regulatory changes that can come about and they give you a number of different answers and of course any transaction, depends both on your own priority list and upon the priority list of the other people with whom you might talk.

Those transactions also affect the answer to your first question too. Some people with whom you talk would rather or appeal for any others with whether you were integrated.

Can we go to the next question please?

Hi, good morning everyone. This was just picking on John Young’s comments around capacity and the RPM auctions.

I followed you said that you obviously or substantially hedged into 2008 on the Eastern MAAC position. And I think you also said that the '08 impact would be somewhat limited by forward sales and I wanted to just kind of see if you could frame a little more the extent of how much we should be thinking about the open position into 2008 and 2009.

Does it relates to the peace outside of Pennsylvania and is that a significant offset to what the potential earnings could be out of RPM and we should think but it's a longer term outside or those hedges can more limited in scope?

Those hedges are along the line of the hedging targets that we gave you and if you heard my comment where we were year-by-year. All those were financial hedge positions, you can extrapolate kind of the physical side of that, and then that's further complicated in the near-term by the transfer rate between western PJM and eastern PJM to exactly what price you get there.

So, the impact in the near term in the '08 timeframe or they are there, they are less then they would have otherwise we have been not RT sold forward in our normal hedging practices. So, when we give you the open EBITDA stuff we will go through that in some detail as to how you should look at that for '08 and beyond.

So, when we look at the 16,000 megawatts of capacity and the 7000 or so commitments under the Illinois auctions we should really be thinking about hedge percentage as it relates to capacity as well do you have number?

Yes, we will give you some clarity on that.

But that starts one other quick down related issue, the transmit be marginal loss pricing issue that is oversee isn't offset in 2007, does that also continue to be a kind of year-over-year offset into 2008 because of…?

You are going to see that's going to have a more prominent impact, that's a permanent change to how losses are priced in the OMP, so you will see that going forward as well. Everybody in PJM is going to see that.

Next question please?

Hi, good morning. I just wanted to ask a question regarding the process you will go through with the Board to size the share buyback.

Are there parameters that you are going to be using that you could share with us to make a proposal in terms of, for example, capitalizing on just the free cash available for distribution to shareholders after your dividend payments to fund a borrowing that would be used for a share buyback, or would you go beyond that and try to achieve material change in the capital structure of the companies through the buyback? Is there any financial parameters that you can share us that would guide your advice to the Board about the scale of the buyback?

I will look at two ways, one the targets that we have already given you around FFO to debt and those things would give you kind of the parameters scaling a share buyback. Obviously that will be impacted by the discussion around the numbers than John gave you in the settlement, a part of the discussion today for this year.

Anything that you're talking about beyond that is a normal part of our value return plan. I would almost put in the category kind of a leverage recap.

That will be a whole different discussion. We haven’t gone there at all, so I would not be thinking of something beyond those parameters that Michael might have given you around FFO to debt and that’s going to be an annual discussion.

Any leverage recap would be a completely different strategic view of how we plan on use the balance sheet.

Can you just remind us what those FFO to debt targets are?

Yeah, the middle of the BBB range which is FFO to debt of about 25%. In business schedule and some of the materials we gave you we've ended up before to kind of give you some targets based on, it’s illustrative but on what's the price expectations we saw in market few months back.

Yes. Thank you.

John, I heard a comment from Mr. Madigan saying that this was one of the toughest negotiations he had to go through.

So you must be feeling very relieved about this thing. So the question then is that well moving forward, you said that you are denied some of the other business objectives which you want to pursue.

So, could you remind us what those business objectives you have in mind?

Well sure. First, there is just no doubt.

I am greatly relived. The combination as a speaker of the house and Attorney General that attack on every front over a two year period is very painful.

And it is nice to have that behind us or at least we think behind us, and ever since, we've had a handshake while the political process has been fluctuating beyond all of the leads. The Madigan's have kept their word, so I do think that this is over and again President Jones has tried ever so hard in the expenses that, but sure I mean, the kinds of things I had in mind were, we have to address what creates the most value.

Whether it's acquiring another integrated generation company that would have been very difficult. After all our New Jersey issue was a handicap by dependency of the Illinois proceedings.

So acquiring a pure generation company, to going as far as looking at the splits between generation and the retail companies or trying to determine to bring pieces of generation, to have more value in other hands. We managed this, is the old time just sitting that goes on rock and roll, this company is built on value per shareholders and there simply isn’t anything that we will not look at.

We have care trying to assess both its short-term and its long-term value per shareholders. I tried to address in response to the first question I had, because the different way these factors interplay we want to be bigger, we want to be more green, we want to capitalize on our carbon positions.

As you know we are looking at a nuclear plant in Texas, building a nuclear plant in a merchant environment would be the ultimate act of faith in the competitive marketplace. So the issue is, we have on our planning platforms, I think all of the live questions that all of you have with investors and the issue is which combination of things gives us the best short and long-term value at.

We are very proud of the value we've had over the last year. We don’t wish to stop there; we wish to find ways to keep improving it for you.

Next question please.

Hi Greg.

Hey John, a question for you on opportunity cost. The settlement in itself, it’s a large dollar amount to get back into majority over first two years.

Having live to California and watch Maryland and they are going to suit these types of situations, it's hard for us to trust that or for me to trust that two years from now if the market continue to rise that a future legislator won't see that they got a big chunk out of the company the first times, so why don't they come back. So, what was the opportunity cost in your mind of taking this to Federal Court where if you won there would be an immunization from future risk of that magnitude like PCG got in their case and about rate reduction case in California?

Greg, I am actually glad you asked it. We think on a rate freeze we have the best amendments and preemptions that you can have.

You will never get better than three to one opinion on a constitutional taking, okay, I won, won, won I know, and to bet their total company on a constitutional case is a very early thing to do. But second, the settlement wasn't so much about the rate freeze case as this was about the generation taxes and the interference with membership in DJM and all of the Attorney General other efforts to attack the markets.

Each one of those had a somewhat different probability of success in your Federal Court, and my general council was liked it if I weren't to clear about my opinion on each case. But each way you write them, each way you change them to create a different set of legal rights.

Only a madman with a leap to back a $50 billion company on a whole chain of constitutional claim. Like I said I tried won, won, I won, won, won.

And I've created many people in this country who can say that. But that was in the situation where there was no choice.

You are very right of course to have concerns about your ability of this yield. But I as the speaker comments on four years and somehow I expect yield to be around keep it for four years.

We've had wonderful integrity from president John and I think the real world we are looking at, is that we are not just basing this on one thing, we have preserve the legal structure, we have kept the right and need expedited the right separate comment if we have too. We have pieces of this deal the PJM membership that go out 15 years.

We have other pieces the swap contract it go out six years. We have some pieces that go out four years.

We have done every thing we know how by putting bricks, plaster and bin in place to continue to protect the structure. Personally, when I look back over the past nine years there are lots of things and I have 50 some billion dollars of value that are driven, I think beyond my personal attempt.

However, Jack and Chris we organized the nuclear fleet how prices have changed and adapted in the wholesale power market and so forth. But as the person who arranged the Unicom, PECO merger is the person who arranged the sale of the ComEd personal finance as the person who grows the separation of the Generation into a totally separate company, I think the structure that I have established here at Exelon have proven to be remarkably valuable.

And I think, if you look at this deal is first to figure out what percentage of the rate increases over say five years, we arranged to bring home, I think that you will have pretty satisfactory number and when you look at it going out into the future, I think you have to step back and say what in the future look like. See if it's the another 25% increase at one time in Northern Illinois and 50% increase in Southern Illinois there will be new pressures on legislator and new problems to deal with.

On the other hand if the systems evolve into a slower or more wretched set of increases I think our structures will prove relatively secure and then step back and say would you really whether defend rate increases in rate based environment, when they have done that it’s not so easy. So, I think, we accomplished what we had to do.

Paying $800 million is not a cause for celebration but protecting the market value of 11 nuclear plants in Illinois that is a very big deal indeed.

Thank you, John.

Next question please.

Thank you. I am still confused with respect to Illinois as to how new power plants can built in the state, and if I in terms of the amenities and the co-ops, is there any specific state involvement in the construction of new power plants or they are offering or proposing to offer specific contracts on new build or they are not planning any action with respect to new built?

Well I think it's not been laid entirely clear because every state with competitive market is sort of muddling we wait for the market simply to jump start them or do you try to do it with contracts which as the old integrated resource management add to it. What I believe is slightly in Illinois is that the new power billing agency, we'll propose contracts of some link for new kinds of power and given the politics of the state in the sort of climate sense you can bet that the first one will be vary and anyway fish with cold and not know what to do about it, because of the climate issue and they will be very reluctant to propose contracts to build nuclear.

But fortunately the power supply situation in Illinois is still where you need peaking capacity before you need a lot base flows, so I think you'll see some mix of contracts in market or gas fired generation, supplementing some real contracts or win and a lot of kind of debate around the issues of coal and carbon.

Also a quick house keeping question on Commonwealth Edison, are you reflecting the full $416 million perk transmission increase in your rates or because they are subject to refund is there a reserve for some element of that?

The full amount is in, however, reflecting in the books, we do have a small reserve set aside, because it is subject to review. We are also reviewing reconsideration on a couple of issues so as of now we are going with the rate as they were approved May 1.

Hi John, can you hear me.

I came to remember you from days in New York.

Yeah, same person with respect to just finalizing this deal could you just go through again what the exact process is?

I will ask Fran to do that, whether talking to Frank or gambling the end trials of the sheep is more productive as the details of the process is valid open question.

Let me try to remind you and stay hold. The deal will set it to the house oversight committee come to have this afternoon.

That’s a nine member committee, it just passed out of that committee toady and we said instead of bill by the way, that the on set meeting LO moved the third meeting, so it will put it out of the House Energy or House Oversight Committee and over to the Senate. It will then go to the house for it's approval.

And probably would not occur into Thursday morning. After the thorough vote and in the needs of majority and needs so many vote after that they needed effective graded and went in the extended fashion.

The next step after passing for house will be to go to the senate E&E Committee, the environment committees. And that should also occur on Thursday and the expectation will be voted out in the E&E Committee on Thursday.

I know that they contemplate all possibilities that are possible, but three books in one day is a challenge that as a broad sense out [Technical Difficulty] also on Thursday.

Friday, if everything works exactly that is right the government would the deal a few days after that. The Governor has indicated that the dual transmission for guidance and that is why expectation that could occur next week you'll see.

Thank you.

Next question please.

Good morning guys.

Hi Paul.

Just sort of follow up on Greg's question with respect to the RTO and tax threat that was out there. If I would understand you correctly, the real sort of -- I guess which you feel very comfortable with is that, when you spoke or and in your negotiation with Madigan and Jones and Lisa Madigan as well.

You have their commitment that they are not going to actually proceed on this because that is sort of I think Greg question, I mean the rebase that you guys are still providing became comparatively small in '09 and '10. And I guess the question just to sort of clarify this.

What happens I guess if, what is it that makes you guys feel comfortable other than obviously this rebase language being able to stop the rebase later on that these guys are not going to come back. And try to say hey G maybe this RTO thing doesn’t work.

I mean, is the legislation associated with the RTO, can that be changed by the legislature or does this pretty much stop a legislature for 2022 to just change that?

A new legislature would change it, I don’t think they will. First I am putting the lines on what I consider the speakers word and the senate Presidents word.

Those are two very strong people. I will ask Frank to comment on that when I finish.

But second this why I put so much emphasis on the financial swap. That contract takes the incentives away to metal.

Very large piece of it probably six years, I believe that the new state power agency and the Attorney General will see that now that they have their price from Exelon and it is the market price they will better opt to have market work to get the best price from everybody else. And so I think that is a strong shifting of the interests on what work received is mugging up the market to an interest in making it work.

What is that John, if this is just the market price right how is anything I mean if I understand you guys correctly it looks like you guys are saying that the peculiar process isn’t likely to change the price that you are receiving. So why is a five year contract at markets so to speak?

What is the incentive not to change? I don’t mean to tense here but why is that actually intensified but not to change it in the market?

It is a price and in the claims that (inaudible) as you can sit here, but this price starts at what was the market price when we made the agreement. And there is certainly room for it to go up a little bit, up and down depending on the exact time of the deal and then it has it escalators in it reports to define terms.

So from the point of view of the AG if the market goes up a lot more than expected they have got price stability for the customers but from our point of view they are now focusing on how they can get the other base load and cycling and picking power they need from other people, that's not a matter of going and beating on one big generator that's a matter of how you make the market work, I think its, what you said is all together. Frank, do you want to add in terms of the degree of confidence you have in, what's the people committed to?

Well, I have a probably high degree of confidence today that speaker Madigan, our president John and Attorney General who is the Madigan have signed a four year deal and signed it to long-term, and agree to be four year deal. You can't buy a future general assembly, so I don't want to give the impression that nothing sustain, but we have that words, we have the signature of the Attorney General on the settlement agreement and we have an understanding with the large body of legislators not just four leaders but their respective leaderships that has impacted four year deal.

So, in some respect while we are acting on the same, I just think of a large number of legislation. In addition, it does impacted two houses to pass legislation so one chamber reacted to other considerations in the future.

They would have to get the other channel to agree and that has -- and what's the corporate causes, in other words its difficult watching a lot of that, it is somewhat difficult to change but not inspirable but the degree of confidence today is high.

No, I would just say the contract was based on market at the time when we made the agreement, it's very much in line with our long range planning, it's not away from that and as trading group was very happy to do this contract just fair amount it's a financial swap its no power, no ancillary services change, hence and I think from Illinois point of view, it give some price certainty for procurement of that load they wanted, they want it that price certainty. If prices go down they will be able to buy the rest of their portfolio much cheaper if price go down, if prices go up, we are happy because they hedge on, so it's a simple is that from my perspective.

Thanks.

Next question?

Good afternoon, if I am hearing in, is it right to expect that the change in the procurement process from your point of view should not have any differences and in prices going forward versus the current process?

As far as we concerned any procurement process, we are entitled to market prices for our energy and that capacity and our ancillary services. And any procurement process should follow that, did you hear all that by the way because my mic went off?

Yes, I did.

You got it, well, okay. In other words unless somebody is trying away to force us to sell away from market prices any procurement process has to follow market pricing and that's our intention.

Okay. And if I can just finish off, John you mentioned the capital allocation decision, will that be just in the third quarter announcement just for this year or is it going to be a broad based decision of what capital allocation return to shareholders going forward for the next two or three years?

It will be just for this year as we did last year, give you some indication at the end of the year kind of what things out of a whole budget assumptions what capacity might be over a longer period, but that again the policy is that we will make that determination each and every year for that year as far as what return to shareholders be a share repurchase how much that, the same thing is setting the dividends that will be in annual decision.

Thank you, sir.

Operator that’s the end for our questions we would like to turn it back over to Mr. Rowe for closing remarks.

I will be very brief. I do believe subject to the final probations that Frank described, we have this issues behind it.

I do believe that this will last at least for a year, because of the way we have staggered pieces of this. I think we have provided a basic structure for peace in Illinois for a longer period than that, and I continue to connect to you just as we look at the options what we can add to this company, what we might separate from this company, we will do it in the same where’s the money added to which we have all done it.

Exelon rests on keeping the life time, running our nuclear plants well and adding value where ever we can and that is what we continually do. My thanks to all of our employees and allies who through their foreign process with it.

My thanks also to new our investors and the phase 50 could come out with the decent results which we have done.