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Exelon Unit Gets Approval to Increase Gas Rates in Maryland

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Exelon Corporation (EXC - Free Report) recently announced that its unit Baltimore Gas & Electric Co. (“BGE”) has received necessary approval from the Maryland Public Service Commission to raise natural gas distribution rates for its natural gas customers in the state. Per the approval, monthly bill of an average residential customer will go up by $5.40 from this year.

Approval Lower Than Claim

Last year, BGE filed an application with the commission to recover the investment made since 2015/2016 to improve its gas distribution infrastructure.  The original filing requested an annual rate increase of $85 million, which included a surcharge of $21.7 million and requested for a return on equity (ROE) of 10.5%. If the same has been approved with any change, the monthly rate would have gone up by $5.77.

However, the Maryland Public Service Commission approved a rate increase of $64.9 million, including $21.7 million, resulting in a ROE of 9.8%.

Impact of Rate Hike
The rate hike will no doubt increase the yearly expenditure for the Baltimore Gas’ natural gas customers in Maryland but is essential to maintain the quality of services and ensure safety in the natural gas distribution operation.

Since 2016, BGE has replaced some sections of major transmission line that runs from western Baltimore County to Baltimore City. In addition, the company continued with repairs and preventive maintenance, adding smart devices inside pipes and equipment inspection that made a hike in distribution essential post June 2016 hike of $4.54 per month.

However, the company believes that even with the rate revisions, the natural gas rates will be lower than what the customers paid a decade ago, primary due to the drop in in natural gas commodity prices.

Long-Term Plans of Exelon

Exelon has plans to invest nearly $21 billion over the 2018-2021 in its regulated operations, in a bid to improve reliability of its operations. Ongoing investment continues to strengthen operation and capability of the company for providing efficient service to its customers.

Price Movement

Exelon’s shares have returned 17.2% in the past 12 months compared with its industry’s growth of 1.2%.

Zacks Rank & Key Picks

Exelon currently has a Zacks Ranks #3 (Hold). Some You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some top-ranked stocks from the same industry are NextEra Energy, Inc. (NEE - Free Report) , Dominion Energy (D - Free Report) and Pinnacle West Capital Corporation (PNW - Free Report) , each holding a Zacks Rank of 2 (Buy).

NextEra Energy pulled off average earnings surprise of 1.7% in the last four reported quarters. The Zacks Consensus Estimate for 2019 earnings has been revised 0.3% upward to $8.36 over the past 90 days.

Dominion Energy pulled off average earnings surprise of 6.99% in the last four reported quarters. The Zacks Consensus Estimate for 2019 earnings has moved 0.5% north to $4.30 over the past 90 days.

Pinnacle West Capital came up with positive earnings surprise in three of the trailing four quarters, the average being 6.15%. The Zacks Consensus Estimate for 2019 earnings has moved 2.5% north to $4.84 over the past 90 days.

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