Dear Exelon Shareholders,

By all measures, 2016 was a remarkable year in our company's history.

We produced record-breaking operational performance and strong financial results in a year in which natural gas prices reached their lowest levels since 1999.

We closed our merger with Pepco Holdings, establishing Exelon as the largest utility company by customer count in the nation.

For the first time, our regulated utility business represented more than half of total earnings, consistent with our goal to have the majority of our earnings come from stable utility revenue.

We secured the future of seven nuclear units and thousands of clean-energy jobs by working with policymakers in Illinois and New York to create landmark policies that value nuclear energy for its ability to produce reliable, zero-carbon energy.

We implemented a strategy to grow our dividend 2.5 percent annually through 2018.

We were the best performing large cap stock in the power and utilities sector, while also outperforming the S&P 500. Exelon shares have delivered total shareholder return of 32.8% over the past three years, outpacing the utility industry benchmark.

As a result of our growth and strong performance, we became the only utility listed on the Fortune 100 and were the sector’s largest company by revenue in 2016.

Importantly, we did all of this while giving back to our communities in record amounts and establishing new, industry-leading policies to benefit our employees.

These achievements are the culmination of a spirit of innovation and operational excellence that has guided our businesses since 1816, when artist Rembrandt Peele lit the first gas lamp in Baltimore at his museum on Holliday Street, launching North America’s first gas light utility, known today as BGE.

Today, BGE and its five sister utilities, our clean generation fleet and our competitive retail and wholesale energy businesses collectively bring centuries of experience, tens of thousands of jobs and billions of dollars of investment annually to the communities Exelon serves. Our position as the nation’s largest utility and leading supplier of energy products and services are a direct result of the characteristics that set us apart from our peers, including:

  • Our ability to leverage our broad scope and scale;

  • Our commitment to advance innovations in technology and customer service;

  • The stability of our industry-leading utility business;

  • Our leadership in articulating and advocating for sound policies that advance clean, reliable and affordable energy;

  • Our well-established culture of best-in-class operations; and

  • Our commitment to our people and being an employer of choice.

These strengths helped us achieve solid shareholder returns in a year that challenged the industry. They enhance our reputation as good employers, good neighbors and good stewards of our environment. Most importantly, they serve as a foundation for the future.

Exelon shares have delivered total shareholder return of 32.8% over the past three years, outpacing the utility industry benchmark.

Clean Energy

At Exelon, we know that our future depends on giving customers what they want most — clean, reliable and affordable energy. As the nation's largest utility and provider of zero-carbon energy, we have a unique perspective on the solutions that are needed to advance sound energy policies that will deliver the kind of future our customers demand.

In pursuit of that goal, we worked with a broad coalition of stakeholders to establish the New York Clean Energy Standard and the Illinois Future Energy Jobs Act, which together saved the future of seven nuclear units by allowing fair compensation for the unique zero-carbon attributes of those plants. These initiatives will preserve and create thousands of jobs, secure stable economic growth for their communities and unleash billions of dollars of investment in new clean energy sources and energy efficiency measures. These innovative policies also serve as a template for other states looking to address environmental and economic challenges by investing in the energy grid of the future.

Utility Growth

In March 2016, we completed our merger with Pepco Holdings, creating the largest electric and gas utility by customer count. We are on track to complete our merger commitments, meet our synergy targets, and complete the integration. The merger also is helping us accelerate our work with regulators to invest in new technology and infrastructure.

As a result of the merger, 2016 was the first year that the net income from the regulated utilities was greater than the net income from generation. We expect this shift to more stable revenue to continue over the next several years.

Building on this momentum, in 2016 we worked collaboratively with regulators to continue investing in grid reliability. The Exelon utilities filed a total of nine distribution rate cases and added approximately $315 million of incremental revenue requirement through the completion of five cases. In addition to the distribution cases, the utilities filed five transmission rate cases with the Federal Energy Regulatory Commission (FERC) in 2016, which will increase annual revenue by approximately $65 million.

These actions allow us to continue investing in new infrastructure and technology to increase reliability and better serve our customers.

In March 2016, we completed our merger with Pepco Holdings, creating the largest electric and gas utility.

Disciplined Management

In a low-commodity-price environment, we have exercised disciplined management at Exelon Generation. We recalibrated our generation development investment plan to strengthen the balance sheet and better manage cyclicality. Exelon Generation's competitive businesses will continue to provide free cash flow to invest primarily in the utilities and to reduce debt.

Constellation's generation-to-customer match strategy continued to serve us well in 2016's low-volatility energy market. We expect this strategy to support strong performance should volatility return in 2017.

The Constellation Retail power and gas business and wholesale power business each performed better than plan, delivering record volumes of power and gas to our customers. We further strengthened our Retail business by acquiring ConEdison Solutions in 2016.

Operational Excellence

We achieved record or best-in-class performance on several important metrics that measure our utilities' quality of customer service. PECO and ComEd were both in the top 10 percent for lowest rate of power interruptions among peers. ComEd's results were not only best-on-record, but also best-in-class. Pepco Holdings also improved to a new record for lowest frequency of interruptions in its history and BGE achieved its best performance ever for minimizing outage duration. Reliability matters to us and our customers.

All our utilities generated top quartile performance in multiple customer operations metrics. BGE, ComEd and PECO saw excellent results for the Customer Satisfaction Index, all having achieved new company records and ranking in the top 10 percent among peers.

Exelon Nuclear had its best operating year ever, with a record high 94.6 percent capacity factor, the highest net generation on record and an all-time shortest average refueling outage duration of 22 days, compared with an industry average of 37 days.

Exelon Power also ended the year with strong operating, safety and environmental performance. Dispatch Match for the fossil units achieved a goal of 97.2 percent, and wind/solar energy capture was our best on record.

Further, to provide faster power restoration after storms, a key customer service, we completed training for crew transitions across Pepco Holdings' utilities.

The strength and scalability of the Exelon Utilities' management model enables the identification and deployment of best practices across all six utilities.

Delivered on Our Values

Our success is directly tied to our investment in our people and our communities. None of our accomplishments would be possible without our talented leadership team and the diverse employees across the country who work every day to drive results for our customers and shareholders. Year after year, they demonstrate that they are the best in the business. We could not be more proud or more grateful for all that our people do to keep the power and gas flowing while representing the company to our customers and communities with pride and integrity. We are particularly proud when that work gets recognized. Here are a few samples from 2016:

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We are also proud of Exelon's active corporate and employee philanthropic activities as we continue to build strong community and customer partnerships. In 2016, Exelon companies and the Exelon Foundation donated more than $46 million to nonprofits — our largest amount to date. In addition, through the giving campaign and matching gifts program, Exelon employees donated more than $10 million and more than 170,000 hours of community service — one of the most successful years ever.

In addition to our philanthropic efforts, we are a good citizen in our communities by supporting local and diverse businesses. In 2016, our spending with women- and minority-owned businesses reached $1.9 billion, up more than 200 percent since 2011 and representing almost 20 percent of our sourceable spending with outside vendors.

Doing right by our employees and communities is the smart thing for our business and, more importantly, it is the right thing to do.

Positioned for a Bright Future

We are encouraged and excited as we enter 2017 and look forward to building on our success. As you know, the pace of change in our business is unparalleled, but Exelon's culture of innovation and operational excellence is designed to ensure we keep pace, and that we never take our eye off the essentials — providing energy that is reliable, clean and affordable.

With the leadership of our management team and the contributions of each of our employees, we will continue to advance our vision of the utility of the future and move our company forward. I hope you share my enthusiasm for Exelon's future, and I offer my sincere thanks for your continued support of our company. Let me assure you, we will continue to do what we do best and drive progress for our company, our shareholders, our customers and our communities.

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Christopher M. Crane
President and Chief Executive Officer
May 2017