Exelon CEO on if our utilities can handle the AI boom | Term Sheet

If you're someone who says, 'Hey, I need 5 gigawatts of power,' you don't need 5 gigawatts tomorrow. There's a ramp-up period. Let us work with you on that ramp-up period to be part of that solution with you.

Ally, thanks for having me.

I would say we're ready to an extent. And let me explain that for you. It's going to require a significant buildout in infrastructure to meet the demands that are coming. But this demand is not going to all appear tomorrow. It's sequential, meaning that it's going to be planned. There's going to be strategy sessions. And what I found is that when we have the ability to partner with the companies, the AI, the data centers, and so forth, we put together a comprehensive plan to meet their needs. And I'm confident that the energy companies across the US can help meet that need. And I do believe this growth being unprecedented as it is is not going to be at the level that some are expecting because understand you still need the supplies. You still need the people. You still need the land to build all of this. We're going to show up and meet that need, but it's going to take time.

I think we have growth and we have potential from talking to all the organizations that are involved in this. It's the next 10 to 20 years minimal that we are planning a long-term horizon to meet the need. What's significant and why I tell you I'm confident that we can do it. We're already doing it. So I'll give you an example for Exelon. In Illinois alone, we will be adding over 19 gigawatts of new load. 19 gigawatts of new load in Illinois alone by 2030.

Okay, so put it in perspective. I know you're from Illinois. Right now, ComEd, the fourth largest utility in the nation, its peak load is 23 gigawatts. So, we're adding almost a whole another utility of load within the ComEd system.

And we have not missed a beat. We're continuing to partner with them, identifying land, building the infrastructure because we believe when done right this could benefit all customers. But please note that I said when done right because we have to make sure from a policy perspective and a community perspective we're showing up and getting it done in real time.

I would tell you one, as a utility that has 11 million customers, my number one focus is safety and reliability and resiliency of the system. Two, ensuring that what I provide is affordable, as affordable as it can be. I can never treat one customer disproportionate to another. So therefore, if I'm powering one of the largest data centers and it disproportionately has an impact because of something I did on a residential customer, that is something that I'm going to work against each and every day. So done right means the policy implications of building out all of this and meeting this new demand has to be very thoughtful. That's one. Two, ensuring that when you locate a data center or this new technology in these communities, it's done with the community. They've given input as to where are you going to site this? What impact does it have on the environment? What impact does it have on the tax structure within that community? Having those conversations upfront means something. You can't have them after the fact. And I think that has been the challenge for some is that they've been having the conversations after they already started. We have conversations with leaders, residents early on. This is what we're thinking. We're running this transmission line through this area. Does that meet your needs? And to be honest, a lot of them say, 'No, we'd like you to do A, B, or C.' And sometimes we can accommodate that and we will.

You know, what I found, Ally, is that it's nearly impossible to get 100% alignment, but I do shoot for 90%. And if I get the vast majority of people signing off, that means I've done my job. And that's how I structure my teams. I said, you can never be afraid to have the conversations with the community. And when they're partners with you, that's when I say you're doing it with them instead of to them.

You know, my background is government affairs. So, I've worked with politicians and community groups at the federal, state, and local level my entire career. And what I understand is that everyone is passionate about what they feel. And you need to understand where they're coming from and just slow down long enough to listen. That's where that comes from. And if all politics is local, you have to be in the community and where it's originating because that's where it's going to erupt. And that's why we believe in hiring from our local communities. That's why we believe reaching into the school systems of the local communities because they are the ones that are going to be most impacted by decisions that I make at the corporate level.

It is. That's a great question and yes, it is. The reality of it is people connect with their home utility because it's in their home. It's a need. More people are working from home, educating their children from home, starting their businesses, and that need is very important in how they show up and the ability to pay for it. So, I do believe people have a different connection with their local utility than other brands or other companies, and I take that very seriously.

You did. You do. And I was speaking to someone earlier today and they were saying, 'I was one of your customers. I remember that jingle when I was growing up.' It's those things that connect you and it's those things that are important that you can never forget because the utility is never going to go anywhere. Some companies can move their headquarters, but your utility is your utility. Now, what comes with that is the good and the bad. And I always say people love to throw the utility under the bus, but they know when they're there and they care. And we have a thing at all of our utilities that we need to show our communities that we care about what's important to them, not what's important to us, what's important to them, and let them know that we're going to partner with them. And that's how we try to show up every day.

Yeah. So, it's interesting. You know, my generation, and I'm not going to tell you what generation that is, but my generation, you know, you're Gen Z.

Think about this. I grew up with Encyclopedia Britannica, right? My kids grew up, I have a son who's a millennial. My daughter's a Gen Zer. So, they view technology very different. And what I recognize is that technology when done right is an enabler. I never consider technology as a replacement for an individual or a department or job. I view it as an enabler to increase productivity and grow. I'll give you an example. A decade ago, we were talking smart meters and people used to get their start with the company doing meter reading. The men and women would go to individual houses and businesses and read. Entry-level job.

Those smart meter jobs went away because of smart meters. I can now read it from my desk on my phone what that meter is reading. My job was to retrain those meter readers to move them into different jobs. And as a result of that, we were able to do that and no one lost their job as a result of that technology.

The process. It all comes down to change management and the willingness for people to continue to learn. Are they a continuous learner? And when you approach people on the why you're doing it, it made us more efficient. It saved our customers money and we offered them opportunities for growth. And those who wanted to take it took it, others retired, but that was okay. I see the AI, this technology much the same way. It will change how some people do their jobs today, most likely all people, but it will also create opportunities for them. And my job as the CEO of this company is to ensure that those who want to be here have an opportunity to continue to grow and succeed.

I don't think I can put one particular job, but I will tell you if you're utilizing the technology correctly, it will change how all of us do our jobs, the level of research, the data, how we're utilizing it. So I think all of us are going to be pushed to rethink and restructure our positions and our departments to be more efficient and more productive. So I won't pinpoint one particular job, but I will challenge my leadership team to rethink their structure and how they're meeting the challenge, utilizing more data and being more efficient in what they do. So that's a big deal for us because that's change. And one of the things that we've learned is that change management is hard for people. It's hard for organizations, especially a utility.

It's not uncommon, Ally, to walk into a conference room that I have 20, 30, 40-year employees, some even second generation, and they pride themselves. They've been doing their job well for all this time. And now all of a sudden, I'm telling them, we're going to do it different. We have this new technology that I need you to employ. And they're like, why? Things are going so well. And that's why it's difficult because of our tenure of our employees. Some of my employees have been around longer than the founders of some of your companies. Right.

Exactly. And they're like, there are founders who are 18. Exactly. And so when we're asking them to meet this new challenge, not that they don't want to, but they will start with why. And what I have to do is create the business case for them on why it's important to meet the needs of our customers tomorrow and not just today.

You know, I've been a CEO of Exelon for almost three years. And prior to this, I ran all of our utilities and then I ran BGE for six. And I always operate with a sense of urgency. And I tell you that because I move quick. Most important thing I've learned is that I can't leave my employees behind. I have to slow down long enough to explain the why. Because when you don't, because you're the CEO, people will do it. And you think they're all in alignment because you're hitting all your numbers, you're meeting all the metrics, the KPIs are all great, everything's green. So, you think everyone's aligned until you do an employment survey and they tell you, 'I don't know why we had to do any of that.' And what I learned from that is I need to slow down and have conversations with my employees on why the need to change and where we're going and what they can expect.

Well, I don't think they get anything wrong. I would just tell you you have to understand your employee base and your industry because at a utility you can't move fast and break things because they come to expect us being there 24/7. And when we move fast and break things, lights don't come on, gas doesn't flow, and people get hurt. I tell my employees just the opposite. Be very thoughtful about what you do. We have processes for a reason because if we don't, people don't go home the same way they came to work. And when you're working with electricity and gas, lives are in danger. So, just the opposite, Silicon Valley is doing what it means for them to be successful. And my job is to ensure that I'm successful and we're ready to meet their needs.

That's a great question. I would tell you three to four years ago.

Three to four years ago, it became what are you doing, right? It became so pretty early in the AI boom as we now understand.

And then we saw it just take off. So the issue for us is that I never want a company in any of my jurisdictions to say I couldn't grow or do what I needed to do as a business because one of Exelon's utilities was unable to meet my need. I start from that premise and then once I address that issue, I then think about from a technology standpoint, can I utilize this to help grow my business, streamline some operations, make people more productive and make our product more affordable. So that's how we've started embedding it and we're doing it in finance, legal, customer service. We're using AI in all those areas, but we're still just scratching the surface.

I think the biggest misconception about AI and energy is that the grid utility companies will not be able to meet the need, meet the demand.

I'm confident because I know the men and women who run these companies and we continue to show up, you know, in times of stress or in times of need. We are an industry that shows up for each other and we'll show up for our communities. Will it mean everything goes seamless? No. There will be hiccups along the way, but we're an industry that meets the need. I mean, we are investing $1.1 trillion dollars as an industry over the next five years in infrastructure. Now the challenge becomes, Ally, how do you invest in that infrastructure to meet this boom while keeping the product affordable? Because as I have the privilege and responsibility to serve 11 million customers, my customers are at all ends of the economic chain. I have some that if their bill goes up a dollar, it's a dollar too much. I have some who never think about their bill, but I have to serve all of them equally and non-discriminatorily. So that's the challenge. So going back to my, I use a DC analogy all the time. I have to serve the second ward in DC the same way I serve the eighth ward and they're very different. That's the challenge right now with all of the technology and the boom. How do you do that in a non-discriminatory way and keep your product affordable so everyone can move in this transformation?