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

12:31Term Sheet Host:It's not uncommon, Allie, 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? Oh yeah. In more ways than one. Exactly.

13:07Calvin Butler:There are founders who are 18. Exactly.

13:09Term Sheet Host: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. What is the most important thing you've learned about retraining and upskilling? 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.

13:53Term Sheet Host: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 they need to change and where we're going and what they can expect.

14:30Calvin Butler:I can't help but think this is the opposite of Silicon Valley move fast and break things. What do you think Silicon Valley gets wrong?

14:38Term Sheet Host: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 you, 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.

15:20Term Sheet Host: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.

15:28Calvin Butler:I'd be curious about the ramp up from your perspective. Like from your perspective, when did the conversation around data centers for AI really start to take off?

15:38Term Sheet Host:That's a great question. I would tell you three to four years ago. Okay. Three to four years ago, it became, what are you doing? Right? It became.

15:49Calvin Butler:So pretty early in the AI boom as we now understand it.

15:52Term Sheet Host:Absolutely. 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 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, but we're still just scratching the surface.

16:37Calvin Butler:What do you think is the biggest misconception about AI and energy?

16:43Term Sheet Host: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.

16:56Calvin Butler:It sounds like you're really confident.

16:57Term Sheet Host: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're an industry that shows up for each other and will show up for our communities. Will it mean everything goes seamless? No, 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 as an industry over the next five years in infrastructure. Now, the challenge becomes, Ali, 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.

17:44Term Sheet Host: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 D.C. 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?

18:22Calvin Butler:Well, it sounds like part of that is also what you're thinking about in terms of data centers, right? You have to serve these families and the data center in their community. That's right. How do you balance it?

18:33Term Sheet Host:Through partnership. It's one of the things that I spend most of my time. It's the reason I'm here, to talk to the data centers, the companies, the startups about bring me your best ideas of how I can be better at doing what we do. I mean, I know how to run a utility company. I know how to run world-class, safe, reliable utility companies. What I don't know is the technology that they're bringing and how do I make what I do more efficient utilizing their technology. And it's through that conversations, that partnership that will make us better. That is why I know we're confident that we can do it, but it will take a lot of conversation.

19:15Calvin Butler:When you sort of think about the future, there is a lot of concern. I mean, Sam Altman, right, reportedly is interested in 250 gigawatts to power data centers. That's a lot.

19:28Term Sheet Host:That's a lot. Right?

19:29Calvin Butler:What is the best possible future look like when it comes to powering AI? And what keeps you up at night?

19:34Term Sheet Host:The best possible scenario is that these companies, open AI, when they are building a data center, will have ideas that they're bringing their own generation to the table. Because what's happening is, as the demand curve goes up, the supply isn't meeting it. So as a result of that, the prices are going up. But if you are a Sam Altman or someone else and you're building a data center, You come in with your own gas turbine. So now you're meeting that future growth with your own supply and no one's being impacted by that. And we're meeting that need in terms of building the infrastructure out over the period of time to get it done.

20:14Term Sheet Host:That's the ideal situation. What concerns me is that until that is done, the public outcry stalls growth and progress. You've probably read the headlines. more communities are pushing back against data centers coming into their community because they're feeling as if they're not being heard. And when they're not being heard, they're going to rally up and say, no, not in our backyard. And that is what's occurring right now.

20:41Calvin Butler:So it sounds like part of what you think is that more conversation will start to solve some of those problems. Is there anything else? For instance, anyone who's thinking about founding an AI company or runs an AI company who's listening to this podcast, what do they need to understand? about energy?

20:56Term Sheet Host:I would say get your local utilities involved in the conversation early. Don't wait until the 11th hour. A lot of people, you know, because this is not what they do. So they think, hey, I'll come in at the end and say, let's flip the switch and let's go. Doesn't quite work that way. I get it though, because this is not what you do. Get us involved early because what you'll find and what they'll find is that we can help streamline, save them some money and help them get it done in a very proactive and constructive way. And also, if you're someone who says, hey, I need five gigawatts of power, you don't need five gigawatts tomorrow.

21:35Term Sheet Host:There's a ramp up period. Let us work with you on that ramp up period to be part of that solution with you. And that's also very important. And I think that's what we're finding as well.

21:45Calvin Butler:I was going to say, so how does it actually work? Imagine this microphone is an AI company. And it is coming to you and saying, hi, Calvin, I need five gigawatts of power. What happens then?

21:56Term Sheet Host:What I would say to them is say, okay, let's first, let's identify a site for you. And what's important about that, once you identify the land, you have to then determine what type of infrastructure is needed to power that five gigawatts. Then I would ask you, what's the timeframe in which you want to be fully up and running to five gigawatts? And then as what we have done at X-Line, we've implemented a transmission, what we call a transmission security agreement. And what does that mean?

22:24Calvin Butler:I was going to say, please tell me.

22:25Term Sheet Host:A TSA, transmission security agreement, means you are committing to certain load. And if that doesn't materialize, we have a letter of credit that we draw down. And why is that important, Allie? Because I'm protecting all the other customers on the system. Because I'm going to build infrastructure to meet your need. But if you go away or it never materializes, guess who's left holding the rest of that? Other customers on the system. So a TSA is geared to protect everyone else. So now you're signing a letter of credit or you're providing a cash deposit to say I'm good for it. And what it says is that I will meet 80 % of the load that I've promised you.

23:09Term Sheet Host:So you should have confidence, excellent, that you can build out the infrastructure to meet my need. That's how we do it. And then we do a study. We conduct a cluster study where we say, how is that five gigawatts going to impact the rest of the system? Because it does have an impact. And we have to do that study because, again, my responsibility is not just to you as a customer. It's to everyone on the grid. Because if I power you and then your home goes out, you don't care. You're like, wait a minute, time out. So we have that study. We work with PJM to get it done. And it comes back and says, okay, we're good to go.

23:47Term Sheet Host:And that's how the process works.

23:48Calvin Butler:Do you think too many AI companies are coming to utilities providers too late in the game right now?

23:56Term Sheet Host:I think early on, yes. I think everyone's gotten some wiser and we're working on that.

24:02Calvin Butler:So two years ago they were coming to you in the 11th hour. And now they're starting to kind of pick up on the process.

24:09Term Sheet Host:Yes. And I'll give the industry a lot of credit. As you know, I'm chair at the Edison Electric Institute. We have productive calls with data center developers now. We have productive calls with technology companies laying out the process. So I think the education has been done, the outreach has been made, and now there's a partnership to get it done.

24:32Calvin Butler:It sounds like that took a moment, though. What was it like starting to develop that conversation?

24:37Term Sheet Host:It was, I wouldn't say adversarial. it was what what you found is that there was tension tension because we didn't really know and think about this you I've never believed that you should ever have tension with one of your customers but they were thinking we weren't meeting their needs we were thinking they're not communicating and they're trying to go around us and you can't go around us so therefore we're worried about all these other things and when we all slowed down and said we're in this together that's when the productive conversation started happening. We started having leaders come to EEI meetings.

25:12Term Sheet Host:We started our own outreach. So now you see, now there's still disagreement, but the disagreements are not about the core of the work that we do or what they're trying to do.

25:23Calvin Butler:I'd also be really interested in your perspective on what a customer means. because, look Calvin, most CEOs I talk to have a very specific customer profile in mind. In a lot of cases, sometimes there's a pretty big variety, but there's usually a pretty finite universe of customers. Whereas for you, your customer is everyone.

25:49Term Sheet Host:Yes.

25:49Calvin Butler:Effectively. Yes. How do you manage that?

25:53Term Sheet Host:So to your point, I have 11 million customers, approximately. 11 million customers, and they represent apartment dwellers, homeowners, large industrials, data centers, small businesses, and my job at the core of what I do is to provide safe, reliable, resilient service each and every day and then wrap that all around affordability. So to your point, I don't define my customer. I define the service that I need to provide my communities because they're part of the community and I'm part of that ecosystem of the community. And I also recognize that each one of those customers have a different need.

26:37Term Sheet Host:We were talking, let's put in perspective my kids. I have a Gen Zer and that millennial I was talking about. They never want to talk to the utility. They don't. Even my kids, they're like, no.

26:52Calvin Butler:That's not happening.

26:54Term Sheet Host:Put that app on my phone. Let me figure it out. I'm good. it.

26:57Calvin Butler:I want to message a chat bot.

26:59Term Sheet Host:That's exact. I don't want, but then my parents, they want that 1-800 number and they want someone to answer on the other end.

27:09Calvin Butler:You need to be there for both of them.

27:11Term Sheet Host:And I need to be there for both of them. I have my large industrial who shops for their electricity and they are seasoned, knowledgeable, and they know how to get the best price for that kilowatt hour. And all they want is that utility to ensure that the lights come on and the gas keeps flowing. Then I have that small business owner who understands that, hey, I could need a little economic help to get my business up and running. And if I want to expand it, does BGE or ComEd have any programs to help me? So you see the dynamic there. And that's what's fun about the job, though, because we are so interwoven in the communities that we serve, it gets me excited because that's what makes a utility a really good utility, partners in this economic engines that happen in our communities.

28:02Term Sheet Host:So for me, yes, I don't define the customers. I define the service to meet the needs of all my customers.

28:09Calvin Butler:In this incredibly broad customer base you have, what have you learned about managing, retaining, making a wide variety of customers ultimately feel included and happy?

28:21Term Sheet Host:Engaging them. The first step is you have to engage them and engage them where they are, not where you want them to be. So one of the things when I was over the utilities and just focused on the utilities, I created customer advisory councils across the business where we would bring in church groups. We would bring in small businesses, large customers, and they would all sit in the room once a month and give counsel. Our number one job was to listen. And I would tell my team all the time, if we're doing more of the talking, something's wrong. Because right or wrong, the customers are going to tell you what they need.

28:58Term Sheet Host:And you then, once you ask the question, you need to be willing to meet their needs. And it was the most productive time. And I think we got really good at it. Unfortunately, the pandemic happened and those councils went away. And I'm just restarting them back at the utilities now because it's a muscle that's uncomfortable. and what you find is that when you get busy, the thing that probably is the quickest thing to get rid of is the things that make you uncomfortable. And when you hear, get feedback, direct feedback, and it may not be what you want to hear, you're like, okay, we won't do that again.

29:34Term Sheet Host:So going back to the best advice I've ever gotten was always take care of your customers and your employees. And that's the muscle. So for people who are saying, how do I meet this diverse customer base? How do I engage them? not just once but often and listen.

29:51Calvin Butler:What do you think is most misunderstood about utilities generally?

29:55Term Sheet Host:Well I can tell you what's most misunderstood about Exelon.

29:58Calvin Butler:Okay.

29:59Term Sheet Host:Is that let's put in perspective you being my ComEd customer. You get a ComEd bill. I have in my

30:07Calvin Butler:life.

30:08Term Sheet Host:And you think ComEd the total price you get on that bill is all ComEd. It's not. Exelon owns no generation. The supply portion of that bill is 50 % of it. My portion of that bill is 50%. Actually, probably 40%. Because what you'll find in most states and jurisdictions, they put all your taxes, they put your fees on there, and they use the utility bill to collect it all. So when prices are going up, I'm a portion of that price increase, but the majority of the increases that customers are feeling right now are on the supply side. So what's misunderstood is that the utility is causing my bills to go up 30 to 40 percent.

30:49Calvin Butler:They think it's you who are making that decision. They think it's me.

30:51Term Sheet Host:And I make not one penny off of a kilowatt that is being served. Now, going back to what we started this conversation with data center growth, when you have increased demand and the supply hasn't increased, guess what? The prices go up. And that's what's happening. I'll give you an example in New Jersey. The average residential customer in New Jersey saw a$36 bill increase last year. You know how much the supply increased? $38. That means the portion of the bill that was mine went down. But because the supply costs went up, it was their bills went up and my utility was getting blamed for that increase.

31:31Term Sheet Host:But to take the time and explain that to someone, they don't want to hear it. They just know my bill went up. and in a time where I'm trying to pay my bills to have my utility bill go up that much is hurting me. That's what we have to explain. A year ago, Ali, no one was talking about PJM. Now everyone is talking about PJM. And it goes back to the discussion, policy matters. We have to get this right.

31:55Calvin Butler:I was going to say, sort of to this end, how are you thinking about D.C. for 2026? Yeah.

32:01Term Sheet Host:What we are working very closely with the administration and with secretaries on what policies need to happen at the federal level to help on the affordability issue. So for example, we talk about permitting reform. Permitting reform is one of the few items that you have bipartisan support. So why can't we get that done in the first quarter of 2026? And what does that mean? It means when I'm going to build a transmission line, a transmission system, if I can cut through some of the red tape and stop all the litigation and the back fighting, it makes the process more affordable and less extrusive.

32:40Term Sheet Host:And meaning that I'm now able to get things done in a timely manner to get the infrastructure built for this build out. That's key. Everyone will tell you permitting reform is something we have to do as a nation. But yet we haven't done it yet.

32:54Calvin Butler:Why not? because I do believe policymakers wait for a crisis.

33:01Term Sheet Host:And what we're telling them is that the crisis is coming. You're in your car. The check engine light is on. Don't wait for the coldest day of the winter, the hottest day of the summer, and a crisis occurs, and then everyone runs to fix it. I'm telling you now, this is the time to get it done proactively. It's going to be more efficient. It's not going to cost as much. And we're now fixing a problem or heading off a problem before it ever happens. That's what we're doing now.

33:27Calvin Butler:Let's be clear. What does that crisis look like and how will we know when we've gotten there?

33:30Term Sheet Host:So let me give you an example. I think it was winter storm Uri in Texas a few years ago. When the pipes froze. When the pipes froze. And they didn't have enough gas and power to supply to homes. And people died. People, they were in a bad situation because of those things. Now, mind you, that utility was not the owner of the generation. Those were all those independent power producers that were being counted on to come online in the coldest day of the year. And they weren't ready. But guess who got blamed? The utility. Because what you as a homeowner or business owner know is that my utility didn't show up when I needed them.

34:16Term Sheet Host:That's the crisis we're trying to avoid. We know when you have more demand, you need increased supply. Let's go after and get it done. Let's make the rules of the road such that we have everyone in this game participating and utilizing all the tools in our tool belt. And right now, it's not happening that way. And we have to do more.

34:37Calvin Butler:Do you think lawmakers understand that this is what we're talking about here?

34:40Term Sheet Host:I think they do. I think there's pockets of knowledge, right? I think people all want to solve the issue. Now, you can appreciate, though, if you're a lawmaker, depending on what state you're from, everyone has a different view on how it should be solved. And that's what we're going through now. And what I am trying to do and what the industry is trying to represent is, look, we can solve it, but we can't piecemeal it. We have to be very systematic and be pragmatic about what we do because we need to make investments that are long term because this isn't something that's just going to go away.

35:16Term Sheet Host:What we can't have happen is that we go to make a 20-year investment and the rules change next year. Because when we invest in something, it's a 20 to 30-year asset. And we can't have rules changing based on administrations or based on local feeling. And that's what we're trying to get to now.

35:37Calvin Butler:Well, this is all happening at a moment when the government is not exactly good at staying open. Right. Is that delicately put? I don't know how delicate that was, but I get you. You see where I'm going. I do. How do you get anything done in that context? For utilities, going back to your statement, it's all local.

36:01Term Sheet Host:Federal has an impact, but we are all governed by our state commissions. So I lean into my states and to my local leaders to say, what do you want to accomplish? Now, I know D.C. has an impact, but let's stay focused on what's important for Illinois, Maryland, Pennsylvania, and the like, and what can we do. Because if you get caught up in the noise, you wouldn't do anything. And what we try to stay is very myopic on fixing real problems for everyday citizens every day.

36:35Calvin Butler:The path to net zero admissions. You're on it. Tell us about it.

36:38Term Sheet Host:In 2019, we laid out our path to clean at Exelon, which means that we were going to be net zero business driven emissions by 2050. And that hasn't changed. Running a company that is sustainable and climate driven is core to who we are. As I always tell everyone, it's a value of Exelon. We were doing green before green was cool. So this is kind of who we are and what we do. And you don't change your values overnight because it may not be in vogue. If we believed it, then we believe it now. And part of that is that, one, we were going to, if greenhouse gas emission or vehicle emissions were a big part of that, we said we were going to electrify our fleet 30 % by 2025.

37:23Term Sheet Host:We were going to, by 2030, get to 50%. We're on course. We met our 2025 goal of electrifying 30 % of our fleet, and we didn't have a lot of fanfare because it wasn't for anyone else. It was for us and the communities that we serve. And that's how we'll continue to show up.

37:40Calvin Butler:As we start to wind down here, we've talked a lot about conversation. What makes for a good conversation, especially one that might start from a place of tension? Yeah.

37:52Term Sheet Host:I really, Allie, try to spend time understanding what are your goals and your objectives. If you tell me whether you're a developer, large developer, or a small business, or a governor, or a local alderman, what are you trying to accomplish? What do you want to accomplish? And then I will tell you, this is what I can do, and this is how we can partner to get even more done. Because I truly do believe in a view that one plus one, when you're working together, can equal three. It's when we work in silos and go at each other, you can't get anything done. It becomes noisy, it becomes more expensive.

38:32Term Sheet Host:All of those things happen. And unfortunately, we're in a very partisan, divided time right now. And that is the norm instead of reaching across saying, what can we do to get things done together? But these issues that we're facing right now, they have to be bipartisan. They have to be in partnership and collaborative nature because they're too important. If we are truly going to win this technology race and we talk about energy dominance, we talk about energy security, if those things are really important, we can't do it without each other. And that's how I start a productive conversation.

39:13Calvin Butler:And I suppose the last thing I'd want to end on is where we started, AI. If there was one thing that you could know about the future of AI, imagine you had a crystal ball. You can look five to ten years in the future, and there's one thing you could know about how this all plays out. What would it be?

39:31Term Sheet Host:I know the technology is real, but how real is the growth projections that we have out there? because if the technology is real and the growth projections are anywhere from zero to 200 percent and I'm somewhere in the middle is it closer to 100 is it down to 10 you know that would help because now we can really plan and we're really good when we're able to plan because what we do is build things and make them the most safe, reliable in the world. But I need good data to be able to do that. So that is one thing I would ask.

40:11Calvin Butler:If I had the answer to that question, my goodness. I know.

40:15Term Sheet Host:I know.

40:15Calvin Butler:Calvin, thank you so much.

40:17Term Sheet Host:Thank you. Thank you. This was really good. I appreciate you asking me to be on.

40:22Calvin Butler:And that was Calvin Butler. My biggest takeaway from the conversation with Calvin is that he's saying something not nearly enough people are saying about AI right now. We need to plan. At a time when energy costs are rising not just for companies, but for individual customers, Calvin actually does believe sincerely that the grid can handle the demands of AI, but only if he has the right data to plan and strategize early. And this planning isn't just important to say yours or my consumer use of chat GPT. It's important to the future of energy costs in the United States for Every single one of us.

40:56Calvin Butler:That's it for Termsheet. See you soon.

41:01Calvin Butler:Termsheet is a Fortune magazine podcast. Our producers are Joyce Coe and Chase McCleary. Our editor is Daniel Ferry. Our production manager is Sam Freund. Our executive producer is Lydia Randall. Fortune's head of video is Adam Banneke.

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