10-KPeriod: FY2002

CONSOLIDATED EDISON INC Annual Report, Year Ended Dec 31, 2002

Filed February 27, 2003For Securities:ED

Summary

Consolidated Edison, Inc. (Con Edison) filed its 2002 10-K report on February 27, 2003, detailing its operations across regulated utility segments (electric, gas, steam) and unregulated businesses. The report highlights the company's substantial revenue generation from its core regulated utility operations, primarily electricity distribution in New York City and Westchester County, as well as gas and steam services. Con Edison's financial performance in 2002 showed a decrease in earnings per share compared to 2001, largely due to lower operating and maintenance expenses in the regulated segments, offset by certain charges and the impact of economic conditions and weather. The company's balance sheet reflects significant investments in utility plant, with ongoing capital expenditures focused on system restoration, load growth, and reliability improvements. Con Edison's strategy involves managing regulatory environments across New York, New Jersey, and Pennsylvania, while also navigating the increasing competition within the energy sector. The company is actively engaged in transitioning its operations to accommodate market changes, including electric retail access programs. Despite significant environmental and legal proceedings, particularly related to Superfund sites and asbestos claims, Con Edison maintains that these do not materially affect its financial position. The company's financial market risk management focuses on interest rate and commodity price fluctuations. Overall, the report provides a comprehensive overview of Con Edison's operational structure, financial health, and strategic priorities as it operates within a dynamic and regulated industry.

Key Highlights

  • 1Consolidated Edison, Inc. (Con Edison) operates regulated electric, gas, and steam utilities primarily in New York City and Westchester County, along with unregulated subsidiaries in energy services and infrastructure.
  • 2In 2002, Con Edison reported earnings per share of $3.03, a decrease from $3.22 in 2001, attributed to various factors including lower operating and maintenance expenses and economic conditions.
  • 3The company's financial statements reflect significant investments in utility plant, with capital expenditures in 2002 increasing for system restoration post-World Trade Center attack, load growth, and reliability.
  • 4Con Edison is subject to extensive state and federal regulation, and its utility subsidiaries are navigating competitive energy markets and regulatory changes, including electric retail access programs.
  • 5The company has significant ongoing legal and environmental proceedings, particularly related to Superfund sites and asbestos claims, which it manages through accruals and regulatory deferrals.
  • 6Con Edison actively manages financial market risks, primarily interest rate and commodity price risks, through derivative instruments and strategic financing.
  • 7The company's regulated segments continue to be the primary drivers of revenue and earnings, demonstrating resilience despite market shifts and regulatory complexities.

Frequently Asked Questions

Consolidated Edison's earnings per share in 2002 were $3.03, a decrease from $3.22 in 2001. This reduction was influenced by several factors, including lower operating and maintenance expenses (excluding nuclear operations), the impact of weather, a reserve for electric excess earnings, and economic conditions, partially offset by decreased goodwill amortization and a positive contribution from O&R.

Con Edison's primary utility subsidiaries are subject to extensive federal and state regulation by commissions such as the New York State Public Service Commission (PSC), New Jersey Board of Public Utilities (NJBPU), and Pennsylvania Public Utility Commission (PPUC). Changes in regulations or legislation applicable to these subsidiaries could have a material adverse effect on the company's financial position, results of operations, or liquidity. The company's financial reporting follows SFAS No. 71, which allows for the recognition of regulatory assets and liabilities reflecting the cause-and-effect relationship of costs and revenues in a rate-regulated environment.

Con Edison faces several significant legal and environmental proceedings, including those related to Superfund statutes concerning hazardous substances like asbestos, PCBs, and coal tar. The company has accrued estimates for these liabilities, which are managed through regulatory deferrals for subsequent recovery from customers. While these matters involve substantial potential liabilities, Con Edison believes they do not currently have a material adverse effect on its financial position.

Con Edison's primary market risks include interest rate risk, commodity price risk, credit risk, and investment risk. The company manages interest rate risk through issuing mostly fixed-rate debt with varying maturities and opportunistic refinancing. Commodity price risk related to electricity and gas is managed using risk management strategies and derivative instruments, with gains and losses on hedges generally deferred for recovery or refund to customers due to regulatory accounting principles.