8-KOther Events

CONSOLIDATED EDISON INC 8-K Report, Corporate Update (Mar 31, 2008)

Filed March 31, 2008For Securities:ED

Summary

Consolidated Edison, Inc. (ED) filed an 8-K on March 31, 2008, to report a significant ruling from the New York State Public Service Commission (PSC) regarding its electric rates. The PSC approved an electric rate increase of $425 million, effective April 1, 2008, which is substantially lower than the $1,225 million requested by the company. This ruling impacts key financial metrics, including a lower return on common equity (9.1% vs. 11.5% requested) and an increased assumption for transmission rights revenue. A substantial portion of the approved increase, $237 million, is subject to potential refund pending further PSC review and an audit of capital expenditures. In addition to the rate case outcome, the filing also details recent credit rating actions. Moody's affirmed its ratings but revised the outlook to negative. Standard & Poor's and Fitch Ratings lowered their ratings on both Consolidated Edison, Inc. and its subsidiary Consolidated Edison Company of New York, Inc., with Fitch placing its ratings on negative watch before ultimately revising the outlook to stable. These developments, particularly the rate case outcome and credit rating adjustments, are crucial for investors to assess the company's near-term earnings potential and financial stability.

Key Highlights

  • 1New York PSC approved an electric rate increase of $425 million, effective April 1, 2008, significantly less than the $1,225 million requested.
  • 2The approved return on common equity was set at 9.1%, below the company's requested 11.5%.
  • 3$237 million of the rate increase is subject to potential customer refund pending further PSC review and capital expenditure audit.
  • 4The PSC ruling includes increased assumed revenue from transmission rights sales ($150 million annually) and a revenue decoupling mechanism.
  • 5Moody's affirmed credit ratings but moved the outlook to negative; Standard & Poor's and Fitch Ratings lowered debt ratings and revised outlooks.
  • 6Fitch Ratings initially placed ratings on negative watch before revising the outlook to stable.
  • 7Consolidated Edison expects to file for another electric rate increase in May 2008 for rates taking effect in April 2009.

Frequently Asked Questions

The main event is the ruling by the New York State Public Service Commission (PSC) on Consolidated Edison's electric rate case. The PSC granted an electric rate increase of $425 million, effective April 1, 2008, which is substantially lower than the company's request of $1,225 million.

The $425 million rate increase is positive, but it's tempered by several factors. The approved return on equity is lower than requested, and $237 million of the increase is contingent on further review and audits, potentially leading to refunds. Additionally, the PSC increased the assumed revenue from transmission rights sales, which could impact the actual revenue recognized.

Credit rating agencies have taken a cautious approach. Moody's affirmed its ratings but changed the outlook to negative. Standard & Poor's and Fitch Ratings both lowered their ratings on Consolidated Edison and its New York subsidiary. Fitch initially put ratings on negative watch before ultimately revising the outlook to stable.

Yes, the company announced its expectation to submit a request for another electric rate increase in May 2008, with the aim for it to take effect in April 2009.