8-KOther Events

CONSOLIDATED EDISON INC 8-K Report, Corporate Update (Nov 24, 2009)

Filed November 24, 2009For Securities:ED

Summary

Consolidated Edison, Inc. (ED) has filed an 8-K report detailing a Joint Proposal entered into on November 23, 2009, with the New York State Public Service Commission (PSC) staff and other parties. This proposal outlines electric delivery service rates for a three-year period from April 2010 through March 2013. Key to investors, the proposal includes planned electric base rate increases totaling approximately $1.127 billion over the three years, with specific amounts effective in April 2010, 2011, and 2012, plus an additional surcharge. The proposal also establishes a weighted average cost of capital of 7.76 percent, including a return on common equity of 10.15 percent, contingent on the company achieving certain expense reduction targets. Furthermore, the Joint Proposal addresses the regulatory treatment of capital expenditures, deferring revenue requirement impacts for certain plant balances that fall below amounts reflected in rates. It also sets limits on capital expenditures for which the company can accrue carrying charges, with exceptions for projects eligible for American Recovery and Reinvestment Act grants. A significant aspect for investors is the earnings-sharing mechanism, where the company will share a portion of its profits with customers if earnings exceed specified thresholds, with the customers' share and part of the company's share used to reduce regulatory liabilities. The report also touches on the deferral of certain expense variances and the continuation of revenue decoupling, purchased power/fuel cost recovery, and provisions for operations penalties.

Key Highlights

  • 1Joint Proposal filed with NY PSC staff for electric delivery rates covering April 2010 - March 2013.
  • 2Plan for electric base rate increases totaling approximately $1.127 billion over the three-year period.
  • 3Established weighted average cost of capital at 7.76%, including a 10.15% return on equity tied to O&M expense reduction targets.
  • 4Includes provisions for regulatory treatment of capital expenditures, including deferrals for plant balances below rate allowances and limits on carrying charges for certain CAPEX.
  • 5Implements an earnings-sharing mechanism where a portion of profits above specified thresholds will be shared with electric customers.
  • 6Continues revenue decoupling, purchased power/fuel cost recovery mechanisms, and provisions for operations penalties.
  • 7Addresses potential refunds related to prior capital expenditure reviews and alleged unlawful conduct by employees/contractors.

Frequently Asked Questions

This 8-K filing announces the execution of a Joint Proposal between Consolidated Edison Company of New York, Inc. and the staff of the New York State Public Service Commission (PSC) along with other parties. This proposal outlines the company's electric delivery service rates for a three-year period, from April 2010 through March 2013, and requires PSC approval.

The Joint Proposal provides for electric base rate increases. Specifically, it includes increases of $420 million effective April 2010 and 2011, $287 million effective April 2012, and an additional $133 million to be collected through a surcharge in the rate year ending March 2013, for a total anticipated increase of approximately $1.127 billion over the three years.

The proposal sets a weighted average cost of capital at 7.76 percent, with a return on common equity of 10.15 percent. This return on equity is contingent on the company achieving specific reductions in operations and maintenance expenses. Additionally, a new earnings-sharing mechanism is introduced, where the company will share a percentage of its earnings with customers if profits exceed certain thresholds.

Yes, the Joint Proposal details the regulatory treatment of capital expenditures. It includes limits on carrying charges for capital expenditures exceeding specified amounts, with exceptions for projects receiving grants under the American Recovery and Reinvestment Act. The proposal also allows for deferral of revenue requirement impacts if actual plant balances are less than those reflected in rates, and outlines conditions for recovering excess capital expenditures made after March 2013.