8-KOther Events

CONSOLIDATED EDISON INC 8-K Report, Corporate Update (Oct 18, 2019)

Filed October 18, 2019For Securities:ED

Summary

Consolidated Edison, Inc. (ED) announced through its subsidiary, Consolidated Edison Company of New York, Inc. (CECONY), the entering into of a Joint Proposal for electric and gas rate plans covering the three-year period from January 2020 through December 2022. This proposal, which is subject to approval by the New York State Public Service Commission (NYSPSC), outlines key changes in base rates, regulatory liabilities, and various revenue and cost reconciliation mechanisms. For investors, the proposed rate increases represent a significant driver of future revenue growth for CECONY. The proposal includes a phased approach to base rate increases for both electric and gas services, totaling approximately $813 million for electric and $373 million for gas over the three-year period. Importantly, the proposal incorporates mechanisms for recovering energy costs, maintaining existing cost reconciliation processes for various expenses, and potential earnings adjustment incentives. However, it also outlines potential negative revenue adjustments if performance targets are not met, introducing an element of performance-based risk.

Key Highlights

  • 1Joint Proposal for CECONY electric and gas rate plans for January 2020 - December 2022 submitted for NYSPSC approval.
  • 2Proposed electric base rate increases: $113 million (Yr. 1), $370 million (Yr. 2), $326 million (Yr. 3), totaling $809 million over three years.
  • 3Proposed gas base rate increases: $84 million (Yr. 1), $122 million (Yr. 2), $167 million (Yr. 3), totaling $373 million over three years.
  • 4Includes revenue decoupling mechanisms for both electric and gas to reconcile actual delivery revenues with authorized amounts.
  • 5Establishes potential negative revenue adjustments ranging from $450 million to $476 million (electric) and $81 million to $96 million (gas) annually if performance targets are not met.
  • 6Retains mechanisms for cost reconciliations, including pension, postretirement benefits, variable-rate debt, major storms, property taxes, and others.
  • 7Authorized return on common equity set at 8.80% with earnings sharing above a 9.3% threshold.

Frequently Asked Questions

This filing is significant because it outlines the proposed rate plans for CECONY's electric and gas services for the next three years (2020-2022). The approved rate increases are a key driver for future revenue and earnings growth for the company. Investors should pay close attention to the details of the proposed base rate changes, revenue reconciliation mechanisms, and potential performance-based adjustments.

The Joint Proposal includes substantial base rate increases. For electric service, the increases are projected to be $113 million in Year 1, $370 million in Year 2, and $326 million in Year 3. For gas service, the increases are projected to be $84 million in Year 1, $122 million in Year 2, and $167 million in Year 3. These increases will directly contribute to higher revenues, subject to the final approval and implementation by the NYSPSC.

Yes, there are potential risks outlined in the proposal. The plans include 'negative revenue adjustments' which could lead to charges for customers if certain performance targets related to service, reliability, and safety are not met. For electric service, these potential charges could range from $450 million to $476 million annually, and for gas service, from $81 million to $96 million annually, depending on the year. This introduces performance-based risk to the company's revenue.

The proposal continues current practices for recovering purchased power and fuel costs for electric and gas. It also includes various cost reconciliations for items like pension costs, property taxes, and major storms, allowing for adjustments to reflect actual expenses. Furthermore, the proposal includes mechanisms for earning incentives up to a certain amount related to energy efficiency and other programs, and an earnings sharing mechanism where most earnings above 9.3% will be applied to reduce regulatory assets.