8-KOther Events

CONSOLIDATED EDISON INC 8-K Report, Corporate Update (Sep 1, 2023)

Filed September 1, 2023For Securities:ED

Summary

Consolidated Edison, Inc. (ED), through its subsidiary Consolidated Edison Company of New York, Inc. (CECONY), has entered into a Joint Proposal with the New York State Department of Public Service and other parties regarding a steam rate plan. This plan, effective from November 1, 2023, through October 31, 2026, outlines changes in base rates, capital expenditures, and regulatory adjustments. Investors should note the phased-in base rate increases totaling $110 million in Year 1, $44 million in Year 2, and $45 million in Year 3, with levelized customer bill impacts. The proposal also introduces a weather normalization adjustment to mitigate the impact of weather fluctuations on rates and continues the current recovery mechanisms for purchased power and fuel costs. Importantly, it addresses regulatory reconciliations for various costs, including uncollectible expenses, property taxes, and pension costs, with provisions for customer credits or surcharges based on actual expenses versus amounts reflected in rates. The plan also specifies a weighted average cost of capital and an authorized return on common equity, along with an earnings sharing mechanism.

Key Highlights

  • 1CECONY and NYSDPS have entered into a Joint Proposal for a three-year steam rate plan (Nov 2023 - Oct 2026).
  • 2The plan includes phased base rate increases totaling $110M (Yr 1), $44M (Yr 2), and $45M (Yr 3), with a levelized customer bill impact starting November 1, 2023.
  • 3A Weather Normalization Adjustment will be implemented to stabilize rates against weather variations during heating seasons.
  • 4Continuation of current rate recovery for purchased power and fuel costs provides revenue stability.
  • 5The proposal details mechanisms for regulatory reconciliations of various expenses (e.g., uncollectibles, property taxes) and net utility plant, allowing for customer surcharges/credits.
  • 6Annual potential negative revenue adjustments of $3.7M-$3.8M are outlined if performance targets for service, reliability, and safety are not met.
  • 7The Weighted Average Cost of Capital is projected to be between 6.78% and 6.83% over the three years, with an Authorized Return on Common Equity of 9.25%.

Frequently Asked Questions

The Joint Proposal will result in phased base rate increases for CECONY's steam customers, beginning November 1, 2023. While the total annual base rate increases are $110 million in Year 1, $44 million in Year 2, and $45 million in Year 3, the customer bill impact will be leveled across these years to mitigate sudden increases. The proposal also introduces a weather normalization adjustment and mechanisms for recovering or crediting differences between actual and forecasted costs for certain expenses.

The rate plan incorporates several mechanisms to manage cost fluctuations. Purchased power and fuel costs will continue to be recovered through existing rate mechanisms. A Weather Normalization Adjustment will be implemented for heating season weather variations. Furthermore, regulatory reconciliations will allow for the deferral and subsequent recovery or refund of differences related to uncollectible expenses, property taxes, and pension costs, subject to annual caps and specific recovery parameters.

The Joint Proposal includes provisions for negative revenue adjustments, ranging from $3.7 million to $3.8 million annually, if CECONY fails to meet certain performance targets related to service, reliability, and safety. These adjustments would reduce the company's revenue.

The Joint Proposal anticipates stable capital expenditures for the steam business, ranging from $105 million to $107 million annually over the three-year period. The weighted average cost of capital is expected to be around 6.78% to 6.83% after-tax, with a long-term debt cost gradually increasing from 4.51% to 4.62% and a common equity ratio maintained at 48%.