8-KOther Events

CONSOLIDATED EDISON INC 8-K Report, Corporate Update (Nov 8, 2024)

Filed November 8, 2024For Securities:ED

Summary

Consolidated Edison, Inc. (ED) has filed an 8-K report detailing a joint proposal for new electric and gas rate plans for its subsidiary, Orange and Rockland Utilities, Inc. (O&R), covering the period from January 2025 through December 2027. This proposal, submitted to the New York State Department of Public Service (NYSDPS) and other parties, is pending approval by the New York State Public Service Commission (NYSPSC). The proposed rate changes indicate a shift towards increased base rates in the second and third years for both electric and gas services, following a slight decrease or minimal change in the first year. Key aspects of the proposal include mechanisms for revenue decoupling, continued recovery of energy costs, and provisions for performance-based adjustments. O&R will be subject to potential negative revenue adjustments if certain service, reliability, and safety targets are not met, while also having opportunities for positive adjustments related to energy efficiency and gas safety. The proposal also outlines various regulatory reconciliations for costs such as pension, environmental remediation, property taxes, and energy efficiency programs, aiming to align actual expenses with authorized rates.

Key Highlights

  • 1Joint proposal submitted for new electric and gas rate plans for Orange and Rockland Utilities (O&R) for the 2025-2027 period.
  • 2Proposed electric base rate changes: $(13.1) million in Yr. 1, $24.8 million in Yr. 2, and $44.1 million in Yr. 3, with the note that actual implementation may involve no change in Yr. 1 and increases of $17.7 million in Yr. 2 and Yr. 3.
  • 3Proposed gas base rate changes: $3.6 million in Yr. 1, $18.0 million in Yr. 2, and $16.5 million in Yr. 3, with actual implementation potentially involving increases of $10.4 million each year.
  • 4Includes revenue decoupling mechanisms for both electric and gas delivery revenues, ensuring actual revenues are reconciled with authorized amounts.
  • 5Provisions for negative revenue adjustments (penalties) for failing to meet performance targets in service, reliability, and safety, and potential positive adjustments for performance incentives.
  • 6Outlines extensive regulatory reconciliations for various costs including pension, environmental, property taxes, and energy efficiency programs.
  • 7Proposed weighted average cost of capital (after-tax) remains consistent across the three years at 7.25%, 7.28%, and 7.31%, with an authorized return on common equity of 9.75%.

Frequently Asked Questions

This 8-K filing announces a joint proposal for new three-year electric and gas rate plans for Consolidated Edison's subsidiary, Orange and Rockland Utilities, Inc. (O&R), from January 2025 to December 2027. The proposal is subject to approval by the New York State Public Service Commission (NYSPSC).

For electric service, base rates are proposed to change by $(13.1) million in Year 1, $24.8 million in Year 2, and $44.1 million in Year 3. However, the note suggests implementation could mean no change in Year 1 and increases of $17.7 million in Years 2 and 3. For gas service, base rates are proposed to change by $3.6 million in Year 1, $18.0 million in Year 2, and $16.5 million in Year 3, with a note indicating potential increases of $10.4 million each year.

Revenue decoupling mechanisms ensure that O&R can recover the authorized revenue for delivering electricity and gas, regardless of the actual volume of energy consumed. This means that if customers use less energy (e.g., due to efficiency measures), O&R can still collect its authorized revenue through adjustments in rates. Conversely, if consumption exceeds authorized levels, there may be adjustments. These mechanisms are designed to align O&R's financial interests with public policy goals like energy efficiency.

The proposal includes potential negative revenue adjustments if O&R fails to meet certain performance targets related to service quality, reliability, and safety. Conversely, there are provisions for positive rate adjustments or incentives for meeting targets in areas like energy efficiency and gas safety. For example, potential penalties for not meeting electric performance targets range from $7.6 million to $11.5 million annually, while potential incentives for gas safety and performance range from $1 million to $1.2 million annually.