Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2024, for Consolidated Edison, Inc. (Con Edison) and its wholly-owned subsidiary, Consolidated Edison Company of New York, Inc. (CECONY). Con Edison is a holding company operating regulated utility businesses in New York City, Westchester County, southeastern New York, and northern New Jersey, alongside transmission investments. The report is a combined filing for both registrants.
Key Financial Metrics (Nine Months Ended Sept 30, 2024)
| Metric | Con Edison (2024) | Con Edison (2023) | CECONY (2024) | CECONY (2023) |
|---|---|---|---|---|
| Total Operating Revenues | $11,587 million | $11,219 million | $10,730 million | $10,287 million |
| Net Income (Common Stock) | $1,510 million | $2,185 million | $1,417 million | $1,308 million |
| Diluted EPS | $4.35 | $6.24 | N/A | N/A |
| Operating Cash Flow | $2,304 million | $1,181 million | $2,087 million | $1,221 million |
| Long-Term Debt | $23,438 million | $21,927 million | $22,196 million | $20,810 million |
| Cash & Equivalents | $93 million | $540 million (excl. held for sale) | $33 million | $20 million |
| Common Equity Ratio | 48.3% | 49.1% | 47.2% | 47.9% |
Material Changes vs. Prior Period
- Net Income Decline: Con Edison's net income decreased by $675 million (31%) year-over-year. This decline is primarily attributable to the absence of the $784 million after-tax gain on the sale of the Clean Energy Businesses recognized in the prior year (March 2023).
- Revenue Growth: Total operating revenues increased by $368 million (3.3%) for Con Edison, driven by higher electric rate base revenues and new steam rate plans, partially offset by lower gas purchased for resale costs.
- Operating Cash Flow Surge: Operating cash flow increased by $1,123 million year-over-year, driven by higher net deferred credits, increased accounts payable, and a decrease in the revenue decoupling mechanism receivable.
- Investing Activities: Net cash used in investing activities increased significantly to $3,889 million (from a net inflow of $352 million in 2023) due to the absence of $3,927 million in proceeds from the Clean Energy Businesses sale and a $436 million increase in utility construction expenditures.
- Regulatory Expense Impact: CECONY incurred a $51 million expense in 2024 related to the NYSPSC order denying the capitalization of costs for a new customer billing system, which were previously capitalized.
Guidance, Outlook, Risks, and Unusual Items
- Regulatory Proceedings:
- O&R Rate Cases: O&R filed updated requests for electric and gas rate increases effective January 2025. The NYSDPS testimony supports rate decreases for both electric and gas, citing a lower return on equity (9.50%) compared to O&R's proposal (10.25%).
- Weld Investigation: CECONY is investigating non-conforming welds on gas and steam mains following contractor misconduct. No liability has been accrued, and the company does not anticipate a significant operational impact, though the financial loss range is currently unestimable.
- Income Tax Audit: The NYSPSC is auditing the Utilities' historical income tax calculations. The Utilities have accumulated significant regulatory assets ($1.066 billion for CECONY) related to this matter and are seeking an IRS ruling to recover these assets through future rates rather than writing them down.
- Environmental Liabilities:
- Gowanus Canal: The EPA ordered remedial action work in the middle segment of the Gowanus Canal Superfund Site, estimated at $369 million. CECONY is unable to estimate its specific exposure.
- Spills: CECONY addressed two oil spills in April 2024 (Bronx River and Hudson River). Costs are not expected to be material, though potential sanctions exceed $0.3 million.
- Capital Projects: Con Edison Transmission is developing the Propel NY Energy project (offshore wind) and has entered into settlement agreements for formula rates on transmission projects with returns on equity ranging from 10.5% to 11.3%.
- Corporate Alternative Minimum Tax (CAMT): Beginning in 2024, the Companies are subject to the 15% CAMT under the Inflation Reduction Act. A liability of $73 million was accrued for the nine months ended September 30, 2024.
Investor Verification Checklist
- Clean Energy Sale Adjustments: Verify the final purchase price adjustments for the Clean Energy Businesses sale, which resulted in a $30 million downward adjustment to the gain in 2024.
- Rate Case Outcomes: Monitor the NYSPSC decisions on O&R's 2025 rate increase requests and CECONY's petition for rehearing regarding the billing system capitalization denial.
- Accounts Receivable Aging: Review the impact of aged accounts receivable ($1.654 billion for CECONY) on liquidity and the effectiveness of collection efforts post-pandemic.
- Environmental Exposure: Track the progress of the Gowanus Canal remediation and the final determination of CECONY's liability share.
- Interest Rate Sensitivity: Assess the impact of rising interest rates on variable-rate debt and commercial paper, noting a 10% rate increase would raise annual interest expense by approximately $12 million for Con Edison.