Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 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 notes that Con Edison completed the sale of its Clean Energy Businesses in March 2023, which significantly impacts year-over-year comparisons.
Key Financial Metrics (Six Months Ended June 30, 2024)
| Metric | Con Edison (2024) | Con Edison (2023) | CECONY (2024) | CECONY (2023) |
|---|---|---|---|---|
| Total Operating Revenues | $7,495 million | $7,347 million | $6,967 million | $6,697 million |
| Net Income for Common Stock | $922 million | $1,658 million | $880 million | $793 million |
| Earnings Per Share (Diluted) | $2.66 | $4.72 | N/A | N/A |
| Operating Cash Flow | $1,912 million | $1,164 million | $1,791 million | $1,140 million |
| Investing Cash Flow | ($2,622 million) | $1,452 million | ($2,453 million) | ($2,162 million) |
| Financing Cash Flow | $1,022 million | ($2,190 million) | $985 million | $1,314 million |
| Long-Term Debt | $23,311 million | $21,927 million | $22,194 million | $20,810 million |
| Cash and Temporary Investments | $1,500 million | $1,955 million | $1,461 million | $1,348 million |
Note: 2023 Con Edison results include an $867 million pre-tax gain on the sale of the Clean Energy Businesses.
Material Changes vs. Prior Period
- Revenue Growth: Total operating revenues increased by $148 million (2.0%) year-over-year for Con Edison, driven primarily by higher electric rate base and purchased power costs, partially offset by lower gas purchased for resale costs.
- Net Income Decline: Con Edison's net income decreased by $736 million (44.4%) compared to the prior year. This decline is primarily attributable to the absence of the $867 million gain on the sale of the Clean Energy Businesses recorded in 2023.
- Operating Expenses: Other operations and maintenance expenses increased by $112 million, largely due to a $51 million expense recognized by CECONY after the NYSPSC denied a petition to capitalize costs for a new customer billing system.
- Capital Expenditures: Utility construction expenditures increased by $299 million to $2.396 billion, reflecting continued investment in grid modernization and clean energy transition.
- Debt Issuance: In May 2024, CECONY issued $1.4 billion in long-term debentures to repay short-term borrowings and fund general corporate purposes.
Guidance, Outlook, Risks, and Contingencies
Management Commentary and Outlook
- Clean Energy Transition: The Companies are heavily investing in offshore wind, energy storage, and thermal energy networks to meet New York State's Climate Leadership and Community Protection Act (CLCPA) goals. CECONY forecasts a decrease in gas demand and an increase in electric usage.
- Rate Plans: O&R has filed requests for electric and gas rate increases effective January 2025. The NYSDPS has submitted testimony supporting rate decreases for O&R, creating uncertainty on final approved rates.
- Dividends: Con Edison paid common stock dividends of $549 million for the six-month period. The company seeks to provide shareholder value through continued dividend growth supported by earnings growth in regulated utilities.
Risks and Contingencies
- Regulatory Risk: The NYSPSC denied CECONY's request to capitalize $89 million of costs for a new billing system, resulting in a $51 million expense in 2024. CECONY has filed a petition for rehearing.
- Environmental Liabilities: Significant potential liabilities exist for Superfund sites (e.g., Gowanus Canal), with estimated remediation costs potentially reaching hundreds of millions. CECONY is unable to estimate the full range of possible losses for certain sites.
- Asbestos Litigation: Thousands of suits remain pending alleging asbestos exposure. While accrued liabilities are $8 million, the Companies believe there is a reasonable possibility of exposure in excess of accrued amounts, though the range cannot be estimated.
- Welding 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, but the financial impact remains unquantifiable.
- Interest Rate Risk: Higher interest rates have increased interest expense. A 10% increase in rates applicable to variable-rate debt would increase annual interest expense by approximately $15 million for Con Edison.
Investor Verification Checklist
- Rate Case Outcomes: Monitor the NYSPSC's final decisions on O&R's requested rate increases and CECONY's petition for rehearing regarding the billing system capitalization denial.
- Capital Expenditure Execution: Verify the ability to fund the $2.4 billion+ in utility construction expenditures without eroding liquidity, given the high interest rate environment.
- Environmental Remediation Costs: Track updates on the Gowanus Canal Superfund Site remediation costs and the status of the non-conforming weld investigation.
- Accounts Receivable Aging: Review the trend in aged accounts receivable (over 60 days), which totaled $1.553 billion for CECONY, as slower cash recovery impacts liquidity.
- Transmission Project Progress: Assess the timeline and cost management of the Propel NY Energy and Empire Wind 1 projects, which are critical to the clean energy strategy.