The Companies recognize interest on liabilities for uncertain tax positions in interest expense and would recognize penalties, if any, in operating expenses in the Companies’ consolidated income statements. InFor the three and nine months ended September 30, 2017,March 31, 2023 and 2022, the Companies recognized an immaterial amount of interest expense and no penalties for uncertain tax positions in their consolidated income statements. At September 30, 2017March 31, 2023 and December 31, 2016,2022, the Companies recognized an immaterial amount of accrued interest on their consolidated balance sheets.
Note J —K – Revenue Recognition
The following table presents, for the three months ended March 31, 2023 and 2022, revenue from contracts with customers as defined in Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers," as well as additional revenue from sources other than contracts with customers, disaggregated by major source.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, 2023 | For the Three Months Ended March 31, 2022 |
(Millions of Dollars) | Revenues from contracts with customers | | Other revenues (a) | Total operating revenues | Revenues from contracts with customers | | Other revenues (a) | Total operating revenues |
CECONY | | | | | | | | |
Electric | $2,263 | | $93 | $2,356 | $2,107 | | $(23) | $2,084 |
Gas | 1,257 | | 34 | 1,291 | 1,104 | | 27 | 1,131 |
Steam | 303 | | 3 | 306 | 299 | | 3 | 302 |
Total CECONY | $3,823 | | $130 | $3,953 | $3,510 | | $7 | $3,517 |
O&R | | | | | | | | |
Electric | 178 | | 4 | 182 | 163 | | 3 | 166 |
Gas | 138 | | 1 | 139 | 120 | | (1) | 119 |
Total O&R | $316 | | $5 | $321 | $283 | | $2 | $285 |
Clean Energy Businesses (c) | | | | | | | | |
Renewables | 68 | | — | | 68 | 129 | | — | | 129 |
Energy services | 7 | | — | | 7 | 19 | | — | | 19 |
Develop/Transfer Projects | 7 | | — | | 7 | 11 | | — | | 11 | |
Other | — | | | 47 | 47 | — | | | 101 | | 101 | |
Total Clean Energy Businesses | $82 | | $47 | $129 | $159 | | $101 | | $260 |
Con Edison Transmission | 1 | | — | | 1 | 1 | | — | | 1 |
Other (b) | — | | | (1) | | (1) | — | | | (3) | (3) |
Total Con Edison | $4,222 | | $181 | $4,403 | $3,953 | | $107 | $4,060 |
(a) For the Utilities, this includes primarily revenue or negative revenue adjustments from alternative revenue programs, such as the revenue decoupling mechanisms under their NY electric and gas rate plans (see "Rate Plans" in Note B). For the Clean Energy Businesses, this includes revenue from wholesale services. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T.
(b) Other includes the parent company, Con Edison's tax equity investments, the deferred project held for sale and consolidated adjustments.
(c) On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T.
Clean Energy Businesses' Use of the Percentage-of-Completion Method
Sales and profits on each percentage-of-completion contract were recorded each month based on the ratio of actual cumulative costs incurred to the total estimated costs at completion of the contract, multiplied by the total estimated contract revenue, less cumulative revenues recognized in prior periods (the ‘‘cost-to-cost’’ method). The impact of revisions of contract estimates, that may result from contract modifications, performance or other reasons, were recognized on a cumulative catch-up basis in the period in which the revisions are made. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S.
| | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | 2022 |
(Millions of Dollars) | Unbilled contract revenue (a) | | Unearned revenue (b) | | Unbilled contract revenue (a) | Unearned revenue (b) | |
Beginning balance as of January 1, | $80 | | $3 | | $35 | $7 | |
Additions (c) | 2 | | — | | 21 | — | |
Subtractions (c) | 33 | | 3 | (d) | 36 | 4 | (d) |
Ending balance as of March 31, | $49 | (e) | $— | | $20 | $3 | |
(a)Unbilled contract revenue represents accumulated incurred costs and earned profits on contracts (revenue arrangements), that have been recorded as revenue, but have not yet been billed to customers, and which represent contract assets as defined in Topic 606. Substantially all accrued unbilled contract revenue is expected to be collected within one year. Unbilled contract revenue arises from the cost-to-cost method of revenue recognition. Unbilled contract revenue from fixed-price type contracts is converted to billed receivables when amounts are invoiced to customers according to contractual billing terms, that generally occur when deliveries or other performance milestones are completed.
(b)Unearned revenue represents a liability for billings to customers in excess of earned revenue, that are contract liabilities as defined in Topic 606.
(c)Additions for unbilled contract revenue and subtractions for unearned revenue represent additional revenue earned. Additions for unearned revenue and subtractions for unbilled contract revenue represent billings. Activity also includes appropriate balance sheet classification for the period. Of the subtractions in 2023, $21 million and $1 million relate to the sale of the Clean Energy Businesses for unbilled contract revenue and unearned revenue, respectively.
(d)Of the subtractions from unearned revenue, $3 million and $4 million were included in the balances as of January 1, 2023 and 2022, respectively.
(e)Following the sale of the Clean Energy Businesses, Con Edison remains entitled to certain unbilled contract revenue for a battery storage project located in Imperial County, California. See Note S.
On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T.
Note L – Current Expected Credit Losses
Allowance for Uncollectible Accounts
The Utilities’ “Account receivable – customers” balance consists of utility bills due (bills are generally due the month following billing) from customers who have energy delivered, generated, or services provided by the Utilities. The balance also reflects the Utilities’ purchase of receivables from energy service companies to support the retail choice programs.
“Other receivables” balance generally reflects costs billed by the Utilities for goods and services provided to external parties, such as accommodation work for private parties and certain governmental entities, real estate rental and pole attachments.
The Companies develop expected loss estimates using past events data and consider current conditions and future reasonable and supportable forecasts. Changes to the Utilities’ reserve balances that result in write-offs of customer accounts receivable balances above existing rate allowances are not reflected in rates during the term of the current rate plans. For the Utilities’ customer accounts receivable allowance for uncollectible accounts, past events considered include write-offs relative to customer accounts receivable; current conditions include macro-and micro-economic conditions related to trends in the local economy, bankruptcy rates and aged customer accounts receivable balances, among other factors; and forecasts about the future include assumptions related to the level of write-offs and recoveries. Generally, the Utilities write off customer accounts receivable as uncollectible 90 days after the account is turned off for non-payment, or the account is closed during the collection process. See "COVID-19 Regulatory Matters" in Note B.
Other receivables allowance for uncollectible accounts is calculated based on a historical average of collections relative to total other receivables, including current receivables. Current macro- and micro-economic conditions are also considered when calculating the current reserve. Probable outcomes of pending litigation, whether favorable or unfavorable to the Companies, are also included in the consideration.
Starting in 2020, the potential economic impact of the COVID-19 pandemic was also considered in forward-looking projections related to write-off and recovery rates and resulted in increases to the allowance for uncollectible accounts. The allowance for customer uncollectible accounts for Con Edison and CECONY decreased by $78 million from December 31, 2022 to March 31, 2023. The decreases primarily resulted from the credits issued pursuant to the New York State COVID-19 arrears assistance programs. See "COVID-19 Regulatory Matters" in Note B. The allowance for uncollectible accounts for Con Edison and CECONY increased by $19 million and $20 million, respectively, from December 31, 2021 to March 31, 2022.
Customer accounts receivable and the associated allowance for uncollectible accounts are included in the line “Accounts receivable – customers” on the Companies’ consolidated balance sheets. Other receivables and the associated allowance for uncollectible accounts are included in “Other receivables” on the consolidated balance sheets.
The table below presents a roll forward by major portfolio segment type for the three months ended March 31, 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, |
| Con Edison | CECONY |
| Accounts receivable - customers | Other receivables | Accounts receivable - customers | Other receivables |
(Millions of Dollars) | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
Allowance for credit losses | | | | | | | | |
Beginning Balance at January 1, | $322 | $317 | $10 | $22 | $314 | $304 | $7 | $19 |
Recoveries | 4 | 5 | — | | — | | 4 | 4 | — | | — | |
Write-offs | (48) | (30) | (1) | (3) | (47) | (28) | — | (2) | |
Reserve adjustments | (34) | 44 | 1 | 6 | (35) | 44 | 1 | 6 |
Ending Balance March 31, | $244 | $336 | $10 | $25 | $236 | $324 | $8 | $23 |
Note M – Financial Information by Business Segment
Con Edison’s principal business segments are CECONY’s regulated utility activities, O&R’s regulated utility activities the Clean Energy Businesses and Con Edison Transmission. CECONY’s principal business segments are its regulated electric, gas and steam utility activities. The financial data for the business segments for the three and nine months ended September 30, 2017March 31, 2023 and 20162022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, |
| Operating revenues | Inter-segment revenues | Depreciation and amortization | Operating income/(loss) |
(Millions of Dollars) | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
CECONY | | | | | | | | |
Electric | $2,356 | $2,084 | $5 | $4 | $343 | $332 | $194 | $170 |
Gas | 1,291 | 1,131 | 2 | 2 | 105 | 90 | 559 | 451 |
Steam | 306 | 302 | 18 | 19 | 25 | 24 | 56 | 90 |
Consolidation adjustments | — | | — | | (25) | (25) | — | | — | | — | | — | |
Total CECONY | $3,953 | $3,517 | $— | | $— | | $473 | $446 | $809 | $711 |
O&R | | | | | | | | |
Electric | $182 | $166 | $— | | $— | | $18 | $17 | $1 | $8 |
Gas | 139 | 119 | — | | — | | 7 | 7 | 40 | 38 |
Total O&R | $321 | $285 | $— | | $— | | $25 | $24 | $41 | $46 |
Clean Energy Businesses (a) | $129 | $260 | $— | | $— | | $— | $59 | $36 | $46 |
Con Edison Transmission | 1 | 1 | — | | — | | — | | — | | (2) | (3) |
Other (b) | (1) | (3) | | — | | — | | 1 | | — | | 855 | (1) |
Total Con Edison | $4,403 | $4,060 | $— | | $— | | $499 | $529 | $1,739 | $799 |
|
| | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, |
| Operating revenues | Inter-segment revenues | Depreciation and amortization | Operating income/(loss) |
(Millions of Dollars) | 2017 |
| 2016 |
| 2017 |
| 2016 |
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
CECONY | | | | | | | | |
Electric | $2,469 | $2,557 | $4 | $5 | $232 | $217 | $855 | $841 |
Gas | 268 | 208 | 2 | 1 | 47 | 41 | (12) | (28) |
Steam | 62 | 63 | 19 | 22 | 21 | 20 | (43) | (47) |
Consolidation adjustments | — |
| — |
| (25) | (28) | — |
| — |
| — |
| — |
|
Total CECONY | $2,799 | $2,828 |
| $— |
|
| $— |
| $300 | $278 | $800 | $766 |
O&R | | | | | | | | |
Electric | $206 | $213 |
| $— |
|
| $— |
| $13 | $12 | $56 | $55 |
Gas | 28 | 27 | — |
| — |
| 5 | 5 | (11) | (7) |
Total O&R | $234 | $240 |
| $— |
|
| $— |
| $18 | $17 | $45 | $48 |
Clean Energy Businesses | $177 | $350 |
| $— |
| $(2) | $19 | $11 | $29 | $125 |
Con Edison Transmission | 1 | — |
| — |
| — |
| — |
| — |
| (2) | (1) |
Other (a) | — |
| (1) | — |
| 2 | — |
| (1) | 1 | 2 |
Total Con Edison | $3,211 | $3,417 |
| $— |
|
| $— |
| $337 | $305 | $873 | $940 |
(a) On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. As a result of this sale, the Clean Energy Businesses are no longer a principal segment. See Note S and Note T.
|
| | | | | | | | | | | | | | | | | | |
| For the Nine Months Ended September 30, |
| Operating revenues | Inter-segment revenues | Depreciation and amortization | Operating income/(loss) |
(Millions of Dollars) | 2017 |
| 2016 |
| 2017 |
| 2016 |
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
CECONY | | | | | | | | |
Electric | $6,079 | $6,222 | $12 | $13 | $690 | $645 | $1,477 | $1,487 |
Gas | 1,421 | 1,113 | 5 | 4 | 137 | 118 | 362 | 273 |
Steam | 448 | 406 | 55 | 65 | 64 | 62 | 52 | 39 |
Consolidation adjustments | — |
| — |
| (72) | (82) | — |
| — |
| — |
| — |
|
Total CECONY | $7,948 | $7,741 |
| $— |
|
| $— |
| $891 | $825 | $1,891 | $1,799 |
O&R | | | | | | | | |
Electric | $495 | $497 |
| $— |
|
| $— |
| $38 | $37 | $83 | $86 |
Gas | 172 | 133 | — |
| — |
| 15 | 13 | 33 | 28 |
Total O&R | $667 | $630 |
| $— |
|
| $— |
| $53 | $50 | $116 | $114 |
Clean Energy Businesses | $460 | $998 |
| $— |
| $7 | $54 | $30 | $63 | $184 |
Con Edison Transmission | 1 | — |
| — |
| — |
| — |
| — |
| (6) | (1) |
Other (a) | (4) | (1) | — |
| (7) | — |
| — |
| 2 | 1 |
Total Con Edison | $9,072 | $9,368 |
| $— |
|
| $— |
| $998 | $905 | $2,066 | $2,097 |
(a)Parent(b) Other includes the parent company, Con Edison’s tax equity investments, the deferred project held for sale and consolidation adjustments. Other does not represent a business segment.
Note K —N – Derivative Instruments and Hedging Activities
Con Edison’s subsidiaries hedge market price fluctuations associated with physical purchases and sales of electricity, natural gas, steam and, to a lesser extent, refined fuels by using derivative instruments including futures, forwards, basis swaps, options, transmission congestion contracts and financial transmission rights contracts. These are economic hedges, for which the Utilities do not elect hedge accounting. The Companies use economic hedges to manage commodity price risk in accordance with provisions set by state regulators. The volume of hedging activity at the Utilities is dependent upon the forecasted volume of physical commodity supply to meet customer needs, and program costs or benefits are recovered from or credited to full-service customers, respectively. See "Recoverable Energy Costs" in Note A. Derivatives are recognized on the consolidated balance sheet at fair value (see Note L)O), unless an exception is available under the accounting rules for derivatives and hedging. Qualifying derivative contracts that have been designated as normal purchases or normal sales contracts are not reported at fair value under the accounting rules. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T.
The fair values of the Companies’ commodity derivatives including the offsetting of assets and liabilities on the consolidated balance sheet at September 30, 2017March 31, 2023 and December 31, 20162022 were:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(Millions of Dollars) | 2023 | | 2022 | |
Balance Sheet Location | Gross Amounts of Recognized Assets/(Liabilities) | Gross Amounts Offset | Net Amounts of Assets/ (Liabilities) (a) | | Gross Amounts of Recognized Assets/(Liabilities) | Gross Amounts Offset | Net Amounts of Assets/ (Liabilities) (a) | |
Con Edison | | | | | | | | |
Fair value of derivative assets | | | | | | | | |
Current | $203 | $(73) | $130 | (b) | $378 | $(332) | $46 | (b) |
Noncurrent | 58 | (32) | | 26 | | 193 | (108) | 85 | |
Total fair value of derivative assets held and used | 261 | (105) | 156 | | 571 | (440) | 131 | |
Current - assets held for sale (d) | — | — | — | | 93 | (8) | 85 | (c)(d) |
Noncurrent - assets held for sale (d) | — | — | — | | 83 | 11 | 94 | (c)(d) |
Total fair value of derivative assets | $261 | $(105) | $156 | | $747 | $(437) | $310 | |
Fair value of derivative liabilities | | | | | | | | |
Current | $(196) | $72 | $(124) | (b) | $(198) | $166 | $(32) | (b) |
Noncurrent | (174) | 38 | (136) | | (49) | 36 | (13) | |
Total fair value of derivative liabilities held and used | (370) | 110 | (260) | | $(247) | $202 | $(45) | |
Current - liabilities held for sale (d) | — | — | — | | (31) | 6 | (25) | (d) |
Noncurrent - liabilities held for sale (d) | — | — | — | | (3) | (8) | (11) | (d) |
Total fair value of derivative liabilities | $(370) | $110 | $(260) | | $(281) | $200 | $(81) | |
Net fair value derivative assets/(liabilities) | $(109) | $5 | | $(104) | | $466 | $(237) | $229 | |
CECONY | | | | | | | | |
Fair value of derivative assets | | | | | | | | |
Current | $190 | $(69) | $121 | (b) | $350 | $(312) | $38 | (b) |
Noncurrent | 56 | (31) | 25 | | 176 | (96) | 80 | |
Total fair value of derivative assets | $246 | $(100) | $146 | | $526 | $(408) | $118 | |
Fair value of derivative liabilities | | | | | | | | |
Current | $(188) | $69 | $(119) | (b) | $(189) | $160 | $(29) | |
Noncurrent | (165) | 36 | (129) | | (43) | 34 | (9) | |
Total fair value of derivative liabilities | $(353) | $105 | $(248) | | $(232) | $194 | $(38) | |
Net fair value derivative assets/(liabilities) | $(107) | $5 | $(102) | | $294 | $(214) | $80 | |
(a)Derivative instruments and collateral were offset on the consolidated balance sheet as applicable under the accounting rules. The Companies enter into master agreements for their commodity derivatives. These agreements typically provide offset in the event of contract termination. In such case, generally the non-defaulting party’s payable will be offset by the defaulting party’s payable. The non-defaulting party will customarily notify the defaulting party within a specific time period and come to an agreement on the early termination amount.
(b)At March 31, 2023, margin deposits for Con Edison ($14 million and $(7) million) were classified as derivative assets and derivative liabilities, respectively, and for CECONY ($14 million and $(2) million) were classified as derivative assets and derivative liabilities, respectively, on the consolidated balance sheet, but not included in the table. At December 31, 2022 margin deposits for Con Edison and CECONY of $13 million were classified as derivative assets, and ($(10) million and $(6) million, respectively) were classified as derivative
|
| | | | | | | | |
(Millions of Dollars) | 2017 | | 2016 | |
Balance Sheet Location | Gross Amounts of Recognized Assets/(Liabilities) | Gross Amounts Offset | Net Amounts of Assets/ (Liabilities) (a) | | Gross Amounts of Recognized Assets/(Liabilities) | Gross Amounts Offset | Net Amounts of Assets/ (Liabilities) (a) | |
Con Edison | | | | | | | | |
Fair value of derivative assets | | | | | | | | |
Current | $77 | $(67) | $10 | (b) | $81 | $(64) | $17 | (b) |
Noncurrent | 64 | (61) | 3 | | 49 | (43) | 6 | |
Total fair value of derivative assets | $141 | $(128) | $13 | | $130 | $(107) | $23 | |
Fair value of derivative liabilities | | | | | | | | |
Current | $(141) | $71 | $(70) | | $(138) | $61 | $(77) | |
Noncurrent | (143) | 60 | (83) | | (91) | 52 | (39) | (c) |
Total fair value of derivative liabilities | $(284) | $131 | $(153) | | $(229) | $113 | $(116) | |
Net fair value derivative assets/(liabilities) | $(143) | $3 | $(140) | (b) | $(99) | $6 | $(93) | (b) (c) |
CECONY | | | | | | | | |
Fair value of derivative assets | | | | | | | | |
Current | $55 | $(53) | $2 | (b) | $52 | $(45) | $7 | (b) |
Noncurrent | 57 | (55) | 2 | | 41 | (35) | 6 | |
Total fair value of derivative assets | $112 | $(108) | $4 | | $93 | $(80) | $13 | |
Fair value of derivative liabilities | | | | | | | | |
Current | $(116) | $57 | $(59) | | $(111) | $45 | $(66) | |
Noncurrent | (127) | 54 | (73) | | (77) | 44 | (33) | |
Total fair value of derivative liabilities | $(243) | $111 | $(132) | | $(188) | $89 | $(99) | |
Net fair value derivative assets/(liabilities) | $(131) | $3 | $(128) | (b) | $(95) | $9 | $(86) | (b) |
liabilities on the consolidated balance sheet, but not included in the table. Margin is collateral, typically cash, that the holder of a derivative instrument is required to deposit in order to transact on an exchange and to cover its potential losses with its broker or the exchange. | |
(a) | Derivative instruments and collateral were offset on the consolidated balance sheet as applicable under the accounting rules. The Companies enter into master agreements for their commodity derivatives. These agreements typically provide offset in the event of contract termination. In such case, generally the non-defaulting party’s payable will be offset by the defaulting party’s payable. The non-defaulting party will customarily notify the defaulting party within a specific time period and come to an agreement on the early termination amount. |
| |
(b) | At September 30, 2017 and December 31, 2016, margin deposits for Con Edison ($5 million and $7 million, respectively) and CECONY ($5 million and $7 million, respectively) were classified as derivative assets on the consolidated balance sheet, but not included in the table. Margin is collateral, typically cash, that the holder of a derivative instrument is required to deposit in order to transact on an exchange and to cover its potential losses with its broker or the exchange. |
| |
(c) | Does not include $(1) million for interest rate swap. |
(c)Includes amounts for interest rate swaps of $75 million in noncurrent assets, $31 million in current assets. At December 31, 2022, the Clean Energy Businesses had interest rate swaps with notional amounts of $982 million. The expiration dates of the swaps ranged from 2025-2041.
(d)Amounts represent derivative assets and liabilities included in current assets and current liabilities held for sale, respectively, on Con Edison's consolidated balance sheet as of December 31, 2022. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T.
The Utilities generally recover their prudently incurred fuel, purchased power and gas costs, including hedging gains and losses, in accordance with rate provisions approved by the applicable state utility regulators. In accordance with the accounting rules for regulated operations, the Utilities record a regulatory asset or regulatory liability to defer recognition of unrealized gains and losses on their electric and gas derivatives. As gains and losses are realized in future periods, they will be recognized as purchased power, gas and fuel costs in the Companies’ consolidated income statements.
The Clean Energy Businesses recordrecorded realized and unrealized gains and losses on their derivative contracts in purchased power, gas purchased for resale and non-utility revenue in the reporting period in which they occur. The Clean Energy Businesses recorded changes in the fair value of their interest rate swaps in other interest expense at the end of each reporting period. Management believes that these derivative instruments represent economic hedges that mitigate exposure to fluctuations in commodity prices.prices and interest rates. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T.
The following table presents the realized and unrealized gains or losses on commodity derivatives that have been deferred or recognized in earnings for the three and nine months ended September 30, 2017March 31, 2023 and 2016:2022:
| | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended March 31, |
| | Con Edison | | CECONY |
(Millions of Dollars) | Balance Sheet Location | 2023 | 2022 | | 2023 | 2022 |
Pre-tax gains/(losses) deferred in accordance with accounting rules for regulated operations: | | | |
Current | Deferred derivative gains | $(149) | $339 | | $(137) | $312 |
Noncurrent | Deferred derivative gains | (126) | 45 | | (111) | 41 |
Total deferred gains/(losses) | | $(275) | $384 | | $(248) | $353 |
Current | Deferred derivative losses | $(16) | $(36) | | $(12) | $(32) |
Current | Recoverable energy costs | (291) | 157 | | (274) | 143 |
Noncurrent | Deferred derivative losses | (133) | (34) | | (130) | (34) |
Total deferred gains/(losses) | | $(440) | $87 | | $(416) | $77 |
Net deferred gains/(losses) | | $(715) | $471 | | $(664) | $430 |
| Income Statement Location | | | | | |
Pre-tax gains/(losses) recognized in income | | | | | |
| Gas purchased for resale | $4 | $5 | | $— | | $— | |
| Non-utility revenue | 17 | (17) | | — | | — | |
| Other operations and maintenance expense | — | | 3 | | — | | 3 | |
| Other interest expense (a) | 5 | 65 | | — | | — | |
Total pre-tax gains/(losses) recognized in income | $26 | $56 | | $— | | $3 | |
(a)Comprised of amounts related to interest rate swaps of the Clean Energy Businesses. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T. |
| | | | | | | | | | | | | |
| | For the Three Months Ended September 30, |
| | Con Edison | | CECONY |
(Millions of Dollars) | Balance Sheet Location | 2017 |
| | 2016 | | 2017 |
| 2016 |
|
Pre-tax gains/(losses) deferred in accordance with accounting rules for regulated operations: | | | |
Current | Deferred derivative gains | $(4) | | $(1) | | $(3) | $(3) |
Noncurrent | Deferred derivative gains | 1 | | (2) | | 1 | — |
|
Total deferred gains/(losses) | | $(3) | | $(3) | | $(2) | $(3) |
Current | Deferred derivative losses | $(11) | | $(19) | | $(9) | $(18) |
Current | Recoverable energy costs | (40) | | (39) | | (38) | (35) |
Noncurrent | Deferred derivative losses | (12) | | (17) | | (8) | (14) |
Total deferred gains/(losses) | | $(63) | | $(75) | | $(55) | $(67) |
Net deferred gains/(losses) | | $(66) | | $(78) | | $(57) | $(70) |
| Income Statement Location | | | | | | |
Pre-tax gains/(losses) recognized in income | | | | | | |
| Purchased power expense |
| $— |
| | $(37) | (b) |
| $— |
|
| $— |
|
| Gas purchased for resale | (47) | | (38) | | — |
| — |
|
| Non-utility revenue | 5 | (a) | (2) | (b) | — |
| — |
|
Total pre-tax gains/(losses) recognized in income | $(42) | | $(77) | |
| $— |
|
| $— |
|
| |
(a) | For the three months ended September 30, 2017, Con Edison recorded an unrealized pre-tax gain in non-utility operating revenue ($6 million). |
| |
(b) | For the three months ended September 30, 2016, Con Edison recorded unrealized pre-tax losses in non-utility operating revenue ($2 million) and purchased power expense ($23 million). |
|
| | | | | | | | | | | | | |
| | For the Nine Months Ended September 30, |
| | Con Edison | | CECONY |
(Millions of Dollars) | Balance Sheet Location | 2017 |
| | 2016 | | 2017 |
| 2016 |
|
Pre-tax gains/(losses) deferred in accordance with accounting rules for regulated operations: | | | |
Current | Deferred derivative gains | $(26) | | $6 | | $(22) | $2 |
Noncurrent | Deferred derivative gains | (2) | | (1) | | (2) | (1) |
Total deferred gains/(losses) | | $(28) | | $5 | | $(24) | $1 |
Current | Deferred derivative losses | $10 | | $19 | | $11 | $16 |
Current | Recoverable energy costs | (125) | | (163) | | (116) | (148) |
Noncurrent | Deferred derivative losses | (40) | | (5) | | (36) | (3) |
Total deferred gains/(losses) | | $(155) | | $(149) | | $(141) | $(135) |
Net deferred gains/(losses) | | $(183) | | $(144) | | $(165) | $(134) |
| Income Statement Location | | | | | | |
Pre-tax gains/(losses) recognized in income | | | | | | |
| Purchased power expense |
| $— |
| | $(106) | (b) |
| $— |
|
| $— |
|
| Gas purchased for resale | (161) | | (72) | | — |
| — |
|
| Non-utility revenue | 11 | (a) | 15 | (b) | — |
| — |
|
Total pre-tax gains/(losses) recognized in income | $(150) | | $(163) | |
| $— |
|
| $— |
|
| |
(a) | For the nine months ended September 30, 2017, Con Edison recorded an unrealized pre-tax gain in non-utility operating revenue ($2 million). |
| |
(b) | For the nine months ended September 30, 2016, Con Edison recorded unrealized pre-tax gains and losses in non-utility operating revenue ($3 million loss) and purchased power expense ($11 million gain). |
The following table presents the hedged volume of Con Edison’s and CECONY’s commodity derivative transactions at September 30, 2017:March 31, 2023:
| | | | | | | | | | | | | | |
| Electric Energy (MWh) (a)(b) | Capacity (MW) (a) | Natural Gas (Dt) (a)(b) | Refined Fuels (gallons) |
Con Edison | 30,093,325 | | 48,600 | | 273,950,000 | | 4,116,000 | |
CECONY | 28,352,725 | | 41,400 | | 260,910,000 | | 4,116,000 | |
(a)Volumes are reported net of long and short positions, except natural gas collars where the volumes of long positions are reported.
(b)Excludes electric congestion and gas basis swap contracts that are associated with electric and gas contracts and hedged volumes.
|
| | | | | | | | |
| Electric Energy (MWh) (a)(b) | Capacity (MW) (a) | Natural Gas (Dt) (a)(b) | Refined Fuels (gallons) |
Con Edison | 32,596,372 |
| 6,790 |
| 166,913,644 |
| 672,000 |
|
CECONY | 30,492,575 |
| 3,000 |
| 158,500,000 |
| 672,000 |
|
| |
(a) | Volumes are reported net of long and short positions, except natural gas collars where the volumes of long positions are reported. |
| |
(b) | Excludes electric congestion and gas basis swap contracts, which are associated with electric and gas contracts and hedged volumes. |
The Companies are exposed to credit risk related to transactions entered into primarily for the various energy supply and hedging activities by the Utilities and the Clean Energy Businesses.Utilities. Credit risk relates to the loss that may result from a counterparty’s nonperformance. The Companies use credit policies to manage this risk, including an established credit approval process, monitoring of counterparty limits, netting provisions within agreements, collateral or prepayment arrangements, credit insurance and credit default swaps. The Companies measure credit risk exposure as the replacement cost for open energy commodity and derivative positions plus amounts owed from counterparties for settled transactions. The replacement cost of open positions represents unrealized gains, net of any unrealized losses where the Companies have a legally enforceable right to offset.
At September 30, 2017,March 31, 2023, Con Edison and CECONY had $80$66 million and $8$58 million of credit exposure in connection with open energy supply net receivables and hedging activities, net of collateral, respectively. Con Edison’s net credit exposure consisted of $23$36 million with investment-grade counterparties $23 million with non-investment grade/non-rated counterparties, $19 million with independent system operators and $15 $30 million with commodity exchange brokers. CECONY’s net credit exposure consisted of $7$30 million with commodity exchange brokers and $1$28 million with investment-grade counterparties. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T.
The collateral requirements associated with, and settlement of, derivative transactions are included in net cash flows from operating activities in the Companies’ consolidated statement of cash flows. Most derivative instrument contracts contain provisions that may require a party to provide collateral on its derivative instruments that are in a net liability position. The amount of collateral to be provided will depend on the fair value of the derivative instruments and the party’s credit ratings.
The following table presents the aggregate fair value of the Companies’ derivative instruments with credit-risk-related contingent features that are in a net liability position, the collateral posted for such positions and the additional collateral that would have been required to be posted had the lowest applicable credit rating been reduced one level and to below investment grade at September 30, 2017:March 31, 2023:
| | | | | | | | | | | | | | |
(Millions of Dollars) | Con Edison (a) | | CECONY (a) | |
Aggregate fair value – net liabilities | $179 | | $170 | |
Collateral posted | 205 | | 205 | |
Additional collateral (b) (downgrade one level from current ratings) | 16 | | 6 | |
Additional collateral (b)(c) (downgrade to below investment grade from current ratings) | 70 | | 56 | |
(a)Non-derivative transactions for the purchase and sale of electricity and gas and qualifying derivative instruments, that have been designated as normal purchases or normal sales, are excluded from the table. These transactions primarily include purchases of electricity from independent system operators. In the event the Utilities are no longer extended unsecured credit for such purchases, the Companies would be required to post $1 million of additional collateral at March 31, 2023. For certain other such non-derivative transactions, the Companies could be required to post collateral under certain circumstances, including in the event counterparties had reasonable grounds for insecurity. |
| | | | |
(Millions of Dollars) | Con Edison (a) | | CECONY (a) | |
Aggregate fair value – net liabilities | $148 | | $131 | |
Collateral posted | 61 | | 56 | |
Additional collateral (b) (downgrade one level from current ratings) | 23 | | 22 | |
Additional collateral (b) (downgrade to below investment grade from current ratings) | 101 | (c) | 88 | (c) |
| |
(a) | Non-derivative transactions for the purchase and sale of electricity and gas and qualifying derivative instruments, which have been designated as normal purchases or normal sales, are excluded from the table. These transactions primarily include purchases of electricity from independent system operators. In the event the Utilities and the Clean Energy Businesses were no longer extended unsecured credit for such purchases, the Companies would be required to post additional collateral of $11 million at September 30, 2017. For certain other such non-derivative transactions, the Companies could be required to post collateral under certain circumstances, including in the event counterparties had reasonable grounds for insecurity. |
| |
(b) | (b)The Companies measure the collateral requirements by taking into consideration the fair value amounts of derivative instruments that contain credit-risk-related contingent features that are in a net liability position plus amounts owed to counterparties for settled transactions and amounts required by counterparties for minimum financial security. The fair value amounts represent unrealized losses, net of any unrealized gains where the Companies have a legally enforceable right to offset. |
| |
(c) | Derivative instruments that are net assets have been excluded from the table. At September 30, 2017, if Con Edison had been downgraded to below investment grade, it would have been required to post additional collateral for such derivative instruments of $13 million. |
Interest Rate Swap
In December 2016, the Clean Energy Businesses acquired Coram Wind project which holds an interest rate swap that terminates in June 2024, pursuant to which it pays a fixed-rate of 2.0855 percent and receives a LIBOR-based variable rate. The fair value amounts represent unrealized losses, net of this interest rate swap was immaterial asany unrealized gains where the Companies have a legally enforceable right to offset.
(c)Derivative instruments that are net assets have been excluded from the table. At March 31, 2023, if Con Edison had been downgraded to below investment grade, it would have been required to post additional collateral for such derivative instruments of September 30, 2017 and a liability of $1 million as of December 31, 2016 on Con Edison’s consolidated balance sheet.$23 million.
Note L —O – Fair Value Measurements
The accounting rules for fair value measurements and disclosures define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in a principal or most advantageous market. Fair value is a market-based measurement that is determined based on inputs, whichthat refer broadly to assumptions that market participants use in pricing assets or liabilities. These inputs can be readily observable, market corroborated, or generally unobservable firm inputs. The Companies often make certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, and the risks inherent in the inputs to valuation techniques. The Companies use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.
The accounting rules for fair value measurements and disclosures established a fair value hierarchy, whichthat prioritizes the inputs to valuation techniques used to measure fair value in three broad levels. The rules require that assets and liabilities be classified in their entirety based on the level of input that is significant to the fair value measurement. Assessing the significance of a particular input may require judgment considering factors specific to the asset or liability and may affect the valuation of the asset or liability and their placement within the fair value
hierarchy. The Companies classify fair value balances based on the fair value hierarchy defined by the accounting rules for fair value measurements and disclosures as follows:
•Level 1 – Consists of assets or liabilities whose value is based on unadjusted quoted prices in active markets at the measurement date. An active market is one in which transactions for assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis. This category includes contracts traded on active exchange markets valued using unadjusted prices quoted directly from the exchange.
•Level 2 – Consists of assets or liabilities valued using industry standard models and based on prices, other than quoted prices within Level 1, that are either directly or indirectly observable as of the measurement date. The industry standard models consider observable assumptions including time value, volatility factors and current market and contractual prices for the underlying commodities, in addition to other economic measures. This category includes contracts traded on active exchanges or in over-the-counter markets priced with industry standard models.
•Level 3 – Consists of assets or liabilities whose fair value is estimated based on internally developed models or methodologies using inputs that are generally less readily observable and supported by little, if any, market activity at the measurement date. Unobservable inputs are developed based on the best available information and subject to cost benefit constraints. This category includes contracts priced using models that are internally developed and contracts placed in illiquid markets. It also includes contracts that expire after the period of time for which quoted prices are available and internal models are used to determine a significant portion of the value.
Assets and liabilities measured at fair value on a recurring basis as of September 30, 2017March 31, 2023 and December 31, 20162022 are summarized below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | 2022 |
(Millions of Dollars) | Level 1 | Level 2 | Level 3 | Netting Adjustment (e) | Total | Level 1 | Level 2 | Level 3 | Netting Adjustment (e) | Total |
Con Edison | | | | | | | | | | |
Derivative assets: | | | | | | | | | | |
Commodity (a)(b)(c) | $34 | $154 | $— | $(18) | $170 | $84 | $476 | $2 | $(420) | $142 |
Commodity held for sale (g) | — | | — | | — | | — | | — | | 6 | | 34 | | 31 | | 2 | | 73 | |
Interest rate swaps (a)(b)(c)(f)(g) | — | | — | | — | | — | | — | | — | | 106 | | — | | — | | 106 | |
Other (a)(b)(d) | 455 | 115 | — | | — | | 570 | 437 | 116 | — | | — | | 553 |
Total assets | $489 | $269 | $0 | $(18) | $740 | $527 | $732 | $33 | $(418) | $874 |
Derivative liabilities: | | | | | | | | | | |
Commodity (a)(b)(c) | $28 | $259 | $11 | $(31) | $267 | $18 | $204 | $16 | $(184) | $54 |
Commodity held for sale (g) | — | | — | | — | | — | | — | 8 | | 24 | 2 | | 2 | | 36 |
Total liabilities | $28 | $259 | $11 | $(31) | $267 | $26 | $228 | $18 | $(182) | $90 |
CECONY | | | | | | | | | | |
Derivative assets: | | | | | | | | | | |
Commodity (a)(b)(c) | $34 | $142 | $— | $(16) | $160 | $83 | $434 | $2 | $(388) | $131 |
Other (a)(b)(d) | 442 | 109 | — | | — | | 551 | 422 | 110 | — | | — | | 532 |
Total assets | $476 | $251 | $— | $(16) | $711 | $505 | $544 | $2 | $(388) | $663 |
Derivative liabilities: | | | | | | | | | | |
Commodity (a)(b)(c) | $27 | $251 | $5 | $(33) | $250 | $18 | $198 | $8 | $(180) | $44 |
Total liabilities | $27 | $251 | $5 | $(33) | $250 | $18 | $198 | $8 | $(180) | $44 |
(a)The Companies’ policy is to review the fair value hierarchy and recognize transfers into and transfers out of the levels at the end of each reporting period. Con Edison and CECONY had $7 million of commodity derivative liabilities transferred from level 3 to level 2 during the three months ended March 31, 2023 because of availability of observable market data due to the decrease in the terms of certain contracts from beyond three years as of December 31, 2022 to less than three years as of March 31, 2023. Con Edison and CECONY had an immaterial amount of derivative liabilities and $10 million and $9 million of commodity derivative assets, respectively, transferred from level 3 to level 2 during the year ended December 31, 2022 because of availability of observable market data due to the decrease in the terms of certain contracts from beyond three years as of September 30, 2022 to less than three years as of December 31, 2022.
(b)Level 2 assets and liabilities include investments held in the deferred compensation plan and/or non-qualified retirement plans, exchange-traded contracts where there is insufficient market liquidity to warrant inclusion in Level 1, and certain over-the-counter derivative instruments for electricity, refined products and natural gas. Derivative instruments classified as Level 2 are valued using industry standard
|
| | | | | | | | | | | | | | | | | | | |
| 2017 | 2016 |
(Millions of Dollars) | Level 1 | Level 2 | Level 3 | Netting Adjustment (e) | Total | Level 1 | Level 2 | Level 3 | Netting Adjustment (e) | Total |
Con Edison | | | | | | | | | | |
Derivative assets: | | | | | | | | | | |
Commodity (a)(b)(c) | $6 | $28 | $2 | $(18) | $18 | $14 | $33 | $7 | $(24) | $30 |
Other (a)(b)(d) | 271 | 118 | — |
| — |
| 389 | 222 | 111 | — |
| — |
| 333 |
Total assets | $277 | $146 | $2 | $(18) | $407 | $236 | $144 | $7 | $(24) | $363 |
Derivative liabilities: | | | | | | | | | | |
Commodity (a)(b)(c) | $2 | $155 | $22 | $(26) | $153 | $4 | $144 | $6 | $(38) | $116 |
Interest Rate Swap (a)(b)(c) | — |
| — |
| — |
| — |
| — |
| — |
| 1 | — |
| — |
| 1 |
Total liabilities | $2 | $155 | $22 | $(26) | $153 | $4 | $145 | $6 | $(38) | $117 |
CECONY | | | | | | | | | | |
Derivative assets: | | | | | | | | | | |
Commodity (a)(b)(c) | $5 | $12 | $1 | $(9) | $9 | $10 | $19 | $1 | $(10) | $20 |
Other (a)(b)(d) | 248 | 113 | — |
| — |
| 361 | 200 | 106 | — |
| — |
| 306 |
Total assets | $253 | $125 | $1 | $(9) | $370 | $210 | $125 | $1 | $(10) | $326 |
Derivative liabilities: | | | | | | | | | | |
Commodity (a)(b)(c) | $1 | $133 | $15 | $(17) | $132 | $1 | $124 |
| $— |
| $(26) | $99 |
models that incorporate corroborated observable inputs, such as pricing services or prices from similar instruments that trade in liquid markets, time value and volatility factors. | |
(a) | The Companies’ policy is to review the fair value hierarchy and recognize transfers into and transfers out of the levels at the end of each reporting period. There were no transfers between levels 1, 2 and 3 for the nine months ended September 30, 2017 and for the year ended December 31, 2016. |
| |
(b) | Level 2 assets and liabilities include investments held in the deferred compensation plan and/or non-qualified retirement plans, exchange-traded contracts where there is insufficient market liquidity to warrant inclusion in Level 1, certain over-the-counter derivative instruments for electricity, refined products and natural gas. Derivative instruments classified as Level 2 are valued using industry standard models that incorporate corroborated observable inputs; such as pricing services or prices from similar instruments that trade in liquid markets, time value and volatility factors. |
| |
(c) | The accounting rules for fair value measurements and disclosures require consideration of the impact of nonperformance risk (including credit risk) from a market participant perspective in the measurement of the fair value of assets and liabilities. At September 30, 2017 and December 31, 2016, the Companies determined that nonperformance risk would have no material impact on their financial position or results of operations. |
| |
(d) | Other assets are comprised of assets such as life insurance contracts within the deferred compensation plan and non-qualified retirement plans. |
| |
(e) | Amounts represent the impact of legally-enforceable master netting agreements that allow the Companies to net gain and loss positions and cash collateral held or placed with the same counterparties. |
(c)The accounting rules for fair value measurements and disclosures require consideration of the impact of nonperformance risk (including credit risk) from a market participant perspective in the measurement of the fair value of assets and liabilities. At March 31, 2023 and December 31, 2022, the Companies determined that nonperformance risk would have no material impact on their financial position or results of operations.
(d)Other assets are comprised of assets such as life insurance contracts within the deferred compensation plan and non-qualified retirement plans.
(e)Amounts represent the impact of legally-enforceable master netting agreements that allow the Companies to net gain and loss positions and cash collateral held or placed with the same counterparties.
(f)See Note N.
(g)On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T.
The employees in the Companies’ risk management group develop and maintain the Companies’ valuation policies and procedures for, and verify pricing and fair value valuation of, commodity derivatives.derivatives and interest rate swaps. Under the Companies’ policies and procedures, multiple independent sources of information are obtained for forward price curves used to value commodity derivatives.derivatives and interest rate swaps. Fair value and changes in fair value of commodity derivatives and interest rate swaps are reported on a monthly basis to the Companies’ risk committees, comprised of officers and employees of the Companies that oversee energy hedging at the Utilities and the Clean Energy Businesses.Utilities. The risk management group reports to the Companies’ Vice President and Treasurer.
|
| | | | |
| Fair Value of Level 3 at September 30, 2017 | Valuation Techniques | Unobservable Inputs | Range |
| (Millions of Dollars) |
Con Edison – Commodity |
Electricity | $(21) | Discounted Cash Flow | Forward energy prices (a) | $19.00-$76.25 per MWh |
|
| Discounted Cash Flow | Forward capacity prices (a) | $1.26-$9.47 per kW-month |
Transmission Congestion Contracts/Financial Transmission Rights | 1 | Discounted Cash Flow | Discount to adjust auction prices for inter-zonal forward price curves (b) | 50.0% |
| | | Inter-zonal forward price curves adjusted for historical zonal losses (b) | $0.50-$6.75 per MWh |
Total Con Edison—Commodity | $(20) | | | |
CECONY – Commodity |
Electricity | $(15) | Discounted Cash Flow | Forward energy prices (a) | $20.50-$76.25 per MWh |
Transmission Congestion Contracts | 1 | Discounted Cash Flow | Discount to adjust auction prices for inter-zonal forward price curves (b) | 50.0% |
Total CECONY—Commodity | $(14) | | | |
| | | | | | | | | | | | | | |
(a) | Generally, increases/(decreases) in this input in isolation would result in a higher/(lower) fair value measurement.Fair Value of Level 3 at March 31, 2023 | Valuation Techniques | Unobservable Inputs | Range |
| (Millions of Dollars) |
Con Edison – Commodity |
| | | | |
(b)Electricity | Generally, increases/(decreases) in this input in isolation would result in a lower/(higher) fair value measurement.(11) | Discounted Cash Flow | Forward capacity prices (a) | $2.25-$7.26 per kW-month |
| | | | |
Transmission Congestion Contracts | — | Discounted Cash Flow | Inter-zonal forward price curves adjusted for historical zonal losses (b) | $0.38-$1.38 per MWh |
Total Con Edison—Commodity | $(11) | | | |
CECONY – Commodity |
| | | | |
Electricity | (5) | Discounted Cash Flow | Forward capacity prices (a) | $2.25-$7.26 per kW-month |
Transmission Congestion Contracts | — | Discounted Cash Flow | Inter-zonal forward price curves adjusted for historical zonal losses (b) | $0.38-$1.38 per MWh |
Total CECONY—Commodity | $(5) | | | |
(a)Generally, increases/(decreases) in this input in isolation would result in a higher/(lower) fair value measurement.
(b)Generally, increases/(decreases) in this input in isolation would result in a lower/(higher) fair value measurement.
The table listed below provides a reconciliation of the beginning and ending net balances for assets and liabilities measured at fair value as of September 30, 2017March 31, 2023 and 20162022 and classified as Level 3 in the fair value hierarchy:
| | | For the Three Months Ended September 30, | | For the Three Months Ended March 31, |
| �� Con Edison | CECONY | | Con Edison | CECONY |
(Millions of Dollars) | 2017 |
| 2016 | 2017 |
| 2016 |
| (Millions of Dollars) | 2023 | 2022 | 2023 | 2022 |
Beginning balance as of July 1, | $(10) | $5 | $(6) | $2 | |
Beginning balance as of January 1, | | Beginning balance as of January 1, | $15 | $(11) | $(6) | $(7) |
Included in earnings | 7 | (4) | 1 | — |
| Included in earnings | (2) | | 24 | (1) | | (1) | |
Included in regulatory assets and liabilities | (13) | (5) | (8) | (3) | Included in regulatory assets and liabilities | 8 | | 1 | 7 | | — | |
Sales | — |
| 4 | — |
| — |
| |
Settlements | (4) | 1 | (1) | 1 | Settlements | 4 | | — | | 2 | | 2 | |
Ending balance as of September 30, | $(20) | $1 | $(14) |
| $— |
| |
Decrease due to the sale of the Clean Energy Businesses (a) | | Decrease due to the sale of the Clean Energy Businesses (a) | (29) | | — | — | | — | |
Transfer out of level 3 | | Transfer out of level 3 | (7) | | — | | (7) | | — | |
Ending balance as of March 31, | | Ending balance as of March 31, | $(11) | $14 | | $(5) | $(6) |
(a) On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T.
|
| | | | | | | | |
| For the Nine Months Ended September 30, |
| Con Edison | CECONY |
(Millions of Dollars) | 2017 |
| 2016 | 2017 |
| 2016 |
|
Beginning balance as of January 1, | $1 | $6 | $1 | $8 |
Included in earnings | 8 | (1) | 1 | (1) |
Included in regulatory assets and liabilities | (21) | (11) | (14) | (6) |
Purchases | 1 | 2 | 1 | 1 |
Sales | — |
| 4 | — |
| — |
|
Settlements | (9) | 1 | (3) | (2) |
Ending balance as of September 30, | $(20) | $1 | $(14) |
| $— |
|
For the Utilities, realized gains and losses on Level 3 commodity derivative assets and liabilities are reported as part of purchased power, gas and fuel costs. The Utilities generally recover these costs in accordance with rate provisions approved by the applicable state public utilities regulators. Unrealized gains and losses for commodity
derivatives are generally deferred on the consolidated balance sheet in accordance with the accounting rules for regulated operations.
For the Clean Energy Businesses, realized and unrealized gains and losses on Level 3 commodity derivative assets and liabilities are reported in non-utility revenues (immaterial for both periods)($17 million loss and purchased power costs ($4$27 million gain and $5 million loss)gain) on the consolidated income statement for the three months ended September 30, 2017March 31, 2023 and 2016, 2022,respectively. RealizedOn March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses and unrealized gainsamounts for 2023 are shown through the date of sale. See Note S and losses on Level 3 commodity derivative assets and liabilities are reported in non-utility revenues (immaterial for both periods) and purchased power costs ($3 million gain and $6 million loss) on the consolidated income statement for the nine months ended September 30, 2017 and 2016, respectively. The change in fair value relating to Level 3 commodity derivative assets and liabilities held at September 30, 2017 and 2016 is included in non-utility revenues (immaterial for both periods) and purchased power costs ($4 million gain and $4 million loss) on the consolidated income statement for the three months endedNote T.
September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, the change in fair value relating to Level 3 commodity derivative assets and liabilities is included in non-utility revenues (immaterial for both periods) and purchased power costs ($2 million gain and $2 million loss) on the consolidated income statement, respectively.
Note M —P – Variable Interest Entities
Con Edison entersThe accounting rules for consolidation address the consolidation of a variable interest entity (VIE) by a business enterprise that is the primary beneficiary. A VIE is an entity that does not have a sufficient equity investment at risk to permit it to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest. The primary beneficiary is the business enterprise that has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and either absorbs a significant amount of the VIE’s losses or has the right to receive benefits that could be significant to the VIE.
The Companies enter into arrangements including leases, partnerships and electricity purchase agreements, with various entities. As a result of these arrangements, Con Edison retainsthe Companies retain or may retain a variable interest in these entities.
CECONY
CECONY has an ongoing long-term electricity purchase agreement with Brooklyn Navy Yard Cogeneration Partners, LP, a potential variable interest entity (VIE).VIE. In April 2017, CECONY's long-term electricity purchase agreement with Cogen Technologies Linden Venture, LP, another potential VIE, expired. In 2016, requests were2022, a request was made of these counterpartiesthis counterparty for information necessary to determine whether the entity was a VIE and whether CECONY is the primary beneficiary; however, the information was not made available. The payments for these contractsthis contract constitute CECONY’s maximum exposure to loss with respect to the potential VIEs.VIE.
The following table summarizes the VIEs in which Con Edison Development has entered into as of September 30, 2017:
|
| | | | | |
Project Name (a) | Generating Capacity (b) (MW AC) | Power Purchase Agreement Term (in Years) | Year of Initial Investment | Location | Maximum Exposure to Loss (Millions of Dollars) (c) |
Copper Mountain Solar 3 | 128 | 20 | 2014 | Nevada | $175 |
Mesquite Solar 1 | 83 | 20 | 2013 | Arizona | 102 |
Copper Mountain Solar 2 | 75 | 25 | 2013 | Nevada | 83 |
California Solar | 55 | 25 | 2012 | California | 64 |
Broken Bow II | 38 | 25 | 2014 | Nebraska | 44 |
Texas Solar 4 | 32 | 25 | 2014 | Texas | 47 |
(a) With the exception of Texas Solar 4, Con Edison’s ownership interest is 50 percent and these projects are accounted for using the equity method of accounting. With the exception of Texas Solar 4, Con Edison is not the primary beneficiary since the power to direct the activities that most significantly impact the economics of the entities are shared equally between Con Edison Development and third parties. Con Edison’s ownership interest in Texas Solar 4 is 80 percent and is consolidated in the financial statements. Con Edison is the primary beneficiary since the power to direct the activities that most significantly impact the economics of Texas Solar 4 is held by Con Edison Development.
(b) Represents Con Edison Development’s ownership interest in the project.
(c) For investments accounted for under the equity method, maximum exposure is equal to the carrying value of the investment on the consolidated balance sheet. For consolidated investments, such as Texas Solar 4, maximum exposure is equal to the net assets of the project on the consolidated balance sheet less any applicable noncontrolling interest ($7 million for Texas Solar 4). Con Edison did not provide any financial or other support during the three and nine months ended September 30, 2017 that was not previously contractually required.
Note N — New Financial Accounting Standards
In May 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board jointly issued a revenue recognition standard that will supersede the revenue recognition requirements within Accounting Standards Codification Topic 605, “Revenue Recognition,” and most industry-specific guidance under the Codification through Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The purpose of the new guidance is to create a consistent framework for revenue recognition. The guidance clarifies how to measure and recognize revenue arising from customer contracts to depict the transfer of goods or services in an amount that reflects the consideration the entity expects to receive. Amendments were issued subsequently to clarify key areas including principal/agent considerations, performance obligations, licensing, sales taxes, noncash consideration, and contracts. The new standard is effective for reporting periods beginning after December 15, 2017. Early adoption is permitted for reporting periods beginning after December 15, 2016, however, the Companies plan to adopt the new standard for reporting periods beginning after December 15, 2017.
Under the new standard, companies may use either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a modified retrospective approach with the cumulative effect of initially adopting ASU
2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Companies anticipate using the modified retrospective approach.
The Companies have completed their analyses of the impact of the new standard on the majority of their various revenue streams.
The majority of the Companies’ sales are derived from tariffs to provide electric, gas, and steam service to customers. For such tariffs, the Companies expect that the revenue from contracts with customers under ASU 2014-09 will be equivalent to revenue from electricity, gas, or steam supplied in that period which is consistent with current practice. Consequently, the Companies do not anticipate that the new standard will materially impact the amount and/or timing of such revenues.
Con Edison has also completed its evaluation for the majority of the revenue at the Clean Energy Businesses, including revenue from the sale of energy-related products and services to retail customers, revenue from operating renewable and energy infrastructure projects, and revenue from the sale of renewable energy credits. For such revenues, Con Edison expects that the revenue from contracts with customers under ASU 2014-09 will not be materially different from revenue recorded consistent with current practice. Consequently, Con Edison does not anticipate that the new standard will materially impact the amount and/or timing of such revenues.
The Companies continue to review the potential impacts of the remaining revenue at the Utilities and the Clean Energy Businesses on the Companies' financial position, results of operations and liquidity as well as the additional disclosures and related controls required under the new standard, and anticipate completing such reviews during the fourth quarter of 2017.
In February 2016, the FASB issued amendments on financial reporting of leasing transactions through ASU No. 2016-02, “Leases (Topic 842)." The amendments require lessees to recognize assets and liabilities on the balance sheet and disclose key information about leasing arrangements. Lessees will need to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model. For income statement purposes, the pattern of expense recognition will be dependent on whether transactions are designated as operating leases or finance leases. The amendments are effective for reporting periods beginning after December 15, 2018. Early adoption is permitted. The amendments must be adopted using a modified retrospective transition and provide for certain practical expedients. Based on the existing portfolio of leases at implementation, for leases currently classified as operating leases, the Companies expect to recognize on the statements of financial position right-of-use assets and lease liabilities. The Companies are in the process of evaluating the potential impact of the new guidance on the Companies’ results of operations and liquidity.
In January 2017, the FASB issued amendments to the guidance for Business Combinations through ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The amendments in this update clarify the definition of a business and provide guidance on evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. For public entities, the amendments are effective for reporting periods beginning after December 15, 2017. Early adoption is permitted. The application of this guidance is not expected to have a material impact on the Companies’ financial position, results of operations and liquidity.
In January 2017, the FASB issued amendments to the guidance for the subsequent measurement of goodwill through ASU 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The amendments in this update simplify goodwill impairment testing by eliminating Step 2 of the goodwill impairment test wherein an entity has to compute the implied fair value of goodwill by performing procedures to determine the fair value of its assets and liabilities. Under the new guidance, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value up to the total amount of goodwill allocated to that reporting unit. For public entities, the amendments are effective for reporting periods beginning after December 15, 2019. Early adoption is permitted. The application of this guidance is not expected to have a material impact on the Companies’ financial position, results of operations and liquidity.
In February 2017, the FASB issued amendments to the guidance for other income through ASU 2017-05, “Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.” The amendments in this update clarify the scope of assets within Subtopic 610-20 and add guidance for partial sales of nonfinancial assets. The amendments are effective upon the adoption of ASU 2014-09, and therefore will be effective for reporting
periods beginning after December 15, 2017. The Company is in the process of evaluating the potential impact of the new guidance on the Company’s financial position, results of operations and liquidity.
In March 2017, the FASB issued amendments to the guidance for retirement benefits through ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The amendments in this update modify the presentation of net benefit cost, where the service component must be disaggregated from the other components of net benefit cost and be presented in the same line item as current employee compensation costs. The remaining components of the net benefit cost should be presented outside of income from operations. Additionally, the update allows only the service cost component to be eligible for capitalization. For public entities, the amendments are effective for reporting periods beginning after December 15, 2017. Early adoption is permitted. The Companies are in the process of evaluating the potential impact of the new guidance on the Companies’ financial position, results of operations and liquidity.
In March 2017, the FASB issued amendments to the guidance for debt securities through ASU 2017-08, “Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” The amendments in this update shorten the amortization period for certain callable debt securities held at a premium. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. For public entities, the amendments are effective for reporting periods beginning after December 15, 2018. Early adoption is permitted. The application of this guidance is not expected to have a material impact on the Companies’ financial position, results of operations and liquidity.
In May 2017, the FASB issued amendments to the guidance for stock compensation through ASU 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting.” The amendments in this update specify that changes to value, vesting conditions, or classification of an existing share-based payment award require application of modification accounting in Topic 718. For public entities, the amendments are effective for reporting periods beginning after December 15, 2017. Early adoption is permitted. The application of this guidance is not expected to have a material impact on the Companies’ financial position, results of operations and liquidity.
In August 2017, the FASB issued amendments to the guidance for derivatives and hedging through ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The amendments in this update provide greater clarification on hedge accounting for risk components, presentation and disclosure of hedging instruments, and overall targeted improvements to simplify hedge accounting. For public entities, the amendments are effective for reporting periods beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The Companies are in the process of evaluating the potential impact of the new guidance on the Companies’ financial position, results of operations and liquidity.
Note O — Dispositions
Upton 2
In May 2017, Con Edison Development sold Upton 2, a development stage solar electric production project, for $11 million to Vistra Asset Co. and recorded a $1 million gain on sale ($0.7 million, net of taxes). In addition, Con Edison Development agreed to perform the engineering, procurement and construction for the 180 MW (AC) project, which is expected to be substantially completed in 2018.
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
This combined management’s discussion and analysis of financial condition and results of operations (MD&A) relates to the consolidated financial statements (the Third Quarter Financial Statements) included in this report of two separate registrants: Consolidated Edison, Inc. (Con Edison) and Consolidated Edison Company of New York, Inc. (CECONY). As used in this report, the term the “Companies” refers to Con Edison and CECONY. CECONY is a subsidiary of Con Edison and, as such, information in this management’s discussion and analysis about CECONY applies to Con Edison.
This MD&A should be read in conjunction with the Third Quarter Financial Statements and the notes thereto, the MD&A in Item 7 of the Companies’ combined Annual Report on Form 10-K for the year ended December 31, 2016 (File Nos. 1-14514 and 1-1217, the Form 10-K) and the MD&A in Part 1, Item 2 of the Companies' combined Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2017 and June 30, 2017 (File Nos. 1-14514 and 1-1217).
Information in any item of this report referred to in this discussion and analysis is incorporated by reference herein. The use of terms such as “see” or “refer to” shall be deemed to incorporate by reference into this discussion and analysis the information to which reference is made.
Con Edison, incorporated in New York State in 1997, is a holding company that owns all of the outstanding common stock of CECONY, Orange and Rockland Utilities, Inc. (O&R), Con Edison Clean Energy Businesses, Inc. and Con Edison Transmission, Inc. As used in this report, the term the “Utilities” refers to CECONY and O&R.
Con Edison’s principal business operations are those of CECONY, O&R, the Clean Energy Businesses and Con Edison Transmission. CECONY’s principal business operations are its regulated electric, gas and steam delivery businesses. O&R’s principal business operations are its regulated electric and gas delivery businesses. The Clean Energy Businesses develop, own and operate renewable and energy infrastructure projects and provide energy-related products and services to wholesale and retail customers. Con Edison Transmission invests in electric transmission facilities and gas pipeline and storage facilities.
Con Edison seeks to provide shareholder value through continued dividend growth, supported by earnings growth in regulated utilities and contracted assets. The company invests to provide reliable, resilient, safe and clean energy critical for New York City’s growing economy. The company is an industry leading owner and operator of contracted, large-scale solar generation in the United States. Con Edison is a responsible neighbor, helping the communities it serves become more sustainable.
CECONY
Electric
CECONY provides electric service to approximately 3.4 million customers in all of New York City (except a part of Queens) and most of Westchester County, an approximately 660 square mile service area with a population of more than nine million.
During the summer of 2017, electric peak demand in CECONY's service area was 12,321 MW (which occurred on July 20, 2017). At design conditions, electric peak demand in the company's service area would have been approximately 13,270 MW in 2017 compared to the company's forecast of 13,470 MW. The company's five-year forecast of average annual growth of the electric peak demand in its service area at design conditions is approximately 0.1 percent for 2018 to 2022 (as compared to approximately 0.2 percent for 2017 to 2021).
Gas
CECONY delivers gas to approximately 1.1 million customers in Manhattan, the Bronx, parts of Queens and most of Westchester County.
In May 2017, the company decreased its five-year forecast of average annual growth of the peak gas demand in its service area at design conditions from approximately 2.3 percent (for 2017 to 2021) to 1.6 percent (for 2018 to 2022). The decrease reflects, among other things, that in rolling the forecast forward a year, another year of oil-to-gas conversions has been completed and fewer opportunities to convert remain.
Steam
CECONY operates the largest steam distribution system in the United States by producing and delivering approximately 19,500 MMlb of steam annually to approximately 1,640 customers in parts of Manhattan.
O&R
Electric
O&R and its utility subsidiary, Rockland Electric Company (RECO) (together referred to herein as O&R) provide electric service to approximately 0.3 million customers in southeastern New York and northern New Jersey, an approximately 1,300 square mile service area.
During the summer of 2017, electric peak demand in O&R's service area was 1,410 MW (which occurred on June 13, 2017). At design conditions, electric peak demand in the company's service area would have been approximately 1,615 MW in 2017 compared to the company's forecast of 1,625 MW. The company’s five-year forecast of average annual growth of the electric peak demand in its service area at design conditions is flat for 2018 to 2022 (as compared to approximately (0.1) percent for 2017 to 2021).
Gas
O&R delivers gas to over 0.1 million customers in southeastern New York.
Clean Energy Businesses
On March 1, 2023, Con Edison Clean Energy Businesses, Inc. has three wholly-owned subsidiaries: Consolidated Edison Development, Inc. (Con Edison Development), Consolidated Edison Energy, Inc. (Con Edison Energy) and Consolidated Edison Solutions, Inc. (Con Edison Solutions). Con Edison Clean Energy Businesses, Inc., together with these subsidiaries (which were formerly referred to ascompleted the competitive energy businesses), are referred to in this report assale of substantially all of the assets of the Clean Energy Businesses. See Note S.
In September 2016,connection with the sale, Con Edison sold the retail electric supply business of its Clean Energy Businesses toretained a subsidiary of Exelon Corporation for cash consideration of $235 million. In addition, Con Edison received $23tax equity interest valued at $20 million in cashtwo renewable electric projects located in Virginia that is accounted for as a working capital adjustment in February 2017.
In May 2017, Con Edison Development sold a development-stage solar electric production projectan equity method investment and that represent the maximum exposure to loss for $11 million and agreed to perform engineering, procurement and construction for the project.this investment. See Note O to the Third Quarter Financial Statements.
Con Edison Transmission
Con Edison Transmission, Inc. invests in electric and gas transmission projects through its wholly-owned subsidiaries, Consolidated Edison Transmission, LLC (CET Electric) and Con Edison Gas Pipeline and Storage, LLC (CET Gas). CET Electric owns a 45.7 percent interest in New York Transco LLC, which owns and is proposing to build additional electric transmission assets in New York. CET Gas owns, through subsidiaries, a 50 percent interest in Stagecoach Gas Services, LLC, a joint venture that owns, operates and will further develop an existing gas pipeline and storage business located in northern Pennsylvania and southern New York. Also, CET Gas and CECONY own 71.2 percent and 28.8 percent interests, respectively, in Honeoye Storage Corporation which operates a gas storage business in upstate New York. In addition, CET Gas owns a 12.5 percent interest in Mountain Valley Pipeline LLC, a joint venture developing a proposed 300 mile gas transmission project in West Virginia and Virginia (Mountain Valley Pipeline). Con Edison Transmission, Inc., together with CET Electric and CET Gas, are referred to in this report as Con Edison Transmission.
In October 2017, FERC issued a Certificate of Public Convenience and Necessity for the Mountain Valley Pipeline.S. The project has an estimated total cost of $3,000 million to $3,500 million and an in-service date targeted for late 2018.
Certain financial data of Con Edison’s businesses are presented below:
|
| | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, 2017 | For the Nine Months Ended September 30, 2017 | At September 30, 2017 |
(Millions of Dollars, except percentages) | Operating Revenues | Net Income | Operating Revenues | Net Income | Assets |
CECONY | $2,799 | 87 | % | $401 | 88 | % | $7,948 | 88 | % | $883 | 87 | % | $41,647 | 85 | % |
O&R | 234 | 7 |
| 22 | 5 |
| 667 | 7 |
| 53 | 5 |
| 2,832 | 6 |
|
Total Utilities | 3,033 | 94 |
| 423 | 93 |
| 8,615 | 95 |
| 936 | 92 |
| 44,479 | 91 |
|
Clean Energy Businesses (a) | 177 | 6 |
| 26 | 5 |
| 460 | 5 |
| 54 | 5 |
| 2,811 | 6 |
|
Con Edison Transmission | 1 | — |
| 9 | 2 |
| 1 | — |
| 25 | 2 |
| 1,210 | 2 |
|
Other (b) | — |
| — |
| (1) | — |
| (4) | — |
| 5 | 1 |
| 746 | 1 |
|
Total Con Edison | $3,211 | 100 | % | $457 | 100 | % | $9,072 | 100 | % | $1,020 | 100 | % | $49,246 | 100 | % |
| |
(a) | Net income from the Clean Energy Businesses includes for the nine months ended September 30, 2017 $1 million net after-tax gain related to the sale of a development stage solar electric production project (see Note O to the Third Quarter Financial Statements). Also includes for the three and nine months ended September 30, 2017 $4 million and $1 million of net after-tax mark-to-market gains, respectively. |
| |
(b) | Other includes parent company and consolidation adjustments. |
Results of Operations
Net income and earnings per share for the three and nine months ended September 30, 2017 and 2016 were as follows:
|
| | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| 2017 | 2016 | 2017 |
| 2016 |
| 2017 | 2016 | 2017 |
| 2016 |
|
(Millions of Dollars, except per share amounts) | Net Income | Earnings per Share | Net Income | Earnings per Share |
CECONY | $401 | $388 |
| $1.30 |
|
| $1.27 |
| $883 | $859 |
| $2.88 |
|
| $2.87 |
|
O&R | 22 | 27 | 0.07 |
| 0.09 |
| 53 | 55 | 0.18 |
| 0.18 |
|
Clean Energy Businesses (a) | 26 | 78 | 0.08 |
| 0.26 |
| 54 | 120 | 0.18 |
| 0.40 |
|
Con Edison Transmission | 9 | 10 | 0.03 |
| 0.03 |
| 25 | 11 | 0.08 |
| 0.04 |
|
Other (b) | (1) | (6) | — |
| (0.02 | ) | 5 | (6) | 0.01 |
| (0.02 | ) |
Con Edison (c) | $457 | $497 |
| $1.48 |
|
| $1.63 |
| $1,020 | $1,039 |
| $3.33 |
|
| $3.47 |
|
| |
(a) | Includes $4 million or $0.01 a share and $(15) million or $(0.05) a share of net after-tax mark-to-market gains/(losses) for the three months ended September 30, 2017 and 2016, respectively, and $1 million or $0.01 a share and $5 million or $0.02 a share of net after-tax mark-to-market gains/(losses) for the nine months ended September 30, 2017 and 2016, respectively. Also includes a $1 million or $0.00 a share net after-tax gain on the sale of a solar electric production project for the nine months ended September 30, 2017 (see Note O to the Third Quarter Financial Statements) and a $47 million or $0.15 a share of net gain related to the sale of the retail electric supply business, $5 million or $0.02 a share of net gain related to the acquisition of a solar electric production investment for the three and nine months ended September 30, 2016 and a $5 million or $0.02 a share of net loss related to the impairment of a solar electric production investment for the nine months ended September 30, 2016. |
| |
(b) | Other includes parent company and consolidation adjustments. |
| |
(c) | Earnings per share on a diluted basis were $1.48 a share and $1.62 a share for the three months ended September 30, 2017 and 2016, respectively, and $3.31 a share and $3.46 a share for the nine months ended September 30, 2017 and 2016, respectively. |
The Companies’ results of operations for the three and nine months ended September 30, 2017, as compared with the 2016 periods, reflect changes in rate plans and regulatory charges and the impact of weather on steam revenues. The new electric rate plan of CECONY includes changes in the timing of recognition of annual revenues between quarters. Operations and maintenance expenses for CECONY for the three and nine months ended September 30, 2017 primarily reflect lower costs for pensions and other postretirement benefits. In addition, the Utilities' rate plans provide for revenues to cover expected changes in certain operating costs including depreciation, property taxes and other tax matters.
The following table presents the estimated effect on earnings per share and net income for the three and nine months ended September 30, 2017 period as compared with 2016 period, resulting from these and other major factors: |
| | | | | | | |
| Three Months Variation | Nine Months Variation |
(Millions of Dollars, except per share amounts) | Earnings per Share Variation | Net Income Variation | Earnings per Share Variation | Net Income Variation |
CECONY (a) | | | | |
Changes in rate plans and regulatory charges (b) | $0.12 | $35 | $0.29 | $87 |
Weather impact on steam revenues | — |
| (1) | 0.01 | 4 |
Other operations and maintenance expenses (c) | 0.07 | 22 | 0.24 | 73 |
Depreciation, property taxes and other tax matters (d) | (0.10) | (30) | (0.36) | (108) |
Other (e) | (0.06) | (13) | (0.17) | (32) |
Total CECONY | 0.03 | 13 | 0.01 | 24 |
O&R (a) |
|
|
|
|
Changes in rate plans and regulatory charges | — |
| 1 | 0.04 | 12 |
Other operations and maintenance expenses (f) | (0.01) | (2) | (0.03) | (9) |
Depreciation and property taxes | (0.01) | (4) | (0.02) | (6) |
Other (e) | — |
| — |
| 0.01 | 1 |
Total O&R | (0.02) | (5) | — |
| (2) |
Clean Energy Businesses |
|
|
|
|
Operating revenues less energy costs (g) | 0.10 | 32 | 0.10 | 31 |
Other operations and maintenance expenses (h) | (0.08) | (23) | (0.10) | (30) |
Depreciation | (0.02) | (5) | (0.05) | (15) |
Net interest expense | (0.01) | (3) | (0.02) | (6) |
Other (e) (i) | (0.17) | (53) | (0.15) | (46) |
Total Clean Energy Businesses | (0.18) | (52) | (0.22) | (66) |
Con Edison Transmission (e) (j) | — |
| (1) | 0.04 | 14 |
Other, including parent company expenses (e) (k) | 0.02 | 5 | 0.03 | 11 |
Total variations | $(0.15) | $(40) | $(0.14) | $(19) |
| |
(a) | Under the revenue decoupling mechanisms in the Utilities’ New York electric and gas rate plans and the weather-normalization clause applicable to their gas businesses, revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. In general, the Utilities recover on a current basis the fuel, gas purchased for resale and purchased power costs they incur in supplying energy to their full-service customers. Accordingly, such costs do not generally affect the Companies' results of operations. |
| |
(b) | For the three and nine months ended September 30, 2017 as compared to the 2016 periods, reflects lower electric net base revenues of $(0.03) a share, resulting from the timing of recognition of annual revenues between quarters under CECONY's new electric rate plan. Also, for the three and nine months ended September 30, 2017 as compared with the 2016 periods, reflects higher electric net base revenues ($0.07 a share and $0.08 a share, respectively), resulting from the increased base rates under CECONY's new electric rate plan, higher gas net base revenues ($0.01 a share and $0.16 a share, respectively), incentives earned under the electric Earnings Adjustment Mechanisms of $0.02 a share, a property tax refund incentive of $0.01 a share and an increase to the regulatory reserve related to certain gas proceedings in 2016 ($0.02 a share and $0.03 a share, respectively). For the nine months ended September 30, 2017 as compared with the 2016 period, reflects growth in the number of gas customers of $0.03 a share. |
| |
(c) | Reflects lower pension and other postretirement benefits costs of $0.07 a share and $0.22 a share for the three and nine months ended September 30, 2017 as compared with the 2016 periods. |
| |
(d) | Reflects higher depreciation and amortization expense of $(0.04) a share and $(0.13) a share, property taxes of $(0.04) a share and $(0.13) a share, and income taxes of $(0.02) a share and $(0.10) a share for the three and nine months ended September 30, 2017 as compared with the 2016 periods. |
| |
(e) | Includes the impact of the dilutive effect of Con Edison's stock issuances. |
| |
(f) | Reflects higher pension costs of $(0.01) a share and $(0.02) a share for the three and nine months ended September 30, 2017 as compared with the 2016 periods. Also, for the nine months ended September 30, 2017 as compared with the 2016 period, reflects higher regulatory assessments and fees that are collected in revenues from customers and a higher reserve for injuries and damages of $(0.01) a share. |
| |
(g) | Reflects higher revenues from renewable electric production projects and lower revenues and energy costs resulting from the retail electric supply business which was sold in September 2016. Includes $0.01 a share and $(0.05) a share of net after-tax mark-to-market gains/(losses) for the three months ended September 30, 2017 and 2016, respectively, and $0.01 a share and $0.02 a share of net after-tax mark-to-market gains for the nine months ended September 30, 2017 and 2016, respectively. Substantially all the mark-to-market effects in the 2016 periods were related to the retail electric supply business sold in September 2016. |
| |
(h) | Reflects Upton 2 engineering, procurement and construction costs ($(0.05) a share and $(0.06) a share, respectively) as well as increased energy service costs ($(0.02) a share and $(0.04) a share, respectively) for the three and nine months ended September 30, 2017 as compared with the 2016 periods. |
| |
(i) | Includes $0.02 a share of net after-tax gain related to the acquisition of a solar electric production investment for the three and nine months ended September 30, 2016, net of $(0.02) a share of impairment loss related to the solar electric production investment for the nine months ended September 30, 2016. Includes $0.15 a share of net after-tax gain related to the sale of the retail electric supply business for the three and nine months ended September 30, 2016. |
| |
(j) | Reflects income from equity investments. |
| |
(k) | Reflects higher state income tax benefits. |
The Companies’ other operations and maintenance expenses for the three and nine months ended September 30, 2017 and 2016 were as follows:
|
| | | | |
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
(Millions of Dollars) | 2017 | 2016 | 2017 | 2016 |
CECONY | | | | |
Operations | $386 | $381 | $1,147 | $1,109 |
Pensions and other postretirement benefits | 51 | 87 | 152 | 261 |
Health care and other benefits | 45 | 47 | 127 | 124 |
Regulatory fees and assessments (a) | 142 | 135 | 355 | 361 |
Other | 67 | 74 | 211 | 250 |
Total CECONY | 691 | 724 | 1,992 | 2,105 |
O&R | 80 | 77 | 236 | 220 |
Clean Energy Businesses | 79 | 40 | 174 | 124 |
Con Edison Transmission | 3 | 1 | 7 | 1 |
Other (b) | (1) | (2) | (3) | (3) |
Total other operations and maintenance expenses | $852 | $840 | $2,406 | $2,447 |
| |
(a) | Includes Demand Side Management, System Benefit Charges and Public Service Law 18A assessments which are collected in revenues. |
| |
(b) | Includes parent company and consolidation adjustments. |
A discussion of the resultsprojects, once in service, are determined using the hypothetical liquidation at book value (HLBV) method of operations by principal business segment for the threeaccounting, and nine months ended September 30, 2017 and 2016 follows. For additional business segment financial information, see Note J to the Third Quarter Financial Statements.
Three Months Ended September 30, 2017 Compared with Three Months Ended September 30, 2016
The Companies’ results of operations in 2017 compared with 2016 were:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| CECONY | O&R | Clean Energy Businesses | Con Edison Transmission | Other (a) | Con Edison (b) |
(Millions of Dollars) | Increases (Decreases) Amount | Increases (Decreases) Percent | Increases (Decreases) Amount | Increases (Decreases) Percent | Increases (Decreases) Amount | Increases (Decreases) Percent | Increases (Decreases) Amount | Increases (Decreases) Percent | Increases (Decreases) Amount | Increases (Decreases) Percent | Increases (Decreases) Amount | Increases (Decreases) Percent |
Operating revenues | $(29) | (1.0 | )% | $(6) | (2.5 | )% | $(173) | (49.4 | )% | $1 | — | % | $1 | Large |
| $(206) | (6.0 | )% |
Purchased power | (95) | (19.2 | ) | (9) | (13.0 | ) | (234) | Large |
| — |
| — |
| — |
| — |
| (338) | (42.4 | ) |
Fuel | 1 | 3.4 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 1 | 3.4 |
|
Gas purchased for resale | 24 | 70.6 |
| 2 | 25.0 |
| 8 | 20.5 |
| — |
| — |
| — |
| — |
| 34 | 42.0 |
|
Other operations and maintenance | (33) | (4.6 | ) | 3 | 3.9 |
| 39 | 97.5 |
| 2 | Large |
| 1 | (50.0 | ) | 12 | 1.4 |
|
Depreciation and amortization | 22 | 7.9 |
| 1 | 5.9 |
| 8 | 72.7 |
| — |
| — |
| 1 | Large |
| 32 | 10.5 |
|
Taxes, other than income taxes | 18 | 3.6 |
| — |
| — |
| (2) | (40.0 | ) | — |
| — |
| — |
| — |
| 16 | 3.0 |
|
Gain on sale of retail electric supply business (2016) | — |
| — |
| — |
| — |
| (104) | Large |
| — |
| — |
| — |
| — |
| (104) | Large |
|
Operating income | 34 | 4.4 |
| (3) | (6.3 | ) | (96) | (76.8 | ) | (1) | Large |
| (1) | (50.0 | ) | (67) | (7.1 | ) |
Other income less deductions | (2) | Large |
| (1) | Large |
| (9) | (33.3 | ) | 1 | 5.0 |
| 1 | Large |
| (10) | (20.4 | ) |
Net interest expense | 3 | 1.9 |
| — |
| — |
| 5 | 71.4 |
| 1 | 33.3 |
| (2) | (40.0 | ) | 7 | 3.9 |
|
Income before income tax expense | 29 | 4.7 |
| (4) | (10.0 | ) | (110) | (75.9 | ) | (1) | (6.3 | ) | 2 | 50.0 |
| (84) | (10.4 | ) |
Income tax expense | 16 | 7.1 |
| 1 | 7.7 |
| (58) | (86.6 | ) | — |
| — |
| (3) | Large |
| (44) | (14.0 | ) |
Net income | $13 | 3.4 | % | $(5) | (18.5 | )% | $(52) | (66.7 | )% | $(1) | (10.0 | )% | $5 | 83.3 | % | $(40) | (8.0 | )% |
| |
(a) | Includes parent company and consolidation adjustments. |
| |
(b) | Represents the consolidated results of operations of Con Edison and its businesses. |
CECONY
|
| | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, 2017 | | For the Three Months Ended September 30, 2016 | | |
(Millions of Dollars) | Electric |
| Gas |
| Steam |
| 2017 Total | Electric |
| Gas |
| Steam |
| 2016 Total | 2017-2016 Variation |
Operating revenues | $2,469 | $268 | $62 | $2,799 | $2,557 | $208 | $63 | $2,828 | $(29) |
Purchased power | 393 | — |
| 7 | 400 | 486 | — |
| 9 | 495 | (95) |
Fuel | 24 | — |
| 6 | 30 | 21 | — |
| 8 | 29 | 1 |
Gas purchased for resale | — |
| 58 | — |
| 58 | — |
| 34 | — |
| 34 | 24 |
Other operations and maintenance | 547 | 104 | 40 | 691 | 578 | 102 | 44 | 724 | (33) |
Depreciation and amortization | 232 | 47 | 21 | 300 | 217 | 41 | 20 | 278 | 22 |
Taxes, other than income taxes | 418 | 71 | 31 | 520 | 414 | 59 | 29 | 502 | 18 |
Operating income | $855 | $(12) | $(43) | $800 | $841 | $(28) | $(47) | $766 | $34 |
Electric
CECONY’s results of electric operationssuch earnings were not material for the three months ended September 30, 2017 compared withMarch 31, 2023. Con Edison is not the 2016 periodprimary beneficiary since the power to direct the activities that most significantly impact the economics of the renewable electric projects is not held by Con Edison.
In June 2021, a subsidiary of the Clean Energy Businesses sold substantially all of its membership interest in the Crane solar project, and retained an equity interest of $11 million in the project that was $0 as follows:
|
| | | |
| For the Three Months Ended | |
(Millions of Dollars) | September 30, 2017 | September 30, 2016 | Variation |
Operating revenues | $2,469 | $2,557 | $(88) |
Purchased power | 393 | 486 | (93) |
Fuel | 24 | 21 | 3 |
Other operations and maintenance | 547 | 578 | (31) |
Depreciation and amortization | 232 | 217 | 15 |
Taxes, other than income taxes | 418 | 414 | 4 |
Electric operating income | $855 | $841 | $14 |
CECONY’s electric salesof March 31, 2023 and deliveriesthat is accounted for as an equity method investment. See Note S. The earnings of the project are determined using the hypothetical liquidation at book value (HLBV) method of accounting, and such earnings were not material for the three months ended September 30, 2017 compared withMarch 31, 2023 or 2022. Con Edison is not the 2016primary beneficiary since the power to direct the activities that most significantly impact the economics of the renewable electric project is not held by Con Edison.
HLBV Accounting
Con Edison has determined that the use of HLBV accounting is reasonable and appropriate to attribute income and loss to the tax equity investors. Using the HLBV method, the company's earnings from the projects are adjusted to reflect the income or loss allocable to the tax equity investors calculated based on how the project would allocate and distribute its cash if it were to sell all of its assets for their carrying amounts and liquidate at a particular point in time. Under the HLBV method, the company calculates the liquidation value allocable to the tax equity investors at the beginning and end of each period were:based on the contractual liquidation waterfall and adjusts its income for the period to reflect the change in the liquidation value allocable to the tax equity investors.
CED Nevada Virginia
|
| | | | | | | | | | | | | | |
| Millions of kWh Delivered | | Revenues in Millions (a) |
| For the Three Months Ended | | | For the Three Months Ended | |
Description | September 30, 2017 |
| September 30, 2016 |
| Variation |
| Percent Variation |
| | September 30, 2017 | September 30, 2016 | Variation | Percent Variation |
|
Residential/Religious (b) | 3,237 |
| 3,653 |
| (416 | ) | (11.4 | )% | | $805 | $883 | $(78) | (8.8 | )% |
Commercial/Industrial | 2,570 |
| 2,749 |
| (179 | ) | (6.5 | ) | | 534 | 551 | (17) | (3.1 | ) |
Retail choice customers | 7,510 |
| 8,136 |
| (626 | ) | (7.7 | ) | | 867 | 918 | (51) | (5.6 | ) |
NYPA, Municipal Agency and other sales | 2,705 |
| 2,764 |
| (59 | ) | (2.1 | ) | | 207 | 204 | 3 | 1.5 |
|
Other operating revenues (c) | — |
| — |
| — |
| — |
| | 56 | 1 | 55 | Large |
|
Total | 16,022 |
| 17,302 |
| (1,280 | ) | (7.4 | )% | (d) | $2,469 | $2,557 | $(88) | (3.4 | )% |
| |
(a) | Revenues from electric sales are subject to a revenue decoupling mechanism, as a result of which delivery revenues generally are not affected by changes in delivery volumes from levels assumed when rates were approved. |
| |
(b) | “Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations. |
| |
(c) | Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the revenue decoupling mechanism and other provisions of the company’s rate plans. |
| |
(d) | After adjusting for variations, primarily weather and billing days, electric delivery volumes in CECONY’s service area decreased 1.4 percent in the three months ended September 30, 2017 compared with the 2016 period. |
In February 2021, a subsidiary of Contents
Operating revenues decreased $88 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to lower purchased power expenses ($93 million), offset by higher revenues from the electric rate plan ($27 million).
Purchased power expenses decreased $93 million in the three months ended September 30, 2017 compared with the 2016 period due to lower purchased volumes ($66 million) and unit costs ($27 million).
Fuel expenses increased $3 million in the three months ended September 30, 2017 compared with the 2016 period due to higher unit costs ($6 million), offset by lower purchased volumes from the company's electric generating facilities ($3 million).
Other operations and maintenance expenses decreased $31 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to lower pension and other postretirement benefits ($38 million) and environmental costs ($6 million), offset by higher surcharges for assessments and fees that are collected in revenues from customers ($6 million) and uncollectible expense ($5 million).
Depreciation and amortization increased $15 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to higher electric utility plant balances.
Taxes, other than income taxes increased $4 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to higher property taxes ($11 million), offset by lower state and local taxes ($5 million).
Gas
CECONY’s results of gas operations for the three months ended September 30, 2017 compared with the 2016 period is as follows:
|
| | | |
| For the Three Months Ended | |
(Millions of Dollars) | September 30, 2017 | September 30, 2016 | Variation |
Operating revenues | $268 | $208 | $60 |
Gas purchased for resale | 58 | 34 | 24 |
Other operations and maintenance | 104 | 102 | 2 |
Depreciation and amortization | 47 | 41 | 6 |
Taxes, other than income taxes | 71 | 59 | 12 |
Gas operating income | $(12) | $(28) | $16 |
CECONY’s gas sales and deliveries, excluding off-system sales, for the three months ended September 30, 2017 compared with the 2016 period were:
|
| | | | | | | | | | | | | | | |
| Thousands of Dt Delivered | | Revenues in Millions (a) |
| For the Three Months Ended | | | For the Three Months Ended | |
Description | September 30, 2017 |
| September 30, 2016 |
| Variation |
| Percent Variation |
| | September 30, 2017 | September 30, 2016 | Variation |
| Percent Variation |
|
Residential | 4,731 |
| 4,335 |
| 396 |
| 9.1 | % | | $104 | $88 | $16 | 18.2 | % |
General | 4,292 |
| 3,963 |
| 329 |
| 8.3 |
| | 49 | 41 | 8 | 19.5 |
|
Firm transportation | 8,766 |
| 8,305 |
| 461 |
| 5.6 |
| | 67 | 53 | 14 | 26.4 |
|
Total firm sales and transportation | 17,789 |
| 16,603 |
| 1,186 |
| 7.1 |
| (b) | 220 | 182 | 38 | 20.9 |
|
Interruptible sales (c) | 2,108 |
| 1,664 |
| 444 |
| 26.7 |
| | 8 | 4 | 4 | Large |
|
NYPA | 10,148 |
| 12,800 |
| (2,652 | ) | (20.7 | ) | | 1 | 1 | — |
| — |
|
Generation plants | 24,068 |
| 35,745 |
| (11,677 | ) | (32.7 | ) | | 7 | 7 | — |
| — |
|
Other | 4,487 |
| 4,975 |
| (488 | ) | (9.8 | ) | | 6 | 6 | — |
| — |
|
Other operating revenues (d) | — |
| — |
| — |
| — |
| | 26 | 8 | 18 | Large |
|
Total | 58,600 |
| 71,787 |
| (13,187 | ) | (18.4 | )% | | $268 | $208 | $60 | 28.8 | % |
| |
(a) | Revenues from gas sales are subject to a weather normalization clause and a revenue decoupling mechanism, as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. |
| |
(b) | After adjusting for variations, primarily billing days, firm gas sales and transportation volumes in the company’s service area increased 6.0 percent in the three months ended September 30, 2017 compared with the 2016 period, reflecting primarily increased volumes attributable to the growth in the number of gas customers. |
| |
(c) | Includes 1,535 thousands and 915 thousands of Dt for the 2017 and 2016 periods, respectively, which are also reflected in firm transportation and other. |
| |
(d) | Other gas operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plans. |
Operating revenues increased $60 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to higher revenues from the gas rate plan and growth in the number of customers ($29 million) and higher gas purchased for resale expense ($24 million).
Gas purchased for resale increased $24 million in the three months ended September 30, 2017 compared with the 2016 period due to higher unit costs ($20 million) and purchased volumes ($4 million).
Other operations and maintenance expenses increased $2 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to higher surcharges for assessments and fees that were collected in revenues from customers.
Depreciation and amortization increased $6 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to higher gas utility plant balances.
Taxes, other than income taxes increased $12 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to higher property taxes ($6 million), state and local taxes ($4 million) and payroll taxes ($1 million).
Steam
CECONY’s results of steam operations for the three months ended September 30, 2017 compared with the 2016 period is as follows:
|
| | | |
| For the Three Months Ended | |
(Millions of Dollars) | September 30, 2017 | September 30, 2016 | Variation |
Operating revenues | $62 | $63 | $(1) |
Purchased power | 7 | 9 | (2) |
Fuel | 6 | 8 | (2) |
Other operations and maintenance | 40 | 44 | (4) |
Depreciation and amortization | 21 | 20 | 1 |
Taxes, other than income taxes | 31 | 29 | 2 |
Steam operating income | $(43) | $(47) | $4 |
CECONY’s steam sales and deliveries for the three months ended September 30, 2017 compared with the 2016 period were:
|
| | | | | | | | | | | | | | | | |
| Millions of Pounds Delivered | | Revenues in Millions |
| For the Three Months Ended | | | For the Three Months Ended | |
Description | September 30, 2017 |
| September 30, 2016 |
| Variation |
| Percent Variation |
| | September 30, 2017 | September 30, 2016 | Variation |
| Percent Variation |
|
General | 13 |
| 10 |
| 3 |
| 30.0 | % | | $2 | $2 |
| $— |
| — | % |
Apartment house | 748 |
| 776 |
| (28 | ) | (3.6 | ) | | 15 | 15 | — |
| — |
|
Annual power | 2,439 |
| 2,950 |
| (511 | ) | (17.3 | ) | | 42 | 49 | (7) | (14.3 | ) |
Other operating revenues (a) | — |
| — |
| — |
| — |
| | 3 | (3) | 6 | Large |
|
Total | 3,200 |
| 3,736 |
| (536 | ) | (14.3 | )% | (b) | $62 | $63 | $(1) | (1.6 | )% |
| |
(a) | Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plan. |
| |
(b) | After adjusting for variations, primarily weather and billing days, steam sales and deliveries decreased 8.6 percent in the three months ended September 30, 2017 compared with the 2016 period. |
Operating revenues decreased $1 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to lower purchased power expenses ($2 million) and lower fuel expenses ($2 million), offset in part by a property tax refund incentive ($3 million).
Purchased power expenses decreased $2 million in the three months ended September 30, 2017 compared with the 2016 period due to lower unit costs ($1 million) and purchased volumes ($1 million).
Fuel expenses decreased $2 million in the three months ended September 30, 2017 compared with the 2016 period due to lower unit costs ($1 million) and purchased volumes from the company's steam generating facilities ($1 million).
Other operations and maintenance expenses decreased $4 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to lower municipal infrastructure support costs.
Depreciation and amortization increased $1 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to higher steam utility plant balances.
Taxes, other than income taxes increased $2 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to higher property taxes.
Other Income (Deductions)
Other income (deductions) decreased $2 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to a decrease in investment and other income.
Net Interest Expense
Net interest expense increased $3 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to higher long-term debt balances in the 2017 period.
Income Tax Expense
Income taxes increased $16 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to higher income before income tax expense ($11 million), a decrease in tax benefits for plant-related flow through items ($7 million), offset in part by higher research and development tax credits ($2 million).
O&R
|
| | | | | | | | | | | | |
| For the Three Months Ended September 30, 2017 | | For the Three Months Ended September 30, 2016 | | |
(Millions of Dollars) | Electric |
| Gas |
| 2017 Total | Electric |
| Gas |
| 2016 Total | 2017-2016 Variation |
|
Operating revenues | $206 | $28 | $234 | $213 | $27 | $240 | $(6) |
Purchased power | 60 | — |
| 60 | 69 | — |
| 69 | (9) |
Gas purchased for resale | — |
| 10 | 10 | — |
| 8 | 8 | 2 |
Other operations and maintenance | 63 | 17 | 80 | 63 | 14 | 77 | 3 |
Depreciation and amortization | 13 | 5 | 18 | 12 | 5 | 17 | 1 |
Taxes, other than income taxes | 14 | 7 | 21 | 14 | 7 | 21 | — |
|
Operating income | $56 | $(11) | $45 | $55 | $(7) | $48 | $(3) |
Electric
O&R’s results of electric operations for the three months ended September 30, 2017 compared with the 2016 period is as follows:
|
| | | | | |
| For the Three Months Ended | |
(Millions of Dollars) | September 30, 2017 | September 30, 2016 | Variation |
|
Operating revenues | $206 | $213 | $(7) |
Purchased power | 60 | 69 | (9) |
Other operations and maintenance | 63 | 63 | — |
|
Depreciation and amortization | 13 | 12 | 1 |
Taxes, other than income taxes | 14 | 14 | — |
|
Electric operating income | $56 | $55 |
| $1 |
|
O&R’s electric sales and deliveries for the three months ended September 30, 2017 compared with the 2016 period were:
|
| | | | | | | | | | | | | | | |
| Millions of kWh Delivered | | Revenues in Millions (a) |
| For the Three Months Ended | | | For the Three Months Ended | |
Description | September 30, 2017 |
| September 30, 2016 |
| Variation |
| Percent Variation |
| | September 30, 2017 |
| September 30, 2016 | Variation | Percent Variation |
|
Residential/Religious (b) | 500 |
| 585 |
| (85 | ) | (14.5 | )% | | $105 | $109 | $(4) | (3.7 | )% |
Commercial/Industrial | 206 |
| 216 |
| (10 | ) | (4.6 | ) | | 34 | 35 | (1) | (2.9 | ) |
Retail choice customers | 818 |
| 925 |
| (107 | ) | (11.6 | ) | | 64 | 70 | (6) | (8.6 | ) |
Public authorities | 31 |
| 31 |
| — |
| — |
| | 3 | 2 | 1 | 50.0 |
|
Other operating revenues (c) | — |
| — |
| — |
| — |
| | — |
| (3) | 3 | Large |
|
Total | 1,555 |
| 1,757 |
| (202 | ) | (11.5 | )% | (d) | $206 | $213 | $(7) | (3.3 | )% |
| |
(a) | O&R’s New York electric delivery revenues are subject to a revenue decoupling mechanism, as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s electric sales in New Jersey are not subject to a decoupling mechanism, and as a result, changes in such volumes do impact revenues. |
| |
(b) | “Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations. |
| |
(c) | Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s electric rate plan. |
| |
(d) | After adjusting for weather and other variations, electric delivery volumes in O&R’s service area decreased 3.4 percent in the three months ended September 30, 2017 compared with the 2016 period. |
Operating revenues decreased $7 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to lower purchased power expenses ($9 million), offset by higher revenues from the New York electric rate plan ($3 million).
Purchased power expenses decreased $9 million in the three months ended September 30, 2017 compared with the 2016 period due to lower purchased volumes ($10 million), offset by higher unit costs ($1 million).
Depreciation and amortization expenses increased $1 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to higher electric utility plant balances.
Gas
O&R’s results of gas operations for the three months ended September 30, 2017 compared with the 2016 period is as follows:
|
| | | | |
| For the Three Months Ended | |
(Millions of Dollars) | September 30, 2017 | September 30, 2016 | Variation |
|
Operating revenues | $28 | $27 | $1 |
Gas purchased for resale | 10 | 8 | 2 |
Other operations and maintenance | 17 | 14 | 3 |
Depreciation and amortization | 5 | 5 | — |
|
Taxes, other than income taxes | 7 | 7 | — |
|
Gas operating income | $(11) | $(7) | $(4) |
O&R’s gas sales and deliveries, excluding off-system sales, for the three months ended September 30, 2017 compared with the 2016 period were:
|
| | | | | | | | | | | | | | | | | |
| Thousands of Dt Delivered | | Revenues in Millions (a) |
| For the Three Months Ended | | | For the Three Months Ended | |
Description | September 30, 2017 |
| September 30, 2016 |
| Variation |
| Percent Variation |
| | September 30, 2017 |
| September 30, 2016 |
| Variation |
| Percent Variation |
|
Residential | 579 |
| 550 |
| 29 |
| 5.3 | % | | $11 | $9 | $2 | 22.2 | % |
General | 198 |
| 177 |
| 21 |
| 11.9 |
| | 2 | 2 | — |
| — |
|
Firm transportation | 898 |
| 884 |
| 14 |
| 1.6 |
| | 8 | 8 | — |
| — |
|
Total firm sales and transportation | 1,675 |
| 1,611 |
| 64 |
| 4.0 |
| (b) | 21 | 19 | 2 | 10.5 |
|
Interruptible sales | 819 |
| 893 |
| (74 | ) | (8.3 | ) | | 1 | — |
| 1 | — |
|
Generation plants | 5 |
| 3 |
| 2 |
| 66.7 |
| | — |
| — |
| — |
| — |
|
Other | 74 |
| 70 |
| 4 |
| 5.7 |
| | — |
| — |
| — |
| — |
|
Other gas revenues | — |
| — |
| — |
| — |
| | 6 | 8 | (2) | (25.0 | ) |
Total | 2,573 |
| 2,577 |
| (4 | ) | (0.2 | )% | | $28 | $27 | $1 | 3.7 | % |
| |
(a) | Revenues from New York gas sales are subject to a weather normalization clause and a revenue decoupling mechanism as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. |
| |
(b) | After adjusting for weather and other variations, total firm sales and transportation volumes increased 3.1 percent in the three months ended September 30, 2017 compared with the 2016 period. |
Operating revenues increased $1 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to higher gas purchased for resale ($2 million), offset by lower revenues from the New York gas rate plan ($1 million).
Gas purchased for resale increased $2 million in the three months ended September 30, 2017 compared with the 2016 period due to higher purchased volumes ($3 million), offset by lower unit costs ($1 million).
Other operations and maintenance expenses increased $3 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to higher pension costs.
Income Tax Expense
Income taxes increased $1 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to the absence in 2017 of a tax benefit from a corporate-owned life insurance policy in 2016 ($2 million), offset in part by lower income before income tax expense ($1 million).
Clean Energy Businesses
The Clean Energy Businesses’ results entered into an agreement relating to certain projects (CED Nevada Virginia) with a noncontrolling tax equity investor to which a percentage of operations for the three months ended September 30, 2017 compared with the 2016 periodearnings, tax attributes and cash flows will be allocated. CED Nevada Virginia is as follows:
|
| | | | |
| For the Three Months Ended | |
(Millions of Dollars) | September 30, 2017 |
| September 30, 2016 | Variation |
Operating revenues | $177 | $350 | $(173) |
Purchased power | — |
| 234 | (234) |
Gas purchased for resale | 47 | 39 | 8 |
Other operations and maintenance | 79 | 40 | 39 |
Depreciation and amortization | 19 | 11 | 8 |
Taxes, other than income taxes | 3 | 5 | (2) |
Gain on sale of retail electric supply business (2016) | — |
| (104) | 104 |
Operating income | $29 | $125 | $(96) |
Operating revenues decreased $173 milliona consolidated entity in the three months ended September 30, 2017 compared with the 2016 period, due primarilywhich Con Edison had less than a 100 percent membership interest at December 31, 2022 and has no interest subsequent to lower electric retail revenues of $256 million from the sale of the retail electric supply business in September 2016. Renewable revenues increased $56 million due primarily to an increase in renewable electric production projects in operation and revenues from the engineering, procurement and construction of Upton
2 (see Note O to the Third Quarter Financial Statements). Energy services revenues increased $9 million. Wholesale revenues increased $10 million due to higher sales volumes. Net mark-to-market values increased $32 million, due primarily to the sale of the retail electric supply business, of which $24 million in gains are reflected in purchased power costs and $8 million in gains are reflected in revenues.
Purchased power expenses decreased $234 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to lower electric costs due to the sale of the retail electric supply business in September 2016 ($210 million) and changes in mark-to-market values ($24 million).
Gas purchased for resale increased $8 million in the three months ended September 30, 2017 compared with the 2016 period due to higher purchased volumes.
Other operations and maintenance expenses increased $39 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to Upton 2 engineering, procurement and construction costs (see Note O to the Third Quarter Financial Statements) and an increase in energy services costs.
Depreciation and amortization increased $8 million in the three months ended September 30, 2017 compared with the 2016 period due to an increase in solar electric production projects in operation during 2017.
Taxes, other than income taxes decreased $2 million in the three months ended September 30, 2017 compared with the 2016 period primarily due to lower gross receipts tax from the sale of the retail electric supply business.
Gain on sale of retail electric supply business was $104 million in the three months ended September 30, 2016 reflecting the sale of the Clean Energy Businesses' retail electric supply business.
Other Income (Deductions)
Other income (deductions) decreased $9 millionBusiness on March 1, 2023. Con Edison was the primary beneficiary since the power to direct the activities that most significantly impact the economics of CED Nevada Virginia was held by Con Edison. The HLBV method of accounting resulted in an immaterial amount of income/(loss) for Con Edison and the tax equity investor for the three months ended September 30, 2017 compared with the 2016 period due primarily to the gain related to the acquisition of a solar electric production investment in 2016.
Net Interest Expense
Net interest expense increased $5 million inMarch 31, 2023, and for the three months ended September 30, 2017 compared with the 2016 period due primarily to increased debt on solar electric production projects.
Income Tax Expense
Income taxes decreased $58 million in the three months ended September 30, 2017 compared with the 2016 period due primarily to lower income before income tax expense ($44 million), higher renewable energy tax credits ($March 31, 2022 were as follows. On March 1, million) and the increase to deferred state income taxes in 2016 as a result of2023, Con Edison completed the sale of substantially all of the retail electric supply business that increasedassets of the Clean Energy Businesses’ state apportionment factor on its cumulative temporary differences ($13 million).Businesses. See Note S.
Other
For Con Edison, “Other” includes parent company and consolidation adjustments.
Nine Months Ended September 30, 2017 Compared with Nine Months Ended September 30, 2016
The Companies’ results of operations in 2017 compared with 2016 were:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| CECONY | O&R | Clean Energy Businesses
| Con Edison Transmission | Other (a) | Con Edison (b) |
(Millions of Dollars) | Increases (Decreases) Amount | Increases (Decreases) Percent | Increases (Decreases) Amount | Increases (Decreases) Percent | Increases (Decreases) Amount | Increases (Decreases) Percent | Increases (Decreases) Amount | Increases (Decreases) Percent | Increases (Decreases) Amount | Increases (Decreases) Percent | Increases (Decreases) Amount | Increases (Decreases) Percent |
Operating revenues | $207 | 2.7 | % | $37 | 5.9 | % | $(538) | (53.9 | )% | $1 | — | % | $(3) | Large |
| $(296) | (3.2 | )% |
Purchased power | (106) | (8.7 | ) | (6) | (3.9 | ) | (679) | Large |
| — |
| — |
| (3) | Large |
| (794) | (38.8 | ) |
Fuel | 36 | 27.1 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 36 | 27.1 |
|
Gas purchased for resale | 155 | 71.4 |
| 20 | 62.5 |
| 89 | Large |
| — |
| — |
| — |
| — |
| 264 | 82.5 |
|
Other operations and maintenance | (113) | (5.4 | ) | 16 | 7.3 |
| 50 | 40.3 |
| 6 | Large |
| — |
| — |
| (41) | (1.7 | ) |
Depreciation and amortization | 66 | 8.0 |
| 3 | 6.0 |
| 24 | 80.0 |
| — |
| — |
| — |
| — |
| 93 | 10.3 |
|
Taxes, other than income taxes | 77 | 5.3 |
| 2 | 3.3 |
| (4) | (25.0 | ) | — |
| — |
| (1) | Large |
| 74 | 4.9 |
|
Gain on sale of retail electric supply business (2016) and solar electric production project (2017)
| — |
| — |
| — |
| — |
| (103) | Large |
| — |
| — |
| — |
| — |
| (103) | Large |
|
Operating income | 92 | 5.1 |
| 2 | 1.8 |
| (121) | (65.8 | ) | (5) | Large |
| 1 | Large |
| (31) | (1.5 | ) |
Other income less deductions | 4 | Large |
| (1) | Large |
| (2) | (5.7 | ) | 37 | Large |
| (1) | — |
| 37 | 60.7 |
|
Net interest expense | 12 | 2.7 |
| (1) | (3.6 | ) | 11 | 47.8 |
| 8 | Large |
| (2) | (18.2 | ) | 28 | 5.4 |
|
Income before income tax expense | 84 | 6.2 |
| 2 | 2.3 |
| (134) | (68.4 | ) | 24 | Large |
| 2 | (20.0 | ) | (22) | (1.3 | ) |
Income tax expense | 60 | 12.2 |
| 4 | 12.5 |
| (68) | (89.5 | ) | 10 | Large |
| (9) | Large |
| (3) | (0.5 | ) |
Net income | $24 | 2.8 | % | $(2) | (3.6 | )% | $(66) | (55.0 | )% | $14 | Large |
| $11 | Large |
| $(19) | (1.8 | )% |
| | | | | | | |
(a) | Includes parent company and consolidation adjustments.For the Three Months Ended March 31, | |
(Millions of Dollars) | 2022 | | |
(b) | Represents the consolidated results of operations of Con Edison and its businesses. |
CECONY
|
| | | | | | | | | | | | | | | |
| For the Nine Months Ended September 30, 2017 | | For the Nine Months Ended September 30, 2016 | | |
(Millions of Dollars) | Electric |
| Gas |
| Steam |
| 2017 Total | Electric |
| Gas |
| Steam |
| 2016 Total | 2017-2016 Variation |
Operating revenues | $6,079 | $1,421 | $448 | $7,948 | $6,222 | $1,113 | $406 | $7,741 | $207 |
Purchased power | 1,084 | — |
| 26 | 1,110 | 1,191 | — |
| 25 | 1,216 | (106) |
Fuel | 95 | — |
| 74 | 169 | 81 | — |
| 52 | 133 | 36 |
Gas purchased for resale | — |
| 372 | — |
| 372 | — |
| 217 | — |
| 217 | 155 |
Other operations and maintenance | 1,528 | 330 | 134 | 1,992 | 1,659 | 307 | 139 | 2,105 | (113) |
Depreciation and amortization | 690 | 137 | 64 | 891 | 645 | 118 | 62 | 825 | 66 |
Taxes, other than income taxes | 1,205 | 220 | 98 | 1,523 | 1,159 | 198 | 89 | 1,446 | 77 |
Operating income | $1,477 | $362 | $52 | $1,891 | $1,487 | $273 | $39 | $1,799 | $92 |
Electric
CECONY’s results of electric operations for the nine months ended September 30, 2017 compared with the 2016 period is as follows:
|
| | | |
| For the Nine Months Ended | |
(Millions of Dollars) | September 30, 2017 | September 30, 2016 | Variation |
Operating revenues | $6,079 | $6,222 | $(143) |
Purchased power | 1,084 | 1,191 | (107) |
Fuel | 95 | 81 | 14 |
Other operations and maintenance | 1,528 | 1,659 | (131) |
Depreciation and amortization | 690 | 645 | 45 |
Taxes, other than income taxes | 1,205 | 1,159 | 46 |
Electric operating income | $1,477 | $1,487 | $(10) |
CECONY’s electric sales and deliveries for the nine months ended September 30, 2017 compared with the 2016 period were:
|
| | | | | | | | | | | | | | |
| Millions of kWh Delivered | | Revenues in Millions (a) |
| For the Nine Months Ended | | | For the Nine Months Ended | |
Description | September 30, 2017 |
| September 30, 2016 |
| Variation | Percent Variation | | September 30, 2017 | September 30, 2016 | Variation | Percent Variation |
Residential/Religious (b) | 7,576 |
| 8,130 |
| (554 | ) | (6.8 | )% | | $1,925 | $2,017 | $(92) | (4.6 | )% |
Commercial/Industrial | 6,965 |
| 7,220 |
| (255 | ) | (3.5 | ) | | 1,393 | 1,381 | 12 | 0.9 |
|
Retail choice customers | 19,748 |
| 20,404 |
| (656 | ) | (3.2 | ) | | 2,092 | 2,114 | (22) | (1.0 | ) |
NYPA, Municipal Agency and other sales | 7,548 |
| 7,641 |
| (93 | ) | (1.2 | ) | | 483 | 474 | 9 | 1.9 |
|
Other operating revenues (c) | — |
| — |
| — |
| — |
| | 186 | 236 | (50) | (21.2 | ) |
Total | 41,837 |
| 43,395 |
| (1,558 | ) | (3.6 | )% | (d) | $6,079 | $6,222 | $(143) | (2.3 | )% |
| |
(a)Income/(Loss) attributable to tax equity investor | Revenues from electric sales are subject to a revenue decoupling mechanism, as a result of which delivery revenues generally are not affected by changes in delivery volumes from levels assumed when rates were approved.$42 |
| |
(b) Income/(Loss) attributable to tax equity investor after tax | “Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations.32 |
| |
(c)Income/(Loss) attributable to Con Edison | Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the revenue decoupling mechanism and other provisions of the company’s rate plans.39 |
| |
(d) Income/(Loss) attributable to Con Edison after tax | After adjusting for variations, primarily weather and billing days, electric delivery volumes in CECONY’s service area decreased 0.9 percent in the nine months ended September 30 2017 compared with the 2016 period. | | |
Operating revenues decreased $143 millionSempra Solar Holdings, LLC. Included in the nine months ended September 30, 2017 comparedacquisition were certain operating projects (Tax Equity Projects) with the 2016 period due primarilya noncontrolling tax equity investor to lower purchased power costs ($107 million).which a percentage of earnings, tax attributes and cash flows are allocated. The lower revenues reflected the declineTax Equity Projects were consolidated entities in surcharges for assessmentswhich Con Edison had less than a 100 percent membership interest at December 31, 2022 and fees that were collectedhas no interest in revenues from customers ($13 million).
Purchased power expenses decreased $107 million in the nine months ended September 30, 2017 compared with the 2016 period duesubsequent to lower purchased volumes ($95 million) and unit costs ($12 million).
Fuel expenses increased $14 million in the nine months ended September 30, 2017 compared with the 2016 period due to higher unit costs ($12 million) and purchased volumes from the company’s electric generating facilities ($2 million).
Other operations and maintenance expenses decreased $131 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to lower costs for pension and other postretirement benefits ($114 million), surcharges for assessments and fees that are collected in revenues from customers ($13 million), environmental costs ($17 million) and stock based compensation ($6 million), offset by higher costs for municipal infrastructure support ($20 million).
Depreciation and amortization increased $45 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher electric utility plant balances.
Taxes, other than income taxes increased $46 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher property taxes ($43 million) and the absence in 2017 of a favorable state audit settlement in 2016 ($5 million), offset by lower state and local taxes ($4 million).
Gas
CECONY’s results of gas operations for the nine months ended September 30, 2017 compared with the 2016 period is as follows:
|
| | | |
| For the Nine Months Ended | |
(Millions of Dollars) | September 30, 2017 | September 30, 2016 | Variation |
Operating revenues | $1,421 | $1,113 | $308 |
Gas purchased for resale | 372 | 217 | 155 |
Other operations and maintenance | 330 | 307 | 23 |
Depreciation and amortization | 137 | 118 | 19 |
Taxes, other than income taxes | 220 | 198 | 22 |
Gas operating income | $362 | $273 | $89 |
CECONY’s gas sales and deliveries, excluding off-system sales, for the nine months ended September 30, 2017 compared with the 2016 period were:
|
| | | | | | | | | | | | | | | | |
| Thousands of Dt Delivered | | Revenues in Millions (a) |
| For the Nine Months Ended | | | For the Nine Months Ended | |
Description | September 30, 2017 |
| September 30, 2016 |
| Variation | Percent Variation | | September 30, 2017 | September 30, 2016 |
| Variation | Percent Variation |
Residential | 39,814 |
| 35,565 |
| 4,249 |
| 11.9 | % | | $613 | $506 | $107 | 21.1 | % |
General | 23,427 |
| 20,962 |
| 2,465 |
| 11.8 |
| | 255 | 200 | 55 | 27.5 |
|
Firm transportation | 53,952 |
| 51,333 |
| 2,619 |
| 5.1 |
| | 390 | 332 | 58 | 17.5 |
|
Total firm sales and transportation | 117,193 |
| 107,860 |
| 9,333 |
| 8.7 |
| (b) | 1,258 | 1,038 | 220 | 21.2 |
|
Interruptible sales (c) | 6,526 |
| 7,587 |
| (1,061 | ) | (14.0 | ) | | 30 | 29 | 1 | 3.4 |
|
NYPA | 30,233 |
| 31,970 |
| (1,737 | ) | (5.4 | ) | | 2 | 2 | — |
| — |
|
Generation plants | 48,989 |
| 70,895 |
| (21,906 | ) | (30.9 | ) | | 19 | 19 | — |
| — |
|
Other | 16,756 |
| 16,442 |
| 314 |
| 1.9 |
| | 24 | 25 | (1) | (4.0 | ) |
Other operating revenues (d) | — |
| — |
| — |
| — |
| | 88 | — |
| 88 | — |
|
Total | 219,697 |
| 234,754 |
| (15,057 | ) | (6.4 | )% | | $1,421 | $1,113 | $308 | 27.7 | % |
| |
(a) | Revenues from gas sales are subject to a weather normalization clause and a revenue decoupling mechanism as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. |
| |
(b) | After adjusting for variations, primarily billing days, firm gas sales and transportation volumes in the company’s service area increased 6.4 percent in the nine months ended September 30, 2017 compared with the 2016 period, reflecting primarily increased volumes attributable to the growth in the number of gas customers. |
| |
(c) | Includes 3,563 thousands and 3,940 thousands of Dt for the 2017 and 2016 periods, respectively, which are also reflected in firm transportation and other. |
| |
(d) | Other gas operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plans. |
Operating revenues increased $308 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher revenues from the gas rate plan and growth in the number of customers ($133 million) and increased gas purchased for resale expense ($155 million).
Gas purchased for resale increased $155 million in the nine months ended September 30, 2017 compared with the 2016 period due to higher unit costs ($151 million) and purchased volumes ($4 million).
Other operations and maintenance expenses increased $23 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher pension and other postretirement benefits costs ($7 million), health and life expenses ($5 million), surcharges for assessments and fees that are collected in revenues from customers ($3 million) and costs for maintenance of gas mains ($2 million).
Depreciation and amortization increased $19 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher gas utility plant balances.
Taxes, other than income taxes increased $22 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher property taxes ($12 million), state and local taxes ($6 million) and payroll taxes ($3 million).
Steam
CECONY’s results of steam operations for the nine months ended September 30, 2017 compared with the 2016 period is as follows:
|
| | | |
| For the Nine Months Ended | |
(Millions of Dollars) | September 30, 2017 | September 30, 2016 | Variation |
Operating revenues | $448 | $406 | $42 |
Purchased power | 26 | 25 | 1 |
Fuel | 74 | 52 | 22 |
Other operations and maintenance | 134 | 139 | (5) |
Depreciation and amortization | 64 | 62 | 2 |
Taxes, other than income taxes | 98 | 89 | 9 |
Steam operating income | $52 | $39 | $13 |
CECONY’s steam sales and deliveries for the nine months ended September 30, 2017 compared with the 2016 period were:
|
| | | | | | | | | | | | | | |
| Millions of Pounds Delivered | | Revenues in Millions |
| For the Nine Months Ended | | | For the Nine Months Ended | |
Description | September 30, 2017 |
| September 30, 2016 |
| Variation | Percent Variation | | September 30, 2017 | September 30, 2016 | Variation | Percent Variation |
General | 364 |
| 345 |
| 19 |
| 5.5 | % | | $20 | $18 | $2 | 11.1 | % |
Apartment house | 4,248 |
| 4,251 |
| (3 | ) | (0.1 | ) | | 119 | 107 | 12 | 11.2 |
|
Annual power | 10,074 |
| 10,640 |
| (566 | ) | (5.3 | ) | | 300 | 284 | 16 | 5.6 |
|
Other operating revenues (a) | — |
| — |
| — |
| — |
| | 9 | (3) | 12 | Large |
|
Total | 14,686 |
| 15,236 |
| (550 | ) | (3.6 | )% | (b) | $448 | $406 | $42 | 10.3 | % |
| |
(a) | Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plan. |
| |
(b) | After adjusting for variations, primarily weather and billing days, steam sales and deliveries decreased 3.5 percent in the nine months ended September 30, 2017 compared with the 2016 period. |
Operating revenues increased $42 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher fuel expenses ($22 million), the weather impact on revenues ($6 million), lower regulatory reserve related to steam earnings sharing ($7 million), a property tax refund incentive ($3 million), and higher purchased power costs ($1 million).
Purchased power expenses increased $1 million in the nine months ended September 30, 2017 compared with the 2016 period due to higher unit costs ($5 million), offset by lower purchased volumes ($4 million).
Fuel expenses increased $22 million in the nine months ended September 30, 2017 compared with the 2016 period due to higher unit costs ($23 million), offset by lower purchased volumes from the company’s steam generating facilities ($1 million).
Other operations and maintenance expenses decreased $5 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to lower equipment maintenance expenses.
Depreciation and amortization increased $2 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher steam utility plant balances.
Taxes, other than income taxes increased $9 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher property taxes ($7 million) and state and local taxes ($1 million).
Net Interest Expense
Net interest expense increased $12 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher long-term debt balances in the 2017 period.
Income Tax Expense
Income taxes increased $60 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher income before income tax expense ($33 million), a decrease in tax benefits for plant-related flow through items ($27 million), lower research and development tax credits ($10 million) and a higher reserve for injuries and damages ($9 million), offset in part by lower state income taxes ($7 million), higher research and development tax credits included in Con Edison's filing of its 2016 consolidated federal tax return in September 2017 ($5 million), a decrease in bad debt expense ($2 million) and a decrease in uncertain tax positions ($1 million).
O&R
|
| | | | | | | | | | | |
| For the Nine Months Ended September 30, 2017 | | For the Nine Months Ended September 30, 2016 | | |
(Millions of Dollars) | Electric |
| Gas |
| 2017 Total | Electric |
| Gas |
| 2016 Total | 2017-2016 Variation |
Operating revenues | $495 | $172 | $667 | $497 | $133 | $630 | $37 |
Purchased power | 148 | — |
| 148 | 154 | — |
| 154 | (6) |
Gas purchased for resale | — |
| 52 | 52 | — |
| 32 | 32 | 20 |
Other operations and maintenance | 185 | 51 | 236 | 180 | 40 | 220 | 16 |
Depreciation and amortization | 38 | 15 | 53 | 37 | 13 | 50 | 3 |
Taxes, other than income taxes | 41 | 21 | 62 | 40 | 20 | 60 | 2 |
Operating income | $83 | $33 | $116 | $86 | $28 | $114 | $2 |
Electric
O&R’s results of electric operations for the nine months ended September 30, 2017 compared with the 2016 period is as follows:
|
| | | |
| For the Nine Months Ended | |
(Millions of Dollars) | September 30, 2017 | September 30, 2016 | Variation |
Operating revenues | $495 | $497 | $(2) |
Purchased power | 148 | 154 | (6) |
Other operations and maintenance | 185 | 180 | 5 |
Depreciation and amortization | 38 | 37 | 1 |
Taxes, other than income taxes | 41 | 40 | 1 |
Electric operating income | $83 | $86 | $(3) |
O&R’s electric sales and deliveries for the nine months ended September 30, 2017 compared with the 2016 period were:
|
| | | | | | | | | | | | | | |
| Millions of kWh Delivered | | Revenues in Millions (a) |
| For the Nine Months Ended | | | For the Nine Months Ended | |
Description | September 30, 2017 |
| September 30, 2016 |
| Variation |
| Percent Variation | | September 30, 2017 | September 30, 2016 | Variation | Percent Variation |
Residential/Religious (b) | 1,208 |
| 1,307 |
| (99 | ) | (7.6 | )% | | $242 | $240 | $2 | 0.8 | % |
Commercial/Industrial | 574 |
| 607 |
| (33 | ) | (5.4 | ) | | 88 | 89 | (1) | (1.1 | ) |
Retail choice customers | 2,255 |
| 2,434 |
| (179 | ) | (7.4 | ) | | 155 | 166 | (11) | (6.6 | ) |
Public authorities | 79 |
| 76 |
| 3 |
| 3.9 |
| | 7 | 6 | 1 | 16.7 |
|
Other operating revenues (c) | — |
| — |
| — |
| — |
| | 3 | (4) | 7 | Large |
|
Total | 4,116 |
| 4,424 |
| (308 | ) | (7.0 | )% | (d) | $495 | $497 | $(2) | (0.4 | )% |
| |
(a) | O&R’s New York electric delivery revenues are subject to a revenue decoupling mechanism, as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s electric sales in New Jersey are not subject to a decoupling mechanism, and as a result, changes in such volumes do impact revenues. |
| |
(b) | “Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations. |
| |
(c) | Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s electric rate plan. |
| |
(d) | After adjusting for weather and other variations, electric delivery volumes in O&R’s service area decreased 2.2 percent in the nine months ended September 30, 2017 compared with the 2016 period. |
Operating revenues decreased $2 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to lower purchased power expense ($6 million) and lower revenues from rental property ($1 million), offset by higher revenues from the New York electric rate plan ($6 million).
Purchased power expenses decreased $6 million in the nine months ended September 30, 2017 compared with the 2016 period due to lower purchased volumes ($5 million) and unit costs ($1 million).
Other operations and maintenance expenses increased $5 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to operating costs related to weather events in 2017 ($2 million), higher surcharges for assessments and fees that are collected in revenues from customers ($1 million) and a higher reserve for injuries and damages ($1 million).
Depreciation and amortization increased $1 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher electric utility plant balances.
Taxes, other than income taxes increased $1 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher property taxes.
Gas
O&R’s results of gas operations for the nine months ended September 30, 2017 compared with the 2016 period is as follows:
|
| | | |
| For the Nine Months Ended | |
(Millions of Dollars) | September 30, 2017 | September 30, 2016 | Variation |
Operating revenues | $172 | $133 | $39 |
Gas purchased for resale | 52 | 32 | 20 |
Other operations and maintenance | 51 | 40 | 11 |
Depreciation and amortization | 15 | 13 | 2 |
Taxes, other than income taxes | 21 | 20 | 1 |
Gas operating income | $33 | $28 | $5 |
O&R’s gas sales and deliveries, excluding off-system sales, for the nine months ended September 30, 2017 compared with the 2016 period were:
|
| | | | | | | | | | | | | | | | | |
| Thousands of Dt Delivered | | Revenues in Millions (a) |
| For the Nine Months Ended | | | For the Nine Months Ended | |
Description | September 30, 2017 |
| September 30, 2016 |
| Variation | Percent Variation | | September 30, 2017 |
| September 30, 2016 |
| Variation | Percent Variation |
Residential | 5,556 |
| 5,266 |
| 290 |
| 5.5 | % | | $79 | $55 | $24 | 43.6 | % |
General | 1,447 |
| 1,224 |
| 223 |
| 18.2 |
| | 16 | 10 | 6 | 60.0 |
|
Firm transportation | 6,543 |
| 7,188 |
| (645 | ) | (9.0 | ) | | 50 | 49 | 1 | 2.0 |
|
Total firm sales and transportation | 13,546 |
| 13,678 |
| (132 | ) | (1.0 | ) | (b) | 145 | 114 | 31 | 27.2 |
|
Interruptible sales | 2,966 |
| 3,020 |
| (54 | ) | (1.8 | ) | | 5 | 2 | 3 | Large |
|
Generation plants | 6 |
| 15 |
| (9 | ) | (60.0 | ) | | — |
| — |
| — |
| — |
|
Other | 589 |
| 583 |
| 6 |
| 1.0 |
| | 1 | — |
| 1 | — |
|
Other gas revenues | — |
| — |
| — |
| — |
| | 21 | 17 | 4 | 23.5 | % |
Total | 17,107 |
| 17,296 |
| (189 | ) | (1.1 | )% | | $172 | $133 | $39 | 29.3 | % |
| |
(a) | Revenues from New York gas sales are subject to a weather normalization clause and a revenue decoupling mechanism as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. |
| |
(b) | After adjusting for weather and other variations, total firm sales and transportation volumes increased 0.1 percent in the nine months ended September 30, 2017 compared with 2016 period. |
Operating revenues increased $39 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to an increase in gas purchased for resale ($20 million) and higher revenues from the New York gas rate plan ($14 million).
Gas purchased for resale increased $20 million in the nine months ended September 30, 2017 compared with the 2016 period due to higher purchased volumes ($12 million) and unit costs ($8 million).
Other operations and maintenance expenses increased $11 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher pension costs.
Depreciation and amortization increased $2 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher gas utility plant balances.
Taxes, other than income taxes increased $1 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher property taxes.
Income Tax Expense
Income taxes increased $4 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to higher income before income tax expense ($1 million), a decrease in tax benefits for plant-related flow through items ($1 million) and the absence in 2017 of a tax benefit from a corporate-owned life insurance policy in 2016 ($2 million).
Clean Energy Businesses
The Clean Energy Businesses’ results of operations for the nine months ended September 30, 2017 compared with the 2016 period is as follows:
|
| | | |
| For the Nine Months Ended | |
(Millions of Dollars) | September 30, 2017 | September 30, 2016 | Variation |
Operating revenues | $460 | $998 | $(538) |
Purchased power | (3) | 676 | (679) |
Gas purchased for resale | 161 | 72 | 89 |
Other operations and maintenance | 174 | 124 | 50 |
Depreciation and amortization | 54 | 30 | 24 |
Taxes, other than income taxes | 12 | 16 | (4) |
Gain on sale of retail electric supply business (2016) and solar electric production project (2017) (a) | (1) | (104) | 103 |
Operating income | $63 | $184 | $(121) |
(a) See Note O to the Third Quarter Financial Statements.
Operating revenues decreased $538 million in the nine months ended September 30, 2017 compared with the 2016 period, due primarily to lower electric retail revenues of $781 million from the sale of the retail electric supply business in September 2016. Renewable revenues increased $112 million due primarily to an increase in renewable electric production projects in operation and revenues from the engineering, procurement and construction of Upton 2 (see Note O to the Third Quarter Financial Statements). Energy services revenues increased $21 million. Wholesale revenues increased $105 million due to higher sales volumes. Net mark-to-market values decreased $6 million of which $11 million in losses are reflected in purchased power costs and $5 million in gains are reflected in revenues.
Purchased power expenses decreased $679 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to lower electric costs due to the sale of the retail electric supply business in September 2016 ($689 million) offset by changes in mark-to-market values ($11 million).
Gas purchased for resale increased $89 million in the nine months ended September 30, 2017 compared with the 2016 period due to higher purchased volumes.
Other operations and maintenance expenses increased $50 million in the nine months ended September 30, 2017 compared with the 2016 period due to Upton 2 engineering, procurement and construction costs (see Note O to the Third Quarter Financial Statements) and an increase in energy services costs.
Depreciation and amortization increased $24 million in the nine months ended September 30, 2017 compared with the 2016 period due to an increase in solar electric production projects in operation during 2017.
Taxes, other than income taxes decreased $4 million in the nine months ended September 30, 2017 compared with the 2016 period due to lower gross receipts tax from the sale of the retail electric supply business in September 2016.
Gain on sale of retail electric supply business was $104 million in the nine months ended September 30, 2016 reflecting the sale of the Clean Energy Businesses' retailBusinesses on March 1, 2023. Con Edison was the primary beneficiary since the power to direct the activities that most significantly impact the economics of the Tax Equity Projects was held by Con Edison. Electricity generated by the Tax Equity Projects is sold to utilities and municipalities pursuant to long-term power purchase agreements. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S. The HLBV method of accounting resulted in an immaterial amount of income/(loss) for Con Edison and the tax equity investor for the three months ended March 31, 2023, and for the three months ended March 31, 2022 were as follows.
| | | | | | | |
| For the Three Months Ended March 31, | |
(Millions of Dollars) | 2022 | | |
| | | |
Income/(Loss) attributable to tax equity investor | $(5) | | |
Income/(Loss) attributable to tax equity investor, after tax | (4) | | |
Income/(Loss) attributable to Con Edison | 10 | | |
Income/(Loss) attributable to Con Edison, after tax | 7 | | |
At December 31, 2022, Con Edison’s consolidated balance sheet included the following amounts associated with its VIEs:
| | | | | | | | | | | |
| Tax Equity Projects | |
| Great Valley Solar (c)(d) | Copper Mountain - Mesquite Solar (c)(e) | CED Nevada Virginia (c)(f) |
(Millions of Dollars) | 2022 | 2022 | 2022 |
Assets held for sale (a) | $305 | $580 | $686 |
| | | |
| | | |
Total assets (a) | $305 | $580 | $686 |
| | | |
Liabilities held for sale (b) | 20 | 81 | 331 |
| | | |
Total liabilities (b) | $20 | $81 | $331 |
(a)The assets of the Tax Equity Projects and CED Nevada Virginia represent assets of a consolidated VIE that can be used only to settle obligations of the consolidated VIE. Amounts shown for 2022 are included in current assets held for sale on Con Edison's consolidated balance sheet as of December 31, 2022. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T. For the disposal of the noncontrolling interest, see Con Edison's Consolidated Statement of Equity.
(b)The liabilities of the Tax Equity Projects and CED Nevada Virginia represent liabilities of a consolidated VIE for which creditors do not have recourse to the general credit of the primary beneficiary. Amounts shown for 2022 are included in current liabilities held for sale on Con
Edison's consolidated balance sheet as of December 31, 2022. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T. For the disposal of the noncontrolling interest, see Con Edison's Consolidated Statement of Equity.
(c)Con Edison did not provide any financial or other support during the year that was not previously contractually required.
(d)Great Valley Solar consists of the Great Valley Solar 1, Great Valley Solar 2, Great Valley Solar 3 and Great Valley Solar 4 projects, for which the noncontrolling interest of the tax equity investor was $67 million at December 31, 2022.
(e)Copper Mountain - Mesquite Solar consists of the Copper Mountain Solar 4, Mesquite Solar 2 and Mesquite Solar 3 projects for which the noncontrolling interest of the tax equity investor was $94 million at December 31, 2022.
(f)CED Nevada Virginia consists of the Copper Mountain Solar 5, Battle Mountain Solar and Water Strider Solar projects for which the noncontrolling interest of the tax equity investor was $39 million at December 31, 2022.
Note Q – Related Party Transactions
The NYSPSC generally requires that the Utilities and Con Edison’s other subsidiaries be operated as separate entities. The Utilities and the other subsidiaries are required to have separate operating employees and operating officers of the Utilities may not be operating officers of the other subsidiaries. The Utilities may provide administrative and other services to, and receive such services from, Con Edison and its other subsidiaries only pursuant to cost allocation procedures approved by the NYSPSC. Transfers of assets between the Utilities and Con Edison or its other subsidiaries may be made only as approved by the NYSPSC. The debt of the Utilities is to be raised directly by the Utilities and not derived from Con Edison. Without the prior permission of the NYSPSC, the Utilities may not make loans to, guarantee the obligations of, or pledge assets as security for the indebtedness of Con Edison or its other subsidiaries. The NYSPSC limits the dividends that the Utilities may pay Con Edison to not more than 100 percent of their respective income available for dividends calculated on a two–year rolling average basis. Excluded from the calculation of “income available for dividends” are non-cash charges to income resulting from accounting changes or charges to income resulting from significant unanticipated events. The restriction also does not apply to dividends paid in order to transfer to Con Edison proceeds from major transactions, such as asset sales, or to dividends reducing each utility subsidiary’s equity ratio to a level appropriate to its business risk. As a result, substantially all of the net assets of CECONY and O&R ($18,892 million and $1,036 million, respectively), at March 31, 2023, are considered restricted net assets. The NYSPSC may impose additional measures to separate, or “ring fence,” the Utilities from Con Edison and its other subsidiaries.
The costs of administrative and other services provided by CECONY to, and received by it from, Con Edison and its other subsidiaries for the three months ended March 31, 2023 and 2022 were as follows:
| | | | | | | | |
| For the Three Months Ended March 31, |
| CECONY (a) |
(Millions of Dollars) | 2023 | 2022 |
Cost of services provided | $33 | | $33 |
Cost of services received | $19 | | $17 |
(a) On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T.In addition, CECONY and O&R have joint gas supply arrangements in connection with which CECONY sold to O&R, $33 million and $45 million of natural gas for the three months ended March 31, 2023 and 2022, respectively. These amounts are net of the effect of related hedging transactions.
At March 31, 2023 and December 31, 2022, CECONY's net receivable (payable) to Con Edison for income taxes was $69 million and $(89) million, respectively.
The Utilities perform work and incur expenses on behalf of NY Transco, a company in which Con Edison Transmission has a 45.7 percent equity interest. The Utilities bill NY Transco for such work and expenses in accordance with established policies. For the three months ended March 31, 2023 and 2022, the amounts billed by the Utilities to NY Transco were $4 million and a $1 million amount, respectively.
CECONY has a 20-year transportation contract with Mountain Valley Pipeline, LLC (MVP) for 250,000 dekatherms per day of capacity. CET owns an equity interest in MVP. See "Investments - Investment in Mountain Valley Pipeline, LLC (MVP)" in Note A. In October 2017, the Environmental Defense Fund and the Natural Resource Defense Council requested the NYSPSC to prohibit CECONY from recovering costs under its MVP contract unless CECONY can demonstrate that the contract is in the public interest. CECONY advised the NYSPSC that it would respond to the request if the NYSPSC opened a proceeding to consider this request. For the three months ended March 31, 2023 and 2022, CECONY incurred no costs under the contract.
FERC has authorized CECONY to lend funds to O&R for a period of not more than 12 months, in an amount not to exceed $250 million, at prevailing market rates. At March 31, 2023 and December 31, 2022 there were no outstanding loans to O&R.
The Clean Energy Businesses had financial electric supply business.
Other Income (Deductions)
Other income (deductions) decreasedcapacity contracts with CECONY and O&R. For the three months ended March 31, 2023 and 2022, the Clean Energy Businesses realized an immaterial gain and $2 million ingain respectively, under these contracts. On March 1, 2023, Con Edison completed the nine months ended September 30, 2017 compared withsale of substantially all of the 2016 period due primarily to earnings from equity investments.
Net Interest Expense
Net interest expense increased $11 million inassets of the nine months ended September 30, 2017 compared with the 2016 period due primarily to increased debt on solar electric production projects.
Income Tax Expense
Income taxes decreased $68 million in the nine months ended September 30, 2017 compared with the 2016 period due primarily to lower income before income tax expense ($54 million), higher renewable energy tax credits ($1 million) and the increase to deferred state income taxes in 2016 asClean Energy Businesses. As a result of the sale, of the retail electric supply business that increased the Clean Energy Businesses’Businesses are no longer recognized as a related party. See Note S and Note T.
Note R – New Financial Accounting Standards
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04). In 2017, the United Kingdom’s Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit the London Interbank Offered Rate (LIBOR), a benchmark interest rate referenced in a variety of agreements, after 2021. The United Kingdom's Financial Conduct Authority ceased publication of U.S. Dollar LIBOR after December 31, 2021 for one-week and two-month U.S. Dollar LIBOR tenors, and expects to cease publishing after June 30, 2023 for all other U.S. Dollar LIBOR tenors. ASU 2020-04 provides entities with optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. In January 2021, the FASB issued amendments to the guidance through ASU 2021-01 to include all contract modifications and hedging relationships affected by reference rate reform, including those that do not directly reference LIBOR or another reference rate expected to be discontinued, and clarify which optional expedients may be applied to them. As the Companies continue to modify contracts that contain references to LIBOR to allow for the use of an alternative rate, they have applied the practical expedient to not assess each change for a contract modification. The guidance can be applied prospectively. The optional relief is temporary and generally cannot be applied to contract modifications and hedging relationships entered into or evaluated after December 31, 2022. The Companies do not expect the new guidance to have a material impact on their financial position, results of operations and liquidity.
In March 2023, the FASB issued amendments to the guidance on accounting for Investments—Equity Method and Joint Ventures (Topic 323) through ASU 2023-02. The amendments would expand the use of the proportional amortization method of income recognition. The Companies do not expect the new guidance to have a material impact on their financial position, results of operations and liquidity.
Note S – Dispositions
During the first nine months of 2022, Con Edison considered strategic alternatives with respect to the Clean Energy Businesses. On October 1, 2022, following the conclusion of such review and to allow for continued focus on the Utilities and their clean energy transition, Con Edison entered into a purchase and sale agreement pursuant to which Con Edison agreed to sell the Clean Energy Businesses to RWE Renewables Americas, LLC, a subsidiary of RWE for a total of $6,800 million, subject to closing adjustments. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses to RWE for $3,993 million. The preliminary purchase price at closing was adjusted (i) upward for certain cash and cash equivalents, (ii) downward for certain indebtedness and debt-like items, (iii) downward for certain transaction expenses, (iv) downward to the extent that the net working capital varied from a set target, (v) upward to the extent that capital expenditures incurred prior to the closing of the transaction varied from a set budget, and (vi) downward by the value allocated to Broken Bow II, a project that was not able to be conveyed to RWE upon closing of the transaction. The final purchase price is subject to customary adjustments for timing differences and a final valuation report, among other factors; the process to finalize the purchase price is ongoing. The transaction was completed at arm’s length and RWE was not, and will not be, considered a related party to Con Edison.
Con Edison's preliminary gain on the sale of the Clean Energy Businesses was $855 million ($791 million, after tax) for the three months ended March 31, 2023 and is subject to true-up for the finalization adjustments described above. The portion of the gain attributable to the non-controlling interest retained in certain tax-equity projects was not material. The sale included all assets, operations and projects of the Clean Energy Businesses with the exception of tax equity interests in three projects, described below, and one deferred project, Broken Bow II, a 75MW nameplate capacity wind power project located in Nebraska. See Note T. Transfer of the project is dependent on one outstanding counterparty consent, and if and when such consent is obtained within two years of the sale of the Clean Energy Businesses, i.e., by February 28, 2025, the project will transfer. RWE Renewables Americas, LLC is operating the facility on behalf of Con Edison pursuant to certain service agreements, for which the fees are not material.
Con Edison retained the Clean Energy Businesses' tax equity investment interest in the Crane solar project and another tax equity investment interest in two solar projects located in Virginia. These tax equity partnerships produce renewable energy tax credits that can be used to reduce Con Edison’s federal income tax in the year in which the projects are placed in service. These tax credits would be subject to recapture, in whole or in part, if the assets were sold within a five-year period beginning on the date on which the assets are placed in service. Con Edison will continue to employ HLBV accounting for its interests in these tax equity partnerships. The combined carrying value of the retained tax equity interests is approximately $20 million.
Con Edison has also retained any post-sale deferred income taxes (federal and state apportionment factorincome taxes, including tax attributes), any valuation allowances associated with the deferred tax assets, all current federal taxes and New York state taxes and the estimated liability for uncertain tax positions. The unamortized deferred investment tax credits of the Clean Energy Businesses were recognized in full upon the completion of the sale of the Clean Energy Businesses.
Concurrent with entering into the purchase and sale agreement, Con Edison incurred costs in the normal course of the sale process. Transaction costs of $48 million ($35 million after-tax) were recorded in 2022, and $11 million ($8 million after-tax) were recorded in the first quarter of 2023. Also, depreciation and amortization expense of approximately $41 million ($28 million after-tax) were not recorded on its cumulative temporary differences ($13 million)the assets of the Clean Energy Businesses in the first quarter of 2023 through the closing of the transaction.
Following the sale, of the Clean Energy Businesses and pursuant to a reimbursement and indemnity agreement with RWE, Con Edison remains responsible for certain potential costs related to a battery storage project located in Imperial County, California. Con Edison's exposure under the agreement could range up to approximately $172 million. As of March 31, 2023, no amounts were recorded as liabilities on Con Edison's consolidated balance sheet related to this agreement. Con Edison is entitled to approximately $61 million of proceeds from this battery storage project, of which $49 million was recorded as unbilled contract revenue as of March 31, 2023. See Note K.
The following table shows the pre-tax operating income for the Clean Energy Businesses for the three months ended March 31, 2023 and 2022. The 2023 period shown is through the date of the sale of the Clean Energy Businesses.
| | | | | | | | |
| For the Three Months Ended March 31, |
(Millions of Dollars) | 2023 | 2022 |
Pre-tax operating income | $25 | $130 |
Pre-tax operating income, excluding non-controlling interest | 21 | 82 |
Note T – Assets and Liabilities Held-for-Sale
On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S. The sale included all assets, operations and projects of the Clean Energy Businesses with the exception of tax equity interests in three projects and one deferred project, Broken Bow II, a 75 MW nameplate capacity wind power project located in Nebraska. Transfer of the project from Con Edison to RWE is dependent on one outstanding counterparty consent, and if and when such consent is obtained within two years of the sale of the Clean Energy Businesses, i.e., by February 28, 2025, the project will transfer. RWE Renewables Americas, LLC is operating the facility on behalf of Con Edison pursuant to certain service agreements for which the fees are not material.
At March 31, 2023, the carrying amounts of the major classes of assets and liabilities of Broken Bow II that are expected to be sold are presented on a held-for-sale basis, and accordingly exclude net deferred tax liability balances, as follows:
| | | | | |
(Millions of Dollars) | March 31, 2023 |
ASSETS | |
CURRENT ASSETS | |
| |
| |
| |
| |
| |
Restricted cash | $2 |
| |
| |
Other current assets | 5 |
TOTAL CURRENT ASSETS | 7 |
| |
NON-UTILITY PLANT | |
Non-utility property, net accumulated depreciation | 76 |
| |
NET PLANT | 76 |
OTHER NONCURRENT ASSETS | |
| |
Intangible assets, less accumulated amortization | 72 |
Operating lease right-of-use asset | 7 |
| |
| |
TOTAL OTHER NONCURRENT ASSETS | 79 |
TOTAL ASSETS | $162 |
| | | | | |
(Millions of Dollars) | March 31, 2023 |
LIABILITIES | |
CURRENT LIABILITIES | |
Long-term debt due within one year | $2 |
| |
| |
| |
| |
Operating lease liabilities | 2 |
| |
Other current liabilities | 1 |
TOTAL CURRENT LIABILITIES | 5 |
NONCURRENT LIABILITIES | |
Asset retirement obligations | 2 |
| |
Operating lease liabilities | 5 |
| |
TOTAL NONCURRENT LIABILITIES | 7 |
LONG-TERM DEBT | 62 |
TOTAL LIABILITIES | $74 |
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
This combined management’s discussion and analysis of financial condition and results of operations (MD&A) relates to the consolidated financial statements (the First Quarter Financial Statements) included in this report of two separate registrants: Consolidated Edison, Inc. (Con Edison) and Consolidated Edison Company of New York, Inc. (CECONY). As used in this report, the term the “Companies” refers to Con Edison and CECONY. CECONY is a subsidiary of Con Edison and, as such, information in this management’s discussion and analysis about CECONY applies to Con Edison.
This MD&A should be read in conjunction with the First Quarter Financial Statements and the notes thereto and the
MD&A in Item 7 of the Companies’ combined Annual Report on Form 10-K for the year ended December 31, 2022
(File Nos.1-14514 and 1-01217, the Form 10-K).
Information in any item of this report referred to in this discussion and analysis is incorporated by reference herein. The use of terms such as “see” or “refer to” shall be deemed to incorporate by reference into this discussion and analysis the information to which reference is made.
Con Edison, incorporated in New York State in 1997, is a holding company that owns all of the outstanding common stock of CECONY, Orange and Rockland Utilities, Inc. (O&R) and Con Edison Transmission, Inc. As used in this report, the term the “Utilities” refers to CECONY and O&R.
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| | | Con Edison | | | | | | | |
| | | | | | | | | | | |
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CECONY | | O&R | | | | | Con Edison Transmission |
| | •RECO | | | | |
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Con Edison’s principal business operations are those of CECONY, O&R and Con Edison Transmission. CECONY’s principal business operations are its regulated electric, gas and steam delivery businesses. O&R’s principal business operations are its regulated electric and gas delivery businesses. Con Edison Transmission invests in electric transmission projects and manages both electric and gas assets while seeking to develop electric transmission projects. See "Investments" in Note A to the First Quarter Financial Statements. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.
Con Edison seeks to provide shareholder value through continued dividend growth, supported by earnings growth in regulated utilities and contracted electric and gas assets. The company invests to provide reliable, resilient, safe and clean energy critical for its NY customers. Con Edison is a responsible neighbor, helping the communities it serves become more sustainable.
In addition to the Companies’ material contingencies described in Notes B, G and H to the First Quarter Financial Statements, the Companies’ management considers the following events, trends, and uncertainties to be important to understanding the Companies’ current and future financial condition.
Clean Energy Goals
The success of the Companies’ efforts to meet federal, state and city clean energy policy goals and the impact of energy consumers' efforts to meet such goals on CECONY’s electric, gas and steam businesses and O&R’s electric and gas businesses may impact the Companies’ future financial condition. The Utilities expect electric demand to increase and gas and steam usage to decrease in their service territories as federal, state and local laws and
policies are enacted and implemented that aim to reduce the carbon intensity of the energy that is consumed. In particular, the long-term future of the Utilities’ gas businesses depends upon the role that natural gas or other gaseous fuels will play in facilitating New York State’s and New York City’s climate goals. In addition, the impact and costs of climate change on the Utilities’ systems and the success of the Utilities’ efforts to increase system reliability and manage service interruptions resulting from severe weather may impact the Companies’ future financial condition, results of operations and liquidity.
CECONY Steam Rate Plan
In November 2022, as updated in February 2023, CECONY filed a request with the NYSPSC for a steam rate increase of $141 million, effective November 2023. The filing reflects a return on common equity of 10 percent and a common equity ratio of 50 percent and requests a new mechanism for decoupling revenues from steam consumption. In March 2023, the NYSDPS submitted testimony in the NYSPSC proceeding that supports a steam rate increase of $94 million reflecting, among other things, a 9 percent return on common equity and a common equity ratio of 48 percent. The NYSDPS testimony does not support CECONY’s request for a new mechanism for decoupling revenues from steam consumption. CECONY’s future earnings will depend on the rates authorized in, and the other provisions of, its November 2023 steam rate plan and CECONY’s ability to operate its businesses in a manner consistent with such rate plan. Therefore, the outcome of CECONY’s rate request that requires approval by the NYSPSC will impact the Companies’ future financial condition, results of operations and liquidity. See “Utility Regulation – State Utility Regulation – Rate Plans” and “Rate Plans” in Note B to the First Quarter Financial Statements.
Con Edison Transmission
Con Edison Transmission has taken steps to realign its portfolio to focus on electric transmission rather than gas by completing the sale of its 50 percent interest in Stagecoach in 2021. During 2020 and 2021, Con Edison Transmission recorded impairments on its investment in Mountain Valley Pipeline, LLC (MVP). Any future impairments of Con Edison Transmission’s investment in MVP may impact Con Edison’s future financial condition and results of operations. Con Edison Transmission is pursuing opportunities and participating in competitive solicitations to develop electric transmission projects that will deliver offshore wind energy to high voltage electric grids in NY, through its NY Transco partnership, and in NJ. The success of Con Edison Transmission’s efforts in these competitive solicitations and to grow its electric transmission portfolio may impact Con Edison’s future capital requirements. See “Investments” in Note A to the First Quarter Financial Statements.
CECONY
Electric
CECONY provides electric service to approximately 3.6 million customers in all of New York City (except a part of Queens) and most of Westchester County, an approximately 660 square mile service area with a population of more than nine million.
Gas
CECONY delivers gas to approximately 1.1 million customers in Manhattan, the Bronx, parts of Queens and most of Westchester County.
Steam
CECONY operates the largest steam distribution system in the United States by producing and delivering approximately 16,408 MMlb of steam annually to approximately 1,527 customers in parts of Manhattan.
O&R
Electric
O&R and its utility subsidiary, Rockland Electric Company (RECO) (together referred to herein as O&R) provide electric service to approximately 0.3 million customers in southeastern New York, "NY", and northern New Jersey "NJ", an approximately 1,300 square mile service area.
Gas
O&R delivers gas to over 0.1 million customers in southeastern NY.
Coronavirus Disease 2019 (COVID-19) Impacts
The Coronavirus Disease 2019 (COVID-19) pandemic resulted in changes in governmental and regulatory policy and contributed to an economic slowdown in the Companies’ service territories. The decline in business activity in
the Companies’ service territories resulted in a slower recovery of cash from outstanding customer accounts receivable balances, material increases in customer accounts receivable balances, increases to the allowance for uncollectible accounts, and may result in increases to write-offs and recoveries of customer accounts. The extent to which the Companies’ are able to recover cash for outstanding customer accounts receivable balances and the amount of write-offs of customer accounts, may impact Con Edison’s future financial condition, results of operations and liquidity. See “Coronavirus Disease 2019 (COVID-19) Impacts” below and “COVID-19 Regulatory Matters” in Note B to the First Quarter Financial Statements.
Certain financial data of Con Edison’s businesses are presented below:
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| For the Three Months Ended March 31, 2023 | | At March 31, 2023 |
(Millions of Dollars, except percentages) | Operating Revenues | Net Income for Common Stock | | | Assets |
CECONY | $3,953 | 90 | % | $604 | 42 | % | | | | | $57,653 | 91 | % |
O&R | 321 | 7 | | 31 | 2 | | | | | | 3,504 | 6 | |
Total Utilities | $4,274 | 97 | % | $635 | 44 | % | | | | | $61,157 | 97 | % |
Clean Energy Businesses (a) | 129 | 3 | | 22 | 2 | | | | | | — | — | |
Con Edison Transmission | 1 | — | | 2 | — | | | | | | 352 | 1 | |
Other (b) | (1) | | — | | 774 | 54 | | | | | | 1,295 | 2 | |
Total Con Edison | $4,403 | 100 | % | $1,433 | 100 | % | | | | | $62,804 | 100 | % |
(a)Net income for common stock from the Clean Energy Businesses for the three months ended March 31, 2023 includes $(9) million net after-tax mark-to-market effects. Net income for common stock from the Clean Energy Businesses for the three months ended March 31, 2023 also includes $2 million (after-tax) net of the effects of HLBV accounting for tax equity investments in certain renewable electric projects. Depreciation and amortization expenses on their assets of $31 million (after-tax) were not recorded for the three months ended March 31, 2023. See "Assets and Liabilities Held for Sale" in Note A, Note S and Note T to the First Quarter Financial Statements.
(b)Other includes the parent company, Con Edison’s tax equity investments, the deferred project held for sale and consolidation adjustments. Net income for common stock for the three months ended March 31, 2023 includes an immaterial amount of income tax impact on the net after-tax mark-to-market effects. Net income for common stock for the three months ended March 31, 2023 also includes an immaterial net of income tax impact on the effects of HLBV accounting for tax equity investments in certain renewable electric projects. Net income for common stock for the three months ended March 31, 2023 also includes $(9) million of transaction costs and other accruals related to the sale of the Clean Energy Businesses (net of tax). Impact of the sale of the Clean Energy Businesses on the changes in state apportionments (net of federal taxes) is $(16) million. Depreciation and amortization expenses on the assets of the Clean Energy Businesses of $(3) million (after-tax) were not recorded for the three months ended March 31, 2023. Net income for common stock for the three months ended March 31, 2023 includes $791 million (after-tax) for the gain on the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.
Inflation Reduction Act
On August 16, 2022, the Inflation Reduction Act of 2022 (the Act) was signed into law and included a new 15 percent Corporate Alternative Minimum Tax (CAMT). Under the Act, a corporation will be subject to the CAMT if its average annual Adjusted Financial Statement Income (AFSI) for the three taxable year period ending prior to the taxable year exceeds $1,000 million, and will apply to tax years beginning after December 31, 2022. Based on management’s preliminary calculations, Con Edison and CECONY do not expect to be subject to the CAMT in 2023 and 2024 but are expected to be subject to the CAMT in subsequent years. However, the provisions of the CAMT are not expected to have a material impact on the Companies’ financial position, results of operations and liquidity.
Accounting Considerations
Due to the COVID-19 pandemic and subsequent New York State on PAUSE and related executive orders (that have since been lifted), decline in business, bankruptcies, layoffs and furloughs, among other factors, both commercial and residential customers have had and may continue to have increased difficulty paying their utility bills. In June 2020, the state of NY enacted a law prohibiting NY utilities, including CECONY and O&R, from disconnecting residential customers, and starting in May 2021 small business customers, during the COVID-19 state of emergency, that ended in June 2021. In addition, such prohibitions were in effect until December 21, 2021 for residential and small business customers who experienced a change in financial circumstances due to the COVID-19 pandemic.
CECONY and O&R have existing allowances for uncollectible accounts established against their customer accounts receivable balances that are reevaluated each quarter and updated accordingly. Changes to the Utilities’ reserve balances that result in write-offs of customer accounts receivable balances are not reflected in rates during the term of the current rate plans.
For the three months ended March 31, 2023, CECONY issued total credits of $343.6 million and O&R issued total credits of $2.2 million towards reducing customers’ accounts receivable balances pursuant to a Phase 2 COVID-19 arrears assistance programs. For the year ended December 31, 2022, CECONY and O&R issued total credits of $359.9 million and $6.1 million, respectively, towards reducing customers’ accounts receivable balances pursuant to COVID-19 arrears assistance programs. See "COVID-19 Regulatory Matters" in Note B to the First Quarter Financial Statements.
CECONY’s "accounts receivable – customers" balance (net of allowance for uncollectible accounts) decreased from $2,099 million at December 31, 2022 to $1,939 million at March 31, 2023. O&R’s "accounts receivable – customers" balance (net allowance for uncollectible accounts) increased from $93 million at December 31, 2022 to $101 million at March 31, 2023. The amount of the customer accounts receivable balances that are over 60 days in arrears for CECONY and O&R decreased from $1,308 million and $22 million, respectively, as of December 31, 2022 to $930 million and $16 million, respectively, as of March 31, 2023. CECONY’s and O&R’s allowances for uncollectible customer accounts reserve decreased from $314 million and $8 million at December 31, 2022 to $236 million and $7 million at March 31, 2023 respectively. During the first three months of 2023, the potential economic impact of the COVID-19 pandemic and the COVID-19 arrears assistance programs, were considered in forward-looking projections related to write-off and recovery rates, resulting in changes to the customer allowance for uncollectible accounts as detailed herein.
The Companies test goodwill for impairment at least annually or whenever there is a triggering event, and test long-lived and intangible assets for recoverability when events or changes in circumstances indicate that the carrying value of long-lived or intangible assets may not be recoverable. The Companies identified no triggering events or changes in circumstances related to the COVID-19 pandemic that would indicate that the carrying value of goodwill, long-lived or intangible assets may not be recoverable at March 31, 2023.
NY Legislation
In April 2021, NY passed a law that increased the corporate franchise tax rate on business income from 6.5 percent to 7.25 percent, retroactive to January 1, 2021, for taxpayers with taxable income greater than $5 million. The law also reinstated the business capital tax at 0.1875 percent, not to exceed a maximum tax liability of $5 million per taxpayer. NY requires a corporate franchise taxpayer to calculate and pay the highest amount of tax under the three alternative methods: a tax on business income; a tax on business capital; or a fixed dollar minimum. The provisions to increase the corporate franchise tax rate and reinstate a capital tax were scheduled to expire after 2023. In May 2023, NY passed a law that extended the increase in the corporate franchise tax rate from 6.5% to 7.25% for another 3-year period, through tax year 2026 and extended the business capital tax through tax year 2026. NY also passed a law establishing a permanent rate of 30% for the metropolitan transportation business tax surcharge. As a result of the sale of the Clean Energy Businesses in 2023, Con Edison has NY State taxable income in excess of $5 million after using its entire NY state NOL carryforward, and therefore, the group is subject to the higher 7.25 percent rate (9.425 percent with the surcharge rate) on its taxable income for tax year 2023. The Companies are evaluating the impact of these provisions on their financial position, results of operations and liquidity for tax years after 2023.
In addition, the April 2021 law created a program that allows eligible residential renters in NY who require assistance with rent and utility bills to have up to twelve months of electric and gas utility bill arrears forgiven, provided that such arrears were accrued on or after March 13, 2020. The program will be administered by the State Office of Temporary and Disability Assistance (OTDA) in coordination with the NYSDPS and the NYSPSC (the OTDA Program). Under the OTDA Program, CECONY and O&R would qualify for a refundable tax credit for NY gross-receipts tax equal to the amount of arrears waived by the Utilities in the year that the arrears are waived and certified by the NYSPSC. See "COVID-19 Regulatory Matters” in Note B to the First Quarter Financial Statements.
Liquidity and Financing
The Companies monitor the financial markets closely, including borrowing rates and daily cash collections. Inflationary pressure and higher interest rates have increased the amount of capital needed by the Utilities and the costs of such capital. See Note C and Note D to the First Quarter Financial Statements and "Interest Rate Risk," below.
The decline in business activity in the Utilities’ service territory due to the COVID-19 pandemic and subsequent New York State on PAUSE and related executive orders (that have since been lifted) resulted in a slower recovery in cash of outstanding customer accounts receivable balances. Increases in electric and gas commodity prices during 2022 also contributed to a slower recovery of cash from outstanding customer accounts receivable balances. The Utilities use derivative instruments to hedge price fluctuations for the purchase of electricity and gas. Volatility in electric and gas commodity prices that lead to the posting of cash collateral with counterparties could negatively
impact the Utilities’ liquidity. See "COVID-19 Regulatory Matters" in Note B to the First Quarter Financial Statements and “Financial and Commodity Market Risks – Commodity Price Risk,” below.
In 2022 and 2023, New York State and the NYSPSC implemented COVID-19 arrears assistance programs that provided credits and established surcharge recovery mechanisms towards reducing the arrears balances of low-income electric and gas customers of CECONY and O&R. See "COVID-19 Regulatory Matters" in Note B and Note L to the First Quarter Financial Statements and “Coronavirus Disease 2019 (COVID-19) Impacts – Accounting Considerations,” above.
The Utilities’ rate plans have revenue decoupling mechanisms in their NY electric and gas businesses that largely reconcile actual energy delivery revenues to the authorized delivery revenues approved by the NYSPSC per month and reconcile the deferred balances semi-annually under CECONY's electric rate plan (January through June and July through December, respectively) and annually under CECONY's gas rate plan and O&R NY's electric and gas rate plans (January through December). Differences are accrued with interest each month for CECONY's and O&R NY’s electric customers and after the annual deferral period ends for CECONY's and O&R NY’s gas customers for refund to, or recovery from customers, as applicable. Generally, the refund to or recovery from customers begins August and February of each year over an ensuing six-month period for CECONY's electric customers and February of each year over an ensuing twelve-month period for CECONY's gas and O&R NY's electric and gas customers. Effective July 2021, the majority of O&R’s electric distribution revenues in NJ are subject to a conservation incentive program, as a result of which distribution revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. Although these revenue decoupling mechanisms are in place, lower billed sales revenues and higher unpaid accounts have reduced and are expected to continue to reduce liquidity at the Utilities.
Con Edison and the Utilities have a $2,500 million revolving credit agreement in place under which banks are committed to provide loans on a revolving credit basis until March 2028, subject to certain conditions. CECONY has a $500 million 364-day revolving credit agreement in place under which banks are committed to provide loans on a revolving credit basis until March 2024, subject to certain conditions. Con Edison and the Utilities have not entered into any loans under the Credit Agreement and CECONY has not entered into any loans under the CECONY Credit Agreement. See Note D to the First Quarter Financial Statements.
Results of Operations
Net income for common stock and earnings per share for the three months ended March 31, 2023 and 2022 were as follows:
| | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | |
| 2023 | 2022 | 2023 | 2022 | | | | |
(Millions of Dollars, except per share amounts) | Net Income for Common Stock | Earnings per Share | | |
CECONY | $604 | $475 | $1.71 | $1.34 | | | | |
O&R | 31 | 30 | 0.09 | 0.09 | | | | |
Clean Energy Businesses (a) (d) | 22 | 107 | 0.07 | 0.30 | | | | |
Con Edison Transmission | 2 | — | — | — | | | | |
Other (b) | 774 | | (10) | 2.19 | | (0.03) | | | | |
Con Edison (c) | $1,433 | $602 | $4.06 | $1.70 | | | | |
(a)Net income for common stock and earnings per share from the Clean Energy Businesses for the three months ended March 31, 2023 includes $(9) million or $(0.03) a share net after-tax mark-to-market effects. Net income for common stock and earnings per share from the Clean Energy Businesses for the three months ended March 31, 2023 also includes $2 million or $0.01 a share (after-tax) net of the effects of HLBV accounting for tax equity investments in certain renewable electric projects. Depreciation and amortization expenses on their assets of $31 million or $0.09 a share (after-tax) were not recorded for the three months ended March 31, 2023. See "Assets and Liabilities Held for Sale" in Note A, Note S and Note T to the First Quarter Financial Statements.
Net income for common stock and earnings per share from the Clean Energy Businesses for the three months ended March 31, 2022 includes $51 million or $0.15 a share of net after-tax mark-to-market effects. Net income for common stock and earnings per share from the Clean Energy Businesses for the three months ended March 31, 2022 also includes $36 million or $0.10 a share (after-tax) of the effects of HLBV accounting for tax equity investments in certain renewable electric projects.
(b)Other includes the parent company, Con Edison’s tax equity investments, the deferred project held for sale and consolidation adjustments. Net income for common stock and earnings per share for the three months ended March 31, 2023 includes an immaterial amount or $0.00 a share net of income tax impact on the net after-tax mark-to-market effects. Net income for common stock and earnings per share for the three months ended March 31, 2023 also includes an immaterial amount or $0.00 a share net of income tax impact on the effects of HLBV accounting for tax equity investments in certain renewable electric projects. Net income for common stock for the three months ended March 31, 2023 also includes $(9) million and $(0.02) a share of transaction costs and other accruals related to the sale of the Clean Energy Businesses (net of tax). Impact of the sale of the Clean Energy Businesses on the changes in state apportionments (net of federal taxes) is $(16) million or $(0.05) per share. Depreciation and amortization expenses on the assets of the Clean Energy Businesses of $(3) million or $(0.01) a share (after-tax) were not recorded for the three months ended March 31, 2023. Net income for common stock and earnings per share for the three months ended March 31, 2023 includes $791 million (after-tax) or $2.24 a share (after-tax) for the gain on the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.
Net income for common stock and earnings per share for the three months ended March 31, 2022 includes $(4) million or $(0.01) a share of income tax impact on the net after-tax mark-to-market effects, and $(3) million or $(0.01) a share (after-tax) of income tax impact on the effects of HLBV accounting for tax equity investments in certain renewable and sustainable electric projects.
(c) Earnings per share on a diluted basis were $4.05 a share and $1.70 a share for the three months ended March 31, 2023 and 2022,
respectively. In March 2023, Con Edison entered into accelerated share repurchase agreements (ASR Contracts) with two dealers to repurchase $1,000 million in aggregate of Con Edison’s Common Shares ($.10 par value) (Common Shares). Pursuant to the ASR Contracts, Con Edison made payments of $1,000 million in aggregate to the dealers and received initial deliveries of 8,730,766 Common Shares in aggregate that were recorded in treasury stock at fair value based on the closing price on March 6, 2023 of $91.63 of $800 million. The remaining $200 million was recorded as additional paid-in-capital, representing the value of the forward contract to purchase additional shares. The final number of Common Shares to be received from the dealers will be based on the volume-weighted average share price of Common Shares during the term of the applicable transaction, less a discount. At settlement, under certain circumstances, the dealers may be required to deliver additional Common Shares to Con Edison or Con Edison may be required either to make a cash payment or deliver Common Shares to the dealers. The final settlement of the transactions under the ASR Contracts is expected to occur no later than the third quarter of 2023. The terms of the accelerated share repurchases under the ASR Contracts are subject to adjustment if Con Edison enters into or announces certain types of transactions or takes certain corporate actions. See Note C to the First Quarter Financial Statements.
(d) On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.
The following tables present the estimated effect of major factors on earnings per share and net income for common stock for the three months ended March 31, 2023 as compared with the 2022 period.
| | | | | | | | | | | |
Variation for the Three Months Ended March 31, 2023 vs. 2022 | |
| Net Income for Common Stock (Millions of Dollars) | Earnings per Share | |
CECONY (a) | | | |
Gas base rate increase | $94 | $0.27 | |
| | | |
Electric base rate increase | 15 | 0.04 | |
Higher income from allowance for funds used during construction | 7 | 0.02 | |
Lower storm-related costs | 7 | 0.02 | |
Lower operation and maintenance expense for stock-based compensation, health care costs, and injuries and damages | 5 | 0.02 | |
Change in incentives earned under the electric and gas earnings adjustment mechanisms (EAMs) and positive incentives | 3 | 0.02 | |
Weather impact on steam revenue | (21) | (0.06) | |
| | | |
Accretive effect of share repurchase | — | 0.01 | |
| | | |
| | | |
| | | |
| | | |
| | | |
Other | 19 | 0.03 | |
Total CECONY | 129 | 0.37 | |
O&R (a) | | | |
Electric base rate increase | 2 | — | |
Gas base rate increase | 2 | 0.01 | |
Higher storm-related costs | (2) | (0.01) | |
| | | |
Other | (1) | — | |
Total O&R | 1 | — | |
Clean Energy Businesses (b) | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Total Clean Energy Businesses | (84) | (0.23) | |
Con Edison Transmission | | | |
Higher investment income | 2 | 0.01 | |
| | | |
| | | |
| | | |
| | | |
Other | — | (0.01) | |
| | | |
Total Con Edison Transmission | 2 | — | |
Other, including parent company expenses | | | |
Gain and other impacts related to the sale of the Clean Energy Businesses | 763 | 2.16 | |
Net mark-to-market effects | 4 | 0.01 | |
HLBV effects | 3 | 0.01 | |
| | | |
Accretive effect of share repurchase | — | 0.01 | |
Higher interest income | 7 | 0.02 | |
Other | 6 | 0.01 | |
Total Other, including parent company expenses | 783 | 2.22 | |
Total Reported (GAAP basis) | $831 | $2.36 | |
| | | |
a.Under the revenue decoupling mechanisms in the Utilities’ NY electric and gas rate plans and the weather-normalization clause applicable to their gas businesses, revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. In general, the Utilities recover on a current basis the fuel, gas purchased for resale and purchased power costs they incur in supplying energy to their full-service customers. Accordingly, such costs do not generally affect Con Edison’s results of operations. | |
b. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. | |
The Companies’ other operations and maintenance expenses for the three months ended March 31, 2023 and 2022 were as follows:
| | | | | | | | | | |
| For the Three Months Ended March 31, | |
(Millions of Dollars) | 2023 | 2022 | | |
CECONY | | | | |
Operations | $423 | $437 | | |
Pensions and other postretirement benefits | 86 | 102 | | |
Health care and other benefits | 37 | 35 | | |
Regulatory fees and assessments (a) | 89 | 87 | | |
Other | 115 | 80 | | |
Total CECONY | $750 | $741 | | |
O&R | 97 | 86 | | |
Clean Energy Businesses (b) | 48 | 76 | | |
Con Edison Transmission | 3 | 4 | | |
Other (c) | (2) | (2) | | |
Total other operations and maintenance expenses | $896 | $905 | | |
(a)Includes Demand Side Management, System Benefit Charges and Public Service Law 18A assessments that are collected in revenues.
(b)On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.
(c)Other includes the parent company, Con Edison’s tax equity investments, the deferred project held for sale and consolidation adjustments.
A discussion of the results of operations by principal business segment for the three months ended March 31, 2023 and 2022 follows. For additional business segment financial information, see Note M to the First Quarter Financial Statements.
The Companies’ results of operations for the three months ended March 31, 2023 and 2022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CECONY | O&R | Clean Energy Businesses (a) | Con Edison Transmission | Other (b) | Con Edison (c) |
(Millions of Dollars) | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
Operating revenues | $3,953 | $3,517 | $321 | $285 | $129 | $260 | $1 | $1 | $(1) | $(3) | $4,403 | $4,060 |
Purchased power | 631 | 430 | 71 | 59 | — | — | — | — | — | (2) | 702 | 487 |
Fuel | 189 | 144 | — | — | — | — | — | — | — | — | 189 | 144 |
Gas purchased for resale | 365 | 324 | 63 | 47 | 41 | 72 | — | — | (1) | — | 468 | 443 |
Other operations and maintenance | 750 | 741 | 97 | 86 | 48 | 76 | 3 | 4 | (2) | (2) | 896 | 905 |
Depreciation and amortization | 473 | 446 | 25 | 24 | — | 59 | — | — | 1 | — | 499 | 529 |
Taxes, other than income taxes | 736 | 721 | 24 | 23 | 4 | 7 | — | — | 1 | 2 | 765 | 753 |
Gain on sale of the Clean Energy Businesses | — | — | — | — | — | — | — | — | 855 | — | 855 | — |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Operating income (loss) | 809 | 711 | 41 | 46 | 36 | 46 | (2) | (3) | 855 | (1) | 1,739 | 799 |
Other income (deductions) | 182 | 81 | 12 | 5 | 1 | — | 7 | 4 | (6) | — | 196 | 90 |
Net interest expense | 233 | 200 | 13 | 11 | 15 | (37) | 2 | 1 | (1) | 7 | 262 | 182 |
Income (loss) before income tax expense | 758 | 592 | 40 | 40 | 22 | 83 | 3 | — | 850 | (8) | 1,673 | 707 |
Income tax expense | 154 | 117 | 9 | 10 | 3 | 24 | 1 | — | 76 | 2 | 243 | 153 |
Net income (loss) | $604 | $475 | $31 | $30 | $19 | $59 | $2 | $— | $774 | $(10) | $1,430 | $554 |
Income (loss) attributable to non-controlling interest | — | — | — | — | (3) | (48) | — | — | — | — | (3) | (48) |
Net income (loss) for common stock | $604 | $475 | $31 | $30 | $22 | $107 | $2 | $— | $774 | $(10) | $1,433 | $602 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
(a)On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.
(b)Other includes the parent company, Con Edison’s tax equity investments, the deferred project held for sale and consolidation adjustments. .
(c)Represents the consolidated results of operations of Con Edison and its businesses.
CECONY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, 2023 | | For the Three Months Ended March 31, 2022 | | |
(Millions of Dollars) | Electric | Gas | Steam | 2023 Total | Electric | Gas | Steam | 2022 Total | 2023-2022 Variation |
Operating revenues | $2,356 | $1,291 | $306 | $3,953 | $2,084 | $1,131 | $302 | $3,517 | $436 |
Purchased power | 613 | — | | 18 | 631 | 411 | — | | 20 | 431 | 200 |
Fuel | 79 | — | | 110 | 189 | 66 | — | | 78 | 144 | 45 |
Gas purchased for resale | — | | 365 | — | | 365 | — | | 323 | — | | 323 | 42 |
Other operations and maintenance | 568 | 125 | 57 | 750 | 573 | 118 | 50 | 741 | 9 |
Depreciation and amortization | 343 | 105 | 25 | 473 | 332 | 90 | 24 | 446 | 27 |
Taxes, other than income taxes | 559 | 137 | 40 | 736 | 532 | 149 | 40 | 721 | 15 |
Operating income | $194 | $559 | $56 | $809 | $170 | $451 | $90 | $711 | $98 |
Electric
CECONY’s results of electric operations for the three months ended March 31, 2023 compared with the 2022 period were as follows:
| | | | | | | | | | | |
| For the Three Months Ended | |
(Millions of Dollars) | March 31, 2023 | March 31, 2022 | Variation |
Operating revenues | $2,356 | $2,084 | $272 |
Purchased power | 613 | 411 | 202 |
Fuel | 79 | 66 | 13 |
Other operations and maintenance | 568 | 573 | (5) |
Depreciation and amortization | 343 | 332 | 11 |
Taxes, other than income taxes | 559 | 532 | 27 |
Electric operating income | $194 | $170 | $24 |
CECONY’s electric sales and deliveries for the three months ended March 31, 2023 compared with the 2022 period were:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Millions of kWh Delivered | | Revenues in Millions (a) |
| For the Three Months Ended | | | For the Three Months Ended | |
Description | March 31, 2023 | March 31, 2022 | Variation | Percent Variation | | March 31, 2023 | March 31, 2022 | Variation | Percent Variation |
Residential/Religious (b) | 2,614 | 2,641 | (27) | (1.0) | % | | $712 | $783 | $(71) | (9.1) | % |
Commercial/Industrial | 2,787 | 2,515 | 272 | 10.8 | | | 676 | 614 | 62 | 10.1 | |
Retail choice customers | 4,805 | 5,144 | (339) | (6.6) | | | 463 | 537 | (74) | (13.8) | |
NYPA, Municipal Agency and other sales | 2,330 | 2,398 | (68) | (2.8) | | | 158 | 162 | (4) | (2.5) | |
Other operating revenues (c) | — | | — | | — | | — | | 347 | (12) | 359 | Large |
Total | 12,536 | 12,698 | (162) | (1.3) | % | (d) | $2,356 | $2,084 | $272 | 13.1 | % |
(a)Revenues from electric sales are subject to a revenue decoupling mechanism, as a result of which delivery revenues generally are not affected by changes in delivery volumes from levels assumed when rates were approved.
(b)“Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations.
(c)Other electric operating revenues generally reflect changes in the revenue decoupling mechanism current asset or regulatory liability and changes in regulatory assets and liabilities in accordance with other provisions of the company’s rate plans.
(d)After adjusting for variations, primarily weather and billing days, electric delivery volumes in CECONY’s service area increased 0.8 percent in the three months ended March 31, 2023 compared with the 2022 period.
Operating revenues increased $272 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher purchased power expenses ($202 million), an increase in revenues from the electric rate plan ($20 million) and higher fuel expenses ($13 million).
Purchased power expenses increased $202 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher unit costs ($189 million) and higher purchased volumes ($14 million).
Fuel expenses increased $13 million in the three months ended March 31, 2023 compared with the 2022 period due to higher unit costs ($15 million), offset by lower purchased volumes from the company's electric generating facilities ($2 million).
Other operations and maintenance increased $6 expenses decreased $5 million in the ninethree months ended September 30, 2017March 31, 2023 compared with the 20162022 period primarily due to lower stock-based compensation ($3 million) and lower costs for injuries and damages ($2 million).
Depreciation and amortization expenses increased $11 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher electric utility plant balances.
Taxes, other than income taxes increased $27 million in the three months ended March 31, 2023 compared with the 2022 period due to higher property taxes ($38 million) and higher state and local revenue taxes ($2 million), offset in part by lower deferral of over-collected property taxes ($14 million).
Gas
CECONY’s results of gas operations for the three months ended March 31, 2023 compared with the 2022 period were as follows:
| | | | | | | | | | | |
| For the Three Months Ended | |
(Millions of Dollars) | March 31, 2023 | March 31, 2022 | Variation |
Operating revenues | $1,291 | $1,131 | $160 |
Gas purchased for resale | 365 | 323 | 42 |
Other operations and maintenance | 125 | 118 | 7 |
Depreciation and amortization | 105 | 90 | 15 |
Taxes, other than income taxes | 137 | 149 | (12) |
Gas operating income | $559 | $451 | $108 |
CECONY’s gas sales and deliveries, excluding off-system sales, for the three months ended March 31, 2023 compared with the 2022 period were:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Thousands of Dt Delivered | | Revenues in Millions (a) |
| For the Three Months Ended | | | For the Three Months Ended | |
Description | March 31, 2023 | March 31, 2022 | Variation | Percent Variation | | March 31, 2023 | March 31, 2022 | Variation | Percent Variation |
Residential | 22,508 | | 25,058 | | (2,550) | | (10.2) | % | | $558 | $522 | $36 | 6.9 | % |
General | 12,526 | | 13,960 | | (1,434) | | (10.3) | | | 255 | 210 | 45 | 21.4 | |
Firm transportation | 31,657 | | 32,847 | | (1,190) | | (3.6) | | | 403 | 348 | 55 | 15.8 | |
Total firm sales and transportation | 66,691 | | 71,865 | | (5,174) | | (7.2) | % | (b) | $1,216 | $1,080 | $136 | 12.6 | % |
Interruptible sales (c) | 1,863 | | 2,697 | | (834) | | (30.9) | | | 20 | 20 | — | — |
NYPA | 9,973 | | 7,785 | | 2,188 | | 28.1 | | | 1 | 1 | — | — |
Generation plants | 11,781 | | 9,952 | | 1,829 | | 18.4 | | | 8 | 5 | 3 | 60.0 | |
Other | 6,173 | | 5,979 | | 194 | | 3.2 | | | 12 | 12 | — | — |
Other operating revenues (d) | — | | — | | — | | — | | 34 | 13 | 21 | Large |
Total | 96,481 | | 98,278 | | (1,797) | | (1.8) | % | | $1,291 | $1,131 | $160 | 14.1 | % |
(a)Revenues from gas sales are subject to a weather normalization clause and a revenue decoupling mechanism, as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.
(b)After adjusting for variations, primarily billing days, firm gas sales and transportation volumes in the company’s service area increased 7.6 percent in the three months ended March 31, 2023 compared with the 2022 period.
(c)Includes 654 thousand and 1,391 thousand of Dt for the 2023 and 2022 periods, respectively, that are also reflected in firm transportation and other.
(d)Other gas operating revenues generally reflect changes in the revenue decoupling mechanism and weather normalization clause current asset or regulatory liability and changes in regulatory assets and liabilities in accordance with other provisions of the company’s rate plans.
Operating revenues increased $160 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to CET having no employees oran increase in revenues from the gas rate plan ($127 million) and higher gas purchased for resale ($42 million).
Gas purchased for resale increased $42 million in the three months ended March 31, 2023 compared with the 2022 period due to higher unit costs ($157 million), offset in part by lower purchased volumes ($115 million).
Other operations and maintenance expenses increased $7 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher gas operations department costs ($7 million).
Depreciation and amortization expenses increased $15 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher gas utility plant balances.
Taxes, other directthan income taxes decreased $12 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to a lower deferral of over-collected property taxes ($24 million), offset in part by higher property taxes ($7 million) and higher state and local taxes ($6 million).
Steam
CECONY’s results of steam operations for the three months ended March 31, 2023 compared with the 2022 period were as follows:
| | | | | | | | | | | |
| For the Three Months Ended | |
(Millions of Dollars) | March 31, 2023 | March 31, 2022 | Variation |
Operating revenues | $306 | $302 | $4 |
Purchased power | 18 | 20 | (2) |
Fuel | 110 | 78 | 32 |
Other operations and maintenance | 57 | 50 | 7 |
Depreciation and amortization | 25 | 24 | 1 |
Taxes, other than income taxes | 40 | 40 | — |
Steam operating income | $56 | $90 | $(34) |
CECONY’s steam sales and deliveries for the three months ended March 31, 2023 compared with the 2022 period were:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Millions of Pounds Delivered | | Revenues in Millions |
| For the Three Months Ended | | | For the Three Months Ended | |
Description | March 31, 2023 | March 31, 2022 | Variation | Percent Variation | | March 31, 2023 | March 31, 2022 | Variation | Percent Variation |
General | 261 | | 315 | | (54) | | (17.1) | % | | $14 | $15 | $(1) | (6.7) | % |
Apartment house | 2,012 | | 2,252 | | (240) | | (10.7) | | | 80 | 76 | 4 | 5.3 | |
Annual power | 4,359 | | 5,083 | | (724) | | (14.2) | | | 199 | 202 | (3) | (1.5) | |
Other operating revenues (a) | — | | — | | — | | — | | 13 | 9 | 4 | 44.4 | |
Total | 6,632 | | 7,650 | | (1,018) | | (13.3) | % | (b) | $306 | $302 | $4 | 1.3 | % |
(a)Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plan.
(b)After adjusting for variations, primarily weather and billing days, steam sales and deliveries increased 4.5 percent in the three months ended March 31, 2023 compared with the 2022 period.
Operating revenues increased $4 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher fuel expenses ($32 million), offset in part by the impact of warmer winter weather ($28 million).
Purchased power decreased $2 million in the three months ended March 31, 2023 compared with the 2022 period due to lower unit costs until January ($3 million), offset by higher purchased volumes ($1 2017.million).
Fuel expenses increased $32 million in the three months ended March 31, 2023 compared with the 2022 period due to higher unit costs ($69 million), offset by lower purchased volumes from the company's steam generating facilities ($37 million).
Other operations and maintenance expenses increased $7 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher costs for pension and other postretirement benefits, reflecting reconciliation to the rate plan level ($6 million).
Depreciation and amortization expenses increased $1 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher steam utility plant balances.
Other Income (Deductions)
Other income increased $101 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to lower costs associated with components of pension and other postretirement benefits other than service cost ($102 million), offset in part by lower expenses resulting from investment performance in a deferred income plan ($3 million).
Net Interest Expense
Net Interest Expense increased $33 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher interest on short-term debt ($20 million), higher interest on long-term debt ($17 million) and higher non-operating interest on deposits ($3 million), offset in part by an increase in allowance for borrowed funds used during construction ($9 million).
Income Tax Expense
Income taxes increased $37 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher income before income tax expense ($35 million), and higher state income taxes ($8 million), offset in part by lower allowance for uncollectible accounts ($7 million).
O&R
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, 2023 | | For the Three Months Ended March 31, 2022 | | |
(Millions of Dollars) | Electric | Gas | 2023 Total | Electric | Gas | 2022 Total | 2023-2022 Variation |
Operating revenues | $182 | $139 | $321 | $166 | $119 | $285 | $36 |
Purchased power | 71 | — | | 71 | 59 | — | | 59 | 12 |
Gas purchased for resale | — | | 63 | 63 | — | | 47 | 47 | 16 |
Other operations and maintenance | 77 | 20 | 97 | 67 | 19 | 86 | 11 |
Depreciation and amortization | 18 | 7 | 25 | 17 | 7 | 24 | 1 |
Taxes, other than income taxes | 15 | 9 | 24 | 15 | 8 | 23 | 1 |
Operating income | $1 | $40 | $41 | $8 | $38 | $46 | $(5) |
Electric
O&R’s results of electric operations for the three months ended March 31, 2023 compared with the 2022 period were as follows:
| | | | | | | | | | | |
| For the Three Months Ended | |
(Millions of Dollars) | March 31, 2023 | March 31, 2022 | Variation |
Operating revenues | $182 | $166 | $16 |
Purchased power | 71 | 59 | 12 |
Other operations and maintenance | 77 | 67 | 10 |
Depreciation and amortization | 18 | 17 | 1 |
Taxes, other than income taxes | 15 | 15 | — |
Electric operating income | $1 | $8 | $(7) |
O&R’s electric sales and deliveries for the three months ended March 31, 2023 compared with the 2022 period were:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Millions of kWh Delivered | | Revenues in Millions (a) |
| For the Three Months Ended | | | For the Three Months Ended | |
Description | March 31, 2023 | March 31, 2022 | Variation | Percent Variation | | March 31, 2023 | March 31, 2022 | Variation | Percent Variation |
Residential/Religious (b) | 467 | | 417 | | 50 | | 12.0 | % | | $107 | $85 | $22 | 25.9 | % |
Commercial/Industrial | 262 | | 227 | | 35 | | 15.4 | | | 41 | 33 | 8 | 24.2 | |
Retail choice customers | 495 | | 629 | | (134) | | (21.3) | | | 30 | 44 | (14) | | (31.8) | |
Public authorities | 27 | | 25 | | 2 | | 8.0 | | | 3 | 4 | (1) | (25.0) | |
Other operating revenues (c) | — | | — | | — | | — | | 1 | — | 1 | Large |
Total | 1,251 | | 1,298 | | (47) | | (3.6) | % | (d) | $182 | $166 | $16 | 9.6 | % |
(a)O&R’s NY electric delivery revenues are subject to a revenue decoupling mechanism, as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. Effective July 2021, the majority of O&R’s electric distribution revenues in NJ are subject to a conservation incentive program, as a result of which distribution revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s electric transmission revenues in NJ are not subject to a conservation incentive program, and as a result, changes in such volumes do impact revenues.
(b)“Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations.
(c)Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s electric rate plan.
(d)After adjusting for weather and other variations, electric delivery volumes in O&R’s service area decreased 1.9 percent in the three months ended March 31, 2023 compared with the 2022 period.
Operating revenues increased $16 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher purchased power expenses ($12 million) and higher revenues from the NY electric rate plan ($2 million).
Purchased power expenses increased $12 million in the three months ended March 31, 2023 compared with the 2022 period due to higher unit costs ($8 million), and higher purchased volumes ($4 million).
Other operations and maintenance expenses increased $10 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher non-deferred storm costs ($3 million), higher tree trimming expenses ($2 million), higher pension and other postretirement benefit costs reflecting reconciliation to the rate plan level ($1 million), higher customer assistance expenses ($1 million) and higher health care costs ($1 million).
Depreciation and amortization expenses increased $1 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher electric utility plant balances.
Gas
O&R’s results of gas operations for the three months ended March 31, 2023 compared with the 2022 period were as follows:
| | | | | | | | | | | |
| For the Three Months Ended | |
(Millions of Dollars) | March 31, 2023 | March 31, 2022 | Variation |
Operating revenues | $139 | $119 | $20 |
Gas purchased for resale | 63 | 47 | 16 |
Other operations and maintenance | 20 | 19 | 1 |
Depreciation and amortization | 7 | 7 | — | |
Taxes, other than income taxes | 9 | 8 | 1 | |
Gas operating income | $40 | $38 | $2 | |
O&R’s gas sales and deliveries, excluding off-system sales, for the three months ended March 31, 2023 compared with the 2022 period were:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Thousands of Dt Delivered | | Revenues in Millions (a) |
| For the Three Months Ended | | | For the Three Months Ended | |
Description | March 31, 2023 | March 31, 2022 | Variation | Percent Variation | | March 31, 2023 | March 31, 2022 | Variation | Percent Variation |
Residential | 5,208 | | 6,165 | | (957) | | (15.5) | % | | $100 | $84 | $16 | 19.0 | % |
General | 1,094 | | 1,350 | | (256) | | (19.0) | | | 18 | 16 | 2 | 12.5 | |
Firm transportation | 2,180 | | 3,074 | | (894) | | (29.1) | | | 17 | 20 | (3) | (15.0) | |
Total firm sales and transportation | 8,482 | | 10,589 | | (2,107) | | (19.9) | % | (b) | $135 | $120 | $15 | 12.5 | % |
Interruptible sales | 957 | | 1,214 | | (257) | | (21.2) | | | 2 | 2 | — | — |
Generation plants | 1 | | 5 | | (4) | | (80.0) | | | — | | — | | — | — |
Other | 294 | | 285 | | 9 | | 3.2 | | | — | | — | | — | — |
Other gas revenues | — | | — | | — | | — | | 2 | (3) | 5 | Large |
Total | 9,734 | | 12,093 | | (2,359) | | (19.5) | % | | $139 | $119 | $20 | 16.8 | % |
(a)Revenues from NY gas sales are subject to a weather normalization clause and a revenue decoupling mechanism as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.
(b)After adjusting for weather and other variations, total firm sales and transportation volumes decreased 0.3 percent in the three months ended March 31, 2023 compared with the 2022 period.
Operating revenues increased $20 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher gas purchased for resale ($16 million) and higher revenues from the NY gas rate plan ($3 million).
Gas purchased for resale increased $16 million in the three months ended March 31, 2023 compared with the 2022 period due to higher unit costs ($35 million), offset in part by lower purchased volumes ($19 million).
Other operations and maintenance expenses increased $1 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher pension and other postretirement benefit costs, reflecting reconciliation to the rate plan level.
Taxes, other than income taxes increased $1 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher property taxes and higher payroll taxes.
Income Tax Expense
Income taxes decreased $1 million in the three months ended March 31, 2023 compared with the 2022 period
primarily due to lower allowance for uncollectible accounts.
Clean Energy Businesses
On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements. The Clean Energy Businesses’ results of operations for the three months ended March 31, 2023 compared with the 2022 period were as follows:
| | | | | | | | | | | |
| For the Three Months Ended | |
(Millions of Dollars) | March 31, 2023 | March 31, 2022 | Variation |
Operating revenues | $129 | $260 | $(131) |
| | | |
| | | |
Gas purchased for resale | 41 | 72 | (31) |
Other operations and maintenance | 48 | 76 | (28) |
Depreciation and amortization | — | 59 | (59) |
Taxes, other than income taxes | 4 | 7 | (3) |
| | | |
| | | |
| | | |
Operating income | $36 | $46 | $(10) |
Operating revenues decreased $131 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to the sale of the Clean Energy Businesses.
Gas purchased for resale decreased $31 million in the three months ended March 31, 2023 compared with the 2022 period due to the sale of the Clean Energy Businesses.
Other operations and maintenance expenses decreased $28 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to the sale of the Clean Energy Businesses.
Depreciation and amortization expenses decreased $59 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to the sale of the Clean Energy Businesses.
Net Interest Expense
Net interest expense increased $8$52 million in the ninethree months ended September 30, 2017March 31, 2023 compared with the 20162022 period primarily due to lower unrealized gains on interest rate swaps in the 2023 period. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses and impact for 2023 is shown through the date of sale. See Note S and Note T to the First Quarter Financial Statements.
Income Tax Expense
Income taxes decreased $21 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to a new debt issuancelower income before income tax expense ($13 million), lower loss attributable to non-controlling interest ($11 million), lower state income tax expense ($3 million), offset in 2016.part by lower renewable energy credits due to the sale of the Clean Energy Businesses ($4 million) and an increase in the valuation allowance on deferred state net operating losses ($2 million).
Income (Loss) Attributable to Non-Controlling Interest
Loss attributable to non-controlling interest decreased $45 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to the sale of the Clean Energy Businesses.
Con Edison Transmission
Other Income (Deductions)
Other income (deductions) increased $37$3 million in the ninethree months ended September 30, 2017March 31, 2023 compared with the 20162022 period primarily due to higher investment income from NY Transco ($3 million).
Net Interest Expense
Net interest expense increased $1 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to earnings from equity investments in Stagecoach Gas Services, LLC, substantially all of which were made in June 2016.higher balances and interest on an intercompany loan.
Income Tax Expense
Income taxes increased $10$1 million in the ninethree months ended September 30, 2017March 31, 2023 compared with the 20162022 period primarily due primarily to higher income before income tax expense.
Other
For Con Edison, “Other” includes parent companyIncome Tax Expense
Income taxes increased $74 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher income before income tax expense from the gain on the sale of the Clean Energy Businesses ($182 million), higher state income taxes ($19 million), higher state income taxes due to unitary adjustment ($17 million), increase in valuation allowance on state NOLs ($8 million), offset in part by the recognition of unamortized deferred investment tax credits ($107 million), lower state tax income expense due to changes in state apportionments, net of federal income taxes ($44 million) and consolidation adjustments.lower loss attributable to non-controlling interest ($3 million).
Liquidity and Capital Resources
The Companies’ liquidity reflects cash flows from operating, investing and financing activities, as shown on their respective consolidated statement of cash flows and as discussed below.
The Companies’ cash, and temporary cash investments and restricted cash resulting from operating, investing and financing activities for the ninethree months ended September 30, 2017March 31, 2023 and 20162022 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, |
| CECONY | O&R | Clean Energy Businesses (d) | Con Edison Transmission | Other (a)(b) | Con Edison (c) |
(Millions of Dollars) | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
Operating activities | $45 | $477 | $44 | $52 | $— | $13 | $(152) | $10 | $155 | $(79) | $92 | $473 |
Investing activities | (1,077) | (873) | (68) | (49) | (248) | (25) | (26) | (10) | 4,037 | 5 | 2,618 | (952) |
Financing activities | 12 | (471) | 21 | (1) | — | (56) | 189 | — | (3,688) | 58 | (3,466) | (470) |
Net change for the period | (1,020) | (867) | (3) | 2 | (248) | (68) | 11 | | — | 504 | (16) | (756) | (949) |
Balance at beginning of period | 1,056 | 920 | 35 | 29 | 248 | 178 | — | | — | 191 | 19 | 1,530 | 1,146 |
Balance at end of period (c) | $36 | $53 | $32 | $31 | $— | $110 | $11 | | $— | $695 | $3 | $774 | $197 |
Less: Cash balances held for sale (d) | — | — | — | — | — | — | — | | — | 3 | | — | 3 | — |
Balance at end of period excluding held for sale | $36 | $53 | $32 | $31 | $— | $110 | $11 | | $— | $692 | $3 | $771 | $197 |
(a) Other includes the parent company, Con Edison’s tax equity investments, the deferred project held for sale and consolidation adjustments.
(b) Represents the consolidated results of operations of Con Edison and its businesses.
(c) See "Reconciliation of Cash, Temporary Cash Investments and Restricted Cash" in Note A to the First Quarter Financial Statements.
(d) On March 1, 2023, Con Edison sold substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.
|
| | | | | | | | | | |
| For the Nine Months Ended September 30, |
| Con Edison | CECONY |
(Millions of Dollars) | 2017 |
| 2016 | Variation | 2017 |
| 2016 |
| Variation |
|
Operating activities | $2,227 | $2,336 | $(109) | $1,790 | $2,017 | $(227) |
Investing activities | (2,572) | (3,717) | 1,145 | (2,197) | (1,943) | (254) |
Financing activities | (362) | 583 | (945) | (278) | (891) | 613 |
Net change for the period | (707) | (798) | 91 | (685) | (817) | 132 |
Balance at beginning of period | 776 | 944 | (168) | 702 | 843 | (141) |
Balance at end of period | $69 | $146 | $(77) | $17 | $26 | $(9) |
Less: Change in cash balances held for sale | — |
| (4) | 4 | — |
| — |
| — |
|
Balance at end of period excluding held for sale | $69 | $150 | $(81) | $17 | $26 | $(9) |
Cash Flows from Operating Activities
The Utilities’ cash flows from operating activities primarily reflect primarily their energy sales and deliveries and cost of operations. The volume of energy sales and deliveries is primarily affected primarily by factors external to the Utilities, such as growth of customer demand, weather, market prices for energy and economic conditions. Measures that promote distributed energy resources, such as distributed generation, demand reduction and energy efficiency, also affect the volume of energy sales and deliveries.
The decline in business activity in the Utilities’ service territory from 2020 through 2022 due to the COVID-19 pandemic and the Utilities' suspension of service disconnections, bill collection activities and certain charges and fees resulted in a slower recovery of cash from outstanding customer accounts receivable balances, material increases in customer accounts receivable balances, increases to the allowance for uncollectible accounts, and may result in increases to write-offs of customer accounts, as compared to prior to the COVID-19 pandemic. Under the revenue decoupling mechanisms in the Utilities’ New YorkNY electric and gas rate plans, changes in delivery volumes from levels assumed when rates were approved may affect the timing of cash flows, but generallylargely not net income. The prices at which the Utilities provide energy to their customers are determined in accordance with their rate plans. During 2022, increases in electric and gas commodity prices further contributed to a slower recovery of cash from outstanding customer accounts receivable balances, increases to the allowance for uncollectible accounts, and increases to write-offs of customer accounts receivable balances. In general, changes in the Utilities’ cost of purchased power, fuel and gas may affect the timing of cash flows, but not net income, because the costs are recovered in accordance with rate plans. See “Financial and Commodity Market Risks – Commodity Price Risk,” below.
Net income is the result of cash and non-cash (or accrual) transactions. Only cash transactions affect the Companies’ cash flows from operating activities. Principal non-cash charges or credits include depreciation, deferred income tax expense, and amortizations of certain regulatory assets and liabilities.liabilities and accrued unbilled revenue. Non-cash charges or credits may also be accrued under the revenue decoupling and cost reconciliation mechanisms in the Utilities’ New YorkNY electric and gas rate plans.
Net cash flows from operating activities for the ninethree months ended September 30, 2017March 31, 2023 for Con Edison and CECONY were $109$381 million lower and $227$432 million lower, respectively, than in the 20162022 period. The change in net cash flows for Con Edison primarily reflects lower net deferred credits, noncurrent liabilities and CECONY reflects primarilyother regulatory liabilities balances ($566 million), a decrease in accounts payable ($387 million), a decrease in accrued interest ($32 million) and lower recoveries of depreciation and amortization ($30 million), offset in part by a higher cash paid for income taxes in the 2017 period as compared with the 2016 perioddecrease of $110 million and $226 million, respectively,accounts receivable balances from customers net of refunds received. The income tax refund receivedallowance for uncollectible accounts ($374 million) (see “COVID-19 Regulatory Matters” in 2016 reflectedNote B to the extension of bonus depreciationFirst Quarter Financial Statements and “Coronavirus Disease 2019 (COVID-19) Impacts", "Accounting Considerations” and “Liquidity and Financing,” above) and an increase in late 2015, resulting in a refund of the 2015 estimated federal tax payments.
The changeaccrued taxes ($279 million). For CECONY, changes in net cash flows alsoprimarily reflects the timinglower net deferred credits, noncurrent liabilities and other regulatory liabilities balances ($505 million), a decrease in accounts payable ($239 million), an increase in prepayments ($107 million) and a decrease in accrued taxes to affiliated companies ($88 million), offset in part by a higher decrease of payments for and recovery of energy costs. This timing is reflected within changes to accounts receivable –balances from customers recoverablenet of allowance for uncollectible accounts ($345 million) (see “COVID-19 Regulatory Matters” in Note B to the First Quarter Financial Statements and refundable energy costs within other regulatory assets“Coronavirus Disease 2019 (COVID-19) Impacts", "Accounting Considerations” and liabilities“Liquidity and accounts payable balances.Financing,” above) and higher deferred income taxes ($178 million).
The changes in regulatory assets primarily reflect changes in deferred pension costs in accordance with the accounting rules for retirement benefits.
Cash Flows Used inFrom (Used in) Investing Activities
Net cash flows from investing activities for Con Edison were $3,570 million higher for the three months ended March 31, 2023 compared with the 2022 period. Net cash flows used in investing activities for Con Edison and CECONY were $1,145 million lower and $254$204 million higher respectively, for the ninethree months ended September 30, 2017March 31, 2023 compared with the 20162022 period. The change for Con Edison primarily reflects primarily lower new investments in electricthe proceeds from substantially all of the assets of the Clean Energy Businesses, net of cash and gas transmission projectscash equivalents sold ($1,011 million) and renewable electric production projects ($240 million), and a decrease in non-utility construction expenditures ($1483,927 million), offset in part by lower proceeds from salean increase in utility construction expenditures ($213 million), an increase in non-utility construction expenditures ($115 million), higher investments ($15 million) and higher cost of assetsremoval less salvage ($21614 million). The change for CECONY primarily reflects absence of proceeds from the transfer of assets to NY Transcoan increase in 2016 ($122 million) and increased utility construction expenditures ($88191 million) and higher cost of removal less salvage ($13 million). Pursuant to their rate plans, the Utilities recover the cost of utility construction expenditures from customers, including an approved rate of return (before and after being placed in service and or AFUDC before being placed in service). Increases in the amount of utility construction expenditures may temporarily increase the amount of short-term debt issued by the Utilities prior to the long-term financing of such amounts.
Cash Flows fromFrom (Used In) Financing Activities
Net cash flows used in financing activities for Con Edison were $2,996 million higher for the three months ended March 31, 2023 compared with the 2022 period. Net cash flows from financing activities for Con Edison and CECONY were $945 million lower and $613$483 million higher respectively, infor the ninethree months ended September 30, 2017March 31, 2023 compared with the 20162022 period.
In August 2017,March 2023, Con Edison issued 4.1entered into accelerated share repurchase agreements (ASR Contracts) with two dealers to repurchase $1,000 million common shares resulting in net proceedsaggregate of $343 million, after issuance expenses, that were invested byCon Edison’s Common Shares ($.10 par value) (Common Shares). Pursuant to the ASR Contracts, Con Edison made payments of $1,000 million in its subsidiaries, principally CECONYaggregate to the dealers and received initial deliveries of 8,730,766 Common Shares in aggregate. See Note C to the Clean Energy Businesses, for funding of their construction expenditures and for other general corporate purposes.First Quarter Financial Statements.
In June 2017,February 2023, CECONY issued $500 million aggregate principal amount of 3.875 percent5.20% debentures, due 2047,2033. See Note C to the net proceeds from the sale of which were used to repay short-term borrowings and for other general corporate purposes.First Quarter Financial Statements.
In March 2017, Con Edison issued $400 million aggregate principal amount of 2.00 percent debentures, due 2020, and prepaid the June 2016 $400 million variable rate term loan that was to mature in 2018.
Also, in March 2017, a Con Edison Development subsidiary issued $97 million aggregate principal amount of 4.45 percent senior notes, due 2042, secured by the company’s Upton County Solar project.
In June 2016, CECONY issued $550 million aggregate principal amount of 3.85 percent debentures, due 2046, the net proceeds from the sale of which were used to repay short-term borrowings and for other general corporate purposes. In September 2016, CECONY redeemed at maturity $400 million of 5.50 percent 10-year debentures.
In June 2016, a Con Edison Solutions subsidiary borrowed $2 million pursuant to a loan agreement with a New Jersey utility. The borrowing matures in 2026, bears interest of 11.18 percent and may be repaid in cash or project Solar Renewable Energy Certificates.
In May 2016, Con Edison issued approximately 10 million common shares resulting in net proceeds, after issuance expenses, of $702 million and $500 million aggregate principal amount of 2.00 percent debentures, due 2021, the net proceeds from the sale of which were used in connection with the acquisition by a CET Gas subsidiary of a 50 percent equity interest in a gas pipeline and storage joint venture (see "Con Edison Transmission", above) and for general corporate purposes.
In May 2016, a Con Edison Development subsidiary issued $95 million aggregate principal amount of 4.07 percent senior notes, due 2036, secured by the company's California Holdings 3 solar project.
In February 2016, a Con Edison Development subsidiary issued $218 million aggregate principal amount of 4.21 percent senior notes, due 2041, secured by the company's Texas Solar 7 solar project.
Con Edison’s cash flows from financing activities for ninethe three months ended September 30, 2017March 31, 2023 and 20162022 also reflect the proceeds, and reduction in cash used for reinvested dividends, resulting from the issuancenet retirement of common shares under the company’s dividend reinvestment, stock purchase and long-term incentive plansshort-term debt of $74 million and $77 million, respectively.$2,454 million.
Cash flows used infrom financing activities of the Companies also reflect commercial paper issuances and repayments. The commercial paper amounts outstanding at September 30, 2017March 31, 2023 and 20162022 and the average daily balances for the ninethree months ended September 30, 2017March 31, 2023 and 20162022 for Con Edison and CECONY were as follows:
| | | | | | | | | | | | | | |
| 2023 | 2022 |
(Millions of Dollars, except Weighted Average Yield) | Outstanding at March 31, | Daily average | Outstanding at March 31, | Daily average |
Con Edison | $411 | $1,858 | $1,313 | $1,275 |
CECONY | $405 | $1,773 | $1,061 | $1,089 |
Weighted average yield | 5.4 | % | 4.8 | % | 0.8 | % | 0.4 | % |
|
| | | | |
| 2017 | 2016 |
(Millions of Dollars, except Weighted Average Yield) | Outstanding at September 30, | Daily average | Outstanding at September 30, | Daily average |
Con Edison | $356 | $645 | $601 | $813 |
CECONY | $147 | $323 | $480 | $385 |
Weighted average yield | 1.3 | 1.1 | 0.7 | 0.6 |
Capital Requirements and Resources
Contractual Obligations
Con Edison’s material obligations to make payments pursuant to contracts totaled $53,645 million and $57,931 million at March 31, 2023 and December 31, 2022, respectively. The decrease at March 31, 2023 is due primarily to Con Edison has decreased its estimates for capital requirements forcompleting the retirementsale of long-term securities for 2018 from $1,688 million to $1,288 million. The decrease reflectssubstantially all of the $400 million prepaymentassets of a variable rate term loan that was to mature in 2018.the Clean Energy Businesses on March 1, 2023. See Note CS and Note T to the ThirdFirst Quarter Financial Statements.
For each of the Companies, the ratio of earnings to fixed charges (Securities and Exchange Commission (SEC) basis) for the nine months ended September 30, 2017 and 2016 and the twelve months ended December 31, 2016 was:
|
| | | |
| Ratio of Earnings to Fixed Charges |
| For the Nine Months Ended September 30, 2017 | For the Nine Months Ended September 30, 2016 | For the Twelve Months Ended December 31, 2016 |
Con Edison | 3.8 | 4.0 | 3.6 |
CECONY | 3.9 | 3.8 | 3.6 |
Capital Resources
For each of the Companies, the common equity ratio at September 30, 2017March 31, 2023 and December 31, 20162022 was:
| | | | | | | | |
| Common Equity Ratio (Percent of total capitalization) |
| March 31, 2023 | December 31, 2022 |
Con Edison | 50.2 | 50.9 |
CECONY | 49.1 | 46.9 |
|
| | |
| Common Equity Ratio (Percent of total capitalization) |
| September 30, 2017 | December 31, 2016 |
Con Edison | 50.8 | 49.3 |
CECONY | 50.9 | 49.5 |
Other Changes in Assets, Liabilities and LiabilitiesEquity
The following table shows changes in certainCompanies' assets, liabilities, and liabilitiesequity at September 30, 2017, compared withMarch 31, 2023 and December 31, 2016.2022 are summarized as follows.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CECONY | O&R | Clean Energy Businesses (c) | Con Edison Transmission | Other (a) | Con Edison (b) |
(Millions of Dollars) | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
ASSETS | | | | | | | | | | | | |
Current assets | $4,669 | $5,247 | $314 | $332 | $— | $879 | $15 | $4 | $870 | $6,510 | $5,868 | $12,972 |
Investments | 558 | 539 | 20 | 20 | — | | — | | 313 | 286 | 14 | (4) | 905 | 841 |
Net plant | 44,507 | 44,011 | 2,766 | 2,738 | — | 4,718 | 17 | 17 | — | | (4,718) | 47,290 | 46,766 |
Other noncurrent assets | 7,919 | 7,648 | 404 | 421 | — | 1,627 | 7 | 7 | 411 | (1,217) | 8,741 | 8,486 |
Total Assets | $57,653 | $57,445 | $3,504 | $3,511 | $— | $7,224 | $352 | $314 | $1,295 | $571 | $62,804 | $69,065 |
| | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | | |
Current liabilities | $3,607 | $6,036 | $320 | $409 | $— | $1,596 | $7 | $163 | $961 | $3,132 | $4,895 | $11,336 |
Noncurrent liabilities | 15,576 | 15,451 | 1,080 | 1,103 | — | 338 | (85) | (86) | (150) | (113) | 16,421 | 16,693 |
Long-term debt | 19,578 | 19,080 | 1,068 | 1,068 | — | 2,292 | — | — | (1) | (2,293) | 20,645 | 20,147 |
Equity | 18,892 | 16,878 | 1,036 | 931 | — | 2,998 | 430 | 237 | 485 | (155) | 20,843 | 20,889 |
Total Liabilities and Equity | $57,653 | $57,445 | $3,504 | $3,511 | $— | $7,224 | $352 | $314 | $1,295 | $571 | $62,804 | $69,065 |
(a) Other includes the parent company, Con Edison’s tax equity investments, the deferred project held for sale and consolidation adjustments. |
| | | |
| Con Edison | CECONY |
(Millions of Dollars) | 2017 vs. 2016 Variation | 2017 vs. 2016 Variation |
Assets | | |
Prepayments | $433 | $398 |
Non-utility property, less accumulated depreciation | 204 | — |
|
Regulatory asset - Unrecognized pension and other postretirement costs | (248) | (254) |
Liabilities | | |
Pension and retiree benefits | $(404) | $(394) |
Deferred income taxes and unamortized investment tax credits | 539 | 610 |
System benefit charge | 194 | 175 |
(b) Represents the consolidated results of operations of Con Edison and its businesses.(c) On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.
Prepayments
CECONY
Current assets at March 31, 2023 were $578 million lower than at December 31, 2022. The change in current assets primarily reflects a decrease in cash and temporary cash investments ($1,020 million), a decrease to accrued unbilled revenues ($173 million), offset in part by an increase in prepayments for Con Edison($574 million), and CECONYan increase in the fair value of short-term derivative assets ($83 million).
Investments at March 31, 2023 were $19 million higher than at December 31, 2022. The change in investments primarily reflects primarily the portion allocablean increase in supplemental retirement income plan assets ($19 million). See Note E to the 2017 fourth quarter of CECONY's July 2017 payment of its New York City semi-annual property taxes.First Quarter Financial Statements.
Non-Utility Property, Less Accumulated Depreciation
Net plant at March 31, 2023 was $496 million higher than at December 31, 2022. The change in net plant primarily reflects an increase in non-utility property, lesselectric ($472 million), gas ($149 million), steam ($30 million) and general ($36 million) plant balances and an increase in construction work in progress ($94 million), offset in part by an increase in accumulated depreciation for Con Edison reflects the completion of construction of Con Edison Development's Upton County Solar renewable electric production project (see Con Edison Development, below)($285 million).
Regulatory AssetOther noncurrent assets at March 31, 2023 were $271 million higher than at December 31, 2022. The change in other noncurrent assets primarily reflects an increase in the regulatory asset for Unrecognized PensionCOVID - 19 arrears relief deferrals programs ($335 million) and Other Postretirement Costs and Liability for Pension and Retiree Benefits
The decreasean increase in the regulatory asset for unrecognized pension and other postretirement costs and the liability for pension and retiree benefits reflectsto reflect the final actuarial valuation, as measured at December 31, 2022, of the pension and other retiree benefit plans as measured at December 31, 2016, in accordance with the accounting rules for retirement benefits.benefits ($43 million). The change in the regulatory asset also reflects the year’speriod's amortization of accounting costs. The changeincrease is offset in part by a decrease in the liability forfair value of deferred assets ($55 million), a decrease in pension and retiree benefits ($48 million) and a decrease in operating lease right-of-use asset ($12 million). See Notes B, E and F to the First Quarter Financial Statements.
Current liabilities at March 31, 2023 were $2,429 million lower than at December 31, 2022. The change in current liabilities primarily reflects a decrease in notes payable ($1,895 million) and a decrease in accounts payable ($502 million).
Noncurrent liabilities at March 31, 2023 were $125 million higher than at December 31, 2022. The change in noncurrent liabilities primarily reflects an increase in deferred income taxes and unamortized investment tax credits
($387 million) primarily due to accelerated tax depreciation, repair deductions and the amortization of excess deferred federal income taxes due to the Tax Cuts and Jobs Act of 2017 (TCJA). See Note J to the First Quarter Financial Statements. The change also reflects an increase in the fair value of derivative liabilities ($120 million), offset in part contributionsby a decrease in the regulatory liability for unrecognized pension and other postretirement costs to reflect the final actuarial valuation, as measured at December 31, 2022, of the pension and other retiree benefit plans made byin accordance with the Utilitiesaccounting rules for retirement benefits ($220 million), a decrease in 2017.the regulatory liability for deferred derivative gains - long term ($111 million) and a decrease in the regulatory liability for future income tax ($57 million). See Notes E and F to the ThirdFirst Quarter Financial Statements.
Deferred Income Taxes and Unamortized Investment Tax CreditsLong-term debt at March 31, 2023 was $498 million higher than at December 31, 2022. The change in long-term
debt primarily reflects CECONY's issuance of $500 million aggregate principal amount of 5.20% debentures, due 2033, offset in part by, the amortization of unamortized debt expense over the three month period. See Note C to the First Quarter Financial Statements
Equity at March 31, 2023 was $2,014 million higher than at December 31, 2022. The change in equity primarily reflects capital contributions from Con Edison ($1,675 million) in 2023,net income for the three months ended March 31, 2023 ($604 million), offset in part by common stock dividends to Con Edison ($264 million) in 2023.
O&R
Current assets at March 31, 2023 were $18 million lower than at December 31, 2022. The change in current assets primarily reflects a decrease in gas storage, at average cost ($15 million), a decrease in accrued unbilled revenue ($13 million), offset in part by an increase in accounts receivables, net of allowance for uncollectible accounts ($8 million) (see “COVID-19 Regulatory Matters” in Note B to the liabilityFirst Quarter Financial Statements and “Coronavirus Disease 2019 (COVID-19) Impacts - Accounting Considerations” and “Liquidity and Financing,” above) and higher prepayments ($4 million).
Net plant at March 31, 2023 was $28 million higher than at December 31, 2022. The change in net plant primarily reflects an increase in electric ($24 million), gas ($18 million), and general ($9 million) plant balances, offset in part by an increase in accumulated depreciation ($17 million) and a decrease in construction work in progress ($6 million).
Other noncurrent assets at March 31, 2023 were $17 million lower than at December 31, 2022. The change in
other noncurrent assets primarily reflects a decrease in pension and retiree benefits ($7 million), a decrease in the fair value of derivative assets ($6 million) and a decrease in regulatory assets ($2 million).
Current liabilities at March 31, 2023 were $89 million lower than at December 31, 2022. The change in current liabilities primarily reflects a decrease in notes payable ($52 million), a decrease in accounts payable ($20 million) and a decrease in accounts payable to affiliated companies ($16 million).
Noncurrent liabilities at March 31, 2023 were $23 million lower than at December 31, 2022. The change in noncurrent liabilities primarily reflects a decrease in long-term deferred derivative gains ($15 million), the regulatory liabilities for deferredunrecognized pension and other postretirement costs ($3 million) and low income taxes and unamortized investment tax credits foraggregation program ($2 million).
Equity at March 31, 2023 was $105 million higher than at December 31, 2022. The change in equity primarily reflects capital contributions from Con Edison ($90 million) in 2023,net income for the three months ended March 31, 2023 ($31 million), offset in part by common stock dividends to Con Edison ($16 million) in 2023.
CleanEnergyBusinesses
On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and CECONY reflects primarily bonus depreciation in 2017, partially offset by the increase in deferred income tax assets associated with the federal tax attribute carryforwards relatedNote T to the net operating loss and general business tax credits. See Note I to the ThirdFirst Quarter Financial Statements.
System Benefit ChargeCon Edison Transmission
Currents assets at March 31, 2023 were $11 million higher than at December 31, 2022. The increase in the liability for the system benefit chargecurrent assets primarily reflects amounts collected by the Utilitiesan equity contribution from their customers that will be required to be paid to NYSERDA.Con Edison.
Off-Balance Sheet Arrangements
None of the Companies’ transactions, agreements or other contractual arrangements meets the SEC definition of off-balance sheet arrangements.
Investments at March 31, 2023 were $27 million higher than at December 31, 2022. The increase in investments reflects additional investment in NY Transco ($26 million).
Regulatory Matters
Equity at March 31, 2023 was $193 million higher than at December 31, 2022. The change in equity primarily reflects an equity contribution from Con Edison, the proceeds of which were primarily used to repay an intercompany loan.
UtilityRegulation
CyberRegulation
In March 2017,2023, the NYSPSC issued an order that changesNY State legislature amended the way distributed energy resources are compensated and begins to phase out net energy metering. In New York, net energy metering compensates kilowatt-hours exported to the electric distribution system at the full service rate (that is production plus delivery plus taxes and fees). To provide a gradual transition, the NYSPSC allowed all existing resources to keep their current rate treatment and will delay making significant changes to policies affecting new residential and small commercial rooftop solar until 2020. Larger installations, including new commercial and industrial projects and new community solar projects, will be paid for the value of their exports to the electricity distribution system. The new policy establishes a 2 percent limit on bill increases, reducing the shifting of avoided distribution costs to non-participating residential customers that would have occurred under net energy metering.
In October 2017, the Environmental Defense Fund and the Natural Resources Defense Council requestedNY State Public Service Law, directing the NYSPSC to prohibit CECONYdevelop rules to direct electric and gas utilities, among other things, to: (i) take necessary measures to monitor and protect customer privacy, including, but not limited to, customer electric and gas consumption data, from recovering costs underunauthorized disclosure or unconsented sharing, (ii) develop and implement tools to monitor operational control networks to detect unauthorized network behavior, including the company’s 20-year transportation contract for 250,000 dekatherms per day of capacity on the Mountain Valley Pipeline unless CECONY demonstrates compliance with a public interest standard.utilities' industrial control systems that support distribution, transmission and advanced metering infrastructure control centers and (iii) mandate that utilities’ emergency response plans include cyber-attack response plans. The law also states that customer electric and gas consumption data should be considered confidential.
For additional information about the Utilities’ regulatory matters, see Note B to the Third Quarter Financial Statements.
Environmental Matters
Clean Energy Future
Clean Energy Goals
In March and April of 2023, CECONY and O&R applied for federal grants of $177 million and $125 million, respectively, appropriated under the Infrastructure Investment and Jobs Act (IIJA). In addition, seven states, including NY State, submitted a proposal for a Northeast Regional Clean Hydrogen Hub (the Hydrogen Hub) to the U.S. Department of Energy for funding under the IIJA. CECONY is seeking up to $116 million of funding to use carbon-free hydrogen to produce steam at its East River steam generating station as part of the Hydrogen Hub proposal. Federal grants obtained pursuant to the IIJA are expected to be used to reduce customers’ costs for investments in CECONY’s electric and steam systems and O&R's electric system.
In April 2023, the NYSPSC approved CECONY’s December 2022 petition seeking cost recovery approval for a proposed clean energy hub in Brooklyn, NY (Brooklyn Clean Energy Hub) at an estimated cost of $810 million, that is in addition to the capital expenditures approved in the CECONY joint proposal. See "Rate Plans" in Note B to the First Quarter Financial Statements. The Brooklyn Clean Energy Hub has an estimated in-service date of December 2027 and addresses a 2028 reliability need. The Brooklyn Clean Energy Hub provides the flexibility for offshore wind resources to interconnect during construction and after it commences operation.
In May 2023, NY approved the 2023-2024 state budget, that includes legislation that prohibits the installation of fossil-fuel equipment and building systems, including oil and natural gas, beginning in 2026 for affected new buildings with not more than seven stories and beginning in 2029 for all other new affected buildings. The law includes exemptions for, among other things, emergency backup generators, hospitals, laundromats and commercial kitchens.
Other Environmental Matters
In May 2017, a transformer failure atJuly 2021, a CECONY substation dischargedfeeder failure led to the discharge of thousands of gallons of transformer oil intodielectric fluid from a street manhole in New Rochelle, NY. Dielectric fluid reached nearby streets, properties and the soil. Some of the transformer oil, which contained small amounts of polychlorinated biphenyls (PCBs), leaked into the East River. The company,New Rochelle Harbor. CECONY, the U.S. Coast Guard, the New York State Department of Environmental ConservationNYSDEC and other agencies responded to the incident. TheCECONY stopped the feeder leak on the same day the discharge occurred and has completed the spill recovery and associated cleanup operations. In addition, the company has replaced the transformer, and is continuing to remediate and monitor the site, thereceived third-party damage claims. The costs of whichassociated with this matter are not expected to have a material adverse effect on itsthe company’s financial condition, results of operations orand liquidity. In connection with the incident, the company may incur monetary sanctions of more than $0.1$0.3 million for violations of certain provisions regulating the discharge of materials into, and for the protection of, the environment.
In June 2017, CECONY received a notice of potential liability from the U.S. Environmental Protection Agency (EPA) with respect to the Newtown Creek site that was listed in 2010 on the EPA’s National Priorities List of Superfund sites. The EPA has identified fourteen potentially responsible parties (PRPs) with respect to the site, including CECONY, and has indicated that it will notify the company as additional PRPs are identified and notified by the EPA. Newtown Creek and its tributaries (collectively, Newtown Creek) form a 3.8 mile border between Brooklyn and Queens, New York. Currently, the predominant land use around Newtown Creek includes industrial, petroleum, recycling, manufacturing and distribution facilities and warehouses. Other uses include trucking, concrete manufacture, transportation infrastructure and a wastewater treatment plant. Newtown Creek is near several residential neighborhoods. Six PRPs, not including CECONY, pursuant to an administrative settlement agreement and order on consent the EPA issued to them in 2011, have been performing a remedial investigation of the site. The EPA indicated that sampling events have shown the sediments in Newtown Creek to be contaminated with a wide variety of hazardous substances including PCBs, metals, pesticides, polycyclic aromatic hydrocarbons and volatile organic contaminants. The EPA also indicated that it has reason to believe that hazardous substances have come to be released from CECONY facilities into Newtown Creek. The EPA’s current schedule anticipates completion of a feasibility study for the site by late 2018 and issuance of its record of decision selecting a remedy for the site by late 2020. CECONY is unable to estimate its exposure to liability for the Newtown Creek site.
In the fourth quarter of 2016, CECONY and another utility responded to a reported dielectric fluid leak at a New Jersey marina on the Hudson River associated with one or two underwater transmission lines, the New Jersey portion of which is owned and operated by the other utility and the New York portion of which is owned and operated by CECONY. During the third quarter of 2017, after the marina owner had cleared substantial debris from its collapsed pier, a dielectric fluid leak was found and repaired on one of the underwater transmission lines. In the fourth quarter of 2017, it is anticipated that sediment regrading will be completed in underwater areas of the marina that had been disturbed during the leak search and repair efforts. Monitoring also will be conducted to evaluate whether any further action is necessary. CECONY expects that, consistent with the cost allocation provisions of their prior arrangements for the transmission lines, the costs to respond to the incident and repair the line, net of any recovery from the marina owner, will be shared by CECONY and the other utility. At September 30, 2017, the response and repair costs amounted to approximately $27 million, including those costs incurred by CECONY and those costs which the company has been notified have been incurred by the other utility and the U.S. Coast Guard.
CECONY does not expect that its ultimate share of the costs to respond to the discharge and repair the transmission line will have a material adverse effect on its financial condition, results of operation or liquidity.
For additional information about the Companies’ environmental matters, see Note G to the ThirdFirst Quarter Financial Statements.
Con Edison DevelopmentTransmission
The following table provides information aboutIn May 2022, the renewable electric production projectsoperator of the Mountain Valley Pipeline, that is being constructed by a joint venture in which Con Edison Development owned at September 30, 2017:
|
| | | | | |
Project Name | Production Technology | Generating Capacity (a) (MW AC) | Purchased Power Agreement (PPA)Term (In Years) (b) | Actual/Expected In-Service Date (c) | Location (State) |
Wholly owned projects |
|
|
|
|
|
Pilesgrove | Solar | 18 | (d) | 2011 | New Jersey |
Flemington Solar | Solar | 8 | (d) | 2011 | New Jersey |
Frenchtown I, II and III | Solar | 14 | (d) | 2011-13 | New Jersey |
PA Solar | Solar | 10 | | 2012 | Pennsylvania |
California Solar 2 (e) | Solar | 80 | 20 | 2014-16 | California |
Oak Tree Wind | Wind | 20 | 20 | 2014 | South Dakota |
Texas Solar 3 | Solar | 6 | 25 | 2015 | Texas |
Texas Solar 5 (e) | Solar | 95 | 25 | 2015 | Texas |
Campbell County Wind | Wind | 95 | 30 | 2015 | South Dakota |
Texas Solar 7 (e) | Solar | 106 | 25 | 2016 | Texas |
California Solar 3 (e) | Solar | 110 | 20 | 2016 | California |
Adams Wind (e) | Wind | 23 | 7 | 2016 | Minnesota |
Valley View (e) | Wind | 10 | 14 | 2016 | Minnesota |
Coram (e) | Wind | 102 | 16 | 2016 | California |
Upton County Solar (e) | Solar | 158 | 25 | 2017 | Texas |
Projects of less than 5 MW | Solar / Wind | 25 | Various | Various | Various |
Jointly owned projects (e) (f) |
|
|
|
|
|
California Solar | Solar | 55 | 25 | 2012-13 | California |
Mesquite Solar 1 | Solar | 83 | 20 | 2013 | Arizona |
Copper Mountain Solar 2 | Solar | 75 | 25 | 2013-15 | Nevada |
Copper Mountain Solar 3 | Solar | 128 | 20 | 2014-15 | Nevada |
Broken Bow II | Wind | 38 | 25 | 2014 | Nebraska |
Texas Solar 4 | Solar | 32 | 25 | 2014 | Texas |
Total MW (AC) in Operation |
| 1,291 |
|
|
|
Panoche Valley | Solar | 240 | 20 | 2018 | California |
Total MW (AC) in Construction |
| 240 |
|
|
|
Total MW (AC), All Projects |
| 1,531 |
|
|
|
(a) RepresentsTransmission owns a 9.5 percent interest (which is expected to be reduced to 8.0 percent based on the latest project cost estimate and Con Edison Development’s ownership interestTransmission’s previous capping of its cash contributions to the joint venture), indicated it plans to pursue new permits and is now targeting a full in-service date during the second half of 2023 at a total project cost of approximately $6,600 million, excluding allowance for funds used during construction. In June 2022, the Mountain Valley Pipeline joint venture filed a request with the FERC for, and in August 2022, the project.
(b) Represents PPA contractual term or remaining term fromFERC granted, a four-year extension of time to complete the project by October 2026. At March 31, 2023, Con Edison Development’s dateTransmission’s carrying value of acquisition.
(c) Represents Actual/Expected In-Service Date or Con Edison Development's date of acquisition.
(d) Have Solar Renewable Energy Credit hedgesits investment in place, in lieu of PPAs, out to 2020.
(e) Project has been pledged to secure financing for the project.
(f) All of the jointly-owned projects are 50 percent owned, except for Texas Solar 4 (which is 80 percent owned). See Note MMVP was $111 million and its cash contributions to the Thirdjoint venture amounted to $530 million.
Quarter Financial Statements.
Con Edison Development's renewable electric production volumes generated for the three and nine months ended September 30, 2017 compared with the 2016 period were:
|
| | | | | | | | | | | | | |
| Millions of kWh Generated |
| For the Three Months Ended | For the Nine Months Ended |
Description | September 30, 2017 |
| September 30, 2016 |
| Variation |
| Percent Variation |
| September 30, 2017 | September 30, 2016 | Variation | Percent Variation |
|
Renewable electric production projects | | | | | | | | |
Solar | 668 |
| 458 |
| 210 |
| 45.9 | % | 1,679 | 1,215 | 464 | 38.2 | % |
Wind | 217 |
| 137 |
| 80 |
| 58.4 | % | 734 | 464 | 270 | 58.2 | % |
Total | 885 |
| 595 |
| 290 |
| 48.7 | % | 2,413 | 1,679 | 734 | 43.7 | % |
Financial and Commodity Market Risks
The Companies are subject to various risks and uncertainties associated with financial and commodity markets. The most significant market risks include interest rate risk, commodity price risk credit risk and investment risk.
Interest Rate Risk
The Companies’Companies' interest rate risk relates primarily to variable rate debt andrelates to new debt financing needed to fund capital requirements, including the construction expenditures of the Utilities and maturing debt securities.securities, and variable-rate debt. Con Edison and its businessessubsidiaries manage interest rate risk through the issuance of mostly fixed-rate debt with varying maturities and through opportunistic refinancing of debt. Con Edison and CECONY estimate that at September 30, 2017,March 31, 2023, a 10 percent increase in interest rates applicable to its variable rate debt would result in an increase in annual interest expense of $2$4 million. Under CECONY’s current electric, gas and steam rate plans, variations in actual variable rate tax-exempt debt interest expense, including costs associated with the refinancing of the variable rate tax-exempt debt, are reconciled to levels reflected in rates.
Inflationary pressure has prompted the Federal Reserve to increase interest rates. Higher interest rates have resulted in, and are expected to continue to result in, increased interest expense on commercial paper, variable-rate debt and long-term debt issuances.
Commodity Price Risk
Con Edison’s commodity price risk primarily relates primarily to the purchase and sale of electricity, gas and related derivative instruments. The Utilities apply, and the Clean Energy Businesses applyapplied risk management strategies to mitigate their related exposures. See Note KN to the ThirdFirst Quarter Financial Statements.
Con Edison estimates that, as of September 30, 2017,March 31, 2023, a 10 percent decline in market prices would result in a decline in fair value of $66$159 million for the derivative instruments used by the Utilities to hedge purchases of electricity and gas, of which $60$149 million is for CECONY and $6$10 million is for O&R. Con Edison expects that any such change in fair value would be largely offset by directionally opposite changes in the cost of the electricity and gas purchased.
The Utilities do not make any margin or profit on the electricity or gas they sell. In accordance with provisions
approved by state regulators, the Utilities generally recover from full-service customers the costs they incur for energy purchased for theirthose customers, including gains and losses on certain derivative instruments used to hedge energy purchased and related costs.
The Clean Energy Businesses use a value-at-risk (VaR) model to assess the market price risk of their portfolio of electricity However, increases in electric and gas commodity fixed-price purchaseprices may contribute to a slower recovery of cash from outstanding customer accounts receivable balances and sales commitments, physical forward contracts, generating assets and commodity derivative instruments. VaR represents the potential change in fair value of the portfolio due to changes in market prices, for a specified time period and confidence level. These businesses estimate VaR across their portfolio using a delta-normal variance/covariance model with a 95 percent confidence level and compare the measured VaR results against performance due to actual prices and stress test the portfolio each quarter using an assumed 30 percent price change from forecast. Since the VaR calculation involves complex methodologies and estimates and assumptions that are based on past experience, it is not necessarily indicative of future results. VaR for the portfolio, assuming a one-day holding period, for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively, was as follows:
|
| | | | |
95% Confidence Level, One-Day Holding Period | September 30, 2017 |
| December 31, 2016 |
| (Millions of Dollars) |
Average for the period |
| $— |
| $2 |
High | 1 | 4 |
Low | — |
| 1 |
Credit Risk
The Companies are exposed to credit risk related to transactions entered into primarily for the various energy supply and hedging activities by the Utilities and the Clean Energy Businesses. See the discussion of credit exposure in Note Kincreases to the Third Quarter Financial Statements.allowance for uncollectible accounts, and may result in increases to write-offs of customer accounts receivable balances.
Investment Risk
The Companies’ investment risk relates to the investment of plan assets for their pension and other postretirement benefit plans andplans. Con Edison's investment risk also relates to the investments of the Clean Energy Businesses and Con Edison Transmission that are accounted for under the equity method. See "Investments" in Note A to the First Quarter Financial Statements.
The Companies’ current investment policy for pension plan assets includes investment targets of 5328 to 6338 percent equitiesequity securities, 42 to 60 percent debt securities and 3512 to 4922 percent fixed income and other securities.alternatives. At September 30, 2017,March 31, 2023, the pension plan investments consisted of 5831.9 percent equity securities, 48.8 percent debt securities and 4219.3 percent fixed income and other securities.alternatives.
For the Utilities’ pension and other postretirement benefit plans, regulatory accounting treatment is generally applied in accordance with the accounting rules for regulated operations. In accordance with the Statement of Policy issued by the NYSPSC and its current electric, gas and steam rate plans, CECONY defers for payment to or recovery from customers the difference between the pension and other postretirement benefit expenses and the amounts for such expenses reflected in rates. Generally, O&R also defers such difference pursuant to its NY rate plans.
Material Contingencies
For information concerning potential liabilities arising from the Companies’ material contingencies, see “COVID-19 Regulatory Matters” and "Other Regulatory Matters" in Note B and Notes G and H to the ThirdFirst Quarter Financial Statements.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
For information about the Companies’ primary market risks associated with activities in derivative financial instruments, other financial instruments and derivative commodity instruments, see “Financial and Commodity Market Risks,” in Part I, Item 2 of this report, which informationthat is incorporated herein by reference.
Item 4: Controls and Procedures
The Companies maintain disclosure controls and procedures designed to provide reasonable assurance that the information required to be disclosed in the reports that they submit to the Securities and Exchange Commission (SEC) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. For each of the Companies, its management, with the participation of its principal executive officer and principal financial officer, has evaluated its disclosure controls and procedures as of the end of the period covered by this report and, based on such evaluation, has concluded that the controls and procedures are effective to provide such reasonable assurance. Reasonable assurance is not absolute assurance, however, and there can be no assurance that any design of controls or procedures would be effective under all potential future conditions, regardless of how remote.
There was no change in the Companies’ internal control over financial reporting that occurred during the Companies’ most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companies’ internal control over financial reporting.
Part II Other Information
Item 1: Legal Proceedings
For information about certain legal proceedings affecting the Companies, see "Other Regulatory Matters" in Note B and Notes G and H to the financial statements in Part I, Item 1 of this report and "Environmental Matters - Other Environmental Matters" in Part I, Item 2 of this report, which informationthat is incorporated herein by reference.
Item 1A: Risk Factors
There were no material changes in the Companies’ risk factors compared to those disclosed in Item 1A of the Form 10-K.
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
On February 16, 2023, Con Edison announced its intent to repurchase up to $1,000 million of its Common Shares ($.10 par value). In March 2023, Con Edison entered into ASR Contracts with two dealers to repurchase $1,000 million in aggregate of its Common Shares. Pursuant to the ASR Contracts, Con Edison made payments of $1,000 million in aggregate to the dealers and received initial deliveries of 8,730,766 Common Shares in aggregate, that were recorded in treasury stock at fair value based on the closing price on March 6, 2023 of $91.63, of $800 million. The remaining $200 million was recorded as additional paid-in-capital, representing the value of the forward contract to purchase additional shares. The final number of Common Shares to be received from the dealers will be based on the volume-weighted average share price of Common Shares during the term of the applicable transaction, less a discount. At settlement, under certain circumstances, the dealers may be required to deliver additional Common Shares to Con Edison or Con Edison may be required either to make a cash payment or deliver Common Shares to the dealers. The final settlement of the transactions under the ASR Contracts is expected to occur no later than the third quarter of 2023. The terms of the accelerated share repurchases under the ASR Contracts are subject to adjustment if Con Edison enters into or announces certain types of transactions or takes certain corporate actions.
ISSUER PURCHASES OF EQUITY SECURITIES
| | | | | | | | | | | | | | |
Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |
January 1 - January 31 | — | — | — | — |
February 1 - February 28 | — | — | — | — |
March 1 - March 31 | 8,730,766 | $91.63 | 8,730,766 | — (1) |
Total | 8,730,766 | $91.63 | 8,730,766 | — |
1.On February 16, 2023, Con Edison’s Board of Directors authorized the repurchase of up to $1,000 million of its Common Shares, of which the entire amount was used in connection with the March 2023 ASR Contracts. As described above, the final number of Common Shares to be received from the dealers will be based on the volume-weighted average share price of Common Shares during the term of the applicable transaction, less a discount. At settlement, under certain circumstances, the dealers may be required to deliver additional Common Shares to Con Edison or Con Edison may be required either to make a cash payment or deliver Common Shares to the dealers.
Item 6: Exhibits
Con Edison
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Exhibit 10.1.2 | |
Exhibit 10.1.3 | |
Exhibit 10.1.4 | |
Exhibit 10.1.5 | |
Exhibit 10.1.6 | |
Exhibit 10.1.7 | |
Exhibit 10.1.8 | |
| Amendment to the Consolidated Edison Retirement Plan. |
| Statement of computation of Con Edison’s ratio of earnings to fixed charges for the nine-month periods ended September 30, 2017 and 2016, and the 12-month period ended December 31, 2016. |
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Exhibit 101.INS | XBRL Instance Document.Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
Exhibit 101.SCH | XBRL Taxonomy Extension Schema. |
Exhibit 101.CAL | XBRL Taxonomy Extension Calculation Linkbase. |
Exhibit 101.DEF | XBRL Taxonomy Extension Definition Linkbase. |
Exhibit 101.LAB | XBRL Taxonomy Extension Label Linkbase. |
Exhibit 101.PRE | XBRL Taxonomy Extension Presentation Linkbase. |
Exhibit 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
CECONY
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3.2 | CECONY Supplemental Medical Benefits. |
10.2.1 | Statement364-Day Revolving Credit Agreement, dated as of computationMarch 27, 2023, among CECONY, the lenders party thereto and Bank of CECONY’s ratio of earnings to fixed charges for the nine-month periods ended September 30, 2017 and 2016, and the 12-month period ended December 31, 2016.America, N.A., as Administrative Agent. (Designated in Con Edison's Current Report on Form 8-K dated March 27, 2023 (File No. 1-1-1217) as Exhibit 10.2) |
Exhibit 10.2.2 | |
Exhibit 10.2.3 | |
Exhibit 31.2.1 | |
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Exhibit 101.INS | XBRL Instance Document.Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
Exhibit 101.SCH | XBRL Taxonomy Extension Schema. |
Exhibit 101.CAL | XBRL Taxonomy Extension Calculation Linkbase. |
Exhibit 101.DEF | XBRL Taxonomy Extension Definition Linkbase. |
Exhibit 101.LAB | XBRL Taxonomy Extension Label Linkbase. |
Exhibit 101.PRE | XBRL Taxonomy Extension Presentation Linkbase. |
Exhibit 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, instruments defining the rights of holders of long-term debt of Con Edison’s subsidiaries other than CECONY, the total amount of which does not exceed ten percent of the total assets of Con Edison and its subsidiaries on a consolidated basis, are not filed as exhibits to Con Edison’s Form 10-K or Form 10-Q. Con Edison agrees to furnish to the SEC upon request a copy of any such instrument.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| Consolidated Edison, Inc. |
| Consolidated Edison Company of New York, Inc. |
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Date: November 2, 2017May 4, 2023 | By | /s/ Robert Hoglund |
| | Robert Hoglund Senior Vice President, Chief
Financial Officer and Duly
Authorized Officer
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