Regulatory Matters

Rate Plans

O&R New York – Electric

In April 2018, O&R filed a preliminary update to its January 2018 request to the NYSPSC for an electric rate increase effective January 1, 2019. The company increased its requested January 2019 rate increase by $2.2 million to $22.5 million.

O&R New York – Gas

In April 2018, O&R filed a preliminary update to its January 2018 request to the NYSPSC for a gas rate increase effective January 2019. The company decreased its requested January 2019 rate increase by $1.7 million to $2.7 million.

Other Regulatory Matters

In August and November 2017, the NYSPSC issued orders in its proceeding investigating an April 21, 2017 Metropolitan Transportation Authority (MTA) subway power outage. The orders indicated that the investigation determined that the outage was caused by a failure of CECONY’s electricity supply to a subway station, which led to a loss of the subway signals, and that one of the secondary services to the MTA facility had been improperly rerouted and was not properly documented by the company. The orders also indicated that the loss of power to the subway station affected multiple subway lines and caused widespread delays across the subway system. Pursuant to the orders, the company is required to take certain actions, including inspecting, repairing and installing certain electrical equipment that serves the subway system, analyzing power supply and power quality events affecting the MTA’s signaling services, and filing monthly reports with the NYSPSC on all of the company's activities related to the subway system. Through March 31, 2018, the company incurred costs related to this matter of $149 million. Included in this amount is $27 million in capital and operating and maintenance costs reflected in the company's electric rate plan and $122 million deferred as a regulatory asset pursuant to the rate plan. The company, which plans to complete the required actions in 2018, expects to incur costs related to this matter during the remainder of 2018 of $115 million. Included in this amount is $5 million in expected capital and operating and maintenance costs reflected in the rate plan and $110 million expected to be deferred as a regulatory asset pursuant to the rate plan.

In December 2017, the NYSPSC issued an order initiating a proceeding to study the potential effects of the federal Tax Cuts and Jobs Act of 2017 (TCJA) on income tax expense and liabilities of New York State utilities and the regulatory treatment to preserve the resulting benefits for customers. In March 2018, the NYSPSC staff recommended that the NYSPSC require most utilities to begin on October 1, 2018 to credit their customers’ bills with the net benefits of the TCJA as measured based on amounts reflected in their rate plans prior to the enactment of the TCJA. The net benefits include the revenue requirement impact of the reduction in the corporate federal income tax rate to 21 percent, the elimination for utilities of bonus depreciation and the amortization of excess deferred federal income taxes the utilities collected from their customers that will not need to be paid to the Internal Revenue Service under the TCJA. Upon enactment of the TCJA in December 2017, CECONY and O&R re-measured their deferred tax assets and liabilities and accrued net regulatory liabilities for future income taxes of $3,513 million and $161 million, respectively. Under the rate normalization requirements continued by the TCJA, the portion of their net regulatory liabilities related to certain accelerated tax depreciation benefits ($2,542 million and $126 million, respectively) is to be amortized over the remaining lives of the related assets. The remainder ($971 million and $35 million, respectively) will be amortized as determined by the NYSPSC.

For the three months ended March 31, 2018, the Utilities deferred as regulatory liabilities estimated net benefits of $112 million, which represents approximately a quarter of the estimated annual net benefits. In January 2018, the NYSPSC issued an order initiating a focused operations audit of the income tax accounting of certain utilities, including CECONY and O&R.

In January 2018, the NJBPU issued an order initiating a proceeding to consider the TCJA. In March 2018, the NJBPU approved a $2.9 million interim decrease in Rockland Electric Company's (RECO) electric base rates, effective April 1, 2018, subject to the outcome of the NJBPU proceeding. Also in March 2018, the Federal Energy Regulatory Commission (FERC) issued an order directing RECO to propose revisions to its transmission revenue requirement to reflect the TCJA. RECO’s net regulatory liability for income taxes resulting from its re-measurement of its deferred tax asset and liabilities is $28 million (including $16 million subject to the normalization requirements continued by the TCJA).

In March 2018, Winter Storms Riley and Quinn caused damage to the Utilities’ electric distribution systems and interrupted service to approximately 209,000 CECONY customers, 93,000 O&R customers and 44,000 RECO customers. Through March 31, 2018, CECONY's costs related to March 2018 storms, including Riley and Quinn, amounted to $106 million, including operation and maintenance expenses reflected in its electric rate plan ($15 million), operation and maintenance expenses charged against a storm reserve pursuant to its electric rate plan ($56 million), capital expenditures ($29 million) and removal costs ($6 million). O&R and RECO had storm-related costs of $31 million and $11 million, respectively, most of which were deferred as regulatory assets pursuant to their electric rate plans. Recovery of CECONY and O&R storm-related costs is subject to review by the NYSPSC, and recovery of RECO storm-related costs is subject to review by the NJBPU. The NYSPSC is investigating the preparation and response to the storms by CECONY, O&R, and other New York electric utilities, including all aspects of their emergency response plans, and may penalize them. The NJBPU is investigating RECO’s preparation and response to the storms. The Companies are unable to estimate the amount or range of their possible loss in connection with the storms.

In February 2018, CECONY filed a response challenging a complaint the NJBPU filed with FERC seeking the re-allocation to the company of certain PJM Interconnection LLC (PJM) transmission costs that had been allocated to the company prior to April 2017 when transmission service provided to the company pursuant to the PJM open access transmission tariff terminated. The NJBPU complaint is pending before FERC. The transmission service terminated because the company did not exercise its option to continue the service following a series of requests PJM had submitted to FERC that substantially increased the charges for the transmission service. CECONY challenged each of these requests. To date, FERC has rejected all but one of CECONY’s protests. In June 2015 and May 2016, CECONY filed appeals of certain FERC decisions with the U.S. Court of Appeals. Under CECONY’s electric rate plan, unless and until changed by the NYSPSC, the company will recover all charges incurred associated with the transmission service.

Regulatory Assets and Liabilities

Regulatory assets and liabilities at March 31, 2018 and December 31, 2017 were comprised of the following items:



	Con Edison		CECONY
(Millions of Dollars)	2018	2017	2018	2017
Regulatory assets
Unrecognized pension and other postretirement costs	$2,332	$2,526	$2,196	$2,376
Environmental remediation costs	783	793	668	677
Revenue taxes	271	260	259	248
MTA power reliability deferral	122	50	122	50
Recoverable energy costs	118	60	103	52
Deferred derivative losses	95	44	86	37
Pension and other postretirement benefits deferrals	77	79	57	58
Property tax reconciliation	64	51	41	25
Municipal infrastructure support costs	59	56	59	56
Unamortized loss on reacquired debt	36	37	34	35
Deferred storm costs	60	38	—	—
Brooklyn Queens demand management program	32	37	32	37
Meadowlands heater odorization project	30	18	30	18
Preferred stock redemption	24	24	24	24
Indian Point Energy Center program costs	21	29	21	29
Recoverable REV demonstration project expenses	19	19	17	17
Gate station upgrade project	13	13	13	13
Workers’ compensation	10	10	10	10
Net electric deferrals	9	9	9	9
O&R transition bond charges	7	9	—	—
Surcharge for New York State assessment	—	2	—	2
Other	102	102	90	90
Regulatory assets – noncurrent	4,284	4,266	3,871	3,863
Deferred derivative losses	88	40	81	37
Recoverable energy costs	35	27	34	25
Regulatory assets – current	123	67	115	62
Total Regulatory Assets	$4,407	$4,333	$3,986	$3,925
Regulatory liabilities
Future income tax	$2,531	$2,545	$2,376	$2,390
Allowance for cost of removal less salvage	853	846	724	719
Pension and other postretirement benefit deferrals	178	207	153	181
Energy efficiency portfolio standard unencumbered funds	127	127	122	122
TCJA net benefits*	112	—	100	—
Net unbilled revenue deferrals	106	183	106	183
Property tax reconciliation	97	107	97	107
Unrecognized other postretirement costs	77	92	77	92
Settlement of prudence proceeding	58	66	58	66
Property tax refunds	44	44	44	44
Carrying charges on repair allowance and bonus depreciation	36	43	35	42
New York State income tax rate change	31	36	31	35
Settlement of gas proceedings	25	27	25	27
Variable-rate tax-exempt debt – cost rate reconciliation	24	30	21	26
Earnings sharing - electric, gas and steam	20	29	10	19
Base rate change deferrals	18	21	18	21
Net utility plant reconciliations	10	12	6	8
Other	176	162	151	137
Regulatory liabilities – noncurrent	4,523	4,577	4,154	4,219
Refundable energy costs	63	41	37	16
Revenue decoupling mechanism	18	29	11	21
Deferred derivative gains	9	31	6	28
Regulatory liabilities – current	90	101	54	65
Total Regulatory Liabilities	$4,613	$4,678	$4,208	$4,284

* See "Other Regulatory Matters," above.