Regulatory Matters

6 Months Ended

Jun. 30, 2019

Rate Plans

CECONY – Electric

In May 2019, the New York State Public Service Commission (NYSPSC) staff submitted testimony in the NYSPSC proceeding in which CECONY requested an electric rate increase, effective January 2020. The NYSPSC staff testimony supports an electric rate increase of $58 million reflecting, among other things, an 8.3 percent return on common equity and a common equity ratio of 47.3 percent. In June 2019, CECONY filed an update to the request it filed in January 2019. The company decreased its requested January 2020 rate increase by $15 million to $470 million, increased its illustrated January 2021 rate increase by $27 million to $379 million and increased its illustrated January 2022 rate increase by $7 million to $270 million. This updated filing reflects a 9.75 percent return on common equity and a common equity ratio of 50 percent.

CECONY – Gas

In May 2019, the NYSPSC staff submitted testimony in the NYSPSC proceeding in which CECONY requested a gas rate increase, effective January 2020. The NYSPSC staff testimony supports a gas rate increase of $83 million reflecting, among other things, an 8.3 percent return on common equity and a common equity ratio of 47.3 percent. In June 2019, CECONY filed an update to the request it filed in January 2019. The company decreased its requested January 2020 rate increase by $4 million to $206 million, decreased its illustrated January 2021 rate increase by $4 million to $134 million and increased its illustrated January 2022 rate increase by $5 million to $160 million. This updated filing reflects a 9.75 percent return on common equity and a common equity ratio of 50 percent.

O&R New York – Electric and Gas

In March 2019, the NYSPSC approved the November 2018 joint proposal for new electric and gas rates. The joint proposal provides for electric rate increases of $13.4 million, $8.0 million and $5.8 million, effective January 1, 2019, 2020 and 2021, respectively. The joint proposal provides for a gas rate decrease of $7.5 million, effective January 1, 2019, and gas rate increases of $3.6 million and $0.7 million, effective January 1, 2020 and 2021.

Rockland Electric Company (RECO)

In May 2019, RECO filed a request with the New Jersey Board of Public Utilities for an electric rate increase of $19.9 million, effective February 2020. The filing reflected a return on common equity of 10.00 percent and a common equity ratio of 49.93 percent. In July 2019, RECO filed an update to the request it filed in May 2019. The company increased its requested February 2020 rate increase to $20.4 million and reduced the common equity ratio to 49.04 percent. The updated filing continues to reflect a return on common equity of 10.00 percent.

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 was 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. The company completed the required actions in 2018. Through June 30, 2019, the company incurred costs related to this matter of $273 million. Included in this amount is $32 million in capital and operating and maintenance costs reflected in the company's electric rate plan and $241 million deferred as a regulatory asset that the company is seeking to recover in its pending electric rate proceeding. The company is unable to estimate the amount or range of its possible loss related to this matter. At June 30, 2019, the company had not accrued a liability related to this matter.

In August 2018, the NYSPSC ordered CECONY to begin on January 1, 2019 to credit the company's electric and gas customers, and to begin on October 1, 2018 to credit its steam customers, with the net benefits of the federal Tax Cuts and Jobs Act of 2017 (TCJA) as measured based on amounts reflected in its rate plans prior to the enactment of the TCJA in December 2017. 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. CECONY estimates that its credit of net benefits of the TCJA to its electric, gas and steam customers in 2019 will amount to $259 million, $113 million and $25 million, respectively. CECONY’s net benefits prior to January 1, 2019 allocable to the company’s electric customers ($311 million) are to be deferred and addressed in its pending electric rate proceeding. CECONY’s net benefits prior to January 1, 2019 allocable to the company’s gas customers ($90 million) and net benefits prior to October 1, 2018 allocable to the company’s steam customers ($15 million) are to be amortized over a three-year period. CECONY’s net regulatory liability for future income taxes, including both the protected and unprotected portions, allocable to the company’s electric customers ($2,489 million) is to continue to be deferred and addressed in its pending electric rate proceeding and the amounts allocable to its gas and steam customers ($804 million and $185 million, respectively) are to be amortized over the remaining lives of the related assets (with the amortization period for the unprotected portion subject to review in its pending gas rate proceeding and next steam rate proceeding).

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. The Utilities are unable to estimate the amount or range of their possible loss related to this matter. At June 30, 2019, the Utilities had not accrued a liability related to this matter.

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. At June 30, 2019, CECONY's costs related to March 2018 storms, including Riley and Quinn, amounted to $134 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 ($84 million), capital expenditures ($29 million) and removal costs ($6 million). At June 30, 2019, O&R and RECO costs related to 2018 storms amounted to $43 million and $17 million, respectively, most of which were deferred as

regulatory assets pursuant to their electric rate plans. In January 2019, O&R began recovering its deferred storm costs over a six year period in accordance with its New York electric rate plan. The NYSPSC investigated 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. In April 2019, following the issuance of a NYSPSC staff report on the investigation, the NYSPSC ordered the utilities to show cause why the NYSPSC should not commence a penalty action against them for violating their emergency response plans. The Utilities are unable to estimate the amount or range of their possible loss related to this matter. At June 30, 2019, the Utilities had not accrued a liability related to this matter.

In May 2018, FERC denied a complaint the NJBPU filed with FERC seeking the re-allocation to CECONY 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 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. FERC 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. In July 2018, FERC established a settlement proceeding relating to the allocation of PJM transmission costs. 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.

In July 2018, the NYSPSC commenced an investigation into the rupture of a CECONY steam main (see Note H).

In March 2019, the NYSPSC ordered CECONY to show cause why the NYSPSC should not commence a penalty action and prudence proceeding against CECONY for alleged violations of gas operator qualification, performance, and inspection requirements. The company is seeking to resolve this matter through settlement negotiations with the NYSPSC staff. Any settlement would be subject to NYSPSC approval. The company is unable to estimate the amount or range of its possible loss related to this matter. At June 30, 2019, the company had not accrued a liability related to this matter.

On July 13, 2019, electric service was interrupted to approximately 72,000 CECONY customers on the west side of Manhattan. The NYSPSC and the Northeast Power Coordinating Council, a regional reliability entity, are investigating the July 13, 2019 power outage. The NYSPSC is also investigating other CECONY power outages that occurred in July 2019. Pursuant to the reliability performance provisions of its electric rate plan, as a result of the July 13, 2019 power outage, the company is subject to a $5 million negative revenue adjustment (which it expects to recognize in the third quarter of 2019). The company is unable to estimate the amount or range of its possible additional loss related to the power outages. At June 30, 2019, the company had not accrued a liability related to the power outages.

Regulatory Assets and Liabilities

Regulatory assets and liabilities at June 30, 2019 and December 31, 2018 were comprised of the following items:



	Con Edison		CECONY
(Millions of Dollars)	2019	2018	2019	2018
Regulatory assets
Unrecognized pension and other postretirement costs	$2,042	$2,238	$1,934	$2,111
Environmental remediation costs	787	810	696	716
Revenue taxes	304	291	291	278
MTA power reliability deferral	241	229	241	229
Property tax reconciliation	127	101	115	86
Deferred derivative losses	117	17	106	11
Municipal infrastructure support costs	76	67	76	67
Pension and other postretirement benefits deferrals	73	73	54	56
Deferred storm costs	72	76	—	—
System peak reduction and energy efficiency programs	48	72	47	70
Meadowlands heater odorization project	35	36	35	36
Brooklyn Queens demand management program	34	39	34	39
Unamortized loss on reacquired debt	32	36	30	34
Preferred stock redemption	23	23	23	23
Recoverable REV demonstration project costs	20	20	18	18
Gate station upgrade project	17	17	17	17
Workers’ compensation	4	5	4	5
O&R transition bond charges	1	2	—	—
Indian Point Energy Center program costs	—	13	—	13
Other	184	129	173	114
Regulatory assets – noncurrent	4,237	4,294	3,894	3,923
Deferred derivative losses	75	36	63	29
Recoverable energy costs	22	40	19	35
Regulatory assets – current	97	76	82	64
Total Regulatory Assets	$4,334	$4,370	$3,976	$3,987
Regulatory liabilities
Future income tax	$2,470	$2,515	$2,323	$2,363
Allowance for cost of removal less salvage	947	928	805	790
TCJA net benefits*	449	434	429	411
Net unbilled revenue deferrals	155	117	155	117
Energy efficiency portfolio standard unencumbered funds	124	127	119	122
Pension and other postretirement benefit deferrals	63	62	39	40
Net proceeds from sale of property	45	6	45	6
Property tax refunds	45	45	45	45
System benefit charge carrying charge	37	27	33	24
Earnings sharing - electric, gas and steam	25	36	17	27
Settlement of prudence proceeding	22	37	22	37
BQDM and REV Demo reconciliations	22	18	22	18
Settlement of gas proceedings	12	15	12	15
Carrying charges on repair allowance and bonus depreciation	10	21	9	21
New York State income tax rate change	8	17	8	17
Unrecognized other postretirement costs	8	7	3	7
Base rate change deferrals	4	10	4	10
Property tax reconciliation	2	36	2	36
Other	156	183	122	152
Regulatory liabilities – noncurrent	4,604	4,641	4,214	4,258
Refundable energy costs	50	31	22	8
Revenue decoupling mechanism	36	53	22	36
Deferred derivative gains	18	30	17	29
Regulatory liabilities – current	104	114	61	73
Total Regulatory Liabilities	$4,708	$4,755	$4,275	$4,331

* See "Other Regulatory Matters," above.