Regulatory Matters

6 Months Ended

Jun. 30, 2012

Note B — Regulatory Matters

Rate Agreements

CECONY — Electric

In March 2012, the NYSPSC issued an order requiring that the $134 million surcharge that was to have been collected from customers during the rate year ending March 2013 instead be offset using certain CECONY regulatory liabilities that would have otherwise been refundable to or applied for the benefit of customers after the rate year.

O&R — Electric

On February 24, 2012, O&R, the staff of the NYSPSC and the Utility Intervention Unit of New York State’s Division of Consumer Protection entered into a Joint Proposal with respect to the Company’s rates for electric delivery service rendered in New York. The Joint Proposal, which the NYSPSC approved in June 2012, covers the three-year period from July 2012 through June 2015. The Joint Proposal provides for electric base rate increases of $19.4 million, $8.8 million and $15.2 million, effective July 2012, 2013 and 2014, respectively, which is being implemented, at the NYSPSC’s option, with increases of $15.2 million effective July 2012 and 2013 and an increase of $13.1 million, together with a surcharge of $2.1 million, effective July 2014. The Joint Proposal reflects the following major items:

•

a weighted average cost of capital of 7.61 percent, 7.65 percent and 7.48 percent for the rate years ending June 30, 2013, 2014 and 2015, respectively, reflecting:

•

a return on common equity of 9.4 percent, 9.5 percent and 9.6 percent for the rate years ending June 30, 2013, 2014 and 2015, respectively;

•

cost of long-term debt of 6.07 percent for each of the rate years ending June 30, 2013 and 2014 and 5.64 percent for the rate year ending June 30, 2015;

•

common equity ratio of 48 percent for each of the rate years ending June 30, 2013, 2014 and 2015; and

•

average rate base of $671 million, $708 million and $759 million for the rate years ending June 30, 2013, 2014 and 2015, respectively;

•

sharing with electric customers of any actual earnings, excluding the effects of any penalties and certain other items, above specified percentage returns on common equity (based on the actual average common equity ratio, subject to a 50 percent maximum):

•

the company will allocate to customers the revenue requirement equivalent of 50 percent, 75 percent and 90 percent of any such earnings for each rate year in excess of 80 basis points, 180 basis points and 280 basis points, respectively, above the return on common equity for that rate year indicated above; and

•

the earnings sharing allocation between the company and customers will be done on a cumulative basis at the end of rate year three;

•

continuation of a revenue decoupling mechanism;

•

continuation of a provision which defers as a regulatory liability for the benefit of customers or, subject to certain limitations, a regulatory asset for recovery from customers, as the case may be, the revenue requirement impact of the amount by which actual average net utility plant for each rate year is different than the average net utility plant reflected in rates ($678 million, $704 million and $753 million for the rate years ending June 30, 2013, 2014 and 2015, respectively);

•

continuation of the rate provisions pursuant to which the company recovers its purchased power costs from customers;

•

continuation of rate provisions under which pension and other post-retirement benefit expenses, environmental remediation expenses, tax-exempt debt costs, property taxes and certain other expenses are reconciled to amounts for those expenses reflected in rates; and

•

continuation of provisions for potential operations penalties of up to $3 million annually if certain customer service and system reliability performance targets are not met.

Other Regulatory Matters

In February 2009, the NYSPSC commenced a proceeding to examine the prudence of certain CECONY expenditures (see “Investigations of Vendor Payments” in Note H). Pursuant to NYSPSC orders, a portion of the company’s revenues (currently, $249 million, $32 million and $6 million on an annual basis for electric, gas and steam service, respectively) is being collected subject to potential refund to customers. At June 30, 2012, the company had collected an estimated $959 million from customers subject to potential refund in connection with this proceeding. In October 2010, a NYSPSC consultant reported its $21 million provisional assessment, which the company has disputed, of potential overcharges for construction work. The potential overcharges related to transactions that involved certain employees who were arrested and a contractor that performed work for the company. The NYSPSC’s consultant is expected to continue to review the company’s expenditures. At June 30, 2012, the company had a $15 million regulatory liability relating to this matter. The company is unable to estimate the amount, if any, by which any refund required by the NYSPSC may exceed this regulatory liability.

In February 2011, the NYSPSC initiated a proceeding to examine the existing mechanisms pursuant to which utilities recover site investigation and remediation costs and possible alternatives. See Note G.

Regulatory Assets and Liabilities

Regulatory assets and liabilities at June 30, 2012 and December 31, 2011 were comprised of the following items:


	Con Edison				CECONY
*(Millions of Dollars)*	2012		2011		2012		2011
Regulatory assets
Unrecognized pension and other postretirement costs		$5,407		$5,852		$5,159		$5,554
Future income tax		1,874		1,798		1,796		1,724
Environmental remediation costs		730		681		615		564
Pension and other postretirement benefits deferrals		214		198		183		157
Revenue taxes		169		163		163		158
Deferred storm costs		121		128		78		80
Net electric deferrals		111		121		111		121
Surcharge for New York State assessment		87		90		80		82
Deferred derivative losses – long-term		70		60		45		44
O&R transition bond charges		42		44		—		—
Preferred stock redemption		30		—		30		—
Workers’ compensation		21		23		20		23
Property tax reconciliation		13		13		—		—
Recoverable energy costs – long-term		—		14		—		14
Other		189		152		177		140
Regulatory assets – long-term		9,078		9,337		8,457		8,661
Deferred derivative losses – current		126		164		104		140
Recoverable energy costs – current		1		—		—		—
Regulatory assets – current		127		164		104		140
Total Regulatory Assets		$9,205		$9,501		$8,561		$8,801
Regulatory liabilities
Allowance for cost of removal less salvage		$ 468		$ 448		$ 389		$ 372
Net unbilled revenue deferrals		140		104		140		104
Property tax reconciliation		97		35		97		35
World Trade Center settlement proceeds		72		62		72		62
Long-term interest rate reconciliation		46		30		46		30
Carrying charges on transmission and distribution net plant		41		38		19		14
Gas line losses		17		21		17		21
Expenditure prudence proceeding		15		11		15		11
Energy efficiency programs		8		22		5		20
Other		125		206		106		192
Regulatory liabilities – long-term		1,029		977		906		861
Electric surcharge offset		104		—		104		—
Refundable energy costs – current		69		51		38		12
Revenue decoupling mechanism		59		66		59		66
Deferred derivative gains – current		1		1		1		1
Regulatory liabilities – current		233		118		202		79
Total Regulatory Liabilities		$1,262		$1,095		$1,108		$ 940

CECONY

Regulatory Matters