Regulatory Matters

3 Months Ended

Mar. 31, 2013

Regulatory Matters

Note B — Regulatory Matters

Other Regulatory Matters

In February 2009, the New York State Public Service Commission (NYSPSC) commenced a proceeding to examine the prudence of certain CECONY expenditures following the arrests of employees for accepting illegal payments from a construction contractor. Subsequently, additional employees were arrested for accepting illegal payments from materials suppliers and an engineering firm. The arrested employees were terminated by the company and have pled guilty or been convicted. 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. The amount of electric revenues collected subject to refund, which was established in a different proceeding, and the amount of gas and steam revenues collected subject to refund were not established as indicative of the company’s potential liability in this proceeding. At March 31, 2013, the company had collected an estimated $1,174 million from customers subject to potential refund in connection with this proceeding. In January 2013, a NYSPSC consultant reported its estimate, with which the company does not agree, of $208 million of overcharges with respect to a substantial portion of the company’s construction expenditures from January 2000 to January 2009. The company is disputing the consultant’s estimate, including its determinations as to overcharges regarding specific construction expenditures it selected to review and its methodology of extrapolating such determinations over a substantial portion of the construction expenditures during this period. The NYSPSC’s consultant has not reviewed the company’s other expenditures. The company and NYSPSC staff anticipate exploring settlement negotiations in this proceeding, the schedule for which may be coordinated with the schedule for consideration of the company’s January 2013 request for new electric, gas and steam rate plans. At March 31, 2013, the company had a $15 million regulatory liability for refund to customers of amounts recovered from vendors, arrested employees and insurers 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 late October 2012, Superstorm Sandy caused extensive damage to the Utilities’ electric distribution system and interrupted service to approximately 1.4 million customers. Superstorm Sandy also damaged CECONY’s steam system and interrupted service to many of its steam customers. As of March 31, 2013, CECONY and O&R incurred response and restoration costs for Superstorm Sandy of $431 million and $90 million, respectively (including capital expenditures of $113 million and $15 million, respectively). Most of the costs that were not capitalized were deferred for recovery as a regulatory asset under the Utilities’ electric rate plans. See “Regulatory Assets and Liabilities” below. The Utilities’ New York electric rate plans include provisions for revenue decoupling, as a result of which delivery revenues generally are not affected by changes in delivery volumes from levels assumed when rates were approved. The provisions of the Utilities’ New York electric plans that impose penalties for operating performance provide for exceptions for major storms and catastrophic events beyond the control of the companies, including natural disasters such as hurricanes and floods. The NYSPSC, the New York State Attorney General and a commission appointed by the Governor of New York are investigating the preparation and performance of the Utilities in connection with Superstorm Sandy and other major storms.

In March 2013, the New Jersey Board of Public Utilities established a proceeding to review the prudency of costs incurred by New Jersey utilities, including Rockland Electric Company (RECO, an O&R subsidiary), in response to major storm events in 2011 and 2012. At March 31, 2013, RECO had $27 million of storm costs deferred for recovery as a regulatory asset and had incurred $6 million of capital expenditures related to the storms.

Regulatory Assets and Liabilities

Regulatory assets and liabilities at March 31, 2013 and December 31, 2012 were comprised of the following items:

	Con Edison				CECONY
(Millions of Dollars)	2013		2012		2013		2012
Regulatory assets
Unrecognized pension and other postretirement costs		$5,443		$5,677		$5,191		$5,407
Future income tax		1,952		1,922		1,851		1,831
Environmental remediation costs		721		730		607		615
Deferred storm costs		443		432		330		309
Revenue taxes		179		176		172		170
Pension and other postretirement benefits deferrals		161		183		131		154
Surcharge for New York State assessment		117		73		111		68
Net electric deferrals		97		102		97		102
Unamortized loss on reacquired debt		71		74		68		70
O&R transition bond charges		37		39		—		—
Deferred derivative losses – long-term		32		40		14		20
Preferred stock redemption		29		29		29		29
Workers’ compensation		20		19		20		19
Property tax reconciliation		16		16		—		—
Recoverable energy costs – long-term		—		23		—		23
Other		166		170		153		155
Regulatory assets – long-term		9,484		9,705		8,774		8,972
Deferred derivative losses – current		31		69		28		60
Recoverable energy costs – current		1		5		—		—
Regulatory assets – current		32		74		28		60
Total Regulatory Assets		$9,516		$9,779		$8,802		$9,032
Regulatory liabilities
Allowance for cost of removal less salvage		$   508		$   503		$   424		$   420
Property tax reconciliation		237		187		237		187
Long-term interest rate reconciliation		77		62		77		62
Net unbilled revenue deferrals		64		136		64		136
World Trade Center settlement proceeds		62		62		62		62
Carrying charges on T&D net plant – electric and steam		25		31		10		13
Expenditure prudence proceeding		15		14		15		14
Gas line losses		14		14		14		14
Energy efficiency programs		6		5		6		6
Other		226		188		201		163
Regulatory liabilities – long-term		1,234		1,202		1,110		1,077
Refundable energy costs – current		100		82		70		48
Revenue decoupling mechanism		23		72		20		68
Deferred derivative gains – current		9		—		8		—
Electric surcharge offset		—		29		—		29
Regulatory liabilities – current		132		183		98		145
Total Regulatory Liabilities		$1,366		$1,385		$1,208		$1,222

“Deferred storm costs” represent response and restoration costs, other than capital expenditures, in connection with Superstorm Sandy and other major storms that were deferred by the Utilities. See “Other Regulatory Matters,” above.

CECONY [Member]

Regulatory Matters

Note B — Regulatory Matters

Other Regulatory Matters

In February 2009, the New York State Public Service Commission (NYSPSC) commenced a proceeding to examine the prudence of certain CECONY expenditures following the arrests of employees for accepting illegal payments from a construction contractor. Subsequently, additional employees were arrested for accepting illegal payments from materials suppliers and an engineering firm. The arrested employees were terminated by the company and have pled guilty or been convicted. 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. The amount of electric revenues collected subject to refund, which was established in a different proceeding, and the amount of gas and steam revenues collected subject to refund were not established as indicative of the company’s potential liability in this proceeding. At March 31, 2013, the company had collected an estimated $1,174 million from customers subject to potential refund in connection with this proceeding. In January 2013, a NYSPSC consultant reported its estimate, with which the company does not agree, of $208 million of overcharges with respect to a substantial portion of the company’s construction expenditures from January 2000 to January 2009. The company is disputing the consultant’s estimate, including its determinations as to overcharges regarding specific construction expenditures it selected to review and its methodology of extrapolating such determinations over a substantial portion of the construction expenditures during this period. The NYSPSC’s consultant has not reviewed the company’s other expenditures. The company and NYSPSC staff anticipate exploring settlement negotiations in this proceeding, the schedule for which may be coordinated with the schedule for consideration of the company’s January 2013 request for new electric, gas and steam rate plans. At March 31, 2013, the company had a $15 million regulatory liability for refund to customers of amounts recovered from vendors, arrested employees and insurers 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 late October 2012, Superstorm Sandy caused extensive damage to the Utilities’ electric distribution system and interrupted service to approximately 1.4 million customers. Superstorm Sandy also damaged CECONY’s steam system and interrupted service to many of its steam customers. As of March 31, 2013, CECONY and O&R incurred response and restoration costs for Superstorm Sandy of $431 million and $90 million, respectively (including capital expenditures of $113 million and $15 million, respectively). Most of the costs that were not capitalized were deferred for recovery as a regulatory asset under the Utilities’ electric rate plans. See “Regulatory Assets and Liabilities” below. The Utilities’ New York electric rate plans include provisions for revenue decoupling, as a result of which delivery revenues generally are not affected by changes in delivery volumes from levels assumed when rates were approved. The provisions of the Utilities’ New York electric plans that impose penalties for operating performance provide for exceptions for major storms and catastrophic events beyond the control of the companies, including natural disasters such as hurricanes and floods. The NYSPSC, the New York State Attorney General and a commission appointed by the Governor of New York are investigating the preparation and performance of the Utilities in connection with Superstorm Sandy and other major storms.

In March 2013, the New Jersey Board of Public Utilities established a proceeding to review the prudency of costs incurred by New Jersey utilities, including Rockland Electric Company (RECO, an O&R subsidiary), in response to major storm events in 2011 and 2012. At March 31, 2013, RECO had $27 million of storm costs deferred for recovery as a regulatory asset and had incurred $6 million of capital expenditures related to the storms.

Regulatory Assets and Liabilities

Regulatory assets and liabilities at March 31, 2013 and December 31, 2012 were comprised of the following items:

	Con Edison				CECONY
(Millions of Dollars)	2013		2012		2013		2012
Regulatory assets
Unrecognized pension and other postretirement costs		$5,443		$5,677		$5,191		$5,407
Future income tax		1,952		1,922		1,851		1,831
Environmental remediation costs		721		730		607		615
Deferred storm costs		443		432		330		309
Revenue taxes		179		176		172		170
Pension and other postretirement benefits deferrals		161		183		131		154
Surcharge for New York State assessment		117		73		111		68
Net electric deferrals		97		102		97		102
Unamortized loss on reacquired debt		71		74		68		70
O&R transition bond charges		37		39		—		—
Deferred derivative losses – long-term		32		40		14		20
Preferred stock redemption		29		29		29		29
Workers’ compensation		20		19		20		19
Property tax reconciliation		16		16		—		—
Recoverable energy costs – long-term		—		23		—		23
Other		166		170		153		155
Regulatory assets – long-term		9,484		9,705		8,774		8,972
Deferred derivative losses – current		31		69		28		60
Recoverable energy costs – current		1		5		—		—
Regulatory assets – current		32		74		28		60
Total Regulatory Assets		$9,516		$9,779		$8,802		$9,032
Regulatory liabilities
Allowance for cost of removal less salvage		$   508		$   503		$   424		$   420
Property tax reconciliation		237		187		237		187
Long-term interest rate reconciliation		77		62		77		62
Net unbilled revenue deferrals		64		136		64		136
World Trade Center settlement proceeds		62		62		62		62
Carrying charges on T&D net plant – electric and steam		25		31		10		13
Expenditure prudence proceeding		15		14		15		14
Gas line losses		14		14		14		14
Energy efficiency programs		6		5		6		6
Other		226		188		201		163
Regulatory liabilities – long-term		1,234		1,202		1,110		1,077
Refundable energy costs – current		100		82		70		48
Revenue decoupling mechanism		23		72		20		68
Deferred derivative gains – current		9		—		8		—
Electric surcharge offset		—		29		—		29
Regulatory liabilities – current		132		183		98		145
Total Regulatory Liabilities		$1,366		$1,385		$1,208		$1,222

“Deferred storm costs” represent response and restoration costs, other than capital expenditures, in connection with Superstorm Sandy and other major storms that were deferred by the Utilities. See “Other Regulatory Matters,” above.