Regulatory Matters

3 Months Ended

Mar. 31, 2014

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, 2014, the company had collected an estimated $1,462 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 are exploring a settlement in this proceeding. In May 2014, the NYSPSC’s Chief Administrative Law Judge appointed a settlement judge to assist the parties. There is no assurance that there will be a settlement, and any settlement would be subject to NYSPSC approval. At March 31, 2014, the company had a $38 million regulatory liability relating to this matter. Included in the regulatory liability was $16 million the company recovered from vendors, arrested employees and insurers relating to this matter. Pursuant to the current rate plans, the company is applying $15 million of these recovered amounts for the benefit of customers to offset a like amount of regulatory assets. The company currently estimates that any additional amount the NYSPSC requires the company to refund to customers could range in amount from $25 million up to an amount based on the NYSPSC consultant’s $208 million estimate of overcharges.

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, 2014, CECONY and O&R incurred response and restoration costs for Superstorm Sandy of $490 million and $93 million, respectively (including capital expenditures of $149 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. CECONY’s current electric rate plan includes collection from customers of deferred storm costs (including for Superstorm Sandy), subject to refund following NYSPSC review of the costs. O&R expects to request recovery of deferred storm costs for its New York electric operations, which are also subject to NYSPSC review, when it next files with the NYSPSC for a new electric rate plan. In March 2013, the NJBPU established a proceeding to review the prudency of costs incurred by New Jersey utilities in response to major storm events in 2011 and 2012. In November 2013, RECO filed an electric rate request with the NJBPU which includes a proposal for recovery over a three-year period of its deferred storm costs of $27 million. In May 2014, RECO, the NJBPU staff and the New Jersey Division of Rate Counsel entered into a stipulation of settlement regarding RECO’s deferred storm costs. The stipulation, which is subject to NJBPU approval, provides that RECO’s deferred storm costs are deemed reasonable, prudent and eligible for recovery over a period to be determined in RECO’s electric rate proceeding.

Regulatory Assets and Liabilities

Regulatory assets and liabilities at March 31, 2014 and December 31, 2013 were comprised of the following items:

	Con Edison				CECONY
(Millions of Dollars)	2014		2013		2014		2013
Regulatory assets
Unrecognized pension and other postretirement costs		$2,591		$2,730		$2,478		$2,610
Future income tax		2,183		2,145		2,070		2,030
Environmental remediation costs		921		938		814		830
Deferred storm costs		411		441		307		334
Revenue taxes		216		207		204		196
Pension and other postretirement benefits deferrals		191		237		163		211
Surcharge for New York State assessment		144		78		136		74
Net electric deferrals		78		83		78		83
Unamortized loss on reacquired debt		63		65		60		62
O&R transition bond charges		31		33		—		—
Preferred stock redemption		28		28		28		28
Property tax reconciliation		25		22		—		—
Workers’ compensation		12		12		12		12
Deferred derivative losses – noncurrent		6		8		5		7
Other		182		174		167		162
Regulatory assets – noncurrent		7,082		7,201		6,522		6,639
Deferred derivative losses – current		7		25		5		22
Recoverable energy costs – current		1		4		—		4
Regulatory assets – current		8		29		5		26
Total Regulatory Assets		$7,090		$7,230		$6,527		$6,665
Regulatory liabilities
Allowance for cost of removal less salvage		$   558		$   540		$   466		$   453
Property tax reconciliation		299		322		299		322
Property tax refunds		119		130		119		130
Long-term interest rate reconciliation		99		105		99		105
Carrying charges on repair allowance and bonus depreciation		81		88		80		87
New York State income tax rate change		66		—		62		—
Net unbilled revenue deferrals		61		133		61		133
World Trade Center settlement proceeds		57		62		57		62
Other postretirement benefit deferrals		51		50		47		50
2014 rate plan base rate revenue deferral		50		—		50		—
Prudence proceeding		38		40		38		40
Unrecognized other postretirement benefits costs		32		—		23		—
Carrying charges on T&D net plant – electric and steam		27		28		21		20
Electric excess earnings		22		22		18		18
Other		240		208		207		178
Regulatory liabilities – noncurrent		1,800		1,728		1,647		1,598
Refundable energy costs – current		160		100		128		66
Deferred derivative gains – current		44		14		36		11
Revenue decoupling mechanism		23		34		19		30
Future income tax		16		—		16		—
Regulatory liabilities – current		243		148		199		107
Total Regulatory Liabilities		$2,043		$1,876		$1,846		$1,705

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, 2014, the company had collected an estimated $1,462 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 are exploring a settlement in this proceeding. In May 2014, the NYSPSC’s Chief Administrative Law Judge appointed a settlement judge to assist the parties. There is no assurance that there will be a settlement, and any settlement would be subject to NYSPSC approval. At March 31, 2014, the company had a $38 million regulatory liability relating to this matter. Included in the regulatory liability was $16 million the company recovered from vendors, arrested employees and insurers relating to this matter. Pursuant to the current rate plans, the company is applying $15 million of these recovered amounts for the benefit of customers to offset a like amount of regulatory assets. The company currently estimates that any additional amount the NYSPSC requires the company to refund to customers could range in amount from $25 million up to an amount based on the NYSPSC consultant’s $208 million estimate of overcharges.

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, 2014, CECONY and O&R incurred response and restoration costs for Superstorm Sandy of $490 million and $93 million, respectively (including capital expenditures of $149 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. CECONY’s current electric rate plan includes collection from customers of deferred storm costs (including for Superstorm Sandy), subject to refund following NYSPSC review of the costs. O&R expects to request recovery of deferred storm costs for its New York electric operations, which are also subject to NYSPSC review, when it next files with the NYSPSC for a new electric rate plan. In March 2013, the NJBPU established a proceeding to review the prudency of costs incurred by New Jersey utilities in response to major storm events in 2011 and 2012. In November 2013, RECO filed an electric rate request with the NJBPU which includes a proposal for recovery over a three-year period of its deferred storm costs of $27 million. In May 2014, RECO, the NJBPU staff and the New Jersey Division of Rate Counsel entered into a stipulation of settlement regarding RECO’s deferred storm costs. The stipulation, which is subject to NJBPU approval, provides that RECO’s deferred storm costs are deemed reasonable, prudent and eligible for recovery over a period to be determined in RECO’s electric rate proceeding.

Regulatory Assets and Liabilities

Regulatory assets and liabilities at March 31, 2014 and December 31, 2013 were comprised of the following items:

	Con Edison				CECONY
(Millions of Dollars)	2014		2013		2014		2013
Regulatory assets
Unrecognized pension and other postretirement costs		$2,591		$2,730		$2,478		$2,610
Future income tax		2,183		2,145		2,070		2,030
Environmental remediation costs		921		938		814		830
Deferred storm costs		411		441		307		334
Revenue taxes		216		207		204		196
Pension and other postretirement benefits deferrals		191		237		163		211
Surcharge for New York State assessment		144		78		136		74
Net electric deferrals		78		83		78		83
Unamortized loss on reacquired debt		63		65		60		62
O&R transition bond charges		31		33		—		—
Preferred stock redemption		28		28		28		28
Property tax reconciliation		25		22		—		—
Workers’ compensation		12		12		12		12
Deferred derivative losses – noncurrent		6		8		5		7
Other		182		174		167		162
Regulatory assets – noncurrent		7,082		7,201		6,522		6,639
Deferred derivative losses – current		7		25		5		22
Recoverable energy costs – current		1		4		—		4
Regulatory assets – current		8		29		5		26
Total Regulatory Assets		$7,090		$7,230		$6,527		$6,665
Regulatory liabilities
Allowance for cost of removal less salvage		$   558		$   540		$   466		$   453
Property tax reconciliation		299		322		299		322
Property tax refunds		119		130		119		130
Long-term interest rate reconciliation		99		105		99		105
Carrying charges on repair allowance and bonus depreciation		81		88		80		87
New York State income tax rate change		66		—		62		—
Net unbilled revenue deferrals		61		133		61		133
World Trade Center settlement proceeds		57		62		57		62
Other postretirement benefit deferrals		51		50		47		50
2014 rate plan base rate revenue deferral		50		—		50		—
Prudence proceeding		38		40		38		40
Unrecognized other postretirement benefits costs		32		—		23		—
Carrying charges on T&D net plant – electric and steam		27		28		21		20
Electric excess earnings		22		22		18		18
Other		240		208		207		178
Regulatory liabilities – noncurrent		1,800		1,728		1,647		1,598
Refundable energy costs – current		160		100		128		66
Deferred derivative gains – current		44		14		36		11
Revenue decoupling mechanism		23		34		19		30
Future income tax		16		—		16		—
Regulatory liabilities – current		243		148		199		107
Total Regulatory Liabilities		$2,043		$1,876		$1,846		$1,705