Regulatory Assets and Liabilities

Regulatory assets and liabilities at December 31, 2014 and 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	$	4,846	$	2,730	$	4,609	$	2,610
Future income tax		2,273		2,145		2,166		2,030
Environmental remediation costs		925		938		820		830
Deferred storm costs		319		441		224		334
Revenue taxes		219		207		208		196
Surcharge for New York State assessment		99		78		92		74
Pension and other postretirement benefits deferrals		66		237		42		211
Net electric deferrals		63		83		63		83
Unamortized loss on reacquired debt		57		65		55		62
O&R property tax reconciliation		36		22		-		-
O&R transition bond charges		27		33		-		-
Preferred stock redemption		27		28		27		28
Deferred derivative losses – noncurrent		25		8		23		7
Recoverable energy costs – noncurrent		19		29		17		28
Workers’ compensation		8		12		8		12
Other		147		145		127		134
Regulatory assets – noncurrent		9,156		7,201		8,481		6,639
Deferred derivative losses – current		97		25		92		22
Recoverable energy costs – current		41		4		40		4
Future income tax – current		10		-		-		-
Regulatory assets – current		148		29		132		26
Total Regulatory Assets	$	9,304	$	7,230	$	8,613	$	6,665
Regulatory liabilities
Allowance for cost of removal less salvage	$	598	$	540	$	499	$	453
Property tax reconciliation		295		322		295		322
2014 rate plan rate base revenue deferrals		155		-		155		-
Net unbilled revenue deferrals		138		133		138		133
Prudence proceeding		105		40		105		40
Property tax refunds		87		130		87		130
Long-term interest rate reconciliation		78		105		78		105
New York State income tax rate change		62		-		59		-
Carrying charges on repair allowance and bonus depreciation		58		88		57		87
Pension and other postretirement benefit deferrals		46		50		37		50
World Trade Center settlement proceeds		41		62		41		62
Carrying charges on T&D net plant – electric and steam		21		28		20		20
Electric excess earnings		19		22		18		18
Other		290		208		248		178
Regulatory liabilities – noncurrent		1,993		1,728		1,837		1,598
Refundable energy costs – current		128		100		84		66
Revenue decoupling mechanism		30		34		30		30
Future income tax		24		-		24		-
Deferred derivative gains – current		5		14		4		11
Regulatory liabilities—current		187		148		142		107
Total Regulatory Liabilities	$	2,180	$	1,876	$	1,979	$	1,705

Summary of Utilities Rate Plans

Rockland Electric Company (RECO)
Effective period	May 2010 – July 2014	August 2014 – July 2015
Base rate changes	Yr. 1 – $9.8 million	Yr. 1 – $13.0 million
Amortization to income of net regulatory (assets) and liabilities	$(3.9) million over four years and $(4.9) million of deferred storm costs over five years	$0.4 million over three years and $(25.6) million of deferred storm costs over four years
Recoverable energy costs	Current rate recovery of purchased power costs.	Continuation of current rate recovery of purchased power costs.
Cost reconciliations	None	None
Average rate base	$148.6 million	$172.2 million
Weighted average cost of capital (after-tax)	8.21 percent	7.83 percent
Authorized return on common equity	10.3 percent	9.75 percent
Cost of long-term debt	6.16 percent	5.89 percent
Common equity ratio	50 percent	50 percent

Summary of Utilities Rate Plans

The following tables contain a summary of the Utilities’ rate plans:


CECONY – Electric
Effective period	April 2010 – December 2013	January 2014 – December 2015
Base rate changes(a)	Yr. 1 – $420 million Yr. 2 – $420 million Yr. 3 – $287 million(b)	Yr. 1 – $(76.2) million(c) Yr. 2 – $124.0 million(c)
Amortizations to income of net regulatory (assets) and liabilities	$(75.3) million over three years	$(37) million over two years, that includes $107 million annually for deferred major storm costs
Other revenue sources	Retention of $120 million of annual transmission congestion revenues from the sale of transmission rights ($90 million for the period April 1, 2013 to December 31, 2013).	Retention of $90 million of annual transmission congestion revenues.
Revenue decoupling mechanisms	In 2012 and 2013, the company deferred for customer benefit $59 million and $34 million of revenues, respectively.	In 2014, the company deferred for customer benefit $146 million of revenues.
Recoverable energy costs	Current rate recovery of purchased power and fuel costs.	Continuation of current rate recovery of purchased power and fuel costs(d).
Negative revenue adjustments	Potential penalties (up to $350 million annually) if certain performance targets are not met. In 2012 and 2013, the company did not record any negative revenue adjustments.	Potential penalties (up to $400 million annually) if certain performance targets are not met. In 2014, the company recorded a $5 million negative revenue adjustment.
Cost reconciliations(e)	In 2012 and 2013, the company deferred $146 million of net regulatory liabilities and $35 million of net regulatory assets, respectively.	In 2014, the company deferred $57 million of net regulatory liabilities.
Net utility plant reconciliations	Target levels reflected in rates were: Transmission and distribution: Yr. 1 –$13,818 million; Yr. 2 – $14,742 million; Yr. 3 – $15,414 million Enterprise resource project: Yr. 2 – $25 million; Yr. 3 -$115 million Other: Yr. 1 – $1,487 million; Yr. 2 – $1,565 million; Yr. 3 – $1,650 million The company deferred an immaterial amount and $7 million as a regulatory liability in 2012 and 2013, respectively.	Target levels reflected in rates were: Transmission and distribution: Yr. 1 – $16,869 million; Yr. 2 – $17,401 million Storm hardening: Yr. 1 – $89 million; Yr. 2 – $177 million Other: Yr. 1 – $2,034 million; Yr. 2 – $2,102 million The company deferred an immaterial amount as a regulatory liability in 2014.
Average rate base	Yr. 1 – $14,887 million Yr. 2 – $15,987 million Yr. 3 – $16,826 million	Yr. 1 – $17,323 million Yr. 2 – $18,113 million
Weighted average cost of capital (after-tax)	7.76 percent	Yr. 1 – 7.05 percent Yr. 2 – 7.08 percent
Authorized return on common equity	10.15 percent assuming the company achieved austerity measures of $27 million, $20 million and $13 million for Yrs. 1, 2 and 3. Austerity measures were achieved.	9.2 percent
Earnings sharing	Actual earnings above an annual earnings threshold of 11.15 percent for Yr. 1 and 10.65 percent for Yrs. 2 and 3 were to be applied to reduce regulatory assets for pensions and other postretirement benefits and other costs. Actual earnings were $17.5 million above the threshold for the period ended 2013.	Most earnings above an annual earnings threshold of 9.8 percent are to be applied to reduce regulatory assets for environmental remediation and other costs. In 2014, the company had no earnings above the threshold.
Cost of long-term debt	5.65 percent	Yr. 1 – 5.17 percent Yr. 2 – 5.23 percent
Common equity ratio	48 percent	48 percent

(a)	$249 million of annual revenues collected from electric customers is subject to potential refund following NYSPSC staff review of costs. See “Other Regulatory Matters” below in this Note B. Revenues for each of 2014 and 2015 include $21 million as funding for major storm reserve.

(b)	Temporary portion of the increase ($134 million) that was scheduled to go into effect April 1, 2012 was eliminated by the application of available credits.

(c)	The impact of these base rate changes is being deferred which will result in a $30 million regulatory liability at December 31, 2015.

(d)

With respect to transmission service provided pursuant to the open access transmission tariff of PJM Interconnection L.L.C. (PJM), the company recovered in 2014 part of charges incurred during 2013 (approximately $20 million) and, commencing in January 2014 and unless and until changed by the NYSPSC, the company will recover all charges incurred associated with the transmission service. In January 2014, PJM submitted to FERC a request that would substantially increase the charges for the transmission service. CECONY has opposed this increase.

(e)	Deferrals for property taxes were limited to 80 percent (90 percent beginning 2014) of the difference from amounts reflected in rates, subject to an annual maximum for the remaining difference of not more than a 10 basis point impact on return on common equity.

Summary of Utilities Rate Plans

O&R New York – Electric
Effective period		July 2012 – June 2015
Base rate changes		Yr. 1 – $19.4 million Yr. 2 – $8.8 million Yr. 3 – $15.2 million
Amortizations to income of net regulatory (assets) and liabilities		$(32.2) million over three years
Revenue decoupling mechanisms		In 2012, 2013 and 2014, the company deferred for the customer’s benefit $2.6 million, $3.2 million and ($3.4) million.
Recoverable energy costs		Current rate recovery of purchased power and fuel costs.
Negative revenue adjustments		Potential penalties (up to $3 million annually) if certain customer service and system reliability performance targets are not met. In 2012, 2013 and 2014, the company did not record any negative revenue adjustments.
Cost reconciliations		In 2012, 2013 and 2014, the company deferred $7.8 million, $4.1 million and $(0.2) million as a net increase to regulatory assets, respectively.
Net utility plant reconciliations		Target levels reflected in rates were: Yr. 1 – $678 million; Yr. 2- $704 million; Yr. 3 – $753 million The company increased its regulatory liability by $4.2 million in 2012. The company reduced its regulatory, liability by $1.1 million and $2.3 million in 2013 and 2014, respectively.
Average rate base		Yr. 1 – $671 million Yr. 2 – $708 million Yr. 3 – $759 million
Weighted average cost of capital (after-tax)		Yr. 1 – 7.61 percent Yr. 2 – 7.65 percent Yr. 3 – 7.48 percent
Authorized return on common equity		Yr. 1 – 9.4 percent Yr. 2 – 9.5 percent Yr. 3 – 9.6 percent
Earnings sharing		The company recorded a regulatory liability of $1 million for earnings above the sharing threshold under the rate plan as of December 31, 2014.
Cost of long-term debt		Yr. 1 – 6.07 percent Yr. 2 – 6.07 percent Yr. 3 – 5.64 percent
Common equity ratio		48 percent

Summary of Utilities Rate Plans

Pike County Light & Power Company (Pike) – Electric
Effective period	April 2009 – August 2014	September 2014 – August 2015
Base rate changes(a)	Yr. 1 – $0.9 million	Yr. 1 – $1.25 million
Amortization to income of net regulatory (assets) and liabilities	$0.1 million over 5 years	$(0.7) million of deferred storm costs over five years
Cost reconciliations	True-up of Other Postretirement Benefits costs. The company deferred an immaterial amount as regulatory liabilities in 2012 and 2013.	True-up of Other Postretirement Benefits costs. The company deferred an immaterial amount as a regulatory liability in 2014.

(a)	Under the current plan, the earliest that the company can file for a new base rate change is September 1, 2016.

Summary of Utilities Rate Plans

CECONY – Gas
Effective period	October 2010 – December 2013	January 2014 – December 2016
Base rate changes(a)	Yr. 1 – $47 million Yr. 2 – $48 million Yr. 3 – $47 million	Yr. 1 – $(54.6) million(b) Yr. 2 – $38.6 million(b) Yr. 3 – $56.8 million(b)
Amortizations to income of net regulatory (assets) and liabilities	$(53.1) million over three years	$4 million over three years
Other revenue sources	Retention of revenues from non-firm customers of up to $58 million and 25 percent of any such revenues above $58 million. The company retained $57 million and $64 million of such revenues in 2012 and 2013, respectively.	Retention of revenues from non-firm customers of up to $65 million and 15 percent of any such revenues above $65 million. The company retained $70 million of such revenues in 2014.
Revenue decoupling mechanisms	In 2012 and 2013, the company deferred $22 million and $36 million of regulatory liabilities, respectively.	In 2014, the company deferred $28 million of regulatory liabilities.
Recoverable energy costs	Current rate recovery of purchased gas costs.	Continuation of current rate recovery of purchased gas costs.
Negative revenue adjustments	Potential penalties (up to $12.6 million annually) if certain gas customer service and system performance targets are not met. In 2012 and 2013, the company did not record any negative revenue adjustments.	Potential penalties (up to $33 million in 2014, $44 million in 2015, and $56 million in 2016) if certain gas performance targets are not met. In 2014, the company did not record any negative revenue adjustments.
Cost reconciliations(c)	In 2012 and 2013, the company deferred $9 million and $26 million of net regulatory assets, respectively.	In 2014, the company deferred $38 million of net regulatory liabilities.
Net utility plant reconciliations	Target levels reflected in rates were: Gas delivery Yr. 1 – $2,934 million; Yr. 2 – $3,148 million; Yr. 3 – $3,346 million For 2012 and 2013, $2.9 million and $9.5 million were deferred as a regulatory liability respectively.	Target levels reflected in rates were: Gas delivery Yr. 1 – $3,899 million; Yr. 2 – $4,258 million; Yr. 3 – $4,698 million Storm hardening: Yr. 1 – $3 million; Yr. 2 – $8 million; Yr. 3 – $30 million There were no deferrals recorded in 2014.
Average rate base	Yr. 1 – $3,027 million Yr. 2 – $3,245 million Yr. 3 – $3,434 million	Yr. 1 – $3,521 million Yr. 2 – $3,863 million Yr. 3 – $4,236 million
Weighted average cost of capital (after-tax)	7.46 percent	Yr. 1 – 7.10 percent Yr. 2 – 7.13 percent Yr. 3 – 7.21 percent
Authorized return on common equity	9.6 percent assuming the company achieved unspecified austerity measures of $4 million and $2 million in 2012 and 2013. Austerity measures were achieved.	9.3 percent
Earnings sharing	Actual earnings did not exceed the thresholds of 10.35 percent in Yr. 1 and 10.15 percent in Yrs. 2 and 3.	Most earnings above an annual earnings threshold of 9.9 percent are to be applied to reduce regulatory assets for environmental remediation and other costs. In 2014, the company had no earnings above the threshold.
Cost of long-term debt	5.57 percent	Yr. 1 – 5.17 percent Yr. 2 – 5.23 percent Yr. 3 – 5.39 percent
Common equity ratio	48 percent	48 percent

(a)	$32 million of annual revenues collected from gas customers is subject to potential refund. See “Other Regulatory Matters” below.

(b)	The impact of these base rate changes is being deferred which will result in a $32 million regulatory liability at December 31, 2016.

(c)	Deferrals for property taxes were limited to 80 percent (90 percent beginning 2014) of the difference from amounts reflected in rates, subject to an annual maximum for the remaining difference of not more than a 10 basis point impact on return on common equity.

Summary of Utilities Rate Plans

O&R New York – Gas
Effective period		November 2009 – December 2014
Base rate changes		Yr. 1 – $9 million Yr. 2 – $9 million Yr. 3 – $4.6 million Yr. 3 – $4.3 million collected through a surcharge
Amortization to income of net regulatory (assets) and liabilities		$(2) million over three years
Revenue decoupling mechanisms		In 2012, 2013 and 2014, the company deferred $4.7 million, $0.7 million and $(0.1) million of regulatory liabilities, respectively.
Recoverable energy costs		Current rate recovery of purchased gas costs.
Negative revenue adjustments		Potential penalties (up to $1.4 million annually) if certain operations and customer service requirements are not met. In 2012, 2013 and 2014, the company did not record any negative revenue adjustments.
Cost reconciliations		In 2012, 2013 and 2014, the company deferred $0.7 million, $8.3 million and $8.3 million as net regulatory assets, respectively.
Net utility plant reconciliations		The company deferred $0.7 million in 2012 as a regulatory asset and no deferrals were recorded for 2013 or 2014.
Average rate base		Yr. 1 – $280 million Yr. 2 – $296 million Yr. 3 – $309 million
Weighted average cost of capital (after-tax)		8.49 percent
Authorized return on common equity		10.4 percent
Earnings sharing		Earnings above an annual earnings threshold of 11.4 percent are to be applied to reduce regulatory assets. In 2012, 2013 and 2014, earnings did not exceed the earnings threshold.
Cost of long-term debt		6.81 percent
Common equity ratio		48 percent

Summary of Utilities Rate Plans

Pike – Gas
Effective period	April 2009 – August 2014	September 2014 – August 2015
Base Rate changes(a)	Yr. 1 – $0.3 million	Yr. 1 – $0.1 million
Amortization to income of net regulatory (assets) and liabilities	None	None
Cost reconciliations	True-up of Other Postretirement Benefits costs. The company deferred an immaterial amount as regulatory liabilities in 2012 and 2013.	True-up of Other Postretirement Benefits costs. The company deferred an immaterial amount as a regulatory liability in 2014.

(a)	Under the current plan, the earliest that the company can file for a new base rate change is September 1, 2016.

Summary of Utilities Rate Plans

CECONY – Steam
Effective period	October 2010 – December 2013	January 2014 – December 2016
Base rate changes(a)	Yr. 1 – $49.5 million Yr. 2 – $49.5 million Yr. 3 – $17.8 million Yr. 3 – $31.7 million collected through a surcharge	Yr. 1 – $(22.4) million(b) Yr. 2 – $19.8 million(b) Yr. 3 – $20.3 million(b)
Amortizations to income of net regulatory (assets) and liabilities	$(20.1) million over three years	$37 million over three years
Recoverable energy costs	Current rate recovery of purchased power and fuel costs.	Continuation of current rate recovery of purchased power and fuel costs.
Negative revenue adjustments	Potential penalties (up to $1 million annually) if certain steam performance targets are not met. In 2012 and 2013, the company did not record any negative revenue adjustments.	Potential penalties (up to $1 million annually) if certain steam performance targets are not met. In 2014, the company did not record any negative revenue adjustments.
Cost reconciliations(c)	In 2012 and 2013, the company deferred $12 million and $17 million of net regulatory liabilities, respectively.	In 2014, the company deferred $42 million of net regulatory liabilities.
Net utility plant reconciliations	Target levels reflected in rates were: Production Yr. 1 – $415 million; Yr. 2 – $426 million; Yr. 3 – $433 million Distribution: Yr. 1 – $521 million; Yr. 2 – $534 million; Yr. 3 – $543 million The company reduced its regulatory liability by $0.2 million in 2012 and made no deferral in 2013.	Target levels reflected in rates were: Production Yr. 1 – $1,752 million; Yr. 2 – $1,732 million; Yr. 3 – $1,720 million Distribution: Yr. 1 – $6 million; Yr. 2 – $11 million; Yr. 3 – $25 million The company reduced its regulatory liability by $1.1 million in 2014.
Average rate base	Yr. 1 – $1,589 million Yr. 2 – $1,603 million Yr. 3 – $1,613 million	Yr. 1 – $1,511 million Yr. 2 – $1,547 million Yr. 3 – $1,604 million
Weighted average cost of capital (after-tax)	7.46 percent	Yr. 1 – 7.10 percent Yr. 2 – 7.13 percent Yr. 3 – 7.21 percent
Authorized return on common equity	9.6 percent (assuming company achieved unspecified austerity measures of $3 million and $2 million in 2012 and 2013). Austerity measures were achieved.	9.3 percent
Earnings sharing	Weather normalized earnings did not exceed the threshold of 10.35 percent in Yr. 1 and 10.15 percent in Yrs. 2 and 3. In 2013, actual earnings were $0.5 million above the earnings threshold of 10.15 percent.	Weather normalized earnings above an annual earnings threshold of 9.9 percent are to be applied to reduce regulatory assets for environmental remediation and other costs. In 2014, the company had no earnings above the threshold.
Cost of long-term debt	5.57 percent	Yr. 1 – 5.17 percent Yr. 2 – 5.23 percent Yr. 3 – 5.39 percent
Common equity ratio	48 percent	48 percent

(a)	$6 million of annual revenues collected from steam customers is subject to potential refund. See “Other Regulatory Matters” below in this Note B.

(b)	The impact of these base rate changes is being deferred which will result in an $8 million regulatory liability at December 31, 2016.

(c)	Deferrals for property taxes were limited to 80 percent (90 percent beginning 2014) of the difference from amounts reflected in rates, subject to an annual maximum for the remaining difference of not more than a 10 basis point impact on return on common equity.