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Regulatory Matters | 9 Months Ended
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Sep. 30, 2020
Regulated Operations [Abstract] |
Regulatory Matters | Regulatory Matters COVID-19 Regulatory Matters Governors, public utility commissions, federal authorities and other regulatory agencies in the states in which the Utilities operate have issued orders related to the COVID-19 pandemic that impact the Utilities as described below. New York State Regulation In March 2020, New York State Governor Cuomo declared a State Disaster Emergency for the State of New York, due to the COVID-19 pandemic and signed the "New York State on PAUSE" executive order that closed all non-essential businesses statewide. New York State designated utilities, including CECONY and O&R, as essential businesses that were able to continue a portion of their work during the effectiveness of the PAUSE order. In May 2020, the "New York Forward" plan went into effect. New York Forward is a phased plan to reopen businesses in geographic areas of New York State that meet metrics established by various public health organizations. In October 2020, Governor Cuomo announced a new cluster action initiative to address COVID-19 hotspots that have arisen in various areas of New York within the Utilities’ service territory and to impose new rules and restrictions targeted to areas with the highest concentration of COVID-19 cases and the surrounding communities. As a result of these COVID-19 clusters, the Utilities have limited their work in customer premises in the impacted areas to only address emergency, safety-related and selected service connections requested by customers. Since the emergency declaration, and due to economic conditions, the NYSPSC and the Utilities have worked to mitigate the potential impact of the COVID-19 pandemic on the Utilities, their customers and other stakeholders. In March 2020, the Utilities began suspending service disconnections, certain collection notices, final bill collection agency activity, new late payment charges and certain other fees for all customers. The Utilities also began providing payment extensions for all customers that were scheduled to be disconnected prior to the start of the COVID-19 pandemic. In June 2020, the state of New York enacted a law prohibiting New York utilities, including CECONY and O&R, from disconnecting residential customers during the COVID-19 state of emergency. In addition, such prohibition will apply for an additional 180 days after the state of emergency ends for residential customers who have experienced a change in financial circumstances due to the COVID-19 pandemic. The law expires on March 31, 2021. For the three and nine months ended September 30, 2020, the estimated foregone revenues that were not collected by the Utilities were approximately $21 million and $44 million, respectively, for CECONY and $1 million and $2 million, respectively, for O&R. See Note K to the Third Quarter Financial Statements. Also in March 2020, the Utilities requested and the NYSPSC granted extensions to file their 2019 Earnings Adjustment Mechanisms (EAMs) reports, which were filed in July 2020. The earned EAM incentives of approximately $46 million and $3 million for CECONY and O&R, respectively, are being recovered from customers over a twelve-month period that began September 2020. In June 2020, the NYSPSC directed CECONY to implement a summer cooling credit program to help mitigate the cost of staying home and running air conditioning for health-vulnerable low-income customers due to the limited availability of public cooling facilities as a result of the COVID-19 social distancing measures. The NYSPSC further ordered that the estimated $70.6 million cost of the program will be recovered over five years, beginning in January 2021. As of September 30, 2020, CECONY deferred for later recovery $63.6 million of summer cooling credit costs. The Utilities’ New York rate plans allow them to defer costs resulting from a change in legislation, regulation and related actions that have taken effect during the term of the rate plans once the costs exceed a specified threshold. For the nine months ended September 30, 2020, the reserve increases to the allowance for uncollectible accounts associated with the COVID-19 pandemic for CECONY electric and gas operations and O&R electric operations were $46 million and $2 million, respectively, and were deferred pursuant to the legislative, regulatory and related actions provisions of the rate plans as a result of the New York State on PAUSE and related executive orders. The reserve increase to the allowance for uncollectible accounts associated with the COVID-19 pandemic for O&R gas operations of $1 million did not meet the deferral threshold at September 30, 2020. The Utilities’ New York rate plans also provide for an allowance for write-offs of customer accounts receivable balances. The above amounts deferred pursuant to the legislative, regulatory and related actions provisions were reduced by the amount that the actual write-offs of customer accounts receivable balances were below the allowance reflected in rates, which differences were $8 million and $1 million for CECONY and O&R, respectively, for the nine months ended September 30, 2020. As of September 30, 2020, CECONY deferred, for New York City residential customers, $46.8 million of higher summer generation capacity supply costs. CECONY expects to recover approximately $17 million of such costs over the period November 2020 through April 2021 and the remaining balance over the period May 2021 through October 2021. In June 2020, the NYSPSC established a generic proceeding on the impacts of the COVID-19 pandemic and sought comment on a variety of COVID-19 related issues. In July 2020, the Utilities submitted joint comments with other large utilities in New York State that included a formal request to defer all COVID-19 related costs and for a surcharge mechanism to collect such deferrals based upon the individual utility's need. The Utilities’ rate plans have revenue decoupling mechanisms in their New York electric and gas businesses that reconcile actual energy delivery revenues to the authorized delivery revenues approved by the NYSPSC per month and accumulate the deferred balances semi-annually under CECONY's electric rate plan (January through June and July through December, respectively) and annually under CECONY's gas rate plan and O&R New York's electric and gas rate plans (January through December). Differences are accrued with interest each month for CECONY and O&R New York’s electric customers and after the annual deferral period ends for CECONY and O&R New York’s gas customers for refund to, or recovery from customers, as applicable. Generally, the refund to or recovery from customers begins August and February of each year over an ensuing six-month period for CECONY's electric customers and February of each year over an ensuing twelve-month period for CECONY's gas and O&R New York's electric and gas customers. New Jersey State Regulation In March 2020, New Jersey Governor Murphy declared a Public Health Emergency and State of Emergency for the State of New Jersey. Since that declaration, the NJBPU and RECO have mitigated the potential impact of the COVID-19 pandemic on RECO, its customers and other stakeholders. New Jersey designated utilities, including RECO, as essential businesses that were able to continue a portion of their work. RECO modified or suspended certain work in the state. In March 2020, RECO began suspending late payment charges, terminations for non-payment, and no access fees during the COVID-19 pandemic. The suspension of these fees is not expected to be material. In July 2020, the NJBPU authorized RECO and other New Jersey utilities to create a COVID-19-related regulatory asset by deferring prudently incurred incremental costs related to COVID-19 beginning on March 9, 2020, and through the later of September 30, 2021, or 60 days after the emergency declaration is no longer in effect. RECO deferred net incremental COVID-19 related costs of $0.3 million through September 30, 2020. Federal Regulation In March 2020, the North American Electric Reliability Corporation (NERC) issued guidance that the effects of the COVID-19 pandemic will be considered an acceptable basis for non-compliance with certain NERC Reliability Standards requirements that would have required action between March 1, 2020 and July 31, 2020. In addition, it suspended on-site NERC compliance audits until December 31, 2020. Also in March 2020, FERC announced several actions to ease regulatory obligations in response to the COVID-19 pandemic. These include postponement of certain filing deadlines and the suspension of all audit site visits and investigative testimony. In April 2020, FERC announced it would expeditiously review and act on requests for relief in response to the COVID-19 pandemic, give priority to processing filings that contribute to the business continuity of regulated entities’ energy infrastructure and exercise prosecutorial discretion when addressing events arising during the COVID-19 pandemic. FERC also approved a blanket waiver of requirements in Open Access Transmission Tariffs that require entities to hold meetings in-person and to provide or obtain notarized documents. The blanket waivers were subsequently extended through January 29, 2021. Gas Safety In March 2020, the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a notice staying enforcement of certain federal operator qualification, control room management and drug testing requirements during the COVID-19 pandemic. The notice also announced that PHMSA would exercise discretion in its overall enforcement of other parts of the pipeline safety regulations. The NYSPSC also provided guidance that it was staying enforcement of many of the same pipeline safety requirements identified in the March 2020 PHMSA notice. In April 2020, the NYSPSC issued an order that extended the deadlines to complete certain gas inspections by all New York gas utilities, including CECONY and O&R, from April 1, 2020 to August 1, 2020. The deadlines were subsequently extended to September 2, 2020, and CECONY and O&R have taken all reasonable measures to complete such inspections. Other Regulatory Matters 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, under its electric rate plan that was approved in January 2020, is amortizing its TCJA net benefits prior to January 1, 2019 allocable to its electric customers ($377 million) over a three-year period, the “protected” portion of its net regulatory liability for future income taxes related to certain accelerated tax depreciation benefits allocable to its electric customers ($1,663 million) over the remaining lives of the related assets and the remainder, or “unprotected” portion of the net regulatory liability allocable to its electric customers ($784 million) over a five-year period. CECONY, under its gas rate plan that was approved in January 2020, is amortizing its remaining TCJA net benefits prior to January 1, 2019 allocable to its gas customers ($63 million) over a two-year period, the protected portion of its net regulatory liability for future income taxes allocable to its gas customers ($725 million) over the remaining lives of the related assets and the unprotected portion of the net regulatory liability allocable to its gas customers ($107 million) over a five-year period. CECONY's net benefits prior to October 1, 2018 allocable to the company’s steam customers ($15 million) are being 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 steam customers ($185 million) is being amortized over the remaining lives of the related assets (with the amortization period for the unprotected portion subject to review in its next steam rate proceeding). O&R, under its current electric and gas rate plans, has reflected its TCJA net benefits in its electric and gas rates beginning as of January 1, 2019. Under the rate plans, O&R is amortizing its net benefits prior to January 1, 2019 ($22 million) over a three-year period, the protected portion of its net regulatory liability for future income taxes ($123 million) over the remaining lives of the related assets and the unprotected portion ($30 million) over a fifteen-year period. 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 September 30, 2020, 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 September 30, 2020, 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 September 30, 2020, 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. In February 2020, RECO began recovering its deferred storm costs over a four-year period in accordance with its New Jersey 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. At June 30, 2020, CECONY and O&R accrued $5.6 million and $0.85 million, respectively, related to this matter. In August 2020, the NYSPSC approved a July 2020 settlement agreement that provides for the Utilities to set aside $5.6 million and $0.85 million for the benefit of CECONY and O&R electric customers, respectively. In July 2018, the NYSPSC commenced an investigation into the rupture of a CECONY steam main located on Fifth Avenue and 21st Street in Manhattan. Debris from the incident included dirt and mud containing asbestos. The response to the incident required the closing of buildings and streets for various periods. The NYSPSC has commenced an investigation. As of September 30, 2020, with respect to the incident, the company incurred operating costs of $17 million for property damage, clean-up and other response costs and invested $9 million in capital and retirement costs. During the second quarter of 2020, the company accrued a $3 million liability related to this matter. 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. At December 31, 2019, the company had an accrued regulatory liability related to this matter of $10 million, and at March 31, 2020, the company accrued an additional regulatory liability of $5 million. In April 2020, the NYSPSC approved a $15 million settlement agreement for the benefit of CECONY’s gas customers between CECONY and NYSPSC staff 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. Pursuant to the major outage reliability performance provisions of its electric rate plan, as a result of the July 13, 2019 power outage, CECONY recorded a $5 million negative revenue adjustment. The NYSPSC is also investigating other CECONY power outages that occurred in July 2019, primarily in the Flatbush area of Brooklyn. Primarily due to these outages, pursuant to the rate plan’s annual non-network outage frequency and non-network outage duration reliability performance provisions, the company recorded a $10 million negative revenue adjustment at December 31, 2019. The company is unable to estimate the amount or range of its possible additional loss related to these power outages. In May 2020, an executive order was issued prohibiting the acquisition, importation, transfer or installation of certain bulk-power system electric equipment that is sourced from foreign adversaries. The scope and effect will be determined by regulations to be issued pursuant to the order. The Companies are unable to predict the impact on them of such regulations. In August 2020, Tropical Storm Isaias caused significant damage to the Utilities’ electric distribution systems and interrupted service to approximately 330,000 CECONY electric customers and approximately 200,000 O&R electric customers. As of September 30, 2020, CECONY incurred costs for Tropical Storm Isaias of $142 million (including $73 million of operation and maintenance expenses charged against a storm reserve pursuant to its electric rate plan, $56 million of capital expenditures and $13 million of operation and maintenance expenses). As of September 30, 2020, O&R incurred costs for Tropical Storm Isaias of $30 million (including $23 million of operation and maintenance expenses charged against a storm reserve pursuant to its New York electric rate plan and $7 million of capital expenditures). The Utilities’ electric rate plans provide for recovery of operating costs and capital expenditures under different provisions. The Utilities’ incremental operating costs attributable to storms are to be deferred for recovery as a regulatory asset under their electric rate plans, while capital expenditures, up to specified levels, are reflected in rates under their electric rate plans. In addition, CECONY and O&R reserved for customer benefit of $5 million and $2 million, respectively, for estimated food and medicine spoilage claims as of September 30, 2020. The provisions of the Utilities’ New York electric rate plans that impose negative revenue adjustments 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. In August 2020, the New York State Department of Public Service (NYSDPS) issued to each of CECONY and O&R a Notice of Apparent Violations Related to Tropical Storm Isaias. The notices, among other things, asserted that, based on NYSDPS' initial investigations, the Utilities were in apparent violation of the New York State Public Service Law for allegedly failing to follow the requirements of their emergency response plans and asserted that the NYSPSC may seek to commence administrative penalty proceedings against the Utilities. The notices also provided for several corrective actions that the Utilities have since implemented. The notices further asserted that: the NYSPSC is authorized to revoke or modify utility certificates to operate based on findings of repeated violations that demonstrate a failure of a utility corporation to continue to provide safe and adequate service; the NYSPSC has on other occasions deemed the Utilities’ response to a major storm event to be inadequate; and the NYSDPS intends to specifically determine as part of its ongoing investigations whether the Utilities’ alleged violations warrant revocation of their certificates to operate. The Companies are unable to estimate the amount or range of their possible additional loss in connection with the storm. In September 2020, CECONY recorded a $5 million negative revenue adjustment pursuant to its electric rate plan’s annual network outage frequency reliability performance provision. In October 2020, the NYSPSC issued an order instituting a proceeding to consider requiring New York’s large, investor-owned utilities, including CECONY and O&R, to annually disclose what risks climate change poses to their companies, investors and customers going forward. The order notes that some holding companies, including Con Edison, already disclose climate change risks at the holding company level, but states that the NYSPSC believes that climate-related risk disclosures should be issued specific to the operating companies in New York, such as CECONY and O&R, and that such climate-related risk disclosures should be included annually with the utilities’ financial reports. The NYSPSC solicited comments by November 16, 2020 on, among other things: the costs and benefits of providing climate-related risk disclosure; whether utility operating companies in New York should be required to make climate risk disclosure in annual financial statements, sustainability reports, or other public filings; which framework for such climate risk disclosure utility operating companies in New York should be required to adopt; and why and how utility operating companies should implement those recommended disclosures. Regulatory Assets and Liabilities Regulatory assets and liabilities at September 30, 2020 and December 31, 2019 were comprised of the following items:
| Con Edison |  | CECONY
(Millions of Dollars) | 2020 | 2019 |  | 2020 | 2019
Regulatory assets |  |  |  |  |
Unrecognized pension and other postretirement costs | $1,901 | $2,541 |  | $1,785 | $2,403
Environmental remediation costs | 723 | 732 |  | 645 | 647
Revenue taxes | 345 | 321 |  | 331 | 308
Pension and other postretirement benefits deferrals | 274 | 71 |  | 237 | 47
Property tax reconciliation | 238 | 219 |  | 235 | 210
MTA power reliability deferral | 200 | 248 |  | 200 | 248
Deferred storm costs | 158 | 77 |  | 60 |  | — |
Deferred derivative losses | 156 | 83 |  | 145 | 76
COVID-19 pandemic deferrals | 102 | — |  |  | 101 | — |
System peak reduction and energy efficiency programs | 95 | 131 |  | 94 | 130
Municipal infrastructure support costs | 67 | 75 |  | 67 | 75
Brooklyn Queens demand management program | 36 | 39 |  | 36 | 39
Meadowlands heater odorization project | 33 | 35 |  | 33 | 35
Gate station upgrade project | 26 | 19 |  | 26 | 19
Recoverable REV demonstration project costs | 24 | 21 |  | 22 | 19
Unamortized loss on reacquired debt | 22 | 28 |  | 21 | 26
Preferred stock redemption | 21 | 22 |  | 21 | 22
Non-wire alternative projects | 15 | 14 |  | 15 | 14
Workers’ compensation | — |  | 3 |  | — |  | 3
Other | 219 | 180 |  | 204 | 166
Regulatory assets – noncurrent | 4,655 | 4,859 |  | 4,278 | 4,487
Deferred derivative losses | 116 | 128 |  | 104 | 113
Recoverable energy costs | 50 | — |  |  | 40 |  | — |
Regulatory assets – current | 166 | 128 |  | 144 | 113
Total Regulatory Assets | $4,821 | $4,987 |  | $4,422 | $4,600
Regulatory liabilities |  |  |  |  |
Future income tax | $2,270 | $2,426 |  | $2,123 | $2,275
Allowance for cost of removal less salvage | 1,038 | 989 |  | 885 | 843
TCJA net benefits* | 337 | 471 |  | 327 | 454
Net proceeds from sale of property | 152 | 173 |  | 152 | 173
Net unbilled revenue deferrals | 148 | 199 |  | 148 | 199
Pension and other postretirement benefit deferrals | 79 | 75 |  | 43 | 46
Energy efficiency portfolio standard unencumbered funds | 65 | 122 |  | 62 | 118
System benefit charge carrying charge | 60 | 48 |  | 54 | 44
Property tax refunds | 35 | 45 |  | 34 | 45
Unrecognized other postretirement costs | 33 | 9 |  | — |  | — |
BQDM and REV Demo reconciliations | 26 | 27 |  | 24 | 26
Settlement of gas proceedings | 22 | 10 |  | 22 | 10
Sales and use tax refunds | 17 | 8 |  | 17 | 8
Earnings sharing - electric, gas and steam | 16 | 22 |  | 10 | 15
Settlement of prudence proceeding | 6 | 8 |  | 6 | 8
Other | 265 | 195 |  | 227 | 163
Regulatory liabilities – noncurrent | 4,569 | 4,827 |  | 4,134 | 4,427
Deferred derivative gains | 57 | 34 |  | 54 | 34
Refundable energy costs | 33 | 44 |  | 8 | 12
Revenue decoupling mechanism | — |  | 24 |  | — |  | 17
Regulatory liabilities – current | 90 | 102 |  | 62 | 63
Total Regulatory Liabilities | $4,659 | $4,929 |  | $4,196 | $4,490
* See "Other Regulatory Matters," above.

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