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Regulatory Matters | 3 Months Ended
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Mar. 31, 2021
Regulated Operations [Abstract] |
Regulatory Matters | Regulatory Matters Rate Plans O&R New York – Electric In March 2021, O&R filed a preliminary update to its January 2021 request to the NYSPSC for an electric rate increase effective January 1, 2022. The company increased its requested January 2022 rate increase by $3.3 million to $27.8 million. O&R New York – Gas In March 2021, O&R filed a preliminary update to its January 2021 request to the NYSPSC for a gas rate increase effective January 1, 2022. The company decreased its requested January 2022 rate increase by $8.6 million to $1.2 million. COVID-19 Regulatory Matters Governors, public utility commissions 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. The Governor has since adjusted these closures over time. 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 expired on March 31, 2021, although legislation has been introduced to also include small business customers after the effective date of the legislation and to extend the expiration date to December 31, 2021. For the three months ended March 31, 2021, the estimated late payment charges and fees that were not billed by CECONY and O&R were approximately $17 million and $1 million, respectively (see Note K). In April 2021, CECONY filed a petition with the NYSPSC to timely establish a surcharge recovery mechanism for $52 million of late payment charges and fees, offset for related savings, for the year ended December 31, 2020 to begin in September 2021 and end in December 2022. The petition also requests a surcharge recovery or surcredit mechanism for any fee deferrals for 2021 and 2022 starting in January of the subsequent year over a twelve-month period, respectively. 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. As of March 31, 2021, 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 and gas operations were $106 million and $4 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 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 (due to the New York State on PAUSE and related executive orders), which differences were $18 million and $2 million for CECONY and O&R, respectively, as of March 31, 2021. In June 2020, the NYSPSC directed CECONY to implement a summer cooling credit program to help mitigate the cost of staying home and operating 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 $63.4 million cost of the program is being recovered over five-year period that began January 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. In January 2021, NYSPSC staff provided guidance to New York utilities that no additional mechanisms are required because there are already established mechanisms for utility recovery of unexpected material expenses through rate plan change in legislation, regulation and related actions provisions of their respective rate plans and the filing of individual deferral petitions The guidance further provided that utilities deferring COVID-19 related costs pursuant to the provisions that allow deferral of costs resulting from a change in legislation, regulation and related actions must comply with the provisions of their rate plans, be able to demonstrate the nexus between the changes in law or regulation and the specific revenue and expense items, and consider any offsetting cost savings due to the pandemic. As of December 31, 2020, CECONY deferred, for New York City residential customers, $54.9 million of higher summer generation capacity supply costs. CECONY expects to recover such costs from customers by October 2021. In February 2021, the NYSPSC staff issued its report on New York State’s Energy Affordability Policy that provides recommendations to large New York utilities, including CECONY and O&R. The report recommends, among other things, that residential and commercial customers’ late payment fees and interest on deferred payment agreements be waived until two years after the expiration of the New York State moratorium on utility terminations (the moratorium expired on March 31, 2021, although legislation has been introduced to extend the expiration date to December 31, 2021) and each utility develop an arrears management program to mitigate the financial burdens of the COVID-19 pandemic on New York households and that program costs be shared, perhaps equally, between shareholders and customers. The NYSPSC staff has requested that the utilities and interested parties comment on the report prior to staff submitting the recommendations to the NYSPSC for consideration. In April 2021, New York State passed a law that creates a program that allows eligible residential renters in New York State who require assistance with rent and utility bills to have up to twelve months of electric and gas utility bill arrears forgiven, provided that such arrears were accrued on or after March 13, 2020. The program will be administered by the State Office of Temporary Disability Assistance in coordination with the New York State Department of Public Service and the NYSPSC. Under the program, CECONY and O&R would qualify for a refundable tax credit for New York State gross-receipts tax equal to the amount of arrears waived by the Utilities in the year that the arrears are waived and certified by the NYSPSC. The Utilities’ rate plans have revenue decoupling mechanisms in their New York electric and gas businesses that largely 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. In March 2021, Governor Murphy extended the State of Emergency through June 30, 2021. Since that declaration, the NJBPU and RECO have worked to mitigate the potential impact of the COVID-19 pandemic on RECO, its customers and other stakeholders. 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 will continue through June 30, 2021 and 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 the COVID-19 pandemic 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 $0.6 million through March 31, 2021. 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 March 31, 2021, the Utilities had not accrued a liability related to this matter. 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. As of March 31, 2021, 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 July 2019, electric service was interrupted to approximately 72,000 CECONY customers on the west side of Manhattan. Also in July 2019, electric service was interrupted to approximately 30,000 CECONY customers primarily in the Flatbush area of Brooklyn. In November 2020, the NYSPSC issued an order in its proceedings investigating these July 2019 power outages ordering CECONY to show cause why the NYSPSC should not commence a review of the prudency of CECONY’s actions and/or omissions prior to, during, and after the July 2019 outages in Manhattan and Brooklyn, and pursue civil or administrative penalties in the amount of up to $24.8 million for CECONY’s alleged failure to comply with certain requirements. The order further indicated that should the NYSPSC confirm some or all of the apparent violations identified in the order or other orders issued by the NYSPSC in the future in connection with this proceeding, and should such confirmed violations be classified as findings of repeated violations of the Public Service Law or rules or regulations adopted pursuant thereto that demonstrate a failure of CECONY to continue to provide safe and adequate service, the NYSPSC would be authorized to commence a proceeding under Public Service Law Section 68(2) to revoke or modify CECONY’s certificate as it relates to its service territory or any portion thereof. In December 2020, CECONY filed a response to the NYSPSC order demonstrating why the NYSPSC should not commence a penalty or prudence action against CECONY. CECONY stated that the NYSPSC order misapplied Section 25-a of the Public Service Law by ignoring the reasonable compliance standard under the statute and instead, was imposing a strict liability standard. For both outages, CECONY presented evidence that it either had complied or reasonably complied with NYSPSC requirements. With respect to the Manhattan outage, CECONY stated that a prudency proceeding was not justified because CECONY’s actions with respect to the Manhattan outage were reasonable based on the information the company had at the time. With respect to the Brooklyn outage, the company stated that the order failed to allege that improper company actions caused the outage. During 2019, CECONY recorded negative revenue adjustments associated with reliability performance provisions of $15 million in aggregate primarily related to these outages. CECONY has not accrued any additional liability related to this matter and is unable to determine the outcome of this proceeding at this time. 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 March 31, 2021, CECONY incurred costs for Tropical Storm Isaias of $172 million (including $87 million of operation and maintenance expenses charged against a storm reserve pursuant to its electric rate plan, $63 million of capital expenditures and $22 million (including $7.5 million for food and medicine spoilage claims) of operation and maintenance expenses). As of March 31, 2021, O&R incurred costs for Tropical Storm Isaias of $37 million (including $29 million of operation and maintenance expenses charged against a storm reserve pursuant to its New York electric rate plan, $8 million of capital expenditures and $2.9 million for food and medicine spoilage claims). 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. 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 November 2020, the NYSPSC issued an order in its proceedings investigating the New York utilities’ preparation for and response to Tropical Storm Isaias that ordered the Utilities to show cause why (i) civil penalties or appropriate injunctive relief should not be imposed against CECONY (in the amount of up to $102.3 million relating to 33 alleged violations) and against O&R (in the amount of up to $19 million relating to 38 alleged violations) to remedy such noncompliance, and (ii) a prudence proceeding should not be commenced against the Utilities for potentially imprudent expenditures of ratepayer funds related to the matter. The order stated that given the continuing nature of the investigation of this matter by the New York State Department of Public Service (NYSDPS), the NYSPSC may amend the order to include any subsequently determined apparent violations identified by the NYSDPS. In addition, the order indicated that should the NYSPSC confirm some or all of the apparent violations identified in the order or other orders issued by the NYSPSC in the future in connection with this proceeding, and should such respective confirmed violations be classified as findings of repeated violations of the Public Service Law or rules or regulations adopted pursuant thereto that demonstrate a failure of CECONY and/or O&R to continue to provide safe and adequate service, the NYSPSC would be authorized to commence a proceeding under Public Service Law Section 68(2) to revoke or modify CECONY’s and/or O&R’s certificate as it relates to its service territory or any portion thereof. In December 2020, CECONY and O&R filed responses to the NYSPSC order demonstrating why the NYSPSC should not commence penalty or prudence actions against them. The Utilities stated that the NYSPSC orders misapplied Section 25-a of the Public Service Law by ignoring the reasonable compliance standard under the statute and instead, was imposing a strict liability standard. CECONY and O&R also presented evidence that the order either misrepresented the applicable requirements or ignored that the Utilities were acting pursuant to practices approved by the NYSPSC. Finally, CECONY and O&R stated that there was no basis to commence a prudence proceeding because the Utilities acted reasonably based on the information available and the circumstances at the time. Administrative law judges have been appointed and hearings have been scheduled for CECONY and O&R to commence in September 2021. The Utilities have not accrued a liability related to this matter and are unable to determine the outcome of this proceeding at this time. 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. In December 2020, CECONY and O&R, along with other large New York utilities, filed comments supporting climate change risk disclosures in annual reports filed with the NYSPSC and recommended the use of an industry-specific template. In May 2020, the president of the United States issued the "Securing the United States Bulk-Power System" executive order. The executive order declares threats to the bulk-power system by foreign adversaries constitute a national emergency and prohibits the acquisition, importation, transfer or installation of certain bulk-power system electric equipment that is sourced from foreign adversaries. In January 2021, the president of the United States suspended the May 2020 executive order for 90 days. In April 2021, the executive order was reinstated and the Department of Energy (DOE) subsequently issued a request for information to assist the DOE in developing additional executive orders and/or regulations to secure United States’ critical electric infrastructure. The Companies are unable to predict the impact on them of any additional orders or regulations that may be adopted regarding the bulk-power system. Regulatory Assets and Liabilities Regulatory assets and liabilities at March 31, 2021 and December 31, 2020 were comprised of the following items:
| Con Edison |  | CECONY
(Millions of Dollars) | 2021 | 2020 |  | 2021 | 2020
Regulatory assets |  |  |  |  |
Unrecognized pension and other postretirement costs | $2,943 | $3,241 |  | $2,791 | $3,065
Environmental remediation costs | 858 | 865 |  | 786 | 791
Revenue taxes | 369 | 356 |  | 353 | 342
Pension and other postretirement benefits deferrals | 365 | 315 |  | 318 | 272
Property tax reconciliation | 244 | 241 |  | 243 | 239
Deferred storm costs | 238 | 195 |  | 119 | 83 |
MTA power reliability deferral | 176 | 188 |  | 176 | 188
COVID-19 pandemic deferrals | 142 | 115 |  | 139 | 113
System peak reduction and energy efficiency programs | 106 | 124 |  | 105 | 124
Deferred derivative losses | 97 | 120 |  | 91 | 111
Municipal infrastructure support costs | 56 | 62 |  | 56 | 62
Brooklyn Queens demand management program | 36 | 36 |  | 36 | 36
Meadowlands heater odorization project | 32 | 32 |  | 32 | 32
Preferred stock redemption | 21 | 21 |  | 21 | 21
Unamortized loss on reacquired debt | 19 | 21 |  | 18 | 19
Non-wire alternative projects | 19 | 18 |  | 19 | 18
Gate station upgrade project | 18 | 25 |  | 18 | 25
Recoverable REV demonstration project costs | 18 | 20 |  | 17 | 18
Other | 233 | 200 |  | 221 | 186
Regulatory assets – noncurrent | 5,990 | 6,195 |  | 5,559 | 5,745
Deferred derivative losses | 186 | 190 |  | 174 | 177
Recoverable energy costs | 67 | 76 |  |  | 60 |  | 67 |
Regulatory assets – current | 253 | 266 |  | 234 | 244
Total Regulatory Assets | $6,243 | $6,461 |  | $5,793 | $5,989
Regulatory liabilities |  |  |  |  |
Future income tax | $2,153 | $2,207 |  | $2,009 | $2,062
Allowance for cost of removal less salvage | 1,089 | 1,090 |  | 929 | 932
TCJA net benefits* | 251 | 295 |  | 244 | 286
Net proceeds from sale of property | 128 | 137 |  | 128 | 137
Net unbilled revenue deferrals | 89 | 198 |  | 89 | 198
Pension and other postretirement benefit deferrals | 89 | 85 |  | 48 | 46
Energy efficiency portfolio standard unencumbered funds | 79 | 1 |  | 78 | — |
System benefit charge carrying charge | 66 | 64 |  | 59 | 57
Property tax refunds | 37 | 36 |  | 35 | 35
BQDM and REV Demo reconciliations | 26 | 27 |  | 23 | 25
Sales and use tax refunds | 17 | 16 |  | 15 | 16
Earnings sharing - electric, gas and steam | 14 | 15 |  | 10 | 10
Settlement of gas proceedings | 13 | 21 |  | 13 | 21
Unrecognized other postretirement costs | 12 | 11 |  | — |  | — |
Settlement of prudence proceeding | 6 | 5 |  | 6 | 5
Workers' compensation | 3 | 3 |  | 3 | 3
Other | 306 | 302 |  | 266 | 261
Regulatory liabilities – noncurrent | 4,378 | 4,513 |  | 3,955 | 4,094
Refundable energy costs | 58 | 28 |  | 33 | 4
Deferred derivative gains | 27 | 8 |  | 25 | 7
Regulatory liabilities – current | 85 | 36 |  | 58 | 11
Total Regulatory Liabilities | $4,463 | $4,549 |  | $4,013 | $4,105
* See "Other Regulatory Matters," above. The recognition of the return on regulatory assets is determined by the Utilities’ rate plans or orders issued by state regulators. In general, the Utilities receive or are being credited with a return at the Other Customer-Provided Capital rate for regulatory assets that have not been included in rate base, and receive or are being credited with a return at the pre-tax weighted average cost of capital once the asset is included in rate base. Similarly, the Utilities pay to or credit customers with a return at the Other Customer-Provided Capital rate for regulatory liabilities that have not been included in rate base, and pay to or credit customers with a return at the pre-tax weighted average cost of capital once the liability is included in rate base. The Other Customer-Provided Capital rate for the three months ended March 31, 2021 and 2020 was 1.80 percent and 2.65 percent, respectively. In general, the Utilities are receiving or being credited with a return on their regulatory assets for which a cash outflow has been made ($1,785 million and $1,696 million for Con Edison, and $1,590 million and $1,509 million for CECONY at March 31, 2021 and December 31, 2020, respectively). Regulatory assets of RECO for which a cash outflow has been made ($27 million and $31 million at March 31, 2021 and December 31, 2020, respectively) are not receiving or being credited with a return. RECO recovers regulatory assets over a period of up to four years or until they are addressed in its next base rate case in accordance with the rate provisions approved by the New Jersey Board of Public Utilities. Regulatory liabilities are treated in a consistent manner. Regulatory assets that represent future financial obligations and were deferred in accordance with the Utilities’ rate plans or orders issued by state regulators do not earn a return until such time as a cash outlay has been made. Regulatory liabilities are treated in a consistent manner. At March 31, 2021 and December 31, 2020, regulatory assets for Con Edison and CECONY that did not earn a return consisted of the following items: Regulatory Assets Not Earning a Return*
| Con Edison | CECONY
(Millions of Dollars) | 2021 | 2020 | 2021 | 2020
Unrecognized and other postretirement costs | $2,943 | $3,241 | $2,791 | $3,065
Environmental remediation costs | 847 | 855 | 776 | 781
Revenue taxes | 350 | 336 | 336 | 323
Deferred derivative losses | 97 | 120 | 91 | 111
Other | 35 | 24 | 35 | 24
Deferred derivative losses - current | 186 | 190 | 174 | 177
Total | $4,458 | $4,766 | $4,203 | $4,481
*This table includes regulatory assets not earning a return for which no cash outlay has been made. The recovery periods for regulatory assets for which a cash outflow has not been made and that do not earn a return have not yet been determined, except as noted below, and are expected to be determined pursuant to the Utilities’ future rate plans to be filed or orders issued by the state regulators in connection therewith. The Utilities recover unrecognized pension and other postretirement costs over 10 years pursuant to NYSPSC policy. The deferral for revenue taxes represent the Metropolitan transportation business tax surcharge on the cumulative temporary differences between the book and tax basis of assets and liabilities of the Utilities, as well as the difference between taxes collected and paid by the Utilities to fund mass transportation. The Utilities recover the majority of the revenue taxes over the remaining book lives of the electric and gas plant assets, as well as the steam plant assets for CECONY. The Utilities recover deferred derivative losses – current within one year, and noncurrent generally within three years.

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