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Regulatory Matters | 9 Months Ended
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Sep. 30, 2024
Regulated Operations [Abstract] |
Regulatory Matters | Regulatory Matters Rate Plans O&R New York – Electric In April 2024, O&R filed an update to its January 2024 request to the New York State Public Service Commission (NYSPSC) for an electric rate increase effective January 1, 2025. The company decreased its requested January 2024 rate increase by $7.5 million to $10.7 million. For purposes of illustration, the filing calculated rate increases of $34.8 million and $55 million effective January 2026 and 2027, respectively, based upon the proposed return on common equity of 10.25 percent and a common equity ratio of 50 percent. In May 2024, the New York State Department of Public Service (NYSDPS) submitted testimony in the NYSPSC proceeding in which O&R requested an electric rate increase, effective January 1, 2025. The NYSDPS testimony supports an electric rate decrease of $27.6 million, reflecting, among other things, a 9.50 percent return on common equity and a common equity ratio of 48 percent. O&R New York – Gas In April 2024, O&R filed an update to its January 2024 request to the NYSPSC for a gas rate increase effective January 1, 2025. The company increased its requested January 2024 rate increase by $3.1 million to $17.5 million. For purposes of illustration, the filing calculated rate increases of $22.8 million and $19.2 million effective January 2026 and 2027, respectively, based upon the proposed return on common equity of 10.25 percent and a common equity ratio of 50 percent. In May 2024, the NYSDPS submitted testimony in the NYSPSC proceeding in which O&R requested a gas rate increase, effective January 1, 2025. The NYSDPS testimony supports a gas rate decrease of $2.9 million, reflecting, among other things, a 9.50 percent return on common equity and a common equity ratio of 48 percent. Bill Relief Program In March 2024, CECONY and O&R received $91 million and $9 million, respectively, pursuant to a New York State bill relief program funded by the state that provided a one-time bill credit for electric and gas customers. The program was established to partially offset the costs all customers pay to fund utility energy affordability programs. Other Regulatory Matters In January 2023, CECONY initiated a review of welds on certain gas and steam mains following the company’s discovery of a leak from a gas main weld in Queens, New York. During the course of its review thus far, CECONY discovered a limited number of other non-conforming gas and steam main welds. New York regulations require utilities to perform and record weld films for certain gas and steam main welds. Upon reviewing these films, CECONY determined that in some instances third-party contractors engaged in misconduct by substituting duplicate weld films for different welds, while another third-party contractor had created poor quality weld films. CECONY voluntarily disclosed its initial review and findings to the NYSDPS which, in turn, initiated its own investigation. CECONY also reported the contractors’ misconduct to law enforcement. Given the nature of the non-conforming welds identified, CECONY does not anticipate significant impact to the operation of its gas and steam mains. CECONY continues to investigate this matter, is remediating and monitoring the known non-conforming welds and is cooperating with the NYSDPS on its investigation of this matter. CECONY is unable to estimate the amount or range of its possible loss, if any, related to this matter. At September 30, 2024, CECONY had not accrued a liability related to this matter. In May 2024, the NYSPSC issued an order denying an April 2023 petition by CECONY that requested permission to capitalize costs to implement its new customer billing and information system to the extent those costs exceeded the $421 million cap established in CECONY’s 2020 – 2022 electric and gas rate plans. CECONY’s final costs for the new system were $510 million ($89 million above the $421 million cap in the rate plans). CECONY believes that the incremental costs were both prudent and necessary for the successful deployment of the system for the benefit of its customers. In May 2024, CECONY expensed incremental costs of $51 million for the new system that were previously capitalized, in addition to a $38 million reserve established at December 31, 2023. In June 2024, CECONY filed a petition for rehearing with the NYSPSC. CECONY is unable to predict the NYSPSC's response to its rehearing petition. In January 2018, the NYSPSC issued an order initiating a focused operations audit of the Utilities’ financial accounting for income taxes. The audit is investigating the Utilities’ inadvertent understatement of a portion, the amount of which may be material, of their calculation of total federal income tax expense for ratemaking purposes related to the calculation of plant retirement-related cost of removal. As a result of such understatement, the Utilities accumulated significant income tax regulatory assets ($1,066 million and $14 million for CECONY and O&R, respectively, as of September 30, 2024 and $1,113 million and $18 million for CECONY and O&R, respectively, as of December 31, 2023) which are not earning a return. While the Utilities have properly calculated and paid their federal income taxes and there is no uncertain tax position related to this matter, this understatement of historical income tax expense materially reduced the amount of revenue collected from the Utilities' customers in the past relative to what it should have been. The Utilities’ rate plans have reflected the correct amount of federal income taxes recoverable from customers, including a proportionate recovery of the regulatory asset, beginning with O&R’s rate plans effective November 2015, CECONY’s electric and gas rate plans effective January 2017, and CECONY’s steam plan effective November 2023. As part of the audit, the Utilities plan to pursue a private letter ruling from the Internal Revenue Service (IRS) confirming that the Utilities’ inadvertent understatement of prior years’ income tax expense constitutes a normalization violation that can be cured through an increase in future years’ revenue requirements until such time as the regulatory asset is fully recovered in rates, and not through a write-down of all or a portion of the Utilities’ regulatory asset. Under Accounting Standards Codification Topic (ASC) 740, the Utilities recorded an unfunded deferred federal income tax liability (with a gross-up amount) and a corresponding regulatory asset. The income tax regulatory assets are netted against the related regulatory liability for future income tax and are shown in the line “Future income tax” in the following table of Regulatory Assets and Liabilities and on the Companies’ consolidated balance sheets in the line “Regulatory liabilities.” Management’s assessment is that the income tax regulatory assets as of September 30, 2024 are probable of collection through future rates. The IRS provides safe harbor relief for inadvertent normalization violations through the jurisdictional rate setting process of including in rates adequate revenue to fully recover the deferred tax balance. However, the Utilities would record a liability or impair a portion of the regulatory assets associated with this understatement if the NYSPSC were to issue an order that required the Utilities to write off all or a portion of their existing regulatory asset. The Utilities are unable to estimate the amount or range of their possible loss, if any, related to this matter. At September 30, 2024, the Utilities had not accrued a liability related to this matter. Regulatory Assets and Liabilities Regulatory assets and liabilities at September 30, 2024 and December 31, 2023 were comprised of the following items:
| Con Edison |  | CECONY
(Millions of Dollars) | 2024 | 2023 |  | 2024 | 2023
Regulatory assets |  |  |  |  |
System peak reduction and energy efficiency programs | $1,204 | $1,095 |  | $1,172 | $1,075
Environmental remediation costs | 1,093 | 1,105 |  | 1,010 | 1,022
COVID - 19 pandemic deferrals | 888 | 789 |  | 875 | 782
Revenue taxes | 525 | 476 |  | 503 | 455
Legacy meters (a) | 420 | 17 |  | 405 | —
Property tax reconciliation | 176 | 169 |  | 176 | 169
Deferred storm costs | 169 | 206 |  | 67 | 115
Deferred derivative losses - long term | 154 | 163 |  | 138 | 148
Electric vehicle make ready | 115 | 73 |  | 105 | 68
MTA power reliability deferral | 38 | 61 |  | 38 | 61
Gas service line deferred costs | 23 | 43 |  | 23 | 43
Unrecognized pension and other postretirement costs (b) | 10 | — |  | 10 | —
Pension and other postretirement benefits deferrals | 5 | 48 |  | 5 | 39
Other | 497 | 362 |  | 444 | 337
Regulatory assets – noncurrent | 5,317 | 4,607 |  | 4,971 | 4,314
Deferred derivative losses - short term | 165 | 269 |  | 151 | 253
Recoverable energy costs | 59 | 12 |  | 42 | 1
Regulatory assets – current | 224 | 281 |  | 193 | 254
Total Regulatory Assets | $5,541 | $4,888 |  | $5,164 | $4,568
Regulatory liabilities |  |  |  |  |
Allowance for cost of removal less salvage | $1,470 | $1,456 |  | $1,269 | $1,266
Future income tax* | 1,324 | 1,535 |  | 1,209 | 1,404
Unrecognized pension and other postretirement costs (b) | 787 | 943 |  | 739 | 867
Pension and other postretirement benefit deferrals | 370 | 284 |  | 312 | 233
Net unbilled revenue deferrals | 260 |  | 278 |  |  | 260 |  | 278 |
Late payment charge deferral | 227 | 167 |  | 221 | 161
System benefit charge carrying charge | 111 |  | 92 |  |  | 106 |  | 88 |
Net proceeds from sale of property | 31 | 48 |  | 30 | 47
Deferred derivative gains - long term | 19 | 49 |  | 19 | 49
Settlement of prudence proceeding | 10 | 11 |  | 10 | 11
Other | 428 | 465 |  | 386 | 414
Regulatory liabilities – noncurrent | 5,037 | 5,328 |  | 4,561 | 4,818
Refundable energy costs | 81 | 71 |  | 43 | 36
Revenue decoupling mechanism | 33 |  | — |  |  | — |  | — |
Deferred derivative gains - short term | 29 | 74 |  | 28 | 71
Regulatory liabilities – current | 143 | 145 |  | 71 | 107
Total Regulatory Liabilities | $5,180 | $5,473 |  | $4,632 | $4,925
* See "Other Regulatory Matters," above. (a) Pursuant to their rate plans, CECONY and O&R are recovering the costs of legacy meters over a 15-year period beginning January 1, 2024 and a 12-year period beginning January 1, 2022, respectively. (b) Unrecognized pension and other postretirement costs represent the deferrals associated with the accounting rules for retirement benefits. 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 nine months ended September 30, 2024 and the year ended December 31, 2023 was 5.95 percent and 5.20 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 ($3,095 million and $2,541 million for Con Edison, and $2,873 million and $2,359 million for CECONY at September 30, 2024 and December 31, 2023, respectively). Regulatory assets of RECO for which a cash outflow has been made ($24 million at September 30, 2024 and December 31, 2023) 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 NJBPU. 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 September 30, 2024 and December 31, 2023, 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) | 2024 | 2023 | 2024 | 2023 |
Environmental remediation costs | $1,093 | $1,105 | $1,009 | $1,022 |
Revenue taxes | 558 | 490 | 535 | 470 |
COVID-19 deferral for uncollectible accounts receivable | 391 | 291 | 384 | 288 |
Deferred derivative losses - current | 165 | 269 | 152 | 253 |
Deferred derivative losses - long term | 154 | 163 | 138 | 148 |
Unrecognized pension and other postretirement costs | 10 | — | 10 | — |
Other | 75 | 29 | 63 | 28 |
Total | $2,446 | $2,347 | $2,291 | $2,209 |
*This table presents 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, and the portion of investment gains or losses are recognized in expense over 15 years, pursuant to NYSPSC policy. The deferral for revenue taxes represents the New York State 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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