Regulatory Matters

3 Months Ended

Mar. 31, 2025

Rate Plans

CECONY – Electric

In April 2025, CECONY filed an update to its January 2025 request to the New York State Public Service Commission (NYSPSC) for an electric rate increase effective January 1, 2026. The company decreased its requested January 2026 rate increase by $3 million to $1,608 million, increased its illustrative January 2027 rate increase by $5 million to $937 million and decreased its illustrative January 2028 rate increase by $9 million to $871 million. The filing reflects a rate on common equity of 10 percent and a common equity ratio of 48 percent.

CECONY – Gas

In April 2025, CECONY filed an update to its January 2025 request to the NYSPSC for a gas rate increase effective January 1, 2026. The company decreased its requested January 2026 rate increase by $91 million to $349 million, increased its illustrative January 2027 rate increase by $3 million to $269 million and increased its illustrative January 2028 rate increase by $9 million to $174 million. The filing reflects a rate on common equity of 10 percent and a common equity ratio of 48 percent.

O&R New York – Electric and Gas

In March 2025, the NYSPSC approved the November 2024 Joint Proposal for new electric and gas rates. The Joint Proposal provides for an electric rate change of $(13.1) million, $24.8 million, and $44.1 million, effective January 1, 2025, 2026 and 2027, respectively. The rate changes will be implemented on a shaped basis, with no change for 2025, and annual increases of $17.7 million, effective January 1, 2026 and 2027. The Joint Proposal provides for gas rate increases of $3.6 million, $18 million and $16.5 million, effective January 1, 2025, 2026 and 2027, respectively. The rate increases will be implemented on a levelized basis, with annual increases of $10.4 million effective January 1, 2025, 2026 and 2027.

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 March 31, 2025, 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 ($1,061 million and $13 million for CECONY and O&R, respectively, as of March 31, 2025 and $1,078 million and $14 million for CECONY and O&R, respectively, as of December 31, 2024) 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 March 31, 2025 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 March 31, 2025, the Utilities had not accrued a liability related to this matter.

Regulatory Assets and Liabilities

Regulatory assets and liabilities at March 31, 2025 and December 31, 2024 were comprised of the following items:


	Con Edison		CECONY
(Millions of Dollars)	2025	2024	2025	2024
Regulatory assets
Energy efficiency and other clean energy programs (a)	$1,680	$1,656	$1,603	$1,598
Customer account deferrals (b)	1,115	1,073	1,103	1,058

Environmental investigation and remediation costs	1,037	1,038	951	952
Revenue taxes	579	540	554	517
Legacy meters (c)	405	413	391	398
Deferred derivative losses - long term	148	106	133	94
Deferred storm costs (d)	128	147	39	53
Property tax reconciliation (e)	122	131	122	131
MTA power reliability deferral (f)	23	31	23	31
Gas service line deferred costs	12	18	12	18
Unrecognized pension and other postretirement costs (b)	9	—	4	—
Pension and other postretirement benefits deferrals	—	2	—	2
Other	324	368	275	306
Regulatory assets – noncurrent	5,582	5,523	5,210	5,158
Deferred derivative losses - short term	207	102	190	92
Recoverable energy costs	—	39	—	14
Regulatory assets – current	207	141	190	106
Total Regulatory Assets	$5,789	$5,664	$5,400	$5,264
Regulatory liabilities
Allowance for cost of removal less salvage (g)	$1,541	$1,527	$1,333	$1,322
Future income tax*	1,200	1,224	1,090	1,112
Unrecognized pension and other postretirement costs (h)	876	1,054	820	984
Pension and other postretirement benefit deferrals	357	368	297	304
Late payment charge deferral	237	231	232	224
Net unbilled revenue deferrals	181	436	181	436
System benefit charge carrying charge	120	115	115	110
Deferred derivative gains - long term	21	8	19	6
Net proceeds from sale of property	19	25	18	24
Settlement of prudence proceeding (i)	9	10	9	10
Other	436	446	395	408
Regulatory liabilities – noncurrent	4,997	5,444	4,509	4,940
Refundable energy costs	70	59	43	18
Deferred derivative gains - short term	112	25	101	22
Revenue decoupling mechanism	31	18	8	—
Regulatory liabilities – current	213	102	152	40
Total Regulatory Liabilities	$5,210	$5,546	$4,661	$4,980

* See "Other Regulatory Matters" above.

(a) Energy Efficiency and Other Clean Energy Programs represent programs designed to increase energy efficiency achievements and other clean energy transformation efforts.

(b) Customer account deferrals include (1) the amount to be collected from customers related to the Emergency Summer Cooling Credits program for CECONY, (2) deferrals under CECONY and O&R's electric and gas rate plans for the reconciliation of write-offs of customer accounts receivable balances to amounts reflected in rates as well as for increases to the allowance for uncollectible accounts receivable and (3) deferral related to the arrears relief programs. Amounts deferred under the arrears relief programs were $314.1 million and $1.4 million for CECONY and O&R at March 31, 2025, respectively, and $323.7 million and $1.4 million at December 31, 2024, respectively, and receive a return at the pre-tax weighted average cost of capital.

(c) 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.

(d) Deferred storm costs represent response and restoration costs, other than capital expenditures, in connection with Tropical Storm Isaias and other major storms that were deferred by the Utilities.

(e) Property tax reconciliation represents the amount deferred between actual property taxes incurred and the level included in rates subject to the provisions of the respective rate plans.

(f) MTA power reliability deferral represents CECONY’s costs in excess of those reflected in its prior electric rate plan to take certain actions relating to the electrical equipment that serves the Metropolitan Transportation Authority (MTA) subway system. The company is recovering this regulatory asset pursuant to its current electric rate plan.

(g) Allowance for cost of removal less salvage represents cash previously collected from customers to fund future anticipated removal expenditures.

(h) Unrecognized pension and other postretirement costs represent the deferrals associated with the accounting rules for retirement benefits.

(i) Settlement of prudence proceeding represents the remaining amount to be credited to customers pursuant to a Joint Proposal, approved by the NYSPSC in April 2016, with respect to the prudence of certain CECONY expenditures and related matters.

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 was 4.75 percent and 5.95 percent for the 2025 and 2024 rate years, 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 ($3,213 million and $3,262 million for Con Edison, and $2,991 million and $3,024 million for CECONY at March 31, 2025 and December 31, 2024, respectively). Regulatory liabilities are treated in a consistent manner. Regulatory assets of RECO for which a cash outflow has been made ($25 million at March 31, 2025 and $28 million at December 31, 2024) 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 March 31, 2025 and December 31, 2024, 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)	2025	2024	2025	2024
Environmental investigation and remediation costs	$1,023	$1,037	$937	$942
Revenue taxes	589	567	564	543
UB deferral for uncollectible accounts receivable	547	551	541	541
Deferred derivative losses - short-term	207	102	190	92
Deferred derivative losses - long-term	148	106	133	94
Unrecognized pension and other postretirement costs	9	—	4	—
Other	53	39	40	28
Total	$2,576	$2,402	$2,409	$2,240

*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 is 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.