Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
This combined management’s discussion and analysis of financial condition and results of operations (MD&A) relates to the consolidated financial statements (the Second Quarter Financial Statements) included in this report of two separate registrants: Consolidated Edison, Inc. (Con Edison) and Consolidated Edison Company of New York, Inc. (CECONY). As used in this report, the term the “Companies” refers to Con Edison and CECONY. CECONY is a subsidiary of Con Edison and, as such, information in this management’s discussion and analysis about CECONY applies to Con Edison.
This MD&A should be read in conjunction with the Second Quarter Financial Statements and the notes thereto, the MD&A in Item 7 of the Companies’ combined Annual Report on Form 10-K for the year ended December 31, 2019 (File Nos. 1-14514 and 1-1217, the Form 10-K) and the MD&A in Part 1, Item 2 of the Companies' combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 (File Nos. 1-14514 and 1-1217).
Information in any item of this report referred to in this discussion and analysis is incorporated by reference herein. The use of terms such as “see” or “refer to” shall be deemed to incorporate by reference into this discussion and analysis the information to which reference is made.
Con Edison, incorporated in New York State in 1997, is a holding company that owns all of the outstanding common stock of CECONY, Orange and Rockland Utilities, Inc. (O&R), Con Edison Clean Energy Businesses, Inc. and Con Edison Transmission, Inc. As used in this report, the term the “Utilities” refers to CECONY and O&R.
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Con Edison
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CECONY
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O&R
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Clean Energy Businesses
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Con Edison Transmission
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Con Edison’s principal business operations are those of CECONY, O&R, the Clean Energy Businesses and Con Edison Transmission. CECONY’s principal business operations are its regulated electric, gas and steam delivery businesses. O&R’s principal business operations are its regulated electric and gas delivery businesses. The Clean Energy Businesses develop, own and operate renewable and energy infrastructure projects and provide energy-related products and services to wholesale and retail customers. Con Edison Transmission invests in electric transmission facilities and gas pipeline and storage facilities.
Con Edison seeks to provide shareholder value through continued dividend growth, supported by earnings growth in regulated utilities and contracted electric and gas assets. The company invests to provide reliable, resilient, safe and clean energy critical for New York City’s growing economy. The company is an industry leading owner and operator of contracted, large-scale solar generation in the United States. Con Edison is a responsible neighbor, helping the communities it serves become more sustainable.
CECONY
Electric
CECONY provides electric service to approximately 3.5 million customers in all of New York City (except a part of Queens) and most of Westchester County, an approximately 660 square mile service area with a population of more than nine million.
Gas
CECONY delivers gas to approximately 1.1 million customers in Manhattan, the Bronx, parts of Queens and most of Westchester County.
In January 2019, due to gas supply constraints, CECONY filed notice with the NYSPSC to establish a temporary moratorium beginning in March 2019 on new applications for firm gas service in most of Westchester County. In July 2020, the company filed a gas planning analysis with the NYSPSC that stated the moratorium is expected to be lifted when increased pipeline capacity is achieved upon completion of the Tennessee pipeline’s 300L East project or peak demand is reduced through efficiency and other demand side reductions to a level that would enable the company to lift the moratorium. Assuming timely regulatory approvals, the Tennessee pipeline project is expected to be completed by November 2023.
In June 2020, CECONY decreased its five-year forecast of average annual growth of the peak gas demand in its service area at design conditions from approximately 1.5 percent (for 2020 to 2024) to approximately 1.4 percent (for 2021 to 2025). The decrease reflects the negative impact the current economy is expected to have on large new construction as well as the projected number of applications for firm gas service in CECONY's service territory. The decrease also reflects an expected increase in customers’ energy efficiency measures and electrification of space heating.
Steam
CECONY operates the largest steam distribution system in the United States by producing and delivering approximately 17,837 MMlb of steam annually to approximately 1,584 customers in parts of Manhattan.
In May 2020, CECONY's five-year forecast of average annual change in the peak steam demand in its service area at design conditions remained unchanged at approximately (0.4) percent (for 2021 to 2025).
Collective Bargaining Agreement
In June 2020, CECONY reached a four-year collective bargaining agreement with its largest union covering approximately 7,100 employees, effective June 21, 2020.
O&R
Electric
O&R and its utility subsidiary, Rockland Electric Company (RECO) (together referred to herein as O&R) provide electric service to approximately 0.3 million customers in southeastern New York and northern New Jersey, an approximately 1,300 square mile service area.
Gas
O&R delivers gas to over 0.1 million customers in southeastern New York.
In June 2020, O&R decreased its five-year forecast of average annual growth of the peak gas demand in its service area at design conditions from approximately 0.7 percent (for 2020 to 2024) to approximately 0.2 percent (for 2021 to 2025). The decrease reflects an expected increase in customers' energy efficiency measures and electrification of space heating.
Clean Energy Businesses
Con Edison Clean Energy Businesses, Inc., together with its subsidiaries, are referred to in this report as the Clean Energy Businesses. The Clean Energy Businesses develop, own and operate renewable and energy infrastructure projects and provide energy-related products and services to wholesale and retail customers. In December 2018, the Clean Energy Businesses acquired Sempra Solar Holdings, LLC.
Con Edison Transmission
Con Edison Transmission, Inc. invests in electric and gas transmission projects through its wholly-owned subsidiaries, Consolidated Edison Transmission, LLC (CET Electric) and Con Edison Gas Pipeline and Storage, LLC (CET Gas). CET Electric owns a 45.7 percent interest in New York Transco LLC (NY Transco), which owns and has been selected to build additional electric transmission assets in New York. CET Gas owns, through subsidiaries, a 50 percent interest in Stagecoach Gas Services, LLC, a joint venture that owns and operates an existing gas pipeline and storage business located in northern Pennsylvania and southern New York. Also, CET Gas and
CECONY own 71.2 percent and 28.8 percent interests, respectively, in Honeoye Storage Corporation, which owns and operates a gas storage facility in upstate New York. In addition, CET Gas owns a 12.1 percent interest (that is expected to be reduced below 10 percent based on the current project cost estimate) in Mountain Valley Pipeline LLC, a joint venture developing a proposed 300-mile gas transmission project in West Virginia and Virginia. Con Edison Transmission, Inc., together with CET Electric and CET Gas, are referred to in this report as Con Edison Transmission.
Certain financial data of Con Edison’s businesses are presented below:
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For the Three Months Ended
June 30, 2020
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For the Six Months Ended
June 30, 2020
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At June 30, 2020
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(Millions of Dollars, except percentages)
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Operating
Revenues
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Net Income for
Common Stock
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Operating
Revenues
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Net Income for
Common Stock
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Assets
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CECONY
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$2,345
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86
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%
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$152
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80
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%
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$5,200
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87
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%
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$558
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99
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%
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$47,324
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80
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%
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O&R
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175
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7
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(2)
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(1
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)
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408
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7
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29
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5
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3,009
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5
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Total Utilities
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2,520
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93
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150
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79
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5,608
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94
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587
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104
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50,333
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85
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Clean Energy Businesses (a)
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198
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7
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34
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18
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344
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6
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(49)
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(9
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)
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6,719
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11
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Con Edison Transmission
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1
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—
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14
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7
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2
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—
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28
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5
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1,640
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3
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Other (b)
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—
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—
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(8)
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(4
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(1)
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—
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(1)
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—
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389
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1
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Total Con Edison
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$2,719
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100
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%
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$190
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100
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%
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$5,953
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100
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%
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$565
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100
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%
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$59,081
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100
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%
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(a)
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Net income for common stock from the Clean Energy Businesses for the three and six months ended June 30, 2020 includes $(2) million and $(65) million, respectively, of net after-tax mark-to-market losses and reflects $9 million (after-tax) and $22 million (after-tax), respectively, of income attributable to the non-controlling interest of a tax equity investor in renewable electric production projects accounted for under the HLBV method of accounting. See Note O to the Second Quarter Financial Statements.
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(b)
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Other includes parent company and consolidation adjustments.
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Coronavirus Disease 2019 (COVID-19) Impacts
The Companies continue to respond to the Coronavirus Disease 2019 (COVID-19) global pandemic by reducing the potential risks posed to employees, customers and other stakeholders by its spread. The Companies continue to employ an incident command structure led by a pandemic planning team. The Companies support employee and facility hygiene through mandatory pre-entry symptom surveys for employees arriving at critical locations, regular cleaning and disinfecting of all work and common areas, promoting social distancing, imposing travel limitations on employees and directing employees to work remotely whenever possible. Employees who test positive for COVID-19 are directed to quarantine at home and are closely evaluated for close, prolonged contact with other employees that would require those employees to quarantine at home and, following the Centers for Disease Control and Prevention guidelines, sick or quarantined employees return to work when they can safely do so. The Utilities continue to provide critical electric, gas and steam service to customers during the pandemic. Additional safety protocols have been implemented to protect employees, customers and the public, when work at customer premises is required.
Below is additional information related to the effects of the COVID-19 pandemic and the Companies’ actions.
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. Since the emergency declaration, and due to economic conditions, the NYSPSC and the Utilities have mitigated the potential impact of the COVID-19 pandemic on the Utilities, their customers and other stakeholders. See "COVID-19 Regulatory Matters" in Note B to the Second Quarter Financial Statements.
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 six months ended June 30, 2020, the estimated foregone revenues that were not collected by the Utilities were approximately $20 million and $23 million, respectively, for CECONY and $1.2 million and $1.4 million, respectively, for O&R. 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 expected to be recovered from customers over a twelve-month period beginning September 2020.
See "COVID-19 Regulatory Matters" in Note B and Note K to the Second Quarter Financial Statements.
As of June 30, 2020, CECONY deferred, for New York City residential customers, $9 million of higher summer generation capacity supply costs. CECONY estimates that a total of $58 million of higher supply costs will be deferred and expects to recover such costs from November 2020 through April 2021. Also 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.
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. See "COVID-19 Regulatory Matters" in Note B to the Second Quarter Financial Statements and “Liquidity and Financing,” below.
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. See "COVID-19 Regulatory Matters" in Note B and Note K to the Second Quarter Financial Statements.
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. As of June 30, 2020, RECO had not yet deferred any incremental costs related to COVID-19 and such costs are not expected to be material.
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 at least July 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. See "COVID-19 Regulatory Matters" in Note B” to the Second Quarter Financial Statements.
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. See "COVID-19 Regulatory Matters" in Note B to the Second Quarter Financial Statements.
Impact of CARES Act on Accounting for Income Taxes
In response to the economic impacts of the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act became law on March 27, 2020. The CARES Act has several key business tax relief measures that may present potential cash benefits and/or refund opportunities for Con Edison and its subsidiaries, including permitting a five-year carryback of a net operating loss (NOL) for tax years 2018, 2019 and 2020, temporary removal of the 80 percent limitation of NOL carryforwards against taxable income for tax years before 2021, temporary relaxation of the limitations on interest deductions, Employee Retention Credit and defer payments of employer payroll taxes.
Con Edison will carryback its NOL of $29 million from tax year 2018 back to tax year 2013. This will allow Con Edison, mostly at the Clean Energy Businesses, to receive a $2.5 million net tax refund and to recognize a discrete income tax benefit of $4 million in March 2020, due to the higher federal tax rate in 2013. See Note J to the Second Quarter Financial Statements. Con Edison and its subsidiaries are not expecting to have a federal NOL in tax years 2019 or 2020.
Con Edison and its subsidiaries expect to benefit by the increase in the percentage for calculating the limitation on the interest expense deduction from 30 percent of Adjusted Taxable Income (ATI) to 50 percent of ATI in 2019 and 2020, which may allow the Companies to deduct 100 percent of interest expense.
The Companies qualify for an Employee Retention Tax Credit created under the CARES Act for "eligible employers" related to governmental authorities imposing restrictions that partially suspended their operations for a portion of their workforce due to the COVID-19 pandemic and the Companies continued to pay them. In the second quarter of 2020, Con Edison and CECONY recognized a tax benefit to Taxes, other than income taxes expense of $8 million and $5 million, respectively.
The CARES Act also allows employers to defer payments of the employer share of Social Security payroll taxes that would have otherwise been owed from March 27, 2020 through December 31, 2020. The Companies intend to defer the payment of employer payroll taxes for the period April 1, 2020 through December 31, 2020 of approximately $73 million ($65 million of which is for CECONY). The Companies will repay one-half of this liability by December 31, 2021 and the other half by December 31, 2022.
Supply Chain Matters
The Utilities continue to procure the materials and services necessary to support the phased plan to reopen businesses in New York State, which includes building an inventory of pandemic-related materials to address anticipated future needs. They maintain regular communications with key suppliers. There are currently no significant supply chain-related shortages or issues.
The Clean Energy Businesses have appropriate assets available to them and currently do not anticipate constraints in completing and placing into service wind and solar projects currently under construction.
Cybersecurity
In April 2020, the United States Homeland Security Cybersecurity and Infrastructure Security Agency issued a joint alert with another agency stating that there has been a growing use of COVID-19 related themes by malicious cyber actors and the surge in teleworking has increased the use of potentially vulnerable services, amplifying the threat to individuals and organizations. The Companies, their contractors and vendors have experienced cyber threats, but
none have had a material impact on the Companies. The Companies continue to monitor cybersecurity threats closely.
Accounting Considerations
As a result of the COVID-19 pandemic, both commercial and residential customers may have increased difficulty paying their utility bills, as a result of a decline in business, bankruptcies, layoffs and furloughs, among other factors. CECONY and O&R have existing allowances for uncollectible accounts established against their customer accounts receivable balances which are reevaluated each quarter and updated accordingly. Changes to the Utilities’ reserve balances that result in write-offs of customer accounts receivable balances are not reflected in rates during the term of the current rate plans. During the first six months of 2020, the potential economic impact of the COVID-19 pandemic was also considered in forward-looking projections related to write-off and recovery rates, resulting in increases to the customer allowance for uncollectible accounts as detailed herein. CECONY’s and O&R’s allowances for uncollectible accounts reserve increased from $65 million and $4.6 million at December 31, 2019 to $81 million and $6.0 million at June 30, 2020, respectively. See Note A to the Second Quarter Financial Statements.
The Companies test goodwill for impairment at least annually or whenever there is a triggering event, and test long-lived and intangible assets for recoverability when events or changes in circumstances indicate that the carrying value of long-lived or intangible assets may not be recoverable. The Companies identified no triggering events or changes in circumstances related to the COVID-19 pandemic that would indicate that the carrying value of long-lived or intangible assets may not be recoverable at June 30, 2020. See Note A to the Second Quarter Financial Statements.
Liquidity and Financing
The Companies continue to monitor the impacts of the COVID-19 pandemic on the financial markets closely, including borrowing rates and daily cash collections. The Companies have been able to issue commercial paper as needed since the start of the COVID-19 pandemic in March 2020. See Note D to the Second Quarter Financial Statements.
In addition, the decline in business activity in the Utilities’ service territory as a result of the COVID-19 pandemic has resulted in lower billed sales revenues and may continue to do so. 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. Although these revenue decoupling mechanisms are in place, lower billed sales revenues and higher uncollectible accounts would temporarily reduce liquidity at the Utilities. See Note A to the Second Quarter Financial Statements and "COVID-19 Regulatory Matters" in Note B to the Second Quarter Financial Statements.
In July 2020, Con Edison borrowed $820 million pursuant to an April 2020 credit agreement that was amended in June 2020 (as amended, the Supplemental Credit Agreement). Con Edison used the proceeds from the borrowing for general corporate purposes, including repayment of short-term debt bearing interest at variable rates. Pursuant to the Supplemental Credit Agreement, the borrowing bears interest at a variable rate and was converted to a term loan, that matures on March 29, 2021. See Note D to the Second Quarter Financial Statements.
Con Edison and the Utilities also have a $2,250 million credit agreement (Credit Agreement) in place under which banks are committed to provide loans on a revolving credit basis until December 2023 ($2,200 million of commitments from December 2022). Con Edison and the Utilities have not entered into any loans under the Credit Agreement. See Note D to the Second Quarter Financial Statements.
Results of Operations
Net income for common stock and earnings per share for the three and six months ended June 30, 2020 and 2019 were as follows:
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For the Three Months Ended June 30,
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For the Six Months Ended June 30,
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2020
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2019
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2020
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2019
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2020
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2019
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2020
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2019
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(Millions of Dollars, except per share amounts)
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Net Income for Common Stock
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Earnings
per Share
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Net Income for Common Stock
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Earnings
per Share
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CECONY
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$152
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$152
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$0.45
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$0.46
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$558
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$564
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$1.67
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$1.73
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O&R
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(2)
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2
|
—
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0.01
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29
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34
|
0.09
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0.11
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Clean Energy Businesses (a)
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34
|
(6)
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0.10
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(0.03)
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(49)
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(41)
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(0.15)
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(0.13)
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Con Edison Transmission
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14
|
12
|
0.04
|
0.04
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28
|
25
|
0.08
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0.08
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Other (b)
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(8)
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(8)
|
(0.02)
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(0.02)
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(1)
|
(6)
|
—
|
|
(0.02)
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Con Edison (c)
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$190
|
$152
|
$0.57
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$0.46
|
$565
|
$576
|
$1.69
|
$1.77
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|
|
(a)
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Net income for common stock from the Clean Energy Businesses for the three and six months ended June 30, 2020 includes $(2) million or $0.00 a share and $(65) million or $(0.19) a share, respectively, of net after-tax mark-to-market losses and reflects $9 million or $0.03 a share (after-tax) and $22 million or $0.07 a share (after-tax), respectively, of income attributable to the non-controlling interest of a tax equity investor in renewable electric production projects accounted for under the HLBV method of accounting. Net income for common stock from the Clean Energy Businesses for the three and six months ended June 30, 2019 includes $(16) million or $(0.05) a share and $(24) million or $(0.08) a share, respectively, of net after-tax mark-to-market losses and reflects $21 million or $0.07 a share (after-tax) and $37 million or $0.11 a share (after-tax), respectively, of income attributable to the non-controlling interest of a tax equity investor in renewable electric production projects accounted for under the HLBV method of accounting. See Note O to the Second Quarter Financial Statements.
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|
|
(b)
|
Other includes parent company and consolidation adjustments.
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|
|
(c)
|
Earnings per share on a diluted basis were $0.57 a share and $0.46 a share for the three months ended June 30, 2020 and 2019, respectively, and $1.69 a share and $1.77 a share for the six months ended June 30, 2020 and 2019, respectively.
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The following tables present the estimated effect of major factors on earnings per share and net income for common stock for the three and six months ended June 30, 2020 as compared with the 2019 period.
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Variation for the Three Months Ended June 30, 2020 vs. 2019
|
|
Earnings
per Share
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Net Income for Common Stock (Millions of Dollars)
|
|
CECONY (a)
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|
|
|
Changes in rate plans
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$(0.02)
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$(8)
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Primarily reflects lower non-weather related steam net revenues due to lower usage by customers.
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Weather impact on steam revenues
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0.01
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4
|
Reflects the impact of warmer spring weather in the 2019 period.
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Operations and maintenance expenses
|
0.22
|
74
|
Reflects lower costs for pension and other postretirement benefits of $0.12 a share, which are reconciled under the rate plans, lower regulatory assessments and fees that are collected in revenues from customers of $0.07 a share, lower healthcare costs of $0.03 a share, lower stock-based compensation of $0.02 a share, and lower consultant costs of $0.01 a share, offset in part by incremental costs associated with the Coronavirus Disease 2019 (COVID-19) pandemic of $(0.06) a share.
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Depreciation, property taxes and other tax matters
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(0.19)
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(63)
|
Reflects higher depreciation and amortization expense of $(0.13) a share and higher property taxes of $(0.07) a share, both of which are recoverable under the rate plans, offset in part by the Employee Retention Tax Credit under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of $0.01 a share.
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Other
|
(0.03)
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(7)
|
Primarily reflects foregone revenues from the suspension of customers' late payment charges and certain other fees associated with COVID-19 of $(0.04) a share and the dilutive effect of Con Edison's stock issuances of $(0.01) a share.
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Total CECONY
|
(0.01)
|
—
|
|
|
O&R (a)
|
|
|
|
Changes in rate plans
|
0.01
|
4
|
Reflects an electric base rate increase of $0.01 a share under the company's rate plans.
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Operations and maintenance expenses
|
(0.01)
|
(3)
|
Primarily reflects incremental costs associated with COVID-19.
|
Depreciation, property taxes and other tax matters
|
—
|
|
(1)
|
Reflects higher depreciation and amortization expense, offset in part by the Employee Retention Tax Credit under the CARES Act.
|
Other
|
(0.01)
|
(4)
|
Primarily reflects higher costs associated with components of pension and other postretirement benefits other than service cost of $(0.01) a share.
|
Total O&R
|
(0.01)
|
(4)
|
|
Clean Energy Businesses
|
|
|
|
|
Operating revenues less energy costs
|
0.01
|
4
|
Reflects higher revenues from renewable electric production projects of $0.02 a share, offset in part by lower energy services revenues of $(0.01) a share.
|
Operations and maintenance expenses
|
0.01
|
2
|
Primarily reflects lower energy services costs.
|
Net interest expense
|
0.06
|
18
|
Primarily reflects lower unrealized losses on interest rate swaps in the 2020 period.
|
HLBV effects
|
0.04
|
12
|
Primarily reflects lower losses from tax equity projects.
|
Other
|
0.01
|
4
|
Primarily reflects the Employee Retention Tax Credit under the CARES Act.
|
Total Clean Energy Businesses
|
0.13
|
40
|
|
Con Edison Transmission
|
—
|
|
2
|
Primarily reflects lower operations and maintenance expenses and higher allowance for funds used during construction (AFUDC) income from Mountain Valley Pipeline, LLC.
|
Other, including parent company expenses
|
—
|
|
—
|
|
|
Total Reported (GAAP basis)
|
$0.11
|
$38
|
|
|
|
|
|
a.
Under the revenue decoupling mechanisms in the Utilities’ New York electric and gas rate plans and the weather-normalization clause applicable to their gas businesses, revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. In general, the utilities recover on a current basis the fuel, gas purchased for resale and purchased power costs they incur in supplying energy to their full-service customers. Accordingly, such costs do not generally affect Con Edison’s results of operations.
|
|
|
|
|
|
|
Variation for the Six Months Ended June 30, 2020 vs. 2019
|
|
Earnings
per Share
|
Net Income for Common Stock (Millions of Dollars)
|
|
CECONY (a)
|
|
|
|
Changes in rate plans
|
$0.10
|
$31
|
Reflects higher electric and gas net base revenues of $0.02 a share and $0.08 a share, respectively, primarily due to electric and gas base rate increases in January 2019 under the company's rate plans.
|
Weather impact on steam revenues
|
(0.06)
|
(21)
|
Reflects the impact of warmer winter weather in the 2020 period.
|
Operations and maintenance expenses
|
0.43
|
140
|
Reflects lower costs for pension and other postretirement benefits of $0.30 a share, which are reconciled under the rate plans, lower regulatory assessments and fees that are collected in revenues from customers of $0.14 a share, lower stock-based compensation of $0.04 a share and lower healthcare costs of $0.03 a share, offset in part by incremental costs associated with COVID-19 of $(0.08) a share.
|
Depreciation, property taxes and other tax matters
|
(0.40)
|
(130)
|
Reflects higher depreciation and amortization expense of $(0.26) a share and higher property taxes of $(0.15) a share, both of which are recoverable under the rate plans, offset in part by the Employee Retention Tax Credit under the CARES Act of $0.01 a share.
|
Other
|
(0.13)
|
(26)
|
Primarily reflects foregone revenues from the suspension of customers' late payment charges and certain other fees associated with COVID-19 of $(0.05) a share and the dilutive effect of Con Edison's stock issuances of $(0.05) a share.
|
Total CECONY
|
(0.06)
|
(6)
|
|
O&R (a)
|
|
|
|
Changes in rate plans
|
0.03
|
9
|
Reflects electric and gas base rate increases of $0.02 a share and $0.01 a share, respectively, under the company's rate plans.
|
Operations and maintenance expenses
|
(0.02)
|
(6)
|
Primarily reflects incremental costs associated with COVID-19.
|
Depreciation, property taxes and other tax matters
|
(0.01)
|
(2)
|
Reflects higher depreciation and amortization expense, offset in part by the Employee Retention Tax Credit under the CARES Act.
|
Other
|
(0.02)
|
(6)
|
Primarily reflects higher costs associated with components of pension and other postretirement benefits other than service cost of $(0.01) a share.
|
Total O&R
|
(0.02)
|
(5)
|
|
Clean Energy Businesses
|
|
|
|
|
Operating revenues less energy costs
|
0.01
|
2
|
Reflects higher revenues from renewable electric production projects of $0.05 a share, offset in part by lower energy services revenues of $(0.04) a share.
|
Operations and maintenance expenses
|
0.02
|
6
|
Primarily reflects lower energy services costs.
|
Net interest expense
|
(0.11)
|
(38)
|
Primarily reflects higher unrealized losses on interest rate swaps in the 2020 period.
|
HLBV effects
|
0.04
|
15
|
Primarily reflects lower losses from tax equity projects.
|
Other
|
0.02
|
8
|
Primarily reflects re-measurement of deferred tax assets and the Employee Retention Tax Credit under the CARES Act.
|
Total Clean Energy Businesses
|
(0.02)
|
(7)
|
|
Con Edison Transmission
|
—
|
|
3
|
Primarily reflects lower operations and maintenance expenses and higher AFUDC income from Mountain Valley Pipeline, LLC.
|
Other, including parent company expenses
|
0.02
|
4
|
Reflects certain NYS combined income tax benefits.
|
Total Reported (GAAP basis)
|
$(0.08)
|
$(11)
|
|
|
|
|
|
a.
Under the revenue decoupling mechanisms in the Utilities’ New York electric and gas rate plans and the weather-normalization clause applicable to their gas businesses, revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. In general, the utilities recover on a current basis the fuel, gas purchased for resale and purchased power costs they incur in supplying energy to their full-service customers. Accordingly, such costs do not generally affect Con Edison’s results of operations.
|
The Companies’ other operations and maintenance expenses for the three and six months ended June 30, 2020 and 2019 were as follows:
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
For the Six Months Ended June 30,
|
(Millions of Dollars)
|
2020
|
2019
|
2020
|
2019
|
|
CECONY
|
|
|
|
|
Operations
|
$383
|
$378
|
$787
|
$776
|
Pensions and other postretirement benefits
|
(43)
|
33
|
(63)
|
67
|
Health care and other benefits
|
29
|
42
|
66
|
80
|
Regulatory fees and assessments (a)
|
75
|
109
|
160
|
222
|
Other
|
105
|
89
|
167
|
166
|
Total CECONY
|
549
|
651
|
1,117
|
1,311
|
O&R
|
77
|
73
|
152
|
144
|
Clean Energy Businesses
|
53
|
55
|
107
|
115
|
Con Edison Transmission
|
2
|
3
|
5
|
5
|
Other (b)
|
(1)
|
(1)
|
(1)
|
—
|
|
Total other operations and maintenance expenses
|
$680
|
$781
|
$1,380
|
$1,575
|
|
|
(a)
|
Includes Demand Side Management, System Benefit Charges and Public Service Law 18A assessments which are collected in revenues.
|
|
|
(b)
|
Includes parent company and consolidation adjustments.
|
A discussion of the results of operations by principal business segment for the three and six months ended June 30, 2020 and 2019 follows. For additional business segment financial information, see Note L to the Second Quarter Financial Statements.
The Companies’ results of operations for the three months ended June 30, 2020 and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CECONY
|
O&R
|
Clean Energy Businesses
|
Con Edison
Transmission
|
Other (a)
|
Con Edison (b)
|
(Millions of Dollars)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
2019
|
Operating revenues
|
$2,345
|
$2,331
|
$175
|
$179
|
$198
|
$233
|
$1
|
$1
|
|
$—
|
|
|
$—
|
|
$2,719
|
$2,744
|
Purchased power
|
345
|
313
|
35
|
39
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
380
|
352
|
Fuel
|
23
|
26
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
23
|
26
|
Gas purchased for resale
|
64
|
76
|
10
|
13
|
3
|
42
|
—
|
|
—
|
|
—
|
|
—
|
|
77
|
131
|
Other operations and maintenance
|
549
|
651
|
77
|
73
|
53
|
55
|
2
|
3
|
(1)
|
(1)
|
680
|
781
|
Depreciation and amortization
|
396
|
339
|
23
|
21
|
57
|
58
|
—
|
|
—
|
|
—
|
|
—
|
|
476
|
418
|
Taxes, other than income taxes
|
579
|
550
|
20
|
20
|
3
|
6
|
—
|
|
—
|
|
2
|
2
|
604
|
578
|
Operating income
|
389
|
376
|
10
|
13
|
82
|
72
|
(1)
|
(2)
|
(1)
|
(1)
|
479
|
458
|
Other income less deductions
|
(40)
|
(15)
|
(3)
|
(2)
|
1
|
—
|
|
25
|
24
|
(4)
|
(4)
|
(21)
|
3
|
Net interest expense
|
190
|
182
|
11
|
10
|
37
|
63
|
4
|
5
|
5
|
3
|
247
|
263
|
Income before income tax expense
|
159
|
179
|
(4)
|
1
|
46
|
9
|
20
|
17
|
(10)
|
(8)
|
211
|
198
|
Income tax expense
|
7
|
27
|
(2)
|
(1)
|
—
|
|
(12)
|
6
|
5
|
(2)
|
—
|
|
9
|
19
|
Net income
|
$152
|
$152
|
$(2)
|
$2
|
$46
|
$21
|
$14
|
$12
|
$(8)
|
$(8)
|
$202
|
$179
|
Income attributable to non-controlling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
12
|
27
|
—
|
|
—
|
|
—
|
|
—
|
|
12
|
27
|
Net income for common stock
|
$152
|
$152
|
$(2)
|
$2
|
$34
|
$(6)
|
$14
|
$12
|
$(8)
|
$(8)
|
$190
|
$152
|
|
|
(a)
|
Includes parent company and consolidation adjustments.
|
|
|
(b)
|
Represents the consolidated results of operations of Con Edison and its businesses.
|
CECONY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
June 30, 2020
|
|
For the Three Months Ended
June 30, 2019
|
|
|
(Millions of Dollars)
|
Electric
|
|
Gas
|
|
Steam
|
|
2020 Total
|
Electric
|
|
Gas
|
|
Steam
|
|
2019 Total
|
2020-2019
Variation
|
Operating revenues
|
$1,845
|
$416
|
$84
|
$2,345
|
$1,833
|
$408
|
$90
|
$2,331
|
$14
|
Purchased power
|
340
|
—
|
|
5
|
345
|
306
|
—
|
|
7
|
313
|
32
|
Fuel
|
7
|
—
|
|
16
|
23
|
14
|
—
|
|
12
|
26
|
(3)
|
Gas purchased for resale
|
—
|
|
64
|
—
|
|
64
|
—
|
|
76
|
—
|
|
76
|
(12)
|
Other operations and maintenance
|
422
|
87
|
40
|
549
|
510
|
97
|
44
|
651
|
(102)
|
Depreciation and amortization
|
301
|
72
|
23
|
396
|
261
|
56
|
22
|
339
|
57
|
Taxes, other than income taxes
|
457
|
88
|
34
|
579
|
428
|
85
|
37
|
550
|
29
|
Operating income
|
$318
|
$105
|
$(34)
|
$389
|
$314
|
$94
|
$(32)
|
$376
|
$13
|
Electric
CECONY’s results of electric operations for the three months ended June 30, 2020 compared with the 2019 period were as follows:
|
|
|
|
|
|
For the Three Months Ended
|
|
(Millions of Dollars)
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Operating revenues
|
$1,845
|
$1,833
|
$12
|
Purchased power
|
340
|
306
|
34
|
Fuel
|
7
|
14
|
(7)
|
Other operations and maintenance
|
422
|
510
|
(88)
|
Depreciation and amortization
|
301
|
261
|
40
|
Taxes, other than income taxes
|
457
|
428
|
29
|
Electric operating income
|
$318
|
$314
|
$4
|
CECONY’s electric sales and deliveries for the three months ended June 30, 2020 compared with the 2019 period were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of kWh Delivered
|
|
Revenues in Millions (a)
|
|
For the Three Months Ended
|
|
|
For the Three Months Ended
|
|
Description
|
June 30, 2020
|
|
June 30, 2019
|
|
Variation
|
|
Percent
Variation
|
|
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Percent
Variation
|
|
Residential/Religious (b)
|
2,294
|
|
2,101
|
|
193
|
|
9.2
|
%
|
|
$616
|
$541
|
$75
|
13.9
|
%
|
Commercial/Industrial
|
2,117
|
|
2,283
|
|
(166)
|
|
(7.3
|
)
|
|
414
|
429
|
(15)
|
(3.5
|
)
|
Retail choice customers
|
5,007
|
|
5,691
|
|
(684)
|
|
(12.0
|
)
|
|
502
|
516
|
(14)
|
(2.7
|
)
|
NYPA, Municipal Agency and other sales
|
2,066
|
|
2,312
|
|
(246)
|
|
(10.6
|
)
|
|
145
|
148
|
(3)
|
(2.0
|
)
|
Other operating revenues (c)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
168
|
199
|
(31)
|
(15.6
|
)
|
Total
|
11,484
|
|
12,387
|
|
(903)
|
|
(7.3
|
)%
|
(d)
|
$1,845
|
$1,833
|
$12
|
0.7
|
%
|
|
|
(a)
|
Revenues from electric sales are subject to a revenue decoupling mechanism, as a result of which delivery revenues generally are not affected by changes in delivery volumes from levels assumed when rates were approved.
|
|
|
(b)
|
“Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations.
|
|
|
(c)
|
Other electric operating revenues generally reflect changes in the revenue decoupling mechanism current asset or regulatory liability and changes in regulatory assets and liabilities in accordance with other provisions of the company’s rate plans.
|
|
|
(d)
|
After adjusting for variations, primarily weather and billing days, electric delivery volumes in CECONY’s service area decreased 8.0 percent in the three months ended June 30, 2020 compared with the 2019 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
|
Operating revenues increased $12 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to higher purchased power expenses ($34 million) and a certain rate plan reconciliation ($6 million), offset in part by a decrease in revenues from the new electric rate plan ($20 million) and lower fuel expenses ($7 million).
Purchased power expenses increased $34 million in the three months ended June 30, 2020 compared with the 2019 period due to higher unit costs ($52 million), offset in part by lower purchased volumes ($18 million).
Fuel expenses decreased $7 million in the three months ended June 30, 2020 compared with the 2019 period due to lower unit costs ($9 million), offset in part by higher purchased volumes from the company's electric generating facilities ($2 million).
Other operations and maintenance expenses decreased $88 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to lower costs for pension and other postretirement benefits ($62 million), lower surcharges for assessments and fees that are collected in revenues from customers ($27 million), lower healthcare costs ($11 million) and lower stock-based compensation ($6 million), offset in part by incremental costs associated with COVID-19 ($19 million).
Depreciation and amortization increased $40 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to higher electric utility plant balances and higher depreciation rates.
Taxes, other than income taxes increased $29 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to higher property taxes ($26 million), lower deferral of under-collected property taxes ($4 million) and higher state and local taxes ($1 million), offset in part by lower payroll taxes ($2 million) that includes the Employee Retention Credit created under the CARES Act. See “Coronavirus Disease 2019 (COVID-19) Impacts - Impact of CARES Act on Accounting for Income Taxes,” above.
Gas
CECONY’s results of gas operations for the three months ended June 30, 2020 compared with the 2019 period were as follows:
|
|
|
|
|
|
For the Three Months Ended
|
|
(Millions of Dollars)
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Operating revenues
|
$416
|
$408
|
$8
|
Gas purchased for resale
|
64
|
76
|
(12)
|
Other operations and maintenance
|
87
|
97
|
(10)
|
Depreciation and amortization
|
72
|
56
|
16
|
Taxes, other than income taxes
|
88
|
85
|
3
|
Gas operating income
|
$105
|
$94
|
$11
|
CECONY’s gas sales and deliveries, excluding off-system sales, for the three months ended June 30, 2020 compared with the 2019 period were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of Dt Delivered
|
|
Revenues in Millions (a)
|
|
For the Three Months Ended
|
|
|
For the Three Months Ended
|
|
Description
|
June 30, 2020
|
|
June 30, 2019
|
|
Variation
|
|
Percent
Variation
|
|
|
June 30, 2020
|
June 30, 2019
|
Variation
|
|
Percent
Variation
|
|
Residential
|
10,602
|
|
9,816
|
|
786
|
|
8.0
|
%
|
|
$192
|
$183
|
$9
|
4.9
|
%
|
General
|
6,646
|
|
6,550
|
|
96
|
|
1.5
|
|
|
63
|
76
|
(13)
|
(17.1
|
)
|
Firm transportation
|
17,112
|
|
16,037
|
|
1,075
|
|
6.7
|
|
|
124
|
120
|
4
|
3.3
|
|
Total firm sales and transportation
|
34,360
|
|
32,403
|
|
1,957
|
|
6.0
|
|
(b)
|
379
|
379
|
—
|
|
—
|
|
Interruptible sales (c)
|
2,501
|
|
1,860
|
|
641
|
|
34.5
|
|
|
7
|
9
|
(2)
|
(22.2
|
)
|
NYPA
|
7,664
|
|
10,515
|
|
(2,851
|
)
|
(27.1
|
)
|
|
1
|
1
|
—
|
|
—
|
|
Generation plants
|
10,239
|
|
10,288
|
|
(49
|
)
|
(0.5
|
)
|
|
5
|
5
|
—
|
|
—
|
|
Other
|
5,078
|
|
5,140
|
|
(62
|
)
|
(1.2
|
)
|
|
8
|
7
|
1
|
14.3
|
|
Other operating revenues (d)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
16
|
7
|
9
|
Large
|
|
Total
|
59,842
|
|
60,206
|
|
(364
|
)
|
(0.6
|
)%
|
|
$416
|
$408
|
$8
|
2.0
|
%
|
|
|
(a)
|
Revenues from gas sales are subject to a weather normalization clause and a revenue decoupling mechanism, as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.
|
|
|
(b)
|
After adjusting for variations, primarily billing days, firm gas sales and transportation volumes in the company’s service area decreased 2.1 percent in the three months ended June 30, 2020 compared with the 2019 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
|
|
|
(c)
|
Includes 1,315 thousand and 753 thousand of Dt for the 2020 and 2019 periods, respectively, which are also reflected in firm transportation and other.
|
|
|
(d)
|
Other gas operating revenues generally reflect changes in the revenue decoupling mechanism and weather normalization clause current asset or regulatory liability and changes in regulatory assets and liabilities in accordance with other provisions of the company’s rate plans.
|
Operating revenues increased $8 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to an increase in revenues from the new gas rate plan ($21 million), offset in part by lower gas purchased for resale expense ($12 million).
Gas purchased for resale decreased $12 million in the three months ended June 30, 2020 compared with the 2019 period due to lower purchased volumes ($8 million) and unit costs ($4 million).
Other operations and maintenance expenses decreased $10 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to lower costs for pension and other postretirement benefits ($11 million), lower healthcare costs ($2 million) and lower stock-based compensation ($1 million), offset in part by incremental costs associated with COVID-19 ($3 million) and higher surcharges for assessments and fees that are collected in revenues from customers ($2 million).
Depreciation and amortization increased $16 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to higher gas utility plant balances and higher depreciation rates.
Taxes, other than income taxes increased $3 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to higher property taxes ($9 million), offset in part by higher deferral of under-collected property taxes ($5 million) and lower payroll taxes ($1 million) that includes the Employee Retention Credit created under the CARES Act. See “Coronavirus Disease 2019 (COVID-19) Impacts - Impact of CARES Act on Accounting for Income Taxes,” above.
Steam
CECONY’s results of steam operations for the three months ended June 30, 2020 compared with the 2019 period were as follows:
|
|
|
|
|
|
For the Three Months Ended
|
|
(Millions of Dollars)
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Operating revenues
|
$84
|
$90
|
$(6)
|
Purchased power
|
5
|
7
|
(2)
|
Fuel
|
16
|
12
|
4
|
Other operations and maintenance
|
40
|
44
|
(4)
|
Depreciation and amortization
|
23
|
22
|
1
|
Taxes, other than income taxes
|
34
|
37
|
(3)
|
Steam operating income
|
$(34)
|
$(32)
|
$(2)
|
CECONY’s steam sales and deliveries for the three months ended June 30, 2020 compared with the 2019 period were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Pounds Delivered
|
|
Revenues in Millions
|
|
For the Three Months Ended
|
|
|
For the Three Months Ended
|
|
Description
|
June 30, 2020
|
|
June 30, 2019
|
|
Variation
|
|
Percent
Variation
|
|
|
June 30, 2020
|
June 30, 2019
|
Variation
|
|
Percent
Variation
|
|
General
|
65
|
|
60
|
|
5
|
|
8.3
|
%
|
|
$4
|
$4
|
—
|
|
—
|
%
|
Apartment house
|
1,037
|
|
1,033
|
|
4
|
|
0.4
|
|
|
26
|
25
|
1
|
4.0
|
|
Annual power
|
1,920
|
|
2,286
|
|
(366
|
)
|
(16.0
|
)
|
|
52
|
60
|
(8)
|
(13.3
|
)
|
Other operating revenues (a)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
2
|
1
|
1
|
Large
|
|
Total
|
3,022
|
|
3,379
|
|
(357
|
)
|
(10.6
|
)%
|
(b)
|
$84
|
$90
|
$(6)
|
(6.7
|
)%
|
|
|
(a)
|
Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plan.
|
|
|
(b)
|
After adjusting for variations, primarily weather and billing days, steam sales and deliveries decreased 20.0 percent in the three months ended June 30, 2020 compared with the 2019 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
|
Operating revenues decreased $6 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to lower revenues from the steam rate plan due to lower usage by customers ($11 million), lower purchased power expenses ($2 million) and certain rate plan reconciliations ($4 million), offset in part by a lower reserve related to steam earnings sharing ($7 million) and higher fuel expenses ($4 million).
Purchased power decreased $2 million in the three months ended June 30, 2020 compared with the 2019 period due to lower unit costs.
Fuel expenses increased $4 million in the three months ended June 30, 2020 compared with the 2019 period due to higher unit costs.
Other operations and maintenance expenses decreased $4 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to lower costs for pension and other postretirement benefits ($3 million) and lower healthcare costs ($1 million).
Depreciation and amortization increased $1 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to higher steam utility plant balances.
Taxes, other than income taxes decreased $3 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to higher deferral of under-collected property taxes ($6 million), offset in part by higher property taxes ($3 million).
Other Income (Deductions)
Other income (deductions) decreased $25 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to higher costs associated with components of pension and other postretirement benefits other than service cost due to a decrease in the discount rate.
Net Interest Expense
Net interest expense increased $8 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to higher interest on long-term debt ($20 million), offset in part by a decrease in interest accrued on the TCJA related regulatory liability ($3 million), lower interest expense for short-term debt ($3 million) and lower interest accrued on the system benefit charge liability ($2 million).
Income Tax Expense
Income taxes decreased $20 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to lower income before income tax expense ($4 million), an increase in the amortization of excess deferred federal income taxes due to CECONY’s new rate plan beginning in the first quarter of 2020 ($24 million) and higher flow-through tax benefits on plant-related items ($4 million), offset in part by the absence of the amortization of excess deferred state income taxes ($5 million), higher cost of removal expenses ($5 million) and higher allowance for uncollectible accounts ($2 million).
O&R
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
June 30, 2020
|
|
For the Three Months Ended
June 30, 2019
|
|
|
(Millions of Dollars)
|
Electric
|
|
Gas
|
|
2020 Total
|
Electric
|
|
Gas
|
|
2019 Total
|
2020-2019
Variation
|
|
Operating revenues
|
$138
|
$37
|
$175
|
$138
|
$41
|
$179
|
$(4)
|
Purchased power
|
35
|
—
|
|
35
|
39
|
—
|
|
39
|
(4)
|
Gas purchased for resale
|
—
|
|
10
|
10
|
—
|
|
13
|
13
|
(3)
|
Other operations and maintenance
|
61
|
16
|
77
|
55
|
18
|
73
|
4
|
Depreciation and amortization
|
16
|
7
|
23
|
15
|
6
|
21
|
2
|
Taxes, other than income taxes
|
13
|
7
|
20
|
13
|
7
|
20
|
—
|
|
Operating income
|
$13
|
$(3)
|
$10
|
$16
|
$(3)
|
$13
|
$(3)
|
Electric
O&R’s results of electric operations for the three months ended June 30, 2020 compared with the 2019 period were as follows:
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
(Millions of Dollars)
|
June 30, 2020
|
June 30, 2019
|
Variation
|
|
Operating revenues
|
$138
|
$138
|
|
$—
|
|
Purchased power
|
35
|
39
|
(4)
|
Other operations and maintenance
|
61
|
55
|
6
|
Depreciation and amortization
|
16
|
15
|
1
|
Taxes, other than income taxes
|
13
|
13
|
—
|
|
Electric operating income
|
$13
|
$16
|
$(3)
|
O&R’s electric sales and deliveries for the three months ended June 30, 2020 compared with the 2019 period were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of kWh Delivered
|
|
Revenues in Millions (a)
|
|
For the Three Months Ended
|
|
|
For the Three Months Ended
|
|
Description
|
June 30, 2020
|
|
June 30, 2019
|
|
Variation
|
|
Percent
Variation
|
|
|
June 30, 2020
|
June 30, 2019
|
Variation
|
|
Percent
Variation
|
|
Residential/Religious (b)
|
415
|
|
356
|
|
59
|
|
16.6
|
%
|
|
$70
|
$64
|
$6
|
9.4
|
%
|
Commercial/Industrial
|
174
|
|
190
|
|
(16
|
)
|
(8.4
|
)
|
|
26
|
25
|
1
|
4.0
|
|
Retail choice customers
|
616
|
|
712
|
|
(96
|
)
|
(13.5
|
)
|
|
42
|
45
|
(3)
|
(6.7
|
)
|
Public authorities
|
24
|
|
24
|
|
—
|
|
—
|
|
|
1
|
2
|
(1)
|
(50.0
|
)
|
Other operating revenues (c)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
(1)
|
2
|
(3)
|
Large
|
|
Total
|
1,229
|
|
1,282
|
|
(53
|
)
|
(4.1
|
)%
|
(d)
|
$138
|
$138
|
|
$—
|
|
—
|
|
|
|
(a)
|
O&R’s New York electric delivery revenues are subject to a revenue decoupling mechanism, as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s electric sales in New Jersey are not subject to a decoupling mechanism, and as a result, changes in such volumes do impact revenues.
|
|
|
(b)
|
“Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations.
|
|
|
(c)
|
Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s electric rate plan.
|
|
|
(d)
|
After adjusting for weather and other variations, electric delivery volumes in O&R’s service area decreased 5.4 percent in the three months ended June 30, 2020 compared with the 2019 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
|
Purchased power expenses decreased $4 million in the three months ended June 30, 2020 compared with the 2019 period due to lower unit costs ($3 million) and purchased volumes ($1 million).
Other operations and maintenance expenses increased $6 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to incremental costs associated with COVID-19 ($3 million), higher non-deferred storm costs ($1 million) and the amortization of prior deferred storm costs ($1 million).
Depreciation and amortization increased $1 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to higher electric utility plant balances.
Gas
O&R’s results of gas operations for the three months ended June 30, 2020 compared with the 2019 period were as follows:
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
(Millions of Dollars)
|
June 30, 2020
|
June 30, 2019
|
Variation
|
|
Operating revenues
|
$37
|
$41
|
$(4)
|
Gas purchased for resale
|
10
|
13
|
(3)
|
Other operations and maintenance
|
16
|
18
|
(2)
|
Depreciation and amortization
|
7
|
6
|
1
|
Taxes, other than income taxes
|
7
|
7
|
—
|
|
Gas operating income
|
$(3)
|
$(3)
|
|
$—
|
|
O&R’s gas sales and deliveries, excluding off-system sales, for the three months ended June 30, 2020 compared with the 2019 period were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of Dt Delivered
|
|
Revenues in Millions (a)
|
|
For the Three Months Ended
|
|
|
For the Three Months Ended
|
|
Description
|
June 30, 2020
|
|
June 30, 2019
|
|
Variation
|
|
Percent
Variation
|
|
|
June 30, 2020
|
|
June 30, 2019
|
|
Variation
|
|
Percent
Variation
|
|
Residential
|
1,686
|
|
1,287
|
|
399
|
|
31.0
|
%
|
|
$19
|
$18
|
$1
|
5.6
|
%
|
General
|
294
|
|
337
|
|
(43
|
)
|
(12.8
|
)
|
|
3
|
4
|
(1)
|
(25.0
|
)
|
Firm transportation
|
1,452
|
|
1,361
|
|
91
|
|
6.7
|
|
|
11
|
10
|
1
|
10.0
|
|
Total firm sales and transportation
|
3,432
|
|
2,985
|
|
447
|
|
15.0
|
|
(b)
|
33
|
32
|
1
|
3.1
|
|
Interruptible sales
|
771
|
|
840
|
|
(69
|
)
|
(8.2
|
)
|
|
1
|
1
|
—
|
|
—
|
|
Generation plants
|
3
|
|
—
|
|
3
|
|
Large
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Other
|
127
|
|
126
|
|
1
|
|
0.8
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Other gas revenues
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3
|
8
|
(5)
|
(62.5
|
)
|
Total
|
4,333
|
|
3,951
|
|
382
|
|
9.7
|
%
|
|
$37
|
$41
|
$(4)
|
(9.8
|
)%
|
|
|
(a)
|
Revenues from New York gas sales are subject to a weather normalization clause and a revenue decoupling mechanism as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.
|
|
|
(b)
|
After adjusting for weather and other variations, total firm sales and transportation volumes decreased 4.8 percent in the three months ended June 30, 2020 compared with the 2019 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
|
Operating revenues decreased $4 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to lower gas purchased for resale.
Gas purchased for resale decreased $3 million in the three months ended June 30, 2020 compared with the 2019 period due to lower unit costs ($4 million), offset in part by higher purchased volumes ($1 million).
Other operations and maintenance expenses decreased $2 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to lower pension costs.
Depreciation and amortization increased $1 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to higher gas utility plant balances.
Income Tax Expense
Income taxes decreased $1 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to lower income before income tax expense.
Clean Energy Businesses
The Clean Energy Businesses’ results of operations for the three months ended June 30, 2020 compared with the 2019 period were as follows:
|
|
|
|
|
|
For the Three Months Ended
|
|
(Millions of Dollars)
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Operating revenues
|
$198
|
$233
|
$(35)
|
Gas purchased for resale
|
3
|
42
|
(39)
|
Other operations and maintenance
|
53
|
55
|
(2)
|
Depreciation and amortization
|
57
|
58
|
(1)
|
Taxes, other than income taxes
|
3
|
6
|
(3)
|
Operating income
|
$82
|
$72
|
$10
|
Operating revenues decreased $35 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to lower wholesale revenues ($36 million) and lower energy services revenues ($5 million), offset in part by higher renewable electric production revenues ($9 million) and net mark-to-market values ($3 million).
Gas purchased for resale decreased $39 million in the three months ended June 30, 2020 compared with the 2019 period due to lower purchased volumes.
Other operations and maintenance expenses decreased $2 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to lower energy services costs.
Taxes, other than income taxes decreased $3 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to the Employee Retention Credit created under the CARES Act. See “Coronavirus Disease 2019 (COVID-19) Impacts - Impact of CARES Act on Accounting for Income Taxes,” above.
Net Interest Expense
Net interest expense decreased $26 million in the three months ended June 30, 2020 compared with the 2019 period due to lower unrealized losses on interest rate swaps in the 2020 period.
Income Tax Expense
Income taxes increased $12 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to higher income before income tax expense ($8 million) and lower income attributable to non-controlling interest ($4 million).
Income Attributable to Non-Controlling Interest
Income attributable to non-controlling interest decreased $15 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to lower income attributable in the 2020 period to a tax equity investor in renewable electric production projects accounted for under the HLBV method of accounting. See Note O to the Second Quarter Financial Statements.
Con Edison Transmission
Income Tax Expense
Income taxes increased $1 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to higher income before income tax expense.
Other
Income Tax Expense
Income taxes decreased $2 million in the three months ended June 30, 2020 compared with the 2019 period primarily due to the absence of an increase in uncertain tax positions in 2019.
The Companies’ results of operations for the six months ended June 30, 2020 and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CECONY
|
O&R
|
Clean Energy Businesses
|
Con Edison
Transmission
|
Other (a)
|
Con Edison (b)
|
(Millions of Dollars)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
2019
|
Operating revenues
|
$5,200
|
$5,371
|
$408
|
$437
|
$344
|
$450
|
$2
|
$2
|
$(1)
|
$(2)
|
$5,953
|
$6,258
|
Purchased power
|
618
|
635
|
71
|
85
|
—
|
|
—
|
|
—
|
|
—
|
|
(1)
|
(1)
|
688
|
719
|
Fuel
|
101
|
133
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
101
|
133
|
Gas purchased for resale
|
260
|
393
|
33
|
57
|
16
|
124
|
—
|
|
—
|
|
—
|
|
(1)
|
309
|
573
|
Other operations and maintenance
|
1,117
|
1,311
|
152
|
144
|
107
|
115
|
5
|
5
|
(1)
|
—
|
|
1,380
|
1,575
|
Depreciation and amortization
|
786
|
673
|
45
|
42
|
115
|
116
|
—
|
|
—
|
|
—
|
|
—
|
|
946
|
831
|
Taxes, other than income taxes
|
1,186
|
1,125
|
42
|
42
|
10
|
12
|
—
|
|
—
|
|
4
|
4
|
1,242
|
1,183
|
Operating income
|
1,132
|
1,101
|
65
|
67
|
96
|
83
|
(3)
|
(3)
|
(3)
|
(4)
|
1,287
|
1,244
|
Other income less deductions
|
(100)
|
(22)
|
(8)
|
(5)
|
1
|
1
|
51
|
49
|
(3)
|
(6)
|
(59)
|
17
|
Net interest expense
|
372
|
364
|
20
|
20
|
160
|
109
|
9
|
12
|
9
|
5
|
570
|
510
|
Income before income tax expense
|
660
|
715
|
37
|
42
|
(63)
|
(25)
|
39
|
34
|
(15)
|
(15)
|
658
|
751
|
Income tax expense
|
102
|
151
|
8
|
8
|
(43)
|
(32)
|
11
|
9
|
(14)
|
(9)
|
64
|
127
|
Net income
|
$558
|
$564
|
$29
|
$34
|
$(20)
|
$7
|
$28
|
$25
|
$(1)
|
$(6)
|
$594
|
$624
|
Income attributable to non-controlling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
29
|
48
|
—
|
|
—
|
|
—
|
|
—
|
|
29
|
48
|
Net income for common stock
|
$558
|
$564
|
$29
|
$34
|
$(49)
|
$(41)
|
$28
|
$25
|
$(1)
|
$(6)
|
$565
|
$576
|
|
|
(a)
|
Includes parent company and consolidation adjustments.
|
|
|
(b)
|
Represents the consolidated results of operations of Con Edison and its businesses.
|
CECONY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended
June 30, 2020
|
|
For the Six Months Ended
June 30, 2019
|
|
|
(Millions of Dollars)
|
Electric
|
|
Gas
|
|
Steam
|
|
2020 Total
|
Electric
|
|
Gas
|
|
Steam
|
|
2019 Total
|
2020-2019
Variation
|
Operating revenues
|
$3,616
|
$1,250
|
$334
|
$5,200
|
$3,630
|
$1,330
|
$411
|
$5,371
|
$(171)
|
Purchased power
|
604
|
—
|
|
14
|
618
|
616
|
—
|
|
19
|
635
|
(17)
|
Fuel
|
38
|
—
|
|
63
|
101
|
47
|
—
|
|
86
|
133
|
(32)
|
Gas purchased for resale
|
—
|
|
260
|
—
|
|
260
|
—
|
|
393
|
—
|
|
393
|
(133)
|
Other operations and maintenance
|
853
|
182
|
82
|
1,117
|
1,017
|
204
|
90
|
1,311
|
(194)
|
Depreciation and amortization
|
598
|
143
|
45
|
786
|
518
|
111
|
44
|
673
|
113
|
Taxes, other than income taxes
|
923
|
191
|
72
|
1,186
|
861
|
184
|
80
|
1,125
|
61
|
Operating income
|
$600
|
$474
|
$58
|
$1,132
|
$571
|
$438
|
$92
|
$1,101
|
$31
|
Electric
CECONY’s results of electric operations for the six months ended June 30, 2020 compared with the 2019 period were as follows:
|
|
|
|
|
|
For the Six Months Ended
|
|
(Millions of Dollars)
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Operating revenues
|
$3,616
|
$3,630
|
$(14)
|
Purchased power
|
604
|
616
|
(12)
|
Fuel
|
38
|
47
|
(9)
|
Other operations and maintenance
|
853
|
1,017
|
(164)
|
Depreciation and amortization
|
598
|
518
|
80
|
Taxes, other than income taxes
|
923
|
861
|
62
|
Electric operating income
|
$600
|
$571
|
$29
|
CECONY’s electric sales and deliveries for the six months ended June 30, 2020 compared with the 2019 period were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of kWh Delivered
|
|
Revenues in Millions (a)
|
|
For the Six Months Ended
|
|
|
For the Six Months Ended
|
|
Description
|
June 30, 2020
|
|
June 30, 2019
|
|
Variation
|
Percent
Variation
|
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Percent
Variation
|
Residential/Religious (b)
|
4,637
|
|
4,516
|
|
121
|
|
2.7
|
%
|
|
$1,225
|
$1,137
|
$88
|
7.7
|
%
|
Commercial/Industrial
|
4,518
|
|
4,743
|
|
(225
|
)
|
(4.7
|
)
|
|
848
|
848
|
—
|
|
—
|
|
Retail choice customers
|
10,720
|
|
11,629
|
|
(909
|
)
|
(7.8
|
)
|
|
1,057
|
1,024
|
33
|
3.2
|
|
NYPA, Municipal Agency and other sales
|
4,440
|
|
4,722
|
|
(282
|
)
|
(6.0
|
)
|
|
289
|
284
|
5
|
1.8
|
|
Other operating revenues (c)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
197
|
337
|
(140)
|
(41.5
|
)
|
Total
|
24,315
|
|
25,610
|
|
(1,295
|
)
|
(5.1
|
)%
|
(d)
|
$3,616
|
$3,630
|
$(14)
|
(0.4
|
)%
|
|
|
(a)
|
Revenues from electric sales are subject to a revenue decoupling mechanism, as a result of which delivery revenues generally are not affected by changes in delivery volumes from levels assumed when rates were approved.
|
|
|
(b)
|
“Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations.
|
|
|
(c)
|
Other electric operating revenues generally reflect changes in the revenue decoupling mechanism current asset or regulatory liability and changes in regulatory assets and liabilities in accordance with other provisions of the company’s rate plans.
|
|
|
(d)
|
After adjusting for variations, primarily weather and billing days, electric delivery volumes in CECONY’s service area decreased 3.9 percent in the six months ended June 30, 2020 compared with the 2019 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
|
Operating revenues decreased $14 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to lower purchased power expenses ($12 million) and fuel expenses ($9 million), offset in part by a certain rate plan reconciliation ($6 million).
Purchased power expenses decreased $12 million in the six months ended June 30, 2020 compared with the 2019 period due to lower purchased volumes ($78 million), offset in part by higher unit costs ($66 million).
Fuel expenses decreased $9 million in the six months ended June 30, 2020 compared with the 2019 period due to lower unit costs ($15 million), offset in part by higher purchased volumes from the company’s electric generating facilities ($6 million).
Other operations and maintenance expenses decreased $164 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to lower costs for pension and other postretirement benefits ($109 million), lower surcharges for assessments and fees that are collected in revenues from customers ($45 million), lower stock-based compensation ($12 million), lower healthcare costs ($10 million), lower consultant costs ($8 million) and lower reserve for injuries and damages ($5 million), offset in part by incremental costs associated with COVID-19 ($27 million).
Depreciation and amortization increased $80 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to higher electric utility plant balances and higher depreciation rates.
Taxes, other than income taxes increased $62 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to higher property taxes ($53 million), lower deferral of under-collected property taxes ($7 million) and higher state and local taxes ($5 million), offset in part by lower payroll taxes ($4 million) that includes the Employee Retention Credit created under the CARES Act. See “Coronavirus Disease 2019 (COVID-19) Impacts - Impact of CARES Act on Accounting for Income Taxes,” above.
Gas
CECONY’s results of gas operations for the six months ended June 30, 2020 compared with the 2019 period were as follows:
|
|
|
|
|
|
For the Six Months Ended
|
|
(Millions of Dollars)
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Operating revenues
|
$1,250
|
$1,330
|
$(80)
|
Gas purchased for resale
|
260
|
393
|
(133)
|
Other operations and maintenance
|
182
|
204
|
(22)
|
Depreciation and amortization
|
143
|
111
|
32
|
Taxes, other than income taxes
|
191
|
184
|
7
|
Gas operating income
|
$474
|
$438
|
$36
|
CECONY’s gas sales and deliveries, excluding off-system sales, for the six months ended June 30, 2020 compared with the 2019 period were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of Dt Delivered
|
|
Revenues in Millions (a)
|
|
For the Six Months Ended
|
|
|
For the Six Months Ended
|
|
Description
|
June 30, 2020
|
|
June 30, 2019
|
|
Variation
|
Percent
Variation
|
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Percent
Variation
|
Residential
|
32,846
|
|
36,940
|
|
(4,094
|
)
|
(11.1
|
)%
|
|
$575
|
$621
|
$(46)
|
(7.4
|
)%
|
General
|
19,048
|
|
20,983
|
|
(1,935
|
)
|
(9.2
|
)
|
|
201
|
254
|
(53)
|
(20.9
|
)
|
Firm transportation
|
50,029
|
|
51,518
|
|
(1,489
|
)
|
(2.9
|
)
|
|
428
|
388
|
40
|
10.3
|
|
Total firm sales and transportation
|
101,923
|
|
109,441
|
|
(7,518
|
)
|
(6.9
|
)
|
(b)
|
1,204
|
1,263
|
(59)
|
(4.7
|
)
|
Interruptible sales (c)
|
4,987
|
|
5,401
|
|
(414
|
)
|
(7.7
|
)
|
|
18
|
28
|
(10)
|
(35.7
|
)
|
NYPA
|
15,744
|
|
17,966
|
|
(2,222
|
)
|
(12.4
|
)
|
|
1
|
1
|
—
|
|
—
|
|
Generation plants
|
20,414
|
|
21,987
|
|
(1,573
|
)
|
(7.2
|
)
|
|
10
|
11
|
(1)
|
(9.1
|
)
|
Other
|
12,024
|
|
11,454
|
|
570
|
|
5.0
|
|
|
21
|
18
|
3
|
16.7
|
|
Other operating revenues (d)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
(4)
|
9
|
(13)
|
Large
|
|
Total
|
155,092
|
|
166,249
|
|
(11,157
|
)
|
(6.7
|
)%
|
|
$1,250
|
$1,330
|
$(80)
|
(6.0
|
)%
|
|
|
(a)
|
Revenues from gas sales are subject to a weather normalization clause and a revenue decoupling mechanism as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.
|
|
|
(b)
|
After adjusting for variations, primarily billing days, firm gas sales and transportation volumes in the company’s service area decreased 0.4 percent in the six months ended June 30, 2020 compared with the 2019 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
|
|
|
(c)
|
Includes 2,285 thousand and 2,733 thousand of Dt for the 2020 and 2019 periods, respectively, which are also reflected in firm transportation and other.
|
|
|
(d)
|
Other gas operating revenues generally reflect changes in the revenue decoupling mechanism and weather normalization clause current asset or regulatory liability and changes in regulatory assets and liabilities in accordance with other provisions of the company’s rate plans.
|
Operating revenues decreased $80 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to lower gas purchased for resale expense ($133 million) and a certain rate plan reconciliation ($7 million), offset in part by an increase in revenues from the new gas rate plan ($62 million).
Gas purchased for resale decreased $133 million in the six months ended June 30, 2020 compared with the 2019 period due to lower unit costs ($88 million) and purchased volumes ($45 million).
Other operations and maintenance expenses decreased $22 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to lower costs for pension and other postretirement benefits ($18 million), lower surcharges for assessments and fees that are collected in revenues from customers ($3 million), lower stock-based compensation ($3 million) and lower healthcare costs ($2 million), offset in part by incremental costs associated with COVID-19 ($4 million).
Depreciation and amortization increased $32 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to higher gas utility plant balances and higher depreciation rates.
Taxes, other than income taxes increased $7 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to higher property taxes ($17 million) and state and local taxes ($1 million), offset in part by higher deferral of under-collected property taxes ($10 million) and lower payroll taxes ($1 million) that includes the Employee Retention Credit created under the CARES Act. See “Coronavirus Disease 2019 (COVID-19) Impacts - Impact of CARES Act on Accounting for Income Taxes,” above.
Steam
CECONY’s results of steam operations for the six months ended June 30, 2020 compared with the 2019 period were as follows:
|
|
|
|
|
|
For the Six Months Ended
|
|
(Millions of Dollars)
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Operating revenues
|
$334
|
$411
|
$(77)
|
Purchased power
|
14
|
19
|
(5)
|
Fuel
|
63
|
86
|
(23)
|
Other operations and maintenance
|
82
|
90
|
(8)
|
Depreciation and amortization
|
45
|
44
|
1
|
Taxes, other than income taxes
|
72
|
80
|
(8)
|
Steam operating income
|
$58
|
$92
|
$(34)
|
CECONY’s steam sales and deliveries for the six months ended June 30, 2020 compared with the 2019 period were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Pounds Delivered
|
|
Revenues in Millions
|
|
For the Six Months Ended
|
|
|
For the Six Months Ended
|
|
Description
|
June 30, 2020
|
|
June 30, 2019
|
|
Variation
|
Percent
Variation
|
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Percent
Variation
|
General
|
327
|
|
388
|
|
(61
|
)
|
(15.7
|
)%
|
|
$16
|
$19
|
$(3)
|
(15.8
|
)%
|
Apartment house
|
3,213
|
|
3,609
|
|
(396
|
)
|
(11.0
|
)
|
|
91
|
107
|
(16)
|
(15.0
|
)
|
Annual power
|
6,438
|
|
7,940
|
|
(1,502
|
)
|
(18.9
|
)
|
|
213
|
268
|
(55)
|
(20.5
|
)
|
Other operating revenues (a)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
14
|
17
|
(3)
|
(17.6
|
)
|
Total
|
9,978
|
|
11,937
|
|
(1,959
|
)
|
(16.4
|
)%
|
(b)
|
$334
|
$411
|
$(77)
|
(18.7
|
)%
|
|
|
(a)
|
Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plan.
|
|
|
(b)
|
After adjusting for variations, primarily weather and billing days, steam sales and deliveries decreased 5.9 percent in the six months ended June 30, 2020 compared with the 2019 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
|
Operating revenues decreased $77 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to the impact of warmer winter weather ($28 million), lower fuel expenses ($23 million), lower revenues from the steam rate plan due to lower usage by customers ($15 million) and lower purchased power expenses ($5 million).
Purchased power expenses decreased $5 million in the six months ended June 30, 2020 compared with the 2019 period due to lower unit costs ($6 million), offset in part by higher purchased volumes ($1 million).
Fuel expenses decreased $23 million in the six months ended June 30, 2020 compared with the 2019 period due to lower purchased volumes from the company’s steam generating facilities ($13 million) and unit costs ($10 million).
Other operations and maintenance expenses decreased $8 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to lower costs for pension and other postretirement benefits ($5 million), lower stock-based compensation ($1 million) and lower healthcare costs ($1 million), offset in part by incremental costs associated with COVID-19 ($1 million).
Depreciation and amortization increased $1 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to higher steam utility plant balances.
Taxes, other than income taxes decreased $8 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to higher deferral of under-collected property taxes ($12 million) and lower state and local taxes ($2 million), offset in part by higher property taxes ($6 million).
Other Income (Deductions)
Other income (deductions) decreased $78 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to higher costs associated with components of pension and other postretirement benefits other than service cost ($70 million) due to a decrease in the discount rate and the absence of the company’s share of a gain on sale of property in 2019 ($5 million).
Net Interest Expense
Net interest expense increased $8 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to higher interest on long-term debt ($23 million), offset in part by a decrease in interest accrued on the TCJA related regulatory liability ($6 million), lower interest expense for short-term debt ($4 million) and lower interest accrued on the system benefit charge liability ($4 million).
Income Tax Expense
Income taxes decreased $49 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to lower income before income tax expense ($12 million), an increase in the amortization of excess deferred federal income taxes due to CECONY’s new rate plan beginning in the first quarter of 2020 ($49 million) and higher flow-through tax benefits on plant-related items ($8 million), offset in part by the absence of the amortization of excess deferred state income taxes ($10 million), higher cost of removal expenses ($8 million), and higher allowance for uncollectible accounts ($3 million).
O&R
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended
June 30, 2020
|
|
For the Six Months Ended
June 30, 2019
|
|
|
(Millions of Dollars)
|
Electric
|
|
Gas
|
|
2020 Total
|
Electric
|
|
Gas
|
|
2019 Total
|
2020-2019
Variation
|
|
Operating revenues
|
$274
|
$134
|
$408
|
$283
|
$154
|
$437
|
$(29)
|
Purchased power
|
71
|
—
|
|
71
|
85
|
—
|
|
85
|
(14)
|
Gas purchased for resale
|
—
|
|
33
|
33
|
—
|
|
57
|
57
|
(24)
|
Other operations and maintenance
|
118
|
34
|
152
|
110
|
34
|
144
|
8
|
Depreciation and amortization
|
32
|
13
|
45
|
30
|
12
|
42
|
3
|
Taxes, other than income taxes
|
26
|
16
|
42
|
27
|
15
|
42
|
—
|
|
Operating income
|
$27
|
$38
|
$65
|
$31
|
$36
|
$67
|
$(2)
|
Electric
O&R’s results of electric operations for the six months ended June 30, 2020 compared with the 2019 period were as follows:
|
|
|
|
|
|
For the Six Months Ended
|
|
(Millions of Dollars)
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Operating revenues
|
$274
|
$283
|
$(9)
|
Purchased power
|
71
|
85
|
(14)
|
Other operations and maintenance
|
118
|
110
|
8
|
Depreciation and amortization
|
32
|
30
|
2
|
Taxes, other than income taxes
|
26
|
27
|
(1)
|
Electric operating income
|
$27
|
$31
|
$(4)
|
O&R’s electric sales and deliveries for the six months ended June 30, 2020 compared with the 2019 period were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of kWh Delivered
|
|
Revenues in Millions (a)
|
|
For the Six Months Ended
|
|
|
For the Six Months Ended
|
|
Description
|
June 30, 2020
|
|
June 30, 2019
|
|
Variation
|
|
Percent
Variation
|
|
June 30, 2020
|
June 30, 2019
|
Variation
|
|
Percent
Variation
|
Residential/Religious (b)
|
767
|
|
753
|
|
14
|
|
1.9
|
%
|
|
$137
|
$137
|
|
$—
|
|
—
|
|
Commercial/Industrial
|
382
|
|
386
|
|
(4
|
)
|
(1.0
|
)
|
|
53
|
51
|
2
|
3.9
|
|
Retail choice customers
|
1,254
|
|
1,397
|
|
(143
|
)
|
(10.2
|
)
|
|
82
|
85
|
(3)
|
(3.5
|
)
|
Public authorities
|
50
|
|
50
|
|
—
|
|
—
|
|
|
3
|
4
|
(1)
|
(25.0
|
)
|
Other operating revenues (c)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
(1)
|
6
|
(7)
|
Large
|
|
Total
|
2,453
|
|
2,586
|
|
(133
|
)
|
(5.1
|
)%
|
(d)
|
$274
|
$283
|
$(9)
|
(3.2
|
)%
|
|
|
(a)
|
O&R’s New York electric delivery revenues are subject to a revenue decoupling mechanism, as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s electric sales in New Jersey are not subject to a decoupling mechanism, and as a result, changes in such volumes do impact revenues.
|
|
|
(b)
|
“Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations.
|
|
|
(c)
|
Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s electric rate plan.
|
|
|
(d)
|
After adjusting for weather and other variations, electric delivery volumes in O&R’s service area decreased 1.3 percent in the six months ended June 30, 2020 compared with the 2019 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
|
Operating revenues decreased $9 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to lower purchased power expenses.
Purchased power expenses decreased $14 million in the six months ended June 30, 2020 compared with the 2019 period due to lower unit costs ($11 million) and purchased volumes ($3 million).
Other operations and maintenance expenses increased $8 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to incremental costs associated with COVID-19 ($3 million), the amortization of prior deferred storm costs ($1 million), higher healthcare costs ($1 million), higher tree trimming costs ($1 million) and higher pension costs ($1 million).
Depreciation and amortization increased $2 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to higher electric utility plant balances.
Taxes, other than income taxes decreased $1 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to lower payroll taxes ($1 million) that includes the Employee Retention Credit created under the CARES Act (see “Coronavirus Disease 2019 (COVID-19) Impacts - Impact of CARES Act on Accounting for Income Taxes,” above), offset in part by higher property taxes ($1 million).
Gas
O&R’s results of gas operations for the six months ended June 30, 2020 compared with the 2019 period were as follows:
|
|
|
|
|
|
|
For the Six Months Ended
|
|
(Millions of Dollars)
|
June 30, 2020
|
June 30, 2019
|
Variation
|
|
Operating revenues
|
$134
|
$154
|
$(20)
|
Gas purchased for resale
|
33
|
57
|
(24)
|
Other operations and maintenance
|
34
|
34
|
—
|
|
Depreciation and amortization
|
13
|
12
|
1
|
Taxes, other than income taxes
|
16
|
15
|
1
|
Gas operating income
|
$38
|
$36
|
$2
|
O&R’s gas sales and deliveries, excluding off-system sales, for the six months ended June 30, 2020 compared with the 2019 period were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of Dt Delivered
|
|
Revenues in Millions (a)
|
|
For the Six Months Ended
|
|
|
For the Six Months Ended
|
|
Description
|
June 30, 2020
|
|
June 30, 2019
|
|
Variation
|
Percent
Variation
|
|
June 30, 2020
|
|
June 30, 2019
|
|
Variation
|
Percent
Variation
|
Residential
|
5,761
|
|
6,253
|
|
(492
|
)
|
(7.9
|
)%
|
|
$70
|
$87
|
$(17)
|
(19.5
|
)%
|
General
|
1,225
|
|
1,448
|
|
(223
|
)
|
(15.4
|
)
|
|
12
|
17
|
(5)
|
(29.4
|
)
|
Firm transportation
|
4,995
|
|
5,579
|
|
(584
|
)
|
(10.5
|
)
|
|
38
|
37
|
1
|
2.7
|
|
Total firm sales and transportation
|
11,981
|
|
13,280
|
|
(1,299
|
)
|
(9.8
|
)
|
(b)
|
120
|
141
|
(21)
|
(14.9
|
)
|
Interruptible sales
|
1,936
|
|
1,892
|
|
44
|
|
2.3
|
|
|
3
|
3
|
—
|
|
—
|
|
Generation plants
|
3
|
|
—
|
|
3
|
|
Large
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Other
|
499
|
|
563
|
|
(64
|
)
|
(11.4
|
)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Other gas revenues
|
—
|
|
—
|
|
—
|
|
—
|
|
|
11
|
10
|
1
|
10
|
%
|
Total
|
14,419
|
|
15,735
|
|
(1,316
|
)
|
(8.4
|
)%
|
|
$134
|
$154
|
$(20)
|
(13.0
|
)%
|
|
|
(a)
|
Revenues from New York gas sales are subject to a weather normalization clause and a revenue decoupling mechanism as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.
|
|
|
(b)
|
After adjusting for weather and other variations, total firm sales and transportation volumes decreased 0.4 percent in the six months ended June 30, 2020 compared with 2019 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
|
Operating revenues decreased $20 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to a decrease in gas purchased for resale ($24 million), offset in part by higher revenues from the New York gas rate plan ($2 million).
Gas purchased for resale decreased $24 million in the six months ended June 30, 2020 compared with the 2019 period due to lower unit costs ($18 million) and purchased volumes ($6 million).
Depreciation and amortization increased $1 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to higher gas utility plant balances.
Taxes, other than income taxes increased $1 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to higher property taxes.
Clean Energy Businesses
The Clean Energy Businesses’ results of operations for the six months ended June 30, 2020 compared with the 2019 period were as follows:
|
|
|
|
|
|
For the Six Months Ended
|
|
(Millions of Dollars)
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Operating revenues
|
$344
|
$450
|
$(106)
|
Gas purchased for resale
|
16
|
124
|
(108)
|
Other operations and maintenance
|
107
|
115
|
(8)
|
Depreciation and amortization
|
115
|
116
|
(1)
|
Taxes, other than income taxes
|
10
|
12
|
(2)
|
Operating income
|
$96
|
$83
|
$13
|
Operating revenues decreased $106 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to lower wholesale revenues ($111 million) and lower energy services revenues ($17 million), offset in part by higher renewable electric production revenues ($20 million) and net mark-to-market values ($2 million).
Gas purchased for resale decreased $108 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to lower purchased volumes.
Other operations and maintenance expenses decreased $8 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to lower energy services costs.
Taxes, other than income taxes decreased $2 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to the Employee Retention Credit created under the CARES Act. See “Coronavirus Disease 2019 (COVID-19) Impacts - Impact of CARES Act on Accounting for Income Taxes,” above.
Net Interest Expense
Net interest expense increased $51 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to higher unrealized losses on interest rate swaps in the 2020 period.
Income Tax Expense
Income taxes decreased $11 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to lower income before income tax expense ($8 million), higher renewable energy credits ($2 million), lower state income taxes ($2 million) and a tax benefit due to the change in the federal corporate income tax rate recognized for a loss carryback from the 2018 tax year to the 2013 tax year as allowed under the CARES Act signed into law during the first quarter of 2020 ($4 million), offset in part by lower income attributable to non-controlling interest ($5 million).
Income Attributable to Non-Controlling Interest
Income attributable to non-controlling interest decreased $19 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to lower income attributable in the 2020 period to a tax equity investor in renewable electric production projects accounted for under the HLBV method of accounting. See Note O to the Second Quarter Financial Statements.
Con Edison Transmission
Income Tax Expense
Income taxes increased $2 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to higher income before income tax expense ($1 million) and higher state income taxes ($1 million).
Other
Income Tax Expense
Income taxes decreased $5 million in the six months ended June 30, 2020 compared with the 2019 period primarily due to lower state income taxes ($3 million) and the absence of an increase in uncertain tax positions in 2019 ($2 million).
Liquidity and Capital Resources
The Companies’ liquidity reflects cash flows from operating, investing and financing activities, as shown on their respective consolidated statement of cash flows and as discussed below.
The Companies’ cash, temporary cash investments and restricted cash resulting from operating, investing and financing activities for the six months ended June 30, 2020 and 2019 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
CECONY
|
O&R
|
Clean Energy Businesses
|
Con Edison
Transmission
|
Other (a)
|
Con Edison (b)
|
(Millions of Dollars)
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
2020
|
|
2019
|
|
2020
|
|
2019
|
2020
|
2019
|
Operating activities
|
$975
|
$1,291
|
$74
|
$124
|
$653
|
$154
|
$(4)
|
$82
|
$(518)
|
$(113)
|
$1,180
|
$1,538
|
Investing activities
|
(1,574)
|
(1,591)
|
(95)
|
(116)
|
(273)
|
(92)
|
10
|
(78)
|
—
|
|
1
|
(1,932)
|
(1,876)
|
Financing activities
|
762
|
268
|
8
|
(36)
|
(405)
|
(32)
|
(6)
|
(6)
|
521
|
108
|
880
|
302
|
Net change for the period
|
163
|
(32)
|
(13)
|
(28)
|
(25)
|
30
|
—
|
|
(2)
|
3
|
(4)
|
128
|
(36)
|
Balance at beginning of period
|
933
|
818
|
32
|
52
|
251
|
126
|
—
|
|
2
|
1
|
8
|
1,217
|
1,006
|
Balance at end of period (c)
|
$1,096
|
$786
|
$19
|
$24
|
$226
|
$156
|
|
$—
|
|
|
$—
|
|
$4
|
$4
|
$1,345
|
$970
|
(a) Includes parent company and consolidation adjustments.
(b) Represents the consolidated results of operations of Con Edison and its businesses.
(c) See "Reconciliation of Cash, Temporary Cash Investments and Restricted Cash" in Note A to the Second Quarter Financial Statements.
Cash Flows from Operating Activities
The Utilities’ cash flows from operating activities primarily reflect their energy sales and deliveries and cost of operations. The volume of energy sales and deliveries is primarily affected by factors external to the Utilities, such as growth of customer demand, weather, market prices for energy and economic conditions. Measures that promote distributed energy resources, such as distributed generation, demand reduction and energy efficiency, also affect the volume of energy sales and deliveries. In addition, the decline in business activity in the Utilities’ service territory as a result of the COVID-19 pandemic has resulted and may continue to result in lower billed sales revenues. Under the revenue decoupling mechanisms in the Utilities’ New York electric and gas rate plans, changes in delivery volumes from levels assumed when rates were approved may affect the timing of cash flows, but generally not net income. The prices at which the Utilities provide energy to their customers are determined in accordance with their rate plans. In general, changes in the Utilities’ cost of purchased power, fuel and gas may affect the timing of cash flows, but not net income, because the costs are recovered in accordance with rate plans. Pursuant to their rate plans, the Utilities have recovered from customers a portion of the tax liability they will pay in the future as a result of temporary differences between the book and tax basis of assets and liabilities. These temporary differences affect the timing of cash flows, but not net income, as the Companies are required to record deferred tax assets and liabilities at the current corporate tax rate for the temporary differences. For the Utilities, credits to their customers of the net benefits of the TCJA, including the reduction of the corporate tax rate to 21 percent, decrease cash flows from operating activities. See “COVID-19 Regulatory Matters” and “Other Regulatory Matters” in Note B to the Second Quarter Financial Statements and “Coronavirus Disease 2019 (COVID-19) Impacts - Liquidity and Financing,” above.
Net income is the result of cash and non-cash (or accrual) transactions. Only cash transactions affect the Companies’ cash flows from operating activities. Principal non-cash charges or credits include depreciation, deferred income tax expense, amortizations of certain regulatory assets and liabilities, and accrued unbilled revenue. Non-cash charges or credits may also be accrued under the revenue decoupling and cost reconciliation mechanisms in the Utilities’ New York electric and gas rate plans.
Net cash flows from operating activities for the six months ended June 30, 2020 for Con Edison and CECONY were $358 million and $316 million lower, respectively, than in the 2019 period. The changes in net cash flows for Con Edison and CECONY primarily reflect higher accounts receivable balances from customers ($278 million and $249 million, respectively) (see “Coronavirus Disease 2019 (COVID-19) Impacts - Accounting Considerations” and “Liquidity and Financing,” above), lower other receivables and other current assets ($135 million and $98 million, respectively) primarily due to lower reimbursement received for Puerto Rico related restoration costs in the 2020 period, a change in pension and retiree benefit obligations ($68 million and $63 million, respectively) and lower system benefit charge ($45 million and $44 million, respectively), offset in part by lower TCJA net benefits provided to customers in the 2020 period ($147 million and $147 million, respectively).
The change in net cash flows also reflects the timing of payments for and recovery of energy costs. This timing is reflected within changes to accounts receivable – customers and recoverable and refundable energy costs within other regulatory assets and liabilities and accounts payable balances.
Cash Flows Used in Investing Activities
Net cash flows used in investing activities for Con Edison and CECONY were $56 million higher and $17 million lower, respectively, for the six months ended June 30, 2020 compared with the 2019 period. The change for Con Edison primarily reflects an increase in non-utility construction expenditures at the Clean Energy Businesses ($166 million) and the proceeds from the sale of a property formerly used by CECONY in its operations in 2019 ($48 million), offset in part by lower investments in electric and gas transmission projects at Con Edison Transmission in the 2020 period ($73 million) and a decrease in utility construction expenditures at CECONY ($66 million) and O&R ($19 million).
Cash Flows from Financing Activities
Net cash flows from financing activities for Con Edison and CECONY were $578 million and $494 million higher, respectively, in the six months ended June 30, 2020 compared with the 2019 period.
In July 2020, Con Edison borrowed $820 million pursuant to an April 2020 credit agreement that was amended in June 2020 (as amended, the Supplemental Credit Agreement). Con Edison used the proceeds from the borrowing
for general corporate purposes, including repayment of short-term debt bearing interest at variable rates. See Note D to the Second Quarter Financial Statements.
In May 2019, Con Edison entered into a forward sale agreement relating to 5,800,000 shares of its common stock. In June 2019, the company issued 4,750,000 shares for $400 million upon physical settlement of shares subject to the forward sale agreement and in January 2020, Con Edison issued 1,050,000 shares of its common stock for $88 million upon physical settlement of the remaining shares subject to its May 2019 forward sale agreement. Con Edison used the proceeds to invest in CECONY for funding of its capital requirements and other general corporate purposes. See Note C to the Second Quarter Financial Statements.
In March 2019, Con Edison issued 5,649,369 shares of its common stock for $425 million upon physical settlement of the remaining shares subject to its November 2018 forward sale agreements. Con Edison used the proceeds to invest in its subsidiaries for funding of their capital requirements and to repay short-term debt incurred for that purpose.
In February 2019, Con Edison borrowed $825 million under a two-year variable-rate term loan to fund the repayment of a six-month variable-rate term loan. In June 2019, Con Edison pre-paid $150 million of the amount borrowed.
In June 2020, CECONY redeemed at maturity $350 million of 4.45 percent 10-year debentures.
In March 2020, CECONY issued $600 million aggregate principal amount of 3.35 percent debentures, due 2030 and $1,000 million aggregate principal amount of 3.95 percent debentures, due 2050, the net proceeds from the sale of which will be used to pay or reimburse the payment of, in whole or in part, existing and new qualifying eligible green expenditures, such as energy efficiency and clean transportation expenditures, that include those funded on or after January 1, 2018 until the maturity date of each series of the debentures. Pending the allocation of the net proceeds to finance or refinance eligible green expenditures, CECONY used the net proceeds for repayment of short-term debt and temporarily placed the remaining net proceeds in short-term interest-bearing instruments. See Note C to the Second Quarter Financial Statements.
In May 2019, CECONY issued $700 million aggregate principal amount of 4.125 percent debentures, due 2049, the net proceeds from the sale of which were used to repay short-term borrowings and for other general corporate purposes.
In April 2019, CECONY redeemed at maturity $475 million of 6.65 percent 10-year debentures.
In May 2019, a Con Edison Development subsidiary borrowed $464 million, due 2026, secured by equity interests in solar electric production projects, the net proceeds from the sale of which were used to repay borrowings from Con Edison and for other general corporate purposes. Con Edison used a portion of the repayment to pre-pay $150 million of an $825 million two-year variable-rate term loan and the remainder to repay short-term borrowings and for other general corporate purposes.
Con Edison’s cash flows from financing for the six months ended June 30, 2020 and 2019 also reflect the proceeds, and reduction in cash used for reinvested dividends, resulting from the issuance of common shares under the company’s dividend reinvestment, stock purchase and long-term incentive plans of $52 million and $51 million, respectively.
Cash flows used in financing activities of the Companies also reflect commercial paper issuances and repayments. The commercial paper amounts outstanding at June 30, 2020 and 2019 and the average daily balances for the six months ended June 30, 2020 and 2019 for Con Edison and CECONY were as follows:
|
|
|
|
|
|
|
2020
|
2019
|
(Millions of Dollars, except Weighted Average Yield)
|
Outstanding at June 30,
|
Daily
average
|
Outstanding at June 30,
|
Daily
average
|
Con Edison
|
$1,813
|
$1,117
|
$1,161
|
$1,111
|
CECONY
|
$1,115
|
$547
|
$849
|
$711
|
Weighted average yield
|
0.2
|
1.6
|
2.6
|
2.7
|
Capital Requirements and Resources
Contractual Obligations
Con Edison’s material obligations to make payments pursuant to contracts totaled $56,926 million and $54,144 million at June 30, 2020 and December 31, 2019, respectively. The increase at June 30, 2020 is primarily due to increases in long-term debt ($1,160 million) and interest on long-term debt ($938 million). See "Cash Flows from Financing Activities,” above.
Capital Resources
For each of the Companies, the common equity ratio at June 30, 2020 and December 31, 2019 was:
|
|
|
|
|
Common Equity Ratio
(Percent of total capitalization)
|
|
June 30, 2020
|
December 31, 2019
|
Con Edison
|
49.1
|
49.6
|
CECONY
|
47.8
|
49.2
|
At June 30, 2020, the credit ratings assigned by Moody’s, S&P and Fitch to the senior unsecured debt and commercial paper of Con Edison, CECONY and O&R were as follows:
|
|
|
|
|
|
Moody's
|
S&P
|
Fitch
|
Con Edison
|
|
|
|
Senior Unsecured Debt
|
Baa2
|
BBB+
|
BBB+
|
Commercial Paper
|
P-2
|
A-2
|
F2
|
CECONY
|
|
|
|
Senior Unsecured Debt
|
Baa1
|
A-
|
A-
|
Commercial Paper
|
P-2
|
A-2
|
F2
|
O&R
|
|
|
|
Senior Unsecured Debt
|
Baa1
|
A-
|
A-
|
Commercial Paper
|
P-2
|
A-2
|
F2
|
Securities ratings assigned by rating organizations are expressions of opinion and are not recommendations to buy, sell or hold securities. A securities rating is subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating.
Assets, Liabilities and Equity
The Companies' assets, liabilities, and equity at June 30, 2020 and December 31, 2019 are summarized as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CECONY
|
O&R
|
Clean Energy
Businesses
|
Con Edison
Transmission
|
Other (a)
|
Con Edison (b)
|
(Millions of Dollars)
|
2020
|
2019
|
2020
|
2019
|
2020
|
|
2019
|
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
$3,747
|
$3,543
|
$231
|
$243
|
$568
|
$511
|
$22
|
$2
|
$(4)
|
$(27)
|
$4,564
|
$4,272
|
Investments
|
475
|
461
|
25
|
26
|
—
|
|
—
|
|
1,587
|
1,585
|
(7)
|
(7)
|
2,080
|
2,065
|
Net plant
|
38,205
|
37,414
|
2,377
|
2,336
|
4,299
|
4,121
|
17
|
17
|
(1)
|
1
|
44,897
|
43,889
|
Other noncurrent assets
|
4,897
|
5,139
|
376
|
401
|
1,852
|
1,896
|
14
|
14
|
401
|
403
|
7,540
|
7,853
|
Total Assets
|
$47,324
|
$46,557
|
$3,009
|
$3,006
|
$6,719
|
$6,528
|
$1,640
|
$1,618
|
$389
|
$370
|
$59,081
|
$58,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
$4,127
|
$4,131
|
$285
|
$311
|
$1,217
|
$1,525
|
$122
|
$135
|
$954
|
$185
|
$6,705
|
$6,287
|
Noncurrent liabilities
|
13,378
|
13,665
|
1,128
|
1,115
|
177
|
201
|
101
|
88
|
2
|
(17)
|
14,786
|
15,052
|
Long-term debt
|
15,554
|
14,614
|
818
|
818
|
2,858
|
2,400
|
500
|
500
|
(581)
|
195
|
19,149
|
18,527
|
Equity
|
14,265
|
14,147
|
778
|
762
|
2,467
|
2,402
|
917
|
895
|
14
|
7
|
18,441
|
18,213
|
Total Liabilities and Equity
|
$47,324
|
$46,557
|
$3,009
|
$3,006
|
$6,719
|
$6,528
|
$1,640
|
$1,618
|
$389
|
$370
|
$59,081
|
$58,079
|
(a) Includes parent company and consolidation adjustments.
(b) Represents the consolidated results of operations of Con Edison and its businesses.
CECONY
Current assets at June 30, 2020 were $204 million higher than at December 31, 2019. The change in current assets primarily reflects an increase in cash and temporary cash investments ($163 million), accounts receivables, less allowance for uncollectible accounts ($90 million) and revenue decoupling mechanism receivable ($71 million), offset in part by a decrease in accrued unbilled revenue ($82 million).
Investments at June 30, 2020 were $14 million higher than at December 31, 2019. The change in investments primarily reflects an increase in supplemental retirement income plan assets. See Note E to the Second Quarter Financial Statements.
Net plant at June 30, 2020 was $791 million higher than at December 31, 2019. The change in net plant primarily reflects an increase in electric ($671 million), gas ($333 million) and steam ($28 million) plant balances and an increase in construction work in progress ($143 million), offset in part by an increase in accumulated depreciation ($438 million).
Other noncurrent assets at June 30, 2020 were $242 million lower than at December 31, 2019. The change in other noncurrent assets primarily reflects a decrease in the regulatory asset for unrecognized pension and other postretirement costs to reflect the final actuarial valuation, as measured at December 31, 2019, of the pension and other retiree benefit plans in accordance with the accounting rules for retirement benefits ($456 million). See Notes B, E and F to the Second Quarter Financial Statements. The change in the regulatory asset also reflects the year's amortization of accounting costs. This decrease is offset in part by an increase in the regulatory asset for deferred pension and other postretirement benefits ($149 million) and deferred derivative losses ($57 million). See “Other Regulatory Matters” in Note B to the Second Quarter Financial Statements.
Noncurrent liabilities at June 30, 2020 were $287 million lower than at December 31, 2019. The change in noncurrent liabilities primarily reflects a decrease in the liability for pension and retiree benefits ($285 million) that primarily reflects the final actuarial valuation, as measured at December 31, 2019, of the plans in accordance with the accounting rules for retirement benefits. See Notes E and F to the Second Quarter Financial Statements. The change also reflects a decrease in the regulatory liability for future income tax ($100 million) and TCJA net benefits ($88 million). These decreases are offset in part by a change in deferred income taxes and unamortized investment tax credits ($159 million) that primarily reflects accelerated tax depreciation, repair deductions and the amortization of excess deferred federal income taxes due to the TCJA. See Note J to the Second Quarter Financial Statements.
Long-term debt at June 30, 2020 was $940 million higher than at December 31, 2019. The change in long-term debt primarily reflects the March 2020 issuance of $1,600 million of debentures, offset in part by the reclassification of $640 million of long-term debt to long-term debt due within one year. See "Liquidity and Capital Resources – Cash Flows From Financing Activities" above and Note C to the Second Quarter Financial Statements.
Equity at June 30, 2020 was $118 million higher than at December 31, 2019. The change in equity primarily reflects net income for the six months ended June 30, 2020 ($558 million) and capital contributions from parent ($50 million) in 2020, offset in part by common stock dividends to parent ($491 million) in 2020.
O&R
Net plant at June 30, 2020 was $41 million higher than at December 31, 2019. The change in net plant primarily reflects an increase in electric ($38 million) and gas ($15 million) plant balances and an increase in construction work in progress ($20 million), offset in part by an increase in accumulated depreciation ($33 million).
Other noncurrent assets at June 30, 2020 were $25 million lower than at December 31, 2019. The change in other noncurrent assets primarily reflects a decrease in the regulatory asset for unrecognized pension and other postretirement costs to reflect the final actuarial valuation, as measured at December 31, 2019, of the pension and other retiree benefit plans in accordance with the accounting rules for retirement benefits ($13 million). The change in the regulatory asset also reflects the year's amortization of accounting costs. The change in other noncurrent assets also reflects a decrease in the regulatory asset for deferred storm costs ($7 million) and a decrease in other work in progress ($6 million).
Current liabilities at June 30, 2020 were $26 million lower than at December 31, 2019. The change in current liabilities primarily reflects a decrease in accounts payable ($16 million), accrued taxes to affiliated companies ($12 million), billing overcollections ($8 million) and a decrease in the current regulatory liability for refundable energy ($9 million) and revenue decoupling mechanism reconciliation ($7 million), offset in part by higher notes payable ($28 million).
Equity at June 30, 2020 was $16 million higher than at December 31, 2019. The change in equity primarily reflects net income for the six months ended June 30, 2020 ($29 million), an increase in other comprehensive income ($6 million) and capital contributions from parent ($5 million) in 2020, offset in part by common stock dividends to parent ($25 million) in 2020.
Clean Energy Businesses
Current assets at June 30, 2020 were $57 million higher than at December 31, 2019. The change in current assets primarily reflects an increase in accrued receivables and cash.
Net plant at June 30, 2020 was $178 million higher than at December 31, 2019. The change in net plant primarily reflects additional capital expenditures, offset in part by an increase in accumulated depreciation.
Other noncurrent assets at June 30, 2020 were $44 million lower than at December 31, 2019. The change in other noncurrent assets primarily reflects the amortization of the purchase power agreement intangible assets.
Current liabilities at June 30, 2020 were $308 million lower than at December 31, 2019. The change in current liabilities primarily reflects the reclassification of the company’s PG&E-related non-recourse project debt with a maturity longer than one year from long-term debt due within one year to long-term debt ($898 million) (see Note C to the Second Quarter Financial Statements), offset in part by the reclassification of an intercompany loan agreement from the parent company from long-term debt to current liabilities ($400 million) and additional working capital requirements.
Noncurrent liabilities at June 30, 2020 were $24 million lower than at December 31, 2019. The change in noncurrent liabilities primarily reflects the change in deferred taxes and the reduction of lease liability associated with the adoption of ASU No. 2016-02 “Leases (Topic 842)," offset in part by the change in the fair value of derivative liabilities.
Long-term debt at June 30, 2020 was $458 million higher than at December 31, 2019. The change in long-term debt primarily reflects the reclassification of the company’s PG&E-related non-recourse project debt with a maturity
longer than one year from long-term debt due within one year to long-term debt ($898 million) (see Note C to the Second Quarter Financial Statements), offset in part by the reclassification of an intercompany loan agreement from the parent company from long-term debt to current liabilities ($400 million).
Equity at June 30, 2020 was $65 million higher than at December 31, 2019. The change in equity primarily reflects capital contributions from parent ($100 million) in 2020 and an increase in noncontrolling interest ($24 million) in 2020, offset in part by a net loss for the six months ended June 30, 2020 ($49 million) and common stock dividends to parent ($10 million) in 2020.
CET
Current assets at June 30, 2020 were $20 million higher than at December 31, 2019. The change in current assets primarily reflects a receivable of $19 million from Crestwood Pipeline and Storage Northeast LLC (Crestwood), the joint venture partner in Stagecoach Gas Services, LLC. The agreement between Crestwood and Con Edison Gas Pipeline and Storage, LLC (CET Gas) provides for payments from Crestwood to CET Gas for shortfalls in meeting certain earnings growth performance targets. The payment is expected to total $57 million ($19 million of which is due in the first quarter 2021 and was recorded as a receivable by CET in March 2020, with an additional $19 million plus interest due in each of January 2022 and January 2023). See "Con Edison Transmission" below.
Investments at June 30, 2020 were $2 million higher than at December 31, 2019. The change in investments primarily reflects increased allowance for funds used during construction (AFUDC) income from Mountain Valley Pipeline, LLC ($29 million) and investment income from NY Transco ($4 million), offset in part by investment income less partnership distribution from Stagecoach Services ($12 million) and the decrease in CET Gas' investment in Stagecoach Gas Services, LLC due to the receivable from Crestwood described above ($19 million).
Equity at June 30, 2020 was $22 million higher than at December 31, 2019. The change in equity primarily reflects net income for the six months ended June 30, 2020 ($28 million), offset in part by common stock dividends to parent ($6 million) in 2020.
Off-Balance Sheet Arrangements
At June 30, 2020, none of the Companies’ transactions, agreements or other contractual arrangements meet the SEC definition of off-balance sheet arrangements.
Regulatory Matters
For information about the Utilities’ regulatory matters, see Note B to the Second Quarter Financial Statements.
Environmental Matters
For information about the Companies’ environmental matters, see Note G to the Second Quarter Financial Statements.
Clean Energy Businesses
The following table provides information about the Clean Energy Businesses' renewable electric production projects that are in operation and/or in construction at June 30, 2020:
|
|
|
|
|
|
|
Project Name
|
Generating
Capacity
(MW AC)
|
Power Purchase Agreement (PPA) Term (In Years) (a)
|
Actual/Expected
In-Service Date (b)
|
State
|
PPA Counterparty (c)
|
Utility Scale
|
|
|
|
|
|
Solar
|
|
|
|
|
|
PJM assets
|
73
|
(d)
|
2011/2013
|
New Jersey/Pennsylvania
|
Various
|
New England assets
|
24
|
Various
|
2011/2017
|
Massachusetts/Rhode Island
|
Various
|
California Solar (e)
|
110
|
25
|
2012/2013
|
California
|
PG&E
|
Mesquite Solar 1 (e)
|
165
|
20
|
2013
|
Arizona
|
PG&E
|
Copper Mountain Solar 2 (e)
|
150
|
25
|
2013/2015
|
Nevada
|
PG&E
|
Copper Mountain Solar 3 (e)
|
255
|
20
|
2014/2015
|
Nevada
|
SCPPA
|
California Solar 2 (e)
|
80
|
20
|
2014/2016
|
California
|
SCE/PG&E
|
Texas Solar 4 (e)
|
40
|
25
|
2014
|
Texas
|
City of San Antonio
|
Texas Solar 5 (e)
|
100
|
25
|
2015
|
Texas
|
City of San Antonio
|
Texas Solar 7 (e)
|
112
|
25
|
2016
|
Texas
|
City of San Antonio
|
California Solar 3 (e)
|
110
|
20
|
2016/2017
|
California
|
SCE/PG&E
|
Upton Solar (e)
|
158
|
25
|
2017
|
Texas
|
City of Austin
|
California Solar 4 (e)
|
240
|
20
|
2017/2018
|
California
|
SCE
|
Copper Mountain Solar 1 (e)
|
58
|
12
|
2018
|
Nevada
|
PG&E
|
Copper Mountain Solar 4 (e) (f)
|
94
|
20
|
2018
|
Nevada
|
SCE
|
Mesquite Solar 2 (e) (f)
|
100
|
18
|
2018
|
Arizona
|
SCE
|
Mesquite Solar 3 (e) (f)
|
150
|
23
|
2018
|
Arizona
|
WAPA (U.S. Navy)
|
Great Valley Solar (e) (f)
|
200
|
17
|
2018
|
California
|
MCE/SMUD/PG&E/SCE
|
Crane Solar
|
112
|
12
|
2020
|
Texas
|
Vistra
|
Other
|
26
|
Various
|
Various
|
Various
|
Various
|
Total Solar
|
2,357
|
|
|
|
|
Wind
|
|
|
|
|
|
Broken Bow II (e)
|
75
|
25
|
2014
|
Nebraska
|
NPPD
|
Wind Holdings (e)
|
180
|
Various
|
Various
|
South Dakota/ Montana
|
NWE/Basin Electric
|
Adams Rose Wind (e)
|
23
|
7
|
2016
|
Minnesota
|
Dairyland
|
Coram Wind (e)
|
102
|
16
|
2016
|
California
|
PG&E
|
Other
|
30
|
Various
|
Various
|
Various
|
Various
|
Total Wind
|
410
|
|
|
|
|
Total MW (AC) in Operation
|
2,767
|
|
|
|
|
Total MW (AC) in Construction
|
607
|
|
|
|
|
Total MW (AC) Utility Scale
|
3,374
|
|
|
|
|
Behind the Meter
|
|
|
|
|
|
Total MW (AC) in Operation
|
56
|
|
|
|
|
Total MW (AC) in Construction
|
13
|
|
|
|
|
Total MW Behind the Meter
|
69
|
|
|
|
|
|
|
(a)
|
Represents PPA contractual term or remaining term from the date of acquisition.
|
|
|
(b)
|
Represents Actual/Expected In-Service Date or date of acquisition.
|
|
|
(c)
|
PPA Counterparties include: Pacific Gas and Electric Company (PG&E), Southern California Public Power Authority (SCPPA), Southern California Edison Company (SCE), Western Area Power Administration (WAPA), Marin Clean Energy (MCE), Sacramento Municipal Utility District (SMUD), Nebraska Public Power District (NPPD) and NorthWestern Energy (NWE). For information about PG&E’s emergence from bankruptcy, see “Long-Lived and Intangible Assets” in Note A to the Second Quarter Financial Statements.
|
|
|
(d)
|
Solar renewable energy credit hedges are in place, in lieu of PPAs, through 2023.
|
|
|
(e)
|
Project has been pledged as security for project debt financing.
|
|
|
(f)
|
Projects are financed with tax equity. See Note O to the Second Quarter Financial Statements.
|
Renewable Electric Generation
Renewable electric production volumes from utility scale assets for the three and six months ended June 30, 2020 compared with the 2019 period were:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of kWh
|
|
For the Three Months Ended
|
For the Six Months Ended
|
Description
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Percent Variation
|
|
June 30, 2020
|
June 30, 2019
|
Variation
|
Percent Variation
|
|
Renewable electric production projects
|
|
|
|
|
|
|
|
|
Solar
|
1,784
|
1,688
|
96
|
5.7
|
%
|
2,939
|
2,732
|
207
|
7.6
|
%
|
Wind
|
388
|
354
|
34
|
9.6
|
%
|
738
|
661
|
77
|
11.6
|
%
|
Total
|
2,172
|
2,042
|
130
|
6.4
|
%
|
3,677
|
3,393
|
284
|
8.4
|
%
|
Con Edison Transmission
CET Gas
In June 2020, the operator of the Mountain Valley Pipeline, which is being constructed by a joint venture in which CET Gas has a 12.1 percent ownership interest (that is expected to be reduced below 10 percent based on the current project cost estimate), indicated that it now expects an early 2021 full in-service date for the project. The operator indicated that total project costs may potentially increase approximately 5% above the project’s $5,400 million estimate, excluding AFUDC. At June 30, 2020, CET Gas’s cash contributions to the joint venture amounted to $530 million.
Financial and Commodity Market Risks
The Companies are subject to various risks and uncertainties associated with financial and commodity markets. The most significant market risks include interest rate risk, commodity price risk and investment risk.
Interest Rate Risk
The Companies’ interest rate risk primarily relates to new debt financing needed to fund capital requirements, including the construction expenditures of the Utilities and maturing debt securities, and variable-rate debt. Con Edison and its subsidiaries manage interest rate risk through the issuance of mostly fixed-rate debt with varying maturities and through opportunistic refinancing of debt. The Clean Energy Businesses use interest rate swaps to exchange variable-rate project financed debt for a fixed interest rate. See Note M to the Second Quarter Financial Statements. Con Edison and CECONY estimate that at June 30, 2020, a 10 percent increase in interest rates applicable to its variable rate debt would result in an increase in annual interest expense of $1 million. Under CECONY’s current electric, gas and steam rate plans, variations in actual variable rate tax-exempt debt interest expense, including costs associated with the refinancing of the variable-rate tax-exempt debt, are reconciled to levels reflected in rates.
Commodity Price Risk
Con Edison’s commodity price risk primarily relates to the purchase and sale of electricity, gas and related derivative instruments. The Utilities and the Clean Energy Businesses apply risk management strategies to mitigate their related exposures. See Note M to the Second Quarter Financial Statements.
Con Edison estimates that, as of June 30, 2020, a 10 percent decline in market prices would result in a decline in fair value of $89 million for the derivative instruments used by the Utilities to hedge purchases of electricity and gas, of which $84 million is for CECONY and $5 million is for O&R. Con Edison expects that any such change in fair value would be largely offset by directionally opposite changes in the cost of the electricity and gas purchased. In accordance with provisions approved by state regulators, the Utilities generally recover from customers the costs they incur for energy purchased for their customers, including gains and losses on certain derivative instruments used to hedge energy purchased and related costs.
The Clean Energy Businesses use a value-at-risk (VaR) model to assess the market price risk of their portfolio of electricity and gas commodity fixed-price purchase and sales commitments, physical forward contracts, generating assets and commodity derivative instruments. VaR represents the potential change in fair value of the portfolio due to changes in market prices, for a specified time period and confidence level. These businesses estimate VaR across their portfolio using a delta-normal variance/covariance model with a 95 percent confidence level, compare the measured VaR results against performance due to actual prices and stress test the portfolio each quarter using an assumed 30 percent price change from forecast. Since the VaR calculation involves complex methodologies and estimates and assumptions that are based on past experience, it is not necessarily indicative of future results. VaR for the portfolio, assuming a one-day holding period, for the six months ended June 30, 2020 and the year ended December 31, 2019, respectively, was as follows:
|
|
|
|
|
|
|
|
95% Confidence Level, One-Day Holding Period
|
June 30, 2020
|
|
December 31, 2019
|
|
|
(Millions of Dollars)
|
Average for the period
|
|
$—
|
|
|
$—
|
|
High
|
—
|
|
1
|
|
Low
|
—
|
|
—
|
|
Investment Risk
The Companies’ investment risk relates to the investment of plan assets for their pension and other postretirement benefit plans and to the investments of Con Edison Transmission that are accounted for under the equity method.
The Companies’ current investment policy for pension plan assets includes investment targets of 45 to 55 percent equity securities, 33 to 43 percent debt securities and 10 to 14 percent real estate. At June 30, 2020, the pension plan investments consisted of 50 percent equity securities, 38 percent debt securities and 12 percent real estate.
For the Utilities’ pension and other postretirement benefit plans, regulatory accounting treatment is generally applied in accordance with the accounting rules for regulated operations. In accordance with the Statement of Policy issued by the NYSPSC and its current electric, gas and steam rate plans, CECONY defers for payment to or recovery from customers the difference between the pension and other postretirement benefit expenses and the amounts for such expenses reflected in rates. O&R also defers such difference pursuant to its New York rate plans.
Material Contingencies
For information concerning potential liabilities arising from the Companies’ material contingencies, see "Other Regulatory Matters" in Note B and Notes G and H to the Second Quarter Financial Statements.