Leadership and Strategy

Letter From The Chairman Utility of the Future
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Managing Our Business

Environmental Performance Safety
Policy Management and Regulatory Impact Governance and Business Ethics
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Reliability Resiliency

Meeting Community Needs

Customers Strategic Partnerships
Employees Shareholders
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Executive Summary Data snapshot

Policy Management and Regulatory Impact

_IIC_Landing_Poicy_manCon Edison operates in a highly regulated environment and is affected by regulatory and social policy adopted at the federal, state, and municipal level. A number of significant proceedings that may impact the sustainability of electric service in New York were initiated by or received significant focus from the New York Public Service Commission (NYPSC) in 2014.  These proceedings include: Reforming the Energy Vision (REV), which assesses the impact of distributed energy resources on the utility business model; the Clean Energy Fund (CEF) which will consider the future path of clean energy activities implemented by the New York State Energy Research & Development Authority (NYSERDA); the Renewable Portfolio Standard program which funds renewable energy projects in the state; and the New York Green Bank, which seeks to remove barriers to using private capital to fund clean energy projects in the state.  In addition, the US Environmental Protection Agency proposed a rulemaking that would seek to limit CO2 emissions from existing electric generation plants. The NYPSC also approved a settlement for rate filings affecting Con Edison’s electric, gas, and steam services.

The company seeks to provide input on state policy management and regulatory impact as we advocate our business positions and coordinate consistent regulatory and policy communications to meet the needs of our customers and shareholders.

Reforming the Energy Vision

In April 2014 the NYPSC established the REV proceeding with the purpose of examining the electric utility regulatory and business model in the context of the potential growth of distributed electric resources and the development of new technologies. The NYPSC articulated six core policy outcomes intended to better align the role and operations of utilities to enable market- and customer-driven change:

  • Customer engagement
  • Distributed market animation
  • System-wide efficiency
  • Fuel and resource diversity
  • System reliability and resiliency
  • Carbon reduction

In August 2014, the NYPSC issued its Straw Proposal on “Track 1” policy issues in the REV proceeding, focusing on the operational aspects of creating energy markets at the distribution level. In the proposal, markets would operate via a Distributed System Platform, addressing distribution system planning and operations issues with inclusion of a market operations role. Other issues contemplated in Track 1 include utility ownership of distributed energy resources, sharing of customer and system information, benefit-cost analysis, demonstration projects, and clean energy programs.  Significantly, the Straw Proposal included consideration of the state’s utilities taking over the role of renewable energy procurement from NYSERDA. Con Edison has expressed interest in assuming this role, provided it is allowed to directly own renewable resources because such ownership is a less expensive way to procure renewable energy compared to long term contracts between utilities and private developers.

“Track 2” of the proceeding addresses New York’s regulatory framework and explores changes that could be made to better align utility interests with policy objectives. Issues under consideration include: rate and tariff design, alternate regulatory schemes such as the U.K.’s ‘RIIO’ regulatory model, and performance-based regulation. At a November technical conference on Track 2 sponsored by NYU for the Commission’s benefit, expert speakers counseled a measured approach to regulatory changes

Commission rulemakings have been issued on narrow and well-defined REV issues. The Commission issued an order in Track 1 on February 26, 2015.  The order confirms that the incumbent utilities will operate the Distributed System Platform, establishes a separate track to consider the issue of large scale renewable energy in the state, but only allows utilities to own distributed energy resources in the cases of energy storage on utility property, to facilitate programs for low and moderate income customers, as part of demonstration projects and as a backstop if the market does not respond.  A straw proposal on Track 2 is expected in the second quarter of 2015.

Specific issues receiving early attention include:

Deferring utility infrastructure investments-

Targeted use of distributed resources and energy efficiency has the potential to defer utility infrastructure investments. In line with the REV vision, the NYPSC recently approved a Con Edison proposal for the Brooklyn-Queens Demand Management program (BQDM) that would defer the need to build a major substation in an area with higher-than-forecast growth. The BQDM program aims to locate 52 MW of distributed resources, thus pushing the need for a new substation from 2017 until 2024. The NYPSC also approved the company’s proposal to earn a rate of return on the costs of the project and incentives related to achieving resource acquisition targets, supplier diversity, and lower costs for customer-side solutions. The NYPSC will allow Con Edison to install and own energy storage devices on its own property when directly integrated into utility distribution services as part of the program, but will only allow ownership of distributed generation if the market does not respond to requests for these types of resources.

Demonstration Projects-

Con Edison is currently developing a portfolio of demonstration projects designed to test REV concepts. Potential projects include electric vehicle charging, grid-connected community solar, multi-tenant advanced metering coupled with energy usage analysis, and variable pricing.

Stakeholder Processes-

Two stakeholder processes were launched in January 2015. The first is focusing on the technology platform needed to animate distributed energy markets, and the second is focusing on market design elements. The state’s utilities are participating in each process.

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Clean Energy Fund

New York currently has ratepayer-funded public policy programs focused on energy efficiency (Energy Efficiency Portfolio Standard program, EEPS), renewable energy (Renewable Portfolio Standard program, RPS), and energy R&D (Technology and Market Development programs, T&MD). NYSERDA implements the RPS and T&MD programs entirely, and NYSERDA and the utilities implement the EEPS program.  In total, these programs collect $368 million annually from Con Edison’s and O&R’s customers via a bill surcharge. They will expire at the end of 2015 unless reauthorized by the NYPSC. In May 2014, the NYPSC proposed to consolidate these funds into a single Clean Energy Fund (CEF) and, in the process, substantially change how NYSERDA uses these funds to align with the Reforming the Energy Vision (REV) proceeding. NYSERDA issued a Clean Energy Fund proposal in September 2014, but the NYPSC has required it to issue additional information on the Clean Energy Fund, which is due on June 8, 2015. NYSERDA also proposes collecting $782 million from PSC-jurisdictional electric customers to fully capitalize the NY Green Bank at $1 billion.  NYSERDA has been reaching out to utilities and stakeholders for input on its proposed plan, and has indicated it will shift its focus to upstream market development and away from incentive-based programs. Utilities may take over energy efficiency programs and renewable energy procurement from NYSERDA.

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EPA Proposed Carbon Emissions Regulations

In June 2014, the EPA proposed limits on CO2 emissions from existing fossil fuel-fired generators above 73 MW under §111(d) of the Clean Air Act.  The proposal seeks a 30-percent reduction in CO2 emissions from the nation’s 2005 levels by 2030. To determine achievable reductions for each state, EPA modeled a “Best System of Emissions Reduction” using four “Building Blocks”: 1) improved heat rates for coal-fired plants; 2) increased utilization of natural gas combined cycle plants; 3) generation from nuclear and renewables; and 4) energy efficiency. New York’s target is a 44-percent reduction from 2012 levels by 2030.  States do not have to follow the building blocks in their compliance strategy and have considerable flexibility in implementing the rule, including regional implementation plans. EPA highlighted RGGI as an example of a regional implementation plan.  On December 1, Con Edison submitted joint comments with other NY transmission owners, generators, and national and regional clean energy groups. We also participated in EEI and AGA comments. EPA scheduled the final rule for release in June 2015.

New York has few coal-fired plants and already relies heavily on natural gas generation; accordingly, increased renewable generation (including Canadian hydro) and energy efficiency could be the primary means for meeting the target. In its projection, EPA anticipates energy generated by non-hydro renewables in the state will increase by  approximately five times 2012 levels, and assumes energy efficiency will reduce end-use by 11 percent by 2030 when compared to business-as-usual forecasts. The NYISO has expressed concern about the implications of these changes on reliability. 

Con Edison is generally supportive of EPA’s efforts to reduce greenhouse gas emissions, while allowing for the continued reliable operation of the power grid. EPA should modify its “best system of emissions reduction” to better reflect the operational realities of the power system, ensure equity among state targets, and recognize the reductions already achieved by early-action states like New York. EPA should accept RGGI as New York’s compliance mechanism.

The rule will likely result in encouraging the development of large-scale renewable resources and expanded transmission projects within the state. NY Transco, a partnership of the state’s investor-owned transmission companies, will facilitate transmission development that can access renewable energy, and Con Edison is prepared to take on the role of procuring renewable energy for its customers.

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Rate Case

II.C4.Rate_CaseAt the close of 2013 parties to Con Edison’s rate cases for electric, gas, and steam agreed to a Joint Proposal (JP) resulting in a two-year electric rate plan and three-year rate plans for gas and steam effective January 1, 2014. The result was a revenue requirement freeze for electric, gas, and steam over the term of their respective rate plans.

Major components of the joint proposal include the following:

  • Investment in capital projects and programs to address reliability, storm hardening and resiliency, new business and oil-to-gas conversions
  • Continuation of revenue decoupling mechanisms for electric and gas
  • Enhanced low-income discount programs for electric and gas customers
  • Modifications and additions to the electric, gas, and steam safety and reliability performance and customer service metrics
  • Additions to the leak-prone gas pipe replacement program and new reliability program to target replacement of leak-prone pipe in flood zones in New York City and Westchester County
  • Improvement and expansion of the oil-to-gas conversion program
  • Approval of current storm hardening projects and programs, and conditional approval of future projects that are reviewed by an ongoing stakeholder collaborative
  • Consideration of non-wires alternative plan (e.g., distributed resources) for the Brownsville section of Brooklyn, expecting significant load growth
  • Company study of future use of Hudson Avenue Property
  • Steam customers now eligible for bill credits (in place now for electric and gas customers) in certain circumstances of a storm outage

The Joint Proposal was supported by the following signatories:

  • Con Edison
  • Department of Public Service Staff
  • City of New York
  • Consumer Power Advocates
  • New York Energy Consumers Council, Inc.
  • New York Power Authority
  • Utility Intervention Unit (NY Department of State)
  • Astoria Generating Company, L.P.
  • Pace Energy and Climate Center
  • Columbia Center for Climate Change Law
  • Environmental Defense Fund
  • NRG Energy

Subsequently, on February 21, 2014, the PSC issued an order approving the rate plans in the joint proposal with two relatively minor modifications. The full Joint Proposal and PSC Order can be found on the New York Public Service Commission Site.

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Energy Highway and the Indian Point Contingency

image[1]In 2012 Governor Cuomo championed the Energy Highway Initiative promoting public-private partnerships to renew the State’s energy infrastructure while protecting the environment and creating opportunities for economic growth and job creation. Accordingly, the PSC initiated two proceedings seeking 1,000 MW of AC transmission upgrades to reduce transmission constraints from upstate to downstate, and transmission, generation, and demand side management solutions to maintain reliability in the event the nuclear power plants at Indian Point are shut down. Con Edison and the New York Power Authority (NYPA) were directed to develop an Indian Point Contingency Plan for solutions to address a possible 2016 Indian Point retirement.

In response to the Energy Highway initiative, the New York State transmission owner (NYTOs), including Con Edison and Orange and Rockland, proposed to create and jointly own a transmission company, New York Transmission Company (NY Transco) to develop, construct, and own transmission facilities in New York State. On behalf of NY Transco, the NYTOs submitted responses to the PSC proceedings. Con Edison and NYPA also submitted three Transco projects in the Indian Point proceeding. More information is available at the NY Transco website.

In November 2013, the PSC approved the three NY Transco projects proposed by Con Edison with NYPA and New York State Electric and Gas Corporation (NYSEG) to prepare for potential Indian Point shutdown in 2016. Two of the projects, Ramapo to Rock Tavern and Staten Island Unbottling, will be developed by Con Edison until they can be transferred to NY Transco. In its order, the PSC also endorsed the NY Transco cost allocation for these projects and supported the plan to file with Federal Energy Regulatory Commission (FERC) for rate recovery for the three Indian Point Projects. In a separate order in the same proceeding, the PSC approved a proposal filed by Con Edison and New York State Energy Research and Development Authority (NYSERDA) to reduce load by 100 MW by the summer of 2016 using energy efficiency and demand reduction projects, plus another 25 MW through new combined heat and power projects.

In response to the Energy Highway initiative, It was originally envisioned that New York State Transmission Owners (NYTOs) would form a public-private partnership to create and jointly own a transmission company, New York Transmission Company (NY Transco), which would develop and own transmission facilities in New York State. Legislative authority needed by NYPA and LIPA to join has not been enacted. As a result, the investor-owned NYTOs created the NY Transco in Fall 2014. The NY Transco filed with the FERC on December 4, 2014 for transmission rates, including incentives, cost allocation, and permission to assume utility assets.

  • In October 2013, NY Transco filed a transmission siting application with the NYPSC to build four transmission projects totaling $1.3 billion that address congestion from upstate to downstate. The proceeding is competitive, with other developers seeking Article VII certificates to build similar upstate/downstate transmission solutions.
  • In November 2013, the NYPSC approved the three NY Transco projects proposed by Con Edison, NYPA and NYSEG to prepare for potential Indian Point shutdown in 2016. In its order, the NYPSC also endorsed the NY Transco cost allocation for these projects and supported NY Transco’s plan to file with FERC for rate recovery. In a subsequent order the NYPSC endorsed a different cost allocation for projects resulting from the AC Transmission proceeding.
  • Responding to a PSC request for transmission developers to revise their proposals to minimize customer impact, in January 2015 the NY Transco filed updates to its projects so that the visual impact of transmission towers will be mitigated and all transmission will be constructed on existing rights of way or utility owned property.
  • More information is available at

As part of the Commission’s approvals in November 2013, Con Edison was authorized to work jointly with New York State Energy Research and Development Authority (NYSERDA) to implement demand-side management and combined-heat-and-power programs, using direct financial incentives, as part of a “no regrets” solution in response to the Indian Point Contingency Plan. The company and NYSERDA now administer the Demand Management Program, targeting 125 MW of permanent, peak-coincident electric load reductions by June 2016 through energy efficiency and demand reduction projects as well as new combined-heat-and-power projects. The total investment is estimated to be $285 million (consisting of incentives and administrative costs), excluding carrying costs. The company was authorized to recover all costs from its customers on a deferred basis over a 10-year period and the company will accrue the cost to finance the deferred expenditures using its allowed pre-tax weighted cost of capital rate.

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Regional Greenhouse Gas Initiative

Since 2009, Con Edison has been subject to carbon dioxide emissions regulations established by New York State as part of its participation in the Regional Greenhouse Gas Initiative (RGGI). The Initiative, a cooperative effort by nine northeastern and mid-Atlantic states (RGGI States), established a decreasing cap on carbon dioxide emissions from electricity generation that will lead to a 15-percent reduction in regional emissions between 2014 and 2020. Under RGGI, affected electric generators are required to obtain emission allowances to cover their carbon dioxide emissions, available primarily through auctions administered by participating states or a secondary market.

While Con Edison sold most of its power plants in the late 1990s, the company still owns one power plant that is subject to the RGGI cap: the East River Generating Station. Con Edison of New York met its requirement of 6.3 million allowances for the first RGGI compliance period (2009—2011) and is managing auction purchases in preparation for complying with the second compliance period (2012—2014).

In February 2013, after a comprehensive stakeholder review, the RGGI States proposed major changes to the RGGI program, including a one- time, 45-percent reduction in the regional emissions cap for 2014, and further reductions of 2.5 percent each year from 2015 to 2020. Additionally, the RGGI States implemented a new cost containment mechanism, supported by Con Edison, which will limit the impact of allowance price spikes on the supply portion of our customers’ bills. New York State adopted the new rules, and the lower, 91-million ton cap is effective as of January 1, 2014.

Under the revised RGGI emissions cap, New York will receive incremental revenues from allowance auctions, above and beyond the $728 million it has collected through the first 26 auctions. As agreed upon in the original “model rule” of the RGGI partnership, each participating state directs its own strategy to invest its auction proceeds in a manner that supports its unique policy objectives, needs, and circumstances. This policy raises redistribution concerns if states invest funds in programs outside of the electric sector. In New York, for example, more than half of the RGGI-funded investments to date were allocated to programs that either indirectly benefit electric customers, or do not benefit them at all.

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Renewable Portfolio Standard

II.C7.Renewable_Portfolio_StandardNew York’s Renewable Portfolio Standard (RPS) goal is to obtain 30 percent of state electricity consumption from renewable resources by the end of 2015 (from a base of 19 percent in 2004). Currently, NYSERDA implements the RPS program for the customers of investor-owned utilities, using funding of $3 billion from electric customers. The company’s customers provide about half of the total funding. LIPA, NYPA and the voluntary green energy purchases by consumers also are expected to increase renewable energy consumption in the state.

NYSERDA administers two primary programs to provide incentives to renewable energy projects:  the ‘Customer-Sited Tier’ program funds renewable energy resources (mostly solar) installed on customer property behind the customer’s meter; the ‘Main Tier’ program competitively solicits large renewable resources, offering 20 year contracts for their renewable energy attributes.  92 percent of the program’s renewable energy comes from the Main Tier.

NYSERDA has achieved about half of its portion of the 2015 goal, but in a recent review acknowledged that it was likely to fall short of achieving the 30 percent goal by the end of 2015.  NYSERDA’s CEF proposal does not contain any funding for large renewable resources. DPS Staff has proposed having the utilities take over the Main Tier program and purchase both the renewable energy attributes and power from new renewable projects through long-term contracts.  The state’s utilities are willing to procure renewable energy, but have advocated strongly of favor of allowing utilities to own renewable energy resources as a primary procurement method.  DPS Staff will issue a large-scale renewables options paper in mid-2015.

In 2014, NYSERDA reported that the environmental benefits of electricity generated by renewable generation from 2006 through 2013, as opposed to the State’s “system-mix,” amounts to reduced emissions of approximately 5,400 tons of nitrogen oxides, 10,600 tons of sulfur dioxides, and 5.3 million tons of carbon dioxide.

NYSERDA issued one solicitation for new renewable resources in 2014, and announced in November 2014 that it would procure 164 MW of incremental renewable energy from wind and hydro resources in New York State.  NYSERDA has issued one RPS solicitation in 2015 and plans to issue another RPS solicitation in 2016.

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Systems Benefit Charge

The System Benefits Charge (SBC) program funds technology and market development (T&MD) activities relevant to the energy system. The PSC uses the SBC to support research and development efforts that serve as a feeder of new technologies to be incorporated into the state’s energy- efficiency and renewable energy programs. The New York State Energy Research and Development Authority implements the program under the PSC’s supervision. 

When the program was reauthorized by the PSC in 2011 through 2016 it was estimated that collections from our customers will provide at least $150 million over the five-year term of the program. In 2013, $26.3 million in SBC charges were collected from the utilities’ electric customers.

The T&MD programs currently funded by the SBC are expected to continue after 2016, funded under the Clean Energy Fund collections once those are approved by the NYPSC.

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New York Green Bank

On October 28, 2013, the companies and other investor-owned utilities in New York State made a joint filing to the PSC supporting the establishment of the New York Green Bank, an entity with the mission to advance the state’s clean energy goals by reducing or eliminating financing-related barriers to clean energy adoption by customers. Con Edison offered comments related to future funding for the Green Bank, such as using RGGI funds. On December 19, 2013, the PSC approved the establishment of the New York Green Bank, with an initial capitalization of $218 million, comprised of $165 million of funds from NYSERDA and utility energy efficiency and renewable energy budgets, and $45 million of RGGI funds allocated to the New York Green Bank by NYSERDA. The New York Green Bank has stated that it has a goal of reaching a capitalization of $1 billion, and in December 2014 NYSERDA submitted a petition to the NYPSC requesting $781 million in funds (to be provided over four years, 2015-2018) to achieve the Green Bank’s capitalization goal. The company filed comments supporting the overall goals of the Green Bank but expressed concern about the impact on customers and suggested a number of ways to mitigate that impact, including raising a portion of the funds from other electric customers who might not otherwise contribute to the Green Bank, such as LIPA and NYPA customers, and relying on RGGI funds to provide a portion of the requested capital.

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Political Engagement

Public policy decisions at all levels of government can have significant implications for the companies’ customers, the energy systems we manage, and the future direction of the companies. Accordingly, Con Edison exercises its fundamental right and responsibility to participate in the political process. We adhere to all applicable national, state, and local laws and regulations governing the public policy process, and have internal policies and practices so that we adhere to applicable reporting requirements.

Our engagement in the political process is grounded in and guided by our commitment to our Standards of Business Conduct. Our efforts in this regard meet high ethical standards, are done in accordance with strict company procedures and guidelines, and in a manner that demonstrates accountability and transparency.

No corporate funds are used for political contributions to candidates or political parties. The companies do not make independent expenditures in support of or in opposition to a candidate or political party. No corporate payments have been made, nor do we intend to make payments, to influence the outcome of ballot measures.

Con Edison Political Action Committee

The Consolidated Edison Inc. Employees’ Political Action Committee (CEIPAC) is a non-partisan political action committee.

  • The CEIPAC is funded entirely through voluntary contributions from eligible employees; employees are not reimbursed, directly or indirectly, for political donations or expenses. Contributions are reported to relevant federal, state and local campaign finance agencies, as required by law.
  • Political disbursements made through the CEIPAC are made without regard to the personal or political preferences of Company officers and executives.
  • The current members of the CEIPAC Executive Committee are the: Vice President & Controller of Con Edison of New York (CECONY), Senior Vice President Public Affairs of CECONY, Vice President Government Relations of CECONY, President and Chief Executive Officer of Consolidated Edison Solutions, and President and Chief Executive Officer of Orange and Rockland Utilities.
  • The CEIPAC Executive Committee factors in many criteria when deciding whether to approve contributions, including a candidate’s position on issues; voting records; incumbents leadership on key committees; and the extent of a member company’s presence in a district.
  • Con Edison’s internal auditing department conducts periodic reviews of CEIPAC’s practices and procedures, and an independent auditing firm audits the financial statements of the CEIPAC on a yearly basis.

Grassroots Advocacy Network

Con Edison’s Grassroots Advocacy Network engages employees and retirees in the evolving political landscape, educating them on issues important to them and the company. Through the Grassroots Network, employees and retirees receive monthly newsletters, updates on policy and political issues and information on elections and voting. The Grassroots Network also provides opportunities for employees and retirees to attend events on emerging topics of interest and engage their local elected officials by taking action on relevant issues that come up throughout the year.

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