Consolidated Edison, Inc. (NYSE:ED) has announced its subsidiary, Orange and Rockland Utilities, Inc. (O&R), has entered into a joint proposal with the New York State Department of Public Service and other parties. The proposal outlines new electric and gas rate plans for a three-year period starting January 2025 and ending December 2027, pending approval by the New York State Public Service Commission (NYSPSC).
The joint proposal suggests a decrease in electric base rates by $13.1 million for the first year, with subsequent increases of $24.8 million and $44.1 million in the second and third years, respectively. It also includes potential incentives for energy efficiency that could add up to $3.9 million in the first year and increase to $5.8 million by the third year. The plan continues the practice of reconciling actual electric delivery revenues with authorized amounts and maintains the current rate recovery for purchased power and fuel costs.
For gas rates, the proposal recommends an initial increase of $3.6 million, followed by $18.0 million and $16.5 million in the following years. It also allows for potential positive rate adjustments for gas safety and performance, starting at $1 million in the first year and increasing to $1.2 million in the third year. Actual gas delivery revenues will also be reconciled with authorized amounts, and the current rate recovery method for purchased gas costs will continue.
The proposal includes mechanisms for negative revenue adjustments if performance targets related to service, reliability, safety, and other matters are not met. Regulatory reconciliations will be made for expenses such as pension, environmental remediation costs, property taxes, and energy efficiency programs, among others.
Capital investments are outlined in the proposal, with $311 million planned for the first year, $349 million for the second, and $315 million for the third year in electric services. Gas services will see capital investments of $121 million, $127 million, and $110 million over the same period.
The weighted average cost of capital (after-tax) is set at 7.25% for the first year, with slight increases in the subsequent years. The authorized return on common equity is fixed at 9.75%, and earnings sharing provisions will apply to most earnings above an annual threshold of 10.25%, which will be used to reduce regulatory assets for environmental remediation and other costs.
In other recent news, Consolidated Edison has been the focus of multiple analyst's reports. Guggenheim maintained a Neutral rating on the company's shares but increased the stock's price target to $99 following the company's third-quarter results. BofA Securities raised its price target for Consolidated Edison from $97.00 to $109.00, maintaining a Buy rating. A Citi analyst upgraded the company's stock rating from Neutral to Buy, while Jefferies initiated coverage with a Hold rating.
Consolidated Edison has also made significant financial moves recently. The company announced its intention to redeem $224.6 million in tax-exempt debt, originally issued by a subsidiary, Consolidated Edison Company of New York, Inc. This redemption is scheduled for November 2024.
The company's Q2 2024 earnings report showed an adjusted EPS of $0.59 and an operating revenue of $3.22 billion. However, operations and maintenance expenses saw a 13.9% increase compared to the same period last year. Consolidated Edison has maintained its full-year 2024 EPS guidance, projecting earnings between $5.20 and $5.40.
Lastly, the New York State Department of Public Service has shown support for rate cases for Consolidated Edison's subsidiary Orange & Rockland, and Kirkland B. Andrews was appointed as the new CFO of Consolidated Edison. These are the latest developments for the company.
InvestingPro Insights
Consolidated Edison's proposed rate plans for its Orange and Rockland Utilities subsidiary align with the company's long-standing commitment to stable financial performance and shareholder returns. According to InvestingPro data, Consolidated Edison boasts a market capitalization of $33.8 billion and a P/E ratio of 19.04, indicating a solid market position and investor confidence.
The company's financial stability is further underscored by two key InvestingPro Tips. Firstly, Consolidated Edison has raised its dividend for an impressive 50 consecutive years, demonstrating a strong commitment to returning value to shareholders. This is particularly relevant given the proposed rate plans, which aim to balance customer affordability with the company's financial needs. Secondly, the stock generally trades with low price volatility, which aligns with the predictable nature of regulated utility businesses and the proposed three-year rate plan structure.
Consolidated Edison's dividend yield stands at 3.4%, with a dividend growth of 2.47% over the last twelve months. This steady dividend performance, coupled with the company's history of maintaining dividend payments for 54 consecutive years, suggests that the proposed rate plans are designed to support continued shareholder returns while managing operational costs.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights, with 7 more tips available for Consolidated Edison.
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