10-Q: Con Edison Reports Strong Q3 Earnings, Advances Clean Energy

Con Edison reports significant earnings growth for Q3 and the first nine months of 2025, driven by higher electric rate base and strategic clean energy investments, despite ongoing challenges with aged accounts receivable and regulatory matters.

Summary

• Con Edison's net income for common stock increased by $100 million to $688 million for the three months ended September 30, 2025, compared to $588 million in the prior year.
• Diluted earnings per share rose to $1.90 for the three months ended September 30, 2025, up from $1.69 in the same period of 2024.
• For the nine months ended September 30, 2025, net income for common stock increased by $216 million to $1,726 million, with diluted EPS at $4.83, up from $4.35 in 2024.
• Operating revenues for Con Edison increased by $438 million to $4,530 million for the three months, and by $1,337 million to $12,924 million for the nine months ended September 30, 2025.
• CECONY's electric and gas rate plans for 2026-2028, subject to NYSPSC approval, propose electric base rate increases of $222 million (Yr. 1), $473 million (Yr. 2), and $329 million (Yr. 3), and gas base rate changes of $(46) million (Yr. 1), $170 million (Yr. 2), and $93 million (Yr. 3).
• CECONY filed a petition in May 2025 for $332 million for early deployment of four steam decarbonization projects and a low carbon fuels pilot program.
• O&R's New York electric and gas rates were approved in March 2025 for 2025-2027, including electric rate changes of $(13.1) million (2025), $24.8 million (2026), and $44.1 million (2027), and gas rate increases of $3.6 million (2025), $18 million (2026), and $16.5 million (2027).
• RECO updated its request to the NJBPU in October 2025 for a $31.8 million electric rate increase, effective January 1, 2026, with a 10.30% return on common equity and a 50.04% common equity ratio.
• Aged accounts receivable balances remain significantly higher than pre-pandemic levels, with CECONY at $1,511 million and O&R at $28 million as of September 30, 2025.
• Con Edison's common equity ratio improved to 49.2% at September 30, 2025, from 47.1% at December 31, 2024.
• The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, is not expected to materially impact Con Edison's financial position, results, or liquidity.
• The Inflation Reduction Act's Corporate Alternative Minimum Tax (CAMT) resulted in a $66 million liability for Con Edison ($89 million for CECONY) as of September 30, 2025.

Sentiment

Score: 8

Explanation: The filing indicates strong financial performance with significant increases in net income and operating revenues. Strategic advancements in clean energy and infrastructure projects are positive. While challenges like aged accounts receivable and regulatory uncertainties exist, the overall financial health and proactive management of future growth and regulatory frameworks suggest a positive outlook.

Positives

• Con Edison reported a strong increase in net income for common stock, up $100 million (17%) for the three months and $216 million (14.3%) for the nine months ended September 30, 2025.
• Diluted EPS increased by $0.21 (12.4%) for the three months and $0.48 (11%) for the nine months ended September 30, 2025.
• Operating revenues saw substantial growth, increasing by $438 million (10.7%) for the three months and $1,337 million (11.5%) for the nine months ended September 30, 2025.
• Net cash flows from operating activities for Con Edison were $1,016 million higher for the nine months ended September 30, 2025, compared to the prior year, indicating improved operational cash generation.
• The common equity ratio for Con Edison improved to 49.2% and for CECONY to 48.4% as of September 30, 2025, reflecting a stronger capital structure.
• CECONY's proposed electric rate plan includes significant base rate increases over three years, totaling $1,024 million, which will support future investments and returns.
• O&R's approved rate plans for 2025-2027 include electric and gas rate increases, providing revenue stability and recovery of costs.
• Con Edison Transmission's Propel NY Energy project, a 90-mile electric transmission project, is advancing, with an estimated share of $2,200 million for New York Transco, supporting grid modernization.
• The NYSPSC adopted a proactive planning framework for upgraded electric grid infrastructure for New York utilities, including CECONY and O&R, to support building and transportation electrification and DER.
• CECONY received approval for five urgent proactive planning projects for grid upgrades totaling $439.9 million, addressing anticipated demand from electrification.

Negatives

• Net cash flows from financing activities for Con Edison shifted to a net outflow of $(685) million for the nine months ended September 30, 2025, a decrease of $1,177 million from the prior year's inflow.
• CECONY's proposed gas base rate change for Year 1 (2026) is a decrease of $(46) million, which could impact initial gas revenue.
• Aged accounts receivable balances remain significantly elevated compared to pre-pandemic levels, impacting liquidity and requiring ongoing collection efforts.
• CECONY's petition to capitalize $89 million in costs for its new customer billing and information system, exceeding a $421 million cap, was denied by the NYSPSC, leading to expensing of $51 million and a $38 million reserve.
• The NYISO identified a bulk power system electric reliability need in New York City beginning in summer 2026 and continuing through 2030, driven by increased peak demand and deactivation notices, posing a challenge for reliability.
• The NYSPSC withdrew the Public Policy Transmission Need (PPTN) process for offshore wind due to federal actions, potentially slowing the development of new offshore wind resources.

Risks

• Extensive regulation and potential for substantial penalties.
• Utilities' rate plans may not provide a reasonable return or may be adversely affected by changes.
• Failure of, or damage to, facilities could adversely affect operations.
• Cyber attacks pose a significant threat to the Companies.
• Failure of processes and systems, or inability to retain and attract employees and contractors, could adversely affect operations.
• Exposure to environmental consequences of operations, including increased costs related to climate change.
• Con Edison's ability to pay dividends or interest depends on dividends from its subsidiaries.
• Changes to tax laws could adversely affect the Companies.
• Requirement for access to capital markets to satisfy funding needs.
• Disruption in wholesale energy markets, increased commodity costs, or failure by an energy supplier or customer could adversely affect the Companies.
• Risks related to health epidemics and other outbreaks.
• Ineffectiveness of strategies to address changes in the external business environment.
• Risks related to supply chain disruptions, inflation, and imposition of tariffs.
• Uncertainty regarding the outcome and potential loss from the NYSDPS investigation into CECONY's gas main welds and third-party contractor misconduct.
• Inability to estimate the amount or range of possible loss related to the NYSPSC audit of Utilities' income tax accounting for plant retirement-related cost of removal.
• Potential for additional liability from Superfund Sites as investigations progress and remediation costs become determinable.
• Uncertainty in estimating the amount or range of loss in excess of accrued liability for asbestos proceedings due to evolving legal standards.
• Potential for increased costs if tariffs are implemented on imported Canadian electricity, leading to higher electric commodity prices.
• Impact of federal, state, and local clean energy policies on electric, gas, and steam usage, potentially decreasing gas and steam demand.
• Challenges in maintaining electric reliability as electric usage increases due to electrification efforts.
• Uncertainty regarding the success of Con Edison Transmission's competitive solicitations and growth of its electric transmission portfolio.
• Increased costs for the utility-scale thermal energy network (UTEN) pilot projects, with remaining proposed budget amounts subject to NYSPSC approval.

Future Outlook

Con Edison anticipates continued earnings growth supported by regulated utilities and electric transmission assets, focusing on providing reliable, resilient, safe, and clean energy. The company expects electric usage to increase while gas and steam usage may decrease due to clean energy policies. Future capital requirements for CECONY's electric and gas operations are projected to be substantial through 2028, with ongoing investments in grid infrastructure and decarbonization projects. The company is assessing the impacts of new accounting standards and tax legislation, though the One Big Beautiful Bill Act is not expected to have a material impact. Management plans to continue efforts to reduce aged accounts receivable balances through integrated collection strategies.

Management Comments

• Management's assessment is that the income tax regulatory assets as of September 30, 2025, are probable of collection through future rates.
• Management believes that the incremental costs for the new customer billing and information system were both prudent and necessary for the successful deployment of the system for the benefit of its customers.
• Management's preliminary assessment indicates that the provisions in the One Big Beautiful Bill Act are not expected to have a material impact on the Companies' financial position, results of operations, or liquidity.
• Management expects the Companies' deferred tax liabilities to exceed the minimum tax credit carryforward for the foreseeable future, thus no valuation allowance is required for CAMT.

Industry Context

The utility sector is undergoing a significant transformation driven by clean energy goals and electrification trends. Con Edison's focus on grid modernization, decarbonization projects, and proactive planning aligns with broader industry shifts towards sustainability and resilience. The identified electric reliability needs in New York City highlight the critical infrastructure challenges faced by urban utilities as demand patterns change. Regulatory frameworks, such as revenue decoupling mechanisms and cost recovery for clean energy programs, are essential for utilities to manage these transitions while maintaining financial stability. The ongoing challenges with aged accounts receivable reflect broader economic pressures impacting customer affordability, a common concern across the utility industry.

Comparison to Industry Standards

• CECONY's authorized return on common equity of 9.40% and common equity ratio of 48% for its proposed rate plans are within typical ranges for regulated utilities, balancing investor returns with customer affordability.
• RECO's requested return on common equity of 10.30% and common equity ratio of 50.04% in its New Jersey rate increase request are comparable to other regulated utilities seeking to ensure adequate capital recovery and investment incentives.
• The proactive planning framework adopted by the NYSPSC for grid infrastructure upgrades, including identifying urgent projects, reflects a leading approach to managing the transition to a more electrified and distributed energy system, aligning with best practices for grid modernization seen in other progressive utility markets.

Legal Proceedings

• NYSDPS initiated an investigation into CECONY's compliance with weld requirements and prudence of oversight regarding non-conforming gas and steam main welds, which could result in adverse regulatory action.
• Two employees of third-party contractors were indicted in the U.S. District Court for the Southern District of New York for wire fraud arising out of their scheme to defraud CECONY related to weld films.
• Lawsuits are pending against CECONY seeking generally unspecified damages and, in some cases, punitive damages, for wrongful death, personal injury, property damage, and business interruption related to the 2014 Manhattan explosion and fire.
• NYSPSC initiated a focused operations audit of the Utilities' financial accounting for income taxes, investigating an inadvertent understatement of federal income tax expense for ratemaking purposes.

Related Party Transactions

• CECONY provides administrative and other services to, and receives such services from, Con Edison and its other subsidiaries pursuant to cost allocation procedures approved by the NYSPSC.
• CECONY and O&R have joint gas supply arrangements, with CECONY selling to, or acting as agent to purchase for, O&R, $16 million and $80 million of natural gas for the three and nine months ended September 30, 2025, respectively.
• CECONY's net receivable from Con Edison for income taxes was $35 million at September 30, 2025.
• The Utilities perform work and incur expenses on behalf of New York Transco, a company in which Con Edison Transmission owns a 45.7% interest.
• CECONY has a 20-year transportation contract with Mountain Valley Pipeline (MVP), a company in which Con Edison Transmission owns a 6.6% interest, with amounts billed by MVP to CECONY of $14 million and $41 million for the three and nine months ended September 30, 2025, respectively.
• The FERC has authorized CECONY to lend funds to O&R for up to 12 months, not exceeding $250 million, at prevailing market rates; no outstanding loans at September 30, 2025.
• Con Edison made a $12 million contribution to The Consolidated Edison Foundation, Inc., a non-consolidated not-for-profit corporation, in March 2025.

Stakeholder Impact

• Shareholders benefit from increased net income and EPS, as well as an improved common equity ratio, indicating stronger financial health and potential for continued dividend growth.
• Customers in New York and New Jersey will experience electric and gas rate changes as per approved and proposed rate plans, impacting their utility bills.
• Customers may receive refunds or surcharges related to regulatory reconciliations for uncollectible expenses, late payment charges, and property taxes.
• Customers will benefit from investments in grid modernization, clean energy programs, and steam decarbonization projects, leading to improved reliability and environmental outcomes.
• Employees and contractors involved in the gas main welds issue face legal proceedings, with two third-party contractor employees indicted for wire fraud.
• The expansion of Energy Affordability Programs will provide financial relief to a broader range of residential electric and gas customers with lower incomes.
• Suppliers and contractors involved in utility capital expenditures and clean energy projects will see continued business opportunities, with significant planned investments through 2028.

Next Steps

• CECONY's electric and gas rate plans for 2026-2028 are subject to approval by the NYSPSC.
• CECONY will begin billing customers at the new shaped rate once the Joint Proposal is approved by the NYSPSC.
• RECO's requested electric rate increase, effective January 1, 2026, is pending approval by the NJBPU.
• CECONY continues to investigate the gas main welds matter and cooperate with the NYSDPS investigation.
• CECONY is unable to predict the NYSPSC's response to its rehearing petition regarding the customer billing system capitalization.
• The Utilities plan to pursue a private letter ruling from the IRS regarding the income tax accounting audit.
• Con Edison Transmission is considering strategic alternatives for its investments in Mountain Valley Pipeline and Honeoye Storage Corporation.
• The operator of the Mountain Valley Pipeline filed a petition with the FERC for approval of the MVP Boost expansion project.
• CECONY and O&R are required to file a methodology document, a report on proposed urgent projects, and an annual report explaining load study integration as part of the proactive planning framework.
• CECONY and O&R are required to file cost recovery plans, update EAP budgets, and track enrollment/participation in the Enhanced Energy Affordability Programs.
• CECONY, as the Responsible Transmission Owner, would propose a regulated backstop solution for the identified electric reliability need in New York City.
• The next iteration of the Gas System Long-Term Plan (GSLTP) is due in August 2027.

Key Dates

Recommendation

Con Edison demonstrates strong financial performance with significant increases in net income and EPS, supported by robust operating revenues. The company's proactive engagement with regulators for favorable rate plans, substantial capital investments in grid modernization, and commitment to clean energy initiatives position it well for future growth in a regulated environment. While challenges like aged accounts receivable and ongoing regulatory audits exist, the company's improved common equity ratio and strong operational cash flows indicate financial resilience. The strategic focus on electric transmission projects and decarbonization aligns with long-term industry trends, making it an attractive investment for stable, dividend-paying growth.

Keywords

Utility, Electric, Gas, Steam, SEC Filing, 10-Q, Earnings, Financial Results, Rate Plans, Regulatory, Clean Energy, Capital Expenditures, Accounts Receivable, New York, New Jersey, Con Edison, CECONY, O&R, Transmission, ESG, Climate Change, Infrastructure, Dividends