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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 Third 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 Third Quarter Financial Statements and the notes thereto and the MD&A in Item 7 of the Companies’ combined Annual Report on Form 10-K for the year ended December 31, 2020 (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 Reports on Form 10-Q for the quarterly periods ended March 31, 2021 and June 30, 2021 (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.
| Con Edison | ||||||||||||||||||||||||||||||||
| CECONY | O&R | Clean Energy Businesses | Con Edison Transmission | |||||||||||||||||||||||||||||
| •RECO | •CET Electric | |||||||||||||||||||||||||||||||
| •CET Gas |
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 sustainable energy infrastructure projects and provide energy-related products and services to wholesale and retail customers. Con Edison Transmission invests in and seeks to develop electric transmission projects and manages, through joint ventures, both electric and gas assets. CET Gas and CECONY are considering strategic alternatives with respect to their interests in Honeoye Storage Corporation (Honeoye), of which CET owns a 71.2 percent interest and CECONY owns a 28.8 percent interest.
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 its New York customers. 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.
Electric Supply
In 2019, the New York State Department of Environmental Conservation (NYSDEC) issued regulations that may require the retirement or seasonal unavailability of fossil-fueled electric generating units owned by CECONY and others in New York City. The NYSDEC rule limits nitrous oxides (NOx) emissions during the ozone season from May through September and affects older peaking units that are generally located downstate and needed during periods of high electric demand or for local reliability purposes. Compliance with the rule will require affected units (approximately 1,400 MW in CECONY's service territory, of which 65 MW is owned by CECONY) to cease operation during the ozone season, install emission controls, repower, or retire by 2023 or 2025. The NYISO, in its 2020 Reliability Needs Assessment study that was approved by the NYISO board, reported local and bulk transmission system reliability needs that are expected to be caused by the retirement or unavailability of some of the impacted units. In January 2021, CECONY updated its Local Transmission Plan (LTP) to address the identified reliability needs on its local system through the construction of three transmission projects, the Reliable Clean City (RCC) projects. In addition, CECONY continues to monitor forecasted system voltage performance and if a need for support persists in the forecast, CECONY will propose solutions in a subsequent LTP update. CECONY estimates that the costs of the RCC projects to solve the local reliability needs to be approximately $780 million over four years. In April 2021, the NYSPSC approved CECONY’s December 2020 petition to recover $780 million of costs to construct the RCC projects to solve the local reliability needs.
During the summer of 2021, electric peak demand in CECONY's service area was 12,039 MW (which occurred on June 30, 2021). At design conditions, electric peak demand in the company's service area would have been approximately 12,336 MW in 2021 compared to the company's forecast of 12,880 MW. The lower peak demand at design conditions as compared to the forecast was primarily due to the slower than expected recovery of electric demand in CECONY's territory during the emergence from the COVID-19 pandemic. The company decreased its five-year forecast of average annual change in electric peak demand in its service area at design conditions from approximately 0.8 percent (for 2021 to 2025) to approximately 0.4 percent (for 2022 to 2026).
Gas
CECONY delivers gas to approximately 1.1 million customers in Manhattan, the Bronx, parts of Queens and most of Westchester County.
In May 2021, CECONY decreased its five-year forecast of average annual growth of the firm peak gas demand in its service area at design conditions from approximately 1.4 percent (for 2021 to 2025) to approximately 1.3 percent (for 2022 to 2026). The slight decrease reflects the negative impact that the current economy and lingering effects of the COVID-19 pandemic is expected to have on large new construction, usage from existing large customers, 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 16,981 MMlb of steam annually to approximately 1,558 customers in parts of Manhattan.
In June 2021, CECONY changed its five-year forecast of average annual growth in the peak steam demand in its service area at design conditions from a 0.4 percent decrease to a 0.1 percent increase (for 2022 to 2026), as steam sales are expected to recover from the decrease in customer usage during the COVID-19 pandemic.
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.
During the summer of 2021, electric peak demand in O&R's service area was 1,520 MW (which occurred on June 30, 2021). At design conditions, electric peak demand in the company's service area would have been approximately 1,575 MW in 2021 compared to the company's forecast of 1,530 MW. The difference at design conditions is higher than expected due to a decrease in residential vacancies and faster recovery of electric demand in O&R's service territory during the emergence from the COVID-19 pandemic. The company increased its five-year
forecast of average annual change in electric peak demand in its service area at design conditions from approximately (0.5) percent (for 2021 to 2025) to approximately (0.3) percent (for 2022 to 2026).
Gas
O&R delivers gas to over 0.1 million customers in southeastern New York.
In May 2021, O&R decreased its five-year forecast of average annual growth of the firm peak gas demand in its service area at design conditions from approximately 0.2 percent (for 2021 to 2025) to approximately 0.1 percent (for 2022 to 2026). 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 sustainable energy infrastructure projects and provide energy-related products and services to wholesale and retail customers.
Con Edison Transmission
Con Edison Transmission, Inc. invests in electric transmission projects and manages, through joint ventures, both electric and gas assets while seeking to develop electric 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, which owns and has been selected to build additional electric transmission assets in New York. In May 2021, a CET Gas subsidiary entered into a purchase and sale agreement pursuant to which it agreed to sell its 50 percent interest in Stagecoach Gas Services LLC (Stagecoach), a joint venture that owned and operated an existing gas pipeline and storage business located in northeastern Pennsylvania and the southern tier of New York, and in July 2021 the transaction was substantially completed. See "Investments" in Note A and Note R to the Third Quarter Financial Statements. Also, CET Gas and CECONY own 71.2 percent and 28.8 percent interests, respectively, in Honeoye, which operates a gas storage facility in upstate New York. CET Gas and CECONY are considering strategic alternatives with respect to their interests in Honeoye. At September 30, 2021, the consolidated carrying value of Honeoye was $25 million. In addition, CET Gas owns a 10.6 percent interest (that is expected to be reduced to 8.5 percent based on the current project cost estimate and CET Gas’ previous capping of its cash contributions to the joint venture) in Mountain Valley Pipeline LLC (MVP), 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:
| For the Three Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2021 | At September 30, 2021 | ||||||||||||||||||||||||||||||
| (Millions of Dollars, except percentages) | Operating Revenues | Net Income for Common Stock | Operating Revenues | Net Income for Common Stock | Assets | |||||||||||||||||||||||||||
| CECONY | $3,092 | 86 | % | $418 | 78 | % | $8,784 | 85 | % | $1,011 | 90 | % | $52,178 | 83 | % | |||||||||||||||||
| O&R | 257 | 7 | 26 | 5 | 699 | 7 | 53 | 5 | 3,344 | 5 | ||||||||||||||||||||||
| Total Utilities | 3,349 | 93 | 444 | 83 | 9,483 | 92 | 1,064 | 95 | 55,522 | 88 | ||||||||||||||||||||||
| Clean Energy Businesses (a) | 264 | 7 | 106 | 20 | 779 | 8 | 223 | 20 | 6,604 | 10 | ||||||||||||||||||||||
| Con Edison Transmission (b) | 1 | — | 1 | — | 3 | — | (142) | (13) | 493 | 1 | ||||||||||||||||||||||
| Other (c) | (1) | — | (13) | (3) | (4) | — | (23) | (2) | 319 | 1 | ||||||||||||||||||||||
| Total Con Edison | $3,613 | 100 | % | $538 | 100 | % | $10,261 | 100 | % | $1,122 | 100 | % | $62,938 | 100 | % |
(a)Net income for common stock from the Clean Energy Businesses for the three and nine months ended September 30, 2021 includes $(9) million and $20 million, respectively, of net after-tax mark-to-market income/(loss) and reflects $52 million (after-tax) and $87 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. Net income for common stock from the Clean Energy Businesses for the nine months ended September 30, 2021 includes $(3) million (after-tax) for the loss from the sale of a renewable electric production project. See Note P to the Third Quarter Financial Statements.
(b)Net income for common stock from Con Edison Transmission for the nine months ended September 30, 2021 includes $(153) million of a net after-tax impairment loss related to its investment in Stagecoach. See Note A to the Third Quarter Financial Statements.
(c)Other includes parent company and consolidation adjustments. Net income for common stock for the three and nine months ended September 30, 2021 includes $(4) million (after-tax) and $(7) million (after-tax), respectively, of loss 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 for the nine months ended September 30, 2021 includes $6 million of income tax impact for the impairment loss related to Con Edison's investment in Stagecoach and $(2) million of net after-tax mark-to-market loss.
Coronavirus Disease 2019 (COVID-19) Impacts
The Companies continue to respond to the Coronavirus Disease 2019 (COVID-19) global pandemic by working to reduce the potential risks posed by its spread to employees, customers and other stakeholders. The Companies continue to employ an incident command structure led by a pandemic planning team. The Companies support employee health and facility hygiene through regular cleaning and disinfecting of all work and common areas, promoting social distancing, allowing employees to work remotely and directing employees to stay at home if they are experiencing COVID or flu-like symptoms. Employees who test positive for COVID-19 are directed to quarantine at home and are evaluated for close, prolonged contact with other employees that would require those employees to quarantine at home. 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.
On October 22, 2021, in response to President Biden's Executive Order 14042, the Companies announced that they are committed to complying with the mandate for employees of federal contractors and subcontractors to be fully vaccinated against COVID-19 by the federally-required deadline (January 4, 2022), unless employees are legally entitled to an accommodation. The Companies are continuing to monitor the situation closely and are implementing appropriate measures to mitigate any workforce and cost impacts that may occur.
Below is additional information related to the effects of the COVID-19 pandemic and the Companies’ actions. Also, see “COVID-19 Regulatory Matters” in Note B to the Third Quarter Financial Statements.
Impact of CARES Act and 2021 Appropriations 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 Tax Credit and deferral of payments of employer payroll taxes.
Con Edison carried back its NOL of $29 million from tax year 2018 to tax year 2013. This allowed 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 2020, due to the higher federal statutory tax rate in 2013. See "Income Tax" in Note J. Con Edison and its subsidiaries did not have a federal NOL in tax years 2019 or 2020.
Con Edison and its subsidiaries benefited 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 allowed the Companies to deduct 100 percent of their interest expense. For 2021, the limitation on interest expense for computing ATI has reverted back to 30 percent.
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. For the year ended December 31, 2020, Con Edison and CECONY recognized a tax benefit to Taxes, other than income taxes of $10 million and $7 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 deferred the payment of employer payroll taxes for the period April 1, 2020 through December 31, 2020 of approximately $71 million ($63 million of which is for CECONY). The Companies will repay half of this liability by December 31, 2021 and the other half by December 31, 2022.
In December 2020, the Consolidated Appropriations Act, 2021 (the 2021 Appropriations Act) was signed into law. The 2021 Appropriations Act, among other things, extends the expiring employee retention tax credit to include qualified wages paid in the first two quarters of 2021, increases the qualified wages paid to an employee from 50 percent up to $10,000 annually in 2020 to 70 percent up to $10,000 per quarter in 2021 and increases the maximum employee retention tax credit amount an employer can take per employee from $5,000 in 2020 to $14,000 in the first two quarters of 2021. In March 2021, the American Rescue Plan Act was signed into law that expanded the
2021 Appropriations Act to extend the period for eligible employers to receive the employer retention credit from June 30, 2021 to December 31, 2021.
Supply Chain Matters
The Utilities have been impacted, and may continue to be impacted, by global and U.S. supply chain disruptions causing shortages of, and increased pricing pressure on, among other things, certain raw materials, labor, microprocessors and microchips. The Utilities have used mitigation strategies in an effort to minimize these supply chain issues, such as increasing inventory and storage of specified materials, identifying alternate distributors and maintaining regular communications with key suppliers. These supply chain disruptions have not had a material impact on the Utilities’ net income, cash flows and financial condition, but have resulted in increased prices and lead times for certain orders of materials and equipment needed by the Utilities in their operations.
Accounting Considerations
Due to the COVID-19 pandemic and subsequent New York State on PAUSE and related executive orders (that have since been lifted), decline in business, bankruptcies, layoffs and furloughs, among other factors, both commercial and residential customers have had and may continue to have increased difficulty paying their utility bills. In June 2020, the state of New York enacted a law prohibiting New York utilities, including CECONY and O&R, from disconnecting residential customers, and starting in May 2021 small business customers, during the COVID-19 state of emergency, which ended in June 2021. In addition, such prohibitions will apply for an additional 180 days after the state of emergency ends (December 21, 2021) for residential and small business customers who have experienced a change in financial circumstances due to the COVID-19 pandemic. CECONY and O&R have existing allowances for uncollectible accounts established against their customer accounts receivable balances that 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 third quarter of 2021, 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 customer accounts reserve increased from $138 million and $8.7 million at December 31, 2020 to $300 million and $12.6 million at September 30, 2021, respectively. See "COVID-19 Regulatory Matters" in Note B and Note L to the Third 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 goodwill, long-lived or intangible assets may not be recoverable at September 30, 2021.
New York State Legislation
In April 2021, New York State passed a law that increases the corporate franchise tax rate on business income from 6.5% to 7.25%, retroactive to January 1, 2021, for taxpayers with taxable income greater than $5 million. The law also reinstates the business capital tax at 0.1875%, not to exceed a maximum tax liability of $5 million per taxpayer. New York State requires a corporate franchise taxpayer to calculate and pay the highest amount of tax under the three alternative methods: a tax on business income; a tax on business capital; or a fixed dollar minimum. The provisions to increase the corporate franchise tax rate and reinstate a capital tax are scheduled to expire after 2023 and are not expected to have a material impact on the Companies’ financial position, results of operations or liquidity. In addition, the new law created a program that allows eligible residential renters in New York State who require assistance with rent and utility bills to have up to twelve months of electric and gas utility bill arrears forgiven, provided that such arrears were accrued on or after March 13, 2020. The program will be administered by the State Office of Temporary Disability Assistance in coordination with the New York State Department of Public Service and the NYSPSC. Under the program, CECONY and O&R would qualify for a refundable tax credit for New York State gross-receipts tax equal to the amount of arrears waived by the Utilities in the year that the arrears are waived and certified by the NYSPSC. See "COVID-19 Regulatory Matters” in Note B to the Third 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 access the capital markets as needed since the start of the COVID-19 pandemic in March 2020. See Notes C and D to the Third Quarter Financial Statements. However, a continued economic downturn as a result of the COVID-19 pandemic has increased the amount of capital needed by the Utilities and could impact the costs of such capital.
The decline in business activity in the Utilities’ service territory as a result of the COVID-19 pandemic and subsequent New York State on PAUSE and related executive orders (that have since been lifted), resulted in a slower recovery in cash of outstanding customer accounts receivable balances in 2020 and for the nine months ended September 30, 2021. These trends will likely continue through the remainder of 2021.
The Utilities’ rate plans have revenue decoupling mechanisms in their New York electric and gas businesses that largely 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's and O&R New York’s electric customers and after the annual deferral period ends for CECONY's 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 have reduced and are expected to continue to reduce liquidity at the Utilities. Also, 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 and such suspensions may continue through 2021.
For the nine months ended September 30, 2021, the estimated late payment charges and fees that were not billed by CECONY and O&R were approximately $46 million and $3 million lower than the amounts that were approved to be collected pursuant to their rate plans, respectively. These unbilled amounts have reduced and may continue to reduce liquidity at the Utilities. See "COVID-19 Regulatory Matters" in Note B and Note K to the Third Quarter Financial Statements.
Con Edison and the Utilities 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 Third Quarter Financial Statements.
Results of Operations
Net income for common stock and earnings per share for the three and nine months ended September 30, 2021 and 2020 were as follows:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| (Millions of Dollars, except per share amounts) | Net Income for Common Stock | Earnings per Share | Net Income for Common Stock | Earnings per Share | ||||||||||||||||||||||
| CECONY | $418 | $405 | $1.19 | $1.21 | $1,011 | $963 | $2.92 | $2.88 | ||||||||||||||||||
| O&R | 26 | 27 | 0.07 | 0.08 | 53 | 57 | 0.15 | 0.17 | ||||||||||||||||||
| Clean Energy Businesses (a) | 106 | 56 | 0.30 | 0.17 | 223 | 8 | 0.64 | 0.03 | ||||||||||||||||||
| Con Edison Transmission (b) | 1 | 15 | — | 0.04 | (142) | 42 | (0.40) | 0.13 | ||||||||||||||||||
| Other (c) | (13) | (10) | (0.04) | (0.03) | (23) | (12) | (0.08) | (0.04) | ||||||||||||||||||
| Con Edison (d) | $538 | $493 | $1.52 | $1.47 | $1,122 | $1,058 | $3.23 | $3.17 |
(a)Net income for common stock from the Clean Energy Businesses for the three and nine months ended September 30, 2021 includes $(9) million or $(0.03) a share and $20 million or $0.06 a share, respectively, of net after-tax mark-to-market income/(loss) and reflects $52 million or $0.15 a share (after-tax) and $87 million or $0.25 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 nine months ended September 30, 2021 includes $(3) million or $(0.01) a share (after-tax) for the loss from the sale of a renewable electric production project. Net income for common stock from the Clean Energy Businesses for the three and nine months ended September 30, 2020 includes $5 million or $0.01 a share and $(60) million or $(0.18) a share, respectively, of net after-tax mark-to-market income/(loss) and reflects $7 million or $0.02 a share (after-tax) and $29 million or $0.08 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 P to the Third Quarter Financial Statements.
(b)Net income for common stock from Con Edison Transmission for the nine months ended September 30, 2021 includes $(153) million or $(0.44) a share of net after-tax impairment loss related to its investment in Stagecoach. See Note A to the Third Quarter Financial Statements.
(c)Other includes parent company and consolidation adjustments. Net income for common stock for the three and nine months ended September 30, 2021 includes $(4) million (after-tax) or $(0.01) a share (after-tax) and $(7) million (after-tax) or $(0.02) a share (after-tax), respectively, of loss 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 for the nine months ended September 30, 2021 includes $6 million or $0.01 a share of income tax impact for the impairment loss related to Con Edison Transmission’s investment in Stagecoach and $(2) million or $(0.01) a share of net after-tax mark-to-market loss. See Note A to the Third Quarter Financial Statements. Net income for common stock for the three and nine months ended September 30, 2020 includes $1 million (after-tax) and $2 million or $0.01 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 nine months ended September 30, 2020 includes $5 million or $0.01 a share of net after-tax mark-to-market income.
(d)Earnings per share on a diluted basis were $1.52 a share and $1.47 a share for the three months ended September 30, 2021 and 2020, respectively, and $3.23 a share and $3.16 a share for the nine months ended September 30, 2021 and 2020, respectively.
The following tables present the estimated effect of major factors on earnings per share and net income for common stock for the three and nine months ended September 30, 2021 as compared with the 2020 period.
| Variation for the Three Months Ended September 30, 2021 vs. 2020 | ||||||||
| Net Income for Common Stock (Millions of Dollars) | Earnings per Share | |||||||
| CECONY (a) | ||||||||
| Higher electric rate base | $21 | $0.06 | ||||||
| Lower healthcare costs | 5 | 0.02 | ||||||
| Lower stock based compensation costs | 5 | 0.01 | ||||||
| Uncollected late payment charges and certain other fees associated with COVID-19 | 4 | 0.01 | ||||||
| Higher uncollectibles written off and increase to reserve for uncollectibles, net of deferrals (that began in the third quarter of 2020) for uncollectibles associated with the Coronavirus Disease (COVID-19) pandemic | (18) | (0.05) | ||||||
| Higher storm-related costs | (3) | (0.01) | ||||||
| Dilutive effect of stock issuances | — | (0.07) | ||||||
| Other | (1) | 0.01 | ||||||
| Total CECONY | 13 | (0.02) | ||||||
| O&R (a) | ||||||||
| Higher storm-related costs | (4) | (0.01) | ||||||
| Other | 3 | — | ||||||
| Total O&R | (1) | (0.01) | ||||||
| Clean Energy Businesses | ||||||||
| HLBV effects | 59 | 0.17 | ||||||
| Net mark-to-market effects | (14) | (0.04) | ||||||
| Dilutive effect of stock issuances | — | (0.02) | ||||||
| Other | 5 | 0.02 | ||||||
| Total Clean Energy Businesses | 50 | 0.13 | ||||||
| Con Edison Transmission | ||||||||
| Foregoing Allowance for Funds Used During Construction income starting in January 2021 until significant construction resumes on the Mountain Valley Pipeline | (11) | (0.03) | ||||||
| Other | (3) | (0.01) | ||||||
| Total Con Edison Transmission | (14) | (0.04) | ||||||
| Other, including parent company expenses | ||||||||
| HLBV effects | (4) | (0.01) | ||||||
| Other | 1 | — | ||||||
| Total Other, including parent company expenses | (3) | (0.01) | ||||||
| Total Reported (GAAP basis) | $45 | $0.05 | ||||||
| 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 Nine Months Ended September 30, 2021 vs. 2020 | ||||||||
| Net Income for Common Stock (Millions of Dollars) | Earnings per Share | |||||||
| CECONY (a) | ||||||||
| Higher electric rate base | $34 | $0.10 | ||||||
| Higher gas rate base | 24 | 0.07 | ||||||
| Weather impact on steam revenues | 15 | 0.05 | ||||||
| Lower incremental costs associated with the COVID-19 pandemic | 8 | 0.02 | ||||||
| Lower stock based compensation costs | 3 | 0.01 | ||||||
| Estimated food and medicine spoilage claims related to outages caused by Tropical Storm Isaias in 2020 | 4 | 0.01 | ||||||
| Higher costs related to heat and storm-related events | (29) | (0.09) | ||||||
| Uncollected late payment charges and certain other fees associated with the COVID-19 pandemic | (7) | (0.02) | ||||||
| Higher uncollectibles written off and increase to reserve for uncollectibles, net of deferrals (that began in the third quarter of 2020) for uncollectibles associated with the COVID-19 pandemic | (2) | (0.01) | ||||||
| Dilutive effect of stock issuances | — | (0.11) | ||||||
| Other | (2) | 0.01 | ||||||
| Total CECONY | 48 | 0.04 | ||||||
| O&R (a) | ||||||||
| Higher storm-related costs | (8) | (0.02) | ||||||
| Other | 4 | — | ||||||
| Total O&R | (4) | (0.02) | ||||||
| Clean Energy Businesses | ||||||||
| Higher revenues | 155 | 0.47 | ||||||
| HLBV effects | 116 | 0.33 | ||||||
| Net mark-to-market effects | 80 | 0.24 | ||||||
| Gain on sale of a renewable electric project | 4 | 0.01 | ||||||
| Higher operations and maintenance expenses | (134) | (0.40) | ||||||
| Loss from sale of a renewable electric production project | (3) | (0.01) | ||||||
| Dilutive effect of stock issuances | — | (0.02) | ||||||
| Other | (3) | (0.01) | ||||||
| Total Clean Energy Businesses | 215 | 0.61 | ||||||
| Con Edison Transmission | ||||||||
| Impairment losses on Stagecoach | (153) | (0.44) | ||||||
| Foregoing Allowance for Funds Used During Construction income starting in January 2021 until significant construction resumes on the Mountain Valley Pipeline | (33) | (0.10) | ||||||
| Other | 2 | — | ||||||
| Total Con Edison Transmission | (184) | (0.54) | ||||||
| Other, including parent company expenses | ||||||||
| HLBV effects | (7) | (0.02) | ||||||
| Net mark-to-market effects | (2) | (0.01) | ||||||
| Impairment tax benefits on Stagecoach | 6 | 0.01 | ||||||
| Other | (8) | (0.01) | ||||||
| Total Other, including parent company expenses | (11) | (0.03) | ||||||
| Total Reported (GAAP basis) | $64 | $0.06 | ||||||
| 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 nine months ended September 30, 2021 and 2020 were as follows:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||
| (Millions of Dollars) | 2021 | 2020 | 2021 | 2020 | ||||||||||
| CECONY | ||||||||||||||
| Operations | $445 | $423 | $1,283 | $1,210 | ||||||||||
| Pensions and other postretirement benefits | (6) | (20) | (23) | (83) | ||||||||||
| Health care and other benefits | 42 | 49 | 134 | 115 | ||||||||||
| Regulatory fees and assessments (a) | 99 | 94 | 252 | 253 | ||||||||||
| Other | 70 | 51 | 202 | 219 | ||||||||||
| Total CECONY | 650 | 597 | 1,848 | 1,714 | ||||||||||
| O&R | 83 | 79 | 240 | 232 | ||||||||||
| Clean Energy Businesses | 114 | 59 | 348 | 165 | ||||||||||
| Con Edison Transmission | 3 | 2 | 9 | 8 | ||||||||||
| Other (b) | (1) | (1) | (2) | (3) | ||||||||||
| Total other operations and maintenance expenses | $849 | $736 | $2,443 | $2,116 |
(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 nine months ended September 30, 2021 and 2020 follows. For additional business segment financial information, see Note M to the Third Quarter Financial Statements.
The Companies’ results of operations for the three months ended September 30, 2021 and 2020 were as follows:
| CECONY | O&R | Clean Energy Businesses | Con Edison Transmission | Other (a) | Con Edison (b) | |||||||||||||||||||||||||||||||||
| (Millions of Dollars) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||
| Operating revenues | $3,092 | $2,872 | $257 | $238 | $264 | $222 | $1 | $1 | $(1) | $— | $3,613 | $3,333 | ||||||||||||||||||||||||||
| Purchased power | 481 | 447 | 68 | 56 | — | — | — | — | (1) | — | 548 | 503 | ||||||||||||||||||||||||||
| Fuel | 44 | 24 | — | — | — | — | — | — | — | — | 44 | 24 | ||||||||||||||||||||||||||
| Gas purchased for resale | 61 | 38 | 13 | 9 | 9 | 8 | — | — | — | — | 83 | 55 | ||||||||||||||||||||||||||
| Other operations and maintenance | 650 | 597 | 83 | 79 | 114 | 59 | 3 | 2 | (1) | (1) | 849 | 736 | ||||||||||||||||||||||||||
| Depreciation and amortization | 429 | 401 | 24 | 23 | 58 | 58 | — | — | 1 | — | 512 | 482 | ||||||||||||||||||||||||||
| Taxes, other than income taxes | 699 | 643 | 22 | 22 | 4 | 5 | — | 1 | 2 | 2 | 727 | 673 | ||||||||||||||||||||||||||
| Operating income | 728 | 722 | 47 | 49 | 79 | 92 | (2) | (2) | (2) | (1) | 850 | 860 | ||||||||||||||||||||||||||
| Other income (deductions) | (23) | (38) | (4) | (4) | — | 3 | 5 | 27 | — | (1) | (22) | (13) | ||||||||||||||||||||||||||
| Net interest expense | 197 | 182 | 10 | 10 | 18 | 22 | 1 | 4 | 6 | 8 | 232 | 226 | ||||||||||||||||||||||||||
| Income before income tax expense | 508 | 502 | 33 | 35 | 61 | 73 | 2 | 21 | (8) | (10) | 596 | 621 | ||||||||||||||||||||||||||
| Income tax expense | 90 | 97 | 7 | 8 | 24 | 8 | 1 | 6 | 5 | — | 127 | 119 | ||||||||||||||||||||||||||
| Net income | $418 | $405 | $26 | $27 | $37 | $65 | $1 | $15 | $(13) | $(10) | $469 | $502 | ||||||||||||||||||||||||||
| Income (loss) attributable to non-controlling interest | — | — | — | — | (69) | 9 | — | — | — | — | (69) | 9 | ||||||||||||||||||||||||||
| Net income for common stock | $418 | $405 | $26 | $27 | $106 | $56 | $1 | $15 | $(13) | $(10) | $538 | $493 | ||||||||||||||||||||||||||
(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 September 30, 2021 | For the Three Months Ended September 30, 2020 | ||||||||||||||||||||||||||||
| (Millions of Dollars) | Electric | Gas | Steam | 2021 Total | Electric | Gas | Steam | 2020 Total | 2021-2020 Variation | ||||||||||||||||||||
| Operating revenues | $2,730 | $307 | $55 | $3,092 | $2,562 | $259 | $51 | $2,872 | $220 | ||||||||||||||||||||
| Purchased power | 473 | — | 8 | 481 | 443 | — | 4 | 447 | 34 | ||||||||||||||||||||
| Fuel | 39 | — | 5 | 44 | 18 | — | 6 | 24 | 20 | ||||||||||||||||||||
| Gas purchased for resale | — | 61 | — | 61 | — | 38 | — | 38 | 23 | ||||||||||||||||||||
| Other operations and maintenance | 516 | 92 | 42 | 650 | 469 | 87 | 41 | 597 | 53 | ||||||||||||||||||||
| Depreciation and amortization | 324 | 82 | 23 | 429 | 305 | 74 | 22 | 401 | 28 | ||||||||||||||||||||
| Taxes, other than income taxes | 544 | 120 | 35 | 699 | 514 | 94 | 35 | 643 | 56 | ||||||||||||||||||||
| Operating income | $834 | $(48) | $(58) | $728 | $813 | $(34) | $(57) | $722 | $6 |
Electric
CECONY’s results of electric operations for the three months ended September 30, 2021 compared with the 2020 period were as follows:
| For the Three Months Ended | |||||||||||
| (Millions of Dollars) | September 30, 2021 | September 30, 2020 | Variation | ||||||||
| Operating revenues | $2,730 | $2,562 | $168 | ||||||||
| Purchased power | 473 | 443 | 30 | ||||||||
| Fuel | 39 | 18 | 21 | ||||||||
| Other operations and maintenance | 516 | 469 | 47 | ||||||||
| Depreciation and amortization | 324 | 305 | 19 | ||||||||
| Taxes, other than income taxes | 544 | 514 | 30 | ||||||||
| Electric operating income | $834 | $813 | $21 |
CECONY’s electric sales and deliveries for the three months ended September 30, 2021 compared with the 2020 period were:
| Millions of kWh Delivered | Revenues in Millions (a) | ||||||||||||||||||||||||||||
| For the Three Months Ended | For the Three Months Ended | ||||||||||||||||||||||||||||
| Description | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | |||||||||||||||||||||
| Residential/Religious (b) | 3,905 | 4,001 | (96) | (2.4 | %) | $1,025 | $995 | $30 | 3.0 | % | |||||||||||||||||||
| Commercial/Industrial | 2,645 | 2,627 | 18 | 0.7 | 652 | 556 | 96 | 17.3 | |||||||||||||||||||||
| Retail choice customers | 6,274 | 6,294 | (20) | (0.3) | 861 | 784 | 77 | 9.8 | |||||||||||||||||||||
| NYPA, Municipal Agency and other sales | 2,466 | 2,532 | (66) | (2.6) | 228 | 217 | 11 | 5.1 | |||||||||||||||||||||
| Other operating revenues (c) | — | — | — | — | (36) | 10 | (46) | Large | |||||||||||||||||||||
| Total | 15,290 | 15,454 | (164) | (1.1) | % | (d) | $2,730 | $2,562 | $168 | 6.6 | % |
(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 increased 2.3 percent in the three months ended September 30, 2021 compared with the 2020 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $168 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to an increase in revenues from the electric rate plan ($95 million), higher purchased power expenses ($30 million) and higher fuel expenses ($21 million).
Purchased power expenses increased $30 million in the three months ended September 30, 2021 compared with the 2020 period due to higher unit costs ($16 million) and purchased volumes ($15 million).
Fuel expenses increased $21 million in the three months ended September 30, 2021 compared with the 2020 period due to higher unit costs ($16 million) and purchased volumes from the company's electric generating facilities ($5 million).
Other operations and m**aintenance expenses increased $47 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to the timing of the recognition of uncollectible expense compared to the rate plan level ($21 million), higher costs for pensions and other postretirement benefits ($11 million), higher storm-related costs ($5 million) and higher surcharges for assessments and fees that are collected in revenues from customers ($5 million).
Depreciation and amortization increased $19 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to higher electric utility plant balances.
Taxes, other than income taxes increased $30 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to higher property taxes ($18 million), higher state and local taxes ($6 million) and lower deferral of under-collected property taxes ($6 million).
Gas
CECONY’s results of gas operations for the three months ended September 30, 2021 compared with the 2020 period were as follows:
| For the Three Months Ended | |||||||||||
| (Millions of Dollars) | September 30, 2021 | September 30, 2020 | Variation | ||||||||
| Operating revenues | $307 | $259 | $48 | ||||||||
| Gas purchased for resale | 61 | 38 | 23 | ||||||||
| Other operations and maintenance | 92 | 87 | 5 | ||||||||
| Depreciation and amortization | 82 | 74 | 8 | ||||||||
| Taxes, other than income taxes | 120 | 94 | 26 | ||||||||
| Gas operating income | $(48) | $(34) | $(14) |
CECONY’s gas sales and deliveries, excluding off-system sales, for the three months ended September 30, 2021 compared with the 2020 period were:
| Thousands of Dt Delivered | Revenues in Millions (a) | ||||||||||||||||||||||||||||
| For the Three Months Ended | For the Three Months Ended | ||||||||||||||||||||||||||||
| Description | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | |||||||||||||||||||||
| Residential | 4,158 | 4,314 | (156) | (3.6 | %) | $128 | $117 | $11 | 9.4 | % | |||||||||||||||||||
| General | 4,133 | 3,504 | 629 | 18.0 | 59 | 35 | 24 | 68.6 | |||||||||||||||||||||
| Firm transportation | 8,943 | 8,668 | 275 | 3.2 | 80 | 70 | 10 | 14.3 | |||||||||||||||||||||
| Total firm sales and transportation | 17,234 | 16,486 | 748 | 4.5 | (b) | 267 | 222 | 45 | 20.3 | ||||||||||||||||||||
| Interruptible sales (c) | 1,198 | 1,882 | (684) | (36.3) | 6 | 4 | 2 | 50.0 | |||||||||||||||||||||
| NYPA | 15,187 | 13,701 | 1,486 | 10.8 | 1 | 1 | — | — | |||||||||||||||||||||
| Generation plants | 14,955 | 19,658 | (4,703) | (23.9) | 7 | 7 | — | — | |||||||||||||||||||||
| Other | 4,193 | 4,457 | (264) | (5.9) | 6 | 6 | — | — | |||||||||||||||||||||
| Other operating revenues (d) | — | — | — | — | 20 | 19 | 1 | 5.3 | |||||||||||||||||||||
| Total | 52,767 | 56,184 | (3,417) | (6.1 | %) | $307 | $259 | $48 | 18.5 | % |
(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 3.1 percent in the three months ended September 30, 2021 compared with the 2020 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
(c)Includes 572 thousand and 676 thousand of Dt for the 2021 and 2020 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 $48 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to an increase in revenues from the gas rate plan ($24 million) and higher gas purchased for resale ($23 million).
Gas purchased for resale increased $23 million in the three months ended September 30, 2021 compared with the 2020 period due to higher unit costs ($29 million), offset in part by lower purchased volumes ($7 million).
Other operations and maintenance expenses increased $5 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to higher costs for pensions and other postretirement benefits ($2 million), higher uncollectible expense ($2 million) and higher surcharges for assessments and fees that are collected in revenues from customers ($1 million).
Depreciation and amortization increased $8 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to higher gas utility plant balances.
Taxes, other than income taxes increased $26 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to lower deferral of under-collected property taxes ($16 million), higher property taxes ($8 million), and higher state and local taxes ($2 million).
Steam
CECONY’s results of steam operations for the three months ended September 30, 2021 compared with the 2020 period were as follows:
| For the Three Months Ended | |||||||||||
| (Millions of Dollars) | September 30, 2021 | September 30, 2020 | Variation | ||||||||
| Operating revenues | $55 | $51 | $4 | ||||||||
| Purchased power | 8 | 4 | 4 | ||||||||
| Fuel | 5 | 6 | (1) | ||||||||
| Other operations and maintenance | 42 | 41 | 1 | ||||||||
| Depreciation and amortization | 23 | 22 | 1 | ||||||||
| Taxes, other than income taxes | 35 | 35 | — | ||||||||
| Steam operating income | $(58) | $(57) | $(1) |
CECONY’s steam sales and deliveries for the three months ended September 30, 2021 compared with the 2020 period were:
| Millions of Pounds Delivered | Revenues in Millions | ||||||||||||||||||||||||||||
| For the Three Months Ended | For the Three Months Ended | ||||||||||||||||||||||||||||
| Description | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | |||||||||||||||||||||
| General | 4 | 7 | (3) | (42.9 | %) | $2 | $1 | $1 | Large | ||||||||||||||||||||
| Apartment house | 588 | 617 | (29) | (4.7) | 13 | 12 | 1 | 8.3 | |||||||||||||||||||||
| Annual power | 1,904 | 2,023 | (119) | (5.9) | 34 | 33 | 1 | 3.0 | |||||||||||||||||||||
| Other operating revenues (a) | — | — | — | — | 6 | 5 | 1 | 20.0 | |||||||||||||||||||||
| Total | 2,496 | 2,647 | (151) | (5.7) | % | (b) | $55 | $51 | $4 | 7.8 | % |
(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 4.3 percent in the three months ended September 30, 2021 compared with the 2020 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $4 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to higher purchased power expenses ($4 million).
Purchased power increased $4 million in the three months ended September 30, 2021 compared with the 2020 period due to higher purchased volumes ($3 million) and unit costs ($1 million).
Fuel decreased $1 million in the three months ended September 30, 2021 compared with the 2020 period due to lower unit costs.
Other operations and maintenance expenses increased $1 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to higher costs for pension and other postretirement benefits.
Depreciation and amortization increased $1 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to higher steam utility plant balances.
Other Income (Deductions)
Other deductions decreased $15 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to lower costs associated with components of pension and other postretirement benefits other than service cost.
Net Interest Expense
Net Interest Expense increased $15 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to higher interest on long-term debt ($15 million).
Income Tax Expense
Income taxes decreased $7 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to an increase in the amortization of excess deferred federal income taxes due to the TCJA ($4 million) and a higher favorable tax adjustment for the 2020 tax return primarily due to an increase in the general business tax credit ($5 million), offset in part by higher income before income tax expense ($1 million) and lower flow-through tax benefits in 2021 for plant-related items ($1 million).
O&R
| For the Three Months Ended September 30, 2021 | For the Three Months Ended September 30, 2020 | ||||||||||||||||||||||
| (Millions of Dollars) | Electric | Gas | 2021 Total | Electric | Gas | 2020 Total | 2021-2020 Variation | ||||||||||||||||
| Operating revenues | $223 | $34 | $257 | $208 | $30 | $238 | $19 | ||||||||||||||||
| Purchased power | 68 | — | 68 | 56 | — | 56 | 12 | ||||||||||||||||
| Gas purchased for resale | — | 13 | 13 | — | 9 | 9 | 4 | ||||||||||||||||
| Other operations and maintenance | 67 | 16 | 83 | 62 | 17 | 79 | 4 | ||||||||||||||||
| Depreciation and amortization | 18 | 6 | 24 | 17 | 6 | 23 | 1 | ||||||||||||||||
| Taxes, other than income taxes | 15 | 7 | 22 | 15 | 7 | 22 | — | ||||||||||||||||
| Operating income | $55 | $(8) | $47 | $58 | $(9) | $49 | $(2) |
Electric
O&R’s results of electric operations for the three months ended September 30, 2021 compared with the 2020 period were as follows:
| For the Three Months Ended | |||||||||||
| (Millions of Dollars) | September 30, 2021 | September 30, 2020 | Variation | ||||||||
| Operating revenues | $223 | $208 | $15 | ||||||||
| Purchased power | 68 | 56 | 12 | ||||||||
| Other operations and maintenance | 67 | 62 | 5 | ||||||||
| Depreciation and amortization | 18 | 17 | 1 | ||||||||
| Taxes, other than income taxes | 15 | 15 | — | ||||||||
| Electric operating income | $55 | $58 | $(3) |
O&R’s electric sales and deliveries for the three months ended September 30, 2021 compared with the 2020 period were:
| Millions of kWh Delivered | Revenues in Millions (a) | ||||||||||||||||||||||||||||
| For the Three Months Ended | For the Three Months Ended | ||||||||||||||||||||||||||||
| Description | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | |||||||||||||||||||||
| Residential/Religious (b) | 581 | 647 | (66) | (10.2 | %) | $114 | $110 | $4 | 3.6 | % | |||||||||||||||||||
| Commercial/Industrial | 221 | 230 | (9) | (3.9) | 32 | 35 | (3) | (8.6) | |||||||||||||||||||||
| Retail choice customers | 820 | 741 | 79 | 10.7 | 75 | 62 | 13 | 21.0 | |||||||||||||||||||||
| Public authorities | 32 | 32 | — | — | 4 | 3 | 1 | 33.3 | |||||||||||||||||||||
| Other operating revenues (c) | — | — | — | — | (2) | (2) | — | — | |||||||||||||||||||||
| Total | 1,654 | 1,650 | 4 | 0.2 | % | (d) | $223 | $208 | $15 | 7.2 | % |
(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 increased 2.9 percent in the three months ended September 30, 2021 compared with the 2020 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $15 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to higher purchased power expenses ($12 million) and higher revenues from the New York electric rate plan ($1 million).
Purchased power expenses increased $12 million in the three months ended September 30, 2021 compared with the 2020 period due to higher unit costs ($23 million), offset in part by lower purchased volumes ($10 million).
Other operations and maintenance expenses increased $5 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to higher storm-related costs.
Depreciation and amortization increased $1 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to higher electric utility plant balances.
Gas
O&R’s results of gas operations for the three months ended September 30, 2021 compared with the 2020 period were as follows:
| For the Three Months Ended | |||||||||||
| (Millions of Dollars) | September 30, 2021 | September 30, 2020 | Variation | ||||||||
| Operating revenues | $34 | $30 | $4 | ||||||||
| Gas purchased for resale | 13 | 9 | 4 | ||||||||
| Other operations and maintenance | 16 | 17 | (1) | ||||||||
| Depreciation and amortization | 6 | 6 | — | ||||||||
| Taxes, other than income taxes | 7 | 7 | — | ||||||||
| Gas operating income | $(8) | $(9) | $1 |
O&R’s gas sales and deliveries, excluding off-system sales, for the three months ended September 30, 2021 compared with the 2020 period were:
| Thousands of Dt Delivered | Revenues in Millions (a) | ||||||||||||||||||||||||||||
| For the Three Months Ended | For the Three Months Ended | ||||||||||||||||||||||||||||
| Description | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | |||||||||||||||||||||
| Residential | 900 | 724 | 176 | 24.3 | % | $18 | $13 | $5 | 38.5 | % | |||||||||||||||||||
| General | 258 | 218 | 40 | 18.3 | 4 | 2 | 2 | Large | |||||||||||||||||||||
| Firm transportation | 736 | 804 | (68) | (8.5) | 6 | 7 | (1) | (14.3) | |||||||||||||||||||||
| Total firm sales and transportation | 1,894 | 1,746 | 148 | 8.5 | (b) | 28 | 22 | 6 | 27.3 | ||||||||||||||||||||
| Interruptible sales | 844 | 787 | 57 | 7.2 | — | 1 | (1) | Large | |||||||||||||||||||||
| Generation plants | 13 | 21 | (8) | (38.1) | — | — | — | — | |||||||||||||||||||||
| Other | 26 | 30 | (4) | (13.3) | 1 | — | 1 | — | |||||||||||||||||||||
| Other gas revenues | — | — | — | — | 5 | 7 | (2) | (28.6) | |||||||||||||||||||||
| Total | 2,777 | 2,584 | 193 | 7.5 | % | $34 | $30 | $4 | 13.3 | % |
(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 increased 2.7 percent in the three months ended September 30, 2021 compared with the 2020 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $4 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to higher gas purchased for resale ($4 million).
Gas purchased for resale increased $4 million in the three months ended September 30, 2021 compared with the 2020 period due to higher unit costs ($2 million) and higher purchased volumes ($1 million).
Other operations and maintenance expenses decreased $1 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to lower uncollectible accounts and lower pension costs.
Income Tax Expense
Income taxes decreased $1 million in the three months ended September 30, 2021 compared with the 2020 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 September 30, 2021 compared with the 2020 period were as follows:
| For the Three Months Ended | |||||||||||
| (Millions of Dollars) | September 30, 2021 | September 30, 2020 | Variation | ||||||||
| Operating revenues | $264 | $222 | $42 | ||||||||
| Gas purchased for resale | 9 | 8 | 1 | ||||||||
| Other operations and maintenance | 114 | 59 | 55 | ||||||||
| Depreciation and amortization | 58 | 58 | — | ||||||||
| Taxes, other than income taxes | 4 | 5 | (1) | ||||||||
| Operating income | $79 | $92 | $(13) |
Operating revenues increased $42 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to higher revenue from renewable electric production projects ($48 million), higher wholesale revenues ($9 million) and higher energy services revenues ($8 million), offset in part by net mark-to-market values ($23 million).
Gas purchased for resale increased $1 million in the three months ended September 30, 2021 compared with the 2020 period due to higher purchased volumes.
Other operations and maintenance expenses increased $55 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to higher costs from engineering, procurement and construction of renewable electric projects for customers.
Net Interest Expense
Net interest expense decreased $4 million in the three months ended September 30, 2021 compared with the 2020 period due to higher unrealized gains on interest rate swaps in the 2021 period.
Income Tax Expense
Income taxes increased $16 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to lower income attributable to non-controlling interest ($19 million), offset in part by lower income before income tax expense ($3 million).
Income (Loss) Attributable to Non-Controll****ing Interest
Income attributable to non-controlling interest decreased $78 million to a loss of $69 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to lower income attributable in the 2021 period to a tax equity investor in renewable electric projects accounted for under the HLBV method of accounting. See Note P to the Third Quarter Financial Statements.
Con Edison Transmission
Other Income (Deductions)
Other income decreased $22 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to the substantial completion of the sale of Stagecoach and CET Gas foregoing AFUDC income from MVP starting January 2021 until significant construction resumes. See "Investments" in Note A and R to the Third Quarter Financial Statements.
Income Tax Expense
Income taxes decreased $5 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to lower income before income tax expense ($4 million) and lower state income taxes ($1 million).
Other
Income Tax Expense
Income taxes increased $5 million in the three months ended September 30, 2021 compared with the 2020 period primarily due to lower consolidated state income tax benefits.
The Companies’ results of operations for the nine months ended September 30, 2021 and 2020 were as follows:
| CECONY | O&R | Clean Energy Businesses | Con Edison Transmission | Other (a) | Con Edison (b) | |||||||||||||||||||||||||||||||||
| (Millions of Dollars) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||
| Operating revenues | $8,784 | $8,072 | $699 | $647 | $779 | $566 | $3 | $3 | $(4) | $(2) | $10,261 | $9,286 | ||||||||||||||||||||||||||
| Purchased power | 1,294 | 1,065 | 157 | 127 | — | — | — | — | (3) | — | 1,448 | 1,192 | ||||||||||||||||||||||||||
| Fuel | 166 | 124 | — | — | — | — | — | — | — | — | 166 | 124 | ||||||||||||||||||||||||||
| Gas purchased for resale | 357 | 298 | 56 | 43 | 49 | 24 | — | — | (1) | (1) | 461 | 364 | ||||||||||||||||||||||||||
| Other operations and maintenance | 1,848 | 1,714 | 240 | 232 | 348 | 165 | 9 | 8 | (2) | (3) | 2,443 | 2,116 | ||||||||||||||||||||||||||
| Depreciation and amortization | 1,267 | 1,187 | 71 | 67 | 172 | 173 | 1 | 1 | — | — | 1,511 | 1,428 | ||||||||||||||||||||||||||
| Taxes, other than income taxes | 2,016 | 1,830 | 67 | 64 | 14 | 16 | — | — | 6 | 5 | 2,103 | 1,915 | ||||||||||||||||||||||||||
| Operating income | 1,836 | 1,854 | 108 | 114 | 196 | 188 | (7) | (6) | (4) | (3) | 2,129 | 2,147 | ||||||||||||||||||||||||||
| Other income (deductions) (c) | (70) | (138) | (9) | (11) | — | 4 | (178) | 78 | (2) | (5) | (259) | (72) | ||||||||||||||||||||||||||
| Net interest expense | 567 | 554 | 32 | 30 | 44 | 183 | 8 | 14 | 18 | 16 | 669 | 797 | ||||||||||||||||||||||||||
| Income before income tax expense | 1,199 | 1,162 | 67 | 73 | 152 | 9 | (193) | 58 | (24) | (24) | 1,201 | 1,278 | ||||||||||||||||||||||||||
| Income tax expense | 188 | 199 | 14 | 16 | 44 | (36) | (51) | 16 | (1) | (12) | 194 | 183 | ||||||||||||||||||||||||||
| Net income | $1,011 | $963 | $53 | $57 | $108 | $45 | $(142) | $42 | $(23) | $(12) | $1,007 | $1,095 | ||||||||||||||||||||||||||
| Income (loss) attributable to non-controlling interest | — | — | — | — | (115) | 37 | — | — | — | — | (115) | 37 | ||||||||||||||||||||||||||
| Net income for common stock | $1,011 | $963 | $53 | $57 | $223 | $8 | $(142) | $42 | $(23) | $(12) | $1,122 | $1,058 |
(a)Includes parent company and consolidation adjustments.
(b)Represents the consolidated results of operations of Con Edison and its businesses.
(c)For the nine months ended September 30, 2021, Con Edison Transmission recorded pre-tax impairment losses of $211 million ($147 million, after-tax) on its investment in Stagecoach. See “Investments” in Note A to the Third Quarter Financial Statements.
CECONY
| For the Nine Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||||
| (Millions of Dollars) | Electric | Gas | Steam | 2021 Total | Electric | Gas | Steam | 2020 Total | 2021-2020 Variation | ||||||||||||||||||||
| Operating revenues | $6,661 | $1,730 | $393 | $8,784 | $6,178 | $1,509 | $385 | $8,072 | $712 | ||||||||||||||||||||
| Purchased power | 1,267 | — | 27 | 1,294 | 1,046 | — | 19 | 1,065 | 229 | ||||||||||||||||||||
| Fuel | 107 | — | 59 | 166 | 56 | — | 68 | 124 | 42 | ||||||||||||||||||||
| Gas purchased for resale | — | 357 | — | 357 | — | 298 | — | 298 | 59 | ||||||||||||||||||||
| Other operations and maintenance | 1,450 | 277 | 121 | 1,848 | 1,322 | 269 | 123 | 1,714 | 134 | ||||||||||||||||||||
| Depreciation and amortization | 959 | 239 | 69 | 1,267 | 904 | 216 | 67 | 1,187 | 80 | ||||||||||||||||||||
| Taxes, other than income taxes | 1,541 | 367 | 108 | 2,016 | 1,437 | 286 | 107 | 1,830 | 186 | ||||||||||||||||||||
| Operating income | $1,337 | $490 | $9 | $1,836 | $1,413 | $440 | $1 | $1,854 | $(18) |
Electric
CECONY’s results of electric operations for the nine months ended September 30, 2021 compared with the 2020 period were as follows:
| For the Nine Months Ended | |||||||||||
| (Millions of Dollars) | September 30, 2021 | September 30, 2020 | Variation | ||||||||
| Operating revenues | $6,661 | $6,178 | $483 | ||||||||
| Purchased power | 1,267 | 1,046 | 221 | ||||||||
| Fuel | 107 | 56 | 51 | ||||||||
| Other operations and maintenance | 1,450 | 1,322 | 128 | ||||||||
| Depreciation and amortization | 959 | 904 | 55 | ||||||||
| Taxes, other than income taxes | 1,541 | 1,437 | 104 | ||||||||
| Electric operating income | $1,337 | $1,413 | $(76) |
CECONY’s electric sales and deliveries for the nine months ended September 30, 2021 compared with the 2020 period were:
| Millions of kWh Delivered | Revenues in Millions (a) | ||||||||||||||||||||||||||||
| For the Nine Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||||||
| Description | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | |||||||||||||||||||||
| Residential/Religious (b) | 8,828 | 8,638 | 190 | 2.2 | % | $2,415 | $2,220 | $195 | 8.8 | % | |||||||||||||||||||
| Commercial/Industrial | 6,981 | 7,145 | (164) | (2.3) | 1,657 | 1,407 | 250 | 17.8 | |||||||||||||||||||||
| Retail choice customers | 16,310 | 17,014 | (704) | (4.1) | 2,008 | 1,838 | 170 | 9.2 | |||||||||||||||||||||
| NYPA, Municipal Agency and other sales | 6,854 | 6,972 | (118) | (1.7) | 536 | 506 | 30 | 5.9 | |||||||||||||||||||||
| Other operating revenues (c) | — | — | — | — | 45 | 207 | (162) | (78.3) | |||||||||||||||||||||
| Total | 38,973 | 39,769 | (796) | (2.0) | % | (d) | $6,661 | $6,178 | $483 | 7.8 | % |
(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 1.3 percent in the nine months ended September 30, 2021 compared with the 2020 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $483 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to an increase in revenues from the electric rate plan ($177 million), higher purchased power expenses ($221 million) and higher fuel expenses ($51 million).
Purchased power expenses increased $221 million in the nine months ended September 30, 2021 compared with the 2020 period due to higher purchased volumes ($157 million) and higher unit costs ($64 million).
Fuel expenses increased $51 million in the nine months ended September 30, 2021 compared with the 2020 period due to higher unit costs.
Other operations and maintenance expenses increased $128 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher costs for pension and other postretirement benefits ($46 million), higher costs related to heat and storm-related events ($40 million), higher uncollectible expense ($6 million) and higher healthcare costs ($10 million).
Depreciation and amortization increased $55 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher electric utility plant balances.
Taxes, other than income taxes increased $104 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher property taxes ($70 million), higher state and local taxes ($17 million) and lower deferral of under-collected property taxes ($14 million).
Gas
CECONY’s results of gas operations for the nine months ended September 30, 2021 compared with the 2020 period were as follows:
| For the Nine Months Ended | |||||||||||
| (Millions of Dollars) | September 30, 2021 | September 30, 2020 | Variation | ||||||||
| Operating revenues | $1,730 | $1,509 | $221 | ||||||||
| Gas purchased for resale | 357 | 298 | 59 | ||||||||
| Other operations and maintenance | 277 | 269 | 8 | ||||||||
| Depreciation and amortization | 239 | 216 | 23 | ||||||||
| Taxes, other than income taxes | 367 | 286 | 81 | ||||||||
| Gas operating income | $490 | $440 | $50 |
CECONY’s gas sales and deliveries, excluding off-system sales, for the nine months ended September 30, 2021 compared with the 2020 period were:
| Thousands of Dt Delivered | Revenues in Millions (a) | ||||||||||||||||||||||||||||
| For the Nine Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||||||
| Description | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | |||||||||||||||||||||
| Residential | 39,231 | 37,161 | 2,070 | 5.6 | % | $789 | $691 | $98 | 14.2 | % | |||||||||||||||||||
| General | 23,663 | 22,551 | 1,112 | 4.9 | 313 | 237 | 76 | 32.1 | |||||||||||||||||||||
| Firm transportation | 58,783 | 58,697 | 86 | 0.1 | 523 | 487 | 36 | 7.4 | |||||||||||||||||||||
| Total firm sales and transportation | 121,677 | 118,409 | 3,268 | 2.8 | (b) | 1,625 | 1,415 | 210 | 14.8 | ||||||||||||||||||||
| Interruptible sales (c) | 4,747 | 6,869 | (2,122) | (30.9) | 22 | 23 | (1) | (4.3) | |||||||||||||||||||||
| NYPA | 36,601 | 29,403 | 7,198 | 24.5 | 2 | 2 | — | — | |||||||||||||||||||||
| Generation plants | 32,653 | 40,073 | (7,420) | (18.5) | 18 | 17 | 1 | 5.9 | |||||||||||||||||||||
| Other | 15,872 | 16,481 | (609) | (3.7) | 27 | 27 | — | — | |||||||||||||||||||||
| Other operating revenues (d) | — | — | — | — | 36 | 25 | 11 | 44.0 | |||||||||||||||||||||
| Total | 211,550 | 211,235 | 315 | 0.1 | % | $1,730 | $1,509 | $221 | 14.6 | % |
(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 0.9 percent in the nine months ended September 30, 2021 compared with the 2020 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
(c)Includes 1,700 thousand and 2,961 thousand of Dt for the 2021 and 2020 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 $221 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to an increase in revenues from the gas rate plan ($154 million) and higher gas purchased for resale expense ($59 million).
Gas purchased for resale increased $59 million in the nine months ended September 30, 2021 compared with the 2020 period due to higher unit costs ($43 million) and higher purchased volumes ($15 million).
Other operations and maintenance expenses increased $8 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher costs for pension and other postretirement benefits ($10 million) and higher surcharges for assessments and fees that are collected in revenues from customers ($7 million), offset in part by municipal infrastructure support ($10 million).
Depreciation and amortization increased $23 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher gas utility plant balances.
Taxes, other than income taxes increased $81 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to lower deferral of under-collected property taxes ($46 million), higher property taxes ($28 million) and higher state and local taxes ($6 million).
Steam
CECONY’s results of steam operations for the nine months ended September 30, 2021 compared with the 2020 period were as follows:
| For the Nine Months Ended | |||||||||||
| (Millions of Dollars) | September 30, 2021 | September 30, 2020 | Variation | ||||||||
| Operating revenues | $393 | $385 | $8 | ||||||||
| Purchased power | 27 | 19 | 8 | ||||||||
| Fuel | 59 | 68 | (9) | ||||||||
| Other operations and maintenance | 121 | 123 | (2) | ||||||||
| Depreciation and amortization | 69 | 67 | 2 | ||||||||
| Taxes, other than income taxes | 108 | 107 | 1 | ||||||||
| Steam operating income | $9 | $1 | $8 |
CECONY’s steam sales and deliveries for the nine months ended September 30, 2021 compared with the 2020 period were:
| Millions of Pounds Delivered | Revenues in Millions | ||||||||||||||||||||||||||||
| For the Nine Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||||||
| Description | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | |||||||||||||||||||||
| General | 396 | 334 | 62 | 18.6 | % | $19 | $17 | $2 | 11.8 | % | |||||||||||||||||||
| Apartment house | 3,768 | 3,830 | (62) | (1.6) | 100 | 103 | (3) | (2.9) | |||||||||||||||||||||
| Annual power | 8,888 | 8,462 | 426 | 5.0 | 256 | 245 | 11 | 4.5 | |||||||||||||||||||||
| Other operating revenues (a) | — | — | — | — | 18 | 20 | (2) | (10.0) | |||||||||||||||||||||
| Total | 13,052 | 12,626 | 426 | 3.4 | % | (b) | $393 | $385 | $8 | 2.1 | % |
(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 3.3 percent in the nine months ended September 30, 2021 compared with the 2020 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $8 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to the impact of colder weather ($20 million) and higher purchased power expenses ($8 million), offset in part by lower fuel expenses ($9 million), a tax law surcharge ($6 million) and lower usage by customers due to COVID-19 pandemic ($4 million).
Purchased power expenses increased $8 million in the nine months ended September 30, 2021 compared with the 2020 period due to higher unit costs ($6 million) and purchased volumes ($2 million).
Fuel expenses decreased $9 million in the nine months ended September 30, 2021 compared with the 2020 period due to lower unit costs ($14 million), offset in part by higher purchased volumes from the company’s steam generating facilities ($4 million).
Other operations and maintenance expenses decreased $2 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to lower municipal infrastructure support.
Depreciation and amortization increased $2 million in the nine months ended September 30, 2021 compared with the 2020 period due to higher steam utility plant balances.
Taxes, other than income taxes increased $1 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher property taxes.
Other Income (Deductions)
Other deductions decreased $68 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to lower costs associated with components of pension and other postretirement benefits other than service cost ($60 million).
Net Interest Expense
Net interest expense increased $13 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher interest expense for long-term debt ($28 million), offset in part by lower interest accrued on the system benefit charge liability ($4 million), lower interest on short-term debt ($4 million), lower interest accrued on deferred storm costs ($2 million) and lower interest on deposits ($2 million).
Income Tax Expense
Income taxes decreased $11 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to an increase in the amortization of excess deferred federal income taxes due to the TCJA ($11 million), a higher favorable tax adjustment for the 2020 tax return primarily due to an increase in the general business tax credit ($5 million) and the absence of the amortization of excess deferred state income taxes in 2021 ($5 million), offset in part by higher income before income tax expense ($8 million) and lower flow-through tax benefits in 2021 for plant-related items ($3 million).
O&R
| For the Nine Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2020 | ||||||||||||||||||||||
| (Millions of Dollars) | Electric | Gas | 2021 Total | Electric | Gas | 2020 Total | 2021-2020 Variation | ||||||||||||||||
| Operating revenues | $522 | $177 | $699 | $483 | $164 | $647 | $52 | ||||||||||||||||
| Purchased power | 157 | — | 157 | 127 | — | 127 | 30 | ||||||||||||||||
| Gas purchased for resale | — | 56 | 56 | — | 43 | 43 | 13 | ||||||||||||||||
| Other operations and maintenance | 193 | 47 | 240 | 181 | 51 | 232 | 8 | ||||||||||||||||
| Depreciation and amortization | 52 | 19 | 71 | 48 | 19 | 67 | 4 | ||||||||||||||||
| Taxes, other than income taxes | 43 | 24 | 67 | 41 | 23 | 64 | 3 | ||||||||||||||||
| Operating income | $77 | $31 | $108 | $86 | $28 | $114 | $(6) |
Electric
O&R’s results of electric operations for the nine months ended September 30, 2021 compared with the 2020 period were as follows:
| For the Nine Months Ended | |||||||||||
| (Millions of Dollars) | September 30, 2021 | September 30, 2020 | Variation | ||||||||
| Operating revenues | $522 | $483 | $39 | ||||||||
| Purchased power | 157 | 127 | 30 | ||||||||
| Other operations and maintenance | 193 | 181 | 12 | ||||||||
| Depreciation and amortization | 52 | 48 | 4 | ||||||||
| Taxes, other than income taxes | 43 | 41 | 2 | ||||||||
| Electric operating income | $77 | $86 | $(9) |
O&R’s electric sales and deliveries for the nine months ended September 30, 2021 compared with the 2020 period were:
| Millions of kWh Delivered | Revenues in Millions (a) | ||||||||||||||||||||||||||||
| For the Nine Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||||||
| Description | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | |||||||||||||||||||||
| Residential/Religious (b) | 1,366 | 1,414 | (48) | (3.4 | %) | $257 | $247 | $10 | 4.0 | % | |||||||||||||||||||
| Commercial/Industrial | 625 | 612 | 13 | 2.1 | 83 | 88 | (5) | (5.7) | |||||||||||||||||||||
| Retail choice customers | 2,201 | 1,995 | 206 | 10.3 | 176 | 144 | 32 | 22.2 | |||||||||||||||||||||
| Public authorities | 83 | 82 | 1 | 1.2 | 8 | 6 | 2 | 33.3 | |||||||||||||||||||||
| Other operating revenues (c) | — | — | — | — | (2) | (2) | — | — | |||||||||||||||||||||
| Total | 4,275 | 4,103 | 172 | 4.2 | % | (d) | $522 | $483 | $39 | 8.1 | % |
(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 increased 2.4 percent in the nine months ended September 30, 2021 compared with the 2020 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $39 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher purchased power expenses ($30 million) and higher revenues from the New York electric rate plan ($7 million).
Purchased power expenses increased $30 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher unit costs ($28 million) and higher purchased volumes ($2 million).
Other operations and maintenance expenses increased $12 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher storm-related costs.
Depreciation and amortization increased $4 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher electric utility plant balances.
Taxes, other than income taxes increased $2 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher property taxes.
Gas
O&R’s results of gas operations for the nine months ended September 30, 2021 compared with the 2020 period were as follows:
| For the Nine Months Ended | |||||||||||
| (Millions of Dollars) | September 30, 2021 | September 30, 2020 | Variation | ||||||||
| Operating revenues | $177 | $164 | $13 | ||||||||
| Gas purchased for resale | 56 | 43 | 13 | ||||||||
| Other operations and maintenance | 47 | 51 | (4) | ||||||||
| Depreciation and amortization | 19 | 19 | — | ||||||||
| Taxes, other than income taxes | 24 | 23 | 1 | ||||||||
| Gas operating income | $31 | $28 | $3 |
O&R’s gas sales and deliveries, excluding off-system sales, for the nine months ended September 30, 2021 compared with the 2020 period were:
| Thousands of Dt Delivered | Revenues in Millions (a) | ||||||||||||||||||||||||||||
| For the Nine Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||||||
| Description | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | |||||||||||||||||||||
| Residential | 7,784 | 6,484 | 1,300 | 20.0 | % | $108 | $83 | $25 | 30.1 | % | |||||||||||||||||||
| General | 1,729 | 1,443 | 286 | 19.8 | 19 | 14 | 5 | 35.7 | |||||||||||||||||||||
| Firm transportation | 5,514 | 5,799 | (285) | (4.9) | 41 | 45 | (4) | (8.9) | |||||||||||||||||||||
| Total firm sales and transportation | 15,027 | 13,726 | 1,301 | 9.5 | (b) | 168 | 142 | 26 | 18.3 | ||||||||||||||||||||
| Interruptible sales | 3,002 | 2,723 | 279 | 10.2 | 4 | 4 | — | — | |||||||||||||||||||||
| Generation plants | 24 | 24 | — | — | — | — | — | — | |||||||||||||||||||||
| Other | 271 | 529 | (258) | (48.8) | 1 | 1 | — | — | |||||||||||||||||||||
| Other gas revenues | — | — | — | — | 4 | 17 | (13) | (76.5) | |||||||||||||||||||||
| Total | 18,324 | 17,002 | 1,322 | 7.8 | % | $177 | $164 | $13 | 7.9 | % |
(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 increased 0.6 percent in the nine months ended September 30, 2021 compared with 2020 period. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $13 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to an increase in gas purchased for resale ($13 million).
Gas purchased for resale increased $13 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher purchased volumes ($11 million) and higher unit costs ($3 million).
Other operations and maintenance expenses decreased $4 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to lower spending on gas programs ($2 million), lower pension costs ($1 million) and lower uncollectible accounts ($1 million).
Taxes, other than income taxes increased $1 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher property taxes.
Income Tax Expense
Income taxes decreased $2 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to lower income before income tax expense.
Clean Energy Businesses
The Clean Energy Businesses’ results of operations for the nine months ended September 30, 2021 compared with the 2020 period were as follows:
| For the Nine Months Ended | |||||||||||
| (Millions of Dollars) | September 30, 2021 | September 30, 2020 | Variation | ||||||||
| Operating revenues | $779 | $566 | $213 | ||||||||
| Gas purchased for resale | 49 | 24 | 25 | ||||||||
| Other operations and maintenance | 348 | 165 | 183 | ||||||||
| Depreciation and amortization | 172 | 173 | (1) | ||||||||
| Taxes, other than income taxes | 14 | 16 | (2) | ||||||||
| Operating income | $196 | $188 | $8 |
Operating revenue**s increased $213 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher revenue from renewable electric production projects ($158 million), higher wholesale revenues ($43 million), higher energy services revenues ($34 million), offset in part by net mark-to-market values ($22 million).
Gas purchased for resale increased $25 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher purchased volumes.
Other operations and maintenance expenses increased $183 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher costs from engineering, procurement and construction of renewable electric projects for customers.
Net Interest Expense
Net interest expense decreased $139 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher unrealized gains on interest rate swaps in the 2021 period.
Income Tax Expense
Income taxes increased $80 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to higher income before income tax expense ($30 million), lower income attributable to non-controlling interests ($38 million), higher state income taxes ($5 million) and the absence of a tax benefit in the 2021 period 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 that was signed into law during the first quarter of 2020 ($4 million).
Income (Loss) Attributable to Non-Controlling Interest
Income attributable to non-controlling interest decreased $152 million to a loss of $115 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to lower income attributable in the 2021 period to a tax equity investor in renewable electric projects accounted for under the HLBV method of accounting. See Note P to the Third Quarter Financial Statements.
Con Edison Transmission
Net Interest Expense
Net interest expense decreased $6 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to the repayment of an intercompany loan from the parent company from a portion of the proceeds from the substantial completion of the sale of Stagecoach. See Note R to the Third Quarter Financial Statements.
Other Income (Deductions)
Other income (deductions) decreased $256 million from $78 million of other income to $178 million of other deductions in the nine months ended September 30, 2021 compared with the 2020 period primarily due to pre-tax impairment losses of $211 million related to Con Edison Transmission's investment in Stagecoach and CET Gas foregoing AFUDC income from MVP starting January 2021 until significant construction resumes. See "Investments" in Note A to the Third Quarter Financial Statements.
Income Tax Expense
Income taxes decreased $67 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to lower income before income tax expense ($53 million) and lower state income taxes ($16 million).
Other
Income Tax Expense
Income taxes increased $11 million in the nine months ended September 30, 2021 compared with the 2020 period primarily due to lower consolidated state income tax benefits.
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 nine months ended September 30, 2021 and 2020 are summarized as follows:
| For the Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||
| CECONY | O&R | Clean Energy Businesses | Con Edison Transmission | Other (a) | Con Edison (b) | |||||||||||||||||||||||||||||||||
| (Millions of Dollars) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||
| Operating activities | $1,251 | $959 | $106 | $82 | $56 | $810 | $43 | $(8) | $256 | $(475) | $1,712 | $1,368 | ||||||||||||||||||||||||||
| Investing activities | (2,782) | (2,412) | (157) | (150) | (106) | (438) | 608 | 16 | — | — | (2,437) | (2,984) | ||||||||||||||||||||||||||
| Financing activities | 482 | 543 | 39 | 50 | 34 | (440) | (651) | (8) | (400) | 568 | (496) | 713 | ||||||||||||||||||||||||||
| Net change for the period | (1,049) | (910) | (12) | (18) | (15) | (68) | — | — | (145) | 93 | (1,221) | (903) | ||||||||||||||||||||||||||
| Balance at beginning of period | 1,067 | 933 | 37 | 32 | 187 | 251 | — | — | 145 | 1 | 1,436 | 1,217 | ||||||||||||||||||||||||||
| Balance at end of period (c) | $18 | $23 | $25 | $14 | $172 | $183 | $— | $— | $— | $94 | $215 | $314 | ||||||||||||||||||||||||||
(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 Third 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 due to the COVID-19 pandemic resulted and may continue to result in a slower recovery of cash from outstanding customer accounts receivable balances and increases to the allowance for uncollectible accounts, that may further result in increases to write-offs of customer accounts. 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 largely not net income. The prices at which the Utilities provide energy to their customers are determined in accordance with their rate plans. However, increases in electric and gas commodity prices, coupled with the decline in business activity due to the COVID-19 pandemic, may further contribute to a slower recovery of cash from outstanding customer accounts receivable balances and increases to the allowance for uncollectible accounts, and may result in increases to write-offs of customer accounts receivable balances. 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. The Utilities’ New York rate plans allow them to defer costs resulting from a change in legislation, regulation and related actions that have taken effect during the term of the rate plans once the costs exceed a specified threshold. Increases to the allowance for uncollectible accounts related to the COVID-19 pandemic have been deferred pursuant to the legislative, regulatory and related actions provisions of their 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 Third 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. For Con Edison, net income for the nine months ended September 30, 2021 also included non-cash losses recognized with respect to an impairment of Con Edison Transmission’s investment in Stagecoach. See “Investments” in Note A to the Third Quarter Financial Statements.
Net cash flows from operating activities for the nine months ended September 30, 2021 for Con Edison and CECONY were $344 million and $292 million higher, respectively, than in the 2020 period. The changes in net cash flows for Con Edison and CECONY primarily reflect a change in pension and retiree benefit obligations ($56 million and $65 million, respectively), lower other receivables and other current assets ($113 million and $32 million, respectively), lower system benefit charge ($59 million and $56 million, respectively), change in pension and retiree benefit contributions ($7 million and $4 million, respectively), for Con Edison, lower cash paid for income taxes, net of refunds received ($40 million) and lower taxes receivable ($24 million), and for CECONY, a decrease in accounts receivables from affiliated companies ($101 million).
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 $547 million lower and $370 million higher, respectively, for the nine months ended September 30, 2021 compared with the 2020 period. The change for Con Edison primarily reflects proceeds from the substantial completion of the sale of Stagecoach ($614 million), a decrease in non-utility construction expenditures at the Clean Energy Businesses ($125 million) and proceeds from the divestiture of renewable electric projects at the Clean Energy Businesses ($183 million), offset in part by an increase in utility construction expenditures at CECONY ($345 million) and O&R ($6 million).
Cash Flows from Financing Activities
Net cash flows from financing activities for Con Edison and CECONY were $1,209 million and $61 million lower, respectively, in the nine months ended September 30, 2021 compared with the 2020 period.
In June 2021, Con Edison issued 10,100,000 shares of its common stock resulting in net proceeds of approximately $775 million, after issuance expenses. The net proceeds from the sale of the common shares were invested by Con Edison in CECONY, for funding of its construction expenditures and for its other general corporate purposes. See Note C to the Third Quarter Financial Statements.
In May 2021, Con Edison redeemed at maturity $500 million of 2.00 percent 5-year debentures. See Note C to the Third Quarter Financial Statements.
During the first quarter of 2021, Con Edison optionally prepaid the remaining $675 million outstanding under a February 2019 term loan prior to its maturity in June 2021.
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.
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.
In June 2021, CECONY redeemed at maturity $640 million of floating rate 3-year debentures. See Note C to the Third Quarter Financial Statements.
In June 2021, CECONY issued $750 million aggregate principal amount of 2.40 percent debentures, due 2031, the net proceeds from the sale of which were used to redeem at maturity its $640 million floating rate 3-year debentures and for other general corporate purposes. In June 2021 CECONY also issued $750 million aggregate principal amount of 3.60 percent debentures, due 2061, 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, 2021 until the maturity date 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 Third Quarter Financial Statements.
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.
In September 2021, O&R agreed to issue in December 2021 $45 million aggregate principal amount of 2.31 percent debentures, due 2031 and $30 million aggregate principal amount of 3.17 percent debentures, due 2051.
In September 2020, O&R issued $35 million aggregate principal amount of 2.02 percent debentures, due 2030 and $40 million aggregate principal amount of 3.24 percent debentures, due 2050.
In March 2021, a subsidiary of the Clean Energy Businesses agreed to issue $229 million aggregate principal amount of 3.77 percent senior notes, due 2046, secured by equity interests in CED Nevada Virginia, all of which had been issued at September 30, 2021. See Notes C and D to the Third Quarter Financial Statements.
In February 2021, a subsidiary of the Clean Energy Businesses borrowed $250 million at a variable rate, due 2028, secured by equity interests in four of the company’s solar electric production projects, the interest rate for which was swapped to a fixed rate of 3.39 percent. See Note C to the Third Quarter Financial Statements.
In February 2021, a subsidiary of the Clean Energy Businesses entered into an agreement with a tax equity investor for the financing of a portfolio of three of the Clean Energy Businesses’ solar electric production projects (CED Nevada Virginia). Under the financing, the tax equity investor acquired a noncontrolling interest in the portfolio and will receive a percentage of earnings, tax attributes and cash flows. As of September 30, 2021, the tax equity investor fully funded its $263 million financing obligation. The Clean Energy Businesses will continue to consolidate this entity and will report the noncontrolling tax equity investor’s interest in the tax equity arrangement. See Notes C and P to the Third Quarter Financial Statements.
Con Edison’s cash flows from financing for the nine months ended September 30, 2021 and 2020 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 $82 million and $79 million, respectively.
Cash flows used in financing activities of the Companies also reflect commercial paper issuances and repayments. The commercial paper amounts outstanding at September 30, 2021 and 2020 and the average daily balances for the nine months ended September 30, 2021 and 2020 for Con Edison and CECONY were as follows:
| 2021 | 2020 | |||||||||||||
| (Millions of Dollars, except Weighted Average Yield) | Outstanding at September 30, | Daily average | Outstanding at September 30, | Daily average | ||||||||||
| Con Edison | $1,036 | $1,294 | $1,009 | $1,027 | ||||||||||
| CECONY | $942 | $1,194 | $991 | $633 | ||||||||||
| Weighted average yield | 0.1 | % | 0.2 | % | 0.2 | % | 1.2 | % |
Capital Requirements and Resources
During the third quarter of 2021, Con Edison increased its estimate for capital requirements in 2021 from $6,015 million to $6,065 million. The increase reflects additional investments by the Clean Energy Businesses. During the first quarter of 2021, Con Edison increased its estimates for capital requirements for 2021, 2022 and 2023 from $5,985 million to $6,015 million, $4,380 million to $4,644 million and $5,137 million to $5,385 million, respectively. The increase reflects additional investments for the Reliable Clean City (RCC) projects approved by the NYSPSC in April 2021. See “CECONY” – “Electric” – “Electric Supply,” above. The company plans to meet its capital requirements for 2021 through 2023, through internally-generated funds and the issuance of long-term debt and common equity. The company's plans include the issuance of between $1,900 million and $2,600 million of long-term debt, including for maturing securities, primarily at the Utilities, in 2021 and approximately $1,400 million in aggregate of long-term debt at the Utilities during 2022 and 2023. The planned debt issuance is in addition to the issuance of long-term debt secured by the Clean Energy Businesses’ renewable electric production projects. The company's plans also include the issuance of up to $800 million of common equity in 2021 and approximately $700 million in aggregate of common equity during 2022 and 2023, in addition to equity under its dividend reinvestment, employee stock purchase and long-term incentive plans. See Note C to the Third Quarter Financial Statements and “Liquidity and Capital Resources - Cash Flows from Financing Activities,” above.
Capital Resources
For each of the Companies, the common equity ratio at September 30, 2021 and December 31, 2020 was:
| Common Equity Ratio (Percent of total capitalization) | ||||||||
| September 30, 2021 | December 31, 2020 | |||||||
| Con Edison | 48.3 | 48.3 | ||||||
| CECONY | 47.9 | 47.9 |
Assets, Liabilities and Equity
The Companies' assets, liabilities, and equity at September 30, 2021 and December 31, 2020 are summarized as follows.
| CECONY | O&R | Clean Energy Businesses | Con Edison Transmission | Other (a) | Con Edison (b) | |||||||||||||||||||||||||||||||||
| (Millions of Dollars) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||
| Current assets | $4,349 | $4,407 | $306 | $277 | $510 | $485 | $8 | $42 | $(77) | $90 | $5,096 | $5,301 | ||||||||||||||||||||||||||
| Investments | 597 | 541 | 27 | 26 | 7 | — | 454 | 1,256 | (7) | (7) | 1,078 | 1,816 | ||||||||||||||||||||||||||
| Net plant | 40,985 | 39,554 | 2,550 | 2,469 | 4,396 | 4,515 | 17 | 17 | (1) | — | 47,947 | 46,555 | ||||||||||||||||||||||||||
| Other noncurrent assets | 6,247 | 6,465 | 461 | 475 | 1,691 | 1,848 | 14 | 33 | 404 | 402 | 8,817 | 9,223 | ||||||||||||||||||||||||||
| Total Assets | $52,178 | $50,967 | $3,344 | $3,247 | $6,604 | $6,848 | $493 | $1,348 | $319 | $485 | $62,938 | $62,895 | ||||||||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||||||||||||||||||||||||
| Current liabilities | $4,127 | $5,247 | $420 | $356 | $990 | $1,330 | $92 | $111 | $(374) | $310 | $5,255 | $7,354 | ||||||||||||||||||||||||||
| Noncurrent liabilities | 14,194 | 14,722 | 1,168 | 1,191 | 121 | 211 | (15) | 28 | (3) | (58) | 15,465 | 16,094 | ||||||||||||||||||||||||||
| Long-term debt | 17,637 | 16,149 | 893 | 893 | 2,664 | 2,776 | — | 500 | 647 | 64 | 21,841 | 20,382 | ||||||||||||||||||||||||||
| Equity | 16,220 | 14,849 | 863 | 807 | 2,829 | 2,531 | 416 | 709 | 49 | 169 | 20,377 | 19,065 | ||||||||||||||||||||||||||
| Total Liabilities and Equity | $52,178 | $50,967 | $3,344 | $3,247 | $6,604 | $6,848 | $493 | $1,348 | $319 | $485 | $62,938 | $62,895 |
(a) Includes parent company and consolidation adjustments.
(b) Represents the consolidated results of operations of Con Edison and its businesses.
CECONY
Current assets at September 30, 2021 were $58 million lower than at December 31, 2020. The change in current assets primarily reflects a decrease in cash and temporary cash investments ($1,049 million), primarily due to the July 2021 payment of New York City semi-annual property taxes. The decrease is offset in part by an increase in prepayments reflecting primarily the July 2021 payment of New York City semi-annual property taxes, offset in part by three months of amortization, while the December 2020 balance reflects the amortization of the entire previous semi-annual payment ($555 million), an increase in accounts receivables, less allowance for uncollectible accounts ($221 million) (see “COVID-19 Regulatory Matters” in Note B to the Third Quarter Financial Statements and “Coronavirus Disease 2019 (COVID-19) Impacts - Accounting Considerations” and “Liquidity and Financing,” above) and an increase in the fair value of short-term derivative assets ($213 million).
Investments at September 30, 2021 were $56 million higher than at December 31, 2020. The change in investments primarily reflects an increase in supplemental retirement income plan assets. See Note E to the Third Quarter Financial Statements.
Net plant at September 30, 2021 was $1,431 million higher than at December 31, 2020. The change in net plant primarily reflects an increase in electric ($1,040 million), gas ($983 million), steam ($77 million) and general ($192 million) plant balances, offset in part by an increase in accumulated depreciation ($664 million) and a decrease in construction work in progress ($197 million).
Other noncurrent assets at September 30, 2021 were $218 million lower than at December 31, 2020. 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, 2020, of the pension and other retiree benefit plans in accordance with the accounting rules for retirement benefits ($671 million). See Notes B, E and F to the Third 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 assets for deferrals for increased costs related to the COVID-19 pandemic ($156 million), deferred pension and other postretirement benefits ($110 million), deferred storm costs ($72 million), revenue taxes ($27 million) and deferred derivative losses ($13 million). See “Other Regulatory Matters” in Note B and Note G to the Third Quarter Financial Statements. This decrease is also offset in part by an increase in the fair value of long-term derivative assets ($78 million).
Current liabilities at September 30, 2021 were $1,120 million lower than at December 31, 2020. The change in current liabilities primarily reflects decreases in notes payable ($718 million), long-term debt due within one year
($640 million), accounts payable ($131 million), offset in part by an increase in the regulatory liability for deferred derivative gains ($416 million).
Noncurrent liabilities at September 30, 2021 were $528 million lower than at December 31, 2020. The change in noncurrent liabilities primarily reflects a decrease in the liability for pension and retiree benefits ($764 million) that primarily reflects the final actuarial valuation, as measured at December 31, 2020, of the plans in accordance with the accounting rules for retirement benefits. See Notes E and F to the Third Quarter Financial Statements. The change also reflects a decrease in the regulatory liability for future income tax ($166 million). These decreases are offset in part by a change in deferred income taxes and unamortized investment tax credits ($359 million) that primarily reflects accelerated tax depreciation, repair deductions and the prepayment of New York City property taxes. See Note J to the Third Quarter Financial Statements.
Long-term debt at September 30, 2021 was $1,488 million higher than at December 31, 2020. The change in long-term debt primarily reflects the June 2021 issuance of $1,500 million of debentures. See "Liquidity and Capital Resources - Cash Flows From Financing Activities" above and Note C to the Third Quarter Financial Statements.
Equity at September 30, 2021 was $1,371 million higher than at December 31, 2020. The change in equity primarily reflects capital contributions from parent ($1,101 million) in 2021 and net income for the nine months ended September 30, 2021 ($1,011 million), offset in part by common stock dividends to parent ($741 million) in 2021.
O&R
Current assets at September 30, 2021 were $29 million higher than at December 31, 2020. The change in current assets primarily reflects increases in other receivables, less allowance for uncollectible accounts ($11 million) and accounts receivables, less allowance for uncollectible accounts ($11 million).
Net plant at September 30, 2021 was $81 million higher than at December 31, 2020. The change in net plant primarily reflects an increase in electric ($91 million), gas ($39 million), and general ($19 million) plant balances, offset in part by an increase in accumulated depreciation ($55 million) and a decrease in construction work in progress ($13 million).
Other noncurrent assets at September 30, 2021 were $14 million lower than at December 31, 2020. 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, 2020, of the pension and other retiree benefit plans in accordance with the accounting rules for retirement benefits ($43 million). See Notes B, E and F to the Third 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 ($13 million) and an increase in deferred storm costs ($10 million).
Current liabilities at September 30, 2021 were $64 million higher than at December 31, 2020. The change in current liabilities primarily reflects higher notes payable ($43 million), an increase in the regulatory liability for deferred derivative gains ($27 million), offset in part by lower accounts payables ($9 million).
Noncurrent liabilities at September 30, 2021 were $23 million lower than at December 31, 2020. The change in noncurrent liabilities primarily reflects a decrease in the liability for pension and retiree benefits ($69 million), offset in part by deferred income taxes and unamortized investment tax credits ($15 million), primarily due to accelerated tax depreciation and repair deductions, an increase in the regulatory liability for long-term deferred derivative gains ($8 million) and deferred other retiree benefit plans rate ($4 million), and an increase in other deferred credits ($16 million).
Equity at September 30, 2021 was $56 million higher than at December 31, 2020. The change in equity primarily reflects net income for the nine months ended September 30, 2021 ($53 million), capital contributions from parent ($35 million) in 2021 and an increase in other comprehensive income ($7 million) offset in part by common stock dividends to parent ($39 million) in 2021.
Clean Energy Businesses
Current assets at September 30, 2021 were $25 million higher than at December 31, 2020. The change in current assets primarily reflects an increase in accrued unbilled revenue ($74 million), offset in part by a decrease in restricted cash ($15 million) and a decrease in other currents assets ($35 million).
Investments at September 30, 2021 were $7 million higher than at December 31, 2020. The change in investments primarily reflects a tax equity investment.
Net plant at September 30, 2021 was $119 million lower than at December 31, 2020. The change in net plant primarily reflects the divestiture of renewable electric projects. See Note R to the Third Quarter Financial Statements.
Other noncurrent assets at September 30, 2021 were $157 million lower than at December 31, 2020. The change in other noncurrent assets primarily reflects the divestiture of renewable electric projects. See Note R to the Third Quarter Financial Statements.
Current liabilities at September 30, 2021 were $340 million lower than at December 31, 2020. The change in current liabilities primarily reflects new borrowing offset in part by a decrease in borrowings under a term loan. See Note D to the Third Quarter Financial Statements.
Noncurrent liabilities at September 30, 2021 were $90 million lower than at December 31, 2020. The change in noncurrent liabilities primarily reflects the change in the fair value of derivative liabilities and the change in deferred taxes.
Long-term debt at September 30, 2021 was $112 million lower than at December 31, 2020. The change in long-term debt primarily reflects the repayment of an intercompany loan from the parent company ($375 million), offset in part by a net increase in project debt ($464 million). See Note C to the Third Quarter Financial Statements.
Equity at September 30, 2021 was $298 million higher than at December 31, 2020. The change in equity primarily reflects an increase in net income for the nine months ended September 30, 2021 ($223 million) and a noncontrolling tax equity interest ($122 million) (see Note P to the Third Quarter Financial Statements), offset in part by common stock dividends to parent ($48 million) in 2021**.**
Con Edison Transmission
Current assets at September 30, 2021 were $34 million lower than at December 31, 2020. The change in current assets primarily reflects the agreement between Crestwood and a subsidiary of CET Gas that provides for payments from Crestwood to the subsidiary of CET Gas for shortfalls in meeting certain earnings growth performance targets. Payments totaled $57 million ($19 million of which was paid in the first quarter 2021 and was recorded as a receivable by CET Gas in March 2020, and the remainder of which, plus interest was paid by Crestwood in July 2021). See "Con Edison Transmission - CET Gas," below.
Investments at September 30, 2021 were $802 million lower than at December 31, 2020. The decrease in investments primarily reflects the substantial completion of the sale of Stagecoach ($828 million), offset in part by additional investment in and income from NY Transco ($27 million). See "Investments" in Note A and Note R to the Third Quarter Financial Statements.
Other noncurrent assets were $19 million lower than at December 31, 2020. The change in noncurrent assets primarily reflects a reduction in accounts receivable due to the noncurrent portion of the $57 million payment from Crestwood described above.
Current liabilities at September 30, 2021 were $19 million lower than at December 31, 2020. The change in current liabilities primarily reflects the repayment of short-term borrowings under an intercompany capital funding facility with a portion of the proceeds from the substantial completion of the sale of Stagecoach. See Note R to the Third Quarter Financial Statements.
Noncurrent liabilities at September 30, 2021 were $43 million lower than at December 31, 2020. The change in noncurrent liabilities reflects primarily a decrease in deferred income taxes and unamortized investment tax credits that reflects primarily timing differences associated with investments in partnerships and the tax loss on the substantial completion of the sale of Stagecoach. See "Investments" in Note A and Note R to the Third Quarter Financial Statements.
Long-term debt at September 30, 2021 was $500 million lower than at December 31, 2020. The change in long-term debt reflects the repayment of a $500 million intercompany loan from the parent company.
Equity at September 30, 2021 was $293 million lower than at December 31, 2020. The change in equity primarily reflects net loss for the nine months ended September 30, 2021 ($142 million) and a reduction to retained earnings due to a dividend paid to CEI ($150 million).
Off-Balance Sheet Arrangements
At September 30, 2021, none of the Companies’ transactions, agreements or other contractual arrangements met the SEC definition of off-balance sheet arrangements.
Regulatory Matters
For information about the Utilities’ regulatory matters, see Note B to the Third Quarter Financial Statements.
Environmental Matters
In July 2021, a feeder failure led to the discharge of thousands of gallons of dielectric fluid from a street manhole in New Rochelle, New York. Dielectric fluid reached nearby streets, properties and the New Rochelle Harbor. CECONY, the U.S. Coast Guard, the New York State Department of Environmental Conservation and other agencies responded to the incident. The company stopped the feeder leak on the same day that the discharge occurred and has substantially completed the spill recovery operations. In coordination with federal and state regulators, CECONY is evaluating certain shoreline areas for the potential presence of residual dielectric fluid and the extent to which additional cleaning in such areas may be necessary. In addition, the company has received third-party damage claims. The costs associated with this matter are not expected to have a material adverse effect on the company’s financial condition, results of operations or liquidity. In connection with the incident, the company may incur monetary sanctions of more than $0.3 million for violations of certain provisions regulating the discharge of materials into, and for the protection of, the environment.
For additional information about the Companies’ environmental matters, see Note G to the Third 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 September 30, 2021:
| 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 | ||||||||||||
| Water Strider Solar (e) (f) (g) | 80 | 20 | 2021 | Virginia | VEPCO | ||||||||||||
| Battle Mountain Solar/Battery Energy Storage System (e) (f) (g) | 101 | 25 | 2021 | Nevada | SPP | ||||||||||||
| Copper Mountain Solar 5 (e) (f) (g) | 250 | 25 | 2021 | Nevada | NPC | ||||||||||||
| Other | 26 | Various | Various | Various | Various | ||||||||||||
| Total Solar | 2,676 | ||||||||||||||||
| 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 | ||||||||||||
| Other | 34 | Various | Various | Various | Various | ||||||||||||
| Total Wind | 312 | ||||||||||||||||
| Total MW (AC) in Operation | 2,988 | ||||||||||||||||
| Total MW (AC) in Construction | 16 | ||||||||||||||||
| Total MW (AC) Utility Scale | 3,004 | ||||||||||||||||
| Behind the Meter | |||||||||||||||||
| Total MW (AC) in Operation | 62 | ||||||||||||||||
| Total MW (AC) in Construction | 10 | ||||||||||||||||
| Total MW Behind the Meter | 72 |
(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), NorthWestern Energy (NWE), Virginia Electric Power Company (VEPCO), Sierra Pacific Power (SPP), and Nevada Power Company (NPC).
(d)Solar renewable energy credit hedges are in place, in lieu of PPAs, through 2025.
(e)Project has been pledged as security for project debt financing.
(f)Projects are financed with tax equity. See Note P to the Third Quarter Financial Statements.
(g)Battle Mountain, Water Strider, and Copper Mountain 5 are a portfolio of three solar electric production projects referred to as CED Nevada Virginia. See Notes C, D and P to the Third Quarter Financial Statements.
Renewable Electric Generation
Renewable electric production volumes from utility scale assets for the three and nine months ended September 30, 2021 compared with the 2020 period were:
| Millions of kWh | ||||||||||||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||||
| Description | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | September 30, 2021 | September 30, 2020 | Variation | Percent Variation | ||||||||||||||||||
| Renewable electric production projects | ||||||||||||||||||||||||||
| Solar | 1,932 | 1,667 | 265 | 15.9% | 4,998 | 4,606 | 392 | 8.5% | ||||||||||||||||||
| Wind | 257 | 303 | (46) | (15.2)% | 978 | 1,042 | (64) | (6.1%) | ||||||||||||||||||
| Total | 2,189 | 1,970 | 219 | 11.1% | 5,976 | 5,648 | 328 | 5.8% |
Con Edison Transmission
CET Gas
In May 2021, a subsidiary of CET Gas entered into a purchase and sale agreement pursuant to which CET Gas and Crestwood agreed to sell their combined interests in Stagecoach to a subsidiary of Kinder Morgan Inc. for a total of $1,225 million, subject to certain adjustments, of which $612.5 million will be Con Edison's portion for its 50 percent interest, subject to closing adjustments. The purchase and sale agreement contemplates a two-stage closing, the first of which was completed in July 2021 for a sale price of $1,195 million, of which $614 million, including working capital, was attributed to CET Gas. The second closing for the remaining $30 million, of which $15 million will be attributed to CET Gas, subject to closing adjustments, is to occur following approval by the NYSPSC, which is expected later this year or during the first quarter of 2022, subject to customary closing conditions. See Note R to the Third Quarter Financial Statements.
As a result of information made available to Stagecoach as part of the sale process, Stagecoach performed impairment tests that resulted in Stagecoach recording impairment charges of $414 million for the nine months ended September 30, 2021. Accordingly, Con Edison recorded pre-tax impairment losses on its 50 percent interest in Stagecoach of $211 million ($147 million after-tax), including working capital and transaction cost adjustments, within "Investment income/(loss)" on Con Edison's consolidated income statement for the nine months ended September 30, 2021. These charges reduced the carrying value of Con Edison’s investment in Stagecoach to $630 million at June 30, 2021. See "Investments" in Note A to the Third Quarter Financial Statements.
In May 2021, the operator of the Mountain Valley Pipeline, which is being constructed by a joint venture in which CET Gas owns a 10.6 percent interest (that is expected to be reduced to 8.5 percent based on the current project cost estimate and CET Gas’ previous capping of its cash contributions to the joint venture) indicated that, subject to receipt of certain authorizations and resolution of certain challenges, it is now targeting an in-service date for the project of summer 2022 at an overall project cost of approximately $6,200 million excluding allowance for funds used during construction. For the year ended December 31, 2020, CET Gas recorded a pre-tax impairment loss of $320 million ($223 million after-tax) that reduced the carrying value of its investment in Mountain Valley Pipeline LLC from $662 million to $342 million. At September 30, 2021, CET Gas’ cash contributions to the joint venture amounted to $530 million.
CET Gas and CECONY own 71.2 percent and 28.8 percent interests, respectively, in Honeoye, which operates a gas storage facility in upstate New York. CET Gas and CECONY are in the process of considering strategic alternatives regarding their interests in Honeoye. At September 30, 2021, the consolidated carrying value of CET Gas’ and CECONY’s investments in Honeoye was $25 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 N to the Third Quarter Financial Statements. Con Edison and CECONY estimate that at September 30, 2021, a 10 percent increase in interest rates applicable to its variable rate debt would result in an immaterial increase in annual interest expense. 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 N to the Third Quarter Financial Statements.
Con Edison estimates that, as of September 30, 2021, a 10 percent decline in market prices would result in a decline in fair value of $149 million for the derivative instruments used by the Utilities to hedge purchases of electricity and gas, of which $139 million is for CECONY and $10 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. However, increases in electric and gas commodity prices may contribute to a slower recovery of cash from outstanding customer accounts receivable balances and increases to the allowance for uncollectible accounts, and may result in increases to write-offs of customer accounts receivable balances.
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 nine months ended September 30, 2021 and the year ended December 31, 2020, respectively, was as follows:
| 95% Confidence Level, One-Day Holding Period | September 30, 2021 | December 31, 2020 | ||||||
| (Millions of Dollars) | ||||||||
| Average for the period | $— | $— | ||||||
| High | 2 | — | ||||||
| Low | — | — |
Investment Risk
The Companies’ investment risk relates to the investment of plan assets for their pension and other postretirement benefit plans. Con Edison's investment risk also relates to the investments of Con Edison Transmission that are accounted for under the equity method. See "Investments" in Note A to the Third Quarter Financial Statements.
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 September 30, 2021, the pension plan investments consisted of 50 percent equity securities, 39 percent debt securities and 11 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 Third Quarter Financial Statements.
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