Item 7: 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 relates to the consolidated financial statements included in this report of two separate registrants: Con Edison and CECONY, and should be read in conjunction with the financial statements and the notes thereto. 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.
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.
Corporate Overview
Con Edison’s principal business operations are those of the Utilities, the Clean Energy Businesses and Con Edison Transmission. CECONY is a regulated utility that provides electric service in New York City and New York's Westchester County, gas service in Manhattan, the Bronx, parts of Queens and parts of Westchester, and steam service in Manhattan. O&R is a regulated utility serving customers in a 1,300-square-mile-area in southeastern NY State and northern NJ. Con Edison Clean Energy Businesses, through its subsidiaries, develops, owns and operates renewable energy infrastructure projects and provides energy-related products and services to wholesale and retail customers. In October 2022, Con Edison entered into a purchase and sale agreement pursuant to which Con Edison agreed to sell the Clean Energy Businesses to RWE Renewables Americas, LLC, a subsidiary of RWE Aktiengesellschaft. The Clean Energy Businesses were classified as held for sale as of December 31, 2022. See “Assets and Liabilities Held for Sale” in Note A and Note X to the financial statements in Item 8. Con Edison Transmission, through its subsidiaries, invests in electric transmission projects supporting Con Edison's effort to transition to clean, renewable energy and manages, through joint ventures, both electric and gas assets while seeking to develop electric transmission projects that will bring clean, renewable electricity to customers, focusing on NY, New England, the Mid-Atlantic states and the Midwest.
In addition to the risks and uncertainties described in Item 1A and the Companies’ material contingencies described in Notes B, G and H to the financial statements in Item 8, the Companies’ management considers the following events, trends, and uncertainties to be important to understanding the Companies’ current and future financial condition.
Anticipated Sale of the Clean Energy Businesses
During the first nine months of 2022, Con Edison considered strategic alternatives with respect to the Clean Energy Businesses. On October 1, 2022, following the conclusion of such review and to allow for continued focus on the Utilities and their clean energy transition, Con Edison entered into a purchase and sale agreement pursuant to which Con Edison agreed to sell the Clean Energy Businesses to RWE Renewables Americas, LLC, a subsidiary of RWE Aktiengesellschaft (RWE) for a total of $6,800 million, subject to closing adjustments. The purchase price will be adjusted (i) upward for certain cash and cash equivalents, (ii) downward for certain indebtedness and debt-like items, (iii) downward for certain transaction expenses, (iv) upward or downward to the extent that the net working capital varies from a set target, (v) upward or downward to the extent that capital expenditures incurred prior to the closing of the transaction vary from a set budget, and (vi) downward by the value allocated to certain assets and projects that are not able to be conveyed to RWE upon closing of the transaction. The purchase and sale agreement includes certain customary representations, warranties and covenants. The transaction is subject to customary closing conditions, including, among other things; expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which occurred on November 28, 2022; approval from the FERC under Section 203 of the Federal Power Act, which was obtained on January 20, 2023 and approval by the Committee on Foreign Investment in the United States, which was obtained on February 6, 2023. The transaction is expected to close on or about the end of the first quarter of 2023.
Subject to, and following the closing of the sale of the Clean Energy Businesses, Con Edison intends to use the net proceeds from the sale to repay $1,250 million of parent company debt in 2023, invest in the Utilities and repurchase up to $1,000 million of its common shares.
See “Assets and Liabilities Held for Sale” in Note A and Note X to the financial statements in Item 8 and "Liquidity and Financing," below.
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Clean Energy Goals
The success of the Companies’ efforts to meet federal, state and city clean energy policy goals and the impact of such goals on CECONY’s electric, gas and steam businesses and O&R’s electric and gas businesses may impact the Companies’ future financial condition. The Utilities expect electric demand to increase and gas and steam usage to decrease in their service territories as federal, state and local laws and policies are enacted and implemented that continue to promote renewable electric energy. In particular, the long-term future of the Utilities’ gas businesses depends upon the role that natural gas or other gaseous fuels will play in facilitating New York State’s and New York City’s climate goals. In addition, the impact and costs of climate change on the Utilities’ systems and the success of the Utilities’ efforts to increase system reliability and manage service interruptions resulting from severe weather may impact the Companies’ future financial condition, results of operations and liquidity.
CECONY Steam Rate Plan
In November 2022, as updated in February 2023, CECONY filed a request with the NYSPSC for a steam rate increase of $141 million, effective November 2023. The filing reflects a return on common equity of 10.0 percent and a common equity ratio of 50 percent and requests a new mechanism for decoupling revenues from steam consumption. CECONY’s future earnings will depend on the rates authorized in, and the other provisions of, its November 2023 steam rate plan and CECONY’s ability to operate its businesses in a manner consistent with such rate plan. Therefore, the outcome of CECONY’s rate request, which requires approval by the NYSPSC, will impact the Companies’ future financial condition, results of operations and liquidity. See “Utility Regulation – State Utility Regulation – Rate Plans” in Item 1 and “Rate Plans” in Note B to the financial statements in Item 8.
Con Edison Transmission
Con Edison Transmission has taken steps to realign its portfolio to focus on electric transmission by completing the sale of its 50 percent interest in Stagecoach in 2021. During 2020 and 2021, Con Edison Transmission recorded impairments on its investment in Mountain Valley Pipeline, LLC and during 2021, Con Edison Transmission recorded impairments on its previously held interest in Stagecoach and its interest in Honeoye Storage Corporation (Honeoye). Any future impairments of Con Edison Transmission’s investments may impact Con Edison’s future financial condition and results of operations. Con Edison Transmission is pursuing opportunities and participating in competitive solicitations to develop electric transmission projects that will deliver renewable energy to high voltage electric grids in NY, through its NY Transco partnership, and in other states. The success of Con Edison Transmission’s efforts in these competitive solicitations and to grow its electric transmission portfolio may impact Con Edison’s future capital requirements. See "Con Edison Transmission" in Item 1 and “Investments” in Note A, Note K and Note W to the financial statements in Item 8.
Coronavirus Disease 2019 (COVID-19) Impacts
The Coronavirus Disease 2019 (COVID-19) pandemic has impacted, and continues to impact, countries, communities, supply chains and markets. The COVID-19 pandemic resulted in changes in governmental and regulatory policy and contributed to an economic slowdown in the Companies’ service territories. The decline in business activity in the Companies’ service territories resulted in a slower recovery of cash from outstanding customer accounts receivable balances, material increases in customer accounts receivable balances, increases to the allowance for uncollectible accounts, and may result in increases to write-offs and recoveries of customer accounts. The extent to which COVID-19 will continue to impact the Companies, in particular, the Companies’ ability to recover cash for outstanding customer accounts receivable balances and the amount of write-offs of customer accounts, may impact Con Edison’s future financial condition, results of operations and liquidity. See “Coronavirus Disease 2019 (COVID-19) Impacts” in Item 7 and “COVID-19 Regulatory Matters” in Note B.
The Companies continue to monitor the impact of the COVID-19 global pandemic on their employees, customers and other stakeholders. The Companies support employee health and facility hygiene through regular cleaning and disinfecting of their facilities and leveraging technology through hybrid (combination of in-person and remote) meetings. Employees who test positive for COVID-19 are directed to isolate at home and are evaluated for close, prolonged contact with other employees. Following the Centers for Disease Control and Prevention guidelines, sick 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 emergence from the pandemic.
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 financial statements in Item 8.
Certain financial data of Con Edison’s businesses are presented below:
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Con Edison Transmission (b) 4 — % (1) — % 314 1 %
(a)Net income for common stock from the Clean Energy Businesses for the year ended December 31, 2022 reflects $46 million (after-tax) of the effects of HLBV accounting for tax equity investments in certain renewable electric projects and $135 million of net after-tax mark-to-market effects. The Clean Energy Businesses were classified as held for sale as of December 31, 2022. Depreciation and amortization expenses on their assets of $(46) million (after-tax) were not recorded for the three months ended December 31, 2022. The impact of the anticipated sale of the Clean Energy Businesses on the remeasurement of deferred state taxes and valuation allowance for deferred tax assets (net of federal taxes) was $(2) million for the year ended December 31, 2022. See "Assets and Liabilities Held for Sale" in Note A, Note S and Note X to the financial statements in Item 8.
(b)Net loss for common stock from Con Edison Transmission for the year ended December 31, 2022 includes $(4) million (net of federal taxes) relating to the remeasurement of deferred state taxes related to prior year dispositions. See "Critical Accounting Estimates - Investments" in Item 7, "Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)" in Note A to the financial statements in Item 8.
(c)Other includes parent company and consolidation adjustments. Net income for common stock for the year ended December 31, 2022 includes $(4) million (after-tax) of income tax impact on the effects of HLBV accounting for tax equity investments in certain renewable projects and $(10) million of income tax impact on the net after-tax mark-to-market effects. Net income for common stock for the year ended December 31, 2022 includes $(9) million (net of federal taxes) relating to the remeasurement of deferred state taxes related to prior year dispositions for Con Edison Transmission. Net income for common stock for the year ended December 31, 2022 also includes $(35) million of transaction costs related to the anticipated sale of the Clean Energy Businesses (net of tax). The impact of the anticipated sale of the Clean Energy Businesses on the remeasurement of deferred state taxes and valuation allowance for deferred tax assets (net of federal taxes) was $(119) million for the year ended December 31, 2022. Depreciation and amortization expenses on the assets of the Clean Energy Businesses $(4) million (after-tax) were not recorded for the three months ended December 31, 2022. See "Assets and Liabilities Held for Sale" in Note A, Note S and Note X to the financial statements in Item 8.
Inflation Reduction Act
On August 16, 2022, the Inflation Reduction Act of 2022 (the Act) was signed into law and included a new 15 percent Corporate Alternative Minimum Tax (CAMT). Under the Act, a corporation will be subject to the CAMT if its average annual Adjusted Financial Statement Income (AFSI) for the three taxable year period ending prior to the taxable year exceeds $1,000 million, and will apply to tax years beginning after December 31, 2022. Based on management’s preliminary calculations, Con Edison and CECONY do not expect to be subject to the CAMT in 2023 but are expected to be subject to the CAMT in subsequent years. However, the provisions of the CAMT are not expected to have a material impact on the Companies’ financial position, results of operations or liquidity.
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 had several key business tax relief measures that presented cash benefits and/or refunds for Con Edison and its subsidiaries, including permitting a five-year carryback of a 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 a 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 L. 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 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
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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 allowed 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 repaid half of this liability during 2021 and the other half during 2022.
Under the CARES Act, the Companies qualified for an employee retention tax credit for “eligible employers” related to governmental authorities imposing restrictions that partially suspended their operation for a portion of their workforce due to the COVID-19 pandemic. In December 2020, the Consolidated Appropriations Act, 2021 (the 2021 Appropriations Act) was signed into law. The 2021 Appropriations Act, among other things, extended the expiring employee retention tax credit to include qualified wages paid in the first two quarters of 2021, increased 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 increased the maximum employee retention tax credit amount an employer could 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. In November 2021, the Infrastructure and Investment and Jobs Act was signed into law and accelerated the end of the employee retention tax credit retroactive to October 1, 2021, rather than December 31, 2021. This effectively reduced the maximum credit available from $28,000 to $21,000 per employee.
For the year ended December 31, 2021, Con Edison and CECONY recognized a tax benefit to Taxes, other than income taxes of $9 million and $4 million, respectively.
Accounting Considerations
Due to the COVID-19 pandemic and subsequent New York State on PAUSE and related executive orders (that have since been lifted), a 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 NY enacted a law prohibiting NY 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 were in effect until December 21, 2021 for residential and small business customers who 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.
For the year ended December 31, 2022, CECONY and O&R issued total credits of $359.9 million and $6.1 million, respectively, towards reducing customers’ accounts receivable balances pursuant to COVID-19 arrears assistance programs. See "COVID-19 Regulatory Matters" in Note B to the financial statements in Item 8.
In January 2023, the NYSPSC issued an order implementing a Phase 2 COVID-19 arrears assistance program that provides credits towards reducing the arrears balances of residential and small commercial electric and gas customers of CECONY and O&R. At the time the order was issued, CECONY’s and O&R’s eligible arrears balances were estimated to be $388.7 million and $2.9 million, respectively. The order authorizes a surcharge mechanism for recovery of the eligible credit amounts over a ten-year period commencing after credits are issued for CECONY and over a one-year period commencing after credits are issued for O&R. See "COVID-19 Regulatory Matters" in Note B and Note N to the financial statements in Item 8.
CECONY’s and O&R’s "accounts receivable – customers" balance (net of allowance for uncollectible accounts) increased from $1,841 million and $91 million at December 31, 2021 to $2,099 million and $93 million at December 31, 2022, respectively. CECONY’s customer accounts receivable balances that are over 60 days in arrears increased from $1,272 million at December 31, 2021 to $1,308 million at December 31, 2022. CECONY’s allowances for uncollectible customer accounts reserve increased from $304 million at December 31, 2021 to $314 million at December 31, 2022. O&R’s customer accounts receivable balances that are over 60 days in arrears decreased from $29 million at December 31, 2021 to $22 million at December 31, 2022. O&R’s allowances for uncollectible customer accounts reserve decreased from $12.3 million at December 31, 2021 to $8 million at December 31, 2022.
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During 2022, the potential economic impact of the COVID-19 pandemic and the COVID-19 arrears assistance programs, were considered in forward-looking projections related to write-off and recovery rates, resulting in changes to the customer allowance for uncollectible accounts as detailed herein. 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 December 31, 2021 and 2022. See Note K to the financial statements in Item 8.
NY Legislation
In April 2021, NY passed a law that increases the corporate franchise tax rate on business income from 6.5 percent to 7.25 percent, 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 percent, not to exceed a maximum tax liability of $5 million per taxpayer. NY 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 NY 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 and Disability Assistance (OTDA) in coordination with the NYSDPS and the NYSPSC (the OTDA Program). Under the OTDA Program, CECONY and O&R would qualify for a refundable tax credit for NY 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 financial statements in Item 8.
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. Inflationary pressure and higher interest rates could increase the amount of capital needed by the Utilities and the costs of such capital. See Notes C and D to the financial statements in Item 8.
The decline in business activity in the Utilities’ service territory due to 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 2021. During 2022, increases in electric and gas commodity prices have contributed and may further contribute to a slower recovery of cash from outstanding customer accounts receivable balances. The Utilities use derivative instruments to hedge price fluctuations for the purchase of electricity and gas. Volatility in electric and gas commodity prices that lead to the posting of cash collateral with counterparties could negatively impact the Utilities’ liquidity. See "COVID-19 Regulatory Matters" in Note B to the financial statements in Item 8 and “Financial and Commodity Market Risks – Commodity Price Risk,” below.
The Utilities’ rate plans have revenue decoupling mechanisms in their NY electric and gas businesses that largely reconcile actual energy delivery revenues to the authorized delivery revenues approved by the NYSPSC per month and reconcile 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 NY's electric and gas rate plans (January through December). Differences are accrued with interest each month for CECONY's and O&R NY’s electric customers and after the annual deferral period ends for CECONY's and O&R NY’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 NY's electric and gas customers. Although these revenue decoupling mechanisms are in place, lower billed sales revenues and higher unpaid accounts have reduced and are expected to continue to reduce liquidity at the Utilities.
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. In November 2021, the NYSPSC issued an order establishing a surcharge recovery mechanism for CECONY to collect, commencing December 1, 2021 through December 31, 2022, $43 million and $7 million for electric and gas, respectively, of late payment charges and fees that were not billed for the year ended December 31, 2020. The company recorded such amounts as revenue for the year ended December 31, 2021, as permitted under the accounting rules for regulated utilities, and also accrued such amounts as a current asset at December 31, 2021. Pursuant to the November 2021
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order, the company also established a recovery mechanism for CECONY to collect, commencing January 2023 through December 2023, $19 million and $4 million for electric and gas, respectively, of late payment charges and fees that were not billed for the year ended December 31, 2021 and the company recorded such amounts as revenue for the year ended December 31, 2021, as permitted under the accounting rules for regulated utilities, and also accrued such amounts as a current asset at December 31, 2021. In addition, pursuant to the November 2021 order, CECONY established a reserve of $7 million toward addressing customer arrearages for the year ended December 31, 2021 that, pursuant to a June 2022 NYSPSC order discussed below, was used to fund a portion of the COVID-19 arrears assistance program for low-income customers. The order also established a surcharge recovery or sur-credit mechanism for any late payment charges and fee deferrals, subject to offsetting related savings resulting from the COVID-19 pandemic, for 2022 starting in January 2024 over a twelve-month period. CECONY resumed late payment charges for commercial and residential customers who have not experienced a change in financial circumstances due to the COVID-19 pandemic on September 3, 2021 and October 1, 2021, respectively. Pursuant to the October 2021 joint proposal for new electric and gas rates for O&R that was approved by the NYSPSC in April 2022, O&R recorded late payment charges and fees that were not billed for the years ended December 31, 2020 and December 31, 2021 of $1.7 million and $2.4 million, respectively, as revenue for the year ended December 31, 2021, as permitted under the accounting rules for regulated utilities, and also accrued such amounts as a current asset at December 31, 2021. See “Rate Plans,” above. O&R resumed late payment charges for commercial and residential customers who have not experienced a change in financial circumstances due to the COVID-19 pandemic on October 1, 2021.
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), subject to certain conditions. In March 2022, CECONY entered into a 364-Day Revolving Credit Agreement (CECONY Credit Agreement) under which banks are committed to provide loans up to $750 million on a revolving credit basis until March 30, 2023, subject to certain conditions. In April 2022, FERC issued an order that increases CECONY's authorization to issue short-term debt from $2,250 million to $3,000 million effective May 2022. Con Edison and the Utilities have not entered into any loans under the Credit Agreement and CECONY has not entered into any loans under the CECONY Credit Agreement. See Note D to the financial statements in Item 8.
New York State and the NYSPSC implemented COVID-19 arrears assistance programs that provide credits and establishes surcharge recovery mechanisms towards reducing the arrears balances of low-income electric and gas customers of CECONY and O&R. See "COVID-19 Regulatory Matters" in Note B and Note L to the financial statements in Item 8 and “Coronavirus Disease 2019 (COVID-19) Impacts – Accounting Considerations,” above.
In October 2022, Con Edison entered into an agreement to sell the Clean Energy Businesses for $6,800 million, subject to closing adjustments, including working capital adjustments and downward adjustments for indebtedness, transaction expenses and the value of certain assets and projects that are not able to be conveyed to the buyer upon closing of the transaction. Subject to, and following the closing of the sale of the Clean Energy Businesses, Con Edison intends to use the net proceeds from the sale to repay $1,250 million of parent company debt in 2023, invest in the Utilities and repurchase up $1,000 million of its common shares. The transaction is expected to close on or about the end of the first quarter of 2023, subject to satisfaction of certain conditions. See "Assets and Liabilities Held for Sale" in Note A and Note X to the financial statements in Item 8 and "Anticipated Sale of the Clean Energy Business," above.
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Results of Operations
Net income for common stock and earnings per share for the years ended December 31, 2022, 2021 and 2020 were as follows:
(a)Net income for common stock and earnings per share from the Clean Energy Businesses for the year ended December 31, 2022, 2021 and 2020 reflects $46 million or $0.14 a share (after-tax), $107 million or $0.31 a share (after-tax) and $(32) million or $(0.10) a share (after-tax) of the effects of HLBV accounting for tax equity investments in certain renewable electric projects. Net income for common stock and earnings per share from the Clean Energy Businesses also includes $135 million or $0.38 a share, $40 million or $0.11 a share and $(43) million or $(0.13) a share of net after-tax mark-to-market effects in 2022, 2021 and 2020, respectively. The Clean Energy Businesses were classified as held for sale as of December 31, 2022. Depreciation and amortization expenses on their assets of $(46) million or $(0.13) a share (after-tax) were not recorded for the three months ended December 31, 2022. The impact of the anticipated sale of the Clean Energy Businesses on the remeasurement of deferred state taxes and valuation allowance for deferred tax assets (net of federal taxes) was $(2) million or $(0.01) a share for the three months ended December 31, 2022. See "Assets and Liabilities Held for Sale" in Note A, Note S and Note X to the financial statements in Item 8. Net income for common stock and earnings per share from the Clean Energy Businesses for the year ended December 31, 2021 includes $(3) million (after-tax) or $(0.01) a share (after-tax) for the loss from the sale of a renewable electric project. See Note S to the financial statements in Item 8.
(b) Net loss for common stock and earnings per share from Con Edison Transmission for the year ended December 31, 2022 includes $(4) million or $(0.01) a share (net of federal taxes) relating to the remeasurement of deferred state taxes related to prior year dispositions. Net loss for common stock and earnings per share from Con Edison Transmission for the year ended December 31, 2021 includes $(153) million or $(0.44) a share of net after-tax impairment loss related to its investment in Stagecoach, $(168) million or $(0.48) a share of net after-tax impairment loss related to its investment in Mountain Valley Pipeline, LLC and $(5) million or $(0.02) a share of loss related to a goodwill impairment loss related to its investment in Honeoye. Net income for common stock and earnings per share from Con Edison Transmission for the year ended December 31, 2020 includes $(232) million or $(0.69) a share of net after-tax impairment loss related to its investment in Mountain Valley Pipeline, LLC. See "Critical Accounting Estimates - Investments" in Item 7 and “Investments - Partial Impairment of Investment in Mountain Valley Pipeline, LLC (MVP)” in Note A to the financial statements in Item 8.
(c) Other includes parent company and consolidation adjustments. Net income for common stock and earnings per share for the year ended December 31, 2022 includes $(4) million (after-tax) or $(0.02) a share (after-tax) of income tax impact on the effects of HLBV accounting for tax equity investments in certain renewable electric projects and $(11) million or $(0.03) a share of income tax impact on the net after-tax mark-to-market effects. Net income for common stock and earnings per share for the year ended December 31, 2022 includes $(9) million or $(0.03) a share (net of federal taxes) relating to the remeasurement of deferred state taxes related to prior year dispositions for Con Edison Transmission. Net income for common stock for the year ended December 31, 2022 also includes $(35) million and $(0.10) a share of transaction costs related to the anticipated sale of the Clean Energy Businesses (net of tax) related to the anticipated sale of the Clean Energy Businesses. Impact of the anticipated sale of the Clean Energy Businesses on the remeasurement of deferred state taxes and valuation allowance for deferred tax assets (net of federal taxes) is $(119 million) or $(0.33) per share. Depreciation and amortization expenses on the assets of the Clean Energy Businesses $(4) million or $(0.01) a share (after-tax) were not recorded for the three months ended December 31, 2022. See "Assets and Liabilities Held for Sale" in Note A, Note S and Note X to the financial statements in Item 8.
Net income for common stock and earnings per share for the year ended December 31, 2021 includes $(9) million (after-tax) or $(0.02) a share (after-tax) of income tax impact on the effects of HLBV accounting for tax equity investments in certain renewable electric projects and $(3) million or $(0.01) a share of income tax impact on the net after-tax mark-to-market effects. Net income for common stock and earnings per share for the year ended December 31, 2021 includes $6 million or $0.02 a share of income tax impact for the impairment loss related to Con Edison Transmission’s investment in Stagecoach. Net income for common stock and earnings per share for the year ended December 31, 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 Mountain Valley Pipeline, LLC. See “Investments - Partial Impairment of Investment in Stagecoach Gas Services LLC (Stagecoach)” and "Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)" in Note A to the financial statements in Item 8.
Net income for common stock and earnings per share for the year ended December 31, 2020 includes $3 million or $0.01 a share (after-tax), respectively, of income tax impact on the effects of HLBV accounting for tax equity investments in certain renewable electric projects. Net income for common stock and earnings per share from the Clean Energy Businesses for the year ended December 31, 2020 includes $4 million or $0.01 a share of income tax impact on the net after-tax mark-to-market effects. Net income for common stock and earnings per share for the year ended December 31, 2020 includes $9 million or $0.03 a share of income tax impact for the impairment loss related to Con Edison Transmission’s investment in Mountain Valley Pipeline, LLC. See “Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)” in Note A to the financial statements in Item 8.
(d) Earnings per share on a diluted basis were $4.66 a share, $3.85 a share and $3.28 a share in 2022, 2021 and 2020, respectively. See "Earnings Per Common Share" in Note A to the financial statements in Item 8.
(e) The Clean Energy Businesses were classified as held for sale as of December 31, 2022. See “Assets and Liabilities Held for Sale” in Note A and Note X to the financial statements in Item 8.
The following tables present the estimated effect of major factors on earnings per share and net income for common stock for the years ended December 31, 2022 as compared with 2021, and 2021 as compared with 2020.
58 CON EDISON ANNUAL REPORT 2022
Variation for the Year Ended December 31, 2022 vs. 2021
Net Income for Common Stock (Millions of Dollars) Earnings per Share
CECONY (a)
Higher electric rate base $48 $0.14
Higher gas rate base 39 0.11
Lower costs related to winter storms and heat events 26 0.08
Higher income from allowance for funds used during construction 16 0.04
Lower health care and other employee benefits costs 13 0.03
Weather impact on steam revenues 6 0.02
Higher stock-based compensation costs (18) (0.05)
Regulatory commission expense (11) (0.03)
Higher payroll taxes (4) (0.01)
Dilutive effect of stock issuances — (0.07)
O&R (a)
Electric base rate increase 16 0.04
Gas base rate increase 8 0.02
Higher stock-based compensation costs (2) (0.01)
Clean Energy Businesses (b)
Higher wholesale revenue 207 0.59
Net mark-to-market effects 95 0.27
Impact of the anticipated sale of the Clean Energy Businesses 44 0.12
Loss from sale of a renewable electric project in 2021 3 0.01
Higher gas purchased for resale (135) (0.39)
Higher cost from purchased power (5) (0.01)
Lower tax credits (4) (0.01)
Higher interest expense (3) (0.01)
Dilutive effect of stock issuances — (0.02)
Other (4) —
Total Clean Energy Businesses 116 0.32
Con Edison Transmission
Impairment loss related to investment in Mountain Valley Pipeline, LLC 168 0.48
Impairment loss related to investment in Stagecoach in 2021 153 0.44
Impairment loss related to investment in Honeoye in 2021 5 0.02
Lower interest expense 3 0.01
Lower investment income (14) (0.04)
Total Con Edison Transmission 315 0.91
Other, including parent company expenses
HLBV effects 5 —
Impact of the anticipated sale of the Clean Energy Businesses (158) (0.44)
Impact of net mark-to-market effects (7) (0.02)
Impairment related to investment in Stagecoach in 2021 (6) (0.02)
CON EDISON ANNUAL REPORT 2022 59
Impairment related to investment in Mountain Valley Pipeline, LLC (6) (0.01)
Dilutive effect of stock issuances — 0.01
Total Other, including parent company expenses (176) (0.50)
Total Reported (GAAP basis) 314 0.82
60 CON EDISON ANNUAL REPORT 2022
Variation for the Year Ended December 31, 2021 vs. 2020
Net Income for Common Stock (Millions of Dollars) Earnings per Share
CECONY (a)
Higher electric rate base 64 0.19
Higher gas rate base 38 0.11
Weather impact on steam revenues 16 0.05
Higher costs related to heat, storm and emergency response (37) (0.11)
Higher healthcare costs (16) (0.05)
Higher stock-based compensation costs (11) (0.03)
Dilutive effect of stock issuances — (0.15)
Other 2 —
O&R (a)
Electric base rate increase 9 0.03
Higher storm-related costs (5) (0.02)
Clean Energy Businesses
Net mark-to-market effects 83 0.24
Higher operations and maintenance expenses (180) (0.54)
Loss from sale of a renewable electric project (3) (0.01)
Dilutive effect of stock issuances — (0.03)
Other (6) —
Total Clean Energy Businesses 242 0.69
Con Edison Transmission
Impairment loss related to investment in Mountain Valley Pipeline, LLC 64 0.21
Impairment losses related to investment in Stagecoach (153) (0.44)
Impairment loss related to investment in Honeoye (5) (0.02)
Total Con Edison Transmission (141) (0.39)
Other, including parent company expenses
Tax impact of HLBV effects (9) (0.02)
Tax impact of net mark-to-market effects (3) (0.01)
Lower consolidated state income tax benefit (9) (0.03)
Impairment tax benefits related to investment in Stagecoach 6 0.02
Other (1) —
Total Other, including parent company expenses (19) (0.06)
Total Reported (GAAP basis) $245 $0.57
CON EDISON ANNUAL REPORT 2022 61
The Companies’ other operations and maintenance expenses for the years ended December 31, 2022, 2021 and 2020 were as follows:
CECONY
Pensions and other postretirement benefits 415 (42) (103)
Regulatory fees and assessments (a) 354 332 330
Con Edison Transmission 13 19 11
Other (b) (5) (5) (4)
Total other operations and maintenance expenses $3,905 $3,254 $2,814
(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.
(c)The Clean Energy Businesses were classified as held for sale as of December 31, 2022. See “Assets and Liabilities Held for Sale” in Note A and Note X to the financial statements in Item 8.
Con Edison’s principal business segments are CECONY’s regulated utility activities, O&R’s regulated utility activities, the Clean Energy Businesses and Con Edison Transmission. The Clean Energy Businesses were classified as held for sale as of December 31, 2022. See “Assets and Liabilities Held for Sale” in Note A and Note X to the financial statements in Item 8. CECONY’s principal business segments are its regulated electric, gas and steam utility activities. A discussion of the results of operations by principal business segment for the years ended December 31, 2022, 2021 and 2020 follows. For additional business segment financial information, see Note P to the financial statements in Item 8.
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The Companies’ results of operations for the years ended December 31, 2022, 2021 and 2020 were:
(a) Includes parent company and consolidation adjustments.
(b) Represents the consolidated results of operations of Con Edison and its businesses.
(c) For the year ended December 31, 2021, Con Edison Transmission recorded a $5 million loss related to a goodwill impairment on its investment in Honeoye. See Note K to the financial statements in Item 8.
(d) For the year ended December 31, 2021, Con Edison Transmission recorded pre-tax impairment losses of $212 million ($147 million, after-tax) on its investment in Stagecoach and during 2021 completed the sale of its interest in Stagecoach. For the year ended December 31, 2021, Con Edison Transmission recorded a pre-tax impairment loss of $231 million ($162 million, after-tax), to reduce the carrying value of its investment in MVP from $342 million to $111 million. See “Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)” in Note A to the financial statements in Item 8. For the year ended December 31, 2020, Con Edison Transmission recorded a pre-tax impairment loss of $320 million ($223 million, after-tax), to reduce the carrying value of its investment in MVP from $662 million to $342 million. See “Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)” in Note A to the financial statements in Item 8.
(e) The Clean Energy Businesses were classified as held for sale as of December 31, 2022. See “Assets and Liabilities Held for Sale” in Note A and Note X to the financial statements in Item 8.
CON EDISON ANNUAL REPORT 2022 63
Year Ended December 31, 2022 Compared with Year Ended December 31, 2021
CECONY
For the Year Ended December 31, 2022 For the Year Ended December 31, 2021
Electric
CECONY’s results of electric operations for the year ended December 31, 2022 compared with the year ended December 31, 2021 were as follows:
For the Years Ended December 31,
(Millions of Dollars) 2022 2021 Variation
CECONY’s electric sales and deliveries in 2022 compared with 2021 were:
Millions of kWh Delivered Revenues in Millions (a)
For the Years Ended For the Years Ended
(a)Revenues from electric sales 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.
(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 plan.
(d)After adjusting for variations, primarily weather and billing days, electric delivery volumes in the company’s service area increased 3.3 percent in 2022 compared with 2021. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $945 million in 2022 compared with 2021 primarily due to higher purchased power expenses ($549 million), higher revenues from the electric rate plan ($279 million) and higher fuel expenses ($90 million).
Purchased power expenses increased $549 million in 2022 compared with 2021 due to higher unit costs ($400 million) and purchased volume ($149 million).
64 CON EDISON ANNUAL REPORT 2022
Fuel expenses increased $90 million in 2022 compared with 2021 due to higher unit costs ($106 million), offset in part by lower purchased volumes from the company’s electric generating facilities ($16 million).
Other operations and maintenance expenses increased $454 million in 2022 compared with 2021 primarily due to higher costs for pension and other postretirement benefits ($355 million), higher stock-based compensation ($19 million), higher total surcharges for assessments and fees that are collected in revenues from customers ($19 million), higher municipal infrastructure support costs ($13 million), higher uncollectible expense ($8 million) and higher costs for injuries and damages ($6 million).
Depreciation and amortization increased $29 million in 2022 compared with 2021 primarily due to higher electric utility plant balances.
Taxes, other than income taxes increased $129 million in 2022 compared with 2021 primarily due to higher property taxes ($75 million), higher deferral of over-collected property taxes ($27 million) and higher state and local taxes ($24 million).
Gas
CECONY’s results of gas operations for the year ended December 31, 2022 compared with the year ended December 31, 2021 were as follows:
For the Years Ended December 31,
(Millions of Dollars) 2022 2021 Variation
Taxes, other than income taxes 556 497 59
CECONY’s gas sales and deliveries, excluding off-system sales, in 2022 compared with 2021 were:
Thousands of Dt Delivered Revenues in Millions (a)
For the Years Ended For the Years Ended
(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 firm retail choice volumes in the company’s service area increased 0.4 percent in 2022 compared with 2021. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
(c)Includes 2,015 thousands and 1,921 thousands of Dt for 2022 and 2021, respectively, which are also reflected in firm retail choice customers 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. See Note B to the financial statements in Item 8.
Operating revenues increased $546 million in 2022 compared with 2021 primarily due to higher gas purchased for resale expense ($328 million) and higher gas revenues under the company's gas rate plan ($207 million).
CON EDISON ANNUAL REPORT 2022 65
Gas purchased for resale increased $328 million in 2022 compared with 2021 due to higher unit costs ($273 million) and higher purchased volumes ($55 million).
Other operations and maintenance expenses increased $104 million in 2022 compared with 2021 primarily due to higher costs for pension and other postretirement benefits ($73 million), higher municipal infrastructure support ($6 million), higher stock-based compensation ($4 million), higher uncollectible expense ($2 million), higher total surcharges for assessments and fees that are collected in revenues from customers ($2 million) and higher costs for injuries and damages ($1 million).
Depreciation and amortization increased $41 million in 2022 compared with 2021 primarily due to higher gas utility plant balances.
Taxes, other than income taxes increased $59 million in 2022 compared with 2021 primarily due to higher deferral of over-collected property taxes ($23 million), higher property taxes ($23 million) and higher state and local taxes ($13 million).
Steam
CECONY’s results of steam operations for the year ended December 31, 2022 compared with the year ended December 31, 2021 were as follows:
For the Years Ended December 31,
(Millions of Dollars) 2022 2021 Variation
Other operations and maintenance 197 165 32
Depreciation and amortization 96 93 3
Taxes, other than income taxes 147 144 3
Steam operating income $(21) $12 $(33)
CECONY’s steam sales and deliveries in 2022 compared with 2021 were:
Millions of Pounds Delivered Revenues in Millions
For the Years Ended For the Years Ended
Other operating revenues (a) — — — — 20 30 (10) (33.3)
(a)Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plan. See Note B to the financial statements in Item 8.
(b)After adjusting for variations, primarily weather and billing days, steam sales and deliveries in the company’s service area increased 1.1 percent in 2022 compared with 2021. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $61 million in 2022 compared with 2021 primarily due to higher fuel expenses ($37 million), higher purchased power expenses ($19 million) and the impact of colder winter weather ($8 million).
Purchasedpower expenses increased $19 million in 2022 compared with 2021 due to higher unit costs ($23 million) offset in part by lower purchased volumes ($4 million).
Fuel expenses increased $37 million in 2022 compared with 2021 due to higher unit costs ($28 million) and higher purchased volumes from the company’s steam generating facilities ($9 million).
Other operations and maintenance expenses increased $32 million in 2022 compared with 2021 primarily due to higher costs for pension and other postretirement benefits ($30 million) and higher stock-based compensation ($2 million).
Depreciation and amortization increased $3 million in 2022 compared with 2021 primarily due to higher steam utility plant balances.
66 CON EDISON ANNUAL REPORT 2022
Taxes, other than income taxes increased $3 million in 2022 compared with 2021 primarily due to higher property taxes ($5 million) and higher state and local taxes ($2 million), offset in part by higher deferral of under-collected property taxes ($5 million).
Taxes, Other Than Income Taxes
At $2,887 million, taxes other than income taxes remain one of CECONY’s largest operating expenses. The principal components of, and variations in, taxes other than income taxes were:
For the Years Ended December 31,
(Millions of Dollars) 2022 2021 Variation
State and local taxes related to revenue receipts 411 373 38
(a)Including sales tax on customers’ bills, total taxes other than income taxes in 2022 and 2021 were $3,548 million and $3,296 million, respectively.
Other Income (Deductions)
Other deductions increased $440 million in 2022 compared with 2021 primarily due to higher costs associated with components of pension and other postretirement benefits other than service cost ($458 million), offset in part by lower expenses resulting from investment performance in a deferred income plan ($19 million).
Net Interest Expense
Net interest expense increased $60 million in 2022 compared with 2021 primarily due to higher interest on long-term debt ($49 million) and higher interest on short-term debt ($29 million), offset in part by an increase in the allowance for borrowed funds used during construction ($22 million).
Income Tax Expense
Income taxes increased $9 million in 2022 compared with 2021 primarily due to higher income before income tax expense ($11 million) and higher state income taxes ($3 million), offset in part by higher research and development credits from prior years ($5 million).
O&R
For the Year Ended December 31, 2022 For the Year Ended December 31, 2021
CON EDISON ANNUAL REPORT 2022 67
Electric
O&R’s results of electric operations for the year ended December 31, 2022 compared with the year ended December 31, 2021 were as follows:
For the Years Ended December 31,
(Millions of Dollars) 2022 2021 Variation
Other operations and maintenance 275 249 26
Depreciation and amortization 71 69 2
Taxes, other than income taxes 57 57 —
Electric operating income $94 $100 $(6)
O&R’s electric sales and deliveries in 2022 compared with 2021 were:
Millions of kWh Delivered Revenues in Millions (a)
For the Years Ended For the Years Ended
Other operating revenues (c) — — — — (1) 5 (6) Large
(a)O&R’s NY 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. Effective July 2021, the majority of O&R’s electric distribution revenues in NJ are subject to a conservation incentive program, as a result of which distribution revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s electric transmission revenues in NJ are not subject to a conservation incentive program, 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 the revenue decoupling mechanism current asset or regulatory liability in accordance with the company’s NY electric rate plan and changes in regulatory assets and liabilities in accordance with the company’s electric rate plans. See Note B to the financial statements in Item 8.
(d)After adjusting for weather and other variations, electric delivery volumes in company’s service area increased 1.5 percent in 2022 compared with 2021. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $92 million in 2022 compared with 2021 primarily due to higher purchased power expenses ($70 million) and higher revenues from the NY electric rate plan ($18 million).
Purchasedpower expenses increased $70 million in 2022 compared with 2021 due to higher unit costs ($59 million) and purchased volumes ($11 million).
Other operations and maintenance expenses increased $26 million in 2022 compared with 2021 primarily due to higher pension costs ($13 million), increased regulatory amortizations ($11 million) and higher stock-based compensation ($2 million).
Depreciation and amortization increased $2 million in 2022 compared with 2021 primarily due to higher electric utility plant balances.
Gas
O&R’s results of gas operations for the year ended December 31, 2022 compared with the year ended December 31, 2021 were as follows:
68 CON EDISON ANNUAL REPORT 2022
For the Years Ended December 31,
(Millions of Dollars) 2022 2021 Variation
Other operations and maintenance 76 64 12
Depreciation and amortization 27 26 1
Taxes, other than income taxes 32 32 —
Gas operating income $42 $50 $(8)
O&R’s gas sales and deliveries, excluding off-system sales, in 2022 compared with 2021 were:
Thousands of Dt Delivered Revenues in Millions (a)
For the Years Ended For the Years Ended
Other gas revenues — — — — 15 8 7 87.5
(a)Revenues from NY 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, firm sales and firm retail choice volumes in the company’s service area increased 1.2 percent in 2022 compared with 2021. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $52 million in 2022 compared with 2021 primarily due to higher gas purchased for resale ($47 million) and higher revenues from the NY gas rate plan ($13 million).
Gas purchased for resale increased $47 million in 2022 compared with 2021 due to higher unit costs ($35 million) and purchased volumes ($12 million).
Other operations and maintenance expenses increased $12 million in 2022 compared with 2021 primarily due to higher pension costs ($10 million) and higher stock-based compensation ($1 million).
Depreciation and amortization increased $1 million in 2022 compared with 2021 primarily due to higher gas utility plant balances.
Taxes, Other Than Income Taxes
Taxes, other than income taxes, remained consistent in 2022 compared with 2021. The principal components of taxes, other than income taxes, were:
For the Years Ended December 31,
(Millions of Dollars) 2022 2021 Variation
Property taxes $69 $71 $(2)
State and local taxes related to revenue receipts 12 11 1
Payroll taxes 8 7 1
Total $89 (a) $89 (a) $—
(a)Including sales tax on customers’ bills, total taxes other than income taxes in 2022 and 2021 were $131 million and $129 million, respectively.
Income Tax Expense
Income taxes increased $4 million in 2022 compared with 2021 primarily due to higher income before income tax expense ($4 million) and higher state income taxes ($2 million), offset in part by an increase in the amortization of excess deferred federal income taxes ($2 million).
CON EDISON ANNUAL REPORT 2022 69
Clean Energy Businesses
The Clean Energy Businesses were classified as held for sale as of December 31, 2022. See “Assets and Liabilities Held for Sale” in Note A and Note X to the financial statements in Item 8. The Clean Energy Businesses’ results of operations for the year ended December 31, 2022 compared with the year ended December 31, 2021 were as follows:
For the Years Ended December 31,
(Millions of Dollars) 2022 2021 Variation
Purchased power 7 — 7
Other operations and maintenance 504 475 29
Depreciation and amortization 178 231 (53)
Taxes, other than income taxes 21 18 3
Operating revenues increased $297 million in 2022 compared with 2021 primarily due to higher wholesale revenues ($195 million), higher revenue from renewable electric projects ($92 million) and higher net mark-to-market values ($21 million), offset in part by lower energy services revenues ($11 million).
Gas purchased for resale increased $179 million in 2022 compared with 2021 primarily due to higher purchased volumes.
Depreciation and amortization decreased $53 million in 2022 compared with 2021 primarily due to the company ceasing to record depreciation and amortization in 2022 as the Clean Energy Businesses were classified as held for sale as of December 31, 2022. See “Assets and Liabilities Held for Sale” in Note A and Note X to the financial statements in Item 8.
Other operations and maintenance expenses increased $29 million in 2022 compared with 2021 primarily due to higher costs from engineering, procurement and construction of renewable electric projects for customers.
Other Income (Deductions)
Other income (deductions) decreased $13 million in 2022 compared with 2021 primarily due to lower income in the 2022 period from an equity method investment in renewable electric projects accounted for under the HLBV method of accounting.
Net Interest Expense
Net interest expense decreased $103 million in 2022 compared with 2021 primarily due to higher unrealized gains on interest rate swaps in the 2022 period.
Income Tax Expense
Income taxes increased $40 million in 2022 compared with 2021 primarily due to higher income before income tax expense ($50 million), higher state income taxes ($6 million), lower research and development credits ($3 million) and an increase in the reserve for uncertain tax positions ($5 million), offset in part by a lower loss attributable to non-controlling interest ($20 million) and higher renewable energy credits ($4 million).
Income (Loss) Attributable to Non-Controlling Interest
Income attributable to non-controlling interest decreased $92 million in 2022 compared with 2021 primarily due to lower income in the 2021 period attributable to a tax equity investor in renewable electric projects accounted for under the HLBV method of accounting. See Note S to the financial statements in Item 8.
Con Edison Transmission
Other operations and maintenance decreased $6 million in 2022 compared with 2021 primarily due to a goodwill impairment loss on its investment in Honeoye in 2021. See Note K to the financial statements in Item 8.
Other Income (Deductions)
Other deductions decreased $426 million in 2022 compared with 2021 primarily due to losses in 2021 from CET’s pre-tax impairment loss of ($212 million) on its investment in Stagecoach, pre-tax impairment loss of ($231 million)
70 CON EDISON ANNUAL REPORT 2022
on its investment in MVP in 2021, lower investment income in 2022 due to the sale of Stagecoach during 2021 ($19 million), offset in part by higher investment income from NY Transco ($4 million). See "Critical Accounting Estimates - Investments" in Item 7 and "Investments" in Note A and Note W to the financial statement in Item 8.
Net Interest Expense
Net interest expense decreased $4 million in 2022 compared with 2021 primarily due to the repayment of an intercompany loan from the parent company from a portion of the proceeds from the sale of Stagecoach in 2021.
Income Tax Expense
Income taxes increased $119 million in 2022 compared with 2021 primarily due to higher income before income tax expense ($91 million), higher state income taxes ($27 million) and a remeasurement of deferred state income tax assets and liabilities ($3 million), offset in part by lower amortization of excess deferred federal income taxes ($2 million).
Other
Taxes, Other Than Income Taxes
Taxes, other than income taxesincreased $1 million in 2022 compared with 2021 primarily due to the settlement in 2022 of the NYC capital tax audit for the years 2015 through 2018 ($1 million).
Other Income (Deductions)
Other income (deductions) decreased $50 million in 2022 compared with 2021 primarily due to the transaction costs at the parent company incurred from the sale of the Clean Energy Businesses ($49 million). See “Assets and Liabilities Held for Sale” in Note A and Note X to the financial statements in Item 8.
Income Tax Expense
Income taxes increased $136 million in 2022 compared with 2021 primarily due to higher consolidated state income taxes ($17 million), an increase in the valuation allowance on state and local net operating loss carryovers ($8 million) and a remeasurement of consolidated deferred state income tax assets and liabilities ($120 million), offset in part by lower income before income tax expense ($8 million).
During the fourth quarter of 2022, Con Edison entered into a purchase and sale agreement pursuant to which Con Edison agreed to sell the Clean Energy Businesses. See Note X to the financial statements in Item 8. Con Edison analyzed the potential impact of the anticipated sale on its state apportionment factors and remeasured its consolidated state tax liability. Based on estimates, Con Edison recorded an increase to its net deferred income tax liabilities of $111 million, an increase in the valuation allowance on the deferred tax asset related to state net operating loss carryforwards of $8 million and a corresponding deferred income tax expense of $119 million (net of federal income taxes) in the fourth quarter of 2022. Con Edison also recorded a $9 million expense from a remeasurement of state deferred liability due to other dispositions.
CON EDISON ANNUAL REPORT 2022 71
Year Ended December 31, 2021 Compared with Year Ended December 31, 2020
CECONY
For the Year Ended December 31, 2021 For the Year Ended December 31, 2020
Electric
CECONY’s results of electric operations for the year ended December 31, 2021 compared with the year ended December 31, 2020 were as follows:
For the Years Ended December 31,
(Millions of Dollars) 2021 2020 Variation
CECONY’s electric sales and deliveries in 2021 compared with 2020 were:
Millions of kWh Delivered Revenues in Millions (a)
For the Years Ended For the Years Ended
Other operating revenues (c) — — — — 211 270 (59) (21.9)
(a)Revenues from electric sales 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.
(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 plan.
(d)After adjusting for variations, primarily weather and billing days, electric delivery volumes in the company’s service area decreased 0.2 percent in 2021 compared with 2020. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $703 million in 2021 compared with 2020 primarily due to higher revenues from the electric rate plan ($243 million), higher purchased power expenses ($183 million), higher fuel expenses ($81 million), higher late payment charges ($90 million), including charges that are being recovered pursuant to a surcharge mechanism established as a result of the order issued by the NYSPSC in November 2021and resuming billing of late payment charges, and higher incentives earned under the earnings adjustment mechanisms and positive incentives ($30 million).See "COVID-19 Regulatory Matters" in Note B to the financial statements in Item 8.
72 CON EDISON ANNUAL REPORT 2022
Purchased power expenses increased $183 million in 2021 compared with 2020 due to higher unit costs ($112 million) and purchased volumes ($72 million).
Fuel expenses increased $81 million in 2021 compared with 2020 due to higher unit costs ($79 million) and higher purchased volumes from the company’s electric generating facilities ($3 million).
Other operations and maintenance expenses increased $166 million in 2021 compared with 2020 primarily due to higher costs for pension and other postretirement benefits ($47 million), higher costs related to heat, storm and emergency response ($50 million), higher stock-based compensation ($24 million), higher healthcare costs ($16 million) and higher municipal infrastructure support costs ($12 million).
Depreciation and amortization increased $72 million in 2021 compared with 2020 primarily due to higher electric utility plant balances.
Taxes, other than income taxes increased $130 million in 2021 compared with 2020 primarily due to lower deferral of under-collected property taxes ($53 million), higher property taxes ($52 million) and higher state and local taxes ($23 million).
CECONY’s results of gas operations for the year ended December 31, 2021 compared with the year ended December 31, 2020 were as follows:
For the Years Ended December 31,
(Millions of Dollars) 2021 2020 Variation
Other operations and maintenance 368 355 13
CECONY’s gas sales and deliveries, excluding off-system sales, in 2021 compared with 2020 were:
Thousands of Dt Delivered Revenues in Millions (a)
For the Years Ended For the Years Ended
Other operating revenues (d) — — — — 111 74 37 50.0
(a)Revenues from gas sales are subject to a weather normalization clause and a revenue decoupling mechanism, as a result of which, delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.
(b)After adjusting for variations, primarily billing days, firm gas sales and firm retail choice volumes in the company’s service area decreased 0.4 percent in 2021 compared with 2020. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
(c)Includes 1,921 thousands and 3,510 thousands of Dt for 2021 and 2020, respectively, which are also reflected in firm retail choice customers 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. See Note B to the financial statements in Item 8.
Operating revenues increased $342 million in 2021 compared with 2020 primarily due to higher gas revenues under the company's gas rate plan ($200 million), higher gas purchased for resale expense ($115 million), higher
CON EDISON ANNUAL REPORT 2022 73
late payment charges ($16 million), including charges that are being recovered pursuant to a surcharge mechanism established as a result of the order issued by the NYSPSC in November 2021 and resuming billing of late payment charges, and higher incentives earned under gas adjustment mechanisms (EAMs) ($11 million). See "COVID-19 Regulatory Matters" in Note B to the financial statements in Item 8.
Gas purchased for resale increased $115 million in 2021 compared with 2020 due to higher unit costs ($106 million) and higher purchased volumes ($8 million).
Other operations and maintenance expenses increased $13 million in 2021 compared with 2020 primarily due to higher costs for pension and other postretirement benefits ($10 million), higher total surcharges for assessments and fees that are collected in revenues from customers ($7 million) and higher stock-based compensation ($5 million), offset in part by lower municipal infrastructure support costs ($9 million).
Depreciation and amortization increased $32 million in 2021 compared with 2020 primarily due to higher gas utility plant balances.
Taxes, other than income taxes increased $110 million in 2021 compared with 2020 primarily due to lower deferral of under-collected property taxes ($68 million), higher property taxes ($30 million) and higher state and local taxes ($12 million).
Steam
CECONY’s results of steam operations for the year ended December 31, 2021 compared with the year ended December 31, 2020 were as follows:
For the Years Ended December 31,
(Millions of Dollars) 2021 2020 Variation
Other operations and maintenance 165 161 4
Depreciation and amortization 93 90 3
Taxes, other than income taxes 144 144 —
Steam operating income $12 $5 $7
CECONY’s steam sales and deliveries in 2021 compared with 2020 were:
Millions of Pounds Delivered Revenues in Millions
For the Years Ended For the Years Ended
Other operating revenues (a) — — — — 30 28 2 7.1
(a)Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plan. See Note B to the financial statements in Item 8.
(b)After adjusting for variations, primarily weather and billing days, steam sales and deliveries in the company’s service area decreased 3.4 percent in 2021 compared with 2020. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $24 million in 2021 compared with 2020 primarily due to the impact of colder winter weather ($21 million) and higher purchased power expenses ($18 million), offset in part by lower fuel expenses ($8 million) and tax law surcharge ($3 million).
Purchasedpower expenses increased $18 million in 2021 compared with 2020 due to higher unit costs ($13 million) and purchased volumes ($5 million).
Fuel expenses decreased $8 million in 2021 compared with 2020 due to lower unit costs ($11 million), offset in part by higher purchased volumes from the company’s steam generating facilities ($3 million).
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Other operations and maintenance expenses increased $4 million in 2021 compared with 2020 primarily due to higher costs for pension and other postretirement benefits ($4 million) and higher stock-based compensation ($2 million), offset in part by lower municipal infrastructure support costs ($1 million).
Depreciation and amortization increased $3 million in 2021 compared with 2020 primarily due to higher steam utility plant balances.
Taxes, Other Than Income Taxes
At $2,696 million, taxes other than income taxes remain one of CECONY’s largest operating expenses. The principal components of, and variations in, taxes other than income taxes were:
For the Years Ended December 31,
(Millions of Dollars) 2021 2020 Variation
State and local taxes related to revenue receipts 373 338 35
(a)Including sales tax on customers’ bills, total taxes other than income taxes in 2021 and 2020 were $3,296 million and $2,989 million, respectively.
Other Income (Deductions)
Other deductions decreased $63 million in 2021 compared with 2020 primarily due to lower costs associated with components of pension and other postretirement benefits other than service cost ($61 million).
Net Interest Expense
Net interest expense increased $23 million in 2021 compared with 2020 primarily due to higher interest on long-term debt ($42 million), offset in part by lower interest accrued on the system benefit charge liability ($7 million), lower interest expense for short-term debt ($4 million), lower interest on deposits ($3 million) and lower interest accrued on deferred storm costs ($2 million).
Income Tax Expense
Income taxes increased $31 million in 2021 compared with 2020 primarily due to higher income before income tax expense ($40 million) and higher state income taxes ($9 million), offset in part by a higher favorable tax adjustment in 2021 for the prior year tax return primarily due to an increase in the general business tax credit ($6 million), higher tax benefits in 2021 from research credits ($5 million) and the absence of the amortization of deficit deferred state income taxes in 2020 ($6 million).
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O&R
For the Year Ended December 31, 2021 For the Year Ended December 31, 2020
Electric
O&R’s results of electric operations for the year ended December 31, 2021 compared with the year ended December 31, 2020 were as follows:
For the Years Ended December 31,
(Millions of Dollars) 2021 2020 Variation
Other operations and maintenance 249 242 7
Depreciation and amortization 69 65 4
Taxes, other than income taxes 57 54 3
Electric operating income $100 $99 $1
O&R’s electric sales and deliveries in 2021 compared with 2020 were:
Millions of kWh Delivered Revenues in Millions (a)
For the Years Ended For the Years Ended
Other operating revenues (c) — — — — 5 1 4 Large
(a)O&R’s NY 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. Effective July 2021, the majority of O&R’s electric distribution revenues in NJ are subject to a conservation incentive program, as a result of which distribution revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s electric transmission revenues in NJ are not subject to a conservation incentive program, 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 the revenue decoupling mechanism current asset or regulatory liability in accordance with the company’s NY electric rate plan and changes in regulatory assets and liabilities in accordance with the company’s electric rate plans. See Note B to the financial statements in Item 8.
(d)After adjusting for weather and other variations, electric delivery volumes in company’s service area increased 1.1 percent in 2021 compared with 2020. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $52 million in 2021 compared with 2020 primarily due to higher purchased power expenses ($37 million) and higher revenues from the NY electric rate plan ($13 million).
Purchasedpower expenses increased $37 million in 2021 compared with 2020 due to higher unit costs ($35 million) and purchased volumes ($2 million).
Other operations and maintenance expenses increased $7 million in 2021 compared with 2020 primarily due to higher storm-related costs.
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Depreciation and amortization increased $4 million in 2021 compared with 2020 primarily due to higher electric utility plant balances.
Taxes, other than income taxes increased $3 million in 2021 compared with 2020 primarily due to higher property taxes ($2 million).
Gas
O&R’s results of gas operations for the year ended December 31, 2021 compared with the year ended December 31, 2020 were as follows:
For the Years Ended December 31,
(Millions of Dollars) 2021 2020 Variation
Gas purchased for resale 88 61 27
Other operations and maintenance 64 68 (4)
Depreciation and amortization 26 25 1
Taxes, other than income taxes 32 31 1
Gas operating income $50 $48 $2
O&R’s gas sales and deliveries, excluding off-system sales, in 2021 compared with 2020 were:
Thousands of Dt Delivered Revenues in Millions (a)
For the Years Ended For the Years Ended
Other gas revenues — — — — 8 23 (15) (65.2)
(a)Revenues from NY 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, firm sales and firm retail choice volumes in the company’s service area increased 0.2 percent in 2021 compared with 2020. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.
Operating revenues increased $27 million in 2021 compared with 2020 primarily due to higher gas purchased for resale expense.
Gas purchased for resale increased $27 million in 2021 compared with 2020 due to higher unit costs ($15 million) and purchased volumes ($12 million).
Other operations and maintenance expenses decreased $4 million in 2021 compared with 2020 primarily due to lower pension costs ($2 million) and lower spending on gas programs ($2 million).
Depreciation and amortization increased $1 million in 2021 compared with 2020 primarily due to higher gas utility plant balances.
Taxes, other than income taxes increased $1 million in 2021 compared with 2020 primarily due to higher property taxes.
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Taxes, Other Than Income Taxes
Taxes, other than income taxes, increased $4 million in 2021 compared with 2020. The principal components of taxes, other than income taxes, were:
For the Years Ended December 31,
(Millions of Dollars) 2021 2020 Variation
State and local taxes related to revenue receipts 11 10 1
Payroll taxes 7 6 1
(a)Including sales tax on customers’ bills, total taxes other than income taxes in 2021 and 2020 were $129 million and $121 million, respectively.
Income Tax Expense
Income taxes remained unchanged in 2021 compared with 2020 primarily due to higher income before income tax expense ($1 million) entirely offset by lower state income taxes, primarily due to a decrease in the amortization of New York’s metropolitan transportation business tax surcharge in 2021 ($1 million).
Clean Energy Businesses
The Clean Energy Businesses were classified as held for sale as of December 31, 2022. See “Assets and Liabilities Held for Sale” in Note A and Note X to the financial statements in Item 8. The Clean Energy Businesses’ results of operations for the year ended December 31, 2021 compared with the year ended December 31, 2020 were as follows:
For the Years Ended December 31,
(Millions of Dollars) 2021 2020 Variation
Gas purchased for resale 62 41 21
Depreciation and amortization 231 231 —
Taxes, other than income taxes 18 21 (3)
Operating revenues increased $286 million in 2021 compared with 2020 primarily due to higher revenue from renewable electric projects ($211 million), higher wholesale revenues ($35 million) and higher energy services revenues ($47 million), offset in part by lower net mark-to-market values ($7 million).
Gas purchased for resale increased $21 million in 2021 compared with 2020 primarily due to higher purchased volumes.
Other operations and maintenance expenses increased $247 million in 2021 compared with 2020 primarily due to higher costs from engineering, procurement and construction of renewable electric projects for customers.
Other Income (Deductions)
Other income (deductions) decreased $14 million in 2021 compared with 2020 primarily due to lower income in the 2021 period from an equity method investment in renewable electric projects accounted for under the HLBV method of accounting.
Net Interest Expense
Net interest expense decreased $128 million in 2021 compared with 2020 primarily due to lower unrealized losses on interest rate swaps in the 2021 period.
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Income Tax Expense
Income taxes increased $88 million in 2021 compared with 2020 primarily due to higher income before income tax expense ($30 million), lower income attributable to non-controlling interest ($47 million), higher state income taxes ($7 million) and the absence of a tax benefit due to the change in the federal corporate income tax rate recognized for a loss carryback from the 2018 tax year to the 2013 tax year as allowed under the CARES Act signed into law during the first quarter of 2020 ($4 million). See Note L to the financial statements in Item 8.
Income (Loss) Attributable to Non-Controlling Interest
Income attributable to non-controlling interest decreased $195 million in 2021 compared with 2020 primarily due to lower income in the 2021 period attributable to a tax equity investor in renewable electric projects accounted for under the HLBV method of accounting. See Note S to the financial statements in Item 8.
Con Edison Transmission
Other operations and maintenance increased $8 million in 2021 compared with 2020 primarily due to a goodwill impairment loss on its investment in Honeoye in 2021. See Note K to the financial statements in Item 8.
Other Income (Deductions)
Other deductions decreased $192 million in 2021 compared with 2020 primarily due to lower losses in 2021 from CET’s pre-tax impairment loss of $212 million on its investment in Stagecoach, pre-tax impairment loss of $231 million on its investment in MVP in 2021, lower investment income in 2021 due to the sale of Stagecoach during 2021 ($19 million) and foregoing AFUDC income from MVP starting January 2021 until significant construction resumes ($60 million), compared to the pre-tax impairment loss of $320 million on its investment in MVP in 2020. See "Critical Accounting Estimates - Investments" in Item 7 and "Investments" in Note A and Note W to the financial statement in Item 8.
Net Interest Expense
Net interest expense decreased $9 million in 2021 compared with 2020 primarily due to the repayment of an intercompany loan from the parent company from a portion of the proceeds from the sale of Stagecoach.
Income Tax Expense
Income taxes decreased $48 million in 2021 compared with 2020 primarily due to lower income before income tax expense ($40 million), lower state income taxes ($12 million), offset in part by higher amortization of excess deferred federal income taxes in 2021 ($2 million).
Other
Taxes, Other Than Income Taxes
Taxes, other than income taxesdecreased $6 million in 2021 compared with 2020 primarily due to adjustments made to the New York City capital tax for prior periods in the 2020 period.
Other Income (Deductions)
Other income (deductions) increased $4 million in 2021 compared with 2020 primarily due to the elimination of CECONY's goodwill impairment related to Con Edison Transmission's investment in Honeoye.
Income Tax Expense
Income taxes increased $29 million in 2021 compared with 2020 primarily due to higher income before income tax expense ($2 million), lower consolidated state income tax benefits in 2021 ($16 million) and the absence of a change to the New York City valuation allowance in 2021 ($10 million).
During the fourth quarter of 2020, Con Edison reversed a portion of its valuation allowance that was recorded against the deferred tax asset established for the New York City NOL. Management has reassessed its ability to realize a portion of the deferred tax benefits generated primarily by its renewable energy projects due to the future reversal of temporary differences associated with the accelerated tax depreciation and by implementing its strategy to secure tax equity financing from third parties for which certain tax deductions and amortization will be specifically allocated to members outside of the consolidated group.
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Liquidity and Capital Resources
The Companies’ liquidity reflects cash flows from operating, investing and financing activities, as shown on their respective consolidated statements of cash flows and as discussed below.
The principal factors affecting Con Edison’s liquidity are its investments in the Utilities, the Clean Energy Businesses and Con Edison Transmission, the dividends it pays to its shareholders and the dividends it receives from its subsidiaries and cash flows from financing activities discussed below.
The principal factors affecting CECONY’s liquidity are its cash flows from operating activities, cash used in investing activities (including construction expenditures), the dividends it pays to Con Edison and cash flows from financing activities discussed below.
The Companies generally maintain minimal cash balances and use short-term borrowings to meet their working capital needs and other cash requirements. The Companies repay their short-term borrowings using funds from long-term financings and operating activities. The Utilities’ cost of capital, including working capital, is reflected in the rates they charge to their customers.
Each of the Companies believes that it will be able to meet its reasonably likely short-term and long-term cash requirements. See “The Companies Require Access To Capital Markets To Satisfy Funding Requirements,” "Changes To Tax Laws Could Adversely Affect the Companies," “The Companies Face Risks Related to Health Epidemics And Other Outbreaks, Including The COVID-19 Pandemic,” and “The Companies Also Face Other Risks That Are Beyond Their Control” in Item 1A, and “Capital Requirements and Resources” in Item 1.
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The Companies’ cash, temporary cash investments and restricted cash resulting from operating, investing and financing activities for the years ended December 31, 2022, 2021 and 2020 are summarized as follows:
(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 financial statements in Item 8.
(d) The Clean Energy Businesses were classified as held for sale as of December 31, 2022. See “Assets and Liabilities Held for Sale” in Note A and Note X to the financial statements in Item 8.
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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 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. See "Competition" and "Environmental Matters – Clean Energy Future – Reforming the Energy Vision" and “Environmental Matters – Climate Change” in Item 1.
During 2020 and 2021, the decline in business activity in the Utilities’ service territory due to the COVID-19 pandemic and the Utilities' suspension of service disconnections, bill collection activities and certain charges and fees resulted in a slower recovery of cash from outstanding customer accounts receivable balances, material increases in customer accounts receivable balances, increases to the allowance for uncollectible accounts, and may result in increases to write-offs of customer accounts, as compared to prior to the COVID-19 pandemic. Under the revenue decoupling mechanisms in the Utilities’ NY 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, increases to the allowance for uncollectible accounts, and 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. See “Recoverable Energy Costs” in Note A to the financial statements in Item 8.
The Utilities’ NY 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. In November 2021, the NYSPSC issued an order establishing a surcharge recovery mechanism commencing December 1, 2021 through December 31, 2022 for CECONY to collect late payment charges and fees that were not billed for the year ended December 31, 2020 due to the COVID-19 pandemic. The order also established a surcharge recovery or sur-credit mechanism for any fee deferrals for 2021 and 2022. In April 2022, the NYSPSC approved the October 2021 joint proposal for new electric and gas rates for O&R for the three-year period from January 2022 through December 2024 (the Joint Proposal) that includes certain COVID-19 provisions, such as: recovery of 2020 late payment charges over three years; reconciliation of late payment charges to amounts reflected in rates for years 2021 through 2024; and reconciliation of write-offs of customer accounts receivable balances to amounts reflected in rates from January 1, 2020 through December 31, 2024. In June 2022 and January 2023, the NYSPSC issued orders implementing COVID-19 arrears assistance programs that provides credits towards the arrears balances of electric and gas customers of CECONY and O&R. See “The Companies Face Risks Related To Health Epidemics And Other Outbreaks, Including The COVID-19 Pandemic,” in Item 1A, “Rate Plans,” "COVID-19 Regulatory Matters" and “Other Regulatory Matters” in Note B to the financial statements in Item 8 and "Coronavirus Disease 2019 (COVID-19) Impacts - Liquidity and Financing," above.
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. Pursuant to their rate plans, the Utilities also recover from customers the amount of property taxes they will pay. The payment of property taxes by the Utilities affects the timing of cash flows and increases the amount of short-term borrowings issued by the Utilities when property taxes are due and as property taxes increase, but generally does not impact net income. See “Changes To Tax Laws Could Adversely Affect the Companies,” in Item 1A, “Federal Income Tax” in Note A, “Rate Plans” in Note B, "COVID-19 Regulatory Matters" in Note B, “Other Regulatory Matters” in Note B and Note L to the financial statements in Item 8 and "Coronavirus Disease 2019 (COVID-19) Impacts - Liquidity and Financing," above.
The Clean Energy Businesses were classified as held for sale as of December 31, 2022. See “Assets and Liabilities Held for Sale” in Note A and Note X to the financial statements in Item 8.
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’ NY electric and gas rate plans. See “Rate Plans – CECONY– Electric and Gas" and
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"Rate Plans – O&R New York – Electric and Gas” in Note B to the financial statements in Item 8. For Con Edison, 2021 net income also included non-cash losses recognized with respect to impairments of Con Edison Transmission’s investments in MVP, Stagecoach and Honeoye. For Con Edison, 2020 net income included a non-cash loss recognized with respect to a partial impairment of Con Edison Transmission’s investment in MVP. See “Investments” in Note A and Note K to the financial statements in Item 8.
Net cash flows from operating activities in 2022 for Con Edison and CECONY were $1,202 million and $1,077 million higher, respectively, than in 2021. The changes in net cash flows for Con Edison and CECONY primarily reflect an increase in accounts payable ($514 million and $257 million, respectively), lower pension and retiree benefit contributions ($433 million and $407 million, respectively) and lower prepayments, other receivables and other current assets ($265 million and $410 million, respectively).
Net cash flows from operating activities in 2021 for Con Edison and CECONY were $535 million and $493 million higher, respectively, than in 2020. The changes in net cash flows for Con Edison and CECONY primarily reflect a lower increase of accounts receivable balances from customers, net of allowance for uncollectible accounts ($223 million and $196 million, respectively) (see “COVID-19 Regulatory Matters” in Note B to the financial statements in Item 8 and “Coronavirus Disease 2019 (COVID-19) Impacts - Accounting Considerations” and “Liquidity and Financing,” above), higher recoveries of depreciation expense ($112 million and $107 million, respectively), lower system benefit charge ($85 million and $80 million, respectively), lower superfund and environmental remediation costs ($12 million and $12 million, respectively) and lower pension and retiree benefit contributions ($6 million and $5 million, respectively). For Con Edison, changes in net cash flows reflects lower other receivables and other current assets ($31 million), lower taxes receivable ($19 million), lower revenue decoupling receivable ($8 million), offset in part by a change in pension and retiree benefit obligations, net ($19 million) and for CECONY, a change in pension and retiree benefit obligations, net ($30 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, 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 $1,081 million and $197 million higher, respectively, in 2022 than in 2021. The change for Con Edison primarily reflects a decrease due to receiving proceeds from the completion of the sale of Stagecoach in 2021 ($629 million), higher utility construction expenditures ($194 million) and a decrease due to receiving proceeds from the divestiture of renewable electric projects at the Clean Energy Businesses in 2021 ($183 million). The change for CECONY primarily reflects an increase in utility construction expenditures ($183 million). Pursuant to their rate plans, the Utilities recover the cost of utility construction expenditures from customers, including an approved rate of return (before and after being placed in service and or AFUDC before being placed in service). Increases in the amount of utility construction expenditures may temporarily increase the amount of short-term debt issued by the Utilities prior to the long-term financing of such amounts.
Net cash flows used in investing activities for Con Edison and CECONY were $740 million lower and $313 million higher, respectively, in 2021 than in 2020. The change for Con Edison primarily reflects proceeds from the completion of the sale of Stagecoach ($629 million), a decrease in non-utility construction expenditures at the Clean Energy Businesses ($261 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 ($301 million) and O&R ($3 million). Pursuant to their rate plans, the Utilities recover the cost of utility construction expenditures from customers, including an approved rate of return (before and after being placed in service and or AFUDC before being placed in service). Increases in the amount of utility construction expenditures may temporarily increase the amount of short-term debt issued by the Utilities prior to the long-term financing of such amounts.
Cash Flows From Financing Activities
Net cash flows from financing activities in 2022 for Con Edison and CECONY were $553 million and $597 million lower, respectively, than in 2021. Net cash flows from financing activities in 2021 for Con Edison and CECONY were $1,784 million higher and $461 million lower, respectively, than in 2020.
Net cash flows from financing activities during the years ended December 31, 2022, 2021 and 2020 reflect the following Con Edison transactions:
CON EDISON ANNUAL REPORT 2022 83
2022
•Entered into and borrowed $400 million under a 364-Day Senior Unsecured Term Loan Credit Agreement, the proceeds from which were used for general corporate purposes. See Note D to the financial statements in Item 8;
•Redeemed at maturity $293 million of 8.71 percent senior unsecured notes.
2021
•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;
•Redeemed at maturity $500 million of 2.00 percent 5-year debentures with proceeds from a $500 million borrowing under an April 2021 Credit Agreement, which Con Edison prepaid in full in July 2021; and
•Optionally prepaid the remaining $675 million outstanding under a February 2019 term loan prior to its maturity in June 2021.
2020
•Issued 1,050,000 shares of its common shares for $88 million upon physical settlement of the remaining shares subject to its May 2019 forward sale agreement. Con Edison used the proceeds to invest in CECONY for funding of its capital requirements and other general corporate purposes;
•Borrowed $820 million pursuant to a credit agreement that was converted to a term loan (the “July 2020 Term Loan”). Con Edison used the proceeds from the borrowing for general corporate purposes, including repayment of short-term debt bearing interest at variable rates. The July 2020 Term Loan was prepaid in full in December 2020;
•Issued 7,200,000 common shares resulting in net proceeds of $553 million, after issuance expenses. The net proceeds from the sale of the common shares, together with the net proceeds from the sale of $650 million aggregate principal amount of 0.65 percent debentures due 2023, were used to prepay in full the July 2020 Term Loan. The remaining net proceeds from the sale of the common shares were invested by Con Edison in its subsidiaries, principally CECONY and O&R, and for other general corporate purposes; and
•Issued $650 million aggregate principal amount of 0.65 percent debentures, due 2023, with an option to redeem at par, in whole or in part, on or after December 1, 2021. The proceeds from the $650 million refinancing, together with a portion of the proceeds from the sale of common shares, were used to prepay in full the July 2020 Term Loan.
Con Edison’s cash flows from financing activities in 2022, 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 $88 million, $109 million and $106 million, respectively.
Net cash flows from financing activities during the years ended December 31, 2022, 2021 and 2020 reflect the following CECONY transactions:
2022
•Issued $700 million aggregate principal amount of 6.15 percent debentures, due 2052, the net proceeds from the sale of which were used to repay short-term borrowings and for other general corporate purposes.
2021
•Issued $600 million aggregate principal amount of 3.20 percent debentures, due 2051, the net proceeds from the sale of which were used to repay short-term borrowings and for other general corporate purposes;
•Issued $900 million aggregate principal amount of 2.40 percent debentures, due 2031, the aggregate
net proceeds from the sales of which were used to redeem at maturity its $640 million floating rate 3-year debentures and for other general corporate purposes, including repayment of short-term debt; and
•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.
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2020
•Issued $600 million aggregate principal amount of 3.00 percent debentures, due 2060, the net proceeds from the sale of which were used to repay short-term borrowings and for other general corporate purposes;
•Redeemed at maturity $350 million of 4.45 percent 10-year debentures; and
•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 a portion of the net proceeds for repayment of short-term debt and temporarily placed the remaining net proceeds in short-term interest-bearing instruments.
Net cash flows from financing activities during the years ended December 31, 2022, 2021 and 2020 also reflect the following O&R transactions:
2022
•Issued $100 million aggregate principal amount of 5.70 percent debentures, due 2032, the net proceeds from the sale of which were used to repay short-term borrowings and for other general corporate purposes.
2021
•Issued $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, the net proceeds from the sales of which were used to repay short-term borrowings and for other general corporate purposes.
2020
•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, the net proceeds from the sales of which were used to repay short-term borrowings and for other general corporate purposes.
Net cash flows from financing activities during the years ended December 31, 2022, 2021 and 2020 also reflect the following Clean Energy Businesses transactions:
2022
•Entered into and borrowed $150 million under a 364-Day Senior Unsecured Term Loan Credit Agreement guaranteed by Con Edison, the proceeds from which were used for general corporate purposes;
2021
•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;
•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 December 31, 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 Note Q to the financial statements in Item 8;
•Prepaid in full $249 million of borrowings outstanding under, and terminated, a $613 million variable-rate construction loan facility that was secured by and used to fund construction costs for CED Nevada Virginia; and
•Issued $229 million aggregate principal amount of 3.77 percent senior notes, due 2046, secured by equity interests in CED Nevada Virginia.
2020
•Borrowed $165 million under a $613 million variable-rate construction loan facility that was terminated in 2021 that was secured by and used to fund construction costs for CED Nevada Virginia.
CON EDISON ANNUAL REPORT 2022 85
Cash flows from financing activities of the Companies also reflect commercial paper issuance. The commercial paper amounts outstanding at December 31, 2022, 2021 and 2020 and the average daily balances for 2022, 2021 and 2020 for Con Edison and CECONY were as follows:
Common stock issuances and external borrowings are sources of liquidity that could be affected by changes in credit ratings, financial performance and capital market conditions. For information about the Companies’ credit ratings and certain financial ratios, see “Capital Requirements and Resources” in Item 1.
Capital Requirements and Resources
For information about capital requirements, contractual obligations and capital resources, see “Capital Requirements and Resources” in Item 1.
Assets, Liabilities and Equity
The Companies’ assets, liabilities and equity at December 31, 2022 and 2021 are summarized as follows:
ASSETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(a) Includes parent company and consolidation adjustments.
(b) Represents the consolidated results of operations of Con Edison and its businesses.
(c) The Clean Energy Businesses were classified as held for sale as of December 31, 2022.
CECONY
Current assets at December 31, 2022 were $544 million higher than at December 31, 2021. The change in current assets primarily reflects increases in accounts receivables, net of allowance for uncollectible accounts ($258 million) (see “COVID-19 Regulatory Matters” in Note B to the financial statements in Item 8 and “Coronavirus Disease 2019 (COVID-19) Impacts - Accounting Considerations” and “Liquidity and Financing,” above), an increase in cash and temporary cash investments ($136 million), higher fuel oil, gas in storage, materials and supplies, at average cost ($71 million), an increase in other receivables, net of allowance for uncollectible accounts ($26 million) and an increase to accrued unbilled revenue ($24 million).
Investments at December 31, 2022 were $69 million lower than at December 31, 2021. The change in investments primarily reflects decreases in supplemental retirement income plan assets ($60 million) and deferred income plan assets ($9 million). See "Investments" in Note A and Note E to the financial statements in Item 8.
Net plant at December 31, 2022 was $2,398 million higher than at December 31, 2021. The change in net plant primarily reflects an increase in electric ($1,790 million), gas ($1,017 million), steam ($107 million) and general ($25
86 CON EDISON ANNUAL REPORT 2022
million) plant balances and an increase in construction work in progress ($283 million), offset in part by an increase in accumulated depreciation ($824 million).
Other noncurrent assets at December 31, 2022 were $1,917 million higher than at December 31, 2021. The change in other noncurrent assets primarily reflects an increase in pension and retiree benefits ($1,507 million) and an increase in the regulatory asset for system peak reduction and energy efficiency programs ($496 million), partially offset in part by property tax reconciliation ($81 million) and deferred derivative losses ($19 million). The change in the regulatory asset also reflects the period's amortization of accounting costs. See Notes B, E, and F to the financial statements in Item 8.
Current liabilities at December 31, 2022 were $1,715 million higher than at December 31, 2021. The change in current liabilities primarily reflects increases in notes payable ($939 million), accounts payable ($478 million), deferred derivative gains ($155 million) and accrued taxes to affiliated companies ($79 million).
Noncurrent liabilities at December 31, 2022 were $1,811 million higher than at December 31, 2021. The change in noncurrent liabilities primarily reflects an increase in regulatory liabilities for unrecognized other postretirement costs ($1,536 million), allowance for cost of removal less salvage ($104 million) and pension and other postretirement benefit deferrals ($43 million), offset in part by a decrease in the liability for pension and retiree benefits ($143 million) as a result of the final actuarial valuation of the pension and other retiree benefit plans, as measured at December 31, 2022, in accordance with the accounting rules for retirement benefits. See Notes E and F to the financial statements in Item 8.
Long-term debt at December 31, 2022 was $698 million higher than at December 31, 2021. The change in long-term debt primarily reflects the November 2022 issuance of $700 million of debentures. See "Liquidity and Capital Resources - Cash Flows From Financing Activities" above and Note C to the financial statements in Item 8.
Equity at December 31, 2022 was $566 million higher than at December 31, 2021. The change in equity primarily reflects net income for the year ($1,390 million) and capital contributions from parent ($150 million) in 2022, offset in part by common stock dividends to parent ($978 million) in 2022.