NEW YORK – Con Edison submitted plans today for major investments to protect critical equipment and customers from devastating storms like Superstorm Sandy that have struck Greater New York in recent years.
The company provided the New York State Public Service Commission (PSC) with details on long-term projects – including putting flood-proof equipment in low-lying areas, building higher flood walls around facilities, reinforcing overhead equipment and/or putting some overhead lines underground to limit outages during storms.
The plans call for $1 billion in investments (click here) through 2016, some of which could be recovered through federal funding. As part of the $1 billion, Con Edison has already committed to spend $250 million this year and next on storm protection measures. The company said it was also committed to providing customers with more accurate, individual restoration times, as well as offering text messaging and other mobile communications for customers who prefer them.
To provide initial funding for the storm-protection effort, Con Edison proposed one-year delivery rates for electric, gas and steam services. The submission of new rate plans, which was delayed due to the company’s focus on recovery from Sandy, reflects Con Edison’s cost-control efforts and its obligation to invest in its systems for customers.
Con Edison President Craig S. Ivey said the company has sharpened its focus on controlling costs in recent years. The 13,000 men and women of Con Edison weave cost-consciousness into every task and project, Ivey said.
“Although the economy is improving, we are still working diligently to hold down costs for our customers,” Ivey said. “At the same time, the increased frequency and damage of storms assaulting our area presents a major challenge. We must invest in our systems in new ways to maintain the safe, reliable service our customers deserve.”
The rate plans, subject to an 11-month review by the PSC and other interested parties, would cover the period January 1, 2014 to December 31, 2014. (To view the filings, click here.)
Electric Service
The filing seeks an additional $375 million in revenue to run the electric delivery system, the company’s smallest electric delivery rate request since 2004, which would represent an overall customer bill increase of 3.3 percent. The typical monthly bill for a New York City resident (300kWhr) would rise from $81.64 to $84.55; for a typical Westchester residential customer (450kWhr), the monthly bill would rise from $114.41 to $118.00. The typical monthly bill for a small business (600kWhr) would rise from $157.55 to $169.31.
The company expects the increase to be mitigated when certain contracts with non-utility generator units begin to expire in 2014. The expiration of these contracts is expected to save customers an estimated $46 million in 2014, and more in future years.
The filing also includes plans for approximately $800 million of storm-protection capital expenditures through 2016 for the electric system, including projects to place certain overhead distribution lines below ground; increase the height of flood walls for certain facilities; raise critical equipment; install submersible equipment; install additional switches and related smart grid technology; and reconfigure certain distribution networks.
Gas Service
For gas service, the filing seeks an additional $25 million in revenue, the smallest gas rate request by the company since 2000, which would result in an overall customer bill increase of 1.3 percent. The typical monthly gas heating bill for a residential heating customer would rise from $187.68 to $190.35. Businesses would see an increase from $349.24 to $351.88 per month.
The gas revenue increase the company is seeking is due to gas infrastructure needs. These include the connection to a new Spectra gas transmission pipeline in Lower Manhattan, and the construction of a 10-mile gas main from the Bronx to White Plains to improve the safety and reliability of Con Edison’s gas distribution system.
Con Edison expects its natural gas infrastructure to grow significantly in the coming years due to the rapidly increasing gas usage resulting from oil-to-gas conversions. The conversions are due to both the declining cost of natural gas and to New York City’s Clean Heat program that requires large buildings that burn No. 6 and No. 4 heating oil to discontinue their use over the next 20 years. The company expects that many large buildings will switch their heating systems to natural gas, producing additional revenues that should more than offset the company’s investment in gas infrastructure to support these conversions.
The filing also includes plans for approximately $100 million of storm-protection capital expenditures through 2016 for the gas system, including projects for cover plates and remote emergency generators to address possible tunnel flooding and check valves to prevent water infiltration that could lead to over-pressurization of piping and equipment.
Steam Service
For steam service, the company is seeking a decrease of $5 million in revenue. This decrease would come in addition to an estimated $66 million in annual fuel cost savings as a result of the conversion of two Con Edison steam plants from burning fuel oil to burning natural gas.
These delivery rate and fuel cost reductions reflect the company’s proactive approach to reduce steam system costs, and their combined effect is equivalent to an overall decrease in customers’ bills of approximately 10.1 percent.
The filing also includes plans for approximately $100 million of storm-protection capital expenditures through 2016 for the steam system, including projects to install or increase the height of existing gates or barriers around facilities, seal perimeter walls and doors, and relocate equipment.
While today’s submissions are for one-year rate plans, Con Edison said it was open to discussions to develop a multi-year rate plan for each service, with aggregate revenue targets for its electric, gas and steam systems of $272 million in 2015 and $351 million in 2016.
To hold down costs for customers, Con Edison has delayed or replaced new capital investments with targeted demand side management programs and works with customers to reduce their energy usage through energy-efficiency programs. Employees are paying a greater share of their health-insurance premiums, even as health-care costs rise.
The company has also improved how it prioritizes and manages work. An example is a new work management program for Electric Operations that is expected to save $45 million of capital and O&M expenses annually once fully deployed in late 2014.
Further, customers now pay a special charge called the Temporary18-a assessment due to a 2009 law that required the PSC to collect an additional assessment from utilities. The surcharge is scheduled to expire in March 2014. If the surcharge is not extended as recently proposed, customers would save approximately $128 million annually on electric, gas and steam services, reducing the impact of storm hardening costs.
The rate plans also reflect company actions to address new cyber security standards, including additional electronic and physical perimeters around critical cyber assets; upgrading control systems associated with critical infrastructure equipment by enhancing system monitoring; and establishing dedicated cyber security personnel who will be responsible for implementing and monitoring the company’s improved cyber security policies and procedures.
The filing marks the first time Con Edison has filed rate plans simultaneously for electric, gas and steam services. The company believes this will produce efficiency in resolving questions and issues that apply to more than one service.
The rate plans and additional information are available at www.conEd.com/publicissues.
Con Edison is a subsidiary of Consolidated Edison, Inc. [NYSE: ED], one of the nation’s largest investor-owned energy companies, with approximately $13 billion in annual revenues and $40 billion in assets. The utility provides electric, gas and steam service to more than three million customers in New York City and Westchester County, New York. For additional financial, operations and customer service information, visit conEd.com, our green site, conEd.com/thepowerofgreen, or Facebook at Power of Green.