Policy Management and
Regulatory Impact

Rate Case

At the close of 2013 parties to Con Edison’s rate cases for electric, gas, and steam agreed to a Joint Proposal (JP) resulting in a two-year electric rate plan and three-year rate plans for gas and steam effective January 1, 2014. The result was a revenue requirement freeze for electric, gas, and steam over the term of their respective rate plans.

Major components of the joint proposal include the following:

• Investment in capital projects and programs to address reliability, storm hardening and resiliency, new business and oil-to-gas conversions
• Continuation of revenue decoupling mechanisms for electric and gas
• Enhanced low-income discount programs for electric and gas customers
• Modifications and additions to the electric, gas, and steam safety and reliability performance and customer service metrics
• Additions to the leak-prone gas pipe replacement program and new reliability program to target replacement of leak-prone pipe in flood zones in New York City and Westchester County
• Improvement and expansion of the oil-to-gas conversion program
• Approval of current storm hardening projects and programs, and conditional approval of future projects that are reviewed by an ongoing stakeholder collaborative
• Consideration of non-wires alternative plan (e.g., distributed resources) for the Brownsville section of Brooklyn, expecting significant load growth
• Company study of future use of Hudson Avenue Property
• Steam customers now eligible for bill credits (in place now for electric and gas customers) in certain circumstances of a storm outage

The Joint Proposal was supported by the following signatories:

• Con Edison
• Department of Public Service Staff
• City of New York
• Consumer Power Advocates
• New York Energy Consumers Council, Inc.
• New York Power Authority
• Utility Intervention Unit (NY Department of State)
• Astoria Generating Company, L.P.
• Pace Energy and Climate Center
• Columbia Center for Climate Change Law
• Environmental Defense Fund
• NRG Energy

Subsequently, on February 21, 2014, the PSC issued an order approving the rate plans in the JP with two relatively minor modifications. The full Joint Proposal and PSC Order can be found on the New York Public Service Commission Site.

Moreland Commission Initiatives

The Moreland Commission made a number of suggestions to enhance utility response to extreme weather events. These include initiatives that result in new ways for the NY Public Service Commission (PSC) to measure utility performance during a catastrophic storm.

The PSC approved a storm scorecard in December 2013 to quantitatively assess electric utility performance after a “significant outage.” The scorecard will be applied for all outage events three days or longer, and others as deemed necessary by the PSC. For Con Edison, the only utility in the state with a significant underground network system, the scorecard will also be used during network outages. We expressed concern that some aspects of the new storm scorecard, including some performance measures will create perverse incentives for utilities to manage restoration to maximize scorecard results. While not opposing use of the scorecard to measure storm performance, the companies suggested that the relative weighting of different “areas of interest,” e.g., safety, should be re-evaluated based on our operational experience with recent storms.

The PSC also approved a proposal by the state’s utilities to share information regarding stockpiled material during a storm recovery effort. Working with the other utilities in the state, Con Edison of New York and Orange and Rockland developed a methodology to establish a state-wide inventory of critical utility equipment and materials used for emergency restoration activities to support the reliability of the State’s electric system. In an emergency, this inventory can be accessed by utilities across the State, supporting efforts to restore customers more quickly during a wide-spread outage.

The Energy Highway and the Indian Point Contingency Plan

In 2012 Governor Cuomo championed the Energy Highway Initiative promoting public-private partnerships to renew the State’s energy infrastructure while protecting the environment and creating opportunities for economic growth and job creation. Accordingly, the PSC initiated two proceedings seeking 1,000 MW of AC transmission upgrades to reduce transmission constraints from upstate to downstate, and transmission, generation, and demand side management solutions to maintain reliability in the event the nuclear power plants at Indian Point are shut down. Con Edison and the New York Power Authority (NYPA) were directed to develop an Indian Point Contingency Plan for solutions to address a possible 2016 Indian Point retirement.

In response to the Energy Highway initiative, the New York State transmission owner (NYTOs), including Con Edison and Orange and Rockland, proposed to create and jointly own a transmission company, New York Transmission Company (NY Transco) to develop, construct, and own transmission facilities in New York State. On behalf of NY Transco, the NYTOs submitted responses to the PSC proceedings. Con Edison and NYPA also submitted three Transco projects in the Indian Point proceeding. More information is available at the NY Transco website.

In November 2013, the PSC approved the three NY Transco projects proposed by Con Edison with NYPA and New York State Electric and Gas Corporation (NYSEG) to prepare for potential Indian Point shutdown in 2016. Two of the projects, Ramapo to Rock Tavern and Staten Island Unbottling, will be developed by Con Edison until they can be transferred to NY Transco. In its order, the PSC also endorsed the NY Transco cost allocation for these projects and supported the plan to file with Federal Energy Regulatory Commission (FERC) for rate recovery for the three Indian Point Projects. In a separate order in the same proceeding, the PSC approved a proposal filed by Con Edison and New York State Energy Research and Development Authority (NYSERDA) to reduce load by 100 MW by the summer of 2016 using energy efficiency and demand reduction projects, plus another 25 MW through new combined heat and power projects.

Regional Greenhouse Gas Initiative

Since 2009, Con Edison has been subject to carbon dioxide emissions regulations established by New York State as part of its participation in the Regional Greenhouse Gas Initiative (RGGI). The Initiative, a cooperative effort by nine northeastern and mid-Atlantic states (RGGI States), established a decreasing cap on carbon dioxide emissions from electricity generation that will lead to a 15-percent reduction in regional emissions between 2014 and 2020. Under RGGI, affected electric generators are required to obtain emission allowances to cover their carbon dioxide emissions, available primarily through auctions administered by participating states or a secondary market.

While Con Edison of New York sold most of its power plants in the late 1990s, the company still owns one power plant that is subject to the RGGI cap: the East River Generating Station. Con Edison of New York met its requirement of 6.3 million allowances for the first RGGI compliance period (2009—2011) and is managing auction purchases in preparation for complying with the second compliance period (2012—2014).

In February 2013, after a comprehensive stakeholder review, the RGGI States proposed major changes to the RGGI program, including a one-time, 45 percent reduction in the regional emissions cap for 2014, and further reductions of 2.5 percent each year from 2015 to 2020. Additionally, the RGGI States implemented a new cost containment mechanism, supported by Con Edison, which will limit the impact of allowance price spikes on the supply portion of our customers’ bills. New York State adopted the new rules, and the lower, 91-million ton cap went into effect January 1, 2014.

Under the revised RGGI emissions cap New York will receive incremental revenues from allowance auctions, above and beyond the $620 million it has collected through the first 23 auctions. As agreed upon in the original “model rule” of the RGGI partnership, each participating state directs its own strategy to invest its auction proceeds in a manner that supports its unique policy objectives, needs, and circumstances. This policy raises redistribution concerns if states invest funds in programs outside of the electric sector. In New York, for example, more than half of the RGGI-funded investments to date were allocated to programs that either indirectly benefit electric customers, or do not benefit them at all.

Renewable Portfolio Standard

The New York State Energy Research and Development Authority (NYSERDA), as the State’s central procurement agency, is responsible for implementing the renewable portfolio standard (RPS) established by the PSC in 2004 with funds collected from the State’s electric utility customers through the RPS charge established by the PSC. For large renewable resources, NYSERDA enters into long-term agreements with developers, and pays the developers renewable premiums based on the facilities’ energy output. Large renewable resources are grid-connected and sell their energy output in the wholesale energy market administered by the New York Independent System Operator (NYISO).

For smaller, customer-sited resources, NYSERDA provides rebates when customers install eligible renewable technologies. The energy produced by customer-sited renewables reduces the overall level of non-renewable energy consumed. In 2013 the companies billed customers the PSC-mandated RPS charges of $109 million, up from $92 million in 2012 (and approximately $365 million cumulatively from 2006), to fund these RPS programs. The PSC has scheduled increases in the RPS charges reaching their maximum annual level of $151 million in 2015.

In 2013, NYSERDA reported that the environmental benefits of electricity generated by renewable generation from 2006 through 2012, as opposed to the State’s “system-mix,” amounts to reduced emissions of approximately 4,028 tons of nitrogen oxides, 8,853 tons of sulfur dioxides, and 4.1 million tons of carbon dioxide.

The PSC approved some programmatic adjustments to the RPS in 2013. These changes included expanding funding for customer-sited solar resources, and prohibiting out of state renewable resources from RPS eligibility. The companies supported expanded funding for solar, but questioned the ban on out-of-state resources because of the likely result of higher renewable energy prices for customers.

Energy Efficiency Portfolio Standard

The New York utilities and The New York State Energy Research and Development Authority (NYSERDA) are responsible for implementing energy efficiency programs through the Energy Efficiency Portfolio Standard (EEPS) established by the New York Public Service Commission (PSC). The utilities billed customers EEPS surcharges of approximately $100 million and $90 million in 2013 and 2012, respectively, to fund these programs. More information about the use of these funds and activities of the utilities related to the EEPS program can be found in the Energy Efficiency and Demand Response section of this report. In addition, Con Edison implements a targeted demand-side management program and demand response programs which are detailed here.

Systems Benefit Charge

The System Benefits Charge (SBC) program funds technology and market development (T&MD) activities relevant to the energy system. The New York Public Service Commission (PSC) uses the SBC to support research and development efforts that serve as a feeder of new technologies to be incorporated into the state’s energy-efficiency and renewable energy programs. The New York State Energy Research and Development Authority (NYSERDA) implements the program under the PSC's supervision.

When the program was reauthorized by the PSC in 2011 through 2017, it was estimated that collections from our customers would provide at least $150 million over the five-year term of the program. In 2013, $26.3 million in SBC charges were collected from the utilities’ electric customers.

The current phase of the SBC program (2012-2016) will focus on a number of areas that should provide benefits to our customers, including smart grid technologies, electric vehicles, advanced clean power systems, advanced building designs, and environmental monitoring and evaluation. Like the RPS program, the SBC T&MD program raises concerns of geographic balance in the program's spending. Of particular concern is whether the program addresses the unique needs of electric customers in New York City and downstate. For example, research is needed to identify ways to incorporate the room air-conditioning units relied upon by residential customers in New York City into demand-response programs that currently use central thermostats to control temperatures.

New York Green Bank

On October 28, 2013, the companies and other investor-owned utilities in New York State made a joint filing to the New York Public Service Commission (PSC) supporting the establishment of the New York Green Bank, an entity with the mission to advance the State’s clean energy goals by reducing or eliminating financing-related barriers to clean energy adoption by customers. Con Edison offered comments related to future funding for the Green Bank, such as using Regional Greenhouse Gas Initiative (RGGI) funds. On December 19, 2013, the PSC approved the establishment of the New York Green Bank, with an initial capitalization of $218 million comprised of $165 million of funds from the New York State Energy Research and Development Authority (NYSERDA) and utility energy efficiency and renewable energy budgets, plus $45 million of RGGI funds allocated to the New York Green Bank by NYSERDA. The New York Green Bank has stated that it has a goal of reaching a capitalization of $1 billion, but it has not been determined how the additional funds will be provided.

Political Engagement

Public policy decisions at all levels of government can have significant implications for the companies’ customers, the energy systems we manage and the future direction of the companies. Accordingly, the companies exercise their fundamental right and responsibility to participate in the political process. We adhere to all applicable national, state and local laws and regulations governing the public policy process, and have internal policies and practices so that we adhere to applicable reporting requirements.

Our engagement in the political process is grounded in and guided by our commitment to our Standards of Business Conduct. Our efforts in this regard meet high ethical standards, are done in accordance with strict company procedures and guidelines, and in a manner that demonstrates accountability and transparency.

No corporate funds are used for political contributions to candidates or political parties. The companies do not make independent expenditures in support of or in opposition to a candidate or political party. No corporate payments have been made, nor do we intend to make payments, to influence the outcome of ballot measures.

Con Edison Political Action Committee

The Consolidated Edison Inc. Employees' Political Action Committee (CEIPAC) is a non-partisan political action committee.

• The CEIPAC is funded entirely through voluntary contributions from eligible employees; employees are not reimbursed, directly or indirectly, for political donations or expenses. Contributions are reported to relevant federal, state and local campaign finance agencies, as required by law.
• Political disbursements made through the CEIPAC are made without regard to the personal or political preferences of Company officers and executives.
• The current members of the CEIPAC Executive Committee are the: Vice President & Controller of Con Edison of New York (CECONY), Senior Vice President Public Affairs of CECONY, Vice President Government Relations of CECONY, President and Chief Executive Officer of Consolidated Edison Solutions, and President and Chief Executive Officer of Orange and Rockland Utilities.
• The CEIPAC Executive Committee factors in many criteria when deciding whether to approve contributions, including a candidate's position on issues; voting records; incumbents leadership on key committees; and the extent of a member company's presence in a district.
• Con Edison's internal auditing department conducts periodic reviews of CEIPAC's practices and procedures, and an independent auditing firm audits the financial statements of the CEIPAC on a yearly basis.

Grassroots Advocacy Network

Con Edison’s Grassroots Advocacy Network engages employees and retirees in the evolving political landscape, educating them on issues important to them and the company. Through the Grassroots Network, employees and retirees receive monthly newsletters, updates on policy and political issues and information on elections and voting. The Grassroots Network also provides opportunities for employees and retirees to attend events on emerging topics of interest and engage their local elected officials by taking action on relevant issues that come up throughout the year.