Consolidated Edison Company of New York, Inc., the regulated utility subsidiary of Consolidated Edison, Inc. (NYSE:ED), joined New York regulatory staff and other parties in filing a proposed three-year steam-rate plan covering November 2026 through October 2029. Approval from the New York State Public Service Commission remains required.
The proposal includes headline base-rate changes of $13 million, $42 million and $39 million over the three rate years. A bill-shaping mechanism would instead implement corresponding base-rate increases of $26.6 million, $27.5 million and $28.5 million, producing an approximately 3.5% total customer-bill effect each year. Any revenue shortfall caused by delayed billing after the proposed November 1 effective date would be collected through a surcharge.
For Consolidated Edison, Inc., the attraction is a visible investment and recovery framework. The trade-off is a 9.5% authorized return on common equity and limited room before earnings sharing begins.
Bull Case
The settlement supports $396 million of steam capital spending over three years, comprising $143 million, $127 million, and $126 million annually. The average rate base is projected to increase from $2.118 billion in the first rate year to $2.234 billion in the second and $2.311 billion in the third. That represents approximately 9.1% cumulative growth from the first year to the third, providing a larger base on which Consolidated Edison, Inc. can earn its authorized return.
The multiyear structure also improves planning. Consolidated Edison, Inc. would know the principal revenue, capital, and financing assumptions through October 2029 rather than returning immediately to a full rate proceeding. The proposed after-tax weighted average cost of capital rises from 7.07% to 7.19% across the plan, reflecting higher assumed long-term debt costs.
Several mechanisms reduce operating volatility. The proposal continues weather normalization during the heating season and existing recovery of purchased-power and fuel costs. It also reconciles specified pension, postretirement, variable-rate debt, property-tax, municipal-infrastructure and environmental costs against amounts included in rates. Those protections do not eliminate execution risk, but they limit exposure to several expenses outside normal operating control.
Bear Case
The 9.5% authorized return on common equity is paired with a 48% common-equity ratio. Most earnings above a 10% annual threshold would be used to reduce regulatory assets for environmental remediation and other accumulated costs. The 50-basis-point gap between the authorized return and the sharing threshold leaves limited upside from outperforming the settlement assumptions.
Service execution can reduce realized revenue. Consolidated Edison, Inc. faces potential negative revenue adjustments of $4.3 million, $4.5 million and $4.7 million if targets covering service, reliability, safety and other matters are missed. The three-year maximum totals $13.5 million.
Capital spending also does not translate dollar for dollar into rate-base growth because depreciation, retirements and recovery rules affect the balance. New York regulators may modify the joint proposal before approval, particularly if affordability or service concerns outweigh the benefits of settlement. The shaped bill increases improve customer predictability, but they do not make the underlying economics unusually generous.
Hedge Fund Sentiment
The filings available so far reflect positions held before Consolidated Edison, Inc. reported the proposed three-year steam-rate settlement. Insider Monkey’s database showed 39 hedge funds holding Consolidated Edison, Inc. at the end of 2Q2026, down from 43 funds three months earlier.
Conclusion
The proposed settlement gives Consolidated Edison, Inc. a clearer path for steam investment, rate-base growth and cost recovery through 2029. Its value rests on predictability rather than exceptional returns. The final regulatory order, approved capital recovery, and performance against service targets will determine whether the growing rate base produces the earnings stability implied by the plan.
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This article is originally published at Insider Monkey.
