Regulated utilities hold key to continued success, Con Edison CEO says
ORLANDO — Led by its regulated utilities, Con Edison is poised for a powerful future, said John McAvoy, chairman, president and CEO of Consolidated Edison Inc., during a presentation earlier this week at the Edison Electric Institute’s (EEI) Financial Conference held here.
With a market cap of $25 billion, “the company’s operational and financial performance continues to be strong and … we have a strategy for our continued growth and success in the future,” McAvoy said Nov. 7 in disclosing the company’s latest financials during an EEI conference session.
At its core, McAvoy said, Con Edison considers itself an energy delivery company. Serving 3.4 million customers, it has one of the highest load densities in the world and provides reliable electric service via a complex, expansive grid.
As one of the nation’s largest investor-owned energy companies with roughly $12 billion in annual revenues and $40 billion in assets, Con Ed provides energy-related products and services via two regulated utilities: Consolidated Edison Co. of New York Inc., which provides electric, gas and steam services in New York City and Westchester County, New York; and Orange and Rockland Utilities Inc., which serves customers in a 1,350-square-mile area in southeastern New York, northern New Jersey and northeastern Pennsylvania.
Con Ed is also comprised of Con Edison Clean Energy Businesses Inc., which includes a retail energy supply and services company, a wholesale energy services company and a development arm that participates in energy infrastructure projects.
The third part of Con Ed’s organizational structure is Con Edison Transmission Inc., formed last year to invest in transmission and storage projects.
McAvoy said the utilities comprise the largest business unit in terms of whatever company measure is considered, be it revenues, earnings, capital investments, number of employees, etc. “The regulated utilities are at the core of what we are. They very much still define who we are and what we do,” he said, noting that the company’s mix of businesses do complement one another.
In outlining Con Ed’s plan for delivering value to its customers and shareholders, McAvoy said it starts with the regulated utilities’ three customer-focused priorities: Improving safety; working to significantly enhance the customer experience; and achieving operational excellence.
Strategically, the customer-focused goals will be accomplished by strengthening the core utility delivery business, pursuing more regulated growth opportunities to add more value, and growing the clean energy businesses, he added.
Over the years, McAvoy said, Con Ed has developed algorithms and metrics that align with specific risks and where investments should be placed “that allows us to monitor the performance after the investment has been made … and we’ve seen improving metrics in all of these areas” around items including improved customer satisfaction levels, reduced equipment failures, higher levels of reliability and better safety from both customers’ and employees’ perspectives, he said.
“Because the utilities are the heart of what we do, we continuously work to strengthen what we do regarding reducing risk and making proper investments for our customers. When you look across all three businesses, you’ll see that we’re looking to achieve a relatively low-risk environment for our future,” McAvoy said.
Specifically, Con Edison’s 2017 through 2019 capital investments across its three lines of businesses include investments of:
$1.25 billion in clean energy – Con Ed’s renewables portfolio is 75 percent solar and the company is ranked fifth among solar photovoltaic (PV) owners in North America, McAvoy said. “We’ve done really well with these projects,” which he said have all been on budget, on schedule and produced more electricity and more earnings than was intended at design. Solar projects provide Con Ed a “good growth platform” going forward, he added.
$500 million in regional transmission opportunities – McAvoy said these investments will include executing existing projects — such as the Stagecoach natural gas pipeline and storage project in the Northeast in which Con Ed is a 50 percent owner — and pursuing future “strategic growth opportunities across the region,” through New York Transco, a joint venture Con Ed belongs to (with 45.7 percent ownership) that owns and develops bulk transmission facilities in the state. The group is currently vying for a 1,000 MW AC transmission line build from central New York to the lower Hudson Valley; a decision by the New York Public Service Commission is expected in the first quarter of 2018.
But overall, “our utilities will be the overwhelming focus for the foreseeable future,” McAvoy said.
$9.4 billion in regulated utilities – These investments run the gamut from playing a central role in the integration of distributed energy resources (DER) in New York State’s Reforming the Energy Vision (REV) plan — such as collaborating on electric vehicles, demand response and energy efficiency measures — to working through ratemaking design, installing smart meters, continuing a variety of natural gas-related investments, and promoting corporate sustainability efforts aligned to statewide carbon-reduction and renewable goals.
McAvoy also highlighted Con Ed’s “non-wires solutions,” which he said expand the company’s toolkit to solve system needs and have the potential to reduce customers’ electric bills, improve reliability and defer capital infrastructure spending.
In a nutshell, non-wire solutions are those that allow Con Ed to utilize new technologies to meet rising consumer demand in a specific location (such as a revitalized neighborhood or newly constructed high-rise building, for example) that’s essentially greater than what the company’s current infrastructure can deliver.
So instead of building out the infrastructure with, say a new substation, Con Ed teams with customers like developers to manage the energy use of their residences and/or businesses by offering them incentives to use DERs. Then Con Ed holds a demand response auction in which the demand response providers (such as developers) bid on reducing energy reliance from the grid at peak times in their location. The catch is that the onus is on the providers to sign up Con Ed customers willing to provide that grid relief when Con Ed requests it.
But so far, McAvoy said, Con Ed has seen and expects to see more success with these types of solutions.
And across this overall business plan, McAvoy said, “the customer in each line of our business will remain the center of everything we strive to do in this dynamic marketplace we’re operating in.”
