QUOTE AND NEWS
The Hindu Business Line  4 hrs ago  Comment 
Taking forward the money laundering probe in the Aircel-Maxis deal, the Enforcement Directorate has questioned the Maran brothers— Dayanidhi and Kalanithi — in connection with its criminal case ag...
Forbes  Dec 10  Comment 
With the holidays just weeks away--with increases in falls from ladders, decorating injuries, and food-borne illnesses--emergency physicians have raised concern that people may not be clear about when to seek medical care in emergency departments...
MedPage Today  Dec 8  Comment 
(MedPage Today) -- Vaccination rates have increased, but influenza-related emergency department visits have too.
Forbes  Dec 5  Comment 
Looking at the sectors faring worst as of midday Friday, shares of Utilities companies are underperforming other sectors, showing a 1.1% loss. Within the sector, Duke Energy (NYSE: DUK) and Consolidated Edison (NYSE: ED) are two large stocks that...
MedPage Today  Dec 2  Comment 
(MedPage Today) -- The American College of Emergency Physicians validates emergency medicine pharmacists.
MedPage Today  Dec 2  Comment 
(MedPage Today) -- Emergency physician Christopher Tedeschi, MD, assesses the options.
MedPage Today  Dec 2  Comment 
(MedPage Today) -- Dual antiplatelet therapy lacks clinical benefit for acute coronary syndrome management.
The Economic Times  Dec 1  Comment 
'The new government has some big challenges ahead, but has already brought a renewed optimism and strong hope that economic recovery is round the corner.'
Forbes  Dec 1  Comment 
In afternoon trading on Monday, Utilities stocks are the best performing sector, up 0.5%. Within that group, Duke Energy (NYSE: DUK) and Consolidated Edison (NYSE: ED) are two large stocks leading the way, showing a gain of 2.0% and 1.6%,...




 

Consolidated Edison, Inc. (NYSE: ED) is an energy holding company whose two primary subsidiaries are the regulated utilities Consolidated Edison Company of New York and Orange & Rockland. Con Edison of New York provides electricity, gas, and steam to over 4 million customers in New York City and Westchester County and is by far the largest business entity, bringing in 80% of operating revenues. Orange & Rockland provides electricity and gas to over 400,000 customers in New Jersey and parts of Pennsylvania.

As regulated Electric Utilities, Con Edison and Orange & Rockland have very little competition and strong customer bases. Their businesses are stable and relatively low-risk because they can rely on consistent customers who pay rates determined by the states’ utilities commissions. Con Edison is embarking on a major infrastructure upgrade to improve reliability and cut costs of energy transmission. The costs for this initiative are thus far essentially borne by the customers—they are included in the rates set by the state—so the project is low-risk for Con Edison and potentially very rewarding.

Still, Con Edison’s future is inextricably tied to its relationship with its regulatory bodies, especially the New York Public Service Commission (NYPSC). The NYPSC is responsible for setting most of the regulations that govern Con Edison’s business—most importantly the rates it is able to charge customers.

Company Overview

Business Financials

In 2009, ED earned a total of $13.0 billion. This was a decline from its 2008 total revenues of $13.6 billion. This had an adverse impact on ED's net income. Between 2008 and 2009, ED's net income declined from $1.2 billion in 2008 to $879 million in 2009.[1]

Businesses and Products

Consolidated Edison Company of New York

Consolidated Edison of New York is by far the largest subsidiary of Consolidated Edison, Inc. and serves New York City and Westchester County. It serves 3.2 million electric customers, 1.05 million gas customers, and 1800 steam customers in Manhattan. Because CECONY primary operations are in New York City, most of its customers are commercial and residential. This makes them more sensitive to weather fluxuations (like last year’s heat wave and the ensuing blackout in Queens), but less effected by economic changes. ConEd is regulated by the New York Public Service Commission. CECONY has no generation capacity, so it has to buy all of the energy it supplies to it customers.

Orange & Rockland

Orange & Rockland is the other utility owned by Consolidated Edison, Inc. and serves the regions northeast of New York City and in northern New Jersey and Pennsylvania. It is significantly smaller than CECONY and serves 294,000 electric and 25,000 gas customers. Its customers are similar to CECONY’s and are mostly residential and commercial with only a few industrial clients. It was purchased by ConEd in 1998 for $790 million and is regulated by the NYPSC as well as the New Jersey Board of Public Utilities.

Unregulated Businesses

Consolidated Edison, Inc. has four unregulated businesses: ConED Solutions, ConEd Development, ConEd Energy, and ConEd Communications. Together, these segments make uup less than 3% of ConEd’s earnings.

  • ConEd Solutions is a retail provider of energy services that sells power, gas, and other energy services to a mix of residential, commercial, and industrial customers in competitive markets (small regions where customers can choose their providers). They also provide renewable energy options.
  • ConEd Development owns and operates energy generation plans and other infrastructure projects in the Northeast and Mid-Atlantic area. They also provide asset management and facility maintenance services to other generations.
  • ConEd Energy provides unregulated wholesale electricity to customers throughout the northeast. ConEd Energy’s customers include generations companies, distribution companies, traders, and municipal and cooperative customers—as well as its cousin ConEd Development. They provide energy sales, risk management, and some ancillary services.

Trends and Forces

Regulatory Environment

Consolidated Edison’s profits are fundamentally tied to its relationship with the regulatory bodies that supervise its utilities. Because the bulk of its operations are in New York, ConEd is primarily regulated by the New York Public Service Commission (NYPSC). Its operations in New Jersey are regulated by the New Jersey Board of Public Utilities. These bodies set the prices ConEd can charge for energy and mandate maximum rates of return on equity. Therefore, a good working relationships with these regulating bodies is critical for ED's earnings.

Population and Economic Shifts

As a monopolist, CECONY does not have to worry about competition, but does have to take into account population growth rates. Unlike most corporations, CECONY does not have to compete with other companies for competitors. Not only are they a monopoly, but prices are set by government regulators, so competition would be infeasible anyway. This means that key drivers of growth for ConEd are changes in the populations of the regions it serves. Recently, however, company growth has not come from population increases, but from load growth. This means that roughly the same number of customers have been consuming more energy per capita.

Furthermore, because of its mix of residential and commercial customers, CECONY is relatively protected against economic shocks (at least compared to utilities that serve more industrial clients). Still, ConEd is dependent on the health of New York’s economy and an economic downturn could seriously hurt earnings.

Energy Prices

Consolidated Edison is also subject to fluctuating energy prices. ConEd does not generate any meaningful amount of energy, so it is forced to buy energy on the open market. While this has not been a problem in the past, the potential exists for a crisis where market prices are set too high—and customer rates too low—for ConEd to generate a profit. This happened in California in 2000 and triggered the 2000-2001 energy crisis that left PG&E (a California utility) in bankruptcy. There are no signs of impending price shifts, but a significant price shock would have serious repercussions on ConEd’s utility businesses.

Competitors

Since its primary businesses are regulated utilities, Consolidated Edison does not face much competition in the markets it serves. While its competitive business units obviously must compete in the market place, their relatively small effect on the company as a whole makes competition a negligible force on the corporation. Nationwide, Consolidated Edison is one of the largest electric and gas providers and is the largest provider of steam. While not the only company to provide both gas and electricity, Consolidated Edison is in the minority as more utilities focus exclusively on electricity.


References

  1. ED 10-K 2009 Item 6 Pg. 44
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki