Regulatory Matters

6 Months Ended

Jun. 30, 2026

Rate Plans

CECONY – Steam

In November 2025, CECONY filed a request with the NYSPSC for a steam rate increase of $66 million, effective November 1, 2026. The filing reflects a return on common equity of 9.9 percent and a common equity ratio of 48 percent. The filing includes supplemental information regarding steam rate plans for November 2027 through October 2028, and November 2028 through October 2029, which the company is not requesting but would consider through settlement discussions. For purposes of illustration, rate increases of $50 million and $50 million effective November 2027 and 2028, respectively, were calculated based on an assumed return on common equity of 9.9 percent and a common equity ratio of 48 percent.

In March 2026, the New York State Department of Public Service (NYSDPS) submitted testimony in the pending steam rate case proceeding supporting a steam rate increase of $18 million, reflecting, among other things, a 9.3 percent return on common equity and a common equity ratio of 47.5 percent.

RECO

In June 2026, the New Jersey Board of Public Utilities (NJBPU) approved an electric rate increase, effective July 1, 2026, of $15.25 million and a 9.6 percent return on equity for RECO. In addition, RECO provided a company-funded bill credit for residential customers of $0.5 million in July 2026. The following table contains a summary of the terms of the distribution rate plan.

RECO

Effective period

July 2026

Base rate changes

$15.25 million

Amortization to income of net regulatory (assets) and liabilities

$8.7 million net assets over three years including $8.1 million of deferred storm costs.

$6.2 million over ten years for deferred costs associated with the electric vehicle program

Recoverable energy costs

Current rate recovery of purchased power costs.

Cost reconciliations

Reconciliation of uncollectible accounts, Demand Side Management and Clean Energy Program, Storm Costs Reconciliation (a)

Average rate base

$330.3 million

Weighted average cost of capital (after-tax)

7.14 percent

Authorized return on common equity

9.6 percent

Cost of long-term debt

4.82 percent

Common equity ratio

48.51 percent

(a) The rate plan stipulation includes a base rate allowance of $2.7 million annually ($1.4 million for the last six months of 2026) for routine storm and weather-related expenses that do not qualify as major event storm costs. RECO is responsible for non-major storm costs above the base allowance up to an additional $1.3 million annually, after which excess costs may be deferred until the next base rate case. Storm costs associated with a major storm event may be deferred if incremental costs are $0.8 million or greater.

In June 2026, as part of New Jersey State’s Fiscal Year 2027 Budget, the state allocated $10.68 million to provide bill credits to eligible residential customers of RECO.

Also in June 2026, the NJBPU issued orders that established a residential universal bill credit and a residential energy assistance credit, in an aggregate amount of approximately $2 million for qualified customers of RECO to be funded by New Jersey.

Other Regulatory Matters

In July 2026, the NYSPSC ordered New York utilities, including CECONY and O&R, to show cause why the NYSPSC should not commence a prudence review and an administrative penalty proceeding related to electric vehicle make‑ready program data collection and reporting deficiencies. The Utilities are unable to estimate the amount or range of possible loss related to this matter.

In May 2026, a woman died after falling into a manhole with a dislodged cover in Midtown Manhattan. A lawsuit has been filed against CECONY seeking unspecified compensatory and punitive damages under multiple causes of action. CECONY has provided information to the NYSDPS and has notified its insurers of the incident and lawsuit. CECONY believes that its applicable insurance policies will satisfy any liability it may have in connection with the lawsuit, to the extent such liability exceeds the required self-retention amount, which amount is not material. CECONY is unable to estimate the amount or range of loss and cannot predict whether any other legal or regulatory actions may arise concerning this matter.

In January 2023, CECONY initiated a review of welds on certain gas and steam mains following the company’s discovery of a leak from a gas main weld in Queens, New York. During the course of its review thus far, CECONY discovered non-conforming gas and steam main welds. The non-conforming welds are not expected to have a significant impact on operations. New York regulations require utilities to perform and record weld films for certain gas and steam main welds. Upon reviewing these films, CECONY determined that in some instances third-party contractors engaged in misconduct by substituting duplicate weld films for different welds, while another third-party contractor had created poor quality weld films. CECONY voluntarily disclosed its initial review and findings to the NYSDPS which, in turn, initiated its own investigation into CECONY’s compliance with weld requirements under the New York State Public Service Law and the prudence of CECONY’s oversight of the weld testing process that could result in adverse regulatory action against the company. CECONY continues to investigate this matter, is remediating and monitoring non-conforming welds and continues to cooperate with the NYSDPS in its investigation. During the time period CECONY disclosed the issue to the NYSDPS, it also reported the contractors’ misconduct to law enforcement. In August 2025, two employees of the third-party contractors were indicted in the U.S. District Court for the Southern District of New York for wire fraud arising out of their scheme to defraud CECONY. Given the nature of the non-conforming welds identified, CECONY does not anticipate significant impact to the operation of its gas and steam mains. CECONY's authorized gas rate plan for the three-year period January 2026 through December 2028 provides that $33.3 million in annual gas revenue requirement ($100 million in aggregate from 2026 through 2028) will be recovered through a rate adjustment mechanism that is subject to refund to customers relating to this matter. NYSDPS’ testimony in the pending steam rate case recommended that recovery of $0.5 million of CECONY's steam revenue requirement through the rate adjustment mechanism be subject to refund for the welds matter. CECONY is unable to estimate the amount or range of its possible loss related to this matter.

In January 2018, the NYSPSC issued an order initiating a focused operations audit of the Utilities’ financial accounting for income taxes. The audit is investigating the Utilities’ inadvertent understatement of a portion, the amount of which may be material, of their calculation of total federal income tax expense for ratemaking purposes related to the calculation of plant retirement-related cost of removal. As a result of such understatement, the Utilities accumulated significant income tax regulatory assets ($1,016 million and $7 million for CECONY and O&R, respectively, as of June 30, 2026 and $1,049 million and $10 million for CECONY and O&R, respectively, as of December 31, 2025) which are not earning a return. While the Utilities have properly calculated and paid their federal income taxes and there is no uncertain tax position related to this matter, this understatement of historical income tax expense materially reduced the amount of revenue collected from the Utilities' customers in the past relative to what it should have been. The Utilities’ rate plans have reflected the correct amount of federal income taxes recoverable from customers, including a proportionate recovery of the regulatory asset, beginning with O&R’s rate plans effective November 2015, CECONY’s electric and gas rate plans effective January 2017, and CECONY’s steam plan effective November 2023. As part of the audit, the Utilities plan to pursue a private letter ruling from the Internal Revenue Service (IRS) confirming that the Utilities’ inadvertent understatement of prior years’ income tax expense constitutes a normalization violation that can be cured through an increase in future years’ revenue requirements until such time as the regulatory asset is fully recovered in rates, and not through a write-down of all or a portion of the Utilities’ regulatory asset. Under Accounting Standards Codification Topic (ASC) 740, the Utilities recorded an unfunded deferred federal income tax liability (with a gross-up amount) and a corresponding regulatory asset. The income tax regulatory assets are netted against the related regulatory liability for future income tax and are shown in the line “Future income tax” in the following table of Regulatory Assets and Liabilities and on the Companies’ consolidated balance sheets in the line “Regulatory liabilities.” Management’s assessment is that the income tax regulatory assets as of June 30, 2026 are probable of collection through future rates. The IRS provides safe harbor relief for inadvertent normalization violations through the jurisdictional rate setting process of including in rates adequate revenue to fully recover the deferred tax balance. However, the Utilities would record a liability or impair a portion of the regulatory assets associated with this understatement if the NYSPSC were to issue an order that required the Utilities to write off all or a portion of their existing regulatory asset. The Utilities are unable to estimate the amount or range of their possible loss related to this matter. At June 30, 2026, the Utilities had not accrued a liability related to this matter.

Regulatory Assets and Liabilities

Regulatory assets and liabilities at June 30, 2026 and December 31, 2025 were comprised of the following items:


	Con Edison		CECONY
(Millions of Dollars)	2026	2025	2026	2025
Regulatory assets
Energy efficiency and other clean energy programs (a)	$2,095	$1,994	$1,982	$1,893
Environmental investigation and remediation costs	1,079	1,079	988	987
Customer account deferrals (b)	997	1,089	993	1,084
Revenue taxes	680	638	650	611
Legacy meters	372	382	360	370
Property tax reconciliation (c)	121	101	111	97
Deferred storm costs (d)	78	85	12	1
Deferred derivative losses-long-term	24	18	23	15
Pension and other postretirement employee benefits deferrals	18	—	—	—
Unrecognized pension and other postretirement costs (f)	7	4	—	—


Other	210	209	175	177
Regulatory assets - noncurrent	5,681	5,599	5,294	5,235
Recoverable energy cost	184	6	184	5
Deferred derivative losses - short term	87	97	80	90
Regulatory assets - current	271	103	264	95
Total Regulatory Assets	$5,952	$5,702	$5,558	$5,330
Regulatory liabilities
Allowance for cost of removal less salvage (e)	$1,747	$1,686	$1,523	$1,468
Future income tax*	1,093	1,120	982	1,015
Unrecognized other postretirement benefit cost (f)	781	873	716	806
Pension and other postretirement employee benefit deferrals	252	356	201	313
Net unbilled revenue deferrals	232	397	232	397
Late payment charge deferral	100	192	100	191
Deferred derivative gains – long term	142	119	132	109
System benefit charge carrying charge	103	108	95	100
Storm reserve passback	64	80	64	80

Settlement of prudence proceeding (g)	7	8	7	8
Other	603	435	555	392
Regulatory liabilities - noncurrent	5,124	5,374	4,607	4,879
Deferred derivative gains	296	165	275	152
Revenue decoupling mechanism liabilities	189	13	163	—
Refundable energy costs current	49	71	5	53
Regulatory liabilities - current	534	249	443	205
Total Regulatory Liabilities	$5,658	$5,623	$5,050	$5,084

* See "Other Regulatory Matters" above.

(a) Energy Efficiency and Other Clean Energy Programs represent programs designed to increase energy efficiency achievements and other clean energy transformation efforts.

(b) Customer account deferrals include (1) deferrals under CECONY and O&R's electric and gas rate plans for the reconciliation of write-offs of customer accounts receivable balances to amounts reflected in rates as well as for increases to the allowance for uncollectible accounts receivable and (2) deferral related to the arrears relief programs. Amounts deferred under the arrears relief programs were $227.7 million and immaterial for CECONY and O&R at June 30, 2026, respectively, and $262.9 million and $0.8 million at December 31, 2025, respectively, and receive a return at the pre-tax weighted average cost of capital. The recovery period for the CECONY arrears relief programs will end in 2033.

(c) Property tax reconciliation represents the amount deferred between actual property taxes incurred and the level included in rates subject to the provisions of the respective rate plans.

(d) Deferred storm costs represent response and restoration costs, other than capital expenditures, in connection with major storms that were deferred by the Utilities.

(e) Allowance for cost of removal less salvage represents cash previously collected from customers to fund future anticipated removal expenditures.

(f) Unrecognized pension and other postretirement costs represent the deferrals associated with the accounting rules for retirement benefits.

(g) Settlement of prudence proceeding represents the remaining amount to be credited to customers pursuant to a Joint Proposal, approved by the NYSPSC in April 2016, with respect to the prudence of certain CECONY expenditures and related matters.

In general, the Utilities receive or are being credited with a return at the Other Customer-Provided Capital rate for regulatory assets that have not been included in rate base, and receive or are being credited with a return at the pre-tax weighted average cost of capital once the asset is included in rate base. Similarly, the Utilities pay to or credit customers with a return at the Other Customer-Provided Capital rate for regulatory liabilities that have not been included in rate base, and pay to or credit customers with a return at the pre-tax weighted average cost of capital once the liability is included in rate base. The Other Customer-Provided Capital rate was 4.70 percent and 4.75 percent for the 2026 and 2025 rate years, respectively.

In general, the Utilities are receiving or being credited with a return on their regulatory assets for which a cash outflow has been made ($3,662 million and $3,421 million for Con Edison, and $3,418 million and $3,193 million for CECONY at June 30, 2026 and December 31, 2025, respectively). Regulatory liabilities are treated in a consistent manner. Regulatory assets of RECO for which a cash outflow has been made ($46 million at June 30, 2026 and $41 million at December 31, 2025) are not receiving or being credited with a return. RECO recovers regulatory assets over a period of up to four years or until they are addressed in its next base rate case in accordance with the rate provisions approved by the NJBPU. Regulatory liabilities are treated in a consistent manner.

Regulatory assets that represent future financial obligations and were deferred in accordance with the Utilities’ rate plans or orders issued by state regulators do not earn a return until such time as a cash outlay has been made. Regulatory liabilities are treated in a consistent manner. At June 30, 2026 and December 31, 2025, regulatory assets for Con Edison and CECONY that did not earn a return consisted of the following items:

Regulatory Assets Not Earning a Return*


	Con Edison		CECONY
(Millions of Dollars)	2026	2025	2026	2025
Environmental investigation and remediation costs	$1,071	$1,072	$980	$980
Revenue taxes	651	621	623	595
Deferral for uncollectible accounts receivable	381	427	378	426
Deferred derivative losses - short-term	87	97	80	90
Deferred derivative losses - long-term	24	18	23	15
Unrecognized pension and other postretirement costs	7	4	—	—
Other	69	42	56	31
Total	$2,290	$2,281	$2,140	$2,137

*This table presents regulatory assets not earning a return for which no cash outlay has been made.

The recovery periods for regulatory assets for which a cash outflow has not been made and that do not earn a return have not yet been determined, except as noted below, and are expected to be determined pursuant to the Utilities’ future rate plans to be filed or orders issued by the state regulators in connection therewith.

The deferral for revenue taxes represents the New York State metropolitan transportation business tax surcharge on the cumulative temporary differences between the book and tax basis of assets and liabilities of the Utilities, as well as the difference between taxes collected and paid by the Utilities to fund mass transportation. The Utilities recover the majority of the revenue taxes over the remaining book lives of the electric and gas plant assets, as well as the steam plant assets for CECONY.

The Utilities recover deferred derivative losses – short-term within one year, and long-term generally within three years.

The Utilities recover unrecognized pension and other postretirement costs over 10 years, and the portion of investment gains or losses is recognized in expense over 15 years, pursuant to NYSPSC policy.