Lawmakers Push for Cap on Con Edison Profits After Latest Rate Hike Request

For New York's Con Edison customers there's bad news, good news, and some more bad news.

First the bad news. At a time when utility bills are nearing untenable levels for many homeowners and businesses, Con Edison recently asked for permission to increase residential utility rates by as much as 13.7%, a proposal that would push up consumers' bills by about $2 billion.

Now the good news. Earlier this month, Crain's reports, the New York Public Service Commission (PSC) recommended that Con Edison collect an increase of $319 million in revenue, far less than the utility's original request.

As an investor-owned utility company, Con Edison is overseen by the PSC, which approves what utility companies can charge their customers and authorizes each utility’s “return on equity” — the level of expected profit utilities can bake into people’s utility bills. The PSC staff also proposed that Con Edison earn a 9.3% return on equity, generous but significantly lower than the 10.1% requested by the utility.

This battle is unfolding at a time when utilities are facing increasing pressure from customers and politicians over rising electricity bills. Power companies say the increased spending is needed to fortify and expand their systems to meet anticipated increased electric demand from electric vehicles, data centers and other industrial sources. Also driving the rising demand for electricity are city and state climate laws, which are pushing many building owners, including co-op and condo boards, to abandon fossil fuel-powered building systems in favor of electric heat pumps and other environmentally-friendly technology.

Which leads us to more bad news. As a result of this rising demand, earlier this month the PSC gave Con Edison the green light to recover the costs of $440 million worth of “urgent” energy projects to bolster the city’s electric grid. Crain's reports that the five projects, all in the Bronx, will install new cable and other power equipment and will allow the utility to recoup the projects’ costs from its electric customers through a surcharge. The exact amount and timing of that surcharge is yet to be determined.

In the end, the key issue in this battle is the profits earned by the shareholders in Con Edison and other investor-owned utilities. A bill that state Sen. James Skoufis of the Hudson Valley introduced earlier this year aims to lower consumer costs by capping those profits at 4%. He says that still leaves plenty of profit for the companies’ shareholders, while providing customers with savings.

“They'll still make money, but we're going to put a cap on just how much money and put an end to the ripping off of New Yorkers from end to end in this state,” Skoufis tells Gothamist. “You look at a lot of for-profit sectors and industries in New York, and they would kill for a 4% profit margin. So, you know, 9% is just highway robbery.”

U.S. Rep. Ritchie Torres, a Bronx Democrat, adds that the profits that go to utility company shareholders are “the most regressive tax that most people have never heard of.”

The PSC is still reviewing Con Edison's proposed rate and profit increases and will issue a final decision later this year.