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An analysis of Con Edison’s Revenue Trends

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Con Edison’s revenue

Consolidated Edison (ED) relies heavily on its regulated operations, deriving more than 90% of its total revenue from them. However, Con Edison posted nearly flat revenue growth from its regulated as well as unregulated segments in the last five years. Consolidated Edison Company of New York (or CECONY) and Orange & Rockland Utilities look after Con Edison’s regulated operations.

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Regulated business

CECONY represents more than 85% of Con Edison’s total revenues as of September 30, 2015. It should be noted that CECONY is under a base rate freeze until the end of 2016. Under the joint proposal entered into by CECONY and New York regulators, the rate plan for 2016 doesn’t include any increase or decrease. This may have a negative impact on the cash flow of the company. Rate base is the value of the property on which a utility is allowed to earn a specified rate of return mandated by the regulator.

Con Edison’s revenues have been quite steady over the last five years due to near-zero demand growth for electricity. However, the company continues to see growth opportunities in the regulated domain. So the company is planning to invest in electric and gas infrastructure assets in the coming years.

FirstEnergy (FE) and Exelon (EXC) are utilities that derive approximately 40% of their revenues from unregulated segments. By contrast, Duke Energy (DUK) has very little exposure to its unregulated operations. For exposure to utility companies like these, you can check out the Utilities Select Sector SPDR ETF (XLU) and the Vanguard Utilities ETF (VPU).

Unregulated business

Unregulated operations are less comprehensively regulated than regulated operations. The unregulated domain of Con Edison includes the operations of power generation, trading of electricity, and the sale of electricity to wholesale customers. Revenues from this segment have been on a decline due to higher power purchase expenses. An unregulated segment of Con Edison controls the wind and power capacity of 446 megawatts.

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