New York City utility Consolidated Edison Co. of New York Inc. said that it expects its revenue to be reduced by $5 million stemming from a recent five-hour blackout in Manhattan and that the penalty will be recognized in the third quarter of 2019.
In an Aug. 1 earnings presentation, Con Edison's parent company Consolidated Edison Inc. said that the revenue hit, "pursuant to the reliability performance provisions of its electric plan," comes after the July 13 power outage that interrupted service to approximately 72,000 customers in Manhattan, lasting from around 6:47 p.m. until shortly before midnight.
The New York State Public Service Commission and the regional reliability entity, the Northeast Power Coordinating Council, are both still investigating the July 13 blackout. In wake of the outage, New York Gov. Andrew Cuomo, a Democrat, threatened to revoke ConEd's state-issued operating license and place the private investor-owned utility under public ownership.
Con Edison's internal investigation initially concluded that the power shortages were triggered after its West 49th Street substation suffered a "significant electrical transmission disturbance." In a domino effect, the outage spread when both the primary and backup relay protection systems at the utility's West 65th Street substation failed to contain it on a faulty 13,000-volt distribution cable.
Stretching south from West 72nd Street to West 30th Street in Manhattan, and from the Hudson River on the West Side to 5th Avenue to the east, the outage stranded thousands of people on subway trains and elevators.
The PSC is investigating other Con Edison power outages that occurred in July, including blackouts on Staten Island on July 16 and July 17. Meanwhile, Con Edison is scheduled for hearings with the PSC starting Aug. 19 on its request for rate hikes of $485 million for its electricity division and $210 million for its natural gas delivery system. The utility, which serves New York City and Westchester County, is seeking an increase in customer rates to recover rising operating and capital costs in its general rate case proceeding with state regulators.
Cuomo's outrage over the blackout looms large over Con Edison's rate hike request. "The political overhang may last longer than the power outage," Mizuho Securities Executive Director Anthony Crowdell wrote in a July 16 note. "At this time, it is unclear if the NYPSC staff will be less inclined to reach a settlement agreement which could potentially draw the ire of [Cuomo]."
In its Aug. 1 presentation, Con Edison acknowledged that it is unable to estimate the amount or range of possible additional losses that could stem from the power outages.
For the second quarter of 2019, Con Edison on Aug. 1 booked adjusted quarterly earnings of $189 million, or 58 cents per share, compared to $189 million, or 61 cents per share, in the same period in 2018.
The S&P Global Market Intelligence consensus normalized EPS estimate for the quarter was 59 cents.