Executive Summary / Key Takeaways

• Regulated Growth Engine: Consolidated Edison, Inc. ($ED) is strategically pivoting towards a clean energy future, divesting non-core assets to sharpen its focus on regulated utilities and electric transmission. This focus, supported by robust rate plans and significant capital expenditures, underpins a stable earnings profile and commitment to dividend growth.
• Robust Financial Performance: For the nine months ended September 30, 2025, Con Edison reported a 14.3% increase in net income for common stock to $1,726 million, with diluted EPS rising to $4.83 from $4.35 in the prior year. Operating revenues climbed 11.5% to $12,924 million, demonstrating strong operational execution and the positive impact of rate adjustments.
• Infrastructure for the Future: The company is making substantial investments in grid modernization and clean energy infrastructure, including the Propel NY Energy transmission project and increased budgets for energy efficiency and thermal networks. These initiatives are critical for supporting electrification trends and meeting New York's ambitious climate goals.
• Navigating Regulatory and Operational Headwinds: While benefiting from regulated rate increases, Con Edison faces challenges such as managing aged accounts receivable, potential liabilities from gas main weld misconduct, and an ongoing income tax accounting audit. These risks are being addressed through specific regulatory mechanisms and operational strategies.
• Competitive Resilience: Con Edison maintains a strong competitive position in its dense urban markets, leveraging established regulatory frameworks and extensive infrastructure. While some peers lead in renewable generation, Con Edison's strength lies in its reliable, resilient energy delivery and strategic investments in transmission and distribution to integrate clean energy.

Setting the Scene: Powering New York's Future

Consolidated Edison, Inc. ($ED) stands as a foundational pillar of the energy landscape in New York and parts of New Jersey, a legacy stretching back to its original incorporation in 1823. As a diversified utility holding company, established in its current structure in 1997, Con Edison's core mission is to deliver reliable, resilient, safe, and clean energy to its vast customer base. This commitment is not merely operational; it is the bedrock of its investment thesis: providing shareholder value through consistent dividend growth, anchored by the stable, predictable earnings of its regulated utility and electric transmission assets.

The company's strategic trajectory has been sharply defined by a significant divestiture in 2023, when it sold its Clean Energy Businesses for $3,993 million. This move was a deliberate pivot to "allow for continued focus on the Utilities and their clean energy transition," underscoring a clear strategic intent to concentrate on its regulated segments: Consolidated Edison Company of New York, Inc. (CECONY), Orange and Rockland Utilities, Inc. (OR), and Con Edison Transmission, Inc. This focus positions Con Edison at the heart of the evolving energy transition, particularly in dense urban environments where reliable infrastructure is paramount.

The broader industry landscape is characterized by accelerating electrification, decarbonization mandates, and a surge in demand from new sectors like AI-driven data centers. Data centers alone are projected to consume up to 9.1% of U.S. electricity generation annually by 2030, a significant jump from 4% today, with over 170 hyperscale and colocation data centers planned requiring more than 45 gigawatts of capacity. This trend, coupled with the reshoring of manufacturing, necessitates substantial investment in electrical infrastructure, with utilities making record capital expenditures, estimated at $174 billion in 2024 and projected to rise to $202 billion in 2025 and $211 billion by 2027. Con Edison's strategy is deeply intertwined with these macro trends, aiming to capture growth opportunities within its regulated footprint.

Technological Edge: Modernizing the Grid for a Clean Energy Future

Con Edison's technological differentiation is not rooted in a single proprietary invention, but rather in its integrated approach to modernizing and managing a complex, high-density urban energy system. This encompasses advanced grid infrastructure, smart systems, and proactive planning frameworks designed to facilitate the clean energy transition and enhance reliability.

The New York State Public Service Commission (NYSPSC) adopted a proactive planning framework in September 2025, requiring New York utilities, including CECONY and OR, to annually identify necessary electric grid infrastructure upgrades. These upgrades are crucial for supporting building and transportation electrification, as well as the increasing deployment of distributed energy resources (DER). While DER, such as energy storage, can reduce system load, their bidirectional nature can also create "DER hotspots" that necessitate sophisticated system upgrades. Con Edison's investment in these upgrades, including advanced distribution management systems and data analytics for load forecasting and DER integration, provides tangible benefits by ensuring grid stability and reliability in the face of evolving energy flows. This proactive stance allows the company to integrate new energy sources efficiently and maintain service quality, a critical advantage in its densely populated service areas.

Further demonstrating its commitment to technological advancement, CECONY has four lease agreements for clean energy facilities, with a total present value of $443 million, expected to commence operations between 2025 and 2028. These investments signify the integration of new energy generation and storage technologies into its portfolio. Additionally, the company is pursuing innovative thermal energy networks (UTEN) pilot projects, with estimated costs increasing to $415 million for CECONY and $112 million for OR. These projects, potentially leveraging geothermal or other low-carbon thermal technologies, aim to decarbonize heating and cooling, showcasing Con Edison's commitment to diverse clean energy solutions.

The "so what" for investors is clear: these technological and infrastructure investments are largely recoverable through regulated rate plans, ensuring a stable return on capital. They fortify Con Edison's competitive moat by enhancing grid resilience, enabling the integration of renewable energy, and supporting the electrification trends that are central to its long-term growth strategy. This strategic focus on advanced infrastructure and clean energy integration positions Con Edison as a critical enabler of New York's climate goals, securing its relevance and earnings stability in a rapidly transforming energy landscape.

Financial Strength and Operational Momentum

Con Edison's financial performance for the nine months ended September 30, 2025, reflects the positive impact of its regulated asset base and strategic investments. The company reported a net income for common stock of $1,726 million, a notable increase from $1,510 million in the same period of 2024. Diluted earnings per share (EPS) also saw a healthy rise to $4.83 from $4.35 year-over-year. This growth was primarily driven by a higher electric rate base, reduced commercial paper interest expense, and increased income from allowance for funds used during construction.

Operating revenues for the nine-month period reached $12,924 million, up from $11,587 million in 2024, demonstrating an 11.5% increase. This revenue growth was largely attributable to rate plan adjustments and higher purchased power and fuel expenses, which are generally passed through to customers in a regulated environment. The company's operating income also expanded, reaching $2,448 million compared to $2,193 million in the prior year.

Cash flow generation remains a critical indicator of financial health for utilities. Net cash flows from operating activities for Con Edison significantly improved, rising to $3,320 million for the nine months ended September 30, 2025, from $2,304 million in the corresponding 2024 period. This robust operating cash flow provides essential liquidity for the company's substantial capital expenditure program. Utility capital expenditures, while slightly down year-over-year at $3,460 million compared to $3,533 million, remain a core component of Con Edison's strategy to modernize and expand its infrastructure.

The company's balance sheet also shows strengthening, with Con Edison's common equity ratio improving to 49.20% at September 30, 2025, from 47.10% at December 31, 2024. This enhanced equity position provides a solid foundation for future investments and debt management. In terms of profitability, Con Edison maintains healthy margins, with a trailing twelve-month (TTM) gross profit margin of 64.40%, an operating profit margin of 17.82%, and a net profit margin of 12.26%. The TTM EBITDA margin stands at 41.80%.

Segment Contributions and Strategic Outlook

Con Edison's performance is a direct reflection of its diversified, yet focused, segment operations. CECONY, serving New York City and Westchester County, is the largest contributor, accounting for approximately 93.05% of Con Edison's net income for common stock in the first nine months of 2025. CECONY's electric revenues increased by $812 million, gas revenues by $327 million, and steam revenues by $94 million for the nine months ended September 30, 2025, primarily due to rate plan increases and cost recovery mechanisms.

Orange and Rockland Utilities (OR) also demonstrated solid growth, with operating revenues increasing by 12.16% to $959 million and net income for common stock rising to $94 million for the nine-month period. Con Edison Transmission, while a smaller segment, plays a crucial role in the company's strategic expansion into electric and gas transmission projects. Its net income for common stock was $31 million for the nine months ended September 30, 2025.

Looking ahead, Con Edison's outlook is shaped by significant capital investment plans and favorable regulatory rate cases. The recently approved Joint Proposal for CECONY's electric and gas rate plans for 2026-2028 outlines substantial base rate changes and capital expenditures. For electric, capital expenditures are projected at $4,550 million in Year 1, $4,474 million in Year 2, and $4,712 million in Year 3, with an authorized return on common equity of 9.40% and a 48% common equity ratio. Similarly, gas capital expenditures are planned at over $1 billion annually for the same period. These figures provide concrete guidance on the company's commitment to infrastructure development and the expected returns on these investments.

Management's preliminary assessment indicates that the federal One Big Beautiful Bill Act (OBBBA) is "not expected to have a material impact on the Companies financial position, results of operations or liquidity". Furthermore, the company anticipates that its deferred tax liabilities will "exceed the minimum tax credit carryforward for the foreseeable future," negating the need for a valuation allowance related to the Corporate Alternative Minimum Tax (CAMT) imposed by the Inflation Reduction Act (IRA). These assessments provide a degree of financial clarity and stability for investors.

Competitive Landscape and Positioning

Con Edison operates within a highly regulated utility sector, where its primary direct competitors include other large, integrated utilities such as Duke Energy , Southern Company , NextEra Energy , and Dominion Energy (D). Con Edison's competitive advantage is deeply entrenched in its established regulatory licenses and extensive infrastructure network within its dense urban service territories. This geographic concentration, while a potential vulnerability to regional disruptions, also provides a defensive moat through exclusive service rights, fostering strong customer loyalty and predictable revenue streams.

Compared to a geographically diversified peer like Duke Energy , Con Edison's urban focus allows for potentially greater efficiency in managing its complex distribution networks. While Duke Energy (DUK) may offer broader scalability and diversification, Con Edison's deep regulatory expertise in New York provides a unique value proposition in urban resilience and service reliability. Against Southern Company (SO), which often benefits from lower-cost energy production due to its generation mix, Con Edison's strength lies in its robust distribution and transmission capabilities for high-demand urban environments.

NextEra Energy , with its aggressive focus on renewable energy and technological innovation, represents a different competitive dynamic. While NextEra (NEE) may lead in the speed of clean energy project development and R&D investment, Con Edison's strategy emphasizes the reliable integration of clean energy into its existing, critical infrastructure. The Propel NY Energy transmission project, a 90-mile electric transmission initiative developed jointly with the New York Power Authority (NYPA), exemplifies Con Edison Transmission's role in expanding high-voltage connections to integrate renewable sources. This project, along with other transmission investments, positions Con Edison to benefit from the broader clean energy transition, even if it is not a primary renewable generator itself.

Indirect competitors, including independent renewable energy developers, advanced battery storage providers, and decentralized energy system companies, pose a long-term threat by offering alternatives that could reduce reliance on traditional grid-based power. However, high barriers to entry in the utility sector, such as stringent regulatory approvals and immense capital requirements, continue to favor incumbents like Con Edison, helping to sustain its market share.

Risks and Challenges

Despite its stable regulated business model, Con Edison faces several pertinent risks. The issue of aged accounts receivable remains a concern, with CECONY and OR reporting $1,511 million and $28 million, respectively, in balances outstanding over 60 days as of September 30, 2025. This impacts liquidity, although regulatory mechanisms are in place to reconcile uncollectible expenses and late payment charges.

Operational integrity has also been tested by the gas main weld misconduct at CECONY, which led to an NYSDPS investigation and indictments of third-party contractors. While the company does not anticipate a significant operational impact, a joint proposal for its gas rate plan includes a $33.33 million annual gas revenue requirement (totaling $100 million from 2026-2028) subject to refund related to this matter.

An ongoing income tax accounting audit by the NYSDPS has resulted in significant non-earning regulatory assets of $1,042 million for CECONY and $10 million for OR as of September 30, 2025. While management believes these are probable of collection, there is a risk of a write-off if the NYSPSC were to issue an adverse order. Furthermore, the company continues to manage asbestos-related litigation, with thousands of pending lawsuits claiming billions in damages, though these amounts are believed to be "greatly exaggerated".

External factors also present risks. The imposition of tariffs on Canadian energy imports and other goods could lead to increased electric commodity prices, higher material costs, and supply chain disruptions. The uncertainty surrounding the long-term future of the Utilities' gas businesses in light of New York's climate goals also presents a strategic challenge. Finally, the impact and costs from climate change itself, including severe weather events, could affect system reliability and financial performance.

Conclusion

Consolidated Edison, Inc. stands as a resilient investment in the utility sector, firmly rooted in its regulated operations and strategically positioned for the clean energy transition. The company's recent financial performance, marked by increased net income and robust operating cash flows, underscores the stability derived from its rate-regulated business model. Significant capital investments in grid modernization, electric transmission, and clean energy initiatives are not merely expenditures but foundational elements of its long-term growth, enabling it to meet evolving energy demands and regulatory mandates.

While Con Edison faces inherent risks common to the utility industry, including regulatory scrutiny, operational challenges, and the impacts of climate change, its proactive management and established regulatory frameworks provide a strong defense. The company's commitment to dividend growth, supported by a strengthening balance sheet and predictable earnings, makes it an attractive proposition for discerning investors seeking stability and income. Con Edison's strategic focus on urban energy delivery, coupled with its continuous technological evolution in grid management and clean energy integration, solidifies its role as a critical enabler of New York's sustainable future and a compelling investment in the evolving energy landscape.