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���������ֳ� - New York - 25 Mar 2020: ���������ֳ� has affirmed the Issuer Default Ratings (IDRs) and debt ratings of Consolidated Edison, Inc. (ED) and its regulated utility subsidiaries Consolidated Edison Company of New York, Inc. (CECONY), Orange & Rockland Utilities, Inc. (ORU) and Rockland Electric Co. (RECO). The Rating Outlooks for all entities has been revised to Negative from Stable.

The Outlook revision reflects ���������ֳ�'s view that ED's service territory has been severely impacted by the coronavirus disease 2019 (COVID-19), and as such, ED and major subsidiary CECONY's credit metrics are likely to weaken. Of particular concern is the revenue impact from lower kilowatt hours sales and escalation of bad debt expense, especially in light of Governor Cuomo's executive order to "stay at home" and the resultant shuttering of non-essential commercial businesses. ���������ֳ� acknowledges that ED and its subsidiaries benefit from revenue decoupling and bad debt expense recovery; however, ���������ֳ� is concerned that in the event of an extended pause in NYC's economic activity, such mechanisms may not be fully protective of ED's revenue stream or recovery time could be deferred.

Prior to the COVID-19 outbreak, ���������ֳ� forecasted ED's consolidated FFO leverage to average near, or at, the rating threshold of 5.0x over the forecast period. CECONY's FFO leverage is expected to average approximately 4.7x over the rating horizon, with some years approaching the threshold of 5.0x. Given the limited headroom in metrics and ���������ֳ�'s view credit metrics are now likely to weaken over the rating horizon, a Negative Outlook is warranted. While the financial impact may not be as pronounced on ORU and its subsidiary RECO, due to parent subsidiary linkages these subsidiaries outlooks reflect that of the ultimate parent company. In rating ED, ���������ֳ� treats the modest amount of nonrecourse project financing as on-balance-sheet debt and reflects the leverage in the consolidated credit metrics.

Key Rating Drivers

ConEd

COVID-19 Potential Impact: Economic activity has been severely impacted in ED subsidiaries' service territories. Particularly hard hit is CECONY's electric service territory as a result of Governor Cuomo's executive order to "stay at home" and the shuttering of non-essential commercial businesses. CECONY's electric sales accounted for 64% of ED's 2019 operating revenues and electric sales accounted for 75% of CECONY's operating revenues. ���������ֳ� estimates that residential sales account for 45%-47% of CECONY's electric revenues and commercial sales account for 52%-55% of sales.

While the exact course and time frame of the COVID-19 outbreak is unknown, ���������ֳ� expects over the near term there to be a decrease in electric sales and increase in bad debt expense. ���������ֳ� acknowledges that ED and its subsidiaries benefit from revenue decoupling and bad debt expense recovery; however, such mechanisms may not be fully protective of ED's revenue stream or expense recovery could be deferred. Liquidity is adequate to cover 2020 needs and there aren't any significant operational concerns at this time.

Conservative Business Model: ED's credit profile benefits from the normally predictable cash flows of regulated utility subsidiaries CECONY and ORU and the financial support it receives from them through dividends for payment of corporate expenses, dividends to common shareholders and other business matters. ���������ֳ� forecasts the utilities will represent around 90% of consolidated EBITDA over 2020-2022. CECONY was the largest contributor to consolidated EBITDA at approximately 85% as of TTM ended Dec. 31, 2019. Investments in long-term contracted renewables and, to a lesser extent, regulated electric and gas infrastructure projects, contribute the remainder of consolidated earnings and cash flows.

Regulatory Predictability: ED and its utility subsidiaries benefit from predictable regulation by the New York State Public Service Commission (NYSPSC). Historically, the company's long-term financial stability has been supported by various regulatory mechanisms, including revenue decoupling, forward-looking test years and trackers for large operating expenses. It is not known at this time if the economic impacts of extended COVID-19 shutdowns, could alter the application of revenue decoupling or bad debt expense recovery . In January 2019, CECONY's received approval of the joint proposal, which sets rates during 2020-2022; however, at a lower than industry 8.8% ROE.

Ring-Fencing Triggers: Ring-fencing triggers that were established by the NYSPSC in CECONY's 2017 rate plan (and ORU's 2019 rate plan) and further modified in the recently enacted rate plan provide ���������ֳ� with greater confidence that ED will maintain a conservative business strategy over the forecast period, centered on the company's low-risk T&D utilities. ED will monitor semi-annually whether its investments in its non-utility businesses exceed 15% of total consolidated operations as measured by revenues, assets or cash flows or if the ratio of holding company debt as a percentage of total consolidated debt rises above 20%. If so, CECONY will notify the NYSPSC when these triggers occur and submit a filing providing a ring-fencing plan to insulate CECONY, or, alternatively, demonstrate why additional ring-fencing measures are not necessary at that time.

Acquisition of Sempra Solar Holdings: ED closed on the acquisition of Sempra Solar Holdings, LLC in December 2018, at which time Sempra Solar Holdings became a direct subsidiary of Consolidated Edison Development, Inc. (CED), one of ED's non-utility businesses. The combination increases CED's portfolio generation capacity to approximately 2.6 gigawatts, of which 85% is solar and 15% wind. The $2.12 billion transaction reflects the assumption of $576.0 million of existing nonrecourse project-level debt and a $1.54 billion purchase price that ED funded with a $715 million common equity issuance and an $825 million ($675 million of Dec. 31, 2019), two-year term loan at ED. The January 2019 bankruptcy of Pacific Gas & Electric Company (PG&E) resulted in an event of default of $1,001 million in PG&E-related debt. PG&E continues to make payments under the terms of the purchased power contract and lenders have not exercised the right to accelerate. The company is seeking to negotiate agreements with the PG&E-related project debt lenders to defer or remove the risk of acceleration.

Elevated Capex: Management expects consolidated capital investments of approximately $11.7 billion over 2020-2022, including $9.7 billion, or approximately 83% of total consolidated capex, at CECONY; $628 million, or 5%, at ORU. The company continues to invest to improve reliability, integrate new technologies and accelerate replacement of leak-prone gas distribution lines.

Pressured Credit Metrics: ���������ֳ� forecasts ED's consolidated FFO leverage to average near or at the rating threshold of 5.0x over the forecast period, providing little headroom at current rating levels. The negative cash flow impact of tax reform at the utilities, CECONY's expected lower ROE, and increased debt associated with the Sempra Solar Holdings acquisition have resulted in weaker credit-protection measures. ED has limited parent level debt. ���������ֳ� expects ED's parent level long term debt to be retired by the end of 2022. ���������ֳ� estimates that ED's total parent level indebtedness is approximately 9%. In rating ED, ���������ֳ� treats the modest amount of nonrecourse project financing as on-balance-sheet debt and reflects the leverage in the consolidated credit metrics.

Parent-Subsidiary Linkage: There is a strong rating linkage among ED and its two principal regulated utility subsidiaries, CECONY and ORU. A downgrade of CECONY, given strong operational and financial ties, with the utility generally contributing nearly 90% of ED's consolidated cash flows, would likely result in a downgrade of ED. A downgrade of ED would likely result in a downgrade of ORU, given the subsidiary's small size within the corporate structure. The linkage also reflects a shared bank credit facility and parental support in the form of equity infusions to maintain the utilities' statutory capital structures. Given the linkages, ���������ֳ� would allow a maximum of a one-notch differential between the Long-Term Issuer Default Ratings (IDRs) of ED and CECONY and ORU. As regulated utilities, both CECONY and ORU are considered stronger credits than ED. ���������ֳ� assigns RECO the same IDR as ORU, given its small size and dependence on ORU for all funding and management support.

CECONY

Low-Risk Business Profile: CECONY's ratings reflect the historically predictable cash flows of its regulated electric and gas delivery businesses, which benefit from full and timely recovery of fuel and commodity costs. Various regulatory mechanisms support CECONY's long-term financial stability, including revenue decoupling, forward-looking test years and trackers for large operating expenses. It is not known at this time if the economic impacts of extended COVID-19 shutdowns, could alter the application of revenue decoupling or bad debt expense recovery. Multi-year settlements are frequently achieved in New York. On a negative note, authorized ROEs at CECONY are some of the lowest in the nation.

Rate Settlement: CECONY filed a joint proposal with the major parties in the case on Oct. 18, 2019, which was approved on Jan. 16, 2020. Under the terms of the settlement, CECONY will be allowed to raise electric base rates $113 million in 2020, $370 million in 2021 and $326 million in 2022. The settlement calls for gas base rate increases of $84 million in 2020, $122 million in 2021 and $167 million in 2022. Electric and gas rates are set on an 8.8% ROE and 48% equity capitalization.

The enacted rate plan provides for performance incentives and allows the company to earn up to 9.3% before earnings are shared with customers. The enacted rate plan includes electric earnings incentives for energy efficiency and other potential incentives of $69 million in 2020, $74 million in 2021, and $79 million in 2022 and gas earnings incentives of $20 million in 2020, $22 million in 2021, and $25 million in 2022. The enacted rate plan also includes penalties for not meeting specified targets related to service, reliability, and safety, among other matters.

While the 8.8% ROE is lower than the national average, it is the outcome of NYSPSC's formulaic approach to ROE and is a reflection of the 75 bp decline in the 30-year treasury rate since CECONY filed its rate case in January 2019 and the 25 bp decline since the prior three-year joint proposal filed in September 2016.

REV Neutral to Credit Profile: ���������ֳ� believes efforts to transform the traditional utility distribution business model of New York T&D utilities, under the scope of the REV initiative, bear no near-term impact on CECONY's credit profile. ���������ֳ� expects REV-related capex to represent less than 5% of capital investments over the forecast horizon. Recovery of REV-related capital spending continues to be assessed as part of the rate-making process, and the utility can earn additional incentives through NYSPSC-approved earnings adjustment mechanisms. Execution risk associated with digitizing the grid and emergence of disruptive technologies are potential longer-term concerns.

Clean Energy Legislation: New York enacted the Climate Leadership and Community Protection Act in July 2019. The legislation requires that 70% of electricity procured by utilities in the state be produced by renewable energy systems by 2030 and that by 2040 the statewide electrical demand system to have zero emissions. The law also codifies state targets for energy efficiency, offshore wind, solar and energy storage. A 22-member Climate Action Council is charged with recommending mandates, regulations and other matters to implement the legislation. ���������ֳ� notes that it is too early to assess the implications of the legislation on ED or its subsidiaries' operations or credit quality.

Reduced Capex: Management expects capex of roughly $9.7 billion over 2020-2022. The 5% reduction from the prior forecast reflects the lower approved ratebase in CECONY's recently enacted rate plan. Capex is primarily earmarked toward replacement of aged infrastructure; network reliability enhancement, including a sizable advanced metering infrastructure program; leak-prone pipe replacement; and projects addressing the Reforming the Energy Vision (REV) initiative. ���������ֳ� projects CECONY's internally generated cash flows to support, on average, 80% of capex over the forecast period.

Weaker Credit Metrics: CECONY's credit metrics weakened in 2018 as a result of tax reform. Prior to the COVID-19 outbreak, ���������ֳ� expected that recently enacted rate plan would forestall any significant recovery in credit metrics over the 2020-2022 rate plan period. This is the result of the below average 8.8% ROE and continued effects of tax reform. CECONY's FFO leverage is expected to average approximately 4.7x over the rating horizon, with some years approaching the threshold of 5.0x. ���������ֳ� is concerned that the potential impact on revenue and cash flow due to the COVID-19 will further erode CECONY's limited headroom.

ORU

Low-Risk Business Profile: ORU's ratings reflect the relatively predictable cash flows of its regulated electric transmission and distribution (T&D) and gas delivery businesses, which have full and timely recovery of fuel and commodity costs. The company benefits from regulatory mechanisms in its New York jurisdiction that are supportive of utility creditworthiness, including decoupling and forward-looking test years. On a negative note, authorized ROEs in New York are the lowest in the nation. The ownership of RECO, a regulated T&D utility that operates in New Jersey, provides modest additional cash flows. RECO's ratings are reflective of ORU's credit quality.

NY Rate Plan Approval: On March 14, 2019, the New York Public Service Commission (PSC) approved the joint proposal that was reached in November 2018 by ORU, PSC staff and other parties. The new rate plan increases ORU's electric rates on a phased-in basis over the next three years (2019-2021) by $33 million and decreases gas rates over the same period by $4 million. The rate changes include the effects of the Tax Cuts and Jobs Act's reduction in corporate income tax rate. The 2019 rate changes are retroactive to Jan. 1, 2019. The new rates are based on a 9.0% ROE and 48% equity capitalization, unchanged from the prior three-year plan, and include an earnings-sharing mechanism for earnings above a 9.6% ROE and the continuation of revenue decoupling. ���������ֳ� views the new rate plan as balanced and consistent with expectations.

NJ Rate Proceeding: In January 2020, the New Jersey Board of Public Utilities approved an electric rate increase of $12 million, effective Feb. 1, 2020 for ORU subsidiary RECO. RECO serves 73,000 customers in parts of northern New Jersey. The company had requested a rate increase of $19.9 million based upon a 10% ROE and 49.93% equity capitalization. In October 2019, RECO filed an updated request increasing the rate increase to $20.3 million. The updated filing reflected an increase to the common equity ratio from 49.93 percent to 50.16% and a decrease in the 10% ROE to 9.6%.

Elevated Capex: ORU plans to spend approximately $628 million over 2020-2022, compared with approximately $633 million over the prior three years. Capex is earmarked toward investments in electric and gas infrastructure, implementation of an advanced metering infrastructure system and, to a lesser extent, projects addressing New York's Reforming the Energy Vision initiative. ���������ֳ� expects ORU's internally generated cash flows to fund 75% of capex requirements on average, with the remainder funded through debt issuance and parent equity infusions.

Declining Credit Metrics: ���������ֳ� forecasts FFO-adjusted leverage to average 4.6x over 2020-2022, providing modest headroom at current rating levels. The projected credit metrics assume the recently approved three-year rate plan.

Small Size Within Corporate Structure: ORU's ratings are closely aligned to the ratings of its parent holding company, ED, given ORU's relatively small size within the corporate structure and the benefit of ownership by a large parent that can provide financial support if needed. ORU represented 7% of ED's consolidated net revenue and 5% of consolidated EBITDA as of TTM Dec. 31, 2020. ���������ֳ� assigns RECO the same IDR as ORU, given its small size and dependence on ORU for all funding and management support.

Derivation Summary

ED's credit profile as a utility parent holding company is weakly positioned at the 'BBB+' rating category and is relatively in line with peers Eversource Energy (BBB+/Stable) and AVANGRID, Inc. (BBB+/Stable). Eversource and AVANGRID's multistate utility operations provide slightly more regulatory diversification than ED, which is predominantly a one-state utility, with the majority of its operations in the large urban service area of New York City. ED has a slightly weaker business risk profile than Eversource and a comparable to moderately stronger business risk profile than AVANGRID, which carries a greater proportion of unregulated businesses in its earnings mix. ED's financial profile is comparable to Eversource's and weaker than AVANGRID's. ���������ֳ� projects FFO-adjusted leverage to average near or at 5.0x through 2022 for ED; average in the 5.3x-5.5x range through 2023 for Eversource; while AVANGRID's FFO-adjusted leverage should average around 4.2x-4.6x through 2022.

Key Assumptions

--Implementation of the CECONY enacted rate plan effective Jan. 1, 2020;

--New three-year rate plan at ORU per settlement terms effective Jan. 1, 2019;

--Consolidated capex of $11.7 billion over 2020-2022;

--Dividend payout ratio between 65%-70%.

RATING SENSITIVITIES

ED

Developments That May, Individually or Collectively, Lead to Positive Rating Action

--Given the Negative Rating Outlook, no positive rating action is anticipated in the near term;

--FFO-adjusted leverage less than 4.0x on a sustained basis;

--Given strong financial ties, an upgrade of CECONY.

Developments That May, Individually or Collectively, Lead to Negative Rating Action

--Given strong financial ties, a downgrade at CECONY;

--FFO-adjusted leverage greater than 5.0x on a sustained basis;

--A more aggressive management strategy towards the non-utility businesses, including investments into more volume/commodity-price sensitive midstream operations, that leads to incremental parent leverage.

CECONY

Developments That May, Individually or Collectively, Lead to Positive Rating Action

--Given the Negative Rating Outlook, no positive rating action is anticipated in the near term;

--FFO-adjusted leverage less than 4.0x on a sustained basis;

--Unexpected improvement in New York regulatory environment.

Developments That May, Individually or Collectively, Lead to Negative Rating Action

--A significant deterioration in the New York regulatory compact;

--FFO-adjusted leverage greater than 5.0x on a sustained basis.

ORU

Developments That May, Individually or Collectively, Lead to Positive Rating Action

--Given the utility's small size within the corporate family and close linkage to ED, an upgrade at ED could lead to positive rating actions.

--Unexpected improvement in New York regulatory environment;

--FFO-adjusted leverage less than 4.0x on a sustained basis.

Developments That May, Individually or Collectively, Lead to Negative Rating Action

--A downgrade at ED;

--FFO-adjusted leverage greater than 5.0x on a sustained basis;

--A significant deterioration in the New York or New Jersey regulatory compact.

Liquidity and Debt Structure

Group liquidity is supported by a $2.25 billion shared bank credit facility that expires in December 2022. In April 2019, the credit facility termination date was extended to December 2023 with respect to banks with aggregate commitments of $2.2 billion. The full amount of the facility is available to CECONY, while ED has access to a total of $1 billion and ORU a total of $200 million. As of Dec. 31, 2019, approximately $1.539 billion of consolidated liquidity was available, including $558 million of unused facilities and $981 million of cash and cash equivalents. The bank credit facility has a covenant that requires total debt/total capital to be no greater than 65%. All entities were in compliance as of Dec. 31, 2019. Consolidated long-term debt maturities are considered manageable, with $518 million due in 2020, $1.967 billion due in 2021 and $437 million due in 2022.

Summary of Financial Adjustments

No financial statement adjustments were made that depart materially from those contained in the published financial statements of the relevant rated entities.

ESG Considerations

ESG issues are credit neutral or have only a minimal credit impact on the entity(ies), either due to their nature or the way in which they are being managed by the entity(ies).  For more information on ���������ֳ�'s ESG Relevance Scores, visit .

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