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���������ֳ� - New York - 01 Dec 2020: ���������ֳ� has assigned a 'BBB+' rating to Consolidated Edison, Inc.'s (ED) issuance of $650 million senior unsecured debentures, series 2020 A due 2023. ED's Long-Term Issuer Default Rating (IDR) is 'BBB+'/Negative. The net proceeds are expected to be used to repay a portion of ED's fully-drawn $820 million variable rate term loan that matures on March 29, 2021. The new senior unsecured debentures will rank pari passu with ED's existing senior unsecured obligations.

Key Rating Drivers

Tropical Storm Isaias Investigation: The service territories of utility subsidiaries, Consolidated Edison Company of New York (CECONY; 'BBB+'/Negative) and Orange & Rockland Utilities, Inc. (ORU; 'BBB+'/Negative) suffered significant damage as a result of Tropical Storm Isaias, which occurred in August 2020. The storm resulted in outages for approximately 330,000 CECONY electric customers and 200,000 ORU electric customers. The company reported that as of Sept. 30, 2020, it has incurred total costs for Tropical Storm Isaias of $172 million. CECONY's and ORU's electric rate plans provide for recovery of operating costs and capital expenditures under different provisions. As such, $96 million of the above amount has been charged against storm reserves pursuant to New York electric rate plans. The remaining amounts are either reflected in current rates as capital expenditures or deferred for recovery as regulatory assets.

The New York Public Service Commission (NYPSC) launched an investigation into CECONY's and ORU's preparation for and response to Tropical Storm Isaias. As a result of the investigation, the NYPSC issued an order on Nov. 19, 2020, initiating proceedings to formally investigate and adjudicate what the commission has determined to be apparent violations of public service law and requiring the companies to respond in 30 days as to why the NYPSC should not commence a civil penalty action and/or an administrative penalty proceeding. The commission order specifies potential penalties of up to $102.3 million for CECONY and $19 million for ORU. Additionally, if the NYPSC determines that there have been violations of the public service law, the show case order states that the NYPSC could revoke CECONY's or ORU's certificate of public convenience and necessity, which ���������ֳ� understands is a prerequisite legal requirement for exercising franchise rights in the state of New York. ED and its utility subsidiaries plan to defend against potential violations and/or penalties. While ���������ֳ� views the financial impact of the penalties as manageable; any action to revoke or modify CECONY's or ORU's certificates or franchises would likely have negative rating consequences.

Coronavirus Sales Impacts: Economic activity has been severely impacted in ED subsidiaries' service territories as a result of the coronavirus pandemic. Particularly hard hit is CECONY's electric service territory. 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. ED disclosed that from March 16 to Oct. 31, 2020 weather-adjusted residential CECONY electric delivery volumes increased 11% while commercial volumes declined 17%. Over the same period residential revenues increased 8% and commercial revenues declined 14%. ORU's weather-adjusted impact over the same period was an increase in residential delivery volumes of 9% and a commercial volume decline of 10%. ORU's residential revenues increased 7% and commercial revenues declined 9%.

CECONY and ORU benefit from electric and gas revenue decoupling mechanisms (RDM) in New York for all customer classes. ED estimates that approximately 87% of the company's consolidated revenues and 94% of utility revenues are subject to RDMs. CECONY recently implemented a RDM adjustment covering sales variations from January 2020 to June 2020. While CECONY's electric revenues are reconciled twice yearly, CECONY's gas revenues and ORU's electric and gas revenues are reconciled annually with any recovery or refund under those mechanisms generally effective in February of the following year.

Regulatory and Legislative Coronavirus Response: CECONY and ORU voluntarily suspended disconnections, late charges, and other fees in March of 2020. Subsequently, the state of New York enacted a law prohibiting residential disconnections during the current state of emergency, and potentially, up to 180 days thereafter. The law expires in March 2021. In October 2020, NJ extended its disconnection by executive order until March 15, 2021. As of Sept. 30, 2020, ED's consolidated allowance for uncollectible accounts is $118 million, a $53 million increase from the year ago period. CECONY's and ORU's current rate plans provide for total of $54 million in bad debt expense for 2020. The utilities are expected to request the ability to defer amounts exceeding current rate recovery until the companies' next rate cases.

NYPSC opened a generic docket in June 2020 to investigate the impacts of the coronavirus pandemic on utility service. The commission has not given any indication of the investigation's time table or potential regulatory actions such as deferred accounting for pandemic-related expenses.

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. Multiyear settlements are frequently achieved in New York. On a negative note, authorized ROEs at CECONY and ORU are some of the lowest in the nation. CECONY's current three-year rate plan (2020-2022) is based upon an 8.8% ROE and ORU's plan (2019-2021) is based on a 9.0% ROE. Both subsidiaries' equity capitalization is 48%. Adding additional pressure, recent outages, such as Tropical Storm Isaias has further exacerbated a politically charged operating environment and may result in disallowed expenditures or lower revenues.

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.

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. ED has limited parent level debt. ���������ֳ� estimates that ED's total parent level indebtedness is approximately 7%, which is low for utility parent companies. 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. The Negative Outlook reflects concerns for weaker credit metrics, especially driven by negative regulatory actions.

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.

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 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 leverage should average around 5.0x through 2023.

Key Assumptions

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

--Implementation 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

Factors that could, individually or collectively, lead to positive rating action/upgrade:

--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.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

--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.

Best/Worst Case Rating Scenario

International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit /site/re/10111579.

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. As of Sept. 30, 2020, approximately $1,394 million of consolidated liquidity was available, including $1,241 million of unused facilities and $153 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 ED entities were in compliance as of Sept. 30, 2020. In July 2020, ED borrowed $820 million pursuant to a supplemental credit agreement due March 2021, which is expected to be repaid with the proceeds of the Series 2020 A debentures. Consolidated long-term debt maturities are considered manageable, with $518 million due in 2020, $1,967 million 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.

Date of Relevant Committee

25 March 2020

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on ���������ֳ�'s ESG Relevance Scores, visit .

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Applicable Models

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

• Corporate Monitoring & Forecasting Model (COMFORT Model), v7.8.0 (1)

Additional Disclosures

• Solicitation Status
• Endorsement Policy

Endorsement Status