Consolidated Edison, Inc. (ED) Environmental, Social, and Governance (ESG) Presentation (Transcript)

Consolidated Edison, Inc. (NYSE:ED) Environmental, Social, and Governance (ESG) Presentation November 29, 2022 9:00 AM ET

Company Participants

Jan Childress – Director of Investor Relations

Timothy Cawley – Chairman, President, and Chief Executive Officer

Jen Hensley – Senior Vice President of Corporate Affairs

Matt Ketschke – President, Consolidated Edison Company of New York, Inc.

Robert Sanchez – President and Chief Executive Officer, Orange and Rockland Utilities, Inc.

Vicki Kuo – Senior Vice President, Customer Energy Solutions

Kathy Boden – Senior Vice President, Gas Operations

Venetia Lannon – Vice President, Environment, Health & Safety

Mary Kelly – Senior Vice President, Corporate Shared Services

Robert Hoglund – Senior Vice President and Chief Financial Officer

Conference Call Participants

Operator

Hello, and thank you for joining us. I’m Jan Childress, Director of Investor Relations for Con Edison. We’re happy to be here today to talk specifically about issues relating to environment, social, and governance, ESG.

This presentation contains forward-looking statements that are intended to qualify for the Safe Harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 as amended.

Forward-looking statements are statements of future expectations and not effects. Words such as forecasts, expects, estimates, anticipates, intends, believes, plans, will, target, guidance and similar expressions identify forward-looking statements. The forward-looking statements reflect information available and assumptions at the time the statements are made, and speak only as of that time. Actual results or developments may differ materially from those included in the forward-looking statements because of various factors, such as those identified in reports the company has filed with the Securities and Exchange Commission, including, but not limited to, that the company’s subsidiaries are extensively regulated and are subject to penalties, its utility subsidiaries rate plans may not provide a reasonable return, it may adversely be affected by changes to the utility subsidiaries’ rate plans, the failure of processes and systems and performance of employees and contractors could adversely affect it, the failure of or damage to its subsidiaries facilities can adversely affect it, a cyberattack could adversely affect it. It is exposed to risks from the environmental consequences of its subsidiaries’ operations, including increased costs related to climate changes. A disruption in the wholesale energy markets or failure by an energy supplier or customer can adversely affect it. It has substantial unfunded pension and other post-retirement benefit liabilities. It requires access to capital markets to satisfy funding requirements. Changes to tax laws could adversely affect it. Its strategies may not be effective to address changes in the external business environment. It faces risks related to health epidemics and other outbreaks, including the COVID-19 pandemic. And it also faces other risks that are beyond its control. Con Edison assumes no obligation to update forward-looking statements.

Now please note that there is an ask a question box right beneath the webcast player on your screen. Just type in any questions you may have and click the submit button. Type your questions at any time. I will be tracking them. We will cycle through the questions as we get to the end of the program.

Now it is my pleasure to turn this over to Con Edison’s Chairman and CEO, Tim Cawley.

Timothy Cawley

Thank you, Jan. Hello, everyone. And thank you so much for being here for our third annual ESG presentation. I hope you all had a safe and wonderful Thanksgiving break with family and friends. I’m really happy to be here with you today to discuss the progress we’ve made this year on environmental, social and governance issues and where we’re going. And as Jan mentioned, we’ll answer some questions at the end.

Con Edison is among the nation’s largest investor-owned utilities. Through CECONY and O&R, we provide electric gas and steam service to 10 million people in New York City, Westchester, Orange and Rockland counties. This service territory is resilient, dynamic, and dense. We deliver 44% of New York State’s electricity, and our delivery systems are mostly underground.

We’ve also been around for a while and are very stable. We’re the longest continuously traded stock on the New York Stock Exchange. And next year, we’ll celebrate our 200th year in business, having started as a small gas company in Lower Manhattan in 1823.

Reliability remains critically important to our company and our customers. And we have nearly 14,000 employees working every day in the streets and behind the scenes to make sure our systems remain safe and reliable.

And when we speak about reliability, we’re really in a class by ourselves. This is what the chart indicates. CECONY electric customers, for example, experienced an outage rate that is seven times lower than the national average, and eight times lower than customers elsewhere in New York state. So if you’re a customer, that’s good because you know when you want to plug in your car or charge your phone, you can count on our service.

But it’s also the foundation upon which New York’s economy is built. So if you’re an ad screen in Times Square, you’re not going to have a revenue impacting outage. And if you’re the New York Stock Exchange, trading won’t come to a halt. We underpin New York City’s economy and are proud to do that safely, reliably, and now more than ever, cleanly.

At Con Edison, the pillars of our company culture remain consistent. We work to maintain the safety of our employees, customers, and the public we serve every day. We value operational excellence, which shows up in all of our work and leads to the reliability that I just spoke about. We know our customers count on us and we work every day to maintain that trust.

We invest in the customer experience. We’re in the process of replacing our customer service system to improve our operations and ensure greater transparency for each of our customers.

Con Ed’s committed to excellence in social and governance practices. We’ve launched meaningful diversity, equity and inclusion initiatives throughout our company, which are supporting the attraction and retention of bright new talent that will grow Con Edison for decades to come.

And we focus on our shareholders, prudently managing our company so that we deliver for our investors, including the thousands of retirees who maintain positions in our company and rely on Con Edison for stable, reliable performance.

In all we do and every one we serve, we remain intensely focused on leading the nation’s energy mid sector, and we leverage our values to continue to deliver a reliable and efficient transition to a clean energy future.

Con Edison is a leader in the clean energy transition. And we were among the first utilities to adopt a clean energy commitment as a way of holding ourselves accountable for the changes we want to see in our industry and in our systems.

Our commitment covers five main areas or pillars, and I’ll walk through them quickly and the team will take you through them in greater detail as we go through the deck. So we’ll build the grid of the future by investing in our infrastructure, so that our system can reliably deliver clean energy to all of our customers.

We’ll empower our customers to meet their climate goals by providing information and incentive programs related to energy efficiency and electrification of heating, think heat pumps, and transportation, EVs.

Recognizing that we’ll need to deliver significantly less natural gas to achieve our aggressive greenhouse gas emission goals, we are reimagining our gas system, focusing on transitioning customers to electrification and decarbonizing through investments in alternative fuels. We’re reducing our own carbon footprint too by focusing on electrifying our fleet and reducing emissions from operations.

And finally, we remain committed to partnering with stakeholders, including our customers, the communities we serve, and advocates in the environmental justice community, to ensure that costs and benefits of the clean energy transition are borne equitably. We’re proud of this commitment, but prouder still to the progress we make every day in achieving it.

Across the ESG landscape, we are seeing real measurable results every day. I’m excited the team has joined today to walk you through the actions we’ve taken, the progress we’ve made, and the plans to continue the effort moving forward.

I’ll turn it over to Jen Hensley, our Senior Vice President of Corporate Affairs, who recently joined the company and we are thrilled to have Jen on board. All yours, Jen.

Jen Hensley

Thanks so much, Tim. I’m really excited to be on the team and happy to be here today with all of you.

I will first provide a quick overview of the energy industry in New York for those less familiar with Con Edison’s regulatory landscape. Our state deregulated the public energy sector in 1994 to promote competitive opportunities in electricity supply. The state’s electric delivery companies, including Con Edison’s utilities, participate in the New York ISO for transmission planning across service territories and bulk power procurement. Delivery is regulated by the New York State Public Service Commission, which sets reasonable rates and ensures safe and adequate service for customers.

New York has long been a leader in progressive climate policies. And in 2019, New York State signed into law new groundbreaking legislation called the Climate Leadership and Community Protection Act, which established aggressive new environmental targets aimed at achieving the broad goals of a zero emissions electricity sector by 2040 and economy-wide carbon neutrality by 2050.

The CLCPA also requires between 35% and 40% of the benefits of spending on clean energy or efficiency programs be in disadvantaged communities and it mandates that an air monitoring program in at least four such communities. These are among the most ambitious goals in the country, and political leadership throughout the state remains strongly committed to realizing them.

Even within the context of these statewide goals, New York City, which accounts for 78% of Con Edison’s customer base, has one of the most ambitious plans for reducing emissions in the nation. Local Law 97 was included in the Climate Mobilization Act, passed by the city council on April 2019, as part of then Mayor de Blasio’s New York City Green New Deal. It requires most buildings over 25,000 square feet to meet new energy efficiency and greenhouse gas emissions limits by 2024, with stricter limits coming into effect in 2030. The goal is to reduce the emissions produced by the city’s largest buildings by 40% by 2030 and 80% by 2050.

Additionally, Local Law 154 bans the burning of fossil fuels in any new building or any building undergoing a major renovation starting in 2024. This will require fully electric solutions for these new customers. And we’re already seeing electrification planning underway on many new developments across the city.

Together, this broad set of policy priorities, they demand significant investment in renewable generation, energy storage solutions, local and regional transmission capabilities, and the delivery system to support the transition and growth in electrification. We believe this is the right thing for the climate for our customers and the communities we serve and for our business, and we’re excited about the opportunities it represents in our service territory.

Turning back to our own commitment. We are well positioned to support state and city’s aggressive goals operationally, with new investments in our electric grid, and by partnering with our customers who are relying on us for support with their efficiency goals, as well as customer sites upgrades that may be required for transitions from gas for cars and heat.

Over the next two years, Con Edison will invest more than $300 million in new EV charging infrastructure and more than $1.5 billion in energy efficiency programs throughout our service territory. We will continue our aggressive maintenance and repair programs so that methane emissions from our gas systems will continue to be significantly less than 1% of total.

By 2030, Con Edison expects to deliver 1000 megawatts of battery storage to help support and balance increased levels of renewables on the grid. We will have electrified 150,000 buildings and our facilities will be powered by 100% clean energy. We will have made more than $3 billion in infrastructure investments supporting resiliency and transmission to move renewable resources from where they are generated to where they are consumed.

And looking ahead to 2035, Con Edison is planning for 400,000 EV charging plugs and a fully electrified light duty fleet of our own. We’ll be net zero by 2040. And by 2050, our territory will have more than 1 million EV chargers, supporting the network of new personal electric vehicles, bus and delivery fleets, taxis and service vehicles.

These are not just goals or aspirations, though. These are plans that we have developed with clear roadmaps to achieving them. We remain focused on ensuring that New York and Con Edison continue to lead the clean energy transition in partnerships with our colleagues in state and city government.

Now I’ll turn it over to my colleague, Matt Ketschke, President of Con Edison of New York, who will share more information about building the grid of the future.

Matt Ketschke

Thank you, Jen. And hello, everyone. It’s really nice to be with you today. As with most parts of the country, New York’s building stock and transportation sectors account for the vast majority of GHG emissions, which is why so many of the laws and regulations Jen mentioned focus on changes to those sectors. We expect that we’ll continue to drive much of the reduction required to meet their goals through implementation in those sectors.

But electricity is a fast follow here. That’s why there’s such a focus on building deliverable renewables in New York state. For Con Ed, we think there’s an opportunity to own in state renewable generation, which will ensure that the value of those assets accrue to our customers over time.

But storage and transmission will also be critical in order to support renewables at the scale required to meet New York State’s demand. So we’re looking at all the potential opportunities for our business. But we’re also looking at our existing service territory and commodities.

Reaching New York State’s emission goals will require significant changes across all Con Ed’s commodities. On the electric side, we expect customers to replace fossil fuels with electrification for many of their end use energy needs. And even with aggressive energy efficiency programs, we will see demand grow from between 42% to 85% by 2050. This means new investments in transmission and delivery systems to accommodate that growth. And for gas, we’re expecting a decrease in delivery of 60% or more over the same period.

Depending on R&D efforts and market changes, we would expect to see the gas delivery infrastructure leverage the delivery of low and no carbon fuels to continue to serve some customers that have difficult-to-electrify applications.

And Con Edison, we operate one of the largest steam systems in the world and we believe that the steam system will play an important role in helping our customers meet the demands of Local Law 97 as we work to aggressively decarbonize the steam production process.

We believe that this will be a vastly more cost effective way for the city to meet the requirements and for some of our customers who have hard-to-electrify applications. We expect that some steam customers will convert to electric and others will adapt to energy efficiency. So, overall, steam sales will decline over time by about 20% to 40%.

So we are planning for a lot of change across our commodity mix going forward and working to help legislators, regulators and customers understand the impact of these changes.

With change in technology and shifts in commodity demand that we are forecasting, we are also expecting a change in the seasonality of our business. With increased utilization of heat pumps for heating and electrification of vehicles, we are planning for a shift from summer to a winter peaking system sometime before 2040. This will create new operational challenges and also require additional investment.

For example, today, when the summer season is over, we start to take pieces of our electric system out of service from maintenance projects that sometimes can last all the way through to the springtime. By 2040, we will need enough redundancy in our systems that we’ll be able to do those projects in half the time, so our system be fully operational and capable during the peak winter heating season.

We are strong advocates where a system needs to be ready for these changes and we are aggressively planning for and implementing the changes necessary to maintain the highest levels of service for our customers.

We’re also integrating climate science into our planning. Columbia University and their climate researchers have published reports showing that today, on average, in New York, we have four hot days. Those are days over 95 degrees. On average each summer. That is going to go up to about 23 by 2050 and then 45 by 2028.

So our grid is going to have to be ready for longer stretches of hot weather in the summertime and prolonged heat rates. This means we’ll need the infrastructure in place to make sure that we can meet the reliability needs.

Now I’m going to turn it over to my colleague Bob Sanchez, President of Orange and Rockland.

Robert Sanchez

Thanks, Matt. Good morning, everyone. Now I would like to discuss the grid enhancements necessary to meet the CLCPA goals that we’ve talked about today. The state’s public service commission has issued solicitations for projects necessary to ensure utilities across the state are advancing the clean energy transition.

Con Edison’s response to the state’s initial solicitation included three reliable clean city transmission projects that supports Queens, Brooklyn, and Staten Island. These local transmission projects are currently underway, and they’re essential to ensuring reliable transmission capacity in these neighborhoods when existing peaker plants retire and new renewable resources come online.

At O&R, we received the accelerated approval for a series of projects at Orange County to support new renewable projects. And across the CEI companies, we also remain focused on transmission and grid connections for upcoming offshore wind projects. These projects include the Brooklyn Energy Hub, the other infrastructure to enable the renewable resources to be dispatched in line with the needs for our customers.

The regulated utilities have also been focused on expanding battery storage capability. Our Pomona and Ozone Park projects are already bringing 5 megawatts, 22 megawatt hours of capacity to the grid. And in addition to the 7.5 megawatt, 30 megawatt hour facility in Fox Hills, an additional 30 megawatts are on the way to further support dispatchability of renewable generation.

Optimizing storage capacity will position us to strategically deploy and integrate intermittent large scale renewable energy resources. Our goal is to continue to leverage our experience in owning and operating energy storage for the benefit of our customers. This experience can effectively transition to ownership of other distributed energy resources, or DERs, like large scale solar. We strongly believe that utilities are well positioned in the current market to deliver efficient and reliable generation of renewables in a cost effective way for our customers. And we’re going to continue to make that case with the legislature and also with the regulators to win the rights to deploy generation for the benefit of our customers. We see opportunity on the horizon for our business and are eager to pursue every opportunity that supports the valuable service that we provide our customers.

The Con Edison Transmission business continues to be active and pursuing opportunities to grow our regional electric transmission presence and support clean energy. The Transco New York Energy Solutions Project is under construction and expected to be in service by the end of next year. The team also has several outstanding bids for electric transmission projects. And we’ll continue to look for new solicitations and opportunities to partner with in order to grow our electric transmission business.

Much of what I discussed today is extremely valuable, it needs to be protected from a cyber standpoint. And because our territory is so visible and vital, not only to our region, but to the country, and frankly speaking, to the world as well, we know that we’re at high risk for cyberattacks. We take this risk very seriously, continue to make significant investments in the tools and women and men necessary to guard against attacks, spot risks and vulnerabilities and prevent activities that could compromise our vital energy systems.

We also take the same approach with protecting data privacy. As one of the first utilities in the country to have a chief privacy officer, we’re setting standards for compliance and industry leading protective data privacy practices.

Now I’ll turn it over to Vicki Kuo, our Senior Vice President of Customer Energy Solutions, to talk about some of the energy efficiency and electrification programs. Vicki?

Vicki Kuo

Thanks so much, Bob. There’s a saying in the energy efficiency industry that the cheapest and the cleanest energy is the energy you don’t use. That’s why energy efficiency is at the heart of our clean energy future.

Since 2009, our programs have empowered more than 2.5 million customers to upgrade their homes and businesses to be more efficient. Over 2,000 of those are affordable housing buildings.

That work has saved 11 million metric tons of carbon emissions, which is the equivalent of taking about 240,000 cars permanently off the road. And we aim to continue to invest over $3 billion through 2030 in this area.

As Matt mentioned earlier that buildings is a major source of carbon emission in our service territory. Our customers are eager for help to decarbonize their buildings. We have a variety of programs that helps customers to electrify their buildings.

Since the launch of our Clean Heat Program in 2020, we have helped about 1% of the building space in our service territory to clean and high efficiency heat pump. But that’s barely scratching the surface of what will be needed to combat climate change in a meaningful way. We will need to electrify 10% of the space heating in our service territory and 15% of water heating by 2030, which requires $5 billion to $7 billion additional investment.

I now turn to talk about transportation electrification. We’ve made tremendous progress since the launch of our PowerReady program in 2020. Our PowerReady program is the second largest electric vehicle make ready program in the country. Our goal is to support the building of 20,000 charging plots, including 2,500 plugs near disadvantaged communities. The availability of charging is a key part of enabling EV adoption.

Working hand in hand with having charging infrastructure is managed charging. Our SmartCharge program enables one quarter of the electric vehicles on the streets today and 25 transit buses in New York City to participate to charge off peak. The program is growing and we’ll be expanding to Orange and Rockland service territory in January.

We have also successfully completed a three-year electric bus pilot in White Plains by enabled insights for fleet transportation, school bus electrification in the future. And we will continue to invest in the area working with our stakeholders to enable medium duty and heavy duty as well as fleet electrification in future.

I will now pass it to Kathy Boden, Senior Vice President of Gas Operations.

Kathy Boden

Thank you, Vicki. I’m going to talk through our gas strategy and touch on the steam strategy. So our gas system provides heating hot water and cooking to 1.2 million customers and our focus today is on providing safe, reliable and cost effective energy for those customers. The longer term gas strategy maintains this focus, while enabling a clean energy transition. And it’s dependent on policy and regulatory changes and advances in technology.

We’re engaged with stakeholders and industry partners to create pathways forward and the strategy for gas can be categorized into three buckets. One is reducing gas consumption and, in turn, reducing building emissions by implementing energy efficiency, phasing out new customer gas connections and electrifying heating systems.

The second bucket is decarbonizing the supply for the remaining customers on the system. And the third is maintaining the safety, reliability and economic viability of the business by employing non-pipeline solutions and continuing to address full recovery of existing assets.

Con Edison believes strongly in our commitment to decarbonization and greenhouse gas reduction, and we’ve been leading the industry in our approach to managing our gas system. Specifically, we’ve already started to slow the customer growth on our system based on supply constraints in our service territory in Westchester with our 2019 moratorium.

We’re implementing a main replacement program that provides safety and reliability and reduces fugitive leaks. And we exercise one of the most thorough leak management programs in the industry.

As you’ll see in the illustrative example below, we expect to see significant reduction in building emission served by our natural gas system through energy efficiency and the aggressive pursuit of end use electrification options that Vicki discussed, in particular heating. And as technologies become scalable and more competitively priced, we expect to see our supply become decarbonized with low carbon fuels, further reducing emissions on our system.

We also believe that the demand is on track to change dramatically over the next several decades, and our system will be rightsized to meet this need. Today, we buy natural gas and deliver it through our gate stations and distribution system to our customers. And as technologies become available and scalable, we expect the supply mix to begin to change in the next decade and after 2030. At the same time, we expect to see significant reduction in demand as customers migrate to our electric system. And by 2050, we expect that any remaining gas grid customers will be served by low carbon fuels.

We’re investing big in research and development to identify and scale the use of low and no carbon alternatives to natural gas. This technology will be essential for hard-to-electrify customers, some large scale commercial customers and other situations where electrification is not practical.

And while the entire industry is mobilized around scaling low carbon fuels, like the Low Carbon Resource Initiative, here on this slide, which really is extremely comprehensive in scope going from supply all the way down to end use, we do remain a bit of an outlier in the industry, particularly in advocating for slowing the growth on our gas system. But we believe we’re in a strong position to succeed as we migrate customers to our reliable electric system.

And while our steam system is separate and apart from our gas system, it is primarily supplied by natural gas. This improved the greenhouse gas emission profile from burning fuel oil to power its generators in the past, but we’re going to take it a step further. In order to fully decarbonize our steam distribution systems, we’re seeking alternative clean technologies and strategies to power it. The low carbon resource initiative I mentioned on the last slide is helping us to find solutions. Our long term strategy for the steam system will sound familiar to the gas story and that we intend to aggressively pursue energy efficiency in steam supply buildings, exercise more demand response to reduce consumption on the coldest days and electrify some end uses where it makes sense.

However, many of the iconic buildings that use steam in Manhattan will be extremely expensive to retrofit with an electric heating solution and, therefore, would be better served by the efficient steam system. The difference being to supply this system with a combination of low carbon fuels, electric boilers and industrial heat pumps. Our R&D department and engineers are very busy benchmarking and seeking solutions for ultimate decarbonization of these traditionally fossil fuel powered systems.

And now, I’ll turn it over to Venetia Lannon, the Vice President of our Environmental, Health and Safety team.

Venetia Lannon

Thank you, Kathy. For nearly 20 years, Con Edison has had a steadfast focus on reducing our carbon footprint. We’ve reduced our footprint, namely our Scope 1 emissions by more than 50% since then. As Kathy noted, we’re working to eliminate methane emissions from our gas system by 2040. Those are the emissions from the pipe network we control.

We’re also working on a pilot project to purchase certified natural gas which would help ensure that upstream methane emissions are minimized as well. Ultimately, our goal is to power all our company facilities with 100% clean energy within the next decade.

You heard how today our steam system offers low carbon energy solutions. Our plan is to continue to look at transitioning our steam generating plants to net zero emissions by 2040 as well. Our steam generating plants today are fueled by natural gas. So as Kathy noted, we’re conducting a comprehensive evaluation of alternatives, including electric boilers and deep geothermal, among many other technology technologies, to meet our 2040 goal.

Our company vehicles are an iconic part of the Metropolitan streetscape. So it’s important that we lead on electrification. We’re purchasing only electric vehicles for our light duty fleet moving forward, with a commitment to reach 100% electric by 2035.

To date, nearly 13% of our Con Edison light duty fleet and 14% of Orange and Rockland light duty fleet now consists of electrified vehicles. Con Edison has invested in the development of the country’s first all-electric utility bucket truck as part of our efforts to electrify our full fleet, including medium and heavy duty vehicles. We’ve purchased and received our first truck and expect the next to be completed and delivered by the second quarter of next year. We’re optimistic that we’ll have viable solutions for all our service equipment in the coming years.

I will now turn it over to Mary Kelly to discuss partnering with our stakeholders.

Mary Kelly

Thanks, Venetia. So we’ll deliver the energy outcomes we’ve outlined through collaboration with the communities we serve, ensuring that the costs and benefits of all of these investments are borne equitably.

We’ll continue to advocate for and support community power programs and focus on delivering new infrastructure to underserved communities, like our EV Superhub in Bed Stuy, Brooklyn, which is the largest universal DC fast charge hub in the country. And we’ll do it all with an open door and with a practice of outreach and communication to all of our stakeholders. We formed an environmental justice working group to bring an equity lens to all that we do, and we’ll be releasing an environmental justice policy statement later this year.

Taken together, these efforts represent a transformational way for us to drive environmental outcomes. And we’re excited to partner with the leaders who set these goals, with our customers who will benefit from them, and with those others engaged in the implementation to ensure that New York delivers on these priorities.

We’ll also continue to show up for our communities, working with more than 600 non-profit partners within our service territory to provide economic support as well as board leadership, volunteers engagement, and promotion where appropriate. We leverage our corporate philanthropy to support causes that will truly make a difference in the communities that we serve.

We’ve made significant efforts to diversify our supply chain, creating more opportunities for MWBE suppliers and contractors and investing in small businesses throughout our region. We’ve supported the green energy opportunities and clean energy academy programs to create opportunities for minorities, women, and veterans. We’ve also published our human rights statement, reinforcing the commitment to working with suppliers and vendors who support the highest ethical standards.

With nearly 14,000 employees, our workers are the heart of everything that we do. And over the past several years, we’ve really focused on our people. 52% of our employees are people of color, and 22% are women and we have an incredibly diverse leadership team. We continue to focus on improving representation at the company.

We’ve also focused our efforts on creating an equitable and inclusive culture over the past decade. We’ve developed a 14 point action plan which outlines specific measures that we’re tracking to improve diversity. Some examples include tying DEI metrics to our executive compensation, rolling out a DEI survey to measure our culture, creating an executive sponsorship program, and auditing our people processes for equity and fairness. We’ve also created a strong foundation to support the development and expansion of our employee resource groups, with many members participating.

We continue to make significant investments in our team members through job readiness training, tuition reimbursement and other programs aimed at safety, operations and field readiness as well as management and leadership.

I’ll now turn it over to Robert Hoglund, our CFO.

Robert Hoglund

Thank you, Mary. We are clearly in a critical time for the clean energy transition as specific goals have been set and much of the pathway to achieving those goals is still information.

Consolidated Edison is well positioned to shape that pathway. And we believe that there is some $72 billion required to invest in this transition within our service territory over the next 10 years, with as much as $15.7 billion being deployed by 2024.

These expenditures will support efforts in green investments, as well as in safety and reliability projects that together will support a safe, reliable transition to the clean energy outcomes that New York state and city have set for us.

As to the CEB sale, we entered into an agreement in October to sell the CEBs to a subsidiary of RWE AG for $6.8 billion. We believe that this sale will allow for additional new investment in the CEBs by RWE that will ultimately result in more renewable development across the country. It will also allow Con Edison, Inc. to focus on New York and its aggressive clean air transition, while continuing to serve customers of our regulated utility businesses.

Our financial discipline will serve us well as we transition to the clean energy future. We will need to invest upfront in order for our customers and our society to reap the long-term benefits of a cleaner, more just environment. We are well positioned to make those needed investments and to continue to provide returns to our investors.

These investments will put pressure on bills, but it’s important to keep a couple of things in mind. First, some of the transition costs will be funded by federal and state tax incentives. And we will continue to advocate for New York’s share of those.

Additionally, Con Edison’s customers have relatively low bills in comparison with customers in other states, and even customers elsewhere in New York. To put it in context, we expect that energy costs will be six-tenths to seven-tenths of a percent of New York State’s gross state product in 2030, increasing to just 1.4% by 2050. And these green investments fund hundreds of thousands of jobs and hundreds of millions of dollars of local expenditures with increased economic impact throughout our region.

To put it in a slightly different context, New Yorkers pay more per kilowatt hour than other residential electric consumers in the United States, but have lower average monthly usage, which results in lower monthly bills on average for customers. While we need to keep an eye on affordability and the efficiency of our operations, especially in this environment of higher interest rates and increased commodity prices, we believe New Yorkers’ cost burden remains manageable relative to other basic costs.

And with that, I’ll pass it back to Tim now to cover governance and wrap up the presentation. Tim?

Timothy Cawley

Thanks, Robert. And thanks to the whole team for the great content you provided through the deck. So on governance, our Board of Directors has a strong and compelling blend of diversity, tenure and skills. And we leverage their experience to improve our operations, set leadership standards, and understand best practices across the industry.

And really, it’s not just us saying this, though. We’ve been recognized by the New York Times, the As You Sow Racial Justice Report, and many others who celebrated Con Edison’s commitment to the clean energy transition, racial justice, and diversity, equity inclusion, among other transformational cultural traits.

We are proud of these recognitions and prouder still of the impact of our work on our employees, customers, and all of our stakeholders.

And with that, let me just conclude by saying I have never been more confident about Con Edison’s impact on the environment and on our customers, and never more excited about the critical role that we’ll play in delivering the future for New York.

So with that, thank you for your time. And I’m happy to open it up to a few questions.

Question-and-Answer Session

A – Jan Childress

[Technical Difficulty] specific buildings, businesses and industries will continue to rely on the gas infrastructure system in the year 2050.

Timothy Cawley

When you think about where things will go the next 30 years, there’ll be lots of change, we have a very clear direction on where we’re headed. I would say the characteristics of those buildings would be mostly in densely populated areas and in buildings that are really difficult to electrify. Vicki and Matt both spoke about heating electrification. And we really need to address that to achieve net zero by 2050 societally. But some of the buildings will be stubborn and very difficult from an infrastructure standpoint to transition. So that’s what we expect to happen. And as these next few decades play out, we’ll learn more about who will remain on the gas system.

Jan Childress

And the second question is, as electrification progresses, won’t those customers that you just spoke of continuing to use the gas delivery system, won’t they face increasing prices to support their system?

Timothy Cawley

Really great question, Jan. And we do long range planning that looks at that. Matt talked about the commodities and the shift that will occur over the next 30 years. We see increases in electricity and significant decreases natural gas. And if you’ve got a system you’ve got to maintain for safety and reliability and you’re pushing less sales volume through it that can produce economic pressures. We’re thinking through that.

Kathy talked about the economic viability of the transition. We’re looking to create a glide path over the next several decades that’ll ensure safety and reliability. That’s job one for natural gas system. But also to make sure the economics remain vital and viable. And we’ll do that through a number of ways. Not investing in increased capacities, that rate base doesn’t grow over the decades, but is shrunken. So, we’ll greatly reduce the connection of new customers. Where there is a capacity increase need, we’ll apply what we call non-pipes alternatives, which is really energy efficiency and demand response to avoid additional infrastructure expense in the system on the aims of tricking the system.

And over the decades, we see that lightly used gas areas would shrink, and we’d actually shrink the footprint of our gas system over the decades, so that those who remain on the guest system are supporting a smaller footprint that relies on alternative fuels, in cases where electrification is not possible.

Jan Childress

Will or should Con Edison have a role in developing or owning utility scale renewables in the state of New York?

Timothy Cawley

Jan, you know the answer, and I’ll share it with others. We think we should play a big role in that space for a number of reasons. And the reason we continue to advocate for that is ultimately we think it’s to the benefit of our customers and to societal goals.

And I’ll hit it really quickly, the high level points of what our rationale is. First of all, we get things done. And to the extent our customers own the solar facilities through a rate based asset, they’ll enjoy the benefits of those assets for the full lifetime. And so, if a private developer develops, they’ll get 20 years signed contract typically, and at the end of 20 years, that solar field is ready to produce more megawatts, and they’ll re-contract. Effectively, our customers will pay twice for that power. If we own it, the customers get every last bit of good out of the racking system and the panels and the interconnect. And when we do the math on that residual life, Jan, we see real savings for our customers. That’s number one.

And the other real big issue, Jan, is that New York state has incredibly ambitious renewable goals. Today, about 30% of the power consumed by New York state residents is produced by renewables. And most of that, the vast majority of that is hydro that’s been around for a long time. So while there’s been a lot of solar and wind contracted for and a lot of activity in this space, we’ve not moved the needle much at all. So we’re at 30% now. The goal is to get to 70% renewable by 2030. And the ramp rate of those renewables just keeps growing. It’ll be about a $40 billion investment. And so, we are of the mind that this is an all hands on deck effort, and we should be able to participate and help the state achieve these ambitious goals that we’re incredibly supportive for society.

Jan Childress

With the expected increase in electric vehicles, would Con Edison be responsible for building more infrastructure to support that higher demand?

Timothy Cawley

I would say absolutely. And EVs is one place where the electric demand will increase significantly. And Matt talked about switching from a summer peaking utility to winter peaking by 2040. EVs is a part of that. Electrification and heating is a part of that. So, we will have to build our systems out to support EV charging. And that is now a component in our load forecasting in the next year, the 5 year, the 10 year and the 20-year load forecasting, both electrification of heating and EVs.

One rule of thumb that our really sharp engineers have shared with me, Jan – so if you look at a fast charging station, there are different rates of charge. But if you use the fast charger, where you pull your EV up and about 20 minutes later, you’d have virtually a full charge, full tank of power, if you will, if you had three of those on a lot, and they were consecutively or simultaneously being used the way fueling stations are, the demand on the grid is about the equivalent of 50 small New York City apartments. And so, when you think about light duty EVs and medium and heavy duty EVs that a fleet, for example, that’s concentrated in an area, it’s going to require a significant build-out. And we’ve got to change our thinking to build ahead of the immediate demand because EV charging going much more quickly than a building. So we’ve got to stay ahead of pace, so that we don’t get in the way of progress toward achieving the state’s goals.

Jan Childress

The next question is regarding the [Technical Difficulty] steam up business. Last week, you filed a steam rate case for the first time in a number of years. What prompted you to file now? And does it relate at all to your clean energy commitment?

Timothy Cawley

I missed a part of it. But why the steam [Technical Difficulty] rate case and is it tied to our commitment. So, first, I’ll cover the why. We’ve not filed for steam since 2013. Rates last went up – so that was a three-year case – about seven years ago. So it was time to go back in.

Two financial drivers really. One is New York City property taxes represent about half of the increase that we filed for, both those that we didn’t collect over the years and reestablishing the mark that we’re taxed at today. New York City taxes are a significant burden on our customers’ bill. Somewhere around 30% of the bill is New York City property tax. Next year, we will pay $2.3 billion in New York City property taxes. That all resides on the bill. And we continue to advocate for more equitable treatment in that space on behalf of our customers. So property taxes.

And the other is really rightsizing the level of sales. Steam is the only commodity where we don’t have revenue decoupling. And so, the revenue we take in is really dependent on the actual sales that occur. We really want to right size that and pursue revenue decoupling and energy efficiency, and that’s sort of [Technical Difficulty] encourage greater efficiency in all of our commodity use, including steam. And with that would come a revenue decouple model, similar to the paradigm that is set up for electric and gas.

And the other thing we’ll do is – Kathy mentioned, we really need to determine a way to produce steam, which is pretty efficient as it is, without releasing carbon. So, you think deep geothermal wells, electric boilers, hydrogen fuel boilers. And in our rate case, we’ll request pilots to pursue those opportunities that we can make steam without the release of carbon in the future.

Jan Childress

Looks like we have one more question, Tim. During the presentation, you’ve referenced electric transmission opportunities at Con Edison Transmission. What is the company’s outlook for gas transmission with respect to Con Edison Transmission?

Timothy Cawley

We are pursuing electric transmission aggressively. There’s going to be tremendous need to move renewables from where they’re produced to where they’re consumed. And so, we’ll have a role in that, whether it’s offshore wind or look to participate in other projects that, again, move renewables from where they’re produced to where they’re consumed.

[Technical Difficulty] we sold our Stagecoach holdings. Last year, we had an investment in MVP. That has sort of stalled in the permitting stage. But we’ve capped our investment there. And gas midstream and transmission is not part of our future. We don’t plan to invest in that moving forward. And as Kathy mentioned, we recognize that we’re going to need to reduce natural gas consumption for our customers in order to achieve our goals. So really, we don’t have any plans to make that part of our core business moving forward.

Jan Childress

And this next question goes back to steam. The steam business has been a sizable earnings headwind for Con Edison. Private equity appears to be interested in energy infrastructure. Would it be possible to separate steam from Con Edison [Technical Difficulty]?

Timothy Cawley

Yeah, I would say anything’s possible. So it would be possible. Our steam customers really like the product. We think the rate case will allow us to get past the headwinds that are referenced here. We only deliver steam in Manhattan and Manhattan was most impacted by COVID. The borough of Manhattan. In fact, while Brooklyn and Queens and some of the outer boroughs have achieved new electric peak demands during the hot summer months, Manhattan still lags by about 6% or 7%. And some of that is the fact that offices are not full the way they were pre-COVID. But we do see steam as a viable opportunity and a key to the mix that we have now. So while anything’s possible, we believe the future is bright for steam and we’ve got to work on creating steam without carbon and we’ve got a crack team that’s after it.

Jan Childress

Great, we’ve got seven minutes left, and I don’t see any other questions. So, Tim, do you want to make any closing remarks.

Timothy Cawley

Thank you, Jan. And my thanks to the team. And thank all of you out there for taking the time to listen in. We are really proud of the progress we’ve made and excited about what the future holds for us. We are in the center and have the incredible opportunity to serve the most vibrant dot on the globe. And the energy infrastructure is at the center of climate change and resiliency. And we’ve got the team to deliver on it and we look forward to making further progress and keeping you up to date on the actions we’re taking. So thanks all. Be well and be safe. Enjoy the close of 2022.