Con Edison (ED) Q2 2026 earnings review
Rate Increases Power Strong Quarter, But Regulatory Clouds Gather
Con Edison delivered a clean, expectation-meeting quarter. Q2 Adjusted EPS surged 24% year-over-year to $0.83, entirely driven by newly approved electric and gas rate base increases and favorable timing of billings at its core CECONY unit. Management reaffirmed its full-year Adjusted EPS guidance of $6.00-$6.20. Underneath the strong top-line numbers, the narrative is split: physical infrastructure growth looks extremely robust due to electrification mandates, but new New York State legislation capping future utility rate increases to the Consumer Price Index introduces a serious structural threat to long-term margin expansion.
🐂 Bull Case
The company boasts a highly visible 8.8% average rate base CAGR through 2030, underpinned by non-negotiable electrification targets, urban densification, and EV infrastructure build-outs in New York.
The recently approved CECONY and O&R rate plans are flowing straight to the bottom line. Q2 results were boosted by $0.14 per share purely from higher electric and gas rate bases.
🐻 Bear Case
New York's newly enacted Chapter 58 laws will limit aggregate revenue increases in rate cases filed after January 2027 to the 3-year average CPI. If capital expenditure inflation outpaces general inflation, margins will compress.
CECONY has $1.38 billion in customer accounts receivable sitting past 60 days. This is structurally absorbing massive amounts of working capital and forcing the company into complex, state-funded relief programs.
⚖️ Verdict: ⚪
Neutral. Con Edison offers a highly defensive 52-year dividend growth streak and a guaranteed pipeline of infrastructure projects. However, New York's aggressive new affordability legislation acts as a heavy ceiling on future profitability.
Key Themes
Electrification Forcing Massive CapEx
Con Edison is essentially a mandated infrastructure play at this point. The company plans to build 28 new substations by 2035 to handle booming electricity demand from building electrification and EV adoptions. The capital expenditure budget accelerates from $4.9 billion in 2025 to $8.5 billion by 2029, driving an 8.8% regulated investment base CAGR. This pipeline is highly insulated from macro-economic cycles because it is driven by local clean-energy legislation.
Chapter 58 Legislation is a Margin Cap
New York State enacted Chapter 58 in May 2026, which drastically alters utility regulation. For rate filings after January 2027, the company must submit 'budget-constrained' plans limiting revenue increases to the prior three-year average of the Consumer Price Index. It also limits recovery of rate case expenses and mandates the return of revenues exceeding the authorized ROE. This fundamentally caps the company's pricing power and puts extreme pressure on O&M cost control.
Elevated Customer Arrears Harming Working Capital
Despite economic normalization, the hangover of unpaid utility bills persists. CECONY reported $1.38 billion in aged accounts receivable (over 60 days) at the end of Q2 2026. While slightly down from $1.42 billion at the end of 2025, it remains over 3x the pre-pandemic norm ($408 million in Feb 2020). The company is heavily reliant on New York State and internal discount programs to chip away at this balance, which drags on free cash flow.
Simplifying the Portfolio
Con Edison is aggressively exiting non-core, non-regulated, and fossil-adjacent assets to become a pure-play electric/gas utility. Following the 2023 Clean Energy Businesses sale, the company completed the sale of a portion of its Mountain Valley Pipeline (MVP) equity interest for a $189 million pre-tax gain earlier this year, and signed an agreement in April 2026 to sell its interest in Honeoye Storage Corporation.
NYC Transmission Reliability Gap
A serious operational risk is looming for New York City's power grid. With fossil generation retiring and replacement clean energy/transmission projects experiencing delays, NYISO has identified a reliability need emerging over the near term. CECONY recently filed a contingency plan to address a projected 125 MW shortfall by 2033, scaling to 675 MW by 2036. If commercial battery storage procurement fails to plug this gap, the company will have to scramble to implement complex transmission upgrades.
Other KPIs
Decelerating cash generation relative to spending. Operating cash flow of $1.97 billion for the first half of 2026 covered approximately 83% of the massive $2.35 billion investing cash outflow (primarily CapEx). To fund the difference and the dividend, Con Edison relies on its at-the-market (ATM) equity programs and debt issuances.
Accelerating significantly. The regulated New York utility, which makes up roughly 90% of the company's assets, delivered an operating income boom driven directly by the implementation of its new rate plans. Weather normalization mechanisms ensured that variations in delivery volumes did not disrupt top-line collection.
Guidance
Stable. The reaffirmed midpoint of $6.10 implies a ~7% year-over-year acceleration compared to the $5.70 reported in FY25. This shows that despite high financing costs and macro headwinds, the locked-in rate base growth guarantees near-term earnings expansion.
Accelerating aggressively. This is a massive step up from the $4.99 billion spent in FY25, highlighting the rapid execution phase of substation and transmission build-outs across the service territory. Management projects this number will climb to over $8.5 billion by 2029.
Stable trajectory. The company must continuously issue equity to maintain its ~48% authorized equity ratios while funding its massive capital program. With $776 million already settled via forward agreements in Q1 and an additional $108 million settled in Q2, the remaining requirement for the year is minimal.
Key Questions
Margin Squeeze Under Chapter 58
With the new Chapter 58 mandate capping aggregate revenue increases to a 3-year CPI average for cases filed post-2026, how do you mathematically reconcile an 8.8% rate base CAGR with a CPI-capped revenue framework without experiencing significant ROE compression?
Clearing the Arrears Overhang
Accounts receivable past 60 days remain stubbornly high at $1.38 billion. While EAP and state programs exist, is there a timeline where this completely normalizes to pre-pandemic levels, or is a portion of this functionally uncollectible bad debt?
Contingency for the Contingency Plan
Your July 2026 reliability contingency plan relies heavily on competitive procurement of battery storage. Given recent supply chain and cost inflation in grid-scale batteries, what is the 'Plan C' if the market fails to deliver the required megawatts cost-effectively to cover the 2033 shortfall?