How ConEd's Delivery Adjustments Work: A Complete Explainer
⚠️ Disclaimer: This guide was generated by an LLM (Claude Opus 4.5) based on the tariff JSON plus the model's background knowledge of utility regulation and NY PSC proceedings. The content looks reasonable but has not been verified by domain experts. Please verify any claims before relying on them for business or regulatory purposes.
Overview
ConEd's delivery charges aren't just a single rate—they're a base rate plus multiple adjustments. This guide explains what each adjustment does, why it exists, and how it's calculated.
Your Delivery Bill = Base Delivery Rate (Summer/Winter Rate)
+ Delivery Revenue Surcharge
+ Reconciliation Rate
+ Transition Adjustment
+ Uncollectible Bill Expense
+ Monthly Adjustment Clause
+ Revenue Decoupling Mechanism Adjustment
+ Clean Energy Standard Delivery Surcharge
All of these adjustments have variableRateKey in the JSON—meaning they change periodically and require the Lookups API to get current values.
Why So Many Adjustments?
Electric utility regulation creates a fundamental timing problem:
- Rate cases are infrequent: ConEd files a rate case every 1-3 years
- Costs change constantly: Fuel prices, labor, taxes, program costs fluctuate
- Sales volumes vary: Weather affects how much electricity customers use
- Policy mandates evolve: NY State adds new clean energy requirements
Rather than constantly filing new rate cases (expensive, slow), regulators allow adjustment mechanisms that automatically true-up certain costs between rate cases.
The Adjustment Mechanisms
1. Monthly Adjustment Clause (MAC)
What Problem It Solves
The MAC is an umbrella mechanism that captures cost changes the PSC has pre-approved for pass-through. It's the "catch-all" for costs that vary but shouldn't require a rate case to update.
What's Included
The MAC typically includes: - Property tax changes - Environmental compliance costs - Storm damage recovery - Pension and benefit cost changes - Other PSC-approved cost pass-throughs
How It Works
Step 1: Rate Case Establishes Baseline
During rate case, PSC sets base delivery rates assuming:
- Property taxes: $X million/year
- Storm costs: $Y million/year
- Pension costs: $Z million/year
Step 2: Actual Costs Differ
Year 1 Reality:
- Property taxes: $X + $5 million (taxes went up)
- Storm costs: $Y + $20 million (bad hurricane season)
- Pension costs: $Z - $2 million (good investment returns)
Step 3: MAC Adjustment Calculated
Net variance = +$5M + $20M - $2M = +$23 million under-recovery
MAC Rate = $23 million / Expected annual kWh sales
= $23 million / 40 billion kWh
= $0.000575/kWh
Step 4: Applied to Bills The MAC rate is updated (typically monthly or quarterly) and applied to all kWh consumed.
Time Lag
- Lag: 1-3 months
- Why: ConEd needs to compile actual costs, file with PSC, get approval
- Pattern: You're paying for cost variances from ~2-3 months ago
Variable Rate Key
2. Revenue Decoupling Mechanism (RDM) Adjustment
What Problem It Solves
Traditional utility regulation created a perverse incentive: utilities made more money when customers used more electricity. This discouraged utilities from promoting energy efficiency.
Revenue decoupling breaks this link by guaranteeing the utility a fixed revenue amount regardless of sales volume.
The Core Concept
Traditional Model:
- Revenue = Rate × Sales Volume
- If customers conserve, utility loses money
- Utility has incentive to encourage consumption
Decoupled Model:
- Revenue = PSC-authorized amount (fixed)
- If customers conserve, rates adjust upward to hit target
- If customers use more, rates adjust downward
- Utility is indifferent to sales volume
How It Works
Step 1: Rate Case Sets Target Revenue
PSC authorizes ConEd to collect $2.5 billion/year in delivery revenue
Based on expected sales of 40 billion kWh
Implied rate: $0.0625/kWh
Step 2: Actual Sales Differ
Year 1: Mild summer → customers use only 38 billion kWh
At $0.0625/kWh, ConEd collects only $2.375 billion
Shortfall: $125 million
Step 3: RDM Adjustment Calculated
RDM Adjustment = Shortfall / Expected Future Sales
= $125 million / 40 billion kWh
= $0.003125/kWh surcharge
Step 4: Applied to Future Bills Next year's bills include the RDM surcharge to make ConEd whole.
The Flip Side
Year 2: Hot summer → customers use 43 billion kWh
At $0.0625/kWh, ConEd collects $2.6875 billion
Over-collection: $187.5 million
RDM Adjustment = -$187.5 million / 40 billion kWh
= -$0.0047/kWh CREDIT
Customers get money back when they use more than expected!
Time Lag
- Lag: 12-18 months typically
- Why: RDM is usually reconciled annually after a full year of data
- Pattern: This year's RDM reflects last year's over/under-collection
Why This Matters for Clean Energy
Revenue decoupling is foundational to NY's climate policy. Without it: - ConEd would fight rooftop solar (reduces sales) - ConEd would oppose efficiency programs (reduces sales) - ConEd would resist electrification messaging (complicated)
With decoupling, ConEd's revenue is protected regardless of sales trends.
Variable Rate Key
3. Delivery Revenue Surcharge
What Problem It Solves
This is a supplemental revenue adjustment that handles specific revenue shortfalls or policy-driven rate changes outside the normal MAC and RDM mechanisms.
Common Uses
- Implementing PSC-ordered rate changes mid-period
- Recovering costs from specific events (major storms, infrastructure failures)
- Adjusting for regulatory lag when costs change faster than rate cases
How It Works
Similar to MAC, but used for more specific, identifiable cost categories that the PSC wants tracked separately.
Variable Rate Key
4. Reconciliation Rate
What Problem It Solves
The Reconciliation Rate handles true-ups for deferred costs from NY's electricity restructuring in the late 1990s.
Historical Context
When NY deregulated electricity in 1996-2000: - Utilities sold off power plants - Some sold at losses ("stranded costs") - PSC allowed utilities to recover these over time - The Reconciliation Rate adjusts for actual vs. expected recovery
Why It Still Exists
Even decades later, there are ongoing reconciliations for: - Legacy power purchase contracts - Deferred regulatory assets - Long-term debt from restructuring
Time Lag
- Lag: Annual
- Pattern: Reconciles prior year's deferred cost recovery
Variable Rate Key
5. Transition Adjustment
What Problem It Solves
Another legacy of deregulation. The Transition Adjustment handles costs related to the transition from regulated monopoly to competitive markets.
What It Covers
- Costs of separating generation from distribution
- Stranded cost recovery adjustments
- Contract buyouts from the restructuring era
Why It's (Usually) Small Now
Most transition costs have been recovered, so this adjustment is typically minimal. It persists for final true-ups and any remaining legacy obligations.
Variable Rate Key
6. Uncollectible Bill Expense
What Problem It Solves
Some customers don't pay their bills. ConEd can't collect from them, but still incurred costs to serve them. This adjustment recovers those costs from paying customers.
How It Works
Step 1: Rate Case Estimates Bad Debt
PSC assumes 1.5% of billed revenue will be uncollectible
Base rates include recovery for this expected level
Step 2: Actual Bad Debt Differs
Step 3: Adjustment Calculated
COVID-19 Impact
This adjustment spiked during COVID when: - Moratoriums prevented disconnections - Many customers fell behind on bills - Bad debt rates exceeded historical norms
The separate "Arrears Management Program Recovery Surcharge" (a rider) handles some of this, but the Uncollectible Bill Expense adjustment captures ongoing bad debt variances.
Time Lag
- Lag: 6-12 months
- Why: ConEd needs time to determine which bills are truly uncollectible (not just late)
Variable Rate Key
7. Clean Energy Standard Delivery Surcharge
What Problem It Solves
NY's Clean Energy Standard (CES) mandates that utilities procure increasing amounts of renewable energy. This surcharge recovers the delivery-side costs of that mandate.
What It Covers (Delivery Side)
- Grid upgrades needed to integrate renewables
- Interconnection study costs
- Distribution system modifications for DERs (Distributed Energy Resources)
- Administrative costs for clean energy programs
The Supply Side Counterpart
There's also a "Clean Energy Standard Supply Surcharge" that covers: - Renewable Energy Credit (REC) purchases - Zero Emission Credit (ZEC) purchases for nuclear - Tier 4 (offshore wind/transmission) costs
The delivery surcharge is separate because these are infrastructure costs, not commodity costs.
How It Works
Step 1: PSC Sets CES Targets
Step 2: ConEd Incurs Costs
Year 1 CES delivery costs:
- Distribution upgrades: $50 million
- DER integration: $30 million
- Program admin: $10 million
Total: $90 million
Step 3: Surcharge Calculated
Time Lag
- Lag: Varies (quarterly to annual updates)
- Why: Depends on when costs are incurred and PSC reporting requirements
Variable Rate Key
Complete Timeline: How Delivery Adjustments Flow
Here's how all these adjustments play out over time:
YEAR 0: RATE CASE
────────────────────────────────────────────────────────────────────────────
│ PSC sets base delivery rates for 3-year period
│ Assumes specific levels for: property taxes, storm costs, sales volume,
│ bad debt, clean energy costs, etc.
│
▼
YEAR 1: ACTUAL OPERATIONS
────────────────────────────────────────────────────────────────────────────
│ Q1: ConEd operates, incurs actual costs, serves actual load
│ Q2: Costs tracked, variances accumulate
│ Q3: ConEd files quarterly/annual reconciliations with PSC
│ Q4: Year-end data compiled
│
│ Meanwhile, customers are billed at:
│ - Base rates (fixed from rate case)
│ - Prior period adjustments (from Year 0 or earlier)
│
▼
YEAR 2: ADJUSTMENTS APPLIED
────────────────────────────────────────────────────────────────────────────
│ Q1-Q2: PSC reviews Year 1 reconciliation filings
│ Q2-Q3: PSC approves adjustment factors
│ Q3-Q4: Adjustments appear on customer bills
│
│ Customer bills now include:
│ - Base rates (still fixed)
│ - Year 1 cost variances via MAC, RDM, etc.
│ - Prior period true-ups being finalized
│
▼
YEAR 3: NEXT RATE CASE (OR CONTINUED ADJUSTMENTS)
────────────────────────────────────────────────────────────────────────────
│ Either: New rate case resets base rates
│ Or: Adjustment mechanisms continue accumulating
How the Adjustments Interact
These aren't completely independent—they're designed to work together:
| Adjustment | What It Catches | Frequency | Typical Lag |
|---|---|---|---|
| MAC | Cost changes (taxes, storms, etc.) | Monthly | 1-3 months |
| RDM | Sales volume variance | Annual | 12-18 months |
| Delivery Revenue Surcharge | Specific revenue shortfalls | As needed | Varies |
| Reconciliation Rate | Deferred cost recovery | Annual | 12+ months |
| Transition Adjustment | Legacy restructuring costs | Annual | 12+ months |
| Uncollectible Bill Expense | Bad debt variance | Quarterly | 6-12 months |
| CES Delivery Surcharge | Clean energy infrastructure | Quarterly | 3-6 months |
Why Variable Rates Instead of Fixed?
You might wonder: why not just set these adjustments at fixed levels?
| Approach | Problem |
|---|---|
| Fixed adjustments | Would be wrong as soon as actual costs differ from forecast |
| Frequent rate cases | Expensive ($millions), slow (12-18 months), adversarial |
| Variable adjustments | Allow continuous true-up within PSC-approved framework |
The variable adjustment mechanism is a regulatory compromise: - Utilities get timely cost recovery - Customers pay actual costs (no more, no less) - PSC maintains oversight through filing requirements - Rate cases can focus on major issues, not routine variances
Practical Impact: What This Means for Your Bill
For a typical ConEd residential customer using 500 kWh/month:
| Component | Typical Range | Monthly Impact |
|---|---|---|
| Base Delivery Rate | $0.161/kWh | $80.50 |
| MAC | ±$0.001-0.005/kWh | ±$0.50-2.50 |
| RDM | ±$0.002-0.008/kWh | ±$1.00-4.00 |
| Uncollectible | $0.0003-0.001/kWh | $0.15-0.50 |
| CES Delivery | $0.001-0.003/kWh | $0.50-1.50 |
| Others | ±$0.001/kWh | ±$0.50 |
The adjustments typically add/subtract $2-8/month from your base delivery charges, or about 3-10% of the delivery portion of your bill.
Summary: The Big Picture
- Base rates are set infrequently (rate cases every 1-3 years)
- Costs change constantly (weather, taxes, policy, bad debt)
- Adjustments bridge the gap (automatic true-ups between rate cases)
- Each adjustment has a specific purpose (not arbitrary line items)
- Time lags exist (you're always paying for past variances)
- Net effect is revenue neutrality (ConEd recovers actual costs, no more, no less)
The complexity isn't arbitrary—it's the result of decades of regulatory evolution trying to balance utility financial health, customer protection, and policy goals like decarbonization.