By: Hadassa Kalatizadeh
Con Edison has had its fair share of clashes this year. Earlier in September, City Council Speaker Corey Johnson criticized the utility giant for July’s power outage in Broadway which left 33,000 Brooklyn residents in the dark. As temperatures continued to rise, feeders began to fail and blackouts occurred across the five boroughs leaving 10,000 customers without power. In response, Con Ed intentionally reduced voltage in underprivileged neighborhoods of Brooklyn during the unbearable summer heatwave, and cut power completely for some of the neighborhoods .
Governor Andrew Cuomo took a shot at the company threatening to overturn Con Ed’s franchise in the city. Mayor Bill de Blasio took his turn bashing the company, and proposing it be turned into a publicly-owned utility. “We do have to figure out whether or not Con Edison should be running this,” fumed Public Advocate Jumaane Williams. “It’s a miracle no one was harmed.” The company staunchly defended its stance, saying its actions prevented a much larger blackout and costly repairs to the city’s infrastructure. Notwithstanding, the City Council hosted a public hearing to grill Con Ed about its management. For hours, council members joined in the chorus, treating the Energy company like a punching bag. “I found it appalling an unacceptable that the people most affected by this blackout where the last to know,” added Councilman Mark Treyger. “The era of these greedy monopolies … has got to end.”
With all this, the power company’s stock seems to keep rising inexplicably. In fact, last week share prices reached an all-time high of $93.32. Further, over the year, the stock produced impressive returns of 23 percent, which beats out the returns of 20 percent posted by the S & P 500 index. As reported by Crain’s NY, the stock rise can be attributed to the overall popularity of energy stocks of late. With the benchmark 10-year yield down to 1.8 percent, government bonds seem unworthy for investor’s money. Utility stocks seem to have gotten a free ride this year with cautious buyers looking for safety plus the generous dividends. Con Ed’s dividend yield is 3.2 percent, and shareholder payouts have increased for the past 45 years.
That might soon change, however. At this month’s City Council hearing, Johnson reproached Con Ed for paying out so lavish a dividend. The City Council Speaker said the energy company’s 3.4 million rate payers deserve better. Con Ed, which is one of the largest investor-owned energy companies in the country, argued that if it didn’t attract Wall Street investors, via its generous dividend, energy customers would need to foot a larger bill. “The city itself is relying on us attracting those shareholders and accessing the debt markets to pay for the infrastructure,” a ConEd executive said.
For next year, Con Edison is already seeking a $695 million rate increase, to offset the costs of maintenance while upholding a reasonable return for shareholders. The state Public Service Commission, however, has recommended Con Ed should only be allowed to raise rates by $223 million. This could limit the company’s ability to continue to payout investors, thereby leading the stock price to plunge. “The stock should materially underperform peers over the next 12 months,” Evercore ISI analyst, Greg Gordon, said this week.
