When we flip a light switch or turn on the heat, we don’t think twice about whether it will work. That reliability is not an accident. It is the result of a long-standing public-interest bargain that governs New York’s investor-owned electric and gas utilities.
Under this model, utilities like Con Edison are legally required to serve everyone in their service territory, every hour of every day — even during storms, heat waves and polar vortices. They cannot pick customers, exit unprofitable neighborhoods, or raise prices at will. In return, their rates and profits are set through rigorous oversight by regulators at New York’s Public Service Commission, which I chair.
Following a directive by Gov. Hochul to prioritize affordability last year, the commission on Thursday adopted a new three-year rate plan that cut Con Ed’s initial rate request by 87% in 2026. The majority of stakeholders who reviewed evidence in our transparent rate-setting proceeding support the plan, including our subject matter experts who scrutinized every expense, independent consumer groups like the NY Energy Consumers Council, the City of New York, and environmental organizations like the Environmental Defense Fund.
But no one likes a rate increase, and we are cognizant of how inflationary pressures across the economy are affecting New Yorkers. Customers deserve to understand why it was necessary to modestly increase Con Ed’s gas and electric revenues.
In short, Con Edison must recover its legitimate expenses to provide electric and gas service to its 4.7 million customers. At a time when there are warnings of blackouts and gas supply disruptions downstate, the company is projected to invest $14.5 billion over three years so that the lights, heat and air conditioning work during even the most extreme weather. This new infrastructure will be financed by shareholders and bondholders, taxed by local governments, and built by a skilled workforce — all real and necessary expenses.
In addition to reliability, through the rate case process, the PSC is ensuring Con Ed customers are not paying excessive rates to line the pockets of utility executives. In fact, we’ve set Con Edison’s return on equity at 9.4%, well below the rates commonly earned in unregulated industries such as technology, pharmaceuticals, private equity, real estate development, or energy generation.
Utilities are competing with other long-lived infrastructure investments that offer similar risk profiles, so we have to be careful not to set returns too low. If we do, investors will take their money elsewhere. Capital then becomes more expensive for utilities — both borrowing costs and the costs to maintain and upgrade critical infrastructure increase. In the end, suppressing returns does not save money, it simply shifts costs around, ultimately making your bills more expensive.
That said, New York has a proud history of keeping utility return on equity at the lowest reasonable level to ensure access to capital markets while keeping costs down for customers; and what we approved for Con Ed is well below the national average for utilities.
It’s important to note that their return on equity is not a guaranteed profit margin. Utilities must control costs, operate efficiently, manage projects prudently, and meet performance standards to achieve them.
Poor performance can lead to penalties, disallowed costs, or reduced earnings. Shareholders — not customers — bear those risks.
Setting utility rates is hard, but necessary work. We can’t do it without the participation of our many stakeholders. Utility rates are set in open proceedings where consumer advocates, environmental groups, labor organizations, businesses, elected officials, and state agencies all participate to challenge the utility and each other about how best to protect the public interest. Every major investment is examined. If a cost is found imprudent, it is rejected. That is how Con Ed’s gas increase was reduced from 13.3% to 2.0%, and how its electric increase was reduced from 11.4% to 2.8%.
It’s not a perfect system, but the commission operates one of the most successful public-private partnerships in American history. It has delivered near-universal service, high reliability, and massive infrastructure investment at a low cost of capital.
But more must be done to help address customer affordability concerns.
The governor has proposed structural reforms to the utility rate-setting process that will force utilities to provide budget-bounded alternatives to proposed rates, expand utility discounts for households in need, and tie executive compensation to new affordability performance metrics. The commission stands with the governor in support of these reforms.
Christian is chair of the New York State Public Service Commission.
