(Updates with closing share price in last paragraph.)
Jan. 25 (Bloomberg) -- Consolidated Edison Inc., owner of the utility that supplies power to New York City, asked state regulators to approve rate increases to help fund $1 billion in investments to protect the power network after Hurricane Sandy.
Under a proposal submitted to the New York Public Service Commission today, the average electricity bill would increase 3.3 percent, according to a company statement. Con Edison plans to spend $1 billion through 2016 on measures including flood- proofing equipment in low-lying areas, burying power lines and building higher flood walls around substations to avoid a repeat of damage caused by Sandy’s winds and record 14-foot (4.3-meter) tides.
“The increased frequency and damage of storms assaulting our area presents a major challenge,” Craig S. Ivey, president of Con Edison’s utility, said in the statement. “We must invest in our systems in new ways to maintain the safe, reliable service our customers deserve.”
Hurricane Sandy caused the worst damage in Con Edison’s 120-year history, felling thousands of power lines, breaching flood barriers and inundating electric facilities and generating stations.
New York Governor Andrew Cuomo, a Democrat, convened a so- called Moreland Commission to investigate utilities’ preparedness for the storm, which knocked out power to more than 2 million homes and businesses in New York, some for as long as 21 days.
Con Edison’s proposed infrastructure upgrades would bolster some of the network weaknesses exposed by the disaster. The utility would spend $240 million protecting 13 substations in flood-prone zones against water damage.
“Our system wasn’t high enough,” John Miksad, Con Edison’s senior vice president for electrical operations, said in a Dec. 18 phone interview. “I don’t think anybody expected 14-foot tides. That was the thing that really hit us in the city, Manhattan and coastal areas like Staten Island, Brooklyn and Queens.”
Con Edison plans to spend $200 million moving more lines underground. Burying all 35,000 miles of overhead wire in the utility’s network would cost about $38 billion, and is politically untenable, Miksad said. The utility plans to spend another $105 million water-proofing underground and substation equipment.
Consumers would start to pay for the effort with a proposed $375 million electricity rate increase that would begin Jan. 1, 2014 and last one year. The company is also seeking a $25 million boost in natural gas rates and a decline in rates for steam service.
While Con Edison is seeking federal funding for some of its infrastructure spending, it’s also looking into additional rate increases that would raise $272 million in 2015 and $351 million in 2016.
The company will probably face backlash to any rate increases as memories of Sandy’s miseries fade, Matthew Cordaro, former chief operating officer of Long Island Lighting Co., said in a telephone interview today.
“In the midst of a storm, people will always say more needs to be spent on infrastructure and equipment,” said Cordaro, a 40-year power industry veteran. “But when the sun shines several months later and a company attempts to put into place the financial means to do that, people will always object.”
Consolidated Edison shares rose less than 1 percent to $56.51 at the close in New York.
--Editors: Charles Siler, Tina Davis