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Rating Action:

Moody's upgrades Consolidated Edison and its subsidiaries; outlooks stable

30 Jan 2014

Approximately $12 billion of debt affected

New York, January 30, 2014 -- Moody's Investors Service today upgraded the senior unsecured ratings of Consolidated Edison, Inc. (ConEd) to A3 from Baa1, Consolidated Edison Company of New York, Inc. (CECONY) to A2 from A3, and Orange and Rockland Utilities, Inc. (O&R) to A3 from Baa1. Moody's also upgraded CECONY's commercial paper rating to Prime-1 from Prime-2. This rating action completes Moody's review of ConEd and its subsidiaries initiated on November 8, 2013. The outlooks for these companies are now stable.

RATING RATIONALE

The primary driver of today's rating action was Moody's more favorable view of the relative credit supportiveness of the US regulatory environment, as detailed in our September 2013 Request for Comment titled "Proposed Refinements to the Regulated Utilities Rating Methodology and our Evolving View of US Utility Regulation."

"ConEd's upgrades reflect a stabilizing features of its cost recovery mechanisms and low business risk as a transmission and distribution utility," said Moody's senior vice president Mihoko Manabe.

Moody's believes that ConEd's regulatory environment is more benign than in 2009, when Moody's downgraded ConEd's ratings by two notches after a series of unfavorable rate cases. The New York regulatory scheme, however, features credit-positive aspects, such as future test years, multi-year rate plans, and full revenue decoupling for both electric and gas services and weather normalization for gas, which protects margins from variations in sales volumes. Purchased power and gas costs are fully and automatically trued-up on a monthly basis. Moody's also considers transmission and distribution utilities like CECONY and O&R to have lower business risk than vertically integrated utilities. These stabilizing features lend resiliency to ConEd's financial performance.

Before the ConEd companies were placed under review for possible upgrade in November 2013 as part of a sector-wide review, its outlook had been positive since July 2013 following Moody's favorable assessment of ConEd's recent results and future prospects. Moody's believes that this upgrade sufficiently captures our improved view of ConEd's regulatory environment, and reverting to stable more reflects the likely outcome in CECONY's current rate case.

CECONY recently entered into a joint proposal to settle this case, and the New York Public Service Commission is expected to approve it sometime this quarter. Moody's believes that the overall credit impact will be neutral, because CECONY did receive reasonable recovery, as expected, of its storm and other deferred costs and was allowed increased investments, such as for storm hardening. On the other hand, CECONY's base rates will be frozen for two years for electric services and three years for gas and steam, and Moody's estimates that this rate plan will not be sufficient for ConEd to maintain consolidated cash flow pre-working capital-to-debt above 17%, a level Moody's indicated in changing the ConEd companies' rating outlooks to positive in July. Their recent results have been below that level. In the last twelve months ended September 30, 2013, ConEd's consolidated cash flow pre-working capital-to-debt was 16.6%.

WHAT COULD CHANGE RATING -- UP

ConEd and its subsidiaries could be upgraded if they receive more rate relief and sustain consolidated cash flow pre-working capital-to-debt comfortably above 17%.

WHAT COULD CHANGE RATING -- DOWN

While unlikely in the foreseeable future, ConEd and its subsidiaries could be downgraded from any unexpectedly negative political or regulatory development that causes a deterioration in their credit profiles, for example the weakening of cash flow pre-working capital-to-debt to below 16% on a sustainable basis. A downgrade could also occur if ConEd's unregulated operations grow to more than the 5% of net income that we anticipate, making the company's financial performance less predictable.

Rating Upgrades:

..Issuer: Consolidated Edison, Inc.

.Long Term Issuer Rating to A3 from Baa1

.Senior Unsecured Shelf to (P)A3 from (P)Baa1

.Subordinate Shelf to (P)Baa1 from (P)Baa2

.....Outlook, Changed To Stable from RUR

..Issuer: Consolidated Edison Company of New York, Inc

.Long Term Issuer Rating to A2 from A3

.Senior Unsecured Rating to A2 from A3

.Backed Senior Unsecured Rating to A2 from A3

.Underlying Senior Unsecured Rating to A2 from A3

.Senior Unsecured Shelf to (P)A2 from (P)A3

.Subordinate Shelf to (P)A3 from (P)Baa1

.Preferred Shelf to (P)Baa1 from (P)Baa2

.Commercial Paper to P-1 from P-2

.Outlook to Stable from RUR

..Issuer: Orange and Rockland Utilities, Inc

.Long Term Issuer Rating to A3 from Baa1

....Senior Unsecured Rating to A3 from Baa1

.Senior Unsecured Shelf to (P)A3 from (P)Baa1

.Subordinate Shelf to (P)Baa1 from (P)Baa2

.Outlook to Stable from RUR

Headquartered in New York, New York, Consolidated Edison, Inc., is a utility holding company for Consolidated Edison Company of New York, Inc., and Orange and Rockland Utilities, Inc.

The principal methodology used in this rating was Regulated Electric and Gas Utilities published in December 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Mihoko Manabe
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

William L. Hess
MD - Utilities
Infrastructure Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's upgrades Consolidated Edison and its subsidiaries; outlooks stable
No Related Data.
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