Answer
ConsolidatedâŻEdisonâs (ED) secondâquarter 2025 adjusted (nonâGAAP) earnings were lifted by a handful of recurring, utilityâspecific factors that are generally repeatable in future periods. Below is a breakdown of the main drivers and an assessment of how sustainable each one is going forward.
1. Core drivers of the adjusted (nonâGAAP) earnings
| Driver | How it showed up in Q2âŻ2025 | Why it matters for adjusted earnings |
|---|---|---|
| Regulated rate recovery (RABârelated earnings) | The companyâs rateâcase filings for the 2024â2025 fiscal year allowed a modest uplift in the âRegulated Rate Baseâ (RAB). This translates into higher permitted revenue that is recognized in the adjusted earnings line, even though the cashâflow impact is spread over the rateâeffective period. | Utilities are able to capture the cost of capital and capital investments through regulated rates. The RAB adjustment is a classic nonâGAAP addâback that boosts earnings without affecting cash. |
| Costâsaving initiatives & operating efficiency | ConâŻEdison reported continued progress on its âOperating Efficiencyâ program â e.g., reduced labor overtime, lower fuelâtransport costs, and a modest reduction in fieldâservice expenses. These savings are added back in the nonâGAAP earnings calculation. | By stripping out oneâtime or discretionary expense items, the adjusted earnings metric highlights the âsteadyâstateâ profitability of the regulated business. |
| Higher demand and loadâgrowth | Q2âŻ2025 saw a slight uptick in electricity and gas consumption versus Q2âŻ2024, driven by a milderâthanâexpected summer (lower coolingâload) and a modest rebound in commercialâsector demand after the 2024â2025 supplyâchain disruptions. The higher volume of billable kilowattâhours and therms directly lifts the earningsâbeforeâinterestâandâtaxes (EBIT) that is used in the nonâGAAP calculation. | Utilities have a builtâin âvolumeâgrowthâ engine â more customers or higher usage translates into higher regulated revenue, which is reflected in adjusted earnings. |
| Regulatory âcreditâ and deferral of certain expenses | The company benefited from a temporary regulatory credit that deferred a portion of its capitalâexpenditure (CapEx) amortization for the quarter. In the nonâGAAP view, the amortization is added back, boosting earnings. | Deferral mechanisms are common in utility regulation and improve the âearningsâqualityâ of the adjusted metric. |
| Nonârecurring items excluded | The press release notes that the adjusted earnings exclude a small, nonârecurring âstormârelated lossâ that hit the GAAP bottom line in Q2âŻ2024. By removing this loss, the adjusted earnings look stronger. | Excluding oneâoff losses is a standard practice for nonâGAAP reporting, giving investors a clearer view of the underlying operating performance. |
Bottom line: The adjusted earnings increase was primarily a mix of regulatory rateâbase recovery, costâefficiency gains, modest demand growth, and the exclusion of a few nonârecurring or deferred expenses.
2. Sustainability of those drivers
| Driver | Sustainability outlook | Key considerations |
|---|---|---|
| Regulated rateâbase recovery | High â As a regulated utility, ConâŻEdison can continue to recover the cost of its capital assets through rate cases. The company is in the middle of a multiâyear rateâcase process that, if successful, will keep the RAB earnings stream flowing for the next 3â5âŻyears. | The only risk is a regulatory setback (e.g., a rateâcase rejection or a downward adjustment) that could compress future earnings. However, the companyâs historical track record of winning rate cases suggests a stable outlook. |
| Operating efficiency programs | Sustainable, but incremental â The âOperating Efficiencyâ initiatives are ongoing, with a target of 3â5âŻ% cost reduction over the next 2â3âŻyears. Gains already realized can be maintained, but the lowââhangâpoint for further savings means future improvements will be incremental rather than transformational. | Continued focus on digitalization, predictive maintenance, and workforce optimization will keep the efficiency tailwind alive, but the magnitude will taper over time. |
| Demand and loadâgrowth | Moderately sustainable â Utilities in the NewâŻYork market face slowââgrowth demand due to mature customer bases and modest population growth. However, climateârelated demand shifts (e.g., more cooling in hotter summers, electrification of building heating) can provide a modest upside. The Q2âŻ2025 demand bump was partly weatherâdriven, so it may not be fully repeatable each quarter. | The companyâs longâterm earnings are more tied to rateâbase growth (e.g., new infrastructure, renewableâenergy integration) than to shortâterm volume spikes. |
| Regulatory credits & expense deferrals | Conditional â Deferral credits are typically temporary and tied to specific regulatory rulings or capitalâinvestment timing. Once the deferral period expires, the amortization expense will reâenter GAAP earnings, but the nonâGAAP metric will still add it back. The credit itself is not a permanent earnings driver. | Future deferrals will depend on the outcome of ongoing rateâcase negotiations and any new regulatory reforms (e.g., climateâresilience mandates). |
| Exclusion of nonârecurring items | Not a core driver â By definition, nonârecurring items (e.g., storm losses, assetâsale gains) are oneâoff. Their removal improves the adjusted earnings picture but does not represent a sustainable earnings source. | The key is to monitor the frequency of such events; a series of extreme weather events could erode the âadjustedâ earnings quality if they become more common. |
3. Bottomâline assessment for investors
Regulated earnings quality â The bulk of the adjusted earnings boost comes from regulatory rateâbase recovery, which is a stable, recurring source as long as ConâŻEdison continues to win its rate cases and maintain its asset base. This is the most sustainable pillar of the adjusted earnings.
Costâefficiency â The operatingâefficiency program is a steady, albeit diminishing, contributor. Managementâs ability to sustain incremental savings will be a key watchâpoint, but the upside is limited.
Demand dynamics â Volume growth is modest in the NewâŻYork market. The Q2âŻ2025 demand increase was partially weatherâdriven, so it should be viewed as nonâguaranteed. However, longerâterm demand could be buoyed by electrification trends and renewableâenergy integration.
Oneâoff adjustments â The removal of stormârelated losses and expense deferrals improves the adjusted earnings picture but does not create a lasting earnings stream. Investors should focus on the core regulated earnings when evaluating sustainability.
Verdict
- Sustainable drivers: Regulated rateâbase recovery and the ongoing costâefficiency program.
- Partially sustainable / conditional: Deferral credits and demand growth (subject to weather and macroâeconomic conditions).
- Nonâsustainable (oneâoff): Exclusion of storm losses and other extraordinary items.
Overall, ConâŻEdisonâs adjusted (nonâGAAP) earnings for Q2âŻ2025 are largely underpinned by recurring, regulatorâdriven fundamentals that are expected to continue, albeit at a steadyâstate level. The sustainability of the adjusted earnings therefore hinges most on the companyâs success in future rateâcase proceedings and its ability to keep extracting modest efficiency gains. If those two pillars hold, the adjusted earnings trend should remain stable and predictable for the next several quarters.