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The New York Public Service Commission on Sept. 17 approved the 90-mile, $3.3 billion Propel New York electric transmission project that Con Ed will help develop.

Why it matters: The Propel NY project is scheduled to be in service in 2030. It will be the largest growth investment during the next few years for Con Ed's subsidiary Con Edison Transmission. Con Edison Transmission owns 41.7% of New York Transco, which is jointly developing the Propel NY project with the municipal New York Power Authority. Con Ed management recently estimated its investment in the project will be about $1 billion. The project comes with an 11.3% allowed return on equity and 53% equity ratio, resulting in returns much higher than regulators allow for Con Ed's distribution utilities.

The bottom line: We are reaffirming our $104 fair value estimate per share and our no-moat Morningstar Economic Moat Rating for Con Ed. Con Ed's stock trades in line with our fair value estimate and a 17 P/E as of Sept. 21. Our 2026 EPS estimate aligns with management's $6.00-$6.20 guidance. On a consolidated basis, we expect 6% annual earnings growth for at least the next three years. Higher financing costs will keep earnings growth below Con Ed's nearly 9% annual regulatory asset growth.

Big picture: We expect Con Ed to invest nearly $40 billion during the next five years, including its share of the Propel NY project and capital investment plans that regulators recently approved at Con Ed's other subsidiary utilities. The Propel NY approval highlights the large amount of grid investment needed in downstate New York to maintain reliability and meet the state's aggressive renewable energy targets. This could support additional growth investment for Con Ed.

Coming up: Con Ed is awaiting the next round of regulatory developments related to utility ownership of renewable energy. Approval could boost Con Ed's growth investment opportunities.

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Our fair value estimate is $104 per share, reflecting year-to-date financial and regulatory updates.

Con Ed's 2026-28 base rate settlement at CECONY and 2025-27 base rate settlement at O&R set the foundation for at least 6% annual earnings growth through 2028.

Our earnings growth outlook is based on regulatory support for Con Ed's plan to invest more than $7 billion annually in 2026-30, resulting in more than 8% annual rate base growth. This investment plan could climb higher if New York policy changes allow rate-regulated investments in transmission and generation, but we don't include that in our current forecasts given the policy uncertainty.

We use a 6.0% cost of capital in our discounted cash flow valuation, which incorporates a 7% cost of equity. This is lower than the 9% rate of return we expect investors will demand of a diversified equity portfolio.

We assign Con Ed a Morningstar Economic Moat Rating of none.

Rate regulation and service territory monopolies typically support economic moats for most US utilities, allowing them to earn a fair return on capital. However, regulators in New York have a history of setting rates that make it difficult for Con Ed to consistently earn its cost of capital. We don't expect a significant change in the coming years.

Con Ed's 2026-28 rate settlement at CECONY included a step-up in the allowed return on equity used to set rates, a sign that New York regulators recognize the importance of attracting investment to support energy policy goals. Customer rates are now based on a 9.4% allowed return on equity, up from 9.25% in CECONY's 2023-25 rate review and 8.8% in its 2020-22 rate review.

New York's forward-looking rate-setting framework helps keep earned returns near the allowed returns that regulators use to set customer rates.

Returns on invested capital are only marginally above our estimate of the company's cost of capital. The small spread between returns on invested capital and the cost of capital leaves very little room for maneuvering in the challenging political and regulatory environments in both states Con Ed serves. Thus, we have low confidence that the company can consistently earn above its cost of capital during the next 15 years.

Con Ed's customers in New York City pay among the highest electricity rates in the country. The city's infrastructure is old, mostly underground—which is much more expensive to expand and maintain—and perennially at risk from serious storm-related damage. These factors also play a role in Con Ed's tight spread between earned returns on capital and its cost of capital over many ratemaking and economic cycles.

Con Ed has divested all of its nonregulated businesses.

Maintaining and expanding Con Ed's electric distribution network is critical to support New York's clean energy targets.

Con Ed has increased its dividend for 52 straight years, including a 4% increase for 2026. We expect the dividend to grow slightly faster than its 3% pace the last few years.

New York's three-year forward ratemaking and usage-decoupled customer rates reduce earnings and cash flow variability.

New York regulators historically have set customer rates for Con Ed's utilities based on allowed returns on equity below industry averages.

New York's intense political climate and high cost of living means that achieving rate increases can be tougher than in other jurisdictions.

Population density and aging infrastructure places additional risk on Con Ed for potential accidents that cause property damage and personal injuries.