NYU Stern Center for Sustainable Business: A Conversation with John McAvoy (MBA '87)

Good afternoon. It is a real privilege to be here at NYU and it's a pleasure to be here with all of you. I look forward to sharing some thoughts with you and then answering questions and getting into more of a discussion. It should be very interesting hopefully and a lot of fun. I will tell you it is a little sobering for me to think back my visit while at Stern, it is now 30 years ago since I graduated. So when you start counting time in decades, that's very humbling. And to put that into perspective that a business student could appreciate, when I started at NYU, the Dow Jones Industrial Average was below a thousand and we had many active class discussions around does the economy, does the market have the horsepower to break through that thousand barrier. And so 23 times that, here we are in 2017. So pleasure to be here with you. I will tell you I think very fondly on my time at Stern, not only for the education but for the values that we learned around how to conduct business. And I will tell you that the values we talked about then and they used to still appeal to now here at Stern, very some of the values that we're working to put into practice at Con Edison, and things like why ethical behavior has to always come first, how encouraging a culture of diversity and inclusion really enables the company to be its best, and why developing products and services to bring value to customers and really, you have to look at us, we are a public service company, how determining those delivering those products and services can really help us to lead a successful and a sustainable future. I'm sure these are themes that are familiar to you, they probably likely covered in much of your classwork and some of your offline discussions, and very much essential to the mission of the Stern Center for Sustainable Business. And so what I'd like to do is share with you some of the ways in which Con Edison is putting those ideas and concepts and objectives into practice. I will tell you for a start, our view is that a sustainable business truly enriches the communities in which it serves, it gives customers the services and the products that they want, it helps to reduce risk both for the company and for the customer, and it's one that can attract and keep and develop its people by encouraging an environment of diversity and inclusion.

I'll tell you I always start off with safety because we manage three large electric, gas, and steam systems in the city, which are large energy systems that would naturally bring with them important hazards that we have to ensure does not affect negatively our employees or the public we serve. We do many things to make sure that that is our top priority. I'll give you a few examples. For our employees, we've worked to dramatically reduce workplace injuries. Since 2009, we've been able to reduce them by two-thirds, and we are on a way towards working towards achieving what we call a zero accident workplace. We take that same philosophy and apply it in terms of public safety for the electric, gas, and steam system. Just one data point: we are extremely aggressive in our response when we hear any reports of natural gas leaks. We reach almost 90% in under 30 minutes and work to make the situation safe immediately upon arriving there. That's the safety side. But I'll tell you we also work to reduce risk by promoting an ethical culture. Ethical behavior is very fundamental to what we do at Con Edison because again, we have to think of us as a public service company. That is a calling, that is the role we play even though we're an investor-owned utility, we are really providing an essential public service. I like to think about this really on very simple terms. When we talk about ethical behavior, it's about doing the right thing the right way every day. The strength of our company depends on it, and frankly I have to believe that the strength of virtually any company would depend on its employees making sure that they uphold standards. For us, that means following procedures, considering potential conflict of interest, making sure we carefully plan our work. And one thing we're very forthright with our employees on: if something just doesn't feel right, it is each of our responsibility to make sure we stand up and say something about it.

Another risk that's very important in today's world is the risk of cyberattacks. And unfortunately, the reality is not only does it continue to increase in volume and sophistication, but for those of us in the energy business, we are increasingly targets of cyber threats. And so we worked very aggressively with our industry peers at other energy companies, very close collaboration with government and law enforcement agencies to make sure that we're addressing this issue. And we have an extremely robust cybersecurity program to identify and protect our assets, to detect intrusions should they occur, and to be able to respond and recover should we have a significant impact. We also recognize that all of our employees are a big part of this, not only because they are users, but there are many in many ways can be the front line of defense. And so we put a tremendous amount of effort into educating our employees and making sure we have a very high level of cyber awareness. I mentioned earlier bringing a variety of products and services to our customers, and we view that too as an element of sustainability. We see the customers' expectations, preferences, and needs are continuously changing, compared to the services that they can get from Uber and Amazon and others. And so we are working to deliver our products in a more transparent, a more specific to individual customers, individualization approach. And some of that includes things like providing easy access to renewables, providing increased resiliency from extreme weather, and providing advanced tools that allow customers to enhance and manage their own energy use.

You heard that we are the fifth largest solar producer in the country through our non-regulated businesses. We've developed that over time through both developing the capability for developing renewable projects and then for developing an investment strategy around it. We've invested over three billion dollars in new solar and wind projects. We have large solar projects in the Southwest and Texas, large wind projects in the Midwest, and then we have smaller solar projects in the Northeast. And it's business students, you'll be interested in knowing that, and this is really pretty remarkable, I'm very proud of the team. We've been able to complete our large renewable projects on budget and on schedule for each one of them, and when they go into production, they make as much or more electricity than they were supposed to, and as much or more earnings for the company as they were supposed to. A real win-win-win combination. That's our solar and wind portfolio across the country. Here more locally within our service territory, the demand for solar continues to increase. Our customers have over 23,000 solar installations that produce about 240 megawatts of energy. And just on the other side of the East River at the Brooklyn Navy Yard is the city's largest solar project, and you can guess that we're pretty proud that it's a Con Edison project. In so many aspects of our lives, we see dramatic change again as customers' needs and expectations evolve. And to better serve our customers, in addition to having new products and services, we also are looking at new business models and new market interest. One of those areas includes energy storage, which is a technology that really has huge potential and will be increasingly required as we have increased levels of intermittent renewables supplying our base load electric needs. Battery storage, if properly done, can also help enhance resiliency for our customers, and we found cases where by coupling renewables and battery storage, we could defer traditional utility investment and in so doing save money and keep our bills low for our customers at the same time that we're driving these type of technologies within our system.

Technology is also driving big change in the transportation industry. More and more electric vehicles are coming to market, vehicle ranges are increasing, charging times are reducing, and industry analysts now think that by 2040, over 60% of the new vehicles sold in this country will be electric. Today there are only 6,000 electric vehicles in New York City, and for a city of this large, they like to joke around, you know, we have more Ray's pizzas than that. So there is tremendous opportunity for growth, and New York City is so well suited for electric vehicles because we have many large fleets, we have relatively short commutes for many of the people who work here, and it helps address the fact that we need to have an essential focus on local air emissions. While we all maintain focus on reducing carbon emissions, local air emissions for such a densely populated city as this is also very important. To help prepare and encourage more electric vehicle adoption, we've recently proposed a $25 million project that would test strategies for how can we best encourage citizens to adopt electric vehicles. We're working with New York City and looking if we can find locations either on company facilities to get it kind of jump-started, as well as on the street, we can provide electric vehicle charging stations that would help advance the adoption of passenger vehicles, taxis, trucks, and fleets. Another element of our development, and it's amongst the most exciting things we're doing, is something called smart meters. We are just started a rollout of 5.4 million smart meters, electric and gas, for every one of our customers. That'll take about the next five years. Customers will not only get better service, but they'll be able to access information, control their energy use in a much more engaging fashion, and we will be able to operate the grid more efficiently.

I don't use this word lightly: smart meters is a transformational project for our company and how we can meet our customers' needs and how we can provide new products and services. Now a little bit on how our business works to enrich the communities we serve and provide a more sustainable environment. First, we start at home. Since 2005, we've been able to reduce our own carbon footprint by 48%. That's roughly the equivalent of taking half a million cars off the road. We're proud of that and we're working to continue to reduce it further going forward. We've also worked to help our customers reduce their energy usage. We are very strong advocates of energy efficiency programs, and we have rebates and incentives and programs for just about every type of customer. Since 2009, we've had 375,000 customers take advantage of those programs. They've received $350 million in rebates and incentives. And if you want to talk about an interesting business model, find another company that pays customers to use less of their product. That is in effect what we do, because we know in the long run that's good for customers, that's good to keep bills low, and it's the right thing for the environment. As of this summer, we had helped 6,500 large New York City buildings transition from oil to much cleaner burning natural gas, and that is one amongst many other reasons why New Yorkers are breathing the cleanest air that they have in over 50 years. And when we look at natural gas, we see pretty clearly the demand for natural gas will continue to increase. It is the cleanest burning of the fossil fuels and it is low cost. But we've recently worked with our staff and developed a proposal for how can we make better use of the natural gas supplies that we have. So we're recommending doubling the incentives for natural gas efficiency, kind of following the model that we've used with the electric system. And we're also looking at what is a relatively new term: non-pipeline alternatives. How can we take advantage of the way customers are using natural gas now in a more efficient way to avoid or defer the need for new gas pipeline builds? And while we may need new pipelines at some point, we want to make sure that we're taking advantage of the existing resources we have as much as possible.

More directly in terms of community activity, we worked hard to enhance the fabric of the communities we work in. Last year we donated $12 million to nonprofits in areas to focus on education, the environment, the arts, civics, and the community. And our employees give of their own time as well. We clean parks, we serve disadvantaged, we mentor students, we rehabilitate homes for veterans, we provide career coaching. That's just a few. We had over 250 volunteer activities last year, and our employees gave over 12,000 hours of volunteer hours just on our activities, in addition to their own volunteer activities that they do in their own communities. Just last month, our employees donated over $60,000 to those who were impacted by hurricanes. The company matched that dollar for dollar, as well as making substantial direct contributions to three of the major nonprofits who are helping support disaster relief. And that's in addition to the dispatch of our personnel, particularly who were impactful in Florida. And I will tell you, when our employees go on the road to help these areas, the role they are taking is something of heroic and something that we're all proud of to be able to reach out and help other communities when they're significantly affected. When natural disasters strike, our people respond. We're also very focused on STEM education. One of our most interesting and really most impressive projects involves the Energy Tech High School in Queens. This is a specific curriculum that we worked to develop with the New York City Department of Education and CCNY. It now offers a six-year program where students get a high school diploma and then can stay for two more years to get an associate's degree, all with a focus on energy technology, and at no cost to the students. We mentor students, we bring them to the company for internships, we help work and develop the curriculum. And the first graduating class from the first four years from the high school just graduated this past summer. As compared to the citywide graduation rate of 67%, Energy Tech had a graduation rate of 94%. And that's something that we think we can continue to maintain going forward. A lot of energy and a lot of enthusiasm there in terms of building the future.

We have something called the STEM Day Out program where we bring thousands of middle school students from around the city to different cultural institutions, and then the partnership is with educators who really help to bring the exhibits to life. Not long ago, we had one of the groups at the American Museum of Natural History, and one of the teachers said that students who had never really been involved in science before are now captivated by it and really were trying to understand how they can pursue careers like that. We think that's adding real value for society. I certainly want to make sure I also spend a little time on diversity and inclusion, because we do believe that is absolutely crucial to long-term success in the workplace, not only in our business but in any business. Our view is that diversity across all categories of race and gender, culture and experience, is what makes our company strong. We put a priority on recruiting and promoting women, veterans, and minorities across all of our businesses, of course all the different aspects of our work, and we emphasize hiring women in non-traditional roles. But we also view that the strength of diversity is really only unleashed if you have an inclusive environment. Inclusion to us means that we make sure all voices are heard, all views are represented, everyone feels valued and respected in the workplace, and all ideas and experiences are welcome. And we believe that's the road for us going forward that will lead to success. So those are kind of my opening remarks. I hope I gave you a flavor for some of the things that we're working to achieve at Con Edison and how we're putting some of the philosophies and values that you hear at the NYU Stern Center for Sustainability into practice. I will tell you our experience has been that it is a real roadmap for success. I wish all the students here that you have a wonderful intellectual experience here at Stern and that it leads to a fulfilling career and a rich life and livelihood. Thank you so much for having me, and I hope we have some opportunity for your questions and maybe get questions from the group. So let's get to them. Thank you.

So this is a $1.4 billion investment, the capital investment on the part of the company, will save customers a net, the full business case, of over a billion dollars. And that's the low estimate. That's only the things that we were affirmed on, not assuming that there's any change in customer behavior. 5.4 million meters, electric and gas, across our service territory. And I tell you, transformational, and I am absolutely confident that that's the case. So I'll start at the simple basics. For starters, we don't have to read your meter anymore. So no more people coming into your homes or houses where you have to go in somebody's basement, you have to get into that kitchen, have to be on the front lawn. Don't have to do any of that. None of the inconvenience, none of the cost associated with that. That's a given. Next is the ability to do remote turn-ons and turn-offs. So when somebody moves into a new apartment and wants to have the service established, which only happens a few zillion times in this city every year, right? Instead of making an appointment with us for us to come on and turn on your electricity, you set up your account either online or on the phone, we verify that you're ready for electric service, and we'll be able to turn it on remotely. Storm and outage response will be dramatically enhanced because we will no longer be responding when you tell us you have a power outage, but we'll know as soon as it happens. And because we'll be able to see the extent of the outage, whether it's three customers, 12 customers, 80 customers, we'll likely be able to in most cases diagnose what the problem is: it's this transformer, it's this feeder, it's this fuse that cut out, and dispatch the right crew with the right equipment to repair it in a shorter period of time than it is traditionally caused. And when you look at broader outages like a Superstorm Sandy or a Superstorm Irene, we believe it will be able to improve our restoration time by several days. And we say that not because we have a model that says that, we say it because utilities that have already installed and benefited from smart meters have been able to see that type of improvement. We'll be able to reduce electric usage we think by seven-tenths of a percent, and a little less than one percent. May not be impressive, but that's one percent 24/7, 365 for every one of our customers going forward, by controlling voltage more precisely and maintaining it more narrowly in exactly the areas that are needed to provide reliable service for our customers. And we believe it will open the door to providing new products and services, probably some that we can't even think of right now, because this is like our version of big data. This will allow us to know what's going on in the system, and as many industries have seen, once you have the data, you find ways to use it that you didn't expect. But ways that we know that we'll be able to use it would be along the lines of looking at and helping customers manage their usage more effectively. So we'll be able to write a letter that says, 'Dear Miss Smith, just want to let you know, as far as we can tell, you live in a single-family 1960 vintage home. Most of the houses on your block are just about the same as yours. You use 43% more electricity than the average of your neighbors. If you're interested, we have energy efficiency consultants we can refer you to, other companies that provide this type of energy efficiency, or these are the type of things you might look at yourself if you want to start checking into why that's the case. And we can see that actually your refrigerator goes on like three times every 10 minutes, so unless you're running a bodega there, you probably need a new refrigerator. Here are some energy-efficient models, here's what they would cost, here would be the payback period, and here's a list of qualified vendors that you could call to have them come in and do the replacement for you.' A very different type of relationship that we can have with our customers around helping them manage their energy use and reduce costs in a much more proactive, much more engaged way. So a lot to be excited about with smart meters.

So first, frame this a little bit. We are not the first doing smart meters, not even close. About 40% of the country already has smart meters. But we're benefiting from the fact that we're getting second-generation smart meters, and actually at less than first-generation prices. And we're able to look forward and build a system that will not only be able to support smart meters but likely be able to support many other uses as well. So we're building out our own communication network that communicates with the meters, and we can see, none of this is actually firmly in the plans yet, but we've built it and sized it so they can support many smart city type activities. So traffic control and congestion: instead of having traffic lights that go on and off based on time, we can set up algorithms that go with that, and with the proper sensors in the street that know how many cars there are, we can control traffic lights based on what cars need to move and where is the most traffic. We can from a security perspective, there are sensors available relatively low-cost that can detect the sound of a gunshot and immediately notify police of a security incident so they can respond immediately instead of when they get a phone call. Control of streetlights is clearly another aspect, and some cities are already doing that and taking advantage in a way that maximizes their effectiveness but minimizes the cost and usage. So by taking advantage of our communications network, we can not only provide really new intelligence and new innovation for electric and gas customers, but really overall for the communities we serve.

I will take a very different from what it looks like now, and in all changes that we're very much looking forward to, and we see frankly as a business and as a service provider a great opportunity. Overall, we'll continue to grow as an enabler of new technologies. So a lot of these distributed energy resources such as rooftop solar, fuel cells in some cases, battery storage, electric vehicles, these are all technologies that were not quite commercial five or ten years ago in most cases, and now are commercial and either breakeven or cost beneficial or pretty close to being able to do it, and the price curves will show that they've got a breakthrough depending on which one you pick in the next three to five years. We have a very significant role in enabling those technologies, making it easy to get a solar connection, helping provide the control so that electric vehicles are charged at the right time so that they don't negatively affect the system by creating new peak usage, and so the customers can charge them at the time of lowest cost so they can minimize their refueling cost. Very much our distribution system, which used to be a way to just provide electricity to the customer, now becomes a two-way flow. We're taking in distributed energy resources and it becomes the...

Center of the system, frankly. Historically, the center of the system was the power plants and the transmission system. They now become one of the feeds in, but the distribution system becomes kind of the essential part that allows all these new technologies to be a bigger part. Solar and wind and other renewables clearly will be a much more significant factor. We have city goals, we have state goals. The most significant for New York State is likely the 50 by 30 goal: by 2030, 50% of our electricity has to come from renewable resources. So we're at 25% now, so you say, oh, not too bad, we're halfway there, except that 20% of that 25% is legacy hydro built 60 and 70 years ago. So with 15 years of new renewables, we'd move the needle about 5%. And so in the next 13 years, we have to move it another 25%, and that's primarily going to require large-scale renewables, large projects that will likely be in northern New York, western New York, and offshore. And then, in addition to requiring those large-scale renewables, we will need to have electric transmission to bring the power from the less populated areas to the load centers like New York City, the lower Hudson Valley, and Long Island, where the largest amount of energy is used. And when we look at large-scale renewables — and I don't mean this in a way to not support rooftop solar, because we do support rooftop solar, in fact we have a rooftop solar company — but when you look at being able to move the needle from 25% to 50%, large-scale renewables is about half the cost of rooftop solar. And so what we're looking for, to find opportunities, is to develop a clean energy economy, but to do it in a way that's the lowest cost for our customers.

Yeah, so a little bit of a quick look back at Sandy, and how the system was designed and where we're headed going forward. We had built the electric system traditionally based on the most significant flooding at the Battery that had ever been recorded in New York, and it dated back to a hurricane in the 1820s where the sea level at the Battery reached 11.1 feet. So we had designed our system for twelve and a half feet, about a foot and a half of buffer to protect against that, and which was a good number that stood up for almost a hundred years. Sandy came in at 14.1 feet, three feet higher than had ever been seen in recorded history in New York City. So once the floodwaters had receded and we had all the electric and gas back on, we quickly started working on where do we take this, how do we enhance the resiliency of the system. And we quickly concluded that this was not something we should do in isolation. We should do it along with New York City and the appropriate building and standards department, we should do it with climate change experts and intellectuals from academia, and we should do it with many of the large building owners and other agencies that operate infrastructure, because it doesn't make a whole lot of sense for us to build to whatever X number of feet we have to build to keep the electricity on, but every large building's basement is flooded and that's where all their electrical equipment is, and so they have to be out of service anyway. So we did it as a collaborative. As those things, when you involve a lot of different parties, it takes a little longer that way, but we were able to come up with the design criteria which basically takes the FEMA flood maps, which were all renewed after Sandy, for the hundred-year flood and adds three feet to them. And so that is our current design criteria. We and the city have agreed to that, and we have completed, absent one project, we completed like 153 projects, one left to go, that take our system to that design criteria. The way we've done it, I think, is important too. By the way, that overall program, over a billion dollars in storm hardening and resiliency efforts, is a very significant investment. Wherever possible… well, let me step back for a second. There are a number of ways of going about making your system more resilient. You can take whatever equipment you're trying to protect and build walls around it. And by the way, that's quick and cheap. And so the first season after Sandy, we were building walls around everything. I used to joke around, if you stood still in a substation for too long, there'd be a wall built around you. Quick and cheap and easy. We worked with one wherever we were doing it to make it so that you could continue to build in the future up, so that if we see climate change continues to progress, you don't have to tear it down and build the next wall, but you can build higher. That's kind of a crude but cheap and quick way of doing it. The more sophisticated way of doing it is either removing the equipment from close to the floodplain — that's often not the case and not possible, particularly with our system being underground for most of our service territory. And so the next technique that we've worked hard to use is to make things submersible. And the beauty of submersible is that you don't have to be right with your prediction of what the flood height is. If it's submersible for 16 feet or 18 feet or 20 feet, it's good to survive either way. And it's submersible for other types of events like water main breaks, which do happen from time to time. And so with the approaches we've used — I'm describing mostly the flooding concerns — we had similar issues around the overhead system primarily in Westchester and Staten Island that were affected by high winds. There we used a number of approaches: stronger poles, stronger wire, quick disconnects that allow service connections to disconnect quickly but restoration to happen much more quickly. The end result is you don't take the pole down when the wire comes down. And when you look at how we've implemented these changes, we've tried to make them so that they benefit customers not just when the next big storm happens, but that they benefit regularly under normal weather type conditions. We estimate that we've avoided 250,000 customer outages over the last several years as a result of our post-Sandy storm hardening, and we see these opportunities to continue to enhance that going forward.

I'll take the first a little bit. Yeah, I'm first. I've been incredibly fortunate in my career. I have been helped by many company employees in virtually every area I've gone. I've gotten the opportunity to have a very broad career and work in all different parts of operations from power plants to substations to control centers. And the benefit of having received others' experience and knowledge is something without which I wouldn't have gotten anywhere close to what I've done. I'm tremendously appreciative. What I've seen in our company and kind of believe it's largely transferable: there are a couple of things that are a part of what often leads to success. None of this will be any surprise to you. The first is you got to work hard. And working hard not only means applying yourself and your resources, it means doing your share of the department's work. It means — I like to use the word 'relentless' because you'll see in everything you're charged with doing, you will hit roadblocks, you will hit obstacles, and it's easy to pull up and say it looks like this isn't working. The people who really deliver for us, and some of the most successful leaders, are really relentless. They find a way — they go above, below, around — they will get through every obstacle. And I want to be careful here: relentless sounds an awful lot like ruthless. No, no, ruthless has no place in this. I'm talking about a persistence and tenacity that you've got to find a way to make it happen, and that you're committed to achieving your goals or the organization's goals. Second is being a team player. There is very little that happens in my company that is of any substantial importance that is done by a single individual. It is almost all a team effort. Our work is so complex, the service territory we serve is so challenging, and the nature of the technology is such that you need to have many people working on it to really deliver good outcomes. So you've got to learn how to be a team player, how to contribute, how to lead sometimes, how to follow sometimes, how to work well with others — often called emotional intelligence in many aspects of workplace psychology. But I'll tell you, it makes all the difference when you can really find a way to engage and communicate and work well with others. I have a good friend who worked at a place maybe many of you may not have ever heard of called Bell Labs. It was the innovation center of the world frankly for many years, not too far from here in Jersey. He worked there, worked on the first solar panels a few decades ago. And they were known for having amongst the brightest people on the planet. And he used to — he was a PhD himself — and he used to say, you know, PhDs are a dime a dozen. I need people who can work with each other. So I think that that has a lot of applicability. And third, the person of integrity. Ethics and integrity are something that we can't teach you. The business — we you can learn the financial sides, the legal sides, the regulatory side, the operational side — and we have all the tools available. But how you approach your job, your responsibilities, your sense of responsibility to the community and to others, the sense… and by integrity, you know, we're not just talking about you know don't cheat or steal. We're talking about standing up for what's right, having the conviction of your principles to know what is and what is not proper, and helping yourself and your organization drive in that direction. Towards sustainability. And we've already touched on a good number of different topics. I guess one suggestion I have is think of sustainability in very broad perspective. It's not just about the environment, it's not just about having a business model that's going to be able to stand up and be successful in 10 or 20 years, it's about public service, it is about integrity and ethics, it's about proper governance of the organization. Think of it in the broadest perspective. And find a company that aligns with your values and where you think what you'd like to accomplish is something that they were already working to accomplish, because that's really satisfying, right? I mean, you could tell I like it a little bit, right? I you know, it started off because I love big equipment. I work where I work, you know, as a kid I used to work on cars and tune-ups and all the changes and all that, all the simple stuff by the way, none of the tough stuff. And I wanted to learn. I found out that you know they had even bigger machinery: they have big turbines and generators and nuclear reactors. Oh, it's all really interesting. And so I wanted to have the opportunity to do that, and I did. And it had all that, but I stayed because of the people. The people are just fantastic. They care about what they do, they're sharing of their information. And this applies 37 years ago when I started in the place to today. They care about what we do. If you were to take a sample of our employees and you were to ask them what's the P/E ratio, what's our current dividend payout ratio, how does it compare to our peers, unless you're talking to the finance department, you're gonna get blank stares. If you were to ask them what our safety record is, what customer service scores are, and what our reliability record is, they'll rattle it off right like that, because that's what makes the job real to us, that's what we care about. And of course we know we have a fiduciary responsibility toward shareholders, so you can't be flippant about it, but fundamentally when we do what's right for our customers, it will eventually be right for our shareholders.

Yeah, and it falls in line with something I mentioned quickly earlier. Our role in enabling new technologies and innovation: in some cases we'll be an owner, a part owner, or complete owner; in some cases we won't, but we're just helping customers find a way to do it. Frankly, developing projects like that, or even something that may sound as simple as, you know, like the Morgan Stanley building wants to put in fuel cells so that they have some on-site generation to keep the data centers up and running — that is not an easy task to do. The regulatory issues, the permitting within the city, and the interconnection, and that alone is very challenging. And then when you try and come to a point, well, how do I optimize this from a business case model? They're often not fully aware of the different incentives and rebates. They're not aware of the fact that there is a marketplace for electricity that operates and clears every six minutes. Very few typical customers know how to play in that market. How do you align? How do you bid in? What's the strategy that you would want? How do you size your project so that you can get the maximum capacity and energy payments from that market but minimize the chance that you won't get picked up? Those are all things that most companies, even big companies like Morgan Stanley, don't spend a whole lot of time on. We have that, that's what we do for a living, we know. And so in some ways we can just enable the projects by working in partnership with the organization. In some cases, there's a lot of opportunity for us to do it with the local municipality as well. And what we're doing with the city of New York on EV charging stations is a good example. The whole plan that we're laying out is something that is the result of the collaboration between us and city planners. And certainly city planners have a very different perspective on economic development and population growth in the city than we do. We don't have that expertise. So you put the two together and you end up, I think in almost all cases, with a much better product. So we see that as being a big part of our role going forward.

So when various regulations are put out, and proposed regulations, city, state, federal, we look at them. We try and understand what the potential impacts are to our customers and to our business because they're often — we find cases where the course impacts are not fully evaluated, or we don't agree with the course the impacts we see them in, and where there are unintended consequences. We don't tend to take positions on what is the best social policy. And if you will, no one elected us. There's a lot of different ways to pursue environmental improvements, economic development of different areas. And so we haven't self-appointed ourselves. We want to make sure it's a fully informed decision. We want to ensure that there, if there are unintended consequences, that they're understood. But we don't specifically take a position of, you know, you should, we should be doing what France is doing and outlawing internal combustion engines by 2040. We don't tend to go that far. We think that's best left to the electorate and to elected officials who are directly connected with what society wants.

Yeah, so we are looking at all the alternatives. We think lithium-ion is likely the technology for the foreseeable future, the next 7 to 10 years. The Fire Department of New York is probably the most proficient, professional fire department in the country. They have the most challenging service territory, and they have driven down the incidents and number of injuries and fatalities due to fires dramatically over the last several decades, and we have tremendous respect for them. We are working very closely with them on the permitting of lithium-ion. They are very cautious, they are very careful, they don't take it at face value. We are literally involved in a significant testing activity with them around lithium-ion batteries to take their criteria and see if the batteries that are commercially available... So it takes longer to work through the Fire Department of the city of New York problem than anywhere else, we know. But we think it's the right thing to do, and we will get there. And I don't think we're too far off from having permissible lithium-ion batteries. It may not be what everyone expects. The idea of a power pack on your garage wall — that's probably a ways off because it's directly adhered to a combustible surface. You know, they'd like it to be 20 feet away. Of course, there's no place in, you know, in Queens Village that is 20 feet away from a combustible surface. So yeah, yeah, there is a give and take. But lithium-ion is likely the technology for the foreseeable future, and the fire department, I think, is doing the right thing, and we're gonna get there.

Yeah, so really great question. Lots there. Let me start with... you know, so the 80 by 50 challenge, 80% reduction in carbon emissions by 2050 for New York City and New York State, is a tremendous challenge. We've done the studies to say, is it even feasible? And the answer is yes, but it requires a significant reduction, as you pointed out, in use of natural gas for space heating and in electric production, and a significant reduction in emissions related to transportation, cars and trucks primarily. It is a very... you know, it's 33 years away, so you don't want to put off a challenge like this, but we do have some time, and that will continue to be technical technology innovation that will help us do this. But if we want to make that march, it is doable. The cost impacts have not been fully scoped out. If you were to take a building like this and convert it to electric heating, the costs are quite substantial. Not so much for the kind of infrastructure for the building infrastructure because it's different type systems, and you have to increase not only... you have to change out from boilers to heat pumps, but you have to increase the size of your electric service because you're powering up much more equipment. So there's a lot of challenges, and it's a good thing we got three decades to work on it. We see it though that it's doable, and it's something we can achieve. The costs will be significant. I didn't mention energy efficiency. Getting to 80 by 50, energy efficiency is a big part of it. If you were to list solar, wind, hydro, battery storage, electric vehicles, and energy efficiency, and which one makes the biggest difference? Almost every case, energy efficiency is the top. It is not quite as sexy as solar and wind, but it is almost always the most effective way to reduce emissions and the lowest cost way to reduce emissions and to reduce customer bills. So we continue to be a massive advocate, and the amount of energy efficiency will need to reach 80 by 50 is very significant as well. So all the things you bring up, those are all things that will have to be addressed. Technically it's feasible. There's going to be a whole lot of policy challenges. There'll be codes and standards that have to change, and they'll have to be a commitment that we're willing to pay the bill at the end of the day. And Con Ed was a partner with NYU on the cogeneration? I mean, we worked with you a bit on the cogeneration job? We did, kind of we were an enabler, right? Yeah, it's all your project. We made sure was connected and you sized it right, and yeah, that the service was as optimized as possible. Thank you.

Yeah, so you know, when you look at the different service territories across the country and realize the economics in those service territories are often vastly different, the culture is vastly different. I'll give you an example: up until last year, 2016, coal was the leading source of fuel for electric generation in this country. Natural gas just exceeded it, but coal is still a third of the fuel used to burn to create electricity in this country. In New York, we stopped burning coal. New York City in the early '70s, over 40 years ago, said coal doesn't work here. It is still a very substantial... what drives that? A whole host of economic and social jobs-related issues that permeate through the different parts of the country. Energy efficiency is something that is very different in a densely populated city like ours as compared to single-family homes in more suburban and especially rural parts of the country. It shows up very differently. You know, New York City is already the most energy-efficient city in the country, and it's a combination of relatively small living spaces, a lot of buildings with a lot of apartments, lower losses because you know you got 26 apartments on a floor but you only have the four walls that surround it, so losses are less, and because of the efficiency of mass transportation and particularly the subway system. So we have a lot of those things that you go to a lot of other parts of the country and they're not there. And it's part of... national energy policy, you know, we really do not have a national energy policy. We do not and have not, going back to the '70s. It's very hard to write one set of rules that everyone can buy into. The Clean Power Plan that was put forth under the Obama administration, and now eventually is... I know I don't even know if it's been officially withdrawn, but it's clearly not going to be enacted. Attempted to do that, and even that did it at a relatively low level. But getting a consensus across the country that you know Kentucky and New York should do the same thing, that's pretty challenging stuff. So I think of us having three lines of business: our regulated utilities, our renewables business, and our transmission business. The regulated utilities are 90 percent or more of the company right now. If you measure by revenues, by earnings, by number of employees, by investment in assets, that is the overwhelming majority of the company, 90 percent or more. And it might not be at the 90 percent more for the next 10 or 20 years, but that will still be the majority of the company. That's where we make our investment, that's where we put the largest part of our focus in terms of operation, optimizing our operations, and it's where most of our investment goes. So for example, regulated utilities will invest $3.1 billion in new capital this year. That's more than we've invested in renewables over the whole life of the renewables business. It's hard for the renewables business to become a larger part of the business when you're investing $3.1 billion every year in your regulated utility. So that's the biggest one. Renewables is clearly going to continue to grow significantly, and tax policy plays into this a bit as well. The uncertainty around tax policy makes it so that in some of the renewable projects, it's harder to be certain. These are long-term investments, 20 or 25 years, typically contracted output. Obviously you got to know what the economics are before you enter into a 20 to 25 year contract. The uncertainty around tax policy is slowing down investment in renewables. I view that as kind of just holding our breath for a little while, let this play out, find out what tax policy will be. That will continue to be a major source of investment. And transmission we see more as an opportunity. We have four or five projects either in service or where we have bid on that will grow with the remote renewables business growing, and we see that there'll be good opportunities. Estimates that New York State to meet 50 by 30 will need a thousand miles of new electric transmission. So that's a thousand miles in 13 years. We've probably built about 40 miles in the last 13 years, so a very significant increase in investment. So that will grow too. But I think if you go out five years, 10 years, 15 years, I don't know if I'll try to go much further than that, our regulated utilities will be the overwhelming majority of our company.

Yeah, we are looking at new revenue streams. So when Mrs. Smith buys that refrigerator and buys it from Joe's Heating & Air Conditioning, we're expecting a little piece of Joe's air conditioning's new business, and we will want to do that not only in the best interest of the company but on the customer's behalf. When we find new opportunities like that, most of those revenues will flow right back to the customer because frankly, you could argue the customer paid for the smart meter that's enabling the technology, they deserve the benefit of that. Part of how, in a low growth electric usage environment, in your exact right on target as you described, is can we develop new revenue streams that will help keep customer bills low? And we see that there'll be opportunities there and are pursuing them.