Former Chairman, President & Chief Executive Officer, Consolidated Edison
Consolidated Edison CEO: Efficient Energy | Mad Money | CNBC
This company keeps the lights on in the city that never sleeps, but can it electrify your portfolio? Jim Cramer sits down with Con Edison's CEO to see if it can power up your profits.
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About John Mcavoy
John McAvoy, former Chairman, President, and CEO of Consolidated Edison, has spoken publicly about his personal history and his work at the utility. In a 2021 podcast appearance, McAvoy discussed his past as a convicted armed robber and his subsequent transformation into an Ironman triathlete. He stated that he believes any successful individual has a "moral obligation to reach back and help other people," and described his own journey as involving "small incremental steps" toward change. During his tenure at Con Edison, McAvoy discussed the company's sustainability initiatives and hiring practices. He stated that the company had reduced its carbon footprint by 48 percent and advocated for energy efficiency programs, noting that the utility had provided $350 million in rebates and incentives to customers since 2009. McAvoy also described the company's smart meter program as "transformational," and said Con Edison was hiring, having added 3,500 employees over five years. He emphasized the importance of a STEM-capable workforce and noted that the company partnered with organizations like the Energy Tech School in Queens.
Transcript (13 segments)
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Jim Cramer0:06
Coming into this year, you probably didn't expect utilities would catch fire. I know I didn't. But this group of slow and steady high yielders has been roaring for months. The reason a lot of it has to do with interest rates. As the yield on the 10-year Treasury declined, the dividends from these utility stocks get more attractive. If we're not worried about surging interest rates, and we sure shouldn't after today's move, we can focus on the good things that are happening at many of these companies. Take Consolidated Edison, ConEd for short. It's one of the largest utilities in America, a regulated provider of power and natural gas to the New York metro area as well as parts of New Jersey and Pennsylvania. If we have a hot summer, you have to believe these guys will be printing money as all of New York City turns on the air conditioning. But there's a lot more to it than that. In just the last 5 months, ConEd stock has rallied more than 12% and even up here, it still sports a 3.3% dividend yield. I like that still. Now, this summer is right around the corner. I think we got to figure out what's going to happen next, particularly in the wake of the company's incredibly bullish and annual investor day two weeks ago. So let's check in with John McAvoy, the chairman and CEO of Consolidated Edison, to get a better sense of how this company is doing, where it's headed. Mr. McAvoy, welcome back to Mad Money. Good to see you, sir. So great to see you. Okay, well first of all John, congratulations 52-week high. Some of it surely has to do with interest rates, but you've also done a lot to be able to make this company a lot more valuable. 43 years of dividends plus very consistent earning profile.
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John McAvoy1:23
That's right. You know, I think we have three fundamental items that support our strategy. The first is we're investing in infrastructure that provides significant benefit and value to our customers in our regulated utilities: $3.1 billion each year for the next three years. The second, we maintain a conservative financial posture that includes a solid balance sheet and allows us to avoid risk, have low volatility, and supports those 43 years of consecutive dividend increases, the only utility in the S&P 500 that can do that. Well, it's pretty fabulous. Then third, and the third is we're leading the transition to a clean energy economy. We're investing in renewables, energy efficiency, customer-side generation, natural gas and electric transmission, all of which are representing significant environmental improvements. One item there: we are the fifth largest solar producer in all of North America.
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Jim Cramer2:11
Now I think people should understand you're not a company that's belching coal plants somewhere. That's not what ConEd does.
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John McAvoy2:15
No, we sold all of our large power plants between '99 and 2001. We still have a few small power plants that supply the steam system in the city, but the large plants we've divested of.
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Jim Cramer2:29
Now I saw today Elon Musk was talking about withdrawing from the president's coalition if the president pulls out of the Paris Accords. I mean, just by nature, you guys just don't talk it. I mean, obviously you must think that it's important that climate change is a big issue and you want to try to do what's best for the environment.
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John McAvoy2:49
Yeah, so we're very customer focused. Customers want clean energy, the communities we serve want clean energy. I think it's up to now 29 states that have clean energy standards. So while there's a lot of discussion at the federal level, there's a lot of state and local community focus that's driving the move to a cleaner energy environment.
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Jim Cramer3:07
I think you're also probably the leader in smart homes, leader in trying to make it so that people are responsible for their own energy. You spend a lot of money on this. Are the people adopting it?
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John McAvoy3:15
So first, energy efficiency is one of the things that we are strong advocates for. We've invested $290 million since 2009 in incentives and rebates. Over 320,000 customers have taken advantage of that. In addition to new facilities and lower energy bills, we have the environmental advantage equivalent to taking 200,000 cars off the road. So energy efficiency is a big part of it, but we are also seeing people adopt clean energy solutions, some of them customer-side. In New York City, we have over 20,000 customer-sited locations providing about 200 megawatts throughout our service territory. By the way, the largest rooftop solar project in New York City is at the Brooklyn Navy Yard and it's a ConEd Solutions project. Now we are to the point where pretty soon we really should expect solar can be able to compete with a lot of the cost of other forms of power. So it continues to drop down. Depends on the location first.
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Jim Cramer4:07
What is the cost of power in that location? What's the amount of radiation in that area, the amount that the general weather trends? But it's in a good number of areas where it's pretty close to being competitive without subsidies. Not quite there yet, but pretty close. Now you are a regulated utility. I mean, should we be thinking if it's a really hot summer, ConEd makes more off its customers? But really, isn't that simple equation right?
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John McAvoy4:28
Yeah, actually, yeah. We've adopted something that's called a revenue decoupling mechanism, there's an acronym for it, RDM. And basically it makes the company insensitive to hot weather or cold weather. If we sell more electricity, those revenues flow back to the customer. If we sell more gas in a cold winter, those go to offset customer bill increases. We kind of use a baseline. And one of the benefits of that is it allows us to be major advocates for energy efficiency because we're not hurt if we sell less of our product.
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Jim Cramer4:55
Now one last question. I'm very worried. Palo Alto reported a big number today, it's a cybersecurity company. I know you guys are intensely focused on cybersecurity. Without giving away any secrets, what are you guys doing to be sure that we're safe?
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John McAvoy5:08
So it is amongst the key focus areas for our company. Four parts of the strategy: protect, prevent, detect, mitigate, and recover. Prevent means you have good firewalls, you practice good cyber hygiene, and you test those mechanisms routinely, including bringing outsiders in to try and hack into your systems. Detect speaks to the fact that in general, most cyber attacks, the intruder has already been in your system for a period of time before they attack. So you have to watch the network traffic, watch which computers are talking to which that shouldn't be normally, watch the communications going outside the company. Mitigate, you got to be ready when there is an intrusion, isolate it to the smallest possible area so that you can recover the rest of the system. And recover, the utility industry has a special way of approaching recovery. We have what's called mutual aid. In the same way that when one area gets hit by storms and we send crews to help it, we're doing that now with cyber crews. And so we have an agreement so that if one of the utilities gets hit, we'll share resources to help that utility.
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Jim Cramer6:09
I'm glad you're doing that. I'm sure all New Yorkers are glad too, and all the other surrounding areas. That's John McAvoy, the chairman, president, CEO of Con Edison. Another new high today and still good yield. Mad Money's back. Booyah! Jim Cramer here from Mad Money. Thanks for watching. C see on YouTube. Click here to subscribe and get the jump on my exclusives with CEOs, plus market news, investing advice, and a whole lot more.