OREANDA-NEWS. June 17, 2015. Recent findings by the National Transportation Safety Board (NTSB) do not have an immediate rating impact on Consolidated Edison Co. of New York, Inc. (CECONY, 'BBB+'/Outlook Stable), according to Fitch Ratings.

However, Fitch believes the NTSB's findings, which concerned a natural gas explosion in East Harlem that destroyed two five-story buildings, increase the likelihood of regulatory fines/penalties that ultimately could have an adverse ratings impact on CECONY. The rating impact will be based on the amount and timing of potential fines and civil lawsuits and insurance coverage.

The New York Public Service Commission (NYPSC) is conducting its own investigation of the accident to determine if the utility bears some responsibility. There is no established timeline for the NYPSC to render its decision, and Fitch will monitor the progress of the NYPSC's investigation.

The NTSB determined that the explosion was partly caused by a faulty plastic fusion on a pipe joint, which was performed by a CECONY contractor in 2011. The explosion leveled two buildings on Park Avenue, killed eight people, and injured more than 48 others. The NTSB report revealed that the probable causes of the accident were the failure of the defective fusion joint at the gas service line, and a breach in the sewer line that went unrepaired by the New York City Department of Environmental Protection since at least 2006.

CECONY is disputing the NTSB findings on the chain of events that led to gas leakage and has filed a lawsuit against the New York City government on the grounds of negligence on their part to address the sewer breach.

Fitch's ratings for CECONY recognize the inherent operating and event risk in the company's businesses, which operate in a highly concentrated urban service territory with an aged infrastructure that is costly to maintain and is prone to sudden breakdown. CECONY has been the subject of intense public scrutiny, political backlash, and reputation risk associated with other high-profile accidents in recent years, including the Manhattan steam main rupture accident in 2007 where one person died and others were injured, and about 90 related suits are currently pending against the company.

In the steam main rupture case, the NYPSC prevented CECONY from recovering from ratepayers the operating, capital, and retirement costs that originated from the incident, limited the recovery of insurance premiums, and instructed the utility to set aside monies for future customer benefits in lieu of imposing penalties. Fitch is unable to predict whether the NYPSC's investigation of the East Harlem explosion would result in a similar outcome.