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Table of Contents

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x
Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2017
OR
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     
Commission
File Number
 
Exact name of registrant as specified in its charter
and principal executive office address and telephone number
 
State of
Incorporation
  
I.R.S. Employer
ID. Number
1-14514
 
Consolidated Edison, Inc.
 
New York
  
13-3965100
 
 
4 Irving Place, New York, New York 10003
 
 
  
 
 
 
(212) 460-4600
 
 
  
 
1-1217
 
Consolidated Edison Company of New York, Inc.
New York
  
13-5009340
 
 
4 Irving Place, New York, New York 10003
 
 
  
 
 
 
(212) 460-4600
 
 
  
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Consolidated Edison, Inc. (Con Edison)
Yes x
No ¨
Consolidated Edison Company of New York, Inc. (CECONY)
Yes x
No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Con Edison
Yes x
No ¨
CECONY
Yes x
No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Con Edison
Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Emerging growth company ¨
 
CECONY
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging growth company ¨
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Con Edison
Yes ¨
No x
CECONY
Yes ¨
No x




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As of July 31, 2017, Con Edison had outstanding 305,674,488 Common Shares ($.10 par value). All of the outstanding common equity of CECONY is held by Con Edison.


Filing Format
This Quarterly Report on Form 10-Q is a combined report being filed separately by two different registrants: Consolidated Edison, Inc. (Con Edison) and Consolidated Edison Company of New York, Inc. (CECONY). CECONY is a wholly-owned subsidiary of Con Edison and, as such, the information in this report about CECONY also applies to Con Edison. As used in this report, the term the “Companies” refers to Con Edison and CECONY. However, CECONY makes no representation as to the information contained in this report relating to Con Edison or the subsidiaries of Con Edison other than itself.
 




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Glossary of Terms
 
The following is a glossary of abbreviations or acronyms that are used in the Companies’ SEC reports:
 
Con Edison Companies
Con Edison
 
Consolidated Edison, Inc.
CECONY
 
Consolidated Edison Company of New York, Inc.
Clean Energy Businesses
 
Con Edison Clean Energy Businesses, Inc., together with its subsidiaries
Con Edison Development
 
Consolidated Edison Development, Inc.
Con Edison Energy
 
Consolidated Edison Energy, Inc.
Con Edison Solutions
 
Consolidated Edison Solutions, Inc.
Con Edison Transmission
 
Con Edison Transmission, Inc., together with its subsidiaries
CET Electric
 
Consolidated Edison Transmission, LLC
CET Gas
 
Con Edison Gas Pipeline and Storage, LLC
O&R
 
Orange and Rockland Utilities, Inc.
RECO
 
Rockland Electric Company
The Companies
 
Con Edison and CECONY
The Utilities
 
CECONY and O&R
 
Regulatory Agencies, Government Agencies and Other Organizations
EPA
 
U.S. Environmental Protection Agency
FASB
 
Financial Accounting Standards Board
FERC
 
Federal Energy Regulatory Commission
IASB
 
International Accounting Standards Board
IRS
 
Internal Revenue Service
NJBPU
 
New Jersey Board of Public Utilities
NJDEP
 
New Jersey Department of Environmental Protection
NYISO
 
New York Independent System Operator
NYPA
 
New York Power Authority
NYSDEC
 
New York State Department of Environmental Conservation
NYSERDA
 
New York State Energy Research and Development Authority
NYSPSC
 
New York State Public Service Commission
NYSRC
 
New York State Reliability Council, LLC
PJM
 
PJM Interconnection LLC
SEC
 
U.S. Securities and Exchange Commission
 
 
Accounting
 
 
AFUDC
 
Allowance for funds used during construction
ASU
 
Accounting Standards Update
GAAP
 
Generally Accepted Accounting Principles in the United States of America
OCI
 
Other Comprehensive Income
VIE
 
Variable Interest Entity


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Environmental
 
 
CO2
 
Carbon dioxide
GHG
 
Greenhouse gases
MGP Sites
 
Manufactured gas plant sites
PCBs
 
Polychlorinated biphenyls
PRP
 
Potentially responsible party
RGGI
 
Regional Greenhouse Gas Initiative
Superfund
 
Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes
 
 
 
Units of Measure
 
 
AC
 
Alternating current
Bcf
 
Billion cubic feet
Dt
 
Dekatherms
kV
 
Kilovolt
kWh
 
Kilowatt-hour
MDt
 
Thousand dekatherms
MMlb
 
Million pounds
MVA
 
Megavolt ampere
MW
 
Megawatt or thousand kilowatts
MWh
 
Megawatt hour
 
 
 
Other
 
 
AMI
 
Advanced metering infrastructure
COSO
 
Committee of Sponsoring Organizations of the Treadway Commission
DER
 
Distributed energy resources
EGWP
 
Employer Group Waiver Plan
Fitch
 
Fitch Ratings
First Quarter Form 10-Q
 
The Companies' combined Quarterly Report on Form 10-Q for the quarterly period ended March 31 of the current year
Second Quarter Form 10-Q
 
The Companies' combined Quarterly Report on Form 10-Q for the quarterly period ended June 30 of the current year
Form 10-K
 
The Companies’ combined Annual Report on Form 10-K for the year ended December 31, 2016
LTIP
 
Long Term Incentive Plan
Moody’s
 
Moody’s Investors Service
REV
 
Reforming the Energy Vision
S&P
 
S&P Global Ratings
VaR
 
Value-at-Risk



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TABLE OF CONTENTS
 
  
  
PAGE
 
ITEM 1
Financial Statements (Unaudited)
 
 
Con Edison
 
 
 
 
 
 
 
CECONY
 
 
 
 
 
 
 
ITEM 2
ITEM 3
ITEM 4
ITEM 1
ITEM 1A
ITEM 6
 
 


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FORWARD-LOOKING STATEMENTS
 
This report includes forward-looking statements intended to qualify for the safe-harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements of future expectation and not facts. Words such as “forecasts,” “expects,” “estimates,” “anticipates,” “intends,” “believes,” “plans,” “will” and similar expressions identify forward-looking statements. Forward-looking statements are based on information available at the time the statements are made, and accordingly speak only as of that time. Actual results or developments might differ materially from those included in the forward-looking statements because of various factors including, but not limited to:
the Companies are extensively regulated and are subject to penalties;
the Utilities’ rate plans may not provide a reasonable return;
the Companies may be adversely affected by changes to the Utilities’ rate plans;
the intentional misconduct of employees or contractors could adversely affect the Companies;
the failure of, or damage to, the Companies’ facilities could adversely affect the Companies;
a cyber attack could adversely affect the Companies;
the Companies are exposed to risks from the environmental consequences of their operations;
a disruption in the wholesale energy markets or failure by an energy supplier could adversely affect the Companies;
the Companies have substantial unfunded pension and other postretirement benefit liabilities;
Con Edison’s ability to pay dividends or interest depends on dividends from its subsidiaries;
the Companies require access to capital markets to satisfy funding requirements;
changes to tax laws could adversely affect the Companies;
the Companies’ strategies may not be effective to address changes in the external business environment; and
the Companies also face other risks that are beyond their control.




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Consolidated Edison, Inc.
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
  
For the Three Months Ended June 30,
For the Six Months Ended June 30,
  
2017
2016

2017
2016

 
(Millions of Dollars/ Except Per Share Data)
OPERATING REVENUES
 
 
 
 
Electric
$1,965
$2,035
$3,899
$3,947
Gas
435
336
1,297
1,012
Steam
88
85
385
343
Non-utility
145
338
280
648
TOTAL OPERATING REVENUES
2,633
2,794
5,861
5,950
OPERATING EXPENSES
 
 
 
 
Purchased power
408
558
793
1,249
Fuel
38
33
139
104
Gas purchased for resale
149
81
470
239
Other operations and maintenance
773
820
1,553
1,607
Depreciation and amortization
332
302
662
599
Taxes, other than income taxes
511
485
1,052
995
TOTAL OPERATING EXPENSES
2,211
2,279
4,669
4,793
Gain on sale of solar electric production project
1

1

OPERATING INCOME
423
515
1,193
1,157
OTHER INCOME (DEDUCTIONS)
 
 
 
 
Investment income
20
7
39
7
Other income
17
8
23
12
Allowance for equity funds used during construction
2
2
5
4
Other deductions
(5)
(6)
(7)
(11)
TOTAL OTHER INCOME
34
11
60
12
INCOME BEFORE INTEREST AND INCOME TAX EXPENSE
457
526
1,253
1,169
INTEREST EXPENSE
 
 
 
 
Interest on long-term debt
179
167
356
330
Other interest
3
5
7
12
Allowance for borrowed funds used during construction
(2)
(2)
(3)
(3)
NET INTEREST EXPENSE
180
170
360
339
INCOME BEFORE INCOME TAX EXPENSE
277
356
893
830
INCOME TAX EXPENSE
102
124
330
288
NET INCOME
$175
$232
$563
$542
Net income per common share—basic
$0.57
$0.78
$1.84
$1.83
Net income per common share—diluted
$0.57
$0.77
$1.84
$1.82
DIVIDENDS DECLARED PER COMMON SHARE
$0.69
$0.67
$1.38
$1.34
AVERAGE NUMBER OF SHARES OUTSTANDING—BASIC (IN MILLIONS)
305.4
299.1
305.3
296.7
AVERAGE NUMBER OF SHARES OUTSTANDING—DILUTED (IN MILLIONS)
306.8
300.4
306.7
298.0
The accompanying notes are an integral part of these financial statements.


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Consolidated Edison, Inc.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
  
For the Three Months Ended June 30,
For the Six Months Ended June 30,
  
2017
2016
2017

2016
 
(Millions of Dollars)
NET INCOME
$175
$232
$563
$542
OTHER COMPREHENSIVE INCOME, NET OF TAXES
 
 
 
 
Pension and other postretirement benefit plan liability adjustments, net of taxes
1
1

1
TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAXES
1
1

1
COMPREHENSIVE INCOME
$176
$233
$563
$543
The accompanying notes are an integral part of these financial statements.


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Consolidated Edison, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
  
For the Six Months Ended June 30,
  
2017

2016

 
(Millions of Dollars)
OPERATING ACTIVITIES
 
 
Net income
$563
$542
PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME
 
 
Depreciation and amortization
662
599
Deferred income taxes
359
268
Rate case amortization and accruals
(62)
(112)
Common equity component of allowance for funds used during construction
(5)
(4)
Net derivative (gains)/losses
2
(33)
(Gain)/Loss on sale of solar electric production project
(1)

Other non-cash items, net
(43)
42
CHANGES IN ASSETS AND LIABILITIES
 
 
Accounts receivable – customers
128
101
Materials and supplies, including fuel oil and gas in storage
(18)
29
Other receivables and other current assets
12
(38)
Income taxes receivable
29
151
Prepayments
(36)
(15)
Accounts payable
(94)
(21)
Pensions and retiree benefits obligations, net
213
302
Pensions and retiree benefits contributions
(283)
(307)
Accrued taxes
(22)
(16)
Accrued interest
(18)
3
Superfund and environmental remediation costs, net
(6)
60
Distributions from equity investments
52
24
System benefit charge
132
151
Deferred charges, noncurrent assets and other regulatory assets
(45)
(98)
Deferred credits and other regulatory liabilities
(17)
75
Other current and noncurrent liabilities
72
(72)
NET CASH FLOWS FROM OPERATING ACTIVITIES
1,574
1,631
INVESTING ACTIVITIES
 
 
Utility construction expenditures
(1,425)
(1,344)
Cost of removal less salvage
(122)
(95)
Non-utility construction expenditures
(225)
(331)
Investments in electric and gas transmission projects
(16)
(79)
Investments in/acquisitions of renewable electric production projects
(1)
(1,171)
Proceeds from the transfer of assets to NY Transco

122
Proceeds from sale of assets
34

Restricted cash
28
(6)
Other investing activities
24
(82)
NET CASH FLOWS USED IN INVESTING ACTIVITIES
(1,703)
(2,986)
FINANCING ACTIVITIES
 
 
Net payment of short-term debt
(18)
(821)
Issuance of long-term debt
997
1,765
Retirement of long-term debt
(426)
(6)
Debt issuance costs
(11)
(15)
Common stock dividends
(398)
(378)
Issuance of common shares - public offering

702
Issuance of common shares for stock plans
25
27
Distribution to noncontrolling interest

(1)
NET CASH FLOWS FROM FINANCING ACTIVITIES
169
1,273
CASH AND TEMPORARY CASH INVESTMENTS:
 
 
NET CHANGE FOR THE PERIOD
40
(82)
BALANCE AT BEGINNING OF PERIOD
776
944
BALANCE AT END OF PERIOD
$816
$862
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
 
 
Cash paid/(received) during the period for:
 
 
Interest
$372
$318
Income taxes
$(35)
$(142)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
 
 
Construction expenditures in accounts payable
$308
$254
Issuance of common shares for dividend reinvestment
$23
$23
The accompanying notes are an integral part of these financial statements. 


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Consolidated Edison, Inc.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
 
June 30,
2017
December 31,
2016
 
(Millions of Dollars)
ASSETS
 
 
CURRENT ASSETS
 
 
Cash and temporary cash investments
$816
$776
Accounts receivable – customers, less allowance for uncollectible accounts of $63 and $69 in 2017 and 2016, respectively
984
1,106
Other receivables, less allowance for uncollectible accounts of $8 and $14 in 2017 and 2016, respectively
165
195
Income taxes receivable
50
79
Accrued unbilled revenue
436
447
Fuel oil, gas in storage, materials and supplies, at average cost
357
339
Prepayments
195
159
Regulatory assets
77
100
Restricted cash
26
54
Other current assets
174
151
TOTAL CURRENT ASSETS
3,280
3,406
INVESTMENTS
1,961
1,921
UTILITY PLANT, AT ORIGINAL COST
 
 
Electric
28,339
27,747
Gas
7,828
7,524
Steam
2,452
2,421
General
2,844
2,719
TOTAL
41,463
40,411
Less: Accumulated depreciation
8,738
8,541
Net
32,725
31,870
Construction work in progress
1,212
1,175
NET UTILITY PLANT
33,937
33,045
NON-UTILITY PLANT
 
 
Non-utility property, less accumulated depreciation of $170 and $140 in 2017 and 2016, respectively
1,535
1,482
Construction work in progress
779
689
NET PLANT
36,251
35,216
OTHER NONCURRENT ASSETS
 
 
Goodwill
428
428
Intangible assets, less accumulated amortization of $10 and $6 in 2017 and 2016, respectively
116
124
Regulatory assets
6,935
7,024
Other deferred charges and noncurrent assets
128
136
TOTAL OTHER NONCURRENT ASSETS
7,607
7,712
TOTAL ASSETS
$49,099
$48,255
The accompanying notes are an integral part of these financial statements.
 


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Consolidated Edison, Inc.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
 
 
 
June 30,
2017
December 31,
2016
 
(Millions of Dollars)
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
CURRENT LIABILITIES
 
 
Long-term debt due within one year
$637
$39
Notes payable
1,036
1,054
Accounts payable
973
1,147
Customer deposits
345
352
Accrued taxes
42
64
Accrued interest
132
150
Accrued wages
103
101
Fair value of derivative liabilities
64
77
Regulatory liabilities
64
128
System benefit charge
566
434
Other current liabilities
367
297
TOTAL CURRENT LIABILITIES
4,329
3,843
NONCURRENT LIABILITIES
 
 
Provision for injuries and damages
171
160
Pensions and retiree benefits
1,652
1,847
Superfund and other environmental costs
745
753
Asset retirement obligations
252
246
Fair value of derivative liabilities
74
40
Deferred income taxes and unamortized investment tax credits
10,549
10,205
Regulatory liabilities
1,886
1,905
Other deferred credits and noncurrent liabilities
240
215
TOTAL NONCURRENT LIABILITIES
15,569
15,371
LONG-TERM DEBT
14,703
14,735
EQUITY
 
 
Common shareholders’ equity
14,490
14,298
Noncontrolling interest
8
8
TOTAL EQUITY (See Statement of Equity)
14,498
14,306
TOTAL LIABILITIES AND EQUITY
$49,099
$48,255
The accompanying notes are an integral part of these financial statements.



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Consolidated Edison, Inc.
CONSOLIDATED STATEMENT OF EQUITY (UNAUDITED)
 
(In Millions)
Common Stock
Additional
Paid-In
Capital
Retained
Earnings
Treasury Stock
Capital
Stock
Expense
Accumulated
Other
Comprehensive
Income/(Loss)
Noncontrolling
Interest
Total
Shares
Amount
Shares
Amount
BALANCE AS OF
DECEMBER 31, 2015
293
$32
$5,030
$9,123
23
$(1,038)
$(61)
$(34)
$9
$13,061
Net income
 
 
 
310
 
 
 
 
 
310
Common stock dividends
 
 
 
(197)
 
 
 
 
 
(197)
Issuance of common shares for stock plans
1
 
28
 
 
 
 
 
 
28
Other comprehensive income
 
 
 
 
 
 
 

 

Noncontrolling interest
 
 
 
 
 
 
 
 
(1)
(1)
BALANCE AS OF
MARCH 31, 2016
294
$32
$5,058
$9,236
23
$(1,038)
$(61)
$(34)
$8
$13,201
Net income
 
 
 
232
 
 
 
 
 
232
Common stock dividends
 
 
 
(204)
 
 
 
 
 
(204)
Issuance of common shares - public offering
10
1
723
 
 
 
(22)
 
 
702
Issuance of common shares for stock plans

 
26
 
 
 
 
 
 
26
Other comprehensive income
 
 
 
 
 
 
 
1
 
1
Noncontrolling interest










BALANCE AS OF
JUNE 30, 2016
304
$33
$5,807
$9,264
23
$(1,038)
$(83)
$(33)
$8
$13,958
 
 
 
 
 
 
 
 
 
 
 
BALANCE AS OF DECEMBER 31, 2016
305
$33
$5,854
$9,559
23
$(1,038)
$(83)
$(27)
$8
$14,306
Net income
 
 
 
388
 
 
 
 
 
388
Common stock dividends
 
 
 
(211)
 
 
 
 
 
(211)
Issuance of common shares for stock plans
 
 
24
 
 
 
 
 
 
24
Other comprehensive loss
 
 
 
 
 
 
 
(1)
 
(1)
Noncontrolling interest
 
 
 
 
 
 
 
 


BALANCE AS OF
MARCH 31, 2017
305
$33
$5,878
$9,736
23
$(1,038)
$(83)
$(28)
$8
$14,506
Net income
 
 
 
175
 
 
 
 
 
175
Common stock dividends
 
 
 
(210)
 
 
 
 
 
(210)
Issuance of common shares for stock plans
1
 
26
 
 
 
 
 
 
26
Other comprehensive income
 
 
 
 
 
 
 
1
 
1
Noncontrolling interest
 
 
 
 
 
 
 
 


BALANCE AS OF
JUNE 30, 2017
306
$33
$5,904
$9,701
23
$(1,038)
$(83)
$(27)
$8
$14,498
The accompanying notes are an integral part of these financial statements.


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Consolidated Edison Company of New York, Inc.
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
  
For the Three Months Ended June 30,
For the Six Months Ended June 30,
  
2017
2016
2017
2016

 
(Millions of Dollars)
OPERATING REVENUES
 
 
 
 
Electric
$1,817
$1,892
$3,610
$3,665
Gas
388
304
1,153
905
Steam
88
85
386
343
TOTAL OPERATING REVENUES
2,293
2,281
5,149
4,913
OPERATING EXPENSES
 
 
 
 
Purchased power
363
369
710
721
Fuel
38
33
139
104
Gas purchased for resale
84
51
314
183
Other operations and maintenance
638
701
1,301
1,381
Depreciation and amortization
296
275
591
547
Taxes, other than income taxes
487
460
1,003
944
TOTAL OPERATING EXPENSES
1,906
1,889
4,058
3,880
OPERATING INCOME
387
392
1,091
1,033
OTHER INCOME (DEDUCTIONS)
 
 
 
 
Investment and other income
3
1
7
2
Allowance for equity funds used during construction
2
2
5
4
Other deductions
(4)
(1)
(6)
(6)
TOTAL OTHER INCOME
1
2
6

INCOME BEFORE INTEREST AND INCOME TAX EXPENSE
388
394
1,097
1,033
INTEREST EXPENSE
 
 
 
 
Interest on long-term debt
151
146
301
290
Other interest
4
4
8
9
Allowance for borrowed funds used during construction
(1)
(1)
(3)
(2)
NET INTEREST EXPENSE
154
149
306
297
INCOME BEFORE INCOME TAX EXPENSE
234
245
791
736
INCOME TAX EXPENSE
91
84
309
264
NET INCOME
$143
$161
$482
$472
The accompanying notes are an integral part of these financial statements.
 



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Consolidated Edison Company of New York, Inc.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
 
  
For the Three Months Ended June 30,
For the Six Months Ended June 30,
  
2017

2016
2017

2016
 
(Millions of Dollars)
NET INCOME
$143
$161
$482
$472
OTHER COMPREHENSIVE INCOME, NET OF TAXES
 
 
 
 
Pension and other postretirement benefit plan liability adjustments, net of taxes

1

1
TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAXES

1

1
COMPREHENSIVE INCOME
$143
$162
$482
$473
The accompanying notes are an integral part of these financial statements.
 


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Consolidated Edison Company of New York, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
 
  
For the Six Months Ended June 30,
  
2017

2016
 
(Millions of Dollars)
OPERATING ACTIVITIES
 
 
Net income
$482
$472
PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME
 
 
Depreciation and amortization
591
547
Deferred income taxes
326
283
Rate case amortization and accruals
(72)
(120)
Common equity component of allowance for funds used during construction
(5)
(4)
Other non-cash items, net
(18)
15
CHANGES IN ASSETS AND LIABILITIES
 
 
Accounts receivable – customers
125
102
Materials and supplies, including fuel oil and gas in storage
(4)
18
Other receivables and other current assets
56
(64)
Accounts receivable from affiliated companies
17
92
Prepayments
(20)
3
Accounts payable
(60)
(54)
Accounts payable to affiliated companies
3
5
Pensions and retiree benefits obligations, net
191
287
Pensions and retiree benefits contributions
(281)
(306)
Superfund and environmental remediation costs, net
(4)
67
Accrued taxes
(17)
(15)
Accrued taxes to affiliated companies
(119)
(2)
Accrued interest

(3)
System benefit charge
120
138
Deferred charges, noncurrent assets and other regulatory assets
(72)
(100)
Deferred credits and other regulatory liabilities
11
89
Other current and noncurrent liabilities
(16)
(51)
NET CASH FLOWS FROM OPERATING ACTIVITIES
1,234
1,399
INVESTING ACTIVITIES
 
 
Utility construction expenditures
(1,341)
(1,268)
Cost of removal less salvage
(119)
(92)
Proceeds from the transfer of assets to NY Transco

122
Restricted cash

13
NET CASH FLOWS USED IN INVESTING ACTIVITIES
(1,460)
(1,225)
FINANCING ACTIVITIES
 
 
Net issuance/(payment) of short-term debt
150
(425)
Issuance of long-term debt
500
550
Debt issuance costs
(6)
(6)
Capital contribution by parent
45
51
Dividend to parent
(398)
(372)
NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES
291
(202)
CASH AND TEMPORARY CASH INVESTMENTS:
 
 
NET CHANGE FOR THE PERIOD
65
(28)
BALANCE AT BEGINNING OF PERIOD
702
843
BALANCE AT END OF PERIOD
$767
$815
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
 
 
Cash paid/(received) during the period for:
 
 
Interest
$296
$285
Income taxes
$86
$(117)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
 
 
Construction expenditures in accounts payable
$234
$196
The accompanying notes are an integral part of these financial statements. 


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Consolidated Edison Company of New York, Inc.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
 
 
June 30,
2017
December 31,
2016
 
(Millions of Dollars)
ASSETS
 
 
CURRENT ASSETS
 
 
Cash and temporary cash investments
$767
$702
Accounts receivable – customers, less allowance for uncollectible accounts of $58 and $65 in 2017 and 2016, respectively
914
1,032
Other receivables, less allowance for uncollectible accounts of $7 and $13 in 2017 and 2016, respectively
78
81
Accrued unbilled revenue
400
399
Accounts receivable from affiliated companies
92
109
Fuel oil, gas in storage, materials and supplies, at average cost
274
270
Prepayments
120
100
Regulatory assets
68
90
Restricted cash
2
2
Other current assets
46
95
TOTAL CURRENT ASSETS
2,761
2,880
INVESTMENTS
361
315
UTILITY PLANT, AT ORIGINAL COST
 
 
Electric
26,687
26,122
Gas
7,095
6,814
Steam
2,452
2,421
General
2,597
2,490
TOTAL
38,831
37,847
Less: Accumulated depreciation
8,017
7,836
Net
30,814
30,011
Construction work in progress
1,140
1,104
NET UTILITY PLANT
31,954
31,115
NON-UTILITY PROPERTY
 
 
Non-utility property, less accumulated depreciation of $25 in 2017 and 2016
4
4
NET PLANT
31,958
31,119
OTHER NONCURRENT ASSETS
 
 
Regulatory assets
6,404
6,473
Other deferred charges and noncurrent assets
64
69
TOTAL OTHER NONCURRENT ASSETS
6,468
6,542
TOTAL ASSETS
$41,548
$40,856
The accompanying notes are an integral part of these financial statements.
 


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Consolidated Edison Company of New York, Inc.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
 

 
June 30,
2017
December 31,
2016
 
(Millions of Dollars)
LIABILITIES AND SHAREHOLDER’S EQUITY
 
 
CURRENT LIABILITIES
 
 
Long-term debt due within one year
$600

$—

Notes payable
750
600
Accounts payable
756
876
Accounts payable to affiliated companies
13
10
Customer deposits
333
336
Accrued taxes
33
50
Accrued taxes to affiliated companies

119
Accrued interest
111
111
Accrued wages
94
91
Fair value of derivative liabilities
49
66
Regulatory liabilities
42
90
System benefit charge
518
398
Other current liabilities
206
242
TOTAL CURRENT LIABILITIES
3,505
2,989
NONCURRENT LIABILITIES
 
 
Provision for injuries and damages
165
154
Pensions and retiree benefits
1,318
1,544
Superfund and other environmental costs
651
655
Asset retirement obligations
231
227
Fair value of derivative liabilities
66
33
Deferred income taxes and unamortized investment tax credits
9,793
9,450
Regulatory liabilities
1,686
1,712
Other deferred credits and noncurrent liabilities
205
190
TOTAL NONCURRENT LIABILITIES
14,115
13,965
LONG-TERM DEBT
11,970
12,073
SHAREHOLDER’S EQUITY (See Statement of Shareholder’s Equity)
11,958
11,829
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY
$41,548
$40,856
The accompanying notes are an integral part of these financial statements.
 


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Consolidated Edison Company of New York, Inc.
CONSOLIDATED STATEMENT OF SHAREHOLDER’S EQUITY (UNAUDITED)
 
Common Stock
Additional
Paid-In
Capital
Retained
Earnings
Repurchased
Con Edison
Stock
Capital
Stock
Expense
Accumulated
Other
Comprehensive
Income/(Loss)
Total
(In Millions)
Shares
Amount
BALANCE AS OF DECEMBER 31, 2015
235
$589
$4,247
$7,611
$(962)
$(61)
$(9)
$11,415
Net income
 
 
 
310
 
 
 
310
Common stock dividend to parent
 
 
 
(186)
 
 
 
(186)
Capital contribution by parent
 
 
23
 
 
 
 
23
Other comprehensive income
 
 
 
 
 
 


BALANCE AS OF MARCH 31, 2016
235
$589
$4,270
$7,735
$(962)
$(61)
$(9)
$11,562
Net income
 
 
 
161
 
 
 
161
Common stock dividend to parent
 
 
 
(186)
 
 
 
(186)
Capital contribution by parent
 
 
28
 
 
 
 
28
Other comprehensive income
 
 
 
 
 
 
1
1
BALANCE AS OF JUNE 30, 2016
235
$589
$4,298
$7,710
$(962)
$(61)
$(8)
$11,566
 
 
 
 
 
 
 
 
 
BALANCE AS OF DECEMBER 31, 2016
235
$589
$4,347
$7,923
$(962)
$(61)
$(7)
$11,829
Net income
 
 
 
339
 
 
 
339
Common stock dividend to parent
 
 
 
(199)
 
 
 
(199)
Capital contribution by parent
 
 
22
 
 
 
 
22
Other comprehensive income
 
 
 
 
 
 



BALANCE AS OF MARCH 31, 2017
235
$589
$4,369
$8,063
$(962)
$(61)
$(7)
$11,991
Net income
 
 
 
143
 
 
 
143
Common stock dividend to parent
 
 
 
(199)
 
 
 
(199)
Capital contribution by parent
 
 
23
 
 
 
 
23
Other comprehensive income
 
 
 
 
 
 



BALANCE AS OF JUNE 30, 2017
235
$589
$4,392
$8,007
$(962)
$(61)
$(7)
$11,958
The accompanying notes are an integral part of these financial statements.

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NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 
General
These combined notes accompany and form an integral part of the separate consolidated financial statements of each of the two separate registrants: Consolidated Edison, Inc. and its subsidiaries (Con Edison) and Consolidated Edison Company of New York, Inc. and its subsidiaries (CECONY). CECONY is a subsidiary of Con Edison and as such its financial condition and results of operations and cash flows, which are presented separately in the CECONY consolidated financial statements, are also consolidated, along with those of Orange and Rockland Utilities, Inc. (O&R), Con Edison Clean Energy Businesses, Inc. (together with its subsidiaries, the Clean Energy Businesses) and Con Edison Transmission, Inc. (together with its subsidiaries, Con Edison Transmission) in Con Edison’s consolidated financial statements. The term “Utilities” is used in these notes to refer to CECONY and O&R.
As used in these notes, the term “Companies” refers to Con Edison and CECONY and, except as otherwise noted, the information in these combined notes relates to each of the Companies. However, CECONY makes no representation as to information relating to Con Edison or the subsidiaries of Con Edison other than itself.
The separate interim consolidated financial statements of each of the Companies are unaudited but, in the opinion of their respective managements, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair presentation of the results for the interim periods presented. The Companies’ separate interim consolidated financial statements should be read together with their separate audited financial statements (including the combined notes thereto) included in Item 8 of their combined Annual Report on Form 10-K for the year ended December 31, 2016 and their separate unaudited financial statements (including the combined notes thereto) included in Part 1, Item 1 of their combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017. Certain prior period amounts have been reclassified to conform to the current period presentation.
Con Edison has two regulated utility subsidiaries: CECONY and O&R. CECONY provides electric service and gas service in New York City and Westchester County. The company also provides steam service in parts of Manhattan. O&R, along with its regulated utility subsidiary, provides electric service in southeastern New York and northern New Jersey and gas service in southeastern New York. Con Edison Clean Energy Businesses, Inc. has three subsidiaries: Consolidated Edison Development, Inc. (Con Edison Development), a company that develops, owns and operates renewable and energy infrastructure projects; Consolidated Edison Energy, Inc. (Con Edison Energy), a company that provides energy-related products and services to wholesale customers; and Consolidated Edison Solutions, Inc. (Con Edison Solutions), a company that provides energy-related products and services to retail customers. Con Edison Transmission, Inc. invests in electric transmission facilities through its subsidiary, Consolidated Edison Transmission, LLC (CET Electric), and invests in gas pipeline and storage facilities through its subsidiary Con Edison Gas Pipeline and Storage, LLC (CET Gas).

Note A – Summary of Significant Accounting Policies
Earnings Per Common Share
Con Edison presents basic and diluted earnings per share on the face of its consolidated income statement. Basic earnings per share (EPS) are calculated by dividing earnings available to common shareholders (“Net income” on Con Edison’s consolidated income statement) by the weighted average number of Con Edison common shares outstanding during the period. In the calculation of diluted EPS, weighted average shares outstanding are increased for additional shares that would be outstanding if potentially dilutive securities were converted to common stock.

Potentially dilutive securities for Con Edison consist of restricted stock units, deferred stock units and stock options for which the average market price of the common shares for the period was greater than the exercise price.

For the three and six months ended June 30, 2017 and 2016, basic and diluted EPS for Con Edison are calculated as follows:
 


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For the Three Months Ended June 30,
For the Six Months Ended June 30,
(Millions of Dollars, except per share amounts/Shares in Millions)
2017
2016
2017
2016
Net income
$175
$232
$563
$542
Weighted average common shares outstanding – basic
305.4
299.1
305.3
296.7
Add: Incremental shares attributable to effect of potentially dilutive securities
1.4
1.3
1.4
1.3
Adjusted weighted average common shares outstanding – diluted
306.8
300.4
306.7
298.0
Net Income per common share – basic
$0.57
$0.78
$1.84
$1.83
Net Income per common share – diluted
$0.57
$0.77
$1.84
$1.82

The computation of diluted EPS for the six months ended June 30, 2016 excludes immaterial amounts of performance share awards that were not included because of their anti-dilutive effect.

Changes in Accumulated Other Comprehensive Income/(Loss) by Component
For the three and six months ended June 30, 2017 and 2016, changes to accumulated other comprehensive income/(loss) (OCI) for Con Edison and CECONY are as follows:
 
 
For the Three Months Ended June 30,
 
        Con Edison
        CECONY
(Millions of Dollars)
2017
2016
2017

2016
Beginning balance, accumulated OCI, net of taxes (a)
$(28)
$(34)
$(7)
$(9)
Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $(1) for Con Edison in 2017 and 2016 (a)(b)
1
1

1
Current period OCI, net of taxes
1
1

1
Ending balance, accumulated OCI, net of taxes
$(27)
$(33)
$(7)
$(8)

 
For the Six Months Ended June 30,
 
        Con Edison
        CECONY
(Millions of Dollars)
2017

2016
2017

2016

Beginning balance, accumulated OCI, net of taxes (a)
$(27)
$(34)
$(7)
$(9)
OCI before reclassifications, net of tax of $1 for Con Edison in 2017 and 2016
(2)
(1)


Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $(2) for Con Edison in 2017 and 2016 (a)(b)
2
2

1
Current period OCI, net of taxes

1

1
Ending balance, accumulated OCI, net of taxes
$(27)
$(33)
$(7)
$(8)
(a)
Tax reclassified from accumulated OCI is reported in the income tax expense line item of the consolidated income statement.
(b)
For the portion of unrecognized pension and other postretirement benefit costs relating to the Utilities, costs are recorded into, and amortized out of, regulatory assets instead of OCI. The net actuarial losses and prior service costs recognized during the period are included in the computation of total periodic pension and other postretirement benefit cost. See Notes E and F.


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Note B — Regulatory Matters
Rate Plans
Rockland Electric Company (RECO)
In February 2017, the New Jersey Board of Public Utilities (NJBPU) approved a stipulation of settlement for a RECO electric rate plan commencing March 2017. The following table contains a summary of the electric rate plan.

RECO
 
 
Effective period
 
March 2017 (a)
Base rate changes
 
Yr. 1 - $1.7 million
Amortization to income of net regulatory (assets) and liabilities
 
$0.2 million over three years and continuation of $(25.6) million of deferred storm costs over four years expiring July 31, 2018 (b)
Recoverable energy costs
 
Current rate recovery of purchased power costs.
Cost reconciliations
 
None
Average rate base
 
Yr. 1 - $178.7 million
Weighted average cost of capital (after-tax)
 
7.47 percent
Authorized return on common equity
 
9.6 percent
Cost of long-term debt
 
5.37 percent
Common equity ratio
 
49.7 percent
(a)
Effective until a new rate plan approved by the NJBPU goes into effect.
(b)
In January 2016, the NJBPU approved RECO’s plan to spend $15.7 million in capital over three years to harden its electric system against storms, the costs of which RECO, beginning in 2017, is collecting through a customer surcharge.

In January 2017, RECO filed a request with FERC for an increase to its annual transmission revenue requirement from $11.8 million to $19.7 million. The filing reflects a return on common equity of 10.7 percent and a common equity ratio of 48 percent.

Other Regulatory Matters
At its August 2, 2017 meeting, the New York State Public Service Commission (NYSPSC) voted to issue an order in its proceeding investigating an April 21, 2017 Metropolitan Transportation Authority (MTA) subway power outage. The NYSPSC indicated that the outage resulted from a failure of CECONY’s electricity supply to a subway station and led to a loss of the subway signals. The NYSPSC also indicated that the company’s failure to document the rerouting of secondary services to the MTA facility significantly delayed repair. The company anticipates that, pursuant to the NYSPSC order, it will be required to take certain actions, including performing inspections of electrical equipment that serves the MTA system, analyzing power supply and power quality events affecting the MTA’s signaling services, providing new monitoring and other equipment and filing monthly reports with the NYSPSC on all of the company's activities related to the MTA system. In July 2017, the Chairman of the NYSPSC notified the company that the April 21, 2017 subway power outage incident will likely result in a prudence review of the reasonableness of CECONY’s actions and conduct. The company does not anticipate that the NYSPSC order will commence a prudence review or address cost recovery. The company is unable to estimate the amount or range of its possible costs related to this matter.



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Table of Contents

Regulatory Assets and Liabilities
Regulatory assets and liabilities at June 30, 2017 and December 31, 2016 were comprised of the following items:
 
  
         Con Edison
 
        CECONY
(Millions of Dollars)
2017
2016
 
2017

2016

Regulatory assets
 
 
 
 
 
Unrecognized pension and other postretirement costs
$2,768
$2,874

$2,612
$2,730
Future income tax
2,413
2,439

2,302
2,325
Environmental remediation costs
807
823

697
711
Revenue taxes
327
295

311
280
Deferred derivative losses
77
48
 
70
42
Pension and other postretirement benefits deferrals
59
38
 
32
7
Municipal infrastructure support costs
54
44
 
54
44
Deferred storm costs
44
56


3
Unamortized loss on reacquired debt
40
43

38
41
Indian Point Energy Center program costs
40
50
 
40
50
Surcharge for New York State assessment
32
28
 
30
26
O&R property tax reconciliation
32
37



Brooklyn Queens demand management program
26
29
 
26
29
Preferred stock redemption
25
25
 
25
25
Net electric deferrals
17
24

17
24
Recoverable energy costs
15
42
 
15
38
Workers’ compensation
14
13
 
14
13
O&R transition bond charges
12
15



Other
133
101

121
85
Regulatory assets – noncurrent
6,935
7,024

6,404
6,473
Deferred derivative losses
71
91

65
86
Recoverable energy costs
6
9

3
4
Regulatory assets – current
77
100

68
90
Total Regulatory Assets
$7,012
$7,124

$6,472
$6,563
Regulatory liabilities





Allowance for cost of removal less salvage
$786
$755

$661
$641
Pension and other postretirement benefit deferrals
206
193
 
177
162
Net unbilled revenue deferrals
164
145

164
145
Property tax reconciliation
148
178

148
178
Unrecognized other postretirement costs
88
60
 
88
60
Settlement of prudence proceeding
80
95

80
95
Carrying charges on repair allowance and bonus depreciation
55
68
 
54
67
New York State income tax rate change
53
61

52
60
Variable-rate tax-exempt debt – cost rate reconciliation
43
55
 
38
48
Base rate change deferrals
31
40

31
40
Settlement of gas proceedings
27
27
 
27
27
Earnings sharing - electric, gas and steam
22
39

13
28
Net utility plant reconciliations
12
16

10
15
Other
171
173

143
146
Regulatory liabilities – noncurrent
1,886
1,905

1,686
1,712
Refundable energy costs
29
29
 
10
5
Revenue decoupling mechanism
29
71

27
61
Deferred derivative gains
6
28

5
24
Regulatory liabilities – current
64
128

42
90
Total Regulatory Liabilities
$1,950
$2,033

$1,728
$1,802
 

Note C — Capitalization
In March 2017, Con Edison issued $400 million aggregate principal amount of 2.00 percent debentures, due 2020, and prepaid the $400 million variable rate term loan that was to mature in 2018. Also, in March 2017, a Con Edison Development subsidiary issued $97 million aggregate principal amount of 4.45 percent senior notes, due 2042,

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secured by the company’s Upton County Solar project. In June 2017, CECONY issued $500 million aggregate principal amount of 3.875 percent debentures, due 2047.
 
The carrying amounts and fair values of long-term debt at June 30, 2017 and December 31, 2016 were:
 
(Millions of Dollars)
2017
2016
Long-Term Debt (including current portion) (a)
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Con Edison
$15,340
$17,052
$14,774
$16,093
CECONY
$12,570
$14,104
$12,073
$13,268
(a)
Amounts shown are net of unamortized debt expense and unamortized debt discount of $139 million and $116 million for Con Edison and CECONY, respectively, as of June 30, 2017 and $134 million and $113 million for Con Edison and CECONY, respectively, as of December 31, 2016.

Fair values of long-term debt have been estimated primarily using available market information. For Con Edison, $16,416 million and $636 million of the fair value of long-term debt at June 30, 2017 are classified as Level 2 and Level 3, respectively. For CECONY, $13,468 million and $636 million of the fair value of long-term debt at June 30, 2017 are classified as Level 2 and Level 3, respectively (see Note L). The $636 million of long-term debt classified as Level 3 is CECONY’s tax-exempt, auction-rate securities for which the market is highly illiquid and there is a lack of observable inputs.

Note D — Short-Term Borrowing
At June 30, 2017, Con Edison had $1,036 million of commercial paper outstanding of which $750 million was outstanding under CECONY’s program. The weighted average interest rate at June 30, 2017 was 1.3 percent for both Con Edison and CECONY. At December 31, 2016, Con Edison had $1,054 million of commercial paper outstanding of which $600 million was outstanding under CECONY’s program. The weighted average interest rate at December 31, 2016 was 1.0 percent for both Con Edison and CECONY.
At June 30, 2017 and December 31, 2016, no loans were outstanding under the credit agreement (Credit Agreement). An immaterial amount and $2 million (including $2 million for CECONY) of letters of credit were outstanding under the Credit Agreement as of June 30, 2017 and December 31, 2016, respectively.

Note E — Pension Benefits
Total Periodic Benefit Cost
The components of the Companies’ total periodic benefit costs for the three and six months ended June 30, 2017 and 2016 were as follows:
 
 
For the Three Months Ended June 30,
 
           Con Edison
         CECONY
(Millions of Dollars)
2017
2016
2017
2016

Service cost – including administrative expenses
$66
$69
$61
$65
Interest cost on projected benefit obligation
148
149
139
140
Expected return on plan assets
(243)
(237)
(229)
(225)
Recognition of net actuarial loss
149
149
141
141
Recognition of prior service costs
(4)
1
(5)

TOTAL PERIODIC BENEFIT COST
$116
$131
$107
$121
Cost capitalized
(51)
(53)
(48)
(50)
Reconciliation to rate level
(3)
13
(5)
14
Cost charged to operating expenses
$62
$91
$54
$85



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Table of Contents

 
For the Six Months Ended June 30,
 
           Con Edison
         CECONY
(Millions of Dollars)
2017
2016
2017
2016
Service cost – including administrative expenses
$132
$138
$123
$129
Interest cost on projected benefit obligation
296
298
277
280
Expected return on plan assets
(484)
(474)
(459)
(449)
Recognition of net actuarial loss
297
298
282
282
Recognition of prior service costs
(9)
2
(10)
1
NET PERIODIC BENEFIT COST
$232
$262
$213
$243
Cost capitalized
(94)
(106)
(88)
(99)
Reconciliation to rate level
(14)
26
(16)
26
Cost charged to operating expenses
$124
$182
$109
$170


Expected Contributions
Based on estimates as of June 30, 2017, the Companies expect to make contributions to the pension plans during 2017 of $450 million (of which $412 million is to be contributed by CECONY). The Companies’ policy is to fund the total periodic benefit cost of the qualified plan to the extent tax deductible and to also contribute to the non-qualified supplemental plans. During the first six months of 2017, the Companies contributed $283 million to the pension plans, nearly all of which was contributed by CECONY. CECONY also contributed $14 million to its external trust supplemental plans.
 
Note F — Other Postretirement Benefits
Total Periodic Benefit Cost
The components of the Companies’ total periodic other postretirement benefit costs for the three and six months ended June 30, 2017 and 2016 were as follows:
 
 
For the Three Months Ended June 30,
  
          Con Edison
          CECONY
(Millions of Dollars)
2017
2016
2017
2016
Service cost
$5
$4
$3
$3
Interest cost on accumulated other postretirement benefit obligation
11
12
10
10
Expected return on plan assets
(17)
(19)
(15)
(17)
Recognition of net actuarial loss/(gain)
1
1
(1)
1
Recognition of prior service cost
(4)
(5)
(3)
(3)
TOTAL PERIODIC OTHER POSTRETIREMENT BENEFIT COST
$(4)
$(7)
$(6)
$(6)
Cost capitalized
2
2
3
2
Reconciliation to rate level
(1)
7
(1)
6
Cost charged to operating expenses
$(3)
$2
$(4)
$2

 
For the Six Months Ended June 30,
  
          Con Edison
          CECONY
(Millions of Dollars)
2017
2016
2017
2016
Service cost
$10
$9
$7
$7
Interest cost on accumulated other postretirement benefit obligation
23
24
19
20
Expected return on plan assets
(35)
(38)
(30)
(34)
Recognition of net actuarial loss/(gain)
1
2
(2)
1
Recognition of prior service cost
(8)
(10)
(6)
(7)
TOTAL PERIODIC OTHER POSTRETIREMENT BENEFIT COST
$(9)
$(13)
$(12)
$(13)
Cost capitalized
4
3
5
3
Reconciliation to rate level
(2)
14
(1)
14
Cost charged to operating expenses
$(7)
$4
$(8)
$4




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Expected Contributions
Based on estimates as of June 30, 2017, Con Edison expects to make a contribution of $16 million, of which $8 million is to be contributed by CECONY, to the other postretirement benefit plans in 2017. The Companies' policy is to fund the total periodic benefit cost of the plans to the extent tax deductible.

Note G — Environmental Matters
Superfund Sites
Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of the Utilities and their predecessors and are present at sites and in facilities and equipment they currently or previously owned, including sites at which gas was manufactured or stored.
The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes (Superfund) impose joint and several liability, regardless of fault, upon generators of hazardous substances for investigation and remediation costs (which include costs of demolition, removal, disposal, storage, replacement, containment and monitoring) and natural resource damages. Liability under these laws can be material and may be imposed for contamination from past acts, even though such past acts may have been lawful at the time they occurred. The sites at which the Utilities have been asserted to have liability under these laws, including their manufactured gas plant sites and any neighboring areas to which contamination may have migrated, are referred to herein as “Superfund Sites.”
For Superfund Sites where there are other potentially responsible parties and the Utilities are not managing the site investigation and remediation, the accrued liability represents an estimate of the amount the Utilities will need to pay to investigate and, where determinable, discharge their related obligations. For Superfund Sites (including the manufactured gas plant sites) for which one of the Utilities is managing the investigation and remediation, the accrued liability represents an estimate of the company’s share of the undiscounted cost to investigate the sites and, for sites that have been investigated in whole or in part, the cost to remediate the sites, if remediation is necessary and if a reasonable estimate of such cost can be made. Remediation costs are estimated in light of the information available, applicable remediation standards and experience with similar sites.
The accrued liabilities and regulatory assets related to Superfund Sites at June 30, 2017 and December 31, 2016 were as follows:
 
        Con Edison
        CECONY
(Millions of Dollars)
2017
2016
2017
2016
Accrued Liabilities:
 
 
 
 
Manufactured gas plant sites
$659
$664
$565
$567
Other Superfund Sites
86
89
86
88
Total
$745
$753
$651
$655
Regulatory assets
$807
$823
$697
$711
Most of the accrued Superfund Site liability relates to sites that have been investigated, in whole or in part. However, for some of the sites, the extent and associated cost of the required remediation has not yet been determined. As investigations progress and information pertaining to the required remediation becomes available, the Utilities expect that additional liability may be accrued, the amount of which is not presently determinable but may be material. The Utilities are permitted to recover or defer as regulatory assets (for subsequent recovery through rates) prudently incurred site investigation and remediation costs.
Environmental remediation costs incurred related to Superfund Sites for the three and six months ended June 30, 2017 and 2016 were as follows: 
 
For the Three Months Ended June 30,
 
          Con Edison
     CECONY
(Millions of Dollars)
2017
2016
2017
2016
Remediation costs incurred
$7
$9
$4
$3




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For the Six Months Ended June 30,
 
          Con Edison
     CECONY
(Millions of Dollars)
2017
2016
2017
2016
Remediation costs incurred
$14
$12
$11
$5

Insurance recoveries received by Con Edison or CECONY were immaterial for the three and six months ended June 30, 2017. No insurance recoveries were received by Con Edison or CECONY for the three or six months ended June 30, 2016.
In 2016, Con Edison and CECONY estimated that for their manufactured gas plant sites (including CECONY’s Astoria site), the aggregate undiscounted potential liability for the investigation and remediation of coal tar and/or other environmental contaminants could range up to $2.8 billion and $2.6 billion, respectively. These estimates were based on the assumption that there is contamination at all sites, including those that have not yet been fully investigated and additional assumptions about the extent of the contamination and the type and extent of the remediation that may be required. Actual experience may be materially different.
Asbestos Proceedings
Suits have been brought in New York State and federal courts against the Utilities and many other defendants, wherein a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the Utilities. The suits that have been resolved, which are many, have been resolved without any payment by the Utilities, or for amounts that were not, in the aggregate, material to them. The amounts specified in all the remaining thousands of suits total billions of dollars; however, the Utilities believe that these amounts are greatly exaggerated, based on the disposition of previous claims. At June 30, 2017, Con Edison and CECONY have accrued their estimated aggregate undiscounted potential liabilities for these suits and additional suits that may be brought over the next 15 years as shown in the following table. These estimates were based upon a combination of modeling, historical data analysis and risk factor assessment. Courts have begun, and unless otherwise determined on appeal may continue, to apply different standards for determining liability in asbestos suits than the standard that applied historically. As a result, the Companies currently believe that there is a reasonable possibility of an exposure to loss in excess of the liability accrued for the suits. The Companies are unable to estimate the amount or range of such loss. In addition, certain current and former employees have claimed or are claiming workers’ compensation benefits based on alleged disability from exposure to asbestos. CECONY is permitted to defer as regulatory assets (for subsequent recovery through rates) costs incurred for its asbestos lawsuits and workers’ compensation claims.
The accrued liability for asbestos suits and workers’ compensation proceedings (including those related to asbestos exposure) and the amounts deferred as regulatory assets for the Companies at June 30, 2017 and December 31, 2016 were as follows:
 
 
          Con Edison
     CECONY
(Millions of Dollars)
2017
2016
2017
2016
Accrued liability – asbestos suits
$8
$8
$7
$7
Regulatory assets – asbestos suits
$8
$8
$7
$7
Accrued liability – workers’ compensation
$89
$88
$85
$83
Regulatory assets – workers’ compensation
$14
$13
$14
$13


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Note H — Other Material Contingencies
Manhattan Steam Main Rupture
In July 2007, a CECONY steam main located in midtown Manhattan ruptured. It has been reported that one person died and others were injured as a result of the incident. Several buildings in the area were damaged. Debris from the incident included dirt and mud containing asbestos. The response to the incident required the closing of several buildings and streets for various periods. Approximately forty-five suits are pending against the company seeking generally unspecified compensatory and, in some cases, punitive damages, for wrongful death, personal injury, property damage and business interruption. In July 2017, the company reached agreements to resolve most of these suits which, after payment by the company of agreed-upon settlement amounts, are expected to be discontinued. The company has notified its insurers of the incident and believes that the policies in force at the time of the incident will cover the company’s costs to satisfy its liability to others in connection with the suits. In the company’s estimation, there is not a reasonable possibility that an exposure to loss exists for the suits that is materially in excess of the estimated liability accrued. At June 30, 2017, the company has accrued its estimated liability for the suits of $18 million and an insurance receivable of $18 million.
Manhattan Explosion and Fire
On March 12, 2014, two multi-use five-story tall buildings located on Park Avenue between 116th and 117th Streets in Manhattan were destroyed by an explosion and fire. CECONY had delivered gas to the buildings through service lines from a distribution main located below ground on Park Avenue. Eight people died and more than 50 people were injured. Additional buildings were also damaged. The National Transportation Safety Board (NTSB) investigated. The parties to the investigation included the company, the City of New York, the Pipeline and Hazardous Materials Safety Administration and the NYSPSC. In June 2015, the NTSB issued a final report concerning the incident, its probable cause and safety recommendations. The NTSB determined that the probable cause of the incident was (1) the failure of a defective fusion joint at a service tee (which joined a plastic service line to a plastic distribution main) installed by the company that allowed gas to leak from the distribution main and migrate into a building where it ignited and (2) a breach in a City sewer line that allowed groundwater and soil to flow into the sewer, resulting in a loss of support for the distribution main, which caused it to sag and overstressed the defective fusion joint. The NTSB also made safety recommendations, including recommendations to the company that addressed its procedures for the preparation and examination of plastic fusions, training of its staff on conditions for notifications to the City’s Fire Department and extension of its gas main isolation valve installation program. In February 2017, the NYSPSC approved a settlement agreement with the company related to the NYSPSC's investigations of the incident and the practices of qualifying persons to perform plastic fusions. Pursuant to the agreement, the company will not recover from customers $126 million of costs it incurred for gas emergency response activities in 2014, 2015 and 2016 in excess of the amounts reflected in its gas rate plan and will provide $27 million of future benefits to customers (for which it has accrued a regulatory liability, see Note B). Approximately eighty suits are pending against the company seeking generally unspecified damages and, in some cases, punitive damages, for wrongful death, personal injury, property damage and business interruption. The company has notified its insurers of the incident and believes that the policies in force at the time of the incident will cover the company’s costs, in excess of a required retention (the amount of which is not material), to satisfy any liability it may have for damages in connection with the incident. The company is unable to estimate the amount or range of its possible loss for damages related to the incident. At June 30, 2017, the company had not accrued a liability for damages related to the incident.
Other Contingencies
See "Other Regulatory Matters" in Note B and “Uncertain Tax Positions” in Note I.
Guarantees
Con Edison and its subsidiaries enter into various agreements providing financial or performance assurance primarily to third parties on behalf of their subsidiaries. Maximum amounts guaranteed by Con Edison totaled $2,329 million and $2,370 million at June 30, 2017 and December 31, 2016, respectively.


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A summary, by type and term, of Con Edison’s total guarantees at June 30, 2017 is as follows:
 
Guarantee Type
0 – 3 years
4 – 10 years

> 10 years

Total
 
(Millions of Dollars)
Con Edison Transmission
$643
$404

$—

$1,047
Energy transactions
497
31
215
743
Renewable electric production projects
392

19
411
Other
128


128
Total
$1,660
$435
$234
$2,329
Con Edison Transmission — Con Edison has guaranteed payment by CET Electric of the contributions CET Electric agreed to make to New York Transco LLC (NY Transco). CET Electric acquired a 45.7 percent interest in NY Transco when it was formed in 2014. In May 2016, the transmission owners transferred certain projects to NY Transco, for which CET Electric made its required contributions. NY Transco has proposed other transmission projects in the New York Independent System Operator's competitive bidding process. These other projects are subject to certain authorizations from the NYSPSC, the FERC and, as applicable, other federal, state and local agencies. Guarantee amount shown is for the maximum possible required amount of CET Electric’s contributions for these other projects as calculated based on the assumptions that the projects are completed at 175 percent of their estimated costs and NY Transco does not use any debt financing for the projects. Guarantee term shown is assumed as the selection of the projects and resulting timing of the contributions is not certain. Also included within the table above is a guarantee for $25 million from Con Edison on behalf of CET Gas in relation to a proposed gas transmission project in West Virginia and Virginia.
Energy Transactions — Con Edison guarantees payments on behalf of the Clean Energy Businesses in order to facilitate physical and financial transactions in electricity, gas, pipeline capacity, transportation, oil, renewable energy credits and energy services. To the extent that liabilities exist under the contracts subject to these guarantees, such liabilities are included in Con Edison’s consolidated balance sheet. Guarantee amounts shown above include $21 million of guarantees provided by Con Edison on behalf of Con Edison Solutions that may continue in effect during the period in which Con Edison Solutions provides transition services in connection with the retail electric supply business it sold in September 2016. As part of the sale agreement, the purchaser has agreed to pay Con Edison Solutions for draws on such guarantees.
Renewable Electric Production Projects — Con Edison, Con Edison Development, and Con Edison Solutions guarantee payments on behalf of their wholly-owned subsidiaries associated with their investment in, or development for others of, solar and wind energy facilities.
Other — Other guarantees include $70 million in guarantees provided by Con Edison to Travelers Insurance Company for indemnity agreements for surety bonds in connection with operation of solar energy facilities and energy service projects of Con Edison Development and Con Edison Solutions, respectively. Other guarantees also includes Con Edison's guarantee (subject to a $53 million maximum amount) of certain obligations of Con Edison Solutions under the agreement pursuant to which it sold its retail electric supply business. In addition, Con Edison issued a guarantee estimated at $5 million to the Public Utility Commission of Texas covering obligations of Con Edison Solutions as a retail electric provider. As part of the sale agreement for the retail electric supply business discussed above, the purchaser has agreed to pay Con Edison Solutions for draws on the guarantee to the Public Utility Commission of Texas.

Note I — Income Tax
Con Edison’s income tax expense decreased to $102 million for the three months ended June 30, 2017 from $124 million for the three months ended June 30, 2016. Con Edison's effective tax rate for the three months ended June 30, 2017 and 2016 was 37 percent and 35 percent, respectively. The increase in Con Edison's effective tax rate is primarily due to a decrease in tax benefits for plant-related flow through items and higher reserves for injuries and damages, offset in part by lower state income taxes and bad debt expense.

CECONY’s income tax expense increased to $91 million for the three months ended June 30, 2017 from $84 million for the three months ended June 30, 2016. CECONY's effective tax rate for the three months ended June 30, 2017 and 2016 was 39 percent and 34 percent, respectively. The increase in CECONY's effective tax rate is primarily due to a decrease in tax benefits for plant-related flow through items and higher reserves for injuries and damages, offset in part by lower state income taxes and bad debt expense.


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Con Edison’s income tax expense increased to $330 million for the six months ended June 30, 2017 from $288 million for the six months ended June 30, 2016. Con Edison's effective tax rate for the six months ended June 30, 2017 and 2016 was 37 percent and 35 percent, respectively. The increase in Con Edison's effective tax rate is primarily due to a decrease in tax benefits for plant-related flow through items and higher reserves for injuries and damages, offset in part by lower state income taxes and bad debt expense.

CECONY’s income tax expense increased to $309 million for the six months ended June 30, 2017 from $264 million for the six months ended June 30, 2016. CECONY's effective tax rate for the six months ended June 30, 2017 and 2016 was 39 percent and 36 percent, respectively. The increase in CECONY's effective tax rate is primarily due to a decrease in tax benefits for plant-related flow through items, lower research and development tax credits and higher reserve for injuries and damages, offset in part by lower state income taxes and bad debt expense.

Con Edison anticipates a federal consolidated net operating loss for 2017, primarily due to bonus depreciation. Con Edison expects to carryback a portion of its 2017 net operating loss to recover $18 million of income tax. The remaining 2017 net operating loss, as well as general business tax credits generated in 2017, will be carried forward to future tax years. A deferred tax asset for these tax attribute carryforwards was recorded, and no valuation allowance has been provided, as it is more likely than not that the deferred tax asset will be realized.

Uncertain Tax Positions
At June 30, 2017, the estimated liability for uncertain tax positions for Con Edison was $40 million ($21 million for CECONY). Con Edison reasonably expects to resolve approximately $33 million ($23 million, net of federal taxes) of its uncertain tax positions within the next twelve months, including $19 million ($13 million, net of federal taxes), which, if recognized, would reduce Con Edison’s effective tax rate. The amount related to CECONY is approximately $17 million ($12 million, net of federal taxes), including $2 million, which, if recognized, would reduce CECONY’s effective tax rate. The total amount of unrecognized tax benefits, if recognized, that would reduce Con Edison’s effective tax rate is $23 million ($16 million, net of federal taxes).
The Companies recognize interest on liabilities for uncertain tax positions in interest expense and would recognize penalties, if any, in operating expenses in the Companies’ consolidated income statements. In the three and six months ended June 30, 2017, the Companies recognized an immaterial amount of interest expense and no penalties for uncertain tax positions in their consolidated income statements. At June 30, 2017 and December 31, 2016, the Companies recognized an immaterial amount of accrued interest on their consolidated balance sheets.



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Table of Contents

Note J — Financial Information by Business Segment
Con Edison’s principal business segments are CECONY’s regulated utility activities, O&R’s regulated utility activities, the Clean Energy Businesses and Con Edison Transmission. CECONY’s principal business segments are its regulated electric, gas and steam utility activities. The financial data for the business segments for the three and six months ended June 30, 2017 and 2016 were as follows:
 
 
For the Three Months Ended June 30,
 
Operating
revenues
Inter-segment
revenues
Depreciation and
amortization
Operating
income/(loss)
(Millions of Dollars)
2017

2016

2017

2016

2017

2016

2017

2016

CECONY
 
 
 
 
 
 
 
 
Electric
$1,817
$1,892
$4
$4
$229
$215
$330
$371
Gas
388
304
2
1
45
39
83
48
Steam
88
85
18
21
22
21
(26)
(27)
Consolidation adjustments


(24)
(26)




Total CECONY
$2,293
$2,281

$—


$—

$296
$275
$387
$392
O&R
 
 
 
 
 
 
 
 
Electric
$148
$144

$—


$—

$13
$13
$14
$14
Gas
47
31


4
4
5
(1)
Total O&R
$195
$175

$—


$—

$17
$17
$19
$13
Clean Energy Businesses
$146
$338

$—

$3
$18
$10
$18
$109
Con Edison Transmission






(2)
(1)
Other (a)
(1)


(3)
1

1
2
Total Con Edison
$2,633
$2,794

$—


$—

$332
$302
$423
$515

 
For the Six Months Ended June 30,
 
Operating
revenues
Inter-segment
revenues
Depreciation and
amortization
Operating
income/(loss)
(Millions of Dollars)
2017

2016

2017

2016

2017

2016

2017

2016

CECONY
 
 
 
 
 
 
 
 
Electric
$3,610
$3,665
$8
$9
$458
$428
$622
$645
Gas
1,153
905
3
3
90
78
374
301
Steam
386
343
37
44
43
41
95
87
Consolidation adjustments


(48)
(56)




Total CECONY
$5,149
$4,913

$—


$—

$591
$547
$1,091
$1,033
O&R
 
 
 
 
 
 
 
 
Electric
$289
$284

$—


$—

$25
$24
$27
$32
Gas
144
106


10
9
44
34
Total O&R
$433
$390

$—


$—

$35
$33
$71
$66
Clean Energy Businesses
$283
$648

$—

$9
$36
$19
$34
$58
Con Edison Transmission






(4)
(1)
Other (a)
(4)
(1)

(9)


1
1
Total Con Edison
$5,861
$5,950

$—


$—

$662
$599
$1,193
$1,157
(a)Parent company and consolidation adjustments. Other does not represent a business segment.


Note K — Derivative Instruments and Hedging Activities
Con Edison’s subsidiaries hedge market price fluctuations associated with physical purchases and sales of electricity, natural gas, steam and, to a lesser extent, refined fuels by using derivative instruments including futures, forwards, basis swaps, options, transmission congestion contracts and financial transmission rights contracts. Derivatives are recognized on the consolidated balance sheet at fair value (see Note L), unless an exception is available under the accounting rules for derivatives and hedging. Qualifying derivative contracts that have been designated as normal purchases or normal sales contracts are not reported at fair value under the accounting rules.
 

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The fair values of the Companies’ commodity derivatives including the offsetting of assets and liabilities on the consolidated balance sheet at June 30, 2017 and December 31, 2016 were:
 
(Millions of Dollars)
2017
 
2016
 
Balance Sheet Location
Gross Amounts of
Recognized
Assets/(Liabilities)
Gross
Amounts
Offset
Net Amounts
of Assets/
(Liabilities) (a)
 
Gross Amounts of
Recognized
Assets/(Liabilities)
Gross
Amounts
Offset
Net Amounts
of Assets/
(Liabilities) (a)
 
Con Edison
 
 
 
 
 
 
 
 
Fair value of derivative assets
 
 
 
 
 
 
 
 
Current
$93
$(78)
$15
(b)
$81
$(64)
$17
(b)
Noncurrent
63
(63)

 
49
(43)
6
 
Total fair value of derivative assets
$156
$(141)
$15
 
$130
$(107)
$23
 
Fair value of derivative liabilities
 
 
 
 
 
 
 
 
Current
$(153)
$89
$(64)
 
$(138)
$61
$(77)
 
Noncurrent
(136)
62
(74)
 
(91)
52
(39)
(c)
Total fair value of derivative liabilities
$(289)
$151
$(138)
 
$(229)
$113
$(116)
 
Net fair value derivative assets/(liabilities)
$(133)
$10
$(123)
(b)
$(99)
$6
$(93)
(b) (c)
CECONY
 
 
 
 
 
 
 
 
Fair value of derivative assets
 
 
 
 
 
 
 
 
Current
$52
$(48)
$4
(b)
$52
$(45)
$7
(b)
Noncurrent
53
(53)

 
41
(35)
6
 
Total fair value of derivative assets
$105
$(101)
$4
 
$93
$(80)
$13
 
Fair value of derivative liabilities
 
 
 
 
 
 
 
 
Current
$(105)
$56
$(49)
 
$(111)
$45
$(66)
 
Noncurrent
(119)
53
(66)
 
(77)
44
(33)
 
Total fair value of derivative liabilities
$(224)
$109
$(115)
 
$(188)
$89
$(99)
 
Net fair value derivative assets/(liabilities)
$(119)
$8
$(111)
(b)
$(95)
$9
$(86)
(b)
(a)
Derivative instruments and collateral were offset on the consolidated balance sheet as applicable under the accounting rules. The Companies enter into master agreements for their commodity derivatives. These agreements typically provide offset in the event of contract termination. In such case, generally the non-defaulting party’s payable will be offset by the defaulting party’s payable. The non-defaulting party will customarily notify the defaulting party within a specific time period and come to an agreement on the early termination amount.
(b)
At June 30, 2017 and December 31, 2016, margin deposits for Con Edison ($7 million and $7 million, respectively) and CECONY ($7 million and $7 million, respectively) were classified as derivative assets on the consolidated balance sheet, but not included in the table. Margin is collateral, typically cash, that the holder of a derivative instrument is required to deposit in order to transact on an exchange and to cover its potential losses with its broker or the exchange.
(c)
Does not include $(1) million for interest rate swap.

The Utilities generally recover their prudently incurred fuel, purchased power and gas costs, including hedging gains and losses, in accordance with rate provisions approved by the applicable state utility regulators. In accordance with the accounting rules for regulated operations, the Utilities record a regulatory asset or liability to defer recognition of unrealized gain