Edgar Filing: CONSOLIDATED EDISON INC

Document

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, 2016



¨	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, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Con Edison
Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨

CECONY
Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨

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

As of July 29, 2016, Con Edison had outstanding 304,414,974 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.
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.
CET Electric		Consolidated Edison Transmission, LLC
CET Gas		Con Edison Gas Pipeline and Storage, LLC
O&R		Orange and Rockland Utilities, Inc.
Pike		Pike County Light & Power Company
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
PAPUC		Pennsylvania Public Utility Commission
PJM		PJM Interconnection LLC
SEC		U.S. Securities and Exchange Commission

Accounting
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
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
AFUDC		Allowance for funds used during construction
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, 2015
LTIP		Long Term Incentive Plan
Moody’s		Moody’s Investors Service
REV		Reforming the Energy Vision
S&P		Standard & Poor’s Financial Services LLC
VaR		Value-at-Risk

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TABLE OF CONTENTS



		PAGE
PART I—Financial Information
ITEM 1	Financial Statements (Unaudited)
	Con Edison
	Consolidated Income Statement	6
	Consolidated Statement of Comprehensive Income	7
	Consolidated Statement of Cash Flows	8
	Consolidated Balance Sheet	9
	Consolidated Statement of Equity	11
	CECONY
	Consolidated Income Statement	12
	Consolidated Statement of Comprehensive Income	13
	Consolidated Statement of Cash Flows	14
	Consolidated Balance Sheet	15
	Consolidated Statement of Shareholder’s Equity	17
	Notes to the Financial Statements (Unaudited)	18
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	71
ITEM 4	Controls and Procedures	71
PART II—Other Information		72
ITEM 1	Legal Proceedings	72
ITEM 1A	Risk Factors	72
ITEM 6	Exhibits	72
	Signatures	73

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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:


•	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;


•	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,
	2016	2015	2016	2015
	(Millions of Dollars/ Except Share Data)
OPERATING REVENUES
Electric	$2,035	$2,040	$3,947	$4,175
Gas	336	324	1,012	1,056
Steam	85	96	343	471
Non-utility	338	328	648	702
TOTAL OPERATING REVENUES	2,794	2,788	5,950	6,404
OPERATING EXPENSES
Purchased power	558	660	1,249	1,544
Fuel	33	31	104	185
Gas purchased for resale	81	89	239	351
Other operations and maintenance	820	802	1,607	1,616
Depreciation and amortization	302	276	599	555
Taxes, other than income taxes	485	458	995	955
TOTAL OPERATING EXPENSES	2,279	2,316	4,793	5,206
OPERATING INCOME	515	472	1,157	1,198
OTHER INCOME (DEDUCTIONS)
Investment and other income	15	14	19	19
Allowance for equity funds used during construction	2	1	4	2
Other deductions	(6)	(5)	(11)	(7)
TOTAL OTHER INCOME	11	10	12	14
INCOME BEFORE INTEREST AND INCOME TAX EXPENSE	526	482	1,169	1,212
INTEREST EXPENSE
Interest on long-term debt	167	156	330	311
Other interest	5	7	12	13
Allowance for borrowed funds used during construction	(2)	(1)	(3)	(1)
NET INTEREST EXPENSE	170	162	339	323
INCOME BEFORE INCOME TAX EXPENSE	356	320	830	889
INCOME TAX EXPENSE	124	101	288	300
NET INCOME	$232	$219	$542	$589
Net income per common share—basic	$0.78	$0.75	$1.83	$2.01
Net income per common share—diluted	$0.77	$0.74	$1.82	$2.01
DIVIDENDS DECLARED PER COMMON SHARE	$0.67	$0.65	$1.34	$1.30
AVERAGE NUMBER OF SHARES OUTSTANDING—BASIC (IN MILLIONS)	299.1	292.9	296.7	292.9
AVERAGE NUMBER OF SHARES OUTSTANDING—DILUTED (IN MILLIONS)	300.4	294.0	298.0	293.9

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,
	2016	2015	2016	2015
	(Millions of Dollars)
NET INCOME	$232	$219	$542	$589
OTHER COMPREHENSIVE INCOME, NET OF TAXES
Pension and other postretirement benefit plan liability adjustments, net of taxes	1	1	1	6
TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAXES	1	1	1	6
COMPREHENSIVE INCOME	$233	$220	$543	$595

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,
	2016	2015
	(Millions of Dollars)
OPERATING ACTIVITIES
Net income	$542	$589
PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME
Depreciation and amortization	599	555
Deferred income taxes	268	202
Rate case amortization and accruals	(112)	(20)
Common equity component of allowance for funds used during construction	(4)	(2)
Net derivative (gains)/losses	(33)	8
Other non-cash items, net	42	18
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable – customers	101	35
Materials and supplies, including fuel oil and gas in storage	29	48
Other receivables and other current assets	(38)	(17)
Income taxes receivable	151	224
Prepayments	(15)	(144)
Accounts payable	(21)	(158)
Pensions and retiree benefits obligations, net	302	379
Pensions and retiree benefits contributions	(307)	(407)
Accrued taxes	(16)	(20)
Accrued interest	3	(1)
Superfund and environmental remediation costs, net	60	15
Distributions from equity investments	24	18
Deferred charges, noncurrent assets and other regulatory assets	(98)	(3)
Deferred credits and other regulatory liabilities	75	136
Other current and noncurrent liabilities	79	31
NET CASH FLOWS FROM OPERATING ACTIVITIES	1,631	1,486
INVESTING ACTIVITIES
Utility construction expenditures	(1,344)	(1,174)
Cost of removal less salvage	(95)	(105)
Non-utility construction expenditures	(331)	(178)
Investments in/acquisitions of renewable electric production and electric and gas transmission projects	(1,250)	(252)
Proceeds from the transfer of assets to NY Transco	122	—
Restricted cash	(6)	(22)
Other investing activities	(82)	6
NET CASH FLOWS USED IN INVESTING ACTIVITIES	(2,986)	(1,725)
FINANCING ACTIVITIES
Net (payment)/issuance of short-term debt	(821)	445
Issuance of long-term debt	1,765	238
Retirement of long-term debt	(6)	(45)
Debt issuance costs	(15)	(2)
Common stock dividends	(378)	(380)
Issuance of common shares - public offering	702	—
Issuance of common shares for stock plans, net of repurchases	27	(7)
Distribution to noncontrolling interest	(1)	—
NET CASH FLOWS FROM FINANCING ACTIVITIES	1,273	249
CASH AND TEMPORARY CASH INVESTMENTS:
NET CHANGE FOR THE PERIOD	(82)	10
BALANCE AT BEGINNING OF PERIOD	944	699
BALANCE AT END OF PERIOD EXCLUDING HELD FOR SALE	$862	$709
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
Cash paid/(received) during the period for:
Interest	$318	$305
Income taxes	$(142)	$(9)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
Construction expenditures in accounts payable	$254	$213
Issuance of common shares for dividend reinvestment	$23	$5

The accompanying notes are an integral part of these financial statements.

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Consolidated Edison, Inc.

CONSOLIDATED BALANCE SHEET (UNAUDITED)



	June 30, 2016	December 31, 2015
	(Millions of Dollars)
ASSETS
CURRENT ASSETS
Cash and temporary cash investments	$862	$944
Special deposits	10	3
Accounts receivable – customers, less allowance for uncollectible accounts of $80 and $85 in 2016 and 2015, respectively	951	1,052
Other receivables, less allowance for uncollectible accounts of $15 and $11 in 2016 and 2015, respectively	247	304
Income taxes receivable	15	166
Accrued unbilled revenue	365	360
Fuel oil, gas in storage, materials and supplies, at average cost	321	350
Prepayments	192	177
Regulatory assets	84	132
Assets held for sale	183	157
Other current assets	269	191
TOTAL CURRENT ASSETS	3,499	3,836
INVESTMENTS	1,913	884
UTILITY PLANT, AT ORIGINAL COST
Electric	26,961	26,358
Gas	7,102	6,858
Steam	2,368	2,336
General	2,614	2,622
TOTAL	39,045	38,174
Less: Accumulated depreciation	8,305	8,044
Net	30,740	30,130
Construction work in progress	1,148	1,003
NET UTILITY PLANT	31,888	31,133
NON-UTILITY PLANT
Non-utility property, less accumulated depreciation of $114 and $95 in 2016 and 2015, respectively	859	832
Construction work in progress	712	244
NET PLANT	33,459	32,209
OTHER NONCURRENT ASSETS
Goodwill	429	429
Intangible assets, less accumulated amortization of $5 and $4 in 2016 and 2015, respectively	2	2
Regulatory assets	7,680	8,096
Other deferred charges and noncurrent assets	288	186
TOTAL OTHER NONCURRENT ASSETS	8,399	8,713
TOTAL ASSETS	$47,270	$45,642

The accompanying notes are an integral part of these financial statements.

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Consolidated Edison, Inc.

CONSOLIDATED BALANCE SHEET (UNAUDITED)



	June 30, 2016	December 31, 2015
	(Millions of Dollars)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Long-term debt due within one year	$746	$739
Notes payable	708	1,529
Accounts payable	969	1,008
Customer deposits	358	354
Accrued taxes	46	62
Accrued interest	139	136
Accrued wages	99	97
Fair value of derivative liabilities	62	66
Regulatory liabilities	122	115
Liabilities held for sale	60	89
Other current liabilities	594	525
TOTAL CURRENT LIABILITIES	3,903	4,720
NONCURRENT LIABILITIES
Provision for injuries and damages	188	185
Pensions and retiree benefits	2,423	2,911
Superfund and other environmental costs	758	765
Asset retirement obligations	249	242
Fair value of derivative liabilities	33	39
Deferred income taxes and unamortized investment tax credits	9,878	9,537
Regulatory liabilities	1,932	1,977
Other deferred credits and noncurrent liabilities	201	199
TOTAL NONCURRENT LIABILITIES	15,662	15,855
LONG-TERM DEBT	13,747	12,006
EQUITY
Common shareholders’ equity	13,950	13,052
Noncontrolling interest	8	9
TOTAL EQUITY (See Statement of Equity)	13,958	13,061
TOTAL LIABILITIES AND EQUITY	$47,270	$45,642

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, 2014	293	$32	$4,991	$8,691	23	$(1,032)	$(61)	$(45)	$9	$12,585
Net income				370						370
Common stock dividends				(190)						(190)
Issuance of common shares for stock plans, net of repurchases	—		2		—	(2)				—
Other comprehensive income								5		5
BALANCE AS OF MARCH 31, 2015	293	$32	$4,993	$8,871	23	$(1,034)	$(61)	$(40)	$9	$12,770
Net income				219						219
Common stock dividends				(190)						(190)
Issuance of common shares for stock plans, net of repurchases	—		—		—	(3)				(3)
Other comprehensive income								1		1
BALANCE AS OF JUNE 30, 2015	293	$32	$4,993	$8,900	23	$(1,037)	$(61)	$(39)	$9	$12,797

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
BALANCE AS OF JUNE 30, 2016	304	$33	$5,807	$9,264	23	$(1,038)	$(83)	$(33)	$8	$13,958

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,
	2016	2015	2016	2015
	(Millions of Dollars)
OPERATING REVENUES
Electric	$1,892	$1,879	$3,665	$3,858
Gas	304	308	905	963
Steam	85	96	343	471
TOTAL OPERATING REVENUES	2,281	2,283	4,913	5,292
OPERATING EXPENSES
Purchased power	369	358	721	897
Fuel	33	31	104	185
Gas purchased for resale	51	54	183	252
Other operations and maintenance	701	687	1,381	1,390
Depreciation and amortization	275	254	547	511
Taxes, other than income taxes	460	439	944	914
TOTAL OPERATING EXPENSES	1,889	1,823	3,880	4,149
OPERATING INCOME	392	460	1,033	1,143
OTHER INCOME (DEDUCTIONS)
Investment and other income	1	2	2	3
Allowance for equity funds used during construction	2	1	4	2
Other deductions	(1)	(5)	(6)	(6)
TOTAL OTHER INCOME (DEDUCTIONS)	2	(2)	—	(1)
INCOME BEFORE INTEREST AND INCOME TAX EXPENSE	394	458	1,033	1,142
INTEREST EXPENSE
Interest on long-term debt	146	141	290	282
Other interest	4	5	9	9
Allowance for borrowed funds used during construction	(1)	—	(2)	(1)
NET INTEREST EXPENSE	149	146	297	290
INCOME BEFORE INCOME TAX EXPENSE	245	312	736	852
INCOME TAX EXPENSE	84	101	264	293
NET INCOME	$161	$211	$472	$559

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,
	2016	2015	2016	2015
	(Millions of Dollars)
NET INCOME	$161	$211	$472	$559
OTHER COMPREHENSIVE INCOME, NET OF TAXES
Pension and other postretirement benefit plan liability adjustments, net of taxes	1	1	1	1
TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAXES	1	1	1	1
COMPREHENSIVE INCOME	$162	$212	$473	$560

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,
	2016	2015
	(Millions of Dollars)
OPERATING ACTIVITIES
Net income	$472	$559
PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME
Depreciation and amortization	547	511
Deferred income taxes	283	135
Rate case amortization and accruals	(120)	(32)
Common equity component of allowance for funds used during construction	(4)	(2)
Other non-cash items, net	15	(10)
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable – customers	102	53
Materials and supplies, including fuel oil and gas in storage	18	42
Other receivables and other current assets	(64)	11
Accounts receivable from affiliated companies	92	(4)
Prepayments	3	18
Accounts payable	(54)	(106)
Accounts payable to affiliated companies	5	5
Pensions and retiree benefits obligations, net	287	360
Pensions and retiree benefits contributions	(306)	(406)
Superfund and environmental remediation costs, net	67	14
Accrued taxes	(15)	(1)
Accrued taxes to affiliated companies	(2)	(10)
Accrued interest	(3)	(1)
Deferred charges, noncurrent assets and other regulatory assets	(100)	(22)
Deferred credits and other regulatory liabilities	89	119
Other current and noncurrent liabilities	87	(31)
NET CASH FLOWS FROM OPERATING ACTIVITIES	1,399	1,202
INVESTING ACTIVITIES
Utility construction expenditures	(1,268)	(1,108)
Cost of removal less salvage	(92)	(101)
Proceeds from the transfer of assets to NY Transco	122	—
Restricted cash	13	—
NET CASH FLOWS USED IN INVESTING ACTIVITIES	(1,225)	(1,209)
FINANCING ACTIVITIES
Net (payment)/issuance of short-term debt	(425)	545
Issuance of long-term debt	550	—
Debt issuance costs	(6)	(1)
Capital contribution by parent	51	—
Dividend to parent	(372)	(516)
NET CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES	(202)	28
CASH AND TEMPORARY CASH INVESTMENTS:
NET CHANGE FOR THE PERIOD	(28)	21
BALANCE AT BEGINNING OF PERIOD	843	645
BALANCE AT END OF PERIOD	$815	$666
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
Cash paid/(received) during the period for:
Interest	$285	$277
Income taxes	$(117)	$160
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
Construction expenditures in accounts payable	$196	$151

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, 2016	December 31, 2015
	(Millions of Dollars)
ASSETS
CURRENT ASSETS
Cash and temporary cash investments	$815	$843
Special deposits	2	2
Accounts receivable – customers, less allowance for uncollectible accounts of $75 and $80 in 2016 and 2015, respectively	890	987
Other receivables, less allowance for uncollectible accounts of $14 and $11 in 2016 and 2015, respectively	76	70
Accrued unbilled revenue	328	327
Accounts receivable from affiliated companies	98	190
Fuel oil, gas in storage, materials and supplies, at average cost	270	288
Prepayments	110	113
Regulatory assets	77	121
Other current assets	165	131
TOTAL CURRENT ASSETS	2,831	3,072
INVESTMENTS	307	286
UTILITY PLANT, AT ORIGINAL COST
Electric	25,398	24,828
Gas	6,421	6,191
Steam	2,368	2,336
General	2,399	2,411
TOTAL	36,586	35,766
Less: Accumulated depreciation	7,615	7,378
Net	28,971	28,388
Construction work in progress	1,055	922
NET UTILITY PLANT	30,026	29,310
NON-UTILITY PROPERTY
Non-utility property, less accumulated depreciation of $25 in 2016 and 2015	4	5
NET PLANT	30,030	29,315
OTHER NONCURRENT ASSETS
Regulatory assets	7,109	7,482
Other deferred charges and noncurrent assets	76	75
TOTAL OTHER NONCURRENT ASSETS	7,185	7,557
TOTAL ASSETS	$40,353	$40,230

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, 2016	December 31, 2015
	(Millions of Dollars)
LIABILITIES AND SHAREHOLDER’S EQUITY
CURRENT LIABILITIES
Long-term debt due within one year	$650	$650
Notes payable	608	1,033
Accounts payable	703	771
Accounts payable to affiliated companies	17	12
Customer deposits	343	339
Accrued taxes	34	49
Accrued taxes to affiliated companies	—	2
Accrued interest	115	118
Accrued wages	90	88
Fair value of derivative liabilities	44	50
Regulatory liabilities	98	84
Other current liabilities	516	443
TOTAL CURRENT LIABILITIES	3,218	3,639
NONCURRENT LIABILITIES
Provision for injuries and damages	181	178
Pensions and retiree benefits	2,085	2,565
Superfund and other environmental costs	664	665
Asset retirement obligations	238	234
Fair value of derivative liabilities	30	36
Deferred income taxes and unamortized investment tax credits	9,121	8,755
Regulatory liabilities	1,743	1,789
Other deferred credits and noncurrent liabilities	174	167
TOTAL NONCURRENT LIABILITIES	14,236	14,389
LONG-TERM DEBT	11,333	10,787
COMMON SHAREHOLDER’S EQUITY (See Statement of Shareholder’s Equity)	11,566	11,415
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY	$40,353	$40,230

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	Additional Paid-In Capital	Retained Earnings	Repurchased Con Edison Stock	Capital Stock Expense	Accumulated Other Comprehensive Income/(Loss)	Total
BALANCE AS OF DECEMBER 31, 2014	235	$589	$4,234	$7,399	$(962)	$(61)	$(11)	$11,188
Net income				348				348
Common stock dividend to parent				(338)				(338)
Other comprehensive income							—	—
BALANCE AS OF MARCH 31, 2015	235	$589	$4,234	$7,409	$(962)	$(61)	$(11)	$11,198
Net income				211				211
Common stock dividend to parent				(178)				(178)
Other comprehensive income							1	1
BALANCE AS OF JUNE 30, 2015	235	$589	$4,234	$7,442	$(962)	$(61)	$(10)	$11,232

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

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 Con Edison’s other utility subsidiary, Orange and Rockland Utilities, Inc. (O&R), Con Edison Transmission, Inc. (Con Edison Transmission) and Con Edison’s competitive energy businesses 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, 2015 and their separate unaudited financial statements (including the combined notes thereto) included in Part I, Item 1 of their combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016. 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 subsidiaries, provides electric service in southeastern New York and adjacent areas of northern New Jersey and eastern Pennsylvania (see Note P) and gas service in southeastern New York and adjacent areas of eastern Pennsylvania. Con Edison has the following competitive energy businesses: Consolidated Edison Solutions, Inc. (Con Edison Solutions), a company which sells to retail customers electricity purchased in wholesale markets (see Note P), enters into related hedging transactions and also provides energy-related products and services to retail customers; Consolidated Edison Energy, Inc. (Con Edison Energy), a company that provides energy-related products and services to wholesale customers; and Consolidated Edison Development, Inc. (Con Edison Development), a company that develops, owns and operates renewable and energy infrastructure projects. In addition, Con Edison has a subsidiary, Con Edison Transmission, that 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

For the three and six months ended June 30, 2016 and 2015, basic and diluted earnings per share (EPS) for Con Edison are calculated as follows:



	For the Three Months Ended June 30,		For the Six Months Ended June 30,
(Millions of Dollars, except per share amounts/Shares in Millions)	2016	2015	2016	2015
Net income	$232	$219	$542	$589
Weighted average common shares outstanding – basic	299.1	292.9	296.7	292.9
Add: Incremental shares attributable to effect of potentially dilutive securities	1.3	1.1	1.3	1.0
Adjusted weighted average common shares outstanding – diluted	300.4	294.0	298.0	293.9
Net income per common share – basic	$0.78	$0.75	$1.83	$2.01
Net income per common share – diluted	$0.77	$0.74	$1.82	$2.01

The computation of diluted EPS for the six months ended June 30, 2016 and three and six months ended June 30, 2015 excludes immaterial amounts of stock-based compensation awards that were not included because of their anti-dilutive effect.

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Changes in Accumulated Other Comprehensive Income/(Loss) by Component

For the three and six months ended June 30, 2016 and 2015, 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)	2016	2015	2016	2015
Beginning balance, accumulated OCI, net of taxes (a)	$(34)	$(40)	$(9)	$(11)
Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $(1) for Con Edison in 2016 and 2015 (a)(b)	1	1	1	1
Current period OCI, net of taxes	1	1	1	1
Ending balance, accumulated OCI, net of taxes	$(33)	$(39)	$(8)	$(10)



	For the Six Months Ended June 30,
	Con Edison		CECONY
(Millions of Dollars)	2016	2015	2016	2015
Beginning balance, accumulated OCI, net of taxes (a)	$(34)	$(45)	$(9)	$(11)
OCI before reclassifications, net of tax of $1 and $(2) for Con Edison in 2016 and 2015, respectively	(1)	3	—	—
Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $(2) for Con Edison in 2016 and 2015 (a)(b)	2	3	1	1
Current period OCI, net of taxes	1	6	1	1
Ending balance, accumulated OCI, net of taxes	$(33)	$(39)	$(8)	$(10)


(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.

Note B — Regulatory Matters

Rate Plans

CECONY - Electric

In May 2016, the New York State Public Service Commission (NYSPSC) staff submitted testimony in the NYSPSC January 2016 proceeding in which CECONY requested an electric rate increase, effective January 2017. The NYSPSC staff testimony supports an electric rate increase of $45 million reflecting, among other things, an 8.6 percent return on common equity. In June 2016, CECONY filed an update to its January 2016 request. The company increased its requested January 2017 rate increase by $16 million to $498 million, decreased its illustrated January 2018 rate increase by $11 million to $169 million and increased its illustrated January 2019 rate increase by $45 million to $186 million. This updated filing reflects a 9.75 percent return on common equity.

In April 2016, the Federal Energy Regulatory Commission (FERC) rejected CECONY’s challenge to FERC’s approval of substantially increased charges allocated to CECONY for transmission service provided pursuant to the open access tariff of PJM Interconnection LLC (PJM). CECONY will continue to challenge FERC’s approval of the increased charges that will be incurred over the remaining contract term, and in May 2016 filed an appeal of FERC's decision with the U.S. Court of Appeals. In April 2016, CECONY notified PJM that it will not be exercising its option to continue the service beyond April 2017.

CECONY - Gas

In May 2016, the NYSPSC staff submitted testimony in the NYSPSC January 2016 proceeding in which CECONY requested a gas rate increase, effective January 2017. The NYSPSC staff testimony supports a gas rate decrease of $25 million reflecting, among other things, an 8.6 percent return on common equity. In June 2016, CECONY filed an update to its January 2016 request. The company decreased its requested January 2017 rate increase by $29 million to $125 million, increased its illustrated January 2018 rate increase by $13 million to $110 million and decreased its illustrated January 2019 rate increase by $9 million to $100 million. This updated filing reflects a 9.75 percent return on common equity.

Rockland Electric Company (RECO)

In April 2016, RECO filed a request with the New Jersey Board of Public Utilities for an electric rate increase of $10 million, effective March 2017. The filing reflected a return on common equity of 10.20 percent and a common equity

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ratio of 49.81 percent. In July 2016, RECO filed an update to its April 2016 request. The company decreased its requested March 2017 rate increase by $1 million to $9 million. The updated filing reflects a return on common equity of 10.20 percent and a common equity ratio of 49.71 percent. The filing reflects continuation of provisions pursuant to which the company recovers its purchased power and fuel costs from customers.

Other Regulatory Matters

In April 2016, the NYSPSC approved the September 2015 Joint Proposal among CECONY, the NYSPSC staff and others with respect to the prudence proceeding the NYSPSC commenced in February 2009 and related matters. Pursuant to the Joint Proposal, the company is required to credit $116 million to customers and, for the period 2017 through 2044, to not seek to recover from customers an aggregate $55 million relating to return on its capital expenditures. In addition, the company’s revenues that were made subject to potential refund in this proceeding are no longer subject to refund. At June 30, 2016, the company had a $97 million regulatory liability for the remaining amount to be credited to customers related to this matter.

In June 2014, the NYSPSC initiated a proceeding to investigate the practices of qualifying persons to perform plastic fusions on gas facilities. New York State regulations require gas utilities to qualify and, except in certain circumstances, annually requalify workers that perform fusion to join plastic pipe. The NYSPSC directed the New York gas utilities to provide information in this proceeding about their compliance with the qualification and requalification requirements and related matters; their procedures for compliance with all gas safety regulations; and their annual chief executive officer certifications regarding these and other procedures. CECONY’s qualification and requalification procedures had not included certain required testing to evaluate specimen fuses. In addition, CECONY and O&R had not timely requalified certain workers that had been qualified under their respective procedures to perform fusion to join plastic pipe. CECONY and O&R have requalified their workers who perform plastic pipe fusions. In May 2015, the NYSPSC, which indicated that it would address enforcement at a later date, ordered CECONY, O&R and other gas utilities to perform risk assessment and remediation plans, additional leakage surveying and reporting; CECONY to hire an independent statistician to develop a risk assessment and remediation plan; and the gas utilities to implement certain new plastic fusion requirements. In December 2015, the NYSPSC staff informed O&R that the company had satisfactorily completed its risk assessment and remediation plan. CECONY expects to submit its risk assessment and remediation plan to the NYSPSC staff in 2016.

In November 2015, the NYSPSC ordered CECONY to show cause why the NYSPSC should not commence proceedings to penalize the company for alleged violations of gas safety regulations identified by the NYSPSC staff in its investigation of a March 2014 explosion and fire and to review the prudence of the company's conduct associated with the incident. See "Manhattan Explosion and Fire" in Note H. In December 2015, the company responded that the NYSPSC should not institute the proceedings and disputed the alleged violations.

At June 30, 2016, CECONY had an $18 million regulatory liability related to the June 2014 plastic fusion proceeding and the November 2015 order to show cause. The company is unable to estimate the amount or range of its possible loss related to these matters in excess of this regulatory liability.

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Regulatory Assets and Liabilities

Regulatory assets and liabilities at June 30, 2016 and December 31, 2015 were comprised of the following items:



	Con Edison		CECONY
(Millions of Dollars)	2016	2015	2016	2015
Regulatory assets
Unrecognized pension and other postretirement costs	$3,516	$3,876	$3,361	$3,697
Future income tax	2,379	2,350	2,262	2,232
Environmental remediation costs	837	904	732	800
Revenue taxes	295	253	281	240
Deferred storm costs	122	185	57	110
Unamortized loss on reacquired debt	47	50	44	48
O&R property tax reconciliation	42	46	—	—
Deferred derivative losses	38	50	35	46
Pension and other postretirement benefits deferrals	35	45	6	16
Net electric deferrals	34	44	34	44
Surcharge for New York State assessment	32	44	29	40
Preferred stock redemption	26	26	26	26
O&R transition bond charges	18	21	—	—
Workers’ compensation	16	11	16	11
Recoverable energy costs	—	16	—	15
Other	243	175	226	157
Regulatory assets – noncurrent	7,680	8,096	7,109	7,482
Deferred derivative losses	75	113	70	103
Recoverable energy costs	9	19	7	18
Regulatory assets – current	84	132	77	121
Total Regulatory Assets	$7,764	$8,228	$7,186	$7,603
Regulatory liabilities
Allowance for cost of removal less salvage	$708	$676	$599	$570
Property tax reconciliation	230	303	230	303
Pension and other postretirement benefit deferrals	125	76	96	46
Net unbilled revenue deferrals	117	109	117	109
Prudence proceeding	97	99	97	99
Unrecognized other postretirement costs	93	28	93	28
Base rate change deferrals	77	128	77	128
New York State income tax rate change	69	75	66	72
Variable-rate tax-exempt debt – cost rate reconciliation	64	70	56	60
Carrying charges on repair allowance and bonus depreciation	51	49	50	48
Earnings sharing - electric, gas and steam	34	80	30	80
Net utility plant reconciliations	28	32	28	31
Property tax refunds	22	44	22	44
World Trade Center settlement proceeds	10	21	10	21
Other	207	187	172	150
Regulatory liabilities – noncurrent	1,932	1,977	1,743	1,789
Revenue decoupling mechanism	79	45	78	45
Refundable energy costs	30	64	9	33
Deferred derivative gains	13	6	11	6
Regulatory liabilities – current	122	115	98	84
Total Regulatory Liabilities	$2,054	$2,092	$1,841	$1,873

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Note C — Capitalization

In February 2016, a Con Edison Development subsidiary issued $218 million aggregate principal amount of 4.21 percent senior notes, due 2041, secured by the company's Texas Solar 7 solar project.

In May 2016, Con Edison issued approximately 10 million common shares resulting in net proceeds, after issuance expenses, of $702 million, and $500 million aggregate principal amount of 2.00 percent debentures, due 2021. Also, in May 2016, a Con Edison Development subsidiary issued $95 million aggregate principal amount of 4.07 percent senior notes, due 2036, secured by the company's California Holding 3 solar projects. In June 2016, Con Edison borrowed $400 million pursuant to a credit agreement with a syndicate of banks. The borrowing matures in 2018 and bears interest at a LIBOR plus margin of 1.00 percent. In June 2016, CECONY issued $550 million aggregate principal amount of 3.85 percent debentures, due 2046. Also, in June 2016, a Con Edison Solutions subsidiary borrowed $2 million pursuant to a loan agreement with a New Jersey utility. The borrowing matures in 2026, bears interest of 11.18 percent and may be repaid in cash or project Solar Renewable Energy Certificates.

The carrying amounts and fair values of long-term debt at June 30, 2016 and December 31, 2015 were:



(Millions of Dollars)	2016		2015
Long-Term Debt (including current portion)	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Con Edison	$14,493	$16,681	$12,745	$13,856
CECONY	$11,983	$13,917	$11,437	$12,427

Fair values of long-term debt have been estimated primarily using available market information. For Con Edison, $16,045 million and $636 million of the fair value of long-term debt at June 30, 2016 are classified as Level 2 and Level 3, respectively. For CECONY, $13,281 million and $636 million of the fair value of long-term debt at June 30, 2016 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, 2016, Con Edison had $708 million of commercial paper outstanding of which $608 million was outstanding under CECONY’s program. The weighted average interest rate at June 30, 2016 was 0.7 percent for both Con Edison and CECONY. At December 31, 2015, Con Edison had $1,529 million of commercial paper outstanding of which $1,033 million was outstanding under CECONY’s program. The weighted average interest rate at December 31, 2015 was 0.7 percent for both Con Edison and CECONY.

At June 30, 2016 and December 31, 2015, no loans were outstanding under the credit agreement (Credit Agreement) and $2 million (including $2 million for CECONY) and $15 million of letters of credit were outstanding under the Credit Agreement, 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, 2016 and 2015 were as follows:

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	For the Three Months Ended June 30,
	Con Edison		CECONY
(Millions of Dollars)	2016	2015	2016	2015
Service cost – including administrative expenses	$69	$74	$65	$70
Interest cost on projected benefit obligation	149	144	140	135
Expected return on plan assets	(237)	(222)	(225)	(210)
Recognition of net actuarial loss	149	194	141	183
Recognition of prior service costs	1	1	—	—
NET PERIODIC BENEFIT COST	$131	$191	$121	$178
Amortization of regulatory asset	—	1	—	1
TOTAL PERIODIC BENEFIT COST	$131	$192	$121	$179
Cost capitalized	(53)	(76)	(50)	(72)
Reconciliation to rate level	13	(17)	14	(18)
Cost charged to operating expenses	$91	$99	$85	$89



	For the Six Months Ended June 30,
	Con Edison		CECONY
(Millions of Dollars)	2016	2015	2016	2015
Service cost – including administrative expenses	$138	$149	$129	$139
Interest cost on projected benefit obligation	298	287	280	269
Expected return on plan assets	(474)	(443)	(449)	(420)
Recognition of net actuarial loss	298	388	282	367
Recognition of prior service costs	2	2	1	1
NET PERIODIC BENEFIT COST	$262	$383	$243	$356
Amortization of regulatory asset	—	1	—	1
TOTAL PERIODIC BENEFIT COST	$262	$384	$243	$357
Cost capitalized	(106)	(144)	(99)	(137)
Reconciliation to rate level	26	(42)	26	(42)
Cost charged to operating expenses	$182	$198	$170	$178

Expected Contributions

Based on estimates as of June 30, 2016, the Companies expect to make contributions to the pension plans during 2016 of $508 million (of which $469 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 2016, the Companies contributed $307 million to the pension plans, nearly all of which was contributed by CECONY. CECONY also contributed $17 million to its external trust for 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, 2016 and 2015 were as follows:



	For the Three Months Ended June 30,
	Con Edison		CECONY
(Millions of Dollars)	2016	2015	2016	2015
Service cost	$4	$5	$3	$4
Interest cost on accumulated other postretirement benefit obligation	12	13	10	11
Expected return on plan assets	(19)	(20)	(17)	(17)
Recognition of net actuarial loss	1	8	1	7
Recognition of prior service cost	(5)	(5)	(3)	(4)
TOTAL PERIODIC OTHER POSTRETIREMENT BENEFIT COST	$(7)	$1	$(6)	$1
Cost capitalized	2	(1)	2	(1)
Reconciliation to rate level	7	4	6	2
Cost charged to operating expenses	$2	$4	$2	$2

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	For the Six Months Ended June 30,
	Con Edison		CECONY
(Millions of Dollars)	2016	2015	2016	2015
Service cost	$9	$10	$7	$7
Interest cost on accumulated other postretirement benefit obligation	24	25	20	22
Expected return on plan assets	(38)	(39)	(34)	(34)
Recognition of net actuarial loss	2	16	1	14
Recognition of prior service cost	(10)	(10)	(7)	(7)
TOTAL PERIODIC OTHER POSTRETIREMENT BENEFIT COST	$(13)	$2	$(13)	$2
Cost capitalized	3	(1)	3	(1)
Reconciliation to rate level	14	8	14	3
Cost charged to operating expenses	$4	$9	$4	$4

Expected Contributions

Based on estimates as of June 30, 2016, Con Edison expects to make a contribution of $6 million, nearly all of which is for CECONY, to the other postretirement benefit plans in 2016. 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, 2016 and December 31, 2015 were as follows:



	Con Edison		CECONY
(Millions of Dollars)	2016	2015	2016	2015
Accrued Liabilities:
Manufactured gas plant sites	$670	$679	$576	$579
Other Superfund Sites	88	86	88	86
Total	$758	$765	$664	$665
Regulatory assets	$837	$904	$732	$800

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,

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the Utilities expect that additional liability may be accrued, the amount of which is not presently determinable but may be material. The Companies are unable to estimate the time period over which the remaining accrued liability will be incurred because, among other things, the required remediation has not been determined for some of the sites. Under their current rate plans, the Utilities are permitted to recover or defer as regulatory assets (for subsequent recovery through rates) certain site investigation and remediation costs.

Environmental remediation costs incurred related to Superfund Sites for the three and six months ended June 30, 2016 and 2015 were as follows:



	For the Three Months Ended June 30,
	Con Edison		CECONY
(Millions of Dollars)	2016	2015	2016	2015
Remediation costs incurred	$9	$8	$3	$7



	For the Six Months Ended June 30,
	Con Edison		CECONY
(Millions of Dollars)	2016	2015	2016	2015
Remediation costs incurred	$12	$15	$5	$12

No insurance recoveries were received by Con Edison or CECONY for the three or six months ended June 30, 2016 and 2015.

In 2015, 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 $2.7 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, 2016, Con Edison and CECONY had 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. The estimates were based upon a combination of modeling, historical data analysis and risk factor assessment. Trial courts have begun, and unless otherwise determined by an appellate court may continue, to apply a different standard 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. Under its current rate plans, 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, 2016 and December 31, 2015 were as follows:

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	Con Edison		CECONY
(Millions of Dollars)	2016	2015	2016	2015
Accrued liability – asbestos suits	$8	$8	$7	$7
Regulatory assets – asbestos suits	$8	$8	$7	$7
Accrued liability – workers’ compensation	$91	$86	$86	$81
Regulatory assets – workers’ compensation	$16	$11	$16	$11

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 eighty 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. 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, 2016, the company has accrued its estimated liability for the suits of $50 million and an insurance receivable in the same amount.

Manhattan Explosion and Fire

On March 12, 2014, two multi-use five-story tall buildings located on Park Avenue between 116^th and 117^th Street 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 (which also conducted an investigation). 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. Approximately 70 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, 2016, 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 $2,544 million and $2,856 million at June 30, 2016 and December 31, 2015, respectively.

A summary, by type and term, of Con Edison’s total guarantees at June 30, 2016 is as follows:

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Guarantee Type	0 – 3 years	4 – 10 years	> 10 years		Total
	(Millions of Dollars)
Con Edison Transmission	$619	$583		$—	$1,202
Energy transactions	672	41	91		804
Renewable electric production projects	443	—	20		463
Other	75	—	—		75
Total	$1,809	$624	$111		$2,544

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. NY Transco’s transmission projects are expected to be initially developed by CECONY and other New York transmission owners and then transferred to NY Transco. In May 2016, the transmission owners transferred certain projects to NY Transco, as to which CET Electric made its required contributions. See Note Q. The other projects that were proposed when NY Transco was formed remain 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 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 (see Note Q).

Energy Transactions — Con Edison guarantees payments on behalf of its competitive 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.

Renewable Electric Production Projects — Con Edison, Con Edison Development, and Con Edison Solutions guarantee payments associated with the investment in solar and wind energy facilities on behalf of their wholly-owned subsidiaries.

Other — Other guarantees primarily relate to $70 million in guarantees provided by Con Edison to Travelers Insurance Company for indemnity agreements for surety bonds in connection with energy service projects and operation of solar energy facilities of Con Edison Solutions and Con Edison Development, respectively. 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.

In addition to the guarantees included in the table above, in July 2016, Con Edison guaranteed (subject to a $53 million maximum amount) certain obligations of Con Edison Solutions under its agreement to sell the assets of its retail electric supply business to a subsidiary of Exelon Corporation. See Note P.

Note I — Income Tax

Con Edison’s income tax expense increased to $124 million for the three months ended June 30, 2016 from $101 million for the three months ended June 30, 2015. Con Edison's effective tax rate for the three months ended June 30, 2016 and 2015 was 35 percent and 32 percent, respectively. For the three months ended June 30, 2016, Con Edison recorded lower tax benefits for plant-related flow through items, partially offset by increased tax benefits as a result of higher injuries and damages payments and higher renewable energy tax credits.

CECONY’s income tax expense decreased to $84 million for the three months ended June 30, 2016 from $101 million for the three months ended June 30, 2015. CECONY's effective tax rate for the three months ended June 30, 2016 and 2015 was 34 percent and 32 percent, respectively. The increase in CECONY's effective tax rate is primarily related to a decrease in tax benefits for plant-related flow through items, partially offset by increased tax benefits as a result of higher injuries and damages payments.

Con Edison’s income tax expense decreased to $288 million for the six months ended June 30, 2016 from $300 million for the six months ended June 30, 2015. Con Edison's effective tax rate for the six months ended June 30, 2016 and 2015 was 35 percent and 34 percent, respectively. For the six months ended June 30, 2016, Con Edison recorded income tax benefits for research and development tax credits and higher renewable energy tax credits, which were primarily offset by a decrease in tax benefits for plant-related flow through items.

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CECONY’s income tax expense decreased to $264 million for the six months ended June 30, 2016 from $293 million for the six months ended June 30, 2015. CECONY's effective tax rate for the six months ended June 30, 2016 and 2015 was 36 percent and 34 percent, respectively. The increase in CECONY's effective tax rate is primarily related to a decrease in tax benefits for plant-related flow through items, partially offset by research and development tax credits.

Con Edison anticipates a federal consolidated net operating loss for 2016, primarily due to bonus depreciation. Con Edison expects to carryback a portion of its 2016 net operating loss and recover $10 million of income tax. General business tax credits that became available as a result of the net operating loss carryback, as well as the remaining 2016 net operating loss 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, 2016, the estimated liability for uncertain tax positions for Con Edison was $36 million ($4 million for CECONY). Con Edison reasonably expects to resolve approximately $27 million ($18 million, net of federal taxes) of its uncertain tax positions within the next twelve months, of which the entire amount, if recognized, would reduce Con Edison’s effective tax rate. The amount related to CECONY is approximately $4 million ($3 million, net of federal taxes), of which the entire amount, 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 $36 million ($24 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, 2016, the Companies recognized an immaterial amount of interest expense and no penalties for uncertain tax positions in their consolidated income statements. At June 30, 2016 and December 31, 2015, the Companies recognized an immaterial amount of accrued interest on their consolidated balance sheets.

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Note J — Financial Information by Business Segment

In 2016, Con Edison Transmission began investing, through CET Electric and CET Gas, in electric transmission and gas pipeline and storage assets (see Note Q). As a result of these investments, Con Edison has changed its business segments to add Con Edison Transmission as a separate reportable segment based on management’s reporting and decision-making, including performance evaluation and resource allocation. For comparison purposes, the previously reported financial information by business segments was reclassified to reflect the current business segment presentation.

The financial data for the business segments are as follows:



	For the Three Months Ended June 30,
	Operating revenues		Inter-segment revenues				Depreciation and amortization		Operating income		Other income (deductions)				Interest charges		Income taxes on operating income		Total assets		Construction expenditures
(Millions of Dollars)	2016	2015	2016		2015		2016	2015	2016	2015	2016		2015		2016	2015	2016	2015	2016	2015	2016	2015
CECONY
Electric	$1,892	$1,879	$4		$5		$215	$201	$371	$422	$2		$(1)		$113	$113	$88	$99	$30,632	$30,474	$338	$409
Gas	304	308	1		1		39	35	48	54	—		(1)		26	23	9	12	7,131	6,598	205	161
Steam	85	96	21		21		21	18	(27)	(16)	—		—		10	10	(10)	(6)	2,590	2,629	28	21
Consolidation adjustments	—	—	(26)		(27)		—	—	—	—	—		—		—	—	—	—	—	—	—	—
Total CECONY	$2,281	$2,283		$—		$—	$275	$254	$392	$460	$2		$(2)		$149	$146	$87	$105	$40,353	$39,701	$571	$591
O&R
Electric	$144	$162		$—		$—	$13	$13	$14	$16		$—		$—	$6	$5	$3	$4	$1,928	$1,944	$25	$25
Gas	31	16	—		—		4	4	(1)	(18)	—		—		3	4	(1)	(8)	761	739	12	11
Total O&R	$175	$178		$—		$—	$17	$17	$13	$(2)		$—		$—	$9	$9	$2	$(4)	$2,689	$2,683	$37	$36
Competitive energy businesses	$338	$328	$3		$(1)		$10	$6	$109	$13	$7		$12		$8	$2	$36	$7	$2,494	$1,549	$128	$364
Con Edison Transmission	—	—	—		—		—	—	(1)	—	3		—		1	—	—	—	1,043	2	—	—
Other (a)	—	(1)	(3)		1		—	(1)	2	1	(1)		—		3	5	3	—	691	816	—	—
Total Con Edison	$2,794	$2,788		$—		$—	$302	$276	$515	$472	$11		$10		$170	$162	$128	$108	$47,270	$44,751	$736	$991


(a)	Parent company and consolidation adjustments. Other does not represent a business segment.

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	For the Six Months Ended June 30,
	Operating revenues		Inter-segment revenues				Depreciation and amortization		Operating income		Other income (deductions)			Interest charges		Income taxes on operating income		Total assets		Construction expenditures
(Millions of Dollars)	2016	2015	2016		2015		2016	2015	2016	2015	2016		2015	2016	2015	2016	2015	2016	2015	2016	2015
CECONY
Electric	$3,665	$3,858	$9		$9		$428	$403	$645	$700	$1		$(1)	$225	$223	$137	$142	$30,632	$30,474	$720	$744
Gas	905	963	3		3		78	70	301	294	(1)		—	52	46	97	98	7,131	6,598	365	289
Steam	343	471	44		43		41	38	87	149	—		—	20	21	35	60	2,590	2,629	51	38
Consolidation adjustments	—	—	(56)		(55)		—	—	—	—	—		—	—	—	—	—	—	—	—	—
Total CECONY	$4,913	$5,292		$—		$—	$547	$511	$1,033	$1,143		$—	$(1)	$297	$290	$269	$300	$40,353	$39,701	$1,136	$1,071
O&R
Electric	$284	$318		$—		$—	$24	$25	$32	$34		$—	$1	$12	$11	$7	$9	$1,928	$1,944	$47	$45
Gas	106	93	—		—		9	9	34	9	—		—	6	6	12	1	761	739	21	17
Total O&R	$390	$411		$—		$—	$33	$34	$66	$43		$—	$1	$18	$17	$19	$10	$2,689	$2,683	$68	$62
Competitive energy businesses	$648	$702	$9		$(4)		$19	$11	$58	$10	$9		$15	$16	$3	$9	$4	$2,494	$1,549	$556	$464
Con Edison Transmission	—	—	—		—		—	—	(1)	—	3		—	1	—	—	—	1,043	2	—	—
Other (a)	(1)	(1)	(9)		4		—	(1)	1	2	—		(1)	7	13	2	—	691	816	—	—
Total Con Edison	$5,950	$6,404		$—		$—	$599	$555	$1,157	$1,198	$12		$14	$339	$323	$299	$314	$47,270	$44,751	$1,760	$1,597


(a)	Parent company and consolidation adjustments. Other does not represent a business segment.

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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.

The fair values of the Companies’ commodity derivatives including the offsetting of assets and liabilities on the consolidated balance sheet at June 30, 2016 and December 31, 2015 were:



(Millions of Dollars)	2016			2015
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