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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, 2016
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, 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.


Table of Contents

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
 
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:
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
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
 



21

Table of Contents

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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Table of Contents

 
 
          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 116th and 117th 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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Table of Contents

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 CorporationSee 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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Table of Contents

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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Table of Contents

 
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.




30

Table of Contents

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