Form 10-Q
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 September 30, 2010

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 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 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 Act).

 

Con Edison        Yes ¨           No x   
CECONY        Yes ¨           No x   

As of October 27, 2010, Con Edison had outstanding 290,536,094 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 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

 

Table of Contents

 

          PAGE  
Glossary of Terms     3   
PART I—Financial Information  
ITEM 1  

Financial Statements (Unaudited)

 
 

Con Edison

 
 

Consolidated Income Statement

    6   
 

Consolidated Statement of Cash Flows

    7   
 

Consolidated Balance Sheet

    8   
 

Consolidated Statement of Comprehensive Income

    10   
 

Consolidated Statement of Common Shareholders’ Equity

    11   
 

CECONY

 
 

Consolidated Income Statement

    12   
 

Consolidated Statement of Cash Flows

    13   
 

Consolidated Balance Sheet

    14   
 

Consolidated Statement of Comprehensive Income

    16   
 

Consolidated Statement of Common Shareholder’s Equity

    17   
 

Notes to Financial Statements (Unaudited)

    18   
ITEM 2  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

    38   
ITEM 3  

Quantitative and Qualitative Disclosures About Market Risk

    61   
ITEM 4  

Controls and Procedures

    61   
PART II—Other Information  
ITEM 1  

Legal Proceedings

    62   
ITEM 1A  

Risk Factors

    62   
ITEM 6  

Exhibits

    63   
  Signatures     64   

 

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Table of Contents

 

Glossary of Terms

 

The following is a glossary of frequently used abbreviations or acronyms that are used in the Companies’ SEC reports:

 

Con Edison Companies
CECONY    Consolidated Edison Company of New York, Inc.
Con Edison    Consolidated Edison, Inc.
Con Edison Development    Consolidated Edison Development, Inc.
Con Edison Energy    Consolidated Edison Energy, Inc.
Con Edison Solutions    Consolidated Edison Solutions, Inc.
O&R    Orange and Rockland Utilities, Inc.
Pike    Pike County Light & Power Company
RECO    Rockland Electric Company
Companies    Con Edison and CECONY
Utilities    CECONY and O&R
Regulatory Agencies, Government Agencies, and Quasi-governmental Not-for-Profits
EPA    U. S. Environmental Protection Agency
FERC    Federal Energy Regulatory Commission
IRS    Internal Revenue Service
ISO-NE    ISO New England Inc.
NJBPU    New Jersey Board of Public Utilities
NJDEP    New Jersey Department of Environmental Protection
NYAG    New York State Attorney General
NYISO    New York Independent System Operator
NYPA    New York Power Authority
NYSDEC    New York State Department of Environmental Conservation
NYSPSC    New York State Public Service Commission
NYSERDA    New York State Energy Research and Development Authority
NYSRC    New York State Reliability Council, LLC
PJM    PJM Interconnection LLC
PAPUC    Pennsylvania Public Utility Commission
SEC    U. S. Securities and Exchange Commission
Accounting
ABO    Accumulated Benefit Obligation
ASU    Accounting Standards Update
FASB    Financial Accounting Standards Board
LILO    Lease In/Lease Out
OCI    Other Comprehensive Income
SFAS    Statement of Financial Accounting Standards
SSCM    Simplified service cost method
VIE    Variable interest entity
Environmental
CO2    Carbon dioxide
GHG    Greenhouse gases
MGP Sites    Manufactured gas plant sites
PCBs    Polychlorinated biphenyls
PRP    Potentially responsible party
SO2    Sulfur dioxide
Superfund    Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes

 

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Units of Measure
dths    Dekatherms
kV    Kilovolts
kWh    Kilowatt-hour
mdths    Thousand dekatherms
MMlbs    Million pounds
MVA    Megavolt amperes
MW    Megawatts or thousand kilowatts
MWH    Megawatt hour
Other
AFDC    Allowance for funds used during construction
COSO    Committee of Sponsoring Organizations of the Treadway Commission
EMF    Electric and magnetic fields
ERRP    East River Repowering Project
Fitch    Fitch Ratings
First Quarter Form 10-Q    The Companies’ combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010
Form 10-K    The Companies’ combined Annual Report on Form 10-K for the year ended December 31, 2009
LTIP    Long Term Incentive Plan
Moody’s    Moody’s Investors Service
S&P    Standard & Poor’s Rating Services
Second Quarter Form 10-Q    The Companies’ combined Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010
Third Quarter Form 10-Q    The Companies’ combined Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010
VaR    Value-at-Risk

 

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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 “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 such as those discussed under “Risk Factors” in Item 1A of the Form 10-K.

 

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Consolidated Edison, Inc.   

Consolidated Income Statement (Unaudited)

 

     For the Three Months
Ended September 30,
    For the Nine Months
Ended September 30,
 
     2010     2009     2010     2009  
    (Millions of Dollars/Except Share Data)  

OPERATING REVENUES

       

Electric

  $ 2,814      $ 2,604      $ 6,959      $ 6,362   

Gas

    229        208        1,276        1,430   

Steam

    91        77        487        521   

Non-utility

    573        600        1,463        1,445   

TOTAL OPERATING REVENUES

    3,707        3,489        10,185        9,758   

OPERATING EXPENSES

       

Purchased power

    1,425        1,338        3,708        3,543   

Fuel

    106        83        342        403   

Gas purchased for resale

    73        89        482        723   

Other operations and maintenance

    738        676        2,117        1,879   

Depreciation and amortization

    211        200        626        589   

Taxes, other than income taxes

    449        418        1,283        1,145   

TOTAL OPERATING EXPENSES

    3,002        2,804        8,558        8,282   

OPERATING INCOME

    705        685        1,627        1,476   

OTHER INCOME (DEDUCTIONS)

       

Investment and other income

    9        3        29        25   

Allowance for equity funds used during construction

    4        4        13        9   

Other deductions

    (3     (3     (12     (11

TOTAL OTHER INCOME (DEDUCTIONS)

    10        4        30        23   

INCOME BEFORE INTEREST AND INCOME TAX EXPENSE

    715        689        1,657        1,499   

INTEREST EXPENSE

       

Interest on long-term debt

    152        148        450        441   

Other interest

    7        10        13        20   

Allowance for borrowed funds used during construction

    (2     (3     (7     (6

NET INTEREST EXPENSE

    157        155        456        455   

INCOME BEFORE INCOME TAX EXPENSE

    558        534        1,201        1,044   

INCOME TAX EXPENSE

    205        195        433        369   

NET INCOME

    353        339        768        675   

Preferred stock dividend requirements of subsidiary

    (3     (3     (9     (9

NET INCOME FOR COMMON STOCK

  $ 350      $ 336      $ 759      $ 666   

Net income for common stock per common share – basic

  $ 1.24      $ 1.22      $ 2.69      $ 2.43   

Net income for common stock per common share – diluted

  $ 1.23      $ 1.22      $ 2.68      $ 2.42   

DIVIDENDS DECLARED PER SHARE OF COMMON STOCK

  $ 0.595      $ 0.590      $ 1.785      $ 1.770   

AVERAGE NUMBER OF SHARES OUTSTANDING – BASIC (IN MILLIONS)

    283.0        275.1        282.2        274.5   

AVERAGE NUMBER OF SHARES OUTSTANDING – DILUTED (IN MILLIONS)

    284.6        276.0        283.7        275.4   

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 Nine Months
Ended September 30,
 
       2010         2009    
    (Millions of Dollars)  

OPERATING ACTIVITIES

   

Net Income

  $ 768      $ 675   

PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME

   

Depreciation and amortization

    626        589   

Deferred income taxes

    562        255   

Rate case amortization and accruals

    8        (38

Common equity component of allowance for funds used during construction

    (13     (9

Net derivative (gains)/losses

    35        (2

Other non-cash items (net)

    (19     (39

CHANGES IN ASSETS AND LIABILITIES

   

Accounts receivable – customers, less allowance for uncollectibles

    (114     55   

Materials and supplies, including fuel oil and gas in storage

    (9     118   

Other receivables and other current assets

    (114     (171

Prepayments

    (473     257   

Recoverable energy costs

           102   

Accounts payable

    (105     (168

Pensions and retiree benefits

    (33     (35

Accrued taxes

    63        (9

Accrued interest

    45        53   

Deferred charges, deferred derivative losses, noncurrent assets and other regulatory assets

    (472     (9

Deferred credits and other regulatory liabilities

    142        (118

Other assets

    (8     (4

Other liabilities

    82        (33

NET CASH FLOWS FROM OPERATING ACTIVITIES

    971        1,469   

INVESTING ACTIVITIES

   

Utility construction expenditures

    (1,455     (1,524

Cost of removal less salvage

    (103     (126

Non-utility construction expenditures

    (6     (5

Common equity component of allowance for funds used during construction

    13        9   

Purchase of additional ownership interest in Honeoye Storage Corporation

    (12       

NET CASH FLOWS USED IN INVESTING ACTIVITIES

    (1,563     (1,646

FINANCING ACTIVITIES

   

Net proceeds from short-term debt

    846        146   

Retirement of long-term debt

    (781     (279

Issuance of long-term debt

    870        750   

Issuance of common stock

    78        25   

Debt issuance costs

    (6     (5

Common stock dividends

    (468     (450

Preferred stock dividends

    (9     (9

NET CASH FLOWS FROM FINANCING ACTIVITIES

    530        178   

CASH AND TEMPORARY CASH INVESTMENTS:

   

NET CHANGE FOR THE PERIOD

    (62     1   

BALANCE AT BEGINNING OF PERIOD

    260        74   

BALANCE AT END OF PERIOD

  $ 198      $ 75   

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

   

Cash paid during the period for:

   

Interest

  $ 394      $ 377   

Income taxes

  $ 284      $ 4   

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

 

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Consolidated Edison, Inc.   

Consolidated Balance Sheet (Unaudited)

 

     September 30,
2010
    December 31,
2009
 
    (Millions of Dollars)  

ASSETS

   

CURRENT ASSETS

   

Cash and temporary cash investments

  $ 198      $ 260   

Accounts receivable – customers, less allowance for uncollectible accounts of $72 in 2010 and $70 in 2009, respectively

    1,161        1,047   

Accrued unbilled revenue

    547        579   

Other receivables, less allowance for uncollectible accounts of $8 and $5 in 2010 and 2009, respectively

    503        379   

Fuel oil, gas in storage, materials and supplies, at average cost

    364        355   

Prepayments

    604        131   

Regulatory assets

    276        172   

Revenue decoupling mechanism receivable

    5        117   

Other current assets

    232        174   

TOTAL CURRENT ASSETS

    3,890        3,214   

INVESTMENTS

    391        385   

UTILITY PLANT, AT ORIGINAL COST

   

Electric

    19,793        18,645   

Gas

    4,180        3,983   

Steam

    2,027        1,935   

General

    1,904        1,866   

TOTAL

    27,904        26,429   

Less: Accumulated depreciation

    5,707        5,412   

Net

    22,197        21,017   

Construction work in progress

    1,223        1,422   

NET UTILITY PLANT

    23,420        22,439   

NON-UTILITY PLANT

   

Non-utility property, less accumulated depreciation of $50 and $45 in 2010 and 2009, respectively

    46        19   

Construction work in progress

    3        6   

NET PLANT

    23,469        22,464   

OTHER NONCURRENT ASSETS

   

Goodwill

    429        416   

Intangible assets, less accumulated amortization of $3 and $2 in 2010 and 2009, respectively

    3        4   

Regulatory assets

    6,981        7,103   

Other deferred charges and noncurrent assets

    289        258   

TOTAL OTHER NONCURRENT ASSETS

    7,702        7,781   

TOTAL ASSETS

  $ 35,452      $ 33,844   

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

 

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Consolidated Edison, Inc.   

Consolidated Balance Sheet (Unaudited)

 

     September 30,
2010
    December 31,
2009
 
    (Millions of Dollars)  

LIABILITIES AND SHAREHOLDERS’ EQUITY

   

CURRENT LIABILITIES

   

Long-term debt due within one year

  $ 5      $ 731   

Notes payable

    846          

Accounts payable

    1,068        1,173   

Customer deposits

    283        274   

Accrued taxes

    115        51   

Accrued interest

    201        156   

Accrued wages

    89        91   

Fair value of derivative liabilities

    159        114   

Other current liabilities

    381        350   

TOTAL CURRENT LIABILITIES

    3,147        2,940   

NONCURRENT LIABILITIES

   

Obligations under capital leases

    8        14   

Provision for injuries and damages

    172        168   

Pensions and retiree benefits

    2,826        3,363   

Superfund and other environmental costs

    239        212   

Asset retirement obligations

    127        122   

Fair value of derivative liabilities

    127        131   

Other noncurrent liabilities

    112        108   

TOTAL NONCURRENT LIABILITIES

    3,611        4,118   

DEFERRED CREDITS AND REGULATORY LIABILITIES

   

Deferred income taxes and investment tax credits

    6,229        5,609   

Regulatory liabilities

    931        829   

Other deferred credits

    24        32   

TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES

    7,184        6,470   

LONG-TERM DEBT

    10,667        9,854   

SHAREHOLDERS’ EQUITY

   

Common shareholders’ equity (See Statement of Shareholders’ Equity)

    10,630        10,249   

Preferred stock of subsidiary

    213        213   

TOTAL SHAREHOLDERS’ EQUITY

    10,843        10,462   

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

  $ 35,452      $ 33,844   

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 September 30,
    For the Nine Months
Ended September 30,
 
     2010     2009     2010     2009  
    (Millions of Dollars)  

NET INCOME

  $ 353      $ 339      $ 768      $ 675   

OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES

       

Pension plan liability adjustments, net of taxes of $1 and $4 in 2010 and $1 and $3 in 2009, respectively

    1        2        5        5   

Less: Reclassification adjustment for losses included in net income, net of taxes of $0 in 2010 and $1 and $1 in 2009, respectively

           1               1   

TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAXES

    1        1        5        4   

COMPREHENSIVE INCOME

  $ 354      $ 340      $ 773      $ 679   

Preferred stock dividend requirements of subsidiary

    (3     (3     (9     (9

COMPREHENSIVE INCOME FOR COMMON STOCK

  $ 351      $ 337      $ 764      $ 670   

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

 

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Consolidated Edison, Inc.   

Consolidated Statement of Common Shareholders’ Equity (Unaudited)

 

    Common Stock     Additional
Paid-In
Capital
    Retained
Earnings
    Treasury Stock    

Capital
Stock

Expense

   

Accumulated
Other

Comprehensive

Income/(Loss)

    Total  
(Millions of Dollars/Except Share Data)   Shares     Amount         Shares     Amount        

BALANCE AS OF DECEMBER 31, 2008

    273,721,686      $ 29      $ 4,112      $ 6,685        23,210,700      $ (1,001   $ (60   $ (67   $ 9,698   

Net income for common stock

          180                180   

Common stock dividends

          (162             (162

Issuance of common shares – dividend reinvestment and employee stock plans

    532,533          20                  20   

Other comprehensive income

                                                            1        1   

BALANCE AS OF MARCH 31, 2009

    274,254,219      $ 29      $ 4,132      $ 6,703        23,210,700      $ (1,001   $ (60   $ (66   $ 9,737   

Net income for common stock

          150                150   

Common stock dividends

          (162             (162

Issuance of common shares – dividend reinvestment and employee stock plans

    584,916          21                  21   

Other comprehensive income

                                                            2        2   

BALANCE AS OF JUNE 30, 2009

    274,839,135      $ 29      $ 4,153      $ 6,691        23,210,700      $ (1,001   $ (60   $ (64   $ 9,748   

Net income for common stock

          336                336   

Common stock dividends

          (162             (162

Issuance of common shares – dividend reinvestment and employee stock plans

    520,041          20                  20   

Other comprehensive income

                                                            1        1   

BALANCE AS OF SEPTEMBER 30, 2009

    275,359,176      $ 29      $ 4,173      $ 6,865        23,210,700      $ (1,001   $ (60   $ (63   $ 9,943   

BALANCE AS OF DECEMBER 31, 2009

    281,123,741      $ 30      $ 4,420      $ 6,904        23,210,700      $ (1,001   $ (62   $ (42   $ 10,249   

Net income for common stock

          226                226   

Common stock dividends

          (167             (167

Issuance of common shares – dividend reinvestment and employee stock plans

    647,731          28                  28   

Other comprehensive income

                                                            3        3   

BALANCE AS OF MARCH 31, 2010

    281,771,472      $ 30      $ 4,448      $ 6,963        23,210,700      $ (1,001   $ (62   $ (39   $ 10,339   

Net income for common stock

          183                183   

Common stock dividends

          (168             (168

Issuance of common shares – dividend reinvestment and employee stock plans

    555,964          25                  25   

Other comprehensive income

                                                            1        1   

BALANCE AS OF JUNE 30, 2010

    282,327,436      $ 30      $ 4,473      $ 6,978        23,210,700      $ (1,001   $ (62   $ (38   $ 10,380   

Net income for common stock

          350                350   

Common stock dividends

          (168             (168

Issuance of common shares – dividend reinvestment and employee stock plans

    1,487,598        1        66                  67   

Other comprehensive income

                                                            1        1   

BALANCE AS OF SEPTEMBER 30, 2010

    283,815,034      $ 31      $ 4,539      $ 7,160        23,210,700      $ (1,001   $ (62   $ (37   $ 10,630   

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 September 30,
    For the Nine Months
Ended September 30,
 
     2010     2009     2010     2009  
    (Millions of Dollars)  

OPERATING REVENUES

       

Electric

  $ 2,570      $ 2,395      $ 6,402      $ 5,865   

Gas

    204        183        1,126        1,259   

Steam

    91        77        487        521   

TOTAL OPERATING REVENUES

    2,865        2,655        8,015        7,645   

OPERATING EXPENSES

       

Purchased power

    764        753        2,102        2,009   

Fuel

    105        83        343        404   

Gas purchased for resale

    63        76        408        618   

Other operations and maintenance

    637        573        1,832        1,606   

Depreciation and amortization

    198        188        586        554   

Taxes, other than income taxes

    432        403        1,232        1,101   

TOTAL OPERATING EXPENSES

    2,199        2,076        6,503        6,292   

OPERATING INCOME

    666        579        1,512        1,353   

OTHER INCOME (DEDUCTIONS)

       

Investment and other income

    5        8        23        23   

Allowance for equity funds used during construction

    3        3        10        8   

Other deductions

    (2     (3     (11     (10

TOTAL OTHER INCOME (DEDUCTIONS)

    6        8        22        21   

INCOME BEFORE INTEREST AND INCOME TAX EXPENSE

    672        587        1,534        1,374   

INTEREST EXPENSE

       

Interest on long-term debt

    137        134        406        399   

Other interest

    5        11        13        19   

Allowance for borrowed funds used during construction

    (1     (2     (6     (6

NET INTEREST EXPENSE

    141        143        413        412   

INCOME BEFORE INCOME TAX EXPENSE

    531        444        1,121        962   

INCOME TAX EXPENSE

    196        159        404        339   

NET INCOME

    335        285        717        623   

Preferred stock dividend requirements

    (3     (3     (8     (8

NET INCOME FOR COMMON STOCK

  $ 332      $ 282      $ 709      $ 615   

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 Nine Months
Ended September 30,
 
     2010     2009  
    (Millions of Dollars)  

OPERATING ACTIVITIES

   

Net income

  $ 717      $ 623   

PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME

   

Depreciation and amortization

    586        554   

Deferred income taxes

    562        222   

Rate case amortization and accruals

    8        (38

Common equity component of allowance for funds used during construction

    (10     (8

Other non-cash items (net)

    (96     (46

CHANGES IN ASSETS AND LIABILITIES

   

Accounts receivable – customers, less allowance for uncollectibles

    (84     39   

Materials and supplies, including fuel oil and gas in storage

    (9     99   

Other receivables and other current assets

    (208     (49

Prepayments

    (309     177   

Recoverable energy costs

           127   

Accounts payable

    (96     (245

Pensions and retiree benefits

    (30     (22

Accrued taxes

    20        (3

Accrued interest

    37        31   

Deferred charges, deferred derivative losses, noncurrent assets and other regulatory assets

    (374     2   

Deferred credits and other regulatory liabilities

    131        (90

Other liabilities

    93        (47

NET CASH FLOWS FROM OPERATING ACTIVITIES

    938        1,326   

INVESTING ACTIVITIES

   

Utility construction expenditures

    (1,371     (1,454

Cost of removal less salvage

    (100     (123

Common equity component of allowance for funds used during construction

    10        8   

Loan to affiliate

           113   

NET CASH FLOWS USED IN INVESTING ACTIVITIES

    (1,461     (1,456

FINANCING ACTIVITIES

   

Net proceeds from short-term debt

    832        174   

Issuance of long-term debt

    700        750   

Retirement of long-term debt

    (625     (275

Debt issuance costs

    (6     (5

Capital contribution by parent

    36          

Dividend to parent

    (502     (489

Preferred stock dividends

    (8     (8

NET CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES

    427        147   

CASH AND TEMPORARY CASH INVESTMENTS:

   

NET CHANGE FOR THE PERIOD

    (96     17   

BALANCE AT BEGINNING OF PERIOD

    131        37   

BALANCE AT END OF PERIOD

  $ 35      $ 54   

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

   

Cash paid during the period for:

   

Interest

  $ 357      $ 356   

Income taxes

  $ 263      $ 17   

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)

 

     September 30,
2010
    December 31,
2009
 
    (Millions of Dollars)  

ASSETS

   

CURRENT ASSETS

   

Cash and temporary cash investments

  $ 35      $ 131   

Accounts receivable – customers, less allowance for uncollectible accounts of $65 in 2010 and $63 in 2009, respectively

    988        904   

Other receivables, less allowance for uncollectible accounts of $7 and $4 in 2010 and 2009, respectively

    77        134   

Accrued unbilled revenue

    384        413   

Accounts receivable from affiliated companies

    482        124   

Fuel oil, gas in storage, materials and supplies, at average cost

    319        310   

Prepayments

    391        82   

Regulatory assets

    218        104   

Revenue decoupling mechanism receivable

    4        107   

Other current assets

    94        89   

TOTAL CURRENT ASSETS

    2,992        2,398   

INVESTMENTS

    156        126   

UTILITY PLANT AT ORIGINAL COST

   

Electric

    18,685        17,570   

Gas

    3,708        3,537   

Steam

    2,027        1,935   

General

    1,741        1,708   

TOTAL

    26,161        24,750   

Less: Accumulated depreciation

    5,220        4,947   

Net

    20,941        19,803   

Construction work in progress

    1,118        1,334   

NET UTILITY PLANT

    22,059        21,137   

NON-UTILITY PLANT

   

Non-utility property, less accumulated depreciation of $21 and $20 in 2010 and 2009, respectively

    8        9   

NET PLANT

    22,067        21,146   

OTHER NONCURRENT ASSETS

   

Regulatory assets

    6,450        6,590   

Other deferred charges and noncurrent assets

    231        201   

TOTAL OTHER NONCURRENT ASSETS

    6,681        6,791   

TOTAL ASSETS

  $ 31,896      $ 30,461   

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)

 

     September 30,
2010
    December 31,
2009
 
    (Millions of Dollars)  

LIABILITIES AND SHAREHOLDER’S EQUITY

   

CURRENT LIABILITIES

   

Long-term debt due within one year

  $      $ 625   

Notes payable

    832          

Accounts payable

    846        937   

Accounts payable to affiliated companies

    12        17   

Customer deposits

    270        259   

Accrued taxes

    29        41   

Accrued taxes to affiliated companies

    41        9   

Accrued interest

    174        137   

Accrued wages

    86        89   

Other current liabilities

    427        333   

TOTAL CURRENT LIABILITIES

    2,717        2,447   

NONCURRENT LIABILITIES

   

Obligations under capital leases

    8        14   

Provision for injuries and damages

    166        160   

Pensions and retiree benefits

    2,485        2,978   

Superfund and other environmental costs

    154        159   

Asset Retirement Obligations

    127        122   

Fair value of derivative liabilities

    40        44   

Other noncurrent liabilities

    103        68   

TOTAL NONCURRENT LIABILITIES

    3,083        3,545   

DEFERRED CREDITS AND REGULATORY LIABILITIES

   

Deferred income taxes and investment tax credits

    5,724        5,139   

Regulatory Liabilities

    810        703   

Other deferred credits

    21        29   

TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES

    6,555        5,871   

LONG-TERM DEBT

    9,737        9,038   

SHAREHOLDER’S EQUITY

   

Common shareholder’s equity (See Statement of Shareholder’s Equity)

    9,591        9,347   

Preferred stock

    213        213   

TOTAL SHAREHOLDER’S EQUITY

    9,804        9,560   

TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY

  $ 31,896      $ 30,461   

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 September 30,
    For the Nine Months
Ended September 30,
 
        2010           2009           2010           2009     
    (Millions of Dollars)  

NET INCOME

  $ 335      $ 285      $ 717      $ 623   

OTHER COMPREHENSIVE INCOME, NET OF TAXES

       

Pension plan liability adjustments, net of taxes of $1 in 2009

                         1   

TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAXES

                         1   

COMPREHENSIVE INCOME

  $ 335      $ 285      $ 717      $ 624   

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 Common 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  
(Millions of Dollars/Except Share Data)   Shares     Amount              

BALANCE AS OF DECEMBER 31, 2008

    235,488,094      $ 589      $ 3,664      $ 5,780      $ (962   $ (60   $ (20   $ 8,991   

Net income

          200              200   

Common stock dividend to parent

          (163           (163

Cumulative preferred dividends

                            (3                             (3

BALANCE AS OF MARCH 31, 2009

    235,488,094      $ 589      $ 3,664      $ 5,814      $ (962   $ (60   $ (20   $ 9,025   

Net income

          139              139   

Common stock dividend to parent

          (163           (163

Cumulative preferred dividends

                            (3                             (3

BALANCE AS OF JUNE 30, 2009

    235,488,094      $ 589      $ 3,664      $ 5,787      $ (962   $ (60   $ (20   $ 8,998   

Net income

          285              285   

Common stock dividend to parent

          (163           (163

Cumulative preferred dividends

          (3           (3

Other comprehensive income

                                                    1        1   

BALANCE AS OF SEPTEMBER 30, 2009

    235,488,094      $ 589      $ 3,664      $ 5,906      $ (962   $ (60   $ (19   $ 9,118   

BALANCE AS OF DECEMBER 31, 2009

    235,488,094      $ 589      $ 3,877      $ 5,909      $ (962   $ (62   $ (4   $ 9,347   

Net income

          246              246   

Capital contribution from parent

        12                12   

Common stock dividend to parent

          (167           (167

Cumulative preferred dividends

                            (3                             (3

BALANCE AS OF MARCH 31, 2010

    235,488,094      $ 589      $ 3,889      $ 5,985      $ (962   $ (62   $ (4   $ 9,435   

Net income

          138              138   

Capital contribution from parent

        12                12   

Common stock dividend to parent

          (168           (168

Cumulative preferred dividends

                            (3                             (3

BALANCE AS OF JUNE 30, 2010

    235,488,094      $ 589      $ 3,901      $ 5,952      $ (962   $ (62   $ (4   $ 9,414   

Net income

          335              335   

Capital contribution from parent

        12                12   

Common stock dividend to parent

          (167           (167

Cumulative preferred dividends

                            (3                             (3

BALANCE AS OF SEPTEMBER 30, 2010

    235,488,094      $ 589      $ 3,913      $ 6,117      $ (962   $ (62   $ (4   $ 9,591   

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

 

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Notes to the Financial Statements

 

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), and Con Edison’s competitive energy businesses (discussed below), 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, 2009 (the Form 10-K) and their separate unaudited financial statements (including the combined notes thereto) included in Part I, Item 1 of their combined Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2010 (the First Quarter Form 10-Q) and June 30, 2010 (the Second Quarter Form 10-Q). Information in the notes to the consolidated financial statements in the Form 10-K, the First Quarter Form 10-Q and the Second Quarter Form 10-Q referred to in these notes is incorporated by reference herein. The use of terms such as “see” or “refer to” shall be deemed to incorporate by reference into these notes the information to which reference is made.

Certain prior year amounts have been reclassified to conform with the current year presentation. Consistent with current industry practice, the Companies are presenting income tax expense as one item on their consolidated income statements (instead of separate items in the operating income and other income sections of the consolidated income statements).

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 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 retail energy services company that sells electricity and also offers energy-related services; Consolidated Edison Energy, Inc. (Con Edison Energy), a wholesale energy supply and services company; and Consolidated Edison Development, Inc. (Con Edison Development), a company that develops and participates in infrastructure projects.

 

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Note A — Summary of Significant Accounting Policies

Earnings Per Common Share

Reference is made to “Earnings Per Common Share” in Note A to the financial statements included in Item 8 of the Form 10-K. For the three and nine months ended September 30, 2010 and 2009, Con Edison’s basic and diluted EPS are calculated as follows:

 

     For the Three Months
Ended September 30,
    For the Nine Months
Ended September 30,
 
(Millions of Dollars, except per share amounts/Shares in Millions)   2010     2009     2010     2009  

Net income for common stock

  $ 350      $ 336      $ 759      $ 666   

Weighted average common shares outstanding – Basic

    283.0        275.1        282.2        274.5   

Add: Incremental shares attributable to effect of potentially dilutive securities

    1.6        0.9        1.5        0.9   

Adjusted weighted average common shares outstanding – Diluted

    284.6        276.0        283.7        275.4   

Net income for common stock per common share – basic

  $ 1.24      $ 1.22      $ 2.69      $ 2.43   

Net income for common stock per common share – diluted

  $ 1.23      $ 1.22      $ 2.68      $ 2.42   

 

Note B — Regulatory Matters

Reference is made to “Accounting Policies” in Note A and “Rate Agreements” in Note B to the financial statements included in Item 8 of the Form 10-K and Note B to the financial statements in Part I, Item 1 of the First Quarter Form 10-Q and Second Quarter Form 10-Q.

Rate Agreements

CECONY — Gas

In September 2010, the NYSPSC issued an order approving the May 2010 Joint Proposal covering the rates CECONY can charge its customers for gas delivery service during the three-year period October 2010 through September 2013. Among other things, the Joint Proposal provides for gas base rate increases of $47.1 million, $47.9 million and $46.7 million, effective October 2010, 2011 and 2012, respectively. For additional information about the Joint Proposal, see “Rate Agreements” in Note B to the financial statements in Part I, Item 1 of the Second Quarter Form 10-Q.

CECONY — Steam

In September 2010, the NYSPSC issued an order approving the May 2010 Joint Proposal covering the rates CECONY can charge its customers for steam delivery service during the three-year period October 2010 through September 2013. Among other things, the Joint Proposal provides for steam base rate increases of $49.5 million, effective October 2010 and 2011, and $17.8 million, effective October 2012, with an additional $31.7 million to be collected through a surcharge in the rate year ending September 2013. The NYSPSC order requires CECONY, in its next steam rate case filing, to propose a phase-in over a period of not more than seven years of an increase in the allocation to steam customers of the fuel costs for the company’s East River Repowering Project (ERRP, which cogenerates electricity and steam) that are above the market value of the electric energy generated by ERRP. For additional information about the Joint Proposal, see “Rate Agreements” in Note B to the financial statements in Part I, Item 1 of the Second Quarter Form 10-Q.

Other Regulatory Matters

In February 2009, the NYSPSC commenced a proceeding to examine the prudence of certain CECONY expenditures (see “Investigations of Vendor Payments” in Note H). Pursuant to NYSPSC orders, a portion of the company’s revenues (effective April 2010, $249 million, $32 million and $6 million on an annual basis for electric, gas and steam service, respectively) is being collected subject to potential refund to customers. At September 30, 2010, the company had collected an estimated $464 million from customers subject to potential refund in connection with this proceeding. In October 2010, a NYSPSC consultant reported its $21 million provisional assessment, which the company has disputed, of potential overcharges for construction work. The

 

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potential overcharges related to transactions that involved certain employees who were arrested and a contractor that performed work for the company. The NYSPSC’s consultant is expected to continue to review the company’s expenditures. The company is unable to estimate the amount, if any, of any refund that may be required in connection with this proceeding and, accordingly, has not established a regulatory liability for a refund.

 

Regulatory Assets and Liabilities

Regulatory assets and liabilities at September 30, 2010 and December 31, 2009 were comprised of the following items:

 

     Con Edison     CECONY  
(Millions of Dollars)   2010     2009     2010     2009  

Regulatory assets

         

Unrecognized pension and other postretirement costs

  $ 4,001      $ 4,472      $ 3,819      $ 4,259   

Future federal income tax

    1,411        1,316        1,337        1,249   

Environmental remediation costs

    421        388        333        329   

Surcharge for New York State Assessment

    185        138        171        126   

Net electric deferrals

    161        82        161        82   

Pension and other postretirement benefits deferrals

    158        101        106        49   

Revenue taxes

    139        119        135        116   

Deferred derivative losses – long-term

    125        106        85        75   

Deferred storm costs

    58        5        43          

Property tax reconciliation

    52        85        47        85   

O&R transition bond charges

    49        55                 

World Trade Center restoration costs

    44        41        44        41   

Workers’ compensation

    34        37        34        37   

Other

    143        158        135        142   

Regulatory assets – long-term

    6,981        7,103        6,450        6,590   

Deferred derivative losses – current

    268        141        218        104   

Recoverable energy costs – current

    8        31                 

Regulatory assets – current

    276        172        218        104   

Total Regulatory Assets

  $ 7,257      $ 7,275      $ 6,668      $ 6,694   

Regulatory liabilities

         

Allowance for cost of removal less salvage

  $ 405      $ 371      $ 334      $ 303   

Net unbilled revenue deferrals

    126        91        126        91   

Refundable energy costs

    78        118        53        77   

Revenue decoupling mechanism

    55               55          

New York State tax refund

    29               29          

Gain on sale of First Avenue properties

    23        23        23        23   

Gain on sale of 125th Street Property

    12               12          

Rate case amortizations

    5        21        5        21   

Electric rate case deferral

           19               19   

2005-2008 capital expenditure reserve

           24               24   

Other

    198        162        173        145   

Regulatory liabilities

    931        829        810        703   

Deferred derivative gains – current

           9               8   

Total Regulatory Liabilities

  $ 931      $ 838      $ 810      $ 711   

 

“Net electric deferrals” at September 30, 2010 represent the remaining unamortized balance of certain regulatory assets and liabilities of CECONY that were combined effective April 1, 2010 and are being amortized to income, in accordance with CECONY’s April 2010 rate plan. At December 2009, “net electric deferrals” represented the remaining unamortized balance of certain regulatory assets and liabilities of CECONY that were combined effective April 1, 2005 and were amortized to income in accordance with CECONY’s April 2009 rate plan through March 2010.

Note C — Capitalization

Reference is made to Note C to the financial statements in Item 8 of the Form 10-K and Note C to the financial statements in Part I, Item 1 of the First Quarter Form 10-Q and Second Quarter Form 10-Q.

 

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In August 2010, O&R issued $55 million aggregate principal amount of 2.50 percent debentures, Series 2010 A, due 2015 and $115 million aggregate principal amount of 5.50 percent debentures, Series 2010 B, due 2040. In addition, O&R purchased, and had cancelled, its $55 million aggregate principal amount of Series 1994 A variable-rate, tax-exempt debt due 2014.

In October 2010, Con Edison issued 6.3 million common shares resulting in net proceeds of $305 million, the proceeds of which were invested by Con Edison in CECONY.

Note D — Short-Term Borrowing

Reference is made to Note D to the financial statements in Item 8 of the Form 10-K and Note D to the financial statements in Part I, Item 1 of the First Quarter Form 10-Q and Second Quarter Form 10-Q.

 

At September 30, 2010, Con Edison had $846 million of commercial paper outstanding, $832 million of which was outstanding under CECONY’s program. The weighted average interest rate was 0.4 percent for each of Con Edison and CECONY. At December 31, 2009, Con Edison and CECONY had no commercial paper outstanding. At September 30, 2010 and December 31, 2009, no loans were outstanding under the Companies’ Credit Agreement and $220 million (including $151 million for CECONY) and $193 million (including $135 million for CECONY) of letters of credit were outstanding under the Credit Agreement, respectively.

Note E — Pension Benefits

Reference is made to Note E to the financial statements in Item 8 of the Form 10-K and Note E to the financial statement in Part I, Item 1 of the First Quarter Form 10-Q and Second Quarter Form 10-Q.

 

Net Periodic Benefit Cost

The components of the Companies’ net periodic benefit costs for the three and nine months ended September 30, 2010 and 2009 were as follows:

 

     For the Three Months Ended September 30,  
     Con Edison     CECONY  
(Millions of Dollars)   2010     2009     2010     2009  

Service cost – including administrative expenses

  $ 42      $ 40      $ 39      $ 37   

Interest cost on projected benefit obligation

    139        131        130        123   

Expected return on plan assets

    (175     (173     (167     (165

Amortization of net actuarial loss

    106        75        100        68   

Amortization of prior service costs

    2        2        2        2   

NET PERIODIC BENEFIT COST

  $ 114      $ 75      $ 104      $ 65   

Amortization of regulatory asset*

           1               1   

TOTAL PERIODIC BENEFIT COST

  $ 114      $ 76      $ 104      $ 66   

Cost capitalized

    (40     (28     (36     (25

Cost deferred

    (29     (4     (29     (3

Cost charged to operating expenses

  $ 45      $ 44      $ 39      $ 38   

 

* Relates to increases in CECONY’s pension obligations of $45 million from a 1999 special retirement program.

 

     For the Nine Months Ended September 30,  
     Con Edison     CECONY  
(Millions of Dollars)   2010     2009     2010     2009  

Service cost – including administrative expenses

  $ 126      $ 120      $ 117      $ 111   

Interest cost on projected benefit obligation

    417        393        390        369   

Expected return on plan assets

    (527     (519     (501     (495

Amortization of net actuarial loss

    318        225        300        204   

Amortization of prior service costs

    6        6        6        6   

NET PERIODIC BENEFIT COST

  $ 340      $ 225      $ 312      $ 195   

Amortization of regulatory asset*

    1        3        1        3   

TOTAL PERIODIC BENEFIT COST

  $ 341      $ 228      $ 313      $ 198   

Cost capitalized

    (118     (82     (109     (75

Cost deferred

    (85     (40     (82     (34

Cost charged to operating expenses

  $ 138      $ 106      $ 122      $ 89   

 

* Relates to increases in CECONY’s pension obligations of $33 million from a 1993 special retirement program (which was fully amortized in March 2009) and $45 million from a 1999 special retirement program.

 

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Expected Contributions

Based on estimates as of December 31, 2009, the Companies are not required under funding regulations and laws to make any contributions to the pension plan during 2010. The Companies’ policy is to fund their accounting cost to the extent tax deductible. During the first nine months of 2010, the Companies contributed $434 million to the pension plan (of which $397 million was contributed by CECONY). During the first nine months of 2009, the Companies contributed $282 million to the pension plan (of which $244 million was contributed by CECONY). During the second quarter of 2010, the Companies funded $25 million for the non-qualified supplemental pension plans. The Companies are continuing to monitor changes to funding and tax laws that may impact future pension plan funding requirements.

Note F — Other Postretirement Benefits

Reference is made to Note F to the financial statements in Item 8 of the Form 10-K and Note F to the financial statements in Part I, Item 1 of the First Quarter Form 10-Q and Second Quarter Form 10-Q.

 

Net Periodic Benefit Cost

The components of the Companies’ net periodic postretirement benefit costs for the three and nine months ended September 30, 2010 and 2009 were as follows:

 

     For the Three Months Ended September 30,  
     Con Edison     CECONY  
(Millions of Dollars)   2010     2009     2010     2009  

Service cost

  $ 6      $ 5      $ 5      $ 4   

Interest cost on accumulated other postretirement benefit obligation

    23        24        20        21   

Expected return on plan assets

    (22     (21     (19     (20

Amortization of net actuarial loss

    23        18        21        16   

Amortization of prior service cost

    (3     (3     (4     (3

Amortization of transition obligation

    1        1        1        1   

NET PERIODIC POSTRETIREMENT BENEFIT COST

  $ 28      $ 24      $ 24      $ 19   

Cost capitalized

    (10     (9     (8     (7

Cost deferred

    2        1        1          

Cost charged to operating expenses

  $ 20      $ 16      $ 17      $ 12   

 

     For the Nine Months Ended September 30,  
     Con Edison     CECONY  
(Millions of Dollars)   2010     2009     2010     2009  

Service cost

  $ 18      $ 15      $ 15      $ 12   

Interest cost on accumulated other postretirement benefit obligation

    69        72        60        63   

Expected return on plan assets

    (66     (63     (57     (60

Amortization of net actuarial loss

    69        54        63        48   

Amortization of prior service cost

    (9     (9     (12     (9

Amortization of transition obligation

    3        3        3        3   

NET PERIODIC POSTRETIREMENT BENEFIT COST

  $ 84      $ 72      $ 72      $ 57   

Cost capitalized

    (30     (27     (25     (22

Cost deferred

    2               (1     (2

Cost charged to operating expenses

  $ 56      $ 45      $ 46      $ 33   

 

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

 

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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 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 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 September 30, 2010 and December 31, 2009 were as follows:

 

     Con Edison     CECONY  
(Millions of Dollars)   2010     2009     2010     2009  

Accrued Liabilities:

       

Manufactured gas plant sites

  $ 193      $ 164      $ 109      $ 112   

Other Superfund Sites

    46        48        45        47   

Total

  $ 239      $ 212      $ 154      $ 159   

Regulatory assets

  $ 421      $ 388      $ 333      $ 329   

Most of the accrued Superfund Site liability relates to sites that have been investigated, in whole or in part. However, for many of the sites, the extent and associated cost of the required remediation has not yet been determined. As investigations progress and information pertaining to the required remediation becomes available, the Utilities expect that additional liability will be accrued, the amount of which is not presently determinable but may be material. Under their current rate agreements, 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 and insurance recoveries received related to Superfund Sites during the three and nine months ended September 30, 2010 and 2009 were as follows:

 

     For the Three Months Ended September 30,  
     Con Edison     CECONY  
(Millions of Dollars)   2010     2009     2010     2009  

Remediation costs incurred

  $ 9      $ 20      $ 8      $ 20   

Insurance recoveries received

  $      $ 3      $      $ 3   

 

     For the Nine Months Ended September 30,  
     Con Edison     CECONY  
(Millions of Dollars)   2010     2009     2010     2009  

Remediation costs incurred

  $ 32      $ 60      $ 30      $ 59   

Insurance recoveries received

  $      $ 3      $      $ 3   

In 2006, CECONY estimated that for its manufactured gas plant sites, its aggregate undiscounted potential liability for the investigation and remediation of coal tar and/or other manufactured gas plant-related environmental contaminants could range up to $1.1 billion. In 2007, O&R estimated that for its manufactured gas plant sites, each of which has been investigated, the aggregate undiscounted potential liability for the remediation of such contaminants could range up to $115 million. These estimates were based on the assumption that there is contamination at the sites that have not yet been investigated and additional assumptions about these and the other sites regarding the extent of contamination and the type and extent of remediation that may be required. Actual experience may be materially different.

 

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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. In 2008, CECONY estimated that its aggregate undiscounted potential liability for these suits and additional suits that may be brought over the next 15 years is $9 million. The estimate was based upon a combination of modeling, historical data analysis and risk factor assessment. Actual experience may be materially different. 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 agreements, 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 September 30, 2010 and December 31, 2009 were as follows:

 

     Con Edison     CECONY  
(Millions of Dollars)   2010     2009     2010     2009  

Accrued liability – asbestos suits

  $ 10      $ 10      $ 9      $ 9   

Regulatory assets – asbestos suits

  $ 10      $ 10      $ 9      $ 9   

Accrued liability – workers’ compensation

  $ 109      $ 113      $ 104      $ 108   

Regulatory assets – workers’ compensation

  $ 34      $ 37      $ 34      $ 37   

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 100 suits are pending against the company seeking generally unspecified compensatory and, in some cases, punitive damages, for personal injury, property damage and business interruption. The company has not accrued a liability for the suits. The company has notified its insurers of the incident and believes that the policies in force at the time of the incident will cover most of the company’s costs, which the company is unable to estimate, but which could be substantial, to satisfy its liability to others in connection with the incident.

Investigations of Vendor Payments

In January 2009, CECONY commenced an internal investigation relating to the arrests of certain employees and retired employees (all of whom have since pleaded guilty) for accepting kickbacks from contractors that performed construction work for the company. The company has retained a law firm, which has retained an accounting firm, to assist in the company’s investigation. The company is providing information to governmental authorities, which consider the company to be a victim of unlawful conduct, in connection with their investigation of the arrested employees and contractors. The company has terminated its employment of the arrested employees and its contracts with the contractors (one of which is suing the company for substantial damages claiming wrongful termination). In February 2009, the NYSPSC commenced a proceeding that, among other things, will examine the prudence of certain of the company’s expenditures relating to the arrests and consider whether additional expenditures should also be examined (see “Other Regulatory Matters” in Note B).

In September 2010, CECONY commenced an internal investigation relating to the arrest of a retired employee for participating in a bribery scheme in which the employee received payments from a bidder that was selected to supply materials to the company.

 

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CECONY has provided information to governmental authorities in connection with their ongoing investigation of this conspiracy to defraud the company.

The company, based upon its evaluation of its internal controls for 2009 and previous years, believes that the controls were effective to provide reasonable assurance that its financial statements have been fairly presented, in all material respects, in conformity with generally accepted accounting principles. Because the company’s investigations are ongoing, the company is unable to predict the impact of any of the employees’ unlawful conduct on the company’s internal controls, business, results of operations or financial position.

Permit Non-Compliance and Pollution Discharges

In March 2009, the New York State Department of Environmental Conservation (NYSDEC) issued a proposed administrative Order on Consent to CECONY with respect to non-compliance with certain laws, regulations and permit conditions and discharges of pollutants at the company’s steam generating facilities. The proposed order effectively instituted a civil enforcement proceeding against the company. In the proposed order, the NYSDEC is seeking, among other things, the company’s agreement to pay a penalty in an amount the NYSDEC did not specify, retain an independent consultant to conduct a comprehensive audit of the company’s generating facilities to determine compliance with federal and New York State environmental laws and regulations and recommend best practices, remove all equipment containing polychlorinated biphenyls from the company’s steam and electric facilities, remediate polychlorinated biphenyl contamination, install certain wastewater treatment facilities, and comply with additional sampling, monitoring, and training requirements. In March 2010, the NYSDEC issued a revised proposed consent order specifying the amount of penalty the NYSDEC is seeking at $10.8 million. The company will seek to resolve this matter through negotiations with the NYSDEC. It is unable to predict the impact of this matter on the company’s operations or the additional costs, which could be substantial, to comply with the requirements resulting from this matter.

 

In January 2010, the NYSDEC issued a proposed administrative Order on Consent to CECONY relating to discharges of pollutants, reported by the company to the NYSDEC from 2002 through 2009, into the storm sewer system at a property the company owns in the Astoria section of New York on which the company is permitted by the NYSDEC to operate a hazardous waste storage facility. In April 2010, the NYSDEC issued an order, to which CECONY consented, pursuant to which CECONY paid a $1.1 million penalty and is undertaking a corrective action plan that will require the company to incur an estimated $32 million of capital expenditures.

In June 2010, the NYSDEC issued a proposed consent order relating to the release of oil into the Bronx River resulting from a November 2009 transformer fire at the company’s Dunwoodie electric substation. In July 2010, the NYSDEC issued an order, to which CECONY consented, pursuant to which CECONY paid a penalty and other amounts totaling $0.7 million.

Lease In/Lease Out Transactions

In each of 1997 and 1999, Con Edison Development entered into a transaction in which it leased property and then immediately subleased it back to the lessor (termed “Lease In/Lease Out,” or LILO transactions). The transactions respectively involve electric generating and gas distribution facilities in the Netherlands, with a total investment of $259 million. The transactions were financed with $93 million of equity and $166 million of non-recourse, long-term debt secured by the underlying assets. In accordance with the accounting rules for leases, Con Edison is accounting for the two LILO transactions as leveraged leases. Accordingly, the company’s investment in these leases, net of non-recourse debt, is carried as a single amount in Con Edison’s consolidated balance sheet and income is recognized pursuant to a method that incorporates a level rate of return for those years when net investment in the lease is positive, based upon the after-tax cash flows projected at the inception of the leveraged leases. The company’s investment in these leveraged leases was $(36) million at September 30, 2010 and $(24) million at December 31, 2009 and is comprised of a $235 million gross investment less $271 million deferred tax liabilities at September 30, 2010

 

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and $235 million gross investment less $259 million of deferred tax liabilities at December 31, 2009.

On audit of Con Edison’s tax return for 1997, the IRS disallowed the tax losses in connection with the 1997 LILO transaction. In December 2005, Con Edison paid a $0.3 million income tax deficiency asserted by the IRS for the tax year 1997 with respect to the 1997 LILO transaction. In April 2006, the company paid interest of $0.2 million associated with the deficiency and commenced an action in the United States Court of Federal Claims, entitled Consolidated Edison Company of New York, Inc. v. United States, to obtain a refund of this tax payment and interest. A trial was completed in November 2007. In October 2009, the court issued a decision in favor of the company concluding that the 1997 LILO transaction was, in substance, a true lease that possessed economic substance, the loans relating to the lease constituted bona fide indebtedness, and the deductions for the 1997 LILO transactions claimed by the company in its 1997 federal income tax return are allowable. The IRS is entitled to appeal the decision.

In connection with its audit of Con Edison’s federal income tax returns for 1998 through 2007, the IRS disallowed $416 million of net tax deductions taken with respect to both of the LILO transactions for the tax years. Con Edison is pursuing administrative appeals of these audit level disallowances. In connection with its audit of Con Edison’s federal income tax returns for 2009 and 2008, the IRS has disallowed $41 million and $42 million, respectively, of net tax deductions taken with respect to both of the LILO transactions. When these audit level disallowances become appealable, Con Edison intends to file an appeal of the disallowances.

Con Edison believes that its LILO transactions have been correctly reported, and has not recorded any reserve with respect to the disallowance of tax losses, or related interest, in connection with its LILO transactions. Con Edison’s estimated tax savings, reflected in its financial statements, from the two LILO transactions through September 30, 2010, in the aggregate, was $217 million. If Con Edison were required to repay all or a portion of these amounts, it would also be required to pay interest of up to $73 million net of tax at September 30, 2010.

 

Pursuant to the accounting rules for leveraged lease transactions, the expected timing of income tax cash flows generated by Con Edison’s LILO transactions are required to be reviewed at least annually. If the expected timing of the cash flows is revised, the rate of return and the allocation of income would be recalculated from the inception of the LILO transactions, and the company would be required to recalculate the accounting effect of the LILO transactions, which would result in a charge to earnings that could have a material adverse effect on the company’s results of operations.

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 $873 million and $929 million at September 30, 2010 and December 31, 2009, respectively.

A summary, by type (described in Note H to the financial statements in Item 8 of the Form 10-K) and term, of Con Edison’s total guarantees at September 30, 2010 is as follows:

 

Guarantee Type   0 – 3 years     4 –10 years     > 10 years     Total  
    (Millions of Dollars)  

Commodity transactions

  $ 618      $ 9      $ 128      $ 755   

Affordable housing program

    4                      4   

Intra-company guarantees

    30               1        31   

Other guarantees

    63        20               83   

TOTAL

  $ 715      $ 29      $ 129      $ 873   

Note I Income Tax

Reference is made to Note L to the financial statements in Item 8 of the Form 10-K.

In August 2010, the IRS entered into a closing agreement with Con Edison, covering the Companies’ use of certain methods to determine the extent to which construction-related costs could be deducted in 2005 through 2008 (the last year for which deduction of construction-related costs was an uncertain tax position), and instructed the IRS to apply the remainder of a June 2007 deposit to pay the tax for

 

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2005 through 2008 determined to be due relating to the closing agreement. At September 30, 2010, the remaining deposit was $51 million (including $47 million attributable to CECONY), which is included in other current assets in the Companies’ consolidated balance sheets, and the tax due relating to the closing agreement was $53 million (including $55 million attributable to CECONY), which is included in other current liabilities in the Companies’ consolidated balance sheets. In October 2010, the IRS indicated that it applied most of the remaining deposit towards payment of the tax due relating to the closing agreement.

At September 30, 2010, the liability for uncertain tax positions (which is included in other current liabilities in the Companies’ consolidated balance sheets) included $8 million (including $8 million attributable to CECONY) relating to the deduction of construction-related costs for New York State income tax purposes in 2005 through 2008.

Settlement of the Companies’ uncertain tax position regarding the timing of the deduction of construction-related costs has had, and will have, no effect (except for interest on amounts owed, which is not expected to be significant) on the Companies’ results of operations because deferred taxes had previously been provided for the related temporary differences between the deductions taken for income tax purposes and the corresponding amounts charged to expense for financial reporting purposes.

In September 2010, Con Edison filed the Companies’ federal income tax return for 2009 reflecting, among other things, the deduction of the costs of certain repairs to utility plant as an operating expense (the “repair allowance deductions”). Previously, the Companies capitalized such costs and reported their depreciation in their tax returns. Taking the repair allowance deductions accelerated the timing of the deduction of the cost of the repairs. The Companies had a net operating loss for federal income tax purposes in 2009 reflecting, among other things, the repair allowance deductions and the bonus depreciation provisions of the American Recovery and Reinvestment Act of 2009. At September 30, 2010, with respect to the repair allowance deductions, Con Edison accrued a liability for uncertain tax positions of $54 million (including $52 million attributable to CECONY), which is included in other current liabilities in the Companies’ consolidated balance sheets.

In September 2010, the Companies applied for a refund of certain prior years’ federal tax payments based upon the carry-back of the 2009 net operating loss. At September 30, 2010, Con Edison’s estimated refunds receivable from the IRS amounted to $297 million, which is included in other accounts receivable in Con Edison’s consolidated balance sheet (including $281 million attributable to CECONY, which is included in accounts receivable from affiliated companies in CECONY’s consolidated balance sheet).

The Companies also estimate that they had a net operating loss for state income tax purposes for 2009 (reflecting, among other things, the repair allowance expense deductions), which is being carried forward and as to which, at September 30, 2010, Con Edison has included a $64 million other current asset in its consolidated balance sheet (including $35 million attributable to CECONY, which is included in accounts receivable from affiliated companies in CECONY’s consolidated balance sheet).

 

 

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Note J — Financial Information by Business Segment

Reference is made to Note N to the financial statements in Item 8 of the Form 10-K.

The financial data for the business segments are as follows:

 

     For the Three Months Ended September 30,  
     Operating
revenues
    Inter-segment
revenues
    Depreciation and
amortization
    Operating
income
 
(Millions of Dollars)   2010     2009     2010     2009     2010     2009     2010     2009  

Con Edison of New York

               

Electric

  $ 2,570      $ 2,395      $ 3      $ 3      $ 156      $ 149      $ 715      $ 641   

Gas

    204        183        1        1        26        24        (16     (28

Steam

    91        77        18        18        16        15        (33     (34

Consolidation adjustments

                  (22     (22                            

Total Con Edison of New York

  $ 2,865      $ 2,655      $      $      $ 198      $ 188      $ 666      $ 579   

O&R

               

Electric

  $ 245      $ 209      $      $      $ 8      $ 7      $ 52      $ 40   

Gas

    25        26                      3        3        (4     (5

Total O&R

  $ 270      $ 235      $      $      $ 11      $ 10      $ 48      $ 35   

Competitive energy businesses

  $ 584      $ 610      $      $ 2      $ 2      $ 2      $ (8   $ 70   

Other*

    (12     (11            (2                   (1     1   

Total Con Edison

  $ 3,707      $ 3,489      $      $      $ 211      $ 200      $ 705      $ 685   

 

* Parent company expenses, primarily interest, and consolidation adjustments. Other does not represent a business segment.

 

     For the Nine Months Ended September 30,  
     Operating
revenues
    Inter-segment
revenues
    Depreciation and
amortization
    Operating
Income
 
(Millions of Dollars)   2010     2009     2010     2009     2010     2009     2010     2009  

Con Edison of New York

               

Electric

  $ 6,402      $ 5,865      $ 9      $ 9      $ 464      $ 437      $ 1,228      $ 1,090   

Gas

    1,126        1,259        4        4        76        73        243        223   

Steam

    487        521        55        54        46        44        41        40   

Consolidation adjustments

                  (68     (67                            

Total Con Edison of New York

  $ 8,015      $ 7,645      $      $      $ 586      $ 554      $ 1,512      $ 1,353   

O&R

               

Electric

  $ 559      $ 499      $      $      $ 24      $ 22      $ 71      $ 57   

Gas

    150        171                      9        9        20        16   

Total O&R

  $ 709      $ 670      $      $      $ 33      $ 31      $ 91      $ 73   

Competitive energy businesses

  $ 1,491      $ 1,477      $      $ (1   $ 6      $ 4      $ 25      $ 52   

Other*

    (30     (34            1                      (1     (2

Total Con Edison

  $ 10,185      $ 9,758      $      $      $ 626      $ 589      $ 1,627      $ 1,476   

 

* Parent company expenses, primarily interest, and consolidation adjustments. Other does not represent a business segment.

Note K — Derivative Instruments and Hedging Activities

Under the accounting rules for derivatives and hedging, derivatives are recognized on the balance sheet at fair value, unless an exception is available under the accounting rules. Certain qualifying derivative contracts have been designated as normal purchases or normal sales contracts. These contracts are not reported at fair value under the accounting rules.

 

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Energy Price Hedging

Con Edison’s subsidiaries hedge market price fluctuations associated with physical purchases and sales of electricity, natural gas, and steam by using derivative instruments including futures, forwards, basis swaps, options, transmission congestion contracts and financial transmission rights contracts. The fair values of these hedges at September 30, 2010 and December 31, 2009 were as follows:

 

     Con Edison     CECONY  
(Millions of Dollars)   2010     2009     2010     2009  

Fair value of net derivative (liabilities) – gross

  $ (436   $ (266   $ (248   $ (137

Impact of netting of cash collateral

    282        162        143        87   

Fair value of net derivative (liabilities) – net

  $ (154   $ (104   $ (105   $ (50

Credit Exposure

The Companies are exposed to credit risk related to transactions entered into primarily for the various energy supply and hedging activities by the Utilities and the competitive energy businesses. The Companies use credit policies to manage this risk, including an established credit approval process, monitoring of counterparty limits, netting provisions within agreements, collateral or prepayment arrangements, credit insurance and credit default swaps.

At September 30, 2010, Con Edison and CECONY had $172 million and $24 million of credit exposure in connection with energy supply and hedging activities, net of collateral, respectively. Con Edison’s net credit exposure consisted of $107 million with investment-grade counterparties, and $65 million primarily with commodity exchange brokers or independent system operators. CECONY’s entire net credit exposure was with commodity exchange brokers.

Economic Hedges

The Companies enter into certain derivative instruments that do not qualify or are not designated as hedges under the accounting rules for derivatives and hedging. However, management believes these instruments represent economic hedges that mitigate exposure to fluctuations in commodity prices.

 

The fair values of the Companies’ commodity derivatives at September 30, 2010 were:

 

(Millions of Dollars)   Fair Value of Commodity Derivatives(a)
Balance Sheet Location
  Con
Edison
    CECONY  
Asset Derivatives  

Current

  Other current assets   $ 234      $ 18   

Long term

  Other deferred charges and non-current assets     67        12   

Total asset derivatives

    $ 301      $ 30   

Impact of netting

        (181     6   

Net asset derivatives

      $ 120      $ 36   
Liability Derivatives  

Current

  Fair value of derivative liabilities   $ 538      $   

Current

  Other current liabilities            192   

Long term

  Fair value of derivative liabilities     199        86   

Total liability derivatives

    $ 737      $ 278   

Impact of netting

        (463     (137

Net liability derivatives

      $ 274      $ 141   

 

(a) Qualifying derivative contracts, which have been designated as normal purchases or normal sales contracts, are not reported at fair value under the accounting rules for derivatives and hedging and, therefore, are excluded from the table.

 

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The fair value of the Companies’ commodity derivatives at December 31, 2009 were:

 

(Millions of Dollars)   Fair Value of Commodity Derivatives(a)
Balance Sheet Location
  Con
Edison
    CECONY  
Asset Derivatives  

Current

  Fair value of derivative assets   $ 213      $ 40   

Long term

  Other deferred charges and non-current assets     148        19   

Total asset derivatives

    $ 361      $ 59   

Impact of netting

        (231     (20

Net asset derivatives

      $ 130      $ 39   
Liability Derivatives  

Current

  Fair value of derivative liabilities   $ 401      $ 110   

Long term

  Fair value of derivative liabilities     226        86   

Total liability derivatives

    $ 627      $ 196   

Impact of netting

        (393     (107

Net liability derivatives

      $ 234      $ 89   

 

(a) Qualifying derivative contracts, which have been designated as normal purchases or normal sales contracts, are not reported at fair value under the accounting rules for derivatives and hedging and, therefore, are excluded from the table.

 

The Utilities generally recover all of their prudently incurred fuel, purchased power and gas costs, including hedging gains and losses, in accordance with rate provisions approved by the applicable state utility commissions. See “Recoverable Energy Costs” in Note A to the financial statements in Item 8 of the Form 10-K. In accordance with the accounting rules for regulated operations, the Utilities record a regulatory asset or liability to defer recognition of unrealized gains and losses on their electric and gas derivatives. As gains and losses are realized in future periods, they will be recognized as purchased power, gas and fuel costs in the Companies’ consolidated income statements. Con Edison’s competitive energy businesses record realized and unrealized gains and losses on their derivative contracts in earnings in the reporting period in which they occur.

 

The following table presents the changes in the fair values of commodity derivatives that have been deferred or recognized in earnings for the three and nine months ended September 30, 2010:

 

Realized and Unrealized Gains/(Losses) on Commodity Derivatives(a)
Deferred or Recognized in Income for the Three Months Ended September 30, 2010
 
(Millions of Dollars)   Balance Sheet Location   Con
Edison
    CECONY  

Pre-tax gains/(losses) deferred in accordance with accounting rules for regulated operations:

  

Current

  Other current liabilities   $ (3   $ (3

Total deferred losses

      $ (3   $ (3

Current

  Other current assets   $ (61   $ (54

Current

  Recoverable energy costs     (70     (63

Long term

  Regulatory assets     4        7   

Total deferred losses

    $ (127   $ (110

Net deferred losses

      $ (130   $ (113
    Income Statement Location                

Pre-tax gain/(loss) recognized in income

  

  Purchased power expense   $ (26 )(b)    $   
  Gas purchased for resale     (1       
    Non-utility revenue     4 (b)        

Total pre-tax gain/(loss) recognized in income

      $ (23   $   

 

(a) Qualifying derivative contracts, which have been designated as normal purchases or normal sales contracts, are not reported at fair value under the accounting rules for derivatives and hedging and, therefore, are excluded from the table.
(b) For the three months ended September 30, 2010, Con Edison recorded in non-utility operating revenues and purchased power expense an unrealized pre-tax gain/(loss) of $(3)million and $(34) million, respectively.

 

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Realized and Unrealized Gains/(Losses) on Commodity Derivatives(a)
Deferred or Recognized in Income for the Nine Months Ended September 30, 2010
 
(Millions of Dollars)   Balance Sheet Location   Con
Edison
    CECONY  

Pre-tax gains/(losses) deferred in accordance with accounting rules for regulated operations:

  

Current

  Other current liabilities   $ (8   $ (8

Total deferred losses

      $ (8   $ (8

Current

  Other current assets   $ (127   $ (114

Current

  Recoverable energy costs   $ (205   $ (172

Long term

  Regulatory assets   $ (19   $ (11

Total deferred losses

    $ (351   $ (297

Net deferred losses

      $ (359   $ (305
    Income Statement Location                

Pre-tax gain/(loss) recognized in income

  

  Purchased power expense   $ (132   $   
  Gas purchased for resale     (7       
    Non-utility revenue     21 (b)        

Total pre-tax gain/(loss) recognized in income

      $ (118   $   

 

(a) Qualifying derivative contracts, which have been designated as normal purchases or normal sales contracts, are not reported at fair value under the accounting rules for derivatives and hedging and, therefore, are excluded from the table.
(b) For the nine months ended September 30, 2010, Con Edison recorded in non-utility operating revenues and purchased power expense an unrealized pre-tax gain/(loss) of $(1) million and $(34) million, respectively.

The following table presents the changes in the fair values of commodity derivatives that have been deferred or recognized in earnings for the three and nine months ended September 30, 2009:

 

Realized and Unrealized Gains/(Losses) on Commodity Derivatives(a)
Deferred or Recognized in Income for the Three Months Ended September 30, 2009
 
(Millions of Dollars)   Balance Sheet Location   Con
Edison
    Con Edison
of New York
 

Pre-tax gains/(losses) deferred in accordance with accounting rules for regulated operations:

  

Current

  Deferred derivative gains   $ 4      $ 4   

Long term

  Regulatory liabilities     2          

Total deferred gains

      $ 6      $ 4   

Current

  Deferred derivative losses   $ 111      $ 97   

Current

  Recoverable energy costs   $ (158   $ (134

Long term

  Regulatory assets   $ 29      $ 21   

Total deferred losses

    $ (18   $ (16

Net deferred losses

      $ (12   $ (12
    Income Statement Location                

Pre-tax gain/(loss) recognized in income

  

  Purchased power expense   $ (176   $   
  Gas purchased for resale     (9       
    Non-utility revenue     27 (b)        

Total pre-tax gain/(loss) recognized in income

      $ (158   $   

 

(a) Qualifying derivative contracts, which have been designated as normal purchases or normal sales contracts, are not reported at fair value under the accounting rules for derivatives and hedging and, therefore, are excluded from the table.
(b) For the three months ended September 30, 2009, Con Edison recorded in non-utility operating revenues an unrealized pre-tax gain of $28 million.

 

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