Edgar Filing: CONSOLIDATED EDISON INC

10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x Annual Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014

¨ 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 1-14514

Consolidated Edison, Inc.

Exact name of registrant as specified in its charter

and principal office address and telephone number

New York

13-3965100

State of Incorporation

I.R.S. Employer

ID. Number

4 Irving Place,

New York, New York 10003

(212) 460-4600

Commission File Number 1-1217

Consolidated Edison Company of New York, Inc.

Exact name of registrant as specified in its charter

and principal office address and telephone number

New York

13-5009340

State of Incorporation

I.R.S. Employer

ID. Number

4 Irving Place,

New York, New York 10003

(212) 460-4600

Securities Registered Pursuant to Section 12(b) of the Act:


Title of each class	Name of each exchange on which registered
Consolidated Edison, Inc.,
Common Shares ($.10 par value)		New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None


						CON EDISON ANNUAL REPORT 2014		1

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Consolidated Edison, Inc. (Con Edison)

Yes

Consolidated Edison Company of New York, Inc. (CECONY)

Yes

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Con Edison

Yes

CECONY

Yes

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.

Con Edison

Yes

CECONY

Yes

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

CECONY

Yes

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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

Accelerated filer

Non-accelerated filer

Smaller reporting company

CECONY

Large accelerated filer

Accelerated filer

Non-accelerated filer

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

CECONY

Yes

The aggregate market value of the common equity of Con Edison held by non-affiliates of Con Edison, as of June 30, 2014, was approximately $16.9 billion.

As of January 30, 2015, Con Edison had outstanding 292,888,812 Common Shares ($.10 par value).

All of the outstanding common equity of CECONY is held by Con Edison.

Documents Incorporated By Reference

Portions of Con Edison’s definitive proxy statement for its Annual Meeting of Stockholders to be held on May 18, 2015, to be filed with the Commission pursuant to Regulation 14A, not later than 120 days after December 31, 2014, is incorporated in Part III of this report.

Filing Format

This Annual Report on Form 10-K 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. CECONY meets the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced disclosure format.

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.


2		CON EDISON ANNUAL REPORT 2014

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		Consolidated Edison Transmission, 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 Quasi-governmental Not-for-Profits
EPA		U. S. Environmental Protection Agency
FERC		Federal Energy Regulatory Commission
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
FASB		Financial Accounting Standards Board
GAAP		Generally Accepted Accounting Principles in the United States of America
LILO		Lease In/Lease Out
OCI		Other Comprehensive Income
VIE		Variable interest entity

Environmental
CO₂		Carbon dioxide
GHG		Greenhouse gases
MGP Sites		Manufactured gas plant sites
PCBs		Polychlorinated biphenyls
PRP		Potentially responsible party
Superfund		Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes


						CON EDISON ANNUAL REPORT 2014		3


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
COSO		Committee of Sponsoring Organizations of the Treadway Commission
DER		Distributed energy resources
DSP		Distributed System Platform
Fitch		Fitch Ratings
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


4		CON EDISON ANNUAL REPORT 2014

TABLE OF CONTENTS


		PAGE
Introduction			6

Available Information			8

Forward-Looking Statements			8
Part I

Item 1:	Business		9

Item 1A:	Risk Factors		32

Item 1B:	Unresolved Staff Comments		34

Item 2:	Properties		34

Item 3:	Legal Proceedings		35

Item 4:	Mine Safety Disclosures		35

	Executive Officers of the Registrant		35

Part II

Item 5:	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		37

Item 6:	Selected Financial Data		40

Item 7:	Management’s Discussion and Analysis of Financial Condition and Results of Operations		41

Item 7A:	Quantitative and Qualitative Disclosures about Market Risk		65

Item 8:	Financial Statements and Supplementary Data		66

Item 9:	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		137

Item 9A:	Controls and Procedures		137

Item 9B:	Other Information		137

Part III

Item 10:	Directors, Executive Officers and Corporate Governance		138

Item 11:	Executive Compensation		138

Item 12:	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		138

Item 13:	Certain Relationships and Related Transactions, and Director Independence		138

Item 14:	Principal Accounting Fees and Services		138

Part IV

Item 15:	Exhibits and Financial Statement Schedules		140

	Signatures		147


						CON EDISON ANNUAL REPORT 2014		5

Introduction

This introduction contains certain information about Con Edison and its subsidiaries, including CECONY, and is qualified in its entirety by reference to the more detailed information appearing elsewhere or incorporated by reference in this report.

Con Edison’s mission is to provide energy services to our customers safely, reliably, efficiently and in an environmentally sound manner; to provide a workplace that allows employees to realize their full potential; to provide a fair return to our investors; and to improve the quality of life in the communities we serve.

Con Edison is a holding company that owns:

•

CECONY, which delivers electricity, natural gas and steam to customers in New York City and Westchester County;

•

O&R (together with CECONY referred to as the Utilities), which delivers electricity and natural gas to customers primarily located in southeastern New York, and northern New Jersey and northeastern Pennsylvania;

•

Competitive energy businesses, which sell to retail customers electricity purchased in wholesale markets and enter into related hedging transactions; provide energy-related products and services to wholesale and retail customers, and develop, own and operate renewable and energy infrastructure projects; and

•

Consolidated Edison Transmission, LLC (Con Edison Transmission), which was formed in 2014 to invest in a transmission company.

Con Edison anticipates that the Utilities, which are subject to extensive regulation, will continue to provide substantially all of its earnings over the next few years. The Utilities have approved rate plans that are generally designed to cover each company’s cost of service, including the capital and other costs of the company’s energy delivery systems. The Utilities recover from their full-service customers (generally, on a current basis) the cost the Utilities pay for the energy and charge all of their customers the cost of delivery service.

Selected Financial Data

Con Edison


	For the Year Ended December 31,
(Millions of Dollars, except per share amounts)	2010		2011			2012			2013			2014
Operating revenues	$	13,325	$	12,886		$	12,188		$	12,354		$	12,919
Energy costs		5,754		5,001			3,887			4,054			4,513
Operating income		2,120		2,239			2,339			2,244			2,209
Net income		1,003		1,062			1,141			1,062	(c)		1,092
Total assets		36,348		39,214	(a)		41,209	(b)		40,647	(d)		44,308	(e)
Long-term debt		10,671		10,143			10,062			10,489			11,631
Total equity		11,274		11,649			11,869			12,245			12,585
Basic earnings per share	$	3.49	$	3.59		$	3.88		$	3.62		$	3.73
Diluted earnings per share	$	3.47	$	3.57		$	3.86		$	3.61		$	3.71
Cash dividends per common share	$	2.38	$	2.40		$	2.42		$	2.46		$	2.52
Book value per share	$	37.95	$	39.05		$	40.53		$	41.81		$	42.97
Average common shares outstanding (millions)		284		293			293			293			293
Stock price low	$	41.52	$	48.55		$	53.63		$	54.33		$	52.23
Stock price high	$	51.03	$	62.74		$	65.98		$	63.66		$	68.92

(a)	Reflects a $1,230 million increase in net plant and a $1,481 million increase in regulatory assets for unrecognized pension and other postretirement costs.

(b)	Reflects a $1,846 million increase in net plant and a $304 million increase in regulatory assets for deferred storm costs.

(c)	Reflects a charge to earnings of $95 million (after taxes of $63 million) relating to the LILO transactions. See “Lease In/Lease Out Transactions” in Note J to the financial statements in Item 8.

(d)

Reflects a $2,947 million decrease in regulatory assets for unrecognized pension and other postretirement costs offset by a $1,497 million increase in net plant, a $280 million increase in cash, a $257 million increase in special deposits and a $223 million increase in regulatory assets for future income tax. See Notes B, E and F to the financial statements in Item 8.

(e)	Reflects a $2,116 million increase in regulatory assets for unrecognized pension and other postretirement costs and a $1,391 million increase in net plant. See Notes E and F to the financial statements in Item 8.


6		CON EDISON ANNUAL REPORT 2014

CECONY


	For the Year Ended December 31,
(Millions of Dollars)	2010		2011			2012			2013			2014
Operating revenues	$	10,573	$	10,432		$	10,187		$	10,430		$	10,786
Energy costs		3,715		3,243			2,665			2,873			2,985
Operating income		1,922		2,083			2,093			2,060			2,139
Net income for common stock		893		978			1,014			1,020			1,058
Total assets		32,605		35,218	(a)		36,885	(b)		36,258	(c)		39,637	(d)
Long-term debt		9,743		9,220			9,145			9,366			10,864
Shareholder’s equity		10,136		10,431			10,552			10,847			11,188

(a)	Reflects a $1,101 million increase in net plant and a $1,402 million increase in regulatory assets for unrecognized pension and other postretirement costs.

(b)	Reflects a $1,243 million increase in net plant and a $229 million increase in regulatory assets for deferred storm costs.

(c)

Reflects a $2,797 million decrease in regulatory assets for unrecognized pension and other postretirement costs offset by a $1,405 million increase in net plant, a $280 million increase in cash and $215 million and $199 million increases in regulatory assets for environmental remediation costs and future income tax, respectively. See Notes B, E and F to the financial statements in Item 8.

(d)	Reflects a $1,999 million increase in regulatory assets for unrecognized pension and other postretirement costs and a $1,440 million increase in net plant. See Notes E and F to the financial statements in Item 8.

Significant 2014 Developments and Outlook

•

Con Edison reported 2014 net income of $1,092 million or $3.73 a share compared with $1,062 million or $3.62 a share in 2013. Earnings from ongoing operations, which exclude the effects of the gain on sale of solar electric production projects, the LILO transactions (see “Lease In/Lease Out Transactions” in Note J to the financial statements in Item 8) and the net mark-to-market effects of the competitive energy businesses, were $1,140 million or $3.89 a share in 2014 compared with $1,112 million or $3.80 a share in 2013. See “Non-GAAP Financial Measure” below. The results of operations reflect changes in the Utilities’ rate plans, the cold weather benefit to steam revenues, increases in certain operations and maintenance expenses, depreciation and amortization, and the net mark-to-market effects of the competitive energy businesses. See “Results of Operations” in Item 7.

•

CECONY delivered 56,303 million kWhs of electricity (1.1 percent decrease from prior year), 154,859 MDt of gas (11.4 percent increase from prior year) and 23,016 MMlb of steam to its customers (5.0 percent increase from prior year). O&R delivered 5,669 million kWhs of electricity (0.9 percent decrease from prior year) and 26,337 MDt of gas (5.4 percent increase from prior year). CECONY and O&R’s New York electric and gas rate plans include revenue decoupling mechanisms pursuant to which delivery revenues are not generally affected by changes in delivery volumes from levels assumed in the rate plans. See “Results of Operations” in Item 7.

•

CECONY forecasts average annual growth in peak demand in its service area at design conditions over the next five years for electric and gas to be approximately 0.9 percent and 2.8 percent, respectively, and average annual decrease in steam peak demand in its service area at design conditions over the next five years to be approximately 0.8 percent. O&R forecasts average annual growth of the peak demand in its service area over the next five years at design conditions for electric and gas to be approximately 0.9 percent and 0.6 percent, respectively. See “The Utilities” in Item 1.

•

In 2014, the Utilities invested $2,274 million to upgrade and reinforce their energy delivery systems and the competitive energy businesses invested $447 million primarily in solar electric production projects. In 2015, the Companies are expected to invest $2,912 million for their energy delivery systems and renewable electric production projects. The Companies expect to meet their 2015 capital requirements, including maturing securities, through internally-generated funds and the issuance of between $1,000 million and $1,500 million of long-term debt. Con Edison does not expect to need to issue common equity in 2015 other than through its dividend reinvestment, employee stock purchase and long term incentive plans. See “Capital Requirements and Resources” in Item 1.

•

In March 2014, an explosion and fire destroyed two buildings to which CECONY had provided gas service. Eight people died and more than 48 people were injured. The National Transportation Safety Board and the New York State Public Service Commission (NYSPSC) are investigating. See Note H to the financial statements in Item 8.

•

In 2014, the NYSPSC adopted a Joint Proposal with respect to CECONY’s rates for electric, gas and steam delivery service in 2014 and 2015 (and gas and steam delivery service in 2016); the NYSPSC initiated its Reforming the Energy Vision proceeding to improve system efficiency and reliability, encourage renewable energy and distributed energy resources and empower customer choice; the NYSPSC initiated a proceeding to investigate the practices of qualifying persons to perform plastic fusions on gas facilities; and O&R filed requests with the NYSPSC for an electric rate increase of $33.4 million and a gas rate increase of $40.7 million,


						CON EDISON ANNUAL REPORT 2014		7

effective November 2015. See “Utility Regulation” in Item 1 and Note B to the financial statements in Item 8.

•

In January 2015, CECONY filed a request with the NYSPSC for an electric rate increase of $368 million, effective January 2016. The filing reflects a return on common equity of 10 percent and a common equity ratio of approximately 48 percent. See “Rate Plans” in Note B to the financial statements in Item 8.

Available Information

Con Edison and CECONY file annual, quarterly and current reports and other information, and Con Edison files proxy statements, with the Securities and Exchange Commission (SEC). The public may read and copy any materials that the Companies file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580 Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy statements, and other information regarding issuers (including Con Edison and CECONY) that file electronically with the SEC. The address of that site is www.sec.gov.

This information the Companies file with the SEC is also available free of charge on or through the Investor Information section of their websites as soon as reasonably practicable after the reports are electronically filed with, or furnished to, the SEC. Con Edison’s internet website is at: www.conedison.com; and CECONY’s is at: www.coned.com.

The Investor Information section of Con Edison’s website also includes the company’s Standards of Business Conduct (its code of ethics) and amendments or waivers of the standards for executive officers or directors, corporate governance guidelines and the charters of the following committees of the company’s Board of Directors: Audit Committee, Management Development and Compensation Committee, and Corporate Governance and Nominating Committee. This information is available in print to any shareholder who requests it. Requests should be directed to: Corporate Secretary, Consolidated Edison, Inc., 4 Irving Place, New York, NY 10003.

Information on the Companies’ websites is not incorporated herein.

Forward-Looking Statements

This report includes forward-looking statements intended to qualify for the safe-harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements of future expectation and not facts. Words such as “forecasts,” “expects,” “estimates,” “anticipates,” “intends,” “believes,” “plans,” “will” and similar expressions identify forward-looking statements. Forward-looking statements are based on information available at the time the statements are made, and accordingly speak only as of that time. Actual results or developments might differ materially from those included in the forward-looking statements because of various factors including, but not limited to, those discussed under “Risk Factors,” in Item 1A.

Non-GAAP Financial Measure

Earnings from ongoing operations is a financial measure that is not determined in accordance with generally accepted accounting principles in the Unites States of America (GAAP). Earnings from ongoing operations should not be considered as an alternative to net income. Management uses this non-GAAP measure to facilitate the analysis of the company’s ongoing performance and believes that this non-GAAP measure also is useful and meaningful to investors. The following table is a reconciliation of Con Edison’s reported net income to earnings from ongoing operations and reported earnings per share to earnings per share from ongoing operations.


(Millions of Dollars, except per share amounts)	2010			2011		2012			2013			2014
Reported net income for common stock – GAAP basis	$	992		$	1,051	$	1,138		$	1,062		$	1,092
Gain on sale of solar electric production projects(a)		-			-		-			-			(26	)
Loss from LILO transactions(b)		-			-		-			95			1
Net mark-to-market effects of the competitive energy businesses(c)		(11	)		13		(40	)		(45	)		73
Earnings from ongoing operations	$	981		$	1,064	$	1,098		$	1,112		$	1,140
Reported earnings per share – GAAP basis (basic)	$	3.49		$	3.59	$	3.88		$	3.62		$	3.73
Gain on sale of solar electric production projects		-			-		-			-			(0.09	)
Loss from LILO transactions		-			-		-			0.32			-
Net mark-to-market effects of the competitive energy businesses		(0.04	)		0.05		(0.13	)		(0.14	)		0.25
Earnings per share from ongoing operations	$	3.45		$	3.64	$	3.75		$	3.80		$	3.89

(a)	After taxes of $19 million for the year ended December 31, 2014.

(b)

In 2013, a court disallowed tax losses claimed by Con Edison relating to Con Edison Development’s LILO transactions and the company subsequently terminated the transactions, resulting in a charge to earnings of $95 million (after taxes of $63 million). In 2014, adjustments were made to taxes and accrued interest.

(c)	After taxes of $8 million, $9 million, $29 million, $30 million and $55 million for the years ended December 31, 2010 through 2014, respectively.


8		CON EDISON ANNUAL REPORT 2014

Item 1:

Business


Contents of Item 1	Page
Overview		11
CECONY		11
Electric		11
Gas		11
Steam		11
O&R		11
Electric		11
Gas		11
Competitive Energy Businesses		11
Utility Regulation		12
State Utility Regulation		12
Regulators		12
Electric Utility Industry Restructuring in New York		12
Rate Plans		13
Liability for Service Interruptions and Other Non-rate Conditions of Service		13
Generic Proceedings		14
Federal Utility Regulation		14
New York Independent System Operator (NYISO)		14
New York Energy Highway		15
Competition		15
The Utilities		15
CECONY		15
Electric Operations		15
Electric Facilities		15
Electric Sales and Deliveries		16
Electric Peak Demand		17
Electric Supply		17
Gas Operations		18
Gas Facilities		18
Gas Sales and Deliveries		18
Gas Peak Demand		19
Gas Supply		19
Steam Operations		19
Steam Facilities		19
Steam Sales and Deliveries		20
Steam Peak Demand and Capacity		20
Steam Supply		20
O&R		20
Electric Operations		20
Electric Facilities		20
Electric Sales and Deliveries		21
Electric Peak Demand		21
Electric Supply		21
Gas Operations		22
Gas Facilities		22
Gas Sales and Deliveries		22
Gas Peak Demand		22
Gas Supply		23


						CON EDISON ANNUAL REPORT 2014		9


Contents of Item 1	Page
Competitive Energy Businesses		23
Con Edison Solutions		23
Con Edison Energy		23
Con Edison Development		24
Con Edison Transmission		24
Capital Requirements and Resources		25
Environmental Matters		28
Climate Change		28
Environmental Sustainability		29
CECONY		29
O&R		31
Other Federal, State and Local Environmental Provisions		31
State Anti-Takeover Law		32
Employees		32

Incorporation By Reference

Information in any item of this report as to which reference is made in this Item 1 is hereby incorporated by reference in this Item 1. The use of terms such as “see” or “refer to” shall be deemed to incorporate into Item 1 at the place such term is used the information to which such reference is made.


10		CON EDISON ANNUAL REPORT 2014

PART I

Item 1:

Business

Overview

Consolidated Edison, Inc. (Con Edison), incorporated in New York State in 1997, is a holding company that owns all of the outstanding common stock of Consolidated Edison Company of New York, Inc. (CECONY), Orange and Rockland Utilities, Inc. (O&R) and the competitive energy businesses. In addition, in 2014 Con Edison formed Consolidated Edison Transmission LLC (Con Edison Transmission) to invest in a transmission company. As used in this report, the term the “Companies” refers to Con Edison and CECONY.

LOGO

Con Edison’s principal business operations are those of CECONY, O&R and the Competitive Energy Businesses. CECONY’s principal business operations are its regulated electric, gas and steam delivery businesses. O&R’s principal business operations are its regulated electric and gas delivery businesses. The competitive energy businesses sell electricity to retail customers, provide energy-related products and services, and develop, own and operate renewable and energy infrastructure projects.

Con Edison seeks to provide shareholder value through continued dividend growth, supported by earnings growth in regulated utilities and contracted assets. The company invests to provide reliable, resilient, safe, and clean energy critical for New York City’s growing economy. The company is an industry leading owner and operator of contracted, large-scale solar generation in the U.S. Con Edison is a responsible neighbor, helping the communities it serves become more sustainable.

CECONY

Electric

CECONY provides electric service to approximately 3.4 million customers in all of New York City (except a part of Queens) and most of Westchester County, an approximately 660 square mile service area with a population of more than nine million.

Gas

CECONY delivers gas to approximately 1.1 million customers in Manhattan, the Bronx, parts of Queens and most of Westchester County.

Steam

CECONY operates the largest steam distribution system in the United States by producing and delivering approximately 23,000 MMlb of steam annually to approximately 1,700 customers in parts of Manhattan.

O&R

Electric

O&R and its utility subsidiaries, Rockland Electric Company (RECO) and Pike County Light & Power Company (Pike) (together referred to herein as O&R) provide electric service to approximately 0.3 million customers in southeastern New York and in adjacent areas of northern New Jersey and northeastern Pennsylvania, an approximately 1,350 square mile service area.

Gas

O&R delivers gas to over 0.1 million customers in southeastern New York and adjacent areas of northeastern Pennsylvania.

Competitive Energy Businesses

Con Edison pursues competitive energy opportunities through three wholly-owned subsidiaries: Con Edison Solutions, Con Edison Energy and Con Edison Development. These businesses sell to retail customers electricity purchased in wholesale markets and enter into related hedging transactions, provide energy-related products and services to wholesale and retail customers, and develop, own and operate renewable and energy infrastructure projects. At December 31, 2014, Con Edison’s equity investment in its competitive energy businesses was $464 million and their assets were $1,025 million.


						CON EDISON ANNUAL REPORT 2014		11

Utility Regulation

State Utility Regulation

Regulators

The Utilities are subject to regulation by the NYSPSC, which under the New York Public Service Law, is authorized to set the terms of service and the rates the Utilities charge for providing service in New York. It also approves the issuance of the Utilities’ securities. It exercises jurisdiction over the siting of the Utilities’ electric transmission lines and approves mergers or other business combinations involving New York utilities. In addition, it has the authority to impose penalties on utilities, which could be substantial, for violating state utility laws and regulations and its orders. O&R’s New Jersey subsidiary, RECO, is subject to similar regulation by the New Jersey Board of Public Utilities (NJBPU). O&R’s Pennsylvania subsidiary, Pike, is subject to similar regulation by the Pennsylvania Public Utility Commission (PAPUC). The NYSPSC, together with the NJBPU and the PAPUC, are referred to herein as state utility regulators.

In March 2013, following the issuance of recommendations by a commission established by the Governor of New York and submission by the Governor of a bill to the State legislature, the New York Public Service Law was amended to, among other things, authorize the NYSPSC to (i) levy expanded penalties against combination gas and electric utilities; (ii) review, at least every five years, an electric utility’s capability to provide safe, adequate and reliable service, order the utility to comply with additional and more stringent terms of service than existed prior to the review, assess the continued operation of the utility as the provider of electric service in its service territory and propose, and act upon, such measures as are necessary to ensure safe and adequate service; and (iii) based on findings of repeated violations of the New York Public Service Law or rules or regulations adopted thereto that demonstrate a failure of a combination gas and electric utility to continue to provide safe and adequate service, revoke or modify an operating certificate issued to the utility by the NYSPSC (following consideration of certain factors, including public interest and standards deemed necessary by the NYSPSC to ensure continuity of service, and due process).

Electric Utility Industry Restructuring In New York

In the 1990s, the NYSPSC restructured the electric utility industry in the state. In accordance with NYSPSC orders, the Utilities sold all of their electric generating facilities other than those that also produce steam for CECONY’s steam business (see Electric Operations – Electric Facilities below) and provided all of their customers the choice to buy electricity or gas from the Utilities or other suppliers (see Electric Operations – Electric Sales and Deliveries and Gas Operations – Gas Sales and Deliveries below). In addition, the Utilities no longer control and operate their electric transmission facilities. See “New York Independent System Operator (NYISO),” below.

Following industry restructuring, there were several utility mergers as a result of which substantially all of the electric and gas delivery service in New York State is now provided by one of four investor-owned utility companies – Con Edison, National Grid plc, Iberdrola, S.A. and Fortis Inc. – or one of two state authorities – New York Power Authority (NYPA) or Long Island Power Authority.

Reforming the Energy Vision Proceeding

In April 2014, the NYSPSC instituted its Reforming the Energy Vision (REV) proceeding, the goals of which are to improve electric system efficiency and reliability, encourage renewable energy resources, support distributed energy resources (DER), and empower customer choice. In this proceeding, the NYSPSC is examining the establishment of a Distributed System Platform (DSP) to manage and coordinate DER, and provide customers with market data and tools to manage their energy use. The NYSPSC also is examining how its regulatory practices should be modified to incent utility practices to promote REV objectives. The proceeding will follow a two-phased schedule with policy determinations for DSP and related matters expected in early 2015 and for regulatory design and regulatory matters, later in 2015.

In August 2014, the NYSPSC staff issued a straw proposal in the REV proceeding in which it indicated that “[t]he reforms envisioned in this proceeding are comprehensive and transformative, and the on-going design and pragmatic implementation of them will take years.” The NYSPSC staff recommended, among other things, that:

•

The NYSPSC should adopt the basic elements of the REV vision and proceed with implementation as proposed in the straw proposal;

•

Existing utilities should serve as DSPs subject to performance reviews;

•

Customers and energy service providers should have access to energy usage information to enable customers to assess the economic value of off-peak usage;

•

Where utility affiliates participate in DSP markets within the service territory operated by their parent company, appropriate market power protections must be in place; and

•

As a transition toward market-based approaches to increase levels of efficiency and renewable energy, utilities should integrate energy efficiency into their regular operations and should take responsibility for procurement of renewable energy.

In December 2014, the NYSPSC encouraged utilities and third parties to begin working together to develop potential


12		CON EDISON ANNUAL REPORT 2014

demonstration projects that will inform decisions with respect to developing DSP functionalities, measuring customer response to programs and prices associated with REV markets, and determining the most effective implementation of DER.

The Companies are not able to predict the outcome of the REV proceeding or its impact.

Rate Plans

Investor-owned utilities in the United States provide service to customers according to the terms of tariffs approved by the appropriate state utility regulator. The tariffs include schedules of rates for service that limit the rates charged by the utilities to amounts that recover from their customers costs approved by the regulator, including capital costs, of providing service to customers as defined by the tariff. The tariffs implement rate plans adopted by state utility regulators in rate orders issued at the conclusion of rate proceedings. The utilities’ earnings depend on the limits on rates authorized in their rate plans and their ability to operate their businesses in a manner consistent with such rate plans.

The utilities’ rate plans cover specified periods, but rates determined pursuant to a plan generally continue in effect until a new rate plan is approved by the state utility regulator. In New York, either the utility or the NYSPSC can commence a proceeding for a new rate plan, and a new rate plan filed by the utility will generally take effect automatically in approximately 11 months unless prior to such time the NYSPSC approves a rate plan.

In each rate proceeding, rates are determined by the state utility regulator following the submission by the utility of testimony and supporting information, which are subject to review by the staff of the regulator. Other parties with an interest in the proceeding can also review the utility’s proposal and become involved in the rate proceeding. The review process is overseen by an Administrative Law Judge. After an Administrative Law Judge issues a recommended decision, that generally considers the interests of the utility, the regulatory staff, other parties, and legal requisites, the regulator will issue a rate order. The utility and the regulator’s staff and interested parties may enter jointly into a proposed settlement agreement prior to the completion of this administrative process, in which case the agreement could be approved by the regulator with or without modification.

For each rate plan, the revenues needed to provide the utility a return on invested capital is determined by multiplying the utilities’ forecasted rate base by the pre-tax weighted average cost of capital determined in the rate plan. In general, rate base is the sum of the utility’s net plant and working capital less deferred taxes. The NYSPSC uses a forecast of the average rate base for the year that new rates would be in effect (“rate year”). The NJBPU and the PAPUC use the rate base balances that would exist at the beginning of the rate year. The capital structure used in the weighted average cost of capital is determined using actual and forecast data for the same time periods as rate base. The costs of long-term debt, customer deposits and the allowed return on common equity represent a combination of actual and forecast financing information. The allowed return on common equity is determined by each state’s respective utility regulator. The NYSPSC’s current methodology for determining the allowed return on common equity assigns a one-third weight to an estimate determined from a capital asset pricing model applied to a peer group of utility companies and a two-thirds weight to an estimate determined from a dividend discount model using stock prices and dividend forecasts for a peer group of utility companies. Both methodologies employ market measurements of equity capital to estimate returns rather than the accounting measurements to which such estimates are applied in setting rates.

Pursuant to the Utilities’ rate plans, there generally can be no change to the rates charged to customers during the respective terms of the rate plans other than specified adjustments provided for in the rate plans.

For information about the Utilities’ rate plans see Note B to the financial statements in Item 8 (which information is incorporated by reference herein).

Liability for Service Interruptions and Other Non-rate Conditions of Service

The tariff provisions under which CECONY provides electric, gas and steam service limit the company’s liability to pay for damages resulting from service interruptions to circumstances resulting from its gross negligence or willful misconduct.

CECONY’s tariff for electric service also provides for reimbursement to electric customers for spoilage losses resulting from service interruptions in certain circumstances. In general, the company is obligated to reimburse affected residential and commercial customers for food spoilage of up to $450 and $9,000, respectively, and reimburse affected residential customers for prescription medicine spoilage losses without limitation on amount per claim. The company’s maximum aggregate liability for such reimbursement for an incident is $15 million. The company is not required to provide reimbursement to electric customers for outages attributable to generation or transmission system facilities or events beyond its control, such as storms, provided the company makes reasonable efforts to restore service as soon as practicable.

In June 2013, a commission established by the Governor of New York issued its final report on utility storm preparation and


						CON EDISON ANNUAL REPORT 2014		13

response. The commission made recommendations regarding, among other things, preparation and response to flooding; estimation of customer restoration times; reliability of website outage maps; coordination with local governments and providers of other utility services; availability and allocation of staffing and other resources (including the utility industry’s mutual aid process); and communications with affected communities and local officials. The commission’s report also addressed the Long Island Power Authority, energy efficiency programs, utility infrastructure investment and regulatory deficiencies.

In August 2013, the NYSPSC approved emergency response plans submitted by the Utilities, subject to certain modifications. Pursuant to the New York Public Service Law, as amended in 2013 (see “Regulators,” above), each electric utility is required to submit to the NYSPSC annually a plan for the reasonably prompt restoration of service in the case of widespread outages in the utility’s service territory due to storms or other events beyond the control of the utility. If, after evidentiary hearings or other investigatory proceedings, the NYSPSC finds that the utility failed to implement its plan reasonably, the NYSPSC may deny recovery of any part of the service restoration costs caused by such failure.

In November 2013, the NYSPSC adopted statewide policies pursuant to which the Utilities are required to provide credits to customers who are without electric service for more than three days; adjust rate plan revenue targets so the credits would not be recovered pursuant to revenue decoupling mechanisms; and temporarily suspend collection-related activities and service terminations for such customers (or, if the NYSPSC determines, to all residential customers in a designated area and certain other customers). The credit to a customer would equal the portion of the monthly customer charge attributable to the period the customer was without service. If an extraordinary event occurs, the NYSPSC may direct New York gas utilities to implement the same policies.

In December 2013, the NYSPSC approved a scorecard for use as a guide in assessing electric utility performance in restoring electric service during outages that result from a major storm event, to assist in holding the utilities accountable to certain performance levels, and to guide utilities as to the NYSPSC’s expectations for their restoration efforts. The order indicated that the scorecard, which could also be applied by the NYSPSC for other outages or actions, was developed to work with the penalty and emergency response plan provisions of the New York Public Service Law, as amended in 2013 (see “Regulators,” above). The scorecard includes performance metrics in categories for preparation, operations response and communications. Within 30 days of the completion of customer restoration, electric utilities are required to provide data for the scorecard. The NYSPSC staff would use the data to assess performance against the metrics and determine a score for each such event for each electric utility.

Generic Proceedings

The NYSPSC from time to time conducts “generic” proceedings to consider issues relating to all electric and gas utilities operating in New York State. Pending proceedings include the REV proceeding, discussed above, and proceedings relating to utilities exiting the service of selling electric energy and gas at retail (including an examination of utilities’ existing responsibility to act as provider of last resort); the utilities’ vision for the “smart grid”; utility staffing levels; and the implementation of energy efficiency and renewable energy programs and consumer protections. The Utilities are typically active participants in such proceedings.

Federal Utility Regulation

The Federal Energy Regulatory Commission (FERC), among other things, regulates the transmission and wholesale sales of electricity in interstate commerce and the transmission and sale of natural gas for resale in interstate commerce. In addition, the FERC has the authority to impose penalties, which could be substantial, including penalties for the violation of reliability and cyber security rules. Certain activities of the Utilities and the competitive energy businesses are subject to the jurisdiction of the FERC. The Utilities are subject to regulation by the FERC with respect to electric transmission rates and to regulation by the NYSPSC with respect to electric and gas retail commodity sales and local delivery service. As a matter of practice, the NYSPSC has approved delivery service rates that include both distribution and transmission costs. FERC approval is being sought to recover costs for certain transmission projects. See “Con Edison Transmission,” below

New York Independent System Operator (NYISO)

The NYISO is a not-for-profit organization that controls and operates most of the electric transmission facilities in New York State, including those of the Utilities, as an integrated system and administers wholesale markets for electricity in New York State. In addition to operating the state’s high voltage grid, the NYISO administers the energy, ancillary services and capacity markets. The New York State Reliability Council (NYSRC) promulgates reliability standards subject to FERC oversight. Pursuant to a requirement that is set annually by the NYSRC, the NYISO requires that entities supplying electricity to customers in New York State have generating capacity (owned, procured through the NYISO capacity markets or contracted for) in an amount equal to the peak demand of their customers plus the applicable reserve margin. In addition, the NYISO has determined that entities that serve customers in New York City must have enough capacity that is electrically located in New York City to cover a substantial percentage (currently 85 percent; 83.5 percent effective May 2015) of the peak demands of their New York City customers. These


14		CON EDISON ANNUAL REPORT 2014

requirements apply both to regulated utilities such as CECONY and O&R for the customers they supply under regulated tariffs and to companies such as Con Edison Solutions that supply customers on market terms. To address the possibility of a disruption due to the unavailability of gas, generating units located in New York City that are capable of using either gas or oil as fuel may be required to use oil as fuel for certain periods and new generating units are required to have dual fuel capability. RECO, O&R’s New Jersey subsidiary, provides electric service in an area that has a different independent system operator – PJM Interconnection LLC (PJM). See “CECONY – Electric Operations – Electric Supply” and “O&R – Electric Operations – Electric Supply,” below.

New York Energy Highway

In October 2012, the Energy Highway Task Force appointed by the Governor of New York issued its Blueprint containing recommendations to modernize New York’s energy systems. The recommended actions included electric transmission construction and upgrades to electric and natural gas infrastructure. In November 2012, the NYSPSC established a proceeding to review specific proposals from utilities and private developers for new electric transmission lines and upgrades to existing facilities that will address transmission congestion between upstate and downstate. See “Con Edison Transmission,” below.

Competition

Distributed generation, such as solar energy production facilities, fuel cells and micro-turbines, provide alternative sources of energy for the Utilities’ electric delivery customers, as does oil for the Utilities’ gas delivery customers. Other distributed energy resources, such as demand reduction and energy efficiency programs, also provide alternatives for the Utilities’ delivery customers. In its ongoing REV proceeding, the NYSPSC is considering the extent to which New York electric distribution utilities and their affiliates will be permitted to compete with other providers of distributed energy resources. See “Reforming the Energy Vision Proceeding” above. At December 31, 2014, there were 4,200 and 1,953 distributed generation projects interconnected with CECONY and O&R, respectively, with aggregate capacities as shown on the following table:


	CECONY					O&R
Technology	Total MW		%			Total MW		%
Internal-combustion engines		101		46			25		46
Photovoltaic solar		58		26			28		52
Gas turbines		40		18			-		-
Micro turbines		9		5			1		2
Fuel cells		8		4			-		-
Steam turbines		3		1			-		-
Total Distribution-level distributed generation		219		100	%		54		100	%

The Utilities do not consider it reasonably likely that another company would be authorized to provide utility delivery service of electricity, natural gas or steam where the company already provides service. Any such other company would need to obtain NYSPSC consent, satisfy applicable local requirements, install facilities to provide the service, meet applicable services standards, and charge customers comparable taxes and other fees and costs imposed on the service. A new delivery company would also be subject to extensive ongoing regulation by the NYSPSC. See “Utility Regulation – State Utility Regulation – Regulators”.

The competitive energy businesses participate in competitive energy supply and services businesses and renewable and energy infrastructure projects that are subject to different risks than those found in the businesses of the Utilities.

The Utilities

CECONY

CECONY, incorporated in New York State in 1884, is a subsidiary of Con Edison and has no significant subsidiaries of its own. Its principal business segments are its regulated electric, gas and steam businesses.

For a discussion of the company’s operating revenues and operating income for each segment, see “Results of Operations” in Item 7. For additional information about the segments, see Note N to the financial statements in Item 8.

Electric Operations

Electric Facilities

CECONY’s capitalized costs for utility plant, net of accumulated depreciation, for distribution facilities were $15,531 million and $14,496 million at December 31, 2014 and 2013, respectively. For its transmission facilities, the costs for utility plant, net of accumulated depreciation, were $2,744 million and $2,597 million at December 31, 2014 and 2013, respectively, and for its portion of the steam-electric generation facilities, the costs for utility plant, net of accumulated depreciation, were $451 million and $452 million, at December 31, 2014 and 2013, respectively.


						CON EDISON ANNUAL REPORT 2014		15

Distribution Facilities. CECONY owns 62 area distribution substations and various distribution facilities located throughout New York City and Westchester County. At December 31, 2014, the company’s distribution system had a transformer capacity of 29,474 MVA, with 36,934 miles of overhead distribution lines and 98,327 miles of underground distribution lines. The underground distribution lines represent the single longest underground electric delivery system in the United States.

Transmission Facilities. The company’s transmission facilities are located in New York City and Westchester, Orange, Rockland, Putnam and Dutchess counties in New York State. At December 31, 2014, CECONY owned or jointly owned 438 miles of overhead circuits operating at 138, 230, 345 and 500 kV and 749 miles of underground circuits operating at 69, 138 and 345 kV. The company’s 39 transmission substations and 62 area stations are supplied by circuits operated at 69 kV and above. In 2013, the NYSPSC approved transmission projects to address, among other things, reliability concerns associated with the potential closure of the Indian Point Energy Center (which is owned by Entergy Corporation subsidiaries). See “CECONY – Electric Operations – Electric Supply” and “Con Edison Transmission,” below.

CECONY’s transmission facilities interconnect with those of National Grid, Central Hudson Gas & Electric Corporation, O&R, New York State Electric & Gas (NYSEG), Connecticut Light & Power Company, Long Island Power Authority, NYPA and Public Service Electric and Gas Company.

Generating Facilities. CECONY’s electric generating facilities consist of plants located in Manhattan with an aggregate capacity of 705 MW. The company expects to have sufficient amounts of gas and fuel oil available in 2015 for use in these facilities.

Electric Sales and Deliveries

CECONY delivers electricity to its full-service customers who purchase electricity from the company. The company also delivers electricity to its customers who choose to purchase electricity from other energy suppliers (energy choice program). In addition, the company delivers electricity to state and municipal customers of NYPA and economic development customers of municipal electric agencies.

The company charges all customers in its service area for the delivery of electricity. The company generally recovers, on a current basis, the cost of the electricity that it buys and then sells to its full-service customers. It does not make any margin or profit on the electricity it sells. CECONY’s electric revenues are subject to a revenue decoupling mechanism. As a result, its electric delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. CECONY’s electric sales and deliveries for the last five years were:


	Year Ended December 31,
	2010		2011		2012		2013		2014
Electric Energy Delivered (millions of kWhs)
CECONY full service customers		24,142		22,622		20,622		20,118		19,757
Delivery service for energy choice customers		23,098		24,234		25,990		26,574		26,221
Delivery service to NYPA customers and others		10,834		10,408		10,267		10,226		10,325
Delivery service for municipal agencies		619		562		322		-		-
Total Deliveries in Franchise Area		58,693		57,826		57,201		56,918		56,303
Electric Energy Delivered ($ in millions)
CECONY full service customers	$	5,546	$	5,237	$	4,731	$	4,799	$	5,023
Delivery service for energy choice customers		2,123		2,354		2,750		2,683		2,646
Delivery service to NYPA customers and others		516		555		596		602		625
Delivery service for municipal agencies		22		22		10		-		-
Other operating revenues		169		60		89		47		143
Total Deliveries in Franchise Area	$	8,376	$	8,228	$	8,176	$	8,131	$	8,437
Average Revenue per kWh Sold (Cents)(a)
Residential		25.8		25.6		25.6		27.0		28.9
Commercial and Industrial		20.4		20.7		20.0		20.6		22.1

(a)	Includes Municipal Agency sales.


16		CON EDISON ANNUAL REPORT 2014

For further discussion of the company’s electric operating revenues and its electric results, see “Results of Operations” in Item 7. For additional segment information, see Note N to the financial statements in Item 8.

Electric Peak Demand

The electric peak demand in CECONY’s service area generally occurs during the summer air conditioning season. The weather during the summer of 2014 was cooler than design conditions. CECONY’s 2014 service area peak demand was 12,198 MW, which occurred on September 2, 2014. The 2014 peak demand included an estimated 4,937 MW for CECONY’s full-service customers, 5,435 MW for customers participating in its electric energy choice program and 1,825 MW for NYPA’s electric commodity customers and municipal electric agency customers. “Design weather” for the electric system is a standard to which the actual peak demand is adjusted for evaluation and planning purposes. Since the NYISO can invoke demand reduction programs under specific circumstances, design conditions do not include these programs’ potential impact. However, the CECONY forecasted peak demand at design conditions does include the impact of other demand reduction programs. The company estimates that, under design weather conditions, the 2015 service area peak demand will be 13,775 MW, including an estimated 5,750 MW for its full-service customers, 5,960 MW for its electric energy choice customers and 2,065 MW for NYPA’s customers and municipal electric agency customers. The company forecasts average annual growth in electric peak demand in its service area at design conditions over the next five years to be approximately 0.9 percent per year.

Electric Supply

Most of the electricity sold by CECONY to its full-service customers in 2014 was purchased under firm power contracts or through the wholesale electricity market administered by the NYISO. The company expects that these resources will again be adequate to meet the requirements of its customers in 2015. The company plans to meet its continuing obligation to supply electricity to its customers through a combination of electricity purchased under contracts, purchased through the NYISO’s wholesale electricity market, or generated from its electricity generating facilities. For information about the company’s contracts for approximately 2,029 MW of electric generating capacity, see Notes I and O to the financial statements in Item 8. To reduce the volatility of its customers’ electric energy costs, the company has contracts to purchase electric energy and enters into derivative transactions to hedge the costs of a portion of its expected purchases under these contracts and through the NYISO’s wholesale electricity market.

CECONY owns generating stations in New York City associated primarily with its steam system. As of December 31, 2014, the generating stations had a combined electric capacity of approximately 705 MW, based on 2014 summer test ratings. For information about electric generating capacity owned by the company, see “Electric Operations – Electric Facilities – Generating Facilities”, above.

In general, the Utilities recover their purchased power costs, including the cost of hedging purchase prices, pursuant to rate provisions approved by the state public utility regulatory authority having jurisdiction. See “Financial and Commodity Market Risks – Commodity Price Risk,” in Item 7 and “Recoverable Energy Costs” in Note A to the financial statements in Item 8. From time to time, certain parties have petitioned the NYSPSC to review these provisions, the elimination of which could have a material adverse effect on the Companies’ financial position, results of operations or liquidity.

CECONY monitors the adequacy of the electric capacity resources and related developments in its service area, and works with other parties on long-term resource adequacy issues within the framework of the NYISO. In addition, the NYISO has adopted reliability rules that include obligations on transmission owners (such as CECONY) to construct facilities that may be needed for system reliability if the market does not solve a reliability need identified by the NYISO. See “New York Independent System Operator” above. In a July 1998 order, the NYSPSC indicated that it “agree(s) generally that CECONY need not plan on constructing new generation as the competitive market develops,” but considers “overly broad” and did not adopt CECONY’s request for a declaration that, solely with respect to providing generating capacity, it will no longer be required to engage in long-range planning to meet potential demand and, in particular, that it will no longer have the obligation to construct new generating facilities, regardless of the market price of capacity.

In November 2012, the NYSPSC directed CECONY to work with NYPA to develop a contingency plan to address reliability concerns associated with the potential closure by the end of 2015 of the nuclear power plants at the Indian Point Energy Center (which is owned by Entergy Corporation subsidiaries). In February 2013, CECONY and NYPA submitted their plan, and, in October 2013, the NYSPSC approved three transmission projects and several energy efficiency, demand reduction and combined heat and power programs to address concerns associated with the potential closure. The transmission projects, which also address transmission congestion between upstate and downstate and make available more generation from Staten Island, are scheduled to be placed into service by 2016. See “Con Edison Transmission” below.

In February 2014, CECONY submitted to the NYSPSC the implementation plan for the energy efficiency, demand reduction and combined heat and power programs, which are


						CON EDISON ANNUAL REPORT 2014		17

estimated to cost up to $285 million. In April 2014, the NYSPSC authorized CECONY to recover its program costs, the majority of which are expected to be incurred from 2014 through 2016, over a ten-year period through a surcharge billed to its electric delivery customers.

In 2009, the then Governor of New York announced a new goal of meeting 45 percent of the State’s electricity needs with energy efficiency or renewable resources by 2015. The goal is to be achieved by reducing electricity consumption by 15 percent, and having 30 percent of the electricity used in New York provided by renewable resources. The New York State Energy Research and Development Authority (NYSERDA) reported that as of the second quarter of 2014, the State had achieved 91 percent of its natural gas efficiency goal and 77 percent of its electric efficiency goal and that the State is unlikely to achieve the 30 percent renewable electricity goal. In March 2014, NYSERDA reported as of the fourth quarter of 2013 it had achieved 49 percent of its renewable electricity goal, and expects to achieve 86 percent or less of the 30 percent renewable electricity goal by the end of 2015. For information about the Utilities’ participation in New York State’s clean energy programs, see “Environmental Matters – Climate Change,” below.

Gas Operations

Gas Facilities

CECONY’s capitalized costs for utility plant, net of accumulated depreciation, for gas facilities, which are primarily distribution facilities, were $4,530 million and $4,013 million at December 31, 2014 and 2013, respectively.

Natural gas is delivered by pipeline to CECONY at various points in or near its service territory and is distributed to customers by the company through an estimated 4,330 miles of mains and 369,339 service lines. The company owns a natural gas liquefaction facility and storage tank at its Astoria property in Queens, New York. The plant can store 1,062 MDt of which a maximum of about 250 MDt can be withdrawn per day. The company has about 1,226 MDt of additional natural gas storage capacity at a field in upstate New York, owned and operated by Honeoye Storage Corporation, a corporation 28.8 percent owned by CECONY and 71.2 percent owned by Con Edison Development.

Gas Sales and Deliveries

The company generally recovers the cost of the gas that it buys and then sells to its full-service customers. It does not make any margin or profit on the gas it sells. CECONY’s gas revenues are subject to a weather normalization clause and a revenue decoupling mechanism. As a result, its gas delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. CECONY’s gas sales and deliveries for the last five years were:


	Year Ended December 31,
	2010		2011		2012		2013		2014
Gas Delivered (MDt)
Firm Sales
Full service		63,592		64,696		57,595		67,007		75,630
Firm transportation		51,859		54,291		52,860		61,139		68,731
Total Firm Sales		115,451		118,987		110,455		128,146		144,361
Interruptible Sales(a)		8,521		10,035		5,961		10,900		10,498
Total Gas Delivered to CECONY Customers		123,972		129,022		116,416		139,046		154,859
Transportation of customer-owned gas
NYPA		24,890		34,893		48,107		48,682		47,548
Other (mainly generating plants)		99,666		97,163		108,086		87,379		105,012
Off-System Sales		7		97		730		4,638		15
Total Sales		248,535		261,175		273,339		279,745		307,434
(a) Includes 6,057, 5,362, 563, 3,801 and 3,385 MDt for 2014, 2013, 2012, 2011 and 2010, respectively, which are also reflected in firm transportation and other.


18		CON EDISON ANNUAL REPORT 2014


	Year Ended December 31,
	2010			2011			2012		2013			2014
Gas Delivered ($ in millions)
Firm Sales
Full service	$	1,099		$	1,048		$	889	$	1,059		$	1,141
Firm transportation		347			356			380		414			453
Total Firm Sales		1,446			1,404			1,269		1,473			1,594
Interruptible Sales		72			74			39		69			91
Total Gas Delivered to CECONY Customers		1,518			1,478			1,308		1,542			1,685
Transportation of customer-owned gas
NYPA		2			2			2		2			2
Other (mainly generating plants and Interruptible transportation)		71			71			68		71			70
Off-System Sales		-			-			5		18			-
Other operating revenues (mainly regulatory amortizations)		(50	)		(30	)		32		(17	)		(36	)
Total Sales	$	1,541		$	1,521		$	1,415	$	1,616		$	1,721
Average Revenue per Dt Sold
Residential	$	19.31		$	18.45		$	18.14	$	18.52		$	16.76
General	$	14.28		$	12.96		$	11.68	$	12.05		$	12.38

For further discussion of the company’s gas operating revenues and its gas results, see “Results of Operations” in Item 7. For additional segment information, see Note N to the financial statements in Item 8.

Gas Peak Demand

The gas peak demand for firm sales customers in CECONY’s service area occurs during the winter heating season. The peak day demand during the winter 2014/2015 (through February 2, 2015) occurred on January 7, 2015 when the demand reached 1,118 MDt. The 2014/2015 peak demand included 574 MDt for CECONY’s full-service customers and 544 MDt for customers participating in its gas energy choice program. “Design weather” for the gas system is a standard to which the actual peak demand is adjusted for evaluation and planning purposes. The company estimates that, under design weather conditions, the 2015/2016 service area peak demand will be 1,408 MDt, including an estimated 729 MDt for its full-service customers and 679 MDt for its gas energy choice customers. The company forecasts average annual growth of the peak gas demand over the next five years at design conditions to be approximately 2.8 percent in its service area. The forecasted peak demand at design conditions does not include gas used by interruptible gas customers including generating stations (electricity and steam).

Gas Supply

CECONY and O&R have combined their gas requirements, and contracts to meet those requirements, into a single portfolio. The combined portfolio is administered by, and related management services are provided by, CECONY (for itself and as agent for O&R) and costs are allocated between the Utilities in accordance with provisions approved by the NYSPSC. See Note S to the financial statements in Item 8.

Charges from suppliers for the firm purchase of gas, which are based on formulas or indexes or are subject to negotiation, are generally designed to approximate market prices. The gas supply contracts are for various terms extending to 2016. The Utilities have contracts with interstate pipeline companies for the purchase of firm transportation from upstream points where gas has been purchased to the Utilities’ distribution systems, and for upstream storage services. Charges under these transportation and storage contracts are approved by the FERC. Such contracts are for various terms extending to 2027. The Utilities are required to pay certain fixed charges under the supply, transportation and storage contracts whether or not the contracted capacity is actually used. These fixed charges amounted to approximately $286 million in 2014, including $246 million for CECONY. See “Contractual Obligations” below. In addition, the Utilities purchase gas on the spot market and contract for interruptible gas transportation. See “Recoverable Energy Costs” in Note A to the financial statements in Item 8.

Steam Operations

Steam Facilities

CECONY’s capitalized costs for utility plant, net of accumulated depreciation, for its portion of the steam-electric generation facilities were $1,795 million and $1,790 million at December 31, 2014 and 2013, respectively.

CECONY generates steam at one steam-electric generating station and five steam-only generating stations and distributes steam to its customers through approximately 105 miles of transmission, distribution, and service piping.


						CON EDISON ANNUAL REPORT 2014		19

Steam Sales and Deliveries

CECONY’s steam sales and deliveries for the last five years were:


	Year Ended December 31,
	2010		2011			2012			2013			2014
Steam Sold (MMlb)
General		515		519			425			547			594
Apartment house		5,748		5,779			5,240			6,181			6,574
Annual power		16,767		16,024			14,076			15,195			15,848
Total Steam Delivered to CECONY Customers		23,030		22,322			19,741			21,923			23,016
Steam Sold ($ in millions)
General	$	25	$	28		$	25		$	31		$	30
Apartment house		158		175			158			187			180
Annual power		457		487			429			491			469
Other operating revenues		16		(7	)		(16	)		(26	)		(51	)
Total Steam Delivered to CECONY Customers	$	656	$	683		$	596		$	683		$	628
Average Revenue per MMlb Sold	$	27.79	$	30.91		$	31.00		$	32.34		$	29.50

For further discussion of the company’s steam operating revenues and its steam results, see “Results of Operations” in Item 7. For additional segment information, see Note N to the financial statements in Item 8.

Steam Peak Demand and Capacity

Demand for steam in CECONY’s service area peaks during the winter heating season. The one-hour peak demand during the winter of 2014/2015 (through February 2, 2015) occurred on January 8, 2015 when the demand reached 8.4 MMlb per hour. “Design weather” for the steam system is a standard to which the actual peak demand is adjusted for evaluation and planning purposes. The company’s estimate for the winter of 2015/2016 peak demand of its steam customers is about 9.0 MMlb per hour under design conditions. The company forecasts average annual decrease in steam peak demand in its service area at design conditions over the next five years to be approximately 0.8 percent.

On December 31, 2014, the steam system was capable of delivering approximately 11.6 MMlb of steam per hour, and CECONY estimates that the system will have the same capability in the 2015/2016 winter.

Steam Supply

Forty-two percent of the steam produced by CECONY in 2014 was supplied by the company’s steam-only generating assets; 41 percent was produced by the company’s steam-electric generating assets, where steam and electricity are primarily cogenerated; and 17 percent was purchased under an agreement with Brooklyn Navy Yard Cogeneration Partners L.P.

O&R

Electric Operations

Electric Facilities

O&R’s capitalized costs for utility plant, net of accumulated depreciation, for distribution facilities were $830 million and $781 million at December 31, 2014 and 2013, respectively. For its transmission facilities, the costs for utility plant, net of accumulated depreciation, were $212 million and $179 million at December 31, 2014 and 2013, respectively.

O&R, RECO and Pike, own, in whole or in part, transmission and distribution facilities which include 572 circuit miles of transmission lines, 14 transmission substations, 62 distribution substations, 86,379 in-service line transformers, 3,991 pole miles of overhead distribution lines and 1,869 miles of underground distribution lines. O&R’s transmission system is part of the NYISO system except that portions of RECO’s system are located within the transmission area controlled by PJM.


20		CON EDISON ANNUAL REPORT 2014

Electric Sales and Deliveries

O&R delivers electricity to its full-service customers who purchase electricity from the company. The company also delivers electricity to its customers who purchase electricity from other suppliers through the company’s energy choice program.

The company charges all customers in its service area for the delivery of electricity. O&R generally recovers, on a current basis, the cost of the electricity that it buys and then sells to its full-service customers. It does not make any margin or profit on the electricity it sells. O&R’s New York electric revenues (which accounted for 77.2 percent of O&R’s electric revenues in 2014) are subject to a revenue decoupling mechanism. As a result, O&R’s New York electric delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s electric sales in New Jersey and Pennsylvania are not subject to a decoupling mechanism. O&R’s electric sales and deliveries for the last five years were:


	Year Ended December 31,
	2010			2011			2012		2013		2014
Electric Energy Delivered (millions of kWhs)
Total deliveries to O&R full service customers		3,498			3,029			2,691		2,555		2,429
Delivery service for energy choice customers		2,330			2,760			3,040		3,166		3,240
Total Deliveries In Franchise Area		5,828			5,789			5,731		5,721		5,669
Electric Energy Delivered ($ in millions)
Total deliveries to O&R full service customers	$	570		$	486		$	405	$	427	$	455
Delivery service for energy choice customers		132			157			178		192		207
Other operating revenues		(10	)		(2	)		9		9		18
Total Deliveries In Franchise Area	$	692		$	641		$	592	$	628	$	680
Average Revenue Per kWh Sold (Cents)
Residential		18.3			18.0			16.7		18.1		20.3
Commercial and Industrial		14.1			13.7			13.0		14.8		16.8

Electric Peak Demand

The electric peak demand in O&R’s service area occurs during the summer air conditioning season. The weather during the summer of 2014 was cooler than design conditions. O&R’s 2014 service area peak demand was 1,370 MW, which occurred on July 2, 2014. The 2014 peak demand included an estimated 697 MW for O&R’s full-service customers and 673 MW for customers participating in its electric energy choice program. “Design weather” for the electric system is a standard to which the actual peak demand is adjusted for evaluation and planning purposes. Since the NYISO can invoke demand reduction programs under specific circumstances, design conditions do not include these programs’ potential impact. However, the O&R forecasted peak demand at design conditions does include the impact of permanent demand reduction programs. The company estimates that, under design weather conditions, the 2015 service area peak demand will be 1,645 MW, including an estimated 819 MW for its full-service customers and 826 MW for its electric energy choice customers. The company forecasts average annual growth of the peak electric demand in the company’s service area over the next five years at design conditions to be approximately 0.9 percent per year.

Electric Supply

The electricity O&R sold to its full-service customers in 2014 was purchased under firm power contracts or through the wholesale electricity markets administered by the NYISO and PJM. The company expects that these resources will again be adequate to meet the requirements of its customers in 2015. O&R does not own any electric generating capacity. The company plans to meet its continuing obligation to supply electricity to its customers through a combination of electricity purchased under contracts or purchased through the NYISO or PJM’s wholesale electricity market. To reduce the volatility of its customers’ electric energy costs, the company has contracts to purchase electric energy and enters into derivative transactions to hedge the costs of a portion of its expected purchases under these contracts and through the NYISO and PJM’s wholesale electricity market. For information about the company’s contracts, see Note O to the financial statements in Item 8.


						CON EDISON ANNUAL REPORT 2014		21

Gas Operations

Gas Facilities

O&R’s capitalized costs for utility plant, net of accumulated depreciation for gas facilities, which are primarily distribution facilities, were $476 million and $456 million at December 31, 2014 and 2013, respectively. O&R and Pike own their gas distribution systems and O&R owns a gas transmission system. Natural gas is delivered by pipeline to O&R at various points in or near its service territory and is distributed to customers by the company through an estimated 1,867 miles of mains and 105,077 service lines.

Gas Sales and Deliveries

O&R generally recovers the cost of the gas that it buys and then sells to its full-service customers. It does not make any margin or profit on the gas it sells. O&R’s gas revenues are subject to a weather normalization clause. O&R’s New York gas revenues (which accounted for substantially all of O&R’s gas revenues in 2014) are subject to a revenue decoupling mechanism. As a result, its gas delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s gas sales and deliveries for the last five years were:


	Year Ended December 31,
	2010		2011		2012		2013		2014
Gas Delivered (MDt)
Firm Sales
Full service		8,772		8,384		7,539		8,808		9,529
Firm transportation		10,692		10,823		10,505		12,062		12,592
Total Firm Sales		19,464		19,207		18,044		20,870		22,121
Interruptible Sales		4,497		4,184		4,326		4,118		4,216
Total Gas Delivered to O&R Customers		23,961		23,391		22,370		24,988		26,337
Transportation of customer-owned gas
Sales for resale		840		864		793		885		945
Sales to electric generating stations		19		24		15		19		70
Off-System Sales		1		-		-		-		3
Total Sales		24,821		24,279		23,178		25,892		27,355
Gas Delivered ($ in millions)
Firm Sales
Full service	$	131	$	122	$	103	$	115	$	121
Firm transportation		65		71		76		77		75
Total Firm Sales		196		193		179		192		196
Interruptible Sales		9		4		4		3		2
Total Gas Delivered to O&R Customers		205		197		183		195		198
Transportation of customer-owned gas
Sales to electric generating stations		-		1		-		-		1
Other operating revenues		13		16		20		10		13
Total Sales	$	218	$	214	$	203	$	205	$	212
Average Revenue Per Dt Sold
Residential	$	15.20	$	14.84	$	14.01	$	13.31	$	13.01
General	$	13.64	$	13.20	$	11.99	$	11.53	$	11.30

Gas Peak Demand

The gas peak demand for firm sales customers in O&R’s service area occurs during the winter heating season. The peak day demand during the winter 2014/2015 (through February 2, 2015) occurred on January 7, 2015 when the demand reached 191 MDt. The 2014/2015 peak day demand included 86 MDt for O&R’s full-service customers and 105 MDt for customers participating in its gas energy choice program. “Design weather” for the gas system is a standard to which the actual peak demand is adjusted for evaluation and planning purposes. The company estimates that, under design weather conditions,


22		CON EDISON ANNUAL REPORT 2014

the 2015/2016 service area peak day demand will be 218 MDt, including an estimated 100 MDt for its full-service customers and 118 MDt for its gas energy choice customers. The company forecasts average annual growth of the peak gas demand over the next five years at design conditions to be approximately 0.6 percent in its service area. The forecasted peak day demand at design conditions does not include gas used by interruptible gas customers including electricity generating stations.

Gas Supply

O&R and CECONY have combined their gas requirements and purchase contracts to meet those requirements into a single portfolio. See “CECONY – Gas Operations – Gas Supply” above.

Competitive Energy Businesses

Con Edison Solutions

Con Edison Solutions primarily sells electricity to industrial, commercial and governmental customers in the northeastern United States and Texas. It also sells electricity to residential and small commercial customers in the northeastern United States. Con Edison Solutions does not sell electricity to the Utilities. Con Edison Solutions does sell electricity to customers who are provided delivery service by the Utilities. It also provides energy efficiency services, procurement and management services to companies and governmental entities throughout most of the United States.

Con Edison Solutions was reported by DNV GL in September 2014 to be the 14th largest non-residential retail electricity provider in the United States. The company sells to retail aggregation entities in Massachusetts, Illinois and New Jersey as well as to individual residential and small commercial (mass market) customers in the northeastern United States. At December 31, 2014, it served approximately 123,000 customers, excluding approximately 154,000 served under the five aggregation agreements. Con Edison Solutions’ electricity sales for the last five years were:


	2010		2011		2012		2013		2014
Retail electric volumes sold (millions of kWhs)		15,993		15,725		13,840		12,167		11,871
Number of retail customers accounts:(a)
Industrial and large commercial		40,081		42,983		35,043		35,504		35,305
Mass market		85,191		117,635		119,276		123,813		123,314

(a)	Excludes aggregation agreement customers.

Con Edison Solutions seeks to serve customers in utility service territories that encourage retail competition through transparent pricing, purchase of receivables programs or utility-sponsored customer acquisition programs. The company currently sells electricity in the service territories of 53 utilities in the states of New York, Massachusetts, Connecticut, New Hampshire, Maine, New Jersey, Delaware, Maryland, Illinois, Pennsylvania, Rhode Island, Ohio and Texas, as well as the District of Columbia. In 2014, approximately 29 percent of the sales volumes were in New York, 29 percent in New England, 34 percent in the District of Columbia, Maryland, New Jersey and Pennsylvania and 8 percent in Texas.

The electricity Con Edison Solutions sold to its customers in 2014 was purchased primarily through wholesale electricity markets administered by the NYISO, PJM, Independent System Operator New England and Electric Reliability Council of Texas. The company expects that these resources will again be adequate to meet the requirements of its customers in 2015. Con Edison Energy provides hedging and risk management services to Con Edison Solutions.

Con Edison Solutions also provides energy-efficiency services to government and commercial customers. The services include the design and installation of lighting retrofits, high-efficiency heating, ventilating and air conditioning equipment and other energy saving technologies. The company is compensated for its services based primarily on the increased energy efficiency of the installed equipment over a multi-year period. Con Edison Solutions has won competitive solicitations for energy savings contracts with the Department of Energy and the Department of Defense, and a shared energy savings contract with the United States Postal Service. The company owns renewable energy projects predominately in Massachusetts and California with an aggregate capacity of 20 MW (AC).

Con Edison Energy

Con Edison Energy provides services to manage the dispatch, fuel requirements and risk management activities for 5,005 MW of generating plants in the northeastern United States owned by unrelated parties and manages energy supply assets leased from others. Among other things, the company also provides wholesale hedging and risk management services to Con Edison Solutions and Con Edison Development. The company, beginning during 2013, no longer engages in the sale of electricity to utilities. The company had sold electricity that it had purchased in wholesale markets to utilities in the northeastern United States, primarily under fixed and indexed price contracts, which they used to supply their full-service customers.


						CON EDISON ANNUAL REPORT 2014		23

Con Edison Development

Con Edison Development develops, owns and operates energy infrastructure. The company focuses its efforts on renewable electric production projects, and at the end of 2014 was the sixth largest owner of operating solar capacity in North America. The output of most of the projects is sold under a long-term power purchase agreement (PPA). The following table provides information about the projects the company owned at December 31, 2014:

Renewable Electric Production Projects

Project Name

Production

Technology

Generating
Capacity(a)

(MWs AC)

PPA Term
(In Years)

Actual/Expected
In-Service Date

Location

(State)

Wholly owned projects

Flemington

Solar

n/a(b)

2011

New Jersey

Frenchtown I, II and III

Solar

n/a(b)

2011-13

New Jersey

PA Solar

Solar

n/a(b)

2012

Pennsylvania

Shrewsbury

Solar

20(b)

2012

Massachusetts

Groveland

Solar

20(b)

2012

Massachusetts

White River 2

Solar

2014

California

Oak Tree Wind

Wind

2014

South Dakota

Projects of less than 3 MW

Solar

Various

Jointly owned projects

Pilesgrove

Solar

n/a(b)

2011

New Jersey

California Solar

Solar

2012-13

California

Mesquite Solar 1

Solar

2013

Arizona

Copper Mountain Solar 2 Phase 1

Solar

2013

Nevada

Copper Mountain Solar 3 (partial)

Solar

2014

Nevada

Broken Bow II

Wind

2014

Nebraska

Texas Solar 4

Solar

2014

Texas

Total MW in Operation

446

Copper Mountain Solar 3 (partial)

Solar

2015

Nevada

Corcoran 2

Solar

2015

California

Atwell West

Solar

2015

California

Copper Mountain Solar 2 Phase 2

Solar

2015

Nevada

Total MW in Construction

105

Total MW, All Projects

551

(a)	Represents Con Edison Development’s ownership interest in the project.

(b)	New Jersey, Pennsylvania and Massachusetts assets have 3-5 year Solar Renewable Energy Credit (SREC) hedges in place.

Con Edison Transmission

In September 2014, Con Edison formed a wholly-owned subsidiary, Con Edison Transmission. In November 2014, Con Edison Transmission, along with affiliates of certain other New York transmission owners, formed New York Transco LLC (NY Transco). NY Transco’s transmission projects are expected to be developed initially by CECONY and other New York transmission owners and then sold to NY Transco, a transaction that is subject to authorizations from the NYSPSC and FERC. In December 2014, CECONY, certain other New York transmission owners and NY Transco made filings with the FERC to establish NY Transco’s transmission rate and authorize the sale of the projects to NY Transco.

NY Transco projects may include three projects ($450 million aggregate estimated cost) the NYSPSC approved in October 2013 in its proceeding to address potential needs that could arise should the Indian Point Energy Center (which is owned by Entergy Corporation subsidiaries) no longer be able to operate. These projects, which are scheduled to be placed into service by Summer 2016, include two projects ($383 million aggregate estimated cost) that CECONY is developing and one project that two other New York transmission owners are developing.

NY Transco’s projects may also include one or more projects proposed on behalf of the NY Transco for consideration by the NYSPSC in its competitive proceeding to select transmission projects that would relieve transmission congestion between upstate and downstate. Depending on the project alternative(s), if any, selected by the NYSPSC, the aggregate estimated costs of the NY Transco projects could range up to approximately $1,200 million. The NY Transco projects, which could be completed in the 2019 to 2021 timeframe, would be developed, at least initially, by New York transmission owners other than CECONY until they are sold to NY Transco.


24		CON EDISON ANNUAL REPORT 2014

Capital Requirements and Resources

Capital Requirements

The following table contains the Companies’ capital requirements for the years 2012 through 2014 and their current estimate of amounts for 2015 through 2017.


	Actual						Estimate
(Millions of Dollars)	2012		2013		2014		2015		2016		2017
Regulated utility construction expenditures(a)
CECONY(b)(c)
Electric	$	1,375	$	1,471	$	1,500	$	1,598	$	1,868	$	1,827
Gas		426		536		549		679		687		808
Steam		108		128		83		98		106		59
Sub-total		1,909		2,135		2,132		2,375		2,661		2,694
O&R
Electric		98		98		105		125		137		132
Gas		39		37		37		37		45		45
Sub-total		137		135		142		162		182		177
Total regulated utility construction expenditures		2,046		2,270		2,274		2,537		2,843		2,871
Competitive energy businesses capital expenditures
Renewable and energy infrastructure projects		489		375		443		370		361		369
Other		3		3		4		5		5		5
Sub-total		492		378		447		375		366		374
Total capital expenditures		2,538		2,648		2,721		2,912		3,209		3,245
Retirement of long-term securities
Con Edison – parent company		1		2		2		2		2		2
CECONY(d)		764		700		475		350		650		-
O&R		3		3		3		143		79		4
Competitive energy businesses		1		1		5		65		-		-
Total retirement of long-term securities		769		706		485		560		731		6
Total capital requirements	$	3,307	$	3,354	$	3,206	$	3,472	$	3,940	$	3,251

(a)	Actuals for 2012-2014 included an aggregate $59 million for one-half of the costs of certain smart electric grid projects for which the company received grants from the U.S. Department of Energy for the other half of the projects’ costs under the American Recovery and Reinvestment Act of 2009.

(b)	CECONY’s capital expenditures for environmental protection facilities and related studies were $218 million $178 million and $194 million in 2014, 2013 and 2012, respectively, and are estimated to be $217 million in 2015.

(c)	Estimates do not include amounts for transmission projects discussed under “Con Edison Transmission,” above or for the energy efficiency, demand reduction and combined heat and power programs discussed under “CECONY – Electric Operations – Electric Supply,” above.

(d)	For 2012, includes $239 million for the May 2012 redemption of all of its preferred stock and $224.6 million of tax-exempt debt which was subject to mandatory tender by bondholders in November 2012.

The Utilities have an ongoing need to make substantial capital investments primarily to maintain the reliability of their electric, gas and steam delivery systems, including programs to strengthen the storm resiliency of their infrastructure and to address the growth in demand for electricity and gas. Estimated capital expenditures for the competitive energy businesses reflect potential investments in renewable generation and energy infrastructure projects and could significantly increase or decrease from the amounts estimated depending on market conditions and opportunities.


						CON EDISON ANNUAL REPORT 2014		25

Contractual Obligations

The following table summarizes the Companies’ material obligations at December 31, 2014 to make payments pursuant to contracts. Long-term debt, capital lease obligations and other long-term liabilities are included on their balance sheets. Operating leases and electricity purchase agreements (for which undiscounted future annual payments are shown) are described in the notes to the financial statements.


	Payments Due by Period
(Millions of Dollars)	Total		1 year or less		Years 2 & 3		Years 4 & 5		After 5 years
Long-term debt (Statement of Capitalization)
CECONY	$	11,236	$	350	$	650	$	1,675	$	8,561
O&R		601		143		83		120		255
Competitive energy businesses and parent		376		67		4		5		300
Interest on long-term debt(a)		9,736		662		1,059		878		7,137
Total long-term debt, including interest		21,949		1,222		1,796		2,678		16,253
Capital lease obligations (Note J)
CECONY		2		1		1		-		-
Total capital lease obligations		2		1		1		-		-
Operating leases (Notes J and Q)
CECONY		112		14		25		22		51
O&R		5		1		1		1		2
Competitive energy businesses		36		3		7		6		20
Total operating leases		153		18		33		29		73
Purchase obligations
Electricity purchase power agreements – Utilities (Note I)
CECONY
Energy(b)		4,908		641		989		243		3,035
Capacity		1,508		252		321		115		820
Total CECONY		6,416		893		1,310		358		3,855
O&R
Energy and Capacity(b)		128		68		60		-		-
Total electricity and purchase power agreements – Utilities		6,544		961		1,370		358		3,855
Natural gas supply, transportation, and storage contracts – Utilities(c)
CECONY
Natural gas supply		147		146		1		-		-
Transportation and storage		1,241		238		435		232		336
Total CECONY		1,388		384		436		232		336
O&R
Natural gas supply		8		8		-		-		-
Transportation and storage		231		44		81		43		63
Total O&R		239		52		81		43		63
Total natural gas supply, transportation and storage contracts		1,627		436		517		275		399
Other purchase obligations(d)
CECONY		3,194		1,484		1,604		78		28
O&R		194		75		113		5		1
Total other purchase obligations		3,388		1,559		1,717		83		29
Competitive energy businesses commodity and service agreements (e)		295		250		40		2		3
Total	$	33,958	$	4,447	$	5,474	$	3,425	$	20,612

(a)	Includes interest on variable rate debt calculated at rates in effect at December 31, 2014.

(b)	Included in these amounts is the cost of minimum quantities of energy that the company is obligated to purchase at both fixed and variable prices.

(c)	Included in these amounts is the cost of minimum quantities of natural gas supply, transportation and storage that the Utilities are obligated to purchase at both fixed and variable prices.

(d)

Amounts shown for other purchase obligations, which reflect capital and operations and maintenance costs incurred by the Utilities in running their day-to-day operations, were derived from the Utilities’ purchasing system as the difference between the amounts authorized and the amounts paid (or vouchered to be paid) for each obligation. For many of these obligations, the Utilities are committed to purchase less than the amount authorized. Payments for the “Other Purchase Obligations” are generally assumed to be made ratably over the term of the obligations. The Utilities believe that unreasonable effort and expense would be involved to enable them to report their “Other Purchase Obligations” in a different manner.

(e)	Amounts represent commitments to purchase minimum quantities of electric energy and capacity, renewable energy certificates, natural gas, natural gas pipeline capacity, energy efficiency services and construction services entered into by Con Edison’s competitive energy businesses.

The Companies’ commitments to make payments in addition to these contractual commitments include their other liabilities reflected in their balance sheets, any funding obligations for their pension and other postretirement benefit plans, financial hedging activities, their collective bargaining agreements and Con Edison’s guarantees of certain obligations of Con Edison Transmission and its competitive energy businesses. See Notes E, F, O and “Guarantees” in Note H to the financial statements in Item 8.


26		CON EDISON ANNUAL REPORT 2014

Capital Resources

Con Edison is a holding company that operates only through its subsidiaries and has no material assets other than its interests in its subsidiaries. Con Edison finances its capital requirements primarily through internally-generated funds and the sale of its securities. Con Edison’s ability to make payments on external borrowings and dividends on its common shares depends on receipt of dividends from its subsidiaries or proceeds from the sale of its securities or its interests in its subsidiaries.

For information about restrictions on the payment of dividends by the Utilities and significant debt covenants, see Note C to the financial statements in Item 8.

For information on the Companies’ commercial paper program and revolving credit agreements with banks, see Note D to the financial statements in Item 8.

The Utilities finance their operations, capital requirements and payment of dividends to Con Edison from internally-generated funds (see “Liquidity and Capital Resources – Cash Flows from Operating Activities” in Item 7), contributions of equity capital from Con Edison, if any, and external borrowings.

The Companies expect to meet their 2015 capital requirements, including for maturing securities, through internally-generated funds and the issuance of between $1,000 million and $1,500 million of long-term debt. Con Edison does not expect to need to issue common equity in 2015 other than through its dividend reinvestment, employee stock purchase and long term incentive plans.

The Companies require access to the capital markets to fund capital requirements that are substantially in excess of available internally-generated funds. See “Capital Requirements,” above. Each of the Companies believes that it will continue to be able to access capital, although capital market conditions may affect the timing and cost of the Companies’ financing activities. The Companies monitor the availability and costs of various forms of capital, and will seek to issue Con Edison common stock and other securities when it is necessary or advantageous to do so. For information about the Companies’ long-term debt and short-term borrowing, see Notes C and D to the financial statements in Item 8.

In 2012, the NYSPSC authorized CECONY, through 2016, to issue up to $3,500 million of debt securities ($2,550 million of which the company had issued as of December 31, 2014). In 2013, the NYSPSC authorized O&R, through 2017, to issue up to $305 million of debt securities (none of which the company had issued as of December 31, 2014). The NYSPSC also authorized CECONY and O&R for such periods to issue up to $2,500 million and $125 million, respectively, of debt securities to refund existing debt securities. At December 31, 2014, the Utilities had not refunded any securities pursuant to this authorization.

Con Edison’s competitive energy businesses have financed their operations and capital requirements primarily with capital contributions and borrowings from Con Edison, internally-generated funds and external borrowings. In April 2013, a Con Edison Development subsidiary issued $219 million aggregate principal amount of 4.78 percent senior notes secured by certain of the company’s California solar electric production projects. In 2014, the company sold a 50 percent interest in the subsidiary. See Note Q to the financial statements in Item 8.

For each of the Companies, the ratio of earnings to fixed charges (SEC basis) for the last five years was:


	Ratio of Earnings to Fixed Charges
	2010		2011		2012		2013			2014
Con Edison		3.3		3.6		3.7		3.0	(a)		3.6
CECONY		3.4		3.8		3.7		3.7			3.8

(a)	Reflects $95 million after-tax charge to earnings relating to Con Edison Development’s LILO transactions. See Note J to the financial statements in Item 8.

For each of the Companies, the common equity ratio for the last five years was:


	Common Equity Ratio (Percent of total capitalization)
	2010		2011		2012		2013		2014
Con Edison		50.4		52.5		54.1		53.9		52.0
CECONY		49.9		52.0		53.6		53.7		50.7

The commercial paper of Con Edison and O&R is rated P-2, A-2 and F2, respectively, by Moody’s, S&P and Fitch. The commercial paper of CECONY is rated P-1, A-2 and F2 by Moody’s, S&P and Fitch, respectively. Con Edison’s long-term credit rating is A3, BBB+ and BBB+ by Moody’s, S&P and Fitch, respectively. The unsecured debt of CECONY is rated A2, A- and A- by Moody’s, S&P and Fitch, respectively. The unsecured debt of O&R is rated A3, A- and A- by Moody’s, S&P and Fitch, respectively. Securities ratings assigned by rating organizations are expressions of opinion and are not recommendations to buy, sell or hold securities. A securities rating is subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating.

CECONY has $636 million of tax-exempt debt for which the interest rates are to be determined pursuant to periodic auctions. Of this amount, $391 million is insured by Ambac Assurance Corporation and $245 million is insured by Syncora Guarantee Inc. (formerly XL Capital Assurance Inc.). Credit rating agencies have withdrawn the ratings of these insurers. Subsequently, there have not been sufficient bids to determine the interest rates pursuant to auctions, and interest rates have


						CON EDISON ANNUAL REPORT 2014		27

been determined by reference to a variable rate index. The weighted average annual interest rate on this tax-exempt debt was 0.13 percent on December 31, 2014. The weighted average interest rate was 0.10 percent, 0.17 percent, and 0.29 percent for the years 2014, 2013 and 2012, respectively. Under CECONY’s current electric, gas and steam rate plans, variations in auction rate debt interest expense are reconciled to the levels set in rates.

Environmental Matters

Climate Change

As indicated by the Intergovernmental Panel on Climate Change, emissions of greenhouse gases (GHG), including carbon dioxide, are very likely changing the world’s climate.

Climate change could affect customer demand for the Companies’ energy services. It might also cause physical damage to the Companies’ facilities and disruption of their operations due to more frequent and more extreme weather-related events. In late October 2012, Superstorm Sandy caused extensive damage to the Utilities’ electric distribution system. Superstorm Sandy interrupted service to approximately 1.4 million of the Utilities’ customers – more than four times the number of customers impacted by the Utilities’ previous worst storm event (Hurricane Irene in 2011). See “Other Regulatory Matters” in Note B to the financial statements in Item 8.

Based on the most recent data (2014) published by the U.S. Environmental Protection Agency (EPA), Con Edison estimates that its direct GHG emissions constitute less than 0.1 percent of the nation’s GHG emissions. Con Edison’s estimated emissions of GHG during the past five years were:


(metric tons, in millions(a))	2010		2011		2012		2013		2014
CO₂ equivalent emissions		3.8		3.4		3.3		3.4		3.2

(a)	Estimated emissions for 2014 are subject to third-party verification.

Con Edison’s 47 percent decrease in direct GHG emissions (carbon dioxide, methane and sulfur hexafluoride) since 2005 (6.0 million metric tons) reflects the emission reductions resulting from equipment and repair projects, reduced steam demand, the increased use of natural gas in lieu of fuel oil at CECONY’s steam production facilities as well as projects to reduce sulfur hexafluoride emissions and to replace gas distribution pipes.

CECONY has participated for several years in voluntary initiatives with the EPA to reduce its methane and sulfur hexafluoride emissions. The Utilities reduce methane emissions from the operation of their gas distribution systems through pipe maintenance and replacement programs, by operating system components at lower pressure, and by introducing new technologies for leak repair prioritization and to reduce work-related losses. The Utilities reduce emissions of sulfur hexafluoride, which is used for arc suppression in substation circuit breakers and switches, by using improved technologies to locate and repair leaks, and by replacing older equipment. The Utilities also actively promote energy efficiency and the use of renewable generation to help their customers’ reduce their GHG emissions.

NYSERDA and New York utilities are responsible for implementing the Energy Efficiency Portfolio Standard (EEPS) established by the NYSPSC through energy efficiency, targeted demand-side management and demand-response programs. The Utilities billed customers EEPS surcharges of approximately $103 million and $100 million in 2014 and 2013, respectively, to fund these programs. Through the Utilities’ energy-efficiency programs, customers reduced their annual energy use by approximately 2,390,000 MWh of electricity and 3,670,000 Dt of gas from the programs’ inception in 2009 through 2014, resulting in their avoiding their release of approximately 1,055,000 tons of GHG into the atmosphere every year. CECONY’s demand-side management programs assisted customers in reducing their annual energy use by approximately 295,000 MWh of electricity from the programs’ inception in 2004 through 2014, resulting in their avoiding their release of approximately 105,000 tons of GHG into the atmosphere every year.

Emissions are also avoided through the development of renewable generation. NYSERDA is responsible for implementing the renewable portfolio standard (RPS) established by the NYSPSC. NYSERDA enters into long-term agreements with developers of large renewable electric production facilities and pays them premiums based on the facilities’ electric output. These facilities sell their energy output in the wholesale energy market administered by the NYISO. As a result of the Utilities’ participation in the NYISO wholesale markets, a portion of the Utilities’ NYISO energy purchases are sourced from renewable electric production facilities. NYSERDA also provides rebates to customers who install eligible renewable electric production technologies. The electricity produced by such customer-sited renewables offsets the energy which the Utilities would otherwise have procured, thereby reducing the amount of electricity produced by non-renewable production facilities. The Utilities billed customers RPS surcharges of $121 million and $109 million in 2014 and 2013, respectively, (and approximately $547 million cumulatively from 2006) to fund these NYSERDA programs. In March 2014, NYSERDA reported that the statewide environmental benefits of having electricity generated by renewable production facilities from 2006 through 2013, as opposed to the State’s “system-mix,” amounts to approximately 5,400 tons of nitrogen oxides, 10,600 tons of sulfur dioxides, and 5.3 million tons of carbon dioxide in reduced emissions over this time period.

In May 2014, the NYSPSC directed NYSERDA to submit for its consideration a proposal for a comprehensive clean energy


28		CON EDISON ANNUAL REPORT 2014

fund. In September 2014, NYSERDA submitted its clean energy fund proposal seeking a 10-year program that it indicated is designed to pursue greater scale for clean energy in the New York economy; foster new investment opportunities to attract private capital to invest in clean energy in New York; and significantly reduce GHG emissions from New York’s energy sector.

In June 2014, the EPA proposed its Clean Power Plan to reduce carbon dioxide emissions from existing power plants 30 percent from 2005 levels by 2030. As proposed, each state will be required to submit for EPA approval a plan to reduce its emissions rate (as determined in accordance with the Clean Power Plan) to a specified target level applicable to the state. For New York State, the emissions rate target level for 2030 would be 44 percent below its 2012 level. State plans may, among other things, include participation in regional cap-and-trade programs, such as the Regional Greenhouse Gas Initiative (in which New York State participates), and renewable energy and energy efficiency programs. Initial state plans would be due by June 2016, with single-state plans to be finalized by June 2017 and multi-state plans to be finalized by June 2018. The costs resulting from the Clean Power Plan could be substantial.

Beginning in 2009 CECONY became subject to carbon dioxide emissions regulations established by New York State under the Regional Greenhouse Gas Initiative (RGGI). The Initiative, a cooperative effort by Northeastern and Mid-Atlantic states, established a decreasing cap on carbon dioxide emissions resulting from the generation of electricity to a level fifteen percent below the Initiative’s baseline by 2020. Under the Initiative, affected electric generators are required to obtain emission allowances to cover their carbon dioxide emissions, available primarily through auctions administered by participating states or a secondary market. CECONY met its requirement of 6.3 million allowances for the first RGGI compliance period (2009-2011) and has purchased sufficient allowances to meet its requirement for the second compliance period (2012-2014). In February 2013, RGGI released a model rule for adoption by the participating states that includes a 45 percent reduction in the emissions cap for 2014 and further reductions of 2.5 percent each year from 2015 to 2020. New York State adopted the model rule, and the lower cap was effective as of January 1, 2014.

Also, New York State and New York City have announced goals to reduce GHG emissions 80 percent below 1990 and 2005 levels respectively, by 2050. The cost to comply with legislation, regulations or initiatives limiting the Companies’ GHG emissions could be substantial.

Environmental Sustainability

Con Edison’s sustainability strategy, as it relates to the environment, provides that the company seeks to reduce its environmental footprint by making effective use of natural resources to address the challenges of climate change and its impact on the company’s business. As part of its strategy, the company seeks, among other things, to reduce direct and indirect emissions; enhance the efficiency of its water use; minimize its impact to natural ecosystems; focus on reducing, reusing, and recycling to minimize consumption; and design its work in consideration of climate forecasts.

CECONY

Superfund

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 costs, remediation costs and environmental damages. The sites as to which CECONY has been asserted to have liability under Superfund include its and its predecessor companies’ former manufactured gas sites, its multi-purpose Astoria site, its former Flushing Service Center site, the Gowanus Canal site, and other Superfund sites discussed below. There may be additional sites as to which assertions will be made that the Company has liability. For a further discussion of claims and possible claims against the Company under Superfund, estimated liability accrued for Superfund claims and recovery from customers of site investigation and remediation costs, see Note G to the financial statements in Item 8 (which information is incorporated herein by reference).

Manufactured Gas Sites

CECONY and its predecessors formerly owned and operated manufactured gas plants at 51 sites (MGP Sites) in New York City and Westchester County. Many of these sites have been subdivided and are now owned by parties other than CECONY and have been redeveloped for other uses, including schools, residential and commercial developments and hospitals. The New York State Department of Environmental Conservation (NYSDEC) is requiring CECONY to investigate, and if necessary, develop and implement remediation programs for the sites, including any neighboring areas to which contamination may have migrated.

CECONY has started remedial investigations at all 51 MGP Sites. After investigations, no MGP impacts have been detected at all or portions of 15 sites, and the NYSDEC has issued No Further Action (NFA) letters for these sites.

Coal tar or other MGP-related contaminants have been detected at the remaining 36 sites. Remedial actions have been completed at all or portions of five sites and the NYSDEC has issued NFA letters for these sites. In addition, remedial actions


						CON EDISON ANNUAL REPORT 2014		29

have been completed by property owners at all or portions of three sites under the NYS Brownfield Cleanup Program and Certificates of Completion have been issued by the NYSDEC for these sites. Remedial design is ongoing for the remaining sites, however, the information as to the extent of contamination and scope of the remediation likely to be required for many of these sites is incomplete. The company estimates that its undiscounted potential liability for the completion of the site investigation and cleanup of the known contamination on MGP sites (other than the Astoria site which is discussed below) could range from $490 million to $2,129 million.

Astoria Site

CECONY is permitted by the NYSDEC to operate a hazardous waste storage facility on property owned by the company in the Astoria section of Queens, New York. Portions of the property were formerly the location of a manufactured gas plant and also have been used or are being used for, among other things, electric generation operations, electric substation operations, the storage of fuel oil and liquefied natural gas, and the maintenance and storage of electric equipment. As a condition of its NYSDEC permit, the company is required to investigate the property and, where environmental contamination is found and action is necessary, to remediate the contamination. The company’s investigations are on-going. The company has submitted to the NYSDEC and the New York State Department of Health reports and in the future will be submitting additional reports identifying the known areas of contamination. The company estimates that its undiscounted potential liability for the completion of the site investigation and cleanup of the known contamination on the property could range from $156 million to $462 million.

Flushing Service Center Site

In September 2007, the NYSDEC demanded that the company investigate and remediate PCB contamination that may have migrated from a former CECONY service center facility in Flushing New York, into the adjacent Flushing River. In April 2008, the company and NYSDEC entered into a consent order under which the company agreed to implement a NYSDEC-approved investigation program for the Flushing River and, if deemed necessary by the NYSDEC to protect human health and the environment, to implement a NYSDEC-approved remediation program for any PCB contamination in the river attributable to the site. In March 2011, the company submitted to NYSDEC a report indicating that PCBs had migrated from the site to sediment in a portion of the river. In August 2013, the NYSDEC selected a remedy that requires the company to submit a remedial design report, remove contaminated sediment, restore the river bed with clean material, prepare a site management plan and implement institutional controls. The company estimates that its undiscounted potential liability for the completion of the cleanup in Flushing River will be at least $5.3 million.

Gowanus Canal

In August 2009, CECONY received a notice of potential liability and request for information from the EPA about the operations of the company and its predecessors at sites adjacent or near the 1.8 mile Gowanus Canal in Brooklyn, New York. In March 2010, the EPA added the Gowanus Canal to its National Priorities List of Superfund sites. The canal’s adjacent waterfront is primarily commercial and industrial, currently consisting of concrete plants, warehouses, and parking lots, and the canal is near several residential neighborhoods. In September 2013, the EPA issued its record of decision for the site. The EPA concluded that there was significant contamination at the site, including polycyclic aromatic hydrocarbons, polychlorinated biphenyls (PCBs), pesticides, metals, and volatile organic compounds. The EPA selected a remedy for the site that includes dredging and disposal of some contaminated sediments and stabilization and capping of contamination that will not be removed. The EPA estimated the cost of the selected remedy to be $506.1 million (and indicated the actual cost could be significantly higher or lower). The EPA has identified 39 potentially responsible parties (PRPs) with respect to the site, including CECONY (which the EPA indicated has facilities that may be a source of PCBs at the site). The EPA has ordered the PRPs, including CECONY, to coordinate and cooperate with each other to perform and/or fund the remedial design for the selected remedy. CECONY is unable to estimate its exposure to liability with respect to the Gowanus Canal site.

Other Superfund Sites

CECONY is a PRP with respect to other Superfund sites involving other PRPs and participates in PRP groups at these sites. The company generally is not responsible for managing the site investigation and remediation at these multiparty sites. Work at these sites is in various stages, and investigation, remediation and monitoring activities at some of these sites can be expected to continue over extended periods of time. The company believes that it is unlikely that monetary sanctions, such as penalties, will be imposed upon it by any governmental authority with respect to these sites.

The following table lists each of CECONY’s other Superfund sites for which the company anticipates it may have a liability. The table also shows for each such site, its location, the year in which the company was designated or alleged to be a PRP or to otherwise have responsibilities with respect to the site (shown in the table under “Start”), the name of the court or agency in which proceedings for the site are pending and CECONY’s estimated percentage of total liability for each site. The company currently estimates that its potential liability for investigation, remediation, monitoring and environmental damages at each site is $0.2 million or less, with the exception of the Cortese Landfill site for which the estimate is $1 million. Superfund liability is joint and several. The company’s estimate of its liability for each site was determined pursuant to consent decrees, settlement agreements


30		CON EDISON ANNUAL REPORT 2014

or otherwise and in light of the financial condition of other PRPs. The company’s actual liability could differ substantially from amounts estimated.


Site	Location	Start		Court or Agency		% of Total Liability
Maxey Flats Nuclear	Morehead, KY		1986		EPA		0.8	%
Curcio Scrap Metal	Saddle Brook, NJ		1987		EPA		100	%
Metal Bank of America	Philadelphia, PA		1987		EPA		1.0	%
Cortese Landfill	Narrowsburg, NY		1987		EPA		6.0	%
Global Landfill	Old Bridge, NJ		1988		EPA		0.3	%
Borne Chemical	Elizabeth, NJ		1997		NJDEP		0.7	%

O&R

Superfund

The sites at which O&R has been asserted to have liability under Superfund include its manufactured gas sites and the Superfund sites discussed below. There may be additional sites as to which assertions will be made that O&R has liability. For a further discussion of claims and possible claims against O&R under Superfund, see Note G to the financial statements in Item 8 (which information is incorporated herein by reference).

Manufactured Gas Sites

O&R and its predecessors formerly owned and operated manufactured gas plants at seven sites (O&R MGP Sites) in Orange County and Rockland County, New York. Three of these sites are now owned by parties other than O&R, and have been redeveloped by them for residential, commercial or industrial uses. The NYSDEC is requiring O&R to develop and implement remediation programs for the O&R MGP Sites including any neighboring areas to which contamination may have migrated.

O&R has completed remedial investigations at all seven of its MGP sites and has received NYSDEC’s decision regarding the remedial work to be performed at six of the sites. Of the six sites, O&R has completed remediation at three sites. Remedial design is ongoing for the remaining three sites. The company estimates that its undiscounted potential liability for the completion of the site investigation and cleanup of the known contamination on MGP sites could range from $96 million to $155 million.

Superfund Sites

O&R is a PRP at Superfund sites involving other PRPs, and participates in PRP groups at those sites. The company is not managing the site investigation and remediation at these multiparty Superfund sites. Work at these sites is in various stages, and investigation, remediation and monitoring at some of these sites is expected to continue over extended periods of time. The company believes that it is unlikely that monetary sanctions, such as penalties, will be imposed by any governmental authority with respect to these sites.

The following table lists each of these Superfund sites for which the company anticipates it may have liability. The table also shows for each such site, its location, the year in which the company was designated or alleged to be a PRP or to otherwise have responsibilities with respect to the site (shown in the table under “Start”), the name of the court or agency in which proceedings with respect to the site are pending and O&R’s estimated percentage of total liability for each site. The company currently estimates that its potential liability for investigation, remediation, monitoring and environmental damages at each site is less than $0.3 million. Superfund liability is joint and several. The company’s estimate of its anticipated share of the total liability for each site was determined pursuant to consent decrees, settlement agreements or otherwise and in light of the financial condition of other PRPs. The company’s actual liability could differ substantially from amounts estimated.

Site

Location

Start

Court or
Agency

% of
Total
Liability

Borne Chemical

Elizabeth, NJ

1997

NJDEP

2.3

Metal Bank of America

Philadelphia, PA

1993

EPA

4.6

Ellis Road

Jacksonville, FL

2011

EPA

0.2

Other Federal, State and Local Environmental Provisions

Toxic Substances Control Act

Virtually all electric utilities, including CECONY, own equipment containing PCBs. PCBs are regulated under the Federal Toxic Substances Control Act of 1976. The Utilities have procedures in place to properly manage and dispose of oil and equipment containing PCBs when they are removed from service.

Water Quality

Under NYSDEC regulations, the operation of CECONY’s generating facilities requires permits for water discharges. Regulations that became effective in 2013 require permits for water withdrawals. Conditions to the renewal of such permits may include limitations on the operations of the permitted facility or requirements to install certain equipment, the cost of which could be substantial. For information about the company’s generating facilities, see “CECONY – Electric Operations – Electric Facilities” and “Steam Operations – Steam Facilities” above in this Item 1.

Certain governmental authorities are investigating contamination in the Hudson River and the New York Harbor. These waters run through portions of CECONY’s service area. Governmental authorities could require entities that released hazardous substances that contaminated these waters to bear the cost of investigation and remediation, which could be substantial.

Air Quality

Under new source review regulations, an owner of a large generating facility, including CECONY’s steam and steam-electric generating facilities, is required to obtain a permit before


						CON EDISON ANNUAL REPORT 2014		31

making modifications to the facility, other than routine maintenance, repair, or replacement, that increase emissions of pollutants from the facility above specified thresholds. To obtain a permit, the facility owner could be required to install additional pollution controls or otherwise limit emissions from the facility. The company reviews on an on-going basis its planned modifications to its generating facilities to determine the potential applicability of new source review and similar regulations.

In December 2011, the company filed its proposed plan to comply with revised New York State nitrogen oxides reasonably available control technology regulations (NOx RACT) and is incorporating the plan provisions into its existing air quality permits as they are renewed. In 2011, the EPA adopted regulations establishing maximum achievable control technology standards for utility and industrial boilers. The regulations apply to major air emissions sources, including CECONY’s generating facilities. CECONY complied with these regulations in 2014, and expects to comply with them in 2015 For information about the company’s generating facilities, see “CECONY – Electric Operations – Electric Facilities” and “Steam Operations – Steam Facilities” above in this Item 1.

In October 2014, the U.S. Court of Appeals for the District of Columbia lifted its stay of the Transport Rule (also referred to as the Cross-State Air Pollution Rule). The appellate court acted on remand from the U.S. Supreme Court, which in April 2014 reversed the appellate court’s August 2012 decision that vacated the rule. The Transport Rule establishes a new cap and trade program requiring further reductions in air emissions than the Clean Air Intrastate Rule (CAIR) that it replaces. Under the Transport Rule, utilities are to be allocated emissions allowances and may sell the allowances or buy additional allowances. CECONY requested and received NYSPSC approval to change the provisions under which the company recovers its purchased power costs to provide for costs incurred to purchase emissions allowances and revenues received from the sale of allowances. Until the Transport Rule was implemented in January 2015, CAIR remained in effect. CECONY complied with CAIR in 2014 and expects to comply with the Transport Rule in 2015.

State Anti-Takeover Law

New York State law provides that a “domestic corporation,” such as Con Edison, may not consummate a merger, consolidation or similar transaction with the beneficial owner of a 20 percent or greater voting stock interest in the corporation, or with an affiliate of the owner, for five years after the acquisition of the voting stock interest, unless the transaction or the acquisition of the voting stock interest was approved by the corporation’s board of directors prior to the acquisition of the voting stock interest. After the expiration of the five-year period, the transaction may be consummated only pursuant to a stringent “fair price” formula or with the approval of a majority of the disinterested stockholders.

Employees

Con Edison has no employees other than those of CECONY, O&R and Con Edison’s competitive energy businesses (which at December 31, 2014 had 13,200, 1,103 and 298 employees, respectively). Of the 13,200 CECONY employees and 1,103 O&R employees, 8,136 and 594 were represented by a collective bargaining unit, respectively. The collective bargaining agreement covering most of these CECONY employees expires in June 2016. Agreements covering other CECONY employees and O&R employees expire in June 2017 and May 2017, respectively.

Available Information

For the sources of information about the Companies, see “Available Information” in the “Introduction” appearing before this Item 1.

Item 1A:

Risk Factors

Information in any item of this report as to which reference is made in this Item 1A is incorporated by reference herein. The use of such terms as “see” or “refer to” shall be deemed to incorporate at the place such term is used the information to which such reference is made.

The Companies’ businesses are influenced by many factors that are difficult to predict, and that involve uncertainties that may materially affect actual operating results, cash flows and financial condition.

The Companies have established an enterprise risk management program to identify, assess, manage and monitor its major business risks based on established criteria for the severity of an event, the likelihood of its occurrence, and the programs in place to control the event or reduce the impact. The Companies’ major risks include:

Regulatory/Compliance Risks:

The Companies Are Extensively Regulated And Are Subject To Penalties. The Companies’ operations require numerous permits, approvals and certificates from various federal, state and local governmental agencies. State utility regulators may seek to impose substantial penalties on the Utilities for violations of state utility laws, regulations or orders. In addition, the Utilities rate plans usually include penalties for failing to meet certain operating and customer satisfaction standards. See Note B to the financial statements in Item 8. FERC has the authority to impose penalties on the Utilities and the competitive energy businesses, which could be substantial, for violations of the Federal Power Act, the Natural Gas Act or related rules, including reliability and cyber security rules. Environmental agencies may seek penalties for failure to comply with laws, regulations or permits. The Companies may also be subject to penalties from other regulatory agencies. The Companies may be subject to new laws, regulations, or other requirements or the revision or reinterpretation of such requirements, which could


32		CON EDISON ANNUAL REPORT 2014

adversely affect the Companies. In April 2014, the NYSPSC instituted its REV proceeding to improve system efficiency and reliability, encourage renewable energy resources, support distributed energy resources and empower customer choice. See “Utility Regulation” and “Environmental Matters – Climate Change and Other Federal, State and Local Environmental Provisions” in Item 1 and “Application of Critical Accounting Policies” in Item 7.

The Utilities’ Rate Plans May Not Provide A Reasonable Return. The Utilities have rate plans approved by state utility regulators that limit the rates they can charge their customers. The rates are generally designed for, but do not guarantee, the recovery of the Utilities’ cost of service (including a return on equity). See “Utility Regulation – State Utility Regulation, Rate Plans” in Item 1 and “Rate Plans” in Note B to the financial statements in Item 8. Rates usually may not be changed during the specified terms of the rate plans other than to recover energy costs and limited other exceptions. The Utilities’ actual costs may exceed levels provided for such costs in the rate plans. State utility regulators can initiate proceedings to prohibit the Utilities from recovering from their customers the cost of service (including energy costs) that the regulators determine to have been imprudently incurred (see “Other Regulatory Matters” in Note B to the financial statements in Item 8). The Utilities have from time to time entered into settlement agreements to resolve various prudence proceedings.

The Companies May Be Adversely Affected By Changes To The Utilities’ Rate Plans. The Utilities’ rate plans typically require action by regulators at their expiration dates, which may include approval of new plans with different provisions. The need to recover from customers increasing costs, taxes or state-mandated assessments or surcharges could adversely affect the Utilities’ opportunity to obtain new rate plans that provide a reasonable rate of return and continue important provisions of current rate plans. The Utilities’ current New York electric and gas rate plans include revenue decoupling mechanisms and their New York electric, gas and steam rate plans include provisions for the recovery of energy costs and reconciliation of the actual amount of pension and other postretirement, environmental and certain other costs to amounts reflected in rates. In February 2014, the NYSPSC adopted a Joint Proposal with respect to CECONY’s rates for electric, gas and steam delivery service in 2014 and 2015 (and, for gas and steam delivery service, 2016). See “Rate Plans” in Note B to the financial statements in Item 8.

The Intentional Misconduct of Employees or Contractors Could Adversely Affect the Companies. The violation of laws or regulations by employees or contractors for personal gain may result from contract and procurement fraud, extortion, bribe acceptance, fraudulent related-party transactions and serious breaches of corporate policy or standards of business conduct. Such intentional misconduct by employees or contractors could result in substantial liability, higher costs and increased regulatory requirements. See “Employees” in Item 1 and “Other Regulatory Matters” in Note B to the financial statements in Item 8.

Operations Risks:

The Failure of, or Damage to, the Companies’ Facilities Could Adversely Affect the Companies. The Utilities provide electricity, gas and steam service using energy facilities, many of which are located either in, or close to, densely populated public places. See the description of the Utilities’ facilities in Item 1. A failure of, or damage to, these facilities, or an error in the operation or maintenance of these facilities, could result in bodily injury or death, property damage, the release of hazardous substances or extended service interruptions. A natural disaster such as a major storm, a heat wave or hurricane could damage our facilities and the Utilities may experience more severe consequences from attempting to operate during and after such events. The Utilities’ response to such events may be perceived to be below customer expectations. The Utilities could be required to pay substantial amounts that may not be covered by the Utilities’ insurance policies to repair or replace their facilities, compensate others for injury or death or other damage, and settle any proceedings initiated by state utility regulators or other regulatory agencies. The occurrence of such events could also adversely affect the cost and availability of insurance. See “Other Regulatory Matters” in Note B and “Manhattan Steam Main Rupture” and “Manhattan Explosion and Fire” in Note H to the financial statements in Item 8. Changes to laws, regulations or judicial doctrines could further expand the Utilities’ liability for service interruptions. See “Utility Regulation – State Utility Regulation” in Item 1.

A Cyber Attack Could Adversely Affect the Companies. The Utilities and other operators of critical energy infrastructure may face a heightened risk of cyber attack. In the event of a cyber attack that the Companies were unable to defend against or mitigate, the Utilities and the competitive energy businesses could have their operations disrupted, financial and other information systems impaired, property damaged and customer and employee information stolen; experience substantial loss of revenues, response costs and other financial loss; and be subject to increased regulation, litigation and damage to their reputation. The Companies have experienced cyber attacks, although none of the attacks had a material impact on the Companies.

Environmental Risks:

The Companies Are Exposed to Risks From The Environmental Consequences Of Their Operations. The Companies are exposed to risks relating to climate change and related matters. See “Environmental Matters – Climate Change” in Item 1. CECONY may also be impacted by regulations requiring reductions in air emissions. See “Environmental Matters – Other


						CON EDISON ANNUAL REPORT 2014		33

Federal, State and Local Environmental Provisions, Air Quality” in Item 1. In addition, the Utilities are responsible for hazardous substances, such as asbestos, PCBs and coal tar, that have been used or produced in the course of the Utilities’ operations and are present on properties or in facilities and equipment currently or previously owned by them. See “Environmental Matters” in Item 1 and Note G to the financial statements in Item 8. The Companies could be adversely affected if a causal relationship between electric and magnetic fields and adverse health effects were to be established.

Financial and Market Risks:

A Disruption In The Wholesale Energy Markets Or Failure By An Energy Supplier Could Adversely Affect The Companies. Almost all the electricity and gas the Utilities sell to their full-service customers is purchased through the wholesale energy markets or pursuant to contracts with energy suppliers. See the description of the Utilities’ energy supply in Item 1. Con Edison’s competitive energy businesses also depend on wholesale energy markets to supply electricity to their customers. See “Competitive Energy Businesses” in Item 1. A disruption in the wholesale energy markets or a failure on the part of the Companies’ energy suppliers or operators of energy delivery systems that connect to the Utilities’ energy facilities could adversely affect the Companies’ ability to meet their customers’ energy needs and adversely affect the Companies. In addition, see “Financial and Commodity Market Risks” in Item 7 (which information is incorporated herein by reference).

The Companies Have Substantial Unfunded Pension And Other Postretirement Benefit Liabilities. The Utilities have substantial unfunded pension and other postretirement benefit liabilities. The Utilities expect to make substantial contributions to their pension and other postretirement benefit plans. Significant declines in the market values of the investments held to fund pension and other postretirement benefits could trigger substantial funding requirements under governmental regulations. See “Application of Critical Accounting Policies – Accounting for Pensions and Other Postretirement Benefits” and “Financial and Commodity Market Risks,” in Item 7 and Notes E and F to the financial statements in Item 8.

Con Edison’s Ability To Pay Dividends Or Interest Depends On Dividends From Its Subsidiaries. Con Edison’s ability to pay dividends on its common stock or interest on its external borrowings depends primarily on the dividends and other distributions it receives from its subsidiaries. The dividends that the Utilities may pay to Con Edison are limited by the NYSPSC to not more than 100 percent of their respective income available for dividends calculated on a two-year rolling average basis, with certain exceptions. See “Dividends” in Note C to the financial statements in Item 8.

The Companies Require Access To Capital Markets To Satisfy Funding Requirements. The Utilities estimate that their construction expenditures will exceed $8 billion over the next three years. The Utilities use internally-generated funds, equity contributions from Con Edison, if any, and external borrowings to fund the construction expenditures. The competitive energy businesses are investing in renewable generation and energy infrastructure projects that may require funds in excess of those produced in the businesses. Con Edison expects to finance its capital requirements primarily through internally generated funds and the sale of its securities. Changes in financial market conditions or in the Companies’ credit ratings could adversely affect their ability to raise new capital and the cost thereof. See “Capital Requirements and Resources” in Item 1.

Other Risks:

The Companies’ Strategies May Not Be Effective To Address Changes In The External Business Environment. The failure to identify, plan and execute strategies to address changes in the external business environment could have a material adverse impact on the Companies. Con Edison seeks to provide shareholder value through continued dividend growth, supported by earnings growth in regulated utilities and contracted assets. Changes to public policy, regulation, tax policy, customer behavior or technology could significantly impact the value of the Utilities’ energy delivery facilities and the competitive energy businesses’ renewable and energy infrastructure projects. Such changes could also affect the Companies’ opportunities to make additional investments in such assets and the potential return on the investments. See “Utility Regulation – State Utility Regulation – Reforming the Energy Vision Proceeding” and “Competition” in Item 1.

The Companies Also Face Other Risks That Are Beyond Their Control. The Companies’ results of operations can be affected by circumstances or events that are beyond their control. Weather directly influences the demand for electricity, gas and steam service, and can affect the price of energy commodities. Terrorist or other physical attacks or acts of war could damage Company facilities. Economic conditions can affect customers’ demand and ability to pay for service, which could adversely affect the Companies.

Item 1B:

Unresolved Staff Comments

Con Edison

Con Edison has no unresolved comments from the SEC staff.

CECONY

CECONY has no unresolved comments from the SEC staff.

Item 2:

Properties

Con Edison

Con Edison has no significant properties other than those of the Utilities and the competitive energy businesses.


34		CON EDISON ANNUAL REPORT 2014

For information about the capitalized cost of the Companies’ utility plant, net of accumulated depreciation, see “Plant and Depreciation” in Note A to the financial statements in Item 8 (which information is incorporated herein by reference).

CECONY

For a discussion of CECONY’s electric, gas and steam facilities, see “CECONY- Electric Operations – Electric Facilities”, “CECONY- Gas Operations – Gas Facilities”, and “CECONY-Steam Operations – Steam Facilities” in Item 1 (which information is incorporated herein by reference).

O&R

For a discussion of O&R’s electric and gas facilities, see “O&R – Electric Operations –Electric Facilities” and “O&R – Gas Operations – Gas Facilities” in Item 1 (which information is incorporated herein by reference).

Competitive Energy Businesses

For a discussion of the competitive energy businesses’ facilities, see “Competitive Energy Businesses” in Item 1 (which information is incorporated herein by reference).

Item 3:

Legal Proceedings

For information about certain legal proceedings affecting the Companies, see “Other Regulatory Matters” in Note B, “Superfund Sites” and “Asbestos Proceedings” in Note G and “Manhattan Steam Main Explosion” and “Manhattan Explosion and Fire” in Note H to the financial statements in Item 8 and “Environmental Matters – CECONY – Superfund” and “Environmental Matters – O&R – Superfund” in Item 1 of this report, which information is incorporated herein by reference.

Item 4:

Mine Safety Disclosures

Not applicable.

Executive Officers of the Registrant

The following table sets forth certain information about the executive officers of Con Edison and CECONY as of February 19, 2015. As indicated, certain of the executive officers are executive officers of each of Con Edison and CECONY and others are executive officers of Con Edison or CECONY. The term of office of each officer, is until the next election of directors (trustees) of their company and until his or her successor is chosen and qualifies. Officers are subject to removal at any time by the board of directors (trustees) of their company.


Name	Age		Offices and Positions During Past Five Years
Executive Officers of Con Edison and CECONY
John McAvoy		54	5/14 to present – Chairman of the Board, President and Chief Executive Officer and Director of Con Edison and Chairman, Chief Executive Officer and Trustee of CECONY
			12/13 to 4/14 – President and Chief Executive Officer and Director of Con Edison and Chief Executive Officer and Trustee of CECONY
			1/13 to 11/13 – President and Chief Executive Officer of O&R
			12/12 – Senior Vice President of CECONY
			2/09 to 11/12 – Senior Vice President – Central Operations of CECONY

Craig S. Ivey		52	12/09 to present – President of CECONY

William G. Longhi		61	1/13 to present – President – Shared Services of CECONY
			2/09 to 12/12 – President and Chief Executive Officer of O&R

Robert Hoglund		53	9/05 to present – Senior Vice President and Chief Financial Officer of Con Edison and CECONY

Elizabeth D. Moore		60	5/13 to present – Senior Vice President and General Counsel of Con Edison and CECONY
			5/09 to 4/13 – General Counsel of Con Edison and CECONY

Joseph P. Oates		53	9/12 to present – Senior Vice President – Business Shared Services of CECONY
			7/12 to 8/12 – Senior Vice President of CECONY
			7/07 to 6/12 – Vice President – Energy Management of CECONY

Frances A. Resheske		54	2/02 to present – Senior Vice President – Public Affairs of CECONY

Gurudatta Nadkarni		49	1/08 to present – Vice President of Strategic Planning

Scott Sanders		51	2/10 to present – Vice President and Treasurer of Con Edison and CECONY
			1/10 to 2/10 – Vice President – Finance

Robert Muccilo		58	7/09 to present – Vice President and Controller of Con Edison and CECONY
			11/09 to present – Chief Financial Officer and Controller of O&R


						CON EDISON ANNUAL REPORT 2014		35


Name	Age		Offices and Positions During Past Five Years
Executive Officers of Con Edison but not CECONY
Timothy P. Cawley		50	12/13 to present – President and Chief Executive Officer of O&R
			11/13 – Senior Vice President of CECONY
			12/12 to 10/13 – Senior Vice President – Central Operations
			5/11 to 11/12 – Vice President – Substation Operations
			9/07 to 4/11 – Vice President – Bronx and Westchester Electric Operations

Executive Officers of CECONY but not Con Edison
(All offices and positions listed are with CECONY)

Milovan Blair		52	11/13 to present – Senior Vice President – Central Operations
			10/13 – Vice President of CECONY
			5/11 to 9/13 – Vice President – Brooklyn and Queens Electric Operations
			2/09 to 4/11 – Vice President – System and Transmission Operations of CECONY

Marilyn Caselli		60	5/05 to present – Senior Vice President – Customer Operations

Marc E. Huestis		54	2/15 to present-Senior Vice President – Gas Operations
			1/15 – Senior Vice President of CECONY
			2/14 to 12/14 – Vice President – Manhattan Electric Operations
			1/14 – Vice President of CECONY
			10/08 to 2/13 – Vice President – Construction

Robert D. Schimmenti		50	9/14 to present – Senior Vice President – Electric Operations
			5/10 to 8/14 – Vice President – Engineering and Planning
			12/08 to 4/10 – Chief Engineer – Distribution Engineering


36		CON EDISON ANNUAL REPORT 2014

Part II

Item 5:

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Con Edison

Con Edison’s Common Shares ($.10 par value), the only class of common equity of Con Edison, are traded on the New York Stock Exchange. As of January 31, 2015, there were 51,089 holders of record of Con Edison’s Common Shares.

The market price range for Con Edison’s Common Shares during 2014 and 2013, as reported in the consolidated reporting system, and the dividends paid by Con Edison in 2014 and 2013 were as follows:


	2014						2013
	High		Low		Dividends Paid		High		Low		Dividends Paid
1^st Quarter	$	56.68	$	52.23	$	0.63	$	61.13	$	54.51	$	0.615
2^nd Quarter	$	58.57	$	52.87	$	0.63	$	64.03	$	55.42	$	0.615
3^rd Quarter	$	58.12	$	54.58	$	0.63	$	60.85	$	54.51	$	0.615
4^th Quarter	$	68.92	$	56.40	$	0.63	$	59.24	$	54.17	$	0.615

On January 15, 2015, Con Edison declared a quarterly dividend of 65 cents per Common Share. The first quarter 2015 dividend will be paid on March 15, 2015.

Con Edison expects to pay dividends to its shareholders primarily from dividends and other distributions it receives from its subsidiaries. The payment of future dividends is subject to approval and declaration by Con Edison’s Board of Directors and will depend on a variety of factors including business, financial and regulatory considerations. For additional information, see “Dividends” in Note C to the financial statements in Item 8 (which information is incorporated herein by reference).

During 2014, the market price of Con Edison’s Common Shares increased by 19.4 percent (from $55.28 at year-end 2013 to $66.01 at year-end 2014). By comparison, the S&P 500 Index increased 11.4 percent and the S&P 500 Utilities Index increased 24.3 percent. The total return to Con Edison’s common shareholders during 2014, including both price appreciation and investment of dividends, was 24.8 percent. By comparison, the total returns for the S&P 500 Index and the S&P 500 Utilities Index were 13.7 percent and 29.0 percent, respectively. For the five-year period 2010 through 2014 inclusive, Con Edison’s shareholders’ total return was 81.6 percent, compared with total returns for the S&P 500 Index and the S&P 500 Utilities Index of 105.1 percent and 87.0 percent, respectively.


						CON EDISON ANNUAL REPORT 2014		37

LOGO


	Period Ending
Company / Index	12/31/09		12/31/10		12/31/11		12/31/12		12/31/13		12/31/14
Consolidated Edison, Inc.		100.00		114.92		150.33		140.22		145.54		181.63
S&P 500 Index		100.00		115.06		117.49		136.30		180.44		205.14
S&P Utilities		100.00		105.46		126.46		128.09		145.02		187.04

Based on $100 invested at December 31, 2009, reinvestment of all dividends in equivalent shares of stock and market price changes on all such shares.

CECONY

The outstanding shares of CECONY’s Common Stock ($2.50 par value) are the only class of common equity of CECONY. They are held by Con Edison and are not traded.

The dividends declared by CECONY in 2014 and 2013 are shown in its Consolidated Statement of Common Shareholder’s Equity included in Item 8 (which information is incorporated herein by reference). For additional information about the payment of dividends by CECONY, and restrictions thereon, see “Dividends” in Note C to the financial statements in Item 8 (which information is incorporated herein by reference).


38		CON EDISON ANNUAL REPORT 2014

ISSUER PURCHASES OF EQUITY SECURITIES

The following table provides information about Con Edison common shares purchased in open-market transactions for the quarter ended December 31, 2014. The number of shares purchased approximated the number of treasury shares used for the company’s employee stock plans.


Period	Total Number of Shares (or Units) Purchased		Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Appropriate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
October 1, 2014 to October 31, 2014		120,809	$	59.00		-		-
November 1, 2014 to November 30, 2014		82,263		62.51		-		-
December 1, 2014 to December 31, 2014		81,928		64.67		-		-
Total		285,000	$	61.64		-		-


						CON EDISON ANNUAL REPORT 2014		39

Item 6:

Selected Financial Data

For selected financial data of Con Edison and CECONY, see “Introduction” appearing before Item 1 (which selected financial data is incorporated herein by reference).


40		CON EDISON ANNUAL REPORT 2014

Item 7:

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

This combined management’s discussion and analysis of financial condition and results of operations relates to the consolidated financial statements included in this report of two separate registrants: Con Edison and CECONY and should be read in conjunction with the financial statements and the notes thereto. As used in this report, the term the “Companies” refers to Con Edison and CECONY. CECONY is a subsidiary of Con Edison and, as such, information in this management’s discussion and analysis about CECONY applies to Con Edison.

Information in any item of this report referred to in this discussion and analysis is incorporated by reference herein. The use of terms such as “see” or “refer to” shall be deemed to incorporate by reference into this discussion and analysis the information to which reference is made.

Corporate Overview

Con Edison’s principal business operations are those of the Utilities. Con Edison also owns competitive energy businesses. See “The Utilities” and “Competitive Energy Businesses” in Item 1, and segment financial information in Note N to the financial statements in Item 8 and “Results of Operations,” below. In addition, in 2014 Con Edison formed a subsidiary to invest in a transmission company. See “Con Edison Transmission” in Item 1. Certain financial data of Con Edison’s businesses are presented below:


	Twelve months ended December 31, 2014									At December 31, 2014
(Millions of Dollars, except percentages)	Operating Revenues				Net Income for Common Stock					Assets
CECONY	$	10,786	83	%	$	1,058		97	%	$	39,637	90	%
O&R		892	7	%		60		5	%		2,837	6	%
Total Utilities		11,678	90	%		1,118		102	%		42,474	96	%
Con Edison Solutions(a)		1,059	8	%		(77	)	(7	)%		250	1	%
Con Edison Energy(a)		133	1	%		17		2	%		117	-	%
Con Edison Development(b)		42	1	%		43		4	%		658	1	%
Other(c)		7	-	%		(9	)	(1	)%		809	2	%
Total Con Edison	$	12,919	100	%	$	1,092		100	%	$	44,308	100	%

(a)	Net income from the competitive energy businesses for the twelve months ended December 31, 2014 includes $(73) million of net after-tax mark-to-market (losses)/gains (Con Edison Solutions, $(76) million and Con Edison Energy, $3 million).

(b)

Includes an after-tax gain on sale of solar electric production projects of $26 million (see Note Q to the financial statements in Item 8) and an after-tax charge of $1 million relating to the lease in/lease out (LILO) transactions (see “Lease In/Lease Out Transactions” in Note J to the financial statements in Item 8) for the twelve months ended December 31, 2014.

(c)	Other includes parent company and consolidation adjustments.

Results of Operations

Net income for common stock and earnings per share for the years ended December 31, 2014, 2013 and 2012 were as follows:


(Millions of Dollars)	Net Income for Common Stock									Earnings per Share
	2014			2013			2012			2014			2013			2012
CECONY	$	1,058		$	1,020		$	1,014		$	3.61		$	3.48		$	3.46
O&R		60			65			64			0.20			0.22			0.22
Competitive energy businesses(a)		(17	)		(23	)		76			(0.05	)		(0.08	)		0.26
Other(b)		(9	)		-			(16	)		(0.03	)		-			(0.06	)
Con Edison(c)	$	1,092		$	1,062		$	1,138		$	3.73		$	3.62		$	3.88

(a)

Includes an after-tax gain on sale of solar electric production projects of $26 million (see Note Q to the financial statements in Item 8) in 2014. Includes an after-tax charge of $1 million and $95 million or $0.32 a share relating to the LILO transactions (see “Lease In/Lease Out Transactions” in Note J to the financial statements in Item 8) in 2014 and 2013, respectively. Also includes a tax benefit of $15 million or $0.05 a share resulting from the acceptance by the Internal Revenue Service (IRS) of the company’s claim for manufacturing tax deductions in 2013. Also includes $(73) million or $(0.25) a share, $45 million or $0.14 a share and $40 million or $0.13 a share of net after-tax mark-to-market (losses)/gains in 2014, 2013 and 2012, respectively.

(b)	Other includes parent company and consolidation adjustments. For 2013, also includes $16 million of certain income tax benefits and related interest.

(c)	Earnings per share on a diluted basis were $3.71 a share, $3.61 a share and $3.86 a share in 2014, 2013 and 2012, respectively.

The Companies’ results of operations for 2014, as compared with 2013, and for 2013, as compared with 2012, reflect changes in the Utilities’ rate plans and the weather impact on its steam delivery service. The rate plans provide for revenues to cover expected increases in certain other operations and maintenance expenses and depreciation, reflecting primarily the impact of higher utility plant balances. The results of operations also include the gain on sale of solar electric production projects, the impact of LILO transactions and the net mark-to-market effects of the competitive energy businesses.


						CON EDISON ANNUAL REPORT 2014		41

Management’s

Discussion and Analysis of Financial Condition and Results of Operations – Continued

The following table presents the estimated effect on earnings per share and net income for common stock for 2014 as compared with 2013, and 2013 as compared with 2012, resulting from these and other major factors:


	2014 vs. 2013						2013 vs. 2012
	Earnings per Share			Net Income for Common Stock (Millions of Dollars)			Earnings per Share			Net Income for Common Stock (Millions of Dollars)
CECONY(a)
Changes in rate plans	$	0.43		$	125		$	(0.07	)	$	(21	)
Weather impact on steam revenues		0.03			10			0.10			30
Other operations and maintenance expenses		(0.28	)		(83	)		0.11			32
Depreciation and amortization		(0.09	)		(27	)		(0.11	)		(31	)
Other		0.04			13			(0.01	)		(4	)
Total CECONY		0.13			38			0.02			6
O&R(a)
Changes in rate plans		0.04			11			0.04			11
Other operations and maintenance expenses		(0.03	)		(10	)		(0.02	)		(7	)
Other		(0.03	)		(6	)		(0.02	)		(3	)
Total O&R		(0.02	)		(5	)		-			1
Competitive energy businesses
Revenues less energy costs		(0.34	)		(100	)		(0.10	)		(30	)
Net interest expense		0.29			86			(0.27	)		(80	)
Other		0.08			20			0.03			11
Total competitive energy businesses(b)		0.03			6			(0.34	)		(99	)
Other, including parent company expenses(c)		(0.03	)		(9	)		0.06			16
Total variations	$	0.11		$	30		$	(0.26	)	$	(76	)

(a)

Under the revenue decoupling mechanisms in the Utilities’ New York electric and gas rate plans and the weather-normalization clause applicable to their gas businesses, revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. Under the rate plans, pension and other postretirement costs and certain other costs are reconciled to amounts reflected in rates for such costs. In general, the Utilities recover on a current basis the fuel, gas purchased for resale and purchased power costs they incur in supplying energy to their full-service customers (see “Recoverable Energy Costs” in Note A and “Rate Plans” in Note B to the financial statements in Item 8). Accordingly, such costs do not generally affect the Companies’ results of operations.

(b)	These variations include the gain on sale of solar electric production projects, the impact of the LILO transactions, the manufacturing tax deduction and the net mark-to-market effects shown in note (a) in the Results of Operations table above.

(c)	The variation for the year ended December 31, 2013, as compared to the 2012 period, reflects certain income tax benefits and related interest in 2013 for Con Edison (parent company), $16 million or $0.06 a share.

The Companies’ other operations and maintenance expenses for the years ending December 31, 2014, 2013 and 2012 were as follows:


(Millions of Dollars)	2014			2013			2012
CECONY
Operations	$	1,384		$	1,313		$	1,312
Pensions and other postretirement benefits		467			485			519
Health care and other benefits		149			133			156
Regulatory fees and assessments(a)		533			517			517
Other		340			287			284
Total CECONY		2,873			2,735			2,788
O&R		318			302			291
Competitive energy businesses		108			105			107
Other(b)		(5	)		(5	)		(4	)
Total other operations and maintenance expenses	$	3,294		$	3,137		$	3,182

(a)	Includes Demand Side Management, System Benefit Charges and Public Service Law 18A assessments which are collected in revenues.

(b)	Includes parent company and consolidation adjustments.


42		CON EDISON ANNUAL REPORT 2014

Management’s

Discussion and Analysis of Financial Condition and Results of Operations – Continued

Con Edison’s principal business segments are CECONY’s regulated utility activities, O&R’s regulated utility activities and Con Edison’s competitive energy businesses. CECONY’s principal business segments are its regulated electric, gas and steam utility activities. A discussion of the results of operations by principal business segment for the years ended December 31, 2014, 2013 and 2012 follows. For additional business segment financial information, see Note N to the financial statements in Item 8.

Year Ended December 31, 2014 Compared with Year Ended December 31, 2013

The Companies’ results of operations in 2014 compared with 2013 were:


	CECONY						O&R						Competitive Energy Businesses						Other(a)						Con Edison(b)
(Millions of Dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent			Increases (Decreases) Amount			Increases (Decreases) Percent			Increases (Decreases) Amount			Increases (Decreases) Percent			Increases (Decreases) Amount			Increases (Decreases) Percent			Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	356			3.4	%	$	59			7.1	%	$	148			13.5	%	$	2			40.0	%	$	565			4.6	%
Purchased power		70			3.5			21			9.7			227			26.4			-			-			318			10.3
Fuel		(35	)		(10.9	)		-			-			-			-			-			-			(35	)		(10.9	)
Gas purchased for resale		77			14.5			12			15.8			88			Large			(1	)		Large			176			27.7
Other operations and maintenance		138			5.0			16			5.3			3			2.9			-			-			157			5.0
Depreciation and amortization		45			4.8			5			8.9			(4	)		(17.4	)		1			Large			47			4.6
Taxes, other than income taxes		(18	)		(1.0	)		(2	)		(3.2	)		2			11.8			-			-			(18	)		(0.9	)
Gain on sale of solar electric production projects		-			-			-			-			45			-			-			-			45			-
Operating income (loss)		79			3.8			7			5.8			(123	)		Large			2			Large			(35	)		(1.6	)
Other income less deductions		10			Large			2			Large			20			Large			(3	)		Large			29			Large
Net interest expense		16			3.1			(2	)		(5.4	)		(143	)		Large			1			3.8			(128	)		(17.8	)
Income before income tax expense		73			4.7			11			13.1			40			62.5			(2	)		(9.1	)		122			7.9
Income tax expense		35			6.7			16			84.2			34			82.9			7			31.8			92			19.3
Net income for common stock	$	38			3.7	%	$	(5	)		(7.7	)%	$	6			26.1	%	$	(9	)		Large		$	30			2.8	%

(a)	Includes parent company and consolidation adjustments.

(b)	Represents the consolidated financial results of Con Edison and its businesses.

CECONY


	Twelve Months Ended December 31, 2014								Twelve Months Ended December 31, 2013
(Millions of Dollars)	Electric		Gas		Steam		2014 Total		Electric		Gas		Steam		2013 Total		2014-2013 Variation
Operating revenues	$	8,437	$	1,721	$	628	$	10,786	$	8,131	$	1,616	$	683	$	10,430	$	356
Purchased power		2,036		-		55		2,091		1,974		-		47		2,021		70
Fuel		180		-		105		285		174		-		146		320		(35	)
Gas purchased for resale		-		609		-		609		-		532		-		532		77
Other operations and maintenance		2,270		418		185		2,873		2,180		351		204		2,735		138
Depreciation and amortization		781		132		78		991		749		130		67		946		45
Taxes, other than income taxes		1,458		248		92		1,798		1,459		241		116		1,816		(18	)
Operating income	$	1,712	$	314	$	113	$	2,139	$	1,595	$	362	$	103	$	2,060	$	79


						CON EDISON ANNUAL REPORT 2014		43

Management’s

Discussion and Analysis of Financial Condition and Results of Operations – Continued

Electric

CECONY’s results of electric operations for the year ended December 31, 2014 compared with the year ended December 31, 2013 is as follows:


	Twelve Months Ended
(Millions of Dollars)	December 31, 2014		December 31, 2013		Variation
Operating revenues	$	8,437	$	8,131	$	306
Purchased power		2,036		1,974		62
Fuel		180		174		6
Other operations and maintenance		2,270		2,180		90
Depreciation and amortization		781		749		32
Taxes, other than income taxes		1,458		1,459		(1	)
Electric operating income	$	1,712	$	1,595	$	117

CECONY’s electric sales and deliveries in 2014 compared with 2013 were:


	Millions of kWhs Delivered										Revenues in Millions(a)
	Twelve Months Ended										Twelve Months Ended
Description	December 31, 2014		December 31, 2013		Variation			Percent Variation			December 31, 2014		December 31, 2013		Variation			Percent Variation
Residential/Religious(b)		9,868		10,273		(405	)		(3.9	)%	$	2,847	$	2,773	$	74			2.7	%
Commercial/Industrial		9,834		9,776		58			0.6			2,176		2,013		163			8.1
Energy choice customers		26,221		26,574		(353	)		(1.3	)		2,646		2,683		(37	)		(1.4	)
NYPA, Municipal Agency and other sales		10,380		10,295		85			0.8			625		615		10			1.6
Other operating revenues(c)		-		-		-			-			143		47		96			Large
Total		56,303		56,918		(615	)		(1.1	)%(d)	$	8,437	$	8,131	$	306			3.8	%

(a)	Revenues from electric sales are subject to a revenue decoupling mechanism, as a result of which delivery revenues generally are not affected by changes in delivery volumes from levels assumed when rates were approved.

(b)	“Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations.

(c)	Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the revenue decoupling mechanism and other provisions of the company’s rate plans. See Note B to the financial statements in Item 8.

(d)	After adjusting for variations, principally weather and billing days, electric delivery volumes in CECONY’s service area decreased 0.1 percent in 2014 compared with 2013.

Operating revenues increased $306 million in 2014 compared with 2013 due primarily to higher revenues from the electric rate plan ($215 million), higher purchased power ($62 million) and fuel expenses ($6 million).

Purchased power expenses increased $62 million in 2014 compared with 2013 due to an increase in unit costs ($56 million) and purchased volumes ($6 million).

Fuel expenses increased $6 million in 2014 compared with 2013 due to higher unit costs ($34 million), offset by lower sendout volumes from the company’s electric generating facilities ($28 million).

Other operations and maintenance expenses increased $90 million due primarily to higher costs for the support and protection of company underground facilities to accommodate New York City municipal projects ($25 million), higher costs for injuries and damages ($24 million), an increase in healthcare costs ($12 million) and an increase in the surcharges for assessments and fees that are collected in revenues from customers ($11 million).

Depreciation and amortization increased $32 million due primarily to higher electric utility plant balances.

Taxes, other than income taxes decreased $1 million principally due to a sales and use tax refund, offset in part by higher property taxes.