MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – CONTINUED any second-step assessment and did not result in any impairment.
The company’s most significant assumptions surrounding the goodwill impairment test relate to the estimates of reporting unit fair values.
The company estimated fair values based primarily on discounted cash flows and on market values for a proxy group of companies.
Accounting for Derivative Instruments The Companies apply the accounting rules for derivatives and hedging to their derivative financial instruments.
The Companies use derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase and sale of electricity and gas and interest rate risk on certain debt securities.
The Utilities are permitted by their respective regulators to reflect in rates all reasonably incurred gains and losses on these instruments.
See “Financial and Commodity Market Risks,” below and Note O to the financial statements in Item 8.
Where the Companies are required to make mark-to-market estimates pursuant to the accounting rules, the estimates of gains and losses at a particular period end do not reflect the end results of particular transactions, and will most likely not reflect the actual gain or loss at the conclusion of a transaction.
Substantially all of the estimated gains or losses are based on prices supplied by external sources such as the fair value of exchange-traded futures and options and the fair value of positions for which price quotations are available through or derived from brokers or other market sources.
Accounting for Leases The Companies apply the accounting rules for leases and other related pronouncements to their leasing transactions.
See Note J to the financial statements in Item 8 for information about Con Edison Development’s “Lease In/Lease Out” or LILO transactions, a disallowance of tax losses by the IRS and the appeal by the IRS of a favorable court decision in the company’s litigation with the IRS.
In accordance with the accounting rules, Con Edison accounted for the two LILO transactions as leveraged leases.
Accordingly, the company’s investment in these leases, net of non-recourse debt, is carried as a single amount in Con Edison’s consolidated balance sheet and income is recognized pursuant to a method that incorporates a level rate of return for those years when net investment in the lease is positive, based upon the after-tax cash flows projected at the inception of the leveraged leases.
Liquidity and Capital Resources The Companies’ liquidity reflects cash flows from operating, investing and financing activities, as shown on their respective consolidated statement of cash flows and as discussed below.
The principal factors affecting Con Edison’s liquidity are its investments in the Utilities, the dividends it pays to its shareholders and the dividends it receives from the Utilities and cash flows from financing activities discussed below.
The principal factors affecting CECONY’s liquidity are its cash flows from operating activities, cash used in investing activities (including construction expenditures), the dividends it pays to Con Edison and cash flows from financing activities discussed below.
The Companies generally maintain minimal cash balances and use short-term borrowings to meet their working capital needs and other cash requirements.
The Companies repay their shortterm borrowings using funds from long-term financings and operating activities.
The Utilities’ cost of capital, including working capital, is reflected in the rates they charge to their customers.
Each of the Companies believes that it will be able to meet its reasonably likely short-term and long-term cash requirements.
See “The Companies Require Access to Capital Markets to Satisfy Funding Requirements” and “The Companies Also Face Other Risks That Are Beyond Their Control” in Item 1A, “Application of Critical Accounting Policies – Accounting for Contingencies,” above, and “Utility Regulation” in Item 1.
Changes in the Companies’ cash and temporary cash investments resulting from operating, investing and financing activities for the years ended December 31, 2011, 2010 and 2009 are summarized as follows: Con Edison
## Table 0 ##
CECONY
## Table 1 ##
## Table 2 ##
Con Edison has established a pension trust for the investment of assets to be used for the exclusive purpose of providing retirement benefits to participants and beneficiaries and payment of plan expenses.
Pursuant to resolutions adopted by Con Edison’s Board of Directors, the Management Development and Compensation Committee of the Board of Directors (the Committee) has general oversight responsibility for Con Edison’s pension and other employee benefit plans.
The pension plan’s named fiduciaries have been granted the authority to control and manage the operation and administration of the plans, including overall responsibility for the investment of assets in the trust and the power to appoint and terminate investment managers.
The investment objectives of the Con Edison pension plan are to maintain a level and form of assets adequate to meet benefit obligations to participants, to achieve the expected long-term total return on the trust assets within a prudent level of risk and maintain a level of volatility that is not expected to have a material impact on the company’s expected contribution and expense or the company’s ability to meet plan obligations.
The assets of the plan have no significant concentration of risk in one country (other than the United States), industry or entity.
The strategic asset allocation is intended to meet the objectives of the pension plan by diversifying its funds across asset classes, investment styles and fund managers.
An asset/liability study typically is conducted every few years to determine whether the current strategic asset allocation continues to represent the appropriate balance of expected risk and reward for the plan to meet expected liabilities.
Each study considers the investment risk of the asset allocation and determines the optimal asset allocation for the plan.
The target asset allocation for 2017 reflects the results of such a study conducted in 2016.
Individual fund managers operate under written guidelines provided by Con Edison, which cover such areas as investment objectives, performance measurement, permissible investments, investment restrictions, trading and execution, and communication and reporting requirements.
Con Edison management regularly monitors, and the named fiduciaries review and report to the Committee regarding, asset class performance, total fund performance, and compliance with asset allocation guidelines.
Management changes fund managers and rebalances the portfolio as appropriate.
At the direction of the named fiduciaries, such changes are reported to the Committee.
In May 2015, the FASB issued ASU 2015-07, Fair Value Measurements (Topic 820):Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or its equivalent), which exempts investments measured using net asset value (NAV) practical expedient in ASC 820, Fair Value Measurement, from categorization within the fair value hierarchy.
The guidance requires retrospective application and is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2015.
Accordingly, the amendment was retrospectively applied, resulting in the reclassification of real estate funds, private equity and hedge fund investments from Level III assets on the fair value hierarchy to investments measured at net asset value.
Assets measured at fair value on a recurring basis are summarized below as defined by the accounting rules for fair value measurements (see Note P).
The fair values of the pension plan assets at December?31, 2016 by asset category are as follows:
non-contributory life insurance program for retirees.
Certain employees of the Clean Energy Businesses are eligible to receive benefits under these programs.
Total Periodic Benefit Cost The components of the Companies’ total periodic postretirement benefit costs for 2016, 2015 and 2014 were as follows:
## Table 3 ##
Funded Status The funded status of the programs at December 31, 2016, 2015 and 2014 were as follows
## Table 4 ##
The decrease in the other postretirement benefit plan obligation was the primary cause of the decreased liability for other postretirement benefits at Con Edison and CECONY of $70 million and $67 million, respectively, compared with December 31, 2015.
For Con Edison, this decreased liability corresponds with an increase to regulatory liabilities of $32 million for unrecognized net losses and unrecognized prior service costs associated with the Utilities consistent with the accounting rules for regulated operations, a credit to OCI of $2 million (net of taxes) for the unrecognized net losses and a debit to OCI of $1 million (net of taxes) for the unrecognized prior service costs associated with the Clean Energy Businesses and RECO.
Stock-Based Compensation – We have several stock-based compensation plans under which employees and non-employee directors receive stock options, nonvested retention shares, and nonvested stock units.
We refer to the nonvested shares and stock units collectively as “retention awards”.
We issue treasury shares to cover option exercises and stock unit vestings, while new shares are issued when retention shares vest.
We adopted FASB Statement No.123(R), Share-Based Payment (FAS 123(R)), on January 1, 2006.
FAS 123(R) requires us to measure and recognize compensation expense for all stock-based awards made to employees and directors, including stock options.
Compensation expense is based on the calculated fair value of the awards as measured at the grant date and is expensed ratably over the service period of the awards (generally the vesting period).
The fair value of retention awards is the stock price on the date of grant, while the fair value of stock options is determined by using the Black-Scholes option pricing model.
We elected to use the modified prospective transition method as permitted by FAS 123(R) and did not restate financial results for prior periods.
We did not make an adjustment for the cumulative effect of these estimated forfeitures, as the impact was not material.
As a result of the adoption of FAS 123(R), we recognized expense for stock options in 2006, in addition to retention awards, which were expensed prior to 2006.
Stock-based compensation expense for the year ended December 31, 2006 was $22 million, after tax, or $0.08 per basic and diluted share.
This includes $9 million for stock options and $13 million for retention awards for 2006.
Before taxes, stock-based compensation expense included $14 million for stock options and $21 million for retention awards for 2006.
We recorded $29 million of excess tax benefits as an inflow of financing activities in the Consolidated Statement of Cash Flows for the year ended December 31, 2006.
Prior to the adoption of FAS 123(R), we applied the recognition and measurement principles of Accounting Principles Board Opinion No.25, Accounting for Stock Issued to Employees, and related interpretations.
No stockbased employee compensation expense related to stock option grants was reflected in net income, as all options granted under those plans had a grant price equal to the market value of our common stock on the date of grant.
Stock-based compensation expense related to retention shares, stock units, and other incentive plans was reflected in net income.
The following table details the effect on net income and earnings per share had compensation expense for all of our stock-based awards, including stock options, been recorded in the years ended December 31, 2005 and 2004 based on the fair value method under FASB Statement No.123, Accounting for Stock-Based Compensation.
## Table 5 ##
[a] Stock options for executives granted in 2003 and 2002 included a reload feature.
This reload feature allowed executives to exercise their options using shares of Union Pacific Corporation common stock that they already owned and obtain a new grant of options in the amount of the shares used for exercise plus any shares withheld for tax purposes.
The reload feature of these option grants could only be exercised if the

<table><tr><td><i></i> <i>(millions of dollars)</i></td><td>2011</td><td>2010</td><td>Variance 2011 vs. 2010</td><td>2009</td><td>Variance 2010 vs. 2009</td></tr><tr><td>Operating activities</td><td>$3,137</td><td>$2,381</td><td>$756</td><td>$2,466</td><td>$-85</td></tr><tr><td>Investing activities</td><td>-2,150</td><td>-2,175</td><td>25</td><td>-2,360</td><td>185</td></tr><tr><td>Financing activities</td><td>-677</td><td>-128</td><td>-549</td><td>80</td><td>-208</td></tr><tr><td>Net change</td><td>310</td><td>78</td><td>232</td><td>186</td><td>-108</td></tr><tr><td>Balance at beginning of period</td><td>338</td><td>260</td><td>78</td><td>74</td><td>186</td></tr><tr><td>Balance at end of period</td><td>$648</td><td>$338</td><td>$310</td><td>$260</td><td>$78</td></tr></table>
<table><tr><td><i></i> <i>(millions of dollars)</i></td><td>2011</td><td>2010</td><td>Variance 2011 vs. 2010</td><td>2009</td><td>Variance 2010 vs. 2009</td></tr><tr><td>Operating activities</td><td>$2,933</td><td>$2,205</td><td>$728</td><td>$2,222</td><td>$-17</td></tr><tr><td>Investing activities</td><td>-1,947</td><td>-1,998</td><td>51</td><td>-2,108</td><td>110</td></tr><tr><td>Financing activities</td><td>-692</td><td>-260</td><td>-432</td><td>-20</td><td>-240</td></tr><tr><td>Net change</td><td>294</td><td>-53</td><td>347</td><td>94</td><td>-147</td></tr><tr><td>Balance at beginning of period</td><td>78</td><td>131</td><td>-53</td><td>37</td><td>94</td></tr><tr><td>Balance at end of period</td><td>$372</td><td>$78</td><td>$294</td><td>$131</td><td>$-53</td></tr></table>
<table><tr><td></td><td rowspan="2">TargetAllocation Range 2017</td><td colspan="3">Plan Assets at December 31,</td></tr><tr><td>Asset Category</td><td>2016</td><td>2015</td><td>2014</td></tr><tr><td>Equity Securities</td><td>52% - 64%</td><td>58%</td><td>57%</td><td>58%</td></tr><tr><td>Debt Securities</td><td>28% - 38%</td><td>33%</td><td>33%</td><td>32%</td></tr><tr><td>Real Estate</td><td>7% - 11%</td><td>9%</td><td>10%</td><td>10%</td></tr><tr><td>Total</td><td>100%</td><td>100%</td><td>100%</td><td>100%</td></tr></table>
<table><tr><td></td><td colspan="3">Con Edison</td><td colspan="3">CECONY</td></tr><tr><td>(Millions of Dollars)</td><td>2016</td><td>2015</td><td>2014</td><td>2016</td><td>2015</td><td>2014</td></tr><tr><td>Service cost</td><td>$18</td><td>$20</td><td>$19</td><td>$13</td><td>$15</td><td>$15</td></tr><tr><td>Interest cost on accumulated other postretirement benefit obligation</td><td>48</td><td>51</td><td>60</td><td>40</td><td>43</td><td>52</td></tr><tr><td>Expected return on plan assets</td><td>-77</td><td>-78</td><td>-77</td><td>-67</td><td>-68</td><td>-68</td></tr><tr><td>Recognition of net actuarial loss</td><td>5</td><td>31</td><td>57</td><td>3</td><td>28</td><td>51</td></tr><tr><td>Recognition of prior service cost</td><td>-20</td><td>-20</td><td>-19</td><td>-14</td><td>-14</td><td>-15</td></tr><tr><td>TOTAL PERIODIC POSTRETIREMENT BENEFIT COST</td><td>$-26</td><td>$4</td><td>$40</td><td>$-25</td><td>$4</td><td>$35</td></tr><tr><td>Cost capitalized</td><td>11</td><td>-2</td><td>-15</td><td>10</td><td>-2</td><td>-14</td></tr><tr><td>Reconciliation to rate level</td><td>22</td><td>14</td><td>10</td><td>22</td><td>6</td><td>2</td></tr><tr><td>Cost charged to operating expenses</td><td>$7</td><td>$16</td><td>$35</td><td>$7</td><td>$8</td><td>$23</td></tr></table>
<table><tr><td></td><td colspan="3">Con Edison</td><td colspan="3">CECONY</td></tr><tr><td>(Millions of Dollars)</td><td>2016</td><td>2015</td><td>2014</td><td>2016</td><td>2015</td><td>2014</td></tr><tr><td>CHANGE IN BENEFIT OBLIGATION</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Benefit obligation at beginning of year</td><td>$1,287</td><td>$1,411</td><td>$1,395</td><td>$1,093</td><td>$1,203</td><td>$1,198</td></tr><tr><td>Service cost</td><td>18</td><td>20</td><td>19</td><td>13</td><td>15</td><td>15</td></tr><tr><td>Interest cost on accumulated postretirement benefit obligation</td><td>48</td><td>51</td><td>60</td><td>40</td><td>43</td><td>52</td></tr><tr><td>Amendments</td><td>—</td><td>—</td><td>-12</td><td>—</td><td>—</td><td>—</td></tr><tr><td>Net actuarial loss/(gain)</td><td>-57</td><td>-103</td><td>47</td><td>-52</td><td>-85</td><td>28</td></tr><tr><td>Benefits paid and administrative expenses</td><td>-134</td><td>-127</td><td>-134</td><td>-122</td><td>-117</td><td>-125</td></tr><tr><td>Participant contributions</td><td>36</td><td>35</td><td>36</td><td>35</td><td>34</td><td>35</td></tr><tr><td>BENEFIT OBLIGATION AT END OF YEAR</td><td>$1,198</td><td>$1,287</td><td>$1,411</td><td>$1,007</td><td>$1,093</td><td>$1,203</td></tr><tr><td>CHANGE IN PLAN ASSETS</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Fair value of plan assets at beginning of year</td><td>$994</td><td>$1,084</td><td>$1,113</td><td>$870</td><td>$950</td><td>$977</td></tr><tr><td>Actual return on plan assets</td><td>60</td><td>-6</td><td>59</td><td>52</td><td>-4</td><td>54</td></tr><tr><td>Employer contributions</td><td>7</td><td>6</td><td>7</td><td>7</td><td>6</td><td>7</td></tr><tr><td>EGWP payments</td><td>35</td><td>28</td><td>12</td><td>33</td><td>26</td><td>11</td></tr><tr><td>Participant contributions</td><td>36</td><td>35</td><td>36</td><td>35</td><td>34</td><td>35</td></tr><tr><td>Benefits paid</td><td>-157</td><td>-153</td><td>-143</td><td>-146</td><td>-142</td><td>-134</td></tr><tr><td>FAIR VALUE OF PLAN ASSETS AT END OF YEAR</td><td>$975</td><td>$994</td><td>$1,084</td><td>$851</td><td>$870</td><td>$950</td></tr><tr><td>FUNDED STATUS</td><td>$-223</td><td>$-293</td><td>$-327</td><td>$-156</td><td>$-223</td><td>$-253</td></tr><tr><td>Unrecognized net loss/(gain)</td><td>$-24</td><td>$28</td><td>$78</td><td>$-42</td><td>$4</td><td>$45</td></tr><tr><td>Unrecognized prior service costs</td><td>-31</td><td>-51</td><td>-71</td><td>-18</td><td>-32</td><td>-46</td></tr></table>
<table><tr><td><i>Pro Forma Stock-Based Compensation Expense</i></td><td>Year Ended December 31,</td></tr><tr><td><i>Millions of Dollars, Except Per Share Amounts</i></td><td>2005</td><td>2004</td></tr><tr><td>Net income, as reported</td><td>$1,026</td><td>$604</td></tr><tr><td>Stock-based employee compensation expense, reported in net income, net of tax</td><td>13</td><td>13</td></tr><tr><td>Total stock-based employee compensation expense determined under fair value–based method for allawards, net of tax [a]</td><td>-50</td><td>-35</td></tr><tr><td>Pro forma net income</td><td>$989</td><td>$582</td></tr><tr><td>Earnings per share – basic, as reported</td><td>$3.89</td><td>$2.33</td></tr><tr><td>Earnings per share – basic, pro forma</td><td>$3.75</td><td>$2.25</td></tr><tr><td>Earnings per share – diluted, as reported</td><td>$3.85</td><td>$2.30</td></tr><tr><td>Earnings per share – diluted, pro forma</td><td>$3.71</td><td>$2.22</td></tr></table>

Question: Which year the Reconciliation to rate level of Con Edison is the highest?
Answer: 2016