##### Table of Contents

FORM 10-Q



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION



Washington, D.C. 20549



|                                                  |  |                                                                                         
|------------------------------------------------- |  | ----------------------------------------------------------------------------------------
|x                                                 |  | Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 
|                                                 
|For the quarterly period ended SEPTEMBER 30, 2007
|                                                  | 
|OR                                                |  |                                                                                         
|                                                  | 
| ̈                                                 |  | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



|                      |  |                                                                                                        |  |                       |  |                          
|--------------------- |  | ------------------------------------------------------------------------------------------------------ |  | --------------------- |  | -------------------------
|CommissionFile Number |  | Exact name of registrant as specified in its charter and
principal office address and telephone number |  | State ofIncorporation |  | I.R.S. EmployerID. Number
|                      |  |                                                                                                        | 
|1-14514               |  | Consolidated Edison, Inc. 4 Irving Place, New
York, New York 10003 (212) 460-4600                      |  | New York              |  | 13-3965100               
|                      |  |                                                                                                        | 
|1-1217                |  | Consolidated Edison Company of New York, Inc. 4 Irving Place, New York, New York 10003 (212) 460-4600  |  | New York              |  | 13-5009340               



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. YesxNo ̈



Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.



|           |  |  |  | 
|---------- |  |  |  | 
|Con Edison |  |  |  | 

|                         |  |                    |  |                       
|------------------------ |  | ------------------ |  | ----------------------
|Large accelerated filerx |  | Accelerated filer ̈ |  | Non-accelerated filer ̈

|                       |  |  |  | 
|---------------------- |  |  |  | 
|                       |  | 
|Con Edison of New York |  |  |  | 

|                         |  |                    |  |                       
|------------------------ |  | ------------------ |  | ----------------------
|Large accelerated filer ̈ |  | Accelerated filer ̈ |  | Non-accelerated filerx



Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



|                       |  |  |  |        
|---------------------- |  |  |  | -------
|Con Edison             |  |  |  | Yes ̈Nox
|                       |  | 
|Con Edison of New York |  |  |  | Yes ̈Nox



As of the close of business on
October 31, 2007, Con Edison had outstanding 271,515,822 Common Shares ($.10 par value). All of the outstanding common equity of Con Edison of New York is held by Con Edison.



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##### Table of Contents

Filing Format



This Quarterly Report on Form 10-Q is a combined report being filed separately by two different registrants: Consolidated Edison, Inc. (Con Edison) and Consolidated
Edison Company of New York, Inc. (Con Edison of New York). Con Edison of New York is a subsidiary of Con Edison and, as such, the information in this report about Con Edison of New York also applies to Con Edison. As used in this report, the term
the Companies refers to Con Edison and Con Edison of New York. However, Con Edison of New York makes no representation as to the information contained in this report relating to Con Edison or the subsidiaries of Con Edison other than
itself.



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TABLE OF CONTENTS



|                             |  |                                                                                       |  |     
|---------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|                             |  |                                                                                       |  | PAGE
|Glossary of Terms            |  | 4                                                                                    
|                             | 
|PART IFinancial Information |  |                                                                                      
|                             |  |                                                                                      
|Item 1                       |  | Financial Statements (Unaudited)                                                      |  |     
|                             |  | Con Edison                                                                            |  |     
|                             |  | Consolidated Balance Sheet                                                            |  | 6   
|                             |  | Consolidated Income Statement                                                         |  | 8   
|                             |  | Consolidated Statement of Comprehensive Income                                        |  | 9   
|                             |  | Consolidated Statement of Common Shareholders Equity                                 |  | 10  
|                             |  | Consolidated Statement of Cash Flows                                                  |  | 11  
|                             |  | Con Edison of New York                                                                |  |     
|                             |  | Consolidated Balance Sheet                                                            |  | 12  
|                             |  | Consolidated Income Statement                                                         |  | 14  
|                             |  | Consolidated Statement of Comprehensive Income                                        |  | 15  
|                             |  | Consolidated Statement of Common Shareholders Equity                                 |  | 16  
|                             |  | Consolidated Statement of Cash Flows                                                  |  | 17  
|                             |  | Notes to Financial Statements (Unaudited)                                             |  | 18  
|Item 2                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 43  
|Item 3                       |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 73  
|Item 4                       |  | Controls and Procedures                                                               |  | 73  
|                             | 
|PART IIOther Information    |  |                                                                                      
|Item 1                       |  | Legal Proceedings                                                                     |  | 74  
|Item 1a                      |  | Risk Factors                                                                          |  | 74  
|Item 6                       |  | Exhibits                                                                              |  | 75  
|Signatures                   |  | 76                                                                                   



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GLOSSARY OF TERMS



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



|                              |  |                                                                       
|----------------------------- |  | ----------------------------------------------------------------------
|Con Edison Companies          |  |                                                                       
|Con Edison                    |  | Consolidated Edison, Inc.                                             
|Con Edison Communications     |  | Con Edison Communications, LLC                                        
|Con Edison Development        |  | Consolidated Edison Development, Inc.                                 
|Con Edison Energy             |  | Consolidated Edison Energy, Inc.                                      
|Con Edison of New York        |  | Consolidated Edison Company of New York, Inc.                         
|Con Edison Solutions          |  | Consolidated Edison Solutions, Inc.                                   
|O&R                           |  | Orange and Rockland Utilities, Inc.                                   
|Pike                          |  | Pike County Light & Power Company                                     
|RECO                          |  | Rockland Electric Company                                             
|The Companies                 |  | Con Edison and Con Edison of New York                                 
|The Utilities                 |  | Con Edison of New York and O&R                                        
|                              | 
|Regulatory and State Agencies |  |                                                                       
|DEC                           |  | New York State Department of Environmental Conservation               
|EPA                           |  | Environmental Protection Agency                                       
|FERC                          |  | Federal Energy Regulatory Commission                                  
|IRS                           |  | Internal Revenue Service                                              
|ISO-NE                        |  | ISO New England                                                       
|NJBPU                         |  | New Jersey Board of Public Utilities                                  
|NJDEP                         |  | New Jersey Department of Environmental Protection                     
|NYAG                          |  | New York Attorney General                                             
|NYISO                         |  | New York Independent System Operator                                  
|NYPA                          |  | New York Power Authority                                              
|NYSERDA                       |  | New York State Energy Research and Development Authority              
|NYSRC                         |  | New York State Reliability Council                                    
|PJM                           |  | PJM Interconnection                                                   
|PSC                           |  | New York State Public Service Commission                              
|PPUC                          |  | Pennsylvania Public Utility Commission                                
|SEC                           |  | Securities and Exchange Commission                                    
|                              | 
|Other                         |  |                                                                       
|ABO                           |  | Accumulated Benefit Obligation                                        
|APB                           |  | Accounting Principles Board                                           
|AFDC                          |  | Allowance for funds used during construction                          
|CO2                           |  | Carbon dioxide                                                        
|COSO                          |  | Committee of Sponsoring Organizations of the Treadway Commission      
|DIG                           |  | Derivatives Implementation Group                                      
|District Court                |  | The United States District Court for the Southern District of New York
|dths                          |  | Dekatherms                                                            
|EITF                          |  | Emerging Issues Task Force                                            
|EMF                           |  | Electric and magnetic fields                                          



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|                         |  |                                                                                                                                                                                                                                                                                      
|------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Other                    |  |                                                                                                                                                                                                                                                                                      
|ERRP                     |  | East River Repowering Project                                                                                                                                                                                                                                                        
|FASB                     |  | Financial Accounting Standards Board                                                                                                                                                                                                                                                 
|FIN                      |  | FASB Interpretation No.                                                                                                                                                                                                                                                              
|First Quarter Form 10-Q  |  | The Companies combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007                                                                                                                                                                                  
|Fitch                    |  | Fitch Ratings                                                                                                                                                                                                                                                                        
|Form 10-K                |  | The Companies combined Annual Report on Form 10-K for the year ended December 31, 2006                                                                                                                                                                                              
|FSP                      |  | FASB Staff Position                                                                                                                                                                                                                                                                  
|GHG                      |  | Greenhouse gases                                                                                                                                                                                                                                                                     
|kV                       |  | Kilovolts                                                                                                                                                                                                                                                                            
|kWh                      |  | Kilowatt-hour                                                                                                                                                                                                                                                                        
|LILO                     |  | Lease In/Lease Out                                                                                                                                                                                                                                                                   
|LTIP                     |  | Long Term Incentive Plan                                                                                                                                                                                                                                                             
|MD&A                     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                                                                                
|mdths                    |  | Thousand dekatherms                                                                                                                                                                                                                                                                  
|MGP Sites                |  | Manufactured gas plant sites                                                                                                                                                                                                                                                         
|mmlbs                    |  | Million pounds                                                                                                                                                                                                                                                                       
|Moodys                  |  | Moodys Investors Service                                                                                                                                                                                                                                                            
|MVA                      |  | Megavolt amperes                                                                                                                                                                                                                                                                     
|MW                       |  | Megawatts or thousand kilowatts                                                                                                                                                                                                                                                      
|MWH                      |  | Megawatt hour                                                                                                                                                                                                                                                                        
|Net T&D Revenues         |  | Revenue requirement impact resulting from the reconciliation pursuant to Con Edison of New Yorks electric rate agreement of the differences between the actual amount of transmission and
distribution utility plant, net of depreciation, to the amount reflected in electric rates
|NUGs                     |  | Non-utility generators                                                                                                                                                                                                                                                               
|OCI                      |  | Other Comprehensive Income                                                                                                                                                                                                                                                           
|PCBs                     |  | Polychlorinated biphenyls                                                                                                                                                                                                                                                            
|PPA                      |  | Power purchase agreement                                                                                                                                                                                                                                                             
|PRP                      |  | Potentially responsible party                                                                                                                                                                                                                                                        
|S&P                      |  | Standard & Poors Rating Services                                                                                                                                                                                                                                                    
|SFAS                     |  | Statement of Financial Accounting Standards                                                                                                                                                                                                                                          
|SO2                      |  | Sulfur dioxide                                                                                                                                                                                                                                                                       
|SSCM                     |  | Simplified service cost method                                                                                                                                                                                                                                                       
|Second Quarter Form 10-Q |  | The Companies combined Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2007                                                                                                                                                                                   
|Superfund                |  | Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes                                                                                                                                                                      
|Third Quarter Form 10-Q  |  | The Companies combined Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007                                                                                                                                                                              
|VaR                      |  | Value-at-Risk                                                                                                                                                                                                                                                                        
|VIE                      |  | Variable interest entity                                                                                                                                                                                                                                                             



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Consolidated Edison, Inc.



CONSOLIDATED BALANCE SHEET

(UNAUDITED)



|                                                                                                                         |  |                       |        |                   |   |       
|------------------------------------------------------------------------------------------------------------------------ |  | --------------------- | ------ | ----------------- | - | ------
|                                                                                                                         |  | September 30, 2007    |        | December 31, 2006
|                                                                                                                         |  | (Millions of Dollars)
|ASSETS                                                                                                                   |  |                       |        |                   |   |       
|UTILITY PLANT, AT ORIGINAL COST                                                                                          |  |                       |        |                   |   |       
|Electric                                                                                                                 |  | $                     | 15,704 |                   | $ | 14,775
|Gas                                                                                                                      |  |                       | 3,349  |                   |   | 3,233 
|Steam                                                                                                                    |  |                       | 1,733  |                   |   | 1,691 
|General                                                                                                                  |  |                       | 1,680  |                   |   | 1,635 
|TOTAL                                                                                                                    |  |                       | 22,466 |                   |   | 21,334
|Less: Accumulated depreciation                                                                                           |  |                       | 4,730  |                   |   | 4,583 
|Net                                                                                                                      |  |                       | 17,736 |                   |   | 16,751
|Construction work in progress                                                                                            |  |                       | 916    |                   |   | 872   
|NET UTILITY PLANT                                                                                                        |  |                       | 18,652 |                   |   | 17,623
|NON-UTILITY PLANT                                                                                                        |  |                       |        |                   |   |       
|Generating assets, less accumulated depreciation of $146 and $127 in 2007 and 2006, respectively                         |  |                       | 767    |                   |   | 785   
|Non-utility property, less accumulated depreciation of $41 and $36 in 2007 and 2006, respectively                        |  |                       | 32     |                   |   | 34    
|Construction work in progress                                                                                            |  |                       | 4      |                   |   | 3     
|NET PLANT                                                                                                                |  |                       | 19,455 |                   |   | 18,445
|CURRENT ASSETS                                                                                                           |  |                       |        |                   |   |       
|Cash and temporary cash investments                                                                                      |  |                       | 192    |                   |   | 94    
|Restricted cash                                                                                                          |  |                       | 17     |                   |   | 18    
|Accounts receivable - customers, less allowance for uncollectible accounts of $46 and $45 in 2007 and 2006, respectively |  |                       | 939    |                   |   | 825   
|Accrued unbilled revenue                                                                                                 |  |                       | 127    |                   |   | 122   
|Other receivables, less allowance for uncollectible accounts of $5 and $4 in 2007 and 2006, respectively                 |  |                       | 411    |                   |   | 522   
|Fuel oil, at average cost                                                                                                |  |                       | 59     |                   |   | 56    
|Gas in storage, at average cost                                                                                          |  |                       | 261    |                   |   | 253   
|Materials and supplies, at average cost                                                                                  |  |                       | 144    |                   |   | 157   
|Prepayments                                                                                                              |  |                       | 346    |                   |   | 157   
|Fair value of derivative assets                                                                                          |  |                       | 33     |                   |   | 122   
|Recoverable energy costs                                                                                                 |  |                       | 211    |                   |   | 235   
|Deferred derivative losses                                                                                               |  |                       | 173    |                   |   | 237   
|Other current assets                                                                                                     |  |                       | 66     |                   |   | 139   
|TOTAL CURRENT ASSETS                                                                                                     |  |                       | 2,979  |                   |   | 2,937 
|INVESTMENTS                                                                                                              |  |                       | 378    |                   |   | 366   
|DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT
ASSETS                                                                |  |                       |        |                   |   |       
|Goodwill                                                                                                                 |  |                       | 407    |                   |   | 406   
|Intangible assets, less accumulated amortization of $41 and $34 in 2007 and 2006, respectively                           |  |                       | 73     |                   |   | 80    
|Regulatory assets                                                                                                        |  |                       | 4,192  |                   |   | 4,179 
|Other deferred charges and noncurrent assets                                                                             |  |                       | 424    |                   |   | 286   
|TOTAL DEFERRED CHARGES, REGULATORY
ASSETS AND NONCURRENT ASSETS                                                          |  |                       | 5,096  |                   |   | 4,951 
|TOTAL ASSETS                                                                                                             |  | $                     | 27,908 |                   | $ | 26,699



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



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Consolidated Edison, Inc.



CONSOLIDATED BALANCE SHEET

(UNAUDITED)



|                                                                           |  |                       |        |                   |   |       
|-------------------------------------------------------------------------- |  | --------------------- | ------ | ----------------- | - | ------
|                                                                           |  | September 30, 2007    |        | December 31, 2006
|                                                                           |  | (Millions of Dollars)
|CAPITALIZATION AND LIABILITIES                                             |  |                       |        |                   |   |       
|CAPITALIZATION                                                             |  |                       |        |                   |   |       
|Common shareholders equity (See Statement of Common Shareholders Equity) |  | $                     | 8,990  |                   | $ | 8,004 
|Preferred stock of subsidiary                                              |  |                       | 213    |                   |   | 213   
|Long-term debt                                                             |  |                       | 8,004  |                   |   | 8,298 
|TOTAL CAPITALIZATION                                                       |  |                       | 17,207 |                   |   | 16,515
|MINORITY INTERESTS                                                         |  |                       | 42     |                   |   | 41    
|NONCURRENT LIABILITIES                                                     |  |                       |        |                   |   |       
|Obligations under capital leases                                           |  |                       | 23     |                   |   | 26    
|Provision for injuries and damages                                         |  |                       | 161    |                   |   | 155   
|Pension and retiree benefits                                               |  |                       | 693    |                   |   | 737   
|Superfund and other environmental costs                                    |  |                       | 333    |                   |   | 292   
|Uncertain income taxes                                                     |  |                       | 156    |                   |   |      
|Asset retirement obligations                                               |  |                       | 117    |                   |   | 97    
|Fair value of derivative liabilities                                       |  |                       | 70     |                   |   | 97    
|Other noncurrent liabilities                                               |  |                       | 93     |                   |   | 93    
|TOTAL NONCURRENT LIABILITIES                                               |  |                       | 1,646  |                   |   | 1,497 
|CURRENT LIABILITIES                                                        |  |                       |        |                   |   |       
|Long-term debt due within one year                                         |  |                       | 836    |                   |   | 374   
|Notes payable                                                              |  |                       | 350    |                   |   | 117   
|Accounts payable                                                           |  |                       | 1,102  |                   |   | 1,126 
|Customer deposits                                                          |  |                       | 244    |                   |   | 228   
|Accrued taxes                                                              |  |                       | 48     |                   |   | 36    
|Accrued interest                                                           |  |                       | 151    |                   |   | 139   
|Accrued wages                                                              |  |                       | 87     |                   |   | 79    
|Fair value of derivative liabilities                                       |  |                       | 177    |                   |   | 395   
|Deferred derivative gains                                                  |  |                       | 3      |                   |   | 6     
|Deferred income taxes - recoverable energy costs                           |  |                       | 85     |                   |   | 96    
|Other current liabilities                                                  |  |                       | 252    |                   |   | 276   
|TOTAL CURRENT LIABILITIES                                                  |  |                       | 3,335  |                   |   | 2,872 
|DEFERRED CREDITS AND REGULATORY LIABILITIES                                |  |                       |        |                   |   |       
|Deferred income taxes and investment tax credits                           |  |                       | 4,379  |                   |   | 4,095 
|Regulatory liabilities                                                     |  |                       | 1,278  |                   |   | 1,657 
|Other deferred credits                                                     |  |                       | 21     |                   |   | 22    
|TOTAL DEFERRED CREDITS AND
REGULATORY LIABILITIES                          |  |                       | 5,678  |                   |   | 5,774 
|TOTAL CAPITALIZATION AND
LIABILITIES                                       |  | $                     | 27,908 |                   | $ | 26,699



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



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Consolidated Edison, Inc.



Consolidated
Income Statement

(UNAUDITED)



|                                                             |  |                                         |       |   |                                        |   |       |      |  |   |        |   |  |   |       |  
|------------------------------------------------------------ |  | --------------------------------------- | ----- | - | -------------------------------------- | - | ----- | ---- |  | - | ------ | - |  | - | ----- | -
|                                                             |  | For the Three MonthsEnded September 30, |       |   | For the Nine MonthsEnded September 30, |  
|                                                             |  | 2007                                    |       |   | 2006                                   |   |       | 2007 |  |   | 2006   |  
|                                                             |  | (Millions of Dollars/Except Share Data) |      
|OPERATING REVENUES                                           |  |                                         |       |   |                                        |   |       |      |  |   |        |   |  |   |       |  
|Electric                                                     |  | $                                       | 2,477 |   |                                        | $ | 2,478 |      |  | $ | 6,160  |   |  | $ | 5,903 |  
|Gas                                                          |  |                                         | 234   |   |                                        |   | 211   |      |  |   | 1,505  |   |  |   | 1,404 |  
|Steam                                                        |  |                                         | 102   |   |                                        |   | 104   |      |  |   | 525    |   |  |   | 485   |  
|Non-utility                                                  |  |                                         | 830   |   |                                        |   | 648   |      |  |   | 1,901  |   |  |   | 1,522 |  
|TOTAL OPERATING REVENUES                                     |  |                                         | 3,643 |   |                                        |   | 3,441 |      |  |   | 10,091 |   |  |   | 9,314 |  
|OPERATING EXPENSES                                           |  |                                         |       |   |                                        |   |       |      |  |   |        |   |  |   |       |  
|Purchased power                                              |  |                                         | 1,719 |   |                                        |   | 1,587 |      |  |   | 4,080  |   |  |   | 3,790 |  
|Fuel                                                         |  |                                         | 189   |   |                                        |   | 200   |      |  |   | 638    |   |  |   | 600   |  
|Gas purchased for resale                                     |  |                                         | 113   |   |                                        |   | 100   |      |  |   | 877    |   |  |   | 845   |  
|Other operations and maintenance                             |  |                                         | 550   |   |                                        |   | 556   |      |  |   | 1,553  |   |  |   | 1,433 |  
|Depreciation and amortization                                |  |                                         | 170   |   |                                        |   | 155   |      |  |   | 501    |   |  |   | 460   |  
|Taxes, other than income taxes                               |  |                                         | 344   |   |                                        |   | 328   |      |  |   | 991    |   |  |   | 945   |  
|Income taxes                                                 |  |                                         | 127   |   |                                        |   | 142   |      |  |   | 357    |   |  |   | 315   |  
|TOTAL OPERATING EXPENSES                                     |  |                                         | 3,212 |   |                                        |   | 3,068 |      |  |   | 8,997  |   |  |   | 8,388 |  
|OPERATING INCOME                                             |  |                                         | 431   |   |                                        |   | 373   |      |  |   | 1,094  |   |  |   | 926   |  
|OTHER INCOME (DEDUCTIONS)                                    |  |                                         |       |   |                                        |   |       |      |  |   |        |   |  |   |       |  
|Investment and other income                                  |  |                                         | 21    |   |                                        |   | 10    |      |  |   | 56     |   |  |   | 30    |  
|Allowance for equity funds used during construction          |  |                                         | 2     |   |                                        |   | 2     |      |  |   | 5      |   |  |   | 3     |  
|Preferred stock dividend requirements of subsidiary          |  |                                         | (3    | ) |                                        |   | (3    | )    |  |   | (8     | ) |  |   | (8    | )
|Other deductions                                             |  |                                         | (3    | ) |                                        |   | (3    | )    |  |   | (21    | ) |  |   | (12   | )
|Income taxes                                                 |  |                                         | 3     |   |                                        |   | 13    |      |  |   | 13     |   |  |   | 15    |  
|TOTAL OTHER INCOME
(DEDUCTIONS)                              |  |                                         | 20    |   |                                        |   | 19    |      |  |   | 45     |   |  |   | 28    |  
|INTEREST EXPENSE                                             |  |                                         |       |   |                                        |   |       |      |  |   |        |   |  |   |       |  
|Interest on long-term debt                                   |  |                                         | 126   |   |                                        |   | 123   |      |  |   | 380    |   |  |   | 356   |  
|Other interest                                               |  |                                         | 15    |   |                                        |   | 40    |      |  |   | 44     |   |  |   | 65    |  
|Allowance for borrowed funds used during construction        |  |                                         | (2    | ) |                                        |   | (2    | )    |  |   | (7     | ) |  |   | (4    | )
|NET INTEREST EXPENSE                                         |  |                                         | 139   |   |                                        |   | 161   |      |  |   | 417    |   |  |   | 417   |  
|INCOME FROM CONTINUING OPERATIONS                            |  |                                         | 312   |   |                                        |   | 231   |      |  |   | 722    |   |  |   | 537   |  
|INCOME FROM DISCONTINUED OPERATIONS
(NET OF INCOME TAXES)    |  |                                         |      |   |                                        |   |      |      |  |   |       |   |  |   | (1    | )
|NET INCOME                                                   |  | $                                       | 312   |   |                                        | $ | 231   |      |  | $ | 722    |   |  | $ | 536   |  
|EARNINGS PER COMMON SHARE - BASIC                            |  |                                         |       |   |                                        |   |       |      |  |   |        |   |  |   |       |  
|Continuing operations                                        |  | $                                       | 1.15  |   |                                        | $ | 0.93  |      |  | $ | 2.73   |   |  | $ | 2.17  |  
|Discontinued operations                                      |  |                                         |      |   |                                        |   |      |      |  |   |       |   |  |   |      |  
|Net income                                                   |  | $                                       | 1.15  |   |                                        | $ | 0.93  |      |  | $ | 2.73   |   |  | $ | 2.17  |  
|EARNINGS PER COMMON SHARE - DILUTED                          |  |                                         |       |   |                                        |   |       |      |  |   |        |   |  |   |       |  
|Continuing operations                                        |  | $                                       | 1.15  |   |                                        | $ | 0.92  |      |  | $ | 2.72   |   |  | $ | 2.16  |  
|Discontinued operations                                      |  |                                         |      |   |                                        |   |      |      |  |   |       |   |  |   |      |  
|Net income                                                   |  | $                                       | 1.15  |   |                                        | $ | 0.92  |      |  | $ | 2.72   |   |  | $ | 2.16  |  
|DIVIDENDS DECLARED PER SHARE
OF COMMON STOCK                 |  | $                                       | 0.580 |   |                                        | $ | 0.575 |      |  | $ | 1.740  |   |  | $ | 1.725 |  
|AVERAGE NUMBER OF SHARES
OUTSTANDING - BASIC (IN MILLIONS)   |  |                                         | 271.0 |   |                                        |   | 249.0 |      |  |   | 264.6  |   |  |   | 247.0 |  
|AVERAGE NUMBER OF SHARES
OUTSTANDING - DILUTED (IN MILLIONS) |  |                                         | 272.0 |   |                                        |   | 250.0 |      |  |   | 265.8  |   |  |   | 248.0 |  



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



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##### Table of Contents

Consolidated Edison, Inc.



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)



|                                                                                                                                             |  |                                         |     |   |                                        |   |     |      |  |   |      |   |  |   |     |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | --- | - | -------------------------------------- | - | --- | ---- |  | - | ---- | - |  | - | --- | -
|                                                                                                                                             |  | For the Three MonthsEnded September 30, |     |   | For the Nine MonthsEnded September 30, |  
|                                                                                                                                             |  | 2007                                    |     |   | 2006                                   |   |     | 2007 |  |   | 2006 |  
|                                                                                                                                             |  | (Millions of Dollars)                   |    
|NET INCOME                                                                                                                                   |  | $                                       | 312 |   |                                        | $ | 231 |      |  | $ | 722  |   |  | $ | 536 |  
|OTHER COMPREHENSIVE INCOME/(LOSS), NET OF
TAXES                                                                                              |  |                                         |     |   |                                        |   |     |      |  |   |      |   |  |   |     |  
|Pension plan liability adjustments, net of $1, $0, $3 and $(3) taxes in 2007 and 2006, respectively                                          |  |                                         | 1   |   |                                        |   |    |      |  |   | 4    |   |  |   | (4  | )
|Unrealized gains/(losses) on derivatives qualified as cash flow hedges, net of $0, $(17), $3 and $(57) taxes in 2007 and 2006, respectively  |  |                                         |    |   |                                        |   | (25 | )    |  |   | 4    |   |  |   | (82 | )
|Less: Reclassification adjustment for losses included in net income, net of $(7), $(8), $(21) and
$(36) taxes in 2007 and 2006, respectively |  |                                         | (11 | ) |                                        |   | (12 | )    |  |   | (31  | ) |  |   | (52 | )
|TOTAL OTHER COMPREHENSIVE
INCOME/(LOSS), NET OF TAXES                                                                                        |  |                                         | 12  |   |                                        |   | (13 | )    |  |   | 39   |   |  |   | (34 | )
|COMPREHENSIVE INCOME                                                                                                                         |  | $                                       | 324 |   |                                        | $ | 218 |      |  | $ | 761  |   |  | $ | 502 |  



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



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Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF COMMON
SHAREHOLDERS EQUITY

FOR THE THREE AND
NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

(UNAUDITED)



|                                                                         |  |                                         |  |                            |    |  |                   |        |   |                |   |       |                      |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   |       |  
|------------------------------------------------------------------------ |  | --------------------------------------- |  | -------------------------- | -- |  | ----------------- | ------ | - | -------------- | - | ----- | -------------------- |  | ---------- | ---------------------------------- | - | ------ | ----- |  | - | --- | - |  | - | --- | - |  | - | ----- | -
|                                                                         |  | Common Stock                            |  | AdditionalPaid- In Capital |    |  | Retained Earnings |        |   | Treasury Stock |   |       | CapitalStock Expense |  |            | AccumulatedOtherComprehensive Loss |   |        | Total | 
|                                                                         |  | Shares                                  |  | Amount                     |    |  |                   | Shares |   | Amount         |   |       |                      | 
|                                                                         |  | (Millions of Dollars/Except Share Data) | 
|BALANCE AS OF DECEMBER 31, 2005                                          |  | 245,286,058                             |  | $                          | 27 |  | $                 | 2,768  |   |                | $ | 5,605 |                      |  | 23,210,700 |                                    | $ | (1,001 | )     |  | $ | (55 | ) |  | $ | (34 | ) |  | $ | 7,310 |  
|                                                                         |  |                                         |  |                            |    |  |                   |        |  
|Net income                                                               |  |                                         |  |                            |    |  |                   |        |   |                |   | 181   |                      |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | 181   |  
|Common stock dividends                                                   |  |                                         |  |                            |    |  |                   |        |   |                |   | (141  | )                    |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | (141  | )
|Issuance of common sharesdividend reinvestment and employee stock plans |  | 456,347                                 |  |                            |    |  |                   | 24     |   |                |   |       |                      |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | 24    |  
|Stock options                                                            |  |                                         |  |                            |    |  |                   | (23    | ) |                |   | 35    |                      |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | 12    |  
|Other comprehensive loss                                                 |  |                                         |  |                            |    |  |                   |        |   |                |   |       |                      |  |            |                                    |   |        |       |  |   |     |   |  |   | (24 | ) |  |   | (24   | )
|BALANCE AS OF MARCH 31,
2006                                             |  | 245,742,405                             |  | $                          | 27 |  | $                 | 2,769  |   |                | $ | 5,680 |                      |  | 23,210,700 |                                    | $ | (1,001 | )     |  | $ | (55 | ) |  | $ | (58 | ) |  | $ | 7,362 |  
|                                                                         |  |                                         |  |                            |    |  |                   |        |  
|Net income                                                               |  |                                         |  |                            |    |  |                   |        |   |                |   | 124   |                      |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | 124   |  
|Common stock dividends                                                   |  |                                         |  |                            |    |  |                   |        |   |                |   | (142  | )                    |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | (142  | )
|Issuance of common sharesdividend reinvestment and employee stock plans |  | 491,822                                 |  |                            |    |  |                   | 28     |   |                |   |       |                      |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | 28    |  
|Other comprehensive income                                               |  |                                         |  |                            |    |  |                   |        |   |                |   |       |                      |  |            |                                    |   |        |       |  |   |     |   |  |   | 3   |   |  |   | 3     |  
|BALANCE AS OF JUNE 30,
2006                                              |  | 246,234,227                             |  | $                          | 27 |  | $                 | 2,797  |   |                | $ | 5,662 |                      |  | 23,210,700 |                                    | $ | (1,001 | )     |  | $ | (55 | ) |  | $ | (55 | ) |  | $ | 7,375 |  
|                                                                         |  |                                         |  |                            |    |  |                   |        |  
|Net income                                                               |  |                                         |  |                            |    |  |                   |        |   |                |   | 231   |                      |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | 231   |  
|Common stock dividends                                                   |  |                                         |  |                            |    |  |                   |        |   |                |   | (143  | )                    |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | (143  | )
|Issuance of common sharespublic offering                                |  | 9,715,000                               |  |                            | 1  |  |                   | 449    |   |                |   |       |                      |  |            |                                    |   |        |       |  |   | (3  | ) |  |   |     |   |  |   | 447   |  
|Issuance of common sharesdividend reinvestment and employee stock plans |  | 633,357                                 |  |                            |    |  |                   | 31     |   |                |   |       |                      |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | 31    |  
|Other comprehensive loss                                                 |  |                                         |  |                            |    |  |                   |        |   |                |   |       |                      |  |            |                                    |   |        |       |  |   |     |   |  |   | (13 | ) |  |   | (13   | )
|BALANCE AS OF SEPTEMBER 30, 2006                                         |  | 256,582,584                             |  | $                          | 28 |  | $                 | 3,277  |   |                | $ | 5,750 |                      |  | 23,210,700 |                                    | $ | (1,001 | )     |  | $ | (58 | ) |  | $ | (68 | ) |  | $ | 7,928 |  
|                                                                         |  |                                         |  |                            |    |  |                   |        |  
|BALANCE AS OF DECEMBER 31, 2006                                          |  | 257,456,303                             |  | $                          | 28 |  | $                 | 3,314  |   |                | $ | 5,804 |                      |  | 23,210,700 |                                    | $ | (1,001 | )     |  | $ | (58 | ) |  | $ | (83 | ) |  | $ | 8,004 |  
|                                                                         |  |                                         |  |                            |    |  |                   |        |  
|Net income                                                               |  |                                         |  |                            |    |  |                   |        |   |                |   | 256   |                      |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | 256   |  
|Common stock dividends                                                   |  |                                         |  |                            |    |  |                   |        |   |                |   | (150  | )                    |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | (150  | )
|Issuance of common sharesdividend reinvestment and employee stock plans |  | 1,327,669                               |  |                            |    |  |                   | 61     |   |                |   |       |                      |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | 61    |  
|Other comprehensive income                                               |  |                                         |  |                            |    |  |                   |        |   |                |   |       |                      |  |            |                                    |   |        |       |  |   |     |   |  |   | 36  |   |  |   | 36    |  
|BALANCE AS OF MARCH 31,
2007                                             |  | 258,783,972                             |  | $                          | 28 |  | $                 | 3,375  |   |                | $ | 5,910 |                      |  | 23,210,700 |                                    | $ | (1,001 | )     |  | $ | (58 | ) |  | $ | (47 | ) |  | $ | 8,207 |  
|                                                                         |  |                                         |  |                            |    |  |                   |        |  
|Net income                                                               |  |                                         |  |                            |    |  |                   |        |   |                |   | 154   |                      |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | 154   |  
|Common stock dividends                                                   |  |                                         |  |                            |    |  |                   |        |   |                |   | (156  | )                    |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | (156  | )
|Issuance of common sharespublic offering                                |  | 11,000,000                              |  |                            | 1  |  |                   | 559    |   |                |   |       |                      |  |            |                                    |   |        |       |  |   | (2  | ) |  |   |     |   |  |   | 558   |  
|Issuance of common sharesdividend reinvestment and employee stock plans |  | 1,089,068                               |  |                            |    |  |                   | 52     |   |                |   |       |                      |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | 52    |  
|Other comprehensive loss                                                 |  |                                         |  |                            |    |  |                   |        |   |                |   |       |                      |  |            |                                    |   |        |       |  |   |     |   |  |   | (9  | ) |  |   | (9    | )
|BALANCE AS OF JUNE 30,
2007                                              |  | 270,873,040                             |  | $                          | 29 |  | $                 | 3,986  |   |                | $ | 5,908 |                      |  | 23,210,700 |                                    | $ | (1,001 | )     |  | $ | (60 | ) |  | $ | (56 | ) |  | $ | 8,806 |  
|                                                                         |  |                                         |  |                            |    |  |                   |        |  
|Net income                                                               |  |                                         |  |                            |    |  |                   |        |   |                |   | 312   |                      |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | 312   |  
|Common stock dividends                                                   |  |                                         |  |                            |    |  |                   |        |   |                |   | (158  | )                    |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | (158  | )
|Issuance of common sharesdividend reinvestment and employee stock plans |  | 375,262                                 |  |                            |    |  |                   | 18     |   |                |   |       |                      |  |            |                                    |   |        |       |  |   |     |   |  |   |     |   |  |   | 18    |  
|Other comprehensive income                                               |  |                                         |  |                            |    |  |                   |        |   |                |   |       |                      |  |            |                                    |   |        |       |  |   |     |   |  |   | 12  |   |  |   | 12    |  
|BALANCE AS OF SEPTEMBER 30, 2007                                         |  | 271,248,302                             |  | $                          | 29 |  | $                 | 4,004  |   |                | $ | 6,062 |                      |  | 23,210,700 |                                    | $ | (1,001 | )     |  | $ | (60 | ) |  | $ | (44 | ) |  | $ | 8,990 |  



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Consolidated Edison, Inc.



CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)



|                                                                                                                          |  |                                        |        |   |      |   |        |  
|------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                                                          |  | For the Nine MonthsEnded September 30, |       
|                                                                                                                          |  | 2007                                   |        |   | 2006 |  
|                                                                                                                          |  | (Millions of Dollars)                  |       
|OPERATING ACTIVITIES                                                                                                      |  |                                        |        |   |      |   |        |  
|Net Income                                                                                                                |  | $                                      | 722    |   |      | $ | 536    |  
|PRINCIPAL NON-CASH CHARGES/(CREDITS) TO
INCOME                                                                            |  |                                        |        |   |      |   |        |  
|Depreciation and amortization                                                                                             |  |                                        | 501    |   |      |   | 460    |  
|Deferred income taxes                                                                                                     |  |                                        | 285    |   |      |   | 299    |  
|Rate case amortization and accruals                                                                                       |  |                                        | (236   | ) |      |   | (187   | )
|Net transmission and distribution reconciliation                                                                          |  |                                        | (138   | ) |      |   | (80    | )
|Common equity component of allowance for funds used during construction                                                   |  |                                        | (5     | ) |      |   | (3     | )
|Prepaid pension costs (net of capitalized amounts)                                                                        |  |                                        | 121    |   |      |   | (41    | )
|Net derivative losses                                                                                                     |  |                                        | (67    | ) |      |   | 67     |  
|Other non-cash items (net)                                                                                                |  |                                        | 58     |   |      |   | 59     |  
|CHANGES IN ASSETS AND LIABILITIES                                                                                         |  |                                        |        |   |      |   |        |  
|Accounts receivable - customers, less allowance for uncollectibles                                                        |  |                                        | (114   | ) |      |   | 216    |  
|Materials and supplies, including fuel oil and gas in storage                                                             |  |                                        | 2      |   |      |   | (33    | )
|Other receivables and other current assets                                                                                |  |                                        | 179    |   |      |   | (276   | )
|Prepayments                                                                                                               |  |                                        | (189   | ) |      |   | (73    | )
|Recoverable energy costs                                                                                                  |  |                                        | 63     |   |      |   | 116    |  
|Accounts payable                                                                                                          |  |                                        | (24    | ) |      |   | (300   | )
|Pensions and retiree benefits                                                                                             |  |                                        | (164   | ) |      |   | 35     |  
|Accrued taxes                                                                                                             |  |                                        | 19     |   |      |   | (44    | )
|Accrued interest                                                                                                          |  |                                        | 12     |   |      |   | 40     |  
|Deferred charges, noncurrent assets and other regulatory assets                                                           |  |                                        | (331   | ) |      |   | (163   | )
|Deferred credits and other regulatory liabilities                                                                         |  |                                        | 191    |   |      |   | 46     |  
|Other assets                                                                                                              |  |                                        | (7     | ) |      |   | 14     |  
|Other liabilities                                                                                                         |  |                                        | 49     |   |      |   | (42    | )
|NET CASH FLOWS FROM OPERATING
ACTIVITIES                                                                                  |  |                                        | 927    |   |      |   | 646    |  
|                                                                                                                          | 
|INVESTING ACTIVITIES                                                                                                      |  |                                        |        |   |      |   |        |  
|Utility construction expenditures (excluding capitalized support costs of $(47) and $(33) in 2007 and 2006, respectively) |  |                                        | (1,357 | ) |      |   | (1,307 | )
|Cost of removal less salvage                                                                                              |  |                                        | (125   | ) |      |   | (126   | )
|Non-utility construction expenditures                                                                                     |  |                                        | (4     | ) |      |   | (4     | )
|Common equity component of allowance for funds used during construction                                                   |  |                                        | 5      |   |      |   | 3      |  
|Restricted cash                                                                                                           |  |                                        | 1      |   |      |   | (4     | )
|Proceeds from sale of properties                                                                                          |  |                                        | 30     |   |      |   | 60     |  
|Proceeds from sale of Con Edison Communications                                                                           |  |                                        |       |   |      |   | 39     |  
|NET CASH FLOWS USED IN INVESTING
ACTIVITIES                                                                               |  |                                        | (1,450 | ) |      |   | (1,339 | )
|                                                                                                                          | 
|FINANCING ACTIVITIES                                                                                                      |  |                                        |        |   |      |   |        |  
|Net proceeds from/(payments of) short-term debt                                                                           |  |                                        | 233    |   |      |   | (324   | )
|Retirement of long-term debt                                                                                              |  |                                        | (357   | ) |      |   | (110   | )
|Issuance of long-term debt                                                                                                |  |                                        | 525    |   |      |   | 1,200  |  
|Issuance of common stock                                                                                                  |  |                                        | 660    |   |      |   | 485    |  
|Debt issuance costs                                                                                                       |  |                                        | (5     | ) |      |   | (10    | )
|Common stock dividends                                                                                                    |  |                                        | (435   | ) |      |   | (395   | )
|NET CASH FLOWS FROM FINANCING
ACTIVITIES                                                                                  |  |                                        | 621    |   |      |   | 846    |  
|                                                                                                                          | 
|CASH AND TEMPORARY CASH INVESTMENTS:                                                                                      |  |                                        |        |   |      |   |        |  
|NET CHANGE FOR THE PERIOD                                                                                                 |  |                                        | 98     |   |      |   | 153    |  
|BALANCE AT BEGINNING OF PERIOD                                                                                            |  |                                        | 94     |   |      |   | 81     |  
|                                                                                                                          | 
|BALANCE AT END OF PERIOD                                                                                                  |  | $                                      | 192    |   |      | $ | 234    |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                                                          |  |                                        |        |   |      |   |        |  
|Cash paid during the period for:                                                                                          |  |                                        |        |   |      |   |        |  
|Interest                                                                                                                  |  | $                                      | 369    |   |      | $ | 324    |  
|Income taxes                                                                                                              |  | $                                      | 75     |   |      | $ | 171    |  



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



11



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##### Table of Contents

Consolidated Edison Company of New York, Inc.



CONSOLIDATED BALANCE SHEET

(UNAUDITED)



|                                                                                                                         |  |                       |        |                   |   |       
|------------------------------------------------------------------------------------------------------------------------ |  | --------------------- | ------ | ----------------- | - | ------
|                                                                                                                         |  | September 30, 2007    |        | December 31, 2006
|                                                                                                                         |  | (Millions of Dollars)
|ASSETS                                                                                                                   |  |                       |        |                   |   |       
|UTILITY PLANT, AT ORIGINAL COST                                                                                          |  |                       |        |                   |   |       
|Electric                                                                                                                 |  | $                     | 14,762 |                   | $ | 13,872
|Gas                                                                                                                      |  |                       | 2,952  |                   |   | 2,848 
|Steam                                                                                                                    |  |                       | 1,733  |                   |   | 1,691 
|General                                                                                                                  |  |                       | 1,552  |                   |   | 1,510 
|TOTAL                                                                                                                    |  |                       | 20,999 |                   |   | 19,921
|Less: Accumulated depreciation                                                                                           |  |                       | 4,313  |                   |   | 4,173 
|Net                                                                                                                      |  |                       | 16,686 |                   |   | 15,748
|Construction work in progress                                                                                            |  |                       | 888    |                   |   | 832   
|NET UTILITY PLANT                                                                                                        |  |                       | 17,574 |                   |   | 16,580
|NON-UTILITY PROPERTY                                                                                                     |  |                       |        |                   |   |       
|Non-utility property, less accumulated depreciation of $19 and $17 in 2007 and 2006,
respectively                        |  |                       | 12     |                   |   | 15    
|NET PLANT                                                                                                                |  |                       | 17,586 |                   |   | 16,595
|CURRENT ASSETS                                                                                                           |  |                       |        |                   |   |       
|Cash and temporary cash investments                                                                                      |  |                       | 66     |                   |   | 47    
|Accounts receivable - customers, less allowance for uncollectible accounts of $42 and $40 in 2007 and 2006, respectively |  |                       | 765    |                   |   | 716   
|Other receivables, less allowance for uncollectible accounts of $4 and $3 in 2007 and 2006, respectively                 |  |                       | 272    |                   |   | 365   
|Accounts receivable from affiliated companies                                                                            |  |                       | 45     |                   |   | 138   
|Fuel oil, at average cost                                                                                                |  |                       | 52     |                   |   | 47    
|Gas in storage, at average cost                                                                                          |  |                       | 204    |                   |   | 193   
|Materials and supplies, at average cost                                                                                  |  |                       | 130    |                   |   | 126   
|Prepayments                                                                                                              |  |                       | 288    |                   |   | 84    
|Fair value of derivative assets                                                                                          |  |                       | 3      |                   |   |      
|Recoverable energy costs                                                                                                 |  |                       | 192    |                   |   | 213   
|Deferred derivative losses                                                                                               |  |                       | 169    |                   |   | 213   
|Other current assets                                                                                                     |  |                       | 3      |                   |   | 14    
|TOTAL CURRENT ASSETS                                                                                                     |  |                       | 2,189  |                   |   | 2,156 
|INVESTMENTS                                                                                                              |  |                       | 100    |                   |   | 91    
|DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT
ASSETS                                                                |  |                       |        |                   |   |       
|Regulatory assets                                                                                                        |  |                       | 3,772  |                   |   | 3,764 
|Other deferred charges and noncurrent assets                                                                             |  |                       | 344    |                   |   | 210   
|TOTAL DEFERRED CHARGES, REGULATORY
ASSETS AND NONCURRENT ASSETS                                                          |  |                       | 4,116  |                   |   | 3,974 
|TOTAL ASSETS                                                                                                             |  | $                     | 23,991 |                   | $ | 22,816



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



12



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##### Table of Contents

Consolidated Edison Company of New York, Inc.



CONSOLIDATED BALANCE SHEET

(UNAUDITED)



|                                                                           |  |                       |        |                   |   |       
|-------------------------------------------------------------------------- |  | --------------------- | ------ | ----------------- | - | ------
|                                                                           |  | September 30, 2007    |        | December 31, 2006
|                                                                           |  | (Millions of Dollars)
|CAPITALIZATION AND LIABILITIES                                             |  |                       |        |                   |   |       
|CAPITALIZATION                                                             |  |                       |        |                   |   |       
|Common shareholders equity (See Statement of Common Shareholders Equity) |  | $                     | 7,918  |                   | $ | 7,132 
|Preferred stock                                                            |  |                       | 213    |                   |   | 213   
|Long-term debt                                                             |  |                       | 7,169  |                   |   | 6,925 
|TOTAL CAPITALIZATION                                                       |  |                       | 15,300 |                   |   | 14,270
|NONCURRENT LIABILITIES                                                     |  |                       |        |                   |   |       
|Obligations under capital leases                                           |  |                       | 23     |                   |   | 26    
|Provision for injuries and damages                                         |  |                       | 155    |                   |   | 148   
|Pensions and retiree benefits                                              |  |                       | 423    |                   |   | 449   
|Superfund and other environmental costs                                    |  |                       | 278    |                   |   | 243   
|Uncertain income taxes                                                     |  |                       | 142    |                   |   |      
|Asset retirement obligations                                               |  |                       | 116    |                   |   | 96    
|Fair value of derivative liabilities                                       |  |                       | 27     |                   |   | 35    
|Other noncurrent liabilities                                               |  |                       | 76     |                   |   | 72    
|TOTAL NONCURRENT LIABILITIES                                               |  |                       | 1,240  |                   |   | 1,069 
|CURRENT LIABILITIES                                                        |  |                       |        |                   |   |       
|Long-term debt due within one year                                         |  |                       | 610    |                   |   | 330   
|Accounts payable                                                           |  |                       | 840    |                   |   | 866   
|Accounts payable to affiliated companies                                   |  |                       | 12     |                   |   | 14    
|Customer deposits                                                          |  |                       | 229    |                   |   | 214   
|Accrued taxes                                                              |  |                       | 73     |                   |   | 118   
|Accrued interest                                                           |  |                       | 128    |                   |   | 121   
|Accrued wages                                                              |  |                       | 83     |                   |   | 71    
|Fair value of derivative liabilities                                       |  |                       | 95     |                   |   | 193   
|Deferred derivative gains                                                  |  |                       | 2      |                   |   | 5     
|Deferred income taxes - recoverable energy costs                           |  |                       | 78     |                   |   | 87    
|Other current liabilities                                                  |  |                       | 207    |                   |   | 233   
|TOTAL CURRENT LIABILITIES                                                  |  |                       | 2,357  |                   |   | 2,252 
|DEFERRED CREDITS AND REGULATORY LIABILITIES                                |  |                       |        |                   |   |       
|Deferred income taxes and investment tax credits                           |  |                       | 3,932  |                   |   | 3,682 
|Regulatory liabilities                                                     |  |                       | 1,144  |                   |   | 1,524 
|Other deferred credits                                                     |  |                       | 18     |                   |   | 19    
|TOTAL DEFERRED CREDITS AND
REGULATORY LIABILITIES                          |  |                       | 5,094  |                   |   | 5,225 
|TOTAL CAPITALIZATION AND
LIABILITIES                                       |  | $                     | 23,991 |                   | $ | 22,816



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



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Consolidated Edison Company of New York, Inc.



CONSOLIDATED INCOME STATEMENT

(UNAUDITED)



|                                                      |  |                                         |       |   |                                        |   |       |      |  |   |       |   |  |   |       |  
|----------------------------------------------------- |  | --------------------------------------- | ----- | - | -------------------------------------- | - | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                                                      |  | For the Three MonthsEnded September 30, |       |   | For the Nine MonthsEnded September 30, |  
|                                                      |  | 2007                                    |       |   | 2006                                   |   |       | 2007 |  |   | 2006  |  
|                                                      |  | (Millions of Dollars)                   |      
|OPERATING REVENUES                                    |  |                                         |       |   |                                        |   |       |      |  |   |       |   |  |   |       |  
|Electric                                              |  | $                                       | 2,272 |   |                                        | $ | 2,273 |      |  | $ | 5,646 |   |  | $ | 5,449 |  
|Gas                                                   |  |                                         | 204   |   |                                        |   | 185   |      |  |   | 1,316 |   |  |   | 1,238 |  
|Steam                                                 |  |                                         | 102   |   |                                        |   | 104   |      |  |   | 525   |   |  |   | 485   |  
|TOTAL OPERATING REVENUES                              |  |                                         | 2,578 |   |                                        |   | 2,562 |      |  |   | 7,487 |   |  |   | 7,172 |  
|OPERATING EXPENSES                                    |  |                                         |       |   |                                        |   |       |      |  |   |       |   |  |   |       |  
|Purchased power                                       |  |                                         | 922   |   |                                        |   | 982   |      |  |   | 2,291 |   |  |   | 2,400 |  
|Fuel                                                  |  |                                         | 125   |   |                                        |   | 135   |      |  |   | 460   |   |  |   | 429   |  
|Gas purchased for resale                              |  |                                         | 88    |   |                                        |   | 84    |      |  |   | 738   |   |  |   | 712   |  
|Other operations and maintenance                      |  |                                         | 463   |   |                                        |   | 477   |      |  |   | 1,326 |   |  |   | 1,215 |  
|Depreciation and amortization                         |  |                                         | 150   |   |                                        |   | 136   |      |  |   | 442   |   |  |   | 404   |  
|Taxes, other than income taxes                        |  |                                         | 326   |   |                                        |   | 310   |      |  |   | 941   |   |  |   | 891   |  
|Income taxes                                          |  |                                         | 108   |   |                                        |   | 117   |      |  |   | 305   |   |  |   | 285   |  
|TOTAL OPERATING EXPENSES                              |  |                                         | 2,182 |   |                                        |   | 2,241 |      |  |   | 6,503 |   |  |   | 6,336 |  
|OPERATING INCOME                                      |  |                                         | 396   |   |                                        |   | 321   |      |  |   | 984   |   |  |   | 836   |  
|OTHER INCOME (DEDUCTIONS)                             |  |                                         |       |   |                                        |   |       |      |  |   |       |   |  |   |       |  
|Investment and other income                           |  |                                         | 6     |   |                                        |   | 7     |      |  |   | 30    |   |  |   | 21    |  
|Allowance for equity funds used during construction   |  |                                         | 2     |   |                                        |   | 2     |      |  |   | 6     |   |  |   | 3     |  
|Other deductions                                      |  |                                         | (3    | ) |                                        |   | (3    | )    |  |   | (10   | ) |  |   | (9    | )
|Income taxes                                          |  |                                         | 1     |   |                                        |   | 10    |      |  |   | 1     |   |  |   | 12    |  
|TOTAL OTHER INCOME
(DEDUCTIONS)                       |  |                                         | 6     |   |                                        |   | 16    |      |  |   | 27    |   |  |   | 27    |  
|INTEREST EXPENSE                                      |  |                                         |       |   |                                        |   |       |      |  |   |       |   |  |   |       |  
|Interest on long-term debt                            |  |                                         | 108   |   |                                        |   | 100   |      |  |   | 317   |   |  |   | 285   |  
|Other interest                                        |  |                                         | 9     |   |                                        |   | 37    |      |  |   | 32    |   |  |   | 56    |  
|Allowance for borrowed funds used during construction |  |                                         | (2    | ) |                                        |   | (2    | )    |  |   | (6    | ) |  |   | (3    | )
|NET INTEREST EXPENSE                                  |  |                                         | 115   |   |                                        |   | 135   |      |  |   | 343   |   |  |   | 338   |  
|NET INCOME                                            |  |                                         | 287   |   |                                        |   | 202   |      |  |   | 668   |   |  |   | 525   |  
|PREFERRED STOCK DIVIDEND
REQUIREMENTS                 |  |                                         | 3     |   |                                        |   | 3     |      |  |   | 9     |   |  |   | 8     |  
|NET INCOME FOR COMMON STOCK                           |  | $                                       | 284   |   |                                        | $ | 199   |      |  | $ | 659   |   |  | $ | 517   |  



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



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Consolidated Edison Company of New York, Inc.



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)



|                                                                                          |  |                                         |     |                                        |   |      |  |      |     |  |   |     |  
|----------------------------------------------------------------------------------------- |  | --------------------------------------- | --- | -------------------------------------- | - | ---- |  | ---- | --- |  | - | --- | -
|                                                                                          |  | For the Three MonthsEnded September 30, |     | For the Nine MonthsEnded September 30, |  
|                                                                                          |  | 2007                                    |     | 2006                                   |   | 2007 |  | 2006 |    
|                                                                                          |  | (Millions of Dollars)                   |    
|NET INCOME                                                                                |  | $                                       | 287 |                                        | $ | 202  |  | $    | 668 |  | $ | 525 |  
|OTHER COMPREHENSIVE LOSS, NET OF
TAXES                                                    |  |                                         |     |                                        |   |      |  |      |     |  |   |     |  
|Pension plan liability adjustments, net of $(3) taxes in 2006                             |  |                                         |    |                                        |   |     |  |      |    |  |   | (4  | )
|Unrealized losses on derivatives qualified as cash flow hedges, net of $(1) taxes in
2006 |  |                                         |    |                                        |   |     |  |      |    |  |   | (1  | )
|TOTAL OTHER COMPREHENSIVE LOSS,
NET OF TAXES                                              |  |                                         |    |                                        |   |     |  |      |    |  |   | (5  | )
|COMPREHENSIVE INCOME                                                                      |  | $                                       | 287 |                                        | $ | 202  |  | $    | 668 |  | $ | 520 |  



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



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Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF
COMMON SHAREHOLDERS EQUITY



FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

(UNAUDITED)



|                                 |  |                                         |  |                            |     |                   |   |       |                             |   |       |                      |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   |       |  
|-------------------------------- |  | --------------------------------------- |  | -------------------------- | --- | ----------------- | - | ----- | --------------------------- | - | ----- | -------------------- |  | - | ---------------------------------- | - |  | ----- | --- | - |  | - | --- | - |  | - | ----- | -
|                                 |  | Common Stock                            |  | AdditionalPaid- In Capital |     | Retained Earnings |   |       | RepurchasedCon Edison Stock |   |       | CapitalStock Expense |  |   | AccumulatedOtherComprehensive Loss |   |  | Total |    
|                                 |  | Shares                                  |  | Amount                     |     |                   |   |       |                             |  
|                                 |  | (Millions of Dollars/Except Share Data) | 
|BALANCE AS OF DECEMBER 31, 2005  |  | 235,488,094                             |  | $                          | 589 |                   | $ | 1,802 |                             | $ | 5,074 |                      |  | $ | (962                               | ) |  | $     | (55 | ) |  | $ | (11 | ) |  | $ | 6,437 |  
|                                 |  |                                         |  |                            |     |                   |   |      
|Net income                       |  |                                         |  |                            |     |                   |   |       |                             |   | 205   |                      |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | 205   |  
|Common stock dividend to parent  |  |                                         |  |                            |     |                   |   |       |                             |   | (113  | )                    |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | (113  | )
|Cumulative preferred dividends   |  |                                         |  |                            |     |                   |   |       |                             |   | (3    | )                    |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | (3    | )
|Other comprehensive loss         |  |                                         |  |                            |     |                   |   |       |                             |   |       |                      |  |   |                                    |   |  |       |     |   |  |   | (5  | ) |  |   | (5    | )
|BALANCE AS OF MARCH 31,
2006     |  | 235,488,094                             |  | $                          | 589 |                   | $ | 1,802 |                             | $ | 5,163 |                      |  | $ | (962                               | ) |  | $     | (55 | ) |  | $ | (16 | ) |  | $ | 6,521 |  
|                                 |  |                                         |  |                            |     |                   |   |      
|Net income                       |  |                                         |  |                            |     |                   |   |       |                             |   | 119   |                      |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | 119   |  
|Common stock dividend to parent  |  |                                         |  |                            |     |                   |   |       |                             |   | (115  | )                    |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | (115  | )
|Cumulative preferred dividends   |  |                                         |  |                            |     |                   |   |       |                             |   | (3    | )                    |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | (3    | )
|BALANCE AS OF JUNE 30,
2006      |  | 235,488,094                             |  | $                          | 589 |                   | $ | 1,802 |                             | $ | 5,164 |                      |  | $ | (962                               | ) |  | $     | (55 | ) |  | $ | (16 | ) |  | $ | 6,522 |  
|                                 |  |                                         |  |                            |     |                   |   |      
|Net income                       |  |                                         |  |                            |     |                   |   |       |                             |   | 202   |                      |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | 202   |  
|Common stock dividend to parent  |  |                                         |  |                            |     |                   |   |       |                             |   | (109  | )                    |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | (109  | )
|Capital contribution by parent   |  |                                         |  |                            |     |                   |   | 450   |                             |   |       |                      |  |   |                                    |   |  |       | (3  | ) |  |   |     |   |  |   | 447   |  
|Cumulative preferred dividends   |  |                                         |  |                            |     |                   |   |       |                             |   | (3    | )                    |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | (3    | )
|BALANCE AS OF SEPTEMBER 30,
2006 |  | 235,488,094                             |  | $                          | 589 |                   | $ | 2,252 |                             | $ | 5,254 |                      |  | $ | (962                               | ) |  | $     | (58 | ) |  | $ | (16 | ) |  | $ | 7,059 |  
|                                 |  |                                         |  |                            |     |                   |   |      
|BALANCE AS OF DECEMBER 31, 2006  |  | 235,488,094                             |  | $                          | 589 |                   | $ | 2,252 |                             | $ | 5,320 |                      |  | $ | (962                               | ) |  | $     | (58 | ) |  | $ | (9  | ) |  | $ | 7,132 |  
|                                 |  |                                         |  |                            |     |                   |   |      
|Net income                       |  |                                         |  |                            |     |                   |   |       |                             |   | 239   |                      |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | 239   |  
|Common stock dividend to parent  |  |                                         |  |                            |     |                   |   |       |                             |   | (131  | )                    |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | (131  | )
|Cumulative preferred dividends   |  |                                         |  |                            |     |                   |   |       |                             |   | (3    | )                    |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | (3    | )
|BALANCE AS OF MARCH 31,
2007     |  | 235,488,094                             |  | $                          | 589 |                   | $ | 2,252 |                             | $ | 5,425 |                      |  | $ | (962                               | ) |  | $     | (58 | ) |  | $ | (9  | ) |  | $ | 7,237 |  
|                                 |  |                                         |  |                            |     |                   |   |      
|Net income                       |  |                                         |  |                            |     |                   |   |       |                             |   | 142   |                      |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | 142   |  
|Common stock dividend to parent  |  |                                         |  |                            |     |                   |   |       |                             |   | (131  | )                    |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | (131  | )
|Capital contribution by parent   |  |                                         |  |                            |     |                   |   | 518   |                             |   |       |                      |  |   |                                    |   |  |       | (2  | ) |  |   |     |   |  |   | 516   |  
|Cumulative preferred dividends   |  |                                         |  |                            |     |                   |   |       |                             |   | (3    | )                    |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | (3    | )
|BALANCE AS OF JUNE 30,
2007      |  | 235,488,094                             |  | $                          | 589 |                   | $ | 2,770 |                             | $ | 5,433 |                      |  | $ | (962                               | ) |  | $     | (60 | ) |  | $ | (9  | ) |  | $ | 7,761 |  
|                                 |  |                                         |  |                            |     |                   |   |      
|Net income                       |  |                                         |  |                            |     |                   |   |       |                             |   | 287   |                      |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | 287   |  
|Common stock dividend to parent  |  |                                         |  |                            |     |                   |   |       |                             |   | (142  | )                    |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | (142  | )
|Capital contribution by parent   |  |                                         |  |                            |     |                   |   | 15    |                             |   |       |                      |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | 15    |  
|Cumulative preferred dividends   |  |                                         |  |                            |     |                   |   |       |                             |   | (3    | )                    |  |   |                                    |   |  |       |     |   |  |   |     |   |  |   | (3    | )
|BALANCE AS OF SEPTEMBER 30,
2007 |  | 235,488,094                             |  | $                          | 589 |                   | $ | 2,785 |                             | $ | 5,575 |                      |  | $ | (962                               | ) |  | $     | (60 | ) |  | $ | (9  | ) |  | $ | 7,918 |  



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



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Consolidated Edison Company of New York, Inc.



CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)



|                                                                                                                          |  |                                        |        |   |      |   |        |  
|------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                                                          |  | For the Nine MonthsEnded September 30, |       
|                                                                                                                          |  | 2007                                   |        |   | 2006 |  
|                                                                                                                          |  | (Millions of Dollars)                  |       
|OPERATING ACTIVITIES                                                                                                      |  |                                        |        |   |      |   |        |  
|Net income                                                                                                                |  | $                                      | 668    |   |      | $ | 525    |  
|PRINCIPAL NON-CASH CHARGES/(CREDITS) TO
INCOME                                                                            |  |                                        |        |   |      |   |        |  
|Depreciation and amortization                                                                                             |  |                                        | 442    |   |      |   | 404    |  
|Deferred income taxes                                                                                                     |  |                                        | 270    |   |      |   | 296    |  
|Rate case amortization and accruals                                                                                       |  |                                        | (236   | ) |      |   | (187   | )
|Net transmission and distribution reconciliation                                                                          |  |                                        | (138   | ) |      |   | (80    | )
|Common equity component of allowance for funds used during construction                                                   |  |                                        | (6     | ) |      |   | (3     | )
|Prepaid pension costs (net of capitalized amounts)                                                                        |  |                                        | 77     |   |      |   | (41    | )
|Other non-cash items (net)                                                                                                |  |                                        | (50    | ) |      |   | 2      |  
|CHANGES IN ASSETS AND LIABILITIES                                                                                         |  |                                        |        |   |      |   |        |  
|Accounts receivable - customers, less allowance for uncollectibles                                                        |  |                                        | (49    | ) |      |   | 212    |  
|Materials and supplies, including fuel oil and gas in storage                                                             |  |                                        | (20    | ) |      |   | (36    | )
|Other receivables and other current assets                                                                                |  |                                        | 177    |   |      |   | (324   | )
|Prepayments                                                                                                               |  |                                        | (204   | ) |      |   | 152    |  
|Recoverable energy costs                                                                                                  |  |                                        | 71     |   |      |   | 117    |  
|Accounts payable                                                                                                          |  |                                        | (28    | ) |      |   | (290   | )
|Pensions and retiree benefits                                                                                             |  |                                        | (124   | ) |      |   | 38     |  
|Accrued taxes                                                                                                             |  |                                        | (39    | ) |      |   | (54    | )
|Accrued interest                                                                                                          |  |                                        | 7      |   |      |   | 30     |  
|Deferred charges, noncurrent assets and other regulatory assets                                                           |  |                                        | (288   | ) |      |   | (168   | )
|Deferred credits and other regulatory liabilities                                                                         |  |                                        | 188    |   |      |   | 48     |  
|Other assets                                                                                                              |  |                                        | (1     | ) |      |   |       |  
|Other liabilities                                                                                                         |  |                                        | 48     |   |      |   | (33    | )
|NET CASH FLOWS FROM
OPERATING ACTIVITIES                                                                                  |  |                                        | 765    |   |      |   | 608    |  
|INVESTING ACTIVITIES                                                                                                      |  |                                        |        |   |      |   |        |  
|Utility construction expenditures (excluding capitalized support costs of $(47) and $(33) in 2007 and 2006, respectively) |  |                                        | (1,297 | ) |      |   | (1,233 | )
|Cost of removal less salvage                                                                                              |  |                                        | (123   | ) |      |   | (124   | )
|Common equity component of allowance for funds used during construction                                                   |  |                                        | 6      |   |      |   | 3      |  
|Proceeds from sale of properties                                                                                          |  |                                        | 30     |   |      |   | 60     |  
|NET CASH FLOWS USED IN
INVESTING ACTIVITIES                                                                               |  |                                        | (1,384 | ) |      |   | (1,294 | )
|FINANCING ACTIVITIES                                                                                                      |  |                                        |        |   |      |   |        |  
|Net payments of short-term debt                                                                                           |  |                                        |       |   |      |   | (370   | )
|Retirement of long-term debt                                                                                              |  |                                        |       |   |      |   | (100   | )
|Issuance of long-term debt                                                                                                |  |                                        | 525    |   |      |   | 1,200  |  
|Debt issuance costs                                                                                                       |  |                                        | (5     | ) |      |   | (10    | )
|Capital contribution by parent                                                                                            |  |                                        | 531    |   |      |   | 447    |  
|Dividend to parent                                                                                                        |  |                                        | (404   | ) |      |   | (337   | )
|Preferred stock dividends                                                                                                 |  |                                        | (9     | ) |      |   | (8     | )
|NET CASH FLOWS FROM
FINANCING ACTIVITIES                                                                                  |  |                                        | 638    |   |      |   | 822    |  
|CASH AND TEMPORARY CASH INVESTMENTS:                                                                                      |  |                                        |        |   |      |   |        |  
|NET CHANGE FOR THE PERIOD                                                                                                 |  |                                        | 19     |   |      |   | 136    |  
|BALANCE AT BEGINNING OF
PERIOD                                                                                            |  |                                        | 47     |   |      |   | 61     |  
|BALANCE AT END OF PERIOD                                                                                                  |  | $                                      | 66     |   |      | $ | 197    |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                                                          |  |                                        |        |   |      |   |        |  
|Cash paid during the period for:                                                                                          |  |                                        |        |   |      |   |        |  
|Interest                                                                                                                  |  | $                                      | 304    |   |      | $ | 256    |  
|Income taxes                                                                                                              |  | $                                      | 102    |   |      | $ | 183    |  



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



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NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)



General

These combined notes accompany and form
an integral part of the separate consolidated financial statements of each of the two separate registrants: Consolidated Edison, Inc. and its subsidiaries (Con Edison) and Consolidated Edison Company of New York, Inc. and its subsidiaries (Con
Edison of New York). Con Edison of New York is a subsidiary of Con Edison and as such its financial condition and results of operations and cash flows, which are presented separately in the Con Edison of New York consolidated financial statements,
are also consolidated, along with those of Con Edisons other utility subsidiary, Orange and Rockland Utilities, Inc. (O&R), and Con Edisons competitive energy businesses (discussed below) in Con Edisons consolidated financial
statements. The term Utilities is used in these notes to refer to Con Edison of New York and O&R.



As used in these notes, the term Companies refers to Con Edison and Con Edison of New York and, except as otherwise noted, the information in these combined
notes relates to each of the Companies. However, Con Edison of New York makes no representation as to information relating to Con Edison or the subsidiaries of Con Edison other than itself.



The separate interim consolidated financial statements of each of the Companies are unaudited
but, in the opinion of their respective managements, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair presentation of the results for the interim periods presented. The Companies separate interim
consolidated financial statements should be read together with their separate audited financial statements (including the combined notes thereto) included in Item 8 of their combined Annual Report on Form 10-K for the year ended
December 31, 2006 (the Form 10-K) and their separate unaudited financial statements (including the combined notes thereto) included in Part I, Item 1 of their combined Quarterly Report Form 10-Q for the quarterly periods ended
March 31, 2007 (the First Quarter Form 10-Q) and June 30, 2007 (the Second Quarter Form 10-Q). Information in the notes to the consolidated financial statements in the Form 10-K, the First Quarter Form 10-Q and the Second Quarter Form 10-Q
referred to in these notes is incorporated by reference herein. The use of terms such as see or refer to shall be deemed to incorporate by reference into this discussion and analysis the information to which reference is
made. Certain prior period amounts have been reclassified to conform to the current period presentation. Results for interim periods are not necessarily indicative of results for the entire fiscal year.



Con Edison has two regulated utility subsidiaries: Con Edison of New York and O&R. Con
Edison of New York provides electric service and gas service in New York City and Westchester County. The company also provides steam service in parts of Manhattan. O&R, along with its regulated utility subsidiaries, provides electric service in
southeastern New York and adjacent areas of northern New Jersey and eastern Pennsylvania and gas service in southeastern New York and adjacent areas of eastern



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NOTES TO THE FINANCIAL
STATEMENTS (UNAUDITED)  CONTINUED



Pennsylvania. Con Edison has the following competitive energy businesses: Consolidated Edison Solutions, Inc. (Con Edison Solutions), a retail energy
services company that sells electricity and also offers energy-related services; Consolidated Edison Energy, Inc. (Con Edison Energy), a wholesale energy supply company; and Consolidated Edison Development, Inc. (Con Edison Development), a company
that owns, leases or operates generating plants and participates in other infrastructure projects.



Note A - Earnings Per Common Share

Reference is made to Earnings Per Common Share in Note A to the financial
statements included in Item 8 of the Form 10-K. For the three and nine months ended September 30, 2007 and 2006, Con Edisons basic and diluted EPS are calculated as follows:



|                                                                                  |  |                                         |       |                                        |   |       |  |      |       |  |   |       |  
|--------------------------------------------------------------------------------- |  | --------------------------------------- | ----- | -------------------------------------- | - | ----- |  | ---- | ----- |  | - | ----- | -
|                                                                                  |  | For the Three MonthsEnded September 30, |       | For the Nine MonthsEnded September 30, |  
|(Millions of Dollars, except per share amounts/Shares in Millions)                |  | 2007                                    |       | 2006                                   |   | 2007  |  | 2006 |      
|Income from continuing operations                                                 |  | $                                       | 312   |                                        | $ | 231   |  | $    | 722   |  | $ | 537   |  
|Income from discontinued operations, net of tax                                   |  |                                         |      |                                        |   |      |  |      |      |  |   | (1    | )
|Net income                                                                        |  | $                                       | 312   |                                        | $ | 231   |  | $    | 722   |  | $ | 536   |  
|Weighted average common shares outstanding - Basic                                |  |                                         | 271.0 |                                        |   | 249.0 |  |      | 264.6 |  |   | 247.0 |  
|Add: Incremental shares attributable to effect of
potentially dilutive securities |  |                                         | 1.0   |                                        |   | 1.0   |  |      | 1.2   |  |   | 1.0   |  
|Adjusted weighted average common shares outstanding - Diluted                     |  |                                         | 272.0 |                                        |   | 250.0 |  |      | 265.8 |  |   | 248.0 |  
|EARNINGS PER COMMON SHARE - BASIC                                                 |  |                                         |       |                                        |   |       |  |      |       |  |   |       |  
|Continuing operations                                                             |  | $                                       | 1.15  |                                        | $ | 0.93  |  | $    | 2.73  |  | $ | 2.17  |  
|Discontinued operations                                                           |  |                                         |      |                                        |   |      |  |      |      |  |   |      |  
|Net income                                                                        |  | $                                       | 1.15  |                                        | $ | 0.93  |  | $    | 2.73  |  | $ | 2.17  |  
|EARNINGS PER COMMON SHARE - DILUTED                                               |  |                                         |       |                                        |   |       |  |      |       |  |   |       |  
|Continuing operations                                                             |  | $                                       | 1.15  |                                        | $ | 0.92  |  | $    | 2.72  |  | $ | 2.16  |  
|Discontinued operations                                                           |  |                                         |      |                                        |   |      |  |      |      |  |   |      |  
|Net income                                                                        |  | $                                       | 1.15  |                                        | $ | 0.92  |  | $    | 2.72  |  | $ | 2.16  |  



Note B - Regulatory Matters

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



Rate Agreements

O&R -
Electric

In October 2007, the PSC issued an order that continues O&Rs rates for electric service rendered in New York at current levels. The
order, which is based on an allowed annual rate of return on common



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equity of 9.1 percent increases, effective July 1, 2007, by $13.1 million annually the amount recognized for pension and other postretirement benefit
costs. Because O&R, in accordance with applicable New York regulatory provisions, defers the difference between the actual amount of such costs and the amounts for such costs reflected in rates, the effect of the increase will be to decrease the
companys deferrals of such costs and increase other operations and maintenance expense by a like amount. As required by the order, the company also has reduced other operating revenues and recorded a regulatory liability of $5 million at
September 30, 2007 primarily for earnings attributable to its New York electric business in excess of a 9.1 percent annual rate of return on common equity applicable to the period March through June 2007. In June 2007, O&R commenced an
action in New York State Supreme Court seeking to annul the March 2007 PSC order that initiated the proceeding in which the October 2007 order was issued.



In August 2007, O&R filed a request with the PSC for an increase in the rates it charges for electric service rendered in New York, effective July 2008, of $47.8
million. The filing reflects a return on common equity of 11.5 percent and a common equity ratio of 48.6 percent. The filing proposes continuation of the current provisions with respect to recovery from customers of the cost of purchased power, and
the reconciliation of actual expenses allocable to the electric business to the amounts for such costs reflected in electric rates for pension and other postretirement benefit costs, environmental and research and development costs.



In October 2007, O&R submitted to the PSC a revenue decoupling proposal applicable to the
companys electric service in New York. Under the proposal, the companys actual electric delivery revenues for most customer service classifications would be compared, on a monthly basis, with the forecasted delivery revenues reflected in
electric rates for each service classification, with the difference accrued, with interest, for refund to, or recovery from, customers, as applicable, and the company would engage in programs to advance energy efficiency.



Con Edison of New York - Gas

In September 2007, the PSC approved the Joint Proposal that Con Edison of New York had entered into in June 2007 with the staff of the PSC and other parties with respect
to the rates the company can charge its customers for gas service. The PSC modified the Joint Proposal to provide for levelized annual rate increases of $67.5 million in each year of the three year rate plan, by accruing, over the first rate year as
gas service is provided, $31.1 million of revenues and a related regulatory asset, which, together with interest, will be billed to customers in the second and third rate years. The Joint Proposal had provided for rate increases of $84.6 million,
$32.7 million and $42.7 million, effective October 1, 2007, 2008 and 2009, respectively, along with annual funding for new energy efficiency programs of $14 million.



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Regulatory Assets and Liabilities

Regulatory assets and liabilities at September 30, 2007 and December 31, 2006 were comprised of the following items:



|                                                             |  |            |       |      |                       |       |      |  |      |       |  |   |      
|------------------------------------------------------------ |  | ---------- | ----- | ---- | --------------------- | ----- | ---- |  | ---- | ----- |  | - | -----
|                                                             |  | Con Edison |       |      | Con Edison ofNew York
|(Millions of Dollars)                                        |  | 2007       |       | 2006 |                       |       | 2007 |  | 2006
|Regulatory assets                                            |  |            |       |      |                       |       |      |  |      |       |  |   |      
|Unrecognized pension and other postretirement costs          |  | $          | 1,881 |      | $                     | 1,929 |      |  | $    | 1,750 |  | $ | 1,776
|Future federal income tax                                    |  |            | 1,081 |      |                       | 995   |      |  |      | 1,023 |  |   | 941  
|Environmental remediation costs                              |  |            | 384   |      |                       | 318   |      |  |      | 310   |  |   | 255  
|World Trade Center restoration costs                         |  |            | 151   |      |                       | 147   |      |  |      | 151   |  |   | 147  
|Pension and other postretirement benefits deferrals          |  |            | 146   |      |                       | 157   |      |  |      | 83    |  |   | 98   
|Revenue taxes                                                |  |            | 74    |      |                       | 68    |      |  |      | 73    |  |   | 67   
|O&R transition bond charges                                  |  |            | 64    |      |                       | 67    |      |  |      |      |  |   |     
|Net T&D reconciliation                                       |  |            | 93    |      |                       | 94    |      |  |      | 93    |  |   | 94   
|Electric rate increase accrual                               |  |            | 28    |      |                       | 44    |      |  |      | 28    |  |   | 44   
|Unbilled gas revenue                                         |  |            | 44    |      |                       | 44    |      |  |      | 44    |  |   | 44   
|Workers compensation                                        |  |            | 45    |      |                       | 42    |      |  |      | 45    |  |   | 42   
|Other retirement program costs                               |  |            | 17    |      |                       | 20    |      |  |      | 17    |  |   | 20   
|Recoverable energy costs                                     |  |            | 5     |      |                       | 55    |      |  |      | 5     |  |   | 55   
|Asbestos-related costs                                       |  |            | 10    |      |                       | 10    |      |  |      | 10    |  |   | 10   
|Deferred derivative losses - long-term                       |  |            | 14    |      |                       | 18    |      |  |      | 13    |  |   | 15   
|Other                                                        |  |            | 155   |      |                       | 171   |      |  |      | 127   |  |   | 156  
|Regulatory assets                                            |  |            | 4,192 |      |                       | 4,179 |      |  |      | 3,772 |  |   | 3,764
|Deferred derivative losses - current                         |  |            | 173   |      |                       | 237   |      |  |      | 169   |  |   | 213  
|Recoverable energy costs - current                           |  |            | 211   |      |                       | 235   |      |  |      | 192   |  |   | 213  
|Total Regulatory Assets                                      |  | $          | 4,576 |      | $                     | 4,651 |      |  | $    | 4,133 |  | $ | 4,190
|Regulatory liabilities                                       |  |            |       |      |                       |       |      |  |      |       |  |   |      
|Allowance for cost of removal less salvage                   |  | $          | 444   |      | $                     | 492   |      |  | $    | 382   |  | $ | 432  
|Gain on sale of First Avenue properties                      |  |            | 144   |      |                       | 144   |      |  |      | 144   |  |   | 144  
|Net electric deferrals                                       |  |            | 86    |      |                       | 164   |      |  |      | 86    |  |   | 164  
|Prior year deferred tax amortization                         |  |            | 51    |      |                       | 81    |      |  |      | 51    |  |   | 81   
|2004 electric, gas and steam one-time rate agreement charges |  |            | 32    |      |                       | 85    |      |  |      | 32    |  |   | 85   
|NYS tax law changes                                          |  |            | 53    |      |                       | 38    |      |  |      | 43    |  |   | 28   
|Interest on federal income tax refund                        |  |            | 41    |      |                       | 41    |      |  |      | 41    |  |   | 41   
|Net steam deferrals                                          |  |            | 28    |      |                       | 48    |      |  |      | 28    |  |   | 48   
|O&R refundable energy costs                                  |  |            | 29    |      |                       | 40    |      |  |      |      |  |   |     
|Gain on sale of W. 24thSt.
property                          |  |            | 20    |      |                       | 46    |      |  |      | 20    |  |   | 46   
|Transmission congestion contracts                            |  |            | 6     |      |                       | 96    |      |  |      | 6     |  |   | 96   
|Deferred derivative gains - long-term                        |  |            | 8     |      |                       | 2     |      |  |      |      |  |   | 1    
|Property tax reconciliation                                  |  |            | 28    |      |                       | 39    |      |  |      | 28    |  |   | 39   
|EPA SO2allowance proceeds - electric and steam               |  |            | 15    |      |                       | 106   |      |  |      | 15    |  |   | 106  
|DC service incentive                                         |  |            | 11    |      |                       | 13    |      |  |      | 11    |  |   | 13   
|Gas interruptible sales credits                              |  |            | 13    |      |                       | 8     |      |  |      | 13    |  |   | 8    
|Other                                                        |  |            | 269   |      |                       | 214   |      |  |      | 244   |  |   | 192  
|Regulatory liabilities                                       |  |            | 1,278 |      |                       | 1,657 |      |  |      | 1,144 |  |   | 1,524
|Deferred derivative gains - current                          |  |            | 3     |      |                       | 6     |      |  |      | 2     |  |   | 5    
|Total Regulatory Liabilities                                 |  | $          | 1,281 |      | $                     | 1,663 |      |  | $    | 1,146 |  | $ | 1,529



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In March 2007, in accordance with the 2005 Electric Rate Agreement, the company offset $265 million of regulatory
liabilities against an equal amount of regulatory assets. The regulatory liabilities settled related primarily to proceeds from the sale of sulfur dioxide allowances, prior years transmission congestion contracts auction proceeds, gains from
the sale of properties, revenue reductions related to customer outages, and the cost reconciliations for property taxes and interference costs. The regulatory assets recovered related primarily to the Net T&D reconciliation and cost
reconciliations for pension and other postretirement benefit costs.



The $81
million prior year deferred tax amortization at December 31, 2006 represents the revenue equivalent of $48 million for the amortization of deferred taxes in the years 2000 to 2004 that was not recorded during that period. The
correction was recognized in 2005 with this balance deferred as a regulatory liability pending disposition by the PSC. In September 2007, the PSC granted the companys petition associated with this regulatory liability by directing the company
to credit customers $51 million to reflect the impact on electric and steam rates of correcting the amortization of these deferred taxes. Accordingly, the Company reduced this regulatory liability to $51 million. The impact of this accounting was a
$17 million benefit to net income in the three and nine month periods ended September 30, 2007.



Power Outage Proceedings

During a July 2006 heat
wave, electric service was interrupted to a number of Con Edison of New Yorks customers, predominantly in the companys Long Island City distribution network in Queens, New York. Also, a number of the companys customers in
Westchester County, New York, experienced weather-related outages in 2006.



In
April 2007, the PSC expanded its ongoing proceeding investigating the Queens outage to also consider the prudence of the companys conduct with respect to the outage. The investigation has been reviewing the circumstances surrounding the
outage, the companys response, communication and restoration efforts, the need for changes to the companys practices and procedures and the costs incurred by the company related to the outage. The PSC indicated that the prudence
examination should consider and address, among other things: (i) the reasonableness of the companys response to the outage, its monitoring of its distribution system, its use of available information, its procedures for determining
whether to shut down the Long Island City network (and the prudence of its decision not to do so) and its operation and maintenance of equipment in the Long Island City network; and (ii) whether and to what extent, the expenses and capital
expenditures associated with the outage that the company has incurred, or may incur, should be borne by the companys customers. In February 2007, the PSC staff issued a report on the outage which, among other things, includes the PSC
staffs (i) finding that the overriding cause of the outage was the companys failure to adequately operate,



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maintain and oversee the Long Island City network, (ii) conclusion that the company should have, but failed to, shut down the Long Island City network
to minimize the impact of the outage to customers, and (iii) recommendation that the PSC initiate a proceeding to consider the prudence of the companys actions or inactions during the outage.



The PSC is also reviewing the Westchester outages, and has ordered the company to show cause
why it should not be liable for certain food spoilage claims in connection with the September 2006 outage in Westchester resulting from Tropical Storm Ernesto.



The PSC has engaged an independent third party consultant to audit the companys performance in response to outage emergencies and planning for restoration of
service. In October 2007, the consultant issued its report which identified opportunities for improvement in emergency response, policy, organization, performance and communication. The consultant, among other things, recommended that (i) the
company prepare a multi-year strategic plan focusing on system reliability, emergency preparedness, and major outage prevention and event restoration; (ii) the company restructure its emergency organizational function in accordance with the
strategic plan; and (iii) a comprehensive study be done to determine if the company is providing adequate resources to support its infrastructure.



From the July 2006 outage through September 30, 2007, Con Edison of New York had paid $14 million, $5 million of which was reimbursed by insurers, to compensate
customers for spoilage of food and other perishables resulting from the Queens outage, incurred estimated operating costs of $39 million, net of $1 million of insurance reimbursement, invested $48 million in capital assets and retirements in the
Long Island City network after the Queens outage, and reduced revenues under its 2005 electric rate agreement by $18 million relating to customer outages.



In July 2007, the PSC issued a notice requesting comments on the tariff provisions pursuant to which the company is required to reimburse its electric customers for
losses resulting from service interruptions in certain circumstances. The current provisions provide for reimbursement to affected residential and commercial customers for food spoilage of up to $450 and $9,000, respectively, with a maximum
aggregate of $15 million for an outage. The company is not required to provide reimbursement for outages caused by certain events such as storms, provided the company makes reasonable efforts to restore service as soon as practicable.



The Companies are unable to predict whether the outages and any related proceedings will have
any further material adverse effect on their results of operations or have a material adverse effect on their financial position or liquidity.



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Note C - Long-Term Debt

Reference is made to Note C to the financial statements in Item 8 of the Form 10-K and in Part I.



In August 2007, Con Edison of New York issued $525 million of 6.30 percent, 30-year debentures. The net proceeds received from the issuance were used for general
corporate purposes, including repayment of short-term debt.



Note D - Short-Term
Borrowing and Credit Agreements

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



At September 30, 2007, Con Edison had $350 million of commercial paper outstanding at a weighted average interest rate of 5.18 percent, none of which was outstanding under Con Edison of New Yorks program. At September 30,
2006, Con Edison had $431 million of commercial paper outstanding of which $150 million was outstanding under Con Edison of New Yorks program. The weighted average interest rate at September 30, 2006 was 5.42 percent and 5.32 percent for
Con Edison and Con Edison of New York, respectively. At September 30, 2007 and 2006, no loans were outstanding under the Companies credit agreements and $79 million and $16 million of letters of credit were outstanding, respectively.



Note E - Pension Benefits

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



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Net Periodic Benefit Cost

The components of the Companies net periodic benefit costs for the three and nine months ended September 30, 2007 and 2006 were as follows:



|                                                 |  |                                          |      |   |                        |   |      |      |  |   |      |   |  |   |      |  
|------------------------------------------------ |  | ---------------------------------------- | ---- | - | ---------------------- | - | ---- | ---- |  | - | ---- | - |  | - | ---- | -
|                                                 |  | For the Three Months Ended September 30, |     
|                                                 |  | Con Edison                               |      |   | Con Edison of New York |  
|(Millions of Dollars)                            |  | 2007                                     |      |   | 2006                   |   |      | 2007 |  |   | 2006 |  
|Service cost - including administrative expenses |  | $                                        | 32   |   |                        | $ | 32   |      |  | $ | 30   |   |  | $ | 30   |  
|Interest cost on projected benefit obligation    |  |                                          | 122  |   |                        |   | 116  |      |  |   | 114  |   |  |   | 108  |  
|Expected return on plan assets                   |  |                                          | (161 | ) |                        |   | (155 | )    |  |   | (154 | ) |  |   | (149 | )
|Amortization of net actuarial loss               |  |                                          | 40   |   |                        |   | 31   |      |  |   | 35   |   |  |   | 26   |  
|Amortization of prior service costs              |  |                                          | 3    |   |                        |   | 3    |      |  |   | 2    |   |  |   | 3    |  
|NET PERIODIC BENEFIT COST                        |  | $                                        | 36   |   |                        | $ | 27   |      |  | $ | 27   |   |  | $ | 18   |  
|Amortization of regulatory asset*                |  |                                          | 1    |   |                        |   | 1    |      |  |   | 1    |   |  |   | 1    |  
|TOTAL PERIODIC BENEFIT COST                      |  | $                                        | 37   |   |                        | $ | 28   |      |  | $ | 28   |   |  | $ | 19   |  
|Cost capitalized                                 |  |                                          | (14  | ) |                        |   | (8   | )    |  |   | (12  | ) |  |   | (6   | )
|Cost deferred                                    |  |                                          | (26  | ) |                        |   | (27  | )    |  |   | (24  | ) |  |   | (24  | )
|Cost credited to operating expenses              |  | $                                        | (3   | ) |                        | $ | (7   | )    |  | $ | (8   | ) |  | $ | (11  | )

|* | Relates to increases in Con Edison of New Yorks pension obligations of $33 million from a 1993 special retirement program and $45 million from a 1999 special retirement
program.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                 |  |                                         |      |   |                       |   |      |      |  |   |      |   |  |   |      |  
|------------------------------------------------ |  | --------------------------------------- | ---- | - | --------------------- | - | ---- | ---- |  | - | ---- | - |  | - | ---- | -
|                                                 |  | For the Nine Months Ended September 30, |     
|                                                 |  | Con Edison                              |      |   | Con Edison ofNew York |  
|(Millions of Dollars)                            |  | 2007                                    |      |   | 2006                  |   |      | 2007 |  |   | 2006 |  
|Service cost - including administrative expenses |  | $                                       | 98   |   |                       | $ | 99   |      |  | $ | 91   |   |  | $ | 92   |  
|Interest cost on projected benefit obligation    |  |                                         | 368  |   |                       |   | 345  |      |  |   | 344  |   |  |   | 323  |  
|Expected return on plan assets                   |  |                                         | (484 | ) |                       |   | (465 | )    |  |   | (463 | ) |  |   | (447 | )
|Amortization of net actuarial loss               |  |                                         | 120  |   |                       |   | 94   |      |  |   | 104  |   |  |   | 78   |  
|Amortization of prior service costs              |  |                                         | 8    |   |                       |   | 10   |      |  |   | 7    |   |  |   | 9    |  
|NET PERIODIC BENEFIT COST                        |  | $                                       | 110  |   |                       | $ | 83   |      |  | $ | 83   |   |  | $ | 55   |  
|Amortization of regulatory asset*                |  |                                         | 3    |   |                       |   | 3    |      |  |   | 3    |   |  |   | 3    |  
|TOTAL PERIODIC BENEFIT COST                      |  | $                                       | 113  |   |                       | $ | 86   |      |  | $ | 86   |   |  | $ | 58   |  
|Cost capitalized                                 |  |                                         | (37  | ) |                       |   | (25  | )    |  |   | (30  | ) |  |   | (19  | )
|Cost deferred                                    |  |                                         | (75  | ) |                       |   | (85  | )    |  |   | (69  | ) |  |   | (75  | )
|Cost charged/(credited) to operating expenses    |  | $                                       | 1    |   |                       | $ | (24  | )    |  | $ | (13  | ) |  | $ | (36  | )

|* | Relates to increases in Con Edison of New Yorks pension obligations of $33 million from a 1993 special retirement program and $45 million from a 1999 special retirement
program.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Expected Contributions

Con Edison of New York expects to contribute $8 million to its non-qualified Supplemental Retirement Income Plan in the fourth quarter of 2007.



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Note F - Other Postretirement Benefits

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



Net Periodic Benefit Cost

The components of the Companies net periodic postretirement benefit costs for the three and nine months ended September 30, 2007 and 2006 were as follows:



|                                                                     |  |                                          |     |   |                        |   |     |      |  |   |      |   |  |   |     |  
|-------------------------------------------------------------------- |  | ---------------------------------------- | --- | - | ---------------------- | - | --- | ---- |  | - | ---- | - |  | - | --- | -
|                                                                     |  | For the Three Months Ended September 30, |    
|                                                                     |  | Con Edison                               |     |   | Con Edison of New York |  
|(Millions of Dollars)                                                |  | 2007                                     |     |   | 2006                   |   |     | 2007 |  |   | 2006 |  
|Service cost                                                         |  | $                                        | 4   |   |                        | $ | 4   |      |  | $ | 4    |   |  | $ | 3   |  
|Interest cost on accumulated other postretirement benefit obligation |  |                                          | 24  |   |                        |   | 21  |      |  |   | 21   |   |  |   | 19  |  
|Expected return on plan assets                                       |  |                                          | (21 | ) |                        |   | (19 | )    |  |   | (19  | ) |  |   | (18 | )
|Amortization of net actuarial loss                                   |  |                                          | 17  |   |                        |   | 15  |      |  |   | 15   |   |  |   | 13  |  
|Amortization of prior service cost                                   |  |                                          | (4  | ) |                        |   | (4  | )    |  |   | (4   | ) |  |   | (4  | )
|Amortization of transition obligation                                |  |                                          | 1   |   |                        |   | 1   |      |  |   | 1    |   |  |   | 1   |  
|NET PERIODIC POSTRETIREMENT BENEFIT COST                             |  | $                                        | 21  |   |                        | $ | 18  |      |  | $ | 18   |   |  | $ | 14  |  
|Cost capitalized                                                     |  |                                          | (7  | ) |                        |   | (7  | )    |  |   | (6   | ) |  |   | (5  | )
|Cost deferred                                                        |  |                                          | (7  | ) |                        |   | (8  | )    |  |   | (7   | ) |  |   | (8  | )
|Cost charged to operating expenses                                   |  | $                                        | 7   |   |                        | $ | 3   |      |  | $ | 5    |   |  | $ | 1   |  
|                                                                     | 
|                                                                     |  | For the Nine Months Ended September 30,  |    
|                                                                     |  | Con Edison                               |     |   | Con Edison of New York |  
|(Millions of Dollars)                                                |  | 2007                                     |     |   | 2006                   |   |     | 2007 |  |   | 2006 |  
|Service cost                                                         |  | $                                        | 13  |   |                        | $ | 13  |      |  | $ | 11   |   |  | $ | 10  |  
|Interest cost on accumulated other postretirement benefit obligation |  |                                          | 70  |   |                        |   | 64  |      |  |   | 62   |   |  |   | 57  |  
|Expected return on plan assets                                       |  |                                          | (61 | ) |                        |   | (58 | )    |  |   | (56  | ) |  |   | (54 | )
|Amortization of net actuarial loss                                   |  |                                          | 50  |   |                        |   | 44  |      |  |   | 44   |   |  |   | 37  |  
|Amortization of prior service cost                                   |  |                                          | (11 | ) |                        |   | (11 | )    |  |   | (11  | ) |  |   | (11 | )
|Amortization of transition obligation                                |  |                                          | 3   |   |                        |   | 3   |      |  |   | 3    |   |  |   | 3   |  
|NET PERIODIC POSTRETIREMENT BENEFIT COST                             |  | $                                        | 64  |   |                        | $ | 55  |      |  | $ | 53   |   |  | $ | 42  |  
|Cost capitalized                                                     |  |                                          | (22 | ) |                        |   | (18 | )    |  |   | (18  | ) |  |   | (14 | )
|Cost deferred                                                        |  |                                          | (27 | ) |                        |   | (23 | )    |  |   | (25  | ) |  |   | (20 | )
|Cost charged to operating expenses                                   |  | $                                        | 15  |   |                        | $ | 14  |      |  | $ | 10   |   |  | $ | 8   |  



Note G - Environmental Matters

Superfund Sites

Hazardous substances, such as asbestos,
polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of the Utilities and their predecessors and are present at sites and in facilities and equipment they currently or previously owned, including
sites at which gas was manufactured or stored.



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The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes
(Superfund) impose joint and several liability, regardless of fault, upon generators of hazardous substances for investigation and remediation costs (which include costs of demolition, removal, disposal, storage, replacement, containment, and
monitoring) and environmental damages. Liability under these laws can be material and may be imposed for contamination from past acts, even though such past acts may have been lawful at the time they occurred. The sites at which the Utilities have
been asserted to have liability under these laws, including their manufactured gas plant sites, are referred to herein as Superfund Sites.



For Superfund Sites where there are other potentially responsible parties and the Utilities are not managing the site investigation and remediation, the accrued liability
represents an estimate in 2006 dollars of the amount the Utilities will need to pay to discharge their related obligations. For Superfund Sites (including the manufactured gas plant sites) for which one of the Utilities is managing the investigation
and remediation, the accrued liability represents an estimate in 2006 dollars of the companys share of undiscounted cost to investigate the sites and, for sites that have been investigated in whole or in part, the cost to remediate the sites.
Remediation costs are estimated in light of the information available, applicable remediation standards, and experience with similar sites.



The accrued liabilities and regulatory assets related to Superfund Sites at September 30, 2007 and December 31, 2006 were as follows:



|                             |  |            |     |      |                       |     |      |  |      |     |  |   |    
|---------------------------- |  | ---------- | --- | ---- | --------------------- | --- | ---- |  | ---- | --- |  | - | ---
|                             |  | Con Edison |     |      | Con Edison ofNew York
|(Millions of Dollars)        |  | 2007       |     | 2006 |                       |     | 2007 |  | 2006
|Accrued Liabilities:         |  |            |     |      |                       |     |      |  |      |     |  |   |    
|Manufactured gas plant sites |  | $          | 272 |      | $                     | 228 |      |  | $    | 218 |  | $ | 180
|Other Superfund Sites        |  |            | 61  |      |                       | 64  |      |  |      | 60  |  |   | 63 
|Total                        |  | $          | 333 |      | $                     | 292 |      |  | $    | 278 |  | $ | 243
|Regulatory assets            |  | $          | 384 |      | $                     | 318 |      |  | $    | 310 |  | $ | 255



Most of the accrued Superfund Site
liability relates to sites that have been investigated, in whole or in part. As investigations progress on these and other sites, the Utilities expect that additional liability will be accrued, the amount of which is not presently determinable but
may be material. Under their current rate agreements, the Utilities are permitted to recover or defer as regulatory assets (for subsequent recovery through rates) certain site investigation and remediation costs.



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Environmental remediation payments and insurance recoveries received related to Superfund Sites for the three and
nine months ended September 30, 2007 and 2006 were as follows:



|                              |  |                                          |    |      |                       |    |      |  |      |    |  |   |   
|----------------------------- |  | ---------------------------------------- | -- | ---- | --------------------- | -- | ---- |  | ---- | -- |  | - | --
|                              |  | For the Three Months Ended September 30,
|                              |  | Con Edison                               |    |      | Con Edison ofNew York
|(Millions of Dollars)         |  | 2007                                     |    | 2006 |                       |    | 2007 |  | 2006
|Remediation payments          |  | $                                        | 16 |      | $                     | 11 |      |  | $    | 13 |  | $ | 9 
|Insurance recoveries received |  |                                          |   |      |                       |   |      |  |      |   |  |   |  
|                              | 
|                              |  | For the Nine Months Ended September 30, 
|                              |  | Con Edison                               |    |      | Con Edison ofNew York
|(Millions of Dollars)         |  | 2007                                     |    | 2006 |                       |    | 2007 |  | 2006
|Remediation payments          |  | $                                        | 33 |      | $                     | 41 |      |  | $    | 29 |  | $ | 34
|Insurance recoveries received |  |                                          | 1  |      |                       | 3  |      |  |      | 1  |  |   | 3 



In 2006, Con Edison of New York
estimated that for its manufactured gas plant sites, its aggregate undiscounted potential liability for the investigation and remediation of coal tar and/or other manufactured gas plant-related environmental contaminants could range up to $1.1
billion. In 2007, O&R estimated that for its manufactured gas plant sites, each of which has been investigated, the aggregate undiscounted potential liability for the remediation of such contaminants could range up to $143 million. These
estimates were based on the assumption that there is contamination at the sites that have not yet been investigated and additional assumptions about these and the other sites regarding the extent of contamination and the type and extent of
remediation that may be required. Actual experience may be materially different.



Asbestos Proceedings

Suits have been brought in New York State and federal courts against the Utilities and many other defendants, wherein
a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the Utilities. The suits that have been resolved, which are many, have
been resolved without any payment by the Utilities, or for amounts that were not, in the aggregate, material to them. The amounts specified in all the remaining thousands of suits total billions of dollars; however, the Utilities believe that these
amounts are greatly exaggerated, based on the disposition of previous claims. In 2006, Con Edison of New York estimated that its aggregate undiscounted potential liability for these suits and additional suits that may be brought over the next 15
years is $10 million. The estimate was based upon a combination of modeling, historical data analysis and risk factor assessment. Actual experience



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may be materially different. In addition, certain current and former employees have claimed or are claiming workers compensation benefits based on
alleged disability from exposure to asbestos. Under its current rate agreements, Con Edison of New York is permitted to defer as regulatory assets (for subsequent recovery through rates) costs incurred for its asbestos lawsuits and workers
compensation claims. The accrued liability for asbestos suits and workers compensation proceedings (including those related to asbestos exposure) and the amounts deferred as regulatory assets for the Companies at September 30, 2007 and
December 31, 2006 were as follows:



|                                          |  |            |     |      |                       |     |      |  |      |     |  |   |    
|----------------------------------------- |  | ---------- | --- | ---- | --------------------- | --- | ---- |  | ---- | --- |  | - | ---
|                                          |  | Con Edison |     |      | Con Edison ofNew York
|(Millions of Dollars)                     |  | 2007       |     | 2006 |                       |     | 2007 |  | 2006
|Accrued liability - asbestos suits        |  | $          | 10  |      | $                     | 10  |      |  | $    | 10  |  | $ | 10 
|Regulatory assets - asbestos suits        |  | $          | 10  |      | $                     | 10  |      |  | $    | 10  |  | $ | 10 
|Accrued liability - workers compensation |  | $          | 120 |      | $                     | 117 |      |  | $    | 115 |  | $ | 112
|Regulatory assets - workers compensation |  | $          | 45  |      | $                     | 42  |      |  | $    | 45  |  | $ | 42 



Note H - Other Material Contingencies

Manhattan Steam Main Rupture

In July 2007, a Con Edison of New
York steam main located in midtown Manhattan ruptured. The cause of the rupture is being investigated. It has been reported that one person died and others were injured as a result of the incident. Several buildings in the area were damaged. Debris
from the incident included dirt and mud containing asbestos. The response to the incident required the closing of several buildings and streets for various periods. As of September 30, 2007, with respect to the incident, the company incurred
estimated operating costs of $19 million for property damage, clean up and other response costs and invested $11 million in capital, retirement and other costs. Several plaintiffs have sued the company seeking generally unspecified compensatory and,
in some cases, punitive damages, for personal injury, property damage and business interruption. The company has notified its insurers of the incident and believes that the policies currently in force will cover most of the companys costs,
which could be substantial, to satisfy its liability to others in connection with the incident.



Lease In/Lease Out Transactions

In each of 1997 and 1999, Con Edison Development entered into a transaction in which it leased property and
then immediately subleased it back to the lessor (termed Lease In/Lease Out, or LILO transaction). The transactions respectively involve gas distribution and electric generating facilities in the Netherlands, with a total investment of
$259 million. The transactions were financed with $93 million of equity and $166 million of non-recourse, long-term debt secured by the underlying assets. In accordance with Statement of Financial Accounting Standards (SFAS) No. 13,
Accounting for Leases, Con Edison is accounting for the two LILO transactions as leveraged leases. Accordingly, the



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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. At September 30,
2007 and December 31, 2006, the companys investment in these leveraged leases ($234 million and $232 million, respectively) net of deferred tax liabilities ($221 million and $208 million, respectively), amounted to $13 million and $24
million, respectively.



On audit of Con Edisons tax return for 1997, the
Internal Revenue Service (IRS) disallowed the tax losses in connection with the 1997 LILO transaction. In December 2005, Con Edison paid a $0.3 million income tax deficiency asserted by the IRS for the tax year 1997 with respect to the 1997
LILO transaction. In April 2006, the company paid interest of $0.2 million associated with the deficiency and commenced an action in the United States Court of Federal Claims, entitled Consolidated Edison Company of New York, Inc. v. United States,
to obtain a refund of this tax payment and interest. A trial commenced in October 2007.



In connection with its audit of Con Edisons federal income tax returns for the tax years 1998, 1999, 2000, 2001 and 2005, the IRS disallowed $194 million of net tax deductions taken with respect to both of the LILO transactions for
the tax years. Con Edison filed appeals of these audit level disallowances with the Appeals Office of the IRS, where consideration of this matter is pending. In connection with its audit of Con Edisons federal income tax returns for the tax
years 2002, 2003, 2004 and 2006, the IRS indicated that it intends to disallow $186 million of net tax deductions taken with respect to both of the LILO transactions for the tax years. If and when these audit level disallowances becomes appealable,
Con Edison intends to file appeals of the disallowances with the Appeals Office of the IRS.



Con Edison believes that its LILO transactions have been correctly reported, and has not recorded any reserve with respect to the disallowance of tax losses, or related interest, in connection with its LILO
transactions. Con Edisons estimated tax savings, reflected in its financial statements, from the two LILO transactions through September 30, 2007, in the aggregate, was $167 million. If Con Edison were required to repay all or a portion
of these amounts, it would also be required to pay interest of up to $58 million.



Northeast Utilities Litigation

Con Edison and Northeast Utilities are pursuing claims against each other for damages as a result of the
alleged breach of their agreement and plan of merger, dated as of October 13, 1999, as amended and restated as of January 11, 2000. The litigation, entitled Consolidated Edison, Inc. v. Northeast



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Utilities, was commenced in March 2001 and is pending in the United States District Court for the Southern District of New York. The parties are seeking to
recover from each other fees and expenses each incurred in connection with the merger agreement and preparing for the merger. In addition, Con Edison is seeking to recover from Northeast Utilities compensation for synergies that were lost when the
merger did not occur, together with the attorneys fees it has incurred in connection with the litigation. Con Edison does not expect that the lawsuit will have a material adverse effect on its financial position, results of operations or
liquidity.



Guarantees

Con Edison and its subsidiaries enter into various agreements providing financial or performance assurance primarily to third parties on behalf of their subsidiaries. In
addition, a Con Edison Development subsidiary has issued a guarantee on behalf of an entity in which it has an equity interest. Maximum amounts guaranteed by Con Edison totaled $1.3 billion and $1.2 billion at September 30, 2007 and
December 31, 2006, respectively.



A summary, by type and term, of Con
Edisons total guarantees at September 30, 2007 is as follows:



|                           |  |                       |     |             |   |            |  |       |     |  |   |      
|-------------------------- |  | --------------------- | --- | ----------- | - | ---------- |  | ----- | --- |  | - | -----
|Guarantee Type             |  | 0 3 years            |     | 4 10 years |   | > 10 years |  | Total
|                           |  | (Millions of Dollars)
|Commodity transactions     |  | $                     | 851 |             | $ | 30         |  | $     | 249 |  | $ | 1,130
|Affordable housing program |  |                       |    |             |   | 22         |  |       |    |  |   | 22   
|Intra-company guarantees   |  |                       | 45  |             |   |           |  |       | 1   |  |   | 46   
|Other guarantees           |  |                       | 78  |             |   | 42         |  |       |    |  |   | 120  
|TOTAL                      |  | $                     | 974 |             | $ | 94         |  | $     | 250 |  | $ | 1,318



For a description of guarantee types,
see Note H to the financial statements in Item 8 of the Form 10-K.



Note I -
Income Tax

Uncertain Tax Positions

Reference is made to Note
H to the financial statements in Part I, Item 1 of the First Quarter Form 10-Q for information about the Companies January 2007 adoption of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for
Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 (FIN 48).



The Companies uncertain tax positions include use of the simplified service cost method (SSCM) to determine the extent to which construction-related costs could be deducted in 2002 through 2005. The
Companies expect that they will be required to repay, with interest, a portion of their past SSCM tax benefits ($323 million, of which $295 million is attributable to Con Edison of New York) and to



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capitalize and depreciate over a period of years costs they previously deducted under SSCM. Interest on all past SSCM tax benefits for Con Edison and Con
Edison of New York could be approximately $101 million and $92 million, respectively. Repayment of the SSCM tax benefits would not otherwise affect the Companies results of operations because deferred taxes have been previously provided for
the related temporary differences between the SSCM deductions taken for federal income tax purposes and the corresponding amounts charged to expense for financial reporting purposes.



At September 30, 2007, the liabilities for uncertain tax positions for Con Edison and Con Edison of New York were $156 million and $142
million, respectively, and accrued interest on the liabilities amounted to $33 million and $29 million, respectively. The Companies recognize interest accrued related to the liability for uncertain tax positions in interest expense and penalties, if
any, in operating expenses in the Companies consolidated income statements. The Companies recognized interest expense for uncertain tax positions for the three and nine months ended September 30, 2007 were as follows:



|                      |  |                                              |   |                       |                                             |   |            |  |                       |    |  |   |  
|--------------------- |  | -------------------------------------------- | - | --------------------- | ------------------------------------------- | - | ---------- |  | --------------------- | -- |  | - | -
|                      |  | For the Three MonthsEnded September 30, 2007 |   |                       | For the Nine MonthsEnded September 30, 2007
|(Millions of Dollars) |  | Con Edison                                   |   | Con Edison ofNew York |                                             |   | Con Edison |  | Con Edison ofNew York
|Interest expense      |  | $                                            | 1 |                       | $                                           | 1 |            |  | $                     | 11 |  | $ | 8



In June 2007, Con Edison paid $160
million to the Internal Revenue Service, $147 million of which is attributable to Con Edison of New York, as a deposit for the repayment, including related interest, that the Companies expect will be required with respect to the past SSCM benefits.
As a result, for federal income tax purposes, interest will continue to accrue only on the portion of the liability, if any, that exceeds the deposit. Con Edison and Con Edison of New York have recorded the deposit as a noncurrent asset on their
consolidated balance sheet.



The Companies do not expect the total amounts of
uncertain tax positions to significantly increase or decrease within the next 12 months.



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Note J - Stock-Based Compensation

For a description of stock-based compensation, including stock options, restricted stock units (RSUs) and the stock purchase plan, reference is made to Note M to the financial statements in Item 8 of the Form 10-K. In accordance with
SFAS No. 123(R), Share-Based Payment (SFAS No. 123(R)), the Companies have recognized the cost of stock-based compensation as an expense using a fair value measurement method. The following table summarizes stock-based
compensation expense recognized by the Companies in the three and nine months ended September 30, 2007 and 2006:



|                                   |  |                                          |   |      |                        |    |      |  |      |   |  |   |   
|---------------------------------- |  | ---------------------------------------- | - | ---- | ---------------------- | -- | ---- |  | ---- | - |  | - | --
|                                   |  | For the Three Months Ended September 30,
|                                   |  | Con Edison                               |   |      | Con Edison of New York
|(Millions of Dollars)              |  | 2007                                     |   | 2006 |                        |    | 2007 |  | 2006
|Stock options                      |  | $                                        | 1 |      | $                      | 2  |      |  | $    | 1 |  | $ | 1 
|Restricted stock units             |  |                                          |  |      |                        |   |      |  |      |  |  |   |  
|Performance-based restricted stock |  |                                          | 1 |      |                        | 2  |      |  |      | 1 |  |   | 1 
|Total                              |  | $                                        | 2 |      | $                      | 4  |      |  | $    | 2 |  | $ | 2 
|                                   | 
|                                   |  | For the Nine Months Ended September 30, 
|                                   |  | Con Edison                               |   |      | Con Edison of New York
|(Millions of Dollars)              |  | 2007                                     |   | 2006 |                        |    | 2007 |  | 2006
|Stock options                      |  | $                                        | 2 |      | $                      | 8  |      |  | $    | 1 |  | $ | 7 
|Restricted stock units             |  |                                          | 1 |      |                        | 1  |      |  |      | 1 |  |   |  
|Performance-based restricted stock |  |                                          | 3 |      |                        | 11 |      |  |      | 3 |  |   | 9 
|Total                              |  | $                                        | 6 |      | $                      | 20 |      |  | $    | 5 |  | $ | 16



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Stock Options

A summary of
changes in the status of stock options during the three and nine months ended September 30, 2007 and 2006 were as follows:



|                        |  |            |   |  |                              |        |  |        |           |   |                              |   |       
|----------------------- |  | ---------- | - |  | ---------------------------- | ------ |  | ------ | --------- | - | ---------------------------- | - | ------
|                        |  | Con Edison |   |  | Con Edison ofNew York       
|                        |  | Shares     |   |  | WeightedAverageExercisePrice |        |  | Shares |           |   | WeightedAverageExercisePrice
|Outstanding at 12/31/05 |  | 7,867,151  |   |  | $                            | 41.913 |  |        | 6,697,401 |   |                              | $ | 42.000
|Granted                 |  | 804,000    |   |  |                              | 46.880 |  |        | 699,000   |   |                              |   | 46.880
|Exercised               |  | (67,500    | ) |  |                              | 37.560 |  |        | (60,800   | ) |                              |   | 37.404
|Forfeited               |  | (20,900    | ) |  |                              | 42.691 |  |        | (5,000    | ) |                              |   | 44.688
|Outstanding at 3/31/06  |  | 8,582,751  |   |  | $                            | 42.412 |  |        | 7,330,601 |   |                              | $ | 42.503
|Granted                 |  | 859,900    |   |  |                              | 43.500 |  |        | 711,700   |   |                              |   | 43.500
|Exercised               |  | (64,725    | ) |  |                              | 35.935 |  |        | (55,725   | ) |                              |   | 35.538
|Forfeited               |  | (19,000    | ) |  |                              | 44.353 |  |        | (13,000   | ) |                              |   | 44.765
|Outstanding at 6/30/06  |  | 9,358,926  |   |  | $                            | 42.553 |  |        | 7,973,576 |   |                              | $ | 42.637
|Granted                 |  |           |   |  |                              |       |  |        |          |   |                              |   |      
|Exercised               |  | (235,200   | ) |  |                              | 39.003 |  |        | (192,800  | ) |                              |   | 39.220
|Forfeited               |  | (17,000    | ) |  |                              | 46.108 |  |        | (11,800   | ) |                              |   | 45.452
|Outstanding at 9/30/06  |  | 9,106,726  |   |  | $                            | 42.641 |  |        | 7,768,976 |   |                              | $ | 42.722
|Outstanding at 12/31/06 |  | 8,617,601  |   |  | $                            | 42.773 |  |        | 7,346,601 |   |                              | $ | 42.842
|Granted                 |  |           |   |  |                              |       |  |        |          |   |                              |   |      
|Exercised               |  | (975,100   | ) |  |                              | 41.630 |  |        | (907,050  | ) |                              |   | 41.634
|Forfeited               |  | (1,001     | ) |  |                              | 42.169 |  |        | (1,001    | ) |                              |   | 42.169
|Outstanding at 3/31/07  |  | 7,641,500  |   |  | $                            | 42.919 |  |        | 6,438,550 |   |                              | $ | 43.013
|Granted                 |  |           |   |  |                              |       |  |        |          |   |                              |   |      
|Exercised               |  | (668,350   | ) |  |                              | 42.803 |  |        | (587,500  | ) |                              |   | 42.829
|Forfeited               |  | (19,350    | ) |  |                              | 42.483 |  |        | (7,500    | ) |                              |   | 41.870
|Outstanding at 6/30/07  |  | 6,953,800  |   |  | $                            | 42.931 |  |        | 5,843,550 |   |                              | $ | 43.033
|Granted                 |  |           |   |  |                              |       |  |        |          |   |                              |   |      
|Exercised               |  | (8,100     | ) |  |                              | 39.997 |  |        | (7,450    | ) |                              |   | 39.639
|Forfeited               |  | (26,450    | ) |  |                              | 42.457 |  |        | (10,250   | ) |                              |   | 41.891
|Outstanding at 9/30/07  |  | 6,919,250  |   |  | $                            | 42.934 |  |        | 5,825,850 |   |                              | $ | 43.037



The change in the fair value of all
outstanding options from their grant dates to September 30, 2007 and 2006 (aggregate intrinsic value) for Con Edison were $23 million and $32 million, respectively. The change in the fair value of all outstanding options from their grant dates
to September 30, 2007 and 2006 (aggregate intrinsic value) for Con Edison of New York were $19 million and $27 million, respectively. The aggregate intrinsic value of options exercised in the period ended September 30, 2007



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and 2006 were $0.05 million and $2 million and the cash received by Con Edison for payment of the exercise price were $0.3 million and $9 million,
respectively. The weighted average remaining contractual life of options outstanding is five years as of September 30, 2007.



The following table summarizes stock options outstanding at September 30, 2007 for each plan year for the Companies:



|          |  |                          |  |                     |  |                              |                        |                    |           |  |                     |           |                              |   |                    |  |          
|--------- |  | ------------------------ |  | ------------------- |  | ---------------------------- | ---------------------- | ------------------ | --------- |  | ------------------- | --------- | ---------------------------- | - | ------------------ |  | ---------
|          |  |                          |  | Con Edison          |  |                              | Con Edison of New York
|Plan Year |  | RemainingContractualLife |  | Options Outstanding |  | WeightedAverageExercisePrice |                        | OptionsExercisable |           |  | Options Outstanding |           | WeightedAverageExercisePrice |   | OptionsExercisable
|2006      |  | 9                        |  | 1,636,800           |  | $                            | 45.160                 |                    |          |  |                     | 1,400,700 |                              | $ | 45.187             |  |         
|2005      |  | 8                        |  | 1,252,500           |  |                              | 42.744                 |                    |          |  |                     | 1,021,250 |                              |   | 42.721             |  |         
|2004      |  | 7                        |  | 949,800             |  |                              | 43.775                 |                    | 949,800   |  |                     | 756,350   |                              |   | 43.769             |  | 756,350  
|2003      |  | 6                        |  | 806,600             |  |                              | 39.923                 |                    | 806,600   |  |                     | 633,900   |                              |   | 39.950             |  | 633,900  
|2002      |  | 5                        |  | 956,550             |  |                              | 42.510                 |                    | 956,550   |  |                     | 819,050   |                              |   | 42.510             |  | 819,050  
|2001      |  | 4                        |  | 504,550             |  |                              | 37.750                 |                    | 504,550   |  |                     | 436,550   |                              |   | 37.750             |  | 436,550  
|2000      |  | 3                        |  | 144,650             |  |                              | 32.500                 |                    | 144,650   |  |                     | 109,150   |                              |   | 32.500             |  | 109,150  
|1999      |  | 2                        |  | 558,750             |  |                              | 47.938                 |                    | 558,750   |  |                     | 541,350   |                              |   | 47.938             |  | 541,350  
|1998      |  | 1                        |  | 109,050             |  |                              | 42.563                 |                    | 109,050   |  |                     | 107,550   |                              |   | 42.563             |  | 107,550  
|Total     |  |                          |  | 6,919,250           |  | $                            | 42.934                 |                    | 4,029,950 |  |                     | 5,825,850 |                              | $ | 43.037             |  | 3,403,900



There were no new awards granted in
2007. The exercise prices of options awarded in 2006 range from $43.50 to $46.88. The total expense to be recognized in future periods for unvested stock options outstanding as of September 30, 2007 is $2 million for Con Edison and Con Edison
of New York.



Restricted Stock Units

At September 30, 2007 and 2006, there were 114,855 and 192,500 units outstanding for Con Edison employees, of which 62,855 and 141,700 units are outstanding for Con
Edison of New York employees. The weighted average fair value as of the grant date of the outstanding units for September 30, 2007 and 2006 were $42.86 and $35.84 per unit for Con Edison, respectively. The weighted average fair value as of the
grant date of the outstanding units for September 30, 2007 and 2006 were $45.87 and $34.73 per unit for Con Edison of New York, respectively. The total expense to be recognized by the Companies in future periods for unvested awards outstanding
as of September 30, 2007 for Con Edison and Con Edison of New York were $1 million.



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NOTES TO THE FINANCIAL
STATEMENTS (UNAUDITED)  CONTINUED



A summary of changes in the status of the Performance RSUs Total Shareholder Return (TSR) portion during the
three, and nine months ended September 30, 2007 and 2006 were as follows:



|                        |  |            |   |  |                           |        |  |       |          |   |                           |   |       
|----------------------- |  | ---------- | - |  | ------------------------- | ------ |  | ----- | -------- | - | ------------------------- | - | ------
|                        |  | Con Edison |   |  | Con Edison ofNew York    
|                        |  | Units      |   |  | WeightedAverageFairValue* |        |  | Units |          |   | WeightedAverageFairValue*
|Outstanding at 12/31/05 |  | 204,425    |   |  | $                         | 31.461 |  |       | 171,950  |   |                           | $ | 31.581
|Granted                 |  | 99,300     |   |  |                           | 43.830 |  |       | 87,400   |   |                           |   | 43.830
|Exercised               |  | (156,450   | ) |  |                           | 46.477 |  |       | (144,475 | ) |                           |   | 46.455
|Forfeited               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Outstanding at 3/31/06  |  | 147,275    |   |  | $                         | 29.313 |  |       | 114,875  |   |                           | $ | 29.530
|Granted                 |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Exercised               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Forfeited               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Outstanding at 6/30/06  |  | 147,275    |   |  | $                         | 31.250 |  |       | 114,875  |   |                           | $ | 44.440
|Granted                 |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Exercised               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Forfeited               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Outstanding at 9/30/06  |  | 147,275    |   |  | $                         | 24.800 |  |       | 114,875  |   |                           | $ | 25.140
|Outstanding at 12/31/06 |  | 126,425    |   |  | $                         | 13.992 |  |       | 94,025   |   |                           | $ | 14.420
|Granted                 |  | 113,600    |   |  |                           | 45.730 |  |       | 81,848   |   |                           |   | 45.730
|Exercised               |  | (31,400    | ) |  |                           |       |  |       | (21,475  | ) |                           |   |      
|Forfeited               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Outstanding at 3/31/07  |  | 208,625    |   |  | $                         | 36.108 |  |       | 154,398  |   |                           | $ | 35.709
|Granted                 |  | 33,280     |   |  |                           | 48.060 |  |       | 30,805   |   |                           |   | 48.060
|Exercised               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Forfeited               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Outstanding at 6/30/07  |  | 241,905    |   |  | $                         | 20.152 |  |       | 185,203  |   |                           | $ | 20.155
|Granted                 |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Exercised               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Forfeited               |  | (4,723     | ) |  |                           |       |  |       | (4,723   | ) |                           |   |      
|Outstanding at 9/30/07  |  | 237,182    |   |  | $                         | 22.677 |  |       | 180,480  |   |                           | $ | 22.726

|* | Fair value is determined using the Monte Carlo simulation.
|- | ----------------------------------------------------------



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NOTES TO THE FINANCIAL
STATEMENTS (UNAUDITED)  CONTINUED



A summary of changes in the status of the Performance RSUs Executive Incentive Plan (EIP) portion during the
three, and nine months ended September 30, 2007 and 2006 were as follows:



|                        |  |            |   |  |                           |        |  |       |          |   |                           |   |       
|----------------------- |  | ---------- | - |  | ------------------------- | ------ |  | ----- | -------- | - | ------------------------- | - | ------
|                        |  | Con Edison |   |  | Con Edison ofNew York    
|                        |  | Units      |   |  | WeightedAverageFairValue* |        |  | Units |          |   | WeightedAverageFairValue*
|Outstanding at 12/31/05 |  | 204,425    |   |  | $                         | 43.297 |  |       | 171,950  |   |                           | $ | 43.300
|Granted                 |  | 99,300     |   |  |                           | 46.880 |  |       | 87,400   |   |                           |   | 46.880
|Exercised               |  | (156,450   | ) |  |                           | 46.477 |  |       | (144,475 | ) |                           |   | 46.455
|Forfeited               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Outstanding at 3/31/06  |  | 147,275    |   |  | $                         | 43.500 |  |       | 114,875  |   |                           | $ | 43.500
|Granted                 |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Exercised               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Forfeited               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Outstanding at 6/30/06  |  | 147,275    |   |  | $                         | 44.440 |  |       | 114,875  |   |                           | $ | 44.440
|Granted                 |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Exercised               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Forfeited               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Outstanding at 9/30/06  |  | 147,275    |   |  | $                         | 46.200 |  |       | 114,875  |   |                           | $ | 46.200
|Outstanding at 12/31/06 |  | 126,425    |   |  | $                         | 48.070 |  |       | 94,025   |   |                           | $ | 48.070
|Granted                 |  | 113,600    |   |  |                           | 47.815 |  |       | 81,848   |   |                           |   | 47.807
|Exercised               |  | (31,400    | ) |  |                           | 47.530 |  |       | (21,475  | ) |                           |   | 47.530
|Forfeited               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Outstanding at 3/31/07  |  | 208,625    |   |  | $                         | 51.060 |  |       | 154,398  |   |                           | $ | 51.060
|Granted                 |  | 33,280     |   |  |                           | 51.060 |  |       | 30,805   |   |                           |   | 51.060
|Exercised               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Forfeited               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Outstanding at 6/30/07  |  | 241,905    |   |  | $                         | 45.120 |  |       | 185,203  |   |                           | $ | 45.120
|Granted                 |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Exercised               |  |           |   |  |                           |       |  |       |         |   |                           |   |      
|Forfeited               |  | (4,723     | ) |  |                           |       |  |       | (4,723   | ) |                           |   |      
|Outstanding at 9/30/07  |  | 237,182    |   |  | $                         | 46.300 |  |       | 180,480  |   |                           | $ | 46.300



The total expense to be recognized by
Con Edison in future periods for unvested Performance RSUs outstanding as of September 30, 2007 is $8 million, including $6 million for Con Edison of New York.



Stock Purchase Plan

In the three months ended
September 30, 2007 and 2006, 128,091 shares and 127,529 shares were purchased under the Stock Purchase Plan at a weighted average price of $46.38 and $44.62 per share, respectively. In the nine months ended September 30, 2007 and 2006,
432,903 shares and 439,646 shares were purchased under the Stock Purchase Plan at a weighted average price of $48.25 and $44.94 per share, respectively.



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NOTES TO THE FINANCIAL
STATEMENTS (UNAUDITED)  CONTINUED



Note K - Financial Information By Business Segment

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



The financial data for the business segments are as follows:



|                              |  |                                          |       |      |                       |       |      |                              |   |      |                  |  |      |     |      |  |   |      |  |   |      |  |  |   |     |   |  |   |     |  
|----------------------------- |  | ---------------------------------------- | ----- | ---- | --------------------- | ----- | ---- | ---------------------------- | - | ---- | ---------------- |  | ---- | --- | ---- |  | - | ---- |  | - | ---- |  |  | - | --- | - |  | - | --- | -
|                              |  | For the Three Months Ended September 30, |      
|                              |  | Operating Revenues                       |       |      | Inter-segmentrevenues |       |      | Depreciationand amortization |   |      | Operating Income | 
|(Millions of Dollars)         |  | 2007                                     |       | 2006 |                       |       | 2007 |                              |   | 2006 |                  |  | 2007 |     | 2006 |  |   | 2007 |  |   | 2006 | 
|Con Edison of New York        |  |                                          |       |      |                       |       |      |                              |   |      |                  |  |      |     |      |  |   |      |  |   |      |  |  |   |     |   |  |   |     |  
|Electric                      |  | $                                        | 2,272 |      | $                     | 2,273 |      |                              | $ | 3    |                  |  | $    | 2   |      |  | $ | 113  |  | $ | 104  |  |  | $ | 395 |   |  | $ | 314 |  
|Gas                           |  |                                          | 204   |      |                       | 185   |      |                              |   | 1    |                  |  |      | 1   |      |  |   | 22   |  |   | 20   |  |  |   | 4   |   |  |   | 7   |  
|Steam                         |  |                                          | 102   |      |                       | 104   |      |                              |   | 18   |                  |  |      | 18  |      |  |   | 15   |  |   | 12   |  |  |   | (3  | ) |  |   |    |  
|Consolidation adjustments     |  |                                          |      |      |                       |      |      |                              |   | (22  | )                |  |      | (21 | )    |  |   |     |  |   |     |  |  |   |    |   |  |   |    |  
|Total Con Edison of New York  |  | $                                        | 2,578 |      | $                     | 2,562 |      |                              | $ |     |                  |  | $    |    |      |  | $ | 150  |  | $ | 136  |  |  | $ | 396 |   |  | $ | 321 |  
|O&R                           |  |                                          |       |      |                       |       |      |                              |   |      |                  |  |      |     |      |  |   |      |  |   |      |  |  |   |     |   |  |   |     |  
|Electric                      |  | $                                        | 205   |      | $                     | 205   |      |                              | $ |     |                  |  | $    |    |      |  | $ | 7    |  | $ | 7    |  |  | $ | 22  |   |  | $ | 25  |  
|Gas                           |  |                                          | 30    |      |                       | 26    |      |                              |   |     |                  |  |      |    |      |  |   | 3    |  |   | 2    |  |  |   | (2  | ) |  |   | (2  | )
|Total O&R                     |  | $                                        | 235   |      | $                     | 231   |      |                              | $ |     |                  |  | $    |    |      |  | $ | 10   |  | $ | 9    |  |  | $ | 20  |   |  | $ | 23  |  
|Competitive energy businesses |  | $                                        | 830   |      | $                     | 648   |      |                              | $ |     |                  |  | $    | 13  |      |  | $ | 10   |  | $ | 10   |  |  | $ | 15  |   |  | $ | 29  |  
|Other*                        |  |                                          |      |      |                       |      |      |                              |   |     |                  |  |      | (13 | )    |  |   |     |  |   |     |  |  |   |    |   |  |   |    |  
|Total Con Edison              |  | $                                        | 3,643 |      | $                     | 3,441 |      |                              | $ |     |                  |  | $    |    |      |  | $ | 170  |  | $ | 155  |  |  | $ | 431 |   |  | $ | 373 |  

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



|                              |  |                                         |        |      |                       |       |      |                              |   |      |                  |  |      |     |      |  |   |      |  |   |      |  |  |   |       |   |  |   |     |  
|----------------------------- |  | --------------------------------------- | ------ | ---- | --------------------- | ----- | ---- | ---------------------------- | - | ---- | ---------------- |  | ---- | --- | ---- |  | - | ---- |  | - | ---- |  |  | - | ----- | - |  | - | --- | -
|                              |  | For the Nine Months Ended September 30, |       
|                              |  | Operating Revenues                      |        |      | Inter-segmentrevenues |       |      | Depreciationand amortization |   |      | Operating Income | 
|(Millions of Dollars)         |  | 2007                                    |        | 2006 |                       |       | 2007 |                              |   | 2006 |                  |  | 2007 |     | 2006 |  |   | 2007 |  |   | 2006 | 
|Con Edison of New York        |  |                                         |        |      |                       |       |      |                              |   |      |                  |  |      |     |      |  |   |      |  |   |      |  |  |   |       |   |  |   |     |  
|Electric                      |  | $                                       | 5,646  |      | $                     | 5,449 |      |                              | $ | 8    |                  |  | $    | 7   |      |  | $ | 333  |  | $ | 308  |  |  | $ | 758   |   |  | $ | 630 |  
|Gas                           |  |                                         | 1,316  |      |                       | 1,238 |      |                              |   | 3    |                  |  |      | 2   |      |  |   | 64   |  |   | 60   |  |  |   | 159   |   |  |   | 136 |  
|Steam                         |  |                                         | 525    |      |                       | 485   |      |                              |   | 59   |                  |  |      | 56  |      |  |   | 45   |  |   | 36   |  |  |   | 67    |   |  |   | 70  |  
|Consolidation adjustments     |  |                                         |       |      |                       |      |      |                              |   | (70  | )                |  |      | (65 | )    |  |   |     |  |   |     |  |  |   |      |   |  |   |    |  
|Total Con Edison of New York  |  | $                                       | 7,487  |      | $                     | 7,172 |      |                              | $ |     |                  |  | $    |    |      |  | $ | 442  |  | $ | 404  |  |  | $ | 984   |   |  | $ | 836 |  
|O&R                           |  |                                         |        |      |                       |       |      |                              |   |      |                  |  |      |     |      |  |   |      |  |   |      |  |  |   |       |   |  |   |     |  
|Electric                      |  | $                                       | 514    |      | $                     | 455   |      |                              | $ |     |                  |  | $    |    |      |  | $ | 20   |  | $ | 19   |  |  | $ | 47    |   |  | $ | 43  |  
|Gas                           |  |                                         | 189    |      |                       | 166   |      |                              |   |     |                  |  |      |    |      |  |   | 8    |  |   | 7    |  |  |   | 16    |   |  |   | 9   |  
|Total O&R                     |  | $                                       | 703    |      | $                     | 621   |      |                              | $ |     |                  |  | $    |    |      |  | $ | 28   |  | $ | 26   |  |  | $ | 63    |   |  | $ | 52  |  
|Competitive energy businesses |  | $                                       | 1,901  |      | $                     | 1,521 |      |                              | $ | 3    |                  |  | $    | 47  |      |  | $ | 30   |  | $ | 30   |  |  | $ | 50    |   |  | $ | 39  |  
|Other*                        |  |                                         |       |      |                       |      |      |                              |   | (3   | )                |  |      | (47 | )    |  |   | 1    |  |   |     |  |  |   | (3    | ) |  |   | (1  | )
|Total Con Edison              |  | $                                       | 10,091 |      | $                     | 9,314 |      |                              | $ |     |                  |  | $    |    |      |  | $ | 501  |  | $ | 460  |  |  | $ | 1,094 |   |  | $ | 926 |  

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



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NOTES TO THE FINANCIAL
STATEMENTS (UNAUDITED)  CONTINUED



Note L - Derivative Instruments and Hedging Activities

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



Energy Price Hedging

Con Edisons subsidiaries hedge market price
fluctuations associated with physical purchases and sales of electricity, natural gas, and steam by using derivative instruments including futures, forwards, basis swaps, options, transmission congestion contracts and financial transmission rights
contracts. The fair values of these hedges at September 30, 2007 and December 31, 2006 were as follows:



|                         |  |            |      |   |                       |   |      |      |  |   |      |   |  |   |      |  
|------------------------ |  | ---------- | ---- | - | --------------------- | - | ---- | ---- |  | - | ---- | - |  | - | ---- | -
|                         |  | Con Edison |      |   | Con Edison ofNew York |  
|(Millions of Dollars)    |  | 2007       |      |   | 2006                  |   |      | 2007 |  |   | 2006 |  
|Fair value of net assets |  | $          | (182 | ) |                       | $ | (319 | )    |  | $ | (113 | ) |  | $ | (206 | )



Credit Exposure

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



Con Edison and Con Edison of New
York had $195 million and $49 million of credit exposure in connection with energy supply and hedging activities, net of collateral and reserves, at September 30, 2007, respectively. Con Edisons net credit exposure consisted of $127
million with investment-grade counterparties (a portion of which is insured through credit insurance and hedged with credit default swaps), $63 million with commodity exchange brokers and $5 million with entities which lacked ratings or whose
ratings were not investment grade. Con Edison of New Yorks net credit exposure was primarily with commodity exchange brokers.



Cash Flow Hedges

Con Edisons subsidiaries, primarily the competitive
energy businesses prior to July 1, 2007, designated a portion of derivative instruments as cash flow hedges under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). Under cash flow
hedge accounting, to the extent a hedge is determined to be effective, the unrealized gain or loss on the hedge is recorded in OCI and reclassified to earnings at the time the underlying transaction is completed. A gain or loss relating
to any portion of the hedge determined to be ineffective is recognized in earnings in the period in which such determination is made. Con Edisons competitive energy businesses elected to discontinue the use of hedge accounting for
their commodity derivatives effective July 1, 2007.



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NOTES TO THE FINANCIAL
STATEMENTS (UNAUDITED)  CONTINUED



The net derivative losses related to the discontinued cash flow hedges continue to be reported in accumulated OCI
until they are reclassified into earnings. The following table presents selected information related to the hedges included in accumulated OCI at September 30, 2007:



|                                     |  |              |  |                       |                                                         |  |            |                                                                         |   |                         |   |   |            |  |   |                       |   |  |   |  
|------------------------------------ |  | ------------ |  | --------------------- | ------------------------------------------------------- |  | ---------- | ----------------------------------------------------------------------- | - | ----------------------- | - | - | ---------- |  | - | --------------------- | - |  | - | -
|                                     |  | Maximum Term |  |                       | Accumulated OtherComprehensive Income/(Loss) Net of Tax |  |            | Portion Expected to beReclassified to Earningsduring the Next 12 Months
|(Term in Months/Millions of Dollars) |  | Con Edison   |  | Con Edison ofNew York |                                                         |  | Con Edison |                                                                         |   | Con Edison of  New York |   |   | Con Edison |  |   | Con Edison ofNew York
|Energy Price Hedges                  |  | 39           |  |                      |                                                         |  | $          | (6                                                                      | ) |                         | $ |  |            |  | $ | (6                    | ) |  | $ | 



The effect of reclassification from
accumulated OCI to earnings will generally be offset by the recognition of the hedged transaction in earnings.



The competitive energy businesses also elected not to apply hedge designations prospectively for any commodity derivative contracts entered into after July 1, 2007. As a result, all unrealized gains and losses on
the contracts will be recognized in net income.



Other Derivatives

The Companies enter into certain derivative instruments that do not qualify or are not designated as hedges under SFAS No. 133. However, management believes these
instruments represent economic hedges that mitigate exposure to fluctuations in commodity prices. The Utilities are permitted by their respective regulators to reflect in rates all reasonably incurred gains and losses on these instruments. See
Recoverable Energy Costs in Note A to the financial statements in Item 8 of the Form 10-K. Con Edisons competitive energy businesses record unrealized gains and losses on these derivative contracts in earnings in the reporting
period in which they occur. Generally, the collateral requirements associated with, and settlement of, derivative transactions are included in net cash flows from operating activities in the Companies consolidated statement of cash flows. For
the three months ended September 30, 2007 and 2006, Con Edison recorded in non-utility operating revenues unrealized pre-tax losses amounting to $22 million and $8 million, respectively. For the nine months ended September 30, 2007 and
2006, Con Edison recorded in non-utility operating revenues unrealized pre-tax losses of $35 million and $67 million, respectively.



Interest Rate Hedging

Con Edisons subsidiaries use interest rate swaps to
manage interest rate exposure associated with debt. The fair values of these interest rate swaps at September 30, 2007 and December 31, 2006 were as follows:



|                                  |  |            |     |   |                       |   |     |      |  |   |      |   |  |   |    |  
|--------------------------------- |  | ---------- | --- | - | --------------------- | - | --- | ---- |  | - | ---- | - |  | - | -- | -
|                                  |  | Con Edison |     |   | Con Edison ofNew York |  
|(Millions of Dollars)             |  | 2007       |     |   | 2006                  |   |     | 2007 |  |   | 2006 |  
|Fair value of interest rate swaps |  | $          | (11 | ) |                       | $ | (15 | )    |  | $ | (1   | ) |  | $ | (3 | )



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##### Table of Contents

NOTES TO THE FINANCIAL
STATEMENTS (UNAUDITED)  CONTINUED



Fair Value Hedges

Con
Edison of New Yorks swap (related to its $225 million of Series 2001A tax-exempt debt) is designated as a fair value hedge, which qualifies for short-cut hedge accounting under SFAS No. 133. Under this method, changes in fair
value of the swap are recorded directly against the carrying value of the hedged bonds and have no impact on earnings.



Cash Flow Hedges

Con Edison Developments and O&Rs swaps are
designated as cash flow hedges under SFAS No. 133. Any gain or loss on the hedges is recorded in OCI and reclassified to interest expense and included in earnings during the periods in which the hedged interest payments occur. See
Interest Rate Hedging in Note O to the financial statements in Item 8 of the Form 10-K for the contractual components of the interest rate swaps accounted for as cash flow hedges.



Note M - New Financial Accounting Standards

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



In June 2007, the FASB issued Emerging Issues Task Force (EITF) Issue No. 07-3, Accounting for Nonrefundable Advance Payments for Goods or
Services to be used in Future Research and Development Activities. The EITF concluded that nonrefundable advance payments for future research and development activities should be deferred and capitalized. Such amounts should be recognized as
an expense as the related goods are delivered or the related services are performed. If an entity does not expect the goods to be delivered or services to be rendered, the capitalized advance payment should be charged to expense. The guidance in
this EITF becomes effective for fiscal years beginning after December 15, 2007. The Companies do not expect this EITF to have a material effect on their financial position, results of operations or liquidity.



In June 2007, the FASB ratified the consensus reached by the EITF in Issue No. 06-11,
Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards, which is effective for fiscal years beginning after December 15, 2007. The EITF concluded that a realized income tax benefit from dividends or dividend
equivalents that are charged to retained earnings and are paid to employees for equity classified as nonvested equity shares, nonvested equity share units, and outstanding equity share options should be recognized as an increase to additional
paid-in capital. The amount recognized in additional paid-in capital for the realized income tax benefit from dividends on those awards should be included in the pool of excess tax benefits available to absorb tax deficiencies on share-based payment
awards. The Companies are currently evaluating the impact of this Issue on their financial position, results of operations and liquidity.



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STATEMENTS (UNAUDITED)  CONTINUED



In May 2007, the FASB issued FASB Staff Position (FSP) No. FIN 48-1, Definition of Settlement in FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes. The guidance in this FSP clarifies how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized
tax benefits. The guidance in this FSP becomes effective upon adoption of the FASB Interpretation No. 48, which the Companies adopted in January 2007. See Note I. The application of this FSP did not have a material impact on the Companies
financial position, results of operations or liquidity.



In February 2007, the
FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115. This Statement permits entities to choose to measure many financial
instruments and certain other items at fair value that are not currently required to be measured at fair value. The guidance in this Statement becomes effective for fiscal periods beginning after November 15, 2007. The Companies are currently
evaluating the impact of this Statement on their financial position, results of operations and liquidity.



In September 2006, the FASB issued EITF Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split Dollar Life Insurance Arrangements. This Issue
requires employers to record a liability for future benefits for endorsement split-dollar life insurance arrangements that provide a postretirement benefit to an employee. The guidance in this EITF becomes effective for fiscal periods beginning
after December 15, 2007. The Companies do not expect this EITF to have a material impact on their financial position, results of operations or liquidity.



In September 2006, the FASB issued Statement No. 157, Fair Value Measurements. This Statement defines fair value, establishes a framework for
measuring fair value and expands the disclosures about fair value measurements. It applies to other accounting pronouncements that require fair value measurements and, accordingly, does not require any new fair value measurements. The guidance in
this Statement becomes effective for financial statements issued for fiscal years beginning after November 15, 2007. The Companies are currently evaluating the impact of this Statement on their financial position, results of operations and
liquidity.



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|       |  |                                                                                                                                           
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------
|ITEM2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (COMBINED FOR CON EDISON AND CON EDISON OF
NEW YORK)

This combined managements discussion and analysis of financial condition and results of operations (MD&A)
relates to the consolidated financial statements (the Third Quarter Financial Statements) included in this report of two separate registrants: Consolidated Edison, Inc. (Con Edison) and Consolidated Edison Company of New York, Inc. (Con Edison
of New York) 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 Con Edison of New York. Con Edison of New York is a subsidiary of
Con Edison and, as such, information in this MD&A about Con Edison of New York applies to Con Edison.



This MD&A should be read in conjunction with the Third Quarter Financial Statements and the notes thereto and the MD&A in Item 7 of the Companies combined Annual Report on Form 10-K for the year
ended December 31, 2006 (File Nos. 1-14514 and 1-1217, the Form 10-K) and the MD&A in Part I, Item 2 of their combined Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2007 and June 30, 2007 (File Nos.
1-14514 and 1-1217, the First Quarter Form 10-Q and the Second Quarter Form 10-Q, respectively).



Information in the notes to the consolidated financial statements 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
its utility companies, Con Edison of New York and Orange and Rockland Utilities, Inc. (O&R), together known as the Utilities. Con Edison also has competitive energy businesses (see Competitive Energy Businesses, below).
Certain financial data of Con Edisons businesses is presented below:



|                           |  |                                       |       |            |                                      |      |                   |                      |            |  |       |        |  |   |        |   |  |      |  |   |     |   |  |       |  |  |   |        |  |     
|-------------------------- |  | ------------------------------------- | ----- | ---------- | ------------------------------------ | ---- | ----------------- | -------------------- | ---------- |  | ----- | ------ |  | - | ------ | - |  | ---- |  | - | --- | - |  | ----- |  |  | - | ------ |  | ----
|                           |  | Three Months Ended September 30, 2007 |       |            | Nine Months Ended September 30, 2007 |      |                   | At September 30,2007
|(Millions of Dollars)      |  | OperatingRevenues                     |       | Net Income |                                      |      | OperatingRevenues |                      | Net Income |  |       | Assets
|Con Edison of New York     |  | $                                     | 2,578 |            |                                      | 71%  |                   | $                    | 284        |  | 91 %  |        |  | $ | 7,487  |   |  | 74%  |  | $ | 659 |   |  | 91 %  |  |  | $ | 23,991 |  | 86% 
|O&R                        |  |                                       | 235   |            |                                      | 6%   |                   |                      | 14         |  | 4 %   |        |  |   | 703    |   |  | 7%   |  |   | 39  |   |  | 6 %   |  |  |   | 1,797  |  | 6%  
|Total Utilities            |  |                                       | 2,813 |            |                                      | 77%  |                   |                      | 298        |  | 95 %  |        |  |   | 8,190  |   |  | 81%  |  |   | 698 |   |  | 97 %  |  |  |   | 25,788 |  | 92% 
|Con Edison Development (a) |  |                                       | 456   |            |                                      | 13%  |                   |                      | 25         |  | 8 %   |        |  |   | 875    |   |  | 9%   |  |   | 24  |   |  | 3 %   |  |  |   | 1,295  |  | 5%  
|Con Edison Energy (a)      |  |                                       |      |            |                                      |     |                   |                      | (1)        |  |      |        |  |   | 28     |   |  |     |  |   |    |   |  |      |  |  |   | 218    |  | 1%  
|Con Edison Solutions (a)   |  |                                       | 378   |            |                                      | 10%  |                   |                      | (9)        |  | (3)%  |        |  |   | 1,021  |   |  | 10%  |  |   | 14  |   |  | 2 %   |  |  |   | 156    |  | 1%  
|Other (b)                  |  |                                       | (4    | )          |                                      |     |                   |                      | (1)        |  |      |        |  |   | (23    | ) |  |     |  |   | (14 | ) |  | (2)%  |  |  |   | 451    |  | 1%  
|Total Con Edison           |  | $                                     | 3,643 |            |                                      | 100% |                   | $                    | 312        |  | 100 % |        |  | $ | 10,091 |   |  | 100% |  | $ | 722 |   |  | 100 % |  |  | $ | 27,908 |  | 100%

|(a) | Net income of the competitive energy businesses for the three months and nine months ended September 30, 2007 includes $(13) million and $(20) million, respectively, of
after-tax net mark-to-market gains/(losses) (Con Edison Development, $(4) million and $(24) million, Con Edison Energy, $(1) million and $0, and Con Edison Solutions, $(8) million and $4 million).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Represents inter-company and parent company accounting. See Results of Operations, below.
|--- | -------------------------------------------------------------------------------------------



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Con Edisons net income for common stock for the three months ended September 30, 2007 was $312 million or
$1.15 a share compared with earnings of $231 million or $0.93 a share for the three months ended September 30, 2006. Net income for common stock for the nine months ended September 30, 2007 was $722 million or $2.73 a share compared with
earnings of $536 million or $2.17 a share for the nine months ended September 30, 2006. See Results of Operations  Summary, below.



Regulated Utilities

Con Edison of New York provides electric service to
approximately 3.2 million customers and gas service to approximately 1.1 million customers in New York City and Westchester County. The company also provides steam service in parts of Manhattan. O&R, along with its regulated utility
businesses, provides electric service to approximately 0.3 million customers in southeastern New York and adjacent areas of northern New Jersey and eastern Pennsylvania and gas service to over 0.1 million customers in southeastern New York
and adjacent areas of eastern Pennsylvania.



The Utilities are primarily
wires and pipes energy delivery businesses that deliver energy in their service areas subject to extensive federal and state regulation. The Utilities customers buy this energy from the Utilities, or from other suppliers through
the Utilities retail access programs. The Utilities purchase substantially all of the energy they sell to customers pursuant to firm contracts or through wholesale energy markets, and recover (generally on a current basis) the cost of the
energy sold, pursuant to approved rate plans.



Con Edison anticipates that the
Utilities will continue to provide substantially all of its earnings over the next few years. The Utilities earnings generally reflect demand for utility service and the Utilities ability to charge rates for their services that reflect
the costs of service, including a return on invested equity capital. The factors affecting demand for utility service include growth of customer demand, weather, market prices for energy, economic conditions and measures that promote energy
efficiency. Demand for electric service peaks during the summer air conditioning season. Demand for gas and steam service peaks during the winter heating season.



Because the energy delivery infrastructure must be adequate to meet demand in peak periods with a high level of reliability, the
Utilities capital investment plans reflect in great part past actual electric peak demand adjusted to summer design weather conditions, as well as forecast growth in peak usage. Since the summers weather was cooler than design, the
highest peak electric demand reached in 2007 was 12,807 MW for Con Edison of New York on August 8, 2007 and 1,474 MW for O&R on July 10, 2007. The Utilities estimate that, under design weather conditions, the 2008 peak electric



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MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



demand in their respective service areas will be 13,775 MW for Con Edison of New York and 1,645 MW for O&R. The Con Edison of New York forecasted peak
load includes the impact of permanent demand reduction programs. The average annual growth rate of the peak electric demand over the next five years at design conditions is estimated to be approximately 1.2 percent for Con Edison of New York and 2.5
percent for O&R. The Companies anticipate an ongoing need for substantial capital investment in order to meet this growth in peak usage with the high level of reliability that they currently provide (see Liquidity and Capital
ResourcesCapital Requirements, below).



The Utilities have rate
plans approved by state utility regulators that cover the rates they can charge their customers. Con Edison of New Yorks electric, gas and steam rate plans are effective through March 31, 2008, September 30, 2010 and
September 30, 2008, respectively. In May 2007, Con Edison of New York filed a request with the New York State Public Service Commission (PSC) for a new electric rate plan to be effective April 1, 2008 and expects in November 2007 to file a
request for a new steam rate plan, including a base rate increase of approximately $125 million, to be effective October 1, 2008. O&Rs rate plans for its electric and gas service in New York and its subsidiarys electric service
in New Jersey extend through June 30, 2008, October 31, 2009 and March 31, 2010, respectively. In August 2007, O&R filed for a new electric rate plan for its New York customers to be effective July 1, 2008. Pursuant to
the Utilities rate plans, charges to customers generally may not be changed during the respective terms of the rate plans other than for recovery of the costs incurred for energy supply, for specified increases provided in the rate plans and
for limited other exceptions. The New York rate plans generally require the Utilities to share with customers earnings in excess of specified rates of return on common equity capital. Changes in delivery volumes are reflected in operating income
(except to the extent that weather-normalization or revenue decoupling provisions apply to the gas businesses, and subject to provisions in the rate plans for sharing above-target earnings with customers). See Regulatory Matters below
and Note B to the Third Quarter Financial Statements.



Accounting rules and
regulations for public utilities include Statement of Financial Accounting Standards No. 71, Accounting for the Effects of Certain Types of Regulation, pursuant to which the economic effects of rate regulation are reflected in
financial statements. See Application of Critical Accounting Policies, below.



Competitive Energy Businesses

Con Edisons competitive energy businesses participate in segments of the electricity industry that are
less comprehensively regulated than the Utilities. These segments include the operation of electric generation facilities, trading of electricity and fuel, sales of electricity to wholesale and retail customers



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MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



and sales of certain energy-related goods and services. At September 30, 2007, Con Edisons equity investment in its competitive energy businesses
was $596 million and their assets amounted to $1.7 billion.



Consolidated
Edison Solutions, Inc. (Con Edison Solutions) sells electricity directly to delivery-service customers of utilities primarily in the Northeast and Mid-Atlantic regions (including some of the Utilities customers) and also offers
energy-related services. Con Edison Solutions does not sell electricity to the Utilities. The company sold approximately 9.1 million MWHs of electricity to customers over the nine-month period ended September 30, 2007.



Consolidated Edison Development, Inc. (Con Edison Development) owns, leases or operates
generating plants and participates in other infrastructure projects. At September 30, 2007, the company owned or leased the equivalent of 1,668 MWs of capacity in electric generating facilities, of which 203 MWs are sold under long-term
purchase power agreements and the balance is sold on the wholesale electricity markets. In addition, the company sells electricity at wholesale to utilities. Con Edison is considering strategic alternatives with respect to the electric generation
facilities of its competitive energy businesses.



Consolidated Edison
Energy, Inc. (Con Edison Energy) procures electric energy and capacity for Con Edison Solutions and fuel for Con Edison Development and others. It sells the electric capacity and energy produced by plants owned, leased or operated by Con Edison
Development and others. The company also provides energy risk management services to Con Edison Solutions and Con Edison Development, offers these services to others and manages wholesale supply transactions for Con Edison Development.



The competitive energy businesses are focusing on increasing their customer base, gross
margins and the value of their existing assets. See Liquidity and Capital Resources  Capital Requirements and Capital Resources, below.



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Results of Operations - Summary

Con Edisons earnings per share (basic and diluted) for the three months ended September 30, 2007
were $1.15 compared with $0.93 ($0.92 on a diluted basis) for the 2006 period. Con Edisons earnings per share for the nine months ended September 30, 2007 were $2.73 ($2.72 on a diluted basis) compared with $2.17 ($2.16 on a diluted
basis) for the 2006 period.



Net income for the three and nine months ended
September 30, 2007 and 2006 was as follows:



|                                  |  |                                 |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|--------------------------------- |  | ------------------------------- | --- | - | ------------------------------ | - | --- | ---- |  | - | ---- | - |  | - | --- | -
|                                  |  | Three Months EndedSeptember 30, |     |   | Nine Months EndedSeptember 30, |  
|(Millions of Dollars)             |  | 2007                            |     |   | 2006                           |   |     | 2007 |  |   | 2006 |  
|Con Edison of New York            |  | $                               | 284 |   |                                | $ | 199 |      |  | $ | 659  |   |  | $ | 517 |  
|O&R                               |  |                                 | 14  |   |                                |   | 17  |      |  |   | 39   |   |  |   | 32  |  
|Competitive energy businesses (a) |  |                                 | 15  |   |                                |   | 21  |      |  |   | 38   |   |  |   | 14  |  
|Other (b)                         |  |                                 | (1  | ) |                                |   | (6  | )    |  |   | (14  | ) |  |   | (26 | )
|Total continuing operations       |  |                                 | 312 |   |                                |   | 231 |      |  |   | 722  |   |  |   | 537 |  
|Discontinued operations (c)       |  |                                 |    |   |                                |   |    |      |  |   |     |   |  |   | (1  | )
|CON EDISON                        |  | $                               | 312 |   |                                | $ | 231 |      |  | $ | 722  |   |  | $ | 536 |  

|(a) | Includes $13 million, $5 million, $20 million and $40 million of after-tax net mark-to-market losses in the three months ended September 30, 2007 and 2006 and the nine months
ended September 30, 2007 and 2006, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Other consists of inter-company and parent company accounting. See Results of Operations, below.
|--- | --------------------------------------------------------------------------------------------------

|(c) | Represents the discontinued operations of Con Edison Communications. See Note T to the financial statements in Item 8 of the Form 10-K.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



The Companies results of operations for the three and nine months ended September 30, 2007, as compared
with the 2006 periods, reflect the Queens power outage in 2006, sales growth, the Utilities rate agreements (which are designed to recover increases in certain operations and maintenance expenses, depreciation and property taxes, and interest
charges), milder summer weather, the impact of storms, the Manhattan steam main rupture in 2007 and the results of the competitive energy businesses including net mark-to-market effects. The following table presents the estimated effect on earnings
per share and net income for the three and nine months ended September 30, 2007 as compared with the 2006 periods, resulting from these and other major factors:



|                                                        |  |                        |       |   |                                 |   |     |                   |  |   |                                 |   |  |   |     |  
|------------------------------------------------------- |  | ---------------------- | ----- | - | ------------------------------- | - | --- | ----------------- |  | - | ------------------------------- | - |  | - | --- | -
|                                                        |  | Three Months Variation |       |   | Nine Months Variation           |  
|                                                        |  | Earningsper Share      |       |   | Net Income(Millions of Dollars) |   |     | Earningsper Share |  |   | Net Income(Millions of Dollars) |  
|Con Edison of New York                                  |  |                        |       |   |                                 |   |     |                   |  |   |                                 |   |  |   |     |  
|Sales growth                                            |  | $                      | 0.07  |   |                                 | $ | 17  |                   |  | $ | 0.13                            |   |  | $ | 32  |  
|Impact of weather                                       |  |                        | (0.09 | ) |                                 |   | (22 | )                 |  |   | 0.02                            |   |  |   | 5   |  
|Electric rate agreement                                 |  |                        | 0.14  |   |                                 |   | 34  |                   |  |   | 0.32                            |   |  |   | 80  |  
|Gas rate agreement                                      |  |                        |      |   |                                 |   |    |                   |  |   | 0.04                            |   |  |   | 10  |  
|Net transfers to firm gas service                       |  |                        | 0.01  |   |                                 |   | 2   |                   |  |   | 0.04                            |   |  |   | 11  |  
|Steam rate agreement                                    |  |                        | 0.02  |   |                                 |   | 5   |                   |  |   | 0.06                            |   |  |   | 15  |  
|Resolution of deferred tax amortization petition        |  |                        | 0.06  |   |                                 |   | 17  |                   |  |   | 0.06                            |   |  |   | 17  |  
|Queens power outage  2006                              |  |                        | 0.16  |   |                                 |   | 39  |                   |  |   | 0.15                            |   |  |   | 37  |  
|Manhattan steam main rupture  2007                     |  |                        | (0.04 | ) |                                 |   | (11 | )                 |  |   | (0.04                           | ) |  |   | (11 | )
|Operations and maintenance expense, other               |  |                        | (0.07 | ) |                                 |   | (20 | )                 |  |   | (0.17                           | ) |  |   | (42 | )
|Depreciation and property taxes                         |  |                        | (0.07 | ) |                                 |   | (17 | )                 |  |   | (0.20                           | ) |  |   | (51 | )
|Interest charges                                        |  |                        | 0.04  |   |                                 |   | 12  |                   |  |   | (0.02                           | ) |  |   | (5  | )
|Other (includes dilutive effect of new stock issuances) |  |                        | 0.02  |   |                                 |   | 29  |                   |  |   | 0.01                            |   |  |   | 44  |  
|Total Con Edison of New York                            |  |                        | 0.25  |   |                                 |   | 85  |                   |  |   | 0.40                            |   |  |   | 142 |  
|Orange and Rockland Utilities                           |  |                        | (0.02 | ) |                                 |   | (3  | )                 |  |   | 0.02                            |   |  |   | 7   |  
|Competitive energy businesses                           |  |                        |       |   |                                 |   |     |                   |  |   |                                 |   |  |   |     |  
|Earnings excluding net mark-to-market effects           |  |                        |      |   |                                 |   | 2   |                   |  |   |                                |   |  |   | 5   |  
|Net mark-to-market effects                              |  |                        | (0.03 | ) |                                 |   | (8  | )                 |  |   | 0.08                            |   |  |   | 19  |  
|Other, including parent company expenses                |  |                        | 0.02  |   |                                 |   | 5   |                   |  |   | 0.06                            |   |  |   | 12  |  
|Discontinued operations                                 |  |                        |      |   |                                 |   |    |                   |  |   |                                |   |  |   | 1   |  
|Total                                                   |  | $                      | 0.22  |   |                                 | $ | 81  |                   |  | $ | 0.56                            |   |  | $ | 186 |  



See Results of Operations
below for further discussion and analysis of results of operations.



Risk Factors

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 factors include those described under Risk Factors in Item 7 of the Form 10-K.



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Forward-Looking Statements

This report includes forward-looking statements intended to qualify for the safe-harbor provisions of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements of future expectation and not facts. Words such as expects,
estimates, anticipates, intends, believes, plans, will and similar expressions identify forward-looking statements. Forward-looking statements are based on information available
at the time the statements are made, and accordingly speak only as of that time. Actual results or developments might differ materially from those included in the forward-looking statements because of various factors such as those discussed under
Risk Factors in Item 7 of the Form 10-K.



Application of Critical
Accounting Policies

The Companies financial statements reflect the application of their accounting policies, which conform to accounting
principles generally accepted in the United States of America. The Companies critical accounting policies include industry-specific accounting applicable to regulated public utilities and accounting for pensions and other postretirement
benefits, contingencies, long-lived assets, derivative instruments, goodwill and leases. See Application of Critical Accounting Policies in Item 7 of the Form 10-K.



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. See Liquidity and Capital Resources in
Item 7 of the Form 10-K. Changes in the Companies cash and temporary cash investments resulting from operating, investing and financing activities for the nine months ended September 30, 2007 and 2006 are summarized as follows:



|                               |  |            |        |   |                        |   |        |          |  |   |      |   |  |      |        |   |          |   |        |   |  |   |      |  
|------------------------------ |  | ---------- | ------ | - | ---------------------- | - | ------ | -------- |  | - | ---- | - |  | ---- | ------ | - | -------- | - | ------ | - |  | - | ---- | -
|                               |  | Con Edison |        |   | Con Edison of New York |  
|(Millions of Dollars)          |  | 2007       |        |   | 2006                   |   |        | Variance |  |   | 2007 |   |  | 2006 |        |   | Variance |  
|Operating activities           |  | $          | 927    |   |                        | $ | 646    |          |  | $ | 281  |   |  | $    | 765    |   |          | $ | 608    |   |  | $ | 157  |  
|Investing activities           |  |            | (1,450 | ) |                        |   | (1,339 | )        |  |   | (111 | ) |  |      | (1,384 | ) |          |   | (1,294 | ) |  |   | (90  | )
|Financing activities           |  |            | 621    |   |                        |   | 846    |          |  |   | (225 | ) |  |      | 638    |   |          |   | 822    |   |  |   | (184 | )
|Net change                     |  | $          | 98     |   |                        | $ | 153    |          |  | $ | (55  | ) |  | $    | 19     |   |          | $ | 136    |   |  | $ | (117 | )
|Balance at beginning of period |  |            | 94     |   |                        |   | 81     |          |  |   | 13   |   |  |      | 47     |   |          |   | 61     |   |  |   | (14  | )
|Balance at end of period       |  | $          | 192    |   |                        | $ | 234    |          |  | $ | (42  | ) |  | $    | 66     |   |          | $ | 197    |   |  | $ | (131 | )



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Cash Flows from Operating Activities

The Utilities cash flows from operating activities reflect principally their energy sales and deliveries and cost of operations. The volume of energy sales and
deliveries is dependent primarily on factors external to the Utilities, such as weather and economic conditions. The prices at which the Utilities provide energy to their customers are determined in accordance with their rate agreements. In general,
changes in the Utilities cost of purchased power, fuel and gas may affect the timing of cash flows but not net income because the costs are recovered in accordance with rate agreements. See Recoverable Energy Costs in Note A to the
financial statements in Item 8 of the Form 10-K.



Net income is the result
of cash and non-cash (or accrual) transactions. Only cash transactions affect the Companies cash flows from operating activities. Principal non-cash charges include depreciation and deferred income tax expense. Principal non-cash credits
include the revenue requirement impact (Net T&D Revenues) resulting from the reconciliation pursuant to Con Edison of New Yorks electric rate agreement of the differences between the actual amount of transmission and distribution utility
plant, net of depreciation to the amounts reflected in electric rates, prepaid pension costs and amortizations of certain net regulatory liabilities. See Application of Critical Accounting Policies  Accounting for Regulated Public
Utilities  SFAS No. 71 and Accounting for Pensions and Other Postretirement Benefits in Item 7 of the Form 10-K and Notes B, E and F to the Third Quarter Financial Statements.



Net cash flows from operating activities for the nine months ended September 30, 2007
for Con Edison and Con Edison of New York were $281 million and $157 million higher, respectively, than in the 2006 period primarily reflecting increased net income, depreciation expense, Net T&D Revenues and recovery of certain other
receivables, described below.



The change in net cash flows also reflects the
timing of payments for and recovery of energy costs. This timing issue is reflected within changes to accounts receivable  customers, recoverable energy costs and accounts payable balances.



The decrease in other receivables reflects primarily the recovery of a property tax credit
associated with Con Edison of New Yorks East River Plant and lower utility hedging program broker margin deposits based on higher commodity prices. For Con Edison, the decrease also reflects the expiration of certain wholesale load contracts,
and receivables associated with other hedging activities at the competitive energy businesses.



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



The change in other deferred charges and noncurrent assets reflects a $160 million deposit paid by Con Edison to the Internal Revenue Service with respect to the timing of deductions of certain construction related costs. See Note I to the
Third Quarter Financial Statements. Con Edison of New Yorks portion of this deposit, also recorded as a noncurrent asset, was $147 million.



See Other Changes in Assets and Liabilities, below.



Cash Flows Used in Investing Activities

Net cash
flows used in investing activities for Con Edison and Con Edison of New York were $111 million and $90 million higher, respectively, for the nine months ended September 30, 2007 than in the 2006 period. The increases for the Companies reflect
primarily increased utility construction expenditures and lower net proceeds from the sale of certain properties ($30 million in 2007, as compared with $60 million in 2006). For Con Edison, the increase also reflects $39 million of net proceeds from
the completion of the sale of Con Edison Communications that offset cash flows used in investing activities in 2006.



Cash Flows from Financing Activities

Net cash flows
from financing activities for Con Edison and Con Edison of New York decreased $225 million and $184 million in the nine months ended September 30, 2007 compared with the 2006 period, respectively.



Con Edisons cash flows from financing activities for the nine months ended
September 30, 2007 as compared with the 2006 period reflects the issuance through a public offering of 11 million Con Edison common shares in the 2007 period, resulting in net proceeds of $558 million. Con Edison invested $418 million of
the net proceeds in Con Edison of New York and $40 million in O&R, for funding of their construction expenditures and for other general corporate purposes. Con Edisons cash flows from financing activities also reflect common shares issued
through its dividend reinvestment and employee stock plans (2007: 2.8 million shares for $98 million, 2006: 1.6 million shares for $38 million). In addition, as a result of the stock plan issuances, cash used to pay common stock dividends
was reduced by $29 million in 2007 and $31 million in 2006.



Cash flows from
financing activities for Con Edison for the nine months ended September 30, 2007 as compared with the 2006 period reflects an increase in commercial paper balances (included on the consolidated balance sheets as Notes payable) and
for the Companies, reflects the repayment of short-term debt in 2006. See Note D to the Third Quarter Financial Statements. In May 2007, Con Edison issued commercial paper and used available cash balances to redeem in advance of maturity $325
million 7.25% 40-year Public Income NotES.



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Net cash flows from financing activities for the Companies during the nine months ended September 30, 2007 and
2006 also reflect the following Con Edison of New York transactions:



2007

| |  |  | Issued $525 million 6.30% 30-year debentures, the proceeds of which were used for general corporate purposes.
| | - |  | -------------------------------------------------------------------------------------------------------------



2006

| |  |  | Issued $400 million 5.85% 30-year debentures, the proceeds of which were used for general corporate purposes;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | Issued $400 million 6.20% 30-year debentures, the proceeds of which were used for general corporate purposes and to redeem in advance of maturity $100 million 7.75%
30-year debentures; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Issued $400 million 5.50% 10-year debentures, the proceeds of which were used to redeem in advance of maturity $400 million 7.50% 40-year debentures.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



Con Edisons net cash flows from financing activities
also include O&Rs financings. In February 2007, O&Rs New Jersey subsidiary redeemed at maturity $20 million 7.125% First Mortgage Bonds.



Common stock issuances and external borrowings are sources of liquidity that could be affected by changes in credit ratings, financial performance and capital market
conditions. For information about the Companies credit ratings and certain financial ratios, see Capital Resources, below.



Other Changes in Assets and Liabilities

The following
table shows changes in assets and liabilities at September 30, 2007, compared with December 31, 2006, that have not impacted the Companies consolidated statements of cash flows.



|                                     |  |                                 |      |   |                                             |   |      |  
|------------------------------------ |  | ------------------------------- | ---- | - | ------------------------------------------- | - | ---- | -
|(Millions of Dollars)                |  | Con Edison2007 vs. 2006Variance |      |   | Con Edison of New York2007 vs. 2006Variance |  
|Assets                               |  |                                 |      |   |                                             |   |      |  
|Fair value of derivative assets      |  | $                               | (89  | ) |                                             | $ | 3    |  
|Deferred derivative losses           |  |                                 | (68  | ) |                                             |   | (46  | )
|                                     |  |                                
|Liabilities                          |  |                                 |      |   |                                             |   |      |  
|Uncertain income taxes               |  |                                 | 156  |   |                                             |   | 142  |  
|Fair value of derivative liabilities |  |                                 | (245 | ) |                                             |   | (106 | )



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



For information on the adoption of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109, see Note I to the Third Quarter Financial Statements.



In the context of higher forward energy market prices and the realization of
gains and losses in the nine months ended September 30, 2007, the Companies policies for managing their energy purchases resulted in a decrease in the fair value of derivative liabilities at September 30, 2007 as compared with
year-end 2006. For Con Edison and Con Edison of New York, the decrease in the fair value of derivative liabilities resulted in a decrease in deferred derivative losses at September 30, 2007 as compared with year-end 2006. For the Utilities,
mark-to-market activity had no effect on net income as the amounts were deferred as regulatory assets/liabilities (deferred derivative losses/gains). In accordance with provisions approved by state regulators, the Utilities generally recover from
customers their energy supply costs, net of gains and losses on derivative instruments used to hedge energy purchases. The mark-to-market accounting for Con Edisons competitive energy businesses resulted in a net decrease in the fair value of
derivative assets and liabilities. The decline in the fair value of derivative assets reflects increasing capacity prices and the timing of entering into new positions, which was offset in part by the maturity of certain contract positions and the
impact of increasing energy prices. The competitive energy businesses record mark-to-market gains and losses on derivative instruments in earnings in the reporting period in which such changes occur. See Note L to the Third Quarter Financial
Statements. For the Companies, changes in fair value of derivative instruments may lead to collateral payments made to or received from counterparties or brokers that are reflected in current assets and current liabilities.



Capital Resources

Reference is made to Capital Resources in Item 7 of the Form 10-K and in Part I, Item 2 of the First Quarter Form 10-Q and the Second Quarter Form
10-Q. Con Edison is in the process of finalizing its financing plans for 2008 and currently expects to finance its capital requirements primarily through the sale of securities including the issuance in 2008 of amounts of Con Edison common shares
not materially different from that issued in 2007 in addition to issuances under its dividend reinvestment and employee stock plans and from dividends it receives from its subsidiaries. Con Edisons ability to make payments on its external
borrowings and dividends on its common shares is also dependent on its receipt of dividends from its subsidiaries or proceeds from the sale of its securities or its interests in its subsidiaries. The Utilities expect to finance their operations,
capital requirements and payment of dividends to Con Edison from internally generated funds, contributions of equity capital from Con Edison and external borrowings.



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



For each of the Companies, the ratio of earnings to fixed charges (Securities and Exchange Commission basis) for the
nine months ended September 30, 2007, the 12 months ended December 31, 2006 and the nine months ended September 30, 2006 was:



|                       |  |                                             |  |                                              |  |                                            
|---------------------- |  | ------------------------------------------- |  | -------------------------------------------- |  | -------------------------------------------
|                       |  | Earnings to Fixed Charges (Times)          
|                       |  | For the Nine Months EndedSeptember 30, 2007 |  | For the Twelve Months EndedDecember 31, 2006 |  | For the Nine Months EndedSeptember 30, 2006
|Con Edison             |  | 3.3                                         |  | 2.9                                          |  | 2.9                                        
|Con Edison of New York |  | 3.7                                         |  | 3.2                                          |  | 3.3                                        



For each of the Companies, the common
equity ratio at September 30, 2007 and December 31, 2006 was:



|                       |  |                                                       |  |                  
|---------------------- |  | ----------------------------------------------------- |  | -----------------
|                       |  | Common Equity Ratio (Percent of total capitalization)
|                       |  | September 30, 2007                                    |  | December 31, 2006
|Con Edison             |  | 52.3                                                  |  | 48.5             
|Con Edison of New York |  | 51.8                                                  |  | 50.0             



Capital
Requirements

Reference is made to Capital Requirements in Item 7 of the Form 10-K and in Part I, Item 2 of the First Quarter Form
10-Q and the Second Quarter Form 10-Q. The Utilities have an ongoing need for substantial capital investment in order to meet the expected growth in customer demand reliably. The Utilities are in the process of finalizing their capital requirements
for 2008 and beyond, and currently estimate that their construction expenditures in 2008 and 2009 may increase by a material amount above the amounts estimated under Capital Requirements in Item 7 of the Form 10-K.



Contractual Obligations

At September 30, 2007, there was no material change in the Companies aggregate obligations to make payments pursuant to contracts compared to those discussed
under Contractual Obligations in Item 7 of the Form 10-K.



Electric
Power Requirements

At September 30, 2007, there were no material changes in the Companies electric power requirements compared to those
disclosed under Electric Power Requirements in Item 7 of the Form 10-K.



Regulatory Matters

At September 30, 2007, there were no material changes in the Companies regulatory matters compared to those
disclosed under Regulatory Matters in Item 7 of the Form 10-K, Part I, Item 2 of



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



the First Quarter Form 10-Q, Rate and Restructuring Agreements in Note B to the financial statements in Item 8 of the Form 10-K and Note B
to the financial statements included in Part I, Item 1 of the First Quarter Form 10-Q and the Second Quarter Form 10-Q, other than as described below and in Note B to the Third Quarter Financial Statements.



The following table summarizes certain significant provisions of the new Con Edison of New
York gas and O&R electric rate plans.



|                              |  |                                           |  |                                                              |  |                                |  |                                 |   |  |                                                
|----------------------------- |  | ----------------------------------------- |  | ------------------------------------------------------------ |  | ------------------------------ |  | ------------------------------- | - |  | -----------------------------------------------
|Effective Period              |  | Rate Increases                            |  | AmortizationTo Incomeof NetRegulatory(Assets) andLiabilities |  | OtherSignificantRevenueSources |  | Return onEquitySharingThreshold |   |  | EarningsSharing Terms (Shareholders /Customers)
|                              |  | (Millions of Dollars, except percentages)
|Con Edison of New York - Gas  |  |                                           |  |                                                              |  |                                |  |                                 |   |  |                                                
|October 2007 - September 2010 |  | Yr. 1  $67.5Yr. 2 
$67.5                |  | $18over 3 yrs.                                               |  | $35 of annualnon-firm          |  | 10.70                           | % |  | 50/50                                          
|                              |  | Yr. 3  $67.5                             |  |                                                              |  | revenues                       |  |                                 |   |  |                                                
|O&R - Electric (NY)*          |  |                                           |  |                                                              |  |                                |  |                                 |   |  |                                                
|March 2007 - June 2008        |  | None                                      |  | $(13)                                                        |  | N/A                            |  | N/A                             |   |  | N/A                                            

|* | O&Rs rates were continued at current levels and the PSC took certain other actions the effects of which decrease net income. See Note B to the Third Quarter Financial
Statements.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Financial and Commodity Market Risks

The Companies are subject to various risks and uncertainties associated with financial and commodity markets. The most significant market risks include interest rate
risk, commodity price risk, credit risk and investment risk. At September 30, 2007, there were no material changes in the Companies financial and commodity market risks compared to those disclosed under Financial and Commodity
Market Risks in Item 7 of the Form 10-K and in Part I, Item 2 of the First Quarter Form 10-Q, other than as described in Note L to the Third Quarter Financial Statements.



Material Contingencies

For information concerning
potential liabilities arising from the Companies material contingencies, see Application of Critical Accounting Policies  Accounting for Contingencies and Notes B, G, H, and I to the Third Quarter Financial Statements.



Results of Operations

Results of operations reflect, among other things, the Companies accounting policies (see Application of Critical Accounting Policies in Item 7 of
the Form 10-K), rate plans that cover the rates the



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Utilities can charge their customers (see Regulatory Matters in Item 7 of the Form 10-K) and demand for utility service. Demand for utility
service is affected by weather, economic conditions and other factors.



The
Companies results of operations for the three and nine months ended September 30, 2007, as compared with the 2006 periods, reflect the Queens power outage in 2006, sales growth, the Utilities rate agreements (which are designed to
recover increases in certain operations and maintenance expenses, depreciation and property taxes, and interest charges), milder summer weather, the impact of storms, the Manhattan steam rupture in 2007 and the results of the competitive energy
businesses including net mark-to-market effects. For additional information about major factors affecting earnings, see Results of Operations  Summary, above.



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 Regulatory Matters in Note B to the financial statements in Item 8 of the Form 10-K). Accordingly, such costs do not generally affect the
Companies results of operations. Management uses the term net revenues (operating revenues less such costs) to identify changes in operating revenues that may affect the Companies results of operations. Management believes
that, although net revenues may not be a measure determined in accordance with accounting principles generally accepted in the United States of America, the measure facilitates the analysis by management and investors of the
Companies results of operations.



Con Edisons principal business
segments are Con Edison of New Yorks regulated electric, gas and steam utility activities, O&Rs regulated electric and gas utility activities and Con Edisons competitive energy businesses. Con Edison of New York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 three and nine months ended September 30, 2007 and 2006 follows. All
inter-segment transactions have been eliminated. For additional business segment financial information, see Note K to the Third Quarter Financial Statements.



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



THREE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 2006

The Companies results of operations (which were discussed above under Results of Operations 
Summary) in 2007 compared with 2006 were:



|                                                                                          |  |                            |     |   |                             |       |   |                            |   |     |                                   |  |       |                            |  |   |                             |   |  |                            |    |  |                             |     |   |  |       |   
|----------------------------------------------------------------------------------------- |  | -------------------------- | --- | - | --------------------------- | ----- | - | -------------------------- | - | --- | --------------------------------- |  | ----- | -------------------------- |  | - | --------------------------- | - |  | -------------------------- | -- |  | --------------------------- | --- | - |  | ----- | --
|                                                                                          |  | Con Edison*                |     |   | Con Edison of New York      |       |   | O&R                        |   |     | Competitive Businessesand Other** | 
|(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 |    
|Operating revenues                                                                        |  | $                          | 202 |   |                             | 5.9   | % |                            | $ | 16  |                                   |  | 0.6   | %                          |  | $ | 4                           |   |  | 1.7                        | %  |  | $                           | 182 |   |  | 28.1  | % 
|Purchased power                                                                           |  |                            | 132 |   |                             | 8.3   |   |                            |   | (60 | )                                 |  | (6.1  | )                          |  |   | 9                           |   |  | 8.3                        |    |  |                             | 183 |   |  | 36.8  |   
|Fuel                                                                                      |  |                            | (11 | ) |                             | (5.5  | ) |                            |   | (10 | )                                 |  | (7.4  | )                          |  |   | N/A                         |   |  | N/A                        |    |  |                             | (1  | ) |  | (1.5  | ) 
|Gas purchased for resale                                                                  |  |                            | 13  |   |                             | 13.0  |   |                            |   | 4   |                                   |  | 4.8   |                            |  |   | 2                           |   |  | 13.3                       |    |  |                             | 7   |   |  | Large |   
|Operating revenues less purchased power, fuel and gas purchased for resale (net revenues) |  |                            | 68  |   |                             | 4.4   |   |                            |   | 82  |                                   |  | 6.0   |                            |  |   | (7                          | ) |  | (6.5                       | )  |  |                             | (7  | ) |  | (8.2  | ) 
|Other operations and maintenance                                                          |  |                            | (6  | ) |                             | (1.1  | ) |                            |   | (14 | )                                 |  | (2.9  | )                          |  |   | (1                          | ) |  | (1.9                       | )  |  |                             | 9   |   |  | 34.6  |   
|Depreciation and amortization                                                             |  |                            | 15  |   |                             | 9.7   |   |                            |   | 14  |                                   |  | 10.3  |                            |  |   | 1                           |   |  | 11.1                       |    |  |                             |    |   |  |      |   
|Taxes, other than income taxes                                                            |  |                            | 16  |   |                             | 4.9   |   |                            |   | 16  |                                   |  | 5.2   |                            |  |   | (1                          | ) |  | (8.3                       | )  |  |                             | 1   |   |  | 16.7  |   
|Income taxes                                                                              |  |                            | (15 | ) |                             | (10.6 | ) |                            |   | (9  | )                                 |  | (7.7  | )                          |  |   | (3                          | ) |  | (30.0                      | )  |  |                             | (3  | ) |  | (20.0 | ) 
|Operating income                                                                          |  |                            | 58  |   |                             | 15.5  |   |                            |   | 75  |                                   |  | 23.4  |                            |  |   | (3                          | ) |  | (12.5                      | )  |  |                             | (14 | ) |  | (50.0 | ) 
|Other income less deductions and related income tax                                       |  |                            | 1   |   |                             | 5.3   |   |                            |   | (10 | )                                 |  | (62.5 | )                          |  |   |                            |   |  |                           |    |  |                             | 11  |   |  | Large |   
|Net interest expense                                                                      |  |                            | (22 | ) |                             | (13.7 | ) |                            |   | (20 | )                                 |  | (14.8 | )                          |  |   |                            |   |  |                           |    |  |                             | (2  | ) |  | (11.1 | ) 
|Net income                                                                                |  | $                          | 81  |   |                             | 35.1  | % |                            | $ | 85  |                                   |  | 42.7  | %                          |  | $ | (3                          | ) |  | (17.6                      | )% |  | $                           | (1  | ) |  | (6.7  | )%

|* | Represents the consolidated financial results of Con Edison and its businesses.
|- | -------------------------------------------------------------------------------

|** | Includes inter-company and parent company accounting.
|-- | -----------------------------------------------------



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Con Edison of New York

Electric

Con Edison of New Yorks electric sales and deliveries, excluding off-system sales, for the three months ended
September 30, 2007 compared with the 2006 period were:



|                                       |  |                            |  |                   |                      |           |   |  |                  |                    |  |                   |       |                   |   |           |  |   |                  |   |  |      |   
|-------------------------------------- |  | -------------------------- |  | ----------------- | -------------------- | --------- | - |  | ---------------- | ------------------ |  | ----------------- | ----- | ----------------- | - | --------- |  | - | ---------------- | - |  | ---- | --
|                                       |  | Millions of kWhs Delivered |  |                   | Revenues in Millions |          
|                                       |  | Three Months Ended         |  |                   |                      |           |   |  |                  | Three Months Ended |  |                   |       |                   |   |          
|Description                            |  | September 30,2007          |  | September 30,2006 |                      | Variation |   |  | PercentVariation |                    |  | September 30,2007 |       | September 30,2006 |   | Variation |  |   | PercentVariation |  
|Residential/Religious                  |  | 3,870                      |  | 4,223             |                      | (353      | ) |  | (8.4             | )%                 |  | $                 | 851   |                   | $ | 921       |  | $ | (70              | ) |  | (7.6 | )%
|Commercial/Industrial                  |  | 3,628                      |  | 3,805             |                      | (177      | ) |  | (4.7             | )                  |  |                   | 744   |                   |   | 772       |  |   | (28              | ) |  | (3.6 | ) 
|Retail access customers                |  | 6,092                      |  | 5,777             |                      | 315       |   |  | 5.5              |                    |  |                   | 423   |                   |   | 330       |  |   | 93               |   |  | 28.2 |   
|NYPA, Municipal Agency and other sales |  | 3,086                      |  | 3,018             |                      | 68        |   |  | 2.3              |                    |  |                   | 115   |                   |   | 100       |  |   | 15               |   |  | 15.0 |   
|Other operating revenues               |  |                           |  |                  |                      |          |   |  |                 |                    |  |                   | 139   |                   |   | 150       |  |   | (11              | ) |  | (7.3 | ) 
|Total                                  |  | 16,676                     |  | 16,823            |                      | (147      | ) |  | (0.9             | )%                 |  | $                 | 2,272 |                   | $ | 2,273     |  | $ | (1               | ) |  |     | % 



Con Edison of New Yorks electric
operating revenues were $1 million lower in the three months ended September 30, 2007 as compared with the 2006 period, due primarily to a decrease in recoverable purchased power and fuel costs ($58 million and $13 million, respectively) and
the impact of the milder summer weather in 2007 ($36 million), offset in part by the third year of the electric rate plan ($47 million, which includes $12 million of Net T&D Revenues), sales growth ($28 million), increased recoveries of demand
side management programs ($15 million) and lower revenue decreases for not meeting certain standards for duration and frequency of service interruption in accordance with the 2005 Electric Rate Agreement ($4 million in 2007 and $18 million in 2006).
Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the companys rate plans. See Note B to the financial statements in Item 8 of the Form 10-K and Note B to the Third Quarter
Financial Statements.



Electric sales and delivery volumes in Con Edison of New
Yorks service area decreased 0.9 percent in the three months ended September 30, 2007 compared with the 2006 period, primarily as a result of the milder weather in the 2007 period compared with the warmer 2006 weather. After adjusting for
variations, principally weather and billing days in each period, electric sales and delivery volumes in Con Edison of New Yorks service area increased 3.5 percent in the three months ended September 30, 2007 compared with the 2006 period.



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Con Edison of New Yorks electric purchased power costs decreased $58 million in the 2007 period compared with the 2006 period reflecting a decrease in unit costs ($37 million) and a decrease in purchased volumes ($21 million),
primarily associated with additional customers obtaining their energy supply through competitive providers in the three months ended September 30, 2007. Electric fuel costs decreased $13 million in the three months ended September 30, 2007
compared with the 2006 period, reflecting lower sendout volumes from the companys generating facilities ($8 million) and a decrease in unit costs ($5 million).



Con Edison of New Yorks electric operating income increased $81 million in the three months ended September 30, 2007 compared
with the 2006 period. The increase reflects higher net revenues ($70 million, due principally to the provisions of the electric rate agreement), lower operations and maintenance costs ($30 million, due primarily to costs for the Queens power outage
in 2006) and lower income taxes ($4 million), offset in part by higher taxes other than income taxes ($14 million, principally property taxes) and higher depreciation ($9 million). The increase also reflects the PSCs grant of the
companys petition to dispose of the electric portion of a deferred tax balance ($14 million), see Note B to the Third Quarter Financial Statements.



Gas

Con Edison of New Yorks gas sales and
deliveries, excluding off-system sales, in the three months ended September 30, 2007 compared with the 2006 period were:



|                                    |  |                             |  |                   |                      |           |   |  |                  |                    |  |                   |     |                   |   |           |  |   |                  |   |  |       |  
|----------------------------------- |  | --------------------------- |  | ----------------- | -------------------- | --------- | - |  | ---------------- | ------------------ |  | ----------------- | --- | ----------------- | - | --------- |  | - | ---------------- | - |  | ----- | -
|                                    |  | Thousands of dths Delivered |  |                   | Revenues in Millions |          
|                                    |  | Three Months Ended          |  |                   |                      |           |   |  |                  | Three Months Ended |  |                   |     |                   |   |          
|Description                         |  | September 30,2007           |  | September 30,2006 |                      | Variation |   |  | PercentVariation |                    |  | September 30,2007 |     | September 30,2006 |   | Variation |  |   | PercentVariation |  
|Residential                         |  | 3,408                       |  | 3,475             |                      | (67       | ) |  | (1.9             | )%                 |  | $                 | 86  |                   | $ | 82        |  | $ | 4                |   |  | 4.9   | %
|General                             |  | 4,025                       |  | 4,248             |                      | (223      | ) |  | (5.2             | )                  |  |                   | 64  |                   |   | 60        |  |   | 4                |   |  | 6.7   |  
|Firm transportation                 |  | 4,934                       |  | 3,403             |                      | 1,531     |   |  | 45.0             |                    |  |                   | 23  |                   |   | 14        |  |   | 9                |   |  | 64.3  |  
|Total firm sales and transportation |  | 12,367                      |  | 11,126            |                      | 1,241     |   |  | 11.2             |                    |  |                   | 173 |                   |   | 156       |  |   | 17               |   |  | 10.9  |  
|Interruptible sales                 |  | 1,558                       |  | 2,163             |                      | (605      | ) |  | (28.0            | )                  |  |                   |    |                   |   | 6         |  |   | (6               | ) |  | Large |  
|NYPA                                |  | 13,537                      |  | 14,010            |                      | (473      | ) |  | (3.4             | )                  |  |                   | 1   |                   |   | 1         |  |   |                 |   |  |      |  
|Generation plants                   |  | 30,681                      |  | 24,479            |                      | 6,202     |   |  | 25.3             |                    |  |                   | 15  |                   |   | 14        |  |   | 1                |   |  | 7.1   |  
|Other                               |  | 3,748                       |  | 4,609             |                      | (861      | ) |  | (18.7            | )                  |  |                   | 5   |                   |   | 4         |  |   | 1                |   |  | 25.0  |  
|Other operating revenues            |  |                            |  |                  |                      |          |   |  |                 |                    |  |                   | 10  |                   |   | 4         |  |   | 6                |   |  | Large |  
|Total                               |  | 61,891                      |  | 56,387            |                      | 5,504     |   |  | 9.8              | %                  |  | $                 | 204 |                   | $ | 185       |  | $ | 19               |   |  | 10.3  | %



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MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Con Edison of New Yorks gas operating revenues in the three months ended September 30, 2007 increased $19
million compared with the 2006 period, reflecting an increase in recoverable purchased gas costs ($4 million), the movement of certain customers from interruptible to firm service ($3 million), the gas rate plan ($3 million) and sales growth ($1
million). Other gas operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the companys rate plans. See Note B to the financial statements in Item 8 of the Form 10-K and Note B to the Third
Quarter Financial Statements.



Con Edison of New Yorks sales and
transportation volumes for firm customers increased 11.2 percent in the three months ended September 30, 2007 compared with the 2006 period reflecting net transfers to firm service. After adjusting for variations, principally billing days and
net transfers to firm service in each period, firm gas sales and transportation volumes in the companys service area increased 3.3 percent in the 2007 period.



Con Edison of New Yorks purchased gas cost increased $4 million in the three months ended September 30, 2007 compared with the
2006 period due to higher unit costs ($8 million) offset by lower sendout volumes ($4 million).



Con Edison of New Yorks gas operating income decreased $3 million in the three months ended September 30, 2007 compared with the 2006 period. The decrease reflects primarily higher operations and
maintenance expense ($8 million, due to higher costs for distribution and injuries and damages), income taxes ($6 million), taxes other than income taxes ($2 million, principally property taxes), and depreciation ($1 million), offset in part by
higher net revenues ($15 million).



Steam

Con Edison of New Yorks steam sales and deliveries in the three months ended September 30, 2007 compared with the 2006 period were:



|                         |  |                              |  |                   |                      |           |   |  |                  |                    |  |                   |     |                   |   |           |  |   |                  |   |  |      |   
|------------------------ |  | ---------------------------- |  | ----------------- | -------------------- | --------- | - |  | ---------------- | ------------------ |  | ----------------- | --- | ----------------- | - | --------- |  | - | ---------------- | - |  | ---- | --
|                         |  | Millions of Pounds Delivered |  |                   | Revenues in Millions |          
|                         |  | Three Months Ended           |  |                   |                      |           |   |  |                  | Three Months Ended |  |                   |     |                   |   |          
|Description              |  | September 30,2007            |  | September 30,2006 |                      | Variation |   |  | PercentVariation |                    |  | September 30,2007 |     | September 30,2006 |   | Variation |  |   | PercentVariation |  
|General                  |  | 18                           |  | 18                |                      |          |   |  |                 | %                  |  | $                 | 2   |                   | $ | 2         |  | $ |                 |   |  |     | % 
|Apartment house          |  | 1,036                        |  | 1,144             |                      | (108      | ) |  | (9.4             | )                  |  |                   | 20  |                   |   | 22        |  |   | (2               | ) |  | (9.1 | ) 
|Annual power             |  | 4,120                        |  | 4,358             |                      | (238      | ) |  | (5.5             | )                  |  |                   | 73  |                   |   | 75        |  |   | (2               | ) |  | (2.7 | ) 
|Other operating revenues |  |                             |  |                  |                      |          |   |  |                 |                    |  |                   | 7   |                   |   | 5         |  |   | 2                |   |  | 40.0 |   
|Total                    |  | 5,174                        |  | 5,520             |                      | (346      | ) |  | (6.3             | )%                 |  | $                 | 102 |                   | $ | 104       |  | $ | (2               | ) |  | (1.9 | )%



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Con Edison of New Yorks steam operating revenues decreased $2 million in the three months ended September 30, 2007 compared with the 2006 period, reflecting primarily the milder weather in 2007 ($1 million). Other steam operating
revenues generally reflect changes in regulatory assets and liabilities in accordance with the companys rate plans. See Note B to the financial statements in Item 8 of the Form 10-K.



Steam sales and delivery volumes decreased 6.3 percent in the three months ended
September 30, 2007 compared with the 2006 period, reflecting primarily the impact of weather. After adjusting for variations, principally weather and billing days in each period, steam sales and deliveries decreased 1.4 percent in the 2007
period.



Con Edison of New Yorks steam purchased power costs decreased $2
million in the three months ended September 30, 2007 compared with the 2006 period due primarily to lower purchased volumes ($2 million). Steam fuel costs increased $3 million due primarily to higher unit costs ($2 million) and higher sendout
volumes ($1 million).



Steam operating income decreased $3 million in the three
months ended September 30, 2007 compared with the 2006 period reflecting lower net revenues ($3 million).



Other Income

Other income decreased $10 million in
the three months ended September 30, 2007 compared with the 2006 period, due principally to the recognition of a tax benefit of $9 million on the interest accrued in the 2006 period relating to the timing of deductions of certain construction
related costs. See Note I to the Third Quarter Financial Statements.



Net Interest Expense

Net interest expense decreased $20 million in the three months ended September 30, 2007 compared with the
2006 period, due principally to $23 million of interest accrued in the 2006 period for the potential repayment of tax benefits from the timing of deductions of certain construction related costs (see Note I to the Third Quarter Financial
Statements).



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



O&R

Electric

O&Rs electric sales and deliveries, excluding off-system sales, in the three months ended September 30, 2007 compared with
the 2006 period were:



|                         |  |                            |  |                   |                      |           |   |  |                  |                    |  |                   |     |   |                   |   |           |  |   |                  |   |  |       |  
|------------------------ |  | -------------------------- |  | ----------------- | -------------------- | --------- | - |  | ---------------- | ------------------ |  | ----------------- | --- | - | ----------------- | - | --------- |  | - | ---------------- | - |  | ----- | -
|                         |  | Millions of kWhs Delivered |  |                   | Revenues in Millions |          
|                         |  | Three Months Ended         |  |                   |                      |           |   |  |                  | Three Months Ended |  |                   |     |   |                   |  
|Description              |  | September 30,2007          |  | September 30,2006 |                      | Variation |   |  | PercentVariation |                    |  | September 30,2007 |     |   | September 30,2006 |   | Variation |  |   | PercentVariation |  
|Residential/Religious    |  | 601                        |  | 594               |                      | 7         |   |  | 1.2              | %                  |  | $                 | 100 |   |                   | $ | 94        |  | $ | 6                |   |  | 6.4   | %
|Commercial/Industrial    |  | 582                        |  | 543               |                      | 39        |   |  | 7.2              |                    |  |                   | 81  |   |                   |   | 75        |  |   | 6                |   |  | 8.0   |  
|Retail access customers  |  | 483                        |  | 523               |                      | (40       | ) |  | (7.6             | )                  |  |                   | 24  |   |                   |   | 26        |  |   | (2               | ) |  | (7.7  | )
|Public authorities       |  | 34                         |  | 32                |                      | 2         |   |  | 6.3              |                    |  |                   | 4   |   |                   |   | 4         |  |   |                 |   |  |      |  
|Other operating revenues |  |                           |  |                  |                      |          |   |  |                 |                    |  |                   | (4  | ) |                   |   | 6         |  |   | (10              | ) |  | Large |  
|Total                    |  | 1,700                      |  | 1,692             |                      | 8         |   |  | 0.5              | %                  |  | $                 | 205 |   |                   | $ | 205       |  | $ |                 |   |  |      | %



O&Rs electric operating
revenues were unchanged in the three months ended September 30, 2007 compared with the 2006 period. Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the companys electric
rate plan. See Note B to the financial statements in Item 8 of the Form 10-K and Note B to the Third Quarter Financial Statements.



Electric delivery volumes in O&Rs service area increased 0.5 percent in the three months ended September 30, 2007 compared with the 2006 period. After
adjusting for weather variations, electric delivery volumes in O&Rs service area increased 3.4 percent in the 2007 period compared with the 2006 period.



Electric operating income decreased $3 million in the three months ended September 30, 2007 compared with the 2006 period reflecting
primarily the accrual of a regulatory liability of $5 million in connection with an October 2007 PSC order. See Note B to the Third Quarter Financial Statements.



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Gas

O&Rs gas sales and deliveries,
excluding off-system sales, in three months ended September 30, 2007 compared with the 2006 period were:



|                                    |  |                             |  |                   |                      |           |   |  |                  |                    |  |                   |    |                   |   |           |  |   |                  |   |  |       |  
|----------------------------------- |  | --------------------------- |  | ----------------- | -------------------- | --------- | - |  | ---------------- | ------------------ |  | ----------------- | -- | ----------------- | - | --------- |  | - | ---------------- | - |  | ----- | -
|                                    |  | Thousands of dths Delivered |  |                   | Revenues in Millions |          
|                                    |  | Three Months Ended          |  |                   |                      |           |   |  |                  | Three Months Ended |  |                   |    |                   |   |          
|Description                         |  | September 30,2007           |  | September 30,2006 |                      | Variation |   |  | PercentVariation |                    |  | September 30,2007 |    | September 30,2006 |   | Variation |  |   | PercentVariation |  
|Residential                         |  | 606                         |  | 620               |                      | (14       | ) |  | (2.3             | )%                 |  | $                 | 12 |                   | $ | 10        |  | $ | 2                |   |  | 20.0  | %
|General                             |  | 160                         |  | 170               |                      | (10       | ) |  | (5.9             | )                  |  |                   | 3  |                   |   | 2         |  |   | 1                |   |  | 50.0  |  
|Firm transportation                 |  | 837                         |  | 857               |                      | (20       | ) |  | (2.3             | )                  |  |                   | 5  |                   |   | 4         |  |   | 1                |   |  | 25.0  |  
|Total firm sales and transportation |  | 1,603                       |  | 1,647             |                      | (44       | ) |  | (2.7             | )                  |  |                   | 20 |                   |   | 16        |  |   | 4                |   |  | 25.0  |  
|Interruptible sales                 |  | 1,280                       |  | 1,273             |                      | 7         |   |  | 0.5              |                    |  |                   | 6  |                   |   | 7         |  |   | (1               | ) |  | (14.3 | )
|Generation plants                   |  | 2,778                       |  | 1,930             |                      | 848       |   |  | 43.9             |                    |  |                   | 1  |                   |   | 1         |  |   |                 |   |  |      |  
|Other                               |  | 88                          |  | 84                |                      | 4         |   |  | 4.8              |                    |  |                   |   |                   |   |          |  |   |                 |   |  |      |  
|Other gas revenues                  |  |                            |  |                  |                      |          |   |  |                 |                    |  |                   | 3  |                   |   | 2         |  |   | 1                |   |  | 50.0  |  
|Total                               |  | 5,749                       |  | 4,934             |                      | 815       |   |  | 16.5             | %                  |  | $                 | 30 |                   | $ | 26        |  | $ | 4                |   |  | 15.4  | %



O&Rs gas operating revenues
increased $4 million in the three months ended September 30, 2007 compared with the 2006 period. The increase is due primarily to higher costs of gas purchased for resale in 2007.



Sales and transportation volumes for firm customers decreased 2.7 percent in the three months ended September 30, 2007 compared with
the 2006 period. After adjusting for weather and other variations in each period, total firm sales and transportation volumes were 1.3 percent lower in the three months ended September 30, 2007 compared with the 2006 period.



Non-firm transportation of customer-owned gas to electric generating plants increased in the
three months ended September 30, 2007 compared with the 2006 period because certain facilities resumed burning gas to generate electricity. The increase in gas burned had minimal impact on earnings because most revenues from these customers
result from a fixed demand charge for local transportation.



Gas operating
income was unchanged in the three months ended September 30, 2007 compared with the 2006 period.



Competitive Energy Businesses

The competitive energy businesses earnings decreased $6 million in the three months ended
September 30, 2007 compared with the 2006 period, due primarily to mark-to-market losses, offset in



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



part by a $4 million after-tax gain recorded in other income on the sale of Con Edison Developments interest in Everpower Wind, LLC. Excluding
mark-to-market activity in both periods, earnings increased $2 million in the three months ended September 30, 2007 compared with the 2006 period.



Operating revenues increased $170 million in the three months ended September 30, 2007 compared with the 2006 period, due primarily to higher electric retail and
wholesale revenues. Electric retail revenues increased $38 million in the three months ended September 30, 2007 as compared with the 2006 period, of which $47 million was due to higher sales volumes, offset by a decrease in unit prices of $9
million. Electric wholesale revenues increased $141 million in the three months ended September 30, 2007 as compared with the 2006 period, primarily due to higher sales volumes. Pre-tax mark-to-market losses decreased $14 million in the three
months ended September 30, 2007 compared with the 2006 period and other revenues, primarily wholesale, increased $5 million.



Operating expenses excluding income taxes increased $187 million in the three months ended September 30, 2007 compared with the 2006 period, reflecting higher
purchased power costs ($171 million), operations and maintenance costs ($9 million, due primarily to higher costs for legal services in relation to the competitive energy businesses lease in/lease out transactions  see Note H to the
Third Quarter Financial Statements) and gas purchased for resale costs ($7 million).



Income taxes decreased $2 million in the three months ended September 30, 2007 as compared with the 2006 period, reflecting primarily lower income.



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MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



NINE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 2006

The Companies results of operations (which were discussed above under Results of Operations 
Summary) in 2007 compared with 2006 were:



|                                                                                          |  |                            |     |                             |                        |   |                            |     |      |                             |                                   |       |                            |  |   |                             |   |  |                            |   |  |                             |     |   |  |       |  
|----------------------------------------------------------------------------------------- |  | -------------------------- | --- | --------------------------- | ---------------------- | - | -------------------------- | --- | ---- | --------------------------- | --------------------------------- | ----- | -------------------------- |  | - | --------------------------- | - |  | -------------------------- | - |  | --------------------------- | --- | - |  | ----- | -
|                                                                                          |  | Con Edison*                |     |                             | Con Edison of New York |   |                            | O&R |      |                             | Competitive Businessesand Other** |      
|(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 |    
|Operating revenues                                                                        |  | $                          | 777 |                             | 8.3                    | % |                            | $   | 315  |                             |                                   | 4.4   | %                          |  | $ | 82                          |   |  | 13.2                       |   |  | $                           | 380 |   |  | 25.0  | %
|Purchased power                                                                           |  |                            | 290 |                             | 7.7                    |   |                            |     | (109 | )                           |                                   | (4.5  | )                          |  |   | 61                          |   |  | 25.8                       |   |  |                             | 338 |   |  | 29.3  |  
|Fuel                                                                                      |  |                            | 38  |                             | 6.3                    |   |                            |     | 31   |                             |                                   | 7.2   |                            |  |   | N/A                         |   |  | N/A                        |   |  |                             | 7   |   |  | 4.1   |  
|Gas purchased for resale                                                                  |  |                            | 32  |                             | 3.8                    |   |                            |     | 26   |                             |                                   | 3.7   |                            |  |   | 8                           |   |  | 7.4                        |   |  |                             | (2  | ) |  | (8.0  | )
|Operating revenues less purchased power, fuel and gas purchased for resale (net revenues) |  |                            | 417 |                             | 10.2                   |   |                            |     | 367  |                             |                                   | 10.1  |                            |  |   | 13                          |   |  | 4.7                        |   |  |                             | 37  |   |  | 21.6  |  
|Other operations and maintenance                                                          |  |                            | 120 |                             | 8.4                    |   |                            |     | 111  |                             |                                   | 9.1   |                            |  |   | 1                           |   |  | 0.7                        |   |  |                             | 8   |   |  | 10.7  |  
|Depreciation and amortization                                                             |  |                            | 41  |                             | 8.9                    |   |                            |     | 38   |                             |                                   | 9.4   |                            |  |   | 2                           |   |  | 7.7                        |   |  |                             | 1   |   |  | 3.3   |  
|Taxes, other than income taxes                                                            |  |                            | 46  |                             | 4.9                    |   |                            |     | 50   |                             |                                   | 5.6   |                            |  |   | (4                          | ) |  | (11.1                      | ) |  |                             |    |   |  |      |  
|Income taxes                                                                              |  |                            | 42  |                             | 13.3                   |   |                            |     | 20   |                             |                                   | 7.0   |                            |  |   | 3                           |   |  | 15.0                       |   |  |                             | 19  |   |  | Large |  
|Operating income                                                                          |  |                            | 168 |                             | 18.1                   |   |                            |     | 148  |                             |                                   | 17.7  |                            |  |   | 11                          |   |  | 21.2                       |   |  |                             | 9   |   |  | 23.7  |  
|Other income less deductions and related income tax                                       |  |                            | 17  |                             | 60.7                   |   |                            |     | (1   | )                           |                                   | (12.5 | )                          |  |   |                            |   |  |                           |   |  |                             | 18  |   |  | Large |  
|Net interest expense                                                                      |  |                            |    |                             |                       |   |                            |     | 5    |                             |                                   | 1.5   |                            |  |   | 4                           |   |  | 19.0                       |   |  |                             | (9  | ) |  | (15.5 | )
|Income from continuing operations                                                         |  |                            | 185 |                             | 34.5                   |   |                            |     | 142  |                             |                                   | 27.5  |                            |  |   | 7                           |   |  | 21.8                       |   |  |                             | 36  |   |  | Large |  
|Discontinued operations                                                                   |  |                            | 1   |                             | Large                  |   |                            |     | N/A  |                             |                                   | N/A   |                            |  |   | N/A                         |   |  | N/A                        |   |  |                             | 1   |   |  | Large |  
|Net income                                                                                |  | $                          | 186 |                             | 34.7                   | % |                            | $   | 142  |                             |                                   | 27.5  | %                          |  | $ | 7                           |   |  | 21.9                       | % |  | $                           | 37  |   |  | Large |  

|* | Represents the consolidated financial results of Con Edison and its businesses.
|- | -------------------------------------------------------------------------------

|** | Includes inter-company and parent company accounting.
|-- | -----------------------------------------------------



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OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Con Edison of New York

Electric

Con Edison of New Yorks electric sales and deliveries, excluding off-system sales, for the nine months ended
September 30, 2007 compared with the 2006 period were:



|                                       |  |                            |  |                   |                      |           |   |  |                  |                   |  |                   |       |                   |   |           |  |   |                  |   |  |      |   
|-------------------------------------- |  | -------------------------- |  | ----------------- | -------------------- | --------- | - |  | ---------------- | ----------------- |  | ----------------- | ----- | ----------------- | - | --------- |  | - | ---------------- | - |  | ---- | --
|                                       |  | Millions of kWhs Delivered |  |                   | Revenues in Millions |          
|                                       |  | Nine Months Ended          |  |                   |                      |           |   |  |                  | Nine Months Ended |  |                   |       |                   |   |          
|Description                            |  | September 30,2007          |  | September 30,2006 |                      | Variation |   |  | PercentVariation |                   |  | September 30,2007 |       | September 30,2006 |   | Variation |  |   | PercentVariation |  
|Residential/Religious                  |  | 9,418                      |  | 9,816             |                      | (398      | ) |  | (4.1             | )%                |  | $                 | 2,039 |                   | $ | 2,076     |  | $ | (37              | ) |  | (1.8 | )%
|Commercial/Industrial                  |  | 9,767                      |  | 10,365            |                      | (598      | ) |  | (5.8             | )                 |  |                   | 1,889 |                   |   | 1,920     |  |   | (31              | ) |  | (1.6 | ) 
|Retail access customers                |  | 16,140                     |  | 14,350            |                      | 1,790     |   |  | 12.5             |                   |  |                   | 989   |                   |   | 755       |  |   | 234              |   |  | 31.0 |   
|NYPA, Municipal Agency and other sales |  | 8,672                      |  | 8,354             |                      | 318       |   |  | 3.8              |                   |  |                   | 260   |                   |   | 237       |  |   | 23               |   |  | 9.7  |   
|Other operating revenues               |  |                           |  |                  |                      |          |   |  |                 |                   |  |                   | 469   |                   |   | 461       |  |   | 8                |   |  | 1.7  |   
|Total                                  |  | 43,997                     |  | 42,885            |                      | 1,112     |   |  | 2.6              | %                 |  | $                 | 5,646 |                   | $ | 5,449     |  | $ | 197              |   |  | 3.6  | % 



Con Edison of New Yorks electric
operating revenues were $197 million higher in the nine months ended September 30, 2007 as compared with the 2006 period, due primarily to the third year of the electric rate plan ($148 million, which includes $58 million of Net T&D
Revenues), increased recoveries of demand side management programs ($84 million), sales growth ($44 million), gain on the sale of properties ($20 million), higher transmission revenues ($8 million), offset in part by a decrease in recoverable
purchased power and fuel costs ($97 million and $6 million, respectively) and the impact of the milder weather ($13 million). Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the
companys rate plans. See Note B to the financial statements in Item 8 of the Form 10-K and Note B to the Third Quarter Financial Statements.



Electric sales and delivery volumes in Con Edison of New Yorks service area increased 2.6 percent in the nine months ended September 30, 2007 compared with the
2006 period, primarily reflecting the sales growth in the 2007 period compared with 2006. After adjusting for variations, principally weather and billing days in each period, electric sales and delivery volumes in Con Edison of New Yorks
service area increased 2.8 percent in the nine months ended September 30, 2007 compared with the 2006 period.



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MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Con Edison of New Yorks electric fuel costs decreased $6 million in the nine months ended September 30, 2007 compared with the 2006 period, reflecting lower sendout volumes from the companys generating facilities ($4
million) and a decrease in unit costs ($2 million). Electric purchased power costs decreased $97 million in the 2007 period compared with the 2006 period reflecting a decrease in purchased volumes ($88 million), primarily associated with additional
customers obtaining their energy supply through competitive providers in the nine months ended September 30, 2007 and a decrease in unit costs ($9 million).



Con Edison of New Yorks electric operating income increased $128 million in the nine months ended September 30, 2007 compared
with the 2006 period. The increase reflects higher net revenues ($301 million, due principally to provisions of the electric rate agreement and sales growth), offset in part by higher operations and maintenance costs ($86 million, reflecting the
impact of storms, demand side management program expenses, increased transmission and distribution expenses and costs for the Queens power outage in 2006), taxes other than income taxes ($39 million, principally property taxes), income taxes ($25
million) and depreciation ($25 million). The increase also reflects the PSCs grant of the companys petition to dispose of the electric portion of a deferred tax balance ($14 million), see Note B to the Third Quarter Financial Statements.



Gas

Con Edison of New Yorks gas sales and deliveries, excluding off-system sales, in the nine months ended September 30, 2007 compared with the 2006 period were:



|                                    |  |                             |  |                   |                      |           |   |  |                  |                   |  |                   |       |                   |   |           |  |   |                  |   |  |       |  
|----------------------------------- |  | --------------------------- |  | ----------------- | -------------------- | --------- | - |  | ---------------- | ----------------- |  | ----------------- | ----- | ----------------- | - | --------- |  | - | ---------------- | - |  | ----- | -
|                                    |  | Thousands of dths Delivered |  |                   | Revenues in Millions |          
|                                    |  | Nine Months Ended           |  |                   |                      |           |   |  |                  | Nine Months Ended |  |                   |       |                   |   |          
|Description                         |  | September 30,2007           |  | September 30,2006 |                      | Variation |   |  | PercentVariation |                   |  | September 30,2007 |       | September 30,2006 |   | Variation |  |   | PercentVariation |  
|Residential                         |  | 32,706                      |  | 31,489            |                      | 1,217     |   |  | 3.9              | %                 |  | $                 | 641   |                   | $ | 608       |  | $ | 33               |   |  | 5.4   | %
|General                             |  | 24,055                      |  | 24,162            |                      | (107      | ) |  | (0.4             | )                 |  |                   | 386   |                   |   | 370       |  |   | 16               |   |  | 4.3   |  
|Firm transportation                 |  | 28,660                      |  | 17,352            |                      | 11,308    |   |  | 65.2             |                   |  |                   | 121   |                   |   | 74        |  |   | 47               |   |  | 63.5  |  
|Total firm sales and transportation |  | 85,421                      |  | 73,003            |                      | 12,418    |   |  | 17.0             |                   |  |                   | 1,148 |                   |   | 1,052     |  |   | 96               |   |  | 9.1   |  
|Interruptible sales                 |  | 8,338                       |  | 9,566             |                      | (1,228    | ) |  | (12.8            | )                 |  |                   | 62    |                   |   | 94        |  |   | (32              | ) |  | (34.0 | )
|NYPA                                |  | 33,268                      |  | 32,096            |                      | 1,172     |   |  | 3.7              |                   |  |                   | 3     |                   |   | 2         |  |   | 1                |   |  | 50.0  |  
|Generation plants                   |  | 63,185                      |  | 47,884            |                      | 15,301    |   |  | 32.0             |                   |  |                   | 39    |                   |   | 36        |  |   | 3                |   |  | 8.3   |  
|Other                               |  | 11,291                      |  | 14,418            |                      | (3,127    | ) |  | (21.7            | )                 |  |                   | 17    |                   |   | 19        |  |   | (2               | ) |  | (10.5 | )
|Other operating revenues            |  |                            |  |                  |                      |          |   |  |                 |                   |  |                   | 47    |                   |   | 35        |  |   | 12               |   |  | 34.3  |  
|Total                               |  | 201,503                     |  | 176,967           |                      | 24,536    |   |  | 13.9             | %                 |  | $                 | 1,316 |                   | $ | 1,238     |  | $ | 78               |   |  | 6.3   | %



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##### Table of Contents

MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Con Edison of New Yorks gas operating revenues in the nine months ended September 30, 2007 increased $78
million compared with the 2006 period, reflecting an increase in recoverable purchased gas costs ($26 million), the gas rate plan ($25 million), the movement of certain customers from interruptible to firm service ($18 million) and sales growth ($7
million). Con Edison of New Yorks revenues from gas sales are subject to a weather normalization clause that moderates, but does not eliminate, the effect of weather-related changes on net income. Other gas operating revenues generally reflect
changes in regulatory assets and liabilities in accordance with the companys rate plans. See Note B to the financial statements in Item 8 of the Form 10-K.



Con Edison of New Yorks sales and transportation volumes for firm customers increased 17.0 percent in the nine months ended
September 30, 2007 compared with the 2006 period, reflecting primarily the impact of the colder winter weather in 2007 compared with 2006 and the net transfers to firm service. After adjusting for variations, principally weather and billing
days and net transfers to firm service in each period, firm gas sales and transportation volumes in the companys service area increased 2.7 percent in the 2007 period.



Con Edison of New Yorks purchased gas cost increased $26 million in the nine months ended September 30, 2007 compared with the
2006 period due to higher sendout volumes ($60 million), offset by lower unit costs ($34 million).



Con Edison of New Yorks gas operating income increased $23 million in the nine months ended September 30, 2007 compared with the 2006 period. The increase reflects primarily higher net revenues ($53
million), offset in part by higher operations and maintenance expense ($13 million, due to higher costs for distribution, injuries and damages, and pensions), income taxes ($8 million), taxes other than income taxes ($6 million, principally property
taxes), and depreciation ($4 million).



Steam

Con Edison of New Yorks steam sales and deliveries in the nine months ended September 30, 2007 compared with the 2006 period were:



|                         |  |                              |  |                   |                      |           |  |                  |                   |  |                   |     |                   |   |           |  |                  |    |  |       |  
|------------------------ |  | ---------------------------- |  | ----------------- | -------------------- | --------- |  | ---------------- | ----------------- |  | ----------------- | --- | ----------------- | - | --------- |  | ---------------- | -- |  | ----- | -
|                         |  | Millions of Pounds Delivered |  |                   | Revenues in Millions |          
|                         |  | Nine Months Ended            |  |                   |                      |           |  |                  | Nine Months Ended |  |                   |     |                   |  
|Description              |  | September 30,2007            |  | September 30,2006 |                      | Variation |  | PercentVariation |                   |  | September 30,2007 |     | September 30,2006 |   | Variation |  | PercentVariation |   
|General                  |  | 450                          |  | 403               |                      | 47        |  | 11.7             | %                 |  | $                 | 18  |                   | $ | 16        |  | $                | 2  |  | 12.5  | %
|Apartment house          |  | 5,625                        |  | 5,236             |                      | 389       |  | 7.4              |                   |  |                   | 142 |                   |   | 136       |  |                  | 6  |  | 4.4   |  
|Annual power             |  | 13,710                       |  | 12,767            |                      | 943       |  | 7.4              |                   |  |                   | 341 |                   |   | 322       |  |                  | 19 |  | 5.9   |  
|Other operating revenues |  |                             |  |                  |                      |          |  |                 |                   |  |                   | 24  |                   |   | 11        |  |                  | 13 |  | Large |  
|Total                    |  | 19,785                       |  | 18,406            |                      | 1,379     |  | 7.5              | %                 |  | $                 | 525 |                   | $ | 485       |  | $                | 40 |  | 8.2   | %



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##### Table of Contents

MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Con Edison of New Yorks steam operating revenues increased $40 million in the nine months ended September 30, 2007 compared with the 2006 period, reflecting primarily the impact of colder winter and warmer spring weather ($18
million) and higher revenues under the steam rate plan ($22 million). Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the companys rate plans. See Note B to the financial
statements in Item 8 of the Form 10-K.



Steam sales and delivery volumes
increased 7.5 percent in the nine months ended September 30, 2007 compared with the 2006 period, reflecting primarily the impact of weather. After adjusting for variations, principally weather and billing days in each period, steam sales and
deliveries increased 0.1 percent in the 2007 period.



Con Edison of New
Yorks steam fuel costs increased $37 million due primarily to higher sendout volumes ($20 million) and higher unit costs ($17 million). Steam purchased power costs decreased $12 million in the nine months ended September 30, 2007 compared
with the 2006 period due primarily to lower unit costs ($11 million) and lower sendout volumes ($1 million).



Steam operating income decreased $3 million in the nine months ended September 30, 2007 compared with the 2006 period, due primarily to higher depreciation ($9 million) and taxes other than income taxes ($5
million), offset in part by higher net revenues ($13 million).



Net Interest Expense

Net interest expense increased $5 million in the nine months ended September 30, 2007 compared with the 2006 period, due
principally to new debt issuances since September 30, 2006, offset in part by interest accrued in 2006 for the potential repayment of tax benefits from the timing of tax deductions of certain construction related costs (see Note I to the Third
Quarter Financial Statements).



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##### Table of Contents

MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



O&R

Electric

O&Rs electric sales and deliveries, excluding off-system sales, in the nine months ended September 30, 2007 compared with
the 2006 period were:



|                         |  |                            |  |                   |                      |           |   |  |                  |                   |  |                   |     |   |                   |   |           |  |   |                  |   |  |       |  
|------------------------ |  | -------------------------- |  | ----------------- | -------------------- | --------- | - |  | ---------------- | ----------------- |  | ----------------- | --- | - | ----------------- | - | --------- |  | - | ---------------- | - |  | ----- | -
|                         |  | Millions of kWhs Delivered |  |                   | Revenues in Millions |          
|                         |  | Nine Months Ended          |  |                   |                      |           |   |  |                  | Nine Months Ended |  |                   |     |   |                   |  
|Description              |  | September 30,2007          |  | September 30,2006 |                      | Variation |   |  | PercentVariation |                   |  | September 30,2007 |     |   | September 30,2006 |   | Variation |  |   | PercentVariation |  
|Residential/Religious    |  | 1,483                      |  | 1,411             |                      | 72        |   |  | 5.1              | %                 |  | $                 | 232 |   |                   | $ | 198       |  | $ | 34               |   |  | 17.2  | %
|Commercial/Industrial    |  | 1,675                      |  | 1,581             |                      | 94        |   |  | 5.9              |                   |  |                   | 217 |   |                   |   | 182       |  |   | 35               |   |  | 19.2  |  
|Retail access customers  |  | 1,262                      |  | 1,353             |                      | (91       | ) |  | (6.7             | )                 |  |                   | 56  |   |                   |   | 60        |  |   | (4               | ) |  | (6.7  | )
|Public authorities       |  | 89                         |  | 86                |                      | 3         |   |  | 3.5              |                   |  |                   | 11  |   |                   |   | 10        |  |   | 1                |   |  | 10.0  |  
|Other operating revenues |  |                           |  |                  |                      |          |   |  |                 |                   |  |                   | (2  | ) |                   |   | 5         |  |   | (7               | ) |  | Large |  
|Total                    |  | 4,509                      |  | 4,431             |                      | 78        |   |  | 1.8              | %                 |  | $                 | 514 |   |                   | $ | 455       |  | $ | 59               |   |  | 13.0  | %



O&Rs electric operating
revenues increased $59 million in the nine months ended September 30, 2007 compared with the 2006 period, due primarily to increased recoverable purchased power costs ($61 million). Other electric operating revenues generally reflect changes in
regulatory assets and liabilities in accordance with the companys electric rate plan. See Note B to the financial statements in Item 8 of the Form 10-K and Note B to the Third Quarter Financial Statements.



Electric delivery volumes in O&Rs service area increased 1.8 percent in the nine
months ended September 30, 2007 compared with the 2006 period. After adjusting for weather variations and unbilled volumes, electric delivery volumes in O&Rs service area increased 2.1 percent in the 2007 period compared with the 2006
period.



Electric operating income increased by $4 million in the nine months
ended September 30, 2007 compared with the 2006 period, due primarily to lower operation and maintenance costs ($4 million) and taxes other than income taxes ($3 million, principally property taxes), offset in part by the accrual of a
regulatory liability in connection with an October 2007 PSC order ($5 million). See Note B to the Third Quarter Financial Statements.



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##### Table of Contents

MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Gas

O&Rs gas sales and deliveries,
excluding off-system sales, in nine months ended September 30, 2007 compared with the 2006 period were:



|                                    |  |                             |  |                   |                      |           |   |  |                  |                   |  |                   |     |                   |   |           |  |   |                  |   |  |       |  
|----------------------------------- |  | --------------------------- |  | ----------------- | -------------------- | --------- | - |  | ---------------- | ----------------- |  | ----------------- | --- | ----------------- | - | --------- |  | - | ---------------- | - |  | ----- | -
|                                    |  | Thousands of dths Delivered |  |                   | Revenues in Millions |          
|                                    |  | Nine Months Ended           |  |                   |                      |           |   |  |                  | Nine Months Ended |  |                   |     |                   |   |          
|Description                         |  | September 30,2007           |  | September 30,2006 |                      | Variation |   |  | PercentVariation |                   |  | September 30,2007 |     | September 30,2006 |   | Variation |  |   | PercentVariation |  
|Residential                         |  | 6,105                       |  | 5,433             |                      | 672       |   |  | 12.4             | %                 |  | $                 | 105 |                   | $ | 94        |  | $ | 11               |   |  | 11.7  | %
|General                             |  | 1,462                       |  | 1,353             |                      | 109       |   |  | 8.1              |                   |  |                   | 24  |                   |   | 22        |  |   | 2                |   |  | 9.1   |  
|Firm transportation                 |  | 7,031                       |  | 6,357             |                      | 674       |   |  | 10.6             |                   |  |                   | 27  |                   |   | 22        |  |   | 5                |   |  | 22.7  |  
|Total firm sales and transportation |  | 14,598                      |  | 13,143            |                      | 1,455     |   |  | 11.1             |                   |  |                   | 156 |                   |   | 138       |  |   | 18               |   |  | 13.0  |  
|Interruptible sales                 |  | 4,446                       |  | 4,451             |                      | (5        | ) |  | (0.1             | )                 |  |                   | 18  |                   |   | 22        |  |   | (4               | ) |  | (18.2 | )
|Generation plants                   |  | 3,940                       |  | 2,884             |                      | 1,056     |   |  | 36.6             |                   |  |                   | 2   |                   |   | 2         |  |   |                 |   |  |      |  
|Other                               |  | 733                         |  | 645               |                      | 88        |   |  | 13.6             |                   |  |                   |    |                   |   |          |  |   |                 |   |  |      |  
|Other gas revenues                  |  |                            |  |                  |                      |          |   |  |                 |                   |  |                   | 13  |                   |   | 4         |  |   | 9                |   |  | Large |  
|Total                               |  | 23,717                      |  | 21,123            |                      | 2,594     |   |  | 12.3             | %                 |  | $                 | 189 |                   | $ | 166       |  | $ | 23               |   |  | 13.9  | %



O&Rs gas operating revenues
increased $23 million in the nine months ended September 30, 2007 compared with the 2006 period. The increase reflects primarily this years colder winter and warmer spring weather and the impact of the gas rate plan increase that went
into effect November 1, 2006.



Sales and transportation volumes for firm
customers increased 11.1 percent in the nine months ended September 30, 2007 compared with the 2006 period, reflecting the impact of the weather in 2007. After adjusting for weather and other variations in each period, total firm sales and
transportation volumes were 0.1 percent lower in the nine months ended September 30, 2007 compared with the 2006 period. O&Rs revenues from gas sales are subject to a weather normalization clause that moderates, but does not
eliminate, the effect of weather-related changes on net income.



Non-firm
transportation of customer-owned gas to electric generating plants increased in the nine months ended September 30, 2007 compared with the 2006 period because certain facilities resumed burning gas to generate electricity. The increase in gas
burned had minimal impact on earnings because most revenues from these customers result from a fixed demand charge for local transportation.



Gas operating income increased by $7 million in the nine months ended September 30, 2007 compared with the 2006 period, due primarily to higher net revenues ($14
million) and lower taxes other than income taxes ($1 million, principally property taxes), offset in part by higher operations and maintenance costs ($6 million, due to higher costs for injuries and damages and pensions) and higher income taxes ($2
million).



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##### Table of Contents

MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS
(COMBINED FOR CON EDISON AND CON EDISON OF

NEW YORK)  CONTINUED



Competitive Energy Businesses and Other

Competitive Energy Businesses

The competitive energy
businesses earnings increased $24 million in the nine months ended September 30, 2007 compared with the 2006 period due primarily to lower mark-to-market losses and a $4 million after-tax gain recorded in other income on the sale of Con
Edison Developments interest in Everpower Wind, LLC. Excluding mark-to-market activity in both periods, earnings increased $5 million in the nine months ended September 30, 2007 compared with the 2006 period.



Operating revenues increased $335 million in the nine months ended September 30, 2007
compared with the 2006 period, due primarily to higher electric retail and wholesale revenues, and lower mark-to-market losses. Electric retail revenues increased $113 million in the nine months ended September 30, 2007 as compared with the
2006 period, of which $109 million was due to higher sales volumes and $4 million was due to an increase in unit prices. Electric wholesale revenues increased $171 million in the nine months ended September 30, 2007 as compared with the 2006
period, primarily due to higher wholesale sales volumes. Pre-tax mark-to-market losses decreased $33 million in the nine months ended September 30, 2007 compared with the 2006 period, while other revenues increased $18 million.



Operating expenses excluding income taxes increased $304 million in the nine months ended
September 30, 2007 compared with the 2006 period, reflecting an increase in purchased power costs ($290 million), operations and maintenance costs ($9 million, due primarily to higher costs for legal services in relation to the competitive
energy businesses lease in/lease out transactions  see Note H to the Third Quarter Financial Statements) and higher fuel costs ($7 million), partially offset by a decrease in gas purchased for resale costs ($2 million).



Income taxes increased $20 million in the nine months ended September 30, 2007 as
compared with the 2006 period, reflecting primarily higher income.



Other

For Con Edison, Other in 2006 reflects a $9 million expense to reclassify from retained earnings to additional
paid-in capital the tax benefits from the exercise of stock options that had been recognized in income in prior years. For Con Edison, Other also includes inter-company eliminations relating to operating revenues and operating expenses.



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##### Table of Contents

ITEM3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information about the Companies primary market risks associated with activities in derivative financial instruments, other financial
instruments and derivative commodity instruments, see Financial and Commodity Market Risks in Part 1, Item 2 of this report, which information is incorporated herein by reference. Also, see Item 7A of the Form 10-K.



ITEM4.    CONTROLS AND PROCEDURES

The
Companies maintain disclosure controls and procedures designed to provide reasonable assurance that the information required to be disclosed in the reports that they submit to the Securities and Exchange Commission (SEC) is recorded, processed,
summarized and reported within the time periods specified in the rules and forms of the SEC. For each of the Companies, its management, with the participation of its principal executive officer and principal financial officer, has evaluated the
companys disclosure controls and procedures as of the end of the period covered by this report and, based upon such evaluation, has concluded that the controls and procedures were effective to provide such reasonable assurance. Reasonable
assurance is not absolute assurance, however, and there can be no assurance that any design of controls or procedures would be effective under all potential future conditions, regardless of how remote.



There were no changes in the Companies internal control over financial reporting that
occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Companies internal control over financial reporting.



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##### Table of Contents

PART II OTHER INFORMATION



ITEM1    LEGAL PROCEEDINGS



Power Outage Proceedings

For information about
proceedings relating to power outages in 2006, see Power Outage Proceedings in Note B to the financial statements included in Part I, Item 1 of this report and Part II, Item 1 of the First Quarter Form 10-Q and Second Quarter
Form 10-Q, which information is incorporated herein by reference.



Mirant Litigation

Reference is made to Mirant Litigation in Item 3 of the Form 10-K and Part II, Item 1 of the
Second Quarter Form 10-Q for information about the settlement of this proceeding for amounts that in aggregate, were not material to the Companies, which information is incorporated herein by reference.



Manhattan Steam Main Rupture

For information about proceedings relating to the July 2007 rupture of a steam main located in midtown Manhattan, see Manhattan Steam Main Rupture in Note H
to the financial statements included in Part I, Item 1 of this report, which information is incorporated herein by reference.



Lease In/Lease Out Transactions

For information about
Con Edisons competitive energy businesses lease in/lease out transactions, as to which a trial commenced in October 2007, see Lease In/Lease Out Transactions in Note H to the financial statements included in Part I,
Item 1 of this report, which information is incorporated herein by reference.



ITEM1A RISK FACTORS

There were no material changes from the risk factors
previously disclosed in the Companies Form 10-K.



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##### Table of Contents

ITEM6    EXHIBITS



(a) EXHIBITS



Con Edison



|               |  |                                                                                                                                                                                           
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 12.1   |  | Statement of computation of Con Edisons ratio of earnings to fixed charges for the nine-month periods ended September 30, 2007 and 2006, and the 12-month period ended December 31, 2006.
|               | 
|Exhibit 31.1.1 |  | Rule 13a-14(a)/15d-14(a) CertificationsChief Executive Officer.                                                                                                                          
|               | 
|Exhibit 31.1.2 |  | Rule 13a-14(a)/15d-14(a) CertificationsChief Financial Officer.                                                                                                                          
|               | 
|Exhibit 32.1.1 |  | Section 1350 CertificationsChief Executive Officer.                                                                                                                                      
|               | 
|Exhibit 32.1.2 |  | Section 1350 CertificationsChief Financial Officer.                                                                                                                                      



Con Edison oF New York



|               |  |                                                                                                                                                                                                       
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 12.2   |  | Statement of computation of Con Edison of New Yorks ratio of earnings to fixed charges for the nine-month periods ended September 30, 2007 and 2006, and the 12-month period ended
December 31, 2006.
|               | 
|Exhibit 31.2.1 |  | Rule 13a-14(a)/15d-14(a) CertificationsChief Executive Officer.                                                                                                                                      
|               | 
|Exhibit 31.2.2 |  | Rule 13a-14(a)/15d-14(a) CertificationsChief Financial Officer.                                                                                                                                      
|               | 
|Exhibit 32.2.1 |  | Section 1350 CertificationsChief Executive Officer.                                                                                                                                                  
|               | 
|Exhibit 32.2.2 |  | Section 1350 CertificationsChief Financial Officer.                                                                                                                                                  



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Signatures



Pursuant to the requirements of the
Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                       |  |                                               |  |                                                                                             
|---------------------- |  | --------------------------------------------- |  | --------------------------------------------------------------------------------------------
|                       | 
|                       |  | Consolidated Edison, Inc.                    
|                       | 
|                       |  | Consolidated Edison Company of New York, Inc.
|                       |  |                                              
|DATE: November 1, 2007 |  | By                                            |  | /S/    ROBERT N. HOGLUND                                                                    
|                       |  |                                               |  | Robert N. Hoglund Senior Vice President, Chief
Financial Officer and Duly Authorized Officer



76