<PAGE>



                                  FORM 10-Q

                      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, 1997

                                      OR

            [ ] Transition Report Pursuant to Section 13 or 15(d)
                    of the Securities Exchange Act of 1934

                          -------------------------

                          Commission File No. 1-1217


                CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                             (Name of Registrant)

                                   NEW YORK 13-5009340
                           (State of Incorporation) (IRS Employer
                             Identification No.)

          4 IRVING PLACE, NEW YORK, NEW YORK 10003 - (212) 460-4600
                        (Address and Telephone Number)


The Registrant 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 and has
been subject to such filing requirements for the past 90 days.


                            Yes ___X___ No _______


As of  the  close  of  business  on  September  30,  1997,  the  Registrant  had
outstanding 235,033,168 shares of Common Stock ($2.50 par value).



<PAGE>


                                    - 2 -




PART I. -  FINANCIAL INFORMATION


            CONTENTS                                                  PAGE NO.

ITEM 1.     Financial  Statements:

                  Consolidated Balance Sheet                               3-4

                  Consolidated Income Statements                           5-7

                  Consolidated Statements of Cash Flows                    8-9

                  Notes to Financial Statements                          10-14

ITEM 2.     Management's Discussion and Analysis                         15-26
            of Financial Condition and Results of
            Operations



                          -------------------------



The  following  consolidated  financial  statements  are  unaudited  but, in the
opinion of  management,  reflect  all  adjustments  (which  include  only normal
recurring  adjustments)  necessary  to a fair  statement  of the results for the
interim  periods   presented.   These  condensed   unaudited  interim  financial
statements  do  not  contain  the  detail,  or  footnote  disclosure  concerning
accounting  policies  and other  matters,  which would be included in  full-year
financial  statements and,  accordingly,  should be read in conjunction with the
Company's audited financial statements (including the notes thereto) included in
the Company's  Annual  Report on Form 10-K for the year ended  December 31, 1996
(File No. 1-1217).



<PAGE>



                                           - 3-

<TABLE>
<CAPTION>

                      CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                                CONSOLIDATED BALANCE SHEET
            AS AT SEPTEMBER 30, 1997, DECEMBER 31, 1996 AND SEPTEMBER 30, 1996



                                                                 As At
                                         Sept. 30, 1997      Dec. 31, 1996      Sept.30, 1996
                                                      (Thousands of Dollars)
<S>                                       <C>                  <C>             <C>

ASSETS

Utility plant, at original cost
    Electric                              $11,791,029          $11,588,344     $11,541,568
    Gas                                     1,713,438            1,642,231       1,609,520
    Steam                                     566,576              536,672         530,761
    General                                 1,194,314            1,152,001       1,138,055
            Total                          15,265,357           14,919,248      14,819,904
       Less: Accumulated depreciation       4,493,341            4,285,732       4,286,812
             Net                           10,772,016           10,633,516      10,533,092
    Construction work in progress             278,244              332,333         342,496
    Nuclear fuel assemblies and components,
        less accumulated amortization          99,498              101,461          62,725
                Net utility plant          11,149,758           11,067,310      10,938,313

Current assets
    Cash and temporary cash investments       269,866              106,882         117,279
    Accounts receivable - customers, less
        allowance for uncollectible accounts
        of $21,674, $21,600 and $21,500       543,821              544,004         565,713
    Other receivables                          62,921               42,056          38,713
    Regulatory accounts receivable             10,013               45,397          33,501
    Fuel, at average cost                      41,894               64,709          42,193
    Gas in storage, at average cost            49,099               44,979          42,874
    Materials and supplies, at average cost   198,667              204,801         213,687
    Prepayments                               201,729               64,492         193,484
    Other current assets                       16,021               15,167          14,915
                   Total current assets     1,394,031            1,132,487       1,262,359

Investments and nonutility property           230,789              177,224         170,025

Deferred charges
    Enlightened Energy program costs          112,164              133,718         127,307
    Unamortized debt expense                  123,273              130,786         133,348
    Recoverable fuel costs                     57,399              101,462          31,228
    Power contract termination costs           54,330               58,560          70,272
    Other deferred charges                    268,779              271,356         284,301
              Total deferred charges          615,945              695,882         646,456

Regulatory asset-future federal
    Income taxes                              930,681              984,282       1,003,774

                         Total            $14,321,204          $14,057,185     $14,020,927


The accompanying notes are an integral part of these financial statements.
</TABLE>


<PAGE>


                                           - 4-
<TABLE>
<CAPTION>

                       CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                                CONSOLIDATED BALANCE SHEET
            AS AT SEPTEMBER 30, 1997, DECEMBER 31, 1996 AND SEPTEMBER 30, 1996

                                                                             As At
                                                         Sept 30, 1997   Dec. 31, 1996      Sept 30, 1996
                                                                  (Thousands of Dollars)

<S>                                                       <C>           <C>                <C>


CAPITALIZATION AND LIABILITIES

Capitalization
    Common stock, authorized 340,000,000
         shares; outstanding 235,033,168 shares,
         234,993,596 shares and 234,981,753 shares       $ 1,478,840    $ 1,478,536        $ 1,478,444
   Capital stock expense                                    (36,249)        (34,903)           (34,972)
   Retained earnings                                      4,469,185       4,283,935          4,290,590
          Total common shareholders' equity               5,911,776       5,727,568          5,734,062
   Preferred stock
      Subject to mandatory redemption
          7.20%   Series  I                                  47,500          47,500             47,500
          6-1/8%  Series J                                   37,050          37,050             37,050
        Total subject to mandatory redemption                84,550          84,550             84,550
      Other preferred stock
          $ 5 Cumulative Preferred                          175,000         175,000             175,000
             5-3/4%  Series  A                                7,061           7,061               7,061
             5-1/4%  Series  B                               13,844          13,844              13,844
             4.65%   Series  C                               15,330          15,330              15,330
             4.65%   Series  D                               22,233          22,233              22,233
             6% Convertible Series  B                         4,326           4,630               4,721
                       Total other preferred stock          237,794         238,098             238,189
                               Total preferred stock        322,344         322,648             322,739

   Long-term debt                                         4,288,837       4,238,622           4,090,810
                      Total capitalization               10,522,957      10,288,838          10,147,611


Noncurrent liabilities
    Obligations under capital leases                         40,575          42,661              43,332
    Other noncurrent liabilities                             83,949          80,499              82,797
                    Total noncurrent liabilities            124,524         123,160             126,129


Current liabilities
    Long-term debt due within one year                      102,630         106,256             179,715
    Accounts payable                                        416,872         431,115             353,918
    Customer deposits                                       161,548         159,616             158,492
    Accrued taxes                                           145,440          27,342             122,882
    Accrued interest                                         67,336          83,090              70,560
    Accrued wages                                            80,345          80,225              78,117
    Other current liabilities                               132,976         147,968             142,049
                  Total current liabilities               1,107,147       1,035,612           1,105,733

Provisions related to future federal income taxes
   and other deferred credits
   Accumulated deferred federal income tax                2,299,834       2,289,092           2,316,138
   Accumulated deferred investment tax credits              165,850         172,510             174,580
   Other deferred credits                                   100,892         147,973             150,736
                  Total deferred credits                  2,566,576       2,609,575           2,641,454

                         Total                          $14,321,204     $14,057,185         $14,020,927

The accompanying notes are an integral part of these financial statements.
</TABLE>


<PAGE>


                                           - 5-

<TABLE>
<CAPTION>

                  CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                          CONSOLIDATED INCOME STATEMENT
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

                                                          1997                1996
                                                          ----                ----
                                                           (Thousands of  Dollars)
<S>                                                    <C>               <C>
Operating revenues
     Electric                                          $1,786,147        $ 1,708,146
     Gas                                                  157,623            141,121
     Steam                                                 67,258             71,074
                                                       --------------    --------------
                  Total operating revenues              2,011,028          1,920,341
                                                      ------------      ------------
Operating expenses
     Purchased power                                      337,033            334,557
     Fuel                                                 188,708            145,942
     Gas purchased for resale                              46,725             38,595
     Other operations                                     267,704            284,755
     Maintenance                                          106,229            100,530
     Depreciation and amortization                        126,389            121,273
     Taxes, other than federal income tax                 312,709            302,990
     Federal income tax                                   187,650            182,280
                                                       -------------     ------------
                  Total operating expenses              1,573,147          1,510,922
                                                       ------------      ------------
Operating income                                          437,881            409,419
Other income (deductions)
     Investment income                                      2,552              1,170
     Allowance for equity funds
           used during construction                           756                883
     Other income less miscellaneous deductions            (5,173)            (2,435)
     Federal income tax                                     2,250              2,070
                                                       --------------     ---------------
                  Total other income                          385              1,688
                                                       ---------------     ---------------
Income before interest charges                            438,266            411,107

Interest on long-term debt                                 80,330             77,956
Other interest                                              3,262              5,578
Allowance for borrowed funds
   used during construction                                  (371)             (415)
                    Net interest charges                    83,221            83,119
                                                       -------------     --------------
Net income                                                 355,045           327,988
Preferred stock dividend requirements                       (4,601)           (4,606)
Net Income for common stock                            $   350,444       $   323,382
                                                       ===========       ============

Common shares outstanding - average (000)                  235,030           234,981
Earnings per share                                     $      1.49       $      1.38
                                                       ===========       ============
Dividends declared per share of common stock           $    0.525        $      0.52
                                                       ==========        ============

Sales
     Electric (Thousands of kilowatthours)
       Con Edison customers                             11,093,900        10,633,845
       Delivery service to NYPA and others               2,311,169         2,281,224
       Service for municipal agencies                      132,588           159,037
           Total sales in service territory             13,537,657        13,074,106
       Off-system sales (A)                                839,518         1,778,475
     Gas (dekatherms)
        Firm                                            10,142,692        10,416,368
        Off-peak firm/interruptible                      4,147,786         3,793,915
            Total sales to Con Edison customers         14,290,478        14,210,283
        Transportation of customer-owned gas
            NYPA                                         6,982,038         4,741,076
            Others                                       1,954,061         1,767,555
         Off-system sales                                5,183,513           265,981
             Total sales and transportation             28,410,090        20,984,895
     Steam (Thousands of pounds)                         5,986,582         6,420,558

(A)Includes  413,552 and 926,426  thousands of kWh,  respectively,  subsequently
   purchased by the Company for sale to its customers.

The accompanying notes are an integral part of these financial statements.
</TABLE>


<PAGE>


                                           - 6-


<TABLE>
<CAPTION>

                      CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                          CONSOLIDATED INCOME STATEMENT
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

                                                          1997                     1996
                                                          ----                     ----
                                                            (Thousands of Dollars)
<S>                                                    <C>                      <C>
Operating revenues
     Electric                                           $ 4,283,463             $ 4,238,720
     Gas                                                    826,019                 771,413
     Steam                                                  291,708                 317,308
                                                       -------------             -------------
                  Total operating revenues                5,401,190               5,327,441
                                                       ------------             ------------
Operating expenses
     Purchased power                                      1,003,962                  960,144
     Fuel                                                   462,488                 450,219
     Gas purchased for resale                               354,845                 315,989
     Other operations                                       827,881                 848,732
     Maintenance                                            367,251                 349,480
     Depreciation and amortization                          375,073                  373,819(A)
     Taxes, other than federal income tax                   888,473                 886,500
     Federal income tax                                     305,780                 328,200
                                                       -------------            -------------
                  Total operating expenses                4,585,753               4,513,083
                                                        ------------            ------------
Operating income                                            815,437                 814,358
Other income (deductions)
     Investment income                                        6,245                   4,891
     Allowance for equity funds
            used during construction                          4,076                   2,141
     Other income less miscellaneous deductions             (12,157)                (15,108)
     Federal income tax                                       2,850                   1,140
                                                       ---------------           ---------------
                     Total other income                       1,014                   3,064
                                                       ---------------           ---------------

Income before interest charges                              816,451                 817,422

Interest on long-term debt                                  238,274                 230,431
Other interest                                               10,963                  14,059
Allowance for borrowed funds
    used during construction                                 (1,998)                 (1,006)
                Net interest charges                        247,239                 243,484
                                                        -------------           -------------
Net income                                                  569,212                 573,938
Preferred stock dividend requirements                       (13,808)                (15,249)
Gain on refunding of preferred stock                           -                     13,943(A)

Net Income for common stock                            $    555,404             $   572,632

Common shares outstanding - average (000)                   235,016                 234,972
Earnings per share                                     $       2.36             $      2.44
                                                       ============             ===========
Dividends declared per share of common stock            $     1.575              $      1.56
                                                        ===========              ===========
Sales
     Electric (Thousands of kilowatthours)
      Con Edison customers                               28,307,154              28,269,089
       Delivery service to NYPA and others                6,561,475               6,673,889
       Service for municipal agencies                       643,179                 443,264
           Total sales in service territory              35,511,808              35,386,242
       Off-system sales (B)                               1,852,366               3,047,621
    Gas (dekatherms)
        Firm                                             69,070,785              75,549,180
        Off-peak firm/interruptible                      17,567,539              14,919,496
                                                         ----------              ------------
            Total sales to Con Edison customers          86,638,324              90,468,676
        Transportation of customer-owned gas
            NYPA                                         14,350,668               4,935,631
            Others                                        5,501,464               3,649,238
         Off-system sales                                 9,944,074               7,402,439
             Total sales and transportation             116,434,530             106,455,984
     Steam (Thousands of pounds)                         20,924,098              23,743,411
(A)The gain from the  preferred  stock  refunding  was  offset by an  additional
   provision for depreciation.
(B)Includes 901,575 and 1,463,871 thousands of kWh,  respectively,  subsequently
   purchased by the Company for sale to its customers.
The accompanying notes are an integral part of these financial statements.
</TABLE>


<PAGE>


                                           - 7-
<TABLE>
<CAPTION>
                  CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                          CONSOLIDATED INCOME STATEMENT
                 FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

                                                          1997                    1996
                                                          ----                    ----
                                                            (Thousands of Dollars)
<S>                                                    <C>                      <C>
Operating revenues
     Electric                                          $ 5,585,861              $ 5,471,159
     Gas                                                 1,069,676                  980,061
     Steam                                                 377,948                  404,605
                                                       -------------            -------------
                  Total operating revenues               7,033,485                6,855,825
                                                       ------------             ------------

Operating expenses
     Purchased power                                     1,316,672                1,219,503
     Fuel                                                  585,544                  568,291
     Gas purchased for resale                              457,127                  387,292
     Other operations                                    1,142,308                1,147,972
     Maintenance                                           476,586                  478,367
     Depreciation and amortization                         497,665                  490,773(A)
     Taxes, other than federal income tax                1,168,173                1,169,765
     Federal income tax                                    374,740                  386,940
                                                        ------------            -------------
                  Total operating expenses               6,018,815                5,848,903
                                                        -----------             ------------

Operating income                                         1,014,670                1,006,922
Other income (deductions)
     Investment income                                       9,678                   13,235
     Allowance for equity funds
        used during construction                             5,404                    2,544
     Other income less miscellaneous deductions            (15,796)                  (8,134)
     Federal income tax                                      2,680                     (360)
                                                        ---------------         -----------------
                    Total other income                       1,966                    7,285
                                                        ---------------         ---------------
Income before interest charges                           1,016,636                1,014,207

Interest on long-term debt                                 315,663                  307,651
Other interest                                              14,235                   20,694
Allowance for borrowed funds
    used during construction                                (2,621)                  (1,200)
                    Net interest charges                   327,277                  327,145
                                                        -------------           -------------

Net income                                                 689,359                  687,062
Preferred stock dividend requirements                      (18,418)                 (24,138)
Gain on refunding of preferred stock                            -                    13,943(A)
Net Income for common stock                            $   670,941                 $676,867

Common shares outstanding - average (000)                  235,009                  234,967
Earnings per share                                     $      2.85              $      2.88
                                                        ===========             ===========
Dividends declared per share of common stock            $    2.095              $      2.07
                                                        ==========              ===========
Sales
     Electric (Thousands of kilowatthours)
      Con Edison customers                              37,242,020               37,146,106
       Delivery service to NYPA and others               8,704,459                8,883,298
       Service for municipal agencies                      817,208                  554,768
           Total sales in service territory             46,763,687               46,584,172
       Off-system sales (B)                              2,722,099                3,690,644
     Gas (dekatherms)
        Firm                                            92,301,714               98,861,793
        Off-peak firm/interruptible                     22,954,481               19,051,789
            Total sales to Con Edison customers        115,256,195              117,913,582
        Transportation of customer-owned gas
            NYPA                                        14,382,020                8,742,285
            Others                                       6,863,348                5,164,710
         Off-system sales                               13,835,060               10,226,915
             Total sales and transportation            150,336,623              142,047,492
     Steam (Thousands of pounds)                        27,176,449               30,822,617

(A)The gain from the  preferred  stock  refunding  was  offset by an  additional
   provision for depreciation.
(B)Includes 991,468 and 1,848,447 thousands of kWh,  respectively,  subsequently
   purchased by the Company for sale to its customers.

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

</TABLE>

<PAGE>


                                           - 8-

<TABLE>
                  CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

                                                             1997                 1996
                                                           ------                 ----
                                                                  (Thousands of Dollars)
<S>                                                      <C>                    <C>

Operating activities
     Net income                                          $  569,212             $573,938
     Principal non-cash charges (credits) to income
        Depreciation and amortization                       375,073              373,819
        Deferred recoverable fuel costs                      44,063               28,226
        Federal income tax deferred                          56,250               50,760
        Common equity component of allowance
             for funds used during construction              (3,959)              (2,021)
        Other non-cash charges                               18,968                  341
     Changes in assets and liabilities
         Accounts receivable - customers, less
             allowance for uncollectibles                       183              (68,498)
         Regulatory accounts receivable                      35,384              (39,982)
         Materials and supplies, including fuel
             and gas in storage                              24,829              (10,770)
         Prepayments, other receivables and
             other current assets                          (158,956)            (120,280)
         Enlightened Energy program costs                    21,554               16,975
         Accounts payable                                   (14,243)             (66,934)
         Accrued income taxes                               101,516              107,997
         Other - net                                       (108,006)             (31,146)
             Net cash flows from operating activities       961,868              812,425

Investing activities including construction
         Construction expenditures                         (433,661)            (478,847)
         Nuclear fuel expenditures                          (10,402)              (1,223)
         Contributions to nuclear decommissioning trust     (19,174)             (19,174)
         Common equity component of allowance
             for funds used during construction               3,959                2,021

             Net cash flows from investing activities
                 including construction                    (459,278)            (497,223)

Financing activities including dividends
         Issuance of long-term debt                         150,000              375,000
         Retirement of long-term debt                      (103,626)            (107,435)
         Advance refunding on long-term debt                 -                   (95,329)
         Advance refunding of preferred stock                -                  (316,982)
         Issuance and refunding costs                       (2,013)              (10,805)
         Common stock dividends                           (370,155)             (366,560)
         Preferred stock dividends                         (13,812)             (18,104)
             Net cash flows from financing activities
                 including dividends                      (339,606)             (540,215)

Net increase (decrease) in cash and temporary
   cash investments                                        162,984              (225,013)

Cash and temporary cash investments at January 1           106,882               342,292

Cash and temporary cash investments at September 30      $ 269,866              $117,279

Supplemental  disclosure  of cash flow  information  Cash paid during the period
    for:
         Interest                                        $ 247,138              $253,697
         Income taxes                                      147,387               169,755

The accompanying notes are an integral part of these financial statements.
</TABLE>


<PAGE>


                                           - 9-

<TABLE>
<CAPTION>

                  CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                 FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

                                                            1997                   1996
                                                            ----                   ----
                                                               (Thousands of Dollars)
<S>                                                      <C>                    <C>

Operating activities
     Net income                                          $  689,359             $  687,062
     Principal non-cash charges (credits) to income
        Depreciation and amortization                       497,665                490,773
        Deferred recoverable fuel costs                     (26,171)               (29,702)
        Federal income tax deferred                          46,090                 37,000
        Common equity component of allowance
             for funds used during construction              (5,212)                (2,401)
        Other non-cash charges                               28,229                  3,259
     Changes in assets and liabilities
         Accounts receivable - customers, less
             allowance for uncollectibles                    21,892                (56,890)
         Regulatory accounts receivable                      23,488                (44,818)
         Materials and supplies, including fuel
             and gas in storage                               9,094                 (5,387)
         Prepayments, other receivables and
             other current assets                           (33,559)                 1,157
         Enlightened Energy program costs                    15,143                 10,561
         Accounts payable                                    62,954                 49,170
         Accrued income taxes                                 3,338                (41,409)
         Other - net                                        (75,530)                24,312
             Net cash flows from operating activities     1,256,780              1,122,687

Investing activities including construction
         Construction expenditures                         (630,047)              (709,412)
         Nuclear fuel expenditures                          (57,884)                (5,462)
         Contributions to nuclear decommissioning trust     (21,301)                (24,499)
         Common equity component of allowance
             for funds used during construction               5,212                   2,401
             
          Net cash flows from investing activities
                 including construction                    (704,020)               (736,972)

Financing activities including dividends
         Issuance of long-term debt                         300,000                 503,285
         Retirement of long-term debt                      (179,715)               (109,205)
         Advance refunding of preferred stock                -                    (316,982)
         Advance refunding on long-term debt                 -                    (251,028)
         Issuance and refunding costs                        (9,688)                (11,016)
         Common stock dividends                            (492,351)              (486,385)
         Preferred stock dividends                          (18,419)               (26,992)
             Net cash flows from financing activities
                 including dividends                       (400,173)              (698,323)

Net decrease in cash and temporary cash investments         152,587               (312,608)

Cash and temporary cash investments at
    beginning of period                                     117,279                429,887

Cash and temporary cash investments at September 30        $269,866             $  117,279

Supplemental  disclosure  of cash flow  information  Cash paid during the period
    for:
         Interest                                           $302,720            $  317,766
         Income taxes                                        324,387               393,937

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

</TABLE>


<PAGE>



                                             - 10 -


NOTES TO FINANCIAL STATEMENTS

NOTE A - Summary of Significant Accounting Policies
PSC Settlement Agreement.  The New York State Public Service Commission ("PSC"),
by order issued and  effective May 20, 1996 in its  "Competitive  Opportunities"
proceeding,  endorsed  a  fundamental  restructuring  of  the  electric  utility
industry in New York State,  based on  competition  in the generation and energy
services  sectors  of the  industry.  The PSC,  by order  issued  and  effective
September 23, 1997, approved an amended and restated settlement agreement, dated
September 19, 1997, between the Company, the PSC staff and certain other parties
(the "Settlement Agreement").

The  Settlement  Agreement  provides for a transition to a competitive  electric
market by instituting  "retail  access;" a rate plan for the period ending March
31,  2002 (the  "Transition");  a  reasonable  opportunity  to recover  electric
"strandable costs;" the divestiture by the Company to unaffiliated third parties
of at least 50 percent of its New York City  electric  fossil-fueled  generating
capacity;   and,  subject  to  shareholder  and  other  approvals,  a  corporate
reorganization into a holding company structure.

The "retail access" program will eventually permit all of the Company's electric
customers  to buy  electricity  from other  suppliers  which  will be  delivered
through the  Company's  transmission  and  distribution  systems.  The Company's
electric fossil-fueled generating capacity not divested to third parties will be
transferred by December 31, 2002 to an unregulated affiliate of the Company. The
Company's contracts with non-utility  generators ("NUGs"),  absent renegotiation
of these contracts,  will remain contractual  obligations of the Company and the
Company could resell electricity provided by the NUGs under the contracts in the
competitive energy supply market. The Settlement  Agreement does not contemplate
the divestiture or transfer of the Company's  Indian Point 2 nuclear  generating
unit. In August 1997, the PSC solicited  comments as to the future  treatment of
nuclear generating facilities in New York.

The  Company's  potential  electric  "strandable  costs" are those prior utility
investments and commitments that may not be recoverable in a competitive  energy
supply  market,  including  the  unrecovered  cost  of  the  Company's  electric
generating plants,  the future cost of decommissioning  the Indian Point nuclear
generating station and charges under contracts with NUGs. During the Transition,
the Company will continue to recover its potential electric  strandable costs in
the rates it charges all customers,  including from those  customers  purchasing
electricity from others.  Following the Transition,  the Company will be given a
reasonable opportunity to recover, through a non-bypassable charge to customers,
remaining   electric   strandable  costs,   including  a  reasonable  return  on
investments,  as  adjusted  for net gains or losses  relating  to the  Company's
electric fossil generating  capacity.  For remaining  fossil-related  strandable
costs,  the  recovery  period will be 10 years.  For  remaining  nuclear-related
strandable  costs,  the recovery period will be the  then-remaining  life of the
Company's  Indian Point 2 nuclear unit (the operating  license for which extends
to 2013).  With respect to its NUG  contracts,  the Company will be permitted to
recover at least 90 percent of the amount,  if any, by which the actual costs of
its purchases under the contracts exceed market value after the Transition.  Any
potential NUG contract  disallowance after the Transition will be limited to the
lower of (i) 10  percent of the  above-market  costs or (ii) $300  million  (net
present value in 2002). The potential  disallowance will be offset by the amount
of NUG contract  mitigation  achieved by the Company  after April 1, 1997 and 10
percent of the gross proceeds


<PAGE>


                                           - 11 -

of  generating  unit sales to third  parties.  The Company  will be  permitted a
reasonable opportunity to recover any costs subject to disallowance that are not
offset by these two  factors  if it makes good  faith  efforts  in  implementing
provisions  of  the  Settlement  Agreement  leading  to  the  development  of  a
competitive  electric market in its service  territory and the development of an
independent  system  operator  (which is expected to  administer  the  wholesale
electric market in New York State).

Accounting Policies.  As a result of the Settlement  Agreement,  there have been
changes  to  certain  of the  accounting  policies  described  in  Note A to the
Company's audited financial  statements  included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 (the "Annual Report Financials
").

The  Company's  accounting  policies  conform to generally  accepted  accounting
principles.  For  regulated  public  utilities,  generally  accepted  accounting
principles include Statement of Financial  Accounting Standards ("SFAS") No. 71,
"Accounting  for the Effects of Certain Types of Regulation"  and, in accordance
with SFAS No. 71, the accounting  requirements  and rate making practices of the
Federal Energy Regulatory Commission and the PSC.

SFAS No. 71 specifies the economic effects that result from the cause and effect
relationship  of costs and revenues in the  rate-regulated  environment  and how
these effects are to be accounted for by a regulated enterprise. For a number of
reasons,  revenues intended to cover some costs may be provided either before or
after the costs are incurred.  If regulation  provides  assurance  that incurred
costs will be  recovered  in the future,  these costs  would be  capitalized  as
deferred  charges under SFAS No. 71. If revenues are provided for costs that are
expected  to be  incurred  in the  future,  these  revenues  would be accrued as
deferred  credits  under SFAS No. 71.  Actions of a regulator may also reduce or
eliminate  the  value of an asset  of, or impose a  liability  (or  eliminate  a
liability  it imposed)  on, a  regulated  enterprise.  Authoritative  accounting
pronouncements  that apply to  enterprises  in general  also apply to  regulated
enterprises.  However,  enterprises subject to SFAS No. 71 are required to apply
it instead of any  conflicting  provisions  of standards in other  authoritative
pronouncements. If some of an enterprise's operations are regulated and meet the
criteria  specified in SFAS No. 71, it is applied only to that regulated portion
of the enterprise's operations.

In September 1997 the Company applied the standards in SFAS No. 101,  "Regulated
Enterprises  -  Accounting  for  the  Discontinuation  of  Application  of  FASB
Statement No. 71" to the  non-nuclear  electric  supply  portion of its business
that  is  being  deregulated  as a  result  of  the  Settlement  Agreement  (the
"Deregulated Business").  The Deregulated Business includes all of the Company's
fossil electric  generating assets,  which had a net book value of approximately
$1.4  billion at  September  30,  1997,  including  approximately  $190  million
relating to the Company's share of the Bowline Point and Roseton stations (which
are located outside New York City and operated by other utilities). As discussed
below,  the  application  of SFAS No.  101 to the  Deregulated  Business  had no
material  adverse  effect on the  Company's  financial  position  or  results of
operations.


<PAGE>


                                          - 12 -

SFAS No.  121  "Accounting  for the  Impairment  of  Long-Lived  Assets  and for
Long-Lived  Assets to be Disposed of" requires certain assets to be reviewed for
impairment if the carrying amount of the asset may not be recoverable,  requires
that  assets to be disposed of be carried at the lower of net book value or fair
value,  and amends SFAS No. 71 to require that  regulatory  assets be charged to
earnings  if such assets are no longer  considered  probable  of  recovery.  The
Company has not recognized an impairment of its fossil generating assets because
the estimated cash flows from the operation  and/or sale of the assets  together
with  the cash  flows  from  the  strandable  cost  recovery  provisions  of the
Settlement  Agreement  will not be less  than  the net  carrying  amount  of the
generating assets.

Certain deferred charges or "regulatory  assets," principally relating to future
federal income taxes and certain deferred  credits or "regulatory  liabilities,"
have  resulted  from  transactions  relating  or  allocated  to the  Deregulated
Business.   At  September  30,  1997,   regulatory  assets,  net  of  regulatory
liabilities, amounted to approximately $ 1.4 billion of which approximately $275
million is attributable to the Deregulated Business. The Company has not charged
against  earnings any net regulatory  assets  because  recovery of the assets is
probable under the Settlement Agreement.

SFAS No. 5 "Accounting for  Contingencies"  requires  accrual of a loss if it is
probable  that a  liability  has been  incurred  and the  amount  of loss can be
reasonably estimated.  The Company has not accrued a loss for its contracts with
NUGs  because it is not  probable  that the charges by NUGs under the  contracts
will  exceed  the cash flows  from the sale by the  Company  of the  electricity
provided by the NUGs under the contracts  together with the cash flows  provided
pursuant to the Settlement Agreement.

Additional changes to the accounting  policies described in Note A to the Annual
Report Financials are as follows:


      Revenues - Revenues for electric,  gas and steam service are recognized on
      a monthly  billing cycle basis.  Effective  April 1, 1997,  the Settlement
      Agreement eliminated the Modified ERAM provision of the 1995 electric rate
      agreement.  As a result, the Company is no longer reconciling revenues for
      the difference  between the actual electric net revenues and actual number
      of customers to the target  levels  established  in the 1995 electric rate
      agreement. In addition,  effective April 1, 1997, the Settlement Agreement
      eliminated  the   Enlightened   Energy  and  electric   customer   service
      incentives.

      Regulatory   Accounts  Receivable  -  Regulatory  accounts  receivable  at
      September  30, 1997 amounted to $10 million,  reflecting  accruals for the
      partial  pass-through  electric fuel adjustment  clause and for gas system
      improvement and gas customer service incentives.  Effective April 1, 1997,
      the Settlement  Agreement eliminated the Modified ERAM and the Enlightened
      Energy  and  electric  customer  service  incentives  and  the  regulatory
      accounts  receivable  recorded for the Modified ERAM and these  incentives
      were,  along with certain other debit and credit balances in the Company's
      financial statements, eliminated. The elimination of these balances had no
      material adverse effect on the Company's  financial position or results of
      operations.



<PAGE>


                                           - 13 -

Note B - Contingencies

Indian Point. Nuclear generating units similar in design to the Company's Indian
Point 2 unit have  experienced  problems  that  have  required  steam  generator
replacement.  Inspections of the Indian Point 2 steam generators since 1976 have
revealed various problems,  some of which appear to have been arrested,  but the
remaining  service life of the steam  generators  is  uncertain.  The  projected
service life of the steam generators is reassessed  periodically in the light of
the inspections made during  scheduled  outages of the unit. Based on the latest
available data and current Nuclear Regulatory  Commission criteria,  the Company
estimates that steam generator replacement will not be required before 2001. The
Company  has  replacement  steam  generators,  which  are  stored  at the  site.
Replacement  of  the  steam  generators  would  require   estimated   additional
expenditures  of  approximately   $110  million  (1996  dollars,   exclusive  of
replacement  power costs) and an outage of approximately  four months.  However,
securing  necessary  permits and  approvals  or other  factors  could  require a
substantially longer outage if steam generator  replacement is required on short
notice.

Nuclear  Insurance.  The  insurance  policies  covering  the  Company's  nuclear
facilities for property damage,  excess property damage, and outage costs permit
assessments under certain  conditions to cover insurers' losses. As of September
30,  1997,  the highest  amount  which could be assessed  for losses  during the
current policy year under all of the policies was $28 million. While assessments
may also be made for losses in certain prior years,  the Company is not aware of
any  losses  in such  years  which  it  believes  are  likely  to  result  in an
assessment.

Under  certain  circumstances,  in the event of nuclear  incidents at facilities
covered  by  the  federal  government's  third-party  liability  indemnification
program, the Company could be assessed up to $79.3 million per incident of which
not more than $10  million may be  assessed  in any one year.  The  per-incident
limit is to be adjusted for inflation not later than 1998 and not less than once
every five years thereafter.

The Company  participates  in an  insurance  program  covering  liabilities  for
injuries to certain workers in the nuclear power industry.  In the event of such
injuries,  the Company is subject to  assessment  up to an estimated  maximum of
approximately $3.1 million.

Environmental Matters. The normal course of the Company's operations necessarily
involves  activities  and  substances  that  expose  the  Company  to  potential
liabilities under federal, state and local laws protecting the environment. Such
liabilities  can be material and in some instances may be imposed without regard
to fault,  or may be imposed for past acts,  even though such past acts may have
been lawful at the time they  occurred.  Sources of such  potential  liabilities
include  (but  are not  limited  to)  the  Federal  Comprehensive  Environmental
Response,   Compensation  and  Liability  Act  of  1980  ("Superfund"),  a  1994
settlement  with the New York State  Department  of  Environmental  Conservation
(DEC), asbestos, and electric and magnetic fields (EMF).




<PAGE>


                                          - 14 -

Superfund.  By its terms Superfund  imposes joint and several strict  liability,
regardless  of fault,  upon  generators  of hazardous  substances  for resulting
removal and remedial costs and environmental  damages.  The Company has received
process or notice  concerning  possible  claims under Superfund or similar state
statutes  relating  to a number of sites at which it is alleged  that  hazardous
substances  generated by the Company (and, in most instances,  a large number of
other  potentially  responsible  parties)  were  deposited.   Estimates  of  the
investigative,  removal,  remedial and  environmental  damage costs (if any) the
Company  will be obligated to pay with respect to each of these sites range from
extremely preliminary to highly refined.  Based on these estimates,  the Company
had accrued a liability at September 30, 1997 of  approximately  $22.9  million.
There will be additional  costs with respect to these and possibly  other sites,
the materiality of which is not presently determinable.

DEC  Settlement.  In 1994 the Company agreed to a consent order settling a civil
administrative   proceeding   instituted  by  the  DEC  alleging   environmental
violations  by the  Company.  Pursuant  to the  consent  order,  the Company has
conducted an environmental  management  systems  evaluation and an environmental
compliance  audit. The Company also must implement "best  management  practices"
plans for certain  facilities  and  undertake a  remediation  program at certain
sites.  At  September  30, 1997,  the Company had an accrued  liability of $17.1
million for these sites. Expenditures for environmental-related capital projects
in the five years 1997-2001,  including  expenditures to comply with the consent
order, are estimated at $147 million.  There will be additional costs, including
costs  arising out of the  compliance  audit,  the  materiality  of which is not
presently determinable.

Asbestos  Claims.  Suits have been brought in New York State and federal  courts
against  the  Company  and  many  other  defendants,   wherein  several  hundred
plaintiffs  sought large amounts of compensatory and punitive damages for deaths
and injuries allegedly caused by exposure to asbestos at various premises of the
Company.  Many of these  suits have been  disposed of without any payment by the
Company, or for immaterial  amounts.  The amounts specified in all the remaining
suits total billions of dollars but the Company  believes that these amounts are
greatly  exaggerated,  as were the  claims  already  disposed  of.  Based on the
information and relevant  circumstances known to the Company at this time, it is
the  opinion of the Company  that these  suits will not have a material  adverse
effect on the Company's financial position, results of operations or liquidity.

EMF.  Electric and magnetic  fields are found wherever  electricity is used. The
Company is the defendant in several suits  claiming  property  damage  resulting
from EMF. The aggregate  amount  sought in these suits is not  material.  In the
event,  however,  that a causal  relationship  between  EMF and  adverse  health
effects is established,  or independently of any such causal  determination,  in
the event of adverse  developments in related legal or public policy  doctrines,
there  could be a material  adverse  effect on the  electric  utility  industry,
including the Company.



<PAGE>



                                          - 15-


  MANAGEMENT'S DISCUSSION AND ANALYSIS
     OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

            The  following  discussion  and  analysis  relates to the  unaudited
interim  financial  statements  appearing in Item 1 of this Form 10-Q report and
should be read in conjunction with Management's  Discussion and Analysis in Item
7 of the Company's  Annual  Report on Form 10-K for the year ended  December 31,
1996 (File No.  1-1217).  Reference is made to Note B (Contingency  Note) to the
financial  statements  in this  report,  which  note is  incorporated  herein by
reference.

            This  report   includes   forward-looking   statements,   which  are
statements  of future  expectation  and not facts.  Words  such as  "estimates,"
"expects,"  "anticipates," "intends, "" plans," and similar expressions identify
forward-looking   statements.   Actual  results  or  developments  might  differ
materially  from those  included in the  forward-looking  statements  because of
factors  such as  competition  and industry  restructuring,  changes in economic
conditions, changes in historical weather patterns, changes in laws, regulations
or  regulatory  policies,  developments  in legal or  public  policy  doctrines,
technological developments and other presently unknown or unforeseen factors.

LIQUIDITY AND CAPITAL RESOURCES

            Cash and temporary cash investments were $269.9 million at September
30, 1997 compared with $106.9 million at December 31, 1996 and $117.3 million at
September 30, 1996. The Company's cash balances reflect, among other things, the
timing and amounts of external financing.

            In June 1997 the Company  issued $150 million of five-year  floating
rate debentures,  the interest rate on which is reset quarterly. The proceeds of
this issue were used for a June 1997  prepayment of New York City property taxes
and for working capital purposes.  The prepayment  balance at September 30, 1997
includes the unamortized portion ( $113.5 million) of the June 1997 property tax
payment.

            The Company  intends to issue  taxable  debentures  to refund  three
series of tax-exempt  debt, with an aggregate  principal amount of approximately
$330  million,  which the  Company  issued  through  the New York  State  Energy
Research and Development Authority: 7 1/2% 1986 A, 9 1/4% 1987 B and 7 3/4% 1989
A. The Company  anticipates  that it will secure  substantial  net present value
savings from this transaction.




<PAGE>


                                          - 16 -

            The Company  borrowed  from banks at various  times during the first
nine months of 1997 at prevailing  market rates. The highest amount  outstanding
was $165 million.  No such borrowings were outstanding at September 30, 1997. In
October  1997 the  Company  submitted  a petition  to the New York State  Public
Service  Commission  (PSC) for  authority  to enter  into one or more  revolving
credit  agreements,  for amounts not to exceed $500 million,  in connection with
the Company's plans to establish a commercial paper program.
The PSC is expected to consider the petition in December 1997.

            Customer  accounts  receivable,  less  allowance  for  uncollectible
accounts,  amounted to $543.8 million at September 30, 1997 compared with $544.0
million at December 31, 1996 and $565.7  million at September 30, 1996. In terms
of equivalent number of days of revenue  outstanding,  these amounts represented
25.4, 28.6 and 25.9 days, respectively.

            The  regulatory  accounts  receivable  balance  of $10.0  million at
September 30, 1997 represents amounts to be recovered from customers pursuant to
the partial  pass-through fuel adjustment clause (PPFAC), and from the incentive
mechanisms of the 1994 gas rate agreement.  The regulatory  accounts  receivable
balances of $45.4  million at December  31, 1996 and $33.5  million at September
30, 1996 also  represented  amounts to be recovered from customers for the PPFAC
and gas incentives and, in addition,  included  amounts relating to the electric
revenue  adjustment  and revenue per  customer  mechanisms  (Modified  ERAM) and
Enlightened  Energy and  customer  service  incentives  (which  were  eliminated
effective April 1, 1997). See "PSC Settlement Agreement" below.

            Interest  coverage  under the SEC  formula  for the 12 months  ended
September 30, 1997 was 4.05 times compared with 4.18 times for the year 1996 and
4.09 times for the 12 months ended  September 30, 1996.  The decline in interest
coverage reflects a lower level of pre-tax earnings and higher interest charges.

1995 Electric Rate Agreement

            In April 1995 the New York Public Service  Commission (PSC) approved
a three-year electric rate agreement effective April 1, 1995. See, however, "PSC
Settlement  Agreement"  below.  For details of the 1995 electric rate agreement,
including  the  Modified  ERAM,  see  "Liquidity  and  Capital  Resources - 1995
Electric Rate  Agreement" in  Management's  Discussion and Analysis in Item 7 of
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.

            For the second rate year of the 1995 electric rate agreement, the 12
months ended March 31,  1997,  the  Company's  actual rate of return on electric
common equity,  excluding  incentives,  exceeded the sharing  threshold of 10.81
percent,  principally  due to  increased  productivity  and  earnings  under the
revenue per  customer  provision  (RPC) of the  Modified  ERAM.  Pursuant to the
Settlement  Agreement,  the balance at March 31, 1997 that was set aside for the
future benefit of customers has been eliminated.  See "PSC Settlement Agreement"
below.



<PAGE>


                                          - 17-

Competition and Industry Restructuring

            In recent years federal and New York State initiatives have promoted
the  development  of  competition  in the  sale  of  electricity  and  gas.  For
information  about these  initiatives,  see "Liquidity  and Capital  Resources -
Competition and Industry  Restructuring" in Management's Discussion and Analysis
in Item 7 of the  Company's  Annual  Report  on Form  10-K  for the  year  ended
December 31, 1996.

PSC Settlement Agreement

            The  PSC,  by  order  issued  and  effective  May  20,  1996  in its
"Competitive Opportunities" proceeding,  endorsed a fundamental restructuring of
the electric  utility  industry in New York State,  based on  competition in the
generation and energy services sectors of the industry. The PSC, by order issued
and effective  September 23, 1997,  approved an amended and restated  settlement
agreement,  dated  September  19, 1997,  between the Company,  the PSC staff and
certain  other  parties  (the  "Settlement  Agreement").  For  more  information
regarding the  Settlement  Agreement,  see the Company's  Current Report on Form
8-K, dated  September 23, 1997,  and Note A (Summary of  Significant  Accounting
Policies) to the financial statements in Item 1 of this Form 10-Q report.

      In October  1997,  the  Company,  pursuant  to the  Settlement  Agreement,
requested  the PSC to defer  certain  costs  related to  agreements to terminate
contracts  with  non-utility  generators  (NUGs) for 42.5 megawatts of capacity.
Including these  agreements,  the Company has since 1993 entered into agreements
to  terminate  NUG  contracts  for  approximately  768  megawatts.  The  Company
currently  purchases   approximately  2,100  megawatts  of  capacity  under  NUG
contracts.

Nuclear Generation

            In October  1997 the Company  submitted  its  comments  objecting to
recommendations  for the period  following  2002  included  in a PSC staff white
paper on  nuclear  generation  issued  in August  1997 in the PSC's  Competitive
Opportunities  proceeding.  The PSC staff  concluded  that nuclear plants should
continue to be operated only if the "to go" or running costs (i.e.,  those costs
that could be reduced or avoided if the plant is shut down permanently) could be
recovered  by the market  price of  electricity.  The staff also  expressed  its
belief that the sale of generating plants to third parties,  preferably  through
an auction  process,  offers the greatest  potential for  mitigation of stranded
costs and the elimination of anti-competitive  subsidies. Where third party sale
of nuclear  units is not feasible  (even where the buyer would not be liable for
decommissioning  and  the  cost  of  spent  fuel),  the PSC  staff  proposed  an
administrative  valuation  of the units and that  recovery of "to go" or running
costs  be  limited  to the  wholesale  market  price  of  power.  The  Company's
objections to the PSC staff's  recommendations  related to the following issues:
possible acceleration of decommissioning  funding, the feasibility of decoupling
operational and post-retirement  responsibilities;  the feasibility of selling a
nuclear  plant  through an  auction  process;  the  limited  provisions  for the
recovery of nuclear running costs; and the apparent lack of relationship between
nuclear plant ownership and market power in New York State.


<PAGE>


                                          - 18-

            The Settlement  Agreement does not  contemplate  the  divestiture or
transfer of the Company's Indian Point 2 nuclear generating unit. The Settlement
Agreement provides that after March 31, 2002, the Company will have a reasonable
opportunity to recover, through a non-bypassable charge, its nuclear "strandable
costs"  (i.e.,  the  remaining net book value of the Indian Point 2 unit and the
balance of its  decommissioning  expense for Indian  Point units 1 and 2) over a
period  ending no later than the 2013  expiration  of Indian Point 2's operating
license.

Gas and Steam Rate Agreements

            For details of the Company's gas rate  agreements  and the Company's
1994 steam rate agreement,  see "Liquidity and Capital Resources - Gas and Steam
Rate  Agreements"  in  Management's  Discussion  and  Analysis  in Item 7 of the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.

            In September  1997 the PSC approved a steam rate  agreement  between
the Company  and the PSC staff.  The  three-year  agreement  provides  for a $16
million  base rate  increase,  effective  October  1,  1997.  Base rates for the
remainder of the term of the agreement will not be increased or decreased except
in certain  limited  circumstances.  With respect to $10.8 million  eligible for
future  recovery  under the 1994  steam rate  agreement,  $6.2  million  will be
recovered over the term of the new agreement,  and $4.6 million will continue to
be deferred until  amortized  against  earnings in excess of a rate of return on
steam common equity of 11.1 percent over the three-year  period. Any earnings in
excess of a 12.6  percent  rate of return  over the  three-year  period  will be
shared: 50 percent to be retained by shareholders and 50 percent to be set aside
for future refund to customers. In its order approving the steam rate agreement,
the PSC  modified  the  agreement  to require the Company to submit a long-range
plan for the steam system in time to be  considered  contemporaneously  with the
divestiture  plan in the Settlement  Agreement in the Competitive  Opportunities
proceeding.

Year 2000 Exposure

            Many  information  systems have been  designed to function  based on
years that begin with 19. The Company expects that by the year 2000 it will have
adapted its systems, to the extent it considers necessary, to process years that
begin with 20, and does not expect that the year 2000 issue will have a material
adverse effect on its financial condition or results of operations.


<PAGE>


                                          - 19 -
New Air Quality Standards

            In July 1997 the United States Environmental Protection Agency (EPA)
adopted new ambient air quality standards for ozone and particulate  matter. The
New York State  Department  of  Environmental  Conservation  will be required to
develop an  implementation  plan  acceptable  to the EPA to attain and  maintain
these standards.  The Company does not expect that compliance with the new ozone
standard  will  require  additional  capital   expenditures  in  excess  of  the
approximately $150 million of capital expenditures  estimated to be required for
compliance  with the Clean  Air Act  amendments  of 1990.  (See  "Liquidity  and
Capital  Resources - Clean Air Act  Amendments" in  Management's  Discussion and
Analysis  in Item 7 of the  Company's  Annual  Report  on Form 10-K for the year
ended  December  31,  1996.)  Assuming  that  ambient  air  quality   monitoring
identifies New York City as a nonattainment  area for the new particulate matter
standard,  the State will be required to adopt regulations to achieve compliance
with the new  standard.  It is not  expected  that  regulations  would be issued
before 2005. Depending on the requirements of the regulations, the Company's use
of oil to generate  electricity  and steam could be affected and compliance with
the  regulations   could  require  a  material  amount  of  additional   capital
expenditures.

Environmental Claims and Other Contingencies

            Reference is made to the notes to the financial  statements included
in this report for information  concerning potential  liabilities of the Company
arising from the Federal Comprehensive Environmental Response,  Compensation and
Liability Act of 1980  (Superfund),  from claims relating to alleged exposure to
asbestos, and from certain other contingencies to which the Company is subject.



RESULTS OF OPERATIONS

            Net income for common stock for the third quarter of 1997 was higher
than in the  corresponding  1996  period by $27.1  million  ($.11 a share).  Net
income for common  stock for the nine months and 12 months ended  September  30,
1997 was lower than in the  corresponding  1996 periods by $17.2 million ($.08 a
share) and $5.9 million  ($.03 a share),  respectively.  These  results  reflect
weather-related  sales  variations  and the  agreements  covering the  Company's
electric rates.

            The  impact of  weather  on the  Company's  earnings  depends on the
Company's  rate  agreements.  The  Modified  ERAM under the 1995  electric  rate
agreement  removed  from the  Company's  earnings  the impact of  variations  in
forecasted  electric  sales due to weather.  The  Modified  ERAM was  eliminated
effective  April  1,  1997.  See  "PSC   Settlement   Agreement"   above.   Most
weather-related   variations  in  gas  sales  do  not  affect  earnings,   while
weather-related variations in steam sales do affect earnings.



<PAGE>



                                           - 20 -


<TABLE>
<CAPTION>
                                                     Increases (Decreases)
                                        Three Months Ended   Nine Months Ended  Twelve Months Ended
                                        September 30, 1997   September 30, 1997 September 30, 1997
                                        Compared With        Compared With      Compared With
                                        Three Months Ended   Nine Months Ended  Twelve Months Ended
                                        September 30, 1996   September 30, 1996 September 30, 1996
                                        Amount     Percent   Amount    Percent  Amount      Percent
                                                            
                                                            (Amounts in Millions)

<S>                                     <C>         <C>       <C>        <C>    <C>         <C>

Operating revenues                      $  90.7       4.7 %   $  73.7     1.4 % $177.7       2.6 %
Purchased power - electric and steam        2.5       0.7        43.8     4.6     97.2       8.0
Fuel - electric and steam                  42.8      29.3        12.3     2.7     17.3       3.0
Gas purchased for resale                    8.1      21.1        38.8    12.3     69.8      18.0

Operating revenues less purchased
    power, fuel and gas purchased for
    resale (Net revenues)                  37.3       2.7       (21.2)   (0.6)    (6.6)     (0.1)

Other operations and maintenance          (11.4)     (2.9)       (3.1)   (0.3)    (7.4)     (0.5)
Depreciation and amortization               5.1       4.2         1.2     0.3      6.9       1.4
Taxes, other than federal
    income tax                              9.7       3.2         2.0     0.2     (1.6)     (0.1)
Federal income tax                          5.4       2.9       (22.4)   (6.8)   (12.2)     (3.2)

Operating income                           28.5       7.0         1.1     0.1      7.7       0.8
Other income less deductions and
    related federal income tax             (1.3)    (77.2)       (2.1)  (66.9)    (5.3)     (73.0)
Net interest charges                        0.1       0.1         3.7     1.5      0.1        -

Net income                                 27.1       8.2        (4.7)   (0.8)     2.3        0.3

Preferred stock dividend
    requirements                             -         -          1.4     9.4      5.7       23.7
Gain on refunding of preferred stock         -         -        (13.9)   Large   (13.9)     Large

Net income for common stock             $  27.1      8.4 %    $ (17.2)   (3.0) %$ (5.9)      (0.9)%
          
</TABLE>


Third Quarter 1997 Compared with
Third Quarter 1996

            Net revenues  (operating revenues less purchased power, fuel and gas
 purchased  for resale)  increased  $37.3  million in the third  quarter of 1997
 compared with the 1996 period.  Electric and gas net revenues  increased  $30.6
 million and $8.4 million, respectively. Steam net revenues decreased $1.7
million.

<PAGE>



                                                 - 21 -


            Electric   net  revenues  in  the  1997   period,   reflecting   the
implementation  of the Settlement  Agreement  (including the  elimination of the
Modified ERAM and  Enlightened  Energy and customer  service  incentives),  were
higher than in the 1996  period  primarily  because of a short  period of warmer
than normal weather during the July billing cycle.

            In  addition,  $7.1  million of higher  electric net revenues in the
1997 period can be attributed to the recognition of deferred revenues related to
the Indian  Point 2 refueling  and  maintenance  outage.  This  increase did not
affect net income  because,  under the  accounting  provisions of the agreements
covering  the  Company's  electric  rates (PSC  Refueling  Accounting),  amounts
collected from customers for the estimated expenses of such outages are deferred
and are recognized when the actual  expenses for the outage are incurred.  Also,
electric  net  revenues  for the  third  quarter  of 1997 were  higher  than the
corresponding  period by $13.1 million for non-utility  generator (NUG) capacity
charge  reconciliations.  This increase did not affect net income because actual
capacity charge expenses were matched against revenues collected from customers.

            Gas net revenues in the 1997 period reflect  increased  retention of
net  revenues  from  interruptible  sales in  accordance  with the 1996 gas rate
settlement   agreement.   Steam  net   revenues  in  the  1997  period   reflect
weather-related  sales  decreases,  offset in part by a rate increase  effective
October 1996.

            Electric sales,  excluding off-system sales, in the third quarter of
1997 compared with the 1996 period were:


                                             Millions of Kwhrs.
                                 3rd Quarter  3rd Quarter                Percent
    Description                     1997           1996    Variation   Variation

Residential/Religious              3,433          3,212     221            6.9 %
Commercial/Industrial              7,485          7,249     236            3.3 %
Other                                176            173       3            1.7 %

Total Con Edison Customers        11,094         10,634     460            4.3 %
NYPA, Municipal Agency
 and Other Sales                   2,444         2,440        4            0.2 %
Total Service Area                13,538        13,074      464            3.5 %

            For the third quarter of 1997,  compared with the 1996 period,  firm
gas sales  volume  decreased  2.6  percent,  off-peak  firm/interruptible  sales
increased 9.3 percent and  transportation of customer-owned  gas (other than gas
transported  for the New York  Power  Authority)  increased  10.6  percent.  The
annualized   volume  of   small-volume   (less  than  3,500   dekatherms)   firm
transportation  customers  who are  buying gas from third  party  suppliers  has
increased to 1,823,000 dekatherms, or 2 percent of the Company's firm gas sales,
from 17,200 dekatherms at the end of 1996.

            For the third  quarter of 1997,  steam sales  volume  decreased  6.8
percent compared with the 1996 period.


<PAGE>


                                           - 22 -

            The increase in electric  sales volume for the third quarter of 1997
was due primarily to a short period of warmer than normal summer weather.  After
adjusting for variations,  primarily in weather and billing days in each period,
electric sales volume in the Company's service  territory  increased 3.5 percent
in the third  quarter of 1997,  firm gas sales volume  decreased 2.7 percent and
steam sales volume decreased 4.5 percent.

            Electric fuel costs  increased  $50.2 million in the 1997 period due
to an increase in the unit cost of fuel and higher  electric  generation  by the
Company.  Electric  purchased power costs decreased in the third quarter of 1997
by $2.8 million from the 1996 period due to lower  purchased  volumes  partially
offset by higher unit costs.  The  variations in fuel and purchased  power costs
also reflect the  availability of Indian Point 2, which was out of service for a
refueling and  maintenance  outage for part of the 1997 period but was operating
during the 1996 period. Steam fuel costs decreased $7.4 million due to decreased
generation  of steam by the  Company.  Steam  purchased  power  costs  were $5.3
million in the 1997  period;  the  Company  did not  purchase  steam in the 1996
period.  Gas purchased for resale  increased  $8.1  million,  reflecting  higher
sendout partially offset by a lower unit cost of purchased gas.

            Other  operations and maintenance  expenses  decreased $11.4 million
for the third quarter of 1997  compared  with the 1996 period,  due primarily to
lower  administrative  and general expenses partially offset by expenses related
to the Indian Point refueling and maintenance  outage (a like amount of deferred
revenues was recognized under PSC Refueling Accounting).

            Depreciation  and  amortization  increased  $5.1 million in the
third  quarter of 1997 due principally to higher plant balances.

            Taxes,  other than federal  income tax,  increased  $9.7 million due
principally to higher property taxes and revenue taxes.

             Federal   income  tax  increased   $5.4  million  for  the  quarter
reflecting higher pre-tax income.

            Other income less  miscellaneous  deductions  for the 1997 period
reflects  the start-up  and  business  development  expenses of the  Company's
subsidiaries,  Consolidated Edison Solutions,  Inc. (formerly ProMark Energy,
Inc.) and Consolidated Edison Development, Inc. (formerly Gramercy Development,
Inc.) (the "Subsidiaries").

Nine Months Ended September 30, 1997 Compared
with Nine Months Ended September 30, 1996

            Net  revenues  decreased  $21.2  million in the first nine months of
1997  compared  with the  first  nine  months  of 1996.  Electric  and steam net
revenues  decreased $18.4 million and $18.6 million,  respectively,  and gas net
revenues increased $15.8 million.



<PAGE>


                                           - 23 -

            Electric  net  revenues  in the 1997  period  were lower than in the
corresponding  1996 period due  primarily  to a lower  allowed  return on common
equity and a lower level of incentive opportunities under the 1995 electric rate
agreement  and  the  implementation  of  the  Settlement   Agreement  (including
elimination  of the Modified ERAM and  Enlightened  Energy and customer  service
incentives) for financial  statement purposes effective April 1, 1997.  Electric
net revenues for the first nine months of 1997 were  increased by $14.0  million
under the revenue  per  customer  provisions  of the  Modified  ERAM that was in
effect for the first three months of this period,  compared  with $42.7  million
for the 1996  period.  Electric  net  revenues for the first nine months of 1997
also include $0.9 million to reflect  incentives earned under the Company's rate
agreements, compared with $41.6 million for the 1996 period.

            Electric net revenues for the 1997 period were $34.5 million  higher
than in the 1996 period because of the recognition of deferred  revenues related
to the Indian Point 2 refueling and  maintenance  outage.  This increase did not
affect net income because of PSC Refueling Accounting. Electric net revenues for
the 1997 period were $15.3 million higher than in the 1996 period as a result of
NUG capacity  charge  reconciliations.  This  increase did not affect net income
because actual capacity charge expenses were matched against revenues.

            Gas net revenues in the 1997 period reflect  increased  retention of
net  revenues  from  interruptible  sales in  accordance  with the 1996 gas rate
settlement   agreement.   Steam  net   revenues  in  the  1997  period   reflect
weather-related  sales  decreases  offset in part by a rate  increase  effective
October 1996.

            Electric sales, excluding off-system sales, in the first nine months
of 1997 compared with the 1996 period were:

                                           Millions of Kwhrs.
                             Nine Months      Nine Months
                                Ended           Ended                    Percent
    Description            Sept. 30, 1997  Sept. 30, 1996   Variation  Variation

Residential/Religious         8,382              8,300           82        1.0 %
Commercial/Industrial        19,461             19,501          (40)      (0.2)%
Other                           464                468           (4)      (0.9)%
Total Con Edison Customers   28,307             28,269           38        0.1 %
NYPA Municipal Agency
 and Other Sales              7,205             7,117            88        1.2 %

Total Service Area           35,512            35,386           126        0.4 %

            For the first nine months of 1997,  compared  with the 1996  period,
firm gas sales volume decreased 8.6 percent,  off-peak  firm/interruptible sales
increased 17.7 percent and  transportation of customer-owned gas (other than gas
transported for the New York Power  Authority)  increased 34.3 percent.  For the
first nine months of 1997,  steam sales volume  decreased  11.9 percent from the
1996  period.  The  decreases  in firm gas and steam sales  volumes for the 1997
period were due  primarily  to milder than normal 1997 winter  weather,  whereas
1996 winter weather was colder than normal.


<PAGE>


                                            -24 -

            After adjusting for variations,  primarily weather and billing days,
in each period,  electric sales volume in the Company's service territory in the
first nine months of 1997 increased 2.0 percent.  Similarly  adjusted,  firm gas
sales volume decreased 0.6 percent and steam sales volume decreased 1.2 percent.

            Electric fuel costs  increased  $42.2 million in the 1997 period due
to a higher  unit cost of fuel  partially  offset  by  decreased  generation  of
electricity  by the Company.  Electric  purchased  power costs  increased  $20.9
million over the 1996 period due to higher unit costs.  The  variations  in fuel
and purchased power costs also reflect the availability of Indian Point 2, which
was out of service for a refueling and  maintenance  outage for part of the 1997
period  but was  operating  during  most of the 1996  period.  Steam  fuel costs
decreased  $29.9 million due to lower sendout.  Steam purchased power costs were
$22.9 million in the 1997 period; the Company did not purchase steam in the 1996
period.  Gas purchased for resale  increased  $38.8 million  reflecting a higher
unit cost of purchases.

            Other operations and maintenance  expenses decreased $3.1 million in
the first nine months of 1997  compared  with the 1996 period due  primarily  to
lower  administrative  and general expenses partially offset by expenses related
to the  Indian  Point 2  refueling  and  maintenance  outage  (a like  amount of
deferred revenues was recognized under PSC Refueling Accounting).

            Depreciation  and  amortization  increased  $1.2 million in the 1997
period due  principally to higher plant  balances;  an additional  provision for
depreciation  expense of $13.9 million was recorded in the 1996 period to offset
a gain on refunding of preferred stock.

            Taxes,  other than federal income tax, increased $2.0 million in the
first  nine  months of 1997  compared  with the 1996  period  due  primarily  to
increased property taxes partially offset by decreased revenue and sales taxes.

            Federal income tax decreased  $22.4 million in the 1997 period
compared with the 1996 period reflecting lower pre-tax income.

            Other  income  less  miscellaneous  deductions  for the 1997  period
reflects the business development expenses of the Subsidiaries.

            Interest on long-term  debt for the period ended  September 30, 1997
increased $7.8 million principally as a result of new debt issues, including the
issuance of subordinated debentures to refund preferred stock in March 1996.

Twelve Months Ended September 30, 1997 Compared with
Twelve Months Ended September 30, 1996

            Net revenues decreased $6.6 million in the 12 months ended September
30,  1997  compared  with the 1996  period.  Electric  and  steam  net  revenues
decreased  $6.9  million  and  $19.5  million,  respectively.  Gas net  revenues
increased $19.8 million.



<PAGE>


                                           - 25 -

            Electric net revenues in the 1997 period were lower  compared to the
1996 period due primarily to a lower  allowed  return on common equity under the
1995 electric rate agreement and the implementation of the Settlement  Agreement
(including  elimination of the Modified ERAM and Enlightened Energy and customer
service  incentives) for financial  statement  purposes effective April 1, 1997.
Electric net revenues for the 12 months ended  September 30, 1997 were increased
by $31.0  million under the RPC  provision of the Modified  ERAM,  compared with
$50.0 million for the 1996 period. Electric net revenues for the 12 months ended
September 30, 1997 include $14.5 million for incentive  earnings,  compared with
$51.8 million for the 1996 period.

            Electric net revenues for the 1997 period were $27.8 million  higher
than the 1996 period because of the recognition of deferred  revenues related to
the Indian  Point 2 refueling  and  maintenance  outage.  This  increase did not
affect net income because of PSC Refueling Accounting. Electric net revenues for
the 1997 period were $27.7 million higher than in the 1996 period as a result of
NUG capacity  charge  reconciliations.  This  increase did not affect net income
because actual capacity charge expenses were matched against revenues.

            Gas net  revenues in the 1997 period  reflect the  retention  of net
revenues  from  interruptible  sales  in  accordance  with  the  1996  gas  rate
settlement   agreement.   Steam  net   revenues  in  the  1997  period   reflect
weather-related  sales  decreases  offset in part by a rate  increase in October
1996.

            Electric sales,  excluding off-system sales, for the 12 months ended
September 30, 1997 compared with the 12 months ended September 30, 1996 were:

                                     Millions of Kwhrs.
                            Twelve  Months  Twelve Months
                                Ended           Ended                    Percent
    Description            Sept. 30, 1997  Sept. 30, 1996   Variation  Variation

Residential/Religious         10,949            10,809           140       1.3 %
Commercial/Industrial         25,686            25,721           (35)     (0.1)%
Other                            607               616            (9)     (1.5)%
Total Con Edison Customers    37,242            37,146            96       0.3 %
NYPA Municipal Agency
 and Other Sales               9,522             9,438            84       0.9 %
Total Service Area            46,764            46,584           180        0.4%

            For the 12 months ended  September 30, 1997,  compared with the 1996
period, firm gas sales volume decreased 6.6 percent, off-peak firm/interruptible
sales increased 20.5 percent and  transportation  of  customer-owned  gas (other
than gas transported for the New York Power  Authority)  increased 32.9 percent.
For the 12 months ended  September 30, 1997,  steam sales volume  decreased 11.8
percent compared with the 1996 period.



<PAGE>


                                           - 26 -

            The  decreases  in firm gas and  steam  sales  volumes  for the 1997
period were due  primarily  to milder than normal 1997 winter  weather,  whereas
1996 winter weather was colder than normal.  After  adjustment  for  variations,
primarily weather and billing days, in each period, electric sales volume in the
Company's  service territory in the 12 months ended September 30, 1997 increased
1.8 percent. Similarly adjusted, firm gas sales volume decreased 0.4 percent and
steam sales volume decreased 1.3 percent.

            Electric fuel costs  increased  $51.0 million in the 1997 period due
to a higher  unit cost of fuel  partially  offset  by  decreased  generation  of
electricity by the Company. Electric purchased power costs increased in the 1997
period by $70.6  million over the 1996 period,  reflecting  increased  purchased
volumes and unit costs.  The  variations in electric  fuel and  purchased  power
costs also reflect the lower  availability  of Indian Point 2 in the 1997 period
as compared with the 1996 period.  Steam fuel costs  decreased $33.7 million due
to decreased  generation of steam by the Company,  partially  offset by a higher
unit cost of fuel.  Steam  purchased  power costs were $26.6 million in the 1997
period; the Company did not purchase steam in the 1996 period. Gas purchased for
resale increased $69.8 million reflecting a higher unit cost of fuel.

            Other operations and maintenance  expenses decreased $7.4 million in
the 1997 period  compared with the 1996 period.  This decrease was due primarily
to lower  administrative  and general and customer  service  expenses  partially
offset by expenses related to the Indian Point refueling and maintenance  outage
( a like  amount  of  deferred  revenues  was  recognized  under  PSC  Refueling
Accounting).

            Depreciation  and  amortization  increased  $6.9  million in the
1997 period due principally to higher plant balances.

            Taxes,  other than federal income tax, decreased $1.6 million in the
12 months ended  September  30, 1997  compared  with the 1996 period.  Decreased
revenue taxes  reflecting the  elimination  of the New York State  corporate tax
surcharge were partially offset by higher property taxes.

            Federal income tax decreased  $12.2 million in the 1997 period
compared with the 1996 period reflecting lower pre-tax income.

            Other  income  less  miscellaneous  deductions  for the 1997  period
reflects the start-up and business development expenses of the Subsidiaries.

            Interest on long-term debt for the 12-month  period ended  September
30, 1997  increased  $8.0  million  principally  as a result of new debt issues,
including the issuance of subordinated  debentures to refund  preferred stock in
March 1996.






<PAGE>



                                            - 27 -


PART II.    OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

TOXIC SUBSTANCES CONTROL ACT

      Reference is made to the information  under the caption "TOXIC  SUBSTANCES
CONTROL ACT" in Part I, Item 3, Legal Proceedings in the Company's Annual Report
on Form 10-K for the year ended  December 31, 1996 and in Part II, Item 1, Legal
Proceedings  in the  Company's  Quarterly  Report on Form 10-Q for the quarterly
period ended June 30, 1997.

RATE PROCEEDINGS

      Reference is made to (i) the  information  under the captions  "REGULATION
AND RATES" in Part I, Item 1, Business,  "RATE  PROCEEDINGS"  in Part I, Item 3,
Legal  Proceedings  and  "LIQUIDITY  AND  CAPITAL  RESOURCES -  Competition  and
Industry  Restructuring,  1992  Electric  Rate  Agreement,  1995  Electric  Rate
Agreement,  PSC Settlement Agreement, and Gas and Steam Rate Agreements" in Part
I, Item 7,  Management's  Discussion and Analysis in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996;  (ii) the  information  under
the caption  "RATE  PROCEEDINGS"  in Part II, Item 1, Legal  Proceedings  in the
Company's  Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1997 and (iii)  the  information  under  the  captions  "LIQUIDITY  AND  CAPITAL
RESOURCES - 1995 Electric Rate  Agreement,  PSC  Settlement  Agreement,  Nuclear
Generation and Gas and Steam Rate  Agreements"  in Part I, Item 2,  Management's
Discussion and Analysis in this Quarterly  Report on Form 10-Q for the quarterly
period ended September 30, 1997.

     In August 1997, the United States District Court for the Southern  District
of New York dismissed the suit against the Company entitled  Brownsville Baptist
Church,  et. al. v.  Consolidated  Edison  Company of New York,  Inc.  On August
29,1997,  the plaintiffs filed a Notice of Appeal.  The appeal is pending in the
United States Court of Appeals for the Second Circuit.

SUPERFUND - CURCIO SCRAP METAL SITE

      Reference is made to the information under the caption "SUPERFUND - Curcio
Scrap Metal Site" in Part I, Item 3, Legal  Proceedings in the Company's  Annual
Report on Form 10-K for the year ended December 31, 1996.

      The groundwater  studies to determine  whether the soil cleanup reduced or
eliminated  the  groundwater  contamination  that had been  detected  have  been
completed.  On September 30, 1997,  the United States  Environmental  Protection
Agency ("EPA") issued a Record of Decision which concludes that the soil cleanup
work had successfully  remediated the principal threats associated with the site
and requires periodic groundwater  monitoring for five years. EPA estimates that
the required groundwater monitoring will cost approximately $200,000.  Depending
on the results of the monitoring, EPA could extend the monitoring program for an
additional five years or require remedial measures such as groundwater treatment
or cleanup work.


<PAGE>


                                           - 28 -

SUPERFUND - METAL BANK OF AMERICA SITES

      Reference is made to the information under the caption  "SUPERFUND - Metal
Bank of America  Sites" in Part I, Item 3, Legal  Proceedings  in the  Company's
Annual Report on Form 10-K for the year ended December 31, 1996.

      The Company does not expect that its share of the cost of the site cleanup
program selected by EPA will exceed 1.48 percent.

SUPERFUND - PCB TREATMENT, INC. SITES

      Reference is made to the  information  under the caption  "SUPERFUND - PCB
Treatment,  Inc.  Sites" in Part I, Item 3, Legal  Proceedings  in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.

      The EPA has indicated that more than 25 million pounds of PCB-contaminated
oil,  equipment and materials  were shipped to the sites by over 1,500  parties.
The  Company  has  informed  the EPA that it shipped  approximately  2.9 million
pounds of PCB-contaminated oil and equipment to the sites.

SUPERFUND - PORT REFINERY SITE

      Reference is made to the information  under the caption  "SUPERFUND - Port
Refinery  Site" in Part I, Item 3, Legal  Proceedings  in the  Company's  Annual
Report on Form 10-K for the year ended December 31, 1996.

      The consent  decree has been approved by the United States  District Court
for the Southern District of New York.

SUPERFUND - BORNE CHEMICAL SITE

      In May 1997, the Company was named as an additional  third-party defendant
in a private  cost  recovery  action in the New  Jersey  Superior  Court  (Union
County)  under the New  Jersey  Spill  Compensation  and Spill Act for the Borne
Chemical site in  Elizabeth,  New Jersey.  Borne  Chemical used the site for the
processing  and  blending  of  various  types of  petroleum,  dyes and  chemical
products  from  approximately  1917  until  1985  when it  became  bankrupt  and
abandoned the site. Between 1971 and 1981, a portion of the site was occupied by
a waste  transporter  and oil  spill  cleanup  contractor  that did work for the
Company at various times (the "Contractor").

      The  third-party  plaintiffs in the lawsuit were ordered by the New Jersey
Department of Environmental  Protection and Energy ("DEPE") to conduct emergency
removal  actions for the oil and chemical drums,  tanks and  underground  piping
systems at the site and to complete studies to determine the extent to which the
site's soil and  groundwater is  contaminated.  The  third-party  plaintiffs are
seeking  contribution for the more than $10 million that they expect to incur to
comply with the DEPE order and for the cost of any cleanup program that DEPE may
require in the future for the site's soil and groundwater.


<PAGE>


                                           - 29 -

      The Company is  investigating  allegations by the  third-party  plaintiffs
that the Company  returned over 1,000 empty drums to Borne  Chemical  containing
residue of oil and chemicals  that it had  purchased  from Borne  Chemical.  The
Company is also  investigating  whether the Contractor used the site for storage
or handling of any  contaminated  materials from work the Contractor did for the
Company.

 DEC PROCEEDINGS

      Reference is made to the information  under the caption "DEC  Proceedings"
in Part I, Item 3, Legal Proceedings in the Company's Annual Report on Form 10-K
for the year ended  December 31, 1996 and in Note B to the financial  statements
included in this  Quarterly  Report on Form 10-Q for the quarterly  period ended
September 30, 1997.

      In September  1997, the Company agreed to a consent order settling a civil
administrative  proceeding  instituted  by the  New  York  State  Department  of
Environmental  Conservation  ("DEC") alleging opacity violations by the Company.
Pursuant to this consent order, the essential elements of the Company's existing
Opacity  Reduction  Program were  established as  enforceable  conditions of the
operating  permits  that  the DEC  issues  for  the  Company's  facilities.  The
September 1997 consent order also assessed a civil penalty of $25,000, which was
suspended provided that the Company complies with the order.

      In October 1997, the Company agreed to a DEC consent order with respect to
oil and hazardous  waste  incidents  occurring  since November 1994.  Under this
consent  order,  the Company will survey a number of its facilities and test the
integrity of underground  fuel oil pipelines at the Company's  major oil storage
facilities.  The Company also will retire  several of its  underground  fuel oil
pipelines that had been operated within New York City, In addition,  the Company
will pay a $385,000  penalty,  $58,000  for  damages  and  $345,000  to programs
designed to benefit the environment.

      The Company does not expect the September and October 1997 consent  orders
to have a material adverse effect on the Company's financial position or results
of operations.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(a)   EXHIBITS
Exhibit 10  The Con Edison Severance Pay Plan for Management Employees.
Exhibit 12  Statement of computation of ratio of earnings to fixed charges for
            the twelve-month periods ended September 30, 1997 and 1996.
Exhibit 27  Financial Data Schedule.  (To the extent provided in Rule 402 of
            Regulation  S-T,  this  exhibit  shall  not be  deemed  "filed",  or
            otherwise   subject  to   liabilities,   or  be  deemed  part  of  a
            registration statement.)

(b)   REPORTS ON FORM 8-K
      The Company filed Current  Reports on Form 8-K,  dated August 29, 1997 and
September  23,1997,  reporting (under Item 5) certain  information about the PSC
Settlement  Agreement  (discussed in Part I, Item 2 of this report). The Company
filed no other Current  Reports on Form 8-K during the quarter  ended  September
30, 1997.



<PAGE>


                                           - 30 -


                                         SIGNATURES




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



                                    CONSOLIDATED EDISON COMPANY
                                         OF NEW YORK, INC.


DATE:       October 30, 1997        By:   JOAN S. FREILICH
                                          Joan S. Freilich
                                          Senior Vice President,
                                          Chief Financial Officer and
                                          Duly Authorized Officer


DATE:       October 30, 1997        By:   HYMAN SCHOENBLUM
                                          Hyman Schoenblum
                                          Vice President, Controller and
                                          Chief Accounting Officer





<PAGE>



                                      INDEX TO EXHIBITS


                                                               SEQUENTIAL PAGE
EXHIBIT                                                        NUMBER AT WHICH
  NO.       DESCRIPTION                                        EXHIBIT BEGINS



10.         The Con Edison Severance Pay Plan for
            Management Employees.

12.         Statement of computation of ratio of earnings to
            fixed charges for the twelve-month periods ended
            September 30, 1997 and 1996.

27.               Financial Data Schedule.  (To the extent provided
            in Rule 402 of Regulation S-T, this exhibit shall
            not be deemed "filed", or otherwise subject to
            liabilities, or be deemed part of a registration statement.)