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 MARCH 31, 1998
                                        
                                       OR

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

                           _________________________



<TABLE>
<CAPTION>
 
 
Commission     Exact name of registrant as specified in its charter    State of         I.R.S. Employer
File Number    and principal office address and telephone number       Incorporation    ID. Number
<S>            <C>                                                     <C>              <C>
 
1-14514        CONSOLIDATED EDISON, INC.                               New York         13-3965100
               4 Irving Place, New York, New York 10003
               (212) 460-3900

1-1217         CONSOLIDATED EDISON COMPANY
               OF NEW YORK, INC.                                       New York         13-5009340
               4 Irving Place, New York, New York 10003
               (212) 460-4600
</TABLE> 


Each  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 April 30, 1998,  (i)  Consolidated  Edison,  Inc.
("CEI") had outstanding  235,488,313 Common Shares ($.10 par value) and (ii) all
of the outstanding Common Stock ($2.50 par value) of Consolidated Edison Company
of New York, Inc. was held by CEI.
<PAGE>
 
                                     - 2 -



                               TABLE OF CONTENTS
                                        


                                                                         PAGE
                                                                             
                                                                             
FILING FORMAT                                                                
                                                                           2 
PART I. -  FINANCIAL INFORMATION                                             
                                                                             
ITEM 1.       FINANCIAL  STATEMENTS:        
                                                                             
              Consolidated Edison, Inc.                                      
                    Consolidated Balance Sheet                           3-4 
                    Consolidated Income Statements                       5-6  
                    Consolidated Statements of Cash Flows                7-8  
                                                                   
              Consolidated Edison Company of New York, Inc.        
                    Consolidated Balance Sheet                          9-10 
                    Consolidated Income Statements                     11-12 
                    Consolidated Statements of Cash Flows                 13  
                                                                   
              Notes to Financial Statements                            15-16
                                                                   
                                                                   
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS                     17-24
              OF FINANCIAL CONDITION AND RESULTS OF                
              OPERATIONS                                           
                                                                   
                                                                   
ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES                    24
              ABOUT MARKET RISK                                     


PART II. -  OTHER INFORMATION


ITEM 1.       LEGAL PROCEEDINGS                                           25
                                                 
                                                 
ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K                            25



                           _________________________



FILING FORMAT

This Quarterly Report on Form 10-Q is a combined quarterly report being filed
separately by two different registrants: Consolidated Edison, Inc. ("CEI") and
Consolidated Edison Company of New York, Inc. ("Con Edison"). CEI became the
holding company for Con Edison on January 1, 1998. See "Corporate Structure" in
Item 1 of the combined CEI and Con Edison Annual Reports on Form 10-K for the
year ended December 31, 1997 (File Nos. 1-4514 and 1-1217, the "1997 Form 10-
K").  Any references in this report to the "Company" are to CEI and Con Edison,
collectively.  Con Edison makes no representation as to the information
contained in this report relating to CEI and the subsidiaries of CEI other than
Con Edison.
<PAGE>
 
                                      -3-


                           CONSOLIDATED EDISON, INC.
                           CONSOLIDATED BALANCE SHEET
           AS AT MARCH 31, 1998, DECEMBER 31, 1997 AND MARCH 31, 1997
                                        

<TABLE> 
<CAPTION>  
 
                                                                       As At
                                                ---------------------------------------------------- 
                                                March 31, 1998      Dec. 31, 1997     March 31, 1997
                                                ---------------     -------------     --------------
                                                               (Thousands of Dollars)                             
ASSETS

UTILITY PLANT, AT ORIGINAL COST

<S>                                            <C>                 <C>                  <C>             
    Electric                                    $11,805,558         $11,743,745          $11,678,164   
    Gas                                           1,759,293           1,741,562            1,665,996   
    Steam                                           582,332             576,206              538,924   
    General                                       1,210,805           1,203,427            1,160,419   
                                                -----------         -----------          -----------   
             Total                               15,357,988          15,264,940           15,043,503   
        Less: Accumulated depreciation            4,481,414           4,392,377            4,371,046   
                                                -----------         -----------          -----------   
             Net                                 10,876,574          10,872,563           10,672,457   
    Construction work in progress                   284,725             292,218              309,315   
    Nuclear fuel assemblies and components,                                                            
        less accumulated amortization               103,690             102,321              100,720   
                                                -----------         -----------          -----------   
                       NET UTILITY PLANT         11,264,989          11,267,102           11,082,492   
                                                -----------         -----------          -----------   
                                                                                                       
CURRENT ASSETS                                                 
                                                 
<S>                                               <C>                 <C>                  <C>         
    Cash and temporary cash investments             198,257             183,458               94,903   
    Funds held for refunding of debt                      -             328,874                    -   
    Accounts receivable  customer, less                                                                
        allowance for uncollectible accounts                                                           
        of $22,705, $21,600 and $21,535             561,655             581,163              570,595   
    Other receivables                                44,983              60,759               36,497   
    Regulatory accounts receivable                    3,888              (1,682)              60,954   
    Fuel, at average cost                            38,985              53,697               45,946   
    Gas in storage, at average cost                  31,137              37,209               22,660   
    Materials and supplies, at average cost         192,698             191,759              203,675   
    Prepayments                                     189,146              75,516              170,852   
    Other current assets                             16,700              16,457               15,453   
                                                  ---------           ---------            ---------   
                 TOTAL CURRENT ASSETS             1,277,449           1,527,210            1,221,535   
                                                  ---------           ---------            ---------   
                                                                                                       
Investments and nonutility property                 331,970             292,397              193,894   
                                                  ---------           ---------            ---------   
                                                                                                       
DEFERRED CHARGES                                                 
                                                 
<S>                                            <C>                 <C>                  <C>            
    Enlightened Energy program costs                102,349             117,807              128,204   
    Unamortized debt expense                        138,262             126,085              128,234   
    Recoverable fuel costs                           25,613              98,301               52,389   
    Power contract termination costs                 69,594              80,978               46,848   
    Other deferred charges                          254,270             239,559              289,795   
                                                -----------         -----------          -----------   
                                                                                                       
                TOTAL DEFERRED CHARGES              590,088             662,730              645,470   
                                                -----------         -----------          -----------   
                                                                                                       
REGULATORY ASSET-FUTURE FEDERAL                                                                        
    INCOME TAXES                                    938,053             973,079              967,977   
                                                -----------         -----------          -----------   
                                                                                                       
                            TOTAL               $14,402,549         $14,722,518          $14,111,368   
                                                ===========         ===========          ===========    
 
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
 
                                      -4-

                           CONSOLIDATED EDISON, INC.
                           CONSOLIDATED BALANCE SHEET
           AS AT MARCH 31, 1998, DECEMBER 31, 1997 AND MARCH 31, 1997
                                        
<TABLE> 
<CAPTION> 
                                                                            As At                               
                                                     ----------------------------------------------------       
                                                     March 31, 1998      Dec. 31, 1997     March 31, 1997       
                                                     ---------------     -------------     --------------       
                                                                    (Thousands of Dollars)                      
 
CAPITALIZATION AND LIABILITIES

CAPITALIZATION

<S>                                                  <C>                  <C>              <C>  
  Common stock, authorized 500,000,000
    shares; outstanding 235,489,650 shares,
    235,489,650 shares and 235,008,078 shares          $ 1,482,351         $ 1,482,351        $ 1,478,647 
  Retained earnings                                      4,531,810           4,484,703          4,322,562 
  Capital stock expense                                    (36,966)            (36,975)           (34,831)
                                                       -----------         -----------        ----------- 
TOTAL COMMON SHAREHOLDERS' EQUITY                        5,977,195           5,930,079          5,766,378 
                                                       -----------         -----------        ----------- 
 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                                  -                   -              4,519 
                                                       -----------         -----------        ----------- 
                    TOTAL OTHER PREFERRED STOCK            233,468             233,468            237,987 
                                                       -----------         -----------        ----------- 
                          TOTAL PREFERRED STOCK            318,018             318,018            322,537 
                                                       -----------         -----------        ----------- 
  Long-term debt                                         4,198,152           4,188,906          4,239,066 
                                                       -----------         -----------        ----------- 
                           TOTAL CAPITALIZATION         10,493,365          10,437,003         10,327,981 
                                                       -----------         -----------        -----------   
 
 NONCURRENT LIABILITIES    
     
<S>                                                    <C>                 <C>                 <C> 
  Obligations under capital leases                          39,180              39,879             41,958
  Other noncurrent liabilities                             111,433             106,137             81,800
                                                       -----------         -----------        -----------   
                                                                                                         
                   TOTAL NONCURRENT LIABILITIES            150,613             146,016            123,758
                                                       -----------         -----------        -----------   
 
CURRENT LIABILITIES

<S>                                                    <C>                 <C>                 <C> 
  Long-term debt due within one year                       200,000             529,385            103,762   
  Accounts payable                                         377,799             440,114            352,461
  Customer deposits                                        163,983             161,731            159,176
  Accrued taxes                                            107,989              65,736            109,052
  Accrued interest                                          66,557              85,613             67,706
  Accrued wages                                             80,509              82,556             78,300
  Other current liabilities                                184,551             183,122            145,787
                                                       -----------         -----------        -----------
                      TOTAL CURRENT LIABILITIES          1,181,388           1,548,257          1,016,244
                                                       -----------         -----------        -----------
                                                                                                         
PROVISIONS RELATED TO FUTURE FEDERAL INCOME TAXES                                                        
  AND OTHER DEFERRED CREDITS                                                                             
  Accumulated deferred federal income tax                2,308,092           2,307,835          2,299,747
  Accumulated deferred investment tax credits              161,490             163,680            170,290
  Other deferred credits                                   107,601             119,727            173,348
                                                       -----------         -----------        -----------
                         TOTAL DEFERRED CREDITS          2,577,183           2,591,242          2,643,385
                                                       -----------         -----------        -----------
                                          TOTAL        $14,402,549         $14,722,518        $14,111,368
                                                       ===========         ===========        =========== 
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
 
                                      -5-

                           CONSOLIDATED EDISON, INC.
                         CONSOLIDATED INCOME STATEMENT
              FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE> 
<CAPTION> 
                                                               1998                        1997                   
                                                               ----                        ----            
                                                                                                           
                                                                               (THOUSANDS OF DOLLARS)      
                                                                           --------------------------      
Operating revenues   
   
<S>                                                         <C>                         <C>           
     Electric                                                $1,291,323                  $1,268,950  
     Gas                                                        399,170                     455,020  
     Steam                                                      135,390                     162,178  
     Non-utility                                                 27,164                      29,407  
                                                             ----------                  ----------  
              TOTAL OPERATING REVENUES                        1,853,047                   1,915,555  
                                                             ----------                  ----------  
                                                                                                     
OPERATING EXPENSES                                                                                   
     Purchased power                                            358,250                     352,708  
     Fuel                                                       134,554                     151,354  
     Gas purchased for resale                                   189,439                     251,711  
     Other operations                                           275,830                     278,075  
     Maintenance                                                117,975                     114,163  
     Depreciation and amortization                              128,258                     123,794  
     Taxes, other than federal income tax                       302,219                     304,983  
     Federal income tax                                          91,961                      91,887  
                                                             ----------                  ----------  
              TOTAL OPERATING EXPENSES                        1,598,486                   1,668,675  
                                                             ----------                  ----------  
                                                                                                     
OPERATING INCOME                                                254,561                     246,880  
                                                                                                     
OTHER INCOME (DEDUCTIONS)                                                                            
     Investment income                                            2,904                       1,036  
     Allowance for equity funds used during construction            512                       1,800  
     Other income less miscellaneous deductions                    (503)                       (521) 
     Federal income tax                                            (979)                       (303) 
                                                             ----------                  ----------  
                    TOTAL OTHER INCOME                            1,934                       2,012  
                                                             ----------                  ----------  
                                                                                                     
INCOME BEFORE INTEREST CHARGES                                  256,495                     248,892  
                                                                                                     
Interest on long-term debt                                       79,058                      78,752  
Other interest                                                    1,247                       4,414  
Allowance for borrowed funds used during construction              (263)                       (882) 
                                                             ----------                  ----------  
                  NET INTEREST CHARGES                           80,042                      82,284  
                                                             ----------                  ----------  
                                                                                                     
NET INCOME                                                      176,453                     166,608  
PREFERRED STOCK DIVIDEND REQUIREMENTS                            (4,536)                     (4,604) 
                                                             ----------                  ----------  
NET INCOME FOR COMMON STOCK                                  $  171,917                  $  162,004  
                                                             ==========                  ==========  
                                                                                                     
COMMON SHARES OUTSTANDING  AVERAGE (000)                        235,490                     235,001  
BASIC AND DILUTED EARNINGS PER SHARE                              $0.73                       $0.69  
                                                             ==========                  ==========  
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK                      $0.53                      $0.525   

                                  
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
 
                                      -6-

                           CONSOLIDATED EDISON, INC.
                         CONSOLIDATED INCOME STATEMENT
              FOR THE TWELVE MONTHS ENDED MARCH 31, 1998 AND 1997

<TABLE> 
<CAPTION> 
                                                               1998                        1997                   
                                                               ----                        ----            
                                                                                                           
                                                                               (THOUSANDS OF DOLLARS)      
                                                                           --------------------------      
Operating revenues   
   
<S>                                                         <C>                       <C>           
     Electric                                               $  5,657,948               $  5,523,800  
     Gas                                                       1,038,031                  1,063,225  
     Steam                                                       365,011                    391,494  
     Non-utility                                                  72,654                    159,480  
                                                            ------------               ------------  
              TOTAL OPERATING REVENUES                         7,133,644                  7,137,999  
                                                            ------------               ------------  
                                                                                                     
OPERATING EXPENSES                                                                                   
     Purchased power                                           1,355,129                  1,321,564  
     Fuel                                                        580,024                    540,741  
     Gas purchased for resale                                    490,325                    618,553  
     Other operations                                          1,122,458                  1,165,863  
     Maintenance                                                 478,600                    447,944  
     Depreciation and amortization                               507,921                    487,713  
     Taxes, other than federal income tax                      1,178,391                  1,165,187  
     Federal income tax                                          377,796                    383,731  
                                                            ------------               ------------  
              TOTAL OPERATING EXPENSES                         6,090,644                  6,131,296  
                                                            ------------               ------------  
                                                                                                     
OPERATING INCOME                                               1,043,000                  1,006,703  
OTHER INCOME (DEDUCTIONS)                                                                            
     Investment income                                            14,082                      8,527  
     Allowance for equity funds used during construction           3,161                      4,755  
     Other income less miscellaneous deductions                   (4,082)                    (7,812) 
     Federal income tax                                           (2,674)                       811  
                                                            ------------               ------------  
                    TOTAL OTHER INCOME                            10,487                      6,281  
                                                            ------------               ------------  
                                                                                                     
INCOME BEFORE INTEREST CHARGES                                 1,053,487                  1,012,984  
                                                                                                     
Interest on long-term debt                                       318,464                    312,203  
Other interest                                                    13,916                     16,893  
Allowance for borrowed funds used during construction             (1,561)                    (2,270) 
                                                            ------------               ------------  
                  NET INTEREST CHARGES                           330,819                    326,826  
                                                            ------------               ------------  
                                                                                                     
NET INCOME                                                       722,668                    686,158  
PREFERRED STOCK DIVIDEND REQUIREMENTS                            (18,276)                   (18,429) 
                                                            ------------               ------------  
NET INCOME FOR COMMON STOCK                                 $    704,392               $    667,729  
                                                            ============               ============  
                                                                                                     
COMMON SHARES OUTSTANDING  AVERAGE (000)                         235,195                    234,987  
BASIC AND DILUTED EARNINGS PER SHARE                               $2.99                      $2.84  
                                                            ============               ============  
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK                      $2.105                     $2.085  
                                                            ============               ============  
                                                                                                     

</TABLE>

The accompanying  notes are an integral part of these financial statements.
<PAGE>
 
                                      -7-

                                        
                           CONSOLIDATED EDISON, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997


<TABLE> 
<CAPTION> 
                                                               1998                        1997                   
                                                               ----                        ----            
                                                                                                           
                                                                               (THOUSANDS OF DOLLARS)      
                                                                           --------------------------      
OPERATING ACTIVITIES 
 
<S>                                                         <C>                       <C>           
     Net income                                                $176,453                  $ 166,608   
     PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME                                                 
        Depreciation and amortization                           128,258                    123,794  
        Deferred recoverable fuel costs                          72,688                     49,073  
        Federal income tax deferred                              32,290                     24,310  
        Common equity component of allowance                                                        
             for funds used during construction                    (498)                    (1,749) 
        Other non-cash credits                                   (5,475)                       (56) 
     CHANGES IN ASSETS AND LIABILITIES                                                              
         Accounts receivable  customer, less                                                        
             allowance for uncollectibles                        19,508                    (26,591) 
         Regulatory accounts receivable                          (5,570)                   (15,557) 
         Materials and supplies, including fuel                                                     
             and gas in storage                                  19,845                     42,208  
         Prepayments, other receivables and                                                         
             other current assets                               (98,097)                  (101,087) 
         Enlightened Energy program costs                        15,458                      5,514  
         Power contract termination costs                         6,912                     11,620  
         Cost of removal less salvage                           (17,968)                   (13,241) 
         Accounts payable                                       (62,315)                   (78,654) 
         Accrued income taxes                                    58,541                     68,364  
         Other  net                                             (71,279)                     5,228  
                                                               --------                  ---------  
             NET CASH FLOWS FROM OPERATING ACTIVITIES           268,751                    259,784  
                                                               --------                  ---------   

INVESTING ACTIVITIES INCLUDING CONSTRUCTION

<S>                                                           <C>                        <C>      
         Construction expenditures                             (120,602)                  (127,723)    
         Nuclear fuel expenditures                               (1,370)                    (3,149)    
         Contributions to nuclear decommissioning trust          (5,325)                   (12,127)    
         Common equity component of allowance                                                          
             for funds used during construction                     498                      1,749     
                                                               --------                   --------     
             NET CASH FLOWS FROM INVESTING ACTIVITIES                                                  
                 including construction                        (126,799)                  (141,250)    
                                                               --------                   --------     

FINANCING ACTIVITIES INCLUDING DIVIDENDS

<S>                                                           <C>                        <C>         
         Issuance of long-term debt                             285,000                          -   
         Retirement of long-term debt                                 -                     (2,494)  
         Advance refunding of long-term debt                   (605,240)                         -   
         Issuance and refunding costs                            (6,441)                       (36)  
         Funds held for refunding of debt                       328,874                          -   
         Common stock dividends                                (124,810)                  (123,377)  
         Preferred stock dividends                               (4,536)                    (4,606)  
                                                              ---------                  ---------   
             NET CASH FLOWS FROM FINANCING ACTIVITIES                                                
                 INCLUDING DIVIDENDS                           (127,153)                  (130,513)  
                                                              ---------                  ---------   
 
NET INCREASE (DECREASE) IN CASH AND TEMPORARY
    CASH INVESTMENTS                                             14,799                    (11,979)  
                                                                                                     
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1                183,458                    106,882   
                                                              ---------                  ---------   
                                                                                                     
CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31               $ 198,257                  $  94,903   
                                                              =========                  =========    

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
                
 Cash paid during the period for:
   Interest                                                   $  89,672                  $  91,181        
   Income taxes                                                       -                          - 
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
 
                                      -8-

                           CONSOLIDATED EDISON, INC.
                     CONSOLIDATED STATEMENT OF CASH FLOWS
              FOR THE TWELVE MONTHS ENDED MARCH 31, 1998 AND 1997

<TABLE> 
<CAPTION> 
                                                                 1998                        1997                 
                                                                 ----                        ----          
                                                                                                           
                                                                               (THOUSANDS OF DOLLARS)      
                                                                           --------------------------      
OPERATING ACTIVITIES 

<S>                                                         <C>                       <C>           
     Net income                                                $  722,668                  $  686,158 
     PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME                                                   
        Depreciation and amortization                             507,243                     487,641 
        Deferred recoverable fuel costs                            26,776                      10,911 
        Federal income tax deferred                                30,600                      20,020 
        Common equity component of allowance                                                          
             for funds used during construction                    (3,070)                     (4,538)
        Other non-cash charges                                     11,849                      23,873 
     CHANGES IN ASSETS AND LIABILITIES                                                                
         Accounts receivable  customer, less                                                          
             allowance for uncollectibles                           8,940                      15,983 
         Regulatory accounts receivable                            57,066                     (61,837)
         Materials and supplies, including fuel                                                       
             and gas in storage                                     9,461                      (2,874)
         Prepayments, other receivables and                                                           
             other current assets                                 (28,027)                      8,414 
         Enlightened Energy program costs                          25,855                       6,057 
         Power contract termination costs                           6,843                      45,048 
         Cost of removal less salvage                             (78,446)                    (69,568)
         Accounts payable                                          25,338                     (32,100)
         Accrued income taxes                                      14,002                      17,129 
         Other  net                                               (89,591)                     27,768 
                                                               ----------                  ---------- 
             NET CASH FLOWS FROM OPERATING ACTIVITIES           1,247,507                   1,178,085 
                                                               ----------                  ---------- 

INVESTING ACTIVITIES INCLUDING CONSTRUCTION                                         
                                        
<S>                                                        <C>                             <C>        
         Construction expenditures                               (647,100)                 (672,068)  
         Nuclear fuel expenditures                                (12,800)                  (51,199)  
         Contributions to nuclear decommissioning trust           (14,499)                  (21,301)  
         Common equity component of allowance                                                         
             for funds used during construction                     3,070                     4,538   
                                                                 --------                  --------   
             NET CASH FLOWS FROM INVESTING ACTIVITIES                                                 
                 INCLUDING CONSTRUCTION                          (671,329)                 (740,030)  
                                                                 --------                  --------    

FINANCING ACTIVITIES INCLUDING DIVIDENDS
          
<S>                                                             <C>                       <C>       
         Issuance of long-term debt                               765,000                   250,000 
         Retirement of long-term debt                            (103,762)                  (82,812)
         Advance refunding of long-term debt                     (605,240)                  (95,329)
         Issuance and refunding costs                             (15,335)                   (9,864)
         Common stock dividends                                  (495,144)                 (489,951)
         Preferred stock dividends                                (18,343)                  (18,428)
                                                                ---------                 --------- 
             NET CASH FLOWS FROM FINANCING ACTIVITIES                                               
                 INCLUDING DIVIDENDS                             (472,824)                 (446,384)
                                                                ---------                 ---------  
                                                                                                   
NET INCREASE (DECREASE) IN CASH AND TEMPORARY
     CASH INVESTMENTS                                             103,354                    (8,329)
                                                                                                   
CASH AND TEMPORARY CASH INVESTMENTS AT                                                             
    BEGINNING OF PERIOD                                            94,903                   103,232
                                                                ---------                 ---------
                                                                                                   
CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31                 $ 198,257                 $  94,903
                                                                =========                 ========= 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 

 Cash paid during the period for:
   Interest                                                    $  308,801                 $ 306,606     
   Income taxes                                                   335,631                   346,755 
</TABLE> 

The accompanying notes are an integral part of these financial statements.
<PAGE>
 
                                      -9-
                                        
                 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                                 BALANCE SHEET
          AS AT MARCH 31, 1998, DECEMBER 31, 1997 AND MARCH 31, 1997
                                        
<TABLE> 
<CAPTION>  
 
                                                                       As At
                                                ---------------------------------------------------- 
                                                March 31, 1998      Dec. 31, 1997     March 31, 1997
                                                ---------------     -------------     --------------
                                                               (Thousands of Dollars)                             

ASSETS

UTILITY PLANT, AT ORIGINAL COST
           
<S>                                            <C>                   <C>               <C>           
    Electric                                    $11,805,558           $11,743,745       $11,678,164  
    Gas                                           1,759,293             1,741,562         1,665,996  
    Steam                                           582,332               576,206           538,924  
    General                                       1,210,805             1,203,427         1,160,419  
                                                -----------           -----------       -----------  
             Total                               15,357,988            15,264,940        15,043,503  
        Less: Accumulated depreciation            4,481,414             4,392,377         4,371,046  
                                                -----------           -----------       -----------  
             Net                                 10,876,574            10,872,563        10,672,457  
    Construction work in progress                   284,725               292,218           309,315  
    Nuclear fuel assemblies and components,                                                          
        less accumulated amortization               103,690               102,321           100,720  
                                                -----------           -----------       -----------  
             NET UTILITY PLANT                   11,264,989            11,267,102        11,082,492  
                                                -----------           -----------       -----------   
 
CURRENT ASSETS
     
<S>                                             <C>                  <C>                <C>        
    Cash and temporary cash investments              98,216               183,458            94,903 
    Funds held for refunding of debt                      -               328,874                 - 
    Accounts receivable  customer, less                                                             
        allowance for uncollectible accounts                                                        
        of $22,372, $21,600 and $21,535             541,322               581,163           570,595 
    Other receivables                                43,780                60,759            36,497 
    Regulatory accounts receivable                    3,888                (1,682)           60,954 
    Fuel, at average cost                            38,985                53,697            45,946 
    Gas in storage, at average cost                  29,577                37,209            22,660 
    Materials and supplies, at average cost         192,698               191,759           203,675 
    Prepayments                                     188,321                75,516           170,852 
    Other current assets                             16,688                16,457            15,453 
                                                  ---------             ---------         --------- 
          TOTAL CURRENT ASSETS                    1,153,475             1,527,210         1,221,535 
                                                  ---------             ---------         ---------  
                                                                                                  
INVESTMENTS AND NONUTILITY PROPERTY                 244,370               292,397           193,894 
                                                  ---------             ---------         ---------  
 
DEFERRED CHARGES

<S>                                             <C>                  <C>                <C>          
    Enlightened Energy program costs                102,349               117,807           128,204
    Unamortized debt expense                        138,262               126,085           128,234   
    Recoverable fuel costs                           25,613                98,301            52,389   
    Power contract termination costs                 69,594                80,978            46,848   
    Other deferred charges                          254,270               239,559           289,795   
                                                -----------           -----------       -----------   
                                                                                                      
        TOTAL DEFERRED CHARGES                      590,088               662,730           645,470   
                                                -----------           -----------       -----------   
                                                                                                      
REGULATORY ASSET-FUTURE FEDERAL                                                                       
    INCOME TAXES                                    938,053               973,079           967,977   
                                                -----------           -----------       -----------   
                                                                                                      
                         TOTAL                  $14,190,975           $14,722,518       $14,111,368   
                                                ===========           ===========       ===========    
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
 
                                      -10-

                 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                                 BALANCE SHEET
           AS AT MARCH 31, 1998, DECEMBER 31, 1997 AND MARCH 31, 1997
                                        
<TABLE> 
<CAPTION>  
 
                                                                                 As At                                
                                                          ---------------------------------------------------- 
                                                          March 31, 1998      Dec. 31, 1997     March 31, 1997 
                                                          ---------------     -------------     -------------- 
                                                                         (Thousands of Dollars)                 

CAPITALIZATION AND LIABILITIES

CAPITALIZATION
 
<S>                                                         <C>               <C>               <C>            
  Common stock                                              $ 1,482,351       $ 1,482,351       $ 1,478,647   
  Retained earnings                                           4,335,539         4,484,703         4,322,562   
  Capital stock expense                                         (36,966)          (36,975)          (34,831)  
                                                            -----------       -----------       -----------   
TOTAL COMMON SHAREHOLDERS' EQUITY                             5,780,924         5,930,079         5,766,378   
                                                            -----------       -----------       -----------   
 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                                         -                 -             4,519   
                                                            -----------       -----------       -----------   
                TOTAL OTHER PREFERRED STOCK                     233,468           233,468           237,987   
                                                            -----------       -----------       -----------   
                      TOTAL PREFERRED STOCK                     318,018           318,018           322,537   
                                                            -----------       -----------       -----------   
 Long-term debt                                               4,198,152         4,188,906         4,239,066   
                                                            -----------       -----------       -----------   
                       TOTAL CAPITALIZATION                  10,297,094        10,437,003        10,327,981   
                                                            -----------       -----------       -----------     
 
  NONCURRENT LIABILITIES
              
<S>                                                             <C>               <C>               <C>          
Obligations under capital leases                                 39,180            39,879            41,958      
Other noncurrent liabilities                                    111,433           106,137            81,800      
                                                            -----------       -----------       -----------      
               TOTAL NONCURRENT LIABILITIES                     150,613           146,016           123,758      
                                                            -----------       -----------       -----------       

CURRENT LIABILITIES

<S>                                                        <C>               <C>               <C>                    
  Long-term debt due within one year                            200,000           529,385           103,762 
  Accounts payable                                              356,606           440,114           352,461           
  Customer deposits                                             163,983           161,731           159,176           
  Accrued taxes                                                 116,795            65,736           109,052           
  Accrued interest                                               66,557            85,613            67,706           
  Accrued wages                                                  80,509            82,556            78,300           
  Other current liabilities                                     181,635           183,122           145,787           
                                                            -----------       -----------       -----------           
                  TOTAL CURRENT LIABILITIES                   1,166,085         1,548,257         1,016,244           
                                                            -----------       -----------       -----------           
 
PROVISIONS RELATED TO FUTURE FEDERAL INCOME TAXES
 AND OTHER DEFERRED CREDITS
 Accumulated deferred federal income tax                      2,308,092         2,307,835         2,299,747  
 Accumulated deferred investment tax credits                    161,490           163,680           170,290  
 Other deferred credits                                         107,601           119,727           173,348  
                                                            -----------       -----------       -----------  
                     TOTAL DEFERRED CREDITS                   2,577,183         2,591,242         2,643,385  
                                                            -----------       -----------       -----------  
                                      TOTAL                 $14,190,975       $14,722,518       $14,111,368  
                                                            ===========       ===========       ===========   
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
 
                                      -11-

                 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                               INCOME STATEMENT
              FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997

<TABLE> 
<CAPTION> 
                                                                 1998                        1997                 
                                                                 ----                        ----          
                                                                                                           
                                                                               (THOUSANDS OF DOLLARS)      
                                                                           --------------------------      
OPERATING REVENUES
          
<S>                                                         <C>                       <C>           
     Electric                                                $1,293,759                   $1,268,950  
     Gas                                                        399,715                      455,020  
     Steam                                                      135,794                      162,178  
                                                             ----------                   ----------  
                  TOTAL OPERATING REVENUES                    1,829,268                    1,886,148  
                                                             ----------                   ----------  
                                                                                                      
OPERATING EXPENSES                                                                                    
     Purchased power                                            347,563                      352,708  
     Fuel                                                       134,554                      151,354  
     Gas purchased for resale                                   164,710                      222,712  
     Other operations                                           282,218                      276,839  
     Maintenance                                                117,975                      114,163  
     Depreciation and amortization                              128,052                      123,752  
     Taxes, other than federal income tax                       302,118                      304,962  
     Federal income tax                                          94,140                       92,140  
                                                             ----------                   ----------  
                  TOTAL OPERATING EXPENSES                    1,571,330                    1,638,630  
                                                             ----------                   ----------  
                                                                                                      
OPERATING INCOME                                                257,938                      247,518  
                                                                                                      
OTHER INCOME (DEDUCTIONS)                                                                             
     Investment income                                            1,043                          844  
     Allowance for equity funds used during construction            512                        1,800  
     Other income less miscellaneous deductions                    (503)                      (1,220) 
     Federal income tax                                            (404)                         (50) 
                                                             ----------                   ----------  
                        TOTAL OTHER INCOME                          648                        1,374  
                                                             ----------                   ----------  
                                                                                                      
INCOME BEFORE INTEREST CHARGES                                  258,586                      248,892  
                                                                                                      
Interest on long-term debt                                       79,058                       78,752  
Other interest                                                    1,247                        4,414  
Allowance for borrowed funds used during construction              (263)                        (882) 
                                                             ----------                   ----------  
                      NET INTEREST CHARGES                       80,042                       82,284  
                                                             ----------                   ----------  
                                                                                                      
NET INCOME                                                      178,544                      166,608  
PREFERRED STOCK DIVIDEND REQUIREMENTS                            (4,536)                      (4,604) 
                                                             ----------                   ----------  
NET INCOME FOR COMMON STOCK                                  $  174,008                   $  162,004  
                                                             ==========                   ==========   

  CON EDISON SALES
                                   
<S>                                                          <C>                          <C>           
     Electric (Thousands of kilowatthours)                                                              
       Con Edison customers                                   9,030,401                    8,931,868    
       DELIVERY SERVICE TO NYPA AND OTHERS                    2,254,597                    2,221,333    
                                                                                                        
       Service for municipal agencies                           199,624                      214,061    
                                                             ----------                   ----------    
           Total sales in service territory                  11,484,622                   11,367,262    
       Off-system sales                                         348,781                   311,778(A)    
     Gas (dekatherms)                                                                                   
        Firm (B)                                             36,439,826                   39,273,950    
        Off-peak firm/interruptible                           7,540,851                    8,204,203    
                                                             ----------                   ----------    
            Total sales to Con Edison customers              43,980,677                   47,478,153    
        Transportation of customer-owned gas                                                            
            NYPA                                              1,083,614                    2,700,208    
            Others                                            3,587,326                    1,717,334    
         Off-system sales                                     5,332,301                    3,505,393    
                                                             ----------                   ----------    
             Total sales and transportation                  53,983,918                   55,401,088    
     Steam (Thousands of pounds)                              8,985,674                   10,140,688     
</TABLE>

(A) Includes 63,800 thousands of kWh, subsequently purchased by Con Edison for
    sale to its customers.
(B) Includes firm transportation for customer aggregation.
The accompanying notes are an integral part of these financial statements.
<PAGE>
 
                                      -12-



                 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                               INCOME STATEMENT
              FOR THE TWELVE MONTHS ENDED MARCH 31, 1998 AND 1997

<TABLE> 
<CAPTION> 
                                                                 1998                        1997                 
                                                                 ----                        ----          
                                                                                                           
                                                                               (THOUSANDS OF DOLLARS)      
                                                                           --------------------------      
  OPERATING REVENUES
                     
<S>                                                         <C>                       <C>           
     Electric                                               $  5,660,384                 $  5,523,800 
     Gas                                                       1,038,575                    1,063,225 
     Steam                                                       365,415                      391,494 
                                                            ------------                 ------------ 
            TOTAL OPERATING REVENUES                           7,064,374                    6,978,519 
                                                            ------------                 ------------ 
                                                                                                      
OPERATING EXPENSES                                                                                    
     Purchased power                                           1,344,276                    1,321,564 
     Fuel                                                        580,024                      540,741 
     Gas purchased for resale                                    421,216                      460,143 
     Other operations                                          1,114,224                    1,162,695 
     Maintenance                                                 478,600                      447,944 
     Depreciation and amortization                               507,079                      487,599 
     Taxes, other than federal income tax                      1,178,237                    1,165,125 
     Federal income tax                                          384,910                      384,260 
                                                            ------------                 ------------ 
            TOTAL OPERATING EXPENSES                           6,008,566                    5,970,071 
                                                            ------------                 ------------ 
                                                                                                      
OPERATING INCOME                                               1,055,808                    1,008,448 
                                                                                                      
OTHER INCOME (DEDUCTIONS)                                                                             
     Investment income                                            11,753                        7,734 
     Allowance for equity funds used during construction           3,160                        4,755 
     Other income less miscellaneous deductions                  (17,979)                      (9,293)
     Federal income tax                                            2,836                        1,340 
                                                            ------------                 ------------ 
                  TOTAL OTHER INCOME                                (230)                       4,536 
                                                            ------------                 ------------ 
                                                                                                      
INCOME BEFORE INTEREST CHARGES                                 1,055,578                    1,012,984 
                                                                                                      
                                                                                                      
Interest on long-term debt                                       318,464                      312,203 
Other interest                                                    13,916                       16,893 
Allowance for borrowed funds used during construction             (1,561)                      (2,270)
                                                            ------------                 ------------ 
                NET INTEREST CHARGES                             330,819                      326,826 
                                                            ------------                 ------------ 
                                                                                                      
NET INCOME                                                       724,759                      686,158 
PREFERRED STOCK DIVIDEND REQUIREMENTS                            (18,276)                     (18,429)
                                                            ------------                 ------------ 
NET INCOME FOR COMMON STOCK                                 $    706,483                 $    667,729 
                                                            ============                 ============ 
                                                                                                      
CON EDISON SALES                                                                                      
     Electric (Thousands of kilowatthours)                                                            
      Con Edison customers                                    37,626,512                   36,962,401 
       Delivery service to NYPA and others                     8,826,642                    8,718,372 
       Service for municipal agencies                            831,459                      723,899 
                                                            ------------                 ------------ 
           Total sales in service territory                   47,284,613                   46,404,672 
       Off-system sales (A)                                    2,536,590                    4,068,429 
     Gas (dekatherms)                                                                                 
        Firm (B)                                              90,659,667                   93,211,622 
        Off-peak firm/interruptible                           23,248,182                   21,656,329 
                                                            ------------                 ------------ 
            Total sales to Con Edison customers              113,907,849                  114,867,951 
        Transportation of customer-owned gas                                                          
            NYPA                                              15,425,100                    7,487,843 
            Others                                             9,526,866                    6,268,814 
         Off-system sales                                     15,785,892                   10,949,867 
                                                            ------------                 ------------ 
             Total sales and transportation                  154,645,707                  139,574,475 
     Steam (Thousands of pounds)                              26,267,547                   28,271,763  
 
</TABLE>

(A) Includes 865,683 and 1,617,564  thousands of kWh, respectively, subsequently
    purchased by Con Edison for sale to its customers.
(B) Includes firm transportation for customer aggregation.
The accompanying  notes are an integral part of these financial statements.
<PAGE>
 
                                      -13-

                 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                            STATEMENT OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
                                        
<TABLE> 
<CAPTION> 
                                                                 1998                        1997                 
                                                                 ----                        ----          
                                                                                                           
                                                                               (THOUSANDS OF DOLLARS)      
                                                                           --------------------------      
OPERATING ACTIVITIES
        
<S>                                                         <C>                       <C>           
     Net income                                                  $ 178,544                 $ 166,608  
     PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME                                                   
        Depreciation and amortization                              128,052                   123,752  
        Deferred recoverable fuel costs                             72,688                    49,073  
        Federal income tax deferred                                 32,290                    24,310  
        Common equity component of allowance                                                          
             for funds used during construction                       (498)                   (1,749) 
        Other non-cash credits                                      (5,475)                      (56) 
     CHANGES IN ASSETS AND LIABILITIES                                                                
         Accounts receivable  customer, less                                                          
             allowance for uncollectibles                           16,917                   (26,591) 
         Regulatory accounts receivable                             (5,570)                  (15,557) 
         Materials and supplies, including fuel                                                       
             and gas in storage                                     21,405                    42,208  
         Prepayments, other receivables and                                                           
             other current assets                                 (102,368)                 (101,087) 
         Enlightened Energy program costs                           15,458                     5,514  
         Power contract termination costs                            6,912                    11,620  
         Cost of removal less salvage                              (17,968)                  (13,241) 
         Accounts payable                                          (58,858)                  (78,654) 
         Accrued income taxes                                       62,254                    68,364  
         Other  net                                                (53,669)                    5,270  
                                                                 ---------                 ---------  
             NET CASH FLOWS FROM OPERATING ACTIVITIES              290,114                   259,784  
                                                                 ---------                 ---------   

INVESTING ACTIVITIES INCLUDING CONSTRUCTION
            
<S>                                                             <C>                       <C>          
         Construction expenditures                                (120,602)                 (127,723)  
         Nuclear fuel expenditures                                  (1,370)                   (3,149)  
         Contributions to nuclear decommissioning trust             (5,325)                  (12,127)  
         Common equity component of allowance                                                          
             for funds used during construction                        498                     1,749   
                                                                  --------                  --------   
             NET CASH FLOWS FROM INVESTING ACTIVITIES                                                  
                 INCLUDING CONSTRUCTION                           (126,799)                 (141,250)  
                                                                  --------                  --------    

FINANCING ACTIVITIES INCLUDING DIVIDENDS
            
<S>                                                              <C>                        <C>
         Issuance of long-term debt                                285,000                         -
         Retirement of long-term debt                                    -                    (2,494)  
         Advance refunding of long-term debt                      (605,240)                        -   
         Issuance and refunding costs                               (6,441)                      (36)
         Funds held for refunding of debt                          328,874                         -     
         Common stock dividends                                   (124,810)                 (123,377)   
         Preferred stock dividends                                  (4,536)                   (4,606)   
         Corporate reorganization                                 (121,404)                        -   
                                                                  ---------                  --------  
             NET CASH FLOWS FROM FINANCING ACTIVITIES 
                 INCLUDING DIVIDENDS                              (248,557)                 (130,513)                         
                                                                  ---------                  --------  
                                                                  
NET DECREASE IN CASH AND TEMPORARY                                                                     
    CASH INVESTMENTS                                                                                   
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1                   (85,242)                  (11,979)  
                                                                   183,458                   106,882   
CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31                  ---------                  --------   
                                                                 $  98,216                    94,903   
                                                                 =========                  ========    
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    

 Cash paid during the period for:
    Interest                                                    $   89,672                  $ 91,181    
    Income taxes                                                         -                         - 

</TABLE> 
The accompanying notes are an integral part of these financial statements.
<PAGE>
 
                                    -14-

                 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                 --------------------------------------------
                            STATEMENT OF CASH FLOWS
                            -----------------------
              FOR THE TWELVE MONTHS ENDED MARCH 31, 1998 AND 1997
              ---------------------------------------------------

<TABLE>
<CAPTION>
                                                                        1998             1997
                                                                        ----             ----
                                                                        (Thousands of Dollars)
<S>                                                                     <C>          <C>
OPERATING ACTIVITIES
     Net income                                                        $  724,759     $686,158
     PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME                               
        Depreciation and amortization                                     507,079      487,599
        Deferred recoverable fuel costs                                    26,776       10,911
        Federal income tax deferred                                        30,600       20,020
        Common equity component of allowance                                      
             for funds used during construction                            (3,070)      (4,538)
        Other non-cash charges                                             11,849       23,873
     CHANGES IN ASSETS AND LIABILITIES                                            
         Accounts receivable  customer, less                                      
             allowance for uncollectibles                                   6,349       15,983
         Regulatory accounts receivable                                    57,066      (61,837)
         Materials and supplies, including fuel                                   
             and gas in storage                                            11,021       (2,874)
         Prepayments, other receivables and                                       
             other current assets                                         (32,299)       8,414
         Enlightened Energy program costs                                  25,855        6,057
         Power contract termination costs                                   6,843       45,048
         Cost of removal less salvage                                     (78,446)     (69,568)
         Accounts payable                                                  28,796      (32,100)
         Accrued income taxes                                              17,715       17,129
         Other  net                                                       (72,023)      27,810
                                                                       ----------    ---------
             NET CASH FLOWS FROM OPERATING ACTIVITIES                   1,268,870    1,178,085
                                                                       ----------   ----------
INVESTING ACTIVITIES INCLUDING CONSTRUCTION
         Construction expenditures                                       (647,100)    (672,068)
         Nuclear fuel expenditures                                        (12,800)     (51,199)
         Contributions to nuclear decommissioning trust                   (14,499)     (21,301)
         Common equity component of allowance                                     
             for funds used during construction                             3,070        4,538
                                                                        ---------    ---------
             NET CASH FLOWS FROM INVESTING ACTIVITIES
                 INCLUDING CONSTRUCTION                                  (671,329)    (740,030)
                                                                        ----------   ----------
FINANCING ACTIVITIES INCLUDING DIVIDENDS
         Issuance of long-term debt                                       765,000       50,000
         Retirement of long-term debt                                    (103,762)      82,812)
         Advance refunding of long-term debt                             (605,240)      95,329)
         Issuance and refunding costs                                     (15,335)      (9,864)
         Common stock dividends                                          (495,144)      89,951)
         Preferred stock dividends                                        (18,343)      18,428)
         Corporate reorganization                                        (121,404)          -
                                                                       ----------       -------
             NET CASH FLOWS FROM FINANCING ACTIVITIES                                  
                 INCLUDING DIVIDENDS                                     (594,228)    (446,384)
                                                                       ----------       -------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY
     CASH INVESTMENTS                                                       3,313       (8,329)    
CASH AND TEMPORARY CASH INVESTMENTS AT                                                             
    BEGINNING OF PERIOD                                                    94,903      103,232     
                                                                       ----------   ----------     
CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31                        $   98,216   $   94,903     
                                                                       ==========   ==========     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    Cash paid during the period for:
         Interest                                                      $  308,801     $306,606
         Income taxes                                                     335,631      346,755
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>

                                      -15

NOTE A - GENERAL

These footnotes accompany and form an integral part of  (i) the interim
consolidated financial statements of Consolidated Edison, Inc. ("CEI") and its
subsidiaries, including Consolidated Edison Company of New York, Inc. ("Con
Edison"), the regulated utility, and several non-utility subsidiaries, and (ii)
the interim consolidated financial statements of Con Edison on a stand-alone
basis.  These financial statements are unaudited but, in the respective opinions
of the managements of CEI and Con Edison, represent all adjustments (which
include only normally recurring adjustments) necessary for a fair statement of
the results for the interim periods presented. These financial statements should
be read together with the audited financial statements (including the notes
thereto) included in the combined CEI and Con Edison Annual Reports on Form 10-K
for the year ended December 31, 1997 (the "1997 Form 10-K").


NOTE B -  CONTINGENCIES

INDIAN POINT Nuclear  generating units similar in design to Con Edison'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 NRC criteria,  Con Edison estimates that steam
generator replacement will not be required  before  2001.  Con Edison has
replacement steam generators,  which are stored at the site.  Replacement of the
steam generators would require estimated additional  expenditures of
approximately $108 million (1997 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 Con Edison's nuclear
facilities for property damage,  excess property damage, and outage costs permit
assessments under certain conditions to cover insurers' losses. As of March 31,
1998,  the highest amount that could be assessed for losses during the current
policy year under all of the policies was $24 million. While assessments may
also be made for losses in certain prior years,  Con Edison is not aware of any
losses in such years that 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, Con Edison 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.


ENVIRONMENTAL  MATTERS The normal course of Con Edison's operations necessarily
involves activities and substances that expose it 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>
 
                                      -16-


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.  Con Edison 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 Con Edison (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) that
Con Edison will be obligated to pay with  respect to each of these sites range
from extremely preliminary to highly refined.  Based on these estimates Con
Edison had accrued at  March 31, 1998 a  liability  of approximately $24.7
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 Con Edison agreed to a consent order settling a civil
administrative proceeding instituted by the DEC alleging environmental
violations by Con Edison.  Pursuant to the consent order,  Con Edison has
conducted an environmental management systems evaluation and an environmental
compliance audit.  Con Edison also must implement "best management  practices"
plans for certain facilities and undertake a remediation program at certain
sites. At March 31, 1998, Con Edison had an accrued liability of $16.7 million
for these sites. Expenditures for environmental-related capital projects in the
five years 1998-2002,  including expenditures to comply with the consent order,
are estimated at $148  million.  These estimated expenditures do not reflect
divestiture by Con Edison of generating plants pursuant to the Settlement
Agreement (see Note A to the financial statements included in the 1997 Form 10-
K) or otherwise.

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

EMF Electric and magnetic  fields (EMF) are found wherever electricity is used.
In the event 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 Con
Edison.
<PAGE>
 
                                      -17-



ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

          The following discussion and analysis relates to (i) the interim
consolidated financial statements of Consolidated Edison, Inc. (CEI) and its
subsidiaries, including Consolidated Edison Company of New York, Inc. (Con
Edison), the regulated utility, and several non-utility subsidiaries, and (ii)
the interim consolidated financial statements of Con Edison on a stand-alone
basis. CEI is a holding company, operates only through its subsidiaries and has
no material assets other than the stock of its subsidiaries.  Con Edison  is the
principal subsidiary of CEI.   Unless otherwise indicated, the discussion and
analysis in this report applies to each of CEI and Con Edison.  References in
this report to the "Company" are to CEI and Con Edison, collectively.

          This discussion and analysis should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations in Item 7 of the combined CEI and Con Edison Annual Reports on Form
10-K for the year ended December 31, 1997 (File Nos. 1-4514 and 1-1217, the 1997
Form 10-K). Reference is also made to the notes to the financial statements in
Item 1 of this report, which notes are incorporated herein by reference.


LIQUIDITY AND CAPITAL RESOURCES


     Con  Edison  cash   balances   reflect   the  January  1,  1998   corporate
reorganization.  See "Corporate Structure" in Item 1 of the 1997 10-K. Net cash
flows in the first quarter of 1998 were higher than in the first quarter of 1997
due  principally  to higher  cash flows from  operating  activities  and reduced
construction  expenditures.  The cash balances also reflect, among other things,
the issuance of $150 million of five-year floating rate debentures in June 1997.
 
        Con Edison initiated a $500 million commercial paper program in January
1998. The highest amount outstanding at any one time was $195 million. There was
no commercial paper outstanding at March 31, 1998.

        Con Edison's interest coverage for the 12 months ended March 31, 1998
was 4.15 times compared with 4.09 times for the year 1997 and 4.08 times for the
12 months ended March 31, 1997.

        For information about securities refunded by Con Edison during the first
quarter of 1998, see "Liquidity and Capital Resources-Refundings" in Item 7 of
the 1997 Form 10-K.


        Con Edison's equivalent number of days of revenue outstanding as
customer accounts receivable was 28.9 days at March 31, 1998 compared with 28.2
days at December 31, 1997 and 28.6 days at March 31, 1997.

        Regulatory accounts receivable represent amounts to be recovered from
(or refunded to) customers pursuant to the partial pass-through fuel adjustment
clause (PPFAC) described in Note A (Summary of Significant Accounting Policies)
to the financial statements included in the 1997 Form 10-K. Regulatory accounts
receivable at March 31, 1997 also included amounts to be recovered from
customers under the modified Electric Revenue Adjustment Mechanism (ERAM) and
incentive provisions of the 1995 electric rate agreement, which were eliminated,
effective April 1, 1998, pursuant to the September 1997 settlement agreement
among Con Edison, the staff of the Public Service Commission and certain other
parties (the Settlement Agreement). For additional information about the
Settlement Agreement, see "Transition to Competition," below.
 
        In January 1998 Con Edison made a $238.7 million semi-annual prepayment
to New York City for property taxes. The prepayment balance at March 31, 1998
includes the unamortized portion ($119.3 million) of this payment. A similar
prepayment was made in January 1997.
<PAGE>
 
                                      -18-

        Recoverable fuel costs amounted to $25.6 million at March 31, 1998
compared with $98.3 million at December 31, 1997 and $52.4 million at March 31,
1997, reflecting the ongoing recovery of previously deferred amounts and the
changes in purchased power, fuel and gas purchased for resale discussed below in
"Results of Operations."

Transition to Competition

        The Settlement Agreement in the Competitive Opportunities proceeding
provides for a transition to a competitive electric market through the
development of a "retail access" plan, a rate plan for the period ending March
31, 2002, a reasonable opportunity for recovery of "strandable costs" and the
divestiture by Con Edison to unaffiliated third parties of at least 50 percent
of its New York City fossil-fueled electric generating capacity. For additional
information about the transition to competition and the Settlement Agreement,
see "Liquidity and Capital Resources Competition and Industry Restructuring and
PSC Settlement Agreement" in Item 7 of the 1997 Form 10-K.

        In April 1998 more than 75,000 Con Edison customers representing 1,555
megawatts of aggregate customer load applied for participation in the June 1998
first phase of Retail Choice, Con Edison's retail access plan under the
Settlement Agreement. Because demand to participate in Retail Choice was so
strong, Con Edison expanded the first phase from 500 megawatts to 1,000
megawatts of load. A lottery was conducted for certain classes of customers to
determine which customers may participate in the first phase. These customers
will no longer receive their energy supply from Con Edison but the delivery of
the energy will still take place through Con Edison's transmission and
distribution system.

       In April 1998 Con Edison proposed a long-range plan for its steam
system. Under the plan, Con Edison proposes to sell at auction a number of its
steam-electric generating plants. The plan is subject to review by the PSC. For
information about Con Edison's plans to divest electric generating capacity, see
"Electric Facilities - Generating Facilities" in Item 2 of the 1997 Form 10-K.

 Acquisition

        In May 1998 CEI agreed to acquire Orange and Rockland Utilities, Inc.
("O&R") for cash at a price of $58.50 per share of O&R common stock
(approximately $790 million in aggregate) pursuant to an Agreement and Plan of
Merger among the parties. The acquisition is to be accomplished through the
merger of O&R into C Acquisition Corp., a CEI subsidiary. The transaction
is subject to certain conditions, including the approval of the holders of O&R's
common stock and the approval of the New York, New Jersey and Pennsylvania
utility regulators, the Federal Energy Regulatory Commission and the Securities
and Exchange Commission. The transaction is not subject to the approval of CEI's
shareholders.

Financial Market Risks

     Reference is made to  "Liquidity  and Capital  Resources  Financial  Market
Risks" in Item 7 of the 1997 Form 10-K.  Consolidated  Edison Solutions,  Inc, a
subisidary of CEI,  ("Con Edison  Solutions")  assumes  commodity  price risk by
offering  its  customers  fixed  prices for  electricity  and natural  gas.  See
"Transition  to  Competition,"  above.  Con Edison  Solutions  hedges  this risk
through forward purchases of physical supply,  capacity and  transportation  and
the use of  derivatives.  At  March  31,  1998  neither  the  fair  value of the
derivatives   outstanding  nor  potential,   near-term  derivative  losses  from
reasonably  possible  near-term  changes in market  prices were  material to the
financial position, results of operations or liquidity of the Company.
<PAGE>
 
                                      -19-



Nuclear Generation

     Con Edison's Indian Point 2 nuclear generating unit has been out of service
since October 15, 1997 for unscheduled maintenace.  In April 1998 Con Edison was
advised by the Nuclear  Regulatory  Commission  (NRC) that it would  monitor Con
Edison's restart activities and performance  improvement  initiatives for Indian
Point 2. Prior to  restart,  Con Edison  must  resolve  process  weaknesses  and
equipment  deficiencies  that were  addressed  in a March 1998 NRC  Confirmatory
Action  Letter.  Additional  issues may also arise that will have to be resolved
prior to restart. In May 1998 an independent safety assessment of Indian Point 2
concluded that it is being operated safely, but that there are significant plant
management and  organizational  issues that should be addressed.  For additional
information  about  Indian  Point  2,  see  "Electric  Facilities  -  Generating
Facilities" in Item 2 and "Nuclear Generation" in Item 7 of the 1997 Form 10-K.


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.

Forward-Looking Statements

        This discussion and analysis 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, regulatory policies or public policy doctrines, technological
developments and other presently unknown or unforeseen factors.

RESULTS OF OPERATIONS


        CEI's net income for common stock for the first quarter and 12 months
ended March 31, 1998 was higher than in the corresponding 1997 periods by $9.9
million ($.04 per share) and $36.7 million ($.15 per share), respectively, as
continued cost reduction programs and ongoing voluntary attrition in the labor
force offset the effects of mild winter weather and expenses incurred during the
current outage of Indian Point 2. Twelve-month earnings were higher for the same
reasons and because of increased gas sales to non-firm customers.

        CEI's results of operations include the net after-tax losses of its non-
utility subsidiaries: $3.2 million ($.01 a share) in the first quarter of 1998;
$0.4 million ($.00 a share) in the first quarter of 1997; $12.3 million ($.05 a
share) for the 12 months ended March 1998; and $1.0 million ($.00 a share) for
the 12 months ended March 1997. CEI's investment in its non-utility subsidiaries
was $107.8 million at March 31, 1998. For additional information about CEI's 
non-utility subsidiaries, see "Competitive Businesses and Competition" in 
Item 1 of the 1997 Form 10-K.

        The impact of weather on the Company's earnings depends on Con Edison's
various rate agreements. The modified ERAM, which was eliminated effective April
1, 1997, removed from earnings the impact of variations in forecasted electric
sales due to weather. See "1995 Electric Rate Agreement" in Item 7 of the 1997
Form 10-K. Most weather-related variations in gas sales do not affect earnings,
while weather-related variations in steam sales do affect earnings.
<PAGE>
 
                                      -20-
                                        

Increases (Decreases)
---------------------

<TABLE> 
<CAPTION> 

                                                   Three Months Ended                 Twelve Months Ended               
                                                     March 31, 1998                      March 31, 1998           
                                                     Compared With                       Compared With            
                                                   Three Months Ended                 Twelve Months Ended         
                                                     March 31, 1997                      March 31, 1997           
                                                  ----------------------           -------------------------      
                                                  Amount         Percent           Amount           Percent       
                                                  ------         -------           ------           -------       
                                                         (Amounts are for CEI and are in millions)                
                                                          ---------------------------------------                  
 
<S>                                             <C>             <C>               <C>                <C>        
Operating revenues                               $(62.5)        (3.3)%            $  (4.3)           (0.1)% 
Purchased power  electric and steam                 5.6           1.6                33.6              2.5  
Fuel  electric and steam                          (16.8)        (11.1)               39.3              7.3  
Gas purchased for resale                          (62.3)        (24.7)             (128.2)           (20.7) 
                                                 ------                           -------                   
Operating revenues less purchased                                                                           
    power, fuel and gas purchased for                                                                       
    resale (Net revenues)                          11.0           1.0                51.0              1.1  
                                                                                                            
Other operations and maintenance                    1.5           0.4               (12.8)            (0.8) 
Depreciation and amortization                       4.5           3.6                20.2              4.1  
Taxes, other than federal                                                                                   
    income tax                                     (2.8)         (0.9)               13.2              1.1  
Federal income tax                                  0.1           0.1                (5.9)            (1.5) 
                                                 ------                           -------                   
                                                                                                            
Operating income                                    7.7           3.1                36.3              3.6  
                                                                                                            
Other income less deductions and                                                                            
    related federal income tax                     (0.1)         (3.9)                4.2             67.0  
Net interest charges                               (2.2)         (2.7)                4.0              1.2  
                                                 ------                           -------                   
                                                                                                            
Net income                                          9.8           5.9                36.5              5.3  
                                                                                                            
Preferred stock dividend                                                                                    
    requirements                                    0.1           1.5                 0.2              0.8  
Gain on refunding of preferred stock                  -             -                   -                -   
                                                 ------   

Net income for common stock                      $  9.9           6.1%            $  36.7              5.5%  
                                                 =======                          ========              
                      
</TABLE>
<PAGE>
 
                                      -21-


First Quarter 1998 Compared with
First Quarter 1997
---------------------------------

        CEI's net revenues (operating revenues less purchased power, fuel and
gas purchased for resale) increased $11.0 million in the first quarter of 1998
compared with the 1997 period. Electric, gas and non-utility net revenues
increased $7.8 million, $2.2 million and $2.0 million, respectively. Steam net
revenues decreased $1.0 million.

        Electric net revenues in the 1998 period were higher than in the 1997
period primarily as a result of higher sales, offset in part by the rate
reduction that went into effect in January 1998. See "PSC Settlement Agreement -
Rate Plan " in Item 7 of the 1997 Form 10-K. Earnings under the PPFAC incentive
mechanism were $3.6 million higher in the 1998 period than the 1997 period. The
continued outage of Indian Point 2 did not result in a penalty under the PPFAC
in the 1998 period because the maximum $10 million penalty for the rate year
ended March 31, 1998 was reached during 1997.

     Con Edison's electric sales, excluding off-system sales, in the 1998 period
compared with the 1997 period were:


                                           Millions of Kwhrs.
                           ------------------------------------------------
                           1st Quarter   1st Quarter               Percent
 Description                   1998          1997     Variation   Variation
 -----------               -----------   -----------  ---------   --------- 

Residential/Religious          2,653       2,642         11         0.4 %  
Commercial/Industrial          6,217       6,142         75         1.2 %  
Other                            161         148         13         8.8 %  
                              ------      ------     ------       

Total Con Edison Customers     9,031       8,932         99         1.1 %

NYPA, Municipal Agency
and Other Sales                2,454       2,435         19         0.8 %
                              ------      ------     ------       

Total Service Area            11,485      11,367        118         1.0 %



        For the 1998 period, Con Edison's firm gas sales volume (including firm
transportation) decreased 7.2 percent and off-peak firm/interruptible sales
decreased 8.1 percent compared with the 1997 period. Transportation of customer-
owned gas (other than gas transported for the New York Power Authority), which
comprised approximately seven percent of the gas Con Edison sold or transported
to customers in the 1998 period, increased 109 percent. Steam sales volume
decreased 11.4 percent compared with the 1997 period as a result of the warmer
winter weather in 1998.

        After adjusting for variations, primarily in weather and billing days in
each period, electric sales volume in Con Edison's service territory increased
1.4 percent in the 1998 period, firm gas sales volume (including firm
transportation) decreased 0.3 percent and steam sales volume decreased 2.3
percent.
<PAGE>
 
                                      -22-


     Electric  fuel costs  increased  $7.9  million in the 1998 period due to an
increase in the unit cost of fuel partially offset by lower electric generation.
Electric  purchased  power costs in the 1998  period  reflect  higher  purchased
volumes.  The  variations  in fuel and  purchased  power costs also reflect that
Indian Point 2 was out of service for a scheduled refueling for part of the 1997
period and the entire 1998 period.  Steam fuel costs  decreased $24.7 million in
the 1998 period due to decreased  generation of steam and lower unit cost. Steam
purchased power costs decreased $1.1 million due to lower purchased  volumes and
unit fuel cost.  Gas purchased for resale  decreased  reflecting  lower sendout,
lower unit cost of  purchased  gas and,  for CEI,  lower  sales by  Con
Edison Solutions.

        Other operations and maintenance expenses increased for the 1998 period
compared with the 1997 period, due primarily to expenses associated with the
current Indian Point 2 outage, partially offset by lower pension and retiree
benefits expenses and continued voluntary attrition in the labor force.

        Depreciation and amortization increased in the 1998 period due
principally to higher plant balances.

     In March 1998 Con Edison settled certain  outstanding  issues relating to a
tax audit for less than the related  expenses accrued in prior periods for taxes
and interest.  The reversal of this accrual was the principal reason that taxes,
other than federal income tax, and other interest charges  decreased in the 1998
period.


Twelve Months Ended March 31, 1998 Compared with
Twelve Months Ended March 31, 1997
------------------------------------------------

        CEI's net revenues increased $51.0 million in the 12 months ended March
31, 1998 compared with the 1997 period. Electric, gas, steam and non-utility net
revenues increased $34.5 million, $13.7 million, $0.5 million and $2.3 million,
respectively.


        Electric net revenues in the 1998 period were higher than in the
corresponding 1997 period due primarily to regulatory accounting provisions
related to Indian Point 2 refueling and maintenance outages (discussed in the
next paragraph) and a period of warmer than normal weather in July 1997,
partially offset by the implementation of the Settlement Agreement (including
the elimination of the modified ERAM, Enlightened Energy and customer service
incentives) for financial statement purposes effective April 1, 1997. Electric
net revenues in the 1997 period were increased by $66.8 million under the
modified ERAM. Electric net revenues in the 1998 period include $2.3 million for
incentive earnings compared with $45.8 million for the 1997 period.

     The accounting provisions of the Settlement Agreement and the 1995 electric
rate  agreement  for  recovery  of the  costs of the  scheduled  Indian  Point 2
refueling and maintenance  outage completed in July 1997 increased  electric net
revenues  in the 1998 period by $44.9  million  compared  with the 1997  period.
Under these  provisions,  amounts  collected  from  customers  for the estimated
expenses of scheduled  refueling  outages are deferred and are recognized during
the period when the actual expenses for the outage are incurred.  As a result of
this matching of revenues and expenses,  the $44.9 million  increase in electric
net revenues did not affect net income.

        Gas net revenues in the 1998 period reflect the retention of net
revenues from interruptible sales in accordance with the 1997 gas rate
agreement. Steam net revenues in the 1998 period reflect rate increases, offset
in part by weather-related sales decreases.
<PAGE>
 
                                      -23-


Con Edison's electric sales, excluding off-system sales, for the 1998 period 
compared with the 1997 period were:

                                           Millions of Kwhrs.
                         ----------------------------------------------------
                          Twelve  Months  Twelve  Months
                              Ended           Ended                  Percent
 Description              March 31, 1998  March 31, 1997  Variation Variation
 -----------             ---------------  --------------  --------- --------- 

Residential/Religious          1,014         10,800          214      2.0%
Commercial/Industrial         25,986         25,557          429      1.7%
Other                            627            606           21      3.5%
                              ------         ------       ------  
 
Total Con Edison Customers    37,627         36,963          664      1.8%

NYPA Municipal Agency
and Other Sales                9,658          9,442          216      2.3%
                              ------         ------       ------  

Total Service Area            47,285         46,405          880      1.9%
                              ======         ======       


        For the 1998 period, Con Edison's firm gas sales volume (including firm
transportation) decreased 2.7 percent and off-peak/interruptible sales increased
7.4 percent. Transportation of customer-owned gas (other than gas transported
for the New York Power Authority), which comprised approximately six percent of
the gas Con Edison sold or transported to customers in the 1998 period,
increased 52 percent. Steam sales volume decreased 7.1 percent compared with the
1997 period. The decreases in firm gas and steam sales volumes for the 1998
period were due primarily to milder than normal 1998 winter weather.

        After adjustment for variations, primarily weather and billing days, in
each period, electric sales volume in Con Edison's service territory in the 1998
period increased 1.6 percent. Similarly adjusted, firm gas sales volume
(including firm transportation) decreased 0.5 percent and steam sales volume
decreased 2.1 percent.

        Electric fuel costs increased $79.5 million in the 1998 period due to a
higher unit cost of fuel, partially offset by decreased generation of
electricity. Electric purchased power costs increased by $20.4 million in the
1998 period, reflecting increased purchased volumes and unit costs. The
variations in electric fuel and purchased power costs also reflect the greater
availability of Indian Point 2 in the 1997 period than in the 1998 period. Steam
fuel costs decreased $40.2 million in the 1998 period due to decreased
generation of steam by Con Edison and a lower unit cost of fuel. Steam purchased
power costs were $13.2 million higher reflecting greater purchased volumes. Gas
purchased for resale decreased reflecting a lower unit cost of fuel and, for
CEI, lower sales by Con Edison Solutions.

        Other operations and maintenance expenses decreased in the 1998 period
due primarily to lower pension, retiree benefits and health insurance costs and
continued voluntary attrition of the labor force, partially offset by expenses
associated with Indian Point 2 outages.

        Depreciation and amortization increased in the 1998 period due
principally to higher plant balances.
<PAGE>
 
                                      -24-


        Taxes, other than federal income tax, increased in 1998 period compared
with the 1997 period due primarily to higher property taxes.

        Other income less miscellaneous deductions reflects increased investment
income in 1998 from higher temporary cash investment balances. For Con Edison,
it also reflects losses from non-utility subsidiaries prior to January 1, 1998
corporate reorganization.  See "Corporate Structure" in Item 1 of the 1997 Form
10-K.

        Interest on long-term debt for the 1998 period increased $6.3 million
principally as a result of new Con Edison debt issues.



ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


     For information about the Company's primary market risks associated with
activities in derivative financial instruments, other financial instruments and
derivative commodity instruments, see "Liquidity and Capital Resources -
Financial Market Risks" in Item 2 of this report and Item 7 of the 1997 Form
10-K.
<PAGE>
 
                                      -25-


PART II.  OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS


GRAMERCY PARK

        Reference is made to "Gramercy Park" in Part I, Item 3, Legal
Proceedings in the 1997 Form 10-K. In April 1998, Con Edison's term of probation
and court monitoring concluded as scheduled. The court order terminating the
probation cited Con Edison's "genuine and significant strides toward developing
and implementing an environmental compliance program." In the order, Con Edison
committed to maintain its environmental compliance program and to replace the
court-appointed monitor with an internal corporate ombudsman for a period of two
years.



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  EXHIBITS


Exhibit 3.2   By-Laws of Con Edison, effective May 18, 1998.

Exhibit 12    Statement of computation of Con Edison's ratio of earnings to
              fixed charges for the twelve-month periods ended March 31, 1998
              and 1997.

Exhibit 27.1  Financial Data Schedule for CEI.*

Exhibit 27.2  Financial Data Schedule for Con Edison.*

___________
*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


CEI and Con Edison each filed a Current Report on Form 8-K,  dated  December 12,
1997,  reporting (under Item 5) the approval and  implementation of the Holding
Company Proposal  discussed in Item 4 of the 1997 Form 10-K and the stock
repurchase  discussed  In  "Liquidity  and  Capital  Resources  -  Stock
Repurchase" in Item 7 of the 1997 Form 10-K.  Con Edison filed a Current  Report
on Form 8-K, dated January 29, 1998,  reporting (under Item 5) the sale of
debentures and refunding of certain series of outstanding debt securities.  No
other CEI or Con Edison Current Reports on Form 8-K were filed during the
quarter ended March 31, 1998. CEI and Con Edison each filed a Current Report on
Form 8-K, dated  May 10, 1998,  reporting the acquisition discussed in
"Liquidity  and Capital Resources - Acquisition" Item 2 of Part I of this
report.
<PAGE>
 
                                      -26-



                                   SIGNATURES
                                        


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


                           CONSOLIDATED EDISON, INC.



                           CONSOLIDATED EDISON COMPANY
                                OF NEW YORK, INC.



DATE:    May 14, 1998      By:  JOAN S. FREILICH
                                Joan S. Freilich
                                Executive Vice President,
                                Chief Financial Officer and
                                Duly Authorized Officer



DATE:    May 14, 1998      By:  HYMAN SCHOENBLUM
                                Hyman Schoenblum
                                Vice President, Controller and
                                Chief Accounting Officer