Consolidated Edison, Inc. (ED, NYSE)
Industry: Utilities - Regulated Electric
Annual report, fiscal year 2014


## 2014 ANNUAL REPORT





EVERYTHING MATTERS



WE POWER NEW YORK, ONE OF THE MOST DYNAMIC REGIONS IN THE WORLD, INVESTING $2 BILLION-PLUS A YEAR IN OUR COMPLEX ENERGY SYSTEMS.













<table><tr><td>FINANCIAL HIGHLIGHTS</td><td>2014</td><td>2013</td></tr><tr><td>(in millions, except per-share information and statistical data)</td><td></td><td></td></tr><tr><td>OPERATING REVENUES</td><td>$12,919</td><td>$12,354</td></tr><tr><td>NET INCOME FOR COMMON STOCK</td><td>$1,092</td><td>$1,062</td></tr><tr><td>BASIC EARNINGS PER COMMON SHARE</td><td>$3.73</td><td>$3.62</td></tr><tr><td>DIVIDENDS PER SHARE</td><td>$2.52</td><td>$2.46</td></tr><tr><td>DIVIDEND PAYOUT RATIO</td><td>68%</td><td>68%</td></tr><tr><td>AVERAGE COMMON SHARES OUTSTANDING</td><td>292.9</td><td>292.9</td></tr><tr><td>TOTAL ASSETS</td><td>$44,308</td><td>$40,647</td></tr><tr><td>CAPITAL EXPENDITURES</td><td>$2,721</td><td>$2,648</td></tr><tr><td>COMMON EQUITY RATIO</td><td>52%</td><td>53.9%</td></tr><tr><td>RETURN ON EQUITY</td><td>8.8%</td><td>8.9%</td></tr><tr><td>MARKET CAPITALIZATION</td><td>$19,300</td><td>$16,200</td></tr><tr><td>STOCK PRICE PER SHARE (YEAR END)</td><td>$66.01</td><td>$55.28</td></tr><tr><td>DIVIDEND YIELD (YEAR END)</td><td>3.8%</td><td>4.5%</td></tr><tr><td>TOTAL SHAREHOLDER RETURN</td><td>24.8%</td><td>3.8%</td></tr></table>

## OUR CRITICAL INFRASTRUCTURE INVESTMENTS

Consolidated Edison, Inc. Capital Program Forecast 2015–2017 ($ in millions)

## CON EDISON OF NEW YORK





ORANGE AND ROCKLAND UTILITIES





COMPETITIVE ENERGY BUSINESSES





RENEWABLE AND ENERGY INFRASTRUCTURE PROJECTS
*gas storage and information technology



## TO OUR SHAREHOLDERS



The energy landscape is changing, and Con Edison is at the forefront of the transformation. In 2014, our company—which has always brought power to the lives, livelihoods, and landmarks of New York—built on our history of reliability and innovation. We continued to evolve our businesses for the 21st century by investing in projects that give customers greater control and choices, strengthen our energy systems, grow our business, sustain our communities, engage employees, and deliver shareholder value. Providing safe, reliable, and increasingly

clean energy at a reasonable price, and keeping customers at the heart of everything we do, remains our mission and guides us as we prepare for the future.

The vitality of our service territory is undisputed. Job growth in the region is outpacing the nation. Employment is at a record level and our ever-diversifying economy includes a rapidly growing technology sector. Over the past decade, employment in New York City’s tech sector has expanded by nearly a fifth. Google, Facebook, Twitter, Pinterest, eBay, and Yelp have all opened offices here.

The region’s economic strength is not just a technology story. The health, education, professional and business services, and hospitality and tourism industries are surging. Higher education construction is booming as universities continue to expand. A new school, Cornell Tech, is taking shape on Roosevelt Island. Across our service territory, permits for residential construction are up 20 percent. Visitors and business travelers are coming to New York in record numbers. Last year, 56 million tourists pumped billions into the Big Apple. And not just in Manhattan. Dozens of hotels across the city are in the pipeline. We are witnessing steady population growth as well, with 8.4 million people now living in New York City.

Clearly, the opportunities for our business are vast and we owe it to our region and our owners to position our business for a profitable future.



















# BUILDING ON RELATIONSHIPS WITH CUSTOMERS

New technologies are redefining the way we live. Customers now expect and deserve convenience and options at their fingertips. To continue to be successful, we must deliver on 21 \( ^{st} \) -century expectations and advance our relationships with customers. Just as retailers are now offering same-day delivery and accepting payment with a wave of a smart phone, we, too, must anticipate and respond to our customers' needs and desires and get them information when and how they want it. Put simply: Our successes will be built on making customers' priorities our priorities.

Every tool needs to be on the table when it comes to improving how we do business. Customers can now make new service requests online, report outages with mobile apps or text messages, get energy-savings tips from Facebook, and connect with customer service representatives on Twitter. A new online advisory community is putting us in touch with customer opinions. Neighborhood work notices let residents and businesses know we’ll be in their communities and explain what we’re doing. Online energy calculators give customers greater insights about their energy use and costs. Looking forward, advanced metering infrastructure has great potential to make our operations more efficient and help customers make smarter energy choices.

Programs that help reduce energy use without compromising lifestyles strengthen our interactions with customers as well. We partner with homeowners and big businesses, offering smart thermostats and other energy management systems that give our customers more control every day, and help us when our energy delivery systems are stressed.

From single-family homes in Rockland County to skyscrapers in Manhattan, we have something for everyone. Customers can get rebates and incentives for turning in old appliances and installing high-efficiency lighting, cooling, and heating systems. To date, the work has kept more than 350,000 tons of carbon out of the atmosphere. For example, last year Duane Reade installed state-of-the-art lighting at its distribution center in Queens, to save more than $65,000 a year. Small businesses are likewise making every penny count. A carpet store in Rockland County will save more than $4,000 a year because of lighting upgrades.

We also address customer needs by integrating renewables into our energy delivery systems. Interest in solar-powered generation continues to grow. Customers installed nearly 3,000 new solar systems in 2014—more than all the solar projects in the company’s entire history. We now support about 85 megawatts of solar generation from Orange County to Staten Island. Our job is to help homeowners and businesses harness the power of the sun by making the connection process as easy as possible, to be there for those customers when they need us, and to maximize the benefits to the electric grid.

Through combined heat and power projects, we have connected more than 180 megawatts of other distributed electric generation to the grid. Going forward, we will seek to integrate more electricity from customers via battery storage, microgrids, and community solar projects.

By integrating energy efficiency and other techniques that help customers manage their energy consumption, as well as using power generated by customers, we are meeting our commitment to prepare for expected growth in Brooklyn and Queens. Ultimately, the goal is to defer the construction of a $1 billion substation. A similar approach is under consideration to defer construction of a $56 million substation in Rockland County’s Pomona area. That plan would incorporate smart meters, which give customers real-time information about their energy use and allow us to improve service.

These projects benefit our customers as well as the region’s air quality. We can delay, and may even eliminate, the need for significant infrastructure investments—costs that would be borne by customers. This new model dovetails with a new state-wide regulatory proceeding aimed at reforming New York’s energy vision.



SOLAR PANELS AT OUR HEADQUARTERS GIVE US GREATER INSIGHTS INTO OUR CUSTOMERS' EXPERIENCE WITH RENEWABLES.



## 2014 HIGHLIGHTS

## CON EDISON OF NEW YORK
ELECTRIC OPERATIONS

• Won PA Consulting Group’s Outstanding System-wide Reliability and the Northeast Region Reliability awards.

• Achieved best safety record in past 10 years, with a 75% reduction in high hazard injuries.

• Embarked on the Demand Management Program, a $285 million program for 125 megawatts of energy efficiency, demand response, and combined heat and power to address the possible closure of the Indian Point Energy Center.

• Avoided 43,000 customer interruptions because of continued investments to make energy-delivery systems more resilient.

• Completed transition to new work management system to streamline forecasting, planning, scheduling, and executing work processes and organizational structure.

## CON EDISON OF NEW YORK
GAS OPERATIONS

• Invested over $507 million to strengthen and expand infrastructure.

• Converted nearly 1,500 large New York City buildings from oil to gas and more than 2,000 other new business services installed.

• Replaced more than 4,700 services and nearly 65 miles of main.

• Installed six multistage gas regulator stations and over 108,000 feet of gas main to strengthen distribution system and allow for gas conversions.

• Set highest daily distribution load delivery record of more than 1.114 million dekatherms on January 8, 2014.

## CON EDISON OF NEW YORK
STEAM OPERATIONS

• Connected 14 new customers, including the tallest residential building in the western hemisphere.

• Lowered customer bills by up to 12 percent.

• Consolidated database systems to enhance emergency response and customer service.

• Continued to enhance reliability and safety with new underground water-level detection devices.

• Completed installation of new ultra-low NOx burners at 60th Street Generating Station, reducing emissions.



# STRENGTHENING THE BACKBONE
OF OUR BUSINESS

The integrity of the grid is the backbone of our business. As we prepare for this new energy landscape, we must continue to appreciate the value of our extensive energy infrastructure. Our core infrastructure is essential for distributed resources and grid modernization. In 2014, we invested $2.3 billion to keep our electric, gas, and steam systems reliable, resilient, and secure. This year, we are increasing capital spending for our regulated utilities by 18 percent. Part of the additional funding is to help protect our energy systems against storms. The increase is allowing us to accelerate our gas main replacement efforts as well.

Last year, an explosion involving natural gas leveled two buildings in East Harlem and eight lives were tragically lost. While the cause of the event remains under federal investigation, we are doing everything possible to prevent something like this from happening again. We have increased gas safety patrols to help identify leaks sooner and prevent accidents. To better educate the public about gas leaks, Con Edison has created an online gas map and enhanced communications in print and digital media about the importance of reporting the smell of gas. We are determined to emerge smarter and safer.

The safety of our communities, our people, and our systems must guide our operations. We’re now more than halfway through our four-year $1 billion plan to fortify our energy infrastructure against changing weather patterns. Keeping our experiences with violent storms in mind, we continue to install devices to reduce outages on our overhead electric distribution system, and to add submersible equipment and devices designed to flood-proof substations, and gas and steam systems. These improvements have already prevented tens of thousands of outages. Storm-recovery strategies and analytical tools are advancing as well. New data sources and technology will help speed the restoration process. At the same time, we offer municipal leaders online dashboards for vital storm-related information and assign staff to work side by side with municipalities through the restoration process.

Reducing risks in all aspects of our business is critical. Among the modern-day realities we must address are the risks of cyber and physical attacks. Today, no corporation, no industry, is safe from an attack. The utility industry is at the vanguard of cyber security. At Con Edison, we know we must remain flexible, consider multiple mechanisms of defense, and not rely on standards alone to set the bar. To lessen the likelihood or impact of an attack, we are steadfast about investigating security risks and investing in new technologies, educating our people, and establishing and practicing contingency plans.

## ORANGE AND
ROCKLAND UTILITIES

• Completed $16.2 million substation to improve electric reliability in Orange County.

• Constructed $24 million transmission line to enhance electric service reliability and delivery capacity to Orange and Rockland communities.

•Achieved best yet safety record in the company’s history.

• Replaced 90,000 feet of gas main to enhance safety and reliability.

• Improved outage map to include storm information for every municipality served.

## CON EDISON SOLUTIONS

• Renewed Cape Light Compact contract for residential electricity supply on Cape Cod and Martha's Vineyard in Massachusetts for three years.

•Awarded $12 million and $15.7 million Energy Savings Performance contracts for William Paterson University and Brevard County, Florida, respectively.

• Entered $3.5 million contract with Walter Reed National Military Medical Center in Bethesda, Maryland.

• Installed 633 kilowatts of solar power on four buildings at Newark Liberty International Airport.

• Began providing additional demand response services for Rudin Management, Fisher Brothers, Monday Properties, CBRE, and Jones Lang LaSalle.

## CON EDISON DEVELOPMENT AND CON EDISON ENERGY

• Completed five renewable projects in 2014, totaling 247 megawatts DC, bringing the total capacity of renewable projects to 567.5 megawatts DC.

• Ranked sixth in the top solar project owners in North America.

• Acquired 50 percent interest in first wind project, Broken Bow II in Nebraska.



# KEEPING OUR COMPANY SUSTAINABLE, DELIVERING SHAREHOLDER VALUE

Our charge is to keep the business sustainable and deliver value to you, our shareholders. We succeed by adapting to change and growing our business to deliver the services our customers want. We are keeping our business flexible by targeting neighborhoods for oil-to-gas conversions, increasing our electric transmission capacity for future needs, and expanding our renewables portfolio nationwide. Together, these actions put us firmly on the path to a solid, profitable, and sustainable business model.

In response to low gas prices, many building owners have switched to natural gas. Last year, we saw a 15 percent increase in the number of large buildings that converted from oil to gas in the city. Across our entire service territory, we expect peak demand for our gas business to grow 2.5 percent annually over the next five years as more buildings convert to natural gas.

Our customers’ long-term electric needs also drive our plans. Through 2019, we forecast an increase in peak electric use of approximately 1 percent a year. We have embarked on several electric transmission projects so that our customers can depend on us for years to come. We’ve designed a series of upgrades that will make it easier to deliver electricity from existing power plants in upstate New York to customers in the lower Hudson Valley. Another transmission project will increase the availability of electricity from existing power plants in Staten Island.

Our Competitive Energy Businesses are responding to the nation’s changing power needs. They are investing in opportunities to transform the energy landscape from coast to coast, and are meeting the country’s demand for cleaner electric generation. Con Edison Development is the sixth-largest solar owner in the country. Last year, we added solar farms in California, Nevada, and Texas. Wind power is the newest renewable in our portfolio. In 2014, we entered the market with wind projects in Ohio, Nebraska, and South Dakota.

At the same time, we are protecting our own backyard. Since 2005, we’ve reduced our carbon footprint by approximately 45 percent. Our commitment to the environment extends to recycling more than 90 percent of our non-hazardous waste, conserving water, limiting our impact to waterways, and preserving fragile wetland ecosystems.










# COMMITTING TO OUR PEOPLE AND COMMUNITIES

Everything we accomplish and all our successes are a reflection of the remarkable women and men of Con Edison. They come from a long line of innovators who helped make New York the place it is today. With dedication and determination, our women and men pursue ways to work smarter and safer, and uphold our stellar reliability record. We have a proud tradition of professionally developing our workforce to continuously improve. To achieve the best possible results, we work hard to fill our ranks with people of different backgrounds and experiences. We draw on that diversity to consider every point of view.
The company continues to foster our broader communities by contributing to hundreds of local nonprofits that focus on education, the arts, the environment, civics, and community. We go further by volunteering, serving on boards, and offering in-kind contributions and professional development. Our job shadowing program gives students a look inside our company and the energy industry. To help develop the next generation, teens are paired with engineers and splicers, architects and accountants, and lawyers and linemen. Participants gain first-hand experience in a wide variety of jobs at Con Edison.










## THE POWER OF GIVING

## New York Immigration Coalition

Con Edison and the New York Immigration Coalition share a commitment to build civic engagement beyond the voting cycle. Our support has helped to strengthen and grow the coalition’s voter empowerment work as well as establish a permanent multi-ethnic Civic Engagement Collaborative. The coalition—an umbrella organization of nearly 200 groups from across the state—is working to mobilize new American voters.

## East Harlem Tutorial Program

The East Harlem Tutorial Program offers neighborhood students academic and enrichment programs, as well as counseling and resources to their families. With our support, middle and high school students attend after-school and summer programs focusing on science, technology, engineering and mathematics (STEM).

## Hudson River Museum

The Hudson River Museum examines the art, history, and science of its surrounding region. We support the museum’s junior docent program and School’s Out, Stars Are In activities for children on school breaks. The docent program gives high school students from Yonkers a chance to lead tours and science and art projects, and develop leadership, public-speaking, and interpersonal skills.

## Museum Village

Museum Village was the vision of Roscoe William Smith, founder of the Orange and Rockland Electric Company. An avid collector of Americana, his interests varied from textiles to horse-drawn carriages to mechanical devices. The O&R Energy Building exhibits artifacts that demonstrate how Americans transitioned from an agricultural society to one driven by the evolution of technology.

## NYU Polytech

Through NYU Polytech’s Science of Smart Cities summer program, middle school students get an introduction to how science, engineering, and technology make cities more livable, efficient, sustainable, and safer. Students create their own sustainable model city and present their findings as a final project. The program was developed and is taught by NYU Polytech engineering students.

## STEPPING FORWARD

We must continue to evolve and innovate. Our region deserves no less than the most reliable service and the most hopeful future. That monumental responsibility belongs to all of us at Con Edison. We bring tremendous talent and dedication to designing and operating some of the most complex energy systems in the world. Keeping the lights on, the heat flowing, and our operations primed for the future enables our neighborhoods to thrive. All of us will continue to work our hardest to deliver value to our customers, shareholders, and fellow employees.

By carefully managing costs and working smartly, we were again able to increase your annual dividend for the 41 \( ^{st} $  consecutive year to 2.60 per share, an 8-cent increase. We are the only utility in the S&P 500 with 30 or more consecutive years of dividend increases.

Moving forward, we will continue to work with our regulators to develop a fair and reasonable rate structure that benefits all customers, supports customer choice, recognizes the value of the grid, and allows for solid returns. I pledge to you that we are determined and ready to lead our industry.

In everything we do, we are committed to keeping our focus on our customers' priorities, the fundamentals of our business, and preparing for the road ahead. They are fundamental parts of a whole, where everything matters. Thank you for your confidence and support.



John McAvoy

Chairman, President, and Chief Executive Officer



# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

# FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014

OR

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

For the transition period from ___ to ___

Commission File Number 1-14514

# Consolidated Edison, Inc.

Exact name of registrant as specified in its charter and principal office address and telephone number

New York
State of Incorporation

13-3965100
I.R.S. Employer
ID. Number

4 Irving Place,
New York, New York 10003

(212) 460-4600

Commission File Number 1-1217

# Consolidated Edison Company of New York, Inc.

Exact name of registrant as specified in its charter and principal office address and telephone number

New York
State of Incorporation

13-5009340
I.R.S. Employer
ID. Number

4 Irving Place,
New York, New York 10003

(212) 460-4600

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

Title of each class

Name of each exchange on which registered

Consolidated Edison, Inc.,

Common Shares ($.10 par value)

New York Stock Exchange

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



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

Consolidated Edison, Inc. (Con Edison) Yes ☒ No ☐

Consolidated Edison Company of New York, Inc. (CECONY) Yes ☒ No ☐

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

Con Edison Yes ☐ No ☒

CECONY Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Con Edison Yes ☒ No ☐

CECONY Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( \( §232.405 \)  of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Con Edison Yes ☒ No ☐

CECONY Yes ☒ No ☐

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Con Edison

Large accelerated filer
☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐

CECONY

Large accelerated filer
☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☐

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

Con Edison

CECONY

Yes ☐ No ☒

Yes ☐ No ☒

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

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

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

## Documents Incorporated By Reference

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

## Filing Format

This Annual Report on Form 10-K is a combined report being filed separately by two different registrants: Consolidated Edison, Inc. (Con Edison) and Consolidated Edison Company of New York, Inc. (CECONY). CECONY is a wholly-owned subsidiary of Con Edison and, as such, the information in this report about CECONY also applies to Con Edison. CECONY meets the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced disclosure format.

As used in this report, the term the “Companies” refers to Con Edison and CECONY. However, CECONY makes no representation as to the information contained in this report relating to Con Edison or the subsidiaries of Con Edison other than itself.



## Glossary of Terms

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

## Con Edison Companies

Con Edison
Consolidated Edison, Inc.
CECONY
Consolidated Edison Company of New York, Inc.
Con Edison Development
Consolidated Edison Development, Inc.
Con Edison Energy
Consolidated Edison Energy, Inc.
Con Edison Solutions
Consolidated Edison Solutions, Inc.
Con Edison Transmission
Consolidated Edison Transmission, LLC
O&R
Orange and Rockland Utilities, Inc.
Pike
Pike County Light & Power Company
RECO
Rockland Electric Company
The Companies
Con Edison and CECONY
The Utilities
CECONY and O&R

## Regulatory Agencies, Government Agencies, and Quasi-governmental Not-for-Profits

EPA
U. S. Environmental Protection Agency
FERC
Federal Energy Regulatory Commission
IRS
Internal Revenue Service
NJBPL
New Jersey Board of Public Utilities
NJDEP
New Jersey Department of Environmental Protection
NYISO
New York Independent System Operator
NYPA
New York Power Authority
NYSDEC
New York State Department of Environmental Conservation
NYSERDA
New York State Energy Research and Development Authority
NYSPSC
New York State Public Service Commission
NYSRC
New York State Reliability Council, LLC
PAPUC
Pennsylvania Public Utility Commission
PJM
PJM Interconnection LLC
SEC
U.S. Securities and Exchange Commission

## Accounting

ASU
Accounting Standards Update
FASB
Financial Accounting Standards Board
GAAP
Generally Accepted Accounting Principles in the United States of America
LILO
Lease In/Lease Out
OCI
Other Comprehensive Income
VIE
Variable interest entity

## Environmental

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



## Units of Measure

<table><tr><td>AC</td><td>Alternating current</td></tr><tr><td>Dt</td><td>Dekatherms</td></tr><tr><td>kV</td><td>Kilovolt</td></tr><tr><td>kWh</td><td>Kilowatt-hour</td></tr><tr><td>MDt</td><td>Thousand dekatherms</td></tr><tr><td>MMIb</td><td>Million pounds</td></tr><tr><td>MVA</td><td>Megavolt ampere</td></tr><tr><td>MW</td><td>Megawatt or thousand kilowatts</td></tr><tr><td>MWH</td><td>Megawatt hour</td></tr><tr><td colspan="2">Other</td></tr><tr><td>AFUDC</td><td>Allowance for funds used during construction</td></tr><tr><td>COSO</td><td>Committee of Sponsoring Organizations of the Treadway Commission</td></tr><tr><td>DER</td><td>Distributed energy resources</td></tr><tr><td>DSP</td><td>Distributed System Platform</td></tr><tr><td>Fitch</td><td>Fitch Ratings</td></tr><tr><td>LTIP</td><td>Long Term Incentive Plan</td></tr><tr><td>Moody&#x27;s</td><td>Moody&#x27;s Investors Service</td></tr><tr><td>REV</td><td>Reforming the Energy Vision</td></tr><tr><td>S&amp;P</td><td>Standard &amp; Poor&#x27;s Financial Services LLC</td></tr><tr><td>VaR</td><td>Value-at-Risk</td></tr></table>



## TABLE OF CONTENTS

Introduction 6
Available Information 8
Forward-Looking Statements 8
Non-GAAP Financial Measure 8
Part I
Item 1: Business 9
Item 1A: Risk Factors 32
Item 1B: Unresolved Staff Comments 34
Item 2: Properties 34
Item 3: Legal Proceedings 35
Item 4: Mine Safety Disclosures 35
Executive Officers of the Registrant 35
Part II
Item 5: Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 37
Item 6: Selected Financial Data 40
Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations 41
Item 7A: Quantitative and Qualitative Disclosures about Market Risk 65
Item 8: Financial Statements and Supplementary Data 66
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 137
Item 9A: Controls and Procedures 137
Item 9B: Other Information 137
Part III
Item 10: Directors, Executive Officers and Corporate Governance 138
Item 11: Executive Compensation 138
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 138
Item 13: Certain Relationships and Related Transactions, and Director Independence 138
Item 14: Principal Accounting Fees and Services 138
Part IV
Item 15: Exhibits and Financial Statement Schedules 140
Signatures 147



## Introduction

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

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

Con Edison is a holding company that owns:

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

- O&R (together with CECONY referred to as the Utilities), which delivers electricity and natural gas to customers primarily located in southeastern New York, and northern New Jersey and northeastern Pennsylvania;
- Competitive energy businesses, which sell to retail customers electricity purchased in wholesale markets and enter into related hedging transactions; provide energy-related products and services to wholesale and retail customers, and develop, own and operate renewable and energy infrastructure projects; and

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

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

## Selected Financial Data

Con Edison

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

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

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

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

(d) Reflects a $2,947 million decrease in regulatory assets for unrecognized pension and other postretirement costs offset by a $1,497 million increase in net plant, a $280 million increase in cash, a

$257 million increase in special deposits and a $223 million increase in regulatory assets for future income tax. See Notes B, E and F to the financial statements in Item 8.

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



<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="5">For the Year Ended December 31,</td></tr><tr><td>2010</td><td>2011</td><td>2012</td><td>2013</td><td>2014</td></tr><tr><td>Operating revenues</td><td>$10,573</td><td>$10,432</td><td>$10,187</td><td>$10,430</td><td>$10,786</td></tr><tr><td>Energy costs</td><td>3,715</td><td>3,243</td><td>2,665</td><td>2,873</td><td>2,985</td></tr><tr><td>Operating income</td><td>1,922</td><td>2,083</td><td>2,093</td><td>2,060</td><td>2,139</td></tr><tr><td>Net income for common stock</td><td>893</td><td>978</td><td>1,014</td><td>1,020</td><td>1,058</td></tr><tr><td>Total assets</td><td>32,605</td><td>35,218(a)</td><td>36,885(b)</td><td>36,258(c)</td><td>39,637(d)</td></tr><tr><td>Long-term debt</td><td>9,743</td><td>9,220</td><td>9,145</td><td>9,366</td><td>10,864</td></tr><tr><td>Shareholder&#x27;s equity</td><td>10,136</td><td>10,431</td><td>10,552</td><td>10,847</td><td>11,188</td></tr></table>

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

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

(c) Reflects a $2,797 million decrease in regulatory assets for unrecognized pension and other postretirement costs offset by a $1,405 million increase in net plant, a $280 million increase in cash and $215 million and $199 million increases in regulatory assets for environmental remediation costs and future income tax, respectively. See Notes B, E and F to the financial statements in Item 8.
(d) Reflects a $1,999 million increase in regulatory assets for unrecognized pension and other postretirement costs and a $1,440 million increase in net plant. See Notes E and F to the financial statements in Item 8.

## Significant 2014 Developments and Outlook

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

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

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

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

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

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



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

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

## Available Information

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

This information the Companies file with the SEC is also available free of charge on or through the Investor Information section of their websites as soon as reasonably practicable after the reports are electronically filed with, or furnished to, the SEC. Con Edison’s internet website is at: www.condeson.com; and CECONY’s is at: www.conded.com.
The Investor Information section of Con Edison’s website also includes the company’s Standards of Business Conduct (its code of ethics) and amendments or waivers of the standards for executive officers or directors, corporate governance guidelines and the charters of the following committees of the company’s Board of Directors: Audit Committee, Management Development and Compensation Committee, and Corporate Governance and Nominating Committee. This information is available in print to any shareholder who requests it. Requests should be directed to: Corporate Secretary, Consolidated Edison, Inc., 4 Irving Place, New York, NY 10003.

Information on the Companies’ websites is not incorporated herein.

## Forward-Looking Statements

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

## Non-GAAP Financial Measure

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

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

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

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

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



## Item 1: Business

Contents of Item 1 Page

Overview 11
CECONY 11
Electric 11
Gas 11
Steam 11
O&R 11
Electric 11
Gas 11
Competitive Energy Businesses 11

Utility Regulation 12
State Utility Regulation 12
Regulators 12
Electric Utility Industry Restructuring in New York 12
Reforming the Energy Vision Proceeding 12
Rate Plans 13
Liability for Service Interruptions and Other Non-rate Conditions of Service 13
Generic Proceedings 14
Federal Utility Regulation 14
New York Independent System Operator (NYISO) 14
New York Energy Highway 15

Competition 15

The Utilities 15
CECONY 15
Electric Operations 15
Electric Facilities 15
Electric Sales and Deliveries 16
Electric Peak Demand 17
Electric Supply 17
Gas Operations 18
Gas Facilities 18
Gas Sales and Deliveries 18
Gas Peak Demand 19
Gas Supply 19
Steam Operations 19
Steam Facilities 19
Steam Sales and Deliveries 20
Steam Peak Demand and Capacity 20
Steam Supply 20

O&R 20
Electric Operations 20
Electric Facilities 20
Electric Sales and Deliveries 21
Electric Peak Demand 21
Electric Supply 21
Gas Operations 22
Gas Facilities 22
Gas Sales and Deliveries 22
Gas Peak Demand 22
Gas Supply 23



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

## Incorporation By Reference

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



## PART I

## Item 1: Business

## Overview

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



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

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

## CECONY

## Electric

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

## Gas

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

## Steam

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

## O&R

## Electric

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

## Gas

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

## Competitive Energy Businesses

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



## Utility Regulation
State Utility Regulation
Regulators

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

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

## Electric Utility Industry Restructuring In New York

In the 1990s, the NYSPSC restructured the electric utility industry in the state. In accordance with NYSPSC orders, the Utilities sold all of their electric generating facilities other than those that also produce steam for CECONY's steam business (see Electric Operations – Electric Facilities below) and provided all of their customers the choice to buy electricity or gas from the Utilities or other suppliers (see Electric Operations – Electric Sales and Deliveries and Gas Operations – Gas Sales and Deliveries below). In addition, the Utilities no longer control and operate their electric transmission facilities. See “New York Independent System Operator (NYISO),” below.
Following industry restructuring, there were several utility mergers as a result of which substantially all of the electric and gas delivery service in New York State is now provided by one of four investor-owned utility companies – Con Edison, National Grid plc, Iberdrola, S.A. and Fortis Inc. – or one of two state authorities – New York Power Authority (NYPA) or Long Island Power Authority.

## Reforming the Energy Vision Proceeding

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

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

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

- Existing utilities should serve as DSPs subject to performance reviews;

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

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

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

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



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

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

## Rate Plans

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

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

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

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

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

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

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

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

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

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



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

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

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

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

## Generic Proceedings

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

## Federal Utility Regulation

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

## New York Independent System Operator (NYISO)

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



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

## New York Energy Highway

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

## Competition

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

<table><tr><td rowspan="2">Technology</td><td colspan="2">CECONY</td><td colspan="2">O&amp;R</td></tr><tr><td>Total MW</td><td>%</td><td>Total MW</td><td>%</td></tr><tr><td>Internal-combustion engines</td><td>101</td><td>46</td><td>25</td><td>46</td></tr><tr><td>Photovoltaic solar</td><td>58</td><td>26</td><td>28</td><td>52</td></tr><tr><td>Gas turbines</td><td>40</td><td>18</td><td>-</td><td>-</td></tr><tr><td>Micro turbines</td><td>9</td><td>5</td><td>1</td><td>2</td></tr><tr><td>Fuel cells</td><td>8</td><td>4</td><td>-</td><td>-</td></tr><tr><td>Steam turbines</td><td>3</td><td>1</td><td>-</td><td>-</td></tr><tr><td>Total Distribution-level distributed generation</td><td>219</td><td>100%</td><td>54</td><td>100%</td></tr></table>

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

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

## The Utilities

## CECONY

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

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

## Electric Operations

## Electric Facilities

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



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

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

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

## Electric Sales and Deliveries

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

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

<table><tr><td rowspan="2"></td><td colspan="6">Year Ended December 31,</td></tr><tr><td>2010</td><td>2011</td><td>2012</td><td>2013</td><td>2014</td><td></td></tr><tr><td>Electric Energy Delivered (millions of kWhs)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>CECONY full service customers</td><td>24,142</td><td>22,622</td><td>20,622</td><td>20,118</td><td>19,757</td><td></td></tr><tr><td>Delivery service for energy choice customers</td><td>23,098</td><td>24,234</td><td>25,990</td><td>26,574</td><td>26,221</td><td></td></tr><tr><td>Delivery service to NYPA customers and others</td><td>10,834</td><td>10,408</td><td>10,267</td><td>10,226</td><td>10,325</td><td></td></tr><tr><td>Delivery service for municipal agencies</td><td>619</td><td>562</td><td>322</td><td>-</td><td>-</td><td></td></tr><tr><td>Total Deliveries in Franchise Area</td><td>58,693</td><td>57,826</td><td>57,201</td><td>56,918</td><td>56,303</td><td></td></tr><tr><td>Electric Energy Delivered ($ in millions)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>CECONY full service customers</td><td>$ 5,546</td><td>$ 5,237</td><td>$ 4,731</td><td>$ 4,799</td><td>$ 5,023</td><td></td></tr><tr><td>Delivery service for energy choice customers</td><td>2,123</td><td>2,354</td><td>2,750</td><td>2,683</td><td>2,646</td><td></td></tr><tr><td>Delivery service to NYPA customers and others</td><td>516</td><td>555</td><td>596</td><td>602</td><td>625</td><td></td></tr><tr><td>Delivery service for municipal agencies</td><td>22</td><td>22</td><td>10</td><td>-</td><td>-</td><td></td></tr><tr><td>Other operating revenues</td><td>169</td><td>60</td><td>89</td><td>47</td><td>143</td><td></td></tr><tr><td>Total Deliveries in Franchise Area</td><td>$ 8,376</td><td>$ 8,228</td><td>$ 8,176</td><td>$ 8,131</td><td>$ 8,437</td><td></td></tr><tr><td>Average Revenue per kWh Sold (Cents)(a)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Residential</td><td>25.8</td><td>25.6</td><td>25.6</td><td>27.0</td><td>28.9</td><td></td></tr><tr><td>Commercial and Industrial</td><td>20.4</td><td>20.7</td><td>20.0</td><td>20.6</td><td>22.1</td><td></td></tr></table>

(a) Includes Municipal Agency sales.



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

## Electric Peak Demand

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

## Electric Supply

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

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

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

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

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

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



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

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

## Gas Operations

## Gas Facilities

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

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

## Gas Sales and Deliveries

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

<table><tr><td rowspan="2"></td><td colspan="6">Year Ended December 31,</td></tr><tr><td>2010</td><td>2011</td><td>2012</td><td>2013</td><td>2014</td><td></td></tr><tr><td>Gas Delivered (MDt)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Firm Sales</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Full service</td><td>63,592</td><td>64,696</td><td>57,595</td><td>67,007</td><td>75,630</td><td></td></tr><tr><td>Firm transportation</td><td>51,859</td><td>54,291</td><td>52,860</td><td>61,139</td><td>68,731</td><td></td></tr><tr><td>Total Firm Sales</td><td>115,451</td><td>118,987</td><td>110,455</td><td>128,146</td><td>144,361</td><td></td></tr><tr><td>Interruptible Sales(a)</td><td>8,521</td><td>10,035</td><td>5,961</td><td>10,900</td><td>10,498</td><td></td></tr><tr><td>Total Gas Delivered to CECONY Customers</td><td>123,972</td><td>129,022</td><td>116,416</td><td>139,046</td><td>154,859</td><td></td></tr><tr><td>Transportation of customer-owned gas</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>NYPA</td><td>24,890</td><td>34,893</td><td>48,107</td><td>48,682</td><td>47,548</td><td></td></tr><tr><td>Other (mainly generating plants)</td><td>99,666</td><td>97,163</td><td>108,086</td><td>87,379</td><td>105,012</td><td></td></tr><tr><td>Off-System Sales</td><td>7</td><td>97</td><td>730</td><td>4,638</td><td>15</td><td></td></tr><tr><td>Total Sales</td><td>248,535</td><td>261,175</td><td>273,339</td><td>279,745</td><td>307,434</td><td></td></tr></table>

(a) Includes 6,057, 5,362, 563, 3,801 and 3,385 MDt for 2014, 2013, 2012, 2011 and 2010, respectively, which are also reflected in firm transportation and other.



<table><tr><td rowspan="2"></td><td colspan="6">Year Ended December 31,</td></tr><tr><td>2010</td><td>2011</td><td>2012</td><td>2013</td><td>2014</td><td></td></tr><tr><td>Gas Delivered (\( in millions)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Firm Sales</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Full service</td><td>$ 1,099</td><td>$ 1,048</td><td>$ 889</td><td>$ 1,059</td><td>$ 1,141</td><td></td></tr><tr><td>Firm transportation</td><td>347</td><td>356</td><td>380</td><td>414</td><td>453</td><td></td></tr><tr><td>Total Firm Sales</td><td>1,446</td><td>1,404</td><td>1,269</td><td>1,473</td><td>1,594</td><td></td></tr><tr><td>Interruptible Sales</td><td>72</td><td>74</td><td>39</td><td>69</td><td>91</td><td></td></tr><tr><td>Total Gas Delivered to CECONY Customers</td><td>1,518</td><td>1,478</td><td>1,308</td><td>1,542</td><td>1,685</td><td></td></tr><tr><td>Transportation of customer-owned gas</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>NYPA</td><td>2</td><td>2</td><td>2</td><td>2</td><td>2</td><td></td></tr><tr><td>Other (mainly generating plants and Interruptible transportation)</td><td>71</td><td>71</td><td>68</td><td>71</td><td>70</td><td></td></tr><tr><td>Off-System Sales</td><td>-</td><td>-</td><td>5</td><td>18</td><td>-</td><td></td></tr><tr><td>Other operating revenues (mainly regulatory amortizations)</td><td>(50)</td><td>(30)</td><td>32</td><td>(17)</td><td>(36)</td><td></td></tr><tr><td>Total Sales</td><td>$ 1,541</td><td>$ 1,521</td><td>$ 1,415</td><td>$ 1,616</td><td>$ 1,721</td><td></td></tr><tr><td>Average Revenue per Dt Sold</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Residential</td><td>$ 19.31</td><td>$ 18.45</td><td>$ 18.14</td><td>$ 18.52</td><td>$ 16.76</td><td></td></tr><tr><td>General</td><td>$ 14.28</td><td>$ 12.96</td><td>$ 11.68</td><td>$ 12.05</td><td>$ 12.38</td><td></td></tr></table>

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

## Gas Peak Demand

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

## Gas Supply

CECONY and O&R have combined their gas requirements, and contracts to meet those requirements, into a single portfolio. The combined portfolio is administered by, and related management services are provided by, CECONY (for itself and as agent for O&R) and costs are allocated between the Utilities in accordance with provisions approved by the NYSPSC. See Note S to the financial statements in Item 8.
Charges from suppliers for the firm purchase of gas, which are based on formulas or indexes or are subject to negotiation, are generally designed to approximate market prices. The gas supply contracts are for various terms extending to 2016. The Utilities have contracts with interstate pipeline companies for the purchase of firm transportation from upstream points where gas has been purchased to the Utilities' distribution systems, and for upstream storage services. Charges under these transportation and storage contracts are approved by the FERC. Such contracts are for various terms extending to 2027. The Utilities are required to pay certain fixed charges under the supply, transportation and storage contracts whether or not the contracted capacity is actually used. These fixed charges amounted to approximately $286 million in 2014, including $246 million for CECONY. See “Contractual Obligations” below. In addition, the Utilities purchase gas on the spot market and contract for interruptible gas transportation. See “Recoverable Energy Costs” in Note A to the financial statements in Item 8.

## Steam Operations

## Steam Facilities

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

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



## Steam Sales and Deliveries

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

<table><tr><td rowspan="2"></td><td colspan="6">Year Ended December 31,</td></tr><tr><td>2010</td><td>2011</td><td>2012</td><td>2013</td><td>2014</td><td></td></tr><tr><td>Steam Sold (MMlb)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>General</td><td>515</td><td>519</td><td>425</td><td>547</td><td>594</td><td></td></tr><tr><td>Apartment house</td><td>5,748</td><td>5,779</td><td>5,240</td><td>6,181</td><td>6,574</td><td></td></tr><tr><td>Annual power</td><td>16,767</td><td>16,024</td><td>14,076</td><td>15,195</td><td>15,848</td><td></td></tr><tr><td>Total Steam Delivered to CECONY Customers</td><td>23,030</td><td>22,322</td><td>19,741</td><td>21,923</td><td>23,016</td><td></td></tr><tr><td>Steam Sold (\( in millions)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>General</td><td>$ 25</td><td>$ 28</td><td>$ 25</td><td>$ 31</td><td>$ 30</td><td></td></tr><tr><td>Apartment house</td><td>158</td><td>175</td><td>158</td><td>187</td><td>180</td><td></td></tr><tr><td>Annual power</td><td>457</td><td>487</td><td>429</td><td>491</td><td>469</td><td></td></tr><tr><td>Other operating revenues</td><td>16</td><td>(7)</td><td>(16)</td><td>(26)</td><td>(51)</td><td></td></tr><tr><td>Total Steam Delivered to CECONY Customers</td><td>$ 656</td><td>$ 683</td><td>$ 596</td><td>$ 683</td><td>$ 628</td><td></td></tr><tr><td>Average Revenue per MMlb Sold</td><td>$ 27.79</td><td>$ 30.91</td><td>$ 31.00</td><td>$ 32.34</td><td>$ 29.50</td><td></td></tr></table>

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

## Steam Peak Demand and Capacity

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

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

## Steam Supply

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

## O&R

## Electric Operations

## Electric Facilities

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

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



## Electric Sales and Deliveries

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

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

<table><tr><td rowspan="2"></td><td colspan="6">Year Ended December 31,</td></tr><tr><td>2010</td><td>2011</td><td>2012</td><td>2013</td><td>2014</td><td></td></tr><tr><td>Electric Energy Delivered (millions of kWhs)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Total deliveries to O&amp;R full service customers</td><td>3,498</td><td>3,029</td><td>2,691</td><td>2,555</td><td>2,429</td><td></td></tr><tr><td>Delivery service for energy choice customers</td><td>2,330</td><td>2,760</td><td>3,040</td><td>3,166</td><td>3,240</td><td></td></tr><tr><td>Total Deliveries In Franchise Area</td><td>5,828</td><td>5,789</td><td>5,731</td><td>5,721</td><td>5,669</td><td></td></tr><tr><td>Electric Energy Delivered ($ in millions)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Total deliveries to O&amp;R full service customers</td><td>$ 570</td><td>$ 486</td><td>$ 405</td><td>$ 427</td><td>$ 455</td><td></td></tr><tr><td>Delivery service for energy choice customers</td><td>132</td><td>157</td><td>178</td><td>192</td><td>207</td><td></td></tr><tr><td>Other operating revenues</td><td>(10)</td><td>(2)</td><td>9</td><td>9</td><td>18</td><td></td></tr><tr><td>Total Deliveries In Franchise Area</td><td>$ 692</td><td>$ 641</td><td>$ 592</td><td>$ 628</td><td>$ 680</td><td></td></tr><tr><td>Average Revenue Per kWh Sold (Cents)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Residential</td><td>18.3</td><td>18.0</td><td>16.7</td><td>18.1</td><td>20.3</td><td></td></tr><tr><td>Commercial and Industrial</td><td>14.1</td><td>13.7</td><td>13.0</td><td>14.8</td><td>16.8</td><td></td></tr></table>

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

## Electric Peak Demand

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

## Electric Supply

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

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



## Gas Operations

## Gas Facilities

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

## Gas Sales and Deliveries

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

<table><tr><td rowspan="2"></td><td colspan="6">Year Ended December 31,</td></tr><tr><td>2010</td><td>2011</td><td>2012</td><td>2013</td><td>2014</td><td></td></tr><tr><td>Gas Delivered (MDt)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Firm Sales</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Full service</td><td>8,772</td><td>8,384</td><td>7,539</td><td>8,808</td><td>9,529</td><td></td></tr><tr><td>Firm transportation</td><td>10,692</td><td>10,823</td><td>10,505</td><td>12,062</td><td>12,592</td><td></td></tr><tr><td>Total Firm Sales</td><td>19,464</td><td>19,207</td><td>18,044</td><td>20,870</td><td>22,121</td><td></td></tr><tr><td>Interruptible Sales</td><td>4,497</td><td>4,184</td><td>4,326</td><td>4,118</td><td>4,216</td><td></td></tr><tr><td>Total Gas Delivered to O&amp;R Customers</td><td>23,961</td><td>23,391</td><td>22,370</td><td>24,988</td><td>26,337</td><td></td></tr><tr><td>Transportation of customer-owned gas</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Sales for resale</td><td>840</td><td>864</td><td>793</td><td>885</td><td>945</td><td></td></tr><tr><td>Sales to electric generating stations</td><td>19</td><td>24</td><td>15</td><td>19</td><td>70</td><td></td></tr><tr><td>Off-System Sales</td><td>1</td><td>-</td><td>-</td><td>-</td><td>3</td><td></td></tr><tr><td>Total Sales</td><td>24,821</td><td>24,279</td><td>23,178</td><td>25,892</td><td>27,355</td><td></td></tr><tr><td>Gas Delivered ($ in millions)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Firm Sales</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Full service</td><td>$ 131</td><td>$ 122</td><td>$ 103</td><td>$ 115</td><td>$ 121</td><td></td></tr><tr><td>Firm transportation</td><td>65</td><td>71</td><td>76</td><td>77</td><td>75</td><td></td></tr><tr><td>Total Firm Sales</td><td>196</td><td>193</td><td>179</td><td>192</td><td>196</td><td></td></tr><tr><td>Interruptible Sales</td><td>9</td><td>4</td><td>4</td><td>3</td><td>2</td><td></td></tr><tr><td>Total Gas Delivered to O&amp;R Customers</td><td>205</td><td>197</td><td>183</td><td>195</td><td>198</td><td></td></tr><tr><td>Transportation of customer-owned gas</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Sales to electric generating stations</td><td>-</td><td>1</td><td>-</td><td>-</td><td>1</td><td></td></tr><tr><td>Other operating revenues</td><td>13</td><td>16</td><td>20</td><td>10</td><td>13</td><td></td></tr><tr><td>Total Sales</td><td>$ 218</td><td>$ 214</td><td>$ 203</td><td>$ 205</td><td>$ 212</td><td></td></tr><tr><td>Average Revenue Per Dt Sold</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Residential</td><td>$ 15.20</td><td>$ 14.84</td><td>$ 14.01</td><td>$ 13.31</td><td>$ 13.01</td><td></td></tr><tr><td>General</td><td>$ 13.64</td><td>$ 13.20</td><td>$ 11.99</td><td>$ 11.53</td><td>$ 11.30</td><td></td></tr></table>

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

## Gas Peak Demand

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



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

## Gas Supply

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

## Competitive Energy Businesses
Con Edison Solutions

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

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

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

(a) Excludes aggregation agreement customers.

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

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

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

## Con Edison Energy

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



## Con Edison Development

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

Renewable Electric Production Projects

<table><tr><td>Project Name</td><td>Production Technology</td><td>Generating Capacity(a) (MWs AC)</td><td>PPA Term (In Years)</td><td>Actual/Expected In-Service Date</td><td>Location (State)</td></tr><tr><td>Wholly owned projects</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Flemington</td><td>Solar</td><td>8</td><td>n/a(b)</td><td>2011</td><td>New Jersey</td></tr><tr><td>Frenchtown I, II and III</td><td>Solar</td><td>14</td><td>n/a(b)</td><td>2011-13</td><td>New Jersey</td></tr><tr><td>PA Solar</td><td>Solar</td><td>10</td><td>n/a(b)</td><td>2012</td><td>Pennsylvania</td></tr><tr><td>Shrewsbury</td><td>Solar</td><td>3</td><td>20(b)</td><td>2012</td><td>Massachusetts</td></tr><tr><td>Groveland</td><td>Solar</td><td>3</td><td>20(b)</td><td>2012</td><td>Massachusetts</td><tr><td>White River 2</td><td>Solar</td><td>20</td><td>20</td><td>2014</td><td>California</td></tr><tr><td>Oak Tree Wind</td><td>Wind</td><td>20</td><td>20</td><td>2014</td><td>South Dakota</td></tr><tr><td>Projects of less than 3 MW</td><td>Solar</td><td>14</td><td>Various</td><td>Various</td><td>Various</td></tr><tr><td>Jointly owned projects</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Pilesgrove</td><td>Solar</td><td>9</td><td>n/a(b)</td><td>2011</td><td>New Jersey</td></tr><tr><td>California Solar</td><td>Solar</td><td>55</td><td>25</td><td>2012-13</td><td>California</td></tr><tr><td>Mesquite Solar 1</td><td>Solar</td><td>83</td><td>20</td><td>2013</td><td>Arizona</td></tr><tr><td>Copper Mountain Solar 2 Phase 1</td><td>Solar</td><td>46</td><td>25</td><td>2013</td><td>Nevada</td></tr><tr><td>Copper Mountain Solar 3 (partial)</td><td>Solar</td><td>92</td><td>20</td><td>2014</td><td>Nevada</td></tr><tr><td>Broken Bow II</td><td>Wind</td><td>37</td><td>20</td><td>2014</td><td>Nebraska</td></tr><tr><td>Texas Solar 4</td><td>Solar</td><td>32</td><td>25</td><td>2014</td><td>Texas</td></tr><tr><td>Total MW in Operation</td><td></td><td>446</td><td></td><td></td><td></td></tr><tr><td>Copper Mountain Solar 3 (partial)</td><td>Solar</td><td>36</td><td>20</td><td>2015</td><td>Nevada</td></tr><tr><td>Corcoran 2</td><td>Solar</td><td>20</td><td>20</td><td>2015</td><td>California</td></tr><tr><td>Atwell West</td><td>Solar</td><td>20</td><td>20</td><td>2015</td><td>California</td></tr><tr><td>Copper Mountain Solar 2 Phase 2</td><td>Solar</td><td>29</td><td>25</td><td>2015</td><td>Nevada</td></tr><tr><td>Total MW in Construction</td><td></td><td>105</td><td></td><td></td><td></td></tr><tr><td>Total MW, All Projects</td><td></td><td>551</td><td></td><td></td><td></td></tr></tr></table>

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

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

## Con Edison Transmission

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

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

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



## Capital Requirements and Resources

## Capital Requirements

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

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

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

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

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

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

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



## Contractual Obligations

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

Payments Due by Period

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

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

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

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

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

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

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



## Capital Resources

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

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

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

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

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

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

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

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

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

<table><tr><td rowspan="2"></td><td colspan="5">Ratio of Earnings to Fixed Charges</td></tr><tr><td>2010</td><td>2011</td><td>2012</td><td>2013</td><td>2014</td></tr><tr><td>Con Edison</td><td>3.3</td><td>3.6</td><td>3.7</td><td>3.0(a)</td><td>3.6</td></tr><tr><td>CECONY</td><td>3.4</td><td>3.8</td><td>3.7</td><td>3.7</td><td>3.8</td></tr></table>

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

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

<table><tr><td rowspan="2"></td><td colspan="5">Common Equity Ratio (Percent of total capitalization)</td></tr><tr><td>2010</td><td>2011</td><td>2012</td><td>2013</td><td>2014</td></tr><tr><td>Con Edison</td><td>50.4</td><td>52.5</td><td>54.1</td><td>53.9</td><td>52.0</td></tr><tr><td>CECONY</td><td>49.9</td><td>52.0</td><td>53.6</td><td>53.7</td><td>50.7</td></tr></table>

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

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



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

## Environmental Matters

## Climate Change

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

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

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

<table><tr><td>(metric tons, in millions(a))</td><td>2010</td><td>2011</td><td>2012</td><td>2013</td><td>2014</td></tr><tr><td>CO2 equivalent emissions</td><td>3.8</td><td>3.4</td><td>3.3</td><td>3.4</td><td>3.2</td></tr></table>

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

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

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

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

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

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



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

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

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

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

## Environmental Sustainability

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

## CECONY

## Superfund

The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes (Superfund) impose joint and several liability, regardless of fault, upon generators of hazardous substances for investigation costs, remediation costs and environmental damages. The sites as to which CECONY has been asserted to have liability under Superfund include its and its predecessor companies' former manufactured gas sites, its multi-purpose Astoria site, its former Flushing Service Center site, the Gowanus Canal site, and other Superfund sites discussed below. There may be additional sites as to which assertions will be made that the Company has liability. For a further discussion of claims and possible claims against the Company under Superfund, estimated liability accrued for Superfund claims and recovery from customers of site investigation and remediation costs, see Note G to the financial statements in Item 8 (which information is incorporated herein by reference).

## Manufactured Gas Sites

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

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

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



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

## Astoria Site

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

## Flushing Service Center Site

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

## Gowanus Canal

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

## Other Superfund Sites

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

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



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

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

## O&R

## Superfund

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

## Manufactured Gas Sites

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

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

## Superfund Sites

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

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

<table><tr><td>Site</td><td>Location</td><td>Start</td><td>Court or Agency</td><td>% of Total Liability</td></tr><tr><td>Borne Chemical</td><td>Elizabeth, NJ</td><td>1997</td><td>NJDEP</td><td>2.3%</td></tr><tr><td>Metal Bank of America</td><td>Philadelphia, PA</td><td>1993</td><td>EPA</td><td>4.6%</td></tr><tr><td>Ellis Road</td><td>Jacksonville, FL</td><td>2011</td><td>EPA</td><td>0.2%</td></tr></table>

## Other Federal, State and Local Environmental Provisions
Toxic Substances Control Act

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

## Water Quality

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

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

## Air Quality

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



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

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

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

## State Anti-Takeover Law

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

## Employees

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

## Available Information

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

## Item 1A: Risk Factors

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

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

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

## Regulatory/Compliance Risks:

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



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

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

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

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

## Operations Risks:

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

## A Cyber Attack Could Adversely Affect the

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

## Environmental Risks:

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



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

## Financial and Market Risks:

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

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

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

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

## Other Risks:

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

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

## Item 1B: Unresolved Staff Comments

## Con Edison

Con Edison has no unresolved comments from the SEC staff.

## CECONY

CECONY has no unresolved comments from the SEC staff.

## Item 2: Properties

## Con Edison

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



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

## CECONY

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

## O&R

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

## Executive Officers of the Registrant

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

<table><tr><td>Name</td><td>Age</td><td>Offices and Positions During Past Five Years</td></tr><tr><td colspan="3">Executive Officers of Con Edison and CECONY</td></tr><tr><td>John McAvoy</td><td>54</td><td>5/14 to present - Chairman of the Board, President and Chief Executive Officer and Director of Con Edison and Chairman, Chief Executive Officer and Trustee of CECONY</td></tr><tr><td></td><td></td><td>12/13 to 4/14 - President and Chief Executive Officer and Director of Con Edison and Chief Executive Officer and Trustee of CECONY</td></tr><tr><td></td><td></td><td>1/13 to 11/13 - President and Chief Executive Officer of O&amp;R</td></tr><tr><td></td><td></td><td>12/12 - Senior Vice President of CECONY</td></tr><tr><td></td><td></td><td>2/09 to 11/12 - Senior Vice President - Central Operations of CECONY</td></tr><tr><td>Craig S. Ivey</td><td>52</td><td>12/09 to present - President of CECONY</td></tr><tr><td>William G. Longhi</td><td>61</td><td>1/13 to present - President - Shared Services of CECONY</td></tr><tr><td></td><td></td><td>2/09 to 12/12 - President and Chief Executive Officer of O&amp;R</td></tr><tr><td>Robert Hoglund</td><td>53</td><td>9/05 to present - Senior Vice President and Chief Financial Officer of Con Edison and CECONY</td></tr><tr><td>Elizabeth D. Moore</td><td>60</td><td>5/13 to present - Senior Vice President and General Counsel of Con Edison and CECONY</td></tr><tr><td></td><td></td><td>5/09 to 4/13 - General Counsel of Con Edison and CECONY</td></tr><tr><td>Joseph P. Oates</td><td>53</td><td>9/12 to present - Senior Vice President - Business Shared Services of CECONY</td></tr><tr><td></td><td></td><td>7/12 to 8/12 - Senior Vice President of CECONY</td></tr><tr><td></td><td></td><td>7/07 to 6/12 - Vice President - Energy Management of CECONY</td></tr><tr><td>Frances A. Resheske</td><td>54</td><td>2/02 to present - Senior Vice President - Public Affairs of CECONY</td></tr><tr><td>Gurudatta Nadkarni</td><td>49</td><td>1/08 to present - Vice President of Strategic Planning</td></tr><tr><td>Scott Sanders</td><td>51</td><td>2/10 to present - Vice President and Treasurer of Con Edison and CECONY</td></tr><tr><td></td><td></td><td>1/10 to 2/10 - Vice President - Finance</td></tr><tr><td>Robert Muccilo</td><td>58</td><td>7/09 to present - Vice President and Controller of Con Edison and CECONY</td></tr><tr><td></td><td></td><td>11/09 to present - Chief Financial Officer and Controller of O&amp;R</td></tr></table>



## Executive Officers of Con Edison but not CECONY

Timothy P. Cawley 50 12/13 to present – President and Chief Executive Officer of O&R
11/13 – Senior Vice President of CECONY
12/12 to 10/13 – Senior Vice President – Central Operations
5/11 to 11/12 – Vice President – Substation Operations
9/07 to 4/11 – Vice President – Bronx and Westchester Electric Operations

## Executive Officers of CECONY but not Con Edison

(All offices and positions listed are with CECONY)

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

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

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

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



## Part II

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

## Con Edison

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

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

<table><tr><td rowspan="2"></td><td colspan="3">2014</td><td colspan="3">2013</td></tr><tr><td>High</td><td>Low</td><td>Dividends Paid</td><td>High</td><td>Low</td><td>Dividends Paid</td></tr><tr><td>1st Quarter</td><td>$56.68</td><td>$52.23</td><td>$0.63</td><td>$61.13</td><td>$54.51</td><td>$0.615</td></tr><tr><td>2nd Quarter</td><td>$58.57</td><td>$52.87</td><td>$0.63</td><td>$64.03</td><td>$55.42</td><td>$0.615</td></tr><tr><td>3rd Quarter</td><td>$58.12</td><td>$54.58</td><td>$0.63</td><td>$60.85</td><td>$54.51</td><td>$0.615</td></tr><tr><td>4th Quarter</td><td>$68.92</td><td>$56.40</td><td>$0.63</td><td>$59.24</td><td>$54.17</td><td>$0.615</td></tr></table>

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

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

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




<table><tr><td></td><td colspan="6">Period Ending</td></tr><tr><td>Company / Index</td><td>12/31/09</td><td>12/31/10</td><td>12/31/11</td><td>12/31/12</td><td>12/31/13</td><td>12/31/14</td></tr><tr><td>Consolidated Edison, Inc.</td><td>100.00</td><td>114.92</td><td>150.33</td><td>140.22</td><td>145.54</td><td>181.63</td></tr><tr><td>S&amp;P 500 Index</td><td>100.00</td><td>115.06</td><td>117.49</td><td>136.30</td><td>180.44</td><td>205.14</td></tr><tr><td>S&amp;P Utilities</td><td>100.00</td><td>105.46</td><td>126.46</td><td>128.09</td><td>145.02</td><td>187.04</td></tr></table>

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

## CECONY

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

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



## ISSUER PURCHASES OF EQUITY SECURITIES

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

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



## Item 6: Selected Financial Data

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



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

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

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

## Corporate Overview

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

At

<table><tr><td></td><td colspan="3">December 31, 2014</td><td colspan="2">December 31, 2014</td></tr><tr><td>(Millions of Dollars, except percentages)</td><td>Operating Revenues</td><td colspan="2">Net Income for Common Stock</td><td colspan="2">Assets</td></tr><tr><td>CECONY</td><td>$10,786</td><td>83%</td><td>$1,058</td><td>$39,637</td><td>90%</td></tr><tr><td>O&amp;R</td><td>892</td><td>7%</td><td>60</td><td>2,837</td><td>6%</td></tr><tr><td>Total Utilities</td><td>11,678</td><td>90%</td><td>1,118</td><td>102%</td><td>42,474</td></tr><tr><td>Con Edison Solutions(a)</td><td>1,059</td><td>8%</td><td>(77)</td><td>(7)%</td><td>250</td></tr><tr><td>Con Edison Energy(a)</td><td>133</td><td>1%</td><td>17</td><td>2%</td><td>117</td></tr><tr><td>Con Edison Development(b)</td><td>42</td><td>1%</td><td>43</td><td>4%</td><td>658</td></tr><tr><td>Other(c)</td><td>7</td><td>-%</td><td>(9)</td><td>(1)%</td><td>809</td></tr><tr><td>Total Con Edison</td><td>$12,919</td><td>100%</td><td>$1,092</td><td>100%</td><td>$44,308</td></tr></table>

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

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

(c) Other includes parent company and consolidation adjustments.

## Results of Operations

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

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Net Income for Common Stock</td><td colspan="3">Earnings per Share</td></tr><tr><td>2014</td><td>2013</td><td>2012</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>CECONY</td><td>$1,058</td><td>$1,020</td><td>$1,014</td><td>$3.61</td><td>$3.48</td><td>$3.46</td></tr><tr><td>O&amp;R</td><td>60</td><td>65</td><td>64</td><td>0.20</td><td>0.22</td><td>0.22</td></tr><tr><td>Competitive energy businesses(a)</td><td>(17)</td><td>(23)</td><td>76</td><td>(0.05)</td><td>(0.08)</td><td>0.26</td></tr><tr><td>Other(b)</td><td>(9)</td><td>-</td><td>(16)</td><td>(0.03)</td><td>-</td><td>(0.06)</td></tr><tr><td>Con Edison(c)</td><td>$1,092</td><td>$1,062</td><td>$1,138</td><td>$3.73</td><td>$3.62</td><td>$3.88</td></tr></table>

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

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

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

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



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

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

<table><tr><td rowspan="2"></td><td colspan="2">2014 vs. 2013</td><td colspan="2">2013 vs. 2012</td></tr><tr><td>Earnings per Share</td><td>Net Income for Common Stock (Millions of Dollars)</td><td>Earnings per Share</td><td>Net Income for Common Stock (Millions of Dollars)</td></tr><tr><td>CECONY(a)</td><td></td><td></td><td></td><td></td></tr><tr><td>Changes in rate plans</td><td>$ 0.43</td><td>$ 125</td><td>$ (0.07)</td><td>$ (21)</td></tr><tr><td>Weather impact on steam revenues</td><td>0.03</td><td>10</td><td>0.10</td><td>30</td></tr><tr><td>Other operations and maintenance expenses</td><td>(0.28)</td><td>(83)</td><td>0.11</td><td>32</td></tr><tr><td>Depreciation and amortization</td><td>(0.09)</td><td>(27)</td><td>(0.11)</td><td>(31)</td></tr><tr><td>Other</td><td>0.04</td><td>13</td><td>(0.01)</td><td>(4)</td></tr><tr><td>Total CECONY</td><td>0.13</td><td>38</td><td>0.02</td><td>6</td></tr><tr><td>O&amp;R(a)</td><td></td><td></td><td></td><td></td></tr><tr><td>Changes in rate plans</td><td>0.04</td><td>11</td><td>0.04</td><td>11</td></tr><tr><td>Other operations and maintenance expenses</td><td>(0.03)</td><td>(10)</td><td>(0.02)</td><td>(7)</td></tr><tr><td>Other</td><td>(0.03)</td><td>(6)</td><td>(0.02)</td><td>(3)</td></tr><tr><td>Total O&amp;R</td><td>(0.02)</td><td>(5)</td><td>-</td><td>1</td></tr><tr><td>Competitive energy businesses</td><td></td><td></td><td></td><td></td></tr><tr><td>Revenues less energy costs</td><td>(0.34)</td><td>(100)</td><td>(0.10)</td><td>(30)</td></tr><tr><td>Net interest expense</td><td>0.29</td><td>86</td><td>(0.27)</td><td>(80)</td></tr><tr><td>Other</td><td>0.08</td><td>20</td><td>0.03</td><td>11</td></tr><tr><td>Total competitive energy businesses(b)</td><td>0.03</td><td>6</td><td>(0.34)</td><td>(99)</td></tr><tr><td>Other, including parent company expenses(c)</td><td>(0.03)</td><td>(9)</td><td>0.06</td><td>16</td></tr><tr><td>Total variations</td><td>$ 0.11</td><td>$ 30</td><td>$ (0.26)</td><td>$ (76)</td></tr></table>

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

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

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

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

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

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

(b) Includes parent company and consolidation adjustments.



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

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

Year Ended December 31, 2014 Compared with Year Ended December 31, 2013
The Companies’ results of operations in 2014 compared with 2013 were:

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

(a) Includes parent company and consolidation adjustments.

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

## CECONY

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="4">Twelve Months Ended
December 31, 2014</td><td colspan="4">Twelve Months Ended
December 31, 2013</td><td rowspan="2">2013
Total</td><td rowspan="2">2014-2013
Variation</td></tr><tr><td>Electric</td><td>Gas</td><td>Steam</td><td>2014
Total</td><td>Electric</td><td>Gas</td><td>Steam</td></tr><tr><td>Operating revenues</td><td>$8,437</td><td>$1,721</td><td>$628</td><td>$10,786</td><td>$8,131</td><td>$1,616</td><td>$683</td><td>$10,430</td><td>$356</td></tr><tr><td>Purchased power</td><td>2,036</td><td>-</td><td>55</td><td>2,091</td><td>1,974</td><td>-</td><td>47</td><td>2,021</td><td>70</td></tr><tr><td>Fuel</td><td>180</td><td>-</td><td>105</td><td>285</td><td>174</td><td>-</td><td>146</td><td>320</td><td>(35)</td></tr><tr><td>Gas purchased for resale</td><td>-</td><td>609</td><td>-</td><td>609</td><td>-</td><td>532</td><td>-</td><td>532</td><td>77</td></tr><tr><td>Other operations and maintenance</td><td>2,270</td><td>418</td><td>185</td><td>2,873</td><td>2,180</td><td>351</td><td>204</td><td>2,735</td><td>138</td></tr><tr><td>Depreciation and amortization</td><td>781</td><td>132</td><td>78</td><td>991</td><td>749</td><td>130</td><td>67</td><td>946</td><td>45</td></tr><tr><td>Taxes, other than income taxes</td><td>1,458</td><td>248</td><td>92</td><td>1,798</td><td>1,459</td><td>241</td><td>116</td><td>1,816</td><td>(18)</td></tr><tr><td>Operating income</td><td>$1,712</td><td>$ 314</td><td>$113</td><td>$ 2,139</td><td>$1,595</td><td>$ 362</td><td>$103</td><td>$ 2,060</td><td>$ 79</td></tr></table>



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

## Electric

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

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Twelve Months Ended</td></tr><tr><td>December 31, 2014</td><td>December 31, 2013</td><td>Variation</td></tr><tr><td>Operating revenues</td><td>$8,437</td><td>$8,131</td><td>$306</td></tr><tr><td>Purchased power</td><td>2,036</td><td>1,974</td><td>62</td></tr><tr><td>Fuel</td><td>180</td><td>174</td><td>6</td></tr><tr><td>Other operations and maintenance</td><td>2,270</td><td>2,180</td><td>90</td></tr><tr><td>Depreciation and amortization</td><td>781</td><td>749</td><td>32</td></tr><tr><td>Taxes, other than income taxes</td><td>1,458</td><td>1,459</td><td>(1)</td></tr><tr><td>Electric operating income</td><td>$1,712</td><td>$1,595</td><td>$117</td></tr></table>

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

<table><tr><td rowspan="3">Description</td><td colspan="4">Millions of kWhs Delivered</td><td colspan="4">Revenues in Millions(a)</td></tr><tr><td colspan="3">Twelve Months Ended</td><td rowspan="2">Percent Variation</td><td colspan="3">Twelve Months Ended</td><td rowspan="2">Percent Variation</td></tr><tr><td>December 31, 2014</td><td>December 31, 2013</td><td>Variation</td><td>December 31, 2014</td><td>December 31, 2013</td><td></td></tr><tr><td>Residential/Religious(b)</td><td>9,868</td><td>10,273</td><td>(405)</td><td>(3.9)%</td><td>$2,847</td><td>$2,773</td><td>$ 74</td><td>2.7%</td></tr><tr><td>Commercial/Industrial</td><td>9,834</td><td>9,776</td><td>58</td><td>0.6</td><td>2,176</td><td>2,013</td><td>163</td><td>8.1</td></tr><tr><td>Energy choice customers</td><td>26,221</td><td>26,574</td><td>(353)</td><td>(1.3)</td><td>2,646</td><td>2,683</td><td>(37)</td><td>(1.4)</td></tr><tr><td>NYPA, Municipal Agency and other sales</td><td>10,380</td><td>10,295</td><td>85</td><td>0.8</td><td>625</td><td>615</td><td>10</td><td>1.6</td></tr><tr><td>Other operating revenues(c)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>143</td><td>47</td><td>96</td><td>Large</td></tr><tr><td>Total</td><td>56,303</td><td>56,918</td><td>(615)</td><td>(1.1)%(d)</td><td>$8,437</td><td>$8,131</td><td>$306</td><td>3.8%</td></tr></table>

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

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

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

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

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

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

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

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

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

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



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

## Gas

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

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Twelve Months Ended</td></tr><tr><td>December 31, 2014</td><td>December 31, 2013</td><td>Variation</td></tr><tr><td>Operating revenues</td><td>$1,721</td><td>$1,616</td><td>$105</td></tr><tr><td>Gas purchased for resale</td><td>609</td><td>532</td><td>77</td></tr><tr><td>Other operations and maintenance</td><td>418</td><td>351</td><td>67</td></tr><tr><td>Depreciation and amortization</td><td>132</td><td>130</td><td>2</td></tr><tr><td>Taxes, other than income taxes</td><td>248</td><td>241</td><td>7</td></tr><tr><td>Gas operating income</td><td>$ 314</td><td>$ 362</td><td>$ (48)</td></tr></table>

CECONY’s gas sales and deliveries, excluding off-system sales, in 2014 compared with 2013 were:

<table><tr><td rowspan="3">Description</td><td colspan="4">Twelve Months Ended</td><td colspan="4">Twelve Months Ended</td></tr><tr><td colspan="2">December 31, 2014</td><td colspan="2">December 31, 2013</td><td colspan="2">Percent Variation</td><td colspan="2">December 31, 2014</td></tr><tr><td>2013</td><td>2013</td><td>2013</td><td>2013</td><td>2013</td><td>2013</td><td>Variation</td><td>Variation</td></tr><tr><td>Residential</td><td>46,661</td><td>38,872</td><td>7,789</td><td>20.0%</td><td>$ 782</td><td>$ 720</td><td>$ 62</td><td>8.6%</td></tr><tr><td>General</td><td>28,969</td><td>28,135</td><td>834</td><td>3.0</td><td>359</td><td>339</td><td>20</td><td>5.9</td></tr><tr><td>Firm transportation</td><td>68,731</td><td>61,139</td><td>7,592</td><td>12.4</td><td>453</td><td>414</td><td>39</td><td>9.4</td></tr><tr><td>Total firm sales and transportation</td><td>144,361</td><td>128,146</td><td>16,215</td><td>12.7(b)</td><td>1,594</td><td>1,473</td><td>121</td><td>8.2</td></tr><tr><td>Interruptible sales(c)</td><td>10,498</td><td>10,900</td><td>(402)</td><td>(3.7)</td><td>91</td><td>69</td><td>22</td><td>31.9</td></tr><tr><td>NYPA</td><td>47,548</td><td>48,682</td><td>(1,134)</td><td>(2.3)</td><td>2</td><td>2</td><td>-</td><td>-</td></tr><tr><td>Generation plants</td><td>82,146</td><td>62,764</td><td>19,382</td><td>30.9</td><td>30</td><td>26</td><td>4</td><td>15.4</td></tr><tr><td>Other</td><td>22,866</td><td>24,615</td><td>(1,749)</td><td>(7.1)</td><td>40</td><td>45</td><td>(5)</td><td>(11.1)</td></tr><tr><td>Other operating revenues(d)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(36)</td><td>1</td><td>(37)</td><td>Large</td></tr><tr><td>Total</td><td>307,419</td><td>275,107</td><td>32,312</td><td>11.7%</td><td>$1,721</td><td>$1,616</td><td>$105</td><td>6.5%</td></tr></table>

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

(b) After adjusting for variations, principally weather and billing days, firm gas sales and transportation volumes in the company's service area increased 8.0 percent in 2014 compared with 2013, reflecting primarily higher oil-to-gas conversions and transfers to firm service.

(c) Includes 6,057 and 5,362 thousands of Dt for 2014 and 2013, respectively, which are also reflected in firm transportation and other.

(d) Other gas operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plans. See Note B to the financial statements in Item 8.

Operating revenues increased $105 million in 2014 compared with 2013 due primarily to an increase in gas purchased for resale expenses ($77 million) and higher revenues from the gas rate plan ($31 million).

Gas purchased for resale increased $77 million in 2014 compared with 2013 due to higher unit costs ($67 million) and sendout volumes ($10 million).

Other operations and maintenance expenses increased $67 million due primarily to higher operating costs attributable to emergency response ($25 million), higher pension costs ($10 million), an increase in the surcharges for assessments and fees that are collected in revenues from customers ($8 million), higher costs for injuries and damages ($4 million) and higher healthcare costs ($2 million).

Depreciation and amortization increased $2 million due primarily to higher gas utility plant balances.

Taxes, other than income taxes increased $7 million principally due to higher state and local revenue taxes and property taxes, offset in part by a sales and use tax refund.



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

## Steam

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

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Twelve Months Ended</td></tr><tr><td>December 31, 2014</td><td>December 31, 2013</td><td>Variation</td></tr><tr><td>Operating revenues</td><td>$628</td><td>$683</td><td>$(55)</td></tr><tr><td>Purchased power</td><td>55</td><td>47</td><td>8</td></tr><tr><td>Fuel</td><td>105</td><td>146</td><td>(41)</td></tr><tr><td>Other operations and maintenance</td><td>185</td><td>204</td><td>(19)</td></tr><tr><td>Depreciation and amortization</td><td>78</td><td>67</td><td>11</td></tr><tr><td>Taxes, other than income taxes</td><td>92</td><td>116</td><td>(24)</td></tr><tr><td>Steam operating income</td><td>$113</td><td>$103</td><td>$10</td></tr></table>

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

<table><tr><td rowspan="3">Description</td><td colspan="4">Millions of Pounds Delivered</td><td colspan="4">Revenues in Millions</td></tr><tr><td colspan="3">Twelve Months Ended</td><td rowspan="2">Percent Variation</td><td colspan="3">Twelve Months Ended</td><td rowspan="2">Percent Variation</td></tr><tr><td>December 31, 2014</td><td>December 31, 2013</td><td>Variation</td><td>December 31, 2014</td><td>December 31, 2013</td><td></td></tr><tr><td>General</td><td>594</td><td>547</td><td>47</td><td>8.6%</td><td>$ 30</td><td>$ 31</td><td>$ (1)</td><td>(3.2)%</td></tr><tr><td>Apartment house</td><td>6,574</td><td>6,181</td><td>393</td><td>6.4</td><td>180</td><td>187</td><td>(7)</td><td>(3.7)</td></tr><tr><td>Annual power</td><td>15,848</td><td>15,195</td><td>653</td><td>4.3</td><td>469</td><td>491</td><td>(22)</td><td>(4.5)</td></tr><tr><td>Other operating revenues(a)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(51)</td><td>(26)</td><td>(25)</td><td>96.2</td></tr><tr><td>Total</td><td>23,016</td><td>21,923</td><td>1,093</td><td>5.0%(b)</td><td>$628</td><td>$683</td><td>$(55)</td><td>(8.0)%</td></tr></table>

(a) Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plans. See Note B to the financial statements in Item 8.
(b) After adjusting for variations, principally weather and billing days, steam sales and deliveries increased 1.8 percent in 2014 compared with 2013, reflecting higher average normalized use per customer.

Operating revenues decreased $55 million in 2014 compared with 2013 due primarily to lower fuel expenses ($41 million) and lower revenues from the steam rate plans ($38 million), offset in part by the weather impact on revenues ($17 million) and higher purchased power costs ($8 million).

Purchased power expenses increased $8 million in 2014 compared with 2013 due to an increase in unit costs ($7 million) and purchased volumes ($1 million).

Fuel expenses decreased $41 million in 2014 compared with 2013 due to lower unit costs ($44 million), offset by higher sendout volumes ($3 million).
Other operations and maintenance expenses decreased $19 million due primarily to the absence in 2014 of certain previously deferred pension costs that were recognized in 2013 under CECONY’s steam rate plan.

Depreciation and amortization increased $11 million due to higher steam utility plant balances.

Taxes, other than income taxes decreased $24 million principally due to lower property taxes and sales and use tax refund.



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

## Taxes, Other Than Income Taxes

At $1.8 billion, taxes other than income taxes remain one of CECONY’s largest operating expenses. The principal components of, and variations in, taxes other than income taxes were:

<table><tr><td>(Millions of Dollars)</td><td>2014</td><td>2013</td><td>Increase/ (Decrease)</td></tr><tr><td>Property taxes</td><td>$1,406</td><td>$1,408</td><td>$ (2)</td></tr><tr><td>State and local taxes related to revenue receipts</td><td>332</td><td>328</td><td>4</td></tr><tr><td>Payroll taxes</td><td>65</td><td>63</td><td>2</td></tr><tr><td>Other taxes</td><td>(5)(a)</td><td>17</td><td>(22)</td></tr><tr><td>Total</td><td>$1,798(b)</td><td>$1,816(b)</td><td>$(18)</td></tr></table>

(a) Includes a sales and use tax refund of $15 million.

(b) Including sales tax on customers' bills, total taxes other than income taxes, billed to customers in 2014 and 2013 were $2,267 million and $2,255 million, respectively.

## Other Income (Deductions)

Other income (deductions) increased $10 million in 2014 compared with 2013 due primarily to the gain on sale of certain non-utility property.

## Net Interest Expense

Net interest expense increased $16 million in 2014 compared with 2013 due primarily to higher interest charges on long-term debt in 2014.

## Income Tax Expense

Income taxes increased $35 million in 2014 compared with 2013 due primarily to higher income before income tax expense ($29 million) and higher amortization of New York State’s Metropolitan Transportation Authority business tax ($6 million).

## O&R

<table><tr><td rowspan="2"></td><td colspan="3">Twelve Months Ended December 31, 2014</td><td colspan="3">Twelve Months Ended December 31, 2013</td><td rowspan="2">2013 Total</td><td rowspan="2">2014-2013 Variation</td></tr><tr><td>Electric</td><td>Gas</td><td>2014 Total</td><td>Electric</td><td>Gas</td><td>2013 Total</td></tr><tr><td>(Millions of Dollars)</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Operating revenues</td><td>$680</td><td>$212</td><td>$892</td><td>$628</td><td>$205</td><td>$833</td><td>$59</td><td></td></tr><tr><td>Purchased power</td><td>238</td><td>-</td><td>238</td><td>217</td><td>-</td><td>217</td><td>21</td><td></td></tr><tr><td>Gas purchased for resale</td><td>-</td><td>88</td><td>88</td><td>-</td><td>76</td><td>76</td><td>12</td><td></td></tr><tr><td>Other operations and maintenance</td><td>251</td><td>67</td><td>318</td><td>238</td><td>64</td><td>302</td><td>16</td><td></td></tr><tr><td>Depreciation and amortization</td><td>46</td><td>15</td><td>61</td><td>41</td><td>15</td><td>56</td><td>5</td><td></td></tr><tr><td>Taxes, other than income taxes</td><td>43</td><td>17</td><td>60</td><td>45</td><td>17</td><td>62</td><td>(2)</td><td></td></tr><tr><td>Operating income</td><td>$102</td><td>$ 25</td><td>$127</td><td>$ 87</td><td>$ 33</td><td>$120</td><td>$ 7</td><td></td></tr></table>

## Electric

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

<table><tr><td rowspan="2"></td><td colspan="3">Twelve Months Ended</td></tr><tr><td>December 31, 2014</td><td>December 31, 2013</td><td>Variation</td></tr><tr><td>(Millions of Dollars)</td><td></td><td></td><td></td></tr><tr><td>Operating revenues</td><td>$680</td><td>$628</td><td>$52</td></tr><tr><td>Purchased power</td><td>238</td><td>217</td><td>21</td></tr><tr><td>Other operations and maintenance</td><td>251</td><td>238</td><td>13</td></tr><tr><td>Depreciation and amortization</td><td>46</td><td>41</td><td>5</td></tr><tr><td>Taxes, other than income taxes</td><td>43</td><td>45</td><td>(2)</td></tr><tr><td>Electric operating income</td><td>$102</td><td>$ 87</td><td>$15</td></tr></table>



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

O&R’s electric sales and deliveries in 2014 compared with 2013 were:

<table><tr><td colspan="6">Millions of kWhs Delivered</td><td colspan="4">Revenues in Millions(a)</td></tr><tr><td colspan="5">Twelve Months Ended</td><td colspan="5">Twelve Months Ended</td></tr><tr><td rowspan="2">Description</td><td>December 31,</td><td>December 31,</td><td></td><td>Percent</td><td>December 31,</td><td>December 31,</td><td></td><td></td><td>Percent</td></tr><tr><td>2014</td><td>2013</td><td>Variation</td><td>Variation</td><td>2014</td><td>2013</td><td>Variation</td><td>Variation</td><td>Variation</td></tr><tr><td>Residential/Religious(b)</td><td>1,515</td><td>1,580</td><td>(65)</td><td>(4.1)%</td><td>$307</td><td>$287</td><td>$20</td><td>7.0%</td><td></td></tr><tr><td>Commercial/Industrial</td><td>812</td><td>871</td><td>(59)</td><td>(6.8)</td><td>136</td><td>129</td><td>7</td><td>5.4</td><td></td></tr><tr><td>Energy choice customers</td><td>3,240</td><td>3,166</td><td>74</td><td>2.3</td><td>207</td><td>192</td><td>15</td><td>7.8</td><td></td></tr><tr><td>Public authorities</td><td>102</td><td>104</td><td>(2)</td><td>(1.9)</td><td>12</td><td>11</td><td>1</td><td>9.1</td><td></td></tr><tr><td>Other operating revenues(c)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>18</td><td>9</td><td>9</td><td>Large</td><td></td></tr><tr><td>Total</td><td>5,669</td><td>5,721</td><td>(52)</td><td>(0.9)%(d)</td><td>$680</td><td>$628</td><td>$52</td><td>8.3%</td><td></td></tr></table>

(a) O&R's New York electric delivery revenues are subject to a revenue decoupling mechanism, as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R's electric sales in New Jersey and Pennsylvania are not subject to a decoupling mechanism, and as a result, changes in such volumes do impact revenues.

(b) “Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations.
(c) Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s electric rate plan. See Note B to the financial statements in Item 8.
(d) After adjusting for weather and other variations, electric delivery volumes in O&R’s service area increased 0.2 percent in 2014 compared with 2013.

Operating revenues increased $52 million in 2014 compared with 2013 due primarily to higher purchased power expenses ($21 million) and higher revenues from the New York electric rate plan ($17 million).

Purchased power expenses increased $21 million in 2014 compared with 2013 due to an increase in unit costs ($26 million), offset by a decrease in purchased volumes ($5 million).

Other operations and maintenance expenses increased $13 million due primarily to an increase in surcharges for

assessments and fees that are collected in revenues from customers ($5 million), increase in storm costs ($3 million) and higher healthcare costs ($1 million).

Depreciation and amortization increased $5 million due primarily to higher electric utility plant balances.

Taxes, other than income taxes decreased $2 million principally due to lower state revenue taxes.

## Gas

O&R’s results of gas operations for the year ended December 31, 2014 compared with the year ended December 31, 2013 is as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Twelve Months Ended</td></tr><tr><td>December 31, 2014</td><td>December 31, 2013</td><td>Variation</td></tr><tr><td>Operating revenues</td><td>$212</td><td>$205</td><td>$ 7</td></tr><tr><td>Gas purchased for resale</td><td>88</td><td>76</td><td>12</td></tr><tr><td>Other operations and maintenance</td><td>67</td><td>64</td><td>3</td></tr><tr><td>Depreciation and amortization</td><td>15</td><td>15</td><td>-</td></tr><tr><td>Taxes, other than income taxes</td><td>17</td><td>17</td><td>-</td></tr><tr><td>Gas operating income</td><td>$ 25</td><td>$ 33</td><td>$ (8)</td></tr></table>



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

O&R’s gas sales and deliveries, excluding off-system sales, in 2014 compared with 2013 were:

<table><tr><td colspan="6">Thousands of Dt Delivered</td><td colspan="4">Revenues in Millions(a)</td></tr><tr><td colspan="5">Twelve Months Ended</td><td colspan="5">Twelve Months Ended</td></tr><tr><td>Description</td><td>December 31, 2014</td><td>December 31, 2013</td><td>Variation</td><td>Percent Variation</td><td>December 31, 2014</td><td>December 31, 2013</td><td>Percent Variation</td><td>Variation</td><td>Percent Variation</td></tr><tr><td>Residential</td><td>7,786</td><td>7,253</td><td>533</td><td>7.3%</td><td>$101</td><td>$ 97</td><td>$ 4</td><td>4.1%</td><td></td></tr><tr><td>General</td><td>1,743</td><td>1,555</td><td>188</td><td>12.1</td><td>20</td><td>18</td><td>2</td><td>11.1</td><td></td></tr><tr><td>Firm transportation</td><td>12,592</td><td>12,062</td><td>530</td><td>4.4</td><td>75</td><td>77</td><td>(2)</td><td>(2.6)</td><td></td></tr><tr><td>Total firm sales and transportation</td><td>22,121</td><td>20,870</td><td>1,251</td><td>6.0(b)</td><td>196</td><td>192</td><td>4</td><td>2.1</td><td></td></tr><tr><td>Interruptible sales</td><td>4,216</td><td>4,118</td><td>98</td><td>2.4</td><td>2</td><td>3</td><td>(1)</td><td>(33.3)</td><td></td></tr><tr><td>Generation plants</td><td>70</td><td>19</td><td>51</td><td>Large</td><td>1</td><td>-</td><td>1</td><td>Large</td><td></td></tr><tr><td>Other</td><td>945</td><td>885</td><td>60</td><td>6.8</td><td>-</td><td>-</td><td>-</td><td>-</td><td></td></tr><tr><td>Other gas revenues</td><td>-</td><td>-</td><td>-</td><td>-</td><td>13</td><td>10</td><td>3</td><td>30.0</td><td></td></tr><tr><td>Total</td><td>27,352</td><td>25,892</td><td>1,460</td><td>5.6</td><td>$212</td><td>$205</td><td>$ 7</td><td>3.4%</td><td></td></tr></table>

(a) Revenues from New York gas sales are subject to a weather normalization clause and a revenue decoupling mechanism as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.

(b) After adjusting for weather and other variations, total firm sales and transportation volumes increased 1.9 percent in 2014 compared with 2013.

Operating revenues increased $7 million in 2014 compared with 2013 due primarily to the increase in gas purchased for resale ($12 million).

Gas purchased for resale increased $12 million in 2014 compared with 2013 due to an increase in unit costs ($6 million) and purchased volumes ($6 million).

Other operations and maintenance expenses increased $3 million due primarily to an increase in surcharges for assessments and fees that are collected in revenues from customers.

## Taxes, Other Than Income Taxes

Taxes, other than income taxes, decreased $2 million in 2014 compared with 2013. The principal components of taxes, other than income taxes, were:

<table><tr><td>(Millions of Dollars)</td><td>2014</td><td>2013</td><td>Increase/ (Decrease)</td></tr><tr><td>Property taxes</td><td>$44</td><td>$43</td><td>$ 1</td></tr><tr><td>State and local taxes related to revenue receipts</td><td>9</td><td>12</td><td>(3)</td></tr><tr><td>Payroll taxes</td><td>7</td><td>7</td><td>-</td></tr><tr><td>Total</td><td>$60(a)</td><td>$62(a)</td><td>$(2)</td></tr></table>

(a) Including sales tax on customers' bills, total taxes other than income taxes, billed to customers in 2014 and 2013 were $86 million and $87 million, respectively.

## Other Income (Deductions)

Other income (deductions) increased $2 million in 2014 compared with 2013 due primarily to higher interest accrued on storm reserves in 2014.

## Net Interest Expense

Net interest expense decreased $2 million in 2014 compared with 2013 reflecting primarily changes to accrued interest resulting from adjustments to prior year federal income tax returns in 2013.

## Income Tax Expense

Income taxes increased $16 million in 2014 compared with 2013 due primarily to higher income before income tax expense ($5 million), higher amortization of New York State’s Metropolitan Transportation Authority business tax ($3 million) and changes in estimates of accumulated deferred income taxes in 2013 ($6 million).



## Competitive Energy Businesses

The competitive energy businesses’ results of operations for the year ended December 31, 2014 compared with the year ended December 31, 2013 is as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Twelve Months Ended</td></tr><tr><td>December 31, 2014</td><td>December 31, 2013</td><td>Variation</td></tr><tr><td>Operating revenues</td><td>$1,244</td><td>$1,096</td><td>$148</td></tr><tr><td>Purchased power</td><td>1,088</td><td>861</td><td>227</td></tr><tr><td>Gas purchased for resale</td><td>115</td><td>27</td><td>88</td></tr><tr><td>Other operations and maintenance</td><td>108</td><td>105</td><td>3</td></tr><tr><td>Depreciation and amortization</td><td>19</td><td>23</td><td>(4)</td></tr><tr><td>Taxes, other than income taxes</td><td>19</td><td>17</td><td>2</td></tr><tr><td>(Gain) on sale of solar electric production projects</td><td>(45)</td><td>-</td><td>(45)</td></tr><tr><td>Operating income (loss)</td><td>$ (60)</td><td>$ 63</td><td>$(123)</td></tr></table>

Operating revenues increased $148 million in 2014 compared with 2013, due primarily to higher wholesale and electric retail revenues ($125 million), and the impact of the LILO transactions ($27 million, see “Lease In/Lease Out Transactions” in Note J to the financial statements in Item 8). Wholesale revenues increased $80 million in 2014 as compared to 2013 due to higher sales volume. Electric retail revenues increased $45 million, due to higher unit prices ($64 million), offset by lower sales volumes ($19 million). Solar revenues decreased $14 million in 2014 as compared with 2013 primarily due to Con Edison Development’s sale of 50 percent of its membership interest in CED California Holdings Financing I, LLC (California Solar – see Note Q to the financial statements in Item 8). Net mark-to-market values decreased $202 million in 2014 as compared with 2013, of which $206 million in losses are reflected in purchased power expenses and $4 million in gains are reflected in revenues. Other revenues increased $6 million in 2014 as compared with 2013, due primarily to higher energy services revenues.

Purchased power expenses increased $227 million in 2014 compared with 2013 due primarily to changes in mark-to-market losses ($206 million) and higher unit prices ($64 million), offset by lower volumes ($43 million).

Gas purchased for resale increased $88 million due primarily to higher volumes.

Other operations and maintenance expenses increased $3 million due primarily to an increase in solar electric production projects in operation during 2014.

Depreciation and maintenance expense decreased $4 million due to Con Edison Development’s sale of 50 percent of its membership interest in California Solar (see Note Q to the financial statements in Item 8).
Taxes, other than income taxes increased $2 million due to an increase in sales and use taxes, property taxes and gross receipts tax.

Gain on sale of solar electric production projects was $45 million reflecting Con Edison Development’s sale of 50 percent of its membership interest in California Solar (see Note Q to the financial statements in Item 8).

## Other Income (Deductions)

Other income (deductions) increased $20 million in 2014 compared to 2013 primarily reflecting income from Con Edison Development’s solar investments that are accounted for under the equity method.

## Net Interest Expense

Net interest expense decreased $143 million in 2014 compared to 2013 due primarily to the impact of the LILO transactions. See “Lease In/Lease Out Transactions” in Note J to the financial statements in Item 8.

## Income Tax Expense

Income taxes increased $34 million in 2014 compared with 2013 due primarily to higher income before income tax expense ($17 million) and a tax benefit in 2013 resulting from the acceptance by the IRS of the company’s claim for manufacturing tax deductions ($15 million).

## Other

For Con Edison, “Other” also includes inter-company eliminations relating to operating revenues and operating expenses.



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

## Year Ended December 31, 2013 Compared with Year Ended December 31, 2012

The Companies’ results of operations in 2013 compared with 2012 were:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="2">CECONY</td><td colspan="2">O&amp;R</td><td colspan="2">Competitive Energy Businesses</td><td colspan="2">Other(a)</td><td colspan="2">Con Edison(b)</td></tr><tr><td>Increases (Decreases) Amount</td><td>Increases (Decreases) Percent</td><td>Increases (Decreases) Amount</td><td>Increases (Decreases) Percent</td><td>Increase (Decreases) Amount</td><td>Increase (Decreases) Percent</td><td>Increase (Decreases) Amount</td><td>Increase (Decreases)
(Decreases) Percent</td><td>Increase (Decreases) Amount</td><td>Increase (Decreases) Percent</td></tr><tr><td>Operating revenues</td><td>$243</td><td>2.4%</td><td>$38</td><td>4.8%</td><td>$117</td><td>(9.6)%</td><td>$2</td><td>28.6%</td><td>$166</td><td>1.4%</td></tr><tr><td>Purchased power</td><td>53</td><td>2.7</td><td>19</td><td>9.6</td><td>(89)</td><td>(9.4)</td><td>-</td><td>-</td><td>(17)</td><td>(0.5)</td></tr><tr><td>Fuel</td><td>10</td><td>3.2</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>10</td><td>3.2</td></tr><tr><td>Gas purchased for resale</td><td>145</td><td>37.5</td><td>7</td><td>10.1</td><td>22</td><td>Large</td><td>-</td><td>-</td><td>174</td><td>37.7</td></tr><tr><td>Other operations and maintenance</td><td>(53)</td><td>(1.9)</td><td>11</td><td>3.8</td><td>(2)</td><td>(1.9)</td><td>(1)</td><td>(25.0)</td><td>(45)</td><td>(1.4)</td></tr><tr><td>Depreciation and amortization</td><td>52</td><td>5.8</td><td>3</td><td>5.7</td><td>15</td><td>Large</td><td>(1)</td><td>Large</td><td>69</td><td>7.2</td></tr><tr><td>Taxes, other than income taxes</td><td>69</td><td>3.9</td><td>1</td><td>1.6</td><td>(1)</td><td>(5.6)</td><td>1</td><td>Large</td><td>70</td><td>3.8</td></tr><tr><td>Operating income</td><td>(33)</td><td>(1.6)</td><td>(3)</td><td>(2.4)</td><td>(62)</td><td>(49.6)</td><td>3</td><td>Large</td><td>(95)</td><td>(4.1)</td></tr><tr><td>Other income less deductions</td><td>3</td><td>Large</td><td>(1)</td><td>(50.0)</td><td>4</td><td>Large</td><td>1</td><td>50.0</td><td>7</td><td>Large</td></tr><tr><td>Net interest expense</td><td>(24)</td><td>(4.4)</td><td>7</td><td>23.3</td><td>134</td><td>Large</td><td>(2)</td><td>(7.1)</td><td>115</td><td>19.0</td></tr><tr><td>Income before income tax expense</td><td>(6)</td><td>(0.4)</td><td>(11)</td><td>(11.6)</td><td>(192)</td><td>Large</td><td>6</td><td>21.4</td><td>(203)</td><td>(11.7)</td></tr><tr><td>Income tax expense</td><td>(9)</td><td>(1.7)</td><td>(12)</td><td>(38.7)</td><td>(93)</td><td>Large</td><td>(10)</td><td>(83.3)</td><td>(124)</td><td>(20.7)</td></tr><tr><td>Net income</td><td>3</td><td>0.3</td><td>1</td><td>1.6</td><td>(99)</td><td>Large</td><td>16</td><td>Large</td><td>(79)</td><td>(6.9)</td></tr><tr><td>Preferred stock dividend requirements</td><td>(3)</td><td>Large</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(3)</td><td>Large</td></tr><tr><td>Net income for common stock</td><td>$ 6</td><td>0.6%</td><td>$ 1</td><td>1.6%</td><td>$ (99)</td><td>Large</td><td>$16</td><td>Large</td><td>$ (76)</td><td>(6.7)%</td></tr></table>

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

## CECONY

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Twelve Months Ended December 31, 2013</td><td colspan="6">Twelve Months Ended December 31, 2012</td></tr><tr><td>Electric</td><td>Gas</td><td>Steam</td><td>2013 Total</td><td>Electric</td><td>Gas</td><td>Steam</td><td>2012 Total</td><td>2013-2012 Variation</td></tr><tr><td>Operating revenues</td><td>$8,131</td><td>$1,616</td><td>$683</td><td>$10,430</td><td>$8,176</td><td>$1,415</td><td>$596</td><td>$10,187</td><td>$243</td></tr><tr><td>Purchased power</td><td>1,974</td><td>-</td><td>47</td><td>2,021</td><td>1,938</td><td>-</td><td>30</td><td>1,968</td><td>53</td></tr><tr><td>Fuel</td><td>174</td><td>-</td><td>146</td><td>320</td><td>159</td><td>-</td><td>151</td><td>310</td><td>10</td></tr><tr><td>Gas purchased for resale</td><td>-</td><td>532</td><td>-</td><td>532</td><td>-</td><td>387</td><td>-</td><td>387</td><td>145</td></tr><tr><td>Other operations and maintenance</td><td>2,180</td><td>351</td><td>204</td><td>2,735</td><td>2,273</td><td>330</td><td>185</td><td>2,788</td><td>(53)</td></tr><tr><td>Depreciation and amortization</td><td>749</td><td>130</td><td>67</td><td>946</td><td>710</td><td>120</td><td>64</td><td>894</td><td>52</td></tr><tr><td>Taxes, other than income taxes</td><td>1,459</td><td>241</td><td>116</td><td>1,816</td><td>1,403</td><td>232</td><td>112</td><td>1,747</td><td>69</td></tr><tr><td>Operating income</td><td>$1,595</td><td>$ 362</td><td>$103</td><td>$ 2,060</td><td>$1,693</td><td>$ 346</td><td>$ 54</td><td>$ 2,093</td><td>$ (33)</td></tr></table>



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

## Electric

CECONY’s results of electric operations for the year ended December 31, 2013 compared with the year ended December 31, 2012 is as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Twelve Months Ended</td></tr><tr><td>December 31, 2013</td><td>December 31, 2012</td><td>Variation</td></tr><tr><td>Operating revenues</td><td>$8,131</td><td>$8,176</td><td>$(45)</td></tr><tr><td>Purchased power</td><td>1,974</td><td>1,938</td><td>36</td></tr><tr><td>Fuel</td><td>174</td><td>159</td><td>15</td></tr><tr><td>Other operations and maintenance</td><td>2,180</td><td>2,273</td><td>(93)</td></tr><tr><td>Depreciation and amortization</td><td>749</td><td>710</td><td>39</td></tr><tr><td>Taxes, other than income taxes</td><td>1,459</td><td>1,403</td><td>56</td></tr><tr><td>Electric operating income</td><td>$1,595</td><td>$1,693</td><td>$(98)</td></tr></table>

CECONY’s electric sales and deliveries in 2013 compared with 2012 were:

<table><tr><td rowspan="3">Description</td><td colspan="4">Millions of kWhs Delivered</td><td colspan="4">Revenues in Millions(a)</td></tr><tr><td colspan="3">Twelve Months Ended</td><td rowspan="2">Percent Variation</td><td colspan="3">Twelve Months Ended</td><td rowspan="2">Percent Variation</td></tr><tr><td>December 31, 2013</td><td>December 31, 2012</td><td>Variation</td><td>December 31, 2013</td><td>December 31, 2012</td><td></td></tr><tr><td>Residential/Religious(b)</td><td>10,273</td><td>10,718</td><td>(445)</td><td>(4.2)%</td><td>$2,773</td><td>$2,749</td><td>$ 24</td><td>0.9%</td></tr><tr><td>Commercial/Industrial</td><td>9,776</td><td>9,848</td><td>(72)</td><td>(0.7)</td><td>2,013</td><td>1,971</td><td>42</td><td>2.1</td></tr><tr><td>Energy choice customers</td><td>26,574</td><td>25,990</td><td>584</td><td>2.2</td><td>2,683</td><td>2,750</td><td>(67)</td><td>(2.4)</td></tr><tr><td>NYPA, Municipal Agency and other sales</td><td>10,295</td><td>10,645</td><td>(350)</td><td>(3.3)</td><td>615</td><td>617</td><td>(2)</td><td>(0.3)</td></tr><tr><td>Other operating revenues(c)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>47</td><td>89</td><td>(42)</td><td>(47.2)</td></tr><tr><td>Total</td><td>56,918</td><td>57,201</td><td>(283)</td><td>(0.5)%(d)</td><td>$8,131</td><td>$8,176</td><td>$(45)</td><td>(0.6)%</td></tr></table>

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

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

(c) Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the revenue decoupling mechanism and other provisions of the company’s rate

plans. See Note B to the financial statements in Item 8.

(d) After adjusting for variations, principally weather and billing days, electric delivery volumes in CECONY’s service area decreased 1.3 percent in 2013 compared with 2012.

Operating revenues decreased $45 million in 2013 compared with 2012 due primarily to lower revenues from the electric rate plan and other regulatory matters ($128 million, which includes a decrease of $76 million reflecting the use of certain regulatory liabilities in 2012 to offset a temporary surcharge under the electric rate plan), offset by higher purchased power ($36 million) and fuel expenses ($15 million).

Purchased power expenses increased $36 million in 2013 compared with 2012 due to an increase in unit costs ($77 million), offset by a decrease in purchased volumes ($41 million).

Fuel expenses increased $15 million in 2013 compared with 2012 due to higher unit costs ($10 million) and sendout volumes from the company’s electric generating facilities ($5 million).

Other operations and maintenance expenses decreased $93 million primarily reflecting a decrease in pension costs ($45 million) in 2013 as compared to 2012 when certain pension costs that were deferred from earlier periods were recognized under the electric rate plan and lower healthcare costs ($11 million).

Depreciation and amortization increased $39 million due primarily to higher electric utility plant balances.

Taxes, other than income taxes increased $56 million principally due to higher property taxes.



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

## Gas

CECONY’s results of gas operations for the year ended December 31, 2013 compared with the year ended December 31, 2012 is as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Twelve Months Ended</td></tr><tr><td>December 31, 2013</td><td>December 31, 2012</td><td>Variation</td></tr><tr><td>Operating revenues</td><td>$1,616</td><td>$1,415</td><td>$201</td></tr><tr><td>Gas purchased for resale</td><td>532</td><td>387</td><td>145</td></tr><tr><td>Other operations and maintenance</td><td>351</td><td>330</td><td>21</td></tr><tr><td>Depreciation and amortization</td><td>130</td><td>120</td><td>10</td></tr><tr><td>Taxes, other than income taxes</td><td>241</td><td>232</td><td>9</td></tr><tr><td>Gas operating income</td><td>$ 362</td><td>$ 346</td><td>$ 16</td></tr></table>

CECONY’s gas sales and deliveries, excluding off-system sales, in 2013 compared with 2012 were:

<table><tr><td rowspan="3">Description</td><td colspan="4">Twelve Months Ended</td><td colspan="4">Twelve Months Ended</td></tr><tr><td>December 31, 2013</td><td>December 31, 2012</td><td>Variation</td><td>Percent Variation</td><td>December 31, 2013</td><td>December 31, 2012</td><td>Percent Variation</td><td>Percent Variation</td></tr><tr><td>Residential</td><td>38,872</td><td>33,457</td><td>5,415</td><td>16.2%</td><td>$ 720</td><td>$ 607</td><td>$113</td><td>18.6%</td></tr><tr><td>General</td><td>28,135</td><td>24,138</td><td>3,997</td><td>16.6</td><td>339</td><td>282</td><td>57</td><td>20.2</td></tr><tr><td>Firm transportation</td><td>61,139</td><td>52,860</td><td>8,279</td><td>15.7</td><td>414</td><td>380</td><td>34</td><td>8.9</td></tr><tr><td>Total firm sales and transportation</td><td>128,146</td><td>110,455</td><td>17,691</td><td>16.0(b)</td><td>1,473</td><td>1,269</td><td>204</td><td>16.1</td></tr><tr><td>Interruptible sales(c)</td><td>10,900</td><td>5,961</td><td>4,939</td><td>82.9</td><td>69</td><td>39</td><td>30</td><td>76.9</td></tr><tr><td>NYPA</td><td>48,682</td><td>48,107</td><td>575</td><td>1.2</td><td>2</td><td>2</td><td>-</td><td>-</td></tr><tr><td>Generation plants</td><td>62,764</td><td>85,827</td><td>(23,063)</td><td>(26.9)</td><td>26</td><td>32</td><td>(6)</td><td>(18.8)</td></tr><tr><td>Other</td><td>24,615</td><td>22,259</td><td>2,356</td><td>10.6</td><td>45</td><td>36</td><td>9</td><td>25.0</td></tr><tr><td>Other operating revenues(d)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>1</td><td>37</td><td>(36)</td><td>(97.3)</td></tr><tr><td>Total</td><td>275,107</td><td>272,609</td><td>2,498</td><td>0.9%</td><td>$1,616</td><td>$1,415</td><td>$201</td><td>14.2%</td></tr></table>

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

(b) After adjusting for variations, principally weather and billing days, firm gas sales and transportation volumes in the company's service area increased 4.6 percent in 2013 compared with 2012.
(c) Includes 5,362 and 563 thousands of Dt for 2013 and 2012, respectively, which are also reflected in firm transportation and other.

(d) Other gas operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plans. See Note B to the financial statements in Item 8.

Operating revenues increased $201 million in 2013 compared with 2012 due primarily to an increase in gas purchased for resale expenses ($145 million) and higher revenues from the gas rate plan and other regulatory matters ($62 million).

Gas purchased for resale increased $145 million in 2013 compared with 2012 due to higher sendout volumes ($91 million) and unit costs ($54 million).

Other operations and maintenance expenses increased $21 million due primarily to an increase in the surcharges for assessments and fees that are collected in revenues from customers ($29 million), offset in part by lower pension costs ($6 million) and healthcare costs ($3 million).

Depreciation and amortization increased $10 million due primarily to higher gas utility plant balances.

Taxes, other than income taxes increased $9 million principally due to higher local revenue taxes and property taxes.



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

## Steam

CECONY’s results of steam operations for the year ended December 31, 2013 compared with the year ended December 31, 2012 is as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Twelve Months Ended</td></tr><tr><td>December 31, 2013</td><td>December 31, 2012</td><td>Variation</td></tr><tr><td>Operating revenues</td><td>$683</td><td>$596</td><td>$87</td></tr><tr><td>Purchased power</td><td>47</td><td>30</td><td>17</td></tr><tr><td>Fuel</td><td>146</td><td>151</td><td>(5)</td></tr><tr><td>Other operations and maintenance</td><td>204</td><td>185</td><td>19</td></tr><tr><td>Depreciation and amortization</td><td>67</td><td>64</td><td>3</td></tr><tr><td>Taxes, other than income taxes</td><td>116</td><td>112</td><td>4</td></tr><tr><td>Steam operating income</td><td>$103</td><td>$ 54</td><td>$49</td></tr></table>

CECONY’s steam sales and deliveries in 2013 compared with 2012 were:

<table><tr><td rowspan="2"></td><td colspan="4">Millions of Pounds Delivered</td><td colspan="4">Revenues in Millions</td></tr><tr><td colspan="3">Twelve Months Ended</td><td colspan="3">Twelve Months Ended</td><td rowspan="2">Percent Variation</td><td rowspan="2">Variation</td></tr><tr><td>Description</td><td>December 31, 2013</td><td>December 31, 2012</td><td>Percent Variation</td><td>Variation</td><td>December 31, 2013</td><td>December 31, 2012</td></tr><tr><td>General</td><td>547</td><td>425</td><td>122</td><td>28.7%</td><td>$ 31</td><td>$ 25</td><td>$ 6</td><td>24.0%</td></tr><tr><td>Apartment house</td><td>6,181</td><td>5,240</td><td>941</td><td>18.0</td><td>187</td><td>158</td><td>29</td><td>18.4</td></tr><tr><td>Annual power</td><td>15,195</td><td>14,076</td><td>1,119</td><td>7.9</td><td>491</td><td>429</td><td>62</td><td>14.5</td></tr><tr><td>Other operating revenues(a)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>(26)</td><td>(16)</td><td>(10)</td><td>62.5</td></tr><tr><td>Total</td><td>21,923</td><td>19,741</td><td>2,182</td><td>11.1%(b)</td><td>$683</td><td>$596</td><td>$87</td><td>14.6%</td></tr></table>

(a) Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company's rate plans. See Note B to the financial statements in Item 8.
(b) After adjusting for variations, principally weather and billing days, steam sales and deliveries decreased 2.2 percent in 2013 compared with 2012, reflecting lower average normalized use per customer.

Operating revenues increased $87 million in 2013 compared with 2012 due primarily to the weather impact on revenues ($50 million), the net change in rates under steam rate plans and other regulatory matters ($32 million) and higher purchased power ($17 million), offset by lower fuel expenses ($5 million).

Purchased power expenses increased $17 million in 2013 compared with 2012 due to an increase in purchased volumes ($11 million) and unit costs ($6 million).

Fuel expenses decreased $5 million in 2013 compared with 2012 due to lower unit costs ($14 million), offset by higher sendout volumes ($9 million).

Other operations and maintenance expense increased $19 million due primarily to higher pension expense ($17 million).

Depreciation and amortization increased $3 million due to higher steam utility plant balances.
Taxes, other than income taxes increased $4 million principally due to higher property taxes.

## Taxes, Other Than Income Taxes

At over $1.8 billion, taxes other than income taxes remain one of CECONY’s largest operating expenses. The principal components of, and variations in, taxes other than income taxes were:

<table><tr><td>(Millions of Dollars)</td><td>2013</td><td>2012</td><td>Increase/ (Decrease)</td></tr><tr><td>Property taxes</td><td>$1,408</td><td>$1,351</td><td>$57(a)</td></tr><tr><td>State and local taxes related to revenue receipts</td><td>328</td><td>318</td><td>10</td></tr><tr><td>Payroll taxes</td><td>63</td><td>66</td><td>(3)</td></tr><tr><td>Other taxes</td><td>17</td><td>12</td><td>5</td></tr><tr><td>Total</td><td>$1,816(b)</td><td>$1,747(b)</td><td>$69</td></tr></table>

(a) Property taxes increased $57 million reflecting primarily higher capital investments.
(b) Including sales tax on customers' bills, total taxes other than income taxes, billed to customers in 2013 and 2012 were $2,255 million and $2,185 million, respectively.



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

## Net Interest Expense

Net interest expense decreased $24 million in 2013 compared with 2012 due primarily to lower interest charges on long-term debt and lower accrued interest as a result of certain federal income tax benefits. See Note L to the financial statements in Item 8.

## Income Tax Expense

Income taxes decreased $9 million in 2013 compared with 2012 due primarily to income tax benefits recognized in 2013 upon completion of IRS audits of the Companies' federal income tax returns for the tax years 1998 through 2011.

## Preferred Stock Dividend Requirements

Preferred stock dividend requirements decreased $3 million in 2013 compared with 2012 due to the company’s redemption, in May 2012, of all of its outstanding shares of $5 Cumulative Preferred Stock and Cumulative Preferred Stock ($100 par value).

## O&R

<table><tr><td rowspan="2"></td><td colspan="3">Twelve Months Ended December 31, 2013</td><td colspan="3">Twelve Months Ended December 31, 2012</td></tr><tr><td>Electric</td><td>Gas</td><td>2013 Total</td><td>Electric</td><td>Gas</td><td>2012 Total</td></tr><tr><td>(Millions of Dollars)</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Operating revenues</td><td>$628</td><td>$205</td><td>$833</td><td>$592</td><td>$203</td><td>$795</td></tr><tr><td>Purchased power</td><td>217</td><td>-</td><td>217</td><td>198</td><td>-</td><td>198</td></tr><tr><td>Gas purchased for resale</td><td>-</td><td>76</td><td>76</td><td>-</td><td>69</td><td>69</td></tr><tr><td>Other operations and maintenance</td><td>238</td><td>64</td><td>302</td><td>227</td><td>64</td><td>291</td></tr><tr><td>Depreciation and amortization</td><td>41</td><td>15</td><td>56</td><td>38</td><td>15</td><td>53</td></tr><tr><td>Taxes, other than income taxes</td><td>45</td><td>17</td><td>62</td><td>46</td><td>15</td><td>61</td></tr><tr><td>Operating income</td><td>$ 87</td><td>$ 33</td><td>$120</td><td>$ 83</td><td>$ 40</td><td>$123</td></tr></table>

## Electric

O&R’s results of electric operations for the year ended December 31, 2013 compared with the year ended December 31, 2012 is as follows:

<table><tr><td rowspan="2"></td><td colspan="3">Twelve Months Ended</td></tr><tr><td>December 31, 2013</td><td>December 31, 2012</td><td>Variation</td></tr><tr><td>(Millions of Dollars)</td><td></td><td></td><td></td></tr><tr><td>Operating revenues</td><td>$628</td><td>$592</td><td>$36</td></tr><tr><td>Purchased power</td><td>217</td><td>198</td><td>19</td></tr><tr><td>Other operations and maintenance</td><td>238</td><td>227</td><td>11</td></tr><tr><td>Depreciation and amortization</td><td>41</td><td>38</td><td>3</td></tr><tr><td>Taxes, other than income taxes</td><td>45</td><td>46</td><td>(1)</td></tr><tr><td>Electric operating income</td><td>$ 87</td><td>$ 83</td><td>$ 4</td></tr></table>



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

O&R’s electric sales and deliveries in 2013 compared with 2012 were:

<table><tr><td colspan="6">Millions of kWhs Delivered</td><td colspan="4">Revenues in Millions(a)</td></tr><tr><td colspan="6">Twelve Months Ended</td><td colspan="4">Twelve Months Ended</td></tr><tr><td rowspan="2">Description</td><td colspan="3">December 31, December 31,</td><td rowspan="2">Percent Variation</td><td rowspan="2">Percent Variation</td><td colspan="3">December 31, December 31,</td><td rowspan="2">Percent Variation</td></tr><tr><td>2013</td><td>2012</td><td></td><td>2013</td><td>2012</td></tr><tr><td>Residential/Religious(b)</td><td>1,580</td><td>1,632</td><td>(52)</td><td>(3.2)%</td><td>$287</td><td>$272</td><td>$15</td><td>5.5%</td></tr><tr><td>Commercial/Industrial</td><td>871</td><td>945</td><td>(74)</td><td>(7.8)</td><td>129</td><td>123</td><td>6</td><td>4.9</td></tr><tr><td>Energy choice customers</td><td>3,166</td><td>3,040</td><td>126</td><td>4.1</td><td>192</td><td>178</td><td>14</td><td>7.9</td></tr><tr><td>Public authorities</td><td>104</td><td>114</td><td>(10)</td><td>(8.8)</td><td>11</td><td>10</td><td>1</td><td>10.0</td></tr><tr><td>Other operating revenues(c)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>9</td><td>9</td><td>-</td><td>-</td></tr><tr><td>Total</td><td>5,721</td><td>5,731</td><td>(10)</td><td>(0.2)%(d)</td><td>$628</td><td>$592</td><td>$36</td><td>6.1%</td></tr></table>

(a) O&R’s New York electric delivery revenues are subject to a revenue decoupling mechanism, as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s electric sales in New Jersey and Pennsylvania are not subject to a decoupling mechanism, and as a result, changes in such volumes do impact revenues.

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

(c) Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s electric rate plan. See Note B to the financial statements in Item 8. (d) After adjusting for weather and other variations, electric delivery volumes in O&R’s service area decreased 0.8 percent in 2013 compared with 2012.

Operating revenues increased $36 million in 2013 compared with 2012 due primarily to higher purchased power expenses ($19 million) and higher revenues from the New York electric rate plan ($14 million).

Purchased power expenses increased $19 million in 2013 compared with 2012 due to an increase in unit costs ($31 million), offset by a decrease in purchased volumes ($12 million).
Other operations and maintenance expenses increased $11 million due primarily to changes in storm costs ($5 million) and an increase in surcharges for assessments and fees that are collected in revenues from customers ($4 million).

Depreciation and amortization increased $3 million due primarily to higher electric utility plant balances.

Taxes, other than income taxes decreased $1 million principally due to lower property taxes.

## Gas

O&R’s results of gas operations for the year ended December 31, 2013 compared with the year ended December 31, 2012 is as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Twelve Months Ended</td></tr><tr><td>December 31, 2013</td><td>December 31, 2012</td><td>Variation</td></tr><tr><td>Operating revenues</td><td>$205</td><td>$203</td><td>$ 2</td></tr><tr><td>Gas purchased for resale</td><td>76</td><td>69</td><td>7</td></tr><tr><td>Other operations and maintenance</td><td>64</td><td>64</td><td>-</td></tr><tr><td>Depreciation and amortization</td><td>15</td><td>15</td><td>-</td></tr><tr><td>Taxes, other than income taxes</td><td>17</td><td>15</td><td>2</td></tr><tr><td>Gas operating income</td><td>$ 33</td><td>$ 40</td><td>$(7)</td></tr></table>



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

O&R’s gas sales and deliveries, excluding off-system sales, in 2013 compared with 2012 were:

<table><tr><td colspan="5">Thousands of Dt Delivered</td><td colspan="4">Revenues in Millions(a)</td></tr><tr><td colspan="5">Twelve Months Ended</td><td colspan="4">Twelve Months Ended</td></tr><tr><td>Description</td><td>December 31, 2013</td><td>December 31, 2012</td><td>Variation</td><td>Percent Variation</td><td>December 31, 2013</td><td>December 31, 2012</td><td>Percent Variation</td><td>Percent Variation</td></tr><tr><td>Residential</td><td>7,253</td><td>6,291</td><td>962</td><td>15.3%</td><td>$ 97</td><td>$ 88</td><td>$9</td><td>10.2%</td></tr><tr><td>General</td><td>1,555</td><td>1,248</td><td>307</td><td>24.6</td><td>18</td><td>15</td><td>3</td><td>20.0</td></tr><tr><td>Firm transportation</td><td>12,062</td><td>10,505</td><td>1,557</td><td>14.8</td><td>77</td><td>76</td><td>1</td><td>1.3</td></tr><tr><td>Total firm sales and transportation</td><td>20,870</td><td>18,044</td><td>2,826</td><td>15.7(b)</td><td>192</td><td>179</td><td>13</td><td>7.3</td></tr><tr><td>Interruptible sales</td><td>4,118</td><td>4,326</td><td>(208)</td><td>(4.8)</td><td>3</td><td>4</td><td>(1)</td><td>(25.0)</td></tr><tr><td>Generation plants</td><td>19</td><td>15</td><td>4</td><td>26.7</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Other</td><td>885</td><td>793</td><td>92</td><td>11.6</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Other gas revenues</td><td>-</td><td>-</td><td>-</td><td>-</td><td>10</td><td>20</td><td>(10)</td><td>(50.0)</td></tr><tr><td>Total</td><td>25,892</td><td>23,178</td><td>2,714</td><td>11.7%</td><td>$205</td><td>$203</td><td>$2</td><td>1.0%</td></tr></table>

(a) Revenues from New York gas sales are subject to a weather normalization clause and a revenue decoupling mechanism as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.

(b) After adjusting for weather and other variations, total firm sales and transportation volumes increased 0.2 percent in 2013 compared with 2012.

Operating revenues increased $2 million in 2013 compared with 2012 due primarily to the increase in gas purchased for resale in 2013 ($7 million), offset in part by the gas rate plan.

Gas purchased for resale increased $7 million in 2013 compared with 2012 due to an increase in purchased volumes ($23 million), offset by a decrease in unit costs ($16 million).

Taxes other than income taxes increased $2 million principally due to higher property taxes.

## Taxes, Other Than Income Taxes

Taxes, other than income taxes, increased $1 million in 2013 compared with 2012. The principal components of taxes, other than income taxes, were:

<table><tr><td>(Millions of Dollars)</td><td>2013</td><td>2012</td><td>Increase/ (Decrease)</td></tr><tr><td>Property taxes</td><td>$43</td><td>$41</td><td>$2</td></tr><tr><td>State and local taxes related to revenue receipts</td><td>12</td><td>13</td><td>(1)</td></tr><tr><td>Payroll taxes</td><td>7</td><td>6</td><td>1</td></tr><tr><td>Other taxes</td><td>-</td><td>1</td><td>(1)</td></tr><tr><td>Total</td><td>$62(a)</td><td>$61(a)</td><td>$1</td></tr></table>

(a) Including sales tax on customers' bills, total taxes other than income taxes, billed to customers in 2013 and 2012 were $87 million and $80 million, respectively.

## Other Income (Deductions)

Other income (deductions) decreased $1 million in 2013 compared with 2012.

## Net Interest Expense

Net interest expense increased $7 million in 2013 compared with 2012 reflecting changes to accrued interest resulting from adjustments to prior year federal income tax returns.

## Income Tax Expense

Income taxes decreased $12 million in 2013 compared with 2012 due primarily to changes in estimates of accumulated deferred income taxes.



## Competitive Energy Businesses

The competitive energy businesses’ results of operations for the year ended December 31, 2013 compared with the year ended December 31, 2012 is as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Twelve Months Ended</td></tr><tr><td>December 31, 2013</td><td>December 31, 2012</td><td>Variation</td></tr><tr><td>Operating revenues</td><td>$1,096</td><td>$1,213</td><td>$(117)</td></tr><tr><td>Purchased power</td><td>861</td><td>950</td><td>(89)</td></tr><tr><td>Gas purchased for resale</td><td>27</td><td>5</td><td>22</td></tr><tr><td>Other operations and maintenance</td><td>105</td><td>107</td><td>(2)</td></tr><tr><td>Depreciation and amortization</td><td>23</td><td>8</td><td>15</td></tr><tr><td>Taxes, other than income taxes</td><td>17</td><td>18</td><td>(1)</td></tr><tr><td>Operating income</td><td>$ 63</td><td>$ 125</td><td>$(62)</td></tr></table>

Operating revenues decreased $117 million in 2013 compared with 2012, due primarily to lower electric retail and wholesale revenues ($156 million), and the impact of the termination of the LILO transactions ($27 million, see “Lease In/Lease Out Transactions” in Note J to the financial statements in Item 8). Electric retail revenues decreased $99 million, due to lower sales volume ($138 million), offset by higher unit prices ($39 million). Wholesale revenues decreased $57 million in 2013 as compared with 2012, due to lower sales volumes. Solar revenues increased $38 million in 2013 compared with 2012 reflecting an increase in solar electric production projects in service. Net mark-to-market values increased $6 million in 2013 as compared with 2012, of which $14 million in gains are reflected in revenues and $8 million in losses are reflected in purchased power expenses. Other revenues increased $14 million in 2013 as compared with 2012, due primarily to higher other wholesale revenues.

Purchased power expenses decreased $89 million in 2013 compared with 2012 due primarily to lower volumes ($180 million), offset by higher unit prices ($83 million) and changes in mark-to-market values ($8 million).

Gas purchased for resale increased $22 million due primarily to higher volumes.

Depreciation and amortization increased $15 million due to higher non-utility plant balances.

## Net Interest Expense

Net interest expense increased $134 million in 2013 compared to 2012 due primarily to the impact of the LILO transactions. See “Lease In/Lease Out Transactions” in Note J to the financial statements in Item 8.

## Income Tax Expense

Income taxes decreased $93 million in 2013 compared with 2012 due primarily to lower income before income tax expense and a tax benefit resulting from the acceptance by the IRS of the company’s claim for manufacturing tax deductions.

## Other

For Con Edison, “Other” also includes inter-company eliminations relating to operating revenues and operating expenses.

## Liquidity and Capital Resources

The Companies’ liquidity reflects cash flows from operating, investing and financing activities, as shown on their respective consolidated statement of cash flows and as discussed below.

The principal factors affecting Con Edison’s liquidity are its investments in the Utilities, the dividends it pays to its shareholders and the dividends it receives from the Utilities and cash flows from financing activities discussed below.

The principal factors affecting CECONY’s liquidity are its cash flows from operating activities, cash used in investing activities (including construction expenditures), the dividends it pays to Con Edison and cash flows from financing activities discussed below.

The Companies generally maintain minimal cash balances and use short-term borrowings to meet their working capital needs and other cash requirements. The Companies repay their short-term borrowings using funds from long-term financings and operating activities. The Utilities’ cost of capital, including working capital, is reflected in the rates they charge to their customers.



Each of the Companies believes that it will be able to meet its reasonably likely short-term and long-term cash requirements. See “The Companies Require Access to Capital Markets to Satisfy Funding Requirements” and “The Companies Also Face Other Risks That Are Beyond Their Control” in Item 1A, and “Capital Requirements and Resources” in Item 1.

Changes in the Companies’ cash and temporary cash investments resulting from operating, investing and financing activities for the years ended December 31, 2014, 2013 and 2012 are summarized as follows:

## Con Edison

<table><tr><td></td><td></td><td colspan="3">2014 vs.</td><td colspan="2">2013 vs.</td></tr><tr><td>(Millions of Dollars)</td><td>2014</td><td>2013</td><td>2013</td><td>2012</td><td>2012</td><td></td></tr><tr><td>Operating activities</td><td>$ 2,831</td><td>$ 2,552</td><td>$ 279</td><td>$ 2,599</td><td>$ (47)</td><td></td></tr><tr><td>Investing activities</td><td>(2,759)</td><td>(2,659)</td><td>(100)</td><td>(2,523)</td><td>(136)</td><td></td></tr><tr><td>Financing activities</td><td>(47)</td><td>387</td><td>(434)</td><td>(330)</td><td>717</td><td></td></tr><tr><td>Net change</td><td>25</td><td>280</td><td>(255)</td><td>(254)</td><td>534</td><td></td></tr><tr><td>Balance at beginning of period</td><td>674</td><td>394</td><td>280</td><td>648</td><td>(254)</td><td></td></tr><tr><td>Balance at end of period</td><td>$ 699</td><td>$ 674</td><td>$ 25</td><td>$ 394</td><td>$ 280</td><td></td></tr></table>

## CECONY

<table><tr><td></td><td></td><td colspan="3">Variance 2014 vs.</td><td colspan="2">Variance 2013 vs.</td></tr><tr><td>(Millions of Dollars)</td><td>2014</td><td>2013</td><td>2013</td><td>2012</td><td>2012</td><td></td></tr><tr><td>Operating activities</td><td>$ 2,430</td><td>$ 2,643</td><td>$ (213)</td><td>$ 2,346</td><td>$ 297</td><td></td></tr><tr><td>Investing activities</td><td>(2,304)</td><td>(2,417)</td><td>113</td><td>(1,958)</td><td>(459)</td><td></td></tr><tr><td>Financing activities</td><td>(114)</td><td>54</td><td>(168)</td><td>(407)</td><td>461</td><td></td></tr><tr><td>Net change</td><td>12</td><td>280</td><td>(268)</td><td>(19)</td><td>299</td><td></td></tr><tr><td>Balance at beginning of period</td><td>633</td><td>353</td><td>280</td><td>372</td><td>(19)</td><td></td></tr><tr><td>Balance at end of period</td><td>$ 645</td><td>$ 633</td><td>$ 12</td><td>$ 353</td><td>$ 280</td><td></td></tr></table>

## Cash Flows from Operating Activities

The Utilities’ cash flows from operating activities reflect principally their energy sales and deliveries and cost of operations. The volume of energy sales and deliveries is affected primarily by factors external to the Utilities, such as growth of customer demand, weather, market prices for energy, economic conditions and measures that promote energy efficiency. Under the revenue decoupling mechanisms in the Utilities’ New York electric and gas rate plans, changes in delivery volumes from levels assumed when rates were approved may affect the timing of cash flows but generally not net income. See Note B to the financial statements in Item 8. The prices at which the Utilities provide energy to their customers are determined in accordance with their rate plans. In general, changes in the Utilities’ cost of purchased power, fuel and gas may affect the timing of cash flows but not net income because the costs are recovered in accordance with rate plans. See “Recoverable Energy Costs” in Note A to the financial statements in Item 8.

The Companies’ cash flows from operating activities also reflect income tax payments. Cash paid by Con Edison for income taxes, net of any refunds received was $633 million, $69 million and $46 million in 2014, 2013 and 2012, respectively (including $748 million, $163 million and $62 million for CECONY in 2014, 2013 and 2012, respectively). The Companies had no current federal income tax liabilities for 2012 due primarily to deduction for costs incurred in connection with Superstorm Sandy and deductions under the bonus depreciation provisions of the federal tax code. The American Taxpayer Relief Act of 2012 has extended bonus depreciation provisions to assets placed in service before January 2014 (or, for certain types of assets, January 2015). In December 2014, President Obama signed into law the Tax Increase Prevention Act of 2014 which extended bonus depreciation for another year through December 31, 2014. As a result, Con Edison is requesting a refund of $224 million of 2014 estimated federal tax payments (including $128 million attributable to CECONY). See Note L to the financial statements in Item 8.

Net income is the result of cash and non-cash (or accrual) transactions. Only cash transactions affect the Companies’ cash flows from operating activities. Principal non-cash charges or credits include depreciation, deferred income tax expense and amortizations of certain regulatory assets and liabilities. Non-cash charges or credits may also be accrued under the revenue decoupling and cost reconciliation mechanisms in the Utilities’ New York electric and gas rate plans. See “Rate Plans – CECONY – Electric and Gas and O&R – Electric and Gas” in Note B to the financial statements in Item 8.

Net cash flows from operating activities in 2014 for Con Edison and CECONY were $279 million higher and $213 million lower, respectively, than in 2013. The increase in net cash flows for Con Edison reflects primarily the decreased pension contributions ($303 million) in 2014. The decrease in net cash for CECONY reflects higher income tax payments ($585 million) in 2014, offset in part by decreased pension contributions ($286 million) in 2014. The Companies contributed $584 million and $887 million (of which $544 million and $830 million was contributed by CECONY) to the pension plan during 2014 and 2013, respectively.

Net cash flows from operating activities in 2013 for Con Edison and CECONY were $47 million lower and $297 million higher, respectively, than in 2012. The decrease in net cash flows for Con Edison reflects a special deposit the company made with federal and state tax agencies relating primarily to the LILO transactions. See “Lease In/Lease Out Transactions” in Note J to



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

the financial statements in Item 8. The increase in net cash for CECONY reflects receipt of a property tax refund from the City of New York.

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

The changes in regulatory assets principally reflect changes in deferred pension costs in accordance with the accounting rules for retirement benefits. See Notes A, B and E to the financial statements in Item 8.

## Cash Flows Used in Investing Activities

Net cash flows used in investing activities for Con Edison and CECONY were $100 million higher and $113 million lower, respectively, in 2014 than in 2013. For Con Edison, the change reflects primarily the proceeds from the termination of the LILO transactions in 2013 ($200 million) and increased investments in renewable electric production projects ($108 million), offset by proceeds from sale relating to its solar electric production projects in 2014 ($108 million, see Note Q to the financial statements in Item 8). In addition, the changes for Con Edison and CECONY reflect decreased utility construction expenditures in 2014.

Net cash flows used in investing activities for Con Edison and CECONY were $136 million and $459 million higher, respectively, in 2013 than in 2012. The changes for Con Edison and CECONY reflect increased utility construction expenditures in 2013. In addition, for Con Edison, the change reflects increased non-utility construction expenditures, offset by receipt of grants related to solar electric production projects, decreased investments in solar electric production projects and the proceeds from the termination of the LILO transactions. See “Lease In/Lease Out Transactions” in Note J to the financial statements in Item 8.

## Cash Flows Used in Financing Activities

Net cash flows used in financing activities in 2014 for Con Edison and CECONY were $434 million and $168 million higher, respectively, than in 2013. Net cash flows from financing activities in 2013 for Con Edison and CECONY were $717 million and $461 million higher, respectively, than in 2012.

Net cash flows from financing activities during the years ended December 31, 2014, 2013 and 2012 reflect the following CECONY transactions:

## 2014

Issued $850 million of 4.45 percent 30-year debentures, $250 million of 3.30 percent 10-year debentures and $750 million of 4.625 percent 40-year debentures, the net proceeds from the sale of which were used to repay short-term borrowings and for other general corporate purposes;

- Redeemed at maturity $200 million of 4.70 percent 10-year debentures; and

- Redeemed at maturity $275 million of 5.55 percent 5-year debentures.

## 2013

- Issued $700 million of 3.95 percent 30-year debentures, the net proceeds from the sale of which were used to repay short-term borrowings and for other general corporate purposes;

- Redeemed at maturity $500 million of 4.875 percent 10-year debentures; and

- Redeemed at maturity $200 million of 3.85 percent 10-year debentures.

## 2012

- Issued $400 million 4.20 percent 30-year debentures, $239 million of the net proceeds from the sale of which were used to redeem all outstanding shares of its $5 Cumulative Preferred Stock and Cumulative Preferred Stock ($100 par value); and

- Redeemed at maturity $300 million 5.625 percent 10-year debentures.

O&R had no issuances of long-term debt in 2014, 2013 and 2012.

In 2013, a Con Edison Development subsidiary issued $219 million aggregate principal amount of 4.78 percent senior notes secured by certain of the company’s California solar electric production projects. The notes have a weighted average life of 15 years and final maturity of 2037. In 2014, the company sold a 50 percent interest in the subsidiary. See Note Q to the financial statements in Item 8.

Cash flows from financing activities of the Companies also reflect commercial paper issuance. The commercial paper amounts outstanding at December 31, 2014, 2013 and 2012 and the average daily balances for 2014, 2013 and 2012 for Con Edison and CECONY were as follows:

<table><tr><td></td><td colspan="2">2014</td><td colspan="2">2013</td><td colspan="2">2012</td></tr><tr><td>(Millions of Dollars, except Weighted Average Yield)</td><td>Out-standing at Dec 31</td><td>Daily</td><td>Out-standing at Dec 31</td><td>Daily</td><td>Out-standing at Dec 31</td><td>Average</td></tr><tr><td>Con Edison</td><td>$801</td><td>$899</td><td>$1,451</td><td>$901</td><td>$539</td><td>$144</td></tr><tr><td>CECONY</td><td>$451</td><td>$765</td><td>$1,210</td><td>$598</td><td>$421</td><td>$123</td></tr><tr><td>Weighted average yield</td><td>0.4%</td><td>0.2%</td><td>0.2%</td><td>0.3%</td><td>0.3%</td><td>0.3%</td></tr></table>



Common stock issuances and external borrowings are sources of liquidity that could be affected by changes in credit ratings, financial performance and capital market conditions. For information about the Companies' credit ratings and certain financial ratios, see “Capital Requirements and Resources” in Item 1.

## Capital Requirements and Resources

For information about capital requirements, contractual obligations and capital resources, see “Capital Requirements and Resources” in Item 1.

## Other Changes in Assets and Liabilities

The following table shows changes in certain assets and liabilities at December 31, 2014, compared with December 31, 2013.

<table><tr><td>(Millions of Dollars)</td><td>Con Edison 2014 vs. 2013 Variance</td><td>ECONY 2014 vs. 2013 Variance</td></tr><tr><td>Assets</td><td></td><td></td></tr><tr><td>Regulatory asset - Unrecognized pension and other postretirement costs</td><td>$2,116</td><td>$1,999</td></tr><tr><td>Investments</td><td>355</td><td>24</td></tr><tr><td>Income taxes receivable</td><td>224</td><td>-</td></tr><tr><td>Non-utility property, less accumulated depreciation</td><td>(217)</td><td>1</td></tr><tr><td>Special deposits</td><td>(319)</td><td>$ (84)</td></tr><tr><td>Liabilities</td><td></td><td></td></tr><tr><td>Pension and retiree benefits</td><td>$2,187</td><td>$2,040</td></tr><tr><td>Deferred income taxes and investment tax credits</td><td>610</td><td>425</td></tr><tr><td>Accrued taxes</td><td>(404)</td><td>-</td></tr></table>

## Regulatory Asset for Unrecognized Pension and Other Postretirement Costs and Liability for Pension and Retiree Benefits

The increase in the regulatory asset for unrecognized pension and other postretirement costs and the liability for pension and retiree benefits reflects the final actuarial valuation of the pension and other retiree benefit plans as measured at December 31, 2014, in accordance with the accounting rules for retirement benefits. The change in the regulatory asset also reflects the year’s amortization of accounting costs. The change in the liability for pension and retiree benefits reflects in part contributions to the plans made by the Utilities in 2014. See Notes B, E and F to the financial statements in Item 8.

## Investments and Non-Utility Property, Less Accumulated Depreciation

The increase in investments and decrease in non-utility property, less accumulated depreciation for Con Edison primarily reflect the purchase and sale of interests in solar electric production projects. See Note Q to the financial statements in Item 8.

## Income Taxes Receivable

The increase in income taxes receivable for Con Edison reflects the refund request filed with the IRS in January 2015. See Note L to the financial statements in Item 8.

## Special Deposits and Accrued Taxes

The decreases in Con Edison’s special deposits and accrued taxes reflect applying the deposits made in 2013 against the federal and state tax liabilities in 2014 that primarily related to settling the LILO transactions. See “Lease In/Lease Out Transactions” in Note J to the financial statements in Item 8.

## Deferred Income Taxes and Investment Tax Credits

The increase in the liability for deferred income taxes and investment tax credits reflects primarily the timing of the deduction of expenditures for utility plant which resulted in amounts being collected from customers to pay income taxes in advance of when the income tax payments will be required. For Con Edison, the increase also reflects the accelerated deductions for expenditures and investment tax credits primarily related to its renewable electric production projects.

## Off-Balance Sheet Arrangements

The Companies have interests in a number of non-consolidated variable interest entities (VIEs) that are accounted for under the equity method. Aside from the guarantees issued by Con Edison Development discussed below, none of the Companies’ interests in VIEs meet the SEC definition of off-balance sheet arrangements. For information regarding the Companies’ VIEs, see Note Q to the financial statements in Item 8.

Con Edison Development issued two guarantees ($63 million maximum and $31 million maximum) on behalf of two entities in which it acquired a 50 percent interest in July 2013 and March 2014, respectively (see “Guarantees” in Note H to the financial statements in Item 8). The entities were formed to develop, construct and operate solar electric production facilities with a cumulative capacity of 400 MW (AC). The guarantees were issued in connection with the construction of the solar electric production facilities. Con Edison Development is not the primary beneficiary of these entities since the power to direct the activities that most significantly impact the economics of the facilities is shared equally between Con Edison Development and a third party. No payments have been made nor are any expected to be made under the guarantees.

## Regulatory Matters

For information about the Utilities’ rate plans and other regulatory matters affecting the Companies, see “Utility Regulation” in Item 1 and Note B to the financial statements in Item 8.



## Risk Factors

The Companies’ businesses are influenced by many factors that are difficult to predict, and that involve uncertainties that may materially affect actual operating results, cash flows and financial condition. See “Risk Factors” in Item 1A.

## Application of Critical Accounting Policies

The Companies’ financial statements reflect the application of their accounting policies, which conform to accounting principles generally accepted in the United States of America. The Companies’ critical accounting policies include industry-specific accounting applicable to regulated public utilities and accounting for pensions and other postretirement benefits, contingencies, long-lived assets, derivative instruments, goodwill and leases.

## Accounting for Regulated Public Utilities

The Utilities are subject to the accounting rules for regulated operations and the accounting requirements of the FERC and the state public utility regulatory commissions having jurisdiction.

The accounting rules for regulated operations specify the economic effects that result from the causal relationship of costs and revenues in the rate-regulated environment and how these effects are to be accounted for by a regulated enterprise. Revenues intended to cover some costs may be recorded either before or after the costs are incurred. If regulation provides assurance that incurred costs will be recovered in the future, these costs would be recorded as deferred charges or “regulatory assets” under the accounting rules for regulated operations. If revenues are recorded for costs that are expected to be incurred in the future, these revenues would be recorded as deferred credits or “regulatory liabilities” under the accounting rules for regulated operations.

The Utilities’ principal regulatory assets and liabilities are listed in Note B to the financial statements in Item 8. The Utilities are each receiving or being credited with a return on all regulatory assets for which a cash outflow has been made. The Utilities are each paying or being charged with a return on all regulatory liabilities for which a cash inflow has been received. The regulatory assets and liabilities will be recovered from customers, or applied for customer benefit, in accordance with rate provisions approved by the applicable public utility regulatory commission.

In the event that regulatory assets of the Utilities were no longer probable of recovery, as required by the accounting rules for regulated operations, these regulatory assets would be charged to earnings. At December 31, 2014, the regulatory assets for Con Edison and CECONY were $9,304 million and $8,613 million, respectively.

## Accounting for Pensions and Other Postretirement Benefits

The Utilities provide pensions and other postretirement benefits to substantially all of their employees and retirees. Con Edison’s competitive energy businesses also provide such benefits to certain of their employees. The Companies account for these benefits in accordance with the accounting rules for retirement benefits. In addition, the Utilities apply the accounting rules for regulated operations to account for the regulatory treatment of these obligations (which, as described in Note B to the financial statements in Item 8, reconciles the amounts reflected in rates for the costs of the benefit to the costs actually incurred). In applying these accounting policies, the Companies have made critical estimates related to actuarial assumptions, including assumptions of expected returns on plan assets, discount rates, health care cost trends and future compensation. See Notes A, E and F to the financial statements in Item 8 for information about the Companies’ pension and other postretirement benefits, the actuarial assumptions, actual performance, amortization of investment and other actuarial gains and losses and calculated plan costs for 2014, 2013 and 2012.

The discount rate for determining the present value of future period benefit payments is determined using a model to match the durations of highly-rated (Aa or higher by either Moody’s or S&P) corporate bonds with the projected stream of benefit payments.

In determining the health care cost trend rate, the Companies review actual recent cost trends and projected future trends.

The cost of pension and other postretirement benefits in future periods will depend on actual returns on plan assets, assumptions for future periods, contributions and benefit experience. Con Edison’s and CECONY’s current estimates for 2015 are increases, compared with 2014, in their pension and other postretirement benefits costs of $148 million and $141 million, respectively.



The following table illustrates the effect on 2015 pension and other postretirement costs of changing the critical actuarial assumptions, while holding all other actuarial assumptions constant:

<table><tr><td>Actuarial Assumption</td><td>Change in Assumption</td><td>Pension</td><td>Other Postretirement Benefits (Millions of Dollars)</td><td>Total</td></tr><tr><td>Increase in accounting cost:</td><td></td><td></td><td></td><td></td></tr><tr><td>Discount rate</td><td></td><td></td><td></td><td></td></tr><tr><td>Con Edison</td><td>(0.25%)</td><td>$ 63</td><td>$ 3</td><td>$ 66</td></tr><tr><td>CECONY</td><td>(0.25%)</td><td>$ 59</td><td>$ 2</td><td>$ 61</td></tr><tr><td>Expected return on plan assets</td><td></td><td></td><td></td><td></td></tr><tr><td>Con Edison</td><td>(0.25%)</td><td>$ 27</td><td>$ 2</td><td>$ 29</td></tr><tr><td>CECONY</td><td>(0.25%)</td><td>$ 26</td><td>$ 2</td><td>$ 28</td></tr><tr><td>Health care trend rate</td><td></td><td></td><td></td><td></td></tr><tr><td>Con Edison</td><td>1.00%</td><td>$ -</td><td>$ (5)</td><td>$ (5)</td></tr><tr><td>CECONY</td><td>1.00%</td><td>$ -</td><td>$ (9)</td><td>$ (9)</td></tr><tr><td>Increase in projected benefit obligation:</td><td></td><td></td><td></td><td></td></tr><tr><td>Discount rate</td><td></td><td></td><td></td><td></td></tr><tr><td>Con Edison</td><td>(0.25%)</td><td>$609</td><td>$ 41</td><td>$650</td></tr><tr><td>CECONY</td><td>(0.25%)</td><td>$573</td><td>$ 33</td><td>$606</td></tr><tr><td>Health care trend rate</td><td></td><td></td><td></td><td></td></tr><tr><td>Con Edison</td><td>1.00%</td><td>$ -</td><td>$ (21)</td><td>$ (21)</td></tr><tr><td>CECONY</td><td>1.00%</td><td>$ -</td><td>$ (43)</td><td>$ (43)</td></tr></table>

A 5.0 percentage point variation in the actual annual return in 2015, as compared with the expected annual asset return of 7.80 percent, would change pension and other postretirement benefit costs for Con Edison and CECONY by approximately $22 million and $20 million, respectively, in 2016.

Pension benefits are provided through a pension plan maintained by Con Edison to which CECONY, O&R and the competitive energy businesses make contributions for their participating employees. Pension accounting by the Utilities includes an allocation of plan assets.

The Companies’ policy is to fund their pension and other postretirement benefit accounting costs to the extent tax deductible, and for the Utilities, to the extent these costs are recovered under their rate plans. The Companies were not required to make cash contributions to the pension plan in 2014 under funding regulations and tax laws. However, CECONY and O&R made discretionary contributions to the pension plan in 2014 of $535 million and $43 million, respectively. In 2015, CECONY and O&R expect to make contributions to the pension plan of $703 million and $53 million, respectively. See “Expected Contributions” in Notes E and F to the financial statements in Item 8.

## Accounting for Contingencies

The accounting rules for contingencies apply to an existing condition, situation or set of circumstances involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur. Known material contingencies, which are described in the notes to the financial statements, include certain regulatory matters (Note B), the Utilities' responsibility for hazardous substances, such as asbestos, PCBs and coal tar that have been used or generated in the course of operations (Note G); and other contingencies (Note H). In accordance with the accounting rules, the Companies have accrued estimates of losses relating to the contingencies as to which loss is probable and can be reasonably estimated and no liability has been accrued for contingencies as to which loss is not probable or cannot be reasonably estimated.

The Utilities generally recover costs for asbestos lawsuits, workers' compensation and environmental remediation pursuant to their current rate plans. Changes during the terms of the rate plans to the amounts accrued for these contingencies would not impact earnings.

## Accounting for Long-Lived Assets

The accounting rules for property, plant and equipment require that certain long-lived assets must be tested for recoverability whenever events or changes in circumstances indicate their carrying amounts may not be recoverable. The carrying amount of a long-lived asset is deemed not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Under the accounting rules, an impairment loss is recognized if the carrying amount is not recoverable from such cash flows, and exceeds its fair value, which approximates market value.

## Accounting for Goodwill

In accordance with the accounting rules for goodwill and intangible assets, Con Edison is required to test goodwill for impairment annually. See Note K to the financial statements in Item 8. Goodwill is tested for impairment using a two-step approach. The first step of the goodwill impairment test compares the estimated fair value of a reporting unit with its carrying value, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is considered not impaired. If the carrying value exceeds the estimated fair value of the reporting unit, the second step is performed to measure the amount of impairment loss, if any. The second step requires a calculation of the implied fair value of goodwill.

Goodwill was $429 million at December 31, 2014, which consists of $406 million related to the O&R merger and $23 million related to two energy services companies acquired by Con Edison Solutions and a gas storage company acquired by Con Edison Development. The most recent tests, which were



performed during 2014, did not require any second-step assessment and did not result in any impairment. The company’s most significant assumptions surrounding the goodwill impairment tests relate to the estimates of reporting unit fair values. The company estimated fair values based primarily on discounted cash flows and on market values for a proxy group of companies. Estimates of future cash flows, projected growth rates and discount rates inherent in the cash flow estimates for the energy services companies and gas storage company may vary significantly from actual results, which could result in a future impairment of goodwill.

## Accounting for Derivative Instruments

The Companies apply the accounting rules for derivatives and hedging to their derivative financial instruments. The Companies use derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase and sale of electricity and gas and interest rate risk on certain debt securities. The Utilities are permitted by their respective regulators to reflect in rates all reasonably incurred gains and losses on these instruments. See “Financial and Commodity Market Risks” below and Note O to the financial statements in Item 8.

Where the Companies are required to make mark-to-market estimates pursuant to the accounting rules, the estimates of gains and losses at a particular period end do not reflect the end results of particular transactions, and will most likely not reflect the actual gain or loss at the conclusion of a transaction. Substantially all of the estimated gains or losses are based on prices supplied by external sources such as the fair value of exchange-traded futures and options and the fair value of positions for which price quotations are available through or derived from brokers or other market sources.

## Accounting for Leases

The Companies apply the accounting rules for leases and other related pronouncements to their leasing transactions. In accordance with the accounting rules, Con Edison accounted for Con Edison Development’s two “Lease In/Lease Out” or LILO transactions as leveraged leases. At December 31, 2012, the company’s investment in these leases, net of non-recourse debt, was carried as a single amount in Con Edison’s consolidated balance sheet included in Item 8. In 2013, a court disallowed tax losses claimed by Con Edison relating to Con Edison Development’s LILO transactions and the company subsequently terminated the transactions, resulting in charges to earnings of $95 million (after taxes of $63 million) and $1 million in 2013 and 2014, respectively. The transactions did not impact earnings in 2012. See Notes J and L to the financial statements in Item 8.

## Financial and Commodity Market Risks

The Companies are subject to various risks and uncertainties associated with financial and commodity markets. The most significant market risks include interest rate risk, commodity price risk, credit risk and investment risk.

## Interest Rate Risk

The interest rate risk relates primarily to variable rate debt and to new debt financing needed to fund capital requirements, including the construction expenditures of the Utilities and maturing debt securities. Con Edison and its businesses manage interest rate risk through the issuance of mostly fixed-rate debt with varying maturities and through opportunistic refinancing of debt. Con Edison and CECONY estimate that at December 31, 2014, a 10 percent variation in interest rates applicable to its variable rate debt would not result in material changes in annual interest expense. Under CECONY’s current gas, steam and electric rate plans, variations in actual variable rate tax-exempt debt interest expense are reconciled to levels reflected in rates. Under O&R’s current New York rate plans, variations in actual tax-exempt (and under the gas rate plan, taxable) long-term debt interest expense are reconciled to the level set in rates.

## Commodity Price Risk

Con Edison’s commodity price risk relates primarily to the purchase and sale of electricity, gas and related derivative instruments. The Utilities and Con Edison’s competitive energy businesses apply risk management strategies to mitigate their related exposures. See Note O to the financial statements in Item 8.

Con Edison estimates that, as of December 31, 2014, a 10 percent decline in market prices would result in a decline in fair value of $53 million for the derivative instruments used by the Utilities to hedge purchases of electricity and gas, of which $47 million is for CECONY and $6 million is for O&R. Con Edison expects that any such change in fair value would be largely offset by directionally opposite changes in the cost of the electricity and gas purchased. In accordance with provisions approved by state regulators, the Utilities generally recover from customers the costs they incur for energy purchased for their customers, including gains and losses on certain derivative instruments used to hedge energy purchased and related costs. See “Recoverable Energy Costs” in Note A to the financial statements in Item 8.

Con Edison’s competitive energy businesses use a value-at-risk (VaR) model to assess the market price risk of their portfolio of electricity and gas commodity fixed-price purchase and sales commitments, physical forward contracts, generating assets and commodity derivative instruments. VaR represents the potential change in fair value of the portfolio due to changes in market prices, for a specified time period and confidence level. These



## Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

businesses estimate VaR across their portfolio using a delta-normal variance/covariance model with a 95 percent confidence level. Since the VaR calculation involves complex methodologies and estimates and assumptions that are based on past experience, it is not necessarily indicative of future results. VaR for the portfolio, assuming a one-day holding period, for the years ended December 31, 2014 and 2013, respectively, was as follows:

95% Confidence Level, One-Day Holding

<table><tr><td>Period</td><td>2014</td><td>2013</td></tr><tr><td></td><td colspan="2">(Millions of Dollars)</td></tr><tr><td>Average for the period</td><td>$1</td><td>$1</td></tr><tr><td>High</td><td>7</td><td>1</td></tr><tr><td>Low</td><td>-</td><td>-</td></tr></table>

The competitive energy businesses compare the measured VaR results against performance due to actual prices and stress test the portfolio each quarter using an assumed 30 percent price change from forecast. The stress test includes an assessment of the impact of volume changes on the portfolio because the businesses generally commit to sell their customers their actual requirements, an amount which is estimated when the sales commitments are made. The businesses limit the volume of commodity derivative instruments entered into relative to their estimated sale commitments to maintain net market price exposures to their estimated sale commitments within a certain percentage of maximum and minimum exposures.

## Credit Risk

The Companies are exposed to credit risk related to transactions entered into primarily for the various energy supply and hedging activities by the Utilities and the competitive energy businesses. See “Credit Exposure” in Note O to the financial statements in Item 8.

## Investment Risk

The Companies’ investment risk relates to the investment of plan assets for their pension and other postretirement benefit plans. See “Application of Critical Accounting Policies – Accounting for Pensions and Other Postretirement Benefits,” above and Notes E and F to the financial statements in Item 8. The Companies’ current investment policy for pension plan assets includes investment targets of 58 percent equities and 42 percent fixed income and other securities. At December 31, 2014, the pension plan investments consisted of 58 percent equity and 42 percent fixed income and other securities.

## Environmental Matters

For information concerning climate change, environmental sustainability, potential liabilities arising from laws and regulations protecting the environment and other environmental matters, see “Environmental Matters” in Item 1 and Note G to the financial statements in Item 8.

## Impact of Inflation

The Companies are affected by the decline in the purchasing power of the dollar caused by inflation. Regulation permits the Utilities to recover through depreciation only the historical cost of their plant assets even though in an inflationary economy the cost to replace the assets upon their retirement will substantially exceed historical costs. The impact is, however, partially offset by the repayment of the Companies’ long-term debt in dollars of lesser value than the dollars originally borrowed.

## Material Contingencies

For information concerning potential liabilities arising from the Companies’ material contingencies, see “Application of Critical Accounting Policies – Accounting for Contingencies,” above, and Notes B, G and H to the financial statements in Item 8.

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

## Con Edison

For information about Con Edison’s primary market risks associated with activities in derivative financial instruments, other financial instruments and derivative commodity instruments, see “Financial and Commodity Market Risks,” in Item 7 (which information is incorporated herein by reference).

## CECONY

For information about CECONY’s primary market risks associated with activities in derivative financial instruments, other financial instruments and derivative commodity instruments, see “Financial and Commodity Market Risks,” in Item 7 (which information is incorporated herein by reference).



## Item 8: Financial Statements and Supplementary Data

Financial Statements Page

Con Edison

Report of Management on Internal Control Over Financial Reporting 68
Report of Independent Registered Public Accounting Firm 69
Consolidated Income Statement for the years ended December 31, 2014, 2013 and 2012 70
Consolidated Statement of Comprehensive Income for the years ended December 31, 2014, 2013 and 2012 (71
Consolidated Statement of Cash Flows for the years ended December 31, 2014, 2013 and 2012 72
Consolidated Balance Sheet at December 31, 2014 and 2013 73
Consolidated Statement of Common Shareholders' Equity for the years ended December 31, 2014, 2013 and 2012 75
Consolidated Statement of Capitalization at December 31, 2014 and 2013 76

ECONY

Report of Management on Internal Control Over Financial Reporting 79
Report of Independent Registered Public Accounting Firm 80
Consolidated Income Statement for the years ended December 31, 2014, 2013 and 2012 81
Consolidated Statement of Comprehensive Income for the years ended December 31, 2014, 2013 and 2012 (82
Consolidated Statement of Cash Flows for the years ended December 31, 2014, 2013 and 2012 83
Consolidated Balance Sheet at December 31, 2014 and 2013 84
Consolidated Statement of Common Shareholder's Equity for the years ended December 31, 2014, 2013 and 2012 86
Consolidated Statement of Capitalization at December 31, 2014 and 2013 87

Notes to the Financial Statements 89

Financial Statement Schedules

Con Edison

Schedule I – Condensed Financial Information 133
Schedule II – Valuation and Qualifying Accounts 136

CECONY

Schedule II – Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable or the required information is shown in financial statements or notes thereto.



## Supplementary Financial Information

Selected Quarterly Financial Data for the years ended December 31, 2014 and 2013 (Unaudited)

<table><tr><td rowspan="2">Con Edison</td><td colspan="4">2014</td></tr><tr><td>First Quarter</td><td>Second Quarter</td><td>Third Quarter</td><td>Fourth Quarter</td></tr><tr><td></td><td colspan="4">(Millions of Dollars, except per share amounts)</td></tr><tr><td>Operating revenues</td><td>$3,789</td><td>$2,911</td><td>$3,390</td><td>$2,829</td></tr><tr><td>Operating income</td><td>685</td><td>455</td><td>819</td><td>250</td></tr><tr><td>Net income (a)</td><td>361</td><td>212</td><td>436</td><td>81</td></tr><tr><td>Net income for common stock (a)</td><td>361</td><td>212</td><td>436</td><td>81</td></tr><tr><td>Basic earnings per common share</td><td>$ 1.23</td><td>$ 0.73</td><td>$ 1.49</td><td>$ 0.28</td></tr><tr><td>Diluted earnings per common share</td><td>$ 1.23</td><td>$ 0.72</td><td>$ 1.48</td><td>$ 0.28</td></tr></table>

(a) Reflects after-tax gain (or charge) in the first and fourth quarter of $7 million and $(8) million, respectively, relating to Con Edison Development's LILO transactions and in the second quarter of $26 million after-tax relating to its sale of solar electric production projects. For additional information about the LILO transactions and the solar electric production projects, see Note J and Q, respectively, to the financial statements in Item 8 (which information is incorporated herein by reference).

<table><tr><td rowspan="2">Con Edison</td><td colspan="4">2013</td></tr><tr><td>First Quarter</td><td>Second Quarter</td><td>Third Quarter</td><td>Fourth Quarter</td></tr><tr><td></td><td colspan="4">(Millions of Dollars, except per share amounts)</td></tr><tr><td>Operating revenues</td><td>$3,184</td><td>$2,818</td><td>$3,484</td><td>$2,868</td></tr><tr><td>Operating income</td><td>526</td><td>386</td><td>855</td><td>477</td></tr><tr><td>Net income (a)</td><td>192</td><td>172</td><td>464</td><td>234</td></tr><tr><td>Net income for common stock (a)</td><td>192</td><td>172</td><td>464</td><td>234</td></tr><tr><td>Basic earnings per common share</td><td>$ 0.66</td><td>$ 0.59</td><td>$ 1.58</td><td>$ 0.80</td></tr><tr><td>Diluted earnings per common share</td><td>$ 0.65</td><td>$ 0.59</td><td>$ 1.58</td><td>$ 0.79</td></tr></table>

(a) Reflects after-tax gain (or charge) in the first, second and third quarters of $(150) million, $29 million and $26 million, respectively, relating to Con Edison Development's LILO transactions. For additional information about the LILO transactions, see Note J to the financial statements in Item 8 (which information is incorporated herein by reference).

In the opinion of Con Edison, these quarterly amounts include all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation. The sum of the quarterly financial information may vary from the annual data due to rounding.

<table><tr><td rowspan="2">CECONY</td><td colspan="4">2014</td></tr><tr><td>First Quarter</td><td>Second Quarter</td><td>Third Quarter</td><td>Fourth Quarter</td></tr><tr><td></td><td colspan="4">(Millions of Dollars)</td></tr><tr><td>Operating revenues</td><td>$3,204</td><td>$2,436</td><td>$2,838</td><td>$2,308</td></tr><tr><td>Operating income</td><td>643</td><td>386</td><td>756</td><td>354</td></tr><tr><td>Net income for common stock</td><td>334</td><td>172</td><td>399</td><td>153</td></tr><tr><td rowspan="2">CECONY</td><td colspan="4">2013</td></tr><tr><td>First Quarter</td><td>Second Quarter</td><td>Third Quarter</td><td>Fourth Quarter</td></tr><tr><td></td><td colspan="4">(Millions of Dollars)</td></tr><tr><td>Operating revenues</td><td>$2,806</td><td>$2,321</td><td>$2,893</td><td>$2,410</td></tr><tr><td>Operating income</td><td>560</td><td>346</td><td>752</td><td>402</td></tr><tr><td>Net income for common stock</td><td>277</td><td>153</td><td>401</td><td>189</td></tr></table>

In the opinion of CECONY, these quarterly amounts include all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation. The sum of the quarterly financial information may vary from the annual data due to rounding.



## Report of Management on Internal Control Over Financial Reporting

Management of Consolidated Edison, Inc. and its subsidiaries (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable, but not absolute, assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of the effectiveness of controls to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Management of the Company assessed the effectiveness of internal control over financial reporting as of December 31, 2014, using the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on that assessment, management has concluded that the Company had effective internal control over financial reporting as of December 31, 2014.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2014, has been audited by PricewaterhouseCoopers LLP, Con Edison’s independent registered public accounting firm, as stated in their report which appears on the following page of this Annual Report on Form 10-K.

/s/ John McAvoy
John McAvoy
Chairman, President and Chief
Executive Officer

/s/ Robert Hoglund
Robert Hoglund
Senior Vice President and Chief
Financial Officer

February 19, 2015



Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Consolidated Edison, Inc.:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Consolidated Edison, Inc. and its subsidiaries (the Company) at December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the accompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP
New York, New York
February 19, 2015



<table><tr><td>(Millions of Dollars/Except Share Data)</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>OPERATING REVENUES</td><td></td><td></td><td></td></tr><tr><td>Electric</td><td>$ 9,114</td><td>$ 8,756</td><td>$ 8,765</td></tr><tr><td>Gas</td><td>1,933</td><td>1,821</td><td>1,618</td></tr><tr><td>Steam</td><td>628</td><td>683</td><td>596</td></tr><tr><td>Non-utility</td><td>1,244</td><td>1,094</td><td>1,209</td></tr><tr><td>TOTAL OPERATING REVENUES</td><td>12,919</td><td>12,354</td><td>12,188</td></tr><tr><td>OPERATING EXPENSES</td><td></td><td></td><td></td></tr><tr><td>Purchased power</td><td>3,417</td><td>3,099</td><td>3,116</td></tr><tr><td>Fuel</td><td>285</td><td>320</td><td>310</td></tr><tr><td>Gas purchased for resale</td><td>811</td><td>635</td><td>461</td></tr><tr><td>Other operations and maintenance</td><td>3,294</td><td>3,137</td><td>3,182</td></tr><tr><td>Depreciation and amortization</td><td>1,071</td><td>1,024</td><td>955</td></tr><tr><td>Taxes, other than income taxes</td><td>1,877</td><td>1,895</td><td>1,825</td></tr><tr><td>TOTAL OPERATING EXPENSES</td><td>10,755</td><td>10,110</td><td>9,849</td></tr><tr><td>Gain on sale of solar electric production projects</td><td>45</td><td>-</td><td>-</td></tr><tr><td>OPERATING INCOME</td><td>2,209</td><td>2,244</td><td>2,339</td></tr><tr><td>OTHER INCOME (DEDUCTIONS)</td><td></td><td></td><td></td></tr><tr><td>Investment and other income</td><td>54</td><td>24</td><td>18</td></tr><tr><td>Allowance for equity funds used during construction</td><td>2</td><td>4</td><td>4</td></tr><tr><td>Other deductions</td><td>(14)</td><td>(15)</td><td>(16)</td></tr><tr><td>TOTAL OTHER INCOME</td><td>42</td><td>13</td><td>6</td></tr><tr><td>INCOME BEFORE INTEREST AND INCOME TAX EXPENSE</td><td>2,251</td><td>2,257</td><td>2,345</td></tr><tr><td>INTEREST EXPENSE</td><td></td><td></td><td></td></tr><tr><td>Interest on long-term debt</td><td>587</td><td>578</td><td>586</td></tr><tr><td>Other interest</td><td>5</td><td>143</td><td>20</td></tr><tr><td>Allowance for borrowed funds used during construction</td><td>(1)</td><td>(2)</td><td>(2)</td></tr><tr><td>NET INTEREST EXPENSE</td><td>591</td><td>719</td><td>604</td></tr><tr><td>INCOME BEFORE INCOME TAX EXPENSE</td><td>1,660</td><td>1,538</td><td>1,741</td></tr><tr><td>INCOME TAX EXPENSE</td><td>568</td><td>476</td><td>600</td></tr><tr><td>NET INCOME</td><td>1,092</td><td>1,062</td><td>1,141</td></tr><tr><td>Preferred stock dividend requirements of subsidiary</td><td>-</td><td>-</td><td>(3)</td></tr><tr><td>NET INCOME FOR COMMON STOCK</td><td>$ 1,092</td><td>$ 1,062</td><td>$ 1,138</td></tr><tr><td>Net income for common stock per common share — basic</td><td>$ 3.73</td><td>$ 3.62</td><td>$ 3.88</td></tr><tr><td>Net income for common stock per common share — diluted</td><td>$ 3.71</td><td>$ 3.61</td><td>$ 3.86</td></tr><tr><td>DIVIDENDS DECLARED PER SHARE OF COMMON STOCK</td><td>$ 2.52</td><td>$ 2.46</td><td>$ 2.42</td></tr><tr><td>AVERAGE NUMBER OF SHARES OUTSTANDING — BASIC (IN MILLIONS)</td><td>292.9</td><td>292.9</td><td>292.9</td></tr><tr><td>AVERAGE NUMBER OF SHARES OUTSTANDING — DILUTED (IN MILLIONS)</td><td>294.0</td><td>294.4</td><td>294.5</td></tr></table>

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



## Consolidated Edison, Inc.

## Consolidated Statement of Comprehensive Income

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">For the Years Ended December 31,</td></tr><tr><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>NET INCOME</td><td>$1,092</td><td>$1,062</td><td>$1,141</td></tr><tr><td>OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES</td><td></td><td></td><td></td></tr><tr><td>Pension and other postretirement benefit plan liability adjustments, net of taxes</td><td>(20)</td><td>28</td><td>5</td></tr><tr><td>TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES</td><td>(20)</td><td>28</td><td>5</td></tr><tr><td>COMPREHENSIVE INCOME</td><td>1,072</td><td>1,090</td><td>1,146</td></tr><tr><td>Preferred stock dividend requirement of subsidiary</td><td>-</td><td>-</td><td>(3)</td></tr><tr><td>COMPREHENSIVE INCOME FOR COMMON STOCK</td><td>$1,072</td><td>$1,090</td><td>$1,143</td></tr></table>

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



## Consolidated Edison, Inc.

## Consolidated Statement of Cash Flows

<table><tr><td>(Millions of Dollars)</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>OPERATING ACTIVITIES</td><td></td><td></td><td></td></tr><tr><td>Net Income</td><td>$ 1,092</td><td>$ 1,062</td><td>$ 1,141</td></tr><tr><td>PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME</td><td></td><td></td><td></td></tr><tr><td>Depreciation and amortization</td><td>1,071</td><td>1,024</td><td>955</td></tr><tr><td>Deferred income taxes</td><td>518</td><td>40</td><td>584</td></tr><tr><td>Rate case amortization and accruals</td><td>102</td><td>10</td><td>42</td></tr><tr><td>Common equity component of allowance for funds used during construction</td><td>(2)</td><td>(4)</td><td>(4)</td></tr><tr><td>Net derivative (gains)/losses</td><td>128</td><td>(74)</td><td>(68)</td></tr><tr><td>Pre-tax gains on termination of LILO transactions</td><td>-</td><td>(95)</td><td>-</td></tr><tr><td>Pre-tax gain on sale of solar electric production projects</td><td>(45)</td><td>-</td><td>-</td></tr><tr><td>Other non-cash items (net)</td><td>(35)</td><td>91</td><td>52</td></tr><tr><td>CHANGES IN ASSETS AND LIABILITIES</td><td></td><td></td><td></td></tr><tr><td>Accounts receivable — customers, less allowance for uncollectibles</td><td>44</td><td>(29)</td><td>(99)</td></tr><tr><td>Special deposits</td><td>312</td><td>(257)</td><td>(13)</td></tr><tr><td>Materials and supplies, including fuel oil and gas in storage</td><td>(10)</td><td>(33)</td><td>26</td></tr><tr><td>Other receivables and other current assets</td><td>4</td><td>34</td><td>40</td></tr><tr><td>Income taxes receivable</td><td>(224)</td><td>-</td><td>-</td></tr><tr><td>Prepayments</td><td>(27)</td><td>23</td><td>(14)</td></tr><tr><td>Accounts payable</td><td>(9)</td><td>(118)</td><td>111</td></tr><tr><td>Pensions and retiree benefits obligations (net)</td><td>822</td><td>829</td><td>903</td></tr><tr><td>Pensions and retiree benefits contributions</td><td>(584)</td><td>(887)</td><td>(870)</td></tr><tr><td>Accrued taxes</td><td>(404)</td><td>314</td><td>(26)</td></tr><tr><td>Accrued interest</td><td>(113)</td><td>96</td><td>(7)</td></tr><tr><td>Superfund and environmental remediation costs (net)</td><td>28</td><td>(4)</td><td>7</td></tr><tr><td>Deferred charges, noncurrent assets and other regulatory assets</td><td>(339)</td><td>(141)</td><td>(337)</td></tr><tr><td>Deferred credits and other regulatory liabilities</td><td>495</td><td>627</td><td>92</td></tr><tr><td>Other current and noncurrent liabilities</td><td>7</td><td>44</td><td>84</td></tr><tr><td>NET CASH FLOWS FROM OPERATING ACTIVITIES</td><td>2,831</td><td>2,552</td><td>2,599</td></tr><tr><td>INVESTING ACTIVITIES</td><td></td><td></td><td></td></tr><tr><td>Utility construction expenditures</td><td>(2,239)</td><td>(2,339)</td><td>(1,917)</td></tr><tr><td>Cost of removal less salvage</td><td>(216)</td><td>(217)</td><td>(175)</td></tr><tr><td>Non-utility construction expenditures</td><td>(180)</td><td>(199)</td><td>(152)</td></tr><tr><td>Investments in renewable electric production projects</td><td>(283)</td><td>(175)</td><td>(309)</td></tr><tr><td>Proceeds from grants related to solar electric production projects</td><td>36</td><td>93</td><td>30</td></tr><tr><td>Proceeds from sale of solar electric production projects</td><td>108</td><td>-</td><td>-</td></tr><tr><td>Restricted cash</td><td>15</td><td>(22)</td><td>-</td></tr><tr><td>Proceeds from the termination of LILO transactions</td><td>-</td><td>200</td><td>-</td></tr><tr><td>NET CASH FLOWS USED IN INVESTING ACTIVITIES</td><td>(2,759)</td><td>(2,659)</td><td>(2,523)</td></tr><tr><td>FINANCING ACTIVITIES</td><td></td><td></td><td></td></tr><tr><td>Net issuance/(payment) of short-term debt</td><td>(651)</td><td>912</td><td>539</td></tr><tr><td>Issuance of long-term debt</td><td>1,850</td><td>919</td><td>400</td></tr><tr><td>Retirement of long-term debt</td><td>(480)</td><td>(709)</td><td>(305)</td></tr><tr><td>Debt issuance costs</td><td>(17)</td><td>(6)</td><td>(4)</td></tr><tr><td>Common stock dividends</td><td>(739)</td><td>(721)</td><td>(709)</td></tr><tr><td>Issuance of common shares for stock plans, net of repurchases</td><td>(10)</td><td>(8)</td><td>(9)</td></tr><tr><td>Preferred stock dividends</td><td>-</td><td>-</td><td>(3)</td></tr><tr><td>Preferred stock redemption</td><td>-</td><td>-</td><td>(239)</td></tr><tr><td>NET CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES</td><td>(47)</td><td>387</td><td>(330)</td></tr><tr><td>CASH AND TEMPORARY CASH INVESTMENTS:</td><td></td><td></td><td></td></tr><tr><td>NET CHANGE FOR THE PERIOD</td><td>25</td><td>280</td><td>(254)</td></tr><tr><td>BALANCE AT BEGINNING OF PERIOD</td><td>674</td><td>394</td><td>648</td></tr><tr><td>BALANCE AT END OF PERIOD</td><td>$ 699</td><td>$ 674</td><td>$ 394</td></tr><tr><td>SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION</td><td></td><td></td><td></td></tr><tr><td>Cash paid during the period for:</td><td></td><td></td><td></td></tr><tr><td>Interest</td><td>$ 561</td><td>$ 574</td><td>$ 571</td></tr><tr><td>Income taxes</td><td>$ 633</td><td>$ 69</td><td>$ 46</td></tr><tr><td>SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION</td><td></td><td></td><td></td></tr><tr><td>Construction expenditures in accounts payable</td><td>$ 179</td><td>$ 174</td><td>$ 254</td></tr></table>



<table><tr><td>(Millions of Dollars)</td><td>December 31, 2014</td><td>December 31, 2013</td></tr><tr><td>ASSETS</td><td></td><td></td></tr><tr><td>CURRENT ASSETS</td><td></td><td></td></tr><tr><td>Cash and temporary cash investments</td><td>$ 699</td><td>$ 674</td></tr><tr><td>Special deposits</td><td>8</td><td>327</td></tr><tr><td>Accounts receivable — customers, less allowance for uncollectible accounts of $96 and $93 in 2014 and 2013, respectively</td><td>1,201</td><td>1,251</td></tr><tr><td>Other receivables, less allowance for uncollectible accounts of $10 in 2014 and 2013</td><td>133</td><td>240</td></tr><tr><td>Income taxes receivable</td><td>224</td><td>-</td></tr><tr><td>Accrued unbilled revenue</td><td>500</td><td>514</td></tr><tr><td>Fuel oil, gas in storage, materials and supplies, at average cost</td><td>372</td><td>363</td></tr><tr><td>Prepayments</td><td>163</td><td>136</td></tr><tr><td>Regulatory assets</td><td>148</td><td>29</td></tr><tr><td>Deferred tax assets — current</td><td>128</td><td>122</td></tr><tr><td>Other current assets</td><td>278</td><td>235</td></tr><tr><td>TOTAL CURRENT ASSETS</td><td>3,854</td><td>3,891</td></tr><tr><td>INVESTMENTS</td><td>816</td><td>461</td></tr><tr><td>UTILITY PLANT, AT ORIGINAL COST</td><td></td><td></td></tr><tr><td>Electric</td><td>25,091</td><td>23,450</td></tr><tr><td>Gas</td><td>6,102</td><td>5,494</td></tr><tr><td>Steam</td><td>2,251</td><td>2,194</td></tr><tr><td>General</td><td>2,465</td><td>2,336</td></tr><tr><td>TOTAL</td><td>35,909</td><td>33,474</td></tr><tr><td>Less: Accumulated depreciation</td><td>7,614</td><td>7,072</td></tr><tr><td>Net</td><td>28,295</td><td>26,402</td></tr><tr><td>Construction work in progress</td><td>1,031</td><td>1,393</td></tr><tr><td>NET UTILITY PLANT</td><td>29,326</td><td>27,795</td></tr><tr><td>NON-UTILITY PLANT</td><td></td><td></td></tr><tr><td>Non-utility property, less accumulated depreciation of $91 and $90 in 2014 and 2013, respectively</td><td>388</td><td>605</td></tr><tr><td>Construction work in progress</td><td>113</td><td>36</td></tr><tr><td>NET PLANT</td><td>29,827</td><td>28,436</td></tr><tr><td>OTHER NONCURRENT ASSETS</td><td></td><td></td></tr><tr><td>Goodwill</td><td>429</td><td>429</td></tr><tr><td>Intangible assets, less accumulated amortization of $4 in 2014 and 2013</td><td>3</td><td>4</td></tr><tr><td>Regulatory assets</td><td>9,156</td><td>7,201</td></tr><tr><td>Other deferred charges and noncurrent assets</td><td>223</td><td>225</td></tr><tr><td>TOTAL OTHER NONCURRENT ASSETS</td><td>9,811</td><td>7,859</td></tr><tr><td>TOTAL ASSETS</td><td>$44,308</td><td>$40,647</td></tr></table>



<table><tr><td>(Millions of Dollars)</td><td>December 31, 2014</td><td>December 31, 2013</td></tr><tr><td>LIABILITIES AND SHAREHOLDERS&#x27; EQUITY</td><td></td><td></td></tr><tr><td>CURRENT LIABILITIES</td><td></td><td></td></tr><tr><td>Long-term debt due within one year</td><td>$ 560</td><td>$ 485</td></tr><tr><td>Notes payable</td><td>800</td><td>1,451</td></tr><tr><td>Accounts payable</td><td>1,019</td><td>1,017</td></tr><tr><td>Customer deposits</td><td>344</td><td>321</td></tr><tr><td>Accrued taxes</td><td>72</td><td>476</td></tr><tr><td>Accrued interest</td><td>132</td><td>249</td></tr><tr><td>Accrued wages</td><td>95</td><td>92</td></tr><tr><td>Fair value of derivative liabilities</td><td>64</td><td>13</td></tr><tr><td>Regulatory liabilities</td><td>187</td><td>148</td></tr><tr><td>Other current liabilities</td><td>508</td><td>478</td></tr><tr><td>TOTAL CURRENT LIABILITIES</td><td>3,781</td><td>4,730</td></tr><tr><td>NONCURRENT LIABILITIES</td><td></td><td></td></tr><tr><td>Provision for injuries and damages</td><td>182</td><td>195</td></tr><tr><td>Pensions and retiree benefits</td><td>3,914</td><td>1,727</td></tr><tr><td>Superfund and other environmental costs</td><td>764</td><td>749</td></tr><tr><td>Asset retirement obligations</td><td>188</td><td>143</td></tr><tr><td>Fair value of derivative liabilities</td><td>13</td><td>5</td></tr><tr><td>Deferred income taxes and investment tax credits</td><td>9,076</td><td>8,466</td></tr><tr><td>Regulatory liabilities</td><td>1,993</td><td>1,728</td></tr><tr><td>Other deferred credits and noncurrent liabilities</td><td>181</td><td>170</td></tr><tr><td>TOTAL NONCURRENT LIABILITIES</td><td>16,311</td><td>13,183</td></tr><tr><td>LONG-TERM DEBT</td><td>11,631</td><td>10,489</td></tr><tr><td>EQUITY</td><td></td><td></td></tr><tr><td>Common shareholders&#x27; equity</td><td>12,576</td><td>12,245</td></tr><tr><td>Noncontrolling interest</td><td>9</td><td>-</td></tr><tr><td>TOTAL EQUITY (See Statement of Equity)</td><td>12,585</td><td>12,245</td></tr><tr><td>TOTAL LIABILITIES AND EQUITY</td><td>$44,308</td><td>$40,647</td></tr></table>

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



## Consolidated Edison, Inc.
Consolidated Statement of Equity

<table><tr><td>(Millions of Dollars/Except Share Data)</td><td colspan="2">Common Stock</td><td>Additional Paid-In Capital</td><td>Retained Earnings</td><td>Treasury Stock Shares</td><td>Amount</td><td>Capital Stock Expense</td><td>Accumulated Other Comprehensive Income/(Loss)</td><td>Noncontrolling Interest</td><td>Total</td></tr><tr><td>BALANCE AS OF DECEMBER 31, 2011</td><td>292,888,521</td><td>$32</td><td>$4,991</td><td>$7,568</td><td>23,194,075</td><td>$(1,033)</td><td>$64)</td><td>$(58)</td><td></td><td>$11,436</td></tr><tr><td>Net income for common stock</td><td></td><td></td><td></td><td>1,138</td><td></td><td></td><td></td><td></td><td></td><td>1,138</td></tr><tr><td>Common stock dividends</td><td></td><td></td><td></td><td>(709)</td><td></td><td></td><td></td><td></td><td></td><td>(709)</td></tr><tr><td>Issuance of common shares for stock plans, net of repurchases</td><td>(16,625)</td><td></td><td></td><td></td><td>16,625</td><td>(4)</td><td>3</td><td></td><td></td><td>(1)</td></tr><tr><td>Other comprehensive income</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td>5</td><td></td><td>5</td></tr><tr><td>BALANCE AS OF DECEMBER 31, 2012</td><td>292,871,896</td><td>$32</td><td>$4,991</td><td>$7,997</td><td>23,210,700</td><td>$(1,037)</td><td>$61)</td><td>$(53)</td><td>$ -</td><td>$11,869</td></tr><tr><td>Net income for common stock</td><td></td><td></td><td></td><td>1,062</td><td></td><td></td><td></td><td></td><td></td><td>1,062</td></tr><tr><td>Common stock dividends</td><td></td><td></td><td></td><td>(721)</td><td></td><td></td><td></td><td></td><td></td><td>(721)</td></tr><tr><td>Issuance of common shares for stock plans, net of repurchases</td><td>500</td><td></td><td>4</td><td></td><td>(500)</td><td>3</td><td></td><td></td><td></td><td>7</td></tr><tr><td>Other comprehensive income</td><td></td><td></td><td></td><td></td><td></td><td></td><td>28</td><td></td><td></td><td>28</td></tr><tr><td>BALANCE AS OF DECEMBER 31, 2013</td><td>292,872,396</td><td>$32</td><td>$4,995</td><td>$8,338</td><td>23,210,200</td><td>$(1,034)</td><td>$61)</td><td>$(25)</td><td>$ -</td><td>$12,245</td></tr><tr><td>Net income for common stock</td><td></td><td></td><td></td><td>1,092</td><td></td><td></td><td></td><td></td><td></td><td>1,092</td></tr><tr><td>Common stock dividends</td><td></td><td></td><td></td><td>(739)</td><td></td><td></td><td></td><td></td><td></td><td>(739)</td></tr><tr><td>Issuance of common shares for stock plans, net of repurchases</td><td>3,800</td><td></td><td>(4)</td><td></td><td>(3,800)</td><td>2</td><td></td><td>(20)</td><td></td><td>(2)</td></tr><tr><td>Other comprehensive loss</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td>(20)</td></tr><tr><td>Noncontrolling interest</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td>9</td><td>9</td></tr><tr><td>BALANCE AS OF DECEMBER 31, 2014</td><td>292,876,196</td><td>$32</td><td>$4,991</td><td>$8,691</td><td>23,206,400</td><td>$(1,032)</td><td>$61)</td><td>$(45)</td><td>$9</td><td>$12,585</td></tr></table>

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



## Consolidated Edison, Inc.
Consolidated Statement of Capitalization

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Shares outstanding</td><td colspan="2">At December 31,</td></tr><tr><td>2014</td><td>2013</td><td>2014</td><td>2013</td><td></td></tr><tr><td>TOTAL COMMON SHAREHOLDERS&#x27; EQUITY BEFORE</td><td>292,876,196</td><td>292,872,396</td><td>$12,621</td><td>$12,270</td><td></td></tr><tr><td>ACCUMULATED OTHER COMPREHENSIVE LOSS</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Pension plan liability adjustments, net of taxes</td><td></td><td></td><td>(42)</td><td>(22)</td><td></td></tr><tr><td>Unrealized gains/(losses) on derivatives qualified as cash flow hedges, less reclassification adjustment for gains/(losses) included in net income and reclassification adjustment for unrealized losses included in regulatory assets, net of taxes</td><td></td><td></td><td>(3)</td><td>(3)</td><td></td></tr><tr><td>TOTAL ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAXES</td><td></td><td></td><td>(45)</td><td>(25)</td><td></td></tr><tr><td>Common shareholders&#x27; equity</td><td></td><td></td><td>12,576</td><td>12,245</td><td></td></tr><tr><td>Noncontrolling interest</td><td></td><td></td><td>9</td><td>—</td><td></td></tr><tr><td>TOTAL EQUITY (See Statement of Equity)</td><td></td><td></td><td>$12,585</td><td>$12,245</td><td></td></tr></table>

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



## Consolidated Edison, Inc.
Consolidated Statement of Capitalization

<table><tr><td colspan="4">LONG-TERM DEBT (Millions of Dollars)</td><td colspan="2">At December 31,</td></tr><tr><td>Maturity</td><td>Interest Rate</td><td>Series</td><td>2014</td><td>2013</td><td></td></tr><tr><td>DEBENTURES:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>2014</td><td>4.70%</td><td>2004A</td><td>-</td><td>200</td><td></td></tr><tr><td>2014</td><td>5.55</td><td>2009A</td><td>-</td><td>275</td><td></td></tr><tr><td>2015</td><td>5.30</td><td>2005A</td><td>40</td><td>40</td><td></td></tr><tr><td>2015</td><td>5.375</td><td>2005C</td><td>350</td><td>350</td><td></td></tr><tr><td>2015</td><td>2.50</td><td>2010A</td><td>55</td><td>55</td><td></td></tr><tr><td>2016</td><td>5.45</td><td>2006A</td><td>75</td><td>75</td><td></td></tr><tr><td>2016</td><td>5.50</td><td>2006C</td><td>400</td><td>400</td><td></td></tr><tr><td>2016</td><td>5.30</td><td>2006D</td><td>250</td><td>250</td><td></td></tr><tr><td>2018</td><td>5.85</td><td>2008A</td><td>600</td><td>600</td><td></td></tr><tr><td>2018</td><td>6.15</td><td>2008A</td><td>50</td><td>50</td><td></td></tr><tr><td>2018</td><td>7.125</td><td>2008C</td><td>600</td><td>600</td><td></td></tr><tr><td>2019</td><td>4.96</td><td>2009A</td><td>60</td><td>60</td><td></td></tr><tr><td>2019</td><td>6.65</td><td>2009B</td><td>475</td><td>475</td><td></td></tr><tr><td>2020</td><td>4.45</td><td>2010A</td><td>350</td><td>350</td><td></td></tr><tr><td>2024</td><td>3.30</td><td>2014B</td><td>250</td><td>-</td><td></td></tr><tr><td>2027</td><td>6.50</td><td>1997F</td><td>80</td><td>80</td><td></td></tr><tr><td>2033</td><td>5.875</td><td>2003A</td><td>175</td><td>175</td><td></td></tr><tr><td>2033</td><td>5.10</td><td>2003C</td><td>200</td><td>200</td><td></td></tr><tr><td>2034</td><td>5.70</td><td>2004B</td><td>200</td><td>200</td><td></td></tr><tr><td>2035</td><td>5.30</td><td>2005A</td><td>350</td><td>350</td><td></td></tr><tr><td>2035</td><td>5.25</td><td>2005B</td><td>125</td><td>125</td><td></td></tr><tr><td>2036</td><td>5.85</td><td>2006A</td><td>400</td><td>400</td><td></td></tr><tr><td>2036</td><td>6.20</td><td>2006B</td><td>400</td><td>400</td><td></td></tr><tr><td>2036</td><td>5.70</td><td>2006E</td><td>250</td><td>250</td><td></td></tr><tr><td>2037</td><td>6.30</td><td>2007A</td><td>525</td><td>525</td><td></td></tr><tr><td>2038</td><td>6.75</td><td>2008B</td><td>600</td><td>600</td><td></td></tr><tr><td>2039</td><td>6.00</td><td>2009B</td><td>60</td><td>60</td><td></td></tr><tr><td>2039</td><td>5.50</td><td>2009C</td><td>600</td><td>600</td><td></td></tr><tr><td>2040</td><td>5.70</td><td>2010B</td><td>350</td><td>350</td><td></td></tr><tr><td>2040</td><td>5.50</td><td>2010B</td><td>115</td><td>115</td><td></td></tr><tr><td>2042</td><td>4.20</td><td>2012A</td><td>400</td><td>400</td><td></td></tr><tr><td>2043</td><td>3.95</td><td>2013A</td><td>700</td><td>700</td><td></td></tr><tr><td>2044</td><td>4.45</td><td>2014A</td><td>850</td><td>-</td><td></td></tr><tr><td>2054</td><td>4.625</td><td>2014C</td><td>750</td><td>-</td><td></td></tr><tr><td>TOTAL DEBENTURES</td><td></td><td></td><td>10,685</td><td>9,310</td><td></td></tr><tr><td>TRANSITION BONDS:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>2019*</td><td>5.22%</td><td>2004-1</td><td>18</td><td>22</td><td></td></tr><tr><td>TOTAL TRANSITION BONDS</td><td></td><td></td><td>18</td><td>22</td><td></td></tr></table>



## Consolidated Edison, Inc.

## Consolidated Statement of Capitalization

<table><tr><td colspan="4">LONG-TERM DEBT (Millions of Dollars)</td><td colspan="2">At December 31,</td></tr><tr><td>Maturity</td><td>Interest Rate</td><td>Series</td><td>2014</td><td>2013</td><td></td></tr><tr><td colspan="6">TAX-EXEMPT DEBT - Notes issued to New York State Energy Research and Development Authority for Facilities Revenue Bonds**:</td></tr><tr><td>2015</td><td>0.06%</td><td>1995***</td><td>44</td><td>44</td><td></td></tr><tr><td>2032</td><td>0.13</td><td>2004B Series 1</td><td>127</td><td>127</td><td></td></tr><tr><td>2034</td><td>0.14</td><td>1999A</td><td>293</td><td>293</td><td></td></tr><tr><td>2035</td><td>0.14</td><td>2004B Series 2</td><td>20</td><td>20</td><td></td></tr><tr><td>2036</td><td>0.11</td><td>2001B</td><td>98</td><td>98</td><td></td></tr><tr><td>2036</td><td>0.03</td><td>2010A</td><td>225</td><td>225</td><td></td></tr><tr><td>2039</td><td>0.10</td><td>2004A</td><td>98</td><td>98</td><td></td></tr><tr><td>2039</td><td>0.04</td><td>2004C</td><td>99</td><td>99</td><td></td></tr><tr><td>2039</td><td>0.03</td><td>2005A</td><td>126</td><td>126</td><td></td></tr><tr><td colspan="3">TOTAL TAX-EXEMPT DEBT</td><td>1,130</td><td>1,130</td><td></td></tr><tr><td colspan="3">Other long-term debt</td><td>380</td><td>532</td><td></td></tr><tr><td colspan="3">Unamortized debt discount</td><td>(22)</td><td>(20)</td><td></td></tr><tr><td colspan="3">TOTAL</td><td>12,191</td><td>10,974</td><td></td></tr><tr><td colspan="3">Less: Long-term debt due within one year</td><td>560</td><td>485</td><td></td></tr><tr><td colspan="3">TOTAL LONG-TERM DEBT</td><td>11,631</td><td>10,489</td><td></td></tr><tr><td colspan="3">TOTAL CAPITALIZATION</td><td>$24,207</td><td>$22,734</td><td></td></tr></table>

* The final date to pay the entire remaining unpaid principal balance, if any, of all outstanding bonds is May 17, 2021.

** Rates are to be reset weekly or by auction held every 35 days; December 31, 2014 rates shown.

*** Issued for O&R pollution control financing.



## Report of Management on Internal Control Over Financial Reporting

Management of Consolidated Edison Company of New York, Inc. and its subsidiaries (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable, but not absolute, assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of the effectiveness of controls to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Management of the Company assessed the effectiveness of internal control over financial reporting as of December 31, 2014, using the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013). Based on that assessment, management has concluded that the Company had effective internal control over financial reporting as of December 31, 2014.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2014, has been audited by PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, as stated in their report which appears on the following page of this Annual Report on Form 10-K.

/s/ John McAvoy

John McAvoy

Chairman and Chief Executive Officer

/s/ Robert Hoglund

Robert Hoglund

Senior Vice President and Chief

Financial Officer

February 19, 2015



Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Stockholder of Consolidated
Edison Company of New York, Inc.:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Consolidated Edison Company of New York, Inc. and its subsidiaries (the Company) at December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP
New York, New York
February 19, 2015



## Consolidated Edison Company of New York, Inc.
Consolidated Income Statement

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">For the Years Ended December 31,</td></tr><tr><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>OPERATING REVENUES</td><td></td><td></td><td></td></tr><tr><td>Electric</td><td>$ 8,437</td><td>$ 8,131</td><td>$ 8,176</td></tr><tr><td>Gas</td><td>1,721</td><td>1,616</td><td>1,415</td></tr><tr><td>Steam</td><td>628</td><td>683</td><td>596</td></tr><tr><td>TOTAL OPERATING REVENUES</td><td>10,786</td><td>10,430</td><td>10,187</td></tr><tr><td>OPERATING EXPENSES</td><td></td><td></td><td></td></tr><tr><td>Purchased power</td><td>2,091</td><td>2,021</td><td>1,968</td></tr><tr><td>Fuel</td><td>285</td><td>320</td><td>310</td></tr><tr><td>Gas purchased for resale</td><td>609</td><td>532</td><td>387</td></tr><tr><td>Other operations and maintenance</td><td>2,873</td><td>2,735</td><td>2,788</td></tr><tr><td>Depreciation and amortization</td><td>991</td><td>946</td><td>894</td></tr><tr><td>Taxes, other than income taxes</td><td>1,798</td><td>1,816</td><td>1,747</td></tr><tr><td>TOTAL OPERATING EXPENSES</td><td>8,647</td><td>8,370</td><td>8,094</td></tr><tr><td>OPERATING INCOME</td><td>2,139</td><td>2,060</td><td>2,093</td></tr><tr><td>OTHER INCOME (DEDUCTIONS)</td><td></td><td></td><td></td></tr><tr><td>Investment and other income</td><td>22</td><td>11</td><td>9</td></tr><tr><td>Allowance for equity funds used during construction</td><td>1</td><td>2</td><td>2</td></tr><tr><td>Other deductions</td><td>(12)</td><td>(12)</td><td>(13)</td></tr><tr><td>TOTAL OTHER INCOME (DEDUCTIONS)</td><td>11</td><td>1</td><td>(2)</td></tr><tr><td>INCOME BEFORE INTEREST AND INCOME TAX EXPENSE</td><td>2,150</td><td>2,061</td><td>2,091</td></tr><tr><td>INTEREST EXPENSE</td><td></td><td></td><td></td></tr><tr><td>Interest on long-term debt</td><td>523</td><td>511</td><td>525</td></tr><tr><td>Other interest</td><td>15</td><td>11</td><td>22</td></tr><tr><td>Allowance for borrowed funds used during construction</td><td>(1)</td><td>(1)</td><td>(2)</td></tr><tr><td>NET INTEREST EXPENSE</td><td>537</td><td>521</td><td>545</td></tr><tr><td>INCOME BEFORE INCOME TAX EXPENSE</td><td>1,613</td><td>1,540</td><td>1,546</td></tr><tr><td>INCOME TAX EXPENSE</td><td>555</td><td>520</td><td>529</td></tr><tr><td>NET INCOME</td><td>1,058</td><td>1,020</td><td>1,017</td></tr><tr><td>Preferred stock dividend requirements</td><td>-</td><td>-</td><td>(3)</td></tr><tr><td>NET INCOME FOR COMMON STOCK</td><td>$ 1,058</td><td>$ 1,020</td><td>$ 1,014</td></tr></table>

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



## Consolidated Edison Company of New York, Inc.
Consolidated Statement of Comprehensive Income

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">For the Years Ended December 31,</td></tr><tr><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>NET INCOME</td><td>$1,058</td><td>$1,020</td><td>$1,017</td></tr><tr><td>OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES</td><td></td><td></td><td></td></tr><tr><td>Pension and other postretirement benefit plan liability adjustments, net of taxes</td><td>(5)</td><td>3</td><td>(1)</td></tr><tr><td>TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES</td><td>(5)</td><td>3</td><td>(1)</td></tr><tr><td>COMPREHENSIVE INCOME</td><td>$1,053</td><td>$1,023</td><td>$1,016</td></tr></table>

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



## Consolidated Edison Company of New York, Inc.
Consolidated Statement of Cash Flows

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">For the Years Ended December 31,</td></tr><tr><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>OPERATING ACTIVITIES</td><td></td><td></td><td></td></tr><tr><td>Net income</td><td>$ 1,058</td><td>$ 1,020</td><td>$ 1,017</td></tr><tr><td>PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME</td><td></td><td></td><td></td></tr><tr><td>Depreciation and amortization</td><td>991</td><td>946</td><td>894</td></tr><tr><td>Deferred income taxes</td><td>331</td><td>222</td><td>365</td></tr><tr><td>Rate case amortization and accruals</td><td>102</td><td>10</td><td>42</td></tr><tr><td>Common equity component of allowance for funds used during construction</td><td>(1)</td><td>(2)</td><td>(2)</td></tr><tr><td>Other non-cash items (net)</td><td>(33)</td><td>(80)</td><td>14</td></tr><tr><td>CHANGES IN ASSETS AND LIABILITIES</td><td></td><td></td><td></td></tr><tr><td>Accounts receivable - customers, less allowance for uncollectibles</td><td>59</td><td>(15)</td><td>(131)</td></tr><tr><td>Materials and supplies, including fuel oil and gas in storage</td><td>(12)</td><td>(15)</td><td>23</td></tr><tr><td>Other receivables and other current assets</td><td>35</td><td>(88)</td><td>(40)</td></tr><tr><td>Prepayments</td><td>(24)</td><td>(21)</td><td>4</td></tr><tr><td>Accounts payable</td><td>(79)</td><td>(58)</td><td>102</td></tr><tr><td>Pensions and retiree benefits obligations (net)</td><td>742</td><td>803</td><td>837</td></tr><tr><td>Pensions and retiree benefits contributions</td><td>(544)</td><td>(830)</td><td>(804)</td></tr><tr><td>Superfund and environmental remediation costs (net)</td><td>32</td><td>(4)</td><td>9</td></tr><tr><td>Accrued taxes</td><td>(403)</td><td>207</td><td>94</td></tr><tr><td>Accrued interest</td><td>(22)</td><td>6</td><td>-</td></tr><tr><td>Deferred charges, noncurrent assets and other regulatory assets</td><td>(334)</td><td>(148)</td><td>(239)</td></tr><tr><td>Deferred credits and other regulatory liabilities</td><td>475</td><td>666</td><td>100</td></tr><tr><td>Other current and noncurrent liabilities</td><td>57</td><td>24</td><td>61</td></tr><tr><td>NET CASH FLOWS FROM OPERATING ACTIVITIES</td><td>2,430</td><td>2,643</td><td>2,346</td></tr><tr><td>INVESTING ACTIVITIES</td><td></td><td></td><td></td></tr><tr><td>Utility construction expenditures</td><td>(2,094)</td><td>(2,207)</td><td>(1,788)</td></tr><tr><td>Cost of removal less salvage</td><td>(210)</td><td>(210)</td><td>(170)</td></tr><tr><td>NET CASH FLOWS USED IN INVESTING ACTIVITIES</td><td>(2,304)</td><td>(2,417)</td><td>(1,958)</td></tr><tr><td>FINANCING ACTIVITIES</td><td></td><td></td><td></td></tr><tr><td>Net Issuance/(payment) of short-term debt</td><td>(760)</td><td>789</td><td>421</td></tr><tr><td>Issuance of long-term debt</td><td>1,850</td><td>700</td><td>400</td></tr><tr><td>Retirement of long-term debt</td><td>(475)</td><td>(700)</td><td>(300)</td></tr><tr><td>Debt issuance costs</td><td>(17)</td><td>(7)</td><td>(4)</td></tr><tr><td>Dividend to parent</td><td>(712)</td><td>(728)</td><td>(682)</td></tr><tr><td>Preferred stock dividends</td><td>-</td><td>-</td><td>(3)</td></tr><tr><td>Preferred stock redemption</td><td>-</td><td>-</td><td>(239)</td></tr><tr><td>NET CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES</td><td>(114)</td><td>54</td><td>(407)</td></tr><tr><td>CASH AND TEMPORARY CASH INVESTMENTS:</td><td></td><td></td><td></td></tr><tr><td>NET CHANGE FOR THE PERIOD</td><td>12</td><td>280</td><td>(19)</td></tr><tr><td>BALANCE AT BEGINNING OF PERIOD</td><td>633</td><td>353</td><td>372</td></tr><tr><td>BALANCE AT END OF PERIOD</td><td>$ 645</td><td>$ 633</td><td>$ 353</td></tr><tr><td>SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION</td><td></td><td></td><td></td></tr><tr><td>Cash paid during the period for:</td><td></td><td></td><td></td></tr><tr><td>Interest</td><td>$ 504</td><td>$ 500</td><td>$ 513</td></tr><tr><td>Income taxes</td><td>$ 748</td><td>$ 163</td><td>$ 62</td></tr><tr><td>SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION</td><td></td><td></td><td></td></tr><tr><td>Construction expenditures in accounts payable</td><td>$ 151</td><td>$ 116</td><td>$ 201</td></tr></table>



## Consolidated Edison Company of New York, Inc.
Consolidated Balance Sheet

<table><tr><td>(Millions of Dollars)</td><td>December 31, 2014</td><td>December 31, 2013</td></tr><tr><td>ASSETS</td><td></td><td></td></tr><tr><td>CURRENT ASSETS</td><td></td><td></td></tr><tr><td>Cash and temporary cash investments</td><td>$ 645</td><td>$ 633</td></tr><tr><td>Special deposits</td><td>2</td><td>86</td></tr><tr><td>Accounts receivable - customers, less allowance for uncollectible accounts of $90 and $87 in 2014 and 2013, respectively</td><td>1,064</td><td>1,123</td></tr><tr><td>Other receivables, less allowance for uncollectible accounts of $8 in 2014 and 2013</td><td>71</td><td>127</td></tr><tr><td>Accrued unbilled revenue</td><td>384</td><td>405</td></tr><tr><td>Accounts receivable from affiliated companies</td><td>132</td><td>119</td></tr><tr><td>Fuel oil, gas in storage, materials and supplies, at average cost</td><td>312</td><td>300</td></tr><tr><td>Prepayments</td><td>126</td><td>102</td></tr><tr><td>Regulatory assets</td><td>132</td><td>26</td></tr><tr><td>Deferred tax assets - current</td><td>94</td><td>100</td></tr><tr><td>Other current assets</td><td>158</td><td>55</td></tr><tr><td>TOTAL CURRENT ASSETS</td><td>3,120</td><td>3,076</td></tr><tr><td>INVESTMENTS</td><td>271</td><td>247</td></tr><tr><td>UTILITY PLANT AT ORIGINAL COST</td><td></td><td></td></tr><tr><td>Electric</td><td>23,599</td><td>22,073</td></tr><tr><td>Gas</td><td>5,469</td><td>4,891</td></tr><tr><td>Steam</td><td>2,251</td><td>2,194</td></tr><tr><td>General</td><td>2,265</td><td>2,154</td></tr><tr><td>TOTAL</td><td>33,584</td><td>31,312</td></tr><tr><td>Less: Accumulated depreciation</td><td>6,970</td><td>6,469</td></tr><tr><td>Net</td><td>26,614</td><td>24,843</td></tr><tr><td>Construction work in progress</td><td>971</td><td>1,303</td></tr><tr><td>NET UTILITY PLANT</td><td>27,585</td><td>26,146</td></tr><tr><td>NON-UTILITY PROPERTY</td><td></td><td></td></tr><tr><td>Non-utility property, less accumulated depreciation of $25 in 2014 and 2013</td><td>5</td><td>4</td></tr><tr><td>NET PLANT</td><td>27,590</td><td>26,150</td></tr><tr><td>OTHER NONCURRENT ASSETS</td><td></td><td></td></tr><tr><td>Regulatory assets</td><td>8,481</td><td>6,639</td></tr><tr><td>Other deferred charges and noncurrent assets</td><td>175</td><td>146</td></tr><tr><td>TOTAL OTHER NONCURRENT ASSETS</td><td>8,656</td><td>6,785</td></tr><tr><td>TOTAL ASSETS</td><td>$39,637</td><td>$36,258</td></tr></table>

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



## Consolidated Edison Company of New York, Inc.
Consolidated Balance Sheet

<table><tr><td>(Millions of Dollars)</td><td>December 31, 2014</td><td>December 31, 2013</td></tr><tr><td>LIABILITIES AND SHAREHOLDER&#x27;S EQUITY</td><td></td><td></td></tr><tr><td>CURRENT LIABILITIES</td><td></td><td></td></tr><tr><td>Long-term debt due within one year</td><td>$ 350</td><td>$ 475</td></tr><tr><td>Notes payable</td><td>450</td><td>1,210</td></tr><tr><td>Accounts payable</td><td>802</td><td>824</td></tr><tr><td>Accounts payable to affiliated companies</td><td>23</td><td>45</td></tr><tr><td>Customer deposits</td><td>330</td><td>308</td></tr><tr><td>Accrued taxes</td><td>46</td><td>46</td></tr><tr><td>Accrued taxes to affiliated companies</td><td>10</td><td>413</td></tr><tr><td>Accrued interest</td><td>117</td><td>139</td></tr><tr><td>Accrued wages</td><td>84</td><td>82</td></tr><tr><td>Fair value of derivative liabilities</td><td>48</td><td>12</td></tr><tr><td>Regulatory liabilities</td><td>142</td><td>107</td></tr><tr><td>Other current liabilities</td><td>415</td><td>385</td></tr><tr><td>TOTAL CURRENT LIABILITIES</td><td>2,817</td><td>4,046</td></tr><tr><td>NONCURRENT LIABILITIES</td><td></td><td></td></tr><tr><td>Provision for injuries and damages</td><td>176</td><td>180</td></tr><tr><td>Pensions and retiree benefits</td><td>3,493</td><td>1,453</td></tr><tr><td>Superfund and other environmental costs</td><td>666</td><td>644</td></tr><tr><td>Asset retirement obligations</td><td>185</td><td>143</td></tr><tr><td>Fair value of derivative liabilities</td><td>10</td><td>3</td></tr><tr><td>Deferred income taxes and investment tax credits</td><td>8,257</td><td>7,832</td></tr><tr><td>Regulatory liabilities</td><td>1,837</td><td>1,598</td></tr><tr><td>Other deferred credits and noncurrent liabilities</td><td>144</td><td>146</td></tr><tr><td>TOTAL NONCURRENT LIABILITIES</td><td>14,768</td><td>11,999</td></tr><tr><td>LONG-TERM DEBT</td><td>10,864</td><td>9,366</td></tr><tr><td>COMMON SHAREHOLDER&#x27;S EQUITY (See Statement of Shareholder&#x27;s Equity)</td><td>11,188</td><td>10,847</td></tr><tr><td>TOTAL LIABILITIES AND SHAREHOLDER&#x27;S EQUITY</td><td>$39,637</td><td>$36,258</td></tr></table>

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



## Consolidated Edison Company of New York, Inc.
Consolidated Statement of Shareholder's Equity

<table><tr><td rowspan="2">(Millions of Dollars/Except Share Data)</td><td colspan="2">Common Stock</td><td rowspan="2">Additional Paid-In Capital</td><td rowspan="2">Retained Earnings</td><td rowspan="2">Repurchased Con Edison Stock</td><td rowspan="2">Capital Stock Expense</td><td rowspan="2">Accumulated Other Comprehensive Income/(Loss)</td><td rowspan="2">Total</td></tr><tr><td>Shares</td><td>Amount</td></tr><tr><td>BALANCE AS OF DECEMBER 31, 2011</td><td>235,488,094</td><td>$589</td><td>$4,234</td><td>$6,429</td><td>$(962)</td><td>$ (64)</td><td>$ (8)</td><td>$10,218</td></tr><tr><td>Net income</td><td></td><td></td><td></td><td>1,017</td><td></td><td></td><td></td><td>1,017</td></tr><tr><td>Common stock dividend to parent</td><td></td><td></td><td></td><td>(682)</td><td></td><td></td><td></td><td>(682)</td></tr><tr><td>Cumulative preferred dividends</td><td></td><td></td><td></td><td>(3)</td><td></td><td></td><td></td><td>(3)</td></tr><tr><td>Preferred stock redemption</td><td></td><td></td><td></td><td></td><td></td><td>3</td><td></td><td>3</td></tr><tr><td>Other comprehensive loss</td><td></td><td></td><td></td><td></td><td></td><td></td><td>(1)</td><td>(1)</td></tr><tr><td>BALANCE AS OF DECEMBER 31, 2012</td><td>235,488,094</td><td>$589</td><td>$4,234</td><td>$6,761</td><td>$(962)</td><td>$ (61)</td><td>$ (9)</td><td>$10,552</td></tr><tr><td>Net income</td><td></td><td></td><td></td><td>1,020</td><td></td><td></td><td></td><td>1,020</td></tr><tr><td>Common stock dividend to parent</td><td></td><td></td><td></td><td>(728)</td><td></td><td></td><td></td><td>(728)</td></tr><tr><td>Other comprehensive income</td><td></td><td></td><td></td><td></td><td></td><td></td><td>3</td><td>3</td></tr><tr><td>BALANCE AS OF DECEMBER 31, 2013</td><td>235,488,094</td><td>$589</td><td>$4,234</td><td>$7,053</td><td>$ (962)</td><td>$ (61)</td><td>$ (6)</td><td>$10,847</td></tr><tr><td>Net income</td><td></td><td></td><td></td><td>1,058</td><td></td><td></td><td></td><td>1,058</td></tr><tr><td>Common stock dividend to parent</td><td></td><td></td><td></td><td>(712)</td><td></td><td></td><td></td><td>(712)</td></tr><tr><td>Other comprehensive loss</td><td></td><td></td><td></td><td></td><td></td><td></td><td>(5)</td><td>(5)</td></tr><tr><td>BALANCE AS OF DECEMBER 31, 2014</td><td>235,488,094</td><td>$589</td><td>$4,234</td><td>$7,399</td><td>$ (962)</td><td>$ (61)</td><td>$ (11)</td><td>$11,188</td></tr></table>

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



## Consolidated Edison Company of New York, Inc.
Consolidated Statement of Capitalization

<table><tr><td rowspan="2"></td><td colspan="4">Shares outstanding</td></tr><tr><td>December 31, 2014</td><td>December 31, 2013</td><td>At December 31, 2014</td><td>2013</td></tr><tr><td>(Millions of Dollars)</td><td></td><td></td><td></td><td></td></tr><tr><td>TOTAL COMMON SHAREHOLDER&#x27;S EQUITY BEFORE ACCUMULATED OTHER COMPREHENSIVE LOSS</td><td>235,488,094</td><td>235,488,094</td><td>$11,199</td><td>$10,853</td></tr><tr><td>Pension plan liability adjustments, net of taxes</td><td></td><td></td><td>(8)</td><td>(3)</td></tr><tr><td>Unrealized gains on derivatives qualified as cash flow hedges, less reclassification adjustment for gains included in net income, net of taxes</td><td></td><td></td><td>(3)</td><td>(3)</td></tr><tr><td>TOTAL ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAXES</td><td></td><td></td><td>(11)</td><td>(6)</td></tr><tr><td>TOTAL COMMON SHAREHOLDER&#x27;S EQUITY (See Statement of Shareholder&#x27;s Equity)</td><td></td><td></td><td>$11,188</td><td>$10,847</td></tr></table>

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



## Consolidated Edison Company of New York, Inc.
Consolidated Statement of Capitalization

<table><tr><td colspan="4">LONG-TERM DEBT (Millions of Dollars)</td><td colspan="2">At December 31,</td></tr><tr><td>Maturity</td><td>Interest Rate</td><td>Series</td><td>2014</td><td>2013</td><td></td></tr><tr><td>DEBENTURES:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>2014</td><td>4.70%</td><td>2004A</td><td>$ -</td><td>$ 200</td><td></td></tr><tr><td>2014</td><td>5.55</td><td>2009A</td><td>-</td><td>275</td><td></td></tr><tr><td>2015</td><td>5.375</td><td>2005C</td><td>350</td><td>350</td><td></td></tr><tr><td>2016</td><td>5.50</td><td>2006C</td><td>400</td><td>400</td><td></td></tr><tr><td>2016</td><td>5.30</td><td>2006D</td><td>250</td><td>250</td><td></td></tr><tr><td>2018</td><td>5.85</td><td>2008A</td><td>600</td><td>600</td><td></td></tr><tr><td>2018</td><td>7.125</td><td>2008C</td><td>600</td><td>600</td><td></td></tr><tr><td>2019</td><td>6.65</td><td>2009B</td><td>475</td><td>475</td><td></td></tr><tr><td>2020</td><td>4.45</td><td>2010A</td><td>350</td><td>350</td><td></td></tr><tr><td>2024</td><td>3.30</td><td>2014B</td><td>250</td><td>-</td><td></td></tr><tr><td>2033</td><td>5.875</td><td>2003A</td><td>175</td><td>175</td><td></td></tr><tr><td>2033</td><td>5.10</td><td>2003C</td><td>200</td><td>200</td><td></td></tr><tr><td>2034</td><td>5.70</td><td>2004B</td><td>200</td><td>200</td><td></td></tr><tr><td>2035</td><td>5.30</td><td>2005A</td><td>350</td><td>350</td><td></td></tr><tr><td>2035</td><td>5.25</td><td>2005B</td><td>125</td><td>125</td><td></td></tr><tr><td>2036</td><td>5.85</td><td>2006A</td><td>400</td><td>400</td><td></td></tr><tr><td>2036</td><td>6.20</td><td>2006B</td><td>400</td><td>400</td><td></td></tr><tr><td>2036</td><td>5.70</td><td>2006E</td><td>250</td><td>250</td><td></td></tr><tr><td>2037</td><td>6.30</td><td>2007A</td><td>525</td><td>525</td><td></td></tr><tr><td>2038</td><td>6.75</td><td>2008B</td><td>600</td><td>600</td><td></td></tr><tr><td>2039</td><td>5.50</td><td>2009C</td><td>600</td><td>600</td><td></td></tr><tr><td>2040</td><td>5.70</td><td>2010B</td><td>350</td><td>350</td><td></td></tr><tr><td>2042</td><td>4.20</td><td>2012A</td><td>400</td><td>400</td><td></td></tr><tr><td>2043</td><td>3.95</td><td>2013A</td><td>700</td><td>700</td><td></td></tr><tr><td>2044</td><td>4.45</td><td>2014A</td><td>850</td><td>-</td><td></td></tr><tr><td>2054</td><td>4.625</td><td>2014C</td><td>750</td><td>-</td><td></td></tr><tr><td>TOTAL DEBENTURES</td><td></td><td></td><td>10,150</td><td>8,775</td><td></td></tr><tr><td colspan="5">TAX-EXEMPT DEBT - Notes issued to New York State Energy Research and Development Authority for Facilities Revenue Bonds*:</td><td></td></tr><tr><td>2032</td><td>0.13%</td><td>2004B Series 1</td><td>127</td><td>127</td><td></td></tr><tr><td>2034</td><td>0.14</td><td>1999A</td><td>293</td><td>293</td><td></td></tr><tr><td>2035</td><td>0.14</td><td>2004B Series 2</td><td>20</td><td>20</td><td></td></tr><tr><td>2036</td><td>0.11</td><td>2001B</td><td>98</td><td>98</td><td></td></tr><tr><td>2036</td><td>0.03</td><td>2010A</td><td>225</td><td>225</td><td></td></tr><tr><td>2039</td><td>0.10</td><td>2004A</td><td>98</td><td>98</td><td></td></tr><tr><td>2039</td><td>0.04</td><td>2004C</td><td>99</td><td>99</td><td></td></tr><tr><td>2039</td><td>0.03</td><td>2005A</td><td>126</td><td>126</td><td></td></tr><tr><td>TOTAL TAX-EXEMPT DEBT</td><td></td><td></td><td>1,086</td><td>1,086</td><td></td></tr><tr><td>Unamortized debt discount</td><td></td><td></td><td>(22)</td><td>(20)</td><td></td></tr><tr><td>TOTAL</td><td></td><td></td><td>11,214</td><td>9,841</td><td></td></tr><tr><td>Less: Long-term debt due within one year</td><td></td><td></td><td>350</td><td>475</td><td></td></tr><tr><td>TOTAL LONG-TERM DEBT</td><td></td><td></td><td>10,864</td><td>9,366</td><td></td></tr><tr><td>TOTAL CAPITALIZATION</td><td></td><td></td><td>$22,052</td><td>$20,213</td><td></td></tr></table>

* Rates are to be reset weekly or by auction held every 35 days; December 31, 2014 rates shown.

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



## Notes to the Financial Statements

## General

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

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

Con Edison has two regulated utility subsidiaries: CECONY and O&R. CECONY provides electric service and gas service in New York City and Westchester County. The company also provides steam service in parts of Manhattan. O&R, along with its regulated utility subsidiaries, provides electric service in southeastern New York and adjacent areas of northern New Jersey and eastern Pennsylvania and gas service in southeastern New York and adjacent areas of eastern Pennsylvania. Con Edison has the following competitive energy businesses: Consolidated Edison Solutions, Inc. (Con Edison Solutions), a company which sells to retail customers electricity purchased in wholesale markets and enters into related hedging transactions and also provides energy-related products and services to retail customers; Consolidated Edison Energy, Inc. (Con Edison Energy), a company that provides energy-related products and services to wholesale customers; and Consolidated Edison Development, Inc. (Con Edison Development), a company that develops, owns and operates renewable and energy infrastructure projects. In addition, in 2014 Con Edison formed Consolidated Edison Transmission LLC (Con Edison Transmission) to invest in a transmission company. See information about Con Edison Transmission under “Guarantees” in Note H.

## Note A – Summary of Significant Accounting Policies
Principles of Consolidation

The Companies’ consolidated financial statements include the accounts of their respective majority-owned subsidiaries, and variable interest entities (see Note Q), as required. All intercompany balances and transactions have been eliminated.

## Accounting Policies

The accounting policies of Con Edison and its subsidiaries conform to generally accepted accounting principles in the United States of America (GAAP). For the Utilities, these accounting principles include the accounting rules for regulated operations and the accounting requirements of the Federal Energy Regulatory Commission (FERC) and the state regulators having jurisdiction.

The accounting rules for regulated operations specify the economic effects that result from the causal relationship of costs and revenues in the rate-regulated environment and how these effects are to be accounted for by a regulated enterprise. Revenues intended to cover some costs may be recorded either before or after the costs are incurred. If regulation provides assurance that incurred costs will be recovered in the future, these costs would be recorded as deferred charges or “regulatory assets” under the accounting rules for regulated operations. If revenues are recorded for costs that are expected to be incurred in the future, these revenues would be recorded as deferred credits or “regulatory liabilities” under the accounting rules for regulated operations.

The Utilities’ principal regulatory assets and liabilities are detailed in Note B. The Utilities are receiving or being credited with a return on all of their regulatory assets for which a cash outflow has been made, and are paying or being charged with a return on all of their regulatory liabilities for which a cash inflow has been received. The Utilities’ regulatory assets and liabilities will be recovered from customers, or applied for customer benefit, in accordance with rate provisions approved by the applicable state regulators.

Other significant accounting policies of the Companies are referenced below in this Note A and in the notes that follow.

## Plant and Depreciation
Utility Plant

Utility plant is stated at original cost. The cost of repairs and maintenance is charged to expense and the cost of betterments is capitalized. The capitalized cost of additions to utility plant includes indirect costs such as engineering, supervision, payroll taxes, pensions, other benefits and an allowance for funds used during construction (AFUDC). The original cost of property is



charged to expense over the estimated useful lives of the assets. Upon retirement, the original cost of property is charged to accumulated depreciation. See Note R.

Rates used for AFUDC include the cost of borrowed funds and a reasonable rate of return on the Utilities' own funds when so used, determined in accordance with regulations of the FERC or the state public utility regulatory authority having jurisdiction. The rate is compounded semiannually, and the amounts applicable to borrowed funds are treated as a reduction of interest charges, while the amounts applicable to the Utilities' own funds are credited to other income (deductions). The AFUDC rates for CECONY were 1.6 percent, 4.0 percent and 6.5 percent for 2014, 2013 and 2012, respectively. The AFUDC rates for O&R were 2.6 percent, 5.7 percent and 7.0 percent for 2014, 2013 and 2012, respectively.

The Utilities generally compute annual charges for depreciation using the straight-line method for financial statement purposes, with rates based on average service lives and net salvage factors. The average depreciation rates for CECONY were 3.1 percent, 3.2 percent and 3.1 percent for 2014, 2013 and 2012, respectively. The average depreciation rates for O&R were 2.9 percent, 2.8 percent and 2.9 percent for 2014, 2013 and 2012, respectively.

The estimated lives for utility plant for CECONY range from 5 to 85 years for electric and gas, 5 to 80 years for steam and 5 to 55 years for general plant. For O&R, the estimated lives for utility plant range from 5 to 75 years for electric and gas and 5 to 50 years for general plant.

At December 31, 2014 and 2013, the capitalized cost of the Companies' utility plant, net of accumulated depreciation, was as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="2">Con Edison</td><td colspan="2">CECONY</td></tr><tr><td>2014</td><td>2013</td><td>2014</td><td>2013</td></tr><tr><td>Electric</td><td></td><td></td><td></td><td></td></tr><tr><td>Generation</td><td>$ 451</td><td>$ 452</td><td>$ 451</td><td>$ 452</td></tr><tr><td>Transmission</td><td>2,956</td><td>2,776</td><td>2,744</td><td>2,597</td></tr><tr><td>Distribution</td><td>16,361</td><td>15,277</td><td>15,531</td><td>14,496</td></tr><tr><td>Gas*</td><td>5,006</td><td>4,469</td><td>4,530</td><td>4,013</td></tr><tr><td>Steam</td><td>1,795</td><td>1,790</td><td>1,795</td><td>1,790</td></tr><tr><td>General</td><td>1,650</td><td>1,565</td><td>1,498</td><td>1,433</td></tr><tr><td>Held for future use</td><td>76</td><td>73</td><td>65</td><td>62</td></tr><tr><td>Construction work in progress</td><td>1,031</td><td>1,393</td><td>971</td><td>1,303</td></tr><tr><td>Net Utility Plant</td><td>29,326</td><td>27,795</td><td>27,585</td><td>26,146</td></tr></table>

* Primarily distribution.

Under the Utilities’ rate plans, the aggregate annual depreciation allowance in effect at December 31, 2014 was $1,048 million, including $993 million under CECONY’s electric, gas and steam rate plans that have been approved by the New York State Public Service Commission (NYSPSC).

## Non-Utility Plant

Non-utility plant is stated at original cost. For Con Edison, non-utility plant consists primarily of the competitive energy businesses' renewable electric production and gas storage. For the Utilities, non-utility plant consists of land and conduit for telecommunication use. Depreciation on these assets is computed using the straight-line method for financial statement purposes over their estimated useful lives, which range from 3 to 30 years.

## Goodwill

Con Edison tests goodwill for impairment at least annually. Goodwill is tested for impairment using a two-step approach. The first step of the goodwill impairment test compares the estimated fair value of a reporting unit with its carrying value, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is considered not impaired. If the carrying value exceeds the estimated fair value of the reporting unit, the second step is performed to measure the amount of impairment loss, if any. The second step requires a calculation of the implied fair value of goodwill. See Note K.

## Impairments

Con Edison evaluates the impairment of long-lived assets, based on projections of undiscounted future cash flows, whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. In the event an evaluation indicates that such cash flows cannot be expected to be sufficient to fully recover the assets, the assets are written down to their estimated fair value. No impairment charges were recognized in 2014, 2013 or 2012.

## Revenues

The Utilities and Con Edison Solutions recognize revenues for energy service on a monthly billing cycle basis. The Utilities defer over a 12-month period net interruptible gas revenues, other than those authorized by the NYSPSC to be retained by the Utilities, for refund to firm gas sales and transportation customers. The Utilities and Con Edison Solutions accrue revenues at the end of each month for estimated energy service not yet billed to customers.

CECONY’s electric and gas rate plans and O&R’s New York electric and gas rate plans each contain a revenue decoupling mechanism under which the company’s actual energy delivery revenues are compared with the authorized delivery revenues



## Notes to the Financial Statements – Continued

and the difference accrued, with interest, for refund to, or recovery from, customers, as applicable. See “Rate Plans” in Note B.

The NYSPSC requires utilities to record gross receipts tax revenues and expenses on a gross income statement presentation basis (i.e., included in both revenue and expense). The recovery of these taxes is generally provided for in the revenue requirement within each of the respective NYSPSC approved rate plans. Total excise taxes (inclusive of gross receipts taxes) recorded in operating revenues were as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">For the Years Ended December 31,</td></tr><tr><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Con Edison</td><td>$365</td><td>$354</td><td>$334</td></tr><tr><td>CECONY</td><td>343</td><td>329</td><td>306</td></tr></table>

## Recoverable Energy Costs

The Utilities generally recover all of their prudently incurred fuel, purchased power and gas costs, including hedging gains and losses, in accordance with rate provisions approved by the applicable state public utility regulators. If the actual energy supply costs for a given month are more or less than the amounts billed to customers for that month, the difference in most cases is recoverable from or refundable to customers. Differences between actual and billed electric and steam supply costs and costs of its electric demand management programs are generally deferred for charge or refund to customers during the next billing cycle (normally within one or two months). For the Utilities' gas costs, differences between actual and billed gas costs during the 12-month period ending each August are charged or refunded to customers during a subsequent 12-month period.

## New York Independent System Operator (NYISO)

The Utilities purchase electricity through the wholesale electricity market administered by the NYISO. The difference between purchased power and related costs initially billed to the Utilities by the NYISO and the actual cost of power subsequently calculated by the NYISO is refunded by the NYISO to the Utilities, or paid to the NYISO by the Utilities. The reconciliation payments or receipts are recoverable from or refundable to the Utilities' customers.

Certain other payments to or receipts from the NYISO are also subject to reconciliation, with shortfalls or amounts in excess of specified rate allowances recoverable from or refundable to customers. These include proceeds from the sale through the NYISO of transmission rights on CECONY’s transmission system (transmission congestion contracts or TCCs).

## Temporary Cash Investments

Temporary cash investments are short-term, highly-liquid investments that generally have maturities of three months or less at the date of purchase. They are stated at cost, which approximates market. The Companies consider temporary cash investments to be cash equivalents.

## Investments

Investments consist primarily of the investments of Con Edison’s competitive energy businesses, which are accounted for under the equity method (depending on the subsidiaries’ percentage ownership). Utilities’ investments are recorded at fair value and include the investments of the deferred income plan and the supplemental retirement income plan in trust-owned life insurance assets.

## Pension and Other Postretirement Benefits

The accounting rules for retirement benefits require an employer to recognize an asset or liability for the overfunded or underfunded status of its pension and other postretirement benefit plans. For a pension plan, the asset or liability is the difference between the fair value of the plan’s assets and the projected benefit obligation. For any other postretirement benefit plan, the asset or liability is the difference between the fair value of the plan’s assets and the accumulated postretirement benefit obligation. The accounting rules generally require employers to recognize all unrecognized prior service costs and credits and unrecognized actuarial gains and losses in accumulated other comprehensive income (OCI), net of tax. Such amounts will be adjusted as they are subsequently recognized as components of net periodic benefit cost or income pursuant to the current recognition and amortization provisions.

For the Utilities’ pension and other postretirement benefit plans, regulatory accounting treatment is generally applied in accordance with the accounting rules for regulated operations. Unrecognized prior service costs or credits and unrecognized actuarial gains and losses are recorded to regulatory assets or liabilities, rather than OCI. See Notes E and F.

The net periodic benefit costs are recognized in accordance with the accounting rules for retirement benefits. Investment gains and losses are recognized in expense over a 15-year period and other actuarial gains and losses are recognized in expense over a 10-year period, subject to the deferral provisions in the rate plans.

In accordance with the Statement of Policy issued by the NYSPSC and its current electric, gas and steam rate plans, CECONY defers for payment to or recovery from customers the difference between such expenses and the amounts for such expenses reflected in rates. Generally, O&R also defers such difference pursuant to its rate plans. See Note B – Regulatory Matters.



## Notes to the Financial Statements – Continued

The Companies calculate the expected return on pension and other postretirement benefit plan assets by multiplying the expected rate of return on plan assets by the market-related value (MRV) of plan assets at the beginning of the year, taking into consideration anticipated contributions and benefit payments that are to be made during the year. The accounting rules allow the MRV of plan assets to be either fair value or a calculated value that recognizes changes in fair value in a systematic and rational manner over not more than five years. The Companies use a calculated value when determining the MRV of the plan assets that adjusts for 20 percent of the difference between fair value and expected MRV of plan assets. This calculated value has the effect of stabilizing variability in assets to which the Companies apply the expected return.

## Federal Income Tax

In accordance with the accounting rules for income taxes, the Companies have recorded an accumulated deferred federal income tax liability for temporary differences between the book and tax basis of assets and liabilities at current tax rates. In accordance with rate plans, the Utilities have recovered amounts from customers for a portion of the tax liability they will pay in the future as a result of the reversal or “turn-around” of these temporary differences. As to the remaining tax liability, in accordance with the accounting rules for regulated operations, the Utilities have established regulatory assets for the net revenue requirements to be recovered from customers for the related future tax expense. See Notes B and L. In 1993, the NYSPSC issued a Policy Statement approving accounting procedures consistent with the accounting rules for income taxes and providing assurances that these future increases in taxes will be recoverable in rates. See Note L.

Accumulated deferred investment tax credits are amortized ratably over the lives of the related properties and applied as a reduction to future federal income tax expense.

Con Edison and its subsidiaries file a consolidated federal income tax return. The consolidated income tax liability is allocated to each member of the consolidated group using the separate return method. Each member pays or receives an amount based on its own taxable income or loss in accordance with tax sharing agreements among the members of the consolidated group. Tax loss carryforwards are allocated among members in accordance with consolidated tax return regulations.

## State Income Tax

Con Edison and its subsidiaries file a combined New York State Corporation Business Franchise Tax Return. Similar to a federal consolidated income tax return, the income of all entities in the combined group is subject to New York State taxation, after adjustments for differences between federal and New York law and apportionment of income among the states in which the company does business. Each member's share of the New York State tax is based on its own New York State taxable income or loss.

## Research and Development Costs

Generally research and development costs are charged to operating expenses as incurred. Research and development costs were as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">For the Years Ended December 31,</td></tr><tr><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Con Edison</td><td>$22</td><td>$18</td><td>$21</td></tr><tr><td>CECONY</td><td>20</td><td>16</td><td>19</td></tr></table>

## Reclassification

Certain prior year amounts have been reclassified to conform with the current year presentation.

## Earnings Per Common Share

Con Edison presents basic and diluted earnings per share on the face of its consolidated income statement. Basic earnings per share (EPS) are calculated by dividing earnings available to common shareholders (“Net income for common stock” on Con Edison’s consolidated income statement) by the weighted average number of Con Edison common shares outstanding during the period. In the calculation of diluted EPS, weighted average shares outstanding are increased for additional shares that would be outstanding if potentially dilutive securities were converted to common stock.

Potentially dilutive securities for Con Edison consist of restricted stock units, deferred stock units and stock options for which the average market price of the common shares for the period was greater than the exercise price. See Note M.



## Notes to the Financial Statements – Continued

Basic and diluted EPS for Con Edison are calculated as follows:

<table><tr><td rowspan="2">(Millions of Dollars, except per share amounts/Shares in Millions)</td><td colspan="3">For the Years Ended December 31,</td></tr><tr><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Net income for common stock</td><td>$1,092</td><td>$1,062</td><td>$1,138</td></tr><tr><td>Weighted average common shares outstanding - basic</td><td>292.9</td><td>292.9</td><td>292.9</td></tr><tr><td>Add: Incremental shares attributable to effect of potentially dilutive securities</td><td>1.1</td><td>1.5</td><td>1.6</td></tr><tr><td>Adjusted weighted average common shares outstanding - diluted</td><td>294.0</td><td>294.4</td><td>294.5</td></tr><tr><td>Net Income for common stock per common share - basic</td><td>$ 3.73</td><td>$ 3.62</td><td>$ 3.88</td></tr><tr><td>Net Income for common stock per common share - diluted</td><td>$ 3.71</td><td>$ 3.61</td><td>$ 3.86</td></tr></table>

The computation of diluted EPS for the years ended December 31, 2014, 2013 and 2012 exclude immaterial amounts of performance share awards that were not included because of their anti-dilutive effect.

## Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

## Changes in Accumulated Other Comprehensive Income by Component

Changes to accumulated other comprehensive income (OCI) for Con Edison and CECONY are as follows:

<table><tr><td>(Millions of Dollars)</td><td>Con Edison</td><td>CECONY</td></tr><tr><td>Accumulated OCI, net of taxes, at December 31, 2012</td><td>$ (53)</td><td>$ (9)</td></tr><tr><td>OCI before reclassifications, net of tax of $ (15) \)  and $ (1) \)  for Con Edison and CECONY, respectively</td><td>21</td><td>2</td></tr><tr><td>Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $ (5) \)  and $ (1) \)  for Con Edison and CECONY, respectively(a)(b)</td><td>7</td><td>1</td></tr><tr><td>Total OCI, net of taxes, at December 31, 2013</td><td>28</td><td>3</td></tr><tr><td>Accumulated OCI, net of taxes, at December 31, 2013(b)</td><td>$ (25)</td><td>$ (6)</td></tr><tr><td>OCI before reclassifications, net of tax of $ 18 \)  and $ 4 \)  for Con Edison and CECONY, respectively</td><td>(26)</td><td>(6)</td></tr><tr><td>Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $ (4) \)  and $ (1) \)  for Con Edison and CECONY, respectively(a)(b)</td><td>6</td><td>1</td></tr><tr><td>Total OCI, net of taxes, at December 31, 2014</td><td>(20)</td><td>(5)</td></tr><tr><td>Accumulated OCI, net of taxes, at December 31, 2014(b)</td><td>$ (45)</td><td>$ (11)</td></tr></table>

(a) For the portion of unrecognized pension and other postretirement benefit costs relating to the regulated Utilities, costs are recorded into, and amortized out of, regulatory assets instead of OCI. The net actuarial losses and prior service costs recognized during the period are included in the computation of net periodic pension and other postretirement benefit cost. See Notes E and F.
(b) Tax reclassified from accumulated OCI is reported in the income tax expense line item of the income statement.

## Note B – Regulatory Matters

## Rate Plans

The Utilities provide service to New York customers according to the terms of tariffs approved by the NYSPSC. Tariffs for service to customers of O&R's New Jersey and Pennsylvania regulated utility subsidiaries are approved by utility regulators in those states. The tariffs include schedules of rates for service that limit the rates charged by the Utilities to amounts that recover from their customers costs approved by the regulator, including capital costs, of providing service to customers as defined by the tariff. The tariffs implement rate plans adopted by state utility regulators in rate orders issued at the conclusion of rate proceedings. Pursuant to the Utilities' rate plans, there generally can be no change to the charges to customers during the respective terms of the rate plans other than specified adjustments provided for in the rate plans. The Utilities' rate plans each cover specified periods, but rates determined pursuant to a plan generally continue in effect until a new rate plan is approved by the state utility regulator.



## Notes to the Financial Statements – Continued

Common provisions of the Utilities’ rate plans include:

Recoverable energy costs that allow the Utilities to recover on a current basis the costs for the energy they supply with no mark-up to their full-service customers.

Cost reconciliations that reconcile pension and other postretirement benefit costs, environmental remediation costs, property taxes, variable rate tax-exempt debt and certain other costs to amounts reflected in delivery rates for such costs. Utilities generally retain the right to petition for recovery or accounting deferral of extraordinary and material cost increases for items such as major storm events and provision is sometimes made for the utility to retain a share of cost reductions, for example, property tax refunds.

Revenue decoupling mechanisms that reconcile actual energy delivery revenues to the authorized delivery revenues approved by the NYSPSC. The difference is accrued with interest for refund to, or recovery from customers, as applicable.

Earnings sharing that require the Utilities to defer for customer benefit a portion of earnings over specified rates of return on common equity. There is no symmetric mechanism for earnings below specified rates of return on common equity.

Negative revenue adjustments for failure to meet certain performance standards relating to service, reliability, safety and other matters.
Net utility plant reconciliations that require deferral as a regulatory liability of the revenue requirement impact of the amount, if any, by which actual average net utility plant balances are less than amounts reflected in rates.

Rate base is, in general, the sum of the Utilities’ net plant and working capital less deferred taxes. For each rate plan, the NYSPSC uses a forecast of the average rate base for each year that new rates would be in effect (“rate year”). The New Jersey Board of Public Utilities (NJBPU) and the Pennsylvania Public Utility Commission (PAPUC) use the rate base balances that would exist at the beginning of the rate year.

Weighted average cost of capital is determined based on the authorized common equity ratio, return on common equity, cost of long-term debt and customer deposits reflected in each rate plan. For each rate plan, the revenues designed to provide the utility a return on invested capital for each rate year is determined by multiplying the Utilities’ rate base by the utility’s pre-tax weighted average cost of capital. The Utilities’ actual return on common equity will reflect their actual operations for each rate year, and may be more or less than the authorized return on equity reflected in their rate plans (and if more, may be subject to earnings sharing).

The following tables contain a summary of the Utilities' rate plans:

<table><tr><td colspan="3">CECONY - Electric</td></tr><tr><td>Effective period</td><td>April 2010 - December 2013</td><td>January 2014 - December 2015</td></tr><tr><td>Base rate changes(a)</td><td>Yr. 1 - $420 millionYr. 2 - $420 millionYr. 3 - $287 million(b)</td><td>Yr. 1 - $76.2 million(c)Yr. 2 - $124.0 million(c)</td></tr><tr><td>Amortizations to income of net regulatory (assets) and liabilities</td><td>$75.3 million over three years</td><td>$37 million over two years, that includes $107 million annually for deferred major storm costs</td></tr><tr><td>Other revenue sources</td><td>Retention of $120 million of annual transmission congestion revenues from the sale of transmission rights ($90 million for the period April 1, 2013 to December 31, 2013).</td><td>Retention of $90 million of annual transmission congestion revenues.</td></tr><tr><td>Revenue decoupling mechanisms</td><td>In 2012 and 2013, the company deferred for customer benefit $59 million and $34 million of revenues, respectively.</td><td>In 2014, the company deferred for customer benefit $146 million of revenues.</td></tr><tr><td>Recoverable energy costs</td><td>Current rate recovery of purchased power and fuel costs.</td><td>Continuation of current rate recovery of purchased power and fuel costs(d).</td></tr><tr><td>Negative revenue adjustments</td><td>Potential penalties (up to $350 million annually) if certain performance targets are not met. In 2012 and 2013, the company did not record any negative revenue adjustments.</td><td>Potential penalties (up to $400 million annually) if certain performance targets are not met. In 2014, the company recorded a $5 million negative revenue adjustment.</td></tr><tr><td>Cost reconciliations(e)</td><td>In 2012 and 2013, the company deferred $146 million of net regulatory liabilities and $35 million of net regulatory assets, respectively.</td><td>In 2014, the company deferred $57 million of net regulatory liabilities.</td></tr></table>



## Notes to the Financial Statements – Continued

<table><tr><td>Net utility plant reconciliations</td><td>Target levels reflected in rates were: Transmission and distribution: Yr. 1 - $13,818 million; Yr. 2 - $14,742 million; Yr. 3 - $15,414 million Enterprise resource project: Yr. 2 - $25 million; Yr. 3 -$115 million Other: Yr. 1 - $1,487 million; Yr. 2 - $1,565 million; Yr. 3 - $1,650 million The company deferred an immaterial amount and $7 million as a regulatory liability in 2012 and 2013, respectively.</td><td>Target levels reflected in rates were: Transmission and distribution: Yr. 1 - $16,869 million; Yr. 2 - $17,401 million Storm hardening: Yr. 1 - $89 million; Yr. 2 - $177 million Other: Yr. 1 - $2,034 million; Yr. 2 - $2,102 million The company deferred an immaterial amount as a regulatory liability in 2014.</td></tr><tr><td>Average rate base</td><td>Yr. 1 - $14,887 million Yr. 2 - $15,987 million Yr. 3 -$16,826 million</td><td>Yr. 1 - $17,323 million Yr. 2 -$18,113 million</td></tr><tr><td>Weighted average cost of capital (after-tax)</td><td>7.76 percent</td><td>Yr. 1 - 7.05 percent Yr. 2 - 7.08 percent</td></tr><tr><td>Authorized return on common equity</td><td>10.15 percent assuming the company achieved austerity measures of $27 million, $20 million and $13 million for Yrs. 1, 2 and 3. Austerity measures were achieved.</td><td>9.2 percent</td></tr><tr><td>Earnings sharing</td><td>Actual earnings above an annual earnings threshold of 11.15 percent for Yr. 1 and 10.65 percent for Yrs. 2 and 3 were to be applied to reduce regulatory assets for pensions and other postretirement benefits and other costs. Actual earnings were $17.5 million above the threshold for the period ended 2013.</td><td>Most earnings above an annual earnings threshold of 9.8 percent are to be applied to reduce regulatory assets for environmental remediation and other costs. In 2014, the company had no earnings above the threshold.</td></tr><tr><td>Cost of long-term debt</td><td>5.65 percent</td><td>Yr. 1 - 5.17 percent Yr. 2 - 5.23 percent</td></tr><tr><td>Common equity ratio</td><td>48 percent</td><td>48 percent</td></tr></table>

(a) $249 million of annual revenues collected from electric customers is subject to potential refund following NYSPSC staff review of costs. See “Other Regulatory Matters” below in this Note B. Revenues for each of 2014 and 2015 include $21 million as funding for major storm reserve.

(b) Temporary portion of the increase ($134 million) that was scheduled to go into effect April 1, 2012 was eliminated by the application of available credits.

(c) The impact of these base rate changes is being deferred which will result in a $30 million regulatory liability at December 31, 2015.

(d) With respect to transmission service provided pursuant to the open access transmission tariff of PJM Interconnection L.L.C. (PJM), the company recovered in 2014 part of charges incurred during 2013 (approximately $20 million) and, commencing in January 2014 and unless and until changed by the NYSPSC, the company will recover all charges incurred associated with the transmission service. In January 2014, PJM submitted to FERC a request that would substantially increase the charges for the transmission service. CECONY has opposed this increase.

(e) Deferrals for property taxes were limited to 80 percent (90 percent beginning 2014) of the difference from amounts reflected in rates, subject to an annual maximum for the remaining difference of not more than a 10 basis point impact on return on common equity.

In January 2015, CECONY filed a request with the NYSPSC for an electric rate increase of $368 million, effective January 2016. The filing reflects a return on common equity of 10 percent and a common equity ratio of approximately 48 percent.

The company also is requesting continuation of provisions pursuant to which expenses for pension and other postretirement benefits, variable rate, tax-exempt debt, storms, the impact of new laws and environmental site investigation and remediation are reconciled to amounts reflected in rates. In addition, the company is requesting reconciliation of property taxes and municipal infrastructure support costs that, unlike the current provisions, would provide for full reconciliation of such costs. The filing also reflects continuation of the revenue decoupling mechanism and provisions for recovery of purchased power and fuel costs from customers.

<table><tr><td colspan="3">CECONY - Gas</td></tr><tr><td>Effective period</td><td>October 2010 - December 2013</td><td>January 2014 - December 2016</td></tr><tr><td>Base rate changes(a)</td><td>Yr. 1 - $47 millionYr. 2 - $48 millionYr. 3 - $47 million</td><td>Yr. 1 - $(54.6) million(b)Yr. 2 - $38.6 million(b)Yr. 3 - $56.8 million(b)</td></tr><tr><td>Amortizations to income of net regulatory (assets) and liabilities</td><td>$(53.1) million over three years</td><td>$4 million over three years</td></tr><tr><td>Other revenue sources</td><td>Retention of revenues from non-firm customers of up to $58 million and 25 percent of any such revenues above $58 million. The company retained $57 million and $64 million of such revenues in 2012 and 2013, respectively.</td><td>Retention of revenues from non-firm customers of up to $65 million and 15 percent of any such revenues above $65 million. The company retained $70 million of such revenues in 2014.</td></tr><tr><td>Revenue decoupling mechanisms</td><td>In 2012 and 2013, the company deferred $22 million and $36 million of regulatory liabilities, respectively.</td><td>In 2014, the company deferred $28 million of regulatory liabilities.</td></tr><tr><td>Recoverable energy costs</td><td>Current rate recovery of purchased gas costs.</td><td>Continuation of current rate recovery of purchased gas costs.</td></tr></table>



Notes to the Financial Statements – Continued

<table><tr><td>Negative revenue adjustments</td><td>Potential penalties (up to $12.6 million annually) if certain gas customer service and system performance targets are not met. In 2012 and 2013, the company did not record any negative revenue adjustments.</td><td>Potential penalties (up to $33 million in 2014, $44 million in 2015, and $56 million in 2016) if certain gas performance targets are not met. In 2014, the company did not record any negative revenue adjustments.</td></tr><tr><td>Cost reconciliations(c)</td><td>In 2012 and 2013, the company deferred $9 million and $26 million of net regulatory assets, respectively.</td><td>In 2014, the company deferred $38 million of net regulatory liabilities.</td></tr><tr><td>Net utility plant reconciliations</td><td>Target levels reflected in rates were: Gas delivery Yr. 1 - $2,934 million; Yr. 2 - $3,148 million; Yr. 3 - $3,346 million For 2012 and 2013, $2.9 million and $9.5 million were deferred as a regulatory liability respectively.</td><td>Target levels reflected in rates were: Gas delivery Yr. 1 - $3,899 million; Yr. 2 - $4,258 million; Yr. 3 - $4,698 million Storm hardening: Yr. 1 - $3 million; Yr. 2 - $8 million; Yr. 3 - $30 million There were no deferrals recorded in 2014.</td></tr><tr><td>Average rate base</td><td>Yr. 1 - $3,027 million Yr. 2 - $3,245 million Yr. 3 - $3,434 million</td><td>Yr. 1 - $3,521 million Yr. 2 - $3,863 million Yr. 3 - $4,236 million</td></tr><tr><td>Weighted average cost of capital (after-tax)</td><td>7.46 percent</td><td>Yr. 1 - 7.10 percent Yr. 2 - 7.13 percent Yr. 3 - 7.21 percent</td></tr><tr><td>Authorized return on common equity</td><td>9.6 percent assuming the company achieved unspecified austerity measures of $4 million and $2 million in 2012 and 2013. Austerity measures were achieved.</td><td>9.3 percent</td></tr><tr><td>Earnings sharing</td><td>Actual earnings did not exceed the thresholds of 10.35 percent in Yr. 1 and 10.15 percent in Yrs. 2 and 3.</td><td>Most earnings above an annual earnings threshold of 9.9 percent are to be applied to reduce regulatory assets for environmental remediation and other costs. In 2014, the company had no earnings above the threshold.</td></tr><tr><td>Cost of long-term debt</td><td>5.57 percent</td><td>Yr. 1 - 5.17 percent Yr. 2 - 5.23 percent Yr. 3 - 5.39 percent</td></tr><tr><td>Common equity ratio</td><td>48 percent</td><td>48 percent</td></tr></table>

(a) $32 million of annual revenues collected from gas customers is subject to potential refund. See "Other Regulatory Matters" below.

(b) The impact of these base rate changes is being deferred which will result in a $32 million regulatory liability at December 31, 2016.

(c) Deferrals for property taxes were limited to 80 percent (90 percent beginning 2014) of the difference from amounts reflected in rates, subject to an annual maximum for the remaining difference of not more than a 10 basis point impact on return on common equity.

<table><tr><td colspan="3">ECONY - Steam</td></tr><tr><td>Effective period</td><td>October 2010 - December 2013</td><td>January 2014 - December 2016</td></tr><tr><td>Base rate changes(a)</td><td>Yr. 1 - $49.5 millionYr. 2 - $49.5 millionYr. 3 - $17.8 millionYr. 3 - $31.7 million collected through a surcharge</td><td>Yr. 1 - $ (22.4) million(b)Yr. 2 - $19.8 million(b)Yr. 3 - $20.3 million(b)</td></tr><tr><td>Amortizations to income of net regulatory (assets) and liabilities</td><td>$(20.1) million over three years</td><td>$37 million over three years</td></tr><tr><td>Recoverable energy costs</td><td>Current rate recovery of purchased power and fuel costs.</td><td>Continuation of current rate recovery of purchased power and fuel costs.</td></tr><tr><td>Negative revenue adjustments</td><td>Potential penalties (up to $1 million annually) if certain steam performance targets are not met. In 2012 and 2013, the company did not record any negative revenue adjustments.</td><td>Potential penalties (up to $1 million annually) if certain steam performance targets are not met. In 2014, the company did not record any negative revenue adjustments.</td></tr><tr><td>Cost reconciliations(c)</td><td>In 2012 and 2013, the company deferred $12 million and $17 million of net regulatory liabilities, respectively.</td><td>In 2014, the company deferred $42 million of net regulatory liabilities.</td></tr><tr><td>Net utility plant reconciliations</td><td>Target levels reflected in rates were:Production Yr. 1 - $415 million;Yr. 2 - $426 million; Yr. 3 - $433 millionDistribution: Yr. 1 - $521 million; Yr. 2 - $534 million; Yr. 3 -$543 millionThe company reduced its regulatory liability by $0.2 million in 2012 and made no deferral in 2013.</td><td>Target levels reflected in rates were:Production Yr. 1 - $1,752 million;Yr. 2 - $1,732 million; Yr. 3 -$1,720 millionDistribution: Yr. 1 - $6 million; Yr. 2 -$11 million; Yr. 3 -$25 millionThe company reduced its regulatory liability by $1.1 million in 2014.</td></tr></table>



Notes to the Financial Statements – Continued

<table><tr><td rowspan="3">Average rate base</td><td>Yr. 1 - $1,589 million</td><td>Yr. 1 - $1,511 million</td></tr><tr><td>Yr. 2 - $1,603 million</td><td>Yr. 2 - $1,547 million</td></tr><tr><td>Yr. 3 - $1,613 million</td><td>Yr. 3 - $1,604 million</td></tr><tr><td rowspan="3">Weighted average cost of capital (after-tax)</td><td rowspan="3">7.46 percent</td><td>Yr. 1 - 7.10 percent</td></tr><tr><td>Yr. 2 - 7.13 percent</td></tr><tr><td>Yr. 3 - 7.21 percent</td></tr><tr><td rowspan="2">Authorized return on common equity</td><td>9.6 percent (assuming company achieved unspecified austerity measures of $3 million and $2 million in 2012 and 2013). Austerity measures were achieved.</td><td>9.3 percent</td></tr><tr><td>Weather normalized earnings did not exceed the threshold of 10.35 percent in Yr. 1 and 10.15 percent in Yrs. 2 and 3. In 2013, actual earnings were $0.5 million above the earnings threshold of 10.15 percent.</td><td>Weather normalized earnings above an annual earnings threshold of 9.9 percent are to be applied to reduce regulatory assets for environmental remediation and other costs. In 2014, the company had no earnings above the threshold.</td></tr><tr><td rowspan="3">Earnings sharing</td><td rowspan="3">5.57 percent</td><td>Yr. 1 - 5.17 percent</td></tr><tr><td>Yr. 2 - 5.23 percent</td></tr><tr><td>Yr. 3 - 5.39 percent</td></tr><tr><td>Cost of long-term debt</td><td>48 percent</td><td>48 percent</td></tr></table>

(a) $6 million of annual revenues collected from steam customers is subject to potential refund. See “Other Regulatory Matters” below in this Note B.

(b) The impact of these base rate changes is being deferred which will result in an $8 million regulatory liability at December 31, 2016.

(c) Deferrals for property taxes were limited to 80 percent (90 percent beginning 2014) of the difference from amounts reflected in rates, subject to an annual maximum for the remaining difference of not more than a 10 basis point impact on return on common equity.

<table><tr><td colspan="2">O&amp;R New York - Electric</td></tr><tr><td>Effective period</td><td>July 2012 - June 2015</td></tr><tr><td rowspan="3">Base rate changes</td><td>Yr. 1 - $19.4 million</td></tr><tr><td>Yr. 2 - $8.8 million</td></tr><tr><td>Yr. 3 - $15.2 million</td></tr><tr><td>Amortizations to income of net regulatory (assets) and liabilities</td><td>$(32.2) million over three years</td></tr><tr><td>Revenue decoupling mechanisms</td><td>In 2012, 2013 and 2014, the company deferred for the customer&#x27;s benefit $2.6 million, $3.2 million and ($3.4) million.</td></tr><tr><td>Recoverable energy costs</td><td>Current rate recovery of purchased power and fuel costs.</td></tr><tr><td>Negative revenue adjustments</td><td>Potential penalties (up to $3 million annually) if certain customer service and system reliability performance targets are not met. In 2012, 2013 and 2014, the company did not record any negative revenue adjustments.</td></tr><tr><td>Cost reconciliations</td><td>In 2012, 2013 and 2014, the company deferred $7.8 million, $4.1 million and $0.2 million as a net increase to regulatory assets, respectively.</td></tr><tr><td>Net utility plant reconciliations</td><td>Target levels reflected in rates were:Yr. 1 - $678 million; Yr. 2 - $704 million; Yr. 3 - $753 millionThe company increased its regulatory liability by $4.2 million in 2012. The company reduced its regulatory, liability by $1.1 million and $2.3 million in 2013 and 2014, respectively.</td></tr><tr><td rowspan="3">Average rate base</td><td>Yr. 1 - $671 million</td></tr><tr><td>Yr. 2 - $708 million</td></tr><tr><td>Yr. 3 - $759 million</td></tr><tr><td rowspan="3">Weighted average cost of capital (after-tax)</td><td>Yr. 1 - 7.61 percent</td></tr><tr><td>Yr. 2 - 7.65 percent</td></tr><tr><td>Yr. 3 - 7.48 percent</td></tr><tr><td rowspan="3">Authorized return on common equity</td><td>Yr. 1 - 9.4 percent</td></tr><tr><td>Yr. 2 - 9.5 percent</td></tr><tr><td>Yr. 3 - 9.6 percent</td></tr><tr><td>Earnings sharing</td><td>The company recorded a regulatory liability of $1 million for earnings above the sharing threshold under the rate plan as of December 31, 2014.</td></tr><tr><td rowspan="3">Cost of long-term debt</td><td>Yr. 1 - 6.07 percent</td></tr><tr><td>Yr. 2 - 6.07 percent</td></tr><tr><td>Yr. 3 - 5.64 percent</td></tr><tr><td>Common equity ratio</td><td>48 percent</td></tr></table>

On November 14, 2014, O&R filed a request with the NYSPSC for an increase in the rates it charges for electric service rendered in New York, effective November 1, 2015, of $33.4 million. The filing reflects a return on common equity of 9.75 percent and a common



## Notes to the Financial Statements – Continued

equity ratio of 48 percent. The filing proposes continuation of the current provisions with respect to recovery from customers of the cost of purchased power, and the reconciliation of actual expenses allocable to the electric business to the amounts for such costs reflected in electric rates for storm costs, pension and other postretirement benefit costs, environmental remediation and property taxes.

<table><tr><td colspan="2">O&amp;R New York - Gas</td></tr><tr><td>Effective period</td><td>November 2009 - December 2014</td></tr><tr><td>Base rate changes</td><td>Yr. 1 - $9 millionYr. 2 - $9 millionYr. 3 - $4.6 millionYr. 3 - $4.3 million collected through a surcharge</td></tr><tr><td>Amortization to income of net regulatory (assets) and liabilities</td><td>$ (2) million over three years</td></tr><tr><td>Revenue decoupling mechanisms</td><td>In 2012, 2013 and 2014, the company deferred $4.7 million, $0.7 million and $0.1 million of regulatory liabilities, respectively.</td></tr><tr><td>Recoverable energy costs</td><td>Current rate recovery of purchased gas costs.</td></tr><tr><td>Negative revenue adjustments</td><td>Potential penalties (up to $1.4 million annually) if certain operations and customer service requirements are not met. In 2012, 2013 and 2014, the company did not record any negative revenue adjustments.</td></tr><tr><td>Cost reconciliations</td><td>In 2012, 2013 and 2014, the company deferred $0.7 million, $8.3 million and $8.3 million as net regulatory assets, respectively.</td></tr><tr><td>Net utility plant reconciliations</td><td>The company deferred $0.7 million in 2012 as a regulatory asset and no deferrals were recorded for 2013 or 2014.</td></tr><tr><td>Average rate base</td><td>Yr. 1 - $280 millionYr. 2 - $296 millionYr. 3 - $309 million</td></tr><tr><td>Weighted average cost of capital (after-tax)</td><td>8.49 percent</td></tr><tr><td>Authorized return on common equity</td><td>10.4 percent</td></tr><tr><td>Earnings sharing</td><td>Earnings above an annual earnings threshold of 11.4 percent are to be applied to reduce regulatory assets. In 2012, 2013 and 2014, earnings did not exceed the earnings threshold.</td></tr><tr><td>Cost of long-term debt</td><td>6.81 percent</td></tr><tr><td>Common equity ratio</td><td>48 percent</td></tr></table>

On November 14, 2014, O&R filed a request with the NYSPSC for an increase in the rates it charges for gas service rendered in New York, effective November 1, 2015, of $40.7 million. The filing reflects a return on common equity of 9.75 percent and a common equity ratio of 48 percent. The filing proposes continuation of the current provisions with respect to recovery from customers of the cost of purchased gas, and the reconciliation of actual expenses allocable to the gas business to the amounts for such costs reflected in gas rates for pension and other postretirement benefit costs, environmental remediation and property taxes.

Rockland Electric Company (RECO)

<table><tr><td>Effective period</td><td>May 2010 - July 2014</td><td>August 2014 - July 2015</td></tr><tr><td>Base rate changes</td><td>Yr. 1 - $9.8 million</td><td>Yr. 1 - $13.0 million</td></tr><tr><td>Amortization to income of net regulatory (assets) and liabilities</td><td>$ (3.9) million over four years and $ (4.9) million of deferred storm costs over five years</td><td>$0.4 million over three years and $ (25.6) million of deferred storm costs over four years</td></tr><tr><td>Recoverable energy costs</td><td>Current rate recovery of purchased power costs.</td><td>Continuation of current rate recovery of purchased power costs.</td></tr><tr><td>Cost reconciliations</td><td>None</td><td>None</td></tr><tr><td>Average rate base</td><td>$148.6 million</td><td>$172.2 million</td></tr><tr><td>Weighted average cost of capital (after-tax)</td><td>8.21 percent</td><td>7.83 percent</td></tr><tr><td>Authorized return on common equity</td><td>10.3 percent</td><td>9.75 percent</td></tr><tr><td>Cost of long-term debt</td><td>6.16 percent</td><td>5.89 percent</td></tr><tr><td>Common equity ratio</td><td>50 percent</td><td>50 percent</td></tr></table>



## Notes to the Financial Statements – Continued

Pike County Light & Power Company (Pike) – Electric

<table><tr><td>Effective period</td><td>April 2009 - August 2014</td><td>September 2014 - August 2015</td></tr><tr><td>Base rate changes(a)</td><td>Yr. 1 - $0.9 million</td><td>Yr. 1 - $1.25 million</td></tr><tr><td>Amortization to income of net regulatory (assets) and liabilities</td><td>$0.1 million over 5 years</td><td>(0.7) million of deferred storm costs over five years</td></tr><tr><td>Cost reconciliations</td><td>True-up of Other Postretirement Benefits costs. The company deferred an immaterial amount as regulatory liabilities in 2012 and 2013.</td><td>True-up of Other Postretirement Benefits costs. The company deferred an immaterial amount a regulatory liability in 2014.</td></tr></table>

(a) Under the current plan, the earliest that the company can file for a new base rate change is September 1, 2016.

Pike – Gas

<table><tr><td>Effective period</td><td>April 2009 - August 2014</td><td>September 2014 - August 2015</td></tr><tr><td>Base Rate changes(a)</td><td>Yr. 1 - $0.3 million</td><td>Yr. 1 - $0.1 million</td></tr><tr><td>Amortization to income of net regulatory (assets) and liabilities</td><td>None</td><td>None</td></tr><tr><td>Cost reconciliations</td><td>True-up of Other Postretirement Benefits costs. The company deferred an immaterial amount as regulatory liabilities in 2012 and 2013.</td><td>True-up of Other Postretirement Benefits costs. The company deferred an immaterial amount a regulatory liability in 2014.</td></tr></table>

(a) Under the current plan, the earliest that the company can file for a new base rate change is September 1, 2016.

## Other Regulatory Matters

In February 2009, the NYSPSC commenced a proceeding to examine the prudence of certain CECONY expenditures following the arrests of employees for accepting illegal payments from a construction contractor. Subsequently, additional employees were arrested for accepting illegal payments from materials suppliers and an engineering firm. The arrested employees were terminated by the company and have pled guilty or been convicted. Pursuant to NYSPSC orders, a portion of the company’s revenues (currently, $249 million, $32 million and $6 million on an annual basis for electric, gas and steam service, respectively) is being collected subject to potential refund to customers. The amount of electric revenues collected subject to refund, which was established in a different proceeding, and the amount of gas and steam revenues collected subject to refund were not established as indicative of the company’s potential liability in this proceeding. At December 31, 2014, the company had collected an estimated $1,675 million from customers subject to potential refund in connection with this proceeding. In January 2013, a NYSPSC consultant reported its estimate, with which the company does not agree, of $208 million of overcharges with respect to a substantial portion of the company’s construction expenditures from January 2000 to January 2009. The company is disputing the consultant’s estimate, including its determinations as to overcharges regarding specific construction expenditures it selected to review and its methodology of extrapolating such determinations over a substantial portion of the construction expenditures during this period. The NYSPSC’s consultant has not reviewed the company’s other expenditures. The company and NYSPSC staff are exploring a settlement in this proceeding. There is no assurance that there will be a settlement, and any settlement would be subject to NYSPSC approval. At December 31, 2014, the company had a $105 million regulatory liability relating to this matter. The company currently estimates that any additional amount the NYSPSC requires the company to refund to customers in excess of the regulatory liability accrued could range up to an amount based on the NYSPSC consultant’s $208 million estimate of overcharges.

In late October 2012, Superstorm Sandy caused extensive damage to the Utilities' electric distribution system and interrupted service to approximately 1.4 million customers. Superstorm Sandy also damaged CECONY's steam system and interrupted service to many of its steam customers. As of December 31, 2014, CECONY and O&R incurred response and restoration costs for Superstorm Sandy of $503 million and $91 million, respectively (including capital expenditures of $148 million and $15 million, respectively). Most of the costs that were not capitalized were deferred for recovery as a regulatory asset under the Utilities' electric rate plans. See "Regulatory Assets and Liabilities" below. CECONY's current electric rate plan includes collection from customers of deferred storm costs (including for Superstorm Sandy), subject to refund following NYSPSC review of the costs. In November 2014, O&R requested recovery of deferred storm costs for its New York electric operations, which are subject to NYSPSC review. RECO's current electric rate plan includes collection from customers of deferred storm costs. See "Rate Plans" above.

In June 2014, the NYSPSC initiated a proceeding to investigate the practices of qualifying persons to perform plastic fusions on gas facilities. New York State regulations require gas utilities to qualify and, except in certain circumstances, annually requalify workers that perform fusion to join plastic pipe. The NYSPSC



## Notes to the Financial Statements – Continued

directed the New York gas utilities to provide information in this proceeding about their compliance with the qualification and requalification requirements and related matters; their procedures for compliance with all gas safety regulations; and their annual chief executive officer certifications regarding these and other procedures. CECONY’s qualification and requalification procedures had not included certain required testing to evaluate specimen fuses. In addition, CECONY and O&R had not timely requalified certain workers that had been qualified under their respective procedures to perform fusion to join plastic pipe. CECONY and O&R have requalified their workers who perform plastic pipe fusions. In October 2014, CECONY and O&R submitted for NYSPSC staff review their plans for testing plastic pipe fusions that were performed on their gas delivery systems, additional leakage surveying and reporting.



## Regulatory Assets and Liabilities

Regulatory assets and liabilities at December 31, 2014 and 2013 were comprised of the following items:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="2">Con Edison</td><td colspan="2">CECONY</td></tr><tr><td>2014</td><td>2013</td><td>2014</td><td>2013</td></tr><tr><td>Regulatory assets</td><td></td><td></td><td></td><td></td></tr><tr><td>Unrecognized pension and other postretirement costs</td><td>$4,846</td><td>$2,730</td><td>$4,609</td><td>$2,610</td></tr><tr><td>Future income tax</td><td>2,273</td><td>2,145</td><td>2,166</td><td>2,030</td></tr><tr><td>Environmental remediation costs</td><td>925</td><td>938</td><td>820</td><td>830</td></tr><tr><td>Deferred storm costs</td><td>319</td><td>441</td><td>224</td><td>334</td></tr><tr><td>Revenue taxes</td><td>219</td><td>207</td><td>208</td><td>196</td></tr><tr><td>Surcharge for New York State assessment</td><td>99</td><td>78</td><td>92</td><td>74</td></tr><tr><td>Pension and other postretirement benefits deferrals</td><td>66</td><td>237</td><td>42</td><td>211</td></tr><tr><td>Net electric deferrals</td><td>63</td><td>83</td><td>63</td><td>83</td></tr><tr><td>Unamortized loss on reacquired debt</td><td>57</td><td>65</td><td>55</td><td>62</td></tr><tr><td>O&amp;R property tax reconciliation</td><td>36</td><td>22</td><td>-</td><td>-</td></tr><tr><td>O&amp;R transition bond charges</td><td>27</td><td>33</td><td>-</td><td>-</td></tr><tr><td>Preferred stock redemption</td><td>27</td><td>28</td><td>27</td><td>28</td></tr><tr><td>Deferred derivative losses - noncurrent</td><td>25</td><td>8</td><td>23</td><td>7</td></tr><tr><td>Recoverable energy costs - noncurrent</td><td>19</td><td>29</td><td>17</td><td>28</td></tr><tr><td>Workers&#x27; compensation</td><td>8</td><td>12</td><td>8</td><td>12</td></tr><tr><td>Other</td><td>147</td><td>145</td><td>127</td><td>134</td></tr><tr><td>Regulatory assets - noncurrent</td><td>9,156</td><td>7,201</td><td>8,481</td><td>6,639</td></tr><tr><td>Deferred derivative losses - current</td><td>97</td><td>25</td><td>92</td><td>22</td></tr><tr><td>Recoverable energy costs - current</td><td>41</td><td>4</td><td>40</td><td>4</td></tr><tr><td>Future income tax - current</td><td>10</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Regulatory assets - current</td><td>148</td><td>29</td><td>132</td><td>26</td></tr><tr><td>Total Regulatory Assets</td><td>$9,304</td><td>$7,230</td><td>$8,613</td><td>$6,665</td></tr><tr><td>Regulatory liabilities</td><td></td><td></td><td></td><td></td></tr><tr><td>Allowance for cost of removal less salvage</td><td>$ 598</td><td>$ 540</td><td>$ 499</td><td>$ 453</td></tr><tr><td>Property tax reconciliation</td><td>295</td><td>322</td><td>295</td><td>322</td></tr><tr><td>2014 rate plan rate base revenue deferrals</td><td>155</td><td>-</td><td>155</td><td>-</td></tr><tr><td>Net unbilled revenue deferrals</td><td>138</td><td>133</td><td>138</td><td>133</td></tr><tr><td>Prudence proceeding</td><td>105</td><td>40</td><td>105</td><td>40</td></tr><tr><td>Property tax refunds</td><td>87</td><td>130</td><td>87</td><td>130</td></tr><tr><td>Long-term interest rate reconciliation</td><td>78</td><td>105</td><td>78</td><td>105</td></tr><tr><td>New York State income tax rate change</td><td>62</td><td>-</td><td>59</td><td>-</td></tr><tr><td>Carrying charges on repair allowance and bonus depreciation</td><td>58</td><td>88</td><td>57</td><td>87</td></tr><tr><td>Pension and other postretirement benefit deferrals</td><td>46</td><td>50</td><td>37</td><td>50</td></tr><tr><td>World Trade Center settlement proceeds</td><td>41</td><td>62</td><td>41</td><td>62</td></tr><tr><td>Carrying charges on T&amp;D net plant - electric and steam</td><td>21</td><td>28</td><td>20</td><td>20</td></tr><tr><td>Electric excess earnings</td><td>19</td><td>22</td><td>18</td><td>18</td></tr><tr><td>Other</td><td>290</td><td>208</td><td>248</td><td>178</td></tr><tr><td>Regulatory liabilities - noncurrent</td><td>1,993</td><td>1,728</td><td>1,837</td><td>1,598</td></tr><tr><td>Refundable energy costs - current</td><td>128</td><td>100</td><td>84</td><td>66</td></tr><tr><td>Revenue decoupling mechanism</td><td>30</td><td>34</td><td>30</td><td>30</td></tr><tr><td>Future income tax</td><td>24</td><td>-</td><td>24</td><td>-</td></tr><tr><td>Deferred derivative gains - current</td><td>5</td><td>14</td><td>4</td><td>11</td></tr><tr><td>Regulatory liabilities - current</td><td>187</td><td>148</td><td>142</td><td>107</td></tr><tr><td>Total Regulatory Liabilities</td><td>$2,180</td><td>$1,876</td><td>$1,979</td><td>$1,705</td></tr></table>



## Notes to the Financial Statements – Continued

Unrecognized pension and other postretirement costs represents the net regulatory asset associated with the accounting rules for retirement benefits. See Note A.

Deferred storm costs represent response and restoration costs, other than capital expenditures, in connection with Superstorm Sandy and other major storms that were deferred by the Utilities. See “Other Regulatory Matters,” above.

Net electric deferrals represents the remaining unamortized balance of certain regulatory assets and liabilities of CECONY that were combined effective April 1, 2010 and are being amortized to income over a ten-year period.

Revenue taxes represents the timing difference between taxes collected and paid by the Utilities to fund mass transportation.

Effective March 31, 2009, the NYSPSC authorized CECONY to accrue unbilled electric, gas and steam revenues. CECONY has deferred the net margin on the unbilled revenues for the future benefit of customers by recording a regulatory liability of $138 million and $133 million at December 31, 2014 and 2013, respectively, for the difference between the unbilled revenues and energy cost liabilities.

## Note C – Capitalization

## Common Stock

At December 31, 2014 and 2013, Con Edison owned all of the issued and outstanding shares of common stock of the Utilities and the competitive energy businesses. CECONY owns 21,976,200 shares of Con Edison stock, which it purchased prior to 2001 in connection with Con Edison’s stock repurchase plan. CECONY presents in the financial statements the cost of the Con Edison stock it owns as a reduction of common shareholder’s equity.

## Capitalization of Con Edison

The outstanding capitalization for each of the Companies is shown on its Consolidated Statement of Capitalization, and for Con Edison includes the Utilities' outstanding debt.

## Preferred Stock of CECONY

In May 2012, CECONY redeemed all of its outstanding shares of $5 Cumulative Preferred Stock and Cumulative Preferred Stock ($100 par value).

## Dividends

In accordance with NYSPSC requirements, the dividends that the Utilities generally pay are limited to not more than 100 percent of their respective income available for dividends calculated on a two-year rolling average basis. Excluded from the calculation of “income available for dividends” are non-cash charges to income resulting from accounting changes or charges to income resulting from significant unanticipated events. The restriction also does not apply to dividends paid in order to transfer to Con Edison proceeds from major transactions, such as asset sales, or to dividends reducing each utility subsidiary’s equity ratio to a level appropriate to its business risk.

## Long-term Debt

Long-term debt maturing in the period 2015-2019 is as follows:

<table><tr><td>(Millions of Dollars)</td><td>Con Edison</td><td>CECONY</td></tr><tr><td>2015</td><td>$ 560</td><td>$ 350</td></tr><tr><td>2016</td><td>731</td><td>650</td></tr><tr><td>2017</td><td>6</td><td>-</td></tr><tr><td>2018</td><td>1,260</td><td>1,200</td></tr><tr><td>2019</td><td>540</td><td>475</td></tr></table>

The Utilities have issued $494 million of tax-exempt debt through the New York State Energy Research and Development Authority (NYSERDA) that currently bear interest at a rate determined weekly and is subject to tender by bondholders for purchase by the Utilities.

The carrying amounts and fair values of long-term debt at December 31, 2014 and 2013 are:

<table><tr><td>(Millions of Dollars)</td><td colspan="2">2014</td><td colspan="2">2013</td></tr><tr><td>Long-Term Debt (including current portion)</td><td>Carrying Amount</td><td>Fair Value</td><td>Carrying Amount</td><td>Fair Value</td></tr><tr><td>Con Edison</td><td>$12,191</td><td>$13,998</td><td>$10,974</td><td>$12,082</td></tr><tr><td>CECONY</td><td>$11,214</td><td>$12,846</td><td>$ 9,841</td><td>$10,797</td></tr></table>

Fair values of long-term debt have been estimated primarily using available market information. For Con Edison, $13,362 million and $636 million of the fair value of long-term debt at December 31, 2014 are classified as Level 2 and Level 3, respectively. For CECONY, $12,210 million and $636 million of the fair value of long-term debt at December 31, 2014 are classified as Level 2 and Level 3, respectively (see Note P). The $636 million of long-term debt classified as Level 3 is CECONY's tax-exempt, auction-rate securities for which the market is highly illiquid and there is a lack of observable inputs.

At December 31, 2014 and 2013, long-term debt of Con Edison included $18 million and $22 million, respectively, of Transition Bonds issued in 2004 by O&R's New Jersey utility subsidiary through a special purpose entity.

## Significant Debt Covenants

The significant debt covenants under the financing arrangements for the notes of Con Edison and the debentures of CECONY are obligations to pay principal and interest when due, covenants not



## Notes to the Financial Statements – Continued

to consolidate with or merge into any other corporation unless certain conditions are met and, for Con Edison’s notes, covenants that Con Edison shall continue its utility business in New York City and shall not permit Con Edison’s ratio of consolidated debt to consolidated capital to exceed 0.675 to 1. Con Edison’s notes are also subject to cross default provisions with respect to other indebtedness of Con Edison or its material subsidiaries having a then outstanding principal balance in excess of $100 million. CECONY’s debentures have no cross default provisions. The tax-exempt financing arrangements of the Utilities are subject to covenants for the CECONY debentures discussed above and the covenants discussed below. The Companies were in compliance with their significant debt covenants at December 31, 2014.

The tax-exempt financing arrangements involved the issuance of uncollateralized promissory notes of the Utilities to NYSERDA in exchange for the net proceeds of a like amount of tax-exempt bonds with substantially the same terms sold to the public by NYSERDA. The tax-exempt financing arrangements include covenants with respect to the tax-exempt status of the financing, including covenants with respect to the use of the facilities financed. The arrangements include provisions for the maintenance of liquidity and credit facilities, the failure to comply with which would, except as otherwise provided, constitute an event of default for the debt to which such provisions applied.

The failure to comply with debt covenants would, except as otherwise provided, constitute an event of default for the debt to which such provisions applied. If an event of default were to occur, the principal and accrued interest on the debt to which such event of default applied and, in the case of the Con Edison notes, a make-whole premium might and, in the case of certain events of default would, become due and payable immediately.

The liquidity and credit facilities currently in effect for the tax-exempt financing include covenants that the ratio of debt to total capital of the obligated utility will not at any time exceed 0.65 to 1 and that, subject to certain exceptions, the utility will not mortgage, lien, pledge or otherwise encumber its assets. Certain of the facilities also include as events of default, defaults in payments of other debt obligations in excess of specified levels ($150 million or $100 million for CECONY, depending on the facility).

## Note D – Short-Term Borrowing

In October 2011, Con Edison and the Utilities entered into a credit agreement (Credit Agreement), under which banks are committed to provide loans and letters of credit on a revolving credit basis. The Credit Agreement, as amended in 2013, expires in October 2017. There is a maximum of $2.25 billion of credit available through October 2016 and approximately $2.1 billion of credit available from then through October 2017. The full amount is available to CECONY and $1 billion is available to Con Edison, including up to $1.2 billion of letters of credit. The Credit Agreement supports the Companies' commercial paper programs. The Companies have not borrowed under the Credit Agreement. At December 31, 2014, Con Edison had $800 million of commercial paper outstanding of which $450 million was outstanding under CECONY's program. The weighted average interest rate at December 31, 2014 was 0.4 percent for both Con Edison and CECONY. At December 31, 2013, Con Edison had $1,451 million of commercial paper outstanding of which $1,210 million was outstanding under CECONY's program. The weighted average interest rate at December 31, 2013 was 0.2 percent for both Con Edison and CECONY. At December 31, 2014 and 2013, no loans were outstanding under the Credit Agreement and $11 million (including $11 million for CECONY) and $26 million (including $11 million for CECONY) of letters of credit were outstanding under the Credit Agreement.

The banks’ commitments under the Credit Agreement are subject to certain conditions, including that there be no event of default. The commitments are not subject to maintenance of credit rating levels or the absence of a material adverse change. Upon a change of control of, or upon an event of default by one of the Companies, the banks may terminate their commitments with respect to that company, declare any amounts owed by that company under the Credit Agreement immediately due and payable and require that company to provide cash collateral relating to the letters of credit issued for it under the Credit Agreement. Events of default include the exceeding at any time of a ratio of consolidated debt to consolidated total capital of 0.65 to 1 (at December 31, 2014 this ratio was 0.51 to 1 for Con Edison and CECONY); having liens on its assets in an aggregate amount exceeding five percent of its consolidated total capital, subject to certain exceptions; and the failure, following any applicable notice period, to meet certain other customary covenants. Interest and fees charged for the revolving credit facilities and any loans made or letters of credit issued under the Credit Agreement reflect the Companies’ respective credit ratings. The Companies were in compliance with their covenants at December 31, 2014.

See Note S for information about short-term borrowing between related parties.

## Note E – Pension Benefits

Con Edison maintains a tax-qualified, non-contributory pension plan that covers substantially all employees of CECONY and O&R and certain employees of Con Edison’s competitive energy businesses. The plan is designed to comply with the Internal Revenue Code and the Employee Retirement Income Security Act of 1974. In addition, Con Edison maintains additional non-qualified supplemental pension plans.



## Net Periodic Benefit Cost

The components of the Companies’ total periodic benefit costs for 2014, 2013 and 2012 were as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Con Edison</td><td colspan="3">CECONY</td></tr><tr><td>2014</td><td>2013</td><td>2012</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Service cost - including administrative expenses</td><td>$ 227</td><td>$ 267</td><td>$ 237</td><td>$ 211</td><td>$ 249</td><td>$ 220</td></tr><tr><td>Interest cost on projected benefit obligation</td><td>572</td><td>537</td><td>547</td><td>536</td><td>503</td><td>513</td></tr><tr><td>Expected return on plan assets</td><td>(832)</td><td>(750)</td><td>(705)</td><td>(789)</td><td>(713)</td><td>(670)</td></tr><tr><td>Recognition of net actuarial loss</td><td>618</td><td>832</td><td>709</td><td>586</td><td>788</td><td>670</td></tr><tr><td>Recognition of prior service costs</td><td>4</td><td>5</td><td>8</td><td>2</td><td>4</td><td>6</td></tr><tr><td>NET PERIODIC BENEFIT COST</td><td>$ 589</td><td>$ 891</td><td>$ 796</td><td>$ 546</td><td>$ 831</td><td>$ 739</td></tr><tr><td>Amortization of regulatory asset*</td><td>2</td><td>2</td><td>2</td><td>2</td><td>2</td><td>2</td></tr><tr><td>TOTAL PERIODIC BENEFIT COST</td><td>$ 591</td><td>$ 893</td><td>$ 798</td><td>$ 548</td><td>$ 833</td><td>$ 741</td></tr><tr><td>Cost capitalized</td><td>(225)</td><td>(348)</td><td>(277)</td><td>(212)</td><td>(327)</td><td>(260)</td></tr><tr><td>Reconciliation to rate level</td><td>118</td><td>(84)</td><td>(8)</td><td>108</td><td>(87)</td><td>(12)</td></tr><tr><td>Cost charged to operating expenses</td><td>$ 484</td><td>$ 461</td><td>$ 513</td><td>$ 444</td><td>$ 419</td><td>$ 469</td></tr></table>

* Relates to an increase in CECONY’s pension obligation of $45 million from a 1999 special retirement program.

## Funded Status

The funded status at December 31, 2014, 2013 and 2012 was as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Con Edison</td><td colspan="3">CECONY</td></tr><tr><td>2014</td><td>2013</td><td>2012</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>CHANGE IN PROJECTED BENEFIT OBLIGATION</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Projected benefit obligation at beginning of year</td><td>$12,197</td><td>$13,406</td><td>$11,825</td><td>$11,429</td><td>$12,572</td><td>$11,072</td></tr><tr><td>Service cost - excluding administrative expenses</td><td>221</td><td>259</td><td>224</td><td>206</td><td>241</td><td>209</td></tr><tr><td>Interest cost on projected benefit obligation</td><td>572</td><td>537</td><td>547</td><td>536</td><td>503</td><td>513</td></tr><tr><td>Net actuarial (gain)/loss</td><td>2,641</td><td>(1,469)</td><td>1,323</td><td>2,484</td><td>(1,388)</td><td>1,255</td></tr><tr><td>Plan amendments</td><td>6</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Benefits paid</td><td>(556)</td><td>(536)</td><td>(513)</td><td>(518)</td><td>(499)</td><td>(477)</td></tr><tr><td>PROJECTED BENEFIT OBLIGATION AT END OF YEAR</td><td>$15,081</td><td>$12,197</td><td>$13,406</td><td>$14,137</td><td>$11,429</td><td>$12,572</td></tr><tr><td>CHANGE IN PLAN ASSETS</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Fair value of plan assets at beginning of year</td><td>$10,755</td><td>$ 9,135</td><td>$ 7,800</td><td>$10,197</td><td>$ 8,668</td><td>$ 7,406</td></tr><tr><td>Actual return on plan assets</td><td>752</td><td>1,310</td><td>1,094</td><td>715</td><td>1,241</td><td>1,040</td></tr><tr><td>Employer contributions</td><td>578</td><td>879</td><td>785</td><td>535</td><td>819</td><td>729</td></tr><tr><td>Benefits paid</td><td>(556)</td><td>(536)</td><td>(513)</td><td>(518)</td><td>(499)</td><td>(477)</td></tr><tr><td>Administrative expenses</td><td>(34)</td><td>(33)</td><td>(31)</td><td>(32)</td><td>(32)</td><td>(30)</td></tr><tr><td>FAIR VALUE OF PLAN ASSETS AT END OF YEAR</td><td>$11,495</td><td>$10,755</td><td>$ 9,135</td><td>$10,897</td><td>$10,197</td><td>$ 8,668</td></tr><tr><td>FUNDED STATUS</td><td>$ (3,586)</td><td>$ (1,442)</td><td>$ (4,271)</td><td>$ (3,240)</td><td>$ (1,232)</td><td>$ (3,904)</td></tr><tr><td>Unrecognized net loss</td><td>$ 4,888</td><td>$ 2,759</td><td>$ 5,594</td><td>$ 4,616</td><td>$ 2,617</td><td>$ 5,297</td></tr><tr><td>Unrecognized prior service costs</td><td>20</td><td>17</td><td>23</td><td>4</td><td>6</td><td>10</td></tr><tr><td>Accumulated benefit obligation</td><td>13,454</td><td>11,004</td><td>11,911</td><td>12,553</td><td>10,268</td><td>11,116</td></tr></table>

The increase in the pension plan’s projected benefit obligation (due primarily to decreased discount rates and, as discussed below, the release of new mortality tables by the Society of Actuaries reflecting longer life expectancies) were the primary causes of the increased pension liability at Con Edison and CECONY of $2,144 million and $2,008 million, respectively, compared with December 31, 2013. For Con Edison, this increase in pension liability resulted in an increase to regulatory assets of $2,101 million for unrecognized net losses and unrecognized prior service costs associated with the Utilities consistent with the accounting rules for regulated operations, and a charge to OCI of $17 million (net of taxes) for the unrecognized net losses, and an immaterial change to OCI (net of taxes) for the unrecognized prior service costs associated with the competitive energy businesses and O&R’s New Jersey and Pennsylvania utility subsidiaries.



## Notes to the Financial Statements – Continued

For CECONY, the increase in pension liability resulted in an increase to regulatory assets of $1,992 million for unrecognized net losses and unrecognized prior service costs consistent with the accounting rules for regulated operations, a debit to OCI of $3 million (net of taxes) for unrecognized net losses, and an immaterial change to OCI (net of taxes) for the unrecognized prior service costs associated with the competitive energy businesses.

A portion of the unrecognized net loss and prior service cost for the pension plan, equal to $783 million and $4 million, respectively, will be recognized from accumulated OCI and the regulatory asset into net periodic benefit cost over the next year for Con Edison. Included in these amounts are $740 million and $2 million, respectively, for CECONY.

At December 31, 2014 and 2013, Con Edison’s investments include $225 million and $201 million, respectively, held in external trust accounts for benefit payments pursuant to the supplemental retirement plans. Included in these amounts for CECONY were $208 million and $183 million, respectively. See Note P. The accumulated benefit obligations for the supplemental retirement plans for Con Edison and CECONY were $289 million and $250 million as of December 31, 2014 and $234 million and $199 million as of December 31, 2013, respectively.

## Assumptions

The actuarial assumptions were as follows:

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Weighted-average assumptions used to determine benefit obligations at December 31:</td><td></td><td></td><td></td></tr><tr><td>Discount rate</td><td>3.90%</td><td>4.80%</td><td>4.10%</td></tr><tr><td>Rate of compensation increase</td><td></td><td></td><td></td></tr><tr><td>- CECONY</td><td>4.25%</td><td>4.35%</td><td>4.35%</td></tr><tr><td>- O&amp;R</td><td>4.00%</td><td>4.25%</td><td>4.25%</td></tr><tr><td>Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31:</td><td></td><td></td><td></td></tr><tr><td>Discount rate</td><td>4.80%</td><td>4.10%</td><td>4.70%</td></tr><tr><td>Expected return on plan assets</td><td>8.00%</td><td>8.00%</td><td>8.00%</td></tr><tr><td>Rate of compensation increase</td><td></td><td></td><td></td></tr><tr><td>- CECONY</td><td>4.35%</td><td>4.35%</td><td>4.35%</td></tr><tr><td>- O&amp;R</td><td>4.25%</td><td>4.25%</td><td>4.25%</td></tr></table>

The expected return assumption reflects anticipated returns on the plan’s current and future assets. The Companies’ expected return was based on an evaluation of the current environment, market and economic outlook, relationships between the economy and asset class performance patterns, and recent and long-term trends in asset class performance. The projections were based on the plan’s target asset allocation.

## Discount Rate Assumption

To determine the assumed discount rate, the Companies use a model that produces a yield curve based on yields on selected highly rated (Aa or higher by either Moody’s Investors Service (Moody’s) or Standard & Poor’s) corporate bonds. Bonds with insufficient liquidity, bonds with questionable pricing information and bonds that are not representative of the overall market are excluded from consideration. For example, the bonds used in the model cannot be callable, they must have a price between 50 percent and 200 percent of the original price, the yield must lie between 1 percent and 20 percent, and the amount of the bond issue outstanding must be in excess of $50 million. The spot rates defined by the yield curve and the plan’s projected benefit payments are used to develop a weighted average discount rate.

## Expected Benefit Payments

Based on current assumptions, the Companies expect to make the following benefit payments over the next ten years:

<table><tr><td>(Millions of Dollars)</td><td>2015</td><td>2016</td><td>2017</td><td>2018</td><td>2019</td><td>2020-2024</td></tr><tr><td>Con Edison</td><td>$592</td><td>$615</td><td>$636</td><td>$658</td><td>$678</td><td>$3,642</td></tr><tr><td>CECONY</td><td>552</td><td>574</td><td>594</td><td>613</td><td>632</td><td>3,388</td></tr></table>

## Expected Contributions

Based on estimates as of December 31, 2014, the Companies expect to make contributions to the pension plan during 2015 of $756 million (of which $703 million is to be contributed by CECONY). The Companies’ policy is to fund the total periodic benefit cost of the qualified plan to the extent tax deductible and to also contribute to the non-qualified plans.

## Plan Assets

The asset allocations for the pension plan at the end of 2014, 2013 and 2012, and the target allocation for 2015 are as follows:

<table><tr><td rowspan="2"></td><td colspan="4">Target</td></tr><tr><td colspan="2">Allocation Range</td><td colspan="2">Plan Assets at December 31,</td></tr><tr><td>Asset Category</td><td>2015</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Equity Securities</td><td>55% - 65%</td><td>58%</td><td>60%</td><td>60%</td></tr><tr><td>Debt Securities</td><td>27% - 33%</td><td>32%</td><td>30%</td><td>31%</td></tr><tr><td>Real Estate</td><td>8% - 12%</td><td>10%</td><td>10%</td><td>9%</td></tr><tr><td>Total</td><td>100%</td><td>100%</td><td>100%</td><td>100%</td></tr></table>

Con Edison has established a pension trust for the investment of assets to be used for the exclusive purpose of providing retirement benefits to participants and beneficiaries and payment of plan expenses.



## Notes to the Financial Statements – Continued

Pursuant to resolutions adopted by Con Edison’s Board of Directors, the Management Development and Compensation Committee of the Board of Directors (the Committee) has general oversight responsibility for Con Edison’s pension and other employee benefit plans. The pension plan’s named fiduciaries have been granted the authority to control and manage the operation and administration of the plans, including overall responsibility for the investment of assets in the trust and the power to appoint and terminate investment managers.

The investment objectives of the Con Edison pension plan are to maintain a level and form of assets adequate to meet benefit obligations to participants, to achieve the expected long-term total return on the trust assets within a prudent level of risk and maintain a level of volatility that is not expected to have a material impact on the Company’s expected contribution and expense or the Company’s ability to meet plan obligations. The assets of the plan have no significant concentration of risk in one country (other than the United States), industry or entity.

The strategic asset allocation is intended to meet the objectives of the pension plan by diversifying its funds across asset classes, investment styles and fund managers. An asset/liability study typically is conducted every few years to determine whether the current strategic asset allocation continues to represent the appropriate balance of expected risk and reward for the plan to meet expected liabilities. Each study considers the investment risk of the asset allocation and determines the optimal asset allocation for the plan. The target asset allocation for 2015 reflects the results of such a study conducted in 2011.

Individual fund managers operate under written guidelines provided by Con Edison, which cover such areas as investment objectives, performance measurement, permissible investments, investment restrictions, trading and execution, and communication and reporting requirements. Con Edison management regularly monitors, and the named fiduciaries review and report to the Committee regarding, asset class performance, total fund performance, and compliance with asset allocation guidelines. Management changes fund managers and rebalances the portfolio as appropriate. At the direction of the named fiduciaries, such changes are reported to the Committee.

Assets measured at fair value on a recurring basis are summarized below under a three-level hierarchy as defined by the accounting rules for fair value measurements (see Note P).

The fair values of the pension plan assets at December 31, 2014 by asset category are as follows:

<table><tr><td>(Millions of Dollars)</td><td>Level 1</td><td>Level 2</td><td>Level 3</td><td>Total</td></tr><tr><td>U.S. Equity(a)</td><td>$3,168</td><td>$ -</td><td>$ -</td><td>$ 3,168</td></tr><tr><td>International Equity(b)</td><td>2,841</td><td>361</td><td>-</td><td>3,202</td></tr><tr><td>Private Equity(c)</td><td>-</td><td>-</td><td>114</td><td>114</td></tr><tr><td>U.S. Government Issued Debt(d)</td><td>-</td><td>2,113</td><td>-</td><td>2,113</td></tr><tr><td>Corporate Bonds Debt(e)</td><td>-</td><td>1,351</td><td>-</td><td>1,351</td></tr><tr><td>Structured Assets Debt(f)</td><td>-</td><td>4</td><td>-</td><td>4</td></tr><tr><td>Other Fixed Income Debt(g)</td><td>-</td><td>208</td><td>-</td><td>208</td></tr><tr><td>Real Estate(h)</td><td>-</td><td>-</td><td>1,137</td><td>1,137</td></tr><tr><td>Cash and Cash Equivalents(i)</td><td>188</td><td>477</td><td>-</td><td>665</td></tr><tr><td>Futures(j)</td><td>192</td><td>37</td><td>-</td><td>229</td></tr><tr><td>Hedge Funds(k)</td><td>-</td><td>-</td><td>224</td><td>224</td></tr><tr><td>Total investments</td><td>$6,389</td><td>$4,551</td><td>$1,475</td><td>$12,415</td></tr><tr><td>Funds for retiree health benefits(l)</td><td>(184)</td><td>(131)</td><td>(43)</td><td>(358)</td></tr><tr><td>Investments (excluding funds for retiree health benefits)</td><td>$6,205</td><td>$4,420</td><td>$1,432</td><td>$12,057</td></tr><tr><td>Pending activities(m)</td><td></td><td></td><td></td><td>(562)</td></tr><tr><td>Total fair value of plan net assets</td><td></td><td></td><td></td><td>$11,495</td></tr></table>

(a) U.S. Equity includes both actively- and passively-managed assets with investments in domestic equity index funds and actively-managed small-capitalization equities.

(b) International Equity includes international equity index funds and actively-managed international equities.

(c) Private Equity consists of global equity funds that are not exchange-traded.

(d) U.S. Government Issued Debt includes agency and treasury securities.

(e) Corporate Bonds Debt consists of debt issued by various corporations.

(f) Structured Assets Debt includes commercial-mortgage-backed securities and collateralized mortgage obligations.

(g) Other Fixed Income Debt includes municipal bonds, sovereign debt and regional governments.

(h) Real Estate investments include real estate funds based on appraised values that are broadly diversified by geography and property type.

(i) Cash and Cash Equivalents include short term investments, money markets, foreign currency and cash collateral.

(j) Futures consist of exchange-traded financial contracts encompassing U.S. Equity, International Equity and U.S. Government indices.

(k) Hedge Funds are within a commingled structure which invests in various hedge fund managers who can invest in all financial instruments.



## Notes to the Financial Statements – Continued

(f) The Companies set aside funds for retiree health benefits through a separate account within the pension trust, as permitted under Section 401(h) of the Internal Revenue Code of 1986, as amended. In accordance with the Code, the plan’s investments in the 401(h) account may not be used for, or diverted to, any purpose other than providing health benefits for retirees. The net assets held in the 401(h) account are calculated based on a pro-rata percentage allocation of the net assets in the pension plan. The related obligations for health benefits are not included in the pension plan’s obligations and are included in the Companies’ other postretirement benefit obligation. See Note F.

(m) Pending activities include security purchases and sales that have not settled, interest and dividends that have not been received and reflects adjustments for available estimates at year end.

The table below provides a reconciliation of the beginning and ending net balances for assets at December 31, 2014 classified as Level 3 in the fair value hierarchy.

<table><tr><td>(Millions of Dollars)</td><td>Beginning Balance as of January 1, 2014</td><td>Assets Still Held at Reporting Date - Unrealized Gains/ (Losses)</td><td>Assets Sold During the Year - Realized Gains/(Losses)</td><td>Purchases Sales and Settlements</td><td>Transfer In/(Out) of Level 3</td><td>Ending Balance as of December 31, 2014</td></tr><tr><td>Real Estate</td><td>$1,062</td><td>$ 66</td><td>$20</td><td>$(31)</td><td>$-</td><td>$1,137</td></tr><tr><td>Private Equity</td><td>67</td><td>12</td><td>-</td><td>35</td><td>-</td><td>114</td></tr><tr><td>Hedge Funds</td><td>206</td><td>11</td><td>-</td><td>7</td><td>-</td><td>224</td></tr><tr><td>Total investments</td><td>$1,335</td><td>$109</td><td>$20</td><td>$ 11</td><td>$-</td><td>$1,475</td></tr><tr><td>Funds for retiree health benefits</td><td>(42)</td><td>(1)</td><td>-</td><td>-</td><td>-</td><td>(43)</td></tr><tr><td>Investments (excluding funds for retiree health benefits)</td><td>$1,293</td><td>$108</td><td>$20</td><td>$ 11</td><td>$-</td><td>$1,432</td></tr></table>

The fair values of the pension plan assets at December 31, 2013 by asset category are as follows:

<table><tr><td>(Millions of Dollars)</td><td>Level 1</td><td>Level 2</td><td>Level 3</td><td>Total</td></tr><tr><td>U.S. Equity(a)</td><td>$3,057</td><td>$ -</td><td>$ -</td><td>$ 3,057</td></tr><tr><td>International Equity(b)</td><td>2,303</td><td>871</td><td>-</td><td>3,174</td></tr><tr><td>Private Equity(c)</td><td>-</td><td>-</td><td>67</td><td>67</td></tr><tr><td>U.S. Government Issued Debt(d)</td><td>-</td><td>1,855</td><td>-</td><td>1,855</td></tr><tr><td>Corporate Bonds Debt(e)</td><td>-</td><td>1,151</td><td>-</td><td>1,151</td></tr><tr><td>Structured Assets Debt(f)</td><td>-</td><td>4</td><td>-</td><td>4</td></tr><tr><td>Other Fixed Income Debt(g)</td><td>-</td><td>150</td><td>-</td><td>150</td></tr><tr><td>Real Estate(h)</td><td>-</td><td>-</td><td>1,062</td><td>1,062</td></tr><tr><td>Cash and Cash Equivalents(i)</td><td>127</td><td>558</td><td>-</td><td>685</td></tr><tr><td>Futures(j)</td><td>348</td><td>-</td><td>-</td><td>348</td></tr><tr><td>Hedge Funds(k)</td><td>-</td><td>-</td><td>206</td><td>206</td></tr><tr><td>Total investments</td><td>$5,835</td><td>$4,589</td><td>$1,335</td><td>$11,759</td></tr><tr><td>Funds for retiree health benefits(l)</td><td>(185)</td><td>(145)</td><td>(42)</td><td>(372)</td></tr><tr><td>Investments(excluding funds for retiree health benefits)</td><td>$5,650</td><td>$4,444</td><td>$1,293</td><td>$11,387</td></tr><tr><td>Pending activities(m)</td><td></td><td></td><td></td><td>(632)</td></tr><tr><td>Total fair value of plan net assets</td><td></td><td></td><td></td><td>$10,755</td></tr></table>

(a) U.S. Equity includes both actively- and passively-managed assets with investments in domestic equity index funds and actively-managed small-capitalization equities.

(b) International Equity includes international equity index funds and actively-managed international equities.

(c) Private Equity consists of global equity funds that are not exchange-traded.

(d) U.S. Government Issued Debt includes agency and treasury securities.

(e) Corporate Bonds Debt consists of debt issued by various corporations.

(f) Structured Assets Debt includes commercial-mortgage-backed securities and collateralized mortgage obligations.

(g) Other Fixed Income Debt includes municipal bonds, sovereign debt and regional governments.

(h) Real Estate investments include real estate funds based on appraised values that are broadly diversified by geography and property type.

(i) Cash and Cash Equivalents include short term investments, money markets, foreign currency and cash collateral.

(j) Futures consist of exchange-traded financial contracts encompassing U.S. Equity, International Equity and U.S. Government indices.

(k) Hedge Funds are within a commingled structure which invests in various hedge fund managers who can invest in all financial instruments.

(l) The Companies set aside funds for retiree health benefits through a separate account within the pension trust, as permitted under Section 401(h) of the Internal Revenue Code of 1986, as amended. In accordance with the Code, the plan’s investments in the 401(h) account may not be used for, or diverted to, any purpose other than providing health benefits for retirees. The net assets held in the 401(h) account are calculated based on a pro-rata percentage allocation of the net assets in the pension plan. The related obligations for health benefits are not included in the pension plan’s obligations and are included in the Companies’ other postretirement benefit obligation. See Note F.

(m) Pending activities include security purchases and sales that have not settled, interest and dividends that have not been received and reflects adjustments for available estimates at year end.



## Notes to the Financial Statements – Continued

The table below provides a reconciliation of the beginning and ending net balances for assets at December 31, 2013 classified as Level 3 in the fair value hierarchy.

<table><tr><td>(Millions of Dollars)</td><td>Beginning Balance as of January 1, 2013</td><td>Assets Still Held at Reporting Date - Unrealized Gains/(Losses)</td><td>Assets Sold During the Year - Realized Gains/(Losses)</td><td>Purchases Sales and Settlements</td><td>Transfer In/(Out) of Level 3</td><td>Ending Balance as of December 31, 2013</td></tr><tr><td>Real Estate</td><td>$833</td><td>$114</td><td>$1</td><td>$114</td><td>$-</td><td>$1,062</td></tr><tr><td>Private Equity</td><td>20</td><td>5</td><td>-</td><td>42</td><td>-</td><td>67</td></tr><tr><td>Hedge Funds</td><td>-</td><td>6</td><td>-</td><td>200</td><td>-</td><td>206</td></tr><tr><td>Total investments</td><td>$853</td><td>$125</td><td>$1</td><td>$356</td><td>$-</td><td>$1,335</td></tr><tr><td>Funds for retiree health benefits</td><td>(31)</td><td>(3)</td><td>-</td><td>(8)</td><td>-</td><td>(42)</td></tr><tr><td>Investments (excluding funds for retiree health benefits)</td><td>$822</td><td>$122</td><td>$1</td><td>$348</td><td>$-</td><td>$1,293</td></tr></table>

The Companies also offer a defined contribution savings plan that covers substantially all employees and made contributions to the plan as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">For the Years Ended December 31,</td></tr><tr><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Con Edison</td><td>$32</td><td>$30</td><td>$23</td></tr><tr><td>CECONY</td><td>27</td><td>26</td><td>21</td></tr></table>

## Mortality Table Revision

The Companies adopted revised mortality tables effective December 31, 2014 in the measurement of its pension and other postretirement benefit plan obligations, accounting costs and required contribution amounts. The revised tables reflect the RP-2014 mortality tables published by the Society of Actuaries in October 2014, as adjusted based on the actual experience of the Companies. The new tables incorporate substantial life expectancy improvements relative to the last tables published in 2000 (RP-2000). As a result of the adoption, Con Edison recognized an increase in its pension benefit obligation of approximately $800 million as of December 31, 2014. The Companies, under their current New York rate plans, defer as a regulatory asset or liability, as the case may be, the differences between the actual level of expenses for pension and other postretirement benefits and amounts for those expenses reflected in rates.

## Note F – Other Postretirement Benefits

The Utilities currently have contributory comprehensive hospital, medical and prescription drug programs for all retirees, their dependents and surviving spouses.

CECONY also has a contributory life insurance program for bargaining unit employees and provides basic life insurance benefits up to a specified maximum at no cost to retired management employees. O&R has a non-contributory life insurance program for retirees. Certain employees of Con Edison’s competitive energy businesses are eligible to receive benefits under these programs.

## Net Periodic Benefit Cost

The components of the Companies’ net periodic postretirement benefit costs for 2014, 2013 and 2012 were as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Con Edison</td><td colspan="3">CECONY</td></tr><tr><td>2014</td><td>2013</td><td>2012</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Service cost</td><td>$ 19</td><td>$ 23</td><td>$ 26</td><td>$ 15</td><td>$ 18</td><td>$ 21</td></tr><tr><td>Interest cost on accumulated other postretirement benefit obligation</td><td>60</td><td>54</td><td>73</td><td>52</td><td>46</td><td>63</td></tr><tr><td>Expected return on plan assets</td><td>(77)</td><td>(77)</td><td>(85)</td><td>(68)</td><td>(68)</td><td>(75)</td></tr><tr><td>Recognition of net actuarial loss</td><td>57</td><td>65</td><td>98</td><td>51</td><td>57</td><td>87</td></tr><tr><td>Recognition of prior service cost</td><td>(19)</td><td>(27)</td><td>(21)</td><td>(15)</td><td>(23)</td><td>(18)</td></tr><tr><td>Recognition of transition obligation</td><td>-</td><td>-</td><td>2</td><td>-</td><td>-</td><td>2</td></tr><tr><td>NET PERIODIC POSTRETIREMENT BENEFIT COST</td><td>$ 40</td><td>$ 38</td><td>$ 93</td><td>$ 35</td><td>$ 30</td><td>$ 80</td></tr><tr><td>Cost capitalized</td><td>(15)</td><td>(15)</td><td>(32)</td><td>(14)</td><td>(12)</td><td>(28)</td></tr><tr><td>Reconciliation to rate level</td><td>10</td><td>58</td><td>20</td><td>2</td><td>50</td><td>16</td></tr><tr><td>Cost charged to operating expenses</td><td>$ 35</td><td>$ 81</td><td>$ 81</td><td>$ 23</td><td>$ 68</td><td>$ 68</td></tr></table>



## Funded Status

The funded status of the programs at December 31, 2014, 2013 and 2012 were as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Con Edison</td><td colspan="3">CECONY</td></tr><tr><td>2014</td><td>2013</td><td>2012</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>CHANGE IN BENEFIT OBLIGATION</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Benefit obligation at beginning of year</td><td>$1,395</td><td>$1,454</td><td>$1,756</td><td>$1,198</td><td>$1,238</td><td>$1,511</td></tr><tr><td>Service cost</td><td>19</td><td>23</td><td>26</td><td>15</td><td>18</td><td>21</td></tr><tr><td>Interest cost on accumulated postretirement benefit obligation</td><td>60</td><td>54</td><td>73</td><td>52</td><td>46</td><td>63</td></tr><tr><td>Amendments</td><td>(12)</td><td>-</td><td>(127)</td><td>-</td><td>-</td><td>(89)</td></tr><tr><td>Net actuarial loss/(gain)</td><td>47</td><td>(42)</td><td>(175)</td><td>28</td><td>(20)</td><td>(178)</td></tr><tr><td>Benefits paid and administrative expenses</td><td>(134)</td><td>(136)</td><td>(146)</td><td>(125)</td><td>(126)</td><td>(134)</td></tr><tr><td>Participant contributions</td><td>36</td><td>38</td><td>37</td><td>35</td><td>38</td><td>36</td></tr><tr><td>Medicare prescription subsidy</td><td>-</td><td>4</td><td>10</td><td>-</td><td>4</td><td>8</td></tr><tr><td>BENEFIT OBLIGATION AT END OF YEAR</td><td>$1,411</td><td>$1,395</td><td>$1,454</td><td>$1,203</td><td>$1,198</td><td>$1,238</td></tr><tr><td>CHANGE IN PLAN ASSETS</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Fair value of plan assets at beginning of year</td><td>$1,113</td><td>$1,047</td><td>$ 947</td><td>$ 977</td><td>$ 922</td><td>$ 840</td></tr><tr><td>Actual return on plan assets</td><td>59</td><td>153</td><td>124</td><td>54</td><td>134</td><td>109</td></tr><tr><td>Employer contributions</td><td>7</td><td>9</td><td>83</td><td>7</td><td>9</td><td>71</td></tr><tr><td>EGWP payments</td><td>12</td><td>8</td><td>-</td><td>11</td><td>7</td><td>-</td></tr><tr><td>Participant contributions</td><td>36</td><td>38</td><td>37</td><td>35</td><td>38</td><td>36</td></tr><tr><td>Benefits paid</td><td>(143)</td><td>(142)</td><td>(144)</td><td>(134)</td><td>(133)</td><td>(134)</td></tr><tr><td>FAIR VALUE OF PLAN ASSETS AT END OF YEAR</td><td>$1,084</td><td>$1,113</td><td>$1,047</td><td>$ 950</td><td>$ 977</td><td>$ 922</td></tr><tr><td>FUNDED STATUS</td><td>$ (327)</td><td>$ (282)</td><td>$ (407)</td><td>$ (253)</td><td>$ (221)</td><td>$ (316)</td></tr><tr><td>Unrecognized net loss</td><td>$ 78</td><td>$ 70</td><td>$ 251</td><td>$ 45</td><td>$ 54</td><td>$ 197</td></tr><tr><td>Unrecognized prior service costs</td><td>(71)</td><td>(78)</td><td>(105)</td><td>(46)</td><td>(61)</td><td>(84)</td></tr></table>

In 2012, the Utilities amended their postretirement life and health benefit plans for management employees, resulting in a reduction to the obligation of $102 million. Also in 2012, the Utilities amended the retiree contributions for supplemental postretirement life insurance for CECONY management and weekly retirees, resulting in a reduction to the obligation of $25 million. Also in 2012, the Utilities elected to change the method of receiving the subsidy under Medicare Part D for retiree prescription drug coverage from the Retiree Drug Subsidy to the Employer Group Waiver Plan (EGWP) beginning in January 2013. Participation in the EGWP allows Con Edison to offer substantially the same postretirement benefits to eligible participants while increasing subsidy reimbursements received by the plans from the Federal Government. This change was effective January 2013 and, as a result, the Utilities recognized a reduction to their postretirement health benefit obligation of $306 million as of December 31, 2012, which was recorded as an actuarial gain.

The increase in the other postretirement benefit plan obligation (due primarily to decreased discount rates) was the primary cause of the increased liability for other postretirement benefits at Con Edison and CECONY of $45 million and $32 million, respectively, compared with December 31, 2013. For Con Edison, this increased liability resulted in an increase to regulatory assets of $14 million for unrecognized net losses and unrecognized prior service costs associated with the Utilities consistent with the accounting rules for regulated operations, and a charge to OCI of $3 million (net of taxes) for the unrecognized net losses and an immaterial change to OCI (net of taxes) for the unrecognized prior service costs associated with the competitive energy businesses and O&R’s New Jersey subsidiary.

For CECONY, the increase in liability resulted in an increase to regulatory assets of $6 million for unrecognized net losses and unrecognized prior service costs associated with the company consistent with the accounting rules for regulated operations, a debit to OCI of $2 million (net of taxes) for the unrecognized net losses and an immaterial change to OCI for unrecognized prior service costs associated with the competitive energy businesses.

A portion of the unrecognized net losses and prior service costs for the other postretirement benefits, equal to $33 million and $(20) million, respectively, will be recognized from



## Notes to the Financial Statements – Continued

accumulated OCI and the regulatory asset into net periodic benefit cost over the next year for Con Edison. Included in these amounts are $29 million and (14) million, respectively, for CECONY.

## Assumptions

The actuarial assumptions were as follows:

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Weighted-average assumptions used to determine benefit obligations at December 31:</td><td></td><td></td><td></td></tr><tr><td>Discount Rate</td><td></td><td></td><td></td></tr><tr><td>CECONY</td><td>3.75%</td><td>4.50%</td><td>3.75%</td></tr><tr><td>O&amp;R</td><td>3.85%</td><td>4.75%</td><td>4.05%</td></tr><tr><td>Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31:</td><td></td><td></td><td></td></tr><tr><td>Discount Rate</td><td></td><td></td><td></td></tr><tr><td>CECONY</td><td>4.50%</td><td>3.75%</td><td>4.55%</td></tr><tr><td>O&amp;R</td><td>4.75%</td><td>4.05%</td><td>4.55%</td></tr><tr><td>Expected Return on Plan Assets</td><td>7.75%</td><td>7.75%</td><td>8.50%</td></tr></table>

Refer to Note E for descriptions of the basis for determining the expected return on assets, investment policies and strategies and the assumed discount rate.

The health care cost trend rate used to determine net periodic benefit cost for the year ended December 31, 2014 was 5.50 percent, which is assumed to decrease gradually to 4.50 percent by 2018 and remain at that level thereafter. The health care cost trend rate used to determine benefit obligations as of December 31, 2014 was 5.25 percent, which is assumed to decrease gradually to 4.50 percent by 2018 and remain at that level thereafter.

A one-percentage point change in the assumed health care cost trend rate would have the following effects at December 31, 2015:

<table><tr><td></td><td>Con Edison</td><td>CECONY</td></tr><tr><td></td><td colspan="2">1-Percentage-Point</td></tr><tr><td>(Millions of Dollars)</td><td>Increase</td><td>Decrease</td></tr><tr><td>Effect on accumulated other postretirement benefit obligation</td><td>$ (21)</td><td>$ 40</td></tr><tr><td>Effect on service cost and interest cost components for 2014</td><td>(2)</td><td>1</td></tr></table>

## Expected Benefit Payments

Based on current assumptions, the Companies expect to make the following benefit payments over the next ten years, net of receipt of governmental subsidies:

<table><tr><td>(Millions of Dollars)</td><td>2015</td><td>2016</td><td>2017</td><td>2018</td><td>2019</td><td>2020-2024</td></tr><tr><td>BENEFIT PAYMENTS</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Con Edison</td><td>$99</td><td>$95</td><td>$94</td><td>$92</td><td>$89</td><td>$419</td></tr><tr><td>CECONY</td><td>89</td><td>85</td><td>84</td><td>82</td><td>79</td><td>364</td></tr></table>

## Expected Contributions

Based on estimates as of December 31, 2014, Con Edison expects to make a contribution of $6 million, nearly all of which is for CECONY, to the other postretirement benefit plans in 2015.

## Plan Assets

The asset allocations for CECONY’s other postretirement benefit plans at the end of 2014, 2013 and 2012, and the target allocation for 2015 are as follows:

<table><tr><td></td><td>Target Allocation Range</td><td colspan="3">Plan Assets at December 31</td></tr><tr><td>Asset Category</td><td>2015</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Equity Securities</td><td>57% - 73%</td><td>59%</td><td>61%</td><td>62%</td></tr><tr><td>Debt Securities</td><td>26% - 44%</td><td>41%</td><td>39%</td><td>38%</td></tr><tr><td>Total</td><td>100%</td><td>100%</td><td>100%</td><td>100%</td></tr></table>

Con Edison has established postretirement health and life insurance benefit plan trusts for the investment of assets to be used for the exclusive purpose of providing other postretirement benefits to participants and beneficiaries.

Refer to Note E for a discussion of Con Edison’s investment policy for its benefit plans.



## Notes to the Financial Statements – Continued

The fair values of the plan assets at December 31, 2014 by asset category as defined by the accounting rules for fair value measurements (see Note P) are as follows:

<table><tr><td>(Millions of Dollars)</td><td>Level 1</td><td>Level 2</td><td>Level 3</td><td>Total</td></tr><tr><td>Equity(a)</td><td>$ -</td><td>$428</td><td>$ -</td><td>$ 428</td></tr><tr><td>Other Fixed Income Debt(b)</td><td>-</td><td>286</td><td>-</td><td>286</td></tr><tr><td>Cash and Cash Equivalents(c)</td><td>-</td><td>11</td><td>-</td><td>11</td></tr><tr><td>Total investments</td><td>$ -</td><td>$725</td><td>$ -</td><td>$ 725</td></tr><tr><td>Funds for retiree health benefits(d)</td><td>184</td><td>131</td><td>43</td><td>358</td></tr><tr><td>Investments(including funds for retiree health benefits)</td><td>$184</td><td>$856</td><td>$43</td><td>$1,083</td></tr><tr><td>Pending activities(e)</td><td></td><td></td><td></td><td>1</td></tr><tr><td>Total fair value of plan net assets</td><td></td><td></td><td></td><td>$1,084</td></tr></table>

(a) Equity includes a passively managed commingled index fund benchmarked to the MSCI All Country World Index.

(b) Other Fixed Income Debt includes a passively managed commingled index fund benchmarked to the Barclays Capital Aggregate Index.

(c) Cash and Cash Equivalents include short term investments and money markets.

(d) The Companies set aside funds for retiree health benefits through a separate account within the pension trust, as permitted under Section 401(h) of the Internal Revenue Code of 1986, as amended. In accordance with the Code, the plan’s investments in the 401(h) account may not be used for, or diverted to, any purpose other than providing health benefits for retirees. The net assets held in the 401(h) account are calculated based on a pro-rata percentage allocation of the net assets in the pension plan. The related obligations for health benefits are not included in the pension plan’s obligations and are included in the Companies’ other postretirement benefit obligation. See Note E.

(e) Pending activities include security purchases and sales that have not settled, interest and dividends that have not been received, and reflects adjustments for available estimates at year end.

The table below provides a reconciliation of the beginning and ending net balances for assets at December 31, 2014 classified as Level 3 in the fair value hierarchy.

<table><tr><td>(Millions of Dollars)</td><td>Beginning Balance as of January 1, 2014</td><td>Assets Still Held at Reporting Date - Unrealized Gains/(Losses)</td><td>Assets Sold During the Year - Realized Gains/(Losses)</td><td>Purchases Sales and Settlements</td><td>Transfers In/(Out) of Level 3</td><td>Ending Balance as of December 31, 2014</td></tr><tr><td>Total investments</td><td>$ -</td><td>$ -</td><td>$ -</td><td>$ -</td><td>$ -</td><td>$ -</td></tr><tr><td>Funds for retiree health benefits</td><td>42</td><td>1</td><td>-</td><td>-</td><td>-</td><td>43</td></tr><tr><td>Investments (including funds for retiree health benefits)</td><td>$42</td><td>$1</td><td>$ -</td><td>$ -</td><td>$ -</td><td>$43</td></tr></table>

The fair values of the plan assets at December 31, 2013 by asset category (see Note P) are as follows:

<table><tr><td>(Millions of Dollars)</td><td>Level 1</td><td>Level 2</td><td>Level 3</td><td>Total</td></tr><tr><td>Equity(a)</td><td>$ -</td><td>$450</td><td>$ -</td><td>$ 450</td></tr><tr><td>Other Fixed Income Debt(b)</td><td>-</td><td>286</td><td>-</td><td>286</td></tr><tr><td>Cash and Cash Equivalents(c)</td><td>-</td><td>7</td><td>-</td><td>7</td></tr><tr><td>Total investments</td><td>$ -</td><td>$743</td><td>$ -</td><td>$ 743</td></tr><tr><td>Funds for retiree health benefits(d)</td><td>185</td><td>145</td><td>42</td><td>372</td></tr><tr><td>Investments(including funds for retiree health benefits)</td><td>$185</td><td>$888</td><td>$42</td><td>$1,115</td></tr><tr><td>Pending activities(e)</td><td></td><td></td><td></td><td>(2)</td></tr><tr><td>Total fair value of plan net assets</td><td></td><td></td><td></td><td>$1,113</td></tr></table>

(a) Equity includes a passively managed commingled index fund benchmarked to the MSCI All Country World Index.

(b) Other Fixed Income Debt includes a passively managed commingled index fund benchmarked to the Barclays Capital Aggregate Index.

(c) Cash and Cash Equivalents include short term investments and money markets.

(d) The Companies set aside funds for retiree health benefits through a separate account within the pension trust, as permitted under Section 401(h) of the Internal Revenue Code of 1986, as amended. In accordance with the Code, the plan’s investments in the 401(h) account may not be used for, or diverted to, any purpose other than providing health benefits for retirees. The net assets held in the 401(h) account are calculated based on a pro-rata percentage allocation of the net assets in the pension plan. The related obligations for health benefits are not included in the pension plan’s obligations and are included in the Companies’ other postretirement benefit obligation. See Note E.

(e) Pending activities include security purchases and sales that have not settled, interest and dividends that have not been received, and reflects adjustments for available estimates at year end.



## Notes to the Financial Statements – Continued

The table below provides a reconciliation of the beginning and ending net balances for assets at December 31, 2013 classified as Level 3 in the fair value hierarchy.

<table><tr><td>(Millions of Dollars)</td><td>Beginning Balance as of January 1, 2013</td><td>Assets Still Held at Reporting Date - Unrealized Gains/(Losses)</td><td>Assets Sold During the Year - Realized Gains/(Losses)</td><td>Purchases Sales and Settlements</td><td>Transfers In/(Out) of Level 3</td><td>Ending Balance as of December 31, 2013</td></tr><tr><td>Total investments</td><td>$ -</td><td>$ -</td><td>$ -</td><td>$ -</td><td>$ -</td><td>$ -</td></tr><tr><td>Funds for retiree health benefits</td><td>31</td><td>3</td><td>-</td><td>8</td><td>-</td><td>42</td></tr><tr><td>Investments (including funds for retiree health benefits)</td><td>$31</td><td>$3</td><td>$ -</td><td>$8</td><td>$ -</td><td>$42</td></tr></table>

## Mortality Table Revision

The Companies adopted revised mortality tables effective December 31, 2014 in the measurement of its pension and other postretirement benefit plan obligations, accounting costs, and required contribution amounts as discussed in Note E. As a result of the adoption, Con Edison recognized an increase of less than $10 million in its other postretirement benefits obligation as of December 31, 2014. The Companies, under their current New York rate plans, defer as a regulatory asset or liability, as the case may be, the differences between the actual level of expenses for pension and other postretirement benefits and amounts for those expenses reflected in rates.

## Note G – Environmental Matters

## Superfund Sites

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

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

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

The accrued liabilities and regulatory assets related to Superfund Sites at December 31, 2014 and 2013 were as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="2">Con Edison</td><td colspan="2">CECONY</td></tr><tr><td>2014</td><td>2013</td><td>2014</td><td>2013</td></tr><tr><td>Accrued Liabilities:</td><td></td><td></td><td></td><td></td></tr><tr><td>Manufactured gas plant sites</td><td>$684</td><td>$665</td><td>$587</td><td>$562</td></tr><tr><td>Other Superfund Sites</td><td>80</td><td>84</td><td>79</td><td>82</td></tr><tr><td>Total</td><td>$764</td><td>$749</td><td>$666</td><td>$644</td></tr><tr><td>Regulatory assets</td><td>$925</td><td>$938</td><td>$820</td><td>$830</td></tr></table>

Most of the accrued Superfund Site liability relates to sites that have been investigated, in whole or in part. However, for some of the sites, the extent and associated cost of the required remediation has not yet been determined. As investigations progress and information pertaining to the required remediation becomes available, the Utilities expect that additional liability may be accrued, the amount of which is not presently determinable but may be material. Con Edison and CECONY estimate that in 2015 they will incur costs for remediation of approximately $39 million and $35 million, respectively. The Companies are unable to estimate the time period over which the remaining accrued liability will be incurred because, among other things, the required remediation has not been determined for some of the sites. Under their current rate plans, the Utilities are permitted to recover or defer as regulatory assets (for



subsequent recovery through rates) certain site investigation and remediation costs.

Environmental remediation costs incurred and insurance recoveries received related to Superfund Sites at December 31, 2014 and 2013 were as follows:

<table><tr><td></td><td colspan="2">Con Edison</td><td colspan="2">CECONY</td></tr><tr><td>(Millions of Dollars)</td><td>2014</td><td>2013</td><td>2014</td><td>2013</td></tr><tr><td>Remediation costs incurred</td><td>$29</td><td>$41</td><td>$20</td><td>$35</td></tr><tr><td>Insurance recoveries received \( ^{*} \)</td><td>7</td><td>-</td><td>7</td><td>-</td></tr></table>

* Reduced amount deferred for recovery from customers

In 2014, Con Edison and CECONY estimated that for their manufactured gas plant sites (including CECONY’s Astoria site), the aggregate undiscounted potential liability for the investigation and remediation of coal tar and/or other environmental contaminants could range up to $2.7 billion and $2.5 billion, respectively. These estimates were based on the assumption that there is contamination at all sites, including those that have not yet been fully investigated and additional assumptions about the extent of the contamination and the type and extent of the remediation that may be required. Actual experience may be materially different.

## Asbestos Proceedings

Suits have been brought in New York State and federal courts against the Utilities and many other defendants, wherein a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the Utilities. The suits that have been resolved, which are many, have been resolved without any payment by the Utilities, or for amounts that were not, in the aggregate, material to them. The amounts specified in all the remaining thousands of suits total billions of dollars; however, the Utilities believe that these amounts are greatly exaggerated, based on the disposition of previous claims. At December 31, 2014 and 2013, Con Edison and CECONY had accrued their estimated aggregate undiscounted potential liabilities for these suits and additional suits that may be brought over the next 15 years of $8 million and $7 million, respectively. The estimates were based upon a combination of modeling, historical data analysis and risk factor assessment. Trial courts have begun, and unless otherwise determined by an appellate court may continue, to apply a different standard for determining liability in asbestos suits than the standard that applied historically. As a result, the Companies currently believe that there is a reasonable possibility of an exposure to loss in excess of the liability accrued for the suits. The Companies are unable to estimate the amount or range of such loss. In addition, certain current and former employees have claimed or are claiming workers' compensation benefits based on alleged disability from exposure to asbestos. Under its current rate plans, CECONY is permitted to defer as regulatory assets (for subsequent recovery through rates) costs incurred for its asbestos lawsuits and workers' compensation claims. The accrued liability for asbestos suits and workers' compensation proceedings (including those related to asbestos exposure) and the amounts deferred as regulatory assets for the Companies at December 31, 2014 and 2013 were as follows:

<table><tr><td></td><td colspan="2">Con Edison</td><td colspan="2">CECONY</td></tr><tr><td>(Millions of Dollars)</td><td>2014</td><td>2013</td><td>2014</td><td>2013</td></tr><tr><td>Accrued liability - asbestos suits</td><td>$ 8</td><td>$ 8</td><td>$ 7</td><td>$ 7</td></tr><tr><td>Regulatory assets - asbestos suits</td><td>$ 8</td><td>$ 8</td><td>$ 7</td><td></td></tr><tr><td>Accrued liability - workers&#x27; compensation</td><td>$83</td><td>$87</td><td>$78</td><td>$82</td></tr><tr><td>Regulatory assets - workers&#x27; compensation</td><td>$ 8</td><td>$12</td><td>$ 8</td><td>$12</td></tr></table>

## Note H – Other Material Contingencies
Manhattan Steam Main Rupture

In July 2007, a CECONY steam main located in midtown Manhattan ruptured. It has been reported that one person died and others were injured as a result of the incident. Several buildings in the area were damaged. Debris from the incident included dirt and mud containing asbestos. The response to the incident required the closing of several buildings and streets for various periods. Approximately ninety suits are pending against the company seeking generally unspecified compensatory and, in some cases, punitive damages, for personal injury, property damage and business interruption. The company has notified its insurers of the incident and believes that the policies in force at the time of the incident will cover the company’s costs to satisfy its liability to others in connection with the suits. In the company’s estimation, there is not a reasonable possibility that an exposure to loss exists for the suits that is materially in excess of the estimated liability accrued. At December 31, 2014, the company has accrued its estimated liability for the suits of $50 million and an insurance receivable in the same amount.

## Manhattan Explosion and Fire

On March 12, 2014, two multi-use five-story tall buildings located on Park Avenue between 116 \( ^{th} \)  and 117 \( ^{th} \)  Street in Manhattan were destroyed by an explosion and fire. CECONY had delivered gas to the buildings through service lines from a distribution main located below ground on Park Avenue. Eight people died and more than 48 people were injured. Additional buildings were also damaged. The National Transportation Safety Board is investigating. The parties to the investigation include the company, the City of New York, the Pipeline and Hazardous Materials Safety Administration and the NYSPSC (which is also conducting an investigation). Approximately thirty suits are



## Notes to the Financial Statements – Continued

pending against the company seeking generally unspecified damages and, in one case, punitive damages, for personal injury, property damage and business interruption. The company has notified its insurers of the incident and believes that the policies in force at the time of the incident will cover the company's costs, in excess of a required retention (the amount of which is not material), to satisfy any liability it may have for damages in connection with the incident. The company is unable to estimate the amount or range of its possible loss related to the incident. At December 31, 2014, the company had not accrued a liability for the incident.

## Other Contingencies

See “Other Regulatory Matters” in Note B.

## Guarantees

Con Edison and its subsidiaries enter into various agreements providing financial or performance assurance primarily to third parties on behalf of their subsidiaries. Maximum amounts guaranteed by Con Edison totaled $2,547 million and $1,331 million at December 31, 2014 and 2013, respectively.

A summary, by type and term, of Con Edison’s total guarantees at December 31, 2014 is as follows:

<table><tr><td>Guarantee Type</td><td>0 - 3 years</td><td>4 - 10 years</td><td>&gt; 10 years</td><td>Total</td></tr><tr><td colspan="5">(Millions of Dollars)</td></tr><tr><td>NY Transco</td><td>$1,361</td><td>$ -</td><td>$ -</td><td>$1,361</td></tr><tr><td>Energy transactions</td><td>774</td><td>31</td><td>96</td><td>901</td></tr><tr><td>Renewable electric production projects</td><td>248</td><td>-</td><td>7</td><td>255</td></tr><tr><td>Other</td><td>30</td><td>-</td><td>-</td><td>30</td></tr><tr><td>Total</td><td>$2,413</td><td>$31</td><td>$103</td><td>$2,547</td></tr></table>

NY Transco – Con Edison has guaranteed payment by its subsidiary, Con Edison Transmission, of the contributions it agreed to make in New York Transco LLC (NY Transco). Con Edison Transmission acquired a 46 percent interest in NY Transco when it was formed in 2014. NY Transco’s transmission projects are expected to be developed initially by CECONY and other New York transmission owners and then sold to NY Transco. The development and sale of the projects would be subject to authorizations from the NYSPSC, FERC and other federal, state and local agencies. Guarantee amount shown is for the maximum possible required amount of Con Edison Transmission’s contributions, which assumed that all the NY Transco projects proposed when NY Transco was formed receive all required regulatory approvals and are completed at 175 percent of their estimated costs and that NY Transco does not use any debt financing for the projects. Guarantee term shown is assumed as the timing of the contributions is not known.

Energy Transactions – Con Edison guarantees payments on behalf of its competitive energy businesses in order to facilitate physical and financial transactions in gas, pipeline capacity, transportation, oil, electricity, renewable energy credits and energy services. To the extent that liabilities exist under the contracts subject to these guarantees, such liabilities are included in Con Edison’s consolidated balance sheet.

Renewable Electric Production Projects – Con Edison and Con Edison Development guarantee payments associated with the investment in solar and wind energy facilities on behalf of their wholly-owned subsidiaries. In addition, Con Edison Development has entered into two guarantees ($63 million maximum and $31 million maximum, respectively) on behalf of entities (Copper Mountain Solar 2 and Copper Mountain Solar 3, respectively) in which it has a 50 percent interest (see Note Q) in connection with the construction of solar energy facilities. Con Edison Development also provided $3 million in guarantees to Travelers Insurance Company for indemnity agreements for surety bonds in connection with the construction and operation of solar energy facilities performed by its subsidiaries.

Other – Other guarantees primarily relate to guarantees provided by Con Edison to Travelers Insurance Company for indemnity agreements for surety bonds in connection with energy service projects performed by Con Edison Solutions ($25 million). In addition, Con Edison issued a guarantee to the Public Utility Commission of Texas covering obligations of Con Edison Solutions as a retail electric provider. Con Edison’s estimate of the maximum potential obligation for this guarantee is $5 million as of December 31, 2014.



## Note I – Electricity Purchase Agreements

CECONY has long-term electricity purchase agreements with non-utility generators and others for generating capacity. The company recovers its purchased power costs in accordance with provisions approved by the NYSPSC. See “Recoverable Energy Costs” in Note A.

At December 31, 2014, the significant terms of the electricity purchase agreements were as follows:

<table><tr><td>Facility</td><td>Equity Owner</td><td>Plant Output (MW)</td><td>Contracted Output (MW)</td><td>Contract Start Date</td><td>Contract Term (Years)</td></tr><tr><td>Brooklyn Navy Yard</td><td>Brooklyn Navy Yard Cogeneration Partners, LP</td><td>322</td><td>291</td><td>November 1996</td><td>40</td></tr><tr><td>Linden Cogeneration</td><td>Cogen Technologies Linden Venture, LP</td><td>1,035</td><td>607</td><td>May 1992</td><td>25</td></tr><tr><td>Indeck Corinth</td><td>Indeck Energy Services of Corinth, Inc.</td><td>147</td><td>131</td><td>July 1995</td><td>20</td></tr><tr><td>Indian Point</td><td>Entergy Nuclear Power Marketing, LLC</td><td>2,311</td><td>500</td><td>August 2001</td><td>16</td></tr><tr><td>Astoria Energy</td><td>Astoria Energy, LLC</td><td>640</td><td>500</td><td>May 2006</td><td>10</td></tr></table>

Assuming performance by the parties to the electricity purchase agreements, CECONY is obligated over the terms of the agreements to make capacity and other fixed payments.

The future capacity and other fixed payments under the contracts are estimated to be as follows:

<table><tr><td>(Millions of Dollars)</td><td>2015</td><td>2016</td><td>2017</td><td>2018</td><td>2019</td><td>All Years Thereafter</td></tr><tr><td>CECONY</td><td>$252</td><td>$186</td><td>$135</td><td>$62</td><td>$53</td><td>$820</td></tr></table>

For energy delivered under most of the electricity purchase agreements, CECONY is obligated to pay variable prices. The company’s payments under the agreements for capacity, energy and other fixed payments in 2014, 2013 and 2012 were as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">For the Years Ended December 31,</td></tr><tr><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Brooklyn Navy Yard</td><td>$ 133</td><td>$ 118</td><td>$ 93</td></tr><tr><td>Linden Cogeneration</td><td>381</td><td>346</td><td>297</td></tr><tr><td>Indeck Corinth</td><td>80</td><td>79</td><td>66</td></tr><tr><td>Indian Point</td><td>247</td><td>220</td><td>204</td></tr><tr><td>Astoria Energy</td><td>230</td><td>183</td><td>181</td></tr><tr><td>Selkirk*</td><td>144</td><td>215</td><td>196</td></tr><tr><td>Independence*</td><td>97</td><td>121</td><td>127</td></tr><tr><td>Total</td><td>$1,312</td><td>$1,282</td><td>$1,164</td></tr></table>

* Contract term ended in 2014

## Note J – Leases

Con Edison’s subsidiaries lease electric transmission facilities, gas distribution facilities, land, office buildings and equipment. In accordance with the accounting rules for leases, these leases are classified as either capital leases or operating leases. Most of the operating leases provide the option to renew at the fair rental value for future periods. Generally, it is expected that leases will be renewed or replaced in the normal course of business.

Capital leases: For ratemaking purposes capital leases are treated as operating leases; therefore, in accordance with the accounting rules for regulated operations, the amortization of the leased asset is based on the rental payments recovered from customers. The following assets under capital leases are included in the Companies’ consolidated balance sheets at December 31, 2014 and 2013:

<table><tr><td></td><td colspan="2">Con Edison</td><td colspan="2">CECONY</td></tr><tr><td>(Millions of Dollars)</td><td>2014</td><td>2013</td><td>2014</td><td>2013</td></tr><tr><td>UTILITY PLANT</td><td></td><td></td><td></td><td></td></tr><tr><td>Common</td><td>$3</td><td>$3</td><td>$1</td><td>$2</td></tr></table>

The accumulated amortization of the capital leases for Con Edison and CECONY was $1.8 million and $0.8 million, respectively at December 31, 2014, and $1.0 million and $0.6 million, respectively at December 31, 2013.



## Notes to the Financial Statements – Continued

The future minimum lease commitments for the above assets are as follows:

<table><tr><td>(Millions of Dollars)</td><td>Con Edison</td><td>CECONY</td></tr><tr><td>2015</td><td>$1</td><td>$1</td></tr><tr><td>2016</td><td>1</td><td>1</td></tr><tr><td>2017</td><td>-</td><td>-</td></tr><tr><td>2018</td><td>-</td><td>-</td></tr><tr><td>2019</td><td>-</td><td>-</td></tr><tr><td>All years thereafter</td><td>-</td><td>-</td></tr><tr><td>Total</td><td>2</td><td>2</td></tr><tr><td>Less: amount representing interest</td><td>1</td><td>1</td></tr><tr><td>Present value of net minimum lease payment</td><td>$1</td><td>$1</td></tr></table>

Operating leases: The future minimum lease commitments under the Companies' non-cancelable operating lease agreements are as follows:

<table><tr><td>(Millions of Dollars)</td><td>Con Edison</td><td>CECONY</td></tr><tr><td>2015</td><td>$ 18</td><td>$ 14</td></tr><tr><td>2016</td><td>17</td><td>13</td></tr><tr><td>2017</td><td>16</td><td>12</td></tr><tr><td>2018</td><td>16</td><td>12</td></tr><tr><td>2019</td><td>14</td><td>10</td></tr><tr><td>All years thereafter</td><td>72</td><td>51</td></tr><tr><td>Total</td><td>$153</td><td>$112</td></tr></table>

## Lease In/Lease Out Transactions

In each of 1997 and 1999, Con Edison Development entered into transactions in which it leased property and then immediately subleased the properties back to the lessor (termed “Lease In/Lease Out,” or LILO transactions). The transactions respectively involved electric generating and gas distribution facilities in the Netherlands, with a total investment of $259 million. The transactions were financed with $93 million of equity and $166 million of non-recourse, long-term debt secured by the underlying assets. In accordance with the accounting rules for leases, Con Edison accounted for the two LILO transactions as leveraged leases. Accordingly, the company’s investment in these leases, net of non-recourse debt, was carried as a single amount in Con Edison’s consolidated balance sheet and income was recognized pursuant to a method that incorporated a level rate of return for those years when net investment in the lease was positive. At December 31, 2012, the company’s net investment in the LILO transactions was $(76) million, comprised of a $228 million gross investment less $304 million of deferred tax liabilities. During 2013, as discussed below, the company terminated its LILO transactions and at December 31, 2013 no longer had an investment recorded for these leases in its consolidated balance sheet.
On audit of Con Edison’s tax returns, the Internal Revenue Service (IRS) disallowed tax losses in connection with the 1997 LILO transactions. In October 2009, the United States Court of Federal Claims issued a decision in favor of the company which, among other things, concluded that the tax losses claimed by the company were allowable. In January 2013, the United States Court of Appeals for the Federal Circuit reversed the October 2009 trial court decision. In June 2013, Con Edison entered into a closing agreement with the IRS regarding the 1997 and 1999 LILO transactions.

As a result of the January 2013 Court of Appeals decision, in 2013, Con Edison recorded an after-tax charge of $150 million to reflect, as required by the accounting rules for leveraged lease transactions, the recalculation of the accounting effect of the LILO transactions based on the revised after-tax cash flows projected from the inception of the leveraged leases as well as the interest on the potential tax liability resulting from the disallowance of federal and state income tax losses for the LILO transactions. Also, in 2013, the LILO transactions were terminated, as a result of which the company realized a $55 million gain (after-tax). In 2014, adjustments were made to the interest accrued on the liability and the related taxes resulting in a decrease to net income of $1 million.

The effect on Con Edison’s consolidated income statement for the twelve months ended as of December 31, 2014 and 2013 was as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="2">For the Years Ended</td></tr><tr><td>2014</td><td>2013</td></tr><tr><td>Increase/(decrease) to non-utility operating revenues</td><td>$ -</td><td>$ (27)</td></tr><tr><td>(Increase)/decrease to other interest expense</td><td>13</td><td>(131)</td></tr><tr><td>Income tax benefit/(expense)</td><td>(14)</td><td>63</td></tr><tr><td>Total increase/(decrease) in net income</td><td>$(1)</td><td>$(95)</td></tr></table>

The transactions did not impact earnings in 2012.

In January 2013, to defray interest charges, the company deposited $447 million with federal and state tax agencies relating primarily to the potential tax liability from the LILO transactions in past tax years and interest thereon. During 2013, $125 million of the deposit was returned from the IRS at the company’s request. Also in 2013, the deposit balance was reduced by an additional $48 million, due to a $10 million refund from the IRS and the application of $38 million toward the settlement of tax and interest for prior tax years, primarily relating to tax liability from the LILO transactions. In the first quarter of



## Notes to the Financial Statements – Continued

2014, Con Edison applied the remainder of the deposit against its federal and state tax liabilities, including interest, for other tax years.

## Note K – Goodwill

In 2014 and 2013, Con Edison completed impairment tests for its goodwill of $406 million related to the O&R merger, and determined that it was not impaired. For the impairment test, $245 million and $161 million of the goodwill were allocated to CECONY and O&R, respectively. In 2014 and 2013, Con Edison also completed impairment tests for the goodwill of $23 million related to two energy services companies acquired by Con Edison Solutions and a gas storage company acquired by Con Edison Development, and determined that the goodwill was not impaired. Estimates of future cash flows, projected growth rates, and discount rates inherent in the cash flow estimates for the energy services companies and gas storage company may vary significantly from actual results, which could result in a future impairment of goodwill.

## Note L – Income Tax

The components of income tax are as follows:

Prior to 2014, Con Edison performed its annual goodwill impairment test on either January 1 or December 31. During the fourth quarter of 2014, Con Edison changed its annual goodwill impairment testing date from January 1 and December 31 to October 1. This change is preferable under the circumstances as it aligns the timing of the annual goodwill impairment test with the strategic planning and budgeting process, which will allow Con Edison to utilize the updated strategic business plans that result from the budget process in the discounted cash flow analyses that it uses to estimate the fair value of its reporting units. This change does not accelerate, delay, avoid or cause an impairment charge, nor does this change result in adjustments to previously issued financial statements. The annual goodwill impairment testing was performed as of October 1, 2014. Consideration was also given to the period between the testing date and December 31, 2014, in order to conclude that no facts or circumstances have arisen that would lead to a different conclusion as of December 31, 2014.

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Con Edison</td><td colspan="3">CECONY</td></tr><tr><td>2014</td><td>2013</td><td>2012</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>State</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Current</td><td>$ 59</td><td>$151</td><td>$ 29</td><td>$ 66</td><td>$111</td><td>$ 53</td></tr><tr><td>Deferred</td><td>61</td><td>(70)</td><td>97</td><td>65</td><td>(14)</td><td>53</td></tr><tr><td>Federal</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Current</td><td>(9)</td><td>285</td><td>(13)</td><td>158</td><td>187</td><td>110</td></tr><tr><td>Deferred</td><td>463</td><td>115</td><td>493</td><td>271</td><td>241</td><td>318</td></tr><tr><td>Amortization of investment tax credits</td><td>(6)</td><td>(5)</td><td>(6)</td><td>(5)</td><td>(5)</td><td>(5)</td></tr><tr><td>Total income tax expense</td><td>$568</td><td>$476</td><td>$600</td><td>$555</td><td>$520</td><td>$529</td></tr></table>



## Notes to the Financial Statements – Continued

The tax effects of temporary differences, which gave rise to deferred tax assets and liabilities, are as follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="2">Con Edison</td><td colspan="2">CECONY</td></tr><tr><td>2014</td><td>2013</td><td>2014</td><td>2013</td></tr><tr><td>Deferred tax liabilities:</td><td></td><td></td><td></td><td></td></tr><tr><td>Property basis differences</td><td>$ 7,510</td><td>$ 7,012</td><td>$ 6,938</td><td>$6,424</td></tr><tr><td>Unrecognized pension and other postretirement costs</td><td>1,968</td><td>1,109</td><td>1,872</td><td>1,060</td></tr><tr><td>Regulatory asset - future income tax</td><td>910</td><td>871</td><td>863</td><td>825</td></tr><tr><td>Environmental remediation costs</td><td>376</td><td>381</td><td>333</td><td>337</td></tr><tr><td>Deferred storm costs</td><td>129</td><td>179</td><td>91</td><td>136</td></tr><tr><td>Equity investments</td><td>168</td><td>21</td><td>-</td><td>-</td></tr><tr><td>Other regulatory assets</td><td>347</td><td>402</td><td>300</td><td>364</td></tr><tr><td>Unamortized investment tax credits</td><td>126</td><td>43</td><td>37</td><td>42</td></tr><tr><td>Total deferred tax liabilities and investment tax credits</td><td>11,534</td><td>10,018</td><td>10,434</td><td>9,188</td></tr><tr><td>Deferred tax assets:</td><td></td><td></td><td></td><td></td></tr><tr><td>Accrued pension and other postretirement costs</td><td>1,306</td><td>458</td><td>1,155</td><td>364</td></tr><tr><td>Regulatory liabilities</td><td>615</td><td>604</td><td>574</td><td>569</td></tr><tr><td>Superfund and other environmental costs</td><td>306</td><td>301</td><td>264</td><td>256</td></tr><tr><td>Asset retirement obligations</td><td>77</td><td>58</td><td>75</td><td>58</td></tr><tr><td>Loss carryforwards</td><td>21</td><td>12</td><td>-</td><td>-</td></tr><tr><td>Loss carryforwards, valuation reserve</td><td>(11)</td><td>(12)</td><td>-</td><td>-</td></tr><tr><td>Other</td><td>272</td><td>253</td><td>203</td><td>209</td></tr><tr><td>Total deferred tax assets</td><td>2,586</td><td>1,674</td><td>2,271</td><td>1,456</td></tr><tr><td>Net deferred tax liabilities and investment tax credits</td><td>$ 8,948</td><td>$ 8,344</td><td>$ 8,163</td><td>$7,732</td></tr><tr><td>Deferred income taxes and investment tax credits - noncurrent</td><td>$ 9,076</td><td>$ 8,466</td><td>$ 8,257</td><td>$7,832</td></tr><tr><td>Deferred tax assets - current</td><td>(128)</td><td>(122)</td><td>(94)</td><td>(100)</td></tr><tr><td>Net deferred tax liabilities and investment tax credits</td><td>$ 8,948</td><td>$ 8,344</td><td>$ 8,163</td><td>$7,732</td></tr></table>

Reconciliation of the difference between income tax expense and the amount computed by applying the prevailing statutory income tax rate to income before income taxes is as follows:

<table><tr><td rowspan="2">(% of Pre-tax income)</td><td colspan="4">Con Edison</td><td colspan="4">CECONY</td></tr><tr><td>2014</td><td>2013</td><td>2012</td><td>2014</td><td>2013</td><td>2012</td><td></td><td></td></tr><tr><td>STATUTORY TAX RATE</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Federal</td><td>35%</td><td>35%</td><td>35%</td><td>35%</td><td>35%</td><td>35</td><td>35</td><td>35</td></tr><tr><td>Changes in computed taxes resulting from:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>State income tax</td><td>5</td><td>4</td><td>4</td><td>5</td><td>5</td><td>4</td><td></td><td></td></tr><tr><td>Cost of removal</td><td>(5)</td><td>(5)</td><td>(4)</td><td>(5)</td><td>(5)</td><td>(4)</td><td></td><td></td></tr><tr><td>Manufacturing deduction</td><td>-</td><td>(1)</td><td>-</td><td>-</td><td>-</td><td>-</td><td></td><td></td></tr><tr><td>Other</td><td>(1)</td><td>(2)</td><td>(1)</td><td>(1)</td><td>(1)</td><td>(1)</td><td></td><td></td></tr><tr><td>Effective tax rate</td><td>34%</td><td>31%</td><td>34%</td><td>34%</td><td>34%</td><td>34%</td><td></td><td></td></tr></table>

Con Edison has a net operating loss carryforward available from the years 1999 through 2014 for which a deferred tax asset of $21 million has been recognized and will not expire until the years 2019 through 2034. An $11 million valuation allowance for New York City income tax purpose has been provided; as it is not more likely than not that the deferred tax asset will be realized.

In September 2013, the IRS issued final regulations, effective in 2014, that provide guidance on the appropriate tax treatment of costs incurred to acquire, produce or improve tangible property, as well as routine maintenance and repair costs. Proposed regulations were issued addressing the tax treatment of asset dispositions. The application of these regulations did not have a material impact on the Companies' financial position, results of operations or liquidity.

In March 2014, tax legislation was enacted in the State of New York that reduced the corporate franchise tax rate from 7.1 percent to 6.5 percent, beginning January 1, 2016. The



## Notes to the Financial Statements – Continued

application of this legislation decreased Con Edison’s accumulated deferred tax liabilities by $74 million ($69 million for CECONY), decreased Con Edison’s regulatory asset for future income tax by $11 million ($10 million for CECONY) and increased Con Edison’s regulatory liability by $62 million ($59 million for CECONY). The impact of this tax legislation on Con Edison’s effective tax rate was not material, and there was no impact on CECONY’s effective tax rate for the year ended December 31, 2014.

Under the Taxpayer Relief Act of 2012, 50 percent bonus depreciation expired on December 31, 2013. On December 19, 2014, President Obama signed into law the Tax Increase Prevention Act of 2014, which extended bonus depreciation for another year through December 31, 2014. As a result of the extension of bonus depreciation to 2014, Con Edison filed a refund request with the IRS in January 2015 to recover $224 million ($128 million attributable to CECONY) in estimated federal tax payments.

## Uncertain Tax Positions

Under the accounting rules for income taxes, the Companies are not permitted to recognize the tax benefit attributable to a tax position unless such position is more likely than not to be sustained upon examination by taxing authorities, including resolution of any related appeals and litigation processes, based solely on the technical merits of the position.

In 2014 following the conclusion of its IRS audit, Con Edison filed amended state tax returns (primarily New York) for tax years 1998 through 2011. As a result of positions taken on the amended state tax returns, Con Edison increased its estimated liabilities for uncertain tax positions by $27 million ($2 million attributable to CECONY). The amended returns contain uncertain tax positions unique to the states, and the returns remain open for examination. The federal tax returns for 2011 through 2013 remain open for examination. These changes to the Companies’ estimated liabilities for uncertain tax positions had an immaterial impact on income tax expense for the year ended December 31, 2014.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for Con Edison and CECONY follows:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Con Edison</td><td colspan="3">CECONY</td></tr><tr><td>2014</td><td>2013</td><td>2012</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Balance at January 1,</td><td>$ 9</td><td>$ 86</td><td>$130</td><td>$ -</td><td>$ 74</td><td>$114</td></tr><tr><td>Additions based on tax positions related to the current year</td><td>-</td><td>5</td><td>12</td><td>-</td><td>-</td><td>11</td></tr><tr><td>Additions based on tax positions of prior years</td><td>27</td><td>253</td><td>-</td><td>2</td><td>-</td><td>-</td></tr><tr><td>Reductions for tax positions of prior years</td><td>(2)</td><td>(86)</td><td>(57)</td><td>-</td><td>(74)</td><td>(52)</td></tr><tr><td>Settlements</td><td>-</td><td>(249)</td><td>1</td><td>-</td><td>-</td><td>1</td></tr><tr><td>Balance at December 31,</td><td>$34</td><td>$ 9</td><td>$ 86</td><td>$2</td><td>$ -</td><td>$ 74</td></tr></table>

As of December 31, 2014, Con Edison reasonably expects to resolve approximately $26 million ($17 million, net of federal taxes) of its uncertainties related to certain tax matters within the next twelve months. Favorable resolution would reduce Con Edison’s effective tax rate. The amount related to CECONY is approximately $2 million ($1 million, net of federal taxes), of which the entire amount, if recognized, would reduce CECONY’s effective tax rate.

The Companies recognize interest on liabilities for uncertain tax positions in interest expense and would recognize penalties, if any, in operating expenses in the Companies' consolidated income statements. In 2014 and 2012, the Companies recognized an immaterial amount of interest and no penalties for uncertain tax positions in their consolidated income statements. In 2013, Con Edison recognized $121 million of interest expense ($131 million related to the LILO transactions (see “Lease In/Lease Out Transactions” in Note J), less a reduction of $10 million in accrued interest expense primarily associated with repair allowance deductions and reversing other uncertain tax positions in 2013). At December 31, 2014 and 2013, the Companies recognized an immaterial amount of interest and no penalties in their consolidated balance sheets.

At December 31, 2014, the total amount of unrecognized tax benefits that, if recognized, would reduce the Companies' effective tax rate is $34 million ($22 million, net of federal taxes) with $2 million ($1 million, net of federal taxes) attributable to CECONY.

## Note M – Stock-Based Compensation

The Companies may compensate employees and directors with, among other things, stock options, stock units, restricted stock units and contributions to the stock purchase plan. The



## Notes to the Financial Statements – Continued

Long Term Incentive Plan, which was approved by Con Edison’s shareholders in 2003 (2003 LTIP), and the Long Term Incentive Plan, which was approved by Con Edison’s shareholders in 2013 (2013 LTIP), are collectively referred to herein as the LTIP. The LTIP provides for, among other things, awards to employees of restricted stock units and stock options and, to Con Edison’s non-employee directors, stock units. Existing awards under the 2003 LTIP continue in effect, however no new awards may be issued under the 2003 LTIP. The 2013 LTIP provides for awards for up to five million shares of common stock.
Shares of Con Edison common stock used to satisfy the Companies' obligations with respect to stock-based compensation may be new (authorized, but unissued) shares, treasury shares or shares purchased in the open market. The Companies intend to use treasury shares and new shares to fulfill their stock-based compensation obligations for 2015.

Under the accounting rules for stock compensation, the Companies have recognized the cost of stock-based compensation as an expense using a fair value measurement method. The following table summarizes stock-based compensation expense recognized by the Companies in the years ended December 31, 2014, 2013 and 2012:

<table><tr><td></td><td colspan="3">Con Edison</td><td colspan="3">CECONY</td></tr><tr><td>(Millions of Dollars)</td><td>2014</td><td>2013</td><td>2012</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Performance-based restricted stock</td><td>$22</td><td>$20</td><td>$14</td><td>$19</td><td>$18</td><td>$13</td></tr><tr><td>Time-based restricted stock</td><td>2</td><td>2</td><td>1</td><td>2</td><td>2</td><td>1</td></tr><tr><td>Non-employee director deferred stock compensation</td><td>2</td><td>2</td><td>1</td><td>2</td><td>2</td><td>1</td>}
 <tr><td>Stock purchase plan</td><td>3</td><td>3</td><td>3</td><td>3</td><td>3</td><td>3</td></tr><tr><td>Total</td><td>$29</td><td>$27</td><td>$19</td><td>$26</td><td>$25</td><td>$18</td></tr><tr><td>Income tax benefit</td><td>$12</td><td>$11</td><td>$ 8</td><td>$10</td><td>$10</td><td>$ 7</td></tr></table>

## Stock Options

The Companies last granted stock options in 2006. The stock options generally vested over a three-year period and have a term of 10 years. Options were granted at an exercise price equal to the fair market value of a common share when the option was granted. The Companies generally recognized compensation expense (based on the fair value of stock option awards) over the vesting period.

The outstanding options are “equity awards” because shares of Con Edison common stock are delivered upon exercise of the options. As equity awards, the fair value of the options is measured at the grant date.
A summary of changes in the status of stock options as of December 31, 2014 is as follows:

<table><tr><td rowspan="2"></td><td colspan="2">Con Edison</td><td colspan="2">CECONY</td></tr><tr><td>Shares</td><td>Weighted Average Exercise Price</td><td>Shares</td><td>Weighted Average Exercise Price</td></tr><tr><td>Outstanding at</td><td></td><td></td><td></td><td></td></tr><tr><td>12/31/13</td><td>481,310</td><td>$43.38</td><td>381,010</td><td>$43.34</td></tr><tr><td>Exercised</td><td>(251,460)</td><td>43.75</td><td>(189,660)</td><td>43.68</td></tr><tr><td>Forfeited</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Outstanding at</td><td></td><td></td><td></td><td></td></tr><tr><td>12/31/14</td><td>229,850</td><td>$42.99</td><td>191,350</td><td>$43.00</td></tr></table>

Note: The weighted average remaining contractual life is one year for all outstanding options as of 12/31/14.

The following table summarizes information about stock options for the years ended December 31, 2014 and 2013:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">Con Edison</td><td colspan="2">CECONY</td></tr><tr><td>2014</td><td>2013</td><td>2014</td><td>2013</td><td></td></tr><tr><td>Aggregate intrinsic value*</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Options outstanding</td><td>$ 5</td><td>$6</td><td>$4</td><td>$5</td><td></td></tr><tr><td>Options exercised</td><td>4</td><td>2</td><td>3</td><td>2</td><td></td></tr><tr><td>Cash received by Con Edison for payment of exercise price</td><td>11</td><td>5</td><td>8</td><td>4</td><td></td></tr></table>

* Aggregate intrinsic value represents the changes in the fair value of all outstanding options from their grant dates to December 31 of the years presented above.



## Notes to the Financial Statements – Continued

The income tax benefit Con Edison realized from stock options exercised in the years ended December 31, 2014, 2013 and 2012 was $1 million, $10 million and an immaterial amount, respectively.

## Restricted Stock and Stock Units

Restricted stock and stock unit awards under the LTIP have been made as follows: (i) awards that provide for adjustment of the number of units (performance-restricted stock units or Performance RSUs) to certain officers and employees; (ii) time-based awards to certain employees; and (iii) awards to non-employee directors. Restricted stock and stock units awarded represents the right to receive, upon vesting, shares of Con Edison common stock, or, except for units awarded under the directors' plan, the cash value of shares or a combination thereof.

The number of units in each annual Performance RSU award is subject to adjustment as follows: (i) 50 percent of the units awarded will be multiplied by a factor that may range from 0 to 200 percent, based on Con Edison's total shareholder return relative to a specified peer group during a specified performance period (the TSR portion); and (ii) 50 percent of the units awarded will be multiplied by a factor that may range from 0 to 120 percent for management employees and from 0 to 200 percent, based on determinations made in connection with the Companies' annual incentive plans or, for certain executive officers, actual performance as compared to certain performance measures during a specified performance period (the non-TSR portion). Performance RSU awards generally vest upon completion of the performance period.

Performance against the established targets is recomputed each reporting period as of the earlier of the reporting date and the vesting date. The TSR portion applies a Monte Carlo simulation model, and the non-TSR portion is the product of the market price at the end of the period multiplied by the average non-TSR determination over the vesting period. Performance RSUs are “liability awards” because each Performance RSU represents the right to receive, upon vesting, one share of Con Edison common stock, the cash value of a share or a combination thereof. As such, changes in the fair value of the Performance RSUs are reflected in net income. The following table illustrates the assumptions used to calculate the fair value of the awards:

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Risk-free interest rate(a)</td><td>0.23% - 3.07%</td><td>0.13% - 5.17%</td><td>0.15% - 3.39%</td></tr><tr><td>Expected term(b)</td><td>3 years</td><td>3 years</td><td>3 years</td></tr><tr><td>Expected share price volatility(c)</td><td>13.14%</td><td>13.52%</td><td>15.27%</td></tr></table>

(a) The risk-free rate is based on the U.S. Treasury zero-coupon yield curve on the date of grant.
(b) The expected term of the Performance RSUs equals the vesting period. The Companies do not expect significant forfeitures to occur.

(c) The expected volatility is calculated using daily closing stock prices over a period of three years, which approximates the expected term of the awards.

A summary of changes in the status of the Performance RSUs' TSR and non-TSR portions during the year ended December 31, 2014 is as follows:

<table><tr><td rowspan="2"></td><td colspan="2">Con Edison</td><td colspan="2">CECONY</td></tr><tr><td>Units</td><td>Weighted Average Grant Date Fair Value(a)</td><td>Units</td><td>Weighted Average Grant Date Fair Value(a)</td></tr><tr><td></td><td>TSR Portion(b) Portion(c)</td><td>Non-TSR Portion(b) Portion(c)</td><td>TSR Portion(b) Portion(c)</td><td>Non-TSR Portion(c)</td></tr><tr><td>Non-vested at</td><td></td><td></td><td></td><td></td></tr><tr><td>12/31/13</td><td>1,121,598</td><td>$49.32</td><td>$55.31</td><td>897,052</td></tr><tr><td>Granted</td><td>428,310</td><td>25.34</td><td>53.65</td><td>342,001</td></tr><tr><td>Vested</td><td>(411,704)</td><td>43.84</td><td>50.05</td><td>(323,483)</td></tr><tr><td>Forfeited</td><td>(37,597)</td><td>40.90</td><td>55.97</td><td>(35,047)</td></tr><tr><td>Non-vested at</td><td></td><td></td><td></td><td></td></tr><tr><td>12/31/14</td><td>1,100,607</td><td>$42.33</td><td>$56.61</td><td>880,523</td></tr></table>

(a) The TSR and non-TSR Portions each account for 50 percent of the awards' value.
(b) Fair value is determined using the Monte Carlo simulation described above. Weighted average grant date fair value does not reflect any accrual or payment of dividends prior to vesting.

(c) Fair value is determined using the market price of one share of Con Edison common stock on the grant date. The market price has not been discounted to reflect that dividends do not accrue and are not payable on Performance RSUs until vesting.

The total expense to be recognized by Con Edison in future periods for unvested Performance RSUs outstanding as of December 31, 2014 is $25 million, including $19 million for CECONY and is expected to be recognized over a weighted average period of one year for both Con Edison and CECONY.

In accordance with the accounting rules for stock compensation, for time-based awards, the Companies have accrued a liability based on the market value of a common share on the grant date and are recognizing compensation expense over the vesting period. The vesting period for awards is three years and is based on the employee’s continuous service to Con Edison. Prior to vesting, the awards are subject to forfeiture in whole or in part under certain circumstances. The awards are “liability awards” because each restricted stock unit represents the right to receive, upon vesting, one share of Con Edison common stock, the cash value of a share or a combination thereof. As such, prior to vesting, changes in the fair value of the units are reflected



## Notes to the Financial Statements – Continued

in net income. A summary of changes in the status of time-based awards during the year ended December 31, 2014 is as follows:

<table><tr><td></td><td colspan="2">Con Edison</td><td colspan="2">CECONY</td></tr><tr><td></td><td>Units</td><td>Weighted Average Grant Date Fair Value</td><td>Units</td><td>Weighted Average Grant Date Fair Value</td></tr><tr><td>Non-vested at 12/31/13</td><td>66,580</td><td>$56.92</td><td>63,030</td><td>$56.93</td></tr><tr><td>Granted</td><td>22,990</td><td>53.65</td><td>21,790</td><td>53.65</td></tr><tr><td>Vested</td><td>(20,900)</td><td>50.74</td><td>(19,800)</td><td>50.75</td></tr><tr><td>Forfeited</td><td>(3,247)</td><td>58.06</td><td>(2,847)</td><td>58.27</td></tr><tr><td>Non-vested at 12/31/14</td><td>65,423</td><td>$57.65</td><td>62,173</td><td>$57.64</td></tr></table>

The total expense to be recognized by Con Edison in future periods for unvested time-based awards outstanding as of December 31, 2014 for Con Edison was $2 million, including $2 million for CECONY, and is expected to be recognized over a weighted average period of one year.

Under the LTIP, each non-employee director receives stock units, which are deferred until the director's separation from service or another date specified by the director. Each director may also elect to defer all or a portion of their cash compensation into additional stock units, which are deferred until the director's termination of service or another date specified by the director. Non-employee directors' stock units issued under the LTIP are considered "equity awards," because they may only be settled in shares. Directors immediately vest in units issued to them. The fair value of the units is determined using the closing price of Con Edison's common stock on the business day immediately preceding the date of issue. In the year ended December 31, 2014, approximately 37,972 units were issued at a weighted average grant date price of $55.51.

## Stock Purchase Plan

The Stock Purchase Plan, which was approved by shareholders in 2004 and 2014, provides for the Companies to contribute up to $1 for each $9 invested by their directors, officers or employees to purchase Con Edison common stock under the plan. Eligible participants may invest up to $25,000 during any calendar year (subject to an additional limitation for officers and employees of not more than 20 percent of their pay). Dividends paid on shares held under the plan are reinvested in additional shares unless otherwise directed by the participant.

Participants in the plan immediately vest in shares purchased by them under the plan. The fair value of the shares of Con Edison common stock purchased under the plan was calculated using the average of the high and low composite sale prices at which shares were traded at the New York Stock Exchange on the trading day immediately preceding such purchase dates. During 2014, 2013 and 2012, 708,276, 864,281 and 665,718 shares were purchased under the Stock Purchase Plan at a weighted average price of $56.23, $57.24 and $59.72 per share, respectively.

## Note N – Financial Information by Business Segment

The business segments of each of the Companies, which are its operating segments, were determined based on management’s reporting and decision-making requirements in accordance with the accounting rules for segment reporting.

Con Edison’s principal business segments are CECONY’s regulated utility activities, O&R’s regulated utility activities and Con Edison’s competitive energy businesses. CECONY’s principal business segments are its regulated electric, gas and steam utility activities.

All revenues of these business segments are from customers located in the United States of America. Also, all assets of the business segments are located in the United States of America. The accounting policies of the segments are the same as those described in Note A.

Common services shared by the business segments are assigned directly or allocated based on various cost factors, depending on the nature of the service provided.



## Notes to the Financial Statements – Continued

The financial data for the business segments are as follows:

<table><tr><td>As of and for the Year Ended December 31, 2014 (Millions of Dollars)</td><td>Operating revenues</td><td>Inter-segment revenues</td><td>Depreciation and amortization</td><td>Operating income</td><td>Interest income</td><td>Income taxes on operating charges</td><td>Total assets(b)</td><td>Construction expenditures</td></tr><tr><td>CECONY</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Electric</td><td>$ 8,437</td><td>$ 16</td><td>$ 781</td><td>$1,712</td><td>$412</td><td>$425</td><td>$30,421</td><td>$1,500</td></tr><tr><td>Gas</td><td>1,721</td><td>6</td><td>132</td><td>314</td><td>89</td><td>88</td><td>6,530</td><td>549</td></tr><tr><td>Steam</td><td>628</td><td>84</td><td>78</td><td>113</td><td>36</td><td>49</td><td>2,686</td><td>83</td></tr><tr><td>Consolidation adjustments</td><td>-</td><td>(106)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Total CECONY</td><td>$10,786</td><td>$ -</td><td>$ 991</td><td>$2,139</td><td>$537</td><td>$562</td><td>$39,637</td><td>$2,132</td></tr><tr><td>O&amp;R</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Electric</td><td>$ 680</td><td>$ -</td><td>$ 46</td><td>$ 103</td><td>$ 24</td><td>$ 29</td><td>$ 2,042</td><td>$ 105</td></tr><tr><td>Gas</td><td>212</td><td>-</td><td>15</td><td>25</td><td>10</td><td>6</td><td>794</td><td>37</td></tr><tr><td>Other(b)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>1</td><td>-</td><td>1</td><td>-</td></tr><tr><td>Total O&amp;R</td><td>$ 892</td><td>$ -</td><td>$ 61</td><td>$ 128</td><td>$ 35</td><td>$ 35</td><td>$ 2,837</td><td>$ 142</td></tr><tr><td>Competitive energy businesses</td><td>$ 1,244</td><td>$ (10)</td><td>$ 19</td><td>$ (60)</td><td>$ (8)</td><td>$ (8)</td><td>$ 1,026</td><td>$ 447</td></tr><tr><td>Other(c)</td><td>(3)</td><td>10</td><td>-</td><td>2</td><td>27</td><td>-</td><td>808</td><td>-</td></tr><tr><td>Total Con Edison</td><td>$12,919</td><td>$ -</td><td>$1,071</td><td>$2,209</td><td>$591</td><td>$589</td><td>$44,308</td><td>$2,721</td></tr><tr><td>As of and for the Year Ended December 31, 2013 (Millions of Dollars)</td><td>Operating revenues</td><td>Inter-segment revenues</td><td>Depreciation and amortization</td><td>Operating income</td><td>Interest income</td><td>Income taxes on operating charges</td><td>Total assets(b)</td><td>Construction expenditures</td></tr><tr><td>CECONY</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Electric</td><td>$ 8,131</td><td>$ 16</td><td>$ 749</td><td>$1,595</td><td>$402</td><td>$380</td><td>$27,673</td><td>$1,471</td></tr><tr><td>Gas</td><td>1,616</td><td>5</td><td>130</td><td>362</td><td>83</td><td>112</td><td>6,008</td><td>536</td></tr><tr><td>Steam</td><td>683</td><td>82</td><td>67</td><td>103</td><td>36</td><td>39</td><td>2,577</td><td>128</td></tr><tr><td>Consolidation adjustments</td><td>-</td><td>(103)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Total CECONY</td><td>$10,430</td><td>$ -</td><td>$ 946</td><td>$2,060</td><td>$521</td><td>$531</td><td>$36,258</td><td>$2,135</td></tr><tr><td>O&amp;R</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Electric</td><td>$ 628</td><td>$ -</td><td>$ 41</td><td>$ 87</td><td>$ 25</td><td>$ 13</td><td>$ 1,898</td><td>$ 98</td></tr><tr><td>Gas</td><td>205</td><td>-</td><td>15</td><td>33</td><td>11</td><td>7</td><td>645</td><td>37</td></tr><tr><td>Other(b)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>1</td><td>-</td><td>2</td><td>-</td></tr><tr><td>Total O&amp;R</td><td>$ 833</td><td>$ -</td><td>$ 56</td><td>$ 120</td><td>$ 37</td><td>$ 20</td><td>$ 2,545</td><td>$ 135</td></tr><tr><td>Competitive energy businesses</td><td>$ 1,096</td><td>$ 5</td><td>$ 23</td><td>$ 63</td><td>$135</td><td>$ (41)</td><td>$ 1,314</td><td>$ 378</td></tr><tr><td>Other(c)</td><td>(5)</td><td>(5)</td><td>(1)</td><td>1</td><td>26</td><td>(6)</td><td>530</td><td>-</td></tr><tr><td>Total Con Edison</td><td>$12,354</td><td>$ -</td><td>$1,024</td><td>$2,244</td><td>$719</td><td>$504</td><td>$40,647</td><td>$2,648</td></tr><tr><td>As of and for the Year Ended December 31, 2012 (Millions of Dollars)</td><td>Operating revenues</td><td>Inter-segment revenues</td><td>Depreciation and amortization</td><td>Operating income</td><td>Interest income</td><td>Income taxes on operating charges</td><td>Total assets(b)</td><td>Construction expenditures</td></tr><tr><td>CECONY</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Electric</td><td>$ 8,176</td><td>$ 15</td><td>$ 710</td><td>$1,693</td><td>$423</td><td>$393</td><td>$28,339</td><td>$1,375</td></tr><tr><td>Gas</td><td>1,415</td><td>5</td><td>120</td><td>346</td><td>82</td><td>99</td><td>5,925</td><td>426</td></tr><tr><td>Steam</td><td>596</td><td>77</td><td>64</td><td>54</td><td>40</td><td>22</td><td>2,621</td><td>108</td></tr><tr><td>Consolidation adjustments</td><td>-</td><td>(97)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td></tr><tr><td>Total CECONY</td><td>$10,187</td><td>$ -</td><td>$ 894</td><td>$2,093</td><td>$545</td><td>$514</td><td>$36,885</td><td>$1,909</td></tr><tr><td>O&amp;R</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Electric</td><td>$ 592</td><td>$ -</td><td>$ 38</td><td>$ 83</td><td>$ 19</td><td>$ 17</td><td>$ 1,960</td><td>$ 98</td></tr><tr><td>Gas</td><td>203</td><td>-</td><td>15</td><td>40</td><td>10</td><td>11</td><td>706</td><td>39</td></tr><tr><td>Other(b)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>2</td><td>-</td><td>5</td><td>-</td></tr><tr><td>Total O&amp;R</td><td>$ 795</td><td>$ -</td><td>$ 53</td><td>$ 123</td><td>$ 31</td><td>$ 28</td><td>$ 2,671</td><td>$ 137</td></tr><tr><td>Competitive energy businesses</td><td>$ 1,213</td><td>$ 8</td><td>$ 8</td><td>$ 125</td><td>$ 1</td><td>$ 52</td><td>$ 1,061</td><td>$ 492</td></tr><tr><td>Other(c)</td><td>(7)</td><td>(8)</td><td>-</td><td>(2)</td><td>27</td><td>-</td><td>592</td><td>-</td></tr><tr><td>Total Con Edison</td><td>$12,188</td><td>$ -</td><td>$ 955</td><td>$2,339</td><td>$604</td><td>$594</td><td>$41,209</td><td>$2,538</td></tr></table>

(a) For Con Edison, income taxes on non-operating income were $21, $28 and $6 million in 2014, 2013 and 2012, respectively. For CECONY, income taxes on non-operating income were $7, $1 and $15 million in 2014, 2013 and 2012, respectively.

(b) Includes amounts related to the RECO securitization.

(c) Parent company and consolidation adjustments. Other does not represent a business segment.



## Notes to the Financial Statements – Continued

## Note O – Derivative Instruments and Hedging Activities

Con Edison’s subsidiaries hedge market price fluctuations associated with physical purchases and sales of electricity, natural gas and steam by using derivative instruments including futures, forwards, basis swaps, options, transmission congestion contracts and financial transmission rights contracts. Derivatives are recognized on the balance sheet at fair value (See Note P), unless an exception is available under the accounting rules for derivatives and hedging. Qualifying derivative contracts that have been designated as normal purchases or normal sales contracts are not reported at fair value under the accounting rules.

The fair values of the Companies’ commodity derivatives including the offsetting of assets and liabilities on the consolidated balance sheet at December 31, 2014 and 2013 were:

<table><tr><td colspan="2">(Millions of Dollars)</td><td colspan="2">2014</td><td colspan="3">2013</td></tr><tr><td></td><td>Gross Amounts of Recognized Assets/ (Liabilities)</td><td>Gross Net Amounts of Assets/ (Offset)</td><td>Gross Amounts of Assets/ (Liabilities)(a)</td><td>Gross Amounts of Recognized Assets/ (Liabilities)</td><td>Gross Net Amounts of Assets/ (Offset)</td><td>Gross Amounts of Assets/ (Liabilities)(a)</td></tr><tr><td>Balance Sheet Location</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Con Edison</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Fair value of derivative assets</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Current</td><td>$ 111</td><td>$ (67)</td><td>$ 44(b)</td><td>$ 134</td><td>$ (77)</td><td>$ 57(b)</td></tr><tr><td>Non-current</td><td>34</td><td>(23)</td><td>11</td><td>32</td><td>(24)</td><td>8</td></tr><tr><td>Total fair value of derivative assets</td><td>$ 145</td><td>$ (90)</td><td>$ 55</td><td>$ 166</td><td>$ (101)</td><td>$ 65</td></tr><tr><td>Fair value of derivative liabilities</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Current</td><td>$ (242)</td><td>$ 139</td><td>$ (103)</td><td>$ (82)</td><td>$ 72</td><td>$ (10)</td></tr><tr><td>Non-current</td><td>(66)</td><td>91</td><td>25</td><td>(31)</td><td>26</td><td>(5)</td></tr><tr><td>Total fair value of derivative liabilities</td><td>$ (308)</td><td>$ 230</td><td>$ (78)</td><td>$ (113)</td><td>$ 98</td><td>$ (15)</td></tr><tr><td>Net fair value derivative assets/(liabilities)</td><td>$ (163)</td><td>$ 140</td><td>$ (23)(b)</td><td>$ 53</td><td>$ (3)</td><td>$ 50(b)</td></tr><tr><td>CECONY</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Fair value of derivative assets</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Current</td><td>$ 26</td><td>$ (15)</td><td>$ 11(b)</td><td>$ 27</td><td>$ (19)</td><td>$ 8(b)</td></tr><tr><td>Non-current</td><td>22</td><td>(20)</td><td>2</td><td>14</td><td>(13)</td><td>1</td></tr><tr><td>Total fair value of derivative assets</td><td>$ 48</td><td>$ (35)</td><td>$ 13</td><td>$ 41</td><td>$ (32)</td><td>$ 9</td></tr><tr><td>Fair value of derivative liabilities</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Current</td><td>$ (96)</td><td>$ 48</td><td>$ (48)</td><td>$ (32)</td><td>$ 21</td><td>$ (11)</td></tr><tr><td>Non-current liabilities</td><td>(42)</td><td>32</td><td>(10)</td><td>(19)</td><td>16</td><td>(3)</td></tr><tr><td>Total fair value of derivative liabilities</td><td>$ (138)</td><td>$ 80</td><td>$ (58)</td><td>$ (51)</td><td>$ 37</td><td>$ (14)</td></tr><tr><td>Net fair value derivative assets/(liabilities)</td><td>$ (90)</td><td>$ 45</td><td>$ (45)(b)</td><td>$ (10)</td><td>$ 5</td><td>$ (5)(b)</td></tr></table>

(a) Derivative instruments and collateral were set off on the consolidated balance sheet as applicable under the accounting rules. The Companies enter into master agreements for their commodity derivatives. These agreements typically provide setoff in the event of contract termination. In such case, generally the non-defaulting party's payable will be set-off by the defaulting party's payable. The non-defaulting party will customarily notify the defaulting party within a specific time period and come to an agreement on the early termination amount.

(b) At December 31, 2014 and 2013, margin deposits for Con Edison ($27 million and $17 million, respectively) and CECONY ($25 million and $16 million, respectively) were classified as derivative assets in the balance sheet, but not included in the table. Margin is collateral, typically cash, that the holder of a derivative instrument is required to deposit in order to transact on an exchange and to cover its potential losses with its broker or the exchange.

The Utilities generally recover their prudently incurred fuel, purchased power and gas costs, including hedging gains and losses, in accordance with rate provisions approved by the applicable state utility regulators. See “Recoverable Energy Costs” in Note A. In accordance with the accounting rules for regulated operations, the Utilities record a regulatory asset or liability to defer recognition of unrealized gains and losses on their electric and gas derivatives. As gains and losses are realized in future periods, they will be recognized as purchased power, gas and fuel costs in the Companies’ consolidated income statements. Con Edison’s competitive energy businesses record realized and unrealized gains and losses on their derivative contracts in purchased power, gas purchased for resale and non-utility revenue in the reporting period in which they occur. Management believes that these derivative instruments represent economic hedges that mitigate exposure to fluctuations in commodity prices.



## Notes to the Financial Statements – Continued

The following table presents the realized and unrealized gains or losses on commodity derivatives that have been deferred or recognized in earnings for the years ended December 31, 2014 and 2013:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td rowspan="2">Balance Sheet Location</td><td colspan="2">Con Edison</td><td colspan="2">CECONY</td></tr><tr><td>2014</td><td>2013</td><td>2014</td><td>2013</td></tr><tr><td>Pre-tax gains/(losses) deferred in accordance with accounting rules for regulated operations:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Current</td><td>Deferred derivative gains</td><td>$ (10)</td><td>$ 14</td><td>$ (7)</td><td>$ 11</td></tr><tr><td>Long-term</td><td>Deferred derivative gains</td><td>1</td><td>-</td><td>1</td><td>-</td></tr><tr><td>Total deferred gains/(losses)</td><td></td><td>$ (9)</td><td>$ 14</td><td>$ (6)</td><td>$ 11</td></tr><tr><td>Current</td><td>Deferred derivative losses</td><td>$ (75)</td><td>$ 47</td><td>$ (70)</td><td>$ 38</td></tr><tr><td>Current</td><td>Recoverable energy costs</td><td>36</td><td>(39)</td><td>26</td><td>(37)</td></tr><tr><td>Long-term</td><td>Deferred derivative losses</td><td>(17)</td><td>27</td><td>(17)</td><td>13</td></tr><tr><td>Total deferred gains/(losses)</td><td></td><td>$ (56)</td><td>$ 35</td><td>$ (61)</td><td>$ 14</td></tr><tr><td>Net deferred gains/(losses)</td><td></td><td>$ (65)</td><td>$ 49</td><td>$ (67)</td><td>$ 25</td></tr><tr><td>Income Statement Location</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Pre-tax gain/(loss) recognized in income</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td></td><td>Purchased power expense</td><td>$ (37)(a)</td><td>$ 90(a)</td><td>$ -</td><td>$ -</td></tr><tr><td></td><td>Gas purchased for resale</td><td>(115)</td><td>(27)</td><td>-</td><td>-</td></tr><tr><td></td><td>Non-utility revenue</td><td>29(a)</td><td>9(a)</td><td>-</td><td>-</td></tr><tr><td>Total pre-tax gain/(loss) recognized in income</td><td></td><td>$ (123)</td><td>$ 72</td><td>$ -</td><td>$ -</td></tr></table>

(a) Con Edison recorded unrealized gains and losses in non-utility operating revenue ($4 million gain and an immaterial gain) and purchased power expense ($132 million loss and $74 million gain) for the years ended December 31, 2014 and 2013, respectively.

The following table presents the hedged volume of Con Edison’s and CECONY’s derivative transactions at December 31, 2014:

<table><tr><td></td><td>Electric Energy (MWHs)(a)(b)</td><td>Capacity (MWs)(a)</td><td>Natural Gas (Dt)(a)(b)</td></tr><tr><td>Con Edison</td><td>17,792,555</td><td>7,706</td><td>66,793,011</td></tr><tr><td>CECONY</td><td>5,543,250</td><td>2,100</td><td>62,065,000</td></tr></table>

(a) Volumes are reported net of long and short positions, except natural gas collars where the volumes of long positions are reported.

(b) Excludes electric congestion and gas basis swap contracts which are associated with electric and gas contracts and hedged volumes.

The Companies are exposed to credit risk related to transactions entered into primarily for the various energy supply and hedging activities by the Utilities and the competitive energy businesses. Credit risk relates to the loss that may result from a counterparty’s nonperformance. The Companies use credit policies to manage this risk, including an established credit approval process, monitoring of counterparty limits, netting provisions within agreements, collateral or prepayment arrangements, credit insurance and credit default swaps. The Companies measure credit risk exposure as the replacement cost for open energy commodity and derivative positions plus amounts owed from counterparties for settled transactions. The replacement cost of open positions represents unrealized gains, net of any unrealized losses where the Companies have a legally enforceable right of setoff.

At December 31, 2014, Con Edison and CECONY had $148 million and $25 million of credit exposure in connection with energy supply and hedging activities, net of collateral, respectively. Con Edison’s net credit exposure consisted of $79 million with commodity exchange brokers, $45 million with independent system operators, $20 million with investment-grade counterparties and $4 million with non-investment grade/non-rated counterparties. CECONY’s net credit exposure was with commodity exchange brokers.

The collateral requirements associated with, and settlement of, derivative transactions are included in net cash flows from operating activities in the Companies’ consolidated statement of cash flows. Most derivative instrument contracts contain provisions that may require a party to provide collateral on its derivative instruments that are in a net liability position. The amount of collateral to be provided will depend on the fair value of the derivative instruments and the party’s credit ratings.



## Notes to the Financial Statements – Continued

The following table presents the aggregate fair value of the Companies’ derivative instruments with credit-risk-related contingent features that are in a net liability position, the collateral posted for such positions and the additional collateral that would have been required to be posted had the lowest applicable credit rating been reduced one level and to below investment grade at December 31, 2014:

<table><tr><td>(Millions of Dollars)</td><td>Con Edison(a)</td><td>ECONY(a)</td></tr><tr><td>Aggregate fair value - net liabilities</td><td>$ 78</td><td>$58</td></tr><tr><td>Collateral posted</td><td>$ 1</td><td>$ -</td></tr><tr><td>Additional collateral(b) (downgrade one level from current ratings)</td><td>$ 6</td><td>$ 2</td></tr><tr><td>Additional collateral(b) (downgrade to below investment grade from current ratings)</td><td>$105(c)</td><td>$63(c)</td></tr></table>

(a) Non-derivative transactions for the purchase and sale of electricity and gas and qualifying derivative instruments, which have been designated as normal purchases or normal sales, are excluded from the table. These transactions primarily include purchases of electricity from independent system operators. In the event the Utilities and Con Edison's competitive energy businesses were no longer extended unsecured credit for such purchases, the Companies would be required to post collateral, which at December 31, 2014, would have amounted to an estimated $16 million for Con Edison, including $3 million for ECONY. For certain other such non-derivative transactions, the Companies could be required to post collateral under certain circumstances, including in the event counterparties had reasonable grounds for insecurity.

(b) The Companies measure the collateral requirements by taking into consideration the fair value amounts of derivative instruments that contain credit-risk-related contingent features that are in a net liabilities position plus amounts owed to counterparties for settled transactions and amounts required by counterparties for minimum financial security. The fair value amounts represent unrealized losses, net of any unrealized gains where the Companies have a legally enforceable right of setoff.

(c) Derivative instruments that are net assets have been excluded from the table. At December 31, 2014, if Con Edison had been downgraded to below investment grade, it would have been required to post additional collateral for such derivative instruments of $15 million.

## Note P – Fair Value Measurements

The accounting rules for fair value measurements and disclosures define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in a principal or most advantageous market. Fair value is a market-based measurement that is determined based on inputs, which refer broadly to assumptions that market participants use in pricing assets or liabilities. These inputs can be readily observable, market corroborated, or generally unobservable firm inputs. The Companies often make certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, and the risks inherent in the inputs to valuation techniques. The Companies use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

The accounting rules for fair value measurements and disclosures established a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value in three broad levels. The rules require that assets and liabilities be classified in their entirety based on the level of input that is significant to the fair value measurement. Assessing the significance of a particular input may require judgment considering factors specific to the asset or liability, and may affect the valuation of the asset or liability and their placement within the fair value hierarchy. The Companies classify fair value balances based on the fair value hierarchy defined by the accounting rules for fair value measurements and disclosures as follows:

- Level 1 – Consists of assets or liabilities whose value is based on unadjusted quoted prices in active markets at the measurement date. An active market is one in which transactions for assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis. This category includes contracts traded on active exchange markets valued using unadjusted prices quoted directly from the exchange.

- Level 2 – Consists of assets or liabilities valued using industry standard models and based on prices, other than quoted prices within Level 1, that are either directly or indirectly observable as of the measurement date. The industry standard models consider observable assumptions including time value, volatility factors, and current market and contractual prices for the underlying commodities, in addition to other economic measures. This category includes contracts traded on active exchanges or in over-the-counter markets priced with industry standard models.

- Level 3 – Consists of assets or liabilities whose fair value is estimated based on internally developed models or methodologies using inputs that are generally less readily observable and supported by little, if any, market activity at the measurement date. Unobservable inputs are developed based on the best available information and subject to cost benefit constraints. This category includes contracts priced using models that are internally developed and contracts placed in illiquid markets. It also includes contracts that expire after the period of time for which quoted prices are available and internal models are used to determine a significant portion of the value.



## Notes to the Financial Statements – Continued

Assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2014 and 2013 are summarized below.

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="4">2014</td><td colspan="4">2013</td></tr><tr><td>Level 1</td><td>Level 2</td><td>Level 3</td><td>Netting Adjustment(e)</td><td>Total</td><td>Level 1</td><td>Level 2</td><td>Netting Adjustment(e)</td></tr><tr><td>Con Edison</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Derivative assets:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Commodity(a)(b)(c)</td><td>$ 3</td><td>$ 78</td><td>$28</td><td>$ (27)</td><td>$ 82</td><td>$ 3</td><td>$130</td><td>$11</td></tr><tr><td>Other(a)(b)(d)</td><td>163</td><td>116</td><td>-</td><td>-</td><td>279</td><td>141</td><td>113</td><td>-</td></tr><tr><td>Total assets</td><td>$166</td><td>$194</td><td>$28</td><td>$ (27)</td><td>$361</td><td>$144</td><td>$243</td><td>$11</td></tr><tr><td>Derivative liabilities:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Commodity(a)(b)(c)</td><td>$ 18</td><td>$246</td><td>$ 8</td><td>$(194)</td><td>$ 78</td><td>$ 5</td><td>$ 84</td><td>$ 2</td></tr><tr><td>Interest rate contract(a)(b)</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>-</td><td>2</td><td>-</td></tr><tr><td>Total liabilities</td><td>$ 18</td><td>$246</td><td>$ 8</td><td>$(194)</td><td>$ 78</td><td>$ 5</td><td>$ 86</td><td>$ 2</td></tr><tr><td>CECONY</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Derivative assets</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Commodity(a)(b)(c)</td><td>$ 1</td><td>$ 3</td><td>$13</td><td>$ 21</td><td>$ 38</td><td>$ 3</td><td>$ 13</td><td>$ 6</td></tr><tr><td>Other(a)(b)(d)</td><td>155</td><td>106</td><td>-</td><td>-</td><td>261</td><td>134</td><td>103</td><td>-</td></tr><tr><td>Total assets</td><td>$156</td><td>$109</td><td>$13</td><td>$ 21</td><td>$299</td><td>$137</td><td>$116</td><td>$ 6</td></tr><tr><td>Derivative liabilities:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Commodity(a)(b)(c)</td><td>$ 16</td><td>$ 91</td><td>$ -</td><td>$ (49)</td><td>$ 58</td><td>$ 5</td><td>$ 27</td><td>$ -</td></tr><tr><td>Total Liabilities</td><td>$ 16</td><td>$ 91</td><td>$ -</td><td>$ (49)</td><td>$ 58</td><td>$ 5</td><td>$ 27</td><td>$ -</td></tr></table>

(a) The Companies' policy is to review the fair value hierarchy and recognize transfers into and transfers out of the levels at the end of each reporting period. There were no transfers between levels 1, 2 and 3 for the years ended December 31, 2014 and 2013.

(b) Level 2 assets and liabilities include investments held in the deferred compensation plan and/or non-qualified retirement plans, interest rate swap, exchange-traded contracts where there is insufficient market liquidity to warrant inclusion in Level 1, and certain over-the-counter derivative instruments for electricity and natural gas. Derivative instruments classified as Level 2 are valued using industry standard models that incorporate corroborated observable inputs; such as pricing services or prices from similar instruments that trade in liquid markets, time value and volatility factors.

(c) The accounting rules for fair value measurements and disclosures require consideration of the impact of nonperformance risk (including credit risk) from a market participant perspective in the measurement of the fair value of assets and liabilities. At December 31, 2014 and 2013, the Companies determined that nonperformance risk would have no material impact on their financial position or results of operations.

(d) Other assets are comprised of assets such as life insurance contracts within the deferred compensation plan and non-qualified retirement plans.

(e) Amounts represent the impact of legally-enforceable master netting agreements that allow the Companies to net gain and loss positions and cash collateral held or placed with the same counterparties.

The employees in the Companies’ risk management group develop and maintain the Companies’ valuation policies and procedures for, and verify pricing and fair value valuation of, commodity derivatives. Under the Companies’ policies and procedures, multiple



## Notes to the Financial Statements – Continued

independent sources of information are obtained for forward price curves used to value commodity derivatives. Fair value and changes in fair value of commodity derivatives are reported on a monthly basis to the Companies' risk committees, comprised of officers and employees of the Companies that oversee energy hedging at the Utilities and the competitive energy businesses. The risk management group reports to the Companies' Vice President and Treasurer.

<table><tr><td></td><td>Fair Value of Level 3 at December 31, 2014 (Millions of Dollars)</td><td>Valuation Techniques</td><td>Unobservable Inputs</td><td>Range</td></tr><tr><td>Con Edison - Commodity</td><td></td><td></td><td></td><td></td></tr><tr><td rowspan="2">Electricity</td><td rowspan="2">$ 1</td><td>Discounted Cash Flow</td><td>Forward energy prices(a)</td><td>$22.59 - $119.75 per MWH</td></tr><tr><td>Discounted Cash Flow</td><td>Forward capacity prices(a)</td><td>$1.00 - $8.80 per kW - month</td></tr><tr><td>Natural Gas</td><td>2</td><td>Discounted Cash Flow</td><td>Forward gas prices(a)</td><td>$(1.64) - $5.00 per Dt</td></tr><tr><td>Transmission Congestion Contracts / Financial Transmission Rights</td><td>17</td><td>Discounted Cash Flow</td><td>Discount to adjust auction prices for inter-zonal forward price curves(b)</td><td>9.6% - 57.9%</td></tr><tr><td></td><td></td><td></td><td>Discount to adjust auction prices for historical monthly realized settlements(b)</td><td>32.3% - 56.1%</td></tr><tr><td></td><td></td><td></td><td>Inter-zonal forward price curves adjusted for historical zonal losses(b)</td><td>$(2.66) - $16.49</td></tr><tr><td>Total Con Edison - Commodity</td><td>$20</td><td></td><td></td><td></td></tr><tr><td>CECONY - Commodity</td><td></td><td></td><td></td><td></td></tr><tr><td rowspan="2">Transmission Congestion Contracts</td><td rowspan="2">$13</td><td rowspan="2">Discounted Cash Flow</td><td>Discount to adjust auction prices for inter-zonal forward price curves(b)</td><td>9.6% - 57.9%</td></tr><tr><td>Discount to adjust auction prices for historical monthly realized settlements(b)</td><td>32.3% - 56.1%</td></tr></table>

(a) Generally, increases/(decreases) in this input in isolation would result in a higher/(lower) fair value measurement.

(b) Generally, increases/(decreases) in this input in isolation would result in a lower/(higher) fair value measurement.

The table listed below provides a reconciliation of the beginning and ending net balances for assets and liabilities measured at fair value for the years ended December 31, 2014 and 2013 and classified as Level 3 in the fair value hierarchy:

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="2">Con Edison</td><td colspan="2">CECONY</td></tr><tr><td>2014</td><td>2013</td><td>2014</td><td>2013</td></tr><tr><td>Beginning Balance as of January 1,</td><td>$ 9</td><td>$ (5)</td><td>$ 6</td><td>$ 10</td></tr><tr><td>Included in Earnings</td><td>30</td><td>7</td><td>2</td><td>7</td></tr><tr><td>Included in Regulatory Assets and Liabilities</td><td>7</td><td>18</td><td>7</td><td>(1)</td></tr><tr><td>Purchases</td><td>22</td><td>17</td><td>16</td><td>13</td></tr><tr><td>Settlements</td><td>(48)</td><td>(28)</td><td>(18)</td><td>(23)</td></tr><tr><td>Ending Balance as of December 31,</td><td>$ 20</td><td>$ 9</td><td>$ 13</td><td>$ 6</td></tr></table>

For the Utilities, realized gains and losses on Level 3 commodity derivative assets and liabilities are reported as part of purchased power, gas and fuel costs. The Utilities generally recover these costs in accordance with rate provisions approved by the applicable state public utilities regulators. See Note A. Unrealized gains and losses for commodity derivatives are generally deferred on the consolidated balance sheet in accordance with the accounting rules for regulated operations.

For the competitive energy businesses, realized and unrealized gains and losses on Level 3 commodity derivative assets and liabilities are reported in non-utility revenues (immaterial and $2 million loss) and purchased power costs ($27 million gain and $5 million gain) on the consolidated income statement for the years ended December 31, 2014 and 2013, respectively. The change in fair value relating to Level 3 commodity derivative assets and liabilities held at December 31, 2014 and 2013 is included in non-utility revenues (immaterial and $2 million loss) and purchased power costs ($2 million gain and $3 million gain) on the consolidated income statement for the years ended December 31, 2014 and 2013, respectively.

## Note Q – Variable Interest Entities

The accounting rules for consolidation address the consolidation of a variable interest entity (VIE) by a business enterprise that is the primary beneficiary. A VIE is an entity that does not have a



## Notes to the Financial Statements – Continued

sufficient equity investment at risk to permit it to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest. The primary beneficiary is the business enterprise that has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and either absorbs a significant amount of the VIE’s losses or has the right to receive benefits that could be significant to the VIE.

Con Edison enters into arrangements including leases, partnerships and electricity purchase agreements, with various entities. As a result of these arrangements, Con Edison retains or may retain a variable interest in these entities.

## CECONY

CECONY has a variable interest in a non-consolidated VIE, Astoria Energy, LLC (Astoria Energy), with which CECONY has entered into a long-term electricity purchase agreement. CECONY is not the primary beneficiary of this VIE since CECONY does not have the power to direct activities that CECONY believes most significantly impact the economic performance of Astoria Energy. In particular, CECONY has not invested in, or guaranteed the indebtedness of, Astoria Energy and CECONY does not operate or maintain Astoria Energy’s generating facilities. CECONY also has long-term electricity purchase agreements with the following three potential VIEs: Cogen Technologies Linden Venture, LP, Brooklyn Navy Yard Cogeneration Partners, LP and Indeck Energy Services of Corinth, Inc. In 2014, requests were made of these three counterparties for information necessary to determine whether the entity was a VIE and whether CECONY is the primary beneficiary; however, the information was not made available. See Note I for information on these electricity purchase agreements, the payments pursuant to which constitute CECONY’s maximum exposure to loss with respect to the potential VIEs.

## Con Edison Development

Con Edison has a variable interest in Copper Mountain Solar 3 Holdings, LLC (Copper Mountain Solar 3), which is a non-consolidated entity in which Con Edison Development purchased a 50 percent membership interest in 2014. Copper Mountain Solar 3 owns a project company that is developing a 250 MW (AC) solar electric production project in Nevada. Electricity generated by the project is to be sold to the Southern California Public Power Authority pursuant to a long-term power purchase agreement. In addition, Con Edison and Con Edison Development have issued certain guarantees to third parties in connection with Copper Mountain Solar 3. See “Guarantees” in Note H.

Con Edison has a variable interest in CED California Holdings Financing I, LLC (California Solar), which is no longer a consolidated entity. Con Edison Development sold 50 percent of its membership interest in California Solar which was previously a wholly-owned subsidiary in 2014. California Solar owns project companies that operate 110 MW (AC) of solar electric production projects in California. Electricity generated by the projects is sold to Pacific Gas and Electric Company pursuant to long-term power purchase agreements. Subsequent to the sale, Con Edison Development’s remaining 50 percent interest in California Solar is accounted for under the equity method.

As a result of the sale, Con Edison Development received net proceeds of $108 million and recognized a pre-tax gain on the sale of $45 million ($26 million, net of tax). The following table summarizes the sale and resultant deconsolidation on the transaction date:

<table><tr><td colspan="2">(Millions of Dollars)</td></tr><tr><td>Proceeds from sale, net of transaction costs of $1</td><td>$ 108</td></tr><tr><td>Non-utility property, less accumulated depreciation</td><td>(341)</td></tr><tr><td>Other assets, including working capital</td><td>(31)</td></tr><tr><td>Long-term debt, including current portion</td><td>217</td></tr><tr><td>Other liabilities</td><td>9</td></tr><tr><td>Gain on sale of solar electric production projects</td><td>(45)</td></tr><tr><td>Equity method investment upon deconsolidation</td><td>$ (83)</td></tr></table>

Con Edison has a variable interest in OCI Solar San Antonio 4 LLC (Texas Solar 4), which is a consolidated entity in which Con Edison Development purchased an 80 percent membership interest in 2014 for $49 million. Texas Solar 4 owns a project company that developed a 40 MW (AC) solar electric production project in Texas. Electricity generated by the project is sold to the City of San Antonio pursuant to a long-term power purchase agreement. At December 31, 2014, Con Edison’s consolidated balance sheet includes $58 million in net assets (as detailed in the table below) and the non-controlling interest of the third party of $9 million related to Texas Solar 4. Earnings for the twelve months ended December 31, 2014 were immaterial.

<table><tr><td colspan="2">(Millions of Dollars)</td></tr><tr><td>Restricted cash</td><td>$ 13</td></tr><tr><td>Non-utility property, less accumulated depreciation</td><td>108</td></tr><tr><td>Other assets</td><td>14</td></tr><tr><td>Total assets(a)</td><td>$135</td></tr><tr><td>Long-term debt due within one year</td><td>$ 66</td></tr><tr><td>Other liabilities</td><td>11</td></tr><tr><td>Total liabilities(b)</td><td>$ 77</td></tr></table>

(a) The assets of Texas Solar 4 represent assets of a consolidated VIE that can be used only to settle obligations of the consolidated VIE.

(b) The liabilities of Texas Solar 4 represent liabilities of a consolidated VIE for which creditors do not have recourse to the general credit of the primary beneficiary.



## Notes to the Financial Statements – Continued

Con Edison has a variable interest in Broken Bow II Wind Holdings, LLC (Broken Bow II), which is a non-consolidated entity in which Con Edison Development purchased a 50 percent membership interest in 2014. Broken Bow II owns a project company that developed a 75 MW (AC) wind electric production project in Nebraska. Electricity generated by the project is sold to Nebraska Public Power District pursuant to a long-term power purchase agreement.

The following table summarizes the VIEs in which Con Edison Development has entered into as of December 31, 2014:

<table><tr><td>Project Name(a)</td><td>Generating Capacity Owned</td><td>Power Purchase Agreement Term in Years</td><td>Year of Initial Investment</td><td>Location</td><td>Maximum Exposure to Loss (In Millions)(c)</td></tr><tr><td>Pilesgrove</td><td>9</td><td>n/a(b)</td><td>2010</td><td>New Jersey</td><td>$ 26</td></tr><tr><td>Mesquite Solar 1</td><td>83</td><td>20</td><td>2013</td><td>Arizona</td><td>111</td></tr><tr><td>Copper Mountain Solar 2</td><td>75</td><td>25</td><td>2013</td><td>Nevada</td><td>80</td></tr><tr><td>Copper Mountain Solar 3</td><td>128</td><td>20</td><td>2014</td><td>Nevada</td><td>175</td></tr><tr><td>California Solar</td><td>55</td><td>25</td><td>2012</td><td>California</td><td>81</td></tr><tr><td>Texas Solar 4</td><td>32</td><td>25</td><td>2014</td><td>Texas</td><td>58</td></tr><tr><td>Broken Bow II</td><td>37</td><td>25</td><td>2014</td><td>Nebraska</td><td>57</td></tr></table>

(a) With the exception of Texas Solar 4, Con Edison’s ownership interest is 50 percent and these projects are accounted for using the equity method of accounting. Con Edison is not the primary beneficiary since the power to direct the activities that most significantly impact the economics of the entities are shared equally between Con Edison Development and third parties. Con Edison’s ownership interest in Texas Solar 4 is 80 percent and is consolidated in the financial statements. Con Edison is the primary beneficiary since the power to direct the activities that most significantly impact the economics of Texas Solar 4 is held by Con Edison Development.

(b) Pilesgrove has 3-5 year Solar Renewable Energy Credit (SREC) hedges in place.

(c) For investments accounted for under the equity method, maximum exposure is equal to the carrying value of the investment on the balance sheet. For consolidated investments, maximum exposure is equal to the net assets of the investment on the balance sheet. Con Edison did not provide any financial or other support during the year that was not previously contractually required.

## Note R – Asset Retirement Obligations

The Companies recognize a liability at fair value for legal obligations associated with the retirement of long-lived assets in the period in which they are incurred, or when sufficient information becomes available to reasonably estimate the fair value of such legal obligations. When the liability is initially recorded, asset retirement costs are capitalized by increasing the carrying amount of the related asset. The liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. The fair value of the asset retirement obligation liability is measured using expected future cash flows discounted at credit-adjusted risk-free rates, historical information, and where available, quoted prices from outside contractors. The Companies evaluate these assumptions underlying the asset retirement obligation liability on an annual basis or as frequently as needed.

The Companies recorded asset retirement obligations associated with the removal of asbestos and asbestos-containing material in their buildings (other than the structures enclosing generating stations and substations), electric equipment and steam and gas distribution systems. The Companies also recorded asset retirement obligations relating to gas pipelines abandoned in place.

The Companies did not record an asset retirement obligation for the removal of asbestos associated with the structures enclosing generating stations and substations. For these building structures, the Companies were unable to reasonably estimate their asset retirement obligations because the Companies were unable to estimate the undiscounted retirement costs or the retirement dates and settlement dates. The amount of the undiscounted retirement costs could vary considerably depending on the disposition method for the building structures, and the method has not been determined. The Companies anticipate continuing to use these building structures in their businesses for an indefinite period, and so the retirement dates and settlement dates are not determinable.

Con Edison recorded asset retirement obligations for the removal of its competitive energy businesses' solar and wind equipment related to projects located on property that is not owned by them and the term of the arrangement is finite including any renewal options. Con Edison did not record asset retirement obligations for its competitive energy businesses' projects that are located on property that is owned by them because they expect that the equipment will continue to generate electricity at these facilities long past the manufacturer's warranty at minimal operating expense. Therefore Con Edison was unable to reasonably estimate the retirement date of this equipment. The Utilities include in depreciation rates the estimated removal costs, less salvage, for utility plant assets. The amounts related to removal costs that are associated with asset retirement obligations are



## Notes to the Financial Statements – Continued

classified as an asset retirement liability. Pursuant to accounting rules for regulated operations, future removal costs that do not represent legal asset retirement obligations are recorded as regulatory liabilities. Accretion and depreciation expenses related to removal costs that represent legal asset retirement obligations are applied against the Companies' regulatory liabilities. Asset retirement costs that are recoverable from customers are recorded as regulatory liabilities to reflect the timing difference between costs recovered through the rate-making process and recognition of costs.

At December 31, 2014, the liabilities for asset retirement obligations of Con Edison and CECONY were $188 million and $185 million, respectively, as compared to $143 million for both Con Edison and CECONY at December 31, 2013. The increase in liabilities at December 31, 2014 was due to changes in estimated cash flows of $60 million and $57 million for Con Edison and CECONY, respectively, and accretion expense of $6 million for both Con Edison and CECONY. The increases were offset in part by liabilities settled of $21 million for both Con Edison and CECONY. Con Edison and CECONY also recorded reductions of $16 million and $17 million during the years ended December 31, 2014 and 2013, respectively, to the regulatory liability associated with cost of removal to reflect depreciation and interest expense.

## Note S – Related Party Transactions

The Utilities and Con Edison’s competitive businesses provide administrative and other services to each other pursuant to cost allocation procedures approved by the NYSPSC. The costs of administrative and other services provided by CECONY to, and received by it from, Con Edison and its other subsidiaries for the years ended December 31, 2014, 2013 and 2012 were as follows:

<table><tr><td></td><td colspan="3">CECONY</td></tr><tr><td>(Millions of Dollars)</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Cost of services provided</td><td>$90</td><td>$84</td><td>$83</td></tr><tr><td>Cost of services received</td><td>$57</td><td>$52</td><td>$49</td></tr></table>

In addition, CECONY and O&R have joint gas supply arrangements, in connection with which CECONY sold to O&R $80 million, $72 million and $54 million of natural gas for the years ended December 31, 2014, 2013 and 2012, respectively. These amounts are net of the effect of related hedging transactions.

FERC has authorized CECONY through 2015 to lend funds to O&R from time to time, for periods of not more than 12 months, in amounts not to exceed $250 million outstanding at any time, at prevailing market rates. There were no outstanding loans to O&R at December 31, 2014 and 2013.

## Note T – New Financial Accounting Standards

In April 2014, the Financial Accounting Standards Board (FASB) issued amendments on reporting discontinued operations through Accounting Standards Update (ASU) No. 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." The amendments revise the definition of a discontinued operation as a disposal of a component of an entity or a group of components of an entity, or a business or nonprofit activity that represents a strategic shift that has or will have a major effect on an entity's operations and financial results. The amendments also require additional disclosures for discontinued operations and individually significant disposals that do not qualify for discontinued operations presentation in the financial statements. For public entities, the amendments are effective prospectively for reporting periods beginning on or after December 15, 2014. The application of this guidance does not have a material impact on the Companies' financial position, results of operations and liquidity.

In May 2014, the FASB and the International Accounting Standards Board (IASB) jointly issued a revenue recognition standard that will supersede the revenue recognition requirements within Accounting Standards Codification (ASC) Topic 605, “Revenue Recognition,” and most industry-specific guidance under the Codification through ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The purpose of the new guidance is to create a consistent framework for revenue recognition. The guidance clarifies how to measure and recognize revenue arising from customer contracts to depict the transfer of goods or services in an amount that reflects the consideration the entity expects to receive. The new guidance must be adopted using either a full retrospective approach or a modified retrospective approach. For public entities reporting under GAAP, the new guidance is effective for periods beginning after December 15, 2016. The Companies are in the process of evaluating the application and impact of the new guidance on the Companies’ financial position, results of operations and liquidity.

In June 2014, the FASB issued ASU No. 2014-12, "Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force)." The amendments clarify the accounting treatment regarding performance targets. Under the new guidance, a performance target that affects vesting and that could be achieved after the requisite service period is required to be treated as a performance condition and should



## Notes to the Financial Statements – Continued

not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized only when it becomes probable that the performance target will be achieved. The amendments are effective for periods beginning after December 15, 2015. The application of this guidance is not expected to have a material impact on the Companies' financial position, results of operations and liquidity.

In August 2014, the FASB issued amendments on reporting about an entity’s ability to continue as a going concern in ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205 - 40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The amendments provide guidance about management’s responsibility to evaluate whether there is substantial doubt surrounding an entity’s ability to continue as a going concern. If management concludes that substantial doubt exists, the amendments also require additional disclosures relating to management’s evaluation and conclusion. The amendments are effective for the annual reporting period ending after December 15, 2016 and interim periods thereafter. The application of this guidance is not expected to have a material impact on the Companies’ financial position, results of operations and liquidity.

In November 2014, the FASB issued amendments on pushdown accounting for subsidiaries and acquired entities in ASU No. 2014-17, “Business Combinations (Topic 805): Pushdown Accounting.” The amendments provide guidance as to whether and at what threshold an acquired entity can apply pushdown accounting in its separate financial statements. The amendments are effective as of the date of issuance. The application of this guidance does not have a material impact on the Companies’ financial position, results of operations and liquidity.



## Condensed Financial Information of Consolidated Edison, Inc.*
Condensed Statement of Income and Comprehensive Income
(Parent Company Only)

<table><tr><td rowspan="2">(Millions of Dollars, except per share amounts)</td><td colspan="3">For the Years Ended December 31,</td></tr><tr><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Equity in earnings of subsidiaries</td><td>$1,101</td><td>$1,062</td><td>$1,154</td></tr><tr><td>Other income (deductions), net of taxes</td><td>19</td><td>29</td><td>12</td></tr><tr><td>Interest expense</td><td>(28)</td><td>(29)</td><td>(28)</td></tr><tr><td>Net Income for Common Stock</td><td>$1,092</td><td>$1,062</td><td>$1,138</td></tr><tr><td>Comprehensive Income for Common Stock</td><td>$1,072</td><td>$1,090</td><td>$1,143</td></tr><tr><td>Net Income Per Common Share - Basic</td><td>$ 3.73</td><td>$ 3.62</td><td>$ 3.88</td></tr><tr><td>Net Income Per Common Share - Diluted</td><td>$ 3.71</td><td>$ 3.61</td><td>$ 3.86</td></tr><tr><td>Dividends Declared Per Share Of Common Stock</td><td>$ 2.52</td><td>$ 2.46</td><td>$ 2.42</td></tr><tr><td>Average Number Of Shares Outstanding - Basic (In Millions)</td><td>292.9</td><td>292.9</td><td>292.9</td></tr><tr><td>Average Number Of Shares Outstanding - Diluted (In Millions)</td><td>294.0</td><td>294.4</td><td>294.5</td></tr></table>

* These financial statements, in which Con Edison’s subsidiaries have been included using the equity method, should be read together with its consolidated financial statements and the notes thereto appearing above.



## Condensed Financial Information of Consolidated Edison, Inc.*
Condensed Statement of Cash Flows
(Parent Company Only)

<table><tr><td rowspan="2">(Millions of Dollars)</td><td colspan="3">For the Years Ended December 31,</td></tr><tr><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Net Income</td><td>$ 1,092</td><td>$ 1,062</td><td>$ 1,138</td></tr><tr><td>Equity in earnings of subsidiaries</td><td>(1,101)</td><td>(1,062)</td><td>(1,154)</td></tr><tr><td>Dividends received from:</td><td></td><td></td><td></td></tr><tr><td>CECONY</td><td>712</td><td>728</td><td>682</td></tr><tr><td>O&amp;R</td><td>40</td><td>38</td><td>34</td></tr><tr><td>Competitive energy businesses</td><td>8</td><td>12</td><td>11</td></tr><tr><td>Change in Assets:</td><td></td><td></td><td></td></tr><tr><td>Special deposits</td><td>314</td><td>(264)</td><td>-</td></tr><tr><td>Income taxes receivable</td><td>(224)</td><td>-</td><td>-</td></tr><tr><td>Other - net</td><td>(199)</td><td>166</td><td>(208)</td></tr><tr><td>Net Cash Flows from Operating Activities</td><td>642</td><td>680</td><td>503</td></tr><tr><td>Investing Activities</td><td></td><td></td><td></td></tr><tr><td>Contributions to subsidiaries</td><td>(1)</td><td>-</td><td>(100)</td></tr><tr><td>Net Cash Flows Used in Investing Activities</td><td>(1)</td><td>-</td><td>(100)</td></tr><tr><td>Financing Activities</td><td></td><td></td><td></td></tr><tr><td>Net proceeds of short-term debt</td><td>101</td><td>58</td><td>115</td></tr><tr><td>Retirement of long-term debt</td><td>(2)</td><td>(1)</td><td>(1)</td></tr><tr><td>Issuance of common shares for stock plans, net of repurchases</td><td>(10)</td><td>(8)</td><td>(9)</td></tr><tr><td>Common stock dividends</td><td>(739)</td><td>(721)</td><td>(709)</td></tr><tr><td>Net Cash Flows Used in Financing Activities</td><td>(650)</td><td>(672)</td><td>(604)</td></tr><tr><td>Net Change for the Period</td><td>(9)</td><td>8</td><td>(201)</td></tr><tr><td>Balance at Beginning of Period</td><td>12</td><td>4</td><td>205</td></tr><tr><td>Balance at End of Period</td><td>$ 3</td><td>$ 12</td><td>$ 4</td></tr></table>

* These financial statements, in which Con Edison’s subsidiaries have been included using the equity method, should be read together with its consolidated financial statements and the notes thereto appearing above.



## Condensed Financial Information of Consolidated Edison, Inc.*
Condensed Balance Sheet
(Parent Company Only)

<table><tr><td>(Millions of Dollars)</td><td>2014</td><td>2013</td></tr><tr><td>Assets</td><td></td><td></td></tr><tr><td>Current Assets</td><td></td><td></td></tr><tr><td>Cash and temporary cash investments</td><td>$ 3</td><td>$ 12</td></tr><tr><td>Special deposits</td><td>1</td><td>315</td></tr><tr><td>Accounts receivable - other</td><td>-</td><td>185</td></tr><tr><td>Income taxes receivable</td><td>224</td><td>-</td></tr><tr><td>Accounts receivable from affiliated companies</td><td>381</td><td>950</td></tr><tr><td>Prepayments</td><td>5</td><td>2</td></tr><tr><td>Other current assets</td><td>4</td><td>-</td></tr><tr><td>Total Current Assets</td><td>618</td><td>1,464</td></tr><tr><td>Investments in subsidiaries</td><td>12,277</td><td>11,954</td></tr><tr><td>Goodwill</td><td>406</td><td>406</td></tr><tr><td>Deferred income tax</td><td>18</td><td>14</td></tr><tr><td>Other noncurrent assets</td><td>11</td><td>4</td></tr><tr><td>Total Assets</td><td>$13,330</td><td>$13,842</td></tr><tr><td>Liabilities and Shareholders&#x27; Equity</td><td></td><td></td></tr><tr><td>Current Liabilities</td><td></td><td></td></tr><tr><td>Long-term debt due within one year</td><td>$ 2</td><td>$ 2</td></tr><tr><td>Notes payable</td><td>274</td><td>173</td></tr><tr><td>Accounts payable to affiliated companies</td><td>147</td><td>148</td></tr><tr><td>Accrued taxes</td><td>13</td><td>426</td></tr><tr><td>Other current liabilities</td><td>10</td><td>538</td></tr><tr><td>Total Current Liabilities</td><td>446</td><td>1,287</td></tr><tr><td>Total Liabilities</td><td>446</td><td>1,287</td></tr><tr><td>Long-term debt</td><td>308</td><td>310</td></tr><tr><td>Shareholders&#x27; Equity</td><td></td><td></td></tr><tr><td>Common stock, including additional paid-in capital</td><td>5,023</td><td>5,027</td></tr><tr><td>Retained earnings</td><td>7,553</td><td>7,218</td></tr><tr><td>Total Shareholders&#x27; Equity</td><td>12,576</td><td>12,245</td></tr><tr><td>Total Liabilities and Shareholders&#x27; Equity</td><td>$13,330</td><td>$13,842</td></tr></table>

* These financial statements, in which Con Edison's subsidiaries have been included using the equity method, should be read together with its consolidated financial statements and the notes thereto appearing above.



## Valuation and Qualifying Accounts
For the Years Ended December 31, 2014, 2013 and 2012

<table><tr><td>Company (Millions of Dollars)</td><td>COLUMN A Description</td><td>COLUMN B Balance at Beginning of Period</td><td>COLUMN C Additions (1) Charged To Costs And Expenses</td><td>(2) Charged To Other Accounts</td><td>COLUMN D Deductions(b)</td><td>COLUMN E Balance At End of Period</td></tr><tr><td>Con Edison</td><td>Allowance for uncollectible accounts(a):</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td></td><td></td><td>2014</td><td>$103</td><td>$98</td><td>$-</td><td>$95</td></tr><tr><td></td><td></td><td>2013</td><td>$105</td><td>$86</td><td>-</td><td>$88</td></tr><tr><td></td><td></td><td>2012</td><td>$ 97</td><td>$96</td><td>-</td><td>$88</td></tr><tr><td>CECONY</td><td>Allowance for uncollectible accounts(a):</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td></td><td></td><td>2014</td><td>$ 95</td><td>$91</td><td>$-</td><td>$88</td></tr><tr><td></td><td></td><td>2013</td><td>$ 96</td><td>$82</td><td>-</td><td>$83</td></tr><tr><td></td><td></td><td>2012</td><td>$ 88</td><td>$90</td><td>-</td><td>$82</td></tr></table>

(a) This is a valuation account deducted in the balance sheet from the assets (Accounts receivable customers) to which they apply.

(b) Accounts written off less cash collections, miscellaneous adjustments and amounts reinstated as receivables previously written off.



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

## Con Edison

None.

## CECONY

None.

## Item 9A: Controls and Procedures

The Companies maintain disclosure controls and procedures designed to provide reasonable assurance that the information required to be disclosed in the reports that they submit to the Securities and Exchange Commission (SEC) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. For each of the Companies, its management, with the participation of its principal executive officer and principal financial officer, has evaluated its disclosure controls and procedures as of the end of the period covered by this report and, based on such evaluation, has concluded that the controls and procedures are effective to provide such reasonable assurance. Reasonable assurance is not absolute assurance, however, and there can be no assurance that any design of controls or procedures would be effective under all potential future conditions, regardless of how remote.

For the Companies’ Reports of Management On Internal Control Over Financial Reporting and the related opinions of PricewaterhouseCoopers LLP (presented in the Reports of Independent Registered Public Accounting Firm), see Item 8 of this report (which information is incorporated herein by reference).

There was no change in the Companies’ internal control over financial reporting that occurred during the Companies’ most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companies’ internal control over financial reporting.

## Item 9B: Other Information

Con Edison

None.

## CECONY

None.



## Part III

Item 10: Directors, Executive Officers and Corporate Governance

Item 11: Executive Compensation

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

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

## Item 14: Principal Accounting Fees and Services
Con Edison

Information required by Part III as to Con Edison, other than the information required in Item 12 of this report by Item 201(d) of Regulation S-K, is incorporated by reference from Con Edison’s definitive proxy statement for its Annual Meeting of Stockholders to be held on May 18, 2015. The proxy statement is to be filed pursuant to Regulation 14A not later than 120 days after December 31, 2014, the close of the fiscal year covered by this report.



The information required pursuant to Item 201(d) of Regulation S-K as at December 31, 2014 is as follows:

## Equity Compensation Plan Information

<table><tr><td>Plan category</td><td>Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)</td><td>Weighted-average exercise price of outstanding options, warrants and rights (2)</td><td>Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) (3)</td></tr><tr><td>Equity compensation plans approved by security holders</td><td></td><td></td><td></td></tr><tr><td>2003 LTIP(a)</td><td>1,435,621</td><td>$42.986</td><td>-</td></tr><tr><td>2013 LTIP(b)</td><td>500,889</td><td>-</td><td>4,499,109</td></tr><tr><td>Stock Purchase Plan(c)</td><td>-</td><td>-</td><td>9,458,106</td></tr><tr><td>Total equity compensation plans approved by security holders</td><td>1,936,510</td><td>-</td><td>13,957,215</td></tr><tr><td>Total equity compensation plans not approved by security holders</td><td>4,500(d)</td><td>-</td><td>-</td></tr><tr><td>Total</td><td>1,941,010</td><td>-</td><td>13,957,215</td></tr></table>

(a) The number of shares of Con Edison common stock that may be issued pursuant to outstanding awards under the Long Term Incentive Plan approved by the company’s shareholders in 2003 (the “2003 LTIP”) include: (A) outstanding awards made in 2012 and 2013 (689,405 shares for performance restricted stock units and 42,783 shares for time-based restricted stock units); (B) 312,878 shares for stock unit awards made prior to 2012 that have vested and for which the receipt of shares was deferred; (C) 160,705 shares covered by outstanding directors’ deferred stock unit awards (which vested upon grant) and (D) 229,850 stock options. Amounts do not include shares that may be issued pursuant to any dividend reinvestment in the future on the deferred stock units. There is no dividend reinvestment on the other outstanding awards. The weighted-average exercise price shown is for stock options; other outstanding awards had no exercise price. No new awards may be made under the 2003 LTIP.

(b) The number of shares of Con Edison common stock that may be issued pursuant to outstanding awards under the Long Term Incentive Plan approved by the company’s shareholders in 2013 (the “2013 LTIP”) include: (A) outstanding awards made in 2014 (411,201 shares for performance restricted stock units and 22,640 shares for time-based restricted stock units); (B) 67,048 shares covered by outstanding directors’ deferred stock unit awards (which vested upon grant). Amounts do not include shares that may be issued pursuant to any dividend reinvestment in the future on the deferred stock units. There is no dividend reinvestment on the other outstanding awards. The outstanding awards had no exercise price. No new awards may be made under the 2013 LTIP after May 20, 2023.

(c) Shares of Con Edison common stock may be issued under the Stock Purchase plan until May 19, 2024 (which is 10 years after the date of the annual meeting at which Con Edison’s shareholders approved the plan).

(d) This amount represents shares to be issued to an officer who had elected to defer receipt of these shares until separation from service or later. These shares are issuable pursuant to awards of restricted stock units made in 2000, which vested in 2004.

For additional information about Con Edison’s stock-based compensation, see Note M to the financial statements in Item 8 of this report (which information is incorporated herein by reference).

In accordance with General Instruction G(3) to Form 10-K, other information regarding Con Edison’s Executive Officers may be found in Part I of this report under the caption “Executive Officers of the Registrant.”

## CECONY

Information required by Items 10, 11, 12 and 13 of Part III as to CECONY is omitted pursuant to Instruction (I)(2) to Form 10-K (Omission of Information by Certain Wholly-Owned Subsidiaries).

In accordance with General Instruction G(3) to Form 10-K, other information regarding CECONY’s Executive Officers may be found in Part I of this report under the caption “Executive Officers of the Registrant.”

Fees paid or payable by CECONY to its principal accountant, PricewaterhouseCoopers LLP, for services related to 2014 and 2013 are as follows:

<table><tr><td></td><td>2014</td><td>2013</td></tr><tr><td>Audit fees</td><td>$3,329,689</td><td>$3,398,277</td></tr><tr><td>Audit-related fees(a)</td><td>281,748</td><td>461,960</td></tr><tr><td>Tax fees</td><td>-</td><td>-</td></tr><tr><td>All other fees</td><td>-</td><td>-</td></tr><tr><td>Total fees</td><td>$3,611,437</td><td>$3,860,237</td></tr></table>

(a) Relates to assurance and related service fees that are reasonably related to the performance of the annual audit or quarterly reviews of CECONY’s financial statements that are not specifically deemed “Audit Services.” The major items included in Audit-Related Fees in 2014 and in 2013 are fees for a compliance audit of certain grants received by the Company from the U.S. Department of Energy.

Con Edison’s Audit Committee or, as delegated by the Audit Committee, the Chair of the Committee, approves in advance each auditing service and non-audit service permitted by applicable laws and regulations, including tax services, to be provided to CECONY by its independent accountants.



## Part IV

## Item 15: Exhibits and Financial Statement Schedules

(a) Documents filed as part of this report:

1. List of Financial Statements – See financial statements listed in Item 8.

2. List of Financial Statement Schedules – See schedules listed in Item 8.

## 3. List of Exhibits

Exhibits listed below which have been filed previously with the Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, and which were designated as noted below, are hereby incorporated by reference and made a part of this report with the same effect as if filed with the report. Exhibits listed below that were not previously filed are filed herewith.

## Con Edison

3.1.1 Restated Certificate of Incorporation of Consolidated Edison, Inc. (Con Edison). (Designated in the Registration Statement on Form S-4 of Con Edison (No. 333-39165) as Exhibit 3.1)

3.1.2 By-laws of Con Edison, effective as of February 19, 2009. (Designated in Con Edison's Current Report on Form 8-K, dated February 19, 2009 (File No. 1-14514) as Exhibit 3.1)

4.1.1 Indenture, dated as of April 1, 2002, between Con Edison and JP Morgan Chase Bank (formerly known as The Chase Manhattan Bank), as Trustee. (Designated in the Registration Statement on Form S-3 of Con Edison (No. 333-102005) as Exhibit 4.1)

4.1.2 Note Assumption and Exchange Agreement, dated as of June 20, 2008, between Con Edison and the institutional investors listed in Schedule I thereto. (Designated in Con Edison's Current Report on Form 8-K, dated June 20, 2008 (File No. 1-14514) as Exhibit 4)

10.1.1.1 Credit Agreement, dated as of October 27, 2011, among CECONY, Con Edison, O&R, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. (Designated in Con Edison's Current Report on Form 8-K dated October 27, 2011 (File No. 1-14514) as Exhibit 10)

10.1.1.2 Extension Agreement, effective August 29, 2013, among CECONY, Con Edison, O&R, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. (Designated in Con Edison's Current Report on Form 8-K, dated August 29, 2013 (File No. 1-14514) as Exhibit 10)

10.1.1.3 Extension Agreement, effective October 23, 2013, among CECONY, Con Edison, O&R, the lender party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. (Designated in Con Edison's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013 (File No. 1-14514) as Exhibit 10.1.4)

10.1.2.1 Severance Program for Officers of Consolidated Edison, Inc. and its Subsidiaries, as amended, effective as of January 1, 2008. (Designated in Con Edison's Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 1-14514) as Exhibit 10.1.3)

10.1.2.2 Amendment #1, dated December 19, 2012, to the Severance Program for Officers of Consolidated Edison, Inc. and its Subsidiaries. (Designated in Con Edison's Annual Report on Form 10-K for the year ended December 31, 2012 (File No. 1-14514) as Exhibit 10.1.4.2)

10.1.3 The Consolidated Edison, Inc. Stock Purchase Plan, as amended and restated as of May 19, 2014. (Designated in Con Edison's Current Report on Form 8-K dated May 19, 2014 (File No. 1-14514) as Exhibit 10)

10.1.4 The Consolidated Edison Retirement Plan

10.1.5 The Consolidated Edison Thrift Plan



10.1.6.1 Consolidated Edison, Inc. Long Term Incentive Plan (2003), as amended and restated effective as of December 26, 2012. (Designated in Con Edison's Annual Report on Form 10-K for the year ended December 31, 2012 (File No. 1-14514) as Exhibit 10.1.8.10)

10.1.6.2 Form of Restricted Stock Unit Award under the Con Edison Long Term Incentive Plan. (Designated in Con Edison's Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 1-14514) as Exhibit 10.1.7.2)

10.1.6.3 Form of Restricted Stock Unit Award for Officers under the Con Edison Long Term Incentive Plan. (Designated in Con Edison's Quarterly Report on Form 10-Q for the year quarterly period ended March 31, 2011 (File No. 1-14514) as Exhibit 10.1)

10.1.6.4 Form of Stock Option Agreement under the Con Edison Long Term Incentive Plan. (Designated in Con Edison's Current Report on Form 8-K, dated January 24, 2005, (File No. 1-14514) as Exhibit 10.3)

10.1.6.5 Amendment Number 1, effective July 1, 2010, to the Consolidated Edison, Inc. Long Term Incentive Plan, as amended and restated effective as of January 1, 2008. (Designated in Con Edison's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010 as Exhibit 10.1)

10.1.6.6 Amendment Number 2, effective January 1, 2011, to the Consolidated Edison, Inc. Long Term Incentive Plan, as amended and restated effective as of January 1, 2008. (Designated in Con Edison's Annual Report on Form 10-K for the year ended December 31, 2010 (File No. 1-14514) as Exhibit 10.1.7.5)

10.1.7.1 Consolidated Edison, Inc. Long Term Incentive Plan. (Designated in Con Edison's Current Report on Form 8-K, dated May 20, 2013 (File No. 1-14514) as Exhibit 10)

10.1.7.2 Form of Performance Unit Award for Officers under the Consolidated Edison, Inc. Long Term Incentive Plan. (Designated in Con Edison's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013 (File No. 1-14514) as Exhibit 10.1.2)

10.1.7.3 Form of Performance Unit Award for Certain Specified Officers under the Consolidated Edison, Inc. Long Term Incentive Plan. (Designated in Con Edison's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014 (File No. 1-14514) as Exhibit 10.1)

10.1.8 Description of Directors' Compensation, effective as of December 31, 2013. (Designated in Con Edison's Annual Report on Form 10-K for the year ended December 31, 2013 (File No. 1-14514) as Exhibit 10.1.10.3)

10.1.9 Letter, dated February 23, 2004, to Robert Hoglund. (Designated in Con Edison's Current Report on Form 8-K, dated July 21, 2005, (File No. 1-14514) as Exhibit 10.5)

10.1.10 Employment offer letter, dated November 21, 2013 to John McAvoy. (Designated in Con Edison's Current Report on Form 8-K, dated November 21, 2013 (File No. 1-14514) as Exhibit 10)

12.1 Statement of computation of Con Edison's ratio of earnings to fixed charges for the years 2010 – 2014

18.1 Letter Re Con Edison Change in Accounting Principle

21.1 Subsidiaries of Con Edison. (Designated in Con Edison's Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 1-14514) as Exhibit 21.1)

23.1 Consent of PricewaterhouseCoopers LLP

31.1.1 Rule 13a-14(a)/15d-14(a) Certifications – Chief Executive Officer

31.1.2 Rule 13a-14(a)/15d-14(a) Certifications – Chief Financial Officer

32.1.1 Section 1350 Certifications – Chief Executive Officer

32.1.2 Section 1350 Certifications – Chief Financial Officer

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema

101.CAL XBRL Taxonomy Extension Calculation Linkbase

101.DEF XBRL Taxonomy Extension Definition Linkbase

101.LAB XBRL Taxonomy Extension Label Linkbase

101.PRE XBRL Taxonomy Extension Presentation Linkbase



Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, instruments defining the rights of holders of long-term debt of Con Edison’s subsidiaries other than CECONY, the total amount of which does not exceed ten percent of the total assets of Con Edison and its subsidiaries on a consolidated basis, are not filed as exhibits to Con Edison’s Form 10-K or Form 10-Q. Con Edison agrees to furnish to the SEC upon request a copy of any such instrument.

## CECONY

3.2.1.1 Restated Certificate of Incorporation of CECONY filed with the Department of State of the State of New York on December 31, 1984. (Designated in the Annual Report on Form 10-K of CECONY for the year ended December 31, 1989 (File No. 1-1217) as Exhibit 3(a))

3.2.1.2 The following certificates of amendment of Restated Certificate of Incorporation of CECONY filed with the Department of State of the State of New York, which are designated as follows:

<table><tr><td colspan="4">Securities Exchange ActFile No. 1-1217</td></tr><tr><td>Date Filed With Department of State</td><td>Form</td><td>Date</td><td>Exhibit</td></tr><tr><td>5/16/88</td><td>10-K</td><td>12/31/89</td><td>3(b)</td></tr><tr><td>6/2/89</td><td>10-K</td><td>12/31/89</td><td>3(c)</td></tr><tr><td>4/28/92</td><td>8-K</td><td>4/24/92</td><td>4(d)</td></tr><tr><td>8/21/92</td><td>8-K</td><td>8/20/92</td><td>4(e)</td></tr><tr><td>2/18/98</td><td>10-K</td><td>12/31/97</td><td>3.1.2.3</td></tr></table>

3.2.2 By-laws of CECONY, effective July 17, 2014. (Designated in CECONY’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014 (File No. 1-1217) as Exhibit 3.2)

4.2.1 Participation Agreement, dated as of July 1, 1999, between New York State Energy Research and Development Authority (NYSERDA) and CECONY. (Designated in CECONY’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999 (File No. 1-1217) as Exhibit 4.1)

4.2.2 Participation Agreement, dated as of November 1, 2010, between NYSERDA and CECONY. (Designated in CECONY’s Annual Report on Form 10-K for the year ended December 31, 2010 (File No. 1-1217) as Exhibit 4.2.2)

4.2.3 Participation Agreement, dated as of November 1, 2001, between NYSERDA and CECONY. (Designated in CECONY’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001 (File No. 1-1217) as Exhibit 10.2.1)

4.2.4 Participation Agreement, dated as of January 1, 2004, between NYSERDA and CECONY. (Designated in CECONY’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 1-1217) as Exhibit 4.2.6)

4.2.5 Participation Agreement, dated as of January 1, 2004, between NYSERDA and CECONY. (Designated in CECONY’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 1-1217) as Exhibit 4.2.7)

4.2.6 Participation Agreement, dated as of November 1, 2004, between NYSERDA and CECONY. (Designated in CECONY’s Current Report on Form 8-K, dated November 9, 2004 (File No. 1-1217) as Exhibit 4.1)

4.2.7 Participation Agreement, dated as of May 1, 2005, between NYSERDA and CECONY. (Designated in CECONY’s Current Report on Form 8-K, dated May 25, 2005 (File No. 1-1217) as Exhibit 4.1)

4.2.8.1 Indenture of Trust, dated as of July 1, 1999 between NYSERDA and HSBC Bank USA, as trustee. (Designated in CECONY’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999 (File No. 1-1217) as Exhibit 4.2)

4.2.8.2 Supplemental Indenture of Trust, dated as of July 1, 2001, to Indenture of Trust, dated July 1, 1999 between NYSERDA and HSBC Bank USA, as trustee. (Designated in CECONY’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001 (File No. 1-1217) as Exhibit 10.2.2)

4.2.9.1 Trust Indenture, dated as of November 1, 2010 between NYSERDA and The Bank of New York Mellon, as trustee. (Designated in CECONY’s Annual Report on Form 10-K for the year ended December 31, 2010 (File No. 1-1217) as Exhibit 4.2.9)



4.2.9.2 First Supplemental Indenture dated November 2, 2012 to the Trust Indenture dated as of November 1, 2010. (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 2012 (File No. 1-1217) as Exhibit 4.2.9.2)

4.2.10 Indenture of Trust, dated as of November 1, 2001, between NYSERDA and The Bank of New York, as trustee. (Designated in CECONY's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001 (File No. 1-1217) as Exhibit 10.2.2)

4.2.11 Indenture of Trust, dated as of January 1, 2004, between NYSERDA and The Bank of New York. (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 1-1217) as Exhibit 4.2.12)

4.2.12 Indenture of Trust, dated as of January 1, 2004, between NYSERDA and The Bank of New York. (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 1-1217) as Exhibit 4.2.13)

4.2.13 Indenture of Trust, dated as of November 1, 2004, between NYSERDA and The Bank of New York. (Designated in CECONY's Current Report on Form 8-K, dated November 9, 2004 (File No. 1-1217) as Exhibit 4.2)

4.2.14.1 Indenture of Trust, dated as of May 1, 2005, between NYSERDA and The Bank of New York. (Designated in CECONY's Current Report on Form 8-K, dated May 25, 2005 (File No. 1-1217) as Exhibit 4.2)

4.2.14.2 Supplemental Indenture of Trust, dated as of June 30, 2010, to Indenture of Trust, dated May 1, 2005 between NYSERDA and The Bank of New York Mellon (formerly known as The Bank of New York), as trustee. (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 2010 (File No. 1-1217) as Exhibit 4.2.14.2)

4.2.15.1 Indenture, dated as of December 1, 1990, between CECONY and The Chase Manhattan Bank (National Association), as Trustee (the "Debenture Indenture"). (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 1990 (File No. 1-1217) as Exhibit 4(h))

4.2.15.2 First Supplemental Indenture (to the Debenture Indenture), dated as of March 6, 1996, between CECONY and The Chase Manhattan Bank (National Association), as Trustee. (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 1-1217) as Exhibit 4.13)

4.2.15.3 Second Supplemental Indenture (to the Debenture Indenture), dated as of June 23, 2005, between CECONY and JPMorgan Chase Bank, N.A. (successor to The Chase Manhattan Bank (National Association)), as Trustee. (Designated in CECONY's Current Report on Form 8-K, dated November 16, 2005 (File No. 1-1217) as Exhibit 4.1)



Securities Exchange Act
File No. 1-1217

<table><tr><td>Debenture</td><td>Form</td><td>Date</td><td>Exhibit</td></tr><tr><td>5.875%</td><td>Series 2003 A</td><td>8-K</td><td>4/7/03</td></tr><tr><td>5.10%</td><td>Series 2003 C</td><td>8-K</td><td>6/12/03</td></tr><tr><td>4.70%</td><td>Series 2004 A</td><td>8-K</td><td>2/11/04</td></tr><tr><td>5.70%</td><td>Series 2004 B</td><td>8-K</td><td>2/11/04</td></tr><tr><td>5.30%</td><td>Series 2005 A</td><td>8-K</td><td>3/7/05</td></tr><tr><td>5.250%</td><td>Series 2005 B</td><td>8-K</td><td>6/20/05</td></tr><tr><td>5.375%</td><td>Series 2005 C</td><td>8-K</td><td>11/16/05</td></tr><tr><td>5.85%</td><td>Series 2006 A</td><td>8-K</td><td>3/9/06</td></tr><tr><td>6.20%</td><td>Series 2006 B</td><td>8-K</td><td>6/15/06</td></tr><tr><td>5.50%</td><td>Series 2006 C</td><td>8-K</td><td>9/25/06</td></tr><tr><td>5.30%</td><td>Series 2006 D</td><td>8-K</td><td>12/1/06</td></tr><tr><td>5.70%</td><td>Series 2006 E</td><td>8-K</td><td>12/1/06</td></tr><tr><td>6.30%</td><td>Series 2007 A</td><td>8-K</td><td>8/28/07</td></tr><tr><td>5.85%</td><td>Series 2008 A</td><td>8-K</td><td>4/4/08</td></tr><tr><td>6.75%</td><td>Series 2008 B</td><td>8-K</td><td>4/4/08</td></tr><tr><td>7.125%</td><td>Series 2008 C</td><td>8-K</td><td>12/4/08</td></tr><tr><td>5.55%</td><td>Series 2009 A</td><td>8-K</td><td>3/25/09</td></tr><tr><td>6.65%</td><td>Series 2009 B</td><td>8-K</td><td>3/25/09</td></tr><tr><td>5.50%</td><td>Series 2009 C</td><td>8-K</td><td>12/4/09</td></tr><tr><td>4.45%</td><td>Series 2010 A</td><td>8-K</td><td>6/7/10</td></tr><tr><td>5.70%</td><td>Series 2010 B</td><td>8-K</td><td>6/7/10</td></tr><tr><td>4.20%</td><td>Series 2012 A</td><td>8-K</td><td>3/13/12</td></tr><tr><td>3.95%</td><td>Series 2013 A</td><td>8-K</td><td>2/25/13</td></tr><tr><td>4.45%</td><td>Series 2014 A</td><td>8-K</td><td>3/3/14</td></tr><tr><td>3.30%</td><td>Series 2014 B</td><td>8-K</td><td>11/19/14</td></tr><tr><td>4.625%</td><td>Series 2014 C</td><td>8-K</td><td>11/19/14</td></tr></table>

10.2.1 Amended and Restated Agreement and Settlement, dated September 19, 1997, between CECONY and the Staff of the New York State Public Service Commission (without Appendices). (Designated in CECONY’s Current Report on Form 8-K, dated September 23, 1997 (File No. 1-1217) as Exhibit 10)

10.2.2 Settlement Agreement, dated October 2, 2000, by and among CECONY, the Staff of the New York State Public Service Commission and certain other parties. (Designated in CECONY’s Current Report on Form 8-K, dated September 22, 2000 (File No. 1-1217) as Exhibit 10)

10.2.3.1 Planning and Supply Agreement, dated March 10, 1989, between CECONY and the Power Authority of the State of New York. (Designated in CECONY’s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 1-1217) as Exhibit 10(gg))

10.2.3.2 Delivery Service Agreement, dated March 10, 1989, between CECONY and the Power Authority of the State of New York. (Designated in CECONY’s Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 1-1217) as Exhibit 10(hh))

10.2.4 Agreement and Plan of Exchange, entered into on October 28, 1997, between Con Edison and CECONY. (Designated in the Registration Statement on Form S-4 of Con Edison (No. 333-39165) as Exhibit 2)

10.2.5 The Consolidated Edison Company of New York, Inc. Executive Incentive Plan, as amended and restated as of January 1, 2008. (Designated in CECONY’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 1-1217) as Exhibit 10.2.5)

10.2.6 Consolidated Edison Company of New York, Inc. Supplemental Retirement Income Plan, as amended and restated as of January 1, 2009. (Designated in CECONY’s Annual Report on Form 10-K for the year ended December 31, 2009 (File No. 1-1217) as Exhibit 10.2.6)



10.2.7.1 Deferred Compensation Plan for the Benefit of Trustees of CECONY, as amended effective January 1, 2008. (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 1-1217) as Exhibit 10.2.7)

10.2.7.2 Amendment #1, dated December 26, 2012, to the Deferred Compensation Plan for the Benefit of Trustees of CECONY. (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 2012 (File No. 1-1217) as Exhibit 10.2.7.2)

10.2.8 Supplemental Medical Plan for the Benefit of CECONY’s officers. (Designated in CECONY’s Annual Report on Form 10-K for the year ended December 31, 1991 (File No. 1-1217) as Exhibit 10(aa))

10.2.9 The CECONY Severance Pay Plan for Management Employees, effective January 1, 2008. (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 1-1217) as Exhibit 10.2.9)

10.2.10.1 The Consolidated Edison Company of New York, Inc. Deferred Income Plan, as amended and restated as of January 1, 2008. (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 1-1217) as Exhibit 10.2.10)

10.2.10.2 Amendment, executed December 19, 2013, to The Consolidated Edison Company of New York, Inc. Deferred Income Plan. (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 2013 (File No. 1-1217) as Exhibit 10.2.10.2)

10.2.11.1 The Consolidated Edison Company of New York, Inc. 2005 Executive Incentive Plan, effective as of January 1, 2005, as amended effective as of January 1, 2008. (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 1-1217) as Exhibit 10.2.11)

10.2.11.2 Amendment, dated October 21, 2009, to The Consolidated Edison Company of New York, Inc. 2005 Executive Incentive Plan. (Designated in CECONY's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 (File No. 1-1217) as Exhibit 10.2.1)

10.2.11.3 Amendment Number 2, dated December 17, 2010, to The Consolidated Edison Company of New York, Inc. 2005 Executive Incentive Plan. (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 2010 (File No. 1-1217) as Exhibit 10.2.11.3)

10.2.11.4 Amendment Number 3, dated December 21, 2011, to The Consolidated Edison Company of New York, Inc. 2005 Executive Incentive Plan. (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 2011 (File No. 1-1217) as Exhibit 10.2.11.4)

10.2.11.5 Amendment Number 4 to the 2005 Executive Incentive Plan. (Designated in CECONY's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012 (File No. 1-1217) as Exhibit 10.2)

10.2.11.6 Amendment Number 5 to the 2005 Executive Incentive Plan. (Designated in CECONY's Annual Report on Form 10-K for the year ended December 31, 2013 (File No. 1-1217) as Exhibit 10.2.11.6)

10.2.12.1 Trust Agreement, dated as of March 31, 1999, between CECONY and Mellon Bank, N.A., as Trustee. (Designated in CECONY's Annual Report on Form 10-K, for the year ended December 31, 2005 (File No. 1-1217) as Exhibit 10.2.13.1)

10.2.12.2 Amendment Number 1 to the CECONY Rabbi Trust, executed October 24, 2003, between CECONY and Mellon Bank, N.A., as Trustee. (Designated in CECONY's Annual Report on Form 10-K, for the year ended December 31, 2005 (File No. 1-1217) as Exhibit 10.2.13.2)

10.2.13 Employment Agreement, dated February 18, 1999, between CECONY and Frances Resheske. (Designated in CECONY's Annual Report on Form 10-K, for the year ended December 31, 2006 (File No. 1-1217) as Exhibit 10.2.14)

12.2 Statement of computation of CECONY's ratio of earnings to fixed charges for the years 2010 – 2014

23.2 Consent of PricewaterhouseCoopers LLP

31.2.1 Rule 13a-14(a)/15d-14(a) Certifications – Chief Executive Officer

31.2.2 Rule 13a-14(a)/15d-14(a) Certifications – Chief Financial Officer



32.2.1 Section 1350 Certifications – Chief Executive Officer

32.2.2 Section 1350 Certifications – Chief Financial Officer

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema

101.CAL XBRL Taxonomy Extension Calculation Linkbase

101.DEF XBRL Taxonomy Extension Definition Linkbase

101.LAB XBRL Taxonomy Extension Label Linkbase

101.PRE XBRL Taxonomy Extension Presentation Linkbase

Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Securities Exchange Act of 1934 by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Securities Exchange Act of 1934.

No annual report to security holders covering CECONY’s last fiscal year has been sent to its security holders. No proxy statement, form of proxy or other proxy soliciting material has been sent to CECONY’s security holders during such period.



## Signatures

Pursuant to the requirements of Section 13 or 15(d) 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, on February 19, 2015.

## Consolidated Edison, Inc.

Consolidated Edison Company of New York, Inc.

By /s/ Robert Hoglund
Robert Hoglund
Senior Vice President and
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, and in the capacities indicated, on February 19, 2015.

<table><tr><td>Signature</td><td>Registrant</td><td>Title</td></tr><tr><td>/s/ John McAvoy</td><td>Con Edison</td><td>Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer)</td></tr><tr><td>John McAvoy</td><td>CECONY</td><td>Chairman of the Board, Chief Executive Officer and Trustee (Principal Executive Officer)</td></tr><tr><td>/s/ Robert Hoglund</td><td>Con Edison</td><td>Senior Vice President and Chief Financial Officer (Principal Financial Officer)</td></tr><tr><td>Robert Hoglund</td><td>CECONY</td><td>Senior Vice President and Chief Financial Officer (Principal Financial Officer)</td></tr><tr><td>/s/ Robert Muccilo</td><td>Con Edison</td><td>Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer)</td></tr><tr><td>Robert Muccilo</td><td>CECONY</td><td>Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer)</td></tr><tr><td>/s/ Kevin Burke</td><td>Con Edison</td><td>Director</td></tr><tr><td>Kevin Burke</td><td>CECONY</td><td>Trustee</td></tr><tr><td>/s/ Vincent A. Calarco</td><td>Con Edison</td><td>Director</td></tr><tr><td>Vincent A. Calarco</td><td>CECONY</td><td>Trustee</td></tr><tr><td>/s/ George Campbell Jr.</td><td>Con Edison</td><td>Director</td></tr><tr><td>George Campbell Jr.</td><td>CECONY</td><td>Trustee</td></tr><tr><td>/s/ Michael J. Del Giudice</td><td>Con Edison</td><td>Director</td></tr><tr><td>Michael J. Del Giudice</td><td>CECONY</td><td>Trustee</td></tr><tr><td>/s/ Ellen V. Futter</td><td>Con Edison</td><td>Director</td></tr><tr><td>Ellen V. Futter</td><td>CECONY</td><td>Trustee</td></tr><tr><td>/s/ John F. Killian</td><td>Con Edison</td><td>Director</td></tr><tr><td>John F. Killian</td><td>CECONY</td><td>Trustee</td></tr><tr><td>/s/ Armando J. Olivera</td><td>Con Edison</td><td>Director</td></tr><tr><td>Armando J. Olivera</td><td>CECONY</td><td>Trustee</td></tr><tr><td>/s/ Sally H. Piñero</td><td>Con Edison</td><td>Director</td></tr><tr><td>Sally H. Piñero</td><td>CECONY</td><td>Trustee</td></tr></table>



<table><tr><td>Signature</td><td>Registrant</td><td>Title</td></tr><tr><td>/s/ Michael W. Ranger</td><td>Con Edison</td><td>Director</td></tr><tr><td>Michael W. Ranger</td><td>ECONY</td><td>Trustee</td></tr><tr><td>/s/ Linda S. Sanford</td><td>Con Edison</td><td>Director</td></tr><tr><td>Linda S. Sanford</td><td>ECONY</td><td>Trustee</td></tr><tr><td>/s/ L. Frederick Sutherland</td><td>Con Edison</td><td>Director</td></tr><tr><td>L. Frederick Sutherland</td><td>ECONY</td><td>Trustee</td></tr></table>






## MANAGEMENT

## Consolidated Edison, Inc.

John McAvoy
Chairman, President, and Chief Executive Officer

Robert Hoglund
Senior Vice President and Chief Financial Officer

Elizabeth D. Moore
Senior Vice President and General Counsel

Carole Sobin
Vice President and Corporate Secretary

Robert Muccilo
Vice President and Controller

Scott Sanders
Vice President and Treasurer

## Consolidated Edison Company of New York, Inc.

John McAvoy
Chairman and Chief Executive Officer

Craig S. Ivey
President

Robert Hoglund
Senior Vice President and Chief Financial Officer

William Longhi
President, Shared Services

Elizabeth D. Moore
Senior Vice President and General Counsel

Carole Sobin
Vice President and Corporate Secretary

## SENIOR VICE PRESIDENTS

Milovan Blair  Central Operations
Marilyn Caselli  Customer Operations
Marc Huestis  Gas Operations
Joseph P. Oates  Business Shared Services
Frances A. Resheske  Public Affairs
Robert D. Schimmenti  Electric Operations

## VICE PRESIDENTS

Walter Alvarado  Staten Island and Electric Services
Richard Bagwell  Human Resources
Lore de la Bastide  General Auditor
Louis M. Bevilacqua  Business Finance
Katherine L. Boden  Gas Operations

Sanjay K. Bose  Central Engineering
Aubrey T. Braz  Substation Operations
Manuel J. Cancel  Information Resources
Brian Horton  System and Transmission Operations
Joan S. Jacobs  Learning and Inclusion
Mary Kelly  Construction
Matthew Ketschke  Manhattan Electric Operations
Ivan Kimball  Energy Management
Charles Lenns  Tax
Patrick G. McHugh  Engineering and Planning
Robert Muccilo  Controller
Stuart Nachmias  Energy Policy and Regulatory Affairs
Gurudatta D. Nadkarni  Strategic Planning
Thomas T. Newell  Bronx and Westchester Electric Operations
Cheryl Payne  Gas Engineering
Marc Richter  Regulatory Services
Robert Sanchez  Brooklyn and Queens Electric Operations
Scott Sanders  Treasurer
Constantine Sanoulis  Steam Operations
Andrea J. Schmitz  Environment, Health and Safety
Saumil P. Shukla  Supply Chain
Saddie L. Smith  Facilities and Field Services
Carole Sobin  Corporate Secretary
Kimberly R. Strong  Chief Ethics and Compliance Officer
Phyllis Taylor  Legal Services
Carlos D. Torres  Emergency Management

## Orange and Rockland Utilities, Inc.

Timothy P. Cawley  President and Chief Executive Officer
Robert Muccilo  Chief Financial Officer and Controller
Yukari Saegusa  Treasurer
Marisa Joss  Corporate Secretary

## VICE PRESIDENTS

Edwin J. Ortiz  Customer Service
Francis W. Peverly  Operations

## Consolidated Edison Solutions, Inc.

Jorge J. Lopez
President and Chief Executive Officer

## Consolidated Edison Development, Inc.

Robert J. Mennella
President and Chief Executive Officer

## Consolidated Edison Energy, Inc.

Robert J. Mennella
President and Chief Executive Officer



## BOARD OF DIRECTORS

Consolidated Edison, Inc.

Kevin Burke
Retired Chairman
Consolidated Edison, Inc., New York, NY

Vincent A. Calarco
Non-Executive Chairman
Newmont Mining Corporation, Denver, CO

George Campbell Jr., Ph.D.
Non-Executive Chairman
Webb Institute, Glen Cove, NY

Michael J. Del Giudice
Senior Managing Director
Millennium Capital Markets LLC, New York, NY

Ellen V. Futter
President
American Museum of Natural History, New York, NY

John F. Killian
Retired Executive Vice President and Chief Financial Officer
Verizon Communications Inc., New York, NY

John McAvoy
Chairman, President, and Chief Executive Officer
Consolidated Edison, Inc., New York, NY

Armando J. Olivera
Retired President and Chief Executive Officer
Florida Power & Light Company, Juno Beach, FL

Sally H. Piñero
Hearing Officer
Office of Administrative Trials and Hearings, New York, NY

Michael W. Ranger
Senior Managing Director
Diamond Castle Holdings, LLC., New York, NY

Linda S. Sanford
Retired Senior Vice President Enterprise Transformation
International Business Machines Corporation (IBM), Somers, NY

L. Frederick Sutherland
Executive Vice President and Chief Financial Officer
Aramark Corporation, Philadelphia, PA



## INVESTOR INFORMATION

## Annual Stockholders' Meeting

The 2015 Annual Meeting of Stockholders will be held at 10 a.m. on Monday, May 18, 2015, in the auditorium on the 19th floor of the Con Edison Building, 4 Irving Place, between East 14th and East 15th Streets, New York, NY. Proxies will be requested from stockholders when the notice of meeting and proxy statement are provided on or about April 6, 2015.

## Stock Listing

The Common Stock is listed on the New York Stock Exchange. The Common Stock ticker symbol is "ED." The press listing is "ConEdison" or "ConEd."

## Transfer Agent and Registrar

Computershare
P.O. Box 30170
College Station, TX 77842-3170
Toll-free telephone: 1-800-522-5522
TTY/Hearing Impaired: 1-800-231-5469
email: web.queries@computershare.com
website: computershare.com/investor

## Dividend Reinvestment

Stockholders of record with 50 or more shares of the Company's Common Stock are eligible to participate in the Company's Automatic Dividend Reinvestment and Cash Payment Plan. For more information and a copy of the plan prospectus, please call Computershare, Investor Relations Department, at 1-800-522-5522.

## Duplicate Mailings and Duplicate Accounts

If you are a record holder, the Transfer Agent and Registrar (see above) may deliver only one copy of the Company's proxy statement and Annual Report to multiple stockholders who share an address unless the Transfer Agent and Registrar has received contrary instructions from one or more of the stockholders. To eliminate duplicate mailings, please contact the Transfer Agent and Registrar, enclosing labels from the mailings or label information where possible. Beneficial owners who share an address and who are receiving multiple copies of proxy materials and annual reports and wish to receive a single copy of such materials in the future will need to contact their broker, bank, or other nominee. Separate dividend checks and form of proxies will continue to be sent for each account on our records.

## Additional Information

The Company reports details concerning its operations and other matters annually to the Securities and Exchange Commission on Form 10-K, which is available on the Company's website at conEd.com or available without charge to the Company's security holders on written request to:

Carole Sobin
Vice President and Corporate Secretary
Consolidated Edison, Inc.
4 Irving Place, Room 1618-S
New York, NY 10003
email: CorporateSecretary@conEd.com

## Investor Relations

Inquiries from security analysts, investment managers, and other members of the financial community should be addressed to:

Jan C. Childress
Director of Investor Relations
Consolidated Edison, Inc.
4 Irving Place, Room 700
New York, NY 10003
Telephone: 1-212-460-6611
email: childress@conEd.com

For additional financial, operational, and customer service information, visit the Consolidated Edison, Inc. website at conEdison.com.



## HOW TO REACH US

Consolidated Edison, Inc.
4 Irving Place
New York, NY 10003
1-212-460-4600
conEdison.com

## REGULATED UTILITY BUSINESSES

Consolidated Edison Company of New York, Inc.
4 Irving Place
New York, NY 10003
1-212-460-4600
conEd.com

Orange and Rockland Utilities, Inc.
One Blue Hill Plaza
Pearl River, NY 10965
1-845-352-6000
oru.com

## COMPETITIVE ENERGY BUSINESSES

Consolidated Edison Solutions, Inc.
100 Summit Lake Drive, Suite 410
Valhalla, NY 10595
1-914-286-7000
conEdisonsolutions.com

Consolidated Edison Energy, Inc.
100 Summit Lake Drive, Suite 410
Valhalla, NY 10595
1-914-993-2189
conEdenergy.com

Consolidated Edison Development, Inc.
100 Summit Lake Drive, Suite 410
Valhalla, NY 10595
1-914-993-2185
conEddev.com

This annual report was printed by a printer with Forest Stewardship Council (FSC) Chain of Custody certification. The cover and editorial sections are printed on recycled paper that contains 100% post-consumer waste, and the financial section is printed on recycled paper that contains 10% post-consumer waste. All of these papers are FSC-certified. The nonrecycled portions of these papers are made from fiber sourced from well managed forests and other controlled wood sources

Savings derived from using these papers, rather than 100% virgin fiber, include:



225 trees preserved for the future



105,764 gallons of wastewater not discharged



7,079 pounds of solid waste not generated



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19,501 pounds of greenhouse gases prevented, equivalent to taking about 2 cars off the road for 1 year

Environmental impact estimates above were made using the Environmental Paper Network Paper Calculator. For more information visit www.papercalculator.org.



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