Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x
Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019
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
 
Exact name of registrant as specified in its charter
and principal executive office address and telephone number
 
State of
Incorporation
  
I.R.S. Employer
ID. Number
1-14514
 
Consolidated Edison, Inc.
 
New York
  
13-3965100
 
 
4 Irving Place, New York, New York 10003
 
 
  
 
 
 
(212) 460-4600
 
 
  
 
1-1217
 
Consolidated Edison Company of New York, Inc.
New York
  
13-5009340
 
 
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
 
Trading Symbol
 
Name of each exchange on which registered
Consolidated Edison, Inc.,
 
ED
 
New York Stock Exchange
Common Shares ($.10 par value)
 
 
 
 

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.
Consolidated Edison, Inc. (Con Edison)
Yes x
No ¨
Consolidated Edison Company of New York, Inc. (CECONY)
Yes x
No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Con Edison
Yes x
No ¨
CECONY
Yes x
No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Con Edison
Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Emerging growth company ¨
 
CECONY
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging growth company ¨
 



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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Con Edison
Yes ¨
No x
CECONY
Yes ¨
No x

As of April 30, 2019, Con Edison had outstanding 327,053,801 Common Shares ($.10 par value). All of the outstanding common equity of CECONY is held by Con Edison.


Filing Format
This Quarterly Report on Form 10-Q is a combined report being filed separately by two different registrants: Consolidated Edison, Inc. (Con Edison) and Consolidated Edison Company of New York, Inc. (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. 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.
 



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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.
Clean Energy Businesses
 
Con Edison Clean Energy Businesses, Inc., together with its subsidiaries
Con Edison Development
 
Consolidated Edison Development, Inc.
Con Edison Energy
 
Consolidated Edison Energy, Inc.
Con Edison Solutions
 
Consolidated Edison Solutions, Inc.
Con Edison Transmission
 
Con Edison Transmission, Inc., together with its subsidiaries
CET Electric
 
Consolidated Edison Transmission, LLC
CET Gas
 
Con Edison Gas Pipeline and Storage, LLC
O&R
 
Orange and Rockland Utilities, Inc.
RECO
 
Rockland Electric Company
The Companies
 
Con Edison and CECONY
The Utilities
 
CECONY and O&R
 
Regulatory Agencies, Government Agencies and Other Organizations
EPA
 
U.S. Environmental Protection Agency
FASB
 
Financial Accounting Standards Board
FERC
 
Federal Energy Regulatory Commission
IASB
 
International Accounting Standards Board
IRS
 
Internal Revenue Service
NJBPU
 
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
PJM
 
PJM Interconnection LLC
SEC
 
U.S. Securities and Exchange Commission
 
 
Accounting
 
 
AFUDC
 
Allowance for funds used during construction
ASU
 
Accounting Standards Update
GAAP
 
Generally Accepted Accounting Principles in the United States of America
HLBV
 
Hypothetical liquidation at book value
OCI
 
Other Comprehensive Income
VIE
 
Variable Interest Entity


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Environmental
 
 
CO2
 
Carbon dioxide
GHG
 
Greenhouse gases
MGP Sites
 
Manufactured gas plant sites
PCBs
 
Polychlorinated biphenyls
PRP
 
Potentially responsible party
RGGI
 
Regional Greenhouse Gas Initiative
Superfund
 
Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes
 
 
 
Units of Measure
 
 
AC
 
Alternating current
Bcf
 
Billion cubic feet
Dt
 
Dekatherms
kV
 
Kilovolt
kWh
 
Kilowatt-hour
MDt
 
Thousand dekatherms
MMlb
 
Million pounds
MVA
 
Megavolt ampere
MW
 
Megawatt or thousand kilowatts
MWh
 
Megawatt hour
 
 
 
Other
 
 
AMI
 
Advanced metering infrastructure
COSO
 
Committee of Sponsoring Organizations of the Treadway Commission
DER
 
Distributed energy resources
Fitch
 
Fitch Ratings
First Quarter Form 10-Q
 
The Companies' combined Quarterly Report on Form 10-Q for the quarterly period ended March 31 of the current year
Form 10-K
 
The Companies’ combined Annual Report on Form 10-K for the year ended December 31, 2018
LTIP
 
Long Term Incentive Plan
Moody’s
 
Moody’s Investors Service
REV
 
Reforming the Energy Vision
S&P
 
S&P Global Ratings
TCJA
 
The federal Tax Cuts and Jobs Act of 2017, as enacted on December 22, 2017
VaR
 
Value-at-Risk




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TABLE OF CONTENTS
 
  
  
PAGE
 
ITEM 1
Financial Statements (Unaudited)
 
 
Con Edison
 
 
 
 
 
 
 
CECONY
 
 
 
 
 
 
 
ITEM 2
ITEM 3
ITEM 4
ITEM 1
ITEM 1A
ITEM 6
 
 


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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:
the Companies are extensively regulated and are subject to penalties;
the Utilities’ rate plans may not provide a reasonable return;
the Companies may be adversely affected by changes to the Utilities’ rate plans;
the intentional misconduct of employees or contractors could adversely affect the Companies;
the failure of, or damage to, the Companies’ facilities could adversely affect the Companies;
a cyber attack could adversely affect the Companies;
the Companies are exposed to risks from the environmental consequences of their operations;
a disruption in the wholesale energy markets or failure by an energy supplier or customer could adversely affect the Companies;
the Companies have substantial unfunded pension and other postretirement benefit liabilities;
Con Edison’s ability to pay dividends or interest depends on dividends from its subsidiaries;
the Companies require access to capital markets to satisfy funding requirements;
changes to tax laws could adversely affect the Companies;
the Companies’ strategies may not be effective to address changes in the external business environment; and
the Companies also face other risks that are beyond their control.
The Companies assume no obligation to update forward-looking statements.





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Consolidated Edison, Inc.
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
  
For the Three Months Ended March 31,
(Millions of Dollars/Except Share Data)
2019
2018

OPERATING REVENUES
 
 
Electric
$1,941
$1,877
Gas
1,034
939
Steam
321
314
Non-utility
218
234
TOTAL OPERATING REVENUES
3,514
3,364
OPERATING EXPENSES
 
 
Purchased power
368
353
Fuel
106
124
Gas purchased for resale
442
378
Other operations and maintenance
794
836
Depreciation and amortization
413
348
Taxes, other than income taxes
605
570
TOTAL OPERATING EXPENSES
2,728
2,609
OPERATING INCOME
786
755
OTHER INCOME (DEDUCTIONS)
 
 
Investment income
24
20
Other income
11
6
Allowance for equity funds used during construction
3
4
Other deductions
(24)
(45)
TOTAL OTHER INCOME (DEDUCTIONS)
14
(15)
INCOME BEFORE INTEREST AND INCOME TAX EXPENSE
800
740
INTEREST EXPENSE
 
 
Interest on long-term debt
221
190
Other interest
29
7
Allowance for borrowed funds used during construction
(3)
(2)
NET INTEREST EXPENSE
247
195
INCOME BEFORE INCOME TAX EXPENSE
553
545
INCOME TAX EXPENSE
108
117
NET INCOME
$445
$428
Income attributable to non-controlling interest
21

Net income for common stock
$424
$428
Net income per common share—basic
$1.31
$1.38
Net income per common share—diluted
$1.31
$1.37
AVERAGE NUMBER OF SHARES OUTSTANDING—BASIC (IN MILLIONS)
322.5
310.4
AVERAGE NUMBER OF SHARES OUTSTANDING—DILUTED (IN MILLIONS)
323.4
311.6
The accompanying notes are an integral part of these financial statements.


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Consolidated Edison, Inc.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
  
Three Months Ended March 31,
(Millions of Dollars)
2019

2018

NET INCOME
$445
$428
INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST
(21
)

OTHER COMPREHENSIVE INCOME, NET OF TAXES
 
 
Pension and other postretirement benefit plan liability adjustments, net of taxes
4
4
TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAXES
4
4
COMPREHENSIVE INCOME
$428
$432
The accompanying notes are an integral part of these financial statements.



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Consolidated Edison, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
  
For the Three Months Ended March 31,
 
(Millions of Dollars)
2019

2018

OPERATING ACTIVITIES
 
 
Net income
$445
$428
PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME
 
 
Depreciation and amortization
413
348
Deferred income taxes
108
101
Rate case amortization and accruals
(29)
(28)
Common equity component of allowance for funds used during construction
(3)
(4)
Net derivative gains
10
(1)
Unbilled revenue and net unbilled revenue deferrals
11
48
Gain on sale of assets
(5)

Other non-cash items, net
(4
)
(23
)
CHANGES IN ASSETS AND LIABILITIES
 
 
Accounts receivable – customers
(43)
(147)
Materials and supplies, including fuel oil and gas in storage
31
33
Other receivables and other current assets
(36)
26
Taxes receivable

18
Prepayments
(448)
(422)
Accounts payable
(108)
30
Pensions and retiree benefits obligations, net
93
84
Pensions and retiree benefits contributions
(4)
(184)
Accrued taxes
(19)
(61)
Accrued interest
97
68
Superfund and environmental remediation costs, net
(1)
(2)
Distributions from equity investments
14
35
System benefit charge
6
63
Deferred charges, noncurrent assets and other regulatory assets
(34)
(246)
Deferred credits and other regulatory liabilities
94
179
Other current and noncurrent liabilities
(124)
(200)
NET CASH FLOWS FROM OPERATING ACTIVITIES
464
143
INVESTING ACTIVITIES
 
 
Utility construction expenditures
(783)
(790)
Cost of removal less salvage
(72)
(63)
Non-utility construction expenditures
(48)
(35)
Investments in electric and gas transmission projects
(38)
(32)
Proceeds from sale of assets
48

Other investing activities
5
11
NET CASH FLOWS USED IN INVESTING ACTIVITIES
(888)
(909)
FINANCING ACTIVITIES
 
 
Net issuance/(payment) of short-term debt
(1,131)
812
Issuance of long-term debt
825

Retirement of long-term debt
(11)
(10)
Debt issuance costs
(1)
(1)
Common stock dividends
(226)
(209)
Issuance of common shares - public offering
425

Issuance of common shares for stock plans
13
13
Distribution to noncontrolling interest
(2
)

NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES
(108)
605
CASH, TEMPORARY CASH INVESTMENTS, AND RESTRICTED CASH:
 
 
NET CHANGE FOR THE PERIOD
(532)
(161)
BALANCE AT BEGINNING OF PERIOD
1,006
844
BALANCE AT END OF PERIOD
$474
$683
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
 
 
Cash paid/(received) during the period for:
 
 
Interest
$130
$124
Income taxes
$3
$(13)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
 
 
Construction expenditures in accounts payable
$300
$352
Issuance of common shares for dividend reinvestment
$12
$12
Software licenses acquired but unpaid as of end of period
$100

$—


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


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Consolidated Edison, Inc.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Millions of Dollars)
March 31,
2019
December 31,
2018

ASSETS
 
 
CURRENT ASSETS
 
 
Cash and temporary cash investments
$406
$895
Accounts receivable – customers, less allowance for uncollectible accounts of $63 and $62 in 2019 and 2018, respectively
1,309
1,267
Other receivables, less allowance for uncollectible accounts of $7 and $5 in 2019 and 2018, respectively
267
285
Taxes receivable
49
49
Accrued unbilled revenue
500
514
Fuel oil, gas in storage, materials and supplies, at average cost
327
358
Prepayments
635
187
Regulatory assets
43
76
Restricted cash
68
111
Other current assets
177
122
TOTAL CURRENT ASSETS
3,781
3,864
INVESTMENTS
1,832
1,766
UTILITY PLANT, AT ORIGINAL COST
 
 
Electric
30,704
30,378
Gas
9,329
9,100
Steam
2,574
2,562
General
3,384
3,331
TOTAL
45,991
45,371
Less: Accumulated depreciation
9,953
9,769
Net
36,038
35,602
Construction work in progress
2,014
1,978
NET UTILITY PLANT
38,052
37,580
NON-UTILITY PLANT
 
 
Non-utility property, less accumulated depreciation of $296 and $275 in 2019 and 2018, respectively
3,976
4,000
Construction work in progress
124
169
NET PLANT
42,152
41,749
OTHER NONCURRENT ASSETS
 
 
Goodwill
440
440
Intangible assets, less accumulated amortization of $53 and $29 in 2019 and 2018, respectively
1,630
1,654
Regulatory assets
4,245
4,294
Operating lease right-of-use asset
852

Other deferred charges and noncurrent assets
134
153
TOTAL OTHER NONCURRENT ASSETS
7,301
6,541
TOTAL ASSETS
$55,066
$53,920
The accompanying notes are an integral part of these financial statements.
 



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Consolidated Edison, Inc.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
 
 
(Millions of Dollars)
March 31,
2019

December 31,
2018

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
CURRENT LIABILITIES
 
 
Long-term debt due within one year
$2,029
$650
Term loan

825
Notes payable
1,435
1,741
Accounts payable
1,010
1,187
Customer deposits
351
351
Accrued taxes
43
61
Accrued interest
226
129
Accrued wages
109
109
Fair value of derivative liabilities
46
50
Regulatory liabilities
152
114
System benefit charge
633
627
Operating lease liabilities
50

Other current liabilities
264
363
TOTAL CURRENT LIABILITIES
6,348
6,207
NONCURRENT LIABILITIES
 
 
Provision for injuries and damages
143
146
Pensions and retiree benefits
1,231
1,228
Superfund and other environmental costs
776
779
Asset retirement obligations
419
450
Fair value of derivative liabilities
51
16
Deferred income taxes and unamortized investment tax credits
5,951
5,820
Operating lease liabilities
825

Regulatory liabilities
4,613
4,641
Other deferred credits and noncurrent liabilities
275
299
TOTAL NONCURRENT LIABILITIES
14,284
13,379
LONG-TERM DEBT
16,933
17,495
EQUITY
 
 
Common shareholders’ equity
17,369
16,726
Noncontrolling interest
132
113
TOTAL EQUITY (See Statement of Equity)
17,501
16,839
TOTAL LIABILITIES AND EQUITY
$55,066
$53,920
The accompanying notes are an integral part of these financial statements.



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Consolidated Edison, Inc.
CONSOLIDATED STATEMENT OF EQUITY (UNAUDITED)
 
(In Millions)
Common Stock
Additional
Paid-In
Capital
Retained
Earnings
Treasury Stock
Capital
Stock
Expense
Accumulated
Other
Comprehensive
Income/(Loss)
Non-
controlling
Interest
Total
Shares
Amount
Shares
Amount
BALANCE AS OF DECEMBER 31, 2017
310
$34
$6,298
$10,235
23
$(1,038)
$(85)
$(26)
$7
$15,425
Net income



428





428
Common stock dividends ($0.72 per share)



(221)





(221)
Issuance of common shares for stock plans
1

25






25
Other comprehensive income







4

4
Noncontrolling interest










BALANCE AS OF MARCH 31, 2018
311
$34
$6,323
$10,442
23
$(1,038)
$(85)
$(22)
$7
$15,661
 
 
 
 
 
 
 
 
 
 
 
BALANCE AS OF DECEMBER 31, 2018
321
$34
$7,117
$10,728
23
$(1,038)
$(99)
$(16)
$113
$16,839
Net income



424




21
445
Common stock dividends ($0.74 per share)



(237)





(237)
Issuance of common shares – public offering
6

433



(8)


425
Issuance of common shares for stock plans


27






27
Other comprehensive income







4

4
Distributions to noncontrolling interest








(2)
(2)
BALANCE AS OF MARCH 31, 2019
327
$34
$7,577
$10,915
23
$(1,038)
$(107)
$(12)
$132
$17,501
The accompanying notes are an integral part of these financial statements.



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Consolidated Edison Company of New York, Inc.
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
  
For the Three Months Ended March 31,
(Millions of Dollars)
2019
2018
OPERATING REVENUES
 
 
Electric
$1,797
$1,729
Gas
921
841
Steam
321
314
TOTAL OPERATING REVENUES
3,039
2,884
OPERATING EXPENSES
 
 
Purchased power
322
303
Fuel
106
124
Gas purchased for resale
317
273
Other operations and maintenance
659
630
Depreciation and amortization
334
310
Taxes, other than income taxes
575
539
TOTAL OPERATING EXPENSES
2,313
2,179
OPERATING INCOME
726
705
OTHER INCOME (DEDUCTIONS)
 
 
Investment and other income
9
5
Allowance for equity funds used during construction
3
3
Other deductions
(19)
(39)
TOTAL OTHER INCOME (DEDUCTIONS)
(7)
(31)
INCOME BEFORE INTEREST AND INCOME TAX EXPENSE
719
674
INTEREST EXPENSE
 
 
Interest on long-term debt
169
163
Other interest
17
5
Allowance for borrowed funds used during construction
(3)
(2)
NET INTEREST EXPENSE
183
166
INCOME BEFORE INCOME TAX EXPENSE
536
508
INCOME TAX EXPENSE
124
119
NET INCOME
$412
$389
The accompanying notes are an integral part of these financial statements.
 



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Consolidated Edison Company of New York, Inc.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
 
  
For the Three Months Ended March 31,
(Millions of Dollars)
2019

2018

NET INCOME
$412
$389
OTHER COMPREHENSIVE INCOME, NET OF TAXES


COMPREHENSIVE INCOME
$412
$389
The accompanying notes are an integral part of these financial statements.
 



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Consolidated Edison Company of New York, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
 
  
For the Three Months Ended March 31,
(Millions of Dollars)
2019

2018

OPERATING ACTIVITIES
 
 
Net income
$412
$389
PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME
 
 
Depreciation and amortization
334
310
Deferred income taxes
122
108
Rate case amortization and accruals
(29)
(33)
Common equity component of allowance for funds used during construction
(3)
(3)
Unbilled revenue and net unbilled revenue deferrals
19
13
Gain on sale of assets
(5)

Other non-cash items, net
(11)
(10)
CHANGES IN ASSETS AND LIABILITIES
 
 
Accounts receivable – customers
(36)
(126)
Materials and supplies, including fuel oil and gas in storage
24
24
Other receivables and other current assets
(24)
(8)
Accounts receivable from affiliated companies
(6)
(19)
Prepayments
(438)
(417)
Accounts payable
(75)
37
Accounts payable to affiliated companies

7
Pensions and retiree benefits obligations, net
87
80
Pensions and retiree benefits contributions
(3)
(183)
Superfund and environmental remediation costs, net
(2)
(3)
Accrued taxes
(18)
(68)
Accrued taxes to affiliated companies

3
Accrued interest
72
68
System benefit charge
7
59
Deferred charges, noncurrent assets and other regulatory assets
(47)
(202)
Deferred credits and other regulatory liabilities
92
161
Other current and noncurrent liabilities
(77)
(131)
NET CASH FLOWS FROM OPERATING ACTIVITIES
395
56
INVESTING ACTIVITIES
 
 
Utility construction expenditures
(728)
(747)
Cost of removal less salvage
(70)
(61)
Proceeds from sale of assets
48

NET CASH FLOWS USED IN INVESTING ACTIVITIES
(750)
(808)
FINANCING ACTIVITIES
 
 
Net issuance/(payment) of short-term debt
(107)
763
Debt issuance costs
(1)
(1)
Capital contribution by parent
225
45
Dividend to parent
(228)
(211)
NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES
(111)
596
CASH, TEMPORARY CASH INVESTMENTS, AND RESTRICTED CASH:
 
 
NET CHANGE FOR THE PERIOD
(466)
(156)
BALANCE AT BEGINNING OF PERIOD
818
730
BALANCE AT END OF PERIOD
$352
$574
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
 
 
Cash paid/(received) during the period for:
 
 
Interest
$101
$93
Income taxes
$8
$18
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
 
 
Construction expenditures in accounts payable
$267
$272
Software licenses acquired but unpaid as of end of period
$95

$—

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


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Consolidated Edison Company of New York, Inc.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
 
(Millions of Dollars)
March 31,
2019
December 31,
2018

ASSETS
 
 
CURRENT ASSETS
 
 
Cash and temporary cash investments
$352
$818
Accounts receivable – customers, less allowance for uncollectible accounts of $58 and $57 in 2019 and 2018, respectively
1,198
1,163
Other receivables, less allowance for uncollectible accounts of $6 and $3 in 2019 and 2018, respectively
182
211
Taxes receivable
5
5
Accrued unbilled revenue
370
392
Accounts receivable from affiliated companies
220
214
Fuel oil, gas in storage, materials and supplies, at average cost
280
304
Prepayments
555
117
Regulatory assets
29
64
Other current assets
129
69
TOTAL CURRENT ASSETS
3,320
3,357
INVESTMENTS
407
385
UTILITY PLANT, AT ORIGINAL COST
 
 
Electric
28,903
28,595
Gas
8,493
8,295
Steam
2,574
2,562
General
3,100
3,056
TOTAL
43,070
42,508
Less: Accumulated depreciation
9,150
8,988
Net
33,920
33,520
Construction work in progress
1,894
1,850
NET UTILITY PLANT
35,814
35,370
NON-UTILITY PROPERTY
 
 
Non-utility property, less accumulated depreciation of $25 in 2019 and 2018
3
4
NET PLANT
35,817
35,374
OTHER NONCURRENT ASSETS
 
 
Regulatory assets
3,895
3,923
Operating lease right-of-use asset
627

Other deferred charges and noncurrent assets
56
69
TOTAL OTHER NONCURRENT ASSETS
4,578
3,992
TOTAL ASSETS
$44,122
$43,108
The accompanying notes are an integral part of these financial statements.
 



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Consolidated Edison Company of New York, Inc.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
 

(Millions of Dollars)
March 31,
2019
December 31,
2018

LIABILITIES AND SHAREHOLDER’S EQUITY
 
 
CURRENT LIABILITIES
 
 
Long-term debt due within one year
$475
$475
Notes payable
1,085
1,192
Accounts payable
870
977
Accounts payable to affiliated companies
17
17
Customer deposits
339
339
Accrued taxes
38
55
Accrued interest
184
112
Accrued wages
99
99
Fair value of derivative liabilities
24
25
Regulatory liabilities
105
73
System benefit charge
576
569
Operating lease liabilities
41

Other current liabilities
201
267
TOTAL CURRENT LIABILITIES
4,054
4,200
NONCURRENT LIABILITIES
 
 
Provision for injuries and damages
137
141
Pensions and retiree benefits
969
952
Superfund and other environmental costs
691
693
Asset retirement obligations
295
292
Fair value of derivative liabilities
32
6
Deferred income taxes and unamortized investment tax credits
5,893
5,739
Operating lease liabilities
598

Regulatory liabilities
4,220
4,258
Other deferred credits and noncurrent liabilities
236
241
TOTAL NONCURRENT LIABILITIES
13,071
12,322
LONG-TERM DEBT
13,678
13,676
SHAREHOLDER’S EQUITY (See Statement of Shareholder’s Equity)
13,319
12,910
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY
$44,122
$43,108
The accompanying notes are an integral part of these financial statements.
 


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Consolidated Edison Company of New York, Inc.
CONSOLIDATED STATEMENT OF SHAREHOLDER’S EQUITY (UNAUDITED)
 
Common Stock
Additional
Paid-In
Capital
Retained
Earnings
Repurchased
Con Edison
Stock
Capital
Stock
Expense
Accumulated
Other
Comprehensive
Income/(Loss)
Total
(In Millions)
Shares
Amount
BALANCE AS OF DECEMBER 31, 2017
235
$589
$4,649
$8,231
$(962)
$(62)
$(6)
$12,439
Net income



389



$389
Common stock dividend to parent



(211)



(211
)
Capital contribution by parent


45




45

Other comprehensive income








BALANCE AS OF MARCH 31, 2018
235
$589
$4,694
$8,409
$(962)
$(62)
$(6)
$12,662
 
 
 
 
 
 
 
 
 
BALANCE AS OF DECEMBER 31, 2018
235
$589
$4,769
$8,581
$(962)
$(62)
$(5)
$12,910
Net income



412



412

Common stock dividend to parent



(228)



(228
)
Capital contribution by parent


225




225

Other comprehensive income








BALANCE AS OF MARCH 31, 2019
235
$589
$4,994
$8,765
$(962)
$(62)
$(5)
$13,319
The accompanying notes are an integral part of these financial statements.


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NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 
General
These combined notes accompany and form an integral part of the separate consolidated financial statements of each of the two separate registrants: Consolidated Edison, Inc. and its subsidiaries (Con Edison) and Consolidated Edison Company of New York, Inc. and its subsidiaries (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 Orange and Rockland Utilities, Inc. (O&R), Con Edison Clean Energy Businesses, Inc. (together with its subsidiaries, the Clean Energy Businesses) and Con Edison Transmission, Inc. (together with its subsidiaries, Con Edison Transmission) 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.
The separate interim consolidated financial statements of each of the Companies are unaudited but, in the opinion of their respective managements, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair presentation of the results for the interim periods presented. The Companies’ separate interim consolidated financial statements should be read together with their separate audited financial statements (including the combined notes thereto) included in Item 8 of their combined Annual Report on Form 10-K for the year ended December 31, 2018. Certain prior period amounts have been reclassified to conform to the current period presentation.
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 subsidiary, provides electric service in southeastern New York and northern New Jersey and gas service in southeastern New York. Con Edison Clean Energy Businesses, Inc. has three subsidiaries: Consolidated Edison Development, Inc. (Con Edison Development), a company that develops, owns and operates renewable and energy infrastructure projects; Consolidated Edison Energy, Inc. (Con Edison Energy), a company that provides energy-related products and services to wholesale customers; and Consolidated Edison Solutions, Inc. (Con Edison Solutions), a company that provides energy-related products and services to retail customers. Con Edison Transmission, Inc. invests in electric transmission facilities through its subsidiary, Consolidated Edison Transmission, LLC (CET Electric), and invests in gas pipeline and storage facilities through its subsidiary Con Edison Gas Pipeline and Storage, LLC (CET Gas).

Note A – Summary of Significant Accounting Policies and Other Matters
Revenue Recognition
The following table presents, for the three months ended March 31, 2019, and 2018 revenue from contracts with customers as defined in Accounting Standards Codification (ASC) Topic 606, "Revenue from Contracts with Customers," as well as additional revenue from sources other than contracts with customers, disaggregated by major source.



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Table of Contents

 
For the Three Months Ended March 31, 2019
For the Three Months Ended March 31, 2018
(Millions of Dollars)
Revenues from contracts with customers
 
Other revenues (a)
Total operating revenues
Revenues from contracts with customers
 
Other revenues (a)
Total operating revenues
CECONY
 
 
 
 
 
 
 
 
Electric
$1,714
 
$83
$1,797
$1,771
 
$(42)
$1,729
Gas
910
 
11
921
835
 
6
841
Steam
317
 
4
321
315
 
(1)
314
Total CECONY
$2,941
 
$98
$3,039
$2,921
 
$(37)
$2,884
O&R
 
 
 
 
 
 
 
 
Electric
143
 
2
145
152
 
(3)
149
Gas
114
 
(1)
113
110
 
(13)
97
Total O&R
$257
 
$1
$258
$262
 
$(16)
$246
Clean Energy Businesses
 
 
 
 
 
 
 
 
Renewables
106
(b)

106
132
(b)

132
Energy services
23
 

23
17
 

17
Other

 
88
88

 
84
84
Total Clean Energy Businesses
$129
 
$88
$217
$149
 
$84
$233
Con Edison Transmission
1
 

1
1
 

1
Other (c)


(1)
(1)




Total Con Edison
$3,328
 
$186
$3,514
$3,333
 
$31
$3,364
(a) For the Utilities, this includes revenue from alternative revenue programs, such as the revenue decoupling mechanisms under their New York electric and gas rate plans. For the Clean Energy Businesses, this includes revenue from wholesale services.
(b) Included within the totals for Renewables revenue at the Clean Energy Businesses is $2 million and $89 million for the three months ended March 31, 2019 and 2018, respectively, of revenue related to engineering, procurement and construction services.
(c)
Parent company and consolidation adjustments.

 
2019
2018
(Millions of Dollars)
Unbilled contract revenue (a)
Unearned revenue (b)

 
Unbilled contract revenue (a)
Unearned revenue (b)
 
Beginning balance as of January 1,
$29
$20
 
$58
$87
 
Additions (c)
24

 
36
32
 
Subtractions (c)
15
1
(d)
15
70
(d)
Ending balance as of March 31,
$38
$19
 
$79
$49
 
(a)
Unbilled contract revenue represents accumulated incurred costs and earned profits on contracts (revenue arrangements), which have been recorded as revenue, but have not yet been billed to customers, and which represent contract assets as defined in Topic 606. Substantially all accrued unbilled contract revenue is expected to be collected within one year. Unbilled contract revenue arises from the cost-to-cost method of revenue recognition. Unbilled contract revenue from fixed-price type contracts is converted to billed receivables when amounts are invoiced to customers according to contractual billing terms, which generally occur when deliveries or other performance milestones are completed.
(b)
Unearned revenue represents a liability for billings to customers in excess of earned revenue, which are contract liabilities as defined in Topic 606.
(c)
Additions for unbilled contract revenue and subtractions for unearned revenue represent additional revenue earned. Additions for unearned revenue and subtractions for unbilled contract revenue represent billings. Activity also includes appropriate balance sheet classification for the period.
(d)
Of the subtractions from unearned revenue, $1 million and $48 million were included in the balance as of January 1, 2019 and 2018, respectively.


As of March 31, 2019, the aggregate amount of the remaining fixed performance obligations is $79 million, of which $43 million will be recognized within the next two years, and the remaining $36 million will be recognized pursuant to long-term service and maintenance agreements.

Utility Plant
General utility plant of Con Edison and CECONY included $98 million and $93 million, respectively, at March 31, 2019 and $100 million and $95 million, respectively, at December 31, 2018, related to a May 2018 acquisition of software licenses. The estimated aggregate annual amortization expense related to the software licenses for Con Edison and CECONY is $7 million. The accumulated amortization for Con Edison and CECONY was $5 million at March 31, 2019 and was $3 million at December 31, 2018.



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Table of Contents

Long-Lived and Intangible Assets
In January 2019, Pacific Gas and Electric Company (PG&E) filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The output of Con Edison Development renewable electric production projects with an aggregate of 680 MW (AC) of generating capacity (PG&E Projects) is sold to PG&E under long-term power purchase agreements (PG&E PPAs). Most of the PG&E PPAs have contract prices that are higher than estimated market prices. PG&E, as a debtor in possession, may assume or reject the PG&E PPAs, subject to review by the bankruptcy court or, pursuant to a January 2019 FERC order (which PG&E is challenging), the bankruptcy court and FERC. In a May 1, 2019 order, FERC denied PG&E’s request for a rehearing of the January 2019 order and reaffirmed its jurisdiction to review and approve the modification or abrogation of wholesale power contracts that are the subject of rejection in bankruptcy. The PG&E bankruptcy is an event of default under the PG&E PPAs. Unless the lenders for the related project debt otherwise agree, distributions from the related projects to Con Edison Development will not be made during the pendency of the bankruptcy. At March 31, 2019, Con Edison’s consolidated balance sheet included $859 million of net non-utility plant relating to the PG&E Projects, $1,108 million of intangible assets relating to the PG&E PPAs, $289 million of net non-utility plant of additional projects that secure the related project debt and $1,041 million of non-recourse related project debt. See "Long-term Debt" in Note C. Con Edison has tested whether its net non-utility plant relating to the PG&E Projects and intangible assets relating to the PG&E PPAs have been impaired. The projected future cash flows used in the test reflected Con Edison’s expectation that the PG&E PPAs are not likely to be rejected. Based on the test, Con Edison has determined that there was no impairment. If, in the future, one or more of the PG&E PPAs is rejected or any such rejection becomes likely, there will be an impairment of the related intangible assets and could be an impairment of the related non-utility plant. The amount of any such impairment could be material.

Earnings Per Common Share
Con Edison presents basic and diluted earnings per share (EPS) on the face of its consolidated income statement. Basic EPS is 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 and deferred stock units for which the average market price of the common shares for the period was greater than the exercise price.

For the three months ended March 31, 2019 and 2018, basic and diluted EPS for Con Edison are calculated as follows:
 
 
For the Three Months Ended March 31,
(Millions of Dollars, except per share amounts/Shares in Millions)
2019
2018
Net income for common stock
$424
$428
Weighted average common shares outstanding – basic
322.5
310.4
Add: Incremental shares attributable to effect of potentially dilutive securities
0.9
1.2
Adjusted weighted average common shares outstanding – diluted
323.4
311.6
Net Income per common share – basic
$1.31
$1.38
Net Income per common share – diluted
$1.31
$1.37

The computation of diluted EPS for the three months ended March 31, 2019 and 2018 excludes immaterial amounts of performance share awards that were not included because of their anti-dilutive effect.



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Changes in Accumulated Other Comprehensive Income/(Loss) by Component
For the three months ended March 31, 2019 and 2018, changes to accumulated other comprehensive income/(loss) (OCI) for Con Edison and CECONY are as follows:
 
 
For the Three Months Ended March 31,
 
        Con Edison
        CECONY
(Millions of Dollars)
2019
2018
2019

2018

Beginning balance, accumulated OCI, net of taxes (a)
$(16)
$(26)
$(5)
$(6)
OCI before reclassifications, net of tax of $(1) for Con Edison in 2019 and 2018
2
3


Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $(1) for Con Edison in 2018 (a)(b)
2
1


Current period OCI, net of taxes
4
4


Ending balance, accumulated OCI, net of taxes
$(12)
$(22)
$(5)
$(6)
(a)
Tax reclassified from accumulated OCI is reported in the income tax expense line item of the consolidated income statement.
(b)
For the portion of unrecognized pension and other postretirement benefit costs relating to the 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 total periodic pension and other postretirement benefit cost. See Notes E and F.

Reconciliation of Cash, Temporary Cash Investments and Restricted Cash
Cash, temporary cash investments and restricted cash are presented on a combined basis in the Companies’ consolidated statements of cash flows. At March 31, 2019 and 2018, cash, temporary cash investments and restricted cash for Con Edison and CECONY are as follows:

 
At March 31,
 
Con Edison
CECONY
(Millions of Dollars)
2019
2018
2019

2018

Cash and temporary cash investments
$406
$651
$352
$574
Restricted cash (a)
68
32


Total cash, temporary cash investments and restricted cash
$474
$683
$352
$574
(a)
Restricted cash included cash of Con Edison Development renewable electric production project subsidiaries ($67 million and $31 million at March 31, 2019 and 2018, respectively) that, under the related project debt agreements, is restricted until the various maturity dates of the project debt to being used for normal operating expenses and capital expenditures, debt service, and required reserves. During the pendency of the PG&E bankruptcy, unless the lenders for the related project debt otherwise agree, cash may not be distributed from the related projects to Con Edison Development. See “Long-Lived and Intangible Assets,” above, and Note C. In addition, restricted cash includes O&R's New Jersey utility subsidiary, Rockland Electric Company transition bond charge collections, net of principal, interest, trustee and service fees ($1 million at March 31, 2019 and 2018) that are restricted until the bonds mature in 2019.

Note B – Regulatory Matters
Rate Plans
CECONY – Electric
In April 2019, CECONY preliminarily updated its January 2019 request to the New York State Public Service Commission (NYSPSC) for an electric rate increase effective January 2020. The company decreased its requested January 2020 rate increase by $12 million to $473 million, increased its illustrated January 2021 rate increase by $7 million to $359 million and decreased its illustrated January 2022 rate increase by $14 million to $249 million.

CECONY – Gas
In April 2019, CECONY preliminarily updated its January 2019 request to the NYSPSC for a gas rate increase effective January 2020. The company decreased its requested January 2020 rate increase by $9 million to $201 million, decreased its illustrated January 2021 rate increase by $14 million to $124 million and decreased its illustrated January 2022 rate increase by $1 million to $154 million.

O&R New York – Electric and Gas
In March 2019, the NYSPSC approved the November 2018 joint proposal for new electric and gas rates. The joint proposal provides for electric rate increases of $13.4 million, $8.0 million and $5.8 million, effective January 1, 2019, 2020 and 2021, respectively. The joint proposal provides for a gas rate decrease of $7.5 million, effective January 1, 2019, and gas rate increases of $3.6 million and $0.7 million, effective January 1, 2020 and 2021.



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Table of Contents

Other Regulatory Matters
In August and November 2017, the NYSPSC issued orders in its proceeding investigating an April 21, 2017 Metropolitan Transportation Authority (MTA) subway power outage. The orders indicated that the investigation determined that the outage was caused by a failure of CECONY’s electricity supply to a subway station, which led to a loss of the subway signals, and that one of the secondary services to the MTA facility had been improperly rerouted and was not properly documented by the company. The orders also indicated that the loss of power to the subway station affected multiple subway lines and caused widespread delays across the subway system. Pursuant to the orders, the company is required to take certain actions, including inspecting, repairing and installing certain electrical equipment that serves the subway system, analyzing power supply and power quality events affecting the MTA’s signaling services, and filing monthly reports with the NYSPSC on all of the company's activities related to the subway system. The company completed the required actions in 2018. Through March 31, 2019, the company incurred costs related to this matter of $270 million. Included in this amount is $31 million in capital and operating and maintenance costs reflected in the company's electric rate plan and $239 million deferred as a regulatory asset that the company is seeking to recover in its pending electric rate proceeding. The company is unable to estimate the amount or range of its possible loss related to this matter. At March 31, 2019, the company had not accrued a liability related to this matter.

In August 2018, the NYSPSC ordered CECONY to begin on January 1, 2019 to credit the company's electric and gas customers, and to begin on October 1, 2018 to credit its steam customers, with the net benefits of the federal Tax Cuts and Jobs Act of 2017 (TCJA) as measured based on amounts reflected in its rate plans prior to the enactment of the TCJA in December 2017. The net benefits include the revenue requirement impact of the reduction in the corporate federal income tax rate to 21 percent, the elimination for utilities of bonus depreciation and the amortization of excess deferred federal income taxes. CECONY estimates that its credit of net benefits of the TCJA to its electric, gas and steam customers in 2019 will amount to $259 million, $113 million and $25 million, respectively. CECONY’s net benefits prior to January 1, 2019 allocable to the company’s electric customers ($311 million) are to be deferred and addressed in its pending electric rate proceeding. CECONY’s net benefits prior to January 1, 2019 allocable to the company’s gas customers ($90 million) and net benefits prior to October 1, 2018 allocable to the company’s steam customers ($15 million) are to be amortized over a three-year period. CECONY’s net regulatory liability for future income taxes, including both the protected and unprotected portions, allocable to the company’s electric customers ($2,489 million) is to continue to be deferred and addressed in its pending electric rate proceeding and the amounts allocable to its gas and steam customers ($804 million and $185 million, respectively) are to be amortized over the remaining lives of the related assets (with the amortization period for the unprotected portion subject to review in its pending gas rate proceeding and next steam rate proceeding).

In January 2018, the NYSPSC issued an order initiating a focused operations audit of the income tax accounting of certain utilities, including CECONY and O&R. The Utilities are unable to estimate the amount or range of their possible loss related to this matter. At March 31, 2019, the Utilities had not accrued a liability related to this matter.

In March 2018, Winter Storms Riley and Quinn caused damage to the Utilities’ electric distribution systems and interrupted service to approximately 209,000 CECONY customers, 93,000 O&R customers and 44,000 RECO customers. At March 31, 2019, CECONY's costs related to March 2018 storms, including Riley and Quinn, amounted to $133 million, including operation and maintenance expenses reflected in its electric rate plan ($15 million), operation and maintenance expenses charged against a storm reserve pursuant to its electric rate plan ($84 million), capital expenditures ($29 million) and removal costs ($6 million). At March 31, 2019, O&R and RECO costs related to 2018 storms amounted to $43 million and $17 million, respectively, most of which were deferred as regulatory assets pursuant to their electric rate plans. The NYSPSC investigated the preparation and response to the storms by CECONY, O&R, and other New York electric utilities, including all aspects of their emergency response plans. In April 2019, following the issuance of a NYSPSC staff report on the investigation, the NYSPSC ordered the utilities to show cause why the NYSPSC should not commence a penalty action against them for violating their emergency response plans. The Utilities are unable to estimate the amount or range of their possible loss related to this matter. At March 31, 2019, the Utilities had not accrued a liability related to this matter.

In May 2018, FERC denied a complaint the NJBPU filed with FERC seeking the re-allocation to CECONY of certain PJM Interconnection LLC (PJM) transmission costs that had been allocated to the company prior to April 2017 when transmission service provided to the company pursuant to the PJM open access transmission tariff terminated. The transmission service terminated because the company did not exercise its option to continue the service following a series of requests PJM had submitted to FERC that substantially increased the charges for the transmission service. CECONY challenged each of these requests. FERC rejected all but one of CECONY’s protests. In June


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2015 and May 2016, CECONY filed appeals of certain FERC decisions with the U.S. Court of Appeals. In July 2018, FERC established a settlement proceeding relating to the allocation of PJM transmission costs. Under CECONY’s electric rate plan, unless and until changed by the NYSPSC, the company will recover all charges incurred associated with the transmission service.

In July 2018, the NYSPSC commenced an investigation into the rupture of a CECONY steam main (see Note H).

In March 2019, the NYSPSC ordered CECONY to show cause why the NYSPSC should not commence a penalty action and prudence proceeding against CECONY for alleged violations of gas operator qualification, performance, and inspection requirements. The company is seeking to resolve this matter through settlement negotiations with the NYSPSC staff. Any settlement would be subject to NYSPSC approval. The company is unable to estimate the amount or range of its possible loss related to this matter. At March 31, 2019, the company had not accrued a liability related to this matter.



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Table of Contents

Regulatory Assets and Liabilities
Regulatory assets and liabilities at March 31, 2019 and December 31, 2018 were comprised of the following items:
 
  
         Con Edison
 
        CECONY
(Millions of Dollars)
2019
2018
 
2019

2018

Regulatory assets
 
 
 
 
 
Unrecognized pension and other postretirement costs
$2,166
$2,238

$2,052
$2,111
Environmental remediation costs
798
810

706
716
Revenue taxes
299
291

286
278
MTA power reliability deferral
239
229
 
239
229
Property tax reconciliation
114
101

101
86
Deferred storm costs
77
76



Municipal infrastructure support costs
75
67
 
75
67
Pension and other postretirement benefits deferrals
63
73
 
45
56
System peak reduction and energy efficiency programs
60
72
 
59
70
Deferred derivative losses
43
17
 
37
11
Brooklyn Queens demand management program
37
39
 
37
39
Meadowlands heater odorization project
36
36
 
36
36
Unamortized loss on reacquired debt
34
36

32
34
Preferred stock redemption
23
23
 
23
23
Recoverable REV demonstration project costs
20
20
 
18
18
Gate station upgrade project
18
17
 
18
17
Indian Point Energy Center program costs
7
13
 
7
13
Workers’ compensation
6
5
 
6
5
O&R transition bond charges
1
2



Other
129
129

118
114
Regulatory assets – noncurrent
4,245
4,294

3,895
3,923
Deferred derivative losses
39
36

29
29
Recoverable energy costs
4
40


35
Regulatory assets – current
43
76

29
64
Total Regulatory Assets
$4,288
$4,370

$3,924
$3,987
Regulatory liabilities





Future income tax
$2,496
$2,515
 
$2,347
$2,363
Allowance for cost of removal less salvage
934
928

795
790
TCJA net benefits*
438
434
 
417
411
Energy efficiency portfolio standard unencumbered funds
124
127
 
119
122
Net unbilled revenue deferrals
115
117

115
117
Pension and other postretirement benefit deferrals
62
62
 
38
40
Net proceeds from sale of property
46
6
 
46
6
Property tax refunds
45
45
 
45
45
System benefit charge carrying charge
31
27
 
28
24
Settlement of prudence proceeding
29
37

29
37
Property tax reconciliation
26
36

26
36
BQDM and REV Demo reconciliations
20
18
 
20
18
Earnings sharing - electric, gas and steam
19
36

10
27
Carrying charges on repair allowance and bonus depreciation
15
21
 
14
21
Settlement of gas proceedings
15
15
 
15
15
New York State income tax rate change
12
17

12
17
Unrecognized other postretirement costs
11
7
 
6
7
Base rate change deferrals
7
10

7
10
Other
168
183

131
152
Regulatory liabilities – noncurrent
4,613
4,641

4,220
4,258
Revenue decoupling mechanism
34
53

22
36
Refundable energy costs
83
31
 
51
8
Deferred derivative gains
35
30

32
29
Regulatory liabilities – current
152
114

105
73
Total Regulatory Liabilities
$4,765
$4,755

$4,325
$4,331
* See "Other Regulatory Matters," above.



25

Table of Contents

Note C – Capitalization
In February 2019, Con Edison borrowed $825 million under a two-year variable-rate term loan to fund the repayment of a 6-month variable-rate term loan.

In March 2019, Con Edison issued 5,649,369 shares of its common stock for $425 million upon physical settlement of the remaining shares subject to its November 2018 forward sale agreements.

The carrying amounts and fair values of long-term debt at March 31, 2019 and December 31, 2018 were:
 
(Millions of Dollars)
2019
2018
Long-Term Debt (including current portion) (a)
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Con Edison
$18,962
$20,304
$18,145
$18,740
CECONY
$14,153
$15,371
$14,151
$14,685
(a)
Amounts shown are net of unamortized debt expense and unamortized debt discount of $181 million and $137 million for Con Edison and CECONY, respectively, as of March 31, 2019 and $185 million and $139 million for Con Edison and CECONY, respectively, as of December 31, 2018.

The fair values of the Companies' long-term debt have been estimated primarily using available market information and at March 31, 2019 are classified as Level 2 (see Note M).

At December 31, 2018, the Clean Energy Businesses had $2,076 million of non-recourse project debt secured by the pledge of the applicable renewable energy production projects, of which $1,965 million was included in long-term debt and $111 million was included in long-term debt due within one year in Con Edison's consolidated balance sheet. As a result of the January 2019 PG&E bankruptcy (see "Long-Lived and Intangible Assets" in Note A), during the first quarter of 2019, Con Edison reclassified on its consolidated balance sheet the PG&E-related project debt that was included in long-term debt to long-term debt due within one year. At March 31, 2019, long-term debt due within one year included $1,041 million of PG&E-related project debt. The lenders for the PG&E-related project debt may, upon written notice, declare principal and interest on the PG&E-related project debt to be due and payable immediately and, if such amounts are not timely paid, foreclose on the related projects. The company is seeking to negotiate agreements with the PG&E-related project debt lenders pursuant to which the lenders would defer exercising these remedies.  

Note D – Short-Term Borrowing
At March 31, 2019, Con Edison had $1,435 million of commercial paper outstanding of which $1,085 million was outstanding under CECONY’s program. The weighted average interest rate at March 31, 2019 was 2.7 percent for both Con Edison and CECONY. At December 31, 2018, Con Edison had $1,741 million of commercial paper outstanding of which $1,192 million was outstanding under CECONY’s program. The weighted average interest rate at December 31, 2018 was 3.0 percent for both Con Edison and CECONY.
At March 31, 2019 and December 31, 2018, no loans were outstanding under the Companies' December 2016 credit agreement (Credit Agreement). An immaterial amount of letters of credit were outstanding under the Credit Agreement as of March 31, 2019 and December 31, 2018. In April 2019, the termination date of the Credit Agreement was extended from December 2022 to December 2023 with respect to banks with aggregate commitments of $2,200 million.

Note E – Pension Benefits
Total Periodic Benefit Cost
The components of the Companies’ total periodic benefit cost for the three months ended March 31, 2019 and 2018 were as follows:
 


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For the Three Months Ended March 31,
 
Con Edison
CECONY
(Millions of Dollars)
2019
2018
2019
2018
Service cost – including administrative expenses
$62
$72
$58
$68
Interest cost on projected benefit obligation
150
140
141
131
Expected return on plan assets
(247)
(258)
(234)
(245)
Recognition of net actuarial loss
130
172
123
163
Recognition of prior service cost/(credit)
(4)
(4)
(5)
(5)
TOTAL PERIODIC BENEFIT COST
$91
$122
$83
$112
Cost capitalized
(26)
(31)
(24)
(29)
Reconciliation to rate level
(5)
(23)
(4)
(25)
Total expense recognized
$60
$68
$55
$58

Components of net periodic benefit cost other than service cost are presented outside of operating income on the Companies' consolidated income statements, and only the service cost component is eligible for capitalization. Accordingly, the service cost component is included in the line "Other operations and maintenance" and the non-service cost components are included in the line "Other deductions" in the Companies' consolidated income statements.

Expected Contributions
Based on estimates as of March 31, 2019, the Companies expect to make contributions to the pension plans during 2019 of $350 million (of which $318 million is to be made 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 supplemental plans. During the first three months of 2019, the Companies contributed $4 million to the pension plans, of which $3 million was made by CECONY.

Note F – Other Postretirement Benefits
Total Periodic Benefit Cost
The components of the Companies’ total periodic other postretirement benefit cost/(credit) for the three months ended March 31, 2019 and 2018 were as follows:
 
 
For the Three Months Ended March 31,
  
          Con Edison
          CECONY
(Millions of Dollars)
2019
2018
2019

2018
Service cost
$4
$5
$3
$3
Interest cost on accumulated other postretirement benefit obligation
11
11
9
9
Expected return on plan assets
(16)
(18)
(14)
(16)
Recognition of net actuarial loss/(gain)
(2)
2
(2)
1
Recognition of prior service cost/(credit)
(1)
(2)

(1)
TOTAL PERIODIC OTHER POSTRETIREMENT BENEFIT COST/(CREDIT)
$(4)
$(2)
$(4)
$(4)
Cost capitalized
(2)
(2)
(2)
(2)
Reconciliation to rate level
3
2
2
3
Total expense/(credit) recognized
$(3)
$(2)
$(4)
$(3)

For information about the presentation of the components of other postretirement benefit costs, see Note E.

Contributions
Based on estimates as of March 31, 2019, Con Edison and CECONY expect to make contributions of $10 million (of which $7 million is to be made by CECONY) to the other postretirement benefit plans in 2019. The Companies' policy is to fund the total periodic benefit cost of the plans to the extent tax deductible.



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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 March 31, 2019 and December 31, 2018 were as follows:
 
        Con Edison
        CECONY
(Millions of Dollars)
2019
2018
2019
2018
Accrued Liabilities:
 
 
 
 
Manufactured gas plant sites
$687
$689
$602
$603
Other Superfund Sites
89
90
89
90
Total
$776
$779
$691
$693
Regulatory assets
$798
$810
$706
$716
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. The Utilities are permitted to recover or defer as regulatory assets (for subsequent recovery through rates) prudently incurred site investigation and remediation costs.
Environmental remediation costs incurred related to Superfund Sites for the three months ended March 31, 2019 and 2018 were as follows: 
 
For the Three Months Ended March 31,
 
          Con Edison
     CECONY
(Millions of Dollars)
2019
2018
2019
2018
Remediation costs incurred
$3
$3
$2
$3

Insurance and other third-party recoveries received by Con Edison or CECONY were immaterial for the three months ended March 31, 2019 and 2018.
In 2018, 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 $2.8 billion and $2.6 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.


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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 March 31, 2019, Con Edison and CECONY have accrued their estimated aggregate undiscounted potential liabilities for these suits and additional suits that may be brought over the next 15 years as shown in the following table. These estimates were based upon a combination of modeling, historical data analysis and risk factor assessment. Courts have begun, and unless otherwise determined on appeal may continue, to apply different standards 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. 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 March 31, 2019 and December 31, 2018 were as follows:
 
 
          Con Edison
     CECONY
(Millions of Dollars)
2019
2018
2019
2018
Accrued liability – asbestos suits
$8
$8
$7
$7
Regulatory assets – asbestos suits
$8
$8
$7
$7
Accrued liability – workers’ compensation
$80
$79
$76
$75
Regulatory assets – workers’ compensation
$6
$5
$6
$5

Note H – Other Material Contingencies
Manhattan Explosion and Fire
On March 12, 2014, two multi-use five-story tall buildings located on Park Avenue between 116th and 117th Streets 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 50 people were injured. Additional buildings were also damaged. The National Transportation Safety Board (NTSB) investigated. The parties to the investigation included the company, the City of New York, the Pipeline and Hazardous Materials Safety Administration and the NYSPSC. In June 2015, the NTSB issued a final report concerning the incident, its probable cause and safety recommendations. The NTSB determined that the probable cause of the incident was (1) the failure of a defective fusion joint at a service tee (which joined a plastic service line to a plastic distribution main) installed by the company that allowed gas to leak from the distribution main and migrate into a building where it ignited and (2) a breach in a City sewer line that allowed groundwater and soil to flow into the sewer, resulting in a loss of support for the distribution main, which caused it to sag and overstressed the defective fusion joint. The NTSB also made safety recommendations, including recommendations to the company that addressed its procedures for the preparation and examination of plastic fusions, training of its staff on conditions for notifications to the City’s Fire Department and extension of its gas main isolation valve installation program. In February 2017, the NYSPSC approved a settlement agreement with the company related to the NYSPSC's investigations of the incident and the practices of qualifying persons to perform plastic fusions. Pursuant to the agreement, the company is providing $27 million of future benefits to customers (for which it has accrued a regulatory liability) and will not recover from customers $126 million of costs for gas emergency response activities that it had previously incurred and expensed. Approximately eighty suits are pending against the company seeking generally unspecified damages and, in some cases, punitive damages, for wrongful death, 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 for damages related to the incident. At March 31, 2019, the company had not accrued a liability for damages related to the incident.



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Manhattan Steam Main Rupture
In July 2018, a CECONY steam main located on Fifth Avenue and 21st Street in Manhattan ruptured. Debris from the incident included dirt and mud containing asbestos. The response to the incident required the closing of buildings and streets for various periods. The NYSPSC has commenced an investigation. As of March 31, 2019, with respect to the incident, the company incurred estimated operating costs of $16 million for property damage, clean- up and other response costs and invested $9 million in capital and retirement costs. The company has notified its insurers of the incident and believes that the policies currently in force 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 to others in connection with the incident. The company is unable to estimate the amount or range of its possible loss related to the incident. At March 31, 2019, the company had not accrued a liability related to the incident.

Other Contingencies
For information about the PG&E bankruptcy, see "Long-Lived and Intangible Assets" in Note A and Note C. Also, for additional contingencies, see "Other Regulatory Matters" in Note B and “Uncertain Tax Positions” in Note J.

Guarantees
Con Edison and its subsidiaries have entered into various agreements providing financial or performance assurance primarily to third parties on behalf of their subsidiaries. Maximum amounts guaranteed by Con Edison under these agreements totaled $2,199 million and $2,439 million at March 31, 2019 and December 31, 2018, respectively.
A summary, by type and term, of Con Edison’s total guarantees under these agreements at March 31, 2019 is as follows:
 
Guarantee Type
0 – 3 years
4 – 10 years

> 10 years

Total
 
(Millions of Dollars)
Con Edison Transmission
$539
$337

$—

$876
Energy transactions
490
19
200
709
Renewable electric production projects
142

402
544
Other
70


70
Total
$1,241
$356
$602
$2,199
Con Edison Transmission — Con Edison has guaranteed payment by CET Electric of the contributions CET Electric agreed to make to New York Transco LLC (NY Transco). CET Electric acquired a 45.7 percent interest in NY Transco when it was formed in 2014. In May 2016, the transmission owners transferred certain projects to NY Transco, for which CET Electric made its required contributions. NY Transco has proposed other transmission projects in the New York Independent System Operator's competitive bidding process. These other projects are subject to certain authorizations from the NYSPSC, the FERC and, as applicable, other federal, state and local agencies. Guarantee amount shown is for the maximum possible required amount of CET Electric’s contributions for these other projects as calculated based on the assumptions that the projects are completed at 175 percent of their estimated costs and NY Transco does not use any debt financing for the projects. Guarantee term shown is assumed as the selection of the projects and resulting timing of the contributions is not certain. Also included within the table above are guarantees for $124 million from Con Edison on behalf of CET Gas in relation to Mountain Valley Pipeline (MVP), LLC, a company developing a proposed gas transmission project in West Virginia and Virginia.
Energy Transactions — Con Edison guarantees payments on behalf of the Clean Energy Businesses in order to facilitate physical and financial transactions in electricity, gas, pipeline capacity, transportation, oil, 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, Con Edison Development, and Con Edison Solutions guarantee payments on behalf of their wholly-owned subsidiaries associated with their investment in, or development for others of, solar and wind energy facilities.
Other — Other guarantees include $70 million in guarantees provided by Con Edison to Travelers Insurance Company for indemnity agreements for surety bonds in connection with operation of solar energy facilities and energy service projects of Con Edison Development and Con Edison Solutions, respectively.



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Note I – Leases
In January 2019, the Companies adopted Accounting Standards Update (ASU) No. 2016-02, “Leases (Topic 842),” including the amendments thereto, using a modified retrospective transition method of adoption that required no prior period adjustments or charges to retained earnings for cumulative impact. The standard supersedes the lease requirements within ASC Topic 840, “Leases.”

The Companies lease electric transmission facilities, gas distribution facilities, land, office buildings and equipment. Upon adoption of Topic 842, the Companies recognized lease right-of-use assets and lease liabilities on their consolidated balance sheets for virtually all of their leases (other than leases that meet the definition of a short-term lease, the expense for which was immaterial). A lease right-of-use asset represents a right to use an identifiable underlying asset and obtain substantially all of the economic benefits from the use of that asset for the lease term. A lease liability represents an obligation to make lease payments arising from the lease. Leases are classified as either operating leases or finance leases. Operating leases are included in operating lease right-of-use asset and operating lease liabilities on the Companies’ consolidated balance sheets. Finance leases are included in other noncurrent assets, other current liabilities and other noncurrent liabilities. The Utilities, as regulated entities, are permitted to continue to recognize expense for operating leases using the timing that conforms to the regulatory rate treatment (with the amortization of the lease asset based on the rental payments recovered from our customers) and to account the same way for finance leases. Lessor accounting is similar to the previous model, but updated to align with ASC Topic 606 “Revenue from Contracts with Customers."

The Companies elected the following practical expedients: (1) a package of practical expedients that allows the Companies to not reassess: (a) whether expired or existing contracts contained leases; (b) the lease classification for expired or existing leases and (c) the initial direct costs for existing leases; (2) for all underlying asset classes, an expedient that allows the Companies to not apply the recognition requirements to short-term leases and an expedient that will allow the Companies to account for lease and associated non-lease components as a single lease component; (3) an expedient that allows the use of hindsight to determine lease term; and (4) an expedient that allows the Companies to not evaluate under Topic 842 land easements that exist or expired before the entity’s adoption of Topic 842 and that were not previously accounted for as leases under Topic 840.

The Companies, upon adoption of Topic 842 recognized, and for new operating leases at commencement date recognize, operating lease right-of-use assets and operating lease liabilities based on the present value of the future minimum lease payments over the lease term. As most of the Companies’ leases do not provide an implicit rate, the Companies used their collateralized incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. Most of the Companies’ leases have remaining lease terms of one year to 35 years, and may include options to renew or extend the leases for up to five years at the fair rental value. The Companies' lease terms may include options to renew, extend or terminate the lease when it is reasonably certain that the Companies will exercise that option. There were no leases with material variable lease payments or residual value guarantees.

Operating lease cost and cash paid for amounts included in the measurement of lease liabilities were as follows for Con Edison and CECONY for the three months ended March 31, 2019:

(Millions of Dollars)
Con Edison
CECONY
Operating lease cost

$21


$16

Operating lease cash flows

$8


$4


As of March 31, 2019, assets recorded as finance leases for Con Edison and CECONY were $2 million and $1 million, respectively, and the accumulated depreciation associated with finance leases for Con Edison and CECONY were $4 million and $3 million, respectively. For the three months ended March 31, 2019, finance lease costs and cash flows for Con Edison and CECONY were immaterial.

Right-of-use assets obtained in exchange for lease obligations were immaterial for Con Edison and CECONY for the three months ended March 31, 2019.



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Other information related to leases for Con Edison and CECONY at March 31, 2019 was as follows:


Con Edison
CECONY
Weighted Average Remaining Lease Term:
 
 
Operating leases
19.3 years
14.7 years
Finance leases
10.0 years
2.5 years
Weighted Average Discount Rate:
 
 
Operating leases
4.3%
3.6%
Finance leases
4.2%
5.3%

Future minimum lease payments under non-cancellable leases at March 31, 2019 were as follows:

(Millions of Dollars)
Con Edison
CECONY
Year Ending March 31,
Operating Leases
Finance Leases
Operating Leases
Finance Leases
2020
$79
$1
$58
$1
2021
74

58

2022
71

55

2023
69

53

2024
68

53

All years thereafter
973
1
553

Total future minimum lease payments
$1,334
$2
$830
$1
Less: imputed interest
(459)

(191)

Total
$875
$2
$639
$1
Reported as of March 31, 2019
 
 
 
 
Operating lease liabilities (current)
$50

$—

$41

$—

Operating lease liabilities (noncurrent)
825

598

Other current liabilities

1

1
Other noncurrent liabilities

1


Total
$875
$2
$639
$1
At March 31, 2019, the Companies do not have material obligations under operating or finance leases that have not yet commenced.
The future minimum lease commitments at December 31, 2018, accounted for under Topic 840, for the Companies’ operating lease agreements that are not cancellable by the Companies were as follows:
(Millions of Dollars)
Con Edison
CECONY
2019
$72
$56
2020
72
56
2021
71
54
2022
68
53
2023
68
53
All years thereafter
890
592
Total
$1,241
$864
The Companies are lessors under certain leases whereby the Companies own real estate and lease portions of it to others. Revenue under such leases was immaterial for Con Edison and CECONY for the three months ended March 31, 2019.

Note J – Income Tax
Con Edison’s income tax expense decreased to $108 million for the three months ended March 31, 2019 from $117 million for the three months ended March 31, 2018. The decrease in income tax expense is primarily due to lower income before income tax expense (excluding income attributable to noncontrolling interest (see Note N)), an increase in the amortization of excess deferred federal income taxes due to the TCJA and higher renewable energy credits, offset in part by higher state income taxes.



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CECONY’s income tax expense increased to $124 million for the three months ended March 31, 2019 from $119 million for the three months ended March 31, 2018. The increase in income tax expense is primarily due to higher income before income tax expense and higher state income taxes, offset in part by an increase in the amortization of excess deferred federal income taxes due to the TCJA.

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 for the three months ended March 31, is as follows:

 
Con Edison
CECONY
(% of Pre-tax income)
2019

2018

2019

2018

STATUTORY TAX RATE
 
 
 
 
Federal
21
 %
21
 %
21
 %
21
 %
Changes in computed taxes resulting from:
 
 
 
 
State income tax
5

4

6

5

Cost of removal
1

1

1

1

Other plant-related items
(1
)


(1
)
Renewable energy credits
(1
)
(1
)


Amortization of excess deferred federal income taxes
(4
)
(3
)
(4
)
(3
)
Other
(1
)
(1
)
(1
)

Effective tax rate
20
 %
21
 %
23
 %
23
 %

CECONY, O&R and RECO deferred as regulatory liabilities their estimated net benefits under the TCJA for the three months ended March 31, 2018. CECONY continued to defer its estimated net benefits for its electric service for the three months ended March 31, 2019. The net benefits include the revenue requirement impact of the reduction in the corporate federal income tax rate to 21 percent, the elimination for utilities of bonus depreciation and the amortization of excess deferred federal income taxes the utilities collected from customers that will not need to be paid to the Internal Revenue Service under the TCJA. See “Other Regulatory Matters” in Note B.

Uncertain Tax Positions
At March 31, 2019, the estimated liability for uncertain tax positions for Con Edison was $7 million ($4 million for CECONY). Con Edison reasonably expects to resolve within the next twelve months approximately $4 million of various federal and state uncertainties due to the expected completion of ongoing tax examinations and resolution of state refund claims, of which the entire amount, if recognized, would reduce Con Edison's effective tax rate. The amount related to CECONY is approximately $2 million, which, if recognized, would reduce CECONY’s effective tax rate. The total amount of unrecognized tax benefits, if recognized, that would reduce Con Edison’s effective tax rate is $7 million ($6 million, net of federal taxes).
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 the three months ended March 31, 2019, the Companies recognized no interest expense or penalties for uncertain tax positions in their consolidated income statements. At March 31, 2019 and December 31, 2018, the Companies recognized an immaterial amount of accrued interest on their consolidated balance sheets.



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Table of Contents

Note K – Financial Information by Business Segment
Con Edison’s principal business segments are CECONY’s regulated utility activities, O&R’s regulated utility activities, the Clean Energy Businesses and Con Edison Transmission. CECONY’s principal business segments are its regulated electric, gas and steam utility activities. The financial data for the business segments for the three months ended March 31, 2019 and 2018 were as follows:
 
 
For the Three Months Ended March 31,
 
Operating
revenues
Inter-segment
revenues
Depreciation and
amortization
Operating
income/(loss)
(Millions of Dollars)
2019

2018

2019

2018

2019

2018

2019

2018

CECONY
 
 
 
 
 
 
 
 
Electric
$1,797
$1,729

$4

$4
$257
$240
$257
$254
Gas
921
841
2

1
55
49
344
321
Steam
321
314
18

19
22
21
125
130
Consolidation adjustments


(24
)
(24)




Total CECONY
$3,039
$2,884

$—


$—

$334
$310
$726
$705
O&R
 
 
 
 
 
 
 
 
Electric
$145
$149

$—


$—

$15
$14
$16
$8
Gas
113
97


6
5
38
36
Total O&R
$258
$246

$—


$—

$21
$19
$54
$44
Clean Energy Businesses
$217
$233

$—


$—

$58
$19
$11
$9
Con Edison Transmission
1
1




(2)
(1)
Other (a)
(1)





(3)
(2)
Total Con Edison
$3,514
$3,364

$—


$—

$413
$348
$786
$755
(a) Parent company and consolidation adjustments. Other does not represent a business segment.

Note L – Derivative Instruments and Hedging Activities
Con Edison’s subsidiaries hedge market price fluctuations associated with physical purchases and sales of electricity, natural gas, steam and, to a lesser extent, refined fuels by using derivative instruments including futures, forwards, basis swaps, options, transmission congestion contracts and financial transmission rights contracts. Derivatives are recognized on the consolidated balance sheet at fair value (see Note M), 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.

In August 2017, the FASB issued amendments to the guidance for derivatives and hedging through ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The amendments in this update provide greater clarification on hedge accounting for risk components, presentation and disclosure of hedging instruments, and overall targeted improvements to simplify hedge accounting. The amendment was effective for reporting periods beginning after December 15, 2018. The application of the guidance did not have a material impact on the Companies’ financial position, results of operations and liquidity because the Companies do not elect hedge accounting for their derivative instruments and hedging activities.
 


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The fair values of the Companies’ commodity derivatives including the offsetting of assets and liabilities on the consolidated balance sheet at March 31, 2019 and December 31, 2018 were:
 
(Millions of Dollars)
2019
 
2018
 
Balance Sheet Location
Gross Amounts of
Recognized
Assets/(Liabilities)
Gross
Amounts
Offset
Net Amounts
of Assets/
(Liabilities) (a)
 
Gross Amounts of
Recognized
Assets/(Liabilities)
Gross
Amounts
Offset
Net Amounts
of Assets/
(Liabilities) (a)
 
Con Edison
 
 
 
 
 
 
 
 
Fair value of derivative assets
 
 
 
 
 
 
 
 
Current
$72
$(37)
$35
(b)
$43
$(14)
$29
(b)
Noncurrent
6
(5)
1
(c)
14
(7)
7
(d)
Total fair value of derivative assets
$78
$(42)
$36
 
$57
$(21)
$36
 
Fair value of derivative liabilities
 
 
 
 
 
 
 
 
Current
$(78)
$32
$(46)
 
$(61)
$11
$(50)
 
Noncurrent
(44)
7
(37)
(c)
(19)
9
(10)
(d)
Total fair value of derivative liabilities
$(122)
$39
$(83)
 
$(80)
$20
$(60)
 
Net fair value derivative assets/(liabilities)
$(44)
$(3)
$(47)
 
$(23)
$(1)
$(24)
 
CECONY
 
 
 
 
 
 
 
 
Fair value of derivative assets
 
 
 
 
 
 
 
 
Current
$62
$(31)
$31
(b)
$25
$(6)
$19
(b)
Noncurrent
4
(4)

 
11
(5)
6
 
Total fair value of derivative assets
$66
$(35)
$31
 
$36
$(11)
$25
 
Fair value of derivative liabilities
 
 
 
 
 
 
 
 
Current
$(53)
$29
$(24)
 
$(31)
$6
$(25)
 
Noncurrent
(37)
5
(32)
 
(12)
6
(6)
 
Total fair value of derivative liabilities
$(90)
$34
$(56)
 
$(43)
$12
$(31)
 
Net fair value derivative assets/(liabilities)
$(24)
$(1)
$(25)
 
$(7)
$1
$(6)
 
(a)
Derivative instruments and collateral were offset 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 offset in the event of contract termination. In such case, generally the non-defaulting party’s payable will be offset 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 March 31, 2019 and December 31, 2018, margin deposits for Con Edison ($4 million and $7 million, respectively) and CECONY ($4 million and $6 million, respectively) were classified as derivative assets on the consolidated 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.
(c)
Does not include interest rate swaps of $1 million in noncurrent assets and $(14) million in noncurrent liabilities (see below).
(d)
Does not include interest rate swaps of $2 million in noncurrent assets and $(6) million in noncurrent liabilities (see below).


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. 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. The Clean 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.
 


35

Table of Contents

The following table presents the realized and unrealized gains or losses on commodity derivatives that have been deferred or recognized in earnings for the three months ended March 31, 2019 and 2018:
 
 
 
For the Three Months Ended March 31,
 
 
          Con Edison
 
          CECONY
(Millions of Dollars)
Balance Sheet Location
2019

 
2018

 
2019

2018

Pre-tax gains/(losses) deferred in accordance with accounting rules for regulated operations:
 
 
 
Current
Deferred derivative gains
$5
 
$(22)
 
$3
$(22)
Noncurrent
Deferred derivative gains
(6)
 
(2)
 
(5)
(1)
Total deferred gains/(losses)