For the quarterly period ended September 30, 2005

Consolidated Edison (ED)

Documents found in this filing:

Annual Reports

Quarterly Reports

8-K

Other

Documents found in this filing:

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Send us Feedback

Consolidated Edison (ED)

	SUMMARY

	BULLS

	BEARS

	TOPICS

	DATA CENTRAL

	STOCK CHART

	SEC FILINGS

	BALANCE

	INCOME

	CASH FLOW

Consolidated Edison 10-Q 2005

For the quarterly period ended September 30, 2005

Form 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


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

For the quarterly period ended SEPTEMBER 30, 2005

OR

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

Indicate by check mark whether each 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, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ (See “Filing Format” on next page)

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).


Consolidated Edison, Inc. (Con Edison)				Yes x No ¨

Consolidated Edison Company of New York, Inc. (Con Edison of New York)				Yes ¨ No x

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

Con Edison of New York				Yes ¨ No x

As of the close of business on October 31, 2005 Con Edison had outstanding 244,960,349 Common Shares ($.10 par value). Con Edison owns all of the outstanding common equity of Con Edison of New York.

Filing Format

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

TABLE OF CONTENTS


			PAGE
Glossary of Terms			4

PART I—Financial Information
Item 1	Financial Statements (Unaudited)
	Con Edison
		Consolidated Balance Sheet	5
		Consolidated Income Statement	7
		Consolidated Statement of Comprehensive Income	8
		Consolidated Statement of Common Shareholders’ Equity	9
		Consolidated Statement of Cash Flows	10
	Con Edison of New York
		Consolidated Balance Sheet	11
		Consolidated Income Statement	13
		Consolidated Statement of Comprehensive Income	14
		Consolidated Statement of Common Shareholder’s Equity	15
		Consolidated Statement of Cash Flows	16
	Notes to Financial Statements (Unaudited)		17
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		38
Item 3	Quantitative and Qualitative Disclosures About Market Risk		70
Item 4	Controls and Procedures		70

PART II—Other Information
Item 1	Legal Proceedings		71
Item 6	Exhibits		72
Signatures			73

GLOSSARY OF TERMS

The following is a glossary of abbreviations or acronyms that may be used in this report:


Con Edison Companies
Con Edison		Consolidated Edison, Inc.
Con Edison Communications		Con Edison Communications, LLC
Con Edison Development		Consolidated Edison Development, Inc.
Con Edison Energy		Consolidated Edison Energy, Inc.
Con Edison of New York		Consolidated Edison Company of New York, Inc.
Con Edison Solutions		Consolidated Edison Solutions, Inc.
O&R		Orange and Rockland Utilities, Inc.
The Companies		The separate registrants: Con Edison and Con Edison of New York
The Utilities		Con Edison of New York and O&R

Regulatory and State Agencies
IRS		Internal Revenue Service
NYPA		New York Power Authority
PSC		New York State Public Service Commission
SEC		Securities and Exchange Commission

Other
DTH		Dekatherm
FASB		Financial Accounting Standards Board
First Quarter Form 10-Q		Companies’ combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005
Form 10-K		Companies’ combined Annual Report on Form 10-K for the year ended December 31, 2004
FSP		FASB Staff Position
kWh		Kilowatt-hour
LILO		Lease In/Lease Out
MD&A		Management’s Discussion and Analysis of Financial Condition and Results of Operations
MW		Megawatts or thousand kilowatts
mWhrs		Megawatt hours
NYISO		New York Independent System Operator
OCI		Other Comprehensive Income
PCBs		Polychlorinated biphenyls
Second Quarter Form 10-Q		Companies’ combined Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005
SFAS		Statement of Financial Accounting Standards
SSCM		Simplified Service Cost Method
Superfund		Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes

Consolidated Edison, Inc.

CONSOLIDATED BALANCE SHEET

(UNAUDITED)


	September 30, 2005		December 31, 2004
	(Millions of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
Electric	$	13,319	$	12,912
Gas		2,977		2,867
Steam		1,591		823
General		1,523		1,500
TOTAL		19,410		18,102
Less: Accumulated depreciation		4,303		4,288
Net		15,107		13,814
Construction work in progress		629		1,354
NET UTILITY PLANT		15,736		15,168
NON-UTILITY PLANT
Unregulated generating assets, less accumulated depreciation of $96 and $78 in 2005 and 2004, respectively		816		841
Non-utility property, less accumulated depreciation of $29 and $25 in 2005 and 2004, respectively		37		31
Non-utility property held for sale		74		65
Construction work in progress		—		1
NET PLANT		16,663		16,106
CURRENT ASSETS
Cash and temporary cash investments		119		26
Restricted cash		20		18
Accounts receivable - customers, less allowance for uncollectible accounts of $32 and $33 in 2005 and 2004, respectively		910		741
Accrued unbilled revenue		129		73
Other receivables, less allowance for uncollectible accounts of $6 and $5 in 2005 and 2004, respectively		308		198
Fuel oil, at average cost		40		32
Gas in storage, at average cost		241		170
Materials and supplies, at average cost		113		105
Prepayments		632		93
Fair value of derivative assets		707		66
Current assets held for sale		5		5
Other current assets		227		186
TOTAL CURRENT ASSETS		3,451		1,713
INVESTMENTS		263		257
DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS
Goodwill		406		406
Intangible assets, less accumulated amortization of $21 and $13 in 2005 and 2004, respectively		93		100
Prepaid pension costs		1,465		1,442
Regulatory assets		2,057		2,258
Other deferred charges and noncurrent assets		370		278
TOTAL DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS		4,391		4,484
TOTAL ASSETS	$	24,768	$	22,560

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

Consolidated Edison, Inc.

CONSOLIDATED BALANCE SHEET

(UNAUDITED)


	September 30, 2005		December 31, 2004
	(Millions of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholders’ equity (See Statement of Common Shareholders’ Equity)	$	7,336	$	7,054
Preferred stock of subsidiary		213		213
Long-term debt		7,061		6,561
TOTAL CAPITALIZATION		14,610		13,828
MINORITY INTERESTS		41		39
NONCURRENT LIABILITIES
Obligations under capital leases		31		33
Provision for injuries and damages		175		180
Pensions and retiree benefits		235		207
Superfund and other environmental costs		236		198
Noncurrent liabilities held for sale		7		5
Other noncurrent liabilities		69		62
TOTAL NONCURRENT LIABILITIES		753		685
CURRENT LIABILITIES
Long-term debt due within one year		371		469
Notes payable		224		156
Accounts payable		1,189		920
Customer deposits		228		232
Accrued taxes		267		36
Accrued interest		111		95
Accrued wages		89		88
Fair value of derivative liabilities		156		24
Deferred derivative gains		496		23
Current liabilities held for sale		10		11
Other current liabilities		407		191
TOTAL CURRENT LIABILITIES		3,548		2,245
DEFERRED CREDITS AND REGULATORY LIABILITIES
Deferred income taxes and investment tax credits		3,810		3,726
Regulatory liabilities		1,983		1,999
Other deferred credits		23		38
TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES		5,816		5,763
TOTAL CAPITALIZATION AND LIABILITIES	$	24,768	$	22,560

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

Consolidated Edison, Inc.

CONSOLIDATED INCOME STATEMENT

(UNAUDITED)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2005			2004			2005			2004
	(Millions of Dollars/Except Share Data)
OPERATING REVENUES
Electric	$	2,518		$	2,168		$	5,682		$	5,238
Gas		232			182			1,314			1,111
Steam		111			88			474			415
Non-utility		514			296			1,112			813
TOTAL OPERATING REVENUES		3,375			2,734			8,582			7,577
OPERATING EXPENSES
Purchased power		1,538			1,215			3,447			3,035
Fuel		222			148			553			467
Gas purchased for resale		133			86			786			643
Other operations and maintenance		420			384			1,239			1,121
Depreciation and amortization		147			140			434			413
Taxes, other than income taxes		323			278			874			815
Income taxes		173			153			322			306
TOTAL OPERATING EXPENSES		2,956			2,404			7,655			6,800
OPERATING INCOME		419			330			927			777
OTHER INCOME (DEDUCTIONS)
Investment and other income		(11	)		24			6			39
Allowance for equity funds used during construction		—			6			8			18
Preferred stock dividend requirements of subsidiary		(3	)		(3	)		(8	)		(8	)
Other deductions		(3	)		(4	)		(14	)		(10	)
Income taxes		5			6			10			12
TOTAL OTHER INCOME (DEDUCTIONS)		(12	)		29			2			51
INTEREST EXPENSE
Interest on long-term debt		111			105			330			320
Other interest		9			8			19			24
Allowance for borrowed funds used during construction		—			(4	)		(6	)		(13	)
NET INTEREST EXPENSE		120			109			343			331
INCOME FROM CONTINUING OPERATIONS		287			250			586			497
LOSS FROM DISCONTINUED OPERATIONS (NET OF INCOME TAXES OF $1, $3, $3 AND $7 IN 2005 AND 2004, RESPECTIVELY)		(2	)		(4	)		(5	)		(10	)
NET INCOME	$	285		$	246		$	581		$	487
EARNINGS PER COMMON SHARE - BASIC
Continuing operations	$	1.17		$	1.04		$	2.41		$	2.12
Discontinued operations		—			(0.02	)		(0.02	)		(0.04	)
Net income	$	1.17		$	1.02		$	2.39		$	2.08
EARNINGS PER COMMON SHARE - DILUTED
Continuing operations	$	1.17		$	1.03		$	2.40		$	2.12
Discontinued operations		(0.01	)		(0.02	)		(0.02	)		(0.04	)
Net income	$	1.16		$	1.01		$	2.38		$	2.08
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK	$	0.570		$	0.565		$	1.710		$	1.695
AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC (IN MILLIONS)		244.4			241.5			243.5			233.9
AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED (IN MILLIONS)		245.4			242.2			244.2			234.6

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

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)


	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2005		2004			2005			2004
	(Millions of Dollars)
NET INCOME	$	285	$	246		$	581		$	487
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
Minimum pension liability adjustments, net of $(2) and $1 taxes in 2005 and 2004, respectively		—		—			(3	)		1
Unrealized (losses)/gains on derivatives qualified as cash flow hedges, net of $22, $(4), $40 and $11 taxes in 2005 and 2004, respectively		31		(6	)		58			15
Less: Reclassification adjustment for gains included in net income, net of $16, $2, $23 and $7 taxes in 2005 and 2004, respectively		23		3			34			9
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES		8		(9	)		21			7
COMPREHENSIVE INCOME	$	293	$	237		$	602		$	494

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

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

(UNAUDITED)


	Common Stock			Additional Paid-In Capital		Retained Earnings			Treasury Stock				Capital Stock Expense			Accumulated Other Comprehensive Income/(Loss)			Total
	Shares	Amount		Additional Paid-In Capital		Retained Earnings			Shares	Amount			Capital Stock Expense			Accumulated Other Comprehensive Income/(Loss)			Total
	(Millions of Dollars/Except Share Data)
BALANCE AS OF DECEMBER 31, 2003	225,840,220	$	25	$	2,003	$	5,451		23,210,700	$	(1,001	)	$	(39	)	$	(16	)	$	6,423

Net income							155													155
Common stock dividends							(127	)												(127	)
Issuance of common shares - dividend reinvestment and employee stock plans	955,259				42		(6	)												36
Other comprehensive income																	5			5
BALANCE AS OF MARCH 31, 2004	226,795,479	$	25	$	2,045	$	5,473		23,210,700	$	(1,001	)	$	(39	)	$	(11	)	$	6,492

Net income							86													86
Common stock dividends							(128	)												(128	)
Issuance of common shares - public offering	14,000,000		1		527									(15	)					513
Issuance of common shares - dividend reinvestment and employee stock plans	530,885				21		(1	)												20
Other comprehensive income																	11			11
BALANCE AS OF JUNE 30, 2004	241,326,364	$	26	$	2,593	$	5,430		23,210,700	$	(1,001	)	$	(54	)	$	—		$	6,994

Net income							246													246
Common stock dividends							(137	)												(137	)
Issuance of common shares - dividend reinvestment and employee stock plans	526,901				20															20
Other comprehensive loss																	(9	)		(9	)
BALANCE AS OF SEPTEMBER 30, 2004	241,853,265	$	26	$	2,613	$	5,539		23,210,700	$	(1,001	)	$	(54	)	$	(9	)	$	7,114

BALANCE AS OF DECEMBER 31, 2004	242,514,183	$	26	$	2,642	$	5,451		23,210,700	$	(1,001	)	$	(55	)	$	(9	)	$	7,054

Net income							181													181
Common stock dividends							(138	)												(138	)
Issuance of common shares - dividend reinvestment and employee stock plans	476,235				20															20
Other comprehensive income																	22			22
BALANCE AS OF MARCH 31, 2005	242,990,418	$	26	$	2,662	$	5,494		23,210,700	$	(1,001	)	$	(55	)	$	13		$	7,139

Net income							115													115
Common stock dividends							(139	)												(139	)
Issuance of common shares - dividend reinvestment and employee stock plans	948,465		1		43		(4	)												40
Other comprehensive loss																	(9	)		(9	)
BALANCE AS OF JUNE 30, 2005	243,938,883	$	27	$	2,705	$	5,466		23,210,700	$	(1,001	)	$	(55	)	$	4		$	7,146

Net income							285													285
Common stock dividends							(139	)												(139	)
Issuance of common shares - dividend reinvestment and employee stock plans	920,011				41		(5	)												36
Other comprehensive income																	8			8
BALANCE AS OF SEPTEMBER 30, 2005	244,858,894	$	27	$	2,746	$	5,607		23,210,700	$	(1,001	)	$	(55	)	$	12		$	7,336

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

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)


	For the Nine Months Ended September 30,
	2005			2004
	(Millions of Dollars)
OPERATING ACTIVITIES
Net Income	$	581		$	487
PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME
Depreciation and amortization		434			416
Deferred income taxes		(2	)		454
Electric rate case amortization/accruals		(78	)		—
Common equity component of allowance for funds used during construction		(8	)		(18	)
Prepaid pension costs (net of capitalized amounts)		(32	)		(104	)
Other non-cash items (net)		7			7
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable - customers, less allowance for uncollectibles		(169	)		50
Materials and supplies, including fuel oil and gas in storage		(87	)		(54	)
Prepayments		(539	)		(176	)
Other receivables		(165	)		(151	)
Other current assets		(42	)		(79	)
Recoverable energy costs		(56	)		81
Accounts payable		269			(38	)
Pensions and retiree benefits		28			4
Accrued taxes		231			(44	)
Accrued interest		17			(3	)
Deferred charges and other regulatory assets		(167	)		(244	)
Deferred credits and other regulatory liabilities		(41	)		176
Other assets		174			21
Other liabilities		255			12
NET CASH FLOWS FROM OPERATING ACTIVITIES		610			797
INVESTING ACTIVITIES
Utility construction expenditures (excluding capitalized support costs of $8 and $33 in 2005 and 2004, respectively)		(1,055	)		(969	)
Cost of removal less salvage		(133	)		(100	)
Non-utility construction expenditures		(13	)		(35	)
Common equity component of allowance for funds used during construction		8			18
Investments by unregulated subsidiaries		(6	)		(7	)
Proceeds from/(cost of) sale of First Avenue properties		534			(16	)
NET CASH FLOWS USED IN INVESTING ACTIVITIES		(665	)		(1,109	)
FINANCING ACTIVITIES
Net proceeds from short-term debt		68			14
Retirement of long-term debt		(239	)		(832	)
Issuance of long-term debt		643			967
Issuance of common stock		70			561
Debt issuance costs		(7	)		(14	)
Common stock dividends		(387	)		(363	)
NET CASH FLOWS FROM FINANCING ACTIVITIES		148			333
CASH AND TEMPORARY CASH INVESTMENTS:
NET CHANGE FOR THE PERIOD		93			21
BALANCE AT BEGINNING OF PERIOD		26			49
BALANCE AT END OF PERIOD	$	119		$	70
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	304		$	293
Income taxes	$	79		$	103

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

Consolidated Edison Company of New York, Inc.

CONSOLIDATED BALANCE SHEET

(UNAUDITED)


	September 30, 2005		December 31, 2004
	(Millions of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
Electric	$	12,486	$	12,100
Gas		2,631		2,531
Steam		1,591		823
General		1,399		1,379
TOTAL		18,107		16,833
Less: Accumulated depreciation		3,908		3,906
Net		14,199		12,927
Construction work in progress		594		1,328
NET UTILITY PLANT		14,793		14,255
NON-UTILITY PROPERTY
Non-utility property		18		19
NET PLANT		14,811		14,274
CURRENT ASSETS
Cash and temporary cash investments		82		10
Accounts receivable - customers, less allowance for uncollectible accounts of $29 in 2005 and 2004		768		666
Other receivables, less allowance for uncollectible accounts of $4 and $3 in 2005 and 2004, respectively		216		113
Accounts receivable from affiliated companies		219		115
Fuel oil, at average cost		30		24
Gas in storage, at average cost		178		125
Materials and supplies, at average cost		101		94
Prepayments		606		73
Fair value of derivative assets		434		18
Other current assets		72		69
TOTAL CURRENT ASSETS		2,706		1,307
INVESTMENTS		3		3
DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS
Prepaid pension costs		1,466		1,442
Regulatory assets		1,786		2,005
Other deferred charges and noncurrent assets		298		213
TOTAL DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS		3,550		3,660
TOTAL ASSETS	$	21,070	$	19,244

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

Consolidated Edison Company of New York, Inc.

CONSOLIDATED BALANCE SHEET

(UNAUDITED)


	September 30, 2005		December 31, 2004
	(Millions of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholder’s equity (See Statement of Common Shareholder’s Equity)	$	6,425	$	6,116
Preferred stock		213		213
Long-term debt		5,706		5,235
TOTAL CAPITALIZATION		12,344		11,564
NONCURRENT LIABILITIES
Obligations under capital leases		31		33
Provision for injuries and damages		166		170
Pensions and retiree benefits		139		109
Superfund and other environmental costs		179		141
Other noncurrent liabilities		34		34
TOTAL NONCURRENT LIABILITIES		549		487
CURRENT LIABILITIES
Long-term debt due within one year		350		450
Notes payable		122		100
Accounts payable		941		738
Accounts payable to affiliated companies		52		40
Customer deposits		214		218
Accrued taxes		326		58
Accrued interest		90		79
Accrued wages		86		81
Deferred derivative gains		408		8
Other current liabilities		337		160
TOTAL CURRENT LIABILITIES		2,926		1,932
DEFERRED CREDITS AND REGULATORY LIABILITIES
Deferred income taxes and investment tax credits		3,385		3,346
Regulatory liabilities		1,847		1,887
Other deferred credits		19		28
TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES		5,251		5,261
TOTAL CAPITALIZATION AND LIABILITIES	$	21,070	$	19,244

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

Consolidated Edison Company of New York, Inc.

CONSOLIDATED INCOME STATEMENT

(UNAUDITED)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2005			2004			2005			2004
	(Millions of Dollars)
OPERATING REVENUES
Electric	$	2,317		$	2,009		$	5,237		$	4,838
Gas		209			161			1,160			962
Steam		111			88			474			415
TOTAL OPERATING REVENUES		2,637			2,258			6,871			6,215
OPERATING EXPENSES
Purchased power		1,073			943			2,476			2,335
Fuel		131			98			358			316
Gas purchased for resale		110			76			666			536
Other operations and maintenance		352			316			1,045			926
Depreciation and amortization		129			120			378			356
Taxes, other than income taxes		305			261			821			761
Income taxes		165			138			300			282
TOTAL OPERATING EXPENSES		2,265			1,952			6,044			5,512
OPERATING INCOME		372			306			827			703
OTHER INCOME (DEDUCTIONS)
Investment and other income		10			10			26			30
Allowance for equity funds used during construction		—			6			8			18
Other deductions		(3	)		(3	)		(9	)		(10	)
Income taxes		1			2			(2	)		1
TOTAL OTHER INCOME (DEDUCTIONS)		8			15			23			39
INTEREST EXPENSE
Interest on long-term debt		87			82			260			250
Other interest		8			7			15			23
Allowance for borrowed funds used during construction		—			(4	)		(6	)		(13	)
NET INTEREST EXPENSE		95			85			269			260
NET INCOME		285			236			581			482
PREFERRED STOCK DIVIDEND REQUIREMENTS		3			3			8			8
NET INCOME FOR COMMON STOCK	$	282		$	233		$	573		$	474

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

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2005		2004		2005			2004
	(Millions of Dollars)
NET INCOME	$	285	$	236	$	581		$	482
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
Minimum pension liability adjustments, net of $(2) and $2 taxes in 2005 and 2004, respectively		—		—		(2	)		3
Unrealized gains/(losses) on derivatives qualified as cash flow hedges, net of $3 and $(2) taxes in 2005		5		—		(3	)		—
Less: Reclassification adjustment for gains included in net income, net of $1 taxes in 2005		—		—		1			—
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES		5		—		(6	)		3
COMPREHENSIVE INCOME	$	290	$	236	$	575		$	485

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

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF COMMON SHAREHOLDER’S EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

(UNAUDITED)


	Common Stock			Additional Paid-In Capital		Retained Earnings			Repurchased Con Edison Stock			Capital Stock Expense			Accumulated Other Comprehensive Income/(Loss)			Total
	Shares	Amount		Additional Paid-In Capital		Retained Earnings			Repurchased Con Edison Stock			Capital Stock Expense			Accumulated Other Comprehensive Income/(Loss)			Total
	(Millions of Dollars/Except Share Data)
BALANCE AS OF DECEMBER 31, 2003	235,488,094	$	589	$	1,274	$	4,626		$	(962	)	$	(39	)	$	(6	)	$	5,482
Net income							155												155
Common stock dividend to parent							(103	)											(103	)
Cumulative preferred dividends							(3	)											(3	)
Other comprehensive income																3			3
BALANCE AS OF MARCH 31, 2004	235,488,094	$	589	$	1,274	$	4,675		$	(962	)	$	(39	)	$	(3	)	$	5,534

Net income							92												92
Common stock dividend to parent							(82	)											(82	)
Capital contribution by parent					528								(15	)					513
Cumulative preferred dividends							(3	)											(3	)
Other comprehensive income																—			—
BALANCE AS OF JUNE 30, 2004	235,488,094	$	589	$	1,802	$	4,682		$	(962	)	$	(54	)	$	(3	)	$	6,054

Net income							235												235
Common stock dividend to parent							(108	)											(108	)
Cumulative preferred dividends							(3	)											(3	)
Other comprehensive income																—			—
BALANCE AS OF SEPTEMBER 30, 2004	235,488,094	$	589	$	1,802	$	4,806		$	(962	)	$	(54	)	$	(3	)	$	6,178

BALANCE AS OF DECEMBER 31, 2004	235,488,094	$	589	$	1,802	$	4,748		$	(962	)	$	(55	)	$	(6	)	$	6,116

Net income							173												173
Common stock dividend to parent							(111	)											(111	)
Cumulative preferred dividends							(3	)											(3	)
Other comprehensive income																5			5
BALANCE AS OF MARCH 31, 2005	235,488,094	$	589	$	1,802	$	4,807		$	(962	)	$	(55	)	$	(1	)	$	6,180

Net income							124												124
Common stock dividend to parent							(52	)											(52	)
Cumulative preferred dividends							(3	)											(3	)
Other comprehensive loss																(16	)		(16	)
BALANCE AS OF JUNE 30, 2005	235,488,094	$	589	$	1,802	$	4,876		$	(962	)	$	(55	)	$	(17	)	$	6,233

Net income							284												284
Common stock dividend to parent							(95	)											(95	)
Cumulative preferred dividends							(2	)											(2	)
Other comprehensive income																5			5
BALANCE AS OF SEPTEMBER 30, 2005	235,488,094	$	589	$	1,802	$	5,063		$	(962	)	$	(55	)	$	(12	)	$	6,425

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

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)


	For the Nine Months Ended September 30,
	2005			2004
	(Millions of Dollars)
OPERATING ACTIVITIES
Net income	$	581		$	482
PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME
Depreciation and amortization		378			356
Deferred income taxes		(22	)		404
Electric rate case amortization/accruals		(78	)		—
Common equity component of allowance for funds used during construction		(8	)		(18	)
Prepaid pension costs (net of capitalized amounts)		(32	)		(104	)
Other non-cash items (net)		(27	)		10
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable - customers, less allowance for uncollectibles		(102	)		47
Materials and supplies, including fuel oil and gas in storage		(66	)		(37	)
Prepayments		(532	)		(162	)
Other receivables		(207	)		(141	)
Other current assets		(2	)		(83	)
Recoverable energy costs		(48	)		(8	)
Accounts payable		217			(13	)
Pensions and retiree benefits		30			5
Accrued taxes		268			(71	)
Accrued interest		10			(3	)
Deferred charges and other regulatory assets		(139	)		(146	)
Deferred credits and other regulatory liabilities		(40	)		172
Other assets		147			11
Other liabilities		212			3
NET CASH FLOWS FROM OPERATING ACTIVITIES		540			704
INVESTING ACTIVITIES
Utility construction expenditures (excluding capitalized support costs of $8 and $33 in 2005 and 2004, respectively)		(1,001	)		(918	)
Cost of removal less salvage		(131	)		(99	)
Common equity component of allowance for funds used during construction		8			18
Proceeds from/(cost of) sale of First Avenue properties		534			(16	)
NET CASH FLOWS USED IN INVESTING ACTIVITIES		(590	)		(1,015	)
FINANCING ACTIVITIES
Net proceeds from short-term debt		22			17
Retirement of long-term debt		(228	)		(823	)
Issuance of long-term debt		601			920
Debt issuance costs		(7	)		(14	)
Capital contribution by parent		—			513
Dividend to parent		(258	)		(293	)
Preferred stock dividends		(8	)		(8	)
NET CASH FLOWS FROM FINANCING ACTIVITIES		122			312
CASH AND TEMPORARY CASH INVESTMENTS:
NET CHANGE FOR THE PERIOD		72			1
BALANCE AT BEGINNING OF PERIOD		10			33
BALANCE AT END OF PERIOD	$	82		$	34
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	241		$	225
Income taxes	$	138		$	127

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

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)

General

These combined notes accompany and form an integral part of the separate interim consolidated financial statements of two separate registrants: Consolidated Edison, Inc. and its subsidiaries (Con Edison); and Consolidated Edison Company of New York, Inc. and its subsidiaries (Con Edison of New York). Con Edison of New York is a subsidiary of Con Edison and as such its financial condition and results of operations and cash flows, which are presented separately in the Con Edison of New York interim 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 unregulated subsidiaries (discussed below), in Con Edison’s interim consolidated financial statements. The term the “Utilities” is used in these notes to refer to Con Edison of New York and O&R. As used in these notes, the term the “Companies” refers to Con Edison and Con Edison of New York and, except as otherwise noted, the information in these combined notes relates to each of the Companies.

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, 2004 (the Form 10-K) and their separate unaudited financial statements (including the combined notes thereto) included in Part I, Item 1 of their combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005 (the First Quarter Form 10-Q) and June 30, 2005 (the Second Quarter Form 10-Q). Certain prior period amounts have been reclassified to conform to the current period presentation. Results for interim periods are not necessarily indicative of results for the entire fiscal year.

Con Edison has two regulated utility subsidiaries: Con Edison of New York and O&R. Con Edison of New York provides electric service to approximately 3.2 million customers and gas service to over 1 million customers in New York City and Westchester County. The company also provides steam service in parts of Manhattan. O&R, along with its regulated utility subsidiaries, provides electric service to approximately 0.3 million customers in southeastern New York and adjacent areas of northern New Jersey and eastern Pennsylvania and gas service to over 0.1 million customers in southeastern New York and adjacent areas of eastern Pennsylvania. Con Edison has the following unregulated energy subsidiaries: Consolidated Edison Solutions, Inc. (Con Edison Solutions), a retail energy services company that sells electricity to delivery customers of utilities, including Con Edison of New York and O&R, and also offers energy-related services; Consolidated Edison Energy, Inc. (Con

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Edison Energy), a wholesale energy supply company; and Consolidated Edison Development, Inc. (Con Edison Development), a company that owns and operates generating plants and participates in other infrastructure projects.

In December 2004, after a comprehensive strategic review, Con Edison determined to sell Con Edison Communications, LLC (Con Edison Communications). See Note N.

Note A - Earnings per Common Share

Reference is made to “Earnings per Common Share” in Note A to the financial statements included in Item 8 of the Form 10-K. For the three and nine months ended September 30, 2005 and 2004, Con Edison’s basic and diluted EPS are calculated as follows:


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(Millions of Dollars, except per share amounts/Shares in Millions)	2005			2004			2005			2004
Income from continuing operations	$	287		$	250		$	586		$	497
Loss from discontinued operations, net of tax		(2	)		(4	)		(5	)		(10	)
Net income		285			246			581			487
Weighted average common shares outstanding – Basic		244.4			241.5			243.5			233.9
Add: Incremental shares attributable to effect of potentially dilutive securities		1.0			0.7			0.7			0.7
Adjusted weighted average common shares outstanding – Diluted		245.4			242.2			244.2			234.6
EARNINGS PER COMMON SHARE – BASIC
Continuing operations	$	1.17		$	1.04		$	2.41		$	2.12
Discontinued operations		—			(0.02	)		(0.02	)		(0.04	)
Net income	$	1.17		$	1.02		$	2.39		$	2.08
EARNINGS PER COMMON SHARE – DILUTED
Continuing operations	$	1.17		$	1.03		$	2.40		$	2.12
Discontinued operations		(0.01	)		(0.02	)		(0.02	)		(0.04	)
Net income	$	1.16		$	1.01		$	2.38		$	2.08

The computation of diluted earnings per share excludes 0.9 million and 7.8 million Con Edison common shares for the three months ended September 30, 2005 and 2004, respectively, and 0.9 million and 7.7 million common shares for the nine months ended September 30, 2005 and 2004, respectively, because the exercise prices of the related underlying options were greater than the average daily closing market price of the common shares during the respective periods.

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note B - Stock-Based Compensation

Reference is made to “Stock-Based Compensation” in Note A to the financial statements in Item 8 of the Form 10-K. The following table illustrates the effect on net income and earnings per share for the three and nine months ended September 30, 2005 and 2004, respectively, if the Companies had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” for purposes of recognizing compensation expense for employee stock-based arrangements:


	For the Three Months Ended September 30,
	Con Edison*				Con Edison of New York
(Millions of Dollars, except per share amounts)	2005		2004		2005		2004
Net income, as reported	$	285	$	246	$	282	$	233
Add: Stock-based compensation expense included in reported net income, net of related tax effects		1		1		1		1
Deduct: Total stock-based compensation expense determined under fair value method for all awards, net of related tax effects		2		4		2		2
Pro forma net income	$	284	$	243	$	281	$	232
Earnings per common share:
Basic - as reported	$	1.17	$	1.02
Basic - pro forma	$	1.16	$	1.01
Diluted - as reported	$	1.16	$	1.01
Diluted - pro forma	$	1.16	$	1.00

*	Represents the consolidated financial results of Con Edison and all of its subsidiaries.


	For the Nine Months Ended September 30,
	Con Edison*				Con Edison of New York
(Millions of Dollars, except per share amounts)	2005		2004		2005		2004
Net income, as reported	$	581	$	487	$	573	$	474
Add: Stock-based compensation expense included in reported net income, net of related tax effects		4		4		3		3
Deduct: Total stock-based compensation expense determined under fair value method for all awards, net of related tax effects		7		8		6		6
Pro forma net income	$	578	$	483	$	570	$	471
Earnings per common share:
Basic - as reported	$	2.39	$	2.08
Basic - pro forma	$	2.37	$	2.07
Diluted - as reported	$	2.38	$	2.08
Diluted - pro forma	$	2.37	$	2.06

*	Represents the consolidated financial results of Con Edison and all of its subsidiaries.

Note C - Regulatory Matters

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

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Regulatory Assets and Liabilities

Regulatory assets and liabilities at September 30, 2005 and December 31, 2004 were comprised of the following items:


	Con Edison				Con Edison of New York
(Millions of Dollars)	2005		2004		2005		2004
Regulatory assets
Future federal income tax	$	827	$	762	$	780	$	715
Recoverable energy costs		295		275		272		257
Environmental remediation costs		224		165		162		106
World Trade Center restoration costs		123		104		123		104
Pension and other postretirement benefits deferrals		91		42		38		—
Transition bond charges		71		74		—		—
Revenue taxes		62		46		61		46
Workers’ compensation		45		48		45		48
Unbilled gas revenue		44		44		44		44
Other retirement program costs		25		29		25		29
Asbestos-related costs		25		26		25		25
Collection agent deferral		21		21		21		21
Sale costs - First Avenue properties		—		178		—		178
Sale of nuclear generating plant including interest		—		176		—		176
Electric interference costs		—		44		—		44
NYS tax law changes		—		40		—		40
Other		204		184		190		172
Total Regulatory Assets	$	2,057	$	2,258	$	1,786	$	2,005
Regulatory liabilities
Allowance for cost of removal less salvage	$	651	$	723	$	594	$	666
Net electric deferrals		383		—		383		—
Gain on sale of First Avenue properties		256		—		256		—
2004 electric, gas and steam one-time rate plan charges		124		124		124		124
Utilities’ hedging unrealized gains		101		2		80		—
EPA SO₂ Allowance Proceeds – Electric and Steam		59		20		59		20
NYS tax law changes		41		44		29		32
Interest on federal income tax refund		41		37		41		37
DC service incentive		23		33		23		33
Refundable energy costs		26		29		—		—
NYISO reconciliation		20		160		20		160
Gas interruptible sales credits		18		22		18		22
Gas interference – cost sharing		13		11		13		11
Excess dividends tax		4		18		4		18
Transmission congestion contracts		—		391		—		391
Gain on divestiture		—		56		—		55
Electric excess earnings		—		50		—		50
Deposit from sale of First Avenue properties		—		50		—		50
Accrued electric rate reduction		—		25		—		25
Gain on disposition of property – W. 45 St.		—		24		—		24
Other		223		180		203		169
Regulatory Liabilities		1,983		1,999		1,847		1,887
Deferred derivative gains - current		496		23		408		8
Total Regulatory Liabilities	$	2,479	$	2,022	$	2,255	$	1,895

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

“Net electric deferrals” represents the remaining unamortized balance of certain regulatory assets and liabilities of Con Edison of New York that were combined effective April 1, 2005 and are being amortized to income over the period April 2005 through March 2008, in accordance with the electric rate plan discussed in Note C to the financial statements in Part I, Item I of the First Quarter Form 10-Q.

In May 2005, Con Edison of New York completed the sale of certain properties located on First Avenue in Manhattan. Net proceeds from the sale received at closing totaled $534 million, resulting in a pre-tax gain on the sale of $256 million. In accordance with the Public Service Commission (PSC) order approving the sale of the properties, the company has deferred the net gain for the benefit of customers. The net after-tax gain on the sale, including additional expenses to be incurred, is estimated at $114 million. There may be additional proceeds in the event of certain zoning or other developments.

In November 2005, Con Edison of New York filed a request with the PSC for a net increase in rates it charges for steam service, effective October 1, 2006, of $68 million (9.6 percent). The filing reflects a return on common equity of 11 percent and a common equity ratio of 49 percent of capitalization. The filing includes a proposal for a three-year rate plan, with additional increases effective October 1, 2007 and 2008 of $15 million and $12 million, respectively. The filing proposes continuation of the current steam rate plan provisions with respect to recovery from customers of the cost of fuel and purchased steam and environmental remediation expenses and the reconciliation of actual expenses allocable to steam to the amounts reflected in rates for pension and other post-employment benefit costs, property taxes and interference costs.

Note D - Short-Term Borrowing and Credit Agreements

For information about the Companies’ commercial paper programs and revolving credit agreements, see Note D to the financial statements in Part I, Item 1 of the First Quarter 10-Q. At September 30, 2005, Con Edison had $224 million of commercial paper outstanding of which $122 million was outstanding under Con Edison of New York’s program. The weighted average interest rate for the nine-month period was 3.13 percent and 2.95 percent for Con Edison and Con Edison of New York, respectively. At September 30, 2005, no loans were outstanding under any of the credit agreements and $248 million of letters of credit were outstanding.

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note E - 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 environmental damages. Liability under these laws can be material and may be imposed for contamination from past acts, even though such past acts may have been lawful at the time they occurred. The sites, at which the Utilities have been asserted to have liability under these laws, including their manufactured gas plant sites, are referred to herein as “Superfund Sites.”

For Superfund Sites where there are other potentially responsible parties and the Utilities are not managing the site investigation and remediation, the accrued liability represents an estimate of the amount the Utilities will need to pay to discharge their related obligations. For Superfund Sites (including the manufactured gas plant sites) for which one of the Utilities is managing the investigation and remediation, the accrued liability represents an estimate 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. Remediation costs are estimated in light of the information available, applicable remediation standards and experience with similar sites.

For the three and nine months ended September 30, 2005, Con Edison of New York incurred approximately $12 million and $25 million, respectively, for environmental remediation costs. Insurance recoveries were $2 million for the nine months ended September 30, 2005, all of which reduced related regulatory assets. For the three and nine months ended September 30, 2004, Con Edison of New York incurred approximately $21 million and $36 million, respectively, for environmental remediation costs. Insurance recoveries of $15 million were received by Con Edison of New York during the nine months ended September 30, 2004, $14 million of which reduced related regulatory assets, with the remainder credited to expense.

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

The accrued liabilities and regulatory assets related to Superfund Sites for the Companies at September 30, 2005 and December 31, 2004 were as follows:


	Con Edison				Con Edison of New York
(Millions of Dollars)	2005		2004		2005		2004
Accrued liabilities:
Manufactured gas plant sites	$	176	$	148	$	120	$	92
Other Superfund Sites		60		50		59		49
Total	$	236	$	198	$	179	$	141
Regulatory assets	$	224	$	165	$	162	$	106

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

In 2002, Con Edison of New York estimated that for its manufactured gas plant sites, many of which had not been investigated, its aggregate undiscounted potential liability for the investigation and remediation of coal tar and/or other manufactured gas plant-related environmental contaminants could range from approximately $65 million to $1.1 billion. In 2004, O&R estimated that for its manufactured gas plant sites, each of which has been investigated, the aggregate undiscounted potential liability for the remediation of such contaminants could range from approximately $31 million to $87 million. These estimates were based on the assumption that there is contamination at each of the sites and additional assumptions regarding the extent of contamination and the type and extent of remediation that may be required. Actual experience may be materially different.

Asbestos Proceedings

Suits have been brought in New York State and federal courts against the Utilities and many other defendants, wherein a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the Utilities. The suits that have been resolved, which are many, have been resolved without any payment by the Utilities, or for amounts that were not, in the aggregate, material to them. The amounts specified in the remaining thousands of suits total billions of dollars; however, the Companies believe that these amounts are greatly exaggerated, based on the disposition of previous claims. In 2004, Con Edison of New York estimated that its aggregate undiscounted potential liability for these suits and

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

additional suits that may be brought over the next 15 years is $25 million. The estimate was based upon a combination of modeling, historical data analysis and risk factor assessment. Actual experience may be materially different.

In addition, certain current and former employees have claimed or are claiming workers’ compensation benefits based on alleged disability from exposure to asbestos. Under its current rate agreements, Con Edison of New York is permitted to defer as regulatory assets (for subsequent recovery through rates) liabilities incurred for its asbestos lawsuits and workers’ compensation claims.

The accrued liability for asbestos suits and workers’ compensation proceedings (including those related to asbestos exposure) and the amounts deferred as regulatory assets for the Companies at September 30, 2005 and December 31, 2004 were as follows:


	Con Edison				Con Edison of New York
(Millions of Dollars)	2005		2004		2005		2004
Accrued liability - asbestos suits	$	25	$	26	$	25	$	25
Regulatory assets - asbestos suits		25		26		25		25
Accrued liability - workers’ compensation		121		122		116		119
Regulatory assets - workers’ compensation	$	45	$	48	$	45	$	48

Note F - Northeast Utilities Litigation

In March 2001, Con Edison commenced an action in the United States District Court for the Southern District of New York (the District Court), entitled Consolidated Edison, Inc. v. Northeast Utilities (the First Federal Proceeding), seeking a declaratory judgment that Northeast Utilities has failed to meet certain conditions precedent to Con Edison’s obligation to complete its acquisition of Northeast Utilities pursuant to their agreement and plan of merger, dated as of October 13, 1999, as amended and restated as of January 11, 2000 (the merger agreement). In May 2001, Con Edison amended its complaint. As amended, Con Edison’s complaint seeks, among other things, recovery of damages sustained by it as a result of the material breach of the merger agreement by Northeast Utilities, and the District Court’s declaration that under the merger agreement Con Edison has no further or continuing obligations to Northeast Utilities and Northeast Utilities has no further or continuing rights against Con Edison.

In June 2001, Northeast Utilities withdrew the separate action it commenced in March 2001 in the same court and filed as a counter-claim in the First Federal Proceeding its claim that Con Edison materially breached the merger agreement and that, as a result, Northeast Utilities and its shareholders have suffered substantial damages, including the difference between the consideration to be paid to Northeast Utilities’ shareholders pursuant to the merger agreement and the market value of Northeast

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Utilities’ common stock (the so-called “lost premium” claim), expenditures in connection with regulatory approvals and lost business opportunities. Pursuant to the merger agreement, Con Edison agreed to acquire Northeast Utilities for $26.00 per share (an estimated aggregate of not more than $3.9 billion) plus $0.0034 per share for each day after August 5, 2000 through the day prior to the completion of the transaction, payable 50 percent in cash and 50 percent in stock.

In March 2003, the District Court ruled on certain motions filed by Con Edison and Northeast Utilities in the First Federal Proceeding. The District Court ruled that Con Edison’s claim against Northeast Utilities for hundreds of millions of dollars for breach of the merger agreement, as well as Con Edison’s claim that Northeast Utilities underwent a material adverse change, will go to trial. The District Court also dismissed Con Edison’s fraud and misrepresentation claims. In addition, the District Court ruled that Northeast Utilities’ shareholders were intended third-party beneficiaries of the merger agreement and the alleged $1.2 billion lost premium claim against Con Edison would go to trial.

In May 2003, a lawsuit by a purported class of Northeast Utilities’ shareholders, entitled Rimkoski, et al. v. Consolidated Edison, Inc., was filed in New York County Supreme Court (the State Proceeding) alleging breach of the merger agreement. The complaint defined the putative class as holders of Northeast Utilities’ common stock on March 5, 2001, and alleged that the class members were intended third party beneficiaries of the merger agreement. The complaint sought damages believed to be substantially duplicative of those sought by Northeast Utilities on behalf of its shareholders in the First Federal Proceeding. In December 2003, the District Court granted Rimkoski’s motion to intervene in the First Federal Proceeding and, in February 2004, the State Proceeding was dismissed without prejudice. In January 2004, Rimkoski filed a motion in the First Federal Proceeding to certify his action as a class action on behalf of all holders of Northeast Utilities’ common stock on March 5, 2001 and to appoint Rimkoski as class representative. The motion is pending.

In May 2004, the District Court ruled that the Northeast Utilities’ shareholders who may pursue the lost premium claim against Con Edison are the holders of Northeast Utilities’ common stock on March 5, 2001 and the District Court therefore dismissed Northeast Utilities’ lost premium claim. The District Court certified its ruling regarding the lost premium claim for interlocutory appeal to the United States Court of Appeals for the Second Circuit (the Court of Appeals), and in June 2004 Northeast Utilities filed its motion for leave to appeal the issue to the Court of Appeals. The District Court further certified for interlocutory appeal its March 2003 determination that Northeast Utilities’ shareholders are intended third-party beneficiaries under the merger agreement, and in June 2004 Con Edison filed its motion for leave to appeal the issue to the Court of Appeals. In October 2004, the

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Court of Appeals granted both Con Edison’s motion and Northeast Utilities’ motion. In October 2005, the Court of Appeals reversed the District Court’s March 2003 ruling that Northeast Utilities’ shareholders were intended third-party beneficiaries of the merger agreement, and held that Northeast Utilities’ shareholders therefore could not sue Con Edison for the claimed lost premium. Also, in October 2005, Northeast Utilities and Rimkowski each filed petitions for rehearing of that Court of Appeals’ decision.

In May 2004, the District Court dismissed the lawsuit that was commenced in October 2003 by a purported class of Northeast Utilities’ shareholders, entitled Siegel et al. v. Consolidated Edison, Inc. (the Second Federal Proceeding). The Second Federal Proceeding had sought unspecified injunctive relief and damages believed to be substantially duplicative of the damages sought from Con Edison in the First Federal Proceeding. A motion by the plaintiffs in the Second Federal Proceeding to intervene in the First Federal Proceeding is pending.

Con Edison believes that Northeast Utilities materially breached the merger agreement, and that Con Edison did not materially breach the merger agreement. Con Edison believes it was not obligated to acquire Northeast Utilities because Northeast Utilities did not meet the merger agreement’s conditions that Northeast Utilities perform all of its obligations under the merger agreement. Those obligations include the obligation that it carry on its businesses in the ordinary course consistent with past practice; that the representations and warranties made by it in the merger agreement were true and correct when made and remain true and correct; and that there be no material adverse change with respect to Northeast Utilities.

Con Edison is unable to predict whether or not any Northeast Utilities related lawsuits or other actions will have a material adverse effect on Con Edison’s financial position, results of operations or liquidity.

Note G - Other Material Contingencies

Lease In/Lease Out Transactions

As part of a broad initiative, the Internal Revenue Service (IRS) is reviewing certain categories of transactions. Among these are transactions in which a taxpayer leases property and then immediately subleases it back to the lessor (termed “Lease In/Lease Out,” or LILO transactions). In 1997 and 1999, Con Edison Development entered into two LILO transactions, involving gas distribution and electric generating facilities in the Netherlands, with a total investment of $259 million. The transactions were financed with $93 million of equity and $166 million of non-recourse, long-term debt secured by the underlying assets. In accordance with SFAS No. 13, “Accounting for Leases,” Con Edison is accounting for the two LILO transactions as leveraged leases. Accordingly, the company’s investment in these leases, net of non-recourse debt, is carried as a single amount in Con Edison’s

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

consolidated balance sheet and income is recognized pursuant to a method that incorporates a level rate of return for those years when net investment in the lease is positive, based upon the after-tax cash flows projected at the inception of the leveraged leases. At September 30, 2005, and December 31, 2004, the company’s investment in these leveraged leases ($223 million and $215 million, respectively) net of deferred tax liabilities ($182 million and $165 million, respectively), amounted to $41 million and $50 million, respectively. The estimated tax savings from the two LILO transactions through September 30, 2005, in the aggregate, was $132 million. On audit of Con Edison’s tax return for 1997, the IRS disallowed the tax losses in connection with the 1997 LILO transaction.

Con Edison believes that its LILO’s have been correctly reported. Con Edison intends to pay the $0.4 million income tax deficiency asserted by the IRS for the tax year 1997 with respect to the 1997 LILO transaction, and commence litigation in federal court to obtain a refund of this tax payment.

In July 2005, the Financial Accounting Standards Board (FASB) issued a proposed FASB Staff Position (FSP) No. FAS 13-a, “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction.” The proposed FSP would require the expected timing of income tax cash flows generated by Con Edison’s LILO transactions to be reviewed at least annually. If the expected timing of the cash flows is revised, the rate of return and the allocation of income would be recalculated from the inception of the LILO transactions. Additionally, if a revision of an important assumption requires a recalculation of a leveraged lease and changes its characteristics such that it would not qualify as a leveraged lease, the lease should be reclassified as a direct financing lease on a prospective basis at the date the change in assumption occurs. If the company’s tax position with respect to the LILO transactions were to be revised, the company could be required to recalculate the accounting effect of the LILO transactions, which could result in a charge to earnings that could have a material adverse effect on its results of operations.

Timing of Deduction of Construction-Related Costs

In August 2005, the IRS issued Revenue Ruling 2005-53 with respect to when federal income tax deductions can be taken for certain construction-related costs. The Companies’ used the “simplified service cost method” (SSCM) to determine the extent to which these costs could be deducted in 2002, 2003 and 2004, and as a result reduced their current tax expense (for Con Edison, by $289 million of which $264 million is attributable to Con Edison of New York). Under Revenue Ruling 2005-53, the Companies may be required to repay, with interest, a portion of their past SSCM tax benefits and to capitalize and depreciate over a period of years costs they previously deducted under SSCM. The interest could range from zero to approximately $35 million. Repayment of the SSCM tax benefits would not otherwise affect the Utilities’ results of operations because deferred taxes have been

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

previously provided for the related temporary differences between the SSCM deductions taken for federal income tax purposes and the corresponding amounts charged to expense for financial reporting purposes.

Collection Agent Termination

In April 2004, Con Edison of New York terminated arrangements with a collection agent, which also processed payments for other large corporations and governmental agencies. The New York State Banking Department suspended the license of the collection agent, and the collection agent consented to an involuntary bankruptcy proceeding commenced against it by a group of its unsecured creditors. The collection agent has not forwarded to the company an estimated $21 million of payments it received from the company’s customers. The company is continuing to review the matter and the possible recovery of these payments from the bankrupt’s estate, insurance or other sources. In April 2004, the company reflected the possible loss of these payments on its balance sheet and recorded an offsetting regulatory asset. The company has filed a petition with the PSC in connection with this matter.

Lower Manhattan Restoration

Con Edison of New York estimates that its costs for emergency response to the September 11, 2001 attack on the World Trade Center, and for resulting temporary and subsequent permanent restoration of electric, gas and steam transmission and distribution facilities damaged in the attack will total $430 million, net of insurance payments. Most of the costs, which are capital in nature, have already been incurred. At September 30, 2005, the company has received reimbursement for $169 million of these costs ($76 million under insurance policies and $93 million from the federal government). The company expects to receive additional funds from insurance policies and federal reimbursement. At September 30, 2005, the company had incurred capital costs of $197 million and, pursuant to a petition it filed with the PSC in 2001, deferred $131 million, including interest, as a regulatory asset; these amounts are net of reimbursements to that date. The company expects the PSC to permit recovery from customers of the costs, net of any federal reimbursement, insurance payments and tax savings.

Suits brought on behalf of several thousand plaintiffs alleged to have been working at the World Trade Center site following the attack are pending in the United States District Court for the Southern District of New York against numerous parties, including the City of New York, Con Edison and Con Edison of New York. The suits generally seek unspecified amounts of damages allegedly resulting from exposure to hazardous substances in connection with emergency response and restoration activities at the site. The Companies believe that their activities were prudent and in compliance with applicable laws. Neither of the Companies, however, is able to predict whether or not any proceedings or other actions relating to the activities will have a material adverse effect on its financial condition, results of operations or liquidity.

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Based upon New York City’s announced plans for improvement projects in lower Manhattan, including a transportation hub, the company anticipates that over the next five to ten years it may incur up to $250 million in incremental interference costs in lower Manhattan. The company’s rate plans include provisions for the recovery of interference costs.

Generating Assets Sold To Mirant

In June 1999, O&R completed the sale of all of its generating assets to affiliates of Mirant Corporation (formerly Southern Energy, Inc.) and the two-thirds interest in the Bowline Point generating facility owned by Con Edison of New York. The total gross proceeds from the sale amounted to $476 million ($343 million attributable to O&R and $133 million attributable to Con Edison of New York). In 2003, Mirant and most of its subsidiaries filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

The Utilities have entered into an agreement with Mirant, its affiliated debtors and debtors in possession, and the Official Committee of Unsecured Creditors for Mirant Corporation tolling the running of any statute of limitations with respect to any claim Mirant, its affiliated debtors or debtors in possession, or the Official Committee of Unsecured Creditors for Mirant Corporation may have against the Utilities. Mirant has indicated that it is considering a lawsuit against the Utilities in which it may seek to claim that some portion of what was paid in 1999 to purchase the generating assets exceeded the fair value of the assets.

Mirant has also indicated that it may pursue claims against O&R for compensation for certain system reliability services it alleges it provided to O&R since November 1999, as well as claims related to certain of the former O&R facilities. The Utilities believe that these purported claims are without merit and would vigorously defend against them if they are pursued by Mirant.

In addition, Mirant has indicated in its Amended Plan of Reorganization that under certain circumstances it would retire its Lovett generating units in 2007 and 2008. O&R is in the process of upgrading its transmission and distribution system to meet anticipated load growth, and believes that by 2007 it would be able to meet existing transmission reliability criteria in the event that the Lovett units were shut down.

The Companies are unable to predict whether or not any Mirant related lawsuits or other actions will have a material adverse effect on their financial position, results of operations or liquidity.

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note H - Guarantees

Con Edison and its subsidiaries enter into various agreements providing financial or performance assurance primarily to third parties on behalf of their subsidiaries. In addition, a Con Edison Development subsidiary has issued guarantees on behalf of entities in which it has an equity interest. Maximum amounts guaranteed by Con Edison totaled $1.2 billion and $989 million at September 30, 2005 and December 31, 2004, respectively.

A summary by type and term, of Con Edison’s total guarantees at September 30, 2005 is as follows:


Guarantee Type	0–3 years		4–10 years		> 10 years		Total
	(Millions of Dollars)
Commodity transactions	$	728	$	3	$	281	$	1,012
Affordable housing program		—		37		—		37
Intra-company guarantees		20		43		1		64
Other guarantees		32		12		2		46
TOTAL	$	780	$	95	$	284	$	1,159

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

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note I - Financial Information By Business Segment

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

The financial data for the business segments are as follows:


	For the Three Months Ended September 30,
	Operating Revenues				Intersegment Revenues						Depreciation and Amortization				Operating Income
(Millions of Dollars)	2005		2004		2005			2004			2005		2004		2005			2004
Con Edison of New York
Electric	$	2,317	$	2,009	$	2		$	3		$	98	$	96	$	363		$	323
Gas		209		161		1			1			19		19		3			4
Steam		111		88		19			—			12		5		6			(21	)
Total Con Edison of New York	$	2,637	$	2,258	$	22		$	4		$	129	$	120	$	372		$	306
O&R
Electric	$	199	$	159	$	—		$	—		$	7	$	6	$	23		$	21
Gas		23		21		—			—			2		2		(2	)		(3	)
Total O&R	$	222	$	180	$	—		$	—		$	9	$	8	$	21		$	18
Unregulated Energy Subsidiaries	$	514	$	296	$	—		$	—		$	9	$	11	$	24		$	6
Other*		2		—		(22	)		(4	)		—		1		2			—
Total Con Edison	$	3,375	$	2,734	$	—		$	—		$	147	$	140	$	419		$	330

*	Parent company expenses, primarily interest and consolidation adjustments. Operating revenues and operating income in 2005 include amounts related to RECO securitization. Other does not represent a business segment.


	For the Nine Months Ended September 30,
	Operating Revenues				Intersegment Revenues						Depreciation and Amortization				Operating Income
(Millions of Dollars)	2005		2004		2005			2004			2005		2004		2005		2004
Con Edison of New York
Electric	$	5,237	$	4,838	$	7		$	8		$	294	$	285	$	650	$	589
Gas		1,160		962		2			2			57		56		126		102
Steam		474		415		38			1			27		15		51		12
Total Con Edison of New York	$	6,871	$	6,215	$	47		$	11		$	378	$	356	$	827	$	703
O&R
Electric	$	441	$	400	$	—		$	—		$	19	$	18	$	44	$	40
Gas		154		149		—			—			7		7		9		7
Total O&R	$	595	$	549	$	—		$	—		$	26	$	25	$	53	$	47
Unregulated Energy Subsidiaries	$	1,112	$	813	$	—		$	—		$	30	$	31	$	43	$	25
Other*		4		—		(47	)		(11	)		—		1		4		2
Total Con Edison	$	8,582	$	7,577	$	—		$	—		$	434	$	413	$	927	$	777

*	Parent company expenses, primarily interest and consolidation adjustments. Operating revenues and operating income in 2005 include amounts related to RECO securitization. Other does not represent a business segment.

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note J - Pension Benefits

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

Net Periodic Benefit Cost

The components of the Companies’ net periodic benefit costs for the three and nine months ended September 30, 2005 and 2004 were as follows:


	For the Three Months Ended September 30,
	Con Edison						Con Edison of New York
(Millions of Dollars)	2005			2004			2005			2004
Service cost - including administrative expenses	$	29		$	26		$	27		$	24
Interest cost on projected benefit obligation		108			100			101			93
Expected return on plan assets		(161	)		(157	)		(155	)		(151	)
Amortization of net actuarial (gain)/loss		21			(11	)		16			(14	)
Amortization of prior service costs		3			2			3			2
NET PERIODIC BENEFIT COST	$	—		$	(40	)	$	(8	)	$	(46	)
Amortization of regulatory asset*		1			1			1			1
TOTAL PERIODIC BENEFIT COST	$	1		$	(39	)	$	(7	)	$	(45	)
Cost capitalized		—			12			2			13
Cost deferred		(12	)		(2	)		(10	)		—
Credited to operating expenses	$	(11	)	$	(29	)	$	(15	)	$	(32	)

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


	For the Nine Months Ended September 30,
	Con Edison						Con Edison of New York
(Millions of Dollars)	2005			2004			2005			2004
Service cost - including administrative expenses	$	88		$	78		$	81		$	72
Interest cost on projected benefit obligation		323			307			302			287
Expected return on plan assets		(482	)		(482	)		(464	)		(465	)
Amortization of net actuarial (gain)/loss		61			(30	)		48			(39	)
Amortization of prior service costs		10			8			9			8
NET PERIODIC BENEFIT COST	$	—		$	(119

Commission

File Number

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

State of
Incorporation

I.R.S. Employer
ID. Number

Consolidated Edison, Inc.

4 Irving Place, New York, New York 10003

(212) 460-4600

Consolidated Edison Company of New York, Inc.

4 Irving Place, New York, New York 10003

(212) 460-4600