Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data


Financial Statements			Page
Supplementary Financial Information

Con Edison
Report of Management on Internal Control Over Financial Reporting			98
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)			99
Consolidated Income Statement for the years ended December 31, 2021, 2020, and 2019			102
Consolidated Statement of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019			103
Consolidated Statement of Cash Flows for the years ended December 31, 2021, 2020 and 2019			104
Consolidated Balance Sheet at December 31, 2021 and 2020			105
Consolidated Statement of Equity for the years ended December 31, 2021, 2020 and 2019			107
Consolidated Statement of Capitalization at December 31, 2021 and 2020			108

CECONY
Report of Management on Internal Control Over Financial Reporting			111
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)			112
Consolidated Income Statement for the years ended December 31, 2021, 2020 and 2019			114
Consolidated Statement of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019			115
Consolidated Statement of Cash Flows for the years ended December 31, 2021, 2020 and 2019			116
Consolidated Balance Sheet at December 31, 2021 and 2020			117
Consolidated Statement of Shareholder’s Equity for the years ended December 31, 2021, 2020 and 2019			119
Consolidated Statement of Capitalization at December 31, 2021 and 2020			120

Notes to the Financial Statements			122

Financial Statement Schedules
Con Edison
Schedule I - Condensed Financial Information of Consolidated Edison, Inc. at December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019			192
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2021, 2020 and 2019			195
CECONY
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 202 1 , 20 20 and 2019			195

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


96			CON EDISON ANNUAL REPORT 2021

Supplementary Financial Information

Selected Quarterly Financial Data for the years ended December 31, 2021 and 2020 (Unaudited)


	2021
Con Edison	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
	(Millions of Dollars, except per share amounts)
Operating revenues	$3,677	$2,971	$3,613	$3,415
Operating income	860	418	850	697
Net income	419	165	538	224
Basic earnings per share	$1.23	$0.48	$1.52	$0.63
Diluted earnings per share	$1.22	$0.48	$1.52	$0.63


	2020
Con Edison	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
	(Millions of Dollars, except per share amounts)
Operating revenues	$3,234	$2,719	$3,333	$2,960
Operating income	808	479	860	507
Net income	375	190	493	43
Basic earnings per share	$1.13	$0.57	$1.47	$0.13
Diluted earnings per share	$1.12	$0.57	$1.47	$0.13

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


	2021
CECONY	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
	(Millions of Dollars)
Operating revenues	$3,205	$2,486	$3,092	$2,932
Operating income	786	321	728	624
Net income	465	128	418	333


	2020
CECONY	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
	(Millions of Dollars)
Operating revenues	$2,854	$2,345	$2,872	$2,576
Operating income	742	389	722	457
Net income	406	152	405	222

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


CON EDISON ANNUAL REPORT 2021			97

Report of Management on Internal Control Over Financial Reporting

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

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

Management of the Company assessed the effectiveness of internal control over financial reporting as of December 31, 2021, using the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on that assessment, management has concluded that the Company had effective internal control over financial reporting as of December 31, 2021.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, has been audited by PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, as stated in their report which appears on the following page of this Annual Report on Form 10-K.


			/s/ Timothy P. Cawley
			Timothy P. Cawley
			Chairman, President and Chief Executive Officer

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

February 17, 2022


98			CON EDISON ANNUAL REPORT 2021

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Consolidated Edison, Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the consolidated financial statements, including the related notes and financial statement schedules, of Consolidated Edison, Inc. and its subsidiaries (the "Company") as listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

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

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


CON EDISON ANNUAL REPORT 2021			99

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for the Effects of Regulatory Matters

As described in Notes A and B to the consolidated financial statements, the Company applies the accounting rules for regulated operations, which specifies the economic effects that result from the causal relationship of costs and revenues in the rate-regulated environment and how these effects are to be accounted for by a regulated enterprise. As of December 31, 2021, there were $3,845 million of deferred costs included in regulatory assets and $4,566 million of regulatory liabilities awaiting potential refund or future rate reductions. Under regulatory accounting rules, if it is probable that incurred costs will be recovered in the future, those costs would be recorded as deferred charges or “regulatory assets.” Similarly, if revenues are recorded for costs expected to be incurred in the future, these revenues would be recorded as deferred credits or “regulatory liabilities.” The Company’s regulatory assets and liabilities will be recovered from customers, or applied for customer benefit, in accordance with rate provisions approved by the applicable state regulators.

The principal considerations for our determination that performing procedures relating to the accounting for the effects of regulatory matters is a critical audit matter are the significant judgment by management in determining the recoverability of certain regulatory assets and the significant auditor judgment and subjectivity in performing procedures and evaluating audit evidence relating to the recognition of regulatory assets and regulatory liabilities, including evaluating management’s judgments relating to the recoverability of certain regulatory assets.

Hypothetical Liquidation at Book Value (HLBV) Calculation of Income or Loss Attributable to Noncontrolling Tax Equity Investor in the CED Nevada Virginia Project

As described in Notes A and S to the consolidated financial statements, in February 2021, the Company entered into an agreement relating to the CED Nevada Virginia project with a noncontrolling tax equity investor to which a percentage of earnings, tax attributes and cash flows will be allocated. CED Nevada Virginia is a consolidated entity in which the Company has less than a 100 percent membership interest. Management used the HLBV method of accounting to determine the income or loss attributable to its noncontrolling tax equity investor based on the terms of the partnership operating agreement. For the year ended December 31, 2021, the HLBV method of accounting for the CED Nevada Virginia project resulted in $155 million of income for the Company and $158 million of loss attributable to the noncontrolling tax equity investor.

The principal considerations for our determination that performing procedures relating to the HLBV calculation of income or loss attributable to noncontrolling tax equity investor in the CED Nevada Virginia project is a critical audit matter are the significant complexity in applying the HLBV method to determine the income or loss the noncontrolling tax equity investor would hypothetically receive at each balance sheet reporting date under the liquidation provisions of the partnership operating agreement and the significant auditor subjectivity and effort in


100			CON EDISON ANNUAL REPORT 2021

performing procedures and evaluating audit evidence related to the HLBV method based on the terms of the partnership operating agreement in the initial year. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s preparation and review of the HLBV method for the CED Nevada Virginia project to allocate income or loss to the noncontrolling tax equity investor. These procedures also included, among others (i) the involvement of professionals with specialized skill and knowledge to assist in developing an independent calculation of the income or loss attributable to the noncontrolling tax equity investor based on the terms of the partnership operating agreement, (ii) comparing the independent calculation of the income or loss attributable to the noncontrolling tax equity investor to management’s HLBV calculation, and (iii) testing the completeness and accuracy of data used as inputs into the independent calculation.

Partial Impairment of the Equity Method Investment in Mountain Valley Pipeline LLC ("MVP")

As described in Note A to the consolidated financial statements, the balance of the Company’s equity method investment in MVP, a company developing a proposed gas transmission project (“Project”), was $111 million as of December 31, 2021. Management periodically evaluates its equity method investments to determine whether an other-than-temporary decline in carrying value has occurred and an impairment exists. Management determined that actions taken by the U.S. Court of Appeals for the Fourth Circuit, along with the potential outcome of other matters pending before that Court, may lead to further delays and increased project costs, constituting a triggering event which required management to test its investment in MVP for an other-than-temporary impairment as of December 31, 2021. In response to the triggering event, management assessed the value of its equity investment in the Project to determine whether the fair value of its investment in MVP had declined below its carrying value on an other-than-temporary basis as of December 31, 2021. The estimated fair value of the investment was determined using a discounted cash flow analysis. The analysis discounted probability-weighted future cash flows, including revenues based on long-term firm transportation contracts, that are secured for the first 20 years following completion of the Project. Based on the discounted cash flow analysis, management concluded as of December 31, 2021 that the fair value of its investment in MVP declined below its carrying value and the declines were other-than-temporary. Accordingly, management recorded a pre-tax impairment loss of $231 million ($162 million, after tax), for the year ended December 31, 2021 to reduce the carrying value of its investment in MVP from $342 million to $111 million. Management determined that the likelihood that the Project will be completed is the most significant and sensitive assumption.

The principal considerations for our determination that performing procedures relating to the partial impairment of the equity method investment in MVP is a critical audit matter are (i) the significant judgment by management when developing the model for the discounted cash flow analysis and determining the significant assumption of the likelihood that the Project will be completed, used to estimate the fair value of the investment, and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s model and significant assumption related to the likelihood that the Project will be completed.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s impairment assessment for the equity method investment in MVP, including controls over the model for the discounted cash flow analysis and determination of the significant assumption related to the likelihood that the Project will be completed. These procedures also included, among others, (i) testing management’s process for estimating the fair value of the investment in MVP; (ii) evaluating the appropriateness of the model for the discounted cash flow analysis used by management to estimate the fair value of the investment in MVP; (iii) testing the completeness and accuracy of the underlying data used in the model for the discounted cash flow analysis; and (iv) evaluating the reasonableness of the significant assumption used by management related to the likelihood that the Project will be completed. Evaluating management’s assumption related to the likelihood that the Project will be completed involved evaluating whether the assumption used by management was reasonable considering (i) the status of matters pending with the relevant authorities and (ii) external market and industry data.

/s/ PricewaterhouseCoopers LLP

New York, New York

February 17, 2022

We have served as the Company’s or its predecessors' auditor since 1938.


CON EDISON ANNUAL REPORT 2021			101

Consolidated Edison, Inc.

Consolidated Income Statement


	For the Years Ended December 31,
(Millions of Dollars/Except Share Data)	2021	2020	2019
OPERATING REVENUES
Electric	$9,485	$8,730	$8,694
Gas	2,638	2,269	2,391
Steam	532	508	627
Non-utility	1,021	739	862
TOTAL OPERATING REVENUES	13,676	12,246	12,574
OPERATING EXPENSES
Purchased power	1,835	1,600	1,546
Fuel	229	156	207
Gas purchased for resale	690	527	880
Other operations and maintenance	3,254	2,814	3,175
Depreciation and amortization	2,032	1,920	1,684
Taxes, other than income taxes	2,810	2,575	2,406
TOTAL OPERATING EXPENSES	10,850	9,592	9,898


OPERATING INCOME	2,826	2,654	2,676
OTHER INCOME (DEDUCTIONS)
Investment income (loss)	(420)	(214)	96
Other income	22	23	45
Allowance for equity funds used during construction	21	17	14
Other deductions	(161)	(227)	(104)
TOTAL OTHER INCOME (DEDUCTIONS)	(538)	(401)	51
INCOME BEFORE INTEREST AND INCOME TAX EXPENSE	2,288	2,253	2,727
INTEREST EXPENSE
Interest on long-term debt	930	915	888
Other interest	(14)	118	116
Allowance for borrowed funds used during construction	(11)	(14)	(13)
NET INTEREST EXPENSE	905	1,019	991
INCOME BEFORE INCOME TAX EXPENSE	1,383	1,234	1,736
INCOME TAX EXPENSE	190	90	296
NET INCOME	$1,193	$1,144	$1,440
(Loss) Income attributable to non-controlling interest	$(153)	$43	$97
NET INCOME FOR COMMON STOCK	$1,346	$1,101	$1,343
Net income per common share — basic	$3.86	$3.29	$4.09
Net income per common share — diluted	$3.85	$3.28	$4.08
AVERAGE NUMBER OF SHARES OUTSTANDING — BASIC (IN MILLIONS)	348.4	334.8	328.5
AVERAGE NUMBER OF SHARES OUTSTANDING — DILUTED (IN MILLIONS)	349.4	335.7	329.5

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


102			CON EDISON ANNUAL REPORT 2021

Consolidated Edison, Inc.

Consolidated Statement of Comprehensive Income


	For the Years Ended December 31,
(Millions of Dollars)	2021	2020	2019
NET INCOME	$1,193	$1,144	$1,440
LOSS (INCOME) ATTRIBUTABLE TO NON-CONTROLLING INTEREST	153	(43)	(97)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES
Pension and other postretirement benefit plan liability adjustments, net of taxes	30	(6)	(5)
Other income, net of taxes	—	—	2
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES	30	(6)	(3)
COMPREHENSIVE INCOME	$1,376	$1,095	$1,340

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


CON EDISON ANNUAL REPORT 2021			103

Consolidated Edison, Inc.

Consolidated Statement of Cash Flows


	For the Years Ended December 31,
(Millions of Dollars)	2021	2020	2019
OPERATING ACTIVITIES
Net Income	$1,193	$1,144	$1,440
PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME
Depreciation and amortization	2,032	1,920	1,684
Impairment of assets	443	320	—
Deferred income taxes	133	85	308
Rate case amortization and accruals	(16)	(40)	(116)
Common equity component of allowance for funds used during construction	(21)	(17)	(14)
Net derivative (gains)/losses	(53)	57	27
Gain on Sale of Assets	—	—	(14)
Unbilled revenue and net unbilled revenue deferrals	(53)	(1)	(3)


Other non-cash items, net	148	49	(26)
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable - customers	(411)	(543)	23
Allowance for uncollectible accounts – customers	169	78	8

Materials and supplies, including fuel oil and gas in storage	(82)	(4)	6
Revenue decoupling mechanism receivable	(53)	(61)	(76)
Other receivables and other current assets	(103)	(134)	54
Taxes receivable	13	(6)	29
Prepayments	(24)	(11)	(73)
Accounts payable	44	170	10
Pensions and retiree benefits obligations, net	266	285	357
Pensions and retiree benefits contributions	(472)	(478)	(357)

Accrued taxes	(46)	74	10
Accrued interest	4	(4)	24
Superfund and environmental remediation costs	(10)	(22)	(9)
Distributions from equity investments	18	39	57
System benefit charge	(34)	(119)	20
Deferred charges, noncurrent assets and other regulatory assets	(563)	(653)	(492)
Deferred credits and other regulatory liabilities	175	10	278
Other current and noncurrent liabilities	36	60	(21)
NET CASH FLOWS FROM OPERATING ACTIVITIES	2,733	2,198	3,134
INVESTING ACTIVITIES
Utility construction expenditures	(3,630)	(3,326)	(3,238)
Cost of removal less salvage	(323)	(310)	(295)
Non-utility construction expenditures	(323)	(583)	(248)

Investments in electric and gas transmission projects	(30)	(3)	(205)
Investments in/acquisitions of renewable electric projects	—	(24)	(10)


Proceeds from sale of assets	629	—	192


Divestiture of renewable electric projects	183	—	—
Other investing activities	10	22	22
NET CASH FLOWS USED IN INVESTING ACTIVITIES	(3,484)	(4,224)	(3,782)
FINANCING ACTIVITIES
Net (payment)/issuance of short-term debt	(382)	178	(874)
Issuance of long-term debt	2,804	2,925	3,017
Retirement of long-term debt	(1,960)	(518)	(1,195)
Debt issuance costs	(40)	(47)	(32)
Common stock dividends	(1,030)	(975)	(924)
Issuance of common shares - public offering	775	640	825
Issuance of common shares for stock plans	60	58	54
Distribution to noncontrolling interest	(23)	(16)	(12)
Sale of equity interest	257	—	—
NET CASH FLOWS FROM FINANCING ACTIVITIES	461	2,245	859
CASH, TEMPORARY CASH INVESTMENTS AND RESTRICTED CASH:
NET CHANGE FOR THE PERIOD	(290)	219	211
BALANCE AT BEGINNING OF PERIOD	1,436	1,217	1,006
BALANCE AT END OF PERIOD	$1,146	$1,436	$1,217



SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
Cash paid/(received) during the period for:
Interest	$924	$920	$876
Income taxes	$9	$38	($26)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
Construction expenditures in accounts payable	$457	$478	$336
Issuance of common shares for dividend reinvestment	$49	$48	$47

Software licenses acquired but unpaid as of end of period	$23	$51	$80
Equipment acquired but unpaid as of end of period	$22	$28	$33

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


104			CON EDISON ANNUAL REPORT 2021

Consolidated Edison, Inc.

Consolidated Balance Sheet


(Millions of Dollars)	December 31, 2021	December 31, 2020
ASSETS
CURRENT ASSETS
Cash and temporary cash investments	$992	$1,272

Accounts receivable — customers, net allowance for uncollectible accounts of $317 and $148 in 2021 and 2020, respectively	1,943	1,701
Other receivables, net allowance for uncollectible accounts of $22 and $7 in 2021 and 2020, respectively	298	278
Taxes receivable	13	26
Accrued unbilled revenue	662	599
Fuel oil, gas in storage, materials and supplies, at average cost	437	356
Prepayments	295	271
Regulatory assets	206	266

Restricted cash	154	164
Revenue decoupling mechanism receivable	190	137
Other current assets	361	231
TOTAL CURRENT ASSETS	5,551	5,301
INVESTMENTS	853	1,816
UTILITY PLANT, AT ORIGINAL COST
Electric	34,938	33,315
Gas	12,303	10,847
Steam	2,828	2,696
General	4,170	3,880
TOTAL	54,239	50,738
Less: Accumulated depreciation	12,177	11,188
Net	42,062	39,550
Construction work in progress	2,152	2,474
NET UTILITY PLANT	44,214	42,024
NON-UTILITY PLANT
Non-utility property, net accumulated depreciation of $626 and $522 in 2021 and 2020, respectively	4,194	3,893
Construction work in progress	188	638
NET PLANT	48,596	46,555
OTHER NONCURRENT ASSETS
Goodwill	439	446
Intangible assets, net accumulated amortization of $297 and $228 in 2021 and 2020, respectively	1,293	1,460
Operating lease right-of-use-asset	809	837
Regulatory assets	3,639	6,195
Pension and Retiree Benefits	1,654	—
Other deferred charges and noncurrent assets	282	285
TOTAL OTHER NONCURRENT ASSETS	8,116	9,223
TOTAL ASSETS	$63,116	$62,895

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


CON EDISON ANNUAL REPORT 2021			105

Consolidated Edison, Inc.

Consolidated Balance Sheet


(Millions of Dollars)	December 31, 2021	December 31, 2020
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Long-term debt due within one year	$440	$1,967
Term Loan	—	165
Notes payable	1,488	1,705
Accounts payable	1,497	1,475
Customer deposits	300	311
Accrued taxes	104	150
Accrued interest	151	149
Accrued wages	113	108
Fair value of derivative liabilities	152	238
Regulatory liabilities	185	36

System benefit charge	423	528
Operating lease liabilities	113	96
Other current liabilities	461	426
TOTAL CURRENT LIABILITIES	5,427	7,354
NONCURRENT LIABILITIES
Provision for injuries and damages	183	178
Pensions and retiree benefits	737	2,257
Superfund and other environmental costs	940	857
Asset retirement obligations	577	576
Fair value of derivative liabilities	84	240
Deferred income taxes and unamortized investment tax credits	6,873	6,475
Operating lease liabilities	717	764
Regulatory liabilities	4,381	4,513
Other deferred credits and noncurrent liabilities	257	234
TOTAL NONCURRENT LIABILITIES	14,749	16,094
LONG-TERM DEBT	22,604	20,382
COMMITMENTS, CONTINGENCIES, AND GUARANTEES (Note B, Note G, and Note H)
EQUITY
Common shareholders’ equity	20,037	18,847
Noncontrolling interest	299	218
TOTAL EQUITY (See Statement of Equity)	20,336	19,065
TOTAL LIABILITIES AND EQUITY	$63,116	$62,895

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


106			CON EDISON ANNUAL REPORT 2021

Consolidated Edison, Inc.

Consolidated Statement of Equity


(In Millions, except for dividends per share)	Common Stock		Additional Paid-In Capital	Retained Earnings	Treasury Stock		Capital Stock Expense	Accumulated Other Comprehensive Income/(Loss)	Noncontrolling Interest
Shares	Amount	Shares	Amount	Total



























BALANCE AS OF DECEMBER 31, 2018	321	$34	$7,117	$10,728	23	$(1,038)	$(99)	$(16)	$113	$16,839
Net income				1,343					97	1,440
Common stock dividends ($2.96 per share)				(971)						(971)
Issuance of common shares - public offering	12	1	835				(11)			825
Issuance of common shares for stock plans			102							102
Other comprehensive income								(3)		(3)
Noncontrolling interest									(19)	(19)
BALANCE AS OF DECEMBER 31, 2019	333	$35	$8,054	$11,100	23	$(1,038)	$(110)	$(19)	$191	$18,213
Net income				1,101					43	1,144
Common stock dividends ($3.06 per share)				(1,023)						(1,023)
Issuance of common shares - public offering	9	1	641				(2)			640
Issuance of common shares for stock plans			113							113
Other comprehensive income								(6)		(6)
Noncontrolling interest									(16)	(16)
BALANCE AS OF DECEMBER 31, 2020	342	$36	$8,808	$11,178	23	$(1,038)	$(112)	$(25)	$218	$19,065
Net income (loss)				1,346					(153)	1,193
Common stock dividends ($3.10 per share)				(1,079)						(1,079)
Issuance of common shares - public offering	10	1	775				(10)			766
Issuance of common shares for stock plans	2		127							127
Other comprehensive income								30		30
Distributions to noncontrolling interests									(23)	(23)
Net proceeds from sale of equity interest									257	257
BALANCE AS OF DECEMBER 31, 2021	354	$37	$9,710	$11,445	23	$(1,038)	$(122)	$5	$299	$20,336

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


CON EDISON ANNUAL REPORT 2021			107

Consolidated Edison, Inc.

Consolidated Statement of Capitalization


	Shares outstanding December 31,		At December 31,
(In Millions)	2021	2020	2021	2020
TOTAL EQUITY BEFORE ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	354	342	$20,032	$18,872
Pension plan liability adjustments, net of taxes			7	(23)
Unrealized gains/(losses) on derivatives qualified as cash flow hedges, less reclassification adjustment for gains/(losses) included in net income and reclassification adjustment for unrealized losses included in regulatory assets, net of taxes			(2)	(2)
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES			5	(25)
Equity			20,037	18,847
Noncontrolling interest			299	218
TOTAL EQUITY (See Statement of Equity)			$20,336	$19,065

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


108			CON EDISON ANNUAL REPORT 2021

Consolidated Edison, Inc.

Consolidated Statement of Capitalization


LONG-TERM DEBT (Millions of Dollars)			At December 31,
Maturity	Interest Rate	Series	2021	2020
DEBENTURES:

2021	2.00	2016A	$—	$500
2021	0.60	2018C	—	640
2023	0.65	2020A	650	650
2024	3.30	2014B	250	250
2026	2.90	2016B	250	250
2027	6.50	1997F	80	80
2027	3.125	2017B	350	350
2028	3.80	2018A	300	300
2028	4.00	2018D	500	500
2029	2.94	2019B	44	44
2030	3.35	2020A	600	600
2030	2.02	2020A	35	35
2031	2.40	2021A	900	—
2031	2.31	2021A	45	—
2033	5.875	2003A	175	175
2033	5.10	2003C	200	200
2034	5.70	2004B	200	200
2035	5.30	2005A	350	350
2035	5.25	2005B	125	125
2036	5.85	2006A	400	400
2036	6.20	2006B	400	400
2036	5.70	2006E	250	250
2037	6.30	2007A	525	525
2038	6.75	2008B	600	600
2039	6.00	2009B	60	60
2039	5.50	2009C	600	600
2039	3.46	2019C	38	38
2040	5.70	2010B	350	350
2040	5.50	2010B	115	115
2042	4.20	2012A	400	400
2043	3.95	2013A	700	700
2044	4.45	2014A	850	850
2045	4.50	2015A	650	650
2045	4.95	2015A	120	120
2045	4.69	2015B	100	100
2046	3.85	2016A	550	550
2046	3.88	2016A	75	75
2047	3.875	2017A	500	500
2048	4.65	2018E	600	600
2048	4.35	2018A	125	125
2048	4.35	2018B	25	25
2049	4.125	2019A	700	700
2049	3.73	2019A	43	43
2050	3.95	2020B	1,000	1,000
2050	3.24	2020B	40	40
2051	3.17	2021B	30	—
2051	3.20	2021C	600	—
2054	4.625	2014C	750	750
2056	4.30	2016C	500	500
2057	4.00	2017C	350	350
2058	4.50	2018B	700	700


CON EDISON ANNUAL REPORT 2021			109


2059	3.70	2019B	600	600
2060	3.00	2020C	600	600
2061	3.60	2021B	750	—
TOTAL DEBENTURES			19,750	18,565

Consolidated Edison, Inc.

Consolidated Statement of Capitalization


LONG-TERM DEBT (Millions of Dollars)				At December 31,
Maturity	Interest Rate		Series	2021	2020
TAX-EXEMPT DEBT - Notes issued to New York State Energy Research and Development Authority for Facilities Revenue Bonds:

2036	0.10	(a)	2010A	225	225
2039	0.10	(a)	2004C	99	99
2039	0.09	(a)	2005A	126	126
TOTAL TAX-EXEMPT DEBT				450	450
PROJECT DEBT:
2023	4.07	(b)	Copper Mountain Solar 2	192	204
2024-2032	3.77 - 4.52		Coram	—	141
2025	4.12	(b)	Copper Mountain Solar 3	247	264
2026	3.72	(b)	CED Southwest	418	437
2028	4.41		Wind Holdings	95	109
2028	3.42	(b)	Copper Mountain Solar 1	49	56
2028	3.39	(b)	CED California Texas	248	—
2031	2.24 - 3.03		Mesquite Solar 1	165	180
2031-2038	5.25 - 4.95		Texas Solar 4	52	54
2036	3.94		California Solar 2	88	93
2036	4.07		California Solar 3	79	82
2037	4.78		California Solar	171	178
2038	3.82		California Solar 4	271	284
2039	4.82		Broken Bow II	65	67
2040	4.53		Texas Solar 5	135	140
2041	4.21		Texas Solar 7	184	192
2042	4.45		Upton County Solar	83	87
2046	3.77		CED Nevada Virginia	228	—

Other project debt				7	10
TOTAL PROJECT DEBT				2,777	2,578

Other long-term debt				293	971
Unamortized debt expense				(177)	(168)
Unamortized debt discount				(49)	(47)
TOTAL				23,044	22,349
Less: Long-term debt due within one year				440	1,967
TOTAL LONG-TERM DEBT				22,604	20,382
TOTAL CAPITALIZATION				$42,641	$39,229

(a) Rates reset weekly; December 31, 2021 rates shown.

(b) December 31, 2021 effective rates shown, reflecting variable interest rates on the debt that are reset quarterly or semi-annually and the effect of applicable interest rate swaps, if any.

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


110			CON EDISON ANNUAL REPORT 2021

Report of Management on Internal Control Over Financial Reporting

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

Management of the Company assessed the effectiveness of internal control over financial reporting as of December 31, 2021, using the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013). Based on that assessment, management has concluded that the Company had effective internal control over financial reporting as of December 31, 2021.


			/s/ Timothy P. Cawley
			Timothy P. Cawley
			Chairman and Chief Executive Officer

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

February 17, 2022


CON EDISON ANNUAL REPORT 2021			111

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholder of Consolidated Edison Company of New York, Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the consolidated financial statements, including the related notes and financial statement schedule, of Consolidated Edison Company of New York, Inc. and its subsidiaries (the “Company”) as listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Basis for Opinions

Definition and Limitations of Internal Control over Financial Reporting

Critical Audit Matters


112			CON EDISON ANNUAL REPORT 2021

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for the Effects of Regulatory Matters

As described in Notes A and B to the consolidated financial statements, the Company applies the accounting rules for regulated operations, which specifies the economic effects that result from the causal relationship of costs and revenues in the rate-regulated environment and how these effects are to be accounted for by a regulated enterprise. As of December 31, 2021, there were $3,504 million of deferred costs included in regulatory assets and $4,055 million of regulatory liabilities awaiting potential refund or future rate reductions. Under regulatory accounting rules, if it is probable that incurred costs will be recovered in the future, those costs would be recorded as deferred charges or “regulatory assets.” Similarly, if revenues are recorded for costs expected to be incurred in the future, these revenues would be recorded as deferred credits or “regulatory liabilities.” The Company’s regulatory assets and liabilities will be recovered from customers, or applied for customer benefit, in accordance with rate provisions approved by the applicable state regulators.

/s/ PricewaterhouseCoopers LLP

New York, New York

February 17, 2022

We have served as the Company’s auditor since 1938.


CON EDISON ANNUAL REPORT 2021			113

Consolidated Edison Company of New York, Inc.

Consolidated Income Statement


	For the Years Ended December 31,
(Millions of Dollars)	2021	2020	2019
OPERATING REVENUES
Electric	$8,806	$8,103	$8,062
Gas	2,378	2,036	2,132
Steam	532	508	627
TOTAL OPERATING REVENUES	11,716	10,647	10,821
OPERATING EXPENSES
Purchased power	1,633	1,432	1,357
Fuel	229	156	207
Gas purchased for resale	541	426	606
Other operations and maintenance	2,452	2,269	2,635
Depreciation and amortization	1,705	1,598	1,373
Taxes, other than income taxes	2,696	2,456	2,295
TOTAL OPERATING EXPENSES	9,256	8,337	8,473
OPERATING INCOME	2,460	2,310	2,348
OTHER INCOME (DEDUCTIONS)
Investment and other income	16	19	40
Allowance for equity funds used during construction	19	14	12
Other deductions	(143)	(204)	(87)
TOTAL OTHER INCOME (DEDUCTIONS)	(108)	(171)	(35)
INCOME BEFORE INTEREST AND INCOME TAX EXPENSE	2,352	2,139	2,313
INTEREST EXPENSE
Interest on long-term debt	759	718	672
Other interest	13	33	67
Allowance for borrowed funds used during construction	(10)	(12)	(11)
NET INTEREST EXPENSE	762	739	728
INCOME BEFORE INCOME TAX EXPENSE	1,590	1,400	1,585
INCOME TAX EXPENSE	246	215	335
NET INCOME	$1,344	$1,185	$1,250

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


114			CON EDISON ANNUAL REPORT 2021

Consolidated Edison Company of New York, Inc.

Consolidated Statement of Comprehensive Income


	For the Years Ended December 31,
(Millions of Dollars)	2021	2020	2019
NET INCOME	$1,344	$1,185	$1,250
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES
Pension and other postretirement benefit plan liability adjustments, net of taxes	7	(1)	(3)
Other income, net of taxes	—	—	2
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES	7	(1)	(1)
COMPREHENSIVE INCOME	$1,351	$1,184	$1,249

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


CON EDISON ANNUAL REPORT 2021			115

Consolidated Edison Company of New York, Inc.

Consolidated Statement of Cash Flows


	For the Years Ended December 31,
(Millions of Dollars)	2021	2020	2019
OPERATING ACTIVITIES
Net income	$1,344	$1,185	$1,250
PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME
Depreciation and amortization	1,705	1,598	1,373
Deferred income taxes	124	168	128
Rate case amortization and accruals	(16)	(40)	(117)
Common equity component of allowance for funds used during construction	(19)	(14)	(12)
Gain on Sale of Assets	—	—	(14)
Unbilled revenue and net unbilled revenue deferrals	(16)	(47)	(3)
Other non-cash items, net	33	(8)	—
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable - customers	(412)	(516)	3
Allowance for uncollectible accounts - customers	166	74	7
Materials and supplies, including fuel oil and gas in storage	(78)	2	11
Revenue decoupling mechanism receivable	(62)	(53)	(76)
Other receivables and other current assets	(85)	(49)	54
Accounts receivables from affiliated companies	96	(61)	141
Prepayments	(53)	19	(61)
Accounts payable	65	145	(7)
Accounts payable to affiliated companies	(4)	9	(4)
Pensions and retiree benefits obligations, net	283	253	330
Pensions and retiree benefits contributions	(433)	(438)	(325)

Superfund and environmental remediation costs	(18)	(30)	(12)
Accrued taxes	(54)	61	11
Accrued taxes to affiliated companies	9	1	—
Accrued interest	1	13	1
System benefit charge	(32)	(112)	18
Deferred charges, noncurrent assets and other regulatory assets	(544)	(603)	(486)
Deferred credits and other regulatory liabilities	128	92	306
Other current and noncurrent liabilities	58	44	(14)
NET CASH FLOWS FROM OPERATING ACTIVITIES	2,186	1,693	2,502
INVESTING ACTIVITIES
Utility construction expenditures	(3,413)	(3,112)	(3,028)
Cost of removal less salvage	(316)	(304)	(288)
Proceeds from sale of assets	—	—	192


NET CASH FLOWS USED IN INVESTING ACTIVITIES	(3,729)	(3,416)	(3,124)
FINANCING ACTIVITIES
Net (payment)/issuance of short-term debt	(299)	523	(55)
Issuance of long-term debt	2,250	2,200	1,300
Retirement of long-term debt	(640)	(350)	(475)
Debt issuance costs	(27)	(34)	(21)
Capital contribution by parent	1,100	500	900
Dividend to parent	(988)	(982)	(912)
NET CASH FLOWS FROM FINANCING ACTIVITIES	1,396	1,857	737
CASH, TEMPORARY CASH INVESTMENTS AND RESTRICTED CASH:
NET CHANGE FOR THE PERIOD	(147)	134	115
BALANCE AT BEGINNING OF PERIOD	1,067	933	818
BALANCE AT END OF PERIOD	$920	$1,067	$933

SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
Cash paid during the period for:
Interest	$739	$693	$676
Income taxes	$5	$102	$73
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
Construction expenditures in accounts payable	$406	$417	$285
Software licenses acquired but unpaid as of end of period	$22	$48	$76
Equipment acquired but unpaid as of end of period	$22	$28	$33

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


116			CON EDISON ANNUAL REPORT 2021

Consolidated Edison Company of New York, Inc.

Consolidated Balance Sheet


(Millions of Dollars)	December 31, 2021	December 31, 2020
ASSETS
CURRENT ASSETS
Cash and temporary cash investments	$920	$1,067

Accounts receivable – customers, net allowance for uncollectible accounts of $304 and $138 in 2021 and 2020, respectively	1,841	1,595
Other receivables, net allowance for uncollectible accounts of $19 and $4 in 2021 and 2020, respectively	121	134
Taxes receivable	5	8
Accrued unbilled revenue	549	523
Accounts receivable from affiliated companies	38	134
Fuel oil, gas in storage, materials and supplies, at average cost	369	291
Prepayments	212	159
Regulatory assets	188	244

Revenue decoupling mechanism receivable	191	129
Other current assets	269	123
TOTAL CURRENT ASSETS	4,703	4,407
INVESTMENTS	608	541
UTILITY PLANT AT ORIGINAL COST
Electric	32,846	31,327
Gas	11,321	9,921
Steam	2,828	2,696
General	3,854	3,585
TOTAL	50,849	47,529
Less: Accumulated depreciation	11,223	10,297
Net	39,626	37,232
Construction work in progress	1,985	2,320
NET UTILITY PLANT	41,611	39,552
NON-UTILITY PROPERTY
Non-utility property, net accumulated depreciation of $25 in 2021 and 2020	2	2
NET PLANT	41,613	39,554
OTHER NONCURRENT ASSETS
Regulatory assets	3,316	5,745
Operating lease right-of-use asset	545	578
Pension and Retiree Benefits	1,677	—
Other deferred charges and noncurrent assets	193	142
TOTAL OTHER NONCURRENT ASSETS	5,731	6,465
TOTAL ASSETS	$52,655	$50,967

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


CON EDISON ANNUAL REPORT 2021			117

Consolidated Edison Company of New York, Inc.

Consolidated Balance Sheet


(Millions of Dollars)	December 31, 2021	December 31, 2020
LIABILITIES AND SHAREHOLDER’S EQUITY
CURRENT LIABILITIES
Long-term debt due within one year	$—	$640
Notes payable	1,361	1,660
Accounts payable	1,285	1,232
Accounts payable to affiliated companies	18	22
Customer deposits	285	296
Accrued taxes	78	132
Accrued taxes to affiliated companies	10	1
Accrued interest	127	126
Accrued wages	103	97
Fair value of derivative liabilities	88	163
Regulatory liabilities	134	11
System benefit charge	372	475
Operating lease liabilities	90	73
Other current liabilities	370	319
TOTAL CURRENT LIABILITIES	4,321	5,247
NONCURRENT LIABILITIES
Provision for injuries and damages	178	172
Pensions and retiree benefits	669	1,943
Superfund and other environmental costs	850	780
Asset retirement obligations	504	508
Fair value of derivative liabilities	40	105
Deferred income taxes and unamortized investment tax credits	6,796	6,411
Operating lease liabilities	462	512
Regulatory liabilities	3,921	4,094
Other deferred credits and noncurrent liabilities	220	197
TOTAL NONCURRENT LIABILITIES	13,640	14,722
LONG-TERM DEBT	18,382	16,149
COMMITMENTS AND CONTINGENCIES (Note B and Note G)
COMMON SHAREHOLDER’S EQUITY (See Statement of Shareholder’s Equity)	16,312	14,849
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY	$52,655	$50,967

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


118			CON EDISON ANNUAL REPORT 2021

Consolidated Edison Company of New York, Inc.

Consolidated Statement of Shareholder’s Equity


(In Millions)	Common Stock		Additional Paid-In Capital	Retained Earnings	Repurchased Con Edison Stock	Capital Stock Expense	Accumulated Other Comprehensive Income/(Loss)	Total
Shares	Amount




















BALANCE AS OF DECEMBER 31, 2018	235	$589	$4,769	$8,581	$(962)	$(62)	$(5)	$12,910
Net income				1,250				1,250
Common stock dividend to parent				(912)				(912)
Capital contribution by parent			900					900
Other comprehensive income							(1)	(1)
BALANCE AS OF DECEMBER 31, 2019	235	$589	$5,669	$8,919	$(962)	$(62)	$(6)	$14,147
Net income				1,185				1,185
Common stock dividend to parent				(982)				(982)
Capital contribution by parent			500					500
Other comprehensive income							(1)	(1)
BALANCE AS OF DECEMBER 31, 2020	235	$589	$6,169	$9,122	$(962)	$(62)	$(7)	$14,849
Net income				1,344				1,344
Common stock dividend to parent				(988)				(988)
Capital contribution by parent			1,100					1,100
Other comprehensive income							7	7
BALANCE AS OF DECEMBER 31, 2021	235	$589	$7,269	$9,478	$(962)	$(62)	$—	$16,312

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


CON EDISON ANNUAL REPORT 2021			119

Consolidated Edison Company of New York, Inc.

Consolidated Statement of Capitalization


	Shares outstanding
	December 31,		At December 31,
(In Millions)	2021	2020	2021	2020
TOTAL SHAREHOLDER’S EQUITY BEFORE ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	235	235	$16,312	$14,856
Pension plan liability adjustments, net of taxes			1	(5)
Unrealized gains/(losses) on derivatives qualified as cash flow hedges, less reclassification adjustment for gains/(losses) included in net income and reclassification adjustment for unrealized losses included in regulatory assets, net of taxes			(1)	(2)
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES			—	(7)
TOTAL SHAREHOLDER’S EQUITY (See Statement of Shareholder’s Equity)			$16,312	$14,849

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


120			CON EDISON ANNUAL REPORT 2021

Consolidated Edison Company of New York, Inc.

Consolidated Statement of Capitalization


LONG-TERM DEBT (Millions of Dollars)				At December 31,
Maturity	Interest Rate		Series	2021	2020
DEBENTURES:

2021	0.60		2018C	$—	$640
2024	3.30		2014B	250	250
2026	2.90		2016B	250	250
2027	3.125		2017B	350	350
2028	3.80		2018A	300	300
2028	4.00		2018D	500	500
2030	3.35		2020A	600	600
2031	2.40		2021A	900	—
2033	5.875		2003A	175	175
2033	5.10		2003C	200	200
2034	5.70		2004B	200	200
2035	5.30		2005A	350	350
2035	5.25		2005B	125	125
2036	5.85		2006A	400	400
2036	6.20		2006B	400	400
2036	5.70		2006E	250	250
2037	6.30		2007A	525	525
2038	6.75		2008B	600	600
2039	5.50		2009C	600	600
2040	5.70		2010B	350	350
2042	4.20		2012A	400	400
2043	3.95		2013A	700	700
2044	4.45		2014A	850	850
2045	4.50		2015A	650	650
2046	3.85		2016A	550	550
2047	3.875		2017A	500	500
2048	4.65		2018E	600	600
2049	4.125		2019A	700	700
2050	3.95		2020B	1,000	1,000
2051	3.20		2021C	600	—
2054	4.625		2014C	750	750
2056	4.30		2016C	500	500
2057	4.00		2017C	350	350
2058	4.50		2018B	700	700
2059	3.70		2019B	600	600
2060	3.00		2020C	600	600
2061	3.60		2021B	750	—




TOTAL DEBENTURES				18,125	16,515
TAX-EXEMPT DEBT – Notes issued to New York State Energy Research and Development Authority for Facilities Revenue Bonds:
2036	0.10	(a)	2010A	225	225
2039	0.10	(a)	2004C	99	99
2039	0.09	(a)	2005A	126	126
TOTAL TAX-EXEMPT DEBT				450	450
Unamortized debt expense				(145)	(130)

Unamortized debt discount				(48)	(46)
TOTAL				18,382	16,789
Less: Long-term debt due within one year				—	640
TOTAL LONG-TERM DEBT				18,382	16,149
TOTAL CAPITALIZATION				$34,694	$30,998

(a) Rates reset weekly; December 31, 2021 rates shown.

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


CON EDISON ANNUAL REPORT 2021			121

Notes to the Financial Statements

General

These combined notes accompany and form an integral part of the separate consolidated financial statements of each of the two separate registrants: Consolidated Edison, Inc. and its subsidiaries (Con Edison) and Consolidated Edison Company of New York, Inc. and its subsidiaries (CECONY). CECONY is a subsidiary of Con Edison and as such its financial condition and results of operations and cash flows, which are presented separately in the CECONY consolidated financial statements, are also consolidated, along with those of 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.

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 NY and northern NJ and gas service in southeastern NY. Con Edison Clean Energy Businesses, Inc., through its subsidiaries, develops, owns and operates renewable and sustainable energy infrastructure projects and provides energy-related products and services to wholesale and retail customers. Con Edison Transmission, Inc. invests in and seeks to develop electric transmission projects through its subsidiary, Consolidated Edison Transmission, LLC (CET Electric), and manages, through joint ventures, investments in gas pipeline and storage facilities through its subsidiary Con Edison Gas Pipeline and Storage, LLC (CET Gas). See "Investments" in Note A and Note W.


122			CON EDISON ANNUAL REPORT 2021

Note A – Summary of Significant Accounting Policies and Other Matters

Principles of Consolidation

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

Accounting Policies

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

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

The Utilities’ principal regulatory assets and liabilities are detailed in Note B. In general, the Utilities are receiving or being credited with a return on their regulatory assets for which a cash outflow has been made, and are paying or being charged with a return on their regulatory liabilities for which a cash inflow has been received. The Utilities’ regulatory assets and liabilities at December 31, 2021 are recoverable from customers, or to be applied for customer benefit, in accordance with rate provisions that have been approved by state regulators.

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

Revenues

CECONY’s electric and gas rate plans and O&R’s NY electric and gas rate plans each contain a revenue decoupling mechanism, that covers all residential and most commercial customers, under which the company’s actual energy delivery revenues are compared with the authorized delivery revenues and the difference accrued, with interest, for refund to, or recovery from, customers, as applicable. See “Rate Plans” in Note B.

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


	For the Years Ended December 31,
(Millions of Dollars)	2021	2020	2019
Con Edison	$358	$335	$323
CECONY	346	323	312

For information about the Companies' revenue recognition policies, see Note M.

Plant and Depreciation

Utility Plant

Utility plant is stated at original cost. The cost of repairs and maintenance is charged to expense and the cost of betterments is capitalized. The capitalized cost of additions to utility plant includes indirect costs such as engineering, supervision, payroll taxes, pensions, other benefits and an allowance for funds used during construction (AFUDC). The original cost of property is charged to expense over the estimated useful lives of the assets. Upon retirement, the original cost of property is charged to accumulated depreciation. See Note T.

Rates used for AFUDC include the cost of borrowed funds and a reasonable rate of return on the Utilities’ own funds when so used, determined in accordance with regulations of the FERC or the state public utility regulatory authority


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having jurisdiction. The rate is compounded semiannually, and the amounts applicable to borrowed funds are treated as a reduction of interest charges, while the amounts applicable to the Utilities’ own funds are credited to other income (deductions). The AFUDC rates for CECONY were 4.5 percent, 5.2 percent and 5.1 percent for 2021, 2020 and 2019, respectively. The AFUDC rates for O&R were 4.8 percent, 5.3 percent and 5.3 percent for 2021, 2020 and 2019, respectively.

The Utilities generally compute annual charges for depreciation using the straight-line method for financial statement purposes, with rates based on average service lives and net salvage factors. The average depreciation rates for CECONY were 3.5 percent for 2021 and 3.5 percent for 2020 and 3.2 percent for 2019. The average depreciation rates for O&R were 3.1 percent for 2021, 3.2 percent for 2020 and 3.0 percent for 2019.

The estimated lives for utility plant for CECONY range from 5 to 85 years for electric, 5 to 90 years for gas, 5 to 80 years for steam and 5 to 55 years for general plant. For O&R, the estimated lives for utility plant range from 5 to 75 years for electric and gas and 5 to 50 years for general plant.

At December 31, 2021 and 2020, the capitalized cost of the Companies’ utility plant, net of accumulated depreciation, was as follows:


	Con Edison		CECONY
(Millions of Dollars)	2021	2020	2021	2020
Electric
Generation	$559	$572	$559	$572
Transmission	3,955	3,786	3,658	3,496
Distribution	22,418	21,481	21,240	20,366
General	87	52	87	52
Gas (a)	10,473	9,206	9,748	8,522
Steam	1,924	1,854	1,924	1,854
General	2,566	2,507	2,338	2,286
Held for future use	80	92	72	84
Construction work in progress	2,152	2,474	1,985	2,320
Net Utility Plant	$44,214	$42,024	$41,611	$39,552

(a) Primarily distribution.

General utility plant of Con Edison and CECONY included $79 million and $74 million, respectively, at December 31, 2021, and $86 million and $81 million, respectively, at December 31, 2020, 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 $24 million at December 31, 2021 and $17 million at December 31, 2020.

Under the Utilities’ rate plans, the aggregate annual depreciation allowance for the period ended December 31, 2021 was $1,802 million, including $1,710 million under CECONY’s electric, gas and steam rate plans that have been approved by the NYSPSC.

Non–Utility Plant

Non-utility plant is stated at original cost. For Con Edison, non-utility plant consists primarily of the Clean Energy Businesses’ renewable electric projects. Property, plant and equipment are stated at cost, less accumulated depreciation and include capitalized interest during construction. Depreciation is computed under the straight-line method over the useful lives of the assets. Solar power generating assets and wind power generating assets have useful lives of 35 years and 30, respectively. For the Utilities, non-utility plant consists of land and conduit for telecommunication use. Depreciation on non-utility plant, other than land, is computed using the straight-line method for financial statement purposes over their estimated useful lives, which is 10 years.

Other Deferred Charges and Noncurrent Assets and Prepayments

Other deferred charges and noncurrent assets and prepayments, net of accumulated depreciation, included the following related to implementation costs incurred in cloud computing arrangements:


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	Con Edison		CECONY
(Millions of Dollars)	2021	2020	2021	2020
Prepayments (a)(b)	$16	$12	$15	$11
Other Deferred Charges and Noncurrent Assets (a)(b)	$81	$54	$78	$51

(a) Depreciation on these assets is computed using the straight-line method for financial statement purposes over their estimated useful lives.

(b) Depreciation expense related to these assets incurred during the year ended December 31, 2021 for Con Edison and CECONY was $12 million and $11 million, respectively, and for the year ended December 31, 2020 for Con Edison and CECONY was $7 million and $6 million, respectively. Accumulated depreciation related to these assets for Con Edison and CECONY was $22 million and $19 million, respectively at December 31, 2021 and was $10 million and $8 million, respectively at December 31, 2020.

Long–Lived and Intangible Assets

The Companies test long-lived and intangible assets for recoverability when events or changes in circumstances indicate that the carrying value of long-lived or intangible assets may not be recoverable. The carrying amount of a long-lived asset or intangible asset with a definite life is deemed not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. In the event a test indicates that such cash flows cannot be expected to be sufficient to fully recover the assets, the assets are considered impaired and written down to their estimated fair value.

Con Edison's intangible assets with definite lives consist primarily of power purchase agreements, which were identified as part of purchase price allocations associated with acquisitions made by the Clean Energy Businesses in 2016 and 2018. At December 31, 2021 and 2020, intangible assets arising from power purchase agreements were $1,290 million and $1,457 million, net of accumulated amortization of $288 million and $220 million, respectively, and are being amortized over the life of each agreement. Excluding power purchase agreements, Con Edison’s other intangible assets were $3 million, net of accumulated amortization of $9 million and $8 million, at December 31, 2021 and 2020, respectively. CECONY’s other intangible assets were immaterial at December 31, 2021 and 2020. Con Edison recorded amortization expense related to its intangible assets of $95 million in 2021, $102 million in 2020, and $99 million in 2019. Con Edison expects amortization expense to be $95 million per year over the next five years. No impairment charges were recorded on Con Edison's long-lived assets or intangible assets with definite lives in 2021 or 2020.

Recoverable Energy Costs

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

New York Independent System Operator (NYISO)

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

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

Temporary Cash Investments

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


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Investments

Accounting for Investments

Con Edison’s investments consist primarily of the investments of Con Edison Transmission that are accounted for under the equity method and the fair value of the Utilities’ supplemental retirement income plan and deferred income plan assets.

The accounting rules require Con Edison to evaluate its investments periodically to determine whether they are impaired. The standard for determining whether an impairment exists and must be recorded is whether an other-than-temporary decline in carrying value has occurred. Changes in economic conditions, forecasted cash flows and the regulatory environment, among other factors, could require equity method investments to recognize a decrease in carrying value for an other-than-temporary decline. When management believes such a decline may have occurred, the fair value of the investment is estimated using market inputs, when observable, or a market valuation model such as a discounted cash flow analysis. The fair value is compared to the carrying value of the investment in order to determine the amount of impairment to record, if any.

The evaluation and measurement of impairments involve uncertainties. The judgments that Con Edison makes to estimate the fair value of its equity method investments are based on assumptions that management believes are reasonable, and variations in these estimates or the underlying assumptions, or the receipt of additional market information, could have a material impact on whether a triggering event is determined to exist or the amount of any such impairment. Additionally, if the projects in which Con Edison holds these investments recognize an impairment, Con Edison may record a share of that impairment loss and would evaluate its investment for an other-than-temporary decline in carrying value as described above.

Partial Impairment of Investment in Stagecoach Gas Services LLC (Stagecoach)

In 2021, a subsidiary of Con Edison Gas Pipeline and Storage, LLC (CET Gas) and its joint venture partner agreed to sell their combined interests in Stagecoach Gas Services LLC (Stagecoach) for a total of $1,225 million, of which $629 million, including closing adjustments, was attributed to CET Gas for its 50 percent interest. The purchase and sale agreement provided for a two-stage closing, the first of which was completed in July 2021 and the second of which was completed in November 2021.

As a result of information made available to Stagecoach as part of the sale process, Stagecoach performed impairment tests that resulted in Stagecoach recording impairment charges of $414 million for the year ended December 31, 2021. Accordingly, Con Edison recorded pre-tax impairment losses on its 50 percent interest in Stagecoach of $212 million ($147 million after-tax), including working capital and transaction cost adjustments, within "Investment income/(loss)" on Con Edison's consolidated income statement for the year ended December 31, 2021.

Stagecoach’s impairment charges and information obtained from the sales process constituted triggering events for Con Edison's investment in Stagecoach as of March 31, 2021 and June 30, 2021. Con Edison evaluated the carrying value of its investment in Stagecoach for other-than-temporary declines in value using income and market-based approaches. Con Edison determined that the carrying value of its investment in Stagecoach of $667 million and $630 million as of March 31, 2021 and June 30, 2021, respectively, was not impaired. The carrying value of $630 million at June 30, 2021 reflected the final sales price received in July 2021 and the remaining amount received in November 2021, including closing adjustments.

2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)

In January 2016, Con Edison Gas Pipeline and Storage, LLC (CET Gas), an indirect subsidiary of Con Edison, acquired a 12.5 percent equity interest in MVP, a company developing a proposed 300-mile gas transmission project (the Project) in West Virginia and Virginia. During 2019, Con Edison exercised its right to limit, and did limit, its cash contributions to the joint venture to approximately $530 million, which reduced CET Gas' interest in MVP to 11.3 percent and 10.2 percent as of December 31, 2020 and 2021, respectively. CET Gas' interest in MVP is expected to be reduced to 8.5 percent based on the Project's current cost estimate and CET Gas' previous capping of its cash contributions. As of December 31, 2020 and 2021, the Project was approximately 92 percent and 94 percent complete, respectively.

During 2020, progress was made on the construction of the Project, and the U.S. Supreme Court issued favorable decisions in cases unrelated to MVP regarding the permitting process for pipeline construction and water crossings. In November 2020, the U.S. Court of Appeals for the Fourth Circuit issued a stay on the Nationwide Permit 12,


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effectively blocking the Project’s ability to pursue water crossings under that permit. As a result, in November 2020 the Project applied to the FERC for a certificate amendment to bore under water bodies in a portion of the Project in West Virginia, allowing this portion of the pipe to be completed and placed in-service while a plan for the remaining water crossings was pursued. If approved, this certificate amendment would have led to additional Project costs and would have extended the anticipated in-service date. In January 2021, the FERC did not approve the requested certificate amendment. Later in January 2021, the Project indicated its plans to apply for U.S. Army Corps of Engineers individual permits for certain water crossings and a new certificate amendment application to the FERC to bore under other water crossings that, in total, would cover the entire Project length.

The uncertainty related to obtaining necessary water crossing permits, the resulting Project costs and the likelihood of the Project not reaching eventual completion increased as a result of actions taken by the U.S. Court of Appeals for the Fourth Circuit. This action and associated delays constituted a triggering event (the "2020 triggering event") that required Con Edison to test its investment in MVP for an other-than-temporary impairment as of December 31, 2020.

In December 2021, the Virginia Department of Environmental Quality and the West Virginia Department of Environmental Protection both issued water quality certification permits which are required in order for the U.S. Army Corps of Engineers to proceed with the permitting process for construction of certain Project water crossings. In January 2022, the U.S. Court of Appeals for the Fourth Circuit rejected permits for crossings through the Jefferson National Forest issued by the U.S. Forest Service and Bureau of Land Management. In February 2022, the U.S. Court of Appeals for the Fourth Circuit vacated a biological opinion from the U.S. Fish and Wildlife Service, applicable to all remaining construction. The biological opinion had been issued and was the subject of litigation prior to December 31, 2021. Con Edison believes that the February 2022 action by the U.S. Court of Appeals for the Fourth Circuit, along with the potential outcome of other matters pending before that Court, may lead to further delays and increased Project costs, which constituted a triggering event (the “2021 triggering event”) that required Con Edison to test its investment in MVP for an other-than-temporary impairment as of December 31, 2021.

In response to the 2020 triggering event and 2021 triggering event, Con Edison assessed the value of its equity investment in the Project to determine whether the fair value of its investment in MVP had declined below its carrying value on an other-than-temporary basis as of December 31, 2020 and 2021, respectively. The estimated fair value of the investment was determined using a discounted cash flow analysis, which is a level 3 fair value measurement. The analysis discounted probability-weighted future cash flows, including revenues based on long-term firm transportation contracts, that are secured for the first 20 years following completion of the Project. See Note U. Con Edison has also assumed cash flows extending beyond this period. All cash flows were discounted at a pre-tax discount rate of 8.3 percent and then weighted based on Con Edison’s estimate of the likelihood that the Project will be completed. For the 2020 triggering event, Con Edison estimated that the likelihood of Project completion was in the upper end of a reasonably possible range. For the 2021 triggering event, Con Edison anticipated that the Project faces legal and regulatory challenges that make construction completion increasingly remote. The Project faces additional delays and increased costs that could further reduce CET Gas' interest in MVP to below 8 percent based on CET Gas' previous capping of its cash contributions. The likelihood that the Project will be completed and, for 2020, the discount rate, are the most significant and sensitive assumptions; changes in these assumptions may materially change the results of the impairment calculation.

Based on the discounted cash flow analyses, Con Edison concluded as of December 31, 2020 and 2021 that the fair value of its investment in MVP declined below its carrying value and the declines were other-than-temporary. Accordingly, Con Edison recorded a pre-tax impairment loss of $320 million ($223 million, after tax) for the year ended December 31, 2020 that reduced the carrying value of its investment in MVP from $662 million to $342 million, with an associated deferred tax asset of $53 million. Additionally, Con Edison recorded a pre-tax impairment loss of $231 million ($162 million, after tax) for the year ended December 31, 2021 that reduced the carrying value of its investment in MVP from $342 million to $111 million, with an additional $77 million associated deferred tax asset, totaling a deferred tax asset of $130 million at December 31, 2021. The impairments were recorded within “Investment income (loss)” on Con Edison’s Consolidated Income Statement. In addition, Con Edison did not record non-cash equity in earnings from allowance for funds used during construction from MVP beginning in January 2021 and will continue to refrain from recording such amounts until such time as substantial construction activities resume, which would be indicative of probable Project completion.

There is risk that the fair value of Con Edison’s investment in MVP may be further or fully impaired in the future. There are ongoing legal and regulatory matters that must be resolved favorably before the Project can be completed. Assumptions and estimates used to test Con Edison’s investment in MVP for impairment may change if adverse or delayed resolutions to the Project’s pending legal and regulatory challenges were to occur, which could have a material adverse effect on the fair value of Con Edison’s investment in MVP.


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Summary of Investment Balances

The following investment assets are included in the Companies' consolidated balance sheets at December 31, 2021 and 2020:


	Con Edison		CECONY
(Millions of Dollars)	2021	2020	2021	2020
CET Gas investment in Stagecoach Gas Services LLC	$—	$845	$—	$—
CET Gas investment in Mountain Valley Pipeline, LLC (a)	111	342	—	—
Supplemental retirement income plan assets (b)	525	465	499	439
Deferred income plan assets	102	92	102	92
CET Electric investment in New York Transco, LLC (c)	112	69	—	—
Other	3	3	7	10
Total investments	$853	$1,816	$608	$541

(a)At December 31, 2021 and 2020, CET Gas' cash investment in MVP was $530 million. In May 2021, the operator of the Mountain Valley Pipeline indicated that, subject to receipt of certain authorizations and resolution of certain challenges, it is targeting an in-service date for the project of summer 2022 at an overall project cost of approximately $6,200 million excluding allowance for funds used during construction. See "2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)" above.

(b)See Note E.

(c)CET Electric owns a 45.7 percent interest in New York Transco, LLC.

Pension and Other Postretirement Benefits

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

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

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

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

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


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Federal Income Tax

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

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

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

State Income Tax

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

Research and Development Costs

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


	For the Years Ended December 31,
(Millions of Dollars)	2021	2020	2019
Con Edison	$25	$24	$24
CECONY	24	23	23

Reclassification

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

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 (see Note O) and its common shares that are subject to forward sale agreements (see Note C). Before the issuance of common shares upon settlement of the forward sale agreements, the shares will be reflected in the company’s diluted earnings per share calculations using the treasury stock method. Under this method, the number of common shares used in calculating diluted earnings per share is deemed to be increased by the excess, if any, of the number of shares that would be issued upon physical settlement of the forward sale agreements over the number of shares that could be purchased by the company in the market (based on the average market price during the period) using the proceeds due upon physical settlement (based on the adjusted forward sale price at the end of the reporting period).


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


	For the Years Ended December 31,
(Millions of Dollars, except per share amounts/Shares in Millions)	2021	2020	2019
Net income for common stock	$1,346	$1,101	$1,343
Weighted average common shares outstanding – basic	348.4	334.8	328.5
Add: Incremental shares attributable to effect of potentially dilutive securities	1.0	0.9	1.0
Adjusted weighted average common shares outstanding – diluted	349.4	335.7	329.5
Net Income per common share – basic	$3.86	$3.29	$4.09
Net Income per common share – diluted	$3.85	$3.28	$4.08

The computation of diluted EPS for the years ended December 31, 2021, 2020 and 2019 excludes immaterial amounts of performance share awards that were not included because of their anti-dilutive effect.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Changes in Accumulated Other Comprehensive Income/(Loss) by Component

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


(Millions of Dollars)	Con Edison	CECONY
Accumulated OCI, net of taxes, at December 31, 2018 (a)	$(16)	$(5)
OCI before reclassifications, net of tax of $(6) and $(1) for Con Edison and CECONY, respectively	(10)	(3)
Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $(2) for Con Edison (a)(b)	7	2
Total OCI, net of taxes, at December 31, 2019	(3)	(1)
Accumulated OCI, net of taxes, at December 31, 2019 (a)	$(19)	$(6)
OCI before reclassifications, net of tax of $4 and $1 for Con Edison and CECONY, respectively	(11)	(3)
Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $(2) for Con Edison (a)(b)	5	2
Total OCI, net of taxes, at December 31, 2020	(6)	(1)
Accumulated OCI, net of taxes, at December 31, 2020 (a)	$(25)	$(7)
OCI before reclassifications, net of tax of $(8) and $(2) for Con Edison and CECONY, respectively	22	5
Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $(3) and $(1) for Con Edison and CECONY, respectively (a)(b)	8	2
Total OCI, net of taxes, at December 31, 2021	30	7
Accumulated OCI, net of taxes, at December 31, 2021 (a)	$5	$—

(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 and liabilities 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 December 31, 2021 and 2020, cash, temporary cash investments and restricted cash for Con Edison and CECONY were as follows:


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	At December 31,
	Con Edison		CECONY
(Millions of Dollars)	2021	2020	2021	2020
Cash and temporary cash investments	$992	$1,272	$920	$1,067
Restricted cash (a)	154	164	—	—
Total cash, temporary cash investments and restricted cash	$1,146	$1,436	$920	$1,067

(a)Restricted cash included cash of the Clean Energy Businesses' renewable electric project subsidiaries ($154 million and $164 million at December 31, 2021 and 2020, respectively) that, under the related project debt agreements, is restricted to being used for normal operating expenditures, debt service, and required reserves until the various maturity dates of the project debt.

Use of Hypothetical Liquidation at Book Value

For certain investments of the Clean Energy Businesses, Con Edison has determined that the use of HLBV accounting is reasonable and appropriate to attribute income and loss to the tax equity investors. Using the HLBV method, the company's earnings from the projects are adjusted to reflect the income or loss allocable to the tax equity investors calculated based on how the project would allocate and distribute its cash if it were to sell all of its assets for their carrying amounts and liquidate at a particular point in time. Under the HLBV method, the company calculates the liquidation value allocable to the tax equity investors at the beginning and end of each period based on the contractual liquidation waterfall and adjusts its income for the period to reflect the change in the liquidation value allocable to the tax equity investors based on the terms of the partnerships' operating agreements. See Note S.


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Note B – Regulatory Matters

Rate Plans

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

Common provisions of the Utilities’ NY rate plans include:

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

Cost reconciliations that reconcile pension and other postretirement benefit costs, environmental remediation costs, property taxes, variable-rate tax-exempt debt and certain other costs to amounts reflected in delivery rates for such costs. In addition, changes in the Utilities' costs not reflected in rates, in excess of certain amounts, resulting from changes in tax or changes in legislation, regulation or related actions, are deferred as a regulatory asset or regulatory liability to be reflected in the Utilities' next rate plan or in a manner to be determined by the NYSPSC. Also, the Utilities generally retain the right to petition for recovery or accounting deferral of extraordinary and material cost increases and provision is sometimes made for the utility to retain a share of cost reductions, for example, property tax refunds.

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

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

Negative revenue adjustments for failure to meet certain performance standards relating to service, reliability, safety and other matters.

Other revenue adjustments represent positive revenue adjustments, positive incentives, and earnings adjustments mechanisms for achievement of performance standards related to achievement of clean energy goals, safety and other matters.

Net utility plant reconciliations that require deferral as a regulatory liability of the revenue requirement impact of the amount, if any, by which actual average net utility plant balances are less than amounts reflected in rates. There is generally no symmetric mechanism if actual average net utility plant balances are more than amounts reflected in rates.

Rate base, as reflected in the rate plans, is, in general, the sum of the Utilities’ net plant, working capital and certain regulatory assets less deferred taxes and certain regulatory liabilities. For each rate plan, the NYSPSC uses a forecast of the average rate base for each year that new rates would be in effect (“rate year”).

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


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


CECONY – Electric
Effective period	January 2017 – December 2019	January 2020 – December 2022 (a)
Base rate changes	Yr. 1 – $195 million (b) Yr. 2 – $155 million (b) Yr. 3 – $155 million (b)	Yr. 1 – $113 million (c) Yr. 2 – $370 million (c) Yr. 3 – $326 million (c)
Amortizations to income of net regulatory (assets) and liabilities	Yr. 1 – $84 million Yr. 2 – $83 million Yr. 3 – $69 million	Yr. 1 – $267 million (d) Yr. 2 – $269 million (d) Yr. 3 – $272 million (d)
Other revenue sources	Retention of $75 million of annual transmission congestion revenues. Potential earnings adjustment mechanism incentives for energy efficiency and other potential incentives of up to: Yr. 1 – $28 million Yr. 2 – $47 million Yr. 3 – $64 million In 2017, 2018 and 2019, the company recorded $13 million, $25 million and $43 million of earnings adjustment mechanism incentives for energy efficiency, respectively. The company also achieved $5 million of incentives for service terminations in 2017, 2018 and 2019 that, pursuant to the rate plan, is being recorded ratably in earnings from 2018 to 2020. In 2018 and 2019, the company recorded $3 million and $7 million of incentives for service terminations, respectively.	Retention of $75 million of annual transmission congestion revenues. Potential earnings adjustment mechanism incentives for energy efficiency and other potential incentives of up to: Yr. 1 - $69 million Yr. 2 - $74 million Yr. 3 - $79 million In 2020 and 2021, the company recorded $34 million and $64 million primarily related to earnings adjustment mechanism incentives for energy efficiency, respectively.
Revenue decoupling mechanisms	Continuation of reconciliation of actual to authorized electric delivery revenues. In 2017, 2018 and 2019, the company deferred for customer benefit $45 million, $(6) million and $169 million of revenues, respectively.	Continuation of reconciliation of actual to authorized electric delivery revenues. In 2020 and 2021, the company deferred for recovery from customers $242 million and $226 million of revenues, respectively.
Recoverable energy costs	Continuation of current rate recovery of purchased power and fuel costs.	Continuation of current rate recovery of purchased power and fuel costs.
Negative revenue adjustments	Potential charges if certain performance targets relating to service, reliability, safety and other matters are not met: Yr. 1 – $376 million Yr. 2 – $341 million Yr. 3 – $352 million In 2017 and 2018, the company did not record any negative revenue adjustments. In 2019, the company recorded negative revenue adjustments of $15 million.	Potential charges if certain performance targets relating to service, reliability, safety and other matters are not met: Yr. 1 - $450 million Yr. 2 - $461 million Yr. 3 - $476 million In 2020, the company recorded negative revenue adjustments of $5 million. In 2021, the company did not record any negative revenue adjustments.
Cost reconciliations	Continuation of reconciliation of expenses for pension and other postretirement benefits, variable-rate tax-exempt debt, major storms, property taxes (e), municipal infrastructure support costs (f), the impact of new laws and environmental site investigation and remediation to amounts reflected in rates (g). In 2017, 2018 and 2019, the company deferred $35 million, $189 million and $10 million of net regulatory assets, respectively.	Continuation of reconciliation of expenses for pension and other postretirement benefits, variable-rate debt, major storms, property taxes (e), municipal infrastructure support costs (f), the impact of new laws and environmental site investigation and remediation to amounts reflected in rates (g). In 2020 and 2021, the company deferred $288 million and $191 million of net regulatory assets, respectively.
Net utility plant reconciliations	Target levels reflected in rates: Electric average net plant target excluding advanced metering infrastructure (AMI): Yr. 1 – $21,689 million Yr. 2 – $22,338 million Yr. 3 – $23,002 million AMI: Yr. 1 – $126 million Yr. 2 – $257 million Yr. 3 – $415 million The company deferred $0.4 million as a regulatory asset in 2017. In 2018 and 2019, $0.4 and $11.8 million was deferred as a regulatory liability, respectively.	Target levels reflected in rates: Electric average net plant target excluding advanced metering infrastructure (AMI): Yr. 1 - $24,491 million Yr. 2 - $25,092 million Yr. 3 - $25,708 million AMI: Yr. 1 - $572 million Yr. 2 - $740 million Yr. 3 - $806 million (h) The company deferred $4.1 million as a regulatory asset in 2020 and $3.2 million as a regulatory liability in 2021.
Average rate base	Yr. 1 – $18,902 million Yr. 2 – $19,530 million Yr. 3 – $20,277 million	Yr. 1 - $21,660 million Yr. 2 - $22,783 million Yr. 3 - $23,926 million
Weighted average cost of capital (after-tax)	Yr. 1 – 6.82 percent Yr. 2 – 6.80 percent Yr. 3 – 6.73 percent	Yr. 1 to Yr. 3 – 6.61 percent
Authorized return on common equity	9.0 percent	8.80 percent


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Actual return on common equity (i) (j)	Yr. 1 – 9.30 percent Yr. 2 – 9.36 percent Yr. 3 – 8.82 percent	Yr. 1 – 8.50 percent Yr. 2 – 8.03 percent
Earnings sharing	Most earnings above an annual earnings threshold of 9.5 percent are to be applied to reduce regulatory assets for environmental remediation and other costs accumulated in the rate year. In 2017, the company had no earnings above the threshold but recorded a positive adjustment related to 2016 of $5.7 million in earnings. In 2018 and 2019, the company had no earnings sharing above the threshold.	Most earnings above an annual earnings threshold of 9.3 percent are to be applied to reduce regulatory assets for environmental remediation and other costs accumulated in the rate year. In 2020 and 2021, the company had no earnings sharing above the threshold. A reserve of $4.3 million was recorded in 2021 related to a potential adjustment to the excess earnings sharing amount for 2016.
Cost of long-term debt	Yr. 1 – 4.93 percent Yr. 2 – 4.88 percent Yr. 3 – 4.74 percent	Yr. 1 to Yr. 3 – 4.63 percent
Common equity ratio	48 percent	48 percent

(a)In January 2020, the NYSPSC approved the October 2019 Joint Proposal for CECONY's electric rate plan for January 2020 through December 2022. If at the end of any semi-annual period ending June 30 and December 31, Con Edison’s investments in its non-utility businesses exceed 15 percent of its total consolidated revenues, assets or cash flow, or if the ratio of holding company debt to total consolidated debt rises above 20 percent, CECONY is required to notify the NYSPSC and submit a ring-fencing plan or a demonstration why additional ring-fencing measures (see Note U) are not necessary.

(b)The electric base rate increases were in addition to a $48 million increase resulting from the December 2016 expiration of a temporary credit under the prior rate plan. At the NYSPSC’s option, these increases were implemented with increases of $199 million in each rate year. Base rates reflect recovery by the company of certain costs of its energy efficiency, system peak reduction and electric vehicle programs (Yr. 1 - $20.5 million; Yr. 2 - $49 million; and Yr. 3 - $107.5 million) over a 10-year period, including the overall pre-tax rate of return on such costs.

(c)Base rates reflect recovery by the company of certain costs of its energy efficiency, Reforming the Energy Vision demonstration projects, non-wire alternative projects (including the Brooklyn Queens demand management program), and off-peak electric vehicle charging programs (Yr. 1 - $206 million; Yr. 2 - $245 million; and Yr. 3 - $251 million) over a ten-year period, including the overall pre-tax rate of return on such costs.

(d)Amounts reflect amortization of the 2018 tax savings under the federal Tax Cuts and Jobs Act of 2017 (TCJA) allocable to CECONY’s electric customers ($377 million) over a three-year period ($126 million annually), the protected portion of the regulatory liability for excess deferred income taxes allocable to CECONY’s electric customers ($1,663 million) over the remaining lives of the related assets ($49 million in Yr. 1, $50 million in Yr. 2, and $53 million in Yr. 3) and the unprotected portion of the net regulatory liability ($784 million) over five years ($157 million annually). Amounts also reflect amortization of the regulatory asset for deferred MTA power reliability costs ($238 million) over a five-year period ($48 million annually).

(e)Deferrals for property taxes are limited to 90 percent of the difference from amounts reflected in rates, subject to an annual maximum for the remaining difference of not more than a maximum number of basis points impact on return on common equity: Yr 1 - 10.0 basis points; Yr 2 - 7.5 basis points; and Yr 3 - 5.0 basis points.

(f)In general, if actual expenses for municipal infrastructure support (other than company labor) are below the amounts reflected in rates the company will defer the difference for credit to customers, and if the actual expenses are above the amount reflected in rates the company will defer for recovery from customers 80 percent of the difference subject to a maximum deferral, subject to certain conditions, of 30 percent of the amount reflected in the January 2017-December 2019 rate plan and 15 percent of the amount reflected in the January 2020-December 2022 rate plan.

(g)In addition, the NYSPSC staff has commenced a focused operations audit to investigate CECONY's income tax accounting. Any NYSPSC ordered adjustment to CECONY’s income tax accounting is expected to be refunded to or collected from customers, as determined by the NYSPSC. See "Other Regulatory Matters," below.

(h)Reconciliation of net utility plant for AMI will be done on a combined basis for electric and gas.

(i)Calculated in accordance with the earnings calculation method prescribed in the rate order.

(j)In November 2021, the NYSPSC issued an order that allowed CECONY to recover $43 million of late payment charges and fees that were not billed for the year ended December 31, 2020. The recalculated return on equity for 2020 which reflects the recovery of these fees is 8.81 percent.

In January 2022, CECONY filed a request with the NYSPSC for an electric rate increase of $1,199 million, effective January 2023. The filing reflects a return on common equity of 10.0 percent and a common equity ratio of 50 percent.

The company is requesting provisions pursuant to which expenses for pension and other post-retirement benefits, long-term debt, storm restoration, property taxes, municipal infrastructure support, the impact of new laws, late payment charges, and environmental site investigation and remediation are reconciled to amounts reflected in rates. In addition, the company is proposing a reconciliation and current recovery or surcharge mechanism of uncollectible write-offs to the level in rates and a reconciliation of the impacts of inflation on operation and maintenance expenses under certain circumstances. The company is proposing the continuation of earnings opportunities from Earnings Adjustment Mechanisms for meeting energy efficiency goals. The filing also reflects continuation of the revenue decoupling mechanism and the provisions pursuant to which the company recovers its purchased power and fuel costs from customers.


134			CON EDISON ANNUAL REPORT 2021

The filing includes supplemental information regarding electric rate plans for 2024 and 2025, which the company is not requesting, but would consider through settlement discussions. For purposes of illustration, rate increases of $853 million and $608 million effective January 2024 and 2025, respectively, were calculated based upon an assumed return on common equity of 10.0 percent and a common equity ratio of 50 percent.


CECONY – Gas
Effective period	January 2017 - December 2019	January 2020 – December 2022 (a)
Base rate changes	Yr. 1 – $(5) million (b) Yr. 2 – $92 million Yr. 3 – $90 million	Yr. 1 – $84 million (c) Yr. 2 – $122 million (c) Yr. 3 – $167 million (c)
Amortizations to income of net regulatory (assets) and liabilities	Yr. 1 – $39 million Yr. 2 – $37 million Yr. 3 – $36 million	Yr. 1 – $45 million (d) Yr. 2 – $43 million (d) Yr. 3 – $10 million (d)
Other revenue sources	Retention of annual revenues from non-firm customers of up to $65 million and 15 percent of any such revenues above $65 million. Potential incentives if performance targets related to gas leak backlog, leak prone pipe and service terminations are met: Yr. 1 – $7 million Yr. 2 – $8 million Yr. 3 – $8 million In 2017, 2018 and 2019, the company achieved incentives of $7 million, $6 million and $7 million, respectively, that, pursuant to the rate plan, was recorded ratably in earnings from 2018 to 2020. In 2018 and 2019, the company recorded incentives of $5 million and $9 million, respectively, for gas leak backlog, leak prone pipe and service terminations.	Retention of annual revenues from non-firm customers of up to $65 million and 15 percent of any such revenues above $65 million. Potential earnings adjusted mechanism incentives for energy efficiency and other potential incentives of up to: Yr. 1 - $20 million Yr. 2 - $22 million Yr. 3 - $25 million In 2020 and 2021, the company recorded $3 million and $26 million of earnings adjustment mechanism incentives for energy efficiency, respectively. In 2020 and 2021, the company recorded positive incentives of $13 million and $7 million, respectively. In 2021, the company reversed $6 million of positive incentives recorded in 2020 pursuant to an order issued by the NYSPSC in December 2021.
Revenue decoupling mechanisms	Continuation of reconciliation of actual to authorized gas delivery revenues. In 2017, 2018 and 2019, the company deferred $3 million, $12 million and $10 million of regulatory liabilities, respectively.	Continuation of reconciliation of actual to authorized gas delivery revenues, modified to be calculated based upon revenue per customer class instead of revenue per customer. In 2020 and 2021, the company deferred for recovery from customers $27 million and $100 million of revenues, respectively.
Recoverable energy costs	Continuation of current rate recovery of purchased gas costs.	Continuation of current rate recovery of purchased gas costs.
Negative revenue adjustments	Potential charges if performance targets relating to service, safety and other matters are not met: Yr. 1 – $68 million Yr. 2 – $63 million Yr. 3 – $70 million In 2017 and 2018, the company recorded negative revenue adjustments of $5 million and $4 million, respectively. In 2019, the company did not record any negative revenue adjustments.	Potential charges if performance targets relating to service, safety and other matters are not met: Yr. 1 - $81 million Yr. 2 - $88 million Yr. 3 - $96 million In 2020 and 2021, the company did not record any negative revenue adjustments.
Cost reconciliations	Continuation of reconciliation of expenses for pension and other postretirement benefits, variable-rate tax-exempt debt, major storms, property taxes (e), municipal infrastructure support costs (f), the impact of new laws and environmental site investigation and remediation to amounts reflected in rates (g). In 2017, 2018 and 2019, the company deferred $2 million of net regulatory liabilities, $44 million of net regulatory assets and $18 million of net regulatory assets, respectively.	Continuation of reconciliation of expenses for pension and other postretirement benefits, variable-rate debt, major storms, property taxes (e), municipal infrastructure support costs (f), the impact of new laws and environmental site investigation and remediation to amounts reflected in rates (g). In 2020 and 2021, the company deferred $91 million and $14 million of net regulatory assets, respectively.
Net utility plant reconciliations	Target levels reflected in rates: Gas average net plant target excluding AMI: Yr. 1 – $5,844 million Yr. 2 – $6,512 million Yr. 3 – $7,177 million AMI: Yr. 1 – $27 million Yr. 2 – $57 million Yr. 3 – $100 million In 2017 and 2018 the company deferred $2.2 million as regulatory liabilities. In 2019, the company deferred $1.7 million as a regulatory liability.	Target levels reflected in rates: Gas average net plant target excluding AMI: Yr. 1 - $8,108 million Yr. 2 - $8,808 million Yr. 3 - $9,510 million AMI: Yr. 1 - $142 million Yr. 2 - $183 million Yr. 3 - $211 million (h) In 2020 and 2021, the company deferred $24.7 million and $26 million as a regulatory liability, respectively.


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Average rate base	Yr. 1 – $4,841 million Yr. 2 – $5,395 million Yr. 3 – $6,005 million	Yr. 1 - $7,171 million Yr. 2 - $7,911 million Yr. 3 - $8,622 million
Weighted average cost of capital (after-tax)	Yr. 1 – 6.82 percent Yr. 2 – 6.80 percent Yr. 3 – 6.73 percent	Yr. 1 to Yr. 3 – 6.61 percent
Authorized return on common equity	9.0 percent	8.8 percent
Actual return on common equity (i) (j)	Yr. 1 – 9.22 percent Yr. 2 – 9.04 percent Yr. 3 – 8.72 percent	Yr. 1 – 8.40 percent Yr. 2 – 8.48 percent
Earnings sharing	Most earnings above an annual earnings threshold of 9.5 percent are to be applied to reduce regulatory assets for environmental remediation and other costs accumulated in the rate year. In 2017, 2018 and 2019, the company had no earnings above the threshold.	Most earnings above an annual earnings threshold of 9.3 percent are to be applied to reduce regulatory assets for environmental remediation and other costs accumulated in the rate year. In 2020 and 2021, the company had no earnings above the threshold.
Cost of long-term debt	Yr. 1 – 4.93 percent Yr. 2 – 4.88 percent Yr. 3 – 4.74 percent	Yr. 1 to Yr. 3 – 4.63 percent
Common equity ratio	48 percent	48 percent

(a)In January 2020, the NYSPSC approved the October 2019 Joint Proposal for CECONY's gas rate plan for January 2020 through December 2022. If at the end of any semi-annual period ending June 30 and December 31, Con Edison’s investments in its non-utility businesses exceed 15 percent of its total consolidated revenues, assets or cash flow, or if the ratio of holding company debt to total consolidated debt rises above 20 percent, CECONY is required to notify the NYSPSC and submit a ring-fencing plan or a demonstration why additional ring-fencing measures (see Note U) are not necessary.

(b)The gas base rate decrease was offset by a $41 million increase resulting from the December 2016 expiration of a temporary credit under the prior rate plan.

(c)The gas base rate increases shown above will be implemented with increases of $47 million in Yr. 1; $176 million in Yr. 2; and $170 million in Yr. 3 in order to levelize customer bill impacts. Base rates reflect recovery by the company of certain costs of its energy efficiency program (Yr. 1 - $30 million; Yr. 2 - $37 million; and Yr. 3 - $40 million) over a ten-year period, including the overall pre-tax rate of return on such costs.

(d)Amounts reflect amortization of the remaining 2018 TCJA tax savings allocable to CECONY’s gas customers ($63 million) over a two year period ($32 million annually), the protected portion of the regulatory liability for excess deferred income taxes allocable to CECONY’s gas customers ($725 million) over the remaining lives of the related assets ($14 million in Yr. 1, $14 million in Yr. 2, and $12 million in Yr. 3) and the unprotected portion of the net regulatory liability ($107 million) over five years ($21 million annually)

(e)-(i) See footnotes (e) - (i) to the table under “CECONY Electric,” above.

(j) In November 2021, the NYSPSC issued an order that allowed CECONY to recover $7 million of late payment charges and fees that were not billed for the year ended December 31, 2020. The recalculated return on equity for 2020 which reflects the recovery of these fees is 8.56 percent.

In January 2022, CECONY filed a request with the NYSPSC for a gas rate increase of $503 million, effective January 2023. The filing reflects a return on common equity of 10.0 percent and a common equity ratio of 50 percent.

The filing includes supplemental information regarding gas rate plans for 2024 and 2025, which the company is not requesting, but would consider through settlement discussions. For purposes of illustration, rate increases of $234 million and $218 million effective January 2024 and 2025, respectively, were calculated based upon an assumed return on common equity of 10.0 percent and a common equity ratio of 50 percent.


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CECONY – Steam
Effective period						January 2014 – December 2016 (a)
Base rate changes						Yr. 1 – $(22.4) million (b) Yr. 2 – $19.8 million (b) Yr. 3 – $20.3 million (b) Yr. 4 – None Yr. 5 – None Yr. 6 – None Yr. 7 – None Yr. 8 – None
Amortizations to income of net regulatory (assets) and liabilities						$37 million over three years
Recoverable energy costs						Current rate recovery of purchased power and fuel costs.
Negative revenue adjustments						Potential charges (up to $1 million annually) if certain steam performance targets are not met. In years 2014 through 2021, the company did not record any negative revenue adjustments.
Cost reconciliations (c)(d)						In 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021, the company deferred $42 million of net regulatory liabilities, $17 million of net regulatory assets, $8 million and $14 million of net regulatory liabilities, $1 million of net regulatory assets, $8 million of net regulatory liabilities, $35 million of net regulatory assets and $32 million of net regulatory assets, respectively.
Net utility plant reconciliations						Target levels reflected in rates were: Production: Yr. 1 – $1,752 million Yr. 2 – $1,732 million Yr. 3 – $1,720 million Distribution: Yr. 1 – $6 million Yr. 2 – $11 million Yr. 3 – $25 million The company reduced its regulatory liability by $0.1 million in 2014 and immaterial amounts in 2015 and 2016 and no deferrals were recorded in 2017, 2018, 2019. The company reduced its regulatory liability by $1.6 million in 2020 and by $0.6 million in 2021.
Average rate base						Yr. 1 – $1,511 million Yr. 2 – $1,547 million Yr. 3 – $1,604 million
Weighted average cost of capital (after-tax)						Yr. 1 – 7.10 percent Yr. 2 – 7.13 percent Yr. 3 – 7.21 percent
Authorized return on common equity						9.3 percent
Actual return on common equity (e)						Yr. 1 – 9.82 percent Yr. 2 – 10.88 percent Yr. 3 – 10.54 percent Yr. 4 – 9.51 percent Yr. 5 – 11.73 percent Yr. 6 – 10.45 percent Yr. 7 – 7.91 percent Yr. 8 – 5.99 percent
Earnings sharing						Weather normalized earnings above an annual earnings threshold of 9.9 percent are to be applied to reduce regulatory assets for environmental remediation and other costs. In 2014, the company had no earnings above the threshold. Actual earnings were $11.5 million and $7.8 million above the threshold in 2015 and 2016, respectively. In 2017, actual earnings were $8.5 million above the threshold, offset in part by a positive adjustment related to 2016 of $4 million. In 2018, actual earnings were $16.5 million above the threshold, and an additional $1.1 million related to 2017 was recorded. In 2019 actual earnings were $5 million above the threshold, offset in part by an adjustment related to 2018 of $2.3 million. In 2020 and 2021, the company had no earnings sharing above the threshold. Reserve adjustments of $0.4 million and $0.2 million were recorded in 2021 related to potential adjustment to the excess earnings sharing amounts for 2016 and 2018, respectively.


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Cost of long-term debt						Yr. 1 – 5.17 percent Yr. 2 – 5.23 percent Yr. 3 – 5.39 percent
Common equity ratio						48 percent

(a)Rates determined pursuant to this rate plan continue in effect until a new rate plan is approved by the NYSPSC.

(b)The impact of these base rate changes was deferred which resulted in an $8 million regulatory liability at December 31, 2016.

(c)Deferrals for property taxes are limited to 90 percent of the difference from amounts reflected in rates, subject to an annual maximum for the remaining difference of not more than a 10 basis point impact on return on common equity.

(d)In addition, the NYSPSC staff has commenced a focused operations audit to investigate CECONY’s income tax accounting. Any NYSPSC ordered adjustment to CECONY’s income tax accounting is expected to be refunded to or collected from customers, as determined by the NYSPSC. CECONY’s historical inadvertent understatement of its calculation of total federal income tax expense for ratemaking purposes has not been addressed in the current steam rate plan. See "Other Regulatory Matters," below.

(e)Calculated in accordance with the earnings calculation method prescribed in the rate order.


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In October 2021, O&R, the New York State Department of Public Service (NYSDPS) and other parties entered into a Joint Proposal for new electric and gas rate plans for the three-year period January 2022 through December 2024 (the Joint Proposal). The Joint Proposal is subject to NYSPSC approval. The Joint Proposal includes certain COVID-19 provisions, such as: recovery of 2020 late payment charges over three years ($2.8 million); reconciliation of late payment charges to amounts reflected in rates for years 2021 through 2024, with full recovery/refund via surcharge/sur-credit once the annual variance equals or exceeds 5 basis points of return on equity; and reconciliation of write-offs of customer accounts receivable balances to amounts reflected in rates from January 1, 2020 through December 31, 2024, with full recovery/refund via surcharge/sur-credit once the annual variance equals or exceeds 5 basis points of return on equity. The following tables contain a summary of the current and proposed rate plans.


O&R New York – Electric
Effective period (a)	January 2019 – December 2021	January 2022 – December 2024
Base rate changes	Yr. 1 – $13.4 million (b) Yr. 2 – $8.0 million (b) Yr. 3 – $5.8 million (b)	Yr. 1 – $4.9 million (i) Yr. 2 – $16.2 million (i) Yr. 3 – $23.1 million (i)
Amortizations to income of net regulatory (assets) and liabilities	Yr. 1 – $(1.5) million (c) Yr. 2 – $(1.5) million (c) Yr. 3 – $(1.5) million (c)	Yr. 1 – $11.8 million (j) Yr. 2 – $13.5 million (j) Yr. 3 – $15.2 million (j)
Other revenue sources	Potential earnings adjustment mechanism incentives for peak reduction, energy efficiency, Distributed Energy Resources utilization and other potential incentives of up to: Yr. 1 - $3.6 million Yr. 2 - $4.0 million Yr. 3 - $4.2 million Potential incentive if performance target related to customer service is met: $0.5 million annually. In 2019, 2020 and 2021, the company recorded $2.6 million, $1.9 million and $1.8 million of earnings adjustment mechanism incentives for energy efficiency, respectively. In 2019 and 2020, the company recorded $0.2 million and $0.5 million of incentives for customer service, respectively. In 2021, the company did not record incentives for customer service. In 2021, the company reversed the $0.5 million of incentives recorded in 2020 pursuant to the October 2021 Joint Proposal.	Potential earnings adjustment mechanism incentives for energy efficiency and other potential incentives of up to: Yr. 1 – $3.3 million Yr. 2 – $2.3 million Yr. 3 – $4.0 million
Revenue decoupling mechanisms	Continuation of reconciliation of actual to authorized electric delivery revenues. In 2019 and 2020, the company deferred $0.1 million and $6 million regulatory assets, respectively. In 2021, $10 million was deferred as regulatory liabilities.	Continuation of reconciliation of actual to authorized electric delivery revenues.
Recoverable energy costs	Continuation of current rate recovery of purchased power costs.	Continuation of current rate recovery of purchased power and fuel costs.
Negative revenue adjustments	Potential charges if certain performance targets relating to service, reliability and other matters are not met: Yr. 1 - $4.4 million Yr. 2 - $4.4 million Yr. 3 - $4.5 million In 2019,2020 and 2021, the company did not record any negative revenue adjustments.	Potential charges if certain performance targets relating to service, reliability, safety and other matters are not met: Yr. 1 – $4.3 million Yr. 2 – $4.4 million Yr. 3 – $5.1 million
Cost reconciliations	Reconciliation of expenses for pension and other postretirement benefits, environmental remediation costs, property taxes (d), energy efficiency program (e), major storms, the impact of new laws and certain other costs to amounts reflected in rates (f). In 2019, 2020 and 2021, the company deferred $4.3 million, $30.3 million and $24 million as net regulatory assets, respectively.	Reconciliation of expenses for pension and other postretirement benefits, environmental remediation costs, property taxes (d), energy efficiency program (k), major storms, and certain other costs to amounts reflected in rates.


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Net utility plant reconciliations	Target levels reflected in rates were: Electric average net plant target excluding advanced metering infrastructure (AMI): Yr. 1 - $1,008 million Yr. 2 - $1,032 million Yr. 3 - $1,083 million AMI (g): Yr. 1 - $48 million Yr. 2 - $58 million Yr. 3 - $61 million The company increased regulatory asset by an immaterial amount in 2019, $0.4 million as a regulatory liability in 2020 and an immaterial amount as a regulatory liability in 2021.	Target levels reflected in rates: Electric average net plant target Yr. 1 – $1,175 million Yr. 2 – $1,198 million Yr. 3 – $1,304 million
Average rate base	Yr. 1 – $878 million Yr. 2 – $906 million Yr. 3 – $948 million	Yr. 1 – $1,021 million Yr. 2 – $1,044 million Yr. 3 – $1,144 million
Weighted average cost of capital (after-tax)	Yr. 1 – 6.97 percent Yr. 2 – 6.96 percent Yr. 3 – 6.96 percent	Yr. 1 – 6.77 percent Yr. 2 – 6.73 percent Yr. 3 – 6.72 percent
Authorized return on common equity	9.0 percent	9.2 percent
Actual return on common equity (h)	Yr. 1 – 9.6 percent Yr. 2 – 8.76 percent Yr. 3 – 9.16 percent
Earnings sharing	Most earnings above an annual earnings threshold of 9.6 percent are to be applied to reduce regulatory assets for environmental remediation and other costs accumulated in the rate year. In 2019, 2020 and 2021, earnings did not exceed the earnings threshold.	Most earnings above an annual earnings threshold of 9.7 percent are to be applied to reduce regulatory assets for environmental remediation and other costs accumulated in the rate year.
Cost of long-term debt	Yr. 1 – 5.17 percent Yr. 2 – 5.14 percent Yr. 3 – 5.14 percent	Yr. 1 – 4.58 percent Yr. 2 – 4.51 percent Yr. 3 – 4.49 percent
Common equity ratio	48 percent	48 percent

(a)If at the end of any year, Con Edison’s investments in its non-utility businesses exceed 15 percent of Con Edison’s total consolidated revenues, assets or cash flow, or if the ratio of holding company debt to total consolidated debt rises above 20 percent, O&R is required to notify the NYSPSC and submit a ring-fencing plan or a demonstration why additional ring-fencing measures (see Note U) are not necessary.

(b)The electric base rate increases were implemented with increases of: Yr. 1 - $8.6 million; Yr. 2 - $12.1 million; and Yr. 3 - $12.2 million.

(c)Reflects amortization of, among other things, the company’s net benefits under the TCJA prior to January 1, 2019, amortization of net regulatory liability for future income taxes and reduction of previously incurred regulatory assets for environmental remediation costs. Also, for electric, reflects amortization over a six year period of previously incurred incremental major storm costs. See "Other Regulatory Matters," below.

(d)Deferrals for property taxes are limited to 90 percent of the difference from amounts reflected in rates, subject to an annual maximum for the remaining difference of not more than a maximum number of basis points impact on return on common equity: Yr. 1 - 10.0 basis points; Yr. 2 - 7.5 basis points; and Yr. 3 - 5.0 basis points.

(e)Energy efficiency costs are expensed as incurred. Such costs are subject to a downward-only reconciliation over the terms of the electric and gas rate plans. The company will defer for the benefit of customers any cumulative shortfall over the terms of the electric and gas rate plans between actual expenditures and the levels provided in rates.

(f)In addition, the NYSPSC staff has commenced a focused operations audit to investigate O&R’s income tax accounting. Any NYSPSC ordered adjustment to O&R’s income tax accounting is expected to be refunded to or collected from customers, as determined by the NYSPSC. See "Other Regulatory Matters," below.

(g)Net plant reconciliation for AMI expenditures will be implemented for a single category of AMI capital expenditures that includes amounts allocated to both electric and gas customers.

(h)Calculated in accordance with the earnings calculation method prescribed in the rate order.

(i)The Joint Proposal recommends that these base rate changes may be implemented with increases of: Yr. 1 - $11.7 million; Yr. 2 - $11.7 million; and Yr. 3 - $11.7 million.

(j)Reflects amortization of, among other things, previously incurred incremental deferred storm costs over a five-year period. See "Other Regulatory Matters," below

(k)Energy efficiency costs are expensed as incurred. Such costs are subject to a cumulative reconciliation that is evenly distributed over the term of the rate plan subject to the caps set forth in the January 2020 NYSPSC New Efficiency New York (“NENY”) order. If the NYSPSC modifies O&R's NENY budgets during the rate term, such modifications will be reflected at the time of the cumulative reconciliations.


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O&R New York – Gas
Effective period (a)	January 2019 – December 2021	January 2022 – December 2024
Base rate changes	Yr. 1 – $(7.5) million (b) Yr. 2 – $3.6 million (b) Yr. 3 – $0.7 million (b)	Yr. 1 – $0.7 million (i) Yr. 2 – $7.4 million (i) Yr. 3 – $9.9 million (i)
Amortization to income of net regulatory (assets) and liabilities	Yr. 1 – $1.8 million (c) Yr. 2 – $1.8 million (c) Yr. 3 – $1.8 million (c)	Yr. 1 – $0.8 million Yr. 2 – $0.7 million Yr. 3 – $0.3 million
Other revenue sources	Continuation of retention of annual revenues from non-firm customers of up to $4.0 million, with variances to be shared 80 percent by customers and 20 percent by company. Potential earnings adjustment mechanism incentives of up to $0.3 million annually. Potential incentives if performance targets related to gas leak backlog, leak prone pipe, emergency response, damage prevention and customer service are met: Yr. 1 - $1.2 million; Yr. 2 - $1.3 million; and Yr. 3 - $1.3 million. In 2019, 2020 and 2021, the company recorded $0.5 million of earnings adjustment mechanism incentives for energy efficiency. In 2019, 2020 and 2021, the company recorded $0.7 million, $0.3 million and $0.2 million of positive incentives, respectively. In 2021, the company reversed $0.3 million of positive incentives recorded in 2020 pursuant to the October 2021 Joint Proposal.	Potential earnings adjustment mechanism incentives for energy efficiency and other potential incentives of up to: Yr. 1 - $0.2 million Yr. 2 - $0.2 million Yr. 3 - $0.4 million Potential positive rate adjustment for gas safety and performance of up to: Yr. 1 – $1.2 million Yr. 2 – $1.3 million Yr. 3 – $1.4 million
Revenue decoupling mechanisms	Continuation of reconciliation of actual to authorized gas delivery revenues. In 2019 and 2020, the company deferred $0.8 million and $0.5 million as regulatory assets, respectively. In 2021, $4 million was deferred as a regulatory liability.	Continuation of reconciliation of actual to authorized gas delivery revenues.
Recoverable energy costs	Continuation of current rate recovery of purchased gas costs.	Continuation of current rate recovery of purchased gas costs.
Negative revenue adjustments	Potential charges if performance targets relating to service, safety and other matters are not met: Yr. 1 - $5.5 million; Yr. 2 - $5.7 million; and Yr. 3 - $6.0 million. In 2019, the company recorded a $0.2 million. In 2020 and 2021, the company recorded an immaterial amount of negative revenue adjustments.	Potential charges if performance targets relating to service, safety and other matters are not met: Yr. 1 – $6.3 million Yr. 2 – $6.7 million Yr. 3 – $7.3 million
Cost reconciliations	Reconciliation of expenses for pension and other postretirement benefits, environmental remediation costs, property taxes (d), energy efficiency program (e), the impact of new laws and certain other costs to amounts reflected in rates (f). In 2019 and 2020, the company deferred $6 million as net regulatory liabilities, $1.8 million as net regulatory assets, respectively. In 2021 $8 million were deferred as regulatory assets.	Reconciliation of expenses for pension and other postretirement benefits, environmental remediation costs, property taxes (j), energy efficiency program (k), major storms and certain other costs to amounts reflected in rates.
Net utility plant reconciliations	Target levels reflected in rates were: Gas average net plant target excluding AMI: Yr. 1 - $593 million Yr. 2 - $611 million Yr. 3 - $632 million AMI (g): Yr. 1 - $20 million Yr. 2 - $24 million Yr. 3 - $25 million In 2019, 2020 and 2021, the company deferred immaterial amounts as regulatory assets.	Target levels reflected in rates: Gas average net plant target Yr. 1 – $720 million Yr. 2 – $761 million Yr. 3 – $803 million
Average rate base	Yr. 1 – $454 million Yr. 2 – $476 million Yr. 3 – $498 million	Yr. 1 – $566 million Yr. 2 – $607 million Yr. 3 – $649 million


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Weighted average cost of capital (after-tax)	Yr. 1 – 6.97 percent Yr. 2 – 6.96 percent Yr. 3 – 6.96 percent	Yr. 1 – 6.77 percent Yr. 2 – 6.73 percent Yr. 3 – 6.72 percent
Authorized return on common equity	9.0 percent	9.2 percent
Actual return on common equity (h)	Yr. 1 – 8.90 percent Yr. 2 – 9.58 percent Yr. 3 – 10.11 percent
Earnings sharing	Most earnings above an annual earnings threshold of 9.6 percent are to be applied to reduce regulatory assets for environmental remediation and other costs accumulated in the rate year. In 2019 and 2020, earnings did not exceed the earnings threshold. In 2021, actual earnings were $1.7 million above the threshold.	Most earnings above an annual earnings threshold of 9.7 percent are to be applied to reduce regulatory assets for environmental remediation and other costs accumulated in the rate year.
Cost of long-term debt	Yr. 1 – 5.17 percent Yr. 2 – 5.14 percent Yr. 3 – 5.14 percent	Yr. 1 – 4.58 percent Yr. 2 – 4.51 percent Yr. 3 – 4.49 percent
Common equity ratio	0.48	48 percent

(b)The gas base rate changes were implemented with changes of: Yr. 1 - $(5.9) million; Yr. 2 - $1.0 million; and Yr. 3 - $1.0 million.

(c)-(h) See footnotes (c) - (h) to the table under “O&R New York - Electric,” above.

(i) The Joint Proposal recommends that these base rate changes may be implemented with increases of: Yr. 1 – $4.4 million; Yr. 2 - $4.4 million; and Yr. 3 - $4.4 million.

(j) Deferrals for property taxes are limited to 90 percent of the difference from amounts reflected in rates, subject to an annual maximum for the remaining difference of not more than a maximum number of basis points impact on return on common equity: Yr. 1 - 10.0 basis points; Yr. 2 - 7.5 basis points; and Yr. 3 - 5.0 basis points.

(k) See footnote (l) to the table under "O&R New York - Electric," above.


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Rockland Electric Company (RECO)

In December 2021, the NJBPU approved an electric rate increase, effective January 1, 2022, of $9.65 million for RECO. The following table contains a summary of the terms of the distribution rate plans.


RECO
Effective period	March 2017 – January 2020	February 2020 – December 2021	January 2022
Base rate changes	$1.7 million	$12 million	$9.65 million
Amortization to income of net regulatory (assets) and liabilities	$0.2 million over three years and continuation of $(25.6) million of deferred storm costs over four years which expired on July 31, 2018 (a)	$4.8 million over four years.	$0.2 million over three years and $9.2 million of deferred storm costs over a three-year period (excluding $2.4 million of costs for Tropical Storm Henri which will be deferred over a three year period in base rates) and continuation of $10 million over 3 years
COVID-19 costs			Recovery of RECO’s COVID-19 related expenditures will be addressed in a separate petition
Recoverable energy costs	Current rate recovery of purchased power costs.	Current rate recovery of purchased power costs.	Current rate recovery of purchased power costs.
Cost reconciliations	None	None	Reconciliation of uncollectible accounts, Demand Side Management and Clean Energy Program.
Average rate base	$178.7 million	$229.9 million	$262.8 million
Weighted average cost of capital (after-tax)	7.47 percent	7.11 percent	7.08 percent
Authorized return on common equity	9.6 percent	9.5 percent	9.6 percent
Actual return on common equity	Yr. 1 – 7.5 percent Yr. 2 – 5.7 percent	Yr. 1 – 5.4 percent Yr. 2 – 2.3 percent
Cost of long-term debt	5.37 percent	4.88 percent	4.74 percent
Common equity ratio	49.7 percent	48.32 percent	48.51 percent

(a)In January 2016, the NJBPU approved RECO’s plan to spend $15.7 million in capital over three years to harden its electric system against storms, the costs of which RECO, beginning in 2017, is collecting through a customer surcharge.

In January 2022, RECO filed a request with FERC for an increase to its annual transmission revenue requirement from $16.9 million to $20.4 million, effective March 30, 2022. The filing reflects a return on common equity of 11.04 percent and a common equity ratio of 47 percent.

COVID - 19 Regulatory Matters

Governors, public utility commissions and other regulatory agencies in the states in which the Utilities operate have issued orders related to the COVID-19 pandemic that impact the Utilities as described below.

New York State Regulation

In March 2020, former New York State Governor Cuomo declared a State Disaster Emergency for the State of New York due to the COVID-19 pandemic and signed the "New York State on PAUSE" executive order that temporarily closed all non-essential businesses statewide. The former Governor then lifted these closures over time and ended the emergency declaration in June 2021. As a result of the emergency declaration, and due to economic conditions, the NYSPSC and the Utilities have worked to mitigate the potential impact of the COVID-19 pandemic on the Utilities, their customers and other stakeholders.


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In March 2020, the Utilities began suspending service disconnections, certain collection notices, final bill collection agency activity, new late payment charges and certain other fees for all customers. The Utilities also began providing payment extensions for all customers that were scheduled to be disconnected prior to the start of the COVID-19 pandemic. In June 2020, the state of NY enacted a law prohibiting NY utilities, including CECONY and O&R, from disconnecting residential customers, and starting in May 2021 small business customers, during the COVID-19 state of emergency, which ended in June 2021. In addition, such prohibitions applied for an additional 180 days after the state of emergency ended (December 21, 2021) for residential and small business customers who experienced a change in financial circumstances due to the COVID-19 pandemic. In November 2021, the NYSPSC issued an order establishing a surcharge recovery mechanism for CECONY to collect, commencing December 1, 2021 through December 31, 2022, $43 million and $7 million for electric and gas, respectively, of late payment charges and fees that were not billed for the year ended December 31, 2020. The company recorded such amounts as revenue for the year ended December 31, 2021, as permitted under the accounting rules for regulated utilities, and also accrued such amounts as a current asset at December 31, 2021. Pursuant to the November 2021 order, the company also established a recovery mechanism for CECONY to collect, commencing January 2023 through December 2023, $19 million and $4 million for electric and gas, respectively, of late payment charges and fees that were not billed for the year ended December 31, 2021 and the company recorded such amounts as revenue for the year ended December 31, 2021, as permitted under the accounting rules for regulated utilities, and also accrued such amounts as a current asset at December 31, 2021. In addition, pursuant to the November 2021 order, CECONY established a reserve of $7 million toward addressing customer arrearages for the year ended December 31, 2021. The order also established a surcharge recovery or surcredit mechanism for any late payment charges and fee deferrals, subject to offsetting related savings resulting from the COVID-19 pandemic, for 2022 starting in January of 2024 over a twelve-month period. CECONY resumed late payment charges for commercial and residential customers who have not experienced a change in financial circumstances due to the COVID-19 pandemic on September 3, 2021 and October 1, 2021, respectively. O&R resumed late payment charges for commercial and residential customers who have not experienced a change in financial circumstances due to the COVID-19 pandemic on October 1, 2021.

The Utilities’ New York rate plans allow them to defer costs resulting from a change in legislation, regulation and related actions that have taken effect during the term of the rate plans once the costs exceed a specified threshold. The total reserve increases to the allowance for uncollectible accounts from January 1, 2020 through December 31, 2021 reflecting the impact of the COVID-19 pandemic for CECONY electric and gas operations and O&R electric and gas operations were $239 million and $7 million, respectively, and were deferred pursuant to the legislative, regulatory and related actions provisions of the rate plans as a result of the New York State on PAUSE and related executive orders, that have since been lifted, as described above. The Utilities’ NY rate plans also provide for an allowance for write-offs of customer accounts receivable balances. The above amounts deferred pursuant to the legislative, regulatory and related actions provisions were reduced by the amount that the actual write-offs of customer accounts receivable balances were below the allowance reflected in rates which differences were $8 million and $3 million for CECONY and O&R, respectively, from March 1, 2020 through December 31, 2021.

In June 2020, the NYSPSC directed CECONY to implement a summer cooling credit program to help mitigate the cost of staying home and operating air conditioning for health-vulnerable low-income customers due to the limited availability of public cooling facilities as a result of the COVID-19 social distancing measures. The $63.4 million cost of the program is being recovered over a five-year period that began January 2021.

As of December 31, 2020, CECONY deferred, for New York City residential customers, $54.9 million of higher summer generation capacity supply costs. CECONY recovered such costs from customers as of October 31, 2021.

In April 2021, New York State passed a law that creates a program that allows eligible residential renters in New York State who require assistance with rent and utility bills to have up to twelve months of electric and gas utility bill arrears forgiven, provided that such arrears were accrued on or after March 13, 2020. The program will be administered by the State Office of Temporary Disability Assistance in coordination with the NYSDPS. Under the program, CECONY and O&R would qualify for a refundable tax credit for New York State gross-receipts tax equal to the amount of arrears waived by the Utilities in the year that the arrears are waived and certified by the NYSPSC.

In May 2021, CECONY and O&R, along with other large NY utilities, submitted joint comments to the NYSDPS' February 2021 report on New York State’s Energy Affordability Policy. The report recommends, among other things, that residential and commercial customers’ late payment fees and interest on deferred payment agreements be waived until two years after the expiration of the NY State moratorium on utility terminations (the moratorium expired on December 21, 2021) and each utility develop an arrears management program to mitigate the financial burdens of the COVID-19 pandemic on NY households and that program costs be shared, perhaps equally, between shareholders and customers. The May 2021 joint comments stated that it is not necessary for the NYSPSC to adopt


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the report’s COVID-19 related recommendations because NY State already passed laws that address the issues in the report, as described above.

The Utilities’ rate plans have revenue decoupling mechanisms in their NY electric and gas businesses that largely reconcile actual energy delivery revenues to the authorized delivery revenues approved by the NYSPSC per month and reconcile the deferred balances semi-annually under CECONY's electric rate plan (January through June and July through December, respectively) and annually under CECONY's gas rate plan and O&R's NY electric and gas rate plans (January through December). Differences are accrued with interest each month for CECONY's and O&R's NY electric customers and after the annual deferral period ends for CECONY's and O&R's NY gas customers for refund to, or recovery from customers, as applicable. Generally, the refund to or recovery from customers begins August and February of each year over an ensuing six-month period for CECONY's electric customers and February of each year over an ensuing twelve-month period for CECONY's gas and O&R's NY electric and gas customers.

New Jersey State Regulation

In March 2020, New Jersey Governor Murphy declared a Public Health Emergency and State of Emergency for the State of NJ. In June 2021, the Governor ended the emergency declaration. As a result of the emergency declaration, and due to economic conditions, the NJBPU and RECO have worked to mitigate the potential impact of the COVID-19 pandemic on RECO, its customers and other stakeholders. In March 2020, RECO began suspending late payment charges, terminations for non-payment, and no access fees during the COVID-19 pandemic. The suspension of these fees continued through July 31, 2021 and are not material.

In July 2020, the NJBPU authorized RECO and other NJ utilities to create a COVID-19-related regulatory asset by deferring prudently incurred incremental costs related to the COVID-19 pandemic beginning on March 9, 2020, and has extended such deferrals through December 31, 2022. RECO deferred net incremental COVID-19 related costs of $0.9 million through December 31, 2021.

Other Regulatory Matters

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, under its electric rate plan that was approved in January 2020, is amortizing its TCJA net benefits prior to January 1, 2019 allocable to its electric customers ($377 million) over a three-year period, the IRS “protected” portion of its net regulatory liability for future income taxes related to certain accelerated tax depreciation benefits allocable to its electric customers ($1,663 million) over the remaining lives of the related assets and the remainder, or “unprotected” portion of the net regulatory liability allocable to its electric customers ($784 million) over a five-year period. CECONY, under its gas rate plan that was approved in January 2020, amortized TCJA net benefits prior to January 1, 2019 allocable to its gas customers ($63 million) over a two-year period. The protected portion of its net regulatory liability for future income taxes allocable to its gas customers ($725 million) is being amortized over the remaining lives of the related assets and the unprotected portion of the net regulatory liability allocable to its gas customers ($107 million) over a five-year period.

CECONY’s net regulatory liability for future income taxes, including both the protected and unprotected portions, allocable to the company’s steam customers ($185 million) is being amortized over the remaining lives of the related assets (with the amortization period for the unprotected portion subject to review in its next steam rate proceeding).

O&R, under its current electric and gas rate plans, has reflected its TCJA net benefits in its electric and gas rates beginning as of January 1, 2019. Under the rate plans, O&R amortized its net benefits prior to January 1, 2019 ($22 million) over a three-year period. The protected portion of its net regulatory liability for future income taxes ($123 million) is being amortized over the remaining lives of the related assets. See "Rate Plans" above. Pursuant to the October 2021 Joint Proposal, O&R will amortize the remaining unprotected portion of its net regulatory liability for future income taxes ($34 million) over a six-year period beginning January 1, 2022.

In January 2018, the NYSPSC issued an order initiating a focused operations audit of the Utilities’ financial accounting for income taxes. The audit is investigating the Utilities’ inadvertent understatement of a portion, the amount of which may be material, of their calculation of total federal income tax expense for ratemaking purposes. The understatement was related to the calculation of plant retirement-related cost of removal. As a result of such


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understatement, the Utilities accumulated significant income tax regulatory assets that were not reflected in O&R’s rate plans prior to 2014, CECONY’s electric and gas rate plans prior to 2015 and 2016, respectively, and is currently not reflected in CECONY’s steam rate plan. This understatement of historical income tax expense materially reduced the amount of revenue collected from the Utilities' customers in the past. As part of the audit, the Utilities plan to pursue a private letter ruling from the Internal Revenue Service (IRS) that is expected to confirm, among other things, that in order to comply with IRS normalization rules, such understatement may not be corrected through a write-down of a portion of the regulatory asset and must be corrected through an increase in future years’ revenue requirements. The regulatory asset ($1,176 million and $26 million for CECONY and O&R, respectively, as of December 31, 2021 and $1,200 million and $29 million for CECONY and O&R, respectively, as of December 31, 2020) is netted against the future income tax regulatory liability on the Companies’ consolidated balance sheet. The Utilities are unable to estimate the amount or range of their possible loss, if any, related to this matter. At December 31, 2021, the Utilities have not accrued a liability related to this matter.

In October 2020, the NYSPSC issued an order instituting a proceeding to consider requiring NY’s large, investor-owned utilities, including CECONY and O&R, to annually disclose what risks climate change poses to their companies, investors and customers going forward. The order notes that some holding companies, including Con Edison, already disclose climate change risks at the holding company level, but states that the NYSPSC believes that climate-related risk disclosures should be issued specific to the operating companies in NY, such as CECONY and O&R, and that such climate-related risk disclosures should be included annually with the utilities’ financial reports. In December 2020, CECONY and O&R, along with other large NY utilities, filed comments supporting climate change risk disclosures in annual reports filed with the NYSPSC and recommended the use of an industry-specific template.

In May 2020, the president of the United States issued the "Securing the United States Bulk-Power System" executive order, which has since expired. The executive order declared threats to the bulk-power system by foreign adversaries constitute a national emergency and prohibits the acquisition, importation, transfer or installation of certain bulk-power system electric equipment that is sourced from foreign adversaries. In April 2021 and November 2021, the Department of Energy (DOE) issued requests for information to: (1) assist the DOE in developing additional orders and/or regulations to secure the United States’ critical electric infrastructure and (2) enable the DOE to perform an energy sector supply chain review. In September 2021, the Cybersecurity and Infrastructure Security Agency and the National Institute of Standards and Technology issued preliminary cybersecurity goals for critical infrastructure control systems, with final goals to be issued by September 2022. The Companies are unable to predict the impact on them of any orders or regulations that may be adopted regarding critical infrastructure.

In July 2021, the NYSPSC approved a settlement agreement among CECONY, O&R and the NYSDPS that fully resolves all issues and allegations that have been raised or could have been raised by the NYSPSC against CECONY and O&R with respect to: (1) the July 2018 rupture of a CECONY steam main located on Fifth Avenue and 21st Street in Manhattan (the “2018 Steam Incident”); (2) the July 2019 electric service interruptions to approximately 72,000 CECONY customers on the west side of Manhattan and to approximately 30,000 CECONY customers primarily in the Flatbush area of Brooklyn (the “2019 Manhattan and Brooklyn Outages”); (3) the August 2020 electric service interruptions to approximately 330,000 CECONY customers and approximately 200,000 O&R customers following Tropical Storm Isaias (the “Tropical Storm Isaias Outages”) and (4) the August 2020 electric service interruptions to approximately 190,000 customers resulting from faults at CECONY’s Rainey substation following Tropical Storm Isaias (the “Rainey Outages”). Pursuant to the settlement agreement, CECONY and O&R agreed to a total settlement amount of $75.1 million and $7.0 million, respectively. CECONY and O&R agreed to forgo recovery from customers of $25 million and $2.5 million, respectively, associated with the return on existing storm hardening assets beginning with the next rate plan for each utility (over a period of 35 years). CECONY and O&R also agreed to incur ongoing operations and maintenance costs of up to $15.8 million and $2.9 million, respectively, for, among other things, costs to maintain a certain level of contractor and vehicle storm emergency support and storm preparation audits. For CECONY, the settlement agreement includes previously incurred or accrued costs of $34.3 million, including negative revenue adjustments of $5 million for the Rainey Outages and $15 million for the 2019 Manhattan and Brooklyn Outages and $14.3 million in costs to reimburse customers for food and medicine spoilage and other previously incurred expenses related to Tropical Storm Isaias and the 2018 Steam Incident. For O&R, the settlement agreement includes previously incurred costs of $1.6 million to reimburse customers for food and medicine spoilage and other expenses related to the Tropical Storm Isaias Outages.

Additional information relating to the 2018 Steam Incident, 2019 Manhattan and Brooklyn Outages and Tropical Storm Isaias Outages follow.

2018 Steam Incident: In July 2018, the NYSPSC commenced an investigation into the rupture of a CECONY steam main located on Fifth Avenue and 21st Street in Manhattan. 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.


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As of June 30, 2021, with respect to the incident, the company incurred operating costs of $17 million for property damage, clean-up and other response costs and invested $9 million in capital and retirement costs. During the second quarter of 2020, the company accrued a $3 million liability related to this matter. As described above, in July 2021, CECONY entered into a settlement agreement that fully resolves all issues and allegations with respect to this matter.

2019 Manhattan and Brooklyn Outages: In July 2019, electric service was interrupted to approximately 72,000 CECONY customers on the west side of Manhattan. Also in July 2019, electric service was interrupted to approximately 30,000 CECONY customers primarily in the Flatbush area of Brooklyn. In November 2020, the NYSPSC issued an order in its proceedings investigating these July 2019 power outages ordering CECONY to show cause why the NYSPSC should not commence a review of the prudency of CECONY’s actions and/or omissions prior to, during, and after the July 2019 outages in Manhattan and Brooklyn, and pursue civil or administrative penalties in the amount of up to $24.8 million for CECONY’s alleged failure to comply with certain requirements. The order further indicated that should the NYSPSC confirm some or all of the apparent violations identified in the order or other orders issued by the NYSPSC in the future in connection with this proceeding, and should such confirmed violations be classified as findings of repeated violations of the Public Service Law or rules or regulations adopted pursuant thereto that demonstrate a failure of CECONY to continue to provide safe and adequate service, the NYSPSC would be authorized to commence a proceeding under Public Service Law Section 68(2) to revoke or modify CECONY’s certificate as it relates to its service territory or any portion thereof.

In December 2020, CECONY filed a response to the NYSPSC order demonstrating why the NYSPSC should not commence a penalty or prudence action against CECONY. CECONY stated that the NYSPSC order misapplied Section 25-a of the Public Service Law by ignoring the reasonable compliance standard under the statute and instead, was imposing a strict liability standard. For both outages, CECONY presented evidence that it either had complied or reasonably complied with NYSPSC requirements. With respect to the Manhattan outage, CECONY stated that a prudency proceeding was not justified because CECONY’s actions with respect to the Manhattan outage were reasonable based on the information the company had at the time. With respect to the Brooklyn outage, the company stated that the order failed to allege that improper company actions caused the outage. During 2019, CECONY recorded negative revenue adjustments associated with reliability performance provisions of $15 million in aggregate primarily related to these outages. As described above, in July 2021, CECONY entered into a settlement agreement that fully resolves all issues and allegations with respect to this matter.

Tropical Storm Isaias Outages: In August 2020, Tropical Storm Isaias caused significant damage to the Utilities’ electric distribution systems and interrupted service to approximately 330,000 CECONY electric customers and approximately 200,000 O&R electric customers. As of December 31, 2021, CECONY incurred costs for Tropical Storm Isaias of $174 million (including $84 million of operation and maintenance expenses charged against a storm reserve pursuant to its electric rate plan, $64 million of capital investments and $26 million (including $7.5 million for food and medicine spoilage claims) of operation and maintenance expenses). As of December 31, 2021, O&R incurred costs for Tropical Storm Isaias of $26.5 million (including $19.2 million of operation and maintenance expenses charged against a storm reserve pursuant to its NY electric rate plan, $5.7 million of capital investments and $1.6 million for food and medicine spoilage claims). As of December 31, 2021, RECO incurred costs for Tropical Storm Isaias of $11.4 million (including $7.6 million of operation and maintenance expenses charged against a storm reserve pursuant to its rate plan, $2.5 million of capital investments and $1.3 million for food and medicine spoilage claims). The Utilities’ electric rate plans provide for recovery of operating costs and capital investments under different provisions. The Utilities’ incremental operating costs attributable to storms are to be deferred for recovery as a regulatory asset under their electric rate plans, while capital investments, up to specified levels, are reflected in rates under their electric rate plans. The provisions of the Utilities’ NY electric rate plans that impose negative revenue adjustments for operating performance provide for exceptions for major storms and catastrophic events beyond the control of the companies, including natural disasters such as hurricanes and floods.

In November 2020, the NYSPSC issued an order in its proceedings investigating the NY utilities’ preparation for and response to Tropical Storm Isaias that ordered the Utilities to show cause why (i) civil penalties or appropriate injunctive relief should not be imposed against CECONY (in the amount of up to $102.3 million relating to 33 alleged violations) and against O&R (in the amount of up to $19 million relating to 38 alleged violations) to remedy such noncompliance, and (ii) a prudence proceeding should not be commenced against the Utilities for potentially imprudent expenditures of ratepayer funds related to the matter. The order stated that given the continuing nature of the investigation of this matter by the NYSDPS, the NYSPSC may amend the order to include any subsequently determined apparent violations identified by the NYSDPS. In addition, the order indicated that should the NYSPSC confirm some or all of the apparent violations identified in the order or other orders issued by the NYSPSC in the future in connection with this proceeding, and should such respective confirmed violations be classified as findings of repeated violations of the Public Service Law or rules or regulations adopted pursuant thereto that demonstrate a failure of CECONY and/or O&R to continue to provide safe and adequate service, the NYSPSC would be


CON EDISON ANNUAL REPORT 2021			147

authorized to commence a proceeding under Public Service Law Section 68(2) to revoke or modify CECONY’s and/or O&R’s certificate as it relates to its service territory or any portion thereof.

In December 2020, CECONY and O&R filed responses to the NYSPSC order demonstrating why the NYSPSC should not commence penalty or prudence actions against them. The Utilities stated that the NYSPSC orders misapplied Section 25-a of the Public Service Law by ignoring the reasonable compliance standard under the statute and instead, was imposing a strict liability standard. CECONY and O&R also presented evidence that the order either misrepresented the applicable requirements or ignored that the Utilities were acting pursuant to practices approved by the NYSPSC. Finally, CECONY and O&R stated that there was no basis to commence a prudence proceeding because the Utilities acted reasonably based on the information available and the circumstances at the time. As described above, in July 2021, CECONY and O&R entered into a settlement agreement that fully resolves all issues and allegations with respect to this matter.


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Regulatory Assets and Liabilities

Regulatory assets and liabilities at December 31, 2021 and 2020 were comprised of the following items:


	Con Edison		CECONY
(Millions of Dollars)	2021	2020	2021	2020
Regulatory assets
Unrecognized pension and other postretirement costs	$128	$3,241	$110	$3,065
Environmental remediation costs	938	865	860	791
Pension and other postretirement benefits deferrals	496	315	435	272
Revenue taxes	395	356	378	342
System peak reduction and energy efficiency programs	285	124	284	124
COVID - 19 Deferrals	282	115	277	113
Deferred storm costs	276	195	158	83
Property tax reconciliation	202	241	202	239
MTA power reliability deferral	140	188	140	188
Deferred derivative losses	51	120	45	111
Municipal infrastructure support costs	44	62	44	62
Brooklyn Queens demand management program	36	36	36	36
Meadowlands heater odorization project	29	32	29	32
Non-wire alternative projects	23	18	23	18
Preferred stock redemption	20	21	20	21
Unamortized loss on reacquired debt	16	21	14	19
Recoverable REV demonstration project costs	16	20	15	18
Gate station upgrade project	14	25	14	25
Other	248	200	232	186
Regulatory assets – noncurrent	3,639	6,195	3,316	5,745
Deferred derivative losses	141	190	133	177
Recoverable energy costs	65	76	55	67
Regulatory assets – current	206	266	188	244
Total Regulatory Assets	$3,845	$6,461	$3,504	$5,989
Regulatory liabilities
Future income tax*	$1,984	$2,207	$1,840	$2,062
Allowance for cost of removal less salvage	1,199	1,090	1,033	932
Net unbilled revenue deferrals	209	198	209	198
TCJA net benefits	125	295	123	286
Net proceeds from sale of property	103	137	103	137
Pension and other postretirement benefit deferrals	102	85	55	46
System benefit charge carrying charge	70	64	63	57
Deferred derivative gains - long term	61	5	55	4
Property tax refunds	35	36	35	35
Unrecognized other postretirement costs	32	11	—	—
BQDM and REV Demo reconciliations	25	27	22	25
Sales and use tax refunds	17	16	16	16
Energy efficiency portfolio standard unencumbered funds	15	1	19	—
Earnings sharing - electric, gas and steam	13	15	10	10
Settlement of gas proceedings	12	21	12	21
Workers’ compensation	8	3	8	3
Settlement of prudence proceeding	6	5	6	5
Other	365	297	312	257
Regulatory liabilities – noncurrent	4,381	4,513	3,921	4,094
Refundable energy costs	32	28	2	4
Deferred derivative gains	142	8	132	7
Revenue decoupling mechanism	11	—	—	—
Regulatory liabilities—current	185	36	134	11
Total Regulatory Liabilities	$4,566	$4,549	$4,055	$4,105

See "Federal Income Tax" in Note A, "Other Regulatory Matters," above, and Note L.

Unrecognized pension and other postretirement costs represent the net regulatory asset associated with the accounting rules for retirement benefits. See Note A.


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MTA power reliability deferral represents CECONY’s costs in excess of those reflected in its prior electric rate plan to take certain actions relating to the electrical equipment that serves the Metropolitan Transportation Authority (MTA) subway system. The company is recovering this regulatory asset pursuant to its current electric rate plan. See footnote (d) to the CECONY - Electric table under “Rate Plans,” above.

Deferred storm costs represent response and restoration costs, other than capital investments, in connection with Tropical Storm Isaias and other major storms that were deferred by the Utilities.

Settlement of prudence proceeding represents the remaining amount to be credited to customers pursuant to a Joint Proposal, approved by the NYSPSC in April 2016, with respect to the prudence of certain CECONY expenditures and related matters.

Settlement of gas proceedings represents the amount to be credited to customers pursuant to a settlement agreement approved by the NYSPSC in February 2017 related to CECONY’s practices of qualifying persons to perform plastic fusions on gas facilities and alleged violations of gas safety violations identified by the NYSPSC staff in its investigation of a March 2014 Manhattan explosion and fire (see Note H).

COVID - 19 Deferrals represents both the amount to be collected from customers related to the Emergency Summer Cooling Credits program for CECONY and amounts related to the increase in the allowance for uncollectible accounts resulting from the COVID-19 pandemic and New York on PAUSE and related executive orders, for electric and gas operations for CECONY and electric operations for O&R.

Property tax reconciliation represents the amount deferred between actual property taxes incurred and the level included in rates subject to the provisions of the respective rate plans.

System Peak Reduction and Energy Efficiency Programs represent programs designed to increase energy efficiency achievements through a combination of responding to locational needs, bundling offerings, leveraging market-based approaches through market solicitations, time-variant pricing and other market transformation efforts.

Allowance for cost of removal less salvage represents cash previously collected from customers to fund future anticipated removal expenditures

The NYSPSC has authorized CECONY to accrue unbilled electric, gas and steam revenues. CECONY has deferred the net margin on the unbilled revenues for the future benefit of customers by recording a regulatory liability of $209 million and $198 million at December 31, 2021 and 2020, respectively, for the difference between the unbilled revenues and energy cost liabilities.

In general, the Utilities receive or are being credited with a return at the Other Customer-Provided Capital rate for regulatory assets that have not been included in rate base, and receive or are being credited with a return at the pre-tax weighted average cost of capital once the asset is included in rate base. Similarly, the Utilities pay to or credit customers with a return at the Other Customer-Provided Capital rate for regulatory liabilities that have not been included in rate base, and pay to or credit customers with a return at the pre-tax weighted average cost of capital once the liability is included in rate base. The Other Customer-Provided Capital rate for the years ended December 31, 2021 and 2020 was 1.80 percent and 2.65 percent, respectively.

In general, the Utilities are receiving or being credited with a return on their regulatory assets for which a cash outflow has been made ($1,962 million and $1,639 million for Con Edison, and $1,751 million and $1,454 million for CECONY at December 31, 2021 and 2020, respectively). Regulatory assets of RECO for which a cash outflow has been made ($25 million and $31 million at December 31, 2021 and 2020, respectively) are not receiving or being credited with a return. RECO recovers regulatory assets over a period of up to four years or until they are addressed in its next base rate case in accordance with the rate provisions approved by the New Jersey Board of Public Utilities. Regulatory liabilities are treated in a consistent manner.

Regulatory assets that represent future financial obligations and were deferred in accordance with the Utilities’ rate plans or orders issued by state regulators do not earn a return until such time as a cash outlay has been made. Regulatory liabilities are treated in a consistent manner. At December 31, 2021 and 2020, regulatory assets for Con Edison and CECONY that did not earn a return consisted of the following items:


150			CON EDISON ANNUAL REPORT 2021

Regulatory Assets Not Earning a Return*


	Con Edison		CECONY
(Millions of Dollars)	2021	2020	2021	2020
Unrecognized pension and other postretirement costs	$128	$3,241	$110	$3,065
Environmental remediation costs	928	855	850	781
Revenue taxes	375	336	359	323
Deferred derivative losses - long term	51	120	45	111
COVID-19 Deferral for Uncollectible Accounts Receivable	236	57	231	55
Other	24	24	24	24
Deferred derivative losses - current	141	190	134	177
Total	$1,883	$4,823	$1,753	$4,536

*This table presents regulatory assets not earning a return for which no cash outlay has been made.

The recovery periods for regulatory assets for which a cash outflow has not been made and that do not earn a return have not yet been determined, except as noted below, and are expected to be determined pursuant to the Utilities’ future rate plans to be filed or orders issued by the state regulators in connection therewith.

The Utilities recover unrecognized pension and other postretirement costs over 10 years, and the portion of investment gains or losses recognized in expense over 15 years, pursuant to NYSPSC policy.

The deferral for revenue taxes represents the New York State metropolitan transportation business tax surcharge on the cumulative temporary differences between the book and tax basis of assets and liabilities of the Utilities, as well as the difference between taxes collected and paid by the Utilities to fund mass transportation. The Utilities recover the majority of the revenue taxes over the remaining book lives of the electric and gas plant assets, as well as the steam plant assets for CECONY.

The Utilities recover deferred derivative losses – current within one year, and noncurrent generally within three years.


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Note C – Capitalization

Common Stock

Con Edison is authorized to issue 500,000,000 shares of its common stock and CECONY is authorized to issue 340,000,000 of its common stock. At December 31, 2021 and 2020, 353,983,712 and 342,297,534 shares, respectively, of Con Edison common stock were outstanding. At December 31, 2021 and 2020, 235,488,094 million shares of CECONY common stock were outstanding, all of which were owned by Con Edison. At December 31, 2021 and 2020, Con Edison had 23,210,700 treasury shares, including 21,976,200 shares of Con Edison stock that CECONY purchased prior to 2001 in connection with Con Edison’s stock repurchase plan. CECONY presents in the financial statements the cost of the Con Edison stock it owns as a reduction of common shareholder’s equity.

In June 2021, Con Edison issued 10,100,000 shares of its common stock resulting in net proceeds of approximately $775 million, after issuance expenses.

Capitalization of Con Edison

Con Edison's capitalization shown on its Consolidated Statement of Capitalization includes its outstanding common stock and long-term debt and the outstanding long-term debt of the Utilities and the Clean Energy Businesses.

Dividends

In accordance with NYSPSC requirements, the dividends that the Utilities generally pay are limited to not more than 100 percent of their respective income available for dividends calculated on a two–year rolling average basis. See Note U. Excluded from the calculation of “income available for dividends” are non-cash charges to income resulting from accounting changes or charges to income resulting from significant unanticipated events. The restriction also does not apply to dividends paid in order to transfer to Con Edison proceeds from major transactions, such as asset sales, or to dividends reducing each utility subsidiary’s equity ratio to a level appropriate to its business risk.

Long-term Debt

Long-term debt maturing in the period 2022-2026 is as follows:


(Millions of Dollars)	Con Edison	CECONY
2022	$440	$—
2023	969	—
2024	393	250
2025	319	—
2026	385	250

CECONY has issued $450 million of tax–exempt debt through the New York State Energy Research and Development Authority (NYSERDA) that currently bears interest at a rate determined weekly and is subject to tender by bondholders for purchase by the company.

The carrying amounts and fair values of long-term debt at December 31, 2021 and 2020 are:


(Millions of Dollars)	2021		2020
Long-Term Debt (including current portion) (a)	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Con Edison	$23,044	$26,287	$22,349	$26,808
CECONY	$18,382	$21,382	$16,789	$20,974

(a)Amounts shown are net of unamortized debt expense and unamortized debt discount of $226 million and $193 million for Con Edison and CECONY, respectively, as of December 31, 2021 and $215 million and $176 million for Con Edison and CECONY, respectively, as of December 31, 2020.

The fair values of the Companies' long-term debt have been estimated primarily using available market information and at December 31, 2021 are classified as Level 2 (see Note R).


152			CON EDISON ANNUAL REPORT 2021

Significant Debt Covenants

The significant debt covenants under the financing arrangements for the Companies' debentures and Con Edison's notes include obligations to pay principal and interest when due and covenants not to consolidate with or merge into any other entity unless certain conditions are met. In addition, Con Edison’s notes include covenants that the company shall continue its utility business in New York City and shall not permit its ratio of consolidated debt to consolidated total capital to exceed 0.675 to 1 and include cross default provisions with respect to the failure by the company or any material subsidiary to make one or more payments in respect of material financial obligations (in excess of an aggregate $100 million of debt, excluding non-recourse debt, of the company or any of its material subsidiaries and the occurrence of an event or condition which results in the acceleration of the maturity of any material debt in excess of an aggregate $100 million, not including non-recourse debt, of the company or any of its material subsidiaries or enables the holders of such debt to accelerate the maturity thereof. The Companies' debentures have no cross default provisions. The tax–exempt financing arrangements of CECONY are subject to covenants for the debentures discussed above and the covenants discussed below. The Companies were in compliance with their significant debt covenants at December 31, 2021.

The tax-exempt financing arrangements involved the issuance of uncollateralized promissory notes of CECONY to NYSERDA in exchange for the net proceeds of a like amount of tax–exempt bonds with substantially the same terms sold to the public by NYSERDA. The tax-exempt financing arrangements include covenants with respect to the tax–exempt status of the financing, including covenants with respect to the use of the facilities financed. The arrangements include provisions for the maintenance of liquidity and credit facilities, the failure to comply with which would, except as otherwise provided, constitute an event of default for the debt to which such provisions applied.

The failure to comply with debt covenants would, except as otherwise provided, constitute an event of default for the debt to which such provisions applied. If an event of default were to occur, the principal and accrued interest on the debt to which such event of default applied and, in the case of the Con Edison notes, a make-whole premium might and, in the case of certain events of default would, become due and payable immediately.

The liquidity and credit facilities currently in effect for the tax–exempt financing include covenants that the ratio of debt to total capital of CECONY will not at any time exceed 0.65 to 1 and that, subject to certain exceptions, CECONY will not mortgage, lien, pledge or otherwise encumber its assets. Certain of the facilities also include as events of default, defaults in payments of other debt obligations in excess of specified levels ($150 million or $100 million, depending on the facility).

Note D – Short-Term Borrowing

In December 2016, Con Edison and the Utilities entered into a credit agreement (Credit Agreement), under which banks are committed to provide loans and letters of credit on a revolving credit basis. The Credit Agreement, as amended in 2019, expires in December 2023. There is a maximum of $2,250 million of credit available through December 2022 and $2,200 million of credit available from then through December 2023. The full amount is available to CECONY and $1,000 million (subject to increase up to $1,500 million) is available to Con Edison, including up to $1,200 million of letters of credit. The Credit Agreement supports the Companies’ commercial paper programs. The Companies have not borrowed under the Credit Agreement. At December 31, 2021, Con Edison had $1,488 million of commercial paper outstanding, of which $1,361 million was outstanding under CECONY’s program. The weighted average interest rate at December 31, 2021 was 0.3 percent for both Con Edison and CECONY. At December 31, 2020, Con Edison had $1,705 million of commercial paper outstanding of which $1,660 million was outstanding under CECONY’s program. The weighted average interest rate at December 31, 2020 was 0.3 percent for both Con Edison and CECONY.

At December 31, 2021 and 2020, no loans were outstanding under the Credit Agreement. An immaterial amount of letters of credit were outstanding under the Credit Agreement as of December 31, 2021 and 2020.

The banks’ commitments under the Credit Agreement are subject to certain conditions, including that there be no event of default. The commitments are not subject to maintenance of credit rating levels or the absence of a material adverse change. Upon a change of control of, or upon an event of default by one of the Companies, the banks may terminate their commitments with respect to that company, declare any amounts owed by that company under the Credit Agreement immediately due and payable and require that company to provide cash collateral relating to the letters of credit issued for it under the Credit Agreement. Events of default for a company include that company exceeding at any time of a ratio of consolidated debt to consolidated total capital of 0.65 to 1 (at December 31, 2021 this ratio was 0.52 to 1 for Con Edison and 0.55 to 1 for CECONY); that company having liens on its assets in an aggregate amount exceeding five percent of its consolidated total capital, subject to certain


CON EDISON ANNUAL REPORT 2021			153

exceptions; that company or any of its material subsidiaries failing to make one or more payments in respect of material financial obligations (in excess of an aggregate $150 million of debt or derivative obligations other than non-recourse debt) of that company; the occurrence of an event or condition which results in the acceleration of the maturity of any material debt (in excess of an aggregate $150 million of debt other than non-recourse debt) of that company or enables the holders of such debt to accelerate the maturity thereof; and other customary events of default. Interest and fees charged for the revolving credit facilities and any loans made or letters of credit issued under the Credit Agreement reflect the Companies’ respective credit ratings. The Companies were in compliance with their significant debt covenants at December 31, 2021.

See Note U for information about short-term borrowing between related parties.

Note E – Pension Benefits

Con Edison maintains a tax-qualified, non-contributory pension plan that covers substantially all employees of CECONY, O&R and Con Edison Transmission and certain employees of the Clean Energy Businesses. The plan is designed to comply with the Internal Revenue Code and the Employee Retirement Income Security Act of 1974. Con Edison also maintains additional non–qualified supplemental pension plans.

Total Periodic Benefit Cost

The components of the Companies’ total periodic benefit costs for 2021, 2020 and 2019 were as follows:


	Con Edison			CECONY
(Millions of Dollars)	2021	2020	2019	2021	2020	2019
Service cost – including administrative expenses	$343	$293	$250	$321	$274	$232
Interest cost on projected benefit obligation	471	549	601	443	515	564
Expected return on plan assets	(1,096)	(1,034)	(988)	(1,040)	(980)	(936)
Recognition of net actuarial loss	787	699	518	746	661	492
Recognition of prior service credit	(17)	(16)	(17)	(19)	(19)	(19)
TOTAL PERIODIC BENEFIT COST	$488	$491	$364	$451	$451	$333
Cost capitalized	(154)	(130)	(108)	(146)	(123)	(102)
Reconciliation to rate level	(226)	(250)	(15)	(216)	(239)	(12)
Total expense recognized	$108	$111	$241	$89	$89	$219

In March 2017, the FASB issued amendments to the guidance for retirement benefits through ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The Companies adopted ASU 2017-07 beginning on January 1, 2018. The guidance requires that components of net periodic benefit cost other than service cost be presented outside of operating income on consolidated income statements, and that only the service cost component is eligible for capitalization. Accordingly, the service cost components are 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. In August 2018, the FASB issued amendments to the guidance for retirement benefits through ASU 2018-14, “Compensation-Retirement Benefits (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans." The guidance requires disclosure of the weighted-average interest crediting rate used for cash balance plans for all periods presented, and a narrative description of significant changes in the benefit obligation. The Companies adopted ASU 2018-14 for fiscal years ending after December 15, 2020 and the required disclosures are included below and, as applicable, in Note F.

Funded Status

The funded status at December 31, 2021, 2020 and 2019 was as follows:


154			CON EDISON ANNUAL REPORT 2021


	Con Edison			CECONY
(Millions of Dollars)	2021	2020	2019	2021	2020	2019
CHANGE IN PROJECTED BENEFIT OBLIGATION
Projected benefit obligation at beginning of year	$18,965	$16,792	$14,449	$17,821	$15,750	$13,542
Service cost – excluding administrative expenses	337	288	245	317	269	228
Interest cost on projected benefit obligation	471	549	601	443	515	564
Net actuarial loss/(gain)	(1,547)	2,281	2,191	(1,441)	2,154	2,076
Plan amendments	—	—	15	—	—	—
Benefits paid	(869)	(945)	(709)	(799)	(867)	(660)
PROJECTED BENEFIT OBLIGATION AT END OF YEAR	$17,357	$18,965	$16,792	$16,341	$17,821	$15,750
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year	$17,022	$15,608	$13,450	$16,147	$14,790	$12,744
Actual return on plan assets	1,935	1,927	2,556	1,838	1,830	2,425
Employer contributions	469	475	350	432	435	318
Benefits paid	(869)	(945)	(709)	(799)	(867)	(660)
Administrative expenses	(53)	(43)	(39)	(52)	(41)	(37)
FAIR VALUE OF PLAN ASSETS AT END OF YEAR	$18,504	$17,022	$15,608	$17,566	$16,147	$14,790
FUNDED STATUS	$1,147	$(1,943)	$(1,184)	$1,225	$(1,674)	$(960)
Unrecognized net loss	$205	$3,330	$2,604	$207	$3,145	$2,466
Unrecognized prior service costs/(credits)	(140)	(156)	(173)	(163)	(183)	(202)
Accumulated benefit obligation	15,469	16,768	15,015	14,504	15,676	14,010

The increase in the pension funded status at December 31, 2021 for Con Edison and CECONY of $3,090 million and $2,899 million, respectively, compared with December 31, 2020, was primarily due to a decrease in the plan's projected benefit obligation as a result of an increase in the discount rate and actuarial gains on plan assets exceeding the expected rate of return. The increase in the pension funded status liability at December 31, 2020 for Con Edison and CECONY of $759 million and $714 million, respectively, compared with December 31, 2019, was primarily due to an increase in the plan’s projected benefit obligation as a result of a decrease in the discount rate, partially offset by an increase in plan assets as a result of the actual return on plan assets. See below for further information on the change in the discount rate and determination of the discount rate assumption. For Con Edison, the 2021 change in pension funded status from a liability to an asset corresponds with a decrease to regulatory assets of $3,067 million for unrecognized net losses and unrecognized prior service costs associated with the Utilities consistent with the accounting rules for regulated operations, a credit to OCI of $30 million (net of taxes) for the unrecognized net losses, and an immaterial change to OCI (net of taxes) for the unrecognized prior service costs associated with certain employees of the Clean Energy Businesses, Con Edison Transmission, and RECO who previously worked for the Utilities. For 2021, included within the funded status are noncurrent liabilities of $459 million and $381 million for Con Edison and CECONY, respectively.

For CECONY, the change in pension funded status from a liability to an asset at December 31, 2021 corresponds with a decrease to regulatory assets of $2,910 million for unrecognized net losses and unrecognized prior service costs consistent with the accounting rules for regulated operations, and also a credit to OCI of $6 million (net of taxes) for unrecognized net losses, and an immaterial change to OCI (net of taxes) for the unrecognized prior service costs associated with certain employees of the Clean Energy Businesses and Con Edison Transmission who previously worked for CECONY.

At December 31, 2021 and 2020, Con Edison’s investments included $525 million and $465 million, respectively, held in external trust accounts for benefit payments pursuant to the supplemental retirement plans. Included in these amounts for CECONY were $499 million and $439 million, respectively. See Note R. The accumulated benefit obligations for the supplemental retirement plans for Con Edison and CECONY were $386 million and $352 million as of December 31, 2021, respectively, and $414 million and $377 million as of December 31, 2020, respectively.


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Assumptions

The actuarial assumptions were as follows:


	2021		2020		2019
Weighted-average assumptions used to determine benefit obligations at December 31:
Discount rate	3.00	%	2.55	%	3.35	%
Interest crediting rate for cash balance plan	3.50	%	3.00	%	3.30	%
Rate of compensation increase
CECONY	3.80	%	3.80	%	3.80	%
O&R	3.20	%	3.20	%	3.20	%
Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31:
Discount rate	2.55	%	3.35	%	4.25	%
Interest crediting rate for cash balance plan	3.00	%	3.30	%	4.00	%
Expected return on plan assets	7.00	%	7.00	%	7.00	%
Rate of compensation increase
CECONY	3.80	%	3.80	%	4.25	%
O&R	3.20	%	3.20	%	4.00	%

The expected return assumption reflects anticipated returns on the plan’s current and future assets. The Companies’ expected return was based on an evaluation of the current environment, market and economic outlook, relationships between the economy and asset class performance patterns, and recent and long-term trends in asset class performance. The projections were based on the plan’s target asset allocation.

Discount Rate Assumption

To determine the assumed discount rate, the Companies use a model that produces a yield curve based on discounting plan specific cash flows with corresponding spot rates on a yield curve. Term structures of interest rates are based on AA rated corporate bonds. Bonds with questionable pricing information and bonds that are not representative of the overall market are excluded from consideration. For example, the bonds used in the model cannot be callable (with the exception of "make whole" callable bonds). The spot rates defined by the yield curve and the plan’s projected benefit payments are used to develop a weighted average discount rate.

Expected Benefit Payments

Based on current assumptions, the Companies expect to make the following benefit payments over the next ten years:


(Millions of Dollars)	2022	2023	2024	2025	2026	2027-2031
Con Edison	$765	$782	$791	$841	$818	$4,219
CECONY	704	721	730	780	756	3,924

Expected Contributions

Based on estimates as of December 31, 2021, the Companies expect to make contributions to the pension plans during 2022 of $29 million (of which $20 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.


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Plan Assets

The asset allocations for the pension plan at the end of 2021, 2020 and 2019, and the target allocation for 2022 are as follows:


	Target Allocation Range	Plan Assets at December 31,
Asset Category	2022	2021		2020		2019
Equity Securities	45% - 55%	50	%	51	%	51	%
Debt Securities	33% - 43%	38	%	38	%	38	%
Real Estate	10% - 14%	12	%	11	%	11	%
Total	100%	100	%	100	%	100	%

Con Edison has established a pension trust for the investment of assets to be used for the exclusive purpose of providing retirement benefits to participants and beneficiaries and payment of plan expenses.

Pursuant to resolutions adopted by Con Edison’s Board of Directors, the Management Development and Compensation Committee of the Board of Directors (the Committee) has general oversight responsibility for Con Edison’s pension and other employee benefit plans. The pension plan’s named fiduciaries have been granted the authority to control and manage the operation and administration of the plans, including overall responsibility for the investment of assets in the trust and the power to appoint and terminate investment managers.

The investment objectives of the Con Edison pension plan are to maintain a level and form of assets adequate to meet benefit obligations to participants, to achieve the expected long-term total return on the trust assets within a prudent level of risk and maintain a level of volatility that is not expected to have a material impact on the company’s expected contribution and expense or the company’s ability to meet plan obligations. The assets of the plan have no significant concentration of risk in one country (other than the United States), industry or entity.

The strategic asset allocation is intended to meet the objectives of the pension plan by diversifying its funds across asset classes, investment styles and fund managers. An asset/liability study typically is conducted every few years to determine whether the current strategic asset allocation continues to represent the appropriate balance of expected risk and reward for the plan to meet expected liabilities. Each study considers the investment risk of the asset allocation and determines the optimal asset allocation for the plan. The target asset allocation for 2022 reflects the results of such a study conducted in 2018.

Individual fund managers operate under written guidelines provided by Con Edison, which cover such areas as investment objectives, performance measurement, permissible investments, investment restrictions, trading and execution, and communication and reporting requirements. Con Edison management regularly monitors, and the named fiduciaries review and report to the Committee regarding, asset class performance, total fund performance, and compliance with asset allocation guidelines. Management changes fund managers and rebalances the portfolio as appropriate. At the direction of the named fiduciaries, such changes are reported to the Committee.

Assets measured at fair value on a recurring basis are summarized below as defined by the accounting rules for fair value measurements (see Note R).


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The fair values of the pension plan assets at December 31, 2021 by asset category are as follows:


(Millions of Dollars)	Level 1	Level 2	Total
Investments within the fair value hierarchy
U.S. Equity (a)	$4,381	$—	$4,381
International Equity (b)	3,536	—	3,536
U.S. Government Issued Debt (c)		1,500	1,500
Corporate Bonds Debt (d)	—	3,936	3,936
Structured Assets Debt (e)	—	262	262
Other Fixed Income Debt (f)	—	1,186	1,186
Cash and Cash Equivalents (g)	80	425	505
Futures (h)	2	—	2
Total investments within the fair value hierarchy	$7,999	$7,309	$15,308
Investments measured at NAV per share (n)
Private Equity (i)			913
Real Estate (j)			2,306
Hedge Funds (k)			315
Total investments valued using NAV per share			$3,534
Funds for retiree health benefits (l)	(110)	(100)	(210)
Funds for retiree health benefits measured at NAV per share (l)(n)			(48)
Total funds for retiree health benefits			$(258)
Investments (excluding funds for retiree health benefits)	$7,889	$7,209	$18,584
Pending activities (m)			(80)
Total fair value of plan net assets			$18,504

(a)U.S. Equity includes both actively- and passively-managed assets with investments in domestic equity index funds and actively-managed small-capitalization equities.

(b)International Equity includes international equity index funds and actively-managed international equities.

(c)U.S. Government Issued Debt includes agency and treasury securities.

(d)Corporate Bonds Debt consists of debt issued by various corporations.

(e)Structured Assets Debt includes commercial-mortgage-backed securities and collateralized mortgage obligations.

(f)Other Fixed Income Debt includes municipal bonds, sovereign debt and regional governments.

(g)Cash and Cash Equivalents include short term investments, money markets, foreign currency and cash collateral.

(h)Futures consist of exchange-traded financial contracts encompassing U.S. Equity, International Equity and U.S. Government indices.

(i)Private Equity consists of global equity funds that are not exchange-traded.

(j)Real Estate investments include real estate funds based on appraised values that are broadly diversified by geography and property type.

(k)Hedge Funds are within a commingled structure which invests in various hedge fund managers who can invest in all financial instruments.

(l)The Companies set aside funds for retiree health benefits through a separate account within the pension trust, as permitted under Section 401(h) of the Internal Revenue Code of 1986, as amended. In accordance with the Code, the plan’s investments in the 401(h) account may not be used for, or diverted to, any purpose other than providing health benefits for retirees. The net assets held in the 401(h) account are calculated based on a pro-rata percentage allocation of the net assets in the pension plan. The related obligations for health benefits are not included in the pension plan’s obligations and are included in the Companies’ other postretirement benefit obligation. See Note F.

(m)Pending activities include security purchases and sales that have not settled, interest and dividends that have not been received and reflects adjustments for available estimates at year end.

(n)In accordance with ASU 2015-07, Fair Value Measurements (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or its equivalent), certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.


158			CON EDISON ANNUAL REPORT 2021

The fair values of the pension plan assets at December 31, 2020 by asset category are as follows:


(Millions of Dollars)	Level 1	Level 2	Total
Investments within the fair value hierarchy
U.S. Equity (a)	$4,202	$—	$4,202
International Equity (b)	3,693	—	3,693
U.S. Government Issued Debt (c)	—	1,424	1,424
Corporate Bonds Debt (d)	—	3,535	3,535
Structured Assets Debt (e)	—	188	188
Other Fixed Income Debt (f)	—	1,067	1,067
Cash and Cash Equivalents (g)	51	408	459

Total investments within the fair value hierarchy	$7,946	$6,622	$14,568
Investments measured at NAV per share (m)
Private Equity (h)			635
Real Estate (i)			1,880
Hedge Funds (j)			292
Total investments valued using NAV per share			$2,807
Funds for retiree health benefits (k)	(116)	(97)	(213)
Funds for retiree health benefits measured at NAV per share (k)(m)			(41)
Total funds for retiree health benefits			$(254)
Investments (excluding funds for retiree health benefits)	$7,830	$6,525	$17,121
Pending activities (l)			(99)
Total fair value of plan net assets			$17,022

(a) - (n) Reference is made to footnotes (a) through (n) in the above table of pension plan assets at December 31, 2021 by asset category.

The Companies also offer a defined contribution savings plan that covers substantially all employees and made contributions to the plan as follows:


	For the Years Ended December 31,
(Millions of Dollars)	2021	2020	2019
Con Edison	$55	$52	$49
CECONY	46	43	42

Note F – Other Postretirement Benefits

The Utilities and Con Edison Transmission currently have contributory comprehensive hospital, medical and prescription drug programs for eligible retirees, their dependents and surviving spouses.

CECONY also has a contributory life insurance program for bargaining unit employees and provides basic life insurance benefits up to a specified maximum at no cost to certain retired management employees. O&R has a non-contributory life insurance program for retirees. Certain employees of the Clean Energy Businesses and Con Edison Transmission are eligible to receive benefits under these programs.

Total Periodic Benefit Cost

The components of the Companies’ total periodic postretirement benefit costs for 2021, 2020 and 2019 were as follows:


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	Con Edison			CECONY
(Millions of Dollars)	2021	2020	2019	2021	2020	2019
Service cost	$22	$21	$18	$16	$16	$13
Interest cost on accumulated other postretirement benefit obligation	33	37	44	28	31	36
Expected return on plan assets	(68)	(66)	(66)	(56)	(54)	(54)
Recognition of net actuarial loss/(gain)	31	37	(9)	27	36	(10)
Recognition of prior service credit	(3)	(3)	(2)	(1)	(2)	(2)
TOTAL PERIODIC POSTRETIREMENT BENEFIT COST/(CREDIT)	$15	$26	$(15)	$14	$27	$(17)
Cost capitalized	(9)	(9)	(7)	(7)	(7)	(5)
Reconciliation to rate level	(7)	(17)	12	(12)	(25)	7
Total credit recognized	$(1)	$—	$(10)	$(5)	$(5)	$(15)

For information about the adoption of ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” and ASU 2018-14, “Compensation-Retirement Benefits (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans," see Note E.

Funded Status

The funded status of the programs at December 31, 2021, 2020 and 2019 were as follows:


	Con Edison			CECONY
(Millions of Dollars)	2021	2020	2019	2021	2020	2019
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year	$1,425	$1,357	$1,114	$1,209	$1,154	$913
Service cost	22	21	18	16	16	13
Interest cost on accumulated postretirement benefit obligation	33	37	44	28	31	36
Amendments	—	—	(14)	—	—	—
Net actuarial loss/(gain)	(13)	74	264	(3)	63	252
Benefits paid and administrative expenses, net of subsidies	(117)	(117)	(110)	(107)	(107)	(100)
Participant contributions	48	53	41	46	52	40
BENEFIT OBLIGATION AT END OF YEAR	$1,398	$1,425	$1,357	$1,189	$1,209	$1,154
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year	$1,115	$1,026	$885	$940	$872	$759
Actual return on plan assets	92	142	198	67	117	165
Employer contributions	6	7	7	3	4	6
Employer group waiver plan subsidies	21	20	23	19	19	22
Participant contributions	48	53	40	46	51	40
Benefits paid	(132)	(133)	(127)	(120)	(123)	(120)
FAIR VALUE OF PLAN ASSETS AT END OF YEAR	$1,150	$1,115	$1,026	$955	$940	$872
FUNDED STATUS	$(248)	$(310)	$(331)	$(234)	$(269)	$(282)
Unrecognized net loss/(gain)	$41	$115	$155	$67	$114	$149
Unrecognized prior service costs	(13)	(16)	(19)	—	(1)	(3)

The decrease in the other postretirement benefits funded status liability at December 31, 2021 for Con Edison and CECONY of $62 million and $35 million, respectively, compared with December 31, 2020, was primarily due to an increase in the fair value of plan assets as a result of the actual return on plan assets, along with a decrease in the plans' projected benefit obligation as a result of an increase in the discount rate. See below for further information on the change in the discount rate and see Note E for determination of the discount rate assumption. The decrease


160			CON EDISON ANNUAL REPORT 2021

in the other postretirement benefits funded status liability at December 31, 2020 for Con Edison and CECONY of $21 million and $13 million, respectively, compared with December 31, 2019, was primarily due to an increase in the fair value of plan assets as a result of the actual return on plan assets, partially offset by an increase in the plans' projected benefit obligation as a result of a decrease in the discount rate. For 2021, included within the funded status are noncurrent assets of $79 million and $55 million for Con Edison and CECONY, respectively.

For Con Edison, the decrease in funded status liability at December 31, 2021 corresponds with a net decrease to regulatory assets of $67 million for unrecognized net losses and unrecognized prior service costs associated with the Utilities consistent with the accounting rules for regulated operations, and immaterial changes to OCI for the unrecognized net losses and the unrecognized prior service costs associated with the Clean Energy Businesses, Con Edison Transmission, and RECO.

For CECONY, the decrease in funded status liability at December 31, 2021 corresponds with a decrease to regulatory assets of $46 million for unrecognized net losses and the unrecognized prior service costs associated with the company consistent with the accounting rules for regulated operations, and immaterial changes to OCI for the unrecognized net losses and the unrecognized prior service costs associated with eligible employees of the Clean Energy Businesses and Con Edison Transmission who previously worked for CECONY.

Assumptions

The actuarial assumptions were as follows:


	2021		2020		2019
Weighted-average assumptions used to determine benefit obligations at December 31:
Discount Rate
CECONY	2.75	%	2.25	%	3.10	%
O&R	3.00	%	2.55	%	3.35	%
Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31:
Discount Rate
CECONY	2.25	%	3.10	%	4.15	%
O&R	2.55	%	3.35	%	4.30	%
Expected Return on Plan Assets	6.80	%	6.80	%	6.80	%

Refer to Note E for descriptions of the basis for determining the expected return on assets, investment policies and strategies and the assumed discount rate.

The health care cost trend rates for covered medical and prescription medication expenses used to determine the accumulated other postretirement benefit obligations (APBO) at December 31, 2021 were assumed to increase each year, with the initial rate gradually decreasing to the ultimate rate as follows:


	Initial Cost Trend Rate	Ultimate Cost Trend Rate	Year That Ultimate Rate is Reached
Pre-65 Medical	6.80%	4.50%	2034
Post-65 Medical	4.50%	4.50%	—
Prescription Medications	7.25%	4.50%	2033

Expected Benefit Payments

Based on current assumptions, the Companies expect to make the following benefit payments over the next ten years, net of receipt of governmental subsidies and participant contributions:


(Millions of Dollars)	2022	2023	2024	2025	2026	2027-2031
Con Edison	$75	$77	$77	$78	$78	$385
CECONY	84	86	86	87	88	435


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Expected Contributions

Based on estimates as of December 31, 2021, Con Edison and CECONY expect to make a contribution of $8 million (all of which is expected to be made by CECONY) to the other postretirement benefit plans in 2022. The Companies’ policy is to fund the total periodic benefit cost of the plans to the extent tax deductible.

Plan Assets

The asset allocations for CECONY’s other postretirement benefit plans at the end of 2021, 2020 and 2019, and the target allocation for 2022 are as follows:


	Target Allocation Range	Plan Assets at December 31,
Asset Category	2022	2021		2020		2019
Equity Securities	42%-80%	55	%	54	%	54	%
Debt Securities	20%-58%	45	%	46	%	46	%
Total	100%	100	%	100	%	100	%

Con Edison has established postretirement health and life insurance benefit plan trusts for the investment of assets to be used for the exclusive purpose of providing other postretirement benefits to participants and beneficiaries.

Refer to Note E for a discussion of Con Edison’s investment policy for its benefit plans.

The fair values of the plans' assets at December 31, 2021 by asset category as defined by the accounting rules for fair value measurements (see Note R) are as follows:


(Millions of Dollars)	Level 1	Level 2	Total
Equity (a)	$—	$474	$474
Other Fixed Income Debt (b)	—	379	379
Cash and Cash Equivalents (c)	—	22	22
Total investments	$—	$875	$875
Funds for retiree health benefits (d)	110	100	210
Investments (including funds for retiree health benefits)	$110	$975	$1,085
Funds for retiree health benefits measured at net asset value (d)(e)			48
Pending activities (f)			17
Total fair value of plan net assets			$1,150

(a)Equity includes a passively managed commingled index fund benchmarked to the MSCI All Country World Index.

(b)Other Fixed Income Debt includes a passively managed commingled index fund benchmarked to the Bloomberg Barclays U.S. Long Credit Index and an active separately managed fund indexed to the Bloomberg Barclays U.S. Long Credit Index.

(c)Cash and Cash Equivalents include short-term investments and money markets.

(d)The Companies set aside funds for retiree health benefits through a separate account within the pension trust, as permitted under Section 401(h) of the Internal Revenue Code of 1986, as amended. In accordance with the Code, the plan’s investments in the 401(h) account may not be used for, or diverted to, any purpose other than providing health benefits for retirees. The net assets held in the 401(h) account are calculated based on a pro-rata percentage allocation of the net assets in the pension plan. The related obligations for health benefits are not included in the pension plan’s obligations and are included in the Companies’ other postretirement benefit obligation. See Note E.

(e)In accordance with ASU 2015-07, Fair Value Measurements (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or its equivalent), certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

(f)Pending activities include security purchases and sales that have not settled, interest and dividends that have not been received, and reflects adjustments for available estimates at year-end.


162			CON EDISON ANNUAL REPORT 2021

The fair values of the plans' assets at December 31, 2020 by asset category (see Note R) are as follows:


(Millions of Dollars)	Level 1	Level 2	Total
Equity (a)	$—	$448	$448
Other Fixed Income Debt (b)	—	367	367
Cash and Cash Equivalents (c)	—	27	27
Total investments	$—	$842	$842
Funds for retiree health benefits (d)	116	97	213
Investments (including funds for retiree health benefits)	$116	$939	$1,055
Funds for retiree health benefits measured at net asset value (d)(e)			41
Pending activities (f)			19
Total fair value of plan net assets			$1,115

(a) - (f) Reference is made to footnotes (a) through (f) in the above table of other postretirement benefit plan assets at December 31, 2021 by asset category.

Note G – Environmental Matters

Superfund Sites

Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of the Utilities and their predecessors and are present at sites and in facilities and equipment they currently or previously owned, including sites at which gas was manufactured or stored.

The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes (Superfund) impose joint and several liability, regardless of fault, upon generators of hazardous substances for investigation and remediation costs (which include costs of demolition, removal, disposal, storage, replacement, containment and monitoring) and natural resource damages. Liability under these laws can be material and may be imposed for contamination from past acts, even though such past acts may have been lawful at the time they occurred. The sites at which the Utilities have been asserted to have liability under these laws, including their manufactured gas plant sites and any neighboring areas to which contamination may have migrated, are referred to herein as “Superfund Sites.”

For Superfund Sites where there are other potentially responsible parties and the Utilities are not managing the site investigation and remediation, the accrued liability represents an estimate of the amount the Utilities will need to pay to investigate and, where determinable, discharge their related obligations. For Superfund Sites (including the manufactured gas plant sites) for which one of the Utilities is managing the investigation and remediation, the accrued liability represents an estimate of the company’s share of the undiscounted cost to investigate the sites and, for sites that have been investigated in whole or in part, the cost to remediate the sites, if remediation is necessary and if a reasonable estimate of such cost can be made. Remediation costs are estimated in light of the information available, applicable remediation standards and experience with similar sites.

The accrued liabilities and regulatory assets related to Superfund Sites at December 31, 2021 and 2020 were as follows:


	Con Edison		CECONY
(Millions of Dollars)	2021	2020	2021	2020
Accrued Liabilities:
Manufactured gas plant sites	$845	$752	$755	$676
Other Superfund Sites	95	105	95	104
Total	$940	$857	$850	$780
Regulatory assets	$938	$865	$860	$791

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


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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 at December 31, 2021 and 2020 were as follows:


	Con Edison		CECONY
(Millions of Dollars)	2021	2020	2021	2020
Remediation costs incurred	$25	$33	$24	$32

Insurance and other third party recoveries received by Con Edison or CECONY were immaterial in 2021 and 2020.

Con Edison and CECONY estimate that in 2022 they will incur costs for remediation of approximately $40 million and $38 million, respectively. The Companies are unable to estimate the time period over which the remaining accrued liability will be incurred because, among other things, the required remediation has not been determined for some of the sites.

In 2021, 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 $2,980 million and $2,840 million, respectively. These estimates were based on the assumption that there is contamination at all sites, including those that have not yet been fully investigated and additional assumptions about the extent of the contamination and the type and extent of the remediation that may be required. Actual experience may be materially different.

Asbestos Proceedings

Suits have been brought in NY State and federal courts against the Utilities and many other defendants, wherein a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the Utilities. The suits that have been resolved, which are many, have been resolved without any payment by the Utilities, or for amounts that were not, in the aggregate, material to them. The amounts specified in all the remaining thousands of suits total billions of dollars; however, the Utilities believe that these amounts are greatly exaggerated, based on the disposition of previous claims. At December 31, 2021, 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 or liabilities for the Companies at December 31, 2021 and 2020 were as follows:


	Con Edison		CECONY
(Millions of Dollars)	2021	2020	2021	2020
Accrued liability – asbestos suits	$8	$8	$7	$7
Regulatory assets – asbestos suits	$8	$8	$7	$7
Accrued liability – workers’ compensation	$65	$72	$62	$68
Regulatory liabilities – workers’ compensation	$8	$3	$8	$3


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Note H – 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 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. During 2020, the company accrued its estimated liability for the suits of $40 million and an insurance receivable in the same amount, which estimated liability did not change in 2021.

Other Contingencies

For additional contingencies, see “Other Regulatory Matters” in Note B, Note G and "Uncertain Tax Positions" in Note L.

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 and its subsidiaries under these agreements totaled $2,157 million and $2,042 million at December 31, 2021 and 2020, respectively.

A summary, by type and term, of Con Edison’s total guarantees under these other agreements at December 31, 2021 is as follows:


Guarantee Type	0 – 3 years	4 – 10 years	> 10 years	Total
	(Millions of Dollars)
Con Edison Transmission	$490	$—	$—	$490
Energy transactions	469	37	325	831
Renewable electric projects	319	51	396	766
Other	70	—	—	70
Total	$1,348	$88	$721	$2,157

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 owns a 45.7 percent interest in NY Transco. In April 2019, the New York Independent System Operator (NYISO) selected a transmission project that was jointly proposed by National Grid and NY Transco. The siting, construction and operation of the project will require approvals and permits from appropriate governmental agencies and authorities, including the NYSPSC. The NYISO indicated it will work with the developers to enter into agreements for the development and operation of the projects, including a schedule for entry into service by December 2023. Guarantee amount shown includes the


CON EDISON ANNUAL REPORT 2021			165

maximum possible required amount of CET Electric’s contributions for this project as calculated based on the assumptions that the project is completed at 175 percent of its estimated costs and NY Transco does not use any debt financing for the project.

Energy Transactions — Con Edison and the Clean Energy Businesses guarantee payments on behalf of their subsidiaries 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 Projects – Con Edison and the Clean Energy Businesses 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 consist of a $70 million guarantee provided by Con Edison to Travelers Insurance Company for indemnity agreements for surety bonds in connection with the operation of solar energy facilities and energy service projects of the Clean Energy Businesses.

Note I – Electricity Purchase Agreements

The Utilities have electricity purchase agreements with non-utility generators and others for generating capacity. The Utilities recover their purchased power costs in accordance with provisions approved by the applicable state public utility regulators. See “Recoverable Energy Costs” in Note A. The Utilities also conducted auctions and have entered into various other electricity purchase agreements. Assuming performance by the parties to the electricity purchase agreements, the Utilities are obligated over the terms of the agreements to make capacity and other fixed payments.

The future capacity and other fixed payments under the electricity purchase agreements are estimated to be as follows:


(Millions of Dollars)	2022	2023	2024	2025	2026	All Years Thereafter
Con Edison	$126	$78	$55	$55	$56	$434
CECONY	124	78	55	55	56	434

For energy delivered under most of the electricity purchase agreements, CECONY is obligated to pay variable prices. The company’s payments under the significant terms of the agreements for capacity, energy and other fixed payments in 2021, 2020 and 2019 were as follows:


	For the Years Ended December 31,
(Millions of Dollars)	2021	2020	2019
Astoria Generating Company (a)	$20	$26	$116
Brooklyn Navy Yard (b)	139	113	115
Total	$159	$139	$231

(a) Capacity purchase agreements with terms ending in 2021 through 2023.

(b) Contract for plant output, which started in 1996 and ends in 2036.


166			CON EDISON ANNUAL REPORT 2021

Note J – Leases

The Companies lease land, office buildings, equipment and access rights to support electric transmission facilities. The Companies recognize 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 as rental payments are recovered from our customers and to account the same way for finance leases.

For new operating leases, the Companies 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 at commencement date. 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 40 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 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. The Companies account for lease and non-lease components as a single lease component.

Operating lease cost and cash paid for amounts included in the measurement of lease liabilities for the twelve months ended December 31, 2021 and 2020 were as follows:


	Con Edison		CECONY
(Millions of Dollars)	2021	2020	2021	2020
Operating lease cost	$86	$85	$66	$65
Operating lease cash flows	$80	$79	$63	$61

As of December 31, 2021, assets recorded as finance leases for Con Edison and CECONY were $2 million and $1 million, respectively, and the accumulated amortization associated with finance leases for Con Edison and CECONY were $4 million and $2 million, respectively. As of December 31, 2020, assets recorded as finance leases were $3 million for Con Edison and $2 million for CECONY, and the accumulated amortization associated with finance leases for Con Edison and CECONY were $3 million and $1 million, respectively.

For the twelve months ended December 31, 2021 and 2020, finance lease costs and cash flows for Con Edison and CECONY were immaterial.

Right-of-use assets obtained in exchange for lease obligations for Con Edison and CECONY were $58 million and $12 million, respectively, for the twelve months ended December 31, 2021 and $23 million and $11 million, respectively, for the twelve months ended December 31, 2020.

Other information related to leases for Con Edison and CECONY at December 31, 2021 and 2020 was as follows:


	Con Edison		CECONY
	2021	2020	2021	2020
Weighted Average Remaining Lease Term:
Operating leases	18.5 years	19.1 years	12.1 years	13.0 years
Finance leases	7.1 years	7.3 years	3.1 years	4.0 years
Weighted Average Discount Rate:
Operating leases	4.3%	4.3%	3.5%	3.6%
Finance leases	1.8%	1.8%	1.1%	1.3%


CON EDISON ANNUAL REPORT 2021			167

Future minimum lease payments under non-cancellable leases at December 31, 2021 were as follows:


(Millions of Dollars)	Con Edison		CECONY
Year Ending December 31,	Operating Leases	Finance Leases	Operating Leases	Finance Leases
2022	$81	$—	$60	$—
2023	77	—	59	—
2024	77	1	59	1
2025	78	—	60	—
2026	76	—	59	—
All years thereafter	877	1	394	—
Total future minimum lease payments	$1,266	$2	$691	$1
Less: imputed interest	(436)	—	(139)	—
Total	$830	$2	$552	$1
Reported as of December 31, 2021
Operating lease liabilities (current)	$113	$—	$90	$—
Operating lease liabilities (noncurrent)	717	—	462	—
Other current liabilities	—	—	—	—
Other noncurrent liabilities	—	2	—	1
Total	$830	$2	$552	$1

At December 31, 2021, the Companies had an additional operating lease agreement that had not yet commenced, for an asset under construction at the Clean Energy Businesses, for which the present value of lease payments is $6 million. This lease is expected to commence within one year, with a lease term of approximately 45 years.

The Companies are lessors under certain leases whereby the Companies own real estate and distribution poles and lease portions of them to others. Revenue under such leases was immaterial for Con Edison and CECONY for the twelve months ended December 31, 2021 and 2020.

Note K – Goodwill

The Companies test goodwill for impairment at least annually or whenever there is a triggering event. There is an option to first make a qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount before applying a quantitative goodwill impairment test. The quantitative goodwill impairment test compares the estimated fair value of a reporting unit with its carrying value, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is considered not impaired. If the carrying value exceeds the estimated fair value of the reporting unit, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

Con Edison has recorded goodwill related to the O&R merger, the acquisition of a portion of Honeoye, and the acquisitions of a residential solar company and a battery storage company by the Clean Energy Businesses. In 2021 and 2020, Con Edison completed impairment tests for its goodwill of $406 million related to the O&R merger and determined that it was not impaired. For the impairment test, $245 million and $161 million of goodwill were allocated to CECONY and O&R, respectively. In 2021, the Companies performed the qualitative assessment for goodwill related to the O&R merger. In 2021 and 2020, Con Edison completed impairment tests for goodwill of $8 million related to Honeoye, $14 million related to the residential solar company acquired by the Clean Energy Businesses and $18 million related to the battery storage company acquired by the Clean Energy Businesses. In 2021, Con Edison determined, based on a discounted cash flow analysis, that $7 million of goodwill was impaired related to Honeoye, $5 million of which was attributed to CET Gas and $2 million of which was attributed to CECONY.


168			CON EDISON ANNUAL REPORT 2021

Estimates of future cash flows, projected growth rates, and discount rates inherent in the cash flow estimates for Con Edison subsidiaries other than the Utilities may vary significantly from actual results, which could result in a future impairment of goodwill. The Companies identified no triggering events or changes in circumstances related to the COVID-19 pandemic that would indicate that the carrying value of goodwill may not be recoverable at December 31, 2021 and 2020.

Note L – Income Tax

In response to the economic impacts of the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on March 27, 2020. The CARES Act provided relief to corporate taxpayers by permitting a five-year carryback of net operating losses (NOLs) for tax years 2018, 2019 and 2020, temporarily removing the 80 percent limitation when applying the NOLs to carryback years, increased the 30 percent limitation on interest deductibility to 50 percent of adjusted taxable income for tax years 2019 and 2020, and provided for certain employee retention tax credits and refunds for eligible employers.

Under the CARES Act, Con Edison carried back its $29 million NOL from tax year 2018 to tax year 2013 generating a $2.5 million net tax refund for which a tax receivable was established in 2020. In addition, Con Edison recognized a discrete income tax benefit of $4 million in 2020, due to the higher federal statutory tax rate in 2013. The 2018 federal NOL was recorded at 21 percent and was carried back to tax year 2013, which had a 35 percent federal statutory tax rate. This income tax benefit was primarily recognized at the Clean Energy Businesses.

The components of income tax are as follows:


	Con Edison			CECONY
(Millions of Dollars)	2021	2020	2019	2021	2020	2019
State
Current	$14	$7	$(12)	$1	$6	$22
Deferred	79	50	96	106	97	68
Federal
Current	43	(2)	—	121	41	185
Deferred	61	42	219	21	73	63
Amortization of investment tax credits	(7)	(7)	(7)	(3)	(2)	(3)
Total income tax expense	$190	$90	$296	$246	$215	$335


CON EDISON ANNUAL REPORT 2021			169

The tax effects of temporary differences, which gave rise to deferred tax assets and liabilities, are as follows:


	Con Edison		CECONY
(Millions of Dollars)	2021	2020	2021	2020	0
Deferred tax liabilities:
Property basis differences	$8,298	$7,985	$7,213	$6,901
Regulatory assets:
Unrecognized pension and other postretirement costs	36	910	31	861
Environmental remediation costs	264	243	241	222
Deferred storm costs	33	31	—	—
Other regulatory assets	640	536	609	508
Operating lease right-of-use asset	204	220	155	165
Pension Asset Reserve	478	—	471	—
Equity investments	—	46	—	—
Other	30	—	—	—
Total deferred tax liabilities	$9,983	$9,971	$8,720	$8,657
Deferred tax assets:
Accrued pension and other postretirement costs	$218	$504	$188	$427
Regulatory liabilities:
Future income tax	554	617	517	579
Other regulatory liabilities	727	656	620	570
Superfund and other environmental costs	264	241	238	219
Asset retirement obligations	177	178	141	143
Operating lease liabilities	195	211	155	165
Loss carryforwards	144	164	38	34
Tax credits carryforward	946	1,022	—	—
Valuation allowance	(22)	(22)	—	—
Equity investments	34	—	—	—
Other	—	59	42	127
Total deferred tax assets	3,237	3,630	1,939	2,264
Net deferred tax liabilities	$6,746	$6,341	$6,781	$6,393
Unamortized investment tax credits	127	134	15	18
Net deferred tax liabilities and unamortized investment tax credits	$6,873	$6,475	$6,796	$6,411

Reconciliation of the difference between income tax expense and the amount computed by applying the prevailing statutory income tax rate to income before income taxes is as follows:


	Con Edison						CECONY
(% of Pre-tax income)	2021		2020		2019		2021		2020		2019
STATUTORY TAX RATE
Federal	21	%	21	%	21	%	21	%	21	%	21	%
Changes in computed taxes resulting from:
State income taxes, net of federal income tax benefit	4		4		4		5		5		5
Taxes attributable to noncontrolling interests	3		(1)		(1)		—		—		—
Cost of removal	2		2		1		1		1		1
Other plant-related items	(1)		(1)		(1)		(1)		(1)		(1)

Amortization of excess deferred federal income taxes	(12)		(14)		(4)		(11)		(12)		(4)
Renewable energy credits	(2)		(3)		(2)		—		—		—
Research and development credits	(1)		—		(1)		—		—		(1)
Other	—		(1)		—		—		1		—
Effective tax rate	14	%	7	%	17	%	15	%	15	%	21	%


170			CON EDISON ANNUAL REPORT 2021

At December 31, 2021, Con Edison had $946 million in general business tax credit carryovers (primarily renewable energy tax credits). If unused, these general business tax credit carryovers will begin to expire in 2034. A deferred tax asset for these tax attribute carryforwards was recorded, and no valuation allowance was provided, as it is more likely than not that the deferred tax asset will be realized.

At December 31, 2021, Con Edison had a New York State NOL of approximately $1.13 billion, primarily as a result of higher accelerated state tax depreciation. A deferred tax asset has been recognized for these New York State NOL carryforwards that will begin to expire, if unused, in 2038 and no valuation allowance was provided; as it is more likely than not that the deferred tax asset will be realized. In addition, Con Edison has a $5 million valuation allowance against the New York City NOL deferred tax asset of approximately $17 million. Con Edison also has a $21.5 million valuation allowance for other state NOL carryforwards; as it is not more likely than not that the deferred tax asset will be realized.

In December 2019, the Federal government issued final regulations providing guidance on provisions in the TCJA allowing for full expensing of qualified plant additions. These provisions, which Con Edison adopted under the proposed regulations of August 2018, allowed the Utilities a full expense tax deduction for plant additions in the fourth quarter of 2017, and the Utilities continue additional first year depreciation transition rules for plant additions placed in service in tax years beginning in 2018, under long-term construction contracts entered into before September 28, 2017. The impact on the Utilities of these regulations is discussed above.

In November 2018, the Federal government issued, and Con Edison adopted, proposed regulations providing guidance on the tax deductibility of interest expense under the TCJA. The TCJA generally provides for the continued deductibility of interest expense by regulated public utilities and may limit the deduction for interest expense by most non-utility businesses to 30 percent of adjusted taxable income (which resembles earnings before interest, taxes, depreciation and amortization).The regulations provide an annual safe harbor test that if at least 90 percent of consolidated plant assets consist of utility property, the entire consolidated group will be treated as a regulated public utility, and all of the consolidated group’s interest expense will be currently tax deductible. For 2018, Con Edison met the 90 percent safe harbor test and its deduction for interest expense was not limited. For 2019, Con Edison did not meet the 90 percent safe harbor test, however, its deduction for interest expense was not limited as a percentage of adjusted taxable income. In 2020, the federal government issued final regulations under the TCJA. Under the CARES Act, the limit of the deductible interest expense as a percentage of adjusted taxable income increased from 30 percent to 50 percent and accordingly, all of Con Edison’s interest expense in 2020 will be tax deductible. In 2021, the limit of the deductible interest expense as a percentage of adjustable taxable income returned to 30 percent; however, Con Edison’s deduction for interest expense was not limited. Qualifying consolidated groups would not be entitled to the full expensing provisions in the TCJA noted above. The safe harbor rules do not apply to partnerships in which Con Edison and its subsidiaries are a partner.

In April 2021, NY State passed a law that increased the corporate franchise tax rate on business income from 6.5% to 7.25%, retroactive to January 1, 2021, for taxpayers with taxable income greater than $5 million. The law also reinstated the business capital tax at 0.1875%, not to exceed an annual maximum tax liability of $5 million per taxpayer. NY State requires a corporate franchise taxpayer to calculate and pay the highest amount of tax under the three alternative methods: a tax on business income; a tax on business capital; or a fixed dollar minimum. The provisions to increase the corporate franchise tax rate and reinstate a business capital tax are scheduled to expire after 2023 and are not expected to have a material impact on the Companies’ financial position, results of operations or liquidity.

Uncertain Tax Positions

Under the accounting rules for income taxes, the Companies are not permitted to recognize the tax benefit attributable to a tax position unless such position is more likely than not to be sustained upon examination by taxing authorities, including resolution of any related appeals and litigation processes, based solely on the technical merits of the position.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for Con Edison and CECONY follows:


CON EDISON ANNUAL REPORT 2021			171


	Con Edison			CECONY
(Millions of Dollars)	2021	2020	2019	2021	2020	2019
Balance at January 1,	$14	$13	$6	$3	$2	$4
Additions based on tax positions related to the current year	3	—	1	2	—	1
Additions based on tax positions of prior years	2	1	10	1	1	—
Reductions for tax positions of prior years	(2)	—	(2)	(1)	—	(1)
Reductions from expiration of statute of limitations	—	—	—	—	—	—
Settlements	—	—	(2)	—	—	(2)
Balance at December 31,	$17	$14	$13	$5	$3	$2

At December 31, 2021, the estimated liability for uncertain tax positions for Con Edison was $17 million ($5 million for CECONY). Con Edison reasonably expects to resolve within the next twelve months approximately $12 million of various federal and state uncertainties due to the expected completion of ongoing tax examinations, of which the entire amount, if recognized, would reduce Con Edison's effective tax rate. The amount related to CECONY is $3 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 $17 million ($16 million, net of federal taxes) with $5 million attributable to CECONY.

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. For the year ended December 31, 2021, the Companies recognized an immaterial amount of interest expense and no penalties for uncertain tax positions in their consolidated income statements. At December 31, 2021 and 2020, the Companies recognized an immaterial amount of accrued interest on their consolidated balance sheets.

Con Edison's federal tax return for 2020 remains under examination. State and local income tax returns remain open for examination in NY State for tax years 2010 through 2020, in NJ for tax years 2017 through 2020 and in New York City for tax years 2017 through 2020.


172			CON EDISON ANNUAL REPORT 2021

Note M – Revenue Recognition

The following table presents, for the years ended December 31, 2021, 2020 and 2019, 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.


	2021			2020			2019
(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	Revenues from contracts with customers	Other revenues (a)	Total operating revenues
CECONY
Electric	$8,736	$70	$8,806	$8,026	$77	$8,103	$7,913	$149	$8,062
Gas	2,324	54	2,378	1,998	38	2,036	2,097	35	2,132
Steam	519	13	532	494	14	508	610	17	627
Total CECONY	$11,579	$137	$11,716	$10,518	$129	$10,647	$10,620	$201	$10,821
O&R
Electric	691	(10)	681	619	10	629	627	7	634
Gas	265	(5)	260	224	9	233	247	12	259
Total O&R	$956	$(15)	$941	$843	$19	$862	$874	$19	$893
Clean Energy Businesses
Renewables	683	—	683	609	—	609	575	—	575
Energy services	234	—	234	52	—	52	71	—	71
Other	—	105	105	—	75	75	—	211	211
Total Clean Energy Businesses	$917	$105	$1,022	$661	$75	$736	$646	$211	$857
Con Edison Transmission	4	—	4	4	—	4	4	—	4
Other (b)	—	(7)	(7)	—	(3)	(3)	—	(1)	(1)
Total Con Edison	$13,456	$220	$13,676	$12,026	$220	$12,246	$12,144	$430	$12,574

(a) For the Utilities, this includes revenue from alternative revenue programs, such as the revenue decoupling mechanisms under their NY electric and gas rate plans, as well as net earnings adjustment mechanisms (EAMs) and positive incentives primarily for achieving energy efficiency goals (see "Rate Plans" in Note B), and for 2021 recognition of late payment charges and fees that were not billed (LPCs) for the years ended December 31, 2020 and 2021 and for which recovery was granted by the NYSPSC. See "COVID-19 Regulatory Matters" in Note B and "Utilities' Assessment of Late Payment Charges" below. The amount of revenue recognized under such alternative revenue programs for 2021 includes $48 million, $34 million and $74 million for CECONY's revenue decoupling mechanisms, net EAMs, and LPCs, respectively, and $(18) million, $2 million and $4 million for O&R's revenue decoupling mechanisms, net EAMs, and LPCs, respectively. For the Clean Energy Businesses, this includes revenue from wholesale services.

(b) Parent company and consolidation adjustments.

Revenues are recorded as energy is delivered, generated or services are provided and billed to customers, except for services under percentage-of-completion contracts. Amounts billed are recorded in accounts receivable - customers, with payment generally due the following month. Con Edison’s and the Utilities’ accounts receivable - customers balance also reflects the Utilities’ purchase of receivables from energy service companies to support retail choice programs. Accrued revenues not yet billed to customers are recorded as accrued unbilled revenues.

The Utilities have the obligation to deliver electricity, gas and steam energy to their customers. As the energy is immediately available for use upon delivery to the customer, the energy and its delivery are identifiable as a single performance obligation. The Utilities recognize revenues as this performance obligation is satisfied over time as the Utilities deliver, and the customers simultaneously receive and consume, the energy. The amount of revenues recognized reflects the consideration the Utilities expect to receive in exchange for delivering the energy. Under their tariffs, the transaction price for full-service customers includes the Utilities’ energy cost and for all customers includes delivery charges determined based on customer class and in accordance with established tariffs and guidelines of the NYSPSC or the NJBPU, as applicable. Accordingly, there is no unsatisfied performance obligation associated with these customers. The transaction price is applied to the Utilities’ revenue generating activities through the customer billing process. Because energy is delivered over time, the Utilities use output methods that recognize revenue based on direct measurement of the value transferred, such as units delivered, which provides an accurate measure of value for the energy delivered. The Utilities accrue revenues at the end of each month for estimated energy delivered but not yet billed to customers. The Utilities defer over a 12-month period net


CON EDISON ANNUAL REPORT 2021			173

interruptible gas revenues, other than those authorized by the NYSPSC to be retained by the Utilities, for refund to firm gas sales and transportation customers.

The Clean Energy Businesses recognize revenue for the sale of energy from renewable electric projects as energy is generated and billed to counterparties; accrue revenues at the end of each month for energy generated but not yet billed to counterparties; and recognize revenue as energy is delivered and services are provided for managing energy supply assets leased from others and managing the dispatch, fuel requirements and risk management activities for generating plants and merchant transmission in the northeastern United States. The Clean Energy Businesses also recognize revenue for providing energy-efficiency services to government and commercial customers, and recognize revenue for engineering, procurement and construction services, under the percentage-of-completion method of revenue recognition.

Clean Energy Businesses' Use of the Percentage-of-Completion Method

Sales and profits on each percentage-of-completion contract are recorded each month based on the ratio of actual cumulative costs incurred to the total estimated costs at completion of the contract, multiplied by the total estimated contract revenue, less cumulative revenues recognized in prior periods (the ‘‘cost-to-cost’’ method). The impact of revisions of contract estimates, which may result from contract modifications, performance or other reasons, are recognized on a cumulative catch-up basis in the period in which the revisions are made.


	2021			2020			2019
(Millions of Dollars)	Unbilled contract revenue (a)	Unearned revenue (b)		Unbilled contract revenue (a)	Unearned revenue (b)		Unbilled contract revenue (a)	Unearned revenue (b)
Beginning balance as of January 1,	$11	$41		$29	$17		$29	$20
Additions (c)	242	—		88	31		86	1
Subtractions (c)	218	34	(d)	106	7	(d)	86	4	(d)
Ending balance as of December 31,	$35	$7		$11	$41		$29	$17

(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, $34 million, $7 million and $4 million were included in the balances as of January 1, 2021, 2020, and 2019, respectively.

As of December 31, 2021, the aggregate amount of the remaining fixed performance obligations of the Clean Energy Businesses under contracts with customers for energy services is $120 million, of which $81 million will be recognized within the next two years, and the remaining $39 million will be recognized pursuant to long-term service and maintenance agreements.

Utilities' Assessment of Late Payment Charges

In March 2020, the Utilities began suspending new late payment charges and certain other fees for all customers. The Utilities also began providing payment extensions for all customers that were scheduled to be disconnected prior to the start of the COVID-19 pandemic. In November 2021, the NYSPSC issued an order establishing a surcharge recovery mechanism for CECONY to collect, commencing December 1, 2021 through December 31, 2022, $43 million and $7 million for electric and gas, respectively, of late payment charges and fees that were not billed for the year ended December 31, 2020. The company recorded such amounts as revenue for the year ended December 31, 2021, as permitted under the accounting rules for regulated utilities, and also accrued such amounts as a current asset at December 31, 2021. Pursuant to the November 2021 order, the company also established a recovery mechanism for CECONY to collect, commencing January 2023 through December 2023, $19 million and $4 million for electric and gas, respectively, of late payment charges and fees that were not billed for the year ended December 31, 2021 and the company recorded such amounts as revenue for the year ended December 31, 2021, as permitted under the accounting rules for regulated utilities, and also accrued such amounts as a current asset at


174			CON EDISON ANNUAL REPORT 2021

December 31, 2021. In October 2021, O&R, the New York State Department of Public Service (NYSDPS) and other parties entered into a Joint Proposal for new electric and gas rate plans for the three-year period January 2022 through December 2024 (the Joint Proposal) that includes certain COVID-19 provisions, such as: recovery of 2020 late payment charges over three years; reconciliation of late payment charges to amounts reflected in rates for years 2021 through 2024; and reconciliation of write-offs of customer accounts receivable balances to amounts reflected in rates from January 1, 2020 through December 31, 2024. The Joint Proposal is subject to NYSPSC approval. CECONY resumed late payment charges for commercial and residential customers who have not experienced a change in financial circumstances due to the COVID-19 pandemic on September 3, 2021 and October 1, 2021, respectively. O&R resumed late payment charges for commercial and residential customers who have not experienced a change in financial circumstances due to the COVID-19 pandemic on October 1, 2021. See "COVID-19 Regulatory Matters" in Note B.

Note N – Current Expected Credit Losses

In January 2020, the Companies adopted Accounting Standards Update (ASU) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”.

Allowance for Uncollectible Accounts

The Utilities’ “Account receivable – customers” balance consists of utility bills due (bills are generally due the month following billing) from customers who have energy delivered, generated, or services provided by the Utilities. The balance also reflects the Utilities’ purchase of receivables from energy service companies to support the retail choice programs.

“Other receivables” balance generally reflects costs billed by the Utilities for goods and services provided to external parties, such as accommodation work for private parties and certain governmental entities, real estate rental and pole attachments. The Clean Energy Businesses’ other receivables balance includes bills related to the sale of energy from renewable electric projects.

The Clean Energy Businesses’ customer accounts receivable balance generally reflects the management of energy supply assets, energy-efficiency services to government and commercial customers, and the engineering, procurement, and construction services of renewable energy projects. The Clean Energy Businesses calculate an allowance for uncollectible accounts related to their energy services customers based on an aging and customer-specific analysis. The amount of such reserves was not material at December 31, 2021 and December 31, 2020.

The Companies develop expected loss estimates using past events data and consider current conditions and future reasonable and supportable forecasts. Changes to the Utilities’ reserve balances that result in write-offs of customer accounts receivable balances above existing rate allowances are not reflected in rates during the term of the current rate plans. For the Utilities’ customer accounts receivable allowance for uncollectible accounts, past events considered include write-offs relative to customer accounts receivable; current conditions include macro-and micro-economic conditions related to trends in the local economy, bankruptcy rates and aged customer accounts receivable balances, among other factors; and forecasts about the future include assumptions related to the level of write-offs and recoveries. Generally, the Utilities write off customer accounts receivable as uncollectible 90 days after the account is turned off for non-payment, or the account is closed during the collection process. See "COVID-19 Regulatory Matters" in Note B.

Other receivables allowance for uncollectible accounts is calculated based on a historical average of collections relative to total other receivables, including current receivables. Current macro- and micro-economic conditions are also considered when calculating the current reserve. Probable outcomes of pending litigation, whether favorable or unfavorable to the Companies, are also included in the consideration.

During the years ended December 31, 2021 and 2020, the potential economic impact of the COVID-19 pandemic was also considered in forward-looking projections related to write-off and recovery rates and resulted in increases to the allowance for uncollectible accounts. The increases to the allowance for customer uncollectible accounts for Con Edison and CECONY were $169 million and $166 million, respectively, for the year ended December 31, 2021. The increases to the allowance for uncollectible accounts for Con Edison and CECONY were $78 million and $73 million for the year ended December 31, 2020.

Customer accounts receivable and the associated allowance for uncollectible accounts are included in the line “Accounts receivable – customers” on the Companies’ consolidated balance sheets. Other receivables and the associated allowance for uncollectible accounts are included in “Other receivables” on the consolidated balance sheets.


CON EDISON ANNUAL REPORT 2021			175

The table below presents a rollforward by major portfolio segment type for the years ended December 31, 2021 and 2020:


	For the Year Ended December 31,
	Con Edison				CECONY
	Accounts receivable - customers		Other receivables		Accounts receivable - customers		Other receivables
(Millions of Dollars)	2021	2020	2021	2020	2021	2020	2021	2020
Allowance for credit losses
Beginning Balance at January 1,	$148	$70	$7	$4	$138	$65	$4	$3
Recoveries	14	8	1	—	12	6	1	—
Write-offs	(91)	(54)	(2)	(2)	(86)	(50)	(1)	(1)
Reserve adjustments	246	124	16	5	240	117	15	2
Ending Balance December 31,	$317	$148	$22	$7	$304	$138	$19	$4


176			CON EDISON ANNUAL REPORT 2021

Note O – Stock-Based Compensation

The Companies may compensate employees and directors with, among other things, stock options, stock units, restricted stock units and contributions to the stock purchase plan. The Long Term Incentive Plan, which was approved by Con Edison’s shareholders in 2003 (2003 LTIP), and the Long Term Incentive Plan, which was approved by Con Edison’s shareholders in 2013 (2013 LTIP), are collectively referred to herein as the LTIP. The LTIP provides for, among other things, awards to employees of restricted stock units and stock options and, to Con Edison’s non-employee directors, stock units. Existing awards under the 2003 LTIP continue in effect, however no new awards may be issued under the 2003 LTIP. The 2013 LTIP provides for awards for up to five million shares of common stock.

During the years ended December 31, 2021, 2020, and 2019, equity awards were granted under the 2013 LTIP. Shares of Con Edison common stock used to satisfy the Companies’ obligations with respect to stock-based compensation may be new shares (authorized, but unissued) or treasury shares (existing treasury shares or shares purchased in the open market). The shares used during the year ended December 31, 2021 were new shares. The Companies intend to use new shares to fulfill their stock-based compensation obligations for 2022.

The Companies recognized stock-based compensation expense using a fair value measurement method. The following table summarizes stock-based compensation expense recognized by the Companies in the years ended December 31, 2021, 2020 and 2019:


	Con Edison			CECONY
(Millions of Dollars)	2021	2020	2019	2021	2020	2019
Performance-based restricted stock	$23	$7	$36	$19	$6	$30
Time-based restricted stock	2	1	2	2	1	2
Non-employee director deferred stock compensation	3	2	2	3	2	2
Stock purchase plan	7	7	7	7	7	6
Total	$35	$17	$47	$31	$16	$40
Income tax benefit	$10	$5	$13	$9	$4	$11

Restricted Stock and Stock Units

Restricted stock and stock unit awards under the LTIP have been made as follows: (i) awards that provide for adjustment of the number of units (performance-restricted stock units or Performance RSUs) to certain officers and employees; (ii) time-based awards to certain employees; and (iii) awards to non-employee directors. Restricted stock and stock units awarded represent the right to receive, upon vesting, shares of Con Edison common stock, or, except for units awarded under the directors’ plan, the cash value of shares or a combination thereof.

The number of units in each annual Performance RSU award is subject to adjustment as follows: (i) 50 percent of the units awarded will be multiplied by a factor that may range from 0 to 200 percent, based on Con Edison’s total shareholder return relative to a specified peer group during a specified performance period (the TSR portion); and (ii) 50 percent of the units awarded will be multiplied by factors that may range from 0 to 200 percent, based on determinations made in connection with the Companies’ annual incentive plans or, with respect to certain executive officers, actual performance as compared to certain performance measures during a specified performance period (the non-TSR portion). Performance RSU awards generally vest upon completion of the performance period.

Performance against the established targets is recomputed each reporting period as of the earlier of the reporting date and the vesting date. The TSR portion applies a Monte Carlo simulation model, and the non-TSR portion is the product of the market price at the end of the period and the average non-TSR determination over the vesting period. Performance RSUs are “liability awards” because each Performance RSU represents the right to receive, upon vesting, one share of Con Edison common stock, the cash value of a share or a combination thereof. As such, changes in the fair value of the Performance RSUs are reflected in net income. The assumptions used to calculate the fair value of the awards were as follows:


CON EDISON ANNUAL REPORT 2021			177


	2021	2020	2019
Risk-free interest rate (a)	0.39% - 0.73%	0.10% - 0.13%	1.58% -1.59%
Expected term (b)	3 years	3 years	3 years
Expected share price volatility (c)	17.25% - 31.42%	30.16% - 40.95%	12.89% - 15.51%

(a)The risk-free rate is based on the U.S. Treasury zero-coupon yield curve.

(b)The expected term of the Performance RSUs equals the vesting period. The Companies do not expect significant forfeitures to occur.

(c)Based on historical experience. The Companies would reevaluate this assumption if market conditions or business developments would reasonably indicate that future volatility might differ materially from historical experience.

A summary of changes in the status of the Performance RSUs’ TSR and non-TSR portions during the year ended December 31, 2021 is as follows:


	Con Edison			CECONY
		Weighted Average Grant Date Fair Value (a)			Weighted Average Grant Date Fair Value (a)
	Units	TSR Portion (b)	Non-TSR Portion (c)	Units	TSR Portion (b)	Non-TSR Portion (c)
Non-vested at December 31, 2020	901,524	$70.11	$81.83	686,471	$70.15	$81.80
Granted	401,100	74.46	71.04	301,087	74.23	71.25
Vested	(301,600)	67.27	76.37	(227,411)	66.82	76.48
Forfeited	(16,296)	75.23	79.78	(15,869)	75.21	79.84

Non-vested at December 31, 2021	984,728	$72.67	$79.14	744,278	$72.71	$79.20

(a)The TSR and non-TSR Portions each account for 50 percent of the awards’ value.

(b)Fair value is determined using the Monte Carlo simulation described above. Weighted average grant date fair value does not reflect any accrual or payment of dividends prior to vesting.

(c)Fair value is determined using the market price of one share of Con Edison common stock on the grant date. The market price has not been discounted to reflect that dividends do not accrue and are not payable on Performance RSUs until vesting.

The total expense to be recognized by Con Edison in future periods for unvested Performance RSUs outstanding at December 31, 2021 is $33 million, including $27 million for CECONY, and is expected to be recognized over a weighted average period of one year for both Con Edison and CECONY. Con Edison and CECONY paid cash of $8 million and $7 million in 2021, $21 million and $18 million in 2020, and $24 million and $22 million in 2019, respectively, to settle vested Performance RSUs.

In accordance with the accounting rules for stock compensation, for time-based awards, the Companies are accruing a liability and recognizing compensation expense based on the market value of a common share throughout the vesting period. The vesting period for awards is three years and is based on the employee’s continuous service to Con Edison. Prior to vesting, the awards are subject to forfeiture in whole or in part under certain circumstances. The awards are “liability awards” because each restricted stock unit represents the right to receive, upon vesting, one share of Con Edison common stock, the cash value of a share or a combination thereof. As such, prior to vesting, changes in the fair value of the units are reflected in net income.

A summary of changes in the status of time-based awards during the year ended December 31, 2021 is as follows:


	Con Edison		CECONY
	Units	Weighted Average Grant Date Fair Value	Units	Weighted Average Grant Date Fair Value
Non-vested at December 31, 2020	67,438	$80.40	62,838	$80.42
Granted	17,150	74.80	16,200	74.80
Vested	(21,121)	77.96	(19,588)	77.95
Forfeited	(1,847)	80.23	(1,580)	79.89
Non-vested at December 31, 2021	61,620	$79.68	57,870	$79.70

The total expense to be recognized by Con Edison in future periods for unvested time-based awards outstanding at December 31, 2021 for Con Edison and CECONY is $2 million, and is expected to be recognized over a weighted


178			CON EDISON ANNUAL REPORT 2021

average period of one year. Con Edison and CECONY paid cash of $1 million in 2021, 2020 and 2019, to settle vested time-based awards.

Under the LTIP, each non-employee director receives stock units, which are deferred until the director’s separation from service or another date specified by the director. Each director may also elect to defer all or a portion of their cash compensation into additional stock units, which are deferred until the director’s termination of service or another date specified by the director. Non-employee directors’ stock units issued under the LTIP are considered “equity awards,” because they may only be settled in shares. Directors immediately vest in units issued to them. The fair value of the units is determined using the closing price of Con Edison’s common stock on the business day immediately preceding the date of issue. In the year ended December 31, 2021, approximately 36,000 units were issued at a weighted average grant date price of $77.53.

Stock Purchase Plan

The Stock Purchase Plan, which was approved by shareholders in 2004 and 2014, provides for the Companies to contribute up to $1 for each $9 invested by their directors, officers or employees to purchase Con Edison common stock under the plan. Eligible participants may invest up to $25,000 during any calendar year (subject to an additional limitation for officers and employees of not more than 20 percent of their pay). Dividends paid on shares held under the plan are reinvested in additional shares unless otherwise directed by the participant.

Participants in the plan immediately vest in shares purchased by them under the plan. Prior to September 1, 2020, the fair value of the shares of Con Edison common stock purchased under the plan was calculated using the average of the high and low composite sale prices at which shares were traded at the New York Stock Exchange on the trading day immediately preceding such purchase dates. During 2020, the plan was amended and as a result of the amendment, the fair value of the shares of Con Edison common stock purchased after September 1, 2020 under the plan was calculated using the closing price at which shares were traded on the New York Stock Exchange on the last business day of the month for all shares purchased during the month. During 2021, 2020 and 2019, 957,866, 836,984 and 747,899 shares were purchased under the Stock Purchase Plan at a weighted average price of $73.38, $79.82 and $85.45 per share, respectively.


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Note P – Financial Information by Business Segment

The business segments of each of the Companies, which are its operating segments, were determined based on management’s reporting and decision-making requirements in accordance with the accounting rules for segment reporting.

Con Edison’s principal business segments are CECONY’s regulated utility activities, O&R’s regulated utility activities, the Clean Energy Businesses and Con Edison Transmission. CECONY’s principal business segments are its regulated electric, gas and steam utility activities.

All revenues of these business segments are from customers located in the United States of America. Also, all assets of the business segments are located in the United States of America. The accounting policies of the segments are the same as those described in Note A.

Common services shared by the business segments are assigned directly or allocated based on various cost factors, depending on the nature of the service provided.

The financial data for the business segments are as follows:


As of and for the Year Ended December 31, 2021 (Millions of Dollars)	Operating revenues	Inter- segment revenues	Depreciation and amortization	Operating income	Other Income (deductions)	Interest charges	Income taxes on operating income (a)	Total assets	Capital expenditures
CECONY
Electric	$8,806	$18	$1,286	$1,802	$(84)	$542	$151	$36,260	$2,189
Gas	2,378	8	326	646	(16)	179	110	13,748	1,126
Steam	532	74	93	12	(8)	41	(9)	2,647	103
Consolidation adjustments	—	(100)	—	—	—	—	—	—	—
Total CECONY	$11,716	$—	$1,705	$2,460	($108)	$762	$252	$52,655	$3,418
O&R
Electric	$681	$—	$69	$100	$(8)	$27	$13	$2,123	$147
Gas	260	—	26	50	(4)	15	8	1,169	70
Other	—	—	—	—	—	—	—	—	—
Total O&R	$941	$—	$95	$150	$(12)	$42	$21	$3,292	$217
Clean Energy Businesses	$1,022	$—	$231	$236	$(10)	$68	$44	$6,554	$298
Con Edison Transmission	4	—	1	(16)	(407)	9	3	249	31
Other (b)	(7)	—	—	(4)	(1)	24	20	366	—
Total Con Edison	$13,676	$—	$2,032	$2,826	$(538)	$905	$340	$63,116	$3,964


As of and for the Year Ended December 31, 2020 (Millions of Dollars)	Operating revenues	Inter- segment revenues	Depreciation and amortization	Operating income	Other Income (deductions)	Interest charges	Income taxes on operating income (a)	Total assets	Capital expenditures
CECONY
Electric	$8,103	$18	$1,214	$1,731	$(134)	$535	$130	$35,673	$2,080
Gas	2,036	7	294	574	(25)	164	102	12,678	1,044
Steam	508	74	90	5	(12)	40	(14)	2,616	122
Consolidation adjustments	—	(99)	—	—	—	—	—	—	—
Total CECONY	$10,647	$—	$1,598	$2,310	$(171)	$739	$218	$50,967	$3,246
O&R
Electric	$629	$—	$65	$99	$(10)	$26	$13	$2,097	$159
Gas	233	—	25	48	(4)	15	8	1,150	61
Other	—	—	—	—	—	—	—	—	—
Total O&R	$862	$—	$90	$147	$(14)	$41	$21	$3,247	$220
Clean Energy Businesses	$736	$—	$231	$215	$4	$196	$(43)	$6,848	$616
Con Edison Transmission	4	—	1	(8)	(215)	18	—	1,348	3
Other (b)	(3)	—	—	(10)	(5)	25	(3)	485	—
Total Con Edison	$12,246	$—	$1,920	$2,654	$(401)	$1,019	$193	$62,895	$4,085


180			CON EDISON ANNUAL REPORT 2021


As of and for the Year Ended December 31, 2019 (Millions of Dollars)	Operating revenues	Inter- segment revenues	Depreciation and amortization	Operating income	Other Income (deductions)	Interest charges	Income taxes on operating income (a)	Total assets	Capital expenditures
CECONY
Electric	$8,062	$17	$1,053	$1,758	$(28)	$539	$239	$32,988	$1,851
Gas	2,132	7	231	528	(4)	147	99	11,090	1,078
Steam	627	70	89	62	(3)	42	4	2,479	91
Consolidation adjustments	—	(94)	—	—	—	—	—	—	—
Total CECONY	$10,821	$—	$1,373	$2,348	$(35)	$728	$342	$46,557	$3,020
O&R
Electric	$634	$—	$60	$98	$(7)	$27	$15	$2,130	$142
Gas	259	—	24	41	(4)	14	6	876	61
Other	—	—	—	—	—	—	—	—	—
Total O&R	$893	$—	$84	$139	$(11)	$41	$21	$3,006	$203
Clean Energy Businesses	$857	$—	$226	$202	$5	$186	$(58)	$6,528	$248
Con Edison Transmission	4	—	1	(6)	104	25	1	1,618	205
Other (b)	(1)	—	—	(7)	(12)	11	(6)	370	—
Total Con Edison	$12,574	$—	$1,684	$2,676	$51	$991	$300	$58,079	$3,676

(a)For Con Edison, the income tax expense/(benefit) on non-operating income was $(150) million, $(103) million and $(4) million in 2021, 2020 and 2019, respectively. For CECONY, the income tax expense/(benefit) on non-operating income was $(6) million, $(3) million and $(7) million in 2021, 2020 and 2019, respectively.

(b)Parent company and consolidation adjustments. Other does not represent a business segment.


CON EDISON ANNUAL REPORT 2021			181

Note Q – 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. These are economic hedges, for which the Utilities and the Clean Energy Business do not elect hedge accounting. The Clean Energy Businesses use interest rate swaps to manage the risks associated with interest rates related to outstanding and expected future debt issuances and borrowings. Derivatives are recognized on the consolidated balance sheet at fair value (see Note R), unless an exception is available under the accounting rules for derivatives and hedging. Qualifying derivative contracts that have been designated as normal purchases or normal sales contracts are not reported at fair value under the accounting rules.

The fair values of the Companies’ derivatives, including the offsetting of assets and liabilities, on the consolidated balance sheet at December 31, 2021 and 2020 were:


(Millions of Dollars)	2021				2020
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	$285	$(158)	$127	(b)	$44	$14	$58	(b)
Noncurrent	90	(13)	77		22	35	57	(d)
Total fair value of derivative assets	$375	$(171)	$204		$66	$49	$115
Fair value of derivative liabilities
Current	$(289)	$137	$(152)	(c)	$(225)	$(13)	$(238)	(d)
Noncurrent	(94)	10	(84)	(c)	(207)	(33)	(240)	(d)
Total fair value of derivative liabilities	$(383)	$147	$(236)		$(432)	$(46)	$(478)
Net fair value derivative assets/(liabilities)	$(8)	$(24)	$(32)		$(366)	$3	$(363)
CECONY
Fair value of derivative assets
Current	$135	$(64)	$71	(b)	$20	$(12)	$8	(b)
Noncurrent	71	(15)	56		16	(8)	8
Total fair value of derivative assets	$206	$(79)	$127		$36	$(20)	$16
Fair value of derivative liabilities
Current	$(131)	$43	$(88)		$(174)	$11	$(163)
Noncurrent	(50)	10	(40)		(114)	9	(105)
Total fair value of derivative liabilities	$(181)	$53	$(128)		$(288)	$20	$(268)
Net fair value derivative assets/(liabilities)	$25	($26)	$(1)		$(252)	$—	$(252)

(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 December 31, 2021 and 2020, margin deposits for Con Edison ($1 million and $3 million, respectively) and CECONY (an immaterial amount and $3 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)Includes amounts for interest rate swaps of $4 million in noncurrent assets, $(20) million in current liabilities and $(38) million in noncurrent liabilities. At December 31, 2021, the Clean Energy Businesses had interest rate swaps with notional amounts of $1,031 million. The expiration dates of the swaps range from 2025-2041. In June 2021, as part of the Clean Energy Businesses' sale of a renewable electric project, interest rate swaps terminating in 2024 were assumed by the buyer.

(d)Includes amounts for interest rate swaps of $(24) million in current liabilities and $(82) million in noncurrent liabilities. At December 31, 2020, the Clean Energy Businesses had interest rate swaps with notional amounts of $863 million. The expiration dates of the swaps ranged from 2024-2041.

The Utilities generally recover their prudently incurred fuel, purchased power and gas costs, including hedging gains and losses, in accordance with rate provisions approved by the applicable state utility regulators. See "Recoverable Energy Costs" in Note A. In accordance with the accounting rules for regulated operations, the Utilities record a


182			CON EDISON ANNUAL REPORT 2021

regulatory asset or regulatory 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 gas purchased for resale and non-utility revenue in the reporting period in which they occur. The Clean Energy Businesses record changes in the fair value of their interest rate swaps in other interest expense at the end of each reporting period. Management believes that these derivative instruments represent economic hedges that mitigate exposure to fluctuations in commodity prices and interest rates.

The following table presents the realized and unrealized gains or losses on derivatives that have been deferred or recognized in earnings for the years ended December 31, 2021 and 2020:


		Con Edison		CECONY
(Millions of Dollars)	Balance Sheet Location	2021	2020	2021	2020
Pre-tax gains/(losses) deferred in accordance with accounting rules for regulated operations:
Current	Deferred derivative gains	$134	$(26)	$124	$(27)
Noncurrent	Deferred derivative gains	57	—	51	—
Total deferred gains/(losses)		$191	$(26)	$175	$(27)
Current	Deferred derivative losses	$49	$(63)	$43	$(64)
Current	Recoverable energy costs	3	(201)	—	(177)
Noncurrent	Deferred derivative losses	70	(37)	66	(36)
Total deferred gains/(losses)		$122	$(301)	$109	$(277)
Net deferred gains/(losses)		$313	$(327)	$284	$(304)
	Income Statement Location
Pre-tax gain/(loss) recognized in income
	Gas purchased for resale	$18	$(2)	$—	$—
	Non-utility revenue	3	7	—	—
	Other operations and maintenance expense	5	(3)	5	(3)
	Other interest expense	52	(65)	—	—
Total pre-tax gain/(loss) recognized in income		$78	$(63)	$5	$(3)

The following table presents the hedged volume of Con Edison’s and CECONY’s commodity derivative transactions at December 31, 2021:


	Electric Energy (MWh) (a)(b)	Capacity (MW) (a)	Natural Gas (Dt) (a)(b)	Refined Fuels (gallons)
Con Edison	26,982,370	42,333	253,195,063	3,696,000
CECONY	24,646,000	28,800	235,570,000	3,696,000

(a)Volumes are reported net of long and short positions, except natural gas collars where the volumes of long positions are reported.

(b)Excludes electric congestion and gas basis swap contracts which are associated with electric and gas contracts and hedged volumes.

The Companies are exposed to credit risk related to transactions entered into primarily for the various energy supply and hedging activities by the Utilities and the Clean Energy Businesses. Credit risk relates to the loss that may result from a counterparty’s nonperformance. The Companies use credit policies to manage this risk, including an established credit approval process, monitoring of counterparty limits, netting provisions within agreements, collateral or prepayment arrangements, credit insurance and credit default swaps. The Companies measure credit risk exposure as the replacement cost for open energy commodity and derivative positions plus amounts owed from counterparties for settled transactions. The replacement cost of open positions represents unrealized gains, net of any unrealized losses where the Companies have a legally enforceable right to offset.

At December 31, 2021, Con Edison and CECONY had $406 million and $145 million of credit exposure in connection with open energy supply net receivables and hedging activities, net of collateral, respectively. Con Edison’s net credit exposure consisted of $91 million with independent system operators, $127 million with investment-grade counterparties, $53 million with non-investment grade/non-rated counterparties, and $135 million


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with commodity exchange brokers. CECONY’s net credit exposure consisted of $66 million with commodity exchange brokers and $79 million with investment-grade counterparties.

The collateral requirements associated with, and settlement of, derivative transactions are included in net cash flows from operating activities in the Companies’ consolidated statement of cash flows. Most derivative instrument contracts contain provisions that may require a party to provide collateral on its derivative instruments that are in a net liability position. The amount of collateral to be provided will depend on the fair value of the derivative instruments and the party’s credit ratings.

The following table presents the aggregate fair value of the Companies’ derivative instruments with credit-risk-related contingent features that are in a net liability position, the collateral posted for such positions and the additional collateral that would have been required to be posted had the lowest applicable credit rating been reduced one level and to below investment grade at December 31, 2021:


(Millions of Dollars)	Con Edison (a)	CECONY (a)
Aggregate fair value – net liabilities	$158	$121
Collateral posted	170	170
Additional collateral (b) (downgrade one level from current ratings)	43	1
Additional collateral (b)(c) (downgrade to below investment grade from current ratings)	94	37

(a)Non-derivative transactions for the purchase and sale of electricity and gas and qualifying derivative instruments, which have been designated as normal purchases or normal sales, are excluded from the table. These transactions primarily include purchases of electricity from independent system operators. In the event the Utilities and the Clean Energy Businesses were no longer extended unsecured credit for such purchases, the Companies would be required to post additional collateral of $5 million at December 31, 2021. For certain other such non-derivative transactions, the Companies could be required to post collateral under certain circumstances, including in the event counterparties had reasonable grounds for insecurity.

(b)The Companies measure the collateral requirements by taking into consideration the fair value amounts of derivative instruments that contain credit-risk-related contingent features that are in a net liability position plus amounts owed to counterparties for settled transactions and amounts required by counterparties for minimum financial security. The fair value amounts represent unrealized losses, net of any unrealized gains where the Companies have a legally enforceable right to offset.

(c)Derivative instruments that are net assets have been excluded from the table. At December 31, 2021, if Con Edison had been downgraded to below investment grade, it would have been required to post additional collateral for such derivative instruments of $66 million.

Note R – Fair Value Measurements

The accounting rules for fair value measurements and disclosures define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in a principal or most advantageous market. Fair value is a market-based measurement that is determined based on inputs, which refer broadly to assumptions that market participants use in pricing assets or liabilities. These inputs can be readily observable, market corroborated, or generally unobservable firm inputs. The Companies often make certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, and the risks inherent in the inputs to valuation techniques. The Companies use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

The accounting rules for fair value measurements and disclosures established a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value in three broad levels. The rules require that assets and liabilities be classified in their entirety based on the level of input that is significant to the fair value measurement. Assessing the significance of a particular input may require judgment considering factors specific to the asset or liability, and may affect the valuation of the asset or liability and their placement within the fair value hierarchy. The Companies classify fair value balances based on the fair value hierarchy defined by the accounting rules for fair value measurements and disclosures as follows:

Level 1 – Consists of assets or liabilities whose value is based on unadjusted quoted prices in active markets at the measurement date. An active market is one in which transactions for assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis. This category includes contracts traded on active exchange markets valued using unadjusted prices quoted directly from the exchange.
Level 2 – Consists of assets or liabilities valued using industry standard models and based on prices, other than quoted prices within Level 1, that are either directly or indirectly observable as of the measurement


184			CON EDISON ANNUAL REPORT 2021

date. The industry standard models consider observable assumptions including time value, volatility factors and current market and contractual prices for the underlying commodities, in addition to other economic measures. This category includes contracts traded on active exchanges or in over-the-counter markets priced with industry standard models.

Level 3 – Consists of assets or liabilities whose fair value is estimated based on internally developed models or methodologies using inputs that are generally less readily observable and supported by little, if any, market activity at the measurement date. Unobservable inputs are developed based on the best available information and subject to cost benefit constraints. This category includes contracts priced using models that are internally developed and contracts placed in illiquid markets. It also includes contracts that expire after the period of time for which quoted prices are available and internal models are used to determine a significant portion of the value.

For information on the measurement of Con Edison's investment in MVP, which was measured at fair value on a non-recurring basis, see Note A. Assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2021 and 2020 are summarized below.


	2021					2020
(Millions of Dollars)	Level 1	Level 2	Level 3	Netting Adjustment (e)	Total	Level 1	Level 2	Level 3	Netting Adjustment (e)	Total
Con Edison
Derivative assets:
Commodity (a)(b)(c)	$95	$260	$17	$(171)	$201	$19	$42	$4	$53	$118
Interest rate swaps (a)(b)(c)(f)	—	4	—	—	4	—	—	—	—	—
Other (a)(b)(d)	492	135	—	—	627	431	126	—	—	557
Total assets	$587	$399	$17	$(171)	$832	$450	$168	$4	$53	$675
Derivative liabilities:
Commodity (a)(b)(c)	$33	$266	$28	$(148)	$179	$7	$296	$23	$46	$372
Interest rate swaps (a)(b)(c)(f)	—	57	—	—	57	—	106	—	—	106
Total liabilities	$33	$323	$28	$(148)	$236	$7	$402	$23	$46	$478
CECONY
Derivative assets:
Commodity (a)(b)(c)	$67	$138	$1	$(79)	$127	$15	$20	$—	$(16)	$19
Other (a)(b)(d)	474	127	—	—	601	411	120	—	—	531
Total assets	$541	$265	$1	$(79)	$728	$426	$140	$—	$(16)	$550
Derivative liabilities:
Commodity (a)(b)(c)	$1	$172	$8	$(53)	$128	$3	$274	$10	$(19)	$268

(a)The Companies’ policy is to review the fair value hierarchy and recognize transfers into and transfers out of the levels at the end of each reporting period. Con Edison and CECONY had $1 million of commodity derivative assets and $4 million and $3 million of commodity derivative liabilities, respectively, transferred from level 3 to level 2 during the year ended December 31, 2021 because of availability of observable market data due to the decrease in the terms of certain contracts from beyond three years as of September 30, 2021 to less than three years as of December 31, 2021. Con Edison and CECONY had $1 million of commodity derivative liabilities transferred from level 3 to level 2 during the year ended December 31, 2020 because of availability of observable market data due to the decrease in the terms of certain contracts from beyond three years as of September 30, 2020 to less than three years as of December 31, 2020.

(b)Level 2 assets and liabilities include investments held in the deferred compensation plan and/or non-qualified retirement plans, exchange-traded contracts where there is insufficient market liquidity to warrant inclusion in Level 1, and certain over-the-counter derivative instruments for electricity, refined products and natural gas. Derivative instruments classified as Level 2 are valued using industry standard models that incorporate corroborated observable inputs, such as pricing services or prices from similar instruments that trade in liquid markets, time value and volatility factors.

(c)The accounting rules for fair value measurements and disclosures require consideration of the impact of nonperformance risk (including credit risk) from a market participant perspective in the measurement of the fair value of assets and liabilities. At December 31, 2021 and 2020, the Companies determined that nonperformance risk would have no material impact on their financial position or results of operations.

(d)Other assets are comprised of assets such as life insurance contracts within the deferred compensation plan and non-qualified retirement plans.

(e)Amounts represent the impact of legally-enforceable master netting agreements that allow the Companies to net gain and loss positions and cash collateral held or placed with the same counterparties.

(f)See Note Q.


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The employees in the Companies’ risk management group develop and maintain the Companies’ valuation policies and procedures for, and verify pricing and fair value valuation of, commodity derivatives and interest rate swaps. Under the Companies’ policies and procedures, multiple independent sources of information are obtained for forward price curves used to value commodity derivatives and interest rate swaps. Fair value and changes in fair value of commodity derivatives and interest rate swaps are reported monthly to the Companies’ risk committees, comprised of officers and employees of the Companies that oversee energy hedging at the Utilities and the Clean Energy Businesses. The risk management group reports to the Companies’ Vice President and Treasurer.


	Fair Value of Level 3 at December 31, 2021
	(Millions of Dollars)	Valuation Techniques	Unobservable Inputs	Range
Con Edison — Commodity
Electricity	$(6)	Discounted Cash Flow	Forward energy prices (a)	$18.75-$82.40 per MWh
	(10)	Discounted Cash Flow	Forward capacity prices (a)	$0.31-$12.93 per kW-month
Transmission Congestion Contracts/Financial Transmission Rights	5	Discounted Cash Flow	Inter-zonal forward price curves adjusted for historical zonal losses (b)	$(20.27)-$83.04 per MWh
Total Con Edison — Commodity	$(11)
CECONY — Commodity
Electricity	$(8)	Discounted Cash Flow	Forward capacity prices (a)	$1.35-$12.93 per kW-month
Transmission Congestion Contracts	1	Discounted Cash Flow	Inter-zonal forward price curves adjusted for historical zonal losses (b)	$0.52-$3.63 per MWh
Total CECONY — Commodity	$(7)

(a)Generally, increases/(decreases) in this input in isolation would result in a higher/(lower) fair value measurement.

(b)Generally, increases/(decreases) in this input in isolation would result in a lower/(higher) fair value measurement.

The table listed below provides a reconciliation of the beginning and ending net balances for assets and liabilities measured at fair value for the years ended December 31, 2021 and 2020 and classified as Level 3 in the fair value hierarchy:


	Con Edison		CECONY
(Millions of Dollars)	2021	2020	2021	2020
Beginning balance as of January 1,	$(19)	$(16)	$(10)	$(6)
Included in earnings	(9)	(10)	(3)	(5)
Included in regulatory assets and liabilities	3	(7)	1	(4)
Purchases	6	—	—	—
Settlements	5	15	3	6
Transfer out of level 3	3	(1)	2	(1)
Ending balance as of December 31,	$(11)	$(19)	$(7)	$(10)

For the Utilities, realized gains and losses on Level 3 commodity derivative assets and liabilities are reported as part of purchased power, gas and fuel costs. The Utilities generally recover these costs in accordance with rate provisions approved by the applicable state public utilities regulators. See Note A. Unrealized gains and losses for commodity derivatives are generally deferred on the consolidated balance sheet in accordance with the accounting rules for regulated operations.

For the Clean Energy Businesses, realized and unrealized gains and losses on Level 3 commodity derivative assets and liabilities are reported in non-utility revenues ($2 million loss and $3 million gain) on the consolidated income statement for the years ended December 31, 2021 and 2020, respectively.

Note S – Variable Interest Entities

The accounting rules for consolidation address the consolidation of a variable interest entity (VIE) by a business enterprise that is the primary beneficiary. A VIE is an entity that does not have a sufficient equity investment at risk to permit it to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest. The primary beneficiary is the business enterprise that has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and either absorbs a significant amount of the VIE’s losses or has the right to receive benefits that could be significant to the VIE.


186			CON EDISON ANNUAL REPORT 2021

The Companies enter into arrangements including leases, partnerships and electricity purchase agreements, with various entities. As a result of these arrangements, the Companies retain or may retain a variable interest in these entities.

CECONY

CECONY has an ongoing long-term electricity purchase agreement with Brooklyn Navy Yard Cogeneration Partners, LP, a potential VIE. In 2021, a request was made of this counterparty for information necessary to determine whether the entity was a VIE and whether CECONY is the primary beneficiary; however, the information was not made available. See Note I for information on these electricity purchase agreements, the payments for this contract constitute CECONY's maximum exposure to loss with respect to the potential VIE.

Clean Energy Businesses

In June 2021, a subsidiary of the Clean Energy Businesses sold substantially all of its membership interest in a renewable electric project, and retained an equity interest of $11 million in the project, which is accounted for as an equity method investment. See Note W. The earnings of the project are determined using the hypothetical liquidation at book value (HLBV) method of accounting which resulted in a loss of $11 million pre-tax ($8 million after-tax) for the year ended December 31, 2021. Con Edison is not the primary beneficiary since the power to direct the activities that most significantly impact the economics of the renewable electric project is not held by the Clean Energy Businesses.

In February 2021, a subsidiary of the Clean Energy Businesses entered into an agreement relating to certain projects (CED Nevada Virginia) with a noncontrolling tax equity investor to which a percentage of earnings, tax attributes and cash flows will be allocated. CED Nevada Virginia is a consolidated entity in which Con Edison has less than a 100 percent membership interest. Con Edison is the primary beneficiary since the power to direct the activities that most significantly impact the economics of CED Nevada Virginia during construction of the projects, and upon commercial operation, is held by the Clean Energy Businesses.

For the year ended December 31, 2021, the HLBV method of accounting for CED Nevada Virginia resulted in a $158 million loss ($119 million, after tax) for the tax equity investor and $155 million of income ($117 million, after tax) for Con Edison.

In 2018, the Clean Energy Businesses completed its acquisition of Sempra Solar Holdings, LLC. Included in the acquisition were certain operating projects (Tax Equity Projects) with a noncontrolling tax equity investor to which a percentage of earnings, tax attributes and cash flows are allocated. The Tax Equity Projects are consolidated entities in which Con Edison has less than a 100 percent membership interest. Con Edison is the primary beneficiary since the power to direct the activities that most significantly impact the economics of the Tax Equity Projects is held by the Clean Energy Businesses. Electricity generated by the Tax Equity Projects is sold to utilities and municipalities pursuant to long-term power purchase agreements.

For the year ended December 31, 2021, the HLBV method of accounting for the Tax Equity Projects resulted in $6 million of income ($4 million, after tax) for the tax equity investor and $30 million of income ($24 million, after tax) for Con Edison. For the year ended December 31, 2020, the HLBV method of accounting for the Tax Equity Projects resulted in $43 million of income ($32 million, after tax) for the tax equity investor and a $6 million loss ($4 million, after tax) for Con Edison.

Con Edison has determined that the use of HLBV accounting is reasonable and appropriate to attribute income and loss to the tax equity investors. Refer to Use of Hypothetical Liquidation at Book Value in Note A.


CON EDISON ANNUAL REPORT 2021			187

At December 31, 2021 and 2020, Con Edison’s consolidated balance sheet included the following amounts associated with its VIEs:


	Tax Equity Projects
	Great Valley Solar (c)(d)		Copper Mountain - Mesquite Solar (c)(e)		CED Nevada Virginia (c)(h)
(Millions of Dollars)	2021	2020	2021	2020	2021
Non-utility property, less accumulated depreciation (f)(g)	$275	$284	$431	$446	$643
Other assets	37	39	167	176	55
Total assets (a)	$312	$323	$598	$622	$698
Other liabilities	14	13	74	71	315
Total liabilities (b)	$14	$13	$74	$71	$315

(a)The assets of the Tax Equity Projects and CED Nevada Virginia represent assets of a consolidated VIE that can be used only to settle obligations of the consolidated VIE.

(b)The liabilities of the Tax Equity Projects and CED Nevada Virginia represent liabilities of a consolidated VIE for which creditors do not have recourse to the general credit of the primary beneficiary.

(c)Con Edison did not provide any financial or other support during the year that was not previously contractually required.

(d)Great Valley Solar consists of the Great Valley Solar 1, Great Valley Solar 2, Great Valley Solar 3 and Great Valley Solar 4 projects, for which the noncontrolling interest of the tax equity investor was $84 million and $82 million at December 31, 2021 and 2020, respectively.

(e)Copper Mountain - Mesquite Solar consists of the Copper Mountain Solar 4, Mesquite Solar 2 and Mesquite Solar 3 projects for which the noncontrolling interest of the tax equity investor was $118 million and $134 million at December 31, 2021 and 2020, respectively.

(f)Non-utility property is reduced by accumulated depreciation of $26 million for Great Valley Solar, $44 million for Copper Mountain - Mesquite Solar and $10 million for CED Nevada Virginia at December 31, 2021.

(g)Non-utility property is reduced by accumulated depreciation of $18 million for Great Valley Solar and $30 million for Copper Mountain - Mesquite Solar at December 31, 2020.

(h)CED Nevada Virginia consists of the Copper Mountain Solar 5, Battle Mountain Solar and Water Strider Solar projects for which the noncontrolling interest of the tax equity investor was $95 million at December 31, 2021.

The following table summarizes the VIEs into which the Clean Energy Businesses have entered as of December 31, 2021:


Project Name	Generating Capacity (a) (MW AC)	Power Purchase Agreement Term in Years	Year of Investment	Location	Maximum Exposure to Loss (Millions of Dollars) (b)
Great Valley Solar (c)	200	15-20	2018	CA	$214
Copper Mountain - Mesquite Solar (c)	344	20-25	2018	NV and AZ	406
CED Nevada Virginia (c)	431	20-25	2021	NV and VA	288

(a)Represents ownership interest in the project.

(b)Maximum exposure is equal to the net assets of the project on the consolidated balance sheet less any applicable noncontrolling interest. Con Edison did not provide any financial or other support during the year that was not previously contractually required.

(c)For the projects comprising Great Valley Solar, Copper Mountain Mesquite Solar and CED Nevada Virginia, refer to (d), (e) and (h) in the table above.

Note T – Asset Retirement Obligations

The Companies recognize a liability at fair value for legal obligations associated with the retirement of long-lived assets in the period in which they are incurred, or when sufficient information becomes available to reasonably estimate the fair value of such legal obligations. When the liability is initially recorded, asset retirement costs are capitalized by increasing the carrying amount of the related asset. The liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. The fair value of the asset retirement obligation liability is measured using expected future cash flows discounted at credit-adjusted risk-free rates, historical information, and where available, quoted prices from outside contractors. The Companies evaluate these assumptions underlying the asset retirement obligation liability on an annual basis or as frequently as needed.

The Companies recorded asset retirement obligations associated with the removal of asbestos and asbestos-containing material in their buildings (other than the structures enclosing generating stations and substations), electric equipment and steam and gas distribution systems. The Companies also recorded asset retirement obligations relating to gas and oil pipelines abandoned in place and municipal infrastructure support.


188			CON EDISON ANNUAL REPORT 2021

The Companies did not record an asset retirement obligation for the removal of asbestos associated with the structures enclosing generating stations and substations. For these building structures, the Companies were unable to reasonably estimate their asset retirement obligations because the Companies were unable to estimate the undiscounted retirement costs or the retirement dates and settlement dates. The amount of the undiscounted retirement costs could vary considerably depending on the disposition method for the building structures, and the method has not been determined. The Companies anticipate continuing to use these building structures in their businesses for an indefinite period, and so the retirement dates and settlement dates are not determinable.

Con Edison recorded asset retirement obligations for the removal of the Clean Energy Businesses’ solar and wind equipment related to projects located on property that is not owned by them and the term of the arrangement is finite including any renewal options. Con Edison did not record asset retirement obligations for the Clean Energy Businesses’ projects that are located on property that is owned by them because they expect that the equipment will continue to generate electricity at these facilities long past the manufacturer’s warranty at minimal operating expense. Therefore, Con Edison was unable to reasonably estimate the retirement date of this equipment.

The Utilities include in depreciation rates the estimated removal costs, less salvage, for utility plant assets. The amounts related to removal costs that are associated with asset retirement obligations are classified as an asset retirement liability. Pursuant to accounting rules for regulated operations, future removal costs that do not represent legal asset retirement obligations are recorded as regulatory liabilities. Accretion and depreciation expenses related to removal costs that represent legal asset retirement obligations are applied against the Companies’ regulatory liabilities. Asset retirement costs that are recoverable from customers are recorded as regulatory liabilities to reflect the timing difference between costs recovered through the rate-making process and recognition of costs.

At December 31, 2021, the liabilities for asset retirement obligations of Con Edison and CECONY were $577 million and $504 million, respectively. At December 31, 2020, the liabilities for asset retirement obligations of Con Edison and CECONY were $576 million and $508 million, respectively. The change in liabilities at December 31, 2021 was due to changes in estimated cash flows of $58 million and $55 million for Con Edison and CECONY, respectively, and accretion expense of $18 million and $15 million for Con Edison and CECONY, respectively. The changes were offset by liabilities settled of $75 million and $74 million for Con Edison and CECONY, respectively. The change in liabilities at December 31, 2020 was due to changes in estimated cash flows of $191 million and $186 million for Con Edison and CECONY, respectively, and accretion expense of $16 million and $13 million for Con Edison and CECONY, respectively. The changes were offset by liabilities settled of $56 million and $53 million for Con Edison and CECONY, respectively. At December 31, 2021, Con Edison and CECONY recorded reductions of $87 million and $85 million, respectively, to the regulatory liability associated with cost of removal to reflect depreciation and interest expense. At December 31, 2020, Con Edison and CECONY recorded reductions of $49 million to the regulatory liability associated with cost of removal to reflect depreciation and interest expense.

Note U – Related Party Transactions

The NYSPSC generally requires that the Utilities and Con Edison’s other subsidiaries be operated as separate entities. The Utilities and the other subsidiaries are required to have separate operating employees and operating officers of the Utilities may not be operating officers of the other subsidiaries. The Utilities may provide administrative and other services to, and receive such services from, Con Edison and its other subsidiaries only pursuant to cost allocation procedures approved by the NYSPSC. Transfers of assets between the Utilities and Con Edison or its other subsidiaries may be made only as approved by the NYSPSC. The debt of the Utilities is to be raised directly by the Utilities and not derived from Con Edison. Without the prior permission of the NYSPSC, the Utilities may not make loans to, guarantee the obligations of, or pledge assets as security for the indebtedness of Con Edison or its other subsidiaries. The NYSPSC limits the dividends that the Utilities may pay Con Edison. See “Dividends” in Note C. As a result, substantially all of the net assets of CECONY and O&R ($16,312 million and $888 million, respectively), at December 31, 2021, are considered restricted net assets. The NYSPSC may impose additional measures to separate, or “ring fence,” the Utilities from Con Edison and its other subsidiaries. See “Rate Plans” in Note B.

The costs of administrative and other services provided by CECONY to, and received by it from, Con Edison and its other subsidiaries for the years ended December 31, 2021, 2020 and 2019 were as follows:


CON EDISON ANNUAL REPORT 2021			189


	CECONY
(Millions of Dollars)	2021	2020	2019
Cost of services provided	$137	$128	$121
Cost of services received	68	66	64

In addition, CECONY and O&R have joint gas supply arrangements in connection with which CECONY sold to O&R $90 million, $59 million and $71 million of natural gas for the years ended December 31, 2021, 2020 and 2019, respectively. These amounts are net of the effect of related hedging transactions.

The Utilities perform work and incur expenses on behalf of NY Transco, a company in which CET Electric has a 45.7 percent equity interest. The Utilities bill NY Transco for such work and expenses in accordance with established policies. For the years ended December 31, 2021 and 2020, the amounts billed by the Utilities to NY Transco were $5.9 million and immaterial, respectively. In May 2016, CECONY transferred certain electric transmission projects to NY Transco.

CECONY has storage and wheeling service contracts with Stagecoach Gas Services LLC (Stagecoach), a joint venture formerly owned by a subsidiary of CET Gas and a subsidiary of Crestwood Equity Partners LP (Crestwood). In addition, CECONY is the replacement shipper on one of Crestwood’s firm transportation agreements with Tennessee Gas Pipeline Company LLC. CECONY incurred costs for storage and wheeling services from Stagecoach of $31 million, $34 million and $33 million for the years ended December 31, 2021, 2020 and 2019, respectively. During 2021, a subsidiary of CET Gas completed the sale of its 50 percent interest in Stagecoach. See Note W.

CECONY has a 20-year transportation contract with Mountain Valley Pipeline, LLC (MVP) for 250,000 dekatherms per day of capacity. CET Gas owns a 10.2 percent equity interest in MVP (that is expected to be reduced to 8.5 percent). See "Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP) " in Note A. In October 2017, the Environmental Defense Fund and the Natural Resource Defense Council requested the NYSPSC to prohibit CECONY from recovering costs under its MVP contract unless CECONY can demonstrate that the contract is in the public interest. CECONY advised the NYSPSC that it would respond to the request if the NYSPSC opened a proceeding to consider this request. For the years ended December 31, 2021 and 2020, CECONY incurred no costs under the contract.

FERC has authorized CECONY to lend funds to O&R for a period of not more than 12 months, in an amount not to exceed $250 million, at prevailing market rates. At December 31, 2021 and 2020 there were no outstanding loans to O&R.

The Clean Energy Businesses had financial electric capacity contracts with CECONY and O&R during 2021 and 2020. For the years ended December 31, 2021 and 2020, the Clean Energy Businesses realized a $4 million loss and an immaterial loss, respectively, under these contracts.

Note V – New Financial Accounting Standards

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04). In 2017, the United Kingdom’s Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit the London Interbank Offered Rate (LIBOR), a benchmark interest rate referenced in a variety of agreements, after 2021. In March 2021, the United Kingdom's Financial Conduct Authority confirmed that U.S. Dollar LIBOR will no longer be published after December 31, 2021 for one-week and two-month U.S. Dollar LIBOR tenors, and after June 30, 2023 for all other U.S. Dollar LIBOR tenors. ASU 2020-04 provides entities with optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. In January 2021, the FASB issued amendments to the guidance through ASU 2021-01 to include all contract modifications and hedging relationships affected by reference rate reform, including those that do not directly reference LIBOR or another reference rate expected to be discontinued, and clarify which optional expedients may be applied to them. The guidance can be applied prospectively. The optional relief is temporary and generally cannot be applied to contract modifications and hedging relationships entered into or evaluated after December 31, 2022. The Companies do not expect the new guidance to have a material impact on their financial position, results of operations or liquidity.


190			CON EDISON ANNUAL REPORT 2021

In December 2021, the FASB issued amendments to the guidance on accounting for government assistance through ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The amendments require that business entities disclose 1) the types of assistance, 2) an entity’s

accounting for the assistance, and 3) the effect of the assistance on an entity’s financial statements. For public entities, the amendments are effective for reporting periods beginning after December 15, 2021. Early adoption is permitted. The Companies are in the process of evaluating the potential impact of the new guidance on the Companies’ financial position, results of operations and liquidity.

Note W – Dispositions

Crane and Coram

In April 2021, a subsidiary of the Clean Energy Businesses entered into an agreement to sell substantially all of its membership interests in a renewable electric project that it developed and also all of its membership interests in a renewable electric project that it acquired in 2016. The sales were completed in June 2021. The combined carrying value of both projects was approximately $192 million in June 2021. The net pre-tax gain on the sales was $3 million ($2 million after-tax) and was included within "Other operations and maintenance" on Con Edison's consolidated income statement for the year ended December 31, 2021. The retained portion of the membership interest in the renewable electric project, of $11 million, was calculated based on a discounted cash flow of future projected earnings, and the retained portion is accounted for as an equity method investment. The portion of the gain attributable to the retained portion of the membership interest was not material for the year ended December 31, 2021. See Note S.

Stagecoach Gas Services


CON EDISON ANNUAL REPORT 2021			191

Schedule I

Condensed Financial Information of Consolidated Edison, Inc. (a)

Condensed Statement of Income and Comprehensive Income

(Parent Company Only)


	For the Years Ended December 31,
(Millions of Dollars, except per share amounts)	2021	2020	2019
Equity in earnings of subsidiaries	$1,369	$1,105	$1,354
Other income (deductions), net of taxes	14	56	76
Interest expense	(37)	(60)	(87)
Net Income	$1,346	$1,101	$1,343
Comprehensive Income	$1,376	$1,095	$1,340
Net Income Per Share – Basic	$3.86	$3.29	$4.09
Net Income Per Share – Diluted	$3.85	$3.28	$4.08
Dividends Declared Per Share	$3.10	$3.06	$2.96
Average Number Of Shares Outstanding—Basic (In Millions)	348.4	334.8	328.5
Average Number Of Shares Outstanding—Diluted (In Millions)	349.4	335.7	329.5

(a)These financial statements, in which Con Edison’s subsidiaries have been included using the equity method, should be read together with its consolidated financial statements and the notes thereto appearing above.


192			CON EDISON ANNUAL REPORT 2021

Condensed Financial Information of Consolidated Edison, Inc. (a)

Condensed Statement of Cash Flows

(Parent Company Only)


	For the Years Ended December 31,
(Millions of Dollars)	2021	2020	2019
Net Income	$1,346	$1,101	$1,343
Equity in earnings of subsidiaries	(1,369)	(1,105)	(1,354)
Dividends received from:
CECONY	988	982	912
O&R	52	49	47
Clean Energy Businesses	64	21	3
Con Edison Transmission	152	11	12
Change in Assets:
Special deposits	—	—	(3)
Income taxes receivable	15	—	25
Other – net (b)	211	(521)	44
Net Cash Flows from Operating Activities(b)	1,459	538	1,029
Investing Activities
Contributions to subsidiaries	(1,135)	(626)	(930)
Debt receivable from affiliated companies	875	400	450
Net Cash Flows Used in Investing Activities	(260)	(226)	(480)
Financing Activities
Net proceeds of short-term debt	50	(537)	(783)
Issuance of long-term debt	—	650	825
Retirement of long-term debt(b)	(1,178)	(3)	(553)
Debt issuance costs	(1)	(3)	—
Issuance of common shares for stock plans, net of repurchases	60	58	54
Issuance of common shares - public offering	775	640	825
Common stock dividends	(1,030)	(975)	(924)
Net Cash Flows Used in Financing Activities(b)	(1,324)	(170)	(556)
Net Change for the Period	(125)	142	(7)
Balance at Beginning of Period	144	2	9
Balance at End of Period	$19	$144	$2

(b)During 2021, Con Edison identified that the reclassification of debt from long-term to current for the year ended December 31, 2020 had been erroneously presented within the operating cash flow section as a cash inflow and in the financing section as a cash outflow in the Condensed Statement of Cash Flows (Parent Company Only). The amounts for the year ended December 31, 2020 have been revised to correct the error in the classification of $1,175 million from Other - net within Net Cash Flows from Operating Activities to Retirement of long-term debt within Net Cash Flows Used in Financing Activities. Con Edison has evaluated the effect of these misstatements, both qualitatively and quantitatively, and concluded that they are not material to the financial statements issued for the year ended December 31, 2020. These amounts were correctly presented on the Consolidated Statement of Cash Flows for the year ended December 31, 2020.


CON EDISON ANNUAL REPORT 2021			193

Condensed Financial Information of Consolidated Edison, Inc. (a)

Condensed Balance Sheet

(Parent Company Only)


	December 31,
(Millions of Dollars)	2021	2020
Assets
Current Assets
Cash and temporary cash investments	$19	$144
Accounts receivable - other	—	1
Income taxes receivable	3	18

Accounts receivable from affiliated companies	1,199	1,256
Prepayments	28	62
Other current assets	14	12
Total Current Assets	1,263	1,493
Investments in subsidiaries and others	19,951	18,670
Goodwill	406	406
Deferred income tax	—	55
Long-term debt receivable from affiliated companies	—	875

Total Assets	$21,620	$21,499
Liabilities and Shareholders’ Equity
Current Liabilities
Long-term debt due within one year	$293	$1,178

Notes payable	50	—
Accounts payable	1	—
Accounts payable to affiliated companies	517	517
Accrued taxes	2	6
Other current liabilities	9	12
Total Current Liabilities	872	1,713
Deferred income tax	64	—
Total Liabilities	936	1,713
Long-term debt	647	939
Shareholders’ Equity
Common stock, including additional paid-in capital	9,748	8,844
Retained earnings	10,289	10,003
Total Shareholders’ Equity	20,037	18,847
Total Liabilities and Shareholders’ Equity	$21,620	$21,499


194			CON EDISON ANNUAL REPORT 2021

Schedule II

Valuation and Qualifying Accounts

For the Years Ended December 31, 2021, 2020 and 2019


				COLUMN C Additions
Company (Millions of Dollars)	COLUMN A Description		COLUMN B Balance at Beginning of Period	(1) Charged To Costs And Expenses	(2) Charged To Other Accounts	COLUMN D Deductions (b)	COLUMN E Balance At End of Period
Con Edison	Allowance for uncollectible accounts (a):
		2021	$154	$83	$—	$102	$339
		2020	$74	$72	$—	$8	$154
		2019	$68	$77	$—	$(71)	$74
CECONY	Allowance for uncollectible accounts (a):
		2021	$143	$78	$—	$102	$323
		2020	$68	$65	$—	$10	$143
		2019	$61	$72	$—	$(65)	$68

(a)This is a valuation account deducted in the balance sheet from the assets (Accounts receivable - customers and Other receivables) to which they apply.

(b)Accounts written off less cash collections, miscellaneous adjustments and amounts reinstated as receivables previously written off.


CON EDISON ANNUAL REPORT 2021			195

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