Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This combined management’s discussion and analysis of financial condition and results of operations (MD&A) relates to the consolidated financial statements (the First Quarter Financial Statements) included in this report of two separate registrants: Consolidated Edison, Inc. (Con Edison) and Consolidated Edison Company of New York, Inc. (CECONY). As used in this report, the term the “Companies” refers to Con Edison and CECONY. CECONY is a subsidiary of Con Edison and, as such, information in this management’s discussion and analysis about CECONY applies to Con Edison.

This MD&A should be read in conjunction with the First Quarter Financial Statements and the notes thereto and the

MD&A in Item 7 of the Companies’ combined Annual Report on Form 10-K for the year ended December 31, 2022

(File Nos.1-14514 and 1-01217, the Form 10-K).

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

Con Edison, incorporated in New York State in 1997, is a holding company that owns all of the outstanding common stock of CECONY, Orange and Rockland Utilities, Inc. (O&R) and Con Edison Transmission, Inc. As used in this report, the term the “Utilities” refers to CECONY and O&R.


	Con Edison


CECONY	O&R	Con Edison Transmission
	•RECO

Con Edison’s principal business operations are those of CECONY, O&R and Con Edison Transmission. CECONY’s principal business operations are its regulated electric, gas and steam delivery businesses. O&R’s principal business operations are its regulated electric and gas delivery businesses. Con Edison Transmission invests in electric transmission projects and manages both electric and gas assets while seeking to develop electric transmission projects. See "Investments" in Note A to the First Quarter Financial Statements. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.

Con Edison seeks to provide shareholder value through continued dividend growth, supported by earnings growth in regulated utilities and contracted electric and gas assets. The company invests to provide reliable, resilient, safe and clean energy critical for its NY customers. Con Edison is a responsible neighbor, helping the communities it serves become more sustainable.

In addition to the Companies’ material contingencies described in Notes B, G and H to the First Quarter Financial Statements, the Companies’ management considers the following events, trends, and uncertainties to be important to understanding the Companies’ current and future financial condition.

Clean Energy Goals

The success of the Companies’ efforts to meet federal, state and city clean energy policy goals and the impact of energy consumers' efforts to meet such goals on CECONY’s electric, gas and steam businesses and O&R’s electric and gas businesses may impact the Companies’ future financial condition. The Utilities expect electric demand to increase and gas and steam usage to decrease in their service territories as federal, state and local laws and

policies are enacted and implemented that aim to reduce the carbon intensity of the energy that is consumed. In particular, the long-term future of the Utilities’ gas businesses depends upon the role that natural gas or other gaseous fuels will play in facilitating New York State’s and New York City’s climate goals. In addition, the impact and costs of climate change on the Utilities’ systems and the success of the Utilities’ efforts to increase system reliability and manage service interruptions resulting from severe weather may impact the Companies’ future financial condition, results of operations and liquidity.

CECONY Steam Rate Plan

In November 2022, as updated in February 2023, CECONY filed a request with the NYSPSC for a steam rate increase of $141 million, effective November 2023. The filing reflects a return on common equity of 10 percent and a common equity ratio of 50 percent and requests a new mechanism for decoupling revenues from steam consumption. In March 2023, the NYSDPS submitted testimony in the NYSPSC proceeding that supports a steam rate increase of $94 million reflecting, among other things, a 9 percent return on common equity and a common equity ratio of 48 percent. The NYSDPS testimony does not support CECONY’s request for a new mechanism for decoupling revenues from steam consumption. CECONY’s future earnings will depend on the rates authorized in, and the other provisions of, its November 2023 steam rate plan and CECONY’s ability to operate its businesses in a manner consistent with such rate plan. Therefore, the outcome of CECONY’s rate request that requires approval by the NYSPSC will impact the Companies’ future financial condition, results of operations and liquidity. See “Utility Regulation – State Utility Regulation – Rate Plans” and “Rate Plans” in Note B to the First Quarter Financial Statements.

Con Edison Transmission

Con Edison Transmission has taken steps to realign its portfolio to focus on electric transmission rather than gas by completing the sale of its 50 percent interest in Stagecoach in 2021. During 2020 and 2021, Con Edison Transmission recorded impairments on its investment in Mountain Valley Pipeline, LLC (MVP). Any future impairments of Con Edison Transmission’s investment in MVP may impact Con Edison’s future financial condition and results of operations. Con Edison Transmission is pursuing opportunities and participating in competitive solicitations to develop electric transmission projects that will deliver offshore wind energy to high voltage electric grids in NY, through its NY Transco partnership, and in NJ. The success of Con Edison Transmission’s efforts in these competitive solicitations and to grow its electric transmission portfolio may impact Con Edison’s future capital requirements. See “Investments” in Note A to the First Quarter Financial Statements.

CECONY

Electric

CECONY provides electric service to approximately 3.6 million customers in all of New York City (except a part of Queens) and most of Westchester County, an approximately 660 square mile service area with a population of more than nine million.

Gas

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

Steam

CECONY operates the largest steam distribution system in the United States by producing and delivering approximately 16,408 MMlb of steam annually to approximately 1,527 customers in parts of Manhattan.

O&R

Electric

O&R and its utility subsidiary, Rockland Electric Company (RECO) (together referred to herein as O&R) provide electric service to approximately 0.3 million customers in southeastern New York, "NY", and northern New Jersey "NJ", an approximately 1,300 square mile service area.

Gas

O&R delivers gas to over 0.1 million customers in southeastern NY.

Coronavirus Disease 2019 (COVID-19) Impacts

The Coronavirus Disease 2019 (COVID-19) pandemic resulted in changes in governmental and regulatory policy and contributed to an economic slowdown in the Companies’ service territories. The decline in business activity in

the Companies’ service territories resulted in a slower recovery of cash from outstanding customer accounts receivable balances, material increases in customer accounts receivable balances, increases to the allowance for uncollectible accounts, and may result in increases to write-offs and recoveries of customer accounts. The extent to which the Companies’ are able to recover cash for outstanding customer accounts receivable balances and the amount of write-offs of customer accounts, may impact Con Edison’s future financial condition, results of operations and liquidity. See “Coronavirus Disease 2019 (COVID-19) Impacts” below and “COVID-19 Regulatory Matters” in Note B to the First Quarter Financial Statements.

Certain financial data of Con Edison’s businesses are presented below:


	For the Three Months Ended March 31, 2023						At March 31, 2023
(Millions of Dollars, except percentages)	Operating Revenues			Net Income for Common Stock				Assets
CECONY	$3,953	90	%	$604	42	%			$57,653	91	%
O&R	321	7		31	2				3,504	6
Total Utilities	$4,274	97	%	$635	44	%			$61,157	97	%
Clean Energy Businesses (a)	129	3		22	2				—	—
Con Edison Transmission	1	—		2	—				352	1
Other (b)	(1)	—		774	54				1,295	2
Total Con Edison	$4,403	100	%	$1,433	100	%			$62,804	100	%

(a)Net income for common stock from the Clean Energy Businesses for the three months ended March 31, 2023 includes $(9) million net after-tax mark-to-market effects. Net income for common stock from the Clean Energy Businesses for the three months ended March 31, 2023 also includes $2 million (after-tax) net of the effects of HLBV accounting for tax equity investments in certain renewable electric projects. Depreciation and amortization expenses on their assets of $31 million (after-tax) were not recorded for the three months ended March 31, 2023. See "Assets and Liabilities Held for Sale" in Note A, Note S and Note T to the First Quarter Financial Statements.

(b)Other includes the parent company, Con Edison’s tax equity investments, the deferred project held for sale and consolidation adjustments. Net income for common stock for the three months ended March 31, 2023 includes an immaterial amount of income tax impact on the net after-tax mark-to-market effects. Net income for common stock for the three months ended March 31, 2023 also includes an immaterial net of income tax impact on the effects of HLBV accounting for tax equity investments in certain renewable electric projects. Net income for common stock for the three months ended March 31, 2023 also includes $(9) million of transaction costs and other accruals related to the sale of the Clean Energy Businesses (net of tax). Impact of the sale of the Clean Energy Businesses on the changes in state apportionments (net of federal taxes) is $(16) million. Depreciation and amortization expenses on the assets of the Clean Energy Businesses of $(3) million (after-tax) were not recorded for the three months ended March 31, 2023. Net income for common stock for the three months ended March 31, 2023 includes $791 million (after-tax) for the gain on the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.

Inflation Reduction Act

On August 16, 2022, the Inflation Reduction Act of 2022 (the Act) was signed into law and included a new 15 percent Corporate Alternative Minimum Tax (CAMT). Under the Act, a corporation will be subject to the CAMT if its average annual Adjusted Financial Statement Income (AFSI) for the three taxable year period ending prior to the taxable year exceeds $1,000 million, and will apply to tax years beginning after December 31, 2022. Based on management’s preliminary calculations, Con Edison and CECONY do not expect to be subject to the CAMT in 2023 and 2024 but are expected to be subject to the CAMT in subsequent years. However, the provisions of the CAMT are not expected to have a material impact on the Companies’ financial position, results of operations and liquidity.

Accounting Considerations

Due to the COVID-19 pandemic and subsequent New York State on PAUSE and related executive orders (that have since been lifted), decline in business, bankruptcies, layoffs and furloughs, among other factors, both commercial and residential customers have had and may continue to have increased difficulty paying their utility bills. 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, that ended in June 2021. In addition, such prohibitions were in effect until December 21, 2021 for residential and small business customers who experienced a change in financial circumstances due to the COVID-19 pandemic.

CECONY and O&R have existing allowances for uncollectible accounts established against their customer accounts receivable balances that are reevaluated each quarter and updated accordingly. Changes to the Utilities’ reserve balances that result in write-offs of customer accounts receivable balances are not reflected in rates during the term of the current rate plans.

For the three months ended March 31, 2023, CECONY issued total credits of $343.6 million and O&R issued total credits of $2.2 million towards reducing customers’ accounts receivable balances pursuant to a Phase 2 COVID-19 arrears assistance programs. For the year ended December 31, 2022, CECONY and O&R issued total credits of $359.9 million and $6.1 million, respectively, towards reducing customers’ accounts receivable balances pursuant to COVID-19 arrears assistance programs. See "COVID-19 Regulatory Matters" in Note B to the First Quarter Financial Statements.

CECONY’s "accounts receivable – customers" balance (net of allowance for uncollectible accounts) decreased from $2,099 million at December 31, 2022 to $1,939 million at March 31, 2023. O&R’s "accounts receivable – customers" balance (net allowance for uncollectible accounts) increased from $93 million at December 31, 2022 to $101 million at March 31, 2023. The amount of the customer accounts receivable balances that are over 60 days in arrears for CECONY and O&R decreased from $1,308 million and $22 million, respectively, as of December 31, 2022 to $930 million and $16 million, respectively, as of March 31, 2023. CECONY’s and O&R’s allowances for uncollectible customer accounts reserve decreased from $314 million and $8 million at December 31, 2022 to $236 million and $7 million at March 31, 2023 respectively. During the first three months of 2023, the potential economic impact of the COVID-19 pandemic and the COVID-19 arrears assistance programs, were considered in forward-looking projections related to write-off and recovery rates, resulting in changes to the customer allowance for uncollectible accounts as detailed herein.

The Companies test goodwill for impairment at least annually or whenever there is a triggering event, and 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 Companies identified no triggering events or changes in circumstances related to the COVID-19 pandemic that would indicate that the carrying value of goodwill, long-lived or intangible assets may not be recoverable at March 31, 2023.

NY Legislation

In April 2021, NY passed a law that increased the corporate franchise tax rate on business income from 6.5 percent to 7.25 percent, 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 percent, not to exceed a maximum tax liability of $5 million per taxpayer. NY 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 capital tax were scheduled to expire after 2023. In May 2023, NY passed a law that extended the increase in the corporate franchise tax rate from 6.5% to 7.25% for another 3-year period, through tax year 2026 and extended the business capital tax through tax year 2026. NY also passed a law establishing a permanent rate of 30% for the metropolitan transportation business tax surcharge. As a result of the sale of the Clean Energy Businesses in 2023, Con Edison has NY State taxable income in excess of $5 million after using its entire NY state NOL carryforward, and therefore, the group is subject to the higher 7.25 percent rate (9.425 percent with the surcharge rate) on its taxable income for tax year 2023. The Companies are evaluating the impact of these provisions on their financial position, results of operations and liquidity for tax years after 2023.

In addition, the April 2021 law created a program that allows eligible residential renters in NY 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 and Disability Assistance (OTDA) in coordination with the NYSDPS and the NYSPSC (the OTDA Program). Under the OTDA Program, CECONY and O&R would qualify for a refundable tax credit for NY 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. See "COVID-19 Regulatory Matters” in Note B to the First Quarter Financial Statements.

Liquidity and Financing

The Companies monitor the financial markets closely, including borrowing rates and daily cash collections. Inflationary pressure and higher interest rates have increased the amount of capital needed by the Utilities and the costs of such capital. See Note C and Note D to the First Quarter Financial Statements and "Interest Rate Risk," below.

The decline in business activity in the Utilities’ service territory due to the COVID-19 pandemic and subsequent New York State on PAUSE and related executive orders (that have since been lifted) resulted in a slower recovery in cash of outstanding customer accounts receivable balances. Increases in electric and gas commodity prices during 2022 also contributed to a slower recovery of cash from outstanding customer accounts receivable balances. The Utilities use derivative instruments to hedge price fluctuations for the purchase of electricity and gas. Volatility in electric and gas commodity prices that lead to the posting of cash collateral with counterparties could negatively

impact the Utilities’ liquidity. See "COVID-19 Regulatory Matters" in Note B to the First Quarter Financial Statements and “Financial and Commodity Market Risks – Commodity Price Risk,” below.

In 2022 and 2023, New York State and the NYSPSC implemented COVID-19 arrears assistance programs that provided credits and established surcharge recovery mechanisms towards reducing the arrears balances of low-income electric and gas customers of CECONY and O&R. See "COVID-19 Regulatory Matters" in Note B and Note L to the First Quarter Financial Statements and “Coronavirus Disease 2019 (COVID-19) Impacts – Accounting Considerations,” 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 NY's electric and gas rate plans (January through December). Differences are accrued with interest each month for CECONY's and O&R NY’s electric customers and after the annual deferral period ends for CECONY's and O&R NY’s 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 NY's electric and gas customers. Effective July 2021, the majority of O&R’s electric distribution revenues in NJ are subject to a conservation incentive program, as a result of which distribution revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. Although these revenue decoupling mechanisms are in place, lower billed sales revenues and higher unpaid accounts have reduced and are expected to continue to reduce liquidity at the Utilities.

Con Edison and the Utilities have a $2,500 million revolving credit agreement in place under which banks are committed to provide loans on a revolving credit basis until March 2028, subject to certain conditions. CECONY has a $500 million 364-day revolving credit agreement in place under which banks are committed to provide loans on a revolving credit basis until March 2024, subject to certain conditions. Con Edison and the Utilities have not entered into any loans under the Credit Agreement and CECONY has not entered into any loans under the CECONY Credit Agreement. See Note D to the First Quarter Financial Statements.

Results of Operations

Net income for common stock and earnings per share for the three months ended March 31, 2023 and 2022 were as follows:


	For the Three Months Ended March 31,
	2023	2022	2023	2022
(Millions of Dollars, except per share amounts)	Net Income for Common Stock		Earnings per Share
CECONY	$604	$475	$1.71	$1.34
O&R	31	30	0.09	0.09
Clean Energy Businesses (a) (d)	22	107	0.07	0.30
Con Edison Transmission	2	—	—	—
Other (b)	774	(10)	2.19	(0.03)
Con Edison (c)	$1,433	$602	$4.06	$1.70

(a)Net income for common stock and earnings per share from the Clean Energy Businesses for the three months ended March 31, 2023 includes $(9) million or $(0.03) a share net after-tax mark-to-market effects. Net income for common stock and earnings per share from the Clean Energy Businesses for the three months ended March 31, 2023 also includes $2 million or $0.01 a share (after-tax) net of the effects of HLBV accounting for tax equity investments in certain renewable electric projects. Depreciation and amortization expenses on their assets of $31 million or $0.09 a share (after-tax) were not recorded for the three months ended March 31, 2023. See "Assets and Liabilities Held for Sale" in Note A, Note S and Note T to the First Quarter Financial Statements.

Net income for common stock and earnings per share from the Clean Energy Businesses for the three months ended March 31, 2022 includes $51 million or $0.15 a share of net after-tax mark-to-market effects. Net income for common stock and earnings per share from the Clean Energy Businesses for the three months ended March 31, 2022 also includes $36 million or $0.10 a share (after-tax) of the effects of HLBV accounting for tax equity investments in certain renewable electric projects.

(b)Other includes the parent company, Con Edison’s tax equity investments, the deferred project held for sale and consolidation adjustments. Net income for common stock and earnings per share for the three months ended March 31, 2023 includes an immaterial amount or $0.00 a share net of income tax impact on the net after-tax mark-to-market effects. Net income for common stock and earnings per share for the three months ended March 31, 2023 also includes an immaterial amount or $0.00 a share net of income tax impact on the effects of HLBV accounting for tax equity investments in certain renewable electric projects. Net income for common stock for the three months ended March 31, 2023 also includes $(9) million and $(0.02) a share of transaction costs and other accruals related to the sale of the Clean Energy Businesses (net of tax). Impact of the sale of the Clean Energy Businesses on the changes in state apportionments (net of federal taxes) is $(16) million or $(0.05) per share. Depreciation and amortization expenses on the assets of the Clean Energy Businesses of $(3) million or $(0.01) a share (after-tax) were not recorded for the three months ended March 31, 2023. Net income for common stock and earnings per share for the three months ended March 31, 2023 includes $791 million (after-tax) or $2.24 a share (after-tax) for the gain on the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.

Net income for common stock and earnings per share for the three months ended March 31, 2022 includes $(4) million or $(0.01) a share of income tax impact on the net after-tax mark-to-market effects, and $(3) million or $(0.01) a share (after-tax) of income tax impact on the effects of HLBV accounting for tax equity investments in certain renewable and sustainable electric projects.

(c) Earnings per share on a diluted basis were $4.05 a share and $1.70 a share for the three months ended March 31, 2023 and 2022,

respectively. In March 2023, Con Edison entered into accelerated share repurchase agreements (ASR Contracts) with two dealers to repurchase $1,000 million in aggregate of Con Edison’s Common Shares ($.10 par value) (Common Shares). Pursuant to the ASR Contracts, Con Edison made payments of $1,000 million in aggregate to the dealers and received initial deliveries of 8,730,766 Common Shares in aggregate that were recorded in treasury stock at fair value based on the closing price on March 6, 2023 of $91.63 of $800 million. The remaining $200 million was recorded as additional paid-in-capital, representing the value of the forward contract to purchase additional shares. The final number of Common Shares to be received from the dealers will be based on the volume-weighted average share price of Common Shares during the term of the applicable transaction, less a discount. At settlement, under certain circumstances, the dealers may be required to deliver additional Common Shares to Con Edison or Con Edison may be required either to make a cash payment or deliver Common Shares to the dealers. The final settlement of the transactions under the ASR Contracts is expected to occur no later than the third quarter of 2023. The terms of the accelerated share repurchases under the ASR Contracts are subject to adjustment if Con Edison enters into or announces certain types of transactions or takes certain corporate actions. See Note C to the First Quarter Financial Statements.

(d) On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.

The following tables present the estimated effect of major factors on earnings per share and net income for common stock for the three months ended March 31, 2023 as compared with the 2022 period.


Variation for the Three Months Ended March 31, 2023 vs. 2022
	Net Income for Common Stock (Millions of Dollars)	Earnings per Share
CECONY (a)
Gas base rate increase	$94	$0.27

Electric base rate increase	15	0.04
Higher income from allowance for funds used during construction	7	0.02
Lower storm-related costs	7	0.02
Lower operation and maintenance expense for stock-based compensation, health care costs, and injuries and damages	5	0.02
Change in incentives earned under the electric and gas earnings adjustment mechanisms (EAMs) and positive incentives	3	0.02
Weather impact on steam revenue	(21)	(0.06)

Accretive effect of share repurchase	—	0.01





Other	19	0.03
Total CECONY	129	0.37
O&R (a)
Electric base rate increase	2	—
Gas base rate increase	2	0.01
Higher storm-related costs	(2)	(0.01)

Other	(1)	—
Total O&R	1	—
Clean Energy Businesses (b)











Total Clean Energy Businesses	(84)	(0.23)
Con Edison Transmission
Higher investment income	2	0.01




Other	—	(0.01)

Total Con Edison Transmission	2	—
Other, including parent company expenses
Gain and other impacts related to the sale of the Clean Energy Businesses	763	2.16
Net mark-to-market effects	4	0.01
HLBV effects	3	0.01

Accretive effect of share repurchase	—	0.01
Higher interest income	7	0.02
Other	6	0.01
Total Other, including parent company expenses	783	2.22
Total Reported (GAAP basis)	$831	$2.36

a.Under the revenue decoupling mechanisms in the Utilities’ NY electric and gas rate plans and the weather-normalization clause applicable to their gas businesses, revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. In general, the Utilities recover on a current basis the fuel, gas purchased for resale and purchased power costs they incur in supplying energy to their full-service customers. Accordingly, such costs do not generally affect Con Edison’s results of operations.
b. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses.

The Companies’ other operations and maintenance expenses for the three months ended March 31, 2023 and 2022 were as follows:


	For the Three Months Ended March 31,
(Millions of Dollars)	2023	2022
CECONY
Operations	$423	$437
Pensions and other postretirement benefits	86	102
Health care and other benefits	37	35
Regulatory fees and assessments (a)	89	87
Other	115	80
Total CECONY	$750	$741
O&R	97	86
Clean Energy Businesses (b)	48	76
Con Edison Transmission	3	4
Other (c)	(2)	(2)
Total other operations and maintenance expenses	$896	$905

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

(b)On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.

(c)Other includes the parent company, Con Edison’s tax equity investments, the deferred project held for sale and consolidation adjustments.

A discussion of the results of operations by principal business segment for the three months ended March 31, 2023 and 2022 follows. For additional business segment financial information, see Note M to the First Quarter Financial Statements.

The Companies’ results of operations for the three months ended March 31, 2023 and 2022 were as follows:


	CECONY		O&R		Clean Energy Businesses (a)		Con Edison Transmission		Other (b)		Con Edison (c)
(Millions of Dollars)	2023	2022	2023	2022	2023	2022	2023	2022	2023	2022	2023	2022
Operating revenues	$3,953	$3,517	$321	$285	$129	$260	$1	$1	$(1)	$(3)	$4,403	$4,060
Purchased power	631	430	71	59	—	—	—	—	—	(2)	702	487
Fuel	189	144	—	—	—	—	—	—	—	—	189	144
Gas purchased for resale	365	324	63	47	41	72	—	—	(1)	—	468	443
Other operations and maintenance	750	741	97	86	48	76	3	4	(2)	(2)	896	905
Depreciation and amortization	473	446	25	24	—	59	—	—	1	—	499	529
Taxes, other than income taxes	736	721	24	23	4	7	—	—	1	2	765	753
Gain on sale of the Clean Energy Businesses	—	—	—	—	—	—	—	—	855	—	855	—



Operating income (loss)	809	711	41	46	36	46	(2)	(3)	855	(1)	1,739	799
Other income (deductions)	182	81	12	5	1	—	7	4	(6)	—	196	90
Net interest expense	233	200	13	11	15	(37)	2	1	(1)	7	262	182
Income (loss) before income tax expense	758	592	40	40	22	83	3	—	850	(8)	1,673	707
Income tax expense	154	117	9	10	3	24	1	—	76	2	243	153
Net income (loss)	$604	$475	$31	$30	$19	$59	$2	$—	$774	$(10)	$1,430	$554
Income (loss) attributable to non-controlling interest	—	—	—	—	(3)	(48)	—	—	—	—	(3)	(48)
Net income (loss) for common stock	$604	$475	$31	$30	$22	$107	$2	$—	$774	$(10)	$1,433	$602

(a)On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.

(b)Other includes the parent company, Con Edison’s tax equity investments, the deferred project held for sale and consolidation adjustments. .

(c)Represents the consolidated results of operations of Con Edison and its businesses.

CECONY


	For the Three Months Ended March 31, 2023				For the Three Months Ended March 31, 2022
(Millions of Dollars)	Electric	Gas	Steam	2023 Total	Electric	Gas	Steam	2022 Total	2023-2022 Variation
Operating revenues	$2,356	$1,291	$306	$3,953	$2,084	$1,131	$302	$3,517	$436
Purchased power	613	—	18	631	411	—	20	431	200
Fuel	79	—	110	189	66	—	78	144	45
Gas purchased for resale	—	365	—	365	—	323	—	323	42
Other operations and maintenance	568	125	57	750	573	118	50	741	9
Depreciation and amortization	343	105	25	473	332	90	24	446	27
Taxes, other than income taxes	559	137	40	736	532	149	40	721	15
Operating income	$194	$559	$56	$809	$170	$451	$90	$711	$98

Electric

CECONY’s results of electric operations for the three months ended March 31, 2023 compared with the 2022 period were as follows:


	For the Three Months Ended
(Millions of Dollars)	March 31, 2023	March 31, 2022	Variation
Operating revenues	$2,356	$2,084	$272
Purchased power	613	411	202
Fuel	79	66	13
Other operations and maintenance	568	573	(5)
Depreciation and amortization	343	332	11
Taxes, other than income taxes	559	532	27
Electric operating income	$194	$170	$24

CECONY’s electric sales and deliveries for the three months ended March 31, 2023 compared with the 2022 period were:


	Millions of kWh Delivered						Revenues in Millions (a)
	For the Three Months Ended						For the Three Months Ended
Description	March 31, 2023	March 31, 2022	Variation	Percent Variation			March 31, 2023	March 31, 2022	Variation	Percent Variation
Residential/Religious (b)	2,614	2,641	(27)	(1.0)	%		$712	$783	$(71)	(9.1)	%
Commercial/Industrial	2,787	2,515	272	10.8			676	614	62	10.1
Retail choice customers	4,805	5,144	(339)	(6.6)			463	537	(74)	(13.8)
NYPA, Municipal Agency and other sales	2,330	2,398	(68)	(2.8)			158	162	(4)	(2.5)
Other operating revenues (c)	—	—	—	—			347	(12)	359	Large
Total	12,536	12,698	(162)	(1.3)	%	(d)	$2,356	$2,084	$272	13.1	%

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

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

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

(d)After adjusting for variations, primarily weather and billing days, electric delivery volumes in CECONY’s service area increased 0.8 percent in the three months ended March 31, 2023 compared with the 2022 period.

Operating revenues increased $272 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher purchased power expenses ($202 million), an increase in revenues from the electric rate plan ($20 million) and higher fuel expenses ($13 million).

Purchased power expenses increased $202 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher unit costs ($189 million) and higher purchased volumes ($14 million).

Fuel expenses increased $13 million in the three months ended March 31, 2023 compared with the 2022 period due to higher unit costs ($15 million), offset by lower purchased volumes from the company's electric generating facilities ($2 million).

Other operations and maintenance expenses decreased $5 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to lower stock-based compensation ($3 million) and lower costs for injuries and damages ($2 million).

Depreciation and amortization expenses increased $11 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher electric utility plant balances.

Taxes, other than income taxes increased $27 million in the three months ended March 31, 2023 compared with the 2022 period due to higher property taxes ($38 million) and higher state and local revenue taxes ($2 million), offset in part by lower deferral of over-collected property taxes ($14 million).

Gas

CECONY’s results of gas operations for the three months ended March 31, 2023 compared with the 2022 period were as follows:


	For the Three Months Ended
(Millions of Dollars)	March 31, 2023	March 31, 2022	Variation
Operating revenues	$1,291	$1,131	$160
Gas purchased for resale	365	323	42
Other operations and maintenance	125	118	7
Depreciation and amortization	105	90	15
Taxes, other than income taxes	137	149	(12)
Gas operating income	$559	$451	$108

CECONY’s gas sales and deliveries, excluding off-system sales, for the three months ended March 31, 2023 compared with the 2022 period were:


	Thousands of Dt Delivered						Revenues in Millions (a)
	For the Three Months Ended						For the Three Months Ended
Description	March 31, 2023	March 31, 2022	Variation	Percent Variation			March 31, 2023	March 31, 2022	Variation	Percent Variation
Residential	22,508	25,058	(2,550)	(10.2)	%		$558	$522	$36	6.9	%
General	12,526	13,960	(1,434)	(10.3)			255	210	45	21.4
Firm transportation	31,657	32,847	(1,190)	(3.6)			403	348	55	15.8
Total firm sales and transportation	66,691	71,865	(5,174)	(7.2)	%	(b)	$1,216	$1,080	$136	12.6	%
Interruptible sales (c)	1,863	2,697	(834)	(30.9)			20	20	—	—
NYPA	9,973	7,785	2,188	28.1			1	1	—	—
Generation plants	11,781	9,952	1,829	18.4			8	5	3	60.0
Other	6,173	5,979	194	3.2			12	12	—	—
Other operating revenues (d)	—	—	—	—			34	13	21	Large
Total	96,481	98,278	(1,797)	(1.8)	%		$1,291	$1,131	$160	14.1	%

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

(b)After adjusting for variations, primarily billing days, firm gas sales and transportation volumes in the company’s service area increased 7.6 percent in the three months ended March 31, 2023 compared with the 2022 period.

(c)Includes 654 thousand and 1,391 thousand of Dt for the 2023 and 2022 periods, respectively, that are also reflected in firm transportation and other.

(d)Other gas operating revenues generally reflect changes in the revenue decoupling mechanism and weather normalization clause current asset or regulatory liability and changes in regulatory assets and liabilities in accordance with other provisions of the company’s rate plans.

Operating revenues increased $160 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to an increase in revenues from the gas rate plan ($127 million) and higher gas purchased for resale ($42 million).

Gas purchased for resale increased $42 million in the three months ended March 31, 2023 compared with the 2022 period due to higher unit costs ($157 million), offset in part by lower purchased volumes ($115 million).

Other operations and maintenance expenses increased $7 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher gas operations department costs ($7 million).

Depreciation and amortization expenses increased $15 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher gas utility plant balances.

Taxes, other than income taxes decreased $12 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to a lower deferral of over-collected property taxes ($24 million), offset in part by higher property taxes ($7 million) and higher state and local taxes ($6 million).

Steam

CECONY’s results of steam operations for the three months ended March 31, 2023 compared with the 2022 period were as follows:


	For the Three Months Ended
(Millions of Dollars)	March 31, 2023	March 31, 2022	Variation
Operating revenues	$306	$302	$4
Purchased power	18	20	(2)
Fuel	110	78	32
Other operations and maintenance	57	50	7
Depreciation and amortization	25	24	1
Taxes, other than income taxes	40	40	—
Steam operating income	$56	$90	$(34)

CECONY’s steam sales and deliveries for the three months ended March 31, 2023 compared with the 2022 period were:


	Millions of Pounds Delivered						Revenues in Millions
	For the Three Months Ended						For the Three Months Ended
Description	March 31, 2023	March 31, 2022	Variation	Percent Variation			March 31, 2023	March 31, 2022	Variation	Percent Variation
General	261	315	(54)	(17.1)	%		$14	$15	$(1)	(6.7)	%
Apartment house	2,012	2,252	(240)	(10.7)			80	76	4	5.3
Annual power	4,359	5,083	(724)	(14.2)			199	202	(3)	(1.5)
Other operating revenues (a)	—	—	—	—			13	9	4	44.4
Total	6,632	7,650	(1,018)	(13.3)	%	(b)	$306	$302	$4	1.3	%

(a)Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plan.

(b)After adjusting for variations, primarily weather and billing days, steam sales and deliveries increased 4.5 percent in the three months ended March 31, 2023 compared with the 2022 period.

Operating revenues increased $4 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher fuel expenses ($32 million), offset in part by the impact of warmer winter weather ($28 million).

Purchased power decreased $2 million in the three months ended March 31, 2023 compared with the 2022 period due to lower unit costs ($3 million), offset by higher purchased volumes ($1 million).

Fuel expenses increased $32 million in the three months ended March 31, 2023 compared with the 2022 period due to higher unit costs ($69 million), offset by lower purchased volumes from the company's steam generating facilities ($37 million).

Other operations and maintenance expenses increased $7 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher costs for pension and other postretirement benefits, reflecting reconciliation to the rate plan level ($6 million).

Depreciation and amortization expenses increased $1 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher steam utility plant balances.

Other Income (Deductions)

Other income increased $101 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to lower costs associated with components of pension and other postretirement benefits other than service cost ($102 million), offset in part by lower expenses resulting from investment performance in a deferred income plan ($3 million).

Net Interest Expense

Net Interest Expense increased $33 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher interest on short-term debt ($20 million), higher interest on long-term debt ($17 million) and higher non-operating interest on deposits ($3 million), offset in part by an increase in allowance for borrowed funds used during construction ($9 million).

Income Tax Expense

Income taxes increased $37 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher income before income tax expense ($35 million), and higher state income taxes ($8 million), offset in part by lower allowance for uncollectible accounts ($7 million).

O&R


	For the Three Months Ended March 31, 2023			For the Three Months Ended March 31, 2022
(Millions of Dollars)	Electric	Gas	2023 Total	Electric	Gas	2022 Total	2023-2022 Variation
Operating revenues	$182	$139	$321	$166	$119	$285	$36
Purchased power	71	—	71	59	—	59	12
Gas purchased for resale	—	63	63	—	47	47	16
Other operations and maintenance	77	20	97	67	19	86	11
Depreciation and amortization	18	7	25	17	7	24	1
Taxes, other than income taxes	15	9	24	15	8	23	1
Operating income	$1	$40	$41	$8	$38	$46	$(5)

Electric

O&R’s results of electric operations for the three months ended March 31, 2023 compared with the 2022 period were as follows:


	For the Three Months Ended
(Millions of Dollars)	March 31, 2023	March 31, 2022	Variation
Operating revenues	$182	$166	$16
Purchased power	71	59	12
Other operations and maintenance	77	67	10
Depreciation and amortization	18	17	1
Taxes, other than income taxes	15	15	—
Electric operating income	$1	$8	$(7)

O&R’s electric sales and deliveries for the three months ended March 31, 2023 compared with the 2022 period were:


	Millions of kWh Delivered						Revenues in Millions (a)
	For the Three Months Ended						For the Three Months Ended
Description	March 31, 2023	March 31, 2022	Variation	Percent Variation			March 31, 2023	March 31, 2022	Variation	Percent Variation
Residential/Religious (b)	467	417	50	12.0	%		$107	$85	$22	25.9	%
Commercial/Industrial	262	227	35	15.4			41	33	8	24.2
Retail choice customers	495	629	(134)	(21.3)			30	44	(14)	(31.8)
Public authorities	27	25	2	8.0			3	4	(1)	(25.0)
Other operating revenues (c)	—	—	—	—			1	—	1	Large
Total	1,251	1,298	(47)	(3.6)	%	(d)	$182	$166	$16	9.6	%

(a)O&R’s NY electric delivery revenues are subject to a revenue decoupling mechanism, as a result of which delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. Effective July 2021, the majority of O&R’s electric distribution revenues in NJ are subject to a conservation incentive program, as a result of which distribution revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s electric transmission revenues in NJ are not subject to a conservation incentive program, and as a result, changes in such volumes do impact revenues.

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

(c)Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s electric rate plan.

(d)After adjusting for weather and other variations, electric delivery volumes in O&R’s service area decreased 1.9 percent in the three months ended March 31, 2023 compared with the 2022 period.

Operating revenues increased $16 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher purchased power expenses ($12 million) and higher revenues from the NY electric rate plan ($2 million).

Purchased power expenses increased $12 million in the three months ended March 31, 2023 compared with the 2022 period due to higher unit costs ($8 million), and higher purchased volumes ($4 million).

Other operations and maintenance expenses increased $10 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher non-deferred storm costs ($3 million), higher tree trimming expenses ($2 million), higher pension and other postretirement benefit costs reflecting reconciliation to the rate plan level ($1 million), higher customer assistance expenses ($1 million) and higher health care costs ($1 million).

Depreciation and amortization expenses increased $1 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher electric utility plant balances.

Gas

O&R’s results of gas operations for the three months ended March 31, 2023 compared with the 2022 period were as follows:


	For the Three Months Ended
(Millions of Dollars)	March 31, 2023	March 31, 2022	Variation
Operating revenues	$139	$119	$20
Gas purchased for resale	63	47	16
Other operations and maintenance	20	19	1
Depreciation and amortization	7	7	—
Taxes, other than income taxes	9	8	1
Gas operating income	$40	$38	$2

O&R’s gas sales and deliveries, excluding off-system sales, for the three months ended March 31, 2023 compared with the 2022 period were:


	Thousands of Dt Delivered						Revenues in Millions (a)
	For the Three Months Ended						For the Three Months Ended
Description	March 31, 2023	March 31, 2022	Variation	Percent Variation			March 31, 2023	March 31, 2022	Variation	Percent Variation
Residential	5,208	6,165	(957)	(15.5)	%		$100	$84	$16	19.0	%
General	1,094	1,350	(256)	(19.0)			18	16	2	12.5
Firm transportation	2,180	3,074	(894)	(29.1)			17	20	(3)	(15.0)
Total firm sales and transportation	8,482	10,589	(2,107)	(19.9)	%	(b)	$135	$120	$15	12.5	%
Interruptible sales	957	1,214	(257)	(21.2)			2	2	—	—
Generation plants	1	5	(4)	(80.0)			—	—	—	—
Other	294	285	9	3.2			—	—	—	—
Other gas revenues	—	—	—	—			2	(3)	5	Large
Total	9,734	12,093	(2,359)	(19.5)	%		$139	$119	$20	16.8	%

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

(b)After adjusting for weather and other variations, total firm sales and transportation volumes decreased 0.3 percent in the three months ended March 31, 2023 compared with the 2022 period.

Operating revenues increased $20 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher gas purchased for resale ($16 million) and higher revenues from the NY gas rate plan ($3 million).

Gas purchased for resale increased $16 million in the three months ended March 31, 2023 compared with the 2022 period due to higher unit costs ($35 million), offset in part by lower purchased volumes ($19 million).

Other operations and maintenance expenses increased $1 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher pension and other postretirement benefit costs, reflecting reconciliation to the rate plan level.

Taxes, other than income taxes increased $1 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher property taxes and higher payroll taxes.

Income Tax Expense

Income taxes decreased $1 million in the three months ended March 31, 2023 compared with the 2022 period

primarily due to lower allowance for uncollectible accounts.

Clean Energy Businesses

On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements. The Clean Energy Businesses’ results of operations for the three months ended March 31, 2023 compared with the 2022 period were as follows:


	For the Three Months Ended
(Millions of Dollars)	March 31, 2023	March 31, 2022	Variation
Operating revenues	$129	$260	$(131)


Gas purchased for resale	41	72	(31)
Other operations and maintenance	48	76	(28)
Depreciation and amortization	—	59	(59)
Taxes, other than income taxes	4	7	(3)



Operating income	$36	$46	$(10)

Operating revenues decreased $131 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to the sale of the Clean Energy Businesses.

Gas purchased for resale decreased $31 million in the three months ended March 31, 2023 compared with the 2022 period due to the sale of the Clean Energy Businesses.

Other operations and maintenance expenses decreased $28 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to the sale of the Clean Energy Businesses.

Depreciation and amortization expenses decreased $59 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to the sale of the Clean Energy Businesses.

Net Interest Expense

Net interest expense increased $52 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to lower unrealized gains on interest rate swaps in the 2023 period. On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses and impact for 2023 is shown through the date of sale. See Note S and Note T to the First Quarter Financial Statements.

Income Tax Expense

Income taxes decreased $21 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to lower income before income tax expense ($13 million), lower loss attributable to non-controlling interest ($11 million), lower state income tax expense ($3 million), offset in part by lower renewable energy credits due to the sale of the Clean Energy Businesses ($4 million) and an increase in the valuation allowance on deferred state net operating losses ($2 million).

Income (Loss) Attributable to Non-Controlling Interest

Loss attributable to non-controlling interest decreased $45 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to the sale of the Clean Energy Businesses.

Con Edison Transmission

Other Income (Deductions)

Other income increased $3 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher investment income from NY Transco ($3 million).

Net Interest Expense

Net interest expense increased $1 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher balances and interest on an intercompany loan.

Income Tax Expense

Income taxes increased $1 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher income before income tax expense.

Other

Income Tax Expense

Income taxes increased $74 million in the three months ended March 31, 2023 compared with the 2022 period primarily due to higher income before income tax expense from the gain on the sale of the Clean Energy Businesses ($182 million), higher state income taxes ($19 million), higher state income taxes due to unitary adjustment ($17 million), increase in valuation allowance on state NOLs ($8 million), offset in part by the recognition of unamortized deferred investment tax credits ($107 million), lower state tax income expense due to changes in state apportionments, net of federal income taxes ($44 million) and lower loss attributable to non-controlling interest ($3 million).

Liquidity and Capital Resources

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

The Companies’ cash, temporary cash investments and restricted cash resulting from operating, investing and financing activities for the three months ended March 31, 2023 and 2022 are summarized as follows:


	For the Three Months Ended March 31,
	CECONY		O&R		Clean Energy Businesses (d)		Con Edison Transmission		Other (a)(b)		Con Edison (c)
(Millions of Dollars)	2023	2022	2023	2022	2023	2022	2023	2022	2023	2022	2023	2022
Operating activities	$45	$477	$44	$52	$—	$13	$(152)	$10	$155	$(79)	$92	$473
Investing activities	(1,077)	(873)	(68)	(49)	(248)	(25)	(26)	(10)	4,037	5	2,618	(952)
Financing activities	12	(471)	21	(1)	—	(56)	189	—	(3,688)	58	(3,466)	(470)
Net change for the period	(1,020)	(867)	(3)	2	(248)	(68)	11	—	504	(16)	(756)	(949)
Balance at beginning of period	1,056	920	35	29	248	178	—	—	191	19	1,530	1,146
Balance at end of period (c)	$36	$53	$32	$31	$—	$110	$11	$—	$695	$3	$774	$197
Less: Cash balances held for sale (d)	—	—	—	—	—	—	—	—	3	—	3	—
Balance at end of period excluding held for sale	$36	$53	$32	$31	$—	$110	$11	$—	$692	$3	$771	$197

(a) Other includes the parent company, Con Edison’s tax equity investments, the deferred project held for sale and consolidation adjustments.

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

(c) See "Reconciliation of Cash, Temporary Cash Investments and Restricted Cash" in Note A to the First Quarter Financial Statements.

(d) On March 1, 2023, Con Edison sold substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.

Cash Flows from Operating Activities

The Utilities’ cash flows from operating activities primarily reflect their energy sales and deliveries and cost of operations. The volume of energy sales and deliveries is primarily affected by factors external to the Utilities, such as customer demand, weather, market prices for energy and economic conditions. Measures that promote distributed energy resources, such as distributed generation, demand reduction and energy efficiency, also affect the volume of energy sales and deliveries.

The decline in business activity in the Utilities’ service territory from 2020 through 2022 due to the COVID-19 pandemic and the Utilities' suspension of service disconnections, bill collection activities and certain charges and fees resulted in a slower recovery of cash from outstanding customer accounts receivable balances, material increases in customer accounts receivable balances, increases to the allowance for uncollectible accounts, and may result in increases to write-offs of customer accounts, as compared to prior to the COVID-19 pandemic. Under the revenue decoupling mechanisms in the Utilities’ NY electric and gas rate plans, changes in delivery volumes from levels assumed when rates were approved may affect the timing of cash flows, but largely not net income. The prices at which the Utilities provide energy to their customers are determined in accordance with their rate plans. During 2022, increases in electric and gas commodity prices further contributed to a slower recovery of cash from outstanding customer accounts receivable balances, increases to the allowance for uncollectible accounts, and increases to write-offs of customer accounts receivable balances. In general, changes in the Utilities’ cost of purchased power, fuel and gas may affect the timing of cash flows, but not net income, because the costs are recovered in accordance with rate plans. See “Financial and Commodity Market Risks – Commodity Price Risk,” below.

Net income is the result of cash and non-cash (or accrual) transactions. Only cash transactions affect the Companies’ cash flows from operating activities. Principal non-cash charges or credits include depreciation, deferred income tax expense, amortizations of certain regulatory assets and liabilities and accrued unbilled revenue. Non-cash charges or credits may also be accrued under the revenue decoupling and cost reconciliation mechanisms in the Utilities’ NY electric and gas rate plans.

Net cash flows from operating activities for the three months ended March 31, 2023 for Con Edison and CECONY were $381 million lower and $432 million lower, respectively, than in the 2022 period. The change in net cash flows for Con Edison primarily reflects lower net deferred credits, noncurrent liabilities and other regulatory liabilities balances ($566 million), a decrease in accounts payable ($387 million), a decrease in accrued interest ($32 million) and lower recoveries of depreciation and amortization ($30 million), offset in part by a higher decrease of accounts receivable balances from customers net of allowance for uncollectible accounts ($374 million) (see “COVID-19 Regulatory Matters” in Note B to the First Quarter Financial Statements and “Coronavirus Disease 2019 (COVID-19) Impacts", "Accounting Considerations” and “Liquidity and Financing,” above) and an increase in accrued taxes ($279 million). For CECONY, changes in net cash flows primarily reflects lower net deferred credits, noncurrent liabilities and other regulatory liabilities balances ($505 million), a decrease in accounts payable ($239 million), an increase in prepayments ($107 million) and a decrease in accrued taxes to affiliated companies ($88 million), offset in part by a higher decrease of accounts receivable balances from customers net of allowance for uncollectible accounts ($345 million) (see “COVID-19 Regulatory Matters” in Note B to the First Quarter Financial Statements and “Coronavirus Disease 2019 (COVID-19) Impacts", "Accounting Considerations” and “Liquidity and Financing,” above) and higher deferred income taxes ($178 million).

Cash Flows From (Used in) Investing Activities

Net cash flows from investing activities for Con Edison were $3,570 million higher for the three months ended March 31, 2023 compared with the 2022 period. Net cash flows used in investing activities for CECONY were $204 million higher for the three months ended March 31, 2023 compared with the 2022 period. The change for Con Edison primarily reflects the proceeds from substantially all of the assets of the Clean Energy Businesses, net of cash and cash equivalents sold ($3,927 million), offset in part by an increase in utility construction expenditures ($213 million), an increase in non-utility construction expenditures ($115 million), higher investments ($15 million) and higher cost of removal less salvage ($14 million). The change for CECONY primarily reflects an increase in utility construction expenditures ($191 million) and higher cost of removal less salvage ($13 million). Pursuant to their rate plans, the Utilities recover the cost of utility construction expenditures from customers, including an approved rate of return (before and after being placed in service and or AFUDC before being placed in service). Increases in the amount of utility construction expenditures may temporarily increase the amount of short-term debt issued by the Utilities prior to the long-term financing of such amounts.

Cash Flows From (Used In) Financing Activities

Net cash flows used in financing activities for Con Edison were $2,996 million higher for the three months ended March 31, 2023 compared with the 2022 period. Net cash flows from financing activities for CECONY were $483 million higher for the three months ended March 31, 2023 compared with the 2022 period.

In March 2023, Con Edison entered into accelerated share repurchase agreements (ASR Contracts) with two dealers to repurchase $1,000 million in aggregate of Con Edison’s Common Shares ($.10 par value) (Common Shares). Pursuant to the ASR Contracts, Con Edison made payments of $1,000 million in aggregate to the dealers and received initial deliveries of 8,730,766 Common Shares in aggregate. See Note C to the First Quarter Financial Statements.

In February 2023, CECONY issued $500 million aggregate principal amount of 5.20% debentures, due 2033. See Note C to the First Quarter Financial Statements.

Con Edison’s cash flows from financing activities for the three months ended March 31, 2023 and 2022 also reflect the net retirement of short-term debt of $2,454 million.

Cash flows from financing activities of the Companies also reflect commercial paper issuances and repayments. The commercial paper amounts outstanding at March 31, 2023 and 2022 and the average daily balances for the three months ended March 31, 2023 and 2022 for Con Edison and CECONY were as follows:


	2023				2022
(Millions of Dollars, except Weighted Average Yield)	Outstanding at March 31,		Daily average		Outstanding at March 31,		Daily average
Con Edison	$411		$1,858		$1,313		$1,275
CECONY	$405		$1,773		$1,061		$1,089
Weighted average yield	5.4	%	4.8	%	0.8	%	0.4	%

Capital Requirements and Resources

Contractual Obligations

Con Edison’s material obligations to make payments pursuant to contracts totaled $53,645 million and $57,931 million at March 31, 2023 and December 31, 2022, respectively. The decrease at March 31, 2023 is due primarily to Con Edison completing the sale of substantially all of the assets of the Clean Energy Businesses on March 1, 2023. See Note S and Note T to the First Quarter Financial Statements.

Capital Resources

For each of the Companies, the common equity ratio at March 31, 2023 and December 31, 2022 was:


	Common Equity Ratio (Percent of total capitalization)
	March 31, 2023	December 31, 2022
Con Edison	50.2	50.9
CECONY	49.1	46.9

Assets, Liabilities and Equity

The Companies' assets, liabilities, and equity at March 31, 2023 and December 31, 2022 are summarized as follows.


	CECONY		O&R		Clean Energy Businesses (c)		Con Edison Transmission		Other (a)		Con Edison (b)
(Millions of Dollars)	2023	2022	2023	2022	2023	2022	2023	2022	2023	2022	2023	2022
ASSETS
Current assets	$4,669	$5,247	$314	$332	$—	$879	$15	$4	$870	$6,510	$5,868	$12,972
Investments	558	539	20	20	—	—	313	286	14	(4)	905	841
Net plant	44,507	44,011	2,766	2,738	—	4,718	17	17	—	(4,718)	47,290	46,766
Other noncurrent assets	7,919	7,648	404	421	—	1,627	7	7	411	(1,217)	8,741	8,486
Total Assets	$57,653	$57,445	$3,504	$3,511	$—	$7,224	$352	$314	$1,295	$571	$62,804	$69,065

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities	$3,607	$6,036	$320	$409	$—	$1,596	$7	$163	$961	$3,132	$4,895	$11,336
Noncurrent liabilities	15,576	15,451	1,080	1,103	—	338	(85)	(86)	(150)	(113)	16,421	16,693
Long-term debt	19,578	19,080	1,068	1,068	—	2,292	—	—	(1)	(2,293)	20,645	20,147
Equity	18,892	16,878	1,036	931	—	2,998	430	237	485	(155)	20,843	20,889
Total Liabilities and Equity	$57,653	$57,445	$3,504	$3,511	$—	$7,224	$352	$314	$1,295	$571	$62,804	$69,065

(a) Other includes the parent company, Con Edison’s tax equity investments, the deferred project held for sale and consolidation adjustments.

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

(c) On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.

CECONY

Current assets at March 31, 2023 were $578 million lower than at December 31, 2022. The change in current assets primarily reflects a decrease in cash and temporary cash investments ($1,020 million), a decrease to accrued unbilled revenues ($173 million), offset in part by an increase in prepayments ($574 million), and an increase in the fair value of short-term derivative assets ($83 million).

Investments at March 31, 2023 were $19 million higher than at December 31, 2022. The change in investments primarily reflects an increase in supplemental retirement income plan assets ($19 million). See Note E to the First Quarter Financial Statements.

Net plant at March 31, 2023 was $496 million higher than at December 31, 2022. The change in net plant primarily reflects an increase in electric ($472 million), gas ($149 million), steam ($30 million) and general ($36 million) plant balances and an increase in construction work in progress ($94 million), offset in part by an increase in accumulated depreciation ($285 million).

Other noncurrent assets at March 31, 2023 were $271 million higher than at December 31, 2022. The change in other noncurrent assets primarily reflects an increase in the regulatory asset for COVID - 19 arrears relief deferrals programs ($335 million) and an increase in the regulatory asset for unrecognized pension and other postretirement costs to reflect the final actuarial valuation, as measured at December 31, 2022, of the pension and other retiree benefit plans in accordance with the accounting rules for retirement benefits ($43 million). The change in the regulatory asset also reflects the period's amortization of accounting costs. The increase is offset in part by a decrease in the fair value of deferred assets ($55 million), a decrease in pension and retiree benefits ($48 million) and a decrease in operating lease right-of-use asset ($12 million). See Notes B, E and F to the First Quarter Financial Statements.

Current liabilities at March 31, 2023 were $2,429 million lower than at December 31, 2022. The change in current liabilities primarily reflects a decrease in notes payable ($1,895 million) and a decrease in accounts payable ($502 million).

Noncurrent liabilities at March 31, 2023 were $125 million higher than at December 31, 2022. The change in noncurrent liabilities primarily reflects an increase in deferred income taxes and unamortized investment tax credits

($387 million) primarily due to accelerated tax depreciation, repair deductions and the amortization of excess deferred federal income taxes due to the Tax Cuts and Jobs Act of 2017 (TCJA). See Note J to the First Quarter Financial Statements. The change also reflects an increase in the fair value of derivative liabilities ($120 million), offset in part by a decrease in the regulatory liability for unrecognized pension and other postretirement costs to reflect the final actuarial valuation, as measured at December 31, 2022, of the pension and other retiree benefit plans in accordance with the accounting rules for retirement benefits ($220 million), a decrease in the regulatory liability for deferred derivative gains - long term ($111 million) and a decrease in the regulatory liability for future income tax ($57 million). See Notes E and F to the First Quarter Financial Statements.

Long-term debt at March 31, 2023 was $498 million higher than at December 31, 2022. The change in long-term

debt primarily reflects CECONY's issuance of $500 million aggregate principal amount of 5.20% debentures, due 2033, offset in part by, the amortization of unamortized debt expense over the three month period. See Note C to the First Quarter Financial Statements

Equity at March 31, 2023 was $2,014 million higher than at December 31, 2022. The change in equity primarily reflects capital contributions from Con Edison ($1,675 million) in 2023, net income for the three months ended March 31, 2023 ($604 million), offset in part by common stock dividends to Con Edison ($264 million) in 2023.

O&R

Current assets at March 31, 2023 were $18 million lower than at December 31, 2022. The change in current assets primarily reflects a decrease in gas storage, at average cost ($15 million), a decrease in accrued unbilled revenue ($13 million), offset in part by an increase in accounts receivables, net of allowance for uncollectible accounts ($8 million) (see “COVID-19 Regulatory Matters” in Note B to the First Quarter Financial Statements and “Coronavirus Disease 2019 (COVID-19) Impacts - Accounting Considerations” and “Liquidity and Financing,” above) and higher prepayments ($4 million).

Net plant at March 31, 2023 was $28 million higher than at December 31, 2022. The change in net plant primarily reflects an increase in electric ($24 million), gas ($18 million), and general ($9 million) plant balances, offset in part by an increase in accumulated depreciation ($17 million) and a decrease in construction work in progress ($6 million).

Other noncurrent assets at March 31, 2023 were $17 million lower than at December 31, 2022. The change in

other noncurrent assets primarily reflects a decrease in pension and retiree benefits ($7 million), a decrease in the fair value of derivative assets ($6 million) and a decrease in regulatory assets ($2 million).

Current liabilities at March 31, 2023 were $89 million lower than at December 31, 2022. The change in current liabilities primarily reflects a decrease in notes payable ($52 million), a decrease in accounts payable ($20 million) and a decrease in accounts payable to affiliated companies ($16 million).

Noncurrent liabilities at March 31, 2023 were $23 million lower than at December 31, 2022. The change in noncurrent liabilities primarily reflects a decrease in long-term deferred derivative gains ($15 million), the regulatory liabilities for unrecognized pension and other postretirement costs ($3 million) and low income aggregation program ($2 million).

Equity at March 31, 2023 was $105 million higher than at December 31, 2022. The change in equity primarily reflects capital contributions from Con Edison ($90 million) in 2023, net income for the three months ended March 31, 2023 ($31 million), offset in part by common stock dividends to Con Edison ($16 million) in 2023.

Clean Energy Businesses

On March 1, 2023, Con Edison completed the sale of substantially all of the assets of the Clean Energy Businesses. See Note S and Note T to the First Quarter Financial Statements.

Con Edison Transmission

Currents assets at March 31, 2023 were $11 million higher than at December 31, 2022. The increase in current assets primarily reflects an equity contribution from Con Edison.

Investments at March 31, 2023 were $27 million higher than at December 31, 2022. The increase in investments reflects additional investment in NY Transco ($26 million).

Equity at March 31, 2023 was $193 million higher than at December 31, 2022. The change in equity primarily reflects an equity contribution from Con Edison, the proceeds of which were primarily used to repay an intercompany loan.

Utility Regulation

Cyber Regulation

In March 2023, the NY State legislature amended the NY State Public Service Law, directing the NYSPSC to develop rules to direct electric and gas utilities, among other things, to: (i) take necessary measures to monitor and protect customer privacy, including, but not limited to, customer electric and gas consumption data, from unauthorized disclosure or unconsented sharing, (ii) develop and implement tools to monitor operational control networks to detect unauthorized network behavior, including the utilities' industrial control systems that support distribution, transmission and advanced metering infrastructure control centers and (iii) mandate that utilities’ emergency response plans include cyber-attack response plans. The law also states that customer electric and gas consumption data should be considered confidential.

Environmental Matters

Clean Energy Future

Clean Energy Goals

In March and April of 2023, CECONY and O&R applied for federal grants of $177 million and $125 million, respectively, appropriated under the Infrastructure Investment and Jobs Act (IIJA). In addition, seven states, including NY State, submitted a proposal for a Northeast Regional Clean Hydrogen Hub (the Hydrogen Hub) to the U.S. Department of Energy for funding under the IIJA. CECONY is seeking up to $116 million of funding to use carbon-free hydrogen to produce steam at its East River steam generating station as part of the Hydrogen Hub proposal. Federal grants obtained pursuant to the IIJA are expected to be used to reduce customers’ costs for investments in CECONY’s electric and steam systems and O&R's electric system.

In April 2023, the NYSPSC approved CECONY’s December 2022 petition seeking cost recovery approval for a proposed clean energy hub in Brooklyn, NY (Brooklyn Clean Energy Hub) at an estimated cost of $810 million, that is in addition to the capital expenditures approved in the CECONY joint proposal. See "Rate Plans" in Note B to the First Quarter Financial Statements. The Brooklyn Clean Energy Hub has an estimated in-service date of December 2027 and addresses a 2028 reliability need. The Brooklyn Clean Energy Hub provides the flexibility for offshore wind resources to interconnect during construction and after it commences operation.

In May 2023, NY approved the 2023-2024 state budget, that includes legislation that prohibits the installation of fossil-fuel equipment and building systems, including oil and natural gas, beginning in 2026 for affected new buildings with not more than seven stories and beginning in 2029 for all other new affected buildings. The law includes exemptions for, among other things, emergency backup generators, hospitals, laundromats and commercial kitchens.

Other Environmental Matters

In July 2021, a CECONY feeder failure led to the discharge of thousands of gallons of dielectric fluid from a street manhole in New Rochelle, NY. Dielectric fluid reached nearby streets, properties and the New Rochelle Harbor. CECONY, the U.S. Coast Guard, the NYSDEC and other agencies responded to the incident. CECONY stopped the feeder leak on the same day the discharge occurred and has completed the spill recovery and associated cleanup operations. In addition, the company has received third-party damage claims. The costs associated with this matter are not expected to have a material adverse effect on the company’s financial condition, results of operations and liquidity. In connection with the incident, the company may incur monetary sanctions of more than $0.3 million for violations of certain provisions regulating the discharge of materials into, and for the protection of, the environment.

For additional information about the Companies’ environmental matters, see Note G to the First Quarter Financial Statements.

Con Edison Transmission

In May 2022, the operator of the Mountain Valley Pipeline, that is being constructed by a joint venture in which Con Edison Transmission owns a 9.5 percent interest (which is expected to be reduced to 8.0 percent based on the latest project cost estimate and Con Edison Transmission’s previous capping of its cash contributions to the joint venture), indicated it plans to pursue new permits and is now targeting a full in-service date during the second half of 2023 at a total project cost of approximately $6,600 million, excluding allowance for funds used during construction. In June 2022, the Mountain Valley Pipeline joint venture filed a request with the FERC for, and in August 2022, the FERC granted, a four-year extension of time to complete the project by October 2026. At March 31, 2023, Con Edison Transmission’s carrying value of its investment in MVP was $111 million and its cash contributions to the joint venture amounted to $530 million.

Financial and Commodity Market Risks

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

Interest Rate Risk

The Companies' interest rate risk primarily relates to new debt financing needed to fund capital requirements, including the construction expenditures of the Utilities and maturing debt securities, and variable-rate debt. Con Edison and its subsidiaries manage interest rate risk through the issuance of mostly fixed-rate debt with varying maturities and through opportunistic refinancing of debt. Con Edison and CECONY estimate that at March 31, 2023, a 10 percent increase in interest rates applicable to its variable rate debt would result in an increase in annual interest expense of $4 million. Under CECONY’s current electric, gas and steam rate plans, variations in actual variable rate tax-exempt debt interest expense, including costs associated with the refinancing of the variable rate tax-exempt debt, are reconciled to levels reflected in rates.

Inflationary pressure has prompted the Federal Reserve to increase interest rates. Higher interest rates have resulted in, and are expected to continue to result in, increased interest expense on commercial paper, variable-rate debt and long-term debt issuances.

Commodity Price Risk

Con Edison’s commodity price risk primarily relates to the purchase and sale of electricity, gas and related derivative instruments. The Utilities apply, and the Clean Energy Businesses applied risk management strategies to mitigate their related exposures. See Note N to the First Quarter Financial Statements.

Con Edison estimates that, as of March 31, 2023, a 10 percent decline in market prices would result in a decline in fair value of $159 million for the derivative instruments used by the Utilities to hedge purchases of electricity and gas, of which $149 million is for CECONY and $10 million is for O&R. Con Edison expects that any such change in fair value would be largely offset by directionally opposite changes in the cost of the electricity and gas purchased.

The Utilities do not make any margin or profit on the electricity or gas they sell. In accordance with provisions

approved by state regulators, the Utilities generally recover from full-service customers the costs they incur for energy purchased for those customers, including gains and losses on certain derivative instruments used to hedge energy purchased and related costs. However, increases in electric and gas commodity prices may contribute to a slower recovery of cash from outstanding customer accounts receivable balances and increases to the allowance for uncollectible accounts, and may result in increases to write-offs of customer accounts receivable balances.

Investment Risk

The Companies’ investment risk relates to the investment of plan assets for their pension and other postretirement benefit plans. Con Edison's investment risk also relates to the investments of Con Edison Transmission that are accounted for under the equity method. See "Investments" in Note A to the First Quarter Financial Statements.

The Companies’ current investment policy for pension plan assets includes investment targets of 28 to 38 percent equity securities, 42 to 60 percent debt securities and 12 to 22 percent alternatives. At March 31, 2023, the pension plan investments consisted of 31.9 percent equity securities, 48.8 percent debt securities and 19.3 percent alternatives.

For the Utilities’ pension and other postretirement benefit plans, regulatory accounting treatment is generally applied in accordance with the accounting rules for regulated operations. 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 the pension and other postretirement benefit expenses and the amounts for such expenses reflected in rates. O&R also defers such difference pursuant to its NY rate plans.

Material Contingencies

For information concerning potential liabilities arising from the Companies’ material contingencies, see “COVID-19 Regulatory Matters” and "Other Regulatory Matters" in Note B and Notes G and H to the First Quarter Financial Statements.

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