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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________________________ 
FORM 10-K
___________________________________________________  
x    Annual Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016
OR
¨    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     
___________________________________________________   
Commission File Number 1-14514
Consolidated Edison, Inc.
Exact name of registrant as specified in its charter
and principal office address and telephone number
New York
 
13-3965100
State of Incorporation
 
I.R.S. Employer
ID. Number
4 Irving Place,
New York, New York 10003
(212) 460-4600
 ___________________________________________________  
Commission File Number 1-1217
Consolidated Edison Company of New York, Inc.
Exact name of registrant as specified in its charter
and principal office address and telephone number
New York
 
13-5009340
State of Incorporation
 
I.R.S. Employer
ID. Number
4 Irving Place,
New York, New York 10003
(212) 460-4600
 ___________________________________________________  
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
  
 
Name of each exchange
on which registered
Consolidated Edison, Inc.,
  
 
 
 
Common Shares ($.10 par value)
  
 
New York Stock Exchange


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Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Consolidated Edison, Inc. (Con Edison)
Yes
 
x
 
No 
 
¨
 
 
Consolidated Edison Company of New York, Inc. (CECONY)
Yes
 
x
 
No 
 
¨
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
 
Con Edison
Yes 
 
¨
 
No 
 
x
 
 
CECONY
Yes 
 
¨
 
No 
 
x
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Con Edison
Yes 
 
x
 
No 
 
¨
 
 
CECONY
Yes 
 
x
 
No 
 
¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Con Edison
Yes 
 
x
 
No 
 
¨
 
 
CECONY
Yes 
 
x
 
No 
 
¨
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Con Edison
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Large accelerated filer
 
x
 
Accelerated filer
 
¨
 
Non-accelerated filer
 
¨
 
Smaller reporting company
 
¨
CECONY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Large accelerated filer
 
¨
 
Accelerated filer
 
¨
 
Non-accelerated filer
 
x
 
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Con Edison
 
Yes 
 
¨
 
No 
 
x
 
CECONY
 
Yes 
 
¨
 
No 
 
x
 
The aggregate market value of the common equity of Con Edison held by non-affiliates of Con Edison, as of June 30, 2016, was approximately $24.5 billion.
As of January 31, 2017, Con Edison had outstanding 305,059,148 Common Shares ($.10 par value).
All of the outstanding common equity of CECONY is held by Con Edison.
Documents Incorporated By Reference
Portions of Con Edison’s definitive proxy statement for its Annual Meeting of Stockholders to be held on May 15, 2017, to be filed with the Commission pursuant to Regulation 14A, not later than 120 days after December 31, 2016, is incorporated in Part III of this report.


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Filing Format
This Annual Report on Form 10-K is a combined report being filed separately by two different registrants: Consolidated Edison, Inc. (Con Edison) and Consolidated Edison Company of New York, Inc. (CECONY). CECONY is a wholly-owned subsidiary of Con Edison and, as such, the information in this report about CECONY also applies to Con Edison. CECONY meets the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced disclosure format.
As used in this report, the term the “Companies” refers to Con Edison and CECONY. However, CECONY makes no representation as to the information contained in this report relating to Con Edison or the subsidiaries of Con Edison other than itself.
 

                            
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Glossary of Terms
The following is a glossary of abbreviations or acronyms that are used in the Companies’ SEC reports:
Con Edison Companies
 
 
Con Edison
 
Consolidated Edison, Inc.
CECONY
 
Consolidated Edison Company of New York, Inc.
Clean Energy Businesses
 
Con Edison Clean Energy Businesses, Inc., together with its subsidiaries
Con Edison Development
 
Consolidated Edison Development, Inc.
Con Edison Energy
 
Consolidated Edison Energy, Inc.
Con Edison Solutions
 
Consolidated Edison Solutions, Inc.
Con Edison Transmission
 
Con Edison Transmission, Inc., together with its subsidiaries
CET Electric
 
Consolidated Edison Transmission, LLC
CET Gas
 
Con Edison Gas Pipeline and Storage, LLC
O&R
 
Orange and Rockland Utilities, Inc.
Pike
 
Pike County Light & Power Company
RECO
 
Rockland Electric Company
The Companies
 
Con Edison and CECONY
The Utilities
 
CECONY and O&R
 
Regulatory Agencies, Government Agencies and Other Organizations
EPA
 
U. S. Environmental Protection Agency
FASB
 
Financial Accounting Standards Board
FERC
 
Federal Energy Regulatory Commission
IASB
 
International Accounting Standards Board
IRS
 
Internal Revenue Service
NJBPU
 
New Jersey Board of Public Utilities
NJDEP
 
New Jersey Department of Environmental Protection
NYISO
 
New York Independent System Operator
NYPA
 
New York Power Authority
NYSDEC
 
New York State Department of Environmental Conservation
NYSERDA
 
New York State Energy Research and Development Authority
NYSPSC
 
New York State Public Service Commission
NYSRC
 
New York State Reliability Council, LLC
PJM
 
PJM Interconnection LLC
SEC
 
U.S. Securities and Exchange Commission
 
 
Accounting
 
 
ASU
 
Accounting Standards Update
GAAP
 
Generally Accepted Accounting Principles in the United States of America
LILO
 
Lease In/Lease Out
OCI
 
Other Comprehensive Income
VIE
 
Variable Interest Entity


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Environmental
 
 
CO2
 
Carbon dioxide
GHG
 
Greenhouse gases
MGP Sites
 
Manufactured gas plant sites
PCBs
 
Polychlorinated biphenyls
PRP
 
Potentially responsible party
RGGI
 
Regional Greenhouse Gas Initiative
Superfund
 
Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes
 
 
Units of Measure
 
 
AC
 
Alternating current
Bcf
 
Billion cubic feet
Dt
 
Dekatherms
kV
 
Kilovolt
kWh
 
Kilowatt-hour
MDt
 
Thousand dekatherms
MMlb
 
Million pounds
MVA
 
Megavolt ampere
MW
 
Megawatt or thousand kilowatts
MWh
 
Megawatt hour
 
 
Other
 
 
AFUDC
 
Allowance for funds used during construction
AMI
 
Advanced metering infrastructure
COSO
 
Committee of Sponsoring Organizations of the Treadway Commission
DER
 
Distributed energy resources
EGWP
 
Employer Group Waiver Plan
Fitch
 
Fitch Ratings
LTIP
 
Long Term Incentive Plan
Moody’s
 
Moody’s Investors Service
REV
 
Reforming the Energy Vision
S&P
 
Standard & Poor’s Financial Services LLC
VaR
 
Value-at-Risk

                            
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TABLE OF CONTENTS
 
PAGE
 
Item 1:
Item 1A:
Item 1B:
Item 2:
Item 3:
Item 4:
 
 
 
Item 5:
Item 6:
Item 7:
Item 7A:
Item 8:
Item 9:
Item 9A:
Item 9B:
 
 
Item 10:
Item 11:
Item 12:
Item 13:
Item 14:
 
 
Item 15:
Item 16:
Form 10-K Summary
 


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Introduction
This introduction contains certain information about Con Edison and its subsidiaries, including CECONY. This introduction is not a summary and should be read together with, and is qualified in its entirety by reference to, the more detailed information appearing elsewhere or incorporated by reference in this report.
Con Edison’s mission is to provide energy services to our customers safely, reliably, efficiently and in an environmentally sound manner; to provide a workplace that allows employees to realize their full potential; to provide a fair return to our investors; and to improve the quality of life in the communities we serve.
Con Edison is a holding company that owns:
 
Consolidated Edison Company of New York, Inc. (CECONY), which delivers electricity, natural gas and steam to customers in New York City and Westchester County;
Orange & Rockland Utilities, Inc. (O&R), which together with its subsidiary, Rockland Electric Company, delivers electricity and natural gas to customers primarily located in southeastern New York State and northern New Jersey (O&R, together with CECONY referred to as the Utilities);
Con Edison Clean Energy Businesses, Inc., which through its subsidiaries develops, owns and operates renewable and energy infrastructure projects and provide energy-related products and services to wholesale and retail customers (Con Edison Clean Energy Businesses, Inc., together with its subsidiaries referred to as the Clean Energy Businesses); and
Con Edison Transmission, Inc., which through its subsidiaries invests in electric and gas transmission projects (Con Edison Transmission, Inc., together with its subsidiaries referred to as Con Edison Transmission).
Con Edison anticipates that the Utilities, which are subject to extensive regulation, will continue to provide substantially all of its earnings over the next few years. The Utilities have approved rate plans that are generally designed to cover each company’s cost of service, including capital and other costs of each company’s energy delivery systems. The Utilities recover from their full-service customers (who purchase electricity from them), generally on a current basis, the cost the Utilities pay for energy and charge all of their customers the cost of delivery service.
 
Selected Financial Data
Con Edison
  
For the Year Ended December 31,
(Millions of Dollars, except per share amounts)
2012
 
2013
 
2014
 
2015
 
2016
 
Operating revenues
$12,188
 
$12,354
 
$12,919
 
$12,554
 
$12,075
 
Energy costs
3,887
 
4,054
 
4,513
 
3,716
 
3,088
 
Operating income
2,339
 
2,244
 
2,209
 
2,427
 
2,575
 
Net income
1,141
 
1,062
(a)
1,092
 
1,193
 
1,245
 
Total assets (f)(g)
40,845
 
40,451
(b)
44,071
(c)
45,642
(d)
48,255
(e)
Long-term debt (f)
9,994
 
10,415
 
11,546
 
12,006
 
14,735
 
Total equity
11,869
 
12,245
 
12,585
 
13,061
 
14,306
 
Net Income per common share – basic
$3.88
 
$3.62
 
$3.73
 
$4.07
 
$4.15
 
Net Income per common share – diluted
$3.86
 
$3.61
 
$3.71
 
$4.05
 
$4.12
 
Dividends declared per common share
$2.42
 
$2.46
 
$2.52
 
$2.60
 
$2.68
 
Book value per share
$40.53
 
$41.81
 
$42.97
 
$44.50
 
$46.91
 
Average common shares outstanding (millions)
293
 
293
 
293
 
293
 
300
 
Stock price low
$53.63
 
$54.33
 
$52.23
 
$56.86
 
$63.47
 
Stock price high
$65.98
 
$63.66
 
$68.92
 
$72.25
 
$81.88
 
(a)
Reflects a charge to earnings of $95 million (after taxes of $63 million) relating to the lease in/lease out (LILO) transactions that were terminated in 2013.
(b)
Reflects a $2,947 million decrease in regulatory assets for unrecognized pension and other postretirement costs offset by an increase of $1,497 million, $280 million, $257 million and $223 million in net plant, cash, special deposits and regulatory assets for future income tax, respectively.
(c)
Reflects a $2,116 million increase in regulatory assets for unrecognized pension and other postretirement costs and a $1,391 million increase in net plant. See Notes B, E and F to the financial statements in Item 8.
(d)
Reflects a $2,382 million increase in net plant offset by a $970 million decrease in regulatory assets for unrecognized pension and other postretirement costs. See Notes B, E and F to the financial statements in Item 8.

                            
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(e)
Reflects a $3,007 million increase in net plant offset by a $1,002 million decrease in regulatory assets for unrecognized pension and other postretirement costs. See Notes B, E and F to the financial statements in Item 8.
(f)
Reflects $68 million, $74 million and $85 million in 2012, 2013 and 2014, respectively, related to the adoption of Accounting Standards Update (ASU) No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.”
(g)
Reflects $296 million, $122 million and $152 million in 2012, 2013, 2014, respectively, related to the adoption of ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.”

CECONY 
  
For the Year Ended December 31,
(Millions of Dollars)
2012
 
2013
 
2014
 
2015
 
2016
 
Operating revenues
$10,187
 
$10,430
 
$10,786
 
$10,328
 
$10,165
 
Energy costs
2,665
 
2,873
 
2,985
 
2,304
 
2,059
 
Operating income
2,093
 
2,060
 
2,139
 
2,247
 
2,262
 
Net income
1,014
 
1,020
 
1,058
 
1,084
 
1,056
 
Total assets (e)(f)
36,630
 
36,095
(a)
39,443
(b)
40,230
(c)
40,856
(d)
Long-term debt (e)
9,083
 
9,303
 
10,788
 
10,787
 
12,073
 
Shareholder’s equity
10,552
 
10,847
 
11,188
 
11,415
 
11,829
 
(a)
Reflects a $2,797 million decrease in regulatory assets for unrecognized pension and other postretirement costs offset by an increase of $1,405 million, $280 million, $215 million and $199 million in net plant, cash, regulatory assets for environmental remediation costs and regulatory assets for future income tax, respectively.
(b)
Reflects a $1,999 million increase in regulatory assets for unrecognized pension and other postretirement costs and a $1,440 million increase in net plant. See Notes B, E and F to the financial statements in Item 8.
(c)
Reflects a $1,725 million increase in net plant and a $912 million decrease in regulatory assets for unrecognized pension and other postretirement costs. See Notes B, E and F to the financial statements in Item 8.
(d)
Reflects a $1,804 million increase in net plant and a $967 million decrease in regulatory assets for unrecognized pension and other postretirement costs. See Notes B, E and F to the financial statements in Item 8.
(e)
Reflects $62 million, $63 million and $76 million in 2012, 2013 and 2014, respectively, related to the adoption of ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.”
(f)
Reflects $193 million, $100 million and $118 million in 2012, 2013 and 2014, respectively, related to the adoption of ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.”

Significant 2016 Developments and Outlook
Con Edison reported 2016 net income of $1,245 million or $4.15 a share compared with $1,193 million or $4.07 a share in 2015. Adjusted earnings were $1,198 million or $3.99 a share in 2016 compared with $1,196 million or $4.08 a share in 2015. See “Results of Operations” in Item 7 and “Non-GAAP Financial Measure” below.
In 2016, the Utilities invested $2,922 million to upgrade and reinforce their energy delivery systems, Con Edison Transmission invested $1,078 million in electric transmission and gas pipeline and storage businesses and the Clean Energy Businesses invested $1,235 million primarily in renewable electric production projects. See "Capital Requirements and Resources" in Item 1 and Note U to the financial statements in Item 8.
In 2017, the Utilities expect to invest $3,154 million for their energy delivery systems, Con Edison Transmission expects to invest $90 million in gas pipeline and storage businesses and the Clean Energy Businesses expect to invest $450 million in renewable electric production projects. Con Edison plans to meet its 2017 capital requirements through internally-generated funds and the issuance of securities. The company’s plans include the issuance of between $1,000 million and $1,800 million of long-term debt, most of which would be at the Utilities, and the issuance of additional debt secured by its renewable electric production projects. The company’s plans also include the issuance of up to $350 million of common equity in addition to equity under its dividend reinvestment, employee stock purchase and long term incentive plans. See “Capital Requirements and Resources” in Item 1.
In 2016, the Clean Energy Businesses sold their retail electric supply business and O&R sold its Pennsylvania utility subsidiary for aggregate cash consideration of $250 million. See Note U to the financial statements in Item 8.
CECONY forecasts average annual growth in peak demand in its service area at design conditions over the next five years for electric and gas to be approximately 0.2 percent and 2.3 percent, respectively, and average annual decrease in steam peak demand in its service area at design conditions over the next five years to be approximately 0.7 percent. O&R forecasts average annual decrease in electric peak demand in its service area at design conditions over the next five years to be approximately 0.1 percent and average annual growth in gas peak demand in its service area over the next five years at design conditions to be approximately 0.2 percent. See “The Utilities” in Item 1.


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In 2016, the New York State Public Service Commission (NYSPSC) continued its Reforming the Energy Vision (REV) proceeding to improve system efficiency and reliability, encourage renewable energy and distributed energy resources and empower customer choice. The NYSPSC, among other things, issued orders adopting a ratemaking and utility revenue framework and a clean energy standard and an order approving CECONY’s advanced metering infrastructure (AMI) plan for the company’s electric and gas businesses. See “Utility Regulation - State Utility Regulation - Reforming the Energy Vision” in Item 1.
In 2016, the NYSPSC continued its proceeding to investigate the practices of qualifying persons to perform plastic fusions on gas facilities and its review of a March 2014 explosion and fire in which eight people died and more than 50 people were injured. In February 2017, the NYSPSC approved a settlement agreement with CECONY related to these matters. Pursuant to the settlement agreement, the company will not recover from customers $126 million of costs it incurred for gas emergency response activities in 2014, 2015 and 2016 in excess of amounts reflected in its gas rate plan for those years. At December 31, 2016, the company had not deferred any such incremental costs as a regulatory asset. In addition, the company will provide $27 million of future benefits to customers. At December 31, 2016, the company had accrued a regulatory liability for these future benefits. See “Other Regulatory Matters” in Note B and “Manhattan Explosion and Fire” in Note H to the financial statements in Item 8.
In January 2017, the NYSPSC approved a September 2016 Joint Proposal among CECONY, the NYSPSC staff and other parties for CECONY electric and gas rate plans for the three-year period January 2017 through December 2019. See “Rate Plans” in Note B to the financial statements in Item 8.

Available Information
Con Edison and CECONY file annual, quarterly and current reports and other information, and Con Edison files proxy statements, with the Securities and Exchange Commission (SEC). The public may read and copy any materials that the Companies file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580 Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy statements, and other information regarding issuers (including Con Edison and CECONY) that file electronically with the SEC.
This information the Companies file with the SEC is also available free of charge on or through the investor information section of their websites as soon as reasonably practicable after the reports are electronically filed with, or furnished to, the SEC. Con Edison’s internet website is at: www.conedison.com; and CECONY’s is at: www.coned.com.
The "About Us - Corporate Governance" section of Con Edison’s website includes the company’s Standards of Business Conduct (its code of ethics) and amendments or waivers of the standards for executive officers or directors, corporate governance guidelines and the charters of the following committees of the company’s Board of Directors: Audit Committee, Management Development and Compensation Committee, and Corporate Governance and Nominating Committee. This information is available in print to any shareholder who requests it. Requests should be directed to: Corporate Secretary, Consolidated Edison, Inc., 4 Irving Place, New York, NY 10003.
Information on the Companies’ websites is not incorporated herein.

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


                            
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Non-GAAP Financial Measure
Adjusted earnings is a financial measure that is not determined in accordance with generally accepted accounting principles in the United States of America (GAAP). This non-GAAP financial measure should not be considered as an alternative to net income, which is an indicator of financial performance determined in accordance with GAAP. Adjusted earnings excludes from net income the net mark-to-market changes in the fair value of the derivative instruments the Clean Energy Businesses use to economically hedge market price fluctuations in related underlying physical transactions for the purchase or sale of electricity and gas. Adjusted earnings may also exclude from net income certain other items that the company does not consider indicative of its ongoing financial performance. Management uses this non-GAAP financial measure to facilitate the analysis of the company's financial performance as compared to its internal budgets and previous financial results. Management also uses this non-GAAP financial measure to communicate to investors and others the company’s expectations regarding its future earnings and dividends on its common stock. Management believes that this non-GAAP financial measure also is useful and meaningful to investors to facilitate their analysis of the company's financial performance. The following table is a reconciliation of Con Edison’s reported net income to adjusted earnings and reported earnings per share to adjusted earnings per share.
 
(Millions of Dollars, except per share amounts)
2012
2013
2014
2015
2016
Reported net income – GAAP basis
$1,138
$1,062
$1,092
$1,193
$1,245
Gain on sale of the Clean Energy Businesses' retail electric supply business (a)




(56)
Goodwill impairment related to the Clean Energy Businesses' energy service business (b)




12
Impairment of assets held for sale (c)



3

Gain on sale of solar electric production projects (d)


(26)


Loss from LILO transactions (e)

95
1


Net mark-to-market effects of the Clean Energy Businesses (f)
(40)
(45)
73

(3)
Adjusted earnings
$1,098
$1,112
$1,140
$1,196
$1,198
Reported earnings per share – GAAP basis (basic)
$3.88
$3.62
$3.73
$4.07
$4.15
Gain on sale of the Clean Energy Businesses' retail electric supply business




(0.19)
Goodwill impairment related to the Clean Energy Businesses' energy service business




0.04
Impairment of assets held for sale



0.01

Gain on sale of solar electric production projects


(0.09)


Loss from LILO transactions

0.32



Net mark-to-market effects of the Clean Energy Businesses
(0.13)
(0.14)
0.25

(0.01)
Adjusted earnings per share
$3.75
$3.80
$3.89
$4.08
$3.99
(a)
After taxes of $(48) million, which includes an adjustment for the apportionment of state income taxes. See Note U to the financial statements in Item 8.
(b)
After taxes of $3 million. See Note K to the financial statements in Item 8.
(c)
After taxes of $2 million, recorded related to Pike County Light & Power Company, which O&R sold in 2016. See Note U to the financial statements in Item 8.
(d)
After taxes of $(19) million.
(e)
In 2013, a court disallowed tax losses claimed by Con Edison relating to Con Edison Development’s Lease In/Lease Out (LILO) transactions and the company subsequently terminated the transactions, resulting in a charge to earnings of $95 million (after taxes of $63 million). In 2014, adjustments were made to taxes and accrued interest.
(f)
After taxes of $(29) million, $(30) million and $55 million for the years ended December 31, 2012 through 2014. After taxes of $(2) million for the year ended December 31, 2016.



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Item 1:    Business

Contents of Item 1
Page
 


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


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PART I
 
Item 1:    Business

Overview
Consolidated Edison, Inc. (Con Edison), incorporated in New York State in 1997, is a holding company that owns all of the outstanding common stock of Consolidated Edison Company of New York, Inc. (CECONY), Orange and Rockland Utilities, Inc. (O&R), Con Edison Clean Energy Businesses, Inc. and Con Edison Transmission, Inc. As used in this report, the term the “Companies” refers to Con Edison and CECONY.
ceiorgchartvf.jpg
Con Edison’s principal business operations are those of CECONY, O&R, the Clean Energy Businesses 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. The Clean Energy Businesses develop, own and operate renewable and energy infrastructure projects and provide energy-related products and services to wholesale and retail customers. Con Edison Transmission invests in electric transmission facilities and gas pipeline and storage facilities.
Con Edison seeks to provide shareholder value through continued dividend growth, supported by earnings growth in regulated utilities and contracted assets. The company invests to provide reliable, resilient, safe and clean energy critical for New York City’s growing economy. The company is an industry leading owner and operator of contracted, large-scale solar generation in the United States. Con Edison is a responsible neighbor, helping the communities it serves become more sustainable.

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

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

Steam
CECONY operates the largest steam distribution system in the United States by producing and delivering approximately 19,979 MMlb of steam annually to approximately 1,649 customers in parts of Manhattan.


                            
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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 and northern New Jersey, an approximately 1,300 square mile service area.

Gas
O&R delivers gas to over 0.1 million customers in southeastern New York.

Sale of Pike County Light & Power Company (Pike)
In August 2016, O&R sold its Pennsylvania subsidiary, Pike, to Corning Natural Gas Holding Corporation (see Note U to the financial statements in Item 8).

Clean Energy Businesses
Con Edison formed Con Edison Clean Energy Businesses, Inc. and, in December 2016, transferred to it three wholly-owned subsidiaries: Consolidated Edison Development, Inc. (Con Edison Development), Consolidated Edison Energy, Inc. (Con Edison Energy) and Consolidated Edison Solutions, Inc. (Con Edison Solutions). Con Edison Clean Energy Businesses, Inc., together with these subsidiaries (which were formerly referred to as the competitive energy businesses), are referred to in this report as the Clean Energy Businesses.

Sale of the Retail Electric Supply Business
In September 2016, Con Edison sold the retail electric supply business of its Clean Energy Businesses to a subsidiary of Exelon Corporation (see Note U to the financial statements in Item 8).

Con Edison Transmission
Con Edison Transmission, Inc. invests in electric and gas transmission projects through its wholly-owned subsidiaries, Consolidated Edison Transmission, LLC (CET Electric) and Con Edison Gas Pipeline and Storage, LLC (CET Gas, which was formerly named Con Edison Gas Midstream, LLC). CET Electric, which was formed in 2014, is investing in a company that owns electric transmission assets in New York. CET Gas, which was formed in 2016, owns, through a subsidiary, a 50 percent equity interest in a joint venture that owns, operates and will further develop an existing gas pipeline and storage business located in northern Pennsylvania and southern New York. In addition, CET Gas owns a 12.5 percent equity interest in a company developing a proposed gas transmission project in West Virginia and Virginia. See “Con Edison Transmission,” below. Con Edison Transmission, Inc., together with CET Electric and CET Gas, are referred to in this report as Con Edison Transmission.

Utility Regulation
State Utility Regulation
Regulators
The Utilities are subject to regulation by the NYSPSC, which under the New York Public Service Law, is authorized to set the terms of service and the rates the Utilities charge for providing service in New York. See “Rate Plans,” below and in Note B to the financial statements in Item 8. The NYSPSC also approves the issuance of the Utilities’ securities. See “Capital Resources,” below. The NYSPSC exercises jurisdiction over the siting of the Utilities’ electric transmission lines (see “Con Edison Transmission,” below) and approves mergers or other business combinations involving New York utilities. In addition, the NYSPSC has the authority to impose penalties on utilities, which could be substantial, for violating state utility laws and regulations and its orders. See “Other Regulatory Matters” in Note B to the financial statements in Item 8. O&R’s New Jersey subsidiary, RECO, is subject to similar regulation by the New Jersey Board of Public Utilities (NJBPU). The NYSPSC, together with the NJBPU, are referred to herein as state utility regulators.
In March 2013, following the issuance of recommendations by a commission established by the Governor of New York and submission by the Governor of a bill to the State legislature, the New York Public Service Law was amended to, among other things, authorize the NYSPSC to (i) levy expanded penalties against combination gas and electric utilities; (ii) review, at least every five years, an electric utility’s capability to provide safe, adequate and reliable service, order the utility to comply with additional and more stringent terms of service than existed prior to the review, assess the continued operation of the utility as the provider of electric service in its service territory and propose, and act upon, such measures as are necessary to ensure safe and adequate service; and (iii) based on findings of repeated violations of the New York Public Service Law or rules or regulations adopted thereto that demonstrate a failure of a combination gas and electric utility to continue to provide safe and adequate service, revoke or modify an operating certificate issued to the utility by the NYSPSC (following consideration of certain


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factors, including public interest and standards deemed necessary by the NYSPSC to ensure continuity of service, and due process).

New York Utility Industry
Restructuring in the 1990s
In the 1990s, the NYSPSC restructured the electric utility industry in the state. In accordance with NYSPSC orders, the Utilities sold all of their electric generating facilities other than those that also produce steam for CECONY’s steam business (see Electric Operations – Electric Facilities below) and provided all of their customers the choice to buy electricity or gas from the Utilities or other suppliers (see Electric Operations – Electric Sales and Deliveries and Gas Operations – Gas Sales and Deliveries below). In 2016, 65 percent of the electricity and 29 percent of the gas CECONY delivered to its customers, and 59 percent of the electricity and 42 percent of the gas O&R delivered to its customers, was purchased by the customers from other suppliers. In addition, the Utilities no longer control and operate their bulk power electric transmission facilities. See “New York Independent System Operator (NYISO),” below.
Following industry restructuring, there were several utility mergers as a result of which substantially all of the electric and gas delivery service in New York State is now provided by one of four investor-owned utility companies – Con Edison, National Grid plc, Avangrid, Inc. (an affiliate of Iberdrola, S.A.) and Fortis Inc. – or one of two state authorities – New York Power Authority (NYPA) or Long Island Power Authority.

Reforming the Energy Vision
In April 2014, the NYSPSC instituted its REV proceeding, the goals of which are to improve electric system efficiency and reliability, encourage renewable energy resources, support distributed energy resources (DER) and empower customer choice. In this proceeding, the NYSPSC is examining the establishment of a distributed system platform to manage and coordinate DER, and provide customers with market data and tools to manage their energy use. The NYSPSC also is examining how its regulatory practices should be modified to incent utility practices to promote REV objectives.
In February 2015, the NYSPSC issued an order in its REV proceeding in which, among other things, the NYSPSC:
ordered CECONY, O&R and the other electric utilities to file distributed system implementation plans (DSIPs) pursuant to which the utilities, under the NYSPSC’s authority and supervision, would serve as distributed system platforms to optimize the use of DER;
indicated that the utilities will be allowed to own DER only under limited circumstances, and that utility affiliate ownership of DER within the utility’s service territory will require market power protections;
ordered the utilities to file energy efficiency plans (see “Environmental Matters - Climate Change," below);
instituted a separate proceeding to consider large-scale renewable generation;
required the utilities to file demonstration projects for approval by NYSPSC staff; and
indicated that the design and implementation of the reformed energy system will occur over a period of years.

In June 2015, the New York State Energy Research and Development Authority (NYSERDA) submitted a report in the large-scale renewable generation proceeding. The report included program design principles and strategies. The NYSPSC requested comments on, among other things: customer funding mechanisms; utility-backed power purchase agreements; financing options; and utility-owned generation. In December 2015, the Governor of New York directed the NYSPSC to establish a clean energy standard to mandate achievement by 2030 of the State Energy Plan’s goals of 50 percent of the State’s electricity being provided from renewable resources and reducing carbon emissions by 40 percent (see “Environmental Matters - Climate Change,” below) and to support the continued operation of upstate nuclear plants. In August 2016, the NYSPSC issued an order adopting a clean energy standard that includes renewable energy credit (REC) and zero-emissions credit (ZEC) requirements. Beginning in 2017, load serving entities (LSEs), including CECONY and O&R for their full-service customers, will be required to obtain RECs and ZECs in amounts determined by the NYSPSC. LSEs may satisfy their REC obligation by either purchasing RECs acquired through central procurement by NYSERDA, by self-supply through direct purchase of tradable RECs, or by making alternative compliance payments. LSEs will purchase ZECs from NYSERDA at prices determined by the NYSPSC. The order establishes an annual NYSPSC staff review and triennial NYSPSC review of the clean energy standard. Citing the risks that utility-backed power purchase agreements could impose on customers and utilities, the August 2016 order rejected requiring utilities to sign such agreements. The August 2016 order also did not authorize utility-owned renewable generation, stating a concern that allowing utilities to own renewable generation could result in reduced competition and higher costs.

                            
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In July 2015, the NYSPSC staff issued a white paper on ratemaking and utility business models in the REV proceeding. The NYSPSC staff indicated that the proposals included in the white paper reflect the following foundational principles: align earning opportunities with customer value; maintain flexibility; provide accurate and appropriate value signals; maintain a sound electric industry; shift balance of regulatory incentives to market incentives; and achieve public policy objectives. In May 2016, the NYSPSC issued an order adopting a ratemaking and utility revenue framework. The order indicated that utilities will have four ways of achieving earnings: traditional cost-of-service earnings; earnings tied to achievement of alternatives that reduce utility capital spending and provide definitive consumer benefit; earnings from market-facing platform activities; and earnings from transitional outcome-based performance measures. The order also indicated, among other things, that existing measures for negative revenue adjustments for utility failure to meet basic service standards should generally be retained and net utility plant reconciliations should be modified to encourage cost-effective DER as an alternative to utility capital investment. The order directed each utility to file a system efficiency proposal; an interconnection survey process and proposed earnings adjustment mechanism; a progress report on aggregated data reporting automation; an aggregated data privacy policy statement; revisions to standby service tariffs and cost allocation matrix; one or more smart home rate demonstration proposals; and revisions to voluntary time of use rates and promotion and education tools.

In November 2015, CECONY submitted to the NYSPSC an update to the company’s advanced metering infrastructure (AMI) plan for its electric and gas delivery businesses. The plan addresses AMI’s financial, operational and environmental benefits to customers and how AMI supports the REV proceeding’s objectives. In March 2016, the NYSPSC issued an order approving CECONY’s AMI plan, subject to a cap on capital expenditures of $1,285 million. AMI components include smart meters, a communication network, information technology systems and business applications. The plan provides for full deployment of AMI to CECONY’s customers to be implemented over a six-year period. During 2016, CECONY, at the NYSPSC’s direction, submitted a customer engagement plan, an update to the company’s benefit cost analysis and metrics that the NYSPSC can use to monitor the success of the project. O&R’s electric and gas rate plans authorize aggregate capital expenditures of approximately $24 million to begin AMI implementation for the company’s customers. In February 2017, O&R submitted to the NYSPSC a request to expend an additional approximately $74 million to expand the scope of the company’s AMI implementation to all of its New York customers.

In December 2015, the NYSPSC authorized a cost recovery surcharge mechanism for REV demonstration projects. Three CECONY and one O&R demonstration projects have been approved by the NYSPSC staff. The demonstration projects are expected to inform decisions with respect to developing distributed system platform functionalities, measuring customer response to programs and prices associated with REV markets.

In January 2016, the NYSPSC established a benefit cost analysis framework that will apply to, among other things, utility proposals to make investments that could instead be met through DER alternatives that meet all applicable reliability and safety requirements. The framework’s primary measure is a societal cost test which, in addition to addressing avoided utility costs, is to quantitatively address certain environmental externalities and, where appropriate, qualitatively address other externalities. The NYSPSC directed the utilities to develop and file benefit cost analysis handbooks to guide DER providers in structuring their projects and proposals.

In June 2016, CECONY and O&R each filed initial DSIPs and benefit-cost handbooks with the NYSPSC, pursuant to which the companies provided additional system and planning information for third-party developers to facilitate the integration of DER in the distributed system platform. In November 2016, CECONY and O&R, with the other state electric utilities, filed a joint supplemental DSIP with the NYSPSC, pursuant to which the companies expanded on the initial DSIPs to address the tools, processes and protocols to be developed jointly to operate the grid to manage DER and support a retail market. The Utilities plan to develop their distribution system platforms as proposed and in conformance with the guidance of the NYSPSC.

The NYSPSC is conducting additional proceedings to consider certain REV-related matters, including proceedings on the value of DER and net energy metering.

The Companies are not able to predict the outcome of the REV proceeding or related proceedings or their impact.



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Rate Plans
Investor-owned utilities in the United States provide delivery service to customers according to the terms of tariffs approved by the appropriate state utility regulator. The tariffs include schedules of rates for service that limit the rates charged by the utilities to amounts that recover from their customers costs approved by the regulator, including capital costs, of providing service to customers as defined by the tariff. The tariffs implement rate plans adopted by state utility regulators in rate orders issued at the conclusion of rate proceedings. The utilities’ earnings depend on the limits on rates authorized in, and the other provisions of, their rate plans and their ability to operate their businesses in a manner consistent with such rate plans.
The utilities’ rate plans cover specified periods, but rates determined pursuant to a plan generally continue in effect until a new rate plan is approved by the state utility regulator. In New York, either the utility or the NYSPSC can commence a proceeding for a new rate plan, and a new rate plan filed by the utility will generally take effect automatically in approximately 11 months unless prior to such time the NYSPSC approves a rate plan.
In each rate proceeding, rates are determined by the state utility regulator following the submission by the utility of testimony and supporting information, which are subject to review by the staff of the regulator. Other parties with an interest in the proceeding can also review the utility’s proposal and become involved in the rate proceeding. The review process is overseen by an administrative law judge who is employed by the NYSPSC. After an administrative law judge issues a recommended decision that generally considers the interests of the utility, the regulatory staff, other parties and legal requisites, the regulator will issue a rate order. The utility and the regulator’s staff and interested parties may enter jointly into a proposed settlement agreement prior to the completion of this administrative process, in which case the agreement could be approved by the regulator with or without modification.
For each rate plan, the revenues needed to provide the utility a return on invested capital is determined by multiplying the utilities’ forecasted rate base by the pre-tax weighted average cost of capital determined in the rate plan. In general, rate base is the sum of the utility’s net plant and working capital less deferred taxes. The NYSPSC uses a forecast of the average rate base for the year that new rates would be in effect (rate year). The NJBPU uses the rate base balances that exist at the end of the historical 12-month period on which base rates are set. The capital structure used in the weighted average cost of capital is determined using actual and forecast data for the same time periods as rate base. The costs of long-term debt, customer deposits and the allowed return on common equity represent a combination of actual and forecast financing information. The allowed return on common equity is determined by each state’s respective utility regulator. The NYSPSC’s current methodology for determining the allowed return on common equity assigns a one-third weight to an estimate determined from a capital asset pricing model applied to a peer group of utility companies and a two-thirds weight to an estimate determined from a dividend discount model using stock prices and dividend forecasts for a peer group of utility companies. Both methodologies employ market measurements of equity capital to estimate returns rather than the accounting measurements to which such estimates are applied in setting rates.
Pursuant to the Utilities’ rate plans, there generally can be no change to the rates charged to customers during the respective terms of the rate plans other than specified adjustments provided for in the rate plans.
For information about the Utilities’ rate plans see Note B to the financial statements in Item 8.

Liability for Service Interruptions
The tariff provisions under which CECONY provides electric, gas and steam service, and O&R provides electric and gas service, limit each company’s liability to pay for damages resulting from service interruptions to circumstances resulting from its gross negligence or willful misconduct. Under RECO's tariff provisions for electric service, the company is not liable for interruptions that are due to causes beyond its control.
CECONY’s tariff for electric service also provides for reimbursement to electric customers for spoilage losses resulting from service interruptions in certain circumstances. In general, the company is obligated to reimburse affected residential and commercial customers for food spoilage of up to approximately $500 and $10,000, respectively, and reimburse affected residential customers for prescription medicine spoilage losses without limitation on amount per claim. The company’s maximum aggregate liability for such reimbursement for an incident is $15 million. The company is not required to provide reimbursement to electric customers for outages attributable to generation or transmission system facilities or events beyond its control, such as storms, provided the company makes reasonable efforts to restore service as soon as practicable.
New York electric utilities are required to provide credits to customers who are without electric service for more than three days. The credit to a customer would equal the portion of the monthly customer charge attributable to the

                            
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period the customer was without service. If an extraordinary event occurs, the NYSPSC may direct New York gas utilities to implement the same policies.

The NYSPSC has approved a scorecard for use as a guide to assess electric utility performance in restoring electric service during outages that result from a major storm event. The scorecard, which could also be applied by the NYSPSC for other outages or actions, was developed to work with the penalty and emergency response plan provisions of the New York Public Service Law. The scorecard includes performance metrics in categories for preparation, operations response and communications.
Each New York electric utility is required to submit to the NYSPSC annually a plan for the reasonably prompt restoration of service in the case of widespread outages in the utility’s service territory due to storms or other events beyond the control of the utility. If, after evidentiary hearings or other investigatory proceedings, the NYSPSC finds that the utility failed to implement its plan reasonably, the NYSPSC may deny recovery of any part of the service restoration costs caused by such failure. In March 2016, the NYSPSC approved emergency response plans submitted by CECONY and O&R, subject to certain modifications. In December 2016, CECONY and O&R submitted updated plans.

Generic Proceedings
The NYSPSC from time to time conducts “generic” proceedings to consider issues relating to all electric and gas utilities operating in New York State. Pending proceedings include the REV proceeding and related proceedings, discussed above, and proceedings relating to data access; retail access; utility staffing levels; energy efficiency and renewable energy programs; low income customers and consumer protections. The Utilities are typically active participants in such proceedings.

Federal Utility Regulation
The Federal Energy Regulatory Commission (FERC), among other things, regulates the transmission and wholesale sales of electricity in interstate commerce and the transmission and sale of natural gas for resale in interstate commerce. In addition, the FERC has the authority to impose penalties, which could be substantial, including penalties for the violation of reliability and cyber security rules. Certain activities of the Utilities, the Clean Energy Businesses and Con Edison Transmission are subject to the jurisdiction of the FERC. The Utilities are subject to regulation by the FERC with respect to electric transmission rates and to regulation by the NYSPSC with respect to electric and gas retail commodity sales and local delivery service. As a matter of practice, the NYSPSC has approved delivery service rates for the Utilities that include both transmission and distribution costs. Wholesale energy and capacity products sold by the Clean Energy Businesses to the regional electric markets are subject to FERC jurisdiction as defined by the independent system operator tariffs. The electric and gas transmission projects in which CET Electric and CET Gas invest are also subject to regulation by the FERC. See “Con Edison Transmission,” below.

New York Independent System Operator (NYISO)
The NYISO is a not-for-profit organization that controls and directs the operation of most of the electric transmission facilities in New York State, including those of the Utilities, as an integrated system. It also administers wholesale markets for electricity in New York State and facilitates the construction of new transmission it considers necessary to meet identified reliability, economic or public policy needs. The New York State Reliability Council (NYSRC) promulgates reliability standards subject to FERC oversight, and the NYISO has agreed to comply with those standards. Pursuant to a requirement that is set annually by the NYSRC, the NYISO requires that entities supplying electricity to customers in New York State have generating capacity (owned, procured through the NYISO capacity markets or contracted for) in an amount equal to the peak demand of their customers plus the applicable reserve margin. In addition, the NYISO has determined that entities that serve customers in New York City must procure sufficient capacity from resources that are electrically located in New York City to cover a substantial percentage of the peak demands of their New York City customers. It also requires entities that serve customers in the lower Hudson valley and New York City customers that are served through the lower Hudson valley to procure sufficient capacity from resources electrically located in the lower Hudson valley. These requirements apply both to regulated utilities such as CECONY and O&R for the customers they supply under regulated tariffs and to companies that supply customers on market terms. To address the possibility of a disruption due to the unavailability of gas, generating units located in New York City that are capable of using either gas or oil as fuel may be required to use oil as fuel for certain periods and new generating units located in New York City are required to have dual fuel capability. RECO, O&R’s New Jersey subsidiary, provides electric service in a portion of its service territory that has a different independent system operator – PJM Interconnection LLC (PJM). See “CECONY – Electric Operations – Electric Supply” and “O&R – Electric Operations – Electric Supply,” below.



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Competition
Distributed generation, such as solar energy production facilities, fuel cells and micro-turbines, provide alternative sources of energy for the Utilities’ electric delivery customers, as does oil for the Utilities’ gas delivery customers. In addition, steam customers may have alternative sources of heating and cooling for their buildings. Micro-grids and community-based micro-grids enable distributed generation to serve multiple locations and multiple customers. Other distributed energy resources, such as demand reduction and energy efficiency programs, provide alternatives for the Utilities’ delivery customers to manage their energy usage. The following table shows the aggregate capacities of the distributed generation projects connected to the Utilities’ distribution systems at the end of the last three years:
Technology
CECONY
O&R
Total MW, except project number
2014
2015
2016
2014
2015
2016
Internal-combustion engines
101

103

104

21

21

22

Photovoltaic solar
58

95

135

28

46

63

Gas turbines
40

40

40




Micro turbines
9

10

10

1

1

1

Fuel cells
8

8

9




Steam turbines
3

3

4




Landfill



2

2

2

Total distribution-level distributed generation
219

259

302

52

70

88

Number of distributed generation projects
4,200

7,451

12,928

1,881

3,704

5,376

The Clean Energy Businesses participate in competitive renewable and energy infrastructure projects and energy products and services businesses that are subject to different risks than those found in the businesses of the Utilities. Con Edison Transmission invests in electric and gas transmission and gas storage projects, the current and prospective customers of which may have competitive alternatives.

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

The Utilities
CECONY
CECONY, incorporated in New York State in 1884, is a subsidiary of Con Edison and has no significant subsidiaries of its own. Its principal business segments are its regulated electric, gas and steam businesses.
For a discussion of the company’s operating revenues and operating income for each segment, see “Results of Operations” in Item 7. For additional information about the segments, see Note N to the financial statements in Item 8.

Electric Operations
Electric Facilities
CECONY’s capitalized costs for utility plant, net of accumulated depreciation, for distribution facilities were $17,234 million and $16,394 million at December 31, 2016 and 2015, respectively. For its transmission facilities, the costs for utility plant, net of accumulated depreciation, were $2,963 million and $2,833 million at December 31, 2016 and 2015, respectively, and for its portion of the steam-electric generation facilities, the costs for utility plant, net of accumulated depreciation, were $479 million and $459 million, at December 31, 2016 and 2015, respectively. See "CECONY – Steam Operations – Steam Facilities," below.
Distribution Facilities
CECONY owns 62 area distribution substations and various distribution facilities located throughout New York City and Westchester County. At December 31, 2016, the company’s distribution system had a transformer capacity of 30,122 MVA, with 36,900 miles of overhead distribution lines and 97,288 miles of underground distribution lines. The underground distribution lines represent the single longest underground electric delivery system in the United States.


                            
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Transmission Facilities
The company’s transmission facilities are located in New York City and Westchester, Orange, Rockland, Putnam and Dutchess counties in New York State. At December 31, 2016, CECONY owned or jointly owned 438 miles of overhead circuits operating at 138, 230, 345 and 500 kV and 749 miles of underground circuits operating at 69, 138 and 345 kV. The company’s 39 transmission substations and 62 area stations are supplied by circuits operated at 69 kV and above. For information about transmission projects to address, among other things, reliability concerns associated with the scheduled closure of the Indian Point Energy Center (which is owned by Entergy Corporation subsidiaries) see “CECONY – Electric Operations – Electric Supply” and “Con Edison Transmission,” below. CECONY’s transmission facilities interconnect with those of National Grid, Central Hudson Gas & Electric Corporation, O&R, New York State Electric & Gas, Connecticut Light & Power Company, Long Island Power Authority, NYPA and Public Service Electric and Gas Company.

Generating Facilities 
CECONY’s electric generating facilities consist of plants located in Manhattan whose primary purpose is to produce steam for the company's steam business. The facilities have an aggregate capacity of 726 MW. The company expects to have sufficient amounts of gas and fuel oil available in 2017 for use in these facilities.

Electric Sales and Deliveries
CECONY delivers electricity to its full-service customers who purchase electricity from the company. The company also delivers electricity to its customers who choose to purchase electricity from other suppliers (retail choice program). In addition, the company delivers electricity to state and municipal customers of NYPA and economic development customers of municipal electric agencies.
The company charges all customers in its service area for the delivery of electricity. The company generally recovers, on a current basis, the cost of the electricity that it buys and then sells to its full-service customers. It does not make any margin or profit on the electricity it sells. CECONY’s electric revenues are subject to a revenue decoupling mechanism. As a result, its electric delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. CECONY’s electric sales and deliveries for the last five years were:
  
 
Year Ended December 31,
  
 
2012
 
2013
 
2014
 
2015
 
2016
Electric Energy Delivered (millions of kWh)
 
 
 
 
 
 
 
 
 
 
CECONY full service customers
 
20,622
 
20,118
 
19,757
 
20,206
 
19,886
Delivery service for retail choice customers
 
25,990
 
26,574
 
26,221
 
26,662
 
26,813
Delivery service to NYPA customers and others
 
10,267
 
10,226
 
10,325
 
10,147
 
10,046
Delivery service for municipal agencies
 
322
 

 

 

 

Total Deliveries in Franchise Area
 
57,201
 
56,918
 
56,303
 
57,015
 
56,745
Electric Energy Delivered ($ in millions)
 
 
 
 
 
 
 
 
 
 
CECONY full service customers
 
$4,731
 
$4,799
 
$5,023
 
$4,757
 
$4,404
Delivery service for retail choice customers
 
2,750
 
2,683
 
2,646
 
2,714
 
2,768
Delivery service to NYPA customers and others
 
596
 
602
 
625
 
600
 
610
Delivery service for municipal agencies
 
10
 

 

 

 

Other operating revenues
 
89
 
47
 
143
 
101
 
324
Total Deliveries in Franchise Area
 
$8,176
 
$8,131
 
$8,437
 
$8,172
 
$8,106
Average Revenue per kWh Sold (Cents) (a)
 
 
 
 
 
 
 
 
 
 
Residential
 
25.6
 
27.0
 
28.9
 
26.3
 
24.9
Commercial and Industrial
 
20.0
 
20.6
 
22.1
 
20.6
 
19.1
(a)
Includes Municipal Agency sales.
For further discussion of the company’s electric operating revenues and its electric results, see “Results of Operations” in Item 7. For additional segment information, see Note N to the financial statements in Item 8.

Electric Peak Demand
The electric peak demand in CECONY’s service area occurs during the summer air conditioning season. The weather during the summer of 2016 was cooler than design conditions. CECONY’s 2016 service area peak demand was 12,652 MW, which occurred on August 11, 2016. The 2016 peak demand included an estimated 6,114 MW for


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CECONY’s full-service customers, 4,541 MW for customers participating in its electric retail choice program and 1,997 MW for NYPA’s electric commodity customers and municipal electric agency customers. “Design weather” for the electric system is a standard to which the actual peak demand is adjusted for evaluation and planning purposes. Since NYISO-invoked demand reduction programs can be called upon under specific circumstances, design conditions do not include these programs’ potential impact. However, the CECONY forecasted peak demand at design conditions does include the impact of certain demand reduction programs. The company estimates that, under design weather conditions, the 2017 service area peak demand will be 13,470 MW, including an estimated 6,559 MW for its full-service customers, 4,755 MW for its electric retail choice customers and 2,156 MW for NYPA’s customers and municipal electric agency customers. The company forecasts an average annual growth in electric peak demand in its service area at design conditions over the next five years to be approximately 0.2 percent per year.

Electric Supply
Most of the electricity sold by CECONY to its full-service customers in 2016 was purchased under firm power contracts or through the wholesale electricity market administered by the NYISO. The company expects that these resources will again be adequate to meet the requirements of its customers in 2017. The company plans to meet its continuing obligation to supply electricity to its customers through a combination of electricity purchased under contracts, purchased through the NYISO’s wholesale electricity market, or generated from its electricity generating facilities. For information about the company’s contracts for approximately 1,423 MW of electric generating capacity, see Notes I and O to the financial statements in Item 8. To reduce the volatility of its customers’ electric energy costs, the company has contracts to purchase electric energy and enters into derivative transactions to hedge the costs of a portion of its expected purchases under these contracts and through the NYISO’s wholesale electricity market.
CECONY owns generating stations in New York City associated primarily with its steam system. As of December 31, 2016, the generating stations had a combined electric capacity of approximately 726 MW, based on 2016 summer test ratings. For information about electric generating capacity owned by the company, see “Electric Operations – Electric Facilities – Generating Facilities,” above.
In general, the Utilities recover their purchased power costs, including the cost of hedging purchase prices, pursuant to rate provisions approved by the state public utility regulatory authority having jurisdiction. See “Financial and Commodity Market Risks – Commodity Price Risk,” in Item 7 and “Recoverable Energy Costs” in Note A to the financial statements in Item 8. From time to time, certain parties have petitioned the NYSPSC to review these provisions, the elimination of which could have a material adverse effect on the Companies’ financial position, results of operations or liquidity.
CECONY monitors the adequacy of the electric capacity resources and related developments in its service area, and works with other parties on long-term resource adequacy within the framework of the NYISO. In addition, the NYISO has adopted reliability rules that include obligations on transmission owners (such as CECONY) to construct facilities that may be needed for system reliability if the market does not solve a reliability need identified by the NYISO. See “New York Independent System Operator” above. In a July 1998 order, the NYSPSC indicated that it “agree(s) generally that CECONY need not plan on constructing new generation as the competitive market develops,” but considers “overly broad” and did not adopt CECONY’s request for a declaration that, solely with respect to providing generating capacity, it will no longer be required to engage in long-range planning to meet potential demand and, in particular, that it will no longer have the obligation to construct new generating facilities, regardless of the market price of capacity.
In November 2012, the NYSPSC directed CECONY to work with NYPA to develop a contingency plan to address reliability concerns associated with the potential closure of the nuclear power plant at the Indian Point Energy Center (which is owned by Entergy Corporation subsidiaries). In October 2013, the NYSPSC approved three transmission projects and several energy efficiency, demand reduction and combined heat and power programs to address concerns associated with the potential closure. The transmission projects were placed into service in May 2016. See “Con Edison Transmission” below. In February 2014, CECONY submitted to the NYSPSC the implementation plan for the energy efficiency, demand reduction and combined heat and power programs. In January 2017, New York State officials announced that, under an agreement reached with Entergy, one of the two nuclear reactors at Indian Point is scheduled to shut down by April 2020, while the other is scheduled to be closed a year later.


                            
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Gas Operations
Gas Facilities
CECONY’s capitalized costs for utility plant, net of accumulated depreciation, for gas facilities, which are primarily distribution facilities, were $5,749 million and $5,196 million at December 31, 2016 and 2015, respectively.

Natural gas is delivered by pipeline to CECONY at various points in or near its service territory and is distributed to customers by the company through an estimated 4,375 miles of mains and 370,924 service lines. The company owns a natural gas liquefaction facility and storage tank at its Astoria property in Queens, New York. The plant can store 1,062 MDt of which a maximum of about 240 MDt can be withdrawn per day. The company has about 1,226 MDt of additional natural gas storage capacity at a field in upstate New York, owned and operated by Honeoye Storage Corporation, a corporation 28.8 percent owned by CECONY and 71.2 percent owned by Con Edison Development.

Gas Sales and Deliveries
The company generally recovers the cost of the gas that it buys and then sells to its full-service customers. It does not make any margin or profit on the gas it sells. CECONY’s gas revenues are subject to a weather normalization clause and a revenue decoupling mechanism. As a result, its gas delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. CECONY’s gas sales and deliveries for the last five years were:
 
Year Ended December 31,
 
2012
2013
2014
2015
2016
Gas Delivered (MDt)
 
 
 
 
 
Firm Sales
 
 
 
 
 
Full service
57,595
67,007
75,630
77,197
75,892
Firm transportation of customer-owned gas
52,860
61,139
68,731
72,864
68,442
Total Firm Sales
110,455
128,146
144,361
150,061
144,334
Interruptible Sales (a)
5,961
10,900
10,498
6,332
8,957
Total Gas Delivered to CECONY Customers
116,416
139,046
154,859
156,393
153,291
Transportation of customer-owned gas
 
 
 
 
 
NYPA
48,107
48,682
47,548
44,038
43,101
Other (mainly generating plants and interruptible transportation)
108,086
87,379
105,012
104,857
109,000
Off-System Sales
730
4,638
15
389

Total Sales
273,339
279,745
307,434
305,677
305,392
Gas Delivered ($ in millions)
 
 
 
 
 
Firm Sales
 
 
 
 
 
Full service
$889
$1,059
$1,141
$956
$933
Firm transportation of customer-owned gas
380
414
453
458
426
Total Firm Sales
1,269
1,473
1,594
1,414
1,359
Interruptible Sales
39
69
91
46
34
Total Gas Delivered to CECONY Customers
1,308
1,542
1,685
1,460
1,393
Transportation of customer-owned gas
 
 
 
NYPA
2
2
2
2
2
Other (mainly generating plants and interruptible transportation)
68
71
70
54
57
Off-System Sales
5
18

1

Other operating revenues (mainly regulatory amortizations)
32
(17)
(36)
11
56
Total Sales
$1,415
$1,616
$1,721
$1,528
$1,508
Average Revenue per Dt Sold
 
 
 
Residential
$18.14
$18.52
$16.76
$13.91
$13.96
General
$11.68
$12.05
$12.38
$9.73
$9.47
(a)
Includes 563, 5,362, 6,057, 1,229 and 4,708 MDt for 2012, 2013, 2014, 2015 and 2016, respectively, which are also reflected in firm transportation and other.
For further discussion of the company’s gas operating revenues and its gas results, see “Results of Operations” in Item 7. For additional segment information, see Note N to the financial statements in Item 8.


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Gas Peak Demand
The gas peak demand for firm sales customers in CECONY’s service area occurs during the winter heating season. The peak day demand during the winter 2016/2017 (through January 31, 2017) occurred on January 9, 2017 when the demand reached 1,155 MDt. The 2016/2017 peak day demand included 606 MDt for CECONY’s full-service customers and 549 MDt for customers participating in its gas retail choice program. “Design weather” for the gas system is a standard to which the actual peak demand is adjusted for evaluation and planning purposes. The company estimates that, under design weather conditions, the 2017/2018 service area peak day demand will be 1,509 MDt, including an estimated 792 MDt for its full-service customers and 717 MDt for its gas retail choice customers. The forecasted peak day demand at design conditions does not include gas used by interruptible gas customers including electric and steam generating stations. The company forecasts an average annual growth of the gas peak demand over the next five years at design conditions to be approximately 2.3 percent in its service area.

Gas Supply
CECONY and O&R have combined their gas requirements, and contracts to meet those requirements, into a single portfolio. The combined portfolio is administered by, and related management services are provided by, CECONY (for itself and as agent for O&R) and costs are allocated between the Utilities in accordance with provisions approved by the NYSPSC. See Note S to the financial statements in Item 8.
Charges from suppliers for the firm purchase of gas, which are based on formulas or indexes or are subject to negotiation, are generally designed to approximate market prices. The Utilities have contracts with interstate pipeline companies for the purchase of firm transportation from upstream points where gas has been purchased to the Utilities’ distribution systems, and for upstream storage services. Charges under these transportation and storage contracts are approved by the FERC. The Utilities are required to pay certain fixed charges under the supply, transportation and storage contracts whether or not the contracted capacity is actually used. These fixed charges amounted to approximately $301 million in 2016, including $263 million for CECONY. See “Contractual Obligations” below. At December 31, 2016, the contracts were for various terms extending to 2020 for supply and 2038 for transportation and storage. During 2016, CECONY entered into four new transportation and storage contracts. In addition, the Utilities purchase gas on the spot market and contract for interruptible gas transportation. See “Recoverable Energy Costs” in Note A and Note P to the financial statements in Item 8.

Steam Operations
Steam Facilities
CECONY’s capitalized costs for utility plant, net of accumulated depreciation, for steam facilities, including steam's portion of the steam-electric generation facilities, were $1,882 million and $1,849 million at December 31, 2016 and 2015, respectively. See "CECONY – Electric Operations – Electric Facilities," above.
CECONY generates steam at one steam-electric generating station and five steam-only generating stations and distributes steam to its customers through approximately 104 miles of transmission, distribution and service piping.

Steam Sales and Deliveries
CECONY’s steam sales and deliveries for the last five years were:
 
Year Ended December 31,
 
2012
2013
2014
2015
2016
Steam Sold (MMlb)
 
 
 
 
 
General
425
547
594
538
465
Apartment house
5,240
6,181
6,574
6,272
5,792
Annual power
14,076
15,195
15,848
15,109
13,722
Total Steam Delivered to CECONY Customers
19,741
21,923
23,016
21,919
19,979
Steam Sold ($ in millions)
 
 
 
 
 
General
$25
$31
$30
$29
$23
Apartment house
158
187
180
176
148
Annual power
429
491
469
453
378
Other operating revenues
(16)
(26)
(51)
(29)
2
Total Steam Delivered to CECONY Customers
$596
$683
$628
$629
$551
Average Revenue per MMlb Sold
$31.00
$32.34
$29.50
$30.02
$27.48

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

Steam Peak Demand and Capacity
Demand for steam in CECONY’s service area peaks during the winter heating season. The one-hour peak demand during the winter of 2016/2017 (through January 31, 2017) occurred on January 9, 2017 when the demand reached 7.8 MMlb per hour. “Design weather” for the steam system is a standard to which the actual peak demand is adjusted for evaluation and planning purposes. The company’s estimate for the winter of 2017/2018 peak demand of its steam customers is about 8.9 MMlb per hour under design conditions. The company forecasts an average annual decrease in steam peak demand in its service area at design conditions over the next five years to be approximately 0.7 percent.
On December 31, 2016, the steam system was capable of delivering approximately 11.6 MMlb of steam per hour, and CECONY estimates that the system will have the same capability in the 2017/2018 winter.

Steam Supply
38 percent of the steam produced by CECONY in 2016 was supplied by the company’s steam-only generating assets; 44 percent was produced by the company’s steam-electric generating assets, where steam and electricity are primarily cogenerated; and 18 percent was purchased under an agreement with Brooklyn Navy Yard Cogeneration Partners L.P.

O&R
Electric Operations
Electric Facilities
O&R’s capitalized costs for utility plant, net of accumulated depreciation, for distribution facilities were $916 million and $850 million at December 31, 2016 and 2015, respectively. For its transmission facilities, the costs for utility plant, net of accumulated depreciation, were $221 million and $212 million at December 31, 2016 and 2015, respectively.
O&R and RECO own, in whole or in part, transmission and distribution facilities which include 532 circuit miles of transmission lines, 15 transmission substations, 62 distribution substations, 85,514 in-service line transformers, 3,913 pole miles of overhead distribution lines and 1,764 miles of underground distribution lines. O&R’s transmission system is part of the NYISO system except that portions of RECO’s system are located within the transmission area controlled by PJM.

Electric Sales and Deliveries
O&R delivers electricity to its full-service customers who purchase electricity from the company. The company also delivers electricity to its customers who purchase electricity from other suppliers through the company’s retail choice program.
The company charges all customers in its service area for the delivery of electricity. O&R generally recovers, on a current basis, the cost of the electricity that it buys and then sells to its full-service customers. It does not make any margin or profit on the electricity it sells. O&R’s New York electric revenues (which accounted for 74 percent of O&R’s electric revenues in 2016) are subject to a revenue decoupling mechanism. As a result, O&R’s New York electric delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s electric sales in New Jersey are not subject to a decoupling mechanism. O&R’s electric sales and deliveries for the last five years were:


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Year Ended December 31,
 
2012
2013
2014
2015
2016
Electric Energy Delivered (millions of kWh)
 
 
 
 
 
Total deliveries to O&R full service customers
2,691
2,555
2,429
2,499
2,555
Delivery service for retail choice customers
3,040
3,166
3,240
3,237
3,180
Total Deliveries In Franchise Area
5,731
5,721
5,669
5,736
5,735
Electric Energy Delivered ($ in millions)
 
 
 
 
 
Total deliveries to O&R full service customers
$405
$427
$455
$441
$426
Delivery service for retail choice customers
178
192
207
213
213
Other operating revenues
9
9
18
9
(2)
Total Deliveries In Franchise Area
$592
$628
$680
$663
$637
Average Revenue Per kWh Sold (Cents)
 
 
 
 
 
Residential
16.7
18.1
20.3
19.2
18.4
Commercial and Industrial
13.0
14.8
16.8
15.4
14.3
For further discussion of the company’s electric operating revenues and its electric results, see “Results of Operations” in Item 7. For additional segment information, see Note N to the financial statements in Item 8.

Electric Peak Demand
The electric peak demand in O&R’s service area occurs during the summer air conditioning season. The weather during the summer of 2016 was cooler than design conditions. O&R’s 2016 service area peak demand was 1,435 MW, which occurred on July 22, 2016. The 2016 peak demand included an estimated 761 MW for O&R’s full-service customers and 674 MW for customers participating in its electric retail choice program. “Design weather” for the electric system is a standard to which the actual peak demand is adjusted for evaluation and planning purposes. Since the NYISO can invoke demand reduction programs under specific circumstances, design conditions do not include these programs’ potential impact. However, the O&R forecasted peak demand at design conditions does include the impact of certain demand reduction programs. The company estimates that, under design weather conditions, the 2017 service area peak demand will be 1,625 MW, including an estimated 861 MW for its full-service customers and 764 MW for its electric retail choice customers. The company decreased its five-year forecast of average annual growth of the electric peak demand in its service area at design conditions from approximately 0.3 percent (for 2016 to 2020) to (0.1) percent (2017 to 2021) primarily due to a forecasted increase in distributed generation as well as lower growth in demand from customers. Pike's peak demand is reflected in the company's service area peak demand amounts (see Note U to the financial statements in Item 8).

Electric Supply
The electricity O&R sold to its full-service customers in 2016 was purchased under firm power contracts or through the wholesale electricity market. The company expects that these resources will again be adequate to meet the requirements of its customers in 2017. O&R does not own any electric generating capacity. The company plans to meet its continuing obligation to supply electricity to its customers through a combination of electricity purchased under contracts or purchased through the wholesale electricity market. To reduce the volatility of its customers’ electric energy costs, the company has contracts to purchase electric energy and enters into derivative transactions to hedge the costs of a portion of its expected purchases. For information about the company’s contracts, see Note O to the financial statements in Item 8.
In general, the Utilities recover their purchased power costs, including the cost of hedging purchase prices, pursuant to rate provisions approved by the state public utility regulatory authority having jurisdiction. See “Financial and Commodity Market Risks – Commodity Price Risk,” in Item 7 and “Recoverable Energy Costs” in Note A to the financial statements in Item 8. From time to time, certain parties have petitioned the NYSPSC to review these provisions, the elimination of which could have a material adverse effect on the Companies’ financial position, results of operations or liquidity.

Gas Operations
Gas Facilities
O&R’s capitalized costs for utility plant, net of accumulated depreciation for gas facilities, which are primarily distribution facilities, were $536 million and $502 million at December 31, 2016 and 2015, respectively. Natural gas is delivered by pipeline to O&R at various points in or near its service territory and is distributed to customers by the company through an estimated 1,865 miles of mains and 104,748 service lines.


                            
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Table of Contents

Gas Sales and Deliveries
O&R generally recovers the cost of the gas that it buys and then sells to its full-service customers. It does not make any margin or profit on the gas it sells. O&R’s gas revenues are subject to a weather normalization clause. O&R’s New York gas revenues (which have accounted for substantially all of O&R’s gas revenues) are subject to a revenue decoupling mechanism. As a result, its gas delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s gas sales and deliveries for the last five years were:
 
Year Ended December 31,
 
2012
2013
2014
2015
2016
Gas Delivered (MDt)
 
 
 
 
 
Firm Sales
 
 
 
 
 
Full service
7,539
8,808
9,529
9,348
9,723
Firm transportation
10,505
12,062
12,592
11,752
10,381
Total Firm Sales
18,044
20,870
22,121
21,100
20,104
Interruptible Sales
4,326
4,118
4,216
4,205
3,853
Total Gas Delivered to O&R Customers
22,370
24,988
26,337
25,305
23,957
Transportation of customer-owned gas
 
 
 
 
 
Sales for resale
793
885
945
906
867
Sales to electric generating stations
15
19
70
25
18
Off-System Sales


3
62
16
Total Sales
23,178
25,892
27,355
26,298
24,858
 
Year Ended December 31,
 
2012
2013
2014
2015
2016
Gas Delivered ($ in millions)
 
 
 
 
 
Firm Sales
 
 
 
 
 
Full service
$103
$115
$121
$91
$99
Firm transportation
76
77
75
68
70
Total Firm Sales
179
192
196
159
169
Interruptible Sales
4
3
2
3
3
Total Gas Delivered to O&R Customers
183
195
198
162
172
Transportation of customer-owned gas
 
 
 
 
 
Sales to electric generating stations


1


Other operating revenues
20
10
13
20
12
Total Sales
$203
$205
$212
$182
$184
Average Revenue Per Dt Sold
 
 
 
 
 
Residential
$14.01
$13.31
$13.01
$10.11
$10.71
General
$11.99
$11.53
$11.30
$8.24
$8.17
For further discussion of the company’s gas operating revenues and its gas results, see “Results of Operations” in Item 7. For additional segment information, see Note N to the financial statements in Item 8.

Gas Peak Demand
The gas peak demand for firm sales customers in O&R’s service area occurs during the winter heating season. The peak day demand during the winter 2016/2017 (through January 31, 2017) occurred on January 8, 2017 when the demand reached 173 MDt. The 2016/2017 peak day demand included 83 MDt for O&R’s full-service customers and 90 MDt for customers participating in its gas retail choice program. “Design weather” for the gas system is a standard to which the actual peak demand is adjusted for evaluation and planning purposes. The company estimates that, under design weather conditions, the 2017/2018 service area peak day demand will be 222 MDt, including an estimated 107 MDt for its full-service customers and 115 MDt for its gas retail choice customers. The forecasted peak day demand at design conditions does not include gas used by interruptible gas customers including electric generating stations. The company forecasts an average annual growth of the gas peak demand over the next five years at design conditions to be approximately 0.2 percent in its service area. Pike’s peak demand is reflected in the company’s service area peak demand amounts (see Note U to the financial statements in Item 8).



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Table of Contents

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

Clean Energy Businesses
Con Edison Development
Con Edison Development develops, owns and operates renewable and energy infrastructure projects. The company focuses its efforts on renewable electric production projects, and at the end of 2015 was the fifth largest owner of operating photovoltaic solar capacity in the United States. The output of most of the projects is sold under long-term power purchase agreements (PPA) with utilities and municipalities. The following table shows the generating capacity (MW AC) of Con Edison Development's renewable electric production projects in operation at the end of the last five years:
Generating Capacity (MW AC)
2012
2013
2014
2015
2016
Renewable electric production projects
127
292
446
748
1,098
The following table provides information about the projects the company owned at December 31, 2016:
Project Name
Production
Technology
Generating
Capacity (a)
(MW AC)
PPA Term
(In Years) (b)
Actual/Expected
In-Service Date (c)
Location
(State)
Wholly owned projects
 
 
 
 
 
Pilesgrove
Solar
18
n/a (d)
2011
New Jersey
Flemington Solar
Solar
8
n/a (d)
2011
New Jersey
Frenchtown I, II and III
Solar
14
n/a (d)
2011-13
New Jersey
PA Solar
Solar
10
n/a (d)
2012
Pennsylvania
California Solar 2 (e)
Solar
80
20
2014-16
California
Oak Tree Wind
Wind
20
20
2014
South Dakota
Texas Solar 3
Solar
6
25
2015
Texas
Texas Solar 5 (e)
Solar
95
25
2015
Texas
Campbell County Wind
Wind
95
30
2015
South Dakota
Texas Solar 7 (e)
Solar
106
25
2016
Texas
California Solar 3 (Partial) (e)
Solar
75
20
2016
California
Adams Wind (e)
Wind
23
7
2016
Minnesota
Valley View (e)
Wind
10
14
2016
Minnesota
Coram (e)
Wind
102
16
2016
California
Projects of less than 5 MW
Solar / Wind
25
Various
Various
Various
Jointly owned projects (e) (f)
 
 
 
 
 
California Solar
Solar
55
25
2012-13
California
Mesquite Solar 1
Solar
83
20
2013
Arizona
Copper Mountain Solar 2
Solar
75
25
2013-15
Nevada
Copper Mountain Solar 3
Solar
128
20
2014-15
Nevada
Broken Bow II
Wind
38
25
2014
Nebraska
Texas Solar 4
Solar
32
25
2014
Texas
Total MW (AC) in Operation
 
1,098
 
 
 
California Solar 3 (Partial) (e)
Solar
35
20
2017
California
Upton County
Solar
158
25
2017
Texas
Panoche Valley
Solar
240
20
2019
California
Total MW (AC) in Construction
 
433
 
 
 
Total MW (AC), All Projects
 
1,531
 
 
 

                            
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Table of Contents

(a)
Represents Con Edison Development’s ownership interest in the project.
(b)
Represents PPA contractual term or remaining term from Con Edison Development’s date of acquisition.
(c)
Represents Actual/Expected In-Service Date or Con Edison Development's date of acquisition.
(d)
New Jersey, Pennsylvania and Massachusetts assets have 3-4 year Solar Renewable Energy Credit hedges in place.
(e)
Project has been pledged to secure financing for the project.
(f)
All of the jointly-owned projects are 50 percent owned, except for Texas Solar 4 (which is 80 percent owned). See Note Q to the financial statements in Item 8.

Con Edison Energy
Con Edison Energy provides services to manage the dispatch, fuel requirements and risk management activities for 4,014 MW of generating plants and merchant transmission in the northeastern United States owned by unrelated parties and manages energy supply assets leased from others. The company also provides wholesale hedging and risk management services to renewable electric production projects owned by Con Edison Development and Con Edison Solutions.

Con Edison Solutions
Con Edison Solutions provides energy-efficiency services to government and commercial customers. The services include the design and installation of lighting retrofits, high-efficiency heating, ventilating and air conditioning equipment and other energy saving technologies. The company is compensated for its services based primarily on the increased energy efficiency of the installed equipment over a multi-year period. Con Edison Solutions has won competitive solicitations for energy savings contracts with the United States Department of Energy and the United States Department of Defense, and a shared energy savings contract with the United States Postal Service. The company also develops, owns and operates behind-the-meter renewable energy projects, predominately in Massachusetts and California, with an aggregate capacity of 44 MW (AC).
In September 2016, Con Edison Solutions sold its retail electric supply business, which primarily sold electricity to industrial, commercial and governmental customers in the northeastern United States and Texas and also sold electricity to residential and small commercial customers (mass market) in the northeastern United States. See Note U to the financial statements in Item 8. Con Edison Solutions’ electricity sales for the last five years were:
 
2012
2013
2014
2015
2016
Retail electric volumes sold (millions of kWh)
13,840

12,167

11,871

13,594

9,843


For information about the Clean Energy Businesses' results, see "Results of Operations" in Item 7 and Note N to the financial statements in Item 8.

Con Edison Transmission
CET Electric
CET Electric owns a 45.7 percent interest in New York Transco LLC (NY Transco). Affiliates of certain other New York transmission owners own the remaining interests.
NY Transco's existing projects include three (called the TOTS Projects) that the NYSPSC approved in October 2013 in its proceeding to address potential needs that could arise should the Indian Point Energy Center (which is owned by Entergy Corporation subsidiaries) no longer be able to operate. The TOTS Projects include the two projects that CECONY developed and transferred to the NY Transco (see Note U to the financial statements in Item 8) and one project that another regulated affiliate of NY Transco developed.
In April 2015, FERC issued an order granting certain transmission incentives for NY Transco projects. In March 2016, the FERC approved a November 2015 settlement agreement that provides for a 10 percent return on common equity (and/or 9.5 percent for capital costs in excess of $228 million incurred for initial commercial operation) and a maximum common equity ratio of 53 percent. The costs of the projects are allocated across New York State, with 63 percent to load serving entities in the CECONY and O&R service areas.
In December 2015, the NYSPSC issued an order in its competitive proceeding to select transmission projects that would relieve transmission congestion between upstate and downstate. The NYSPSC determined that there is a public policy need for new transmission to address the congestion, such as a project ($1,000 million estimated cost) proposed on behalf of NY Transco. This NY Transco project, which could be completed in the 2019 to 2021 timeframe, would be developed, at least initially, by National Grid and NY Transco. The NYSPSC also directed certain developers, including NY Transco, to submit project(s) to the NYISO. The NYISO evaluated the submitted projects under its FERC-approved public policy planning process and, in October 2016, submitted its list of viable


28



Table of Contents

and sufficient projects (including the NY Transco project) to the NYSPSC for its determination as to whether the transmission need still exists. In January 2017, the NYSPSC found that the public policy need still exists, asking the NYISO to proceed with selection. The NYISO may select one or more of the viable and sufficient projects for development. The cost of the project(s) selected by the NYISO would be recoverable through the NYISO’s tariff after FERC approves the rates for the project(s).

CET Gas
CET Gas, through its subsidiaries, owns a 50 percent interest in Stagecoach Gas Services LLC (Stagecoach) and a 12.5 percent ownership interest in Mountain Valley Pipeline LLC (MVP). Stagecoach is a joint venture with a subsidiary of Crestwood Equity Partners LP to own, operate and further develop a gas pipeline and storage business located in northern Pennsylvania and southern New York. Stagecoach provides services to its customers (including CECONY, see Note S to the financial statements in Item 8) through its 181 miles of pipe and 41 Bcf of storage capacity. MVP is a joint venture with four other partners developing a proposed 300 mile gas transmission project in West Virginia and Virginia. MVP has indicated that the project has an estimated total cost of $3,000 million to $3,500 million, and subject to FERC approval, is targeted to be fully in-service during the fourth quarter of 2018. See Note U to the financial statements in Item 8.

For information about Con Edison Transmission's results, see "Results of Operations" in Item 7 and Note N to the financial statements in Item 8.

Capital Requirements and Resources
Capital Requirements
The following table contains the Companies’ capital requirements for the years 2014 through 2016 and their current estimate of amounts for 2017 through 2019:
  
Actual
Estimate
(Millions of Dollars)
2014
2015
2016
2017
2018
2019
CECONY (a)(b)
 
 
 
 
 
 
Electric
$1,500
$1,658
$1,819
$1,957
$1,919
$1,798
Gas
549
671
811
935
953
983
Steam
83
106
126
70
71
68
Sub-total
2,132
2,435
2,756
2,962
2,943
2,849
O&R
 
 
 
 
 
 
Electric
105
114
114
136
151
148
Gas
37
46
52
56
58
52
Sub-total
142
160
166
192
209
200
Con Edison Transmission
 
 
 
 
 
 
CET Electric


51

19
19
CET Gas


1,027
90
313
93
Sub-total


1,078
90
332
112
Clean Energy Businesses
447
823
1,235
450
400
400
Total capital expenditures
2,721
3,418
5,235
3,694
3,884
3,561
Retirement of long-term securities
 
 
 
 
 
 
Con Edison – parent company
2
2
2
2
402
3
CECONY
475
350
650

1,200
475
O&R
3
143
79
4
55
62
Clean Energy Businesses
5
4
4
33
31
34
Total retirement of long-term securities
485
499
735
39
1,688
574
Total capital requirements
$3,206
$3,917
$5,970
$3,733
$5,572
$4,135
(a)
CECONY’s capital expenditures for environmental protection facilities and related studies were $218 million, $224 million and $259 million in 2014, 2015 and 2016, respectively, and are estimated to be $372 million in 2017.
(b)
Amounts shown do not include amounts for the energy efficiency, demand reduction and combined heat and power programs.

The Utilities have an ongoing need to make substantial capital investments primarily to maintain the reliability of their electric, gas and steam delivery systems. Their estimated construction expenditures also reflect programs that will give customers greater control over their energy usage and bills, help integrate customers' new clean energy technologies into the Utilities’ electric delivery systems and accelerate the replacement of leak-prone gas distribution mains and service lines.


                            
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Estimated capital expenditures for Con Edison Transmission primarily reflect planned investments in the MVP gas transmission project. Estimated capital expenditures for the Clean Energy Businesses primarily reflect planned investments in renewable electric production projects. Actual capital expenditures for Con Edison Transmission and the Clean Energy Businesses could increase or decrease significantly from the amounts estimated depending on opportunities.

Contractual Obligations
The following table summarizes the Companies’ material obligations at December 31, 2016 to make payments pursuant to contracts. Long-term debt, capital lease obligations and other noncurrent liabilities are included on their balance sheets. Operating leases and electricity purchase agreements (for which undiscounted future annual payments are shown) are described in the notes to the financial statements.


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Payments Due by Period
(Millions of Dollars)
Total
1 year
or less
Years
2 & 3
Years
4 & 5
After 5
years
Long-term debt (Statement of Capitalization)
 


 
 
CECONY
$12,186

$—

$1,675
$350
$10,161
O&R
671
4
117

550
Clean Energy Businesses
845
33
65
72
675
Parent
1,206
2
405
506
293
Interest on long-term debt (a)
12,709
719
1,251
1,115
9,624
Total long-term debt, including interest
27,617
758
3,513
2,043
21,303
Capital lease obligations (Note J)
 
 
 
 
 
CECONY
2
1
1


Total capital lease obligations
2
1
1


Operating leases (Notes J and Q)
 
 
 
 
 
CECONY
964
53
108
107
696
O&R
5
1
2
1
1
Clean Energy Businesses
122
7
13
11
91
Total operating leases
1,091
61
123
119
788
Purchase obligations
 
 
 
 
 
Electricity purchase power agreements – Utilities (Note I)
 
 
 
 
 
CECONY
 
 
 
 
 
Energy
2,661
390
202
202
1,867
Capacity (b)
1,506
255
412
129
710
Total CECONY
4,167
645
614
331
2,577
O&R
 
 
 
 
 
Energy and Capacity (b)
91
57
33
1

Total electricity and purchase power agreements – Utilities
4,258
702
647
332
2,577
Natural gas supply, transportation, and storage contracts – Utilities (c)
 
 
 
 
CECONY
 
 
 
 
 
Natural gas supply
296
212
80
4

Transportation and storage
2,680
241
463
375
1,601
Total CECONY
2,976
453
543
379
1,601
O&R
 
 
 
 
 
Natural gas supply
29
18
11


Transportation and storage
499
45
86
70
298
Total O&R
528
63
97
70
298
Total natural gas supply, transportation and storage contracts
3,504
516
640
449
1,899
Other purchase obligations
 
 
 
 
 
CECONY (d)
4,845
1,529
1,814
677
825
O&R (d)
195
85
86
23
1
Clean Energy Businesses (e)
581
482
91
3
5
Total other purchase obligations
5,621
2,096
1,991
703
831
Uncertain tax positions (f)
12
12



Total
$42,105
$4,146
$6,915
$3,646
$27,398
(a)
Includes interest on variable rate debt calculated at rates in effect at December 31, 2016.
(b)
Included in these amounts is the cost of minimum quantities of energy that the company is obligated to purchase at both fixed and variable prices.
(c)
Included in these amounts is the cost of minimum quantities of natural gas supply, transportation and storage that the Utilities are obligated to purchase at both fixed and variable prices.
(d)
Amounts shown for other purchase obligations, which reflect capital and operations and maintenance costs incurred by the Utilities in running their day-to-day operations, were derived from the Utilities’ purchasing system as the difference between the amounts authorized and the amounts paid (or vouchered to be paid) for each obligation. For many of these obligations, the Utilities are committed to purchase less than the amount authorized. Payments for the “Other Purchase Obligations” are generally assumed to be made ratably over the term of the obligations. The Utilities believe that unreasonable effort and expense would be involved to enable them to report their “Other Purchase Obligations” in a different manner.
(e)
Amounts represent commitments to purchase minimum quantities of electric energy and capacity, renewable energy certificates, natural gas, natural gas pipeline capacity, energy efficiency services and construction services entered into by the Clean Energy Businesses.
(f)
Con Edison reasonably expects to resolve approximately $35 million of its liability for uncertain tax positions within the next twelve months, of which an estimated $12 million may be settled in cash payments. Con Edison is unable to reasonably estimate the timing of the

                            
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resolution of its remaining liability for uncertain tax positions, which will depend on the progress of tax examinations with the various tax authorities. See Note L to the financial statements in Item 8. 
The Companies’ commitments to make payments in addition to these contractual commitments include their other liabilities reflected in their balance sheets, any funding obligations for their pension and other postretirement benefit plans, financial hedging activities, their collective bargaining agreements and Con Edison’s guarantees of certain obligations of the Clean Energy Businesses and CET - Electric. See Notes E, F, O and “Guarantees” in Note H to the financial statements in Item 8.
Capital Resources
Con Edison is a holding company that operates only through its subsidiaries and has no material assets other than its interests in its subsidiaries. Con Edison finances its capital requirements primarily through internally-generated funds and the sale of its securities. Con Edison’s ability to make payments on external borrowings and dividends on its common shares depends on receipt of dividends from its subsidiaries or proceeds from the sale of its securities or its interests in its subsidiaries.
For information about restrictions on the payment of dividends by the Utilities and significant debt covenants, see Note C to the financial statements in Item 8.
For information on the Companies’ commercial paper program and revolving credit agreements with banks, see Note D to the financial statements in Item 8.
The Companies require access to the capital markets to fund capital requirements that are substantially in excess of available internally-generated funds. See “Capital Requirements,” above. Each of the Companies believes that it will continue to be able to access capital, although capital market conditions may affect the timing and cost of the Companies’ financing activities. The Companies monitor the availability and costs of various forms of capital, and will seek to issue Con Edison common stock and other securities when it is necessary or advantageous to do so. For information about the Companies’ long-term debt and short-term borrowing, see Notes C and D to the financial statements in Item 8.

Con Edison plans to meet its 2017 capital requirements through internally-generated funds and the issuance of securities. The company’s plans include the issuance of between $1,000 million and $1,800 million of long-term debt, most of which would be at the Utilities, and the issuance of additional debt secured by its renewable electric production projects. The company’s plans also include the issuance of up to $350 million of common equity in addition to equity under its dividend reinvestment, employee stock purchase and long term incentive plans.

The Utilities finance their operations, capital requirements and payment of dividends to Con Edison from internally-generated funds, contributions of equity capital from Con Edison, if any, and external borrowings. See "Liquidity and Capital Resources" in Item 7.
In 2016, the NYSPSC authorized CECONY, through 2019, to issue up to $5,200 million of debt securities ($1,300 million of which the company had issued as of December 31, 2016). In 2013, the NYSPSC authorized O&R, through 2017, to issue up to $305 million of debt securities ($295 of which the company had issued as of December 31, 2016). The NYSPSC also authorized CECONY and O&R for such periods to issue up to $2,500 million and $125 million, respectively, of debt securities to refund existing debt securities. At December 31, 2016, the Utilities had not refunded any securities pursuant to this authorization.
The Clean Energy Businesses have financed their operations and capital requirements primarily with capital contributions and borrowings from Con Edison, internally-generated funds and external borrowings. See "Liquidity and Capital Resources" in Item 7.
For each of the Companies, the ratio of earnings to fixed charges (SEC basis) for the last five years was:
 
Ratio of Earnings to Fixed Charges
 
2012
2013
 
2014
2015
2016
Con Edison
3.7

3.0

(a) 
3.6

3.5

3.6

CECONY
3.7

3.7

 
3.8

3.6

3.6

(a)
Reflects $95 million after-tax charge to earnings relating to Con Edison Development’s LILO transactions that were terminated in 2013.


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For each of the Companies, the common equity ratio for the last five years was:
 
Common Equity Ratio
(Percent of total capitalization)
 
2012
2013
2014
2015
2016
Con Edison
54.3
54.0
52.2
52.1
49.3
CECONY
53.7
53.8
50.9
51.4
49.5
The commercial paper of Con Edison and O&R is rated P-2, A-2 and F2, respectively, by Moody’s, S&P and Fitch. The commercial paper of CECONY is rated P-1, A-2 and F2 by Moody’s, S&P and Fitch, respectively. The senior unsecured debt of Con Edison is rated A3, BBB+ and BBB+ by Moody's, S&P and Fitch, respectively. The senior unsecured debt of CECONY is rated A2, A- and A- by Moody’s, S&P and Fitch, respectively. The senior unsecured debt of O&R is rated A3, A- and A- by Moody’s, S&P and Fitch, respectively. Securities ratings assigned by rating organizations are expressions of opinion and are not recommendations to buy, sell or hold securities. A securities rating is subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating.
CECONY has $636 million of tax-exempt debt for which the interest rates are to be determined pursuant to periodic auctions. Of this amount, $391 million is insured by Ambac Assurance Corporation and $245 million is insured by Syncora Guarantee Inc. (formerly XL Capital Assurance Inc.). Credit rating agencies have withdrawn the ratings of these insurers. Subsequently, there have not been sufficient bids to determine the interest rates pursuant to auctions, and interest rates have been determined by reference to a variable rate index. The weighted average annual interest rate on this tax-exempt debt was 1.00 percent on December 31, 2016. The weighted average interest rate was 0.75 percent, 0.14 percent and 0.10 percent for the years 2016, 2015 and 2014, respectively. Under CECONY’s current electric, gas and steam rate plans, variations in auction rate debt interest expense are reconciled to the levels set in rates.

Environmental Matters
Climate Change
As indicated by the Intergovernmental Panel on Climate Change, emissions of greenhouse gases (GHG), including carbon dioxide, are very likely changing the world’s climate.
Climate change could affect customer demand for the Companies’ energy services. It might also cause physical damage to the Companies’ facilities and disruption of their operations due to more frequent and more extreme weather-related events. In late October 2012, Superstorm Sandy caused extensive damage to the Utilities’ electric distribution system. Superstorm Sandy interrupted service to approximately 1.4 million of the Utilities’ customers – more than four times the number of customers impacted by the Utilities’ previous worst storm event (Hurricane Irene in 2011) and resulted in the Utilities incurring substantial response and restoration costs.
Based on the most recent data (2015) published by the U.S. Environmental Protection Agency (EPA), Con Edison estimates that its direct GHG emissions constitute less than 0.1 percent of the nation’s GHG emissions. Con Edison’s estimated emissions of GHG during the past five years were:
(Metric tons, in millions (a))
2012
2013
2014
2015
2016
CO2 equivalent emissions
3.3

3.4

3.2

3.2

3.1

(a)
Estimated emissions for 2016 are based on preliminary data and are subject to third-party verification.
Con Edison’s 49 percent decrease in direct GHG emissions (carbon dioxide, methane and sulfur hexafluoride) since 2005 (6.0 million metric tons) reflects the emission reductions resulting from equipment and repair projects, reduced steam demand, the increased use of natural gas in lieu of fuel oil at CECONY’s steam production facilities as well as projects to reduce sulfur hexafluoride emissions and to replace gas distribution pipes.
CECONY has participated for several years in voluntary initiatives with the EPA to reduce its methane and sulfur hexafluoride emissions. The Utilities reduce methane emissions from the operation of their gas distribution systems through pipe maintenance and replacement programs, by operating system components at lower pressure, and by introducing new technologies to prioritize leak repairs and to reduce losses when work is performed on operating assets. The Utilities reduce emissions of sulfur hexafluoride, which is used for arc suppression in substation circuit breakers and switches, by using improved technologies to locate and repair leaks and by replacing older equipment. The Utilities also actively promote energy efficiency and the use of renewable generation to help their customers’ reduce their GHG emissions.

                            
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NYSERDA and New York utilities have been responsible for implementing the Energy Efficiency Portfolio Standard (EEPS) established by the NYSPSC through energy efficiency programs designed and managed by NYSERDA and the utilities and authorized by the NYSPSC. CECONY billed customers EEPS surcharges of approximately $103 million in 2015 and 2014 to fund these programs. EEPS authorization ended December 2015. Beginning January 2016, New York utilities have implemented Energy Efficiency Transition Implementation Plans (ETIPs) and are responsible for designing and managing their energy efficiency programs consistent with NYSPSC-approved, utility-specific program budgets and metrics. Effective January 2016, the utilities are recovering the costs of their ETIP programs from their customers primarily through NYSPSC-approved energy efficiency tracker surcharge mechanisms. The Utilities billed customers $107 million in 2016 through the tracker surcharge mechanism. Pursuant to CECONY's current electric rate plan, the company will supplement its existing ETIP programs with new energy efficiency, electric vehicle and system peak reduction programs, the cost of which will be reflected in base rates. See Note B to the financial statements in Item 8. The estimated costs of the existing and new programs are approximately $120 million, $150 million, and $210 million in 2017, 2018, and 2019, respectively.
Through the Utilities' energy-efficiency programs, customers reduced their annual energy use by approximately 1,249,000 MWh of electricity and 1,702,000 Dth of gas from the programs’ inception in 2009 through 2016, resulting in their avoiding their release of approximately 765,000 tons of GHG into the atmosphere in 2016. In addition, CECONY’s other demand-side management programs assisted customers in reducing their annual energy use by approximately 336,000 MWh of electricity from the programs’ inception in 2004 through 2016, resulting in their avoiding their release of approximately 189,000 tons of GHG into the atmosphere in 2016.
Emissions are also avoided by renewable electric production facilities replacing fossil-fueled electric production facilities. NYSERDA has been responsible for implementing the renewable portfolio standard (RPS) established by the NYSPSC. NYSERDA has entered into long-term agreements with developers of large renewable electric production facilities and pays them premiums based on the facilities’ electric output. These facilities sell their energy output in the wholesale energy market administered by the NYISO. As a result of the Utilities’ participation in the NYISO wholesale markets, a portion of the Utilities’ NYISO energy purchases are sourced from renewable electric production facilities. NYSERDA also has provided rebates to customers who installed eligible renewable electric production technologies. The electricity produced by such customer-sited renewables generation offsets the energy that the Utilities would otherwise have procured, thereby reducing the amount of electricity produced by non-renewable production facilities. The Utilities billed customers RPS surcharges of $19 million and $131 million in 2016 and 2015, respectively, (and approximately $697 million cumulatively from 2006) to fund these NYSERDA programs. In March 2016, NYSERDA reported that the statewide environmental benefits of having electricity generated by renewable production facilities from 2006 through 2015, as opposed to the State’s “system-mix,” amounts to approximately 6,700 tons of nitrogen oxides, 12,200 tons of sulfur dioxides and 6.4 million tons of carbon dioxide in reduced emissions over this time period. In January 2016, the NYSPSC approved a 10-year $5.3 billion clean energy fund to be managed by NYSERDA under the NYSPSC's supervision. The clean energy fund has four portfolios: market development; innovation and research; NY Green Bank and NY Sun. The Utilities have eliminated the separate RPS tariff and now collect all clean energy fund surcharges through the system benefit charge (including previously authorized RPS, EEPS, Technology and Market Development collections, and incremental clean energy fund collections to be collected from electric customers only). The Utilities billed customers clean energy fund surcharges of $277 million in 2016. For information about NYSPSC proceedings considering renewable generation see “Utility Regulation – State Utility Regulation – New York Utility Industry – Reforming the Energy Vision," above.
In June 2015, the New York State Energy Planning Board released its 2015 State Energy Plan. Under New York State law, any energy-related action or decision of State agencies must be reasonably consistent with the plan. The plan reflects clean energy initiatives, including the REV proceeding, NYSERDA’s clean energy fund and the following goals for New York State to meet by 2030: a 40 percent reduction in greenhouse gas emissions from 1990 levels; 50 percent of electric generation from renewable energy sources; and a 23 percent decrease in energy consumption in buildings from 2012 levels. For information about the NYSPSC's adoption of a clean energy standard to mandate achievement of the State Energy Plan's goals, see "Utility Regulation – State Utility Regulation – New York Utility Industry – Reforming the Energy Vision," above. Also, New York State and New York City have announced goals to reduce GHG emissions 80 percent below 1990 and 2005, respectively, levels by 2050.
In August 2015, the United States Environmental Protection Agency (EPA) issued its Clean Power Plan to reduce carbon dioxide emissions from existing power plants 32 percent from 2005 levels by 2030. Under the Clean Power Plan, each state is required to submit for EPA approval a plan to reduce its emissions to specified rate-based or equivalent mass-based target levels (as determined in accordance with the Clean Power Plan) applicable to the state. For New York State, the emissions rate-based target level for 2030 is approximately 20 percent below its 2012 emissions rate. State plans may, among other things, include participation in regional cap-and-trade programs,


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such as the Regional Greenhouse Gas Initiative (RGGI), and renewable energy and energy efficiency programs. In February 2016, the Supreme Court of the United States stayed the implementation of the Clean Power Plan until the resolution of litigation challenging the plan.
CECONY is subject to carbon dioxide emissions regulations established by New York State under RGGI. The initiative, a cooperative effort by Northeastern and Mid-Atlantic states, established a decreasing cap on carbon dioxide emissions resulting from the generation of electricity. Under RGGI, affected electric generators are required to obtain emission allowances to cover their carbon dioxide emissions, available primarily through auctions administered by participating states or a secondary market. CECONY met its requirement of 6.3 million allowances for the most recent RGGI compliance period (2012-2014) and has purchased sufficient allowances to meet its requirement for the current compliance period (2015-2017).
The cost to comply with legislation, regulations or initiatives limiting the Companies’ GHG emissions could be substantial.

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

CECONY
Superfund
The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes (Superfund) impose joint and several liability, regardless of fault, upon generators of hazardous substances for investigation costs, remediation costs and environmental damages. The sites as to which CECONY has been asserted to have liability under Superfund include its and its predecessor companies’ former manufactured gas sites, its multi-purpose Astoria site, the Gowanus Canal site, and other Superfund sites discussed below. There may be additional sites as to which assertions will be made that the company has liability. For a further discussion of claims and possible claims against the company under Superfund, estimated liability accrued for Superfund claims and recovery from customers of site investigation and remediation costs, see Note G to the financial statements in Item 8.
Manufactured Gas Sites
CECONY and its predecessors formerly owned and operated manufactured gas plants at 51 sites (MGP Sites) in New York City and Westchester County. Many of these sites have been subdivided and are now owned by parties other than CECONY and have been redeveloped for other uses, including schools, residential and commercial developments and hospitals. The New York State Department of Environmental Conservation (NYSDEC) is requiring CECONY to investigate, and if necessary, develop and implement remediation programs for the sites, including any neighboring areas to which contamination may have migrated.
CECONY has started remedial investigations at all 51 MGP Sites. After investigations, no MGP impacts have been detected at all or portions of 15 sites, and the NYSDEC has issued No Further Action (NFA) letters for these sites.
Coal tar or other MGP-related contaminants have been detected at the remaining 36 sites. Remedial actions have been completed at all or portions of six sites and the NYSDEC has issued NFA letters for these sites. In addition, remedial actions have been completed by property owners at all or portions of three sites under the NYS Brownfield Cleanup Program and Certificates of Completion have been issued by the NYSDEC for these sites. Remedial design is ongoing for the remaining sites, however, the information as to the extent of contamination and scope of the remediation likely to be required for many of these sites is incomplete. The company estimates that its undiscounted potential liability for the completion of the site investigation and cleanup of the known contamination on MGP sites (other than the Astoria site which is discussed below) could range from $469 million to $2,260 million.
Astoria Site
CECONY is permitted by the NYSDEC to operate a hazardous waste storage facility on property owned by it in the Astoria section of Queens, New York. Portions of the property were formerly the location of a manufactured gas plant and also have been used or are being used for, among other things, electric generation operations, electric substation operations, the storage of fuel oil and liquefied natural gas, and the maintenance and storage of electric equipment. As a condition of its NYSDEC permit, the company is required to investigate the property and, where

                            
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environmental contamination is found and action is necessary, to remediate the contamination. The company’s investigations are ongoing. The company has submitted to the NYSDEC and the New York State Department of Health reports and in the future will be submitting additional reports identifying the known areas of contamination. The company estimates that its undiscounted potential liability for the completion of the site investigation and cleanup of the known contamination on the property could range from $162 million to $475 million.

Gowanus Canal
In August 2009, CECONY received a notice of potential liability and request for information from the EPA about the operations of the company and its predecessors at sites adjacent to or near the 1.8 mile Gowanus Canal in Brooklyn, New York. In March 2010, the EPA added the Gowanus Canal to its National Priorities List of Superfund sites. The canal’s adjacent waterfront is primarily commercial and industrial, currently consisting of concrete plants, warehouses, and parking lots. The canal is near several residential neighborhoods. In September 2013, the EPA issued its record of decision for the site. The EPA concluded that there was significant contamination at the site, including polycyclic aromatic hydrocarbons, polychlorinated biphenyls (PCBs), pesticides, metals and volatile organic compounds. The EPA selected a remedy for the site that includes dredging and disposal of some contaminated sediments and stabilization and capping of contamination that will not be removed. The EPA estimated the cost of the selected remedy to be $506.1 million (and indicated the actual cost could be significantly higher or lower). The EPA has identified 39 potentially responsible parties (PRPs) with respect to the site, including CECONY (which the EPA indicated has facilities that may be a source of PCBs at the site). The EPA has ordered the PRPs, including CECONY, to coordinate and cooperate with each other to perform and/or fund the remedial design for the selected remedy, which current estimates indicate could cost approximately $62 million. CECONY is participating with other PRPs in an allocation process to determine each PRP’s share of the liability for these remedial design costs. In June 2015, other Federal agencies and the NYSDEC notified the PRPs of their intent to perform a natural resource damage assessment for the site. CECONY is unable to estimate its exposure to liability for the Gowanus Canal site.
Other Superfund Sites
In September 2007, the NYSDEC demanded that the company investigate and remediate PCB contamination that may have migrated from a former CECONY service center facility in Flushing New York, into the adjacent Flushing River. In April 2008, the company and NYSDEC entered into a consent order under which the company agreed to implement a NYSDEC-approved investigation program for the Flushing River and, if deemed necessary by the NYSDEC to protect human health and the environment, to implement a NYSDEC-approved remediation program for any PCB contamination in the river attributable to the site. In March 2011, the company submitted to NYSDEC a report indicating that PCBs had migrated from the site to sediment in a portion of the river. In August 2013, the NYSDEC selected a remedy that requires the company to submit a remedial design report, remove contaminated sediment, restore the river bed with clean material, prepare a site management plan and implement institutional controls. The company estimates that its undiscounted potential liability for the completion of the cleanup in Flushing River could range from $5 million to $6 million.
In November 2016, the U.S. Coast Guard ordered CECONY and another utility to take certain response actions to locate, secure, contain and remove a discharge of dielectric fluid at a New Jersey marina located on the Hudson River from one or two underwater transmission lines, and ordered the marina owner to remove substantial debris from its collapsed pier that is blocking access to the lines. The other utility owns and operates the portion of the transmission lines located in New Jersey. CECONY owns and operates the portion of the transmission lines located in New York.  Consistent with prior arrangements between CECONY and the other utility for these lines, which included cost allocation provisions, CECONY has been responding to the incident on behalf of the other utility. In response to CECONY’s request for reconsideration to the U.S. Coast Guard, in which CECONY asserted that it is not a responsible party for the dielectric fluid discharge but would continue, on behalf of the other utility, to take actions necessary to respond to the dielectric fluid discharge, the U.S. Coast Guard rescinded its order to CECONY. CECONY does not expect that its share, if any, of the costs to respond to the discharge (which is ongoing) and repair the other utility’s portion of the transmission lines will have a material adverse effect on its financial condition, results of operation or liquidity.
CECONY is a PRP at additional Superfund sites involving other PRPs and participates in PRP groups at those sites. The company generally is not managing the site investigation and remediation at these multiparty sites. Work at these sites is in various stages, and investigation, remediation and monitoring activities at some of these sites can be expected to continue over extended periods of time. The company believes that it is unlikely that monetary sanctions, such as penalties, will be imposed by any governmental authority with respect to these sites.
The following table lists each of the additional Superfund sites for which the company anticipates it may have liability. The table also shows for each such site its location, the year in which the company was designated or


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alleged to be a PRP or to otherwise have responsibilities for the site (shown in the table under “Start”), the name of the court or agency in which proceedings for the site are pending and CECONY’s estimated percentage of the total liability for each site. The company currently estimates that its potential liability for investigation, remediation, monitoring and environmental damages in aggregate for the sites below is less than $2 million. Superfund liability is joint and several. The company’s estimate of its liability for each site was determined pursuant to consent decrees, settlement agreements or otherwise and in light of the financial condition of other PRPs. The company’s actual liability could differ substantially from amounts estimated.
Site
Location
Start
Court or
Agency
% of Total
Liability
Curcio Scrap Metal
Saddle Brook, NJ
1987
EPA
100%
Metal Bank of America
Philadelphia, PA
1987
EPA
1.0%
Cortese Landfill
Narrowsburg, NY
1987
EPA
6.0%
Global Landfill
Old Bridge, NJ
1988
EPA
0.3%
Borne Chemical
Elizabeth, NJ
1997
NJDEP
0.7%

O&R
Superfund
The sites at which O&R has been asserted to have liability under Superfund include its manufactured gas sites and the Superfund sites discussed below. There may be additional sites as to which assertions will be made that O&R has liability. For a further discussion of claims and possible claims against O&R under Superfund, see Note G to the financial statements in Item 8.
Manufactured Gas Sites
O&R and its predecessors formerly owned and operated manufactured gas plants at seven sites (O&R MGP Sites) in Orange County and Rockland County, New York. Three of these sites are now owned by parties other than O&R, and have been redeveloped by them for residential, commercial or industrial uses. The NYSDEC is requiring O&R to develop and implement remediation programs for the O&R MGP Sites including any neighboring areas to which contamination may have migrated.
O&R has completed remedial investigations at all seven of its MGP sites and has received NYSDEC’s decision regarding the remedial work to be performed at six of the sites. Of the six sites, O&R has completed remediation at three sites and remedial construction is in progress at one site. Remedial design is ongoing for the remaining two sites. The company estimates that its undiscounted potential liability for the completion of the site investigation and cleanup of the known contamination on MGP sites could range from $97 million to $151 million.
Superfund Sites
O&R is a PRP at Superfund sites involving other PRPs, and participates in PRP groups at those sites. The company is not managing the site investigation and remediation at these multiparty Superfund sites. Work at these sites is in various stages, and investigation, remediation and monitoring activities at some of these sites is expected to continue over extended periods of time. The company believes that it is unlikely that monetary sanctions, such as penalties, will be imposed by any governmental authority with respect to these sites.
The following table lists each of the Superfund sites for which the company anticipates it may have liability. The table also shows for each such site its location, the year in which the company was designated or alleged to be a PRP or to otherwise have responsibilities for the site (shown in the table under “Start”), the name of the court or agency in which proceedings for the site are pending and O&R’s estimated percentage of the total liability for each site. The company currently estimates that its potential liability for investigation, remediation, monitoring and environmental damages in aggregate for the sites below is less than $1 million. Superfund liability is joint and several. The company’s estimate of its liability for each site was determined pursuant to consent decrees, settlement agreements or otherwise and in light of the financial condition of other PRPs. The company’s actual liability could differ substantially from amounts estimated.
Site
Location
Start
Court or
Agency
% of Total
Liability
Borne Chemical
Elizabeth, NJ
1997
NJDEP
2.3%
Metal Bank of America
Philadelphia, PA
1993
EPA
4.6%
Ellis Road
Jacksonville, FL
2011
EPA
0.2%


                            
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Other Federal, State and Local Environmental Provisions
Toxic Substances Control Act
Virtually all electric utilities, including CECONY, own equipment containing PCBs. PCBs are regulated under the Federal Toxic Substances Control Act of 1976. The Utilities have procedures in place to manage and dispose of oil and equipment containing PCBs properly when they are removed from service.
Water Quality
Under NYSDEC regulations, the operation of CECONY’s generating facilities requires permits for water discharges and water withdrawals. Conditions to the renewal of such permits may include limitations on the operations of the permitted facility or requirements to install certain equipment, the cost of which could be substantial. For information about the company’s generating facilities, see “CECONY – Electric Operations – Electric Facilities” and “Steam Operations – Steam Facilities” above in this Item 1.
Certain governmental authorities are investigating contamination in the Hudson River and the New York Harbor. These waters run through portions of CECONY’s service area. Governmental authorities could require entities that released hazardous substances that contaminated these waters to bear the cost of investigation and remediation, which could be substantial.
Air Quality
Under new source review regulations, an owner of a large generating facility, including CECONY’s steam and steam-electric generating facilities, is required to obtain a permit before making modifications to the facility, other than routine maintenance, repair, or replacement, that increase emissions of pollutants from the facility above specified thresholds. To obtain a permit, the facility owner could be required to install additional pollution controls or otherwise limit emissions from the facility. The company reviews on an on-going basis its planned modifications to its generating facilities to determine the potential applicability of new source review and similar regulations.
The EPA's Transport Rule (also referred to as the Cross-State Air Pollution Rule), which was implemented in January 2015, established a new cap and trade program requiring further reductions in air emissions than the Clean Air Intrastate Rule (CAIR) that it replaced. Under the Transport Rule, utilities are to be allocated emissions allowances and may sell the allowances or buy additional allowances. CECONY requested and received NYSPSC approval to change the provisions under which the company recovers its purchased power costs to provide for costs incurred to purchase emissions allowances and revenues received from the sale of allowances. CECONY complied with the Transport Rule in 2016 and expects to comply with the rule in 2017. If changes to the Transport Rule that have been proposed are adopted, the number of allowances allocated to CECONY would decrease and the company would be required to purchase allowances to offset the decreased allocation.

State Anti-Takeover Law
New York State law provides that a “domestic corporation,” such as Con Edison, may not consummate a merger, consolidation or similar transaction with the beneficial owner of a 20 percent or greater voting stock interest in the corporation, or with an affiliate of the owner, for five years after the acquisition of the voting stock interest, unless the transaction or the acquisition of the voting stock interest was approved by the corporation’s board of directors prior to the acquisition of the voting stock interest. After the expiration of the five-year period, the transaction may be consummated only pursuant to a stringent “fair price” formula or with the approval of a majority of the disinterested stockholders.
Employees
At December 31, 2016, Con Edison had no employees other than those of CECONY, O&R, and the Clean Energy Businesses (which had 13,531, 1,145 and 284 employees, respectively). In January 2017, 8 CECONY employees transferred to Con Edison Transmission. Of the CECONY and O&R employees, 8,196 and 593 employees, respectively, were represented by a collective bargaining unit. The collective bargaining agreement covering most of these CECONY employees expires in June 2020. Agreements covering other CECONY employees and O&R employees expire in June 2017 and May 2017, respectively.
Available Information
For the sources of information about the Companies, see “Available Information” in the “Introduction” appearing before this Item 1.
Item 1A: Risk Factors
Information in any item of this report as to which reference is made in this Item 1A is incorporated by reference herein. The use of such terms as “see” or “refer to” shall be deemed to incorporate at the place such term is used the information to which such reference is made.


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The Companies’ businesses are influenced by many factors that are difficult to predict, and that involve uncertainties that may materially affect actual operating results, cash flows and financial condition.
The Companies have established an enterprise risk management program to identify, assess, manage and monitor its major business risks based on established criteria for the severity of an event, the likelihood of its occurrence, and the programs in place to control the event or reduce the impact. The Companies’ major risks include:
Regulatory/Compliance Risks:
The Companies Are Extensively Regulated And Are Subject To Penalties.    The Companies’ operations require numerous permits, approvals and certificates from various federal, state and local governmental agencies. State utility regulators may seek to impose substantial penalties on the Utilities for violations of state utility laws, regulations or orders. In addition, the Utilities' rate plans usually include penalties for failing to meet certain operating and customer satisfaction standards. See Note B to the financial statements in Item 8. FERC has the authority to impose penalties on the Utilities and the Clean Energy Businesses, which could be substantial, for violations of the Federal Power Act, the Natural Gas Act or related rules, including reliability and cyber security rules. Environmental agencies may seek penalties for failure to comply with laws, regulations or permits. The Companies may also be subject to penalties from other regulatory agencies. The Companies may be subject to new laws, regulations, or other requirements or the revision or reinterpretation of such requirements, which could adversely affect them. In April 2014, the NYSPSC instituted its REV proceeding to improve system efficiency and reliability, encourage renewable energy resources, support distributed energy resources and empower customer choice. See “Utility Regulation” and “Environmental Matters – Climate Change and Other Federal, State and Local Environmental Provisions” in Item 1 and “Application of Critical Accounting Policies” in Item 7.
The Utilities’ Rate Plans May Not Provide A Reasonable Return.    The Utilities have rate plans approved by state utility regulators that limit the rates they can charge their customers. The rates are generally designed for, but do not guarantee, the recovery of the Utilities’ cost of service (including a return on equity). See “Utility Regulation – State Utility Regulation, Rate Plans” in Item 1 and “Rate Plans” in Note B to the financial statements in Item 8. Rates usually may not be changed during the specified terms of the rate plans other than to recover energy costs and limited other exceptions. The Utilities’ actual costs may exceed levels provided for such costs in the rate plans. State utility regulators can initiate proceedings to prohibit the Utilities from recovering from their customers the cost of service (including energy costs) that the regulators determine to have been imprudently incurred (see "Other Regulatory Matters" in Note B to the financial statements in Item 8). The Utilities have from time to time entered into settlement agreements to resolve various prudence proceedings.
The Companies May Be Adversely Affected By Changes To The Utilities’ Rate Plans.    The Utilities’ rate plans typically require action by regulators at their expiration dates, which may include approval of new plans with different provisions. The need to recover from customers increasing costs, taxes or state-mandated assessments or surcharges could adversely affect the Utilities’ opportunity to obtain new rate plans that provide a reasonable rate of return and continue important provisions of current rate plans. The Utilities’ current New York electric and gas rate plans include revenue decoupling mechanisms and their New York electric, gas and steam rate plans include provisions for the recovery of energy costs and reconciliation of the actual amount of pension and other postretirement, environmental and certain other costs to amounts reflected in rates. See “Rate Plans” in Note B to the financial statements in Item 8.
The Intentional Misconduct of Employees or Contractors Could Adversely Affect the Companies.    The violation of laws or regulations by employees or contractors for personal gain may result from contract and procurement fraud, extortion, bribe acceptance, fraudulent related-party transactions and serious breaches of corporate policy or standards of business conduct. Such intentional misconduct by employees or contractors could result in substantial liability, higher costs and increased regulatory requirements. See “Employees” in Item 1.

                            
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Operations Risks:
The Failure of, or Damage to, the Companies’ Facilities Could Adversely Affect the Companies.    The Utilities provide electricity, gas and steam service using energy facilities, many of which are located either in, or close to, densely populated public places. See the description of the Utilities’ facilities in Item 1. A failure of, or damage to, these facilities, or an error in the operation or maintenance of these facilities, could result in bodily injury or death, property damage, the release of hazardous substances or extended service interruptions. A natural disaster such as a major storm, a heat wave or hurricane could damage facilities and the Utilities may experience more severe consequences from attempting to operate during and after such events. The Utilities’ response to such events may be perceived to be below customer expectations. The Utilities could be required to pay substantial amounts that may not be covered by the Utilities’ insurance policies to repair or replace their facilities, compensate others for injury or death or other damage, and settle any proceedings initiated by state utility regulators or other regulatory agencies. The occurrence of such events could also adversely affect the cost and availability of insurance. See “Other Regulatory Matters” in Note B and "Manhattan Steam Main Rupture" and “Manhattan Explosion and Fire” in Note H to the financial statements in Item 8. Changes to laws, regulations or judicial doctrines could further expand the Utilities’ liability for service interruptions. See “Utility Regulation – State Utility Regulation” and "Environmental Matters" in Item 1.
A Cyber Attack Could Adversely Affect the Companies.    The Utilities and other operators of critical energy infrastructure face a heightened risk of cyber attack. The U.S. Department of Energy's Quadrennial Energy Review, issued in January 2017, indicated that cyber threats to the electricity system are increasing in sophistication, magnitude, and frequency. In the event of a cyber attack that the Companies were unable to defend against or mitigate, the Companies could have their operations disrupted, financial and other information systems impaired, property damaged and customer and employee information stolen; experience substantial loss of revenues, response costs and other financial loss; and be subject to increased regulation, litigation and damage to their reputation. The Companies have experienced cyber attacks, although none of the attacks had a material impact.
Environmental Risks:
The Companies Are Exposed to Risks From The Environmental Consequences Of Their Operations.    The Companies are exposed to risks relating to climate change and related matters. See “Environmental Matters – Climate Change” in Item 1. CECONY may also be impacted by regulations requiring reductions in air emissions. See “Environmental Matters – Other Federal, State and Local Environmental Provisions, Air Quality” in Item 1. In addition, the Utilities are responsible for hazardous substances, such as asbestos, PCBs and coal tar, that have been used or produced in the course of the Utilities’ operations and are present on properties or in facilities and equipment currently or previously owned by them. See “Environmental Matters” in Item 1 and Note G to the financial statements in Item 8. The Companies could be adversely affected if a causal relationship between electric and magnetic fields and adverse health effects were to be established.
Financial and Market Risks:
A Disruption In The Wholesale Energy Markets Or Failure By An Energy Supplier Could Adversely Affect The Companies.    Almost all the electricity and gas the Utilities sell to their full-service customers is purchased through the wholesale energy markets or pursuant to contracts with energy suppliers. See the description of the Utilities’ energy supply in Item 1. A disruption in the wholesale energy markets or a failure on the part of the Utilities’ energy suppliers or operators of energy delivery systems that connect to the Utilities’ energy facilities could adversely affect their ability to meet their customers’ energy needs and adversely affect the Companies. In addition, see “Financial and Commodity Market Risks” in Item 7.
The Companies Have Substantial Unfunded Pension And Other Postretirement Benefit Liabilities.    The Utilities have substantial unfunded pension and other postretirement benefit liabilities. The Utilities expect to make substantial contributions to their pension and other postretirement benefit plans. Significant declines in the market values of the investments held to fund pension and other postretirement benefits could trigger substantial funding requirements under governmental regulations. See “Application of Critical Accounting Policies – Accounting for Pensions and Other Postretirement Benefits” and “Financial and Commodity Market Risks,” in Item 7 and Notes E and F to the financial statements in Item 8.
Con Edison’s Ability To Pay Dividends Or Interest Depends On Dividends From Its Subsidiaries.    Con Edison’s ability to pay dividends on its common stock or interest on its external borrowings depends primarily on the dividends and other distributions it receives from its subsidiaries. The dividends that the Utilities may pay to Con Edison are limited by the NYSPSC to not more than 100 percent of their respective income available for dividends calculated on a two-year rolling average basis, with certain exceptions. See “Dividends” in Note C to the financial statements in Item 8.


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The Companies Require Access To Capital Markets To Satisfy Funding Requirements.    The Utilities estimate that their construction expenditures will exceed $9 billion over the next three years. The Utilities use internally-generated funds, equity contributions from Con Edison, if any, and external borrowings to fund the construction expenditures. The Clean Energy Businesses and Con Edison Transmission are investing in renewable generation and energy infrastructure projects that require funds in excess of those produced in the businesses. Con Edison expects to finance its capital requirements primarily through internally generated funds and the sale of its securities. Changes in financial market conditions or in the Companies’ credit ratings could adversely affect their ability to raise new capital and the cost thereof. See “Capital Requirements and Resources” in Item 1.
Changes To Tax Laws Could Adversely Affect the Companies.  Changes to tax laws, regulations or interpretations thereof could have a material adverse impact on the Companies. Changes to tax laws that would have the effect of reducing Con Edison’s taxable income could adversely affect the company’s ability to use its renewable energy tax credits. See Note L to the financial statements in Item 8.

Other Risks:
The Companies’ Strategies May Not Be Effective To Address Changes In The External Business Environment.    The failure to identify, plan and execute strategies to address changes in the external business environment could have a material adverse impact on the Companies. Con Edison seeks to provide shareholder value through continued dividend growth, supported by earnings growth in regulated utilities and contracted assets. Changes to public policy, laws or regulations (or interpretations thereof), customer behavior or technology could significantly impact the value of the Utilities’ energy delivery facilities, the Clean Energy Businesses’ renewable and energy infrastructure projects and Con Edison Transmission's investment in electric and gas transmission projects. Such changes could also affect the Companies’ opportunities to make additional investments in such assets and the potential return on the investments. See “Utility Regulation – State Utility Regulation – New York Utility Industry – Reforming the Energy Vision,” and “Competition” in Item 1.

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

Item 1B: Unresolved Staff Comments
Con Edison
Con Edison has no unresolved comments from the SEC staff.
CECONY
CECONY has no unresolved comments from the SEC staff.

Item 2:    Properties
Con Edison
Con Edison has no significant properties other than those of the Utilities, the Clean Energy Businesses and Con Edison Transmission.
For information about the capitalized cost of the Companies’ utility plant, net of accumulated depreciation, see “Plant and Depreciation” in Note A to the financial statements in Item 8 (which information is incorporated herein by reference).
CECONY
For a discussion of CECONY’s electric, gas and steam facilities, see “CECONY- Electric Operations – Electric Facilities,” “CECONY- Gas Operations – Gas Facilities” and “CECONY-Steam Operations – Steam Facilities” in Item 1 (which information is incorporated herein by reference).
O&R
For a discussion of O&R’s electric and gas facilities, see “O&R – Electric Operations –Electric Facilities” and “O&R – Gas Operations – Gas Facilities” in Item 1 (which information is incorporated herein by reference).
Clean Energy Businesses
For a discussion of the Clean Energy Businesses’ facilities, see “Clean Energy Businesses” in Item 1 (which information is incorporated herein by reference).


                            
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Con Edison Transmission
Con Edison Transmission has no properties. Con Edison Transmission has ownership interests in electric and gas transmission companies. For information about these companies, see "Con Edison Transmission" in Item 1 (which information is incorporated herein by reference).

Item 3:    Legal Proceedings
For information about certain legal proceedings affecting the Companies, see “Other Regulatory Matters” in Note B, “Superfund Sites” and “Asbestos Proceedings” in Note G and “Manhattan Steam Main Rupture” and “Manhattan Explosion and Fire” in Note H to the financial statements in Item 8 and “Environmental Matters – CECONY – Superfund” and “Environmental Matters – O&R – Superfund” in Item 1 of this report, which information is incorporated herein by reference.

Item 4:    Mine Safety Disclosures
Not applicable.

Executive Officers of the Registrant
The following table sets forth certain information about the executive officers of Con Edison and CECONY as of February 16, 2017. As indicated, certain of the executive officers are executive officers of each of Con Edison and CECONY and others are executive officers of Con Edison or CECONY. The term of office of each officer, is until the next election of directors (trustees) of their company and until his or her successor is chosen and qualifies. Officers are subject to removal at any time by the board of directors (trustees) of their company.
Name
Age
Offices and Positions During Past Five Years
Executive Officers of Con Edison and CECONY
John McAvoy
56
5/14 to present – Chairman of the Board, President and Chief Executive Officer and Director of Con Edison and Chairman, Chief Executive Officer and Trustee of CECONY
 
 
12/13 to 4/14 – President and Chief Executive Officer and Director of Con Edison and Chief Executive Officer and Trustee of CECONY
 
 
1/13 to 11/13 – President and Chief Executive Officer of O&R
 
 
12/12 – Senior Vice President of CECONY
 
 
2/09 to 11/12 – Senior Vice President – Central Operations of CECONY
Craig S. Ivey
54
12/09 to present – President of CECONY
Robert Hoglund
55
9/05 to present – Senior Vice President and Chief Financial Officer of Con Edison and CECONY
Elizabeth D. Moore
62
5/13 to present – Senior Vice President and General Counsel of Con Edison and CECONY
 
 
5/09 to 4/13 – General Counsel of Con Edison and CECONY
Frances A. Resheske
56
2/02 to present – Senior Vice President – Corporate Affairs (formerly known as Public Affairs) of CECONY
Robert Sanchez
51
9/16 to present – Senior Vice President - Corporate and Shared Services of CECONY
 
 
9/14 to 8/16 Vice President - Brooklyn & Queens Electric Operations of CECONY
 
 
5/11 to 8/14 Vice President - System & Transmission Operations of CECONY
Saumil P. Shukla
57
9/15 to present – Senior Vice President – Utility Shared Services of CECONY
 
 
10/14 to 8/15 – Vice President – Supply Chain (Shared Services)
 
 
9/07 to 9/14 – Vice President - Steam Operations of CECONY
Robert Muccilo
60
7/09 to present – Vice President and Controller of Con Edison and CECONY
 
 
11/09 to present – Chief Financial Officer and Controller of O&R
Gurudatta Nadkarni
51
1/08 to present – Vice President of Strategic Planning of CECONY
Yukari Saegusa
49
9/16 to present – Treasurer of Con Edison and CECONY
 
 
8/16 to present – Vice President of Con Edison and CECONY
 
 
8/13 to present – Treasurer of O&R
 
 
3/13 to 7/16 – Director of Corporate Finance of CECONY
 
 
12/08 to 3/13 – Managing Director, Debt Capital Markets at Barclays Capital
 
 
 
Executive Officers of Con Edison but not CECONY
Timothy P. Cawley
52
12/13 to present – President and Chief Executive Officer of O&R
 
 
11/13 – Senior Vice President of CECONY
 
 
12/12 to 10/13 – Senior Vice President – Central Operations of CECONY
 
 
5/11 to 11/12 – Vice President – Substation Operations of CECONY
Mark Noyes
52
12/16 to present – President and Chief Executive Officer of Con Edison Clean Energy Businesses, Inc.


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5/16 to present – President and Chief Executive Officer of Con Edison Solutions
 
 
10/15 to present – President and Chief Executive Officer of Con Edison Development and Con Edison Energy
 
 
10/14 to 9/15 – Senior Vice President and Chief Operating Officer of Con Edison Development and Con Edison Energy
 
 
3/09 to 9/14 – Vice President of Con Edison Development
Joseph P. Oates
55