Consolidated Edison Inc. (ED)

FORM 10-Q | Quarterly Report
Aug. 2, 2018 4:28 PM
|
About: Consolidated Edison Inc. (ED)View as PDF
CONSOLIDATED EDISON INC (Form: 10-Q, Received: 08/02/2018 16:34:06)

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x
Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2018
OR
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     
Commission
File Number
 
Exact name of registrant as specified in its charter
and principal executive office address and telephone number
 
State of
Incorporation
  
I.R.S. Employer
ID. Number
1-14514
 
Consolidated Edison, Inc.
 
New York
  
13-3965100
 
 
4 Irving Place, New York, New York 10003
 
 
  
 
 
 
(212) 460-4600
 
 
  
 
1-1217
 
Consolidated Edison Company of New York, Inc.
New York
  
13-5009340
 
 
4 Irving Place, New York, New York 10003
 
 
  
 
 
 
(212) 460-4600
 
 
  
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Consolidated Edison, Inc. (Con Edison)
Yes   x
No   ¨
Consolidated Edison Company of New York, Inc. (CECONY)
Yes   x
No   ¨
Indicate by check mark whether the registrant has submitted electronically 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Con Edison
Large accelerated filer   x
Accelerated filer   ¨
Non-accelerated filer ¨
Smaller reporting company   ¨
Emerging growth company ¨
 
CECONY
Large accelerated filer   ¨
Accelerated filer   ¨
Non-accelerated filer x
Smaller reporting company   ¨
Emerging growth company ¨
 

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



1


As of July 31, 2018 , Con Edison had outstanding 311,102,989 Common Shares ($.10 par value). All of the outstanding common equity of CECONY is held by Con Edison.


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



2


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


3


Environmental
 
 
CO2
 
Carbon dioxide
GHG
 
Greenhouse gases
MGP Sites
 
Manufactured gas plant sites
PCBs
 
Polychlorinated biphenyls
PRP
 
Potentially responsible party
RGGI
 
Regional Greenhouse Gas Initiative
Superfund
 
Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes
 
 
 
Units of Measure
 
 
AC
 
Alternating current
Bcf
 
Billion cubic feet
Dt
 
Dekatherms
kV
 
Kilovolt
kWh
 
Kilowatt-hour
MDt
 
Thousand dekatherms
MMlb
 
Million pounds
MVA
 
Megavolt ampere
MW
 
Megawatt or thousand kilowatts
MWh
 
Megawatt hour
 
 
 
Other
 
 
AMI
 
Advanced metering infrastructure
COSO
 
Committee of Sponsoring Organizations of the Treadway Commission
DER
 
Distributed energy resources
EGWP
 
Employer Group Waiver Plan
Fitch
 
Fitch Ratings
First Quarter Form 10-Q
 
The Companies' combined Quarterly Report on Form 10-Q for the quarterly period ended March 31 of the current year
Second Quarter Form 10-Q
 
The Companies' combined Quarterly Report on Form 10-Q for the quarterly period ended June 30 of the current year
Form 10-K
 
The Companies’ combined Annual Report on Form 10-K for the year ended December 31, 2017
LTIP
 
Long Term Incentive Plan
Moody’s
 
Moody’s Investors Service
REV
 
Reforming the Energy Vision
S&P
 
S&P Global Ratings
TCJA
 
The federal Tax Cuts and Jobs Act of 2017, as enacted on December 22, 2017
VaR
 
Value-at-Risk




4


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


5




FORWARD-LOOKING STATEMENTS
 
This report includes forward-looking statements intended to qualify for the safe-harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements of future expectation and not facts. Words such as “forecasts,” “expects,” “estimates,” “anticipates,” “intends,” “believes,” “plans,” “will” and similar expressions identify forward-looking statements. Forward-looking statements are based on information available at the time the statements are made, and accordingly speak only as of that time. Actual results or developments might differ materially from those included in the forward-looking statements because of various factors including, but not limited to:
the Companies are extensively regulated and are subject to penalties;
the Utilities’ rate plans may not provide a reasonable return;
the Companies may be adversely affected by changes to the Utilities’ rate plans;
the intentional misconduct of employees or contractors could adversely affect the Companies;
the failure of, or damage to, the Companies’ facilities could adversely affect the Companies;
a cyber attack could adversely affect the Companies;
the Companies are exposed to risks from the environmental consequences of their operations;
a disruption in the wholesale energy markets or failure by an energy supplier could adversely affect the Companies;
the Companies have substantial unfunded pension and other postretirement benefit liabilities;
Con Edison’s ability to pay dividends or interest depends on dividends from its subsidiaries;
the Companies require access to capital markets to satisfy funding requirements;
changes to tax laws could adversely affect the Companies;
the Companies’ strategies may not be effective to address changes in the external business environment; and
the Companies also face other risks that are beyond their control.





6


Consolidated Edison, Inc.
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
  
For the Three Months Ended June 30,
For the Six Months Ended June 30,
(Millions of Dollars/Except Share Data)
2018

2017
2018

2017
OPERATING REVENUES
 
 
 
 
Electric
$1,951
$1,965
$3,828
$3,899
Gas
489
435
1,428
1,297
Steam
96
88
410
385
Non-utility
160
145
394
280
TOTAL OPERATING REVENUES
2,696
2,633
6,060
5,861
OPERATING EXPENSES
 
 
 
 
Purchased power
388
408
742
793
Fuel
38
38
162
139
Gas purchased for resale
194
149
572
470
Other operations and maintenance
756
732
1,592
1,471
Depreciation and amortization
354
332
702
662
Taxes, other than income taxes
540
511
1,110
1,052
TOTAL OPERATING EXPENSES
2,270
2,170
4,880
4,587
Gain on sale of retail electric supply business and solar electric production project

1

1
OPERATING INCOME
426
464
1,180
1,275
OTHER INCOME (DEDUCTIONS)
 
 
 
 
Investment income
36
34
57
53
Other income
6
3
11
9
Allowance for equity funds used during construction
3
2
7
5
Other deductions
(48)
(46)
(92)
(89)
TOTAL OTHER INCOME (DEDUCTIONS)
(3)
(7)
(17)
(22)
INCOME BEFORE INTEREST AND INCOME TAX EXPENSE
423
457
1,163
1,253
INTEREST EXPENSE
 
 
 
 
Interest on long-term debt
190
179
380
356
Other interest
9
3
16
7
Allowance for borrowed funds used during construction
(2)
(2)
(5)
(3)
NET INTEREST EXPENSE
197
180
391
360
INCOME BEFORE INCOME TAX EXPENSE
226
277
772
893
INCOME TAX EXPENSE
38
102
156
330
NET INCOME
$188
$175
$616
$563
Net income per common share—basic
$0.60
$0.57
$1.98
$1.84
Net income per common share—diluted
$0.60
$0.57
$1.98
$1.84
DIVIDENDS DECLARED PER COMMON SHARE
$0.72
$0.69
$1.43
$1.38
AVERAGE NUMBER OF SHARES OUTSTANDING—BASIC (IN MILLIONS)
310.8
305.4
310.6
305.3
AVERAGE NUMBER OF SHARES OUTSTANDING—DILUTED (IN MILLIONS)
311.9
306.8
311.7
306.7
The accompanying notes are an integral part of these financial statements.


7


Consolidated Edison, Inc.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
  
For the Three Months Ended June 30,
For the Six Months Ended June 30,
(Millions of Dollars)
2018
2017
2018
2017

NET INCOME
$188
$175
$616
$563
OTHER COMPREHENSIVE INCOME, NET OF TAXES
 
 
 
 
Pension and other postretirement benefit plan liability adjustments, net of taxes
2
1
6

TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAXES
2
1
6

COMPREHENSIVE INCOME
$190
$176
$622
$563
The accompanying notes are an integral part of these financial statements.



8


Consolidated Edison, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
   
For the Six Months Ended June 30,
 
(Millions of Dollars)
2018

2017

OPERATING ACTIVITIES
 
 
Net income
$616
$563
PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME
 
 
Depreciation and amortization
702
662
Deferred income taxes
155
359
Rate case amortization and accruals
(56)
(62)
Common equity component of allowance for funds used during construction
(7)
(5)
Net derivative gains
2
2
Unbilled revenue and net unbilled revenue deferrals
113
18
Gain on sale of solar electric production project

(1)
Other non-cash items, net
(55)
(61)
CHANGES IN ASSETS AND LIABILITIES
 
 
Accounts receivable – customers
5
128
Materials and supplies, including fuel oil and gas in storage
16
(18)
Other receivables and other current assets
(68)
12
Taxes receivable
49
29
Prepayments
(36)
(36)
Accounts payable
(61)
(94)
Pensions and retiree benefits obligations, net
171
213
Pensions and retiree benefits contributions
(368)
(283)
Accrued taxes
(63)
(22)
Accrued interest
(4)
(18)
Superfund and environmental remediation costs, net
(6)
(6)
Distributions from equity investments
54
52
System benefit charge
94
132
Deferred charges, noncurrent assets and other regulatory assets
(233)
(45)
Deferred credits and other regulatory liabilities
244
(17)
Other current and noncurrent liabilities
(224)
72
NET CASH FLOWS FROM OPERATING ACTIVITIES
1,040
1,574
INVESTING ACTIVITIES
 
 
Utility construction expenditures
(1,602)
(1,425)
Cost of removal less salvage
(121)
(122)
Non-utility construction expenditures
(109)
(225)
Investments in electric and gas transmission projects
(51)
(16)
Investments in/acquisitions of renewable electric production projects

(1)
Proceeds from sale of assets

34
Other investing activities
17
24
NET CASH FLOWS USED IN INVESTING ACTIVITIES
(1,866)
(1,731)
FINANCING ACTIVITIES
 
 
Net issuance/(payment) of short-term debt
292
(18)
Issuance of long-term debt
1,640
997
Retirement of long-term debt
(619)
(426)
Debt issuance costs
(16)
(11)
Common stock dividends
(420)
(398)
Issuance of common shares for stock plans
26
25
NET CASH FLOWS FROM FINANCING ACTIVITIES
903
169
CASH, TEMPORARY CASH INVESTMENTS, AND RESTRICTED CASH:
 
 
NET CHANGE FOR THE PERIOD
77
12
BALANCE AT BEGINNING OF PERIOD
844
830
BALANCE AT END OF PERIOD
$921
$842
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
 
 
Cash paid/(received) during the period for:
 
 
Interest
$389
$372
Income taxes
$(2)
$(35)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
 
 
Construction expenditures in accounts payable
$333
$308
Issuance of common shares for dividend reinvestment
$24
$23
Software licenses acquired but unpaid as of end of period
$94

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


9


Consolidated Edison, Inc.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Millions of Dollars)
June 30,
2018
December 31,
2017
ASSETS
 
 
CURRENT ASSETS
 
 
Cash and temporary cash investments
$866
$797
Accounts receivable – customers, less allowance for uncollectible accounts of $64 and $63 in 2018 and 2017, respectively
1,097
1,103
Other receivables, less allowance for uncollectible accounts of $7 and $8 in 2018 and 2017, respectively
264
160
Taxes receivable
27
76
Accrued unbilled revenue
382
598
Fuel oil, gas in storage, materials and supplies, at average cost
318
334
Prepayments
214
178
Regulatory assets
90
67
Restricted cash
55
47
Other current assets
123
177
TOTAL CURRENT ASSETS
3,436
3,537
INVESTMENTS
2,057
2,001
UTILITY PLANT, AT ORIGINAL COST
 
 
Electric
29,702
28,994
Gas
8,690
8,256
Steam
2,496
2,473
General
3,167
3,008
TOTAL
44,055
42,731
Less: Accumulated depreciation
9,385
9,063
Net
34,670
33,668
Construction work in progress
1,714
1,605
NET UTILITY PLANT
36,384
35,273
NON-UTILITY PLANT
 
 
Non-utility property, less accumulated depreciation of $233 and $201 in 2018 and 2017, respectively
1,791
1,776
Construction work in progress
592
551
NET PLANT
38,767
37,600
OTHER NONCURRENT ASSETS
 
 
Goodwill
428
428
Intangible assets, less accumulated amortization of $19 and $15 in 2018 and 2017, respectively
127
131
Regulatory assets
4,097
4,266
Other deferred charges and noncurrent assets
152
148
TOTAL OTHER NONCURRENT ASSETS
4,804
4,973
TOTAL ASSETS
$49,064
$48,111
The accompanying notes are an integral part of these financial statements.
 



10


Consolidated Edison, Inc.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
 
 
(Millions of Dollars)
June 30,
2018
December 31,
2017
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
CURRENT LIABILITIES
 
 
Long-term debt due within one year
$1,815
$1,298
Notes payable
869
577
Accounts payable
1,130
1,286
Customer deposits
349
346
Accrued taxes
45
108
Accrued interest
139
143
Accrued wages
108
105
Fair value of derivative liabilities
40
17
Regulatory liabilities
60
101
System benefit charge
629
535
Other current liabilities
272
386
TOTAL CURRENT LIABILITIES
5,456
4,902
NONCURRENT LIABILITIES
 
 
Provision for injuries and damages
159
153
Pensions and retiree benefits
959
1,443
Superfund and other environmental costs
728
737
Asset retirement obligations
320
314
Fair value of derivative liabilities
28
38
Deferred income taxes and unamortized investment tax credits
5,710
5,495
Regulatory liabilities
4,551
4,577
Other deferred credits and noncurrent liabilities
273
296
TOTAL NONCURRENT LIABILITIES
12,728
13,053
LONG-TERM DEBT
15,225
14,731
EQUITY
 
 
Common shareholders’ equity
15,648
15,418
Noncontrolling interest
7
7
TOTAL EQUITY (See Statement of Equity)
15,655
15,425
TOTAL LIABILITIES AND EQUITY
$49,064
$48,111
The accompanying notes are an integral part of these financial statements.



11


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



616





616
Common stock dividends



(444)





(444)
Issuance of common shares for stock plans
1

52






52
Other comprehensive income







6

6
BALANCE AS OF
JUNE 30, 2018
311
$34
$6,350
$10,407
23
$(1,038)
$(85)
$(20)
$7
$15,655
The accompanying notes are an integral part of these financial statements.



12


Consolidated Edison Company of New York, Inc.
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
  
For the Three Months Ended June 30,
For the Six Months Ended June 30,
(Millions of Dollars)
2018
2017
2018
2017
OPERATING REVENUES
 
 
 
 
Electric
$1,807
$1,817
$3,536
$3,610
Gas
435
388
1,276
1,153
Steam
96
88
410
386
TOTAL OPERATING REVENUES
2,338
2,293
5,222
5,149
OPERATING EXPENSES
 
 
 
 
Purchased power
343
363
645
710
Fuel
38
38
162
139
Gas purchased for resale
118
84
391
314
Other operations and maintenance
629
602
1,260
1,229
Depreciation and amortization
316
296
626
591
Taxes, other than income taxes
512
487
1,051
1,003
TOTAL OPERATING EXPENSES
1,956
1,870
4,135
3,986
OPERATING INCOME
382
423
1,087
1,163
OTHER INCOME (DEDUCTIONS)
 
 
 
 
Investment and other income
4
3
8
7
Allowance for equity funds used during construction
3
2
6
5
Other deductions
(42)
(40)
(81)
(78)
TOTAL OTHER INCOME (DEDUCTIONS)
(35)
(35)
(67)
(66)
INCOME BEFORE INTEREST AND INCOME TAX EXPENSE
347
388
1,020
1,097
INTEREST EXPENSE
 
 
 
 
Interest on long-term debt
162
151
324
301
Other interest
7
4
12
8
Allowance for borrowed funds used during construction
(2)
(1)
(4)
(3)
NET INTEREST EXPENSE
167
154
332
306
INCOME BEFORE INCOME TAX EXPENSE
180
234
688
791
INCOME TAX EXPENSE
31
91
150
309
NET INCOME
$149
$143
$538
$482
The accompanying notes are an integral part of these financial statements.
 



13


Consolidated Edison Company of New York, Inc.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
 
  
For the Three Months Ended June 30,
For the Six Months Ended June 30,
(Millions of Dollars)
2018
2017

2018
2017

NET INCOME
$149
$143
$538
$482
OTHER COMPREHENSIVE INCOME, NET OF TAXES
1

1

COMPREHENSIVE INCOME
$150
$143
$539
$482
The accompanying notes are an integral part of these financial statements.
 



14


Consolidated Edison Company of New York, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
 
   
For the Six Months Ended June 30,
 
(Millions of Dollars)
2018
2017

OPERATING ACTIVITIES
 
 
Net income
$538
$482
PRINCIPAL NON-CASH CHARGES/(CREDITS) TO INCOME
 
 
Depreciation and amortization
626
591
Deferred income taxes
149
326
Rate case amortization and accruals
(65)
(72)
Common equity component of allowance for funds used during construction
(6)
(5)
Unbilled revenue and net unbilled revenue deferrals
36
18
Other non-cash items, net
(13)
(36)
CHANGES IN ASSETS AND LIABILITIES
 
 
Accounts receivable – customers
14
125
Materials and supplies, including fuel oil and gas in storage
10
(4)
Other receivables and other current assets
(74)
56
Accounts receivable from affiliated companies
(149)
17
Prepayments
(17)
(20)
Accounts payable
(71)
(60)
Accounts payable to affiliated companies
9
3
Pensions and retiree benefits obligations, net
157
191
Pensions and retiree benefits contributions
(367)
(281)
Superfund and environmental remediation costs, net
(9)
(4)
Accrued taxes
(66)
(17)
Accrued taxes to affiliated companies
(72)
(119)
Accrued interest
(1)

System benefit charge
86
120
Deferred charges, noncurrent assets and other regulatory assets
(164)
(72)
Deferred credits and other regulatory liabilities
229
11
Other current and noncurrent liabilities
(125)
(16)
NET CASH FLOWS FROM OPERATING ACTIVITIES
655
1,234
INVESTING ACTIVITIES
 
 
Utility construction expenditures
(1,509)
(1,341)
Cost of removal less salvage
(118)
(119)
NET CASH FLOWS USED IN INVESTING ACTIVITIES
(1,627)
(1,460)
FINANCING ACTIVITIES
 
 
Net issuance of short-term debt
400
150
Issuance of long-term debt
1,640
500
Retirement of long-term debt
(600)

Debt issuance costs
(16)
(6)
Capital contribution by parent
70
45
Dividend to parent
(423)
(398)
NET CASH FLOWS FROM FINANCING ACTIVITIES
1,071
291
CASH, TEMPORARY CASH INVESTMENTS, AND RESTRICTED CASH:
 
 
NET CHANGE FOR THE PERIOD
99
65
BALANCE AT BEGINNING OF PERIOD
730
704
BALANCE AT END OF PERIOD
$829
$769
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
 
 
Cash paid/(received) during the period for:
 
 
Interest
$324
$296
Income taxes
$227
$86
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
 
 
Construction expenditures in accounts payable
$284
$234
Software licenses acquired but unpaid as of end of period
$89

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


15


Consolidated Edison Company of New York, Inc.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
 
(Millions of Dollars)
June 30,
2018

December 31,
2017
ASSETS
 
 
CURRENT ASSETS
 
 
Cash and temporary cash investments
$829
$730
Accounts receivable – customers, less allowance for uncollectible accounts of $59 and $58 in 2018 and 2017, respectively
994
1,009
Other receivables, less allowance for uncollectible accounts of $6 and $7 in 2018 and 2017, respectively
166
92
Taxes receivable

19
Accrued unbilled revenue
315
454
Accounts receivable from affiliated companies
213
64
Fuel oil, gas in storage, materials and supplies, at average cost
277
287
Prepayments
125
108
Regulatory assets
85
62
Other current assets
85
84
TOTAL CURRENT ASSETS
3,089
2,909
INVESTMENTS
406
383
UTILITY PLANT, AT ORIGINAL COST
 
 
Electric
27,960
27,299
Gas
7,909
7,499
Steam
2,496
2,473
General
2,896
2,753
TOTAL
41,261
40,024
Less: Accumulated depreciation
8,622
8,321
Net
32,639
31,703
Construction work in progress
1,622
1,502
NET UTILITY PLANT
34,261
33,205
NON-UTILITY PROPERTY
 
 
Non-utility property, less accumulated depreciation of $25 in 2018 and 2017
4
4
NET PLANT
34,265
33,209
OTHER NONCURRENT ASSETS
 
 
Regulatory assets
3,694
3,863
Other deferred charges and noncurrent assets
71
87
TOTAL OTHER NONCURRENT ASSETS
3,765
3,950
TOTAL ASSETS
$41,525
$40,451
The accompanying notes are an integral part of these financial statements.
 



16


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

(Millions of Dollars)
June 30,
2018

December 31,
2017
LIABILITIES AND SHAREHOLDER’S EQUITY
 
 
CURRENT LIABILITIES
 
 
Long-term debt due within one year
$1,711
$1,200
Notes payable
550
150
Accounts payable
922
1,057
Accounts payable to affiliated companies
19
10
Customer deposits
337
334
Accrued taxes
36
102
Accrued taxes to affiliated companies

72
Accrued interest
112
113
Accrued wages
97
95
Fair value of derivative liabilities
28
12
Regulatory liabilities
40
65
System benefit charge
569
483
Other current liabilities
215
245
TOTAL CURRENT LIABILITIES
4,636
3,938
NONCURRENT LIABILITIES
 
 
Provision for injuries and damages
153
147
Pensions and retiree benefits
665
1,140
Superfund and other environmental costs
631
637
Asset retirement obligations
293
287
Fair value of derivative liabilities
23
31
Deferred income taxes and unamortized investment tax credits
5,513
5,306
Regulatory liabilities
4,179
4,219
Other deferred credits and noncurrent liabilities
225
242
TOTAL NONCURRENT LIABILITIES
11,682
12,009
LONG-TERM DEBT
12,582
12,065
SHAREHOLDER’S EQUITY (See Statement of Shareholder’s Equity)
12,625
12,439
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY
$41,525
$40,451
The accompanying notes are an integral part of these financial statements.
 


17


Consolidated Edison Company of New York, Inc.
CONSOLIDATED STATEMENT OF SHAREHOLDER’S EQUITY (UNAUDITED)
 
Common Stock
Additional
Paid-In
Capital
Retained
Earnings
Repurchased
Con Edison
Stock
Capital
Stock
Expense
Accumulated
Other
Comprehensive
Income/(Loss)
Total
(In Millions)
Shares
Amount
BALANCE AS OF DECEMBER 31, 2017
235
$589
$4,649
$8,231
$(962)
$(62)
$(6)
$12,439
Net income
 
 
 
538
 
 
 
538
Common stock dividend to parent
 
 
 
(423)
 
 
 
(423)
Capital contribution by parent
 
 
70
 
 
 
 
70
Other comprehensive income
 
 
 
 
 
 
1
1
BALANCE AS OF JUNE 30, 2018
235
$589
$4,719
$8,346
$(962)
$(62)
$(5)
$12,625
The accompanying notes are an integral part of these financial statements.


18


NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
 
General
These combined notes accompany and form an integral part of the separate consolidated financial statements of each of the two separate registrants: Consolidated Edison, Inc. and its subsidiaries (Con Edison) and Consolidated Edison Company of New York, Inc. and its subsidiaries (CECONY). CECONY is a subsidiary of Con Edison and as such its financial condition and results of operations and cash flows, which are presented separately in the CECONY consolidated financial statements, are also consolidated, along with those of Orange and Rockland Utilities, Inc. (O&R), Con Edison Clean Energy Businesses, Inc. (together with its subsidiaries, the Clean Energy Businesses) and Con Edison Transmission, Inc. (together with its subsidiaries, Con Edison Transmission) in Con Edison’s consolidated financial statements. The term “Utilities” is used in these notes to refer to CECONY and O&R.
As used in these notes, the term “Companies” refers to Con Edison and CECONY and, except as otherwise noted, the information in these combined notes relates to each of the Companies. However, CECONY makes no representation as to information relating to Con Edison or the subsidiaries of Con Edison other than itself.
The separate interim consolidated financial statements of each of the Companies are unaudited but, in the opinion of their respective managements, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair presentation of the results for the interim periods presented. The Companies’ separate interim consolidated financial statements should be read together with their separate audited financial statements (including the combined notes thereto) included in Item 8 of their combined Annual Report on Form 10-K for the year ended December 31, 2017 and their separate unaudited financial statements (including the combined notes thereto) included in Part 1, Item 1 of their combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018 . Certain prior period amounts have been reclassified to conform to the current period presentation.
Con Edison has two regulated utility subsidiaries: CECONY and O&R. CECONY provides electric service and gas service in New York City and Westchester County. The company also provides steam service in parts of Manhattan. O&R, along with its regulated utility subsidiary, provides electric service in southeastern New York and northern New Jersey and gas service in southeastern New York. Con Edison Clean Energy Businesses, Inc. has three subsidiaries: Consolidated Edison Development, Inc. (Con Edison Development), a company that develops, owns and operates renewable and energy infrastructure projects; Consolidated Edison Energy, Inc. (Con Edison Energy), a company that provides energy-related products and services to wholesale customers; and Consolidated Edison Solutions, Inc. (Con Edison Solutions), a company that provides energy-related products and services to retail customers. Con Edison Transmission, Inc. invests in electric transmission facilities through its subsidiary, Consolidated Edison Transmission, LLC (CET Electric), and invests in gas pipeline and storage facilities through its subsidiary Con Edison Gas Pipeline and Storage, LLC (CET Gas).

Note A – Summary of Significant Accounting Policies
Revenues
Adoption of New Standard
On January 1, 2018, the Companies adopted Accounting Standards Codification (ASC) Topic 606, “Revenue from Contracts with Customers,” using the modified retrospective method applied to those contracts that were not completed. No charge to retained earnings for cumulative impact was required as a result of the Companies’ adoption of Topic 606.

Revenue Recognition
The following table presents, for the three and six months ended June 30, 2018 , revenue from contracts with customers as defined in Topic 606, as well as additional revenue from sources other than contracts with customers, disaggregated by major source.



19


 
For the Three Months Ended June 30, 2018
For the Six Months Ended June 30, 2018
(Millions of Dollars)
Revenues from contracts with customers
 
Other revenues (a)
Total operating revenues
Revenues from contracts with customers
 
Other revenues (a)
Total operating revenues
CECONY
 
 
 
 
 
 
 
 
Electric
$1,771
 
$36
$1,807
$3,474
 
$62
$3,536
Gas
428
 
7
435
1,252
 
24
1,276
Steam
93
 
3
96
404
 
6
410
Total CECONY
$2,292
 
$46
$2,338
$5,130
 
$92
$5,222
O&R
 
 
 
 
 
 
 
 
Electric
146
 
(2)
144
293
 

293
Gas
47
 
7
54
148
 
4
152
Total O&R
$193
 
$5
$198
$441
 
$4
$445
Clean Energy Businesses
 
 
 
 
 
 
 
 
Renewables
73
(b)

73
205
(b)

205
Energy services
23
 

23
41
 

41
Other

 
62
62

 
145
145
Total Clean Energy Businesses
$96
 
$62
$158
$246
 
$145
$391
Con Edison Transmission
1
 

1
2
 

2
Other (c)

 
1
1

 


Total Con Edison
$2,582
 
$114
$2,696
$5,819
 
$241
$6,060
(a) For the Utilities, this includes revenue from alternative revenue programs, such as the revenue decoupling mechanisms under their New York electric and gas rate plans. For the Clean Energy Businesses, this includes revenue from wholesale services.
(b) Included within the total for Renewables revenue at the Clean Energy Businesses is $9 million and $97 million for the three and six months ended June 30, 2018 , respectively, of revenue related to engineering, procurement and construction services.
(c)
Parent company and consolidation adjustments.

The Utilities recognize revenues for tariff-based sales as they deliver electricity, gas and steam energy to their customers. The amount of revenues recognized reflects the consideration the Utilities expect to receive in exchange for delivering the energy. The transaction price for full-service customers includes the Utilities’ energy cost and for all customers includes delivery charges determined based on customer class and in accordance with established tariffs and guidelines of the New York State Public Service Commission (NYSPSC) or the New Jersey Board of Public Utilities (NJBPU), as applicable. Accordingly, there is no unsatisfied performance obligation associated with these customers. The transaction price is allocated to the Utilities’ revenue generating activities through the customer billing process. Because energy is delivered over time, the Utilities use output methods that recognize revenue based on direct measurement of the value transferred, such as units delivered, which provides an accurate measure of value for the energy delivered. The Utilities accrue revenues at the end of each month for estimated energy delivered but not yet billed to customers. The Utilities defer over a 12 -month period net interruptible gas revenues, other than those authorized by the NYSPSC to be retained by the Utilities, for refund to firm gas sales and transportation customers.

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

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



20


(Millions of Dollars)
Unbilled contract revenue (a)
Unearned revenue (b)
 
Beginning balance as of January 1, 2018
$58
$87
 
Additions (c)
73
31
 
Subtractions (c)
88
105
(d)
Ending balance as of June 30, 2018
$43
$13
 
(a)
Unbilled contract revenue represents accumulated incurred costs and earned profits on contracts (revenue arrangements), which have been recorded as revenue, but have not yet been billed to customers, and which represent contract assets as defined in Topic 606. Substantially all accrued unbilled contract revenue is expected to be collected within one year. Unbilled contract revenue arises from the cost-to-cost method of revenue recognition. Unbilled contract revenue from fixed-price type contracts is converted to billed receivables when amounts are invoiced to customers according to contractual billing terms, which generally occur when deliveries or other performance milestones are completed.
(b)
Unearned revenue represents a liability for billings to customers in excess of earned revenue, which are contract liabilities as defined in Topic 606.
(c)
Additions for unbilled contract revenue and subtractions for unearned revenue represent additional revenue earned. Additions for unearned revenue and subtractions for unbilled contract revenue represent billings. Activity also includes appropriate balance sheet classification for the period.
(d)
Of the $105 million in subtractions from unearned revenue, $50 million was included in the balance as of December 31, 2017.

As of June 30, 2018 , the aggregate amount of the remaining fixed performance obligations is $109 million , of which $72 million will be recognized within the next two years, and the remaining $37 million will be recognized pursuant to long-term service and maintenance agreements.

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

Utility Plant
At June 30, 2018 , utility plant of Con Edison and CECONY included $94 million and $89 million , respectively, related to a May 2018 acquisition of software licenses. The software licenses asset is being amortized over a period of 15 years , and the estimated aggregate annual amortization expense for Con Edison and CECONY is $6 million . At June 30, 2018 , the accumulated amortization was immaterial.

Earnings Per Common Share
Con Edison presents basic and diluted earnings per share (EPS) on the face of its consolidated income statement. Basic EPS is calculated by dividing earnings available to common shareholders (“Net income” on Con Edison’s consolidated income statement) by the weighted average number of Con Edison common shares outstanding during the period. In the calculation of diluted EPS, weighted average shares outstanding are increased for additional shares that would be outstanding if potentially dilutive securities were converted to common stock.

Potentially dilutive securities for Con Edison consist of restricted stock units and deferred stock units for which the average market price of the common shares for the period was greater than the exercise price.

For the three and six months ended June 30, 2018 and 2017 , basic and diluted EPS for Con Edison are calculated as follows:
 
 
For the Three Months Ended June 30,
For the Six Months Ended June 30,
(Millions of Dollars, except per share amounts/Shares in Millions)
2018
2017
2018
2017
Net income
$188
$175
$616
$563
Weighted average common shares outstanding – basic
310.8
305.4
310.6
305.3
Add: Incremental shares attributable to effect of potentially dilutive securities
1.1
1.4
1.1
1.4
Adjusted weighted average common shares outstanding – diluted
311.9
306.8
311.7
306.7
Net Income per common share – basic
$0.60
$0.57
$1.98
$1.84
Net Income per common share – diluted
$0.60
$0.57
$1.98
$1.84



21


The computation of diluted EPS for the three and six months ended June 30, 2018 excludes immaterial amounts of performance share awards that were not included because of their anti-dilutive effect.

Changes in Accumulated Other Comprehensive Income/(Loss) by Component
For the three and six months ended June 30, 2018 and 2017 , changes to accumulated other comprehensive income/(loss) (OCI) for Con Edison and CECONY are as follows:
 
 
For the Three Months Ended June 30,
 
        Con Edison
        CECONY
(Millions of Dollars)
2018
2017
2018
2017

Beginning balance, accumulated OCI, net of taxes (a)
$(22)
$(28)
$(6)
$(7)
Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $(1) for Con Edison in 2018 and 2017 (a)(b)
2
1
1

Current period OCI, net of taxes
2
1
1

Ending balance, accumulated OCI, net of taxes
$(20)
$(27)
$(5)
$(7)

 
For the Six Months Ended June 30,
 
Con Edison
CECONY
(Millions of Dollars)
2018
2017

2018

2017

Beginning balance, accumulated OCI, net of taxes (a)
$(26)
$(27)
$(6)
$(7)
OCI before reclassifications, net of tax of $(1) and $1 for Con Edison in 2018 and 2017, respectively
3
(2)


Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $(1) and $(2) for Con Edison in 2018 and 2017, respectively (a)(b)
3
2
1

Current period OCI, net of taxes
6

1

Ending balance, accumulated OCI, net of taxes
$(20)
$(27)
$(5)
$(7)
(a)
Tax reclassified from accumulated OCI is reported in the income tax expense line item of the consolidated income statement.
(b)
For the portion of unrecognized pension and other postretirement benefit costs relating to the Utilities, costs are recorded into, and amortized out of, regulatory assets instead of OCI. The net actuarial losses and prior service costs recognized during the period are included in the computation of total periodic pension and other postretirement benefit cost. See Notes E and F.

Reconciliation of Cash, Temporary Cash Investments and Restricted Cash
On January 1, 2018, the Companies adopted Accounting Standard Update (ASU) 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash," which they applied retrospectively for each prior period presented. Pursuant to ASU 2016-18, cash, temporary cash investments and restricted cash are presented on a combined basis in the Companies’ consolidated statements of cash flows. At June 30, 2018 and 2017 , cash, temporary cash investments and restricted cash for Con Edison and CECONY are as follows:

 
At June 30,
 
Con Edison
CECONY
(Millions of Dollars)
2018
2017
2018

2017
Cash and temporary cash investments
$866
$816
$829
$767
Restricted cash (a)
55
26

2
Total cash, temporary cash investments and restricted cash
$921
$842
$829
$769
(a)
Restricted cash is comprised of funding reserved for CECONY construction expenditures ( $2 million at June 30, 2017 ), RECO transition bond charge collections, net of principal, interest, trustee and service fees ( $1 million and $2 million at June 30, 2018 and 2017 , respectively) that are restricted until the bond matures in 2019, and the CEBs' cash collateral held for project finance agreements ( $54 million and $22 million at June 30, 2018 and 2017 , respectively) that are restricted until varying maturity dates. For these projects, such funds are restricted to being used for normal operating expenses and capital expenditures, debt service, and required reserves.



22


Note B – Regulatory Matters
Rate Plans
O&R New York – Electric
In May 2018, in O&R's electric rate proceeding, the NYSPSC staff recommended a $10.6 million increase in O&R's electric rates (reflecting an authorized return on common equity of 8.6 percent ). In June 2018, O&R filed an update to its requested rate increase, changing its request to a $30.4 million increase (reflecting an authorized return on common equity of 9.75 percent ).

O&R New York – Gas
In May 2018, in O&R's gas rate proceeding, the NYSPSC staff recommended a $6.7 million decrease in O&R's gas rates (reflecting an authorized return on common equity of 8.6 percent ). In June 2018, O&R filed an update to its requested rate increase, changing its request to a $0.5 million decrease (reflecting an authorized return on common equity of 9.75 percent ).

Other Regulatory Matters
In August and November 2017, the NYSPSC issued orders in its proceeding investigating an April 21, 2017 Metropolitan Transportation Authority (MTA) subway power outage. The orders indicated that the investigation determined that the outage was caused by a failure of CECONY’s electricity supply to a subway station, which led to a loss of the subway signals, and that one of the secondary services to the MTA facility had been improperly rerouted and was not properly documented by the company. The orders also indicated that the loss of power to the subway station affected multiple subway lines and caused widespread delays across the subway system. Pursuant to the orders, the company is required to take certain actions, including inspecting, repairing and installing certain electrical equipment that serves the subway system, analyzing power supply and power quality events affecting the MTA’s signaling services, and filing monthly reports with the NYSPSC on all of the company's activities related to the subway system. Through June 30, 2018, the company incurred costs related to this matter of $180 million . Included in this amount is $30 million in capital and operating and maintenance costs reflected in the company's electric rate plan and $150 million deferred as a regulatory asset pursuant to the rate plan. The company, which plans to complete the required actions in 2018, expects to incur costs related to this matter during the remainder of 2018 of $84 million . Included in this amount is $2 million in expected capital and operating and maintenance costs reflected in the rate plan and $82 million expected to be deferred as a regulatory asset pursuant to the rate plan.

In December 2017, the NYSPSC issued an order initiating a proceeding to study the potential effects of the federal Tax Cuts and Jobs Act of 2017 (TCJA) on income tax expense and liabilities of New York State utilities and the regulatory treatment to preserve the resulting benefits for customers. Upon enactment of the TCJA in December 2017, CECONY and O&R re-measured their deferred tax assets and liabilities and accrued net regulatory liabilities for future income taxes of $3,513 million and $161 million , respectively. Under the rate normalization requirements continued by the TCJA, the portion of their net regulatory liabilities related to certain accelerated tax depreciation benefits ( $2,542 million and $126 million , respectively) is to be amortized over the remaining lives of the related assets. The remainder, or "unprotected portion," ( $971 million and $35 million , respectively) will be amortized as determined by the NYSPSC.

In March 2018, the NYSPSC staff recommended that the NYSPSC require most New York State utilities to begin on October 1, 2018 to credit their customers’ bills with the net benefits of the TCJA as measured based on amounts reflected in their rate plans prior to the enactment of the TCJA. The net benefits include the revenue requirement impact of the reduction in the corporate federal income tax rate to 21 percent, the elimination for utilities of bonus depreciation and the amortization of excess deferred federal income taxes the utilities collected from their customers that will not need to be paid to the Internal Revenue Service under the TCJA.

In June 2018, CECONY, O&R and other New York State utilities filed comments on the March 2018 NYSPSC staff recommendation. CECONY proposed to defer providing its electric customers with the net benefits of the TCJA allocable to them until its next electric rate proceeding, unless the NYSPSC determines that CECONY's electric customers should be credited sooner with a portion of the net benefits (for example, 20 percent). CECONY also proposed to begin on October 1, 2018 to credit its gas and steam customers’ bills with the net benefits allocable to them. CECONY’s proposals reflect deferral and amortization over a five-year period of the revenue requirement impact of the company’s net reduction in federal income tax expense in 2018 and 2019 due to the TCJA (except that for steam customers the impact after September 30, 2018 would be credited on a current monthly basis) and amortization over the remaining lives of the related assets of CECONY’s net regulatory liability for future income taxes (except that, for electric customers, the unprotected portion of the net regulatory liability would be amortized


23


over a five-year period). In its ongoing rate proceedings (see “Rate Plans,” above), O&R has proposed and the NYSPSC staff has recommended that the company amortize over a five-year period the impact of its net reduction in federal income tax expense in 2018 due to the TCJA and amortize its net regulatory liability for future income taxes over the remaining lives of the related assets.

For the six months ended June 30, 2018, the Utilities deferred as regulatory liabilities estimated net benefits of the TCJA of $217 million , which represented approximately half of their estimated annual net benefits.

In January 2018, the NYSPSC issued an order initiating a focused operations audit of the income tax accounting of certain utilities, including CECONY and O&R.

In January 2018, the NJBPU issued an order initiating a proceeding to consider the TCJA. In June 2018, the NJBPU made permanent its previously approved $2.9 million interim decrease in Rockland Electric Company's (RECO) electric base rates, effective April 1, 2018, and ordered RECO to pay to its customers in July 2018 its approximately $1 million of net benefits of the TCJA for the three-month period ended March 31, 2018 and to begin in July 2018 to refund to its customers the unprotected portion of its net regulatory liability for future income taxes over a three-year period. Also in March 2018, the Federal Energy Regulatory Commission (FERC) issued an order directing RECO to propose revisions to its transmission revenue requirement to reflect the TCJA. RECO’s net regulatory liability for future income taxes resulting from its re-measurement of its deferred tax asset and liabilities is $28 million (including $16 million subject to the normalization requirements continued by the TCJA).
In March 2018, Winter Storms Riley and Quinn caused damage to the Utilities’ electric distribution systems and interrupted service to approximately 209,000 CECONY customers, 93,000 O&R customers and 44,000 RECO customers. Through June 30, 2018, CECONY's costs related to March 2018 storms, including Riley and Quinn, amounted to $126 million , including operation and maintenance expenses reflected in its electric rate plan ( $17 million ), operation and maintenance expenses charged against a storm reserve pursuant to its electric rate plan ( $75 million ), capital expenditures ( $28 million ) and removal costs ( $6 million ). O&R and RECO had storm-related costs of $48 million and $18 million , respectively, most of which were deferred as regulatory assets pursuant to their electric rate plans. Recovery of CECONY and O&R storm-related costs is subject to review by the NYSPSC, and recovery of RECO storm-related costs is subject to review by the NJBPU. The NYSPSC is investigating the preparation and response to the storms by CECONY, O&R, and other New York electric utilities, including all aspects of their emergency response plans, and may penalize them. In July 2018, the NJBPU adopted NJBPU staff's recommendations to increase requirements for New Jersey utilities, including RECO, relating to pre-storm preparations, restoration of service and communications and outreach. The Companies are unable to estimate the amount or range of their possible loss in connection with the storms.
In May 2018, FERC denied a complaint the NJBPU filed with FERC seeking the re-allocation to CECONY of certain PJM Interconnection LLC (PJM) transmission costs that had been allocated to the company prior to April 2017 when transmission service provided to the company pursuant to the PJM open access transmission tariff terminated. The transmission service terminated because the company did not exercise its option to continue the service following a series of requests PJM had submitted to FERC that substantially increased the charges for the transmission service. CECONY challenged each of these requests. FERC rejected all but one of CECONY’s protests. In June 2015 and May 2016, CECONY filed appeals of certain FERC decisions with the U.S. Court of Appeals. In July 2018, FERC established a settlement proceeding relating to the allocation of PJM transmission costs. Under CECONY’s electric rate plan, unless and until changed by the NYSPSC, the company will recover all charges incurred associated with the transmission service.
In July 2018, the NYSPSC commenced an investigation into the rupture of a CECONY steam main (see Note H).



24


Regulatory Assets and Liabilities
Regulatory assets and liabilities at June 30, 2018 and December 31, 2017 were comprised of the following items:
 
   
         Con Edison
 
        CECONY
(Millions of Dollars)
2018
2017

 
2018

2017

Regulatory assets
 
 
 
 
 
Unrecognized pension and other postretirement costs
$2,167
$2,526

$2,039
$2,376
Environmental remediation costs
772
793

662
677
Revenue taxes
276
260

264
248
MTA power reliability deferral
150
50
 
150
50
Pension and other postretirement benefits deferrals
74
79
 
57
58
Property tax reconciliation
77
51

57
25
Municipal infrastructure support costs
72
56
 
72
56
Recoverable energy costs
66
60
 
59
52
Deferred storm costs
82
38



Deferred derivative losses
36
44
 
30
37
Unamortized loss on reacquired debt
34
37

32
35
Meadowlands heater odorization project
33
18
 
33
18
Brooklyn Queens demand management program
30
37
 
30
37
Preferred stock redemption
24
24
 
24
24
Indian Point Energy Center program costs
20
29
 
20
29
Recoverable REV demonstration project expenses
18
19
 
16
17
Gate station upgrade project
14
13
 
14
13
Net electric deferrals
8
9

8
9
Workers’ compensation
6
10
 
6
10
O&R transition bond charges
5
9



Other
133
104

121
92
Regulatory assets – noncurrent
4,097
4,266

3,694
3,863
Deferred derivative losses
44
40

39
37
Recoverable energy costs
46
27

46
25
Regulatory assets – current
90
67

85
62
Total Regulatory Assets
$4,187
$4,333

$3,779
$3,925
Regulatory liabilities





Future income tax
$2,512
$2,545
 
$2,359
$2,390
Allowance for cost of removal less salvage
872
846

741
719
TCJA net benefits*
217

 
202

Pension and other postretirement benefit deferrals
145
207
 
122
181
Energy efficiency portfolio standard unencumbered funds
125
127
 
119
122
Net unbilled revenue deferrals
96
183

96
183
Unrecognized other postretirement costs
78
92
 
78
92
Property tax reconciliation
76
107

76
107
Settlement of prudence proceeding
51
66

51
66
Property tax refunds
45
44
 
45
44
Carrying charges on repair allowance and bonus depreciation
29
43
 
29
42
Earnings sharing - electric, gas and steam
28
29

18
19
New York State income tax rate change
26
36

26
35
Settlement of gas proceedings
24
27
 
24
27
Variable-rate tax-exempt debt – cost rate reconciliation
16
30
 
14
26
Base rate change deferrals
15
21

15
21
Net utility plant reconciliations
9
12

5
8
Other
187
162

159
137
Regulatory liabilities – noncurrent
4,551
4,577

4,179
4,219
Refundable energy costs
34
41
 
16
16
Deferred derivative gains
14
31

12
28
Revenue decoupling mechanism
12
29

12
21
Regulatory liabilities – current
60
101

40
65
Total Regulatory Liabilities
$4,611
$4,678

$4,219
$4,284
* See "Other Regulatory Matters," above.



25


Note C – Capitalization
In April 2018, CECONY redeemed at maturity $600 million of 5.85 percent 10 -year debentures. In May 2018, CECONY issued $300 million of 3.80 percent 10 -year debentures and $700 million of 4.50 percent 40 -year debentures. In June 2018, the $636 million of CECONY's tax-exempt debt for which the interest rates were to be determined pursuant to periodic auctions was called for redemption on various dates in July and August 2018, and CECONY issued $640 million of floating rate debentures.

The carrying amounts and fair values of long-term debt at June 30, 2018 and December 31, 2017 were:
 
(Millions of Dollars)
2018
2017
Long-Term Debt (including current portion) (a)
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Con Edison
$17,040
$17,944
$16,029
$18,147
CECONY
$14,293
$15,108
$13,265
$15,163
(a)
Amounts shown are net of unamortized debt expense and unamortized debt discount of $152 million and $133 million for Con Edison and CECONY, respectively, as of June 30, 2018 and $142 million and $121 million for Con Edison and CECONY, respectively, as of December 31, 2017 .

Fair values of long-term debt have been estimated primarily using available market information. For Con Edison, $636 million and $17,308 million of the fair value of long-term debt at June 30, 2018 are classified as Level 1 and Level 2, respectively. For CECONY, $636 million and $14,472 million of the fair value of long-term debt at June 30, 2018 are classified as Level 1 and Level 2, respectively (see Note L).

Note D – Short-Term Borrowing
At June 30, 2018 , Con Edison had $869 million of commercial paper outstanding of which $550 million was outstanding under CECONY’s program. The weighted average interest rate at June 30, 2018 was 2.2 percent for both Con Edison and CECONY. At December 31, 2017 , Con Edison had $577 million of commercial paper outstanding of which $150 million was outstanding under CECONY’s program. The weighted average interest rate at December 31, 2017 was 1.8 percent for both Con Edison and CECONY.
At June 30, 2018 and December 31, 2017 , no loans were outstanding under the credit agreement (Credit Agreement). An immaterial amount of letters of credit were outstanding under the Credit Agreement as of June 30, 2018 and December 31, 2017 .

Note E – Pension Benefits
Total Periodic Benefit Cost
The components of the Companies’ total periodic benefit costs for the three and six months ended June 30, 2018 and 2017 were as follows:
 
 
For the Three Months Ended June 30,
 
Con Edison
CECONY
(Millions of Dollars)
2018
2017
2018
2017
Service cost – including administrative expenses
$72
$66
$68
$61
Interest cost on projected benefit obligation
140
148
131
139
Expected return on plan assets
(258)
(243)
(245)
(229)
Recognition of net actuarial loss
172
149
163
141
Recognition of prior service cost/(credit)
(4)
(4)
(5)
(5)
TOTAL PERIODIC BENEFIT COST
$122
$116
$112
$107
Cost capitalized
(31)
(51)
(29)
(48)
Reconciliation to rate level
(23)
(3)
(25)
(5)
Total expense recognized
$68
$62
$58
$54



26


 
For the Six Months Ended June 30,
 
Con Edison
CECONY
(Millions of Dollars)
2018
2017
2018
2017
Service cost – including administrative expenses
$145
$132
$136
$123
Interest cost on projected benefit obligation
280
296
263
277
Expected return on plan assets
(516)
(484)
(490)
(459)
Recognition of net actuarial loss
344
297
326
282
Recognition of prior service cost/(credit)
(9)
(9)
(10)
(10)
TOTAL PERIODIC BENEFIT COST
$244
$232
$225
$213
Cost capitalized
(62)
(94)
(59)
(88)
Reconciliation to rate level
(46)
(14)
(50)
(16)
Total expense recognized
$136
$124
$116
$109

In March 2017, the FASB issued amendments to the guidance for retirement benefits through ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The Companies adopted ASU 2017-07 beginning on January 1, 2018. The guidance requires that components of net periodic benefit cost other than service cost be presented outside of operating income on consolidated income statements, and that only the service cost component is eligible for capitalization. Accordingly, the service cost components are included in the line "Other operations and maintenance" and the non-service cost components are included in the line “Other deductions” in the Companies' consolidated income statements. As permitted by a practical expedient under ASU 2017-07, the Companies applied the presentation requirements retrospectively for both pension and other postretirement benefit costs using amounts disclosed in prior-period financial statements as appropriate estimates.

Expected Contributions
Based on estimates as of June 30, 2018 , the Companies expect to make contributions to the pension plans during 2018 of $472 million (of which $433 million is to be contributed by CECONY). The Companies’ policy is to fund the total periodic benefit cost of the qualified plan to the extent tax deductible and to also contribute to the non-qualified supplemental plans. During the first six months of 2018 , the Companies contributed $368 million to the pension plans, nearly all of which was contributed by CECONY. CECONY also contributed $17 million to the external trust for its non-qualified supplemental plan.
 
Note F – Other Postretirement Benefits
Total Periodic Benefit Cost
The components of the Companies’ total periodic other postretirement benefit costs for the three and six months ended June 30, 2018 and 2017 were as follows:
 
 
For the Three Months Ended June 30,
   
          Con Edison
          CECONY
(Millions of Dollars)
2018
2017
2018
2017
Service cost
$5
$5
$3
$3
Interest cost on accumulated other postretirement benefit obligation
11
11
9
10
Expected return on plan assets
(18)
(17)
(16)
(15)
Recognition of net actuarial loss/(gain)
2
1
1
(1)
Recognition of prior service cost/(credit)
(2)
(4)
(1)
(3)
TOTAL PERIODIC OTHER POSTRETIREMENT BENEFIT COST/(CREDIT)
$(2)
$(4)
$(4)
$(6)
Cost capitalized
(2)
2
(1)
3
Reconciliation to rate level
2
(1)
2
(1)
Total expense/(credit) recognized
$(2)
$(3)
$(3)
$(4)



27


 
For the Six Months Ended June 30,
   
Con Edison
CECONY
(Millions of Dollars)
2018
2017
2018
2017
Service cost
$10
$10
$7
$7
Interest cost on accumulated other postretirement benefit obligation
21
23
17
19
Expected return on plan assets
(37)
(35)
(31)
(30)
Recognition of net actuarial loss/(gain)
4
1
1
(2)
Recognition of prior service cost/(credit)
(3)
(8)
(1)
(6)
TOTAL PERIODIC OTHER POSTRETIREMENT BENEFIT COST/(CREDIT)
$(5)
$(9)
$(7)
$(12)
Cost capitalized
(4)
4
(3)
5
Reconciliation to rate level
5
(2)
5
(1)
Total expense/(credit) recognized
$(4)
$(7)
$(5)
$(8)

For information about the adoption of ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” see Note E.

Contributions
Based on estimates as of June 30, 2018 , Con Edison and CECONY expect to make a contribution of $6 million (substantially all of which is to be contributed by CECONY) to the other postretirement benefit plans in 2018. The Companies' policy is to fund the total periodic benefit cost of the plans to the extent tax deductible.

Note G – Environmental Matters
Superfund Sites
Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of the Utilities and their predecessors and are present at sites and in facilities and equipment they currently or previously owned, including sites at which gas was manufactured or stored.
The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes (Superfund) impose joint and several liability, regardless of fault, upon generators of hazardous substances for investigation and remediation costs (which include costs of demolition, removal, disposal, storage, replacement, containment and monitoring) and natural resource damages. Liability under these laws can be material and may be imposed for contamination from past acts, even though such past acts may have been lawful at the time they occurred. The sites at which the Utilities have been asserted to have liability under these laws, including their manufactured gas plant sites and any neighboring areas to which contamination may have migrated, are referred to herein as “Superfund Sites.”
For Superfund Sites where there are other potentially responsible parties and the Utilities are not managing the site investigation and remediation, the accrued liability represents an estimate of the amount the Utilities will need to pay to investigate and, where determinable, discharge their related obligations. For Superfund Sites (including the manufactured gas plant sites) for which one of the Utilities is managing the investigation and remediation, the accrued liability represents an estimate of the company’s share of the undiscounted cost to investigate the sites and, for sites that have been investigated in whole or in part, the cost to remediate the sites, if remediation is necessary and if a reasonable estimate of such cost can be made. Remediation costs are estimated in light of the information available, applicable remediation standards and experience with similar sites.
The accrued liabilities and regulatory assets related to Superfund Sites at June 30, 2018 and December 31, 2017 were as follows:
 
        Con Edison
        CECONY
(Millions of Dollars)
2018
2017
2018
2017
Accrued Liabilities:
 
 
 
 
Manufactured gas plant sites
$645
$651
$548
$551
Other Superfund Sites
83
86
83
86
Total
$728
$737
$631
$637
Regulatory assets
$772
$793
$662
$677


28


Most of the accrued Superfund Site liability relates to sites that have been investigated, in whole or in part. However, for some of the sites, the extent and associated cost of the required remediation has not yet been determined. As investigations progress and information pertaining to the required remediation becomes available, the Utilities expect that additional liability may be accrued, the amount of which is not presently determinable but may be material. The Utilities are permitted to recover or defer as regulatory assets (for subsequent recovery through rates) prudently incurred site investigation and remediation costs.
Environmental remediation costs incurred related to Superfund Sites for the three and six months ended June 30, 2018 and 2017 were as follows:  
 
For the Three Months Ended June 30,
 
          Con Edison
     CECONY
(Millions of Dollars)
2018
2017
2018
2017
Remediation costs incurred
$6
$7
$5
$4

 
For the Six Months Ended June 30,
 
          Con Edison
     CECONY
(Millions of Dollars)
2018
2017
2018
2017
Remediation costs incurred
$9
$14
$8
$11


Insurance and other third-party recoveries received by Con Edison or CECONY were immaterial for the three and six months ended June 30, 2018 and 2017 .
In 2017, Con Edison and CECONY estimated that for their manufactured gas plant sites (including CECONY’s Astoria site), the aggregate undiscounted potential liability for the investigation and remediation of coal tar and/or other environmental contaminants could range up to $2.7 billion and $2.5 billion , respectively. These estimates were based on the assumption that there is contamination at all sites, including those that have not yet been fully investigated and additional assumptions about the extent of the contamination and the type and extent of the remediation that may be required. Actual experience may be materially different.
Asbestos Proceedings
Suits have been brought in New York State and federal courts against the Utilities and many other defendants, wherein a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the Utilities. The suits that have been resolved, which are many, have been resolved without any payment by the Utilities, or for amounts that were not, in the aggregate, material to them. The amounts specified in all the remaining thousands of suits total billions of dollars; however, the Utilities believe that these amounts are greatly exaggerated, based on the disposition of previous claims. At June 30, 2018 , Con Edison and CECONY have accrued their estimated aggregate undiscounted potential liabilities for these suits and additional suits that may be brought over the next 15 years as shown in the following table. These estimates were based upon a combination of modeling, historical data analysis and risk factor assessment. Courts have begun, and unless otherwise determined on appeal may continue, to apply different standards for determining liability in asbestos suits than the standard that applied historically. As a result, the Companies currently believe that there is a reasonable possibility of an exposure to loss in excess of the liability accrued for the suits. The Companies are unable to estimate the amount or range of such loss. In addition, certain current and former employees have claimed or are claiming workers’ compensation benefits based on alleged disability from exposure to asbestos. CECONY is permitted to defer as regulatory assets (for subsequent recovery through rates) costs incurred for its asbestos lawsuits and workers’ compensation claims.
The accrued liability for asbestos suits and workers’ compensation proceedings (including those related to asbestos exposure) and the amounts deferred as regulatory assets for the Companies at June 30, 2018 and December 31, 2017 were as follows:


29


 
 
          Con Edison
     CECONY
(Millions of Dollars)
2018
2017
2018
2017
Accrued liability – asbestos suits
$8
$8
$7
$7
Regulatory assets – asbestos suits
$8
$8
$7
$7
Accrued liability – workers’ compensation
$81
$84
$77
$80
Regulatory assets – workers’ compensation
$6
$10
$6
$10

Note H – Other Material Contingencies
Manhattan Explosion and Fire
On March 12, 2014, two multi-use five-story tall buildings located on Park Avenue between 116 th and 117 th Streets in Manhattan were destroyed by an explosion and fire. CECONY had delivered gas to the buildings through service lines from a distribution main located below ground on Park Avenue. Eight people died and more than 50 people were injured. Additional buildings were also damaged. The National Transportation Safety Board (NTSB) investigated. The parties to the investigation included the company, the City of New York, the Pipeline and Hazardous Materials Safety Administration and the NYSPSC. In June 2015, the NTSB issued a final report concerning the incident, its probable cause and safety recommendations. The NTSB determined that the probable cause of the incident was (1) the failure of a defective fusion joint at a service tee (which joined a plastic service line to a plastic distribution main) installed by the company that allowed gas to leak from the distribution main and migrate into a building where it ignited and (2) a breach in a City sewer line that allowed groundwater and soil to flow into the sewer, resulting in a loss of support for the distribution main, which caused it to sag and overstressed the defective fusion joint. The NTSB also made safety recommendations, including recommendations to the company that addressed its procedures for the preparation and examination of plastic fusions, training of its staff on conditions for notifications to the City’s Fire Department and extension of its gas main isolation valve installation program. In February 2017, the NYSPSC approved a settlement agreement with the company related to the NYSPSC's investigations of the incident and the practices of qualifying persons to perform plastic fusions. Pursuant to the agreement, the company is providing $27 million of future benefits to customers (for which it has accrued a regulatory liability) and will not recover from customers $126 million of costs for gas emergency response activities that it had previously incurred and expensed. Approximately eighty suits are pending against the company seeking generally unspecified damages and, in some cases, punitive damages, for wrongful death, personal injury, property damage and business interruption. The company has notified its insurers of the incident and believes that the policies in force at the time of the incident will cover the company’s costs, in excess of a required retention (the amount of which is not material), to satisfy any liability it may have for damages in connection with the incident. The company is unable to estimate the amount or range of its possible loss for damages related to the incident. At June 30, 2018 , the company had not accrued a liability for damages related to the incident.

Manhattan Steam Main Rupture
In July 2018, a CECONY steam main located on Fifth Avenue and 21 st street in Manhattan ruptured. Debris from the incident included dirt and mud containing asbestos. The response to the incident required the closing of buildings and streets for various periods. The NYSPSC has commenced an investigation. The company has notified its insurers of the incident and believes that the policies currently in force will cover the company’s costs, in excess of a required retention (the amount of which is not material), to satisfy any liability it may have for damages to others in connection with the incident. The company is unable to estimate the amount or range of its possible loss related to the incident. At June 30, 2018, the company had not accrued a liability related to the incident.

Other Contingencies
See "Other Regulatory Matters" in Note B and “Uncertain Tax Positions” in Note I.
Guarantees
Con Edison and its subsidiaries enter into various agreements providing financial or performance assurance primarily to third parties on behalf of their subsidiaries. Maximum amounts guaranteed by Con Edison totaled $2,012 million and $2,073 million at June 30, 2018 and December 31, 2017 , respectively.


30


A summary, by type and term, of Con Edison’s total guarantees at June 30, 2018 is as follows:
 
Guarantee Type
0 – 3 years
4 – 10 years

> 10 years

Total
 
(Millions of Dollars)
Con Edison Transmission
$744
$404

$—

$1,148
Energy transactions
426
31
204
661
Renewable electric production projects
109

24
133
Other
70


70
Total
$1,349
$435
$228
$2,012
Con Edison Transmission — Con Edison has guaranteed payment by CET Electric of the contributions CET Electric agreed to make to New York Transco LLC (NY Transco). CET Electric acquired a 45.7 percent  interest in NY Transco when it was formed in 2014. In May 2016, the transmission owners transferred certain projects to NY Transco, for which CET Electric made its required contributions. NY Transco has proposed other transmission projects in the New York Independent System Operator's competitive bidding process. These other projects are subject to certain authorizations from the NYSPSC, the FERC and, as applicable, other federal, state and local agencies. Guarantee amount shown is for the maximum possible required amount of CET Electric’s contributions for these other projects as calculated based on the assumptions that the projects are completed at 175 percent of their estimated costs and NY Transco does not use any debt financing for the projects. Guarantee term shown is assumed as the selection of the projects and resulting timing of the contributions is not certain. Also included within the table above are guarantees for $125 million from Con Edison on behalf of CET Gas in relation to a proposed gas transmission project in West Virginia and Virginia.
Energy Transactions — Con Edison guarantees payments on behalf of the Clean Energy Businesses in order to facilitate physical and financial transactions in electricity, gas, pipeline capacity, transportation, oil, renewable energy credits and energy services. To the extent that liabilities exist under the contracts subject to these guarantees, such liabilities are included in Con Edison’s consolidated balance sheet.
Renewable Electric Production Projects — Con Edison, Con Edison Development, and Con Edison Solutions guarantee payments on behalf of their wholly-owned subsidiaries associated with their investment in, or development for others of, solar and wind energy facilities.
Other — Other guarantees include $70 million in guarantees provided by Con Edison to Travelers Insurance Company for indemnity agreements for surety bonds in connection with operation of solar energy facilities and energy service projects of Con Edison Development and Con Edison Solutions, respectively.

Note I – Income Tax
Con Edison’s income tax expense decreased to $38 million for the three months ended June 30, 2018 from $102 million for the three months ended June 30, 2017 . CECONY’s income tax expense decreased to $31 million for the three months ended June 30, 2018 from $91 million for the three months ended June 30, 2017 . The decrease in income tax expense for both Companies is due primarily to lower income before income tax expense and the lower corporate federal income tax rate of 21 percent in 2018 resulting from the enactment of the TCJA.

Reconciliation of the difference between income tax expense and the amount computed by applying the prevailing statutory income tax rate to income before income taxes for the three months ended June 30 is as follows:



31


 
Con Edison
CECONY
(% of Pre-tax income)
2018

2017

2018

2017

STATUTORY TAX RATE
 
 
 
 
Federal
21
 %
35
 %
21
 %
35
 %
Changes in computed taxes resulting from:
 
 
 
 
State income tax
5

3

4

3

Cost of removal
2

3

2

3

Other plant-related items
(1
)
(2
)
(1
)
(2
)
Renewable energy credits
(3
)
(2
)


Amortization of excess deferred federal income taxes
(7
)

(8
)

Other


(1
)

Effective tax rate
17
 %
37
 %
17
 %
39
 %

Con Edison’s income tax expense decreased to $156 million for the six months ended June 30, 2018 from $330 million for the six months ended June 30, 2017. CECONY’s income tax expense decreased to $150 million for the six months ended June 30, 2018 from $309 million for the six months ended June 30, 2017. The decrease in income tax expense for both Companies is due primarily to lower income before income tax expense and the lower corporate federal income tax rate of 21 percent in 2018 resulting from the enactment of the TCJA.

Reconciliation of the difference between income tax expense and the amount computed by applying the prevailing statutory income tax rate to income before income taxes for the six months ended June 30 is as follows:

 
Con Edison
CECONY
(% of Pre-tax income)
2018

2017

2018

2017

STATUTORY TAX RATE
 
 
 
 
Federal
21
 %
35
 %
21
 %
35
 %
Changes in computed taxes resulting from:
 
 
 
 
State income tax
5

4

5

4

Cost of removal
1

2

1

2

Other plant-related items
(1
)
(1
)
(1
)
(1
)
Change in deferred taxes

(1
)


Renewable energy credits
(2
)
(1
)


Amortization of excess deferred federal income taxes
(4
)

(4
)

Other

(1
)

(1
)
Effective tax rate
20
 %
37
 %
22
 %
39
 %


CECONY and O&R deferred as regulatory liabilities their estimated net benefits under the TCJA for the six months ended June 30, 2018. RECO deferred as a regulatory liability its estimated net benefits under the TCJA for the three months ended March 31, 2018. The net benefits include the revenue requirement impact of the reduction in the corporate federal income tax rate to 21 percent, the elimination for utilities of bonus depreciation and the amortization of excess deferred federal income taxes the utilities collected from customers that will not need to be paid to the Internal Revenue Service under the TCJA. See “Other Regulatory Matters” in Note B.

At December 31, 2017, the Companies recorded provisional income tax amounts in its accounting for certain effects of the provisions of the TCJA as allowed under SEC Staff Accounting Bulletin 118 (SAB 118). SAB 118 allowed for a measurement period for companies to finalize the provisional amounts recorded as of December 31, 2017, not to exceed one year. As of June 30, 2018 , the Companies have not yet finalized their assessment of the provisional amounts, and there were no adjustments recorded in the second quarter of 2018. The Companies expect to complete their assessment and record any final adjustments to the provisional amounts by the fourth quarter of 2018.

Uncertain Tax Positions
In March 2018, Con Edison received approval of its tax refunds by the Joint Committee on Taxation for tax years 2012 through 2015. The approval effectively settled approximately $3 million in uncertain federal tax positions. Federal tax returns for 2016 remain under examination.


32



At June 30, 2018 , the estimated liability for uncertain tax positions for Con Edison was $10 million ( $4 million for CECONY). Con Edison reasonably expects to resolve within the next twelve months approximately $5 million ( $4 million , net of federal taxes) of various federal and state uncertainties due to the expected completion of ongoing tax examinations and expiration of statute of limitations, of which the entire amount, if recognized, would reduce Con Edison's effective tax rate. The amount related to CECONY is approximately $2 million , which, if recognized, would reduce CECONY’s effective tax rate. The total amount of unrecognized tax benefits, if recognized, that would reduce Con Edison’s effective tax rate is $10 million ( $9 million , net of federal taxes).
The Companies recognize interest on liabilities for uncertain tax positions in interest expense and would recognize penalties, if any, in operating expenses in the Companies’ consolidated income statements. In the three and six months ended June 30, 2018 , the Companies recognized an immaterial amount of interest expense and no penalties for uncertain tax positions in their consolidated income statements. At June 30, 2018 and December 31, 2017 , the Companies recognized an immaterial amount of accrued interest on their consolidated balance sheets.

Note J – Financial Information by Business Segment
Con Edison’s principal business segments are CECONY’s regulated utility activities, O&R’s regulated utility activities, the Clean Energy Businesses and Con Edison Transmission. CECONY’s principal business segments are its regulated electric, gas and steam utility activities. The financial data for the business segments for the three and six months ended June 30, 2018 and 2017 were as follows:
 
 
For the Three Months Ended June 30,
 
Operating
revenues
Inter-segment
revenues
Depreciation and
amortization
Operating
income/(loss)
(Millions of Dollars)
2018

2017

2018

2017

2018

2017

2018

2017

CECONY
 
 
 
 
 
 
 
 
Electric
$1,807
$1,817
$4
$4
$243
$229
$318
$358
Gas
435
388
2
2
51
45
82
89
Steam
96
88
18
18
22
22
(18)
(24)
Consolidation adjustments


(24)
(24)




Total CECONY
$2,338
$2,293

$—


$—

$316
$296
$382
$423
O&R
 
 
 
 
 
 
 
 
Electric
$144
$148

$—


$—

$14
$13
$18
$18
Gas
54
47


5
4
5
6
Total O&R
$198
$195

$—


$—

$19
$17
$23
$24
Clean Energy Businesses
$158
$146

$—


$—

$19
$18
$24
$18
Con Edison Transmission
1





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



1
(2)
1
Total Con Edison
$2,696
$2,633

$—


$—

$354
$332
$426
$464




33


 
For the Six Months Ended June 30,
 
Operating
revenues
Inter-segment
revenues
Depreciation and
amortization
Operating
income/(loss)
(Millions of Dollars)
2018

2017