Indicate by check mark whether ~~each Registrant~~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. Yes x No ¨ ~~(See “Filing Format” on next page)~~

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 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).

As of the close of business on ~~October 31, 2006~~April 30, 2007, Con Edison had outstanding ~~256,794,082~~259,457,566 Common Shares ($.10 par value). ~~Con Edison owns all~~All of the outstanding common equity of Con Edison of New ~~York.~~York is held by Con Edison.

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

The following is a glossary of frequently used abbreviations or acronyms that are found in the Companies’ SEC reports:



Other
EITF		Emerging Issues Task Force
EMF		Electric and magnetic fields
ERRP		East River Repowering Project
FASB		Financial Accounting Standards Board
FIN		FASB Interpretation No.


~~Other~~
First Quarter Form 10-Q		The Companies’ combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, ~~2006~~2007
Fitch		Fitch Ratings
Form 10-K		The Companies’ combined Annual Report on Form 10-K for the year ended December 31, ~~2005~~2006
FSP		FASB Staff Position
GHG		Greenhouse gases
kV		Kilovolts
kWh		Kilowatt-hour
LILO		Lease In/Lease Out
LTIP		Long Term Incentive Plan
MD&A		Management’s Discussion and Analysis of Financial Condition and Results of Operations
mdths		Thousand dekatherms
MGP Sites		Manufactured gas plant sites
mmlbs		Million pounds
Moody’s		Moody’s Investors Service
MVA		Megavolt amperes
MW		Megawatts or thousand kilowatts
MWH		Megawatt hour
~~NYAG~~		~~New York Attorney General~~
NUGs		Non-utility generators
OCI		Other Comprehensive Income
PCBs		Polychlorinated biphenyls
PPA		Power purchase agreement
PRP		Potentially responsible party
~~RCN~~		~~RCN Corporation~~
S&P		Standard & Poor’s Rating Services
SFAS		Statement of Financial Accounting Standards
SO₂		Sulfur dioxide
SSCM		Simplified service cost method
~~Second Quarter Form 10-Q~~		~~The Companies’ combined Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006~~
Superfund		Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state statutes
~~Third Quarter Form 10-Q~~		~~The Companies’ combined Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006~~
VaR		Value-at-Risk
VIE		Variable interest entity


	September 30, 2006		December 31, 2005		March 31, 2007		December 31, 2006
	(Millions of Dollars)				(Millions of Dollars)
ASSETS
UTILITY PLANT,ATORIGINALCOST
UTILITYPLANT,ATORIGINALCOST
Electric	$	14,270	$	13,586	$	15,004	$	14,775
Gas		3,182		3,044		3,265		3,233
Steam		1,676		1,624		1,699		1,691
General		1,580		1,541		1,661		1,635
TOTAL		20,708		19,795		21,629		21,334
Less: Accumulated depreciation		4,560		4,355		4,650		4,583
Net		16,148		15,440		16,979		16,751
Construction work in progress		1,047		771		977		872
NETUTILITYPLANT		17,195		16,211		17,956		17,623
NON-UTILITYPLANT
Unregulated generating assets, less accumulated depreciation of $121 and $102 in 2006 and 2005, respectively		791		810
Non-utility property, less accumulated depreciation of $35 and $31 in 2006 and 2005, respectively		34		38
Non-utility property held for sale		—		52
Generating assets, less accumulated depreciation of $134 and $127 in 2007 and 2006, respectively						779		785
Non-utility property, less accumulated depreciation of $37 and $36 in 2007 and 2006, respectively						32		34
Construction work in progress		1		1		3		3
NET PLANT		18,021		17,112
NETPLANT						18,770		18,445
CURRENTASSETS
Cash and temporary cash investments		234		81		157		94
Restricted cash		19		15		26		18
Accounts receivable - customers, less allowance for uncollectible accounts of $43 and $39 in 2006 and 2005, respectively		809		1,025
Accounts receivable - customers, less allowance for uncollectible accounts of $47 and $45 in 2007 and 2006, respectively						961		825
Accrued unbilled revenue		112		116		118		122
Other receivables, less allowance for uncollectible accounts of $4 and $6 in 2006 and 2005, respectively		463		348
Other receivables, less allowance for uncollectible accounts of $5 and $4 in 2007 and 2006, respectively						429		522
Fuel oil, at average cost		55		47		38		56
Gas in storage, at average cost		260		248		124		253
Materials and supplies, at average cost		143		130		139		157
Prepayments		507		434		331		157
Fair value of derivative assets		143		331		37		122
Recoverable energy costs		155		221		174		235
Current assets held for sale		—		8
Deferred derivative losses		196		9		121		237
Other current assets		312		147		75		139
TOTALCURRENTASSETS		3,408		3,160		2,730		2,937
INVESTMENTS		272		265		372		366
DEFERREDCHARGES,REGULATORYASSETSANDNONCURRENTASSETS
Goodwill		406		406		406		406
Intangible assets, less accumulated amortization of $32 and $24 in 2006 and 2005, respectively		82		90
Prepaid pension costs		1,482		1,474
Intangible assets, less accumulated amortization of $37 and $34 in 2007 and 2006, respectively						77		80
Regulatory assets		2,193		2,017		4,099		4,176
Other deferred charges and noncurrent assets		277		324		249		289
TOTALDEFERREDCHARGES,REGULATORYASSETSANDNONCURRENTASSETS		4,440		4,311		4,831		4,951
TOTALASSETS	$	26,141	$	24,848	$	26,703	$	26,699


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2006			2005			2006			2005			2007			2006
	(Millions of Dollars/Except Share Data)												(Millions of Dollars/ Except Share Data)
OPERATINGREVENUES
Electric	$	2,478		$	2,502		$	5,903		$	5,646		$	1,787		$	1,759
Gas		211			232			1,404			1,314			849			843
Steam		104			111			485			474			295			275
Non-utility		648			492			1,522			1,089			487			440
TOTALOPERATINGREVENUES		3,441			3,337			9,314			8,523			3,418			3,317
OPERATINGEXPENSES
Purchased power		1,587			1,522			3,790			3,411			1,109			1,184
Fuel		200			222			600			553			268			255
Gas purchased for resale		100			133			845			786			514			556
Other operations and maintenance		556			420			1,433			1,239			499			440
Depreciation and amortization		155			147			460			434			164			151
Taxes, other than income taxes		328			323			945			874			329			318
Income taxes		140			173			310			322			151			108
TOTALOPERATINGEXPENSES		3,066			2,940			8,383			7,619			3,034			3,012
OPERATINGINCOME		375			397			931			904			384			305
OTHERINCOME (DEDUCTIONS)
Investment and other income		10			11			30			29			13			13
Allowance for equity funds used during construction		2			—			3			8			2			1
Preferred stock dividend requirements of subsidiary		(3	)		(3	)		(8	)		(8	)		(3	)		(3	)
Other deductions		(3	)		(3	)		(12	)		(14	)		(5	)		(5	)
Income taxes		11			5			10			10			6			(5	)
TOTALOTHERINCOME (DEDUCTIONS)		17			10			23			25			13			1
INTERESTEXPENSE
Interest on long-term debt		123			111			356			330			128			113
Other interest		40			9			65			19			15			14
Allowance for borrowed funds used during construction		(2	)		—			(4	)		(6	)		(2	)		(1	)
NETINTERESTEXPENSE		161			120			417			343			141			126
INCOMEFROMCONTINUINGOPERATIONS		231			287			537			586			256			180
LOSSFROMDISCONTINUEDOPERATIONS (NETOFINCOMETAXES)		—			(2	)		(1	)		(5	)
INCOMEFROMDISCONTINUEDOPERATIONS (NETOFINCOMETAXES)														—			1
NETINCOME	$	231		$	285		$	536		$	581		$	256		$	181
EARNINGSPERCOMMONSHARE -BASIC
Continuing operations	$	0.93		$	1.17		$	2.17		$	2.41		$	0.99		$	0.74
Discontinued operations		—			—			—			(0.02	)		—			—
Net income	$	0.93		$	1.17		$	2.17		$	2.39		$	0.99		$	0.74
EARNINGSPERCOMMONSHARE -DILUTED
Continuing operations	$	0.92		$	1.17		$	2.16		$	2.40		$	0.99		$	0.74
Discontinued operations		—			(0.01	)		—			(0.02	)		—			—
Net income	$	0.92		$	1.16		$	2.16		$	2.38		$	0.99		$	0.74
DIVIDENDSDECLAREDPERSHAREOFCOMMONSTOCK	$	0.575		$	0.570		$	1.725		$	1.710		$	0.58		$	0.575
AVERAGENUMBEROFSHARESOUTSTANDING -BASIC (INMILLIONS)		249.0			244.4			247.0			243.5			258.0			245.5
AVERAGENUMBEROFSHARESOUTSTANDING -DILUTED (INMILLIONS)		250.0			245.4			248.0			244.2			259.1			246.5

FOR~~THE~~ T~~HREEAND~~ N~~INE~~ M~~ONTHS~~ E~~NDED~~ S~~EPTEMBER~~ ~~30, 2006AND~~ ~~2005~~


	Common Stock			Additional Paid-In Capital				Retained Earnings				Treasury Stock					Capital Stock Expense				Accumulated Other Comprehensive Income/(Loss)				Total				Common Stock			Additional Paid-In Capital				Retained Earnings			Treasury Stock				Capital Stock Expense			Accumulated Other Comprehensive Loss			Total
	Shares	Amount					Shares	Retained Earnings				Amount					Capital Stock Expense				Accumulated Other Comprehensive Income/(Loss)			Shares	Total				Amount			Additional Paid-In Capital			Shares	Retained Earnings			Amount				Capital Stock Expense			Accumulated Other Comprehensive Loss			Total
	(Millions of Dollars/Except Share Data)																												(Millions of Dollars/Except Share Data)
BALANCEASOF DECEMBER 31, 2004	242,514,183	$	26	Additional Paid-In Capital		$	2,642			$	5,451		23,210,700		$	(1,001	)		$	(55	)		$	(9	)		$	7,054
BALANCEASOF DECEMBER 31, 2005																													245,286,058	$	27	$	2,768			$	5,605		23,210,700	$	(1,001	)	$	(55	)	$	(34	)	$	7,310

Net income									181																	181											181													181
Common stock dividends									(138	)																(138	)										(141	)												(141	)
Issuance of common shares - dividend reinvestment and employee stock plans	476,235				20																					20
Other comprehensive income																						22				22
BALANCEASOF MARCH 31, 2005	242,990,418	$	26	$	2,662			$	5,494			23,210,700	$	(1,001	)		$	(55	)		$	13			$	7,139
Net income									115																	115
Common stock dividends									(139	)																(139	)
Issuance of common shares - dividend reinvestment and employee stock plans	948,465		1		43				(4	)																40
Issuance of common shares—dividend reinvestment and employee stock plans																													456,347				24																	24
Stock options																																	(23	)			35													12
Other comprehensive loss																						(9	)			(9	)																				(24	)		(24	)
BALANCEASOF JUNE 30, 2005	243,938,883	$	27	$	2,705			$	5,466			23,210,700	$	(1,001	)		$	(55	)		$	4			$	7,146
BALANCEASOF MARCH 31, 2006																													245,742,405	$	27	$	2,769			$	5,680		23,210,700	$	(1,001	)	$	(55	)	$	(58	)	$	7,362

BALANCEASOF DECEMBER 31, 2006																													257,456,303	$	28	$	3,314			$	5,804		23,210,700	$	(1,001	)	$	(58	)	$	(83	)	$	8,004

Net income									285																	285											256													256
Common stock dividends									(139	)																(139	)										(150	)												(150	)
Issuance of common shares - dividend reinvestment and employee stock plans	920,011				41				(5	)																36
Issuance of common shares—dividend reinvestment and employee stock plans																													1,327,669				61																	61
Other comprehensive income																						8				8																					36			36
BALANCEASOF SEPTEMBER 30, 2005	244,858,894	$	27	$	2,746			$	5,607			23,210,700	$	(1,001	)		$	(55	)		$	12			$	7,336

BALANCEASOF DECEMBER 31, 2005	245,286,058	$	27	$	2,768			$	5,605			23,210,700	$	(1,001	)		$	(55	)		$	(34	)		$	7,310
Net income									181																	181
Common stock dividends									(141	)																(141	)
Issuance of common shares - dividend reinvestment and employee stock plans	456,347				24																					24
Stock options					(23	)			35																	12
Other comprehensive loss																						(24	)			(24	)
BALANCEASOF MARCH 31, 2006	245,742,405	$	27	$	2,769			$	5,680			23,210,700	$	(1,001	)		$	(55	)		$	(58	)		$	7,362
Net income									124																	124
Common stock dividends									(142	)																(142	)
Issuance of common shares - dividend reinvestment and employee stock plans	491,822				28																					28
Other comprehensive income																						3				3
BALANCEASOF JUNE 30, 2006	246,234,227	$	27	$	2,797			$	5,662			23,210,700	$	(1,001	)		$	(55	)		$	(55	)		$	7,375
Net income									231																	231
Common stock dividends									(143	)																(143	)
Issuance of common shares - public offering	9,715,000		1		449													(3	)							447
Issuance of common shares - dividend reinvestment and employee stock plans	633,357				31																					31
Other comprehensive loss																						(13	)			(13	)
BALANCEASOF SEPTEMBER 30, 2006	256,582,584	$	28	$	3,277			$	5,750			23,210,700	$	(1,001	)		$	(58	)		$	(68	)		$	7,928
BALANCEASOF MARCH 31, 2007																													258,783,972	$	28	$	3,375			$	5,910		23,210,700	$	(1,001	)	$	(58	)	$	(47	)	$	8,207


	For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2006			2005			2007			2006
	(Millions of Dollars)						(Millions of Dollars)
OPERATINGACTIVITIES
Net Income	$	536		$	581		$	256		$	181
PRINCIPALNON-CASHCHARGES/(CREDITS)TOINCOME
Depreciation and amortization		460			434			164			151
Deferred income taxes		299			(2	)		114			(8	)
Rate case amortization and accruals		(227	)		(82	)		(121	)		(50	)
Common equity component of allowance for funds used during construction		(3	)		(8	)		(2	)		(1	)
Prepaid pension costs (net of capitalized amounts)		(41	)		(32	)		(16	)		7
Net derivative losses		67			23
Other non-cash items (net)		59			6			5			93
CHANGESINASSETSANDLIABILITIES
Accounts receivable - customers, less allowance for uncollectibles		216			(169	)		(136	)		118
Materials and supplies, including fuel oil and gas in storage		(33	)		(87	)		165			91
Other receivables and other current assets		(276	)		(203	)		161			(34	)
Prepayments		(73	)		(539	)		(174	)		178
Recoverable energy costs		116			(56	)		69			180
Accounts payable		(300	)		264			(112	)		(247	)
Pensions and retiree benefits		35			28			9			34
Accrued taxes		(44	)		231			54			8
Accrued interest		40			17			10			12
Deferred charges and other regulatory assets		(163	)		(133	)		213			(39	)
Deferred credits and other regulatory liabilities		6			(45	)		(220	)		(51	)
Other assets		14			135			—			13
Other liabilities		(42	)		252			39			(46	)
NETCASHFLOWSFROMOPERATINGACTIVITIES		646			615			478			590
INVESTINGACTIVITIES
Utility construction expenditures (excluding capitalized support costs of $(33) and $(8) in 2006 and 2005, respectively)		(1,307	)		(1,055	)
Utility construction expenditures (excluding capitalized support costs of $(16) and $(11) in 2007 and 2006, respectively)								(443	)		(375	)
Cost of removal less salvage		(126	)		(133	)		(38	)		(44	)
Non-utility construction expenditures		(4	)		(13	)		(1	)		(1	)
Common equity component of allowance for funds used during construction		3			8			2			1
Increase in restricted cash		(4	)		(2	)
Restricted cash								(8	)		(8	)
Proceeds from sale of properties		60			534			30			60
Proceeds from sale of CEC		39			—
Proceeds from sale of Con Edison Communications								—			39
NETCASHFLOWSUSEDININVESTINGACTIVITIES		(1,339	)		(661	)		(458	)		(328	)
FINANCINGACTIVITIES
Net proceeds from/(payments of) short-term debt		(324	)		68			149			(440	)
Retirement of long-term debt		(110	)		(239	)		(20	)		(1	)
Issuance of long-term debt		1,200			643			—			400
Issuance of common stock		485			70			54			10
Debt issuance costs		(10	)		(16	)		—			(4	)
Common stock dividends		(395	)		(387	)		(140	)		(131	)
NETCASHFLOWSFROMFINANCINGACTIVITIES		846			139
NETCASHFLOWSFROM/(USEDIN)FINANCINGACTIVITIES								43			(166	)
CASHANDTEMPORARYCASHINVESTMENTS:
NETCHANGEFORTHEPERIOD		153			93			63			96
BALANCEATBEGINNINGOFPERIOD		81			26			94			81
BALANCEATENDOFPERIOD	$	234		$	119		$	157		$	177
SUPPLEMENTALDISCLOSUREOFCASHFLOWINFORMATION
Cash paid during the period for:
Cash paid/(received) during the period for:
Interest	$	324		$	306		$	119		$	105
Income taxes	$	171		$	79		$	(44	)	$	37


	September 30, 2006		December 31, 2005		March 31, 2007		December 31, 2006
	(Millions of Dollars)				(Millions of Dollars)
ASSETS
UTILITY PLANT,AT ORIGINAL COST
UTILITYPLANT,ATORIGINALCOST
Electric	$	13,388	$	12,740	$	14,081	$	13,872
Gas		2,805		2,683		2,877		2,848
Steam		1,676		1,624		1,699		1,691
General		1,456		1,418		1,534		1,510
TOTAL		19,325		18,465		20,191		19,921
Less: Accumulated depreciation		4,154		3,960		4,236		4,173
Net		15,171		14,505		15,955		15,748
Construction work in progress		1,007		739		949		832
NET UTILITY PLANT		16,178		15,244
NON-UTILITY PROPERTY
Non-utility property, less accumulated depreciation of $16 and $14 in 2006 and 2005, respectively		15		19
NET PLANT		16,193		15,263
CURRENT ASSETS
NETUTILITYPLANT						16,904		16,580
NON-UTILITYPROPERTY
Non-utility property, less accumulated depreciation of $17 in 2007 and 2006						13		15
NETPLANT						16,917		16,595
CURRENTASSETS
Cash and temporary cash investments		197		61		44		47
Accounts receivable - customers, less allowance for uncollectible accounts of $39 and $35 in 2006 and 2005, respectively		668		880
Other receivables, less allowance for uncollectible accounts of $3 and $5 in 2006 and 2005, respectively		305		224
Accounts receivable - customers, less allowance for uncollectible accounts of $43 and $40 in 2007 and 2006, respectively						817		716
Other receivables, less allowance for uncollectible accounts of $4 and $3 in 2007 and 2006, respectively						330		365
Accounts receivable from affiliated companies		235		34		132		138
Fuel oil, at average cost		44		32		32		47
Gas in storage, at average cost		195		183		99		193
Materials and supplies, at average cost		112		100		126		126
Prepayments		265		417		280		84
Fair value of derivative assets		—		175		5		—
Recoverable energy costs		135		192		150		213
Deferred derivative losses		175		9		114		213
Other current assets		128		73		3		14
TOTAL CURRENT ASSETS		2,459		2,380
TOTALCURRENTASSETS						2,132		2,156
INVESTMENTS		3		3		95		91
DEFERRED CHARGES, REGULATORY ASSETSAND NONCURRENT ASSETS
Prepaid pension costs		1,482		1,474
DEFERREDCHARGES,REGULATORYASSETSANDNONCURRENTASSETS
Regulatory assets		1,939		1,773		3,701		3,764
Other deferred charges and noncurrent assets		196		251		188		210
TOTAL DEFERRED CHARGES, REGULATORY ASSETSAND NONCURRENT ASSETS		3,617		3,498
TOTAL ASSETS	$	22,272	$	21,144
TOTALDEFERREDCHARGES,REGULATORYASSETSANDNONCURRENTASSETS						3,889		3,974
TOTALASSETS					$	23,033	$	22,816


	September 30, 2006		December 31, 2005		March 31, 2007		December 31, 2006
	(Millions of Dollars)				(Millions of Dollars)
CAPITALIZATIONAND LIABILITIES
CAPITALIZATIONANDLIABILITIES
CAPITALIZATION
Common shareholder’s equity (See Statement of Common Shareholder’s Equity)	$	7,059	$	6,437	$	7,237	$	7,132
Preferred stock		213		213		213		213
Long-term debt		6,755		6,055		6,746		6,925
TOTAL CAPITALIZATION		14,027		12,705
NONCURRENT LIABILITIES
TOTALCAPITALIZATION						14,196		14,270
NONCURRENTLIABILITIES
Obligations under capital leases		27		30		25		26
Provision for injuries and damages		162		160		151		148
Pensions and retiree benefits		160		122		553		449
Superfund and other environmental costs		220		186		288		243
Uncertain incomes taxes						128		—
Asset retirement obligations		97		93		97		96
Fair value of derivative liabilities		42		3		16		35
Other noncurrent liabilities		28		29		73		72
TOTAL NONCURRENT LIABILITIES		736		623
CURRENT LIABILITIES
TOTALNONCURRENTLIABILITIES						1,331		1,069
CURRENTLIABILITIES
Long-term debt due within one year		400		—		510		330
Notes payable		150		520		261		—
Accounts payable		719		1,013		803		866
Accounts payable to affiliated companies		11		23		18		14
Customer deposits		211		215		220		214
Accrued taxes		49		103		152		118
Accrued interest		117		87		121		121
Accrued wages		81		70		80		71
Fair value of derivative liabilities		196		9		30		193
Deferred derivative gains		—		170		9		5
Deferred income taxes - recoverable energy costs		55		78		61		87
Other current liabilities		251		323		233		233
TOTAL CURRENT LIABILITIES		2,240		2,611
DEFERRED CREDITSAND REGULATORY LIABILITIES
TOTALCURRENTLIABILITIES						2,498		2,252
DEFERREDCREDITSANDREGULATORYLIABILITIES
Deferred income taxes and investment tax credits		3,611		3,258		3,726		3,682
Regulatory liabilities		1,640		1,924		1,265		1,524
Other deferred credits		18		23		17		19
TOTAL DEFERRED CREDITSAND REGULATORY LIABILITIES		5,269		5,205
TOTAL CAPITALIZATIONAND LIABILITIES	$	22,272	$	21,144
TOTALDEFERREDCREDITSANDREGULATORYLIABILITIES						5,008		5,225
TOTALCAPITALIZATIONANDLIABILITIES					$	23,033	$	22,816


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2006			2005			2006			2005			2007			2006
	(Millions of Dollars)												(Millions of Dollars)
OPERATINGREVENUES
Electric	$	2,273		$	2,301		$	5,449		$	5,201		$	1,643		$	1,633
Gas		185			209			1,238			1,160			735			737
Steam		104			111			485			474			295			275
TOTALOPERATINGREVENUES		2,562			2,621			7,172			6,835			2,673			2,645
OPERATINGEXPENSES
Purchased power		982			1,057			2,400			2,440			656			775
Fuel		135			131			429			358			213			193
Gas purchased for resale		84			110			712			666			433			460
Other operations and maintenance		477			352			1,215			1,045			432			375
Depreciation and amortization		136			129			404			378			145			133
Taxes, other than income taxes		310			305			891			821			312			299
Income taxes		117			165			285			300			136			113
TOTALOPERATINGEXPENSES		2,241			2,249			6,336			6,008			2,327			2,348
OPERATINGINCOME		321			372			836			827			346			297
OTHERINCOME (DEDUCTIONS)
Investment and other income		7			10			21			26			9			9
Allowance for equity funds used during construction		2			—			3			8			2			—
Other deductions		(3	)		(3	)		(9	)		(9	)		(4	)		(3	)
Income taxes		10			1			12			(2	)		2			—
TOTALOTHERINCOME (DEDUCTIONS)		16			8			27			23			9			6
INTERESTEXPENSE
Interest on long-term debt		100			87			285			260			104			89
Other interest		37			8			56			15			14			10
Allowance for borrowed funds used during construction		(2	)		—			(3	)		(6	)		(2	)		(1	)
NETINTERESTEXPENSE		135			95			338			269			116			98
NETINCOME		202			285			525			581			239			205
PREFERREDSTOCKDIVIDENDREQUIREMENTS		3			3			8			8			3			3
NETINCOMEFORCOMMONSTOCK	$	199		$	282		$	517		$	573		$	236		$	202

FOR~~THE~~ T~~HREEAND~~ N~~INE~~ M~~ONTHS~~ E~~NDED~~ S~~EPTEMBER~~ ~~30, 2006AND~~ ~~2005~~


	Common Stock			Additional Paid-In Capital			Retained Earnings			Repurchased Con Edison Stock				Capital Stock Expense			Accumulated Other Comprehensive Loss				Total				Common Stock				Additional Paid-In Capital		Retained Earnings			Repurchased Con Edison Stock			Capital Stock Expense			Accumulated Other Comprehensive Loss			Total
	Shares	Amount								Repurchased Con Edison Stock			Shares	Capital Stock Expense			Accumulated Other Comprehensive Loss			Amount									Additional Paid-In Capital		Retained Earnings			Repurchased Con Edison Stock			Capital Stock Expense			Accumulated Other Comprehensive Loss			Total
	(Millions of Dollars/Except Share Data)																								(Millions of Dollars/Except Share Data)
BALANCEASOFDECEMBER 31, 2004	235,488,094	$	589	Additional Paid-In Capital		$	Retained Earnings		1,802	$	4,748			$	(962	)	$	(55	)		Total	$	(6	)		$	6,116

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

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

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

BALANCEASOFDECEMBER 31, 2005	235,488,094	$	589	$	1,802		$	5,074		$	(962	)		$	(55	)	$	(11	)		$	6,437
BALANCEASOF DECEMBER 31, 2005																									235,488,094		$	589	$	1,802	$	5,074		$	(962	)	$	(55	)	$	(11	)	$	6,437

Net income								205														205										205												205
Common stock dividend to parent								(113	)													(113	)									(113	)											(113	)
Cumulative preferred dividends								(3	)													(3	)									(3	)											(3	)
Other comprehensive loss																		(5	)			(5	)																		(5	)		(5	)
BALANCEASOF MARCH 31, 2006	235,488,094	$	589	$	1,802		$	5,163		$	(962	)		$	(55	)	$	(16	)		$	6,521			235,488,094		$	589	$	1,802	$	5,163		$	(962	)	$	(55	)	$	(16	)	$	6,521

BALANCEASOFDECEMBER 31, 2006																									235,488,094		$	589	$	2,252	$	5,320		$	(962	)	$	(58	)	$	(9	)	$	7,132

Net income								119														119										239												239
Common stock dividend to parent								(115	)													(115	)									(131	)											(131	)
Cumulative preferred dividends								(3	)													(3	)									(3	)											(3	)
BALANCEASOF JUNE 30, 2006	235,488,094	$	589	$	1,802		$	5,164		$	(962	)		$	(55	)	$	(16	)		$	6,522

Net income								202														202
Common stock dividend to parent								(109	)													(109	)
Capital contribution by parent					450										(3	)						447
Cumulative preferred dividends								(3	)													(3	)
BALANCEASOF SEPTEMBER 30, 2006	235,488,094	$	589	$	2,252		$	5,254		$	(962	)		$	(58	)	$	(16	)		$	7,059
BALANCEASOF MARCH 31, 2007																									235,488,094		$	589	$	2,252	$	5,425		$	(962	)	$	(58	)	$	(9	)	$	7,237


	For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2006			2005			2007			2006
	(Millions of Dollars)						(Millions of Dollars)
OPERATINGACTIVITIES
Net income	$	525		$	581		$	239		$	205
PRINCIPALNON-CASHCHARGES/(CREDITS)TOINCOME
Depreciation and amortization		404			378			145			133
Deferred income taxes		296			(22	)		115			32
Rate case amortization and accruals		(227	)		(82	)		(121	)		(50	)
Common equity component of allowance for funds used during construction		(3	)		(8	)		(2	)		—
Prepaid pension costs (net of capitalized amounts)		(41	)		(32	)		(16	)		7
Other non-cash items (net)		2			4			1			(16	)
CHANGESINASSETSANDLIABILITIES
Accounts receivable - customers, less allowance for uncollectibles		212			(102	)		(101	)		109
Materials and supplies, including fuel oil and gas in storage		(36	)		(66	)		109			58
Other receivables and other current assets		(324	)		(206	)		52			(18	)
Prepayments		152			(532	)		(196	)		174
Recoverable energy costs		117			(48	)		74			163
Accounts payable		(290	)		194			(71	)		(243	)
Pensions and retiree benefits		38			30			(7	)		20
Accrued taxes		(54	)		268			45			9
Accrued interest		30			10			—			4
Deferred charges and other regulatory assets		(168	)		(131	)		194			(40	)
Deferred credits and other regulatory liabilities		8			(42	)		(218	)		(57	)
Other assets		—			145			(1	)		—
Other liabilities		(33	)		210			61			(36	)
NETCASHFLOWSFROMOPERATINGACTIVITIES		608			549			302			454
INVESTINGACTIVITIES
Utility construction expenditures (excluding capitalized support costs of $(33) and $(8) in 2006 and 2005, respectively)		(1,233	)		(1,001	)
Utility construction expenditures (excluding capitalized support costs of $(16) and $(11) in 2007 and 2006, respectively)								(427	)		(356	)
Cost of removal less salvage		(124	)		(131	)		(37	)		(43	)
Common equity component of allowance for funds used during construction		3			8			2			—
Proceeds from sale of properties		60			534			30			60
NETCASHFLOWSUSEDININVESTINGACTIVITIES		(1,294	)		(590	)		(432	)		(339	)
FINANCINGACTIVITIES
Net (payments of)/proceeds from short-term debt		(370	)		22
Retirement of long-term debt		(100	)		(228	)
Net proceeds from/(payments of) short-term debt								261			(341	)
Issuance of long-term debt		1,200			601			—			400
Debt issuance costs		(10	)		(16	)		—			(4	)
Capital contribution by parent		447			—
Dividend to parent		(337	)		(258	)		(131	)		(113	)
Preferred stock dividends		(8	)		(8	)		(3	)		(3	)
NETCASHFLOWSFROMFINANCINGACTIVITIES		822			113
NETCASHFLOWSFROM/(USEDIN)FINANCINGACTIVITIES								127			(61	)
CASHANDTEMPORARYCASHINVESTMENTS:
NETCHANGEFORTHEPERIOD		136			72			(3	)		54
BALANCEATBEGINNINGOFPERIOD		61			10			47			61
BALANCEATENDOFPERIOD	$	197		$	82		$	44		$	115
SUPPLEMENTALDISCLOSUREOFCASHFLOWINFORMATION
Cash paid during the period for:
Cash paid/(received) during the period for:
Interest	$	256		$	240		$	103		$	86
Income taxes	$	183		$	138		$	(20	)	$	55

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 (Con Edison of New York). Con Edison of New York is a subsidiary of Con Edison and as such its financial condition and results of operations and cash flows, which are presented separately in the Con Edison of New York consolidated financial statements, are also consolidated, along with those of Con Edison’s other utility subsidiary, Orange and Rockland Utilities, Inc. (O&R), and Con Edison’s competitive energy businesses (discussed below) in Con Edison’s consolidated financial statements. The term “Utilities” is used in these notes to refer to Con Edison of New York and O&R.

As used in these notes, the term “Companies” refers to Con Edison and Con Edison of New York and, except as otherwise noted, the information in these combined notes relates to each of the Companies. However, Con Edison of New York 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, ~~2005~~2006 (the Form 10-K) and their separate unaudited financial statements (including the combined notes thereto) included in Part I, Item 1 of their combined Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2006 (the First Quarter Form 10-Q) and June 30, 2006 (the Second Quarter Form 10-Q). Information in the notes to the consolidated financial statements in the Form 10-K ~~the First Quarter Form 10-Q and the Second Quarter Form 10-Q~~ referred to in these notes is incorporated by reference herein. The use of terms such as “see” or “refer to” shall be deemed to incorporate by reference into this discussion and analysis the information to which reference is made. Certain prior period amounts have been reclassified to conform to the current period presentation. Results for interim periods are not necessarily indicative of results for the entire fiscal year.

Con Edison has two regulated utility subsidiaries: Con Edison of New York and O&R. Con Edison of New York provides electric service 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 subsidiaries, provides electric service in southeastern New York and adjacent areas of northern New Jersey and eastern Pennsylvania and gas service in southeastern New York and adjacent areas of eastern

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

Pennsylvania. Con Edison has the following competitive energy businesses: Consolidated Edison Solutions, Inc. (Con Edison Solutions), a retail energy services company that sells electricity and also offers energy-related services; Consolidated Edison Energy, Inc. (Con Edison Energy), a

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

Reference is made to “Earnings ~~per~~Per Common Share” in Note A to the financial statements included in Item 8 of the Form 10-K. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2007 and 2006, ~~and 2005,~~ Con Edison’s basic and diluted EPS are calculated as follows:


	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
(Millions of Dollars, except per share amounts/Shares in Millions)	2006		2005			2006			2005			2007		2006
Income from continuing operations	$	231	$	287		$	537		$	586		$	256	$	180
Loss from discontinued operations, net of tax		—		(2	)		(1	)		(5	)
Income from discontinued operations, net of tax													—		1
Net income		231		285			536			581		$	256	$	181
Weighted average common shares outstanding - Basic		249.0		244.4			247.0			243.5			258.0		245.5
Add: Incremental shares attributable to effect of potentially dilutive securities		1.0		1.0			1.0			0.7			1.1		1.0
Adjusted weighted average common shares outstanding - Diluted		250.0		245.4			248.0			244.2			259.1		246.5
EARNINGSPERCOMMONSHARE -BASIC
EARNINGS PER COMMON SHARE - BASIC
Continuing operations	$	0.93	$	1.17		$	2.17		$	2.41		$	0.99	$	0.74
Discontinued operations		—		—			—			(0.02	)		—		—
Net income	$	0.93	$	1.17		$	2.17		$	2.39		$	0.99	$	0.74
EARNINGSPERCOMMONSHARE -DILUTED
EARNINGS PER COMMON SHARE - DILUTED
Continuing operations	$	0.92	$	1.17		$	2.16		$	2.40		$	0.99	$	0.74
Discontinued operations		—		(0.01	)		—			(0.02	)		—		—
Net income	$	0.92	$	1.16		$	2.16		$	2.38		$	0.99	$	0.74

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

~~In October 2006,~~Adjusted Earnings under the 2005 Electric Rate Agreement for the rate year ended March 31, 2007 did not exceed an 11.4 percent return on common equity (the level above which portions of the earnings would have been applied to offset regulatory assets or deferred for the benefit of customers).

On May 4, 2007, Con Edison of New York filed a request with the New York State Public Service Commission (PSC) ~~approved the June 2006 settlement agreement among O&R, the staff~~for an electric rate increase of ~~the PSC~~$1.2 billion effective April 1, 2008. The filing reflects a return on common equity of 11.5 percent and ~~other parties.~~a common equity ratio of 48.7 percent. The ~~settlement agreement establishes a rate plan that covers the three-year period November 1, 2006 through October 31, 2009.~~

~~The~~filing also includes a proposal for a three-year rate plan, ~~provides for rate~~with additional increases ~~in base rates~~ of ~~$12~~$335 million inand $390 million effective April 1, 2009 and 2010, respectively.

Of the first year, $0.7 million in the second year and $1.1 million in the third year. To phase-in the effect of the increase for customers, the rate plan provides for O&R to accrue revenues for, but defer billing to customers of, $5.5 million of the first rate year rate increase by establishing a regulatory asset which, together with interest, will be billed to customers in the second and third years. As a result, O&R’s billings to customers will increase $6.5 million in each of the first two years and $6.3 million in the third. Therequested first year rate increase, ~~includes $2.3~~$515 million ~~relating~~is attributable to ~~a change in~~provisions of the ~~way~~2005 Electric Rate Agreement:

$265 million of the rate increase relates to provisions that deferred for future recovery from customers ~~are provided~~ the benefit of non-firm revenue from sales of pipeline transportation capacity. Under the prior rate plan, base rates were reduced to reflect the assumption that the company would realize these revenues. Under the new rate plan, such revenues will be used to offset the cost of gas to be recovered from customers. The rate plan continues the provisions pursuant to which the company recovers its cost of purchasing gas.

~~The rate plan provides that if~~differences between the actual amount of ~~pension~~transmission and distribution utility plant, net of depreciation, and the actual amount of certain operating costs experienced over the term of the agreement, as compared in each case to the amounts reflected in electric rates; and

The requested first year rate increase also includes recovery for increased operating costs and new and or ~~other postretirement benefit costs,~~expanded operating programs, including environmental remediation ~~costs, property taxes~~programs ($280 million); carrying charges on additional infrastructure investments ($235 million); and ~~certain other costs vary from~~an increased return on equity as compared to the respective amount for each such cost reflected in gas rates, the company will defer recognition of the variation in income and, as the case may be, establish a regulatory asset or liability for recovery from, or refund to, customers of the variation (86 percent of the variation, in the case of property tax differences due to assessment changes)2005 Electric Rate Agreement ($115 million).

The company ~~may earn more~~is requesting that the provisions of the 2005 Electric Rate Agreement under which certain operating costs are reconciled to amounts reflected in rates be continued. The company is also proposing to implement a revenue decoupling mechanism that eliminates the direct relationship between the company’s level of delivery revenues and profits. Under the proposed mechanism actual delivery revenues billed to customers, on a weather-normalized basis, would be compared to the forecasted revenues used to establish new rates. Shortfalls would be subject to recovery from customers and over-collections would be deferred for future customer benefit.

In March 2007, the PSC ordered that O&R’s rates be made temporary, the effect of which is that amounts collected by O&R for electric service rendered in New York State after March 1, 2007 will be subject to refund pending the conclusion of a proceeding to set new rates. In the Order, the PSC confirmed that no issues had been raised regarding the company’s service adequacy or operations.

In March 2007, the New Jersey Board of Public Utilities (NJBPU) approved a new three-year electric base rate plan for Rockland Electric Company (RECO) that went into effect on April 1, 2007. The plan provides for a $6.4 million rate increase during the first year, ~~than~~with no further increase during the ~~9.8 percent~~final two years. The plan reflects a return on common equity ~~reflected in the rate plan pursuant to the plan’s earnings sharing provisions. Earnings attributable to its gas business, excluding any penalties, (O&R Adjusted Earnings) up to an 11~~of 9.75 percent ~~annual return on common equity (based upon the actual average~~and a common equity ratio ~~subject to a maximum 50~~of 46.5 percent of capitalization) are retained by the company. O&R Adjusted Earnings above an 11 percent return are to be used to offset up to one-half of any regulatory asset resulting from the cost reconciliations (discussed in the preceding paragraph). One-half of any remaining O&R Adjusted Earnings between 11 and 12 percent return are retained by the company, with the balance being deferred for the benefit of customers. Thirty-five percent of any remaining O&R Adjusted Earnings between a 12 and 14 percent return are retained by the company, with the balance deferred for the benefit of customers. Any remaining O&R Adjusted Earnings above a 14 percent return are to be deferred for the benefit of customers. The earnings sharing thresholds will each be reduced by 20 basis points if certain objectives relating to the company’s retail choice program are not met.

The rate plan also includes up to $1 million of potential penalties in the first year of the agreement, increasing up to $1.2 million in the third year, if the company does not comply with certain requirements regarding safety and customer service.capitalization.

~~On November 2, 2006,~~ Con Edison of New York ~~filed~~expects that a settlement of the company’s November 2006 request ~~with~~to increase gas rates will be submitted to the PSC for ~~a net increase in~~approval. The company expects the ~~rates it charges for gas service, effective October 1, 2007, of $197 million. The filing reflects a~~authorized return on common equity ofto be below the requested 11.6 percent return and ~~a common equity ratio of 48.3 percent. The filing includes a proposal for a three-year rate plan,~~consistent with additional increases effective October 1, 2008 and 2009 of $39 million and $49 million, respectively. The filing proposes continuation of the current gas rate plan provisions with respect to recovery from customers of the cost of purchased gas, environmental remediation expenses and the reconciliation of actual expenses allocable to the gas business to the amounts for such costs reflected in gas rates for pension and other postretirement benefit costs, property taxes and interference costs.

In September 2006, the PSC approved the June 2006 settlement agreement among Con Edison of New York, the staff of the PSC and other parties. The settlement agreement establishes a rate plan that covers the two-year period October 1, 2006 through September 30, 2008. The rate plan provides for no changes in base rates or in the rate provisions pursuant to which the company recovers its fuel and purchased steam costs (the fuel adjustment clause), except for changes in the manner in which certain costs are recovered. Currently, carrying costs (return on investment, depreciation and property and other taxes) for the East River Repowering Project (ERRP), which at June 30, 2006 had a book value, net of accumulated depreciation, of approximately $726 million, are allocated between the company’s electric and steam businesses, and the steam business’s share is recovered under the fuel adjustment clause. Beginning October 2007, the steam business’s share of allowed ERRP carrying charges will be recovered through base rates.

The rate plan provides that if the actual amount of pension or other postretirement benefit costs, environmental remediation costs, property taxes or interference costs is greater than the respective amount for each such cost reflected in steam rates, the company will recognize a regulatory asset for the difference (90 percent of the difference, in the case of property taxes and interference costs) and defer recognition in expense of the difference. If, however, the actual amount of such costs is less than the amount reflected in steam rates, the company will recognize a regulatory liability for the difference and decrease its revenuesreturns recently authorized by the ~~amount of such difference (90 percent of the difference, in the case of property taxes and interference costs).~~

The company may earn more than the 9.8 percent return on common equity reflected in the rate plan pursuant to the plan’s earnings sharing provisions. Earnings attributable to its steam business, excluding the net revenue effect of steam sales related to colder-than-normal weather and certain other items, (Adjusted Earnings) for a rate year up to 11 percent are retained by the company. Adjusted

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

Earnings between an 11 and 12 percent return on common equity (based upon the actual average common equity ratio, subject to a maximum of 50 percent of capitalization) are to be used to offset up to one-half of any regulatory asset resulting from the cost reconciliations (discussed in the preceding paragraph) for the rate year. The company will retain one-half of any remaining such Adjusted Earnings, with the balance being deferred for the benefit of customers. Any Adjusted Earnings in excess of a 12 percent return on common equity are to be used to offset any regulatory asset resulting from the cost reconciliations, with the company retaining one-quarter of any remaining Adjusted Earnings and the balance being deferred for the benefit of customers. The earnings sharing thresholds will each be reduced by 20 basis points if certain requirements are not met.

The rate plan also includes up to approximately $4 million of potential penalties if the company does not comply with certain requirements regarding steam business development and certain other matters.PSC.

Regulatory assets and liabilities at ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005~~2006 were comprised of the following items:


	Con Edison					Con Edison of New York					Con Edison				Con Edison of New York
(Millions of Dollars)	2006		2005			2006		2005			2007		2006		2007		2006
Regulatory assets
Unrecognized pension and other postretirement costs											$	1,990	$	1,929	$	1,841	$	1,776
Future federal income tax	$	993	$	952		$	940	$	902			1,016		995		961		941
Environmental remediation costs		282		241			223		182			369		318		306		255
World Trade Center restoration costs		142		127			142		127			147		147		147		147
Pension and other postretirement benefits deferrals		132		96			77		46			84		157		28		98
Revenue taxes												70		68		69		67
O&R transition bond charges		68		70			—		—			66		67		—		—
Electric rate increase accrual												59		44		59		44
Recoverable energy costs		60		120			60		120			44		55		44		55
Unbilled gas revenue												44		44		44		44
Workers’ compensation												44		42		44		42
Other retirement program costs												19		20		19		20
Asbestos-related costs												10		10		10		10
Deferred derivative losses - long-term												6		18		5		15
Net T&D reconciliation		58		38			58		38			—		94		—		94
Revenue taxes		56		59			56		59
Workers’ compensation		45		42			45		42
Unbilled gas revenue		44		44			44		44
Deferred derivative losses - long-term		42		—			35		—
Electric rate increase accrual		30		—			30		—
Asbestos-related costs		25		25			25		25
Other retirement program costs		21		24			21		24
Electric cost reconciliations		—		(47	)		—		(47	)
Other		195		226			183		211			131		168		124		156
Regulatory Assets		2,193		2,017			1,939		1,773
Regulatory assets												4,099		4,176		3,701		3,764
Deferred derivative losses - current		196		9			175		9			121		237		114		213
Recoverable energy costs - current		155		221			135		192			174		235		150		213
Total Regulatory Assets	$	2,544	$	2,247		$	2,249	$	1,974		$	4,394	$	4,648	$	3,965	$	4,190
Regulatory liabilities
Allowance for cost of removal less salvage	$	503	$	558		$	445	$	501		$	481	$	492	$	421	$	432
Gain on sale of First Avenue properties		254		256			254		256			144		144		144		144
Net electric deferrals		215		288			215		288			132		164		132		164
Prior year deferred tax amortization												81		81		81		81
2004 electric, gas and steam one-time rate agreement charges												71		85		71		85
Net steam deferrals												41		48		41		48
Gain on sale of W. 24^th St. property												41		46		41		46
Interest on federal income tax refund												41		41		41		41
NYS tax law changes												38		38		29		28
Transmission congestion contracts												27		96		27		96
O&R refundable energy costs												24		27		—		—
DC service incentive												12		13		12		13
EPA SO₂ allowance proceeds - electric and steam		108		76			108		76			9		106		9		106
2004 electric, gas and steam one-time rate plan charges		96		121			96		121
Prior year deferred tax amortization		81		81			81		81
Transmission congestion contracts		58		163			58		163
Gain on sale of W. 24^th St. property		47		—			47		—
NYS tax law changes		45		51			33		39
Interest on federal income tax refund		41		41			41		41
O&R refundable energy costs		30		40			—		—
Deferred derivative gains - long-term												8		2		1		1
Gas interruptible sales credits												7		8		7		8
Property tax reconciliation		30		31			30		31			5		39		5		39
DC service incentive		15		17			15		17
Gas interruptible sales credits		10		8			10		8
Deferred derivative gains - long-term		—		75			—		59
NYISO reconciliation		—		20			—		20
Earnings sharing reserve		—		7			—		7
Other		220		229			207		216			226		214		203		192
Regulatory Liabilities		1,753		2,062			1,640		1,924
Regulatory liabilities												1,388		1,644		1,265		1,524
Deferred derivative gains - current		3		224			—		170			18		6		9		5
Total Regulatory Liabilities	$	1,756	$	2,286		$	1,640	$	2,094		$	1,406	$	1,650	$	1,274	$	1,529

“Net electric deferrals” represents the remaining unamortized balance of certain regulatory assets and liabilities of Con Edison of New York that were combined effective April 1, 2005 and are being amortized to income over the period April 2005 throughIn March ~~2008,~~2007, in accordance with ~~Con Edison of New York’s 2005 Electric Rate Agreement.~~

~~In June 2006, in accordance with Con Edison of New York’s~~the 2005 Electric Rate Agreement, the company ~~settled $141~~offset $265 million of regulatory liabilities against an equal amount of regulatory assets. The regulatory liabilities settled ~~consisted~~related primarily ~~of Adjusted Earnings (as defined in Note B~~ to ~~the financial statements in Item 8 of the Form 10-K) for the rate year ending March 31, 2006 in excess of the specified level, refunds received~~proceeds from the ~~New York Independent System Operator, amounts collected~~sale of sulfur dioxide allowances, prior year’s transmission congestion contracts auction proceeds, gains from ~~customers in excess~~the sale of ~~amounts reflected in rates~~properties, penalties related to customer outages, and the cost reconciliations for property taxes and ~~the costs of moving facilities to avoid interfering with government projects (interference costs).~~interference costs. The regulatory assets recovered ~~consisted~~related primarily ~~of deferred~~to the Net T&D reconciliation and cost reconciliations for pension and other postretirement benefit costs.

During a July 2006 heat wave, electric service was interrupted to a number of Con Edison of New York’s customers, predominantly in the company’s Long Island City distribution network in Queens, New York. Also, a number of the company’s customers in Westchester County, New York, experienced weather-related outages in 2006.

In April 2007, the PSC expanded its ongoing proceeding investigating the Queens outage to also consider the prudence of the company’s conduct with respect to the outage. The investigation has been reviewing the circumstances surrounding the outage, the company’s response, communication and restoration efforts, the need for changes to the company’s practices and procedures and the costs ~~environmental remediation~~incurred by the company related to the outage. The PSC indicated that the prudence examination should consider and address, among other things: (i) the reasonableness of the company’s response to the outage, its monitoring of its distribution system, its use of available information, its procedures for determining whether to shut down the Long Island City network (and the prudence of its decision not to do so) and its operation and maintenance of equipment in the Long Island City network; and (ii) whether and to what extent, the expenses and capital expenditures associated with the outage that the company has incurred, or may incur, should be borne by the company’s customers. In February 2007, the PSC staff issued a report on the outage which, among other things, includes the PSC staff’s (i) finding that the overriding cause of the outage was the company’s failure to adequately operate, maintain and oversee the Long Island City network, (ii) conclusion that the company should have, but failed to, shut down the Long Island City network to minimize the impact of the outage to customers, and (iii) recommendation that the PSC initiate a proceeding to consider the prudence of the company’s actions or inactions during the outage.

The PSC is also reviewing the Westchester outages. Certain members of the New York State Assembly have petitioned the PSC, among other things, to prohibit the company from recovering any costs from customers as a result of its alleged imprudent policies and ~~carrying charges~~grossly negligent response to the September 2006 outage in Westchester resulting from Tropical Storm Ernesto.

The PSC has engaged an independent third party consultant to audit the company’s performance in response to outage emergencies and planning for ~~excess transmission~~restoration of service.

As of March 31, 2007, Con Edison of New York had paid $14 million, $5 million of which was reimbursed by insurers, to compensate customers for spoilage of food and other perishables resulting from the Queens outage, incurred estimated operating costs of $39 million, net of $1 million of insurance reimbursement, invested $48 million in capital assets and retirements in the Long Island City network after the Queens outage, and accrued penalties under its 2005 electric rate agreement of $18 million relating to customer outages. The company’s electric tariff prescribes compensation to customers for spoilage resulting from certain distribution ~~charges.~~system outages, but does not provide for compensation for weather-related overhead outages.

The Companies are unable to predict whether the outages and any related proceedings will have any further material adverse effect on their results of operations or have a material adverse effect on their financial position or liquidity.

~~Reference is made to Note C to the financial statements in Item 8 of the Form 10-K and in Part I, Item 1 of the Second Quarter Form 10-Q.~~

In September 2006, Con Edison of New York issued $400 million of 5.50 percent, 10-year debentures, the proceeds of which were used in October 2006 to refund in advance of maturity $400 million of 7.50 percent, 40-year debentures. In October 2006, O&R issued $75 million of 5.45 percent, 10-year debentures.

Reference is made to Note D to the financial statements in Item 8 of the Form ~~10-K and Note C to the financial statements in Part I, Item 1 of the First Quarter Form 10-Q and Note D to the financial statements in Part I, Item 1 of the Second Quarter Form 10-Q.~~10-K.

At ~~September 30, 2006,~~March 31, 2007, Con Edison had ~~$431~~$266 million of commercial paper outstanding of which ~~$150~~$261 million was outstanding under Con Edison of New York’s program. The weighted average interest rate ~~for the nine-month period~~at March 31, 2007 was ~~4.95 percent and 4.97~~5.5 percent for each of Con Edison and Con Edison of New ~~York, respectively.~~York. At ~~September 30,~~March 31, 2006, Con Edison had $315 million of commercial paper outstanding of which $179 million was outstanding under Con Edison of New York’s program. The weighted average interest rate at March 31, 2006 was 4.9 percent for each of Con Edison and Con Edison of New York. At March 31, 2007 and 2006, no loans were outstanding under ~~any of~~ the Companies’ credit agreements and ~~$15.6~~$87.3 million and $7.2 million of letters of credit ~~had been issued.~~were outstanding, respectively.

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

The components of the Companies’ net periodic benefit costs for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~ were as follows:


	For the Nine Months Ended September 30,
	Con Edison						Con Edison of New York						Con Edison						Con Edison of New York
(Millions of Dollars)	2006			2005			2006			2005			2007			2006			2007			2006
Service cost - including administrative expenses	$	99		$	88		$	92		$	81		$	33		$	34		$	30		$	31
Interest cost on projected benefit obligation		345			323			323			302			123			114			115			107
Expected return on plan assets		(465	)		(482	)		(447	)		(464	)		(161	)		(155	)		(154	)		(149	)
Amortization of net actuarial loss		94			61			78			48			40			31			35			26
Amortization of prior service cost		10			10			9			9
NET PERIODIC BENEFIT COST/(CREDIT)	$	83		$	—		$	55		$	(24	)
Amortization of prior service costs														2			3			2			3
NET PERIODIC BENEFIT COST													$	37		$	27		$	28		$	18
Amortization of regulatory asset*		3			3			3			3			1			1			1			1
TOTAL PERIODIC BENEFIT COST/(CREDIT)	$	86		$	3		$	58		$	(21	)
TOTAL PERIODIC BENEFIT COST													$	38		$	28		$	29		$	19
Cost capitalized		(25	)		1			(19	)		6			(12	)		(8	)		(10	)		(6	)
Cost deferred		(85	)		(35	)		(75	)		(26	)		(29	)		(30	)		(27	)		(27	)
Cost credited to operating expenses	$	(24	)	$	(31	)	$	(36	)	$	(41	)	$	(3	)	$	(10	)	$	(8	)	$	(14	)

In December 2006, Con Edison adopted Statement of Financial Accounting Standards (SFAS) No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of Financial Accounting Standards Board (FASB) Statements No. 87, 88, 106 and 132(R)” (SFAS No. 158). In the first quarter of 2007, in accordance with SFAS No. 158 and based on the final actuarial valuation as of December 31, 2006, Con Edison adjusted the estimated amounts recorded upon adoption of SFAS No. 158 by increasing its pension liability by $83 million and the related regulatory asset by $81 million and recognizing a charge of $1 million (net of taxes) to Other Comprehensive Income (OCI). Con Edison of New York reversed the pension asset of $13 million it recorded upon adoption of SFAS No. 158 and recorded a pension liability of $64 million and an additional regulatory asset of $77 million.

Based on current estimates, the Companies are not required under funding regulations and laws to make any contributions to the pension plan during ~~2006.~~2007. The Companies’ policy ~~however~~ is to fund their accounting cost to the extent ~~such funding is~~ tax ~~deductible.~~deductible, therefore, Con Edison and Con Edison of New York expect to make discretionary contributions of $132 million and $99 million, respectively, to the pension plan during 2007. The Companies’ 2007 funding level for the non-qualified supplemental pension plans has not been determined.

York made discretionary contributions of $98 million and $63 million, respectively, to the pension plan during 2006. The Companies’ 2006 funding level for the non-qualified supplemental pension plans has not been determined.

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

The components of the Companies’ net periodic postretirement benefit costs for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~ were as follows:


	For the Three Months Ended September 30,
	Con Edison						Con Edison of New York						Con Edison						Con Edison of New York
(Millions of Dollars)	2006			2005			2006			2005			2007			2006			2007			2006
Service cost	$	4		$	4		$	3		$	3		$	4		$	4		$	3		$	3
Interest cost on accumulated other postretirement benefit obligation		21			20			19			18			23			21			20			19
Expected return on plan assets		(19	)		(19	)		(18	)		(18	)		(20	)		(19	)		(18	)		(18	)
Amortization of net actuarial loss		15			18			13			16			17			14			15			12
Amortization of prior service cost		(4	)		(4	)		(4	)		(4	)		(4	)		(3	)		(4	)		(3	)
Amortization of transition obligation		1			1			1			1			1			1			1			1
NET PERIODIC POSTRETIREMENT BENEFIT COST	$	18		$	20		$	14		$	16		$	21		$	18		$	17		$	14
Cost capitalized		(7	)		(6	)		(5	)		(5	)		(7	)		(6	)		(6	)		(5	)
Cost deferred		(8	)		(5	)		(8	)		(4	)		(11	)		(6	)		(9	)		(5	)
Cost charged to operating expenses	$	3		$	9		$	1		$	7		$	3		$	6		$	2		$	4

	For the Nine Months Ended September 30,
	Con Edison						Con Edison of New York
(Millions of Dollars)	2006			2005			2006			2005
Service cost	$	13		$	11		$	10		$	8
Interest cost on accumulated other postretirement benefit obligation		64			62			57			55
Expected return on plan assets		(58	)		(59	)		(54	)		(55	)
Amortization of net actuarial loss		44			54			37			47
Amortization of prior service cost		(11	)		(11	)		(11	)		(11	)
Amortization of transition obligation		3			3			3			3
NET PERIODIC POSTRETIREMENT BENEFIT COST	$	55		$	60		$	42		$	47
Cost capitalized		(18	)		(18	)		(14	)		(15	)
Cost deferred		(23	)		(16	)		(20	)		(12	)
Cost charged to operating expenses	$	14		$	26		$	8		$	20

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~In the first quarter of 2007, in accordance with SFAS No. 158 and based on the final actuarial valuation as of December 31, 2006, Con Edison adjusted the estimated amounts recorded upon adoption of SFAS No. 158 by increasing its liability for other postretirement benefits by $27 million and the related regulatory asset by $29 million and recognizing a credit of $1 million (net of taxes) to OCI. Con Edison of New York recorded an additional liability for other postretirement benefits of $37 million and an additional regulatory asset of $37 million.

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 ~~includes~~include costs of demolition, removal, disposal, storage, replacement, containment, and monitoring) and environmental damages. Liability under these laws can be material and may be imposed for contamination from past acts, even

though such past acts may have been lawful at the time they occurred. The sites at which the Utilities have been asserted to have liability under these laws, including their manufactured gas plant sites, are referred to herein as “Superfund Sites.”

For Superfund Sites where there are other potentially responsible parties and the Utilities are not managing the site investigation and remediation, the accrued liability represents an estimate in 2006 dollars of the amount the Utilities will need to pay to discharge their related obligations. For Superfund Sites (including the manufactured gas plant sites) for which one of the Utilities is managing the investigation and remediation, the accrued liability represents an estimate in 2006 dollars of the company’s share of undiscounted cost to investigate the sites and, for sites that have been investigated in whole or in part, the cost to remediate the sites. Remediation costs are estimated in light of the information available, applicable remediation standards, and experience with similar sites.

The accrued liabilities and regulatory assets related to Superfund Sites at ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005~~2006 were as follows:


	Con Edison				Con Edison of New York				Con Edison					Con Edison of New York
(Millions of Dollars)	2006		2005		2006		2005		2007		��	2006		2007		2006
Accrued Liabilities
Accrued Liabilities:
Manufactured gas plant sites	$	201	$	173	$	156	$	121	$	275		$	228	$	227	$	180
Other Superfund Sites		65		65		64		65		62			64		61		63
Total	$	266	$	238	$	220	$	186	$	337		$	292	$	288	$	243
Regulatory Assets	$	282	$	241	$	223	$	182	$	369		$	318	$	306	$	255

Most of the accrued Superfund Site liability relates to sites that have been investigated, in whole or in part. As investigations progress on these and other sites, the Utilities expect that additional liability will

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

be accrued, the amount of which is not presently determinable but may be material. Under their current rate agreements, the Utilities are permitted to recover or defer as regulatory assets (for subsequent recovery through rates) certain site investigation and remediation costs.

~~Environmental remediation payments and~~There were no insurance recoveries received related to ~~the~~ Superfund ~~sites~~Sites for the three ~~and nine~~ months ended ~~September 30, 2006~~March 31, 2007 and ~~2005~~2006. Environmental remediation costs incurred related to Superfund Sites for these periods were as follows:

In ~~2002,~~2006, Con Edison of New York estimated that for its manufactured gas plant sites, ~~most of which had not been investigated,~~ its aggregate undiscounted potential liability for the investigation and remediation of coal tar and/or other manufactured gas plant-related environmental contaminants could range up to $1.1 billion. In ~~2004,~~2006, O&R estimated that for its manufactured gas plant sites, each of which has been investigated, the aggregate undiscounted potential liability for the remediation of such contaminants could range up to ~~$87~~$96 million. These estimates were based on the assumption that there is contamination at ~~each of~~ the sites that have not yet been investigated and additional assumptions about these and the other sites regarding the extent of contamination and the type and extent of remediation that may be required. Actual experience may be materially different.

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. In ~~2004,~~2006, Con

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

Edison of New York estimated that its aggregate undiscounted potential liability for these suits and additional suits that may be brought over the next 15 years is ~~$25~~$10 million. The estimate was based upon a combination of modeling, historical data analysis and risk factor assessment. Actual experience may be materially different. In addition, certain current and former employees have claimed or are claiming workers’ compensation benefits based on alleged disability from exposure to asbestos.

Under its current rate agreements, Con Edison of New York is permitted to defer as regulatory assets (for subsequent recovery through rates) 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 ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005~~2006 were as follows:


	Con Edison				Con Edison of New York				Con Edison				Con Edison of New York
(Millions of Dollars)	2006		2005		2006		2005		2007		2006		2007		2006
Accrued liability - asbestos suits	$	25	$	25	$	25	$	25	$	10	$	10	$	10	$	10
Regulatory assets - asbestos suits	$	25	$	25	$	25	$	25	$	10	$	10	$	10	$	10
Accrued liability - workers’ compensation	$	120	$	118	$	116	$	113	$	119	$	117	$	114	$	112
Regulatory assets - workers’ compensation	$	45	$	42	$	45	$	42	$	44	$	42	$	44	$	42

In each of 1997 and 1999, Con Edison Development entered into a transaction in which it leased property and then immediately subleased it back to the lessor (termed “Lease In/Lease Out,” or LILO transaction). The transactions respectively involve gas distribution and electric generating facilities in the Netherlands, with a total investment of $259 million. The transactions were financed with $93 million of equity and $166 million of non-recourse, long-term debt secured by the underlying assets. In accordance with SFAS No. 13, Con Edison is accounting for the two LILO transactions as leveraged leases. Accordingly, the company’s investment in these leases, net of non-recourse debt, is carried as a single amount in Con Edison’s consolidated balance sheet and income is recognized pursuant to a method that incorporates a level rate of return for those years when net investment in the lease is positive, based upon the after-tax cash flows projected at the inception of the leveraged leases. At March 31, 2007 and December 31, 2006, the company’s investment in these leveraged leases ($232 million on such date) net of deferred tax liabilities ($212 million and $208 million, respectively), amounted to $20 million and $24 million, respectively.

On audit of Con Edison’s tax return for 1997, the Internal Revenue Service (IRS) disallowed the tax losses in connection with the 1997 LILO transaction. In December 2005, Con Edison paid a $0.3 million income tax deficiency asserted by the IRS for the tax year 1997 with respect to the 1997 LILO transaction. In April 2006, the company paid interest of $0.2 million associated with the deficiency and commenced an action in the United States Court of Federal Claims, entitled Consolidated Edison Company of New York, Inc. v. United States, to obtain a refund of this tax payment and interest. In September 2006, at the audit level, the IRS also disallowed $151 million of net tax deductions taken with respect to both of the LILO transactions for the tax years 1998 through 2001. In November 2006, Con Edison filed an appeal of this disallowance with the Appeals Office of the IRS, where consideration of this matter is pending. In March 2007, at the audit level, the IRS disallowed $43 million of net tax deductions taken with respect to both of the LILO transactions for the tax year 2005. Con Edison intends to file an appeal of this disallowance with the Appeals Office of the IRS.

Con Edison believes that its LILO transactions have been correctly reported, and has not recorded any reserve with respect to the disallowance of tax losses, or related interest, in connection with its LILO transactions. Con Edison’s estimated tax savings, reflected in its financial statements, from the two LILO transactions through March 31, 2007, in the aggregate, was $158 million. If Con Edison were required to repay all or a portion of these amounts, it would also be required to pay interest of up to $49 million.

Con Edison and Northeast Utilities are pursuing claims against each other for damages as a result of the alleged breach of their agreement and plan of merger, dated as of October 13, 1999, as amended and restated as of January 11, 2000. The litigation, entitled Consolidated Edison, Inc. v. Northeast Utilities, was commenced in March 2001 and is pending in the United States District Court for the Southern District of New York. The parties are seeking to recover from each other fees and expenses each incurred in connection with the merger agreement and preparing for the merger. In addition, Con Edison is seeking to recover from Northeast Utilities compensation for synergies that were lost when the merger did not occur, together with the attorney’s fees it has incurred in connection with the litigation.

In May 2004, the District Court determined that Northeast Utilities could not sue Con Edison for the claimed difference between the consideration Con Edison would have paid pursuant to the merger agreement and the unaffected trading price of Northeast Utilities’ common stock prior to the announcement of the merger agreement (the so-called “lost premium”). In October 2005, the United States Court of Appeals for the Second Circuit held that Northeast Utilities’ shareholders could not sue Con Edison for the so-called lost premium.

Con Edison does not expect that the lawsuit will have a material adverse effect on its financial position, results of operations or liquidity.

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

In each of 1997 and 1999, Con Edison Development entered into a transaction in which it leased property and then immediately subleased it back to the lessor (termed “Lease In/Lease Out,” or LILO transaction). The transactions respectively involved gas distribution and electric generating facilities in the Netherlands, with a total investment of $259 million. The transactions were financed with $93 million of equity and $166 million of non-recourse, long-term debt secured by the underlying assets. In accordance with Statement of Financial Accounting Standards (SFAS) No. 13, “Accounting for Leases,” Con Edison is accounting for the two LILO transactions as leveraged leases. Accordingly, the company’s investment in these leases, net of non-recourse debt, is carried as a single amount in Con Edison’s consolidated balance sheet and income is recognized pursuant to a method that incorporates a level rate of return for those years when net investment in the lease is positive, based upon the after-tax cash flows projected at the inception of the leveraged leases. At September 30, 2006 and December 31, 2005, the company’s investment in these leveraged leases ($230 million and $225 million, respectively) net of deferred tax liabilities ($203 million and $187 million, respectively), amounted to $27 million and $38 million, respectively.

On audit of Con Edison’s tax return for 1997, the Internal Revenue Service (IRS) disallowed the tax losses in connection with the 1997 LILO transaction. In December 2005, Con Edison paid a $0.3 million income tax deficiency asserted by the IRS for the tax year 1997 with respect to the 1997 LILO transaction. In April 2006, the company paid interest of $0.2 million associated with the deficiency and commenced an action in the United States Court of Federal Claims, entitled Consolidated Edison Company of New York, Inc. v. United States to obtain a refund of this tax payment and interest. In September 2006, at the audit level, the IRS also disallowed $151 million of net tax deductions taken with respect to both of the LILO transactions for the 1998 through 2001 tax years. Con Edison intends to appeal this decision, first within the IRS, and then, if necessary, to the federal courts.

Con Edison believes that its LILO’s have been correctly reported, and has not recorded any reserve with respect to the disallowance of tax losses in connection with its LILO transactions. Con Edison’s estimated tax savings from the two LILO transactions through September 30, 2006, in the aggregate, was $150 million. If Con Edison were required to repay all or a portion of these amounts, it would also be required to pay interest of up to $40 million. See Note L for a discussion of a new accounting requirement regarding accounting for uncertainty in income taxes.

In August 2005, the IRS issued Revenue Ruling 2005-53 with respect to when federal income tax deductions can be taken for certain construction-related costs. The Companies’ used the “simplified service cost method” (SSCM) to determine the extent to which these costs could be deducted in 2002,

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

~~2003, 2004 and 2005, and as a result reduced their current tax expense by $355 million, of which $324 million is attributable to Con Edison of New York.~~

For 2005, the Companies have agreed with the IRS to change their method of deducting these costs to a new method which the Companies are developing with the IRS. The Companies expect that they will be required to repay, with interest, a portion of their past SSCM tax benefits and to capitalize and depreciate over a period of years costs they previously deducted under SSCM. Interest on all past SSCM tax benefits would be approximately $64 million. In September 2006, Con Edison and Con Edison of New York accrued interest of $26 million and $23 million, respectively, representing their best estimates of the interest that may be required. Repayment of the SSCM tax benefits would not otherwise affect the Companies’ results of operations because deferred taxes have been previously provided for the related temporary differences between the SSCM deductions taken for federal income tax purposes and the corresponding amounts charged to expense for financial reporting purposes. See Note L for a discussion of a new accounting requirement regarding accounting for uncertainty in income taxes.

Con Edison of New York estimates that its costs for emergency response to the September 11, 2001 attack on the World Trade Center, and for resulting temporary and subsequent permanent restoration of electric, gas and steam transmission and distribution facilities damaged in the attack will total $430 million, net of estimated insurance recoveries. Most of the costs have already been incurred. At September 30, 2006, the company had received reimbursement for $171 million of these costs ($77 million under insurance policies and $94 million from the federal government). The company expects to receive additional funds from insurance policies and federal reimbursement.

At September 30, 2006, the company had incurred capital costs of $213 million and, pursuant to a petition it filed with the PSC in 2001, deferred non-capital costs of $142 million as a regulatory asset (these amounts are net of reimbursements received). Non-capital costs include primarily the costs of moving facilities to avoid interfering with governmental projects (interference costs) and interest on capital and non-capital costs previously deferred. Con Edison of New York’s current rate plans provide for recovery from customers of $21.8 million annually of deferred non-capital costs associated with the World Trade Center. The company expects the PSC to permit recovery of all costs from customers, net of any federal reimbursement, insurance payments and tax savings.

Based upon New York City’s announced plans for improvement projects in lower Manhattan, the company anticipates that over the next five years it may incur up to $250 million of costs to move its facilities to avoid interfering with these projects. The company’s rate plans include provisions for the recovery of such costs. See Note B to the financial statements in Item 8 of the Form 10-K.

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

In June 1999, O&R completed the sale of all of its generating assets and Con Edison of New York completed the sale of its two-thirds interest in the Bowline Point generating facility to affiliates (Mirant Affiliates) of Mirant Corporation (Mirant, formerly Southern Energy, Inc.). The total gross proceeds from the sale amounted to $476 million ($343 million attributable to O&R and $133 million attributable to Con Edison of New York). In 2003, Mirant and most of its subsidiaries filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. In January 2006, Mirant and most of its subsidiaries, but not the Mirant Affiliates, emerged from bankruptcy.

In May 2006, Mirant, the Mirant Affiliates and another Mirant subsidiary (the Claimants) commenced a proceeding seeking, among other things, to void the sale of the generating assets and recover the amounts paid by the Mirant Affiliates in connection with the sale (which the Claimants allege exceeded the fair value of the assets), together with interest on such amounts. In addition, the Claimants seek damages and a declaration that the Utilities defend and indemnify the Mirant Affiliates in connection with certain environmental, operational and other matters relating to some of the assets, the costs of which could be substantial. The Claimants also object to the allowance of claims totaling approximately $1 million filed by the Utilities in the bankruptcy proceeding.

In October 2006, the Mirant Affiliate that owns the Lovett generating units notified the PSC and O&R of its intention to retire the units in 2007 and 2008. O&R ~~is in~~believes that the ~~process of constructing~~recent upgrades to its transmission and distribution system ~~to meet anticipated demand growth, and believes that these upgrades~~ will allow ~~the system~~it to meet existing ~~reliability criteria in~~and future demand requirements if the ~~event that the Lovett~~ units ~~are shut down.~~do not operate.

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

During a July 2006 heat wave, electric service to a number of Con Edison of New York’s customers, predominantly in the company’s Long Island City distribution network in Queens, New York was interrupted. Also, a number of the company’s customers in Westchester County, New York, experienced weather-related outages in 2006.

The PSC is comprehensively investigating the Queens outage, including the circumstances surrounding the outage, the company’s response, communication and restoration efforts, the need for changes to the company’s practices and procedures and the costs incurred by the company related to the outage. The PSC is also reviewing the Westchester outages. Certain members of the New York State Assembly have filed a petition with the PSC with respect to the Queens outage and the

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

September 2006 outage in Westchester resulting from Tropical Storm Ernesto. Their petition requests the PSC, among other things, to determine how the company’s actions affect its liability to provide compensation to customers whose service was interrupted and to prohibit the company from recovering any costs from customers as a result of its alleged imprudent policies and grossly negligent response. In addition, the PSC has issued an order to engage an independent third party consultant to conduct an audit of the company’s performance in response to outage emergencies and planning for restoration of service.

As of September 30, 2006, Con Edison of New York had paid $14 million to compensate customers for spoilage of food and other perishables resulting from the Queens outage, incurred estimated operating costs of $53 million and capital and retirement costs of $25 million, relating to the Queens and Tropical Storm Ernesto outages, and accrued anticipated penalties under its 2005 Electric Rate Agreement of $18 million relating to customer outages. The company’s electric tariff prescribes compensation to customers for spoilage resulting from certain distribution system outages, but does not require compensation for weather-related overhead outages.

The Companies are unable to predict whether the outages and any related proceedings will have any further material adverse effect on their results of operation or have a material adverse effect on their financial position or liquidity.

Con Edison and its subsidiaries enter into various agreements providing financial or performance assurance primarily to third parties on behalf of their subsidiaries. In addition, a Con Edison Development subsidiary has issued a guarantee on behalf of an entity in which it has an equity interest. Maximum amounts guaranteed by Con Edison totaled $1.3 billion and ~~$1.1~~$1.2 billion at ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005,~~2006, respectively.

A summary, by type and term, of Con Edison’s total guarantees at March 31, 2007 is as follows:

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

In January 2007, the Companies adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (FIN 48). This interpretation clarifies the accounting for uncertain tax positions in accordance with FASB Statement No. 109. Under the interpretation, an enterprise would not be allowed to recognize, in its financial statements, the benefit of a tax position unless that position is more likely than not to be sustained upon examination by taxing authorities, including resolution of any related appeals and litigation processes, based solely on the technical merits of the position.

The IRS has essentially completed its audits of the Companies’ federal income tax returns through 2001 and for tax year 2005. The Companies’ federal income tax returns for 2002 through 2004, which the IRS is reviewing, reflect certain tax positions with which the IRS does not or may not agree, including tax positions with respect to the deduction of certain construction-related costs for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

~~A summary,~~The Companies used the “simplified service cost method” (SSCM) to determine the extent to which construction-related costs could be deducted in 2002 through 2005, and as a result reduced their current tax expense by ~~type and term, of Con Edison’s total guarantees at September 30, 2006 is as follows:~~

~~Other guarantees include $47~~$340 million, of ~~guarantees issued by Con Edison covering RCN Corporation’s (RCN) lease payments for the right~~which $310 million is attributable to ~~use~~ Con Edison of New ~~York’s conduit system~~York. In August 2005, the IRS issued Revenue Ruling 2005-53 with respect to when federal income tax deductions can be taken for certain construction-related costs. The Companies expect that they will be required to repay, with interest, a portion of their past SSCM tax benefits and to capitalize and depreciate over a period of years costs they previously deducted under SSCM. Interest on all past SSCM tax benefits for Con Edison and Con Edison of New York would be approximately $90 million and $82 million, respectively. Repayment of the SSCM tax benefits would not otherwise affect the Companies’ results of operations because deferred taxes have been previously provided for the related temporary differences between the SSCM deductions taken for federal income tax purposes and the corresponding amounts charged to expense for financial reporting purposes.

Upon adoption of FIN 48, Con Edison and Con Edison of New York reclassified previously recorded tax liabilities of $142 million and $131 million, respectively, which primarily related to SSCM, to a liability for uncertain tax positions. At March 31, 2007, the liabilities for uncertain tax positions for Con Edison and Con Edison of New York were $139 million and $ 128 million, respectively, and accrued interest on the liabilities amounted to $29 million and $25 million, respectively. The Companies recognize interest accrued related to the liability for uncertain tax positions in ~~accordance with~~interest expense and penalties, if any, in operating expenses in the Companies’ consolidated income statements. In the three months ended March 31, 2007, Con Edison and Con Edison of New York recognized interest expense for uncertain tax positions of approximately $4 million.

The Companies do not expect the total amounts of uncertain tax positions to significantly increase or decrease within the next 12 months.

The adoption of FIN 48 did not have a ~~tariff approved by~~material impact on the ~~PSC~~Companies’ financial position, results of operations or liquidity.

For a description of stock-based compensation, including stock options, restricted stock units (RSUs) and ~~rent payment obligations under various lease agreements for office buildings. See~~the stock purchase plan, reference is made to Note UM to the financial statements in Item 8 of the Form 10-K.

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

~~Note I – Stock-Based Compensation~~NOTESTOTHE FINANCIAL STATEMENTS (UNAUDITED) —CONTINUED

The Companies compensate employees and directors with, among other things, stock options, restricted stock units and contributions to a discount stock purchase plan. Shares of Con Edison common stock used to satisfy the Companies’ obligations with respect to such compensation may be new (authorized, but unissued) shares, treasury shares or shares purchased on the open market. The shares used during the nine months ended September 30, 2006 have been new shares, except for shares distributed to a retired officer with respect to 30,000 vested restricted stock units which were purchased in the open market.

In ~~January 2006, Con Edison adopted~~accordance with SFAS No. 123(R), “Share-Based ~~Payment,” applying the modified prospective approach. Pursuant to SFAS~~Payment” (SFAS No. 123(R)), the Companies have recognized the cost of ~~stock based~~stock-based compensation as an expense using a fair value measurement method. The following table summarizes stock-based compensation expense recognized by the Companies in the three ~~and nine~~ months ended ~~September 30,~~March 31, 2007 and 2006:

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

If the Companies had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – An Amendment of Financial Accounting Standards Board (FASB) Statement No. 123,” for the purposes of recognizing expense for stock-based compensation arrangements, the following table illustrates the effect on net income and earnings per share for the three and nine months ended September 30, 2005:

For a description of the stock options, and the 1996 Stock Option Plan and the Long Term Incentive Plan (LTIP) under which the stock options have been awarded, reference is made to Note N to the financial statements in Item 8 of the Form 10-K. Pursuant to SFAS No. 123(R), the Companies generally recognize compensation expense (based on the fair value of stock option awards) over the continuous service period in which the options vest. Awards to employees currently eligible for retirement are expensed in the month awarded.

The outstanding options are “equity awards” because shares of Con Edison common stock are delivered upon exercise of the options. As equity awards, the fair value of the options is measured at the grant date. The weighted average fair value of options awarded in 2006 is $3.81. This value was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

The weighted average risk-free rate is calculated using the five-year U.S. Treasury securities rate on the grant date of each stock option and then weighted for the number of shares awarded. The expected life of the options is based on historical employee exercise behavior and post-vesting cancellations. The expected stock volatility is calculated using the quarterly closing prices of Con Edison stock over a period of five years, which approximates the expected term of the options. The expected dividend yield is calculated using the annualized dividend divided by the stock price on the date of grant.

A summary of changes in the status of stock options during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2007 and 2006 iswere as follows:


	Con Edison				Con Edison of New York				Con Edison				Con Edison of New York
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding at 12/31/05	7,867,151		$	41.913	6,697,401		$	42.000	7,867,151		$	41.913	6,697,401		$	42.000
Granted	804,000			46.880	699,000			46.880	804,000			46.880	699,000			46.880
Exercised	(67,500	)		37.560	(60,800	)		37.404	(67,500	)		37.560	(60,800	)		37.404
Forfeited	(20,900	)		42.691	(5,000	)		44.688	(20,900	)		42.691	(5,000	)		44.688
Outstanding at 3/31/06	8,582,751		$	42.412	7,330,601		$	42.503	8,582,751		$	42.412	7,330,601		$	42.503
Outstanding at 12/31/06									8,617,601		$	42.773	7,346,601		$	42.842
Granted	859,900			43.500	711,700			43.500	—			—	—			—
Exercised	(64,725	)		35.935	(55,725	)		35.538	(975,100	)		41.630	(907,050	)		41.634
Forfeited	(19,000	)		44.353	(13,000	)		44.765	(1,001	)		42.169	(1,001	)		42.169
Outstanding at 6/30/06	9,358,926		$	42.553	7,973,576		$	42.637
Granted	—			—	—			—
Exercised	(235,200	)		39.003	(192,800	)		39.220
Forfeited	(17,000	)		46.108	(11,800	)		45.452
Outstanding at 9/30/06	9,106,726		$	42.641	7,768,976		$	42.722
Outstanding at 3/31/07									7,641,500		$	42.919	6,438,550		$	43.013

~~The weighted average exercise price of options awarded in 2006 was $45.13 per share.~~ The change in the fair value of all outstanding options from their grant dates to ~~September 30,~~March 31, 2007 and 2006 (aggregate intrinsic value) ~~was $32 million~~ for Con ~~Edison.~~Edison were $62 million and $9 million, respectively. The change in the fair value of all outstanding options from their grant dates to March 31, 2007 and 2006 (aggregate intrinsic value) for Con Edison of New York were $52 million and $7 million, respectively. The aggregate intrinsic value of options exercised in the ~~three months~~period ended ~~September 30,~~March 31, 2007 and 2006 ~~was $2~~were $7 million and $1 million and the cash received by Con Edison for payment of the exercise price ~~was $9 million.~~were $40 million and $2 million, respectively. The weighted average remaining contractual life of options outstanding is ~~six~~five years as of ~~September 30, 2006.~~March 31, 2007.

The following table summarizes stock options outstanding at ~~September 30, 2006~~March 31, 2007 for each plan year for the Companies:


		Con Edison			Con Edison of New York				Con Edison				Con Edison of New York
Plan Year	Remaining Contractual Life	Options Outstanding	Weighted Average Exercise Price	Options Exercisable	Options Outstanding	Weighted Average Exercise Price	Options Exercisable	Remaining Contractual Life	Options Outstanding	Weighted Average Exercise Price		Options Exercisable	Options Outstanding	Weighted Average Exercise Price		Options Exercisable
2006	10	1,654,800	45.142	—	1,404,700	45.182	—	9	1,654,800	$	45.142	—	1,404,700	$	45.182	—
2005	9	1,273,050	42.735	—	1,027,750	42.718	—	8	1,271,050		42.736	—	1,025,750		42.719	—
2004	8	1,290,150	43.766	—	1,046,700	43.764	—	7	1,216,650		43.808	393,000	979,200		43.811	304,000
2003	7	1,431,675	39.735	1,431,675	1,191,075	39.794	1,191,075	6	909,150		39.842	909,150	725,450		39.867	725,450
2002	6	1,240,050	42.510	1,240,050	1,071,550	42.510	1,071,550	5	1,041,950		42.510	1,041,950	889,950		42.510	889,950
2001	5	718,400	37.750	718,400	620,900	37.750	620,900	4	559,800		37.750	559,800	485,800		37.750	485,800
2000	4	214,100	32.500	214,100	168,100	32.500	168,100	3	168,100		32.500	168,100	132,600		32.500	132,600
1999	3	891,350	47.938	891,350	849,550	47.938	849,550	2	675,450		47.938	675,450	653,050		47.938	653,050
1998	2	358,000	42.563	358,000	353,500	42.563	353,500
1997	1	35,151	31.500	35,151	35,151	31.500	35,151
1998/97								1	144,550		42.563	144,550	142,050		42.736	142,050
Total		9,106,726		4,888,726	7,768,976		4,289,826		7,641,500	$	42.919	3,892,000	6,438,550	$	43.013	3,332,900

There were no new awards granted in 2007. The exercise prices of options awarded in 2006 range from $43.50 to $46.88. The total expense to be recognized in future periods for unvested stock options outstanding as of ~~September 30, 2006~~March 31, 2007 is $6$3 million for Con Edison, including $4$2 million for Con Edison of New York.

For ~~a description of~~ the restricted stock units, reference is made to Note N to the financial statements in Item 8 of the Form 10-K. In certain cases, dividend equivalents are paid on the restricted stock units. In 2006, restricted stock unit awards under the LTIP were made as follows: (i) annual awards to officers under restricted stock unit agreements that provide for adjustment of the number of units (as described in Note N to the financial statements in Item 8 of the Form 10-K, performance-based restricted stock units or PBRS)three-month period ended March 31, 2007 and ~~(ii) under the directors’ deferred compensation plan. No other awards of restricted stock units were made in 2006.~~

In accordance with SFAS No. 123(R), for outstanding restricted stock awards other than PBRS or awards under the directors’ deferred compensation plan, the Companies have accrued a liability based on the market value of a common share on the grant date and are recognizing compensation expense over the vesting period. The weighted average vesting period for outstanding awards is two years and is based on the employees’ continuous service to Con Edison; the latest period ends April 2009. Prior to vesting, the awards are subject to forfeiture in whole or in part under certain circumstances. The awards are “liability awards” because each restricted stock unit represents the right to receive, upon vesting, one share of Con Edison common stock, the cash value of a share or a combination thereof. As such, prior to vesting, changes in the fair value of the units are reflected in net income. At September 30, 2006, there were ~~192,500~~92,500 and ~~141,700~~222,500 units outstanding for Con Edison and 41,700 and 171,700 units outstanding for Con Edison of New York,

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

respectively. The weighted average fair value as of the grant date of the outstanding units ~~is $35.844 per unit~~for March 31, 2007 and ~~$34.732~~2006 were $40.88 and $36.59 per unit for Con Edison, respectively. The weighted average fair value as of the grant date of the outstanding units for March 31, 2007 and 2006 were $43.23 and $36.31 per unit for Con Edison of New York, respectively. ~~In September 2006, 30,000 vested restricted stock units were distributed to a retired officer.~~ The total expense to be recognized by the Companies in future periods for unvested awards outstanding as of ~~September 30, 2006 is $1 million.~~

For PBRS that are subject to adjustment based on Con Edison’s total shareholder return relative to the Standard and Poor’s Electric Utilities Index during a specified performance period (the TSR portion), the Companies use a Monte Carlo simulation model to estimate the fair value of the awards. The fair value is recomputed each reporting period as of the earlier of the reporting date and the vesting date. For PBRS that are subject to adjustment based on determinations made in connection with the Companies’ annual bonus plans (the EIP portion), the fair value of the awards is determined using the market price on the date of grant. PBRS awards are “liability awards” because each PBRS represent the right to receive, upon vesting, one share ofMarch 31, 2007 for Con Edison ~~common stock, the cash value~~and Con Edison of a share or a combination thereof. As such, changes in the fair value of the PBRS are reflected in net income. The following table illustrates the assumptions used to calculate the fair value of the awards:

The risk-free rate is based on the U.S. Treasury zero-coupon yield curve on the date of grant. The expected term of the PBRS is three years, which equals the vesting period. The Companies do not expect significant forfeitures to occur. The expected volatility is calculated using daily closing stock prices over a period of three years, which approximates the expected term of the awards. Expected annual escalation of dividends is based on historical trends.New York were $1 million and $0.5 million, respectively.

A summary of changes in the status of the ~~PBRS’ TSR~~Performance RSUs’ Total Shareholder Return (TSR) portion during the three months ended ~~September 30,~~March 31, 2007 and 2006 iswere as follows:


	Con Edison				Con Edison of New York				Con Edison				Con Edison of New York
	Units		Weighted Average Fair Value*		Units		Weighted Average Fair Value*		Units		Weighted Average Fair Value*		Units		Weighted Average Fair Value*
Non-vested at 12/31/05	206,275		$	31.489	171,950		$	31.581	204,425		$	31.461	171,950		$	31.581
Granted	99,300			43.830	87,400			43.830	99,300			43.830	87,400			43.830
Vested and Exercised	(156,450	)		46.477	(144,475	)		46.455	(156,450	)		46.477	(144,475	)		46.455
Forfeited	—			—	—			—	—			—	—			—
Non-vested at 3/31/06	149,125		$	29.252	114,875		$	29.530	147,275		$	29.252	114,875		$	29.530
Non-vested at 12/31/06									126,425		$	13.992	94,025		$	14.420
Granted	—			—	—			—	113,600			45.730	81,848			45.730
Vested and Exercised	—			—	—			—	(31,400	)		—	(21,475	)		—
Forfeited	—			—	—			—	—			—	—			—
Non-vested at 6/30/06	149,125		$	31.190	114,875		$	44.440
Granted	—			—	—			—
Vested and Exercised	—			—	—			—
Forfeited	—			—	—			—
Non-vested at 9/30/06	149,125		$	24.800	114,875		$	25.140
Non-vested at 3/31/07									208,625		$	36.108	154,398		$	35.709

A summary of changes in the status of the ~~PBRS’ EIP~~Performance RSUs’ Executive Incentive Plan (EIP) portion during the three months ended ~~September 30,~~March 31, 2007 and 2006 iswere as follows:


	Con Edison				Con Edison of New York				Con Edison				Con Edison of New York
	Units		Weighted Average Price		Units		Weighted Average Price		Units		Weighted Average Price		Units		Weighted Average Price
Non-vested at 12/31/05	206,275		$	43.297	171,950		$	43.300	204,425		$	43.297	171,950		$	43.300
Granted	99,300			46.880	87,400			46.880	99,300			46.880	87,400			46.880
Vested and Exercised	(156,450	)		46.477	(144,475	)		46.455	(156,450	)		46.477	(144,475	)		46.455
Forfeited	—			—	—			—	—			—	—			—
Non-vested at 3/31/06	149,125		$	43.500	114,875		$	43.500	147,275		$	43.500	114,875		$	43.500
Non-vested at 12/31/06									126,425		$	48.070	94,025		$	48.070
Granted	—			—	—			—	113,600			47.815	81,848			47.807
Vested and Exercised	—			—	—			—	(31,400	)		47.530	(21,475	)		47.530
Forfeited	—			—	—			—	—			—	—			—
Non-vested at 6/30/06	149,125		$	44.440	114,875		$	44.440
Granted	—			—	—			—
Vested and Exercised	—			—	—			—
Forfeited	—			—	—			—
Non-vested at 9/30/06	149,125		$	46.200	114,875		$	46.200
Non-vested at 3/31/07									208,625		$	51.060	154,398		$	51.060

The total expense to be recognized by Con Edison in future periods for unvested Performance RSUs outstanding as of March 31, 2007 is $14 million, including $10 million for Con Edison of New York.

~~The total expense to be recognized by the Companies in future periods for unvested PBRS outstanding as of September 30, 2006 is $4 million (including $3 million for Con Edison of New York).~~

For a description of the Non-Officer Director Deferred Compensation plan, reference is made to Note N to the financial statements in Item 8 of the Form 10-K. Restricted stock units issued under the directors’ deferred compensation plan are considered “equity awards,” because they may only be settled in shares. Directors immediately vest in units issued to them. The fair value of the units is determined using the closing price of Con Edison’s common stock on the business day immediately preceding the date of issue. In the three and nine months ended September 30, 2006, approximately 2,384 and 23,196 units were issued, respectively.

For a description of the Stock Purchase Plan, reference is made to Note N to the financial statements in Item 8 of the Form 10-K. Participants in the plan immediately vest in shares purchased by them under the plan. The fair value of the shares of Con Edison common stock purchased under the plan was calculated using the average of the high and low composite sale prices at which shares were traded at the New York Stock Exchange on the trading day immediately preceding such purchase dates. In the three ~~and nine~~ months ended ~~September 30,~~March 31, 2007 and 2006, ~~127,529~~149,397 shares and ~~439,646~~149,584 shares were purchased under the Stock Purchase Plan at a weighted average price of ~~$44.62~~$48.50 and ~~$44.94~~$46.17 per share, respectively.

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

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


	For the Three Months Ended September 30,																					For the Three Months Ended March 31,
	Operating Revenues					Inter-segment revenues						Depreciation and amortization				Operating Income						Operating Revenues						Inter-segment revenues						Depreciation and amortization				Operating Income
(Millions of Dollars)	2006			2005		2006			2005			2006		2005		2006			2005			2007			2006			2007			2006			2007		2006		2007			2006
Con Edison of New York
Electric	$	2,273		$	2,301	$	2		$	2		$	104	$	98	$	314		$	363		$	1,643		$	1,633		$	3		$	2		$	109	$	101	$	173		$	137
Gas		185			209		1			1			20		19		7			3			735			737			1			1			21		20		112			98
Steam		104			111		18			19			12		12		—			6			295			275			18			19			15		12		61			62
Consolidation adjustments		—			—		(21	)		(22	)		—		—		—			—			—			—			(22	)		(22	)		—		—		—			—
Total Con Edison of New York	$	2,562		$	2,621	$	—		$	—		$	136	$	129	$	321		$	372		$	2,673		$	2,645		$	—		$	—		$	145	$	133	$	346		$	297
O&R
Electric	$	205		$	201	$	—		$	—		$	7	$	7	$	25		$	25		$	144		$	126		$	—		$	—		$	6	$	6	$	10		$	8
Gas		26			23		—			—			2		2		(2	)		(2	)		113			106			—			—			3		3		16			10
Total O&R	$	231		$	224	$	—		$	—		$	9	$	9	$	23		$	23		$	257		$	232		$	—		$	—		$	9	$	9	$	26		$	18
Competitive energy businesses	$	661		$	490	$	11		$	2		$	10	$	9	$	29		$	2		$	489		$	456		$	13		$	16		$	10	$	9	$	14		$	(10	)
Other*		(13	)		2		(11	)		(2	)		—		—		2			—			(1	)		(16	)		(13	)		(16	)		—		—		(2	)		—
Total Con Edison	$	3,441		$	3,337	$	—		$	—		$	155	$	147	$	375		$	397		$	3,418		$	3,317		$	—		$	—		$	164	$	151	$	384		$	305

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

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

Con Edison’s subsidiaries hedge market price fluctuations associated with physical purchases and sales of electricity, natural gas, and steam by using derivative instruments including futures, forwards, basis swaps, options, transmission congestion contracts and financial transmission rights contracts. The fair values of these hedges at ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005~~2006 were as follows:


	Con Edison					Con Edison of New York					Con Edison						Con Edison of New York
(Millions of Dollars)	2006			2005		2006			2005		2007			2006			2007			2006
Fair value of net assets/(liabilities)	$	(371	)	$	280	$	(214	)	$	223
Fair value of net assets											$	(79	)	$	(319	)	$	(40	)	$	(206	)

The Companies are exposed to credit risk related to transactions entered into primarily for the various energy supply and hedging activities by the Utilities and the competitive energy businesses. The Companies use credit policies to manage this risk, including an established credit approval process, monitoring of counterparty limits, netting provisions within agreements, ~~and~~ collateral or prepayment ~~arrangements.~~arrangements, credit insurance and credit default swaps.

Con Edison and Con Edison of New York had ~~$367~~$193 million and ~~$71~~$67 million credit exposure in connection with energy supply and hedging activities, net of collateral and reserves, at ~~September 30, 2006,~~March 31, 2007, respectively. Con Edison’s net credit exposure consisted of ~~$235~~$84 million with investment-grade counterparties (a portion of which is insured through credit insurance and ~~$132~~hedged with credit default swaps), $104 million ~~primarily~~ with commodity exchange ~~brokers.~~brokers and $5 million with entities which lacked ratings or whose ratings were not investment grade. Con Edison of New York’s net credit exposure was primarily with commodity exchange brokers.

Con Edison’s subsidiaries, primarily the competitive energy businesses, designate a portion of derivative instruments as cash flow hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging ~~Activities.~~Activities” (SFAS No. 133). Under cash flow hedge accounting, to the extent a hedge is determined to be “effective,” the unrealized gain or loss on the hedge is recorded in OCI and reclassified to earnings at the time the underlying transaction is completed. A gain or loss relating to any portion of the hedge determined to be “ineffective” is recognized in earnings in the period in which such determination is made.

The following table presents selected information related to these cash flow hedges included in accumulated OCI at ~~September 30, 2006:~~March 31, 2007:

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

The actual amounts that will be reclassified to earnings may vary from the expected amounts presented above as a result of changes in market prices. The effect of reclassification from accumulated OCI to earnings will generally be offset by the recognition of the hedged transaction in earnings.

The unrealized net gains and losses relating to the hedge ineffectiveness of these cash flow hedges that were recognized in net earnings for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~ were immaterial to the results of operations of the Companies for those periods.

The Companies enter into certain derivative instruments that do not qualify or are not designated as hedges under SFAS No. 133. However, management believes these instruments represent economic hedges that mitigate exposure to fluctuations in commodity prices. The Utilities are permitted by their respective regulators to reflect in rates all reasonably incurred gains and losses on these instruments. See “Recoverable Energy Costs” in Note A to the financial statements in Item 8 of the Form 10-K. Con Edison’s competitive energy businesses record unrealized gains and losses on these derivative contracts in earnings in the reporting period in which they occur. Generally, the collateral requirements associated with, and settlement of, derivative transactions are included in net cash flows from operating activities in the Companies’ consolidated statement of cash flows. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2007 and 2006, Con Edison recorded in non-utility operating revenues unrealized pre-tax losses ~~of $8~~amounting to $16 million and ~~$67~~$51 million, respectively. These losses reflect primarily lower prices on natural gas contracts employed as economic hedges used to support wholesale and retail obligations of the competitive energy businesses that did not qualify for cash flow hedge accounting. For the three and nine months ended September 30, 2005, Con Edison recorded in non-utility operating revenues unrealized pre-tax losses of $22 million and $23 million, respectively. These losses were due primarily to the forward market price of electricity sold by the competitive energy businesses increasing more than the forward market price of fuel purchased by the competitive energy businesses.

Con Edison’s subsidiaries use interest rate swaps to manage interest rate exposure associated with debt. The fair values of these interest rate swaps at ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005~~2006 were as follows:

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

Con Edison of New York’s swap (related to its $225 million of Series 2001A tax-exempt debt) is designated as a fair value hedge, which qualifies for “short-cut” hedge accounting under SFAS No. 133. Under this method, changes in fair value of the swap are recorded directly against the carrying value of the hedged bonds and have no impact on earnings.

Con Edison ~~Development~~Development’s and O~~&R have entered into interest rate~~&R’s swaps ~~that~~ are designated as cash flow hedges under SFAS No. 133. Any gain or loss on the hedges is recorded in OCI and reclassified to interest expense and included in earnings during the periods in which the hedged interest payments occur. See “Interest Rate Hedging” in Note PO to the financial statements in Item 8 of the Form 10-K for the contractual components of the interest rate swaps accounted for as cash flow hedges.

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

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and ~~Note L~~Financial Liabilities – including an amendment of FASB Statement No. 115.” This Statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The guidance in this Statement becomes effective for fiscal periods beginning after November 15, 2007. The Companies are currently evaluating the impact of this Statement on their financial ~~statements in Part I, Item 1~~position, results of ~~the First Quarter Form 10-Q~~operations and ~~Second Quarter Form 10-Q.~~liquidity.

In September 2006, the FASB issued ~~FASB Staff Position (“FSP”) No. AUG AIR-1,~~Emerging Issues Task Force (EITF) Issue 06-4, “Accounting for ~~Planned Major Maintenance Activities.~~Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split Dollar Life Insurance Arrangements.” This ~~FSP prohibits the use of the accrual-in-advance method of accounting~~Issue requires employers to record a liability for ~~planned major maintenance activities.~~future benefits for endorsement split-dollar life insurance arrangements that provide a postretirement benefit to an employee. The guidance in this ~~FSP~~EITF becomes effective ~~in the first~~for fiscal ~~year~~periods beginning after December 15, ~~2006. Neither Con Edison nor Con Edison of New York expects~~2007. The Companies are currently evaluating the ~~implementation~~impact of this ~~FSP to have a material effect~~Issue on ~~its~~their financial position, results of operations orand liquidity.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value and expands the disclosures about fair value measurements. It applies to other accounting pronouncements that require fair value measurements and, accordingly, does not require any new fair value measurements. The guidance in this Statement becomes effective for financial statements issued for fiscal years beginning after November 15, 2007. The Companies are currently evaluating the impact of this Statement on their financial position, results of operations and liquidity.

In September 2006, the FASB issued FASB Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Benefits – an amendment of FASB Statements No. 87, 88, 106 and 123(R).” This Statement requires an employer that sponsors one or more defined benefit

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

pension or other postretirement plans to recognize an asset or liability for the overfunded or underfunded status of the plan. For a pension plan, the asset or liability is the difference between the fair value of the plan’s assets and the projected benefit obligation. For any other postretirement benefit plan, the asset or liability is the difference between the fair value of the plan’s assets and the accumulated postretirement benefit obligation. Employers must recognize all unrecognized prior service costs and credits and unrecognized actuarial gains and losses in accumulated other comprehensive income, net of tax. Such amounts would be adjusted as they are subsequently recognized as components of net periodic benefit cost or income pursuant to the current recognition and amortization provisions of FASB Statements No. 87, “Employers’ Accounting for Pensions,” and No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” For a description of the Companies’ pension plan and other postretirement benefit plans, see Notes E and F to the financial statements in Item 8 of the Form 10-K. In general, under the Utilities’ rate plans, the difference between expenses recognized under these accounting standards and the rate allowance is deferred. The Utilities will record a regulatory asset for the amount that would otherwise have been charged to other comprehensive income. The guidance in this statement becomes effective for financial statements issued for fiscal years ending after December 15, 2006. If this Statement had been effective as of December 31, 2005, the Companies would have accrued an additional liability of $1.0 billion for pension and other postretirement benefits, eliminated the prepaid pension asset of $1.5 billion, and recorded a regulatory asset of $2.5 billion.

In July 2006, the FASB issued FSP No. FAS 13-2, “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction,” which becomes effective for fiscal years beginning after December 15, 2006. This FSP requires the expected timing of income tax cash flows generated by Con Edison’s LILO transactions to be reviewed at least annually. If the expected timing of the cash flows is revised, the rate of return and the allocation of income would be recalculated from the inception of the LILO transactions, and the company would be required to recalculate the accounting effect of the LILO transactions, which would result in a charge to earnings that could have a material adverse effect on the company’s results of operations. See Note H.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109.” This interpretation clarifies the accounting for uncertain tax positions in accordance with FASB Statement No. 109 and becomes effective for fiscal years beginning after December 15, 2006. Under the interpretation, an enterprise would not be allowed to recognize, in its financial statements, the benefit of a tax position unless that position is more likely than not to be sustained upon examination, by taxing authorities including resolution of any related appeals and litigation processes, based solely on the technical merits of the position. The IRS has completed its audits of the Companies’ federal income tax returns through 1997. The Companies’ federal income tax returns

N~~OTES~~TO~~THE~~ F~~INANCIAL~~ S~~TATEMENTS~~ (U~~NAUDITED) —CONTINUED~~

for subsequent years, which the IRS is reviewing, reflect certain tax positions with which the IRS does not or may not agree, including tax positions with respect to Con Edison’s leveraged lease transactions and the deduction of certain construction related costs. See Note H. The Companies are continuing to evaluate the interpretation; however, it is not expected to have a material impact on their financial position, results of operations and liquidity.

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

In March 2006, Con Edison completed the sale of CEC to RCN and received approximately $39 million in cash, subject to certain adjustments. The sale resulted in a loss from discontinued operations of approximately $1 million for the nine months ended September 30, 2006.


ITEM 2.		MANAGEMENT’S DISCUSSIONAND ANALYSISOF FINANCIAL CONDITIONAND RESULTSOF OPERATIONS (COMBINEDFOR CON EDISONAND CON EDISONOF NEW YORK)

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

This MD&A should be read in conjunction with the ~~Third~~First Quarter Financial Statements and the notes thereto and the MD&A in Item 7 of the Companies’ combined Annual Report on Form 10-K for the year ended December 31, ~~2005~~2006 (File Nos. 1-14514 and 1-1217, the Form 10-K) and the MD&A in Part I, Item 2 of their combined Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2006 and June 30, 2006 (File Nos. 1-14514 and 1-1217, the First Quarter Form 10-Q and the Second Quarter Form 10-Q, respectively).

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

Con Edison’s principal business operations are those of its utility companies, Con Edison of New York and Orange and Rockland Utilities, Inc. (O&R), together known as the “Utilities.” Con Edison also has competitive energy businesses (see “Competitive Energy Businesses,” below). Certain financial data of Con Edison’s businesses is presented below:


	Three Months Ended September 30, 2006										Nine Months Ended September 30, 2006										At September 30, 2006				Three months ended March 31, 2007										At March 31, 2007
(Millions of Dollars)	Operating Revenues					Net Income					Operating Revenues					Net Income					Assets				Operating Revenues					Net Income					Assets
Con Edison of New York	$	2,562		74	%	$	199		86	%	$	7,172		77	%	$	517		96	%	$	22,272	85	%	$	2,673		78	%	$	236		92	%	$	23,033	86	%
O&R		231		7	%		17		7	%		621		7	%		32		6	%		1,577	6	%		257		8	%		19		8	%		1,727	7	%
Total Utilities		2,793		81	%		216		93	%		7,793		84	%		549		102	%		23,849	91	%		2,930		86	%		255		100	%		24,760	93	%
Con Edison Development (a)		325		10	%		23		10	%		723		8	%		16		3	%		1,267	5	%		176		5	%		(11	)	(4)	%		1,256	5	%
Con Edison Energy (a)		9		—	%		1		—	%		30		—	%		(1	)	—	%		413	2	%		13		—	%		1		—	%		170	1	%
Con Edison Solutions (a)		338		10	%		(3	)	(1	)%		860		9	%		(1	)	—	%		59	—	%		313		9	%		16		6	%		155	—	%
Other (b)		(24	)	(1	)%		(6	)	(2	)%		(92	)	(1	)%		(26	)	(5	)%		553	2	%		(14	)	—	%		(5	)	(2)	%		362	1	%
Total continuing operations		3,441		100	%		231		100	%		9,314		100	%		537		100	%		26,141	100	%
Discontinued operations (c)		—		—	%		—		—	%		—		—	%		(1	)	—	%		—	—	%
Total Con Edison	$	3,441		100	%	$	231		100	%	$	9,314		100	%	$	536		100	%	$	26,141	100	%	$	3,418		100	%	$	256		100	%	$	26,703	100	%

Con Edison’s net income for common stock for the three months ended ~~September 30, 2006~~March 31, 2007 was ~~$231~~$256 million or ~~$0.93~~$0.99 a share compared with earnings of ~~$285~~$181 million or ~~$1.17~~$0.74 a share for the three months ended September 30, 2005. Net income for common stock for the nine months ended September 30, 2006 was $536 million or $2.17 a share compared with earnings of $581 million or $2.39 a share for the nine months ended September 30, 2005.March 31, 2006. See “Results of Operations – Summary,” below.

Con Edison of New York provides electric service to approximately 3.2 million customers and gas service to approximately 1.1 million customers in New York City and Westchester County. The company also provides steam service in parts of Manhattan. O&R, along with its regulated utility businesses, provides electric service to approximately 0.3 million customers in southeastern New York and adjacent areas of northern New Jersey and eastern Pennsylvania and gas service to over 0.1 million customers in southeastern New York and adjacent areas of eastern Pennsylvania.

The Utilities are primarily “wires and pipes” energy delivery businesses that deliver energy in their service areas subject to extensive federal and state regulation. The Utilities’ customers buy this energy from the Utilities, or from other suppliers through the Utilities’ retail access programs. The Utilities purchase substantially all of the energy they sell to customers pursuant to firm contracts or through wholesale energy markets, and recover (generally on a current basis) the cost of the energy sold, pursuant to approved rate plans.

Con Edison anticipates that the Utilities will continue to provide substantially all of its earnings over the next few years. The Utilities’ earnings will depend on various factors including demand for utility service and the Utilities’ ability to charge rates for their services that reflect the costs of service, including a return on invested equity capital. The factors affecting demand for utility service include growth of customer demand, weather, market prices for energy and economic conditions. Demand for electric service peaks during the summer air conditioning season. Demand for gas and steam service peaks during the winter heating season.

Because the energy delivery infrastructure must be adequate to meet demand in peak periods with a high level of reliability, the Utilities’ capital investment plans reflect in great part ~~the~~past actual ~~growth in~~ electric peak demand adjusted to summer design weather conditions, as well as forecast growth in peak usage. The Utilities ~~had estimated~~estimate that, under design weather conditions, the ~~2006~~2007 peak electric demand in their respective service areas ~~would~~will be ~~13,400~~13,575 MW for Con Edison of New York and ~~1,570~~1,610 MW for O&R. ~~On August 2, 2006,~~The average annual growth rate of the peak electric demand ~~served by~~over the ~~Utilities reached new record peaks: 13,141 MW~~next five years at design conditions is estimated to be approximately 1.5 percent for Con Edison of New York and ~~1,617 MW~~2.3 percent for O&R. ~~Also, on August 2, 2006,~~Design conditions do not include the ~~New York Independent System Operator invoked~~potential impact of any demand reduction programs invoked only in specific circumstances. The Companies anticipate an ongoing need for ~~Con Edison of New York customers. Without these reduction programs, the actual peak demand for Con Edison of New York would have been higher.~~substantial

The average annual growth rate of the peak electric demand over the next five years at design conditions is estimated to be approximately 1.5 percent for Con Edison of New York and 2.7 percent for O&R. Design conditions do not include the potential impact of those demand reduction programs that are invoked only in specific circumstances. The Companies anticipate an ongoing need for substantial capital investment in order to meet this growth in peak usage with the high level of reliability that they currently provide (see “Liquidity and Capital Resources – Capital Requirements,” below).

The Utilities have rate plans approved by state utility regulators that cover the rates they can charge their customers. Con Edison of New York’s electric, gas and steam rate plans are effective through March 31, 2008, September 30, 2007 and September 30, 2008, respectively. ~~On November 2, 2006, the company~~Con Edison of New York has filed a request ~~with~~for a new gas rate plan to be effective October 1, 2007, and in May 2007 filed a request for a new electric rate plan to be effective April 1, 2008. O&R��s rate plans for its gas service in New York and its subsidiary’s electric service in New Jersey extend through October 31, 2009 and March 31, 2010, respectively. O&R’s plan for electric service in New York expired on October 31, 2006, and in March 2007 the New York State Public Service Commission (PSC) ~~for~~ordered that O&R’s rates be made temporary and subject to refund until a proceeding to set new ~~gas~~ rates to be effective October 1, 2007. O&R will continue to charge its electric service customers in New York the tariff rates prescribed by the rate plan that ended on October 31, 2006. O&R’s rate plan for its gas service in New York extends through October 31, 2009. In June 2006, O&R’s New Jersey subsidiary, Rockland Electric Company, filed a request with the New Jersey Board of Public Utilities for new electric rates, to be effective April 1, 2007.is concluded. Pursuant to the Utilities’ rate plans, charges to customers generally may not be changed during the respective terms of the rate plans other than for recovery of the costs incurred for energy supply, for specified increases provided in the rate plans and for limited other exceptions. The New York rate plans generally require the Utilities to share with customers earnings in excess of specified rates of return on common equity capital. Changes in delivery volumes are reflected in operating income (except to the extent that weather-normalization provisions apply to the gas businesses, and subject to provisions in the rate plans for sharing above-target earnings with customers). See “Regulatory ~~Matters,”~~Matters” below and Note B to the ~~Third~~First Quarter Financial Statements.

Accounting rules and regulations for public utilities include Statement of Financial Accounting Standards ~~(SFAS)~~ No. 71, “Accounting for the Effects of Certain Types of Regulation,” pursuant to which the economic effects of rate regulation are reflected in financial statements. See “Application of Critical Accounting Policies,” below.

Con Edison’s competitive energy businesses participate in segments of the electricity industry that are ~~subject to different risks~~less comprehensively regulated than the Utilities. ~~See “Risk Factors,” below.~~These segments include the operation of electric generation facilities, trading of electricity and fuel, sales of electricity to wholesale and retail customers and sales of certain energy-related goods and services. At ~~September 30, 2006,~~March 31, 2007, Con Edison’s equity investment in its competitive energy businesses was ~~$529~~$585 million and their assets amounted to ~~$1,739 million.~~$1.6 billion.

Consolidated Edison Solutions, Inc. (Con Edison Solutions) sells electricity directly to ~~some~~ delivery-service customers of ~~the Utilities and other~~ utilities primarily in the Northeast and Mid-Atlantic regions ~~and also offers energy-related services. Con Edison Solutions does not sell electricity to~~(including some of the

Utilities’ customers) and also offers energy-related services. Con Edison Solutions does not sell electricity to the Utilities. The company sold approximately 82.6 million ~~megawatt hours~~MWHs of electricity to customers over the ~~nine-month~~three-month period ended ~~September 30, 2006.~~March 31, 2007.

Consolidated Edison Development, Inc. (Con Edison Development) owns, ~~and~~leases or operates generating plants and participates in other infrastructure projects. At ~~September 30, 2006,~~March 31, 2007, the company owned or leased the equivalent of 1,668 MWMWs of capacity in electric generating facilities, of which 203 ~~MW is~~MWs are sold under long-term purchase power agreements and the balance is sold on the wholesale electricity markets. In addition, the company ~~participates in~~sells electricity at wholesale ~~load transactions in which electricity~~to utilities. Con Edison is ~~sold~~considering strategic alternatives with respect to ~~utilities.~~the electric generation facilities of its competitive energy businesses.

Consolidated Edison Energy, Inc. (Con Edison Energy) ~~provides~~procures electric energy and capacity tofor Con Edison Solutions and ~~others~~fuel for Con Edison Development and ~~markets~~others. It sells the ~~output of~~electric capacity and energy produced by plants owned, leased or operated by Con Edison ~~Development.~~Development and others. The company also provides energy risk management services to Con Edison Solutions and Con Edison Development, ~~and~~ offers these services to others and manages wholesale ~~load~~supply transactions for Con Edison Development.

The competitive energy businesses ~~intend to focus~~are focusing on increasing their customer base, gross margins and the value of their existing assets. See “Liquidity and Capital Resources – Capital Requirements” and “Capital Resources,” below.

~~In March 2006, Con Edison completed the sale~~Results of ~~Con Edison Communications, LLC (Con Edison Communications) to RCN Corporation. See Note M to the Third Quarter Financial Statements.~~

Con Edison’s earnings per share for the three months ended ~~September 30, 2006~~March 31, 2007 were ~~$0.93 ($0.92 on a diluted basis)~~$0.99 (basic and diluted) compared with ~~$1.17 ($1.16 on a diluted basis)~~$0.74 (basic and diluted) for the ~~2005 period. Con Edison’s earnings per share for the nine months ended September 30,~~ 2006 ~~were $2.17 ($2.16 on a diluted basis) compared with $2.39 ($2.38 on a diluted basis) for the 2005~~ period.

Net income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~ was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
(Millions of Dollars)	2006			2005			2006			2005			2007			2006
Con Edison of New York	$	199		$	282		$	517		$	573		$	236		$	202
O&R		17			18			32			41			19			12
Competitive energy businesses (a)		21			(8	)		14			(13	)		6			(19	)
Other (b)		(6	)		(5	)		(26	)		(15	)		(5	)		(15	)
Total continuing operations		231			287			537			586			256			180
Discontinued operations (c)		—			(2	)		(1	)		(5	)		—			1
CON EDISON	$	231		$	285		$	536		$	581		$	256		$	181

The Companies’ results of operations for the three ~~and nine~~ months ended ~~September 30, 2006,~~March 31, 2007, as compared with the ~~2005 periods,~~2006 period, reflect ~~milder~~colder weather and sales growth in ~~2006,~~2007, the ~~Companies’~~Utilities’ rate ~~plans (including~~agreements (which are designed to recover increased operations and maintenance expense, depreciation and property taxes, and interest charges) and the electric rate plan that took effect in April 2005), expenditures related to the power outages discussed under “Power Outage Proceedings” in Note H to the Third Quarter Financial Statements and increased interest expense. Con Edison’s results of ~~operations also reflect~~ the competitive energy ~~businesses’ results~~businesses including net mark-to-market ~~losses.~~effects. The following table presents the estimated effect on earnings per share and net income for the three ~~and nine~~ months ended ~~September 30, 2006~~March 31, 2007 as compared with the ~~2005 periods,~~2006 period, resulting from these and other major factors:

See “Results of ~~Operations,”~~Operations” below for further discussion and analysis of results of operations.

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 factors include those described under “Risk Factors” in Item 7 of the Form 10-K.

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 “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 such as those discussed under “Risk Factors” in Item 7 of the Form 10-K.

The Companies’ financial statements reflect the application of their accounting policies, which conform to accounting principles generally accepted in the United States of America. The Companies’ critical accounting policies include industry-specific accounting applicable to regulated public utilities and accounting for pensions and other postretirement benefits, contingencies, long-lived assets, derivative instruments, goodwill and leases. See “Application of Critical Accounting Policies” in Item 7 of the Form ~~10-K and Note L to the Third Quarter Financial Statements.~~10-K.

The Companies’ liquidity reflects cash flows from operating, investing and financing activities, as shown on their respective consolidated statement of cash flows and as discussed below. See “Liquidity and Capital Resources” in Item 7 of the Form 10-K. Changes in the Companies’ cash and temporary cash investments resulting from operating, investing and financing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~ are summarized as follows:


	Con Edison									Con Edison of New York									Con Edison									Con Edison of New York
(Millions of Dollars)	2006			2005			Variance			2006			2005			Variance			2007			2006			Variance			2007			2006			Variance
Operating activities	$	646		$	615		$	31		$	608		$	549		$	59		$	478		$	590		$	(112	)	$	302		$	454		$	(152	)
Investing activities		(1,339	)		(661	)		(678	)		(1,294	)		(590	)		(704	)		(458	)		(328	)		(130	)		(432	)		(339	)		(93	)
Financing activities		846			139			707			822			113			709			43			(166	)		209			127			(61	)		188
Net change	$	153		$	93		$	60		$	136		$	72		$	64			63			96			(33	)		(3	)		54			(57	)
Balance at beginning of period		81			26			55			61			10			51			94			81			13			47			61			(14	)
Balance at end of period	$	234		$	119		$	115		$	197		$	82		$	115		$	157		$	177		$	(20	)	$	44		$	115		$	(71	)

The Utilities’ cash flows from operating activities reflect principally their energy sales and deliveries and cost of operations. The volume of energy sales and deliveries is dependent primarily on factors external to the Utilities, such as weather and economic conditions. The prices at which the Utilities provide energy to their customers are determined in accordance with their rate ~~plans.~~agreements. In general, changes in the Utilities’ cost of purchased power, fuel and gas may affect the timing of cash flows but not net income because the costs are recovered in accordance with rate ~~plans.~~agreements. See “Recoverable Energy Costs” in Note A to the financial statements in Item 8 of the Form 10-K.

~~Net cash flows from operating activities for the nine months ended September 30, 2006 for Con Edison and Con Edison of New York reflect net income and changes in certain assets and liabilities.~~

Net income is the result of cash and non-cash (or accrual) transactions. Only cash transactions affect the Companies’ cash flows from operating activities. Principal non-cash charges include depreciation and deferred income tax expense. For ~~Con Edison of New York,~~the Companies, principal non-cash credits also ~~include~~included prepaid pension costs and amortizations of certain net regulatory liabilities, including the tax effects, in accordance with ~~its~~their rate plans. See ~~Note B~~“Application of Critical Accounting Policies – Accounting for Pensions and Other Postretirement Benefits” in Item 7 of the Form 10-K and Notes D and E to the ~~Third~~First Quarter Financial Statements.

Net cash flows from operating activities for the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 for Con Edison and Con Edison of New York were ~~$31~~$112 million and ~~$59~~$152 million ~~higher,~~lower, respectively, than in the ~~2005~~2006 period. The ~~increase~~decrease in net cash flows reflects the ~~timing~~$385 million payment of Con Edison of New York’s New York City property ~~tax payments and higher energy prices~~taxes in the ~~last~~first quarter of ~~2005.~~2007 with no comparable payment made in the 2006 period. The company achieved a 1.5 percent reduction in its City property taxes for the fiscal year ending June 30, 2006 by prepaying the annual tax amount due on June 30, 2005, $734 million, instead of paying semi-annual installments on their due dates (July 1, 2005 and January 1, 2006). ~~For~~This decrease was offset in part by increased deferred tax benefits and increased net income.

The change in net cash flows also reflects the ~~fiscal year ending June 30, 2007, the company made a semi-annual installment on July 1, 2006. The higher 2005~~timing of payments for and recovery of energy ~~prices resulted in higher~~costs. This timing issue is reflected within changes to accounts receivable ~~net of allowance for uncollectibles,~~– customers, recoverable energy costs and accounts payable atbalances. In addition, in March 2007, in accordance with the ~~beginning of the 2006 period and increased collections of receivables from customers and accounts payable payments in the 2006 period.~~

~~Net cash flows used in investing activities for Con Edison and~~2005 Electric Rate Plan, Con Edison of New York were $678 million and $704 million higher, respectively, for the nine months ended September 30, 2006 than in the 2005 period. The increases for the Companies reflect primarily increased utility construction expenditures, offset ~~by net sale proceeds received in 2006 of $60 million from the sale of the West 24~~^th ~~Street property compared with $534~~$265 million of ~~net sale proceeds received~~regulatory liabilities against an equal amount of regulatory assets. See Note B to the First Quarter Financial Statements.

For Con Edison, the decrease in ~~2005 for~~other receivables reflects primarily the expiration of certain ~~properties~~wholesale load contracts and receivables associated with hedging activities at the competitive energy businesses.

~~located on First Avenue~~Cash Flows Used in ~~Manhattan.~~Investing Activities

Net cash flows used in investing activities for Con Edison and Con Edison of New York were $130 million and $93 million higher, respectively, for the three months ended March 31, 2007 than in the 2006 period. The increases for the Companies reflect primarily increased utility construction expenditures and lower net proceeds from the sale of certain properties ($30 million in 2007, as compared with $60 million in 2006). For Con Edison, the ~~change was offset in part by~~increase also reflects $39 million of net proceeds from the completion of the sale of Con Edison Communications that offset cash flows used in ~~March~~investing activities in 2006.

Net cash flows from financing activities for Con Edison and Con Edison of New York increased ~~$707~~$209 million and ~~$709~~$188 million in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period, respectively.

Cash flows from financing activities of the Companies for the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 as compared with the ~~2005~~2006 period reflects ~~a reduction~~an increase in commercial paper balances (included on the consolidated balance sheets as “Notes payable”). See Note DC to the ~~Third~~First Quarter Financial Statements.

Con Edison’s cash flows from financing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2007 and 2006 ~~as compared with the 2005 period~~ also reflect the issuance ~~through a public offering~~ of ~~9.7 million~~ Con Edison common shares in the 2006 period, resulting in net proceeds of $447 million which Con Edison invested in Con Edison of New York. Con Edison’s cash flows from financing activities also reflect common shares issued underthrough its dividend reinvestment and employee stock plans ~~(2006: 1,581,526~~(2007: 1.3 million shares for ~~$38~~$54 million, ~~2005: 2,344,711~~2006: 456,347 shares for ~~$70~~$10 million). In addition, as a result of the stock plan issuances, cash used to pay common stock dividends was reduced by ~~$31~~$10 million in 2007 and 2006, ~~and $29 million in 2005.~~respectively.

~~Net cash flows from financing activities during the nine months ended September 30, 2006 and 2005 also reflect the following Con Edison of New York transactions:~~

M~~ANAGEMENT~~’S D~~ISCUSSIONAND~~ A~~NALYSIS~~OF F~~INANCIAL~~ C~~ONDITION~~

~~AND~~ R~~ESULTS~~OF O~~PERATIONS~~ (C~~OMBINEDFOR~~ CON E~~DISONAND~~ CON E~~DISON~~OF

Con Edison’s net cash flows from financing activities also include O&R’s financings. In February 2007, O&R’s New Jersey subsidiary redeemed at maturity $20 million 7.125% First Mortgage Bonds.

Con Edison’s net cash flows from financing activities for the three months ended March ~~2005, O&R issued $40~~31, 2006 include the issuance of $400 million ~~5.30% 10-year debentures. In October 2006, O&R issued $75 million 5.45% 10-year debentures.~~5.85% 30-year debentures, the proceeds of which were used for general corporate purposes.

Common stock issuances and external borrowings are sources of liquidity that could be affected by changes in credit ratings, financial performance and capital market ~~conditions and credit ratings.~~conditions. For information about the Companies’ credit ratings and certain financial ratios, see “Capital Resources,” below.

~~The following table shows changes in assets and liabilities at September 30, 2006, compared with December 31, 2005, that have not impacted the Companies’ cash flows.~~

In the context of decreasing energy market prices in the third quarter of 2006, the Companies’ policies for managing their energy purchases resulted in a decrease in the fair value of derivative assets (included in the consolidated balance sheets as a current asset) and an increase in the fair value of derivative liabilities at September 30, 2006 as compared with year-end 2005. For the Utilities, mark-to-market activity had no effect on net income as the amounts were deferred as regulatory assets/liabilities (deferred derivative losses/gains). In accordance with provisions approved by state regulators, the Utilities generally recover from customers their energy supply costs, net of gains and losses on derivative instruments used to

The following table shows changes in assets and liabilities at March 31, 2007, compared with December 31, 2006, that have not impacted the Companies’ consolidated statements of cash flows.

For information on the adoption of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109”, see Note H to the First Quarter Financial Statements. For Con Edison, the increase in long-term debt due within a year reflects the anticipated redemption in May 2007 of $325 million of 7.25% Con Edison Public Income Notes (PINES). Funding for the redemption of the PINES is expected to come from the issuance of commercial paper and the use of available cash balances.

In the context of increasing energy market prices in the first quarter of 2007, the Companies’ policies for managing their energy purchases resulted in an increase in the fair value of derivative assets for Con Edison of New York (included in the consolidated balance sheets as a current asset) and a decrease in the fair value of derivative liabilities at March 31, 2007 as compared with year-end 2006. For the Utilities, mark-to-market activity had no effect on net income as the amounts were deferred as regulatory assets/liabilities (deferred derivative losses/gains). In accordance with provisions approved by state regulators, the Utilities generally recover from customers their energy supply costs, net of gains and losses on derivative instruments used to hedge energy purchases. The mark-to-market accounting for Con Edison’s competitive energy businesses resulted in a net ~~increase~~decrease in the fair value of derivative assets and liabilities. The decline in the fair value of derivative assets reflects increasing capacity prices and the timing of entering into new positions, which was offset in part by the maturity of certain contract positions and the impact of increasing energy prices. The competitive energy businesses record mark-to-market gains and losses on derivative instruments in earnings in the reporting period in which such changes occur for contracts that do not meet the requirements of cash flow hedge accounting or for which such accounting has not been elected. For the Companies, changes in fair value of derivative

instruments may lead to collateral payments made to or received from counterparties or brokers that are reflected in other current assets and other current liabilities.

~~Reference is made~~At March 31, 2007, there was no material change in the Companies’ capital resources compared to those disclosed under “Capital Resources” in Item 7 of the Form 10-K, and in Part I, Item 2 of the First Quarter Form 10-Q and the Second Quarter Form 10-Q. Con Edison is in the process of finalizing its financing plans for 2007, and currently expects to finance its capital requirements primarily through the sale of securities and the issuance in 2007 of a material amount of Con Edison common shares in addition to issuances under its dividend reinvestment and employee stock plans and from dividends it receives from its subsidiaries. Con Edison’s ability to make payments on its external borrowings and dividends on its common shares is also dependent on its receipt of dividends from its subsidiaries or proceeds from the sale of its securities or its interests in its subsidiaries. The Utilities expect to finance their operations, capital requirements and payment of dividends to Con Edison from internally generated funds, contributions of equity capital from Con Edison and external borrowings.other than as described below.

For each of the Companies, the ratio of earnings to fixed charges (Securities and Exchange Commission basis) for the ~~nine~~three months ended ~~September 30, 2006,~~March 31, 2007, the 12 months ended December 31, ~~2005~~2006 and the ~~nine~~three months ended ~~September 30, 2005~~March 31, 2006 was:


	Earnings to Fixed Charges (Times)			Earnings to Fixed Charges (Times)
	For the Nine Months Ended September 30, 2006	For the Twelve Months Ended December 31, 2005	For the Nine Months Ended September 30, 2005	For the Three Months Ended March 31, 2007	For the Twelve Months Ended December 31, 2006	For the Three Months Ended March 31, 2006
Con Edison	2.9	3.1	3.3	3.6	2.9	3.1
Con Edison of New York	3.3	3.7	4.0	4.0	3.2	4.1

For each of the Companies, the common equity ratio at ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005~~2006 was:


	Common Equity Ratio (Percent of total capitalization)		Common Equity Ratio (Percent of total capitalization)
	September 30, 2006	December 31, 2005	March 31, 2007	December 31, 2006
Con Edison	48.9	49.0	50.6	48.5
Con Edison of New York	50.3	50.7	51.0	50.0

At March 31, 2007, there was no material change in the Companies’ capital requirements compared to those discussed under “Capital Requirements” in Item 7 of the Form 10-K.

At March 31, 2007, there was no material change in the Companies’ aggregate obligations to make payments pursuant to contracts compared to those discussed under “Contractual Obligations” in Item 7 of the Form 10-K.

At March 31, 2007, there were no material changes in the Companies’ electric power requirements compared to those disclosed under “Electric Power Requirements” in Item 7 of the Form 10-K.

The commercial paper of the Companies is rated P-1, A-2 and F1, respectively, by Moody’s, S&P and Fitch. Con Edison’s unsecured debt is rated A2, A- and A, respectively, by Moody’s, S&P and Fitch. The unsecured debt of Con Edison of New York is rated A1, A and A+, respectively, by Moody’s, S&P and Fitch. The unsecured debt of O&R is rated A2, A and A+, respectively, by Moody’s, S&P and Fitch. 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.

Reference is made to “Capital Requirements” in Item 7 of the Form 10-K and in Part I, Item 2 of the First Quarter Form 10-Q and the Second Quarter Form 10-Q. The Utilities have an ongoing need for substantial capital investment in order to meet the expected growth in customer demand reliably. Con Edison of New York currently estimates that its 2006 utility construction expenditures will amount to $1,795 million. The Utilities are in the process of finalizing their capital budgets for 2007, and currently estimate that their construction expenditures in 2007 may increase by five to ten percent above the amounts estimated under “Capital Requirements” in Item 7 of the Form 10-K.

At September 30, 2006, there was no material change in the Companies’ aggregate obligations to make payments pursuant to contracts compared to those discussed under “Contractual Obligations” in Item 7 of the Form 10-K.

~~At September 30, 2006, there was no material change in the Companies’ electric power requirements compared to those discussed under “Electric Power Requirements” in Item 7 of the Form 10-K.~~

At ~~September 30, 2006,~~March 31, 2007, there were no material changes in the Companies’ regulatory matters compared to those disclosed under “Regulatory Matters” in Item 7 of the Form 10-K, “Rate and Restructuring Agreements” in Note B to the financial statements in Item 8 of the Form 10-K and ~~Note B to the financial statements included in Part 1, Item 1 of the First Quarter Form 10-Q and the Second Quarter Form 10-Q~~ other than as described in Note B to the First Quarter Financial Statements and in the following paragraphs.

In May 2007, Con Edison of New York filed a request with the PSC to increase charges for electric service by $1.2 billion. In April 2007, the PSC expanded its ongoing proceeding investigating the July 2006 Queens power outage to also consider the prudence of the company’s conduct with respect to the outage. See Note B to the First Quarter Financial Statements.

In April 2007, the Governor of New York State and the Mayor of New York City each announced proposals to, among other things, limit growth in electricity demand and increase electric supply. Proposals to reduce demand include decoupling utilities’ profits from the amount of energy used by its customers, strengthening building codes and other efficiency standards and reducing government’s energy usage. Proposals to increase supply include facilitating power plant development and promoting renewable energy technology. In April 2007, the PSC announced a plan to develop “revenue decoupling mechanisms” by requiring periodic rate adjustments to reconcile forecast and actual utility delivery service revenues. In April 2007, the PSC indicated that it will further examine long-term contracts and long-term planning for future electricity supply infrastructure. See “Con Edison of New York – Electric Operations – Electric Supply” in Item 1 of the Form 10-K.

The Companies are subject to various risks and uncertainties associated with financial and commodity markets. The most significant market risks include interest rate risk, commodity price risk, credit risk and investment risk. At March 31, 2007, there were no material changes in the Companies’ financial and commodity market risks compared to those disclosed under “Financial and Commodity Market Risks” in Item 7 of the Form 10-K, other than as described in Note K to the First Quarter Financial Statements.

For information concerning potential liabilities arising from the Companies’ material contingencies, see “Application of Critical Accounting Policies – Accounting for Contingencies” and Notes B, F, G, and H to the ~~Third~~First Quarter Financial Statements.

~~The following table summarizes certain significant provisions of the new Con Edison of New York steam and O&R gas rate plans (which are described in Note B to the Third Quarter Financial Statements).~~

The Companies are subject to various risks and uncertainties associated with financial and commodity markets. The most significant market risks include interest rate risk, commodity price risk, credit risk and investment risk. At September 30, 2006, there were no material changes in the Companies’ financial and commodity market risks compared to those disclosed under “Financial and Commodity Market Risks” in Item 7 of the Form 10-K and in Part I, Item 2 of the First Quarter Form 10-Q and the Second Quarter Form 10-Q, other than as described below and in Note K to the Third Quarter Financial Statements.

Con Edison’s commodity price risk relates primarily to the purchase and sale of electricity, gas and related derivative instruments. The Utilities and Con Edison’s competitive energy businesses have risk management strategies to mitigate their related exposures.

Con Edison estimates that, as of September 30, 2006, each 10 percent change in market prices would result in a change in fair value of $150 million for the derivative instruments used by the Utilities to hedge purchases of electricity and gas, of which $119 million is for Con Edison of New York and $31 million is for O&R. Con Edison expects that any such change in fair value would be largely offset by directionally opposite changes in the cost of the electricity and gas purchased. In accordance with provisions approved by state regulators, the Utilities generally recover from customers the costs they

M~~ANAGEMENT~~’S D~~ISCUSSIONAND~~ A~~NALYSIS~~OF F~~INANCIAL~~ C~~ONDITION~~

~~AND~~ R~~ESULTS~~OF O~~PERATIONS~~ (C~~OMBINEDFOR~~ CON E~~DISONAND~~ CON E~~DISON~~OF

incur for energy purchased for their customers, including gains and losses on certain derivative instruments used to hedge energy purchased and related costs. See “Recoverable Energy Costs” in Note A to the financial statements in Item 8 of the Form 10-K.

Con Edison’s competitive energy businesses use a value-at-risk (VaR) model to assess the market risk of their electricity and gas commodity fixed-price purchase and sales commitments, physical forward contracts and commodity derivative instruments. VaR represents the potential change in fair value of instruments or the portfolio due to changes in market factors, for a specified time period and confidence level. These businesses estimate VaR across their electricity and natural gas commodity businesses using a delta-normal variance/covariance model with a 95 percent confidence level. Since the VaR calculation involves complex methodologies and estimates and assumptions that are based on past experience, it is not necessarily indicative of future results. VaR for transactions associated with hedges on generating assets and commodity contracts, assuming a one-day holding period, for the three months ended September 30, 2006 and 2005, respectively, was as follows:

For information concerning potential liabilities arising from the Companies’ material contingencies, see “Application of Critical Accounting Policies – Accounting for Contingencies” in Item 7 of the Form 10-K and Notes G and H to the Third Quarter Financial Statements.

Results of operations reflect, among other things, the Companies’ accounting policies (see “Application of Critical Accounting Policies” in Item 7 of the Form 10-K), rate plans that cover the rates the Utilities can charge their customers (see “Regulatory Matters” in Item 7 of the Form 10-K) and demand for utility service. Demand for utility service is affected by weather, economic conditions and other factors.

The Companies’ results of operations for the three months ended March 31, 2007, as compared with the 2006 period, reflect colder weather and sales growth in 2007, the Utilities’ rate agreements (which are designed to recover increased operations and maintenance expense, depreciation and property taxes and interest charges) and the results of the competitive energy businesses including mark-to-market effects. For additional information about major factors affecting earnings, see “Results of Operations – Summary,” above.

In general, the Utilities recover on a current basis the fuel, gas purchased for resale and purchased power costs they incur in supplying energy to their full-service customers (see “Recoverable Energy Costs” in Note A and “Regulatory Matters” in Note B to the financial statements in Item 8 of the Form 10-K). Accordingly, such costs do not generally affect the Companies’ results of operations. Management uses the term “net revenues” (operating revenues less such costs) to identify changes in operating revenues that may affect

M~~ANAGEMENT~~’S D~~ISCUSSIONAND~~ A~~NALYSIS~~OF F~~INANCIAL~~ C~~ONDITION~~

~~AND~~ R~~ESULTS~~OF O~~PERATIONS~~ (C~~OMBINEDFOR~~ CON E~~DISONAND~~ CON E~~DISON~~OF

the Companies’ results of operations. Management believes that, although “net revenues” may not be a measure determined in accordance with accounting principles generally accepted in the United States of America, the measure facilitates the analysis by management and investors of the Companies’ results of operations.

Con Edison’s principal business segments are Con Edison of New York’s regulated electric, gas and steam utility activities, O&R’s regulated electric and gas utility activities and Con Edison’s competitive energy businesses. Con Edison of New York’s principal business segments are its regulated electric, gas and steam utility activities. A discussion of the results of operations by principal business segment for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~ follows. All inter-segment transactions have been eliminated. For additional business segment financial information, see Note J to the ~~Third~~First Quarter Financial Statements.

T~~HREE~~ M~~ONTHS~~ E~~NDED~~ S~~EPTEMBER~~ ~~30, 2006 COMPAREDWITH~~ T~~HREE~~ M~~ONTHS~~ E~~NDED~~ S~~EPTEMBER~~ ~~30, 2005~~

~~The Companies’ results of operations (which were discussed above under “Results of Operations – Summary”) in 2006 compared with 2005 were:~~

M~~ANAGEMENT~~’S D~~ISCUSSIONAND~~ A~~NALYSIS~~OF F~~INANCIAL~~ C~~ONDITION~~

~~AND~~ R~~ESULTS~~OF O~~PERATIONS~~ (C~~OMBINEDFOR~~ CON E~~DISONAND~~ CON E~~DISON~~OF

~~Con Edison of New York’s electric sales and deliveries, excluding off-system sales, for the three months ended September 30, 2006 compared with the 2005 period were:~~

Con Edison of New York’s electric operating revenues were $28 million lower in the three months ended September 30, 2006 as compared with the 2005 period, due primarily to a decrease in purchased power ($74 million), the impact of the milder summer weather ($51 million) and anticipated penalties for not meeting certain standards for duration and frequency of service interruption in accordance with the 2005 Electric Rate Agreement ($18 million), offset in part by an increase in recoverable fuel costs ($8 million), the electric rate plan ($43 million), sales growth ($25 million) and increased collections for demand side management programs ($26 million). Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plans. See Note B to the financial statements in Item 8 of the Form 10-K and Note B to the Third Quarter Financial Statements.

Electric sales and delivery volumes in Con Edison of New York’s service area decreased 2.4 percent in the three months ended September 30, 2006 compared with the 2005 period, primarily reflecting milder summer weather in the 2006 period compared with 2005. After adjusting for weather and billing-day variations in each period, electric sales and delivery volumes in Con Edison of New York’s service area increased 3.9 percent in the three months ended September 30, 2006 compared with the 2005 period.

Con Edison of New York’s electric purchased power costs decreased $74 million in the three months ended September 30, 2006 compared with the 2005 period reflecting a decrease in purchased volumes associated with additional customers obtaining their energy supply through competitive providers.

M~~ANAGEMENT~~’S D~~ISCUSSIONAND~~ A~~NALYSIS~~OF F~~INANCIAL~~ C~~ONDITION~~

~~AND~~ R~~ESULTS~~OF O~~PERATIONS~~ (C~~OMBINEDFOR~~ CON E~~DISONAND~~ CON E~~DISON~~OF

~~Electric fuel costs increased $8 million, reflecting higher sendout volumes from the company’s generating facilities ($12 million), offset by a decrease in unit costs ($4 million).~~

Con Edison of New York’s electric operating income decreased $50 million in the three months ended September 30, 2006 compared with the 2005 period. The decrease reflects higher operations and maintenance costs ($126 million, due primarily to higher expenses relating to power outages ($53 million), compensation for spoilage of food associated with certain of the outages ($14 million), demand side management program expenses ($26 million), uncollectible customer accounts ($4 million) and increased transmission expenses ($4 million)), taxes other than income taxes ($6 million, principally property taxes) and depreciation ($6 million), offset in part by higher net revenues ($38 million, due principally to the electric rate plan) and lower income taxes ($50 million). The increased property taxes and depreciation reflect large continuing investments in energy delivery infrastructure.

~~Con Edison of New York’s gas sales and deliveries, excluding off-system sales, in the three months ended September 30, 2006 compared with the 2005 period were:~~

Con Edison of New York’s gas operating revenues in the three months ended September 30, 2006 decreased $24 million compared with the 2005 period, reflecting primarily a decrease in recoverable gas costs ($26 million) offset in part by the gas rate plan ($4 million). Other gas operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plans. See Note B to the financial statements in Item 8 of the Form 10-K.

M~~ANAGEMENT~~’S D~~ISCUSSIONAND~~ A~~NALYSIS~~OF F~~INANCIAL~~ C~~ONDITION~~

~~AND~~ R~~ESULTS~~OF O~~PERATIONS~~ (C~~OMBINEDFOR~~ CON E~~DISONAND~~ CON E~~DISON~~OF

Con Edison of New York’s sales and transportation volumes for firm customers increased 0.8 percent in the three months ended September 30, 2006 compared with the 2005 period. After adjusting for variations in the number of billing days in each period, firm gas sales and transportation volumes in the company’s service area increased 0.9 percent in the 2006 period.

~~Con Edison of New York’s purchased gas cost decreased $26 million in the three months ended September 30, 2006 compared with the 2005 period due principally to lower unit costs.~~

Con Edison of New York’s gas operating income increased $5 million in the three months ended September 30, 2006 compared with the 2005 period, reflecting primarily higher net revenues ($2 million), lower operations and maintenance expense ($1 million) and taxes other than income taxes ($2 million, principally property taxes), offset in part by higher depreciation ($1 million).

~~Con Edison of New York’s steam sales and deliveries in the three months ended September 30, 2006 compared with the 2005 period were:~~

Con Edison of New York’s steam operating revenues decreased $7 million in the three months ended September 30, 2006 compared with the 2005 period, due primarily to lower fuel and purchased power costs ($5 million) and the milder summer weather in 2006 ($1 million). Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plans. See Note B to the financial statements in Item 8 of the Form 10-K.

Steam sales and delivery volumes decreased 5.4 percent in the three months ended September 30, 2006 compared with the 2005 period, reflecting primarily the impact of weather. After adjusting for variations, principally weather and billing days in each period, steam sales and deliveries decreased 0.1 percent in the 2006 period.

M~~ANAGEMENT~~’S D~~ISCUSSIONAND~~ A~~NALYSIS~~OF F~~INANCIAL~~ C~~ONDITION~~

~~AND~~ R~~ESULTS~~OF O~~PERATIONS~~ (C~~OMBINEDFOR~~ CON E~~DISONAND~~ CON E~~DISON~~OF

Con Edison of New York’s steam purchased power costs decreased $1 million in the three months ended September 30, 2006 compared with the 2005 period due primarily to lower unit costs. Steam fuel costs decreased $4 million due primarily to lower sendout volumes.

Steam operating income decreased $6 million in the three months ended September 30, 2006 compared with the 2005 period reflecting primarily lower net revenues ($2 million), higher taxes other than income taxes ($1 million, principally property taxes) and higher income taxes ($3 million, due principally to the timing of deductions associated with the East River Repowering Project).

Net interest charges increased $40 million in the three months ended September 30, 2006 compared with the 2005 period, due principally to $23 million of interest accrued for the potential repayment of tax benefits from the timing of deductions of certain construction related costs (See Note H to the Third Quarter Financial Statements), new debt issuances since September 30, 2005 and higher interest rates on variable-rate debt.

~~O&R’s electric sales and deliveries, excluding off-system sales, in the three months ended September 30, 2006 compared with the 2005 period were:~~

O&R’s electric operating revenues increased $4 million in the three months ended September 30, 2006 compared with September 30, 2005. Other electric operating revenues primarily reflect changes in regulatory assets and liabilities in accordance with the company’s electric rate plan. See Note B to the financial statements in Item 8 of the Form 10-K.

~~Electric sales and delivery volumes in O&R’s service area decreased 6.6 percent in the three months ended September 30, 2006 compared with the 2005 period primarily as a result of the milder summer~~

M~~ANAGEMENT~~’S D~~ISCUSSIONAND~~ A~~NALYSIS~~OF F~~INANCIAL~~ C~~ONDITION~~

~~AND~~ R~~ESULTS~~OF O~~PERATIONS~~ (C~~OMBINEDFOR~~ CON E~~DISONAND~~ CON E~~DISON~~OF

~~weather in 2006. After adjusting for weather variations in each period, electric delivery volumes in O&R’s service area increased 2.0 percent in the 2006 period.~~

~~O&R’s purchased power costs decreased $2 million in the three months ended September 30, 2006 compared with the 2005 period due to a decrease in purchased volumes.~~

Electric operating income was unchanged in the three months ended September 30, 2006 compared with the 2005 period. In September 2006, in accordance with O&R’s 2003 electric rate agreement, the company settled a $6 million regulatory liability against a regulatory asset. The regulatory liability settled related to a provision for refund to customers of shared earnings above the targeted level, and was credited to other operating revenue. The regulatory asset recovered was for deferred pension benefit costs, which was charged to operation and maintenance expense.

~~O&R’s gas sales and deliveries, excluding off-system sales, in the three months ended September 30, 2006 compared with the 2005 period were:~~

O&R’s gas operating revenues increased $3 million in the three months ended September 30, 2006 compared with the 2005 period. The increase is due primarily to higher costs of gas purchased for resale in 2006.

Sales and transportation volumes for firm customers increased 5.9 percent in the three months ended September 30, 2006 compared with the 2005 period. After adjusting for variations in distribution losses in each period, total firm sales and transportation volumes were 3.4 percent higher in the three months ended September 30, 2006 compared with the 2005 period reflecting increased customer usage.

M~~ANAGEMENT~~’S D~~ISCUSSIONAND~~ A~~NALYSIS~~OF F~~INANCIAL~~ C~~ONDITION~~

~~AND~~ R~~ESULTS~~OF O~~PERATIONS~~ (C~~OMBINEDFOR~~ CON E~~DISONAND~~ CON E~~DISON~~OF

Non-firm transportation of customer-owned gas to electric generating plants increased substantially in the three months ended September 30, 2006 compared with the 2005 period because certain facilities resumed burning gas to generate electricity. The increase in gas burned had minimal impact on earnings because most revenues from these customers result from a fixed demand charge for local transportation.

~~Gas operating income increased $1 million in the three months ended September 30, 2006 compared with the 2005 period.~~

The earnings of the competitive energy businesses were $29 million higher in the three months ended September 30, 2006 compared with the 2005 period. Excluding net mark-to-market losses on derivatives in both periods, the earnings of the competitive energy businesses were $21 million higher in the three months ended September 30, 2006 compared with the 2005 period, due primarily to higher gross margins on wholesale and retail electric sales.

Operating revenues of the competitive energy businesses were $171 million higher in the three months ended September 30, 2006 compared with the 2005 period, primarily due to higher electric wholesale and retail revenues. Electric wholesale revenues increased $174 million, of which $173 million was due to higher sales volume and $1 million was due to an increase in unit prices. Electric retail revenues increased $12 million, of which $19 million was due to higher sales volume, offset in part by a $7 million decrease due to lower unit prices. Other revenues decreased $15 million.

Operating expenses excluding income taxes increased by $123 million, reflecting principally increased purchased power ($156 million) and other operations and maintenance costs ($3 million), offset in part by lower fuel ($26 million) and gas purchased for resale costs ($9 million).

~~Income taxes increased $20 million in the three months ended September 30, 2006 as compared with the 2005 period, reflecting primarily higher income.~~

NT~~INE~~HREE MONTHS ENDED SM~~EPTEMBER~~ARCH ~~30, 2006~~31, 2007 COMPARED W~~WITH~~ITH NT~~INE~~HREE MONTHS ENDED SM~~EPTEMBER~~ARCH ~~30, 2005~~31, 2006

The Companies’ results of operations (which were discussed above under “Results of Operations – Summary”) in ~~2006~~2007 compared with ~~2005~~2006 were:


	Con Edison*					Con Edison of New York					O&R					Competitive Businesses and Other**					Con Edison*					Con Edison of New York					O&R					Competitive Businesses and Other**
(Millions of Dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent		Increases (Decreases) Amount			Increases (Decreases) Percent		Increases (Decreases) Amount			Increases (Decreases) Percent		Increases (Decreases) Amount			Increases (Decreases) Percent		Increases (Decreases) Amount			Increases (Decreases) Percent		Increases (Decreases) Amount			Increases (Decreases) Percent		Increases (Decreases) Amount			Increases (Decreases) Percent		Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	791		9.3	%	$	337		4.9	%	$	21		3.5	%	$	433		39.8	%	$	101		3.0	%	$	28		1.1	%	$	25		10.8	%	$	48		10.9	%
Purchased power		379		11.1			(40	)	(1.6	)		8		3.5			411		55.3			(75	)	(6.3	)		(119	)	(15.4	)		16		23.9			28		8.2
Fuel		47		8.5			71		19.8			—		—			(24	)	(12.3	)		13		5.1			20		10.4			—		—			(7	)	(11.3	)
Gas purchased for resale		59		7.5			46		6.9			13		13.7			—		—			(42	)	(7.6	)		(27	)	(5.9	)		(3	)	(4.1	)		(12	)	(54.5	)
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		306		8.1			260		7.7			—		—			46		36.5			205		15.5			154		12.7			12		13.2			39		Large
Other operations and maintenance		194		15.7			170		16.3			14		10.9			10		15.4			59		13.4			57		15.2			2		4.5			—		—
Depreciation and amortization		26		6.0			26		6.9			—		—			—		—			13		8.6			12		9.0			—		—			1		11.1
Taxes, other than income taxes		71		8.1			70		8.5			—		—			1		5.9			11		3.5			13		4.3			(3	)	(23.1	)		1		16.7
Income taxes		(12	)	(3.7	)		(15	)	(5.0	)		(9	)	(31.0	)		12		Large			43		39.8			23		20.4			5		71.4			15		Large
Operating income		27		3.0			9		1.1			(5	)	(8.8	)		23		Large			79		25.9			49		16.5			8		44.4			22		Large
Other income less deductions and related federal income tax		(2	)	(8.0	)		4		17.4			—		—			(6	)	(66.7	)		12		Large			3		50.0			(1	)	Large			10		Large
Net interest charges		74		21.6			69		25.7			4		23.5			1		1.8
Net interest expense																						15		11.9			18		18.4			—		—			(3	)	(14.3	)
Income from continuing operations		(49	)	(8.4	)		(56	)	(9.6	)		(9	)	(22.0	)		16		59.3			76		42.2			34		16.8			7		58.3			35		Large
Discontinued operations		4		80.0			N/A		N/A			N/A		N/A			4		80.0			(1	)	Large			N/A		N/A			N/A		N/A			(1	)	Large
Net income	$	(45	)	(7.7	)%	$	(56	)	(9.6	)%	$	(9	)	(22.0	)%	$	20		62.5	%	$	75		41.4	%	$	34		16.8	%	$	7		58.3	%	$	34		Large

Con Edison of New York’s electric sales and deliveries, excluding off-system sales, for the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period were:


	Millions of kWhs Delivered									Revenues in Millions												Millions of kWhs Delivered								Revenues in Millions
	Nine Months Ended		Variation			Percent Variation				Nine Months Ended					Variation				Percent Variation			Three Months Ended								Three Months Ended
Description	September 30, 2006	September 30, 2005				Percent Variation		September 30, 2006		September 30, 2005				March 31, 2007	Variation				Percent Variation		March 31, 2006		Variation			Percent Variation		March 31, 2007		March 31, 2006		Variation			Percent Variation
Residential/Religious	9,816	10,554	Variation		(738	)		(7.0	)%			$	2,076		$	2,124		$	(48	)		(2.3	)%		2,877		2,972	(95	)	(3.2	)%	$	581	$	628		$	(47	)	(7.5	)%
Commercial/Industrial	10,365	11,815	(1,450	)		(12.3	)				1,920		2,084			(164	)		(7.9	)		3,115		3,442		(327	)	(9.5	)		547		619		(72	)		(11.6	)
Retail access customers	14,350	12,528	1,822			14.5					755		579			176			30.4			5,033		4,255		778		18.3			279		185		94			50.8
NYPA, Municipal Agency and other sales	8,329	8,626	(297	)		(3.4	)				237		260			(23	)		(8.8	)		2,924		2,766		158		5.7			69		66		3			4.5
Other operating revenues	—	—	—			—					461		154			307			Large			—		—		—		—			167		135		32			23.7
Total	42,860	43,523	(663	)		(1.5	)%			$	5,449	$	5,201		$	248			4.8	%		13,949		13,435		514		3.8	%	$	1,643	$	1,633	$	10			0.6	%

Con Edison of New York’s electric operating revenues were ~~$248~~$10 million higher in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 as compared with the ~~2005~~2006 period, due primarily to the second year of the electric rate plan ($47 million), increased ~~recoverable fuel~~demand side management programs ($49 million), an accrual for incentives ($13 million), sales growth ($8 million), the impact of the colder weather ($5 million), higher transmission revenues ($5 million) and the reserve of a street lighting settlement with the New York Power Authority recorded in 2006 ($4 million), offset in part by a decrease in purchased power costs ($~~35 million), sales growth ($38 million), the electric rate plan that took effect in April 2005 ($179 million), recovery of costs relating to the East River Repowering Project ($19~~105 million), a reversal recorded in the first quarter of 2006 of a portion of the provision for refund to customers of shared earnings above the target level accrued in 2005 ($1715 million), ~~a 2005 provision for refund to customers of deferred taxes associated with the sale of the First Avenue Properties~~and decreased recoverable fuel costs ($23 million) and increased collections for demand side management programs ($23 million), offset in part by the impact of the milder weather ($73 million) and anticipated penalties for not meeting certain standards for duration and frequency of service interruption in accordance with the 2005 Electric Rate Agreement ($188 million). Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plans. See Note B to the financial statements in Item 8 of the Form 10-K and Note B to the ~~Third~~First Quarter Financial Statements.

Electric sales and delivery volumes in Con Edison of New York’s service area ~~decreased 1.5~~increased 3.8 percent in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period, primarily reflecting ~~milder~~colder weather and sales growth in the ~~2006~~2007 period compared with ~~2005.~~2006. After adjusting for variations, principally weather and billing days in each period, electric sales and delivery volumes in Con Edison of New York’s service area increased ~~2.3~~2.6 percent in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period.

Con Edison of New York’s electric fuel costs ~~increased $94~~decreased $8 million in the three months ended March 31, 2007 compared with the 2006 period, reflecting a decrease in unit costs ($11 million), offset by higher sendout volumes from the company’s generating facilities ($~~72 million) and an increase in unit costs ($22~~3 million). Electric purchased power costs decreased ~~$59~~$105 million in the ~~nine months ended September 30, 2006~~2007 period compared with the ~~2005~~2006 period reflecting a decrease in unit costs ($59 million) and a decrease in purchased volumes ($46 million), primarily associated with additional customers obtaining their energy supply through competitive providers ~~($394 million), partially offset by an increase~~ in ~~unit costs ($335 million).~~the three months ended March 31, 2007.

Con Edison of New York’s electric operating income ~~decreased $20~~increased $36 million in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period. The ~~decrease~~increase reflects higher operations and maintenance costs ($182 million, due primarily to power outages ($63 million), compensation for spoilage of food associated with certain of the outages ($14 million), demand side management program expenses ($23 million), East River Repowering Project costs ($19 million), higher expenses relating to uncollectible customer accounts ($12 million), increased transmission expenses ($12 million) and recognition of expense for stock-based compensation ($7 million)), taxes other than income taxes ($58 million, principally property taxes) and depreciation ($14 million), offset in part by higher net revenues ($~~214~~123 million, due principally to the electric rate ~~plan)~~agreement), offset in part by higher operations and ~~lower~~maintenance costs ($49 million, due primarily to demand side management program expenses ($49 million)), higher income taxes ($20 million), taxes other than income taxes ($10 million, principally property taxes) and depreciation ($8 million).

Con Edison of New York’s gas sales and deliveries, excluding off-system sales, in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period were:


	Thousands of DTHs Delivered						Revenues in Millions									Thousands of dths Delivered						Revenues in Millions
	Nine Months Ended						Nine Months Ended									Three Months Ended						Three Months Ended
Description	September 30, 2006	September 30, 2005	Variation		Percent Variation		September 30, 2006		September 30, 2005		Variation			Percent Variation		March 31, 2007	March 31, 2006	Variation		Percent Variation		March 31, 2007		March 31, 2006		Variation			Percent Variation
Residential	31,489	37,211	(5,722	)	(15.4	)%	$	608	$	589	$	19		3.2	%	20,740	20,563	177		0.9	%	$	378	$	375	$	3		0.8	%
General	24,162	28,312	(4,150	)	(14.7	)		370		351		19		5.4		13,194	13,605	(411	)	(3.0	)		210		214		(4	)	(1.9	)
Firm transportation	17,352	14,065	3,287		23.4			74		49		25		51.0		15,343	8,931	6,412		71.8			63		39		24		61.5
Total firm sales and transportation	73,003	79,588	(6,585	)	(8.3	)		1,052		989		63		6.4		49,277	43,099	6,178		14.3			651		628		23		3.7
Interruptible sales	9,566	9,953	(387	)	(3.9	)		94		101		(7	)	(6.9	)	3,282	5,098	(1,816	)	(35.6	)		41		70		(29	)	(41.4	)
NYPA	32,096	17,796	14,300		80.4			2		2		—		—		8,150	8,208	(58	)	(0.7	)		1		—		1		Large
Generation plants	47,884	43,057	4,827		11.2			36		38		(2	)	(5.3	)	11,859	7,886	3,973		50.4			12		10		2		20.0
Other	14,418	14,897	(479	)	(3.2	)		19		16		3		18.8		3,370	4,502	(1,132	)	(25.1	)		2		10		(8	)	(80.0	)
Other operating revenues	—	—	—		—			35		14		21		Large		—	—	—		—			28		19		9		47.4
Total	176,967	165,291	11,676		7.1	%	$	1,238	$	1,160	$	78		6.7	%	75,938	68,793	7,145		10.4	%	$	735	$	737	$	(2	)	(0.3	)%

Con Edison of New York’s gas operating revenues in the ~~nine~~three months ended ~~September 30, 2006 increased $78~~March 31, 2007 decreased $2 million compared with the ~~2005~~2006 period, reflecting ~~primarily an increase~~a decrease in ~~recoverable~~purchased gas costs ($27 million), offset in part by the gas rate plan ($16 million) and sales growth ($4 million). Other gas

gas costs ($46 million), higher non-firm revenues ($8 million) and the gas rate plan ($20 million). Con Edison of New York’s revenues from gas sales are subject to a weather normalization clause that moderates, but does not eliminate, the effect of weather-related changes on net income. Other gas operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plans. See Note B to the financial statements in Item 8 of the Form 10-K.

Con Edison of New York’s sales and transportation volumes for firm customers ~~decreased 8.3~~increased 14.3 percent in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period reflecting primarily the impact of the ~~milder~~colder winter ~~and spring~~ weather in ~~2006.~~2007 compared with 2006 and the movement of certain customers from interruptible to firm service. After adjusting for variations, principally weather and billing days in each period, firm gas sales and transportation volumes in the company’s service area increased ~~0.3~~7.4 percent in the ~~2006~~2007 period. Con Edison of New York’s revenues from gas sales are subject to a weather normalization clause that moderates, but does not eliminate, the effect of weather-related changes on net income.

Con Edison of New York’s purchased gas cost ~~increased $46~~decreased $27 million in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period due to ~~higher~~lower unit costs ($~~184~~78 million), offset in part by ~~lower~~higher sendout ($~~138~~51 million).

Con Edison of New York’s gas operating income increased ~~$10~~$14 million in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005 period, reflecting~~2006 period. The increase reflects primarily higher net revenues ($3125 million), offset in part by higher operations and maintenance expense ($85 million), income taxes ($4 million), taxes other than income taxes ($62 million, principally property taxes), and depreciation ($~~3 million) and income taxes ($4~~1 million).

Con Edison of New York’s steam sales and deliveries in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period were:

Con Edison of New York’s steam operating revenues increased $11 million in the nine months ended September 30, 2006 compared with the 2005 period, due primarily to the net increase in rates under the steam rate plan ($19 million) and higher purchased power costs ($19 million), offset in part by the

~~milder~~Con Edison of New York’s steam operating revenues increased $20 million in the three months ended March 31, 2007 compared with the 2006 period, due primarily to the colder weather in ~~2006~~2007 ($2411 million) and higher revenues under the steam rate plan ($9 million). Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plans. See Note B to the financial statements in Item 8 of the Form 10-K.

Steam sales and delivery volumes ~~decreased 11.6~~increased 10.6 percent in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period, reflecting primarily the impact of weather. After adjusting for variations, principally weather and billing days in each period, steam sales and deliveries ~~decreased 0.8~~increased 0.5 percent in the ~~2006~~2007 period.

Con Edison of New York’s steam purchased power costs ~~increased $19~~decreased $14 million in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period due primarily to ~~higher~~decreased unit ~~costs ($11 million) and increased purchased volumes ($8 million).~~costs. Steam fuel costs ~~decreased $23~~increased $28 million due primarily to ~~lower~~higher sendout volumes ($2816 million)~~, offset in part by~~ and higher unit costs ($512 million).

Steam operating income ~~increased $19~~decreased $1 million in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period reflecting higher ~~net revenues~~depreciation expense ($153 million), ~~recovery of costs related to the East River Repowering Project ($18 million) and lower~~ operations and maintenance costs ($~~2 million), offset in part by higher depreciation expense ($9~~3 million) and taxes, other than income taxes ($~~5 million, principally property taxes)~~1 million), offset in part by higher net revenues ($6 million).

Net interest ~~charges~~expense increased ~~$69~~$18 million in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period, due principally to ~~$23 million of~~new debt issuances since March 31, 2006, higher interest rates on variable-rate debt, interest accrued for the potential repayment of tax benefits from the timing of tax deductions of certain construction related costs ~~(See~~(see Note H to the ~~Third~~First Quarter Financial Statements)~~, new debt issuances since September 30, 2005~~ and higher interest rates on ~~variable-rate debt.~~and principal amounts of commercial paper.

O&R’s electric sales and deliveries, excluding off-system sales, in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period were:


	Millions of kWhs Delivered						Revenues in Millions										Millions of kWhs Delivered						Revenues in Millions
	Nine Months Ended						Nine Months Ended										Three Months Ended						Three Months Ended
Description	September 30, 2006	September 30, 2005	Variation		Percent Variation		September 30, 2006		September 30, 2005			Variation			Percent Variation		March 31, 2007	March 31, 2006	Variation		Percent Variation		March 31, 2007		March 31, 2006			Variation			Percent Variation
Residential/Religious	1,411	1,506	(95	)	(6.3	)%	$	198	$	195		$	3		1.5	%	439	415	24		5.8	%	$	61	$	54		$	7		13.0	%
Commercial/Industrial	1,581	1,723	(142	)	(8.2	)		182		178			4		2.2		532	510	22		4.3			62		54			8		14.8
Retail access customers	1,353	1,426	(73	)	(5.1	)		60		64			(4	)	(6.3	)	377	406	(29	)	(7.1	)		15		16			(1	)	(6.3	)
Public authorities	86	85	1		1.2			10		10			—		—		29	27	2		7.4			4		3			1		33.3
Other operating revenues	—	—	—		—			5		(1	)		6		Large		—	—	—		—			2		(1	)		3		Large
Total	4,431	4,740	(309	)	(6.5	)%	$	455	$	446		$	9		2.0	%	1,377	1,358	19		1.4	%	$	144	$	126		$	18		14.3	%

O&R’s electric operating revenues increased $9$18 million in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period due primarily to increased recoverable purchased power costs ($816 million). Other electric operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s electric rate plan. See Note B to the financial statements in Item 8 of the Form 10-K.

Electric ~~sales and~~ delivery volumes in O&R’s service area ~~decreased 6.5~~increased 1.4 percent in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period primarily as a result of the ~~milder weather in 2006.~~colder winter weather. After adjusting for weather variations ~~in each period,~~and unbilled volumes, electric delivery volumes in O&R’s service area increased ~~0.1~~0.7 percent in the ~~2006~~2007 period compared with the ~~2005.~~

~~O&R’s purchased power costs increased $8 million in the nine months ended September 30,~~ 2006 ~~compared with the 2005 period due to an increase in average unit costs.~~

In September 2006, in accordance with O&R’s 2003 electric rate agreement, the company settled a $6 million regulatory liability against a regulatory asset. The regulatory liability settled related to a provision for refund to customers of shared earnings above the targeted level, and was credited to other operating revenue. The regulatory asset recovered was for deferred pension benefit costs, which was charged to operation and maintenance expense.period.

Electric operating income ~~decreased~~increased by $5$2 million in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005 period.~~2006 period, due primarily to higher net revenues ($3 million), offset in part by higher income taxes ($1 million).

O&R’s gas sales and deliveries, excluding off-system sales, in ~~the nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period were:


	Thousands of DTHs Delivered						Revenues in Millions								Thousands of dths Delivered						Revenues in Millions
	Nine Months Ended						Nine Months Ended								Three Months Ended						Three Months Ended
Description	September 30, 2006	September 30, 2005	Variation		Percent Variation		September 30, 2006		September 30, 2005		Variation		Percent Variation		March 31, 2007	March 31, 2006	Variation		Percent Variation		March 31, 2007		March 31, 2006		Variation			Percent Variation
Residential	5,433	6,562	(1,129	)	(17.2	)%	$	94	$	86	$	8	9.3	%	4,245	3,744	501		13.4	%	$	69	$	68	$	1		1.5	%
General	1,353	1,623	(270	)	(16.6	)		22		20		2	10.0		997	907	90		9.9			16		16		—		—
Firm transportation	6,357	6,693	(336	)	(5.0	)		22		22		—	—		4,644	4,142	502		12.1			16		13		3		23.1
Total firm sales and transportation	13,143	14,878	(1,735	)	(11.7	)		138		128		10	7.8		9,886	8,793	1,093		12.4			101		97		4		4.1
Interruptible sales	4,451	4,912	(461	)	(9.4	)		22		20		2	10.0		1,754	1,793	(39	)	(2.2	)		6		9		(3	)	(33.3	)
Generation plants	2,884	1,323	1,561		Large			2		2		—	—		298	62	236		Large			—		—		—		—
Other	645	773	(128	)	(16.6	)		—		—		—	—		489	423	66		15.6			—		—		—		—
Other gas revenues	—	—	—		—			4		4		—	—		—	—	—		—			6		—		6		Large
Total	21,123	21,886	(763	)	(3.5	)%	$	166	$	154	$	12	7.8	%	12,427	11,071	1,356		12.2	%	$	113	$	106	$	7		6.6	%

O&R’s gas operating revenues increased ~~$12~~$7 million in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period. The increase is due primarily to ~~higher costs~~this year’s colder winter weather and the impact of the gas ~~purchased for resale in~~rate plan increase that went into effect November 1, 2006.

Sales and transportation volumes for firm customers ~~decreased 11.7~~increased 12.4 percent in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period reflecting the impact of the ~~milder~~colder winter ~~and spring~~ weather in ~~2006.~~2007. After adjusting for weather and other variations in each period, total firm sales and transportation volumes were ~~4.0~~0.2 percent lower in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005 period partially due to reduced customer usage.~~2006 period. O&R’s revenues from gas sales are subject to a weather normalization clause that moderates, but does not eliminate, the effect of weather-related changes on net income.

Non-firm transportation of customer-owned gas to electric generating plants increased in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period because certain facilities resumed burning gas to generate electricity. The increase in gas burned had minimal impact on earnings because most revenues from these customers result from a fixed demand charge for local transportation.

Gas operating income ~~was unchanged~~increased by $6 million in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005 period.~~2006 period, due primarily to higher net revenues ($10 million), offset in part by higher income taxes ($4 million).

The competitive energy businesses’ operating income and earnings increased $25 million, respectively, in the three months ended March 31, 2007 compared with the 2006 period due primarily to lower mark-to-market losses. Excluding mark-to-market activity in both periods, earnings increased $4 million in the ~~nine~~three months ended ~~September 30,~~March 31, 2007 compared to the 2006 ~~compared with the 2005 period, due principally to an increase in short-term borrowings.~~

The earnings of the competitive energy businesses were $27 million higher in the nine months ended September 30, 2006 compared with the 2005 period. Excluding net mark-to-market losses on derivatives in both periods, the earnings of the competitive energy businesses were $53 million higher in the nine months ended September 30, 2006 compared with the 2005 period, due primarily to higher gross margins on wholesale ~~and retail~~ electric sales.

Operating revenues ~~of the competitive energy businesses were $480~~increased $33 million ~~higher~~ in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 compared with the ~~2005~~2006 period, primarily due to higher electric retail revenues and lower mark-to-market losses, offset in part by lower electric wholesale and ~~retail~~other revenues. Electric ~~wholesale~~retail revenues increased ~~$385~~$18 million in the three months ended March 31, 2007 as compared with the 2006 period, of which ~~$362~~$11 million was due to higher sales ~~volume~~volumes and ~~$23~~$7 million was due to an increase in unit prices. Electric ~~retail~~wholesale revenues ~~increased $156~~decreased $15 million ~~of which $79 million was~~in the three months ended March 31, 2007 as compared with the 2006 period, primarily due to ~~higher sales volumes and $77~~lower generation revenues. Pre-tax mark-to-market losses decreased $35 million ~~was~~in the three months ended March 31, 2007 compared with the 2006 period, primarily due to ~~an increase~~increases in ~~unit prices. These increases were offset~~commodity prices in ~~part by net mark-to-market losses of $44~~the 2007 period. Other revenues decreased $5 million, ~~and~~primarily due to lower ~~other revenues of $17 million. The net mark-to-market losses reflect primarily lower prices on natural~~wholesale gas ~~contracts employed as economic hedges used to support wholesale and retail obligations that did not qualify for cash flow hedge accounting.~~sales volumes.

Operating expenses excluding income taxes ~~increased~~decreased $7 million in the three months ended March 31, 2007 compared with the 2006 period, reflecting lower fuel costs ($6 million), gas purchased for resale costs ($13 million) and lower maintenance costs ($4 million), partially offset by ~~$445 million, reflecting increased~~an increase in purchased power costs ($~~460~~13 million) and other operations ~~and maintenance costs~~expense ($~~10 million), offset in part by lower fuel costs ($25~~3 million).

Income taxes increased ~~$18~~$15 million in the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 as compared with the ~~2005~~2006 period, reflecting primarily higher income.

For Con Edison, “Other” in 2006 reflects $9 million in the nine months ended September 30, 2006 compared with the 2005 period due primarily to higher interest income and the recognition in 2005 of losses previously allocated to the minority interest in the Con Edison subsidiary that owns the Newington generating plant.

~~Other reflects a $9 million~~ expense ~~recognized in 2006~~ to effectively reclassify from retained earnings to additional paid-in capital the tax benefits from the exercise of stock options that had been recognized in income in prior years. ~~Other~~For Con Edison, “Other” also includes ~~the activity of the parent company and~~ inter-company eliminations relating to operating revenues and operating expenses.

For information about the Companies’ primary market risks associated with activities in derivative financial instruments, other financial instruments and derivative commodity instruments, see “Financial and Commodity Market Risks” in Part 1, Item 2 of this report, which information is incorporated herein by reference. Also, see Item 7A of the Form 10-K.

The Companies maintain disclosure controls and procedures designed to provide reasonable assurance that the information required to be disclosed in the reports that they submit to the Securities and Exchange Commission (SEC) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. For each of the Companies, its management, with the participation of its principal executive officer and principal financial officer, has evaluated the company’s disclosure controls and procedures as of the end of the period covered by this report and, based upon such evaluation, has concluded that the controls and procedures were effective to provide such reasonable assurance. Reasonable assurance is not absolute assurance, however, and there can be no assurance that any design of controls or procedures would be effective under all potential future conditions, regardless of how remote.

There were no changes in the Companies’ internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Companies’ internal control over financial reporting.

For information about legal proceedings relating to Con Edison’s October 1999 agreement to acquire Northeast Utilities, see Note H to the financial statements included in Part I, Item 1 of this report and the First Quarter Form 10-Q), which is incorporated herein by reference.

For information about disallowances by the Internal Revenue Service of tax losses recognized in connection with the company’s lease in/lease out transactions, see Note H to the financial statements included in Part I, Item 1 of this report, which is incorporated herein by reference.

For information about the legal proceeding relating to the Utilities’ 1999 sale of generating assets (Mirant Corporation, et al. v. Consolidated Edison et al. (In re Mirant Corporation)), pending in the United States Bankruptcy Court for the Northern District of Texas, see “Mirant Litigation” in Note H to the financial statements included in Part 1, Item 1 of this report, which is incorporated herein by reference.

For information about proceedings relating to power outages in 2006, see ~~“Queens Power Outage” in Part II, Item 1 of the Second Quarter Form 10-Q and~~ “Power Outage Proceedings” in Note HB to the financial statements included in Part I, Item 1 of this report, which is incorporated herein by reference. In ~~October~~April 2007, the PSC expanded its ongoing proceeding investigating the July 2006 Queens power outage to also consider the ~~two purported class actions were discontinued, without prejudice.~~

~~In October 2006,~~prudence of the ~~United States District Court for the Southern District of New York dismissed the suits (entitled In Re World Trade Center Disaster Site Litigation) against the Companies~~company’s conduct with respect to ~~emergency response and restoration activities following~~ the September 11, 2001 attack on the World Trade Center. For additional information about this litigation, see “Lower Manhattan Restoration” in Note I to the financial statements included in Item 8 of the Form 10-K, which information is incorporated herein by reference.outage.

There were no material changes from the risk factors previously disclosed in the Companies’ Form 10-K.

Pursuant to the requirements of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


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

For the quarterly period ended ~~SEPTEMBER 30, 2006~~MARCH 31, 2007

OR

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


			PAGE
Glossary of Terms			4

PART I—Financial Information
Item 1	Financial Statements (Unaudited)
	Con Edison
		Consolidated Balance Sheet	6
		Consolidated Income Statement	8
		Consolidated Statement of Comprehensive Income	9
		Consolidated Statement of Common Shareholders’ Equity	10
		Consolidated Statement of Cash Flows	11
	Con Edison of New York
		Consolidated Balance Sheet	12
		Consolidated Income Statement	14
		Consolidated Statement of Comprehensive Income	15
		Consolidated Statement of Common Shareholder’s Equity	16
		Consolidated Statement of Cash Flows	17
	Notes to Financial Statements (Unaudited)		18
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		4740
Item 3	Quantitative and Qualitative Disclosures About Market Risk		7560
Item 4	Controls and Procedures		7560

PART II—Other Information
Item 1	Legal Proceedings		7661
Item 1A1a	Risk Factors		7661
Item 6	Exhibits		7762
Signatures			7863


	For the Three Months Ended September 30, 2005				For the Nine Months Ended September 30, 2005
(Millions of Dollars, except per share amounts/Shares in Millions)	Con Edison		Con Edison of New York		Con Edison		Con Edison of New York
Net income, as reported	$	285	$	282	$	581	$	573
Add: Stock-based compensation expense included in reported net income, net of related tax effects		1		1		4		3
Deduct: Total stock-based compensation expense determined under fair value method for all awards, net of related tax effects		2		2		7		6
Pro forma net income	$	284	$	281	$	578	$	570
Earnings per common share:
Basic - as reported	$	1.17			$	2.39
Basic - pro forma	$	1.16			$	2.37
Diluted - as reported	$	1.16			$	2.38
Diluted - pro forma	$	1.16			$	2.37


	~~2006~~
~~Risk-free interest rate~~	~~4.62~~	%
~~Expected term~~	~~4.6 years~~
~~Expected stock volatility~~	~~13.41~~	%
~~Expected dividend yield~~	~~5.06~~	%


Large accelerated filer x		Accelerated filer ¨		Non-accelerated filer ¨


Large accelerated filer ¨		Accelerated filer ¨		Non-accelerated filer x


Con Edison Companies
Con Edison		Consolidated Edison, Inc.
Con Edison Communications		Con Edison Communications, LLC
Con Edison Development		Consolidated Edison Development, Inc.
Con Edison Energy		Consolidated Edison Energy, Inc.
Con Edison of New York		Consolidated Edison Company of New York, Inc.
Con Edison Solutions		Consolidated Edison Solutions, Inc.
O&R		Orange and Rockland Utilities, Inc.
Pike		Pike County Light & Power Company
RECO		Rockland Electric Company
The Companies		Con Edison and Con Edison of New York
The Utilities		Con Edison of New York and O&R

Regulatory and State Agencies
DEC		New York State Department of Environmental Conservation
~~ECAR~~		~~East Central Area Reliability Council~~
EPA		Environmental Protection Agency
FERC		Federal Energy Regulatory Commission
IRS		Internal Revenue Service
ISO-NE		ISO New England
NJBPU		New Jersey Board of Public Utilities
NJDEP		New Jersey Department of Environmental Protection
NYAG		New York Attorney General
NYISO		New York Independent System Operator
NYPA		New York Power Authority
NYSERDA		New York State Energy Research and Development Authority
NYSRC		New York State Reliability Council
PJM		PJM Interconnection
PSC		New York State Public Service Commission
PPUC		Pennsylvania Public Utility Commission
SEC		Securities and Exchange Commission

Other
ABO		Accumulated Benefit Obligation
APB		Accounting Principles Board
AFDC		Allowance for funds used during construction
CO₂		Carbon dioxide
COSO		Committee of Sponsoring Organizations ~~of the~~ Treadway Commission
DIG		Derivatives Implementation Group
District Court		The United States District Court for the Southern District of New York
dths		Dekatherms


Guarantee Type	0–3 years		4–10 years		> 10 years		Total
	(Millions of Dollars)
Commodity transactions	$	895	$	23	$	238	$	1,156
Affordable housing program		—		26		—		26
Intra-company guarantees		25		—		1		26
Other guarantees		39		48		—		87
TOTAL	$	959	$	97	$	239	$	1,295


	~~2006~~
~~Risk-free interest rate~~		~~4.48 to 4.88~~	%
~~Expected term~~		~~3 years~~
~~Expected volatility~~		~~13.15~~	%
~~Expected quarterly dividends~~	$	~~0.575 to $0.59~~


	For the Nine Months Ended September 30,
	Operating Revenues						Inter-segment revenues						Depreciation and amortization				Operating Income
(Millions of Dollars)	2006			2005			2006			2005			2006		2005		2006		2005
Con Edison of New York
Electric	$	5,449		$	5,201		$	7		$	7		$	308	$	294	$	630	$	650
Gas		1,238			1,160			2			2			60		57		136		126
Steam		485			474			56			38			36		27		70		51
Consolidation adjustments		—			—			(65	)		(47	)		—		—		—		—
Total Con Edison of New York	$	7,172		$	6,835		$	—		$	—		$	404	$	378	$	836	$	827
O&R
Electric	$	455		$	446		$	—		$	—		$	19	$	19	$	43	$	48
Gas		166			154			—			—			7		7		9		9
Total O&R	$	621		$	600		$	—		$	—		$	26	$	26	$	52	$	57
Competitive energy businesses	$	1,568		$	1,089		$	45		$	7		$	30	$	30	$	38	$	22
Other*		(47	)		(1	)		(45	)		(7	)		—		—		5		(2	)
Total Con Edison	$	9,314		$	8,523		$	—		$	—		$	460	$	434	$	931	$	904


	Maximum Term		Accumulated Other Comprehensive Income/ (Loss) Net of Tax					Portion Expected to be Reclassified to Earnings during the Next 12 Months
(Term in Months/Millions of Dollars)	Con Edison	Con Edison of New York	Con Edison			Con Edison of New York		Con Edison			Con Edison of New York
Energy Price Hedges	39	5	$	(43	)	$	—	$	(19	)	$	—


	Maximum Term		Accumulated Other Comprehensive Income/ (Loss) Net of Tax					Portion Expected to be Reclassified to Earnings during the Next 12 Months
(Term in Months/Millions of Dollars)	Con Edison	Con Edison of New York	Con Edison			Con Edison of New York		Con Edison			Con Edison of New York
Energy Price Hedges	45	—	$	(5	)	$	—	$	(2	)	$	—


	Three Months Variation						Nine Months Variation
	Earnings per Share			Net Income (Millions of Dollars)			Earnings per Share			Net Income (Millions of Dollars)
Con Edison of New York
Sales growth	$	0.05		$	13		$	0.11		$	27
Impact of weather in 2006 versus 2005		(0.12	)		(31	)		(0.24	)		(60	)
Electric rate plan		0.10			26			0.52			128
Gas rate plan		0.01			3			0.06			14
Steam rate plan		—			—			0.05			11
Queens power outage		(0.16	)		(39	)		(0.16	)		(39	)
Operations and maintenance expense - other		(0.11	)		(28	)		(0.20	)		(49	)
Stock-based compensation expense		—			(1	)		(0.03	)		(7	)
Depreciation and property taxes		(0.04	)		(11	)		(0.21	)		(52	)
Interest charges - timing of deductions of construction-related costs		(0.06	)		(14	)		(0.06	)		(14	)
Interest charges - other		(0.04	)		(11	)		(0.10	)		(26	)
Other (includes dilutive effect of new stock issuances)		0.01			10			—			11
Total Con Edison of New York		(0.36	)		(83	)		(0.26	)		(56	)
Orange and Rockland Utilities		—			(1	)		(0.04	)		(9	)
Competitive energy businesses
Earnings excluding net mark-to-market losses		0.09			21			0.21			53
Net mark-to-market losses		0.04			8			(0.10	)		(26	)
Other, including parent company expenses		(0.01	)		(1	)		(0.05	)		(11	)
Discontinued operations		—			2			0.02			4
Total	$	(0.24	)	$	(54	)	$	(0.22	)	$	(45	)


	Variations
	Earnings per Share			Net Income (Millions of Dollars)
Con Edison of New York
Sales growth	$	0.03		$	8
Impact of weather		0.04			10
Electric rate agreement		0.06			17
Gas rate agreement		0.04			10
Net transfers to firm gas service		0.03			6
Steam rate agreement		0.02			6
Operations and maintenance expense		(0.01	)		(2	)
Depreciation and property taxes		(0.06	)		(15	)
Interest charges		(0.05	)		(12	)
Other (includes dilutive effect of new stock issuances)		(0.01	)		6
Total Con Edison of New York		0.09			34
Orange and Rockland Utilities		0.03			7
Competitive energy businesses
Earnings excluding net mark-to-market effects		0.01			4
Net mark-to-market effects		0.08			21
Other, including parent company expenses		0.04			10
Discontinued operations		—			(1	)
Total	$	0.25		$	75


(Millions of Dollars)	Con Edison 2006 vs. 2005 Variance			Con Edison of New York 2006 vs. 2005 Variance
Assets
Fair value of derivative assets	$	(188	)	$	(175	)
Deferred derivative losses		187			166

Liabilities
Deferred derivative gains		(221	)		(170	)
Fair value of derivative liabilities		410			226


(Millions of Dollars)	Con Edison 2007 vs. 2006 Variance			Con Edison of New York 2007 vs. 2006 Variance
Assets
Fair value of derivative assets	$	(85	)	$	5
Deferred derivative losses		(116	)		(99	)

Liabilities
Long-term debt due within one year		485			180
Uncertain income taxes		139			128
Fair value of derivative liabilities		(300	)		(182	)


~~Effective Period~~	~~Rate Increases~~	~~Amortization~~ ~~To Income of~~ ~~Net Regulatory~~ ~~(Assets) and~~ ~~Liabilities~~	~~Return on~~ ~~Equity Sharing~~ ~~Threshold~~	Earnings Sharing Terms* ~~(Shareholders / Customers)~~
	~~(Millions of Dollars, except percentages)~~
~~Con Edison of New York - Steam~~

~~October 2006 - September 2008~~	~~None~~	~~$53~~ ~~over 2 yrs.~~	~~11.00%~~	~~11% - 12% - 50/50~~ ~~>12% - 25/75~~

O&R - Gas **
~~November 2006 - October 2009~~	~~Yr. 1 - $6.5~~ ~~Yr. 2 - $6.5~~ ~~Yr. 3 - $6.3~~	~~$(3)~~ ~~over 3 yrs.~~	~~11.00%~~	~~11% - 12% - 50/50~~ ~~12% - 14% - 35/65~~ ~~>14% - - 0/100~~


	Millions of Pounds Delivered						Revenues in Millions
	Three Months Ended						Three Months Ended
Description	September 30, 2006	September 30, 2005	Variation		Percent Variation		September 30, 2006		September 30, 2005		Variation			Percent Variation
General	18	20	(2	)	(10.0	)%	$	2	$	1	$	1		100.0	%
Apartment house	1,144	1,126	18		1.6			22		20		2		10.0
Annual power	4,358	4,690	(332	)	(7.1	)		75		78		(3	)	(3.8	)
Other operating revenues	—	—	—		—			5		12		(7	)	(58.3	)
Total	5,520	5,836	(316	)	(5.4	)%	$	104	$	111	$	(7	)	(6.3	)%


Exhibit 12.1		Statement of computation of Con Edison’s ratio of earnings to fixed charges for the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2007 and 2006, ~~and 2005,~~ and the 12-month period ended December 31, ~~2005.~~2006.

Exhibit 31.1.1		Rule 13a-14(a)/15d-14(a) Certifications—Chief Executive Officer.

Exhibit 31.1.2		Rule 13a-14(a)/15d-14(a) Certifications—Chief Financial Officer.

Exhibit 32.1.1		Section 1350 Certifications—Chief Executive Officer.

Exhibit 32.1.2		Section 1350 Certifications—Chief Financial Officer.


Exhibit 4.2		By-laws of Con Edison of New York, effective May 21, 2007. Incorporated by reference from Exhibit 3.2 to Con Edison of New York’s Current Report on Form 8-K, dated April 19, 2007 (File No. 1-1217).

Exhibit 12.2		Statement of computation of Con Edison of New York’s ratio of earnings to fixed charges for the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2007 and 2006, ~~and 2005,~~ and the 12-month period ended December 31, ~~2005.~~2006.

Exhibit 31.2.1		Rule 13a-14(a)/15d-14(a) Certifications—Chief Executive Officer.

Exhibit 31.2.2		Rule 13a-14(a)/15d-14(a) Certifications—Chief Financial Officer.

Exhibit 32.2.1		Section 1350 Certifications—Chief Executive Officer.

Exhibit 32.2.2		Section 1350 Certifications—Chief Financial Officer.



	Consolidated Edison, Inc.

	Consolidated Edison Company of New York, Inc.

~~Date: November 2, 2006~~DATE: May 10, 2007	By	/s/S/ ROBERT N. HOGLUND
		Robert N. Hoglund Senior Vice President, Chief Financial Officer and ~~and~~ Duly Authorized Officer

Commission
File Number

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

State of
Incorporation

I.R.S. Employer
ID. Number

Consolidated Edison, Inc.
4 Irving Place, New York, New York 10003
(212) 460-4600

Consolidated Edison Company of New York, Inc.
4 Irving Place, New York, New York 10003
(212) 460-4600