Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2016

Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015 are summarized below.



	2016					2015
(Millions of Dollars)	Level 1	Level 2	Level 3	Netting Adjustment (e)	Total	Level 1	Level 2	Level 3		Netting Adjustment (e)	Total
Con Edison
Derivative assets:
Commodity (a)(b)(c)	$6	$21	$6	$(5)	$28	$2	$25	$13		$7	$47
Commodity held for sale (f)	—	—	—	—	—	—	63	1		(63)	1
Other (a)(b)(d)	224	113	—	—	337	185	112	—		—	297
Total assets	$230	$134	$6	$(5)	$365	$187	$200	$14		$(56)	$345
Derivative liabilities:
Commodity (a)(b)(c)	$3	$146	$5	$(32)	$122	$16	$153	$1		$(65)	$105
Commodity held for sale (f)	—	—	—	—	—	1	133	7		(63)	78
Total liabilities	$3	$146	$5	$(32)	$122	$17	$286	$8		$(128)	$183
CECONY
Derivative assets:
Commodity (a)(b)(c)	$4	$7	$1	$6	$18	$1	$9	$8		$17	$35
Other (a)(b)(d)	200	108	—	—	308	171	105	—		—	276
Total assets	$204	$115	$1	$6	$326	$172	$114	$8		$17	$311
Derivative liabilities:
Commodity (a)(b)(c)	$2	$126	$1	$(23)	$106	$14	$129		$—	$(57)	$86


(a)	The Companies’ policy is to review the fair value hierarchy and recognize transfers into and transfers out of the levels at the end of each reporting period. There were no transfers between levels 1, 2 and 3 for the nine months ended September 30, 2016 and for the year ended December 31, 2015.

(b)

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

(c)

The accounting rules for fair value measurements and disclosures require consideration of the impact of nonperformance risk (including credit risk) from a market participant perspective in the measurement of the fair value of assets and liabilities. At September 30, 2016 and December 31, 2015, the Companies determined that nonperformance risk would have no material impact on their financial position or results of operations.


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


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


(f)	Amounts represent derivative assets and liabilities included in Assets and Liabilities held for sale on the consolidated balance sheet.

Schedule of Commodity Derivatives

The risk management group reports to the Companies’ Vice President and Treasurer.



	Fair Value of Level 3 at September 30, 2016		Valuation Techniques	Unobservable Inputs	Range
	(Millions of Dollars)		Valuation Techniques	Unobservable Inputs	Range
Con Edison – Commodity
Electricity	$(1)		Discounted Cash Flow	Forward energy prices (a)	$19.75-$80.00 per MWh
	1		Discounted Cash Flow	Forward capacity prices (a)	$2.68-$9.45 per kW-month
Transmission Congestion Contracts/Financial Transmission Rights	1		Discounted Cash Flow	Discount to adjust auction prices for inter-zonal forward price curves (b)	52.8%-59.4%
				Discount/(premium) to adjust auction prices for historical monthly realized settlements (b)	(44.9)%-58.9%
				Inter-zonal forward price curves adjusted for historical zonal losses (b)	$(0.14)-$2.82 per MWh
Total Con Edison—Commodity	$1
CECONY—Commodity
Electricity	$(1)		Discounted Cash Flow	Forward energy prices (a)	$21.10-$80.00 per MWh
Transmission Congestion Contracts	$1		Discounted Cash Flow	Discount to adjust auction prices for inter-zonal forward price curves (b)	52.8%-59.4%
				Discount/(premium) to adjust auction prices for historical monthly realized settlements (b)	(44.9)%-58.9%
Total CECONY—Commodity		$—


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


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

Reconciliation of Beginning and Ending Net Balances for Assets and Liabilities Measured at Level 3 Fair Value

The table listed below provides a reconciliation of the beginning and ending net balances for assets and liabilities measured at fair value as of September 30, 2016 and 2015 and classified as Level 3 in the fair value hierarchy:



	For the Three Months Ended September 30,
	Con Edison		CECONY
(Millions of Dollars)	2016	2015	2016		2015
Beginning balance as of July 1,	$5	$13	$2		$11
Included in earnings	(4)	(4)	—		(1)
Included in regulatory assets and liabilities	(5)	(1)	(3)		(1)
Purchases	—	1	—		1
Sales (a)	4	—	—		—
Settlements	1	(5)	1		(2)
Ending balance as of September 30,	$1	$4		$—	$8



	For the Nine Months Ended September 30,
	Con Edison		CECONY
(Millions of Dollars)	2016	2015	2016		2015
Beginning balance as of January 1,	$6	$20	$8		$13
Included in earnings	(1)	(18)	(1)		(5)
Included in regulatory assets and liabilities	(11)	(1)	(6)		(1)
Purchases	2	9	1		5
Sales (a)	4	—	—		—
Settlements	1	(6)	(2)		(4)
Ending balance as of September 30,	$1	$4		$—	$8


(a)	Amounts represent derivative instruments novated as part of the assets of Con Edison Solutions’ retail electric supply business which were sold to a subsidiary of Exelon Corporation (see Note P).