Summary of Significant Accounting Policies and Other Matters

9 Months Ended

Sep. 30, 2019

Summary of Significant Accounting Policies and Other Matters

Revenue Recognition

The following table presents, for the three and nine months ended September 30, 2019 and 2018, revenue from contracts with customers as defined in Accounting Standards Codification (ASC) Topic 606, "Revenue from Contracts with Customers," as well as additional revenue from sources other than contracts with customers, disaggregated by major source.



	For the Three Months Ended September 30, 2019				For the Three Months Ended September 30, 2018
(Millions of Dollars)	Revenues from contracts with customers		Other revenues (a)	Total operating revenues	Revenues from contracts with customers		Other revenues (a)		Total operating revenues
CECONY
Electric	$2,582		$(38)	$2,544	$2,631		$(60)		$2,571
Gas	263		12	275	264		—		264
Steam	54		4	58	64		—		64
Total CECONY	$2,899		$(22)	$2,877	$2,959		$(60)		$2,899
O&R
Electric	205		5	210	215		(3)		212
Gas	25		6	31	31		3		34
Total O&R	$230		$11	$241	$246			$—	$246
Clean Energy Businesses
Renewables	193	(b)	—	193	68	(b)	—		68
Energy services	14		—	14	24		—		24
Other	—		40	40	—		89		89
Total Clean Energy Businesses	$207		$40	$247	$92		$89		$181
Con Edison Transmission	1		—	1	1		—		1
Other (c)	—		(1)	(1)	—		1		1
Total Con Edison	$3,337		$28	$3,365	$3,298		$30		$3,328

(a) For the Utilities, this includes revenue from alternative revenue programs, such as the revenue decoupling mechanisms under their New York electric and gas rate plans.For the Clean Energy Businesses, this includes revenue from wholesale services.

(b) Included within the totals for Renewables revenue at the Clean Energy Businesses is $3 million for the three months ended September 30, 2019 and 2018, of revenue related to engineering, procurement and construction services.


(c)	Parent company and consolidation adjustments.



	For the Nine Months Ended September 30, 2019				For the Nine Months Ended September 30, 2018
(Millions of Dollars)	Revenues from contracts with customers		Other revenues (a)	Total operating revenues	Revenues from contracts with customers		Other revenues (a)	Total operating revenues
CECONY
Electric	$6,048		$126	$6,174	$6,106		$1	$6,107
Gas	1,573		32	1,605	1,516		24	1,540
Steam	456		13	469	467		7	474
Total CECONY	$8,077		$171	$8,248	$8,089		$32	$8,121
O&R
Electric	488		5	493	508		(3)	505
Gas	178		7	185	179		7	186
Total O&R	$666		$12	$678	$687		$4	$691
Clean Energy Businesses
Renewables	465	(b)	—	465	273	(b)	—	273
Energy services	53		—	53	65		—	65
Other	—		178	178	—		235	235
Total Clean Energy Businesses	$518		$178	$696	$338		$235	$573
Con Edison Transmission	3		—	3	3		—	3
Other (c)	—		(2)	(2)	—		—	—
Total Con Edison	$9,264		$359	$9,623	$9,117		$271	$9,388

(b) Included within the totals for Renewables revenue at the Clean Energy Businesses is $9 million and $100 million for the nine months ended September 30, 2019 and 2018, respectively, of revenue related to engineering, procurement and construction services.


(c)	Parent company and consolidation adjustments.



	2019			2018
(Millions of Dollars)	Unbilled contract revenue (a)	Unearned revenue (b)		Unbilled contract revenue (a)	Unearned revenue (b)
Beginning balance as of January 1,	$29	$20		$58	$87
Additions (c)	63	2		111	34
Subtractions (c)	68	2	(d)	138	105	(d)
Ending balance as of September 30,	$24	$20		$31	$16

(a)

Unbilled contract revenue represents accumulated incurred costs and earned profits on contracts (revenue arrangements), which have been recorded as revenue, but have not yet been billed to customers, and which represent contract assets as defined in Topic 606. Substantially all accrued unbilled contract revenue is expected to be collected within one year. Unbilled contract revenue arises from the cost-to-cost method of revenue recognition. Unbilled contract revenue from fixed-price type contracts is converted to billed receivables when amounts are invoiced to customers according to contractual billing terms, which generally occur when deliveries or other performance milestones are completed.


(b)	Unearned revenue represents a liability for billings to customers in excess of earned revenue, which are contract liabilities as defined in Topic 606.


(c)	Additions for unbilled contract revenue and subtractions for unearned revenue represent additional revenue earned. Additions for unearned revenue and subtractions for unbilled contract revenue represent billings. Activity also includes appropriate balance sheet classification for the period.


(d)	Of the subtractions from unearned revenue, $2 million and $50 million were included in the balance as of January 1, 2019 and 2018, respectively.

As of September 30, 2019, the aggregate amount of the remaining fixed performance obligations of the Clean Energy Businesses under contracts with customers for energy services is $89 million, of which $53 million will be recognized within the next two years, and the remaining $36 million will be recognized pursuant to long-term service and maintenance agreements.

Utility Plant

General utility plant of Con Edison and CECONY included $95 million and $90 million, respectively, at September 30, 2019 and $100 million and $95 million, respectively, at December 31, 2018, related to a May 2018 acquisition of software licenses. The estimated aggregate annual amortization expense related to the software licenses for Con Edison and CECONY is $7 million. The accumulated amortization for Con Edison and CECONY was $8 million at September 30, 2019 and was $3 million at December 31, 2018.

Long-Lived and Intangible Assets

In January 2019, Pacific Gas and Electric Company (PG&E) filed in the United States Bankruptcy Court for the Northern District of California for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The output of certain Con Edison Development renewable electric production projects with an aggregate generating capacity of 680 MW (AC) (PG&E Projects) is sold to PG&E under long-term power purchase agreements (PG&E PPAs). Most of the PG&E PPAs have contract prices that are higher than estimated market prices. PG&E, as a debtor in possession, may assume or reject the PG&E PPAs, subject to review by the bankruptcy court. In September 2019, PG&E submitted its plan of reorganization to the bankruptcy court. PG&E’s plan includes the assumption by PG&E of all of its power purchase agreements. PG&E’s plan is subject to, among other things: confirmation by the bankruptcy court by June 30, 2020 (or any extension of the date by which PG&E’s bankruptcy must be resolved for PG&E to participate in the insurance fund described below); approval by the California Public Utilities Commission (CPUC) of PG&E’s implementation of the plan and participation in the insurance fund; and PG&E obtaining funding for distributions under the plan. PG&E may revoke, withdraw or delay consideration of the plan prior to its confirmation by the bankruptcy court, and file subsequent amended plans of reorganization. In October 2019, the Ad Hoc PG&E senior note holder committee (Noteholders) and tort claimant committee (TCC) submitted to the bankruptcy court an alternative plan of reorganization for PG&E. The Noteholder/TCC plan also calls for PG&E to assume all of its power purchase agreements and participate in the insurance fund. The Noteholder/TCC plan is also subject to, among other things, confirmation by the bankruptcy court, approval by the CPUC and obtaining funding for distributions under the plan. The Noteholder/TCC plan can be revoked, amended, withdrawn or delayed. Bankruptcy court approval is required for a plan of reorganization to be sent to creditors for consideration.

In January and May 2019, FERC issued orders (which PG&E is challenging) affirming its jurisdiction to review and approve the modification or abrogation of wholesale power contracts that are the subject of rejection in bankruptcy. In June 2019, the bankruptcy court ruled that FERC does not have concurrent jurisdiction with it and that FERC’s January and May 2019 orders are of no force and effect in the bankruptcy proceeding. FERC and additional parties, including Con Edison Development, are challenging the bankruptcy court’s June 2019 ruling in appeals that are pending in the United States Court of Appeals for the Ninth Circuit.

In July 2019, California enacted a law addressing future California wildfires. The law includes provisions for the establishment of wildfire liquidity and insurance funds and possible limitation of future wildfire liabilities for California utilities. PG&E, Southern California Edison Company and San Diego Gas & Electric Company have agreed to participate in the insurance fund. PG&E’s participation will require bankruptcy court approval and is conditioned on, among other things, resolution of PG&E’s bankruptcy by June 30, 2020, and a determination by the CPUC that PG&E’s bankruptcy reorganization plan is consistent with the state’s climate goals as required under the California Renewables Portfolio Standard Program and related procurement requirements of the state.

The PG&E bankruptcy is an event of default under the PG&E PPAs. Unless the lenders for the related project debt otherwise agree, distributions from the related projects to Con Edison Development will not be made during the pendency of the bankruptcy. See “Reconciliation of Cash, Temporary Cash Investments and Restricted Cash,” below.

At September 30, 2019, Con Edison’s consolidated balance sheet included $827 million of net non-utility plant relating to the PG&E Projects, $1,075 million of intangible assets relating to the PG&E PPAs, $287 million of net non-utility plant of additional projects that secure the related project debt and $1,012 million of non-recourse related project debt. See Note C. Con Edison has tested whether its net non-utility plant relating to the PG&E Projects and intangible assets relating to the PG&E PPAs have been impaired. The projected future cash flows used in the test reflected Con Edison’s expectation that the PG&E PPAs are not likely to be rejected. Based on the test, Con Edison has determined that there was no impairment. If, in the future, one or more of the PG&E PPAs is rejected or any such rejection becomes likely, there will be an impairment of the related intangible assets and could be an impairment of the related non-utility plant. The amount of any such impairment could be material.

Acquisitions and Investments

For the nine months ended September 2019, the Clean Energy Businesses reclassified approximately $100 million related to the purchase price adjustments for the December 2018 acquisition by a Con Edison Development subsidiary of Sempra Solar Holdings, LLC. The adjustments primarily decreased property, plant and equipment and asset retirement obligations, and were recorded within the one year available to finalize the purchase price allocation, including working capital and other closing adjustments.

Earnings Per Common Share

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

Potentially dilutive securities for Con Edison consist of restricted stock units and deferred stock units for which the average market price of the common shares for the period was greater than the exercise price and its common shares that are subject to a May 2019 forward sale agreement (see Note C). Before the issuance of common shares upon settlement of the forward sale agreement, the shares will be reflected in the company’s diluted earnings per share calculations using the treasury stock method. Under this method, the number of common shares used in calculating diluted earnings per share is deemed to be increased by the excess, if any, of the number of shares that would be issued upon physical settlement of the forward sale agreement over the number of shares that could be purchased by the company in the market (based on the average market price during the period) using the proceeds due upon physical settlement (based on the adjusted forward sale price at the end of the reporting period).

For the three and nine months ended September 30, 2019 and 2018, basic and diluted EPS for Con Edison 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)	2019	2018	2019	2018
Net income for common stock	$473	$435	$1,048	$1,051
Weighted average common shares outstanding – basic	332.2	311.1	327.3	310.8
Add: Incremental shares attributable to effect of potentially dilutive securities	1.0	1.2	1.0	1.1
Adjusted weighted average common shares outstanding – diluted	333.2	312.3	328.3	311.9
Net Income per common share – basic	$1.42	$1.40	$3.20	$3.38
Net Income per common share – diluted	$1.42	$1.39	$3.19	$3.37

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

Changes in Accumulated Other Comprehensive Income/(Loss) by Component

For the three and nine months ended September 30, 2019 and 2018, changes to accumulated other comprehensive income/(loss) (OCI) for Con Edison and CECONY are as follows:



	For the Three Months Ended September 30,
	Con Edison		CECONY
(Millions of Dollars)	2019	2018	2019	2018
Beginning balance, accumulated OCI, net of taxes (a)	$(11)	$(20)	$(5)	$(5)
Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $(1) for Con Edison in 2019 and 2018 (a)(b)	1	2	1	—
Current period OCI, net of taxes	1	2	1	—
Ending balance, accumulated OCI, net of taxes	$(10)	$(18)	$(4)	$(5)



	For the Nine Months Ended September 30,
	Con Edison		CECONY
(Millions of Dollars)	2019	2018	2019	2018
Beginning balance, accumulated OCI, net of taxes (a)	$(16)	$(26)	$(5)	$(6)
OCI before reclassifications, net of tax of $(1) for Con Edison in 2019 and 2018	2	3	—	—
Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $(1) and $(2) for Con Edison in 2019 and 2018, respectively (a)(b)	4	5	1	1
Current period OCI, net of taxes	6	8	1	1
Ending balance, accumulated OCI, net of taxes	$(10)	$(18)	$(4)	$(5)


(a)	Tax reclassified from accumulated OCI is reported in the income tax expense line item of the consolidated income statement.


(b)	For the portion of unrecognized pension and other postretirement benefit costs relating to the Utilities, costs are recorded into, and amortized out of, regulatory assets instead of OCI. The net actuarial losses and prior service costs recognized during the period are included in the computation of total periodic pension and other postretirement benefit cost. See Notes E and F.

Reconciliation of Cash, Temporary Cash Investments and Restricted Cash

Cash, temporary cash investments and restricted cash are presented on a combined basis in the Companies’ consolidated statements of cash flows. At September 30, 2019 and 2018, cash, temporary cash investments and restricted cash for Con Edison and CECONY are as follows:



	At September 30,
	Con Edison		CECONY
(Millions of Dollars)	2019	2018	2019	2018
Cash and temporary cash investments	$78	$199	$15	$17
Restricted cash (a)	175	46	—	—
Total cash, temporary cash investments and restricted cash	$253	$245	$15	$17

(a)

Restricted cash included cash of Con Edison Development renewable electric production project subsidiaries ($174 million and $44 million at September 30, 2019 and 2018, respectively) that, under the related project debt agreements, is either restricted until the various maturity dates of the project debt to being used for normal operating expenses and capital expenditures, debt service, and required reserves or

restricted as a result of the PG&E bankruptcy. During the pendency of the PG&E bankruptcy, unless the lenders for the related project debt otherwise agree, cash may not be distributed from the related projects to Con Edison Development. See “Long-Lived and Intangible Assets,” above, and Note C. In addition, restricted cash included O&R's New Jersey utility subsidiary, Rockland Electric Company transition bond charge collections, net of principal, interest, trustee and service fees ($1 million and $2 million at September 30, 2019 and 2018, respectively).