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Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

/x/	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended JUNE 30, 2002
or
/ /	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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
1-14514	Consolidated Edison, Inc. 4 Irving Place, New York, New York 10003 (212) 460-4600	New York	13-3965100
1-1217	Consolidated Edison Company of New York, Inc. 4 Irving Place, New York, New York 10003 (212) 460-4600	New York	13-5009340
1-4315	Orange and Rockland Utilities, Inc. One Blue Hill Plaza, Pearl River, New York 10965 (914) 352-6000	New York	13-1727729

Indicate by check mark whether each 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, and (2) has been subject to such filing requirements for the past 90 days. Yes /x/    No / /

As of the close of business on July 31, 2002, Consolidated Edison, Inc. ("Con Edison") had outstanding 213,144,081 Common Shares ($.10 par value). Con Edison owns all of the outstanding common equity of Consolidated Edison Company of New York, Inc. ("Con Edison of New York") and Orange and Rockland Utilities, Inc. ("O&R").

O&R meets the conditions specified in general instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.

1

TABLE OF CONTENTS

				PAGE
Filing Format				3
Part I.—Financial Information
Item 1.	Financial Statements
		Con Edison
			Consolidated Balance Sheet	4
			Consolidated Income Statements	6
			Consolidated Statement of Retained Earnings	8
			Consolidated Statements of Comprehensive Income	8
			Consolidated Statement of Cash Flows	10
			Notes to Financial Statements	11
		Con Edison of New York
			Consolidated Balance Sheet	22
			Consolidated Income Statements	24
			Consolidated Statement of Retained Earnings	26
			Consolidated Statements of Comprehensive Income	26
			Consolidated Statement of Cash Flows	28
			Notes to Financial Statements	29
		O&R
			Consolidated Balance Sheet	35
			Consolidated Income Statements	37
			Consolidated Statement of Retained Earnings	39
			Consolidated Statements of Comprehensive Income	39
			Consolidated Statement of Cash Flows	41
			Notes to Financial Statements	42
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
		Con Edison		48
		Con Edison of New York		63
		O&R		*
	O&R Management's Narrative Analysis of the Results of Operations			77
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
		Con Edison		81
		Con Edison of New York		81
		O&R		*
Forward-Looking Statements				82
Part II.—Other Information
Item 1.	Legal Proceedings			84
Item 4.	Submission of Matters to a Vote of Securities Holders			84
Item 6.	Exhibits and Reports on Form 8-K			85

*

O&R is omitting this information pursuant to General Instruction H of Form 10-Q.

2

Filing Format

This Quarterly Report on Form 10-Q is a combined report being filed separately by three different registrants: Consolidated Edison, Inc. ("Con Edison"), Consolidated Edison Company of New York, Inc. ("Con Edison of New York") and Orange and Rockland Utilities, Inc. ("O&R"). Neither Con Edison of New York nor O&R makes any representation as to the information contained in this report relating to Con Edison or the subsidiaries of Con Edison other than itself.

O&R, a wholly-owned subsidiary of Con Edison, meets the conditions specified in General Instruction H of Form 10-Q and is permitted to use the reduced disclosure format for wholly-owned subsidiaries of companies, such as Con Edison, that are reporting companies under the Securities Exchange Act of 1934. Accordingly, O&R has omitted from this report the information called for by Part 1, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations and has included in this report its Management's Narrative Analysis of the Results of Operations. In accordance with general instruction H, O&R has also omitted from this report the information, if any, called for by Part 1, Item 3, Quantitative and Qualitative Disclosure About Market Risk; Part II, Item 2, Changes in Securities and Use of Proceeds; Part II, Item 3, Defaults Upon Senior Securities; and Part II, Item 4, Submission of Matters to a Vote of Security Holders.

3

Consolidated Edison, Inc.


CONSOLIDATED BALANCE SHEET
(UNAUDITED)

			As at
			June 30, 2002		December 31, 2001
			(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
	Electric		$	11,335,704	$	11,145,400
	Gas			2,444,138		2,405,730
	Steam			760,053		758,600
	General			1,425,696		1,354,099
	TOTAL			15,965,591		15,663,829
	Less: Accumulated depreciation			4,576,424		4,472,994
	NET			11,389,167		11,190,835
	Construction work in progress			770,743		654,107
NET UTILITY PLANT				12,159,910		11,844,942
NON-UTILITY PLANT
	Unregulated generating assets, less accumulated depreciation of $25,048 and $21,289 in 2002 and 2001, respectively			463,176		291,039
	Non-utility property, less accumulated depreciation of $14,484 and $11,235 in 2002 and 2001 respectively			130,728		112,394
NET PLANT				12,753,814		12,248,375
CURRENT ASSETS
	Unrestricted cash and temporary cash investments			59,202		271,356
	Restricted cash			13,824		69,823
	Accounts receivable - customer, less allowance for uncollectible accounts of $33,632 and $34,775 in 2002 and 2001, respectively			640,183		613,733
	Other receivables			236,772		124,343
	Fuel, at average cost			13,253		18,216
	Gas in storage, at average cost			70,971		111,507
	Materials and supplies, at average cost			91,398		90,976
	Prepayments			68,463		79,687
	Other current assets			89,090		50,454
TOTAL CURRENT ASSETS				1,283,156		1,430,095
INVESTMENTS
	Other			217,822		216,979
TOTAL INVESTMENTS				217,822		216,979
DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS
	Goodwill			439,944		439,944
	Intangible assets			83,903		85,783
	Accrued pension credits			868,706		697,807
	Regulatory assets
		Future federal income tax		610,276		659,891
		Recoverable energy costs		302,276		210,264
		Sale of nuclear generating plant		124,463		170,241
		Real estate sale costs - First Avenue properties		106,917		105,407
		Deferred special retirement program costs		82,909		81,796
		Accrued unbilled revenue		63,151		64,249
		Deferred environmental remediation costs		61,451		62,559
		Workers' compensation		55,453		62,109
		Divestiture - capacity replacement reconciliation		58,850		58,850
		Deferred revenue taxes		54,969		41,256
		World Trade Center restoration costs		34,975		32,933
		Other		111,599		88,260
	TOTAL REGULATORY ASSETS			1,667,289		1,637,815
	Other deferred charges and noncurrent assets			233,041		239,313
TOTAL DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS				3,292,883		3,100,662
TOTAL			$	17,547,675	$	16,996,111

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

4

Consolidated Edison, Inc.

CONSOLIDATED BALANCE SHEET
(UNAUDITED)

			As at
			June 30, 2002			December 31, 2001
			(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
	Common stock, authorized 500,000,000 shares; outstanding 213,043,030 shares and 212,257,244 shares		$	1,514,493		$	1,482,341
	Retained earnings			5,276,276			5,251,017
	Treasury stock, at cost; 23,210,700 shares and 23,230,850 shares			(1,001,241	)		(1,002,107	)
	Capital stock expense			(35,412	)		(35,547	)
	Accumulated other comprehensive income			(15,083	)		(29,436	)
		TOTAL COMMON SHAREHOLDERS' EQUITY		5,739,033			5,666,268
	Preferred stock			212,563			212,563
	Long-term debt			5,935,001			5,501,217
TOTAL CAPITALIZATION				11,886,597			11,380,048
MINORITY INTERESTS				8,639			9,522
NONCURRENT LIABILITIES
	Obligations under capital leases			39,801			41,088
	Accumulated provision for injuries and damages			179,352			175,665
	Pension and benefits reserve			234,165			187,739
	Other noncurrent liabilities			39,551			30,159
TOTAL NONCURRENT LIABILITIES				492,869			434,651
CURRENT LIABILITIES
	Long-term debt due within one year			196,630			310,950
	Preferred stock to be redeemed in one year			37,050			37,050
	Notes payable			165,657			343,722
	Accounts payable			769,339			665,342
	Customer deposits			221,347			214,121
	Accrued taxes			96,909			146,657
	Accrued interest			81,528			80,238
	Accrued wages			75,218			77,131
	Other current liabilities			341,632			372,404
TOTAL CURRENT LIABILITIES				1,985,310			2,247,615
DEFERRED CREDITS AND REGULATORY LIABILITIES
	Accumulated deferred income tax			2,368,229			2,235,295
	Accumulated deferred investment tax credits			115,051			118,350
	Regulatory liabilities
		NYISO reconciliation		102,471			92,504
		World Trade Center casualty loss		78,787			81,483
		Gain on divestiture		42,182			59,030
		Deposit from sale of First Avenue properties		50,000			50,000
		Refundable energy costs		46,408			45,008
		Accrued electric rate reduction		38,018			38,018
		Transmission Congestion Contracts		78,757			4,896
		Gas Rate Plan—World Trade Center Recovery		36,388			—
		Other		201,657			185,188
	TOTAL REGULATORY LIABILITIES			674,668			556,127
	Other deferred credits			16,312			14,503
TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES				3,174,260			2,924,275
TOTAL			$	17,547,675		$	16,996,111

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

5

Consolidated Edison, Inc.

CONSOLIDATED INCOME STATEMENT
(UNAUDITED)

		For the Three Months Ended June 30,
		2002			2001
		(Thousands of Dollars)
OPERATING REVENUES
	Electric	$	1,400,045		$	1,531,949
	Gas		242,355			305,394
	Steam		70,488			89,666
	Non-utility		187,351			185,206
TOTAL OPERATING REVENUES			1,900,239			2,112,215
OPERATING EXPENSES
	Purchased power		752,587			766,678
	Fuel		46,749			57,230
	Gas purchased for resale		119,220			197,979
	Other operations		230,496			278,123
	Maintenance		98,863			116,340
	Depreciation and amortization		122,126			136,782
	Taxes, other than income taxes		269,253			256,661
	Income taxes		60,927			86,600
TOTAL OPERATING EXPENSES			1,700,221			1,896,393
OPERATING INCOME			200,018			215,822
OTHER INCOME (DEDUCTIONS)
	Investment income		403			1,840
	Allowance for equity funds used during construction		1,915			258
	Other income less miscellaneous deductions		2,229			(9,191	)
	Income taxes		1,975			1,552
TOTAL OTHER INCOME (DEDUCTIONS)			6,522			(5,541	)
INCOME BEFORE INTEREST CHARGES			206,540			210,281
	Interest on long-term debt		98,994			98,355
	Other interest		8,205			9,536
	Allowance for borrowed funds used during construction		(1,637	)		(1,684	)
NET INTEREST CHARGES			105,562			106,207
NET INCOME		$	100,978		$	104,074
PREFERRED STOCK DIVIDEND REQUIREMENTS			3,398			3,398
NET INCOME FOR COMMON STOCK		$	97,580		$	100,676
EARNINGS PER COMMON SHARE-BASIC		$	0.46		$	0.48
EARNINGS PER COMMON SHARE-DILUTED		$	0.46		$	0.48
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK		$	0.555		$	0.550
AVERAGE NUMBER OF SHARES OUTSTANDING-BASIC			212,756,843			212,115,094
AVERAGE NUMBER OF SHARES OUTSTANDING-DILUTED			213,931,052			212,554,995

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

6

Consolidated Edison, Inc.

CONSOLIDATED INCOME STATEMENT
(UNAUDITED)

		For the Six Months Ended June 30,
		2002			2001
		(Thousands of Dollars)
OPERATING REVENUES
	Electric	$	2,700,893		$	3,239,323
	Gas		716,219			1,007,213
	Steam		211,954			347,918
	Non-utility		370,312			404,024
TOTAL OPERATING REVENUES			3,999,378			4,998,478
OPERATING EXPENSES
	Purchased power		1,466,083			1,775,284
	Fuel		111,292			241,288
	Gas purchased for resale		349,374			655,168
	Other operations		467,095			539,531
	Maintenance		198,571			244,786
	Depreciation and amortization		242,569			271,866
	Taxes, other than income taxes		536,484			564,469
	Income taxes		170,471			203,772
TOTAL OPERATING EXPENSES			3,541,939			4,496,164
OPERATING INCOME			457,439			502,314
OTHER INCOME (DEDUCTIONS)
	Investment income		1,105			4,623
	Allowance for equity funds used during construction		6,121			501
	Other income less miscellaneous deductions		501			(13,626	)
	Income taxes		16,067			7,138
TOTAL OTHER INCOME (DEDUCTIONS)			23,794			(1,364	)
INCOME BEFORE INTEREST CHARGES			481,233			500,950
	Interest on long-term debt		193,190			197,562
	Other interest		18,768			20,023
	Allowance for borrowed funds used during construction		(1,707	)		(3,221	)
NET INTEREST CHARGES			210,251			214,364
NET INCOME		$	270,982		$	286,586
PREFERRED STOCK DIVIDEND REQUIREMENTS			6,796			6,796
NET INCOME FOR COMMON STOCK		$	264,186		$	279,790
EARNINGS PER COMMON SHARE-BASIC		$	1.24		$	1.32
EARNINGS PER COMMON SHARE-DILUTED		$	1.24		$	1.32
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK		$	1.11		$	1.10
AVERAGE NUMBER OF SHARES OUTSTANDING-BASIC			212,546,200			212,078,295
AVERAGE NUMBER OF SHARES OUTSTANDING-DILUTED			213,677,032			212,439,716

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

7

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(UNAUDITED)

		As at
		June 30, 2002		December 31, 2001
		(Thousands of Dollars)
BALANCE, JANUARY 1		$	5,251,017	$	5,040,931
	Less: Stock options exercised		3,059		5,430
	Net income for the period		270,982		695,835
TOTAL			5,518,940		5,731,336
DIVIDENDS DECLARED ON CAPITAL STOCK
	Cumulative Preferred, at required annual rates		6,796		13,593
	Common, $.555 and $2.20 per share, respectively		235,868		466,726
TOTAL DIVIDEND DECLARED			242,664		480,319
BALANCE AT END OF PERIOD		$	5,276,276	$	5,251,017

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)

		For the Three Months Ended June 30,
		2002			2001
		(Thousands of Dollars)
NET INCOME FOR COMMON STOCK		$	97,580		$	100,676
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
	INVESTMENT IN MARKETABLE EQUITY SECURITIES, NET OF ($118) AND $16 TAXES, RESPECTIVELY		(168	)		23
	MINIMUM PENSION LIABILITY ADJUSTMENTS, NET OF $0 AND $293 TAXES, RESPECTIVELY		-			293
	UNREALIZED GAINS/(LOSSES) ON DERIVATIVES QUALIFIED AS HEDGES DUE TO CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE, NET OF $0 AND $1,178 TAXES, RESPECTIVELY		-			850
	UNREALIZED GAINS/(LOSSES) ON DERIVATIVES QUALIFIED AS HEDGES, NET OF ($634) AND ($8,253) TAXES, RESPECTIVELY		(886	)		(10,439	)
	LESS: RECLASSIFICATION ADJUSTMENT FOR GAINS/(LOSSES)INCLUDED IN NET INCOME, NET OF $353 AND ($1,415) TAXES, RESPECTIVELY		506			(2,639	)
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES			(1,560	)		(6,634	)
COMPREHENSIVE INCOME		$	96,020		$	94,042

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

8

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)

		For the Six Months Ended June 30,
		2002			2001
		(Thousands of Dollars)
NET INCOME FOR COMMON STOCK		$	264,186		$	279,790
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
	INVESTMENT IN MARKETABLE EQUITY SECURITIES, NET OF ($245) AND ($279) TAXES, RESPECTIVELY		(348	)		(189	)
	MINIMUM PENSION LIABILITY ADJUSTMENTS, NET OF ($2,049) AND ($1,656) TAXES, RESPECTIVELY		(2,959	)		(2,055	)
	UNREALIZED GAINS/(LOSSES) ON DERIVATIVES QUALIFIED AS HEDGES DUE TO CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE, NET OF $0 AND ($5,587) TAXES, RESPECTIVELY		-			(8,050	)
	UNREALIZED GAINS/(LOSSES) ON DERIVATIVES QUALIFIED AS HEDGES, NET OF $6,990 AND ($8,659) TAXES, RESPECTIVELY		9,971			(12,452	)
	LESS: RECLASSIFICATION ADJUSTMENT FOR GAINS/(LOSSES) INCLUDED IN NET INCOME, NET OF ($5,413) AND ($378) TAXES, RESPECTIVELY		(7,689	)		(713	)
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES			14,353			(22,033	)
COMPREHENSIVE INCOME		$	278,539		$	257,757

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

9

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)

			For the Six Months Ended June 30,
			2002			2001
			(Thousands of Dollars)
OPERATING ACTIVITIES
	Net income		$	270,982		$	286,586
	PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
		Depreciation and amortization		242,569			271,866
		Income tax deferred (excluding taxes resulting from divestiture of plant)		94,713			(55,354	)
		Common equity component of allowance for funds used during construction		(6,121	)		(501	)
		Accrued pension credits		(170,900	)		(161,285	)
		Other non-cash charges		20,229			6,534
	CHANGES IN ASSETS AND LIABILITIES
		Accounts receivable—customer, less allowance for uncollectibles		(26,450	)		160,808
		Materials and supplies, including fuel and gas in storage		45,077			3,305
		Other receivables		(112,429	)		37,174
		Prepayments (other than pensions) and other current assets		(27,412	)		94,307
		Deferred recoverable energy costs		(92,012	)		85,048
		Cost of removal less salvage		(64,240	)		(44,570	)
		Accounts payable		103,997			(207,739	)
		Other-net		71,638			(76,880	)
NET CASH FLOWS FROM OPERATING ACTIVITIES				349,641			399,299
INVESTING ACTIVITIES INCLUDING CONSTRUCTION
		Utility construction expenditures		(506,360	)		(448,215	)
		Nuclear fuel expenditures		-			(6,229	)
		Contributions to nuclear decommissioning trust		-			(10,650	)
		Common equity component of allowance for funds used during construction		6,121			501
		Divestiture of utility plant (net of federal income tax)		-			99,951
		Investments by unregulated subsidiaries		(468	)		(12,435	)
		Non-utility plant		(175,896	)		(37,728	)
NET CASH FLOWS USED IN INVESTING ACTIVITIES INCLUDING CONSTRUCTION				(676,603	)		(414,805	)
FINANCING ACTIVITIES INCLUDING DIVIDENDS
		Net proceeds from short-term debt		(45,001	)		(32,776	)
		Additions to long-term debt		625,000			624,600
		Retirement of long-term debt		(300,000	)		(150,000	)
		Issuance and refunding costs		(10,602	)		(14,846	)
		Funds held for refunding of NYSERDA Notes		-			(224,600	)
		Common stock dividends		(235,868	)		(233,271	)
		Issuance of common stock		32,076			-
		Preferred stock dividends		(6,796	)		(6,796	)
NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES INCLUDING DIVIDENDS				58,809			(37,689	)
NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS				(268,153	)		(53,195	)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1				341,179			94,828
CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30			$	73,026		$	41,633
LESS: RESTRICTED CASH				13,824			-
BALANCE: UNRESTRICTED CASH AND TEMPORARY CASH INVESTMENTS			$	59,202		$	41,633

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

10

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CON EDISON

Note A - General

These footnotes accompany and form an integral part of the interim consolidated financial statements of Consolidated Edison, Inc. (Con Edison) and its subsidiaries, including the regulated utility Consolidated Edison Company of New York, Inc. (Con Edison of New York), the regulated utility Orange and Rockland Utilities, Inc. (O&R) and several non-utility subsidiaries. These financial statements are unaudited but, in the opinion of Con Edison's management, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair statement of the results for the interim periods presented. These financial statements should be read together with the audited Con Edison financial statements (including the notes thereto) included in the combined Con Edison, Con Edison of New York and O&R Annual Reports on Form 10-K for the year ended December 31, 2001 (the Form 10-K). Results for interim periods are not necessarily indicative of results for the entire fiscal year.

Earnings Per Common Share

For the three months ended June 30, 2002 and 2001, the weighted average number of shares used to calculate the diluted earnings per common share included dilutive common stock equivalents of approximately 1,174,209 shares and 439,901 shares, respectively. For the six months ended June 30, 2002 and 2001, the weighted average number of shares used to calculate the diluted earnings per common share included dilutive common stock equivalents of approximately 1,130,832 shares and 361,421 shares, respectively. Stock options to purchase 6.35 million and 5.34 million common shares for the three months and 6.39 million and 5.42 million common shares for the six months ended June 30, 2002 and 2001, respectively, were not included in the respective period's computation of diluted earnings per share because the exercise price of the options was greater than the average market price of the common shares. See "Earnings Per Common Share" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Note B - Environmental Matters

Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of Con Edison's utility subsidiaries and may be present in their facilities and equipment.

The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund) and similar state statutes impose joint and several strict liabilities upon generators of hazardous substances for resulting removal and remedial costs and environmental damages. Liabilities under these laws can be material and in some instances may be imposed without regard to fault, or may be imposed for past acts, even though such past acts may have been lawful at the time they occurred.

At June 30, 2002, Con Edison had accrued $129 million as its best estimate of the utility subsidiaries' liability for sites as to which they have received process or notice alleging that hazardous substances generated by them (and, in most instances, other potentially responsible parties) were deposited. There will be additional liability relating to these sites and other sites, the amount of which is not presently determinable but may be material to Con Edison's financial position, results of operations or liquidity.

11

Con Edison's utility subsidiaries are permitted under current rate agreements to defer for subsequent recovery through rates certain site investigation and remediation costs with respect to hazardous waste. At June 30, 2002, $61.5 million of such costs had been deferred as regulatory assets.

Suits have been brought in New York State and federal courts against Con Edison's utility subsidiaries 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 utility subsidiaries. The suits that have been resolved, which are many, have been resolved without any payment by the utility subsidiaries, or for amounts that were not, in the aggregate, material to the company. The amounts specified in all the remaining suits total billions of dollars but Con Edison believes that these amounts are greatly exaggerated, as were the claims already disposed of. Based on the information and relevant circumstances known to Con Edison at this time, these suits are not expected to have a material adverse effect on Con Edison's financial position, results of operations or liquidity. At June 30, 2002, the company had accrued an $8.7 million provision as its best estimate of liability for these suits and deferred a like amount as a regulatory asset.

Workers' compensation administrative proceedings have been commenced, wherein current and former employees claim benefits based upon alleged disability from exposure to asbestos. Based on the information and relevant circumstances known to Con Edison at this time, these claims are not expected to have a material adverse effect on Con Edison's financial position, results of operations or liquidity. At June 30, 2002, Con Edison had accrued a $134 million provision as its best estimate of the utility subsidiaries' liability for workers' compensation claims, including those related to asbestos exposure. Of this amount $55.5 million was deferred as a regulatory asset.

Note C - Nuclear Generation

The New York State Public Service Commission (PSC) is investigating the February 2000 to January 2001 outage of the nuclear generating unit sold by Con Edison of New York in September 2001, its causes and the prudence of the company's actions regarding the operation and maintenance of the generating unit. The proceeding covers, among other things, Con Edison of New York's inspection practices, the circumstances surrounding prior outages, the basis for postponement of the unit's steam generator replacement and whether, and to what extent, increased replacement power costs and repair and replacement costs should be borne by Con Edison's shareholders.

Con Edison of New York has billed to customers replacement power costs for the outage incurred prior to August 2000 and after October 2000, but not approximately $90 million of replacement power costs incurred in August through October 2000. Con Edison of New York has also accrued a $40 million liability for the possible disallowance of replacement power costs that it had previously recovered from customers.

On June 5, 2002, the United States Court of Appeals for the Second Circuit unanimously affirmed the October 2000 decision by the United States District Court for the Northern District of New York, in an action entitled Consolidated Edison Company of New York, Inc. v. Pataki, et al., in which the district court had determined that the New York State law that directed the PSC to prohibit Con Edison of New York from recovering replacement power costs for the outage from customers was unconstitutional and

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granted the company's motion for a permanent injunction to prevent its implementation. Unless extended by a Justice of the United States Supreme Court, defendants have 90 days from entry of the decision to seek a writ of certiorari to the Supreme Court.

The company is unable to predict whether or not any proceedings, lawsuits, legislation or other actions relating to the nuclear generating unit will have a material adverse effect on its financial position, results of operations or liquidity.

Note D - Northeast Utilities

In March 2001, Con Edison commenced an action in the United States District Court for the Southern District of New York, entitled Consolidated Edison, Inc. v. Northeast Utilities, seeking a declaratory judgment that Northeast Utilities has failed to meet certain conditions precedent to Con Edison's obligation to complete its acquisition of Northeast Utilities pursuant to their agreement and plan of merger, dated October 13, 1999, as amended and restated as of January 11, 2000 (the merger agreement). In May 2001 Con Edison amended its complaint. As amended, Con Edison's complaint seeks, among other things, recovery of damages sustained by it as a result of the material breach of the merger agreement by Northeast Utilities and the court's declaration that under the merger agreement Con Edison has no further or continuing obligations to Northeast Utilities, and that Northeast Utilities has no further or continuing rights against Con Edison.

In June 2001, Northeast Utilities withdrew the separate action it commenced in March 2001 in the same court and filed as a counter-claim to Con Edison's amended complaint its claim that Con Edison materially breached the merger agreement and that as a result Northeast Utilities and its shareholders have suffered substantial damages, including the difference between the consideration to be paid to Northeast Utilities shareholders pursuant to the merger agreement and the market value of Northeast Utilities common stock, expenditures in connection with regulatory approvals and lost business opportunities. Pursuant to the merger agreement, Con Edison had agreed to acquire Northeast Utilities for $26.00 per share (an estimated aggregate of not more than $3.9 billion) plus $0.0034 per share for each day after August 5, 2000 through the day prior to the completion of the transaction, payable 50 percent in cash and 50 percent in stock.

Con Edison believes that Northeast Utilities has materially breached the merger agreement, and that Con Edison has not materially breached the merger agreement. Con Edison believes it is not obligated to acquire Northeast Utilities because Northeast Utilities does not meet the merger agreement's conditions that Northeast Utilities perform all of its obligations under the merger agreement. Those obligations include the obligation that it carry on its businesses in the ordinary course consistent with past practice; that the representations and warranties made by it in the merger agreement were true and correct when made and remain true and correct; and that there be no material adverse change with respect to Northeast Utilities.

Both parties have filed motions for summary judgement. Con Edison is unable to predict whether or not any Northeast Utilities related lawsuits or other actions will have a material adverse effect on Con Edison's financial position, results of operations or liquidity.

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Note E - Leases

In accordance with SFAS No. 13 "Accounting for Leases" and related Financial Accounting Standards Board's (FASB) Emerging Issues Task Force (EITF) issue statements, a 525 MW electric generating facility being developed under an operating lease arrangement by a Con Edison unregulated subsidiary in Newington, New Hampshire (the Newington Project) and the related lease obligations are not included in Con Edison's consolidated balance sheet.

In June 2002, the FASB issued an exposure draft of a proposed Interpretation on "Consolidation of Certain Special Purpose Entities" (SPEs). If the exposure draft were adopted in its current form, Con Edison would be required to include the Newington Project and the related lease obligations on its consolidated balance sheet. Con Edison estimates that this would result in a decrease in annual net income of approximately $4 million (after tax) and increases of approximately $350 million in non-utility plant and long-term debt.

Completion of construction of the Newington Project is now scheduled for later in 2002, and the company's unregulated subsidiary and the construction contractor are disputing whether the subsidiary is entitled to damages for a delay in completion and whether the contractor is entitled to additional project costs. Con Edison does not expect that this dispute will have a material adverse effect on its financial position, results of operations or liquidity.

As part of a broad initiative, the Internal Revenue Service is reviewing certain categories of transactions. Among these are transactions in which a taxpayer leases property and then immediately subleases it back to the lessor (termed "Lease In/Lease Out," or LILO transactions). In 1997 and 1999, Con Edison unregulated subsidiaries invested $93 million in two LILO transactions, involving gas distribution and electric generating facilities in the Netherlands.

For additional information, see Note J to financial statements included in the Form 10-K.

Note F - Derivative Instruments and Hedging Activities

As of January 2001 Con Edison adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities—an amendment of FASB Statement No. 133" (collectively, SFAS No. 133).

Energy Price Hedging

Con Edison's subsidiaries use derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase or sale of electricity and gas (Hedges). As of June 30, 2002, the fair value of the derivatives for such use was $25.9 million, comprised of $15.5 million at the regulated utility subsidiaries and $10.4 million at the unregulated subsidiaries.

Con Edison's utility subsidiaries, pursuant to SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation," defer recognition in income of gains and losses on a Hedge until the underlying transaction is completed. Pursuant to rate provisions that permit the recovery of the cost of purchased power and gas, Con Edison's utility subsidiaries credit or charge to their customers gains or losses on

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Hedges and related transaction costs. See "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K.

To the extent SFAS No. 71 does not allow deferred recognition in income, Con Edison's utility subsidiaries have elected special hedge accounting pursuant to SFAS No. 133 (Cash Flow Hedge Accounting). Con Edison Solutions (which provides competitive gas and electric supply and energy-related products and services) has also elected Cash Flow Hedge Accounting. Con Edison Energy accounts for its trading activities in accordance with EITF No. 98-10 (see below).

Pursuant to Cash Flow Hedge Accounting, except as described in the following paragraph, the mark-to-market unrealized gain or loss on each Hedge is recorded in other comprehensive income and reclassified to income at the time the underlying transaction is completed. Upon adoption of SFAS No. 133, Con Edison's subsidiaries recognized after-tax transition gains of $1.7 million in other comprehensive income and $0.4 million in income. For the quarters ended June 30, 2002 and 2001, the company recognized in other comprehensive income unrealized after-tax net gains of $2.7 million and after-tax net losses of $12.7 million, respectively, relating to the subsidiaries' Hedges for which Cash Flow Hedge Accounting was used. For the six months ended June 30, 2002 and 2001, the company recognized in other comprehensive income unrealized after-tax net gains of $13.2 million and after-tax net losses of $12.3 million, respectively. The company reclassified to income from accumulated other comprehensive income after-tax net gains of $1.5 million for the second quarter of 2002, compared with after-tax net losses of $2.4 million for the second quarter of 2001. For the six months ended June 30, 2002 and 2001, the company reclassified to income from accumulated other comprehensive income after-tax net losses of $5.7 million and $0.5 million, respectively. These amounts, which were recognized in net income as fuel or purchased power costs, were largely offset by directionally opposite changes in the market value of the underlying commodities. As of June 30, 2002, the subsidiaries' Hedges for which Cash Flow Hedge Accounting was used were for a term of less than two years and $5.2 million of after-tax net gains relating to such Hedges were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months.

Under Cash Flow Hedge Accounting, any gain or loss relating to any portion of a Hedge determined to be "ineffective" is recognized in income in the period in which such determination is made. As a result, changes in the value of a Hedge may be recognized in income in an earlier period than the period in which the underlying transaction is recognized in income. The company expects, however, that these changes in values will be offset, at least in part, when the underlying transactions are recognized in income. For the second quarter of 2002, the company recognized in income mark-to-market unrealized pre-tax net gains of $3.4 million compared with unrealized pre-tax net losses of $8.9 million for the second quarter of 2001, relating to derivative transactions at Con Edison Solutions that were determined to be "ineffective." For the six months ended June 30, 2002 and 2001, with respect to such hedges, the company recognized in income mark-to-market unrealized pre-tax net gains of $6.5 million and pre-tax net losses of $9.9 million, respectively.

Con Edison Energy (which markets specialized energy supply services to wholesale customers) enters into over-the-counter and exchange traded contracts for the purchase and sale of electricity and installed

15

capacity, gas or oil (which may provide for either physical or financial settlement) and is considered an "energy trading organization" required to account for such trading activities in accordance with FASB EITF Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk Management Activities." With respect to such contracts entered into by Con Edison Energy, Con Edison recognized in income unrealized mark-to-market pre-tax net losses of $0.6 million and pre-tax net gains of $1.3 million for the second quarters of 2002 and 2001, respectively. For the six months ended June 30, 2002 and 2001, the company recognized in income unrealized mark-to-market pre-tax net gains of $3.8 million and $9.2 million, respectively. As of June 30, 2002, the fair value of the energy trading contracts was $15.0 million.

Interest Rate Hedging

O&R and Con Edison Development (which invests in and manages energy infrastructure projects) use Cash Flow Hedge Accounting for their interest rate swap agreements as described below. As of June 30, 2002, the fair value of the O&R interest rate swap was a loss of $15.4 million, and the fair value of the Con Edison Development interest rate swap was a loss of $6.7 million.

In connection with its $55 million promissory note issued to the New York State Energy Research and Development Authority for the net proceeds of the Authority's variable rate Pollution Control Refunding Revenue Bonds, 1994 Series A (the 1994 Bonds), O&R has a swap agreement pursuant to which it pays interest at a fixed rate of 6.09 percent and is paid interest at the same variable rate as is paid on the 1994 Bonds. Upon adoption of SFAS No. 133, the company recognized in other comprehensive income after-tax transition adjustment losses relating to the swap agreement of $8.1 million. For the second quarter of 2002, the company recognized in other comprehensive income unrealized after-tax losses of $1.6 million compared with unrealized after-tax gains of $0.4 million for the second quarter of 2001. For the six months ended June 30, 2002 and 2001, the company recognized in other comprehensive income unrealized after-tax losses of $1.4 million and after-tax gains of $0.1 million, respectively. During the second quarters of 2002 and 2001, $0.4 million and $0.5 million, respectively, of after-tax losses were reclassified from accumulated other comprehensive income to income. For the six months ended June 30, 2002 and 2001, the company reclassified from accumulated other comprehensive income to income after-tax net losses of $0.8 million and $0.5 million, respectively. As of June 30, 2002, $1.1 million of after-tax losses relating to the swap agreement were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months.

In connection with $90 million of variable rate loans relating to the Lakewood electric generating plant, Con Edison Development has swap agreements pursuant to which it pays interest at a fixed rate of 6.68 percent and is paid interest at a variable rate equal to the three-month London Interbank Offered Rate. Upon adoption of SFAS No. 133, the company recognized in other comprehensive income after-tax transition adjustment losses relating to the swap agreements of $1.6 million. For the second quarter of 2002, the company recognized in other comprehensive income unrealized after-tax losses of $1.9 million compared with unrealized after-tax gains of $1.8 million for the second quarter of 2001. For the six months ended June 30, 2002 and 2001, the company recognized in other comprehensive income unrealized after-tax losses of $1.8 million and $0.2 million, respectively. During the second quarter of

16

2002 and 2001, $0.6 million after-tax losses and $0.3 million after-tax gains, respectively, were reclassified from accumulated other comprehensive income to income. For the six months ended June 30, 2002 and 2001, $1.2 million after-tax losses and $0.3 million of after-tax gains, respectively, were reclassified from accumulated other comprehensive income to income. As of June 30, 2002, $2.3 million of after-tax losses relating to the swap agreements were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months.

Comprehensive Income

Unrealized gains/(losses) on derivatives, net of tax, included in accumulated other comprehensive income for the three months ended June 30, 2002 and 2001 were as follows:

	Three Months Ended
	June 30, 2002			June 30, 2001
	(Millions of Dollars)
Unrealized gains/(losses) on derivatives qualified as hedges due to cumulative effect of a change in accounting principle net of $0 and $1.2 taxes	$	-		$	0.9
Unrealized gains/(losses) on derivatives qualified as hedges, net of ($0.6) and ($7.6) taxes		(0.9	)		(10.4	)
Less: Reclassification adjustment for gains/(losses) included in net income, net of $0.4 and ($1.6) taxes		0.5			(2.6	)
Unrealized gains/(losses) on derivatives qualified as hedges for the period	$	(1.4	)	$	(6.9	)

Unrealized gains/(losses) on derivatives, net of tax, included in accumulated other comprehensive income for the six months ended June 30, 2002 and 2001 were as follows:

	Six Months Ended
	June 30, 2002			June 30, 2001
	(Millions of Dollars)
Unrealized gains/(losses) on derivatives qualified as hedges due to cumulative effect of a change in accounting principle, net of $0 and ($5.6) taxes	$	-		$	(8.0	)
Unrealized gains/(losses) on derivatives qualified as hedges, net of $7.0 and ($8.7) taxes		10.0			(12.5	)
Less: Reclassification adjustment for gains/(losses) included in net income, net of ($5.4) and ($0.4) taxes		(7.7	)		(0.7	)
Unrealized gains/(losses) on derivatives qualified as hedges for the period	$	17.7		$	(19.8	)

Note G - Financial Information by Business Segment

Con Edison's business segments were determined based on similarities in economic characteristics, the regulatory environment, and management's reporting requirements. Con Edison's principal business segments are:

•

Regulated Electric - consists of regulated utility activities of Con Edison of New York and O&R relating to the generation, transmission and distribution of electricity in New York, New Jersey and Pennsylvania.


•

Regulated Gas - consists of regulated utility activities of Con Edison of New York and O&R relating to the transportation, storage and distribution of natural gas in New York and Pennsylvania.

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•

Regulated Steam - consists of regulated utility activities of Con Edison of New York relating to the generation and distribution of steam in New York.


•

Unregulated subsidiaries - represents the operations of the competitive electric and gas supply and energy-related products and services businesses and the operations of the affiliates that invest in energy infrastructure and telecommunications projects.


•

Other - includes the operations of the parent company, Con Edison, and consolidation adjustments.

All revenues of Con Edison's business segments, excluding revenues earned by an unregulated subsidiary on certain energy infrastructure projects, which are deemed to be immaterial, are from customers located in the United States. Also, all assets, excluding certain investments in energy infrastructure projects by an unregulated subsidiary, are located in the United States and are materially consistent with segment assets as disclosed in the Form 10-K. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Common services shared by the business segments (shared services) are assigned directly or allocated based on various cost factors, depending on the nature of the service provided.

The financial data for business segments are as follows:

CONSOLIDATED EDISON, INC.
SEGMENT FINANCIAL INFORMATION
$000'S

FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)

	Regulated Electric				Regulated Steam
	2002		2001		2002			2001
Operating revenues	$	1,400,045	$	1,531,949	$	70,488		$	89,666
Intersegment revenues		2,617		3,213		429			485
Depreciation and amortization		93,599		107,153		4,571			4,431
Operating income	$	183,365	$	183,986	$	(4,280	)	$	(5,422	)

	Regulated Gas				Unregulated Subsidiaries & Other
	2002		2001		2002		2001
Operating revenues	$	242,355	$	305,394	$	187,351	$	185,206
Intersegment revenues		839		872		10,262		2,830
Depreciation and amortization		19,073		18,016		4,883		7,182
Operating income	$	19,269	$	30,240	$	1,664	$	7,018

	Total
	2002		2001
Operating revenues	$	1,900,239	$	2,112,215
Intersegment revenues		14,147		7,400
Depreciation and amortization		122,126		136,782
Operating income	$	200,018	$	215,822

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FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)

	Regulated Electric				Regulated Steam
	2002		2001		2002		2001
Operating revenues	$	2,700,893	$	3,239,323	$	211,954	$	347,918
Intersegment revenues		4,433		6,742		905		951
Depreciation and amortization		186,070		213,252		9,135		8,836
Operating income	$	307,629	$	333,117	$	22,386	$	34,452

	Regulated Gas				Unregulated Subsidiaries & Other
	2002		2001		2002		2001
Operating revenues	$	716,219	$	1,007,213	$	370,312	$	404,024
Intersegment revenues		1,635		1,591		18,282		5,166
Depreciation and amortization		37,921		35,757		9,443		14,021
Operating income	$	116,718	$	128,170	$	10,706	$	6,575

	Total
	2002		2001
Operating revenues	$	3,999,378	$	4,998,478
Intersegment revenues		25,255		14,450
Depreciation and amortization		242,569		271,866
Operating income	$	457,439	$	502,314

Note H - New Financial Accounting Standards

On January 1, 2002, Con Edison adopted SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 provides that goodwill (i.e., the excess of cost over fair value of the assets of a business acquired) and intangible assets with indefinite useful lives will no longer be amortized, but instead be tested for impairment at least annually. Other intangible assets will continue to be amortized over their useful lives. The goodwill impairment test is a two-step process. The first step identifies potential impairments by comparing the estimated fair value of a reporting unit to its carrying amount, including goodwill. If the fair value is less than the carrying amount, the second step of the impairment test is performed. The second step compares the implied fair value determined in the same manner as the amount of goodwill recognized in a business combination pursuant to SFAS No. 141, "Business Combination," to its carrying amount to determine the amount of the impairment, if any.

Con Edison currently has $439.9 million of recorded goodwill relating to the 1999 acquisition of O&R and certain generating assets owned by Con Edison Development. The company completed the first step of the goodwill impairment test, which indicated that the $34.1 million (approximately $20 million after tax) of goodwill related to Con Edison Development is impaired. Con Edison will complete the second step of the impairment test before the end of the year and will recognize any impairment charge as a cumulative effect of a change in accounting principle at January 1, 2002. There is no impairment of the $405.8 million of goodwill related to the acquisition of O&R.

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Had Con Edison been accounting for goodwill under SFAS No. 142 for all periods presented, its net income and earnings per share would have been as follows:

		Three months ended June 30,				Six months ended June 30,
		2002		2001		2002		2001
		(Millions of dollars, except per share data)
Reported net income		$	97.6	$	100.7	$	264.2	$	279.8
Add back: goodwill amortization (net of tax)			-		2.7		-		5.8
Adjusted net income		$	97.6	$	103.4	$	264.2	$	285.6
Basic and diluted earnings per share:
	Reported	$	0.46	$	0.48	$	1.24	$	1.32
	Goodwill amortization (net of tax)		-		0.01		-		0.03
	Adjusted	$	0.46	$	0.49	$	1.24	$	1.35

Con Edison's definite life intangible asset relates to a power purchase agreement of an unregulated subsidiary, and is being amortized on a straight-line basis over its 25-year contract period. At June 30, 2002, the gross carrying amount and accumulated amortization were $91.7 million and $7.8 million, respectively. Amortization expense was $1.9 million for the six months ended June 30, 2002, and is estimated to be $3.7 million per year from 2002 to 2006.

In June 2002, the EITF discussed EITF Issue No. 02-3, "Accounting for Contracts Involved in Energy Trading and Risk Management Activities." The Task Force reached a final consensus that revenue resulting from energy trading contracts, whether realized or unrealized and whether financially or physically settled, should be shown net in the income statement. The consensus also expanded disclosure requirements for energy trading activities. The new ruling, which applies to Con Edison Energy, is effective for periods ending after July 2002 with reclassification of prior period amounts required. The reclassification will reduce Con Edison's non-utility revenues and costs for purchased power and gas by $245 million in 2001 and $114 million in 2000 (about 2.5 percent and 1.2 percent, respectively, of Con Edison's total operating revenues in those years). For the six-month period ended June 30, 2002, revenues and costs will be reduced by $104 million (2.6 percent of Con Edison's total operating revenues). The adoption of EITF Issue No. 02-3 will have no material impact on Con Edison's consolidated financial position or results of operations.

SFAS No. 143, "Accounting for Asset Retirement Obligations," which Con Edison is required to adopt on January 1, 2003, requires entities to record the fair value of a liability associated with an asset retirement obligation in the period incurred. When the liability is initially recorded, the entity will capitalize the cost by increasing the amount of the related asset. The liability will be increased to its present value each period and the capitalized cost will be depreciated over the useful life of the related asset. Upon retirement of the asset, the entity will settle the obligation for the amount recorded or incur a gain or loss. Con Edison has not yet determined the impact of this standard on its consolidated financial position or results of operations.

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which Con Edison adopted on January 1, 2002, replaces SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 144 requires that all long-lived assets

20

held for sale or meeting other specified criteria be measured at the lower of book value or fair value less cost to sell. The standard also broadens the reporting of discontinued operations. The adoption of SFAS No. 144 had no impact on Con Edison's consolidated financial position or results of operations.

SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections," which was issued in April 2002, rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and SFAS No. 64, "Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements." The provisions of this section are effective January 1, 2003. Con Edison does not expect that adoption of the standard will have a material adverse effect on its consolidated financial position or results of operations.

This Statement also amends SFAS No. 13, "Accounting for Leases," to require sale-leaseback accounting for certain lease modifications that have economic impact similar to sale-leaseback transactions and amends certain other authoritative pronouncements. These provisions of SFAS No. 145, adopted in May 2002, had no impact on Con Edison's consolidated financial position or results of operations.

SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", which Con Edison is required to adopt on January 1, 2003, requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Con Edison does not expect that adoption of the standard will have a material adverse effect on its consolidated financial position or results of operations.

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Consolidated Edison of New York, Inc.

CONSOLIDATED BALANCE SHEET
(UNAUDITED)

			As at
			June 30, 2002		December 31, 2001
			(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
	Electric		$	10,618,480	$	10,441,779
	Gas			2,147,474		2,113,664
	Steam			760,053		758,600
	General			1,313,442		1,241,746
	Total			14,839,449		14,555,789
	Less: Accumulated depreciation			4,178,523		4,083,760
	Net			10,660,926		10,472,029
	Construction work in progress			748,970		626,835
NET UTILITY PLANT				11,409,896		11,098,864
NON-UTILITY PLANT
	Non-utility property			25,001		29,408
NET PLANT				11,434,897		11,128,272
CURRENT ASSETS
	Cash and temporary cash investments			33,957		264,776
	Accounts receivable — customer, less allowance for uncollectible accounts of $28,287 and $29,400 in 2002 and 2001, respectively			531,763		527,635
	Other receivables			185,093		63,885
	Accounts receivable from affiliated companies			42,367		27,929
	Fuel, at average cost			11,701		16,719
	Gas in storage, at average cost			54,871		85,534
	Materials and supplies, at average cost			82,737		82,301
	Prepayments			44,986		58,628
	Other current assets			34,767		33,247
TOTAL CURRENT ASSETS				1,022,242		1,160,654
INVESTMENTS
	Other			5,325		4,950
TOTAL INVESTMENTS				5,325		4,950
DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS
	Accrued pension credits			868,706		697,807
	Regulatory assets
		Future federal income tax		574,131		624,625
		Sale of nuclear generating unit		124,463		170,241
		Recoverable energy costs		218,409		121,748
		Real estate sale costs — First Avenue properties		106,917		105,407
		Workers' compensation		55,453		60,466
		Divestiture — capacity replacement reconciliation		58,850		58,850
		Accrued unbilled gas revenue		43,594		43,594
		Deferred special retirement program costs		39,918		42,197
		Deferred revenue taxes		47,968		34,404
		World Trade Center restoration costs		34,975		32,933
		Other		101,815		83,180
	TOTAL REGULATORY ASSETS			1,406,493		1,377,645
	Other deferred charges and noncurrent assets			175,125		149,490
TOTAL DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS				2,450,324		2,224,942
TOTAL			$	14,912,788	$	14,518,818

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

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Consolidated Edison of New York, Inc.

CONSOLIDATED BALANCE SHEET
(UNAUDITED)

			As at
			June 30, 2002			December 31, 2001
			(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
	Common stock		$	1,482,341		$	1,482,341
	Repurchased Consolidated Edison, Inc. common stock			(962,092	)		(962,092	)
	Retained earnings			4,241,232			4,185,575
	Capital stock expense			(35,412	)		(35,547	)
	Accumulated other comprehensive income			(4,566	)		(4,472	)
		TOTAL COMMON SHAREHOLDERS' EQUITY		4,721,503			4,665,805
	Preferred stock
		$5 Cumulative Preferred		175,000			175,000
		4.65% Series C		15,330			15,330
		4.65% Series D		22,233			22,233
		TOTAL PREFERRED STOCK		212,563			212,563
	Long-term debt			5,161,291			5,011,752
TOTAL CAPITALIZATION				10,095,357			9,890,120
NONCURRENT LIABILITIES
	Obligations under capital leases			39,801			41,088
	Accumulated provision for injuries and damages			168,086			163,632
	Pension and benefits reserve			138,992			101,759
	Other noncurrent liabilities			12,187			12,187
TOTAL NONCURRENT LIABILITIES				359,066			318,666
CURRENT LIABILITIES
	Long-term debt due within one year			150,000			300,000
	Preferred stock to be redeemed in one year			37,050			37,050
	Notes payable			84,000			–
	Accounts payable			630,785			589,696
	Accounts payable to affiliated companies			24,491			8,441
	Customer deposits			206,826			204,873
	Accrued taxes			88,734			141,259
	Accrued interest			68,570			73,311
	Accrued wages			70,769			71,177
	Other current liabilities			267,796			270,109
TOTAL CURRENT LIABILITIES				1,629,021			1,695,916
DEFERRED CREDITS AND REGULATORY LIABILITIES
	Accumulated deferred federal income tax			2,122,795			2,022,638
	Accumulated deferred investment tax credits			108,867			111,925
	Regulatory liabilities
		NYISO reconciliation		102,471			92,504
		World Trade Center casualty loss		78,787			81,483
		Gain on divestiture		36,806			52,784
		Deposit from sale of First Avenue properties		50,000			50,000
		Accrued electric rate reduction		38,018			38,018
		DC service incentive		32,869			28,455
		Transmission Congestion Contracts		78,757			4,896
		Gas Rate Plan–World Trade Center Recovery		36,388			–
		Other		143,586			131,413
	TOTAL REGULATORY LIABILITIES			597,682			479,553
TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES				2,829,344			2,614,116
TOTAL			$	14,912,788		$	14,518,818

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

23

Consolidated Edison Of New York, Inc.

CONSOLIDATED INCOME STATEMENT
(UNAUDITED)

		For the Three Months Ended June 30,
		2002			2001
		(Thousands of Dollars)
OPERATING REVENUES
	Electric	$	1,282,627		$	1,396,411
	Gas		215,107			269,327
	Steam		70,488			89,666
TOTAL OPERATING REVENUES			1,568,222			1,755,404
OPERATING EXPENSES
	Purchased power		560,292			593,956
	Fuel		40,677			46,020
	Gas purchased for resale		96,666			133,476
	Other operations		177,219			228,890
	Maintenance		92,463			109,960
	Depreciation and amortization		108,751			121,526
	Taxes, other than income taxes		251,305			238,736
	Income taxes		55,076			83,692
TOTAL OPERATING EXPENSES			1,382,449			1,556,256
OPERATING INCOME			185,773			199,148
OTHER INCOME (DEDUCTIONS)
	Investment income		39			118
	Allowance for equity funds used during construction		1,915			258
	Other income less miscellaneous deductions		1,866			1,796
	Income taxes		999			(514	)
TOTAL OTHER INCOME (DEDUCTIONS)			4,819			1,658
INCOME BEFORE INTEREST CHARGES			190,592			200,806
	Interest on long-term debt		84,441			88,817
	Other interest		7,129			7,085
	Allowance for borrowed funds used during construction		(1,575	)		(1,388	)
NET INTEREST CHARGES			89,995			94,514
NET INCOME			100,597			106,292
PREFERRED STOCK DIVIDEND REQUIREMENTS			3,398			3,398
NET INCOME FOR COMMON STOCK		$	97,199		$	102,894

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

24

Consolidated Edison Of New York, Inc.

CONSOLIDATED INCOME STATEMENT
(UNAUDITED)

		For the Six Months Ended June 30,
		2002			2001
		(Thousands of Dollars)
OPERATING REVENUES
	Electric	$	2,491,384		$	2,979,610
	Gas		623,949			866,768
	Steam		211,954			347,918
TOTAL OPERATING REVENUES			3,327,287			4,194,296
OPERATING EXPENSES
	Purchased power		1,115,864			1,375,943
	Fuel		101,536			216,335
	Gas purchased for resale		277,093			498,504
	Other operations		364,512			444,187
	Maintenance		186,414			231,174
	Depreciation and amortization		216,174			241,527
	Taxes, other than income taxes		500,224			526,931
	Income taxes		149,953			192,927
TOTAL OPERATING EXPENSES			2,911,770			3,727,528
OPERATING INCOME			415,517			466,768
OTHER INCOME (DEDUCTIONS)
	Investment income		101			274
	Allowance for equity funds used during construction		6,121			501
	Other income less miscellaneous deductions		3,266			624
	Income taxes		13,133			4,121
TOTAL OTHER INCOME (DEDUCTIONS)			22,621			5,520
INCOME BEFORE INTEREST CHARGES			438,138			472,288
	Interest on long-term debt		169,355			178,494
	Other interest		15,717			14,979
	Allowance for borrowed funds used during construction		(1,584	)		(2,695	)
NET INTEREST CHARGES			183,488			190,778
NET INCOME			254,650			281,510
PREFERRED STOCK DIVIDEND REQUIREMENTS			6,796			6,796
NET INCOME FOR COMMON STOCK		$	247,854		$	274,714

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

25

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(UNAUDITED)

		As at
		June 30, 2002		December 31, 2001
		(Thousands of Dollars)
BALANCE, JANUARY 1		$	4,185,575	$	3,995,825
	Net income for the period		254,650		663,061
TOTAL			4,440,225		4,658,886
DIVIDENDS DECLARED ON CAPITAL STOCK
	Cumulative preferred, at required annual rates		6,796		13,593
	Common		192,197		459,718
TOTAL DIVIDENDS DECLARED			198,993		473,311
BALANCE AT END OF PERIOD		$	4,241,232	$	4,185,575

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)

		For the Three Months Ended June 30,
		2002	2001
		(Thousands of Dollars)
NET INCOME FOR COMMON STOCK		$97,199	$102,894
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
	Minimum pension liability adjustments, net of $0 and $294 taxes, respectively	–	294
	Unrealized gains/(losses) on derivatives qualified as hedges, net of $226 and ($1,757) taxes, respectively	326	(2,509	)
	Less: Reclassification adjustment for gains/(losses) included in net income, net of $116 and ($288) taxes, respectively	167	(412	)
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES		159	(1,803	)
COMPREHENSIVE INCOME		$97,358	$101,091

26

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)

		For the Six Months Ended June 30,
		2002			2001
		(Thousands of Dollars)
NET INCOME FOR COMMON STOCK		$	247,854		$	274,714
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
	Minimum pension liability adjustments, net of ($1,882) and ($1,593) taxes, respectively		(2,721	)		(2,118	)
	Unrealized gains/(losses) on derivatives qualified as hedges, net of $1,899 and ($1,757) taxes, respectively		2,724			(2,509	)
	Less: Reclassification adjustment for gains/(losses) included in net income, net of $66 and ($288) taxes, respectively		97			(412	)
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES			(94	)		(4,215	)
COMPREHENSIVE INCOME		$	247,760		$	270,499

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

27

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)

			For the Six Months Ended June 30,
			2002			2001
			(Thousands of Dollars)
OPERATING ACTIVITIES
	Net income		$	254,650		$	281,510
	PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
		Depreciation and amortization		216,174			241,527
		Income tax deferred (excluding taxes resulting from divestiture of plant)		85,606			(71,248	)
		Common equity component of allowance for funds used during construction		(6,121	)		(501	)
		Accrued pension credits		(170,899	)		(161,285	)
		Other non-cash charges		8,402			24,423
	CHANGES IN ASSETS AND LIABILITIES
		Accounts receivable - customer, less allowance for uncollectibles		(4,127	)		131,339
		Materials and supplies, including fuel and gas in storage		35,245			4,348
		Other receivables		(121,208	)		16,434
		Prepayments (other than pensions) and other current assets		13,734			64,240
		Deferred recoverable energy costs		(96,661	)		81,742
		Cost of removal less salvage		(63,449	)		(43,894	)
		Accounts payable		41,089			(200,316	)
		Other-net		176,133			13,415
NET CASH FLOWS FROM OPERATING ACTIVITIES				368,568			381,734
INVESTING ACTIVITIES INCLUDING CONSTRUCTION
		Construction expenditures		(490,167	)		(456,045	)
		Nuclear fuel expenditures		-			(6,229	)
		Contributions to nuclear decommissioning trust		-			(10,650	)
		Divestiture of utility plant (net of federal income tax)		-			99,951
		Common equity component of allowance for funds used during construction		6,121			501
NET CASH FLOWS USED IN INVESTING ACTIVITIES INCLUDING CONSTRUCTION				(484,046	)		(372,472	)
FINANCING ACTIVITIES INCLUDING DIVIDENDS
		Net proceeds from short-term debt		84,000			(36,772	)
		Additions to long-term debt		300,000			624,600
		Retirement of long-term debt		(300,000	)		(150,000	)
		Funds held for refunding NYSERDA Notes		-			(224,600	)
		Issuance and refunding costs		(348	)		(14,846	)
		Common stock dividends		(192,197	)		(233,271	)
		Preferred stock dividends		(6,796	)		(6,796	)
NET CASH FLOWS USED IN FINANCING ACTIVITIES INCLUDING DIVIDENDS				(115,341	)		(41,685	)
NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS				(230,819	)		(32,423	)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1				264,776			70,273
CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30			$	33,957		$	37,850

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

28

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -
CON EDISON OF NEW YORK

Note A - General

These footnotes accompany and form an integral part of the interim consolidated financial statements of Consolidated Edison Company of New York, Inc. (Con Edison of New York) and its subsidiaries. Consolidated Edison, Inc. (Con Edison) owns all of the outstanding common stock of Con Edison of New York. These financial statements are unaudited but, in the opinion of Con Edison of New York's management, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair statement of the results for the interim periods presented. These financial statements should be read together with the audited Con Edison of New York financial statements (including the notes thereto) included in the combined Con Edison, Con Edison of New York and Orange and Rockland Utilities, Inc. Annual Reports on Form 10-K for the year ended December 31, 2001 (the Form 10-K). Results for interim periods are not necessarily indicative of results for the entire fiscal year.

Note B - Environmental Matters

Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of Con Edison of New York and may be present in its facilities and equipment.

The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund) and similar state statutes impose joint and several strict liabilities, upon generators of hazardous substances for resulting removal and remedial costs and environmental damages. Liabilities under these laws can be material and in some instances may be imposed without regard to fault, or may be imposed for past acts, even though such past acts may have been lawful at the time they occurred.

At June 30, 2002, Con Edison of New York had accrued $92.2 million as its best estimate of its liability for sites as to which it has received process or notice alleging that hazardous substances generated by Con Edison of New York (and, in most instances, other potentially responsible parties) were deposited. There will be additional liability relating to these sites and other sites, the amount of which is not presently determinable but may be material to Con Edison of New York's financial position, results of operations or liquidity.

Under Con Edison of New York's current electric, gas and steam rate agreements, site investigation and remediation costs in excess of $5 million annually incurred with respect to hazardous waste for which it is responsible are to be deferred and subsequently reflected in rates. At June 30, 2002, $22.1 million of such costs had been deferred as regulatory assets.

Suits have been brought in New York State and federal courts against Con Edison of New York 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 Con Edison of New York. The suits that have been resolved, which are many, have been resolved without any payment by Con Edison of New York, or for amounts that were not, in the aggregate, material to the company. The amounts specified in all the remaining suits total billions of dollars, but Con Edison of

29

New York believes that these amounts are greatly exaggerated, as were the claims already disposed of. Based on the information and relevant circumstances known to Con Edison of New York at this time, these suits are not expected to have a material adverse effect on its financial position, results of operations or liquidity. At June 30, 2002, Con Edison of New York had accrued an $8.7 million provision as its best estimate of its liability for these suits and deferred a like amount as a regulatory asset.

Workers' compensation administrative proceedings have been commenced, wherein current and former employees claim benefits based upon alleged disability from exposure to asbestos. Based on the information and relevant circumstances known to Con Edison of New York at this time, these claims are not expected to have a material adverse effect on its financial position, results of operations or liquidity. At June 30, 2002, Con Edison of New York had accrued a $128.5 million provision as its best estimate of its liability for workers' compensation claims, including those related to asbestos exposure. Of this amount, $55.5 million was deferred as a regulatory asset.

Note C - Nuclear Generation

The New York State Public Service Commission (PSC) is investigating the February 2000 to January 2001 outage of the nuclear generating unit sold by Con Edison of New York in September 2001, its causes and the prudence of the company's actions regarding the operation and maintenance of the generating unit. The proceeding covers, among other things, Con Edison of New York's inspection practices, the circumstances surrounding prior outages, the basis for postponement of the unit's steam generator replacement and whether, and to what extent, increased replacement power costs and repair and replacement costs should be borne by Con Edison's shareholders.

Con Edison of New York has billed to customers replacement power costs for the outage incurred prior to August 2000 and after October 2000, but not approximately $90 million of replacement power costs incurred in August through October 2000. Con Edison of New York has also accrued a $40 million liability for the possible disallowance of replacement power costs that it had previously recovered from customers.

On June 5, 2002, the United States Court of Appeals for the Second Circuit unanimously affirmed the October 2000 decision by the United States District Court for the Northern District of New York, in an action entitled Consolidated Edison Company of New York, Inc. v. Pataki, et al., in which the district court had determined that the New York State law that directed the PSC to prohibit Con Edison of New York from recovering replacement power costs for the outage from customers was unconstitutional and granted the company's motion for a permanent injunction to prevent its implementation. Unless extended by a Justice of the United States Supreme Court, defendants have 90 days from entry of the decision to seek a writ of certiorari to the Supreme Court.

The company is unable to predict whether or not any proceedings, lawsuits, legislation or other actions relating to the nuclear generating unit will have a material adverse effect on its financial position, results of operations or liquidity.

30

Note D - Derivative Instruments and Hedging Activities

As of January 2001 Con Edison of New York adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133" (collectively, SFAS No. 133).

Energy Price Hedging

Con Edison of New York uses derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase or sale of electricity and gas (Hedges). As of June 30, 2002, the fair value of the derivatives for such use was $16.1 million.

Pursuant to SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation," Con Edison of New York defers recognition in income of gains and losses on a Hedge until the underlying transaction is completed. In accordance with rate provisions that permit the recovery of the cost of purchased power and gas, Con Edison of New York credits or charges to its customers gains or losses on Hedges and related transaction costs. See "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K. To the extent SFAS No. 71 does not allow deferred recognition in income, Con Edison of New York has elected special hedge accounting under SFAS No. 133 (Cash Flow Hedge Accounting).

Pursuant to Cash Flow Hedge Accounting, the mark-to-market unrealized gain or loss on each Hedge is recorded in other comprehensive income and reclassified to income at the time the underlying transaction is completed (except that any gain or loss relating to any portion of a Hedge determined to be "ineffective" is recognized in income in the period in which such determination is made).

Upon adoption of SFAS No. 133, Con Edison of New York had no transition adjustments to recognize in other comprehensive income. For the quarters ended June 30, 2002 and 2001, Con Edison of New York recognized in other comprehensive income unrealized after-tax net gains of $0.3 million and after-tax net losses of $2.5 million, respectively. For the six months ended June 30, 2002 and 2001, Con Edison of New York recognized in other comprehensive unrealized after-tax net gains of $2.7 million and after-tax net losses of $2.5 million, respectively. For the quarters ended June 30, 2002 and 2001, Con Edison of New York reclassified to income from accumulated other comprehensive income after-tax net gains relating to Hedges of $0.2 million and after-tax net losses of $0.4 million, respectively. For the six months ended June 30, 2002 and 2001, Con Edison of New York reclassified to income from accumulated other comprehensive income after-tax net gains relating to Hedges of $0.1 million and after-tax net losses of $0.4 million. As of June 30, 2002, $0.7 million of after-tax net gains relating to Hedges were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months.

31

Comprehensive Income

Unrealized gains/(losses) on derivatives, net of tax, included in accumulated other comprehensive income for the three months ended June 30, 2002 and 2001 were as follows:

	Three Months Ended
	June 30, 2002		June 30, 2001
	(Millions of Dollars)
Unrealized gains/(losses) on derivatives qualified as hedges, net of $0.2 and ($1.8) taxes	$	0.3	$	(2.5	)
Less: Reclassification adjustment for (gains)/losses included in net income, net of $0.1 and ($0.3) taxes		0.2		(0.4	)
Unrealized gains/(losses) on derivatives qualified as hedges for the period	$	0.1	$	(2.1	)

Unrealized gains/(losses) on derivatives, net of tax, included in accumulated other comprehensive income for the six months ended June 30, 2002 and 2001 were as follows:

	Six Months Ended
	June 30, 2002		June 30, 2001
	(Millions of Dollars)
Unrealized gains/(losses) on derivatives qualified as hedges, net of $1.9 and ($1.8) taxes	$	2.7	$	(2.5	)
Less: Reclassification adjustment for (gains)/losses included in net income, net of $0.1 and ($0.3) taxes		0.1		(0.4	)
Unrealized gains/(losses) on derivatives qualified as hedges for the period	$	2.6	$	(2.1	)

Note E - Financial Information by Business Segment

Con Edison of New York's business segments were determined based on similarities in economic characteristics, the regulatory environment, and management's reporting requirements. Con Edison of New York's principal business segments are:

•

Regulated Electric - consists of regulated utility activities relating to the generation, transmission and distribution of electricity in New York.



•

Regulated Gas - consists of regulated utility activities relating to the transportation, storage and distribution of natural gas in New York.



•

Regulated Steam - consists of regulated utility activities relating to the generation and distribution of steam in New York.

All revenues of Con Edison of New York's business segments are from customers located in the United States. Also, all assets are located in the United States and are materially consistent with segment assets as disclosed in the Form 10-K.

Common services shared by the business segments (shared services) are assigned directly or allocated based on various cost factors, depending on the nature of the service provided.

32

The financial data for business segments are as follows:

CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
SEGMENT FINANCIAL INFORMATION
$000'S

FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)

	Regulated Electric				Regulated Steam
	2002		2001		2002			2001
Operating revenues	$	1,282,627	$	1,396,411	$	70,488		$	89,666
Intersegment revenues		2,648		3,195		429			485
Depreciation and amortization		87,144		101,150		4,571			4,431
Operating income	$	170,739	$	173,358	$	(4,280	)	$	(5,422	)

	Regulated Gas				Total
	2002		2001		2002		2001
Operating revenues	$	215,107	$	269,327	$	1,568,222	$	1,755,404
Intersegment revenues		839		872		3,916		4,552
Depreciation and amortization		17,036		15,945		108,751		121,526
Operating income	$	19,314	$	31,212	$	185,773	$	199,148

FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)

	Regulated Electric				Regulated Steam
	2002		2001		2002		2001
Operating revenues	$	2,491,384	$	2,979,610	$	211,954	$	347,918
Intersegment revenues		5,577		5,858		905		951
Depreciation and amortization		173,185		201,065		9,135		8,836
Operating income	$	286,840	$	313,606	$	22,386	$	34,452

	Regulated Gas				Total
	2002		2001		2002		2001
Operating revenues	$	623,949	$	866,768	$	3,327,287	$	4,194,296
Intersegment revenues		1,635		1,591		8,117		8,400
Depreciation and amortization		33,854		31,626		216,174		241,527
Operating income	$	106,291	$	118,710	$	415,517	$	466,768

Note F - New Financial Accounting Standards

On January 1, 2002, Con Edison of New York adopted SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 provides that goodwill (i.e., the excess of cost over fair value of assets of business acquired) and intangible assets with indefinite useful lives shall no longer be amortized, but instead be tested for impairment at least annually. Other intangible assets will continue to be amortized over their useful lives. The adoption of SFAS No. 142 had no impact on Con Edison of New York's consolidated financial position or results of operations.

In June 2002, The Financial Accounting Standards Board's (FASB) Emerging Issues Task Force (EITF) discussed EITF Issue No. 02-3, "Accounting for Contracts Involved in Energy Trading and Risk

33

Management Activities." The Task Force reached a final consensus ruling that the revenue resulting from energy trading contracts, whether realized or unrealized and whether financially or physically settled, should be shown net in the income statement. The consensus also expanded disclosure requirements for energy trading activities. The new ruling is effective for periods ending after July 2002 with reclassification of prior period amounts required. The adoption of EITF Issue No. 02-3 will have no impact on Con Edison of New York's consolidated financial position or results of operations.

SFAS No. 143, "Accounting for Asset Retirement Obligations," which Con Edison of New York is required to adopt on January 1, 2003, requires entities to record the fair value of a liability associated with an asset retirement obligation in the period incurred. When the liability is initially recorded, the entity will capitalize the cost by increasing the carrying amount of the related asset. The liability is increased to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon retirement of the asset, the entity settles the obligation for the amount recorded or incurs a gain or loss. Con Edison of New York has not yet determined the impact of this standard on its consolidated financial position or results of operations.

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which Con Edison of New York adopted on January 1, 2002, replaces SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 144 requires that all long-lived assets held for sale be measured at the lower of book value or fair value less cost to sell. The standard also broadens the reporting of discontinued operations. The adoption of SFAS No. 144 had no impact on Con Edison of New York's consolidated financial position or results of operations.

SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections," which was issued in April 2002, rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and SFAS No. 64, "Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements." The provisions of this section are effective January 1, 2003. Con Edison of New York does not expect that adoption of the standard will have a material adverse effect on its consolidated financial position or results of operations.

This Statement also amends SFAS No. 13, "Accounting for Leases," to require sale-leaseback accounting for certain lease modifications that have economic impact similar to sale-leaseback transactions and amends certain other authoritative pronouncements. These provisions of SFAS No. 145, adopted in May 2002, had no impact on Con Edison of New York's consolidated financial position or results of operations.

SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", which Con Edison of New York is required to adopt on January 1, 2003, requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Con Edison of New York does not expect that adoption of the standard will have a material adverse effect on its consolidated financial position or results of operations.

34

Orange and Rockland Utilities, Inc.

CONSOLIDATED BALANCE SHEET
(UNAUDITED)

			As At
			June 30, 2002		December 31, 2001
			(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
	Electric		$	717,224	$	703,621
	Gas			296,665		292,066
	Common			112,254		112,353
	TOTAL			1,126,143		1,108,040
	Less: Accumulated depreciation			397,901		389,234
	NET			728,242		718,806
	Construction work in progress			21,773		27,271
NET UTILITY PLANT				750,015		746,077
NON-UTILITY PLANT
	Non-utility property, less accumulated depreciation of $2,054 and $2,399 in 2002 and 2001, respectively			2,542		2,621
NET PLANT				752,557		748,698
CURRENT ASSETS
	Cash and cash equivalents			10,511		1,785
	Customer accounts receivable, less allowance for uncollectable accounts of $2,637 and $2,625			37,408		44,371
	Other accounts receivable, less allowance for uncollectable accounts of $1,070 and $860			4,510		5,166
	Accrued utility revenue			19,557		20,655
	Gas in storage, at average cost			13,718		21,227
	Materials and supplies, at average cost			5,549		5,563
	Prepayments			17,740		17,776
	Other current assets			10,330		11,532
TOTAL CURRENT ASSETS				119,323		128,075
DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS
	Regulatory assets
		Recoverable fuel costs		83,866		87,514
		Deferred pension and other postretirement benefits		42,991		39,599
		Deferred environmental remediation costs		39,366		40,474
		Future federal income tax		36,145		35,266
		Other regulatory assets		31,869		28,808
		Deferred revenue taxes		7,001		6,852
		Hedges on energy trading		650		1,002
	TOTAL REGULATORY ASSETS			241,888		239,515
	Other deferred charges and noncurrent assets			16,150		19,052
TOTAL DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS				258,038		258,567
TOTAL			$	1,129,918	$	1,135,340

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

35

Orange and Rockland Utilities, Inc.

CONSOLIDATED BALANCE SHEET
(UNAUDITED)

			As At
			June 30, 2002			December 31, 2001
			(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
	Common stock		$	5		$	5
	Additional paid in capital			194,499			194,499
	Retained earnings			157,312			151,792
	Accumulated comprehensive income			(12,147	)		(10,905	)
		TOTAL COMMON SHAREHOLDERS' EQUITY		339,669			335,391
	Long-term debt			300,830			335,771
TOTAL CAPITALIZATION				640,499			671,162
NONCURRENT LIABILITIES
	Pension and benefit reserve			94,807			85,607
	Other noncurrent liabilities			19,485			18,619
TOTAL NONCURRENT LIABILITIES				114,292			104,226
CURRENT LIABILITIES
	Long term debt due within one year			35,000			-
	Notes payable			-			16,600
	Accounts payable			49,112			52,818
	Accounts payable to affiliated companies			2,340			3,113
	Accrued federal income and other taxes			3,255			3,302
	Customer deposits			9,743			9,248
	Accrued interest			7,525			6,968
	Accrued environmental costs			37,809			38,417
	Other current liabilities			5,203			6,878
TOTAL CURRENT LIABILITIES				149,987			137,344
DEFERRED CREDITS AND REGULATORY LIABILITIES
ACCUMULATED DEFERRED FEDERAL INCOME TAX				126,385			125,108
DEFERRED INVESTMENT TAX CREDITS				6,184			6,425
	Regulatory liabilities
		Pension and other benefits		3,180			6,173
		Recoverable energy costs		46,408			45,008
		Competition enhancement fund		10,137			10,149
		Gain on divestiture		5,376			6,246
		Other regulatory liabilities		11,885			8,998
	TOTAL REGULATORY LIABILITIES			76,986			76,574
		Deferred credits		15,585			14,501
TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES				225,140			222,608
TOTAL			$	1,129,918		$	1,135,340

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

36

Orange and Rockland Utilities, Inc.

CONSOLIDATED INCOME STATEMENT
(UNAUDITED)

		For the Three Months Ended June 30,
		2002			2001
		(Thousands of Dollars)
OPERATING REVENUES
	Electric	$	117,387		$	135,549
	Gas		27,248			36,067
TOTAL OPERATING REVENUES			144,635			171,616
OPERATING EXPENSES
	Purchased power		55,740			74,223
	Gas purchased for resale		16,269			24,534
	Other operations		28,697			30,361
	Maintenance		6,400			6,380
	Depreciation and amortization		8,492			8,074
	Taxes, other than income tax		12,324			13,341
	Income taxes		4,314			5,274
TOTAL OPERATING EXPENSES			132,236			162,187
OPERATING INCOME			12,399			9,429
OTHER INCOME (DEDUCTIONS)
	Investment income		78			275
	Other income and deductions		93			(19	)
	Income taxes		175			38
TOTAL OTHER INCOME (DEDUCTIONS)			346			294
INCOME BEFORE INTEREST CHARGES			12,745			9,723
	Interest on long-term debt		5,323			5,527
	Other interest		355			740
	Allowance for borrowed funds used during construction		(63	)		(296	)
NET INTEREST CHARGES			5,615			5,971
NET INCOME FOR COMMON STOCK		$	7,130		$	3,752

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

37

Orange and Rockland Utilities, Inc.

CONSOLIDATED INCOME STATEMENT
(UNAUDITED)

		For the Six Months Ended June 30,
		2002			2001
		(Thousands of Dollars)
OPERATING REVENUES
	Electric	$	208,365		$	260,585
	Gas		92,270			140,444
	Non-utility		-			34
TOTAL OPERATING REVENUES			300,635			401,063
OPERATING EXPENSES
	Purchased power		93,791			144,970
	Gas purchased for resale		52,015			97,067
	Other operations		56,233			58,084
	Maintenance		12,157			13,613
	Depreciation and amortization		16,952			16,318
	Taxes, other than income tax		25,426			28,263
	Income taxes		13,079			14,153
TOTAL OPERATING EXPENSES			269,653			372,468
OPERATING INCOME			30,982			28,595
OTHER INCOME (DEDUCTIONS)
	Investment income		(3	)		1,209
	Other income and deductions		(191	)		(343	)
	Income taxes		389			(147	)
TOTAL OTHER INCOME (DEDUCTIONS)			195			719
INCOME BEFORE INTEREST CHARGES			31,177			29,314
	Interest on long-term debt		10,564			11,020
	Other interest		1,216			1,894
	Allowance for borrowed funds used during construction		(123	)		(527	)
NET INTEREST CHARGES			11,657			12,387
NET INCOME FOR COMMON STOCK		$	19,520		$	16,927

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

38

Orange and Rockland Utilities, Inc.

CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(UNAUDITED)

		As at
		June 30, 2002			December 31, 2001
		(Thousands of Dollars)
BALANCE, JANUARY 1		$	151,792		$	139,610
	Net income for the period		19,520			40,182
TOTAL			171,312			179,792
DIVIDENDS DECLARED ON CAPITAL STOCK			(14,000	)		(28,000	)
BALANCE, JUNE 30		$	157,312		$	151,792

Orange and Rockland Utilities, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)

		For the Three Months Ended June 30,
		2002			2001
		(Thousands of Dollars)
NET INCOME FOR COMMON STOCK		$	7,130		$	3,752
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
	Investment in marketable equity securities, net of ($118), and $16 taxes, respectively		(168	)		23
	Unrealized gains/(losses) on derivatives qualified as hedges, net of ($1,160), and $257 taxes, respectively		(1,655	)		405
	Less: Reclassification adjustment for gains/(losses) included in net income, net of ($270) and ($356) taxes, respectively		(385	)		(502	)
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES			(1,438	)		930
COMPREHENSIVE INCOME		$	5,692		$	4,682

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

39

Orange and Rockland Utilities, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)

		For the Six Months Ended June 30,
		2002			2001
		(Thousands of Dollars)
NET INCOME FOR COMMON STOCK		$	19,520		$	16,927
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
	Investment in marketable equity securities, net of ($244), and ($279) taxes, respectively		(348	)		(189	)
	Minimum pension liability adjustments, net of ($166) and $63 taxes, respectively		(238	)		63
	Unrealized gains/(losses) on derivatives qualified as hedges due to cumulative effect of a change in accounting principle, net of $0 and ($5,709) taxes, respectively		—			(8,107	)
	Unrealized gains/(losses) on derivatives qualified as hedges, net of ($1,012) and $15 taxes, respectively		(1,444	)		21
	Less: Reclassification adjustment for gains/(losses) included in net income, net of ($552) and ($356) taxes, respectively		(788	)		(502	)
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES			(1,242	)		(7,710	)
COMPREHENSIVE INCOME		$	18,278		$	9,217

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

40

Orange and Rockland Utilities, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)

			For the Six Months Ended June 30,
			2002			2001
			(Thousands of Dollars)
OPERATING ACTIVITIES
	Net income		$	19,520		$	16,927
	PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
		Depreciation and amortization		16,770			16,160
		Amortization of investment tax credit		(241	)		(243	)
		Federal and state income tax deferred		398			(6,655	)
		Other non-cash changes (debits)		1,672			879
	CHANGES IN ASSETS AND LIABILITIES
		Accounts receivable - net, and accrued utility revenue		(4,761	)		14
		Materials and supplies, including fuel and gas in storage		7,523			59
		Prepayments, other receivables and other current assets		1,893			(8,398	)
		Deferred recoverable fuel costs		5,047			6,236
		Accounts payable		8,342			21,730
		Refunds to customers		495			(2,332	)
		Other - net		4,202			(8,397	)
NET CASH FLOWS FROM OPERATING ACTIVITIES				60,860			35,980
INVESTING ACTIVITIES INCLUDING CONSTRUCTION
		Construction expenditures		(21,859	)		(23,398	)
		Proceeds from disposition of property		325			118
NET CASH FLOWS USED IN INVESTING ACTIVITIES INCLUDING CONSTRUCTION				(21,534	)		(23,280	)
FINANCING ACTIVITIES INCLUDING DIVIDENDS
		Short-term debt arrangements		(16,600	)		(4,570	)
		Dividend to parent		(14,000	)		(14,000	)
NET CASH FLOWS USED IN FINANCING ACTIVITIES INCLUDING DIVIDENDS				(30,600	)		(18,570	)
CASH AND TEMPORARY CASH INVESTMENTS:
NET CHANGE FOR THE PERIOD				8,726			(5,870	)
BALANCE AT BEGINNING OF PERIOD				1,785			8,483
BALANCE AT END OF PERIOD			$	10,511		$	2,613

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

41

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - O&R

Note A - General

These footnotes accompany and form an integral part of the interim consolidated financial statements of Orange and Rockland Utilities, Inc. (O&R), a wholly owned subsidiary of Consolidated Edison, Inc. (Con Edison). These financial statements are unaudited but, in the opinion of O&R's management, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair statement of the results for the interim periods presented. These financial statements should be read together with the audited O&R financial statements (including the notes thereto) included in the combined Con Edison, Consolidated Edison Company of New York, Inc. (Con Edison of New York) and O&R's Annual Reports on Form 10-K for the year ended December 31, 2001 (the Form 10-K). Results for interim periods are not necessarily indicative of results for the entire fiscal year.

Note B - Environmental Matters

Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of O&R and may be present in its facilities and equipment.

The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund) and similar state statutes impose joint and several strict liabilities, upon generators of hazardous substances for resulting removal and remedial costs and environmental damages. Liabilities under these laws can be material and in some instances may be imposed without regard to fault, or may be imposed for past acts, even though such past acts may have been lawful at the time that they occurred.

At June 30, 2002, O&R had accrued $36.8 million as its best estimate of its liability for sites as to which it has received process or notice alleging that hazardous substances generated by O&R (and, in most instances, other potentially responsible parties) were deposited. There will be additional liability relating to these sites and other sites, including the costs of investigating and remediating sites where O&R or its predecessors manufactured gas. The total amount of liability is not presently determinable but may be material to O&R's financial position, results of operations or liquidity.

O&R is permitted under current rate agreements to defer for subsequent recovery through rates certain site investigation and remediation costs with respect to hazardous waste. At June 30, 2002, $39.4 million of such costs had been deferred as a regulatory asset.

Suits have been brought in New York State and federal courts against O&R 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 O&R. The suits that have been resolved, which are many, have been resolved without any payment by O&R, or for amounts that were not, in the aggregate, material to the company. The amounts specified in all the remaining suits total billions of dollars but O&R believes that these amounts are greatly exaggerated, as were the claims already disposed of. Based on the information and relevant circumstances known to O&R at this time, these suits are not expected to have a material adverse effect on O&R's financial position, results of operations or liquidity.

42

Workers' compensation administrative proceedings have been commenced, wherein current and former employees claim benefits upon alleged disability from exposure to asbestos. Based on the information and relevant circumstances known to O&R at this time, these claims are not expected to have a material adverse effect on O&R's financial position, results of operations or liquidity. At June 30, 2002, O&R had accrued a $1.6 million provision as its best estimate of its liability for these alleged claims and deferred a like amount as a regulatory asset.

In May 2000, the New York State Department of Environmental Conservation issued notices of violation to O&R and four other companies that have operated coal-fired electric generating facilities in New York State. The notices allege violations of the Federal Clean Air Act and the New York State Environmental Conservation Law resulting from the alleged failure to install pollution control equipment that would have reduced emissions of certain chemicals deemed potentially hazardous. The notice of violations received by O&R relates to the Lovett Generating Station that it sold in June 1999. O&R is unable to predict whether or not the alleged violations will have a material adverse effect on its financial position, results of operations or liquidity.

Note C - Related Party Transactions

Each month O&R is invoiced by Con Edison and its affiliates for the cost of any services rendered to O&R by Con Edison and its affiliates. These services, provided primarily by Con Edison's other regulated subsidiary, Con Edison of New York, include substantially all administrative support operations, such as corporate directorship and associated ministerial duties, accounting, treasury, investor relations, information resources, legal, human resources, fuel supply and energy management services. The cost of these services totaled $7.2 million and $7.7 million for the six months ended June 30, 2002 and 2001, respectively. In addition, O&R purchased $51.0 million of natural gas and $12.3 million of electricity from Con Edison of New York during the 2002 period and $97.6 million of natural gas from Con Edison of New York during the 2001 period.

O&R provides certain recurring services to Con Edison of New York on a monthly basis, including cash receipts processing and certain administrative services. The cost of these services, which are invoiced to Con Edison of New York, totaled $5.8 million and $5.7 million during the first six months of 2002 and 2001, respectively.

In February 2002, the Federal Energy Regulatory Commission authorized Con Edison of New York to lend funds to O&R, for periods of not more than 12 months, in amounts not to exceed $150 million at any time outstanding, at prevailing market rates. Through June 30, 2002, O&R has not borrowed any funds from Con Edison of New York.

Note D - Derivative Instrument and Hedging Activities

As of January 2001, O&R adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133" (collectively, SFAS No. 133).

43

Energy Price Hedging

O&R uses derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase or sale of electricity (Hedges). As of June 30, 2002, the fair value of the derivatives for such use was a loss of $0.6 million.

Pursuant to SFAS No. 71, "Accounting for the Effects of Certain Types of Regulations," O&R defers recognition in income of gains and losses on a Hedge until the underlying transactions are completed. Pursuant to rate provisions that permit the recovery of the cost of purchased power, O&R credits or charges to its customers gains and losses on Hedges and related transaction costs. See "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K. Upon adoption of SFAS No. 133, O&R had no transition adjustments relating to Hedges to recognize in other comprehensive income.

Interest Rate Hedging

O&R uses Cash Flow Hedge Accounting for its interest rate swap agreement. As of June 30, 2002, the fair value of the O&R interest rate swap was a loss of $15.4 million. In connection with its $55 million promissory note issued to the New York State Energy Research and Development Authority for the net proceeds of the Authority's variable rate Pollution Control Refunding Revenue Bonds, 1994 Series A (the 1994 Bonds), O&R has a swap agreement pursuant to which it pays interest at a fixed rate of 6.09 percent and is paid interest at the same variable rate as is paid on the 1994 Bonds. Upon adoption of SFAS No. 133, O&R recognized in other comprehensive income after-tax transition adjustment losses relating to the swap agreement of $8.1 million. For the second quarter of 2002, O&R recognized in other comprehensive income unrealized after-tax losses of $1.6 million compared with unrealized after-tax gains of $0.4 million for the second quarter of 2001. For the six months ended June 30, 2002 and 2001, O&R recognized in other comprehensive income unrealized after-tax losses of $1.4 million and after-tax gains of $0.1 million, respectively. During the second quarters of 2002 and 2001, $0.4 million and $0.5 million, respectively, of after-tax losses were reclassified from accumulated other comprehensive income to income. For the six months ended June 30, 2002 and 2001, after-tax losses of $0.8 million and $0.5 million, respectively, were reclassified from accumulated other comprehensive income to income. As of June 30, 2002, $1.1 million of after-tax losses relating to the swap agreement were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months.

44

Comprehensive Income

Unrealized gains/(losses) on derivatives, net of tax, included in accumulated other comprehensive income for the three months ended June 30, 2002 and 2001 were as follows:

	Three Months Ended
	June 30, 2002			June 30, 2001
	(Millions of Dollars)
Unrealized gains/(losses) on derivatives qualified as hedges, net of ($1.2) and $0.3 taxes	$	(1.6	)	$	0.4
Less: Reclassification adjustment for gains/(losses) included in net income, net of ($0.3) and ($0.4) taxes		(0.4	)		(0.5	)
Unrealized gains/(losses) on derivatives qualified as hedges for the period	$	(1.2	)	$	0.9

Unrealized gains/(losses) on derivatives, net of tax, included in accumulated other comprehensive income for the six months ended June 30, 2002 and 2001 were as follows:

	Six Months Ended
	June 30, 2002			June 30, 2001
	(Millions of Dollars)
Unrealized gains/(losses) on derivatives qualified as hedges due to cumulative effect of a change in accounting principle, net of $0 and ($5.7) taxes	$	—		$	(8.1	)
Unrealized gains/(losses) on derivatives qualified as hedges, net of ($1.0) and $0 taxes		(1.4	)		0.1
Less: Reclassification adjustment for gains/(losses) included in net income, net of ($0.6) and ($0.4) taxes		(0.8	)		(0.5	)
Unrealized gains/(losses) on derivatives qualified as hedges for the period	$	(0.6	)	$	(7.5	)

Note E - Financial Information by Business Segment

O&R's business segments were determined based on similarities in economic characteristics, the regulatory environment, and management's reporting requirement. O&R's business segments are:

•

Regulated Electric - consists of regulated utility activities relating to the transmission and distribution of electricity in New York, New Jersey, and Pennsylvania.



•

Regulated Gas - consists of regulated utility activities relating to the transportation and distribution of natural gas in New York and Pennsylvania.



•

Unregulated Subsidiary - represents the operations of O&R's unregulated subsidiary in a land development business. The company is pursuing the closure of its real estate operations and is in the process of selling off remaining land holdings.

All revenues of O&R's business segments are from customers located in the United States. Also, all assets are located in the United States and are materially consistent with segment assets as disclosed in the Form 10-K.

Common services shared by the business segments (shared services) are assigned directly or allocated based on various cost factors, depending on the nature of the service provided.

45

The financial data for business segments are as follows:

	Regulated Electric
	Three Months Ended				Six Months Ended
	June 30, 2002		June 30, 2001		June 30, 2002		June 30, 2001
	(Thousands of Dollars)
Operating revenue	$	117,387	$	135,549	$	208,365	$	260,585
Intersegment revenues		-		7		-		12
Depreciation and amortization		6,455		6,003		12,885		12,187
Operating income		12,626		10,609		20,789		19,489

	Regulated Gas
	Three Months Ended						Six Months Ended
	June 30, 2002			June 30, 2001			June 30, 2002		June 30, 2001
	(Thousands of Dollars)
Operating revenue	$	27,248		$	36,067		$	92,270	$	140,444
Intersegment revenues		-			-			-		-
Depreciation and amortization		2,037			2,071			4,067		4,130
Operating income		(45	)		(947	)		10,427		9,499

	Unregulated Subsidiaries
	Three Months Ended						Six Months Ended
	June 30, 2002			June 30, 2001			June 30, 2002			June 30, 2001
	(Thousands of Dollars)
Operating revenue	$	-		$	-		$	-		$	34
Intersegment revenues		-			-			-			-
Depreciation and amortization		-			-			-			1
Operating income		(182	)		(233	)		(234	)		(393	)

	Total
	Three Months Ended				Six Months Ended
	June 30, 2002		June 30, 2001		June 30, 2002		June 30, 2001
	(Thousands of Dollars)
Operating revenue	$	144,635	$	171,616	$	300,635	$	401,063
Intersegment revenues		-		7		-		12
Depreciation and amortization		8,492		8,074		16,952		16,318
Operating income		12,399		9,429		30,982		28,595

Note F - New Financial Accounting Standards

On January 1, 2002, O&R adopted SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 provides that goodwill (i.e., the excess of cost over fair value of the assets of a business acquired) and intangible assets with indefinite useful lives will no longer be amortized, but instead be tested for impairment at least annually. Other intangible assets will continue to be amortized over their useful lives. The adoption of SFAS No. 142 had no impact on O&R's consolidated financial position or results of operations.

In June 2002, The Financial Accounting Standards Board's (FASB) Emerging Issues Task Force (EITF) discussed EITF Issue No. 02-3, "Accounting for Contracts Involved in Energy Trading and Risk Management Activities." The Task Force reached a final consensus ruling that the revenue resulting from

46

energy trading contracts, whether realized or unrealized and whether financially or physically settled, should be shown net in the income statement. The consensus also expanded the disclosure requirements for energy trading activities. The new ruling is effective for periods ending after July 2002 with reclassification of prior period amounts required. The adoption of EITF Issue No. 02-3 will have no impact on O&R's consolidated financial position or results of operations.

SFAS No. 143, "Accounting for Asset Retirement Obligations," which O&R is required to adopt on January 1, 2003, requires entities to record the fair value of a liability associated with an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity will capitalize the cost by increasing the carrying amount of the related asset. The liability is increased to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon retirement of the asset, the entity settles the obligation for the amount recorded or incurs a gain or loss. O&R has not yet determined the impact of this standard on its consolidated financial position or results of operations.

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which O&R adopted on January 1, 2002, replaces SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 144 requires that all long-lived assets held for sale be measured at the lower of book value of fair value less cost to sell. The standard also broadens the reporting of discontinued operations. The adoption of SFAS No. 144 had no impact on O&R's financial position or results of operations.

SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections," which was issued in April 2002, rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and SFAS No. 64, "Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements." The provisions of this section are effective January 1, 2003. O&R does not expect that adoption of the standard will have a material adverse effect on its consolidated financial position or results of operations.

This Statement also amends SFAS No. 13, "Accounting for Leases," to require sale-leaseback accounting for certain lease modifications that have economic impacts similar to sale-leaseback transactions and amends certain other authoritative accounting pronouncement. These provisions of SFAS No. 145, adopted in May 2002, had no impact on O&R's consolidated financial position or results of operations.

SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", which O&R is required to adopt on January 1, 2003, requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. O&R does not expect that adoption of the standard will have a material adverse effect on its consolidated financial position or results of operations.

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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CON EDISON

Consolidated Edison, Inc. (Con Edison) is a holding company that operates only through its subsidiaries and has no material assets other than the stock of its subsidiaries. Con Edison's principal subsidiaries are regulated utilities: Consolidated Edison Company of New York, Inc. (Con Edison of New York) and Orange and Rockland Utilities, Inc. (O&R). Con Edison also has several unregulated subsidiaries, which accounted for 1.9 percent of consolidated net income in the six months ended June 30, 2002 and 7.0 percent of consolidated total assets at June 30, 2002.

The following discussion and analysis, which relates to the interim consolidated financial statements of Con Edison and its subsidiaries (including Con Edison of New York and O&R) included in Part I, Item 1 of this report, should be read in conjunction with Con Edison's Management's Discussion and Analysis of Financial Condition and Results of Operations (Con Edison's Form 10-K MD&A) in Item 7 of the combined Con Edison, Con Edison of New York and O&R Annual Reports on Form 10-K for the year ended December 31, 2001 (File Nos. 1-14514, 1-1217 and 1-4315, the Form 10-K) and Con Edison's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of the combined Con Edison, Con Edison of New York and O&R Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 2002. Reference is also made to the notes to the Con Edison financial statements in Part I, Item 1 of this report, which notes are incorporated herein by reference.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Con Edison's financial statements reflect the application of its accounting policies, which conform to accounting principles generally accepted in the United States. The company's critical accounting policies include industry-specific accounting applicable to its regulated public utility subsidiaries, and accounting for pensions and other postretirement benefits, contingencies, derivative instruments, goodwill and leases.

The application of certain of these accounting policies requires the company to use estimates. Such estimates require the company to make assumptions about matters that are highly uncertain and for which different estimates that also could reasonably have been used could have had a material impact on the company's financial condition or results of operations.

Accounting for Regulated Public Utilities—SFAS No. 71

Con Edison's principal subsidiaries, Con Edison of New York and O&R, are regulated public utilities subject to Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," and, in accordance with SFAS No. 71, subject to the accounting requirements and rate making practices of the Federal Energy Regulatory Commission (FERC) and state public utility regulatory authorities. See "Critical Accounting Policies" in Con Edison's Form 10-K MD&A and Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

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Accounting for Pensions and Other Postretirement Benefits

Con Edison and its subsidiaries have pension and other postretirement plans that cover substantially all employees and retirees. The company accounts for these plans in accordance with SFAS No. 87, "Employers' Accounting for Pensions" and SFAS No. 106, "Employers' Accounting for Postretirement Benefits other than Pensions." In applying these accounting policies, the company has made critical estimates related to actuarial assumptions, including assumptions of expected returns on plan assets, future compensation and health cost increase trends, and appropriate discount rates. See Notes D and E to the Con Edison financial statements included in Item 8 of the Form 10-K for information about these assumptions, actual performance, amortization of investment and other actuarial gains and losses and calculated plan costs for 2001, 2000 and 1999. Plan expense or credit in future periods will depend on the assumptions the company makes and actual performance.

Accounting for Contingencies

SFAS No. 5, "Accounting for Contingencies," applies to an existing condition, situation, or set of circumstances involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur. The company's known material contingencies include its litigation relating to its October 1999 merger agreement with Northeast Utilities, proceedings relating to outages at the nuclear generating unit the company sold in 2001, its workers' compensation claims and its responsibility for hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs), and coal tar that have been used or generated in the course of the operations of its subsidiaries and may be present in its facilities and equipment. See Notes B, C and D to the Con Edison financial statements included in Part I, Item 1 of this report. In accordance with SFAS No. 5, the company has accrued its best estimate of its probable losses relating to these contingencies and no liability has been accrued where the loss is not probable or the amount of the loss cannot be reasonably estimated.

Accounting For Derivative Instruments

Con Edison's subsidiaries use derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase or sale of electricity or gas and interest rate risk on certain debt securities. See "Financial Market Risks" below, and Note F to the Con Edison financial statements included in Part I, Item 1 of this report.

Accounting for Goodwill

Con Edison adopted SFAS No. 142, "Goodwill and Other Intangible Assets" on January 1, 2002. In accordance with SFAS No. 142 Con Edison ceased amortizing goodwill and will instead test it for impairment at least annually. The impairment test is a two-step process; the first step identifies the potential impairment and the second step measures the amount of impairment loss, if any. The company completed the first step, which indicated that the goodwill related to Con Edison Development is impaired. On completion of the second step, the company expects to record an after-tax impairment charge of approximately $20 million effective January 1, 2002. See "New Financial Accounting Standards" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K and Note H to the Con Edison financial statements included in Part I, Item 1 of this report. In determining

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whether or not its goodwill was impaired, the company was required to make certain assumptions, including those related to future cash flows and discount rates.

Accounting for Leases

Con Edison applies SFAS No. 13, "Accounting for Leases" and other related accounting pronouncements to its leasing transactions. See Note J to the Con Edison financial statements included in Item 8 of the Form 10-K and Note E to the Con Edison financial statements included in Part I, Item 1 of this report.

LIQUIDITY AND CAPITAL RESOURCES

Con Edison's liquidity is dependent on cash flows from its operating, investing and financing activities listed on the accompanying consolidated statement of cash flows and discussed below. As a result of these activities, unrestricted cash and temporary cash investments decreased $212.2 million during the first six months of 2002. In addition, $56.0 million of the restricted cash in an escrow account was used during this period to retire a like amount of short-term financing relating to electric generating projects. See Note C to the Con Edison financial statements included in Item 8 of the Form 10-K.

Cash Flows from Operating Activities

Net cash flows from operating activities during the first six months of 2002 were $349.6 million, $49.7 million less than the first six months of 2001. This decrease reflects principally lower net income, increased accounts receivable and higher recoverable energy costs, offset in part by increased accounts payable.

Accounts receivable from customers, less allowance for uncollectible accounts, increased $26.5 million at June 30, 2002 compared with year-end 2001, reflecting primarily the timing of customer payments and increased customer billings, resulting from higher sales and delivery volumes. Con Edison of New York's equivalent number of days of revenue outstanding (ENDRO) was 26.3 days at June 30, 2002 compared with 29.6 days at year-end 2001. For O&R, the ENDRO was 18.9 days and 23.6 days at June 30, 2002 and at year-end 2001, respectively. The decrease in ENDRO for Con Edison of New York and O&R is due to the decrease in receivables under payment agreements and on level billing accounts.

Other accounts receivable increased $112.4 million at June 30, 2002 compared with year-end 2001, due primarily to a $95.1 million federal tax refund in connection with Con Edison of New York's calculation of its repair allowance deductions and other matters.

Accrued pension credits increased $170.9 million at June 30, 2002 compared with year-end 2001 reflecting favorable past performance in the company's pension fund and assumptions about performance. See Note D to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Accounts payable increased $104.0 million at June 30, 2002 compared with year-end 2001, due primarily to a higher level of energy purchases in June 2002 as compared to December 2001. See discussion of electric purchase power costs in "Results of Operations," below.

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The regulatory asset for deferred recoverable energy costs increased $92.0 million at June 30, 2002 compared with year-end 2001, due primarily to the deferral for future recovery of purchased power and gas costs, offset in part by the ongoing recovery of previously deferred amounts. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Other-net assets increased $71.6 million at June 30, 2002 compared with year-end 2001 due primarily to the following items:

	Effect on Cash
	(Millions of Dollars)
Sale of nuclear generating unit	$	45.8
Pension and benefit reserves		46.4
Accrued taxes		(49.7	)
Other current liabilities		(30.8	)
Proceeds from auction of the transmission congestion contracts		73.9
Other		(14.0	)
	$	71.6

The regulatory asset associated with Con Edison of New York's sale of its nuclear generating unit in September 2001 decreased $45.8 million at June 30, 2002, compared with year-end 2001. This regulatory asset was established for the recovery from customers of the net-after tax loss on the sale. The decrease reflects the recognition in 2002 of $30.4 million of New York State tax benefits that were not reflected in the net after-tax loss when the regulatory asset was established (which reduced the net-after tax loss to $145 million) and the recovery from customers in 2002 of $15.4 million pursuant to rate provisions approved in September 2001 by the New York State Public Service Commission (PSC). Pursuant to these provisions, net revenues have been reduced to reflect that Con Edison of New York no longer has costs associated with the nuclear generating unit. Annual revenues include $35 million that is being used to amortize the regulatory asset. The electric rate agreement approved by the PSC in November 2000 provides that the company "will be given a reasonable opportunity to recover stranded and strandable costs remaining at March 31, 2005, including a reasonable return on investments." See Notes A and I to the Con Edison financial statements included in Item 8 of the Form 10-K.

Pension and benefits reserves increased $46.4 million at June 30, 2002 compared with year-end 2001, due primarily to an increase of $42.2 million in the cost of postretirement benefits other than pensions (OPEB). The reserve represents OPEB costs that have been recognized in income but not funded, and also includes a minimum liability for supplemental retirement programs, a portion of which has been included in other comprehensive income. See Note E to Con Edison's financial statements included in Item 8 of the Form 10-K.

Accrued taxes decreased $49.7 million at June 30, 2002 compared with year-end 2001. Due to the World Trade Center attack the Federal government extended to January 2002 the due date for final payment of 2001 estimated income taxes. As a result, the payment normally made in December was not made until mid-January 2002.

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Other current liabilities decreased $30.8 million at June 30, 2002 compared with year-end 2001, reflecting principally net unrealized mark-to-market gains on energy hedging transactions entered into by the unregulated subsidiaries.

Proceeds from the auction of transmission congestion contracts increased $73.9 million at June 30, 2002 compared with year-end 2001. Con Edison of New York sells rights to use its transmission system for specified periods of time, pursuant to procedures established by the New York Independent System Operator (NYISO). These auction proceeds are deferred for customer benefit, as directed by the PSC.

Cash Flows Used in Investing and Financing Activities

Net cash flows used in investing activities during the first six months of 2002 increased $261.8 million compared with the first six months of 2001. The increase reflects increased construction expenditures in the first six months of 2002 as compared with 2001 ($58.1 million) and the receipt in 2001 of proceeds from the sale of the company's 480 MW interest in the Roseton generating station ($100.0 million, net of federal income tax). Construction expenditures increased in 2002 principally to meet load growth on Con Edison of New York's electric distribution system and to effect permanent restoration of portions of the electric, gas, and steam systems in lower Manhattan following the World Trade Center attack.

Con Edison's investments in non-utility plant increased $138.2 million during the first six months of 2002 compared with the first six months of 2001, due principally to unregulated generation projects and fiber-optic network build-out costs.

Net cash flows from financing activities during the first six months of 2002 increased $96.5 million compared with the first six months of 2001, reflecting principally reduced debt redemptions and refundings.

In February 2002, Con Edison of New York redeemed at maturity $150 million of 6.6 percent 9-year debentures. In April 2002, Con Edison issued $325 million of 7.25 percent 40-year debentures, the proceeds of which were used to repay commercial paper. In June 2002, Con Edison of New York redeemed at maturity $150 million of variable rate 5-year debentures and issued $300 million of non-callable 5.625 percent 10-year debentures.

During the first six months of 2002, Con Edison issued 765,636 shares of its common stock for $32.1 million under its Automatic Dividend Reinvestment and Cash Payment Plan, Stock Purchase Plan and Stock Option Plan.

Capital Resources and Requirements

There have been no material changes in the company's capital resources or capital requirements from those reflected in the Form 10-K. In August 2002, President Bush signed into law an appropriations bill, which authorizes funds for which the company is eligible to apply to recover costs it incurred in connection with the World Trade Center attack. For additional information, see "Cash Flows Used in Investing and Financing Activities," above, "Capital Resources" and "Capital Requirements" in Con Edison's Form 10-K MD&A and Note Q to the Con Edison's financial statements included in Item 8 of the Form 10-K.

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Con Edison's ratio of earnings to fixed charges (for the periods ended on the date indicated) and common equity ratio (as of the date indicated) were:

	Six months ended June 30, 2002	Twelve months ended
		June 30, 2002	December 31, 2001
Earnings to fixed charges	2.94	3.42	3.49
Common equity ratio*	48.2	48.2	49.8

          * Common shareholders' equity as a percentage of total capitalization

Con Edison's ratio of earnings to fixed charges decreased for the periods ending June 30, 2002 compared to the 12-month period ending December 31, 2001 primarily as a result of decreased earnings.

Contractual Obligations and Commercial Commitments

Reference is made to "Contractual Obligations and Commercial Commitments" in Con Edison's Form 10-K MD&A. At June 30, 2002 there was no material change in the company's contractual obligations and commercial commitments compared to those at December 31, 2001, other than the long-term debt transactions described under "Cash Flows Used in Investing and Financing Activities," above.

Energy Trading Net Assets Accounted For at Fair Value

An unregulated subsidiary of Con Edison engages in energy trading activities in relation to which Con Edison recognized in income in the first six months of 2002 $3.8 million of mark-to-market pre-tax gains, reflecting changes in the fair value of derivative financial and commodity instruments. See "Financial Market Risks," below, Note F to the Con Edison financial statements included in Part 1, Item 1 of this report and Note O to the Con Edison financial statements included in Item 8 of the Form 10-K.

As of June 30, 2002, the sources of the fair value of the energy trading net assets are as follows:

	Fair Value of Net Assets at Period-End (Millions of Dollars)
	Maturity less than 1 year		Maturity 1 - 3 years		Maturity 4 - 5 years		Maturity in excess of 5 years
										Total Fair Value
Source of Fair Value
Prices provided by external sources	$	10.7	$	2.5	$	—	$	—		$	13.2
Prices based on models and other valuation methods		1.9		0.1		0.2		(0.4	)		1.8
										$	15.0

Prices provided by external sources - represents the fair value of exchange-traded futures and options quoted and the fair value of positions for which price quotations are available through or derived from brokers or other market sources.

Prices based on models and other valuation methods - represents the fair value of positions calculated using internal models when external prices are not available. Internal models incorporate the use of options pricing, load forecasts and estimates of the present value of cash flows based upon underlying contractual terms. The models reflect management's best estimates, including observable market prices, estimated market prices in the absence of quoted market prices, the risk-free market discount rate, volatility factors, estimated correlation of energy commodity prices, contractual volumes, and estimated volumes for requirements contracts. Counterparty-specific credit quality, market price uncertainty and other risks are factored into the models.

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The change in fair value of the energy trading net assets for the six months ended June 30, 2002, is as follows:

	Total Fair Value
	(Millions of Dollars)
Fair value of net assets outstanding at the beginning of the period (January 1, 2002)	$	11.2
Contracts realized or otherwise settled during the period		(3.9	)
Fair value of new contracts entered into during the period		5.1
Changes in fair value of contracts that existed at the beginning of the period		2.6
Fair value of net assets outstanding at the end of the period (June 30, 2002)	$	15.0

REGULATORY MATTERS

In April 2002, the PSC approved a three-year gas rate agreement that reduces retail sales and transportation rates by approximately $25 million, on an annual basis. Reference is made to "Regulatory Matters" in Con Edison's Form 10-K MD&A.

In July 2002, FERC issued a notice of proposed rulemaking on a standard market design for the wholesale electricity industry. FERC indicated that it was undertaking standard market design to create consistent wholesale competitive markets and efficient transmission systems in order to reduce costs to customers and improve reliability. The notice proposes to establish a single open access transmission tariff that would apply to all transmission customers: wholesale, unbundled retail and bundled retail service. Other pricing, monitoring, operational and governance matters are also addressed in the notice, which the company is in the process of reviewing. For information about the company's transmission facilities, see "Con Edison of New York—Electric Supply" in Item 1 of the Form 10-K, "Regulatory Matters—Electric Supply" in Con Edison of New York's 10-K MD&A and Item 2 of the Form 10-K.

FINANCIAL MARKET RISKS

Con Edison's primary market risks associated with activities in derivative financial instruments, other financial instruments, and derivative commodity instruments are interest rate risk and commodity price risk.

Interest Rate Risk

The interest rate risk relates primarily to variable rate debt and to new debt financing needed to fund capital requirements, including utility construction expenditures and maturing debt securities. Con Edison and its subsidiaries manage interest rate risk through the issuance of mostly fixed-rate debt with varying maturities and through opportunistic refunding of debt. The company estimates that, as of June 30, 2002, a 10 percent change in interest rates applicable to its variable rate debt would result in a change in annual interest expense of approximately $2.1 million.

In addition, Con Edison and its subsidiaries, from time to time, have entered into derivative financial instruments to hedge interest rate risk on certain debt securities and may use derivative financial instruments to hedge interest rate risk or changes in fair value of certain debt securities. See "Interest Rate Hedging" in Note F to the Con Edison financial statements included in Part I, Item 1 of this report.

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Commodity Price Risk

Con Edison's commodity price risk relates primarily to the purchase and sale of electricity and gas, related derivative instruments and the sale of electricity from the generating facilities of its unregulated subsidiaries. The regulated and unregulated subsidiaries have risk management strategies to mitigate their related exposures. See "Energy Price Hedging" in Note F to the Con Edison financial statements included in Part I, Item 1 of this report.

Con Edison estimates that, as of June 30, 2002, a 10 percent change in market prices would result in a change in fair value of approximately $17.5 million for the derivative instruments used by its utility subsidiaries to hedge purchases of electricity and gas. The company 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 general, the rates the utility subsidiaries charge customers for electric, gas and steam service are subject to change for fluctuations in the cost of purchased power or gas, including gains or losses on such derivative instruments and related transaction costs. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Con Edison's unregulated subsidiaries use a value-at-risk model to assess the market risk of their electricity and gas commodity activities. The model includes fixed price sales commitments, physical forward contracts, and commodity derivative instruments. Value-at-risk represents the potential gain or loss on instruments or portfolios due to changes in market factors, for a specified time period and confidence level. The unregulated subsidiaries estimate value-at-risk across their electricity and natural gas commodity businesses using a delta-normal variance/covariance model with a 95 percent confidence level and assuming a one-day holding period. Since the value-at-risk calculation involves complex calculation methodologies, estimates and assumptions that are based on past experience, it is not necessarily indicative of future results. The calculated value-at-risk with respect to commodity price exposure associated with contractual arrangements of the unregulated subsidiaries was approximately $1.2 million as of June 30, 2002. The average, high, and low values-at-risk for the six months ended June 30, 2002 were $1.4 million, $2.7 million and $0.6 million, respectively.

Environmental Matters

For information concerning potential liabilities of Con Edison arising from laws and regulations protecting the environment, including the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund), see Note B to the Con Edison financial statements included in Part I, Item 1 of this report.

RESULTS OF OPERATIONS

Second Quarter of 2002 Compared with Second Quarter of 2001

Con Edison's net income for common stock for the second quarter of 2002 was $97.6 million or $.46 a share (based upon an average of 212.8 million common shares outstanding) compared with $100.7 million or $.48 a share (based upon an average of 212.1 million common shares outstanding) for the second quarter of 2001. The company's net income in the 2002 period reflects the impact of softness in the economy, partially offset by lower operating expenses.

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Earnings for the quarters ended June 30, 2002 and 2001 were as follows:

		2002			2001
		(Millions of Dollars)
Con Edison of New York		$	97.2		$	102.9
O&R			7.1			3.7
Unregulated subsidiaries			0.4			(2.1	)
Other*			(7.1	)		(3.8	)
	Con Edison	$	97.6		$	100.7

*

Includes parent company interest and litigation expenses, goodwill amortization for the 2001 period and inter-company eliminations.

A comparison of the results of operations of Con Edison for the second quarter of 2002 compared to the second quarter of 2001 follows:

THREE MONTHS ENDED JUNE 30, 2002 COMPARED WITH
THREE MONTHS ENDED JUNE 30, 2001

	Increases (Decreases) Amount			Increases (Decreases) Percent
	(Millions of Dollars)
Operating revenues	$	(212.0	)	(10.0	)%
Purchased power - electric and steam		(14.1	)	(1.8	)
Fuel - electric and steam		(10.5	)	(18.3	)
Gas purchased for resale		(78.8	)	(39.8	)
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		(108.6	)	(10.0	)
Other operations and maintenance		(65.0	)	(16.5	)
Depreciation and amortization		(14.7	)	(10.7	)
Taxes, other than income tax		12.6		4.9
Income tax		(25.7	)	(29.6	)
Operating income		(15.8	)	(7.3	)
Other income less deductions and related federal income tax		12.1		217.7
Net interest charges		(0.6	)	(0.6	)
Net income for common stock	$	(3.1	)	(3.1	)%

A discussion of Con Edison's operating revenues and operating income by business segment follows. Con Edison's principal business segments are the electric, gas and steam utility businesses of its regulated subsidiaries and the businesses of its unregulated subsidiaries. For additional information about the segments, see Note G to the Con Edison financial statements included in Part I, Item 1 of this report.

Electric

Con Edison's electric operating revenues in the second quarter of 2002 decreased $131.9 million compared with the second quarter of 2001. The decrease reflects net revenue reductions of approximately $63.1 million related to the sale of Con Edison of New York's nuclear generating unit in September 2001 (as discussed above under "Cash Flows From Operating Activities") and lower fuel and purchased power costs of $38.7 million (discussed below). The decrease also reflects the completion on March 31, 2002 of the one-year amortization of the previously deferred gain on the sale of divested plants and the New York Power Authority (NYPA) revenue increase ($21.7 million in total). See "Recoverable Energy Costs" and

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"Rate and Restructuring Agreements" in Notes A and I to the Con Edison financial statements included in Item 8 of the Form 10-K.

Electricity sales and delivery volumes for Con Edison's utility subsidiaries increased 2.0 percent in the second quarter of 2002 compared with the second quarter of 2001. After adjusting for variations, principally weather and billing days, in each period electricity sales volumes for Con Edison of New York and O&R increased 1.0 percent and 4.7 percent, respectively, in the second quarter of 2002. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Con Edison's purchased power costs decreased $50.6 million in the second quarter of 2002 compared with the second quarter of 2001, due to a decrease in the price of purchased power and an increase in volumes of electricity purchased from other suppliers by participants in the company's Retail Choice programs, offset in part by the increased purchased volumes resulting from the sale of Con Edison of New York's nuclear generating unit in September 2001. Fuel costs increased $12.0 million due to an increase in the price of fuel, offset in part by a decrease in volumes as a result of decreased generation at company-owned power plants. In general, Con Edison's utility subsidiaries recover prudently incurred fuel and purchased power costs pursuant to rate provisions approved by the applicable state public utility commissions. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Con Edison's electric operating income decreased $0.6 million in the second quarter of 2002 compared with the second quarter of 2001. The principal component of the decrease was a decrease in net revenues (operating revenues less fuel and purchased power costs) of $93.3 million. The decrease in net revenues reflects the completion on March 31, 2002 of the one-year amortization of a previously deferred gain on the sale of divested plants and the NYPA revenue increase ($21.7 million) and net revenue reductions ($72.2 million) related to the sale of the nuclear generating unit. The decrease in net revenues is offset in part by reduced other operations and maintenance expenses of $68.2 million, decreased depreciation expense of $13.6 million and reduced property tax expense of $2.5 million, resulting primarily from the sale.

Gas

Con Edison's gas operating revenues decreased $63.0 million and gas operating income decreased $11.0 million in the second quarter of 2002 compared with the second quarter of 2001. The lower revenues reflect reduced sales to gas customers, resulting primarily from the unusual weather and revenue reductions implemented in accordance with the gas rate agreement approved by the PSC in April 2002. The decrease in operating income reflects primarily a decrease in net revenues (operating revenues less gas purchased for resale) of $18.0 million as well as increased property tax expense ($10.5 million) and increased expenses for customer related services ($1.8 million), offset in part by reduced transmission and distribution expenses ($3.2 million), and reduced income taxes ($15.7 million).

Gas sales and transportation volumes for firm customers for Con Edison's utility subsidiaries decreased 3.6 percent in the second quarter of 2002 compared with the second quarter of 2001 primarily as a result of the unusual weather. After adjusting for variations, principally weather and billing days in each period,

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firm gas sales and transportation volumes in the 2002 period increased 0.3 percent for Con Edison of New York and increased 3.8 percent for O&R. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

A weather-normalization provision that applies to the gas business of Con Edison's utility subsidiaries moderates, but does not eliminate, the effect of weather-related changes on gas operating income.

Steam

Con Edison of New York's steam operating revenues decreased $19.2 million and steam operating income increased $1.1 million for the second quarter of 2002 compared with the second quarter of 2001. The lower revenues reflect reduced sales volumes and lower fuel and purchased steam power costs. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K. The increase in operating income reflects primarily reduced transmission and distribution expenses ($0.7 million) and reduced income taxes ($5.8 million), offset in part by a decrease in net revenues (operating revenues less fuel and purchased power costs) of $0.4 million and increased revenue taxes of $4.7 million.

Steam sales volume decreased 4.8 percent in the 2002 period compared with the 2001 period, primarily, as a result of the unusual weather. After adjusting for variations, principally weather and billing days, in each period steam sales volume decreased 5.5 percent.

Other Income

Other income increased $12.1 million in the second quarter of 2002 compared to the second quarter of 2001, due principally to unrealized mark-to-market gains on commodity purchase and sale transactions and related hedges entered into by the unregulated subsidiaries ($3.4 million), compared to a loss of on these types of transactions in the second quarter of 2001 ($5.1 million). In addition, the increase reflects the cessation of goodwill amortization in accordance with Statement of Financial Accounting Standard No. 142 ($2.7 million; see "New Financial Accounting Standards" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K). In addition the allowance for equity funds used during construction increased by $1.7 million as a result of the East River re-powering project.

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Unregulated Businesses

Earnings for the unregulated subsidiaries increased $2.5 million in the second quarter of 2002 compared with the second quarter of 2001. The increase is due principally to higher electric retail sales volumes and higher electric retail gross margins, offset in part by the write-down of an unregulated subsidiary's remaining investment in Neon Communications, Inc. (NEON) of $1.3 million after-tax.

Six Months Ended June 30, 2002 Compared With Six Months Ended June 30, 2001

Con Edison's net income for common stock for the six months ended June 30, 2002 was $264.2 million or $1.24 a share (based upon an average of 212.5 million common shares outstanding) compared with $279.8 million or $1.32 a share (based upon an average of 212.1 million common shares outstanding) for the six months ended June 30, 2001. The company's net income in the 2002 period reflects the impact of the unusually mild winter and softness in the economy, partially offset by lower operating expenses.

Earnings for the six months ended June 30, 2002 and 2001 were as follows:

		2002			2001
		(Millions of Dollars)
Con Edison of New York		$	247.9		$	274.7
O&R			19.5			16.9
Unregulated subsidiaries			4.9			(2.4	)
Other*			(8.1	)		(9.4	)
	Con Edison	$	264.2		$	279.8

*

Includes parent company interest and litigation expenses, goodwill amortization for the 2001 period and inter-company eliminations.

A comparison of the results of operations of Con Edison for the first six months of 2002 compared to the first six months of 2001 follows:

SIX MONTHS ENDED JUNE 30, 2002 COMPARED WITH SIX MONTHS ENDED
JUNE 30, 2001

	Increases (Decreases) Amount			Increases (Decreases) Percent
	(Millions of Dollars)
Operating revenues	$	(999.1	)	(20.0)	%
Purchased power - electric and steam		(309.2	)	(17.4	)
Fuel - electric and steam		(130.0	)	(53.9	)
Gas purchased for resale		(305.8	)	(46.7	)
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		(254.1	)	(10.9	)
Other operations and maintenance		(118.7	)	(15.1	)
Depreciation and amortization		(29.3	)	(10.8	)
Taxes, other than income tax		(28.0	)	(5.0	)
Income tax		(33.3	)	(16.3	)
Operating income		(44.8	)	(8.9	)
Other income less deductions and related federal income tax		25.1		Large
Net interest charges		(4.1	)	(1.9	)
Net income for common stock	$	(15.6	)	(5.6)	%

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A discussion of Con Edison's operating revenues and operating income by business segment follows. Con Edison's principal business segments are the electric, gas and steam utility businesses of its regulated subsidiaries and the businesses of its unregulated subsidiaries. For additional information about the segments, see Note G to the Con Edison financial statements included in Part I, Item 1 of this report.

Electric

Con Edison's electric operating revenues in the six months ended June 30, 2002 decreased $538.4 million compared with the six months ended June 30, 2001. The decrease reflects net revenue reductions of approximately $161.2 million (attributable primarily to the sale of Con Edison of New York's nuclear generating unit as discussed above under "Cash Flows From Operating Activities" and the April 2001 rate reduction), lower fuel and purchased power costs of $322.3 million (discussed below), reduced sales and deliveries of $15.8 million resulting from the very mild winter weather and economic slowdown, and a reserve related to the sale of Con Edison of New York's nuclear generating unit ($16.1 million). See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Electricity sales volumes for Con Edison's utility subsidiaries decreased 0.7 percent in the six months ended June 30, 2002 compared with the six months ended June 30, 2001. After adjusting for variations, principally weather and billing days, in each period, electricity sales volumes for Con Edison of New York and O&R decreased 0.1 percent and increased 4.4 percent, respectively, in the 2002 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Purchased power costs decreased $288.2 million in the six months ended June 30, 2002 compared with the six months ended June 30, 2001, due to a decrease in the price of purchased power and an increase in volumes of electricity purchased from other suppliers by the participants in the company's Retail Choice programs, offset in part by the company's increased purchased volumes resulting from Con Edison of New York's sale of its nuclear generating unit in September 2001. Fuel costs decreased $34.1 million as a result of decreased generation, offset in part by an increase in the price of fuel. In general, Con Edison's utility subsidiaries recover prudently incurred purchased fuel and power costs pursuant to rate provisions approved by the applicable state public utility commission. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Con Edison's electric operating income decreased $25.5 million in the six months ended June 30, 2002 compared with the six months ended June 30, 2001. The principal component of the decrease was lower net revenues (operating revenues less fuel and purchased power costs) of $218.1 million. The decrease in net revenues reflects lower sales due principally to weather and economic conditions ($15.8 million), a reserve related to the sale of Con Edison of New York's nuclear generating unit ($16.1 million) and net revenue reductions ($161.2 million). The decrease in net revenues is offset in part by reduced other operations and maintenance expenses of $116.1 million, lower depreciation expense of $27.2 million and lower property taxes of $5.2 million, resulting primarily from the sale in September 2001 of the company's nuclear generating unit. The decrease also reflects lower revenue taxes of $24.4 million.

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Gas

Con Edison's gas operating revenues decreased $291.0 million, while the cost of purchased gas decreased by $266.5 million in the six months ended June 30, 2002 compared with the six months ended June 30, 2001. The lower revenues reflect reduced sales and transportation to gas customers as discussed below. Gas operating income decreased $11.5 million in the six months ended June 30, 2002, reflecting the $24.5 million decrease in net revenues (operating revenues less gas purchased for resale) as well as increased property tax expense ($16.0 million), offset in part by reduced operation and maintenance expenses ($7.9 million), and lower revenue taxes ($12.3 million).

Gas sales and transportation volumes for firm customers for Con Edison's utility subsidiaries decreased 13.4 percent in the six months ended June 30, 2002 compared with the six months ended June 30, 2001, reflecting primarily the very mild winter weather and an increase in volumes of gas purchased from other suppliers by participants in the company's Retail Choice programs. After adjusting for variations, principally weather and billing days in each period, firm gas sales and transportation volumes in the 2002 period decreased 0.1 percent for Con Edison of New York and decreased 4.1 percent for O&R. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

A weather-normalization provision that applies to the gas business of Con Edison's utility subsidiaries moderates, but does not eliminate, the effect of weather-related changes on gas operating income.

Steam

Con Edison of New York's steam operating revenues decreased $136.0 million and steam operating income decreased $12.1 million for the six months ended June 30, 2002 compared with the six months ended June 30, 2001. The lower revenues reflect reduced sales volumes and lower fuel and purchased steam power costs. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K. The decrease in operating income reflects primarily a decrease in net revenues (operating revenues less fuel and purchased power costs) of $32.2 million, offset in part by lower income taxes ($16.5 million) and revenue taxes ($1.8 million).

Steam sales volume decreased 18.3 percent in the six months ended June 30, 2002 compared with the six months ended June 30, 2001, reflecting primarily the very mild winter weather. After adjusting for variations, principally weather and billing days in each period, steam sales volume decreased 4.4 percent.

Other Income

Other income increased $25.2 million in the six months ended June 30, 2002 compared to the six months ended June 30, 2001, due principally to unrealized mark-to-market gains on commodity purchase and sale transactions and higher related hedges entered into by the unregulated subsidiaries ($6.5 million), compared to a loss of on these types of transactions in the six months ended June 30, 2001 ($7.8 million). In addition, the increase reflects the cessation of goodwill amortization in accordance with Statement of Financial Accounting Standard No. 142 ($5.5 million; see "New Financial Accounting Standards" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K), increased allowance for equity funds used during construction of $5.6 million as a result of the East River

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re-powering project, and lower income taxes of $8.9 million attributable primarily to the recognition of tax benefits relating to the September 2001 sale of Con Edison of New York's nuclear generating unit and the write-down of the NEON investment.

Net Interest Charges

Net interest charges decreased $4.1 million in the six months ended June 30, 2002 compared to the 2001 period, reflecting principally decreased interest expense on long-term debt of $4.4 million.

Unregulated Businesses

Earnings for the unregulated subsidiaries increased $7.3 million in the six months ended June 30, 2002 compared with the six months ended June 30, 2001. The increase is due principally to higher electric retail sales volumes and higher electric retail gross margins, offset in part by the write-down of an unregulated subsidiary's investment in NEON of $5.2 million after tax.

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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CON EDISON OF NEW YORK

Consolidated Edison Company of New York, Inc. (Con Edison of New York) is a regulated utility that provides electric service to over 3.1 million customers and gas service to over 1.1 million customers in New York City and Westchester County. It also provides steam service in parts of Manhattan. All of the common stock of Con Edison of New York is owned by Consolidated Edison, Inc. (Con Edison).

This discussion and analysis should be read in conjunction with Con Edison of New York's Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in Item 7 of the combined Con Edison, Con Edison of New York and Orange and Rockland Utilities, Inc. (O&R) Annual Reports on Form 10-K for the year ended December 31, 2001 (File Nos. 1-14514, 1-1217 and 1-4315, the Form 10-K) and Con Edison of New York's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of the combined Con Edison, Con Edison of New York and O&R Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 2002. Reference is also made to the notes to the Con Edison of New York financial statements in Part I, Item 1 of this report, which notes are incorporated herein by reference.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Con Edison of New York's financial statements reflect the application of its accounting policies, which conform to accounting principles generally accepted in the United States. The company's critical accounting policies include industry-specific accounting applicable to regulated public utilities and accounting for pensions and other postretirement benefits and contingencies.

The application of certain of these accounting policies requires the company to use estimates. Such estimates require the company to make assumptions about matters that are highly uncertain and for which different estimates that also could reasonably have been used could have had a material impact on the company's financial condition or results of operations.

Accounting for Regulated Public Utilities—SFAS No. 71

Con Edison of New York is a regulated public utility subject to Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," and, in accordance with SFAS No. 71, subject to the accounting requirements and rate making practices of the Federal Energy Regulatory Commission (FERC) and state public utility regulatory authorities. See "Critical Accounting Policies" in Con Edison of New York's Form 10-K MD&A and Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Accounting for Pensions and Other Postretirement Benefits

Con Edison of New York has pension and other postretirement plans that cover substantially all employees and retirees. The company accounts for these plans in accordance with SFAS No. 87, "Employers' Accounting for Pensions" and SFAS No. 106, "Employers' Accounting for Postretirement Benefits other than Pensions." In applying these accounting policies, the company has made critical estimates related to actuarial assumptions, including assumptions of expected returns on plan assets, future compensation and health cost increase trends, and appropriate discount rates. See Notes D and E

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to the Con Edison of New York financial statements included in Item 8 of the Form 10-K for information about these assumptions, actual performance, amortization of investment and other actuarial gains and losses and calculated plan costs for 2001, 2000 and 1999. Plan expense or credit in future periods will depend on the assumptions the company makes and actual performance.

Accounting for Contingencies

SFAS No. 5, "Accounting for Contingencies," applies to an existing condition, situation, or set of circumstances involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur. The company's known material contingencies include proceedings relating to outages at the nuclear generating unit the company sold in 2001, workers' compensation claims and its responsibility for hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs), and coal tar that have been used or generated in the course of its operations and may be present in its facilities and equipment. See Notes B and C to the Con Edison of New York financial statements included in Part I, Item 1 of this report. In accordance with SFAS No. 5, the company has accrued its best estimate of its probable losses relating to these contingencies and no liability has been accrued where the loss is not probable or the amount of the loss cannot be reasonably estimated.

LIQUIDITY AND CAPITAL RESOURCES

Con Edison of New York's liquidity is dependent on its cash flows from its operating, investing and financing activities listed on the accompanying consolidated statement of cash flows and discussed below. As a result of these activities, cash and temporary cash investments decreased $230.8 million during the first six months of 2002.

Cash Flows from Operating Activities

Net cash flows from operating activities during the first six months of 2002 were $368.6 million, $13.2 million less than the first six months of 2001. This decrease reflects principally lower net income, increased accounts receivable and higher recoverable energy costs, offset in part by increased accounts payable.

Con Edison of New York's customer accounts receivable, less allowance for uncollectible accounts, increased $4.1 million at June 30, 2002 compared with year-end 2001. The company's equivalent number of days of revenue outstanding (ENDRO) was 26.3 days at June 30, 2002 compared with 29.6 days at December 31, 2001. The decrease in ENDRO is due to the decreases in receivables under payment agreements and level billing accounts.

Other accounts receivable increased $121.2 million at June 30, 2002 compared with year-end 2001 due primarily to a $95.1 million federal tax refund in connection with the company's calculation of its repair allowance deductions and other matters.

Accrued pension credits increased $170.9 million at June 30, 2002 compared with year-end 2001, reflecting favorable past performance in the company's pension fund and assumptions about performance. See Note D to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Accounts payable increased $41.1 million at June 30, 2002 compared with year-end 2001, due primarily to a higher level of energy purchases in June 2002 as compared to December 2001.

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The regulatory asset for deferred recoverable energy costs increased $96.7 million at June 30, 2002 compared with year-end 2001, due primarily to the deferral for future recovery of purchased power and gas costs, offset in part by the ongoing recovery of previously deferred amounts. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Other-net assets increased $176.1 million at June 30, 2002 compared with year-end 2001 due primarily from the following items:

	Effect on Cash
	(Millions of Dollars)
Sale of nuclear generating unit	$	45.8
Pension and benefit reserves		37.2
Accrued taxes		(52.5	)
Proceeds from auction of the transmission congestion contracts		73.9
Capitalized construction		30.5
Other		41.2
	$	176.1

The regulatory asset associated with Con Edison of New York's sale of its nuclear generating unit in September 2001 decreased $45.8 million at June 30, 2002, compared with year-end 2001. This regulatory asset was established for the recovery from customers of the net after-tax loss on the sale. The decrease reflects the recognition in 2002 of $30.4 million of New York State tax benefits that were not reflected in the net after-tax loss when the regulatory asset was established (which reduced the net after-tax loss to $145 million) and the recovery from customers in 2002 of $15.4 million pursuant to rate provisions approved in September 2001 by the New York State Public Service Commission (PSC). Pursuant to these provisions, net revenues have been reduced to reflect that Con Edison of New York no longer has costs associated with the nuclear generating unit. Annual revenues include $35 million that is being used to amortize the regulatory asset. The electric rate agreement approved by the PSC in November 2000 provides that the company "will be given a reasonable opportunity to recover stranded and strandable costs remaining at March 31, 2005, including a reasonable return on investments." See Notes A and I to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Pension and benefits reserves increased $37.2 million at June 30, 2002 compared with year-end 2001, due primarily to an increase of $33.0 million in the cost of postretirement benefits other than pensions (OPEB). The reserve represents OPEB costs that have been recognized in income but not funded, and also includes a minimum liability for supplemental retirement programs, a portion of which has been included in other comprehensive income. See Note E to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Accrued taxes decreased $52.5 million at June 30, 2002 compared with year-end 2001. Due to the World Trade Center attack, the Federal government extended to January 2002 the due date for final payment of 2001 estimated income taxes. As a result, the payment normally made in December was not made until mid-January 2002.

Proceeds from the auction of transmission congestion contracts increased $73.9 million at June 30, 2002 compared with year-end 2001. The company sells rights to use its transmission system for specified

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periods of time, pursuant to procedures established by the New York Independent System Operator (NYISO). These auction proceeds are deferred for customer benefit, as directed by the PSC.

Cash Flows Used in Investing and Financing Activities

Net cash flows used in investing activities during the first six months of 2002 increased $111.6 million compared with the first six months of 2001, reflecting increased construction expenditures in the first six months of 2002 as compared with 2001 ($34.1 million) and the receipt in 2001 of proceeds from the sale of the company's 480 MW interest in the Roseton generating station ($100.0 million, net of federal income tax). Construction expenditures increased in 2002 principally to meet load growth on the company's electric distribution system and to effect permanent restoration of portions of the electric, gas and steam systems in lower Manhattan following the World Trade Center attack.

Net cash flows from financing activities during the first six months of 2002 increased $73.7 million compared with the first six months of 2001, reflecting principally lower external borrowings and decreased debt redemptions, offset in part by increased net proceeds from commercial paper.

In February 2002, Con Edison of New York redeemed at maturity $150 million of 6.6 percent 9-year debentures. In June 2002, Con Edison of New York redeemed at maturity $150 million of variable rate 5-year debentures and issued $300 million of non-callable 5.625 percent 10-year debentures.

Capital Resources and Requirements

There have been no material changes in the company's capital resources or capital requirements from those reflected in the Form 10-K. In August 2002, President Bush signed into law an appropriations bill, which authorizes funds for which the company is eligible to apply to recover costs it incurred in connection with the World Trade Center attack. For additional information, see "Cash Flows Used in Investing and Financing Activities," above, "Capital Resources" and "Capital Requirements" in Con Edison of New York's Form 10-K MD&A and Note P to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's ratio of earnings to fixed charges (for the periods ended on the date indicated) and common equity ratio (as of the date indicated) were:

		Twelve Months Ended
	Six Months Ended June 30, 2002	June 30, 2002	December 31, 2001
Earnings to fixed charges	3.05	3.56	3.66
Common equity ratio*	46.8	46.8	47.2

*

Common shareholders' equity as a percentage of total capitalization

Con Edison of New York's ratio of earnings to fixed charges decreased for the 12-month period ending June 30, 2002 compared to the 12-month period ending December 31, 2001 primarily as a result of decreased earnings.

Contractual Obligations and Commercial Commitments

Reference is made to "Contractual Obligations and Commercial Commitments" in Con Edison of New York's Form 10-K MD&A. At June 30, 2002 there was no material change in the company's contractual obligations and commercial commitments compared to those at December 31, 2001, other than the long-term debt transactions described under "Cash Flows Used in Investing and Financing Activities," above.

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Energy Trading Net Assets Accounted For at Fair Value

Con Edison of New York has not engaged to a material extent in trading activities that are accounted for at fair value. See "Financial Market Risks," below and Note O to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Regulatory Matters

In April 2002, the PSC approved a three-year gas rate agreement that reduces retail sales and transportation rates by approximately $25 million, on an annual basis. Reference is made to "Regulatory Matters" in Con Edison of New York's Form 10-K MD&A.

In July 2002, FERC issued a notice of proposed rulemaking on a standard market design for the wholesale electricity market. FERC indicated that it was undertaking standard market design to create consistent wholesale competitive markets and efficient transmission systems in order to reduce costs to customers and improve reliability. The notice proposes to establish a single open access transmission tariff that would apply to all transmission customers: wholesale, unbundled retail and bundled retail service. Other pricing, monitoring, operational and governance matters are also addressed in the notice, which the company is in the process of reviewing. For information about the company's transmission facilities, see "Con Edison of New York—Electric Supply" in Item 1 of the Form 10-K, "Regulatory Matters—Electric Supply" in Con Edison of New York's 10-K MD&A and Item 2 of the Form 10-K.

FINANCIAL MARKET RISKS

Con Edison of New York's primary market risks associated with activities in derivative financial instruments, other financial instruments and derivative commodity instruments are interest rate risk and commodity price risk.

Interest Rate Risk

The interest rate risk relates primarily to variable rate debt and to new debt financing needed to fund capital requirements, including utility construction expenditures and maturing debt securities.

Con Edison of New York manages interest rate risk through the issuance of mostly fixed-rate debt with varying maturities and through opportunistic refunding of debt. The company estimates that, as of June 30, 2002, a 10 percent change in interest rates applicable to its variable rate debt would result in a change in annual interest expense of approximately $1.7 million.

In addition, Con Edison of New York, from time to time, has entered into derivative financial instruments to hedge interest rate risk on certain debt securities and may use derivative financial instruments to hedge interest rate risk or changes in fair value of certain debt securities. See "Interest Rate Hedging" in Note D to the Con Edison of New York financial statements included in Part I, Item 1 of this report.

Commodity Price Risk

Con Edison of New York's commodity price risk relates primarily to the purchase of electricity and gas that the company delivers to its customers. Con Edison of New York has risk management strategies to mitigate its related exposure and uses derivative instruments to hedge this price risk. See "Energy Price Hedging" in Note D to the Con Edison of New York financial statements included in Part I, Item 1 of this report.

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Con Edison of New York estimates that, as of June 30, 2002, a 10 percent change in market prices would result in a change in fair value of approximately $14.4 million for the derivative instruments used by it to hedge purchases of electricity and gas. The company 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 general, the rates Con Edison of New York charges customers for electric, gas and steam service are subject to change for fluctuations in the cost of purchased power or gas, including gains or losses on such derivative instruments and related transaction costs. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Environmental Matters

For information concerning potential liabilities of Con Edison of New York arising from laws and regulations protecting the environment, including the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund), see Note B to the Con Edison of New York financial statements included in Part I, Item 1 of this report.

RESULTS OF OPERATIONS

Second Quarter of 2002 Compared with Second Quarter of 2001

Con Edison of New York's net income for common stock for the second quarter of 2002 was $97.2 million compared with $102.9 million for the second quarter of 2001. The company's net income in the 2002 period reflects the impact of the softness in the economy, partially offset by lower operating expenses. A comparison of the results of operations of Con Edison of New York for the second quarter of 2002 with the results for the second quarter of 2001 follows:

THREE MONTHS ENDED JUNE 30, 2002 COMPARED WITH
THREE MONTHS ENDED JUNE 30, 2001

	Increases (Decreases) Amount			Increases (Decreases) Percent
	(Millions of Dollars)
Operating revenues	$	(187.2	)	(10.7	)%
Purchased power - electric and steam		(33.7	)	(5.7	)
Fuel - electric and steam		(5.3	)	(11.6	)
Gas purchased for resale		(36.8	)	(27.6	)
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		(111.4	)	(11.3	)
Other operations and maintenance		(69.2	)	(20.4	)
Depreciation and amortization		(12.8	)	(10.5	)
Taxes, other than income tax		12.6		5.3
Income tax		(28.6	)	(34.2	)
Operating income		(13.4	)	(6.7	)
Other income less deductions and related income tax		3.2		190.7
Net interest charges		(4.5	)	(4.8	)
Net income for common stock	$	(5.7	)	(5.5	)%

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A discussion of Con Edison of New York's operating revenues and operating income by business segment follows. Con Edison of New York's principal business segments are its regulated electric, gas and steam utility businesses. For additional information about the segments, see Note E to the Con Edison of New York financial statements included in Part I, Item 1 of this report.

Electric

Con Edison of New York's electric operating revenues in the second quarter of 2002 decreased $113.8 million compared with the second quarter of 2001. The decrease reflects net revenue reductions of approximately $63.1 million related to the sale of the company's nuclear generating unit in September 2001 (as discussed above under "Cash Flows from Operating Activities") and lower fuel and purchased power costs of $20.2 million (discussed below). The decrease also reflects the completion on March 31, 2002 of the one-year amortization of the previously deferred gain on the sale of divested plants and the New York Power Authority (NYPA) revenue increase ($21.7 million). See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Notes A and I to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric sales and deliveries, excluding off-system sales, for the second quarter of 2002 compared with the second quarter of 2001 were:

MILLIONS OF KWHRS.

Description		Three Months Ended June 30, 2002	Three Months Ended June 30, 2001	Variation		Percent Variation
Residential/Religious		2,629	2,596	33		1.3	%
Commercial/Industrial		4,517	4,680	(163	)	(3.5	)
Other		44	53	(9	)	(17.0	)
	Total Full Service Customers	7,190	7,329	(139	)	(1.9	)
Retail Choice Customers		2,687	2,415	272		11.3
	Sub-total	9,877	9,744	133		1.4
NYPA, Municipal Agency and Other Sales		2,516	2,433	83		3.4
	Total Service Area	12,393	12,177	216		1.8	%

Electricity sales and delivery volumes in Con Edison of New York's service territory increased 1.8 percent in the second quarter of 2002 compared with the second quarter of 2001. The increase in sales volume reflects primarily the warmer weather compared to the 2001 period. After adjusting for variations, principally weather and billing days in each period, electricity sales volume in the service territory increased 1.0 percent in the second quarter of 2002 compared with the second quarter of 2001. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Con Edison of New York's purchased power costs decreased $32.2 million in the second quarter of 2002 compared with the second quarter of 2001, due to a decrease in the price of purchased power and an increase in volumes of electricity purchased from other suppliers by participants in the company's Retail Choice programs, offset in part by increased purchased volumes resulting from the sale of the company's

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nuclear generating unit in September 2001. Fuel costs increased $12.0 million due to an increase in the price of fuel, offset in part by a decrease in volumes as a result of decreased generation at company-owned powerplants. In general, Con Edison of New York recovers prudently incurred purchased fuel and power costs pursuant to rate provisions approved by the PSC. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric operating income decreased $2.5 million in the second quarter of 2002 compared with the second quarter of 2001. The principal component of the decrease was a decrease in net revenues (operating revenues less fuel and purchased power costs) of $93.6 million. The decrease in net revenues reflects the completion on March 31, 2002 of the one-year amortization of the previously deferred gain on the sale of divested plants and the NYPA revenue increase ($21.7 million) and net revenue reductions ($72.2 million) related to the sale of the nuclear generating unit. The decrease in net revenues is offset in part by reduced other operations and maintenance expenses of $67.5 million, decreased depreciation expense of $14.0 million and reduced property tax expense of $2.5 million, resulting primarily from the sale.

Gas

Con Edison of New York's gas operating revenues decreased $54.2 million, while the cost of purchased gas decreased by $36.8 million in the second quarter of 2002 compared with the 2001 period. The lower revenues reflect reduced sales to gas customers, resulting primarily from the unusual weather and revenue reductions implemented in accordance with the gas rate agreement approved by the PSC in April 2002. Gas operating income decreased $11.9 million in the second quarter of 2002, reflecting the $17.4 million decrease in net revenues (operating revenues less gas purchased for resale), as well as increased property tax expense ($10.3 million) and increased expenses for customer related services ($1.8 million), offset in part by reduced transmission and distribution expenses ($3.2 million) and reduced income taxes ($15.7 million).

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Con Edison of New York's gas sales and deliveries, excluding off-system sales, for the second quarter of 2002 compared with the second quarter of 2001 were:

THOUSANDS OF DKTHS.

Description		Three Months Ended June 30, 2002	Three Months Ended June 30, 2001	Variation		Percent Variation
Firm Sales
Residential		8,627	9,368	(741	)	(7.9	)%
General		6,940	7,635	(695	)	(9.1	)
Firm Transportation		3,527	2,980	547		18.3
	Total Firm Sales and Transportation	19,094	19,983	(889	)	(4.4	)
Off Peak/Interruptible Sales		2,911	2,803	108		3.9
Transportation of Customer Owned Gas
NYPA		4,544	1,546	2,998		193.9
Divested Plants		20,011	15,871	4,140		26.1
Other		5,960	2,996	2,964		98.9
	Total Sales and Transportation	52,520	43,199	9,321		21.6	%

Con Edison of New York's gas sales and transportation volumes for firm customers decreased 4.4 percent in the second quarter of 2002 compared with the second quarter of 2001. After adjusting for variations, principally weather and billing days, in each period, firm gas sales and transportation volumes in the company's service territory increased 0.3 percent in the 2002 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

The increase in non-firm transportation of customer-owned gas is attributable primarily to reduced gas prices as compared to oil prices.

A weather-normalization provision that applies to Con Edison of New York's gas business moderates, but does not eliminate, the effect of weather-related changes on gas operating income.

Steam

Con Edison of New York's steam operating revenues decreased $19.2 million and steam operating income increased $1.1 million for the second quarter of 2002 compared with the second quarter of 2001. The lower revenues reflect reduced sales volumes and lower fuel and purchased steam power costs. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K. The increase in operating income reflects primarily reduced transmission and distribution expenses ($0.7 million) and reduced income taxes ($5.8 million), offset in part by a decrease in net revenues (operating revenues less fuel and purchased power costs) of $0.4 million and increased revenue taxes of $4.7 million.

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Con Edison of New York's steam sales and deliveries for the second quarter of 2002 compared with the second quarter of 2001 were:

MILLIONS OF POUNDS

Description		Three Months Ended June 30, 2002	Three Months Ended June 30, 2001	Variation		Percent Variation
General		86	90	(4	)	(4.4	)%
Apartment house		1,297	1,356	(59	)	(4.4	)
Annual power		3,099	3,261	(162	)	(5.0	)
	Total Sales	4,482	4,707	(225	)	(4.8	)%

Steam sales volume decreased 4.8 percent in the 2002 period compared with the 2001 period, primarily as a result of the unusual weather. After adjusting for variations, principally weather and billing days, in each period, steam sales volume decreased 5.5 percent.

Other Income

Other income increased $3.2 million in the second quarter of 2002 compared to the second quarter of 2001, due to reduced income taxes of $1.5 million and an increase in allowance for equity funds used during construction of $1.7 million as a result of the East River re-powering project.

Net Interest Charges

Net interest charges decreased $4.5 million in the second quarter of 2002 compared to the 2001 period, reflecting principally decreased interest on long-term debt of $4.4 million.

Six Months Ended June 30, 2002 Compared with Six Months Ended June 30, 2001

Con Edison of New York's net income for common stock for the six months ended June 30, 2002 was $247.9 million compared with $274.7 million for the six months ended June 30, 2001. The company's net income in the 2002 period reflects the impact of the unusually mild winter and softness in the economy, partially offset by lower operating expenses.

A comparison of the results of operations of Con Edison of New York for the six months ended June 30, 2002 with the results for the six months ended June 30, 2001 follows:

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SIX MONTHS ENDED JUNE 30, 2002 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2001

	Increases (Decreases) Amount			Increases (Decreases) Percent
	(Millions of Dollars)
Operating revenues	$	(867.0	)	(20.7	)%
Purchased power - electric and steam		(260.1	)	(18.9	)
Fuel - electric and steam		(114.8	)	(53.1	)
Gas purchased for resale		(221.4	)	(44.4	)
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		(270.7	)	(12.9	)
Other operations and maintenance		(124.4	)	(18.4	)
Depreciation and amortization		(25.4	)	(10.5	)
Taxes, other than income tax		(26.7	)	(5.1	)
Income tax		(43.0	)	(22.3	)
Operating income		(51.3	)	(11.0	)
Other income less deductions and related income tax		17.1		309.8
Net interest charges		(7.3	)	(3.8	)
Net income for common stock	$	(26.9	)	(9.8	)%

A discussion of Con Edison of New York's operating revenues and operating income by business segment follows. Con Edison of New York's principal business segments are its regulated electric, gas and steam utility businesses. For additional information about the segments, see Note E to the Con Edison of New York financial statements included in Part I, Item 1 of this report.

Electric

Con Edison of New York's electric operating revenues in the six months ended June 30, 2002 decreased $488.2 million compared with the six months ended June 30, 2001. The decrease reflects net revenue reductions of approximately $161.2 million (attributable primarily to the sale of the company's nuclear generating unit as discussed above under "Cash Flows from Operating Activities" and the April 2001 rate reduction), lower fuel and purchased power costs of $271.1 million (discussed below), reduced sales and deliveries of $15.8 million resulting from the mild winter weather and economic slowdown, and a reserve of $16.1 million related to the sale of the company's nuclear generating unit. See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

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Con Edison of New York's electric sales and deliveries, excluding off-system sales, for the six months ended June 30, 2002 compared with the six months ended June 30, 2001 were:

MILLIONS OF KWHRS.

Description		Six Months Ended June 30, 2002	Six Months Ended June 30, 2001	Variation		Percent Variation
Residential/Religious		5,396	5,446	(50	)	(1.0	)%
Commercial/Industrial		8,966	9,569	(603	)	(6.3	)
Other		76	88	(12	)	(13.6	)
	Total Full Service Customers	14,438	15,103	(665	)	(4.4	)
Retail Choice Customers		5,360	4,865	495		10.2
	Sub-total	19,798	19,968	(170	)	(1.0	)
NYPA, Municipal Agency and Other Sales		4,897	4,990	(93	)	(1.9	)
	Total Service Area	24,695	24,958	(263	)	(1.0	)%

Electricity sales volume in Con Edison of New York's service territory decreased 1.0 percent in the six months ended June 30, 2002 compared with the six months ended June 30, 2001. The decrease in sales volume reflects the extremely mild winter weather compared to the 2001 period. After adjusting for variations, principally weather and billing days, in each period, electricity sales volume in the service territory decreased 0.1 percent in the 2002 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Con Edison of New York's purchased power costs decreased $237.0 million in the six months ended June 30, 2002 compared with the six months ended June 30, 2001, due to a decrease in the price of purchased power and an increase in volumes of electricity purchased from other suppliers by participants in the company's Retail Choice programs, offset in part by the company's increased purchased volumes resulting from the sale of the company's nuclear generating unit in September 2001. Fuel costs decreased $34.1 million as a result of decreased generation at company-owned power plants, offset in part by an increase in the price of fuel. In general, Con Edison of New York recovers prudently incurred purchased fuel and power costs pursuant to rate provisions approved by the PSC. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric operating income decreased $26.8 million in the six months ended June 30, 2002 compared with the six months ended June 30, 2001. The principal component of the decrease was lower net revenues (operating revenues less fuel and purchased power costs) of $217.1 million. The decrease in net revenues reflects lower sales due principally to weather and economic conditions ($15.8 million), a reserve related to the sale of the company's nuclear generating unit ($16.1 million) and net revenue reductions ($161.2 million). The decrease in net revenues is offset in part by reduced other operations and maintenance expenses ($115.3 million), lower depreciation expense ($27.9 million) and lower property taxes ($5.1 million) resulting primarily from the sale in September 2001 of the company's nuclear generating unit. The decrease also reflects lower revenue taxes of $23.2 million.

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Gas

Con Edison of New York's gas operating revenues decreased $242.8 million, while the cost of purchased gas decreased by $221.4 million in the six months ended June 30, 2002 compared with the six months ended June 30, 2001. The lower revenues reflect reduced sales to gas customers, resulting primarily from the very mild winter weather. Gas operating income decreased $12.4 million in the six months ended June 30, 2002, reflecting the $21.4 million decrease in net revenues (operating revenues less gas purchased for resale), as well as increased property tax expense ($15.6 million), offset in part by reduced transmission and distribution expenses ($7.5 million), and reduced revenue taxes ($10.6 million).

Con Edison of New York's gas sales and deliveries, excluding off-system sales, for the six months ended June 30, 2002 compared with the six months ended June 30, 2001 were:

THOUSANDS OF DKTHS.

Description		Six Months Ended June 30, 2002	Six Months Ended June 30, 2001	Variation		Percent Variation
Firm Sales
Residential		28,000	33,439	(5,439	)	(16.3	)%
General		19,485	22,872	(3,387	)	(14.8	)
Firm Transportation		9,436	9,129	307		3.4
	Total Firm Sales and Transportation	56,921	65,440	(8,519	)	(13.0	)
Off-Peak/Interruptible Sales		6,955	8,630	(1,675	)	(19.4	)
Transportation of Customer Owned Gas
NYPA		8,764	1,576	7,188		Large
Divested Plants		34,227	18,643	15,584		83.6
Other		13,524	6,834	6,690		97.9
	Total Sales and Transportation	120,391	101,123	19,268		19.1	%

Con Edison of New York's gas sales and transportation volumes for firm customers decreased 13.0 percent in the six months ended June 30, 2002 compared with the six months ended June 30, 2001. After adjusting for variations, principally weather and billing days, in each period, firm gas sales and transportation volumes in the company's service territory decreased 0.1 percent in the 2002 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

The decrease in interruptible sales is due primarily to the unusually mild winter of 2002. The increase in non-firm transportation is attributable primarily to reduced gas prices as compared to oil prices.

A weather-normalization provision that applies to Con Edison of New York's gas business moderates, but does not eliminate, the effect of weather-related changes on gas operating income.

Steam

Con Edison of New York's steam operating revenues decreased $136.0 million and steam operating income decreased $12.1 million for the six months ended June 30, 2002 compared with the six months ended June 30, 2001. The lower revenues reflect reduced sales volumes and lower fuel and purchased

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steam power costs. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K. The decrease in operating income reflects primarily a decrease in net revenues (operating revenues less fuel and purchased power costs) of $32.2 million, offset in part by lower income taxes ($16.5 million) and revenue taxes ($1.8 million).

Con Edison of New York's steam sales and deliveries for the six months ended June 30, 2002 compared with the six months ended June 30, 2001 were:

MILLIONS OF POUNDS

Description		Six Months Ended June 30, 2002	Six Months Ended June 30, 2001	Variation		Percent Variation
General		388	501	(113	)	(22.6	)%
Apartment house		3,925	4,603	(678	)	(14.7	)
Annual power		8,104	10,086	(1,981	)	(19.6	)
	Total Sales	12,417	15,190	(2,773	)	(18.3	)%

Steam sales volume decreased 18.3 percent in the six months ended June 30, 2002 compared with the six months ended June 30, 2001, reflecting primarily the warm winter weather. After adjusting for variations, principally weather and billing days, in each period, steam sales volume decreased 4.4 percent.

Other Income

Other income increased $17.1 million in the six months ended June 30, 2002 compared to the six months ended June 30, 2001, due to reduced income taxes of $9.0 million attributable primarily to the recognition of tax benefits relating to the September 2001 sale of the company's nuclear generating unit and an increase in the allowance for equity funds used during construction of $5.6 million as a result of the East River re-powering project.

Net Interest Charges

Net interest charges decreased $7.3 million in the six months ended June 30, 2002 compared to the six months ended June 30, 2001, reflecting principally decreased interest expense on long-term debt of $9.1 million.

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O&R MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

Orange and Rockland Utilities, Inc. (O&R), is a wholly owned subsidiary of Consolidated Edison, Inc. (Con Edison) and meets the conditions specified in General Instruction H to Form 10-Q, which allows it to use the reduced disclosure format for wholly owned subsidiaries of companies, such as Con Edison, that are reporting companies under the Securities Exchange Act of 1934. Accordingly, this O&R Management's Narrative Analysis of the Results of Operations is included in this report, and O&R has omitted from this report the information called for by Part I, Item 2 (Management's Discussion and Analysis of Financial Condition and Results of Operations). Results for interim periods are not necessarily indicative of results for the entire fiscal year.

O&R's net income for common stock for the six-month period ended June 30, 2002 was $19.5 million, $2.6 million higher than the corresponding 2001 period. The increase in the company's net income was attributable primarily to higher electric sales, which produced an additional $1.2 million of net electric revenues, lower customer bad debt and other expenses ($3.3 million), savings in financing costs ($1.1 million) and income tax benefits ($0.5 million). Partially offsetting these items were lower gas sales resulting in lower net gas revenues of $1.3 million and reduced customer late payment charge revenues of $1.1 million. Customer late payment charge revenues decreased by 47.8 percent, primarily as a result of a decrease in the cost of energy billed to customers.

A comparison of the results of operations of O&R for the six months ended June 30, 2002 to the six months ended June 30, 2001 follows:

(Millions of Dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	(100.4	)	(25.0	)%
Purchased power - electric		(51.1	)	(35.3	)
Gas purchased for resale		(45.1	)	(46.4	)
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		(4.2	)	(2.6	)
Other operation and maintenance expenses		(3.3	)	(4.6	)
Depreciation and amortization		0.6		3.9
Taxes, other than income tax		(2.8	)	(10.0	)
Income tax		(1.1	)	(7.6	)
Operating income		2.4		8.3
Other income less deductions and related income tax		(0.5	)	(72.9	)
Net interest charges		(0.7	)	(5.9	)
Net income for common stock	$	2.6		15.3	%

A discussion of O&R's operating revenues by business segment follows. O&R's principal business segments are its electric and gas utility businesses. For additional information about O&R's business segments, see Note E to the O&R financial statements included in Part I, Item 1 of this report.

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Electric

Electric operating revenues decreased $52.2 million during the six months ended June 30, 2002 compared to the 2001 period. This decrease was primarily the result of lower purchased power and tax costs and recoveries in the 2002 period. See "Recoverable Energy Costs" in Note A to the O&R financial statements in Item 8 of the combined O&R, Con Edison and Consolidated Edison Company of New York, Inc. Annual Reports on Form 10-K for the year ended December 31, 2001 (file Nos. 1-4315, 1-14514 and 1-1217, the Form 10-K).

O&R's electric sales and deliveries, excluding off-system sales, for the six months ended June 30, 2002 compared with the six months ended June 30, 2001 were:

MILLIONS OF KWHRS

Description		Six Months Ended June 30, 2002	Six Months Ended June 30, 2001	Variation		Percent Variation
Residential/Religious		801,570	852,916	(51,346	)	(6.0	)%
Commercial/Industrial		1,176,503	1,290,917	(114,414	)	(8.9	)
Other		51,112	50,774	338		0.7
	Total Full Service Customers	2,029,185	2,194,607	(165,422	)	(7.5	)
Retail Choice Customers		545,747	320,744	225,003		70.2
	Total Service Area	2,574,932	2,515,351	59,581		2.4	%

Electric sales volumes in the six months ended June 30, 2002 increased 2.4 percent compared to the 2001 period due to customer growth and higher average usage. After adjusting for weather variations, total electricity sales volumes were 4.4 percent higher in the current year. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed. Net electric revenues (operating revenues less purchased power and associated tax recoveries) were $1.2 million higher in the current period.

Purchased power costs decreased $51.1 million during the first half of 2002 compared to the 2001 period, reflecting decreases in the unit cost of purchased power, partially offset by higher energy requirements.

Decreased electric revenues and purchased power costs also reflect increased purchases of electricity by customers from other suppliers.

Electric operating income increased $1.3 million during the six months ended June 30, 2002, compared to the 2001 period. This increase reflects the impact of higher net electric revenues, and lower customer bad debt and other expenses.

Gas

Gas operating revenues decreased $48.2 million during the six months ended June 30, 2002, compared to the 2001 period. This decrease was primarily the result of lower gas costs in the 2002 period. See "Recoverable Energy Costs" in Note A to the O&R financial statements in Item 8 of the Form 10-K.

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O&R's gas sales and deliveries, excluding off-system sales, for the six months ended June 30, 2002 compared with the six months ended June 30, 2001 were:

THOUSANDS OF DKTHS.

Description		Six Months Ended June 30, 2002	Six Months Ended June 30, 2001	Variation		Percent Variation
Firm Sales
	Residential	6,115	8,232	(2,117	)	(25.7	)%
	General	1,975	2,869	(894	)	(31.2	)
	Firm Transportation	3,380	2,470	910		36.8
Total Firm Sales and Transportation		11,470	13,571	(2,101	)	(15.5	)
	Off Peak/Interruptible Sales	3,778	3,150	628		19.9
Transportation of Customer Owned Gas
	Divested Plants	5,853	2,893	2,960		102.3
	Other	574	597	(23	)	(3.9	)
	Total Sales and Transportation	21,675	20,211	1,464		7.2	%

Total gas sales volumes in the six months ended June 30, 2002 decreased 15.5 percent compared to the 2001 period. O&R's revenues from gas sales in New York are subject to a weather normalization clause that moderates, but does not eliminate, the effect of weather-related changes on net income. After adjusting for weather variations in each period, total firm sales and transportation volumes were 7.5 percent lower for the 2002 period compared to the 2001 period.

The cost of gas purchased for resale decreased $45.1 million in the 2002 period compared to the 2001 period, due to the lower sales volumes and unit costs.

Decreased gas revenues and cost of gas purchased for resale in the 2002 period, compared to 2001, also reflect increased purchases of gas by customers from other suppliers.

Gas operating income increased by $0.9 million for the six months ended June 30, 2002, compared to the 2001 period, due primarily to lower operation and maintenance expenses, offset in part by lower net revenues.

Taxes Other Than Income Taxes

Taxes other than income taxes decreased by $2.8 million in the 2002 period compared to the 2001 period. The decrease was primarily the result of lower New York State revenue taxes, which resulted from reduced tax rates and lower energy costs billed to customers.

Other Income

Other income decreased $0.5 million in the 2002 period compared to the 2001 period, due primarily to lower earnings on short-term investments during the current year.

Net Interest Charges

Interest charges decreased by $0.7 million in the 2002 period compared to the 2001 period reflecting lower average debt balances and interest rates in the 2002 period, offset in part by lower allowance for borrowed funds used during construction.

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Income Taxes

Income taxes decreased $0.5 million in the 2002 period compared to the 2001 period, due to lower customer bad debt costs in the current period. Under existing rate agreements, the tax effects of changes in reserves, such as that for uncollectibles, flow through to net income.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Con Edison

For information about Con Edison's primary market risks associated with activities in derivative financial instruments, other financial instruments and derivative commodity instruments, see "Financial Market Risks" in Con Edison's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part 1, Item 2 of this report and Item 7A of the combined Con Edison, Con Edison of New York and O&R Annual Report on Form 10-K for the year ended December 31, 2001 (the Form 10-K), which information is incorporated herein by reference.

Con Edison of New York

For information about Con Edison of New York's primary market risks associated with activities in derivative financial instruments, other financial instruments and derivative commodity instruments, see "Financial Market Risks" in Con Edison of New York's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part 1, Item 2 of this report and Item 7A of the Form 10-K, which information is incorporated herein by reference.

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Forward-Looking Statements

This Quarterly Report on Form 10-Q 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," "plans," "will" and similar expressions identify forward-looking statements.

Actual results or developments might differ materially from those included in the forward-looking statements because of various factors such as:

•

continued restructuring of the regulated public utility, unregulated energy and telecommunications industries;



•

competition, including competition in the energy supply, trading and services businesses;



•

operating performance and condition of the company's energy delivery systems, generating assets and fiber optic communications network;



•

success of completion of ongoing construction projects;



•

legal proceedings relating to hazardous substances, the nuclear generating plant that the company sold in 2001 and Northeast Utilities (see Notes B, C and D to the Con Edison financial statements in Part 1, Item 1 of this report);



•

wholesale energy markets, including availability, sufficiency and cost of energy and the effectiveness of the company's efforts to manage its risks in these markets;



•

capital markets, including availability, sufficiency and cost of liquidity and credit facilities and the effectiveness of the company's efforts to manage its risks in these markets;



•

availability, sufficiency and cost of other services and goods used in Con Edison's business, including insurance coverage;



•

investment returns on the assets of the company's pension and other post-employment benefit plans and actual experience regarding the plans' other actuarial assumptions (see Notes D and E to the Con Edison financial statements in Item 8 of the Form 10-K);



•

employee matters, including changes in key executives and collective bargaining with union employees;



•

economic conditions, including recession, inflation or deflation;



•

technological developments;



•

weather, including its effects on the company's sales and facilities;



•

laws, regulations or regulatory policies, including those relating to taxes or fees, the environment and any that would adversely effect the ability of the company's regulated utility subsidiaries to operate or recover costs from their customers;

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•

public policy doctrines;



•

accounting matters, including changes in policies, principles and interpretations thereof generally accepted in the United States;



•

acts of war or terrorism; and



•

other presently unknown or unforeseen factors.

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PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Con Edison

Northeast Utilities

For information about legal proceedings relating to Con Edison's October 1999 agreement to acquire Northeast Utilities, see Note D to the Con Edison financial statements included in Part 1, Item 1 of this report (which information is incorporated herein by reference).

Con Edison of New York

Nuclear Generation

For information about legal proceedings relating to the nuclear generating unit that Con Edison of New York sold in 2001, see Note C to the Con Edison of New York financial statements included in Part 1, Item 1 of this report (which information is incorporated herein by reference).

Employees' Class Action

Reference is made to "Con Edison of New York—Employee's Class Action" in Item 3 of the Form 10-K. In August 2002, the new settlement agreement received fiscal approval from the court.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Con Edison

(a)    At the Annual Meeting of Stockholders of Con Edison on May 20, 2002, the stockholders of Con Edison voted to elect members of the Board of Directors, to ratify and approve the appointment of Con Edison's independent accountants, and not to adopt a stockholder proposal. 166,115,779 shares of Common Stock of Con Edison, representing approximately 78.14% of the 212,585,320 shares of Common Stock outstanding and entitled to vote, were present at the meeting in person or by proxy.

(b)    The name of each nominee for election as a member of Con Edison's Board of Directors and the number of shares voted for or with respect to which authority to vote for was withheld are as follows:

	Votes For	Votes Withheld
Vincent A. Calarco	163,676,816	2,438,963
George Campbell, Jr.	163,153,313	2,962,466
Gordon J. Davis	163,811,897	2,303,882
Michael J. Del Giudice	163,201,550	2,914,229
Joan S. Freilich	163,796,817	2,318,962
Ellen V. Futter	163,094,453	3,021,326
Sally Hernandez-Pinero	163,067,292	3,048,487
Peter W. Likins	163,741,084	2,374,695
Eugene R. McGrath	163,772,714	2,343,065
Richard A. Voell	163,763,660	2,352,119
Stephen R. Volk	163,786,602	2,329,177

(c)    The results of the vote on the appointment of PricewaterhouseCoopers LLP as independent accountants for Con Edison for 2002 were as follows: 161,072,164 shares were voted for this proposal; 3,358,452 shares were voted against the proposal; and 1,685,163 shares were abstentions.

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(d)    The following stockholder-proposed resolution was voted upon by the stockholders of Con Edison at the Annual Meeting:

"RESOLVED: That the shareholders recommend that the Board take the necessary step that Con Edison specifically identify by name and corporate title in all future proxy statements those executive officers, not otherwise so identified, who are contractually entitled to receive in excess of $250,000 annually as base salary, together with whatever other additional compensation bonuses and other cash payments were due them."

The results of the vote on this proposal were as follows: 15,151,507 shares were voted for this proposal; 106,597,261 shares were voted against the proposal; 4,710,358 shares were abstentions; and 39,656,653 shares were broker nonvotes.

Con Edison of New York

At the Annual Meeting of Stockholders of Con Edison of New York on May 20, 2002, all 235,488,094 outstanding shares of common stock of Con Edison of New York were voted to elect as members of Con Edison of New York's Board of Trustees management's nominees for the Board of Trustees (Vincent A. Calarco, George Campbell, Jr., Gordon J. Davis, Michael J. Del Giudice, Joan S. Freilich, Ellen V. Futter, Sally Hernandez-Pinero, Peter W. Likins, Eugene R. McGrath, Richard A. Voell and Stephen R. Volk), and to ratify and approve the appointment of PricewaterhouseCoopers LLP as Con Edison of New York's independent accountants for 2002. All of the common stock of Con Edison of New York is owned by Con Edison.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)

EXHIBITS

Con Edison

Exhibit 10.1.1	Amendment No. 1, effective May 31, 2002, to the Employment agreement, dated as of September 1, 2000, between Con Edison and Eugene R. McGrath.
Exhibit 10.1.2	Amendment No. 1, effective May 31, 2002, to the Employment agreement, dated as of September 1, 2000, between Con Edison and Joan S. Freilich.
Exhibit 10.1.3	Amendment No. 1, effective May 31, 2002, to the Employment agreement, dated as of September 1, 2000, between Con Edison and Kevin Burke.
Exhibit 10.1.4	Amendment No. 1, effective May 31, 2002, to the Employment agreement, dated as of September 1, 2000, between Con Edison and John D. McMahon.
Exhibit 10.1.5	Restricted Stock Unit Award Agreement, dated as of May 31, 2002, between Con Edison and Stephen B. Bram.
Exhibit 10.1.6	Description of the Consolidated Edison, Inc. Deferred Stock Compensation Plan For Non-Officer Directors.
Exhibit 12.1	Statement of computation of Con Edison's ratio of earnings to fixed charges for the six and twelve-month periods ended June 30, 2002 and the year ended December 2001.
Exhibit 99.1.1	Certification of chief executive officer required under Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.1.2	Certification of chief financial officer required under Section 906 of the Sarbanes-Oxley Act of 2002.

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Con Edison of New York

Exhibit 3.2	By-laws of Con Edison of New York, effective June 20, 2002.
Exhibit 10.2	The Consolidated Edison Thrift Savings Plan, amended and restated as of May 8, 2002.
Exhibit 12.2	Statement of computation of Con Edison of New York's ratio of earnings to fixed charges for the six and twelve-month periods ended June 30, 2002 and the year December 2001.
Exhibit 99.2.1	Certification of chief executive officer required under Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.2.2	Certification of chief financial officer required under Section 906 of the Sarbanes-Oxley Act of 2002.

O&R

Exhibit 99.3.1	Certification of chief executive officer required under Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.3.2	Certification of chief financial officer required under Section 906 of the Sarbanes-Oxley Act of 2002.

(b)

REPORTS ON FORM 8-K 

Con Edison

Con Edison filed a Current Report on Form 8-K, dated May 13, 2002, announcing the death of a Board member and reporting the adoption of a resolution reducing the number of Directors. Con Edison filed a Current Report on Form 8-K, dated April 3, 2002, reporting (under Item 5) entering into an underwriting agreement for the issuance and sale of $325 million aggregate principal amount of its 7.25% Debentures, Series 2002 A, due 2042.

Con Edison of New York

Con Edison of New York filed a Current Report on Form 8-K, dated May 13, 2002, announcing the death of a Board member and reporting the adoption of a resolution to change the by-laws to reduce the number of Trustees. Con Edison of New York filed a Current Report on Form 8-K, dated June 19, 2002, reporting (under Item 5) entering into an underwriting agreement for the issuance and sale of $300 million aggregate principal amount of its 5.625% Debentures, Series 2002 A, due 2012.

O&R

O&R filed no Current Reports on Form 8-K during the quarter ended June 30, 2002.

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Signatures

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.

	Consolidated Edison, Inc.
	Consolidated Edison Company of New York, Inc.
DATE: August 12, 2002	By:	/s/  JOAN S. FREILICH Joan S. Freilich Executive Vice President, Chief Financial Officer and Duly Authorized Officer
	Orange and Rockland Utilities, Inc.
DATE: August 12, 2002	By:	/s/  EDWARD J. RASMUSSEN Edward J. Rasmussen Vice President, Chief Financial Officer and Duly Authorized Officer

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Table of Contents
Filing Format
Consolidated Edison, Inc. CONSOLIDATED BALANCE SHEET (UNAUDITED)
Consolidated Edison, Inc. CONSOLIDATED BALANCE SHEET (UNAUDITED)
Consolidated Edison, Inc. CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Consolidated Edison, Inc. CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Consolidated Edison, Inc. CONSOLIDATED STATEMENT OF RETAINED EARNINGS (UNAUDITED)
Consolidated Edison, Inc. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Consolidated Edison, Inc. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Consolidated Edison, Inc. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Notes to Consolidated Financial Statements
Consolidated Edison of New York, Inc. CONSOLIDATED BALANCE SHEET (UNAUDITED)
Consolidated Edison of New York, Inc. CONSOLIDATED BALANCE SHEET (UNAUDITED)
Consolidated Edison Of New York, Inc. CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Consolidated Edison Of New York, Inc. CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Consolidated Edison Company of New York, Inc. CONSOLIDATED STATEMENT OF RETAINED EARNINGS (UNAUDITED)
Consolidated Edison Company of New York, Inc. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Consolidated Edison Company of New York, Inc. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Consolidated Edison Company of New York, Inc. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Notes to Consolidated Financial Statements
Orange and Rockland Utilities, Inc. CONSOLIDATED BALANCE SHEET (UNAUDITED)
Orange and Rockland Utilities, Inc. CONSOLIDATED BALANCE SHEET (UNAUDITED)
Orange and Rockland Utilities, Inc. CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Orange and Rockland Utilities, Inc. CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Orange and Rockland Utilities, Inc. CONSOLIDATED STATEMENT OF RETAINED EARNINGS (UNAUDITED)
Orange and Rockland Utilities, Inc. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Orange and Rockland Utilities, Inc. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Orange and Rockland Utilities, Inc. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Notes to Financial Statements
SIX MONTHS ENDED JUNE 30, 2002 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2001

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

THREE MONTHS ENDED JUNE 30, 2002 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2001
SIX MONTHS ENDED JUNE 30, 2002 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2001
Forward-Looking Statements
Signatures