Summary of Significant Accounting Policies

Revenues

Adoption of New Standard

On January 1, 2018, the Companies adopted Accounting Standards Codification (ASC) Topic 606, “Revenue from Contracts with Customers,” using the modified retrospective method applied to those contracts that were not completed. For the three months ended March 31, 2018, the Companies recognized revenues from contracts with customers in accordance with Topic 606 and recognized other revenues in accordance with ASC Topic 605, “Revenue Recognition.” The revenues recognized were equivalent to the revenues that would have been recognized had the Companies not adopted Topic 606 and had recognized all revenues in accordance with Topic 605. For the three months ended March 31, 2017, the Companies recognized revenues, including revenues from contracts with customers, in accordance with Topic 605. No prior period adjustment or charge to retained earnings for cumulative impact was required as a result of the Companies’ adoption of Topic 606.

Revenue Recognition

The following table presents, for the three months ended March 31, 2018, revenue from contracts with customers as defined in Topic 606, as well as additional revenue from sources other than contracts with customers, disaggregated by major source.



	For the Three Months Ended March 31, 2018
(Millions of Dollars)	Revenues from contracts with customers		Other revenues (a)	Total operating revenues
CECONY
Electric	$1,771		$(42)	$1,729
Gas	835		6	841
Steam	315		(1)	314
Total CECONY	$2,921		$(37)	$2,884
O&R
Electric	152		(3)	149
Gas	110		(13)	97
Total O&R	$262		$(16)	$246
Clean Energy Businesses
Renewables	132	(b)	—	132
Energy services	17		—	17
Other	—		84	84
Total Clean Energy Businesses	$149		$84	$233
Con Edison Transmission	1		—	1
Total Con Edison	$3,333		$31	$3,364

(a) For the Utilities, this includes revenue from alternative revenue programs, such as the revenue decoupling mechanisms under their New York electric and gas rate plans and the weather-normalization clause applicable to their gas businesses.For the Clean Energy Businesses, this includes revenue from wholesale services. For the Utilities, this also reflects the reduction in revenues resulting from the deferral as regulatory liabilities of the net benefits of the federal Tax Cuts and Job Act of 2017 (TCJA). See "Other Regulatory Matters" in Note B.

(b) Included within the total for Renewables revenue at the Clean Energy Businesses is $89 million of revenue related to engineering, procurement and construction services.

The Utilities recognize revenues for tariff-based sales as they deliver electricity, gas and steam energy to their customers. The amount of revenues recognized reflects the consideration the Utilities expect to receive in exchange for delivering the energy. The transaction price for full-service customers includes the Utilities’ energy cost and for all customers includes delivery charges determined based on customer class and in accordance with established tariffs and guidelines of the New York State Public Service Commission (NYSPSC) or the New Jersey Board of Public Utilities (NJBPU), as applicable. The transaction price is allocated to the Utilities’ revenue generating activities through the customer billing process. Because energy is delivered over time, the Utilities use output methods that recognize revenue based on direct measurement of the value transferred, such as units delivered, which provides an accurate measure of value for the energy delivered. The Utilities accrue revenues at the end of each month for estimated energy delivered but not yet billed to customers. The Utilities defer over a 12-month period net interruptible gas revenues, other than those authorized by the NYSPSC to be retained by the Utilities, for refund to firm gas sales and transportation customers.

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

Sales and profits on each percentage-of-completion contract are recorded each month based on the ratio of actual cumulative costs incurred to the total estimated costs at completion of the contract, multiplied by the total estimated contract revenue, less cumulative revenues recognized in prior periods (the ‘‘cost-to-cost’’ method). The impact of revisions of contract estimates, which may result from contract modifications, performance or other reasons, are recognized on a cumulative catch-up basis in the period in which the revisions are made. Unbilled contract revenues were $79 million and $58 million as of March 31, 2018 and December 31, 2017, respectively, reflecting $36 million of additional revenue earned and $15 million of billings and appropriate balance sheet classification for the period. Unbilled contract revenues represent accumulated incurred costs and earned profits on contracts (revenue arrangements), which have been recorded as revenues, but have not yet been billed to customers, and which represent contract assets as defined in Topic 606. Substantially all unbilled contract revenues are expected to be collected within one year. Unbilled contract revenues arise from the cost-to-cost method of revenue recognition. Unbilled contract revenues from fixed-price type contracts are converted to billed receivables when amounts are invoiced to customers according to contractual billing terms, which generally occur when deliveries or other performance milestones are completed. Unearned revenue was $49 million and $87 million as of March 31, 2018 and December 31, 2017, respectively, reflecting $70 million of additional revenue earned (of which $48 million was included in the balance as of December 31, 2017) and $32 million of billings and appropriate balance sheet classification for the period. Unearned revenue represents a liability for billings to customers in excess of earned revenue, which are contract liabilities as defined in Topic 606. As of March 31, 2018, the aggregate amount of the remaining performance obligations is $111 million, of which $75 million will be recognized within the next two years, and the remaining $36 million will be recognized pursuant to long-term service and maintenance agreements.

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

Earnings Per Common Share

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

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

For the three months ended March 31, 2018 and 2017, basic and diluted EPS for Con Edison are calculated as follows:



	For the Three Months Ended March 31,
(Millions of Dollars, except per share amounts/Shares in Millions)	2018	2017
Net income	$428	$388
Weighted average common shares outstanding – basic	310.4	305.1
Add: Incremental shares attributable to effect of potentially dilutive securities	1.2	1.2
Adjusted weighted average common shares outstanding – diluted	311.6	306.3
Net Income per common share – basic	$1.38	$1.27
Net Income per common share – diluted	$1.37	$1.27

The computation of diluted EPS for the three months ended March 31, 2018 and 2017 excludes immaterial amounts of performance share awards that were not included because of their anti-dilutive effect.

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

For the three months ended March 31, 2018 and 2017, changes to accumulated other comprehensive income/(loss) (OCI) for Con Edison and CECONY are as follows:



	For the Three Months Ended March 31,
	Con Edison		CECONY
(Millions of Dollars)	2018	2017	2018	2017
Beginning balance, accumulated OCI, net of taxes (a)	$(26)	$(27)	$(6)	$(7)
OCI before reclassifications, net of tax of $(1) and $1 for Con Edison in 2018 and 2017, respectively	3	(2)	—	—
Amounts reclassified from accumulated OCI related to pension plan liabilities, net of tax of $(1) for Con Edison in 2018 and 2017 (a)(b)	1	1	—	—
Current period OCI, net of taxes	4	(1)	—	—
Ending balance, accumulated OCI, net of taxes	$(22)	$(28)	$(6)	$(7)


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


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

Reconciliation of Cash, Temporary Cash Investments and Restricted Cash

On January 1, 2018, the Companies adopted Accounting Standard Update (ASU) 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash," which they applied retrospectively for each prior period presented. Pursuant to ASU 2016-18, cash, temporary cash investments and restricted cash are presented on a combined basis in the Companies’ consolidated statements of cash flows. At March 31, 2018 and 2017, cash, temporary cash investments and restricted cash for Con Edison and CECONY are as follows:



	At March 31,
	Con Edison		CECONY
(Millions of Dollars)	2018	2017	2018	2017
Cash and temporary cash investments	$651	$67	$574	$17
Restricted cash (a)	32	35	—	2
Total cash, temporary cash investments and restricted cash	$683	$102	$574	$19

(a)

Restricted cash is comprised of funding reserved for CECONY construction expenditures ($2 million at March 31, 2017), RECO transition bond charge collections, net of principal, interest, trustee and service fees ($1 million and $2 million at March 31, 2018 and 2017, respectively) that are restricted until the bond matures in 2019, and the CEBs' cash collateral held for project finance agreements ($31 million at March 31, 2018 and 2017) that are restricted until varying maturity dates. For these projects, such funds are restricted to being used for normal operating expenses and capital expenditures, debt service, and required reserves.