Other Postretirement Benefits

12 Months Ended

Dec. 31, 2011

Other Postretirement Benefits

Note F — Other Postretirement Benefits

The Utilities currently have contributory comprehensive hospital, medical and prescription drug programs for all retirees, their dependents and surviving spouses.

CECONY also has a contributory life insurance program for bargaining unit employees and provides basic life insurance benefits up to a specified maximum at no cost to retired management employees. O&R has a non-contributory life insurance program for retirees. Certain employees of Con Edison's competitive energy businesses are eligible to receive benefits under these programs.

Net Periodic Benefit Cost

The components of the Companies' net periodic postretirement benefit costs for 2011, 2010, and 2009 were as follows:

	Con Edison									CECONY
(millions of dollars)	2011			2010			2009			2011			2010			2009
Service cost	$	26		$	24		$	22		$	20		$	19		$	18
Interest cost on accumulated other postretirement benefit obligation		83			91			95			72			80			84
Expected return on plan assets		(88	)		(86	)		(86	)		(78	)		(78	)		(78	)
Amortization of net actuarial loss		88			92			74			80			85			65
Amortization of prior service cost		(10	)		(12	)		(12	)		(11	)		(14	)		(14	)
Amortization of transition obligation		4			3			3			4			3			3
NET PERIODIC POSTRETIREMENT BENEFIT COST	$	103		$	112		$	96		$	87		$	95		$	78
Cost capitalized		(35	)		(39	)		(35	)		(29	)		(33	)		(29	)
Cost charged		14			4			3			13			1			1
Cost charged to operating expenses	$	82		$	77		$	64		$	71		$	63		$	50

Funded Status

The funded status of the programs at December 31, 2011, 2010, and 2009 were as follows:

	Con Edison									CECONY
(millions of dollars)	2011			2010			2009			2011			2010			2009
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year	$	1,642		$	1,697		$	1,702		$	1,426		$	1,495		$	1,495
Service cost		25			24			22			20			19			18
Interest cost on accumulated postretirement benefit obligation		83			91			95			72			80			84
Net actuarial loss/(gain)		109			(68	)		(14	)		86			(77	)		(3	)
Benefits paid and administrative expenses		(144	)		(138	)		(141	)		(132	)		(126	)		(130	)
Participant contributions		33			29			26			32			28			25
Medicare prescription benefit		8			7			7			7			7			6
BENEFIT OBLIGATION AT END OF YEAR	$	1,756		$	1,642		$	1,697		$	1,511		$	1,426		$	1,495
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year	$	942		$	866		$	737		$	839		$	777		$	668
Actual return on plan assets		20			89			153			19			78			137
Employer contributions		84			96			86			74			85			73
Participant contributions		33			29			26			32			28			25
Benefits paid		(132	)		(138	)		(136	)		(124	)		(129	)		(126	)
FAIR VALUE OF PLAN ASSETS AT END OF YEAR	$	947		$	942		$	866		$	840		$	839		$	777
FUNDED STATUS	$	(809	)	$	(700	)	$	(831	)	$	(671	)	$	(587	)	$	(718	)
Unrecognized net loss		563			483			646			496			601			728
Unrecognized prior service costs		(1	)		(10	)		(23	)		(15	)		(40	)		(54	)
Unrecognized net transition liability at January 1, 1993		4			7			11			4			11			15

The increase in the value of other postretirement benefit plan obligation was a primary driver in the increased liability for other postretirement benefits at Con Edison and CECONY of $109 million and $84 million respectively, compared with December 31, 2010. For Con Edison, this increased liability resulted in an increase to regulatory assets of $79 million for unrecognized net losses and unrecognized prior service costs associated with the Utilities consistent with the accounting rules for regulated operations and a debit to OCI of $3 million (net of taxes) for the unrecognized net losses and unrecognized prior service costs associated with the competitive energy businesses and O&R's New Jersey and Pennsylvania utility subsidiaries.

For CECONY, the increase in liability resulted in an increase to regulatory assets of $64 million for unrecognized net losses and unrecognized prior service costs associated with the company consistent with the accounting rules for regulated operations and an immaterial change to OCI for unrecognized net losses and unrecognized prior service costs associated with the competitive energy businesses.

A portion of the estimated net loss, prior service costs and transition obligation for the other postretirement benefits, equal to $97 million, $(6) million and $4 million, respectively, will be amortized from accumulated OCI and the regulatory asset into net periodic benefit cost over the next year for Con Edison. Included in these amounts are $86 million, $(8) million and $4 million, respectively, for CECONY.

Assumptions

The actuarial assumptions were as follows:

	2011			2010			2009
Weighted-average assumptions used to determine benefit obligations at December 31:
Discount Rate		4.55	%		5.40	%		5.95	%
Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31:
Discount Rate		5.40	%		5.95	%		5.75	%
Expected Return on Plan Assets
Tax-Exempt		8.50	%		8.50	%		8.50	%
Taxable
CECONY		7.50	%		7.50	%		7.50	%
O&R		8.00	%		8.00	%		8.00	%

Refer to Note E for descriptions of the basis for determining the expected return on assets, investment policies and strategies, and the assumed discount rate.

The health care cost trend rate used to determine net periodic benefit cost for the year ended December 31, 2011 was 6.0 percent, which is assumed to decrease gradually to 4.5 percent by 2014 and remain at that level thereafter. The health care cost trend rate used to determine benefit obligations as of December 31, 2011 was 6.0 percent, which is assumed to decrease gradually to 4.5 percent by 2018 and remain at that level thereafter.

A one-percentage point change in the assumed health care cost trend rate would have the following effects at December 31, 2012:

	Con Edison							CECONY
	1-Percentage-Point
(millions of dollars)	Increase			Decrease				Increase				Decrease
Effect on accumulated other postretirement benefit obligation		$	8		$	(5	)		$	(25	)		$	22
Effect on service cost and interest cost components for 2011			1			(1	)			(1	)			1

Expected Benefit Payments

Based on current assumptions, the Companies expect to make the following benefit payments over the next ten years:

(millions of dollars)	2012		2013		2014		2015		2016		2017-2021
GROSS BENEFIT PAYMENTS
Con Edison	$	122	$	124	$	126	$	128	$	128	$	640
CECONY		110		112		113		114		114		559
MEDICARE PRESCRIPTION BENEFIT RECEIPTS
Con Edison	$	12	$	13	$	14	$	15	$	16	$	94
CECONY		11		12		13		14		14		85

Expected Contributions

Based on estimates as of December 31, 2011, Con Edison expects to make a contribution of $100 million, including $86 million for CECONY, to the other postretirement benefit plans in 2012.

Plan Assets

The asset allocations for CECONY's other postretirement benefit plans at the end of 2011, 2010, and 2009, and the target allocation for 2012 are as follows:

	Target Allocation Range		Plan Assets at December 31
Asset Category	2012		2011		2010		2009
Equity Securities		57% - 73%		62%		67%		66%
Debt Securities		26% -44%		38%		33%		34%
Total		100%		100%		100%		100%

Con Edison has established postretirement health and life insurance benefit plan trusts for the investment of assets to be used for the exclusive purpose of providing other postretirement benefits to participants and beneficiaries.

Refer to Note E for a discussion of Con Edison's investment policy for its benefit plans.

The fair values of the plan assets at December 31, 2011 by asset category (see description of levels in Note E) are as follows:

(millions of dollars)	Level 1		Level 2		Level 3		Total
U.S. Equity(a)	$	115	$	162	$	—	$	277
International Equity(b)		—		104		—		104
Other Fixed Income(c)		—		207		—		207
Cash and Cash Equivalents(d)		—		18		—		18
Total investments	$	115	$	491	$	—	$	606
Funds for retiree health benefits(e)		174		134		28		336
Investments (including funds for retiree health benefits)	$	289	$	625	$	28	$	942
Pending activities(f)								5
Total fair value of plan net assets							$	947

(a) U.S. Equity includes both actively- and passively-managed assets with investments in domestic equity index funds and commingled funds.

(b) International Equity includes commingled international equity funds.

(c) Other Fixed Income includes commingled funds, which are valued at Net Asset Value (NAV).

(d) Cash and Cash Equivalents include short term investments and money markets.

(e) The Companies set aside funds for retiree health benefits through a separate account within the pension trust, as permitted under Section 401(h) of the Internal Revenue Code of 1986, as amended. In accordance with the Code, the plan's investments in the 401(h) account may not be used for, or diverted to, any purpose other than providing health benefits for retirees. The net assets held in the 401(h) account are calculated based on a pro-rata percentage allocation of the net assets in the pension plan. The related obligations for health benefits are not included in the pension plan's obligations and are included in the Companies' other postretirement benefit obligation. See Note E.

(f) Pending activities include security purchases and sales that have not settled, interest and dividends that have not been received, and reflects adjustments for available estimates at year end.

The table below provides a reconciliation of the beginning and ending net balances for assets at December 31, 2011 classified as Level 3 in the fair value hierarchy.

(millions of dollars)	Beginning Balance as of January 1, 2011		Assets Still Held at Reporting Date – Unrealized Gains (Losses)			Assets Sold During the Period – Realized (Losses)			Purchases Sales and Settlements		Transfers Out of Level 3			Ending Balance as of December 31, 2011
Other Fixed Income	$	189	$	—		$	—		$	—	$	(189	)	$	—
Insurance Contracts		—		—			—			—		—			—
Total investments	$	189		—			—			—		(189	)	$	—
Funds for retiree health benefits		30		(3	)		(1	)		2		—			28
Investments (including funds for retiree health benefits)	$	219	$	(3	)	$	(1	)	$	2	$	(189	)	$	28

The fair values of the plan assets at December 31, 2010 by asset category (see description of levels in Note E) are as follows:

(millions of dollars)	Level 1		Level 2		Level 3		Total
U.S. Equity(a)	$	118	$	172	$	—	$	290
International Equity(b)		—		107		—		107
Other Fixed Income(c)		—		—		189		189
Cash and Cash Equivalents(d)		—		11		—		11
Total investments	$	118	$	290	$	189	$	597
Funds for retiree health benefits(e)		226		103		30		359
Investments (including funds for retiree health benefits)	$	344	$	393	$	219	$	956
Pending activities(f)								(14	)
Total fair value of plan net assets							$	942

(a) U.S. Equity includes both actively- and passively-managed assets with investments in domestic equity index funds and commingled funds.

(b) International Equity includes commingled international equity funds.

(c) Other Fixed Income includes commingled funds, which are valued at Net Asset Value (NAV).

(d) Cash and Cash Equivalents include short term investments and money markets.

(e) The Companies set aside funds for retiree health benefits through a separate account within the pension trust, as permitted under Section 401(h) of the Internal Revenue Code of 1986, as amended. In accordance with the Code, the plan's investments in the 401(h) account may not be used for, or diverted to, any purpose other than providing health benefits for retirees. The net assets held in the 401(h) account are calculated based on a pro-rata percentage allocation of the net assets in the pension plan. The related obligations for health benefits are not included in the pension plan's obligations and are included in the Companies' other postretirement benefit obligation. See Note E.

(f) Pending activities include security purchases and sales that have not settled, interest and dividends that have not been received, and reflects adjustments for available estimates at year end.

The table below provides a reconciliation of the beginning and ending net balances for assets at December 31, 2010 classified as Level 3 in the fair value hierarchy.

(millions of dollars)	Beginning Balance as of January 1, 2010		Assets Still Held at Reporting Date – Unrealized Gains/(Losses)		Assets Sold During the Period – Realized Gains/(Losses)			Purchases Sales and Settlements			Ending Balance as of December 31, 2010
Other Fixed Income	$	173	$	11	$	1		$	4		$	189
Insurance Contracts		8		—		(1	)		(7	)		—
Total investments	$	181	$	11	$	—		$	(3	)	$	189
Funds for retiree health benefits		28		3		2			(3	)		30
Investments (including funds for retiree health benefits)	$	209	$	14	$	2		$	(6	)	$	219

Effect of Medicare Prescription Benefit

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 created a benefit for certain employers who provide postretirement drug programs. The accounting rules for retirement benefits provide accounting and disclosure requirements relating to the Act. The Companies' actuaries have determined that each of their prescription drug plans provides a benefit that is at least actuarially equivalent to the Medicare prescription drug plan and projections indicate that this will be the case for 20 years; therefore, the Companies are eligible to receive the benefit that the Act makes available. When the plans' benefits are no longer actuarially equivalent to the Medicare plan, 25 percent of the retirees in each plan are assumed to begin to decline participation in the Companies' prescription programs.

In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 became law. In the first half of 2010, the Companies reduced their deferred tax asset to reflect the laws' repeal, effective 2013, of the deduction for federal income tax purposes of the portion of the cost of an employer's retiree prescription drug coverage for which the employer received a benefit under the Medicare Prescription Drug Improvement and Modernization Act of 2003. For CECONY, the reductions in its deferred tax asset of $33 million had no effect on net income because a regulatory asset in a like amount on a pre-tax basis was established to reflect future recovery from customers of the increased cost of its retiree prescription drug coverage resulting from the loss of the tax deduction. For O&R's New York electric and gas services the reductions in their deferred tax assets of $3 million had no effect on net income because a regulatory asset in a like amount on a pre-tax basis was established to reflect future recovery from customers of the increased cost of their retiree prescription drug coverage resulting from the loss of the tax deduction. For RECO and Pike County Light & Power Company, the reduction in their deferred tax assets of $1 million was taken as a charge to net income. The impact on Con Edison's deferred tax assets for its other businesses was not material to its results of operations.

CECONY [Member]

Other Postretirement Benefits

Note F — Other Postretirement Benefits

The Utilities currently have contributory comprehensive hospital, medical and prescription drug programs for all retirees, their dependents and surviving spouses.

CECONY also has a contributory life insurance program for bargaining unit employees and provides basic life insurance benefits up to a specified maximum at no cost to retired management employees. O&R has a non-contributory life insurance program for retirees. Certain employees of Con Edison's competitive energy businesses are eligible to receive benefits under these programs.

Net Periodic Benefit Cost

The components of the Companies' net periodic postretirement benefit costs for 2011, 2010, and 2009 were as follows:

	Con Edison									CECONY
(millions of dollars)	2011			2010			2009			2011			2010			2009
Service cost	$	26		$	24		$	22		$	20		$	19		$	18
Interest cost on accumulated other postretirement benefit obligation		83			91			95			72			80			84
Expected return on plan assets		(88	)		(86	)		(86	)		(78	)		(78	)		(78	)
Amortization of net actuarial loss		88			92			74			80			85			65
Amortization of prior service cost		(10	)		(12	)		(12	)		(11	)		(14	)		(14	)
Amortization of transition obligation		4			3			3			4			3			3
NET PERIODIC POSTRETIREMENT BENEFIT COST	$	103		$	112		$	96		$	87		$	95		$	78
Cost capitalized		(35	)		(39	)		(35	)		(29	)		(33	)		(29	)
Cost charged		14			4			3			13			1			1
Cost charged to operating expenses	$	82		$	77		$	64		$	71		$	63		$	50

Funded Status

The funded status of the programs at December 31, 2011, 2010, and 2009 were as follows:

	Con Edison									CECONY
(millions of dollars)	2011			2010			2009			2011			2010			2009
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year	$	1,642		$	1,697		$	1,702		$	1,426		$	1,495		$	1,495
Service cost		25			24			22			20			19			18
Interest cost on accumulated postretirement benefit obligation		83			91			95			72			80			84
Net actuarial loss/(gain)		109			(68	)		(14	)		86			(77	)		(3	)
Benefits paid and administrative expenses		(144	)		(138	)		(141	)		(132	)		(126	)		(130	)
Participant contributions		33			29			26			32			28			25
Medicare prescription benefit		8			7			7			7			7			6
BENEFIT OBLIGATION AT END OF YEAR	$	1,756		$	1,642		$	1,697		$	1,511		$	1,426		$	1,495
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year	$	942		$	866		$	737		$	839		$	777		$	668
Actual return on plan assets		20			89			153			19			78			137
Employer contributions		84			96			86			74			85			73
Participant contributions		33			29			26			32			28			25
Benefits paid		(132	)		(138	)		(136	)		(124	)		(129	)		(126	)
FAIR VALUE OF PLAN ASSETS AT END OF YEAR	$	947		$	942		$	866		$	840		$	839		$	777
FUNDED STATUS	$	(809	)	$	(700	)	$	(831	)	$	(671	)	$	(587	)	$	(718	)
Unrecognized net loss		563			483			646			496			601			728
Unrecognized prior service costs		(1	)		(10	)		(23	)		(15	)		(40	)		(54	)
Unrecognized net transition liability at January 1, 1993		4			7			11			4			11			15

The increase in the value of other postretirement benefit plan obligation was a primary driver in the increased liability for other postretirement benefits at Con Edison and CECONY of $109 million and $84 million respectively, compared with December 31, 2010. For Con Edison, this increased liability resulted in an increase to regulatory assets of $79 million for unrecognized net losses and unrecognized prior service costs associated with the Utilities consistent with the accounting rules for regulated operations and a debit to OCI of $3 million (net of taxes) for the unrecognized net losses and unrecognized prior service costs associated with the competitive energy businesses and O&R's New Jersey and Pennsylvania utility subsidiaries.

For CECONY, the increase in liability resulted in an increase to regulatory assets of $64 million for unrecognized net losses and unrecognized prior service costs associated with the company consistent with the accounting rules for regulated operations and an immaterial change to OCI for unrecognized net losses and unrecognized prior service costs associated with the competitive energy businesses.

A portion of the estimated net loss, prior service costs and transition obligation for the other postretirement benefits, equal to $97 million, $(6) million and $4 million, respectively, will be amortized from accumulated OCI and the regulatory asset into net periodic benefit cost over the next year for Con Edison. Included in these amounts are $86 million, $(8) million and $4 million, respectively, for CECONY.

Assumptions

The actuarial assumptions were as follows:

	2011			2010			2009
Weighted-average assumptions used to determine benefit obligations at December 31:
Discount Rate		4.55	%		5.40	%		5.95	%
Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31:
Discount Rate		5.40	%		5.95	%		5.75	%
Expected Return on Plan Assets
Tax-Exempt		8.50	%		8.50	%		8.50	%
Taxable
CECONY		7.50	%		7.50	%		7.50	%
O&R		8.00	%		8.00	%		8.00	%

Refer to Note E for descriptions of the basis for determining the expected return on assets, investment policies and strategies, and the assumed discount rate.

The health care cost trend rate used to determine net periodic benefit cost for the year ended December 31, 2011 was 6.0 percent, which is assumed to decrease gradually to 4.5 percent by 2014 and remain at that level thereafter. The health care cost trend rate used to determine benefit obligations as of December 31, 2011 was 6.0 percent, which is assumed to decrease gradually to 4.5 percent by 2018 and remain at that level thereafter.

A one-percentage point change in the assumed health care cost trend rate would have the following effects at December 31, 2012:

	Con Edison							CECONY
	1-Percentage-Point
(millions of dollars)	Increase			Decrease				Increase				Decrease
Effect on accumulated other postretirement benefit obligation		$	8		$	(5	)		$	(25	)		$	22
Effect on service cost and interest cost components for 2011			1			(1	)			(1	)			1

Expected Benefit Payments

Based on current assumptions, the Companies expect to make the following benefit payments over the next ten years:

(millions of dollars)	2012		2013		2014		2015		2016		2017-2021
GROSS BENEFIT PAYMENTS
Con Edison	$	122	$	124	$	126	$	128	$	128	$	640
CECONY		110		112		113		114		114		559
MEDICARE PRESCRIPTION BENEFIT RECEIPTS
Con Edison	$	12	$	13	$	14	$	15	$	16	$	94
CECONY		11		12		13		14		14		85

Expected Contributions

Based on estimates as of December 31, 2011, Con Edison expects to make a contribution of $100 million, including $86 million for CECONY, to the other postretirement benefit plans in 2012.

Plan Assets

The asset allocations for CECONY's other postretirement benefit plans at the end of 2011, 2010, and 2009, and the target allocation for 2012 are as follows:

	Target Allocation Range		Plan Assets at December 31
Asset Category	2012		2011		2010		2009
Equity Securities		57% - 73%		62%		67%		66%
Debt Securities		26% -44%		38%		33%		34%
Total		100%		100%		100%		100%

Con Edison has established postretirement health and life insurance benefit plan trusts for the investment of assets to be used for the exclusive purpose of providing other postretirement benefits to participants and beneficiaries.

Refer to Note E for a discussion of Con Edison's investment policy for its benefit plans.

The fair values of the plan assets at December 31, 2011 by asset category (see description of levels in Note E) are as follows:

(millions of dollars)	Level 1		Level 2		Level 3		Total
U.S. Equity(a)	$	115	$	162	$	—	$	277
International Equity(b)		—		104		—		104
Other Fixed Income(c)		—		207		—		207
Cash and Cash Equivalents(d)		—		18		—		18
Total investments	$	115	$	491	$	—	$	606
Funds for retiree health benefits(e)		174		134		28		336
Investments (including funds for retiree health benefits)	$	289	$	625	$	28	$	942
Pending activities(f)								5
Total fair value of plan net assets							$	947

(a) U.S. Equity includes both actively- and passively-managed assets with investments in domestic equity index funds and commingled funds.

(b) International Equity includes commingled international equity funds.

(c) Other Fixed Income includes commingled funds, which are valued at Net Asset Value (NAV).

(d) Cash and Cash Equivalents include short term investments and money markets.

(e) The Companies set aside funds for retiree health benefits through a separate account within the pension trust, as permitted under Section 401(h) of the Internal Revenue Code of 1986, as amended. In accordance with the Code, the plan's investments in the 401(h) account may not be used for, or diverted to, any purpose other than providing health benefits for retirees. The net assets held in the 401(h) account are calculated based on a pro-rata percentage allocation of the net assets in the pension plan. The related obligations for health benefits are not included in the pension plan's obligations and are included in the Companies' other postretirement benefit obligation. See Note E.

(f) Pending activities include security purchases and sales that have not settled, interest and dividends that have not been received, and reflects adjustments for available estimates at year end.

The table below provides a reconciliation of the beginning and ending net balances for assets at December 31, 2011 classified as Level 3 in the fair value hierarchy.

(millions of dollars)	Beginning Balance as of January 1, 2011		Assets Still Held at Reporting Date – Unrealized Gains (Losses)			Assets Sold During the Period – Realized (Losses)			Purchases Sales and Settlements		Transfers Out of Level 3			Ending Balance as of December 31, 2011
Other Fixed Income	$	189	$	—		$	—		$	—	$	(189	)	$	—
Insurance Contracts		—		—			—			—		—			—
Total investments	$	189		—			—			—		(189	)	$	—
Funds for retiree health benefits		30		(3	)		(1	)		2		—			28
Investments (including funds for retiree health benefits)	$	219	$	(3	)	$	(1	)	$	2	$	(189	)	$	28

The fair values of the plan assets at December 31, 2010 by asset category (see description of levels in Note E) are as follows:

(millions of dollars)	Level 1		Level 2		Level 3		Total
U.S. Equity(a)	$	118	$	172	$	—	$	290
International Equity(b)		—		107		—		107
Other Fixed Income(c)		—		—		189		189
Cash and Cash Equivalents(d)		—		11		—		11
Total investments	$	118	$	290	$	189	$	597
Funds for retiree health benefits(e)		226		103		30		359
Investments (including funds for retiree health benefits)	$	344	$	393	$	219	$	956
Pending activities(f)								(14	)
Total fair value of plan net assets							$	942

(a) U.S. Equity includes both actively- and passively-managed assets with investments in domestic equity index funds and commingled funds.

(b) International Equity includes commingled international equity funds.

(c) Other Fixed Income includes commingled funds, which are valued at Net Asset Value (NAV).

(d) Cash and Cash Equivalents include short term investments and money markets.

(e) The Companies set aside funds for retiree health benefits through a separate account within the pension trust, as permitted under Section 401(h) of the Internal Revenue Code of 1986, as amended. In accordance with the Code, the plan's investments in the 401(h) account may not be used for, or diverted to, any purpose other than providing health benefits for retirees. The net assets held in the 401(h) account are calculated based on a pro-rata percentage allocation of the net assets in the pension plan. The related obligations for health benefits are not included in the pension plan's obligations and are included in the Companies' other postretirement benefit obligation. See Note E.

(f) Pending activities include security purchases and sales that have not settled, interest and dividends that have not been received, and reflects adjustments for available estimates at year end.

The table below provides a reconciliation of the beginning and ending net balances for assets at December 31, 2010 classified as Level 3 in the fair value hierarchy.

(millions of dollars)	Beginning Balance as of January 1, 2010		Assets Still Held at Reporting Date – Unrealized Gains/(Losses)		Assets Sold During the Period – Realized Gains/(Losses)			Purchases Sales and Settlements			Ending Balance as of December 31, 2010
Other Fixed Income	$	173	$	11	$	1		$	4		$	189
Insurance Contracts		8		—		(1	)		(7	)		—
Total investments	$	181	$	11	$	—		$	(3	)	$	189
Funds for retiree health benefits		28		3		2			(3	)		30
Investments (including funds for retiree health benefits)	$	209	$	14	$	2		$	(6	)	$	219

Effect of Medicare Prescription Benefit

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 created a benefit for certain employers who provide postretirement drug programs. The accounting rules for retirement benefits provide accounting and disclosure requirements relating to the Act. The Companies' actuaries have determined that each of their prescription drug plans provides a benefit that is at least actuarially equivalent to the Medicare prescription drug plan and projections indicate that this will be the case for 20 years; therefore, the Companies are eligible to receive the benefit that the Act makes available. When the plans' benefits are no longer actuarially equivalent to the Medicare plan, 25 percent of the retirees in each plan are assumed to begin to decline participation in the Companies' prescription programs.

In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 became law. In the first half of 2010, the Companies reduced their deferred tax asset to reflect the laws' repeal, effective 2013, of the deduction for federal income tax purposes of the portion of the cost of an employer's retiree prescription drug coverage for which the employer received a benefit under the Medicare Prescription Drug Improvement and Modernization Act of 2003. For CECONY, the reductions in its deferred tax asset of $33 million had no effect on net income because a regulatory asset in a like amount on a pre-tax basis was established to reflect future recovery from customers of the increased cost of its retiree prescription drug coverage resulting from the loss of the tax deduction. For O&R's New York electric and gas services the reductions in their deferred tax assets of $3 million had no effect on net income because a regulatory asset in a like amount on a pre-tax basis was established to reflect future recovery from customers of the increased cost of their retiree prescription drug coverage resulting from the loss of the tax deduction. For RECO and Pike County Light & Power Company, the reduction in their deferred tax assets of $1 million was taken as a charge to net income. The impact on Con Edison's deferred tax assets for its other businesses was not material to its results of operations.