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Fair Value Measurements (Tables)
 12 Months Ended
Dec. 31, 2012
Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 are summarized below.

 

     Level 1     Level 2     Level 3    

Netting

Adjustments(4)

     Total  
(Millions of Dollars)   Con
Edison		     CECONY     Con
Edison		     CECONY     Con
Edison		     CECONY     Con
Edison		     CECONY     Con
Edison		     CECONY  

Derivative assets:

                    

Commodity

   $ -      $ -      $ 43      $ 8      $ 33      $ 10      $ (10 )    $ 12      $ 66      $ 30   

Transfer in(5)(6)

     -        -        -        -        -        -        -        -        -        -   

Transfer out(5)(6)

     -        -        -        -        -        -        -        -        -        -   

Commodity Total(1)

   $ -      $ -      $ 43      $ 8      $ 33      $ 10      $ (10 )    $ 12      $ 66      $ 30   

Other assets

   $ 106      $ 99      $ 2      $ 3      $ 105      $ 95      $ -      $ -      $ 213      $ 197   

Transfer in(5)(6)

     -        -        105        95        -        -        -        -        105        95   

Transfer out(5)(6)

     -        -        -        -        (105 )      (95 )      -        -        (105 )      (95 ) 

Other assets(3)

   $ 106      $ 99      $ 107      $ 98      $ -      $ -      $ -      $ -      $ 213      $ 197   

Total

   $ 106      $ 99      $ 150      $ 106      $ 33      $ 10      $ (10 )    $ 12      $ 279      $ 227   

Derivative liabilities:

                    

Commodity

   $ 5      $ 3      $ 114      $ 62      $ 47      $ 9      $ (94 )    $ (35 )    $ 72      $ 39   

Transfer in(5)(6)

     9        9        13        9        2        -        -        -        24        18   

Transfer out(5)(6)

     (2 )      -        (11 )      (9 )      (11 )      (9 )      -        -        (24 )      (18 ) 

Commodity Total(1)

   $ 12      $ 12      $ 116      $ 62      $ 38      $ -      $ (94 )    $ (35 )    $ 72      $ 39   

Interest rate contract

   $ -      $ -      $ (2 )    $ -      $ 8      $ -      $ -      $ -      $ 6      $ -   

Transfer in(5)(6)

     -        -        8        -        -        -        -        -        8        -   

Transfer out(5)(6)

     -        -        -        -        (8 )      -        -        -        (8 )      -   

Interest rate contract(2)

   $ -      $ -      $ 6      $ -      $ -      $ -      $ -      $ -      $ 6      $ -   

Total

   $ 12      $ 12      $ 122      $ 62      $ 38      $ -      $ (94 )    $ (35 )    $ 78      $ 39   

 

(1) A portion of the commodity derivatives categorized in Level 3 is valued using an internally developed model with observable inputs. The models also include some less readily observable inputs resulting in the classification of the entire contract as Level 3. See Note O.
(2) See Note O.
(3) Other assets are comprised of assets such as life insurance contracts within the deferred compensation plan and non-qualified retirement plans.
(4) Amounts represent the impact of legally-enforceable master netting agreements that allow the Companies to net gain and loss positions and cash collateral held or placed with the same counterparties.
(5) The Companies’ policy is to recognize transfers into and transfers out of the levels at the end of the reporting period.
(6) Transferred between Level 3 and Levels 1 and 2 because of reassessment of the levels in the fair value hierarchy within which certain inputs fall. Other assets and interest rate contract were transferred as of March 31, 2012.

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2011 are summarized below.

 

     Level 1     Level 2     Level 3    

Netting

Adjustments(4)

     Total  
(Millions of Dollars)   Con
Edison		     CECONY     Con
Edison		     CECONY     Con
Edison		     CECONY     Con
Edison		     CECONY     Con
Edison		     CECONY  

Derivative assets:

                    

Commodity(1)

   $ 3      $ -      $ 64      $ 8      $ 87      $ 11      $ (84 )    $ 5      $ 70      $ 24   

Other assets(3)

     76        76        -        -        99        90        -        -        175        166   

Total

   $ 79      $ 76      $ 64      $ 8      $ 186      $ 101      $ (84 )    $ 5      $ 245      $ 190   

Derivative liabilities:

                    

Commodity

   $ 12      $ 4      $ 222      $ 122      $ 169      $ 37      $ (194 )    $ (41 )    $ 209      $ 122   

Transfer in(5)(6)(7)

     -        -        26        25        6        6        -        -        32        31   

Transfer out(5)(6)(7)

     -        -        (6 )      (6 )      (26 )      (25 )      -        -        (32 )      (31 ) 

Commodity(1)

   $ 12      $ 4      $ 242      $ 141      $ 149      $ 18      $ (194 )    $ (41 )    $ 209      $ 122   

Interest rate contract(2)

     -        -        -        -        8        -        -        -        8        -   

Total

   $ 12      $ 4      $ 242      $ 141      $ 157      $ 18      $ (194 )    $ (41 )    $ 217      $ 122   

 

(1) A significant portion of the commodity derivative contracts categorized in Level 3 is valued using either an industry acceptable model or an internally developed model with observable inputs. The models also include some less readily observable inputs resulting in the classification of the entire contract as Level 3. See Note O.
(2) See Note O.
(3) Other assets are comprised of assets such as life insurance contracts within the Deferred Income Plan and Supplemental Retirement Income Plans, held in rabbi trusts.
(4) Amounts represent the impact of legally-enforceable master netting agreements that allow the Companies to net gain and loss positions and cash collateral held or placed with the same counterparties.
(5) The Companies’ policy is to recognize transfers into and transfers out of the levels at the end of the reporting period.
(6) Transferred from Level 2 to Level 3 because of reassessment of the levels in the fair value hierarchy within which certain inputs fall.
(7) Transferred from Level 3 to Level 2 because of availability of observable market data due to decrease in the terms of certain contracts from beyond one year as of December 31, 2010 to less than one year as of December 31, 2011.
Schedule of Commodity Derivatives

The managers of the risk management groups report to the Companies’ Vice President and Treasurer.

 

     

Fair Value of Level 3 at
December 31, 2012

(Millions of Dollars)

    

Valuation

Techniques

    Unobservable Inputs    Range

Con Edison – Commodity

           

Electricity

    $ (5 )    Discounted Cash Flow    Forward prices(1)    $28-$82 per MWH

Electricity Wholesale Contract

      (1 )    Discounted Cash Flow   

Forward prices(2)

New Jersey solar renewable energy credit (SREC)(2)

   

$29-$48 per MWH

$90 per SREC

Standard Offer Capacity Agreements

      (12 )    Discounted Cash Flow   

Forward capacity prices(1)

Forward price escalator(1)

Present value factor(1)

   

$166 MW - day

0% - 3%

1.66%

Transmission Congestion Contracts / Financial Transmission Rights

      13      Discounted Cash Flow   

Discount to adjust auction prices for inter-zonal forward price curves(2)

Discount to adjust auction prices for historical monthly realized settlements(2)

Forward energy prices and zonal losses(1)

   

17.5% - 38%

8.5% - 31%

$0.01 - $12

Total Con Edison —Commodity

    $ (5 )               

CECONY — Commodity

           

Transmission Congestion Contracts

    $ 10      Discounted Cash Flow   

Discount to adjust auction prices for inter-zonal forward price curves(2)

Discount to adjust auction prices for historical monthly realized settlements(2)

   

17.5%-38%

8.5%-31%

 

(1) Generally, increases/(decreases) in this input in isolation would result in a higher/(lower) fair value measurement.
(2) Generally, increases/(decreases) in this input in isolation would result in a lower/(higher) fair value measurement.
Reconciliation of Beginning and Ending Net Balances for Assets and Liabilities Measured at Level 3 Fair Value

The table listed below provides a reconciliation of the beginning and ending net balances for assets and liabilities measured at fair value for the years ended December 31, 2012 and 2011 and classified as Level 3 in the fair value hierarchy:

 

     For the Year Ended December 31, 2012  
         

Total Gains/(Losses) –

Realized and Unrealized

                                      
(Millions of Dollars)   Beginning
Balance as of
January 1, 2012		     Included in
Earnings		     Included in
Regulatory
Assets and
Liabilities		     Purchases     Issuances     Sales     Settlements     Transfer
In/Out of
Level 3		    

Ending

Balance as of
December 31, 2012

  

Con Edison

                  

Derivatives:

                  

Commodity

   $ (62 )    $ (112 )    $ 16      $ 22      $ -      $ -      $ 122      $ 9      $ (5 ) 

Interest rate contract

     (8 )      (1 )      -        -        -        -        1        8 (2)      -   

Other assets(1)

     99        3        3        -        -        -        -        (105 )(2)      -   

Total

   $ 29      $ (110 )    $ 19      $ 22      $ -      $ -      $ 123      $ (88 )    $ (5 ) 

CECONY

                  

Derivatives:

                  

Commodity

   $ (7 )    $ (32 )    $ 8      $ 18      $ -      $ -      $ 14      $ 9      $ 10   

Other assets(1)

     90        3        2        -        -        -        -        (95 )(2)      -   

Total

   $ 83      $ (29 )    $ 10      $ 18      $ -      $ -      $ 14      $ (86 )    $ 10   

 

(1) Amounts included in earnings are reported in investment and other income on the consolidated income statement.
(2) Other assets and interest rate contract were transferred as of March 31, 2012.

 

     For the Year Ended December 31, 2011  
         

Total Gains/(Losses) –

Realized and Unrealized

                                      
(Millions of Dollars)   Beginning
Balance as of
January 1, 2011		     Included in
Earnings		     Included in
Regulatory
Assets and
Liabilities		     Purchases     Issuances     Sales     Settlements     Transfer
In/Out of
Level 3		    

Ending

Balance as of
December 31, 2011

  

Con Edison

                  

Derivatives:

                  

Commodity

   $ (88 )    $ (113 )    $ 20      $ 32      $ -      $ -      $ 67      $ 20      $ (62 ) 

Interest rate contract

     (10 )      (3 )      2        -        -        -        3        -        (8 ) 

Other assets(1)

     101        -        (2 )      -        -        -        -        -        99   

Total

   $ 3      $ (116 )    $ 20      $ 32      $ -      $ -      $ 70      $ 20      $ 29   

CECONY

                  

Derivatives:

                  

Commodity

   $ (26 )    $ (21 )    $ -      $ 19      $ -      $ -      $ 2      $ 19      $ (7 ) 

Other assets(1)

     92        -        (2 )      -        -        -        -        -        90   

Total

   $ 66      $ (21 )    $ (2 )    $ 19      $ -      $ -      $ 2      $ 19      $ 83   

 

(1) Amounts included in earnings are reported in investment and other income on the consolidated income statement.