Lease In/Lease Out Transactions

6 Months Ended

Jun. 30, 2014

Lease In/Lease Out Transactions

Note I — Lease In/Lease Out Transactions

As a result of the January 2013 Court of Appeals decision, in March 2013, Con Edison recorded an after-tax charge of $150 million to reflect, as required by the accounting rules for leveraged lease transactions, the recalculation of the accounting effect of its 1997 and 1999 LILO transactions based on the revised after-tax cash flows projected from the inception of the leveraged leases, as well as the interest on the potential tax liability resulting from the disallowance of federal and state income tax losses with respect to the LILO transactions. In the second quarter of 2013, the 1999 LILO transaction was terminated, as a result of which the company realized a $29 million gain (after-tax). In the first quarter of 2014, the interest accrued on the liability was reduced by $13 million ($7 million, net of tax).

The effect of the LILO transactions on Con Edison’s consolidated income statement for the three and six months ended as of June 30, 2014 and 2013 was as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(Millions of Dollars)	2014		2013		2014		2013
Increase/(decrease) to non-utility operating revenues	$	—	$	51	$	—	$	(70)
(Increase)/decrease to other interest expense		—		—		13		(131)
Income tax benefit/(expense)		—		(22)		(6)		80
Total increase/(decrease) in net income	$	—	$	29	$	7	$	(121)

In January 2013, to defray interest charges, the company deposited $447 million with federal and state tax agencies relating primarily to the potential tax liability from the LILO transactions in past tax years and interest thereon. During 2013, $125 million of the deposit was returned from the IRS at the company’s request. Also in 2013, the deposit balance was reduced by an additional $48 million, due to a $10 million refund from the IRS and the application of $38 million toward the settlement of tax and interest for certain tax years, primarily relating to tax liability from the LILO transactions. In the first quarter of 2014, Con Edison applied the remainder of the deposit against its federal and state tax liabilities, including interest. See “Uncertain Tax Positions” in Note J.

CECONY [Member]

Lease In/Lease Out Transactions

Note I — Lease In/Lease Out Transactions

As a result of the January 2013 Court of Appeals decision, in March 2013, Con Edison recorded an after-tax charge of $150 million to reflect, as required by the accounting rules for leveraged lease transactions, the recalculation of the accounting effect of its 1997 and 1999 LILO transactions based on the revised after-tax cash flows projected from the inception of the leveraged leases, as well as the interest on the potential tax liability resulting from the disallowance of federal and state income tax losses with respect to the LILO transactions. In the second quarter of 2013, the 1999 LILO transaction was terminated, as a result of which the company realized a $29 million gain (after-tax). In the first quarter of 2014, the interest accrued on the liability was reduced by $13 million ($7 million, net of tax).

The effect of the LILO transactions on Con Edison’s consolidated income statement for the three and six months ended as of June 30, 2014 and 2013 was as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(Millions of Dollars)	2014		2013		2014		2013
Increase/(decrease) to non-utility operating revenues	$	—	$	51	$	—	$	(70)
(Increase)/decrease to other interest expense		—		—		13		(131)
Income tax benefit/(expense)		—		(22)		(6)		80
Total increase/(decrease) in net income	$	—	$	29	$	7	$	(121)

In January 2013, to defray interest charges, the company deposited $447 million with federal and state tax agencies relating primarily to the potential tax liability from the LILO transactions in past tax years and interest thereon. During 2013, $125 million of the deposit was returned from the IRS at the company’s request. Also in 2013, the deposit balance was reduced by an additional $48 million, due to a $10 million refund from the IRS and the application of $38 million toward the settlement of tax and interest for certain tax years, primarily relating to tax liability from the LILO transactions. In the first quarter of 2014, Con Edison applied the remainder of the deposit against its federal and state tax liabilities, including interest. See “Uncertain Tax Positions” in Note J.