CONSOLIDATED EDISON INC (ED) FY 2021 MD&A

Item 7:    Management’s Discussion and Analysis of Financial Condition and Results of Operations

This combined management’s discussion and analysis of financial condition and results of operations relates to the consolidated financial statements included in this report of two separate registrants: Con Edison and CECONY, and should be read in conjunction with the financial statements and the notes thereto. As used in this report, the term the “Companies” refers to Con Edison and CECONY. CECONY is a subsidiary of Con Edison and, as such, information in this management’s discussion and analysis about CECONY applies to Con Edison.

Information in any item of this report referred to in this discussion and analysis is incorporated by reference herein. The use of terms such as “see” or “refer to” shall be deemed to incorporate by reference into this discussion and analysis the information to which reference is made.

Corporate Overview

Con Edison’s principal business operations are those of the Utilities, the Clean Energy Businesses and Con Edison Transmission. CECONY is a regulated utility that provides electric service in New York City and New York's Westchester County, gas service in Manhattan, the Bronx, parts of Queens and parts of Westchester, and steam service in Manhattan. O&R is a regulated utility serving customers in a 1,300-square-mile-area in southeastern NY State and northern NJ. Con Edison Clean Energy Businesses, through its subsidiaries, develops, owns and operates renewable and sustainable energy infrastructure projects and provides energy-related products and services to wholesale and retail customers. Con Edison Transmission, through its subsidiaries, invests in electric transmission projects supporting Con Edison's effort to transition to clean, renewable energy and manages, through joint ventures, both electric and gas assets while seeking to develop electric transmission projects that will bring clean, renewable electricity to customers, focusing on NY, New England, the Mid-Atlantic states and the Midwest.

In addition to the risks and uncertainties described in Item 1A and the Companies’ material contingencies described in Notes B, G and H to the financial statements in Item 8, the Companies’ management considers the following events, trends, and uncertainties to be important to understanding the Companies’ current and future financial condition.

CECONY Electric and Gas Rate Plans

In January 2022, CECONY filed a request with the NYSPSC for electric and gas rate increases of $1,199 million and $503 million, respectively, effective January 2023. CECONY’s future earnings will depend on the rates authorized in, and the other provisions of, its January 2023 rate plans and CECONY’s ability to operate its businesses in a manner consistent with such rate plans. Therefore, the outcome of CECONY’s rate request, which requires approval by the NYSPSC, will impact the Companies’ future financial condition, results of operations and liquidity. See “Utility Regulation – State Utility Regulation – Rate Plans” in Item 1 and “Rate Plans” in Note B to the financial statements in Item 8.

Pursuant to its current electric and gas rate plans, CECONY recorded $92 million of earnings for the year ended December 31, 2021 of earnings adjustment mechanisms and positive incentives, primarily reflecting the achievement of certain energy efficiency measures, as compared to $50 million, $59 million and $33 million for the years ended December 31, 2020, 2019 and 2018, respectively. The amount of earnings or losses CECONY records pursuant to the earnings adjustment mechanisms and positive incentives will also impact the Companies’ future financial condition, results of operations and liquidity. See “Rate Plans” in Note B to the financial statements in Item 8.

In November 2021, the NYSPSC issued an order establishing a surcharge recovery mechanism for CECONY to collect $43 million and $7 million for electric and gas, respectively, of late payment charges and fees that were not billed for the year ended December 31, 2020. The company recorded such amounts as revenue for the year ended December 31, 2021, as permitted under the accounting rules for regulated utilities, and also accrued such amounts as a current asset at December 31, 2021. See “COVID-19 Regulatory Matters” in Note B to the financial statements in Item 8.

Clean Energy Goals

The success of the Companies’ efforts to meet federal, state and city clean energy policy goals and the impact of such goals on CECONY’s electric, gas and steam businesses and O&R’s electric and gas businesses may impact the Companies’ future financial condition. The Utilities expect electric demand to increase and gas and steam usage to decrease in their service territories as federal, state and local laws and policies are enacted and implemented. In particular, the long-term future of the Utilities’ gas businesses depends upon the role that natural gas will play in facilitating NY State’s and New York City’s climate goals. In addition, the impact and costs of climate change on the Utilities’ systems and the success of the Utilities’ efforts to increase system reliability and manage service

interruptions resulting from severe weather may impact the Companies’ future financial condition, results of operations and liquidity.

Clean Energy Businesses

The Clean Energy Businesses develop, own and operate renewable and sustainable energy infrastructure projects. The success of the Clean Energy Businesses’ strategy to increase earnings is dependent upon the expansion of their renewable energy portfolio and successful execution of develop/transfer opportunities. Con Edison is considering strategic alternatives with respect to the Clean Energy Businesses. The outcome of such evaluation may impact Con Edison’s future financial condition, results of operations and liquidity. See “Clean Energy Businesses” in Item 1.

Con Edison Transmission

Con Edison Transmission has taken steps to realign its portfolio to focus on electric transmission rather than gas by completing the sale of its 50 percent interest in Stagecoach in 2021. During 2020 and 2021, Con Edison Transmission recorded impairments on its investment in Mountain Valley Pipeline, LLC and during 2021, Con Edison Transmission recorded impairments on its previously held interest in Stagecoach and its interest in Honeoye. Any future impairments of Con Edison Transmission’s investments may impact Con Edison’s future financial condition and results of operations. Con Edison Transmission is pursuing opportunities to deliver offshore wind energy to high voltage electric grids through its participation in competitive solicitations in NY through its NY Transco partnership and in NJ. The success of Con Edison Transmission’s efforts to be awarded projects that will grow its electric transmission portfolio may impact Con Edison’s future capital requirements. See "Con Edison Transmission" in Item 1 and “Investments” in Note A and Note K and Note W to the financial statements in Item 8.

COVID-19

The COVID-19 pandemic has impacted, and continues to impact, countries, communities, supply chains and markets. As a result of the COVID-19 pandemic, there has been an economic slowdown in the Companies’ service territories and changes in governmental and regulatory policy. The decline in business activity in the Companies’ service territories has resulted in a slower recovery of cash from outstanding customer accounts receivable balances, material increases in customer accounts receivable balances, increases to the allowance for uncollectible accounts, and may result in increases to write-offs and recoveries of customer accounts. The extent to which COVID-19 will continue to impact the Companies, in particular, the Companies’ ability to recover cash from outstanding customer accounts receivable balances and the amount of write-offs of customer accounts, may impact Con Edison’s future financial condition, results of operations and liquidity. See “Coronavirus Disease 2019 (COVID-19) Impacts” in Item 7 and “COVID-19 Regulatory Matters” in Note B.

Also, see “Significant Developments and Outlook” in the Introduction to this report, “The Utilities,” “Clean Energy Businesses” and "Con Edison Transmission" in Item 1, and segment financial information in Note P to the financial statements in Item 8.

Certain financial data of Con Edison’s businesses are presented below:

(a)Net income for common stock from the Clean Energy Businesses for the year ended December 31, 2021 reflects $107 million (after-tax) of the effects of HLBV accounting for tax equity investments in certain renewable and sustainable electric projects and $40 million of net after-tax mark-to-market effects. Net income for common stock from the Clean Energy Businesses for the year ended December 31, 2021 includes $(3) million (after-tax) of loss from the sale of a renewable electric project. See Note S to the financial statements in Item 8.

(b)Net loss for common stock from Con Edison Transmission for the year ended December 31, 2021 includes $(153) million of a net after-tax impairment loss related to its investment in Stagecoach, $(168) million of a net after-tax impairment loss related to its investment in Mountain Valley Pipeline, LLC and $(5) million of goodwill impairment loss on its investment in Honeoye. See "Critical Accounting Estimates - Investments" in Item 7, "Investments - Partial Impairment of Investment in Stagecoach Gas Services LLC (Stagecoach)" and "Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)" in Note A, Note K and Note W to the financial statements in Item 8.

(c)Other includes parent company and consolidation adjustments. Net income for common stock for the year ended December 31, 2021 includes $(9) million (after-tax) of income tax impact on the effects of HLBV accounting for tax equity investments in certain renewable and sustainable projects and $(3) million of income tax impact on the net after-tax mark-to-market effects. Net income for common stock for the year ended December 31, 2021 includes $6 million of income tax impact for the impairment loss related to Con Edison's investment in

Stagecoach. Net income for common stock for the year ended December 31, 2021 includes $6 million of income tax impact for the impairment loss related to Con Edison's investment in Mountain Valley Pipeline, LLC.

Coronavirus Disease 2019 (COVID-19) Impacts

The Companies continue to respond to the Coronavirus Disease 2019 (COVID-19) global pandemic by working to reduce the potential risks posed by its spread to employees, customers and other stakeholders. The Companies continue to employ an incident command structure led by a pandemic planning team. The Companies support employee health and facility hygiene through regular cleaning and disinfecting of all work and common areas, promoting social distancing, allowing employees to work remotely and directing employees to stay at home if they are experiencing COVID or flu-like symptoms. Employees who test positive for COVID-19 are directed to quarantine at home and are evaluated for close, prolonged contact with other employees that would require those employees to quarantine at home. Following the Centers for Disease Control and Prevention guidelines, sick or quarantined employees return to work when they can safely do so. The Utilities continue to provide critical electric, gas and steam service to customers during the pandemic. Additional safety protocols have been implemented to protect employees, customers and the public, when work at customer premises is required.

In October 2021, in response to President Biden's Executive Order 14042, the Companies announced that they are committed to complying with the mandate for employees of federal contractors and subcontractors to be fully vaccinated against COVID-19 by the federally-required deadline, unless employees are legally entitled to an accommodation. In December 2021, an injunction was issued in the United States District Court for the Southern District of Georgia which currently prevents the U.S. government from enforcing this federal contractor vaccine mandate nationwide. The U.S. Supreme Court is expected to hear oral arguments in April 2022.

In December 2021, New York City instituted a vaccination mandate that requires employees of private businesses located in New York City who perform in-person work or interact with the public to be vaccinated against COVID-19. In furtherance of the mandate, in December 2021, the New York City Commissioner of Health and Mental Hygiene issued an order that requires workers entering workplaces within New York City to provide proof of COVID-19 vaccination, except in cases of a medical or religious exemption. This order is applicable to the Companies’ employees and contractors who report in-person to a company workplace located in New York City and the Companies are complying with its requirements.

The Companies are continuing to monitor the vaccination mandates closely and are implementing appropriate measures to mitigate any workforce and cost impacts that may occur.

Below is additional information related to the effects of the COVID-19 pandemic and the Companies’ actions. Also, see “COVID-19 Regulatory Matters” in Note B to the financial statements in Item 8.

Impact of CARES Act and 2021 Appropriations Act on Accounting for Income Taxes

In response to the economic impacts of the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act became law on March 27, 2020. The CARES Act has several key business tax relief measures that may present potential cash benefits and/or refund opportunities for Con Edison and its subsidiaries, including permitting a five-year carryback of a net operating loss (NOL) for tax years 2018, 2019 and 2020, temporary removal of the 80 percent limitation of NOL carryforwards against taxable income for tax years before 2021, temporary relaxation of the limitations on interest deductions, Employee Retention Tax Credit and deferral of payments of employer payroll taxes.

Con Edison carried back a NOL of $29 million from tax year 2018 to tax year 2013. This allowed Con Edison, mostly at the Clean Energy Businesses, to receive a $2.5 million net tax refund and to recognize a discrete income tax benefit of $4 million in 2020, due to the higher federal statutory tax rate in 2013. See "Income Tax" in Note L. Con Edison and its subsidiaries did not have a federal NOL in tax years 2019 or 2020.

Con Edison and its subsidiaries benefited by the increase in the percentage for calculating the limitation on the interest expense deduction from 30 percent of Adjusted Taxable Income (ATI) to 50 percent of ATI in 2019 and 2020, which allowed the Companies to deduct 100 percent of their interest expense. For 2021, the limitation on interest expense for computing ATI reverted back to 30 percent.

The Companies qualify for an employee retention tax credit created under the CARES Act for "eligible employers" related to governmental authorities imposing restrictions that partially suspended their operations for a portion of their workforce due to the COVID-19 pandemic and the Companies continued to pay them. For the year ended December 31, 2020, Con Edison and CECONY recognized a tax benefit to Taxes, other than income taxes of $10 million and $7 million, respectively.

The CARES Act also allows employers to defer payments of the employer share of Social Security payroll taxes that would have otherwise been owed from March 27, 2020 through December 31, 2020. The Companies deferred the payment of employer payroll taxes for the period April 1, 2020 through December 31, 2020 of approximately $71 million ($63 million of which is for CECONY). The Companies paid half of this liability by December 31, 2021 and will repay the other half by December 31, 2022.

In December 2020, the Consolidated Appropriations Act, 2021 (the 2021 Appropriations Act) was signed into law. The 2021 Appropriations Act, among other things, extends the expiring employee retention tax credit to include qualified wages paid in the first two quarters of 2021, increases the qualified wages paid to an employee from 50 percent up to $10,000 annually in 2020 to 70 percent up to $10,000 per quarter in 2021 and increases the maximum employee retention tax credit amount an employer can take per employee from $5,000 in 2020 to $14,000 in the first two quarters of 2021. In March 2021, the American Rescue Plan Act was signed into law that expanded the 2021 Appropriations Act to extend the period for eligible employers to receive the employer retention credit from June 30, 2021 to December 31, 2021. In November 2021, the Infrastructure and Investment and Jobs Act was signed into law and accelerated the end of the employee retention tax credit retroactive to October 1, 2021, rather than December 31, 2021. This effectively reduced the maximum credit available from $28,000 to $21,000 per employee.

For the year ended December 31, 2021, Con Edison and CECONY recognized a tax benefit to Taxes, other than income taxes of $9 million and $4 million, respectively.

Accounting Considerations

Due to the COVID-19 pandemic and subsequent New York State on PAUSE and related executive orders (that have since been lifted), decline in business, bankruptcies, layoffs and furloughs, among other factors, both commercial and residential customers have had and may continue to have increased difficulty paying their utility bills. In June 2020, the state of NY enacted a law prohibiting NY utilities, including CECONY and O&R, from disconnecting residential customers, and starting in May 2021 small business customers, during the COVID-19 state of emergency, which ended in June 2021. In addition, such prohibitions applied for an additional 180 days after the state of emergency ended (December 21, 2021) for residential and small business customers who experienced a change in financial circumstances due to the COVID-19 pandemic. CECONY and O&R have existing allowances for uncollectible accounts established against their customer accounts receivable balances that are reevaluated each quarter and updated accordingly. Changes to the Utilities’ reserve balances that result in write-offs of customer accounts receivable balances are not reflected in rates during the term of the current rate plans. During 2021, the potential economic impact of the COVID-19 pandemic was also considered in forward-looking projections related to write-off and recovery rates, resulting in increases to the customer allowance for uncollectible accounts as detailed herein. CECONY’s and O&R’s allowances for uncollectible customer accounts reserve increased from $138 million and $8.7 million at December 31, 2020 to $304 million and $12.3 million at December 31, 2021, respectively. See "COVID-19 Regulatory Matters" in Note B and Note N to the financial statements in Item 8.

The Companies test goodwill for impairment at least annually or whenever there is a triggering event, and test long-lived and intangible assets for recoverability when events or changes in circumstances indicate that the carrying value of long-lived or intangible assets may not be recoverable. The Companies identified no triggering events or changes in circumstances related to the COVID-19 pandemic that would indicate that the carrying value of goodwill, long-lived or intangible assets may not be recoverable at December 31, 2020 and 2021. See Note K to the financial statements in Item 8.

New York State Legislation

In April 2021, New York State passed a law that increases the corporate franchise tax rate on business income from 6.5% to 7.25%, retroactive to January 1, 2021, for taxpayers with taxable income greater than $5 million. The law also reinstates the business capital tax at 0.1875%, not to exceed a maximum tax liability of $5 million per taxpayer. NY State requires a corporate franchise taxpayer to calculate and pay the highest amount of tax under the three alternative methods: a tax on business income; a tax on business capital; or a fixed dollar minimum. The provisions to increase the corporate franchise tax rate and reinstate a capital tax are scheduled to expire after 2023 and are not expected to have a material impact on the Companies’ financial position, results of operations or liquidity. In addition, the new law created a program that allows eligible residential renters in NY State who require assistance with rent and utility bills to have up to twelve months of electric and gas utility bill arrears forgiven, provided that such arrears were accrued on or after March 13, 2020. The program will be administered by the State Office of Temporary and Disability Assistance in coordination with the New York State Department of Public Service and the NYSPSC. Under the program, CECONY and O&R would qualify for a refundable tax credit for NY State gross-receipts tax equal to the amount of arrears waived by the Utilities in the year that the arrears are waived and certified by the NYSPSC. See "COVID-19 Regulatory Matters” in Note B to the financial statements in Item 8.

Liquidity and Financing

The Companies continue to monitor the impacts of the COVID-19 pandemic on the financial markets closely, including borrowing rates and daily cash collections. The Companies have been able to access the capital markets as needed since the start of the COVID-19 pandemic in March 2020. See Notes C and D to the financial statements in Item 8. However, a continued economic downturn as a result of the COVID-19 pandemic has increased the amount of capital needed by the Utilities and could impact the costs of such capital.

The decline in business activity in the Utilities’ service territory as a result of the COVID-19 pandemic and subsequent New York State on PAUSE and related executive orders (that have since been lifted), resulted in a slower recovery in cash of outstanding customer accounts receivable balances in 2020 and 2021.

The Utilities’ rate plans have revenue decoupling mechanisms in their NY electric and gas businesses that largely reconcile actual energy delivery revenues to the authorized delivery revenues approved by the NYSPSC per month and reconcile the deferred balances semi-annually under CECONY's electric rate plan (January through June and July through December, respectively) and annually under CECONY's gas rate plan and O&R NY's electric and gas rate plans (January through December). Differences are accrued with interest each month for CECONY's and O&R NY’s electric customers and after the annual deferral period ends for CECONY's and O&R NY’s gas customers for refund to, or recovery from customers, as applicable. Generally, the refund to or recovery from customers begins August and February of each year over an ensuing six-month period for CECONY's electric customers and February of each year over an ensuing twelve-month period for CECONY's gas and O&R NY's electric and gas customers. Although these revenue decoupling mechanisms are in place, lower billed sales revenues and higher unpaid accounts have reduced and are expected to continue to reduce liquidity at the Utilities.

In March 2020, the Utilities began suspending service disconnections, certain collection notices, final bill collection agency activity, new late payment charges and certain other fees for all customers. In November 2021, the NYSPSC issued an order establishing a surcharge recovery mechanism for CECONY to collect, commencing December 1, 2021 through December 31, 2022, $43 million and $7 million for electric and gas, respectively, of late payment charges and fees that were not billed for the year ended December 31, 2020. The company recorded such amounts as revenue for the year ended December 31, 2021, as permitted under the accounting rules for regulated utilities, and also accrued such amounts as a current asset at December 31, 2021. Pursuant to the November 2021 order, the company also established a recovery mechanism for CECONY to collect, commencing January 2023 through December 2023, $19 million and $4 million for electric and gas, respectively, of late payment charges and fees that were not billed for the year ended December 31, 2021 and the company recorded such amounts as revenue for the year ended December 31, 2021, as permitted under the accounting rules for regulated utilities, and also accrued such amounts as a current asset at December 31, 2021. In addition, pursuant to the November 2021 order, CECONY established a reserve of $7 million toward addressing customer arrearages for the year ended December 31, 2021. The order also established a surcharge recovery or surcredit mechanism for any late payment charges and fee deferrals, subject to offsetting related savings resulting from the COVID-19 pandemic, for 2022 starting in January of 2024 over a twelve-month period.

In October 2021, O&R, the New York State Department of Public Service (NYSDPS) and other parties entered into a Joint Proposal for new electric and gas rate plans for the three-year period January 2022 through December 2024 (the Joint Proposal) that includes certain COVID-19 provisions, such as: recovery of 2020 late payment charges over three years; reconciliation of late payment charges to amounts reflected in rates for years 2021 through 2024; and reconciliation of write-offs of customer accounts receivable balances to amounts reflected in rates from January 1, 2020 through December 31, 2024. The Joint Proposal is subject to NYSPSC approval. CECONY resumed late payment charges for commercial and residential customers who have not experienced a change in financial circumstances due to the COVID-19 pandemic on September 3, 2021 and October 1, 2021, respectively. O&R resumed late payment charges for commercial and residential customers who have not experienced a change in financial circumstances due to the COVID-19 pandemic on October 1, 2021.

Con Edison and the Utilities have a $2,250 million credit agreement (Credit Agreement) in place under which banks are committed to provide loans on a revolving credit basis until December 2023 ($2,200 million of commitments from December 2022). Con Edison and the Utilities have not entered into any loans under the Credit Agreement. See Note D to the financial statements in Item 8. In February 2022, CECONY filed a request with FERC to increase its authorization to issue short-term debt from $2,250 million to $3,000 million.

Results of Operations

Net income for common stock and earnings per share for the years ended December 31, 2021, 2020 and 2019 were as follows:

(a)Net income for common stock and earnings per share from the Clean Energy Businesses for the year ended December 31, 2021, 2020 and 2019 reflects $107 million or $0.31 a share (after-tax), $(32) million or $(0.10) a share (after-tax) and $(74) million or $(0.22) a share (after-tax) of the effects of HLBV accounting for tax equity investments in certain renewable and sustainable electric projects. Net income for common stock and earnings per share from the Clean Energy Businesses also includes $40 million or $0.11 a share, $(43) million or $(0.13) a share and $(21) million or $(0.07) a share of net after-tax mark-to-market effects in 2021, 2020 and 2019, respectively. Net income for common stock and earnings per share from the Clean Energy Businesses for the year ended December 31, 2021 includes $(3) million (after-tax) or $(0.01) a share (after-tax) for the loss from the sale of a renewable electric project. See Note S to the financial statements in Item 8.

(b)    Net loss for common stock and earnings per share from Con Edison Transmission for the year ended December 31, 2021 includes $(153) million or $(0.44) a share of net after-tax impairment loss related to its investment in Stagecoach, $(168) million or $(0.48) a share of net after-tax impairment loss related to its investment in Mountain Valley Pipeline, LLC and $(5) million or $(0.02) a share of loss related to a goodwill impairment loss related to its investment in Honeoye. See "Critical Accounting Estimates - Investments" in Item 7, “Investments - Partial Impairment of Investment in Stagecoach Gas Services LLC (Stagecoach)” and "Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)" in Note A, Note K and Note W to the financial statements in Item 8. Net income for common stock and earnings per share from Con Edison Transmission for the year ended December 31, 2020 includes $(232) million or $(0.69) a share of net after-tax impairment loss related to its investment in Mountain Valley Pipeline, LLC. See "Critical Accounting Estimates - Investments" in Item 7 and “Investments - Partial Impairment of Investment in Mountain Valley Pipeline, LLC (MVP)” in Note A to the financial statements in Item 8.

(c)    Other includes parent company and consolidation adjustments. Net income for common stock and earnings per share for the year ended December 31, 2021 includes $(9) million (after-tax) or $(0.02) a share (after-tax) of income tax impact on the effects of HLBV accounting for tax equity investments in certain renewable and sustainable electric projects and $(3) million or $(0.01) a share of income tax impact on the net after-tax mark-to-market effects. Net income for common stock and earnings per share for the year ended December 31, 2021 includes $6 million or $0.02 a share of income tax impact for the impairment loss related to Con Edison Transmission’s investment in Stagecoach. Net income for common stock and earnings per share for the year ended December 31, 2021 includes $6 million or $0.01 a share of income tax impact for the impairment loss related to Con Edison Transmission’s investment in Mountain Valley Pipeline, LLC. See “Investments - Partial Impairment of Investment in Stagecoach Gas Services LLC (Stagecoach)” and "Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)" in Note A to the financial statements in Item 8.

Net income for common stock and earnings per share for the year ended December 31, 2020 includes $3 million or $0.01 a share (after-tax), respectively, of income tax impact on the effects of HLBV accounting for tax equity investments in certain renewable and sustainable electric projects. Net income for common stock and earnings per share from the Clean Energy Businesses for the year ended December 31, 2020 includes $4 million or $0.01 a share of income tax impact on the net after-tax mark-to-market effects. Net income for common stock and earnings per share for the year ended December 31, 2020 includes $9 million or $0.03 a share of income tax impact for the impairment loss related to Con Edison Transmission’s investment in Mountain Valley Pipeline, LLC. See “Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)” in Note A to the financial statements in Item 8.

Net income for common stock and earnings per share for the year ended December 31, 2019 includes $6 million or $0.02 a share (after-tax), respectively, of income tax impact on the effects of HLBV accounting for tax equity investments in certain renewable and sustainable electric projects. Net income for common stock and earnings per share from the Clean Energy Businesses for the year ended December 31, 2019 includes $2 million or $0.00 of income tax impact on the net after-tax mark-to-market effects.

(d)    Earnings per share on a diluted basis were $3.85 a share, $3.28 a share and $4.08 a share in 2021, 2020 and 2019, respectively. See "Earnings Per Common Share" in Note A to the financial statements in Item 8.

The following tables present the estimated effect of major factors on earnings per share and net income for common stock for the years ended December 31, 2021 as compared with 2020, and 2020 as compared with 2019.

The Companies’ other operations and maintenance expenses for the years ended December 31, 2021, 2020 and 2019 were as follows:

(a)Includes Demand Side Management, System Benefit Charges and Public Service Law 18A assessments which are collected in revenues.

(b)Includes parent company and consolidation adjustments.

Con Edison’s principal business segments are CECONY’s regulated utility activities, O&R’s regulated utility activities, the Clean Energy Businesses and Con Edison Transmission. CECONY’s principal business segments are its regulated electric, gas and steam utility activities. A discussion of the results of operations by principal business segment for the years ended December 31, 2021, 2020 and 2019 follows. For additional business segment financial information, see Note P to the financial statements in Item 8.

The Companies’ results of operations for the years ended December 31, 2021, 2020 and 2019 were:

(a) Includes parent company and consolidation adjustments.

(b) Represents the consolidated results of operations of Con Edison and its businesses.

(c) For the year ended December 31, 2021, Con Edison Transmission recorded a $5 million loss related to a goodwill impairment on its investment in Honeoye. See Note K to the financial statements in Item 8.

(d) For the year ended December 31, 2021, Con Edison Transmission recorded pre-tax impairment losses of $212 million ($147 million, after-tax) on its investment in Stagecoach and during 2021 completed the sale of its interest in Stagecoach. For the year ended December 31, 2021, Con Edison Transmission recorded a pre-tax impairment loss of $231 million ($162 million, after-tax), to reduce the carrying value of its investment in MVP from $342 million to $111 million. See “Investments - Partial Impairment of Investment in Stagecoach Gas Services LLC (Stagecoach)” and "Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)" in Note A and Note W to the financial statements in Item 8. For the year ended December 31, 2020, Con Edison Transmission recorded a pre-tax impairment loss of $320 million ($223 million, after-tax), to reduce the carrying value of its investment in MVP from $662 million to $342 million. See “Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)” in Note A to the financial statements in Item 8.

Year Ended December 31, 2021 Compared with Year Ended December 31, 2020

CECONY

Electric

CECONY’s results of electric operations for the year ended December 31, 2021 compared with the year ended December 31, 2020 were as follows:

CECONY’s electric sales and deliveries in 2021 compared with 2020 were:

(a)Revenues from electric sales are subject to a revenue decoupling mechanism, as a result of which, delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.

(b)“Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations.

(c)Other electric operating revenues generally reflect changes in the revenue decoupling mechanism current asset or regulatory liability and changes in regulatory assets and liabilities in accordance with other provisions of the company’s rate plan.

(d)After adjusting for variations, primarily weather and billing days, electric delivery volumes in the company’s service area decreased 0.2 percent in 2021 compared with 2020. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.

Operating revenues increased $703 million in 2021 compared with 2020 primarily due to higher revenues from the electric rate plan ($243 million), higher purchased power expenses ($183 million), higher fuel expenses ($81 million), higher late payment charges ($90 million), including charges that are being recovered pursuant to a surcharge mechanism established as a result of the order issued by the NYSPSC in November 2021 and resuming billing of late payment charges, and higher incentives earned under the earnings adjustment mechanisms and positive incentives ($30 million). See "COVID-19 Regulatory Matters" in Note B to the financial statements in Item 8.

Purchased power expenses increased $183 million in 2021 compared with 2020 due to higher unit costs ($112 million) and purchased volumes ($72 million).

Fuel expenses increased $81 million in 2021 compared with 2020 due to higher unit costs ($79 million) and higher purchased volumes from the company’s electric generating facilities ($3 million).

Other operations and maintenance expenses increased $166 million in 2021 compared with 2020 primarily due to higher costs for pension and other postretirement benefits ($47 million), higher costs related to heat, storm and emergency response ($50 million), higher stock-based compensation ($24 million), higher healthcare costs ($16 million) and higher municipal infrastructure support costs ($12 million).

Depreciation and amortization increased $72 million in 2021 compared with 2020 primarily due to higher electric utility plant balances.

Taxes, other than income taxes increased $130 million in 2021 compared with 2020 primarily due to lower deferral of under-collected property taxes ($53 million), higher property taxes ($52 million) and higher state and local taxes ($23 million).

CECONY’s results of gas operations for the year ended December 31, 2021 compared with the year ended December 31, 2020 were as follows:

CECONY’s gas sales and deliveries, excluding off-system sales, in 2021 compared with 2020 were:

(a)Revenues from gas sales are subject to a weather normalization clause and a revenue decoupling mechanism, as a result of which, delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.

(b)After adjusting for variations, primarily billing days, firm gas sales and transportation volumes in the company’s service area decreased 0.4 percent in 2021 compared with 2020. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.

(c)Includes 1,921 thousands and 3,510 thousands of Dt for 2021 and 2020, respectively, which are also reflected in firm transportation and other.

(d)Other gas operating revenues generally reflect changes in the revenue decoupling mechanism and weather normalization clause current asset or regulatory liability and changes in regulatory assets and liabilities in accordance with other provisions of the company’s rate plans. See Note B to the financial statements in Item 8.

Operating revenues increased $342 million in 2021 compared with 2020 primarily due to higher gas revenues under the company's gas rate plan ($200 million), higher gas purchased for resale expense ($115 million), higher

late payment charges ($16 million), including charges that are being recovered pursuant to a surcharge mechanism established as a result of the order issued by the NYSPSC in November 2021 and resuming billing of late payment charges, and higher incentives earned under gas adjustment mechanisms (EAMs) ($11 million). See "COVID-19 Regulatory Matters" in Note B to the financial statements in Item 8.

Gas purchased for resale increased $115 million in 2021 compared with 2020 due to higher unit costs ($106 million) and higher purchased volumes ($8 million).

Other operations and maintenance expenses increased $13 million in 2021 compared with 2020 primarily due to higher costs for pension and other postretirement benefits ($10 million), higher total surcharges for assessments and fees that are collected in revenues from customers ($7 million) and higher stock-based compensation ($5 million), offset in part by lower municipal infrastructure support costs ($9 million).

Depreciation and amortization increased $32 million in 2021 compared with 2020 primarily due to higher gas utility plant balances.

Taxes, other than income taxes increased $110 million in 2021 compared with 2020 primarily due to lower deferral of under-collected property taxes ($68 million), higher property taxes ($30 million) and higher state and local taxes ($12 million).

Steam

CECONY’s results of steam operations for the year ended December 31, 2021 compared with the year ended December 31, 2020 were as follows:

CECONY’s steam sales and deliveries in 2021 compared with 2020 were:

(a)Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plan. See Note B to the financial statements in Item 8.

(b)After adjusting for variations, primarily weather and billing days, steam sales and deliveries in the company’s service area decreased 3.4 percent in 2021 compared with 2020. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.

Operating revenues increased $24 million in 2021 compared with 2020 primarily due to the impact of colder winter weather ($21 million) and higher purchased power expenses ($18 million), offset in part by lower fuel expenses ($8 million) and tax law surcharge ($3 million).

Purchased power expenses increased $18 million in 2021 compared with 2020 due to higher unit costs ($13 million) and purchased volumes ($5 million).

Fuel expenses decreased $8 million in 2021 compared with 2020 due to lower unit costs ($11 million), offset in part by higher purchased volumes from the company’s steam generating facilities ($3 million).

Other operations and maintenance expenses increased $4 million in 2021 compared with 2020 primarily due to higher costs for pension and other postretirement benefits ($4 million) and higher stock-based compensation ($2 million), offset in part by lower municipal infrastructure support costs ($1 million).

Depreciation and amortization increased $3 million in 2021 compared with 2020 primarily due to higher steam utility plant balances.

Taxes, Other Than Income Taxes

At $2,696 million, taxes other than income taxes remain one of CECONY’s largest operating expenses. The principal components of, and variations in, taxes other than income taxes were:

(a)Including sales tax on customers’ bills, total taxes other than income taxes in 2021 and 2020 were $3,296 million and $2,989 million, respectively.

Other Income (Deductions)

Other deductions decreased $63 million in 2021 compared with 2020 primarily due to lower costs associated with components of pension and other postretirement benefits other than service cost ($61 million).

Net Interest Expense

Net interest expense increased $23 million in 2021 compared with 2020 primarily due to higher interest on long-term debt ($42 million), offset in part by lower interest accrued on the system benefit charge liability ($7 million), lower interest expense for short-term debt ($4 million), lower interest on deposits ($3 million) and lower interest accrued on deferred storm costs ($2 million).

Income Tax Expense

Income taxes increased $31 million in 2021 compared with 2020 primarily due to higher income before income tax expense ($40 million) and higher state income taxes ($9 million), offset in part by a higher favorable tax adjustment in 2021 for the prior year tax return primarily due to an increase in the general business tax credit ($6 million), higher tax benefits in 2021 from research credits ($5 million) and the absence of the amortization of deficit deferred state income taxes in 2020 ($6 million).

O&R

Electric

O&R’s results of electric operations for the year ended December 31, 2021 compared with the year ended December 31, 2020 were as follows:

O&R’s electric sales and deliveries in 2021 compared with 2020 were:

(a)Revenues from NY electric delivery sales are subject to a revenue decoupling mechanism, as a result of which, delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s electric sales in NJ are not subject to a decoupling mechanism, and as a result, changes in such volumes do impact revenues.

(b)“Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations.

(c)Other electric operating revenues generally reflect changes in the revenue decoupling mechanism current asset or regulatory liability in accordance with the company’s NY electric rate plan and changes in regulatory assets and liabilities in accordance with the company’s electric rate plans. See Note B to the financial statements in Item 8.

(d)After adjusting for weather and other variations, electric delivery volumes in company’s service area increased 1.1 percent in 2021 compared with 2020. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.

Operating revenues increased $52 million in 2021 compared with 2020 primarily due to higher purchased power expenses ($37 million) and higher revenues from the NY electric rate plan ($13 million).

Purchased power expenses increased $37 million in 2021 compared with 2020 due to higher unit costs ($35 million) and purchased volumes ($2 million).

Other operations and maintenance expenses increased $7 million in 2021 compared with 2020 primarily due to higher storm-related costs.

Depreciation and amortization increased $4 million in 2021 compared with 2020 primarily due to higher electric utility plant balances.

Taxes, other than income taxes increased $3 million in 2021 compared with 2020 primarily due to higher property taxes ($2 million).

Gas

O&R’s results of gas operations for the year ended December 31, 2021 compared with the year ended December 31, 2020 were as follows:

O&R’s gas sales and deliveries, excluding off-system sales, in 2021 compared with 2020 were:

(a)Revenues from NY gas sales are subject to a weather normalization clause and a revenue decoupling mechanism, as a result of which, delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.

(b)After adjusting for weather and other variations, firm sales and transportation volumes in the company’s service area increased 0.2 percent in 2021 compared with 2020. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.

Operating revenues increased $27 million in 2021 compared with 2020 primarily due to higher gas purchased for resale expense.

Gas purchased for resale increased $27 million in 2021 compared with 2020 due to higher unit costs ($15 million) and purchased volumes ($12 million).

Other operations and maintenance expenses decreased $4 million in 2021 compared with 2020 primarily due to lower pension costs ($2 million) and lower spending on gas programs ($2 million).

Depreciation and amortization increased $1 million in 2021 compared with 2020 primarily due to higher gas utility plant balances.

Taxes, other than income taxes increased $1 million in 2021 compared with 2020 primarily due to higher property taxes.

Taxes, Other Than Income Taxes

Taxes, other than income taxes, increased $4 million in 2021 compared with 2020. The principal components of taxes, other than income taxes, were:

(a)Including sales tax on customers’ bills, total taxes other than income taxes in 2021 and 2020 were $129 million and $121 million, respectively.

Income Tax Expense

Income taxes remained unchanged in 2021 compared with 2020 primarily due to higher income before income tax expense ($1 million) entirely offset by lower state income taxes, primarily due to a decrease in the amortization of New York’s metropolitan transportation business tax surcharge in 2021 ($1 million).

Clean Energy Businesses

The Clean Energy Businesses’ results of operations for the year ended December 31, 2021 compared with the year ended December 31, 2020 were as follows:

Operating revenues increased $286 million in 2021 compared with 2020 primarily due to higher revenue from renewable electric projects ($211 million), higher wholesale revenues ($35 million) and higher energy services revenues ($47 million), offset in part by lower net mark-to-market values ($7 million).

Gas purchased for resale increased $21 million in 2021 compared with 2020 primarily due to higher purchased volumes.

Other operations and maintenance expenses increased $247 million in 2021 compared with 2020 primarily due to higher costs from engineering, procurement and construction of renewable electric projects for customers.

Other Income (Deductions)

Other income (deductions) decreased $14 million in 2021 compared with 2020 primarily due to lower income in the 2021 period from an equity method investment in renewable electric projects accounted for under the HLBV method of accounting.

Net Interest Expense

Net interest expense decreased $128 million in 2021 compared with 2020 primarily due to lower unrealized losses on interest rate swaps in the 2021 period.

Income Tax Expense

Income taxes increased $88 million in 2021 compared with 2020 primarily due to higher income before income tax expense ($30 million), lower income attributable to non-controlling interest ($47 million), higher state income taxes ($7 million) and the absence of a tax benefit due to the change in the federal corporate income tax rate recognized for a loss carryback from the 2018 tax year to the 2013 tax year as allowed under the CARES Act signed into law during the first quarter of 2020 ($4 million). See Note L to the financial statements in Item 8.

Income (Loss) Attributable to Non-Controlling Interest

Income attributable to non-controlling interest decreased $195 million in 2021 compared with 2020 primarily due to lower income in the 2021 period attributable to a tax equity investor in renewable electric projects accounted for under the HLBV method of accounting. See Note S to the financial statements in Item 8.

Con Edison Transmission

Other operations and maintenance increased $8 million in 2021 compared with 2020 primarily due to a goodwill impairment loss on its investment in Honeoye in 2021. See Note K to the financial statements in Item 8.

Other Income (Deductions)

Other deductions decreased $192 million in 2021 compared with 2020 primarily due to lower losses in 2021 from CET Gas’ pre-tax impairment loss of $212 million on its investment in Stagecoach, pre-tax impairment loss of $231 million on its investment in MVP in 2021, lower investment income in 2021 due to the sale of Stagecoach during 2021 ($19 million) and foregoing AFUDC income from MVP starting January 2021 until significant construction resumes ($60 million), compared to the pre-tax impairment loss of $320 million on its investment in MVP in 2020. See "Critical Accounting Estimates - Investments" in Item 7 and "Investments" in Note A and Note W to the financial statement in Item 8.

Net Interest Expense

Net interest expense decreased $9 million in 2021 compared with 2020 primarily due to the repayment of an intercompany loan from the parent company from a portion of the proceeds from the sale of Stagecoach.

Income Tax Expense

Income taxes decreased $48 million in 2021 compared with 2020 primarily due to lower income before income tax expense ($40 million), lower state income taxes ($12 million), offset in part by higher amortization of excess deferred federal income taxes in 2021 ($2 million).

Other

Taxes, Other Than Income Taxes

Taxes, other than income taxes decreased $6 million in 2021 compared with 2020 primarily due to adjustments made to the New York City capital tax for prior periods in the 2020 period.

Other Income (Deductions)

Other income (deductions) increased $4 million in 2021 compared with 2020 primarily due to the elimination of CECONY's goodwill impairment related to Con Edison Transmission's investment in Honeoye.

Income Tax Expense

Income taxes increased $29 million in 2021 compared with 2020 primarily due to higher income before income tax expense ($2 million), lower consolidated state income tax benefits in 2021 ($16 million) and the absence of a change to the New York City valuation allowance in 2021 ($10 million).

During the fourth quarter of 2020, Con Edison reversed a portion of its valuation allowance that was recorded against the deferred tax asset established for the New York City NOL. Management has reassessed its ability to realize a portion of the deferred tax benefits generated primarily by its renewable energy projects due to the future reversal of temporary differences associated with the accelerated tax depreciation and by implementing its strategy to secure tax equity financing from third parties for which certain tax deductions and amortization will be specifically allocated to members outside of the consolidated group.

Year Ended December 31, 2020 Compared with Year Ended December 31, 2019

CECONY

Electric

CECONY’s results of electric operations for the year ended December 31, 2020 compared with the year ended December 31, 2019 were as follows:

CECONY’s electric sales and deliveries in 2020 compared with 2019 were:

(a)Revenues from electric sales are subject to a revenue decoupling mechanism, as a result of which, delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.

(b)“Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations.

(c)Other electric operating revenues generally reflect changes in the revenue decoupling mechanism current asset or regulatory liability and changes in regulatory assets and liabilities in accordance with other provisions of the company’s rate plan.

(d)After adjusting for variations, primarily weather and billing days, electric delivery volumes in the company’s service area decreased 6.1 percent in 2020 compared with 2019. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.

Operating revenues increased $41 million in 2020 compared with 2019 primarily due to higher purchased power expenses ($81 million), offset in part by lower fuel expenses ($24 million) and lower revenues from the electric rate plan ($16 million).

Purchased power expenses increased $81 million in 2020 compared with 2019 due to higher unit costs ($158 million), offset in part by lower purchased volumes ($77 million).

Fuel expenses decreased $24 million in 2020 compared with 2019 due to lower unit costs ($31 million), offset in part by higher purchased volumes from the company’s electric generating facilities ($7 million).

Other operations and maintenance expenses decreased $306 million in 2020 compared with 2019 primarily due to lower costs for pension and other postretirement benefits ($195 million), lower surcharges for assessments and fees that are collected in revenues from customers ($110 million), lower stock-based compensation ($25 million) and lower healthcare costs ($16 million), offset in part by incremental costs associated with the COVID-19 pandemic ($14 million), higher municipal infrastructure support costs ($9 million) and food and medicine spoilage claims related to outages caused by Tropical Storm Isaias ($7 million).

Depreciation and amortization increased $161 million in 2020 compared with 2019 primarily due to higher electric utility plant balances and higher depreciation rates.

Taxes, other than income taxes increased $156 million in 2020 compared with 2019 primarily due to higher property taxes ($105 million), lower deferral of under-collected property taxes ($38 million), higher state and local taxes ($11 million) and the absence in 2020 of a reduction in the sales and use tax reserve upon conclusion of the audit assessment ($5 million), offset in part by lower payroll taxes ($3 million) due to the Employee Retention Tax Credit created under the CARES Act. See “Coronavirus Disease 2019 (COVID-19) Impacts - Impact of CARES Act and 2021 Appropriations Act on Accounting for Income Taxes,” above.

Gas

CECONY’s results of gas operations for the year ended December 31, 2020 compared with the year ended December 31, 2019 were as follows:

CECONY’s gas sales and deliveries, excluding off-system sales, in 2020 compared with 2019 were:

(a)Revenues from gas sales are subject to a weather normalization clause and a revenue decoupling mechanism, as a result of which, delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.

(b)After adjusting for variations, primarily billing days, firm gas sales and transportation volumes in the company’s service area decreased 0.7 percent in 2020 compared with 2019. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.

(c)Includes 3,510 thousands and 5,484 thousands of Dt for 2020 and 2019, respectively, which are also reflected in firm transportation and other.

(d)Other gas operating revenues generally reflect changes in the revenue decoupling mechanism and weather normalization clause current asset or regulatory liability and changes in regulatory assets and liabilities in accordance with other provisions of the company’s rate plans. See Note B to the financial statements in Item 8.

Operating revenues decreased $96 million in 2020 compared with 2019 primarily due to lower gas purchased for resale expense ($180 million) and certain rate plan reconciliations ($6 million), offset in part by higher gas revenues due to the gas base rates increase in January 2020 under the company's gas rate plan ($91 million).

Gas purchased for resale decreased $180 million in 2020 compared with 2019 due to lower unit costs ($110 million) and lower purchased volumes ($70 million).

Other operations and maintenance expenses decreased $44 million in 2020 compared with 2019 primarily due to lower costs for pension and other postretirement benefits ($31 million), lower stock-based compensation ($5 million), lower municipal infrastructure support costs ($5 million) and lower reserve for injuries and damages ($4 million).

Depreciation and amortization increased $63 million in 2020 compared with 2019 primarily due to higher gas utility plant balances and higher depreciation rates.

Taxes, other than income taxes increased $19 million in 2020 compared with 2019 primarily due to higher property taxes ($37 million), higher state and local taxes ($1 million) and the absence in 2020 of a reduction in the sales and use tax reserve upon conclusion of the audit assessment ($1 million), offset in part by higher deferral of under-collected property taxes ($19 million) and lower payroll taxes ($1 million) due to the Employee Retention Tax Credit created under the CARES Act. See “Coronavirus Disease 2019 (COVID-19) Impacts - Impact of CARES Act and 2021 Appropriations Act on Accounting for Income Taxes,” above.

Steam

CECONY’s results of steam operations for the year ended December 31, 2020 compared with the year ended December 31, 2019 were as follows:

CECONY’s steam sales and deliveries in 2020 compared with 2019 were:

(a)Other steam operating revenues generally reflect changes in regulatory assets and liabilities in accordance with the company’s rate plan. See Note B to the financial statements in Item 8.

(b)After adjusting for variations, primarily weather and billing days, steam sales and deliveries in the company’s service area decreased 6.7 percent in 2020 compared with 2019. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.

Operating revenues decreased $119 million in 2020 compared with 2019 primarily due to the impact of warmer winter weather ($43 million), lower fuel expenses ($27 million), lower usage by customers due to the impact of the COVID-19 pandemic ($19 million), certain rate plan reconciliations ($15 million) and lower purchased power expenses ($6 million).

Purchased power expenses decreased $6 million in 2020 compared with 2019 due to lower unit costs ($3 million) and purchased volumes ($3 million).

Fuel expenses decreased $27 million in 2020 compared with 2019 due to lower unit costs ($14 million) and lower purchased volumes from the company’s steam generating facilities ($13 million).

Other operations and maintenance expenses decreased $16 million in 2020 compared with 2019 primarily due to lower costs for pension and other postretirement benefits ($7 million) and lower municipal infrastructure support costs ($7 million).

Depreciation and amortization increased $1 million in 2020 compared with 2019 primarily due to higher steam utility plant balances.

Taxes, other than income taxes decreased $14 million in 2020 compared with 2019 primarily due to higher deferral of under-collected property taxes ($20 million) and lower state and local taxes ($2 million), offset in part by higher property taxes ($8 million).

Taxes, Other Than Income Taxes

At $2,456 million, taxes other than income taxes remain one of CECONY’s largest operating expenses. The principal components of, and variations in, taxes other than income taxes were:

(a)Including sales tax on customers’ bills, total taxes other than income taxes in 2020 and 2019 were $2,989 and $2,807 million, respectively.

Other Income (Deductions)

Other income (deductions) decreased $136 million in 2020 compared with 2019 primarily due to higher costs associated with components of pension and other postretirement benefits other than service cost ($117 million) and the absence of the company’s share of gain on sale of properties in 2019 ($14 million).

Net Interest Expense

Net interest expense increased $11 million in 2020 compared with 2019 primarily due to higher interest on long-term debt ($46 million), offset in part by a decrease in interest accrued on the TCJA related regulatory liability ($13 million), lower interest expense for short-term debt ($12 million) and lower interest accrued on the system benefit charge liability ($8 million).

Income Tax Expense

Income taxes decreased $120 million in 2020 compared with 2019 primarily due to lower income before income tax expense ($39 million), an increase in the amortization of excess deferred federal income taxes due to CECONY’s electric and gas rate plans that went into effect in January 2020 ($103 million) and lower state income taxes ($13 million), offset in part by the absence of the amortization of excess deferred state income taxes in 2020 ($24 million), lower research and development credits in 2020 ($5 million) and lower flow-through tax benefits in 2020 for plant-related items ($4 million).

O&R

Electric

O&R’s results of electric operations for the year ended December 31, 2020 compared with the year ended December 31, 2019 were as follows:

O&R’s electric sales and deliveries in 2020 compared with 2019 were:

(a)Revenues from NY electric delivery sales are subject to a revenue decoupling mechanism, as a result of which, delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved. O&R’s electric sales in NJ are not subject to a decoupling mechanism, and as a result, changes in such volumes do impact revenues.

(b)“Residential/Religious” generally includes single-family dwellings, individual apartments in multi-family dwellings, religious organizations and certain other not-for-profit organizations.

(c)Other electric operating revenues generally reflect changes in the revenue decoupling mechanism current asset or regulatory liability in accordance with the company’s NY electric rate plan and changes in regulatory assets and liabilities in accordance with the company’s electric rate plans. See Note B to the financial statements in Item 8.

(d)After adjusting for weather and other variations, electric delivery volumes in company’s service area decreased 0.7 percent in 2020 compared with 2019. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.

Operating revenues decreased $5 million in 2020 compared with 2019 primarily due to lower purchased power expenses ($19 million), offset in part by higher revenues from the NY electric rate plan ($16 million).

Purchased power expenses decreased $19 million in 2020 compared with 2019 due to lower unit costs.

Other operations and maintenance expenses increased $7 million in 2020 compared with 2019 primarily due to the amortization of prior deferred storm costs ($3 million) and food and medicine spoilage claims related to outages caused by Tropical Storm Isaias ($3 million).

Depreciation and amortization increased $5 million in 2020 compared with 2019 primarily due to higher electric utility plant balances.

Taxes, other than income taxes increased $1 million in 2020 compared with 2019 primarily due to higher property taxes ($2 million), offset in part by lower payroll taxes ($1 million).

Gas

O&R’s results of gas operations for the year ended December 31, 2020 compared with the year ended December 31, 2019 were as follows:

O&R’s gas sales and deliveries, excluding off-system sales, in 2020 compared with 2019 were:

(a)Revenues from NY gas sales are subject to a weather normalization clause and a revenue decoupling mechanism, as a result of which, delivery revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.

(b)After adjusting for weather and other variations, firm sales and transportation volumes in the company’s service area increased 0.6 percent in 2020 compared with 2019. See “Coronavirus Disease 2019 (COVID-19) Impacts,” above.

Operating revenues decreased $26 million in 2020 compared with 2019 primarily due to lower gas purchased for resale expense.

Gas purchased for resale decreased $29 million in 2020 compared with 2019 due to lower unit costs ($24 million) and purchased volumes ($5 million).

Other operations and maintenance expenses decreased $5 million in 2020 compared with 2019 primarily due to lower pension costs.

Depreciation and amortization increased $1 million in 2020 compared with 2019 primarily due to higher gas utility plant balances.

Taxes, Other Than Income Taxes

Taxes, other than income taxes, increased $1 million in 2020 compared with 2019. The principal components of taxes, other than income taxes, were:

(a)Including sales tax on customers’ bills, total taxes other than income taxes in 2020 and 2019 were $121 million and $116 million, respectively.

Income Tax Expense

Income taxes increased $4 million in 2020 compared with 2019 primarily due to higher income before income tax expense ($1 million), higher state income taxes ($1 million), lower flow-through tax benefits on plant-related items in 2020 ($1 million), and an increase in flow-through income tax expense on higher bad debt reserves in 2020 as compared with 2019 ($1 million).

Clean Energy Businesses

The Clean Energy Businesses’ results of operations for the year ended December 31, 2020 compared with the year ended December 31, 2019 were as follows:

Operating revenues decreased $121 million in 2020 compared with 2019 primarily due to lower wholesale revenues ($136 million) and lower energy services revenues ($19 million), offset in part by higher renewable electric production revenues ($34 million).

Gas purchased for resale decreased $144 million in 2020 compared with 2019 primarily due to lower purchased volumes.

Other operations and maintenance expenses increased $5 million in 2020 compared with 2019 primarily due to an increase in general operating expenses.

Depreciation and amortization increased $5 million in 2020 compared with 2019 primarily due to an increase in renewable electric projects in operation during 2020.

Net Interest Expense

Net interest expense increased $10 million in 2020 compared with 2019 primarily due to higher unrealized losses on interest rate swaps in the 2020 period.

Income Tax Expense

Income taxes increased $14 million in 2020 compared with 2019 primarily due to higher income before income tax expense ($1 million), lower income attributable to non-controlling interest ($13 million), and the absence of the adjustment for prior period federal income tax returns primarily due to higher research and development credits in 2019 ($13 million), offset in part by a tax benefit due to the change in the federal corporate income tax rate recognized for a loss carryback from the 2018 tax year to the 2013 tax year as allowed under the CARES Act ($4 million), a lower increase in uncertain tax position ($7 million) and higher renewable energy credits ($2 million).

Income Attributable to Non-Controlling Interest

Income attributable to non-controlling interest increased $54 million in 2020 compared with 2019 primarily due to lower losses attributable in the 2020 period to a tax equity investor in renewable electric projects accounted for under the HLBV method of accounting. See Note S to the financial statements in Item 8.

Con Edison Transmission

Net Interest Expense

Net interest expense decreased $7 million in 2020 compared with 2019 primarily due to a reduction to short-term borrowings and rates charged under an intercompany capital funding facility.

Other Income (Deductions)

Other income (deductions) decreased $319 million in 2020 compared with 2019 primarily due to an impairment loss related to Con Edison Transmission's investment in Mountain Valley Pipeline, LLC. See "Critical Accounting Estimates - Investments" in Item 7 and "Investments" in Note A to the financial statement in Item 8.

Income Tax Expense

Income taxes decreased $87 million in 2020 compared with 2019 primarily due to the MVP impairment loss recorded in 2020 ($88 million).

Other

Taxes, Other Than Income Taxes

Taxes, other than income taxes increased $7 million in 2020 compared with 2019 primarily due to adjustments made to the New York City capital tax for prior periods in the 2020 period.

Other Income (Deductions)

Other income (deductions) increased $7 million in 2020 compared with 2019 primarily due to the absence in 2020 of an elimination related to interest income under the intercompany capital funding facility.

Income Tax Expense

Income taxes decreased $17 million in 2020 compared with 2019 primarily due to lower income before income tax expense ($3 million), the reversal of a portion of a New York City valuation allowance ($9 million), and the MVP impairment loss recorded in 2020 ($9 million), offset in part by lower consolidated state income tax benefits ($4 million).

During the fourth quarter of 2020, Con Edison reversed a portion of its valuation allowance that was recorded against the deferred tax asset established for the New York City NOL. Management has reassessed its ability to realize a portion of the deferred tax benefits generated primarily by its renewable energy projects due to the future reversal of temporary differences associated with the accelerated tax depreciation and by implementing its strategy to secure tax equity financing from third parties for which certain tax deductions and amortization will be specifically allocated to members outside of the consolidated group.

Liquidity and Capital Resources

The Companies’ liquidity reflects cash flows from operating, investing and financing activities, as shown on their respective consolidated statements of cash flows and as discussed below.

The principal factors affecting Con Edison’s liquidity are its investments in the Utilities, the Clean Energy Businesses and Con Edison Transmission, the dividends it pays to its shareholders and the dividends it receives from its subsidiaries and cash flows from financing activities discussed below.

The principal factors affecting CECONY’s liquidity are its cash flows from operating activities, cash used in investing activities (including construction expenditures), the dividends it pays to Con Edison and cash flows from financing activities discussed below.

The Companies generally maintain minimal cash balances and use short-term borrowings to meet their working capital needs and other cash requirements. The Companies repay their short-term borrowings using funds from long-term financings and operating activities. The Utilities’ cost of capital, including working capital, is reflected in the rates they charge to their customers.

Each of the Companies believes that it will be able to meet its reasonably likely short-term and long-term cash requirements. See “The Companies Require Access To Capital Markets To Satisfy Funding Requirements,” "Changes To Tax Laws Could Adversely Affect the Companies," “The Companies Face Risks Related to Health Epidemics And Other Outbreaks, Including The COVID-19 Pandemic,” and “The Companies Also Face Other Risks That Are Beyond Their Control” in Item 1A, and “Capital Requirements and Resources” in Item 1.

The Companies’ cash, temporary cash investments and restricted cash resulting from operating, investing and financing activities for the years ended December 31, 2021, 2020 and 2019 are summarized as follows:

(a) Includes parent company and consolidation adjustments.

(b) Represents the consolidated results of operations of Con Edison and its businesses.

(c) See "Reconciliation of Cash, Temporary Cash Investments and Restricted Cash" in Note A to the financial statements in Item 8.

Cash Flows from Operating Activities

The Utilities’ cash flows from operating activities primarily reflect their energy sales and deliveries and cost of operations. The volume of energy sales and deliveries is primarily affected by factors external to the Utilities, such as growth of customer demand, weather, market prices for energy and economic conditions. Measures that promote distributed energy resources, such as distributed generation, demand reduction and energy efficiency, also affect the volume of energy sales and deliveries. See "Competition" and "Environmental Matters – Clean Energy Future – Reforming the Energy Vision" and “Environmental Matters – Climate Change” in Item 1.

During 2020 and 2021, the decline in business activity in the Utilities’ service territory due to the COVID-19 pandemic resulted in a slower recovery of cash from outstanding customer accounts receivable balances, material increases in customer accounts receivable balances, increases to the allowance for uncollectible accounts, and may result in increases to write-offs of customer accounts, as compared to prior to the COVID-19 pandemic. These trends may continue through 2022. Under the revenue decoupling mechanisms in the Utilities’ NY electric and gas rate plans, changes in delivery volumes from levels assumed when rates were approved may affect the timing of cash flows, but largely not net income. The prices at which the Utilities provide energy to their customers are determined in accordance with their rate plans. However, increases in electric and gas commodity prices, coupled with the decline in business activity due to the COVID-19 pandemic, may further contribute to a slower recovery of cash from outstanding customer accounts receivable balances, increases to the allowance for uncollectible accounts, and increases to write-offs of customer accounts receivable balances. In general, changes in the Utilities’ cost of purchased power, fuel and gas may affect the timing of cash flows, but not net income, because the costs are recovered in accordance with rate plans. See “Recoverable Energy Costs” in Note A to the financial statements in Item 8.

The Utilities’ NY rate plans allow them to defer costs resulting from a change in legislation, regulation and related actions that have taken effect during the term of the rate plans once the costs exceed a specified threshold. Increases to the allowance for uncollectible accounts related to the COVID-19 pandemic have been deferred pursuant to the legislative, regulatory and related actions provisions of their rate plans. In November 2021, the NYSPSC issued an order establishing a surcharge recovery mechanism for CECONY to collect late payment charges and fees that were not billed for the year ended December 31, 2020 due to the COVID-19 pandemic. The order also established a surcharge recovery or surcredit mechanism for any fee deferrals for 2021 and 2022. In October 2021, O&R, the New York State Department of Public Service (NYSDPS) and other parties entered into a Joint Proposal for new electric and gas rate plans for the three-year period January 2022 through December 2024 (the Joint Proposal) that includes certain COVID-19 provisions, such as: recovery of 2020 late payment charges over three years; reconciliation of late payment charges to amounts reflected in rates for years 2021 through 2024; and reconciliation of write-offs of customer accounts receivable balances to amounts reflected in rates from January 1, 2020 through December 31, 2024. The Joint Proposal is subject to NYSPSC approval. See “The Companies Face Risks Related To Health Epidemics And Other Outbreaks, Including The COVID-19 Pandemic,” in Item 1A, “Rate Plans,” "COVID-19 Regulatory Matters" and “Other Regulatory Matters” in Note B to the financial statements in Item 8 and "Coronavirus Disease 2019 (COVID-19) Impacts - Liquidity and Financing," above.

Pursuant to their rate plans, the Utilities have recovered from customers a portion of the tax liability they will pay in the future as a result of temporary differences between the book and tax basis of assets and liabilities. These temporary differences affect the timing of cash flows, but not net income, as the Companies are required to record deferred tax assets and liabilities at the current corporate tax rate for the temporary differences. For the Utilities, credits to their customers of the net benefits of the TCJA, including the reduction of the corporate tax rate to 21 percent, decrease cash flows from operating activities. Pursuant to their rate plans, the Utilities also recover from customers the amount of property taxes they will pay. The payment of property taxes by the Utilities affects the timing of cash flows and increases the amount of short-term borrowings issued by the Utilities when property taxes are due and as property taxes increase, but generally does not impact net income. See “Changes To Tax Laws Could Adversely Affect the Companies,” in Item 1A, “Federal Income Tax” in Note A, “Rate Plans” in Note B, "COVID-19 Regulatory Matters" in Note B, “Other Regulatory Matters” in Note B and Note L to the financial statements in Item 8 and "Coronavirus Disease 2019 (COVID-19) Impacts - Liquidity and Financing," above.

Net income is the result of cash and non-cash (or accrual) transactions. Only cash transactions affect the Companies’ cash flows from operating activities. Principal non-cash charges or credits include depreciation, deferred income tax expense, amortizations of certain regulatory assets and liabilities and accrued unbilled revenue. Non-cash charges or credits may also be accrued under the revenue decoupling and cost reconciliation mechanisms in the Utilities’ NY electric and gas rate plans. See “Rate Plans – CECONY– Electric and Gas" and "Rate Plans – O&R New York – Electric and Gas” in Note B to the financial statements in Item 8. For Con Edison, 2021 net income also included non-cash losses recognized with respect to impairments of Con Edison Transmission’s investments in MVP, Stagecoach and Honeoye. For Con Edison, 2020 net income included a non-cash loss recognized with respect to a partial impairment of Con Edison Transmission’s investment in MVP. See “Investments” in Note A and Note K to the financial statements in Item 8.

Net cash flows from operating activities in 2021 for Con Edison and CECONY were $535 million and $493 million higher, respectively, than in 2020. The changes in net cash flows for Con Edison and CECONY primarily reflect a lower increase of accounts receivable balances from customers, net of allowance for uncollectible accounts ($223 million and $196 million, respectively) (see “COVID-19 Regulatory Matters” in Note B to the financial statements in Item 8 and “Coronavirus Disease 2019 (COVID-19) Impacts - Accounting Considerations” and “Liquidity and Financing,” above), higher recoveries of depreciation expense ($112 million and $107 million, respectively), lower system benefit charge ($85 million and $80 million, respectively), lower superfund and environmental remediation costs ($12 million and $12 million, respectively) and lower pension and retiree benefit contributions ($6 million and $5 million, respectively). For Con Edison, changes in net cash flows reflects lower other receivables and other current assets ($31 million), lower taxes receivable ($19 million), lower revenue decoupling receivable ($8 million), offset in part by a change in pension and retiree benefit obligations, net ($19 million) and for CECONY, a change in pension and retiree benefit obligations, net ($30 million).

Net cash flows from operating activities in 2020 for Con Edison and CECONY were $936 million and $809 million lower, respectively, than in 2019. The changes in net cash flows for Con Edison and CECONY primarily reflects higher accounts receivable balances from customers ($566 million and $519 million, respectively) (see “COVID-19 Regulatory Matters” in Note B to the financial statements in Item 8 and “Coronavirus Disease 2019 (COVID-19) Impacts - Accounting Considerations” and “Liquidity and Financing,” above) and higher other receivables and other current assets ($188 million and $103 million, respectively) primarily due to lower reimbursement received for restoration costs related to the restoration of power in Puerto Rico in the aftermath of the September 2017 hurricanes in the 2020 period ($94 million and $88 million, respectively), higher system benefit charge ($139 million and $130 million, respectively), higher pension and retiree benefit contributions ($121 million and $113 million, respectively), deferrals for increased costs related to the COVID-19 pandemic ($115 million and $113 million, respectively), and a change in pension and retiree benefit obligations ($72 million and $77 million, respectively), offset in part by lower TCJA net benefits provided to customers in the 2020 period ($263 million and $263 million, respectively).

The change in net cash flows also reflects the timing of payments for and recovery of energy costs. This timing is reflected within changes to accounts receivable – customers, recoverable and refundable energy costs within other regulatory assets and liabilities and accounts payable balances.

Cash Flows Used in Investing Activities

Net cash flows used in investing activities for Con Edison and CECONY were $740 million lower and $313 million higher, respectively, in 2021 than in 2020. The change for Con Edison primarily reflects proceeds from the completion of the sale of Stagecoach ($629 million), a decrease in non-utility construction expenditures at the Clean Energy Businesses ($261 million) and proceeds from the divestiture of renewable electric projects at the Clean Energy Businesses ($183 million), offset in part by an increase in utility construction expenditures at CECONY ($301 million) and O&R ($3 million). Pursuant to their rate plans, the Utilities recover the cost of utility construction expenditures from customers, including an approved rate of return (before and after being placed in service and or AFUDC before being placed in service). Increases in the amount of utility construction expenditures may temporarily increase the amount of short-term debt issued by the Utilities prior to the long-term financing of such amounts.

Net cash flows used in investing activities for Con Edison and CECONY were $442 million and $292 million higher, respectively, in 2020 than in 2019. The change for Con Edison primarily reflects an increase in non-utility construction expenditures at the Clean Energy Businesses ($335 million), the absence in 2020 of proceeds from the sale of properties formerly used by CECONY in its operations ($192 million), an increase in utility construction expenditures at CECONY ($84 million) and O&R ($4 million) and higher cost of removal less salvage at CECONY ($16 million), offset in part by lower investments in electric and gas transmission projects at Con Edison Transmission in the 2020 period ($202 million).

Cash Flows From Financing Activities

Net cash flows from financing activities in 2021 for Con Edison and CECONY were $1,784 million and $461 million lower, respectively, than in 2020. Net cash flows from financing activities in 2020 for Con Edison and CECONY were $1,386 million and $1,120 million higher, respectively, than in 2019.

Net cash flows from financing activities during the years ended December 31, 2021, 2020 and 2019 reflect the following Con Edison transactions:

2021

•Issued 10,100,000 shares of its common stock resulting in net proceeds of approximately $775 million, after issuance expenses. The net proceeds from the sale of the common shares were invested by Con Edison in CECONY, for funding of its construction expenditures and for its other general corporate purposes. See Note C to the financial statements in Item 8;

•Redeemed at maturity $500 million of 2.00 percent 5-year debentures with proceeds from a $500 million borrowing under an April 2021 Credit Agreement, which Con Edison prepaid in full in July 2021; and

•Optionally prepaid the remaining $675 million outstanding under a February 2019 term loan prior to its maturity in June 2021.

2020

•Issued 1,050,000 shares of its common shares for $88 million upon physical settlement of the remaining shares subject to its May 2019 forward sale agreement. Con Edison used the proceeds to invest in CECONY for funding of its capital requirements and other general corporate purposes;

•Borrowed $820 million pursuant to a credit agreement that was converted to a term loan (the “July 2020 Term Loan”). Con Edison used the proceeds from the borrowing for general corporate purposes, including repayment of short-term debt bearing interest at variable rates. The July 2020 Term Loan was prepaid in full in December 2020;

•Issued 7,200,000 common shares resulting in net proceeds of $553 million, after issuance expenses. The net proceeds from the sale of the common shares, together with the net proceeds from the sale of $650 million aggregate principal amount of 0.65 percent debentures due 2023, were used to prepay in full the July 2020 Term Loan. The remaining net proceeds from the sale of the common shares were invested by Con Edison in its subsidiaries, principally CECONY and O&R, and for other general corporate purposes; and

•Issued $650 million aggregate principal amount of 0.65 percent debentures, due 2023, with an option to redeem at par, in whole or in part, on or after December 1, 2021. The proceeds from the $650 million refinancing, together with a portion of the proceeds from the sale of common shares, were used to prepay in full the July 2020 Term Loan.

2019

•Redeemed in advance of maturity $400 million of 2.00 percent 3-year debentures;

•Entered into a forward sale agreement relating to 5,800,000 shares of its common stock. In June 2019, the company issued 4,750,000 shares for $400 million upon physical settlement of shares subject to the forward sale agreement. Con Edison used the proceeds to invest in CECONY for funding of its capital requirements and other general corporate purposes;

•Issued 5,649,369 common shares for $425 million upon physical settlement of the remaining shares subject to its November 2018 forward sale agreements. Con Edison used the proceeds to invest in its subsidiaries for funding of their capital requirements and to repay short-term debt incurred for that purpose; and

•Borrowed $825 million under a variable-rate term loan that matured in June 2021 to fund the repayment of a six-month variable-rate term loan. In June 2019 and during the first quarter of 2021, Con Edison optionally pre-paid $150 million and $675 million, respectively, of the amount borrowed.

Con Edison’s cash flows from financing activities in 2021, 2020 and 2019 also reflect the proceeds, and reduction in cash used for reinvested dividends, resulting from the issuance of common shares under the company’s dividend reinvestment, stock purchase and long-term incentive plans of $109 million, $106 million and $101 million, respectively.

Net cash flows from financing activities during the years ended December 31, 2021, 2020 and 2019 reflect the following CECONY transactions:

2021

•Issued $600 million aggregate principal amount of 3.20 percent debentures, due 2051, the net proceeds from the sale of which were used to repay short-term borrowings and for other general corporate purposes;

•Issued $900 million aggregate principal amount of 2.40 percent debentures, due 2031, the aggregate

net proceeds from the sales of which were used to redeem at maturity its $640 million floating rate 3-year debentures and for other general corporate purposes, including repayment of short-term debt; and

•Issued $750 million aggregate principal amount of 3.60 percent debentures, due 2061, the net proceeds from the sale of which will be used to pay or reimburse the payment of, in whole or in part, existing and new qualifying eligible green expenditures, such as energy efficiency and clean transportation expenditures, that include those funded on or after January 1, 2021 until the maturity date of the debentures. Pending the allocation of the net proceeds to finance or refinance eligible green expenditures, CECONY used the net

proceeds for repayment of short-term debt and temporarily placed the remaining net proceeds in short-term interest-bearing instruments.

2020

•Issued $600 million aggregate principal amount of 3.00 percent debentures, due 2060, the net proceeds from the sale of which were used to repay short-term borrowings and for other general corporate purposes;

•Redeemed at maturity $350 million of 4.45 percent 10-year debentures; and

•Issued $600 million aggregate principal amount of 3.35 percent debentures, due 2030 and $1,000 million aggregate principal amount of 3.95 percent debentures, due 2050, the net proceeds from the sale of which will be used to pay or reimburse the payment of, in whole or in part, existing and new qualifying eligible green expenditures, such as energy efficiency and clean transportation expenditures, that include those funded on or after January 1, 2018 until the maturity date of each series of the debentures. Pending the allocation of the net proceeds to finance or refinance eligible green expenditures, CECONY used a portion of the net proceeds for repayment of short-term debt and temporarily placed the remaining net proceeds in short-term interest-bearing instruments.

2019

•Issued $600 million aggregate principal amount of 3.70 percent debentures, due 2059, and $700 million aggregate principal amount of 4.125 percent debentures, due 2049, the net proceeds from the sale of which were used to repay short-term borrowings and for other general corporate purposes; and

•Redeemed at maturity $475 million of 6.65 percent 10-year debentures.

Net cash flows from financing activities during the years ended December 31, 2021, 2020 and 2019 also reflect the following O&R transactions:

2021

•Issued $45 million aggregate principal amount of 2.31 percent debentures, due 2031 and $30 million aggregate principal amount of 3.17 percent debentures, due 2051, the net proceeds from the sales of which were used to repay short-term borrowings and for other general corporate purposes.

2020

•Issued $35 million aggregate principal amount of 2.02 percent debentures, due 2030, and $40 million aggregate principal amount of 3.24 percent debentures, due 2050, the net proceeds from the sales of which were used to repay short-term borrowings and for other general corporate purposes.

2019

•Issued $43 million aggregate principal amount of 3.73 percent debentures, due 2049, $44 million aggregate principal amount of 2.94 percent debentures, due 2029, and $38 million aggregate principal amount of 3.46 percent debentures, due 2039, the net proceeds from the sales of which were used to repay short-term borrowings and for other general corporate purposes; and

•Redeemed at maturity $60 million of 4.96 percent 10-year debentures.

Net cash flows from financing activities during the years ended December 31, 2021, 2020 and 2019 also reflect the following Clean Energy Businesses transactions:

2021

•Borrowed $250 million at a variable rate, due 2028, secured by equity interests in four of the company’s solar electric production projects, the interest rate for which was swapped to a fixed rate of 3.39 percent;

•Entered into an agreement with a tax equity investor for the financing of a portfolio of three of the Clean Energy Businesses’ solar electric production projects (CED Nevada Virginia). Under the financing, the tax equity investor acquired a noncontrolling interest in the portfolio and will receive a percentage of earnings, tax attributes and cash flows. As of December 31, 2021, the tax equity investor fully funded its $263 million financing obligation. The Clean Energy Businesses will continue to consolidate this entity and will report the noncontrolling tax equity investor’s interest in the tax equity arrangement. See Note Q to the financial statements in Item 8;

•Prepaid in full $249 million of borrowings outstanding under, and terminated, a $613 million variable-rate construction loan facility that was secured by and used to fund construction costs for CED Nevada Virginia; and

•Issued $229 million aggregate principal amount of 3.77 percent senior notes, due 2046, secured by equity interests in CED Nevada Virginia.

2020

•Borrowed $165 million under a $613 million variable-rate construction loan facility that was terminated in 2021 that was secured by and used to fund construction costs for CED Nevada Virginia.

2019

•Issued $303 million aggregate principal amount of 3.82 percent senior notes, due 2038, secured by the company's California Solar 4 renewable electric projects; and

•Borrowed $464 million at a variable-rate, due 2026, secured by equity interests in solar electric production projects, the net proceeds from the sale of which were used to repay borrowings from Con Edison and for other general corporate purposes. Con Edison used a portion of the repayment to pre-pay $150 million of an $825 million variable-rate term loan that matured in June 2021 and the remainder to repay short-term borrowings and for other general corporate purposes. The company has entered into fixed-rate interest rate swaps in connection with this borrowing. See Note Q to the financial statements in Item 8.

Cash flows from financing activities of the Companies also reflect commercial paper issuance. The commercial paper amounts outstanding at December 31, 2021, 2020 and 2019 and the average daily balances for 2021, 2020 and 2019 for Con Edison and CECONY were as follows:

Common stock issuances and external borrowings are sources of liquidity that could be affected by changes in credit ratings, financial performance and capital market conditions. For information about the Companies’ credit ratings and certain financial ratios, see “Capital Requirements and Resources” in Item 1.

Capital Requirements and Resources

For information about capital requirements, contractual obligations and capital resources, see “Capital Requirements and Resources” in Item 1.

Assets, Liabilities and Equity

The Companies’ assets, liabilities and equity at December 31, 2021 and 2020 are summarized as follows:

(a) Includes parent company and consolidation adjustments.

(b) Represents the consolidated results of operations of Con Edison and its businesses.

CECONY

Current assets at December 31, 2021 were $296 million higher than at December 31, 2020. The change in current assets primarily reflects increases in accounts receivables, net of allowance for uncollectible accounts ($246 million) (see “COVID-19 Regulatory Matters” in Note B to the financial statements in Item 8 and “Coronavirus Disease 2019 (COVID-19) Impacts - Accounting Considerations” and “Liquidity and Financing,” above) and revenue decoupling mechanism receivable ($62 million).

Investments at December 31, 2021 were $67 million higher than at December 31, 2020. The change in investments primarily reflects increases in supplemental retirement income plan assets ($60 million) and deferred income plan assets ($10 million). See "Investments" in Note A and Note E to the financial statements in Item 8.

Net plant at December 31, 2021 was $2,059 million higher than at December 31, 2020. The change in net plant primarily reflects an increase in electric ($1,519 million), gas ($1,400 million), steam ($132 million) and general ($269 million) plant balances, offset in part by an increase in accumulated depreciation ($926 million) and a decrease in construction work in progress ($335 million).

Other noncurrent assets at December 31, 2021 were $734 million lower than at December 31, 2020. The change in other noncurrent assets primarily reflects a decrease in the regulatory asset for unrecognized pension and other postretirement costs to reflect the final actuarial valuation, as measured at December 31, 2021, of the pension and other retiree benefit plans in accordance with the accounting rules for retirement benefits ($2,955 million). This decrease is offset in part by increases in the deferrals for increased costs related to the COVID-19 pandemic ($164 million), regulatory assets for deferred pension and other postretirement benefits ($163 million), deferred storm costs ($75 million), environmental remediation costs ($69 million). See Notes B, E, F and G to the financial statements in Item 8. This decrease is also offset in part by an increase in the pension funded status non-current asset due to an increase in the funded status of the pension plan resulting in an asset balance ($1,677 million) and an increase in the fair value of long-term derivative assets ($48 million).

Current liabilities at December 31, 2021 were $926 million lower than at December 31, 2020. The change in current liabilities primarily reflects decreases in debt due within one year as of December 31, 2020 ($640 million) and notes payable ($299 million).

Noncurrent liabilities at December 31, 2021 were $1,082 million lower than at December 31, 2020. The change in noncurrent liabilities primarily reflects a decrease in the liability for pension and retiree benefits ($1,274 million) as a result of the final actuarial valuation of the pension and other retiree benefit plans, as measured at December 31, 2021, in accordance with the accounting rules for retirement benefits. The change also reflects a decrease in the regulatory liability for future income tax ($222 million). These decreases are offset in part by an increase in deferred income taxes and unamortized investment tax credits ($385 million), primarily due to accelerated tax depreciation and repair deductions and increases in deferred regulatory costs. See Notes E, F, and L to the financial statements in Item 8.

Long-term debt at December 31, 2021 was $2,233 million higher than at December 31, 2020. The change in long-term debt primarily reflects the June and December 2021 issuance of $2,250 million of debentures. See "Liquidity and Capital Resources - Cash Flows From Financing Activities" above and Note C to the financial statements in Item 8.

Equity at December 31, 2021 was $1,463 million higher than at December 31, 2020. The change in equity reflects net income for the year ($1,344 million), capital contributions from parent ($1,100 million) in 2021 and an increase in other comprehensive income ($7 million), offset in part by common stock dividends to parent ($988 million) in 2021.

O&R

Current assets at December 31, 2021 were $13 million higher than at December 31, 2020. The change in current assets primarily reflects increases in accrued unbilled revenue ($18 million), accounts receivables, net of allowance for uncollectible accounts ($5 million), offset in part by a decrease in cash and temporary cash investments ($8 million).

Net plant at December 31, 2021 was $130 million higher than at December 31, 2020. The change in net plant primarily reflects an increase in electric ($104 million), gas ($56 million), and general ($21 million) plant balances and an increase in construction work in progress ($12 million), offset in part by an increase in accumulated depreciation ($63 million).

Other noncurrent assets at December 31, 2021 were $98 million lower than at December 31, 2020. The change in other noncurrent assets primarily reflects a decrease in the regulatory asset for unrecognized pension and other postretirement costs as a result of the final actuarial valuation, as measured at December 31, 2021, of the pension and other retiree benefit plans in accordance with the accounting rules for retirement benefits ($157 million). See Notes B, E and F to the financial statements in Item 8. This decrease is offset in part by an increase in pension and retiree benefits ($24 million), an increase in the regulatory asset for deferred pension and other postretirement benefits ($18 million), an increase in deferred storm costs ($7 million), an increase in deferred environmental remediation costs ($4 million) and an increase in deferred revenue taxes ($3 million).

Current liabilities at December 31, 2021 were $16 million higher than at December 31, 2020. The change in current liabilities primarily reflects higher notes payable ($32 million), an increase in the regulatory liabilities ($27 million) and higher accounts payables to affiliates ($8 million), offset in part by lower accounts payables ($56 million).

Noncurrent liabilities at December 31, 2021 were $127 million lower than at December 31, 2020. The change in noncurrent liabilities primarily reflects a decrease in the liability for pension and retiree benefits ($198 million), as a result of the final actuarial valuation of the pension and other retiree benefit plans, as measured at December 31, 2021 in accordance with the accounting rules for retirement benefits, offset in part by an increase in the regulatory liability for other employee benefits ($22 million), long-term deferred derivative gains ($6 million) and deferred other retiree benefit plans rate ($6 million). It also reflects an increase in deferred income taxes and unamortized investment tax credits ($22 million), primarily due to accelerated tax depreciation and repair deductions and increases in deferred regulatory costs. It also reflects an increase in superfund and other environmental costs ($13 million). See Notes E, F, G and L to the financial statements in Item 8.

Long-term debt at December 31, 2021 was $75 million higher than at December 31, 2020. The change in long-term debt reflects the December 2021 issuance of $75 million of debentures. See "Liquidity and Capital Resources - Cash Flows From Financing Activities" above.

Equity at December 31, 2021 was $81 million higher than at December 31, 2020. The change in equity reflects net income for the year ($75 million), an increase in other comprehensive income ($23 million) and capital contributions from parent ($35 million) in 2021, offset in part by common stock dividends to parent ($52 million).

Clean Energy Businesses

Current assets at December 31, 2021 were $57 million higher than at December 31, 2020. The change in current assets primarily reflects an increase in other receivables ($72 million), accrued unbilled revenue ($19 million), offset in part by a decrease in restricted cash ($11 million) and a decrease in other currents assets ($26 million).

Net plant at December 31, 2021 was $148 million lower than at December 31, 2020. The change in net plant primarily reflects the divestiture of renewable electric projects.

Other noncurrent assets at December 31, 2021 were $203 million lower than at December 31, 2020. The change in other noncurrent assets primarily reflects the divestiture of renewable electric projects.

Current liabilities at December 31, 2021 were $319 million lower than at December 31, 2020. The change in current liabilities primarily reflects new borrowing offset in part by a decrease in borrowings under a term loan.

Noncurrent liabilities at December 31, 2021 were $90 million lower than at December 31, 2020. The change in noncurrent liabilities primarily reflects the change in the fair value of derivative liabilities.

Long-term debt at December 31, 2021 was $169 million lower than at December 31, 2020. The change in long-term debt primarily reflects the repayment of an intercompany loan from the parent company ($375 million), offset in part by a net increase in project debt ($206 million).

Equity at December 31, 2021 was $284 million higher than at December 31, 2020. The change in equity primarily reflects an increase in net income for common stock for the year ($266 million) and in noncontrolling tax equity interest ($81 million) in 2021, offset in part by common stock dividends to parent ($64 million) in 2021.

Con Edison Transmission

Current assets at December 31, 2021 were $40 million lower than at December 31, 2020. The change in current assets primarily reflects the agreement between Crestwood and a subsidiary of CET Gas that provided for payments from Crestwood to the subsidiary of CET Gas for shortfalls in meeting certain earnings growth performance targets. Payments totaled $57 million ($38 million of which was recorded as a current receivable by CET Gas on December 2020, and payments in full from Crestwood plus interest were received in 2021). See "Con Edison Transmission - CET Gas" in Item 1.

Investments at December 31, 2021 were $1,033 million lower than at December 31, 2020. The decrease in investments primarily reflects the completion of the sale of Stagecoach ($828 million), the impairment loss related to Con Edison Transmission's investment in Mountain Valley Pipeline, LLC ($231 million), offset in part by additional investment in and income from NY Transco ($44 million). See "Investments - Partial Impairment of Investment in Stagecoach Gas Services LLC (Stagecoach)" and "Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)” in Note A and Note W to the financial statements in Item 8.

Other noncurrent assets at December 31, 2021 were $26 million lower than at December 31, 2020. The change in noncurrent assets primarily reflects a reduction in accounts receivable due to the noncurrent portion of the $57 million payment from Crestwood described above.

Current liabilities at December 31, 2021 were $11 million lower than at December 31, 2020. The change in current liabilities primarily reflects the repayment of short-term borrowings under an intercompany capital funding facility

with a portion of the proceeds from the completion of the sale of Stagecoach. See Note A and Note W to the financial statements in Item 8.

Noncurrent liabilities at December 31, 2021 were $118 million lower than at December 31, 2020. The change in noncurrent liabilities reflects primarily a decrease in deferred income taxes and unamortized investment tax credits that reflects primarily timing differences associated with investments in partnerships and the tax loss on the completion of the sale of Stagecoach. See "Investments - Partial Impairment of Investment in Stagecoach" and "Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)” in Note A and Note W to the financial statements in Item 8.

Long-term debt at December 31, 2021 was $500 million lower than at December 31, 2020. The change in long-term debt reflects the repayment of a $500 million intercompany loan from the parent company.

Equity at December 31, 2021 was $470 million lower than at December 31, 2020. The change in equity reflects net loss for the year ($318 million) and common stock dividends to parent ($152 million) in 2021.

Regulatory Matters

For information about the Utilities’ rate plans and other regulatory matters affecting the Companies, see “Utility Regulation” in Item 1 and Note B to the financial statements in Item 8.

Risk Factors

The Companies’ businesses are influenced by many factors that are difficult to predict, and that involve uncertainties that may materially affect actual operating results, cash flows and financial condition. See “Risk Factors” in Item 1A.

Critical Accounting Estimates

The Companies’ financial statements reflect the application of certain critical accounting estimates, which conform to accounting principles generally accepted in the United States of America. The Companies’ critical accounting estimates include assumptions applied to accounting for: pensions and other postretirement benefits, contingencies, derivative instruments, investments, allowance for uncollectible accounts receivable, asset retirement obligations, and for Con Edison, the use of the hypothetical liquidation at book value method. Also, see “Summary of Significant Accounting Policies and Other Matters” in Note A to the financial statements in Item 8.

Accounting for Pensions and Other Postretirement Benefits

The Utilities provide pensions and other postretirement benefits to substantially all of their employees and retirees. The Clean Energy Businesses and Con Edison Transmission also provide such benefits to transferred employees who previously worked for the Utilities. The Companies account for these benefits in accordance with the accounting rules for retirement benefits. In addition, the Utilities apply the accounting rules for regulated operations to account for the regulatory treatment of these obligations (which, as described in Note B to the financial statements in Item 8, reconciles the amounts reflected in rates for the costs of the benefit to the costs actually incurred). In applying these accounting policies, the Companies have made critical estimates related to actuarial assumptions, including assumptions of expected returns on plan assets, discount rates, health care cost trends and future compensation. See Notes A, E and F to the financial statements in Item 8 for information about the Companies’ pension and other postretirement benefits, the actuarial assumptions, actual performance, amortization of investment and other actuarial gains and losses and calculated plan costs for 2021, 2020 and 2019.

The discount rate for determining the present value of future period benefit payments is determined using a model to match the durations of Aa rated (by either Moody’s or S&P) corporate bonds with the projected stream of benefit payments.

In determining the health care cost trend rate, the Companies review actual recent cost trends and projected future trends.

The cost of pension and other postretirement benefits in future periods will depend on actual returns on plan assets, assumptions for future periods, contributions and benefit experience. Con Edison’s and CECONY’s current estimates for 2022 are decreases, compared with 2021, in their pension and other postretirement benefits costs of $523 million and $487 million, respectively, largely driven by increases in the discount rates used to determine plan liabilities and stronger than anticipated returns on plan assets. See Notes E and F to the financial statements in Item 8.

The following table illustrates the effect on 2022 pension and other postretirement costs of changing the critical actuarial assumptions, while holding all other actuarial assumptions constant:

A 5.0 percentage point variation in the actual annual return in 2022, as compared with the expected annual asset return of 7.00 percent, would change pension and other postretirement benefit costs for Con Edison and CECONY by approximately $33 million and $31 million, respectively, in 2023.

Pension benefits are provided through a pension plan maintained by Con Edison to which CECONY, O&R, the Clean Energy Businesses and Con Edison Transmission make contributions for their participating employees. Pension accounting by the Utilities includes an allocation of plan assets.

The Companies’ policy is to fund their pension and other postretirement benefit accounting costs to the extent tax deductible, and for the Utilities, to the extent these costs are recovered under their rate plans. The Companies were not required to make cash contributions to the pension plan in 2021 under funding regulations and tax laws. However, CECONY and O&R made discretionary contributions to the pension plan in 2021 of $432 million and $37 million, respectively. In 2022, CECONY and O&R expect to make contributions to the pension plan of $20 million and $9 million, respectively. See “Expected Contributions” in Notes E and F to the financial statements in Item 8.

Accounting for Contingencies

The accounting rules for contingencies apply 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. Known material contingencies, which are described in the notes to the financial statements, include certain regulatory matters (Note B), the Utilities’ responsibility for hazardous substances, such as asbestos, PCBs and coal tar that have been used or generated in the course of operations (Note G) and other contingencies (Note H). Inputs to the estimation of the liability for such environmental remediation include the possible selected remedy for each site where investigation is ongoing, the inflation rate related to the cost of inputs to the remediation process, and for those sites where there are other potentially responsible parties, the allocation of costs to the Companies. Inputs to the estimation of the liability for certain regulatory matters include facts specific to each item and the status and progress of discussions with the applicable state regulator. Inputs to the estimation of the liability for other contingencies may include liabilities incurred for similar circumstances and the outcome of legal proceedings. In accordance with the accounting rules, the Companies have accrued estimates of losses relating to the contingencies as to which loss is probable and can be reasonably estimated, and no liability has been accrued for contingencies as to which loss is not probable or cannot be reasonably estimated.

The Utilities recover costs for asbestos lawsuits, workers’ compensation and environmental remediation pursuant to their current rate plans. Generally, changes during the terms of the rate plans to the amounts accrued for these contingencies would not impact earnings.

Accounting for Derivative Instruments

The Companies apply the accounting rules for derivatives and hedging to their derivative financial instruments. The Companies use derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase and sale of electricity and gas. The Utilities are permitted by their respective regulators to reflect in rates all reasonably incurred gains and losses on these instruments. The Clean Energy Businesses have also hedged interest rate risk on certain debt securities. See “Financial and Commodity Market Risks,” below and Note P to the financial statements in Item 8.

Where the Companies are required to make mark-to-market estimates pursuant to the accounting rules, the estimates of gains and losses at a particular period end do not reflect the end results of particular transactions, and will most likely not reflect the actual gain or loss at the conclusion of a transaction. Substantially all of the estimated gains or losses are based on prices supplied by external sources such as the fair value of exchange-traded futures and options and the fair value of positions for which price quotations are available through or derived from brokers or other market sources. See Note Q to the financial statements in Item 8.

Investments

The accounting rules require Con Edison to periodically evaluate its equity method investments, to determine whether they are impaired. The standard for determining whether an impairment exists and must be recorded is whether an other-than-temporary decline in carrying value has occurred. The evaluation and measurement of impairments involve uncertainties. The estimates that Con Edison makes with respect to its equity method investments are based on assumptions that management believes are reasonable, and variations in these estimates or the underlying assumptions could have a material impact on whether a triggering event is determined to exist or the amount of any such impairment. Additionally, if the projects in which Con Edison holds these investments recognize an impairment, Con Edison may record its proportionate share of that impairment loss and would evaluate its investment for an other-than-temporary decline in value.

Con Edison evaluated its equity method investments and concluded that as of December 31, 2020 and 2021 that the fair value of its investment in Mountain Valley Pipeline, LLC (MVP) declined below its carrying value and the decline is other-than-temporary. Accordingly, Con Edison recorded pre-tax impairment losses of $320 million ($223 million after tax) and $231 million ($162 million after tax) for the years ended December 31, 2020 and 2021, respectively, that reduced the carrying value of its investment in MVP from $662 million to $342 million with an associated deferred tax asset of $53 million for the year ended December 31, 2020 and from $342 million to $111 million with an additional $77 million associated deferred tax asset for the year ended December 31, 2021, totaling a deferred tax asset of $130 million at period end. See “Investments - 2020 and 2021 Partial Impairments of Investment in Mountain Valley Pipeline, LLC (MVP)” in Note A to the financial statements in Item 8.

There is risk that the fair value of Con Edison’s investment in MVP may be further or fully impaired in the future. There are ongoing legal and regulatory matters that must be resolved favorably before the project can be completed. Assumptions and estimates used to test Con Edison’s investment in MVP for impairment, including the likelihood of project completion, may change if adverse or delayed resolutions to the Project’s pending legal and regulatory challenges were to occur, which could have a material adverse effect on the fair value of Con Edison’s investment in MVP.

In May 2021, a subsidiary of Con Edison Gas Pipeline and Storage, LLC (CET Gas) entered into a purchase and sale agreement pursuant to which the subsidiary and its joint venture partner agreed to sell their combined interests in Stagecoach Gas Services LLC (Stagecoach) for a total of $1,225 million, of which $629 million was attributed to CET Gas for its 50 percent interest, subject to closing adjustments. The purchase and sale agreement contemplated a two-stage closing, the first of which was completed in July 2021 and the second of which was completed in November 2021.

As a result of information made available to Stagecoach as part of the sale process, Stagecoach performed impairment tests that resulted in Stagecoach recording impairment charges of $414 million for the year ended December 31, 2021. Accordingly, Con Edison recorded pre-tax impairment losses on its 50 percent interest in Stagecoach of $212 million ($147 million after-tax), including working capital and transaction cost adjustments, within "Investment income/(loss)" on Con Edison's consolidated income statement for the year ended December 31, 2021.

Stagecoach’s impairment charges and information obtained from the sales process constituted triggering events for Con Edison's investment in Stagecoach as of March 31, 2021 and June 30, 2021. Con Edison evaluated the carrying value of its investment in Stagecoach for other-than-temporary declines in value using income and market-based approaches. Con Edison determined that the carrying value of its investment in Stagecoach of $667 million

and $630 million as of March 31, 2021 and June 30, 2021, respectively, was not impaired. The carrying value of $630 million at June 30, 2021 reflected the final sales price received in July 2021 and the remaining amount received in November 2021, including closing adjustments.

At December 31, 2021 and 2020, Con Edison’s consolidated balance sheet included investments of $853 million and $1,086 million, respectively. See “Investments” in Note A and Note W to the financial statements in Item 8.

Allowance for Uncollectible Accounts

The Companies develop expected loss estimates using past events data and consider current conditions and future reasonable and supportable forecasts. For the Utilities’ customer accounts receivable allowance for uncollectible accounts, past events considered include write-offs relative to customer accounts receivable; current conditions include macro-and micro-economic conditions related to trends in the local economy, bankruptcy rates and aged customer accounts receivable balances, among other factors; and forecasts about the future include assumptions related to the level of write-offs and recoveries. During the COVID-19 pandemic, the historical write-off rate was determined based on an historical weather event with a significant impact to the Companies’ service territory. During the COVID-19 pandemic, Con Edison's and CECONY's allowances for uncollectible accounts increased from $70 million and $65 million to $317 million and $304 million, respectively. See "COVID-19 Regulatory Matters" in Note B and “Allowance for Uncollectible Accounts" in Note N to the financial statements in Item 8.

Asset Retirement Obligations (AROs)

AROs are computed as the present value of the estimated costs for an asset's future retirement and are recorded in the period in which the liability is incurred. The estimated costs are capitalized as part of the related long-lived asset and depreciated over the asset's useful life. CECONY and O&R, as rate-regulated entities, recognize Regulatory Assets or Liabilities as a result of timing differences between the recording of costs and costs recovered through the ratemaking process. Because quoted market prices are not available for AROs, the Companies estimate the fair value of AROs by calculating discounted cash flows that are dependent upon various assumptions including estimated retirement dates, discount rates, inflation rates, the timing and amount of future cash outlays, and currently available technologies.

The Companies recorded asset retirement obligations associated with the removal of asbestos and asbestos-containing material in their buildings (other than the structures enclosing generating stations and substations), electric equipment and steam and gas distribution systems. The Companies also recorded asset retirement obligations relating to gas and oil pipelines abandoned in place and municipal infrastructure support. See Note T to the financial statements in Item 8.

A 1% increase in the assumed inflation rate used to value the ARO liability as of December 31, 2021 would increase the liability by $42 million and $41 million for Con Edison and CECONY, respectively.

Hypothetical Liquidation at Book Value (HLBV)

For certain investments of the Clean Energy Businesses, Con Edison has determined that the use of HLBV accounting is reasonable and appropriate to attribute income and loss to the tax equity investors. Using the HLBV method, the company's earnings from the projects are adjusted to reflect the income or loss allocable to the tax equity investors calculated based on how the project would allocate and distribute its cash if it were to sell all of its assets for their carrying amounts and liquidate at a particular point in time. Under the HLBV method, the company calculates the liquidation value allocable to the tax equity investors at the beginning and end of each period based on contractual liquidation waterfall calculations and adjusts its income for the period to reflect the change in the liquidation value allocable to the tax equity investors based on the terms of the partnerships' operating agreements. See Note S to the financial statements in Item 8.

Financial and Commodity Market Risks

The Companies are subject to various risks and uncertainties associated with financial and commodity markets. The most significant market risks include interest rate risk, commodity price risk and investment risk.

Interest Rate Risk

The Companies' interest rate risk primarily relates to new debt financing needed to fund capital requirements, including the construction expenditures of the Utilities and maturing debt securities, and variable-rate debt. Con Edison and its subsidiaries manage interest rate risk through the issuance of mostly fixed-rate debt with varying maturities and through opportunistic refinancing of debt. The Clean Energy Businesses use interest rate swaps to exchange variable-rate project financed debt for a fixed interest rate. See Note Q to the financial statements in Item 8. Con Edison and CECONY estimate that at December 31, 2021, a 10 percent increase in interest rates applicable to its variable rate debt would result in an increase in annual interest expense of $1 million and an immaterial amount, respectively. Under CECONY’s current electric, gas and steam rate plans, variations in actual variable rate tax-exempt debt interest expense, including costs associated with the refinancing of the variable rate tax-exempt debt, are reconciled to levels reflected in rates.

Commodity Price Risk

Con Edison’s commodity price risk primarily relates to the purchase and sale of electricity, gas and related derivative instruments. The Utilities and the Clean Energy Businesses apply risk management strategies to mitigate their related exposures. See Note P to the financial statements in Item 8.

Con Edison estimates that, as of December 31, 2021, a 10 percent decline in market prices would result in a decline in fair value of $117 million for the derivative instruments used by the Utilities to hedge purchases of electricity and gas, of which $106 million is for CECONY and $11 million is for O&R. Con Edison 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. The Utilities do not make any margin or profit on the electricity or gas they sell. In accordance with provisions approved by state regulators, the Utilities generally recover from customers the costs they incur for energy purchased for their customers, including gains and losses on certain derivative instruments used to hedge energy purchased and related costs. See “Recoverable Energy Costs” in Note A to the financial statements in Item 8. However, increases in electric and gas commodity prices may contribute to a slower recovery of cash from outstanding customer accounts receivable balances and increases to the allowance for uncollectible accounts, and may result in increases to write-offs of customer accounts receivable balances. In February 2022, the NYSPSC, in response to higher customer bills, requested that CECONY enhance its efforts to mitigate customer bill volatility due to commodity price increases by reassessing its power supply billing practices and improve communications to customers regarding forecasted significant bill increases resulting from commodity price increases.

The Clean Energy Businesses use a value-at-risk (VaR) model to assess the market price risk of their portfolio of electricity and gas commodity fixed-price purchase and sales commitments, physical forward contracts, generating assets and commodity derivative instruments. VaR represents the potential change in fair value of the portfolio due to changes in market prices for a specified time period and confidence level. These businesses estimate VaR across their portfolio using a delta-normal variance/covariance model with a 95 percent confidence level, compare the measured VaR results against performance due to actual prices and stress test the portfolio each quarter using an assumed 30 percent price change from forecast. Since the VaR calculation involves complex methodologies and estimates and assumptions that are based on past experience, it is not necessarily indicative of future results. VaR for the portfolio, assuming a one-day holding period, for the years ended December 31, 2021 and 2020, respectively, was as follows:

Investment Risk

The Companies’ investment risk relates to the investment of plan assets for their pension and other postretirement benefit plans. Con Edison's investment risk also relates to the investments of Con Edison Transmission that are accounted for under the equity method. See “Critical Accounting Estimates – Accounting for Pensions and Other Postretirement Benefits,” above and “Investments” in Note A and Notes E and F to the financial statements in Item 8.

The Companies’ current investment policy for pension plan assets includes investment targets of 45 to 55 percent equity securities, 33 to 43 percent debt securities and 10 to 14 percent real estate. At December 31, 2021, the pension plan investments consisted of 50 percent equity securities, 38 percent debt securities and 12 percent real estate.

For the Utilities’ pension and other postretirement benefit plans, regulatory accounting treatment is generally applied in accordance with the accounting rules for regulated operations. In accordance with the Statement of Policy issued by the NYSPSC and its current electric, gas and steam rate plans, CECONY defers for payment to or recovery from customers the difference between the pension and other postretirement benefit expenses and the amounts for such expenses reflected in rates. O&R also defers such difference pursuant to its NY rate plans.

Environmental Matters

For information concerning climate change, environmental sustainability, potential liabilities arising from laws and regulations protecting the environment and other environmental matters, see “Environmental Matters” in Item 1 and Note G to the financial statements in Item 8.

Material Contingencies

For information concerning potential liabilities arising from the Companies’ material contingencies, see “Critical Accounting Estimates – Accounting for Contingencies,” above, and Notes B, G and H to the financial statements in Item 8.