Consolidated Edison Co Of New York 10Q 2001 Q2 Quarterly report

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Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

/x/	Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
For The Quarterly Period Ended June 30, 2001
or
/ /	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number	Exact name of registrant as specified in its charter and principal office address and telephone number	State of Incorporation	I.R.S. Employer ID. Number

1-14514	Consolidated Edison, Inc. 4 Irving Place, New York, New York 10003 (212) 460-4600	New York	13-3965100
1-1217	Consolidated Edison Company of New York, Inc. 4 Irving Place, New York, New York 10003 (212) 460-4600	New York	13-5009340
1-4315	Orange and Rockland Utilities, Inc. One Blue Hill Plaza, Pearl River, New York 10965 (914) 352-6000	New York	13-1727729

Indicate by check mark whether each Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes/x/ No/ /

As of the close of business on July 31, 2001, Consolidated Edison, Inc. (Con Edison) had outstanding 212,205,964 Common Shares ($.10 par value). Con Edison owns all of the outstanding common equity of Consolidated Edison Company of New York, Inc. (Con Edison of New York) and Orange and Rockland Utilities, Inc. (O&R).

O&R meets the conditions specified in general instruction H(1)(a) and (b) of Form 10-Q
and is therefore filing this form with the reduced disclosure format.

TABLE OF CONTENTS



Filing Format
Forward-Looking Statements
Part I.	Financial Information
Item 1.	Financial Statements
	Con Edison	Consolidated Balance Sheet
		Consolidated Income Statement
		Consolidated Statement of Retained Earnings
		Consolidated Statement of Comprehensive Income
		Consolidated Statement of Cash Flows
		Notes to Financial Statements
	Con Edison	Consolidated Balance Sheet
	of New York	Consolidated Income Statement
		Consolidated Statement of Retained Earnings
		Consolidated Statement of Comprehensive Income
		Consolidated Statement of Cash Flows
		Notes to Financial Statements
	O&R	Consolidated Balance Sheet
		Consolidated Income Statement
		Consolidated Statement of Retained Earnings
		Consolidated Statement of Comprehensive Income
		Consolidated Statement of Cash Flows
		Notes to Financial Statements
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
	Con Edison
	Con Edison of New York
	O&R
O&R Management's Narrative Analysis of the Results of Operations
Item 3	Quantitative and Qualitative Disclosures About Market Risk
	Con Edison
	Con Edison of New York
	O&R
Part II.	Other Information
Item 1.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Securities Holders
Item 6.	Exhibits and Reports on Form 8-K

* O&R is omitting this information pursuant to General Instruction H of Form 10-Q.

Filing Format

This Quarterly Report on Form 10-Q is a combined report being filed separately by three different registrants: Consolidated Edison, Inc. (Con Edison), Consolidated Edison Company of New York, Inc. (Con Edison of New York) and Orange and Rockland Utilities, Inc. (O&R). Neither Con Edison of New York nor O&R makes any representation as to the information contained in this report relating to Con Edison or the subsidiaries of Con Edison other than itself.

O&R, a wholly-owned subsidiary of Con Edison, meets the conditions specified in General Instruction H of Form 10-Q and is permitted to use the reduced disclosure format for wholly-owned subsidiaries of companies, such as Con Edison, that are reporting companies under the Securities Exchange Act of 1934. Accordingly, O&R has omitted from this report the information called for by Part 1, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations and has included in this report its Management's Narrative Analysis of the Results of Operations. In accordance with general instruction H, O&R has also omitted from this report the information, if any, called for by Part 1, Item 3, Quantitative and Qualitative Disclosure About Market Risk; Part II, Item 2, Changes in Securities and Use of Proceeds; Part II, Item 3, Defaults Upon Senior Securities; and Part II, Item 4, Submission of Matters to a Vote of Security Holders.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements, which are statements of future expectation and not facts. Words such as "estimates," "expects," "anticipates," "intends," "plans" and similar expressions identify forward-looking statements. Actual results or developments might differ materially from those included in the forward-looking statements because of factors such as competition and industry restructuring, developments relating to Indian Point 2 (see Note C to the Con Edison financial statements in Part 1, Item 1 of this report), developments relating to Northeast Utilities (see Note D to the Con Edison financial statements in Part 1, Item 1 of this report), developments in wholesale energy markets, technological developments, changes in economic conditions, changes in historical weather patterns, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, and other presently unknown or unforeseen factors.

Consolidated Edison, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As at
			June 30, 2001			December 31, 2000
			(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
	Electric		$	11,894,294		$	11,808,102
	Gas			2,348,862			2,300,056
	Steam			751,035			740,189
	General			1,419,025			1,388,602

	TOTAL			16,413,216			16,236,949
	Less: Accumulated depreciation			5,211,509			5,186,058

	NET			11,201,707			11,050,891
	Construction work in progress			527,415			504,470
	Nuclear fuel assemblies and components, less accumulated amortization			96,890			107,641

NET UTILITY PLANT				11,826,012			11,663,002

NON-UTILITY PLANT
	Unregulated generating assets, less accumulated depreciation of $49,871 and $48,643			142,404			230,416
	Non-utility property, less accumulated depreciation of $7,135 and $5,516			74,836			41,752

NET PLANT				12,043,252			11,935,170

CURRENT ASSETS
	Cash and temporary cash investments			41,633			94,828
	Funds held for refunding of NYSERDA Notes			224,600			-
	Accounts receivable - customer, less allowance for uncollectible accounts of $31,762 and $33,714			749,536			910,344
	Other receivables			131,241			168,415
	Fuel, at average cost			23,827			29,148
	Gas in storage, at average cost			87,264			82,419
	Materials and supplies, at average cost			120,881			131,362
	Prepayments			628,654			524,377
	Other current assets			52,537			75,094

TOTAL CURRENT ASSETS				2,060,173			2,015,987

INVESTMENTS
	Nuclear decommissioning trust funds			344,134			328,969
	Other			210,534			197,120

TOTAL INVESTMENTS				554,668			526,089

DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS
	Goodwill and other intangible assets			565,913			488,702
	Regulatory assets
		Future federal income tax		670,112			676,527
		Recoverable energy costs		255,447			340,495
		Real estate sale costs - First Avenue properties		103,928			103,009
		Deferred special retirement program costs		85,385			88,633
		Divestiture - capacity replacement reconciliation		73,850			73,850
		Accrued unbilled revenues		69,210			72,619
		Workers' compensation reserve		58,944			47,097
		Deferred environmental remediation costs		54,723			49,056
		Deferred revenue taxes		44,416			43,879
		Other		199,112			112,604

	TOTAL REGULATORY ASSETS			1,615,127	��		1,607,769
	Other deferred charges and noncurrent assets			214,187			193,528

TOTAL DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS				2,395,227			2,289,999

TOTAL			$	17,053,320		$	16,767,245

The accompanying notes are an integral part of these financial statements.

Consolidated Edison, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As At
			June 30, 2001			December 31, 2000
			(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
	Common stock, authorized 500,000,000 shares; outstanding 212,182,481 shares and 212,027,131 shares		$	1,482,341		$	1,482,341
	Retained earnings			5,084,902			5,040,931
	Treasury stock, at cost; 23,305,613 shares and 23,460,963 shares			(1,005,728	)		(1,012,919	)
	Capital stock expense			(35,682	)		(35,817	)
	Accumulated other comprehensive income			(24,180	)		(2,147	)

	TOTAL COMMON SHAREHOLDERS' EQUITY			5,501,653			5,472,389

	Preferred stock subject to mandatory redemption			37,050			37,050
	Other preferred stock			212,563			212,563
	Long-term debt			5,507,885			5,415,409

TOTAL CAPITALIZATION				11,259,151			11,137,411

NONCURRENT LIABILITIES
	Obligations under capital leases			29,942			31,504
	Accumulated provision for injuries and damages			168,669			160,671
	Pension and benefits reserve			209,877			181,346
	Other noncurrent liabilities			32,232			30,118

TOTAL NONCURRENT LIABILITIES				440,720			403,639

CURRENT LIABILITIES
	Long-term debt due within one year			688,420			309,590
	Notes payable			222,266			255,042
	Accounts payable			812,662			1,020,401
	Customer deposits			206,536			202,888
	Accrued taxes			32,031			64,345
	Accrued interest			84,030			85,276
	Accrued wages			87,493			70,951
	Other current liabilities			335,105			328,686

TOTAL CURRENT LIABILITIES				2,468,543			2,337,179

DEFERRED CREDITS AND REGULATORY LIABILITIES
	Accumulated deferred federal income tax			2,260,560			2,302,764
	Accumulated deferred investment tax credits			125,578			131,429
	Regulatory liabilities
		Gain on divestiture		84,186			60,338
		Deposit from sale of First Avenue properties		50,000			50,000
		Accrued electric rate reduction		38,018			38,018
		NY state tax law revisions		30,121			59,523
		NYPA revenue increase		27,507			35,021
		Other		252,428			211,706

	TOTAL REGULATORY LIABILITIES			482,260			454,606
	Other deferred credits			16,508			217

TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES				2,884,906			2,889,016

TOTAL			$	17,053,320		$	16,767,245

The accompanying notes are an integral part of these financial statements.

Consolidated Edison, Inc.

CONSOLIDATED INCOME STATEMENT

For the Three Months Ended June 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
OPERATING REVENUES
	Electric	$	1,531,949		$	1,531,262
	Gas		305,394			247,016
	Steam		89,666			74,600
	Non-utility		185,206			189,016

TOTAL OPERATING REVENUES			2,112,215			2,041,894

OPERATING EXPENSES
	Purchased power		796,600			791,340
	Fuel		46,019			42,730
	Gas purchased for resale		177,982			164,538
	Other operations		279,382			289,865
	Maintenance		116,341			128,140
	Depreciation and amortization		136,868			145,618
	Taxes, other than income tax		256,484			275,160
	Income tax		86,724			33,174

TOTAL OPERATING EXPENSES			1,896,400			1,870,565

OPERATING INCOME			215,815			171,329
OTHER INCOME (DEDUCTIONS)
	Investment income		1,422			2,542
	Allowance for equity funds used during construction		258			486
	Other income less miscellaneous deductions		(8,772	)		(3,989	)
	Income tax		1,558			961

TOTAL OTHER INCOME (DEDUCTIONS)			(5,534	)		-

INCOME BEFORE INTEREST CHARGES			210,281			171,329
	Interest on long-term debt		98,355			87,658
	Other interest		9,536			12,559
	Allowance for borrowed funds used during construction		(1,684	)		(1,032	)

NET INTEREST CHARGES			106,207			99,185

PREFERRED STOCK DIVIDEND REQUIREMENTS			3,398			3,398

NET INCOME FOR COMMON STOCK		$	100,676		$	68,746

COMMON SHARES OUTSTANDING - AVERAGE BASIC (000)			212,115			211,966
COMMON SHARES OUTSTANDING - AVERAGE DILUTED (000)			212,555			212,074
BASIC EARNINGS PER SHARE		$	0.48		$	0.33

DILUTED EARNINGS PER SHARE		$	0.48		$	0.33

DIVIDENDS DECLARED PER SHARE OF COMMON STOCK		$	0.550		$	0.545

The accompanying notes are an integral part of these financial statements.

Consolidated Edison, Inc.

CONSOLIDATED INCOME STATEMENT

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
OPERATING REVENUES
	Electric	$	3,239,323		$	3,043,511
	Gas		1,007,213			716,489
	Steam		347,918			244,858
	Non-utility		404,024			355,627

TOTAL OPERATING REVENUES			4,998,478			4,360,485

OPERATING EXPENSES
	Purchased power		1,812,485			1,521,528
	Fuel		216,335			127,968
	Gas purchased for resale		641,466			430,836
	Other operations		540,987			601,963
	Maintenance		244,786			234,972
	Depreciation and amortization		271,866			288,340
	Taxes, other than income tax		564,469			564,332
	Income tax		203,787			136,508

TOTAL OPERATING EXPENSES			4,496,181			3,906,447

OPERATING INCOME			502,297			454,038
OTHER INCOME (DEDUCTIONS)
	Investment income		2,887			6,941
	Allowance for equity funds used during construction		501			(91	)
	Other income less miscellaneous deductions		(11,889	)		(4,251	)
	Income tax		7,154			(239	)

TOTAL OTHER INCOME (DEDUCTIONS)			(1,347	)		2,360

INCOME BEFORE INTEREST CHARGES			500,950			456,398
	Interest on long-term debt		197,563			170,971
	Other interest		20,023			24,537
	Allowance for borrowed funds used during construction		(3,222	)		(2,787	)

NET INTEREST CHARGES			214,364			192,721

PREFERRED STOCK DIVIDEND REQUIREMENTS			6,796			6,796

NET INCOME FOR COMMON STOCK		$	279,790		$	256,881

COMMON SHARES OUTSTANDING - AVERAGE BASIC (000)			212,078			212,352
COMMON SHARES OUTSTANDING - AVERAGE DILUTED (000)			212,440			212,425
BASIC EARNINGS PER SHARE		$	1.32		$	1.21

DILUTED EARNINGS PER SHARE		$	1.32		$	1.21

DIVIDENDS DECLARED PER SHARE OF COMMON STOCK		$	1.100		$	1.090

The accompanying notes are an integral part of these financial statements.

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

		As At
As At June 30, 2001 and December 31, 2000		June 30, 2001		December 31, 2000
(Unaudited)		(Thousands of Dollars)
BALANCE, JANUARY 1		$	5,040,931	$	4,921,089
	Less: Stock options exercised		2,540		1,026
	Orange & Rockland purchase accounting adjustment		48		(46	)
	Net income for common stock for the period		279,742		582,835

TOTAL			5,318,181		5,502,852

DIVIDENDS DECLARED ON COMMON, $1.10 AND $2.18 PER SHARE, RESPECTIVELY			233,279		461,921

ENDING BALANCE		$	5,084,902	$	5,040,931

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
NET INCOME		$	279,790		$	256,881
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
	Investment in marketable equity securities, net of $279 taxes		(189	)		-
	Minimum pension liability adjustments, net of $1,656 taxes		(2,055	)		-
	Unrealized gains (losses) on derivatives qualified as hedges arising during the period due to cumulative effect of a change in accounting principle, net of $5,587 taxes		(8,050	)		-
	Unrealized gains (losses) on derivatives qualified as hedges, net of $8,659 taxes		(12,452	)		-
	Less: Reclassification adjustment for losses included in net income, net of $378 taxes		(713	)		-

TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES			(22,033	)		-

COMPREHENSIVE INCOME		$	257,757		$	256,881

The accompanying notes are an integral part of these financial statements.

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)				2001			2000
				(Thousands of Dollars)
OPERATING ACTIVITIES
	Net income for common stock			$	279,790		$	256,881
	PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
		Depreciation and amortization			271,753			288,340
		Income tax deferred (excluding taxes resulting from divestiture of plant)			(55,354	)		28,134
		Common equity component of allowance for funds used during construction			(501	)		91
		Prepayments - accrued pension credits			(161,285	)		(102,025	)
		Other non-cash charges			6,534			29,156
	CHANGES IN ASSETS AND LIABILITIES
		Accounts receivable - customer, less allowance for uncollectibles			160,808			(38,245	)
		Materials and supplies, including fuel and gas in storage			3,305			3,153
		Prepayments (other than pensions), other receivables and other current assets			131,481			(26,965	)
		Deferred recoverable energy costs			85,048			(183,684	)
		Cost of removal less salvage			(44,570	)		(44,575	)
		Accounts payable			(207,739	)		259,921
		Other - net			(76,767	)		22,466

NET CASH FLOWS FROM OPERATING ACTIVITIES					392,503			492,648

INVESTING ACTIVITIES INCLUDING CONSTRUCTION
		Utility construction expenditures			(448,215	)		(391,189	)
		Nuclear fuel expenditures			(6,229	)		(24,114	)
		Contributions to nuclear decommissioning trust			(10,650	)		(10,650	)
		Common equity component of allowance for funds used during construction			501			(91	)
		Divestiture of utility plant (net of federal income tax)			99,951			-
		Investments by unregulated subsidiaries			(12,435	)		(4,786	)
		Non-utility plant			(37,728	)		(258,987	)

NET CASH FLOWS USED IN INVESTING ACTIVITIES INCLUDING CONSTRUCTION					(414,805	)		(689,817	)

FINANCING ACTIVITIES INCLUDING DIVIDENDS
		Repurchase of common stock			-			(68,531	)
		Net proceeds from short-term debt			(32,776	)		(291,091	)
		Additions to long-term debt			624,600			567,395
		Retirement of long-term debt			(150,000	)		(225,000	)
		Issuance and refunding costs			(14,846	)		(1,768	)
		Funds held for refunding of NYSERDA Notes			(224,600	)		-
		Common stock dividends			(233,271	)		(231,230	)

NET CASH FLOWS USED IN FINANCING ACTIVITIES INCLUDING DIVIDENDS					(30,893	)		(250,225	)

NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS					(53,195	)		(447,394	)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1					94,828			485,050

CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30				$	41,633		$	37,656

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
		Cash paid during the period for:
			Interest	$	190,207		$	166,605
			Income taxes		227,735			74,245

The accompanying notes are an integral part of these financial statements.

NOTES TO FINANCIAL STATEMENTS - CON EDISON

Note A - General

These footnotes accompany and form an integral part of the interim consolidated financial statements of Consolidated Edison, Inc. (Con Edison) and its subsidiaries, including the regulated utility Consolidated Edison Company of New York, Inc. (Con Edison of New York), the regulated utility Orange and Rockland Utilities, Inc. (O&R) and several non-utility subsidiaries. These financial statements are unaudited but, in the opinion of Con Edison's management, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair statement of the results for the interim periods presented. These financial statements should be read together with the audited Con Edison financial statements (including the notes thereto) included in the combined Con Edison, Con Edison of New York and O&R Annual Reports on Form 10-K for the year ended December 31, 2000 (the Form 10-K).

Note B - Environmental Matters

Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of Con Edison's utility subsidiaries and may be present in their facilities and equipment.

The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund) and similar state statutes impose joint and several strict liability, regardless of fault, upon generators of hazardous substances for resulting removal and remedial costs and environmental damages. Liabilities under these laws can be material and in some instances may be imposed without regard to fault, or may be imposed for past acts, even though such past acts may have been lawful at the time they occurred.

At June 30, 2001, Con Edison had accrued $126.2 million as its best estimate of the utility subsidiaries' liability for sites as to which they have received process or notice alleging that hazardous substances generated by them (and, in most instances, other potentially responsible parties) were deposited. There will be additional liability at these sites and other sites, the amount of which is not presently determinable but may be material to Con Edison's financial position, results of operations or liquidity.

Con Edison's utility subsidiaries are permitted under current rate agreements to defer for subsequent recovery through rates certain site investigation and remediation costs with respect to hazardous waste. At June 30, 2001, $55.8 million of such costs had been deferred as regulatory assets.

Suits have been brought in New York State and federal courts against Con Edison's utility subsidiaries and many other defendants, wherein a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the utility subsidiaries. Many of these suits have been disposed of without any payment by the utility subsidiaries, or for immaterial amounts. The amounts specified in all the remaining suits total billions of dollars but Con Edison believes that these amounts are greatly exaggerated, as were the claims already disposed of. Based on the information and relevant circumstances known to Con Edison at this time, it does not believe that these suits will have a material adverse effect on its financial position, results of operations or liquidity.

Note C - Nuclear Generation

The Indian Point 2 nuclear generating unit, which Con Edison of New York owns and has agreed to sell, was out of service from February 2000 to January 2001. The New York State Public Service Commission (PSC) is investigating the Indian Point 2 outage and its causes and the prudence of the company's actions regarding the operation and maintenance of Indian Point 2. An appeal is pending in the United States Court of Appeals for the Second Circuit of the October 2000 decision by the United States District Court for the Northern District of New York, in an action entitled Consolidated Edison Company of New York, Inc. v. Pataki, et al., in which the court determined that the law that directed the PSC to prohibit the company from recovering Indian Point 2 replacement power costs from customers was unconstitutional and granted the company's motion for a permanent injunction to prevent its implementation. The staff of the Nuclear Regulatory Commission is monitoring Indian Point 2 with heightened oversight. The company is unable to predict whether or not any Indian Point 2-related proceedings, lawsuits, legislation or other actions will have a material adverse effect on its financial position, results of operations or liquidity. For additional information about Indian Point 2, its pending sale and the outage, see Note G to Con Edison's financial statements included in Item 8 of the Form 10-K.

Note D - Northeast Utilities

In May 2001, Con Edison amended its complaint against Northeast Utilities in the proceeding it commenced in March 2001 in the United States District Court for the Southern District of New York, entitled Consolidated Edison, Inc. v. Northeast Utilities, with respect to their agreement and plan of merger, dated as of October 13, 1999, as amended and restated as of January 11, 2000 (the merger agreement). As amended, Con Edison's complaint seeks, among other things, recovery of damages sustained by it as a result of the material breach of the merger agreement by Northeast Utilities.

In June 2001, Northeast Utilities withdrew the separate action it commenced in March 2001 in the same court and filed as a counter-claim to Con Edison's amended complaint its claim that Con Edison materially breached the merger agreement and that as a result Northeast Utilities and its shareholders have suffered substantial damages, including the difference between the consideration to be paid to Northeast Utilities shareholders pursuant to the merger agreement and the current market value of Northeast Utilities common stock, expenditures in connection with regulatory approvals and lost business opportunities. Pursuant to the merger agreement, Con Edison agreed to acquire Northeast Utilities for $26.00 per share (an estimated aggregate of not more than $3.9 billion) plus $0.0034 per share for each day after August 5, 2000 through the day prior to the completion of the transaction, payable 50 percent in cash and 50 percent in stock.

Con Edison believes that Northeast Utilities has materially breached the merger agreement and that Con Edison has not materially breached the merger agreement. Con Edison is unable to predict whether or not any Northeast Utilities-related lawsuits or other actions will have a material adverse effect on Con Edison's financial position, results of operations or liquidity.

Note E - Derivative Instruments and Hedging Activities

As of January 2001, Con Edison adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137,

"Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities—an amendment of FASB Statement No. 133" (SFAS No. 133).

Energy Price Hedging

Con Edison's subsidiaries use derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase or sale of electricity and gas (Hedges).

Con Edison's utility subsidiaries, pursuant to Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS No. 71), defer recognition in income of gains and losses on a Hedge until the underlying transaction is completed. Pursuant to rate provisions that permit the recovery of the cost of purchased power and gas, Con Edison's utility subsidiaries credit or charge to their customers gains or losses on Hedges and related transaction costs. See "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K. To the extent SFAS No. 71 does not allow deferred recognition in income, Con Edison's utility subsidiaries have elected special hedge accounting pursuant to SFAS No. 133 (Cash Flow Hedge Accounting). For each Hedge that qualifies as a cash flow hedge under SFAS No. 133, the mark-to-market unrealized gain or loss on the Hedge is recorded in other comprehensive income and reclassified to income at the time the underlying transaction is completed, except that any gain or loss relating to any portion of the Hedge determined to be "ineffective" is recognized in income in the period in which such determination is made. Upon adoption of SFAS No. 133, Con Edison's utility subsidiaries had no transition adjustments relating to Hedges to recognize in other comprehensive income. In the quarter and six month period ended June 30, 2001, the company realized pre-tax losses relating to its utility subsidiaries' Hedges of $11.7 million, of which $10.9 million has been billed to customers. At June 30, 2001, the company had $58.0 million of mark-to-market unrealized pre-tax net losses relating to such Hedges deferred as regulatory assets and $2.1 million of mark-to-market unrealized after-tax net losses relating to such Hedges included in other comprehensive income. As of June 30, 2001, the utility subsidiaries' Hedges for which Cash Flow Hedge Accounting was used were for a term of less than 12 months and $2.1 million of losses relating to such Hedges were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months.

Consolidated Edison Solutions, Inc., a wholly-owned subsidiary of Con Edison (which provides competitive gas and electric supply and energy-related products and services), uses Cash Flow Hedge Accounting for each Hedge that qualifies as a cash flow hedge under SFAS No. 133. For Hedges which, although intended to hedge related underlying transactions, do not meet the criteria of SFAS No. 133 for Cash Flow Hedge Accounting, mark-to-market unrealized gains or losses on the Hedge are recognized in income in the period in which they occur. As a result, changes in value of a Hedge may be recognized in income in an earlier period than the period in which the underlying transaction is recognized in income. The company expects, however, that these changes in values will be offset, at least in part, when the underlying transactions are recognized in income. The company has recognized after-tax transition gains relating to Con Edison Solutions' Hedges of $1.6 million in other comprehensive income and $0.4 million in income in connection with its adoption of SFAS No. 133. For the quarter and six month

period ended June 30, 2001, with respect to such Hedges, the company reclassified to income from accumulated other comprehensive income after-tax net losses of $1.3 million and $0.1 million, respectively, recognized in income mark-to-market unrealized pre-tax net losses of $8.9 million and $9.9 million, respectively, and recorded in other comprehensive income mark-to-market unrealized after-tax net losses of $9.6 million and $9.8 million, respectively. As of June 30, 2001, all of Con Edison Solutions' Hedges for which Cash Flow Hedge Accounting was used were for a term of less than two years and $7.6 million of losses relating to such Hedges were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months.

Consolidated Edison Energy, Inc., a wholly-owned subsidiary of Con Edison (which markets specialized energy supply services to wholesale customers), enters into over-the-counter and exchange traded contracts for the purchase and sale of electricity, gas or oil (which may provide for either physical or financial settlement) and is considered an "energy trading organization" required to account for such trading activities in accordance with FASB Emerging Issues Task Force Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk Management Activities". With respect to such contracts, the company recognized in income unrealized mark-to-market pre-tax net gains of $1.1 million and $1.6 million in the quarter and six month period ended June 30, 2001, respectively. Con Edison Energy has also entered into transactions for another subsidiary of Con Edison, as to which the company recognized in income unrealized mark-to-market pre-tax net gains of $0.3 million and $7.6 million in the quarter and six month period ended June 30, 2001, respectively.

Interest Rate Hedging

O&R and Consolidated Edison Development, Inc., a wholly-owned subsidiary of Con Edison (which invests in and manages energy infrastructure projects), use Cash Flow Hedge Accounting for their interest rate swap agreements.

In connection with its $55 million promissory note issued to the New York State Energy Research and Development Authority for the net proceeds of the Authority's variable rate Pollution Control Refunding Revenue Bonds (O&R Projects), 1994 Series A (the 1994 Bonds), O&R has a swap agreement pursuant to which it pays interest at a fixed rate of 6.09 percent and is paid interest at the same variable rate as is paid on the 1994 Bonds. Upon adoption of SFAS No. 133, the company recognized after-tax transition adjustment losses relating to the swap agreement of $8.1 million in other comprehensive income. In the quarter ended June 30, 2001, the company reclassified $0.9 million of such losses from accumulated other comprehensive income to income. As of June 30, 2001, $1.2 million of losses relating to the swap agreement were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months. If the swap agreement had been terminated on June 30, 2001, O&R would have been required to pay approximately $13.0 million.

In connection with $95 million of variable rate loans undertaken relating to the Lakewood electric generating plant, Con Edison Development has swap agreements pursuant to which it pays interest at a fixed rate of 6.68 percent and is paid interest at a variable rate equal to the three-month London Interbank Offered Rate. Upon adoption of SFAS No. 133, the company recognized after-tax transition adjustment losses relating to the swap agreements of $1.6 million in other comprehensive income. In the

quarter ended June 30, 2001, the company reclassified $0.4 million of such losses from accumulated other comprehensive income to income. As of June 30, 2001, $0.5 million of losses relating to the swap agreements were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months. If these swap agreements had been terminated on June 30, 2001, Con Edison Development would have been required to pay approximately $3.4 million.

Note F - Financial Information by Business Segment

Consolidated Edison, Inc.

SEGMENT FINANCIAL INFORMATION

$000's

For the three months ended June 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
	2001		2000		2001		2000
Operating revenues	$	1,531,949	$	1,531,262	$	305,394	$	247,016
Intersegment revenues		3,213		12,993		872		2,106
Depreciation and amortization		107,153		118,541		18,016		17,259
Operating income		183,986		151,187		30,240		29,067

	Regulated Steam						Unregulated Subsidiaries & Other
	2001			2000			2001		2000
Operating revenues	$	89,666		$	74,600		$	185,206	$	189,016
Intersegment revenues		485			517			2,830		323
Depreciation and amortization		4,431			4,618			7,268		5,200
Operating income		(5,422	)		(4,061	)		7,011		(4,864	)

	Consolidated
	2001		2000
Operating revenues	$	2,112,215	$	2,041,894
Intersegment revenues		7,400		15,939
Depreciation and amortization		136,868		145,618
Operating income		215,815		171,329

Consolidated Edison, Inc.

SEGMENT FINANCIAL INFORMATION

$000's

For the six months ended June 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
For the six months ended June 30, 2001 and 2000 (Unaudited)	2001		2000		2001		2000
Operating revenues	$	3,239,323	$	3,043,511	$	1,007,213	$	716,489
Intersegment revenues		6,742		31,737		1,591		4,437
Depreciation and amortization		213,252		235,720		35,757		34,143
Operating income		333,117		304,629		128,170		129,685

	Regulated Steam				Unregulated Subsidiaries & Other
	2001		2000		2001		2000
Operating revenues	$	347,918	$	244,858	$	404,024	$	355,627
Intersegment revenues		951		934		5,166		691
Depreciation and amortization		8,836		9,210		14,021		9,267
Operating income		34,452		26,375		6,558		(6,651	)

	Consolidated
	2001		2000
Operating revenues	$	4,998,478	$	4,360,485
Intersegment revenues		14,450		37,799
Depreciation and amortization		271,866		288,340
Operating income		502,297		454,038

Note G - New Accounting Standards

In June 2001, the Financial Accounting Standards Board issued two new accounting standards: Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and SFAS No. 142, "Accounting for Goodwill and Other Intangible Assets."

SFAS No. 141 requires that all business combinations initiated after June 30, 2001 use the purchase method of accounting, which includes recognition of goodwill.

SFAS No. 142, which the company is required to adopt on January 1, 2002, provides that goodwill, including amounts previously recognized under the purchase method, will no longer be subject to amortization and instead will be subject to periodic reviews for impairment. If determined to be impaired, goodwill will be reduced to its fair value and an impairment charge will be recognized in income. Con Edison is required to determine whether or not its goodwill is impaired following its adoption of SFAS No. 142. In accordance with SFAS No. 142, Con Edison is also required to review its goodwill for impairment each year and whenever an event or series of events occurs indicating that goodwill might be impaired. The company has not yet determined the impact SFAS No. 142 will have on its financial statements.

Consolidated Edison Company of New York, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As at
			June 30, 2001		December 31, 2000
			(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
	Electric		$	11,216,706	$	11,135,764
	Gas			2,064,496		2,020,395
	Steam			751,035		740,189
	General			1,311,496		1,282,254

	Total			15,343,733		15,178,602
	Less: Accumulated depreciation			4,834,185		4,819,626

	Net			10,509,548		10,358,976
	Construction work in progress			493,919		476,379
	Nuclear fuel assemblies and components, less accumulated amortization			96,890		107,641

NET UTILITY PLANT				11,100,357		10,942,996

NON-UTILITY PLANT
	Non-utility property			9,293		4,087

NET PLANT				11,109,650		10,947,083

CURRENT ASSETS
	Cash and temporary cash investments			37,850		70,273
	Funds held for refunding of NYSERDA Notes			224,600		-
	Accounts receivable - customer, less allowance for uncollectible accounts of $23,774 and $25,800			612,544		743,883
	Other receivables			139,222		155,656
	Fuel, at average cost			21,858		28,455
	Gas in storage, at average cost			64,926		64,144
	Materials and supplies, at average cost			112,160		118,344
	Prepayments			591,733		497,884
	Other current assets			54,170		50,977

TOTAL CURRENT ASSETS				1,859,063		1,729,616

INVESTMENTS
	Nuclear decommissioning trust funds			344,134		328,969
	Other			15,097		15,068

TOTAL INVESTMENTS				359,231		344,037

DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS
	Regulatory assets
		Future federal income tax		636,670		642,868
		Recoverable energy costs		192,546		274,288
		Real estate sale costs - First Avenue properties		103,928		103,009
		Divestiture - capacity replacement reconciliation		73,850		73,850
		Workers' compensation reserve		58,944		47,097
		Deferred special retirement program costs		44,468		46,743
		Accrued unbilled gas revenue		43,594		43,594
		Deferred revenue taxes		37,012		36,542
		Other		170,554		100,843

	Total regulatory assets			1,361,566		1,368,834
	Other deferred charges and noncurrent assets			154,917		158,371

TOTAL DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS				1,516,483		1,527,205

TOTAL			$	14,844,427	$	14,547,941

The accompanying notes are an integral part of these financial statements.

Consolidated Edison Company of New York, Inc.

CONSOLIDATED BALANCE SHEET
(Unaudited)

				As at
				June 30, 2001			December 31, 2000
				(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
	Common stock			$	1,482,341		$	1,482,341
	Repurchased Consolidated Edison, Inc. common stock				(962,092	)		(962,092	)
	Retained earnings				4,037,268			3,995,825
	Capital stock expense				(35,682	)		(35,817	)
	Accumulated other comprehensive income				(4,888	)		(673	)

	TOTAL COMMON SHAREHOLDER'S EQUITY				4,516,947			4,479,584

	Preferred stock
		Subject to mandatory redemption
			6¹/8% Series J		37,050			37,050

	TOTAL SUBJECT TO MANDATORY REDEMPTION				37,050			37,050

	Other preferred stock
		$5 Cumulative Preferred			175,000			175,000
		4.65% Series C			15,330			15,330
		4.65% Series D			22,233			22,233

	TOTAL OTHER PREFERRED STOCK				212,563			212,563

	TOTAL PREFERRED STOCK				249,613			249,613

	Long-term debt				5,012,661			4,915,108

TOTAL CAPITALIZATION					9,779,221			9,644,305

NONCURRENT LIABILITIES
	Obligations under capital leases				29,903			31,432
	Accumulated provision for injuries and damages				155,983			148,047
	Pension and benefits reserve				125,134			105,124
	Other noncurrent liabilities				14,822			14,822

TOTAL NONCURRENT LIABILITIES					325,842			299,425

CURRENT LIABILITIES
	Long-term debt due within one year				678,150			300,000
	Notes payable				103,197			139,969
	Accounts payable				679,286			879,602
	Customer deposits				199,617			195,762
	Accrued taxes				30,951			49,509
	Accrued interest				75,371			78,230
	Accrued wages				83,307			70,951
	Other current liabilities				255,337			237,634

TOTAL CURRENT LIABILITIES					2,105,216			1,951,657

DEFERRED CREDITS AND REGULATORY LIABILITIES
	Accumulated deferred federal income tax				2,087,799			2,134,973
	Accumulated deferred investment tax credits				118,924			124,532
	Regulatory liabilities
		Gain on divestiture			75,705			50,000
		Deposit from sale of First Avenue properties			50,000			50,000
		Accrued electric rate reduction			38,018			38,018
		NY state tax law revisions			30,121			59,523
		NYPA revenue increase			27,507			35,021
		Other			206,074			160,487

	TOTAL REGULATORY LIABILITIES				427,425			393,049

TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES					2,634,148			2,652,554

TOTAL				$	14,844,427		$	14,547,941

The accompanying notes are an integral part of these financial statements.

Consolidated Edison Company of New York, Inc.

CONSOLIDATED INCOME STATEMENT

For the Three Months Ended June 30, 2001 and 2000 (Unaudited)				2001			2000
				(Thousands of Dollars)
OPERATING REVENUES
	Electric			$	1,396,411		$	1,429,502
	Gas				269,327			217,380
	Steam				89,666			74,600

TOTAL OPERATING REVENUES					1,755,404			1,721,482

OPERATING EXPENSES
	Purchased power				593,956			639,181
	Fuel				46,020			42,731
	Gas purchased for resale				133,476			90,628
	Other operations				228,890			239,195
	Maintenance				109,960			121,556
	Depreciation and amortization				121,526			132,959
	Taxes, other than income tax				238,736			257,116
	Income tax				83,692			32,160

TOTAL OPERATING EXPENSES					1,556,256			1,555,526

OPERATING INCOME					199,148			165,956
OTHER INCOME (DEDUCTIONS)
	Investment income				118			817
	Allowance for equity funds used during construction				258			400
	Other income less miscellaneous deductions				1,796			(2,315	)
	Income tax				(514	)		1,206

TOTAL OTHER INCOME (DEDUCTIONS)					1,658			108

INCOME BEFORE INTEREST CHARGES					200,806			166,064
	Interest on long-term debt				88,817			81,148
	Other interest				7,085			11,292
	Allowance for borrowed funds used during construction				(1,388	)		(905	)

NET INTEREST CHARGES					94,514			91,535

NET INCOME					106,292			74,529
PREFERRED STOCK DIVIDEND REQUIREMENTS					3,398			3,398

NET INCOME FOR COMMON STOCK				$	102,894		$	71,131

CON EDISON OF NEW YORK SALES
	Electric (thousands of kilowatthours)
		Con Edison of New York customers			7,319,177			7,402,219
		Delivery service for Retail Choice			2,401,091			2,120,980
		Delivery service to NYPA and others			2,432,752			2,336,904

	Total sales in service territory				12,153,020			11,860,103
	Gas (dekatherms)
		Firm sales and transportation			19,982,893			18,949,573
		Off-peak firm/interruptible			2,802,914			3,500,595

	Total sales to Con Edison of New York customers				22,785,807			22,450,168
		Transportation of customer-owned gas
			NYPA		1,546,204			5,756,826
			Other		18,866,764			24,811,439

	Total sales and transportation				43,198,775			53,018,433
	Steam (thousands of pounds)				4,707,156			4,666,444

The accompanying notes are an integral part of these financial statements.

Consolidated Edison Company of New York, Inc.

CONSOLIDATED INCOME STATEMENT

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)				2001			2000
				(Thousands of Dollars)
OPERATING REVENUES
	Electric			$	2,979,610		$	2,852,663
	Gas				866,768			611,022
	Steam				347,918			244,858

TOTAL OPERATING REVENUES					4,194,296			3,708,543

OPERATING EXPENSES
	Purchased power				1,375,943			1,257,424
	Fuel				216,335			127,929
	Gas purchased for resale				498,504			250,180
	Other operations				444,187			496,294
	Maintenance				231,174			222,241
	Depreciation and amortization				241,527			264,498
	Taxes, other than income tax				526,931			527,419
	Income tax				192,927			128,117

TOTAL OPERATING EXPENSES					3,727,528			3,274,102

OPERATING INCOME					466,768			434,441
OTHER INCOME (DEDUCTIONS)
	Investment income				274			1,550
	Allowance for equity funds used during construction				501			(226	)
	Other income less miscellaneous deductions				624			(2,298	)
	Income tax				4,121			816

TOTAL OTHER INCOME (DEDUCTIONS)					5,520			(158	)

INCOME BEFORE INTEREST CHARGES					472,288			434,283
	Interest on long-term debt				178,494			157,898
	Other interest				14,979			22,762
	Allowance for borrowed funds used during construction				(2,695	)		(2,585	)

NET INTEREST CHARGES					190,778			178,075

NET INCOME					281,510			256,208
PREFERRED STOCK DIVIDEND REQUIREMENTS					6,796			6,796

NET INCOME FOR COMMON STOCK				$	274,714		$	249,412

CON EDISON OF NEW YORK SALES
	Electric (thousands of kilowatthours)
		Con Edison of New York customers			15,067,166			15,018,669
		Delivery service for Retail Choice			4,840,653			4,375,829
		Delivery service to NYPA and others			4,990,103			4,811,793

	Total sales in service territory				24,897,922			24,206,291
	Gas (dekatherms)
		Firm sales and transportation			65,439,756			60,647,576
		Off-peak firm/interruptible			8,629,977			8,355,644

	Total sales to Con Edison of New York customers				74,069,733			69,003,220
		Transportation of customer-owned gas
			NYPA		1,576,173			8,981,343
			Other		25,476,770			45,133,010

	Total sales and transportation				101,122,676			123,117,573
	Steam (thousands of pounds)				15,189,852			14,892,054

The accompanying notes are an integral part of these financial statements.

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

		As At
As At June 30, 2001 and December 31, 2000		June 30, 2001		December 31, 2000
(Unaudited)		(Thousands of Dollars)
BALANCE, JANUARY 1		$	3,995,825	$	3,887,993
	Net income for the period		281,510		583,715

TOTAL			4,277,335		4,471,708

DIVIDENDS DECLARED ON CAPITAL STOCK
	Cumulative Preferred, at required annual rates		6,796		13,593
	Common		233,271		462,290

TOTAL DIVIDENDS DECLARED			240,067		475,883

ENDING BALANCE		$	4,037,268	$	3,995,825

The accompanying notes are an integral part of these financial statements.

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
NET INCOME		$	274,714		$	249,412
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
	Minimum pension liability adjustments, net of $1,593 taxes		(2,118	)		-
	Unrealized gains (losses) on derivatives qualified as hedges, net of $1,757 taxes		(2,509	)		-
	Less: Reclassification adjustment for losses included in net income, net of $288 taxes		(412	)		-

TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES			(4,215	)		-

COMPREHENSIVE INCOME		$	270,499		$	249,412

The accompanying notes are an integral part of these financial statements.

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)				2001			2000
				(Thousands of Dollars)
OPERATING ACTIVITIES
	Net income			$	281,510		$	256,208
	PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
		Depreciation and amortization			241,414			264,498
		Income tax deferred (excluding taxes resulting from divestiture of plant)			(71,248	)		21,235
		Common equity component of allowance for funds used during construction			(501	)		226
		Prepayments - accrued pension credits			(161,285	)		(102,025	)
		Other non-cash charges			24,423			4,976
	CHANGES IN ASSETS AND LIABILITIES
		Accounts receivable - customer, less allowance for uncollectibles			131,339			7,547
		Materials and supplies, including fuel and gas in storage			4,348			(1,729	)
		Prepayments (other than pensions), other receivables and other current assets			80,674			(6,076	)
		Deferred recoverable energy costs			81,742			(166,479	)
		Cost of removal less salvage			(43,894	)		(44,575	)
		Accounts payable			(200,316	)		209,151
		Other - net			(16,904	)		69,731

NET CASH FLOWS FROM OPERATING ACTIVITIES					351,302			512,688

INVESTING ACTIVITIES INCLUDING CONSTRUCTION
		Construction expenditures			(425,613	)		(370,878	)
		Nuclear fuel expenditures			(6,229	)		(24,114	)
		Contributions to nuclear decommissioning trust			(10,650	)		(10,650	)
		Divestiture of utility plant (net of federal income tax)			99,951			-
		Common equity component of allowance for funds used during construction			501			(226	)

NET CASH FLOWS USED IN INVESTING ACTIVITIES INCLUDING CONSTRUCTION					(342,040	)		(405,868	)

FINANCING ACTIVITIES INCLUDING DIVIDENDS
		Repurchase of common stock			-			(29,454	)
		Net proceeds from short-term debt			(36,772	)		(385,441	)
		Additions to long-term debt			624,600			325,000
		Retirement of long-term debt			(150,000	)		(125,000	)
		Issuance and refunding costs			(14,846	)		(1,768	)
		Funds held for refunding of NYSERDA Notes			(224,600	)		-
		Common stock dividends			(233,271	)		(231,230	)
		Preferred stock dividends			(6,796	)		(6,796	)

NET CASH FLOWS USED IN FINANCING ACTIVITIES INCLUDING DIVIDENDS					(41,685	)		(454,689	)

NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS					(32,423	)		(347,869	)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1					70,273			349,033

CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30				$	37,850		$	1,164

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
		Cash paid during the period for:
			Interest	$	171,414		$	151,794
			Income taxes		222,531			67,515

The accompanying notes are an integral part of these financial statements.

NOTES TO FINANCIAL STATEMENTS - CON EDISON OF NEW YORK

Note A - General

These footnotes accompany and form an integral part of the interim consolidated financial statements of Consolidated Edison Company of New York, Inc. (Con Edison of New York) and its subsidiaries. Consolidated Edison, Inc. (Con Edison) owns all of the outstanding common stock of Con Edison of New York. These financial statements are unaudited but, in the opinion of Con Edison of New York's management, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair statement of the results for the interim periods presented. These financial statements should be read together with the audited Con Edison of New York financial statements (including the notes thereto) included in the combined Con Edison, Con Edison of New York and Orange and Rockland Utilities, Inc. Annual Reports on Form 10-K for the year ended December 31, 2000 (the Form 10-K).

Note B - Environmental Matters

Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of Con Edison of New York and may be present in its facilities and equipment.

At June 30, 2001, Con Edison of New York had accrued $93.3 million as its best estimate of its liability for sites as to which it has received process or notice alleging that hazardous substances generated by the company (and, in most instances, other potentially responsible parties) were deposited. There will be additional liability at these sites and other sites, the amount of which is not presently determinable but may be material to the company's financial position, results of operations or liquidity.

Under Con Edison of New York's current electric, gas and steam rate agreements, site investigation and remediation costs in excess of $5 million annually incurred with respect to hazardous waste for which it is responsible are to be deferred and subsequently reflected in rates. At June 30, 2001, $20.5 million of such costs had been deferred as regulatory assets.

Suits have been brought in New York State and federal courts against Con Edison of New York and many other defendants, wherein a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the company. Many of these suits have been disposed of without any payment by the company, or for immaterial amounts. The amounts specified in all the remaining suits total billions of dollars but the company believes that these amounts are greatly exaggerated, as were the claims already disposed of. Based on the information and relevant circumstances known to the company at this time, it does not

believe that these suits will have a material adverse effect on its financial position, results of operations or liquidity.

Note C - Nuclear Generation

The Indian Point 2 nuclear generating unit, which Con Edison of New York owns and has agreed to sell, was out of service from February 2000 to January 2001. The New York State Public Service Commission (PSC) is investigating the Indian Point 2 outage and its causes and the prudence of the company's actions regarding the operation and maintenance of Indian Point 2. An appeal is pending in the United States Court of Appeals for the Second Circuit of the October 2000 decision by the United States District Court for the Northern District of New York, in an action entitled Consolidated Edison Company of New York, Inc. v. Pataki, et al., in which the court determined that the law that directed the PSC to prohibit the company from recovering Indian Point 2 replacement power costs from customers was unconstitutional and granted the company's motion for a permanent injunction to prevent its implementation. The staff of the Nuclear Regulatory Commission is monitoring Indian Point 2 with heightened oversight. The company is unable to predict whether or not any Indian Point 2-related proceedings, lawsuits, legislation or other actions will have a material adverse effect on its financial position, results of operations or liquidity. For additional information about Indian Point 2, its pending sale and the outage, see Note G to Con Edison of New York's financial statements included in Item 8 of the Form 10-K.

Note D - Derivative Instruments and Hedging Activities

As of January 2001, Con Edison of New York adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities—an amendment of FASB Statement No. 133" (SFAS No. 133).

Con Edison of New York uses derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase or sale of electricity and gas (Hedges).

Pursuant to Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS No. 71), the company defers recognition in income of gains and losses on a Hedge until the underlying transaction is completed. Pursuant to rate provisions that permit the recovery of the cost of purchased power and gas, the company credits or charges to its customers gains or losses on Hedges and related transaction costs. See "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K. To the extent SFAS No. 71 does not allow deferred recognition in income, the company has elected special hedge accounting pursuant to SFAS No. 133 to defer recognition of unrealized gains and losses on Hedges in other comprehensive income. Upon adoption of SFAS No. 133, the company had no transition adjustments to recognize in other comprehensive income. In the quarter and six month period ended June 30, 2001, the company realized pre-tax losses on Hedges of $7.6 million, of which $6.8 million has been billed to customers. At June 30, 2001, the company had $36.4 million of mark-to-market unrealized pre-tax net losses on Hedges deferred as regulatory assets and $2.1 million of mark-to-market unrealized after-tax net losses on Hedges included in other comprehensive income. As of June 30, 2001, Hedges for which special hedge

accounting was used were for a term of less than 12 months and $2.1 million of losses relating to such Hedges were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months.

Note E - Financial Information by Business Segment

Consolidated Edison Company of New York, Inc.

SEGMENT FINANCIAL INFORMATION

$000's

For the three months ended June 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
	2001		2000		2001		2000
Operating revenues	$	1,396,411	$	1,429,502	$	269,327	$	217,380
Intersegment revenues		3,195		2,142		872		734
Depreciation and amortization		101,150		113,396		15,945		14,945
Operating income		173,358		140,036		31,212		29,981

	Regulated Steam						Total
	2001			2000			2001		2000
Operating revenues	$	89,666		$	74,600		$	1,755,404	$	1,721,482
Intersegment revenues		485			517			4,552		3,393
Depreciation and amortization		4,431			4,618			121,526		132,959
Operating income		(5,422	)		(4,061	)		199,148		165,956

Consolidated Edison Company of New York, Inc.

SEGMENT FINANCIAL INFORMATION

$000's

For the six months ended June 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
For the six months ended June 30, 2001 and 2000 (Unaudited)	2001		2000		2001		2000
Operating revenues	$	2,979,610	$	2,852,663	$	866,768	$	611,022
Intersegment revenues		5,858		5,327		1,591		1,437
Depreciation and amortization		201,065		225,612		31,626		29,676
Operating income		313,606		286,760		118,710		121,306

	Regulated Steam				Total
	2001		2000		2001		2000
Operating revenues	$	347,918	$	244,858	$	4,194,296	$	3,708,543
Intersegment revenues		951		934		8,400		7,698
Depreciation and amortization		8,836		9,210		241,527		264,498
Operating income		34,452		26,375		466,768		434,441

Orange and Rockland Utilities, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As At
			June 30, 2001		December 31, 2000
			(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
	Electric		$	677,588	$	672,338
	Gas			284,366		279,661
	Common			107,529		106,348

	TOTAL			1,069,483		1,058,347
	Less: accumulated depreciation			377,324		366,432

	NET			692,159		691,915
	Construction work in progress			33,496		28,091

NET UTILITY PLANT				725,655		720,006

NON-UTILITY PLANT
	Non-utility property, less accumulated depreciation of $211 and $239			3,017		3,249

NET PLANT				728,672		723,255

CURRENT ASSETS
	Cash and cash equivalents			2,613		8,483
	Customer accounts receivable, less allowance for uncollectible accounts of $3,625 and $3,845			85,578		82,183
	Other accounts receivable, less allowance for uncollectible accounts of $915 and $818			8,813		7,551
	Accrued utility revenue			25,616		29,025
	Gas in storage, at average cost			15,886		16,567
	Materials and supplies, at average cost			5,437		4,815
	Prepayments			34,072		23,854
	Other current assets			17,655		20,735

TOTAL CURRENT ASSETS				195,670		193,213

INVESTMENTS
	Other			6		6

TOTAL INVESTMENTS				6		6

DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS
	Regulatory assets
		Deferred pension and other postretirement benefits		40,917		41,890
		Recoverable fuel costs		62,901		66,207
		Deferred environmental remediation costs		34,203		34,056
		Future federal income tax		33,442		33,659
		Other regulatory assets		27,477		26,761
		Hedges on energy trading		21,601		-
		Deferred revenue taxes		7,404		7,337

	TOTAL REGULATORY ASSETS			227,945		209,910
	Other deferred charges and noncurrent assets			11,675		12,273

TOTAL DEFERRED CHARGES REGULATORY ASSETS AND NONCURRENT ASSETS				239,620		222,183

TOTAL			$	1,163,968	$	1,138,657

The accompanying notes are an integral part of these financial statements.

Orange and Rockland Utilities, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As At
			June 30, 2001			December 31, 2000
			(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
	Common stock		$	5		$	5
	Additional paid In capital			194,499			194,498
	Retained earnings			142,537			139,610
	Accumulated comprehensive Income			(9,184	)		(1,473	)

	TOTAL COMMON SHAREHOLDERS' EQUITY			327,857			332,640
	Long term debt			335,714			335,656

TOTAL CAPITALIZATION				663,571			668,296

NON-CURRENT LIABILITIES
	Pension and Benefit Reserve			84,423			76,222
	Other noncurrent liabilities			16,224			16,636

TOTAL NON-CURRENT LIABILITIES				100,647			92,858

CURRENT LIABILITIES
	Long-term debt due within one year			-			-
	Notes payable			36,250			40,820
	Accounts payable			61,150			58,664
	Accounts payable to affiliated companies			28,412			9,169
	Accrued federal income and other taxes			7,930			4,863
	Customer deposits			6,919			7,126
	Accrued interest			8,700			7,087
	Accrued environmental costs			32,944			32,852
	Other current liabilities			29,228			27,756

TOTAL CURRENT LIABILITIES				211,533			188,337

DEFERRED CREDITS AND REGULATORY LIABILITIES
	Accumulated deferred federal income tax			113,625			120,497
	Deferred investment tax credits			6,654			6,897
	Regulatory liabilities
		Pension and other benefits		10,210			15,587
		Gas recoveries and pipeline refunds		13,008			15,076
		Industry restructuring collections		15,267			14,198
		Gain on divestiture		8,481			10,338
		Other regulatory liabilities		7,869			6,358

	TOTAL REGULATORY LIABILITIES			54,835			61,557
	Deferred credits
		Termination cost of long-term debt		12,964			-
		Other deferred credits		138			215

	TOTAL DEFERRED CREDITS			13,102			215

TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES				188,216			189,166

TOTAL			$	1,163,968		$	1,138,657

The accompanying notes are an integral part of these financial statements.

Orange and Rockland Utilities, Inc.

CONSOLIDATED INCOME STATEMENT

For the Three Months Ended June 30, 2001 and 2000 (Unaudited)			2001			2000
			(Thousands of Dollars)
OPERATING REVENUES
	Electric		$	135,549		$	112,609
	Gas			36,067			31,009
	Non-utility			-			21

TOTAL OPERATING REVENUES				171,616			143,639

OPERATING EXPENSES
	Purchased power			70,965			54,390
	Gas purchased for resale			27,793			18,824
	Other operations			30,439			28,829
	Maintenance			6,380			6,584
	Depreciation and amortization			7,995			7,460
	Taxes, other than federal income tax			13,342			14,341
	State Income Taxes			1,411			189
	Federal income tax			3,868			2,935

TOTAL OPERATING EXPENSES				162,193			133,552

OPERATING INCOME				9,423			10,087
OTHER INCOME (DEDUCTIONS)
	Investment income			275			1,280
	Allowance for equity funds used during construction			-			85
	Other income and deductions			(18	)		105
	Federal income tax			43			(495	)

TOTAL OTHER INCOME				300			975

INCOME BEFORE INTEREST CHARGES				9,723			11,062
INTEREST CHARGES
	Interest on long-term debt			5,527			5,107
	Other interest			740			749
	Allowance for borrowed funds used during construction			(296	)		(128	)

TOTAL INTEREST CHARGES				5,971			5,728

NET INCOME				3,752			5,334
PREFERRED AND PREFERENCE STOCK REQUIREMENTS				- -			- -

NET INCOME FOR COMMON STOCK			$	3,752		$	5,334

ORANGE AND ROCKLAND SALES & DELIVERIES
	Electric – (thousands of killowatthours)
		Orange And Rockland customers		1,101,506			1,029,221
		Delivery service for Retail Choice		184,196			180,739

	Total sales in service territory			1,285,702			1,209,960
	Gas – (dekatherms)
		Firm sales and transportation		2,797,582			2,633,921
		Off-peak firm/interruptible		1,853,448			2,282,471

	Total sales to Orange And Rockland customers			4,651,030			4,916,392
		Transportation of customer-owned gas		2,479,767			4,614,357

	Total sales and transportation			7,130,797			9,530,749

The accompanying notes are an integral part of these financial statements.

Orange and Rockland Utilities, Inc.

CONSOLIDATED INCOME STATEMENT

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)			2001			2000
			(Thousands of Dollars)
OPERATING REVENUES
	Electric		$	260,585		$	217,252
	Gas			140,445			108,467
	Non-utility			33			116

TOTAL OPERATING REVENUES				401,063			325,835

OPERATING EXPENSES
	Purchased power			140,626			108,946
	Fuel			-			39
	Gas purchased for resale			101,411			67,151
	Other operations			58,242			57,741
	Maintenance			13,613			12,732
	Depreciation and amortization			16,160			14,577
	Taxes, other than federal income tax			28,266			30,457
	State Income Taxes			2,948			534
	Federal income tax			11,219			7,800

TOTAL OPERATING EXPENSES				372,485			299,977

OPERATING INCOME				28,578			25,858
OTHER INCOME (DEDUCTIONS)
	Investment income			1,209			4,385
	Allowance for equity funds used during construction			-			135
	Other income and deductions			(340	)		(243	)
	Federal income tax			(133	)		(1,370	)

TOTAL OTHER INCOME				736			2,907

INCOME BEFORE INTEREST CHARGES				29,314			28,765
INTEREST CHARGES
	Interest on long-term debt			11,020			11,670
	Other interest			1,895			1,253
	Allowance for borrowed funds used during construction			(528	)		(202	)

TOTAL INTEREST CHARGES				12,387			12,721

NET INCOME				16,927			16,044
PREFERRED AND PREFERENCE STOCK REQUIREMENTS				-			-

NET INCOME FOR COMMON STOCK				16,927			16,044

ORANGE AND ROCKLAND SALES & DELIVERIES
	Electric - (thousands of killowatthours)
		Orange And Rockland customers		2,194,560			2,051,345
		Delivery service for Retail Choice		320,744			352,656

	Total sales in service territory			2,515,304			2,404,001
	Gas - (dekatherms)
		Firm sales and transportation		12,653,298			12,761,293
		Off-peak firm/interruptible		4,067,118			4,469,072

	Total sales to Orange And Rockland customers			16,720,416			17,230,365
		Transportation of Customer-Owned Gas		3,490,320			7,399,712

	Total sales and transportation			20,210,736			24,630,077

The accompanying notes are an integral part of these financial statements.

Orange and Rockland Utilities, Inc.

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

		As at
As at June 30, 2001 and December 31, 2000 (Unaudited)		June 30, 2001			December 31, 2000
		(Thousands of Dollars)
BALANCE, JANUARY 1		$	139,610		$	137,536
	Net income for the period		16,927			16,044

TOTAL			156,537			153,580
	Dividends declared on Capital Stock		(14,000	)		(18,500	)

ENDING BALANCE		$	142,537		$	135,080

The accompanying notes are an integral part of these financial statements.

Orange and Rockland Utilities, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
NET INCOME		$	16,927		$	16,044
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
	Investment in marketable securities, net of $279 taxes		(189	)		-
	Minimum pension liability adjustments, net of $63 taxes		63			-
	Unrealized (losses) gains on derivatives qualified as hedges due to cumulative effect of a change in accounting principle, net of $5,751 taxes		(8,107	)		-
	Unrealized gains (losses) on derivatives qualified as hedges during 2001, net of ($15) taxes		21			-
	Less: Reclassification adjustment for losses included in net income during 2001, net of $356 taxes		(502	)		-

TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES			(7,710	)		-

COMPREHENSIVE INCOME		$	9,217		$	16,044

The accompanying notes are an integral part of these financial statements.

Orange And Rockland Utilities, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)			2001			2000
			(Thousands of Dollars)
OPERATING ACTIVITIES
	Net income		$	16,927		$	16,044
PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
	Depreciation and amortization			16,160			14,577
	Amortization of investment tax credit			(243	)		(227	)
	Federal and state income tax deferred			(6,655	)		(4,361	)
	Common equity component of allowance for funds used during construction			-			(135	)
	Other non-cash changes (debits)			879			1,351
CHANGES IN ASSETS AND LIABILITIES
	Accounts receivable - net, and accrued utility revenue			14			(3,503	)
	Materials and supplies, including fuel and gas in storage			59			6,138
	Prepayments, other receivables and other current assets			(8,398	)		(12,317	)
	Deferred recoverable fuel costs			6,236			2,697
	Accounts payable			21,730			1,451
	Refunds to customers			(2,332	)		800
	Other - net			(8,397	)		(5,544	)

NET CASH FLOWS FROM OPERATING ACTIVITIES				35,980			16,971

INVESTING ACTIVITIES INCLUDING CONSTRUCTION
	Construction expenditures			(23,398	)		(20,312	)
	Proceeds from disposition of property			118			-
	Common equity component of allowance for funds used during construction			-			135

NET CASH FLOWS USED IN INVESTING ACTIVITIES INCLUDING CONSTRUCTION				(23,280	)		(20,177	)

FINANCING ACTIVITIES
	Issuance of long-term debt			-			55,000
	Retirement of long-term debt			-			(100,026	)
	Short-term debt arrangements			(4,570	)		19,650
	Dividend to parent			(14,000	)		(18,500	)

NET CASH FLOWS FROM FINANCING ACTIVITIES INCLUDING DIVIDENDS				(18,570	)		(43,876	)

NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS				(5,870	)		(47,082	)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1				8,483			78,927

CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30			$	2,613		$	31,845

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
	Cash paid during the period for:
		Interest	$	11,336		$	14,811
		Income Taxes	$	14,503		$	27,819

The accompanying notes are an integral part of these financial statements.

NOTES TO FINANCIAL STATEMENTS - O&R

Note A - General

These footnotes accompany and form an integral part of the interim consolidated financial statements of Orange and Rockland Utilities, Inc. (O&R), a wholly-owned subsidiary of Consolidated Edison, Inc. (Con Edison). These financial statements are unaudited but, in the opinion of O&R's management, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair statement of the results for the interim periods presented. These financial statements should be read together with the audited O&R financial statements (including the notes thereto) included in the combined Con Edison, Consolidated Edison Company of New York, Inc. (Con Edison of New York) and O&R Annual Reports on Form 10-K for the year ended December 31, 2000.

Note B - Environmental Matters

Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of O&R and may be present in its facilities and equipment. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund) and similar state statutes impose joint and several strict liability, regardless of fault, upon generators of hazardous substances for resulting removal and remedial costs and environmental damages. Liabilities under these laws can be material and in some instances may be imposed without regard to fault, or may be imposed for past acts, even though such past acts may have been lawful at the time they occurred.

At June 30, 2001, O&R had accrued $32.9 million as its best estimate of its liability for sites as to which it has received process or notice alleging that hazardous substances generated by the company (and, in most instances, other potentially responsible parties) were deposited. There will be additional liability at these sites and other sites, including the costs of investigating and remediating sites where the company or its predecessors manufactured gas. The total amount of liability is not presently determinable but may be material to the company's financial position, results of operations or liquidity.

Under O&R's current gas rate agreement, O&R may defer for subsequent recovery through rates the cost of investigating and remediating manufactured gas sites. At June 30, 2001, $35.3 million of such costs had been deferred as a regulatory asset.

Suits have been brought in New York State and federal courts against O&R and many other defendants, wherein a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the company. Many of these suits have been disposed of without any payment by O&R, or for immaterial amounts. The amounts specified in all the remaining suits total billions of dollars but the company believes that these amounts are greatly exaggerated, as were the claims already disposed of. Based on the information and relevant circumstances known to the company at this time, it does not believe that these suits will have a material adverse effect on its financial position, results of operations or liquidity.

In May 2000, the New York State Department of Environmental Conservation (DEC) issued notices of violation to O&R and four other companies that have operated coal -fired electric generating facilities in New York State. The notices allege violations of the federal Clean Air Act and the New York State

Environmental Conservation law resulting from the alleged failure of the companies to obtain DEC permits for physical modifications to their generating facilities and to install pollution control equipment that would have reduced harmful emissions. The notice of violation received by O&R relates to the Lovett Generating Station that it sold in June 1999. O&R is unable to predict whether or not the alleged violations will have a material adverse effect on its financial position, results of operations or liquidity.

Note C - Related Party Transactions

O&R is invoiced monthly by Con Edison and its affiliates for the cost of any services they render to the company. These services, provided primarily by Con Edison of New York, include substantially all administrative support operations such as corporate directorship and associated ministerial duties, accounting, treasury, investor relations, information resources, legal, human resources, fuel supply and energy management services. The cost of these services totaled $7.7 million during the first six months of 2001. In addition, O&R purchased $97.6 million of gas from Con Edison of New York during this period. See Note D for information about energy price hedging which Con Edison of New York entered into on behalf of O&R.

O&R provides certain recurring services to Con Edison of New York on a monthly basis, including cash receipts processing and certain other services. The cost of these services totaled $5.7 million during the first six months of 2001.

Note D - Derivative Instruments and Hedging Activities

As of January 2001, O&R adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities—an amendment of FASB Statement No. 133" (SFAS No. 133).

Energy Price Hedging

O&R uses derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase or sale of electricity (Hedges).

Interest Rate Hedging

In connection with its $55 million promissory note issued to the New York State Energy Research and Development Authority for the net proceeds of the Authority's variable rate Pollution Control

Refunding Revenue Bonds (O&R Projects), 1994 Series A (the 1994 Bonds), O&R has a swap agreement pursuant to which it pays interest at a fixed rate of 6.09 percent and is paid interest at the same variable rate as is paid on the 1994 Bonds. Upon adoption of SFAS No. 133, O&R recognized after-tax transition adjustment losses of $8.1 million in other comprehensive income. In the quarter ended June 30, 2001, the company reclassified $0.9 million of losses from accumulated other comprehensive income to income. As of June 30, 2001, $1.2 million of losses relating to the swap agreement were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months. If the swap agreement had been terminated on June 30, 2001, O&R would have been required to pay approximately $13.0 million. Pursuant to SFAS No. 133, the swap agreement is accounted for as a cash flow hedge and changes in its fair value are recorded in other comprehensive income. The fair value of the swap agreement is calculated based upon current market conditions.

Note E - Financial Information by Business Segment

Orange And Rockland Utilities, Inc.
SEGMENT FINANCIAL INFORMATION
$000's

For the three months ended June 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
	2001		2000		2001			2000
Sales revenues	$	135,542	$	112,607	$	36,067		$	31,009
Intersegment revenues		7		2		-			-
Depreciation and amortization		6,003		5,145		2,071			2,314
Operating income		10,628		11,151		(972	)		(914	)

	Unregulated Affiliates & Other						Consolidated
	2001			2000			2001		2000
Sales revenues	$	-		$	21		$	171,609	$	143,637
Intersegment revenues		-			-			7		2
Depreciation and amortization		-			1			8,074		7,460
Operating income		(233	)		(166	)		9,423		10,071

For the six months ended June 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
For the six months ended June 30, 2001 and 2000 (Unaudited)	2001		2000		2001		2000
Sales revenues	$	260,573	$	217,246	$	140,445	$	108,467
Intersegment revenues		12		6		-		-
Depreciation and amortization		12,187		10,108		4,131		4,467
Operating income		19,511		17,869		9,460		8,379

	Unregulated Affiliates & Other						Consolidated
	2001			2000			2001		2000
Sales revenues	$	34		$	116		$	401,051	$	325,829
Intersegment revenues		-			-			12		6
Depreciation and amortization		1			2			16,318		14,577
Operating income		(393	)		(390	)		28,578		25,858

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CON EDISON

Consolidated Edison, Inc. (Con Edison) is a holding company that operates only through its subsidiaries and has no material assets other than the stock of its subsidiaries. Con Edison's principal subsidiaries are regulated utilities: Consolidated Edison Company of New York, Inc. (Con Edison of New York) and Orange and Rockland Utilities, Inc. (O&R). Con Edison also has several unregulated subsidiaries.

The following discussion and analysis, which relates to the interim consolidated financial statements of Con Edison and its subsidiaries (including Con Edison of New York and O&R) included in Part I, Item 1 of this report, should be read in conjunction with Con Edison's Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of the combined Con Edison, Con Edison of New York and O&R Annual Reports on Form 10-K for the year ended December 31, 2000 (File Nos. 1-14514, 1-1217 and 1-4315, the Form 10-K) and Con Edison's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of the combined Con Edison, Con Edison of New York and O&R Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 2001. Reference is also made to the notes to the Con Edison financial statements in Part I, Item 1 of this report, which notes are incorporated herein by reference.

Liquidity and Capital Resources

Cash and temporary cash investments and outstanding notes payable (principally commercial paper) at June 30, 2001 and December 31, 2000 were (amounts shown in millions):

		June 30, 2001			December 31, 2000
Cash and temporary cash investments		$	41.6		$	94.8
Notes payable		$	222.3		$	255.0

The decrease in cash and temporary cash investments at June 30, 2001 compared with December 31, 2000 reflects net cash flows from operating activities and net cash flows used in investing and financing activities.

Cash Flows from Operating Activities

Net cash flows from operating activities during the first six months of 2001 decreased $100.1 million compared with the first six months of 2000, reflecting principally decreased accounts payable and increased other regulatory assets and accrued pension credits, offset in part by decreased accounts receivable and recoverable energy costs.

Customer accounts receivable, less allowance for uncollectible accounts, was $160.8 million lower at June 30, 2001 than at year-end 2000, due primarily to lower customer billings by Con Edison's utility subsidiaries, reflecting reduced energy sales volume in June 2001 as compared to December 2000 and lower energy costs, offset in part by the timing of customer payments. Con Edison of New York's equivalent number of days of revenue outstanding (ENDRO) of customer accounts receivable was 30.6 days at June 30, 2001 compared with 29.7 days at December 31, 2000. For O&R, the ENDRO was 46.1 days at June 30, 2001 and 35.4 days at December 31, 2000. The changes in ENDRO reflect

increased use by customers of level billing and alternative payment arrangements and the timing of customer payments.

Prepayments include cumulative credits to pension expense for Con Edison of New York amounting to $528.0 million at June 30, 2001 compared with $366.7 million at December 31, 2000. Pension credits, which result primarily from favorable performance by the company's pension fund in past years, increase net income but do not provide cash for the company's operations. See Note D to the Con Edison financial statements included in Item 8 of the Form 10-K.

Deferred recoverable energy costs decreased $85.0 million at June 30, 2001 compared with December 31, 2000, due primarily to the ongoing recovery of previously deferred amounts, offset in part by the deferral for future recovery of additional purchased power and gas costs. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Other regulatory assets increased $86.5 million at June 30, 2001 compared with year-end 2000, in part reflecting unrealized mark-to-market losses on transactions entered into to hedge purchases of electricity and gas against adverse market price fluctuations. Con Edison of New York and O&R refund to or collect from customers their hedging gains or losses, as the case may be, pursuant to rate provisions that permit recovery of the cost of purchased power and gas. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K and "Energy Price Hedging" in Note E to the Con Edison financial statements included in Part I, Item 1 of this report.

Unfunded pension and other post-employment benefit (OPEB) obligations (shown as pension and benefit reserve on the balance sheet) increased $28.5 million at June 30, 2001 compared with year-end 2000. Con Edison of New York's policy is to fund its pension and OPEB costs to the extent deductible under current tax regulations. O&R's policy is to fund the amounts recovered in rates for its pension and OPEB costs to the extent those contributions are tax deductible. The reserve also includes a minimum liability for supplemental executive retirement programs, a portion of which liability has been included in other comprehensive income. See Note E to the Con Edison financial statements included in Item 8 of the Form 10-K.

The accumulated provision for injuries and damages increased $8.0 million at June 30, 2001 compared with year-end 2000, due primarily to increased workers' compensation claims.

Accounts payable decreased $207.7 million at June 30, 2001 compared with year-end 2000, due primarily to lower energy purchases in June 2001 as compared to December 2000, offset in part by the accrual of liabilities for unrealized losses on energy price hedging transactions for which, as discussed above, other regulatory assets were established by Con Edison of New York and O&R.

Accrued taxes decreased $32.3 million at June 30, 2001 compared with year-end 2000, due principally to timing differences.

Other regulatory liabilities increased $40.7 million at June 30, 2001 compared with year-end 2000, reflecting the deferral pending future disposition by the New York State Public Service Commission (PSC) of a $27.9 million refund from the New York Independent System Operator to Con Edison of New York resulting from a reconciliation of prior period payments for purchased power, and $10.0 million of Con Edison of New York gas earnings to be shared with customers pursuant to the company's

current gas rate agreement. See "Rate and Restructuring Agreements" in Note A to the Con Edison financial statements in Item 8 of the Form 10-K.

Other deferred credits increased $16.3 million at June 30, 2001 compared with year-end 2000, reflecting $16.4 million of interest rate swap agreements related to O&R and Con Edison Development. If the swaps had been terminated on June 30, 2001, O&R and Con Edison Development would have been required to pay approximately $13.0 million and $3.4 million, respectively. See Note E to the Con Edison financial statements included in Part I, Item 1 of this report.

Cash Flows Used in Investing and Financing Activities

Cash flows used in investing activities during the first six months of 2001 decreased $275.0 million compared with the first six months of 2000, reflecting the completion of the sale of Con Edison of New York's 480 MW interest in the Roseton generating station in January 2001 (proceeds of $100.0 million, net of federal income tax), decreased nuclear fuel expenditures ($17.9 million) and decreased investment in non-utility plant ($221.3 million), offset in part by increased utility construction expenditures ($57.0 million). Nuclear fuel expenditures decreased because refueling was conducted in the 2000 period but not in the 2001 period. Construction expenditures increased principally to meet load growth on Con Edison of New York's electric distribution system. Non-utility plant investments decreased due primarily to the purchase of an 80 percent interest in the Lakewood generating unit by Con Edison Development in the 2000 period.

Cash flows used in financing activities during the first six months of 2001 decreased $219.3 million compared with the first six months of 2000, primarily because the company increased short-term debt in December 1999 in anticipation of its January 2000 cash requirements but financed its January 2001 cash requirements in January 2001. In addition, the company issued $474.6 million of long-term debt, net of retirements, in the 2001 period compared with $342.4 million in the 2000 period.

In June 2001 Con Edison of New York issued $400 million of 7.5 percent 40-year debentures. In addition Con Edison of New York issued $224.6 million of variable rate 35-year tax-exempt debt (with an initial weekly rate of 2.25 percent) through the New York State Energy Research and Development Authority (NYSERDA), the proceeds of which (along with other funds of the company) were used in July 2001 to redeem, in advance of maturity, $228.2 million of tax-exempt debt with a weighted average interest rate of 7.2 percent.

Capital Resources

Con Edison's ratio of earnings to fixed charges (for the 12 months ended on the date indicated) and common equity ratio (as of the date indicated) were:

		June 30, 2001		December 31, 2000
Earnings to fixed charges (SEC basis)		3.17		3.10
Common equity ratio*		48.9		49.1

*: Common shareholders' equity as a percentage of total capitalization

Con Edison's ratio of earnings to fixed charges increased for the 12-month period ending June 30, 2001 compared to the 12-month period ending December 31, 2000 as a result of increased earnings, offset in part by increased interest expense. Excluding non-recurring charges relating to Con Edison of New

York's Indian Point 2 nuclear plant (see Note C to the Con Edison financial statements included in Part I, Item 1 of this report and Note G to the Con Edison financial statements included in Item 8 of the Form 10-K) and the $33.6 million charge for merger-related expenses (see Note P to the Con Edison financial statements included in Item 8 of the Form 10-K), Con Edison's ratio of earnings to fixed charges would have been 3.46 and 3.47 for the 12-month periods ended June 30, 2001 and December 31, 2000, respectively.

FERC RTO Order

In July 2001, the Federal Energy Regulatory Commission (FERC) concluded that the three independent system operators in the Northeastern United States, including the New York State Independent System Operator (NYISO), should combine to form one regional transmission organization (RTO) and initiated a mediation process with respect to issues associated with its formation. The company is participating in the mediation process. The terms and conditions pursuant to which an RTO for the Northeastern United States would be formed and operate have not been determined. FERC has, however, indicated that an RTO should have certain characteristics, including independence from market participants and operational authority for all transmission assets under its control, and perform certain functions, including tariff administration and design, congestion management, market monitoring, planning and expansion and interregional coordination. Con Edison of New York's transmission facilities, other than those located underground, and O&R's transmission facilities are controlled and operated by the NYISO. For a description of the transmission facilities, see Item 2 of the Form 10-K. The company is unable to predict the effect on its results of operations or financial condition which the formation of an RTO for the Northeastern United States or any related proceedings would have.

Market Risks

Reference is made to "Financial Market Risks" in the Con Edison Management's Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of the Form 10-K and to Note E to the Con Edison financial statements included in Part I, Item 1 of this report. At June 30, 2001 neither the fair value of derivatives outstanding nor potential derivative losses from reasonably possible near-term changes in market prices were material to the financial position, results of operations or liquidity of the company.

Environmental Matters

For information concerning potential liabilities of the company arising from laws and regulations protecting the environment, including the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund), see the notes to Con Edison's financial statements included in Part I, Item 1 of this report and also see Part II, Item 3 of this report.

Results of Operations

Second Quarter of 2001 Compared with Second Quarter of 2000

Con Edison's net income for common stock for the second quarter of 2001 was $100.7 million or $.48 a share (based upon an average of 212.1 million common shares outstanding) compared with $68.7 million or $.33 a share (based upon an average of 212.0 million common shares outstanding) for the second quarter of 2000. The increase in the company's net income reflects higher sales volumes and increased pension credits, partially offset by electric rate reductions in the 2001 period, as well as non-recurring

charges relating to Con Edison of New York's nuclear replacement power costs in the 2000 period (see Note C to the Con Edison financial statements included in Part I, Item 1 of this report and Note G to the Con Edison financial statements included in Item 8 of the Form 10-K).

Earnings for the quarters ended June 30, 2001 and 2000 were as follows:

(Millions of dollars)		2001			2000
Con Edison of New York		$	102.9		$	71.1
O&R			3.7			5.3
Unregulated subsidiaries			(2.1	)		(4.0	)
Other*			(3.8	)		(3.7	)

	Con Edison	$	100.7		$	68.7

* Includes parent company expenses, goodwill amortization and inter-company eliminations.

A comparison of the results of operations of Con Edison for the second quarter of 2001 with the results for the second quarter of 2000 follows.

Three Months Ended June 30, 2001 Compared With Three Months Ended June 30, 2000

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	70.3		3.4	%
Purchased power - electric and steam		5.3		0.7
Fuel - electric and steam		3.3		7.7
Gas purchased for resale		13.4		8.2
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		48.3		4.6
Other operations and maintenance		(22.3	)	(5.3	)
Depreciation and amortization		(8.8	)	(6.0	)
Taxes, other than income tax		(18.7	)	(6.8	)
Income tax		53.6		(A	)
Operating income		44.5		26.0
Other income less deductions and related federal income tax		(5.5	)	(A	)
Net interest charges		7.0		7.1
Net income for common stock	$	32.0		46.4	%

(A) Amounts in excess of 100 percent

A discussion of Con Edison's operating revenues and operating income by business segment follows. Con Edison's principal business segments are its regulated electric, gas and steam utility businesses. For additional information about the segments, see Note F to the Con Edison financial statements included in Part I, Item 1 of this report.

Electric

Con Edison's electric operating revenues in the second quarter of 2001 increased $0.7 million compared with the second quarter of 2000, reflecting higher sales and regulatory incentive earnings, partially offset by lower recoverable purchased power costs and rate reductions of approximately $85 million in the 2001 period, and the accrual of a $30 million liability relating to nuclear replacement power costs in the 2000 period. See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Electricity sales volumes for Con Edison's utility subsidiaries increased 2.8 percent in the second quarter of 2001 compared with the second quarter of 2000. The increase in sales volumes reflects the continued

strength of the economy in the service territory. Con Edison of New York and O&R electric sales volumes for these periods are shown at the bottom of their consolidated income statements included in Part I, Item 1 of this report. After adjusting for variations, principally weather and billing days, in each period, electricity sales volumes for Con Edison of New York and O&R increased 2.9 percent and 7.7 percent, respectively, in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Purchased power costs increased $4.4 million in the second quarter of 2001 compared with the second quarter of 2000, due to an increase in the price of purchased power, offset in part by decreased purchased volumes resulting from the availability of Indian Point 2 in the 2001 period. Fuel costs decreased $10.9 million as a result of a decrease in the unit cost of fuel, offset in part by increased generation. In general, Con Edison's utility subsidiaries recover prudently incurred purchased power costs pursuant to rate provisions approved by the relevant state public utility commission. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Con Edison's electric operating income increased $32.8 million for the second quarter of 2001 compared with the second quarter of 2000. The principal components of this increase were an increase in net revenues (operating revenues less fuel and purchased power costs) of $41.1 million and decreased other operations and maintenance expenses ($20.4 million), offset in part by increased property taxes ($11.0 million) and Federal income tax ($14.7 million). Other operations and maintenance expenses in the 2001 period reflect increased pension credits ($24.1 million) and lower expenses relating to the Indian Point 2 plant ($20.8 million), offset in part by higher injuries and damages expenses ($14.1 million).

Gas

Con Edison's gas operating revenues increased $58.4 million and gas operating income increased $1.1 million in the second quarter of 2001 compared with the second quarter of 2000. The higher revenues reflect an increased cost of purchased gas, offset in part by the accrual of a liability for $10.0 million of Con Edison of New York gas earnings in excess of a stipulated equity return level to be shared with customers pursuant to the company's current gas rate agreement. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K. The increase in operating income of $1.1 million reflects primarily an increase in net revenues (operating revenues less gas purchased for resale) of $5.3 million, increased pension credits ($4.5 million) and decreased Federal income tax ($4.9 million), offset in part by increased state income tax and gross receipts taxes billed to customers ($13.6 million).

Firm gas sales and transportation volumes for Con Edison's utility subsidiaries increased 3.2 percent in the second quarter of 2001 compared with the second quarter of 2000. Con Edison of New York and O&R gas sales and transportation volumes for these periods are shown at the bottom of their consolidated income statements included in Part I, Item 1 of this report. After adjusting for variations, principally weather and billing days, in each period, firm gas sales and transportation volumes in the 2001 period increased 3.7 percent for Con Edison of New York and decreased 5.6 percent for O&R. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

A weather-normalization provision that applies to the gas business of Con Edison's utility subsidiaries operating in New York moderates, but does not eliminate, the effect of weather-related changes on gas operating income.

Steam

Con Edison of New York's steam operating revenues increased $15.1 million and steam operating income decreased $1.4 million for the second quarter of 2001 compared with the second quarter of 2000. The higher revenues reflect an October 2000 rate increase, increased sales volumes and increased fuel and purchased power costs. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K. The decrease in operating income of $1.4 million reflects primarily higher operations expenses ($2.9 million), offset in part by increased pension credits ($1.8 million).

Steam sales volume (see bottom of the Con Edison of New York consolidated income statement included in Part I, Item 1 of this report) increased 0.9 percent in the 2001 period compared with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, steam sales volume decreased 3.7 percent.

Other Income

Other income decreased $5.5 million in the 2001 period compared with the 2000 period, due primarily to $8.9 million of unrealized mark-to-market losses in the 2001 period relating to an unregulated subsidiary's commodity hedges entered into in connection with transactions for the sale of electricity and gas. In accordance with Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), the company has recognized in income a portion of the unrealized mark-to-market change in the value of these hedging instruments. The company expects that gains or losses on these instruments will be offset, at least in part, by the value of the related sales transactions. See Note E to the Con Edison financial statements included in Part I, Item 1 of this report.

Net Interest Charges

Net interest charges increased $7.0 million in the 2001 period compared with the 2000 period, reflecting $10.7 million of interest on increased long-term debt balances, offset in part by a $1.0 million decrease in interest related to short-term borrowings and a $4.0 million charge in 2000 for interest accrued on a deferred gain on generation divestiture.

Six Months Ended June 30, 2001 Compared with Six Months Ended June 30, 2000

Con Edison's net income for common stock for the six months ended June 30, 2001 was $279.8 million or $1.32 a share (based upon an average of 212.1 million common shares outstanding) compared with $256.9 million or $1.21 a share (based upon an average of 212.4 million common shares outstanding) for the six months ended June 30, 2000. The increase in the company's net income reflects higher sales volumes and increased pension credits, partially offset by electric rate reductions in the 2001 period, as well as non-recurring charges relating to Con Edison of New York's nuclear replacement power costs in the 2000 period (see Note C to the Con Edison financial statements included in Part I, Item 1 of this report and Note G to the Con Edison financial statements included in Item 8 of the Form 10-K).

Earnings for the six months ended June 30, 2001 and 2000 were as follows:

(Millions of dollars)		2001			2000
Con Edison of New York		$	274.7		$	249.4
O&R			16.9			16.0
Unregulated subsidiaries			(2.4	)		(1.7	)
Other*			(9.4	)		(6.8	)

	Con Edison	$	279.8		$	256.9

* Includes parent company expenses, goodwill amortization and inter-company eliminations.

A comparison of the results of operations of Con Edison for the six months ended June 30, 2001 with the results for the six months ended June 30, 2000 follows.

Six Months Ended June 30, 2001 Compared With Six Months Ended June 30, 2000

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	638.0		14.6	%
Purchased power - electric and steam		291.0		19.1
Fuel - electric and steam		88.4		69.1
Gas purchased for resale		210.6		48.9
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		48.0		2.1
Other operations and maintenance		(51.2	)	(6.1	)
Depreciation and amortization		(16.5	)	(5.7	)
Taxes, other than income tax		0.1		—
Income tax		67.3		49.3
Operating income		48.3		10.6
Other income less deductions and related federal income tax		(3.7	)	(A	)
Net interest charges		21.7		11.2
Net income for common stock	$	22.9		8.9	%

(A) Amounts in excess of 100 percent

Electric

Con Edison's electric operating revenues in the six months ended June 30, 2001 increased $195.8 million compared with the six months ended June 30, 2000. The increase reflects increased recoverable purchased power costs and higher sales, partially offset by rate reductions of approximately $131.1 million in 2001, and the accrual of a $30 million liability relating to nuclear replacement power costs in the 2000 period. See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Electricity sales volumes for Con Edison's utility subsidiaries increased 3.0 percent in the six months ended June 30, 2001 compared with the six months ended June 30, 2000. The increase in sales volumes reflects the continued strength of the economy in the service territory. Con Edison of New York and O&R electric sales volumes for these periods are shown at the bottom of their consolidated income statements included in Part I, Item 1 of this report. After adjusting for variations, principally weather and billing days, in each period, electricity sales volumes for Con Edison of New York and O&R increased

2.8 percent and 4.6 percent, respectively, in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Purchased power costs increased $270.3 million in the six months ended June 30, 2001 compared with the six months ended June 30, 2000, due to an increase in the price of purchased power, offset in part by decreased purchased volumes resulting from the availability of Indian Point 2 in the 2001 period. Fuel costs increased $29.4 million as a result of increased generation, offset in part by a decrease in the unit cost of fuel. In general, Con Edison's utility subsidiaries recover prudently incurred purchased power costs pursuant to rate provisions approved by the relevant state public utility commission. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Con Edison's electric operating income increased $28.5 million for the six months ended June 30, 2001 compared with the six months ended June 30, 2000. The principal components of this increase were an increase in net revenues (operating revenues less fuel and purchased power costs) of $36.8 million and decreased other operations expenses ($51.9 million), offset in part by increased maintenance expenses ($6.3 million), property tax expense ($24.9 million) and state income tax and gross receipts taxes billed to customers ($14.1 million). Other operations and maintenance expenses in the 2001 period reflect increased pension credits ($48.9 million) and lower expenses relating to Indian Point 2 ($28.5 million), offset in part by increased transmission and distribution expenses resulting from the 2000-2001 winter weather conditions, relocation of company facilities to avoid interference with municipal infrastructure projects and preparations for summer 2001 ($12.0 million).

Gas

Con Edison's gas operating revenues increased $290.7 million and gas operating income decreased $1.5 million in the six months ended June 30, 2001 compared with the six months ended June 30, 2000. The higher revenues reflect an increased cost of purchased gas, offset in part by a reduction in customer bills of $18.3 million, reflecting a refund of previously deferred credits and other provisions of the Con Edison of New York gas rate agreement approved by the PSC in November 2000, and the accrual of a liability for $10.0 million of Con Edison of New York gas earnings in excess of a stipulated equity return level to be shared with customers pursuant to the company's current gas rate agreement. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K. The decrease in operating income of $1.5 million reflects primarily increased state income tax and gross receipts taxes billed to customers ($21.2 million) and increased transmission and distribution expenses ($0.7 million), offset in part by increased net revenues (operating revenues less gas purchased for resale) of $5.3 million, increased pension credits ($9.1 million) and lower property taxes ($4.5 million).

Firm gas sales and transportation volumes for Con Edison's utility subsidiaries increased 5.5 percent in the six months ended June 30, 2001 compared with the six months ended June 30, 2000. Con Edison of New York and O&R gas sales and transportation volumes for these periods are shown at the bottom of their consolidated income statements included in Part I, Item 1 of this report. After adjusting for variations, principally weather and billing days, in each period, firm gas sales and transportation volumes in the 2001 period increased 3.0 percent for Con Edison of New York and decreased 9.0 percent for

O&R. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Steam

Con Edison of New York's steam operating revenues increased $103.1 million and steam operating income increased $8.1 million for the six months ended June 30, 2001 compared with the six months ended June 30, 2000, reflecting an October 2000 rate increase and increased sales volumes. The higher revenues also reflect increased fuel and purchased power costs. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K.

Steam sales volume (see bottom of the Con Edison of New York consolidated income statement included in Part I, Item 1 of this report) increased 2.0 percent in the 2001 period compared with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, steam sales volume decreased 1.9 percent.

Other Income

Other income decreased $4.7 million in the 2001 period compared with the 2000 period, reflecting the recognition in the 2001 period of approximately $4.0 million of deferred federal income tax credits relating to the Roseton generating plant sale and a $4.1 million decrease in investment income (due primarily to lower short-term investment balances in the 2001 period and a $2.3 million gain relating to O&R's supplemental employee retirement plan that was recognized in the 2000 period). In addition, other income less miscellaneous deductions decreased $7.6 million as a result of $9.3 million of unrealized mark-to-market losses in the 2001 period relating to an unregulated subsidiary's commodity hedges entered into in connection with transactions for the sale of electricity and gas. In accordance with SFAS 133, the company has recognized in income a portion of the unrealized mark-to-market change in the value of these hedging instruments. The company expects that gains or losses on these instruments will be offset, at least in part, by the value of the related sales transactions. See Note E to the Con Edison financial statements included in Part I, Item 1 of this report.

Net Interest Charges

Net interest charges increased $21.6 million in the 2001 period compared with the 2000 period, reflecting $26.6 million of interest on increased long-term debt balances, offset in part by a $3.4 million decrease in interest related to short-term borrowings and a $4.0 million charge in 2000 for interest accrued on a deferred gain on generation divestiture.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CON EDISON OF NEW YORK

Consolidated Edison Company of New York, Inc. (Con Edison of New York) is a regulated utility that provides electric service to over three million customers and gas service to over one million customers in New York City and Westchester County. It also provides steam service in parts of Manhattan. All of the common stock of Con Edison of New York is owned by Consolidated Edison, Inc. (Con Edison).

This discussion and analysis should be read in conjunction with Con Edison of New York's Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of the combined Con Edison, Con Edison of New York and Orange and Rockland Utilities, Inc. (O&R) Annual Reports on Form 10-K for the year ended December 31, 2000 (File Nos. 1-14514, 1-1217 and 1-4315, the Form 10-K) and Con Edison of New York's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of the combined Con Edison, Con Edison of New York and O&R Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 2001. Reference is also made to the notes to the financial statements in Part I, Item 1 of this report, which notes are incorporated herein by reference.

Liquidity and Capital Resources

Cash and temporary cash investments and outstanding commercial paper (shown as notes payable on the balance sheet) at June 30, 2001 and December 31, 2000 were (amounts shown in millions):

			June 30, 2001			December 31, 2000
	Cash and temporary cash investments		$	37.9		$	70.3
	Commercial paper		$	103.2		$	140.0

Cash Flows from Operating Activities

Net cash flows from operating activities during the first six months of 2001 decreased $161.4 million compared with the first six months of 2000, reflecting principally decreased accounts payable and increased other regulatory assets and accrued pension credits, offset in part by decreased accounts receivable and recoverable energy costs.

Con Edison of New York's customer accounts receivable, less allowance for uncollectible accounts, was $131.3 million lower at June 30, 2001 than at year-end 2000, due primarily to lower customer billings, reflecting reduced energy sales volume in June 2001 as compared to December 2000 and lower energy costs, offset in part by the timing of customer payments. The company's equivalent number of days of revenue outstanding (ENDRO) of customer accounts receivable was 30.6 days at June 30, 2001 compared with 29.7 days at December 31, 2000. The change in ENDRO reflects increased use by customers of level billing and alternative payment arrangements and the timing of customer payments.

Prepayments include cumulative credits to pension expense amounting to $528.0 million at June 30, 2001 compared with $366.7 million at December 31, 2000. Pension credits, which result primarily from favorable performance by the company's pension fund in past years, increase net income but do not provide cash for the company's operations. See Note D to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Deferred recoverable energy costs decreased $81.7 million at June 30, 2001 compared with December 31, 2000, due primarily to the recovery of previously deferred amounts, offset in part by the deferral for future recovery of additional purchased power and gas costs. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Other regulatory assets increased $69.7 million at June 30, 2001 compared with year-end 2000, in part reflecting unrealized mark-to-market losses on transactions entered into to hedge purchases of electricity and gas against adverse market price fluctuations. The company refunds to or collects from its customers its hedging gains or losses, as the case may be, pursuant to rate provisions that permit recovery of the cost of purchased power and gas. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K and "Energy Price Hedging" in Note D to the Con Edison of New York financial statements included in Part I, Item 1 of this report.

Unfunded pension and other post-employment benefit (OPEB) obligations (shown as pension and benefit reserve on the balance sheet) increased $20.0 million at June 30, 2001 compared with year-end 2000. The company's policy is to fund its pension and OPEB costs to the extent deductible under current tax regulations. The reserve also includes a minimum liability for the company's supplemental executive retirement program, a portion of which liability has been included in other comprehensive income. See Note E to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

The accumulated provision for injuries and damages increased $7.9 million at June 30, 2001 compared with year-end 2000, due primarily to increased workers' compensation claims.

Accounts payable decreased $200.3 million at June 30, 2001 compared with year-end 2000, due primarily to lower energy purchases in June 2001 as compared to December 2000, offset in part by the accrual of a liability for unrealized losses on energy price hedging transactions for which, as discussed above, an other regulatory asset was established.

Other regulatory liabilities increased $45.6 million at June 30, 2001 compared with year-end 2000, reflecting the deferral pending future disposition by the New York State Public Service Commission (PSC) of a $27.9 million refund from the New York Independent System Operator resulting from a reconciliation of prior period payments for purchased power, and $10.0 million of gas earnings to be shared with customers pursuant to the company's current gas rate agreement. See "Rate and Restructuring Agreements" in Note A to the Con Edison of New York financial statements in Item 8 of the Form 10-K.

Cash Flows Used in Investing and Financing Activities

Cash flows used in investing activities during the first six months of 2001 decreased $63.8 million compared with the first six months of 2000, reflecting the completion of the sale of the company's 480

MW interest in the Roseton generating station in January 2001 (proceeds of $100.0 million, net of federal income tax) and decreased nuclear fuel expenditures ($17.9 million), offset in part by increased construction expenditures ($54.7 million). Nuclear fuel expenditures decreased because refueling was conducted in the 2000 period but not in the 2001 period. Construction expenditures increased principally to meet load growth on the company's electric distribution system.

Cash flows used in financing activities during the first six months of 2001 decreased $413.0 million compared with the first six months of 2000, primarily because the company increased short-term debt in December 1999 in anticipation of its January 2000 cash requirements but financed its January 2001 cash requirements in January 2001. In addition, the company issued $474.6 million of long-term debt, net of retirements, in the 2001 period compared with $200 million in the 2000 period.

In June 2001 the company issued $400 million of 7.5 percent 40-year debentures. In addition the company issued $224.6 million of variable rate 35-year tax-exempt debt (with an initial weekly rate of 2.25 percent) through the New York State Energy Research and Development Authority (NYSERDA), the proceeds of which (along with other funds of the company) were used in July 2001 to redeem, in advance of maturity, $228.2 million of tax-exempt debt with a weighted average interest rate of 7.2 percent.

Capital Resources

Con Edison of New York's ratio of earnings to fixed charges (for the 12 months ended on the date indicated) and common equity ratio (as of the date indicated) were:

			June 30, 2001		December 31, 2000
	Earnings to fixed charges (SEC basis)		3.37		3.23
	Common equity ratio*		46.2		46.4

* Common shareholder's equity as a percentage of total capitalization

Con Edison of New York's ratio of earnings to fixed charges increased for the 12-month period ending June 30, 2001 compared to the 12-month period ending December 31, 2000 as a result of increased earnings, offset in part by increased interest expense. Excluding non-recurring charges relating to the company's Indian Point 2 nuclear plant (see Note C to the Con Edison of New York financial statements included in Part I, Item 1 of this report and Note G to the Con Edison of New York financial statements included in Item 8 of the Form 10-K), Con Edison of New York's ratio of earnings to fixed charges would have been 3.62 and 3.56 for the 12-month periods ended June 30, 2001 and December 31, 2000, respectively.

FERC RTO Order

that an RTO should have certain characteristics, including independence from market participants and operational authority for all transmission assets under its control, and perform certain functions, including tariff administration and design, congestion management, market monitoring, planning and expansion and interregional coordination. Con Edison of New York's transmission facilities, other than those located underground, are controlled and operated by the NYISO. For a description of the transmission facilities, see Item 2 of the Form 10-K. The company is unable to predict the effect on its results of operations or financial condition which the formation of an RTO for the Northeastern United States or any related proceedings would have.

Market Risks

Reference is made to "Financial Market Risks" in Con Edison of New York Management's Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of the Form 10-K and to Note D to the Con Edison of New York financial statements included in Part I, Item 1 of this report. At June 30, 2001 neither the fair value of derivatives outstanding nor potential derivative losses from reasonably possible near-term changes in market prices were material to the financial position, results of operations or liquidity of the company.

Environmental Matters

For information concerning potential liabilities of Con Edison of New York arising from laws and regulations protecting the environment, including the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund), see the notes to the Con Edison of New York financial statements included in Part I, Item 1 of this report and also see Part II, Item 3 of this report.

Results of Operations

Second Quarter of 2001 Compared with Second Quarter of 2000

Con Edison of New York's net income for common stock for the second quarter of 2001 was $102.9 million compared with $71.1 million for the second quarter of 2000. The increase in the company's net income reflects higher sales volumes and increased pension credits, partially offset by electric rate reductions in the 2001 period, as well as non-recurring charges relating to nuclear replacement power costs in the 2000 period (see Note C to the Con Edison of New York financial statements included in Part I, Item 1 of this report and Note G to the Con Edison of New York financial statements included in Item 8 of the Form 10-K).

A comparison of the results of operations of Con Edison of New York for the second quarter of 2001 with the results for the second quarter of 2000 follows.

Three Months Ended June 30, 2001 Compared With Three Months Ended June 30, 2000

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	33.9		2.0	%
Purchased power - electric and steam		(45.2	)	(7.1	)
Fuel - electric and steam		3.3		7.7
Gas purchased for resale		42.8		47.3
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		33.0		3.5
Other operations and maintenance		(21.9	)	(6.1	)
Depreciation and amortization		(11.4	)	(8.6	)
Taxes, other than income tax		(18.4	)	(7.1	)
Income tax		51.5		(A	)
Operating income		33.2		20.0
Other income less deductions and related federal income tax		1.6		(A	)
Net interest charges		3.0		3.3
Net income for common stock	$	31.8		44.7	%

(A): Amounts in excess of 100 percent

A discussion of Con Edison of New York's operating revenues and operating income by business segment follows. Con Edison of New York's principal business segments are its regulated electric, gas and steam utility businesses. For additional information about the segments, see Note E to the Con Edison of New York financial statements included in Part I, Item 1 of this report.

Electric

Con Edison of New York's electric operating revenues in the second quarter of 2001 decreased $33.1 million compared with the second quarter of 2000. The decrease reflects rate reductions of approximately $84.3 million and lower recoverable purchased power costs, partially offset by higher sales volume in the 2001 period, and the accrual of a $30 million liability relating to nuclear replacement power costs in the 2000 period. See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric sales, excluding off-system sales, for the second quarter of 2001 compared with the second quarter of 2000 were:

	Millions of Kwhrs.
Description	Three Months Ended June 30, 2001	Three Months Ended June 30, 2000	Variation		Percent Variation
Residential/Religious	2,596	2,610	(14	)	(0.5	)%
Commercial/Industrial	4,670	4,688	(18	)	(0.4	)
Other	53	104	(51	)	(49.0	)

TOTAL FULL SERVICE CUSTOMERS	7,319	7,402	(83	)	(1.1	)
Retail Choice Customers	2,401	2,121	280		13.2

SUB-TOTAL	9,720	9,523	197		2.1
NYPA, Municipal Agency and Other Sales	2,433	2,337	96		4.1

TOTAL SERVICE AREA	12,153	11,860	293		2.5	%

Electricity sales volume in Con Edison of New York's service territory increased 2.5 percent in the second quarter of 2001 compared with the second quarter of 2000. The increase in sales volume reflects the continued strength of the New York City economy. After adjusting for variations, principally weather and billing days, in each period, electricity sales volume in the service territory increased 2.9 percent in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Con Edison of New York's purchased power costs decreased $46.1 million in the second quarter of 2001 compared with the second quarter of 2000, due to a decrease in the price of purchased power and decreased purchased volumes resulting from the availability of Indian Point 2 in the 2001 period. Fuel costs decreased $10.9 million as a result of a decrease in the unit cost of fuel, offset in part by increased generation. In general, Con Edison of New York recovers prudently incurred purchased power costs pursuant to rate provisions approved by the PSC. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric operating income increased $33.3 million in the second quarter of 2001 compared with the second quarter of 2000. The principal components of the increase were an increase in net revenues (operating revenues less fuel and purchased power costs) of $23.9 million and decreased other operations and maintenance expenses ($23.8 million), offset in part by higher Federal income tax ($9.8 million). Other operations and maintenance expenses in the 2001 period reflect increased pension credits ($24.1 million) and lower expenses relating to the Indian Point 2 plant ($20.8 million), offset in part by higher injuries and damages expenses ($13.9 million).

Gas

Con Edison of New York's gas operating revenues increased $51.9 million and gas operating income increased $1.2 million in the second quarter of 2001 compared with the second quarter of 2000. The higher revenues reflect an increased cost of purchased gas, offset in part by the accrual of a liability for $10.0 million of gas earnings in excess of a stipulated equity return level to be shared with customers pursuant to the company's current gas rate agreement. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K. The increase in operating income of $1.2 million reflects primarily an increase in net revenues (operating revenues less gas purchased for resale) of $9.2 million, increased pension credits ($4.5 million) and decreased Federal income tax ($1.5 million), offset in part by increased injuries and damages expenses ($2.5 million) and state income tax and gross receipts taxes billed to customers ($11.4 million).

Con Edison of New York's gas sales and transportation volumes for firm customers (see bottom of the company's consolidated income statement included in Part I, Item 1 of this report) increased 5.5 percent in the second quarter of 2001 compared with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, firm gas sales and transportation volumes in the company's service territory increased 3.7 percent in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

A weather-normalization provision that applies to Con Edison of New York's gas business moderates, but does not eliminate, the effect of weather-related changes on gas operating income.

Steam

Con Edison of New York's steam sales volume (see bottom of the company's consolidated income statement included in Part I, Item 1 of this report) increased 0.9 percent in the 2001 period compared with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, steam sales volume decreased 3.7 percent.

Net Interest Charges

Net interest charges increased $3.0 million in the second quarter of 2001 compared to the 2000 period, reflecting principally $7.7 million of interest on increased long-term debt balances, offset in part by a $0.9 million decrease in interest related to short-term borrowings and a $4.0 million charge in 2000 for interest accrued on a deferred gain on generation divestiture.

Six Months Ended June 30, 2001 Compared with Six Months Ended June 30, 2000

Con Edison of New York's net income for common stock for the six months ended June 30, 2001 was $274.7 million compared with $249.4 million for the six months ended June 30, 2000. The increase in the company's net income reflects higher sales volumes and increased pension credits, partially offset by electric rate reductions in the 2001 period, as well as non-recurring charges for nuclear replacement power costs in the 2000 period (see Note C to the Con Edison of New York financial statements included in Part I, Item 1 of this report and Note G to the Con Edison of New York financial statements included in Item 8 of the Form 10-K).

A comparison of the results of operations of Con Edison of New York for the six months ended June 30, 2001 with the results for the six months ended June 30, 2000 follows.

Six Months Ended June 30, 2001 Compared With Six Months Ended June 30, 2000

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	485.7		13.1	%
Purchased power - electric and steam		118.5		9.4
Fuel - electric and steam		88.4		69.1
Gas purchased for resale		248.3		99.3
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		30.5		1.5
Other operations and maintenance		(43.2	)	(6.0	)
Depreciation and amortization		(22.9	)	(8.7	)
Taxes, other than income tax		(0.5	)	(0.1	)
Income tax		64.8		50.6
Operating income		32.3		7.4
Other income less deductions and related federal income tax		5.7		(A	)
Net interest charges		12.7		7.1
Net income for common stock	$	25.3		10.1	%

(A): Amounts in excess of 100 percent

Electric

Con Edison of New York's electric operating revenues in the six months ended June 30, 2001 increased $126.9 million compared with the six months ended June 30, 2000. The increase reflects increased recoverable purchased power costs and higher sales, partially offset by rate reductions of approximately $129.8 million in 2001, and the accrual of a $30 million liability relating to nuclear replacement power costs in the 2000 period. See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric sales, excluding off-system sales, for the six months ended June 30, 2001 compared with the six months ended June 30, 2000 were:

	Millions of Kwhrs.
Description	Six Months Ended June 30, 2001	Six Months Ended June 30, 2000	Variation		Percent Variation
Residential/Religious	5,446	5,407	39		0.7	%
Commercial/Industrial	9,528	9,371	157		1.7
Other	93	240	(147	)	(61.3	)

TOTAL FULL SERVICE CUSTOMERS	15,067	15,018	49		0.3
Retail Choice Customers	4,841	4,376	465		10.6

SUB-TOTAL	19,908	19,394	514		2.7
NYPA, Municipal Agency and Other Sales	4,990	4,812	178		3.7

TOTAL SERVICE AREA	24,898	24,206	692		2.9	%

Electricity sales volume in Con Edison of New York's service territory increased 2.9 percent in the six months ended June 30, 2001 compared with the six months ended June 30, 2000. The increase in sales volume reflects the continued strength of the New York City economy. After adjusting for variations, principally weather and billing days, in each period, electricity sales volume in the service territory increased 2.8 percent in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Con Edison of New York's purchased power costs increased $97.9 million in the six months ended June 30, 2001 compared with the six months ended June 30, 2000, due primarily to an increase in the price of purchased power, offset in part by decreased purchased volumes resulting from the availability of Indian Point 2 in the 2001 period. Fuel costs increased $29.5 million as a result of increased generation, offset in part by a decrease in the unit cost of fuel. In general, Con Edison of New York recovers prudently incurred purchased power costs pursuant to rate provisions approved by the PSC. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric operating income increased $26.8 million in the six months ended June 30, 2001 compared with the six months ended June 30, 2000. The principal components of the increase were decreased other operations expenses ($51.8 million), offset in part by increased maintenance expenses ($5.9 million) and higher property taxes ($25.2 million). Other operations and maintenance expenses in the 2001 period reflect increased pension credits ($48.9 million) and lower expenses relating to Indian Point 2 ($28.5 million), offset in part by increased transmission and distribution expenses resulting from the 2000-2001 winter weather conditions, relocation of company facilities to avoid interference with municipal infrastructure projects and preparations for summer 2001 ($12.0 million) and increased advertising expenses ($8.2 million).

Gas

Con Edison of New York's gas operating revenues increased $255.7 million and gas operating income decreased $2.6 million in the six months ended June 30, 2001 compared with the six months ended June 30, 2000. The higher revenues reflect an increased cost of purchased gas, offset in part by a reduction in customer bills of $18.3 million, reflecting a refund of previously deferred credits and other provisions of the gas rate agreement approved by the PSC in November 2000, and the accrual of a liability for $10.0 million of gas earnings in excess of a stipulated equity return level to be shared with customers pursuant to the company's current rate agreement. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K. The decrease in operating income of $2.6 million reflects primarily increased state income tax and gross receipts taxes billed to customers ($19.6 million), offset in part by an increase in net revenues (operating revenues less gas purchased for resale) of $7.6 million and increased pension credits ($9.1 million).

principally weather and billing days, in each period, firm gas sales and transportation volumes in the company's service territory increased 3.0 percent in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

A weather-normalization provision that applies to Con Edison of New York's gas business moderates, but does not eliminate, the effect of weather-related changes on gas operating income.

Steam

Con Edison of New York's steam sales volume (see bottom of the company's consolidated income statement included in Part I, Item 1 of this report) increased 2.0 percent in the 2001 period compared with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, steam sales volume decreased 1.9 percent.

Net Interest Charges

Net interest charges increased $12.7 million in the six months ended June 30, 2001 compared to the 2000 period, reflecting principally $20.6 million of interest on increased long-term debt balances, offset by a $3.9 million decrease in interest related to short-term borrowings and a $4.0 million charge in 2000 for interest accrued on a deferred gain on generation divestiture.

O&R MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

Orange and Rockland Utilities, Inc. (O&R), a wholly-owned subsidiary of Consolidated Edison, Inc. (Con Edison), meets the conditions specified in General Instruction H to Form 10-Q and is permitted to use the reduced disclosure format for wholly-owned subsidiaries of companies, such as Con Edison, that are reporting companies under the Securities Exchange Act of 1934. Accordingly, this O&R Management's Narrative Analysis of the Results of Operations is included in this report, and O&R has omitted from this report the information called for by Part I, Item 2 (Management's Discussion and Analysis of Financial Condition and Results of Operations).

O&R's net income for common stock for the six-month period ended June 30, 2001 was $16.9 million, $0.9 million higher than the corresponding 2000 period. This increase was due primarily to a 4.6 percent increase in the volume of electric sales and the recognition in income in the 2001 period of $4.5 million of previously deferred credits pursuant to its New York gas rate agreement, offset in part by $1.3 million of electric rate reductions in the 2001 period pursuant to its New Jersey utility subsidiary's electric restructuring plan and $0.2 million of purchased power costs of its Pennsylvania subsidiary that are not recoverable from customers. See "Rate Regulation" in Note A to the O&R financial statements in Item 8 of the combined O&R, Con Edison and Consolidated Edison Company of New York, Inc. Annual Reports on Form 10-K for the year ended December 31, 2000 (File Nos. 1-4315, 1-14514 and 1-1217, the Form 10-K).

A comparison of the results of operations of O&R for the six months ended June 30, 2001 to the six months ended June 30, 2000, follows.

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	75.2		23.1	%
Purchased power - electric		31.6		29.0
Gas purchased for resale		34.3		51.0
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		9.3		6.2
Other operation and maintenance expenses		1.4		2.0
Depreciation and amortization		1.6		10.9
Taxes, other than income tax		(2.2	)	(7.2	)
Income tax		5.8		70.0
Operating income		2.7		10.5
Other income less deductions and related income tax		(2.1	)	(74.7	)
Net interest charges		0.3		2.6
Net income for common stock	$	0.9		5.5	%

A discussion of O&R's operating revenues by business segment follows. O&R's principal business segments are its electric and gas utility businesses. For additional information about O&R's business segments, see the notes to the O&R financial statements included in Part I, Item 1 of this report.

Electric operating revenues increased $43.3 million during the six months ended June 30, 2001 compared to the 2000 period. This increase was attributable primarily to an increase in sales volume and the billing to customers of higher purchased power costs in the 2001 period.

Electric sales volumes for the 2001 and 2000 periods are shown at the bottom of O&R's consolidated income statement for those periods included in Part I, Item 1 of this report. Electric sales volumes in the

six months ended June 30, 2001 increased 4.6 percent compared to the 2000 period. After adjusting for variations, principally weather and billing days, electricity sales volumes were 4.5 percent higher in the 2001 period, reflecting the continued strength of the economy in the company's service area. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Purchased power costs increased $31.6 million for the six months ended June 30, 2001 compared to the 2000 period, reflecting to increases in the cost of purchased power and higher customer sales. O&R and its New Jersey utility subsidiary recover all of their prudently incurred purchased power costs in accordance with rate provisions approved by their state public utility commissions. For O&R's New York operations, the difference between the actual purchased power costs for a given month and the amount billed to customers for that month is deferred for recovery from, or refund to, customers during the next billing cycle (normally within one to two months). For O&R's New Jersey utility subsidiary, differences between actual and billed electricity costs (which amounted to a cumulative excess of actual over billed costs of $46.9 million at June 30, 2001) are deferred for future charge or refund to customers, as the case may be. For O&R's Pennsylvania utility subsidiary, recovery of purchased power costs is limited to a predetermined fixed price and, as a result, it incurred $0.5 million of purchased power costs in the 2001 period that are not subject to recovery from customers, an increase of $0.2 million from the 2000 period.

Gas operating revenues increased $32.0 million in the 2001 period, compared to the 2000 period. The increase was due primarily to recovery from customers of higher gas costs in the 2001 period.

Gas sales volumes for the 2001 and 2000 periods are shown at the bottom of O&R's consolidated income statement for those periods included in Part I, Item 1 of this report. Firm gas sales volumes in the six months ended June 30, 2001 decreased 0.8 percent compared to the 2000 period. O&R's revenues from gas sales in New York are subject to a weather normalization clause that moderates, but does not eliminate, the effect of weather-related changes on gas operating income. After adjusting for variations, principally weather and billing days, in each period, gas sales and transportation volumes to firm customers were 8.0 percent lower for the 2001 period, compared to the 2000 period.

The cost of gas purchased for resale increased $34.3 million during the first six months of 2001 compared to the 2000 period, due primarily to higher unit costs.

Taxes other than income tax decreased by $2.2 million during the first six months of 2001 compared to the 2000 period and state income taxes increased by a like amount, reflecting a change in New York law that effectively transferred the tax liability from a revenue based tax to a net income tax.

Income tax increased $5.8 million in the 2001 period compared to the 2000 period due primarily to the change in New York law and to higher income from operations.

Other income decreased $2.1 million during the first six months of 2001 compared to the 2000 period. The 2000 period included a market gain of $2.3 million in relation to O&R's supplemental employee retirement plan. Excluding the impact of the gain, investment income decreased $0.9 million, due primarily to lower short-term investment balances, offset by a decrease in income tax.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Con Edison

For information about Con Edison's primary market risks associated with activities in derivative financial instruments, other financial instruments and derivative commodity instruments, see "Market Risks" in Con Edison's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part 1, Item 2 of this report and Item 7A of the combined Con Edison, Con Edison of New York and O&R Annual Report on Form 10-K for the year ended December 31, 2000 (the Form 10-K), which information is incorporated herein by reference.

Con Edison of New York

For information about Con Edison of New York's primary market risks associated with activities in derivative financial instruments, other financial instruments and derivative commodity instruments, see "Market Risks" in Con Edison of New York's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part 1, Item 2 of this report and Item 7A of the Form 10-K, which information is incorporated herein by reference.

PART II.		OTHER INFORMATION
Item 1.		Legal Proceedings

Con Edison

Northeast Utilities Litigation

For information about legal proceedings relating to Con Edison's October 1999 agreement to acquire Northeast Utilities, see Note D to the Con Edison financial statements included in Part 1, Item 1 of this report (which information is incorporated herein by reference).

Item 4.

Submission of Matters to a Vote of Security Holders

Con Edison

(a): At the Annual Meeting of Stockholders of Con Edison on May 21, 2001, the stockholders of Con Edison voted to elect management's nominees for the Board of Directors, to ratify and approve the appointment of Con Edison's independent accountants, and not to adopt a stockholder proposal. 167,961,576 shares of Common Stock of Con Edison, representing approximately 79.12% of the 212,292,190 shares of Common Stock outstanding and entitled to vote, were present at the meeting in person or by proxy.
(b): The name of each nominee for election as a member of Con Edison's Board of Directors and the number of shares voted for or with respect to which authority to vote for was withheld are as follows:

	Votes for	Votes Withheld
E. Virgil Conway	165,237,796	2,723,780
Peter W. Likins	165,569,501	2,392,075
Eugene R. McGrath	165,526,764	2,434,812
Gordon J. Davis	165,543,833	2,417,743
Ellen V. Futter	165,475,693	2,485,883
Richard A. Voell	165,512,372	2,449,204
Sally Hernandez-Piñero	165,413,578	2,547,998
Stephen R. Volk	164,902,096	3,059,480
Joan S. Freilich	165,558,316	2,403,260
Michael J. Del Giudice	165,539,238	2,422,338
George Campbell, Jr.	165,491,804	2,469,772
George W. Sarney	165,602,539	2,359,037

(c): The results of the vote on the appointment of PricewaterhouseCoopers LLP as independent accountants for Con Edison for 2001 were as follows: 164,988,377 shares were voted for this proposal; 1,395,248 shares were voted against the proposal; and 1,577,951 shares were abstentions.
(d): The following stockholder-proposed resolution was voted upon by the stockholders of Con Edison at the Annual Meeting:

"RESOLVED: That the shareholders recommend that the Board take the necessary step that Con Edison specifically identify by name and corporate title in all future proxy statements those executive officers, not otherwise so identified, who are contractually entitled to receive in excess of $250,000 annually as base salary, together with whatever other additional compensation bonuses and other cash payments were due them."

The results of the vote on this proposal were as follows: 15,384,595 shares were voted for this proposal; 110,517,880 shares were voted against the proposal; 4,760,742 shares were abstentions; and 37,298,359 shares were broker nonvotes.

Con Edison of New York

At the Annual Meeting of Stockholders of Con Edison of New York on May 21, 2001, all 235,488,094 outstanding shares of common stock of Con Edison of New York were voted to elect as members of Con Edison of New York's Board of Trustees management's nominees for the Board of Trustees (George Campbell, Jr., E. Virgil Conway, Gordon J. Davis, Joan S. Freilich, Ellen V. Futter, Sally Hernandez-Pinero, Peter W. Likins, Eugene R. McGrath, George W. Sarney, Richard A. Voell and Stephen R. Volk), and to ratify and approve the appointment of PricewaterhouseCoopers LLP as Con Edison of New York's independent accountants for 2001. All of the common stock of Con Edison of New York is owned by Con Edison.

Item 6.		Exhibits and Reports on Form 8-K
(a) Exhibits

Con Edison

Exhibit 12.1

Statement of computation of Con Edison's ratio of earnings to fixed charges for the twelve-month periods ended June 30, 2001 and 2000.

Con Edison of New York

Exhibit 10.2.1		Participation Agreement, dated as of June 1, 2001, between New York State Energy Research and Development Authority (NYSERDA) and Con Edison of New York.
Exhibit 10.2.2		Indenture of Trust, dated as of July 1, 1999 between NYSERDA and HSBC Bank USA, as trustee.
Exhibit 10.2.3		Supplemental Indenture of Trust, dated as of June 1, 2001, to Indenture of Trust, dated as of July 1, 1999 between NYSERDA and HSBC Bank USA, as trustee.
Exhibit 12.2		Statement of computation of Con Edison of New York's ratio of earnings to fixed charges for the twelve-month periods ended June 30, 2001 and 2000.

O&R

Exhibit 12.3

Statement of computation of O&R's ratio of earnings to fixed charges for the twelve-month periods ended June 30, 2001 and 2000.

(b) Reports on Form 8-K

Con Edison

Con Edison filed no Current Reports on Form 8-K during the quarter ended June 30, 2001.

Con Edison of New York

Con Edison of New York filed a Current Report on Form 8-K, dated June 14, 2001, reporting (under Item 5) the issuance and sale of $400 million aggregate principal amount of its Public Income NotES, 7.50% Debentures, Series 2001 A.

O&R

O&R filed no Current Reports on Form 8-K during the quarter ended June 30, 2001.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Consolidated Edison, Inc.
	Consolidated Edison Company of New York, Inc.
Date: August 13, 2001	By	/s/ JOAN S. FREILICH Joan S. Freilich Executive Vice President, Chief Financial Officer and Duly Authorized Officer
	Orange and Rockland Utilities, Inc.
Date: August 13, 2001	By	/s/ EDWARD J. RASMUSSEN Edward J. Rasmussen Vice President, Chief Financial Officer and Duly Authorized Officer

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Consolidated Edison Co Of New York 10-Q2001 Q2 Quarterly report

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