ML20246E271

Con Edison 1988 Annual Rept

ML20246E271
Person / Time
Site:	Indian Point
Issue date:	12/31/1988
From:	Bram S, Hauspurg A CONSOLIDATED EDISON CO. OF NEW YORK, INC.
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
NUDOCS 8908290055
Download: ML20246E271 (45)

Text

{{#Wiki_filter:y - ~ ~ -, Stephen B. Bram y vee Presid;nt e o Consolidated Edison Cornpeny of New York, Inc. Indian Point Station Broadway & Bleakley Avenue Buchanan, NY 10511 Telephone (914) 737-8116 August 18, 1989 Re: Indian Point Unit Nos. I and 2 Docket Nos. 50-03 and 50-247 Document Control Desk I US Nuclear Regulatory Commission Mail Station P1-137 Washington, DC 20555 In accordance with Section 50.71(b) of the Commission's regulations, Consolidated Edison Company of New York, Inc. submits herewith ten (10) copies of its Annual Report to Stockholders for 1988. Very truly yours, L' 1" / cc: Mr. William Russell Regional Administrator - Region I US Nuclear Regulatory Commission i 475 Allendale Road King of Prussia, PA 19406-1498 Mr. Donald S. Brinkman, Project Manager Project Directorate 1-1 Division of Reactor Projects I/11 US Nuclear Regulatory Commission Mail Stop 14B-2 Washington, DC 20555 Senior Resident Inspector US Nuclear Regulatory Commission PO Box 38 Buchanan, NY 10511 fD / (* 8908290055 881231 PDR ADDCK 05000003 i I PNV (

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An p a f CONTENTS. e '4

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-,..-e. .- *. m m. e ..-6-,.u....~..-4..,7~, .ws., <_4. ..i.as... u., ..%.,y__..,mE,.._., 'To Our Stockholders 2 p Commitment to Customer Satisfaction 4 [ Operations 10 [ Selected Financial Data and Selected Quarterly information 16 l Management's Discussion and Analysis of Financibl Condition and Results of Operations 17

Report of the Company 21.

[ Report of Independen't Accountants. 21-I L Consolidated Financial Statements 22 j; Notes to Consolidated Financial Statements 29 !L .- Statistics 36 p Management 39 j~ Trustees. 40 {' . Investor Information 41 i l<

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kl FIN ANCI AL. ll1GIII.lGIITS s h tcent . War Duled Decemter 31 Ofillions of Dollars) E988 1987 Change Operating revenues $5.109 $5.094 ~ 0.3 - 1 Fuel and purchased power and gas purchased for resale 1.371 1.406 (2.5) l Operating income 773 724 6.8 L Netincome for common stock 562 512 9.8 l Earnings per common share $ 4.93 $ 4.42 11 5 - 1' Dividends per common share 3.20 2.96 8.1 36.89 35.17 4.9 Book value per common share at December 31 . _ _ _ _ _ _. ~.. _.. - i Weighted average common shares outstanding (millions) 114.0 116.0 (1.7) _ _ _ _ _. ~ _ _. _.. _.. ) Closing common stock price at December 31 $46.50 $41.75 11.4 MARKET PRICE RANGC IN COMOLllMTED REPORTING SYSTEM AND DIVIDf;NDS PAID ON COMMON STOCL 1988 1987 Dhidends DWidend R mgh low raid High low hnd _.. -.. ~ !i 1st Quarter $47% $42 $.80 $52 $42% $.74

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2nd Quarter 45% 40% .80 45% 40 .74 I 3rd Quarter 45% 42 % .80 4-6 42 .74 l 4th Quarter 46% 44 .80 46% 37 % .74 As of January 31.1989, there were 167.178 holders of record of common stock. i f. 1 C-

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1 -.To Ot* St.ocKil0LDEks' -i ' Con Edison's financial performance in 1988 produced the highest per shart earnings in ' the company's history. Record electricity sales were the main reason for the strong h . performance, and gas and steam sales volumes also increased. While electricity sales were at an all-time high electricity bills for (W %le usage were lower than in any - year since 1980 and customers benefited from refunds that reduced their bills. The j electric system performed well through a rer 4 high peak demand. { CARNINGS. DIVIDENDS AND STOCK Spt,lT ' Net income for common stock in 1988 was j $4.93 per share on an average of 113.968.000 shares outstanding. This compares with - ) $4.42 per share in 1987 on an average of 116.016.000 shares outstanding. and exceeds the previous record of $4.48 per share set in 1984. In January 1988 the Board of Trustees. raised the quarterly dividend from 74 cents to 80 cents a share. In January 1989 the Board increased the dividend to 86 cents a share, in February 1989 the Board of Trustees voted. subject to stockholder approval at the May 1989 Annual Meeting. a two-for+ne split of the company's common stock, if the split receives the necessary stockholder and regulatory agency approvals. each share of $5 par value common stock -l will be changed into two shares of $2.50 par salue common stock. KATI:s : Under the electric rate settiement approved by the New York State Public Service Commission (PSC). we reduced rates by 3 percent effective Aprill 1987 and will keep rates unchanged through March 1990. The last major cicctric rate increase was in 1983. The rate agreement also stipulates tha't earnings above a predetermined level are shared equally by customers and stockholders. For the first rate year ended March 31.1988 the. custoraers' half of these earnings was $26.5 million, which was refunded during'the a summer of 1988. The stockholders' half equated to 14 cents a share, of which 9 cents a share was reflected in 1987 carnings and 5 cents a share was reflected in 1988 carnings. Based on the strong electricity sales and revenues. we made accounting provisions during 1988 for an antidpated refund of $65 milhon for the second rate year, which will end March 31,1969. This amount could change up or down, based on results for the remaining three months of the rate year. Any such change will be reflected in 1989 earnings. In November 1988 we filed for a gas rate increase of $46.7 million, or 7.2 percent. If appcoved, it would take oflect in October 1989. General gas rates were last increased in Novenber 1985. Steam rates have not increased since October 1981. CIEC'IRl try An abnormally hot summer and the continuing strong economy in our service ti ritory led to the record electricity sales and peak levels. Sales were 4.3 percent aboe the 1987 level. A record peak demand of 10.182.000 kilowat18 was set on August 15.19e 9. The previous record was 9.386.090 kilowatts in July 1987. Con Edison Nas made significant strides in support of its long-range strategy to defer new power plat construction. We negotiated lon&tcrm agreements with the New York Ibwer Authority ud independent power producers for 919.000 kilowatts of addi- !ional annual capacity. Tht company and the Ibwer Authorityalso negotiated agreements under which the Ibwer Authority will meet the future electricity requirements of its i l customers in Con Edison's service area. The ibwer Authority is securing power for these L requirements. which relieves the company of the need to plan to meet this load. Our aggressive conservation and energy management incentive programs for residential. commercial and industrial customers have avoided the addition of an estimated 24.400 kilowatts to peak electric load tbrough 1988. 2 _u_____._ _1__ ._...__1_. .l

i 1 i i i - G\\S AND STI:AM Gas sales to firm customers rose 5.5 percent and steam sales in-creased 5.6 percent. The increases were due primarily to cold weather in early 1988. Con Edison has an effective rebate program for customers buying steam. air - conditioning equipment. Fifty-six customers have elected to replace aging steam systems l with new energy-efficient steam units, rather than with electric air conditioning. or have chosen steam to cool expanded facilities or new buildings. This is expect'.Si to avoid adding about 56.000 kilowatts to summer peak electric demand. ARE:A DCn101'Mt3T Through the Project Appleseed program Con Edison has long played an active role in keeping the region's economy robust. Since 1981 we have offered rate incentives to businesses that locate or expand in economically depressed areas of our service territory. We also offer reduced rates to firms that relocate to new or vacant buildings shd qualify for local real estate tax abatements. More than 8.100 husinesses have benefited from Project Appleseed through 1988. with more than 45.000 jobs created or retained. COSTONIER MilstN: Tion Although our customer service track record has been good-fewer customer complaints were received in 1988 than in any other recent year-we must do even better. Satisfying customers is one of our most important priorities. The soet :1 section that begins on page 4 describes ways in which we're improving our services to customers. \\t\\ucl: STENT Cilect:s con Edison has a strong and experienced senior management team to lead the company in the futura. On February 1.1989. Eugene R. McGrath became president and chief operating of ficer and Executive Vice President Raymond J. McCann became chief Imancial officer. Vice Chairman of the Board John V. Thornton, who joined Con Edison in 1969. retired last month at his normal retirement date. He had overall responsibility for finance and law. He is now Columbia University's cucutive vice president, treasurer and chief financial officer. John's wise counsel and financial knowledge guided us through some challenging times, and the company's current healthy wrH0R liwSeLRG financial pesillon is due in no small measure to his efforts. I know that our stockholders loin me in wishing him the very best. l l ,y ,1l l iff ' ' h UA 'lJtt) i"]~ R W } &I h. b [/ W 'l [' Arthur Hauspurg (/ l[ [. Chairman and Chief Executive Officer February 28.1989 ? n uf cs' n L... p y ~' w 3

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COMMITM ENT Tu Ct3Tmack S AT!bacTim Con Edison is dedicated to providing superior service to its 2.9 million custom-ers. Improving the quality of customer service and the level of satisfaction is one of the company's top objectives. A satisfied custor;ier base complements our long-standing drh'e to increase productivity and control costs, and will be a consider-able asset in an era ofincreased competition in the utility business. By every barometer used to gauge service reliability, Con Edison's perfor-mance already ranks among the best in the nation. In the area of customer satisfaction, complaints to the company and to the Public Service Commission l dropped significantlyin 1988. continuing the downward trend of the past several years. Our surveys show that most customers rate our performance highly. \\\\'c have worked hard to achieve our current level of custcmer satisfaction M usL" and we're working even harder to better it. Ilere are some of the things we are doing to realize our goal. vu sana cunw. ,,, 3 g,,,, gg gggg we,ggpogggg79 mg,ggygg g,,,,,og (gg. su snu.+ swomn"' tomer calls. visits and letters. \\\\'e satisfied 98.8 percent of telephone inquiries on the first call. \\\\b have streamlined procedures so our customer account repre-sentatives can make more decisions without harmg to get supervisory approval. con lasons ensuunn All Con Edison employees who deal with customers are participating in sentec peonic won wnn expanded customer satisfaction training programs. Business office personnel, us to meet the nens of telephone service representatives and field emplohecs like meter readers and om fast-emine testers are learning better ways to listen to the customer and take necessary chinese-smern an action to ensure that the customer has been satisfied. Supervisors and members hu mess oimmunin e [ of senior management are taking similar training, and are also learning how to Theoc mwd hmnen.a reinforce the improved customer satisfaction skills daily in the workplace. m count reen sentmhrs in 1988 we began comprehensive surveys of customers to determine if we at ine h4 eat businem are meeting their needs. Each month, researchers call a sampling of customers oflier nod are helping us pmduce a brw hme. in chinese. that n 01 ciphnu utillt) senh e i, e - coures m new commeM^tdl ( U*<lomely " 5

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who recently contacted Con' Edison to ask them how well we satisfiedtheir U

l lnquiries. This information helps us to evaluate our performance and determine'. ^

howIt can beimproved.

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We provide many services for customers who am elderly, handicapped or have of her specialnee' s. In 1988 we doubled the number d of customers enrolled in our CONCEPA' Program, to more Ihan 80,000, through, expanded advertising and outreach efforts. The CONCERN Program for custom- " ers who are age 62 and older or disabled, offers specially trained representath'es who can help resolve billing and service questions, work out payment arrange-i= ' ments and assist with appilcations for government and community aid peerams. ) i

Hb also launched the CONCERN Spotlight a quarterly newsletter mailed to customers in the program. Published in casily readable large type;it describes

'l ) C'"""" programs; services and community events for older peo. ple. In 1988 we began training our meter readers to help the elderly and others. lj as part of the national Gatekeeper Program, in the course of their normal

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contacts with customers, meter readers who observe obvious signs of problems are encouraged to alert the local Office of the Aging. l K Micr my husband Through our third party notification service any customer can designate a closed his busints out-relative or friend who, in addition to the customer, will be notified of any credit ) lifest)le changed l notices. The 'thirdparty' can then get in touch wilh the customer and Con Edison ^l Considerably. Our .l to help resoh'c the situation. This is useful for people who may not respond to } personal con f:dison ' notices because thcy are elderly, sick or away from home for long periods. Ut? also ) v (o:ks . keep annually updated records of customers who depend on respirators, kidney representatae has . machines and other electric-powered life support equipment so we can try to been wonderful help in case the electricity goes off Speech-and hearing-impaired customers Shei arranged for can communicate with us by using telephone-teletype machines. us to have extra time to 1 comtsni ovmen su scrimi .As part of our outreach efforts we seek to pa) out iniht) biHs and { V learn what additional services customers need, and to provide them. For exam- ,i 6 has cae out of her was H ple. Con Edison representatives in a section o' Brooklyn that has a large to vquamt us with ] -) other sert h'es that 4 asist senior dO7eni l l I 6 ]

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--.,, :.7.; n ~ .e ,,,/, 4 ...e.. 1: ,0 ,: # a ....,...c...~.,., _ z[ _ g_ 'y. ' : ' '...[ u, s concentration of Russian-speaking customers studied Russian phrases. Chinese-speaking representatives have been added to serve the growing Chinese com-munity in Queens. Our Bronx division began free credit and budget counseling seminars for an estimated 1,000 customers in January 1989. i?ocus group sessions with residential and commercial customers have shown us better ways to communicate information en billing. energy conserva-tion and rate design. \\\\b plan to conduct customer roundtable meetings through-out our service territory in 1989. bringing together representatives from local civic. religious and ethnic groups to tell us their concerns. 1 Con Edison consumer education representatives present information on energy conservation, electric safety and other topics to students. senior citizen groups and ofher audiences. In 1988 we gave more than 1.800 presentations to a CV%WR SYlWREiT .ve Cxpanded our consumer education ofkrings to

g.ggg swann.ntax include more presentations that address specific customer interests. These waes som w includc tl,c rnost frequently asked customer service questions, the CONCERN ustuu sns p,0g;,am. and customers' rights and responsibilities.

A major concern in many communities is the need for reasonably priced A i.uh inom con phson huu.Rn Con Edisca's Renaissance housing rehabilitation program, now in its talteouim>russand eleventh year, wo:ks with lending institutions and non-profit community devel-umw ed us a oartnon opment groupa in 16 Brooklyn neighborhoods to convert vacant dwellings into atniut ricetric sarets multi-unit cooperatives and condominiums. More than 800 housing units have wu shoumn t co in ihe been completed or are under construction, providing moderate-cost housing for water when there's an estimated 2.500 people. The effort has generated about $63 million in new thunder and henmna private sector reinvestment in Brooklyn, and has produced nearly $500.000 or >nu ruum vet hun. annually in additional electricity revenues. And u p.u: Lite reis Con Edison customers expect and deserve outstanding service. Our job is to stock on a power une make sure they get it. don't tr> in pun it down. l brOURht con v.dl5Hil's safeh rotoring bo..t home and read it to In) brothef 9 Cfy g 1 {. OPERAt!ONS - .'unictwccry ~ The electric system had an outstanding year in 1988. For the Drst ' time in Con Edison history, demand for cIcctricity in our service cea surpassed l10 million kilowatts. On August 15. demand was 10,182,000 kilonotts, almost " B00,000 higher than the previous record set in July 1987, ~All told, peak demand. exceeded 9 million kilowatts on 22 days. This was due to a '46-day period of-almost continuous hot, hu' mid ' eather ending in mid-August. n Fuel costs per kilowatt-hour were 9 percent lower in 1988 than in 1987. The. decrease in fuel costs was due to lower fuelprices, record power plant efficiency

and a higher percentage oflow-cost nuclear generation from Indian Ibint 2.

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was produced from nuclear fuel, 32 percent from oil and 19 percent from natural gas. The remaining 17 percent consisted ofhydroelectric, refuse and coalpower l untw u nt-nln purchased from others. a "'~* ans More than 3.000 new customersjoined Con Edisonk gas system in 1988, most of them residential customers. In addition, more than 3,900 customers 1 wn 1:dison emergesy ' ] convertedfrom oilto gas heating. crewmane to the i ' Our cost ofgas per therm was 6 percent lower in 1988 than in 1987. Supply l reaue w hen a nre i is expected to exceed our customers' needs in 1989, allowing substantial destroyed our electric I amounts of gas to be utilized for boiler fuel m the production of electricity and \\ senlee cable. Although ,j - steam. In 1988 we nstalled a 4,500-horsepower compressor at Hunts Ibint, in our cable w asn't their \\ the Bronx. This compressor enabled the company to increase its purchases of re@onsibilit). ther gas delivered during the non-heating season when boiler fuel requirements are surked into the night to the greatest. l hook up a temporary sient A total of 20 new Manhattan buildings joined the Con Edison steam senice conneconn ana system in 1988. Based on requests for service that we hm e received, we estimate restore power. Their we will gain 36 more new steam customers (inch, ling renovated buildings and uork enabled us to expanded service) over the next three years. ennunar an conununn The refurbishment of boilers in our generating sistions continues to be an senices, including j effective means to ensure both system reliability and competitiveness. Meals on Wheeb for ] the homebound. without interruption" J t ,, s;' ., 3, f :..:n '-,;.,'.-; '- fj..,*: ,;.c ^. - 'l ? f... g.y y; .g II

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. y._ .y ,i. a< ..h - [. ; ;, q). yx,;; .,;.. (b .g 4 - g .. a o. - i .g. g ; -.- c.. a., v. co m eccno% ! in 198{l we placed in sen' ice the Bensonhurst No. 2 substation in Brooklyn as well as two power flow regulators at the Ramapo substation in; , e: { . Rockland County. l\\vo new substations are scheduled to begin service in 1989-the \\\\brid kade Center No. 2 substation in Afanhattan and the \\\\bler Street . Substation in Brooklyn. \\\\b are a.' a juilding a new area substation at Hell Gate in e. the Bronx. It is scheduled to begin service in 1990. The new substations will help us meet growing demands for electricityin these areas. ( cossi m itoN Our programs to encourage residential, commercial and indus-trial customers to conserve energy and reduce peak electric load continue to be en unmunwu gg,g,gg,,,, ,,, gygg,pg gp,ggg,gggyggggy m mresnnonu Under our sal'INGPoll'ER Program, designed to encourage home energy or oumes efficiency and cost savings, we have completed more than 105,000 energy l- . uvot.s aam ,,, gg,gg,g,7,g g7 gg gg gg,,damily hon;es since the program began in - row um erkrossuw Aicid. isc. - gg g gg gpg g ggg g . age achieved by any utility in the state. The program also offers to arrange I financing for home improvements suggested by Ihe energy consen ation sun cys. "Mhch the old stearn-13b continue to offer a similar program for apartments. Under this Apartment ^I powered splem that Building Consenation Sen' ice, more than 900 energy suneys im?olving about emds our bundings .] G1,000 apartments have been completed. . m eded replacing, w e Afore than 55,000 people base visited our Consen'ation Center in midtown l considered switching to Afanhattan since it reopened in July 1987 after a complete renovation. Since it electrie air i ondilhaning. opened in 1979, more than 615,000 visitors have viewed the Center' displays, i s This would hate added ) erhibits and audiovisual presentations, which all provide information on how to to sunnner peak electrie save on residentialenergy costs. demand Con I:disonk Con Edison has about 50 programs to help residential, commercial and rebate progranunade it industrial customers conserve energy, and to evaluate ways to reduce peak economirat for us io electric load in order to defer the need to build new power plants and other install snadern. energy facilities. These programs include financialincentiws to commercial and indus-emcient sicam air trial customers for the installation of energy-efficient electric, steam and gas air conditioning equipment conditioning, lighting and other electric equipment. that win hold down our rochng costs'J 13 o . Programs for residentialcustomers include the Appliance Efficiency Guide- ^ line telephone senice and the Consenation Sm'ings Van. Both provide informa- . tion about high-efficiency air conditioners, refrigerators and lighting. In 1988 almost 40,000 people visited our van at 95 locations. Several other programs are being conducted to investigate the potential for residentialload management. k sc a cn w o ovvetn n.u m i The Electric lbwer Research Institute (EPRI) last year presented the company with three Tirst Use' auards for the successful first-time application of new technologies produced by research sponsored all or swa vana

g pg,g py gpgf, One award-winning application was the test of a computer-based boiler

" " " ~ " " stress and condition analyzer at our Ravenswood generating plant Developed by EPRI. the analyzer continually monitors temperatures and stress levels uithin a .j boiler, it alerts plant operators and engineering and maintenance staff to l ' potential problems so they can take the steps necessary to minimize long-term "We were thrilled 1o rind metal fatigue and avoid unscheduled outages, thereby extending the life and rPUsunabl)-prlfed improving the availability of generating units. housing in a great A remotely controlled, mobile robot named CECIL (Con Edison Combined building like this. R used. Inspection and Lancing System), first used during the 1987 refueling outage at to he a Vafanl, . our Indian Ibint 2 nuclear power station, was another auard winner. CECIL I delcriorating c,sesore. performed inspection and maintenance tasks inside the plants steam gener-connuunit3 groups and alors. CECll is part of a larger robotics program at Indian Ibint 2 sponsored by desrtopers rebuilt it into Con Edison, EPRI, and the Empire State Electric Energy Research Corporation. attrarthe. spanous co-The third award winner was a water quality controlprogram developed by ops under Con 1;disonk EPRI and Westmghouse Electric Corporation and adapted by Con Edison engi-1&naissance program. neers. This program was applied to the last severalfuelcycles at Indian Ibint 2. It wre proud to oun a co-involves adding a chemical to the reactor cooling water to control corrosion and op here, and inint con remove the products of corrosion. The program has resulted in a significant Edison does a fine inh productivity gain for maintenance personnel doing inspection and repair work. coordinanne housing rehabilllahon in Ilrooidyn j neighborhood ( 14 ____-__________a .(.... - '. ' '..,,

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..a _ 7 . War Ended Deccinher 3I (Millions of Dollars] 1988 1987 : _'1986.. _ _. _,1985' 1984. .m_,._._... .Ol erating revenues - $5.108.8 $5.094.4 $5.197.7 . $5.497.9 $5,728.8 - i 1Fuela'nd purchased gewer and -

gas purchased for resalc

'1.371,0 1,405.6 1,507.5 ' 1 1.008.1' ' 2,158.9. Operatingincome - 773.2 . 724.0 709.9 715.1 - 751.0-

Net income for common stock -

561,7 512.3 508.3

525.-1 581.3

[ Total assets - '9.551,7 9.411.6* ~ 9,267.2* 9,112.9 8.864.9 1.ong-term obligations 1.ong-term debt. 2,806.3** 2.769.7 L 2.675.1-2,590.4 2.409.7 Capitalized leases ~ 83.1 *

• 137.6.

147.3 159.5. 168.0 Preferred stock subject to mandatory. redemption - 48.0 50.3 52.5 54.8 57.0 4.205.1 4,007.2 4,037.3 3.953.0 4.012.0 Common sl.areholders' equity.. ii:' common share: Nethrome. $4.93 $4.42 $4.26 $4.26 $4.48 Cash disidends. $3.20 - $2.96 $2.68 $2.40 $2.12 Weighted average common shares outstanding (millions) 114.0 116.0 119.3 123.3 '129.8

• Restated to reflect consolidation of Gramercy Assets Corporation. See Note A i

' Reflects purchase ofcertain leased gas turbine ettuipment. See Management' Discussion and Analysis. I s i SEllCTED QlMP':t Riy IN!'ORMATION First Scrond Third Fourth ' 1988 (3fillions of Dollars) - Quarter Quarter Quarter Quarter j bperating revenues $ 1.326.7 $1,101.5 $1,469.2 $1,211.4 ' Operating income' 196.6 127.7 312.8 136.1 l Net income 154.8 84.0 266.3 94.2 - Net income for common stock 145.3 74.6 256.9 84.9 Earnings per common share $1.28 $.65 $2.25 $ 75 First Second Third fourth 1987 (Afdlions of Dollars) Quarter Quarter Quarter Quarter 1 Operating revenues $1.284.3 $1,125.1 $1,493.8 $1.191.2 Operating income 198.9 135.0 278.3 111.2 Net income 159.7 93.6 235.7 61.1 Netincome for common stock 150.3 84.1 226.2 51.7 ) Earnings per common share $ 1.27 $.72 $1.96 .$.47 ] In the opinion of the Company these amounts include alladjustments. consisting onl> of normal recurring un ruals. necessarp for a fair l . presemation. i 1 16 .-______________A MAWEMENT s DISClN!ON AND AN AlJS!S Of flWCML CONDMON AND RESL LTS OF OIDAT!ONS Research and Development Authority. In each of the years L1001DITY AND CAPITAL RES0t'RCES 1987 and 1986 the Company issued $150 million of such Cash and temporary cash investments were $364.9 milhon debt, but did not finance externally during 1988. The at December 31,1988 compared with $492.9 million at Company has bank credit lines amounting to $50 million December 31,1987 and $589.0 million at December 31, but has not had short term borrowings for many years. 1986. These amounts include $185.8 million, $66.5 million The major portion of the Company's capital requirements, and $140.5 million, respectively, of such investments held including securities retirements, have in recent years been by Gramercy Assets Corporation, the Company's wholly-funded from operations. Cash flows from operating activi-owned investment subsidiary. In addition, to fund its com-ties, before and alter dividends, for years 1986 through mon stock repurcnase program, which was completed in 1988 were: 1987, the Company had set aside $200 milhon at December ~W 1956 31,1986. In the entire program, which began in 1985, the dunuettsnars; _[ t9 mas Company repurchased a total of 16.3 milhon shares of het cash flows from operaung acuviues $861.2 $884.7 $932.1 common stock for $595.7 million. Less: Dmdends on common and preferred st ck 402.2 381 2 357.7 Excluding the balances held by Gramercy Assets Corpo-ration, cash and temporary cash investment balances Net after dividends $459.0 $503.5 $574.4 decreased $217.3 milhon durmg 1988. $22.1 million during 1987 and $93.9 million during 1986. The decrease in 1988 The following table shows the Compar.y's expenditures for was attributable to the retirement of long-term debt, higher construction, nuclear fuel and the retirement of securities construction expenditures and the acceleration of federal f rom 1986 through 1988 and estimated amounts for 1989 l income tax payments under the 1987 Tax Act. The decreases and 1990. l l during 1987 and 1986 reflect the transfer of funds into

• 87 _"

" "" * " *" '8 l Gramercy Assets ($48 million in 1987 and $252 million in constructor $653 0 5622.0 $574.7 5516.1 5490,8 l 1986). For the year 1986. cash balances were benefited by l'urchase f gas turbmes 21.1 reduced inventory levels and lower accounts receivabic Nuclear fuel 41 0 16.0 33.6 27.9 9.1 Rettn ment of long term At December 31,1988,1987 and 1986 the Company's oct,t and preferred investment in Gramercy Assets was $333.2 milhon $311.0 stock 136.3 11.0 57A 67.4 77.3 million and $253.4 million, respectively. The subsidiary's Repurchase c! common mock - 200.0 106A assets consist generally of short and intermediate term investments. Total $830.3 5649 0 5686.8 5811 A $683.6 In January 1989 the Company issued $150 million of 35-year tax-exempt debt through the New York State Energy in December 1988 the Company purchased for $21 million the owners' interests in certain gas turbines which the Company leases. The Company will continue to make the lease pay ments wnic h will service and amortize the non-recourse debt to which this equipment is subject. Such debt was approximately $46 million at December 31,1988. The Company expects to fmance its capital requirements for 1989 and 1990, includmg requirements for maturing long-term debt, trom internally generated funds and det,t fmancings of $250 miMn in 1989 ($150 milhon issued in January 1989) and $350 million in 1990. The Compan3's 17 capital requirements for the five years 1989 to 1993 include F. ATE SETTLEMENTS refunding of approximately $667 million of maturinglong-term debt. As part of a three-year rate reduction and freeze agreement Although the Company has in recent years experienced approved by the PSC. the Companfs base electric rates and ~ substantial growth in electric demand, the Company does revenues were reduced effective April 1,1987 by approx-not expect to begin constructing new generating capacity imately $132.5 million (3 percent) on an annual basis. before the next century, in order to reduce peak demand. Partially offsetting this reduction are certain tax benefits the Company is aggressively pursuing the development and resulting from the Tax Reform Act of 1986 which the implementation of demand-side management programs to Company is retaining. Also under the agreement, certain encourage customers to utilize electricity more efficiently. previously deferred charges and credits were schedsled for The Company is also taking steps to assure the continued amortization: $33.7 million of charges over the 12 months useful lives of its existing generating facilities. The Company ending March 31.1988 $22 million of charges over the 12 has negotiated purchase agreements for significant amounts months ending March 31,1989, and $66 million of credits of firm power from the New York Power Authority (NYPA) over the 12 months ending March 31.1990. well into the next century included will be additional firm The agreement provides that if the Company earns more power from Hydro-Quebec beginning in 1995 and extending than 12.9 percent on its electric common equity during the for a period of 20 years, and continuation of an existing 12-month periods ending March 31,1988.1989 or 1990 Hydro-Quebec power centract beyond 1998. The Company (measured for rate-making purposes by reference to a continues to negotiate firm power purchase contracts with common equity ratio not exceeding 50 percent), the Com-independent power producers. The Public Service Commis-pany will return to its electricity customers, within a sion (PSC) has ordered each investor-owned utility to succeeding 12-month period, half of such excess with the prepare and implement a bidding system through which new Company retaining the other half. For the first rate year power supply resources will be acquired. The Company and ended March 31.1988 the Company in 1988 refunded $26.5 NYPA have negotiated agreements under which NYPA will million to electricity customers. Accounting provisions for provide for the future electricity requirements of its custom-this refund were recorded in the fourth quarter of 1987 ' ) ers in the Company's service area. NYPA is securing power ($18.0 million) and in the first quarter of 1988 ($8.5 for these requirements. thereby relieving the Company of million). I the need to plan to meet this load. For the second rate year, the 12 months ending March 31. l The Company's earnings include a relatively low percent-1989, the Company estimates a refund of $65 million and l_ age of allowance for funds used during construction (2.2 has made accounting provisions for such refund in 1988 in L percent in 1988. 3.0 percent in 1987 and 2.0 percent in the third quarter ($50 million) and in the fourth quarter 1986).' Interest coverage on the SEC basis was 4.67. 4.76 ($15 million). The refund could increase, or decrease. 1 and 5.31 times for 1988,1987 and 1986 respectively. These depending upon results of operations for the remaining are high coverages compared with the electric utility three months of the rate year. Any such change will be industry generally and would permit the Company to avail reflected in the operating results for the calendar year 1989 j l itself of substantial unused bonding capacity. The Company's and will not alter 1988 reported results. mortgage bonds are rated Aal by Moody's investors Service. A somewhat similar two-year gas rate freeze agreement l AA by Standard & Ibor's and 2 by Duff and Phelps (approx-(not involving a rate reduction) was approved by the PSC in I imately equivalent to a high double A rating). October 1987. For the first rate year ended September 30. 1988 the Company's rate of return on gas common equity was below the 12.9 percent " ceiling" and, therefore, no refund was due gas customers. On November 18.1988 the Company filed for an increase of $46.7 million (7.2 percent)in gas rates to firm customers j to become ef fective in October 1989 following the expiration of the two-year agreement. i 4 g m.- an. inflationary economy the cost to replace the assets upon

w. _.

their retirement will substantially exceed historical cost. ! For rate purposes the PSC considers securities maturing'. Thus the Company experiences losses on its property . within one year and customer deposits as part of a ' equivalent to the effect of inflation. These losses are company's capitalization. Thus considered, and excluding however, partially offset by the fact that repayment of the.

the Company's investment in Gramercy Assets Corporation, Company's long-term debt is made in dollars of lesser value.

the common equity ratios at December 31,1988,1987 and - . than the dollars originally borrowedf 1986 were 52.0 percent,50.7 percent and 51.9 percent. respectively. - RESL'LTS of ^"SRATioNS The Company's common equity' ratiols one'of.1he highest ~ brnbgs per share were $4.9 in 1988 $4 42In 1987 and among electric utilities. The Company believes that ' $4.26 in 1986. The weighted average number of common ratepayers, as well as security holders. have benefited from shares for 1988.1987 and 1986 was 114.0 million',116.0 - the relatively high common equity ratio. Ilowever, the PSC million and 119.3 million, respectively. The decrease in each. l. has ruled that it will not allow a full return on the common . 4 year was a result of the common stock repurchase program. [ ' equity to the extent it exceeds 50 percent of the Company's Earnings for 1988 and 1987 reflect higher sales volumes I capitalization. To reduce its utility common' equity ratio, the.- due to improved economic conditions and warmer than Company executed the common stock repurchase program normal weather during the summer periods. Earnings for mentioned above, and established its nonutility Gramercy 1988 and 1987 were also favorably affected by the reduction Assets subsidiary, in the federalincome tax rate from 46 percent in 1986 to 40 _.7------- percent in 1987 and 34 percent in 1988. These factors were IMPACT OF INFLATION partially ofrset by the electric rate reduction which took

In an inflationary period the purchasing power of the dollar effect April 1,1987, decliries. The historical cost amounts reported in traditional.

OPERATING KEVENt:ES AND Ft:EL COSTS Operating reve- . financial statements represent dollars of varying purchasing nues increased by $14.4 million in 1988 and decreased by. power because such financial statements combine dollars $103.3 million in 1987. The principal increases and spent at various times in the past with dollars spent decreases in revenue were: currently. . Although the rate of inflation has cased considerably over @MM50g{ _ increseicec~r'easei ~ ~ the past few years, the Company is still affected by the 1988 ogr 1987 1987 over 1986 decline in the purchasing power of the dollar caused by even Fuel billings $(125.5) $(202.1) modest inflation. The Company cannot readily increase its Sales mlume changes Electric-con Edison direct prices to keep pace with inflation. The regulatory process customers and delivery service introduces a time lag during which increased operating WPA and municipal agencies 177.7 178.1 expenses are typically not fully recovered. Moreover, reg. Cas 6.0 (3.2) ulation permits the Company to recover through deprecia' Steam 18.6 13.2 tion only the historical cos* of its plant assets even though in Rate changes Electric (37.3) (98.0) Gas 1.0 5.8 Subtotal 40.5 (106.2) 1 Provmon for electric rate refunds (55.5) (18.0) Ll Sales to other electric utilitics 20.3 21.6 Other 9.1 (.7) Total $ 14.4 $(103.3) J The decline in fuel billings in each year reflects reductions J in the cost of fuel to produce electricity and steam and of gas purchased for resale. 1 19 [ r k. t Electricity sales volumes in the Company's service ter- - The principal variations in operating taxes were: ritory increased 4.3 percent in 1988 and 4.8 percent in (1987 reflecting in both years abnormally hot summers and Wdho"8"H*#8f8 C _ . twear mmease( _o 1mproved economic conditionsin the Company's service 1988 1988 1987.: aru as salenolumes to firm customers increased. ^""E Om1987 On1986 o 1 y 5.5 percent in 1988, and decreased 0.4 percent in 1987.: Local property taxes ..s 632.5 - . 514 A $361

Steam sales volumes increased 5.6 percent in 1988 and State and local taxes on was 297.7

. (9.0 11&9) 4.1' percent in 1987. . After adjusting for weather variations in each period. 7f fg electricity sales volumes increased 3.5 percent in 1988 and - ~ -

(4.3 percent in 1987. Similarly adjusted, gas sales volumes D i.-__._._81g27.{

ya $2 a - to firm customers increased 2.2 percent in 1988 and - L cal property taxes increased by $14.4 million in 1988 and ' ~ decreased 0.3 percent in 1987, and steam sales volumes $3&8 muuon in M87 as a msuk oNghn mx rates and . increased 1.2 percent in 1988 and 5.2 percent in 1987. plant additions. In December 1988 the Company reached a Weather adjusted sales represent the Company's estimate of settlement with New York City. Westchester municipalities the scles that would have been made if historical average an eso g n ndng sussmmsWs@al weather condidons had prevailed. nc axes. W eHecan M8 pmpumaxes was a - Revenues from sales of electricity to other utuities U" U" , represent recoupment of fuel and certain incremental ' E# E production costs. The savings on these sales is paased on to customers and has no effect on net income, ranayus and spyus oMHamMon and ay OTHER OPERATIONS AND MAINTENANCE EXPENSES Other July 29,1987,climinated operations and mamtenance expenses mcreased 2.9 per-the New York City public utility excise tax (2.35 percent)- cent and 1.7 percent in 1988 and 1987, respectively. The - aW@ mhMM Whmm increases reflect increased costs for labor and materials U and services. For 1988 the increase includes scheduled INTEREST OIARGl:S Interest on long-term debt increased maintenance at electric generating stations, changes in the $1.6 million in 1988 and $14.5 million in 1987 as a result of Company's street facilities required by government projects, the issuance of additional debt in 1987. .I c*tric cable replacement and increased expenses for ds FeW he WhM health and insurance plans. The increase in 1987 reflects $58.2 million in 1988 and decreased $79.0 milnon in 1987 refueling cycle expenditures at the indian Ibint 2 nuclear o am m 198D unit and charges for amortization of previously deferred ehh electric producuon maintenance expenses. Offsetting these .j increases in 1987 was a reduction in pension expense February 28.1989 primarily due to lower funding requirements resulting from

favorable returns on plan assets in prior years.

TAXES OTHER TilAN FEDERAL,1%COME T\\XES At over $1 billion, taxes other than federalincome taxes remain the Company's largest operating expense after fuel. The largest components of these taxes are local property taxes and state and local revenue taxes. 20 RITOP1 or lim Comm The aNompanying consolidated fmancial statements have The Company's ihoard of Trustees maintains an Audit been prepared by Consolidated Edison Company of New Committee composed of Trustees who are not employees York,Inc. In the Company's opinion such statements have of the Company. The Audit Committee meets with the been prepared in coMormity with generally accepted Company's management, its internal auditor and its accounting principles at, ?pplied in the case of regulated independent accountants several times a year to discuss public utilities. The statements reflect judgments and internal controls and accounting matters, the Company's estimates made in the application of such principles. consolidated financial statements, and the scope and The integrity of the Company's financial records, from results of the auditing programs of the independent which the consolidated financial statements were pre-accountants and of the Company's internal auditing pared, is largely dependent upon the Company's system department. The independent accountants have direct of internal accounting controls. Based upon continuing access to the Audit Committee and periodically meet with monitoring of such controls, the Company believes they it without management r 'esentatives present. provide reasonable assurance that transactions are exe-The accompanying conschdated financial statements cuted in accordance with management's authorization have t,een examined by Price Waterhouse, tne Company's and aie properly recorded, and that assets are appropri-independent accountants, whose report appears below. ately safeguarded against loss from unauthorized use. February 28,1989 I wm nr twf attu not ums lVice llitteritonse To the Board of Trustees and Stockholders of Consolidated Edison Company of New York, Inc. In our opimon, the accompanying consolidated balance and perform the audit to obtain reasonable assuraace sheet and statement of capitalization, and the related about whether the financial statements are free of mate-consolidated statements of income, of retained earnings, rial misstatement. An audit includes examining, on a test and of cash flows, present f airly, in all material rupects, basis evidence supporting the amounts and disclosures the financial position of Consolidated Edison Company of in the financial statements, assessing the accounting New York. Inc. and its subsidiaries at December 31,1988 principles used and significant estimates made by man-and 1987, and the results of their operations and their agement and evaluating the overall financial statement cash flows for each of the three years in the period ended presentation. We believe that our audits provide a rea-December 31,1988 in conformity with generally accepted sonable basis for the opinion expressed above. accounting principles. These financial staements are the 153 East 53rd Street responsibility of the Company's management; our respon- .Y.10322 sibility is to express an opinion on these financial statements based on our audits. We conducted our audits February 28,1989 of these statements in accordance with generally accepted auditing standards which require that we plan i e, w 21 1-Y, Y CD%DUDNTED 6%ANCE SibBB7 Consolidated Edison Company of Ned York. In': a p - ~- ? At December 31 (Thousands of Dollars) l9Ba 1987* .._ -. ~... Utility plant at original cost (Notes A and B) Electric - $ 8,652,438 $ 8.276.456 Gas _ 936,488 871.034 Steam 301,557 310,121 General-633,049 573.504' 1btal 10,523,532 10.031,115 Less: Accumulated depreciation - 2.797,034 .2.664,611 Net 7,726,498 7.366,504 Construction work in progress 271,316 310.054' Nuclear fuel assemblies and components, less accumulated amortization of $282.481 and $255,330 - 72,840 66,408 Net utility plant 8,070,654 7,742,966 j Current assets ' 1 Cash and temporary cash investments (Note A) 364.939 492.947-Accounts receivable-customers,less allowance for uncollectible accounts of $18.500 and $18,100 348.634 330,021- - Other receivables 27,031 42.645 Fuel, at average cost _ 67.910 86,585-Gas in storage, at average cost 31,661 29.829 Materials and suppl:es, at average cost - 210,722 207.939 - Prepayments and other current assets 71,800 44,687 I Total current assets 1,129,697 1,234.653-investments and nonutility property Investments (Note A) 174.929 266,330' Nonutility property 2.599 _ 2.200- .~ - lbtal investments and nonutility property 177.528 268,620 ' L)eferred charges Recoverable fuelcosts (Note A) (2,019) (14.941) Unamortized detit expense 21.645 22.998 Other deferred charges 154,160 157.338 Total deferred charges 173,786 165,395 Total $ 9.551.665 $ 9.411,634

• Restated to stilect consolidation of Gramercy. Assets Corporation. See Note A.

The accompanying notes are an integralpart of these financialstatements. 22 g-.. .} .E s,. 4.. -4..-.-- -.---...-..+.2.... ~,....... 192,8 1987* ' At December 31 (Thousands of Dollars). _ _......_._ _,. _ _ _ _ _.._. _. _. _ __-_._._m ~ Capitalization.(see Consolidated Statement of Capita!!zation)L

Common shareholders' equity

$4,205,135 ' . $4,007,195, Preferred stock subject to' mandatory redemption 48,000, 50,250 z Other preferred stock 594.240 595,142 u 2,806,307 '2,769,748 Long-term debt. Total capitalization 7,653,682 7,422,335 - Noncurrent liabilities - Obligations under capitalleases 83,067 137,558 ~ Accumulated provision for electric rate refunds 65,000 '18.000 Other noncurrent liabilities 20,200 .17,800 'Ibtal noncurrent liabilities 168,267 173,358 Current liabilities Long-term debt due within one year (Note B) 8,776 55,106 Preferred stock to be redeemed within one year (Note B) 2,250 2,250 182.213 190.847 Accounts payable , Customer deposits 122,519 131,022 Accrued income taxes 24,905 95,753 Other accrued taxes. 76,326 68,338 Accrued interest 57,577 57,741 Accrued wages 63,765 69,481 Other current liabilities ' 165,230 162,643 T[dalcur$n[IlabillUes 7b3,561 833,581 Dek ed credits Accumulated deferred federal income tax (Note D) 616.134 599,174 L Accumulated deferred investment tax credits (Note D) 273,050 283,800 Other defert > :redits 136,971 99.696 _7'ai r.Irred credits 1,b2b.155 982,h6b h .,ut.ngencies (Note F) Total $9,551,665 $9,411,634 - " Restated to reflect consolidation of Gramercy Assets Corporation. See Note A. The accompanytag notes are an integralpart of these Rnancial statements. f 23 _______b CON SOLlle.TED l%COMT, STATEM ENT ConsoMuted Ednon Co:npany ol New f ort lnc. 1k ar Ended December 31 (Thocsands olhollars) 1988 1987* 1986* Operating revenues (Note.A) Electric $4,222.563 $4.188,843 $4.226.116 Gas 614.823 629.220 695.552 Steam 271.440 276.355 276.068 Total operating revenues 5,108.826 5.094.418 5.197.736 Operating expenses Fuel and purchased power 1.148.078 1,164.599 1.199.781 Gas purchased for resale 222.900 241.025 307.742 Other operations 890.835 853.732 888.567 Maintenance 447.232 447.057 391.095 Depreciation and amortization (Note A) 308.079 292.291 281.402 Taxes, other than federalincome tax 1.027.124 1,015.392 990.840 Federalincome tax (Note D) 291.380 356,350 428.410 .~. 'lotal operating expenses 4.335.628 4.370.446 4.487.837 Operating income 773.198 723.972 709.899 Otherincome (deductions) investment income 48.217 35.660 42.266 Allowance for equity funds used during construction (Note A) 8.970 11.473 7.621 Other income less miscellaneous deductions (8.876) (10.612) (7.320) Federallncome tax (Note D) (9,740) (2.943) (9.911) Total other income 38.571 33.578 32.656 income before interest charges 811.769 757.550 742.555 Interest on long-term debt 198.062 196.414 181.924 Otherinterest 17.555 14.830 16.692 Allowance for borrowed funds used during construction (Note A) (3,130) (3.808) (2.468) Net Interest charges 212.487 207.436 196.148 Net income 599.282 550.114 546.407 Preferred stock dividend requirements 37.560 37.798 38.077 Net Income for common stock $ 561.722 $ 512.316 $ 508.330 Earnings per common share based on weighted average number of shares outstanding during each year (113.968.273; 116.015.735 and 119.263.515) $4.93 $4.42 $4.26

• Restated to reflect consohdation of Gramercy Assets Corporation See Note A The accompanying notes are an integralpart af these f nancial statements.

24 '- -T s g iCDNSDl.1UATCD STATEMENT OVCASif f1,0%S Consolidated Edison Company of New YorL inc, War Ended December 31 (Timusands of Dollars) .1988 1987 1986^ , ~. -... -,.... - - _.. - -.~ l Operating activities l Het income - $599,282 $550,114 $546.407 Principal non-cash charges (credits) to income: J Depreciation and amortization 308.079 292.291

281,402

. Deferred recoverable fuel costs (12,922) - (57.067) ' . 73,304 ~ Federalincome tax deferred - 8.020-33.527 54,550 . Common equity component f allowance for funds used j o (8,379) (10.717) (7.105) 1 during construction - ' Other non-cash charges (credits); 100,204 106.328 (8,602) - Changes in assets and liabilities Materials and supplies. Including fuel and gas in storage 7,060 -(47.965) 42.810 Accounts receivable-customers, less allowance for uncollectibles. (18.613) (11,796)

40.762 3 Prepayments, other receivables and other current assets (11,499)

(8.636) 14.673-Accounts payable - (8,634) 50,655 (63.545) Fe@egall comptax and other_ ,,_ (43,557). .y (101l430) (12.021) Net cash flows from operating activities 861,168 884.713 932.099 Investing activilles including construction ' Construction expenditures (574,715) (516,079) (490,805)- Purchase of gas tttrbines (21.078) Nuclear fuel expenditures (33,583) (27,855) (9,124) Common equity component of allowance or funds used during construction 8.379 10,717 7,105 01,422 (148,975) (111.208) Other investments held in Gramercy Assets Corporation- . - ~ Nel cash flows from investing activities Including construction (529,575) (682,192). (604,032) Financing activities including dividends 150,000 150,000 issuance of NYSERDA tax-exempt debt Retirement oflong-term debt and preferred stock (57,356) (67,351) (77.345) Repurchase of common stock -(200.000) (106.402) Common stock dividends (364.704) (343.453). (319.694) Preferred stock dividends (37,541) (37.778) (38.052) Net cash flows from financing activilles incluoing dividends (459.601) (498.582) (391,493) Net decrease in cash and temporary cash investments and funds held for repurchase of common stock (128.008) (296.061) (63.426) Cash and temporary cash investments at January 1 492.947 589.008 542.434 Fimds hr 1d for repurchase of common stock at January 1 200.000 310.000 Cash and temporary cash investments at December 31 $364.939 $492.947 $589.008 Funds held for repurchase of common stock at December 31 200.000 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $197,837 $192.867 $176,062 income taxes 364.160 383.116 371.80 e t Non-cash investing activities-liens on purchased gas turbines 45,511 The accompanying notes are an integralpart of these financial statements. I 25 L-l p y CONSOU DATE D STATEM ENT OF C ANTAUZATION Con;solidated Ednon Company of New Fort Inc. Al December 31 (Thousands of Dollars) 1988 87 Shares outstanding Dec.31,1988 ' Dec. 31,1987 Common shareholders' equity (Note B). Common stock, $5 par value, authorized ~ 170,000,000 shares 113,996,544 113,937,916 $1,276,665 $1,275.763 Retained earnings 2,960,256 2,763,229 Capita 1 stock expense. _ _ _ (31,786)- '(31,797) Total common shareholders' equity 4,205,135 4,007,195 Preferred stock (Note B) Subject to mandatory redemption Cumulative Preferred, $100 par value,8%%

Series H (mandatory redemption amount $50,250 and $52,500) 502,500 525,000 50,250 52,500 ISSi. Amounts }o befgdeemed within one year 2,250 2.250 -

'Ibtal subject to mandatory redemption 48,000 50,250 Other preferred stock $5 Cumulative Preferred, without par . value, authorized 1,915.319 shares 1,915,319 1,915,319 175,000 175,000-Cumulative Preferred, $100 par value, authorized 6,000,000 shares ** 5%% Series A 600,000 600,000 '60,000 60,000 5%% Series B 750,000 750,000 ~ .75,000 75.000 4.65% Series C 600,000 600,000 60,000 60,000 4.65%. Series D 750,000 750,000 75,000 75,000 5%% Series E 500,000 500,000 50,000 50,000 6.20%. Series F 400,000 400,000_ 40,000 40,000 8.30 % Series G 500,000 500,000 50,000 50,000 Cumulative Preference, $100 par value, authorized 2,250,000 shares: 6% Convertible Series B 92.404 101,425 9,240 10.142 594,240 595.142 Total other preferred stock Total preferred stock 642,240 645,392

• Represents total authorized shares of cumulative preferred stock. $100 par value, including 8%% Series H.

The accompanying notes are an integralpart of these (mancialstatements. 26 4 1988. t087 At D_ecember 31 (Thousands of Dollars) ~ .Long-term debt (Note B) First and Refunding Mortgage Bonds (open-end mortgage): Maturity Interest Rate Series 1988 4% 0 50,000 1990 4% R 50,000 50.000 1990 5 S. 75,000 75,000 1991; .4% T 50.000 50.000 1991 4% U 60.000 60,000 1992 4% V 100,000 100,000 1992 4% W 75,000 75,000 '1992 4% X 60,000 60,000 - -1993 4.40 Y 75.000 75.000 1993 4% AA 75,000 75,900 1994' 4.60 BB '125.000 125.000 1996 5 CC 100,000 100,000 - 1996 5.90 DD 75,000 75,000 1997 6% EE 80,000 00.000 1997 8% LL 45,000 50,000 1998 6.85 FF 60,000 60,000 1999 7.90 GG 80,000 80,000 2000 8.90 till 125,000 125,000 2000 9% 11 150,000 .150,000 2001 7.90 JJ 150,000 150,000 2002 7.90 KK 150.000 150,000 2003 7% MM 150,000 150.000 2003 8.40 NN 150.000 150,000 2004 9% 00 150,000 150.000 2,210.000 2,265.000 .1hx exempt debt (issued through New York State Energy Research and Development Authority)-notes issued for Electric Facilities Revenue Bonds: 2020 9% 1985A 256,000 256,000 .2021 7% 1986A 150,000 150.000 2022 7% 1987A 100.855 100,855 2021 9% 1987B 49.145 49.145 1 'Ibtal tax-exempt debt 556,000 556,000 Other long-term debt Liens on purchased gas turbines 45.511 Other long-term debt 3.002 3.108 Unamortized debt premium 570 746 lbtal 2,815.083 2.824.854 Less: Long-term debt due within one year 8,776 55.106 Tbtallong-term debt 2,806.307 2.769,748 lbtal capitalization $7.653.682 $7.422.335 The accompanying notes are an integralpart of these (mancial statements. 27 CONS 01,1DATCD RCThlNCD CAkNINGS STATCMENT: . Consolidated 1:dison Company of Nei York, Inc, ' Year Ended December 31 (Triousands of Dollars) ' 1988 '19RT . t986 . _. ~.... _ _ _.. - Balance. January 1 $2.763.229 - $2.743.261 $2.633.312 - Netincome for the year 599.282 550,114 -546.-407.- 'Ibtal 3,362.511' 3.293.375 ~ 3.179.719 Dividends declared on capital stock Cumulative preferred at required annual rates - (see Consolidated Statement of Capitalization) 36.967 37.149 ~ 37.332 Cumulative Preference,6% Convertible Series B 574 629 720- _ Common, $3.20. $2.96 and $_2.68 per share...-._ _.... 364.704 - 343.453-319.694 Total dividends declared 402.245 381.231 357.746 ' Adjustments to retained earnings (Note B) Repurchase of common stock - 148.905 78.702 _.-__ _.._n of Cumulative P_. referred Stock _. 8%% Series 11_. _. _.... _ _.. _ _.. _ _ _. _. _ _ _ _ _ _. Redemptio.. ~... _ _. _. _ _ _ _ _. 10 10 10 'Ibtaldeductions . _ _402.255.._ 530.146 436.458 Balance, December 31 $2.960.256 $2.763.229 $2.743.261. The accompanying notes are an integralpart of these financialstatements. 4 s 'I l 1 l l-l 28 1 } t t< NOTES TO CONS 00 DATED FINANCIAL STATEMENTS ,j 21st century at a projected cost of approximately $861 - E .I .NN million. Depreciation expense also includes the amortiza-a.- F k1bluTION' The Company is' subject to regulation by the tion of certain deferred charges authorized by the PSC. i 3ew York Public Service Commissloa (PSC) and the Federal 'The Company is a joint owner of two oil fired 1,200-Energy Regulatory Commission (FERC). The Company's megawatt electric generating stations: (1) Bowline Itint, accounting policies conform to generally accepted account-operated by Orange and Rockland Utilitica. Inc. with Con ; ' ing principles, as applied in the case of regulated public Edison owning a two-thirds interest and (2) Roseton oper-utilities, and to the accounting requirements and rate-ated by Central liudson Gas & Electric Corp. with Con maOng practices of these regulatory authorities. Edison owning a 40 percent interest. Central Hudson has PRINCipl1S OF CONSOUMTION The accompanying con-the option to acquire the Company's interest in the Roseton. colidated financial statements include the accounts of the station in 2004. Con Edison's share of the investment in - Company and its wholly-owned investment subsidiary, these stations, at original cost and as included in its balance l Gramercy Assets Corporation, in accordance with State-sheet at December 31,1988 and December 31,1987, was: I ment of Financial Accounting Standards (SFAS) No. 94. __, _ ___. _ _ _. _.qey 1988 Prior to 1988, the Company's investment in Gramercy crgwamtp Assets was accounted for under the equity method. Finan-Bowhne Ibint: clal statements for prior years have been restated to reflect Planun senice $185.045 s184.383 c nstrucuanworkin progress 1.891 909-the consolidation. Intercompany transactions have been I E 805"; eliminated. ~. Plant in service 133.762 134.336-tJTluTY PLANT AND DEPRECIATION The capitalized cost of Construcuan wrk in progress 165 '280

additions to utility plant includes indirect costs such as I

engineering, supervision, payroll taxes, pensions, other Accumulated depreciation for the Company's share of the benefits and an allowance for funds used during construc-Roseton station at Decernber 31.1988 and 1987 was $44.1 tion ( AFDC). The original cost of property, together with _ million an'd $42.4 million. A separate depreciation account removal cost, less salvage. is charged to accumulated s not maintained for the Company's share of the Bowline depreciation as property is retired. The cost of repairs and Itint station. The Company's share of operating expenses 'l . maintenance is charged to expense, and the cost of better-for these stations is included in its income statement. ments is capitalized. WCu:AR lui. Nuclear fuel assemblics and components Rates used for AFDC include the cost of borrowed funds are amortized to operating expenses based on the quantity used for construction purposes and a reasonable rate on the of heat produced for the generation of electricity. A provi-Company's own funds when so used, determined in accord-sion for the future storage of the spent fuelis charged to ance with FERC and PSC regulations. The Company used an operating expenses based on the kilowatt-hours of electric-AFDC rate of 10.1 percent in 1988.1987 and 1986. The rate ty generated. Nuclear fuel costs are recovered in revenues was compounded semiannually, and the amounts applicable through base rates or through the fuel adjustment clause. to borrowed funds were treated as a teduction of interest U3SCS Prior to 1987 all leases were treated as operating charges. leases for rate-making and accc mting purposes. Effective in The annual charge for depreciation is computed on the 1987, in accordance with SFAS No. 71. " Accounting for the straight-line method for financial statement purposes, using Effects of Certain Types of Regulation' those leases that met l rates based on average lives and net salvage, with the the criteria for capitalization established by the Financial exception of the Indian itint 2 nuclear unit which is Accounting Standards Board veere capitalized for accounting depreciated on a remaining life amortization method. purposes and prior period statements were restated. For Depreciation rates averaged 3.0 percent in 1988,1987 and rate-making purposes all leases have t een treated as 1986. Depreciation charges include a provision for decom-operating leases. missioning both the Indian Ibint 2 and the retired Indian wens Revenues are recognized on a monthly cycle Itint 1 nuclear units. In 1983 the PSC determined, based on billing basis. The Company does not accrue revenues for site-specific cost estimates of $92.7 million in 1980 dollars. that such charge will be sufficient to provide for the dismantling and removal of both nuclear units in the early 29 .u !n l energy delivered after the. cycle billing date. Remnues from provided were $758.1 million at December 31.1988 and the fuel adjustment clause are not recorded until billed. $769.3 millior, at December St.1987. In accordance with RECOVERABt.E Fett. Costs -. Fuel costs which are above the SPAS No. 96.* Accounting for locome Taxes'l as amended by. levels included in base rates are recoverable under electric, . SFAS No.100, these amounts will be reflected in the p gas and steam fuel adjustment clauses. If costs fall below consolidated fmancial statements beginning with the calen-L . these levels. the difference is credited to customers. For dar year 1990, but will have a minimal impact on the electric and steam, such costs are deferred until the period Company because of PSC rate-making practices. The rate-l~ 'in which they are billed or credited to customers (40 days making treatment currently accorded federal income tax for electric 30 days for steam). For gas, the excess or - expenses by the PSC permits recovery of these future taxes deficiency is accumulated for refund or surcharge to cus-when they are paid. 'tomers on an annual basis. - The Company and its investment subsidiary file a consoli-The PSC has allowed the Company to recover in rates dated federal income tax return, income taxes nre allocated certain deferred recoverable fuel costs which were affected to each company based on its separate taxable income by shortening the billing lag period or increasing the cost of or loss. l fuel in base rates, if there were any further such revisions. KESEARcil AND DDB1,OPMENTCOSTS Research and devel-the Company believes that deferred recoverable fuel costs opment costs relating to specific construction projects and affected thereby would be recovered. to certain projects in advance of construction are capital-TEMPORARY CAsilINVESTMENTS Temporary cash invest. ized. All other sach costs are charged to operating expenses . ments include investments held by Con Edison and by as incurred. Research and development costs in 1988.1987, - Gramercy Assets Corporation that are stated at cost which and 1986. amounting to $32.5 million. $28.4 million and j L' approximates market. The Company considers temporary $30.7 million, respectively, were charged to operating cash lavestments to be cash equivalents, expenses. No research and development costs were cap-l INVESTMENTS Investments consist primarily of equity italized in these years. [ ' investments and tax-exempt securitics held by Gramercy Assets Corporation. These investments are stated at market NOTr B CAPITAUZATioN . value which approximates cost. COMMos Stock ANIWRUrERRED Stuck NOT st'nJECT To STATEMENT OF CASH Fl.0WS In accordance with SFAS No. MMMoW EDEWil0N Each share of Series B prefer- . 95. the Company's consolidated financial statements include ence stock is convertible into 6.50 shares of common stock a Consolidated Statement of Cash Flows. at a conversion price of $15.39 per share. During 1988. FEDERAI, INCOME Tu The Company provides for deferred 1987 and 1986. 9.021 shares.10.233 shares and 20.353 federal income taxes with respect to certain benefits shares of Series B preference stock were converted into realized f rom depreciation deductions utilized for tax pur-common stock. poses deferred fuel accounting. unbilled revenues included During 1987 and 1986 the Company repurchased common in taxable income, and certain other specific items when stock. These repurchases and the conversions of Series B approved by the PSC. The Company defers the benefits of all ference stock resulted in the following changes to the investment tax credits realized, number of shares of common stock outstanding: For rate-making purposes, accumulated deferred federal income taxes are deducted from rate base and amortized or 19aa 1987

198r, otherwise applied as a rednction (or increase) in federal outstandmg income tax expense in fut a e years. Accumulated deferred at January 1 113.937.916 118.520.603 120.908.707

' investment tax credits are amortized ratably over the lives Repurchased (4.649.200) (2.520.400) of the related properties, except for the credits related to issuea on con m on 58.628 66.513 132.296 employee stock ownership plans. Tax reductions resulting from other differences between outstanding at income for financial statement purposes and federal income December 31 113.996.544 113.937.916 I18.520.603 tax purposes are accounted for as current reductions in federal income tax provisions. The cumulative net amounts of such reductions for w hich deferred taxes have not been 30 l s e > 12 h K, ? The repurchased shares were canceled as of December 31 ' October 31,2005 (in each case, plus accrued dividends). No S ( of the year of purchase, thereby reducing common share-optional redemption constitutes a credit against the man-

holders' equity as follows:

datory redemption requirement. a__.-_2 Series !! shares may not be called for either mandatory c trhousandsn/ponors) 1987; 1980 or optional redemption while dividends are in arrears on . Commonytock - outst3nding shares of $5 Cumulative Preferred Stock or 1 Stated capital (par value) - $ '23.246 - $ 12.602 Cumulative Preferred Stod. Nevertheless, the annual man-capital surplus 28.779 15.602 datory redemption obligation of the Company with respect to Series 11 shares is cumulative and if the mandatory ai st c nse 0 ) 04) redemption requirement for the Series H shares is in l

• ta( - _

.}2m00, arrears the Company may cot purchase or redeem or pay :

l

$1 W 02 any dividends on the common stock or any other stock l l ' At December 31,1988. 600,626 shares of unissued common M o Mdd msm M n Celak stock were reserved for cpnwesion of preference stock. P fed Std eg fows oMshhs in 1 ' The preference stock is subordinate to the $5 Cumulative common stock or such lunior stock. .i . Preferred Stock and Cumulative Preferred Stock with sc4ERM DEBT lbtallong term debt maturing in the -l ' respect to dividends and liquidation rights. eriod 1989-93 is as follows: The Bcard of Trustees has by resolution determined that [; ' an. amount equal to the excess of the $100 per share invol-ggg , g,gg E untary liquidating value over the stated value of the out. i .. standing $5 Cumulative Preferred Stock will not be applied $1R000 goo 1990 ta the payment of dividends. The amount of such excess is 1991 $119.368.000 . $16.532.000. 1992 5244.771.000 ~ ~ ~ ~ Redemption prices of preferred stock at December 21, 3993 $160.210.000 1988 (in each case, plus accrued divMends) were as follows: u -. _.. - _. Substantially all properties and franchises of the Company. 55 Celaggened St{ $10300 other than expressly excepted property, are subject to the - Cumulative Preferred Stock-liens securing the Company's First and Refunding Mortgage Series A 102.00 Bonds and the mortgage bonds of acquired companies. Series B 102.00 Each November 1. the Company is required 10 redeem $5 million aggregate principal amount of Series LL Bonds at 100 percent of their principal amount plus accrued interest. Series E 101.00 Series F (through 7/31/89. ultimately $102.50) 104.00 These amounts are included in the debt maturing in 1989 .Senes0 101.00 through 1993 shown above. Cumutauve Preference Stock 6% Convertible Senes B 100.00 NOTEC "GNSATING BALANCES The Company has bank lines of credit amounting to $50 PREFERRED STvCK St:BJECT TO MANDATORY REDEMPTION milhon with borrowing thereunder to be at such banks' On November 1 of each year the Company is required I respective prime or other base lending rates, or at negoti-redetn 22.500 of the Series H shares at a price of $100 per ated rates of trAerest. In 1988 and 1987 there were no share plus dividends accrued to the redemption date. borrowings under these lines. The credit lines require The Cc;apany has the option on November 1 of each year average compensating balances of up to 3% percent of the to redeem up to 22.500 additional Scries H shares at a credit hnes and could require 6dditional balances for price of $100 per share, plus accrued dividends, up to a amounts borrowed. There are no legal restrictions applica-1 mar.imum accregate of 250.000 shares. The Series H shares ble to the Company's cash balances resulting from its are also redeemable at the optior, of the Company at a Mgation to maimain compensating balances. redemption price of $104.19 through Octouer 31.1989 and thereafter at prices declining annually to $100.00 af ter 31 __....m_.___ y[ f s. L. .+. _. i. NOTE D ' FEDERAL INCOME tax . 1har I:nded December 31 (Thousands of Dollars) 1988 19BT, 1986' Charged to:. Operations $291,380 $356.350. ' $428.410 Other income 9,740 2,943 9,911 %tal federalincome tax'- -301.120 359.293 438,321 Reconciliation of reported net income with taxable income: - Federal income tax-current - 293,100 325,766 1383.771 Federalincome tax-deferred 18.860 _ 39,487 ~ 44,250 (10,840) (5.960) 10,300 . _. _. -Investment tax credits deferred. _ 1Totalfedetalincome tax 301.120 - 359.293 438,321 . Net income. 599,282 550.114 546.407 Income before federalincome tax 900,402 909.407 984,728 ' 33.4% 39.5% 44.5%; Effective federalintbme tax rate -... - - -. ~ _. . Adjustments decreasing (increasing) taxable income: Tax depreciation in excess of book depreciation: Amounts subject to normalization 220.362 165,111 169,206 Other (58,049) (40,458)' (32.355)-

Deferred recoverabic fuelcosts 12.922' 57.067 (73.305)

Unbilled revenue (68,747)- (53.260) Production maintenance. HIECA and conservation compliance Emortizations (24,940) (29,880)- 6.497 Electric rate refunds - (47,000) (18.000) -{ Special franchise tax settlement (23.651) 4 Other-net 5,603 (9.382) 25,629 Total 16.500 71,198 95.672 . hxable income 883.902 838.209 889,056 Federalincome tax-current Amount computed at statutory rates 296.060 333,409 406.970 investment tax credits. (2.960) (7.643) (23,199) Charged to: Operations 287,030 318,700 373.600 Other income 6.070 7.066 10.171 . ~. Federal income tax-deferred Provisions for deferred lederal income taxes consist of the following - tax effects of timing differences between tax and book income: - Tax depreciation in excess of book depreciation 73.841 64.772 77.833 . Deferred recoverable fuel costs 5,317 27,506 (33,720) Unbilled revenue (23.672) (21.277) . Production maintenance. HIECA and conservation compliance amortization (11.513) (13.674) 2.989 Electric rate refunds (14.909) (7.191) - Special franchise tax settlement (8.041) Other-net (2.163) (10.649) (2.852) 1btal 18.860 39,487 44.250 Charged to: Operations 15.190 43.610 44.510 Otherincome 3.670 (4.123) (260) Total 18.860 39.487 44.250 Investment tax credits deferred Credits generated and utilized 2.960 7.643 23.199 Less: Amortization 13,800 13.603 12.699 32 -_--______D The investment tax credits generated and utihzed included To determine the present value of the projected beneht $68.000 and $3.540.000 for 1987 and 1986. respectively, obligation in 1988 and 1987, a discount rate of 7.5 percent related to the Company's employee stock ownership plans and an average rate of increase in future compensation which were used to purchase common stocuor employees. levels of approximately 6.5 percent were assumed. The assumed long-term rate of return on plan essets was 8.5 NOTE E PENsloN PtANS AND OTHER POST 4ETIKEMENT BENEFITS percent ior both 1988 and 1987. In 1986 the assumed rate of increase in future compensation levels was 6.5 percent and The pension plans for management and union employees the expected long-term rate of return on p;an ssets (also cover substantially all employees of the Company and are used as discount rate) was 7.75 percent. designed to comply with the Employee Retiremer.t income The pension plan assets consist primarily of corporate Security Act of 1974 (ERISA). Contributions are made solely common st0ck and bonds. group annuity contracts and debt by the Company based on an actuarial valuation, and are not of the United States government and its agencies. less than the mim. mum amount required by ERIS A. The 'lhe funded status of the pension plans as of December 31. Company's policy is to fund the actuarially computed net 1988 and 1987 was as follows: pension cost as such cost accrues. Benehts for management employees are based on a find five-year average pay plan (thousands ortiollars; maa mei while benefits for union employees are based on a modified g, g career average pay plan. Vested $ 1.775.000 $ 1.620.000 Elfective January 1.1987, the Company adopted SFAS Nonsested 183.000 168.000 No. 87. " Employers' Accounting for Pensions'! Adoption of Accumulated to date 1.958.000 1.7es.000 SFAS No. 87 required the Company to change from the entry Enect of pr@ ctem - age normal method to the projected unit credit method for compensanon levets 550.000 580.000 determining pension cost for financial reporting purposes-Tom gNem ouignon 2.508.000 2.368.000 The pension cost for 1988 and 1987 amounted to $56.0 mil-Plan asseis at fair value 2.577.000 2.333.000 lion and $57.5 million, respectively, of which $45.3 million Pun mets less proiected and $46.8 million were charged to operating expense, beneM oNipnon 69.000 (31000) Pension cost for 1986 computed using the entry age normal t:nrecocntzed net gain (106.000) 15.000) method amounted to $109.5 million, of which $89.9 million t' unrecognized net trar.sinon hatithty was charged to operating expense. The application or cpAs at knuary 1.1987 t emg recopized wer appiwmai$ 16ars 37.000 40.000 No. 87 resulted in a minimal decrease in pension expem e. Favc4able returns on plan assets in prior years were the Prepaid taccruedi pensioc cost 0 5 0 prmeipal reason for decreased pens;on expense in 1988 and 1987 compared with 1986. Effective January 1.1986 the Company established a The components of pet periodic pension cost for 1988 and contributory comprehensive hospital, medical and prescrip-1987 were as fo!!ows: tion drug program for all retirees. their dependents and surviving spouses. The program is funded based on an (rhonunds o/liousi m88 1987 actuarial valuation. The cost to the Company for 1988.1987 sernte cosi+enchts earned and 1986 amounted to $23.3 million. $17.6 million and during the period $ 74.800 5 72.000 $16.6 million, respectively, of u hich $18.9 million for 1988. Interest cost on projected t>cnehi onhunon 171.200 1642a0 $14.3 milhon for 1987 and $13.7 million for 1986 was Net aniottizantm and deterral 95.40(> (35.400 g ggg gg, .h G a n W n rved Actual return on plan assets (285.400) (143 300i the right to terminate the program. In addition to providing pension t enehts, the Company Net periodic pensmn cost 5 56.000 $ 57.500 provides hfe insurance benehts for approximately 7.300 retired mployees. The cost of the plan.which is based on actual claims experience and is recogni&d as expense on a current basis. is not readily separablo from the cost of providmg benehts to aclive employees. The total cost to the Company for the hfe insurance plan was approumately 33 $9.5 million in 19884L1 million af ter receipt of credits third-party liability indemnification program, the Company applicable to prior year s), $8.2 million in 1987 ($4.7 million could be assessed. per unit, up to $5 miHion per incident, alter receipt of credits applicable to the prior year) and but not more than $10 million in a calenaar year. Lccislatic $8.9 million in 1986. amendments to the program were enacted in 1988, but have All of the Company's employees become eligible for these not yet been implemented by Nuclear Regulatory Commis-benefits upon re!!rement except that the amount of life sion regulations. When so implemented, the amendments insurance is limited and is available only to management willincrease the maximum assessment for each unit to empkiyees and to those union employees who participated in $66 million per incident of which not more than $10 million the optional ; atributory program prior to retirement. may be assessed in any one year. This limit is subject to adjustment for inflation in luture years. The Company is NOTE F CONTINGENCIES seeking a determinat!on that its retired indian roint i unit is not subject te these assessments. INtMN Po!NT Nuclear generating units similar in design to ny pa@aks in an hana gam the Company's Indian Ibint 2 unit have experienced prob-coverlag liabilities for injuries to certain workers in the lems of varying severity in their steam generators, which in nu w n usW in k nent Wud inMa k several instances have required steam generator replace-any b w$Uo amsnwnL up an emmM ment. Inspections of the Indian ftint 2 steam generators ma um app maw W nGon. since 1976 have revealed similar problems, which appear to EPf M W CIAIMS The federal Comprehensive Environ-be progressive. The remaining service life of the steam mental Response, Compensation and Liability Act of 1980 generators is uncertain and may be shorter than the unit's FSu;)erfund') by its terms imposes strict liability. hfe. Based on data from steam generator m.specuons and m au @ n gnnam M hade nb other sources, the Company presently estimates that steam nm k muWng mmwaland unwM ma and generator replacement will not be required before 1992, and m nm n g onmany has MN mms probably not until some years later. To avoid procurement and/or notice of possible claims under Superfund relating to delays in the event replacement is necessary, the Company several sites at which it is alleged that hazardous sub-has purchased, and stored at the site replacement steam anm genna h pany (and in mW instanm generators. If replacement of the steam generators is a ge numW MOWU penuaHy mpmW paq required, such replacement is presently estimated (in 1988 dollars) to require additional expenditures of approximately

• E

" #3

• d il7 million (exclusive of replacement power costs) and an mpan am o

s not pmm% outage of approximately six months. flowever, securing m onmany B unaW at Ws ume m necessary permits and approvals or other factors could Mn n at M gosum to Hamy maw as a md of require a substantially longer outage if steam generator Replacement is required on short notice A umam n 3 am pMngin & M Nt'Ci m Inst u ct The insurance policies covering the nw un againM bdompany and man Company's nuclear facilities for property damage. excess a dekndanN whm n mnal Mnded Nain@ sM property damage, and outage costs, permit assessments mnkma and punitive damages estimated at approx-under certain conditions to cover insurers' losses. As of maw $13 billion, and additional unspecified punitive December 31,1988 the highest amount which could be damagm for deaths and injuries allegedly caused by assessed for losses deGg the current policy year was $21.3 exp sure to asbestos at various times at various premises of mHlion under the property damage insurance, $7.7 million mpany. The Company is unable at this time to under the excess property damage insurance and $3.9 nm at M ewumo hang dany may k as a miHion under the outara insurance. While assessments may also be made for losses in certain prior policy years, the Company is not aware of any losses in such years which it believes are likely to result in an assessment. Under certain circumstances, m the event of nuclear incidents at facihties covered by the federal government's 34 t ,,,....,a -,.u._..., ,,r.-.m._., ...i.-.,-. .....-~-.-~.-,.~.--...e..- -.. -. - - - ~. ~. - - - - - - -. - - NOTE G FINANCIAL INFORMATioN BY BUSINESS SEGMENTS (TI1ousands of Dollars) Electric Steam 1988 1987 1986 1988 1987 1986- $4.232.023 $4.198.363 $4.235.568 $ 273.154 $ 278.030 $ 277.686 Operating revenues

• _

Operating expenses fuel and purchased power 1,016.613 1.024.273 1.056,644 131.465 140.326 -143.137 Other operations and maintenance

• 1,121.742 1.098.689 1.072.874 59.328 51.209 51.897 Depreciation and amortization 271.440 259.103 249.156 7.899 6.300 6.071 Taxes, other than federalincome 885.034 874.239 850.730 41.033 40.255 39.196 Federal'mcome tax 256.859 309.400 382.861 12.056 14.917 14.065 Total operating expenses
• 3,551.688 3.565.704 3.612.265 251.781 253.007 254.366 Operating income 680.335 032.659 623.303 21.373 25.023 23.320 Construction expenditures 479.667 435.591 422.115 12,507 9.558 10.457 Net utility plant" 6.996.076 6.723.525 6.547.397 234.008-236.057 200.244 fuel 67.800 86.485 54.962 110 100 94 Other identihable assets 328,982 343.031 302.761 (7.800)

(b.e79) (6.876)

• lntersegment rentais Mcluded in segments' income but climmated for total company Operating revenues

$ 9.460 $ 9.520 $ 9.452 $ 1.714 $ 1.675 $ 1.618 Opi gung expenses 2.618 2.614 2.574 9.994 10.031 9.899 Gas Total Company 1988 1987 1986 1988 1987 1986 Operating revenues * $ 616.278 $ 630.687 $ 696.973 $5.108.826 $5.094.418 $5.197.736 Operating expenses Fuel and purchased power 1.148.078 1.164.599 1.199.781 Gas purchased for resale 222.900 241.025 307.742 222.900 241.025 307,742 Other operations and maintenance

• 169.626 163.553 167.382 1.338.067 1.300.789 1.279.662 Depreciation and amortization 28.740 26.888 26.175 308.079 292.291 281.402 Taxes, other than federalincome 101.057 100.898 100.914 1.027.124 1.015.392 990.840 Federalincome tax 22.465 32.033 31.484 291.380 356.350 428.410 Total operating expenses
• 544.788 564.397 633.697 4.335,628 4.370.446 4.487.837 Operating income 71.490 66.290 63.276 773.198 723.972 709.899 Construction expenditures 82.541 70.930 58.233 574.715 516.079 490.805 Net utility plant" 840.570 783.384 735.628 8.070.654 7.742.966 7.483.269 fuel and gas in storage 32,661 29.82D 23.984 100.571 116.414 79.040 Other identifiable assets 45.660 24.109 19.035 366.842 361.461 314.920 Other corporate assets 1.013.598 1.190.793 1.389.955 Total assets

$9.551.665 $9.411.634 $9.267.184

• Intersegment rentals included in segments' income but ehminated for total company Operanne revenues

$ 1.455 $ 1.467 5 1.421 $12.629 $12.662 $12.491 Operatmg expenses 17 17 18 12.629 12.662 12.491 "Generall'lthly Plant was alkocated to Dectnc and Gas on the trasis of the ' departmental use of sxh plant. Pursuant to PSC requirements the Stcam department is charged an mterdepartmental rent for General Plent used in Steam operations u hich is credited to Ifu Dectric and Gas departments. 35 STATISTICS 1988 1987 198r 1985 1984 Customers-Average for vear Electric 2.883.960 2.859.002 2.830.953 2.306.330 2.783.593 Gas 1.024.296 1.021.992 1.020.883 1.020.274 1.017,794 Steam 1.996 1.990 1.998 2.004 2.024 Sales volumes Electric (thousands of kilowatt-hours) Con Edison customers 33.768.923 31.607.921 30.167.339 29.568.087 29.389.790 Delivery service to NYPA 7.831.495 7.574.894 7.265.942 6.872.652 6.766.091 Service for municipal agencies 606.991 1.292.448 1.171.894 407.726 Other electric utilities

• 2.475.506 2.015.999 1.623.411 2.605.674 3.021.233 Gas (dekatherms)

Con Edison customers 96.376.152 96.815.284 98.491.110 105.012.206 101.714.107 Transportation of customer-owned gas 10,869.074 13.303.549 Steam (thousands of pounds) 30.613.119 28.984.131 27.830.247 26.435.523 27.953.090 Operating revenues (thousands) Electric sales to Con Edison customers $3.863.666 $3.803.334 $3.866.385 $4.076.908 $4.275.385 Delivery service to NYPA 172.939 171.540 172.083 167.206 162.732 Service for municipal agencies 59.352 116.683 112.493 39.517 Sales to other electric utilities 97.150 76.867 55.303 105.769 145.675 Other electric revenues 29.456 20,419 19.850 19.882 26.951 Tbtal electric 4.222.563 4.188.843 4.226.116 4.409.282 4.610.743 Gas sales revenues 609.095 620.943 691.717 752.734 744.698 1 transportation of customer-owned gas 2.920 5.563 Other gas revenues 2,808 2,714 3.835 19,310 16.906 Total gas 614.823 629.220 695.552 772.044 761,604 Steam sales revenues 271.499 276.414 275.942 316.493 356.318 Other steam revenues (59) (59) 126 101 166 Tital steam 271.440 276.355 276.068 316.594 356.484 lotaloperatingre enues $5.108.826 $5.094.418 $5.197.736 $5.497.920 $5.728.831 l Taxes other than federal income (thousands) l Property taxes $ 633.042 $ 618.569 $ 581.651 5 541.965 $ 508.493 Revenue taxes 298.888 302.730 323.171 340.935 354.547 OGier 150.366 140.201 130.698 137.902 147.688 Total $1.082.296 $1.061.500 $1.035.520 $1.020.802 $1.010.728 Charged to: Operating taxes $1,027.124 $1,015.392 $ 990.840 $ 964.680 $ 944.774 Operations-principally fuel 27.850 26.981 23.780 36.248 43.343 Construction and other accounts 27.322 19.127 20.900 19.874 22.611 Total $ 1,082.296 $1.061.500 $1.035.520 $1.020.802 $1.010.728 Operatingincome (thousands) Electric $ 680.335 $ 632.659 $ 623.303 $ 639.625 $ 658.936 Gas 71.490 66.290 63.276 58.852 67.591 Steam 21.373 25.023 23.320 16..i60 24.438 Total $ 773,198 $ 723.972 $ 709.899 $ 715.143 $ 750,965

• int ides thousands of kwh sold to NYPA and meluded in dehvery service to NYPA 390.734 20.536 23,494 55.084 19.569 36

1988 1987 1986 1985 1984 , Shareholders at December 31 Common 167.834 171.650 177.550 188.423 196.378 Preferred 23.218 24.555 26.229 28,860 31,159 Total 191.052 196.205 203.779 217.283 227.537 Shares outstanding at December 31 Common 113.996.544 113.937.916 118.520.603 120.908.707 129.897.917 Preferred 6.610.223 6.641.744 6.674.477 6.717.330 6.758.689 Employees at Decemter 31 20.108 70.266 20.698 21.076 21,481 Active payroll (thousands) Operating $654,589 $643.105 $633.075 $617,394 $592.375 Construction 189,8'>8 182.519 170.711 162.336 163.713 Total $844,447 $825.624 $803.786 $779.730 $756.088 CILCTRIC SYSTIN CON EDISON CUSTOMERS ONIN Net Generating Capability at Time of System Con Edison Heat Capacity Frak Ftriod-Kilowatts Customer Irak* Rate Residential Sales" Dec. 31 (Summer Net Total Ratind Generating Net firm Capanty Btu per Kwh per Remnue lear Kil(rvatts Capacity l'urchases* " Kesources Date Kilowatts Kwh Customer per Kwh 1988 9.248.000 9.196.000 901,000 10.097.000 Aug.15 8.617.000t 10.540 3.892 13.5e 1987 9.098.000 9.073.000 851.000 9.924.000 July 24 7.924.000 10.815 3.709 14.0 1986 9.063.000 9.200.000 992.000 10.192.000 July 7 7.641,000 10.970 3.511 14.7 1985 9.341.000 9.455.000 1.102.000 10.557.000 Aug.15 7.670.000 11.139 3.386 15.8 1984 9.451.000 9.387.000 1.181.000 10.568.000 June 11 7.435,000 11.319 3.391 16.5 'One hour net maximum load distributed to Con Edison customers on day of frauc:.!se area peat " Includes municipalagency sales from 1985 through 1988. '* Excludes reserve credit for hTIM purchases. if'reliminary. 110CTRIC SISTLN CON EDISON FIMClllSE AREA Capabihty at Time of System Irak ltriod-Kilowatts franchise Area Peak

• Net Total Generalma Net Fnm Capacity icar Cr.pacity" Purchases"*

Resources Date Kilowatts 1988 10,988.400 929.400 11.917.800 Aug.15 10.182.000 1987 10.865.400 755.000 11.620.400 July 24 9.386.000 1986 10.992.000 845.400 11.837,400 July 7 8.950.000 1985 11.247.000 812.000 12.059.000 Aug.15 8.819.000 1984 11,170.000 896.000 12.075.000 June 11 8.585.00 'One hour nel matimum load distributed in franchise area. ' Includes the canacity of NllH's ibletti and Indian FDint units.

• "ExclJdes firm purchases from N}}%'s lbletti and Indian (bint units and reserve Credit from other N11% VHrchaseS.

1988 ELECTRIC SALES AND RFVENCES Thousands of % Change sales Revenues % Change Kilowau-hours from 1987 (Thousands o/ Dollars / from 1987 Residential 9.291,713 7.9 $1,264.728 4.0 Commercial-industrial 23.946.874 6.4 2.602,640 1.6 Railroads and railways 69,999 3.6 6.587 (0.6) Public authorities 460,337 6.4 43.701 1.2 Total salv to Con Edison customers 33.768.923 6.8 3,917,656 2.4 Provision for electric rate refunds (73.500) Large Other sales revenues 19.510 Large Delivery service to NYPA customers 7.831.495 3.4 172,939 0.8 Service for municipal agencies 606.991 (53.0) 59.352 (49.1) Tbtal sales in service territory 42,207.404 4.3 $4.095.957 0.1 Sales to other electric utilities 2,475.306* 22.8 97,150 26.4

• See footnote on Statistics, page 3G.

Residential-Sales directly to residential customers and to t eligious institutions. Commercial-industrial-Sales to all types of general customers, also to customers sto include residential or commercial tenant se in the rent and to customers who resell energy to commercial and industrial tenants. Rattroads and railways-Sales to certain electrified railroads. Public atithorities-Sales to municipal and other governmental authorities. Delivery service to NYPA customers-Electricity supplied by NYPA and distributed by Con Edison. Service for municipal agencies-Electricity supplied by the New York City Public Utility Service and the County of Westchester Public Utility Service Agency and distributed by Con Edison. --~ 1988 GAS SALES AND REVENt'ES % Change Sales Revenues % Change Dekatherms from 1987 (Thousands of Ikilars) from 1987 Firm sales: Residential 49,119.172 6.0 $ 367,456 1.5 General 34.234.653 4.8 197,031 (0.2) 'Ibtal firm sales 83.353.825 5.5 564,487 0.9 Interruptible sales 13.022.327 (26.8) 44.608 (27.6) 'Ibtal sales to Con Edison customtrs 96,376,152 (0.5) 609.095 (1.0) Transportation of customer-owned gas lu,869.074 (18.3) 2,920 (47,5) 'Ibtal sales and transpor tation 107,245.226 (2.6) $612.015 (2.3) Residential-Sales directly Io residential customers and to religious institutions, including sales for heating. General-Sales to commercial ir.'dustrial and governmental customers who use gas for various purposes in their operations. Interrupttble-Sales to other general-use customers who use gas on an interruptible basis and sales to NYPA for natural gas used as boiler fuel at its Ibletti unit. Transportation of customer-owned gas-Gas which is purchased directh by the l customer from a supplier and transported by the Company for the customer's own use. 1988 STEAM SALES AND REVENUES Thousands of % Change Sales Revenues % Change rtiune from 1987 (Thousands of Dollars) from 1987 General 1,090,588 12.1 $ 13.751 7.9 Annual power 21,178,022 5.2 185.544 (3.0) Apartment house 8,344.509 6.0 72,204 (0.4) Total 30.613.119 5.6 $271.499 (1.8) General-Sales to relatively small-use customers. Annual power-Sales for power. or power and heat use. Apartment house-Sales to apartment houses and hotels. 38 4 rL e i EMpAGlhttNT .~ m, r Chairman of the P,oard Vice Presidents Sand Chief becutlie Officer - Robert A. Bell, Research and Development Arthur Hauspurg Arthur J. Bennett, Bronx Division ' Vice Chairman of the 15oard David G. Bosland, Transportation and Stores - John V Thornton (Retired January 31,1989.) Stephen B. Bram,NuclearIbwer j Lr 1 d . Kevin M. Burke, Construction ' Pr'esident and Chief Operating Officer l Warren B. Coburn; Brooklyn Division

Eugene R. McG'ath l

Robert V. Crane, Manhattan Division nernthe V)ce President'

and Chief l'inaticial O!!1cer.

George J. Delaney, Westchester Division q Charles J. Durkin, Jr. Engineering Raymond J. McCann Thomas J. Galvin, Employee Relations beruthe Vice Presidents CarlW. Greene(and Controller) John T. Conway, Corporate Affairs i Garrett W. Groscup, ? stem and kansmission Coerations l Joseph T. Hydot, Gas Operations William A. Harkins, Planning andInter-Utility Affairs l Murray Selman,CentralOperations Paul H. Kinkel, fbssillbwer i Charles F. Soutar. Division Operations Laurence V. Kleinman, Corporate Communications and PublicInformation - 1 Senior Vice President' Edward W. Livingston, Government and Community . John E. Deegan, Jr.. CentralServices Relations Joy Tannlan (and GeneralCounsel) Bertram D. Mall, Gas Supply l(Died August 3.1988.) Leonard D. Murphy, Staten Island Division General Auditor. Edward J. Carey John A.Nutant Purchasing Senetary, Archie M. Bankston Raymond P. Priore Systems andInformation Processing 'Itcasurer. Alfred R. Wassler Dennis P. Quirk. Queens Division General Tas Counsel Frederick J. Hunziker, Jr. Peter Zarakas, Project Management 39 ,t; I \\ 4 (TkUSTEES ~ e-m- ~ .M.,,,,_ Ross Barzelay Frederick P. Rose Retired. Former Vice Chairman of the Board, General Foods. Chairman. Rose Associates, Inc., New York. N.Y. (Real estate 5 Corporation, White Plains, N.Y. (Manufacturer of processed L investment.) ' / -- ' foods.) Donald K. Ross 1s. Virgil Conway Chairman of the Board and Chief Executive Gificer, New - Chairman of the Board The Seamen's Bank for Savings, . York Life Insurance Company, New York. NJ. FSB, New York, N.Y. Richard R. Shinn Rutti M. Davis Executive Vice Chairman, New York Stock Exchange, Inc..,. President.The Py natuning Group. Inc., Arlington,Va. ' New York, N.Y. Former Chairman of the Board and Chief. .' (Technology management consultants.). Executive Officer, Metropolitan Life Insurance Company, New York, N.Y. . Arthur llatspurg Chairman of the Board and Chief Executive Officer. John V. Thornton Vice Chairman of the Board. (Retired from the Board and the Marian S ileiskell Company January 31,1989.) Director The New York Times Company, New York, N.Y. ' f (Newspaper publishing and other communications media.) Myles V. Whalen. Jr. Retired. Former Partner Shearman & Sterling, Attorneys at R Peter W. Likins Law, New York. N.Y. President. Lehigh University, Bethlehem, Pa. I'ranklii, i1. Williams Charles F. Luce President and Chief Executive Officer, Phelps-Stokes Fund. Special Counsel, Metropolitan Life Insurance Company. New Yo'rk, N.Y. (Educational foundation.) New York, N.Y. Former Chairman of the Board and Chief - Executive Officer of the Company. Raymond J. McCann Executive Vice President and Chief Financial Officer. Eugene R. McGrath President and Chief Operating Officer. Donald C. Platten Chairman of the Executive Committee and Director and

formerly Chairman of the Board and Chief Executive Officer.

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