Leases

12 Months Ended

Dec. 31, 2015

Operating Leased Assets [Line Items]

Leases

Leases

Con Edison’s subsidiaries lease electric transmission facilities, gas distribution facilities, land, office buildings and equipment. In accordance with the accounting rules for leases, these leases are classified as either capital leases or operating leases. Most of the operating leases provide the option to renew at the fair rental value for future periods. Generally, it is expected that leases will be renewed or replaced in the normal course of business.

Capital leases: For ratemaking purposes capital leases are treated as operating leases; therefore, in accordance with the accounting rules for regulated operations, the amortization of the leased asset is based on the rental payments recovered from customers. The following assets under capital leases are included in the Companies’ consolidated balance sheets at December 31, 2015 and 2014:

	Con Edison		CECONY
(Millions of Dollars)	2015	2014	2015	2014
UTILITY PLANT
Common	$3	$3	$2	$1

The accumulated amortization of the capital leases for Con Edison and CECONY was $3 million and $2 million, respectively at December 31, 2015, and $2 million and $1 million, respectively at December 31, 2014.

The future minimum lease commitments for the above assets are as follows:

(Millions of Dollars)	Con Edison	CECONY
2016	$1	$1
2017	1	1
2018	1	1
2019	—	—
2020	—	—
All years thereafter	—	—
Total	3	3
Less: amount representing interest	1	1
Present value of net minimum lease payment	$2	$2

Operating leases: The future minimum lease commitments under the Companies’ non-cancelable operating lease agreements are as follows:

(Millions of Dollars)	Con Edison	CECONY
2016	$18	$12
2017	18	12
2018	18	12
2019	16	10
2020	15	9
All years thereafter	123	42
Total	$208	$97

Lease In/Lease Out Transactions

In each of 1997 and 1999, Con Edison Development entered into transactions in which it leased property and then immediately subleased the properties back to the lessor (termed “Lease In/Lease Out,” or LILO transactions). The transactions respectively involved electric generating and gas distribution facilities in the Netherlands. In accordance with the accounting rules for leases, Con Edison accounted for the two LILO transactions as leveraged leases.

In 2013, the Court of Appeals for the Federal Circuit reversed a lower court decision and disallowed tax losses in connection with the 1997 LILO transaction and Con Edison entered into a closing agreement with the Internal Revenue Service (IRS) regarding the 1997 and 1999 LILO transactions. In addition, in 2013, Con Edison recorded an after-tax charge of $150 million to reflect, as required by the accounting rules for leveraged lease transactions, the recalculation of the accounting effect of the LILO transactions based on the revised after-tax cash flows projected from the inception of the leveraged leases as well as the interest on the potential tax liability resulting from the disallowance of federal and state income tax losses for the LILO transactions. Also, in 2013, the LILO transactions were terminated, as a result of which the company realized a $55 million gain (after-tax). In 2014, adjustments were made to the interest accrued on the liability and the related taxes resulting in a decrease to net income of $1 million. Adjustments made in 2015 were immaterial.

The effect on Con Edison’s consolidated income statement for the twelve months ended as of December 31, 2014 and 2013 was as follows:

	For the Years Ended December 31,
(Millions of Dollars)	2014		2013
Increase/(decrease) to non-utility operating revenues		$—	$(27)
(Increase)/decrease to other interest expense	13		(131)
Income tax benefit/(expense)	(14)		63
Total increase/(decrease) in net income	$(1)		$(95)

CECONY

Operating Leased Assets [Line Items]

Leases

Leases

Con Edison’s subsidiaries lease electric transmission facilities, gas distribution facilities, land, office buildings and equipment. In accordance with the accounting rules for leases, these leases are classified as either capital leases or operating leases. Most of the operating leases provide the option to renew at the fair rental value for future periods. Generally, it is expected that leases will be renewed or replaced in the normal course of business.

Capital leases: For ratemaking purposes capital leases are treated as operating leases; therefore, in accordance with the accounting rules for regulated operations, the amortization of the leased asset is based on the rental payments recovered from customers. The following assets under capital leases are included in the Companies’ consolidated balance sheets at December 31, 2015 and 2014:

	Con Edison		CECONY
(Millions of Dollars)	2015	2014	2015	2014
UTILITY PLANT
Common	$3	$3	$2	$1

The accumulated amortization of the capital leases for Con Edison and CECONY was $3 million and $2 million, respectively at December 31, 2015, and $2 million and $1 million, respectively at December 31, 2014.

The future minimum lease commitments for the above assets are as follows:

(Millions of Dollars)	Con Edison	CECONY
2016	$1	$1
2017	1	1
2018	1	1
2019	—	—
2020	—	—
All years thereafter	—	—
Total	3	3
Less: amount representing interest	1	1
Present value of net minimum lease payment	$2	$2

Operating leases: The future minimum lease commitments under the Companies’ non-cancelable operating lease agreements are as follows:

(Millions of Dollars)	Con Edison	CECONY
2016	$18	$12
2017	18	12
2018	18	12
2019	16	10
2020	15	9
All years thereafter	123	42
Total	$208	$97

Lease In/Lease Out Transactions

In each of 1997 and 1999, Con Edison Development entered into transactions in which it leased property and then immediately subleased the properties back to the lessor (termed “Lease In/Lease Out,” or LILO transactions). The transactions respectively involved electric generating and gas distribution facilities in the Netherlands. In accordance with the accounting rules for leases, Con Edison accounted for the two LILO transactions as leveraged leases.

In 2013, the Court of Appeals for the Federal Circuit reversed a lower court decision and disallowed tax losses in connection with the 1997 LILO transaction and Con Edison entered into a closing agreement with the Internal Revenue Service (IRS) regarding the 1997 and 1999 LILO transactions. In addition, in 2013, Con Edison recorded an after-tax charge of $150 million to reflect, as required by the accounting rules for leveraged lease transactions, the recalculation of the accounting effect of the LILO transactions based on the revised after-tax cash flows projected from the inception of the leveraged leases as well as the interest on the potential tax liability resulting from the disallowance of federal and state income tax losses for the LILO transactions. Also, in 2013, the LILO transactions were terminated, as a result of which the company realized a $55 million gain (after-tax). In 2014, adjustments were made to the interest accrued on the liability and the related taxes resulting in a decrease to net income of $1 million. Adjustments made in 2015 were immaterial.

The effect on Con Edison’s consolidated income statement for the twelve months ended as of December 31, 2014 and 2013 was as follows:

	For the Years Ended December 31,
(Millions of Dollars)	2014		2013
Increase/(decrease) to non-utility operating revenues		$—	$(27)
(Increase)/decrease to other interest expense	13		(131)
Income tax benefit/(expense)	(14)		63
Total increase/(decrease) in net income	$(1)		$(95)