SIGNIFICANT ACCOUNTING POLICIES

Other Income

Other income is recognized for non-operating income such as equity earnings, interest and dividends, allowance for funds used during construction and contract services. Power & Industrial Projects also recognizes Other income in connection with the sale of membership interests in reduced emissions fuel facilities to investors. In exchange for the cash received, the investors will receive a portion of the economic attributes of the facilities, including income tax attributes. The transactions are not treated as a sale of membership interests for financial reporting purposes. Other income is considered earned when refined coal is produced and tax credits are generated. Power & Industrial Projects recognized approximately $15 million and $20 million of Other income for the three months ended June 30, 2014 and 2013, respectively, and approximately $32 million and $35 million of Other income for the six months ended June 30, 2014 and 2013, respectively.

Comprehensive Income (Loss)

Comprehensive income (loss) is the change in common shareholders’ equity during a period from transactions and events from non-owner sources, including net income. As shown in the following tables, amounts recorded to accumulated other comprehensive loss for the three and six months ended June 30, 2014 include unrealized gains and losses from derivatives accounted for as cash flow hedges, unrealized gains and losses on available-for-sale securities and the Company’s interest in other comprehensive income of equity investees, which comprise the net unrealized gains and losses on investments, changes in benefit obligations, consisting of deferred actuarial losses, prior service costs and transition amounts related to pension and other postretirement benefit plans, and foreign currency translation adjustments.



	Changes in Accumulated Other Comprehensive Loss by Component (a)
	For The Three Months Ended June 30, 2014
	Net Unrealized Gain/(Loss) on Derivatives			Net Unrealized Gain/(Loss) on Investments			Benefit Obligations (b)			Foreign Currency Translation			Total
	(In millions)
Beginning balance, March 31, 2014	$	(4	)	$	(6	)	$	(126	)	$	(1	)	$	(137	)
Other comprehensive income before reclassifications	—			1			—			1			2
Amounts reclassified from accumulated other comprehensive income	—			—			1			—			1
Net current-period other comprehensive income	—			1			1			1			3
Ending balance, June 30, 2014	$	(4	)	$	(5	)	$	(125	)	$	—		$	(134	)



	Changes in Accumulated Other Comprehensive Loss by Component (a)
	For The Six Months Ended June 30, 2014
	Net Unrealized Gain/(Loss) on Derivatives			Net Unrealized Gain/(Loss) on Investments			Benefit Obligations (b)			Foreign Currency Translation		Total
	(In millions)
Beginning balance, December 31, 2013	$	(4	)	$	(6	)	$	(126	)	$	—	$	(136	)
Other comprehensive income before reclassifications	—			1			(2		)	—		(1		)
Amounts reclassified from accumulated other comprehensive income	—			—			3			—		3
Net current-period other comprehensive income	—			1			1			—		2
Ending balance, June 30, 2014	$	(4	)	$	(5	)	$	(125	)	$	—	$	(134	)

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(a)	All amounts are net of tax.


(b)	The amounts reclassified from accumulated other comprehensive income are included in the computation of the net periodic pension and other postretirement benefits cost (see Note 12).

Intangible Assets

The Company has certain intangible assets relating to emission allowances, renewable energy credits and non-utility contracts as shown below:



	June 30,		December 31,
	2014		2013
	(In millions)
Emission allowances	$	2	$	2
Renewable energy credits	51		51
Contract intangible assets	123		126
	176		179
Less accumulated amortization	51		45
Intangible assets, net	125		134
Less current intangible assets	13		12
	$	112	$	122

Emission allowances and renewable energy credits are charged to expense, using average cost, as the allowances and credits are consumed in the operation of the business. The Company amortizes contract intangible assets on a straight-line basis over the expected period of benefit, ranging from 1 to 28 years.

Income Taxes

The Company's effective tax rate for the three months ended June 30, 2014 was 28% as compared to 29% for the three months ended June 30, 2013. The Company's effective tax rate for the six months ended June 30, 2014 was 31% as compared to 30% for the six months ended June 30, 2013. The 1% decrease in the effective tax rate for the three months ended June 30, 2014 is due to higher production tax credits. The 1% increase in effective tax rate for the six months ended June 30, 2014 is due to $8 million of deferred tax expense resulting from New York state income tax reform enacted on March 31, 2014, partially offset by higher production tax credits.

The Company had $2 million of unrecognized tax benefits at June 30, 2014, that, if recognized, would favorably impact its effective tax rate. The Company believes that it is possible that there will be a decrease in the unrecognized tax benefits of up to $1 million in the next twelve months.