This combined management's discussion and analysis of financial condition and results of operations (MD&A) relates to the consolidated financial statements (the Third Quarter Financial Statements) included in this report of two separate registrants: Consolidated Edison, Inc. (Con Edison) and Consolidated Edison Company of New York, Inc. (Con Edison of New York) and should be read in conjunction with the financial statements and the notes thereto. As used in this report, the term the "Companies" refers to Con Edison and Con Edison of New York. Con Edison of New York is a subsidiary of Con Edison and, as such, information in this MD&A about Con Edison of New York applies to Con Edison.

This MD&A should be read in conjunction with the Third Quarter Financial Statements and the notes thereto and the MD&A in Item 7 of the Companies' combined Annual Report on Form 10-K for the year ended December 31, 2007 (File Nos. 1-14514 and 1-1217, the Form 10-K) and the MD&A in Part I, Item 2 of their combined Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2008 and June 30, 2008 (File Nos. 1-14514 and 1-1217, the First Quarter Form 10-Q and Second Quarter Form 10-Q, respectively).

Information in the notes to the consolidated financial statements referred to in this discussion and analysis is incorporated by reference herein. The use of terms such as "see" or "refer to" shall be deemed to incorporate by reference into this discussion and analysis the information to which reference is made.

Corporate Overview

Con Edison's principal business operations are those of its utility companies,
Con Edison of New York and Orange and Rockland Utilities, Inc. (O&R), together
known as the "Utilities." Con Edison also has competitive energy businesses (see
"Competitive Energy Businesses," below). Certain financial data of Con Edison's
businesses is presented below:



                                      Three Months Ended                       Nine Months Ended                 At September 30,
                                      September 30, 2008                       September 30, 2008                      2008
                                 Operating                               Operating
(Millions of Dollars)            Revenues           Net Income            Revenues           Net Income               Assets
Con Edison of New York        $ 3,023      79 %   $  250     137 %    $  8,057      76 %   $   590      57 %    $    26,326     90%
O&R                               283       7 %       19      10 %         769       7 %        35       3 %          1,914      6%
Total Utilities                 3,306      86 %      269     147 %       8,826      83 %       625      60 %         28,240     96%
Con Edison Development (a)         (6 )     - %       (1 )    (1 )%         48       1 %       148      14 %            432      2%
Con Edison Energy (a)             324       8 %        3       2 %         685       6 %       (14 )    (1 )%           144      1%
Con Edison Solutions (a)          245       6 %      (88 )   (48 )%      1,032      10 %       (22 )    (2 )%            93      -%
Other (b)                         (11 )     - %       (1 )     - %          (7 )     - %        25       2 %            413      1%
Total continuing operations     3,858     100 %      182     100 %      10,584     100 %       762      73 %         29,322    100%
Discontinued operations (c)       N/A     N/A        N/A     N/A           N/A     N/A         274      27 %            N/A     N/A
Total Con Edison              $ 3,858     100 %   $  182     100 %    $ 10,584     100 %   $ 1,036     100 %    $    29,322    100%

(a) Income from continuing operations of the competitive energy businesses for the three and nine months ended September 30, 2008 includes $(88) million and $(25) million of net after-tax mark-to-market gains/(losses) (Con Edison Development, $(2) million and $16

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

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million, respectively, Con Edison Energy $1 million and $(26) million, respectively and Con Edison Solutions, $(87) million and $(15) million respectively). Con Edison Development's income from continuing operations for the nine months ended September 30, 2008 also includes $137 million after-tax from the gain on the sale of generation projects. See Note N to the Third Quarter Financial Statements.

(b) Represents inter-company and parent company accounting. The nine month period ended September 30, 2008 includes $30 million of after-tax net income related to the resolution of the Company's legal proceeding with Northeast Utilities. See Note H to the Financial Statements in Part I, Item 1 of the First Quarter Form 10-Q.

(c) Represents the discontinued operations of Con Edison Development's generation projects, which includes a $270 million after-tax gain on the sale of generation projects for the nine months ended September 30, 2008, respectively. See Note N to the Third Quarter Financial Statements.

Con Edison's net income for the three months ended September 30, 2008 was $182 million or $0.66 a share compared with earnings of $312 million or $1.15 a share for the three months ended September 30, 2007. Net income for the nine months ended September 30, 2008 was $1,036 million or $3.80 a share compared with earnings of $722 million or $2.73 a share for the nine months ended September 30, 2007. See "Results of Operations - Summary," below.

Regulated Utilities

Con Edison of New York provides electric service to approximately 3.2 million customers and gas service to approximately 1.1 million customers in New York City and Westchester County. The company also provides steam service in parts of Manhattan. O&R, along with its regulated utility businesses, provides electric service to approximately 0.3 million customers in southeastern New York and adjacent areas of northern New Jersey and eastern Pennsylvania and gas service to over 0.1 million customers in southeastern New York and adjacent areas of eastern Pennsylvania.

The Utilities are primarily "wires and pipes" energy delivery businesses that deliver energy in their service areas subject to extensive federal and state regulation. The Utilities' customers buy this energy from the Utilities, or from other suppliers through the Utilities' retail access programs. The Utilities purchase substantially all of the energy they sell to customers pursuant to firm contracts or through wholesale energy markets, and recover (generally on a current basis) the cost of the energy sold, pursuant to approved rate plans.

Con Edison anticipates that the Utilities will continue to provide substantially all of its earnings over the next few years. The Utilities' earnings will depend on various factors including the Utilities' ability to charge rates for their services that reflect the costs of service, including a return on invested equity capital.

Because the energy delivery infrastructure must be adequate to meet demand in peak periods with a high level of reliability, the Utilities' capital investment plans reflect in great part past actual electric peak demand adjusted to summer design weather conditions, as well as forecast growth in peak usage.

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The factors affecting demand for utility service include growth of customer demand, weather, market prices for energy, economic conditions and measures that promote energy efficiency. Demand for electric service peaks during the summer air conditioning season. Demand for gas and steam service peaks during the winter heating season.

The weather during the summer of 2008 was cooler than design conditions. The highest peak electric demand reached in 2008 was 12,987 MW for Con Edison of New York and 1,530 MW for O&R. Both peaks occurred on June 10, 2008. The Companies continue to monitor the effects of the ongoing global financial turmoil on the local economy, and its potential impact on customer demand. The Utilities currently estimate that, under design weather conditions, the 2009 peak electric demand in their respective service areas will be 13,875 MW for Con Edison of New York and 1,670 MW for O&R. The average annual growth rate of the peak electric demand over the next five years at design conditions is currently estimated to be approximately 0.9 percent for Con Edison of New York and 2.6 percent for O&R. The Con Edison of New York forecasted peak demand includes the impact of permanent demand reduction programs. The Companies anticipate an ongoing need for substantial capital investment in order to meet this growth in peak usage with the high level of reliability that they currently provide. See "Liquidity and Capital Resources - Capital Requirements," below.

The Utilities have rate plans approved by state utility regulators that cover the rates they can charge their customers. Con Edison of New York's electric, gas and steam rate plans are effective through March 31, 2009, September 30, 2010 and September 30, 2010, respectively. In May 2008, Con Edison of New York filed a request for a new electric rate plan to be effective April 1, 2009. O&R's rate plans for its electric and gas service in New York and its subsidiary's electric service in New Jersey extend through June 30, 2011, October 31, 2009 and March 31, 2010, respectively. Pursuant to the Utilities' multi-year rate plans, charges to customers generally may not be changed during the respective terms of the rate plans other than for recovery of the costs incurred for energy supply, for specified increases provided in the rate plans and for limited other exceptions. The New York rate plans for Con Edison of New York's gas and steam operations as well as O&R's electric and gas operations generally require the Utilities to share with customers, earnings in excess of specified rates of return on common equity capital. Under the revenue decoupling mechanisms in Con Edison of New York's current electric and gas rate plans and O&R's electric rate plan, the Utilities' revenues will generally not be affected by changes in delivery volumes from levels assumed when rates were approved.

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See "Regulatory Matters" below and Note B to the Third Quarter Financial Statements.

Accounting rules and regulations for public utilities include Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," pursuant to which the economic effects of rate regulation are reflected in financial statements. See "Application of Critical Accounting Policies," below.

Competitive Energy Businesses

Con Edison's competitive energy businesses participate in segments of the electricity industry that are less comprehensively regulated than the Utilities. These segments include the sales and related hedging of electricity to wholesale and retail customers and sales of certain energy-related products and services. At September 30, 2008, Con Edison's equity investment in its competitive energy businesses was $267 million and their assets amounted to $669 million.

Consolidated Edison Solutions, Inc. (Con Edison Solutions) sells electricity directly to delivery-service customers of utilities primarily in the Northeast and Mid-Atlantic regions (including some of the Utilities' customers) and also offers energy-related services. Con Edison Solutions does not sell electricity to the Utilities. The company sold approximately 8.2 million MWHs of electricity to customers over the nine-month period ended September 30, 2008.

Consolidated Edison Development, Inc. (Con Edison Development) participates in infrastructure projects. During the second quarter of 2008, Con Edison Development and its subsidiary, CED/SCS Newington, LLC, completed the sale of their ownership interests in power generating projects with an aggregate capacity of approximately 1,706 MW. See Note N to the Third Quarter Financial Statements.

Consolidated Edison Energy, Inc. (Con Edison Energy) procures electric energy and capacity for Con Edison Solutions and fuel for other companies. It sells the electric capacity and energy produced by plants owned, leased or operated by others. The company also provides energy risk management services to Con Edison Solutions, offers these services to others and enters into wholesale supply transactions.

The competitive energy businesses are focusing on increasing their customer base and gross margins. See "Liquidity and Capital Resources - Capital Requirements" and "Capital Resources," below.

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Discontinued Operations

During the second quarter of 2008, Con Edison Development and its subsidiary, CED/SCS Newington, LLC, completed the sale of their ownership interests in power generating projects with an aggregate capacity of approximately 1,706 MW. See Note N to the Third Quarter Financial Statements.

Results of Operations-Summary

Con Edison's earnings per share for the three months ended September 30, 2008 were $0.66 (basic and diluted) compared with $1.15 (basic and diluted) for the 2007 period. Con Edison's earnings per share for the nine months ended September 30, 2008 were $3.80 ($3.79 on a diluted basis) compared with $2.73 ($2.72 on a diluted basis) for the 2007 period.

Net income for the three and nine months ended September 30, 2008 and 2007 was as follows:

                                          Three Months Ended           Nine Months Ended
                                             September 30,               September 30,
   (Millions of Dollars)                 2008            2007           2008         2007
   Con Edison of New York              $     250       $     284     $       590    $  659
   O&R                                        19              14              35        39
   Competitive energy businesses (a)         (86 )            13             112        35
   Other (b)                                  (1 )            (1 )            25       (14 )
   Total continuing operations               182             310             762       719
   Discontinued operations (c)                 -               2             274         3
   CON EDISON                          $     182       $     312     $     1,036    $  722

(a) Income from continuing operations of the competitive energy businesses for the three and nine months ended September 30, 2008 includes $(88) million and $(25) million of net after-tax mark-to-market losses. The competitive energy businesses' income from continuing operations also includes $137 million after-tax from the gain on the sale of generation projects. See Note N to the Third Quarter Financial Statements.

(b) Other consists of inter-company and parent company accounting. The nine month period ended September 30, 2008 includes $30 million of after-tax net income related to the resolution of the Company's legal proceeding with Northeast Utilities. See Note H to the Financial Statements in Part I, Item 1 of the First Quarter Form 10-Q.

(c) Represents the discontinued operations of certain of Con Edison Development's generation projects, which includes a $274 million after-tax gain ($4 million after-tax income and $270 million after-tax gain on the sale of generation projects) for the nine months ended September 30, 2008, respectively. See Note U to the financial statements in Item 8 of the Form 10-K and Note N to the Third Quarter Financial Statements.

The Companies' results of operations for the three and nine months ended September 30, 2008, compared with the 2007 period, reflect changes in the Utilities' rate plans (including lower allowed returns on equity and additional revenues designed to recover increases in certain operations and maintenance expenses, depreciation and property taxes, and interest charges) and the results of the competitive energy businesses (including net mark-to-market effects, the gain on the sale of generation projects and discontinued operations). Results for the nine-month periods also include an additional reserve in 2008 related to the Long Island City power outage (see Note B to the Third Quarter Financial

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Statements), the resolution in 2008 of litigation with Northeast Utilities (see Note H to the Financial Statements in Part I, Item1 of the First Quarter Form 10-Q) and the resolution in 2007 of a deferred tax amortization petition (see "Regulatory Assets and Liabilities" in Note B to the financial statements in Item 8 of the Form 10-K). Operations and maintenance expenses were higher in the three and nine months ended September 30, 2008 compared with the 2007 periods reflecting primarily higher costs, which are generally reflected in rates, such as pension and other post-retirement benefits, the movement of company facilities to accommodate municipal projects and additional operating programs. Depreciation and property taxes were higher in the three and nine months ended September 30, 2008 compared with the 2007 periods reflecting primarily the impact from increased capital expenditures.

The following table presents the estimated effect on earnings per share and net income for the three and nine months ended September 30, 2008 compared with the 2007 period, resulting from these and other major factors:

                                                  Third Quarter Variation                              Nine Months Ended Variation
                                          Earnings                 Net Income                   Earnings                    Net Income
                                         per Share                  Variation                  per Share                     Variation
                                         Variation            (Millions of Dollars)            Variation               (Millions of Dollars)
Con Edison of New York (a)
Sales growth                            $       0.01         $                     2        $           0.05          $                    14
Impact of weather                               0.03                               7                   (0.03 )                             (7 )
Electric rate plan                              0.06                              15                    0.26                               68
Gas rate plan                                   0.03                               9                    0.08                               22
Steam rate plan                                 0.04                              10                    0.05                               13
Resolution of deferred tax
amortization petition in 2007 and
other tax matters                              (0.11 )                           (32 )                 (0.07 )                            (19 )
Operations and maintenance expense             (0.09 )                           (25 )                 (0.27 )                            (70 )
Long Island City power outage
reserve                                            -                               -                   (0.05 )                            (14 )
Depreciation and property taxes                (0.05 )                           (14 )                 (0.18 )                            (48 )
Net interest expense                           (0.02 )                            (6 )                 (0.03 )                             (9 )
Other (includes dilutive effect of
new stock issuances)                           (0.04 )                             -                   (0.14 )                            (19 )
Total Con Edison of New York                   (0.14 )                           (34 )                 (0.33 )                            (69 )
Orange and Rockland Utilities
(O&R)                                           0.02                               6                   (0.02 )                             (4 )
Competitive energy businesses
Earnings excluding net
mark-to-market effects, gain on
sale of generation projects and
discontinued operations                        (0.08 )                           (23 )                 (0.20 )                            (56 )
Net mark-to-market effects (b)                 (0.28 )                           (77 )                 (0.02 )                             (6 )
Gain on the sale of Con Edison
Development's generation projects
and discontinued operations                    (0.01 )                            (1 )                  1.50                              409
Total competitive energy
businesses                                     (0.37 )                          (101 )                  1.28                              347
Northeast Utilities litigation
settlement                                         -                               -                    0.11                               30
Other, including parent company
expenses                                           -                              (1 )                  0.03                               10
Total variation                         $      (0.49 )       $                  (130 )      $           1.07          $                   314

(a) Under the revenue decoupling mechanisms in Con Edison of New York's electric and gas rate plans (effective April 2008 and October 2007, respectively) and the weather-normalization clause applicable to the gas business, revenues are generally not affected by changes in delivery volumes from levels assumed when rates were approved.

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(b) These variations reflect after-tax net mark-to-market losses of $88 million or $(0.32) a share in the third quarter of 2008, after-tax net mark-to-market losses of $11 million or $(0.04) a share in the third quarter of 2007, and after-tax net mark-to-market losses of $25 million or $(0.09) a share in the first nine months of 2008 and after-tax net mark-to-market losses of $19 million or $(0.07) a share in the first nine months of 2007.

See "Results of Operations" below for further discussion and analysis of results of operations.

Risk Factors

The Companies' businesses are influenced by many factors that are difficult to predict, and that involve uncertainties that may materially affect actual operating results, cash flows and financial condition. The factors include those described under "Risk Factors" in Item 7 of the Form 10-K, including "The Companies Are Active Participants in Financial Markets" and "The Companies Face Risks That Are Beyond Their Control," which the following paragraph supplements.

Global Financial Turmoil is Ongoing - Ongoing global financial turmoil has, to a significant extent, reduced the availability, and increased the cost, of credit and capital and reduced the value of financial assets. The level of economic activity also has been reduced. The Companies continue to monitor the effects on their businesses of these events. See "Capital Resources" and "Capital Requirements," below. For information about potential for material pension plan funding requirements, see Note E to the Third Quarter Financial Statements. The ongoing turmoil could also reduce customer demand for the services provided by the Companies and the ability of the Companies' customers, lenders and other counterparties to meet their obligations to the Companies.

Forward-Looking Statements

This report includes forward-looking statements intended to qualify for the safe-harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements of future expectation and not facts. Words such as "expects," "estimates," "anticipates," "intends," "believes," "plans," "will" and similar expressions identify forward-looking statements. Forward-looking statements are based on information available at the time the statements are made, and accordingly speak only as of that time. Actual results or developments might differ materially from those included in the forward-looking statements because of various factors such as those discussed under "Risk Factors," in Item 7 of the Form 10-K.

Application of Critical Accounting Policies

The Companies' financial statements reflect the application of their accounting policies, which conform to accounting principles generally accepted in the United States of America. The Companies'

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critical accounting policies include industry-specific accounting applicable to regulated public utilities and accounting for pensions and other postretirement benefits, contingencies, long-lived assets, derivative instruments, goodwill and leases. See "Application of Critical Accounting Policies" in Item 7 of the Form 10-K. For information about potential material pension plan funding requirements, see Note E to the Third Quarter Financial Statements.

Liquidity and Capital Resources

The Companies' liquidity reflects cash flows from operating, investing and financing activities, as shown on their respective consolidated statement of cash flows and as discussed below. See "Liquidity and Capital Resources" in Item 7 of the Form 10-K. Changes in the Companies' cash and temporary cash investments resulting from operating, investing and financing activities for the nine months ended September 30, 2008 and 2007 are summarized as follows:

                                                 Con Edison                            Con Edison of New York
. . .