This combined management's discussion and analysis of financial condition and results of operations (MD&A) relates to the consolidated 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.

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:



                                                                                   At
                                           Twelve months ended                December 31,
                                            December 31, 2008                     2008
                                      Operating               Net
     (Millions of Dollars)             Revenues             Income               Assets
     Con Edison of New York        $ 10,424      77 %   $   783      65 %    $  30,415    91 %
     O&R                                991       7 %        44       4 %        2,157     6 %
     Total Utilities                 11,415      84 %       827      69 %       32,572    97 %
     Con Edison Development (a)          48       - %       146      12 %          407     1 %
     Con Edison Energy (a)              878       7 %       (17 )    (1 )%         223     1 %
     Con Edison Solutions (a)         1,258       9 %       (56 )    (5 )%          38     - %
     Other (b)                          (16 )     - %        22       2 %          258     1 %
     Total continuing operations     13,583     100 %       922      77 %       33,498   100 %
     Discontinued operations (c)          -       - %       274      23 %            -     - %
     Total Con Edison              $ 13,583     100 %   $ 1,196     100 %    $  33,498   100 %

(a) Income from continuing operations of the competitive energy businesses for the twelve months ended December 31, 2008 includes $(59) million of net after-tax mark-to-market gains/(losses) (Con Edison Development, $17 million, Con Edison Energy, $(26) million and Con Edison Solutions, $(50) million). Con Edison Development's income from continuing operations for the twelve months ended December 31, 2008 also includes $131 million of after-tax gain from the sale of generation projects. See Note V to the financial statements.

(b) Represents inter-company and parent company accounting. See "Results of Operations," below. The twelve months ended December 31, 2008 includes $30 million of after-tax net income related to the resolution of the Company's legal proceeding with Northeast Utilities.

(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 twelve months ended December 31, 2008. See Note V to the financial statements.

Con Edison's net income for common stock in 2008 was $1,196 million or $4.38 a share. Net income for common stock in 2007 and 2006 was $929 million or $3.49 a share and $737 million or $2.96 a share, respectively. See "Results of Operations - Summary," below.

Con Edison's principal business segments are Con Edison of New York's regulated electric, gas and steam utility activities, O&R's regulated electric and gas utility activities and Con Edison's competitive energy businesses. Con Edison of New York's principal business segments are its regulated electric, gas and steam utility activities. For segment financial information, see Note N to the financial statements and "Results of Operations," below.

For information about factors that could have a material adverse effect on the Companies, see "Risk Factors," below.

Regulated Utilities

Con Edison of New York provides electric service to approximately 3.3 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 demand for utility service and the Utilities' ability to charge rates for their services that reflect the costs of service, including a return on invested equity capital.

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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. 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 have continued to monitor the effects of the ongoing global financial turmoil on the local economy and have reduced their outlook for customer demand. The Utilities currently estimate that, under design weather conditions, the 2009 peak electric demand in their respective service areas will be 13,750 MW for Con Edison of New York and 1,650 MW for O&R. The average annual growth rate of the peak electric demand over the next five years at design conditions is estimated to be approximately 0.6 percent for Con Edison of New York and 2.1 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. 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. See "Regulatory Matters" below and "Recoverable Energy Costs" and "Rate Agreements" in Notes A and B, respectively, to the 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 December 31, 2008, Con Edison's equity investment in its competitive energy businesses was $229 million and their assets amounted to $668 million. Con Edison is evaluating additional opportunities to invest in electric and gas-related businesses.

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 11 million MWHs of electricity to customers in 2008.

Consolidated Edison Development, Inc. (Con Edison Development) participates in infrastructure projects. In 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 V to the 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.

Discontinued Operations

In 2008, Con Edison Development and its subsidiary, CED/SCS Newington, LLC, completed the sale of their ownership interests

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in power generating projects with an aggregate capacity of approximately 1,706 MW. See Note V to the financial statements.

Results of Operations-Summary

Con Edison's earnings per share in 2008 were $4.38 ($4.37 on a diluted basis). In 2007, earnings per share were $3.49 ($3.47 on a diluted basis). Earnings per share in 2006 were $2.96 ($2.95 on a diluted basis).

Net income for the years ended December 31, 2008, 2007 and 2006 was as follows:

              (Millions of Dollars)                2008     2007      2006
              Con Edison of New York              $   783   $ 844     $ 686
              O&R                                      44      46        45
              Competitive energy businesses (a)        73      58        40
              Other (b)                                22     (23 )     (31 )
              Total continuing operations             922     925       740
              Discontinued operations (c)             274       4        (3 )
              Con Edison                          $ 1,196   $ 929     $ 737

(a) Includes $(59) million, $(5) million and $(15) million of net after-tax mark-to-market losses in 2008, 2007 and 2006, respectively. In 2008, also includes $131 million after-tax from the gain on sale of Con Edison Development's generation projects. See Note V to the financial statements.

(b) Other consists of inter-company and parent company accounting. See "Results of Operations," below.

(c) Represents the discontinued operations of certain of Con Edison Development's generation projects and Con Edison Communications. See Notes U and V to the financial statements.

Con Edison's results of operations for 2008 include the gain on the sale of Con Edison Development's generation projects in 2008, the resolution in 2008 of litigation with Northeast Utilities, the impact of discontinued operations in 2008 and 2007 (see Note V to the financial statements) and the operating results of the competitive energy businesses (including net mark-to-market effects). The Companies' results of operations for 2008, as compared with 2007, also 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), an additional reserve in 2008 related to the Long Island City power outage and the resolution in 2007 of a deferred tax amortization petition (see "Regulatory Assets and Liabilities" in Note B to the financial statements). Operations and maintenance expenses were higher in 2008 compared with 2007 reflecting primarily higher costs, which are generally reflected in rates, such as pension and other post-retirement benefits, the support and maintenance of company underground facilities to accommodate municipal projects, the write-off of uncollectible accounts and additional operating programs. Depreciation and property taxes were higher in 2008 compared with 2007 reflecting primarily the impact from increased capital expenditures.

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The following table presents the estimated effect on earnings per share and net income from continuing operations for 2008 as compared with 2007 and 2007 as compared with 2006, resulting from these and other major factors:

                                                  2008 vs. 2007                          2007 vs. 2006
                                                             Net Income                             Net Income
                                          Earnings          (Millions of          Earnings         (Millions of
                                          per Share           Dollars)           per Share           Dollars)
Con Edison of New York
Sales growth                             $      0.04       $           11       $       0.18       $          46
Impact of weather                              (0.07 )                (17 )             0.11                  28
Electric rate plan                              0.47                  125               0.44                 109
Gas rate plan                                   0.13                   35               0.05                  12
Net transfers to firm gas service                  -                    -               0.05                  14
Steam rate plan                                 0.06                   15               0.08                  19
Resolution of deferred tax
amortization petition in 2007 and
other tax matters                              (0.08 )                (22 )             0.06                  17
Operations and maintenance expense             (0.44 )               (117 )            (0.05 )               (13 )
Long Island City power outage
reserve                                         0.04                   10              (0.10 )               (24 )
Depreciation and property taxes                (0.22 )                (59 )            (0.28 )               (69 )
Net interest expense                           (0.07 )                (19 )            (0.04 )               (10 )
Other (includes dilutive effect of
new stock issuances)                           (0.16 )                (23 )            (0.08 )                29
Total Con Edison of New York                   (0.30 )                (61 )             0.42                 158
Orange and Rockland Utilities                  (0.01 )                 (2 )            (0.01 )                 1
Competitive energy businesses
Earnings excluding net
mark-to-market effects, gain on sale
of generation projects and
discontinued operations                        (0.24 )                (62 )             0.01                   8
Net mark-to-market effects                     (0.20 )                (54 )             0.04                  10
Gain on the sale of Con Edison
Development's generation projects
and discontinued operations                     1.48                  401               0.02                   7
Total Competitive energy businesses             1.04                  285               0.07                  25
Northeast Utilities litigation
settlement                                      0.11                   30                  -                   -
Other, including parent company
expenses                                        0.05                   15               0.05                   8
Total variations                         $      0.89       $          267       $       0.53       $         192

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

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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. These risk factors include:

The Utilities' Revenues And Results Of Operations Reflect Regulatory Actions-The Utilities have rate plans approved by state utility regulators that cover the prices they can charge their customers. The prices are generally designed to cover the Utilities' cost of service (including a return on equity) and generally may not be changed during the specified terms of the rate plans other than for the recovery of energy costs and limited other exceptions. The rate plans generally include earnings adjustments for meeting or failing to meet certain standards. Certain of the plans require action by regulators at their expiration dates, which may include approval of new plans with different provisions. Regulators may also take actions affecting the company outside of the framework of the approved rate plans. The regulators in the states in which the Utilities provide service generally permit the Utilities to recover from their customers the cost of service, other than any cost that is determined to have been imprudently incurred. Regulatory policies are subject to change. The Utilities' regulatory filings can involve complex accounting and other calculations. See "Application of Critical Accounting Polices" and "Regulatory Matters," below.

Con Edison's Ability To Pay Dividends Or Interest Is Subject To Regulatory Restrictions-Con Edison's ability to pay dividends on its common stock or interest on its external borrowings depends primarily on the dividends and other distributions it receives from its businesses. The dividends that the Utilities may pay to Con Edison are generally limited to not more than 100 percent of their respective income available for dividends calculated on a two-year rolling average basis, with certain exceptions. See "Dividends" in Note C to the financial statements.

The Companies Purchase Energy For Their Customers-A disruption in the wholesale energy markets or in the Companies' energy supply arrangements could adversely affect their ability to meet their customers' energy needs and the Companies' results of operations. The Companies have policies to manage the economic risks related to energy supply, including related hedging transactions and the risk of a counterparty's non-performance. The Utilities generally recover their prudently incurred fuel, purchased power and gas costs, including the cost of hedging transactions, in accordance with rate provisions approved by state regulators. Con Edison's competitive energy businesses enter into hedging transactions to manage their commodity-related price and volumetric risks. See "Financial and Commodity Market Risks," below.

Energy Market Prices Are Volatile-The impact of changing energy market prices on the Companies is mitigated by their energy management policies and rate provisions pursuant to which the Utilities recover energy supply costs. See "Financial and Commodity Market Risks," below. High energy market prices result in increases in energy costs billed to customers that could result in decreased energy usage. If this were to occur, until rates for Con Edison of New York's steam business, O&R's electric businesses in New Jersey and Pennsylvania and O&R's gas business were adjusted to offset the effect of decreased usage, the Utilities would have decreased energy delivery revenues. Under the revenue decoupling mechanisms currently applicable to Con Edison of New York's electric and gas businesses and O&R's electric business in New York, the Utilities' revenues will generally not be affected by changes in delivery volumes from levels assumed when rates were approved. See Note B to the financial statements. Prices for electricity, fuel oil and gas could also affect the value of Con Edison's competitive energy businesses.

The Utilities Have A Substantial Ongoing Utility Construction Program-The Utilities estimate that their construction expenditures will exceed $7 billion over the next three years. The ongoing construction program includes large energy transmission, substation and distribution system projects. The failure to complete these projects in a timely manner could adversely affect the Utilities' ability to meet their customers' growing energy needs with the high level of reliability that they currently provide. A substantial portion of the construction program is undertaken through contractors. See "Investigation of Contractor Payments" in Note H to the financial statements. The Utilities expect to use internally-generated funds, equity contributions from Con Edison and external borrowings to fund the construction expenditures.

The Companies Are Active Participants in Financial Markets -Changes in financial market conditions or in the Companies' credit ratings could adversely affect their ability and their cost to borrow funds. The Companies' commercial paper and unsecured debt are rated by Moody's Investors Services, Inc. (Moody's), Standard & Poor's Ratings Services (S&P) and Fitch Ratings (Fitch). The interest rates on $636 million of Con Edison of New York tax-exempt debt and $99 million of O&R tax-exempt debt are also affected by the credit ratings of bond insurers. See "Liquidity and Capital Resources - Capital

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Resources," below. Changes to financial market conditions could also adversely affect the return on investment of the plan assets for the Companies' pension and other postretirement benefit plans, and in 2008 did materially adversely affect the value of the plan assets. See "Application of Critical Accounting Policies-Accounting for Pensions and Other Postretirement Benefits" and "Financial and Commodity Market Risks," below and Notes E and F to the financial statements.

The Companies Operate Essential Energy Facilities And Other Systems-The Utilities provide electricity, gas and steam service using energy facilities that are located either in, or close to, public places. A failure of, or damage to, these facilities could result in bodily injury or death, property damage, the release of hazardous substances or extended service interruptions. See "Manhattan Steam Main Rupture" in Note H to the financial statements. The Companies have energy facilities, information systems and business processes relating to their operations, billing, accounting and other matters, the failure of which could adversely affect the Companies' operations and liquidity and result in substantial liability, higher costs and increased regulatory requirements. The Companies have training, operating, security, maintenance and capital programs designed to provide for the safe and reliable operation of their energy facilities, information systems and business processes.

Con Edison's Competitive Energy Businesses Are In Evolving Markets-Con Edison's competitive energy businesses are active in evolving markets that are affected by the actions of governmental agencies, other organizations (such as independent system operators) and other competitive businesses. Compared to the Utilities, the profitability of their products and services and the recoverability of Con Edison's investment in these competitive energy businesses is not as predictable.

The Companies May Be Affected By The Application Of Critical Accounting Policies And Rules-The application of the Companies' critical accounting policies reflects complex judgments, assumptions and estimates. These policies, which are described in "Application of Critical Accounting Policies" below, include industry specific accounting applicable to regulated public utilities, the accounting and funding rules applicable to pensions and other postretirement benefits, and accounting for contingencies, long-lived assets, derivative instruments, goodwill and leases. New accounting policies or rules or changes to current accounting policies, rules or interpretations of such policies or rules that affect the Companies' financial statements may be adopted by the relevant . . .