content_image/19921.jpg content_image/19922.jpg content_image/19923.jpg content_image/19927.jpg
applicable to borrowed funds are treated as a reduction of interest charges, while the amounts applicable to the regulated utilities’ own funds are credited to other income (deductions). 

The AFDC rates for the Utilities were as follows: 

<img src='content_image/19921.jpg'>

The Utilities generally compute annual charges for depreciation using the straight-line method for financial statement purposes, with rates based on average service lives and net salvage factors. 

The average depreciation rates for the Utilities were as follows: 

<img src='content_image/19922.jpg'>

The estimated lives for utility plant for Con Edison of New York range from 25 to 80 years for electric, 15 to 85 years for gas, 30 to 75 years for steam and 8 to 50 years for general plant. For O&R, the estimated lives for utility plant range from 5 to 65 years for electric, 7 to 75 years for gas and 5 to 55 years for general plant. 

## Non-Utility Plant 

Non-utility plant is stated at original cost. For the Utilities, non- utility plant consists primarily of land and telecommunication facilities that are currently not utilized within electric, gas or steam utility operations. For Con Edison’s unregulated sub- sidiaries, non-utility plant consists primarily of generating assets and telecommunication facilities. Depreciation on these assets is computed using the straight-line method for financial state- ment purposes over their estimated useful lives, which range from 5 to 40 years for generating assets, 3 to 20 years for telecommunication facilities and 3 to 50 years for other property. 

The average non-utility depreciation rates for Con Edison Development and Con Edison Communications were as follows: 

<img src='content_image/19923.jpg'>

In 2002, in accordance with SFAS No. 34, “Capitalization of Interest Costs,” Con Edison capitalized interest on its borrowings associated with the unregulated subsidiaries’ capital projects in progress. Capitalized interest is added to 

the asset cost, and is amortized over the useful lives of the assets. The amount of such capitalized interest cost for 2003 and 2002 was $6 million and $14 million, respectively. No amounts were capitalized in 2001. 

## Revenues 

The Utilities and Con Edison Solutions recognize revenues for electric, gas or steam service on a monthly billing cycle basis. The Utilities defer over a 12-month period all net interruptible gas revenues not authorized by the New York State Public Service Commission (PSC) to be retained by the Utilities for refund to firm gas sales and transportation customers. O&R and Con Edison Solutions accrue revenues at the end of each month for estimated energy usage not yet billed to customers, while Con Edison of New York does not accrue such revenues, in accordance with current regulatory agreements. Unbilled revenues included in Con Edison’s and O&R’s balance sheets at December 31, 2003 and 2002 were as follows: 

<img src='content_image/19927.jpg'>

## Recoverable Energy Costs 

The Utilities generally recover all of their prudently incurred fuel, purchased power and gas costs, including hedging gains and losses, in accordance with rate provisions approved by the applicable state public utility commissions. If the actual energy costs for a given month are more or less than the amounts billed to customers for that month, the difference is recoverable from or refundable to customers. Differences between actual and billed energy costs are generally deferred for charge or refund to customers during the next billing cycle (normally with- in one or two months). For Con Edison of New York, rate pro- visions also include a possible incentive or penalty of up to $25 million annually relating to electric costs (see “Energy Price Hedging” in Note P). For O&R gas costs, differences between actual and billed gas costs during the 12-month period ending each August are charged or refunded to customers during a subsequent 12-month period. 

The difference between purchased power costs initially billed to the Utilities by the New York Independent System Operator (NYISO) and the cost of power subsequently determined by the NYISO to have actually been supplied is refunded by the NYISO to the Utilities, or paid to the NYISO by the Utilities. The reconciliation payments or receipts are recoverable from or refundable to the Utilities’ customers. At December 31, 2003, Con Edison of New York had deferred $134 million of refunds received from the NYISO as a regulatory liability. In New Jersey, O&R’s subsidiary purchases energy under competitive bidding supervised by the New Jersey Board of Public Utilities (NJBPU) for contracts ranging from one to three years. Base 

