the sale was deferred as a regulatory asset. The company was authorized, effective September 2001, to continue to recover the cost of the nuclear assets, which is included in rates, and to amortize the regulatory asset, until the loss on divestiture has been recovered. The unrecovered amount was $159 mil- lion at December 31, 2003 and $215 million at December 31, 2002. The 2000 Electric Agreement provides that the company “will be given a reasonable opportunity to recover stranded and strandable costs remaining at March 31, 2005, including a rea- sonable return on investments.”  provisions approved by the state public utility regulatory author- ity having jurisdiction. Pursuant to restructuring agreements approved by the PSC (See “Rate and Restructuring Agreements” in Note B), the Utilities have divested all of their electric generating assets other than approximately 630 MW of Con Edison of New York’s steam/electric generating stations located in New York City. Con Edison of New York sold approximately 6,300 MW of elec- tric generating assets in 1999 and approximately 1,480 MW in 2001. O&R completed the sale of all of its generating assets prior to the completion of Con Edison’s purchase of O&R in 1999. Pursuant to the 2000 Electric Rate Agreement, the net after-tax gain (including interest accrued thereon) from Con Edison of New York’s 1999 generation divestiture was applied in 2000 as follows: $188 million was credited against electric distribution plant balances; $107 million was used to offset a like amount of regulatory assets (including deferred power contract termina- tion costs); $50 million (after-tax) was deferred for recognition in income during the 12 months ended March 31, 2002; and $12 million was deferred to be used for low-income customer pro- grams. In addition, $30 million of employee retirement incentive expenses related to the generation divestiture was deferred for amortization over 15 years and $15 million of such expenses was charged to income in 2000. Capital leases: For ratemaking purposes capital leases are treated as operating leases; therefore, in accordance with SFAS No. 71, the amortization of the leased asset is based on the rental payments recovered through rates. The following assets and obligations under capital leases are included in the accompanying consolidated balance sheet at December 31, 2003 and 2002: Con Edison’s subsidiaries lease electric generating and gas dis- tribution facilities, other electric transmission and distribution facilities, office buildings and equipment. In accordance with SFAS No. 13, these leases are classified as either capital leas- es 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.  Note J – Generation Divestiture Note K – Leases The accumulated amortization of the capital leases for  Con Edison and Con Edison of New York was $32 million and $29 million as of December 31, 2003 and 2002, respectively. The 2000 Electric Rate Agreement provides for Con Edison of New York to amortize to income a $74 million regulatory asset representing incremental electric capacity costs incurred prior to May 2000 to purchase capacity from the buyers of the gen- erating assets the company sold in 1999. Amortization to income will take place in years in which the company would otherwise share excess earnings with customers, in amounts corresponding to the company’s share of the excess earnings. By March 2005, any remaining unrecovered balance will be charged to expense. Of this amount, $30 million was charged to expense in 2002 and $15 million was expensed in 2001. In January 2001, Con Edison of New York completed the sale of its 480 MW interest in the jointly-owned Roseton generating station for $138 million. The gain from the sale, which has been deferred as a regulatory liability, was $55 million at December 31, 2003, and $64 million at December 31, 2002. In September 2001, the company completed the sale of its approximately 1,000 MW nuclear generating plant and related assets for $505 million. The proceeds were net of a $74 million payment to increase the value of the nuclear decommissioning trust funds being transferred to $430 million (the amount pro- vided for in the sales agreement). The net after-tax loss from Con Edison Con Edison of New York (Millions of Dollars) 2003 2002 2003 2002 Utility Plant T ransmission $17 $12 $11 $12 Common 28 29 28 29 To tal $45 $41 $39 $41 Curr ent Liabilities $ 9 $ 3 $ 3 $ 3 Non-Curr ent Liabilities 36 38 36 38 To tal Liabilities $45 $41 $39 $41 76 Con Edison Annual Report 2003