energy to their customers are determined in accordance with rate plans approved by the state public utility regulatory author- ity having jurisdiction – the PSC, the New Jersey Board of Public Utilities (NJBPU) and the Pennsylvania Public Utility Commission (PPUC). See “Regulatory Matters” below. In gen- eral, changes in the Utilities’ cost of purchased power, fuel and gas may affect the timing of cash flows but not net income because the costs are recovered in accordance with rate plans. See “Recoverable Energy Costs” in Note A to the finan- cial statements. Net income for common stock is the result of cash and non- cash (or accrual) transactions. Only cash transactions affect the Companies’ cash flows from operating activities. Principal non-cash charges include depreciation and deferred taxes, and for Con Edison in 2003, impairment charges. For Con Edison of New York, principal non-cash credits include prepaid pen- sion costs. Pension credits result from past favorable perform- ance in Con Edison of New York’s pension fund and assump- tions about future performance. See “Application of Critical Accounting Policies – Accounting for Pensions and Other Postretirement Benefits” and Notes E and F to the financial statements. Net cash flows from operating activities in 2003 for Con Edison and Con Edison of New York were $203 million and $141 mil- lion lower than 2002, respectively. This decrease reflects lower net income at Con Edison of New York (due to a certain extent to costs not reflected in current rates) and for Con Edison (due to greater losses at the unregulated subsidiaries). This decrease also reflects Con Edison of New York’s increase in the value of gas in storage (reflecting both higher unit costs and higher volumes) and a higher level of accrued construction commitments at year-end 2002 that were paid for in 2003. This decrease was partially offset by an increase in deferred income tax expense. Net cash flows from operating activities in 2003 for O&R were $24 million higher than in 2002 due primarily to increased deferred income tax expense, partially offset by the increased value of gas in storage (resulting from higher unit costs and volumes). Net cash flows from operating activities in 2002 for Con Edison were $65 million lower than in 2001. This decrease was due principally to higher energy costs and sales at the Utilities in December 2002 as compared with December 2001, resulting in increased customer accounts receivable and recoverable energy costs, offset in part by increased accounts payable bal- ances. The net benefit to cash flows from these activities in 2001 was greater than the benefit in 2002 because high ener- gy costs at year-end 2000 were collected in 2001 and energy Deferred real estate sale costs related to the demolition and remediation of a nine-acre development site in midtown Manhattan along the East River were $134 million at December 31, 2002, compared with $105 million at December 31, 2001. In 2000, Con Edison of New York agreed to sell this site for an expected price of $576 million to $680 million, depending on zoning and other adjustments. The sale is subject to PSC approval and other conditions. The buyer paid Con Edison of New York $50 million in 2000 as a down payment, which Con Edison used to fund a portion of the demolition and remedia- tion expenses. The down payment has been recorded as a re gulatory liability. Net cash flows used in investing activities for Con Edison and Con Edison of New York were $693 million and $704 million higher in 2002 compared with 2001, respectively, due primarily to the receipt in 2001 of net proceeds from generation divesti- ture. See Note J to the financial statements. In addition, Con Edison of New York construction expenditures increased in 2002 compared with 2001, principally to meet load growth on the company’s electric distribution system, to effect permanent restoration of portions of the electric, gas and steam systems in lower Manhattan following the World Trade Center attack and for the ongoing project to add incremental generating capacity at Con Edison of New York’s East River steam-electric generating plant (the East River Repowering Project). Net cash flows from operating activities in 2002 for Con Edison of New York were $4 million higher than in 2001. The change in cash flows reflects the aforementioned impact of the timing of energy sales and cost recovery, the timing of federal income tax payments and refunds, and cash received or expended related to regulatory liabilities and regulatory assets,  r espectively.  purchases at year-end 2001 were lower than the prior year. The change in cash flows also reflects the timing of federal income tax payments and refunds for the Utilities and net cash r eceived related to regulatory liabilities, such as transmission congestion contracts, offset by increased cash expended relat- ed to regulatory assets.  Net cash flows used in investing activities for Con Edison  were $107 million lower in 2003 than in 2002, due primarily to lower construction expenditures by its unregulated subsidiaries, partially offset by increased construction expenditures by the Utilities. Cash flows used in investing activities were $64 million and $11 million higher in 2003 than in 2002 for Con Edison  of New York and O&R, respectively, due primarily to increased construction expenditures.  Cash Flows Used in Investing Activities  Con Edison Annual Report 2003 27