FE-9.30.2011-10Q
Table of Contents

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________
Commission
 
Registrant; State of Incorporation;
 
I.R.S. Employer
File Number
 
Address; and Telephone Number
 
Identification No.
 
 
 
 
 
333-21011
 
FIRSTENERGY CORP.
 
34-1843785
 
 
(An Ohio Corporation)
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 
 
 
 
 
 
000-53742
 
FIRSTENERGY SOLUTIONS CORP.
 
31-1560186
 
 
(An Ohio Corporation)
 
 
 
 
c/o FirstEnergy Corp.
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 
 
 
 
 
 
1-2578
 
OHIO EDISON COMPANY
 
34-0437786
 
 
(An Ohio Corporation)
 
 
 
 
c/o FirstEnergy Corp.
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 
 
 
 
 
 
1-2323
 
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
 
34-0150020
 
 
(An Ohio Corporation)
 
 
 
 
c/o FirstEnergy Corp.
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 
 
 
 
 
 
1-3583
 
THE TOLEDO EDISON COMPANY
 
34-4375005
 
 
(An Ohio Corporation)
 
 
 
 
c/o FirstEnergy Corp.
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 
 
 
 
 
 
1-3141
 
JERSEY CENTRAL POWER & LIGHT COMPANY
 
21-0485010
 
 
(A New Jersey Corporation)
 
 
 
 
c/o FirstEnergy Corp.
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 
 
 
 
 
 
1-446
 
METROPOLITAN EDISON COMPANY
 
23-0870160
 
 
(A Pennsylvania Corporation)
 
 
 
 
c/o FirstEnergy Corp.
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 
 
 
 
 
 
1-3522
 
PENNSYLVANIA ELECTRIC COMPANY
 
25-0718085
 
 
(A Pennsylvania Corporation)
 
 
 
 
c/o FirstEnergy Corp.
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
 
FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No o
 
FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company, and Pennsylvania Electric Company
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer þ
FirstEnergy Corp.
 
 
Accelerated Filer o
N/A
 
 
Non-accelerated Filer (Do not check
if a smaller reporting company)
þ
FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company
 
 
Smaller Reporting Company o
N/A
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No þ
 
FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
 
 
OUTSTANDING
CLASS
 
AS OF OCTOBER 31, 2011
FirstEnergy Corp., $.10 par value
 
418,216,437

FirstEnergy Solutions Corp., no par value
 
7

Ohio Edison Company, no par value
 
60

The Cleveland Electric Illuminating Company, no par value
 
67,930,743

The Toledo Edison Company, $5 par value
 
29,402,054

Jersey Central Power & Light Company, $10 par value
 
13,628,447

Metropolitan Edison Company, no par value
 
740,905

Pennsylvania Electric Company, $20 par value
 
4,427,577

FirstEnergy Corp. is the sole holder of FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company common stock.
This combined Form 10-Q is separately filed by FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to any other registrant, except that information relating to any of the FirstEnergy subsidiary registrants is also attributed to FirstEnergy Corp.

FirstEnergy Web Site
Each of the registrants’ Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are also made available free of charge on or through FirstEnergy’s Internet web site at www.firstenergycorp.com.
These reports are posted on the web site as soon as reasonably practicable after they are electronically filed with the SEC. Additionally, the registrants routinely post important information on FirstEnergy’s Internet web site and recognize FirstEnergy’s Internet web site as a channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under SEC Regulation FD. Information contained on FirstEnergy’s Internet web site shall not be deemed incorporated into, or to be part of, this report.
OMISSION OF CERTAIN INFORMATION
FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) to Form 10-Q.
 

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Forward-Looking Statements: This Form 10-Q includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements include declarations regarding management’s intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “believe,” “estimate” and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Actual results may differ materially due to:
The speed and nature of increased competition in the electric utility industry.
The impact of the regulatory process on the pending matters in the various states in which we do business including, but not limited to, matters related to rates.
The status of the PATH project in light of PJM’s direction to suspend work on the project pending review of its planning process, its re-evaluation of the need for the project and the uncertainty of the timing and amounts of any related capital expenditures.
Business and regulatory impacts from ATSI’s realignment into PJM Interconnection, L.L.C.
Economic or weather conditions affecting future sales and margins.
Changes in markets for energy services.
Changing energy and commodity market prices and availability.
Financial derivative reforms that could increase our liquidity needs and collateral costs.
The continued ability of FirstEnergy’s regulated utilities to collect transition and other costs.
Operation and maintenance costs being higher than anticipated.
Other legislative and regulatory changes, and revised environmental requirements, including possible GHG emission, water intake and coal combustion residual regulations, the potential impacts of any laws, rules or regulations that ultimately replace CAIR, including CSAPR, and the effects of the EPA’s recently released MACT proposal to establish certain mercury and other emission standards for electric generating units.
The uncertainty of the timing and amounts of the capital expenditures that may arise in connection with any NSR litigation or potential regulatory initiatives or rulemakings (including that such expenditures could result in our decision to shut down or idle certain generating units).
Adverse regulatory or legal decisions and outcomes with respect to our nuclear operations (including, but not limited to the revocation or non-renewal of necessary licenses, approvals or operating permits by the NRC including as a result of the incident at Japan’s Fukushima Daiichi Nuclear Plant).
Issues that could delay the current outage at Davis-Besse for the installation of the new reactor vessel head, including indications of cracking in the plant's shield building currently under investigation.
Adverse legal decisions and outcomes related to Met-Ed’s and Penelec’s ability to recover certain transmission costs through their transmission service charge riders.
The continuing availability of generating units and changes in their ability to operate at or near full capacity.
Replacement power costs being higher than anticipated or inadequately hedged.
The ability to comply with applicable state and federal reliability standards and energy efficiency mandates.
Changes in customers’ demand for power, including but not limited to, changes resulting from the implementation of state and federal energy efficiency mandates.
The ability to accomplish or realize anticipated benefits from strategic goals.
FirstEnergy's ability to improve electric commodity margins and the impact of, among other factors, the increased cost of coal and coal transportation on such margins.
The ability to experience growth in the distribution business.
The changing market conditions that could affect the value of assets held in FirstEnergy’s nuclear decommissioning trusts, pension trusts and other trust funds, and cause FirstEnergy and its subsidiaries to make additional contributions sooner, or in amounts that are larger than currently anticipated.
The ability to access the public securities and other capital and credit markets in accordance with FirstEnergy’s financing plan, the cost of such capital and overall condition of the capital and credit markets affecting FirstEnergy and its subsidiaries.
Changes in general economic conditions affecting FirstEnergy and its subsidiaries.
Interest rates and any actions taken by credit rating agencies that could negatively affect FirstEnergy’s and its subsidiaries’ access to financing or their costs and increase requirements to post additional collateral to support outstanding commodity positions, LOCs and other financial guarantees.
The continuing uncertainty of the national and regional economy and its impact on FirstEnergy’s and its subsidiaries’ major industrial and commercial customers.
Issues concerning the soundness of financial institutions and counterparties with which FirstEnergy and its subsidiaries do business.
Issues arising from the recently completed merger of FirstEnergy and Allegheny Energy, Inc. and the ongoing coordination of their combined operations including FirstEnergy’s ability to maintain relationships with customers, employees and suppliers, as well as the ability to successfully integrate the businesses and realize cost savings and any other synergies and the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect.
The risks and other factors discussed from time to time in the registrants’ SEC filings, and other similar factors.
Dividends declared from time to time on FirstEnergy’s common stock during any annual period may in aggregate vary from the

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indicated amount due to circumstances considered by FirstEnergy’s Board of Directors at the time of the actual declarations. A security rating is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.
The foregoing review of factors should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on the registrants’ business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. The registrants expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events or otherwise.

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TABLE OF CONTENTS

 
Page
 
 
Part I. Financial Information
 
 
 
 
 
Item 1. Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

i

Table of Contents

TABLE OF CONTENTS (Continued)

 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

ii

Table of Contents

GLOSSARY OF TERMS
The following abbreviations and acronyms are used in this report to identify FirstEnergy Corp. and its current and former subsidiaries:

AE
Allegheny Energy, Inc., a Maryland utility holding company that merged with a subsidiary of FirstEnergy on February 25, 2011
AESC
Allegheny Energy Service Corporation, a subsidiary of AE
AE Supply
Allegheny Energy Supply Company LLC, an unregulated generation subsidiary of AE
AET
Allegheny Energy Transmission, LLC, a parent of TrAIL and PATH
AGC
Allegheny Generating Company, a generation subsidiary of AE
Allegheny
Allegheny Energy, Inc., together with its consolidated subsidiaries
AVE
Allegheny Ventures, Inc.
ATSI
American Transmission Systems, Incorporated, which owns and operates transmission facilities
CEI
The Cleveland Electric Illuminating Company, an Ohio electric utility operating subsidiary
FENOC
FirstEnergy Nuclear Operating Company, which operates nuclear generating facilities
FES
FirstEnergy Solutions Corp., which provides energy-related products and services
FESC
FirstEnergy Service Company, which provides legal, financial and other corporate support services
FEV
FirstEnergy Ventures Corp., which invests in certain unregulated enterprises and business ventures
FGCO
FirstEnergy Generation Corp., which owns and operates non-nuclear generating facilities
FirstEnergy
FirstEnergy Corp., a public utility holding company
Global Rail
A joint venture between FEV and WMB Loan Ventures II LLC, that owns coal transportation operations near Roundup, Montana
GPU
GPU, Inc., former parent of JCP&L, Met-Ed and Penelec, that merged with FirstEnergy on November 7, 2001
JCP&L
Jersey Central Power & Light Company, a New Jersey electric utility operating subsidiary
Merger Sub
Element Merger Sub, Inc., a Maryland corporation and a wholly owned subsidiary of FirstEnergy
Met-Ed
Metropolitan Edison Company, a Pennsylvania electric utility operating subsidiary
MP
Monongahela Power Company, a West Virginia electric utility operating subsidiary of AE
NGC
FirstEnergy Nuclear Generation Corp., which owns nuclear generating facilities
OE
Ohio Edison Company, an Ohio electric utility operating subsidiary
Ohio Companies
CEI, OE and TE
PATH
Potomac-Appalachian Transmission Highline LLC, a joint venture between Allegheny and a subsidiary of AEP
PATH-VA
PATH Allegheny Virginia Transmission Corporation
PE
The Potomac Edison Company, a Maryland electric operating subsidiary of AE
Penelec
Pennsylvania Electric Company, a Pennsylvania electric utility operating subsidiary
Penn
Pennsylvania Power Company, a Pennsylvania electric utility operating subsidiary of OE
Pennsylvania Companies
Met-Ed, Penelec, Penn and WP
PNBV
PNBV Capital Trust, a special purpose entity created by OE in 1996
Shippingport
Shippingport Capital Trust, a special purpose entity created by CEI and TE in 1997
Signal Peak
A joint venture between FEV, WMB Loan Ventures LLC and Gunvor Group, Ltd. that owns mining operations near Roundup, Montana
TE
The Toledo Edison Company, an Ohio electric utility operating subsidiary
TrAIL
Trans-Allegheny Interstate Line Company
Utilities
OE, CEI, TE, Penn, JCP&L, Met-Ed, Penelec, MP, PE and WP
Utility Registrants
OE, CEI, TE, JCP&L, Met-Ed and Penelec
WP
West Penn Power Company, a Pennsylvania electric utility operating subsidiary of AE
 
 
The following abbreviations and acronyms are used to identify frequently used terms in this report:
ALJ
Administrative Law Judge
Anker WV
Anker West Virginia Mining Company, Inc.
Anker Coal
Anker Coal Group, Inc.
AOCL
Accumulated Other Comprehensive Loss
AEP
American Electric Power Company, Inc.
AQC
Air Quality Control
ARO
Asset Retirement Obligation
ARR
Auction Revenue Rights

iii

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GLOSSARY OF TERMS, Continued

ASLB
Atomic Safety and Licensing Board
BGS
Basic Generation Service
BMP
Bruce Mansfield Plant
CAA
Clean Air Act
CAIR
Clean Air Interstate Rule
CAMR
Clean Air Mercury Rule
CATR
Clean Air Transport Rule
CBP
Competitive Bid Process
CCB
Coal Combustion By-products
CDWR
California Department of Water Resources
CERCLA
Comprehensive Environmental Response, Compensation, and Liability Act
CFL
Compact Florescent Light-bulb
CO2
Carbon Dioxide
CSAPR
Cross-State Air Pollution Rule
CTC
Competitive Transition Charge
CWA
Clean Water Act
CWIP
Construction Work in Progress
DCPD
Deferred Compensation Plan for Outside Directors
DOE
United States Department of Energy
DOJ
United States Department of Justice
DPA
Department of the Public Advocate, Division of Rate Counsel (New Jersey)
DSP
Default Service Plan
EDC
Electric Distribution Company
EDCP
Executive Deferred Compensation Plan
EE&C
Energy Efficiency and Conservation
EGS
Electric Generation Supplier
EIS
Energy Insurance Services, Inc.
EMP
Energy Master Plan
ENEC
Expanded Net Energy Cost
EPA
United States Environmental Protection Agency
ERO
Electric Reliability Organization
ESOP
Employee Stock Ownership Plan
ESP
Electric Security Plan
FASB
Financial Accounting Standards Board
FERC
Federal Energy Regulatory Commission
Fitch
Fitch Ratings
FMB
First Mortgage Bond
FPA
Federal Power Act
FRR
Fixed Resource Requirement
FTRs
Financial Transmission Rights
GAAP
Accounting Principles Generally Accepted in the United States
GHG
Greenhouse Gases
ICG
International Coal Group inc.
IRS
Internal Revenue Service
JOA
Joint Operating Agreement
kV
Kilovolt
KWH
Kilowatt-hours
LBR
Little Blue Run
LED
Light-Emitting Diode
LiDAR
Light Detection and Ranging
LOC
Letter of Credit
LSE
Load Serving Entity

iv

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GLOSSARY OF TERMS, Continued

LTIP
Long-Term Incentive Plan
MACT
Maximum Achievable Control Technology
MDE
Maryland Department of the Environment
MDPSC
Maryland Public Service Commission
MEIUG
Met-Ed Industrial Users Group
MISO
Midwest Independent Transmission System Operator, Inc.
Moody’s
Moody’s Investors Service, Inc.
MRO
Market Rate Offer
MSHA
Mine Safety and Health Administration
MTEP
MISO Regional Transmission Expansion Plan
MVP
Multi-value Project
MW
Megawatts
MWH
Megawatt-hours
NAAQS
National Ambient Air Quality Standards
NDT
Nuclear Decommissioning Trusts
NERC
North American Electric Reliability Corporation
NJBPU
New Jersey Board of Public Utilities
NNSR
Non-Attainment New Source Review
NOAC
Northwest Ohio Aggregation Coalition
NOPEC
Northeast Ohio Public Energy Council
NOV
Notice of Violation
NOx
Nitrogen Oxide
NPDES
National Pollutant Discharge Elimination System
NRC
Nuclear Regulatory Commission
NSR
New Source Review
NUG
Non-Utility Generation
NUGC
Non-Utility Generation Charge
NYPSC
New York State Public Service Commission
NYSEG
New York State Electric and Gas
OCA
Office of Consumer Advocate
OCC
Ohio Consumers’ Counsel
OCI
Other Comprehensive Income
OPEB
Other Post-Employment Benefits
OSBA
Office of Small Business Advocate
OVEC
Ohio Valley Electric Corporation
PAD
Pre-application Document
PA DEP
Pennsylvania Department of Environmental Protection
PCRB
Pollution Control Revenue Bond
PICA
Pennsylvania Intergovernmental Cooperation Authority
PJM
PJM Interconnection L. L. C.
POLR
Provider of Last Resort; an electric utility’s obligation to provide generation service to customers whose alternative supplier fails to deliver service
PPUC
Pennsylvania Public Utility Commission
PSA
Power Supply Agreement
PSD
Prevention of Significant Deterioration
PUCO
Public Utilities Commission of Ohio
PURPA
Public Utility Regulatory Policies Act of 1978
RECs
Renewable Energy Credits
RFC
ReliabilityFirst Corporation
RFP
Request for Proposal
RGGI
Regional Greenhouse Gas Initiative
Rider DCR
Delivery Capital Recovery Rider

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GLOSSARY OF TERMS, Continued

ROE
Return on Equity
RPM
Reliability Pricing Model
RTEP
Regional Transmission Expansion Plan
RTC
Regulatory Transition Charge
RTO
Regional Transmission Organization
S&P
Standard & Poor’s Ratings Service
SB221
Amended Substitute Senate Bill 221
SBC
Societal Benefits Charge
SEC
United States Securities and Exchange Commission
SECA
Seams Elimination Cost Adjustment
SIP
State Implementation Plan(s) Under the Clean Air Act
SMIP
Smart Meter Implementation Plan
SNCR
Selective Non-Catalytic Reduction
SO2
Sulfur Dioxide
SOS
Standard Offer Service
SRECs
Solar Renewable Energy Credits
TBC
Transition Bond Charge
TDS
Total Dissolved Solid
TMDL
Total Maximum Daily Load
TMI-2
Three Mile Island Unit 2
TO
Transmission Owner
TSC
Transmission Service Charge
VIE
Variable Interest Entity
VSCC
Virginia State Corporation Commission
WVDEP
West Virginia Department of Environmental Protection
WVPSC
Public Service Commission of West Virginia
 

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FIRSTENERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three Months
Ended September 30
 
Nine Months
Ended September 30
In millions, except per share amounts
 
2011
 
2010
 
2011
 
2010
REVENUES:
 
 
 
 
 
 
 
 
Electric utilities
 
$
3,041

 
$
2,757

 
$
7,966

 
$
7,673

Unregulated businesses
 
1,678

 
971

 
4,389

 
2,495

Total revenues*
 
4,719

 
3,728

 
12,355

 
10,168

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Fuel
 
632

 
400

 
1,720

 
1,084

Purchased power
 
1,349

 
1,319

 
3,755

 
3,620

Other operating expenses
 
1,024

 
738

 
3,130

 
2,112

Provision for depreciation
 
292

 
182

 
794

 
565

Amortization of regulatory assets
 
122

 
176

 
344

 
549

General taxes
 
269

 
206

 
748

 
587

Impairment of long-lived assets
 
9

 
292

 
41

 
294

Total operating expenses
 
3,697

 
3,313

 
10,532

 
8,811

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
1,022

 
415

 
1,823

 
1,357

 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
Investment income
 
48

 
46

 
100

 
93

Interest expense
 
(267
)
 
(208
)
 
(763
)
 
(628
)
Capitalized interest
 
17

 
41

 
55

 
122

Total other expense
 
(202
)
 
(121
)
 
(608
)
 
(413
)
 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
820

 
294

 
1,215

 
944

 
 
 
 
 
 
 
 
 
INCOME TAXES
 
311

 
119

 
490

 
364

 
 
 
 
 
 
 
 
 
NET INCOME
 
509

 
175

 
725

 
580

 
 
 
 
 
 
 
 
 
Loss attributable to noncontrolling interest
 
(2
)
 
(4
)
 
(17
)
 
(19
)
 
 
 
 
 
 
 
 
 
EARNINGS AVAILABLE TO FIRSTENERGY CORP.
 
$
511

 
$
179

 
$
742

 
$
599

 
 
 
 
 
 
 
 
 
EARNINGS PER SHARE OF COMMON STOCK:
 
 
 
 
 
 
 
 
Basic
 
$
1.22

 
$
0.59

 
$
1.89

 
$
1.97

Diluted
 
$
1.22

 
$
0.59

 
$
1.88

 
$
1.96

AVERAGE SHARES OUTSTANDING:
 
 
 
 
 
 
 
 
Basic
 
418

 
304

 
392

 
304

Diluted
 
420

 
305

 
394

 
305

DIVIDENDS DECLARED PER SHARE OF COMMON STOCK
 
$
1.10

 
$
1.10

 
$
1.65

 
$
1.65

*
Includes excise tax collections of $137 million and $120 million in the three months ended September 30, 2011 and 2010, respectively, and $371 million and $328 million in the nine months ended September 30, 2011 and 2010, respectively.

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.


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FIRSTENERGY CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
 
Three Months
Ended September 30
 
Nine Months
Ended September 30
(In millions)
 
2011
 
2010
 
2011
 
2010
 
 
 
 
 
 
 
 
 
NET INCOME
 
$
509

 
$
175

 
$
725

 
$
580

 
 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS):
 
 
 
 
 
 
 
 
Pension and other postretirement benefits
 
15

 
17

 
145

 
47

Unrealized gain on derivative hedges
 
2

 
6

 
13

 
16

Change in unrealized gain on available-for-sale securities
 
(26
)
 
20

 
(7
)
 
32

Other comprehensive income (loss)
 
(9
)
 
43

 
151

 
95

Income taxes (benefits) on other comprehensive income (loss)
 
(6
)
 
14

 
48

 
30

Other comprehensive income (loss), net of tax
 
(3
)
 
29

 
103

 
65

 
 
 
 
 
 
 
 
 
COMPREHENSIVE INCOME
 
506

 
204

 
828

 
645


COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
 
(2
)
 
(4
)
 
(17
)
 
(19
)
 
 
 
 
 
 
 
 
 
COMPREHENSIVE INCOME AVAILABLE TO FIRSTENERGY CORP.
 
$
508

 
$
208

 
$
845

 
$
664


The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.



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Table of Contents

FIRSTENERGY CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except share amounts)
 
September 30,
2011
 
December 31,
2010
ASSETS
 
 
 
 
CURRENT ASSETS:
 
 
 
 
Cash and cash equivalents
 
$
291

 
$
1,019

Receivables-
 
 
 
 
Customers, net of allowance for uncollectible accounts of $37 in 2011 and $36 in 2010
 
1,633

 
1,392

Other, net of allowance for uncollectible accounts of $9 in 2011 and $8 in 2010
 
247

 
176

Materials and supplies, at average cost
 
822

 
638

Prepaid taxes
 
214

 
199

Derivatives
 
195

 
182

Other
 
189

 
92

 
 
3,591

 
3,698

 
 
 
 
 
ASSETS PENDING SALE (Note 15)
 
402

 

 
 
 
 
 
PROPERTY, PLANT AND EQUIPMENT:
 
 
 
 
In service
 
39,350

 
29,451

Less — Accumulated provision for depreciation
 
11,803

 
11,180

 
 
27,547

 
18,271

Construction work in progress
 
1,720

 
1,517

 
 
29,267

 
19,788

INVESTMENTS:
 
 
 
 
Nuclear plant decommissioning trusts
 
2,060

 
1,973

Investments in lease obligation bonds
 
414

 
476

Nuclear fuel disposal trust
 
218

 
208

Other
 
440

 
345

 
 
3,132

 
3,002

DEFERRED CHARGES AND OTHER ASSETS:
 
 
 
 
Goodwill
 
6,448

 
5,575

Regulatory assets
 
2,160

 
1,826

Intangible assets
 
910

 
256

Other
 
751

 
660

 
 
10,269

 
8,317

 
 
$
46,661

 
$
34,805

LIABILITIES AND CAPITALIZATION

 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
Currently payable long-term debt
 
$
1,840

 
$
1,486

Short-term borrowings
 

 
700

Accounts payable
 
1,009

 
872

Accrued taxes
 
482

 
326

Accrued compensation and benefits
 
350

 
315

Derivatives
 
202

 
266

Other
 
980

 
733

 
 
4,863

 
4,698

 
 
 
 
 
LIABILITIES RELATED TO ASSETS PENDING SALE (Note 15)
 
401

 

 
 
 
 
 
CAPITALIZATION:
 
 
 
 
Common stockholders’ equity-
 
 
 
 
Common stock, $0.10 par value, authorized 490,000,000 and 375,000,000 shares, respectively- 418,216,437 and 304,835,407 shares outstanding, respectively
 
42

 
31

Other paid-in capital
 
9,782

 
5,444

Accumulated other comprehensive loss
 
(1,436
)
 
(1,539
)
Retained earnings
 
4,658

 
4,609

Total common stockholders’ equity
 
13,046

 
8,545

Noncontrolling interest
 
(31
)
 
(32
)
Total equity
 
13,015

 
8,513

Long-term debt and other long-term obligations
 
15,823

 
12,579

 
 
28,838

 
21,092

NONCURRENT LIABILITIES:
 
 
 
 
Accumulated deferred income taxes
 
5,315

 
2,879

Retirement benefits
 
2,045

 
1,868

Asset retirement obligations
 
1,473

 
1,407

Deferred gain on sale and leaseback transaction
 
934

 
959

Adverse power contract liability
 
665

 
466

Other
 
2,127

 
1,436

 
 
12,559

 
9,015

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 10)
 

 

 
 
$
46,661

 
$
34,805


The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.


3

Table of Contents

FIRSTENERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Nine Months
Ended September 30
(In millions)
 
2011
 
2010
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net Income
 
$
725

 
$
580

Adjustments to reconcile net income to net cash from operating activities-
 
 
 
 
Provision for depreciation
 
794

 
565

Amortization of regulatory assets
 
344

 
549

Nuclear fuel and lease amortization
 
152

 
123

Deferred purchased power and other costs
 
(222
)
 
(192
)
Deferred income taxes and investment tax credits, net
 
636

 
259

Deferred rents and lease market valuation liability
 
(17
)
 
(21
)
Accrued compensation and retirement benefits
 
95

 
48

Commodity derivative transactions, net
 
(22
)
 
(40
)
Pension trust contributions
 
(375
)
 

Asset impairments
 
59

 
315

Cash collateral paid, net
 
(66
)
 
(54
)
Interest rate swap transactions
 

 
129

   Gain on investment securities held in trusts
 
(56
)
 
(39
)
Decrease (increase) in operating assets-
 
 
 
 
Receivables
 
139

 
(172
)
Materials and supplies
 
62

 
(6
)
Prepayments and other current assets
 
(1
)
 
(4
)
Increase (decrease) in operating liabilities-
 
 
 
 
Accounts payable
 
(154
)
 
(16
)
Accrued taxes
 
20

 
(18
)
Accrued interest
 
67

 
63

Other
 
49

 
4

Net cash provided from operating activities
 
2,229

 
2,073

CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
New Financing-
 
 
 
 
Long-term debt
 
603

 
251

Redemptions and Repayments-
 
 
 
 
Long-term debt
 
(1,581
)
 
(422
)
Short-term borrowings, net
 
(700
)
 
(171
)
Common stock dividend payments
 
(651
)
 
(503
)
Other
 
(73
)
 
(25
)
Net cash used for financing activities
 
(2,402
)
 
(870
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Property additions
 
(1,529
)
 
(1,467
)
Proceeds from asset sales
 
519

 
117

Sales of investment securities held in trusts
 
3,678

 
2,577

Purchases of investment securities held in trusts
 
(3,801
)
 
(2,610
)
Customer acquisition costs
 
(2
)
 
(110
)
Cash investments
 
51

 
56

Cash received in Allegheny merger
 
590

 

Other
 
(61
)
 
(8
)
Net cash used for investing activities
 
(555
)
 
(1,445
)

Net change in cash and cash equivalents
 
(728
)
 
(242
)
Cash and cash equivalents at beginning of period
 
1,019

 
874

Cash and cash equivalents at end of period
 
$
291

 
$
632

 
 
 
 
 
SUPPLEMENTAL CASH FLOW INFORMATION:
 
 
 
 
Non-cash transaction: merger with Allegheny, common stock issued
 
$
4,354

 
$


The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.


4

Table of Contents

FIRSTENERGY SOLUTIONS CORP.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months
Ended September 30
 
Nine Months
Ended September 30
(In millions)
 
2011
 
2010
 
2011
 
2010
 
 
 
 
 
 
 
 
 
STATEMENTS OF INCOME
 
 
 
 
 
 
 
 

REVENUES:
 
 
 
 
 
 
 
 
Electric sales to non-affiliates
 
$
1,251

 
$
951

 
$
3,348

 
$
2,348

Electric sales to affiliates
 
143

 
600

 
574

 
1,746

Other
 
73

 
38

 
229

 
209

Total revenues
 
1,467

 
1,589

 
4,151

 
4,303

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Fuel
 
386

 
391

 
1,045

 
1,062

Purchased power from affiliates
 
55

 
116

 
189

 
246

Purchased power from non-affiliates
 
328

 
446

 
954

 
1,206

Other operating expenses
 
405

 
308

 
1,315

 
916

Provision for depreciation
 
69

 
60

 
205

 
186

General taxes
 
31

 
22

 
91

 
71

Impairment of long-lived assets
 
2

 
292

 
22

 
294

Total operating expenses
 
1,276

 
1,635

 
3,821

 
3,981

 
 
 
 
 
 
 
 
 
OPERATING INCOME (LOSS)
 
191

 
(46
)
 
330

 
322

 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
Investment income
 
28

 
30

 
50

 
44

Miscellaneous income (expense)
 
9

 
3

 
17

 
10

Interest expense — affiliates
 
(2
)
 
(2
)
 
(5
)
 
(7
)
Interest expense — other
 
(51
)
 
(50
)
 
(156
)
 
(151
)
Capitalized interest
 
8

 
23

 
28

 
67

Total other income (expense)
 
(8
)
 
4

 
(66
)
 
(37
)

INCOME (LOSS) BEFORE INCOME TAXES

 
183

 
(42
)
 
264

 
285

INCOME TAXES (BENEFITS)
 
73

 
(5
)
 
98

 
108


NET INCOME (LOSS)
 
110

 
(37
)
 
166

 
177

 
 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS):
 
 
 
 
 
 
 
 
Pension and other postretirement benefits
 
1

 
1

 
4

 
(8
)
Unrealized gain (loss) on derivative hedges
 
(1
)
 
3

 
4

 
7

Change in unrealized gain on available-for-sale securities
 
(22
)
 
18

 
(7
)
 
29

Other comprehensive income (loss)
 
(22
)
 
22

 
1

 
28

Income taxes (benefits) on other comprehensive income (loss)
 
(9
)
 
8

 
(1
)
 
10

Other comprehensive income (loss), net of tax
 
(13
)
 
14

 
2

 
18


COMPREHENSIVE INCOME (LOSS)
 
$
97

 
$
(23
)
 
$
168

 
$
195


The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.


5

Table of Contents

FIRSTENERGY SOLUTIONS CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except share amounts)
 
September 30,
2011
 
December 31,
2010
ASSETS
 
 
 
 
CURRENT ASSETS:
 
 
 
 
Cash and cash equivalents
 
$
6

 
$
9

Receivables-
 
 
 
 
Customers, net of allowance for uncollectible accounts of $19 in 2011 and $17 in 2010
 
452

 
366

Affiliated companies
 
478

 
478

Other, net of allowances for uncollectible accounts of $3 in 2011 and $7 in 2010
 
61

 
90

Notes receivable from affiliated companies
 
340

 
397

Materials and supplies, at average cost
 
477

 
545

Derivatives
 
170

 
182

Prepayments and other
 
61

 
59

 
 
2,045

 
2,126

PROPERTY, PLANT AND EQUIPMENT:
 
 
 
 
In service
 
11,440

 
11,321

Less — Accumulated provision for depreciation
 
4,314

 
4,024

 
 
7,126

 
7,297

Construction work in progress
 
818

 
1,063

 
 
7,944

 
8,360

INVESTMENTS:
 
 
 
 
Nuclear plant decommissioning trusts
 
1,187

 
1,146

Other
 
10

 
12

 
 
1,197

 
1,158

DEFERRED CHARGES AND OTHER ASSETS:
 
 
 
 
Customer intangibles
 
126

 
134

Goodwill
 
24

 
24

Property taxes
 
41

 
41

Unamortized sale and leaseback costs
 
68

 
73

Derivatives
 
136

 
98

Other
 
83

 
48

 
 
478

 
418

 
 
$
11,664

 
$
12,062

LIABILITIES AND CAPITALIZATION
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
Currently payable long-term debt
 
$
877

 
$
1,132

Short-term borrowings-
 
 
 
 
Affiliated companies
 

 
12

Accounts payable-
 
 
 
 
Affiliated companies
 
425

 
467

Other
 
170

 
241

Derivatives
 
175

 
266

Other
 
323

 
322

 
 
1,970

 
2,440

CAPITALIZATION:
 
 
 
 
Common stockholder’s equity-
 
 
 
 
Common stock, without par value, authorized 750 shares- 7 shares outstanding
 
1,492

 
1,490

Accumulated other comprehensive loss
 
(118
)
 
(120
)
Retained earnings
 
2,584

 
2,418

Total common stockholder’s equity
 
3,958

 
3,788

Long-term debt and other long-term obligations
 
2,892

 
3,181

 
 
6,850

 
6,969

NONCURRENT LIABILITIES:
 
 
 
 
Deferred gain on sale and leaseback transaction
 
934

 
959

Accumulated deferred income taxes
 
303

 
58

Asset retirement obligations
 
889

 
892

Retirement benefits
 
299

 
285

Lease market valuation liability
 
183

 
217

Derivatives
 
67

 
81

Other
 
169

 
161

 
 
2,844

 
2,653

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 10)
 

 

 
 
$
11,664

 
$
12,062


The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.


6

Table of Contents

FIRSTENERGY SOLUTIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Nine Months
Ended September 30
(In millions)
 
2011
 
2010
 
 
 
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net Income
 
$
166

 
$
177

Adjustments to reconcile net income to net cash from operating activities-
 
 
 
 
Provision for depreciation
 
205

 
186

Nuclear fuel and lease amortization
 
151

 
126

Deferred rents and lease market valuation liability
 
(37
)
 
(41
)
Deferred income taxes and investment tax credits, net
 
229

 
96

Asset impairments
 
40

 
315

Accrued compensation and retirement benefits
 
16

 
16

Gain on investment securities held in trusts
 
(48
)
 
(34
)
Commodity derivative transactions, net
 
(54
)
 
(40
)
Cash collateral paid, net
 
(81
)
 
(54
)
Decrease (increase) in operating assets-
 
 
 
 
Receivables
 
(34
)
 
(91
)
Materials and supplies
 
72

 
(15
)
Prepayments and other current assets
 
8

 
36

Increase (decrease) in operating liabilities-
 
 
 
 
Accounts payable
 
(113
)
 
(50
)
Accrued taxes
 
24

 
(8
)
Other
 
(7
)
 
5

Net cash provided from operating activities
 
537

 
624

 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
New financing-
 
 
 
 
Long-term debt
 
247

 
250

Redemptions and repayments-
 
 
 
 
Long-term debt
 
(791
)
 
(296
)
   Short-term borrowings, net
 
(12
)
 

Other
 
(10
)
 
(1
)
Net cash used for financing activities
 
(566
)
 
(47
)
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Property additions
 
(473
)
 
(801
)
Proceeds from asset sales
 
519

 
117

Sales of investment securities held in trusts
 
1,613

 
1,478

Purchases of investment securities held in trusts
 
(1,654
)
 
(1,511
)
Loans to affiliated companies, net
 
57

 
303

Customer acquisition costs
 
(2
)
 
(110
)
Leasehold improvement payments to affiliated companies
 

 
(51
)
Other
 
(34
)
 
(2
)
Net cash provided from (used for) investing activities
 
26

 
(577
)
 
 
 
 
 
Net change in cash and cash equivalents
 
(3
)
 

Cash and cash equivalents at beginning of period
 
9

 

Cash and cash equivalents at end of period
 
$
6

 
$


The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.


7

Table of Contents

OHIO EDISON COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months
Ended September 30
 
Nine Months
Ended September 30
(In millions)
 
2011
 
2010
 
2011
 
2010
 
 
 
 
 
 
 
 
 
STATEMENTS OF INCOME
 
 
 
 
 
 
 
 

REVENUES:
 
 
 
 
 
 
 
 
Electric sales
 
$
441

 
$
457

 
$
1,165

 
$
1,352

Excise and gross receipts tax collections
 
29

 
30

 
82

 
82

Total revenues
 
470

 
487

 
1,247

 
1,434


OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Purchased power from affiliates
 
57

 
137

 
220

 
425

Purchased power from non-affiliates
 
80

 
84

 
203

 
257

Other operating expenses
 
119

 
95

 
331

 
272

Provision for depreciation
 
23

 
22

 
67

 
66

Amortization of regulatory assets, net
 
46

 
10

 
49

 
48

General taxes
 
51

 
49

 
146

 
140

Total operating expenses
 
376

 
397

 
1,016

 
1,208

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
94

 
90

 
231

 
226

 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
Investment income
 
10

 
5

 
19

 
17

Miscellaneous income
 
1

 
2

 
1

 
2

Interest expense
 
(22
)
 
(22
)
 
(66
)
 
(66
)
Capitalized interest
 

 

 
1

 
1

Total other expense
 
(11
)
 
(15
)
 
(45
)
 
(46
)
 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
83

 
75

 
186

 
180


INCOME TAXES
 
33

 
29

 
67

 
61

 
 
 
 
 
 
 
 
 
NET INCOME
 
50

 
46

 
119

 
119


OTHER COMPREHENSIVE INCOME:
 
 
 
 
 
 
 
 
Pension and other postretirement benefits
 
2

 
1

 
3

 
5

Change in unrealized gain on available-for-sale securities
 
(3
)
 
2

 
(1
)
 
3

Other comprehensive income
 
(1
)
 
3

 
2

 
8

Income taxes (benefits) on other comprehensive income
 
(1
)
 
1

 
(2
)
 
1

Other comprehensive income, net of tax
 

 
2

 
4

 
7


COMPREHENSIVE INCOME

 
$
50

 
$
48

 
$
123

 
$
126


The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.


8

Table of Contents

OHIO EDISON COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except share amounts)
 
September 30,
2011
 
December 31,
2010
ASSETS
 
 
 
 
CURRENT ASSETS:
 
 
 
 
Cash and cash equivalents
 
$

 
$
420

Receivables-
 
 
 
 
Customers, net of allowance for uncollectible accounts of $4 in 2011 and 2010
 
177

 
177

Affiliated companies
 
76

 
118

Other
 
30

 
12

Notes receivable from affiliated companies
 
180

 
17

Prepayments and other
 
36

 
7

 
 
499

 
751

UTILITY PLANT:
 
 
 
 
In service
 
3,206

 
3,137

Less — Accumulated provision for depreciation
 
1,241

 
1,208

 
 
1,965

 
1,929

Construction work in progress
 
78

 
45

 
 
2,043

 
1,974

OTHER PROPERTY AND INVESTMENTS:
 
 
 
 
Investment in lease obligation bonds
 
178

 
190

Nuclear plant decommissioning trusts
 
136

 
127

Other
 
91

 
96

 
 
405

 
413

DEFERRED CHARGES AND OTHER ASSETS:
 
 
 
 
Regulatory assets
 
343

 
400

Pension assets
 
66

<