Form 10-Q
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 June 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    
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 JULY 29, 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 the Cross-State Air Pollution Rule (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).
 
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.
 
Efforts and our 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 us 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 or 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 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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 Exhibit 10.1
 Exhibit 12
 Exhibit 31.1
 Exhibit 31.2
 Exhibit 32
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT

 

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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
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., 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 American Electric Power Company, Inc.
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 and WMB Loan Ventures LLC, 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
AOCL
  Accumulated Other Comprehensive Loss
AEP
  American Electric Power
AQC
  Air Quality Control
ARO
  Asset Retirement Obligation
ARR
  Auction Revenue Rights
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

 

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Table of Contents

GLOSSARY OF TERMS, Cont’d.
     
CCB
  Coal Combustion By-products
CDWR
  California Department of Water Resources
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
EDCP
  Executive Deferred Compensation Plan
EE&C
  Energy Efficiency and Conservation
EIS
  Energy Insurance Services, Inc.
EMP
  Energy Master Plan
ENEC
  Expanded Net Energy Cost
EPA
  United States Environmental Protection Agency
ESOP
  Employee Stock Ownership Plan
ESP
  Electric Security Plan
FASB
  Financial Accounting Standards Board
FERC
  Federal Energy Regulatory Commission
FMB
  First Mortgage Bond
FPA
  Federal Power Act
FRR
  Fixed Resource Requirement
FTRs
  Financial Transmission Rights
GAAP
  Generally Accepted Accounting Principles in the United States
RGGI
  Regional Greenhouse Gas Initiative
GHG
  Greenhouse Gases
IRS
  Internal Revenue Service
JOA
  Joint Operating Agreement
kV
  Kilovolt
KWH
  Kilowatt-hours
LBR
  Little Blue Run
LED
  Light-Emitting Diode
LOC
  Letter of Credit
LSE
  Load Serving Entity
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

 

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GLOSSARY OF TERMS, Cont’d.
     
NSR
  New Source Review
NUG
  Non-Utility Generation
NUGC
  Non-Utility Generation Charge
NYSEG
  New York State Electric and Gas
OCC
  Ohio Consumers’ Counsel
OCI
  Other Comprehensive Income
OPEB
  Other Post-Employment Benefits
OSBA
  Office of Small Business Advocate
OVEC
  Ohio Valley Electric Corporation
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
PSCWV
  Public Service Commission of West Virginia
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
RFP
  Request for Proposal
RGGI
  Regional Greenhouse Gas Initiative
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
  U.S. Securities and Exchange Commission
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
TBC
  Transition Bond Charge
TDS
  Total Dissolved Solid
TMDL
  Total Maximum Daily Load
TMI-2
  Three Mile Island Unit 2
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     Six Months  
    Ended June 30     Ended June 30  
In millions, except per share amounts   2011     2010     2011     2010  
REVENUES:
                               
Electric utilities
  $ 2,590     $ 2,373     $ 4,925     $ 4,916  
Unregulated businesses
    1,470       766       2,711       1,522  
 
                       
Total revenues*
    4,060       3,139       7,636       6,438  
 
                       
 
                               
EXPENSES:
                               
Fuel
    635       350       1,088       684  
Purchased power
    1,220       1,063       2,406       2,301  
Other operating expenses
    1,105       673       2,138       1,374  
Provision for depreciation
    282       190       502       383  
Amortization of regulatory assets
    90       161       222       373  
General taxes
    242       176       479       381  
 
                       
Total expenses
    3,574       2,613       6,835       5,496  
 
                       
 
                               
OPERATING INCOME
    486       526       801       942  
 
                       
 
                               
OTHER INCOME (EXPENSE):
                               
Investment income
    31       31       52       47  
Interest expense
    (265 )     (207 )     (496 )     (420 )
Capitalized interest
    20       40       38       81  
 
                       
Total other expense
    (214 )     (136 )     (406 )     (292 )
 
                       
 
                               
INCOME BEFORE INCOME TAXES
    272       390       395       650  
 
                               
INCOME TAXES
    101       134       179       245  
 
                       
 
                               
NET INCOME
    171       256       216       405  
 
                               
Loss attributable to noncontrolling interest
    (10 )     (9 )     (15 )     (15 )
 
                       
 
                               
EARNINGS AVAILABLE TO FIRSTENERGY CORP.
  $ 181     $ 265     $ 231     $ 420  
 
                       
 
                               
EARNINGS PER SHARE OF COMMON STOCK:
                               
Basic
  $ 0.43     $ 0.87     $ 0.61     $ 1.38  
Diluted
  $ 0.43     $ 0.87     $ 0.61     $ 1.37  
AVERAGE SHARES OUTSTANDING:
                               
Basic
    418       304       380       304  
Diluted
    420       305       382       305  
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK
              $ 0.55     $ 0.55  
     
*  
Includes excise tax collections of $116 million and $99 million in the three months ended June 30, 2011 and 2010, respectively, and $235 million and $208 million in the six months ended June 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     Six Months  
    Ended June 30     Ended June 30  
(In millions)   2011     2010     2011     2010  
 
                               
NET INCOME
  $ 171     $ 256     $ 216     $ 405  
 
                       
 
                               
OTHER COMPREHENSIVE INCOME:
                               
Pension and other postretirement benefits
    111       17       130       30  
Unrealized gain on derivative hedges
    17       6       11       10  
Change in unrealized gain on available-for-sale securities
    10       6       19       12  
 
                       
Other comprehensive income
    138       29       160       52  
Income tax expense related to other comprehensive income
    53       9       54       16  
 
                       
Other comprehensive income, net of tax
    85       20       106       36  
 
                       
 
                               
COMPREHENSIVE INCOME
    256       276       322       441  
 
                               
COMPREHENSIVE LOSS ATTRIBUTABLE
                               
TO NONCONTROLLING INTEREST
    (10 )     (9 )     (15 )     (15 )
 
                       
 
                               
COMPREHENSIVE INCOME AVAILABLE TO FIRSTENERGY CORP.
  $ 266     $ 285     $ 337     $ 456  
 
                       
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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FIRSTENERGY CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    June 30,     December 31,  
(In millions)   2011     2010  
ASSETS
               
 
               
CURRENT ASSETS:
               
Cash and cash equivalents
  $ 476     $ 1,019  
Receivables-
               
Customers, net of allowance for uncollectible accounts of $35 in 2011 and $36 in 2010
    1,578       1,392  
Other, net of allowance for uncollectible accounts of $8 in 2011 and 2010
    256       176  
Materials and supplies, at average cost
    866       638  
Prepaid taxes
    474       199  
Derivatives
    265       182  
Other
    203       92  
 
           
 
    4,118       3,698  
 
           
PROPERTY, PLANT AND EQUIPMENT:
               
In service
    39,568       29,451  
Less — Accumulated provision for depreciation
    11,593       11,180  
 
           
 
    27,975       18,271  
Construction work in progress
    1,465       1,517  
Property, plant and equipment held for sale, net
    502        
 
           
 
    29,942       19,788  
 
           
INVESTMENTS:
               
Nuclear plant decommissioning trusts
    2,051       1,973  
Investments in lease obligation bonds
    414       476  
Nuclear fuel disposal trust
    212       208  
Other
    479       345  
 
           
 
    3,156       3,002  
 
           
DEFERRED CHARGES AND OTHER ASSETS:
               
Goodwill
    6,456       5,575  
Regulatory assets
    2,182       1,826  
Intangible assets
    973       256  
Other
    769       660  
 
           
 
    10,380       8,317  
 
           
 
  $ 47,596     $ 34,805  
 
           
LIABILITIES AND CAPITALIZATION
               
 
               
CURRENT LIABILITIES:
               
Currently payable long-term debt
  $ 2,058     $ 1,486  
Short-term borrowings
    656       700  
Accounts payable
    1,122       872  
Accrued taxes
    399       326  
Accrued compensation and benefits
    331       315  
Derivatives
    287       266  
Other
    691       733  
 
           
 
    5,544       4,698  
 
           
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
    (1,433 )     (1,539 )
Retained earnings
    4,607       4,609  
 
           
Total common stockholders’ equity
    12,998       8,545  
Noncontrolling interest
    (48 )     (32 )
 
           
Total equity
    12,950       8,513  
Long-term debt and other long-term obligations
    16,491       12,579  
 
           
 
    29,441       21,092  
 
           
NONCURRENT LIABILITIES:
               
Accumulated deferred income taxes
    5,219       2,879  
Retirement benefits
    2,134       1,868  
Asset retirement obligations
    1,459       1,407  
Deferred gain on sale and leaseback transaction
    942       959  
Adverse power contract liability
    649       466  
Other
    2,208       1,436  
 
           
 
    12,611       9,015  
 
           
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
               
 
  $ 47,596     $ 34,805  
 
           
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 CASH FLOWS
(Unaudited)
                 
    Six Months Ended  
    June 30  
(In millions)   2011     2010  
 
               
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net Income
  $ 216     $ 405  
Adjustments to reconcile net income to net cash from operating activities-
               
Provision for depreciation
    502       383  
Amortization of regulatory assets
    222       373  
Nuclear fuel and lease amortization
    92       76  
Deferred purchased power and other costs
    (168 )     (146 )
Deferred income taxes and investment tax credits, net
    552       159  
Deferred rents and lease market valuation liability
    (61 )     (62 )
Accrued compensation and retirement benefits
    49       (27 )
Commodity derivative transactions, net
    (21 )     (29 )
Pension trust contribution
    (262 )      
Asset impairments
    41       21  
Cash collateral paid, net
    (31 )     (63 )
Interest rate swap transactions
          43  
Decrease (increase) in operating assets-
               
Receivables
    199       (156 )
Materials and supplies
    24       (17 )
Prepayments and other current assets
    (268 )     (81 )
Increase (decrease) in operating liabilities-
               
Accounts payable
    (28 )     18  
Accrued taxes
    (66 )     (58 )
Accrued interest
    (4 )     10  
Other
    43       9  
 
           
Net cash provided from operating activities
    1,031       858  
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
New Financing-
               
Long-term debt
    503        
Short-term borrowings, net
          281  
Redemptions and Repayments-
               
Long-term debt
    (1,002 )     (407 )
Short-term borrowings, net
    (44 )      
Common stock dividend payments
    (420 )     (335 )
Other
    (76 )     (23 )
 
           
Net cash used for financing activities
    (1,039 )     (484 )
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Property additions
    (1,018 )     (997 )
Proceeds from asset sales
          116  
Sales of investment securities held in trusts
    1,703       1,915  
Purchases of investment securities held in trusts
    (1,807 )     (1,934 )
Customer acquisition costs
    (2 )     (105 )
Cash investments
    50       59  
Cash received in Allegheny merger
    590        
Other
    (51 )     (21 )
 
           
Net cash used for investing activities
    (535 )     (967 )
 
           
 
               
Net change in cash and cash equivalents
    (543 )     (593 )
Cash and cash equivalents at beginning of period
    1,019       874  
 
           
Cash and cash equivalents at end of period
  $ 476     $ 281  
 
           
 
               
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.

 

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FIRSTENERGY SOLUTIONS CORP.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
(In millions)   2011     2010     2011     2010  
STATEMENTS OF INCOME
                               
 
                               
REVENUES:
                               
Electric sales to non-affiliates
  $ 1,052     $ 729     $ 2,097     $ 1,397  
Electric sales to affiliates
    170       539       431       1,146  
Other
    70       58       156       171  
 
                       
Total revenues
    1,292       1,326       2,684       2,714  
 
                       
 
                               
EXPENSES:
                               
Fuel
    316       343       659       671  
Purchased power from affiliates
    65       69       134       130  
Purchased power from non-affiliates
    329       310       626       760  
Other operating expenses
    429       304       910       608  
Provision for depreciation
    68       63       136       126  
General taxes
    30       22       60       49  
Impairment of long-lived assets
    7             20       2  
 
                       
Total expenses
    1,244       1,111       2,545       2,346  
 
                       
 
                               
OPERATING INCOME
    48       215       139       368  
 
                       
 
                               
OTHER INCOME (EXPENSE):
                               
Investment income
    16       13       22       14  
Miscellaneous income (expense)
    4       4       8       7  
Interest expense — affiliates
    (2 )     (2 )     (3 )     (5 )
Interest expense — other
    (52 )     (51 )     (105 )     (101 )
Capitalized interest
    10       24       20       44  
 
                       
Total other expense
    (24 )     (12 )     (58 )     (41 )
 
                       
 
                               
INCOME BEFORE INCOME TAXES
    24       203       81       327  
 
                               
INCOME TAXES
    4       69       25       113  
 
                       
 
                               
NET INCOME
  $ 20     $ 134     $ 56     $ 214  
 
                       
 
                               
STATEMENTS OF COMPREHENSIVE INCOME
                               
 
                               
NET INCOME
  $ 20     $ 134     $ 56     $ 214  
 
                       
 
                               
OTHER COMPREHENSIVE INCOME:
                               
Pension and other postretirement benefits
    1       1       3       (9 )
Unrealized gain on derivative hedges
    14       3       5       4  
Change in unrealized gain on available-for-sale securities
    8       6       15       11  
 
                       
Other comprehensive income
    23       10       23       6  
Income taxes related to other comprehensive income
    10       4       8       2  
 
                       
Other comprehensive income, net of tax
    13       6       15       4  
 
                       
 
                               
COMPREHENSIVE INCOME
  $ 33     $ 140     $ 71     $ 218  
 
                       
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    June 30,     December 31,  
(In millions)   2011     2010  
ASSETS
               
CURRENT ASSETS:
               
Cash and cash equivalents
  $ 6     $ 9  
Receivables-
               
Customers, net of allowance for uncollectible accounts of $18 in 2011 and $17 in 2010
    450       366  
Associated companies
    490       478  
Other, net of allowances for uncollectible accounts of $3 in 2011 and $7 in 2010
    51       90  
Notes receivable from associated companies
    490       397  
Materials and supplies, at average cost
    499       545  
Derivatives
    221       182  
Prepayments and other
    49       59  
 
           
 
    2,256       2,126  
 
           
PROPERTY, PLANT AND EQUIPMENT:
               
In service
    11,455       11,321  
Less — Accumulated provision for depreciation
    4,206       4,024  
 
           
 
    7,249       7,297  
Construction work in progress
    694       1,063  
Property, plant and equipment held for sale, net
    487        
 
           
 
    8,430       8,360  
 
           
INVESTMENTS:
               
Nuclear plant decommissioning trusts
    1,184       1,146  
Other
    10       12  
 
           
 
    1,194       1,158  
 
           
DEFERRED CHARGES AND OTHER ASSETS:
               
Customer intangibles
    129       134  
Goodwill
    24       24  
Property taxes
    41       41  
Unamortized sale and leaseback costs
    76       73  
Derivatives
    135       98  
Other
    75       48  
 
           
 
    480       418  
 
           
 
  $ 12,360     $ 12,062  
 
           
LIABILITIES AND CAPITALIZATION
               
CURRENT LIABILITIES:
               
Currently payable long-term debt
  $ 1,088     $ 1,132  
Short-term borrowings-
               
Associated companies
    541       12  
Other
    1        
Accounts payable-
               
Associated companies
    393       467  
Other
    191       241  
Derivatives
    242       266  
Other
    262       322  
 
           
 
    2,718       2,440  
 
           
CAPITALIZATION:
               
Common stockholder’s equity-
               
Common stock, without par value, authorized 750 shares- 7 shares outstanding
    1,488       1,490  
Accumulated other comprehensive loss
    (105 )     (120 )
Retained earnings
    2,474       2,418  
 
           
Total common stockholder’s equity
    3,857       3,788  
Long-term debt and other long-term obligations
    3,000       3,181  
 
           
 
    6,857       6,969  
 
           
NONCURRENT LIABILITIES:
               
Deferred gain on sale and leaseback transaction
    942       959  
Accumulated deferred income taxes
    216       58  
Asset retirement obligations
    875       892  
Retirement benefits
    295       285  
Lease market valuation liability
    194       217  
Derivatives
    85       81  
Other
    178       161  
 
           
 
    2,785       2,653  
 
           
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
               
 
  $ 12,360     $ 12,062  
 
           
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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FIRSTENERGY SOLUTIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                 
    Six Months Ended  
    June 30  
(In millions)   2011     2010  
 
               
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net Income
  $ 56     $ 214  
Adjustments to reconcile net income to net cash from operating activities-
               
Provision for depreciation
    136       126  
Nuclear fuel and lease amortization
    92       78  
Deferred rents and lease market valuation liability
    (58 )     (59 )
Deferred income taxes and investment tax credits, net
    126       114  
Asset impairments
    28       21  
Accrued compensation and retirement benefits
    8       7  
Commodity derivative transactions, net
    (60 )     (29 )
Cash collateral paid, net
    (40 )     (38 )
Decrease (increase) in operating assets-
               
Receivables
    (36 )     (193 )
Materials and supplies
    50       (29 )
Prepayments and other current assets
    12       25  
Decrease in operating liabilities-
               
Accounts payable
    (124 )     (32 )
Accrued taxes
    (29 )     (8 )
Other
    21       21  
 
           
Net cash provided from operating activities
    182       218  
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
New financing-
               
Long-term debt
    247        
Short-term borrowings, net
    530       76  
Redemptions and repayments-
               
Long-term debt
    (472 )     (295 )
Other
    (11 )     (1 )
 
           
Net cash provided from (used for) financing activities
    294       (220 )
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Property additions
    (334 )     (566 )
Proceeds from asset sales
          116  
Sales of investment securities held in trusts
    513       957  
Purchases of investment securities held in trusts
    (545 )     (979 )
Loans to associated companies, net
    (93 )     631  
Customer acquisition costs
    (2 )     (105 )
Leasehold improvement payments to associated companies
          (51 )
Other
    (18 )     (1 )
 
           
Net cash provided from (used for) investing activities
    (479 )     2  
 
           
 
               
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.

 

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OHIO EDISON COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
(In thousands)   2011     2010     2011     2010  
 
                               
STATEMENTS OF INCOME
                               
 
                               
REVENUES:
                               
Electric sales
  $ 360,203     $ 415,437     $ 724,034     $ 895,362  
Excise and gross receipts tax collections
    24,941       23,949       53,136       52,424  
 
                       
Total revenues
    385,144       439,386       777,170       947,786  
 
                       
 
                               
EXPENSES:
                               
Purchased power from affiliates
    69,134       134,050       162,396       287,727  
Purchased power from non-affiliates
    62,667       78,826       123,046       173,057  
Other operating expenses
    110,778       88,275       212,240       177,130  
Provision for depreciation
    22,470       22,014       44,346       43,894  
Amortization of regulatory assets, net
    2,405       9,424       3,179       38,769  
General taxes
    45,592       43,362       95,018       90,854  
 
                       
Total expenses
    313,046       375,951       640,225       811,431  
 
                       
 
                               
OPERATING INCOME
    72,098       63,435       136,945       136,355  
 
                       
 
                               
OTHER INCOME (EXPENSE):
                               
Investment income
    5,043       6,309       9,351       11,553  
Miscellaneous income (expense)
    (477 )     1,295       (187 )     1,003  
Interest expense
    (22,011 )     (22,155 )     (44,156 )     (44,465 )
Capitalized interest
    510       295       841       503  
 
                       
Total other expense
    (16,935 )     (14,256 )     (34,151 )     (31,406 )
 
                       
 
                               
INCOME BEFORE INCOME TAXES
    55,163       49,179       102,794       104,949  
 
                               
INCOME TAXES
    16,538       11,856       34,029       31,465  
 
                       
 
                               
NET INCOME
    38,625       37,323       68,765       73,484  
 
                               
Income attributable to noncontrolling interest
    114       130       230       262  
 
                       
 
                               
EARNINGS AVAILABLE TO PARENT
  $ 38,511     $ 37,193     $ 68,535     $ 73,222  
 
                       
 
                               
STATEMENTS OF COMPREHENSIVE INCOME
                               
 
                               
NET INCOME
  $ 38,625     $ 37,323     $ 68,765     $ 73,484  
 
                       
 
                               
OTHER COMPREHENSIVE INCOME:
                               
Pension and other postretirement benefits
    1,122       322       1,461       4,337  
Increase in unrealized gain on available-for-sale securities
    1,591       520       1,569       811  
 
                       
Other comprehensive income
    2,713       842       3,030       5,148  
Income tax expense (benefit) related to other
                               
comprehensive income
    386       (26 )     (1,110 )     667  
 
                       
Other comprehensive income, net of tax
    2,327       868       4,140       4,481  
 
                       
 
                               
COMPREHENSIVE INCOME
    40,952       38,191       72,905       77,965  
 
                               
COMPREHENSIVE INCOME ATTRIBUTABLE TO
                               
NONCONTROLLING INTEREST
    114       130       230       262  
 
                       
 
                               
COMPREHENSIVE INCOME AVAILABLE TO PARENT
  $ 40,838     $ 38,061     $ 72,675     $ 77,703  
 
                       
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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OHIO EDISON COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    June 30,     December 31,  
(In thousands)   2011     2010  
 
               
ASSETS
               
CURRENT ASSETS:
               
Cash and cash equivalents
  $ 176     $ 420,489  
Receivables-
               
Customers, net of allowance for uncollectible accounts of $3,564 in 2011 and $4,086 in 2010
    159,393       176,591  
Associated companies
    68,709       118,135  
Other
    32,798       12,232  
Notes receivable from associated companies
    95,884       16,957  
Prepayments and other
    35,339       6,393  
 
           
 
    392,299       750,797  
 
           
UTILITY PLANT:
               
In service
    3,176,455       3,136,623  
Less — Accumulated provision for depreciation
    1,230,570       1,207,745  
 
           
 
    1,945,885       1,928,878  
Construction work in progress
    66,656       45,103  
 
           
 
    2,012,541       1,973,981  
 
           
OTHER PROPERTY AND INVESTMENTS:
               
Investment in lease obligation bonds
    177,835       190,420  
Nuclear plant decommissioning trusts
    133,354       127,017  
Other
    92,440       95,563  
 
           
 
    403,629       413,000  
 
           
DEFERRED CHARGES AND OTHER ASSETS:
               
Regulatory assets
    392,580       400,322  
Pension assets
    62,612       28,596  
Property taxes
    71,331       71,331  
Unamortized sale and leaseback costs
    27,628       30,126  
Other
    19,041       17,634  
 
           
 
    573,192       548,009  
 
           
 
  $ 3,381,661     $ 3,685,787  
 
           
LIABILITIES AND CAPITALIZATION
               
CURRENT LIABILITIES:
               
Currently payable long-term debt
  $ 1,429     $ 1,419  
Short-term borrowings-
               
Associated companies
          142,116  
Other
    166       320  
Accounts payable-
               
Associated companies
    94,821       99,421  
Other
    41,417       29,639  
Accrued taxes
    69,364       78,707  
Accrued interest
    25,374       25,382  
Other
    79,795       74,947  
 
           
 
    312,366       451,951  
 
           
CAPITALIZATION:
               
Common stockholder’s equity-
               
Common stock, without par value, authorized 175,000,000 shares – 60 shares outstanding
    783,871       951,866  
Accumulated other comprehensive loss
    (174,936 )     (179,076 )
Retained earnings
    110,156       141,621  
 
           
Total common stockholder’s equity
    719,091       914,411  
Noncontrolling interest
    5,313       5,680  
 
           
Total equity
    724,404       920,091  
Long-term debt and other long-term obligations
    1,151,720       1,152,134  
 
           
 
    1,876,124       2,072,225  
 
           
NONCURRENT LIABILITIES:
               
Accumulated deferred income taxes
    749,687       696,410  
Accumulated deferred investment tax credits
    9,439       10,159  
Retirement benefits
    183,345       183,712  
Asset retirement obligations
    69,164       74,456  
Other
    181,536       196,874  
 
           
 
    1,193,171       1,161,611  
 
           
COMMITMENTS AND CONTINGENCIES (Note 9)
               
 
  $ 3,381,661     $ 3,685,787  
 
           
   
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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OHIO EDISON COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                 
    Six Months Ended  
    June 30  
(In thousands)   2011     2010  
 
               
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net Income
  $ 68,765     $ 73,484  
Adjustments to reconcile net income to net cash from operating activities-
               
Provision for depreciation
    44,346       43,894  
Amortization of regulatory assets, net
    3,179       38,769  
Purchased power cost recovery reconciliation
    (8,584 )     (1,514 )
Amortization of lease costs
    (4,696 )     (4,619 )
Deferred income taxes and investment tax credits, net
    62,216       4,964  
Accrued compensation and retirement benefits
    (8,328 )     (16,154 )
Accrued regulatory obligations
    (3,309 )     (2,309 )
Cash collateral from (to) suppliers, net
    (850 )     1,215  
Pension trust contribution
    (27,000 )      
Decrease (increase) in operating assets-
               
Receivables
    80,968       49,250  
Prepayments and other current assets
    (28,947 )     5,072  
Decrease in operating liabilities-
               
Accounts payable
    (22,253 )     (57,208 )
Accrued taxes
    (9,360 )     (25,685 )
Other
    4,261       (114 )
 
           
Net cash provided from operating activities
    150,408       109,045  
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Redemptions and Repayments-
               
Long-term debt
    (707 )     (2,957 )
Short-term borrowings, net
    (142,270 )     (93,017 )
Common stock dividend payments
    (268,000 )     (250,000 )
Other
    (2,340 )     (881 )
 
           
Net cash used for financing activities
    (413,317 )     (346,855 )
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Property additions
    (78,894 )     (71,698 )
Leasehold improvement payments from associated companies
          18,375  
Sales of investment securities held in trusts
    19,595       59,804  
Purchases of investment securities held in trusts
    (25,547 )     (64,063 )
Loans to associated companies, net
    (78,927 )     12,420  
Cash investments
    11,962       11,774  
Other
    (5,593 )     (1,298 )
 
           
Net cash used for investing activities
    (157,404 )     (34,686 )
 
           
 
               
Net change in cash and cash equivalents
    (420,313 )     (272,496 )
Cash and cash equivalents at beginning of period
    420,489       324,175  
 
           
Cash and cash equivalents at end of period
  $ 176     $ 51,679  
 
           
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
(In thousands)   2011     2010     2011     2010  
 
                               
STATEMENTS OF INCOME
                               
REVENUES:
                               
Electric sales
  $ 202,148     $ 280,180     $ 408,890     $ 592,677  
Excise tax collections
    15,706       15,495       33,851       33,068  
 
                       
Total revenues
    217,854       295,675       442,741       625,745  
 
                       
 
                               
EXPENSES:
                               
Purchased power from affiliates
    36,040       99,422       82,208       208,815  
Purchased power from non-affiliates
    23,099       32,651       41,319       70,049  
Other operating expenses
    31,625       28,937       66,661       60,172  
Provision for depreciation
    18,488       18,336       36,914       36,447  
Amortization of regulatory assets, net
    18,166       30,807       41,536       75,946  
General taxes
    36,954       28,840       77,166       67,329  
 
                       
Total expenses
    164,372       238,993       345,804       518,758  
 
                       
 
                               
OPERATING INCOME
    53,482       56,682       96,937       106,987  
 
                       
 
                               
OTHER INCOME (EXPENSE):
                               
Investment income
    5,637       6,605       12,234       14,152  
Miscellaneous income
    1,038       675       1,674       1,257  
Interest expense
    (32,135 )     (33,262 )     (65,213 )     (66,883 )
Capitalized interest
    36       7       63       33  
 
                       
Total other expense
    (25,424 )     (25,975 )     (51,242 )     (51,441 )
 
                       
 
                               
INCOME BEFORE INCOME TAXES
    28,058       30,707       45,695       55,546  
 
                               
INCOME TAXES
    6,209       8,785       10,645       19,628  
 
                       
 
                               
NET INCOME
    21,849       21,922       35,050       35,918  
 
                               
Income attributable to noncontrolling interest
    309       366       675       785  
 
                       
 
                               
EARNINGS AVAILABLE TO PARENT
  $ 21,540     $ 21,556     $ 34,375     $ 35,133  
 
                       
 
                               
STATEMENTS OF COMPREHENSIVE INCOME
                               
 
                               
NET INCOME
  $ 21,849     $ 21,922     $ 35,050     $ 35,918  
 
                       
 
                               
OTHER COMPREHENSIVE INCOME (LOSS):
                               
Pension and other postretirement benefits (charges)
    2,975       3,228       5,942       (19,357 )
Income tax expense (benefit) related to other comprehensive income
    860       976       398       (7,301 )
 
                       
Other comprehensive income (loss), net of tax
    2,115       2,252       5,544       (12,056 )
 
                       
 
                               
COMPREHENSIVE INCOME
    23,964       24,174       40,594       23,862  
 
                               
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST
    309       366       675       785  
 
                       
 
                               
COMPREHENSIVE INCOME AVAILABLE TO PARENT
  $ 23,655     $ 23,808     $ 39,919     $ 23,077  
 
                       
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    June 30,     December 31,  
(In thousands)   2011     2010  
 
               
ASSETS
               
CURRENT ASSETS:
               
Cash and cash equivalents
  $ 244     $ 238  
Receivables-
               
Customers, net of allowance for uncollectible accounts of $2,801 in 2011 and $4,589 in 2010
    97,997       183,744  
Associated companies
    32,348       77,047  
Other
    13,476       11,544  
Notes receivable from associated companies
    71,911       23,236  
Materials and supplies, at average cost
    13,784       398  
Prepayments and other
    6,431       3,258  
 
           
 
    236,191       299,465  
 
           
UTILITY PLANT:
               
In service
    2,417,031       2,396,893  
Less — Accumulated provision for depreciation
    944,379       932,246  
 
           
 
    1,472,652       1,464,647  
Construction work in progress
    59,281       38,610  
 
           
 
    1,531,933       1,503,257  
 
           
OTHER PROPERTY AND INVESTMENTS:
               
Investment in lessor notes
    286,745       340,029  
Other
    10,048       10,074  
 
           
 
    296,793       350,103  
 
           
DEFERRED CHARGES AND OTHER ASSETS:
               
Goodwill
    1,688,521       1,688,521  
Regulatory assets
    320,337       370,403  
Pension assets
    14,652        
Property taxes
    80,614       80,614  
Other
    12,884       11,486  
 
           
 
    2,117,008       2,151,024  
 
           
 
  $ 4,181,925     $ 4,303,849  
 
           
LIABILITIES AND CAPITALIZATION
               
CURRENT LIABILITIES:
               
Currently payable long-term debt
  $ 188     $ 161  
Short-term borrowings from associated companies
    23,303       105,996  
Accounts payable-
               
Associated companies
    51,001       32,020  
Other
    18,700       14,947  
Accrued taxes
    83,265       84,668  
Accrued interest
    18,551       18,555  
Other
    38,685       44,569  
 
           
 
    233,693       300,916  
 
           
CAPITALIZATION:
               
Common stockholder’s equity-
               
Common stock, without par value, authorized 105,000,000 shares, 67,930,743 shares outstanding
    887,053       887,087  
Accumulated other comprehensive loss
    (147,643 )     (153,187 )
Retained earnings
    539,280       568,906  
 
           
Total common stockholder’s equity
    1,278,690       1,302,806  
Noncontrolling interest
    15,195       18,017  
 
           
Total equity
    1,293,885       1,320,823  
Long-term debt and other long-term obligations
    1,831,023       1,852,530  
 
           
 
    3,124,908       3,173,353  
 
           
NONCURRENT LIABILITIES:
               
Accumulated deferred income taxes
    640,059       622,771  
Accumulated deferred investment tax credits
    10,574       10,994  
Retirement benefits
    76,010       95,654  
Other
    96,681       100,161  
 
           
 
    823,324       829,580  
 
           
COMMITMENTS AND CONTINGENCIES (Note 9)
               
 
  $ 4,181,925     $ 4,303,849  
 
           
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                 
    Six Months Ended  
    June 30  
(In thousands)   2011     2010  
 
               
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net Income
  $ 35,050     $ 35,918  
Adjustments to reconcile net income to net cash from operating activities-
               
Provision for depreciation
    36,914       36,447  
Amortization of regulatory assets, net
    41,536       75,946  
Deferred income taxes and investment tax credits, net
    17,221       (18,083 )
Accrued compensation and retirement benefits
    5,421       5,421  
Accrued regulatory obligations
    (2,001 )     (444 )
Cash collateral from suppliers, net
          685  
Pension trust contribution
    (35,000 )      
Decrease (increase) in operating assets-
               
Receivables
    140,455       51,757  
Prepayments and other current assets
    (17,469 )     5,392  
Increase (decrease) in operating liabilities-
               
Accounts payable
    10,135       (34,488 )
Accrued taxes
    (346 )     (11,317 )
Other
    (4,436 )     2,023  
 
           
Net cash provided from operating activities
    227,480       149,257  
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Redemptions and Repayments-
               
Long-term debt
    (74 )     (54 )
Short-term borrowings, net
    (104,228 )     (136,013 )
Common stock dividend payments
    (64,000 )     (100,000 )
Other
    (5,239 )     (3,367 )
 
           
Net cash used for financing activities
    (173,541 )     (239,434 )
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Property additions
    (52,743 )     (44,373 )
Loans to associated companies, net
    (48,676 )     2,322  
Redemptions of lessor notes
    53,283       48,608  
Other
    (5,797 )     (2,365 )
 
           
Net cash provided from (used for) investing activities
    (53,933 )     4,192  
 
           
 
               
Net change in cash and cash equivalents
    6       (85,985 )
Cash and cash equivalents at beginning of period
    238       86,230  
 
           
Cash and cash equivalents at end of period
  $ 244     $ 245  
 
           
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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THE TOLEDO EDISON COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
(In thousands)   2011     2010     2011     2010  
 
                               
STATEMENTS OF INCOME
                               
 
                               
REVENUES:
                               
Electric sales
  $ 93,048     $ 114,691     $ 199,373     $ 240,122  
Excise tax collections
    6,270       6,059       13,572       13,100  
 
                       
Total revenues
    99,318       120,750       212,945       253,222  
 
                       
 
                               
EXPENSES:
                               
Purchased power from affiliates
    17,037       47,106       52,554       101,725  
Purchased power from non-affiliates
    16,114       15,223       30,102       33,713  
Other operating expenses
    32,549       25,499       69,136       51,044  
Provision for depreciation
    7,959       8,013       15,890       15,963  
Deferral of regulatory assets, net
    (7,054 )     (1,800 )     (18,532 )     (10,299 )
General taxes
    12,438       12,282       26,890       25,743  
 
                       
Total expenses
    79,043       106,323       176,040       217,889  
 
                       
 
                               
OPERATING INCOME
    20,275       14,427       36,905       35,333  
 
                       
 
                               
OTHER INCOME (EXPENSE):
                               
Investment income
    2,599       5,057       5,521       8,857  
Miscellaneous income (expense)
    396       (945 )     (1,233 )     (2,351 )
Interest expense
    (10,415 )     (10,455 )     (20,858 )     (20,942 )
Capitalized interest
    135       80       237       158  
 
                       
Total other expense
    (7,285 )     (6,263 )     (16,333 )     (14,278 )
 
                       
 
                               
INCOME BEFORE INCOME TAXES
    12,990       8,164       20,572       21,055  
 
                               
INCOME TAXES
    1,429       948       3,164       6,330  
 
                       
 
                               
NET INCOME
    11,561       7,216       17,408       14,725  
 
                               
Income attributable to noncontrolling interest
    2       2       4       5  
 
                       
 
                               
EARNINGS AVAILABLE TO PARENT
  $ 11,559     $ 7,214     $ 17,404     $ 14,720  
 
                       
 
                               
STATEMENTS OF COMPREHENSIVE INCOME
                               
 
                               
NET INCOME
  $ 11,561     $ 7,216     $ 17,408     $ 14,725  
 
                       
 
                               
OTHER COMPREHENSIVE INCOME:
                               
Pension and other postretirement benefits
    575       714       1,167       1,010  
Increase (decrease) in unrealized gain on available-for-sale securities
    754       (330 )     2,059       39  
 
                       
Other comprehensive income
    1,329       384       3,226       1,049  
Income tax expense related to other comprehensive income
    351       65       685       235  
 
                       
Other comprehensive income, net of tax
    978       319       2,541       814  
 
                       
 
                               
COMPREHENSIVE INCOME
    12,539       7,535       19,949       15,539  
 
                               
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST
    2       2       4       5  
 
                       
 
                               
COMPREHENSIVE INCOME AVAILABLE TO PARENT
  $ 12,537     $ 7,533     $ 19,945     $ 15,534  
 
                       
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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THE TOLEDO EDISON COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    June 30,     December 31,  
(In thousands)   2011     2010  
 
               
ASSETS
               
 
               
CURRENT ASSETS:
               
Cash and cash equivalents
  $ 12     $ 149,262  
Receivables-
               
Customers, net of allowance for uncollectible accounts of $1,142 in 2011 and $1 in 2010
    45,931       29  
Associated companies
    48,340       31,777  
Other, net of allowance for uncollectible accounts of $339 in 2011 and $330 in 2010
    5,272       18,464  
Notes receivable from associated companies
    128,815       96,765  
Prepayments and other
    12,052       2,306  
 
           
 
    240,422       298,603  
 
           
UTILITY PLANT:
               
In service
    955,002       947,203  
Less — Accumulated provision for depreciation
    453,517       446,401  
 
           
 
    501,485       500,802  
Construction work in progress
    17,386       12,604  
 
           
 
    518,871       513,406  
 
           
OTHER PROPERTY AND INVESTMENTS:
               
Investment in lessor notes
    82,153       103,872  
Nuclear plant decommissioning trusts
    79,018       75,558  
Other
    1,448       1,492  
 
           
 
    162,619       180,922  
 
           
DEFERRED CHARGES AND OTHER ASSETS:
               
Goodwill
    500,576       500,576  
Regulatory assets
    89,112       72,059  
Pension assets
    24,603        
Property taxes
    24,990       24,990  
Other
    42,341       23,750  
 
           
 
    681,622       621,375  
 
           
 
  $ 1,603,534     $ 1,614,306  
 
           
LIABILITIES AND CAPITALIZATION
               
 
               
CURRENT LIABILITIES:
               
Currently payable long-term debt
  $ 188     $ 199  
Accounts payable-
               
Associated companies
    22,144       17,168  
Other
    12,524       7,351  
Accrued taxes
    23,699       24,401  
Accrued interest
    5,933       5,931  
Lease market valuation liability
    36,900       36,900  
Other
    18,060       23,145  
 
           
 
    119,448       115,095  
 
           
CAPITALIZATION:
               
Common stockholder’s equity-
               
Common stock, $5 par value, authorized 60,000,000 shares, 29,402,054 shares outstanding
    147,010       147,010  
Other paid-in capital
    178,157       178,182  
Accumulated other comprehensive loss
    (46,642 )     (49,183 )
Retained earnings
    100,937       117,534  
 
           
Total common stockholder’s equity
    379,462       393,543  
Noncontrolling interest
    2,593       2,589  
 
           
Total equity
    382,055       396,132  
Long-term debt and other long-term obligations
    600,524       600,493  
 
           
 
    982,579       996,625  
 
           
NONCURRENT LIABILITIES:
               
Accumulated deferred income taxes
    168,429       132,019  
Accumulated deferred investment tax credits
    5,715       5,930  
Retirement benefits
    51,764       71,486  
Asset retirement obligations
    29,737       28,762  
Lease market valuation liability
    180,850       199,300  
Other
    65,012       65,089  
 
           
 
    501,507       502,586  
 
           
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
               
 
  $ 1,603,534     $ 1,614,306  
 
           
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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THE TOLEDO EDISON COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                 
    Six Months Ended  
    June 30  
(In thousands)   2011     2010  
 
               
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net Income
  $ 17,408     $ 14,725  
Adjustments to reconcile net income to net cash from operating activities-
               
Provision for depreciation
    15,890       15,963  
Deferral of regulatory assets, net
    (18,532 )     (10,299 )
Deferred rents and lease market valuation liability
    (43,851 )     (42,264 )
Deferred income taxes and investment tax credits, net
    41,457       16,503  
Accrued compensation and retirement benefits
    1,085       2,600  
Accrued regulatory obligations
    (1,193 )     (632 )
Pension trust contribution
    (45,000 )      
Cash collateral from (to) suppliers, net
    (14 )     343  
Increase (decrease) in operating assets-
               
Receivables
    (48,807 )     52,754  
Prepayments and other current assets
    (9,758 )     3,608  
Increase (decrease) in operating liabilities-
               
Accounts payable
    3,661       (61,195 )
Accrued taxes
    (701 )     (4,007 )
Other
    5,771       (8,960 )
 
           
Net cash used for operating activities
    (82,584 )     (20,861 )
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Redemptions and Repayments-
               
Long-term debt
    (105 )     (111 )
Short-term borrowings, net
          (225,975 )
Common stock dividend payments
    (34,000 )     (130,000 )
Other
    (1,742 )     (112 )
 
           
Net cash used for financing activities
    (35,847 )     (356,198 )
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Property additions
    (17,386 )     (20,237 )
Leasehold improvement payments from associated companies
          32,829  
Loans to associated companies, net
    (32,050 )     (10,818 )
Redemptions of lessor notes
    21,739       20,485  
Sales of investment securities held in trusts
    28,401       106,814  
Purchases of investment securities held in trusts
    (30,050 )     (107,978 )
Other
    (1,473 )     (2,905 )
 
           
Net cash provided from (used for) investing activities
    (30,819 )     18,190  
 
           
 
               
Net change in cash and cash equivalents
    (149,250 )     (358,869 )
Cash and cash equivalents at beginning of period
    149,262       436,712  
 
           
Cash and cash equivalents at end of period
  $ 12     $ 77,843  
 
           
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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JERSEY CENTRAL POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
(In thousands)   2011     2010     2011     2010  
 
                               
STATEMENTS OF INCOME
                               
REVENUES:
                               
Electric sales
  $ 576,977     $ 709,606     $ 1,211,000     $ 1,400,998  
Excise tax collections
    11,120       11,012       23,607       23,364  
 
                       
Total revenues
    588,097       720,618       1,234,607       1,424,362  
 
                       
 
                               
EXPENSES:
                               
Purchased power
    328,463       410,470       698,631       824,486  
Other operating expenses
    78,603       75,177       164,682       170,837  
Provision for depreciation
    26,773       27,093       52,087       55,064  
Amortization of regulatory assets, net
    40,046       81,326       121,633       150,774  
General taxes
    15,115       14,902       32,526       31,338  
 
                       
Total expenses
    489,000       608,968       1,069,559       1,232,499  
 
                       
 
                               
OPERATING INCOME
    99,097       111,650       165,048       191,863  
 
                       
 
                               
OTHER INCOME (EXPENSE):
                               
Miscellaneous income
    3,554       1,649       5,464       3,482  
Interest expense
    (31,125 )     (30,041 )     (61,782 )     (59,464 )
Capitalized interest
    618       156       1,045       289  
 
                       
Total other expense
    (26,953 )     (28,236 )     (55,273 )     (55,693 )
 
                       
 
                               
INCOME BEFORE INCOME TAXES
    72,144       83,414       109,775       136,170  
 
                               
INCOME TAXES
    30,383       33,521       48,461       57,051  
 
                       
 
                               
NET INCOME
  $ 41,761     $ 49,893     $ 61,314     $ 79,119  
 
                       
 
                               
STATEMENTS OF COMPREHENSIVE INCOME
                               
 
                               
NET INCOME
  $ 41,761     $ 49,893     $ 61,314     $ 79,119  
 
                       
 
                               
OTHER COMPREHENSIVE INCOME:
                               
Pension and other postretirement benefits
    4,290       4,135       8,511       20,063  
Unrealized gain on derivative hedges
    69       69       138       138  
 
                       
Other comprehensive income
    4,359       4,204       8,649       20,201  
Income tax expense related to other comprehensive income
    1,612       1,441       3,202       7,999  
 
                       
Other comprehensive income, net of tax
    2,747       2,763       5,447       12,202  
 
                       
 
                               
COMPREHENSIVE INCOME
  $ 44,508     $ 52,656     $ 66,761     $ 91,321  
 
                       
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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JERSEY CENTRAL POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    June 30,     December 31,  
(In thousands)   2011     2010  
 
               
ASSETS
               
 
               
CURRENT ASSETS:
               
Cash and cash equivalents
  $ 42     $ 4  
Receivables-
               
Customers, net of allowance for uncollectible accounts of $3,306 in 2011 and $3,769 in 2010
    259,313       323,044  
Associated companies
    66,069       53,780  
Other
    25,580       26,119  
Notes receivable — associated companies
    16,288       177,228  
Prepaid taxes
    135,679       10,889  
Other
    15,421       12,654  
 
           
 
    518,392       603,718  
 
           
UTILITY PLANT:
               
In service
    4,589,369       4,562,781  
Less — Accumulated provision for depreciation
    1,682,577       1,656,939  
 
           
 
    2,906,792       2,905,842  
Construction work in progress
    112,573       63,535  
 
           
 
    3,019,365       2,969,377  
 
           
OTHER PROPERTY AND INVESTMENTS:
               
Nuclear fuel disposal trust
    212,419       207,561  
Nuclear plant decommissioning trusts
    190,422       181,851  
Other
    2,118       2,104  
 
           
 
    404,959       391,516  
 
           
DEFERRED CHARGES AND OTHER ASSETS:
               
Goodwill
    1,810,936       1,810,936  
Regulatory assets
    469,490       513,395  
Other
    34,028       27,938  
 
           
 
    2,314,454       2,352,269  
 
           
 
  $ 6,257,170     $ 6,316,880  
 
           
LIABILITIES AND CAPITALIZATION
               
 
               
CURRENT LIABILITIES:
               
Currently payable long-term debt
  $ 33,315     $ 32,402  
Short-term borrowings-
               
Associated companies
    360,917        
Other
    50,000        
Accounts payable-
               
Associated companies
    56,544       28,571  
Other
    159,720       158,442  
Accrued compensation and benefits
    35,578       35,232  
Customer deposits
    23,684       23,385  
Accrued taxes
    1,346       2,509  
Accrued interest
    18,059       18,111  
Other
    13,487       22,263  
 
           
 
    752,650       320,915  
 
           
CAPITALIZATION:
               
Common stockholder’s equity-
               
Common stock, $10 par value, authorized 16,000,000 shares- 13,628,447 shares outstanding
    136,284       136,284  
Other paid-in capital
    2,008,847       2,508,874  
Accumulated other comprehensive loss
    (248,095 )     (253,542 )
Retained earnings
    288,484       227,170  
 
           
Total common stockholder’s equity
    2,185,520       2,618,786  
Long-term debt and other long-term obligations
    1,754,582       1,769,849  
 
           
 
    3,940,102       4,388,635  
 
           
NONCURRENT LIABILITIES:
               
Accumulated deferred income taxes
    761,844       715,527  
Power purchase contract liability
    239,943       233,492  
Nuclear fuel disposal costs
    196,868       196,768  
Retirement benefits
    71,711       182,364  
Asset retirement obligations
    111,831       108,297  
Other
    182,221       170,882  
 
           
 
    1,564,418       1,607,330  
 
           
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
               
 
  $ 6,257,170     $ 6,316,880  
 
           
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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JERSEY CENTRAL POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                 
    Six Months Ended  
    June 30  
(In thousands)   2011     2010  
 
               
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net Income
  $ 61,314     $ 79,119  
Adjustments to reconcile net income to net cash from operating activities-
               
Provision for depreciation
    52,087       55,064  
Amortization of regulatory assets, net
    121,633       150,774  
Deferred purchased power and other costs
    (70,998 )     (67,664 )
Deferred income taxes and investment tax credits, net
    51,222       (1,425 )
Accrued compensation and retirement benefits
    1,319       2,608  
Cash collateral paid, net
    (235 )     (23,400 )
Pension trust contribution
    (105,000 )      
Decrease (increase) in operating assets-
               
Receivables
    58,466       (46,788 )
Prepaid taxes
    (124,790 )     (111,968 )
Increase (decrease) in operating liabilities-
               
Accounts payable
    13,856       11,924  
Accrued taxes
    (1,167 )     10,368  
Other
    612       (6,446 )
 
           
Net cash provided from operating activities
    58,319       52,166  
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
New Financing-
               
Short-term borrowings, net
    410,917       57,850  
Redemptions and Repayments-
               
Long-term debt
    (14,671 )     (13,830 )
Common stock dividend payments
          (90,000 )
Equity payment to parent
    (500,000 )      
Other
    (1,452 )      
 
           
Net cash used for financing activities
    (105,206 )     (45,980 )
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Property additions
    (98,153 )     (80,727 )
Loans to associated companies, net
    160,940       85,049  
Sales of investment securities held in trusts
    375,885       281,242  
Purchases of investment securities held in trusts
    (385,448 )     (289,454 )
Other
    (6,299 )     (2,224 )
 
           
Net cash provided from (used for) investing activities
    46,925       (6,114 )
 
           
 
               
Net change in cash and cash equivalents
    38       72  
Cash and cash equivalents at beginning of period
    4       27  
 
           
Cash and cash equivalents at end of period
  $ 42     $ 99  
 
           
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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Table of Contents

METROPOLITAN EDISON COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
(In thousands)   2011     2010     2011     2010  
 
REVENUES:
                               
Electric sales
  $ 265,363     $ 422,030     $ 603,779     $ 873,590  
Gross receipts tax collections
    14,601       20,629       33,401       42,196  
 
                       
Total revenues
    279,964       442,659       637,180       915,786  
 
                       
 
                               
EXPENSES:
                               
Purchased power from affiliates
    34,935       149,000       84,824       310,080  
Purchased power from non-affiliates
    100,836       85,276       253,879       177,204  
Other operating expenses
    50,075       90,151       97,307       192,134  
Provision for depreciation
    12,766       13,440       25,189       26,198  
Amortization of regulatory assets, net
    22,167       48,589       54,261       97,389  
General taxes
    17,152       19,894       39,302       41,634  
 
                       
Total expenses
    237,931       406,350       554,762       844,639  
 
                       
 
                               
OPERATING INCOME
    42,033       36,309       82,418       71,147  
 
                       
OTHER INCOME (EXPENSE):
                               
Interest income
    13       880       106       2,097  
Miscellaneous income
    915       1,381       1,885       3,554  
Interest expense
    (13,130 )     (13,002 )     (26,187 )     (26,775 )
Capitalized interest
    228       159       375       285  
 
                       
Total other expense
    (11,974 )     (10,582 )     (23,821 )     (20,839 )
 
                       
 
                               
INCOME BEFORE INCOME TAXES
    30,059       25,727       58,597       50,308  
 
                               
INCOME TAXES
    13,281       8,618       19,232       20,884  
 
                       
 
                               
NET INCOME
  $ 16,778     $ 17,109     $ 39,365     $ 29,424  
 
                       
 
                               
STATEMENTS OF COMPREHENSIVE INCOME
                               
 
                               
NET INCOME
  $ 16,778     $ 17,109     $ 39,365     $ 29,424  
 
                       
 
                               
OTHER COMPREHENSIVE INCOME
                               
Pension and other postretirement benefits
    2,227       2,162       4,190       11,871  
Unrealized gain on derivative hedges
    84       84       168       168  
 
                       
Other comprehensive income
    2,311       2,246       4,358       12,039  
Income tax expense related to other comprehensive income
    869       724       1,632       4,901  
 
                       
Other comprehensive income, net of tax
    1,442       1,522       2,726       7,138  
 
                       
 
                               
COMPREHENSIVE INCOME
  $ 18,220     $ 18,631     $ 42,091     $ 36,562  
 
                       
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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METROPOLITAN EDISON COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    June 30,     December 31,  
(In thousands)   2011     2010  
ASSETS
               
 
               
CURRENT ASSETS:
               
Cash and cash equivalents
  $ 157     $ 243,220  
Receivables-
               
Customers, net of allowance for uncollectible accounts of $3,087 in 2011 and $3,868 in 2010
    143,820       178,522  
Associated companies
    12,849       24,920  
Other
    16,437       13,007  
Notes receivable from associated companies
    10,432       11,028  
Prepaid taxes
    27,083       343  
Other
    1,443       2,289  
 
           
 
    212,221       473,329  
 
           
UTILITY PLANT:
               
In service
    2,266,437       2,247,853  
Less — Accumulated provision for depreciation
    859,055       846,003  
 
           
 
    1,407,382       1,401,850  
Construction work in progress
    42,604       23,663  
 
           
 
    1,449,986       1,425,513  
 
           
OTHER PROPERTY AND INVESTMENTS:
               
Nuclear plant decommissioning trusts
    301,188       289,328  
Other
    840       884  
 
           
 
    302,028       290,212  
 
           
DEFERRED CHARGES AND OTHER ASSETS:
               
Goodwill
    416,499       416,499  
Regulatory assets
    341,488       295,856  
Power purchase contract asset
    65,861       111,562  
Other
    54,587       31,699  
 
           
 
    878,435       855,616  
 
           
 
  $ 2,842,670     $ 3,044,670  
 
           
LIABILITIES AND CAPITALIZATION
               
 
               
CURRENT LIABILITIES:
               
Currently payable long-term debt
  $ 28,760     $ 28,760  
Short-term borrowings-
               
Associated companies
    238,399       124,079  
Other
    50,000        
Accounts payable-
               
Associated companies
    24,377       33,942  
Other
    48,262       29,862  
Accrued taxes
    12,844       60,856  
Accrued interest
    16,011       16,114  
Other
    29,605       29,278  
 
           
 
    448,258       322,891  
 
           
CAPITALIZATION:
               
Common stockholder’s equity-
               
Common stock, without par value, authorized 900,000 shares, 740,905 and 859,500 shares outstanding, respectively
    842,023       1,197,076  
Accumulated other comprehensive loss
    (139,657 )     (142,383 )
Retained earnings
    46,772       32,406  
 
           
Total common stockholder’s equity
    749,138       1,087,099  
Long-term debt and other long-term obligations
    704,486       718,860  
 
           
 
    1,453,624       1,805,959  
 
           
NONCURRENT LIABILITIES:
               
Accumulated deferred income taxes
    494,716       473,009  
Accumulated deferred investment tax credits
    6,656       6,866  
Nuclear fuel disposal costs
    44,471       44,449  
Asset retirement obligations
    199,162       192,659  
Retirement benefits
    22,276       29,121  
Power purchase contract liability
    121,924       116,027  
Other
    51,583       53,689  
 
           
 
    940,788       915,820  
 
           
COMMITMENTS AND CONTINGENCIES (Note 9)
               
  $ 2,842,670     $ 3,044,670  
 
           
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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METROPOLITAN EDISON COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                 
    Six Months Ended  
    June 30  
(In thousands)   2011     2010  
 
               
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net Income
  $ 39,365     $ 29,424  
Adjustments to reconcile net income to net cash from operating activities-
               
Provision for depreciation
    25,189       26,198  
Amortization of regulatory assets, net
    54,261       97,389  
Deferred costs recoverable as regulatory assets
    (41,699 )     (38,358 )
Deferred income taxes and investment tax credits, net
    11,972       (12,079 )
Accrued compensation and retirement benefits
    (510 )     (1,573 )
Cash collateral from suppliers, net
    174       50  
Pension trust contribution
    (35,000 )      
Decrease (increase) in operating assets-
               
Receivables
    46,240       (29,439 )
Prepaid taxes
    (26,740 )     (31,246 )
Increase (decrease) in operating liabilities-
               
Accounts payable
    5,148       733  
Accrued taxes
    (47,676 )     9,519  
Accrued interest
    (103 )     (1,277 )
Other
    10,903       7,553  
 
           
Net cash provided from operating activities
    41,524       56,894  
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
New Financing-
               
Short-term borrowings, net
    164,320       17,898  
Redemptions and Repayments-
               
Common stock
    (150,000 )      
Long-term debt
    (14,784 )     (100,000 )
Common stock dividend payments
    (80,000 )      
Equity payment to parent
    (150,000 )      
 
           
Net cash used for financing activities
    (230,464 )     (82,102 )
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Property additions
    (46,647 )     (54,405 )
Sales of investment securities held in trusts
    501,260       376,610  
Purchases of investment securities held in trusts
    (506,220 )     (381,219 )
Loans to associated companies, net
    596       85,943  
Other
    (3,112 )     (1,715 )
 
           
Net cash provided from (used for) investing activities
    (54,123 )     25,214  
 
           
 
               
Net change in cash and cash equivalents
    (243,063 )     6  
Cash and cash equivalents at beginning of period
    243,220       120  
 
           
Cash and cash equivalents at end of period
  $ 157     $ 126  
 
           
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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PENNSYLVANIA ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
(In thousands)   2011     2010     2011     2010  
 
                               
STATEMENTS OF INCOME
                               
REVENUES:
                               
Electric sales
  $ 238,942     $ 350,335     $ 547,258     $ 736,271  
Gross receipts tax collections
    12,727       16,162       29,256       33,686  
 
                       
Total revenues
    251,669       366,497       576,514       769,957  
 
                       
 
                               
EXPENSES:
                               
Purchased power from affiliates
    54,635       152,945       102,119       321,345  
Purchased power from non-affiliates
    64,459       86,829       205,895       178,252  
Other operating expenses
    44,570       67,070       85,898       139,464  
Provision for depreciation
    15,770       16,605       30,343       31,287  
Amortization (deferral) of regulatory assets, net
    12,608       (10,522 )     25,615       (20,488 )
General taxes
    14,665       18,647       35,401       35,181  
 
                       
Total expenses
    206,707       331,574       485,271       685,041  
 
                       
 
                               
OPERATING INCOME
    44,962       34,923       91,243       84,916  
 
                       
 
                               
OTHER INCOME (EXPENSE):
                               
Miscellaneous income
    644       1,310       669       2,923  
Interest expense
    (17,361 )     (17,630 )     (34,595 )     (34,920 )
Capitalized interest
    41       183       63       323  
 
                       
Total other expense
    (16,676 )     (16,137 )     (33,863 )     (31,674 )
 
                       
 
                               
INCOME BEFORE INCOME TAXES
    28,286       18,786       57,380       53,242  
 
                               
INCOME TAXES
    13,568       5,812       25,356       22,969  
 
                       
 
                               
NET INCOME
  $ 14,718     $ 12,974     $ 32,024     $ 30,273  
 
                       
 
                               
STATEMENTS OF COMPREHENSIVE INCOME
                               
 
                               
NET INCOME
  $ 14,718     $ 12,974     $ 32,024     $ 30,273  
 
                       
 
                               
OTHER COMPREHENSIVE INCOME:
                               
Pension and other postretirement benefits
    1,890       1,830       3,475       10,377  
Unrealized gain on derivative hedges
    17       16       33       32  
 
                       
Other comprehensive income
    1,907       1,846       3,508       10,409  
Income tax expense related to other comprehensive income
    678       483       1,233       3,767  
 
                       
Other comprehensive income, net of tax
    1,229       1,363       2,275       6,642  
 
                       
 
                               
COMPREHENSIVE INCOME
  $ 15,947     $ 14,337     $ 34,299     $ 36,915  
 
                       
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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PENNSYLVANIA ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    June 30,     December 31,  
(In thousands)   2011     2010  
 
               
ASSETS
               
 
               
CURRENT ASSETS:
               
Cash and cash equivalents
  $ 2     $ 5  
Receivables-
               
Customers, net of allowance for uncollectible accounts of $2,856 in 2011 and $3,369 in 2010
    121,511       148,864  
Associated companies
    65,989       54,052  
Other
    11,420       11,314  
Notes receivable from associated companies
    13,498       14,404  
Prepaid taxes
    26,372       14,026  
Other
    1,423       1,592  
 
           
 
    240,215       244,257  
 
           
UTILITY PLANT:
               
In service
    2,552,303       2,532,629  
Less — Accumulated provision for depreciation
    947,315       935,259  
 
           
 
    1,604,988       1,597,370  
Construction work in progress
    62,592       30,505  
 
           
 
    1,667,580       1,627,875  
 
           
OTHER PROPERTY AND INVESTMENTS:
               
Nuclear plant decommissioning trusts
    162,154       152,928  
Non-utility generation trusts
    126,786       80,244  
Other
    292       297  
 
           
 
    289,232       233,469  
 
           
DEFERRED CHARGES AND OTHER ASSETS:
               
Goodwill
    768,628       768,628  
Regulatory assets
    222,804       163,407  
Power purchase contract asset
    4,000       5,746  
Other
    15,272       19,287  
 
           
 
    1,010,704       957,068  
 
           
 
  $ 3,207,731     $ 3,062,669  
 
           
LIABILITIES AND CAPITALIZATION
               
 
               
CURRENT LIABILITIES:
               
Currently payable long-term debt
  $ 45,000     $ 45,000  
Short-term borrowings-
               
Associated companies
    159,902       101,338  
Accounts payable-
               
Associated companies
    77,121       35,626  
Other
    29,217       41,420  
Accrued taxes
    3,397       5,075  
Accrued interest
    17,454       17,378  
Other
    23,280       22,541  
 
           
 
    355,371       268,378  
 
           
CAPITALIZATION:
               
Common stockholder’s equity-
               
Common stock, $20 par value, authorized 5,400,000 shares- 4,427,577 shares outstanding
    88,552       88,552  
Other paid-in capital
    913,486       913,519  
Accumulated other comprehensive loss
    (161,251 )     (163,526 )
Retained earnings
    23,017       60,993  
 
           
Total common stockholder’s equity
    863,804       899,538  
Long-term debt and other long-term obligations
    1,072,417       1,072,262  
 
           
 
    1,936,221       1,971,800  
 
           
NONCURRENT LIABILITIES:
               
Accumulated deferred income taxes
    415,899       371,877  
Retirement benefits
    188,407       187,621  
Power purchase contract liability
    160,130       116,972  
Asset retirement obligations
    101,441       98,132  
Other
    50,262       47,889  
 
           
 
    916,139       822,491  
 
           
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
         
 
  $ 3,207,731     $ 3,062,669  
 
           
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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PENNSYLVANIA ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                 
    Six Months Ended  
    June 30  
(In thousands)   2011     2010  
 
               
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net Income
  $ 32,024     $ 30,273  
Adjustments to reconcile net income to net cash from operating activities-
               
Provision for depreciation
    30,343       31,287  
Amortization (deferral) of regulatory assets, net
    25,615       (20,488 )
Deferred costs recoverable as regulatory assets
    (38,291 )     (38,955 )
Deferred income taxes and investment tax credits, net
    46,687       42,943  
Accrued compensation and retirement benefits
    4,733       4,216  
Cash collateral paid, net
    (1,276 )     (3,613 )
Decrease (increase) in operating assets-
               
Receivables
    19,561       3,266  
Prepaid taxes
    (12,346 )     (37,504 )
Increase (decrease) in operating liabilities-
               
Accounts payable
    23,449       (4,603 )
Accrued taxes
    (12,373 )     (1,339 )
Other
    13,153       10,227  
 
           
Net cash provided from operating activities
    131,279       15,710  
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
New Financing-
               
Long-term debt
    25,000        
Short-term borrowings, net
    58,564       25,313  
Redemptions and Repayments-
               
Long-term debt
    (25,000 )      
Common stock dividend payments
    (70,000 )      
Other
    (1,353 )     5  
 
           
Net cash provided from (used for) financing activities
    (12,789 )     25,318  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Property additions
    (64,177 )     (58,293 )
Loans to associated companies, net
    906       498  
Sales of investment securities held in trusts
    265,223       133,934  
Purchases of investment securities held in trusts
    (314,738 )     (113,067 )
Other
    (5,707 )     (4,104 )
 
           
Net cash used for investing activities
    (118,493 )     (41,032 )
 
           
 
               
Net change in cash and cash equivalents
    (3 )     (4 )
Cash and cash equivalents at beginning of period
    5       14  
 
           
Cash and cash equivalents at end of period
  $ 2     $ 10  
 
           
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

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FIRSTENERGY CORP. AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
             
Note       Page  
Number       Number  
 
           
  Organization and Basis of Presentation     27  
 
           
  Merger     27  
 
           
  Earnings Per Share     31  
 
           
  Fair Value of Instruments     31  
 
           
  Derivative Instruments     45  
 
           
  Pension Benefits and Other Postretirement Benefits     50  
 
           
  Variable Interest Entities     52  
 
           
  Income Taxes     53  
 
           
  Commitments, Guarantees and Contingencies     54  
 
           
  Regulatory Matters     61  
 
           
  Stock-Based Compensation Plans     70  
 
           
  New Accounting Standards and Interpretations     72  
 
           
  Segment Information     72  
 
           
  Impairment of Long-Lived Assets     74  
 
           
  Asset Retirement Obligations     75  
 
           
  Supplemental Guarantor Information     75  

 

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COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
FirstEnergy is a diversified energy company that holds, directly or indirectly, all of the outstanding common stock of its principal subsidiaries: OE, CEI, TE, Penn (a wholly owned subsidiary of OE), ATSI, JCP&L, Met-Ed, Penelec, FENOC, AE and its principal subsidiaries (AE Supply, AGC, MP, PE, WP and TrAIL), FES and its subsidiaries FGCO and NGC, and FESC. AE merged with a subsidiary of FirstEnergy on February 25, 2011, with AE continuing as the surviving corporation and becoming a wholly-owned subsidiary of FirstEnergy (See Note 2, Merger).
FirstEnergy and its subsidiaries follow GAAP and comply with the related regulations, orders, policies and practices prescribed by the SEC, FERC, and, as applicable, the PUCO, the PPUC, the MDPSC, the NYPSC, the WVPSC and the NJBPU. These unaudited interim financial statements and notes were prepared in accordance with GAAP for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements. The preparation of financial statements in conformity with GAAP requires management to make periodic estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Actual results could differ from these estimates. The reported results of operations are not indicative of results of operations for any future period.
These unaudited interim financial statements should be read in conjunction with the financial statements and notes included in the combined Annual Report on Form 10-K for the year ended December 31, 2010 for FirstEnergy, FES and the Utility Registrants, as applicable. The consolidated unaudited financial statements of FirstEnergy, FES and each of the Utility Registrants reflect all normal recurring adjustments that, in the opinion of management, are necessary to fairly present results of operations for the interim periods. Certain prior year amounts have been reclassified to conform to the current year presentation. Unless otherwise indicated, defined terms used herein have the meanings set forth in the accompanying Glossary of Terms.
FirstEnergy and its subsidiaries consolidate all majority-owned subsidiaries over which they exercise control and, when applicable, entities for which they have a controlling financial interest. Intercompany transactions and balances are eliminated in consolidation. FirstEnergy consolidates a VIE when it is determined that it is the primary beneficiary (see Note 7, Variable Interest Entities). Investments in affiliates over which FirstEnergy and its subsidiaries have the ability to exercise significant influence, but with respect to which are not the primary beneficiary and do not exercise control, follow the equity method of accounting. Under the equity method, the interest in the entity is reported as an investment in the Consolidated Balance Sheets and the percentage share of the entity’s earnings is reported in the Consolidated Statements of Income.
2. MERGER
Merger
On February 25, 2011, the merger between FirstEnergy and Allegheny closed. Pursuant to the terms of the Agreement and Plan of Merger among FirstEnergy, Element Merger Sub, Inc., a Maryland corporation and a wholly-owned subsidiary of FirstEnergy (Merger Sub) and AE, Merger Sub merged with and into AE, with AE continuing as the surviving corporation and becoming a wholly-owned subsidiary of FirstEnergy. As part of the merger, AE shareholders received 0.667 of a share of FirstEnergy common stock for each share of AE common stock outstanding as of the date the merger was completed, and all outstanding AE equity-based employee compensation awards were converted into FirstEnergy equity-based awards on the same basis.
The total consideration in the merger was based on the closing price of a share of FirstEnergy common stock on February 24, 2011, the day prior to the date the merger was completed, and was calculated as follows (in millions, except per share data):
         
Shares of Allegheny common stock outstanding on February 24, 2011
    170  
Exchange ratio
    0.667  
 
     
Number of shares of FirstEnergy common stock issued
    113  
Closing price of FirstEnergy common stock on February 24, 2011
  $ 38.16  
 
     
Fair value of shares issued by FirstEnergy
  $ 4,327  
Fair value of replacement share-based compensation awards relating to pre-merger service
    27  
 
     
Total consideration transferred
  $ 4,354  
 
     

 

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The allocation of the total consideration transferred to the assets acquired and liabilities assumed includes adjustments for the fair value of coal contracts, energy supply contracts, emission allowances, unregulated property, plant and equipment, derivative instruments, goodwill, intangible assets, long-term debt and accumulated deferred income taxes. The preliminary allocation of the purchase price is as follows:
         
(In millions)        
 
       
Current assets
  $ 1,494  
Property, plant and equipment
    9,656  
Investments
    138  
Goodwill
    881  
Other noncurrent assets
    1,347  
Current liabilities
    (716 )
Noncurrent liabilities
    (3,452 )
Long-term debt and other long-term obligations
    (4,994 )
 
     
 
  $ 4,354  
 
     
The allocation of purchase price in the table above reflects a refinement made during the quarter ended June 30, 2011 in the determination of the fair values of income tax benefits, certain coal contracts and an adverse purchase power contract. This resulted in an increase in noncurrent assets of approximately $85 million and decreases in current assets and goodwill of $15 million and $71 million, respectively. The impact of the refinements on the amortization of purchase accounting adjustments recorded during the quarter ended March 31, 2011 was not significant. Further modifications to the purchase price allocation may occur as a result of continuing review of the assets acquired and liabilities assumed.
The estimated fair values of the assets acquired and liabilities assumed have been determined based on the accounting guidance for fair value measurements under GAAP, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was recognized as goodwill. The Allegheny delivery, transmission and generation businesses have been assigned to the Regulated Distribution, Regulated Independent Transmission and Competitive Energy Services segments, respectively. The preliminary estimate of goodwill from the merger of $881 million has been assigned to the Competitive Energy Services segment based on expected synergies from the merger. The goodwill is not deductible for tax purposes.
Total goodwill recognized by segment in FirstEnergy’s Consolidated Balance Sheet is as follows:
                                         
            Competitive     Regulated              
    Regulated     Energy     Independent     Other/        
(In millions)   Distribution     Services     Transmission     Corporate     Consolidated  
 
                                       
Balance as of December 31, 2010
  $ 5,551     $ 24     $     $     $ 5,575  
 
                                       
Merger with Allegheny
          881                   881  
 
                             
 
                                       
Balance as of June 30, 2011
  $ 5,551     $ 905     $     $     $ 6,456  
 
                             

 

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The preliminary valuation of the additional intangible assets and liabilities recorded as result of the merger is as follows:
                 
    Preliminary     Weighted Average  
(In millions)   Valuation     Amortization Period  
Above market contracts:
               
Energy contracts
  $ 189     10 years
NUG contracts
    124     25 years
Coal supply contracts
    516     8 years
 
             
 
    829          
 
               
Below market contracts:
               
NUG contracts
    143     13 years
Coal supply contracts
    83     7 years
Transportation contract
    35     8 years
 
             
 
    261          
 
             
 
               
Net intangible assets
  $ 568          
 
             
The fair value measurements of intangible assets and liabilities were based on significant unobservable inputs and thus represent level 3 measurements as defined in accounting guidance for fair value measurements.
The fair value of Allegheny’s energy, NUG and gas transportation contracts, both above-market and below-market, were estimated based on the present value of the above/below market cash flows attributable to the contracts based on the contract type, discounted by a current market interest rate consistent with the overall credit quality of the portfolio. The above/below market cash flows were estimated by comparing the expected cash flow based on existing contracted prices and expected volumes with the cash flows from estimated current market contract prices for the same expected volumes. The estimated current market contract prices were derived considering current market prices, such as the price of energy and transmission, miscellaneous fees and a normal profit margin. The weighted average amortization period was determined based on the expected volumes to be delivered over the life of the contract.
The fair value of coal supply contracts was determined in a similar manner based on the present value of the above/below market cash flows attributable to the contracts. The fair value adjustment for these contracts is being amortized based on expected deliveries under each contract.
As of June 30, 2011, intangible assets on FirstEnergy’s Consolidated Balance Sheet, including those recorded in connection with the merger, include the following:
         
    Intangible  
(In millions)   Assets  
Purchase contract assets
       
NUG
  $ 198  
OVEC
    54  
 
     
 
    252  
 
       
Intangible assets
       
Coal contracts
    487  
FES customer intangible assets
    129  
Energy contracts
    105  
 
     
 
    721  
 
     
 
       
Total intangible assets
  $ 973  
 
     
Acquired land easements and software with a fair value of $169 million are included in “Property, plant and equipment” on FirstEnergy’s Consolidated Balance Sheet as of June 30, 2011.
In connection with the merger, FirstEnergy recorded merger transaction costs of approximately $7 million ($5 million net of tax) and $7 million ($5 million net of tax) during the three months ended June 30, 2011 and 2010, respectively and approximately $89 million ($72 million net of tax) and $21 million ($15 million net of tax) during the first six months of 2011 and 2010, respectively. These costs are included in “Other operating expenses” in the Consolidated Statements of Income. Merger transaction costs recognized in the first six months of 2011 include $56 million ($47 net of tax) of change in control and other benefit payments to AE executives.

 

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FirstEnergy also recorded approximately $10 million ($6 million net of tax) and $85 million ($66 million net of tax) in merger integration costs during the three and six months ended June 30 2011, respectively, including an inventory valuation adjustment. In connection with the merger, FirstEnergy reviewed its inventory levels as a result of combining the inventory of both companies. Following this review, FirstEnergy management determined that the combined inventory stock contained excess and duplicative items. FirstEnergy management also adopted a consistent excess and obsolete inventory practice for the combined entity. Application of the revised practice, in conjunction with those items identified as excess and duplicative, resulted in an inventory valuation adjustment of $67 million ($42 million net of tax) in the first quarter of 2011.
Revenues and earnings of Allegheny included in FirstEnergy’s Consolidated Statement of Income for the periods subsequent to the February 25, 2011 merger date are as follows:
                 
  April 1 –     February 26 –  
(In millions, except per share amounts)   June 30, 2011     June 30, 2011  
 
               
Total revenues
  $ 1,181     $ 1,618  
Earnings available to FirstEnergy Corp.(1)
    63       17  
 
               
Basic Earnings Per Share
  $ 0.15     $ 0.04  
Diluted Earnings Per Share
  $ 0.15     $ 0.04  
     
(1)  
Includes Allegheny’s after-tax merger costs of $4 million and $56 million, respectively.
Pro Forma Financial Information
The following unaudited pro forma financial information reflects the consolidated results of operations of FirstEnergy as if the merger with Allegheny had taken place on January 1, 2010. The unaudited pro forma information has been calculated after applying FirstEnergy’s accounting policies and adjusting Allegheny’s results to reflect the depreciation and amortization that would have been charged assuming fair value adjustments to property, plant and equipment, debt and intangible assets had been applied on January 1, 2010, together with the consequential tax effects.
FirstEnergy and Allegheny both incurred non-recurring costs directly related to the merger that have been included in the pro forma earnings presented below. Combined pre-tax transaction costs incurred were approximately $7 million and $11 million in the three months ended June 30, 2011 and 2010, respectively, and approximately $90 million and $39 million in the six months ended June 30, 2011 and 2010, respectively. In addition, during the six months ended June 30, 2011, $85 million of pre-tax merger integration costs and $32 million of charges from merger settlements approved by regulatory agencies were recognized. Charges resulting from merger settlements are not expected to be material in future periods.
The unaudited pro forma financial information has been presented below for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved or the future consolidated results of operations of the combined company.
                                 
    Three Months Ended     Six Months Ended  
(Pro forma amounts in millions, except   June 30     June 30  
per share amounts)   2011     2010     2011     2010  
 
                               
Revenues
  $ 4,062     $ 4,401     $ 8,848     $ 9,086  
Earnings available to FirstEnergy
  $ 186     $ 389     $ 323     $ 644  
 
                               
Basic Earnings Per Share
  $ 0.44     $ 0.93     $ 0.77     $ 1.54  
 
                       
Diluted Earnings Per Share
  $ 0.44     $ 0.93     $ 0.77     $ 1.53  
 
                       

 

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3. EARNINGS PER SHARE
Basic earnings per share of common stock are computed using the weighted average of actual common shares outstanding during the relevant period as the denominator. The denominator for diluted earnings per share of common stock reflects the weighted average of common shares outstanding plus the potential additional common shares that would be issued if dilutive securities and other agreements to issue common stock were exercised. The following table reconciles basic and diluted earnings per share of common stock:
                                 
  Three Months     Six Months  
Reconciliation of Basic and Diluted Earnings per Share   Ended June 30     Ended June 30  
of Common Stock   2011     2010     2011     2010  
    (In millions, except per share amounts)  
 
                               
Earnings available to FirstEnergy Corp.
  $ 181     $ 265     $ 231     $ 420  
 
                       
Weighted average number of basic shares outstanding(1)
    418       304       380       304  
Assumed exercise of dilutive stock options and awards
    2       1       2       1  
 
                       
Weighted average number of diluted shares outstanding(1)
    420       305       382       305  
 
                       
 
                               
Basic earnings per share of common stock
  $ 0.43     $ 0.87     $ 0.61     $ 1.38  
 
                       
Diluted earnings per share of common stock
  $ 0.43     $ 0.87     $ 0.61     $ 1.37  
 
                       
     
(1)  
Includes 113 million shares issued to AE stockholders for the periods subsequent to the merger date. (See Note 2)
4. FAIR VALUE MEASUREMENTS
(A) LONG-TERM DEBT AND OTHER LONG-TERM OBLIGATIONS
All borrowings with initial maturities of less than one year are defined as short-term financial instruments under GAAP and are reported on the Consolidated Balance Sheets at cost, which approximates their fair market value, in the caption “short-term borrowings”. The following table provides the approximate fair value and related carrying amounts of long-term debt and other long-term obligations as of June 30, 2011 and December 31 2010:
                                 
    June 30, 2011     December 31, 2010  
  Carrying     Fair     Carrying     Fair  
  Value     Value     Value     Value  
  (In millions)  
FirstEnergy(1)
  $ 18,371     $ 19,436     $ 13,928     $ 14,845  
FES
    4,056       4,310       4,279       4,403  
OE
    1,158       1,367       1,159       1,321  
CEI
    1,831       2,083       1,853       2,035  
TE
    600       690       600       653  
JCP&L
    1,795       2,008       1,810       1,962  
Met-Ed
    729       828       742       821  
Penelec
    1,120       1,231       1,120       1,189  
     
(1)  
Includes debt assumed in the Allegheny merger (See Note 2) with a carrying value and a fair value as of June 30, 2011 of $4,530 million and $4,127 million, respectively.
The fair values of long-term debt and other long-term obligations reflect the present value of the cash outflows relating to those obligations based on the current call price, the yield to maturity or the yield to call, as deemed appropriate at the end of each respective period. The yields assumed were based on debt with similar characteristics offered by corporations with credit ratings similar to those of FirstEnergy, FES, the Utilities and other subsidiaries.
(B) INVESTMENTS
All temporary cash investments purchased with an initial maturity of three months or less are reported as cash equivalents on the Consolidated Balance Sheets at cost, which approximates their fair market value. Investments other than cash and cash equivalents include held-to-maturity securities, available-for-sale securities and notes receivable.
FES and the Utilities periodically evaluate their investments for other-than-temporary impairment. They first consider their intent and ability to hold an equity investment until recovery and then consider, among other factors, the duration and the extent to which the security’s fair value has been less than cost and the near-term financial prospects of the security issuer when evaluating an investment for impairment. For debt securities, FES and the Utilities consider their intent to hold the security, the likelihood that they will be required to sell the security before recovery of their cost basis, and the likelihood of recovery of the security’s entire amortized cost basis.

 

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Unrealized gains applicable to the decommissioning trusts of FES, OE and TE are recognized in OCI because fluctuations in fair value will eventually impact earnings while unrealized losses are recorded to earnings. The decommissioning trusts of JCP&L, Met-Ed and Penelec are subject to regulatory accounting. Net unrealized gains and losses are recorded as regulatory assets or liabilities because the difference between investments held in the trust and the decommissioning liabilities will be recovered from or refunded to customers.
The investment policy for the nuclear decommissioning trust funds restricts or limits the trusts’ ability to hold certain types of assets including private or direct placements, warrants, securities of FirstEnergy, investments in companies owning nuclear power plants, financial derivatives, preferred stocks, securities convertible into common stock and securities of the trust funds’ custodian or managers and their parents or subsidiaries.
Available-For-Sale Securities
FES and the Utilities hold debt and equity securities within their NDT, nuclear fuel disposal trusts and NUG trusts. These trust investments are considered as available-for-sale at fair market value. FES and the Utilities have no securities held for trading purposes.
The following table summarizes the amortized cost basis, unrealized gains and losses and fair values of investments held in NDT, nuclear fuel disposal trusts and NUG trusts as of June 30, 2011 and December 31, 2010:
                                                                 
    June 30, 2011(1)     December 31, 2010(2)  
    Cost     Unrealized     Unrealized     Fair     Cost     Unrealized     Unrealized     Fair  
    Basis     Gains     Losses     Value     Basis     Gains     Losses     Value  
    (In millions)  
Debt securities
                                                               
FirstEnergy
  $ 2,015     $ 48     $     $ 2,063     $ 1,699     $ 31     $     $ 1,730  
FES
    1,023       26             1,049       980       13             993  
OE
    128       3             131       123       1             124  
TE
    52       1             53       42                   42  
JCP&L
    353       9             362       281       9             290  
Met-Ed
    249       5             254       127       4             131  
Penelec
    210       4             214       145       4             149  
 
                                                               
Equity securities
                                                               
FirstEnergy
  $ 187     $ 11     $     $ 198     $ 268     $ 69     $     $ 337  
FES
    90       6             96                          
TE
    24       2             26                          
JCP&L
    21       1             22       80       17             97  
Met-Ed
    32       1             33       125       35             160  
Penelec
    20       1             21       63       16             79  
     
(1)  
Excludes cash investments, receivables, payables, deferred taxes and accrued income: FirstEnergy – $130 million; FES – $39 million; OE – $3 million; JCP&L – $19 million; Met-Ed – $14 million and Penelec – $55 million.
 
(2)  
Excludes cash investments, receivables, payables, deferred taxes and accrued income: FirstEnergy – $193 million; FES – $153 million; OE – $3 million; TE – $34 million; JCP&L – $3 million; Met-Ed – $(3) million and Penelec – $4 million.

 

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Proceeds from the sale of investments in available-for-sale securities, realized gains and losses on those sales net of adjustments recorded to earnings and interest and dividend income for the three months and six months ended June 30, 2011 and 2010 were as follows:
                                 
Three Months Ended June 30,  
 
                            Interest and  
2011   Sales Proceeds     Realized Gains     Realized Losses     Dividend Income  
    (In millions)  
FirstEnergy
  $ 734     $ 22     $ (16 )   $ 28  
FES
    297       10       (7 )     17  
OE
    12                   1  
TE
    15       1       (1 )     1  
JCP&L
    159       4       (2 )     4  
Met-Ed
    165       4       (3 )     3  
Penelec
    86       3       (3 )     2  
                                 
                            Interest and  
2010   Sales Proceeds     Realized Gains     Realized Losses     Dividend Income  
    (In millions)  
FirstEnergy
  $ 1,183     $ 46     $ (36 )   $ 16  
FES
    685       41       (35 )     9  
OE
    57       2              
TE
    76       2              
JCP&L
    91                   3  
Met-Ed
    233       1       (1 )     2  
Penelec
    41                   2  
                                 
Six Months Ended June 30,  
 
                            Interest and  
2011   Sales Proceeds     Realized Gains     Realized Losses     Dividend Income  
    (In millions)  
FirstEnergy
  $ 1,703     $ 122     $ (45 )   $ 52  
FES
    513       22       (23 )     32  
OE
    20                   2  
TE
    28       1       (2 )     1  
JCP&L
    376       26       (6 )     8  
Met-Ed
    501       48       (7 )     5  
Penelec
    265       25       (7 )     4  
                                 
                            Interest and  
2010   Sales Proceeds     Realized Gains     Realized Losses     Dividend Income  
    (In millions)  
FirstEnergy
  $ 1,915     $ 83     $ (86 )   $ 37  
FES
    957       54       (58 )     22  
OE
    60       2             1  
TE
    107       3             1  
JCP&L
    281       9       (9 )     7  
Met-Ed
    377       9       (12 )     3  
Penelec
    134       6       (7 )     3  
Held-To-Maturity Securities
The following table provides the amortized cost basis, unrealized gains and losses, and approximate fair values of investments in held-to-maturity securities as of June 30, 2011 and December 31, 2010:
                                                                 
    June 30, 2011     December 31, 2010  
    Cost     Unrealized     Unrealized     Fair     Cost     Unrealized     Unrealized     Fair  
    Basis     Gains     Losses     Value     Basis     Gains     Losses     Value  
    (In millions)  
Debt Securities
                                                               
FirstEnergy
  $ 414     $ 84     $       498     $ 476     $ 91     $     $ 567  
OE
    178       45             223       190       51             241  
CEI
    287       39             326       340       41             381  
Investments in emission allowances, employee benefits and cost and equity method investments totaling $345 million as of June 30, 2011 and $259 million as of December 31, 2010, are not required to be disclosed and are excluded from the amounts reported above.

 

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Notes Receivable
The table below provides the approximate fair value and related carrying amounts of notes receivable as of June 30, 2011 and December 31, 2010. The fair value of notes receivable represents the present value of the cash inflows based on the yield to maturity. The yields assumed were based on financial instruments with similar characteristics and terms. The maturity dates range from 2013 to 2021.
                                 
    June 30, 2011     December 31, 2010  
    Carrying     Fair     Carrying     Fair  
    Value     Value     Value     Value  
    (In millions)  
Notes Receivable
                               
FirstEnergy
  $ 6     $ 7     $ 7     $ 8  
TE
    82       94       104       118  

 

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(C) RECURRING FAIR VALUE MEASUREMENTS
Authoritative accounting guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy gives the highest priority to Level 1 measurements and the lowest priority to Level 3 measurements.
The three levels of the fair value hierarchy are as follows:
     
Level 1
  — Quoted prices for identical instruments in active markets.
 
   
Level 2
  — Quoted prices for similar instruments in active markets;
 
   
 
  — quoted prices for identical or similar instruments in markets that are not active; and
 
   
 
  — model-derived valuations for which all significant inputs are observable market data.
 
   
Level 3
  — Valuation inputs are unobservable and significant to the fair value measurement.
The following tables set forth financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy. There were no significant transfers between levels during the three months and six months ended June 30, 2011.

 

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FirstEnergy Corp.
The following tables summarize assets and liabilities recorded on FirstEnergy’s Consolidated Balance Sheets at fair value as of June 30, 2011 and December 31, 2010:
                                 
June 30, 2011   Level 1     Level 2     Level 3     Total  
    (In millions)  
Assets
                               
Corporate debt securities
  $     $ 868     $     $ 868  
Derivative assets — commodity contracts
          312             312  
Derivative assets — FTRs
                13       13  
Derivative assets — interest rate swaps
          4             4  
Derivative assets — NUG contracts(1)
                75       75  
Equity securities(2)
    198                   198  
Foreign government debt securities
          206             206  
U.S. government debt securities
          673             673  
U.S. state debt securities
          306             306  
Other(4)
          146             146  
 
                       
Total assets
  $ 198     $ 2,515     $ 88     $ 2,801  
 
                       
 
                               
Liabilities
                               
Derivative liabilities — commodity contracts
  $     $ (362 )   $     $ (362 )
Derivative liabilities — FTRs
                (7 )     (7 )
Derivative liabilities — interest rate swaps
          (5 )           (5 )
Derivative liabilities — NUG contracts(1)
                (522 )     (522 )
 
                       
Total liabilities
  $     $ (367 )   $ (529 )   $ (896 )
 
                       
 
Net assets (liabilities)(3)
  $ 198     $ 2,148     $ (441 )   $ 1,905  
 
                       
                                 
December 31, 2010   Level 1     Level 2     Level 3     Total  
    (In millions)  
Assets
                               
Corporate debt securities
  $     $ 597     $     $ 597  
Derivative assets — commodity contracts
          250             250  
Derivative assets — NUG contracts(1)
                122       122  
Equity securities(2)
    338                   338  
Foreign government debt securities
          149             149  
U.S. government debt securities
          595             595  
U.S. state debt securities
          379             379  
Other(4)
          219             219  
 
                       
Total assets
  $ 338     $ 2,189     $ 122     $ 2,649  
 
                       
 
                               
Liabilities
                               
Derivative liabilities — commodity contracts
  $     $ (348 )   $     $ (348 )
Derivative liabilities — NUG contracts(1)
                (466 )     (466 )
 
                       
Total liabilities
  $     $ (348 )   $ (466 )   $ (814 )
 
                       
 
                               
Net assets (liabilities)(3)
  $ 338     $ 1,841     $ (344 )   $ 1,835  
 
                       
     
(1)  
NUG contracts are generally subject to regulatory accounting and do not materially impact earnings.
 
(2)  
NDT funds hold equity portfolios the performance of which is benchmarked against the S&P 500 Index or Russell 3000 Index.
 
(3)  
Excludes $6 million and $(7) million as of June 30, 2011 and December 31, 2010, respectively, of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.
 
(4)  
Primarily consists of cash and cash equivalents.

 

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Rollforward of Level 3 Measurements
The following table provides a reconciliation of changes in the fair value of NUG contracts held by the Utilities and FTRs held by FirstEnergy and classified as Level 3 in the fair value hierarchy during the periods ending June 30, 2011 and December 31, 2010:
                         
    Derivative Asset(1)     Derivative Liability(1)     Net(1)  
    (In millions)  
January 1, 2011 Balance
  $ 122     $ (466 )   $ (344 )
Realized gain (loss)
                 
Unrealized gain (loss)
    (40 )     (203 )     (243 )
Purchases
    13       (3 )     10  
Issuances
                 
Sales
                 
Settlements
    (6 )     154       148  
Transfers into  Level 3
          (12 )     (12 )
 
                 
June 30, 2011 Balance
  $ 89     $ (530 )   $ (441 )
 
                 
 
                       
January 1, 2010 Balance
  $ 200     $ (643 )   $ (443 )
Realized gain (loss)
                 
Unrealized gain (loss)
    (71 )     (110 )     (181 )
Purchases
                 
Issuances
                 
Sales
                 
Settlements
    (7 )     287       280  
Transfers into  Level 3
                 
 
                 
December 31, 2010 Balance
  $ 122     $ (466 )   $ (344 )
 
                 
     
(1)  
Changes in the fair value of NUG contracts are generally subject to regulatory accounting and do not materially impact earnings.

 

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FirstEnergy Solutions Corp.
The following tables summarize assets and liabilities recorded on FES’ Consolidated Balance Sheets at fair value as of June 30, 2011 and December 31, 2010:
                                 
June 30, 2011   Level 1     Level 2     Level 3     Total  
    (In millions)  
Assets
                               
Corporate debt securities
  $     $ 562     $     $ 562  
Derivative assets — commodity contracts
          283             283  
Derivative assets — FTRs
                2       2  
Equity securities(3)
    96                   96  
Foreign government debt securities
          160             160  
U.S. government debt securities
          316             316  
U.S. state debt securities
          7             7  
Other(2)
          42             42  
 
                       
Total assets
  $ 96     $ 1,370     $ 2     $ 1,468  
 
                       
 
                               
Liabilities
                               
Derivative liabilities — commodity contracts
  $     $ (327 )   $     $ (327 )
 
                       
Total liabilities
  $     $ (327 )   $     $ (327 )
 
                       
 
                               
Net assets (liabilities)(1)
  $ 96     $ 1,043     $ 2     $ 1,141  
 
                       
                                 
December 31, 2010   Level 1     Level 2     Level 3     Total  
    (In millions)  
Assets
                               
Corporate debt securities
  $     $ 528     $     $ 528  
Derivative assets — commodity contracts
          241             241  
Foreign government debt securities
          147             147  
U.S. government debt securities
          308             308  
U.S. state debt securities
          6             6  
Other(2)
          148             148  
 
                       
Total assets
  $     $ 1,378     $     $ 1,378  
 
                       
 
                               
Liabilities
                               
Derivative liabilities — commodity contracts
  $     $ (348 )   $     $ (348 )
 
                       
Total liabilities
  $     $ (348 )   $     $ (348 )
 
                       
 
                               
Net assets (liabilities)(1)
  $     $ 1,030     $     $ 1,030  
 
                       
     
(1)  
Excludes $7 million as of December 31, 2010 of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.
 
(2)  
Primarily consists of cash and cash equivalents.
 
(3)  
NDT funds hold equity portfolios the performance of which is benchmarked against the S&P 500 Index or Russell 3000 Index.
Rollforward of Level 3 Measurements
The following table provides a reconciliation of changes in the fair value of FTRs held by FES and classified as Level 3 in the fair value hierarchy during the period ending June 30, 2011:
                         
    Derivative Asset     Derivative Liability     Net  
    FTRs     FTRs     FTRs  
    (In millions)  
January 1, 2011 Balance
  $     $     $  
Realized gain (loss)
                 
Unrealized gain (loss)
    1             1  
Purchases
    2             2  
Issuances
                 
Sales
                 
Settlements
    (1 )           (1 )
Transfers in (out) of Level 3
                 
 
                 
June 30, 2011 Balance
  $ 2     $     $ 2  
 
                 

 

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Ohio Edison Company
The following tables summarize assets and liabilities recorded on OE’s Consolidated Balance Sheets at fair value as of June 30, 2011 and December 31, 2010:
                                 
June 30, 2011   Level 1     Level 2     Level 3     Total  
    (In millions)  
Assets
                               
U.S. government debt securities
  $     $ 131     $     $ 131  
Other
          2             2  
 
                       
Total assets(1)
  $     $ 133     $     $ 133  
 
                       
                                 
December 31, 2010   Level 1     Level 2     Level 3     Total  
    (In millions)  
Assets
                               
U.S. government debt securities
  $     $ 124     $     $ 124  
Other
          2             2  
 
                       
Total assets(1)
  $     $ 126     $     $ 126  
 
                       
     
(1)  
Excludes $2 million and $1 million as of June 30, 2011 and December 31, 2010, respectively, of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.
The Toledo Edison Company
The following tables summarize assets and liabilities recorded on TE’s Consolidated Balance Sheets at fair value as of June 30, 2011 and December 31, 2010:
                                 
June 30, 2011   Level 1     Level 2     Level 3     Total  
    (In millions)  
Assets
                               
Corporate debt securities
  $     $ 16     $     $ 16  
Equity securities(3)
    26                   26  
U.S. government debt securities
          33             33  
U.S. state debt securities
          1             1  
Other(2)
          3             3  
 
                       
Total assets(1)
  $ 26     $ 53     $     $ 79  
 
                       
                                 
December 31, 2010   Level 1     Level 2     Level 3    </