main_10q.htm
 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.  20549
 
FORM 10-Q
(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2010
 
OR
 
[  ]  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 (X)  No (  )
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 (X) No (  )
FirstEnergy Corp.

Yes (  ) No (  )
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
(X)
 
FirstEnergy Corp.
Accelerated Filer
(  )
 
N/A
Non-accelerated Filer (Do
not check if a smaller
reporting company)
(X)
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
(  )
N/A

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes (  ) No (X)
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 APRIL 30, 2010
FirstEnergy Corp., $.10 par value
304,835,407
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
859,500
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 the Web site and recognize the Web site is 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 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.

 
 

 

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 and legislative and regulatory changes affecting how generation rates will be determined following the expiration of existing rate plans in Pennsylvania.
·  
The impact of the regulatory process on the pending matters in Ohio, Pennsylvania and New Jersey.
·  
Business and regulatory impacts from ATSI’s realignment into PJM.
·  
Economic or weather conditions affecting future sales and margins.
·  
Changes in markets for energy services.
·  
Changing energy and commodity market prices and availability.
·  
Replacement power costs being higher than anticipated or inadequately hedged.
·  
The continued ability of FirstEnergy’s regulated utilities to collect transition and other charges or to recover increased transmission costs.
·  
Operation and maintenance costs being higher than anticipated.
·  
Other legislative and regulatory changes, and revised environmental requirements, including possible GHG emission regulations.
·  
The potential impacts of the U.S. Court of Appeals’ July 11, 2008 decision requiring revisions to the CAIR rules and the scope of any laws, rules or regulations that may ultimately take their place.
·  
The uncertainty of the timing and amounts of the capital expenditures needed to, among other things, implement the Air Quality Compliance Plan (including that such amounts could be higher than anticipated or that certain generating units may need to be shut down) or levels of emission reductions related to the Consent Decree resolving the NSR litigation or other potential similar regulatory initiatives or actions.
·  
Adverse regulatory or legal decisions and outcomes (including, but not limited to, the revocation of necessary licenses or operating permits and oversight) by the NRC.
·  
Factors that may further delay, or increase the costs associated with (including replacement power costs), the restart of the Davis-Besse Nuclear Power Station from its current refueling outage, including that the modifications to control rod drive mechanism nozzles take longer than expected or are not effective, other conditions requiring remediation are discovered during the extended outage, or the NRC takes adverse action in connection with any of the foregoing.
·  
Ultimate resolution of Met-Ed’s and Penelec’s TSC filings with the PPUC.
·  
The continuing availability of generating units and their ability to operate at or near full capacity.
·  
The ability to comply with applicable state and federal reliability standards and energy efficiency mandates.
·  
The ability to accomplish or realize anticipated benefits from strategic goals (including employee workforce initiatives).
·  
The ability to improve electric commodity margins and to experience growth in the distribution business.
·  
The changing market conditions that could affect the value of assets held in the registrants’ nuclear decommissioning trusts, pension trusts and other trust funds, and cause FirstEnergy 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 and the cost of such capital.
·  
Changes in general economic conditions affecting the registrants.
·  
The state of the capital and credit markets affecting the registrants.
·  
Interest rates and any actions taken by credit rating agencies that could negatively affect the registrants’ 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 decline of the national and regional economy and its impact on the registrants’ major industrial and commercial customers.
·  
Issues concerning the soundness of financial institutions and counterparties with which the registrants do business.
·  
The expected timing and likelihood of completion of the proposed merger with Allegheny Energy, Inc., including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed merger that could reduce anticipated benefits or cause the parties to abandon the merger, the diversion of management's time and attention from FirstEnergy’s ongoing business during this time period, the 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.

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. A security rating is not a recommendation to buy, sell or hold securities that may be subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating. 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.

 
 

 

TABLE OF CONTENTS



   
Pages
 
     
Glossary of Terms
iii-iv
 
       
Item 1.    Financial Statements
   
       
FirstEnergy Corp.
   
       
 
Consolidated Statements of Income
1
 
 
Consolidated Statements of Comprehensive Income
2
 
 
Consolidated Balance Sheets
3
 
 
Consolidated Statements of Cash Flows
4
 
       
FirstEnergy Solutions Corp.
   
       
 
Consolidated Statements of Income and Comprehensive Income
5
 
 
Consolidated Balance Sheets
6
 
 
Consolidated Statements of Cash Flows
7
 
       
Ohio Edison Company
   
       
 
Consolidated Statements of Income and Comprehensive Income (Loss)
8
 
 
Consolidated Balance Sheets
9
 
 
Consolidated Statements of Cash Flows
10
 
       
The Cleveland Electric Illuminating Company
   
       
 
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
11
 
 
Consolidated Balance Sheets
12
 
 
Consolidated Statements of Cash Flows
13
 
       
The Toledo Edison Company
   
       
 
Consolidated Statements of Income and Comprehensive Income (Loss)
14
 
 
Consolidated Balance Sheets
15
 
 
Consolidated Statements of Cash Flows
16
 
       
Jersey Central Power & Light Company
   
       
 
Consolidated Statements of Income and Comprehensive Income
17
 
 
Consolidated Balance Sheets
18
 
 
Consolidated Statements of Cash Flows
19
 
       
Metropolitan Edison Company
   
       
 
Consolidated Statements of Income and Comprehensive Income (Loss)
20
 
 
Consolidated Balance Sheets
21
 
 
Consolidated Statements of Cash Flows
22
 
       
Pennsylvania Electric Company
   
       
  Consolidated Statements of Income and Comprehensive Income (Loss)
23
 
 
Consolidated Balance Sheets
24
 
 
Consolidated Statements of Cash Flows
25
 

 
i

 

TABLE OF CONTENTS (Cont'd)


   
Pages
     
Combined Notes To Consolidated Financial Statements
26-62
   
Item 2.   Management's Discussion and Analysis of Registrant and Subsidiaries
63-95
   
Management's Narrative Analysis of Results of Operations
 
   
FirstEnergy Solutions Corp.
96-98
Ohio Edison Company
99-100
The Cleveland Electric Illuminating Company
101-102
The Toledo Edison Company
103-104
Jersey Central Power & Light Company
105-106
Metropolitan Edison Company
107-108
Pennsylvania Electric Company
109-110
   
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
111
     
Item 4.    Controls and Procedures – FirstEnergy
111
   
Item 4T.  Controls and Procedures – FES, OE, CEI, TE, JCP&L, Met-Ed and Penelec
111
     
Part II.    Other Information
 
     
Item 1.    Legal Proceedings
112
     
Item 1A. Risk Factors
112
   
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
112
   
Item 5.    Other Information
112
   
Item 6.    Exhibits
112-113



 
ii

 

GLOSSARY OF TERMS

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

ATSI
American Transmission Systems, Incorporated, owns and operates transmission facilities
CEI
The Cleveland Electric Illuminating Company, an Ohio electric utility operating subsidiary
FENOC
FirstEnergy Nuclear Operating Company, operates nuclear generating facilities
FES
FirstEnergy Solutions Corp., provides energy-related products and services
FESC
FirstEnergy Service Company, provides legal, financial and other corporate support services
FEV
FirstEnergy Ventures Corp., invests in certain unregulated enterprises and business ventures
FGCO
FirstEnergy Generation Corp., owns and operates non-nuclear generating facilities
FirstEnergy
FirstEnergy Corp., a public utility holding company
GPU
GPU, Inc., former parent of JCP&L, Met-Ed and Penelec, which merged with FirstEnergy on
November 7, 2001
JCP&L
Jersey Central Power & Light Company, a New Jersey electric utility operating subsidiary
JCP&L Transition
   Funding
JCP&L Transition Funding LLC, a Delaware limited liability company and issuer of transition bonds
JCP&L Transition
   Funding II
JCP&L Transition Funding II LLC, a Delaware limited liability company and issuer of transition bonds
Met-Ed
Metropolitan Edison Company, a Pennsylvania electric utility operating subsidiary
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
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 and Penn
PNBV
PNBV Capital Trust, a special purpose entity created by OE in 1996
Shelf Registrants
FirstEnergy, OE, CEI, TE, JCP&L, Met-Ed and Penelec
Shippingport
Shippingport Capital Trust, a special purpose entity created by CEI and TE in 1997
Signal Peak
A joint venture between FirstEnergy Ventures Corp. and Boich Companies, that owns mining and
    coal transportation operations near Roundup, Montana
TE
The Toledo Edison Company, an Ohio electric utility operating subsidiary
Utilities
OE, CEI, TE, Penn, JCP&L, Met-Ed and Penelec
Waverly
The Waverly Power and Light Company, a wholly owned subsidiary of Penelec
   
The following abbreviations and acronyms are used to identify frequently used terms in this report:
   
AEP
American Electric Power Company, Inc.
ALJ
Administrative Law Judge
AMP-Ohio
American Municipal Power-Ohio, Inc.
AOCL
Accumulated Other Comprehensive Loss
AQC
Air Quality Control
ARO
Asset Retirement Obligation
BGS
Basic Generation Service
CAA
Clean Air Act
CAIR
Clean Air Interstate Rule
CAMR
Clean Air Mercury Rule
CAVR
Clean Air Visibility Rule
CBP
Competitive Bid Process
CMEC
Capacity market Evolution Committee
CO2
Carbon dioxide
CTC
Competitive Transition Charge
DOE
United States Department of Energy
DOJ
United States Department of Justice
DCPD
Deferred Compensation Plan for Outside Directors
DPA
Department of the Public Advocate, Division of Rate Counsel (New Jersey)
ECAR
East Central Area Reliability Coordination Agreement
EDCP
Executive Deferred Compensation Plan
EE&C
Energy Efficiency and Conservation
EMP
Energy Master Plan
EPA
United States Environmental Protection Agency
EPACT
Energy Policy Act of 2005
EPRI
Electric Power Research Institute

 
iii

 

GLOSSARY OF TERMS, Cont'd.

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
GAAP
Accounting Principles Generally Accepted in the United States
GHG
Greenhouse Gases
IBEW
International Brotherhood of Electrical Workers
IFRS
International Financial Reporting Standards
IRS
Internal Revenue Service
JCARR
Joint Committee on Agency Review
kV
Kilovolt
KWH
Kilowatt-hours
LED
Light-emitting Diode
LIBOR
London Interbank Offered Rate
LOC
Letter of Credit
LTIP
Long-Term Incentive Plan
MACT
Maximum Achievable Control Technology
MISO
Midwest Independent Transmission System Operator, Inc.
Moody's
Moody's Investors Service, Inc.
MRO
Market Rate Offer
MW
Megawatts
MWH
Megawatt-hours
NAAQS
National Ambient Air Quality Standards
NEIL
Nuclear Electric Insurance Limited
NERC
North American Electric Reliability Corporation
NJBPU
New Jersey Board of Public Utilities
NNSR
Non-Attainment New Source Review
NOPEC
Northeast Ohio Public Energy Council
NOV
Notice of Violation
NOX
Nitrogen Oxide
NRC
Nuclear Regulatory Commission
NSR
New Source Review
NUG
Non-Utility Generation
NUGC
Non-Utility Generation Charge
OCC
Ohio Consumers’ Counsel
OCI
Other Comprehensive Income
OPEB
Other Post-Employment Benefits
OVEC
Ohio Valley Electric Corporation
PCRB
Pollution Control Revenue Bond
PJM
PJM Interconnection L. L. C.
PLR
Provider of Last Resort; an electric utility's obligation to provide generation service to customers
    whose alternative supplier fails to deliver service
PPUC
Pennsylvania Public Utility Commission
PSA
Power Supply Agreement
PSD
Prevention of Significant Deterioration
PUCO
Public Utilities Commission of Ohio
QSPE
Qualifying Special-Purpose Entity
RCP
Rate Certainty Plan
RECs
Renewable Energy Credits
RFP
Request for Proposal
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
SECA
Seams Elimination Cost Adjustment

 
iv

 


GLOSSARY OF TERMS, Cont'd.

SIP
State Implementation Plan(s) Under the Clean Air Act
SNCR
Selective Non-Catalytic Reduction
SO2
Sulfur Dioxide
SRECs
Solar Renewable Energy Credits
TBC
Transition Bond Charge
TMI-2
Three Mile Island Unit 2
TSC
Transmission Service Charge
VERO
Voluntary Enhanced Retirement Option
VIE
Variable Interest Entity

 
v

 
 

FIRSTENERGY CORP.
 
             
CONSOLIDATED STATEMENTS OF INCOME
 
(Unaudited)
 
             
    Three Months Ended  
     March 31  
    2010     2009  
   
(In millions, except
 
   
per share amounts)
 
REVENUES:
           
Electric utilities
  $ 2,543     $ 3,020  
Unregulated businesses
    756       314  
Total revenues*
    3,299       3,334  
                 
EXPENSES:
               
Fuel
    334       312  
Purchased power
    1,238       1,143  
Other operating expenses
    701       827  
Provision for depreciation
    193       177  
Amortization of regulatory assets
    212       411  
Deferral of new regulatory assets
    -       (93 )
General taxes
    205       211  
Total expenses
    2,883       2,988  
                 
OPERATING INCOME
    416       346  
                 
OTHER INCOME (EXPENSE):
               
Investment income (loss), net
    16       (11 )
Interest expense
    (213 )     (194 )
Capitalized interest
    41       28  
Total other expense
    (156 )     (177 )
                 
INCOME  BEFORE INCOME TAXES
    260       169  
                 
INCOME TAXES
    111       54  
                 
NET INCOME
    149       115  
                 
Noncontrolling interest loss
    (6 )     (4 )
                 
EARNINGS AVAILABLE TO FIRSTENERGY CORP.
  $ 155     $ 119  
                 
                 
BASIC EARNINGS PER SHARE OF COMMON STOCK
  $ 0.51     $ 0.39  
                 
WEIGHTED AVERAGE NUMBER OF BASIC SHARES OUTSTANDING
    304       304  
                 
DILUTED EARNINGS PER SHARE OF COMMON STOCK
  $ 0.51     $ 0.39  
                 
WEIGHTED AVERAGE NUMBER OF DILUTED SHARES OUTSTANDING
    306       306  
                 
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK
  $ 0.55     $ 0.55  
                 
                 
* Includes $109 million of excise tax collections in the three months ended March 31, 2010 and 2009.
 
                 
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.
 

 
1

 


FIRSTENERGY CORP.
 
             
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
(Unaudited)
 
             
   
Three Months Ended
 
   
March 31
 
    2010    
2009
 
   
(In millions)
 
             
NET INCOME
  $ 149     $ 115  
                 
OTHER COMPREHENSIVE INCOME:
               
Pension and other postretirement benefits
    13       35  
Unrealized gain on derivative hedges
    4       15  
Change in unrealized gain on available-for-sale securities
    6       (5 )
Other comprehensive income
    23       45  
Income tax expense related to other comprehensive income
    7       15  
Other comprehensive income, net of tax
    16       30  
                 
COMPREHENSIVE INCOME
    165       145  
                 
COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
    (6 )     (4 )
                 
COMPREHENSIVE INCOME AVAILABLE TO FIRSTENERGY CORP.
  $ 171     $ 149  
                 
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.
 

 
2

 


FIRSTENERGY CORP.
 
             
CONSOLIDATED BALANCE SHEETS
 
(Unaudited)
 
   
March 31,
   
December 31,
 
   
2010
   
2009
 
   
(In millions)
 
ASSETS
           
             
CURRENT ASSETS:
           
Cash and cash equivalents
  $ 310     $ 874  
Receivables-
               
Customers (less accumulated provisions of $36 million and $33 million,
         
 respectively, for uncollectible accounts)
    1,255       1,244  
Other (less accumulated provisions of $7 million for uncollectible accounts)
    140       153  
Materials and supplies, at average cost
    699       647  
Prepaid taxes
    236       248  
Other
    214       154  
      2,854       3,320  
PROPERTY, PLANT AND EQUIPMENT:
               
In service
    27,980       27,826  
Less - Accumulated provision for depreciation
    11,554       11,397  
      16,426       16,429  
Construction work in progress
    2,931       2,735  
      19,357       19,164  
INVESTMENTS:
               
Nuclear plant decommissioning trusts
    1,882       1,859  
Investments in lease obligation bonds
    495       543  
Other
    609       621  
      2,986       3,023  
DEFERRED CHARGES AND OTHER ASSETS:
               
Goodwill
    5,575       5,575  
Regulatory assets
    2,398       2,356  
Power purchase contract asset
    148       200  
Other
    760       666  
      8,881       8,797  
    $ 34,078     $ 34,304  
LIABILITIES AND CAPITALIZATION
               
                 
CURRENT LIABILITIES:
               
Currently payable long-term debt
  $ 1,783     $ 1,834  
Short-term borrowings
    886       1,181  
Accounts payable
    772       829  
Accrued taxes
    266       314  
Other
    1,179       1,130  
      4,886       5,288  
CAPITALIZATION:
               
Common stockholders’ equity-
               
Common stock, $0.10 par value, authorized 375,000,000 shares-
               
304,835,407 shares outstanding
    31       31  
Other paid-in capital
    5,432       5,448  
Accumulated other comprehensive loss
    (1,399 )     (1,415 )
Retained earnings
    4,482       4,495  
Total common stockholders' equity
    8,546       8,559  
Noncontrolling interest
    (11 )     (2 )
Total equity
    8,535       8,557  
Long-term debt and other long-term obligations
    11,847       11,908  
      20,382       20,465  
NONCURRENT LIABILITIES:
               
Accumulated deferred income taxes
    2,602       2,468  
Asset retirement obligations
    1,449       1,425  
Deferred gain on sale and leaseback transaction
    984       993  
Power purchase contract liability
    738       643  
Retirement benefits
    1,527       1,534  
Lease market valuation liability
    251       262  
Other
    1,259       1,226  
      8,810       8,551  
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 8)
               
    $ 34,078     $ 34,304  
                 
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these
 
financial statements.
               

 
3

 


FIRSTENERGY CORP.
 
             
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(Unaudited)
 
             
   
Three Months Ended
 
   
March 31
 
   
2010
   
2009
 
   
(In millions)
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net Income
  $ 149     $ 115  
Adjustments to reconcile net income to net cash from operating activities-
               
Provision for depreciation
    193       177  
Amortization of regulatory assets
    212       411  
Deferral of new regulatory assets
    -       (93 )
Nuclear fuel and lease amortization
    41       27  
Deferred purchased power and other costs
    (77 )     (62 )
Deferred income taxes and investment tax credits, net
    59       (28 )
Investment impairment
    10       36  
Deferred rents and lease market valuation liability
    (17 )     (14 )
Stock-based compensation
    (15 )     (13 )
Accrued compensation and retirement benefits
    (81 )     (66 )
Commodity derivative transactions, net
    33       16  
Cash collateral paid
    (46 )     (15 )
Decrease (increase) in operating assets-
               
Receivables
    2       46  
Materials and supplies
    (42 )     (7 )
Prepayments and other current assets
    33       (71 )
Increase (decrease) in operating liabilities-
               
Accounts payable
    (57 )     (90 )
Accrued taxes
    7       (51 )
Accrued interest
    66       118  
Other
    36       26  
Net cash provided from operating activities
    506       462  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
New Financing-
               
Long-term debt
    -       700  
Redemptions and Repayments-
               
Long-term debt
    (109 )     (444 )
Short-term borrowings, net
    (295 )     -  
Common stock dividend payments
    (168 )     (168 )
Other
    (22 )     (18 )
Net cash provided from (used for) financing activities
    (594 )     70  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Property additions
    (508 )     (654 )
Proceeds from asset sales
    114       8  
Sales of investment securities held in trusts
    733       567  
Purchases of investment securities held in trusts
    (755 )     (584 )
Customer intangibles
    (101 )     -  
Cash investments
    49       17  
Other
    (8 )     (32 )
Net cash used for investing activities
    (476 )     (678 )
                 
Net change in cash and cash equivalents
    (564 )     (146 )
Cash and cash equivalents at beginning of period
    874       545  
Cash and cash equivalents at end of period
  $ 310     $ 399  
                 
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.
 

 
4

 


FIRSTENERGY SOLUTIONS CORP.
 
             
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 
(Unaudited)
 
             
   
Three Months Ended
 
   
March 31
 
   
2010
   
2009
 
   
(In thousands)
 
             
             
REVENUES:
           
Electric sales to affiliates
  $ 607,302     $ 892,690  
Electric sales to non-affiliates
    668,685       279,746  
Other
    112,106       53,670  
Total revenues
    1,388,093       1,226,106  
                 
EXPENSES:
               
Fuel
    328,221       306,158  
Purchased power from affiliates
    60,953       63,207  
Purchased power from non-affiliates
    450,216       160,342  
Other operating expenses
    304,510       307,356  
Provision for depreciation
    62,918       61,373  
General taxes
    26,746       23,376  
Total expenses
    1,233,564       921,812  
                 
OPERATING INCOME
    154,529       304,294  
                 
OTHER EXPENSE:
               
Investment income (loss)
    717       (28,874 )
Miscellaneous expense
    1,310       2,511  
Interest expense to affiliates
    (2,305 )     (2,979 )
Interest expense - other
    (49,644 )     (22,527 )
Capitalized interest
    19,690       10,078  
Total other expense
    (30,232 )     (41,791 )
                 
INCOME BEFORE INCOME TAXES
    124,297       262,503  
                 
INCOME TAXES
    44,371       91,822  
                 
NET INCOME
    79,926       170,681  
                 
OTHER COMPREHENSIVE INCOME (LOSS):
               
Pension and other postretirement benefits
    (9,834 )     2,568  
Unrealized gain on derivative hedges
    1,274       11,016  
Change in unrealized gain on available-for-sale securities
    5,028       (1,477 )
Other comprehensive income (loss)
    (3,532 )     12,107  
Income tax expense (benefit) related to other comprehensive income
    (1,340 )     4,709  
Other comprehensive income (loss), net of tax
    (2,192 )     7,398  
                 
TOTAL COMPREHENSIVE INCOME
  $ 77,734     $ 178,079  
                 
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.
 

 
5

 


FIRSTENERGY SOLUTIONS CORP.
 
             
CONSOLIDATED BALANCE SHEETS
 
(Unaudited)
 
   
March 31,
   
December 31,
 
   
2010
   
2009
 
   
(In thousands)
 
ASSETS
           
CURRENT ASSETS:
           
Cash and cash equivalents
  $ 11     $ 12  
Receivables-
               
Customers (less accumulated provisions of $13,641,000 and $12,041,000,
         
respectively, for uncollectible accounts)
    248,994       195,107  
Associated companies
    360,804       318,561  
Other (less accumulated provisions of $6,702,000)
    81,659       51,872  
Notes receivable from associated companies
    483,423       805,103  
Materials and supplies, at average cost
    558,751       539,541  
Prepayments and other
    160,668       107,782  
      1,894,310       2,017,978  
PROPERTY, PLANT AND EQUIPMENT:
               
In service
    10,368,007       10,357,632  
Less - Accumulated provision for depreciation
    4,617,864       4,531,158  
      5,750,143       5,826,474  
Construction work in progress
    2,597,630       2,423,446  
      8,347,773       8,249,920  
INVESTMENTS:
               
Nuclear plant decommissioning trusts
    1,091,114       1,088,641  
Other
    8,525       22,466  
      1,099,639       1,111,107  
DEFERRED CHARGES AND OTHER ASSETS:
               
Accumulated deferred income tax benefits
    66,462       86,626  
Goodwill
    24,248       24,248  
Customer intangibles
    114,567       16,566  
Property taxes
    50,125       50,125  
Unamortized sale and leaseback costs
    90,803       72,553  
Other
    109,494       121,665  
      455,699       371,783  
    $ 11,797,421     $ 11,750,788  
LIABILITIES AND CAPITALIZATION
               
                 
CURRENT LIABILITIES:
               
Currently payable long-term debt
  $ 1,601,184     $ 1,550,927  
Short-term borrowings-
               
Associated companies
    -       9,237  
Other
    100,000       100,000  
Accounts payable-
               
Associated companies
    385,251       466,078  
Other
    270,457       245,363  
Accrued taxes
    66,585       83,158  
Other
    393,512       359,057  
      2,816,989       2,813,820  
CAPITALIZATION:
               
Common stockholder's equity -
               
Common stock, without par value, authorized 750 shares,
               
7 shares outstanding
    1,465,698       1,468,423  
Accumulated other comprehensive loss
    (105,193 )     (103,001 )
Retained earnings
    2,229,075       2,149,149  
Total common stockholder's equity
    3,589,580       3,514,571  
Long-term debt and other long-term obligations
    2,660,200       2,711,652  
      6,249,780       6,226,223  
NONCURRENT LIABILITIES:
               
Deferred gain on sale and leaseback transaction
    984,440       992,869  
Accumulated deferred investment tax credits
    57,353       58,396  
Asset retirement obligations
    936,453       921,448  
Retirement benefits
    219,174       204,035  
Property taxes
    50,125       50,125  
Lease market valuation liability
    250,871       262,200  
Other
    232,236       221,672  
      2,730,652       2,710,745  
COMMITMENTS AND CONTINGENCIES (Note 8)
               
    $ 11,797,421     $ 11,750,788  
                 
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.
 

 
6

 


FIRSTENERGY SOLUTIONS CORP.
 
             
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(Unaudited)
 
             
   
Three Months Ended
 
   
March 31
 
   
2010
   
2009
 
 
(In thousands)
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 79,926     $ 170,681  
Adjustments to reconcile net income to net cash from operating activities-
         
Provision for depreciation
    62,918       61,373  
Nuclear fuel and lease amortization
    42,118       27,169  
Deferred rents and lease market valuation liability
    (40,869 )     (37,522 )
Deferred income taxes and investment tax credits, net
    37,773       24,866  
Investment impairment
    9,606       33,535  
Commodity derivative transactions, net
    32,900       15,817  
Cash collateral, net
    (21,411 )     (5,492 )
Decrease (increase) in operating assets:
               
Receivables
    (158,288 )     80,067  
Materials and supplies
    (8,700 )     (865 )
Prepayments and other current assets
    13,516       (3,456 )
Increase (decrease) in operating liabilities:
               
Accounts payable
    (41,057 )     (61,419 )
Accrued taxes
    (16,300 )     39,846  
Accrued interest
    (14,930 )     10,338  
Other
    13,902       (7,071 )
Net cash provided from (used for) operating activities
    (8,896 )     347,867  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
New Financing-
               
Long-term debt
    -       100,000  
Short-term borrowings, net
    -       621,294  
Redemptions and Repayments-
               
Long-term debt
    (1,278 )     (335,916 )
Short-term borrowings, net
    (9,237 )     -  
Other
    (731 )     -  
Net cash provided from (used for) financing activities
    (11,246 )     385,378  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Property additions
    (301,603 )     (412,805 )
Proceeds from asset sales
    114,272       7,573  
Sales of investment securities held in trusts
    272,094       351,414  
Purchases of investment securities held in trusts
    (284,888 )     (356,904 )
Loans from (to) associated companies, net
    321,680       (303,963 )
Customer intangibles
    (100,615 )     -  
Other
    (799 )     (18,565 )
Net cash provided from (used for) investing activities
    20,141       (733,250 )
                 
Net change in cash and cash equivalents
    (1 )     (5 )
Cash and cash equivalents at beginning of period
    12       39  
Cash and cash equivalents at end of period
  $ 11     $ 34  
                 
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.
 

 
7

 


OHIO EDISON COMPANY
 
             
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 
(Unaudited)
 
             
   
Three Months Ended
 
   
March 31
 
   
2010
   
2009
 
   
(In thousands)
 
STATEMENTS OF INCOME
           
REVENUES:
           
Electric sales
  $ 479,925     $ 720,011  
Excise and gross receipts tax collections
    28,475       28,980  
Total revenues
    508,400       748,991  
                 
EXPENSES:
               
Purchased power from affiliates
    135,857       332,336  
Purchased power from non-affiliates
    112,051       137,813  
Other operating costs
    88,855       157,830  
Provision for depreciation
    21,880       21,513  
Amortization of regulatory assets, net
    29,345       20,211  
General taxes
    47,492       49,120  
Total expenses
    435,480       718,823  
                 
OPERATING INCOME
    72,920       30,168  
                 
OTHER INCOME (EXPENSE):
               
Investment income
    5,244       9,362  
Miscellaneous expense
    (292 )     (810 )
Interest expense
    (22,310 )     (23,287 )
Capitalized interest
    208       220  
Total other expense
    (17,150 )     (14,515 )
                 
INCOME BEFORE INCOME TAXES
    55,770       15,653  
                 
INCOME TAXES
    19,609       4,005  
                 
NET INCOME
    36,161       11,648  
                 
Noncontrolling interest income
    132       146  
                 
EARNINGS AVAILABLE TO PARENT
  $ 36,029     $ 11,502  
                 
STATEMENTS OF COMPREHENSIVE INCOME
               
                 
NET INCOME
  $ 36,161     $ 11,648  
                 
OTHER COMPREHENSIVE INCOME (LOSS):
               
Pension and other postretirement benefits
    4,015       5,738  
Change in unrealized gain on available-for-sale securities
    291       (2,709 )
Other comprehensive income
    4,306       3,029  
Income tax expense related to other comprehensive income
    693       529  
Other comprehensive income, net of tax
    3,613       2,500  
                 
COMPREHENSIVE INCOME
    39,774       14,148  
                 
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST
    132       146  
                 
COMPREHENSIVE INCOME AVAILABLE TO PARENT
  $ 39,642     $ 14,002  
                 
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.
 

 
8

 


OHIO EDISON COMPANY
 
             
CONSOLIDATED BALANCE SHEETS
 
(Unaudited)
 
   
March 31,
   
December 31,
 
   
2010
   
2009
 
      (In thousands)  
ASSETS
           
CURRENT ASSETS:
           
Cash and cash equivalents
  $ 60,680     $ 324,175  
Receivables-
               
Customers (less accumulated provisions of $5,417,000 and $5,119,000, respectively,
         
for uncollectible accounts)
    196,226       209,384  
Associated companies
    49,839       98,874  
Other (less accumulated provisions of $1,000 and $18,000, respectively,
               
for uncollectible accounts)
    18,758       14,155  
Notes receivable from associated companies
    104,183       118,651  
Prepayments and other
    37,766       15,964  
      467,452       781,203  
UTILITY PLANT:
               
In service
    3,057,995       3,036,467  
Less - Accumulated provision for depreciation
    1,177,211       1,165,394  
      1,880,784       1,871,073  
Construction work in progress
    35,331       31,171  
      1,916,115       1,902,244  
OTHER PROPERTY AND INVESTMENTS:
               
Investment in lease obligation bonds
    216,498       216,600  
Nuclear plant decommissioning trusts
    120,819       120,812  
Other
    96,669       96,861  
      433,986       434,273  
DEFERRED CHARGES AND OTHER ASSETS:
               
Regulatory assets
    432,526       465,331  
Pension assets
    33,128       19,881  
Property taxes
    67,037       67,037  
Unamortized sale and leaseback costs
    33,877       35,127  
Other
    36,454       39,881  
      603,022       627,257  
    $ 3,420,575     $ 3,744,977  
LIABILITIES AND CAPITALIZATION
               
CURRENT LIABILITIES:
               
Currently payable long-term debt
  $ 1,470     $ 2,723  
Short-term borrowings-
               
Associated companies
    -       92,863  
Other
    807       807  
Accounts payable-
               
Associated companies
    75,374       102,763  
Other
    32,351       40,423  
Accrued taxes
    66,100       81,868  
Accrued interest
    25,523       25,749  
Other
    109,429       81,424  
      311,054       428,620  
CAPITALIZATION:
               
Common stockholder's equity-
               
Common stock, without par value, authorized 175,000,000 shares -
               
60 shares outstanding
    949,735       1,154,797  
Accumulated other comprehensive loss
    (159,964 )     (163,577 )
Retained earnings
    20,920       29,890  
Total common stockholder's equity
    810,691       1,021,110  
Noncontrolling interest
    6,574       6,442  
Total equity
    817,265       1,027,552  
Long-term debt and other long-term obligations
    1,160,250       1,160,208  
      1,977,515       2,187,760  
NONCURRENT LIABILITIES:
               
Accumulated deferred income taxes
    670,758       660,114  
Accumulated deferred investment tax credits
    11,243       11,406  
Asset retirement obligations
    87,315       85,926  
Retirement benefits
    174,404       174,925  
Other
    188,286       196,226  
      1,132,006       1,128,597  
COMMITMENTS AND CONTINGENCIES (Note 8)
               
    $ 3,420,575     $ 3,744,977  
                 
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.
 
 

 
9

 


OHIO EDISON COMPANY
 
             
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(Unaudited)
 
             
   
Three Months Ended
 
   
March 31
 
   
2010
   
2009
 
   
(In thousands)
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 36,161     $ 11,648  
Adjustments to reconcile net income to net cash from operating activities-
         
Provision for depreciation
    21,880       21,513  
Amortization of regulatory assets, net
    29,345       20,211  
Purchased power cost recovery reconciliation
    (5,908 )     2,978  
Amortization of lease costs
    32,934       32,934  
Deferred income taxes and investment tax credits, net
    (2,489 )     (7,272 )
Accrued compensation and retirement benefits
    (12,160 )     (1,746 )
Accrued regulatory obligations
    (623 )     18,350  
Electric service prepayment programs
    -       (3,944 )
Decrease (increase) in operating assets-
               
Receivables
    65,141       1,435  
Prepayments and other current assets
    (21,802 )     (9,806 )
Increase (decrease) in operating liabilities-
               
Accounts payable
    (35,461 )     11,880  
Accrued taxes
    (15,849 )     (26,222 )
Accrued interest
    (226 )     (1,956 )
Other
    10,270       6,708  
Net cash provided from operating activities
    101,213       76,711  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
New Financing-
               
Short-term borrowings, net
    -       79,810  
Redemptions and Repayments-
               
Long-term debt
    (1,363 )     (100,393 )
Short-term borrowings, net
    (92,863 )        
Dividend Payments-
               
Common stock
    (250,000 )     -  
Other
    (113 )     (69 )
Net cash used for financing activities
    (344,339 )     (20,652 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Property additions
    (35,680 )     (37,523 )
Sales of investment securities held in trusts
    2,424       9,417  
Purchases of investment securities held in trusts
    (2,971 )     (10,422 )
Loan repayments from associated companies, net
    14,469       146,098  
Cash investments
    (384 )     (243 )
Other
    1,773       1,463  
Net cash provided from (used for) investing activities
    (20,369 )     108,790  
                 
Net change in cash and cash equivalents
    (263,495 )     164,849  
Cash and cash equivalents at beginning of period
    324,175       146,343  
Cash and cash equivalents at end of period
  $ 60,680     $ 311,192  
                 
The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.
 
 

 
10

 


THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
 
             
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
 
(Unaudited)
 
             
   
Three Months Ended
 
   
March 31
 
   
2010
   
2009
 
   
(In thousands)
 
STATEMENTS OF INCOME
           
REVENUES:
           
Electric sales
  $ 312,497     $ 431,405  
Excise tax collections
    17,573       18,320  
Total revenues
    330,070       449,725  
                 
EXPENSES:
               
Purchased power from affiliates
    94,965       238,872  
Purchased power from non-affiliates
    51,826       71,746  
Other operating costs
    31,235       64,830  
Provision for depreciation
    18,111       18,280  
Amortization of regulatory assets
    45,139       256,737  
Deferral of new regulatory assets
    -       (94,816 )
General taxes
    38,489       38,141  
Total expenses
    279,765       593,790  
                 
OPERATING INCOME (LOSS)
    50,305       (144,065 )
                 
OTHER INCOME (EXPENSE):
               
Investment income
    7,547       8,420  
Miscellaneous income
    581       1,994  
Interest expense
    (33,621 )     (33,322 )
Capitalized interest
    26       67  
Total other expense
    (25,467 )     (22,841 )
                 
INCOME