EX-99.2 3 ex99_2.htm EXHIBIT 99.2 - CONSOLIDATED REPORT TO THE FINANCIAL COMMUNITY Exhibit 99.2 - Consolidated Report to the Financial Community
EXHIBIT 99.2
Consolidated Report to the Financial Community                            
First Quarter 2007    
(Released May 3, 2007) (Unaudited)                        
 
           
   HIGHLIGHTS    After-Tax EPS Variance Analysis
 1st Qtr.
  
      1Q 2006 Basic EPS - GAAP Basis
          $0.67
  
 § Normalized non-GAAP* earnings, excluding      Special Items - 2006              0.00  
  special items, were $0.88 per share for the first   1Q 2006 Normalized Earnings - Non-GAAP Basis*
          $0.67
  
  quarter of 2007.  GAAP earnings for the first       Distribution Deliveries 
            0.05
  
  quarter of 2007 were $0.92 per share compared       Met-Ed and Penelec Distribution Rate Decrease
           (0.04)
 
  with $0.67 per share in the first quarter of 2006.        Generation Revenues
         0.18
  
          Fuel & Purchased Power    
           (0.06)
  
   1Q 2007 Results vs. 1Q 2006       Generation O&M
            0.06
  
         PA Transmission Cost Recovery          0.05  
 §
 Electric distribution deliveries increased 4%,  
Pensions and Other Post-retirement Benefits
            0.06
  
  primarily due to colder weather. Heating-       Depreciation   
           (0.02)
  
  degree-days were 15% higher than the same       General Taxes
           (0.02)
  
  period last year and 4% above normal.       Investment Income - NDT and COLI
           (0.03)
  
  Residential and commercial deliveries increased       Financing Costs
           (0.04)
  
  7% and 4%, respectively, while industrial      Reduced Common Shares
            0.03   
  
  deliveries were flat. Higher distribution delivery        Other            (0.01)  
  revenues increased earnings by $0.05 per share,   1Q 2007 Normalized Earnings - Non-GAAP Basis*  
          $0.88
  
  but were partially offset by a $0.04 per share earnings       Special Items - 2007             0.04  
  reduction due to lower distribution rates at our Metropolitan    1Q 2007 Basic EPS - GAAP Basis         $0.92  
 
Edison (Met-Ed) and Pennsylvania Electric (Penelec)
       
  subsidiaries as a result of the January 11, 2007,
  Pennsylvania Public Utility Commission (PPUC) Order.
   
 §
Total electric generation sales increased 3%, as a 1.3 million MWh or 5% increase in retail generation sales was partially offset by a 0.4 million MWh or 7% 
  reduction in wholesale sales.Generation revenues, excluding power sourced from third-party auction suppliers for our Jersey Central Power & Light (JCP&L)
  and Pennsylvania Power Company (Penn Power) customers, increased earnings by $0.18 per share. This increase was attributable to the higher generation 
  sales volume, as well as higher wholesale and retail market prices.
   
 §
 Higher purchased power expense, excluding JCP&L and Penn Power purchases from third-party auction suppliers, reduced earnings by $0.08 per share with
  increased purchase volumes supporting a 3% increase in generation sales and a 3% decline in generation output. This was partially offset by a reduction in
  fuel costs of $0.02 per share attributable to a higher proportion of nuclear output in the generation mix. 
   
 §
 Lower generation O&M expenses increased earnings by $0.06 per share.  Reduced nuclear O&M expenses increased earnings by $0.11 per share due to the
  refueling of Beaver Valley Unit 1 and Davis-Besse in the first quarter of last year, with no comparable outages in the first quarter of 2007.  Increased fossil O&M
  expenses reduced earnings by $0.05 per share principally due to maintenance activities at the Sammis, Eastlake, and Mansfield plants.
 
 
 
Consolidated Report to the Financial Community - 1st Quarter 2007
1
 
 §
The deferral and recovery of incremental Met-Ed and Penelec transmission charges increased earnings by $0.05 per share. The companies were authorized 
 
by the PPUC in May 2006 to defer these charges, retroactive to the beginning of the year. Thus, results from the first quarter of 2006 do not reflect the deferral,
  while the first quarter of 2007 reflects actual recovery of these transmission expenses following the January 11, 2007,PPUC Order in the Met-Ed and Penelec
  rate cases.
   
 §
Reduced pensions and other post-retirement benefit costs increased earnings by $0.06 per share mainly due to retiree health care design changes, as well 
  as the impact of the $300 million voluntary contribution to the pension plan made in January 2007.
   
 §
 Incremental property and plant additions increased depreciation by $0.02 per share.
   
 §
 Increased general taxes reduced earnings by $0.02 per share primarily due to higher gross receipts taxes in Pennsylvania, higher kilowatt-hour taxes in Ohio,
  and higher property taxes.
   
 §
Investment income related to nuclear decommissioning trusts and corporate-owned life insurance decreased $0.03 per share.
   
 §
  Increased financing costs lowered earnings by $0.04 per share, primarily attributable to short-term borrowing levels related to interim funding of the share
   repurchase programs and the $300-million pension plan contribution.
   
 §
 The reduction in shares outstanding due to the accelerated repurchases of 10.6 million and 14.4 million common shares in August 2006 and March 2007,
  respectively, enhanced earnings by $0.03 per share.
   
 § Two special items were recognized during the first quarter of 2007. The first item resulted from a PPUC order authorizing Met-Ed and Penelec to create a
  new regulatory asset for costs associated with decommissioning the Saxton Nuclear Research Reactor. This item increased earnings by $0.05 per share.
 
The second item relates to a $0.01 per share reduction in earnings from impairment of securities held in trust for future nuclear decommissioning activities.
 
2007 Earnings Guidance
 
§
Normalized non-GAAP earnings guidance for 2007, excluding special items, remains at $4.05 to $4.25 per share.
 
 
* The 2007 GAAP to non-GAAP reconciliation statements can be found on page 10 of this report and all GAAP to non-GAAP reconciliation statements are available
on the Investor Information section of FirstEnergy Corp.'s Web site at www.firstenergycorp.com/ir.
 

For additional information, please contact:
 Ronald E. Seeholzer     Kurt E. Turosky  Rey Y. Jimenez
 Vice President, Investor Relations  Director, Investor Relations   Principal, Investor Relations
 (330) 384-5783  (330) 384-5500   (330) 761-4239

 
Consolidated Report to the Financial Community - 1st Quarter 2007
2
 

 

 
FirstEnergy Corp.
Consolidated Statements of Income
(Unaudited)
(In millions, except for per share amounts)

 
 
  
Three Months Ended March 31,
  
 
 
  
2007
  
2006
  
Change
  
 
Revenues
  
 
  
 
  
 
  
 (1)
Electric sales
  
$
2,764
  
$
2,511
  
$
253
  
 (2)
FE Facilities
    
-
   
15
   
(15
)
 (3)
Other
    
209
   
179
   
30
 
 (4)
Total Revenues
    
2,973
   
2,705
   
268
 
 
 
              
 
Expenses
              
 (5)
Fuel
    
262
   
282
   
(20
)
 (6)
Purchased power
    
859
   
716
   
143
 
 (7)
Other operating expenses
    
749
   
738
   
11
 
 (8)
FE Facilities
    
-
   
16
   
(16
)
 (9)
Provision for depreciation
    
156
   
148
   
8
 
 (10)
Amortization of regulatory assets
    
251
   
221
   
30
 
 (11)
Deferral of new regulatory assets
    
(144
)
  
(80
)
  
(64
)
 (12)
General taxes
    
203
   
193
   
10
 
 (13)
Total Expenses
    
2,336
   
2,234
   
102
 
 
 
              
 (14)
Operating Income
    
637
   
471
   
166
 
 
 
              
 
Other Income (Expense)
    
   
   
 
 (15)
Investment income
    
33
   
43
   
(10
)
 (16)
Interest expense
    
(185
)
  
(165
)
  
(20
)
 (17)
Capitalized interest
    
5
   
7
   
(2
)
 (18)
Subsidiaries' preferred stock dividends
    
-
   
(2
)
  
2
 
 (19)
Total Other Income (Expense)
    
(147
)
  
(117
)
  
(30
)
 
 
    
   
   
 
 (20)
Income From Continuing Operations
   
   
   
 
 
Before Income Taxes
    
490
   
354
   
136
 
 (21)
Income taxes
    
200
   
135
   
65
 
 (22)
Income From Continuing Operations
   
290
   
219
   
71
 
 (23)
Discontinued operations
    
-
   
2
   
(2
)
 (24)
Net Income
  
$
290
  
$
221
  
$
69
  
 
 
    
   
   
 
 
Basic Earnings Per Common Share:
    
   
   
 
 (25)
Income from continuing operations
  
$
0.92
  
$
0.67
  
$
0.25
  
 (26)
Discontinued operations
    
-
   
-
   
-
 
 (27)
Basic Earnings Per Common Share
  
$
0.92
  
$
0.67
  
$
0.25
  
 (28)
Weighted Average Number of
   
   
   
 
 
Basic Shares Outstanding
    
314
   
329
   
(15
)
 
 
    
   
   
 
 
Diluted Earnings Per Common Share:
    
   
   
 
 (29)
Income from continuing operations
  
$
0.92
  
$
0.67
  
$
0.25
  
 (30)
Discontinued operations
    
-
   
-
   
-
 
 (31)
Diluted Earnings Per Common Share
  
$
0.92
  
$
0.67
  
$
0.25
  
 (32)
Weighted Average Number of
             
 
Diluted Shares Outstanding
    
316
   
330
   
(14
)
 
 
Consolidated Report to the Financial Community - 1st Quarter 2007

3
 

FirstEnergy Corp.
Consolidated Income Segments
(Unaudited)
(In millions)

 
 
  
Three Months Ended March 31, 2007
  
 
 
  
 
  
 
  
Ohio
 
 
  
 
  
 
  
 
 
  
Energy
  
Competitive
  
Transitional
  
 
  
 
  
 
  
 
 
  
Delivery
  
Energy
  
Generation
  
 
  
Reconciling
 
 
  
 
 
  
Services (a)
  
Services (b)
  
Services (c)
  
Other (d)
  
Adjustments
  
Consolidated
  
 
Revenues
  
 
  
 
  
 
  
 
  
 
  
 
  
 (1)
Electric sales
  
$
1,875
  
$
276
  
$
613
  
$
-
  
$
-
  
$
2,764
  
 (2)
FE Facilities
    
-
   
-
   
-
   
-
   
-
   
-
 
 (3)
Other
    
165
   
52
   
6
   
12
   
(26
)
  
209
 
 (4)
Internal revenues
    
-
   
714
   
-
   
-
   
(714
)
  
-
 
 (5)
Total Revenues
    
2,040
   
1,042
   
619
   
12
   
(740
)
  
2,973
 
 
 
    
   
   
   
   
   
 
 
Expenses
    
   
   
   
   
   
 
 (6)
Fuel
    
-
   
262
   
-
   
-
   
-
   
262
 
 (7)
Purchased power
    
844
   
185
   
544
   
-
   
(714
)
  
859
 
 (8)
Other operating expenses
    
408
   
307
   
49
   
3
   
(18
)
  
749
 
 (9)
FE Facilities
    
-
   
-
   
-
   
-
   
-
   
-
 
 (10)
Provision for depreciation
    
98
   
51
   
-
   
1
   
6
   
156
 
 (11)
Amortization of regulatory assets
    
246
   
-
   
5
   
-
   
-
   
251
 
 (12)
Deferral of new regulatory assets
    
(124
)
  
-
   
(20
)
  
-
   
-
   
(144
)
 (13)
General taxes
    
165
   
28
   
2
   
-
   
8
   
203
 
 (14)
Total Expenses
    
1,637
   
833
   
580
   
4
   
(718
)
  
2,336
 
 
 
    
   
   
   
   
   
 
 (15)
Operating Income
    
403
   
209
   
39
   
8
   
(22
)
  
637
 
 
 
    
   
   
   
   
   
 
 
Other Income (Expense)
    
   
   
   
   
   
 
 (16)
Investment income
    
70
   
3
   
1
   
-
   
(41
)
  
33
 
 (17)
Interest expense
    
(109
)
  
(52
)
  
(1
)
  
(2
)
  
(21
)
  
(185
)
 (18)
Capitalized interest
    
2
   
3
   
-
   
-
   
-
   
5
 
 (19)
Subsidiaries' preferred stock dividends
    
-
   
-
   
-
   
-
   
-
   
-
 
 (20)
Total Other Income (Expense)
    
(37
)
  
(46
)
  
-
   
(2
)
  
(62
)
  
(147
)
 
 
    
   
   
   
   
   
 
 (21)
Income From Continuing Operations
    
   
   
   
   
   
 
 
Before Income Taxes
    
366
   
163
   
39
   
6
   
(84
)
  
490
 
 
 
    
   
   
   
   
       
 (22)
Income taxes
    
148
   
65
   
15
   
5
   
(33
)
  
200
 
 
 
    
   
   
   
   
   
 
 (23)
Income From Continuing Operations
    
218
   
98
   
24
   
1
   
(51
)
  
290
 
 (24)
Discontinued operations
    
-
   
-
   
-
   
-
   
-
   
-
 
 (25)
Net Income
  
$
218
  
$
98
  
$
24
  
$
1
  
$
(51
)
$
290
  
                                         
 (a)
Consists of regulated transmission and distribution operations, including transition cost recovery, and provider of last resort generation service for
FirstEnergy's Pennsylvania and New Jersey electric utility subsidiaries.
 (b) Consists of unregulated generation and commodity operations, including competitive electric sales, and generation sales to affiliated electric utilities.
 (c) Represents provider of last resort generation service by FirstEnergy's Ohio electric utility subsidiaries. 
 (d)
Primarily consists of telecommunications services.

 
Consolidated Report to the Financial Community - 1st Quarter 2007

4
 
 
FirstEnergy Corp.
Consolidated Income Segments
(Unaudited)
(In millions)
 
 
  
Three Months Ended March 31, 2006
  
 
 
  
 
  
 
  
Ohio
 
 
  
 
  
 
  
 
 
  
Energy
  
Competitive
  
Transitional
  
 
  
 
  
 
  
 
 
  
Delivery
  
Energy
  
Generation
  
 
  
Reconciling
 
 
  
 
Revenues
  
Services (a)
  
Services (b)
  
Services (c)
  
Other (d)
  
Adjustments
  
Consolidated
  
(1) 
Electric sales
  
$
1,668
  
$
304
  
$
539
  
$
-
  
$
-
  
$
2,511
  
(2)
FE Facilities
    
-
   
-
   
-
   
15
   
-
   
15
 
(3)
Other
    
128
   
51
   
4
   
13
   
(17
)
  
179
 
(4)
Internal revenues
    
9
   
611
    
-
   
-
   
(620
)
  
-
 
(5)
Total Revenues
    
1,805
   
966
   
543
   
28
   
(637
)
  
2,705
 
 
 
    
   
   
   
   
   
 
 
Expenses
    
   
   
   
   
   
 
(6)
Fuel
    
1
   
281
   
-
   
-
   
-
   
282
 
(7)
Purchased power
    
692
   
187
   
457
   
-
   
(620
)
  
716
 
(8)
Other operating expenses
    
366
   
344
   
56
   
3
   
(31
)
  
738
 
(9)
FE Facilities
    
-
   
-
   
-
   
16
   
-
   
16
 
(10)
Provision for depreciation
    
96
   
46
   
-
   
1
   
5
   
148
 
(11)
Amortization of regulatory assets
    
217
   
-
   
4
   
-
   
-
   
221
 
(12)
Deferral of new regulatory assets
    
(55
)
  
-
   
(25
)
  
-
   
-
   
(80
)
(13)
General taxes
    
158
   
26
   
1
   
1
   
7
   
193
 
(14) 
Total Expenses
    
1,475
   
884
   
493
   
21
   
(639
)
  
2,234
 
 
 
    
   
   
   
   
   
 
(15) 
Operating Income
    
330
   
82 
    
50
   
7
   
2
   
471
 
 
 
    
   
   
   
   
   
 
 
Other Income (Expense)
    
   
   
   
   
   
 
(16) 
Investment income
    
84
   
15
   
-
   
-
   
(56
)
  
43
 
(17)
Interest expense
    
(100
)
  
(47
)
  
-
   
(1
)
  
(17
)
  
(165
)
(18)
Capitalized interest
    
3
   
3
   
-
   
-
   
1
   
7
 
(19)
Subsidiaries' preferred stock dividends
    
(2
)
  
-
   
-
   
-
   
-
   
(2
)
(20)
Total Other Income (Expense)
    
(15
)
  
(29
)
  
-
   
(1
)
  
(72
)
  
(117
)
 
 
    
   
   
   
   
   
 
(21)
Income From Continuing Operations
  
   
   
   
   
 
 
Before Income Taxes
    
315
   
53
   
50 
    
6
   
(70
)
  
354
 
 
 
    
   
   
   
   
       
(22)
Income taxes
    
126
   
21 
    
20
   
(6
)
  
(26
)
  
135
 
 
 
    
   
   
   
   
   
 
(23)
Income From Continuing Operations
    
189
   
32 
    
30 
    
12
   
(44
)
  
219
 
(24)
Discontinued operations
    
-
   
-
   
-
   
2
   
-
   
2
 
(25)
Net Income
  
$
189
  
$
32
  
$
30
  
$
14
  
$
(44
)
$
221
  
   
(a) Consists of regulated transmission and distribution operations, including transition cost recovery, and provider of last resort generation service for
FirstEnergy's Pennsylvania and New Jersey electric utility subsidiaries.
(b) Consists of unregulated generation and commodity operations, including competitive electric sales, and generation sales to affiliated electric utilities.
(c) Represents provider of last resort generation service by FirstEnergy's Ohio electric utility subsidiaries. 
(d)
Primarily consists of telecommunications services and non-core businesses divested in 2006 (Facilities Services Group and MYR).
 
 
Consolidated Report to the Financial Community - 1st Quarter 2007

5
 
FirstEnergy Corp.
Consolidated Income Segments
(Unaudited)
(In millions)
 
     
Three Months Ended March 31, 2007 vs. Three Months Ended March 31, 2006
  
             
Ohio
             
     
Energy
  
Competitive
  
Transitional
              
     
Delivery
  
Energy
  
Generation
      
Reconciling
     
 
Revenues
  
Services (a)
  
Services (b)
  
Services (c)
  
Other (d)
  
Adjustments
  
Consolidated
  
 (1)
Electric sales 
  
$
207
  
$
(28
)
$
74
  
$
-
  
$
-
  
$
253
  
 (2)
FE Facilities 
    
-
   
-
   
-
   
(15
)
  
-
   
(15
)
 (3)
Other 
    
37
   
1
   
2
   
(1
)
  
(9
)
  
30
 
 (4)
Internal revenues 
    
(9
)
  
103
   
-
   
-
   
(94
)
  
-
 
 (5)
Total Revenues
    
235
   
76 
    
76
   
(16
)
  
(103
)
  
268
 
                                         
 
Expenses
                                      
 (6)
Fuel 
    
(1
)
  
(19
)
  
-
   
-
   
-
   
(20
)
 (7)
Purchased power 
    
152
   
(2
)
  
87 
    
-
   
(94
)
  
143
 
 (8)
Other operating expenses 
    
42
   
(37
)
  
(7
)
  
-
   
13
   
11
 
 (9)
FE Facilities 
    
-
   
-
   
-
   
(16
)
  
-
   
(16
)
 (10)
Provision for depreciation 
    
2
   
5
   
-
   
-
   
1
   
8
 
 (11)
Amortization of regulatory assets 
    
29
   
-
   
1
   
-
   
-
   
30
 
 (12)
Deferral of new regulatory assets 
    
(69
)
  
-
   
5
   
-
   
-
   
(64
)
 (13)
General taxes 
    
7
   
2
   
1
   
(1
)
  
1
   
10
 
 (14)
Total Expenses
    
162
   
(51
)
  
87 
    
(17
)
  
(79
)
  
102
 
                                         
 (15)
Operating Income
    
73
   
127 
    
(11
)
  
1
   
(24
)
  
166
 
                                         
 
Other Income (Expense)
                                      
 (16)
Investment income 
    
(14
)
  
(12
)
  
1
   
-
   
15 
    
(10
)
 (17)
Interest expense 
    
(9
)
  
(5
 )   
(1
)
  
(1
)
  
(4
)
  
(20
)
 (18)
Capitalized interest 
    
(1
)
  
-
   
-
   
-
   
(1
)
  
(2
)
 (19)
Subsidiaries' preferred stock dividends 
    
2
   
-
   
-
   
-
   
-
   
2
 
 (20)
Total Other Income (Expense)
    
(22
)
  
(17
)
  
-
   
(1
)
  
10
   
(30
)
                                         
 (21)
Income From Continuing Operations
                                      
 
Before Income Taxes 
    
51
    
110
   
(11
)
  
-
   
(14
)
  
136
 
                                         
 (22)
Income taxes 
    
22
   
44 
    
(5
)
  
11
   
(7
)
  
65
 
                                         
 (23)
Income From Continuing Operations
    
29
   
66 
    
(6
)
  
(11
)
  
(7
)
  
71
 
 (24)
Discontinued operations 
    
-
   
-
   
-
   
(2
)
  
-
   
(2
)
 (25)
Net Income
  
$
29
  
$
66
  
$
(6
)
$
(13
)
$
(7
)
$
69
  
                                         
 (a) Consists of regulated transmission and distribution operations, including transition cost recovery, and provider of last resort generation service for
FirstEnergy's Pennsylvania and New Jersey electric utility subsidiaries.
 (b) Consists of unregulated generation and commodity operations, including competitive electric sales, and generation sales to affiliated electric utilities. 
 (c) Represents provider of last resort generation service by FirstEnergy's Ohio electric utility subsidiaries.  
 (d)
Primarily consists of telecommunications services and non-core businesses divested in 2006 (Facilities Services Group and MYR).
 
 
Consolidated Report to the Financial Community - 1st Quarter 2007

6
 
FirstEnergy Corp.
Financial Statements
(Unaudited)
(In millions)
 
Condensed Consolidated Balance Sheets
  
 
  
 
  
 
  
 
  
 
  
 
  
March 31,
2007
  
December 31,
2006
  
Assets
  
 
  
 
  
Current Assets:
  
 
  
 
  
Cash and cash equivalents
  
$
89
  
$
90
  
Receivables
    
1,434
   
1,267
 
Other
    
824
   
726
 
Total Current Assets
    
2,347
   
2,083
 
 
          
Property, Plant and Equipment
    
14,786
   
14,667
 
Investments
    
3,525
   
3,534
 
Deferred Charges and Other Assets
    
11,132
   
10,912
 
Total Assets
  
$
31,790
  
$
31,196
  
 
          
Liabilities and Capitalization
          
Current Liabilities:
          
 Currently payable long-term debt
    $ 2,092     $ 1,867   
Short-term borrowings
  
 
2,247
  
 
1,108
  
Accounts payable
    
625
   
726
 
Other
    
1,432
   
1,554
 
Total Current Liabilities
    
6,396
   
5,255
 
 
          
Capitalization:
          
Common stockholders' equity
    
8,299
   
9,035
 
Long-term debt and other long-term obligations
    
8,548
   
8,535
 
Total Capitalization
    
16,847
   
17,570
 
Noncurrent Liabilities
    
8,547
   
8,371
 
 Total Liabilities and Capitalization    $ 31,790   
$
 31,196   
 
  
 
 
  
 
 
  
 

 
  
 
  
 
  
General Information
  
 
  
 
  
 
  
Three Months Ended March 31,
 
 
  
2007
  
2006
  
   
 
  
 
  
Debt and equity securities redemptions
  
$
(904
)
$
(94
)
New long-term debt issues
  
$
250
  
$
-
  
Short-term debt increase
  
$
1,139
  
$
200
  
Capital expenditures
  
$
296
  
$
447
  
 
            
 

 Adjusted Capitalization (Including Off-Balance Sheet Items) - Rating Agency View 
  
 
 As of March 31,
  
 
  
2007
  
% Total
  
2006
  
% Total
  
Total common equity
  
$
8,299
    
38
%
$
9,320
    
43
%
Preferred stock
   
-
   
0
%
  
154
   
1
%
Long-term debt*
    
10,220
   
46
%
  
9,859
   
46
%
Short-term debt
    
2,247
   
10
%
  
931
   
4
%
Off-balance sheet debt equivalents:
                 
Sale-leaseback net debt equivalents
    
1,235
   
6
%
  
1,297
   
6
%
Total
 
$
22,001
    
100
%
$
21,561
    
100
%
  
                  
 *Includes amounts due to be paid within one year and excludes JCP&L securitization debt of
  $420 million and $260 million in 2007 and 2006, respectively.
 
 
 
Consolidated Report to the Financial Community - 1st Quarter 2007
7
 

FirstEnergy Corp.
Financial Statements
(Unaudited)
(In millions)

 Condensed Consolidated Statements of Cash Flows
  
 
  
 
  
  
  
Three Months Ended March 31,
 
  
2007
  
2006
  
Cash flows from operating activities:
  
 
  
 
  
Net income
  
$
290
  
$
221
  
Adjustments to reconcile net income to net cash from
operating activities:
 
 
 
 
 
 Depreciation, amortization, and deferral
of regulatory assets
    
263
    
289
  
Deferred purchased power and other costs
    
(116
)
  
(104
)
Deferred income taxes and investment tax credits
    
53
   
6
 
Deferred rents and lease market valuation liability
    
(25
)
  
(38
)
Pension trust contribution
    
(300
)
  
-
 
Cash collateral, net
    
6
   
(106
)
Electric service prepayment programs
    
(17
)
  
(14
)
Change in working capital and other
    
(229
)
  
70
 
Cash flows provided from (used for)
operating activities:
    
(75
)
  
324
 
 
          
Cash flows provided from (used for)
financing activities:
    
346
   
(50
)
 
          
Cash flows used for investing activities
    
(272
)
  
(310
)
Net decrease in cash and cash equivalents
  
$
(1
)
$
(36
)
 
          
 
 
Deferrals and Amortizations 
  
 
  
 
  
 
  
  
  
Three Months Ended March 31,
  
  
  
2007
  
2006
  
Change
  
Ohio Regulatory Assets
              
Deferred Balance - Beginning
  
$
1,844
  
$
1,924
        
  
                    
 Shopping incentives
    
-
   
3
 
$
(3
)
 Interest on shopping incentives
    
10
   
10
   
-
 
 MISO costs and interest
    
8
   
4
   
4
 
 RCP distribution reliability costs and interest
    
46
   
39
   
7
 
 RCP fuel costs and interest
    
14
   
21
   
(7
)
 Other regulatory assets
    
6
   
3
   
3
 
Current period deferrals
  
$
84
  
$
80
  
$
4
  
                     
Amortization
                    
Ohio transition costs
  
$
(68
)
$
(72
)
$
4
  
Shopping incentives
    
(30
)
  
(30
)
  
-
 
MISO costs
    
(5
)
  
(5
)
  
-
 
Other
    
(5
)
  
(6
)
  
1
 
Current period amortization
  
$
(108
)
$
(113
)
$
5
  
  
                    
Deferred Balance - Ending
 
$
1,820
  
$
1,891
        
  
                    
Pennsylvania Deferred PJM Costs
                    
Beginning balance
  
$
157
    $
-
       
Deferral of PJM transmission costs
    
35
   
-
 
$
35
  
Ending Balance
  
$
192
    $
-
       
                     
New Jersey Deferred Energy Costs
                    
Beginning balance
  
$
369
  
$
541
        
Deferral (recovery) of energy costs
    
(12
)
  
17
 
$
(29
)
 Ending Balance    $ 357     $ 558         
 
 
Consolidated Report to the Financial Community - 1st Quarter 2007
8
 
FirstEnergy Corp.
Statistical Summary
(Unaudited)
 
 
  
 
  
 
  
 
  
ELECTRIC SALES STATISTICS
  
 Three Months Ended March 31,
  
(in millions of kWhs)
  
2007
  
2006
  
Change
  
Electric Generation Sales
  
 
  
 
  
 
  
Retail - Regulated
    
24,809
   
24,006
   
3.3
%
Retail - Competitive
    
3,206
   
2,719
   
17.9
%
Total Retail 
    
28,015
   
26,725
   
4.8
%
Wholesale 
    
5,063
   
5,422
   
-6.6
%
Total Electric Generation Sales
    
33,078
   
32,147
   
2.9
%
   
              
Electric Distribution Deliveries
              
Ohio                - Residential 
    
4,831
   
4,443
   
8.7
%
                 - Commercial 
    
3,795
   
3,644
   
4.1
%
                 - Industrial 
    
5,679
   
5,659
   
0.4
%
                 - Other 
    
94
   
91
   
3.3
%
                 Total Ohio 
    
14,399
   
13,837
   
4.1
%
Pennsylvania - Residential 
    
3,303
   
3,092
   
6.8
%
             - Commercial 
    
2,771
   
2,650
   
4.6
%
                         - Industrial 
    
2,542
   
2,563
   
-0.8
%
                         - Other 
    
20
   
20
   
0.0
%
                         Total Pennsylvania 
    
8,636
   
8,325
   
3.7
%
New Jersey    - Residential 
    
2,353
   
2,254
   
4.4
%
                         - Commercial
    
2,297
   
2,204
   
4.2
%
                         - Industrial 
    
702
   
691
   
1.6
%
                         - Other
    
21
   
22
   
-4.5
%
                         Total New Jersey 
    
5,373
   
5,171
   
3.9
%
Total Residential 
    
10,487
   
9,789
   
7.1
%
Total Commercial 
    
8,863
   
8,498
   
4.3
%
Total Industrial
    
8,923
   
8,913
   
0.1
%
Total Other 
    
135
   
133
   
1.5
%
Total Distribution Deliveries 
    
28,408
   
27,333
   
3.9
%
  
              
Electric Sales Shopped 
              
Ohio                - Residential 
    
560
   
596
   
-6.0
%
                         - Commercial 
    
880
   
957
   
-8.0
%
                         - Industrial 
    
642
   
734
   
-12.5
%
                         Total Ohio 
    
2,082
   
2,287
   
-9.0
%
Pennsylvania - Residential 
    
-
   
1
   
-100.0
%
                         - Commercial 
    
108
   
1
   
-
 
                         - Industrial 
    
415
   
131
   
216.8
%
                        Total Pennsylvania 
    
523
   
133
   
293.2
%
New Jersey    - Residential 
    
-
   
-
   
-
 
                         - Commercial 
    
475
   
403
   
17.9
%
                         - Industrial
    
519
   
504
   
3.0
%
                         Total New Jersey 
    
994
   
907
   
9.6
%
Total Electric Sales Shopped 
    
3,599
   
3,327
   
8.2
%
 

Operating Statistics
  
Three Months Ended
March 31,
  
 
 
2007
 
2006
 
 
Capacity Factors:
            
Fossil - Baseload
  
64%
  
83%
    
Fossil - Load Following
  
74%
  
69%
    
Peaking
  
0%
  
0%
    
Nuclear
  
99%
  
85%
    
Generation Output:
            
Fossil - Baseload
  
32%
  
41%
    
Fossil - Load Following
  
25%
  
23%
    
Peaking
  
0%
  
0%
    
Nuclear
  
43%
  
36%
    
 
            
   
Three Months Ended
March 31,
Weather
  
2007
 
2006
 
Normal
Composite Heating-Degree-Days
  
2,908
 
2,523
 
2,804
Composite Cooling-Degree-Days
  
1
 
-
 
8
             
 
 
Consolidated Report to the Financial Community - 1st Quarter 2007
9
 
FirstEnergy Corp.
2007 EPS Reconciliations
(Unaudited)

 
  
 
  
 
  
Special Items
          
   
Three Months Ended March 31,
  
   
2007
  
2006
  
Pre-tax Items - Income Increase (Decrease)
  
 
  
 
  
Gain (Loss) on Non-Core Asset Sales of:
          
Loss on sale on MYR 60% interest (a)
  
$
-
  
$
(5
)
 
            
Saxton Decommissioning costs regulatory assets (b)
    
27
   
-
 
Trust securities impairment (c)
    
(5
)
  
-
 
 Total-Pretax Items
  
$
22
  
$
(5
)
 
              
 EPS Effect
  
$
0.04
  
$
-
  
(a) Included in "Other operating expenses"
              
(b) Included in "Deferral of new regulatory assets"
              
(c) Included in "Investment income"
              
 

2007 Earnings Per Share (EPS)
  
(Reconciliation of GAAP to Non-GAAP)
  
 
  
 
  
 
  
   
ACTUAL
Three Months
Ended March 31
  
Non-GAAP
Guidance For
Year 2007
  
 
  
 
  
 
  
Basic EPS (GAAP basis)
  
$
0.92
  
$
4.09 - $4.29
  
Excluding Special Items:
          
New Regulatory Asset Authorized by PPUC
    
(0.05
)
  
(0.05
)
Trust securities impairment
    
0.01
   
0.01
 
Basic EPS (Non-GAAP basis)
  
$
0.88
  
$
4.05 - $4.25
  
 
          
 
 
Consolidated Report to the Financial Community - 1st Quarter 2007
10

 
RECENT DEVELOPMENTS

Share Repurchase Programs
On March 2, 2007, FirstEnergy repurchased approximately 14.4 million shares, or 4.5 percent of its outstanding common stock, under an accelerated share repurchase (ASR) agreement with an affiliate of Morgan Stanley & Co. Incorporated (Morgan Stanley). The initial purchase price was $900 million, or $62.63 per share. The final purchase price will be adjusted to reflect the volume-weighted average price of our stock during the period of time that Morgan Stanley will acquire the shares (up to approximately one year from inception). The ASR was completed under a January 30, 2007, Board of Directors’ authorization to repurchase up to 16 million shares of outstanding common stock.

On April 2, 2007, an affiliate of J.P. Morgan Securities (J.P. Morgan) completed its acquisition of common shares under FirstEnergy’s prior ASR program of 10.6 million shares, which was executed in August 2006. In settling the transaction, FirstEnergy paid J.P. Morgan approximately $27 million (direct charge to common stockholders’ equity) for a purchase price adjustment and true-up of dividends paid on shares that J.P. Morgan had not repurchased as of the respective record dates.

Under the two ASR programs, FirstEnergy has repurchased approximately 25 million common shares, or 8 percent of the total outstanding as of July 2006.

FirstEnergy Solutions Corp. Credit Ratings
On March 26, 2007, Standard & Poor’s Rating Services (S&P) assigned its corporate credit rating of BBB to FirstEnergy Solutions Corp. (FES), an unregulated subsidiary of FirstEnergy. FES also received an issuer rating of Baa2 from Moody’s Investor Services (Moody’s) on March 27, 2007. FES is the holding company of FirstEnergy Generation Corp. and FirstEnergy Nuclear Generation Corp., the owners of FirstEnergy’s fossil and nuclear generation assets, respectively. Both S&P and Moody’s cited the strength of FirstEnergy’s generation portfolio as a key contributor to the investment grade credit ratings. On April 20, 2007, FirstEnergy filed a Form 8-K with the Securities and Exchange Commission furnishing FES’ audited financial statements for the three years ended December 31, 2006.

The Cleveland Electric Illuminating Company Debt Offering
On March 27, 2007, The Cleveland Electric Illuminating Company (CEI) issued $250 million of 5.70% Senior Notes due 2017. The proceeds from the transaction will be used to meet CEI’s 2007 maturing long-term debt obligations of $120 million and to repay short-term borrowings.

NRC Oversight Update
On March 2, 2007, the Nuclear Regulatory Commission (NRC) returned FirstEnergy’s Perry Nuclear Power Plant to routine agency oversight as a result of sufficient corrective actions that have been taken over the last two-and-a-half years. The Perry Plant had been operating under heightened NRC oversight since August 2004.

Refueling Outage at Perry Nuclear Power Plant
FirstEnergy’s Perry Plant began its regularly scheduled refueling outage on April 2, 2007. Major work activities to be done on the 1,258-megawatt (MW) facility include replacing approximately one-third of the fuel assemblies in the reactor and two of the three low-pressure turbine rotors in the main generator.

Power Uprates
In March 2007, FirstEnergy’s Beaver Valley Unit 1 completed the final phase of an extended power uprate project to add additional capacity to our system. This is its second power uprate in the past 12 months. Capacity testing will be conducted later this year to verify the actual megawatts gained. This power uprate was achieved in support of FirstEnergy’s strategy to maximize the full potential of its existing generation assets.


Consolidated Report to the Financial Community - 1st Quarter 2007
11
 

Environmental Update
In March 2007, a selective non-catalytic reduction (SNCR) system was placed in-service at the 597-MW Eastlake Unit 5 upon completion of a scheduled maintenance outage. The SNCR installation is part of FirstEnergy’s overall Air Quality Compliance Strategy and was required under the New Source Review consent decree. The SNCR is expected to reduce NOx emissions and help achieve reductions required by the EPA’s NOx Transport Rule.

Sale and Leaseback of Bruce Mansfield Unit 1
On January 31, 2007, FirstEnergy announced its intention to pursue a sale and leaseback transaction for its owned portion of Bruce Mansfield Unit 1. FirstEnergy anticipates the after-tax proceeds of this proposed transaction to be approximately $1.2 billion. The proceeds are expected to be used to repay short-term borrowings incurred to fund the recently executed ASR program and the recent pension plan contribution. The Company is targeting a second quarter of 2007 closing for the transaction, including related lease debt financing.

Met-Ed and Penelec Rate Transition Plan Update
On January 11, 2007, the Pennsylvania Public Utility Commission (PPUC) issued its order in the Metropolitan Edison (Met-Ed) and Pennsylvania Electric Company (Penelec) Rate Transition Plan cases, approving net T&D rate increases for Met-Ed of 5% ($59 million) and Penelec of 4.5% ($50 million). Several parties to the proceeding, including Met-Ed and Penelec, have filed appeals of the PPUC’s decision to the Pennsylvania Commonwealth Court. The companies appealed the Commission’s decision on the denial of generation rate relief and on a consolidated income tax adjustment related to cost of capital. The appeals are currently pending.

Met-Ed and Penelec NUG Accounting Case Update
A hearing was held on February 21, 2007, in the Met-Ed and Penelec Non-Utility Generation (NUG) accounting case. Met-Ed and Penelec are seeking to modify the NUG purchased power stranded costs accounting methodology to eliminate reductions of the deferred cost balance during periods in which market prices exceeded NUG payments. The value at issue in this request is estimated to be approximately $40 million for the period 1999 through 2006. Legal briefs were filed in March 2007 and the companies are currently awaiting the Administrative Law Judge’s Recommended Decision.

Pennsylvania Power Company Default Service Plan
On May 2, 2007, Pennsylvania Power Company (Penn Power) made a filing with the PPUC proposing how it will procure the power supply needed for default service customers beginning June 1, 2008. Penn Power customers transitioned to a fully competitive market on January 1, 2007, and the default service plan that the Commission previously approved covered a 17-month period through May 31, 2008. The filing proposes that Penn Power procure a full requirements product, by class, through multiple Requests for Proposal with staggered delivery periods extending through May 2011. It also proposes a 3-year phase-out of promotional generation rates. The Company expects the Commission to address the filing later this year.
Forward-looking Statements. This Consolidated Report to the Financial Community includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “believe,” “estimate” and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, the continued ability of our regulated utilities to collect transition and other charges or to recover increased transmission costs, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), and the legal and regulatory changes resulting from the implementation of the Energy Policy Act of 2005 (including, but not limited to, the repeal of the Public Utility Holding Company Act of 1935), 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 levels of emission reductions related to the Consent Decree resolving the New Source Review litigation, adverse regulatory or legal decisions and outcomes (including, but not limited to, the revocation of necessary licenses or operating permits and oversight) by the Nuclear Regulatory Commission and the various state public utility commissions as disclosed in our Securities and Exchange Commission filings, the timing and outcome of various proceedings before the Public Utilities Commission of Ohio (PUCO) (including, but not limited to, the successful resolution of the issues remanded to the PUCO by the Ohio Supreme Court regarding the Rate Stabilization Plan) and the PPUC (including the transition rate plan filings for Met-Ed and Penelec and the Pennsylvania Power Company Default Service Plan filing), the continuing availability and operation of generating units, the ability of generating units to continue to operate at, or near full capacity, the inability to accomplish or realize anticipated benefits from strategic goals (including employee workforce initiatives), the anticipated benefits from voluntary pension plan contributions, the ability to improve electric commodity margins and to experience growth in the distribution business, the ability to access the public securities and other capital markets and the cost of such capital, the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to the August 14, 2003 regional power outage, the successful structuring and completion of a potential sale and leaseback transaction for Bruce Mansfield Unit 1 currently under consideration by management, any purchase price adjustment under the accelerated share repurchase program announced on March 2, 2007, the risks and other factors discussed from time to time in our Securities and Exchange Commission filings, including our annual report on Form 10-K for the year ended December 31, 2006, and other similar factors. Also, a security rating is not a recommendation to buy, sell or hold securities and it may be subject to revision or withdrawal at any time and each such rating should be evaluated independently of any other rating. We expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.
 
Consolidated Report to the Financial Community - 1st Quarter 2007
12