ASSET RETIREMENT OBLIGATIONS

FirstEnergy has recognized applicable legal obligations for AROs and their associated cost primarily for nuclear power plant decommissioning, reclamation of sludge disposal ponds, closure of coal ash disposal sites, underground and above-ground storage tanks, wastewater treatment lagoons and transformers containing PCBs. In addition, FirstEnergy has recognized conditional retirement obligations, primarily for asbestos remediation.

The ARO liabilities for FES primarily relate to the decommissioning of the Beaver Valley, Davis-Besse and Perry nuclear generating facilities. FES uses an expected cash flow approach to measure the fair value of their nuclear decommissioning AROs.

FirstEnergy and FES maintain NDTs that are legally restricted for purposes of settling the nuclear decommissioning ARO. The fair values of the decommissioning trust assets as of December 31, 2014 and 2013 were as follows:



	2014		2013
	(In millions)
FirstEnergy	$	2,341	$	2,201
FES	$	1,365	$	1,276

The following table summarizes the changes to the ARO balances during 2014 and 2013:



ARO Reconciliation	FirstEnergy			FES
	(In millions)
Balance, January 1, 2013	$	1,599		$	965
Liabilities settled	(18		)	(18		)
Accretion	115			71
Revisions in estimated cash flows	(18		)	(3		)
Balance, December 31, 2013	$	1,678		$	1,015
Liabilities settled	(9		)	(7		)
Accretion	113			66
Revisions in estimated cash flows	(395		)	(233		)
Balance, December 31, 2014	$	1,387		$	841

During 2013, revisions to estimated cash flows as a result of increased cost estimates for the closure of LBR increased the associated ARO liability of FES by $163 million. The revised cost estimates were the result of a Closure Plan submitted to the PA DEP by FG on March 28, 2013, which provides for placing a final cap over LBR, and a response to a technical deficiency letter issued by the PA DEP on October 3, 2013. See Note 15, Commitments, Guarantees, and Contingencies for additional information related to the closure of LBR.

During the third quarter of 2013, studies were completed to update the estimated cost of asbestos remediation for FirstEnergy and FES. The cost studies resulted in a revision to the estimated cash flows associated with the ARO liabilities of FirstEnergy and FES and increased the liability by $12 million and $5 million, respectively.

During the fourth quarter of 2013, revisions to estimated nuclear decommissioning cash flows associated with the ARO liability of FirstEnergy and FES decreased the liability by $193 million and $171 million, respectively. The revision in estimates for the ARO balances is the result of a decommissioning study that was completed by a third-party in connection with Davis-Besse’s license renewal that was submitted to the NRC in February 2014. The most significant revision from this study was related to accelerating the expected date when the DOE would begin to accept spent fuel, to be more in line with the industry assumptions. Additionally, FirstEnergy also updated and revised its estimates for Perry and Beaver Valley Units 1 and 2, in a consistent manner.

During the fourth quarter of 2014, based on studies completed by a third-party to reassess the estimated costs of decommissioning certain nuclear generating facilities, FE decreased its ARO by $395 million ($233 million at FES) of which $133 million was credited against a regulatory asset associated with nuclear decommissioning and spent fuel disposal costs for TMI-2. The decrease in the ARO primarily resulted from an extension in the number of years in which decommissioning activities are estimated to occur at Davis-Besse, Perry, TMI-2 and Beaver Valley Units 1 and 2.