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, which are approximately $701 million, as of September 30, 2016. 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 September 30, 2016 and December 31, 2015 were as follows:



	2016		2015
	(In millions)
FirstEnergy	$	2,502	$	2,282
FES	$	1,542	$	1,327

The following table summarizes the changes to the ARO balances during 2016:



ARO Reconciliation	FirstEnergy			FES
	(In millions)
Balance, December 31, 2015	$	1,410		$	831
Liabilities settled	(25		)	(17		)
Liabilities incurred	4			32
Accretion	70			41
Balance, September 30, 2016	$	1,459		$	887

During the second quarter of 2016, in connection with NG purchasing the lessor equity interests of the remaining non-affiliated leasehold interests from an owner participant in Perry Unit 1, OE transferred the ARO (included within the FES liabilities incurred above) and related NDT assets associated with the leasehold interest to NG with the difference of $28 million credited to the common stock of FES. As of June 30, 2016, NG owns 100% of Perry Unit 1.

Federal and state hazardous waste regulations have been promulgated as a result of the RCRA, as amended, and the Toxic Substances Control Act. Certain coal combustion residuals, such as coal ash, were exempted from hazardous waste disposal requirements pending the EPA's evaluation of the need for future regulation.

In December 2014, the EPA finalized regulations for the disposal of CCRs (non-hazardous), establishing national standards regarding landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring and protection procedures and other operational and reporting procedures to assure the safe disposal of CCRs from electric generating plants. Based on an assessment of the finalized regulations, the future cost of compliance and expected timing of spend had no significant impact on FirstEnergy's or FES' existing AROs associated with CCRs. Although none are currently expected, any changes in timing and closure plan requirements in the future could materially and adversely impact FirstEnergy's and FES' AROs.