Transactions With Affiliated Companies

12 Months Ended

Dec. 31, 2016

Transactions With Affiliated Companies [Abstract]

FES’ operating revenues, operating expenses, investment income and interest expenses include transactions with affiliated companies. These affiliated company transactions include affiliated company power sales agreements between FirstEnergy's competitive and regulated companies, support service billings, including corporate and nuclear facility operational and maintenance support, interest on affiliated company notes including the money pools and other transactions.

FirstEnergy's competitive companies at times provide power through affiliated company power sales to meet a portion of the Utilities' POLR and default service requirements. The primary affiliated company transactions for FES during the three years ended December 31, 2016 are as follows:



FES	2016		2015		2014
	(In millions)
Revenues:
Electric sales to affiliates	$	457	$	664	$	861
Other	11		14		15
Expenses:
Purchased power from affiliates	622		353		271
Fuel	4		1		1
Support services	748		705		619
Investment Income:
Interest income from FE	2		2		3
Interest Expense:
Interest expense to affiliates	5		4		3
Interest expense to FE	2		3		4

FirstEnergy does not bill directly or allocate any of its costs to any subsidiary company. Costs are allocated to FES and the Utilities from FESC and FENOC. The majority of costs are directly billed or assigned at no more than cost. The remaining costs are for services that are provided on behalf of more than one company, or costs that cannot be precisely identified and are allocated using formulas developed by FESC and FENOC. The current allocation or assignment formulas used and their bases include multiple factor formulas: each company’s proportionate amount of FirstEnergy’s aggregate direct payroll, number of employees, asset balances, revenues, number of customers, other factors and specific departmental charge ratios. Intercompany transactions are generally settled under commercial terms within thirty days. FES purchases the entire output of the generation facilities owned by FG and NG, as well as the output relating to leasehold interests of OE and TE in certain of those facilities that are subject to sale and leaseback arrangements, and pursuant to full output, cost-of-service PSAs. Prior to April 1, 2016, FES financially purchased the uncommitted output of AE Supply's generation facilities under a PSA. On December 21, 2015, FES agreed under a PSA to physically purchase all the output of AE Supply's generation facilities effective April 1, 2016. FES and AE Supply are evaluating the possible termination of the PSA.

Additionally, FES and AE Supply are parties to an affiliated commodity transfer agreement in which AE Supply sells coal to FES in accordance with the terms and conditions set forth under the respective coal purchase agreements that AE Supply has with a third party. During 2016, 2015 and 2014, AE Supply sold 1.5 million, 1.2 million, and 1.7 million tons of coal to FES, respectively, at its cost of $80.4 million, $62.8 million, and $96.3 million, respectively.

FES and the Utilities are parties to an intercompany income tax allocation agreement with FE and its other subsidiaries that provides for the allocation of consolidated tax liabilities. Net tax benefits attributable to FE are generally reallocated to the subsidiaries of FirstEnergy that have taxable income. That allocation is accounted for as a capital contribution to the company receiving the tax benefit (see "Note 6, Taxes").