Revenue

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenue

REVENUE

FirstEnergy accounts for revenues from contracts with customers under ASC 606, “Revenue from Contracts with Customers.” Revenue from leases, financial instruments, other contractual rights or obligations and other revenues that are not from contracts with customers are outside the scope of the new standard and accounted for under other existing GAAP.

FirstEnergy has elected to exclude sales taxes and other similar taxes collected on behalf of third parties from revenue as prescribed in the new standard. As a result, tax collections and remittances are excluded from recognition in the income statement and instead recorded through the balance sheet. Excise and gross receipts taxes that are assessed on FirstEnergy are not subject to the election and are included in revenue. FirstEnergy has elected the optional invoice practical expedient for most of its revenues and utilizes the optional short-term contract exemption for transmission revenues due to the annual establishment of revenue requirements, which eliminates the need to provide certain revenue disclosures regarding unsatisfied performance obligations.

FirstEnergy’s revenues are primarily derived from electric service provided by the Utilities and Transmission Companies.

The following tables represent a disaggregation of revenue from contracts with customers for the three months ended June 30, 2020 and 2019, by type of service from each reportable segment:

	For the Three Months Ended June 30, 2020
Revenues by Type of Service	Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments (1)		Total
	(In millions)
Distribution services (2)	$	1,241	$	—	$	(22)	$	1,219
Retail generation	826		—		(15)		811
Wholesale sales	50		—		2		52
Transmission (2)	—		380		—		380
Other	31		—		—		31
Total revenues from contracts with customers	$	2,148	$	380	$	(35)	$	2,493
ARP (3)	15		—		—		15
Other non-customer revenue	25		4		(15)		14
Total revenues	$	2,188	$	384	$	(50)	$	2,522

⁽¹⁾ Includes eliminations and reconciling adjustments of inter-segment revenues.

⁽²⁾ Includes $22 million reductions to revenue related to amounts subject to refund resulting from the Tax Act, primarily at Regulated Distribution.

⁽³⁾ ARP revenue for the three months ended June 30, 2020, is primarily related to the reconciliation of Ohio decoupling rates that became effective on February 1, 2020.

	For the Three Months Ended June 30, 2019
Revenues by Type of Service	Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments (1)		Total
	(In millions)
Distribution services	$	1,160	$	—	$	(21)	$	1,139
Retail generation	806		—		(14)		792
Wholesale sales	110		—		3		113
Transmission (2)	—		367		—		367
Other	37		—		—		37
Total revenues from contracts with customers	$	2,113	$	367	$	(32)	$	2,448
ARP (3)	55		—		—		55
Other non-customer revenue	24		5		(16)		13
Total revenues	$	2,192	$	372	$	(48)	$	2,516

⁽¹⁾ Includes eliminations and reconciling adjustments of inter-segment revenues.

⁽²⁾ Includes $2 million in reductions to revenue at Regulated Transmission related to amounts subject to refund resulting from the Tax Act.

⁽³⁾ ARP revenue for the three months ended June 30, 2019, includes DMR revenue, and lost distribution and shared savings revenue in Ohio.

Other non-customer revenue also includes revenue from late payment charges of $6 million and $9 million for the three months

ended June 30, 2020 and 2019, respectively. Starting in mid-March 2020, certain late payment charges began to be waived in response to the COVID-19 pandemic, and as a result, FirstEnergy stopped recognizing these revenues. See Note 1, “Organization and Basis of Presentation,” for further discussion on the COVID-19 pandemic. Other non-customer revenue also includes revenue from derivatives of $6 million and $3 million for the three months ended June 30, 2020 and 2019, respectively.

The following tables represent a disaggregation of revenue from contracts with customers for the six months ended June 30, 2020 and 2019, by type of service from each reportable segment:

	For the Six Months Ended June 30, 2020
Revenues by Type of Service	Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments (1)		Total
	(In millions)
Distribution services (2)	$	2,497	$	—	$	(43)	$	2,454
Retail generation	1,730		—		(30)		1,700
Wholesale sales	121		—		3		124
Transmission (2)	—		777		—		777
Other	67		—		—		67
Total revenues from contracts with customers	$	4,415	$	777	$	(70)	$	5,122
ARP (3)	83		—		—		83
Other non-customer revenue	48		8		(30)		26
Total revenues	$	4,546	$	785	$	(100)	$	5,231

⁽¹⁾ Includes eliminations and reconciling adjustments of inter-segment revenues.

⁽²⁾ Includes $45 million in net reductions to revenue related to amounts subject to refund resulting from the Tax Act, primarily at Regulated Distribution.

⁽³⁾ ARP revenue for the six months ended June 30, 2020, is primarily related to the reconciliation of Ohio decoupling rates that became effective on February 1, 2020.

	For the Six Months Ended June 30, 2019
Revenues by Type of Service	Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments (1)		Total
	(In millions)
Distribution services (2)	$	2,446	$	—	$	(42)	$	2,404
Retail generation	1,864		—		(28)		1,836
Wholesale sales	216		—		7		223
Transmission (2)	—		719		—		719
Other	71		—		1		72
Total revenues from contracts with customers	$	4,597	$	719	$	(62)	$	5,254
ARP (3)	117		—		—		117
Other non-customer revenue	51		9		(32)		28
Total revenues	$	4,765	$	728	$	(94)	$	5,399

⁽¹⁾ Includes eliminations and reconciling adjustments of inter-segment revenues.

⁽²⁾ Includes $34 million in net reductions to revenue related to amounts subject to refund resulting from the Tax Act ($27 million at Regulated Distribution and $7 million at Regulated Transmission).

⁽³⁾ ARP revenue for the six months ended June 30, 2019, includes DMR revenue, and lost distribution and shared savings revenue in Ohio.

Other non-customer revenue includes revenue from late payment charges of $16 million and $20 million for the six months ended June 30, 2020 and 2019, respectively, that FirstEnergy expects are collectible. Other non-customer revenue also includes revenue from derivatives of $6 million and $5 million for the six months ended June 30, 2020 and 2019, respectively.

Regulated Distribution

The Regulated Distribution segment distributes electricity through FirstEnergy’s ten utility operating companies and also controls 3,790 MWs of regulated electric generation capacity located primarily in West Virginia, Virginia and New Jersey, 210 MWs of which are related to the Yards Creek generating plant that is being sold pursuant to an asset purchase agreement as further discussed below. Each of the Utilities earns revenue from state-regulated rate tariffs under which it provides distribution

services to residential, commercial and industrial customers in its service territory. The Utilities are obligated under the regulated construct to deliver power to customers reliably, as it is needed, which creates an implied monthly contract with the end-use customer. See Note 9, “Regulatory Matters,” for additional information on rate recovery mechanisms. Distribution and electric revenues are recognized over time as electricity is distributed and delivered to the customer and the customers consume the electricity immediately as delivery occurs.

Retail generation sales relate to POLR, SOS, SSO and default service requirements in Ohio, Pennsylvania, New Jersey and Maryland, as well as generation sales in West Virginia that are regulated by the WVPSC. Certain of the Utilities have default service obligations to provide power to non-shopping customers who have elected to continue to receive service under regulated retail tariffs. The volume of these sales varies depending on the level of shopping that occurs. Supply plans vary by state and by service territory. Default service for the Ohio Companies, Pennsylvania Companies, JCP&L and PE’s Maryland jurisdiction are provided through a competitive procurement process approved by each state’s respective commission. Retail generation revenues are recognized over time as electricity is delivered and consumed immediately by the customer.

The following table represents a disaggregation of the Regulated Distribution segment revenue from contracts with distribution service and retail generation customers for the three and six months ended June 30, 2020 and 2019, by class:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Revenues by Customer Class	2020		2019		2020		2019
	(In millions)
Residential	$	1,280	$	1,123	$	2,599	$	2,607
Commercial	507		572		1,051		1,159
Industrial	259		251		536		500
Other	21		20		41		44
Total Revenues	$	2,067	$	1,966	$	4,227	$	4,310

Wholesale sales primarily consist of generation and capacity sales into the PJM market from FirstEnergy’s regulated electric generation capacity and NUGs. Certain of the Utilities may also purchase power in the PJM markets to supply power to their customers. Generally, these power sales from generation and purchases to serve load are netted hourly and reported as either revenues or purchased power on the Consolidated Statements of Income based on whether the entity was a net seller or buyer each hour. Capacity revenues are recognized ratably over the PJM planning year at prices cleared in the annual PJM Reliability Pricing Model Base Residual Auction and Incremental Auctions. Capacity purchases and sales through PJM capacity auctions are reported within revenues on the Consolidated Statements of Income. Certain capacity income (bonuses) and charges (penalties) related to the availability of units that have cleared in the auctions are unknown and not recorded in revenue until, and unless, they occur.

The Utilities’ distribution customers are metered on a cycle basis. An estimate of unbilled revenues is calculated to recognize electric service provided from the last meter reading through the end of the month. This estimate includes many factors, among which are historical customer usage, load profiles, estimated weather impacts, customer shopping activity and prices in effect for each class of customer. In each accounting period, the Utilities accrue the estimated unbilled amount as revenue and reverse the related prior period estimate. Customer payments vary by state but are generally due within 30 days.

ASC 606 excludes industry-specific accounting guidance for recognizing revenue from ARPs as these programs represent contracts between the utility and its regulators, as opposed to customers. Therefore, revenue from these programs are not within the scope of ASC 606 and regulated utilities are permitted to continue to recognize such revenues in accordance with existing practice but are presented separately from revenue arising from contracts with customers. FirstEnergy currently has ARPs in Ohio, primarily under the DMR in 2019 and decoupling revenue in 2020. Please see Note 9, “Regulatory Matters,” for further discussion on decoupling revenues in Ohio.

Regulated Transmission

The Regulated Transmission segment provides transmission infrastructure owned and operated by the Transmission Companies and certain of FirstEnergy's utilities (JCP&L, MP, PE and WP) to transmit electricity from generation sources to distribution facilities. The segment's revenues are primarily derived from forward-looking formula rates at the Transmission Companies, as well as stated transmission rates at MP, PE and WP. JCP&L had stated rates in 2019, but moved to forward-looking formula rates, subject to a refund, effective January 1, 2020, as further discussed in Note 9, “Regulatory Matters.”

Both the forward-looking formula and stated rates recover costs that the regulatory agencies determine are permitted to be recovered and provide a return on transmission capital investment. Under forward-looking formula rates, the revenue requirement is updated annually based on a projected rate base and projected costs, which is subject to an annual true-up based on actual costs. Revenue requirements under stated rates are calculated annually by multiplying the highest one-hour peak load

in each respective transmission zone by the approved, stated rate in that zone. Revenues and cash receipts for the stand-ready obligation of providing transmission service are recognized ratably over time.

The following table represents a disaggregation of revenue from contracts with regulated transmission customers by transmission owner for the three and six months ended June 30, 2020 and 2019, by transmission owner:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Transmission Owner	2020		2019		2020		2019
	(In millions)
ATSI	$	192	$	184	$	396	$	358
TrAIL	58		59		121		117
MAIT	58		50		115		99
Other	72		74		145		145
Total Revenues	$	380	$	367	$	777	$	719