Discontinued Operations

9 Months Ended

Sep. 30, 2021

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

    FES and FENOC Chapter 11 Bankruptcy Filing

On March 31, 2018, the FES Debtors announced that, in order to facilitate an orderly financial restructuring, they filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code with the Bankruptcy Court. On February 27, 2020, the FES Debtors effectuated their plan, emerged from bankruptcy and FirstEnergy tendered the bankruptcy court approved settlement payments totaling $853 million and a $125 million tax sharing payment to the FES Debtors.

By eliminating a significant portion of its competitive generation fleet with the deconsolidation of the FES Debtors, FirstEnergy has concluded the FES Debtors meet the criteria for discontinued operations, as this represents a significant event in management’s strategic review to exit commodity-exposed generation and transition to a fully regulated company.

Summarized Results of Discontinued Operations

Summarized results of discontinued operations for the three and nine months ended September 30, 2021 and 2020, were as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(In millions)	2021		2020		2021		2020
Revenues	$	—	$	—	$	—	$	7
Fuel	—		—		—		(6)
Other operating expenses	—		—		—		(6)
Other income	—		—		—		5
Income from discontinued operations, before tax	—		—		—		—
Income tax expense	—		—		—		—
Income from discontinued operations, net of tax	—		—		—		—
Settlement consideration	—		—		—		(1)
Accelerated net pension and OPEB prior service credits	—		—		—		18
Gain on disposal of FES and FENOC, before tax	—		—		—		17
Income taxes (benefits), including worthless stock deduction	(47)		6		(47)		(29)
Gain on disposal of FES and FENOC, net of tax	47		(6)		47		46
Income from discontinued operations	$	47	$	(6)	$	47	$	46

FirstEnergy’s Consolidated Statements of Cash Flows combine cash flows from discontinued operations with cash flows from continuing operations within each cash flow category. For the nine months ended September 30, 2021 and 2020, cash flows from operating activities includes income from discontinued operations of $47 million and $46 million, respectively. There were no cash flows from investing or financing activities from discontinued operations for the nine months ended September 30, 2021 or 2020.

Income Taxes

For U.S. federal income taxes, the FES Debtors were included in FirstEnergy’s consolidated tax return until emergence from bankruptcy on February 27, 2020. As a result of the FES Debtors’ tax return deconsolidation, FirstEnergy recognized a worthless stock deduction, of approximately $4.9 billion, net of unrecognized tax benefits of $316 million, for the remaining tax basis in the stock of the FES Debtors. Tax-effected, the worthless stock deduction is approximately $1.0 billion, net of valuation allowances recorded against the state tax benefit ($19 million) and the aforementioned unrecognized tax benefits ($68 million). In conjunction with filing the 2020 consolidated federal income tax return during the third quarter of 2021, FirstEnergy computed a final federal NOL allocation between the FES Debtors and FirstEnergy consolidated that resulted in FirstEnergy recording an increase to the consolidated NOL carryforward of approximately $289 million ($61 million tax-effected).