DISCONTINUED OPERATIONS

12 Months Ended

Dec. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

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. The FES Bankruptcy settlement was conditioned on the FES Debtors confirming and effectuating a plan of reorganization acceptable to FirstEnergy.

As contemplated under the FES Bankruptcy settlement agreement, AE Supply entered into an agreement on December 31, 2018, to transfer the 1,300 MW Pleasants Power Station and related assets to FG, while retaining certain specified liabilities. Under the terms of the agreement, FG acquired the economic interests in Pleasants as of January 1, 2019, and AE Supply operated Pleasants until ownership was transferred on January 30, 2020. AE Supply will continue to provide access to the McElroy's Run CCR impoundment facility, which was not transferred, and FE will provide guarantees for certain retained environmental liabilities of AE Supply, including the McElroy’s Run CCR impoundment facility. During the first quarter of 2020, FG paid AE Supply approximately $65 million of cash for related materials and supplies (at book value) and the settlement of FG’s economic interest in Pleasants.

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.

Income Taxes

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. Based upon completion of the IRS’s review of the 2020 federal income tax return during fourth quarter 2021, FirstEnergy recognized the full tax benefit of the worthless stock deduction of approximately $5.2 billion, or $1.1 billion on a tax-effected basis, net of valuation allowances recorded against the state tax benefit ($21 million), eliminating associated uncertain tax position reserves.

Upon emergence, FirstEnergy paid the FES Debtors $125 million to settle all reconciliations under the Intercompany Tax Allocation Agreement for 2018, 2019 and 2020 tax years, including all issues regarding nondeductible interest.

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).

Summarized Results of Discontinued Operations

Summarized results of discontinued operations for the years ended December 31, 2021, 2020, and 2019 were as follows:

	For the Years Ended December 31,
(In millions)	2021		2020		2019
Revenues	$	—	$	7	$	188
Fuel	—		(6)		(140)
Other operating expenses	—		(6)		(63)
General taxes	—		—		(14)
Pleasants economic interest(1)	—		5		27
Other expense, net	(4)		—		(2)
Loss from discontinued operations, before tax	(4)		—		(4)
Income tax expense (benefit)	(1)		—		47
Loss from discontinued operations, net of tax	(3)		—		(51)
Settlement consideration and services credit	—		(1)		7
Accelerated net pension and OPEB prior service credits	—		18		—
Gain on disposal of FES and FENOC, before tax	—		17		7
Income tax benefits, including worthless stock deduction	(47)		(59)		(52)
Gain on disposal of FES and FENOC, net of tax	47		76		59
Income from discontinued operations	$	44	$	76	$	8

(1) Reflects the estimated amounts owed from FG for its economic interests in Pleasants effective January 1, 2019. As discussed above, settlement of the economic interests occurred during the first quarter of 2020.

FirstEnergy's Consolidated Statements of Cash Flows combines cash flows from discontinued operations with cash flows from continuing operations within each cash flow category. The following table summarizes the major classes of cash flow items from discontinued operations for the years ended December 31, 2021, 2020 and 2019:

	For the Years Ended December 31,
(In millions)	2021		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from discontinued operations	$	44	$	76	$	8
Gain on disposal, net of tax	(47)		(76)		(59)
Deferred income taxes and investment tax credits, net	—		—		47