VARIABLE INTEREST ENTITIES

12 Months Ended

Dec. 31, 2023

Business Combination and Asset Acquisition [Abstract]

FirstEnergy performs qualitative analyses based on control and economics to determine whether a variable interest classifies FirstEnergy as the primary beneficiary (a controlling financial interest) of a VIE. An enterprise has a controlling financial interest if it has both power and economic control, such that an entity has: (i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. FirstEnergy consolidates a VIE when it is determined that it is the primary beneficiary.

In order to evaluate contracts for consolidation treatment and entities for which FirstEnergy has an interest, FirstEnergy aggregates variable interests into categories based on similar risk characteristics and significance.

Consolidated VIEs

Total assets on the FirstEnergy consolidated balance sheets include approximately $11,024 million and $10,104 million of consolidated VIE assets, as of December 31, 2023 and 2022, respectively, that can only be used to settle the liabilities of the applicable VIE. Total liabilities include approximately $7,835 million and $7,573 million as of December 31, 2023 and 2022, respectively, of consolidated VIE liabilities for which the VIE's creditors do not have recourse to FirstEnergy.

VIEs in which FirstEnergy is the primary beneficiary consist of the following (included in FirstEnergy’s consolidated financial statements):

Securitization Companies

•Ohio Securitization Companies - In June 2013, the SPEs formed by the Ohio Companies issued approximately $445 million of pass-through trust certificates supported by phase-in recovery bonds to securitize the recovery of certain all-electric customer heating discounts, fuel and purchased power regulatory assets. The phase-in recovery bonds are payable only from, and secured by, phase in recovery property owned by the SPEs. The bondholder has no recourse to the general credit of FirstEnergy or any of the Ohio Companies. Each of the Ohio Companies, as servicer of its respective SPE, manages and administers the phase in recovery property including the billing, collection and remittance of usage-based charges payable by retail electric customers. The SPEs are considered VIEs and each one is consolidated into its applicable utility. As of December 31, 2023 and 2022, $191 million and $206 million of the phase-in recovery bonds were outstanding, respectively.

•MP and PE Environmental Funding Companies - The consolidated financial statements of FirstEnergy include environmental control bonds issued by two bankruptcy remote, special purpose limited liability companies that are indirect subsidiaries of MP and PE. Proceeds from the bonds were used to construct environmental control facilities. Principal and interest owed on the environmental control bonds is secured by, and payable solely from, the proceeds of the environmental control charges. Creditors of FirstEnergy, other than the limited liability company SPEs, have no recourse to any assets or revenues of the special purpose limited liability companies. As of December 31, 2023 and 2022, $218 million and $247 million of environmental control bonds were outstanding, respectively.

Restricted cash included on the FE Consolidated Balance Sheets of $40 million and $41 million as of December 31, 2023 and 2022 respectively, relates to cash collected from MP, PE and the Ohio Companies' customers that is specifically used to service debt of their respective funding companies.

FET

FET is a holding company that owns equity interests in ATSI, MAIT, TrAIL and PATH. As of December 31, 2023, FE has ownership in FET of 80.1% with Brookfield having 19.9%. As further discussed above, on February 2, 2023, FE entered into an agreement with Brookfield to sell an incremental 30% equity interest in FET, which will bring FE’s equity ownership in FET to 50.1% and Brookfield to 49.9%. The FET Minority Equity Interest Sale is expected to close by the end of first quarter of 2024. FirstEnergy has concluded that FET is a VIE and that FE is the primarily beneficiary because FE has exposure to the economics of FET and the power to direct significant activities of FET through the FESC services agreement, which represents a separate variable interest.

Although Brookfield will be granted incremental consent rights upon closing of the incremental 30% sale, Brookfield will not have unilateral control over any activities that most significantly impact FET’s economic performance. However, FE will continue to retain power over the activities that most significantly impact FET’s economic performance through its incremental decision making rights under the existing FESC services agreement, through which executive management and workforce services are provided to FET. As a result, FE is the primary beneficiary of FET and FET will continue to be consolidated in FirstEnergy’s financial statements.

The following shows the carrying amounts and classification of the FET assets and liabilities included in the consolidated financial statements as of December 31, 2023 and 2022. Amounts exclude intercompany balances which were eliminated in consolidation. The assets of FET can only be used to settle its obligations, and creditors of FET do not have recourse to the general credit of FirstEnergy.


Assets	December 31, 2023		December 31, 2022
Cash and cash equivalents	$	76	$	77
Receivables	88		79
Materials and supplies, at average cost	1		1
Prepaid taxes and other	23		23
Total current assets	188		180
Property, plant and equipment, net	10,227		9,365
Goodwill	224		224
Investments	19		20
Regulatory assets	16		1
Other	310		273
Total noncurrent assets	10,796		9,883
TOTAL ASSETS	$	10,984	$	10,063


Liabilities	December 31, 2023		December 31, 2022

Accounts payable	2		—
Accrued interest	63		58
Accrued taxes	262		278
Other	14		7
Total current liabilities	341		343
Long-term debt and other long-term obligations	5,275		4,949
Accumulated deferred income taxes	1,218		1,129
Regulatory liabilities	307		443
Other	285		256
Total noncurrent liabilities	7,085		6,777
TOTAL LIABILITIES	$	7,426	$	7,120

Unconsolidated VIEs

FirstEnergy is not the primary beneficiary of its equity method investments in Global Holding and PATH WV, as further discussed above, or its PPAs.

FirstEnergy evaluated its PPAs and determined that certain NUG entities at its Regulated Distribution segment may be VIEs to the extent that they own a plant that sells substantially all of its output to the applicable utilities and the contract price for power is correlated with the plant’s variable costs of production. As of December 31, 2023, FirstEnergy maintains four long-term PPAs with NUG entities that were entered into pursuant to the Public Utility Regulatory Policies Act of 1978. FirstEnergy was not involved in the creation of, and has no equity or debt invested in, any of these entities. FirstEnergy has determined that, it does not have a variable interest, or the entities do not meet the criteria to be considered a VIE.

During 2023, FirstEnergy terminated the PPA with the NUG entity in which it had previously applied the scope exception that exempts enterprises unable to obtain the necessary information to evaluate entities.

Because FirstEnergy has no equity or debt interests in the NUG entities, its maximum exposure to loss relates primarily to the above-market costs incurred for power. FirstEnergy expects any above-market costs incurred at its Regulated Distribution segment to be recovered from customers.