Stock Based Compensation Plans

6 Months Ended

Jun. 30, 2011

Stock Based Compensation Plans [Abstract]

STOCK-BASED COMPENSATION PLANS

11. STOCK-BASED COMPENSATION PLANS

FirstEnergy has four types of stock-based compensation programs — LTIP, EDCP, ESOP and DCPD, as described below.

Allegheny’s stock-based awards were converted into FirstEnergy stock-based awards as of the date of the merger. These awards, referred to below as converted Allegheny awards, were adjusted in terms of the number of awards and, where applicable, the exercise price thereof, to reflect the merger’s common stock exchange ratio of 0.667 of a share of FirstEnergy common stock for each share of Allegheny common stock.

(A) LTIP

FirstEnergy’s LTIP includes four forms of stock-based compensation awards — stock options, performance shares, restricted stock and restricted stock units.

Under FirstEnergy’s LTIP, total awards cannot exceed 29.1 million shares of common stock or their equivalent. Only stock options, restricted stock and restricted stock units have currently been designated to be settled in common stock, with vesting periods ranging from two months to ten years. Performance share awards are currently designated to be paid in cash rather than common stock and therefore do not count against the limit on stock-based awards. There were 5.6 million shares available for future awards as of June 30, 2011.

Restricted Stock and Restricted Stock Units

Restricted common stock (restricted stock) and restricted stock unit (stock unit) activity was as follows:

	Six Months
	Ended
	June 30, 2011
Restricted stock and stock units outstanding as of January 1, 2011		1,878,022
Granted		891,881
Converted Allegheny restricted stock		645,197
Exercised		(428,686	)
Forfeited		(71,775	)
Restricted stock and stock units outstanding as of June 30, 2011		2,914,639

The 891,881 shares of restricted common stock granted during the six months ended June 30, 2011 had a grant-date fair value of $33.2 million and a weighted-average vesting period of 2.74 years.

Restricted stock units include awards that will be settled in a specific number of shares of common stock after the service condition has been met. Restricted stock units also include performance-based awards that will be settled after the service condition has been met in a specified number of shares of common stock based on FirstEnergy’s performance compared to annual target performance metrics.

Compensation expense recognized during the six months ended June 30, 2011 and 2010 for restricted stock and restricted stock units, net of amounts capitalized, was approximately $27 million and $20 million, respectively.

Stock Options

Stock option activity for the six months ended June 30, 2011 was as follows:

				Weighted
				Average
	Number of			Exercise
Stock Option Activities	Shares			Price
Stock options outstanding as of January 1, 2011 (all exercisable)		2,889,066		$	35.18
Options granted		662,122			37.75
Converted Allegheny options		1,805,811			41.75
Options exercised		(691,304	)		31.38
Options forfeited/expired		(78,978	)		71.71
Stock options outstanding as of June 30, 2011		4,586,717		$	38.09
(3,924,595 options exercisable)

Compensation expense recognized for stock options during the six months ended June 30, 2011 was $0.3 million. No expense was recognized during the six months ended June 30, 2010. Options granted during the six months ended June 30, 2011 had a grant-date fair value of $3.3 million and an expected weighted-average vesting period of 3.79 years.

Options outstanding by exercise price as of June 30, 2011 were as follows:

			Weighted		Remaining
	Shares Under		Average		Contractual
Exercise Prices	Options		Exercise Price		Life in Years
$20.02 – $30.74		1,045,122	$	26.54		2.02
$30.89 – $40.93		3,160,440		37.30		4.17
$42.72 – $51.82		3,883		51.02		0.70
$53.06 – $62.97		54,559		56.15		3.02
$64.52 – $71.82		9,042		67.50		5.24
$73.39 – $80.47		311,003		80.17		3.81
$81.19 – $89.59		2,668		85.39		6.09
Total		4,586,717	$	38.08		3.64

Performance Shares

Performance shares will be settled in cash and are accounted for as liability awards. Compensation expense (income) recognized for performance shares during the six months ended June 30, 2011 and 2010, net of amounts capitalized, totaled $2 million and $(6) million, respectively. No performance shares under the FirstEnergy LTIP were settled during the six months ended June 30, 2011 and 2010.

(B) ESOP

During 2011, shares of FirstEnergy common stock were purchased on the open market and contributed to participants’ accounts. Total ESOP-related compensation expense for the six months ended June 30, 2011 and 2010, net of amounts capitalized and dividends on common stock, were $19 million and $10 million, respectively.

(C) EDCP

There was no material compensation expense recognized on EDCP stock units during the six months ended June 30, 2011 and 2010.

(D) DCPD

DCPD expenses recognized during the six months ended June 30, 2011 and 2010 were approximately $2 million in each period. The net liability recognized for DCPD of approximately $6 million as of June 30, 2011 is included in the caption “Retirement benefits” on the Consolidated Balance Sheets.

Of the 1.7 million stock units authorized under the EDCP and DCPD, 1,076,779 stock units were available for future awards as of June 30, 2011.