-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S8uIuWXTne0Q7fFX/yDM8kMhel49Kko8R4NbA5e75ioo1CmRC/RRftaaui8nMZWc bf0lnYDwm6NI5UuZh4G04A== 0001031296-99-000008.txt : 19990517 0001031296-99-000008.hdr.sgml : 19990517 ACCESSION NUMBER: 0001031296-99-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTENERGY CORP CENTRAL INDEX KEY: 0001031296 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 341843785 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-21011 FILM NUMBER: 99623485 BUSINESS ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 BUSINESS PHONE: 3303845100 MAIL ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLEVELAND ELECTRIC ILLUMINATING CO CENTRAL INDEX KEY: 0000020947 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 340150020 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02323 FILM NUMBER: 99623486 BUSINESS ADDRESS: STREET 1: 76 SOUTH MAIN STREET STREET 2: C/O FIRSTENERGY CORP CITY: AKRON STATE: OH ZIP: 44308 BUSINESS PHONE: 2166229800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OHIO EDISON CO CENTRAL INDEX KEY: 0000073960 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 340437786 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02578 FILM NUMBER: 99623487 BUSINESS ADDRESS: STREET 1: 76 S MAIN ST CITY: AKRON STATE: OH ZIP: 44308 BUSINESS PHONE: 2163845100 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENNSYLVANIA POWER CO CENTRAL INDEX KEY: 0000077278 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 250718810 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03491 FILM NUMBER: 99623488 BUSINESS ADDRESS: STREET 1: 1 E WASHINGTON ST STREET 2: P O BOX 891 CITY: NEW CASTLE STATE: PA ZIP: 16103-0891 BUSINESS PHONE: 4126525531 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOLEDO EDISON CO CENTRAL INDEX KEY: 0000352049 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 344375005 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03583 FILM NUMBER: 99623489 BUSINESS ADDRESS: STREET 1: 76 SOUTH MAIN STREET CITY: AKRON STATE: OH ZIP: 43308 BUSINESS PHONE: 2166229800 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission Registrant; State of Incorporation; I.R.S. Employer File Number Address; and Telephone Number Identification No. - ----------- ----------------------------------- ------------------ 333-21011 FIRSTENERGY CORP. 34-1843785 (An Ohio Corporation) 76 South Main Street Akron, Ohio 44308 Telephone (800)736-3402 1-2578 OHIO EDISON COMPANY 34-0437786 (An Ohio Corporation) 76 South Main Street Akron, OH 44308 Telephone (800)736-3402 1-2323 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY 34-0150020 (An Ohio Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402 1-3583 THE TOLEDO EDISON COMPANY 34-4375005 (An Ohio Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402 1-3491 PENNSYLVANIA POWER COMPANY 25-0718810 (A Pennsylvania Corporation) 1 East Washington Street P. O. Box 891 New Castle, Pennsylvania 16103 Telephone (412)652-5531 Indicate by check mark whether each of the registrants (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ ____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: OUTSTANDING CLASS AS OF MAY 13, 1999 ----- ------------------ FirstEnergy Corp., $.10 par value 234,653,887 Ohio Edison Company, $9 par value 100 The Cleveland Electric Illuminating Company, no par value 79,590,689 The Toledo Edison Company, $5 par value 39,133,887 Pennsylvania Power Company, $30 par value 6,290,000 FirstEnergy Corp. is the sole holder of Ohio Edison Company, The Cleveland Electric Illuminating Company and The Toledo Edison Company common stock; Ohio Edison Company is the sole holder of Pennsylvania Power Company common stock. This combined Form 10-Q is separately filed by FirstEnergy Corp., Ohio Edison Company, Pennsylvania Power Company, The Cleveland Electric Illuminating Company and The Toledo Edison Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to any other registrant, except that information relating to any of the four FirstEnergy subsidiaries is also attributed to FirstEnergy. This Form 10-Q includes forward looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms "anticipate", "potential", "expect", "believe", "estimate" and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy market prices, legislative and regulatory changes (including revised environmental requirements), availability and cost of capital and other similar factors. TABLE OF CONTENTS Pages Part I. Financial Information Notes to Consolidated Financial Statements 1-3 FirstEnergy Corp. Consolidated Statements of Income 4 Consolidated Balance Sheets 5-6 Consolidated Statements of Cash Flows 7 Report of Independent Public Accountants 8 Management's Discussion and Analysis of Results of Operations and Financial Condition 9-11 Ohio Edison Company Consolidated Statements of Income 12 Consolidated Balance Sheets 13-14 Consolidated Statements of Cash Flows 15 Report of Independent Public Accountants 16 Management's Discussion and Analysis of Results of Operations and Financial Condition 17-19 The Cleveland Electric Illuminating Company Consolidated Statements of Income 20 Consolidated Balance Sheets 21-22 Consolidated Statements of Cash Flows 23 Report of Independent Public Accountants 24 Management's Discussion and Analysis of Results of Operations and Financial Condition 25-26 The Toledo Edison Company Consolidated Statements of Income 27 Consolidated Balance Sheets 28-29 Consolidated Statements of Cash Flows 30 Report of Independent Public Accountants 31 Management's Discussion and Analysis of Results of Operations and Financial Condition 32-33 Pennsylvania Power Company Consolidated Statements of Income 34 Consolidated Balance Sheets 35-36 Consolidated Statements of Cash Flows 37 Report of Independent Public Accountants 38 Management's Discussion and Analysis of Results of Operations and Financial Condition 39-40 Part II. Other Information PART I. FINANCIAL INFORMATION - ------------------------------ FIRSTENERGY CORP. AND SUBSIDIARIES OHIO EDISON COMPANY AND SUBSIDIARIES THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARY THE TOLEDO EDISON COMPANY AND SUBSIDIARY PENNSYLVANIA POWER COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1 - CONSOLIDATED FINANCIAL STATEMENTS: The principal business of FirstEnergy Corp. (FirstEnergy) is the holding, directly or indirectly, of all of the outstanding common stock of its four principal electric utility operating subsidiaries, Ohio Edison Company (OE), The Cleveland Electric Illuminating Company (CEI), The Toledo Edison Company (TE) and Pennsylvania Power Company (Penn). These utility subsidiaries are referred to throughout as "Companies." Penn is a wholly owned subsidiary of OE. The condensed consolidated financial statements of FirstEnergy and each of the Companies reflect all normal recurring adjustments that, in the opinion of management, are necessary to fairly present results of operations for the interim periods. These statements should be read in connection with the financial statements and notes included in the combined Annual Report on Form 10-K for the year ended December 31, 1998 for FirstEnergy and the Companies. The reported results of operations are not indicative of results of operations for any future period. Certain prior year amounts have been reclassified to conform with the current year presentation. Penn's consolidated financial statements include Penn and its wholly owned subsidiary, Penn Power Energy, Inc. The subsidiary was formed to market energy products and services coincident with the commencement of electricity generation customer choice and competition in Pennsylvania in January 1999. All significant intercompany transactions have been eliminated. The sole assets of the subsidiary trust that is the obligor on the preferred securities included in FirstEnergy's and OE's capitalization are $123,711,350 principal amount of 9% Junior Subordinated Debentures of OE due December 31, 2025. 2 - COMMITMENTS, GUARANTEES AND CONTINGENCIES: CAPITAL EXPENDITURES- FirstEnergy's current forecast reflects expenditures of approximately $2.2 billion (FirstEnergy-$263 million, OE-$856 million, CEI-$701 million, TE-$257 million and Penn-$167 million) for property additions and improvements from 1999-2003, of which approximately $522 million (FirstEnergy-$172 million, OE-$140 million, CEI-$124 million, TE-$48 million and Penn-$38 million) is applicable to 1999. Investments for additional nuclear fuel during the 1999-2003 period are estimated to be approximately $404 million (OE-$140 million, CEI-$133 million, TE- $103 million and Penn-$28 million), of which approximately $51 million (OE-$21 million, CEI-$17 million, TE-$10 million and Penn-$3 million) applies to 1999. GUARANTEES- The Companies and Duquesne Light Company (Duquesne) have each severally guaranteed certain debt and lease obligations in connection with a coal supply contract for the Bruce Mansfield Plant. As of March 31, 1999, the Companies' share of the guarantees was $23.5 million (OE- $13.6 million, CEI-$5.0 million, TE-$2.9 million and Penn-$2.0 million). The price under the coal supply contract, which includes certain minimum payments, has been determined to be sufficient to satisfy the debt and lease obligations. ENVIRONMENTAL MATTERS- Various federal, state and local authorities regulate the Companies with regard to air and water quality and other environmental matters. The Companies estimate additional capital expenditures for environmental compliance of approximately $449 million (OE-$213 million, CEI-$145 million, TE-$44 million and Penn-$47 million), which is included in the construction forecast provided under "Capital Expenditures" for 1999 through 2003. The Companies are in compliance with the current sulfur dioxide (SO2) and nitrogen oxides (NOx) reduction requirements under the Clean Air Act Amendments of 1990. SO2 reductions are being achieved by burning lower-sulfur fuel, generating more electricity from lower- emitting plants, and/or purchasing emission allowances. NOx reductions are being achieved through combustion controls and generating more electricity from lower-emitting plants. In September 1998, the Environmental Protection Agency (EPA) finalized regulations requiring additional NOx reductions from the Companies' Ohio and Pennsylvania facilities by May 2003. The EPA`s NOx Transport Rule imposes uniform reductions of NOx emissions across a region of twenty-two states and the District of Columbia, including Ohio and Pennsylvania, based on a conclusion that such NOx emissions are contributing significantly to ozone pollution in the eastern United States. By September 1999, each of the twenty-two states are required to submit revised State Implementation Plans (SIP) which comply with individual state NOx budgets established by the EPA. These state NOx budgets contemplate an 85% reduction in utility plant NOx emissions from 1990 emissions. A proposed Federal Implementation Plan accompanied the NOx Transport Rule and may be implemented by the EPA in states which fail to revise their SIP. In another separate but related action, eight states filed petitions with the EPA under Section 126 of the Clean Air Act seeking reductions of NOx emissions which are alleged to contribute to ozone pollution in the eight petitioning states. The EPA suggests that the Section 126 petitions will be adequately addressed by the NOx Transport Program, but an April 30, 1999 rulemaking established an alternative program which would require nearly identical 85% NOx reductions at the Companies' Ohio and Pennsylvania plants by May 2003 in the event implementation of the NOx Transport Rule is delayed. The Companies continue to evaluate their compliance plans and other compliance options and currently estimate the additional capital expenditures for NOx reductions may reach $500 million. The Companies are required to meet federally approved SO2 regulations. Violations of such regulations can result in shutdown of the generating unit involved and/or civil or criminal penalties of up to $25,000 for each day the unit is in violation. The EPA has an interim enforcement policy for SO2 regulations in Ohio that allows for compliance based on a 30-day averaging period. The Companies cannot predict what action the EPA may take in the future with respect to the interim enforcement policy. In July 1997, the EPA promulgated changes in the National Ambient Air Quality Standard (NAAQS) for ozone and proposed a new NAAQS for previously unregulated ultra-fine particulate matter. The cost of compliance with these regulations may be substantial and depends on the manner in which they are implemented by the states in which the Companies operate affected facilities. Implementation in Ohio and Pennsylvania has not yet occurred. CEI and TE have been named as "potentially responsible parties" (PRPs) at waste disposal sites which may require cleanup under the Comprehensive Environmental Response, Compensation and Liability Act of 1980. Allegations of disposal of hazardous substances at historical sites and the liability involved, are often unsubstantiated and subject to dispute. Federal law provides that all PRPs for a particular site be held liable on a joint and several basis. CEI and TE have accrued liabilities of $4.6 million and $1.0 million, respectively, as of March 31, 1999, based on estimates of the costs of cleanup and the proportionate responsibility of other PRPs for such costs. CEI and TE believe that waste disposal costs will not have a material adverse effect on their financial condition, cash flows or results of operations. Legislative, administrative and judicial actions will continue to change the way that the Companies must operate in order to comply with environmental laws and regulations. With respect to any such changes and to the environmental matters described above, the Companies expect that while they remain regulated, any resulting additional capital costs which may be required, as well as any required increase in operating costs, would ultimately be recovered from their customers. PENDING EXCHANGE OF ASSETS- On March 26, 1999, FirstEnergy announced that it completed its agreements with Duquesne to exchange certain generating assets. Upon receipt of regulatory approvals, Duquesne will transfer 1,436 megawatts owned by Duquesne at eight Central Area Power Coordination Group (CAPCO) generating units in exchange for 1,323 megawatts at three non-CAPCO power plants owned by the Companies. The agreements for the exchange of assets, which is structured as a like-kind exchange for tax purposes, will provide the Companies with exclusive ownership and operating control of all CAPCO generating units. The three FirstEnergy plants to be transferred will be included in Duquesne's upcoming auction of its generating assets. The Companies will operate the plants until the assets are transferred to the new owners. Duquesne will fund decommissioning costs equal to its percentage interest in the three nuclear generating units to be transferred. The asset transfer could take place later in 1999. Under the agreements, the existing CAPCO arrangements will terminate upon transfer of the assets. 3 - REGULATORY ACCOUNTING: Based on the current regulatory environment and the Companies' respective regulatory plans, the Companies believe they will continue to be able to bill and collect cost-based rates relating to all of OE's operations, CEI's and TE's nonnuclear operations, and Penn's nongeneration operations; accordingly, it is appropriate that the Companies continue the application of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation," to those respective operations. However, changes in the regulatory environment are on the horizon in Ohio. The Companies believe that changes in Ohio regulation are possible in 1999 but cannot assess what the ultimate impact may be. 4 - SEGMENT INFORMATION: FirstEnergy's primary segment is its Electric Utility Group which includes four regulated electric utility operating companies that provide electric service in Ohio and Pennsylvania. Its other material business segment is the FirstEnergy Trading Services, Inc. subsidiary (formerly known as FirstEnergy Trading & Power Marketing, Inc.) which markets and trades electricity in nonregulated markets. Financial data for these business segments and products and services are as follows: Segment Financial Information - ------------------------------

FIRSTENERGY CORP. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

FIRSTENERGY CORP. CONSOLIDATED BALANCE SHEETS (Unaudited)

FIRSTENERGY CORP. CONSOLIDATED BALANCE SHEETS (Unaudited)

FIRSTENERGY CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To FirstEnergy Corp.: We have reviewed the accompanying consolidated balance sheet of FirstEnergy Corp. (an Ohio corporation) and subsidiaries as of March 31, 1999, and the related consolidated statements of income and cash flows for the three-month periods ended March 31, 1999 and 1998. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of FirstEnergy Corp. and subsidiaries as of December 31, 1998 (not presented herein), and, in our report dated February 12, 1999, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1998, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Cleveland, Ohio May 14, 1999 FIRSTENERGY CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The Company, as a producer and trader of electricity and natural gas, has certain financial risks inherent in its business activities. With respect to its trading operations, the Company uses principally over-the-counter and commodity exchange contracts for the purchase and sale of electricity and natural gas. These contracts may expose the Company to commodity price fluctuations. Market risk represents the risk of loss that may impact financial position, results of operations or cash flow due to either changes in the commodity market prices for electricity and natural gas or the failure of contract counterparties to perform. Various policies and procedures have been established to manage market risk. However, electricity and natural gas are subject to unpredictable price fluctuations due to changing economic and weather conditions and supply constraints, which arise from time to time. Results of Operations Basic and diluted earnings per share of common stock increased to $.60 per share for the first quarter of 1999 from $.56 per share for the same period last year. Results benefited from higher retail revenues, lower fuel and purchased power costs, and reduced interest expense. Revenues increased $50.3 million in the first quarter of 1999, compared to the same period of 1998, as a result of higher revenue contributions from the Electric Utility Operating Companies (EUOC) business segment and the acquisition of facilities services and natural gas companies, offset by reduced revenue from the FirstEnergy Trading Services, Inc. (FETS) business segment. The sources of the increase in first quarter 1999 revenues are summarized in the following table. (In millions) Electric sales $ 33.9 Other electric utility revenue 3.0 ------- EUOC 36.9 FETS (104.3) Business acquisitions 117.7 ------- Net Revenue Increase $ 50.3 ======= The increase in EUOC revenue resulted from an increase in kilowatt-hour sales, which was partially offset by reduced unit prices. Residential, commercial and industrial customers all contributed to the increase in kilowatt-hour sales in the first quarter of 1999 compared to the same period of 1998, with increases of 11.2%, 7.9% and 1.2%, respectively. Residential sales in the first quarter of 1999 benefited from lower temperatures, compared to the very mild first quarter of 1998. Adjusting for weather, residential sales were up 5.7%. Continued service sector growth contributed to the commercial sales increase while industrial sales were affected by weak demand from the primary metal sector. Despite a 6.0% increase in retail kilowatt-hour sales in the first quarter of 1999, compared to the same period of 1998, total kilowatt-hour sales increased by a more modest 1.6% due to a decrease in sales to the wholesale market. The decrease in FETS revenue resulted from limiting trading activities and focusing on support of FirstEnergy's retail marketing activities. Acquisition of nine facilities services companies and MARBEL Energy Corporation (MARBEL) in the twelve months ending March 31, 1999, contributed significantly to the increased revenues. Total expenses increased $26.4 million in the first quarter of 1999, compared to the same quarter of 1998. More available generation from EUOC sources in the first quarter of 1999, compared to the first quarter of 1998, reduced EUOC purchased power costs. A higher level of available nuclear capacity in 1999 resulted in lower fuel costs, despite the additional generation to support increased kilowatt- hour sales. Other expenses for the EUOCs increased in 1999 due in part to customer service and sales costs - similar costs in 1998 were recognized later in that year. Reduced FETS activity resulted in significant cost reductions in that business segment. The increases in facilities services and other costs in the first quarter of 1999 from the same quarter of 1998 reflect expenses of businesses acquired subsequent to March 31, 1998. Depreciation and amortization in the first quarter of 1999 decreased from the same quarter of 1998 primarily due to the net effect of the OE and Penn rate plans, which were partially offset by additional depreciation and amortization from companies acquired since the first quarter of 1998. Capital Resources and Liquidity The Company and its subsidiaries have continuing cash requirements for planned capital expenditures and debt maturities. During the last three quarters of 1999, capital requirements for property additions and capital leases are expected to be about $456 million, including $9 million for nuclear fuel. The Companies have additional cash requirements of approximately $653.1 million to meet sinking fund requirements for preferred stock and maturing long-term debt during the remainder of 1999. These cash requirements are expected to be satisfied with internal cash and/or short-term credit arrangements. During the first quarter of 1999, the Company initiated its previously announced common stock repurchase program by buying almost 1.5 million shares at an average price of slightly less than $29 per share. As of March 31, 1999, the Company and its subsidiaries had about $45.6 million of cash and temporary investments and $265.7 million of short-term indebtedness. Unused borrowing capability included $174.0 million under revolving lines of credit and a $2.0 million bank facility that provides for borrowings on a short-term basis at the bank's discretion. On January 19, 1999, the Company completed the purchase of Webb Technologies, Inc., an HVAC contractor headquartered in Norfolk, Virginia. The new acquisition adds approximately $14 million in annual revenue and 90 employees to FirstEnergy Facilities Services Group, Inc., a wholly owned subsidiary of the Company. On March 31, 1999, the Company also completed its purchase of Atlas Gas Marketing Inc. of Pittsburgh, Pennsylvania, which will become part of FETS. The Company has entered into an agreement with Atlas Gas Marketing's former parent, Atlas America, to buy and market their natural gas production. The Company completed its agreements with Duquesne on March 25, 1999, to exchange certain generating assets. Upon receipt of regulatory approvals, Duquesne will transfer 1,436 megawatts (MW) that it owns at eight generating units to the Company in exchange for 1,323 MW at three power plants owned by the Company's EUOCs. Following an appeal by Penn of the 1998 restructuring order from the Pennsylvania Public Utility Commission (PPUC) to the Commonwealth Court, a settlement was reached in April 1999 with parties to Penn's original restructuring proceeding. Among the provisions of the settlement was a one year extension of the period for which all customers may select among alternative generation suppliers. In the continuing move toward enactment of legislation deregulating Ohio's investor-owned electric utility industry, substitute bills (HB 5 & SB 3) were introduced at a joint meeting of the House Public Utilities and the Senate Ways and Means committees on March 26, 1999. The bills, sponsored by House Republican Priscilla Mead and Senate Republican Bruce Johnson, will be considered by the two committees individually. Hearings in the Senate and House began on April 13 and 14, 1999, respectively. As many as two hearings a week will be held with the objective of delivering legislation to the Governor by the beginning of June. The Company is unable to predict the ultimate outcome of this process or the level of recovery of regulatory assets and nuclear generating unit investment for OE, CEI and TE. Unfavorable resolution could result in a charge to earnings which could have a material adverse effect on the Company's results of operations and financial condition. Year 2000 Readiness The Year 2000 issue is the result of computer programs being written using two digits rather than four to identify the applicable year. Any of the Company's programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. Because so many of the Company's computer functions are date sensitive, this could cause far-reaching problems, such as system-wide computer failures and miscalculations, if no remedial action is taken. The Company has developed a multi-phase program for Year 2000 compliance that consists of an assessment of its systems and operations that could be affected by the Year 2000 problem; remediation or replacement of noncompliant systems and components; and testing of systems and components following such remediation or replacement. The Company has focused its Year 2000 review on three areas: centralized system applications, noncentralized systems and relationships with third parties (including suppliers as well as end-use customers). The Company's review of system readiness extends to systems involving customer service, safety, shareholder needs and regulatory obligations. The Company is committed to taking appropriate actions to eliminate or lessen negative effects of the Year 2000 issue on its operations. The Company has completed an inventory of all computer systems and hardware including equipment with embedded computer chips and has determined which systems need to be converted or replaced to become Year 2000-ready and is in the process of remediating them. Based on its timetable, the Company expects to have all identified repairs, replacements and upgrades completed by June 30, 1999 to enable it to be ready to serve its customers into the Year 2000. Most of the Company's Year 2000 issues will be resolved through system replacement. Of the Company's major centralized systems, the general ledger system and inventory management, procurement and accounts payable systems were replaced at the end of 1998. The Company's payroll system was enhanced to be Year 2000 compliant in July 1998; all employees have been converted to the new system. The customer service system is due to be replaced in mid-1999. The Company has completed formal communications with most of its key suppliers to determine the extent to which it is vulnerable to those third parties' failure to resolve their own Year 2000 problems. For suppliers having potential compliance problems, the Company is developing alternate sources and services in the event such noncompliance occurs. The Company is also identifying areas requiring higher inventory levels based on compliance uncertainties. There can be no guarantee that the failure of companies to resolve their own Year 2000 issues will not have a material adverse effect on the Company's business, financial condition and results of operations, although it does not consider this likely to occur. The Company is using both internal and external resources to reprogram and/or replace and test its software for Year 2000 modifications. Of the $93 million total project cost, approximately $70 million will be capitalized since those costs are attributable to the purchase of new software for total system replacements because the Year 2000 solution comprises only a portion of the benefits resulting from the system replacements. The remaining $23 million will be expensed as incurred. As of March 31, 1999, the Company had spent $60 million for Year 2000 capital projects and had expensed approximately $13 million for Year 2000-related maintenance activities. The Company's total Year 2000 project cost, as well as its estimates of the time needed to complete remedial efforts, are based on currently available information and do not include the estimated costs and time associated with the impact of third party Year 2000 issues. The Company believes it is managing the Year 2000 issue in such a way that its customers will not experience any interruption of service. The Company believes the most likely worst-case scenario from the Year 2000 issue will be disruption in power plant monitoring systems, thereby producing inaccurate data and potential failures in electronic switching mechanisms at transmission junctions. This would prolong localized outages, as technicians would have to manually activate switches. Such an event could have a material, but currently undeterminable, effect on its financial results. The Company is developing contingency plans to address the effects of any delay in becoming Year 2000 compliant and expects to have contingency plans completed by June 30, 1999. The costs of the project and the dates on which the Company plans to complete the Year 2000 modifications are based on management's best estimates, which were derived from numerous assumptions of future events including the continued availability of certain resources, and other factors. However, there can be no guarantee that this project will be completed as planned and actual results could differ materially from the estimates. Specific factors that might cause material differences include but are not limited to, the availability and cost of trained personnel, the ability to locate and correct all relevant computer code, and similar uncertainties. OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

OHIO EDISON COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)

OHIO EDISON COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)

OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Ohio Edison Company: We have reviewed the accompanying consolidated balance sheet of Ohio Edison Company (an Ohio corporation and wholly owned subsidiary of FirstEnergy Corp.) and subsidiaries as of March 31, 1999, and the related consolidated statements of income and cash flows for the three- month periods ended March 31, 1999 and 1998. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Ohio Edison Company and subsidiaries as of December 31, 1998 (not presented herein), and, in our report dated February 12, 1999, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1998, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Cleveland, Ohio May 14, 1999 OHIO EDISON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations Operating revenues increased $35.3 million in the first quarter of 1999 from the first quarter of 1998 due to an increase in retail kilowatt-hour sales. Residential and commercial customers contributed to the higher kilowatt-hour sales with increases of 10.8% and 9.5%, respectively. Industrial sales decreased 2.2% between the two periods. Residential sales in the first quarter of 1999 benefited from lower temperatures, compared to mild weather conditions in the first quarter of 1998. Continued service sector growth contributed to the commercial sales increase while industrial sales were affected by weaker demand from the primary metal sector. Overall, retail kilowatt- hour sales increased by 5.3% in the first quarter of 1999, compared to the same period of 1998 while total kilowatt-hour sales increased a more substantial 6.1% due to a 10.3% increase in kilowatt-hour sales to the wholesale market. Operation and maintenance expenses increased $6.8 million in the first quarter of 1999 compared to the first quarter the previous year. The increase resulted from higher other operating costs, which were offset in part by lower fuel and purchased power expenses. More available internal generation in the first quarter of 1999 lowered purchased power expenses. Other operating costs increased in the first quarter of 1999 from the same period the prior year due to an increase in customer service and sales costs. Factors contributing to the increase included expenditures for energy efficiency programs, marketing program expenditures, unregulated business management costs, and similar costs in 1998 being recognized later in that year. Depreciation and amortization in the first quarter of 1999 decreased from the same period of 1998 primarily due to the net effect of the OE and Penn rate plans. Total accelerated depreciation and amortization of nuclear and regulatory assets under the OE rate plan was $43.0 million in the first quarter of 1999, down from $49.6 million the previous year. Increased gross receipts taxes due to higher retail operating revenues, and increased property taxes were the primary factors contributing to the increase in general taxes in the first quarter of 1999, compared to the same period in the prior year. Net redemptions of long-term debt reduced interest expense in the first quarter of 1999, compared to same period of 1998. Capital Resources and Liquidity OE and Penn (OE companies) have continuing cash requirements for planned capital expenditures and debt maturities. During the last three quarters of 1999, capital requirements for property additions and capital leases are expected to be about $148 million, including $3 million for nuclear fuel. The OE companies have additional cash requirements of approximately $369.2 million to meet sinking fund requirements for preferred stock and maturing long-term debt during the remainder of 1999. These cash requirements are expected to be satisfied with internal cash and/or short-term credit arrangements. As of March 31, 1999, the OE companies had about $14.5 million of cash and temporary investments and $353.4 million of short- term indebtedness. In addition, the OE companies' unused borrowing capability included $74.0 million under revolving lines of credit and a $2.0 million bank facility that provided for borrowings on a short-term basis at the bank's discretion. Under its first mortgage indenture, as of March 31, 1999, OE would have been permitted to issue up to $1.2 billion of additional first mortgage bonds on the basis of bondable property additions and retired bonds. FirstEnergy completed its agreements with Duquesne on March 25, 1999, to exchange certain generating assets. Upon receipt of regulatory approvals, Duquesne will transfer 886 MW that it owns at five generating units to the OE companies in exchange for the OE companies' 584 MW at the Niles and New Castle Plants. Following an appeal by Penn of the 1998 restructuring order from the PPUC to the Commonwealth Court, a settlement was reached in April 1999 with parties to Penn's original restructuring proceeding. Among the provisions of the settlement was a one year extension of the period for which all customers may select alternative generation suppliers. In the continuing move toward enactment of legislation deregulating Ohio's investor-owned electric utility industry, substitute bills (HB 5 & SB 3) were introduced at a joint meeting of the House Public Utilities and the Senate Ways and Means committees on March 26, 1999. The bills, sponsored by House Republican Priscilla Mead and Senate Republican Bruce Johnson, will be considered by the two committees individually. Hearings in the Senate and House began on April 13 and 14, 1999, respectively. As many as two hearings a week will be held with the objective of delivering legislation to the Governor by the beginning of June. OE is unable to predict the ultimate outcome of this process or the level of recovery of regulatory assets and nuclear generating unit investment. Unfavorable resolution could result in a charge to earnings which could have a material adverse effect on OE's results of operations and financial condition. Year 2000 Readiness The Year 2000 issue is the result of computer programs being written using two digits rather than four to identify the applicable year. Any of the OE companies' programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. Because so many of the OE companies' computer functions are date sensitive, this could cause far-reaching problems, such as system-wide computer failures and miscalculations, if no remedial action is taken. The OE companies have developed a multi-phase program for Year 2000 compliance that consists of an assessment of their systems and operations that could be affected by the Year 2000 problem; remediation or replacement of noncompliant systems and components; and testing of systems and components following such remediation or replacement. The OE companies have focused their Year 2000 review on three areas: centralized system applications, noncentralized systems and relationships with third parties (including suppliers as well as end-use customers). The OE companies' review of system readiness extends to systems involving customer service, safety, shareholder needs and regulatory obligations. The OE companies are committed to taking appropriate actions to eliminate or lessen negative effects of the Year 2000 issue on their operations. The OE companies have completed an inventory of all computer systems and hardware including equipment with embedded computer chips and has determined which systems need to be converted or replaced to become Year 2000-ready and is in the process of remediating them. Based on their timetable, the OE companies expect to have all identified repairs, replacements and upgrades completed by June 30, 1999 to enable them to be ready to serve their customers into the Year 2000. Most of the OE companies' Year 2000 issues will be resolved through system replacement. Of the OE companies' major centralized systems, the general ledger system and inventory management, procurement and accounts payable systems were replaced at the end of 1998. The OE companies' payroll system was enhanced to be Year 2000 compliant in July 1998; all employees have been converted to the new system. The customer service system is due to be replaced in mid-1999. The OE companies have completed formal communications with most of their key suppliers to determine the extent to which they are vulnerable to those third parties' failure to resolve their own Year 2000 problems. For suppliers having potential compliance problems, the OE companies are developing alternate sources and services in the event such noncompliance occurs. The OE companies are also identifying areas requiring higher inventory levels based on compliance uncertainties. There can be no guarantee that the failure of companies to resolve their own Year 2000 issues will not have a material adverse effect on the OE companies' business, financial condition and results of operations, although it does not consider this likely to occur. The OE companies are using both internal and external resources to reprogram and/or replace and test their software for Year 2000 modifications. Of the $46 million total project cost, approximately $34 million will be capitalized since those costs are attributable to the purchase of new software for total system replacements because the Year 2000 solution comprises only a portion of the benefits resulting from the system replacements. The remaining $12 million will be expensed as incurred. As of March 31, 1999, the OE companies had spent $29 million for Year 2000 capital projects and had expensed approximately $7 million for Year 2000-related maintenance activities. The OE companies' total Year 2000 project cost, as well as their estimates of the time needed to complete remedial efforts, are based on currently available information and do not include the estimated costs and time associated with the impact of third party Year 2000 issues. The OE companies believe they are managing the Year 2000 issue in such a way that their customers will not experience any interruption of service. The OE companies believe the most likely worst-case scenario from the Year 2000 issue will be disruption in power plant monitoring systems, thereby producing inaccurate data and potential failures in electronic switching mechanisms at transmission junctions. This would prolong localized outages, as technicians would have to manually activate switches. Such an event could have a material, but currently undeterminable, effect on their financial results. The OE companies are developing contingency plans to address the effects of any delay in becoming Year 2000 compliant and expect to have contingency plans completed by June 30, 1999. The costs of the project and the dates on which the OE companies plan to complete the Year 2000 modifications are based on management's best estimates, which were derived from numerous assumptions of future events including the continued availability of certain resources, and other factors. However, there can be no guarantee that this project will be completed as planned and actual results could differ materially from the estimates. Specific factors that might cause material differences include but are not limited to, the availability and cost of trained personnel, the ability to locate and correct all relevant computer code, and similar uncertainties. THE CLEVELAND ELECTRIC ILLUMINATING COMPANY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Cleveland Electric Illuminating Company: We have reviewed the accompanying consolidated balance sheet of The Cleveland Electric Illuminating Company (an Ohio corporation and wholly owned subsidiary of FirstEnergy Corp.) and subsidiary as of March 31, 1999, and the related consolidated statements of income and cash flows for the three-month periods ended March 31, 1999 and 1998. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of The Cleveland Electric Illuminating Company and subsidiary as of December 31, 1998 (not presented herein), and, in our report dated February 12, 1999, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1998, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Cleveland, Ohio May 14, 1999 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations Operating revenues increased $3.8 million in the first quarter of 1999 from the first quarter of 1998 due to an increase in retail kilowatt-hour sales. Residential and commercial customers contributed to the higher kilowatt-hour sales with increases of 13.8% and 1.9%, respectively. Industrial sales experienced a small, 0.4% decline. Residential sales in the first quarter of 1999 benefited from lower temperatures, compared to milder weather conditions in the first quarter of 1998. Overall, retail kilowatt-hour sales increased by 4.1% in the first quarter of 1999, compared to the same period of 1998. However, sales to the wholesale market in the first quarter of 1999 were down approximately 60% from the first quarter of 1998, due in part to the expiration of several wholesale contracts, which contributed to a 0.5% decline in total kilowatt-hour sales. Operation and maintenance expenses increased $14.8 million in the first quarter of 1999, compared to the same period of 1998. Increased operating costs at the Beaver Valley Plant and costs related to the Davis-Besse Plant outage scheduled for April 1999 contributed to the increase in nuclear operating costs in the first quarter of 1999, compared to the first quarter of 1998. Other operating costs increased primarily as a result of higher fossil generating unit operating costs, and customer and sales expenses. A turbine-generator outage at the Eastlake Plant, which began in the first quarter of 1999, was a major factor contributing to the $5 million increase in fossil unit costs. Customer and sales expenses reflect increased expenditures for energy efficiency programs and similar costs in 1998 being recognized later in that year. Other income decreased in the first quarter of 1999, compared to the first quarter of 1998, due in part to reduced interest income. Long-term debt refinancings of $229 million and net redemptions of $217 million during the twelve months ended March 31, 1999, produced the $6.3 million reduction in long-term debt interest expense in 1999. Preferred stock dividend requirements increased in the first quarter of 1999, compared to the first quarter of 1998, due to the declaration in the fourth quarter of 1997 of preferred dividends payable in 1998 by CEI. Capital Resources and Liquidity CEI has continuing cash requirements for planned capital expenditures and debt maturities. During the last three quarters of 1999, capital requirements for property additions and capital leases are expected to be about $115 million, including $4 million for nuclear fuel. CEI has additional cash requirements of approximately $178 million to meet sinking fund requirements for preferred stock and maturing long-term debt during the remainder of 1999. These cash requirements are expected to be satisfied with internal cash and/or short-term credit arrangements. As of March 31, 1999, CEI had approximately $73.5 million of cash and temporary investments and $68.8 million of short-term indebtedness to associated companies. Together with TE, CEI had unused borrowing capability of $100 million under a FirstEnergy revolving line of credit at the end of the first quarter of 1999. Under its first mortgage indenture, as of March 31, 1999, CEI would have been permitted to issue at least $190 million of additional first mortgage bonds on the basis of bondable property additions and retired bonds. FirstEnergy completed its agreements with Duquesne on March 25, 1999, to exchange certain generating assets. Upon receipt of regulatory approvals, Duquesne will transfer 550 MW that it owns at four generating units to CEI in exchange for CEI's 739 MW Avon Lake Plant. In the continuing move toward enactment of legislation deregulating Ohio's investor-owned electric utility industry, substitute bills (HB 5 & SB 3) were introduced at a joint meeting of the House Public Utilities and the Senate Ways and Means committees on March 26, 1999. The bills, sponsored by House Republican Priscilla Mead and Senate Republican Bruce Johnson, will be considered by the two committees individually. Hearings in the Senate and House began on April 13 and 14, 1999, respectively. As many as two hearings a week will be held with the objective of delivering legislation to the Governor by the beginning of June. CEI is unable to predict the ultimate outcome of this process or the level of recovery of regulatory assets and nuclear generating unit investment. Unfavorable resolution could result in a charge to earnings which could have a material adverse effect on CEI's results of operations and financial condition. Year 2000 Readiness The Year 2000 issue is the result of computer programs being written using two digits rather than four to identify the applicable year. Any of CEI's programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. Because so many of CEI's computer functions are date sensitive, this could cause far-reaching problems, such as system-wide computer failures and miscalculations, if no remedial action is taken. CEI has developed a multi-phase program for Year 2000 compliance that consists of an assessment of its systems and operations that could be affected by the Year 2000 problem; remediation or replacement of noncompliant systems and components; and testing of systems and components following such remediation or replacement. CEI has focused its Year 2000 review on three areas: centralized system applications, noncentralized systems and relationships with third parties (including suppliers as well as end-use customers). CEI's review of system readiness extends to systems involving customer service, safety, shareholder needs and regulatory obligations. CEI is committed to taking appropriate actions to eliminate or lessen negative effects of the Year 2000 issue on its operations. CEI has completed an inventory of all computer systems and hardware including equipment with embedded computer chips and has determined which systems need to be converted or replaced to become Year 2000- ready and is in the process of remediating them. Based on its timetable, CEI expects to have all identified repairs, replacements and upgrades completed by June 30, 1999 to enable it to be ready to serve its customers into the Year 2000. Most of CEI's Year 2000 issues will be resolved through system replacement. Of CEI's major centralized systems, the general ledger system and inventory management, procurement and accounts payable systems were replaced at the end of 1998. CEI's payroll system was enhanced to be Year 2000 compliant in July 1998; all employees have been converted to the new system. The customer service system is due to be replaced in mid-1999. CEI has completed formal communications with most of its key suppliers to determine the extent to which it is vulnerable to those third parties' failure to resolve their own Year 2000 problems. For suppliers having potential compliance problems, CEI is developing alternate sources and services in the event such noncompliance occurs. CEI is also identifying areas requiring higher inventory levels based on compliance uncertainties. There can be no guarantee that the failure of companies to resolve their own Year 2000 issues will not have a material adverse effect on CEI's business, financial condition and results of operations, although it does not consider this likely to occur. CEI is using both internal and external resources to reprogram and/or replace and test its software for Year 2000 modifications. Of the $31 million total project cost, approximately $23 million will be capitalized since those costs are attributable to the purchase of new software for total system replacements because the Year 2000 solution comprises only a portion of the benefits resulting from the system replacements. The remaining $8 million will be expensed as incurred. As of March 31, 1999, CEI had spent $20 million for Year 2000 capital projects and had expensed approximately $4 million for Year 2000-related maintenance activities. CEI's total Year 2000 project cost, as well as its estimates of the time needed to complete remedial efforts, are based on currently available information and do not include the estimated costs and time associated with the impact of third party Year 2000 issues. CEI believes it is managing the Year 2000 issue in such a way that its customers will not experience any interruption of service. CEI believes the most likely worst-case scenario from the Year 2000 issue will be disruption in power plant monitoring systems, thereby producing inaccurate data and potential failures in electronic switching mechanisms at transmission junctions. This would prolong localized outages, as technicians would have to manually activate switches. Such an event could have a material, but currently undeterminable, effect on its financial results. CEI is developing contingency plans to address the effects of any delay in becoming Year 2000 compliant and expect to have contingency plans completed by June 30, 1999. The costs of the project and the dates on which CEI plans to complete the Year 2000 modifications are based on management's best estimates, which were derived from numerous assumptions of future events including the continued availability of certain resources, and other factors. However, there can be no guarantee that this project will be completed as planned and actual results could differ materially from the estimates. Specific factors that might cause material differences include but are not limited to, the availability and cost of trained personnel, the ability to locate and correct all relevant computer code, and similar uncertainties. THE TOLEDO EDISON COMPANY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

THE TOLEDO EDISON COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)

THE TOLEDO EDISON COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)

THE TOLEDO EDISON COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Toledo Edison Company: We have reviewed the accompanying consolidated balance sheet of The Toledo Edison Company (an Ohio corporation and wholly owned subsidiary of FirstEnergy Corp.) and subsidiary as of March 31, 1999, and the related consolidated statements of income and cash flows for the three- month periods ended March 31, 1999 and 1998. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of The Toledo Edison Company and subsidiary as of December 31, 1998 (not presented herein), and, in our report dated February 12, 1999, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1998, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Cleveland, Ohio May 14, 1999 THE TOLEDO EDISON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations Operating revenues increased $3.2 million in the first quarter of 1999 from the first quarter of 1998 due to an increase in retail kilowatt-hour sales. Residential and industrial customers contributed to the higher kilowatt-hour sales with increases of 7.5% and 10.5%, respectively. Commercial sales declined 1.4% in 1999. Residential sales in the first quarter of 1999 benefited from lower temperatures, compared to milder weather conditions in the first quarter of 1998. Strong automotive demand and expanded production at the North Star BHP Steel facility contributed to the increase in industrial sales. Operation and maintenance expenses increased $6.2 million in the first quarter of 1999, compared to the same period of 1998. Increased operating costs at the Beaver Valley Plant and costs related to the Dave-Besse Plant outage scheduled for April 1999 contributed to the increase in nuclear operating costs in the first quarter of 1999, compared to the first quarter of 1998. Other income decreased in the first quarter of 1999, from the same period the prior year, primarily as a result of lower interest income. Net debt redemptions of $65 million during the twelve months ended March 31, 1999, produced the reduction in long-term debt interest expense in 1999. Preferred stock dividend requirements increased in the first quarter of 1999, compared to the first quarter of 1998, due to the declaration in the fourth quarter of 1997 of preferred dividends payable in 1998 by TE. Capital Resources and Liquidity TE has continuing cash requirements for planned capital expenditures and debt maturities. During the last three quarters of 1999, capital requirements for property additions and capital leases are expected to be about $42 million, including $2 million for nuclear fuel. TE has additional cash requirements of approximately $105.9 million to meet sinking fund requirements for preferred stock and maturing long-term debt during the remainder of 1999. These cash requirements are expected to be satisfied with internal cash and/or short-term credit arrangements. As of March 31, 1999, TE had approximately $104.3 million of cash and temporary investments and no short-term indebtedness. Together with CEI, TE had unused borrowing capability of $100 million under a FirstEnergy revolving line of credit at the end of the first quarter of 1999. Under its first mortgage indenture, as of March 31, 1999, TE would have been permitted to issue approximately $194 million of additional first mortgage bonds on the basis of bondable property additions and retired bonds. In the continuing move toward enactment of legislation deregulating Ohio's investor-owned electric utility industry, substitute bills (HB 5 & SB 3) were introduced at a joint meeting of the House Public Utilities and the Senate Ways and Means committees on March 26, 1999. The bills, sponsored by House Republican Priscilla Mead and Senate Republican Bruce Johnson, will be considered by the two committees individually. Hearings in the Senate and House began on April 13 and 14, 1999, respectively. As many as two hearings a week will be held with the objective of delivering legislation to the Governor by the beginning of June. TE is unable to predict the ultimate outcome of this process or the level of recovery of regulatory assets and nuclear generating unit investment. Unfavorable resolution could result in a charge to earnings which could have a material adverse effect on TE's results of operations and financial condition. Year 2000 Readiness The Year 2000 issue is the result of computer programs being written using two digits rather than four to identify the applicable year. Any of TE's programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. Because so many of TE's computer functions are date sensitive, this could cause far-reaching problems, such as system-wide computer failures and miscalculations, if no remedial action is taken. TE has developed a multi-phase program for Year 2000 compliance that consists of an assessment of its systems and operations that could be affected by the Year 2000 problem; remediation or replacement of noncompliant systems and components; and testing of systems and components following such remediation or replacement. TE has focused its Year 2000 review on three areas: centralized system applications, noncentralized systems and relationships with third parties (including suppliers as well as end-use customers). TE's review of system readiness extends to systems involving customer service, safety, shareholder needs and regulatory obligations. TE is committed to taking appropriate actions to eliminate or lessen negative effects of the Year 2000 issue on its operations. TE has completed an inventory of all computer systems and hardware including equipment with embedded computer chips and has determined which systems need to be converted or replaced to become Year 2000- ready and is in the process of remediating them. Based on its timetable, TE expects to have all identified repairs, replacements and upgrades completed by June 30, 1999 to enable it to be ready to serve its customers into the Year 2000. Most of TE's Year 2000 issues will be resolved through system replacement. Of TE's major centralized systems, the general ledger system and inventory management, procurement and accounts payable systems were replaced at the end of 1998. TE's payroll system was enhanced to be Year 2000 compliant in July 1998; all employees have been converted to the new system. The customer service system is due to be replaced in mid-1999. TE has completed formal communications with most of its key suppliers to determine the extent to which it is vulnerable to those third parties' failure to resolve their own Year 2000 problems. For suppliers having potential compliance problems, TE is developing alternate sources and services in the event such noncompliance occurs. TE is also identifying areas requiring higher inventory levels based on compliance uncertainties. There can be no guarantee that the failure of companies to resolve their own Year 2000 issues will not have a material adverse effect on TE's business, financial condition and results of operations, although it does not consider this likely to occur. TE is using both internal and external resources to reprogram and/or replace and test its software for Year 2000 modifications. Of the $16 million total project cost, approximately $12 million will be capitalized since those costs are attributable to the purchase of new software for total system replacements because the Year 2000 solution comprises only a portion of the benefits resulting from the system replacements. The remaining $4 million will be expensed as incurred. As of March 31, 1999, TE had spent $11 million for Year 2000 capital projects and had expensed approximately $2 million for Year 2000-related maintenance activities. TE's total Year 2000 project cost, as well as its estimates of the time needed to complete remedial efforts, are based on currently available information and do not include the estimated costs and time associated with the impact of third party Year 2000 issues. TE believes it is managing the Year 2000 issue in such a way that its customers will not experience any interruption of service. TE believes the most likely worst-case scenario from the Year 2000 issue will be disruption in power plant monitoring systems, thereby producing inaccurate data and potential failures in electronic switching mechanisms at transmission junctions. This would prolong localized outages, as technicians would have to manually activate switches. Such an event could have a material, but currently undeterminable, effect on its financial results. TE is developing contingency plans to address the effects of any delay in becoming Year 2000 compliant and expect to have contingency plans completed by June 30, 1999. The costs of the project and the dates on which TE plans to complete the Year 2000 modifications are based on management's best estimates, which were derived from numerous assumptions of future events including the continued availability of certain resources, and other factors. However, there can be no guarantee that this project will be completed as planned and actual results could differ materially from the estimates. Specific factors that might cause material differences include but are not limited to, the availability and cost of trained personnel, the ability to locate and correct all relevant computer code, and similar uncertainties. PENNSYLVANIA POWER COMPANY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

PENNSYLVANIA POWER COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)

PENNSYLVANIA POWER COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)

PENNSYLVANIA POWER COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

EX-15 2 EXHIBIT 15 May 14, 1999 FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Gentlemen: We are aware that FirstEnergy Corp. has incorporated by reference in its Registration Statements No. 333-40065, No. 333-48587, No. 333-48651, No. 333-58279, No. 333-65409 and No. 333-75985 its Form 10-Q for the quarter ended March 31, 1999, which includes our report dated May 14, 1999 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statements prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, ARTHUR ANDERSEN LLP EX-27 3
UT This schedule contains summary financial information extracted from the related Form 10-Q financial statements for FirstEnergy Corp. and is qualified in its entirety by reference to such financial statements. (Amounts in 1,000's, except earnings per share.) 0001031296 FIRSTENERGY CORP. 1,000 U.S. DOLLARS 3-MOS DEC-31-1999 MAR-31-1999 1 PER-BOOK 9,219,634 2,416,743 1,085,249 5,466,737 0 18,188,363 23,553 3,667,052 768,993 4,459,598 294,710 660,195 6,335,289 145,769 0 119,965 742,822 40,154 0 58,537 5,331,324 18,188,363 1,417,410 92,925 1,041,687 1,134,612 282,798 0 282,798 146,077 136,721 0 0 86,138 511,753 212,630 .60 .60

EX-15 4 EXHIBIT 15 May 14, 1999 Ohio Edison Company 76 South Main Street Akron, OH 44308 Gentlemen: We are aware that Ohio Edison Company has incorporated by reference in its Registration Statements No. 33-49135, No. 33- 49259, No. 33-49413, No. 33-51139, No. 333-01489 and No. 333- 05277 its Form 10-Q for the quarter ended March 31, 1999, which includes our report dated May 14, 1999 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statements prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, ARTHUR ANDERSEN LLP EX-27 5
UT This schedule contains summary financial information extracted from the related Form 10-Q financial statements for Ohio Edison Company and is qualified in its entirety by reference to such financial statements. (Amounts in 1,000's.)Income tax expense includes $5,936,000 related to other income. 0000073960 OHIO EDISON COMPANY 1,000 U.S. DOLLARS 3-MOS DEC-31-1999 MAR-31-1999 1 PER-BOOK 4,732,595 1,319,093 762,831 2,105,960 0 8,920,479 1 2,098,728 586,443 2,685,172 145,000 211,870 2,220,693 233,444 0 119,965 474,022 5,000 0 3,857 2,821,456 8,920,479 633,118 53,699 450,405 498,168 134,950 9,318 144,268 56,462 87,806 2,913 84,893 81,738 197,987 159,159 0 0

EX-15 6 EXHIBIT 15 May 14, 1999 The Cleveland Electric Illuminating Company 76 South Main Street Akron, OH 44308 Gentlemen: We are aware that The Cleveland Electric Illuminating Company has incorporated by reference in its Registration Statements No. 33- 55513, No. 333-47651 and No. 333-72891 its Form 10-Q for the quarter ended March 31, 1999, which includes our report dated May 14, 1999 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statements prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, ARTHUR ANDERSEN LLP EX-27 7
UT This schedule contains summary financial information extracted from the related Form 10-Q financial statements for The Cleveland Electric Illuminating Company and is qualified in its entirety by reference to such financial statements. (Amounts in 1000's.) Income tax expense includes $3,279,000 related to other income. 0000020947 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY 1,000 U.S. DOLLARS 3-MOS DEC-31-1999 MAR-31-1999 1 PER-BOOK 3,052,498 667,745 410,680 2,153,024 0 6,283,947 931,962 0 91,882 1,023,844 149,710 238,325 2,880,207 68,773 0 0 144,530 33,464 0 30,133 1,714,961 6,283,947 418,839 23,434 317,163 337,318 81,521 6,457 87,978 53,058 34,920 8,541 26,379 7,163 215,631 34,209 0 0

EX-27 8
UT This schedule contains summary financial information extracted from the related Form 10-Q financial statements for The Toledo Edison Company and is qualified in its entirety by reference to such financial statements. (Amounts in 1,000's.) Income tax expense includes $1,531,000 related to other income. 0000352049 THE TOLEDO EDISON COMPANY 1,000 U.S. DOLLARS 3-MOS DEC-31-1999 MAR-31-1999 1 PER-BOOK 1,165,235 406,996 263,515 932,714 0 2,768,460 195,670 328,559 78,184 602,413 0 210,000 1,063,644 0 0 0 118,300 1,690 0 24,547 747,866 2,768,460 224,262 18,438 158,651 175,558 48,704 2,922 51,626 19,478 32,148 4,070 28,078 0 85,606 11,319 0 0

EX-15 9 EXHIBIT 15 May 14, 1999 Pennsylvania Power Company 1 E. Washington Street P. O. Box 891 New Castle, PA 16103 Gentlemen: We are aware that Pennsylvania Power Company has incorporated by reference in its Registration Statements No. 33-62450 and No. 33- 65156 its Form 10-Q for the quarter ended March 31, 1999, which includes our report dated May 14, 1999 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statements prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, ARTHUR ANDERSEN LLP EX-27 10
UT This schedule contains summary financial information extracted from the related Form 10-Q financial statements for Pennsylvania Power Company and is qualified in its entirety by reference to such financial statements. (Amounts in 1,000's.) Income tax expense includes $(4,000) related to other income. 0000077278 PENNSYLVANIA POWER COMPANY 1,000 U.S. DOLLARS 3-MOS DEC-31-1999 MAR-31-1999 1 PER-BOOK 415,361 32,644 144,749 364,653 0 957,407 188,700 (310) 64,398 252,788 15,000 50,905 289,804 0 0 0 487 0 0 5,336 343,087 957,407 81,372 8,382 58,694 67,080 14,292 997 15,289 4,950 10,339 1,157 9,182 31,765 19,115 13,610 0 0

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