Segment Information

6 Months Ended

Jun. 30, 2011

Segment Information [Abstract]

SEGMENT INFORMATION

13. SEGMENT INFORMATION

With the completion of the Allegheny merger in the first quarter of 2011, FirstEnergy reorganized its management structure, which resulted in changes to its operating segments to be consistent with the manner in which management views the business. The new structure supports the combined company’s primary operations — distribution, transmission, generation and the marketing and sale of its products. The external segment reporting is consistent with the internal financial reporting used by FirstEnergy’s chief executive officer (its chief operating decision maker) to regularly assess the performance of the business and allocate resources. FirstEnergy now has three reportable operating segments — Regulated Distribution, Regulated Independent Transmission and Competitive Energy Services.

Prior to the change in composition of business segments, FirstEnergy’s business was comprised of two reportable operating segments. The Energy Delivery Services segment was comprised of FirstEnergy’s then eight existing utility operating companies that transmit and distribute electricity to customers and purchase power to serve their POLR and default service requirements. The Competitive Energy Services segment was comprised of FES, which supplies electric power to end-use customers through retail and wholesale arrangements. The “Other/Corporate” segment consisted of corporate items and other businesses that were below the quantifiable threshold for separate disclosure. Disclosures for FirstEnergy’s operating segments for 2010 have been reclassified to conform to the current presentation.

The changes in FirstEnergy’s reportable segments during 2011 consisted primarily of the following:

• Energy Delivery Services was renamed Regulated Distribution and the operations of MP, PE and WP, which were acquired as part of the merger with Allegheny, and certain regulatory asset recovery mechanisms formerly included in the “Other” segment, were placed into this segment.

• A new Regulated Independent Transmission segment was created consisting of ATSI, and the operations of TrAIL Company and FirstEnergy’s interest in PATH; TrAIL and PATH were acquired as part of the merger with Allegheny. The transmission assets and operations of JCP&L, Met-Ed, Penelec, MP, PE and WP remain within the Regulated Distribution segment.

• AE Supply, an operator of generation facilities that was acquired as part of the merger with Allegheny, was placed into the Competitive Energy Services segment.

The Regulated Distribution segment distributes electricity through FirstEnergy’s ten utility operating companies, serving approximately 6 million customers within 67,000 square miles of Ohio, Pennsylvania, West Virginia, Maryland, New Jersey and New York, and purchases power for its POLR, SOS and default service requirements in Ohio, Pennsylvania, New Jersey and Maryland. This segment also includes the transmission operations of JCP&L, Met-Ed, Penelec, WP, MP and PE and the regulated electric generation facilities in West Virginia and New Jersey which MP and JCP&L, respectively, own or contractually control.

The Regulated Distribution segment’s revenues are primarily derived from the delivery of electricity within FirstEnergy’s service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR, SOS or default service) in its Maryland, New Jersey, Ohio and Pennsylvania franchise areas. Its results reflect the commodity costs of securing electric generation from FES and AE Supply and from non-affiliated power suppliers and the deferral and amortization of certain fuel costs.

The Regulated Independent Transmission segment transmits electricity through transmission lines and its revenues are primarily derived from the formula rate recovery of costs and a return on investment for capital expenditures in connection with TrAIL, PATH and other projects and revenues from providing transmission services to electric energy providers, power marketers and receiving transmission-related revenues from operation of a portion of the FirstEnergy transmission system. Its results reflect the net PJM and MISO transmission expenses related to the delivery of the respective generation loads. On June 1, 2011, the ATSI transmission assets previously dedicated to MISO were integrated into the PJM market. All of FirstEnergy’s assets now reside in one RTO.

The Competitive Energy Services segment, through FES, supplies electric power to end-use customers through retail and wholesale arrangements, including associated company power sales to meet a portion of the POLR and default service requirements of FirstEnergy’s Ohio and Pennsylvania utility subsidiaries and competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey. FES purchases the entire output of the 18 generating facilities which it owns and operates through its FGCO subsidiary (fossil and hydroelectric generating facilities) and owns, through its NGC subsidiary, FirstEnergy’s nuclear generating facilities. FENOC, a separate subsidiary of FirstEnergy, operates and maintains NGC’s nuclear generating facilities as well as the output relating to leasehold interests of OE and TE in certain of those facilities that are subject to sale and leaseback arrangements with non-affiliates, pursuant to full output, cost-of-service PSAs.

The Competitive Energy Services segment also includes Allegheny’s unregulated electric generation operations, including AE Supply and AE Supply’s interest in AGC. AE Supply owns, operates and controls the electric generation capacity of its 18 facilities. AGC owns and sells generation capacity to AE Supply and MP, which own approximately 59% and 41% of AGC, respectively. AGC’s sole asset is a 40% undivided interest in the Bath County, Virginia pumped-storage hydroelectric generation facility and its connecting transmission facilities. All of AGC’s revenues are derived from sales of its 1,109 MW share of generation capacity from the Bath County generation facility to AE Supply and MP.

This business segment controls approximately 20,000 MWs of capacity and also purchases electricity to meet sales obligations. The segment’s net income is primarily derived from affiliated and non-affiliated electric generation sales less the related costs of electricity generation, including purchased power and net transmission (including congestion) and ancillary costs charged by PJM and MISO (prior to June 1, 2011) to deliver energy to the segment’s customers.

The Other/Corporate segment contains corporate items and other businesses that are below the quantifiable threshold for separate disclosure as a reportable segment.

Financial information for each of FirstEnergy’s reportable segments is presented in the table below, which includes financial results for Allegheny beginning February 25, 2011. FES and the Utilities do not have separate reportable operating segments.

Segment Financial Information

			Competitive		Regulated
	Regulated		Energy		Independent		Other/			Reconciling
Three Months Ended	Distribution		Services		Transmission		Corporate			Adjustments			Consolidated
	(In millions)
June 30, 2011
External revenues	$	2,485	$	1,495	$	105	$	(30	)	$	(7	)	$	4,048
Internal revenues		—		318		—		—			(306	)		12
Total revenues		2,485		1,813		105		(30	)		(313	)		4,060
Depreciation and amortization		240		107		18		7			—			372
Investment income (loss), net		27		15		—		1			(12	)		31
Net interest charges		145		67		11		21			1			245
Income taxes		108		7		18		(30	)		(2	)		101
Net income (loss)		184		12		31		(51	)		(5	)		171
Total assets		26,932		17,146		2,339		1,179			—			47,596
Total goodwill		5,551		905		—		—			—			6,456
Property additions		302		197		45		25			—			569
June 30, 2010
External revenues	$	2,314	$	795	$	59	$	(21	)	$	(8	)	$	3,139
Internal revenues		19		539		—		—			(558	)		—
Total revenues		2,333		1,334		59		(21	)		(566	)		3,139
Depreciation and amortization		264		71		13		3			—			351
Investment income (loss), net		28		13		—		—			(10	)		31
Net interest charges		124		33		5		9			(4	)		167
Income taxes		81		75		7		(12	)		(17	)		134
Net income (loss)		132		121		11		(20	)		12			256
Total assets		21,457		11,102		993		914			—			34,466
Total goodwill		5,551		24		—		—			—			5,575
Property additions		157		290		15		27			—			489
Six Months Ended
June 30, 2011
External revenues	$	4,753	$	2,736	$	172	$	(53	)	$	(16	)	$	7,592
Internal revenues		—		661		—		—			(617	)		44
Total revenues		4,753		3,397		172		(53	)		(633	)		7,636
Depreciation and amortization		485		195		31		13			—			724
Investment income (loss), net		52		21		—		1			(22	)		52
Net interest charges		276		122		20		40			—			458
Income taxes		164		10		25		(50	)		30			179
Net income (loss)		280		17		44		(86	)		(39	)		216
Total assets		26,932		17,146		2,339		1,179			—			47,596
Total goodwill		5,551		905		—		—			—			6,456
Property additions		479		411		72		56			—			1,018
June 30, 2010
External revenues	$	4,798	$	1,514	$	116	$	(43	)	$	(14	)	$	6,371
Internal revenues		19		1,213		—		—			(1,165	)		67
Total revenues		4,817		2,727		116		(43	)		(1,179	)		6,438
Depreciation and amortization		577		148		25		6			—			756
Investment income (loss), net		54		14		—		1			(22	)		47
Net interest charges		248		66		10		22			(7	)		339
Income taxes		143		117		14		(24	)		(5	)		245
Net income (loss)		235		190		23		(39	)		(4	)		405
Total assets		21,457		11,102		993		914			—			34,466
Total goodwill		5,551		24		—		—			—			5,575
Property additions		309		619		29		40			—			997

Reconciling adjustments primarily consist of elimination of intersegment transactions.