4. FAIR VALUE MEASUREMENTS

(A) LONG-TERM DEBT AND OTHER LONG-TERM OBLIGATIONS

All borrowings with initial maturities of less than one year are defined as short-term financial instruments under GAAP and are reported on the Consolidated Balance Sheets at cost, which approximates their fair market value, in the caption “short-term borrowings”. The following table provides the approximate fair value and related carrying amounts of long-term debt and other long-term obligations as of June 30, 2011 and December 31 2010:


	June 30, 2011				December 31, 2010
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
	*(In millions)*
FirstEnergy⁽¹⁾	$	18,371	$	19,436	$	13,928	$	14,845
FES		4,056		4,310		4,279		4,403
OE		1,158		1,367		1,159		1,321
CEI		1,831		2,083		1,853		2,035
TE		600		690		600		653
JCP&L		1,795		2,008		1,810		1,962
Met-Ed		729		828		742		821
Penelec		1,120		1,231		1,120		1,189


⁽¹⁾		Includes debt assumed in the Allegheny merger (See Note 2) with a carrying value and a fair value as of June 30, 2011 of $4,530 million and $4,127 million, respectively.

The fair values of long-term debt and other long-term obligations reflect the present value of the cash outflows relating to those obligations based on the current call price, the yield to maturity or the yield to call, as deemed appropriate at the end of each respective period. The yields assumed were based on debt with similar characteristics offered by corporations with credit ratings similar to those of FirstEnergy, FES, the Utilities and other subsidiaries.

(B) INVESTMENTS

All temporary cash investments purchased with an initial maturity of three months or less are reported as cash equivalents on the Consolidated Balance Sheets at cost, which approximates their fair market value. Investments other than cash and cash equivalents include held-to-maturity securities, available-for-sale securities and notes receivable.

FES and the Utilities periodically evaluate their investments for other-than-temporary impairment. They first consider their intent and ability to hold an equity investment until recovery and then consider, among other factors, the duration and the extent to which the security’s fair value has been less than cost and the near-term financial prospects of the security issuer when evaluating an investment for impairment. For debt securities, FES and the Utilities consider their intent to hold the security, the likelihood that they will be required to sell the security before recovery of their cost basis, and the likelihood of recovery of the security’s entire amortized cost basis.

Unrealized gains applicable to the decommissioning trusts of FES, OE and TE are recognized in OCI because fluctuations in fair value will eventually impact earnings while unrealized losses are recorded to earnings. The decommissioning trusts of JCP&L, Met-Ed and Penelec are subject to regulatory accounting. Net unrealized gains and losses are recorded as regulatory assets or liabilities because the difference between investments held in the trust and the decommissioning liabilities will be recovered from or refunded to customers.

The investment policy for the nuclear decommissioning trust funds restricts or limits the trusts’ ability to hold certain types of assets including private or direct placements, warrants, securities of FirstEnergy, investments in companies owning nuclear power plants, financial derivatives, preferred stocks, securities convertible into common stock and securities of the trust funds’ custodian or managers and their parents or subsidiaries.

Available-For-Sale Securities

FES and the Utilities hold debt and equity securities within their NDT, nuclear fuel disposal trusts and NUG trusts. These trust investments are considered as available-for-sale at fair market value. FES and the Utilities have no securities held for trading purposes.

The following table summarizes the amortized cost basis, unrealized gains and losses and fair values of investments held in NDT, nuclear fuel disposal trusts and NUG trusts as of June 30, 2011 and December 31, 2010:


	June 30, 2011⁽¹⁾								December 31, 2010⁽²⁾
	Cost		Unrealized		Unrealized		Fair		Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value		Basis		Gains		Losses		Value
	*(In millions)*
Debt securities
FirstEnergy	$	2,015	$	48	$	—	$	2,063	$	1,699	$	31	$	—	$	1,730
FES		1,023		26		—		1,049		980		13		—		993
OE		128		3		—		131		123		1		—		124
TE		52		1		—		53		42		—		—		42
JCP&L		353		9		—		362		281		9		—		290
Met-Ed		249		5		—		254		127		4		—		131
Penelec		210		4		—		214		145		4		—		149

Equity securities
FirstEnergy	$	187	$	11	$	—	$	198	$	268	$	69	$	—	$	337
FES		90		6		—		96		—		—		—		—
TE		24		2		—		26		—		—		—		—
JCP&L		21		1		—		22		80		17		—		97
Met-Ed		32		1		—		33		125		35		—		160
Penelec		20		1		—		21		63		16		—		79


⁽¹⁾		Excludes cash investments, receivables, payables, deferred taxes and accrued income: FirstEnergy – $130 million; FES – $39 million; OE – $3 million; JCP&L – $19 million; Met-Ed – $14 million and Penelec – $55 million.

⁽²⁾		Excludes cash investments, receivables, payables, deferred taxes and accrued income: FirstEnergy – $193 million; FES – $153 million; OE – $3 million; TE – $34 million; JCP&L – $3 million; Met-Ed – $(3) million and Penelec – $4 million.

Proceeds from the sale of investments in available-for-sale securities, realized gains and losses on those sales net of adjustments recorded to earnings and interest and dividend income for the three months and six months ended June 30, 2011 and 2010 were as follows:


Three Months Ended June 30,

								Interest and
2011	Sales Proceeds		Realized Gains		Realized Losses			Dividend Income
	*(In millions)*
FirstEnergy	$	734	$	22	$	(16	)	$	28
FES		297		10		(7	)		17
OE		12		—		—			1
TE		15		1		(1	)		1
JCP&L		159		4		(2	)		4
Met-Ed		165		4		(3	)		3
Penelec		86		3		(3	)		2


								Interest and
2010	Sales Proceeds		Realized Gains		Realized Losses			Dividend Income
	*(In millions)*
FirstEnergy	$	1,183	$	46	$	(36	)	$	16
FES		685		41		(35	)		9
OE		57		2		—			—
TE		76		2		—			—
JCP&L		91		—		—			3
Met-Ed		233		1		(1	)		2
Penelec		41		—		—			2


Six Months Ended June 30,

								Interest and
2011	Sales Proceeds		Realized Gains		Realized Losses			Dividend Income
	*(In millions)*
FirstEnergy	$	1,703	$	122	$	(45	)	$	52
FES		513		22		(23	)		32
OE		20		—		—			2
TE		28		1		(2	)		1
JCP&L		376		26		(6	)		8
Met-Ed		501		48		(7	)		5
Penelec		265		25		(7	)		4


								Interest and
2010	Sales Proceeds		Realized Gains		Realized Losses			Dividend Income
	*(In millions)*
FirstEnergy	$	1,915	$	83	$	(86	)	$	37
FES		957		54		(58	)		22
OE		60		2		—			1
TE		107		3		—			1
JCP&L		281		9		(9	)		7
Met-Ed		377		9		(12	)		3
Penelec		134		6		(7	)		3

Held-To-Maturity Securities

The following table provides the amortized cost basis, unrealized gains and losses, and approximate fair values of investments in held-to-maturity securities as of June 30, 2011 and December 31, 2010:


	June 30, 2011								December 31, 2010
	Cost		Unrealized		Unrealized		Fair		Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value		Basis		Gains		Losses		Value
	*(In millions)*
Debt Securities
FirstEnergy	$	414	$	84	$	—		498	$	476	$	91	$	—	$	567
OE		178		45		—		223		190		51		—		241
CEI		287		39		—		326		340		41		—		381

Investments in emission allowances, employee benefits and cost and equity method investments totaling $345 million as of June 30, 2011 and $259 million as of December 31, 2010, are not required to be disclosed and are excluded from the amounts reported above.

Notes Receivable

The table below provides the approximate fair value and related carrying amounts of notes receivable as of June 30, 2011 and December 31, 2010. The fair value of notes receivable represents the present value of the cash inflows based on the yield to maturity. The yields assumed were based on financial instruments with similar characteristics and terms. The maturity dates range from 2013 to 2021.


	June 30, 2011				December 31, 2010
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
	*(In millions)*
Notes Receivable
FirstEnergy	$	6	$	7	$	7	$	8
TE		82		94		104		118

(C) RECURRING FAIR VALUE MEASUREMENTS

Authoritative accounting guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy gives the highest priority to Level 1 measurements and the lowest priority to Level 3 measurements.

The three levels of the fair value hierarchy are as follows:


Level 1		— Quoted prices for identical instruments in active markets.

Level 2		— Quoted prices for similar instruments in active markets;

		— quoted prices for identical or similar instruments in markets that are not active; and

		— model-derived valuations for which all significant inputs are observable market data.

Level 3		— Valuation inputs are unobservable and significant to the fair value measurement.

The following tables set forth financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy. There were no significant transfers between levels during the three months and six months ended June 30, 2011.

FirstEnergy Corp.

The following tables summarize assets and liabilities recorded on FirstEnergy’s Consolidated Balance Sheets at fair value as of June 30, 2011 and December 31, 2010:


June 30, 2011	Level 1		Level 2			Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	868		$	—		$	868
Derivative assets — commodity contracts		—		312			—			312
Derivative assets — FTRs		—		—			13			13
Derivative assets — interest rate swaps		—		4			—			4
Derivative assets — NUG contracts⁽¹⁾		—		—			75			75
Equity securities⁽²⁾		198		—			—			198
Foreign government debt securities		—		206			—			206
U.S. government debt securities		—		673			—			673
U.S. state debt securities		—		306			—			306
Other⁽⁴⁾		—		146			—			146

Total assets	$	198	$	2,515		$	88		$	2,801


Liabilities
Derivative liabilities — commodity contracts	$	—	$	(362	)	$	—		$	(362	)
Derivative liabilities — FTRs		—		—			(7	)		(7	)
Derivative liabilities — interest rate swaps		—		(5	)		—			(5	)
Derivative liabilities — NUG contracts⁽¹⁾		—		—			(522	)		(522	)

Total liabilities	$	—	$	(367	)	$	(529	)	$	(896	)


Net assets (liabilities)⁽³⁾	$	198	$	2,148		$	(441	)	$	1,905


December 31, 2010	Level 1		Level 2			Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	597		$	—		$	597
Derivative assets — commodity contracts		—		250			—			250
Derivative assets — NUG contracts⁽¹⁾		—		—			122			122
Equity securities⁽²⁾		338		—			—			338
Foreign government debt securities		—		149			—			149
U.S. government debt securities		—		595			—			595
U.S. state debt securities		—		379			—			379
Other⁽⁴⁾		—		219			—			219

Total assets	$	338	$	2,189		$	122		$	2,649


Liabilities
Derivative liabilities — commodity contracts	$	—	$	(348	)	$	—		$	(348	)
Derivative liabilities — NUG contracts⁽¹⁾		—		—			(466	)		(466	)

Total liabilities	$	—	$	(348	)	$	(466	)	$	(814	)


Net assets (liabilities)⁽³⁾	$	338	$	1,841		$	(344	)	$	1,835


⁽¹⁾		NUG contracts are generally subject to regulatory accounting and do not materially impact earnings.

⁽²⁾		NDT funds hold equity portfolios the performance of which is benchmarked against the S&P 500 Index or Russell 3000 Index.

⁽³⁾		Excludes $6 million and $(7) million as of June 30, 2011 and December 31, 2010, respectively, of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.

⁽⁴⁾		Primarily consists of cash and cash equivalents.

Rollforward of Level 3 Measurements

The following table provides a reconciliation of changes in the fair value of NUG contracts held by the Utilities and FTRs held by FirstEnergy and classified as Level 3 in the fair value hierarchy during the periods ending June 30, 2011 and December 31, 2010:


	Derivative Asset⁽¹⁾			Derivative Liability⁽¹⁾			Net⁽¹⁾
	*(In millions)*
January 1, 2011 Balance	$	122		$	(466	)	$	(344	)
Realized gain (loss)		—			—			—
Unrealized gain (loss)		(40	)		(203	)		(243	)
Purchases		13			(3	)		10
Issuances		—			—			—
Sales		—			—			—
Settlements		(6	)		154			148
Transfers into Level 3		—			(12	)		(12	)

June 30, 2011 Balance	$	89		$	(530	)	$	(441	)


January 1, 2010 Balance	$	200		$	(643	)	$	(443	)
Realized gain (loss)		—			—			—
Unrealized gain (loss)		(71	)		(110	)		(181	)
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		(7	)		287			280
Transfers into Level 3		—			—			—

December 31, 2010 Balance	$	122		$	(466	)	$	(344	)


⁽¹⁾		Changes in the fair value of NUG contracts are generally subject to regulatory accounting and do not materially impact earnings.

FirstEnergy Solutions Corp.

The following tables summarize assets and liabilities recorded on FES’ Consolidated Balance Sheets at fair value as of June 30, 2011 and December 31, 2010:


June 30, 2011	Level 1		Level 2			Level 3		Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	562		$	—	$	562
Derivative assets — commodity contracts		—		283			—		283
Derivative assets — FTRs		—		—			2		2
Equity securities⁽³⁾		96		—			—		96
Foreign government debt securities		—		160			—		160
U.S. government debt securities		—		316			—		316
U.S. state debt securities		—		7			—		7
Other⁽²⁾		—		42			—		42

Total assets	$	96	$	1,370		$	2	$	1,468


Liabilities
Derivative liabilities — commodity contracts	$	—	$	(327	)	$	—	$	(327	)

Total liabilities	$	—	$	(327	)	$	—	$	(327	)


Net assets (liabilities)⁽¹⁾	$	96	$	1,043		$	2	$	1,141


December 31, 2010	Level 1		Level 2			Level 3		Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	528		$	—	$	528
Derivative assets — commodity contracts		—		241			—		241
Foreign government debt securities		—		147			—		147
U.S. government debt securities		—		308			—		308
U.S. state debt securities		—		6			—		6
Other⁽²⁾		—		148			—		148

Total assets	$	—	$	1,378		$	—	$	1,378


Liabilities
Derivative liabilities — commodity contracts	$	—	$	(348	)	$	—	$	(348	)

Total liabilities	$	—	$	(348	)	$	—	$	(348	)


Net assets (liabilities)⁽¹⁾	$	—	$	1,030		$	—	$	1,030


⁽¹⁾		Excludes $7 million as of December 31, 2010 of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.

⁽²⁾		Primarily consists of cash and cash equivalents.

⁽³⁾		NDT funds hold equity portfolios the performance of which is benchmarked against the S&P 500 Index or Russell 3000 Index.

Rollforward of Level 3 Measurements

The following table provides a reconciliation of changes in the fair value of FTRs held by FES and classified as Level 3 in the fair value hierarchy during the period ending June 30, 2011:


	Derivative Asset			Derivative Liability		Net
	FTRs			FTRs		FTRs
	*(In millions)*
January 1, 2011 Balance	$	—		$	—	$	—
Realized gain (loss)		—			—		—
Unrealized gain (loss)		1			—		1
Purchases		2			—		2
Issuances		—			—		—
Sales		—			—		—
Settlements		(1	)		—		(1	)
Transfers in (out) of Level 3		—			—		—

June 30, 2011 Balance	$	2		$	—	$	2

Ohio Edison Company

The following tables summarize assets and liabilities recorded on OE’s Consolidated Balance Sheets at fair value as of June 30, 2011 and December 31, 2010:


June 30, 2011	Level 1		Level 2		Level 3		Total
	*(In millions)*
Assets
U.S. government debt securities	$	—	$	131	$	—	$	131
Other		—		2		—		2

Total assets⁽¹⁾	$	—	$	133	$	—	$	133


December 31, 2010	Level 1		Level 2		Level 3		Total
	*(In millions)*
Assets
U.S. government debt securities	$	—	$	124	$	—	$	124
Other		—		2		—		2

Total assets⁽¹⁾	$	—	$	126	$	—	$	126


⁽¹⁾		Excludes $2 million and $1 million as of June 30, 2011 and December 31, 2010, respectively, of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.

The Toledo Edison Company

The following tables summarize assets and liabilities recorded on TE’s Consolidated Balance Sheets at fair value as of June 30, 2011 and December 31, 2010:


June 30, 2011	Level 1		Level 2		Level 3		Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	16	$	—	$	16
Equity securities⁽³⁾		26		—		—		26
U.S. government debt securities		—		33		—		33
U.S. state debt securities		—		1		—		1
Other⁽²⁾		—		3		—		3

Total assets⁽¹⁾	$	26	$	53	$	—	$	79


December 31, 2010	Level 1		Level 2		Level 3		Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	7	$	—	$	7
U.S. government debt securities		—		33		—		33
U.S. state debt securities		—		1		—		1
Other⁽²⁾		—		35		—		35

Total assets⁽¹⁾	$	—	$	76	$	—	$	76


⁽¹⁾		Excludes $(1) million and $2 million as of June 30, 2011 and December 31, 2010, respectively of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.

⁽²⁾		Primarily consists of cash and cash equivalents.

⁽³⁾		NDT funds hold equity portfolios the performance of which is benchmarked against the S&P 500 Index or Russell 3000 Index.

Jersey Central Power & Light Company

The following tables summarize assets and liabilities recorded on JCP&L’s Consolidated Balance Sheets at fair value as of June 30, 2011 and December 31, 2010:


June 30, 2011	Level 1		Level 2		Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	81	$	—		$	81
Derivative assets — NUG contracts⁽¹⁾		—		—		5			5
Equity securities⁽²⁾		21		—		—			21
Foreign government debt securities		—		13		—			13
U.S. government debt securities		—		54		—			54
U.S. state debt securities		—		215		—			215
Other		—		14		—			14

Total assets	$	21	$	377	$	5		$	403


Liabilities
Derivative liabilities — NUG contracts⁽¹⁾	$	—	$	—	$	(240	)	$	(240	)

Total liabilities	$	—	$	—	$	(240	)	$	(240	)


Net assets (liabilities)⁽³⁾	$	21	$	377	$	(235	)	$	163


December 31, 2010	Level 1		Level 2		Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	23	$	—		$	23
Derivative assets — commodity contracts		—		2		—			2
Derivative assets — NUG contracts⁽¹⁾		—		—		6			6
Equity securities⁽²⁾		96		—		—			96
U.S. government debt securities		—		33		—			33
U.S. state debt securities		—		236		—			236
Other		—		4		—			4

Total assets	$	96	$	298	$	6		$	400


Liabilities
Derivative liabilities — NUG contracts⁽¹⁾	$	—	$	—	$	(233	)	$	(233	)

Total liabilities	$	—	$	—	$	(233	)	$	(233	)


Net assets (liabilities)⁽³⁾	$	96	$	298	$	(227	)	$	167


⁽¹⁾		NUG contracts are subject to regulatory accounting and do not impact earnings.

⁽²⁾		NDT funds hold equity portfolios the performance of which is benchmarked against the S&P 500 Index or Russell 3000 Index.

⁽³⁾		Excludes $5 million and $(3) million as of June 30, 2011 and December 31, 2010, respectively, of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.

Rollforward of Level 3 Measurements

The following table provides a reconciliation of changes in the fair value of NUG contracts held by JCP&L and classified as Level 3 in the fair value hierarchy during the periods ending June 30, 2011 and December 31, 2010:


	Derivative Asset			Derivative Liability			Net
	NUG Contracts⁽¹⁾			NUG Contracts⁽¹⁾			NUG Contracts⁽¹⁾
	*(In millions)*
January 1, 2011 Balance	$	6		$	(233	)	$	(227	)
Realized gain (loss)		—			—			—
Unrealized gain (loss)		(1	)		(71	)		(72	)
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		—			64			64
Transfers in (out) of Level 3		—			—			—

June 30, 2011 Balance	$	5		$	(240	)	$	(235	)


January 1, 2010 Balance	$	8		$	(399	)	$	(391	)
Realized gain (loss)		—			—			—
Unrealized gain (loss)		(1	)		36			35
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		(1	)		130			129
Transfers in (out) of Level 3		—			—			—

December 31, 2010 Balance	$	6		$	(233	)	$	(227	)


⁽¹⁾		Changes in the fair value of NUG contracts are subject to regulatory accounting and do not impact earnings.

Metropolitan Edison Company

The following tables summarize assets and liabilities recorded on Met-Ed’s Consolidated Balance Sheets at fair value as of June 30, 2011 and December 31, 2010:


June 30, 2011	Level 1		Level 2		Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	138	$	—		$	138
Derivative assets — NUG contracts⁽¹⁾		—		—		66			66
Equity securities⁽²⁾		33		—		—			33
Foreign government debt securities		—		20		—			20
U.S. government debt securities		—		87		—			87
U.S. state debt securities		—		2		—			2
Other		—		22		—			22

Total assets	$	33	$	269	$	66		$	368


Liabilities
Derivative liabilities — NUG contracts⁽¹⁾	$	—	$	—	$	(122	)	$	(122	)

Total liabilities	$	—	$	—	$	(122	)	$	(122	)


Net assets (liabilities)⁽³⁾	$	33	$	269	$	(56	)	$	246


December 31, 2010	Level 1		Level 2		Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	32	$	—		$	32
Derivative assets — commodity contracts		—		5		—			5
Derivative assets — NUG contracts⁽¹⁾		—		—		112			112
Equity securities⁽²⁾		160		—		—			160
Foreign government debt securities		—		1		—			1
U.S. government debt securities		—		88		—			88
U.S. state debt securities		—		2		—			2
Other		—		14		—			14

Total assets	$	160	$	142	$	112		$	414


Liabilities
Derivative liabilities — NUG contracts⁽¹⁾	$	—	$	—	$	(116	)	$	(116	)

Total liabilities	$	—	$	—	$	(116	)	$	(116	)


Net assets (liabilities)⁽³⁾	$	160	$	142	$	(4	)	$	298


⁽¹⁾		NUG contracts are subject to regulatory accounting and do not impact earnings.

⁽²⁾		NDT funds hold equity portfolios the performance of which is benchmarked against the S&P 500 Index or Russell 3000 Index.

⁽³⁾		Excludes $(1) million and $(9) million as of June 30, 2011 and December 31, 2010, respectively, of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.

Rollforward of Level 3 Measurements

The following table provides a reconciliation of changes in the fair value of NUG contracts held by Met-Ed and classified as Level 3 in the fair value hierarchy during the periods ending June 30, 2011 and December 31, 2010:


	Derivative Asset			Derivative Liability			Net
	NUG Contracts⁽¹⁾			NUG Contracts⁽¹⁾			NUG Contracts⁽¹⁾
	*(In millions)*
January 1, 2011 Balance	$	112		$	(116	)	$	(4	)
Realized gain (loss)		—			—			—
Unrealized gain (loss)		(42	)		(36	)		(78	)
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		(4	)		30			26
Transfers in (out) of Level 3		—			—			—

June 30, 2011 Balance	$	66		$	(122	)	$	(56	)


January 1, 2010 Balance	$	176		$	(143	)	$	33
Realized gain (loss)		—			—			—
Unrealized gain (loss)		(59	)		(38	)		(97	)
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		(5	)		65			60
Transfers in (out) of Level 3		—			—			—

December 31, 2010 Balance	$	112		$	(116	)	$	(4	)


⁽¹⁾		Changes in the fair value of NUG contracts are subject to regulatory accounting and do not impact earnings.

Pennsylvania Electric Company

The following tables summarize assets and liabilities recorded on Penelec’s Consolidated Balance Sheets at fair value as of June 30, 2011 and December 31, 2010:


June 30, 2011	Level 1		Level 2		Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	69	$	—		$	69
Derivative assets — NUG contracts⁽¹⁾		—		—		4			4
Equity securities⁽²⁾		20		—		—			20
Foreign government debt securities				12					12
U.S. government debt securities		—		52		—			52
U.S. state debt securities		—		81		—			81
Other		—		53		—			53

Total assets	$	20	$	267	$	4		$	291


Liabilities
Derivative liabilities — NUG contracts⁽¹⁾	$	—	$	—	$	(160	)	$	(160	)

Total liabilities	$	—	$	—	$	(160	)	$	(160	)


Net assets (liabilities)⁽³⁾	$	20	$	267	$	(156	)	$	131


December 31, 2010	Level 1		Level 2		Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	8	$	—		$	8
Derivative assets — commodity contracts		—		2		—			2
Derivative assets — NUG contracts⁽¹⁾		—		—		4			4
Equity securities⁽²⁾		81		—		—			81
U.S. government debt securities		—		9		—			9
U.S. state debt securities		—		133		—			133
Other		—		5		—			5

Total assets	$	81	$	157	$	4		$	242


Liabilities
Derivative liabilities — NUG contracts⁽¹⁾	$	—	$	—	$	(117	)	$	(117	)

Total liabilities	$	—	$	—	$	(117	)	$	(117	)


Net assets (liabilities)⁽³⁾	$	81	$	157	$	(113	)	$	125


⁽¹⁾		NUG contracts are subject to regulatory accounting and do not impact earnings.

⁽²⁾		NDT funds hold equity portfolios the performance of which is benchmarked against the S&P 500 Index or Russell 3000 Index.

⁽³⁾		Excludes $1 million and $(3) million as of June 30, 2011 and December 31, 2010, respectively, of receivables, payables and accrued income associated with the financial instruments reflected within the fair value table.

Rollforward of Level 3 Measurements

The following table provides a reconciliation of changes in the fair value of NUG and commodity contracts held by Penelec and classified as Level 3 in the fair value hierarchy during the periods ended June 30, 2011 and December 31, 2010:


	Derivative Asset			Derivative Liability			Net
	NUG Contracts⁽¹⁾			NUG Contracts⁽¹⁾			NUG Contracts⁽¹⁾
	*(In millions)*
January 1, 2011 Balance	$	4		$	(117	)	$	(113	)
Realized gain (loss)		—			—			—
Unrealized gain (loss)		—			(88	)		(88	)
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		—			45			45
Transfers in (out) of Level 3		—			—			—

June 30, 2011 Balance	$	4		$	(160	)	$	(156	)


January 1, 2010 Balance	$	16		$	(101	)	$	(85	)
Realized gain (loss)		—			—			—
Unrealized gain (loss)		(11	)		(108	)		(119	)
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		(1	)		92			91
Transfers in (out) of Level 3		—			—			—

December 31, 2010 Balance	$	4		$	(117	)	$	(113	)


⁽¹⁾		Changes in the fair value of NUG contracts are subject to regulatory accounting and do not impact earnings.