FIRSTENERGY CORP [FE] Filings

10-Q 1 fe-20220331.htm 10-Q fe-20220331

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ 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

44308

Telephone

(800)

736-3402

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, $0.10 par value

New York Stock Exchange

Indicate by check mark whether the registrant (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

☑

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☑

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer			☑

Accelerated Filer			☐

Non-accelerated Filer			☐

Smaller Reporting Company			☐

Emerging Growth Company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☑

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 MARCH 31, 2022
Common Stock, $0.10 par value						570,932,260

FirstEnergy Website and Other Social Media Sites and Applications

FirstEnergy’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to those reports, and all other documents filed with or furnished to the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934 are made available free of charge on or through the “Investors” page of FirstEnergy’s website at www.firstenergycorp.com. These documents are also available to the public from commercial document retrieval services and the website maintained by the SEC at www.sec.gov.

These SEC filings are posted on the website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Additionally, FirstEnergy routinely posts additional important information, including press releases, investor presentations, investor factbook, and notices of upcoming events under the “Investors” section of FirstEnergy’s website and recognizes FirstEnergy’s website as a channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under Regulation FD. Investors may be notified of postings to the website by signing up for email alerts and Rich Site Summary feeds on the “Investors” page of FirstEnergy’s website. FirstEnergy also uses Twitter® and Facebook® as additional channels of distribution to reach public investors and as a supplemental means of disclosing material non-public information for complying with its disclosure obligations under Regulation FD. Information contained on FirstEnergy’s website, Twitter® handle or Facebook® page, and any corresponding applications of those sites, shall not be deemed incorporated into, or to be part of, this report.

Forward-Looking Statements: This Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 based on information currently available to management. Such statements are subject to certain risks and uncertainties and readers are cautioned not to place undue reliance on these forward-looking statements. These statements include declarations regarding management's intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” "forecast," "target," "will," "intend," “believe,” "project," “estimate," "plan" and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, which may include the following (see Glossary of Terms for definitions of capitalized terms):

•The potential liabilities, increased costs and unanticipated developments resulting from government investigations and agreements, including those associated with compliance with or failure to comply with the DPA.

•The risks and uncertainties associated with government investigations and audits regarding HB 6 and related matters, including potential adverse impacts on federal or state regulatory matters, including, but not limited to, matters relating to rates.

•The risks and uncertainties associated with litigation, arbitration, mediation, and similar proceedings, particularly regarding HB 6 related matters, including risks associated with obtaining court approval of the definitive settlement agreement in the derivative shareholder lawsuits.

•Weather conditions, such as temperature variations and severe weather conditions, or other natural disasters affecting future operating results and associated regulatory actions or outcomes in response to such conditions.

•Legislative and regulatory developments, including, but not limited to, matters related to rates, compliance and enforcement activity, cybersecurity, and climate change.

•The ability to accomplish or realize anticipated benefits from our FE Forward initiative and our other strategic and financial goals, including, but not limited to, overcoming current uncertainties and challenges associated with the ongoing government investigations, executing our transmission and distribution investment plans, greenhouse gas reduction goals, controlling costs, improving our credit metrics, growing earnings, strengthening our balance sheet, and satisfying the conditions necessary to close the sale of the minority interest in FET.

•The risks associated with cyber-attacks and other disruptions to our, or our vendors’, information technology system, which may compromise our operations, and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information.

•Mitigating exposure for remedial activities associated with retired and formerly owned electric generation assets.

•The ability to access the public securities and other capital and credit markets in accordance with our financial plans, the cost of such capital and overall condition of the capital and credit markets affecting us, including the increasing number of financial institutions evaluating the impact of climate change on their investment decisions.

•The extent and duration of the COVID-19 pandemic and the related impacts to our business, operations and financial condition resulting from the outbreak of COVID-19 including, but not limited to, disruption of businesses in our territories, supply chain disruptions, additional costs, workforce impacts and governmental and regulatory responses to the pandemic, such as moratoriums on utility disconnections and workforce vaccination mandates.

•Actions that may be taken by credit rating agencies that could negatively affect either our access to or terms of financing or our financial condition and liquidity.

•Changes in assumptions regarding factors such as economic conditions within our territories, the reliability of our transmission and distribution system, or the availability of capital or other resources supporting identified transmission and distribution investment opportunities.

•Changes in customers’ demand for power, including, but not limited to, economic conditions, the impact of climate change, or energy efficiency and peak demand reduction mandates.

•Changes in national and regional economic conditions, including recession and inflationary pressure, affecting us and/or our customers and those vendors with which we do business.

•The potential of non-compliance with debt covenants in our credit facilities.

•The ability to comply with applicable reliability standards and energy efficiency and peak demand reduction mandates.

•Changes to environmental laws and regulations, including, but not limited to, those related to climate change.

•Changing market conditions affecting the measurement of certain liabilities and the value of assets held in our pension trusts, or causing us to make contributions sooner, or in amounts that are larger, than currently anticipated.

•Labor disruptions by our unionized workforce.

•Changes to significant accounting policies.

•Any changes in tax laws or regulations, or adverse tax audit results or rulings.

•The risks and other factors discussed from time to time in our SEC filings.

Dividends declared from time to time on our common stock during any period may in the aggregate vary from prior periods due to circumstances considered by the FE Board at the time of the actual declarations. A security rating is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.

These forward-looking statements are also qualified by, and should be read together with, the risk factors included in FirstEnergy’s filings with the SEC, including, but not limited to, the most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The foregoing review of factors also should not be construed

as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on FirstEnergy’s business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. FirstEnergy expressly disclaims any obligation to update or revise, except as required by law, any forward-looking statements contained herein or in the information incorporated by reference as a result of new information, future events or otherwise.

TABLE OF CONTENTS


			Page

Part I. Financial Information

Glossary of Terms			ii

Item 1. Financial Statements

FirstEnergy Corp.
Consolidated Statements of Income			1
Consolidated Statements of Comprehensive Income			2
Consolidated Balance Sheets			3
Consolidated Statements of Stockholders’ Equity			4
Consolidated Statements of Cash Flows			5

Notes To Consolidated Financial Statements			6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			30

Item 3. Quantitative and Qualitative Disclosures About Market Risk			64

Item 4. Controls and Procedures			64

Part II. Other Information

Item 1. Legal Proceedings			64

Item 1A. Risk Factors			64

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			64

Item 3. Defaults Upon Senior Securities			64

Item 4. Mine Safety Disclosures			64

Item 5. Other Information			64

Item 6. Exhibits			65

GLOSSARY OF TERMS

The following abbreviations and acronyms are used in this report to identify FirstEnergy Corp. and its current and former subsidiaries:


AE Supply			Allegheny Energy Supply Company, LLC, an unregulated generation subsidiary
AGC			Allegheny Generating Company, a generation subsidiary of MP
ATSI			American Transmission Systems, Incorporated, a subsidiary of FET, which owns and operates transmission facilities
CEI			The Cleveland Electric Illuminating Company, an Ohio electric utility operating subsidiary
FE			FirstEnergy Corp., a public utility holding company
FENOC			Energy Harbor Nuclear Corp. (formerly known as FirstEnergy Nuclear Operating Company), a subsidiary of EH, which operates NG’s nuclear generating facilities
FES			Energy Harbor LLC. (formerly known as FirstEnergy Solutions Corp.), a subsidiary of EH, which provides energy-related products and services
FES Debtors			FES, FENOC, FG, NG, FE Aircraft Leasing Corp., Norton Energy Storage LLC, and FGMUC
FESC			FirstEnergy Service Company, which provides legal, financial, and other corporate support services
FET			FirstEnergy Transmission, LLC, the parent company of ATSI, KATCo, MAIT and TrAIL, and has a joint venture in PATH
FEV			FirstEnergy Ventures Corp., which invests in certain unregulated enterprises and business ventures
FG			Energy Harbor Generation LLC (formerly known as FirstEnergy Generation, LLC), a subsidiary of EH, which owns and operates fossil generating facilities
FGMUC			FirstEnergy Generation Mansfield Unit 1 Corp., a subsidiary of FG
FirstEnergy			FirstEnergy Corp., together with its consolidated subsidiaries
Global Holding			Global Mining Holding Company, LLC, a joint venture between FEV, WMB Marketing Ventures, LLC and Pinesdale LLC
Global Rail			Global Rail Group, LLC, a subsidiary of Global Holding that owns coal transportation operations near Roundup, Montana
GPU			GPU, Inc., former parent of JCP&L, ME and PN, that merged with FE on November 7, 2001
GPUN			GPU Nuclear, Inc., a subsidiary of FE, which formerly operated TMI-2
JCP&L			Jersey Central Power & Light Company, a New Jersey electric utility operating subsidiary
KATCo			Keystone Appalachian Transmission Company, a subsidiary of FET
MAIT			Mid-Atlantic Interstate Transmission, LLC, a subsidiary of FET, which owns and operates transmission facilities
ME			Metropolitan Edison Company, a Pennsylvania electric utility operating subsidiary
MP			Monongahela Power Company, a West Virginia electric utility operating subsidiary
NG			Energy Harbor Nuclear Generation LLC (formerly known as FirstEnergy Nuclear Generation, LLC), a subsidiary of EH, which owns nuclear generating facilities
OE			Ohio Edison Company, an Ohio electric utility operating subsidiary
Ohio Companies			CEI, OE and TE
PATH			Potomac-Appalachian Transmission Highline, LLC, a joint venture between FE and a subsidiary of AEP
PATH-Allegheny			PATH Allegheny Transmission Company, LLC
PATH-WV			PATH West Virginia Transmission Company, LLC
PE			The Potomac Edison Company, a Maryland and West Virginia electric utility operating subsidiary
Penn			Pennsylvania Power Company, a Pennsylvania electric utility operating subsidiary of OE
Pennsylvania Companies			ME, PN, Penn and WP
PN			Pennsylvania Electric Company, a Pennsylvania electric utility operating subsidiary
Signal Peak			Signal Peak Energy, LLC, an indirect subsidiary of Global Holding that owns mining operations near Roundup, Montana
TE			The Toledo Edison Company, an Ohio electric utility operating subsidiary
TrAIL			Trans-Allegheny Interstate Line Company, a subsidiary of FET, which owns and operates transmission facilities
Transmission Companies			ATSI, MAIT and TrAIL
Utilities			OE, CEI, TE, Penn, JCP&L, ME, PN, MP, PE, and WP
WP			West Penn Power Company, a Pennsylvania electric utility operating subsidiary

The following abbreviations and acronyms may be used to identify frequently used terms in this report:

2021 Credit Facilities

Collectively, the six separate senior unsecured five-year syndicated revolving credit facilities entered into by FE, FET, the Utilities, and the Transmission Companies, on October 18, 2021

D.C. Circuit

United States Court of Appeals for the District of Columbia Circuit

ACE

Affordable Clean Energy

DMR

Distribution Modernization Rider

ADIT

Accumulated Deferred Income Taxes

DOE

United States Department of Energy

AEP

American Electric Power Company, Inc.

DPA

Deferred Prosecution Agreement entered into on July 21, 2021 between FE and S.D. Ohio

AEPSC

American Electric Power Service Corporation

DPL

Dayton Power & Light

AFS

Available-for-sale

DSIC

Distribution System Improvement Charge

AFUDC

Allowance for Funds Used During Construction

DSP

Default Service Plan

AMI

Advance Metering Infrastructure

DTA

Deferred Tax Asset

AMT

Alternative Minimum Tax

EDC

Electric Distribution Company

AOCI

Accumulated Other Comprehensive Income (Loss)

EE&C

Energy Efficiency and Conservation

ARO

Asset Retirement Obligation

EEI

Edison Electric Institute

ARP

Alternative Revenue Program

EGS

Electric Generation Supplier

ASC

Accounting Standard Codification

EGU

Electric Generation Units

ASU

Accounting Standards Update

Energy Harbor Corp.

Bankruptcy Court

U.S. Bankruptcy Court in the Northern District of Ohio in Akron

EmPOWER Maryland

EmPOWER Maryland Energy Efficiency Act

BGS

Basic Generation Service

ENEC

Expanded Net Energy Cost

Brookfield

North American Transmission Company II LLC, a controlled investment vehicle entity of Brookfield Infrastructure Partners

EPA

United States Environmental Protection Agency

Brookfield Guarantors

Brookfield Super-Core Infrastructure Partners L.P., Brookfield Super-Core Infrastructure Partners (NUS) L.P., and Brookfield Super-Core Infrastructure Partners (ER) SCSp

EPS

Earnings per Share

CAA

Clean Air Act

ERO

Electric Reliability Organization

CCR

Coal Combustion Residuals

ESG

Environmental, Social, Corporate Governance

CERCLA

Comprehensive Environmental Response, Compensation, and Liability Act of 1980

ESP IV

Electric Security Plan IV

CFIUS

Committee on Foreign Investments in the United States

Exchange Act

Securities and Exchange Act of 1934, as amended

CFR

Code of Federal Regulations

Facebook®

Facebook is a registered trademark of Facebook, Inc.

CO2

Carbon Dioxide

FASB

Financial Accounting Standards Board

Code of Business Conduct

The FirstEnergy Code of Business Conduct and Ethics as approved by the FE Board on July 20, 2021

FCA

Financial Conduct Authority

COVID-19

Coronavirus disease

FE Board

FE Board of Directors

CPP

EPA's Clean Power Plan

FE Revolving Facility

FE and the Utilities’ former five-year syndicated revolving credit facility, as amended, and replaced by the 2021 Credit Facilities on October 18, 2021

CSAPR

Cross-State Air Pollution Rule

FERC

Federal Energy Regulatory Committee

CSR

Conservation Support Rider

FES Bankruptcy

FES Debtors' voluntary petitions for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code with the Bankruptcy Court

CTA

Consolidated Tax Adjustment

FET Board

The Board of Directors of FET

CWA

Clean Water Act

FET LLC Agreement

Third Amended and Restated Limited Liability Company Operating Agreement of FET

DCR

Delivery Capital Recovery

FET P&SA

Purchase and Sale Agreement entered into on November 6, 2021, by and between FE, FET, Brookfield and Brookfield Guarantors

iii

FET Revolving Facility

FET and certain of its subsidiaries’ former five-year syndicated revolving credit facility, as amended, and replaced by the 2021 Credit Facilities on October 18, 2021

NSR

New Source Review

Fitch

Fitch Ratings Service

NYPSC

New York State Public Service Commission

FMB

First Mortgage Bond

NUG

Non-Utility Generation

FPA

Federal Power Act

OAG

Ohio Attorney General

FTR

Financial Transmission Right

OCA

Office of Consumer Advocate

GAAP

Accounting Principles Generally Accepted in the United States of America

OCC

Ohio Consumers' Counsel

GHG

Greenhouse Gases

ODSA

Ohio Development Service Agency

HB 6

House Bill 6, as passed by Ohio's 133rd General Assembly

Ohio Stipulation

Stipulation and Recommendation, dated November 1, 2021, entered into by and among
the Ohio Companies, the OCC, PUCO Staff, and
several other signatories

HB 128

House Bill 128, as passed by Ohio's 134th General Assembly

OPEB

Other Post-Employment Benefits

IBA

ICE Benchmark Administration Limited

OPEIU

Office and Professional Employees International Union

IBEW

International Brotherhood of Electrical Workers

OPIC

Other Paid-in Capital

ICP 2007

FirstEnergy Corp. 2007 Incentive Compensation Plan

OSHA

Occupational Safety and Health Administration

ICP 2015

FirstEnergy Corp. 2015 Incentive Compensation Plan

OVEC

Ohio Valley Electric Corporation

ICP 2020

FirstEnergy Corp. 2020 Incentive Compensation Plan

PA DEP

Pennsylvania Department of Environmental Protection

IRS

Internal Revenue Service

PCRB

Pollution Control Revenue Bond

ISO

Independent System Operator

PIR

Phase-In Recovery Rider

ITC

Investment Tax Credit

PJM

PJM Interconnection, LLC

Kilovolt

PJM Tariff

PJM Open Access Transmission Tariff

KWH

Kilowatt-hour

POLR

Provider of Last Resort

LED

Light Emitting Diode

PPA

Purchase Power Agreement

LIBOR

London Inter-Bank Offered Rate

PPB

Parts per Billion

LOC

Letter of Credit

PPUC

Pennsylvania Public Utility Commission

LSE

Load Serving Entity

PUCO

Public Utilities Commission of Ohio

LTIIPs

Long-Term Infrastructure Improvement Plans

PURPA

Public Utility Regulatory Policies Act of 1978

MDPSC

Maryland Public Service Commission

RCRA

Resource Conservation and Recovery Act

MGP

Manufactured Gas Plants

REC

Renewable Energy Credit

MISO

Midcontinent Independent System Operator, Inc.

Regulation FD

Regulation Fair Disclosure promulgated by the SEC

Moody’s

Moody’s Investors Service, Inc.

RFC

ReliabilityFirst Corporation

Megawatt

RFP

Request for Proposal

MWH

Megawatt-hour

RGGI

Regional Greenhouse Gas Initiative

NAAQS

National Ambient Air Quality Standards

ROE

Return on Equity

NAV

Net Asset Value

RSS

Rich Site Summary

N.D. Ohio

Northern District of Ohio

RTEP

Regional Transmission Expansion Plan

NDT

Nuclear Decommissioning Trust

RTO

Regional Transmission Organization

NERC

North American Electric Reliability Corporation

SBC

Societal Benefits Charge

NJBPU

New Jersey Board of Public Utilities

SCOH

Supreme Court of Ohio

NJ Rate Counsel

New Jersey Division of Rate Counsel

S.D. Ohio

Southern District of Ohio

NOL

Net Operating Loss

SEC

United States Securities and Exchange Commission

NOx

Nitrogen Oxide

SEET

Significantly Excessive Earnings Test

NPDES

National Pollutant Discharge Elimination System

SF6

Sulfur hexafluoride

NRC

Nuclear Regulatory Commission

SIP

State Implementation Plan(s) Under the Clean Air Act

SO2

Sulfur Dioxide

Twitter®

Twitter is a registered trademark of Twitter, Inc.

SLC

Special Litigation Committee of the FE Board

Tax Act

Tax Cuts and Jobs Act adopted December 22, 2017

SOFR

Secured Overnight Financing Rate

TMI-1

Three Mile Island Unit 1

SOS

Standard Offer Service

UWUA

Utility Workers Union of America

SREC

Solar Renewable Energy Credit

VEPCO

Virginia Electric and Power Company

S&P

Standard & Poor’s Ratings Service

VIE

Variable Interest Entity

SSO

Standard Service Offer

VSCC

Virginia State Corporation Commission

TMI-2

Three Mile Island Unit 2

WVPSC

Public Service Commission of West Virginia

Transmission Owner

PART I. FINANCIAL INFORMATION

ITEM I. Financial Statements

FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	For the Three Months Ended March 31,
(In millions, except per share amounts)	2022		2021

REVENUES:
Distribution services and retail generation	$	2,397	$	2,236
Transmission	451		401
Other	141		89
Total revenues(1)	2,989		2,726

OPERATING EXPENSES:
Fuel	140		118
Purchased power	875		718
Other operating expenses	820		752

Provision for depreciation	340		323

Amortization (deferral) of regulatory assets, net	(37)		92
General taxes	292		273

Gain on sale of Yards Creek (Note 9)	—		(109)

Total operating expenses	2,430		2,167

OPERATING INCOME	559		559

OTHER INCOME (EXPENSE):


Miscellaneous income, net	106		135


Interest expense	(313)		(285)
Capitalized financing costs	19		13
Total other expense	(188)		(137)

INCOME BEFORE INCOME TAXES	371		422

INCOME TAXES	83		87





NET INCOME	$	288	$	335









EARNINGS PER SHARE OF COMMON STOCK (Note 3):


Basic - Earnings Per Share of Common Stock	$	0.51	$	0.62



Diluted - Earnings Per Share of Common Stock	$	0.50	$	0.62

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic	570		543
Diluted	571		544

(1) Includes excise and gross receipts tax collections of $103 million and $95 million during the three months ended March 31, 2022 and 2021, respectively.

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	For the Three Months Ended March 31,
(In millions)	2022		2021

NET INCOME	$	288	$	335

OTHER COMPREHENSIVE LOSS:
Pension and OPEB prior service costs	(2)		(3)



Other comprehensive loss	(2)		(3)
Income tax benefits on other comprehensive loss	(1)		(1)
Other comprehensive loss, net of tax	(1)		(2)

COMPREHENSIVE INCOME	$	287	$	333

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

FIRSTENERGY CORP.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions, except share amounts)	March 31, 2022		December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	283	$	1,462
Restricted cash	27		49
Receivables-
Customers	1,258		1,192
Less — Allowance for uncollectible customer receivables	132		159
	1,126		1,033

Other, net of allowance for uncollectible accounts of $10 in 2022 and 2021	246		246
Materials and supplies, at average cost	273		260




Prepaid taxes and other	295		187

	2,250		3,237
PROPERTY, PLANT AND EQUIPMENT:
In service	46,349		46,002
Less — Accumulated provision for depreciation	12,834		12,672
	33,515		33,330
Construction work in progress	1,481		1,414
	34,996		34,744



INVESTMENTS AND OTHER NONCURRENT ASSETS:
Goodwill	5,618		5,618
Investments (Note 6)	646		655
Regulatory assets	70		71
Other	1,037		1,107

	7,371		7,451
	$	44,617	$	45,432
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	1,055	$	1,606
Short-term borrowings	350		—
Accounts payable	1,090		943

Accrued interest	289		283
Accrued taxes	650		647
Accrued compensation and benefits	276		313


Dividends Payable	223		222
Other	427		402

	4,360		4,416
CAPITALIZATION:
Stockholders’ equity-
Common stock, $0.10 par value, authorized 700,000,000 shares - 570,932,260 and 570,261,104 shares outstanding as of March 31, 2022 and December 31, 2021, respectively	57		57

Other paid-in capital	10,031		10,238
Accumulated other comprehensive loss	(16)		(15)
Accumulated deficit	(1,317)		(1,605)
Total stockholders’ equity	8,755		8,675


Long-term debt and other long-term obligations	21,754		22,248
	30,509		30,923
NONCURRENT LIABILITIES:
Accumulated deferred income taxes	3,544		3,437
Retirement benefits	2,620		2,669
Regulatory liabilities	2,025		2,124



Other	1,559		1,863

	9,748		10,093
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 8)
	$	44,617	$	45,432

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	Three Months Ended March 31, 2022
	Common Stock			OPIC		AOCI		Accumulated Deficit		Total Stockholders’ Equity
(In millions)	Shares	Amount
Balance, January 1, 2022	570	$	57	$	10,238	$	(15)	$	(1,605)	$	8,675
Net income								288		288
Other comprehensive loss, net of tax						(1)				(1)
Stock Investment Plan and share-based benefit plans	1			20						20
Cash dividends declared on common stock ($0.39 per share in March)				(223)						(223)
Other				(4)						(4)
Balance, March 31, 2022	571	$	57	$	10,031	$	(16)	$	(1,317)	$	8,755


	Three Months Ended March 31, 2021
	Common Stock			OPIC		AOCI			Accumulated Deficit		Total Stockholders’ Equity
(In millions)	Shares	Amount
Balance, January 1, 2021	543	$	54	$	10,076	$	(5)	0	$	(2,888)	$	7,237
Net income									335		335
Other comprehensive loss, net of tax						(2)					(2)
Share-based benefit plans	1			2							2
Cash dividends declared on common stock ($0.39 per share in March)				(212)							(212)
Balance, March 31, 2021	544	$	54	$	9,866	$	(7)		$	(2,553)	$	7,360

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Three Months Ended March 31,
(In millions)	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	288	$	335
Adjustments to reconcile net income to net cash from operating activities-
Depreciation and amortization	359		454


Deferred income taxes and investment tax credits, net	77		82

Retirement benefits, net of payments	(96)		(105)





Gain on sale of Yards Creek	—		(109)

Changes in current assets and liabilities-
Receivables	(93)		161
Materials and supplies	(13)		14
Prepaid taxes and other current assets	(105)		(121)
Accounts payable	147		43

Accrued taxes	(133)		(127)
Accrued interest	6		7
Accrued compensation and benefits	(106)		(129)
Other current liabilities	10		(7)

Other	14		35
Net cash provided from operating activities	355		533



CASH FLOWS FROM FINANCING ACTIVITIES:
New financing-
Long-term debt	—		500
Short-term borrowings, net	350		—


Redemptions and repayments-
Long-term debt	(1,046)		(29)
Short-term borrowings, net	—		(750)
Make-whole premiums paid on debt redemptions	(38)		—

Common stock dividend payments	(222)		(212)
Other	(8)		(18)
Net cash used for financing activities	(964)		(509)



CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions	(520)		(604)

Proceeds from sale of Yards Creek	—		155
Sales of investment securities held in trusts	6		5
Purchases of investment securities held in trusts	(9)		(7)



Asset removal costs	(49)		(47)
Other	(20)		(1)
Net cash used for investing activities	(592)		(499)




Net change in cash, cash equivalents, and restricted cash	(1,201)		(475)
Cash, cash equivalents, and restricted cash at beginning of period	1,511		1,801
Cash, cash equivalents, and restricted cash at end of period	$	310	$	1,326

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

FIRSTENERGY CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


Note Number		Page Number

1	Organization and Basis of Presentation	7

2	Revenue	9

3	Earnings Per Share of Common Stock	11

4	Pension and Other Post-Employment Benefits	12

5	Income Taxes	12

6	Fair Value Measurements	13

7	Regulatory Matters	15

8	Commitments, Guarantees and Contingencies	22

9	Segment Information	27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Unless otherwise indicated, defined terms and abbreviations used herein have the meanings set forth in the accompanying Glossary of Terms.

FE was incorporated under Ohio law in 1996. FE’s principal business is the holding, directly or indirectly, of all of the outstanding equity of its principal subsidiaries: OE, CEI, TE, Penn (a wholly owned subsidiary of OE), JCP&L, ME, PN, FESC, MP, AGC (a wholly owned subsidiary of MP), PE, WP, and FET and its principal subsidiaries (ATSI, MAIT and TrAIL). In addition, FE holds all of the outstanding equity of other direct subsidiaries including: AE Supply, FirstEnergy Properties, Inc., FEV, FirstEnergy License Holding Company, GPUN, Allegheny Ventures, Inc., and Suvon, LLC, doing business as both FirstEnergy Home and FirstEnergy Advisors.

FE and its subsidiaries are principally involved in the transmission, distribution and generation of electricity. FirstEnergy’s ten utility operating companies comprise one of the nation’s largest investor-owned electric systems, based on serving over six million customers in the Midwest and Mid-Atlantic regions. FirstEnergy’s transmission operations include approximately 24,000 miles of lines and two regional transmission operation centers. AGC and MP control 3,580 MWs of total capacity.

PN, as lessee of the property of its subsidiary, the Waverly Electric Light & Power Company, serves approximately 4,000 customers in the Waverly, New York vicinity. On February 10, 2021, PN entered into an agreement to transfer its customers and the related assets in Waverly, New York to Tri-County Rural Electric Cooperative; the completion of such transfer is subject to several closing conditions including regulatory approval, which are ongoing.

These interim financial statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and disclosures normally included in financial statements and notes prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These interim financial statements should be read in conjunction with the financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2021.

FE and its subsidiaries follow GAAP and comply with the related regulations, orders, policies and practices prescribed by the SEC, FERC, and, as applicable, the PUCO, the PPUC, the MDPSC, the NYPSC, the WVPSC, the VSCC and the NJBPU. The accompanying interim financial statements are unaudited, but reflect all adjustments, consisting of normal recurring adjustments, that, in the opinion of management, are necessary for a fair statement of the financial statements. The preparation of financial statements in conformity with GAAP requires management to make periodic estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Actual results could differ from these estimates. The reported results of operations are not necessarily indicative of results of operations for any future period. FE and its subsidiaries have evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

FE and its subsidiaries consolidate all majority-owned subsidiaries over which they exercise control and, when applicable, entities for which they have a controlling financial interest. Intercompany transactions and balances are eliminated in consolidation as appropriate and permitted pursuant to GAAP. FE and its subsidiaries consolidate a VIE when it is determined that it is the primary beneficiary. Investments in affiliates over which FE and its subsidiaries have the ability to exercise significant influence, but do not have a controlling financial interest, follow the equity method of accounting. Under the equity method, the interest in the entity is reported as an investment in the Consolidated Balance Sheets and the percentage of FE’s ownership share of the entity’s earnings is reported in the Consolidated Statements of Income and Comprehensive Income.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Capitalized Financing Costs

For the three months ended March 31, 2022 and 2021, capitalized financing costs on FirstEnergy’s Consolidated Statements of Income include $13 million and $7 million, respectively, of allowance for equity funds used during construction and $6 million of capitalized interest in both periods.

COVID-19

FirstEnergy is continuously evaluating the COVID-19 global pandemic and taking steps to mitigate known risks. FirstEnergy provides a critical and essential service to its customers and the health and safety of its employees and customers is its first priority. FirstEnergy continues to provide flexibility for approximately 7,000 of its 12,400 employees to work from home. Pandemic safety and cleaning protocols were implemented for those workers who have continued to report to a FirstEnergy work location during the pandemic, ensuring FirstEnergy employees can report directly to job sites and work with the same small group of employees every day. FirstEnergy continues to assess its work from home policies to allow for a flexible workplace to continue for its employees after the pandemic.

FirstEnergy continues to effectively manage operations during the pandemic in order to provide critical service to customers. FirstEnergy has experienced supply chain challenges during the COVID-19 pandemic. Lead times have increased across numerous material categories, with some as much as doubling from previous times. Some key suppliers have struggled with labor shortages and raw material availability, which along with increasing inflationary pressure, have increased the costs of certain materials, equipment and contractors. FirstEnergy has taken steps to mitigate these risks and does not currently expect service disruptions or any material impact on its capital spending plan. However, the situation remains fluid and future impacts to FirstEnergy that are presently unknown or unanticipated may occur.

Customer Receivables

Receivables from customers include distribution services and retail generation sales to residential, commercial and industrial customers of the Utilities. The allowance for uncollectible customer receivables is based on historical loss information comprised of a rolling 36-month average net write-off percentage of revenues, in conjunction with a qualitative assessment of elements that impact the collectability of receivables to determine if allowances for uncollectible accounts should be further adjusted in accordance with the accounting guidance for credit losses.

FirstEnergy reviews its allowance for uncollectible customer receivables utilizing a quantitative and qualitative assessment. Management contemplates available current information such as changes in economic factors, regulatory matters, industry trends, customer credit factors, amount of receivable balances that are past-due, payment options and programs available to customers, and the methods that the Utilities are able to utilize to ensure payment. This analysis includes consideration of the outbreak of COVID-19 and the impact on customer receivable balances outstanding and write-offs since the pandemic began. During the first quarter of 2022, various regulatory actions including extensions on moratoriums, certain restrictions on disconnections, and extended installment plan offerings continue to impact the level of past due balances in certain states. However, certain states have resumed normal collections activity and arrears levels have declined towards pre-pandemic levels. As a result of this analysis, FirstEnergy recognized a $25 million decrease to its allowance for uncollectible customer receivables during the first quarter of 2022, of which $15 million was applied to existing deferred regulatory assets. Additionally, as a result of these pandemic-related moratoriums and certain customer installment or extended payment plans offered, the allowance for uncollectible accounts on receivables in 2022 continue to be elevated due to the extension of when certain write-offs would have otherwise occurred.

Receivables from customers also include PJM receivables resulting from transmission and wholesale sales. FirstEnergy’s uncollectible risk on PJM receivables is minimal due to the nature of PJM’s settlement process whereby members of PJM legally agree to share the cost of defaults and as a result there is no allowance for doubtful accounts.

Activity in the allowance for uncollectible accounts on customer receivables for the three months ended March 31, 2022 and for the year ended December 31, 2021 are as follows:


	(In millions)

Balance, January 1, 2021	$	164
Charged to income (1)	54
Charged to other accounts (2)	42
Write-offs	(101)
Balance, December 31, 2021	$	159
Charged to income(3)	(5)
Charged to other accounts (2)	39
Write-offs	(61)
Balance, March 31, 2022	$	132

(1) $12 million of which was deferred for future recovery in the twelve months ended December 31, 2021.

(2) Represents recoveries and reinstatements of accounts written off for uncollectible accounts.

(3) $(11) million of which was deferred for future refund to customers in the three months ended March 31, 2022.

Sale of Minority Interest in FirstEnergy Transmission, LLC

On November 6, 2021, FirstEnergy, along with FET, entered into the FET P&SA, with Brookfield and Brookfield Guarantors, pursuant to which FET agreed to issue and sell to Brookfield at the closing, and Brookfield agreed to purchase from FET, certain newly issued membership interests of FET, such that Brookfield will own 19.9% of the issued and outstanding membership interests of FET, for a purchase price of $2.375 billion. KATCo, which is currently a subsidiary of FET, will become a wholly owned subsidiary of FE prior to the closing of the transaction and will remain in the Regulated Transmission segment. The transaction is subject to customary closing conditions, including approval from the FERC and review by the CFIUS. On January 5, 2022, the parties to this transaction submitted an application to FERC requesting approval of the transaction no later than April 30, 2022. On April 14, 2022, CFIUS notified FET and Brookfield that it has determined that there were no unresolved national security issues and its review of the transaction was concluded. On April 21, 2022, FERC approved the matter. The transaction is now expected to close at the end of May 2022.

Pursuant to the terms of the FET P&SA, in connection with the closing, Brookfield, FET and FirstEnergy Corp will enter into the FET LLC Agreement. The FET LLC Agreement, among other things, provides for the governance, exit, capital and distribution, and other arrangements for FET from and following the closing. Under the FET LLC Agreement, Brookfield will be entitled to appoint a number of directors to the FET Board, in approximate proportion to Brookfield’s ownership percentage in FET (rounded to the next whole number). Upon the closing, the FET Board will consist of five directors, one appointed by Brookfield and four appointed by FE. The FET LLC Agreement contains certain investor protections, including, among other things, requiring Brookfield's approval for FET and its subsidiaries to take certain major actions. Under the terms of the FET LLC Agreement, for so long as Brookfield holds a 9.9% interest in FET, Brookfield’s consent is required for FET or any of its subsidiaries to incur indebtedness (other than the refinancing of existing indebtedness on commercially reasonable terms reflecting then-current credit market conditions) that would reasonably be expected to result in FET’s consolidated Debt-to-Capital Ratio (as defined in the FET LLC Agreement) equaling or exceeding (i) prior to the fifth anniversary of the effective date, 65%, and (ii) thereafter, 70%.

New Accounting Pronouncements

Recently Issued Pronouncements - FirstEnergy has assessed new authoritative accounting guidance issued by the FASB that has not yet been adopted and none are currently expected to have a material impact to the financial statements.

2. REVENUE

FirstEnergy accounts for revenues from contracts with customers under ASC 606, “Revenue from Contracts with Customers.” Revenue from leases, financial instruments, other contractual rights or obligations and other revenues that are not from contracts with customers are outside the scope of the standard and accounted for under other existing GAAP.

FirstEnergy has elected to exclude sales taxes and other similar taxes collected on behalf of third parties from revenue as prescribed in the standard. As a result, tax collections and remittances are excluded from recognition in the income statement and instead recorded through the balance sheet. Excise and gross receipts taxes that are assessed on FirstEnergy are not subject to the election and are included in revenue. FirstEnergy has elected the optional invoice practical expedient for most of its revenues and utilizes the optional short-term contract exemption for transmission revenues due to the annual establishment of revenue requirements, which eliminates the need to provide certain revenue disclosures regarding unsatisfied performance obligations.

FirstEnergy’s revenues are primarily derived from electric service provided by the Utilities and Transmission Companies.

The following represents a disaggregation of revenue from contracts with customers for the three months ended March 31, 2022 and 2021:


	For the Three Months Ended March 31, 2022
Revenues by Type of Service	Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments (1)		Total
	(In millions)
Distribution services	$	1,348	$	—	$	(28)	$	1,320
Retail generation	1,094		—		(17)		1,077
Wholesale sales	90		—		6		96
Transmission	—		451		—		451
Other	26		—		—		26
Total revenues from contracts with customers	$	2,558	$	451	$	(39)	$	2,970

Other revenue unrelated to contracts with customers	31		2		(14)		19
Total revenues	$	2,589	$	453	$	(53)	$	2,989

(1) Includes eliminations and reconciling adjustments of inter-segment revenues.


	For the Three Months Ended March 31, 2021
Revenues by Type of Service	Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments (1)		Total
	(In millions)
Distribution services	$	1,339	$	—	$	(26)	$	1,313
Retail generation	935		—		(12)		923
Wholesale sales	69		—		4		73
Transmission	—		401		—		401
Other	33		—		—		33
Total revenues from contracts with customers	$	2,376	$	401	$	(34)	$	2,743
ARP (2)	(27)		—		—		(27)
Other revenue unrelated to contracts with customers	21		4		(15)		10
Total revenues	$	2,370	$	405	$	(49)	$	2,726

(1) Includes eliminations and reconciling adjustments of inter-segment revenues.

(2) Reflects amount the Ohio Companies refunded to customers that was previously collected under decoupling mechanisms, with interest. See Note 7, “Regulatory Matters,” for further discussion on Ohio decoupling rates.

Other revenue unrelated to contracts with customers includes revenue from late payment charges of $10 million and $9 million for the three months ended March 31, 2022 and 2021, respectively. Other revenue unrelated to contracts with customers also includes revenue from derivatives of $9 million for the three months ended March 31, 2022.

Regulated Distribution

The Regulated Distribution segment distributes electricity through FirstEnergy’s ten utility operating companies and also controls 3,580 MWs of regulated electric generation capacity located primarily in West Virginia and Virginia. Each of the Utilities earns revenue from state-regulated rate tariffs under which it provides distribution services to residential, commercial and industrial customers in its service territory. The Utilities are obligated under the regulated construct to deliver power to customers reliably, as it is needed, which creates an implied monthly contract with the end-use customer. See Note 7, “Regulatory Matters,” for additional information on rate recovery mechanisms. Distribution and electric revenues are recognized over time as electricity is distributed and delivered to the customer and the customers consume the electricity immediately as delivery occurs.

Retail generation sales relate to POLR, SOS, SSO and default service requirements in Ohio, Pennsylvania, New Jersey and Maryland, as well as generation sales in West Virginia that are regulated by the WVPSC. Certain of the Utilities have default service obligations to provide power to non-shopping customers who have elected to continue to receive service under regulated retail tariffs. The volume of these sales varies depending on the level of shopping that occurs. Supply plans vary by state and by service territory. Default service for the Ohio Companies, Pennsylvania Companies, JCP&L and PE’s Maryland jurisdiction are provided through a competitive procurement process approved by each state’s respective commission. Retail generation revenues are recognized over time as electricity is delivered and consumed immediately by the customer.

The following table represents a disaggregation of the Regulated Distribution segment revenue from contracts with distribution service and retail generation customers for the three months ended March 31, 2022 and 2021, by class:


	For the Three Months Ended March 31,
Revenues by Customer Class	2022		2021
	(In millions)
Residential	$	1,542	$	1,457
Commercial	597		541
Industrial	283		258
Other	20		18
Total Revenues	$	2,442	$	2,274

Wholesale sales primarily consist of generation and capacity sales into the PJM market from FirstEnergy’s regulated electric generation capacity and NUGs. Certain of the Utilities may also purchase power in the PJM markets to supply power to their customers. Generally, these power sales from generation and purchases to serve load are netted hourly and reported as either revenues or purchased power on the Consolidated Statements of Income based on whether the entity was a net seller or buyer

each hour. Capacity revenues are recognized ratably over the PJM planning year at prices cleared in the annual PJM Reliability Pricing Model Base Residual Auction and Incremental Auctions. Capacity purchases and sales through PJM capacity auctions are reported within revenues on the Consolidated Statements of Income. Certain capacity income (bonuses) and charges (penalties) related to the availability of units that have cleared in the auctions are unknown and not recorded in revenue until, and unless, they occur.

The Utilities’ distribution customers are metered on a cycle basis. An estimate of unbilled revenues is calculated to recognize electric service provided from the last meter reading through the end of the month. This estimate includes many factors, among which are historical customer usage, load profiles, estimated weather impacts, customer shopping activity and prices in effect for each class of customer. In each accounting period, the Utilities accrue the estimated unbilled amount as revenue and reverse the related prior period estimate. Customer payments vary by state but are generally due within 30 days.

ASC 606 excludes industry-specific accounting guidance for recognizing revenue from ARPs as these programs represent contracts between the utility and its regulators, as opposed to customers. Therefore, revenues from these programs are not within the scope of ASC 606 and regulated utilities are permitted to continue to recognize such revenues in accordance with existing practice but are presented separately from revenue arising from contracts with customers. FirstEnergy had ARPs in Ohio and has reflected refunds of decoupling revenue owed to customers as reductions to ARPs in 2021. Please see Note 7, “Regulatory Matters,” for further discussion on decoupling revenues in Ohio.

Regulated Transmission

The Regulated Transmission segment provides transmission infrastructure owned and operated by the Transmission Companies and certain of FirstEnergy's utilities (JCP&L, MP, PE and WP) to transmit electricity from generation sources to distribution facilities. The segment's revenues are derived from forward-looking formula rates. See Note 7, “Regulatory Matters,” for additional information.

Forward-looking formula rates recover costs that the regulatory agencies determine are permitted to be recovered and provide a return on transmission capital investment. Under forward-looking formula rates, the revenue requirement is updated annually based on a projected rate base and projected costs, which is subject to an annual true-up based on actual costs. Revenues and cash receipts for the stand-ready obligation of providing transmission service are recognized ratably over time.

The following table represents a disaggregation of revenue from contracts with regulated transmission customers for the three months ended March 31, 2022 and 2021, by transmission owner:


	For the Three Months Ended March 31,
Transmission Owner	2022		2021
	(In millions)
ATSI	217		$	206
TrAIL	63		59
MAIT	79		67
JCP&L	60		36
MP, PE and WP	32		33

Total Revenues	$	451	$	401

3. EARNINGS PER SHARE OF COMMON STOCK

Basic EPS is computed using the weighted average number of common shares outstanding during the relevant period as the denominator. The denominator for diluted EPS of common stock reflects the weighted average of common shares outstanding plus the potential additional common shares that could result if dilutive securities and other agreements to issue common stock were exercised.

Diluted EPS reflects the dilutive effect of potential common shares from share-based awards. The dilutive effect of outstanding share-based awards was computed using the treasury stock method, which assumes any proceeds that could be obtained upon the exercise of the award would be used to purchase common stock at the average market price for the period.

The following table reconciles basic and diluted EPS of common stock:


	For the Three Months Ended March 31,
Reconciliation of Basic and Diluted EPS		2022		2021

(In millions, except per share amounts)










Net Income		$	288	$	335





Share count information:
Weighted average number of basic shares outstanding		570		543
Assumed exercise of dilutive stock options and awards		1		1

Weighted average number of diluted shares outstanding		571		544