REGULATORY ASSETS AND LIABILITIES

Regulatory assets represent incurred costs that have been deferred because of their probable future recovery from customers through regulated rates. Regulatory liabilities represent amounts that are expected to be credited to customers through future regulated rates or amounts collected from customers for costs not yet incurred. FirstEnergy, the Utilities and the Transmission Companies net their regulatory assets and liabilities based on federal and state jurisdictions.

Management assesses the probability of recovery of regulatory assets, and settlement of regulatory liabilities, at each balance sheet date and whenever new events occur. Factors that may affect probability ~~include~~relate to changes in the regulatory environment, issuance of a regulatory commission order or passage of new legislation. ~~Management applies judgment in evaluating the evidence available~~Upon material changes to ~~assess the probability of recovery of~~these factors, where applicable, FirstEnergy will record new regulatory assets ~~from customers, including, but not limited to evaluating evidence related to precedent for similar items at FirstEnergy~~ and ~~information on comparable companies within similar jurisdictions, as well as assessing progress of communications between FirstEnergy~~liabilities and ~~regulators. Certain of these~~will assess whether it is probable that currently recorded regulatory assets ~~totaling approximately $117 million as of June 30, 2021~~ and ~~December 31, 2020, respectively, are recorded based on prior precedent~~liabilities will be recovered or anticipated recovery based on rate making premises without a specific order, of which, $78 million and $79 million as of June 30, 2021 and December 31, 2020, respectively, are being sought for recoverysettled in ~~a formula rate amendment filing at ATSI that is pending before FERC. See Note 8, "Regulatory Matters" for additional information.~~future rates.

The following table provides information about the composition of net regulatory assets and liabilities as of ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, and the changes during the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:


Net Regulatory Assets (Liabilities) by Source	Net Regulatory Assets (Liabilities) by Source	June 30, 2021		December 31, 2020		Change		Net Regulatory Assets (Liabilities) by Source	March 31, 2022		December 31, 2021		Change
		(In millions)							(In millions)
Customer payables for future income taxes	Customer payables for future income taxes	$	(2,312)	$	(2,369)	$	57	Customer payables for future income taxes	$	(2,303)	$	(2,345)	$	42
Spent nuclear fuel disposal costs	Spent nuclear fuel disposal costs	(100)		(102)		2		Spent nuclear fuel disposal costs	(87)		(101)		14
Asset removal costs	Asset removal costs	(683)		(721)		38		Asset removal costs	(650)		(646)		(4)
Deferred transmission costs	Deferred transmission costs	218		319		(101)		Deferred transmission costs	(30)		(3)		(27)
Deferred generation costs	Deferred generation costs	43		17		26		Deferred generation costs	163		118		45
Deferred distribution costs	Deferred distribution costs	45		79		(34)		Deferred distribution costs	75		49		26
Contract valuations		27		41		(14)

Storm-related costs	Storm-related costs	641		748		(107)		Storm-related costs	673		660		13
Uncollectible and COVID-19 related costs	Uncollectible and COVID-19 related costs	64		97		(33)		Uncollectible and COVID-19 related costs	55		56		(1)
Energy efficiency program costs	Energy efficiency program costs	50		42		8		Energy efficiency program costs	47		47		—
New Jersey societal benefit costs	New Jersey societal benefit costs	108		112		(4)		New Jersey societal benefit costs	106		109		(3)
Regulatory transition costs	Regulatory transition costs	(32)		(20)		(12)		Regulatory transition costs	(18)		(18)		—
Vegetation management	Vegetation management	17		22		(5)		Vegetation management	39		33		6
Other	Other	(12)		(9)		(3)		Other	(25)		(12)		(13)
Net Regulatory Liabilities included on the Consolidated Balance Sheets	Net Regulatory Liabilities included on the Consolidated Balance Sheets	$	(1,926)	$	(1,744)	$	(182)	Net Regulatory Liabilities included on the Consolidated Balance Sheets	$	(1,955)	$	(2,053)	$	98

The following is a description of the regulatory assets and liabilities described above:

Customer payables for future income taxes - Reflects amounts to be recovered or refunded through future rates to pay income taxes that become payable when rate revenue is provided to recover items such as AFUDC-equity and depreciation of property, plant and equipment for which deferred income taxes were not recognized for ratemaking purposes, including amounts attributable to tax rate changes such as ~~tax reform.~~the Tax Act. These amounts are being amortized over the period in which the related deferred tax assets reverse, which is generally over the expected life of the underlying asset.

Spent nuclear fuel disposal costs - Reflects amounts collected from customers, and the investment income, losses and changes in fair value of the trusts for spent nuclear fuel disposal costs related to the former nuclear generating facilities, Oyster Creek and TMI-1.

Asset removal costs - Primarily represents the rates charged to customers that include a provision for the cost of future activities to remove assets, including obligations for which an ARO has been recognized, that are expected to be incurred at the time of retirement.

Deferred transmission costs - ~~Primarily represents~~Reflects differences between revenues earned based on actual costs for the formula-rate Transmission Companies and the amounts ~~billed. Amounts~~billed, which amounts are recorded as a regulatory asset or liability and recovered or refunded, respectively, in subsequent periods. Also included is the recovery of non-market based costs or fees charged to certain of the Utilities by various regulatory bodies including FERC and RTOs, which can include PJM charges and credits for service including, but not limited to, procuring transmission services and transmission enhancement.

Deferred generation costs - Primarily relates to regulatory assets associated with the securitized recovery of certain ~~electric customer heating discounts,~~ fuel and purchased power regulatory assets at the Ohio Companies (amortized through 2034) as well as the ENEC at MP and PE. MP and PE recover net power supply costs, including fuel costs, purchased power costs and related expenses, net of related market sales revenue through the ENEC. The ENEC rate is updated annually.

Deferred distribution costs - Primarily relates to the Ohio Companies’ deferral of certain expenses resulting from distribution and reliability related expenditures, including interest (amortized through 2036)~~, as well as the Ohio Companies’ 2020 deferrals related~~ and remaining refunds owed to ~~the decoupling mechanism which are recorded as a regulatory asset or liability and recovered or refunded, respectively, in subsequent periods.~~

~~Contract valuations~~ ~~- Includes the amortization of purchase accounting adjustments at PE which were recorded in connection~~customers associated with the ~~Allegheny Energy, Inc. merger representing the fair value of NUG purchased power contracts (amortized over the life of the contracts through 2030).~~PUCO-approved Ohio Stipulation.

Storm-related costs - Relates to the deferral of storm costs, ~~net of recovery,~~ which vary by jurisdiction. Approximately ~~$152~~$190 million and ~~$167~~$148 million are currently being recovered through rates as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Uncollectible and COVID-19 related costs - Includes the deferral of ~~prudently incurred incremental~~ costs arising from COVID-19, including uncollectible expenses under new and existing riders prior to the pandemic.

Energy efficiency program costs - Relates to the recovery of costs in excess of revenues associated with energy efficiency programs including New Jersey energy efficiency and renewable energy programs, the Pennsylvania Companies’ EE&C programs, the Ohio Companies’ Demand Side Management and Energy Efficiency Rider, and PE’s EmPOWER Maryland Surcharge. Investments in certain of these energy efficiency programs earn a long-term return.

New Jersey societal benefit costs - Primarily relates to regulatory assets associated with ~~manufactured gas plant~~MGP remediation, ~~energy efficiency and renewable energy programs,~~ universal service and lifeline funds, and consumer education in New Jersey.

Regulatory transition costs - Includes the recovery of PN above-market NUG costs; ~~JCP&L costs incurred during the transition to a competitive retail market and under-recovery during the period from August 1, 1999 through July 31, 2003;~~ and JCP&L costs associated with BGS, capacity and ancillary services, net of revenues from the sale of the committed supply in the wholesale market.

Vegetation management - Relates to regulatory assets in New Jersey and West Virginia associated with the recovery of certain distribution vegetation management ~~costs.~~costs as well as MAIT vegetation management costs (amortized through 2024).

The following table provides information about the composition of net regulatory assets that do not earn a current return as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, of which approximately ~~$180~~$332 million and ~~$195~~$228 million, respectively, are currently being recovered through rates over varying periods, through 2068, depending on the nature of the deferral and the jurisdiction.


Regulatory Assets by Source Not Earning a Current Return	Regulatory Assets by Source Not Earning a Current Return	June 30, 2021		December 31, 2020		Change		Regulatory Assets by Source Not Earning a Current Return	March 31, 2022		December 31, 2021		Change
		(In millions)							(In millions)

Deferred transmission costs	Deferred transmission costs	$	14	$	17	$	(3)	Deferred transmission costs	$	9	$	13	$	(4)
Deferred generation costs	Deferred generation costs	6		5		1		Deferred generation costs	112		50		62

Storm-related costs	Storm-related costs	539		654		(115)		Storm-related costs	569		549		20
COVID-19 related costs	COVID-19 related costs	65		66		(1)		COVID-19 related costs	63		65		(2)

Regulatory transition costs	Regulatory transition costs	14		16		(2)		Regulatory transition costs	12		13		(1)
Vegetation management	Vegetation management	17		22		(5)		Vegetation management	28		31		(3)
Other	Other	10		9		1		Other	14		11		3
Regulatory Assets Not Earning a Current Return	Regulatory Assets Not Earning a Current Return	$	665	$	789	$	(124)	Regulatory Assets Not Earning a Current Return	$	807	$	732	$	75

5845

CAPITAL RESOURCES AND LIQUIDITY

FirstEnergy’s business is capital intensive, requiring significant resources to fund operating expenses, construction and other investment expenditures, scheduled debt maturities and interest payments, dividend payments, and potential contributions to its pension plan.

FirstEnergy does not currently anticipate the need to issue additional equity through 2021 and expects to issue, subject to, among other things, market conditions, pricing terms and business operations, up to $600 million of equity annually in 2022 and 2023, including up to $100 million in equity for its regular stock investment and employee benefit plans. FirstEnergy is also exploring various alternatives to raise equity capital in a manner that could be more value-enhancing to all stakeholders. FirstEnergy’s expectations regarding the amount and timing of any potential equity issuances are subject to, among other matters, the ongoing government investigations and related lawsuits and regulatory actions.

FE and its distribution and transmission subsidiaries expect their existing sources of liquidity to remain sufficient to meet their respective anticipated obligations. In addition to internal sources to fund liquidity and capital requirements for ~~2021~~2022 and beyond, FE and its distribution and transmission subsidiaries expect to rely on external sources of funds. Short-term cash requirements not met by cash provided from operations are generally satisfied through short-term borrowings. Long-term cash needs may be met through the issuance of long-term debt by FE and certain of its distribution and transmission subsidiaries to, among other things, fund capital expenditures and other capital-like investments, and refinance short-term and maturing long-term debt, subject to market conditions and other factors.

With an operating territory of 65,000 square miles, the scale and diversity of the ten Utilities that comprise the Regulated Distribution business uniquely position this business for growth through opportunities for additional investment, with plans to invest up to $6.6 billion in capital from 2020 to 2023. Over the past several years, Regulated Distribution has experienced rate base growth through investments that have improved reliability and added operating flexibility to the distribution infrastructure, which provide benefits to the customers and communities those Utilities serve. Additionally, this business is exploring other opportunities for growth, including investments in electric system improvement and modernization projects to increase reliability and improve service to customers, as well as exploring opportunities in customer engagement that focus on the electrification of customers’ homes and businesses by providing a full range of products and services.

FirstEnergy believes there are incremental investment opportunities for its existing transmission infrastructure of over $20 billion beyond those identified through 2023, which are expected to strengthen grid and cyber-security and make the transmission system more reliable, robust, secure and resistant to extreme weather events, with improved operational flexibility.

In alignment with FirstEnergy’s strategy to invest in its Regulated ~~Transmission~~Distribution and Regulated ~~Distribution~~Transmission segments as a fully regulated company, FirstEnergy is focused on maintaining balance sheet strength and flexibility. Specifically, at the regulated businesses, regulatory authority has been obtained for various regulated distribution and transmission subsidiaries to issue and/or refinance debt.

Any financing plans by FE or any of its consolidated subsidiaries, including the issuance of equity and debt, and the refinancing of short-term and maturing long-term debt are subject to market conditions and other factors. No assurance can be given that any such issuances, financing or refinancing, as the case may be, will be completed as anticipated or at all. Any delay in the completion of financing plans could require FE or any of its consolidated subsidiaries to utilize short-term borrowing capacity, which could impact available liquidity. In addition, FE and its consolidated subsidiaries expect to continually evaluate any planned financings, which may result in changes from time to time.

On ~~March 31, 2018,~~November 6, 2021, FirstEnergy, along with FET, entered into the ~~FES Debtors announced~~FET P&SA with Brookfield and the 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 ~~in order to facilitate an orderly financial restructuring, they filed voluntary petitions under Chapter 11~~Brookfield will own 19.9% of the ~~United States Bankruptcy Code~~issued and outstanding membership interests of FET, for a purchase price of $2.375 billion. The transaction is subject to customary closing conditions, including approval from the FERC and review by the CFIUS. CFIUS completed its review on April 14, 2022 and FERC approved the transaction on April 21, 2022. The transaction is expected to close at the end of May 2022.

On December 13, 2021, FE privately issued to BIP Securities II-B L.P., an affiliate of Blackstone Infrastructure Partners L.P., 25,588,535 shares of FE’s common stock, par value $0.10 per share, at a price of $39.08 per share, representing an investment of $1.0 billion. In addition, FE nominated Sean T. Klimczak, the Blackstone Infrastructure Partners-selected representative, to stand for election to the FE Board at the 2022 annual shareholders’ meeting. On April 21, 2022, FERC approved the Blackstone representative’s ability to participate as a voting member of the FE Board.

On October 18, 2021, FE, FET, the Utilities, and the Transmission Companies entered into six separate senior unsecured five-year syndicated revolving credit facilities. These new credit facilities provide substantial liquidity to support the Regulated Distribution and Regulated Transmission businesses, and each of the operating companies within the businesses. See “Capital Resources and Liquidity" below for additional details.

Together, these transactions enhance FirstEnergy's credit profile, provide funding for the strategic investments discussed above, and address all of FirstEnergy's equity plans, with the ~~Bankruptcy Court. On February 27, 2020, the FES Debtors effectuated their plan, emerged from bankruptcy~~exception of annual issuances of up to $100 million under regular dividend reinvestment plans and ~~FirstEnergy tendered the bankruptcy court approved settlement payments totaling $853 million and a $125 million tax sharing payment to the FES Debtors.~~employee benefit stock investment plans, through at least 2025.

FirstEnergy is continuously evaluating the COVID-19 global ~~COVID-19~~ pandemic and taking steps to mitigate known risks. FirstEnergy is actively monitoring the continued impact COVID-19 is having on its customers’ receivable balances, which include increasing arrears balances since the pandemic has begun. FirstEnergy has incurred, and it is expected to incur for the foreseeable future, COVID-19 pandemic related expenses. COVID-19 related expenses consist of additional costs that FirstEnergy is incurring to protect its employees, contractors and customers, and to support social distancing requirements. These costs include, but are not limited to, new or added benefits provided to employees, the purchase of additional personal protection equipment and disinfecting supplies, additional facility cleaning services, initiated programs and communications to customers on utility response, and increased technology expenses to support remote working, where possible. The full impact on FirstEnergy’s business from the COVID-19 pandemic, including the governmental and regulatory responses, is unknown at this time and difficult to predict. FirstEnergy provides a critical and essential service to its customers and the health and safety of its employees ~~contractors~~ and customers is its first priority. FirstEnergy ~~is continuously monitoring~~continues to provide flexibility for approximately 7,000 of its ~~supply chain~~12,400 employees to work from home. Pandemic safety and ~~is working closely~~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 ~~essential vendors~~the same small group of employees every day. FirstEnergy continues to ~~understand~~assess its work from home policies to allow for a flexible workplace to continue for its employees after the continued impact the COVID-19 pandemic is having on its business; however, FirstEnergy does not currently expect disruptions in its ability to deliver service to customers or any material impact on its capital spending plan.pandemic.

FirstEnergy continues to effectively manage operations during the pandemic in order to provide critical service to ~~customers~~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 ~~believes it is well positioned~~raw material availability, which along with increasing inflationary pressure, have increased the costs of certain materials, equipment and contractors. FirstEnergy has taken steps to ~~manage through the economic slowdown. FirstEnergy Distribution~~mitigate these risks and ~~Transmission revenues benefit from geographic and economic diversity across a five-state~~does not currently expect service ~~territory, which also allows for flexibility with~~disruptions or any material impact on its capital ~~investments and measures to maintain sufficient liquidity over the next twelve months.~~spending plan. However, the situation remains fluid and future impacts to FirstEnergy that are presently unknown or unanticipated may occur. ~~Furthermore, the likelihood of an impact to FirstEnergy, and the severity of any impact that does occur, could increase the longer the global pandemic persists.~~

On July 21, 2020, a complaint and supporting affidavit containing federal criminal allegations were unsealed against the now former Ohio House Speaker Larry Householder and other individuals and entities allegedly affiliated with Mr. Householder. Also, on July 21, 2020, and in connection with the investigation, FirstEnergy received subpoenas for records from the U.S. Attorney’s Office for the S.D. Ohio. FirstEnergy was not aware of the criminal allegations, affidavit or subpoenas before July 21, 2020.

On July 21, 2021, FE entered into a three-year DPA with the U.S. Attorney’s Office that, subject to court proceedings, resolves the U.S. Attorney’s Office investigation into FirstEnergy relating to FirstEnergy’s lobbying and governmental affairs activities concerning HB 6, which, among other things requires FE to pay a monetary penalty of $230 million within the next sixty days. Under the DPA, FE has agreed to the filing of a criminal information charging FE with one count of conspiracy to commit honest services wire fraud. The $230 million payment will neither be recovered in rates or charged to FirstEnergy customers nor will FirstEnergy seek any tax deduction related to such payment. Under the terms of the DPA, the criminal information will be dismissed after FirstEnergy fully complies with its obligations under the DPA.

In addition to the subpoenas referenced above, the OAG, certain FE shareholders and FirstEnergy customers filed several lawsuits against FirstEnergy and certain current and former directors, officers and other employees, each relating to the allegations against the now former Ohio House Speaker Larry Householder and other individuals and entities allegedly affiliated with Mr. Householder. In addition, on August 10, 2020, the SEC, through its Division of Enforcement, issued an order directing an investigation of possible securities laws violations by FE, and on September 1, 2020, issued subpoenas to FE and certain FE officers. Subsequently, on April 28, 2021, the SEC issued an additional subpoena to FE. Further, in a letter dated February 22, 2021, staff of FERC's Division of Investigations notified FirstEnergy that the Division is conducting an investigation of FirstEnergy’s lobbying and governmental affairs activities concerning HB 6.

Despite the many disruptions FirstEnergy is currently facing, the leadership team remains committed and focused on executing its strategy and running the business. See “Outlook - Other Legal Proceedings” below for additional details on the government investigations, the DPA, and subsequent litigation surrounding the investigation of HB 6. See also “Outlook - State Regulation - Ohio” below for details on the PUCO proceeding reviewing political and charitable spending and legislative activity in response to the investigation of HB 6. The outcome of the government investigations, PUCO proceedings, legislative activity, and any of these lawsuits is uncertain and could have a material adverse effect on FE’s or its subsidiaries’ financial condition, results of operations and cash flows. As discussed below, FirstEnergy has made reductions to its Regulated Distribution and Regulated Transmission capital investment plans and is considering reductions to operating expenses, as well as changes to its planned equity issuances, to allow for flexibility to address the outcomes of the ongoing government investigations and related lawsuits and regulatory actions.

As of ~~June 30, 2021,~~March 31, 2022, FirstEnergy’s net deficit in working capital (current assets less current liabilities) was primarily due to accounts payable, ~~short-term borrowings,~~ current portions of long-term debt, short-term borrowings and accrued interest, taxes, and compensation and

benefits. FirstEnergy believes its cash from operations and available liquidity will be sufficient to meet its current working capital needs.

Short-Term Borrowings / Revolving Credit Facilities

On October 18, 2021, FE, ~~and~~FET, the Utilities, and ~~FET and certain of its subsidiaries participate in two~~the Transmission Companies entered into the 2021 Credit Facilities, which were six separate senior unsecured five-year syndicated revolving credit facilities ~~providing~~with JPMorgan Chase Bank, N.A., Mizuho Bank, Ltd. and PNC Bank, National Association that replace the FE Revolving Facility and the FET Revolving Facility, and provide for aggregate commitments of ~~$3.5 billion, which~~$4.5 billion. The 2021 Credit Facilities are available until ~~December 6, 2022.~~ October 18, 2026, as follows:

•FE and FET, $1.0 billion revolving credit facility;

•Ohio Companies, $800 million revolving credit facility;

•Pennsylvania Companies, $950 million revolving credit facility;

•JCP&L, $500 million revolving credit facility;

•MP and PE, $400 million revolving credit facility; and

•Transmission Companies, $850 million credit facility.

Under the ~~FE Revolving Facility,~~2021 Credit Facilities, an aggregate amount of ~~$2.5~~$4.5 billion is available to be borrowed, repaid and reborrowed, subject to ~~separate borrowing sublimits for~~ each ~~borrower including FE~~borrower’s respective sublimit under the respective facilities. These new credit facilities provide substantial liquidity to support the Regulated Distribution and ~~its regulated distribution subsidiaries. Under the FET Revolving Facility, an aggregate amount of $1.0 billion is available to be borrowed, repaid~~Regulated Transmission businesses, and ~~reborrowed under a syndicated credit facility, subject to separate borrowing sublimits for~~ each borrower including FE's transmission subsidiaries. On July 21, 2021, FE and the Utilities and FET and certain of its subsidiaries entered into amendments to the FE Revolving Facility and the FET Revolving Facility, respectively. The amendments provide for modifications and/or waivers of (i) certain representations and warranties, (ii) certain affirmative and negative covenants, contained therein, and (iii) any resulting event of default, which, in each case, resulted either from FE entering into the DPA or as a consequence of the ~~facts and circumstances described in~~operating companies within the ~~DPA, thus allowing FirstEnergy to be in compliance with the revolving credit facilities and maintain access to the liquidity provided thereunder.~~businesses.

Borrowings under the ~~credit facilities~~2021 Credit Facilities may be used for working capital and other general corporate ~~purposes, including intercompany loans and advances by a borrower to any of its subsidiaries.~~purposes. Generally, borrowings under each of the credit facilities are available to each borrower separately and mature on the earlier of 364 days from the date of borrowing or the commitment termination date, as the same may be extended. Each of the ~~credit facilities contains~~2021 Credit Facilities contain financial covenants requiring each borrower, with the exception of FE, to maintain a consolidated debt-to-total-capitalization ratio (as defined under each of the ~~credit facilities)~~2021 Credit Facilities) of no more than 65%, and 75% for FET, measured at the end of each fiscal quarter. FE is required under its 2021 Credit Facility to maintain a consolidated interest coverage ratio of not less than 2.50 times, measured at the end of each fiscal quarter for the last four fiscal quarters beginning with the quarter ending December 31, 2021.

FirstEnergy’s ~~revolving credit facilities~~2021 Credit Facilities bear interest at fluctuating interest rates, primarily based on LIBOR. LIBOR tends to fluctuate based on general interest rates, rates set by the U.S. Federal Reserve and other central banks, the supply of and demand for credit in the London interbank market and general economic conditions. FirstEnergy has not hedged its interest rate exposure with respect to its floating rate debt. Accordingly, FirstEnergy’s interest expense for any particular period will fluctuate based on LIBOR and other variable interest rates. On July 27, 2017, the ~~Financial Conduct Authority~~FCA (the authority that regulates LIBOR)~~, or FCA,~~ announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. Subsequently, on March 5, 2021, ~~ICE Benchmark Administration Limited~~IBA (the entity that calculates and publishes LIBOR)~~, or IBA,~~ and FCA made public statements regarding the future cessation of LIBOR. IBA permanently ceased publication for 1-week and 2-month LIBOR settings and all settings for non-USD LIBOR on December 31, 2021. According to the FCA, IBA will permanently cease to publish ~~each of the~~overnight, 1-month, 3-month, 6-month and 12-month LIBOR settings on ~~either December 31, 2021 or~~ June 30, 2023. IBA did not identify any successor administrator in its announcement. The announced final publication date for 1-week and 2-month LIBOR settings and all settings for non-USD LIBOR is December 31, 2021. The announced final publication date for overnight, 1-month, 3-month, 6-month and 12-month LIBOR settings is June 30, 2023. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after such end dates, and there is considerable uncertainty regarding the publication or representativeness of LIBOR beyond such end dates. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, is seeking to replace U.S. dollar LIBOR with a newly created index, ~~(the secured overnight financing rate or SOFR),~~SOFR, calculated based on repurchase agreements backed by treasury securities. FirstEnergy’s 2021 Credit Facilities provide a mechanism to automatically transition to a SOFR-based benchmark when all United States dollar LIBOR settings are no longer provided or are no longer representative. In addition, FirstEnergy’s 2021 Credit Facilities provide an option for the applicable borrower and lender to jointly elect to transition early to a SOFR-based benchmark, or in certain circumstances, an alternative benchmark replacement. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United Kingdom, the United States or elsewhere. To the extent these interest rates increase, interest expense will increase. If sources of capital for us are reduced, capital costs could increase materially. Restricted access to capital markets and/or increased borrowing costs could have an adverse effect on FirstEnergy’s results of operations, cash flows, financial condition and liquidity.

On November 17, 2020, FE and the Utilities and FET and certain of its subsidiaries entered into amendments to the FE Revolving Facility and the FET Revolving Facility, respectively. The amendments provide for modifications and/or waivers of: (i) certain representations and warranties and (ii) certain affirmative and negative covenants, contained therein, which allowed FirstEnergy to regain compliance with such provisions. In addition, among other things, the amendment to the FE Revolving Facility reduces the sublimit applicable to FE to $1.5 billion, and the amendments increased certain tiers of pricing applicable to borrowings under the credit facilities.

On November 23, 2020, JCP&L, ME, Penn, TE and WP, borrowed $950 million in the aggregate under the FE Revolving Facility, bringing the outstanding principal balance under the FE Revolving Facility to $1.2 billion, with $1.3 billion of remaining availability under the FE Revolving Facility. On November 23, 2020, FET and ATSI, borrowed $1 billion in the aggregate under the FET Revolving Facility, bringing the outstanding principal balance under the FET Revolving Facility to $1 billion, with no remaining availability under the FET Revolving Facility. FE, FET and certain of their respective subsidiaries increased their borrowings under the Revolving Facilities as a proactive measure to increase their respective cash positions and preserve financial flexibility.

~~The following table summarizes the borrowings and repayments under the FE and FET Revolving Credit Facilities since December 31, 2020:~~

FE Revolving Facility FET Revolving Facility
(in millions) FE TE WP ME Penn JCP&L Total FET ATSI Total
Borrowings as of December 31, 2020 $ 350 $ 100 $ 150 $ 100 $ 50 $ 450 $ 1,200 $ 850 $ 150 $ 1,000
Repayments:
March 23, 2021 (250) — — — — — (250) (500) — (500)
June 10, 2021 (50) — — — — (450) (500) — — —
June 30, 2021 (50) — — — (50) — (100) (350) — (350)
Total Repayments (350) — — — (50) (450) (850) (850) — (850)
Borrowings as of June 30, 2021 $ — $ 100 $ 150 $ 100 $ — $ — $ 350 $ — $ 150 $ 150

6147

FirstEnergy had ~~$500~~$350 million ~~and $2.2 billion~~ of outstanding short-term borrowings as of ~~June 30, 2021~~March 31, 2022, and no short-term borrowings as of December 31, ~~2020, respectively.~~2021. FirstEnergy’s available liquidity from external sources as of ~~July 21, 2021,~~April 18, 2022, was as follows:

Borrower(s) Type Maturity Commitment Available Liquidity
(In millions)
FirstEnergy(1)
Revolving December 2022 $ 2,500 $ 2,496
FET(2)
Revolving December 2022 1,000 1,000
Subtotal $ 3,500 $ 3,496
Cash and cash equivalents — 460
Total $ 3,500 $ 3,956

~~(1)FE and the Utilities. Available liquidity includes impact of $4 million of LOCs issued under various terms.~~

~~(2)Includes FET and the Transmission Companies.~~


Revolving Credit Facility	Maturity	Commitment		Available Liquidity
		(In millions)
FE and FET	October 2026	$	1,000	$	647
Ohio Companies	October 2026	800		800
Pennsylvania Companies	October 2026	950		950
JCP&L	October 2026	500		499
MP and PE	October 2026	400		400
Transmission Companies	October 2026	850		850
	Subtotal	$	4,500	$	4,146
Cash and cash equivalents		—		383
	Total	$	4,500	$	4,529

The following table summarizes ~~the borrowing sublimits for each borrower under the facilities,~~ the limitations on short-term indebtedness applicable to each borrower under current regulatory approvals and applicable statutory and/or charter limitations as of ~~June 30, 2021:~~March 31, 2022:

Borrower FirstEnergy Revolving Facility
Sublimit FET Revolving Facility
Sublimit Regulatory and
Other Short-Term Debt Limitations
(In millions)
FE $ 1,500 $ — $ — (1)
FET — 1,000 — (1)
OE 500 — 500 (2)
CEI 500 — 500 (2)
TE 300 — 300 (2)
JCP&L 500 — 500 (2)
ME 500 — 500 (2)
PN 300 — 300 (2)
WP 200 — 200 (2)
MP 500 — 500 (2)
PE 150 — 150 (2)
ATSI — 500 500 (2)
Penn 100 — 100 (2)
TrAIL — 400 400 (2)
MAIT — 400 400 (2)

~~(1)No limitations.~~

~~(2)Includes amounts which may be borrowed under the regulated companies’ money pool.~~


Individual Borrower	Regulatory and Other Short-Term Debt Limitations
		(In millions)
FE and FET			N/A
OE, CEI, JCP&L, ME, MP, and ATSI			$	500	(1)
TE and PN			300		(1)
WP			200		(1)
PE			150		(1)
Penn			100		(1)
TrAIL and MAIT			400		(1)

(1) Includes amounts which may be borrowed under the regulated companies’ money pool.

Subject to each borrower’s sublimit, ~~$250 million of~~ the ~~FE Revolving Facility and $100 million of the FET Revolving Facility, is~~amounts noted below are available for the issuance of LOCs (subject to borrowings drawn under the 2021 Credit Facilities) expiring up to one year from the date of issuance. The stated amount of outstanding LOCs will count against total commitments available under each of the 2021 Credit Facilities and against the applicable borrower’s borrowing sublimit. As of March 31, 2022, FirstEnergy had $4 million in outstanding LOCs.


Revolving Credit Facility	LOC Availability
(In millions)
FE and FET	$	100
Ohio Companies	150
Pennsylvania Companies	200
JCP&L	100
MP and PE	100
Transmission Companies	200

The 2021 Credit Facilities do not contain provisions that restrict the ability to borrow or accelerate payment of outstanding advances in the event of any change in credit ratings of the borrowers. Pricing is defined in “pricing grids,” whereby the cost of funds borrowed under the 2021 Credit Facilities isare related to the credit ratings of the company borrowing the funds. Additionally, borrowings under each of the 2021 Credit Facilities are subject to the usual and customary provisions for acceleration upon the occurrence of events of default, including a cross-default for other indebtedness in excess of $100 million.

As of ~~June 30, 2021,~~March 31, 2022, the borrowers were in compliance with the applicable interest coverage and debt-to-total-capitalization ratio covenants in each case as defined under the ~~respective~~2021 Credit Facilities.

6248

FirstEnergy Money Pools

FirstEnergy’s utility operating subsidiary companies also have the ability to borrow from each other and FE to meet their short-term working capital requirements. Similar but separate arrangements exist among FirstEnergy’s unregulated companies with AE Supply, FE, FET, FEV and certain other unregulated subsidiaries. FESC administers these money pools and tracks surplus funds of FE and the respective regulated and unregulated subsidiaries, as the case may be, as well as proceeds available from bank borrowings. Companies receiving a loan under the money pool agreements must repay the principal amount of the loan, together with accrued interest, within 364 days of borrowing the funds. The rate of interest is the same for each company receiving a loan from their respective pool and is based on the average cost of funds available through the pool. The average interest rate for borrowings inthrough the ~~second~~first quarter of ~~2021~~2022 was ~~1.75%~~0.37% per annum for the regulated companies’ money pool and ~~1.06%~~0.52% per annum for the unregulated companies’ money pool.

Long-Term Debt Capacity

FE’s and its subsidiaries’ access to capital markets and costs of financing are influenced by the credit ratings of their securities. The following table displays FE’s and its subsidiaries’ credit ratings as of ~~July 19, 2021:~~April 18, 2022:

Corporate Credit Rating

Senior Secured

Senior Unsecured

Outlook/~~Watch~~CreditWatch (1)

Issuer

S&P

Moody’s

Fitch

S&P

Moody’s

Fitch

S&P

Moody’s

Fitch

S&P

Moody’s

Fitch

BBBBB-

Ba1

BB+

—

BBBB+

Ba1

BB+

~~CW-N~~S

AGC

BBBB+

Baa2

BBB-

—

~~CW-N~~S

ATSI

BBBBB

BBB-

—

~~BB+~~BBB

BBB

~~CW-N~~S

CEI

BBBBB

Baa2

BBB-

~~BBB~~A-

BBB+

~~BB+~~BBB

Baa2

BBB

~~CW-N~~S

FET

BBBBB-

Baa2

BB+

—

BBBB+

Baa2

BB+

~~CW-N~~S

JCP&L

BBBBB

BBB-

—

~~BB+~~BBB

BBB

~~CW-N~~S

BBBBB

BBB-

—

~~BB+~~BBB

BBB

~~CW-N~~S

MAIT

BBBBB

BBB-

—

~~BB+~~BBB

BBB

~~CW-N~~S

BBBBB

Baa2

BBB-

~~BBB~~A-

BBB+

~~BB+~~BBB

Baa2

—

~~CW-N~~S

BBBBB

BBB-

~~BBB~~A-

BBB+

~~BB+~~BBB

BBB

~~CW-N~~S

BBBBB

Baa1

BBB-

—

~~BB+~~BBB

Baa1

BBB

~~CW-N~~S

Penn

BBBBB

BBB-

~~BBB~~A-

BBB+

—

~~CW-N~~S

BBBBB

Baa2

BBB-

~~BBB~~A-

BBB+

—

~~CW-N~~S

BBBBB

Baa1

BBB-

~~BBB~~A-

BBB+

—

~~CW-N~~S

TrAIL

BBBBB

BBB-

—

~~BB+~~BBB

BBB

~~CW-N~~S

BBBBB

BBB-

~~BBB~~A-

BBB+

—

~~CW-N~~S

(1) S = Stable, P = Positive, N = Negative ~~CW-N = CreditWatch with Negative implications~~

The applicable undrawn and drawn margin on the ~~FE and FET credit facilities~~2021 Credit Facilities are subject to ratings based pricing grids. The applicable fee paid on the undrawn commitments under the ~~FE and FET credit facilities~~2021 Credit Facilities are based on ~~FE and FET’s~~each borrower’s senior unsecured non-credit enhanced debt ratings as determined by S&P and Moody’s. The fee paid on actual borrowings are determined based on each borrower’s senior unsecured non-credit enhanced debt ratings as determined by S&P and Moody’s.

The interest rate payable on approximately ~~$3.85~~$3.0 billion in FE’s senior unsecured notes are subject to adjustments from time to time if the ratings on the notes from any one or more of S&P, Moody’s and Fitch decreases to a rating set forth in the applicable governing documents. Generally a one-notch downgrade by the applicable rating agency may result in a 25 ~~bps~~basis points coupon rate increase beginning at BB, Ba1, and BB+ for S&P, Moody’s and Fitch, respectively, to the extent such rating is applicable to the series of outstanding senior unsecured notes, during the next interest period, subject to an aggregate cap of 2% from issuance interest rate.

Debt capacity is subject to the consolidated ~~debt-to-total-capitalization limits~~interest coverage ratio in the ~~credit facilities previously discussed.~~2021 Credit Facilities. As of ~~June 30, 2021, FE and its subsidiaries~~March 31, 2022, FirstEnergy could ~~issue additional debt~~incur approximately $790 million of ~~approximately $5.3 billion,~~incremental interest expense or incur a ~~$2.9~~$2.0 billion reduction to ~~equity,~~the consolidated interest coverage earnings numerator, as defined under the covenant, and FE would remain within the limitations of the financial ~~covenants required~~covenant requirements by the ~~FE Revolving Facility.~~2021 Credit Facilities.

Cash Requirements and Commitments

FirstEnergy has certain obligations and commitments to make future payments under contracts. For an in-depth discussion of FirstEnergy’s cash requirements and commitments, see “Capital Resources and Liquidity - Cash Requirements and Commitments " in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" within FirstEnergy’s Form 10-K for the year ended December 31, 2021 (filed on February 16, 2022).

Changes in Cash Position

As of ~~June 30, 2021,~~March 31, 2022, FirstEnergy had approximately ~~$1.3~~$283 million of cash and cash equivalents and $27 million of restricted cash compared to approximately $1.5 billion of cash and cash equivalents and ~~$58 million of restricted cash compared to approximately $1.7 billion of cash and cash equivalents and $67~~$49 million of restricted cash as of December 31, ~~2020,~~2021, on the Consolidated Balance Sheets.

Cash Flows From Operating Activities

FirstEnergy's most significant sources of cash are derived from electric service provided by its distribution and transmission operating subsidiaries. ~~Beyond the cash settlement and tax sharing payments to the FES Debtors in the first quarter of 2020, the~~The most significant use of cash from operating activities is buying electricity to serve non-shopping customers and paying fuel suppliers, employees, tax authorities, lenders and others for a wide range of materials and services.

FirstEnergy’s Consolidated Statement of Cash Flows combines cash flows from discontinued operations with cash flows from continuing operations within each cash flow category. For the six months ended June 30, 2020, cash flows from operating activities includes income from discontinued operations of $52 million.

In the first ~~six~~three months of ~~2021,~~2022, cash provided from operating activities was approximately ~~$1.3 billion~~$355 million compared to ~~$150~~$533 million in the same period of ~~2020.~~2021. The ~~increase~~decrease in cash provided from operating activities is primarily due to rate refunds and rate credits provided to Ohio customers during the first quarter of 2022 under the PUCO-approved Ohio Stipulation, higher operating expenses from lower capitalization of certain vegetation management and corporate support costs, and the absence of ~~a $978 million cash settlement and tax sharing payment made to~~accounts receivable working capital improvements in the ~~FES Debtors upon their emergence in February 2020, increased sales, impact~~first quarter of 2021, when collection activity improved since the start of the ~~distribution rider~~pandemic. These decreases in cash flow from operating activities are partially offset by cash flow generated from capital investments made since the first quarter of 2021 and ~~transmission investment recovery, and increased collections~~improvements in accounts payable working capital from the implementation of ~~customer account receivable balances.~~FE Forward initiatives.

Cash Flows From Financing Activities

In the first ~~six~~three months of ~~2021,~~2022, cash ~~provided from (used for)~~used for financing activities was ~~$(662)~~$964 million compared to ~~$742~~$509 million during the same period of ~~2020.~~2021. The following table summarizes ~~new debt~~ financing ~~redemptions, repayments, short-term borrowings~~activities for the first three months of 2022 and ~~dividends:~~2021:

For the Six Months Ended June 30,
Securities Issued or Redeemed / Repaid 2021 2020
(In millions)
New Issues
Unsecured notes $ 1,150 $ 3,000
Senior secured notes 150 —
FMBs 200 175
$ 1,500 $ 3,175
Redemptions / Repayments
Term loan $ — $ (750)
Unsecured notes — (250)
FMBs — (50)
Senior secured notes (33) (32)
$ (33) $ (1,082)
Short-term borrowings redemptions, net $ (1,700) $ (885)
Common stock dividend payments $ (424) $ (422)


	For the Three Months Ended March 31,
Securities Issued or Redeemed / Repaid	2022		2021
	(In millions)







New issues - Unsecured notes	$	—	$	500

Redemptions / Repayments:

Unsecured notes	(1,000)		—

FMBs	(25)		—

Senior secured notes	(21)		(29)
	$	(1,046)	$	(29)

Make-whole premiums paid on debt redemptions	$	(38)	$	—

Short-term borrowings/(redemptions), net	$	350	$	(750)



Common stock dividend payments	$	(222)	$	(212)

In December 2021, notice of redemption was provided for all remaining $850 million of FE’s 4.25% Notes, Series B, due 2023, which was completed on January 20, 2022, and with a make-whole premium of approximately $38 million.

On ~~March 19, 2021, FET issued $500~~January 27, 2022, CEI instructed its indenture trustee to provide notice of redemption for all remaining $150 million of ~~2.866% senior unsecured notes~~CEI’s 2.77% Senior Notes, Series A, due ~~2028. Proceeds from the issuance were used to repay short-term borrowings under the FET Revolving Facility.~~2034, for redemption which occurred on March 14, 2022.

~~On April 9, 2021, MP issued an additional $200~~Also on January 27, 2022, TE instructed its indenture trustee to provide notice of partial redemption for $25 million of its 3.55% first mortgage bonds due 2027 at an effective interest rate of approximately 2.06%. Proceeds from the issuance were used to fund MP’s ongoing capital expenditures, for working capital needs and for other general corporate purposes.

~~On May 6, 2021, TE issued $150 million of~~TE’s 2.65% ~~senior secured notes due 2028. Proceeds from the issuance were used to repay short-term borrowings, fund TE’s ongoing capital expenditures and for other general corporate purposes.~~

~~On May 24, 2021, MAIT issued an additional $150 million of its 4.10% senior notes~~Senior Secured Notes, due 2028, at an effective interest rate of approximately 2.55%. Proceeds from the issuance were used to repay borrowings outstanding under FirstEnergy’s regulated company money pool, to fund MAIT’s ongoing capital expenditures, to fund working capital and for ~~other general corporate purposes.~~partial redemption which occurred on February 11, 2022.

6450

On June 10, 2021, JCP&L issued $500 million of 2.75% senior notes due 2032. Proceeds from the issuance were used to repay $450 million of short-term debt under the FE Revolving Facility, storm recovery and restoration costs and expenses, to fund JCP&L’s ongoing capital expenditures, working capital requirements and for other general corporate purposes.

Cash Flows From Investing Activities

Cash used for investing activities in the first ~~six~~three months of ~~2021~~2022 principally represented cash used for property additions. The following table summarizes investing activities for the first ~~six~~three months of ~~2021~~2022 and ~~2020:~~2021:


		For the Six Months Ended June 30,				Increase			For the Three Months Ended March 31,				Increase
Cash Used for Investing Activities	Cash Used for Investing Activities	2021		2020		(Decrease)		Cash Used for Investing Activities	2022		2021		(Decrease)
		(In millions)							(In millions)
Property Additions:	Property Additions:							Property Additions:
Regulated Distribution	Regulated Distribution	$	667	$	724	$	(57)	Regulated Distribution	$	317	$	321	$	(4)
Regulated Transmission	Regulated Transmission	530		539		(9)		Regulated Transmission	197		273		(76)
Corporate / Other	Corporate / Other	29		29		—		Corporate / Other	6		10		(4)
Proceeds from sale of Yards Creek	Proceeds from sale of Yards Creek	(155)		—		(155)		Proceeds from sale of Yards Creek	—		(155)		155
Investments		6		14		(8)

Asset removal costs	Asset removal costs	111		102		9		Asset removal costs	49		47		2
Other	Other	(14)		(2)		(12)		Other	23		3		20
		$	1,174	$	1,406	$	(232)		$	592	$	499	$	93

Cash used for investing activities for the ~~second~~first quarter of ~~2021 decreased $232~~2022 increased $93 million, compared to the same period of ~~2020,~~2021, primarily due to the absence of proceeds from the sale of Yards Creek ~~and~~received in the first quarter of 2021, partially offset by lower ~~capital expenditures.~~property additions.

6551

GUARANTEES AND OTHER ASSURANCES

FirstEnergy has various financial and performance guarantees and indemnifications, which are issued in the normal course of business. These contracts include performance guarantees, stand-by letters of credit, debt guarantees, surety bonds and indemnifications. FirstEnergy enters into these arrangements to facilitate commercial transactions with third parties by enhancing the value of the transaction to the third party. The maximum potential amount of future payments FirstEnergy and its subsidiaries could be required to make under these guarantees as of ~~June 30, 2021,~~March 31, 2022, was approximately ~~$1.2~~$1.1 billion, as summarized below:


Guarantees and Other Assurances	Maximum Exposure
	(In millions)









FE’s Guarantees on Behalf of its Consolidated Subsidiaries
Deferred compensation arrangements	$	~~492~~520
Vehicle leases	75
~~AE Supply asset sales(1)~~	15
Other	7
	~~589~~602

FE’s Guarantees on Other Assurances
Surety Bonds	~~329~~330
~~Global holding facility~~	~~108~~
Deferred compensation arrangements	~~132~~134
LOCs ~~and other~~	114
	~~580~~468







Total Guarantees and Other Assurances	$	~~1,169~~1,070

~~(1)~~As a condition to closing AE Supply’s transfer of Pleasants Power Station and as contemplated under the FES Bankruptcy settlement agreement, FE has provided two guarantees for certain retained liabilities of AE Supply, the first totaling up to $15 million for certain environmental liabilities associated with Pleasants Power Station, and the second being limited solely to environmental liabilities for the McElroy’s Run CCR Impoundment Facility, for which an ARO of $47 million is reflected on FirstEnergy’s Consolidated Balance Sheet, and which is not reflected on the table above.

Collateral and Contingent-Related Features

In the normal course of business, FE and its subsidiaries may enter into physical or financially settled contracts for the sale and purchase of electric capacity, energy, fuel and emission allowances. Certain agreements contain provisions that require FE or its subsidiaries to post collateral. This collateral may be posted in the form of cash or credit support with thresholds contingent upon FE’s or its subsidiaries’ credit rating from each of the major credit rating agencies. The collateral and credit support requirements vary by contract and by counterparty.

As of~~June 30, 2021, $33~~ March 31, 2022, $52 million of collateral has been posted by FE or its subsidiaries ~~of which, $32 million was posted as a result of the credit rating downgrades~~and is included in ~~the fourth quarter of 2020.~~Prepaid taxes and other current assets on FirstEnergy’s Consolidated Balance Sheets.

These credit-risk-related contingent features stipulate that if the subsidiary were to be downgraded or lose its investment grade credit rating (based on its senior unsecured debt rating), it would be required to provide additional collateral. The following table discloses the potential additional credit rating contingent contractual collateral obligations as of ~~June 30, 2021:~~March 31, 2022:

Potential Collateral Obligations Utilities and FET FE Total
(In millions)
Contractual Obligations for Additional Collateral
Upon further downgrade $ 37 $ — $ 37
Surety Bonds (collateralized amount)(1)
56 258 314
Total Exposure from Contractual Obligations $ 93 $ 258 $ 351


Potential Collateral Obligations		Utilities and Transmission Companies		FE		Total
	(In millions)
Contractual Obligations for Additional Collateral

Upon further downgrade		$	43	$	—	$	43

Surety Bonds (collateralized amount)(1)		57		258		315
Total Exposure from Contractual Obligations		$	100	$	258	$	358

(1)Surety bonds are not tied to a credit rating. Surety Bonds’ impact assumes maximum contractual obligations, which is ordinarily 100% of the face amount of the surety bond except with ~~the~~ respect to $39 million of surety bond obligations for which the collateral obligation is capped at 60% of the face amount, and typical obligations require 30 days to cure.

~~Other Commitments and Contingencies~~

FE is a guarantor under a $120 million syndicated senior secured term loan facility due November 12, 2024, under which Global Holding’s outstanding principal balance was $108 million as of June 30, 2021. Signal Peak, Global Rail, Global Mining Group,

LLC and Global Coal Sales Group, LLC, each being a direct or indirect subsidiary of Global Holding, and FE continue to provide their joint and several guaranties of the obligations of Global Holding under the facility.

In connection with the facility, 69.99% of Global Holding’s direct and indirect membership interests in Signal Peak, Global Rail and their affiliates along with FEV’s and WMB Marketing Ventures, LLC’s respective 33-1/3% membership interests in Global Holding, are pledged to the lenders under the current facility as collateral.

MARKET RISK INFORMATION

FirstEnergy uses various market risk sensitive instruments, including derivative contracts, primarily to manage the risk of price and interest rate fluctuations. FirstEnergy’s Risk Policy Committee, comprised of members of senior management, provides general oversight for risk management activities throughout FirstEnergy.

Commodity Price Risk

FirstEnergy has limited exposure to financial risks resulting from fluctuating commodity prices, such as prices for electricity, coal and energy transmission. FirstEnergy’s Risk Management and Risk Policy Committees are responsible for promoting the

effective design and implementation of sound risk management programs and oversees compliance with corporate risk management policies and established risk management practice.

The valuation of derivative contracts is based on observable market information. As of ~~June 30, 2021,~~March 31, 2022, FirstEnergy has a net asset of $3$1 million in non-hedge derivative contracts that are related to FTRs at certain of the Utilities. FTRs are subject to regulatory accounting and do not impact earnings.

Equity Price Risk

As of ~~June 30, 2021,~~March 31, 2022, the FirstEnergy pension plan assets were allocated approximately as follows: ~~34%~~35% in equity securities, ~~33%~~25% in fixed income securities, 8%12% in ~~absolute return strategies, 9%~~alternatives, 10% in real estate, 7%11% in private debt/equity, 2%5% in derivatives and 7%2% in cash and short-term securities. ~~As further discussed below, due~~Due to the American Rescue Plan Act of 2021, under current assumptions, including an expected annual return on assets of ~~7.50%~~7.5%, FirstEnergy does not currently expect to have a required contribution to the pension plan. However, a decline in the value of pension plan assets could result in additional funding ~~requirements. Additionally,~~requirements and FirstEnergy may elect to contribute to the pension plan voluntarily. As of ~~June 30, 2021,~~March 31, 2022, FirstEnergy’s OPEB plan assets were allocated approximately as follows: ~~52%~~50% in equity securities, ~~45%~~47% in fixed income securities and 3% in cash and short-term securities. Investment markets experienced elevated market volatility during 2020 as a result of the U.S. general election and the COVID-19 pandemic. In order to reduce the effect of market volatility on the plan’s funded status and to preserve capital gains experienced during 2020, approximately $1.4 billion of return-seeking assets were sold (including approximately $800 million of equity securities) during the third quarter of 2020. As previously disclosed, the FirstEnergy pension plan assets were expected to be reinvested in return-seeking investments during 2021 to more consistently align the pension trust portfolios to FirstEnergy’s target asset allocations. In the first half of 2021, the return-seeking investments were increased by approximately 15%, and as a result, as of June 30, 2021, the FirstEnergy pension plan return-seeking assets are now consistently aligned to the target asset allocation. See Note 5,4, “Pension and Other Post-Employment Benefits,” of the Notes to Consolidated Financial Statements for additional details on FirstEnergy’s pension and OPEB plans.

In the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, FirstEnergy’s pension and OPEB plan assets have ~~gained~~lost approximately ~~3.3%~~5.8% and ~~8.1%~~4.8%, respectively, as compared to an annual expected return on plan assets of 7.5%.

Interest Rate Risk

FirstEnergy recognizes net actuarial gains or losses for its pension and OPEB plans in the fourth quarter of each ~~fiscal~~ year and whenever a plan is determined to qualify for a remeasurement. A primary factor contributing to these actuarial gains and losses are changes in the discount rates used to value pension and OPEB obligations as of the measurement date and the difference between expected and actual returns on the plans’ assets. FirstEnergy utilizes a spot rate approach in the estimation of the components of benefit cost by applying specific spot rates along the full yield curve to the relevant projected cash flows. As of March 31, 2022, the spot rate was 3.75% and 3.65% for pension and OPEB obligations, respectively, as compared to 3.02% and 2.84% as of December 31, 2021, respectively. At this time, FirstEnergy is unable to determine or project the mark-to-market adjustment that may be recorded as of December 31, ~~2021.~~2022.

CREDIT RISK

Credit risk is the risk that FirstEnergy would incur a loss as a result of nonperformance by counterparties of their contractual obligations. FirstEnergy maintains credit policies and procedures with respect to counterparty credit (including requirement that counterparties maintain specified credit ratings) and require other assurances in the form of credit support or collateral in certain circumstance in order to limit counterparty credit risk. In addition, in response to the COVID-19 pandemic, FirstEnergy has increased reviews of counterparties, customers and industries that have been negatively impacted, which could affect meeting contractual obligations with FirstEnergy. FirstEnergy has concentrations of suppliers and customers among electric utilities, financial institutions and energy marketing and trading companies. These concentrations may impact FirstEnergy’s overall exposure to credit risk, positively or negatively, as counterparties may be similarly affected by changes in economic, regulatory or

other conditions. In the event an energy supplier of the Ohio Companies, Pennsylvania Companies, JCP&L or PE defaults on its obligation, the affected company would be required to seek replacement power in the market. In general, subject to regulatory review or other processes, it is expected that appropriate incremental costs incurred by these entities would be recoverable from customers through applicable rate mechanisms, thereby mitigating the financial risk for these entities. FirstEnergy’s credit policies to manage credit risk include the use of an established credit approval process, daily credit mitigation provisions, such as margin, prepayment or collateral requirements, and surveys to determine negative impacts to essential vendors as a result of the COVID-19 pandemic. FE and its subsidiaries may request additional credit assurance, in certain circumstances, in the event that the counterparties’ credit ratings fall below investment grade, their tangible net worth falls below specified percentages or their exposures exceed an established credit limit.

OUTLOOK

~~AMERICAN RESCUE PLAN ACT OF 2021~~

On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021. While the Act is primarily an economic stimulus package, it also, among other changes, expanded the scope of Section 162(m) of the Internal Revenue Code that limits deductions on certain executive officer compensation. FirstEnergy does not currently expect these changes to have a material impact.

STATE REGULATION

Each of the Utilities' retail rates, conditions of service, issuance of securities and other matters are subject to regulation in the states in which it operates - in Maryland by the MDPSC, in New Jersey by the NJBPU, in Ohio by the PUCO, in Pennsylvania by the PPUC, in West Virginia by the WVPSC and in New York by the NYPSC. The transmission operations of PE in Virginia, ATSI in Ohio, and the Transmission Companies in Pennsylvania are subject to certain regulations of the VSCC, PUCO and PPUC, respectively. In addition, under Ohio law, municipalities may regulate rates of a public utility, subject to appeal to the PUCO if not acceptable to the utility. Further, if any of the FirstEnergy affiliates were to engage in the construction of significant new transmission facilities, depending on the state, they may be required to obtain state regulatory authorization to site, construct and operate the new transmission facility.

MARYLAND

PE operates under MDPSC approved base rates that were effective as of March 23, 2019. PE also provides SOS pursuant to a combination of settlement agreements, MDPSC orders and regulations, and statutory provisions. SOS supply is competitively procured in the form of rolling contracts of varying lengths through periodic auctions that are overseen by the MDPSC and a third-party monitor. Although settlements with respect to SOS supply for PE customers have expired, service continues in the same manner until changed by order of the MDPSC. PE recovers its costs plus a return for providing SOS. PE expects to file a new base rate case in early 2023, consistent with the MDPSC’s order issued on March 22, 2019.

The EmPOWER Maryland program requires each electric utility to file a plan to reduce electric consumption and demand 0.2% per year, up to the ultimate goal of 2% annual savings, for the duration of the ~~2018-2020 and~~ 2021-2023 EmPOWER Maryland program cycles to the extent the MDPSC determines that cost-effective programs and services are available. PE's approved ~~2018-2020~~2021-2023 EmPOWER Maryland plan continues and expands upon prior years' programs ~~and adds new programs,~~ for a projected total ~~cost~~investment of ~~$116~~approximately $148 million over the three-year period. PE recovers program ~~costs~~investments with a return through an annually reconciled surcharge, with most costs subject to recovery over a five-year ~~amortization.~~period with a return on the unamortized balance. Maryland law only allows for the utility to recover lost distribution revenue attributable to energy efficiency or demand reduction programs through a base rate case proceeding, and to date, such recovery has not been sought or obtained by PE. On September 1, 2020, PE filed its proposed plan for the 2021-2023 EmPOWER Maryland program cycle. The new plan largely continues PE’s existing programs and is estimated to cost approximately $148 million over the three-year period. The MDPSC approved the plan on December 18, 2020.

On March 22, 2019, MDPSC issued an order approving PE’s 2018 base rate case filing, which among other things, approved an annual rate increase of $6.2 million, approved three of the four EDIS programs for four years to fund enhanced service reliability programs, directed PE to file a new depreciation study within 18 months, and ordered the filing of a new base rate case in four years to correspond to the ending of the approved EDIS programs. On September 22, 2020, PE filed its depreciation study reflecting a slight increase in expense and is seeking the difference to be deferred for future recovery in PE’s next base rate case. On January 29, 2021, the Maryland Office of People's Counsel filed testimony recommending an annual reduction in depreciation expense of $10.8 million, and the staff of the MDPSC filed testimony recommending an annual reduction of $9.6 million. On May 26, 2021, the judge issued a Proposed Order which would reduce PE’s base rates by $2.1 million. PE filed an appeal of the Proposed Order to the MDPSC on June 25, 2021. On July 15, 2021, the Maryland Office of People’s Counsel and staff submitted reply memoranda arguing that the PE appeal be denied and the Proposed Order be affirmed.

Maryland’s Governor issued an order on March 16, 2020, forbidding utilities from terminating residential service or charging late fees for non-payment for the duration of the COVID-19 pandemic. On April 9, 2020, the MDPSC issued an order allowing utilities to track and create a regulatory asset for future recovery of all prudently incurred incremental costs arising from the COVID-19 pandemic, including incremental uncollectible expense, incurred from the date of the Governor’s order (or earlier if the utility could show that the expenses related to suspension of service terminations). In July 2020, the MDPSC subsequently issued

orders allowing Maryland electric and gas utilities to resume residential service terminations for non-payment on November 15, 2020, subject to various restrictions, and clarifying that utilities could resume charging late fees on October 1, 2020. On June 16, 2021, the MDPSC assigned $4 million to PE of COVID-19 relief that was allocated by the Maryland General Assembly to retire residential customer utility arrearages.

NEW JERSEY

JCP&L operates under NJBPU approved rates that were effective for customers as of ~~January~~November 1, ~~2017.~~2021. JCP&L provides BGS for retail customers who do not choose a third-party EGS and for customers of third-party EGSs that fail to provide the contracted service. All New Jersey EDCs participate in this competitive BGS procurement process and recover BGS costs directly from customers as a charge separate from base rates.

JCP&L has instituted energy efficiency and peak demand reduction programs in accordance with the New Jersey Clean Energy Act as approved by the NJBPU in April 2021. The NJBPU approved plans include recovery of lost revenues resulting from the programs and a three-year plan including total program costs of $203 million, of which $158 million of investment is recovered over a ten-year amortization period with a return as well as operations and maintenance expenses and financing costs of $45 million recovered on an annual basis.

In December 2017, the NJBPU issued proposed rules to modify its current CTA policy in base rate cases to: (i) calculate savings using a five-year look back from the beginning of the test year; (ii) allocate savings with 75% retained by the company and 25% allocated to ~~ratepayers;~~customers; and (iii) exclude transmission assets of electric distribution companies in the savings ~~calculation, which were published in the NJ Register in the first quarter of 2018. JCP&L filed comments supporting the proposed rulemaking.~~calculation. On January 17, 2019, the NJBPU approved the proposed CTA rules with no changes. On May 17, 2019, the NJ Rate Counsel filed an appeal with the Appellate Division of the Superior Court of New Jersey and on June 7, 2021, the ~~court~~Superior Court issued an ~~Order~~order reversing the NJBPU’s CTA rules and remanded the case back to the NJBPU. Specifically, the ~~court’s~~Court’s ruling requires 100% of the CTA savings to be credited to customers in lieu of the NJBPU’s current policy requiring 25%. ~~The court’s ruling~~On December 6, 2021, the NJBPU issued proposed amended rules modifying its current CTA policy in base rate cases consistent with the Superior Court’s June 7, 2021 order. Comments were filed on March 3, 2022. Once the proposed rules are final, they will be applied on a prospective ~~basis.~~basis in a future base rate case, however, it is not expected to have a material adverse effect on FirstEnergy’s results or financial condition.

~~On February 18, 2020, JCP&L submitted a filing with the NJBPU requesting a distribution base rate increase.~~ On October 28, 2020, the NJBPU approved a stipulated settlement between JCP&L and various parties, ~~providing~~resolving JCP&L’s request for ~~among other things,~~distribution base rate increase. The settlement provided for a $94 million annual base distribution revenues increase for JCP&L based on an ROE of 9.6%, which ~~will become~~became effective for customers on November 1, 2021. ~~Until the rates become effective, and starting on January 1, 2021,~~The settlement additionally provided that JCP&L would be subject to a management audit. The management audit began ~~to amortize an existing regulatory liability totaling approximately $86 million to offset the base rate increase that otherwise would have occurred~~ in this period. The parties also agreed that the actual net gain from the sale of JCP&L’s interest in the Yards Creek pumped-storage hydro generation facility in New Jersey (210 MWs), as further discussed below, be applied to reduce JCP&L’s existing regulatory asset for previously deferred storm costs. Lastly, the parties agreed that approximately $95 million of Reliability Plus capital investment for projects through December 31, 2020, is included in rate base effective December 31, 2020, with a final prudence review of only those capital investment projects from July 1, 2020, through December 31, 2020, to occur in January 2021. During the first quarter of 2021, JCP&L submitted its review of storm costs, filed a written report for its Reliability Plus projects placed in service from July 1, 2020 through December 31, 2020, and submitted the vegetation management report, all required under the stipulation of settlement. On March 24, 2021, JCP&L, NJ Rate Counsel and the NJBPU Staff submitted a stipulation of settlement to the NJBPU, which was approved on April 7, 2021, providing that the Reliability Plus projects placed into service from July 1, 2020 through December 31, 2020 were reasonable and prudent.

On April 6, 2020, JCP&L signed an asset purchase agreement with Yards Creek Energy, LLC, a subsidiary of LS Power to sell its 50% interest in the Yards Creek pumped-storage hydro generation facility. Subject to terms and conditions of the agreement, the base purchase price is $155 million. As of December 31, 2020, assets held for sale on FirstEnergy’s Consolidated Balance Sheets associated with the transaction consist of property, plant and equipment of $45 million, which is included in the regulated distribution segment. On July 31, 2020, FERC approved the transfer of JCP&L’s interest in the hydroelectric operating license. On October 8, 2020, FERC issued an order authorizing the transfer of JCP&L’s ownership interest in the hydroelectric facilities. On October 28, 2020, the NJBPU approved the sale of Yards Creek. With the receipt of all required regulatory approvals, the transaction was consummated on March 5,May 2021 and resulted in a $109 million gain within the regulated distribution segment. As further discussed above, the gain from the transaction was applied against and reduced JCP&L’s existing regulatory asset for previously deferred storm costs and, as a result, was offset by expense in the “Amortization of regulatory assets, net”, line on the Consolidated Statements of Income, resulting in no earnings impact to FirstEnergy or JCP&L.is currently ongoing.

On August 27, 2020, JCP&L filed an AMI Program with the NJBPU, which ~~proposes~~proposed the deployment of approximately 1.2 million advanced meters over a three-year period beginning on January 1, 2023, at a total cost of approximately $418 million, including the pre-deployment phase. The then proposed 3-year deployment iswas part of the 20-year AMI Program that ~~is expected~~was projected to cost ~~a total of~~ approximately $732 million and ~~proposes~~proposed a cost recovery mechanism through a separate AMI tariff rider. On ~~February 26,~~September 14, 2021, JCP&L ~~filed~~submitted a ~~letter requesting a suspension~~supplemental filing, which reflected increases in the AMI Program’s costs. Under the revised AMI Program, during the first six years of the ~~procedural schedule to allow for settlement discussions, which was granted on March 5, 2021.~~

~~On June 10, 2020, the NJBPU issued an order establishing a framework for the filing~~AMI Program from 2022 through 2027, JCP&L estimates costs of utility-run energy efficiency and peak demand reduction programs in accordance with the New Jersey Clean Energy Act. Under the established framework, JCP&L will recover its program investments over a ten-year amortization period and its$494 million, consisting of capital expenditures of approximately $390 million, incremental operations and maintenance expenses of approximately $73 million and cost of removal of $31 million. On February 8, 2022, JCP&L filed with the NJBPU a stipulation entered into with the NJBPU staff, NJ Rate Counsel and others, that, pending NJBPU approval, would affirm the terms of the revised AMI Program. The Stipulation, which was approved by NJBPU order on ~~an annual basis,~~February 23, 2022, also provides that the revised AMI Program-related capital costs, the legacy meter stranded costs, and the operations and maintenance expense will be ~~eligible~~deferred and placed in regulatory assets, with such amounts sought to ~~receive lost revenues on energy savings that resulted from its programs and~~ be ~~eligible for incentives or subject to penalties based on its annual program performance, beginning~~recovered in the ~~fifth year of its program offerings. On September 25, 2020, JCP&L filed its energy efficiency and peak demand reduction program.~~ JCP&L’s program consists of 11 energy efficiency and peak demand reduction programs and subprograms to be run from July 1, 2021 through June 30, 2024. The program also seeks approval of cost recovery totaling approximately $230 million as well as lost revenues associated with thesubsequent base rate cases.

energy savings resulting from the programs. On April 23, 2021, JCP&L filed a Stipulation of Settlement with the NJBPU for approval of a three-year plan including $203 million in total cost, as well as recovery of lost revenues resulting from the programs. On April 27, 2021, the NJBPU issued an Order approving the Stipulation of Settlement.

On July 2, 2020, the NJBPU issued an order allowing New Jersey utilities to track and create a regulatory asset for future recovery of all prudently incurred incremental costs arising from the COVID-19 pandemic beginning March 9, 2020 ~~through September 30, 2021, or~~and continuing until the New Jersey Governor issues an order stating that the COVID-19 pandemic is no longer in effect. New Jersey utilities can request recovery of such regulatory asset in a stand-alone COVID-19 regulatory asset filing or future base rate case. On October 28, 2020, the NJBPU issued an order expanding the scope of the proceeding to examine all pandemic issues, including recovery of the COVID-19 regulatory assets, by way of a generic proceeding. Through various ~~Executive Orders~~executive orders issued by the New Jersey Governor, ~~Murphy,~~ the moratorium period iswas extended to December 31, 2021. On December 21, 2021, the moratorium on residential disconnections for certain entities providing utility service was extended until March 15, 2022. The moratorium on residential disconnections was not extended for investor-owned electric utilities such as JCP&L, but does require that investor-owned electric public utilities offer qualifying residential customers deferred payment arrangements meeting certain minimum criteria prior to disconnecting service.Additionally, while the moratorium on residential disconnections for certain entities providing electric service was not extended after March 15, 2022, new legislation was enacted on March 25, 2022, prohibiting utilities from disconnecting electric service to customers that have applied for utility bill assistance before June 15, 2022 until such time as the state agency administering the assistance program makes a decision on the application and further requiring that all utilities offer a deferred payment arrangement meeting certain minimum criteria after the state agency’s decision on the application has been made.

~~The recent credit rating actions taken on October 28, 2020, by S&P and Fitch triggered a requirement from various~~Pursuant to an NJBPU orders that JCP&L file a mitigation plan, which was filed on November 5, 2020, to demonstrate that JCP&L has sufficient liquidity to meet its BGS obligations. On December 11, 2020, the NJBPU held a public hearing on the mitigation plan. Written comments on JCP&L’s mitigation plan were submitted on January 8, 2021.

~~On September 23, 2020, the NJBPU issued an Order~~order requiring all New Jersey electric distribution companies to file electric vehicle ~~programs.~~programs, JCP&L filed its ~~electric vehicle~~ program on March 1, ~~2021, which consists~~2021. JCP&L’s proposed electric vehicle program consisted of six sub-programs, including a consumer education and outreach initiative that would begin on January 1, 2022, and continue over a four-year period. The total proposed budget for the electric vehicle program is approximately $50 million, including investments of ~~which~~ $16 million ~~is capital expenditures~~ and ~~$34 million is for~~ operations and maintenance ~~expenses.~~expenses of $34 million. JCP&L is proposing to recover the electric vehicle program costs via a non-bypassable rate clause applicable to all distribution customer rate classes, which ~~would become~~became effective on January 1, 2022. On May 26, 2021, a procedural schedule was set to include evidentiary hearings the week of October 18, 2021. On July 16, 2021, the procedural schedule was extended by thirty days as requested by JCP&L to continue settlement discussions.

On ~~October 28, 2020,~~August 19, 2021, the presiding commissioner issued an order modifying the procedural schedule by extending the procedural schedule by ninety days as requested by JCP&L to continue settlement discussions. On November 12, 2021, JCP&L filed a letter with the presiding commissioner requesting a suspension of the procedural schedule in order to allow the parties to continue settlement discussion. On November 23, 2021, the presiding commissioner entered an order suspending the procedural schedule. JCP&L expects an order from the NJBPU ~~approved a settlement in JCP&L’s distribution rate, and voted that JCP&L will be subject to an upcoming management audit. The management audit began at~~by the end of ~~May 2021 and is currently ongoing.~~the second quarter of 2022.

OHIO

The Ohio Companies operate under PUCO approved base distribution rates ~~approved by the PUCO~~that became effective in 2009. The Ohio Companies currently operate under ESP IV, effective June 1, 2016 and continuing through May 31, 2024, that continues the supply of power to non-shopping customers at a market-based price set through an auction process. ESP IV also continues the Rider DCR, which supports continued investment related to the distribution system for the benefit of customers, with increased revenue caps of $20 million per year from June 1, 2019 through May 31, 2022; and $15 million per year from June 1, 2022 through May 31, 2024. In addition, ESP IV includes: (1) continuation of a base distribution rate freeze through May 31, 2024; (2) a goal across FirstEnergy to reduce CO2 emissions by 90% below 2005 levels by 2045; and (3) contributions, totaling $51 million to: (a) fund energy conservation programs, economic development and job retention in the Ohio Companies’ service territories; (b) establish a fuel-fund in each of the Ohio Companies’ service territories to assist low-income customers; and (c) establish a Customer Advisory Council to ensure preservation and growth of the competitive market in Ohio.

ESP IV further provided for the Ohio Companies to collect DMR revenues, but the SCOH reversed the PUCO’s decision to include DMR in ESP IV and subsequently the PUCO entered an order directing the Ohio Companies to cease further collection through the DMR and credit back to customers a refund of the DMR funds collected since July 2, 2019. On July 15, 2019, the OCC filed an appeal with the SCOH, challenging the PUCO’s exclusion of DMR revenues from the determination of the existence of significantly excessive earnings under ESP IV for OE for calendar year 2017, and claiming a $42 million refund is due to OE customers. On December 1, 2020, the SCOH reversed the PUCO’s exclusion of the DMR revenues from the determination of the existence of significantly excessive earnings under ESP IV for OE for calendar year 2017, and remanded the case to the PUCO with instructions to conduct new proceedings which include the DMR revenues in the analysis, determine the threshold against which the earned return is measured, and make other necessary determinations. FirstEnergy is unable to predict the outcome of these proceedings but has not deemed a liability probable as of June 30, 2021.

On July 23, 2019, Ohio enacted HB 6, which included provisions supporting nuclear energy, as well as a decoupling mechanism for Ohio electric utilities and ending current energy efficiency program mandates. Under HB 6 the energy efficiency program mandates would end on December 31, 2020, provided that statewide energy efficiency mandates are achieved as determined by the PUCO. On February 24, 2021, the PUCO found that statewide energy efficiency mandates had been achieved, and ordered that Ohio electric utilities’ energy efficiency and peak demand reduction cost recovery riders terminate.

On March 31, 2021, Governor DeWine signed HB 128, which, among other things, repealed parts of HB 6, the legislation that established support for nuclear energy supply in Ohio, provided for a decoupling mechanism for Ohio electric utilities, and provided for the ending of current energy efficiency program mandates. HB 128 was effective June 30, 2021. As FirstEnergy would not have financially benefited from the mechanism to provide support to nuclear energy in Ohio, there is no expected additional impact to FirstEnergy due to the repeal of that provision in HB 128.

As further discussed below, in connection with a partial settlement with the OAG and other parties, the Ohio Companies filed an application with the PUCO on February 1, 2021, to set the respective decoupling riders (CSR) to zero. On February 2, 2021, the PUCO approved the application. While the partial settlement with the OAG focused specifically on decoupling, the Ohio Companies will of their own accord not seek to recover lost distribution revenue. FirstEnergy is committed to pursuing an open dialogue with stakeholders in an appropriate manner with respect to the numerous regulatory proceedings currently underway as further discussed herein. As a result of the partial settlement, and the decision to not seek lost distribution revenue, FirstEnergy recognized a $108 million pre-tax charge ($84 million after-tax) in the fourth quarter of 2020, and $77 million (pre-tax) of which is associated with forgoing collection of lost distribution revenue. On March 31, 2021, FirstEnergy announced that the Ohio Companies will proactively refund to customers amounts previously collected under decoupling, with interest, which total approximately $27 million. On April 22, 2021, in anticipation of the effective date of HB 128 and in accordance with HB 128’s provisions regarding the prompt refund of decoupling funds, the Ohio Companies filed an application with the PUCO to modify CSR to return such amount over twelve months commencing June 1, 2021. On June 17, 2021, the Ohio Companies agreed to modify their proposal to return such amount in a single lump sum to customers, beginning on July 1, 2021, or promptly upon obtaining PUCO approval. On July 7, 2021, the PUCO issued an order approving the Ohio Companies’ modified application and directed that all funds collected through CSR be refunded to customers over a single billing cycle beginning August 1, 2021.

On July 17, 2019, the PUCO approved, with no material modifications, a settlement agreement that provides for the implementation of the Ohio Companies’ first phase of grid modernization plans, including the investment of $516 million over three years to modernize the Ohio Companies’ electric distribution system, and for all tax savings associated with the Tax Act to flow back to customers. The settlement had broad support, including PUCO staff, the OCC, representatives of industrial and commercial customers, a low-income advocate, environmental advocates, hospitals, competitive generation suppliers and other parties.

In March 2020, the PUCO issued entries directing utilities to review their service disconnection and restoration policies and suspend, for the duration of the COVID-19 pandemic, otherwise applicable requirements that may impose a service continuity hardship or service restoration hardship on customers. The Ohio Companies are utilizing their existing approved cost recovery mechanisms where applicable to address the financial impacts of these directives. On July 31, 2020, the Ohio Companies filed with the PUCO their transition plan and requests for waivers to allow for the safe resumption of normal business operations, including service disconnections for non-payment. On September 23, 2020, the PUCO approved the Ohio Companies’ transition plan, including approval of the resumption of service disconnections for non-payment, which the Ohio Companies began on October 5, 2020.

On July 29, 2020, the PUCO consolidated the Ohio Companies’ applications for determination of the existence of significantly excessive earnings, or SEET, under ESP IV for calendar years 2018 and 2019, which had been previously filed on July 15, 2019, and May 15, 2020, respectively, and set a procedural schedule with evidentiary hearings. On September 4, 2020, the PUCO opened its quadrennial review of ESP IV, consolidated it with the Ohio Companies’ 2018 and 2019 SEET Applications, and set a procedural schedule for the consolidated matters. On October 29, 2020, the PUCO issued an entry extending the deadline for the Ohio Companies to file quadrennial review of ESP IV testimony and supplemental SEET testimony to March 1, 2021, with the evidentiary hearings to commence no sooner than May 3, 2021. On January 12, 2021, the PUCO consolidated these matters with the determination of the existence of significantly excessive earnings under ESP IV for calendar year 2017, which the SCOH had remanded to the PUCO. On March 1, 2021, the Ohio Companies filed testimony in the quadrennial review and supplemental testimony in the SEET cases for calendar years 2017 through 2019. The calculations included in the quadrennial review for 2020 through 2024 demonstrate that the prospective effect of ESP IV is not substantially likely to provide the Ohio Companies with significantly excessive earnings during the balance of ESP IV. In addition, the Ohio Companies’ quadrennial review testimony demonstrated that ESP IV continues to be more favorable in the aggregate and during the remaining term of ESP IV as compared to the expected results of a market rate offer. Further, the revised calculations included in the Ohio Companies’ supplemental SEET testimony for calendar years 2017 through 2019 demonstrated that the Ohio Companies did not have significantly excessive earnings, on an individual company basis or on a consolidated basis. On March 31, 2021, Governor DeWine signed House Bill 128, which repeals legislation passed in 2019 that permitted the Ohio Companies to file their SEET results on a consolidated basis instead of on an individual company basis. HB 128 was effective June 30, 2021. Further, the OCC and another party filed testimony on April 5, 2021, recommending refunds for one or more of the Ohio Companies for calendar years 2017 through 2019. On April 20, 2021, the Ohio Companies filed supplemental testimony in the quadrennial review providing prospective SEET values on an individual company basis, which demonstrate that the Ohio Companies are not projected to have significantly excessive earnings, on an individual company basis, during the balance of ESP IV. On May 28, 2021, the attorney examiner issued a procedural schedule setting hearings for August 30, 2021. No contingency has been reflected in FirstEnergy’s consolidated financial statements with respect to these matters as a loss is neither probable, nor is a loss or range of a loss reasonably estimable.

On May 17, 2021, the Ohio Companies filed their application for the determination of significantly excessive earnings for calendar year 2020. The calculations included in the application demonstrated that the Ohio Companies, on an individual company basis, did not have significantly excessive earnings.

In connection with the audit of the Ohio Companies’ Rider DCR for 2017, the PUCO issued an order on June 16, 2021, directing the Ohio Companies to prospectively discontinue capitalizing certain vegetation management costs and reduce the 2017 Rider DCR revenue requirement by $3.7 million associated with these costs.

On September 8, 2020, the OCC filed motions in the Ohio Companies’ corporate separation audit and DMR audit dockets, requesting the PUCO to open an investigation and management audit, hire an independent auditor, and require FirstEnergy to show it did not improperly use money collected from consumers or violate any utility regulatory laws, rules or orders in its activities regarding HB 6. On December 30, 2020, in response to the OCC's motion, the PUCO reopened the DMR audit docket, and directed PUCO staff to solicit a third-party auditor and conduct a full review of the DMR to ensure funds collected from ~~ratepayers~~customers through the DMR were only used for the purposes established in ESP IV. On June 2, 2021, the PUCO selected an auditor and athe auditor filed the final audit report ison January 14, 2022, which made certain findings and recommendations. The report found that spending of DMR revenues was not required to be ~~filed by October 29, 2021.~~tracked, and that DMR revenues, like all rider revenues, are placed into the regulated money pool as a matter of routine, where the funds lose their identity. Therefore, the report could not suggest that DMR funds were used definitively for direct or indirect support for grid modernization. The report also concluded that there was no documented evidence that ties revenues from the DMR to lobbying for the passage of HB 6, but also could not rule out with certainty uses of DMR funds to support the passage of HB 6. The report further recommended that the regulated companies' money pool be audited more frequently and the Ohio Companies adopt formal dividend policies.

On September 15, 2020, the PUCO opened a new proceeding to review the political and charitable spending by the Ohio Companies in support of HB 6 and the subsequent referendum effort, and directing the Ohio Companies to show cause, demonstrating that the costs of any political or charitable spending in support of HB 6, or the subsequent referendum effort, were not included, directly or indirectly, in any rates or charges paid by ~~ratepayers.~~customers. The Ohio Companies initially filed a response ~~on September 30, 2020,~~ stating that the costs of any political ~~and~~or charitable spending in support of HB 6, or the subsequent referendum effort, were not included, directly or indirectly, in any rates or charges paid ~~for~~ by ~~its customers. Several parties requested~~customers, but on August 6, 2021, filed a supplemental response explaining that, in light of the facts set forth in the DPA and the findings of the Rider DCR audit report further discussed below,

political or charitable spending in support of HB 6, or the subsequent referendum effort, affected pole attachment rates paid by approximately $15 thousand. On October 26, 2021, the OCC filed a motion requesting the PUCO ~~broaden the scope of the review of~~to order an independent external audit to investigate FE’s political and charitable ~~spending. Discovery~~spending related to HB 6, and to appoint an independent review panel to retain and oversee the auditor. In November and December 2021, parties filed comments and reply comments regarding the Ohio Companies’ original and supplemental responses to the PUCO’s September 15, 2020, show cause directive. On March 9, 2022, the PUCO directed its staff to seek the services of a third-party auditor to determine whether the show cause demonstration submitted by the Ohio Companies is ~~ongoing.~~sufficient to ensure that the cost of any political or charitable spending in support of HB 6 or the subsequent referendum effort was not included, directly or indirectly, in any rates or charges paid by ratepayers.

In connection with an ongoing audit of the Ohio Companies’ policies and procedures relating to the code of conduct rules between affiliates, on November 4, 2020, the PUCO initiated an additional corporate separation audit as a result of the FirstEnergy leadership transition announcement made on October 29, 2020, as further discussed below. The additional audit is to ensure compliance by the Ohio Companies and their affiliates with corporate separation laws and the Ohio Companies’ corporate separation plan. The additional audit is for the period from November 2016 through October ~~2020, with a~~2020. The final audit report ~~to be~~was filed ~~by August 6,~~on September 13, 2021. ~~On January 27, 2021, the PUCO selected an auditor,~~The audit report makes no findings of major non-compliance with Ohio corporate separation requirements, minor non-compliance with eight requirements, and ~~the auditor’s investigation is ongoing.~~

~~On November 24, 2020, the Environmental Law~~findings of compliance with 23 requirements. Parties filed comments and Policy Center filed motions to vacate the PUCO’s orders in proceedings related to the Ohio Companies’ settlement that provides for the implementation of the first phase of grid modernization plans and for all tax savings associated with the Tax Act to flow back to customers, the Ohio Companies’ energy efficiency portfolio plans for the period from 2013 through 2016, and the Ohio Companies’ application for a two-year extension of the DMR,reply comments on the ~~grounds that the former Chairman of the~~audit report, and a PUCO ~~should have recused himself in these matters. On December 30, 2020, the PUCO denied the motions, and reinstated the requirement under ESP IV that the Ohio Companies file~~attorney examiner has issued a ~~base distribution rate case by May 31, 2024, the end of ESP IV, which the Ohio Companies had indicated they would not oppose.~~procedural schedule setting an evidentiary hearing on August 22, 2022.

In the fourth quarter of 2020, motions were filed with the PUCO requesting that the PUCO amend the Ohio Companies’ riders for collecting the OVEC related charges required by HB 6, which the Ohio Companies are further required to remit to other Ohio electric distribution utilities or to the State Treasurer, to provide for refunds in the event such provisions of HB 6 are repealed. The Ohio Companies contested the motions, which are pending before the PUCO.

On ~~December 7, 2020,~~November 1, 2021, the ~~Citizens’ Utility Board of~~ Ohio ~~filed a complaint~~Companies, together with the OCC, PUCO ~~against~~Staff, and several other signatories, entered into an Ohio Stipulation with the intent of resolving the ongoing energy efficiency rider audits, various SEET proceedings, including the Ohio ~~Companies. The complaint alleges~~Companies’ 2017 SEET proceeding, and the Ohio Companies’ quadrennial ESP review, each of which was pending before the PUCO. Specifically, the Ohio Stipulation provides that the Ohio Companies’ ~~new charges resulting from HB 6,~~current ESP IV passes the required statutory test for their prospective SEET review as part of the Quadrennial Review of ESP IV, and ~~any increased rates resulting from proceedings over which~~except for limited circumstances, the ~~former PUCO Chairman presided, are unjust~~signatory parties have agreed not to challenge the Ohio Companies’ SEET return on equity calculation methodology for their 2021-2024 SEET proceedings. The Ohio Stipulation additionally affirms that: (i) the Ohio Companies’ ESP IV shall continue through its previously authorized term of May 31, 2024; and ~~unreasonable, and that~~(ii) the Ohio Companies violated Ohio corporate separation laws by failing to operate separately from unregulated affiliates. The complaint requests, among other things, that any rates authorized by HB 6 or authorized by the PUCO in a proceeding over which the former Chairman presided be made refundable; that the Ohio Companies be required towill file ~~a new distribution~~their next base rate case ~~at the earliest possible date;~~in May 2024, and ~~that~~further, no signatory party will seek to adjust the Ohio Companies’ ~~corporate separation plans be modified to introduce institutional controls.~~base distribution rates before that time, except in limited circumstances. The Ohio Companies further agreed to refund $96 million to customers in connection with the 2017-2019 SEET cases, and to provide $210 million in future rate reductions for all customers, including $80 million in 2022, $60 million in 2023, $45 million in 2024, and $25 million in 2025. The PUCO approved the 2017-2019 SEET refunds and 2022 rate reductions December 1, 2021, and refunds began in January 2022. Future rate reductions are ~~contesting~~recognized as a reduction to regulated distribution segment’s revenue in the ~~complaint.~~Consolidated Statements of Income as they are provided to the Ohio Companies’ customers.

In connection with an ongoing annual audit of the Ohio Companies’ Rider DCR for 2020, and as a result of disclosures in FirstEnergy’s Form 10-K for the year ended December 31, 2020 (filed on February 18, 2021), the PUCO expanded the scope of the audit on March 10, 2021, to include a review of certain transactions that were either improperly classified, misallocated, or lacked supporting documentation, and to determine whether funds collected from ~~ratepayers~~customers were used to pay the vendors, and if so, whether or not the funds associated with those payments should be returned to ~~ratepayers~~customers through Rider DCR or through an alternative proceeding. AOn August 3, 2021, the auditor filed its final report on this phase of the audit, and the parties submitted comments and reply comments on this audit report isin October 2021. Additionally, on September 29, 2021, the PUCO expanded the scope of the audit in this proceeding to bedetermine if the costs of the naming rights for FirstEnergy Stadium have been recovered from the Ohio Companies’ customers. On November 19, 2021, the auditor filed its final report, in which the auditor concluded that the FirstEnergy Stadium naming rights expenses were not recovered from Ohio customers. On December 15, 2021, the PUCO further expanded the scope of the audit to include an investigation into an apparent nondisclosure of a side agreement in the Ohio Companies’ ESP IV settlement proceedings, but stayed its expansion of the audit until otherwise ordered by ~~August 3, 2021.~~the PUCO.

See ~~“Outlook - Other Legal Proceedings”~~ below for additional details on the government ~~investigation~~investigations and subsequent litigation surrounding the investigation of HB 6.

PENNSYLVANIA

The Pennsylvania Companies operate under rates approved by the PPUC, effective as of January 27, 2017. ~~These rates were adjusted for~~On November 18, 2021, the ~~net impact~~PPUC issued orders to each of the Tax Act, effective March 15, 2018. The net impact of the Tax Act for the period January 1, 2018 through March 14, 2018 was separately tracked and its treatment will be addressed in a future rate proceeding. The Pennsylvania Companies directing they operate under DSPs for the June 1, 2019 through May 31, 2023 delivery period, which DSPs provide for the competitive procurement of generation supply for customers who do not ~~choose~~receive service from an alternative ~~EGS or for customers of alternative EGSs that fail to provide the contracted service.~~EGS. Under the 2019-2023 DSPs, supply will be provided by wholesale suppliers through a mix of 3, 12 and 24-month energy contracts, as well as two RFPs for 2-year SREC contracts for ME, PN and Penn. On

December 14, 2021, the Pennsylvania Companies filed proposed DSPs for provision of generation for the June 1, 2023 through May 31, 2027 delivery period, to be sourced through competitive procurements for customers who do not receive service from an alternative EGS. An evidentiary hearing was held on April 13, 2022, and the parties filed a partial settlement with the PPUC resolving most of the issues in the proceeding on April 20, 2022. The remaining issues in the proceeding, which are limited to the treatment of customer-generated energy and renewable energy credit production will be resolved through briefing. Under the 2023-2027 DSPs, supply is proposed to be provided through a mix of 12 and 24-month energy contracts, as well as long-term solar PPAs.

In March 2018, the PPUC approved adjusted customer rates of the Pennsylvania Companies to reflect the net impact of the Tax Act. As a result, the Pennsylvania Companies established riders that, beginning July 1, 2018, refunded to customers tax savings attributable to the Tax Act as compared to the amounts established in their most recent base rate proceedings on a current and going forward basis. The amounts recorded as savings for the total period of January 1 through June 30, 2018, were tracked and were to be addressed for treatment in a future proceeding. On May 17, 2021, the Pennsylvania Companies filed petitions with the PPUC proposing to refund the net savings for the January through June 2018 period to customers beginning January 1, 2022. On November 18, 2021, the PPUC approved the Pennsylvania Companies' proposed refunds, but also revised a previous methodology for calculating the net tax savings, which resulted in additional tax savings attributable to the Tax Act to be refunded to customers and directed the Pennsylvania Companies to file new petitions to propose the timing and methodology to provide these additional refunds to customers. The Pennsylvania Companies recalculated the net impact for 2018 through 2021 under the revised PPUC methodology in comparison to amounts already refunded to customers under the existing riders, which resulted in an additional $61 million in savings, with interest, to be provided to customers. As a result, FirstEnergy recognized a pre-tax charge of $61 million in the fourth quarter of 2021 associated with the additional refund and based on the November 2021 PPUC order and methodology. The Pennsylvania Companies filed petitions to propose the timing and methodology of the refund of these amounts on February 17, 2022. If approved, the Pennsylvania Companies would refund these amounts beginning July 1, 2022, and continuing through the end of the year.

Pursuant to Pennsylvania Act 129 of 2008 and PPUC orders, Pennsylvania EDCs implement energy efficiency and peak demand reduction programs. The Pennsylvania Companies’ Phase III EE&C plans for the June 2016 through May 2021 period, which were approved in March 2016, with expected costs up to $390 million, are designed to achieve the targets established in the PPUC’s Phase III Final Implementation Order with full recovery through the reconcilable EE&C riders. On June 18, 2020, the PPUC entered a Final Implementation Order for a Phase IV EE&C Plan, operating from June 2021 through May 2026. The Final Implementation Order set demand reduction targets, relative to 2007 to 2008 peak demands, at 2.9% MW for ME, 3.3% MW for PN, 2.0% MW for Penn, and 2.5% MW for WP; and energy consumption reduction targets, as a percentage of the Pennsylvania Companies’ historic 2009 to 2010 reference load at 3.1% MWH for ME, 3.0% MWH for PN, 2.7% MWH for Penn, and 2.4% MWH for WP. The Pennsylvania Companies’ Phase IV plans were ~~filed November 30, 2020. A settlement has been reached in this matter, and a joint petition seeking approval of that settlement~~approved by ~~the parties was filed~~PPUC without modification on ~~February 16, 2021. On~~ March 25, ~~2021, the PPUC issued an order approving the settlement without modification.~~2021.

Pennsylvania EDCs are permitted to seek PPUC approval of an LTIIP for infrastructure improvements and costs related to highway relocation projects, after which a DSIC may be approved to recover LTIIP costs. On January 16, 2020, the PPUC approved the Pennsylvania Companies’ LTIIPs for the five-year period beginning January 1, 2020 and ending December 31, 2024 for a total capital investment of approximately $572 million for certain infrastructure improvement initiatives. On June 25, 2021, the Pennsylvania OCA filed a complaint against Penn’s quarterly DSIC rate, disputing the recoverability of the Companies’ automated distribution management system investment under the DSIC mechanism. ~~Penn responded on July 19, 2021.~~On January 26, 2022, the parties filed a joint petition for settlement that resolves all issues in this matter pending PPUC approval.

Following the Pennsylvania Companies’ 2016 base rate proceedings, the PPUC ruled in a separate proceeding related to the DSIC mechanisms that the Pennsylvania Companies were not required to reflect federal and state income tax deductions related to DSIC-eligible property in DSIC ~~rates, which~~rates. The decision was appealed ~~by the Pennsylvania OCA~~ to the Pennsylvania Supreme Court and in July 2021 the court upheld the Pennsylvania Commonwealth ~~Court. The Commonwealth Court reversed~~Court’s reversal of the PPUC’s decision and remanded the matter back to ~~require~~ the ~~Pennsylvania Companies~~PPUC for determination as to ~~revise their tariffs and~~how DSIC calculations ~~to include~~shall account for ADIT and state ~~income~~ taxes. ~~On April 7, 2020,~~The matter awaits further action by the Pennsylvania Supreme Court issued an order granting Petitions for Allowance of Appeal by both the PPUC and the Pennsylvania Companies of the Commonwealth Court’s Opinion and Order. Briefs and Reply Briefs of the parties were filed, and oral argument before the Supreme Court was held on October 21, 2020. AnPPUC. The adverse ruling by the Pennsylvania Supreme Court is not expected to result in a material impact to FirstEnergy.

The PPUC issued an order on March 13, 2020, forbidding utilities from terminating service for non-payment for the duration of the COVID-19 pandemic. On May 13, 2020, the PPUC issued a Secretarial letter directing utilities to track all prudently incurred incremental costs arising from the COVID-19 pandemic, and to create a regulatory asset for future recovery of incremental uncollectibles incurred as a result of the COVID-19 pandemic and termination moratorium. On October 13, 2020, the PPUC entered an order lifting the service termination moratorium effective November 9, 2020, subject to certain additional notification, payment procedures and exceptions, and permits the Pennsylvania Companies to create a regulatory asset for all incremental expenses associated with their compliance with the order. On March 19, 2021, the PPUC entered an order lifting the moratorium in total effective March 31, 2021, subject to certain additional guidelines regarding the duration of payment arrangements and reporting obligations.

WEST VIRGINIA

MP and PE provide electric service to all customers through traditional cost-based, regulated utility ratemaking and operate under WVPSC approved rates ~~approved by the WVPSC~~that became effective in February 2015. MP and PE recover net power supply costs, including fuel costs, purchased power costs and related expenses, net of related market sales revenue through the ENEC. MP’s and PE’s ENEC rate is updated annually.

On March 13, 2020, the WVPSC urged all utilities to suspend utility service terminations except where necessary as a matter of safety or where requested by the customer. On May 15, 2020, the WVPSC issued an order to authorize MP and PE to record a deferral of additional, extraordinary costs directly related to complying with the various COVID-19 government shut-down orders and operational precautions, including impacts on uncollectible expense and cash flow related to temporary discontinuance of service terminations for non-payment and any credits to minimum demand charges associated with business customers adversely impacted by shut-downs or temporary closures related to the pandemic. MP and PE resumed disconnection activity for commercial and industrial customers on September 15, 2020, and for residential customers on November 4, 2020.

On August 28, 2020, MP and PE filed with the WVPSC their annual ENEC case requesting a decrease in ENEC rates of $55 million beginning January 1, 2021, representing a 4% decrease in rates compared to those in effect on August 28, 2020. The decrease in the ENEC rates is net of recovering approximately $10.5 million in previously deferred, incremental uncollectible and other related costs resulting from the COVID-19 pandemic. The WVPSC approved a unanimous settlement by the parties on December 16, 2020 with rates effective January 1, 2021.

Also, on August 28, 2020, MP and PE filed with the WVPSC for recovery of costs associated with modernization and improvement program for their coal-fired boilers. The proposed annual revenue increase for these environmental compliance projects is $5 million beginning January 1, 2021. The WVPSC approved a unanimous settlement by the parties on December 16, 2020 approving the recovery of those costs.

On December 30, 2020, MP and PE filed an integrated resource plan with the WVPSC. The plan projects a small capacity deficit but an energy surplus in MP’s and PE’s supply resources when compared with current WV load demand and projects the capacity deficit growing over the next 15 years. The plan does not recommend additional supply-side resources with a possible exception for small utility-scale solar resources and recommends that the capacity deficit be met through the PJM capacity market. MP currently expects to seek approval in 2021 to construct solar generation sources of up to 50 MWs. On July 13, 2021, the WVPSC accepted MP’s and PE’s integrated resource plan and closed the case.

On December 30, 2020, MP and PE filed with the WVPSC a determination of the rate impact of the Tax Act with respect to ADIT. The filing ~~proposes~~proposed an annual revenue reduction of $2.6 million, ~~annually,~~ effective January 1, 2022, with reconciliation and any resulting adjustments incorporated into ~~the~~ annual ENEC proceedings. On August 12, 2021, a unanimous settlement was reached with all the parties agreeing to a $7.7 million rate reduction beginning January 1, 2022, with a true-up in the ENEC proceeding each year. On November 30, 2021, the WVPSC approved the settlement on all terms, except for the proposed effective date of the rate reduction, which was held in abeyance until further notice.

On August 27, 2021, MP and PE filed with the WVPSC their annual ENEC case requesting an increase in ENEC rates of $19.6 million beginning January 1, 2022, which represented a 1.5% increase to the rates currently in effect. WVPSC issued an order on December 29, 2021, granting the requested $19.6 million increase in ENEC rates. Among other things, the order requires MP

and PE to refund to its large industrial customers their respective portion of the $7.7 million rate reduction discussed above and also requires MP and PE to negotiate a PPA for its capacity shortfall and a reasonable reserve margin if certain conditions are met. By order dated March 2, 2022, the WVPSC reopened the case to determine whether rates should be increased to recover growing ENEC under-recoveries. MP and PE proposed a $94 million rate increase to address the growing under-recoveries and a hearing was held on March 24, 2022. Any interim rate increase approved by WVPSC would be expected to begin May 1, 2022.

On December 3, 2021 and on December 27, 2021, the WVPSC approved settlements granting MP and PE a $16 million increase in rates effective January 1, 2022, and permitting the continuation of the vegetation management program and surcharge for another two years. WVPSC additionally ordered MP and PE to perform equipment inspections within a reasonable time after vegetation management occurs on a circuit.

On November 22, 2021, MP and PE filed with the WVPSC their plan to construct 50 MWs of solar generation at five sites in West Virginia. The plan includes a tariff to offer solar power to West Virginia customers and cost recovery for MP and PE from other customers through a surcharge for any solar investment not fully subscribed by their customers. A hearing was held on March 16 and 17, 2022, and an order is expected in the second quarter of 2022. The solar generation project, if approved, is expected to cost approximately $110 million and begin being in-serviced by the end of 2023 with all construction completed at the other sites no later than the end of 2025.

On December 17, 2021, MP and PE filed with the WVPSC for approval of environmental compliance projects at the Ft. Martin and Harrison Power Stations to comply with the EPA’s ELG and operate these plants beyond 2028. The request includes a surcharge to recover the expected $142 million capital investment and $3 million in annual operation and maintenance expense. A hearing has been set for in August ~~18, 2021.~~2022, with a ruling from the WVPSC expected in the fall of 2022. If approved, construction would be expected to be completed by the end of 2025. See “Outlook - Environmental Matters - Clean Water Act" below, for additional details on the EPA's ELG.

FERC REGULATORY MATTERS

Under the FPA, FERC regulates rates for interstate wholesale sales, transmission of electric power, accounting and other matters, including construction and operation of hydroelectric projects. With respect to their wholesale services and rates, the Utilities, AE Supply and the Transmission Companies are subject to regulation by FERC. FERC regulations require JCP&L, MP, PE, WP and the Transmission Companies to provide open access transmission service at FERC-approved rates, terms and conditions. Transmission facilities of JCP&L, MP, PE, WP and the Transmission Companies are subject to functional control by PJM and transmission service using their transmission facilities is provided by PJM under the PJM Tariff.

FERC regulates the sale of power for resale in interstate commerce in part by granting authority to public utilities to sell wholesale power at market-based rates upon showing that the seller cannot exert market power in generation or transmission or erect barriers to entry into markets. The Utilities and AE Supply each have been authorized by FERC to sell wholesale power in interstate commerce at market-based rates and have a market-based rate tariff on file with FERC, although in the case of the Utilities major wholesale purchases remain subject to review and regulation by the relevant state commissions.

Federally enforceable mandatory reliability standards apply to the bulk electric system and impose certain operating, record-keeping and reporting requirements on the Utilities, AE Supply, and the Transmission Companies. NERC is the ERO designated by FERC to establish and enforce these reliability standards, although NERC has delegated day-to-day implementation and enforcement of these reliability standards to six regional entities, including RFC. All of the facilities that FirstEnergy operates are located within the RFC region. FirstEnergy actively participates in the NERC and RFC stakeholder processes, and otherwise monitors and manages its companies in response to the ongoing development, implementation and enforcement of the reliability standards implemented and enforced by RFC.

FirstEnergy believes that it is in material compliance with all currently effective and enforceable reliability standards. Nevertheless, in the course of operating its extensive electric utility systems and facilities, FirstEnergy occasionally learns of isolated facts or circumstances that could be interpreted as excursions from the reliability standards. If and when such occurrences are found, FirstEnergy develops information about the occurrence and develops a remedial response to the specific circumstances, including in appropriate cases “self-reporting” an occurrence to RFC. Moreover, it is clear that NERC, RFC and FERC will continue to refine existing reliability standards as well as to develop and adopt new reliability standards. Any inability on FirstEnergy’s part to comply with the reliability standards for its bulk electric system could result in the imposition of financial penalties, or obligations to upgrade or build transmission facilities, that could have a material adverse effect on its financial condition, results of operations, and cash flows.

FERC Audit

74FERC’s Division of Audits and Accounting initiated a nonpublic audit of FESC in February 2019. Among other matters, the audit is evaluating FirstEnergy’s compliance with certain accounting and reporting requirements under various FERC regulations. On February 4, 2022, FERC filed the final audit report for the period of January 1, 2015 through September 30, 2021, which included several findings and recommendations. FirstEnergy has accepted the findings and recommendations of the final audit report. The audit report included a finding and related recommendation that FirstEnergy may have used an inappropriate methodology

for allocation of certain costs to regulatory capital accounts under certain FERC regulations and reporting. As such, FirstEnergy is currently performing an analysis of these costs and how it impacted certain wholesale transmission customer rates. FirstEnergy is unable to predict or estimate the final outcome of this analysis and audit, however, it could result in refunds, with interest, to certain wholesale transmission customers and/or write-offs of previously capitalized costs if they are determined to be nonrecoverable.

ATSI Transmission Formula Rate

On May 1, 2020, ATSI filed amendments to its formula rate to recover regulatory assets for certain costs that ATSI incurred as a result of its 2011 move from MISO to PJM, certain costs allocated to ATSI by FERC for transmission projects that were constructed by other MISO transmission owners, and certain costs for transmission-related vegetation management programs. A portion of these costs would have been charged to the Ohio Companies. Additionally, ATSI proposed certain income tax-related adjustments and certain tariff changes addressing the revenue credit components of the formula rate template. In its filing, ATSI requested recovery of approximately $85 million related to ATSI’s costs to move to PJM, and the MISO transmission project costs that are allocated to ATSI through December 31, 2020; and recovery of future costs associated with the MISO transmission projects. Per prior FERC orders, ATSI included a “cost-benefit study” to support recovery of ATSI’s costs to move to PJM, and the MISO transmission project costs that are allocated to ATSI. Certain intervenors filed protests of the formula rate amendments on May 29, 2020, ATSI filed a reply on June 15, 2020, and certain intervenors filed responses to ATSI’s reply on June 25, and 29, 2020. On June 30, 2020, FERC issued an initial order accepting the tariff amendments subject to refund ~~suspending the effective date for five months to be effective December 1, 2020,~~ and setting the matter for hearing and settlement proceedings. ATSI ~~is engaged in settlement negotiations with~~and the ~~other~~ parties to ~~this proceeding.~~the FERC proceeding subsequently were able to reach settlement, and on October 14, 2021, filed the settlement with FERC. As a result of the filed settlement, FirstEnergy recognized a $21 million pre-tax charge during the third quarter of 2021, which reflects the difference between amounts originally recorded as regulatory assets and amounts which will ultimately be recovered as a result of the pending settlement. From a segment perspective, during the third quarter of 2021, the Regulated Transmission segment recorded a pre-tax charge of $48 million and the Regulated Distribution segment recognized a $27 million reduction to a reserve previously recorded in 2010. In addition, the settlement provides for partial recovery of future incurred costs allocated to ATSI by MISO for the above-referenced transmission projects that were constructed by other MISO transmission owners, which is not expected to have a material impact on FirstEnergy or ATSI. The uncontested settlement was approved by FERC on March 24, 2022 without modification.

FERC Actions on Tax Act

On March 15, 2018, FERC initiated proceedings on the question of how to address possible changes to ADIT and bonus depreciation as a result of the Tax Act. Such possible changes could impact FERC-jurisdictional rates, including transmission rates. On November 21, 2019, FERC issued a final rule (Order No. 864). Order No. 864 requires utilities with transmission formula rates to update their formula rate templates to include mechanisms to: (i) deduct any excess ADIT from or add any deficient ADIT to their rate base; (ii) raise or lower their income tax allowances by any amortized excess or deficient ADIT; and (iii) incorporate a new permanent worksheet into their rates that will annually track information related to excess or deficient ADIT. Per FERC directives, ATSI submitted its compliance filing on May 1, 2020. MAIT submitted its compliance filing on June 1, 2020. ~~Certain intervenors filed protests of the compliance filings,~~On November 18, 2021, FERC issued an order that: (i) accepted ATSI proposed tariff amendments to ~~which ATSI and MAIT responded. On October 28, 2020, FERC staff requested additional information about ATSI’s proposed~~its rate base adjustment mechanism, effective January 27, 2020; (ii) directed ATSI to make a further compliance filing by January 17, 2022; and (iii) set the amount of ATSI’s recorded ADIT balances as of December 31, 2017, for hearing and settlement procedures. ATSI submitted the ~~requested information on November 25, 2020.~~compliance filing, and is participating in settlement negotiations. On ~~May 4,~~December 3, 2021, FERC ~~staff requested additional information about~~issued an order that (i) accepted MAIT’s proposed tariff amendments to its rate base adjustment mechanism, effective January 27, 2020; (ii) directed MAIT to make a further compliance filing by February 1, 2022; and (iii) set the amount of MAIT’s recorded ADIT balances as of December 31, 2017 for hearing and settlement procedures. MAIT submitted the ~~requested information on June 3, 2021. On June 24, 2021, an intervenor protested the supplemental information that MAIT submitted, to which MAIT responded.~~compliance filing, and is participating in settlement negotiations. On May 15, 2020, TrAIL submitted its compliance filing and on June 1, 2020, PATH submitted its required compliance filing. On May 4, 2021, FERC staff requested additional information about PATH’s proposed rate base adjustment mechanism, and PATH submitted the requested information on June 3, 2021. On July 12, 2021, FERC staff requested additional information about TrAIL’s proposed rate base adjustment ~~mechanism;~~mechanism. TrAIL filed its response on August 6, 2021. On March 31, 2022, FERC issued an order, ruling that TrAIL’s compliance filing partially complied with the ~~due date for TrAIL’s response is August 11, 2021. These~~requirements of Order No. 864 and directing TrAIL to submit a further compliance ~~filings each remain~~filing on or before May 31, 2022 to address certain additional items that according to FERC further will enhance transparency. The PATH compliance filing remains pending before FERC. MP, WP and PE (as holders of a “stated” transmission ~~rate)~~rate when Order No. 864 issued) are addressing these requirements in the transmission formula rates amendments that were filed on October 29, 2020, and which have been accepted by FERC effective January 1, 2021, subject to refund, pending further hearing and settlement procedures. ~~JCP&L addressed these requirements as part of its~~MP, WP and PE are engaged in settlement negotiations with other parties to this proceeding.

ATSI ROE – Ohio Consumers Counsel v. ATSI, et al.

On February 24, 2022, the OCC filed a complaint with FERC against ATSI, AEP’s Ohio affiliates and AEPSC, and Duke Energy Ohio, LLC asserting that FERC should reduce the ROE utilized in the utilities’ transmission formula ~~rate case, which~~rates by eliminating the 50 basis point adder associated with RTO membership, effective February 24, 2022. The OCC contends that this result is required because Ohio law mandates that transmission owning utilities join an RTO and that the 50 basis point adder is applicable only where RTO membership is voluntary. ATSI disagrees with OCC’s characterization and set forth its reasons for such disagreement in a combined motion to dismiss and answer that was ~~resolved by a settlement approved by~~filed with FERC on ~~April 15, 2021, addressed further below.~~March 31, 2022. On that same date, AEP and Duke filed separate motions to dismiss and answers to the OCC complaint, and several other parties filed comments. ATSI is currently evaluating whether to file an additional answer to respond to certain of the comments.

Transmission ROE Methodology

On May 20, 2021, in a case not involving FirstEnergy, FERC issued Opinion No. 575 in which it reiterated the nationwide ROE methodology set forth in 2020 in Opinion No. 569-A. Under this methodology, FERC employs three financial models – discounted cash flow, capital-asset pricing, and risk premium – to calculate a composite zone of reasonableness. As it has done in other recent ROE cases, FERC rejected the use of the expected earnings methodology in calculating the authorized ROE. A request for clarification or, alternatively, rehearing of Opinion No. 575 was filed on June 21, 2021, and remains pending before FERC. FERC’s Opinion Nos. 569-A and 569-B, upon which Opinion No. 575 is based, have been appealed to the D.C. Circuit. FirstEnergy is not participating in the appeal. Any changes to FERC’s transmission rate ROE and incentive policies for the Utilities would be applied on a prospective basis.

InOn March 20, 2020, FERC initiated a rulemaking proceeding on the transmission rate incentives provisions of Section 219 of the 2005 Energy Policy Act. FirstEnergy submitted comments through EEI and as part of a consortium of PJM Transmission Owners. In a supplemental rulemaking proceeding that was initiated on April 15, 2021, FERC requested comments on, among other things, whether to require utilities that have been members of an RTO for three years or more and that have been collecting an “RTO membership” ROE incentive adder to file tariff updates that would terminate collection of the incentive adder. Initial comments on the proposed rule were filed on June 25, 2021, and reply comments ~~are due~~were filed on July 26, 2021. The rulemaking remains pending before FERC. FirstEnergy is a member of PJM and its transmission subsidiaries could be affected by the supplemental proposed rule. FirstEnergy ~~is participating~~participated in comments on the supplemental rulemaking that ~~are to be~~were submitted by a group of PJM transmission owners and by various industry trade groups. If there were to be any changes to FirstEnergy transmission incentive ROE, such changes will be applied on a prospective basis.

~~JCP&L Transmission Formula Rate~~

On October 30, 2019, JCP&L filed tariff amendments with FERC to convert JCP&L’s existing stated transmission rate to a forward-looking formula transmission rate. JCP&L requested that the tariff amendments become effective January 1, 2020. On December 19, 2019, FERC issued its initial order in the case, allowing JCP&L to transition to a forward-looking formula rate as of January 1, 2020 as requested, subject to refund, pending further hearing and settlement proceedings. JCP&L and the parties to the FERC proceeding subsequently were able to reach settlement, and on February 2, 2021, JCP&L filed an offer of settlement with FERC. On April 15, 2021, FERC approved the settlement agreement as filed, with no changes, effective January 1, 2021. JCP&L submitted a compliance filing on May 14, 2021 to implement aspects of the settlement, which is pending before FERC.

Allegheny Power Zone Transmission Formula Rate Filings

On October 29, 2020, MP, PE and WP filed tariff amendments with FERC to ~~convert their existing stated transmission rate to~~implement a forward-looking formula transmission rate, to be effective January 1, 2021. In addition, on October 30, 2020, KATCo filed a proposed new tariff to establish a forward-looking formula rate and requested that the new rate become effective January 1, 2021. In its filing, KATCo explained that while it currently owns no transmission assets, it may build new transmission facilities in the Allegheny zone, and that it may seek required state and federal authorizations to acquire transmission assets from PE and WP by January 1, 2022. These transmission rate filings were accepted for filing by FERC on December 31, 2020, effective January 1, 2021, subject to refund, pending further hearing and settlement procedures and were consolidated into a single proceeding. MP, PE and WP, and KATCo are engaged in settlement negotiations with the other parties to the formula rate proceedings. ~~KATCo will be included in the Regulated Transmission reportable segment.~~

ENVIRONMENTAL MATTERS

Various federal, state and local authorities regulate FirstEnergy with regard to air and water quality, hazardous and solid waste disposal, and other environmental matters. While FirstEnergy’s environmental policies and procedures are designed to achieve compliance with applicable environmental laws and regulations, such laws and regulations are subject to periodic review and potential revision by the implementing agencies. FirstEnergy cannot predict the timing or ultimate outcome of any of these reviews or how any future actions taken as a result thereof may materially impact its business, results of operations, cash flows and financial condition.

Clean Air Act

FirstEnergy complies with SO2 and NOx emission reduction requirements under the CAA and SIP(s) by burning lower-sulfur fuel, utilizing combustion controls and post-combustion controls and/or using emission allowances.

CSAPR requires reductions of NOx and SO2 emissions in two phases (2015 and 2017), ultimately capping SO2 emissions in affected states to 2.4 million tons annually and NOx emissions to 1.2 million tons annually. CSAPR allows trading of NOx and SO2 emission allowances between power plants located in the same state and interstate trading of NOx and SO2 emission allowances with some restrictions. On July 28, 2015, the D.C. Circuit ordered the EPA to reconsider the CSAPR caps on NOx and SO2 emissions from power plants in 13 states, including West Virginia. This followed the 2014 U.S. Supreme Court ruling generally upholding the EPA’s regulatory approach under CSAPR but questioning whether the EPA required upwind states to reduce emissions by more than their contribution to air pollution in downwind states. The EPA issued a CSAPR Update on September 7, 2016, reducing summertime NOx emissions from power plants in 22 states in the eastern U.S., including West Virginia, beginning in 2017. Various states and other stakeholders appealed the CSAPR Update to the D.C. Circuit in November and December 2016. On September 13, 2019, the D.C. Circuit remanded the CSAPR Update to the EPA citing that the rule did not eliminate upwind states’ significant contributions to downwind states’ air quality attainment requirements within applicable attainment deadlines.

Also ~~during this time,~~ in March 2018, the State of New York filed a CAA Section 126 petition with the EPA alleging that NOx emissions from nine states (including West Virginia) significantly contribute to New York’s inability to attain the ozone NAAQS. The petition sought suitable emission rate limits for large stationary sources that are allegedly affecting New York’s air quality within the three years allowed by CAA Section 126. On September 20, 2019, the EPA denied New York’s CAA Section 126 petition. On October 29, 2019, the State of New York appealed the denial of its petition to the D.C. Circuit. On July 14, 2020, the D.C. Circuit reversed and remanded the New York petition to the EPA for further consideration. On March 15, 2021, the EPA issued a revised CSAPR Update that addresses, among other things, the remands of the prior CSAPR Update and the New York Section 126 ~~Petition.~~petition. In December 2021, MP purchased NOx emissions allowances to comply with 2021 ozone season requirements. On April 6, 2022, the EPA published proposed rules seeking to impose further significant reductions in EGU NOx emissions in 25 states, including West Virginia. The EPA held a virtual public hearing regarding the proposed rules on April 21, 2022, with comments due June 6, 2022. Depending on the outcome of any appeals and how the EPA and the states ultimately implement the revised CSAPR Update, the future cost of compliance may materially impact FirstEnergy's operations, cash flows and financial condition.

~~In February 2019, the EPA announced its final decision to retain without changes the NAAQS for SO~~2~~, specifically retaining the 2010 primary (health-based) 1-hour standard of 75 PPB. As of March 31, 2020, FirstEnergy has no power plants operating in areas designated as non-attainment by the EPA.~~Climate Change

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~~Climate Change~~

There are several initiatives to reduce GHG emissions at the state, federal and international level. Certain northeastern states are participating in the RGGI and western states led by California, have implemented programs, primarily cap and trade mechanisms, to control emissions of certain GHGs. Additional policies reducing GHG emissions, such as demand reduction programs, renewable portfolio standards and renewable subsidies have been implemented across the nation.

In September 2016, the U.S. joined in adopting the agreement reached on December 12, 2015, at the United Nations Framework Convention on Climate Change meetings in Paris to reduce ~~GHG.~~GHGs. The Paris Agreement’s non-binding obligations to limit global warming to below two degrees Celsius became effective on November 4, 2016. On June 1, 2017, the Trump Administration announced that the U.S. would cease all participation in the Paris Agreement. On January 20, 2021, President Biden signed an executive order re-adopting the agreement on behalf of the U.S. In November 2020, FirstEnergy published its Climate Story which includes its climate position and strategy, as well as a new comprehensive and ambitious GHG emission goal. FirstEnergy pledged to achieve carbon neutrality by 2050 and set an interim goal for a 30% reduction in ~~GHG~~GHGs within FirstEnergy’s direct operational control by 2030, based on 2019 levels. Future resource plans to achieve carbon reductions, including any determination of retirement dates of the regulated coal-fired generation, will be developed by working collaboratively with regulators in West Virginia. Determination of the useful life of the regulated coal-fired generation could result in changes in depreciation, and/or continued collection of net plant in rates after retirement, securitization, sale, impairment, or regulatory disallowances. If MP is unable to recover these costs, it could have a material adverse effect on FirstEnergy’s and/or MP’s financial condition, results of operations, and cash flow. Furthermore, FirstEnergy cannot currently estimate the financial impact of climate change policies, although potential legislative or regulatory programs restricting ~~CO2~~CO2 emissions, or litigation alleging damages from GHG emissions, could require material capital and other expenditures or result in changes to its operations.

In December 2009, the EPA released its final “Endangerment and Cause or Contribute Findings for ~~GHG~~GHGs under the Clean Air Act,” concluding that concentrations of several key GHGs constitute an "endangerment" and may be regulated as "air pollutants" under the CAA and mandated measurement and reporting of GHG emissions from certain sources, including electric generating plants. Subsequently, the EPA released its final CPP regulations in August 2015 to reduce ~~CO2~~CO2 emissions from existing fossil fuel-fired EGUs and finalized separate regulations imposing ~~CO2~~CO2 emission limits for new, modified, and reconstructed fossil fuel-fired EGUs. Numerous states and private parties filed appeals and motions to stay the CPP with the D.C. Circuit in October 2015. On February 9, 2016, the U.S. Supreme Court stayed the rule during the pendency of the challenges to the D.C. Circuit and U.S. Supreme Court. On March 28, 2017, an executive order, entitled “Promoting Energy Independence and Economic Growth,” instructed the EPA to review the CPP and related rules addressing GHG emissions and suspend, revise or rescind the rules if appropriate. On June 19, 2019, the EPA repealed the CPP and replaced it with the ACE rule that established guidelines for states to develop standards of performance to address GHG emissions from existing coal-fired ~~power plants.~~generation. On January 19, 2021, the D.C. Circuit vacated and remanded the ACE rule declaring that the EPA was “arbitrary and capricious” in its rule making and, as such, the ACE rule is no longer in effect and all actions thus far taken by states to implement the federally mandated rule are now null and void. The D.C. Circuit decision was appealed by several states, including West Virginia, as well as other interested parties. On February 28, 2022, the U.S. Supreme Court heard oral arguments on the matter is subject to legal challenge. Depending on the outcomes of ~~further appeals~~the appeal and how any final rules are ultimately implemented, the future cost of compliance may be material.

Clean Water Act

Various water quality regulations, the majority of which are the result of the federal CWA and its amendments, apply to FirstEnergy’s facilities. In addition, the states in which FirstEnergy operates have water quality standards applicable to FirstEnergy’s operations.

On September 30, 2015, the EPA finalized new, more stringent effluent limits for the Steam Electric Power Generating category (40 CFR Part 423) for arsenic, mercury, selenium and nitrogen for wastewater from wet scrubber systems and zero discharge of pollutants in ash transport water. The treatment obligations were to phase-in as permits are renewed on a five-year cycle from 2018 to 2023. However, on April 13, 2017, the EPA granted a Petition for Reconsideration and on September 18, 2017, the EPA postponed certain compliance deadlines for two years. On August 31, 2020, the EPA issued a final rule revising the effluent limits for discharges from wet scrubber systems, retaining the zero-discharge standard for ash transport water, (with some limited discharge allowances), and extending the deadline for compliance to December 31, 2025 for both. In addition, the EPA allows for less stringent limits for sub-categories of generating units based on capacity utilization, flow volume from the scrubber system, and unit retirement date. The EPA is reconsidering the ELG rule with a publicly announced target of issuing a proposed revised rule in the Fall of 2022 and a final rule by the Spring of 2023. In the interim, the rule issued on August 31, 2020, remains in effect. Depending on the outcome of appeals and how final rules are ultimately implemented, ~~and the compliance options MP elects to take with the new rules,~~ the compliance with these standards, ~~which~~ could ~~include~~require additional capital expenditures or changes in operations at ~~the~~ Ft. Martin and Harrison power stations ~~may be substantial and changes~~from what was filed with the WVPSC in December 2021 that seeks approval of environmental compliance projects to ~~MP’s operations at those power stations may also result.~~comply with the EPA’s ELG.

On September 29, 2016, FirstEnergy received a request from the EPA for information pursuant to CWA Section 308(a) for information concerning boron exceedances of effluent limitations established in the NPDES Permit for the former Mitchell Power Station’s Mingo landfill, owned by WP. On November 1, 2016, WP provided an initial response that contained information related to a similar boron issue at the former Springdale Power Station’s landfill, also owned by WP. The EPA requested additional information regarding the Springdale landfill and on November 15, 2016, WP provided a comprehensive response for both facilities and has fully complied with the Section 308(a) information request. On March 3, 2017, WP proposed to the PA DEP a re-route of its wastewater discharge to eliminate potential boron exceedances at the Springdale landfill and on January 29, 2018, WP submitted an NPDES permit renewal application to PA DEP proposing to re-route its wastewater discharge to eliminate potential boron exceedances at the Mingo landfill. On February 20, 2018, the Department of Justice issued a letter and tolling agreement to WP on behalf of the EPA alleging violations of the CWA at the Springdale and Mingo landfills and seeking to enter settlement negotiations in lieu of filing a complaint. To settle alleged past boron exceedances at both facilities, WP has agreed to

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After the completion of a negotiated settlement, a complaint was filed by the EPA and PA DEP on January 10, 2022 in Federal District Court for the Western District of Pennsylvania, alleging, among other things, that WP violated the CWA in connection with past boron exceedances at WP’s Springdale and Mingo landfills. On January 11, 2022, WP entered into a consent decree with the EPA and PA DEP resolving the matters addressed in the complaint, which, among other things, required a civil penalty of $610 thousand. The District Court entered the Consent Decree as final on March 17, 2022 and WP subsequently paid the penalty amount of $610,000 to be paid over two years. It is expected that the parties will sign a Consent Decree memorializing the pipeline construction milestones and the civil penalty payments in the third quarter of 2021.as required therein.

Regulation of Waste Disposal

Federal and state hazardous waste regulations have been promulgated as a result of the RCRA, as amended, and the Toxic Substances Control Act. Certain CCRs, such as coal ash, were exempted from hazardous waste disposal requirements pending the EPA’s evaluation of the need for future regulation.

In April 2015, the EPA finalized regulations for the disposal of CCRs (non-hazardous), establishing national standards for landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring and protection procedures and other operational and reporting procedures to assure the safe disposal of CCRs from electric generating plants. On September 13, 2017, the EPA announced that it would reconsider certain provisions of the final regulations. On July 17, 2018, the EPA Administrator signed a final rule extending the deadline for certain CCR facilities to cease disposal and commence closure activities, as well as, establishing less stringent groundwater monitoring and protection requirements. On August 21, 2018, the D.C. Circuit remanded sections of the CCR Rule to the EPA to provide for additional safeguards for unlined CCR impoundments that are more protective of human health and the environment. On December 2, 2019, the EPA published a proposed rule accelerating the date that certain CCR impoundments must cease accepting waste and initiate closure to August 31, 2020. The proposed rule allowed for an extension of the closure deadline based on meeting proscribed site-specific criteria. On July 29, 2020, the EPA published a final rule again revising the date that certain CCR impoundments must cease accepting waste and initiate closure to April 11, 2021. The final rule also allows for an extension of the closure deadline based on meeting proscribed site-specific criteria. On November 30, 2020, AE Supply submitted a closure deadline extension request to the EPA seeking to extend the closure date of McElroy's Run CCR impoundment facility until ~~2024.~~2024, which request is pending technical review by the EPA. AE Supply continues to operate McElroy’s Run as a disposal facility for ~~EH’s~~FG’s Pleasants Power Station.

FE or its subsidiaries have been named as potentially responsible parties at waste disposal sites, which may require cleanup under the CERCLA. Allegations of disposal of hazardous substances at historical sites and the liability involved are often unsubstantiated and subject to dispute; however, federal law provides that all potentially responsible parties for a particular site may be liable on a joint and several basis. Environmental liabilities that are considered probable have been recognized on the Consolidated Balance Sheets as of ~~June 30,~~March 31, 2021, based on estimates of the total costs of cleanup, FirstEnergy’s proportionate responsibility for such costs and the financial ability of other unaffiliated entities to pay. Total liabilities of approximately $~~101~~110 million have been accrued through ~~June 30, 2021,~~March 31, 2022, of which, approximately ~~$67~~$70 million are for environmental remediation of former MGP and gas holder facilities in New Jersey, which are being recovered by JCP&L through a non-bypassable SBC. FE or its subsidiaries could be found potentially responsible for additional amounts or additional sites, but the loss or range of losses cannot be determined or reasonably estimated at this time.

OTHER LEGAL PROCEEDINGS

United States v. Larry Householder, et al.

On July 21, 2021, FE entered into a three-year DPA with the U.S. Attorney’s Office that, subject to court proceedings, resolves this matter. Under the DPA, FE has agreed to the filing of a criminal information charging FE with one count of conspiracy to commit honest services wire fraud. The DPA requires that FirstEnergy, among other obligations: (i) continue to cooperate with the U.S. Attorney’s Office in all matters relating to the conduct described in the DPA and other conduct under investigation by the U.S. government; (ii) pay a criminal monetary penalty totaling $230 million within sixty days, which shall consist of (x) $115 million paid by FE to the United States Treasury and (y) $115 million paid by FE to the ODSA to fund certain assistance programs, as determined by the ODSA, for the benefit of low-income Ohio electric utility customers; (iii) publish a list of all payments made in 2021 to either 501(c)(4) entities or to entities known by FirstEnergy to be operating for the benefit of a public official, either directly or indirectly, and update the same on a quarterly basis during the term of the DPA; (iv) issue a public statement, as dictated in the DPA, regarding FE’s use of 501(c)(4) entities; and (v) continue to implement and review its compliance and ethics program, internal controls, policies and procedures designed, implemented and enforced to prevent and detect violations of the U.S. laws throughout its operations, and to take certain related remedial measures. The $230 million payment will neither be recovered in rates or charged to FirstEnergy customers nor will FirstEnergy seek any tax deduction related to such payment. The entire amount of the monetary penalty was recognized as expense in the second quarter of 2021, and paid in the third quarter of 2021. Under the terms of the DPA, the criminal information will be dismissed after FirstEnergy fully complies with its obligations under the DPA.

Legal Proceedings Relating to United States v. Larry Householder, et al.

On August 10, 2020, the SEC, through its Division of Enforcement, issued an order directing an investigation of possible securities laws violations by FE, and on September 1, 2020, issued subpoenas to FE and certain FE officers. On April 28, 2021,

the SEC issued an additional subpoena to FE. While no contingency has been reflected in its consolidated financial statements,

FE believes that it is probable that it will incur a loss in connection with the resolution of the SEC investigation. Given the ongoing nature and complexity of the review, inquiries and investigations, FE cannot yet reasonably estimate a loss or range of loss that may arise from the resolution of the SEC investigation.

In addition to the subpoenas referenced above under “—United States v. Larry Householder, et. al.” and the SEC investigation, certain FE stockholders and FirstEnergy customers filed several lawsuits against FirstEnergy and certain current and former directors, officers and other employees, and the complaints in each of these suits is related to allegations in the complaint and supporting affidavit relating to HB 6 and the now former Ohio House Speaker Larry Householder and other individuals and entities allegedly affiliated with Mr. Householder. The plaintiffs in each of the below cases seek, among other things, to recover an unspecified amount of damages (unless otherwise noted). NoUnless otherwise indicated, no contingency has been reflected in FirstEnergy’s consolidated financial statements with respect to these lawsuits as a loss is neither probable, nor is a loss or range of a loss reasonably estimable.

•~~Owens v.~~In re FirstEnergy Corp. ~~et al. and Frand v. FirstEnergy Corp. et al.~~Securities Litigation (Federal District Court, S.D. Ohio); on July 28, 2020 and August 21, 2020, purported stockholders of FE filed putative class action lawsuits alleging violations of the federal securities laws. Those actions have been consolidated and a lead plaintiff, the Los Angeles County Employees Retirement Association, has been appointed by the court. A consolidated complaint was filed on February 26, 2021. The consolidated complaint alleges, on behalf of a proposed class of persons who purchased FE securities between February 21, 2017 and July 21, 2020, that FE and certain current or former FE officers violated Sections 10(b) and 20(a) of the ~~Securities~~ Exchange Act ~~of 1934~~ by issuing misrepresentations or omissions concerning FE’s business and results of operations. The consolidated complaint also alleges that FE, certain current or former FE officers and directors, and a group of underwriters violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 as a result of alleged misrepresentations or omissions in connection with offerings of senior notes by FE in February and June 2020. FE believes that it is probable that it will incur a loss in connection with the resolution of this lawsuit. Given the ongoing nature and complexity of such litigation, FE cannot yet reasonably estimate a loss or range of loss.

•~~Gendrich~~MFS Series Trust I, et al. v. ~~Anderson,~~FirstEnergy Corp., et al. and ~~Sloan~~Brighthouse Funds II – MFS Value Portfolio, et al. v. ~~Anderson,~~FirstEnergy Corp., et al. ~~(Common Pleas~~(Federal District Court, ~~Summit County, OH);~~S.D. Ohio) on ~~July 26, 2020~~December 17, 2021 and ~~July 31, 2020, respectively,~~February 21, 2022, purported stockholders of FE filed ~~shareholder derivative action lawsuits~~complaints against ~~certain~~ FE, ~~directors and officers, alleging, among other things, breaches of fiduciary duty. These actions have been consolidated.~~

•~~Miller v. Anderson, et al.~~ ~~(Federal District Court, N.D. Ohio);~~ Bloom, et al. v. Anderson, et al.; Employees Retirement System of the City of St. Louis v. Jones, et al.; Electrical Workers Pension Fund, Local 103, I.B.E.W. v. Anderson et al.; Massachusetts Laborers Pension Fund v. Anderson et al.; The City of Philadelphia Board of Pensions and Retirement v. Anderson et al.; Atherton v. Dowling et al; Behar v. Anderson, et al. (U.S. District Court, S.D. Ohio, all actions have been consolidated); beginning on August 7, 2020, purported stockholders of FE filed shareholder derivative actions alleging the board and officers breached their fiduciary duties and committed violations of Section 14(a) of the Securities Exchange Act of 1934. The cases in the S.D. Ohio have been consolidated and co-lead plaintiffs have been appointed by the court. On May 11, 2021, the court denied the defendants’ motion to dismiss in the consolidated derivative proceedings in the S.D. Ohio. As previously disclosed, on June 29, 2021, the Board established a Special Litigation Committee, effective July 1, 2021. The Special Litigation Committee has been delegated full authority by the Board to take all actions as the Special Litigation Committee deems advisable, appropriate, and in the best interests of FirstEnergy and its shareholders with respect to pending shareholder derivative litigation and demands. On July 20, 2021, the Special Litigation Committee filed motions to stay proceedings in each of the shareholder derivative actions pending in the Northern and Southern Districts of Ohio and in Summit County, Ohio, while the Special Litigation Committee investigates the matters asserted in the lawsuits.

•~~Smith v. FirstEnergy Corp. et al., Buldas v. FirstEnergy Corp. et al., and Hudock and Cameo Countertops, Inc. v. FirstEnergy Corp. et al.~~ (Federal District Court, S.D. Ohio); on July 27, 2020, July 31, 2020, and August 5, 2020, respectively, purported customers of FirstEnergy filed putative class action lawsuits against FE and FESC, as well as certain current and former officers, and certain current and former officers of EH. The complaints allege that the defendants violated Sections 10(b) and 20(a) of the Exchange Act by issuing alleged misrepresentations or omissions regarding FE’s business and its results of operations, and seek the same relief as the In re FirstEnergy ~~officers, alleging civil Racketeer Influenced~~Corp. Securities Litigation described above. FE believes that it is probable that it will incur losses in connection with the resolution of these lawsuits. Given the ongoing nature and Corrupt Organizations Act violations and related state law claims. These actions have been consolidated, and the court denied FirstEnergy’s motions to dismiss and stay discovery on February 10 and 11, 2021, respectively. The defendants submitted answers to the complaint on March 10, 2021. Discovery is proceeding.complexity of such litigation, FE cannot yet reasonably estimate a loss or range of loss.

•State of Ohio ex rel. Dave Yost, Ohio Attorney General v. FirstEnergy Corp., et al. and City of Cincinnati and City of Columbus v. FirstEnergy Corp. (Common Pleas Court, Franklin County, ~~OH)~~OH, all actions have been consolidated); on September 23, 2020 and October 27, 2020, the OAG and the cities of Cincinnati and Columbus, respectively, filed complaints against several parties including FE (the OAG also named FES as a defendant), each alleging civil violations of the Ohio Corrupt Activity Act in connection with the passage of HB 6. On January 13, 2021, the OAG filed a motion for a temporary restraining order and preliminary injunction against FirstEnergy seeking to enjoin FirstEnergy from collecting the Ohio Companies' decoupling rider. On January 31, 2021, FE reached a partial settlement with the OAG and the cities of Cincinnati and Columbus with respect to the temporary restraining order and preliminary injunction request and related issues. In connection with the partial settlement, the Ohio Companies filed an application on February 1, 2021, with the PUCO to set their respective decoupling riders (CSR) to zero. On February 2, 2021, the PUCO approved the application of the Ohio Companies setting the rider to zero and no additional customer bills will include new decoupling rider charges after February 8, 2021. The ~~cities of Dayton and Toledo have also been added as plaintiffs to the action. These actions have been consolidated. The~~ cases are stayed pending final resolution of the United States v. Larry Householder, et alal. criminal proceeding described ~~above.~~above, although on August 13, 2021, new defendants were added to the complaint, including two former officers of FirstEnergy. On November 9, 2021, the OAG filed a motion to lift the agreed-upon stay, which FE opposed on November 19, 2021; the motion remains pending. On December 2, 2021, the cities and FE entered a stipulated dismissal with prejudice of the cities’ suit.

•Smith v. FirstEnergy Corp. et al., Buldas v. FirstEnergy Corp. et al., and Hudock and Cameo Countertops, Inc. v. FirstEnergy Corp. et al. (Federal District Court, S.D. Ohio, all actions have been consolidated); on July 27, 2020, July 31, 2020, and August 5, 2020, respectively, purported customers of FE filed putative class action lawsuits against FE and FESC, as well as certain current and former FE officers, alleging civil Racketeer Influenced and Corrupt Organizations Act violations and related state law claims. FE agreed to a settlement to resolve these claims on April 11, 2022. In the fourth quarter of 2021, FirstEnergy recognized a pre-tax reserve of $37.5 million in the aggregate with respect to these lawsuits and the Emmons lawsuit below.

•Emmons v. FirstEnergy Corp. et al. (Common Pleas Court, Cuyahoga County, OH); on August 4, 2020, a purported customer of FirstEnergy filed a putative class action lawsuit against FE, FESC, ~~OE, TE and CEI,~~the Ohio Companies, along with FES,

alleging several causes of action, including negligence and/or gross negligence, breach of contract, unjust enrichment, and unfair or deceptive consumer acts or practices. FE agreed to a settlement to resolve these claims on April 11, 2022. In the fourth quarter of 2021, FirstEnergy recognized a pre-tax reserve of $37.5 million in the aggregate with respect to this lawsuit and the lawsuits above consolidated with Smith in the S.D. Ohio alleging, among other things, civil violations of the Racketeer Influenced and Corrupt Organizations Act.

On ~~October 1,~~February 9, 2022, FE, acting through the SLC, agreed to a settlement term sheet to resolve the following shareholder derivative lawsuits relating to HB 6 and the now former Ohio House Speaker Larry Householder and other individuals and entities allegedly affiliated with Mr. Householder that were filed in the S.D. Ohio, the N.D. Ohio, and the Ohio Court of Common Pleas, Summit County:

•Gendrich v. Anderson, et al. and Sloan v. Anderson, et al. (Common Pleas Court, Summit County, OH, all actions have been consolidated); on July 26, 2020 ~~plaintiffs~~and July 31, 2020, respectively, purported stockholders of FE filed shareholder derivative action lawsuits against certain FE directors and officers, alleging, among other things, breaches of fiduciary duty.

•Miller v. Anderson, et al. (Federal District Court, N.D. Ohio); Bloom, et al. v. Anderson, et al.; Employees Retirement System of the City of St. Louis v. Jones, et al.; Electrical Workers Pension Fund, Local 103, I.B.E.W. v. Anderson et al.; Massachusetts Laborers Pension Fund v. Anderson et al.; The City of Philadelphia Board of Pensions and Retirement v. Anderson et al.; Atherton v. Dowling et al.; Behar v. Anderson, et al. (Federal District Court, S.D. Ohio, all actions have been consolidated); beginning on August 7, 2020, purported stockholders of FE filed shareholder derivative actions alleging the FE Board and officers breached their fiduciary duties and committed violations of Section 14(a) of the Exchange Act.

On March 11, 2022, the parties executed a stipulation and agreement of settlement, and filed a ~~First Amended Complaint, adding as~~motion the same day requesting preliminary settlement approval in the S.D. Ohio. The settlement agreement, if approved, will fully resolve the shareholder derivative lawsuits above and stipulates a ~~plaintiff a purported customer~~series of ~~FirstEnergy and alleging a civil violation~~corporate governance enhancements, that has resulted or is expected to result in the following:

•Six members of the ~~Ohio Corrupt Activity Act~~FE Board, Messrs. Michael J. Anderson, Donald T. Misheff, Thomas N. Mitchell, Christopher D. Pappas and ~~civil conspiracy against~~Luis A. Reyes, and Ms. Julia L. Johnson are not standing for re-election at FE’s 2022 annual shareholder meeting;

•A special FE ~~FESC and FES. On May 4, 2021, the court granted the defendants’ motion~~Board committee of at least three recently appointed independent directors will be formed to ~~dismiss plaintiffs’ breach of contract claims and denied the remainder~~initiate a review process of the ~~motions~~current senior executive team, to ~~dismiss.~~ begin within 30 days of the 2022 annual shareholder meeting;

•The ~~defendants submitted answers~~FE Board will oversee FE’s lobbying and political activities, including periodically reviewing and approving political and lobbying action plans prepared by management;

•An FE Board committee of recently appointed independent directors will oversee the implementation and third-party audits of the FE Board-approved action plans with respect to ~~the complaint on June 1, 2021. Discovery is proceeding.~~political and lobbying activities;

•FE will implement enhanced disclosure to shareholders of political and lobbying activities, including enhanced disclosure in its annual proxy statement; and

•FE will further align financial incentives of senior executives to proactive compliance with legal and ethical obligations.

The settlement also includes a payment to FirstEnergy of $180 million, to be paid by insurance after court approval, less any court-ordered attorney’s fees awarded to plaintiffs.

In letters dated January 26, and February 22, 2021, staff of FERC's Division of Investigations notified FirstEnergy that the Division is conducting an investigation of FirstEnergy’s lobbying and governmental affairs activities concerning HB 6, and staff directed FirstEnergy to preserve and maintain all documents and information related to the same as such have been developed as part of an ongoing non-public audit being conducted by FERC's Division of Audits and Accounting. While no contingency has been reflected in ~~its~~the consolidated financial statements, FirstEnergy believes that it is probable that it will incur a loss in connection with the resolution of the FERC investigation. Given the ongoing nature and complexity of the review, inquiries and investigations, FirstEnergy cannot yet reasonably estimate a loss or range of loss that may arise from the resolution of the FERC investigation.

The outcome of any of these lawsuits, governmental investigations and audit ~~are~~is uncertain and could have a material adverse effect on FE’s or its subsidiaries’ reputation, business, financial condition, results of operations, liquidity, and cash flows.

~~Internal Investigation Relating to United States v. Larry Householder, et al.~~

As previously disclosed, a committee of independent members of the Board of Directors has been directing an internal investigation related to ongoing government investigations. In connection with FirstEnergy’s internal investigation, such committee determined on October 29, 2020, to terminate FirstEnergy’s Chief Executive Officer, Charles E. Jones, together with two other executives: Dennis M. Chack, Senior Vice President of Product Development, Marketing, and Branding; and Michael J. Dowling, Senior Vice President of External Affairs. Each of these terminated executives violated certain FirstEnergy policies and its code of conduct. These executives were terminated as of October 29, 2020. Such former members of senior management did not maintain and promote a control environment with an appropriate tone of compliance in certain areas of FirstEnergy’s business, nor sufficiently promote, monitor or enforce adherence to certain FirstEnergy policies and its code of conduct. Furthermore, certain former members of senior management did not reasonably ensure that relevant information was communicated within our organization and not withheld from our independent directors, our Audit Committee, and our independent auditor. Among the matters considered with respect to the determination by the committee of independent members of the Board of Directors that certain former members of senior management violated certain FirstEnergy policies and its code of conduct related to a payment of approximately $4 million made in early 2019 in connection with the termination of a purported consulting agreement, as amended, which had been in place since 2013. The counterparty to such agreement was an entity associated with an individual who subsequently was appointed to a full-time role as an Ohio government official directly involved in regulating the Ohio Companies, including with respect to distribution rates. Additionally, on November 8, 2020, the Senior Vice President and Chief Legal Officer, and the Vice President, General Counsel, and Chief Ethics Officer, were separated from FirstEnergy due to inaction and conduct that the Board determined was influenced by the improper tone at the top. Subsequently, effective May 26, 2021, the Vice President, Rates and Regulatory Affairs, and Acting Vice President, External Affairs was separated from FirstEnergy related to her inaction regarding an amendment in 2015 of the purported consulting agreement discussed above.

Additionally, on February 17, 2021, the Board appointed Mr. John W. Somerhalder II to the positions of Vice Chairperson of the Board and Executive Director of FE, each effective as of March 1, 2021. Mr. Donald T. Misheff will continue to serve as Non-Executive Chairman of the Board. Mr. Somerhalder will help lead efforts to enhance FirstEnergy’s reputation. On March 7, 2021, the Board appointed Mr. Steven E. Strah to the position of Chief Executive Officer of FirstEnergy, effective as of March 8, 2021. On March 7, 2021, at the recommendation of the FirstEnergy Corporate Governance and Corporate Responsibility Committee, the Board also elected Mr. Strah as a Director of FirstEnergy, effective as of March 8, 2021.

Also, in connection with the internal investigation, FirstEnergy identified certain transactions, which, in some instances, extended back ten years of more, including vendor service, that were either improperly classified, misallocated to certain of the Utilities and Transmission Companies, or lacked proper supporting documentation. These transactions resulted in amounts collected from customers that were immaterial to FirstEnergy. The Utilities and Transmission Companies are working with the appropriate regulatory agencies to address these amounts.

The internal investigation has revealed no new material issues since FirstEnergy’s Form 10-K was filed on February 18, 2021. The focus of the internal investigation has transitioned from a proactive investigation to continued cooperation with the ongoing government investigations.

~~Nuclear Plant Matters~~

On October 15, 2019, JCP&L, ME, PN and GPUN executed an asset purchase and sale agreement with TMI-2 Solutions, LLC, a subsidiary of EnergySolutions, LLC, concerning the transfer and dismantlement of TMI-2. This transfer of TMI-2 to TMI-2 Solutions, LLC will include the: (i) transfer of the ownership and operating NRC licenses for TMI-2; (ii) transfer of the external

trusts for the decommissioning and environmental remediation of TMI-2; and (iii) assumption by TMI-2 Solutions, LLC, of certain liabilities, including all responsibility for the TMI-2 site, full decommissioning of TMI-2 and ongoing management of core debris material not previously transferred to the DOE. On August 10, 2020, JCP&L, ME, PN, GPUN, TMI-2 Solutions, LLC, and the PA DEP reached a settlement agreement regarding the decommissioning of TMI-2. On December 2, 2020, the NJBPU issued an order approving the transfer and sale under the conditions requested by NJ Rate Counsel and agreed to by JCP&L. Those conditions will restrict JCP&L from seeking recovery from its ratepayers for any future liabilities JCP&L could incur with respect to TMI-2. Also, on December 2, 2020, the NRC issued its order approving the license transfer as requested. With the receipt of all required regulatory approvals, the transaction was consummated on December 18, 2020.

Other Legal Matters

There are various lawsuits, claims (including claims for asbestos exposure) and proceedings related to FirstEnergy’s normal business operations pending against FE or its subsidiaries. The loss or range of loss in these matters is not expected to be material to FE or its subsidiaries. The other potentially material items not otherwise discussed above are described under Note 8,7, “Regulatory Matters.”

FirstEnergy accrues legal liabilities only when it concludes that it is probable that it has an obligation for such costs and can reasonably estimate the amount of such costs. In cases where FirstEnergy determines that it is not probable, but reasonably possible that it has a material obligation, it discloses such obligations and the possible loss or range of loss if such estimate can be made. If it were ultimately determined that FE or its subsidiaries have legal liability or are otherwise made subject to liability based on any of the matters referenced above, it could have a material adverse effect on FE’s or its subsidiaries’ financial condition, results of operations, and cash flows.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 1, "Organization and Basis of Presentation," for a discussion of new accounting pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “FirstEnergy Corp. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk Information” in Item 2 above.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The management of FirstEnergy, with the participation of ~~our chief executive officer~~the Chief Executive Officer and ~~chief financial officer,~~Chief Financial Officer, have reviewed and evaluated the effectiveness of its disclosure controls and procedures, ~~(as~~as defined under the Exchange Act, in Rules 13a-15(e) and 15d-15(e) ~~under the Exchange Act)~~, as of ~~June 30, 2021.~~the end of the period covered by this report. Based on that evaluation, the ~~chief executive officer~~Chief Executive Officer and ~~chief financial officer~~Chief Financial Officer of FirstEnergy have concluded that ~~our~~its disclosure controls and procedures were ~~not~~ effective as of ~~June 30, 2021, due to~~ the ~~material weakness in internal control over financial reporting described below.~~

Notwithstanding the material weakness described below, management has concluded that its consolidated financial statements included in the current and prior period filings were not materially misstated and presented fairly, in all material respects, FirstEnergy’s consolidated financial statements asend of the ~~three and six months ended June 30, 2021 and 2020.~~

~~Material Weakness in Internal Control Over Financial Reporting Existing as of June 30, 2021~~

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of FirstEnergy’s annual or interim financial statements will not be prevented or detected on a timely basis.

We did not maintain an effective control environment as our senior management failed to set an appropriate tone at the top. Specifically, certain members of senior management failed to reinforce the need for compliance with FirstEnergy’s policies and its code of conduct, which resulted in inappropriate conduct that was inconsistent with FirstEnergy’s policies and its code of conduct.

~~This control deficiency did not result in a material misstatement of our annual or interim consolidated financial statements. However,~~period covered by this control deficiency could have resulted in material misstatements to the annual or interim consolidated financial statements that would not have been prevented or detected. Accordingly, our management has concluded that this control deficiency constitutes a material weakness.

~~Remediation Plans~~

Management and the Board of Directors take FirstEnergy’s internal control over financial reporting and the integrity of its financial statements seriously. Management, the Board of Directors, along with the Audit Committee, and its subcommittee, are currently working to remediate the material weakness identified above. The remedial activities include the following:

•~~the appointment of a new Chief Executive Officer to improve the tone at the top;~~

•~~the termination of certain members of senior management, including FirstEnergy’s former Chief Executive Officer, for violations of certain FirstEnergy policies and its code of conduct;~~

•~~the separation of two senior members of the legal department, due to inaction and conduct that the Board of Directors determined was influenced by the improper tone at the top;~~

•the establishment of a subcommittee of FirstEnergy’s Audit Committee, who, with the Board of Directors, assessed the compliance program, provided recommendations, and is overseeing the implementation of changes (as appropriate) in FirstEnergy’s compliance program;

•~~the appointment of a new Chief Legal Officer;~~

•~~the appointment of a new Vice Chairperson of the Board and Executive Director to help lead efforts to enhance FirstEnergy’s reputation with external stakeholders;~~

•~~the appointment of new independent directors to the Board;~~

•~~the appointment of a new Chief Ethics & Compliance Officer who is overseeing the ethics and compliance program and implementation of enhancements to the existing compliance structure and role;~~

•the Board of Directors’ reinforcement of and executive team’s recommitment to the importance of setting appropriate tone at the top and the expectation to demonstrate FirstEnergy’s core values and behaviors which support an ethical and compliant culture, as well as adherence to internal control over financial reporting; and

•~~increased communication and training of employees with respect to:~~

•~~our commitment to ethical standards and integrity of our business procedures,~~

•~~compliance requirements,~~

•~~our code of conduct and other FirstEnergy policies, and~~

•~~availability of and the process for reporting suspected violations of law or code of conduct.~~

Management and the Board of Directors are committed to maintaining a strong internal control environment and believes the above efforts will effectively remediate the material weakness; however, the material weakness cannot be considered remediated until the applicable remedial actions are implemented and operating for a sufficient period of time to allow management to conclude, through testing, that a remediation plan is implemented and the controls are operating effectively. Management, under the oversight of the Board of Directors, has developed and are implementing a comprehensive remediation plan, and continues to consider additional enhancement measures, as appropriate, which includes defined responsibilities and measurable milestones to evaluate the progress of the remediation activities. Management and the Board of Directors are monitoring the progress of these activities on an ongoing basis and management will continue to assess the effectiveness of the remediation efforts in connection with evaluations of internal control over financial reporting.report.

(b) Changes in Internal Control over Financial Reporting

During the quarter ended ~~June 30, 2021,~~March 31, 2022, there were no changes in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the ~~Securities~~ Exchange ~~Act of 1934)~~Act) that have materially affected, or are reasonably likely to materially affect, FirstEnergy’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information required for Part II, Item 1 is incorporated by reference to the discussions in Note 8,7, “Regulatory Matters,” and Note 9,8, “Commitments, Guarantees and Contingencies,” of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

ITEM 1A. RISK FACTORS

You should carefully consider the risk factors discussed in "Item 1A. Risk Factors" in FirstEnergy’s Annual Report on Form 10-K for the year ended December 31, ~~2020, and its Quarterly Report on Form 10-Q for the quarter ended March 31,~~ 2021, which could materially affect FirstEnergy’s business, financial condition or future results.

The information set forth in this report, including without limitation, the risk factors presented below, updates and should be read in conjunction with, the risk factors and information disclosed in FirstEnergy’s Annual Report on Form 10-K for the year ended December 31, 2020, and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.

We Have Received Requests for Information Related to Government Investigations. The Investigations and Related Litigation Could Have a Material Adverse Effect on our Reputation, Business, Financial Condition, Results of Operations, Liquidity or Cash Flows.

On July 21, 2020, we received subpoenas for records from the U.S. Attorney’s Office for the S.D. Ohio requesting the production of information concerning an investigation surrounding HB 6 involving the now former Ohio House Speaker Larry Householder and other individuals and entities allegedly affiliated with Mr. Householder. Following the announcement of the investigation surrounding HB 6, certain of our stockholders and customers filed several lawsuits against us and certain current and former directors, officers and other employees. In addition, on August 10, 2020, the SEC, through its Division of Enforcement, issued an order directing an investigation of possible securities laws violations by FirstEnergy, and on September 1, 2020, issued subpoenas to FirstEnergy and certain of its officers. We are cooperating with both the U.S. Attorney’s Office and the SEC in their ongoing investigations. On July 21, 2021, FE entered into a three-year DPA with the U.S. Attorney’s Office that, subject to court proceedings, resolves the previously disclosed U.S. Attorney’s Office investigation into FirstEnergy relating to FirstEnergy’s lobbying and governmental affairs activities concerning HB 6, which, among other things requires FE to pay a monetary penalty of $230 million. With respect to the SEC, we believe that it is probable that FE will incur a loss in connection with the resolution of the SEC’s investigation. Given the ongoing nature and complexity of such investigation, we cannot yet reasonably estimate a loss or range of loss that may arise from the resolution of the SEC investigation but such resolution could have a material adverse effect on our reputation, business, financial condition, results of operations, liquidity or cash flows. See Note 9, “Commitments, Guarantees and Contingencies,” of the Notes to Consolidated Financial Statements, for additional details on the government investigations and subsequent litigation surrounding HB 6.

The investigations and litigation related to HB 6 could divert management’s focus and have resulted in, and could continue to result in substantial investigation expenses, and the commitment of substantial corporate resources. The outcome of the government investigations and related litigation is inherently uncertain. If one or more legal matters, were resolved against us, our reputation, business, financial condition, results of operations, liquidity or cash flows may be adversely affected. Further, such an outcome could result in settlement agreements, significant monetary damages, remedial corporate measures or other relief against us that could adversely impact our operations. These matters are likely to continue to have an adverse impact on the trading prices of our securities.

We are unable to predict the outcome, duration, scope, result or related costs of the investigations and related litigation and, therefore, any of these risks could impact us significantly beyond expectations. Moreover, we are unable to predict the potential for any additional investigations or litigation, any of which could exacerbate these risks or expose us to potential criminal or civil liabilities, sanctions or other remedial measures, and could have a material adverse effect on our reputation, business, financial condition, results of operations, liquidity or cash flows.

We Have Received Requests for Information Related to Government Investigations. Related Potential Adverse Impacts on Federal or State Regulatory Matters Could Have a Material Adverse Effect on our Reputation, Business, Financial Condition, Results of Operations, Liquidity or Cash Flows

On July 21, 2020, we received subpoenas for records from the U.S. Attorney’s Office for the S.D. Ohio requesting the production of information concerning an investigation surrounding HB 6 involving the now former Ohio House Speaker Larry Householder and other individuals and entities allegedly affiliated with Mr. Householder. On July 21, 2021, FE entered into a three-year DPA with the U.S. Attorney’s Office that, subject to court proceedings, resolves the previously disclosed U.S. Attorney’s Office investigation into FirstEnergy relating to FirstEnergy’s lobbying and governmental affairs activities concerning HB 6, which, among other things requires FE to pay a monetary penalty of $230 million. The filing of the criminal information agreed to in the DPA, which included a single charge that FE conspired to commit honest services wire fraud, as well as any future allegations of non-compliance with anti-corruption laws could have an adverse impact on our reputation or relationships with the various federal, state and local regulatory authorities that significantly influence our operating environment. Further, any such failure to have complied with anti-corruption laws could result in a material inquiry or investigation by such federal, state and local regulatory agencies, and result in adverse rulings against us, which could have a material adverse impact on our financial condition, operating results and operations.

On January 26, 2021, staff of FERC’s Division of Investigations issued a letter directing FirstEnergy to preserve and maintain all documents and information related to an ongoing audit being conducted by FERC’s Division of Audits and Accounting, including activities relating to lobbying and governmental affairs activities concerning HB 6. Subsequently, on February 22, 2021, staff of FERC's Division of Investigations notified FirstEnergy that the Division is conducting an investigation of FirstEnergy’s lobbying and governmental affairs activities concerning HB 6. We are cooperating with the FERC in the ongoing audit and investigation. With respect to the FERC Division of Investigations matter, we believe that it is probable that FirstEnergy will incur a loss in connection with its resolution. Given the ongoing nature and complexity of such investigation, we cannot yet reasonably estimate a loss or range of loss that may arise from the resolution of the FERC Division of Investigations matter but such resolution could have a material adverse effect on our reputation, business, financial condition, results of operations, liquidity or cash flows. See Note 8, "Regulatory Matters," and Note 9, “Commitments, Guarantees and Contingencies,” of the Notes to Consolidated Financial Statements, for additional details on the government investigations and regulatory matters related to the investigation of HB 6.

~~For example, there are several regulatory matters associated with the ongoing governmental investigations including, but not limited to, the following:~~

•On September 15, 2020, the PUCO opened a new proceeding to review the political and charitable spending by the Ohio Companies in support of HB 6 and the subsequent referendum effort, directing the Ohio Companies to show cause, demonstrating that the costs of any political or charitable spending in support of HB 6, or the subsequent referendum effort, were not included, directly or indirectly, in any rates or charges paid by ratepayers.

•~~On November 4, 2020, the PUCO initiated an additional corporate separation audit as a result of the termination of certain members of senior management.~~

• On December 30, 2020, the PUCO reinstated the requirement that the Ohio Companies file a distribution rate case by May 31, 2024, which requirement had previously been eliminated by the PUCO in November 2019.

•Also on December 30, 2020, the PUCO reopened the DMR audit docket, and directed PUCO staff to solicit a third-party auditor and conduct a full review of the DMR to ensure funds collected from ratepayers through the DMR were only used for the purposes established in ESP IV.

•On January 26, 2021, staff of FERC's Division of Investigations issued a letter directing FirstEnergy to preserve and maintain all documents and information related to an ongoing audit being conducted by FERC's Division of Audits and Accounting, including activities related to lobbying and governmental affairs activities concerning HB 6.

•In connection with the partial settlement with the OAG and other parties, the Ohio Companies filed an application with the PUCO on February 1, 2021, to set the respective decoupling riders (Rider CSR) to zero and, in a related action, the Ohio Companies will not seek to recover lost distribution revenue from residential and commercial customers; as a

result, FirstEnergy recognized a $108 million pre-tax charge ($84 million after-tax) in the fourth quarter of 2020 and $77 million (pre-tax) of which is associated with forgoing collection of lost distribution revenue.

•On April 22, 2021, in anticipation of the effective date of HB 128 and in accordance with HB 128’s provisions regarding the prompt refund of decoupling funds, the Ohio Companies filed an application with the PUCO to modify CSR to return such amount over twelve months commencing June 1, 2021. On July 7, 2021, the PUCO issued an order approving the Ohio Companies’ modified application and directed that all funds collected through CSR be refunded to customers over a single billing cycle beginning August 1, 2021.

While FirstEnergy is committed to pursuing an open dialogue with stakeholders in an appropriate manner with respect to the numerous regulatory proceedings currently underway, the rates our Utilities and Transmission Companies are allowed to charge may be decreased as a result of actions taken by FERC or by a state regulatory commission to which our Utilities is subject to jurisdiction, whether as a result of the DPA, any failure to have complied with anti-corruption laws, or otherwise. Also, in connection with our internal investigation, we identified certain transactions, which, in some instances, extended back ten years or more, including vendor services, that were either improperly classified, misallocated to certain of the Utilities and Transmission Companies, or lacked proper supporting documentation. These transactions resulted in amounts collected from customers that were immaterial to FirstEnergy, and the Utilities and Transmission Companies are working with the appropriate regulatory agencies to address these amounts.

We are unable to predict the adverse impacts on federal or state regulatory matters, including with respect to rates, and, therefore, any of these risks could impact us significantly beyond expectations. Moreover, we are unable to predict the potential for any additional regulatory actions, any of which could exacerbate these risks or expose us to adverse outcomes in pending or future rate cases, and could have a material adverse effect on our reputation, business, financial condition, results of operations, liquidity or cash flows.

~~If We Violate our DPA That We Entered Into on July 20, 2021, It Could Have an Adverse Effect on our Reputation and Consolidated Financial Statements~~

On July 21, 2021, we entered into a three-year DPA with the U.S. Attorney’s Office that, subject to court proceedings, resolves the previously disclosed U.S. Attorney’s Office investigation into us relating to our lobbying and governmental affairs activities concerning HB 6. Under the DPA, the U.S. Attorney’s Office filed a single charge alleging that we conspired to commit honest services wire fraud. The DPA provides that the U.S. Attorney’s Office will defer any prosecution of such conspiracy charge and any other criminal or civil case against us in connection with the matters identified therein for a three-year period subject to certain obligations of ours, including, but not limited to, the following: (i) continued cooperation with the U.S. Attorney’s Office in all matters relating to the conduct described in the DPA and other conduct under investigation by the U.S. government; (ii) payment of a criminal monetary penalty totaling $230 million; (iii) publish a list of all payments made in 2021 to either 501(c)(4) entities or to entities known by FirstEnergy to be operating for the benefit of a public official, either directly or indirectly, and update the same on a quarterly basis during the term of the DPA; (iv) publication of a public acknowledgement of our conduct, including a statement, as dictated in the DPA, regarding our use of 501(c)(4) entities; and (v) continued implementation and review of our compliance and ethics program, internal controls, policies and procedures designed, implemented and enforced to prevent and detect violations of the U.S. laws throughout its operations, and to take certain related remedial measures. If we are found to have breached the terms of the DPA, the U.S. Attorney’s Office may elect to prosecute, or bring a civil action against, us for conduct alleged in the DPA or known to the government, which could result in fines or penalties and could have a material adverse impact on our reputation or relationships with regulatory and legislative authorities, customers and other stakeholders, as well as our consolidated financial statements.

Failure to Comply with Debt Covenants in our Credit Agreements or Conditions Could Adversely Affect our Ability to Execute Future Borrowings and/or Require Early Repayment, and Could Restrict our Ability to Obtain Additional or Replacement Financing on Acceptable Terms or at All

~~Our debt and credit agreements contain various financial and other covenants including a consolidated debt to total capitalization ratio of no more than 65% measured at the end of each fiscal quarter.~~

Our credit agreements contain certain negative and affirmative covenants. Our ability to comply with the covenants and restrictions contained in our FE Revolving Facility and FET Revolving Facility has been and may, in the future, be affected by events related to the ongoing government investigations or otherwise.

On July 21, 2021, FE and the Utilities and FET and certain of its subsidiaries entered into amendments to the FE Revolving Facility and the FET Revolving Facility, respectively. The amendments provide for modifications and/or waivers of (i) certain representations and warranties, (ii) certain affirmative and negative covenants, contained therein, and (iii) any resulting event of default, which, in each case, resulted either from FE entering into the DPA or as a consequence of the facts and circumstances described in the DPA, thus allowing FirstEnergy to be in compliance with the revolving credit facilities and maintain access to the liquidity provided thereunder. In addition, we may be required to seek additional covenant waivers in future periods, and there can be no assurance that we will be able to obtain such waivers on favorable terms, or at all.

A breach of any of the covenants contained in our credit agreements, including any breach related to alleged failures to comply with anti-corruption and anti-bribery laws, could result in an event of default under such agreements, and we would not be able to access our credit facilities for additional borrowings and letters of credit while any default exists. Upon the occurrence of such an event of default, any amounts outstanding under our credit facilities could be declared to be immediately due and payable and all applicable commitments to extend further credit could be terminated. If indebtedness under our credit facilities is accelerated, there can be no assurance that we will have sufficient assets to repay the indebtedness. In addition, certain events, including but not limited to any covenant breach related to alleged failures to comply with anti-corruption and anti-bribery laws, an event of default under our credit agreements, and the acceleration of applicable commitments under such facilities could restrict our ability to obtain additional or replacement financing on acceptable terms or at all. The operating and financial restrictions and covenants in our credit facilities and any future financing agreements may adversely affect our ability to finance future operations or capital needs or to engage in other business activities.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

On July 20, 2021, the Board of FirstEnergy approved and adopted a new Code of Business Conduct and Ethics, which became effective immediately. The Code of Business Conduct is applicable to all directors, officers, employees, contractors and temporary workers of FirstEnergy, including FirstEnergy’s principal executive officer, principal financial officer and principal accounting officer. The new Code of Business Conduct (i) promotes and emphasizes FirstEnergy’s commitment to compliance and ethics; (ii) fosters a “speak up” culture in which stakeholders are encouraged to report actual or suspected Code of Business Conduct violations without fear of retaliation; (iii) improves readability; and (iv) promotes understanding of compliance commitments and expectations.

Adoption of the Code of Business Conduct did not result in any explicit or implicit waiver of any provision of the Code of Business Conduct. A copy of the new Code of Business Conduct is available on FirstEnergy’s website at www.firstenergycorp.com (under Investors > Governance > Ethics and Business Conduct Policies and Statements). The foregoing summary is qualified in its entirety by the full text of the Code, which is filed as Exhibit 14.1 and incorporated herein by reference. The other contents of FirstEnergy’s website are not incorporated by reference in this report.

None.

8665

ITEM 6. EXHIBITS


Exhibit Number		Description

(A)~~(B)~~	10.1	Form of ~~2021-2023~~2022-2024 Cash-Based Performance-Adjusted Restricted Stock Unit Award Agreement
(A)~~(B)~~	10.2	Form of ~~2021-2023~~2022-2024 Stock-Based Performance-Adjusted Restricted Stock Unit Award Agreement
~~(A)(B)~~	~~10.3~~	~~Form of Restricted Stock Award Agreement~~
~~(A)(B)~~	~~10.4~~	~~Voluntary Retirement Agreement with Gary D. Benz~~
~~(A)(B)~~	~~10.5~~	~~Restricted Stock Award Agreement to John W. Somerhalder II~~
	~~10.6~~	~~Deferred Prosecution Agreement, dated as of July 21, 2021 (incorporated by reference to FE’s Form 8-K filed July 22, 2021, Exhibit 10.1, File No. 333-21011)~~
	~~10.7~~	Waiver and Amendment No. 4 to Credit Agreement, dated as of July 21, 2021, among FE, The Cleveland Electric Illuminating Company, Metropolitan Edison Company, Ohio Edison Company, Pennsylvania Power Company, The Toledo Edison Company, Jersey Central Power & Light Company, Monongahela Power Company, Pennsylvania Electric Company, The Potomac Edison Company and West Penn Power Company, as borrowers, Mizuho Bank, Ltd., as administrative agent, and the lenders identified therein (incorporated by reference to FE’s Form 8-K filed July 22, 2021, Exhibit 10.2, File No. 333-21011)
	~~10.8~~	Waiver and Amendment No. 4 to Credit Agreement, dated as of July 21, 2021, to Credit Agreement, among FirstEnergy Transmission, LLC, American Transmission Systems, Incorporated, Mid-Atlantic Interstate Transmission, LLC and Trans-Allegheny Interstate Line Company, as borrowers, and PNC Bank, National Association, as administrative agent, and the lenders identified therein (incorporated by reference to FE’s Form 8-K filed July 22, 2021, Exhibit 10.3, File No. 333-21011)
~~(A)~~	~~14.1~~	~~Code of Business Conduct and Ethics~~
(A)	31.1	Certification of chief executive officer, as adopted pursuant to Rule 13a-14(a)
(A)	31.2	Certification of chief financial officer, as adopted pursuant to Rule 13a-14(a)
(A)	32	Certification of chief executive officer and chief financial officer, pursuant to 18 U.S.C. Section 1350
	101	The following materials from the Quarterly Report on Form 10-Q of FirstEnergy Corp. for the period ended ~~June 30, 2021,~~March 31, 2022, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, (v) related notes to these financial statements and (vi) document and entity information
	104	Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document contained in Exhibit 101)

(A) Provided herein in electronic format as an exhibit.

~~(B) Management contract or compensatory plan contract or arrangement filed pursuant to Item 601 of Regulation S-K.~~

Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K, FirstEnergy has not filed as an exhibit to this Form 10-Q any instrument with respect to long-term debt if the respective total amount of securities authorized thereunder does not exceed 10% of its respective total assets, but hereby agrees to furnish to the SEC on request any such documents.

8766

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

~~July 22, 2021~~April 21, 2022


			FIRSTENERGY CORP.
			Registrant

			/s/ Jason J. Lisowski
			Jason J. Lisowski
			Vice President, Controller and Chief Accounting Officer


Large Accelerated Filer			☑

Accelerated Filer			☐

Non-accelerated Filer			☐

Smaller Reporting Company			☐

Emerging Growth Company			☐


						OUTSTANDING
CLASS						AS OF ~~JUNE 30, 2021~~MARCH 31, 2022
Common Stock, $0.10 par value						~~544,193,637~~570,932,260


			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			3530

Item 3. Quantitative and Qualitative Disclosures About Market Risk			8264

Item 4. Controls and Procedures			8264

Part II. Other Information

Item 1. Legal Proceedings			8364

Item 1A. Risk Factors			8364

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			8664

Item 3. Defaults Upon Senior Securities			8664

Item 4. Mine Safety Disclosures			8664

Item 5. Other Information			8664

Item 6. Exhibits			8765



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
~~FE Revolving Facility~~			~~FE and the Utilities’ five-year syndicated revolving credit facility, as amended~~
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
~~FET Revolving Facility~~			~~FET and certain of its subsidiaries’ five-year syndicated revolving credit facility, as amended~~
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 ~~operates~~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


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended March 31,
(In millions, except per share amounts)	(In millions, except per share amounts)	2021		2020		2021		2020		(In millions, except per share amounts)	2022		2021

REVENUES:	REVENUES:									REVENUES:
Distribution services and retail generation	Distribution services and retail generation	$	2,096	$	2,030	$	4,332	$	4,154	Distribution services and retail generation	$	2,397	$	2,236
Transmission	Transmission	411		380		812		777		Transmission	451		401
Other	Other	115		112		204		300		Other	141		89
Total revenues(1)	Total revenues(1)	2,622		2,522		5,348		5,231		Total revenues(1)	2,989		2,726

OPERATING EXPENSES:	OPERATING EXPENSES:									OPERATING EXPENSES:
Fuel	Fuel	112		77		230		175		Fuel	140		118
Purchased power	Purchased power	614		613		1,332		1,307		Purchased power	875		718
Other operating expenses	Other operating expenses	718		730		1,470		1,479		Other operating expenses	820		752

Provision for depreciation	Provision for depreciation	323		321		646		638		Provision for depreciation	340		323

Amortization of regulatory assets, net		49		13		141		65
Amortization (deferral) of regulatory assets, net										Amortization (deferral) of regulatory assets, net	(37)		92
General taxes	General taxes	264		253		537		520		General taxes	292		273
DPA penalty (Note 9)		230		0		230		0
Gain on sale of Yards Creek (Note 8)		0		0		(109)		0

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

Total operating expenses	Total operating expenses	2,310		2,007		4,477		4,184		Total operating expenses	2,430		2,167

OPERATING INCOME	OPERATING INCOME	312		515		871		1,047		OPERATING INCOME	559		559

OTHER INCOME (EXPENSE):	OTHER INCOME (EXPENSE):									OTHER INCOME (EXPENSE):

Miscellaneous income, net	Miscellaneous income, net	108		103		243		203		Miscellaneous income, net	106		135

Pension and OPEB mark-to-market adjustment (Note 5)		0		0		0		(423)

Interest expense	Interest expense	(287)		(263)		(572)		(526)		Interest expense	(313)		(285)
Capitalized financing costs	Capitalized financing costs	21		18		34		36		Capitalized financing costs	19		13
Total other expense	Total other expense	(158)		(142)		(295)		(710)		Total other expense	(188)		(137)

INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	154		373		576		337		INCOME BEFORE INCOME TAXES	371		422

INCOME TAXES	INCOME TAXES	96		66		183		6		INCOME TAXES	83		87

INCOME FROM CONTINUING OPERATIONS		58		307		393		331

Discontinued operations (Note 3)(2)		0		2		0		52

NET INCOME	NET INCOME	$	58	$	309	$	393	$	383	NET INCOME	$	288	$	335

EARNINGS PER SHARE OF COMMON STOCK (Note 4):
Basic - Continuing Operations		$	0.11	$	0.57	$	0.72	$	0.61
Basic - Discontinued Operations		0		0		0		0.10
Basic - Net Income Attributable to Common Stockholders		$	0.11	$	0.57	$	0.72	$	0.71
EARNINGS PER SHARE OF COMMON STOCK (Note 3):										EARNINGS PER SHARE OF COMMON STOCK (Note 3):

Diluted - Continuing Operations		$	0.11	$	0.57	$	0.72	$	0.61
Diluted - Discontinued Operations		0		0		0		0.10
Diluted - Net Income Attributable to Common Stockholders		$	0.11	$	0.57	$	0.72	$	0.71

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

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

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:	WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:									WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic	Basic	544		542		544		541		Basic	570		543
Diluted	Diluted	545		543		545		543		Diluted	571		544


(In millions, except share amounts)	(In millions, except share amounts)	June 30, 2021		December 31, 2020		(In millions, except share amounts)	March 31, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
CURRENT ASSETS:	CURRENT ASSETS:					CURRENT ASSETS:
Cash and cash equivalents	Cash and cash equivalents	$	1,254	$	1,734	Cash and cash equivalents	$	283	$	1,462
Restricted cash	Restricted cash	58		67		Restricted cash	27		49
Receivables-	Receivables-					Receivables-
Customers	Customers	1,243		1,367		Customers	1,258		1,192
Less — Allowance for uncollectible customer receivables	Less — Allowance for uncollectible customer receivables	157		164		Less — Allowance for uncollectible customer receivables	132		159
		1,086		1,203			1,126		1,033

Other, net of allowance for uncollectible accounts of $10 in 2021 and $26 in 2020		232		236
Other, net of allowance for uncollectible accounts of $10 in 2022 and 2021						Other, net of allowance for uncollectible accounts of $10 in 2022 and 2021	246		246
Materials and supplies, at average cost	Materials and supplies, at average cost	274		317		Materials and supplies, at average cost	273		260

Prepaid taxes and other	Prepaid taxes and other	292		157		Prepaid taxes and other	295		187

		3,196		3,714			2,250		3,237
PROPERTY, PLANT AND EQUIPMENT:	PROPERTY, PLANT AND EQUIPMENT:					PROPERTY, PLANT AND EQUIPMENT:
In service	In service	44,683		43,654		In service	46,349		46,002
Less — Accumulated provision for depreciation	Less — Accumulated provision for depreciation	12,328		11,938		Less — Accumulated provision for depreciation	12,834		12,672
		32,355		31,716			33,515		33,330
Construction work in progress	Construction work in progress	1,662		1,578		Construction work in progress	1,481		1,414
		34,017		33,294			34,996		34,744

PROPERTY, PLANT AND EQUIPMENT, NET - HELD FOR SALE (NOTE 8)		0		45

INVESTMENTS AND OTHER NONCURRENT ASSETS:	INVESTMENTS AND OTHER NONCURRENT ASSETS:					INVESTMENTS AND OTHER NONCURRENT ASSETS:
Goodwill	Goodwill	5,618		5,618		Goodwill	5,618		5,618
Investments (Note 7)		622		605
Investments (Note 6)						Investments (Note 6)	646		655
Regulatory assets	Regulatory assets	97		82		Regulatory assets	70		71
Other	Other	813		1,106		Other	1,037		1,107

		7,150		7,411			7,371		7,451
		$	44,363	$	44,464		$	44,617	$	45,432
LIABILITIES AND CAPITALIZATION	LIABILITIES AND CAPITALIZATION					LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:	CURRENT LIABILITIES:					CURRENT LIABILITIES:
Currently payable long-term debt	Currently payable long-term debt	$	733	$	146	Currently payable long-term debt	$	1,055	$	1,606
Short-term borrowings	Short-term borrowings	500		2,200		Short-term borrowings	350		—
Accounts payable	Accounts payable	1,184		827		Accounts payable	1,090		943

Accrued interest	Accrued interest	293		282		Accrued interest	289		283
Accrued taxes	Accrued taxes	528		640		Accrued taxes	650		647
Accrued compensation and benefits	Accrued compensation and benefits	296		349		Accrued compensation and benefits	276		313

Dividends Payable						Dividends Payable	223		222
Other	Other	337		560		Other	427		402

		3,871		5,004			4,360		4,416
CAPITALIZATION:	CAPITALIZATION:					CAPITALIZATION:
Stockholders’ equity-	Stockholders’ equity-					Stockholders’ equity-
Common stock, $0.10 par value, authorized 700,000,000 shares - 544,193,637 and 543,117,533 shares outstanding as of June 30, 2021 and December 31, 2020, respectively		54		54
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						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	Other paid-in capital	9,880		10,076		Other paid-in capital	10,031		10,238
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(9)		(5)		Accumulated other comprehensive loss	(16)		(15)
Accumulated deficit	Accumulated deficit	(2,495)		(2,888)		Accumulated deficit	(1,317)		(1,605)
Total stockholders’ equity	Total stockholders’ equity	7,430		7,237		Total stockholders’ equity	8,755		8,675

Long-term debt and other long-term obligations	Long-term debt and other long-term obligations	23,025		22,131		Long-term debt and other long-term obligations	21,754		22,248
		30,455		29,368			30,509		30,923
NONCURRENT LIABILITIES:	NONCURRENT LIABILITIES:					NONCURRENT LIABILITIES:
Accumulated deferred income taxes	Accumulated deferred income taxes	3,316		3,095		Accumulated deferred income taxes	3,544		3,437
Retirement benefits	Retirement benefits	3,201		3,345		Retirement benefits	2,620		2,669
Regulatory liabilities	Regulatory liabilities	2,023		1,826		Regulatory liabilities	2,025		2,124

Other	Other	1,497		1,826		Other	1,559		1,863

		10,037		10,092			9,748		10,093
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)		0		0
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 8)						COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 8)	0		0
		$	44,363	$	44,464		$	44,617	$	45,432


		Six Months Ended June 30, 2021																			Three Months Ended March 31, 2022
		Common Stock			OPIC				AOCI				Accumulated Deficit			Total Stockholders’ Equity					Common Stock				OPIC			AOCI			Accumulated Deficit			Total Stockholders’ Equity
(In millions)	(In millions)	Shares	Amount								(In millions)							Shares				Amount
Balance, January 1, 2021		543	$	54			$	10,076			$	(5)			$	(2,888)			$	7,237
Balance, January 1, 2022																		Balance, January 1, 2022			570		$	57		$	10,238		$	(15)		$	(1,605)		$	8,675
Net income	Net income												335			335		Net income													288			288
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax								(2)							(2)		Other comprehensive loss, net of tax										(1)						(1)
Share-based benefit plans		1			2											2
Stock Investment Plan and share-based benefit plans																		Stock Investment Plan and share-based benefit plans			1				20									20
Cash dividends declared on common stock ($0.39 per share in March)	Cash dividends declared on common stock ($0.39 per share in March)				(212)											(212)		Cash dividends declared on common stock ($0.39 per share in March)							(223)									(223)
Balance, March 31, 2021		544	$	54	$	9,866			$	(7)			$	(2,553)		$	7,360
Net income													58			58
Other comprehensive loss, net of tax									(2)							(2)
Share-based benefit plans					14											14

Balance, June 30, 2021		544	$	54	$	9,880			$	(9)			$	(2,495)		$	7,430
Other																		Other							(4)									(4)
Balance, March 31, 2022																		Balance, March 31, 2022			571		$	57	$	10,031		$	(16)		$	(1,317)		$	8,755


	Six Months Ended June 30, 2020
	Common Stock			OPIC		AOCI		Accumulated Deficit		Total Stockholders’ Equity
(In millions)	Shares	Amount
Balance, January 1, 2020	541	$	54	$	10,868	$	20	$	(3,967)	$	6,975
Net income								74		74
Other comprehensive loss, net of tax						(18)				(18)
Stock Investment Plan and share-based benefit plans	1			(6)						(6)
Cash dividends declared on common stock ($0.39 per share in March)				(211)						(211)
Balance, March 31, 2020	542	$	54	$	10,651	$	2	$	(3,893)	$	6,814
Net income								309		309
Other comprehensive loss, net of tax						(2)				(2)

Stock Investment Plan and share-based benefit plans				22						22
Balance, June 30, 2020	542	$	54	$	10,673	$	0	$	(3,584)	$	7,143


	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


Note Number	Note Number		Page Number	Note Number		Page Number

1	1	Organization and Basis of Presentation	7	1	Organization and Basis of Presentation	7

2	2	Revenue	9	2	Revenue	9

3	3	Discontinued Operations	13	3	Earnings Per Share of Common Stock	11

4	4	Earnings Per Share of Common Stock	14	4	Pension and Other Post-Employment Benefits	12

5	5	Pension and Other Post-Employment Benefits	15	5	Income Taxes	12

6	6	Income Taxes	15	6	Fair Value Measurements	13

7	7	Fair Value Measurements	16	7	Regulatory Matters	15

8	8	Regulatory Matters	19	8	Commitments, Guarantees and Contingencies	22

9	9	Commitments, Guarantees and Contingencies	27	9	Segment Information	27

10		Segment Information	33


	(In millions)

Balance, January 1, ~~2020~~2021	$	46164
Charged to income (1)	~~174~~54
Charged to other accounts (2)	4642
Write-offs	~~(102)~~(101)
Balance, December 31, ~~2020~~2021	$	~~164~~159
Charged to income(3)	11 (5)
Charged to other accounts (2)	2339
Write-offs	~~(41)~~(61)
Balance, ~~June 30, 2021~~March 31, 2022	$	~~157~~132


	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


	For the Three Months Ended June 30, 2021
Revenues by Type of Service	Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments (1)		Total
	(In millions)
Distribution services	$	1,304	$	0	$	(26)	$	1,278
Retail generation	831		0		(13)		818
Wholesale sales	74		0		3		77
Transmission	0		411		0		411
Other	26		0		0		26
Total revenues from contracts with customers	$	2,235	$	411	$	(36)	$	2,610
ARP	0		0		0		0
Other non-customer revenue	23		8		(19)		12
Total revenues	$	2,258	$	419	$	(55)	$	2,622


	For the Three Months Ended June 30, 2020
Revenues by Type of Service	Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments (1)		Total
	(In millions)
Distribution services	$	1,241	$	0	$	(22)	$	1,219
Retail generation	826		0		(15)		811
Wholesale sales	50		0		2		52
Transmission	0		380		0		380
Other	31		0		0		31
Total revenues from contracts with customers	$	2,148	$	380	$	(35)	$	2,493
ARP (2)	15		0		0		15
Other non-customer revenue	25		4		(15)		14
Total revenues	$	2,188	$	384	$	(50)	$	2,522


	For the Six Months Ended June 30, 2021
Revenues by Type of Service	Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments (1)		Total
	(In millions)
Distribution services	$	2,643	$	0	$	(52)	$	2,591
Retail generation	1,766		0		(25)		1,741
Wholesale sales	143		0		7		150
Transmission	0		812		0		812
Other	59		0		0		59
Total revenues from contracts with customers	$	4,611	$	812	$	(70)	$	5,353
ARP (2)	(27)		0		0		(27)
Other non-customer revenue	44		12		(34)		22
Total revenues	$	4,628	$	824	$	(104)	$	5,348


	For the Six Months Ended June 30, 2020
Revenues by Type of Service	Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments (1)		Total
	(In millions)
Distribution services	$	2,497	$	0	$	(43)	$	2,454
Retail generation	1,730		0		(30)		1,700
Wholesale sales	121		0		3		124
Transmission	0		777		0		777
Other	67		0		0		67
Total revenues from contracts with customers	$	4,415	$	777	$	(70)	$	5,122
ARP (2)	83		0		0		83
Other non-customer revenue	48		8		(30)		26
Total revenues	$	4,546	$	785	$	(100)	$	5,231


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Transmission Owner	2021		2020		2021		2020
	(In millions)
ATSI	$	193	$	192	$	398	$	394
TrAIL	57		57		117		121
MAIT	80		58		147		117
JCP&L	46		39		85		77
MP, PE and WP	35		34		65		68

Total Revenues	$	411	$	380	$	812	$	777


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Reconciliation of Basic and Diluted EPS of Common Stock	2021		2020		2021		2020

(In millions, except per share amounts)
EPS of Common Stock
Income from continuing operations	$	58	$	307	$	393	$	331




Discontinued operations, net of tax	0		2		0		52


Income available to common stockholders	$	58	$	309	$	393	$	383





Share count information:
Weighted average number of basic shares outstanding	544		542		544		541
Assumed exercise of dilutive stock options and awards	1		1		1		2

Weighted average number of diluted shares outstanding	545		543		545		543

Income available to common stockholders, per common share:
Income from continuing operations, basic	$	0.11	$	0.57	$	0.72	$	0.61
Discontinued operations, basic	0		0		0		0.10
Income available to common stockholders, basic	$	0.11	$	0.57	$	0.72	$	0.71

Income from continuing operations, diluted	$	0.11	$	0.57	$	0.72	$	0.61
Discontinued operations, diluted	0		0		0		0.10
Income available to common stockholders, diluted	$	0.11	$	0.57	$	0.72	$	0.71


	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

EPS of Common Stock:



Basic EPS of common stock		$	0.51	$	0.62


Diluted EPS of common stock		$	0.50	$	0.62


Components of Net Periodic Benefit Costs (Credits)	Components of Net Periodic Benefit Costs (Credits)	Pension				OPEB				Components of Net Periodic Benefit Costs (Credits)	Pension				OPEB
For the Three Months Ended June 30,		2021		2020		2021		2020
For the Three Months Ended March 31,										For the Three Months Ended March 31,	2022		2021		2022		2021
		(In millions)									(In millions)
Service costs	Service costs	$	48	$	48	$	1	$	1	Service costs	$	46	$	49	$	1	$	1
Interest costs	Interest costs	57		70		2		4		Interest costs	68		56		3		3
Expected return on plan assets	Expected return on plan assets	(163)		(155)		(7)		(8)		Expected return on plan assets	(164)		(163)		(10)		(10)
Amortization of prior service costs (credits)(1)	Amortization of prior service costs (credits)(1)	1		1		(5)		(5)		Amortization of prior service costs (credits)(1)	1		1		(3)		(4)

Net periodic credits, including amounts capitalized	Net periodic credits, including amounts capitalized	$	(57)	$	(36)	$	(9)	$	(8)	Net periodic credits, including amounts capitalized	$	(49)	$	(57)	$	(9)	$	(10)
Net periodic credits, recognized in earnings	Net periodic credits, recognized in earnings	$	(85)	$	(62)	$	(10)	$	(8)	Net periodic credits, recognized in earnings	$	(69)	$	(78)	$	(9)	$	(10)


Level 1	-	Quoted prices for identical instruments in active market.

Level 2	-	Quoted prices for similar instruments in active market.
	-	Quoted prices for identical or similar instruments in markets that are not active.
	-	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.


		June 30, 2021								December 31, 2020									March 31, 2022								December 31, 2021
		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets	Assets	(In millions)																Assets	(In millions)

Derivative assets FTRs(1)	Derivative assets FTRs(1)	$	0	$	0	$	5	$	5	$	0	$	0	$	3	$	3	Derivative assets FTRs(1)	$	—	$	—	$	1	$	1	$	—	$	—	$	9	$	9

Equity securities	Equity securities	2		0		0		2		2		0		0		2		Equity securities	2		—		—		2		2		—		—		2

U.S. state debt securities	U.S. state debt securities	0		269		0		269		0		276		0		276		U.S. state debt securities	—		258		—		258		—		273		—		273
Cash, cash equivalents and restricted cash(2)	Cash, cash equivalents and restricted cash(2)	1,312		0		0		1,312		1,801		0		0		1,801		Cash, cash equivalents and restricted cash(2)	310		—		—		310		1,511		—		—		1,511
Other(3)	Other(3)	0		45		0		45		0		41		0		41		Other(3)	—		45		—		45		—		42		—		42
Total assets	Total assets	$	1,314	$	314	$	5	$	1,633	$	1,803	$	317	$	3	$	2,123	Total assets	$	312	$	303	$	1	$	616	$	1,513	$	315	$	9	$	1,837

Liabilities	Liabilities																	Liabilities

Derivative liabilities FTRs(1)	Derivative liabilities FTRs(1)	$	0	$	0	$	(2)	$	(2)	$	0	$	0	$	0	$	0	Derivative liabilities FTRs(1)	$	—	$	—	$	—	$	—	$	—	$	—	$	(1)	$	(1)

Total liabilities	Total liabilities	$	0	$	0	$	(2)	$	(2)	$	0	$	0	$	0	$	0	Total liabilities	$	—	$	—	$	—	$	—	$	—	$	—	$	(1)	$	(1)

Net assets (liabilities)~~(4)~~	Net assets (liabilities)~~(4)~~	$	1,314	$	314	$	3	$	1,631	$	1,803	$	317	$	3	$	2,123	Net assets (liabilities)~~(4)~~	$	312	$	303	$	1	$	616	$	1,513	$	315	$	8	$	1,836


	June 30, 2021(1)								December 31, 2020(2)
	Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value		Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value
	(In millions)

Debt securities	$	272	$	4	$	(7)	$	269	$	275	$	7	$	(6)	$	276


	March 31, 2022(1)								December 31, 2021(2)
	Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value		Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value
	(In millions)

Debt securities	$	279	$	—	$	(21)	$	258	$	280	$	2	$	(9)	$	273


Potential Collateral Obligations	Potential Collateral Obligations		Utilities and FET		FE		Total		Potential Collateral Obligations		Utilities and Transmission Companies		FE		Total
		(In millions)								(In millions)
Contractual Obligations for Additional Collateral	Contractual Obligations for Additional Collateral								Contractual Obligations for Additional Collateral

Upon Further Downgrade	Upon Further Downgrade		$	37	$	0	$	37	Upon Further Downgrade		$	43	$	—	$	43

Surety Bonds (Collateralized Amount) (1)	Surety Bonds (Collateralized Amount) (1)		56		258		314		Surety Bonds (Collateralized Amount) (1)		57		258		315
Total Exposure from Contractual Obligations	Total Exposure from Contractual Obligations		$	93	$	258	$	351	Total Exposure from Contractual Obligations		$	100	$	258	$	358


For the Three Months Ended	Regulated Distribution		Regulated Transmission		Corporate/ Other		Reconciling Adjustments		FirstEnergy Consolidated
	(In millions)




































March 31, 2022
External revenues	$	2,532	$	451	$	6	$	—	$	2,989
Internal revenues	57		2		—		(59)		—
Total revenues	$	2,589	$	453	$	6	$	(59)	$	2,989
Depreciation	235		86		2		17		340
Amortization (deferral) of regulatory assets, net	(38)		1		—		—		(37)


Miscellaneous income (expense), net	85		6		17		(2)		106

Interest expense	129		59		127		(2)		313
Income taxes (benefits)	69		41		(27)		—		83
Net income (loss)	265		125		(102)		—		288
Property additions	$	317	$	197	$	6	$	—	$	520



March 31, 2021
External revenues	$	2,321	$	401	$	4	$	—	$	2,726
Internal revenues	49		4		—		(53)		—
Total revenues	$	2,370	$	405	$	4	$	(53)	$	2,726
Depreciation	226		81		1		15		323
Amortization of regulatory assets, net	87		5		—		—		92


Miscellaneous income (expense), net	107		11		22		(5)		135
Interest expense	128		61		101		(5)		285
Income taxes (benefits)	82		33		(28)		—		87
Net income (loss)	313		109		(87)		—		335
Property additions	$	321	$	273	$	10	$	—	$	604



As of March 31, 2022
Total assets	$	30,883	$	13,070	$	664	$	—	$	44,617
Total goodwill	$	5,004	$	614	$	—	$	—	$	5,618

As of December 31, 2021
Total assets	$	30,812	$	13,237	$	1,383	$	—	$	45,432
Total goodwill	$	5,004	$	614	$	—	$	—	$	5,618


	For the Years Ended December 31,
FE Forward Expected Capital Expenditure Efficiencies and Working Capital Improvements	2021 Actual		2022 Forecast		2023 Forecast		2024 Forecast		2025 Forecast		Total
	(In millions)
Gross Capital Expenditure Efficiencies	$	210	$	280	$	380	$	380	$	380	$	1,630
Cost to Achieve (+/- 10%)	(40)		(80)		(30)		—		—		(150)
Net Capital Expenditure Efficiencies	$	170	$	200	$	350	$	380	$	380	$	1,480
Working Capital Improvements	130		120		—		—		—		250
Total Cash Flow Improvements	$	300	$	320	$	350	$	380	$	380	$	1,730


	For the Years Ended December 31,
FE Forward Expected Capital Efficiencies and Working Capital Improvements	2021		2022		2023
	(In millions)
Gross Capital Expenditure Efficiencies	$	180	$	210	$	300
Cost to Achieve (+/- 10%)	(40)		(60)		(50)
Net Capital Expenditure Efficiencies	$	140	$	150	$	250
Working Capital Improvements	100		150		—
Total Free Cash Flow Improvements	$	240	$	300	$	250


Second Quarter 2021 Financial Results		Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments		FirstEnergy Consolidated
First Three Months 2022 Financial Results										First Three Months 2022 Financial Results	Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments		FirstEnergy Consolidated
		(In millions)									(In millions)
Revenues:	Revenues:									Revenues:
Electric	Electric	$	2,209	$	411	$	(36)	$	2,584	Electric	$	2,532	$	451	$	(39)	$	2,944
Other	Other	49		8		(19)		38		Other	57		2		(14)		45

Total Revenues	Total Revenues	2,258		419		(55)		2,622		Total Revenues	2,589		453		(53)		2,989

Operating Expenses:	Operating Expenses:									Operating Expenses:
Fuel	Fuel	112		—		—		112		Fuel	140		—		—		140
Purchased power	Purchased power	609		—		5		614		Purchased power	870		—		5		875
Other operating expenses	Other operating expenses	696		79		(57)		718		Other operating expenses	798		90		(68)		820

Provision for depreciation	Provision for depreciation	229		77		17		323		Provision for depreciation	235		86		19		340

Amortization of regulatory assets, net		43		6		—		49
Amortization (deferral) of regulatory assets, net										Amortization (deferral) of regulatory assets, net	(38)		1		—		(37)
General taxes	General taxes	192		62		10		264		General taxes	215		66		11		292
DPA penalty		—		—		230		230

Total Operating Expenses	Total Operating Expenses	1,881		224		205		2,310		Total Operating Expenses	2,220		243		(33)		2,430

Operating Income (Loss)	Operating Income (Loss)	377		195		(260)		312		Operating Income (Loss)	369		210		(20)		559

Other Income (Expense):	Other Income (Expense):									Other Income (Expense):

Miscellaneous income, net	Miscellaneous income, net	88		11		9		108		Miscellaneous income, net	85		6		15		106

Interest expense	Interest expense	(131)		(63)		(93)		(287)		Interest expense	(129)		(59)		(125)		(313)
Capitalized financing costs	Capitalized financing costs	11		10		—		21		Capitalized financing costs	9		9		1		19
Total Other Expense	Total Other Expense	(32)		(42)		(84)		(158)		Total Other Expense	(35)		(44)		(109)		(188)

Income (Loss) Before Income Taxes (Benefits)	Income (Loss) Before Income Taxes (Benefits)	345		153		(344)		154		Income (Loss) Before Income Taxes (Benefits)	334		166		(129)		371
Income taxes (benefits)	Income taxes (benefits)	71		37		(12)		96		Income taxes (benefits)	69		41		(27)		83

Net Income (Loss)	Net Income (Loss)	$	274	$	116	$	(332)	$	58	Net Income (Loss)	$	265	$	125	$	(102)	$	288


Second Quarter 2020 Financial Results		Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments		FirstEnergy Consolidated
First Three Months 2021 Financial Results										First Three Months 2021 Financial Results	Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments		FirstEnergy Consolidated
		(In millions)									(In millions)
Revenues:	Revenues:									Revenues:

Electric	Electric	$	2,132	$	380	$	(35)	$	2,477	Electric	$	2,316	$	401	$	(34)	$	2,683
Other	Other	56		4		(15)		45		Other	54		4		(15)		43

Total Revenues	Total Revenues	2,188		384		(50)		2,522		Total Revenues	2,370		405		(49)		2,726

Operating Expenses:	Operating Expenses:									Operating Expenses:
Fuel	Fuel	77		—		—		77		Fuel	118		—		—		118
Purchased power	Purchased power	610		—		3		613		Purchased power	714		—		4		718
Other operating expenses	Other operating expenses	733		62		(65)		730		Other operating expenses	728		67		(43)		752

Provision for depreciation	Provision for depreciation	226		78		17		321		Provision for depreciation	226		81		16		323

Amortization of regulatory assets, net	Amortization of regulatory assets, net	10		3		—		13		Amortization of regulatory assets, net	87		5		—		92
General taxes	General taxes	189		56		8		253		General taxes	201		62		10		273

Gain on sale of Yards Creek										Gain on sale of Yards Creek	(109)		—		—		(109)
Total Operating Expenses	Total Operating Expenses	1,845		199		(37)		2,007		Total Operating Expenses	1,965		215		(13)		2,167

Operating Income (Loss)	Operating Income (Loss)	343		185		(13)		515		Operating Income (Loss)	405		190		(36)		559

Other Income (Expense):	Other Income (Expense):									Other Income (Expense):

Miscellaneous income, net	Miscellaneous income, net	90		8		5		103		Miscellaneous income, net	107		11		17		135

Interest expense	Interest expense	(123)		(55)		(85)		(263)		Interest expense	(128)		(61)		(96)		(285)
Capitalized financing costs	Capitalized financing costs	8		10		—		18		Capitalized financing costs	11		2		—		13
Total Other Expense	Total Other Expense	(25)		(37)		(80)		(142)		Total Other Expense	(10)		(48)		(79)		(137)

Income (Loss) Before Income Taxes (Benefits)	Income (Loss) Before Income Taxes (Benefits)	318		148		(93)		373		Income (Loss) Before Income Taxes (Benefits)	395		142		(115)		422
Income taxes (benefits)	Income taxes (benefits)	67		34		(35)		66		Income taxes (benefits)	82		33		(28)		87
Income (Loss) From Continuing Operations		251		114		(58)		307
Discontinued operations, net of tax		—		—		2		2

Net Income (Loss)	Net Income (Loss)	$	251	$	114	$	(56)	$	309	Net Income (Loss)	$	313	$	109	$	(87)	$	335


Changes Between Second Quarter 2021 and Second Quarter 2020 Financial Results		Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments		FirstEnergy Consolidated
Changes Between First Three Months 2022 and First Three Months 2021 Financial Results										Changes Between First Three Months 2022 and First Three Months 2021 Financial Results	Regulated Distribution		Regulated Transmission		Corporate/Other and Reconciling Adjustments		FirstEnergy Consolidated
		(In millions)									(In millions)
Revenues:	Revenues:									Revenues:

Electric	Electric	$	77	$	31	$	(1)	$	107	Electric	$	216	$	50	$	(5)	$	261
Other	Other	(7)		4		(4)		(7)		Other	3		(2)		1		2

Total Revenues	Total Revenues	70		35		(5)		100		Total Revenues	219		48		(4)		263

Operating Expenses:	Operating Expenses:									Operating Expenses:
Fuel	Fuel	35		—		—		35		Fuel	22		—		—		22
Purchased power	Purchased power	(1)		—		2		1		Purchased power	156		—		1		157
Other operating expenses	Other operating expenses	(37)		17		8		(12)		Other operating expenses	70		23		(25)		68

Provision for depreciation	Provision for depreciation	3		(1)		—		2		Provision for depreciation	9		5		3		17

Amortization of regulatory assets, net		33		3		—		36
Amortization (deferral) of regulatory assets, net										Amortization (deferral) of regulatory assets, net	(125)		(4)		—		(129)
General taxes	General taxes	3		6		2		11		General taxes	14		4		1		19
DPA penalty		—		—		230		230

Gain on sale of Yards Creek										Gain on sale of Yards Creek	109		—		—		109

Total Operating Expenses	Total Operating Expenses	36		25		242		303		Total Operating Expenses	255		28		(20)		263

Operating Income (Loss)	Operating Income (Loss)	34		10		(247)		(203)		Operating Income (Loss)	(36)		20		16		—

Other Income (Expense):	Other Income (Expense):									Other Income (Expense):

Miscellaneous income, net	Miscellaneous income, net	(2)		3		4		5		Miscellaneous income, net	(22)		(5)		(2)		(29)

Interest expense	Interest expense	(8)		(8)		(8)		(24)		Interest expense	(1)		2		(29)		(28)
Capitalized financing costs	Capitalized financing costs	3		—		—		3		Capitalized financing costs	(2)		7		1		6
Total Other Expense	Total Other Expense	(7)		(5)		(4)		(16)		Total Other Expense	(25)		4		(30)		(51)

Income (Loss) Before Income Taxes (Benefits)	Income (Loss) Before Income Taxes (Benefits)	27		5		(251)		(219)		Income (Loss) Before Income Taxes (Benefits)	(61)		24		(14)		(51)
Income taxes (benefits)	Income taxes (benefits)	4		3		23		30		Income taxes (benefits)	(13)		8		1		(4)
Income (Loss) From Continuing Operations		23		2		(274)		(249)
Discontinued operations, net of tax		—		—		(2)		(2)

Net Income (Loss)	Net Income (Loss)	$	23	$	2	$	(276)	$	(251)	Net Income (Loss)	$	(48)	$	16	$	(15)	$	(47)


		For the Three Months Ended June 30,									For the Three Months Ended March 31,
(in thousands)		Actual				Weather-Adjusted
(In thousands)										(In thousands)	Actual				Weather-Adjusted
Electric Distribution MWH Deliveries	Electric Distribution MWH Deliveries	2021	2020	Increase (Decrease)		2021	2020	Increase (Decrease)		Electric Distribution MWH Deliveries	2022	2021	Increase		2022	2021	Increase (Decrease)

Residential	Residential	12,347	12,764	(3.3)	%	11,861	12,669	(6.4)	%	Residential	15,213	14,890	2.2	%	15,170	15,397	(1.5)	%
Commercial(1)	Commercial(1)	8,590	7,825	9.8	%	8,466	7,823	8.2	%	Commercial(1)	9,291	8,631	7.6	%	9,265	8,853	4.7	%
Industrial	Industrial	13,384	12,009	11.4	%	13,384	12,007	11.5	%	Industrial	13,583	13,257	2.5	%	13,583	13,258	2.5	%

Total Electric Distribution MWH Deliveries	Total Electric Distribution MWH Deliveries	34,321	32,598	5.3	%	33,711	32,499	3.7	%	Total Electric Distribution MWH Deliveries	38,087	36,778	3.6	%	38,018	37,508	1.4	%


Source of Change in Generation Revenues		Increase (Decrease)
		(In millions)
Retail:
Change in sales volumes		$	2262
Change in prices		~~(17)~~97
		5159
Wholesale:
Change in sales volumes		24 (15)
Change in prices		15
Capacity revenue		21

	21
Change in Generation Revenues		$	29180


	For the Three Months Ended June 30,
Revenues by Transmission Asset Owner	2021		2020		Increase
	(In millions)
ATSI	$	198	$	193	$	5
TrAIL	59		59		—
MAIT	81		59		22
JCP&L	46		39		7
MP, PE and WP	35		34		1

Total Revenues	$	419	$	384	$	35