UNITED STATESTable of Contents

~~SECURITIES~~UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-K

(Mark One)

~~[X]~~ þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~OF THE~~For ~~SECURITIES~~the ~~EXCHANGE~~fiscal ~~ACT~~year OFended ~~1934~~December 31, 2010

~~For the fiscal year ended December 31, 2009~~OR

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

~~[ ] TRANSITION~~For ~~REPORT~~the ~~PURSUANT~~transition TOperiod ~~SECTION 13 OR 15(d)~~from to

OF THE SECURITIES EXCHANGE ACT OF 1934


Commission	Registrant; State of Incorporation;	I.R.S. Employer
File Number	Address; and Telephone Number	Identification No.

333-21011	FIRSTENERGY CORP.	34-1843785
	(An Ohio Corporation)
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

000-53742	FIRSTENERGY SOLUTIONS CORP.	31-1560186
	(An Ohio Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

1-2578	OHIO EDISON COMPANY	34-0437786
	(An Ohio Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

1-2323	THE CLEVELAND ELECTRIC ILLUMINATING COMPANY	34-0150020
	(An Ohio Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

1-3583	THE TOLEDO EDISON COMPANY	34-4375005
	(An Ohio Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

1-3141	JERSEY CENTRAL POWER & LIGHT COMPANY	21-0485010
	(A New Jersey Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

1-446	METROPOLITAN EDISON COMPANY	23-0870160
	(A Pennsylvania Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

1-3522	PENNSYLVANIA ELECTRIC COMPANY	25-0718085
	(A Pennsylvania Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

For theTable transitionof period from to _Contents

Commission	Registrant; State of Incorporation;	I.R.S. Employer
File Number	Address; and Telephone Number	Identification No.
333-21011	FIRSTENERGY CORP.	34-1843785
	(An Ohio Corporation)
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402
333-145140-01	FIRSTENERGY SOLUTIONS CORP.	31-1560186
	(An Ohio Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402
1-2578	OHIO EDISON COMPANY	34-0437786
	(An Ohio Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402
1-2323	THE CLEVELAND ELECTRIC ILLUMINATING COMPANY	34-0150020
	(An Ohio Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402
1-3583	THE TOLEDO EDISON COMPANY	34-4375005
	(An Ohio Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402
1-3141	JERSEY CENTRAL POWER & LIGHT COMPANY	21-0485010
	(A New Jersey Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402
1-446	METROPOLITAN EDISON COMPANY	23-0870160
	(A Pennsylvania Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402
1-3522	PENNSYLVANIA ELECTRIC COMPANY	25-0718085
	(A Pennsylvania Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

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

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


		Name of Each Exchange
Registrant	Title of Each Class	on Which Registered

FirstEnergy Corp.	Common Stock, $0.10 par value	New York Stock Exchange

		Name of Each Exchange
Registrant	Title of Each Class	on Which Registered
FirstEnergy Corp.	Common Stock, $0.10 par value	New York Stock Exchange

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

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


Registrant		Title of Each Class

Ohio Edison Company		Common Stock, no par value per share

The Cleveland Electric Illuminating Company		Common Stock, no par value per share

The Toledo Edison Company		Common Stock, $5.00 par value per share

Jersey Central Power & Light Company		Common Stock, $10.00 par value per share

Metropolitan Edison Company		Common Stock, no par value per share

Pennsylvania Electric Company		Common Stock, $20.00 par value per share

FirstEnergy Solutions Corp.		Common Stock, no par value per share

	Registrant		Title of Each Class
	Ohio Edison Company		Common Stock, no par value per share
	The Cleveland Electric Illuminating Company		Common Stock, no par value per share
	The Toledo Edison Company		Common Stock, $5.00 par value per share
	Jersey Central Power & Light Company		Common Stock, $10.00 par value per share
	Metropolitan Edison Company		Common Stock, no par value per share
	Pennsylvania Electric Company		Common Stock, $20.00 par value per share
	FirstEnergy Solutions Corp.		Common Stock, no par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

~~Indicate by~~Yes ~~check~~þ ~~mark~~No ifo ~~the~~FirstEnergy ~~registrant~~Corp. isYes ao ~~well-known~~No ~~seasoned~~þ ~~issuer~~FirstEnergy Solutions Corp., asOhio ~~defined~~Edison ~~in Rule~~Company, ~~405~~The ofCleveland ~~the~~Electric ~~Securities~~Illuminating ~~Act.~~Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company

~~Yes~~Indicate ~~(X)~~by Nocheck (mark )if ~~FirstEnergy~~the ~~Corp.~~registrant ~~Yes~~is (not )required Noto ~~(X)~~file ~~FirstEnergy~~reports ~~Solutions~~pursuant ~~Corp.,~~to ~~Ohio~~Section 13 ~~Edison~~or Section ~~Company,~~15(d) ~~The~~of ~~Cleveland~~the ~~Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company~~Act.

~~Indicate by~~Yes ~~check~~o ~~mark~~No ifþ ~~the~~FirstEnergy ~~registrant~~Corp., isOhio ~~not~~Edison ~~required~~Company, toThe ~~file~~Cleveland ~~reports~~Electric ~~pursuant~~Illuminating ~~to Section~~Company, 13The orToledo ~~Section~~Edison ~~15(d)~~Company, ofJersey ~~the~~Central ~~Act~~Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company, FirstEnergy Solutions Corp.

~~Yes~~Indicate (by check mark whether the registrant (1) has Nofiled all reports required to be filed by Section 13 or 15(Xd) ~~FirstEnergy~~of ~~Corp.,~~the ~~Ohio~~Securities ~~Edison~~Exchange ~~Company,~~Act ~~The~~of ~~Cleveland~~1934 ~~Electric~~during ~~Illuminating~~the ~~Company,~~preceding ~~The~~12 months ~~Toledo~~(or ~~Edison~~for such ~~Company,~~shorter ~~Jersey~~period ~~Central~~that ~~Power~~the &registrant ~~Light~~was ~~Company,~~required ~~Metropolitan~~to ~~Edison~~file ~~Company~~such reports), and ~~Pennsylvania~~(2) has ~~Electric~~been subject ~~Company,~~to ~~FirstEnergy~~such ~~Solutions~~filing ~~Corp~~requirements for the past 90 days.

~~Indicate by~~Yes ~~check~~þ ~~mark~~No ~~whether~~o ~~the~~FirstEnergy ~~registrant~~Corp., ~~(1) has~~Ohio ~~filed~~Edison ~~all~~Company, ~~reports~~The ~~required~~Cleveland ~~to be~~Electric ~~filed~~Illuminating byCompany, ~~Section 13~~The orToledo ~~15(d)~~Edison ofCompany, ~~the~~Jersey ~~Securities~~Central ~~Exchange~~Power ~~Act~~& ofLight ~~1934 during~~Company, ~~the~~Metropolitan ~~preceding~~Edison ~~12 months~~Company ~~(or~~and ~~for~~Pennsylvania ~~such~~Electric ~~shorter period that the registrant was required to file such reports)~~Company, ~~and (2)~~FirstEnergy ~~has~~Solutions ~~been subject to such filing requirements for the past 90 days~~Corp.

~~Yes~~Indicate ~~(X)~~by Nocheck (mark )whether ~~FirstEnergy~~the ~~Corp.,~~registrant ~~Ohio~~has ~~Edison~~submitted ~~Company,~~electronically ~~The~~and ~~Cleveland~~posted ~~Electric~~on ~~Illuminating~~its corporate ~~Company~~Web site, ~~The~~if ~~Toledo~~any, ~~Edison~~every ~~Company,~~Interactive ~~Jersey~~Data ~~Central~~File ~~Power~~required &to ~~Light~~be ~~Company,~~submitted ~~Metropolitan~~and ~~Edison~~posted pursuant ~~Company~~to ~~and~~Rule 405 ~~Pennsylvania~~of ~~Electric~~Regulation S-T ~~Company,~~(§232.405 ~~FirstEnergy~~of ~~Solutions~~this ~~Corp~~chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

~~Indicate by~~Yes ~~check~~þ ~~mark~~No ifo ~~disclosure~~FirstEnergy ofCorp. ~~delinquent~~Yes ~~filers~~o ~~pursuant~~No toþ ~~Item 405~~FirstEnergy ~~of Regulation~~Solutions ~~S-K~~Corp., isOhio ~~not~~Edison ~~contained herein~~Company, ~~and~~The ~~will~~Cleveland ~~not~~Electric beIlluminating ~~contained~~Company, toThe ~~the~~Toledo ~~best of~~Edison ~~registrant’s knowledge~~Company, inJersey ~~definitive~~Central ~~proxy~~Power or& ~~information~~Light ~~statements incorporated~~Company, byMetropolitan ~~reference~~Edison inCompany ~~Part III~~and ofPennsylvania ~~this~~Electric ~~Form 10-K or any amendment to this Form 10-K.~~Company

~~(X)~~Indicate ~~FirstEnergy~~by ~~Corp.,~~check ~~FirstEnergy~~mark ~~Solutions~~if ~~Corp.,~~disclosure ~~Ohio~~of ~~Edison~~delinquent ~~Company,~~filers ~~The~~pursuant ~~Cleveland~~to ~~Electric~~Item 405 ~~Illuminating~~of ~~Company~~Regulation S-K is not contained herein, ~~The~~and ~~Toledo~~will ~~Edison~~not ~~Company~~be contained, ~~Jersey~~to ~~Central~~the ~~Power~~best &of ~~Light~~registrant’s ~~Company~~knowledge, ~~Metropolitan~~in definitive ~~Edison~~proxy ~~Company~~or ~~and~~information ~~Pennsylvania~~statements ~~Electric~~incorporated ~~Company~~by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

~~Indicate by~~Yes ~~check~~o ~~mark~~No ~~whether~~þYes ~~the~~þ ~~registrant~~No iso aFirstEnergy ~~large~~Corp. ~~accelerated~~FirstEnergy ~~filer,~~Solutions ~~an accelerated filer~~Corp., aOhio ~~non-accelerated~~Edison ~~filer~~Company, orThe aCleveland ~~smaller~~Electric ~~reporting~~Illuminating ~~company.~~Company, ~~See definitions~~The ofToledo ~~“large~~Edison ~~accelerated filer~~Company,” ~~“accelerated~~Jersey ~~filer”~~Central ~~and~~Power ~~“smaller reporting~~& ~~company”~~Light inCompany, ~~Rule~~Metropolitan ~~12b-2~~Edison ofCompany ~~the~~and ~~Exchange~~Pennsylvania ~~Act.~~Electric Company

LargeTable acceleratedof filer (X) FirstEnergy Corp. Accelerated filer ( ) N/A Non-accelerated filer (do not check if a smaller reporting company) (X) FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company Smaller reporting company ( ) N/AContents

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

~~Yes~~Large (accelerated )filer Noþ ~~(X)~~ FirstEnergy Corp., Accelerated filer o N/A Non-accelerated filer (do not check if a smaller reporting company) þ FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company, and Pennsylvania Electric Company Smaller reporting company o N/A

~~State the~~Indicate ~~aggregate market value of the voting and non-voting common equity held~~ by ~~non-affiliates~~ ~~computed~~check bymark ~~reference~~whether to the ~~price~~registrant atis ~~which~~a ~~the~~shell ~~common~~company ~~equity was last sold, or the average bid and ask price of such common equity,~~ (as ofdefined ~~the last~~in ~~business~~Rule 12b-2 ~~day~~ of the ~~registrant’s most recently completed second fiscal~~ ~~quarter~~Act).

Yes o No þ FirstEnergy Corp., ~~$11~~FirstEnergy Solutions Corp.,~~812~~ Ohio Edison Company,~~372~~ The Cleveland Electric Illuminating Company,~~021~~ asThe ofToledo ~~June 30~~Edison Company, ~~2009;~~Jersey ~~and~~Central ~~for~~Power ~~all~~& ~~other~~Light ~~registrants~~Company, ~~none.~~ Metropolitan Edison Company, and Pennsylvania Electric Company

~~Indicate~~ State the ~~number~~aggregate market value of ~~shares~~the ~~outstanding~~voting ofand ~~each~~non-voting ofcommon equity held by non-affiliates computed by reference to the ~~registrant’s~~price ~~classes~~at ofwhich the common equity was last sold, or the average bid and ~~stock~~ask price of such common equity, as of the ~~latest~~last ~~practicable~~business ~~date~~day of the registrant’s most recently completed second fiscal quarter.

	OUTSTANDING
CLASS	AS OF JANUARY 31, 2010
FirstEnergy Corp., $.10 par value		304,835,407
FirstEnergy Solutions Corp., no par value		7
Ohio Edison Company, no par value		60
The Cleveland Electric Illuminating Company, no par value		67,930,743
The Toledo Edison Company, $5 par value		29,402,054
Jersey Central Power & Light Company, $10 par value		13,628,447
Metropolitan Edison Company, no par value		859,500
Pennsylvania Electric Company, $20 par value		4,427,577

FirstEnergy Corp., $10,712,157,232 as of June 30, 2010; and for all other registrants, none.

~~FirstEnergy Corp.~~Indicate is the ~~sole~~number ~~holder~~ of ~~FirstEnergy~~shares ~~Solutions~~outstanding ~~Corp.,~~of ~~Ohio~~each ~~Edison~~of ~~Company, The~~the ~~Cleveland~~registrant’s ~~Electric~~classes ~~Illuminating~~of ~~Company,~~common ~~The Toledo Edison Company~~stock, ~~Jersey~~as ~~Central~~of ~~Power~~the &latest ~~Light~~practicable ~~Company, Metropolitan Edison Company, and Pennsylvania Electric Company common stock~~date.

Documents incorporated by reference (to the extent indicated herein):


	OUTSTANDING
CLASS	AS OF JANUARY 31, 2011
FirstEnergy Corp., $0.10 par value		304,835,407
FirstEnergy Solutions Corp., no par value		7
Ohio Edison Company, no par value		60
The Cleveland Electric Illuminating Company, no par value		67,930,743
The Toledo Edison Company, $5 par value		29,402,054
Jersey Central Power & Light Company, $10 par value		13,628,447
Metropolitan Edison Company, no par value		741,880
Pennsylvania Electric Company, $20 par value		4,427,577

		PART OF FORM 10-K INTO WHICH
DOCUMENT		DOCUMENT IS INCORPORATED
FirstEnergy Corp. Annual Report to Stockholders for
the fiscal year ended December 31, 2009		Part II
Proxy Statement for 2010 Annual Meeting of Stockholders
to be held May 18, 2010		Part III

FirstEnergy Corp. is the sole holder of FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company, and Pennsylvania Electric Company common stock.

~~This combined~~Documents ~~Form~~incorporated ~~10-K is separately filed~~ by ~~FirstEnergy~~reference Corp., FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company. Information contained herein relating (to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to any other registrant, except that information relating to any of the ~~FirstEnergy~~extent ~~subsidiary~~indicated ~~registrants is also attributed to~~herein): ~~FirstEnergy Corp.~~

OMISSION OF CERTAIN INFORMATION


		PART OF FORM 10-K INTO WHICH
DOCUMENT		DOCUMENT IS INCORPORATED

Proxy Statement for 2011 Annual Meeting of Stockholders to be held May 17, 2011		Part III

This combined Form 10-K is separately filed by FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company. Information ~~meet~~contained ~~the~~herein relating to any individual registrant is filed by such registrant on ~~conditions~~its ~~set~~own ~~forth~~behalf. inNo ~~General~~registrant ~~Instruction~~makes ~~I(1)(a)~~any ~~and~~representation ~~(b)~~as ofto ~~Form~~information ~~10-K~~relating ~~and~~to ~~are~~any other ~~therefore~~registrant, ~~filing~~except ~~this~~that ~~Form~~information ~~10-K~~relating ~~with~~to ~~the~~any ~~reduced~~of ~~disclosure~~the ~~format~~FirstEnergy ~~specified~~subsidiary inregistrants is ~~General~~also ~~Instruction~~attributed ~~I(2)~~ to ~~Form~~FirstEnergy ~~10-K~~Corp.

Forward-LookingTable Statements: Thisof Form 10-K includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements include declarations regarding management’s intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “believe,” “estimate” and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.Contents

~~Actual results~~OMISSION ~~may~~OF ~~differ~~CERTAIN ~~materially due to:~~INFORMATION

·FirstEnergy Solutions Corp., Ohio Edison Company, The ~~speed~~Cleveland ~~and~~Electric ~~nature~~Illuminating ofCompany, ~~increased~~The Toledo ~~competition~~Edison inCompany, ~~the~~Jersey ~~electric~~Central ~~utility~~Power ~~industry~~& ~~and~~Light ~~legislative~~Company, Metropolitan Edison Company and Pennsylvania ~~regulatory~~Electric ~~changes~~Company ~~affecting~~meet ~~how~~the ~~generation~~conditions ~~rates~~set ~~will~~forth bein ~~determined~~General ~~following~~Instruction ~~the~~I(1)(a) ~~expiration~~and (b) of ~~existing~~Form ~~rate~~10-K ~~plans~~and are therefore filing this Form 10-K with the reduced disclosure format specified in ~~Pennsylvania~~General Instruction I(2) to Form 10-K.

·Table The impact of the regulatory process on the pending matters in Ohio, Pennsylvania and New Jersey.Contents

·Forward-Looking ~~Business~~Statements: This Form 10-K includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and ~~regulatory~~uncertainties. These ~~impacts~~statements ~~from~~include ~~ATSI~~declarations regarding management’s ~~realignment~~intents, ~~into~~beliefs ~~PJM~~and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “believe,” “estimate” and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

·Actual ~~Economic~~results ormay ~~weather~~differ ~~conditions~~materially ~~affecting~~due ~~future sales and margins.~~to:

·• ~~Changes~~The speed and nature of increased competition in ~~markets~~the ~~for~~electric ~~energy~~utility ~~services~~industry.

·• ~~Changing~~The ~~energy~~impact ~~and~~of ~~commodity~~the ~~market~~regulatory ~~prices~~process ~~and~~on ~~availability~~the pending matters in the various states in which we do business.

·• ~~Replacement~~Business ~~power~~and ~~costs~~regulatory ~~being~~impacts ~~higher~~from ~~than~~ATSI’s ~~anticipated~~realignment into PJM Interconnection, L.L.C., economic or ~~inadequately~~weather ~~hedged~~conditions affecting future sales and margins.

·• ~~The~~Changes ~~continued~~in ~~ability~~markets offor ~~FirstEnergy’s~~energy ~~regulated utilities to collect transition and other charges or to recover increased transmission costs~~services.

·• ~~Operation~~Changing energy and ~~maintenance~~commodity ~~costs~~market ~~being~~prices ~~higher~~and ~~than anticipated~~availability.

·• ~~Other~~Financial ~~legislative~~derivative reforms that could increase our liquidity needs and ~~regulatory~~collateral ~~changes~~costs, ~~and~~replacement ~~revised~~power ~~environmental~~costs ~~requirements,~~being ~~including~~higher ~~possible~~than ~~GHG~~anticipated ~~emission~~or ~~regulations~~inadequately hedged.

·• The ~~potential~~continued ~~impacts~~ability of ~~the U.S. Court of Appeals~~FirstEnergy’s ~~July~~regulated ~~11,~~utilities ~~2008 decision requiring revisions~~ to ~~the~~collect ~~CAIR~~transition ~~rules~~ and ~~the~~other ~~scope of any laws, rules or regulations that may ultimately take their place~~costs.

·• ~~The~~Operation ~~uncertainty of the timing~~ and ~~amounts~~maintenance ofcosts ~~the~~being ~~capital expenditures needed to, among other things, implement the Air Quality Compliance Plan (including that such amounts could be~~ higher than anticipated or that certain generating units may need to be shut down) or levels of emission reductions related to the Consent Decree resolving the NSR litigation or other potential similar regulatory initiatives or actions.

·• ~~Adverse~~Other ~~regulatory~~legislative ~~or legal decisions~~ and ~~outcomes~~regulatory ~~(including~~changes, ~~but~~and ~~not~~revised ~~limited~~environmental torequirements, ~~the~~including ~~revocation~~possible ofGHG ~~necessary~~emission ~~licenses or operating permits~~ and ~~oversight)~~coal bycombustion ~~the~~residual ~~NRC~~regulations.

·• ~~Ultimate~~The ~~resolution~~potential impacts of ~~Met-Ed’s~~any ~~and~~laws, ~~Penelec’s~~rules ~~TSC~~or ~~filings~~regulations ~~with~~that ~~the~~ultimately ~~PPUC~~replace CAIR.

·• The ~~continuing~~uncertainty ~~availability~~ of ~~generating~~the ~~units~~timing and ~~their~~amounts ~~ability~~of the capital expenditures needed to ~~operate~~resolve atany NSR litigation or ~~near~~other ~~full~~potential ~~capacity~~similar regulatory initiatives or rulemakings (including that such expenditures could result in our decision to shut down or idle certain generating units).

·• ~~The~~Adverse ~~ability~~regulatory or legal decisions and outcomes (including, but not limited to, ~~comply~~the ~~with~~revocation ~~applicable~~of ~~state~~necessary ~~and~~licenses ~~federal~~or ~~reliability~~operating ~~standards~~permits and ~~energy~~oversight) ~~efficiency~~by ~~mandates~~the NRC.

·• ~~The~~Adverse ~~ability~~legal decisions and outcomes related to ~~accomplish~~Met-Ed’s orand ~~realize~~Penelec’s ~~anticipated~~transmission ~~benefits~~service ~~from~~charge ~~strategic~~appeal ~~goals~~at ~~(including~~the ~~employee~~Commonwealth ~~workforce~~Court ~~initiatives)~~of Pennsylvania.

·• ~~The~~Any ~~ability~~impact toresulting ~~improve~~from ~~electric~~the ~~commodity~~receipt ~~margins~~by ~~and~~Signal toPeak ~~experience~~of ~~growth~~the inDepartment ~~the~~of ~~distribution~~Labor’s ~~business~~notice of a potential pattern of violations at Bull Mountain Mine No.1.

·• The ~~changing~~continuing ~~market~~availability ~~conditions that could affect the value~~ of ~~assets~~generating ~~held~~units ~~in the registrants’ nuclear decommissioning trusts, pension trusts~~ and ~~other~~their ~~trust~~ability ~~funds, and cause FirstEnergy~~ to ~~make~~operate ~~additional~~at ~~contributions sooner,~~ or innear ~~amounts~~full ~~that are larger than currently anticipated~~capacity.

·• The ability to ~~access~~comply ~~the~~with ~~public~~applicable ~~securities~~state and ~~other~~federal ~~capital~~reliability ~~and~~standards ~~credit markets in accordance with FirstEnergy’s financing plan~~ and ~~the~~energy ~~cost~~efficiency ~~of such capital~~mandates.

·• Changes in ~~general~~customers’ ~~economic~~demand ~~conditions~~for ~~affecting~~power, including but not limited to, changes resulting from the ~~registrants~~implementation of state and federal energy efficiency mandates.

·• The ~~state~~ability ofto ~~the~~accomplish ~~capital~~or ~~and~~realize ~~credit~~anticipated ~~markets~~benefits ~~affecting~~from ~~the~~strategic ~~registrants~~goals (including employee workforce initiatives).

·• ~~Interest~~The ~~rates~~ability ~~and~~to ~~any~~improve ~~actions~~electric ~~taken~~commodity bymargins ~~credit~~and ~~rating~~the ~~agencies~~impact ~~that~~of, ~~could~~among ~~negatively~~other ~~affect~~factors, the ~~registrants’~~increased ~~access~~cost toof ~~financing~~coal orand ~~their~~coal ~~costs~~transportation ~~and~~on ~~increase~~such ~~requirements~~margins toand ~~post~~the ~~additional~~ability ~~collateral~~ to ~~support~~experience ~~outstanding~~growth ~~commodity~~in ~~positions,~~the ~~LOCs~~distribution ~~and other financial guarantees~~business.

·• The ~~continuing~~changing ~~decline~~market ofconditions ~~the~~that ~~national~~could ~~and~~affect ~~regional~~the ~~economy~~value ~~and~~of ~~its~~assets ~~impact~~held onin the registrants’ ~~major~~nuclear ~~industrial~~decommissioning trusts, pension trusts and ~~commercial~~other ~~customers~~trust funds, and cause FirstEnergy to make additional contributions sooner, or in amounts that are larger than currently anticipated.

·• ~~Issues~~The ~~concerning~~ability to access the ~~soundness~~public ofsecurities ~~financial~~and ~~institutions~~other capital and ~~counterparties~~credit markets in accordance with ~~which~~FirstEnergy’s financing plan and the ~~registrants~~cost doof ~~business~~such capital.

·• ~~The~~Changes ~~expected~~in ~~timing~~general ~~and~~economic ~~likelihood of completion of the proposed merger with Allegheny Energy, Inc., including the timing, receipt and terms and~~ conditions ofaffecting ~~any required governmental and regulatory approvals of~~ the proposed merger that could reduce anticipated benefits or cause the parties to abandon the merger, the diversion of management's time and attention from our ongoing business during this time period, the ability to maintain relationships with customers, employees or suppliers as well as the ability to successfully integrate the businesses and realize cost savings and any other synergies and the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expectregistrants.

·• The ~~risks~~state ~~and~~of ~~other~~the ~~factors~~capital ~~discussed~~and ~~from~~credit ~~time~~markets toaffecting ~~time in~~ the registrants~~’ SEC filings, and other similar factors~~.

~~The foregoing~~• ~~review~~Interest ofrates ~~factors should not be construed as exhaustive. New factors emerge from time to time,~~ and itany isactions ~~not~~taken ~~possible~~by ~~for~~credit ~~management~~rating toagencies ~~predict~~that ~~all such~~could ~~factors,~~negatively ~~nor~~affect ~~assess~~ the ~~impact of any such factor on the~~ registrants’ ~~business~~ oraccess ~~the extent~~ to ~~which~~financing ~~any factor,~~ or ~~combination~~their ofcosts ~~factors,~~and ~~may~~increase ~~cause results~~requirements to ~~differ~~post ~~materially~~additional ~~from~~collateral ~~those~~to ~~contained~~support inoutstanding ~~any~~commodity ~~forward-looking statements. A security rating is not a recommendation to buy~~positions, ~~sell~~LOCs orand ~~hold securities that may be subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any~~ other ~~rating.~~financial ~~The registrants expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events or otherwise~~guarantees.

~~GLOSSARY OF~~• ~~TERMS~~The continuing uncertainty of the national and regional economy and its impact on the registrants’ major industrial and commercial customers.

~~The following~~• ~~abbreviations~~Issues ~~and~~concerning ~~acronyms~~the ~~are~~soundness ~~used~~of infinancial ~~this~~institutions ~~report~~and tocounterparties ~~identify FirstEnergy~~with ~~Corp.~~which ~~and~~the ~~its~~registrants ~~current~~do ~~and former subsidiaries:~~business.

ATSI	American Transmission Systems, Incorporated, owns and operates transmission facilities
CEI	The Cleveland Electric Illuminating Company, an Ohio electric utility operating subsidiary
FENOC	FirstEnergy Nuclear Operating Company, operates nuclear generating facilities
FES	FirstEnergy Solutions Corp., provides energy-related products and services
FESC	FirstEnergy Service Company, provides legal, financial and other corporate support services
FEV	FirstEnergy Ventures Corp., invests in certain unregulated enterprises and business ventures
FGCO	FirstEnergy Generation Corp., owns and operates non-nuclear generating facilities
FirstEnergy	FirstEnergy Corp., a public utility holding company
GPU	GPU, Inc., former parent of JCP&L, Met-Ed and Penelec, which merged with FirstEnergy on November 7, 2001
JCP&L	Jersey Central Power & Light Company, a New Jersey electric utility operating subsidiary
JCP&L Transition Funding	JCP&L Transition Funding LLC, a Delaware limited liability company and issuer of transition bonds
JCP&L Transition Funding II	JCP&L Transition Funding II LLC, a Delaware limited liability company and issuer of transition bonds
Met-Ed	Metropolitan Edison Company, a Pennsylvania electric utility operating subsidiary
NGC	FirstEnergy Nuclear Generation Corp., owns nuclear generating facilities
OE	Ohio Edison Company, an Ohio electric utility operating subsidiary
Ohio Companies	CEI, OE and TE
Penelec	Pennsylvania Electric Company, a Pennsylvania electric utility operating subsidiary
Penn	Pennsylvania Power Company, a Pennsylvania electric utility operating subsidiary of OE
Pennsylvania Companies	Met-Ed, Penelec and Penn
PNBV	PNBV Capital Trust, a special purpose entity created by OE in 1996
Shelf Registrants	FirstEnergy, OE, CEI, TE, JCP&L, Met-Ed and Penelec
Shippingport	Shippingport Capital Trust, a special purpose entity created by CEI and TE in 1997
Signal Peak	A joint venture between FirstEnergy Ventures Corp. and Boich Companies, that owns mining and coal transportation operations near Roundup, Montana
TE	The Toledo Edison Company, an Ohio electric utility operating subsidiary
Utilities	OE, CEI, TE, Penn, JCP&L, Met-Ed and Penelec
Waverly	The Waverly Power and Light Company, a wholly owned subsidiary of Penelec
The following abbreviations and acronyms are used to identify frequently used terms in this report:
AEP	American Electric Power Company, Inc.
ALJ	Administrative Law Judge
AMP-Ohio	American Municipal Power-Ohio, Inc.
AOCL	Accumulated Other Comprehensive Loss
AQC	Air Quality Control
ARO	Asset Retirement Obligation
BGS	Basic Generation Service
CAA	Clean Air Act
CAIR	Clean Air Interstate Rule
CAMR	Clean Air Mercury Rule
CAVR	Clean Air Visibility Rule
CBP	Competitive Bid Process
CMEC	Capacity market Evolution Committee
CO2	Carbon dioxide
CTC	Competitive Transition Charge
DOE	United States Department of Energy
DOJ	United States Department of Justice
DCPD	Deferred Compensation Plan for Outside Directors
DPA	Department of the Public Advocate, Division of Rate Counsel (New Jersey)
ECAR	East Central Area Reliability Coordination Agreement
EDCP	Executive Deferred Compensation Plan
EE&C	Energy Efficiency and Conservation
EMP	Energy Master Plan
EPA	United States Environmental Protection Agency
EPACT	Energy Policy Act of 2005
EPRI	Electric Power Research Institute
ESOP	Employee Stock Ownership Plan
ESP	Electric Security Plan
FASB	Financial Accounting Standards Board

•

The expected timing and likelihood of completion of the proposed merger with Allegheny, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed merger that could reduce anticipated benefits or cause the parties to abandon the merger, the diversion of management’s time and attention from FirstEnergy’s ongoing business during this time period, the ability to maintain relationships with customers, employees or suppliers as well as the ability to successfully integrate the businesses and realize cost savings and any other synergies and the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect.

i• The risks and other factors discussed from time to time in the registrants’ SEC filings, and other similar factors.

~~GLOSSARY~~Dividends declared from time to time on FirstEnergy’s common stock during any annual period may in OFaggregate ~~TERMS~~vary from the indicated amount due to circumstances considered by FirstEnergy’s Board of Directors at the time of the actual declarations. The foregoing review of factors should not be construed as exhaustive. New factors emerge from time to time, ~~Cont'd~~and it is not possible for management to predict all such factors, nor assess the impact of any such factor on the registrants’ business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. The registrants expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events or otherwise.

FERC	Federal Energy Regulatory Commission
FMB	First Mortgage Bond
FPA	Federal Power Act
FRR	Fixed Resource Requirement
GAAP	Accounting Principles Generally Accepted in the United States
GHG	Greenhouse Gases
IBEW	International Brotherhood of Electrical Workers
IFRS	International Financial Reporting Standards
IRS	Internal Revenue Service
JCARR	Joint Committee on Agency Review
kV	Kilovolt
KWH	Kilowatt-hours
LED	Light-emitting Diode
LIBOR	London Interbank Offered Rate
LOC	Letter of Credit
LTIP	Long-Term Incentive Plan
MACT	Maximum Achievable Control Technology
MISO	Midwest Independent Transmission System Operator, Inc.
Moody's	Moody's Investors Service, Inc.
MRO	Market Rate Offer
MW	Megawatts
MWH	Megawatt-hours
NAAQS	National Ambient Air Quality Standards
NEIL	Nuclear Electric Insurance Limited
NERC	North American Electric Reliability Corporation
NJBPU	New Jersey Board of Public Utilities
NNSR	Non-Attainment New Source Review
NOPEC	Northeast Ohio Public Energy Council
NOV	Notice of Violation
NOX	Nitrogen Oxide
NRC	Nuclear Regulatory Commission
NSR	New Source Review
NUG	Non-Utility Generation
NUGC	Non-Utility Generation Charge
OCC	Ohio Consumers’ Counsel
OCI	Other Comprehensive Income
OPEB	Other Post-Employment Benefits
OVEC	Ohio Valley Electric Corporation
PCRB	Pollution Control Revenue Bond
PJM	PJM Interconnection L. L. C.
PLR	Provider of Last Resort; an electric utility's obligation to provide generation service to customers whose alternative supplier fails to deliver service
PPUC	Pennsylvania Public Utility Commission
PSA	Power Supply Agreement
PSD	Prevention of Significant Deterioration
PUCO	Public Utilities Commission of Ohio
QSPE	Qualifying Special-Purpose Entity
RCP	Rate Certainty Plan
RECs	Renewable Energy Credits
RFP	Request for Proposal
RPM	Reliability Pricing Model
RTEP	Regional Transmission Expansion Plan
RTC	Regulatory Transition Charge
RTO	Regional Transmission Organization
S&P	Standard & Poor's Ratings Service
SB221	Amended Substitute Senate Bill 221
SBC	Societal Benefits Charge
SEC	U.S. Securities and Exchange Commission
SECA	Seams Elimination Cost Adjustment
SIP	State Implementation Plan(s) Under the Clean Air Act
SNCR	Selective Non-Catalytic Reduction
SO2	Sulfur Dioxide
SRECs	Solar Renewable Energy Credits
TBC	Transition Bond Charge

iiGLOSSARY OF TERMS

~~GLOSSARY OF~~The ~~TERMS,~~following ~~Cont'd~~abbreviations and acronyms are used in this report to identify FirstEnergy Corp. and its current and former subsidiaries:

TMI-2	Three Mile Island Unit 2
ATSI		American Transmission Systems, Incorporated, owns and operates transmission facilities
TSC	Transmission Service Charge
Beaver Valley		Beaver Valley Power Station
VERO	Voluntary Enhanced Retirement Option
CEI		The Cleveland Electric Illuminating Company, an Ohio electric utility operating subsidiary
VIE	Variable Interest Entity
FENOC		FirstEnergy Nuclear Operating Company, operates nuclear generating facilities
FES		FirstEnergy Solutions Corp., provides energy-related products and services
FESC		FirstEnergy Service Company, provides legal, financial and other corporate support services
FEV		FirstEnergy Ventures Corp., invests in certain unregulated enterprises and business ventures
FGCO		FirstEnergy Generation Corp., owns and operates non-nuclear generating facilities
FirstEnergy		FirstEnergy Corp., a public utility holding company
Global Rail		A joint venture between FirstEnergy Ventures Corp. and WMB Loan Ventures II LLC, that owns coal transportation operations near Roundup, Montana
GPU		GPU, Inc., former parent of JCP&L, Met-Ed and Penelec, which merged with FirstEnergy on November 7, 2001
JCP&L		Jersey Central Power & Light Company, a New Jersey electric utility operating subsidiary
JCP&L Transition Funding		JCP&L Transition Funding LLC, a Delaware limited liability company and issuer of transition bonds
JCP&L Transition Funding II		JCP&L Transition Funding II LLC, a Delaware limited liability company and issuer of transition bonds
Met-Ed		Metropolitan Edison Company, a Pennsylvania electric utility operating subsidiary
NGC		FirstEnergy Nuclear Generation Corp., owns nuclear generating facilities
OE		Ohio Edison Company, an Ohio electric utility operating subsidiary
Ohio Companies		CEI, OE and TE
Penelec		Pennsylvania Electric Company, a Pennsylvania electric utility operating subsidiary
Penn		Pennsylvania Power Company, a Pennsylvania electric utility operating subsidiary of OE
Pennsylvania Companies		Met-Ed, Penelec and Penn
PNBV		PNBV Capital Trust, a special purpose entity created by OE in 1996
Perry		Perry Nuclear Power Plant
Shelf Registrants		FirstEnergy, OE, CEI, TE, JCP&L, Met-Ed and Penelec
Shippingport		Shippingport Capital Trust, a special purpose entity created by CEI and TE in 1997
Signal Peak		A joint venture between FirstEnergy Ventures Corp. and WMB Loan Ventures LLC, that owns mining and coal transportation operations near Roundup, Montana
TE		The Toledo Edison Company, an Ohio electric utility operating subsidiary
Utilities		OE, CEI, TE, Penn, JCP&L, Met-Ed and Penelec

~~iii~~The following abbreviations and acronyms are used to identify frequently used terms in this report:

~~FORM 10~~AEP American Electric Power Company, Inc. ALJ Administrative Law Judge Allegheny Allegheny Energy, Inc. is the parent holding company of Allegheny Supply, Monongahela Power Company, The Potomac Edison Company and West Penn Power Company AOCL Accumulated Other Comprehensive Loss AQC Air Quality Control ARO Asset Retirement Obligation AS Allegheny Energy Supply Company, LLC owns and operates non-Knuclear ~~TABLE~~generating OFfacilities ~~CONTENTS~~and purchases and sells energy and energy-related commodities BGS Basic Generation Service CAA Clean Air Act CAIR Clean Air Interstate Rule CAMR Clean Air Mercury Rule

					Page
	Glossary of Terms				i-iii
Part I
	Item 1.	Business			1-26
			The Company		1-2
			Utility Regulation		2-13
				State Regulation	2
				Federal Regulation	3
				Regulatory Accounting	3-4
				Reliability Initiatives	4
				Ohio Regulatory Matters	4-6
				Pennsylvania Regulatory Matters	6-8
				New Jersey Regulatory Matters	8-9
				FERC Matters	9-13
		Capital Requirements			13-15
		Nuclear Operating Licenses			15-16
		Nuclear Regulation			16
		Nuclear Insurance			16-17
		Environmental Matters			17-21
		Fuel Supply			21-22
		System Demand			22-23
		Supply Plan			23
		Regional Reliability			23
		Competition			23-24
		Research and Development			24
		Executive Officers			25
		Employees			26
		FirstEnergy Web Site			26
	Item 1A.	Risk Factors			27-41
	Item 1B.	Unresolved Staff Comments			41
	Item 2.	Properties			41-43
	Item 3.	Legal Proceedings			43
	Item 4.	Submission of Matters to a Vote of Security Holders			43
Part II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			43-44
	Item 6.	Selected Financial Data			44-45
	Item 7.	Management’s Discussion and Analysis of Registrant and Subsidiaries			45-130
		FirstEnergy Corp.			47-105
		FirstEnergy Solutions Corp.			106-110
		Ohio Edison Company			111-113
		The Cleveland Electric Illuminating Company			114-115
		The Toledo Edison Company			116-118
		Jersey Central Power & Light Company			119-122
		Metropolitan Edison Company			123-126
		Pennsylvania Electric Company			127-130
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk			131
	Item 8.	Financial Statements and Supplementary Data			132-186
		Management Reports			132-139
		Report of Independent Registered Public Accounting Firm.			140-147

ivTable of Contents

~~TABLE~~ GLOSSARY OF ~~CONTENTS~~TERMS, (Cont'’d).

		Page
CATR		Clean Air Transport Rule
Financial Statements
CBP		Competitive Bid Process
FirstEnergy Corp.
CO2		Carbon dioxide
	Consolidated Statements of Income	148
CRDM		Control Rod Drive Mechanism
	Consolidated Balance Sheets	149
CTC		Competitive Transition Charge
	Consolidated Statements of Common Stockholders Equity	150
DOE		United States Department of Energy
	Consolidated Statements of Cash Flows	151
DOJ		United States Department of Justice
FirstEnergy Solutions Corp.
DCPD		Deferred Compensation Plan for Outside Directors
	Consolidated Statements of Income	152
DPA		Department of the Public Advocate, Division of Rate Counsel (New Jersey)
	Consolidated Balance Sheets	153
ECAR		East Central Area Reliability Coordination Agreement
	Consolidated Statements of Capitalization	154
EDCP		Executive Deferred Compensation Plan
	Consolidated Statements of Common Stockholders Equity	155
EE&C		Energy Efficiency and Conservation
	Consolidated Statements of Cash Flows	156
EMP		Energy Master Plan
Ohio Edison Company
EPA		United States Environmental Protection Agency
	Consolidated Statements of Income	157
EPACT		Energy Policy Act of 2005
	Consolidated Balance Sheets	158
EPRI		Electric Power Research Institute
	Consolidated Statements of Capitalization	159
ESOP		Employee Stock Ownership Plan
	Consolidated Statements of Common Stockholders Equity	160
ESP		Electric Security Plan
	Consolidated Statements of Cash Flows	161
FASB		Financial Accounting Standards Board
The Cleveland Electric Illuminating Company
FERC		Federal Energy Regulatory Commission
	Consolidated Statements of Income	162
FMB		First Mortgage Bond
	Consolidated Balance Sheets	163
FPA		Federal Power Act
	Consolidated Statements of Capitalization	164
FRR		Fixed Resource Requirement
	Consolidated Statements of Common Stockholders Equity	165
GAAP		Accounting Principles Generally Accepted in the United States
	Consolidated Statements of Cash Flows	166
GHG		Greenhouse Gases
The Toledo Edison Company
IFRS		International Financial Reporting Standards
	Consolidated Statements of Income	167
IRS		Internal Revenue Service
	Consolidated Balance Sheets	168
ISO		Independent System Operators
	Consolidated Statements of Capitalization	169
kV		Kilovolt
	Consolidated Statements of Common Stockholders Equity	170
KWH		Kilowatt-hours
	Consolidated Statements of Cash Flows	171
LED		Light-Emitting Diode
Jersey Central Power & Light Company
LOC		Letter of Credit
	Consolidated Statements of Income	172
LTIP		Long-Term Incentive Plan
	Consolidated Balance Sheets	173
MACT		Maximum Achievable Control Technology
	Consolidated Statements of Capitalization	174
MDPSC		Maryland Public Service Commission
	Consolidated Statements of Common Stockholders Equity	175
MEIUG		Met-Ed Industrial Users Group
	Consolidated Statements of Cash Flows	176
MISO		Midwest Independent Transmission System Operator, Inc.
Metropolitan Edison Company
Moody’s		Moody’s Investors Service, Inc.
	Consolidated Statements of Income	177
MRO		Market Rate Offer
	Consolidated Balance Sheets	178
MTEP		MISO Regional Transmission Expansion Plan
	Consolidated Statements of Capitalization	179
MW		Megawatts
	Consolidated Statements of Common Stockholders Equity	180
MWH		Megawatt-hours
	Consolidated Statements of Cash Flows	181
NAAQS		National Ambient Air Quality Standards
Pennsylvania Electric Company
NEIL		Nuclear Electric Insurance Limited
	Consolidated Statements of Income	182
NERC		North American Electric Reliability Corporation
	Consolidated Balance Sheets	183
NJBPU		New Jersey Board of Public Utilities
	Consolidated Statements of Capitalization	184
NNSR		Non-Attainment New Source Review
	Consolidated Statements of Common Stockholders Equity	185
NOAC		Northwest Ohio Aggregation Coalition
	Consolidated Statements of Cash Flows	186
NOPEC		Northeast Ohio Public Energy Council
NOV		Notice of Violation
NOX		Nitrogen Oxide
NRC		Nuclear Regulatory Commission
NSR		New Source Review
NUG		Non-Utility Generation
NUGC		Non-Utility Generation Charge
NYPSC		New York Public Service Commission
NYSEG		New York State Electric and Gas Corporation
OCC		Ohio Consumers’ Counsel
OCI		Other Comprehensive Income
OPEB		Other Post-Employment Benefits
OVEC		Ohio Valley Electric Corporation

vii

TABLE OFTable CONTENTSof (Cont'd)Contents

			Page
		Combined Notes to Consolidated Financial Statements	187-254
	Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	255
	Item 9A.	Controls and Procedures - FirstEnergy	255
	Item 9A(T).	Controls and Procedures – FES, OE, CEI, TE, JCP&L, Met-Ed and Penelec	255
	Item 9B.	Other Information	255
Part III
	Item 10.	Directors, Executive Officers and Corporate Governance	256
	Item 11.	Executive Compensation	256
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	256
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	256
	Item 14.	Principal Accounting Fees and Services	256
Part IV
	Item 15.	Exhibits, Financial Statement Schedules
		Report of Independent Registered Public Accounting Firm on Financial Statement Schedule	257-293

GLOSSARY OF TERMS, Cont’d.


PCRB		Pollution Control Revenue Bond
PICA		Pennsylvania Intergovernmental Cooperation Authority
PJM		PJM Interconnection L. L. C.
POLR		Provider of Last Resort; an electric utility’s obligation to provide generation service to customers whose alternative supplier fails to deliver service
PPUC		Pennsylvania Public Utility Commission
PSA		Power Supply Agreement
PSCWV		Public Service Commission of West Virginia
PSD		Prevention of Significant Deterioration
PUCO		Public Utilities Commission of Ohio
QSPE		Qualifying Special-Purpose Entity
RCP		Rate Certainty Plan
RECs		Renewable Energy Credits
RFP		Request for Proposal
RTEP		Regional Transmission Expansion Plan
RTC		Regulatory Transition Charge
RTO		Regional Transmission Organization
S&P		Standard & Poor’s Ratings Service
SB221		Ohio Amended Substitute Senate Bill 221
SBC		Societal Benefits Charge
SEC		U.S. Securities and Exchange Commission
SECA		Seams Elimination Cost Adjustment
SIP		State Implementation Plan(s) Under the Clean Air Act
SMIP		Smart Meter Implementation Plan
SNCR		Selective Non-Catalytic Reduction
SO₂		Sulfur Dioxide
SRECs		Solar Renewable Energy Credits
TBC		Transition Bond Charge
TMI-2		Three Mile Island Unit 2
TSC		Transmission Service Charge
VERO		Voluntary Enhanced Retirement Option
VIE		Variable Interest Entity
VSCC		Virginia State Corporation Commission

~~PART~~iii I

ITEM 1.Table BUSINESSof Contents

~~Proposed Merger~~FORM ~~with~~10-K ~~Allegheny~~TABLE ~~Energy,~~OF ~~Inc.~~CONTENTS

On February 10, 2010, FirstEnergy entered into an Agreement and Plan of Merger (Merger Agreement) with Element Merger Sub, Inc., a Maryland corporation and its wholly-owned subsidiary (Merger Sub) and Allegheny Energy, Inc., a Maryland corporation (Allegheny). Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Allegheny with Allegheny continuing as the surviving corporation and a wholly-owned subsidiary of FirstEnergy. Pursuant to the Merger Agreement, upon the closing of the merger, each issued and outstanding share of Allegheny common stock, including grants of restricted common stock, will automatically be converted into the right to receive 0.667 of a share of common stock of FirstEnergy. Completion of the merger is conditioned upon, among other things, shareholder approval of both companies as well as expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and approval by the FERC, the Maryland Public Service Commission, PPUC, the Virginia State Corporation Commission and the West Virginia Public Service Commission. FirstEnergy anticipates that the necessary approvals will be obtained within 12 to 14 months. The Merger Agreement contains certain termination rights for both FirstEnergy and Allegheny, and further provides for the payment of fees and expenses upon termination under specified circumstances. Further information concerning the proposed merger will be included in a joint proxy statement/prospectus contained in the registration statement on Form S-4 to be filed by FirstEnergy with the SEC in connection with the merger. See Note 21 to the consolidated financial statements.


	Page

Glossary of Terms		i-iii

Part I

Item 1. Business		1

Proposed Merger With Allegheny		1

The Company		1

Utility Regulation		3

State Regulation		3

Federal Regulation		3

Regulatory Accounting		3

Reliability Initiatives		4

Ohio Regulatory Matters		5

Pennsylvania Regulatory Matters		6

New Jersey Regulatory Matters		7

FERC Matters		8

Capital Requirements		10

Nuclear Operating Licenses		13

Nuclear Regulation		13

Nuclear Insurance		13

Hydro Relicensing		14

Environmental Matters		15

Fuel Supply		18

System Demand		19

Supply Plan		20

Regional Reliability		20

Competition		20

Seasonality		20

Research and Development		21

Executive Officers		22

Employees		23

FirstEnergy Web Site		23

Item 1A. Risk Factors		23

Item 1B. Unresolved Staff Comments		39

Item 2. Properties		39

Item 3. Legal Proceedings		42

Item 4. (Removed and Reserved)		42

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		42

Item 6. Selected Financial Data		43

Item 7. Management’s Discussion and Analysis of Registrant and Subsidiaries		45

FirstEnergy Corp.		46

FirstEnergy Solutions Corp.		98

Ohio Edison Company		103

The Cleveland Electric Illuminating Company		106

The Toledo Edison Company		109

Jersey Central Power & Light Company		112

Metropolitan Edison Company		116

Pennsylvania Electric Company		120

~~The~~iv ~~Company~~

FirstEnergy Corp.Table was organized under the laws of the State of Ohio in 1996. FirstEnergy’s principal business is the holding, directly or indirectly, of all of the outstanding common stock of its eight principal electric utility operating subsidiaries: OE, CEI, TE, Penn, ATSI, JCP&L, Met-Ed and Penelec; and of its generating and marketing subsidiary, FES. FirstEnergy’s consolidated revenues are primarily derived from electric service provided by its utility operating subsidiaries and the revenues of its other principal subsidiary, FES. In addition, FirstEnergy holds all of the outstanding common stock of other direct subsidiaries including: FirstEnergy Properties, Inc., FEV, FENOC, FELHC, Inc., FirstEnergy Facilities Services Group, LLC, FirstEnergy Fiber Holdings Corp., GPU Power, Inc., GPU Nuclear, Inc., MARBEL Energy Corporation, and FESC.Contents

~~FES was~~TABLE ~~organized~~OF ~~under~~CONTENTS the laws of the State of Ohio in 1997. FES provides energy-related products and services to wholesale and retail customers in the MISO and PJM markets. FES also owns and operates, through its subsidiary, FGCO, FirstEnergy(Cont’~~s fossil and hydroelectric generating facilities and owns, through~~d) its subsidiary, NGC, FirstEnergy’s nuclear generating facilities. FENOC, a separate subsidiary of FirstEnergy, organized under the laws of the State of Ohio in 1998, operates and maintains NGC’s nuclear generating facilities. FES purchases the entire output of the generation facilities owned by FGCO and NGC, as well as the output relating to leasehold interests of the Ohio Companies in certain of those facilities that are subject to sale and leaseback arrangements with non-affiliates, pursuant to full output, cost-of-service PSAs.

FirstEnergy’s generating portfolio includes 13,970 MW of diversified capacity (FES – 13,770 MW and JCP&L – 200 MW). Within FES’ portfolio, approximately 7,469 MW, or 54.2%, consists of coal-fired capacity; 3,991 MW, or 29.0%, consists of nuclear capacity; 1,599 MW, or 11.6%, consists of oil and natural gas peaking units; 451 MW, or 3.3%, consists of hydroelectric capacity; and 260 MW, or 1.9%, consists of capacity from FGCO’s current 11.5% entitlement to the generation output owned by the OVEC. FirstEnergy’s nuclear and non-nuclear facilities are operated by FENOC and FGCO, respectively, and, except for portions of certain facilities that are subject to the sale and leaseback arrangements with non-affiliates referred to above for which the corresponding output is available to FES through power sale agreements, are all owned directly by NGC and FGCO, respectively. The FES generating assets are concentrated primarily in Ohio, plus the bordering regions of Pennsylvania and Michigan. All FES units are dedicated to MISO except the Beaver Valley Power Station, which is designated as a PJM resource. Additionally, see FERC Matters for RTO Consolidation.


	Page

Item 7A. Quantitative and Qualitative Disclosures About Market Risk		124

Item 8. Financial Statements and Supplementary Data		124

Management Reports		124

Report of Independent Registered Public Accounting Firm		132

Financial Statements

FirstEnergy Corp.

Consolidated Statements of Income		140

Consolidated Balance Sheets		141

Consolidated Statements of Common Stockholders Equity		142

Consolidated Statements of Cash Flows		143

FirstEnergy Solutions Corp.

Consolidated Statements of Income		144

Consolidated Balance Sheets		145

Consolidated Statements of Capitalization		146

Consolidated Statements of Common Stockholders Equity		147

Consolidated Statements of Cash Flows		148

Ohio Edison Company

Consolidated Statements of Income		149

Consolidated Balance Sheets		150

Consolidated Statements of Capitalization		151

Consolidated Statements of Common Stockholders Equity		152

Consolidated Statements of Cash Flows		153

The Cleveland Electric Illuminating Company

Consolidated Statements of Income		154

Consolidated Balance Sheets		155

Consolidated Statements of Capitalization		156

Consolidated Statements of Common Stockholders Equity		157

Consolidated Statements of Cash Flows		158

The Toledo Edison Company

Consolidated Statements of Income		159

Consolidated Balance Sheets		160

Consolidated Statements of Capitalization		161

Consolidated Statements of Common Stockholders Equity		162

Consolidated Statements of Cash Flows		163

Jersey Central Power & Light Company

Consolidated Statements of Income		164

Consolidated Balance Sheets		165

Consolidated Statements of Capitalization		166

Consolidated Statements of Common Stockholders Equity		167

Consolidated Statements of Cash Flows		168

~~FES,~~v FGCO and NGC comply with the regulations, orders, policies and practices prescribed by the SEC and the FERC. In addition, NGC and FENOC comply with the regulations, orders, policies and practices prescribed by the NRC.

The Utilities’Table combined service areas encompass approximately 36,100 square miles in Ohio, New Jersey and Pennsylvania. The areas they serve have a combined population of approximately 11.3 million.Contents

~~OE was~~TABLE ~~organized~~OF ~~under~~CONTENTS ~~the laws of the State of Ohio in 1930 and owns property and does~~(Cont’d) business as an electric public utility in that state. OE engages in the distribution and sale of electric energy to communities in a 7,000 square mile area of central and northeastern Ohio. The area it serves has a population of approximately 2.8 million. OE complies with the regulations, orders, policies and practices prescribed by the SEC, FERC and PUCO.


	Page

Metropolitan Edison Company

Consolidated Statements of Income		169

Consolidated Balance Sheets		170

Consolidated Statements of Capitalization		171

Consolidated Statements of Common Stockholders Equity		172

Consolidated Statements of Cash Flows		173

Pennsylvania Electric Company

Consolidated Statements of Income		174

Consolidated Balance Sheets		175

Consolidated Statements of Capitalization		176

Consolidated Statements of Common Stockholders Equity		177

Consolidated Statements of Cash Flows		178

Combined Notes to Consolidated Financial Statements		179

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure		259

Item 9A. Controls and Procedures — FirstEnergy		259

Item 9B. Other Information		260

Part III

Item 10. Directors, Executive Officers and Corporate Governance		261

Item 11. Executive Compensation		261

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		261

Item 13. Certain Relationships and Related Transactions, and Director Independence		261

Item 14. Principal Accounting Fees and Services		261

Part IV

Item 15. Exhibits, Financial Statement Schedules		263

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule		298

Exhibit 12.1
Exhibit 12.2
Exhibit 12.3
Exhibit 12.4
Exhibit 12.5
Exhibit 12.6
Exhibit 12.7
Exhibit 12.8
Exhibit 21
Exhibit 23.1
Exhibit 23.2
Exhibit 23.3
Exhibit 23.4
Exhibit 23.5
Exhibit 23.6
Exhibit 23.7
Exhibit 31.1
Exhibit 31.2
Exhibit 32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

~~OE owns~~vi all of Penn’s outstanding common stock. Penn was organized under the laws of the Commonwealth of Pennsylvania in 1930 and owns property and does business as an electric public utility in that state. Penn is also authorized to do business in the State of Ohio (see Item 2 – Properties). Penn furnishes electric service to communities in 1,100 square miles of western Pennsylvania. The area it serves has a population of approximately 0.4 million. Penn complies with the regulations, orders, policies and practices prescribed by the FERC and PPUC.

CEITable was organized under the laws of the State of Ohio in 1892 and does business as an electric public utility in that state. CEI engages in the distribution and sale of electric energy in an area of approximately 1,600 square miles in northeastern Ohio. The area it serves has a population of approximately 1.8 million. CEI complies with the regulations, orders, policies and practices prescribed by the SEC, FERC and PUCO.Contents

TEPART ~~was~~I organized under the laws of the State of Ohio in 1901 and does business as an electric public utility in that state. TE engages in the distribution and sale of electric energy in an area of approximately 2,300 square miles in northwestern Ohio. The area it serves has a population of approximately 0.8 million. TE complies with the regulations, orders, policies and practices prescribed by the SEC, FERC and PUCO.

~~ATSI~~ITEM was organized under the laws of the State of Ohio in 1998. ATSI owns transmission assets that were formerly owned by the Ohio Companies and Penn. ATSI owns major, high-voltage transmission facilities, which consist of approximately 5,821 pole miles of transmission lines with nominal voltages of 345 kV, 138 kV and 69 kV. Effective October 1~~, 2003, ATSI transferred operational control of its transmission facilities to MISO~~. With its affiliation with MISO, ATSI plans, operates, and maintains its transmission system in accordance with NERC reliability standards, and applicable regulatory agencies to ensure reliable service to customers. Additionally, see FERC Matters for RTO Consolidation.BUSINESS

~~JCP&L was~~Proposed ~~organized~~Merger under the laws of the State of New Jersey in 1925 and owns property and does business as an electric public utility in that state. JCP&L provides transmission and distribution services in 3,200 square miles of northern, western and east central New Jersey. The area it serves has a population of approximately 2.6 million. JCP&L complies with ~~the~~Allegheny ~~regulations, orders, policies and practices prescribed by the SEC, FERC and the NJBPU.~~

~~Met-Ed was~~As ~~organized~~previously ~~under~~disclosed, ~~the~~on ~~laws~~February 10, of2010, ~~the~~FirstEnergy ~~Commonwealth~~entered ofinto ~~Pennsylvania~~an inAgreement ~~1922~~ and ~~owns~~ ~~property~~Plan ~~and~~of ~~does~~Merger, subsequently ~~business~~amended ason anJune 4, ~~electric~~2010 ~~public~~(Merger ~~utility~~Agreement), inwith ~~that~~Element ~~state~~Merger Sub, Inc. ~~Met~~, a Maryland corporation, its wholly-Edowned ~~provides~~subsidiary ~~transmission~~(Merger Sub) and ~~distribution~~Allegheny ~~services~~a Maryland corporation. Upon the terms and subject to the conditions set forth in 3the Merger Agreement,~~300~~ ~~square~~Merger ~~miles~~Sub ~~of eastern~~will merge with and ~~south~~into ~~central~~Allegheny ~~Pennsylvania.~~with ~~The~~Allegheny ~~area~~continuing as itthe ~~serves~~surviving ~~has~~corporation and a ~~population~~wholly-owned subsidiary of ~~approximately~~ 1FirstEnergy.~~3 million.~~ ~~Met-Ed~~Pursuant ~~complies~~to ~~with~~the Merger Agreement, upon the ~~regulations~~closing of the merger, ~~orders~~each issued and outstanding share of Allegheny common stock, including grants of restricted common stock, would automatically be converted into the right to receive 0.667 of a share of common stock of ~~policies~~ FirstEnergy, and ~~practices~~Allegheny ~~prescribed~~stockholders bywould own approximately 27% of the ~~SEC,~~combined ~~FERC~~company. ~~and~~FirstEnergy ~~PPUC~~would also assume all outstanding Allegheny debt.

~~Penelec was~~Pursuant ~~organized~~to ~~under~~ the ~~laws~~Merger Agreement, completion of the ~~Commonwealth~~merger ofis ~~Pennsylvania~~conditioned inupon, ~~1919~~among ~~and~~other things, ~~owns~~shareholder ~~property~~approval ~~and~~of ~~does~~both ~~business~~companies, aswhich anwas ~~electric~~received ~~public~~on ~~utility~~September 14, in2010; ~~that~~the ~~state. Penelec~~SEC’s ~~provides~~clearance ~~transmission~~of ~~and~~a ~~distribution~~registration ~~services~~statement registering the FirstEnergy common stock to be issued in ~~17,600~~connection ~~square~~with ~~miles of~~the ~~western~~merger, ~~northern~~which occurred ~~and~~on ~~south~~July 16, ~~central Pennsylvania~~2010. ~~The~~Approval ~~area~~of itthe ~~serves~~merger ~~has~~was areceived ~~population~~from ofthe ~~approximately~~VSCC ~~1.6~~on September ~~million~~9, 2010. ~~Penelec,~~Approval asfrom ~~lessee~~the ofFERC and from the ~~property of~~PSCWV ~~its~~was ~~subsidiary~~received on December 16, ~~The~~2010. ~~Waverly~~Approval ~~Electric~~from ~~Light~~the &MDPSC ~~Power~~was ~~Company~~received on January 18, ~~also~~2011. ~~serves customers~~On inJanuary 7, ~~Waverly~~2011, ~~New~~we ~~York~~were notified by the DOJ that it had completed its review of the merger and closed its ~~vicinity~~investigation. ~~Penelec~~The ~~complies~~proposed ~~with~~merger is also conditioned upon receipt of the approval ~~regulations,~~ ~~orders,~~of ~~policies~~the PPUC. The Merger Agreement also contains certain termination rights for both FirstEnergy and ~~practices~~Allegheny, ~~prescribed~~and byfurther provides for the ~~SEC,~~payment ~~FERC~~of fees and expenses upon ~~PPUC~~termination under specified circumstances.

~~FESC~~FirstEnergy ~~provides~~and ~~legal~~Allegheny currently anticipate completing the merger in the first quarter of 2011. Although FirstEnergy and Allegheny believe that they will receive the required authorizations, ~~financial~~approvals and ~~other~~consents ~~corporate~~to ~~support~~complete ~~services~~the merger, there can be no assurance as to ~~affiliated~~the timing of these authorizations, approvals and consents or as to FirstEnergy’s ~~companies~~and Allegheny’s ultimate ability to obtain such authorizations, consents or approvals (or any additional authorizations, approvals or consents which may otherwise become necessary) or that such authorizations, approvals or consents will be obtained on terms and subject to conditions satisfactory to Allegheny and FirstEnergy. Further information concerning the proposed merger is included in the Registration Statement filed by FirstEnergy with the SEC in connection with the merger.

~~Reference is~~The ~~made to Note 16, Segment Information, of the Notes to Consolidated~~Company ~~Financial Statements contained in Item 8 for information regarding FirstEnergy's reportable segments.~~

~~Utility~~FirstEnergy Corp. was organized under the laws of the State of Ohio in 1996. FirstEnergy’s ~~Regulation~~principal business is the holding, directly or indirectly, of all of the outstanding common stock of its eight principal electric utility operating subsidiaries: OE, CEI, TE, Penn, ATSI, JCP&L, Met-Ed and Penelec; and of its generating and marketing subsidiary, FES. FirstEnergy’s consolidated revenues are primarily derived from electric service provided by its utility operating subsidiaries and the revenues of its other principal subsidiary, FES. In addition, FirstEnergy holds all of the outstanding common stock of other direct subsidiaries including: FirstEnergy Properties, Inc., FEV, FENOC, FELHC, Inc., FirstEnergy Facilities Services Group, LLC, FirstEnergy Fiber Holdings Corp., GPU Power, Inc., GPU Nuclear, Inc., MARBEL Energy Corporation and FESC.

FES was organized under the laws of the State of Ohio in 1997. FES provides energy-related products ~~Regulation~~and services to wholesale and retail customers. FES also owns and operates, through its subsidiary, FGCO, FirstEnergy’s fossil and hydroelectric generating facilities and owns, through its subsidiary, NGC, FirstEnergy’s nuclear generating facilities. FENOC, a separate subsidiary of FirstEnergy, organized under the laws of the State of Ohio in 1998, operates and maintains NGC’s nuclear generating facilities. FES purchases the entire output of the generation facilities owned by FGCO and NGC, as well as the output relating to leasehold interests of the Ohio Companies in certain of those facilities that are subject to sale and leaseback arrangements with non-affiliates, pursuant to full output, cost-of-service PSAs.

~~Each of~~1 the Utilities’ retail rates, conditions of service, issuance of securities and other matters are subject to regulation in the state in which each company operates – in Ohio by the PUCO, in New Jersey by the NJBPU and in Pennsylvania by the PPUC. 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.

AsTable a competitive retail electric supplier serving retail customers in Ohio, Pennsylvania, New Jersey, Maryland, Michigan, and Illinois, FES is subject to state laws applicable to competitive electric suppliers in those states, including affiliate codes of conduct that apply to FES and its public utility affiliates. In addition, if FES or any of its subsidiaries were to engage in the construction of significant new generation facilities, they would also be subject to state siting authority.Contents

FirstEnergy’s generating portfolio includes 13,436 MW of diversified capacity (FES — 13,236 MW and JCP&L — 200 MW). Within FES’ portfolio, approximately 7,157 MW, or 54.1%, consist of coal-fired capacity; 3,991 MW, or 30.2%, consist of nuclear capacity; 1,151 MW, or 8.7%, consist of oil and natural gas peaking units; 451 MW, or 3.4%, consist of hydroelectric capacity, 376 MW, or 2.8%, are from wind facilities; and 110 MW, or 0.8%, consist of capacity from FGCO’s current 4.85% entitlement to the generation output owned by the OVEC. FirstEnergy’s nuclear and non-nuclear facilities are operated by FENOC and FGCO, respectively, and, except for portions of certain facilities that are subject to the sale and leaseback arrangements with non-affiliates referred to above for which the corresponding output is available to FES through power sale agreements, are all owned directly by NGC and FGCO, respectively. The FES generating assets are concentrated primarily in Ohio and Pennsylvania. All FES units are currently dedicated to MISO except Beaver Valley and Seneca Pumped Storage Plant, which are designated as a PJM resource. Additionally, see FERC Matters for RTO Realignment.

~~Federal~~FES, FGCO and NGC comply with the regulations, orders, policies and practices prescribed by the SEC ~~Regulation~~and the FERC. In addition, NGC and FENOC comply with the regulations, orders, policies and practices prescribed by the NRC.

~~With respect~~The ~~to their wholesale and interstate electric operations and rates, the~~ Utilities,’ ~~ATSI,~~combined ~~FES,~~service ~~FGCO~~areas ~~and~~encompass ~~NGC~~approximately ~~are subject to regulation by the FERC. Under the FPA~~36,100 ~~the~~square ~~FERC~~miles ~~regulates~~in ~~rates for interstate sales at wholesale~~Ohio, ~~transmission~~ ~~of electric power, accounting and other matters, including~~New ~~construction~~Jersey and ~~operation of hydroelectric projects~~Pennsylvania. The ~~FERC~~areas ~~regulations require~~they ~~ATSI,~~serve ~~Met-Ed,~~have ~~JCP&L~~a ~~and~~combined ~~Penelec~~population toof ~~provide~~approximately ~~open access transmission service at FERC-approved rates, terms and conditions~~11. ~~Transmission service over~~3 ATSI’s facilities is provided by MISO under its open access transmission tariff, and transmission service over Met-Ed’s, JCP&L’s and Penelec’s facilities is provided by PJM under its open access transmission tariffmillion. ~~The FERC also~~ ~~regulates unbundled transmission service to retail customers. Additionally, see FERC Matters for RTO Consolidation.~~

~~The~~OE ~~FERC regulates~~was ~~the~~organized ~~sale~~under ~~of power for resale in interstate commerce by granting authority to public utilities to sell wholesale power at market-based rates upon a showing that~~ the ~~seller~~laws ~~cannot~~of ~~exert market power in generation or transmission. FES, FGCO and NGC have been authorized by~~ the ~~FERC~~State toof ~~sell wholesale~~Ohio ~~power~~ in ~~interstate~~1930 ~~commerce~~ and ~~have~~owns aproperty ~~market-based tariff on file with the FERC. By virtue of this tariff~~ and ~~authority~~does tobusiness ~~sell wholesale power,~~as ~~each~~an ~~company~~electric ~~is regulated as a~~ public utility ~~under~~in ~~the~~that ~~FPA~~state. ~~However,~~OE ~~consistent with~~engages ~~its~~in ~~historical practice,~~ the ~~FERC~~distribution ~~has granted FES, FGCO~~ and ~~NGC~~sale ~~a waiver from most~~ of ~~the reporting, record-keeping and accounting requirements that~~electric ~~typically~~energy ~~apply~~ to ~~traditional~~communities ~~public~~in ~~utilities.~~a ~~Along with market-based rate authority~~7,000 ~~the~~square ~~FERC~~mile ~~also~~area ~~granted~~of ~~FES,~~central ~~FGCO~~ and ~~NGC~~northeastern ~~blanket~~Ohio. ~~authority~~The toarea ~~issue~~it ~~securities~~serves ~~and~~has ~~assume~~a ~~liabilities~~population ~~under Section 204~~ of ~~the~~approximately ~~FPA~~2.8 million. AsOE acomplies ~~condition to~~with ~~selling~~the ~~electricity on a wholesale basis at market-based rates~~regulations, ~~FES~~orders, policies ~~FGCO~~ and ~~NGC,~~ ~~like~~practices ~~all~~prescribed ~~other~~by ~~entities~~the ~~granted market-based rate authority~~SEC, ~~must file electronic quarterly reports with the~~ FERC, ~~listing~~and ~~its sales transactions for the prior quarter~~PUCO.

~~The nuclear~~OE ~~generating~~owns ~~facilities~~all ~~owned~~of ~~and~~Penn’s ~~leased~~outstanding bycommon ~~NGC~~stock. ~~are~~Penn ~~subject~~was toorganized ~~extensive regulation~~under by the ~~NRC.~~laws ~~The~~of ~~NRC~~the Commonwealth ~~subjects~~of ~~nuclear~~Pennsylvania ~~generating~~in ~~stations~~1930 ~~to continuing~~and ~~review~~owns property and ~~regulation~~does ~~covering,~~business ~~among~~as ~~other~~an ~~things,~~electric ~~operations,~~public ~~maintenance,~~utility ~~emergency~~in ~~planning,~~that ~~security~~state. ~~and~~Penn ~~environmental~~is ~~and~~also ~~radiological aspects~~authorized ofto ~~those~~do ~~stations.~~business ~~The~~in ~~NRC~~the ~~may~~State ~~modify,~~of ~~suspend~~Ohio or(see ~~revoke~~Item 2 ~~operating~~— ~~licenses~~Properties). ~~and~~Penn ~~impose~~furnishes ~~civil~~electric ~~penalties~~service ~~for~~to ~~failure~~communities toin ~~comply~~1,100 ~~with~~square ~~the~~miles ~~Atomic~~of ~~Energy~~western ~~Act,~~Pennsylvania. ~~the~~The ~~regulations~~area ~~under~~it ~~such~~serves ~~Act~~has ora ~~the~~population ~~terms~~ of ~~the~~approximately ~~licenses~~0.4 million. ~~FENOC~~Penn iscomplies ~~the~~with ~~licensee~~the ~~for~~regulations, ~~these~~orders, ~~plants~~policies and ~~has~~practices ~~direct~~prescribed ~~compliance~~by ~~responsibility for NRC matters. FES controls~~ the ~~economic~~SEC, ~~dispatch~~FERC ofand ~~NGC’s plants~~PPUC. ~~See Nuclear~~ ~~Regulation below.~~

~~Regulatory~~CEI was organized under the laws of the State of Ohio in 1892 and does business as an electric ~~Accounting~~public utility in that state. CEI engages in the distribution and sale of electric energy in an area of approximately 1,600 square miles in northeastern Ohio. The area it serves has a population of approximately 1.8 million. CEI complies with the regulations, orders, policies and practices prescribed by the SEC, FERC and PUCO.

~~The Utilities~~TE ~~and~~was ~~ATSI~~organized ~~recognize,~~under asthe ~~regulatory~~laws ~~assets,~~of ~~costs which~~ the ~~FERC,~~State ~~PUCO, PPUC~~of ~~and~~Ohio ~~NJBPU~~in ~~have~~1901 ~~authorized~~and ~~for~~does ~~recovery~~business ~~from~~as ~~customers~~an ~~in future periods or~~electric ~~for~~public ~~which~~utility ~~authorization~~in isthat ~~probable~~state. ~~Without~~TE ~~the~~engages ~~probability~~in ofthe ~~such authorization,~~distribution ~~costs~~and ~~currently~~sale ~~recorded~~of aselectric ~~regulatory~~energy ~~assets~~in ~~would~~an ~~have been~~area ~~charged~~of toapproximately ~~income~~2,300 assquare ~~incurred.~~miles ~~All~~in ~~regulatory~~northwestern ~~assets~~Ohio. ~~are~~The ~~expected~~area toit ~~be recovered~~serves ~~from~~has ~~customers~~a ~~under~~population ~~the Utilities' respective transition and~~of ~~regulatory~~approximately ~~plans~~0.8 million. ~~Based~~TE oncomplies ~~those~~with ~~plans,~~ the ~~Utilities~~regulations, ~~continue~~orders, topolicies ~~bill~~ and ~~collect~~ ~~cost-based rates for their transmission and distribution services, which~~practices ~~remain~~prescribed ~~regulated;~~by ~~accordingly, it is appropriate that~~ the ~~Utilities~~SEC, ~~continue~~FERC ~~the application~~and ~~of regulatory accounting to those operations~~PUCO.

~~FirstEnergy~~ATSI was organized under the laws of the State of Ohio in 1998. ATSI owns transmission assets that ~~accounts~~were ~~for~~formerly owned by the ~~effects~~Ohio Companies and Penn. ATSI owns major, high-voltage transmission facilities, which consist of ~~regulation~~approximately ~~through~~5,821 pole miles of transmission lines with nominal voltages of 345 kV, 138 kV and 69 kV. Effective October 1, 2003, ATSI transferred operational control of its transmission facilities to MISO. On December 17, 2009, the ~~application~~FERC authorized ATSI to transfer operational control of ~~regulatory~~its facilities to PJM. As described below in FERC Matters the ~~accounting~~transfer is scheduled to occur on June 1, 2011. ATSI plans, operates, and maintains its transmission ~~operating~~system ~~utilities~~in ~~since~~accordance ~~their~~with ~~rates:~~NERC reliability standards, and applicable regulatory requirements to ensure reliable service to customers. Additionally, see FERC Matters for RTO Realignment. ATSI complies with the regulations, orders, policies and practices prescribed by the SEC, FERC and applicable state regulatory authorities.

·JCP&L ~~are~~was ~~established~~organized byunder the laws of the State of New Jersey in 1925 and owns property and does business as an electric public utility in that state. JCP&L provides transmission and distribution services in 3,200 square miles of northern, western and east central New Jersey. The area it serves has a ~~third-party~~population ~~regulator~~of approximately 2.6 million. JCP&L complies with the ~~authority~~regulations, toorders, policies ~~set~~and ~~rates~~practices ~~that~~prescribed ~~bind~~by ~~customers;~~the SEC, FERC and the NJBPU.

·Met-Ed ~~are~~was ~~cost~~organized under the laws of the Commonwealth of Pennsylvania in 1922 and owns property and does business as an electric public utility in that state. Met-~~based;~~Ed provides transmission and distribution services in 3,300 square miles of eastern and south central Pennsylvania. The area it serves has a population of approximately 1.3 million. Met-Ed complies with the regulations, orders, policies and practices prescribed by the SEC, FERC and PPUC.

·Penelec ~~can~~was beorganized ~~charged~~under tothe laws of the Commonwealth of Pennsylvania in 1919 and ~~collected~~owns ~~from~~property and does business as an electric public utility in that state. Penelec provides transmission and distribution services in 17,600 square miles of western, northern and south central Pennsylvania. The area it serves has a population of approximately 1.6 million. Penelec, as lessee of the property of its subsidiary, The Waverly Electric Light & Power Company, also serves customers in Waverly, New York and its vicinity. Penelec complies with the regulations, orders, policies and practices prescribed by the SEC, FERC, NYPSC and PPUC, as applicable.

An2 enterprise meeting all of these criteria capitalizes costs that would otherwise be charged to expense (regulatory assets) if the rate actions of its regulator make it probable that those costs will be recovered in future revenue. Regulatory accounting is applied only to the parts of the business that meet the above criteria. If a portion of the business applying regulatory accounting no longer meets those requirements, previously recorded net regulatory assets are removed from the balance sheet in accordance with GAAP.

InTable Ohio, Newof Jersey and Pennsylvania, laws applicable to electric industry restructuring contain similar provisions that are reflected in the Utilities' respective state regulatory plans. These provisions include:Contents

·FESC ~~restructuring~~provides ~~the~~legal, ~~electric~~financial ~~generation business~~ and ~~allowing~~other ~~the~~corporate ~~Utilities'~~support ~~customers~~services to ~~select~~affiliated ~~a competitive electric generation supplier other than the Utilities;~~FirstEnergy companies.

·Reference ~~establishing~~is ormade ~~defining~~to ~~the~~Note ~~PLR~~15, ~~obligations~~Segment Information, of the Notes to ~~customers~~Consolidated Financial Statements contained in ~~the~~Item 8 ~~Utilities'~~for ~~service~~information ~~areas;~~regarding FirstEnergy’s reportable segments.

·Utility ~~providing the Utilities with the opportunity to recover potentially stranded investment (or transition costs) not otherwise recoverable in a competitive generation market;~~Regulation

3State Regulation

·Each ~~itemizing~~of ~~(unbundling)~~ the ~~price~~Utilities’ retail rates, conditions of ~~electricity~~service, ~~into~~issuance ~~its~~of ~~component~~securities ~~elements~~and –other matters ~~including~~are ~~generation,~~subject ~~transmission~~to regulation in the state in which each company operates — in Ohio by the PUCO, ~~distribution~~in New Jersey by the NJBPU and ~~stranded~~in ~~costs~~Pennsylvania ~~recovery~~by ~~charges;~~the PPUC. 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.

·As ~~continuing~~a ~~regulation~~competitive ofretail ~~the~~electric ~~Utilities'~~supplier ~~transmission~~serving retail customers in Ohio, Pennsylvania, New Jersey, Maryland, Michigan, and ~~distribution~~Illinois, ~~systems;~~FES is subject to state laws applicable to competitive electric suppliers in those states, including affiliate codes of conduct that apply to FES and its public utility affiliates. In addition, if FES or any of its subsidiaries were to engage in the construction of significant new generation facilities, they would also be subject to state siting authority.

·Federal ~~requiring corporate separation of regulated and unregulated business activities.~~Regulation

~~Reliability~~With respect to their wholesale and interstate electric operations and rates, the Utilities, ATSI, ~~Initiatives~~FES, FGCO and NGC are subject to regulation by the FERC. Under the FPA, the FERC regulates rates for interstate sales at wholesale, transmission of electric power, accounting and other matters, including construction and operation of hydroelectric projects. The FERC regulations require ATSI, Met-Ed, JCP&L and Penelec to provide open access transmission service at FERC-approved rates, terms and conditions. Transmission service over ATSI’s facilities is provided by MISO under its open access transmission tariff although as explained herein effective June 1, 2011 transmission service over ATSI’s facilities will be provided pursuant to PJM’s open access transmission tariff. Transmission service over Met-Ed’s, JCP&L’s and Penelec’s facilities is provided by PJM under its open access transmission tariff. The FERC also regulates unbundled transmission service to retail customers. Additionally, see FERC Matters for RTO Realignment.

InThe ~~2005, Congress~~FERC ~~amended~~regulates the ~~FPA~~sale toof ~~provide~~power for ~~federally-enforceable~~resale ~~mandatory reliability~~in ~~standards.~~interstate ~~The~~commerce ~~mandatory~~in ~~reliability~~part ~~standards~~by ~~apply~~granting authority to ~~the~~public ~~bulk~~utilities to sell wholesale power at market-based rates upon a showing that the seller cannot exert market power ~~system~~in ~~and~~generation ~~impose~~or ~~certain~~transmission. ~~operating~~FES, ~~record-keeping~~FGCO and ~~reporting~~NGC have been ~~requirements~~authorized onby the ~~Utilities~~FERC to sell wholesale power in interstate commerce and ~~ATSI~~have a market-based tariff on file with the FERC. ~~The~~By ~~NERC~~virtue of this tariff and authority to sell wholesale power, each company is ~~charged~~regulated as a public utility under the FPA. However, consistent with ~~establishing~~its historical ~~and~~practice, ~~enforcing~~the ~~these~~FERC ~~reliability~~has ~~standards~~granted FES, ~~although~~FGCO itand ~~has~~NGC ~~delegated~~a ~~day-to-day~~waiver from most of the reporting, ~~implementation~~record-keeping and ~~enforcement~~accounting ofrequirements ~~its~~that ~~responsibilities~~typically apply to ~~eight~~traditional ~~regional~~public utilities. ~~entities~~Along with market-based rate authority, ~~including~~the ~~ReliabilityFirst~~FERC ~~Corporation.~~also ~~All~~granted ofFES, ~~FirstEnergy’s~~FGCO and NGC blanket authority ~~facilities~~to ~~are~~issue ~~located~~securities ~~within~~and ~~the~~assume ~~ReliabilityFirst~~liabilities ~~region~~under Section 204 of the FPA. ~~FirstEnergy~~As ~~actively~~a condition to selling ~~participates~~electricity inon ~~the~~a ~~NERC~~wholesale ~~and~~basis ~~ReliabilityFirst~~at ~~stakeholder~~market-based ~~processes~~rates, FES, FGCO and NGC, like all other entities ~~otherwise~~granted ~~monitors~~market-based ~~and~~rate ~~manages~~authority, ~~its~~must ~~companies~~file inelectronic ~~response~~quarterly toreports with the ~~ongoing development~~FERC, ~~implementation~~listing their ~~and~~sales ~~enforcement~~transactions offor the ~~reliability standards~~prior quarter.

~~FirstEnergy believes~~The ~~that~~nuclear itgenerating isfacilities inowned ~~compliance with all currently-effective~~ and ~~enforceable reliability~~leased ~~standards.~~by ~~Nevertheless,~~NGC itare issubject ~~clear~~to ~~that~~extensive ~~the~~regulation ~~NERC, ReliabilityFirst~~by ~~and~~ the ~~FERC~~NRC. ~~will~~The ~~continue~~NRC tosubjects ~~refine~~nuclear ~~existing~~generating ~~reliability~~stations ~~standards as well as~~ to ~~develop~~continuing review and ~~adopt~~regulation ~~new~~covering, among ~~reliability~~other ~~standards.~~things, ~~The~~operations, ~~financial~~maintenance, ~~impact~~emergency ~~of complying~~planning, ~~with~~security ~~new~~and orenvironmental ~~amended~~and radiological ~~standards~~aspects ~~cannot~~of bethose ~~determined~~stations. atThe ~~this~~NRC ~~time. However~~may modify, ~~the~~suspend ~~2005~~or ~~amendments~~revoke tooperating ~~the~~licenses and ~~FPA~~impose ~~provide~~civil ~~that~~penalties ~~all~~for ~~prudent~~failure ~~costs incurred~~ to comply with the ~~new~~Atomic ~~reliability~~Energy ~~standards~~Act, bethe ~~recovered~~regulations inunder such ~~rates.~~Act ~~Still,~~or ~~any future~~the ~~inability~~terms onof ~~FirstEnergy’s~~the ~~part~~licenses. toFENOC ~~comply~~is ~~with~~ the ~~reliability~~licensee ~~standards~~ for ~~its bulk power system could result in~~ the ~~imposition~~operating ofnuclear ~~financial~~plants ~~penalties~~and ~~that~~has ~~could~~direct ~~have~~compliance aresponsibility ~~material~~for ~~adverse~~NRC ~~effect~~matters. onFES ~~its~~controls ~~financial~~the ~~condition,~~economic ~~results~~dispatch of NGC’s ~~operations~~plants. ~~and~~See ~~cash~~Nuclear ~~flows~~Regulation below.

InRegulatory ~~April~~Accounting 2007, ReliabilityFirst performed a routine compliance audit of FirstEnergy’s bulk-power system within the Midwest ISO region and found it to be in full compliance with all audited reliability standards. Similarly, in October 2008, ReliabilityFirst performed a routine compliance audit of FirstEnergy’s bulk-power system within the PJM region and found it to be in full compliance with all audited reliability standards. Our MISO facilities are next due for the periodic audit by ReliabilityFirst later this year.

~~On December~~The 9,Utilities ~~2008,~~and aATSI ~~transformer~~recognize, atas ~~JCP&L’s~~regulatory ~~Oceanview substation failed~~assets, ~~resulting~~ incosts anwhich ~~outage on certain bulk electric system (transmission voltage) lines out of~~ the ~~Oceanview~~FERC, ~~and Atlantic substations~~PUCO, ~~with~~PPUC ~~customers~~and ~~in the~~NJBPU ~~affected~~have ~~area~~authorized ~~losing~~for ~~power.~~recovery ~~Power~~from ~~was restored to most~~ customers ~~within~~in afuture ~~few hours~~periods ~~and~~or tofor ~~all~~which ~~customers~~authorization ~~within eleven hours~~is probable. OnWithout ~~December 16, 2008, JCP&L provided preliminary information about~~ the ~~event~~probability toof ~~certain~~such ~~regulatory agencies~~authorization, ~~including~~costs ~~the~~currently ~~NERC.~~recorded Onas ~~March 31, 2009, the NERC initiated a Compliance~~regulatory ~~Violation~~assets ~~Investigation~~would inhave ~~order~~been tocharged ~~determine JCP&L’s contribution~~ to ~~the electrical~~income ~~event~~as ~~and~~incurred. toAll ~~review~~regulatory ~~any~~assets ~~potential~~are ~~violation~~expected ofto ~~NERC Reliability~~be ~~Standards~~recovered ~~associated~~from ~~with~~customers ~~the~~under ~~event. The initial phase of~~ the ~~investigation required JCP&L to respond to the NERC~~Utilities’s ~~request~~respective ~~for~~transition ~~factual~~and ~~data~~regulatory ~~about the outage~~plans. ~~JCP&L~~Based ~~submitted its written response~~ on those ~~May 1~~plans, ~~2009.~~the ~~The~~Utilities ~~NERC conducted~~and onATSI ~~site~~continue ~~interviews with personnel involved in responding~~ to ~~the~~bill ~~event on~~and ~~June~~collect 16cost-~~17,~~based ~~2009.~~rates Onfor ~~July 7, 2009, the NERC issued additional questions~~their ~~regarding~~transmission ~~the event~~ and ~~JCP&L~~distribution ~~replied~~services, aswhich ~~requested~~remain onregulated; ~~August 6~~accordingly, ~~2009. JCP&L~~it is ~~not~~appropriate ~~able at this time to predict what actions, if any,~~ that ~~the~~ ~~NERC~~the ~~may~~Utilities ~~take~~and ~~based~~ATSI oncontinue the ~~data~~application ~~submittals~~of orregulatory ~~interview~~accounting ~~results~~to those operations.

~~On June~~3 5, 2009, FirstEnergy self-reported to ReliabilityFirst a potential violation of NERC Standard PRC-005 resulting from its inability to validate maintenance records for 20 protection system relays (out of approximately 20,000 reportable relays) in JCP&L’s and Penelec’s transmission systems. These potential violations were discovered during a comprehensive field review of all FirstEnergy substations to verify equipment and maintenance database accuracy. FirstEnergy has completed all mitigation actions, including calibrations and maintenance records for the relays. ReliabilityFirst issued an Initial Notice of Alleged Violation on June 22, 2009. The NERC approved FirstEnergy’s mitigation plan on August 19, 2009, and submitted it to the FERC for approval on August 19, 2009. FirstEnergy is not able at this time to predict what actions or penalties, if any, that ReliabilityFirst will propose for this self-reported violation.

Ohio RegulatoryTable Mattersof Contents

OnFirstEnergy ~~June 7,~~accounts ~~2007, the Ohio Companies filed an application~~ for ~~an increase in electric distribution rates with~~ the ~~PUCO~~effects ~~and,~~of onregulation ~~August 6,~~through ~~2007, updated their filing. On January 21, 2009,~~ the ~~PUCO granted the Ohio Companies’~~ application in part to increase electric distribution rates by $136.6 million (OE - $68.9 million, CEI - $29.2 million and TE - $38.5 million). These increases went into effect for OE and TE on January 23, 2009, and for CEI on May 1, 2009. Applications for rehearing of ~~this~~ ~~order~~regulatory ~~were filed by the Ohio Companies and one other party on February 20,~~accounting ~~2009.~~to ~~The~~its ~~PUCO~~operating ~~granted~~utilities ~~these~~since ~~applications~~their ~~for rehearing on March 18, 2009~~rates: ~~for the purpose of further consideration. The PUCO has not yet issued a substantive Entry on Rehearing.~~

4• are established by a third-party regulator with the authority to set rates that bind customers; • are cost-based; and • can be charged to and collected from customers.

~~SB221, which~~An ~~became~~enterprise ~~effective~~meeting ~~on July 31, 2008, required~~ all ~~electric utilities to file an ESP, and permitted the filing~~ of anthese ~~MRO.~~criteria Oncapitalizes ~~July 31,~~costs ~~2008,~~that ~~the~~would ~~Ohio Companies~~otherwise ~~filed~~be ~~with~~charged ~~the PUCO a comprehensive ESP and a separate MRO. The PUCO~~to ~~denied~~expense ~~the~~(regulatory ~~MRO~~assets) ~~application;~~if ~~however,~~ the ~~PUCO~~rate ~~later~~actions ~~granted the Ohio Companies’ application for rehearing for the purpose~~ of ~~further~~its ~~consideration~~regulator ofmake ~~the matter.~~it ~~The~~probable ~~PUCO~~that ~~has~~those ~~not yet issued a substantive Entry on~~costs ~~Rehearing. The~~will ~~ESP~~be ~~proposed~~recovered ~~to phase~~ in ~~new~~future ~~generation~~revenue. ~~rates~~Regulatory ~~for customers~~accounting ~~beginning~~is inapplied ~~2009~~only ~~for up~~ to ~~a three-year period and resolve~~ the ~~Ohio Companies’~~parts ~~collection~~ of ~~fuel costs deferred in 2006 and 2007, and~~ the ~~distribution~~business ~~rate request described above. In response to the PUCO’s December 19, 2008 order, which significantly modified and approved the ESP as modified, the Ohio Companies notified the PUCO~~ that ~~they~~meet ~~were withdrawing and terminating~~ the ~~ESP~~above ~~application in addition to continuing their rate plan then in effect as allowed by the terms of SB221~~criteria. OnIf ~~December 31, 2008, the Ohio Companies conducted~~ a ~~CBP~~portion ~~for the procurement~~ of electric generation for retail customers from January 5, 2009 through March 31, 2009. The average winning bid price was equivalent to a retail rate of 6.98 cents per KWH. The power supply obtained through this process provided generation service to the ~~Ohio~~business ~~Companies’ retail~~applying ~~customers~~regulatory ~~who chose not to shop with alternative suppliers. On~~accounting ~~January 9,~~no ~~2009,~~longer ~~the~~meets ~~Ohio~~those ~~Companies requested the implementation of a new fuel rider to recover the costs resulting from the December 31~~requirements, ~~2008~~previously ~~CBP. The~~recorded ~~PUCO~~net ~~ultimately~~regulatory ~~approved~~assets ~~the~~are ~~Ohio~~removed ~~Companies’ request for a new fuel rider to recover increased costs resulting~~ from the ~~CBP but denied OE’s and TE’s request~~ tobalance ~~continue~~sheet ~~collecting~~in ~~RTC~~accordance and denied the request to allow the Ohio Companies to continue collections pursuant to the two existing fuel riders. The new fuel rider recovered the increased purchased power costs for OE and TE, and recovered a portion of those costs for CEI, with ~~the remainder being deferred for future recovery~~GAAP.

~~On January~~In ~~29, 2009, the PUCO ordered its Staff to develop a proposal to establish an ESP for the~~ Ohio ~~Companies. On February 19~~, ~~2009,~~New ~~the~~Jersey ~~Ohio Companies filed an Amended ESP application, including an attached Stipulation~~ and ~~Recommendation~~ ~~that was signed by the Ohio Companies~~Pennsylvania, ~~the~~laws ~~Staff~~applicable of the PUCO, and many of the intervening parties. Specifically, the Amended ESP provided that generation would be provided by FES at the average wholesale rate of the CBP described above for April and May 2009 to ~~the~~electric ~~Ohio~~industry ~~Companies~~restructuring ~~for their~~contain ~~non-shopping~~similar ~~customers;~~provisions ~~for the period of June 1, 2009 through May 31, 2011, retail generation prices would be based upon the outcome of a descending clock CBP on a slice-of-system basis. The Amended ESP further provided~~ that ~~the Ohio~~are ~~Companies~~reflected will not seek a base distribution rate increase, subject to certain exceptions, with an effective date of such increase before January 1, 2012, that CEI would agree to write-off approximately $216 million of its Extended RTC regulatory asset, and that the Ohio Companies would collect a delivery service improvement rider at an overall average rate of $.002 per KWH for the period of April 1, 2009 through December 31, 2011. The Amended ESP also addressed a number of other issues, including but not limited to, rate design for various customer classes, and resolution of the prudence review and the collection of deferred costs that were approved in ~~prior proceedings. On February 26, 2009,~~ the ~~Ohio~~Utilities’ ~~Companies filed~~respective astate ~~Supplemental~~regulatory Stipulation, which was signed or not opposed by virtually all of the parties to the proceeding, that supplemented and modified certain provisions of the February 19, 2009 Stipulation and Recommendationplans. ~~Specifically,~~ ~~the Supplemental Stipulation modified the provision relating to~~These governmental aggregation and the Generation Service Uncollectible Rider, provided further detail on the allocation of the economic development funding contained in the Stipulation and Recommendation, and proposed additional provisions ~~related to the collaborative process for the development of energy~~include: efficiency programs, among other provisions. The PUCO adopted and approved certain aspects of the Stipulation and Recommendation on March 4, 2009, and adopted and approved the remainder of the Stipulation and Recommendation and Supplemental Stipulation without modification on March 25, 2009. Certain aspects of the Stipulation and Recommendation and Supplemental Stipulation took effect on April 1, 2009 while the remaining provisions took effect on June 1, 2009.

~~The~~• ~~CBP auction~~restructuring ~~occurred~~the onelectric ~~May 13-14,~~generation ~~2009,~~business and ~~resulted~~allowing inthe aUtilities’ ~~weighted~~customers ~~average wholesale~~to ~~price~~select ~~for~~a ~~generation~~competitive ~~and~~electric ~~transmission~~generation ofsupplier ~~6.15~~other ~~cents~~than ~~per~~the ~~KWH.~~Utilities; ~~The~~• ~~bid was~~establishing ~~for~~or adefining ~~single, two-year product for~~ the ~~service~~POLR ~~period~~obligations ~~from~~to ~~June 1,~~customers ~~2009 through~~in ~~May~~the ~~31,~~Utilities’ ~~2011.~~service ~~FES~~areas; ~~participated~~• inproviding the ~~auction,~~Utilities ~~winning~~with ~~51% of~~ the ~~tranches~~ ~~(one~~opportunity ~~tranche~~to ~~equals~~recover ~~one~~potentially ~~percent~~stranded ofinvestment ~~the~~(or ~~load~~transition ~~supply~~costs). ~~Subsequent~~not tootherwise ~~the signing~~recoverable ofin ~~the~~a ~~wholesale~~competitive ~~contracts,~~generation ~~four~~market; ~~winning~~• ~~bidders~~itemizing ~~reached~~(unbundling) ~~separate agreements~~the ~~with~~price ~~FES~~of ~~with~~electricity ~~the~~into ~~result~~its ~~that~~component ~~FES~~elements is— ~~now~~including ~~responsible~~generation, ~~for~~transmission, ~~providing 77%~~distribution ofand ~~the~~stranded ~~Ohio~~costs ~~Companies’~~recovery ~~total~~charges; ~~load~~• ~~supply. The~~continuing ~~results~~regulation of the ~~CBP were~~Utilities’ ~~accepted~~transmission byand ~~the~~distribution ~~PUCO~~systems; onand ~~May 14,~~• ~~2009.~~requiring ~~FES~~corporate ~~has~~separation ~~also~~of ~~separately contracted~~regulated ~~with~~and ~~numerous~~unregulated ~~communities~~business ~~to provide retail generation service through governmental aggregation programs~~activities.

OnReliability ~~July~~Initiatives 27, 2009, the Ohio Companies filed applications with the PUCO to recover three different categories of deferred distribution costs on an accelerated basis. In the Ohio Companies' Amended ESP, the PUCO approved the recovery of these deferrals, with collection originally set to begin in January 2011 and to continue over a 5 or 25 year period. The principal amount plus carrying charges through August 31, 2009 for these deferrals totaled $305.1 million. The applications were approved by the PUCO on August 19, 2009. Recovery of this amount, together with carrying charges calculated as approved in the Amended ESP, commenced on September 1, 2009, and will be collected in the 18 non-summer months from September 2009 through May 2011, subject to reconciliation until fully collected, with $165 million of the above amount being recovered from residential customers, and $140.1 million being recovered from non-residential customers.

5In 2005, Congress amended the FPA to provide for federally-enforceable mandatory reliability standards. The mandatory reliability standards apply to the bulk power system and impose certain operating, record-keeping and reporting requirements on the Utilities, FES, FGCO, FENOC and ATSI. The NERC, as the ERO, is charged with establishing and enforcing these reliability standards, although it has delegated day-to-day implementation and enforcement of its responsibilities to eight regional entities, including ReliabilityFirst Corporation. All of FirstEnergy’s facilities are located within the ReliabilityFirst region. FirstEnergy actively participates in the NERC and ReliabilityFirst stakeholder processes, and otherwise monitors and manages its companies in response to the ongoing development, implementation and enforcement of the reliability standards.

~~SB221 also~~FirstEnergy ~~requires~~believes ~~electric~~that ~~distribution~~it ~~utilities~~is toin ~~implement~~compliance ~~energy~~with ~~efficiency programs.~~all ~~Under~~currently-effective ~~the~~and ~~provisions~~enforceable reliability ofstandards. ~~SB221~~Nevertheless, in the ~~Ohio~~course ~~Companies are required to achieve a total annual energy savings equivalent~~ of ~~approximately~~operating ~~166,000~~its ~~MWH~~extensive inelectric utility ~~2009,~~systems ~~290,000~~and ~~MWH~~facilities inFirstEnergy ~~2010,~~occasionally ~~410,000~~learns ~~MWH~~of inisolated ~~2011,~~facts ~~470,000~~or ~~MWH~~circumstances ~~in 2012 and 530,000~~that ~~MWH~~could inbe ~~2013,~~interpreted ~~with~~as ~~additional~~excursions ~~savings~~from ~~required~~the ~~through~~reliability ~~2025~~standards. ~~Utilities~~If ~~are~~and ~~also required~~when tosuch ~~reduce~~items ~~peak demand in 2009 by 1%~~are found, ~~with~~FirstEnergy andevelops ~~additional~~information ~~.75%~~about ~~reduction each~~the ~~year~~item ~~thereafter~~and ~~through~~develops ~~2018.~~a ~~The~~remedial ~~PUCO~~response ~~may~~to ~~amend these benchmarks in~~the ~~certain,~~specific ~~limited~~ circumstances, ~~and~~including ~~the~~in ~~Ohio~~appropriate ~~Companies~~cases ~~have~~“self-reporting” ~~filed~~ an ~~application with~~item ~~the PUCO seeking such amendments~~to ReliabilityFirst. AsMoreover, ~~discussed~~it ~~below,~~is onclear ~~January~~that 7,the ~~2010~~NERC, ~~the~~ ~~PUCO~~ReliabilityFirst ~~amended~~and the ~~2009~~FERC ~~energy~~will ~~efficiency benchmarks~~ continue to ~~zero,~~refine ~~contingent~~existing ~~upon the~~reliability ~~Ohio~~standards ~~Companies~~as ~~meeting~~well ~~the~~as ~~revised~~to ~~benchmarks~~develop inand aadopt ~~period~~new ofreliability ~~not more than three years~~standards. The ~~PUCO~~financial ~~has~~impact ~~not~~of ~~yet~~complying ~~acted~~with ~~upon~~new ~~the~~or ~~application~~amended ~~seeking a~~standards ~~reduction~~cannot ofbe ~~the~~determined ~~peak~~at ~~demand~~this ~~reduction requirements~~time. ~~The Ohio Companies are~~ ~~presently~~However, ~~involved~~the in2005 ~~collaborative~~amendments ~~efforts related~~ to ~~energy~~the ~~efficiency, including~~FPA ~~filing~~provide ~~applications~~that ~~for~~all ~~approval~~prudent ~~with~~costs ~~the~~incurred ~~PUCO,~~to ascomply ~~well~~with ~~as other~~the ~~implementation~~new ~~efforts~~reliability ~~arising~~standards ~~out~~be ofrecovered ~~the~~in ~~Supplemental Stipulation~~rates. ~~On December 15~~Still, ~~2009,~~any ~~the~~future ~~Ohio~~inability ~~Companies~~on ~~filed~~FirstEnergy’s ~~the~~part to ~~required~~comply ~~three~~with ~~year~~the ~~portfolio~~reliability ~~plan seeking~~standards ~~approval~~ for ~~the~~its ~~programs~~bulk ~~they~~power ~~intend~~system tocould ~~implement~~result toin ~~meet~~ the ~~energy~~imposition ~~efficiency~~of ~~and~~financial ~~peak~~penalties ~~demand~~that ~~reduction~~could ~~requirements~~have ~~for~~a ~~the~~material ~~2010-2012 period. The~~adverse ~~PUCO~~effect ~~has set the matter for hearing~~ on ~~March~~its 2,financial ~~2010. The~~condition, ~~Ohio~~results ~~Companies~~of ~~expect~~operations ~~that~~and ~~all~~cash ~~costs associated with compliance will be recoverable from customers~~flows.

In ~~October~~ April ~~2009~~2007, ~~the~~ReliabilityFirst ~~PUCO~~performed ~~issued~~a ~~additional~~routine ~~Entries,~~compliance ~~modifying~~audit ~~certain~~ of ~~its~~FirstEnergy’s bulk-power ~~previous~~system ~~rules~~within ~~that set out~~ the ~~manner~~Midwest inISO ~~which~~region ~~electric~~and ~~utilities,~~found ~~including the~~it ~~Ohio~~to ~~Companies, will~~ be ~~required~~in tofull ~~comply~~compliance with ~~benchmarks~~all ~~contained in~~audited ~~SB221~~reliability ~~related~~standards. toSimilarly, ~~the~~in ~~employment~~October 2008, ofReliabilityFirst ~~alternative~~performed ~~energy~~a ~~resources,~~routine ~~energy~~compliance ~~efficiency/peak~~audit ~~demand~~of ~~reduction~~FirstEnergy’s ~~programs~~bulk-power assystem ~~well~~within asthe ~~greenhouse~~PJM ~~gas~~region ~~reporting requirements~~ and ~~changes~~found it to ~~long~~be ~~term~~in ~~forecast reporting requirements.~~full ~~Applications~~compliance ~~for~~with ~~rehearing~~all ~~filed~~audited inreliability ~~mid-November~~standards. ~~2009~~In ~~were~~May 2010, ~~granted~~ReliabilityFirst onperformed ~~December~~a 9,routine ~~2009~~compliance ~~for~~audit ~~the sole purpose~~ of ~~further~~FirstEnergy’s ~~consideration~~bulk-power ofsystem ~~the matters raised~~ in ~~those~~ ~~applications. The PUCO has not yet issued a substantive Entry on Rehearing. The rules implementing~~ the ~~requirements~~Midwest ofISO ~~SB221~~region ~~went into effect on December 10~~and, ~~2009.~~subject to ~~The~~certain ~~Ohio~~nonmaterial ~~Companies~~items, onfound ~~October 27,~~it ~~2009, submitted an application~~ to ~~amend~~be ~~their~~in ~~2009~~compliance ~~statutory~~with ~~energy~~the ~~efficiency benchmarks~~audited toreliability ~~zero~~standards. FirstEnergy’s OnPJM ~~January~~facilities 7,are ~~2010,~~next ~~the~~due ~~PUCO~~for ~~issued an Order granting~~ the ~~Companies’~~ ~~request~~periodic toaudit ~~amend~~by ~~the~~ReliabilityFirst ~~energy~~in ~~efficiency benchmarks~~2011.

~~Additionally~~4 under SB221, electric utilities and electric service companies are required to serve part of their load from renewable energy resources equivalent to 0.25% of the KWH they serve in 2009. In August and October 2009, the Ohio Companies conducted RFPs to secure RECs. The RFPs sought renewable energy RECs, including solar RECs and RECs generated in Ohio in order to meet the Ohio Companies’ alternative energy requirements set forth in SB221. The RECs acquired through these two RFPs will be used to help meet the renewable energy requirements established under SB221 for 2009, 2010 and 2011. On December 7, 2009, the Ohio Companies filed an application with the PUCO seeking a force majeure determination regarding the Ohio Companies’ compliance with the 2009 solar energy resources benchmark, and seeking a reduction in the benchmark. The PUCO has not yet ruled on that application.

On OctoberTable 20, 2009, the Ohio Companies filed an MRO to procure electric generation service for the period beginning June 1, 2011. The proposed MRO would establish a CBP to secure generation supply for customers who do not shop with an alternative supplier and would be similar, in all material respects, to the CBP conducted in May 2009 in that it would procure energy, capacity and certain transmission services on a slice of system basis. Enhancements to the May 2009 CBP, the MRO would include multiple bidding sessions and multiple products with different delivery periods for generation supply features which are designed to reduce potential price volatility and reduce supplier risk and encourage bidder participation. A technical conference was held on October 29, 2009. Hearings took place in December and the matter has been fully briefed. Pursuant to SB221, the PUCO has 90 days from the date of the application to determine whether the MRO meets certain statutory requirements. Although the Ohio Companies requested a PUCO determination by January 18, 2010, on February 3, 2010, the PUCO announced that its determination would be delayed. Under a determination that such statutory requirements are met, the Ohio Companies would be able to implement the MRO and conduct the CBP.Contents

~~Pennsylvania~~ Ohio Regulatory Matters

~~Met-Ed~~The Ohio Companies operate under an ESP, which expires on May 31, 2011, that provides for ~~and~~generation ~~Penelec~~supplied ~~purchase~~through a ~~portion~~CBP. ofThe ~~their~~ESP ~~PLR~~also ~~and~~allows ~~default~~the Ohio Companies to collect a delivery service ~~requirements~~improvement rider (Rider DSI) at an overall average rate of $0.002 per KWH for the period ~~from~~of ~~FES~~April 1, 2009 through aDecember 31, ~~fixed-price~~2011. ~~partial~~The ~~requirements~~Ohio Companies currently purchase generation at the average wholesale ~~power~~rate ~~sales~~of a CBP conducted in May 2009. FES is one of the suppliers to the Ohio ~~agreement~~Companies through the May 2009 CBP. The ~~agreement~~PUCO ~~allows~~approved ~~Met-Ed~~a ~~and~~$136.6 million ~~Penelec~~distribution torate ~~sell~~increase for the ~~output~~Ohio ofCompanies ~~NUG~~in January 2009, which went into effect on January 23, 2009 for OE ($68.9 ~~energy~~million) toand TE ($38.5 million) and on May 1, 2009 for CEI ($29.2 million). Applications for rehearing of the ~~market~~PUCO order in the distribution case were filed by the Ohio Companies and ~~requires~~one ~~FES~~other party. toThe ~~provide~~Ohio ~~energy~~Companies atraised ~~fixed~~numerous ~~prices~~issues toin ~~replace~~their ~~any~~application ~~NUG~~for ~~energy~~rehearing ~~sold~~related to rate recovery of certain expenses, recovery of line extension costs, the ~~extent~~level ~~needed~~of ~~for~~rate ~~Met-Ed~~of return and ~~Penelec~~the toamount of general plant balances. On February ~~satisfy~~2, ~~their~~2011, ~~PLR~~the PUCO issued an Entry on Rehearing denying the applications for rehearing filed both by the Ohio Companies and ~~default~~by ~~service~~the ~~obligations~~other party.

On ~~February~~ 20March 23, ~~2009~~2010, ~~Met-Ed~~the ~~and~~Ohio ~~Penelec~~Companies filed ~~with~~an ~~the~~application ~~PPUC~~for a ~~generation procurement~~new ~~plan~~ESP. ~~covering~~The ~~the~~new ~~period~~ESP ~~January~~will go into effect on June 1, 2011 ~~through~~and conclude on May 31, ~~2013~~ 2014. The ~~plan~~PUCO isapproved ~~designed~~the tonew ~~provide~~ESP ~~adequate~~on ~~and~~August 25, 2010 ~~reliable~~with ~~service~~certain ~~via~~modifications. ~~a prudent~~The ~~mix~~material terms of ~~long-term,~~the ~~short-term~~new ~~and~~ESP ~~spot~~include: ~~market~~a ~~generation~~CBP ~~supply,~~similar asto the ~~required~~one byused ~~Act~~in May ~~129.~~2009 ~~The~~and ~~plan~~the one proposed in the October 2009 MRO filing; a ~~staggered~~6% ~~procurement~~generation ~~schedule,~~discount ~~which~~to ~~varies~~certain bylow-income ~~customer~~customers ~~class,~~provided ~~through~~by the ~~use~~Ohio ofCompanies through a ~~descending~~bilateral ~~clock~~wholesale contract ~~auction.~~with FES (initial auctions scheduled for October 20, 2010 and January 25, 2011); no Onincrease ~~August~~in 12base distribution rates through May 31, ~~2009~~2014; a load cap of no less than 80%, ~~Met-Ed~~which also applies to any tranches assigned post auction; and ~~Penelec~~a ~~filed~~new distribution rider, Delivery Capital Recovery Rider (Rider DCR), to recover a ~~settlement~~return ~~agreement~~of, ~~with~~and on, capital investments in the delivery ~~PPUC~~system. Rider DCR substitutes for Rider DSI which terminates under the ~~generation~~current ~~procurement~~ESP. ~~plan~~The ~~covering~~Ohio Companies also agreed not to pay certain costs related to the companies’ integration into PJM, for the longer of the five year period ~~January~~from June 1, 2011, through May 31, ~~2013,~~2016 ~~reflecting~~or when the ~~settlement~~amount onof costs ~~all~~avoided ~~but~~by ~~two~~customers ~~issues.~~for ~~The settlement~~certain ~~plan~~types isof ~~designed~~products tototals ~~provide~~$360 million ~~adequate~~dependent ~~and~~on ~~reliable~~the outcome ~~service~~of ascertain ~~required by~~PJM ~~Pennsylvania~~proceedings, ~~law~~established ~~through~~ a ~~prudent~~$12 million ~~mix~~fund ofto ~~long-term,~~assist ~~short-term~~low ~~and~~income customers ~~spot-market~~over ~~generation~~the ~~supply~~term asof ~~required~~the byESP, ~~Act~~and ~~129~~agreed to additional energy efficiency benefits. ~~The~~Many ~~settlement~~of ~~plan~~the existing ~~proposes~~riders aapproved ~~staggered~~in ~~procurement~~the ~~schedule,~~previous ~~which~~ESP ~~varies~~remain byin ~~customer~~effect, ~~class~~some with modifications. OnThe new ESP resolved ~~September~~proceedings 2,pending ~~2009,~~at the ~~ALJ~~PUCO ~~issued~~regarding acorporate ~~Recommended~~separation, ~~Decision~~elements ~~(RD)~~of ~~approving~~ the smart grid ~~settlement~~proceeding and ~~adopted~~the ~~Met-Ed~~integration ~~and~~into ~~Penelec’s~~PJM. ~~positions~~FirstEnergy onrecorded ~~two~~approximately ~~reserved~~$39.5 million ~~issues~~of regulatory asset impairments and expenses related to the ESP. On ~~November~~ 6September 24, ~~2009~~2010, ~~the~~an ~~PPUC~~application for ~~entered~~rehearing anwas ~~Order~~filed ~~approving~~by the ~~settlement~~OCC and ~~finding in~~two ~~favor~~other ofparties. ~~Met-Ed~~On ~~and~~February ~~Penelec~~9, on2011, the ~~two~~PUCO ~~reserved~~issued ~~issues. Generation procurement~~an ~~began~~Entry inon ~~January~~Rehearing ~~2010~~denying the applications for rehearing.

6Under the provisions of SB221, the Ohio Companies are required to implement energy efficiency programs that will achieve a total annual energy savings equivalent to approximately 166,000 MWH in 2009, 290,000 MWH in 2010, 410,000 MWH in 2011, 470,000 MWH in 2012 and 530,000 MWH in 2013, with additional savings required through 2025. Utilities are also required to reduce peak demand in 2009 by 1%, with an additional 0.75% reduction each year thereafter through 2018.

On ~~May 22~~December 15, ~~2008~~2009, the ~~PPUC~~Ohio ~~approved~~Companies ~~Met-Ed~~filed ~~and Penelec annual updates to~~ the ~~TSC~~required ~~rider for~~three ~~the~~year ~~period~~portfolio ~~June 1,~~plan ~~2008, through May 31, 2009. The TSCs included a~~seeking ~~component~~approval for ~~under-recovery~~the ofprograms ~~actual~~they ~~transmission~~intend ~~costs~~to ~~incurred~~implement ~~during~~to meet the ~~prior~~ ~~period~~energy ~~(Met-Ed~~efficiency ~~- $144 million~~ and ~~Penelec~~peak ~~- $4 million) and~~demand ~~transmission~~reduction ~~cost~~requirements ~~projections~~ for ~~June~~the ~~2008 through May 2009 (Met~~2010-Ed2012 ~~- $258 million and Penelec - $92 million)~~period. ~~Met-Ed~~The ~~received~~Ohio ~~PPUC~~Companies ~~approval for~~expect ~~a transition approach~~ that ~~would~~all ~~recover past under-recovered~~ costs ~~plus~~ ~~carrying~~associated ~~charges~~with ~~through~~compliance ~~the~~will ~~new~~be ~~TSC~~recoverable ~~over~~from ~~thirty-one~~customers. ~~months~~The ~~and~~Ohio ~~defer~~Companies’ athree ~~portion~~year ofportfolio ~~the~~plan ~~projected~~is ~~costs~~still ~~($92 million)~~awaiting ~~plus~~decision ~~carrying~~from ~~charges~~the ~~for recovery through future TSCs by December 31~~PUCO, ~~2010.~~which ~~Various~~is ~~intervenors~~delaying ~~filed complaints against those filings. In addition,~~ the ~~PPUC~~launch ~~ordered an investigation to review the reasonableness~~ of ~~Met-Ed’s TSC, while at~~ the ~~same time allowing~~ ~~Met-Ed~~programs todescribed ~~implement~~in the ~~rider~~plan. ~~June 1,~~As ~~2008,~~a ~~subject to refund. On July 15~~result, ~~2008,~~ the ~~PPUC~~Ohio ~~directed~~Companies ~~the~~filed ~~ALJ~~on ~~to consolidate the complaints against Met-Ed with its investigation and a litigation schedule was adopted. Hearings and briefing for both Met-Ed and Penelec have concluded. On August~~January 11, ~~2009~~2011, ~~the ALJ issued~~ a request ~~Recommended~~for ~~Decision~~amendment toof ~~the PPUC approving Met-Ed~~OE’s ~~and~~2010 ~~Penelec’s~~energy ~~TSCs~~efficiency ~~as filed~~ and ~~dismissing~~peak ~~all~~demand ~~complaints. Exceptions~~reduction bybenchmarks ~~various~~to ~~interveners were filed and reply exceptions were filed by~~levels ~~Met-Ed~~actually ~~and~~achieved ~~Penelec. On~~in ~~January 28,~~ 2010,. Because the ~~PPUC~~Commission ~~adopted~~indicated athat ~~motion which~~it ~~denies~~would ~~the~~revise ~~recovery~~all of ~~marginal transmission losses through~~ the ~~TSC for~~Ohio ~~the~~Companies’ ~~period of June 1~~2010, ~~2007 through March 31~~2011, ~~2008,~~ and ~~instructs~~2012 ~~Met-Ed~~benchmarks ~~and Penelec~~when toaddressing ~~work with~~ the ~~parties~~Ohio ~~and~~Companies’ ~~file~~three ayear ~~petition to retain any~~portfolio ~~over-collection~~plan, ~~with interest, until 2011 for the purpose of providing mitigation of future rate increases starting in 2011 for their customers. Met-Ed~~ and ~~Penelec are now awaiting~~ an order, ~~which~~has ~~is expected~~yet to be ~~consistent~~issued ~~with~~on ~~the~~that ~~motion. If so~~plan, ~~Met-Ed~~CEI and ~~Penelec~~TE ~~plan~~also ~~to appeal~~requested ~~such~~ a ~~decision~~waiver ~~to the Commonwealth Court~~ of ~~Pennsylvania.~~their respective ~~Although~~yet-to-be ~~the ultimate~~defined ~~outcome~~2010 ofenergy ~~this~~efficiency ~~matter~~benchmarks ~~cannot~~if beand ~~determined~~only atto ~~this~~the ~~time,~~degree itone is ~~the~~ ~~belief~~deemed ofnecessary ~~the~~to ~~companies~~bring ~~that~~these ~~they~~companies ~~should~~into ~~prevail~~compliance inwith ~~any~~their ~~such~~2010 ~~appeal~~energy ~~and~~efficiency ~~therefore~~obligations. ~~expect~~Failure to ~~fully~~comply ~~recover~~with the ~~approximately~~benchmarks ~~$170.5~~or ~~million ($138.7 million~~to ~~for~~obtain ~~Met-Ed~~such ~~and~~an ~~$31.8 million~~amendment ~~for~~may ~~Penelec)~~subject ~~in marginal~~the ~~transmission~~Companies ~~losses~~to ~~for~~an ~~the~~assessment ~~period~~by ~~prior~~the toPUCO ~~January~~of 1,a ~~2011~~penalty.

On May 28, 2009, the PPUC approved Met-Ed’s and Penelec’s annual updates to their TSC rider for the period June 1, 2009 through May 31, 2010, subject to the outcome of the proceeding related to the 2008 TSC filing described above. For Penelec’s customers the new TSC resulted in an approximate 1% decrease in monthly bills, reflecting projected PJM transmission costs as well as a reconciliation for costs already incurred. The TSC for Met-Ed’s customers increased to recover the additional PJM charges paid by Met-Ed in the previous year and to reflect updated projected costs. In order to gradually transition customers to the higher rate, the PPUC approved Met-Ed’s proposal to continue to recover the prior period deferrals allowed in the PPUC’s May 2008 Order and defer $57.5 ~~million of projected costs to a future TSC to be fully recovered by~~ ~~December 31, 2010. Under this proposal, monthly bills for Met-Ed’s customers would increase approximately 9.4% for the period June 2009 through May 2010.~~

ActTable 129 became effective in 2008 and addresses issues such as: energy efficiency and peak load reduction; generation procurement; time-of-use rates; smart meters; and alternative energy. Among other things Act 129 requires each Pennsylvania utility to file with the PPUC an energy efficiency and peak load reduction plan by July 1, 2009, setting forth the utilities’ plans to reduce energy consumption by a minimum of 1% and 3% by May 31, 2011 and May 31, 2013, respectively, and to reduce peak demand by a minimum of 4.5% by May 31, 2013. On July 1, 2009, Met-Ed, Penelec, and Penn filed EE&C Plans with the PPUC in accordance with Act 129. The Pennsylvania Companies submitted a supplemental filing on July 31, 2009, to revise the Total Resource Cost test items in the EE&C Plans pursuant to the PPUC’s June 23, 2009 Order. Following an evidentiary hearing and briefing, the Pennsylvania Companies filed revised EE&C Plans on September 21, 2009. In an October 28, 2009 Order, the PPUC approved in part, and rejected in part, the Pennsylvania Companies' filing. Following additional filings related to the plans, including modifications as requested by the PPUC. The PPUC issued an order on January 28, 2010, approving, in part, and rejecting, in part the Pennsylvania Companies’ modified plans. The Pennsylvania Companies filed final plans and tariff revisions on February 5, 2010 consistent with the minor revisions required by the PPUC. The PPUC must approve or reject the plans within 60 days.Contents

~~Act~~Additionally ~~129 also~~under ~~required~~SB221, electric utilities toand ~~file~~electric byservice ~~August~~companies ~~14,~~are ~~2009~~required ~~with~~to ~~the~~serve part ~~PPUC~~of ~~smart~~their ~~meter technology~~load ~~procurement~~from ~~and~~renewable ~~installation~~energy ~~plan~~resources equivalent to ~~provide~~0.25% ~~for~~of the ~~installation~~KWH ofthey served in ~~smart~~2009. ~~meter~~In ~~technology~~August ~~within~~and 15October 2009, ~~years~~the Ohio Companies conducted RFPs to secure RECs. OnThe ~~August 14,~~RFPs ~~2009~~sought RECs, ~~Met-Ed,~~including ~~Penelec~~ solar RECs and ~~Penn~~RECs ~~jointly~~generated ~~filed~~in aOhio ~~Smart~~in ~~Meter~~order ~~Technology~~to ~~Procurement~~meet ~~and~~the ~~Installation~~Ohio Companies’ ~~Plan.~~alternative ~~Consistent~~energy ~~with~~requirements ~~the~~as ~~PPUC’s~~set ~~rules~~forth in SB221 for 2009, ~~this~~2010 ~~plan~~and ~~proposes~~2011. aThe ~~24-month~~RECs ~~assessment~~acquired ~~period~~through inthese ~~which~~two ~~the~~RFPs ~~Pennsylvania~~were ~~Companies~~used ~~will~~to ~~assess~~help ~~their~~meet ~~needs,~~the ~~select~~renewable ~~the necessary~~energy ~~technology,~~requirements ~~secure~~established ~~vendors,~~under SB221 ~~train~~for ~~personnel~~2009, ~~install~~2010 and ~~test~~2011. ~~support equipment~~On March 10, ~~and~~2010, ~~establish~~the aPUCO ~~cost~~found ~~effective~~that ~~and~~there ~~strategic~~was ~~deployment~~an ~~schedule,~~insufficient ~~which~~quantity ~~currently~~of issolar ~~expected~~energy toresources bereasonably ~~completed~~available in ~~fifteen~~the ~~years~~market. ~~Met-Ed,~~The ~~Penelec and~~PUCO ~~Penn~~reduced ~~estimate~~the ~~assessment~~Ohio Companies’ ~~period~~aggregate ~~costs~~2009 atbenchmark ~~approximately~~to ~~$29.5 million, which~~ the ~~Pennsylvania~~level ~~Companies,~~of insolar ~~their~~RECs ~~plan,~~the ~~proposed~~Ohio toCompanies ~~recover~~acquired through an ~~automatic~~their ~~adjustment~~2009 ~~clause.~~RFP Aprocesses, ~~Technical~~provided ~~Conference~~the ~~and~~Ohio ~~evidentiary~~Companies’ ~~hearings were~~2010 ~~held~~alternative inenergy ~~November~~requirements ~~2009.~~be increased ~~Briefs~~to ~~were~~include ~~filed~~the onshortfall ~~December~~for ~~11,~~the 2009, ~~and~~solar ~~Reply Briefs~~REC ~~were~~benchmark. ~~filed~~FES onalso ~~December~~applied ~~31,~~for ~~2009.~~a Anforce majeure ~~Initial~~determination ~~Decision~~from ~~was~~the ~~issued~~PUCO byregarding ~~the presiding~~a ~~ALJ~~portion onof ~~January~~their ~~28,~~compliance ~~2010. The~~with ~~ALJ’s~~the ~~Initial~~2009 ~~Decision~~solar ~~approved~~energy ~~the~~resource ~~Smart~~benchmark, ~~Meter~~which ~~Plan~~application asis ~~modified~~still bypending. ~~the~~In ~~ALJ~~July 2010, ~~including:~~the ~~ensuring~~Ohio ~~that~~Companies ~~the~~initiated ~~smart~~an ~~meters~~additional RFP to besecure ~~deployed~~RECs ~~include~~and ~~the~~solar ~~capabilities~~RECs ~~listed~~needed into meet the ~~Commission’s~~ ~~Implementation~~Ohio ~~Order;~~Companies’ alternative ~~eliminating~~energy ~~the~~requirements ~~provision~~as ofset ~~interest~~forth in ~~the 1307(e)~~SB221 ~~reconciliation;~~for ~~providing~~2010 ~~for~~and ~~the~~2011. ~~recovery~~As ofa ~~reasonable~~result ~~and~~of ~~prudent~~this RFP, ~~costs~~contracts ~~minus~~were ~~resulting~~executed ~~savings~~in ~~from~~August 2010. ~~installation~~On ~~and~~January 11, ~~use~~2011, ofthe ~~smart~~Ohio ~~meters;~~Companies ~~and~~filed an ~~reflecting~~application ~~that~~with ~~administrative~~the ~~start-up~~PUCO ~~costs~~seeking bean ~~expensed~~amendment ~~and~~to ~~the~~each ~~costs~~of ~~incurred for~~their ~~research~~2010 ~~and~~alternative ~~development~~energy requirements infor ~~the~~solar ~~assessment~~RECs ~~period~~generated ~~be capitalized. Exceptions~~in ~~are~~Ohio due onto ~~February~~the ~~17,~~insufficient ~~2010,~~quantity ~~and~~of ~~Reply~~solar energy ~~Exceptions~~resources ~~are~~reasonably ~~due~~available onin ~~March~~the 1market. The ~~Pennsylvania~~PUCO ~~Companies~~has ~~expect~~not ~~the PPUC~~yet toruled ~~act~~ on ~~the~~that ~~plans in early 2010~~application.

7On February 12, 2010, OE and CEI filed an application with the PUCO to establish a new credit for all-electric customers. On March 3, 2010, the PUCO ordered that rates for the affected customers be set at a level that will provide bill impacts commensurate with charges in place on December 31, 2008 and authorized the Ohio Companies to defer incurred costs equivalent to the difference between what the affected customers would have paid under previously existing rates and what they pay with the new credit in place. Tariffs implementing this new credit went into effect on March 17, 2010. On April 15, 2010, the PUCO issued a Second Entry on Rehearing that expanded the group of customers to which the new credit would apply and authorized deferral for the associated additional amounts. The PUCO also stated that it expected that the new credit would remain in place through at least the 2011 winter season, and charged its staff to work with parties to seek a long term solution to the issue. Tariffs implementing this newly expanded credit went into effect on May 21, 2010, and the proceeding remains open. The hearing in the matter is set to commence on February 16, 2011.

Legislation addressing rate mitigation and the expiration of rate caps has been introduced in both the 2008 and 2009 legislative sessions. The final form of such legislation and its possible impact on the Pennsylvania ~~Companies’~~Regulatory ~~business and~~Matters ~~operations are uncertain.~~

OnThe PPUC adopted a Motion on January 28, 2010 and subsequently entered an Order on March 3, 2010 ~~February~~which 26denied the recovery of marginal transmission losses through the TSC rider for the period of June 1, ~~2009~~2007 through March 31, 2008, and directed Met-Ed and Penelec to submit a new tariff or tariff supplement reflecting the removal of marginal transmission losses from the TSC, and instructed Met-Ed and Penelec to work with the various intervening parties to file a recommendation to the PPUC ~~approved~~regarding the establishment of a ~~Voluntary~~separate ~~Prepayment~~account ~~Plan~~for ~~requested~~all bymarginal transmission losses collected from ratepayers plus interest to be used to mitigate future generation rate increases beginning January 1, 2011. On March 18, 2010, Met-Ed and Penelec filed a Petition with the PPUC requesting that ~~provides~~it anstay ~~opportunity~~the portion of the March 3, 2010 Order requiring the filing of tariff supplements to end collection of costs for ~~residential~~marginal ~~and~~transmission ~~small~~losses. By Order entered March 25, ~~commercial~~2010, ~~customers~~the PPUC granted the requested stay until December 31, 2010. Pursuant to ~~prepay~~the anPPUC’s ~~amount~~order, Met-Ed onand ~~their~~Penelec ~~monthly~~filed ~~electric~~the ~~bills~~plan ~~during~~to establish separate accounts for marginal transmission loss ~~2009~~revenues and ~~2010~~related interest and carrying charges and the plan for the use of these funds to mitigate future generation rate increases commencing January 1, 2011. ~~Customer~~The ~~prepayments~~PPUC ~~earn~~approved ~~interest~~this atplan on June 7, 2010.5% On April 1, 2010, Met-Ed and ~~will~~Penelec filed a Petition for Review with the Commonwealth Court of Pennsylvania appealing the PPUC’s March 3, 2010 Order. Although the ultimate outcome of this matter cannot be ~~used~~determined at this time, Met-Ed and Penelec believe that they should prevail in the appeal and therefore expect to fully recover the approximately $252.7 million ~~reduce~~($188.0 million ~~electricity~~for ~~charges~~Met-Ed and $64.7 million for Penelec) in marginal transmission losses for the period prior to January 1, 2011. ~~and~~The ~~2012~~argument before the Commonwealth Court, en banc, was held on December 8, 2010.

On ~~March 31~~May 20, ~~2009~~2010, ~~Met-Ed and Penelec submitted their 5-year NUG Statement Compliance filing to~~ the PPUC inapproved accordance with their 1998 Restructuring Settlement originally entered into with the PPUC pursuant to comprehensive electric utility industry restructuring legislation (Customer Choice Act) adopted in Pennsylvania in 1996. In the compliance filing, Met-Ed’s ~~proposed to reduce its CTC rate for the residential class with a corresponding increase in the generation rate~~ and ~~the shopping credit, and~~ Penelec’s ~~proposed~~annual updates to ~~reduce~~their ~~its CTC~~TSC ~~rate~~rider ~~to zero~~ for ~~all classes with a corresponding increase in~~ the ~~generation~~ ~~rate~~period ~~and the shopping credit. While these changes would result in additional annual generation revenue (Met-Ed - $27~~June ~~million~~1, ~~and~~2010 ~~Penelec~~through ~~- $59~~December ~~million)~~31, ~~overall~~2010, ~~rates~~including ~~would~~marginal ~~remain~~transmission ~~unchanged.~~losses Onas ~~July 30,~~approved ~~2009,~~by the PPUC, ~~entered~~although anthe ~~order~~recovery ~~approving~~of ~~the~~marginal ~~5-year~~losses ~~NUG~~will ~~Statement,~~be ~~approving~~subject to the ~~reduction~~ outcome of the ~~CTC,~~proceeding related ~~and directing Met-Ed and Penelec~~ to ~~file~~the a2008 ~~tariff supplement~~TSC ~~implementing~~filing ~~this~~as ~~change~~described above. OnThe ~~July 31,~~TSC ~~2009,~~for Met-Ed’s ~~and~~customers ~~Penelec filed~~was ~~tariff~~increased ~~supplements decreasing the CTC rate in compliance with the~~to ~~July 30,~~provide ~~2009~~for ~~order,~~full ~~and~~recovery ~~increasing~~by ~~the generation rate in compliance with the companies’ Restructuring Orders of 1998. On August~~December 1431, ~~2009, the PPUC approved Met-Ed and Penelec’s compliance filings~~2010.

~~By Tentative~~Met-Ed ~~Order~~and ~~entered~~Penelec ~~September 17,~~filed ~~2009,~~with the PPUC ~~provided~~a ~~for~~generation ~~an additional~~procurement ~~30-day~~plan ~~comment~~covering ~~period on whether “~~the ~~Restructuring~~period ~~Settlement allows~~January 1, ~~NUG~~2011 ~~over-collection~~through ~~for~~May 31, ~~select~~2013. ~~and~~The ~~isolated~~plan ~~months~~is todesigned ~~be used~~ to ~~reduce~~provide ~~non-NUG stranded~~adequate ~~costs~~and ~~when~~reliable aservice ~~cumulative~~through ~~NUG stranded cost balance~~a ~~exists.” In~~prudent ~~response~~mix ~~to the Tentative Order, the Office~~ of ~~Small~~ ~~Business Advocate~~long-term, ~~Office of Consumer Advocate, York County Solid Waste and Refuse Authority, ARIPPA, the Met~~short-Edterm ~~Industrial Users Group~~ and ~~Penelec Industrial~~spot ~~Customer~~market ~~Alliance~~generation ~~filed~~supply ~~comments~~with ~~objecting~~a tostaggered ~~the above accounting~~procurement ~~method~~schedule ~~utilized~~that varies by ~~Met-Ed~~customer ~~and~~class, ~~Penelec.~~using ~~Met-Ed~~a ~~and~~descending ~~Penelec~~clock ~~filed reply comments on October 26, 2009~~auction. On ~~November 5~~August 12, 2009, the ~~PPUC issued a Secretarial~~ ~~Letter allowing~~ parties to ~~file~~the ~~reply~~proceeding ~~comments~~filed toa ~~Met-Ed~~settlement ~~and~~agreement ~~Penelec’s~~of ~~reply comments~~all bybut ~~November~~two 16issues, ~~2009,~~ and ~~reply comments were filed by~~ the ~~Office~~PPUC ofentered ~~Consumer~~an ~~Advocate,~~Order ~~ARIPPA,~~approving ~~and~~ the ~~Met-Ed~~settlement ~~Industrial Users Group~~ and ~~Penelec Industrial~~the ~~Customer~~generation ~~Alliance. Met-Ed~~procurement ~~and~~plan ~~Penelec~~on ~~are~~November 6, ~~awaiting further~~2009. ~~action~~Generation byprocurement ~~the~~began ~~Commission~~in January 2010.

On ~~February~~ February 8, 2010, Penn filed ~~with~~a ~~the~~Petition ~~PPUC~~for aApproval ~~generation~~of ~~procurement~~its ~~plan covering~~Default Service Plan for the period June 1, 2011 through May 31, 2013. ~~The~~On ~~plan~~July 29, is2010, ~~designed to~~the ~~provide~~parties ~~adequate~~to ~~and~~the ~~reliable~~proceeding ~~service~~filed ~~through~~ a ~~prudent~~Joint Petition ~~mix~~for Settlement of ~~long-term, short-term~~all ~~and~~issues. ~~spot~~Although ~~market~~the ~~generation~~PPUC’s ~~supply,~~Order asapproving ~~required~~the byJoint ~~Act 129.~~Petition ~~The~~held ~~plan~~that ~~proposed~~the aprovisions ~~staggered~~relating ~~procurement~~to ~~schedule~~the recovery of MISO exit fees and one-time PJM integration costs (resulting from Penn’s June 1, ~~which~~2011 ~~varies~~exit byfrom ~~customer~~MISO ~~class~~and integration into PJM) were approved, it made ~~through~~such provisions subject to the ~~use~~approval of acost ~~descending~~recovery ~~clock~~by ~~auction~~FERC. ~~The~~Therefore, ~~PPUC~~Penn ismay ~~required~~not toput ~~issue an~~these ~~order~~provisions oninto effect until FERC has approved the ~~plan~~recovery noand ~~later~~allocation ~~than~~of ~~November~~MISO 8,exit ~~2010~~fees and PJM integration costs.

~~New~~6 ~~Jersey Regulatory Matters~~

JCP&L isTable permitted to defer for future collection from customers the amounts by which its costs of supplying BGS to non-shopping customers, costs incurred under NUG agreements, and certain other stranded costs, exceed amounts collected through BGS and NUGC rates and market sales of NUG energy and capacity. As of December 30, 2009, the accumulated deferred cost balance totaled approximately $98 million.Contents

~~In accordance~~Met-Ed, ~~with~~Penelec anand ~~April 28,~~Penn ~~2004~~jointly ~~NJBPU~~filed ~~order,~~a ~~JCP&L~~SMIP ~~filed~~with ~~testimony~~the PPUC on ~~June~~ August 714, ~~2004,~~2009. ~~supporting~~This ~~continuation~~plan ofproposed a 24-month assessment period in which the ~~current~~Pennsylvania ~~level~~Companies ~~and~~will ~~duration~~assess oftheir needs, select the ~~funding~~necessary oftechnology, ~~TMI-2~~secure ~~decommissioning~~vendors, ~~costs~~train bypersonnel, ~~New~~install ~~Jersey~~and ~~customers~~test ~~without~~support ~~a reduction~~equipment, ~~termination~~and establish ora ~~capping~~cost ofeffective ~~the~~and ~~funding.~~strategic ~~TMI-2~~deployment schedule, which currently is aexpected ~~retired~~to ~~nuclear~~be ~~facility~~completed ~~owned~~in byfifteen ~~JCP&L~~years. OnMet-Ed, ~~September~~Penelec and Penn estimate assessment period costs of approximately $29.5 30million, ~~2004~~which the Pennsylvania Companies, ~~JCP&L~~in ~~filed~~their anplan, proposed to recover ~~updated~~through ~~TMI-2~~an ~~decommissioning~~automatic ~~study~~adjustment clause. ~~This~~The ~~study~~ALJ’s ~~resulted~~Initial Decision approved the SMIP as modified by the ALJ, including: ensuring that the smart meters to be deployed include the capabilities listed in anthe ~~updated~~PPUC’s ~~total~~Implementation Order; denying the recovery of interest through the automatic ~~decommissioning~~adjustment ~~cost~~clause; ~~estimate~~providing for the recovery of ~~$729 million~~reasonable ~~(in~~and ~~2003~~prudent ~~dollars)~~costs ~~compared~~net toof resulting savings from installation and use of smart meters; and requiring that administrative start-up costs be expensed and the ~~estimated~~costs ~~$528 million~~incurred (for research and development in ~~2003~~the ~~dollars)~~assessment ~~from~~period be capitalized. On April 15, 2010, the ~~prior~~PPUC ~~1995~~adopted a Motion by Chairman Cawley that modified the ~~decommissioning~~ALJ’s ~~study~~initial decision, and decided various issues regarding the SMIP for the Pennsylvania Companies. The ~~DPA~~PPUC ~~filed~~entered ~~comments~~its Order on ~~February~~June 289, ~~2005 requesting~~2010, ~~that~~consistent ~~decommissioning~~with ~~funding~~the beChairman’s ~~suspended~~Motion. On ~~March~~ June 1824, ~~2005~~2010, ~~JCP&L~~ Met-Ed, Penelec and Penn filed a ~~response~~Petition tofor ~~those~~Reconsideration ~~comments.~~of ~~JCP&L~~a ~~responded~~single toportion ~~additional~~of ~~NJBPU~~the ~~staff~~PPUC’s ~~discovery~~Order ~~requests~~regarding inthe ~~May~~future ~~and~~ability ~~November~~to ~~2007~~include ~~and~~smart ~~also~~meter ~~submitted comments~~costs in base rates. On August 5, 2010, the ~~proceeding~~PPUC granted in ~~November~~part ~~2007.~~the Apetition ~~schedule~~ for ~~further~~reconsideration ~~NJBPU proceedings~~by ~~has~~deleting ~~not~~language ~~yet~~from ~~been~~its original ~~set. On~~order ~~March~~that ~~13,~~would ~~2009~~have precluded Met-Ed, ~~JCP&L~~Penelec ~~filed~~and ~~its annual~~Penn ~~SBC~~from ~~Petition~~seeking ~~with~~to ~~the~~include ~~NJBPU~~smart meter ~~that~~costs ~~includes~~in abase ~~request~~rates ~~for~~at a ~~reduction~~later in time. The costs to implement the ~~level~~SMIP ofcould ~~recovery~~be ofmaterial. However, ~~TMI-2~~assuming ~~decommissioning~~these costs ~~based~~satisfy ona anjust ~~updated~~and ~~TMI-2~~reasonable standard they are expected to be ~~decommissioning~~recovered ~~cost~~in ~~analysis~~a ~~dated~~rider ~~January~~(Smart ~~2009.~~Meter ~~This~~Technologies ~~matter~~Charge isRider) ~~currently pending~~which ~~before~~was approved when the ~~NJBPU~~PPUC approved the SMIP.

~~New Jersey~~By ~~statutes~~Tentative ~~require~~Order ~~that~~entered September 17, 2009, the ~~state~~PPUC ~~periodically~~provided ~~undertake~~for aan ~~planning~~additional 30-day comment ~~process,~~period ~~known~~on aswhether the ~~EMP~~1998 Restructuring Settlement, towhich ~~address~~addressed ~~energy~~how ~~related~~Met-Ed ~~issues~~and ~~including~~Penelec ~~energy~~were ~~security,~~going ~~economic~~to ~~growth,~~implement ~~and~~direct access ~~environmental~~to ~~impact.~~a ~~The~~competitive ~~EMP~~market isfor tothe begeneration ~~developed with involvement~~ of ~~the~~electricity, ~~Governor’s~~allows ~~Office~~Met-Ed and ~~the~~Penelec ~~Governor’s~~to apply ~~Office~~over-collection of ~~Economic Growth,~~NUG costs for select and isisolated months to bereduce ~~prepared~~non-NUG bystranded costs when a ~~Master~~cumulative ~~Plan~~NUG ~~Committee,~~stranded ~~which~~cost isbalance ~~chaired~~exists. by In response to the ~~NJBPU~~Tentative ~~President~~Order, ~~and~~various parties ~~includes~~filed ~~representatives~~comments ofobjecting ~~several~~to ~~State~~the ~~departments~~above accounting method utilized by Met-Ed and Penelec. ~~The~~Met-Ed ~~EMP~~and ~~was~~Penelec ~~issued~~are onawaiting ~~October 22,~~further ~~2008,~~action ~~establishing~~by ~~five~~the ~~major~~PPUC. ~~goals:~~

8New Jersey Regulatory Matters

·JCP&L ~~maximize~~is permitted to defer for future collection from customers the amounts by which its costs of supplying BGS to non-shopping customers, costs incurred under NUG agreements, and certain other stranded costs, exceed amounts collected through BGS and NUGC rates and market sales of NUG energy and ~~efficiency~~capacity. As of December 31, 2010, the accumulated deferred cost balance was a credit of approximately $37 million. To better align the recovery of expected costs, on July 26, 2010, JCP&L filed a request to ~~achieve~~decrease the amount recovered for the costs incurred under the NUG agreements by $180 million annually. On February 10, 2011, the NJBPU approved a ~~20%~~stipulation ~~reduction~~which allows the change in ~~energy~~rates ~~consumption~~to bybecome ~~2020;~~effective March 1, 2011.

·On ~~reduce~~March 13, ~~peak~~2009, ~~demand~~JCP&L filed its annual SBC Petition with the NJBPU that includes a request for ~~electricity~~a reduction byin ~~5,700~~the MWlevel byof ~~2020;~~recovery of TMI-2 decommissioning costs based on an updated TMI-2 decommissioning cost analysis dated January 2009 estimated at $736 million (in 2003 dollars). This matter is currently pending before the NJBPU.

·New ~~meet~~Jersey ~~30%~~statutes ofrequire that the state’s ~~electricity~~periodically ~~needs~~undertake ~~with~~a ~~renewable~~planning process, known as the EMP, to address energy related issues including energy security, economic growth, and environmental impact. The NJBPU adopted an order establishing the general process and contents of specific EMP plans that must be filed by ~~2020;~~New Jersey electric and gas utilities in order to achieve the goals of the EMP. On April 16, 2010, the NJBPU issued an order indefinitely suspending the requirement of New Jersey utilities to submit Utility Master Plans until such time as the status of the EMP has been made clear. At this time, FirstEnergy and JCP&L cannot determine the impact, if any, the EMP may have on their operations.

~~· examine smart grid technology and develop additional cogeneration and other generation resources consistent with the state’s greenhouse gas targets; and~~7

·Table investof in innovative clean energy technologies and businesses to stimulate the industry’s growth in New Jersey.Contents

~~On January~~FERC ~~28, 2009, the NJBPU adopted an order establishing the general process~~Matters and contents of specific EMP plans that must be filed by New Jersey electric and gas utilities in order to achieve the goals of the EMP. Such utility specific plans are due to be filed with the NJBPU by July 1, 2010. At this time, FirstEnergy and JCP&L cannot determine the impact, if any, the EMP may have on their business or operations.

~~In support~~Rates of former New Jersey Governor Corzine's Economic Assistance and Recovery Plan, JCP&L announced a proposal to spend approximately $98 million on infrastructure and energy efficiency projects in 2009. Under the proposal, an estimated $40 million would be spent on infrastructure projects, including substation upgrades, new transformers, distribution line re-closers and automated breaker operations. In addition, approximately $34 million would be spent implementing new demand response programs as well as expanding on existing programs. Another $11 million would be spent on energy efficiency, specifically replacing transformers and capacitor control systems and installing new LED street lights. The remaining $13 million would be spent on energy efficiency programs that would complement those currently being offered. The project relating to expansion of the existing demand response programs was approved by the NJBPU on August 19, 2009, and implementation began in 2009. Approval for ~~the $11~~Transmission ~~million~~Service ~~project~~Between ~~related~~MISO to energy efficiency programs intended to complement those currently being offered was denied by the NJBPU on December 1, 2009. Implementation of the remaining projects is dependent upon resolution of regulatory issues between the NJBPU and ~~JCP&L including recovery of the~~PJM ~~costs associated with the proposal.~~

On ~~February~~ 11November 18, ~~2010~~2004, ~~S&P~~the ~~downgraded~~FERC issued an order eliminating the ~~senior~~through ~~unsecured~~and ~~debt~~out ofrate ~~FirstEnergy~~for ~~Corp~~transmission service between the MISO and PJM regions. The FERC’s intent was to ~~BB+. As~~eliminate multiple transmission charges for a ~~result~~single transaction between the MISO and PJM regions. The FERC also ordered MISO, ~~pursuant~~PJM toand the ~~requirements~~transmission ofowners within MISO and PJM to submit compliance filings containing a rate mechanism to recover lost transmission revenues created by elimination of this ~~pre~~charge (referred to as SECA) during a 16-~~existing~~month ~~NJBPU~~transition ~~order,~~period. ~~JCP&L~~In ~~filed~~2005, onthe ~~February~~FERC 17set the SECA for hearing. The presiding ALJ issued an initial decision on August 10, ~~2010~~2006, arejecting ~~plan~~the ~~addressing~~compliance ~~the~~filings ~~mitigation~~made ofby ~~any~~MISO, ~~effect~~PJM ofand the ~~downgrade~~transmission owners, and ~~provided~~directing annew compliance ~~assessment~~filings. ofThis ~~present~~decision was subject to review and ~~future~~approval ~~liquidity~~by ~~necessary~~the toFERC. ~~assure~~On ~~JCP&L~~May 21, 2010, FERC issued an order denying pending rehearing requests and an Order on Initial Decision which reversed the presiding ALJ’s ~~continued~~ ~~payment~~rulings toin ~~BGS~~many ~~suppliers~~respects. ~~The~~ ~~order~~Most ~~also~~notably, ~~provides~~these ~~that~~orders affirmed the right of ~~NJBPU~~transmission ~~should:~~owners 1)to ~~within~~collect 10SECA ~~days~~charges ofwith adjustments that ~~filing,~~modestly ~~hold~~reduce athe ~~public~~level ~~hearing~~of such charges, and changes to ~~review~~ the ~~plan~~entities ~~and~~deemed ~~consider~~responsible for payment of the ~~available~~SECA ~~options~~charges. ~~and~~The 2)Ohio Companies ~~within~~were 30identified ~~days~~as load serving entities responsible for payment of ~~that~~additional ~~filing~~SECA ~~issue~~charges anfor ~~order~~a ~~with~~portion ~~respect~~of to the ~~matter~~SECA period (Green Mountain/Quest issue). At ~~this~~FirstEnergy ~~time~~executed settlements with AEP, Dayton and the ~~public~~Exelon parties to fix FirstEnergy’s liability for SECA charges ~~hearing~~originally ~~has~~billed ~~not~~to ~~been~~Green ~~scheduled~~Mountain and ~~FirstEnergy~~Quest ~~and~~for ~~JCP&L~~load ~~cannot~~that ~~determine~~returned to regulated service during the ~~impact~~SECA period. The AEP, ifDayton ~~any~~and Exelon, ~~these~~settlements ~~proceedings~~were ~~will~~approved ~~have~~by FERC on ~~their~~November 23, ~~operations~~2010, and the relevant payments made. Rehearings remain pending in this proceeding.

~~FERC~~PJM Transmission Rate ~~Matters~~

~~Transmission~~On April 19, 2007, FERC issued an order (Opinion 494) finding that the PJM transmission owners’ ~~Service~~existing ~~between~~“license ~~MISO~~plate” or zonal rate design was just and reasonable and ordered that the current license plate rates for existing transmission facilities be retained. On the issue of rates for new transmission facilities, FERC directed that costs for new transmission facilities that are rated at 500 kV or higher are to be collected from all transmission zones throughout the PJM footprint by means of a postage-stamp rate based on the amount of load served in a transmission zone. Costs for new transmission facilities that are rated at less than 500 kV, however, are to be allocated on a load flow methodology (DFAX), which is generally referred to as a “beneficiary pays” approach to allocating the cost of high voltage transmission facilities.

~~On November 18, 2004, the FERC issued an order eliminating the through and out rate for transmission service between the MISO and PJM regions.~~ The FERC’s ~~intent~~Opinion ~~was to~~494 ~~eliminate~~order ~~multiple~~was ~~transmission~~appealed ~~charges~~to ~~for a single transaction between~~ the ~~MISO~~ ~~and PJM regions~~U.S. ~~The~~Court ~~FERC also ordered MISO, PJM and the transmission owners within MISO and PJM to submit compliance filings containing a rate mechanism to recover lost transmission revenues created by elimination~~ of ~~this charge~~Appeals ~~(referred~~for ~~to as~~ the ~~Seams~~Seventh ~~Elimination Cost Adjustment or SECA) during a~~Circuit, ~~16-month~~which ~~transition period. The FERC~~ issued ~~orders~~a ~~in 2005 setting the SECA for hearing. The presiding judge issued an initial~~ decision on August 106, ~~2006, rejecting the compliance filings made by MISO, PJM and the transmission owners, and directing new compliance filings~~2009. ~~This~~The ~~decision~~court isaffirmed ~~subject to review and approval by the~~ FERC.’s Aratemaking ~~final~~treatment ~~order is pending before the FERC, and in the~~for ~~meantime,~~existing ~~FirstEnergy affiliates have been negotiating and entering into settlement agreements with other parties in the docket to mitigate the risk of lower~~ transmission ~~revenue collection associated with an adverse order. On September 26~~facilities, ~~2008,~~but ~~the~~found ~~MISO and PJM transmission owners filed a motion requesting~~ that ~~the~~ FERC ~~approve~~had ~~the pending settlements and act on the initial decision. On November 20, 2008, FERC issued an order approving uncontested settlements, but did~~ not ~~rule~~supported onits ~~the initial~~ decision. Onto ~~December 19,~~allocate ~~2008,~~costs anfor ~~additional~~new ~~order~~500+ ~~was~~kV ~~issued~~facilities ~~approving~~on ~~two~~a ~~contested~~load ~~settlements.~~ratio ~~On October 29,~~share ~~2009,~~basis ~~FirstEnergy~~and, ~~with~~based ~~another~~on ~~Company,~~this ~~filed an additional settlement agreement with FERC to resolve their outstanding claims. FirstEnergy is actively pursuing settlement agreements with other parties to the case. On December 8~~finding, ~~2009, certain parties sought a writ of mandamus~~remanded ~~from~~ the DCrate ~~Circuit~~design ~~Court of Appeals directing FERC to~~ issue anback ~~order on the Initial Decision. The Court agreed~~ to ~~hold this matter in abeyance based upon~~ FERC~~’s representation to use good faith efforts to issue a substantive ruling on the initial decision no later than May 27, 2010~~. ~~If FERC fails to~~ ~~act, the case will be submitted for briefing in June. The outcome of this matter cannot be predicted.~~

9In an order dated January 21, 2010, FERC set the matter for “paper hearings”— meaning that FERC called for parties to submit comments or written testimony pursuant to the schedule described in the order. FERC identified nine separate issues for comments and directed PJM to file the first round of comments on February 22, 2010, with other parties submitting responsive comments and then reply comments on later dates. PJM filed certain studies with FERC on April 13, 2010, in response to the FERC order. PJM’s filing demonstrated that allocation of the cost of high voltage transmission facilities on a beneficiary pays basis results in certain eastern utilities in PJM bearing the majority of their costs. Numerous parties filed responsive comments or studies on May 28, 2010 and reply comments on June 28, 2010. FirstEnergy and a number of other utilities, industrial customers and state commissions supported the use of the beneficiary pays approach for cost allocation for high voltage transmission facilities. Certain eastern utilities and their state commissions supported continued socialization of these costs on a load ratio share basis. FERC is expected to act by May 31, 2011.

~~PJM Transmission~~RTO ~~Rate~~Realignment

On ~~January~~ 31December 17, ~~2005~~2009, ~~certain PJM transmission owners made filings with the~~ FERC ~~pursuant~~ toissued aan ~~settlement~~order ~~agreement previously approved by the FERC. JCP&L~~approving, ~~Met-Ed~~ ~~and~~subject ~~Penelec were parties~~ to ~~that~~certain ~~proceeding~~future ~~and~~compliance ~~joined in two of the~~ filings~~. In the first filing~~, ~~the settling transmission owners submitted a~~ ~~filing~~ATSI’s ~~justifying~~withdrawal ~~continuation~~from ofMISO ~~their~~and ~~existing~~integration ~~rate~~into ~~design within the~~ PJM ~~RTO~~. ~~Hearings~~ ~~were~~This ~~held~~move, onwhich ~~the~~is ~~content~~expected ofto ~~the~~be ~~compliance filings and numerous parties~~effective ~~appeared~~on ~~and litigated various issues concerning PJM rate design~~June 1, ~~notably AEP~~2011, ~~which~~ ~~proposed~~allows FirstEnergy to ~~create~~consolidate aits ~~"postage stamp," or average rate for all high voltage~~ transmission ~~facilities~~assets ~~across PJM~~ and aoperations ~~zonal~~into ~~transmission rate for facilities~~PJM. ~~below~~Currently, ~~345 kV. AEP'~~FirstEnergy’s ~~proposal would have the effect of shifting recovery of the costs of high voltage~~ transmission ~~lines~~assets toand ~~other~~operations ~~transmission~~are ~~zones,~~divided ~~including those~~between ~~where~~PJM ~~JCP&L, Met-Ed,~~ and ~~Penelec serve load~~MISO. ~~On April 19, 2007,~~The ~~the~~realignment ~~FERC~~will ~~issued~~make ~~an order (Opinion 494) finding that~~ the ~~PJM~~ transmission ~~owners’ existing~~assets ~~“license plate” or zonal rate design was just and reasonable and ordered~~ that ~~the~~are ~~current~~part ~~license plate rates for existing transmission facilities be retained. On the issue~~ of ~~rates for new transmission facilities~~ATSI, ~~the~~ ~~FERC~~whose ~~directed~~footprint ~~that~~includes ~~costs for new transmission facilities that are rated at 500 kV or higher are to be collected from all transmission zones throughout~~ the ~~PJM~~Ohio ~~footprint~~Companies byand ~~means~~Penn, part of ~~a postage-stamp rate~~PJM. ~~Costs~~In ~~for~~the ~~new transmission facilities that are rated at less than 500 kV~~order, ~~however, are to be allocated on a “beneficiary pays” basis. The~~ FERC ~~found~~approved ~~that PJM~~FirstEnergy’s ~~current~~proposal ~~beneficiary-pays cost~~to ~~allocation~~use ~~methodology is not sufficiently detailed and, in~~ a ~~related order~~ ~~that~~FRR ~~also~~Plan ~~was~~to ~~issued~~obtain oncapacity ~~April~~to ~~19,~~satisfy ~~2007,~~the ~~directed~~PJM ~~that~~capacity ~~hearings~~requirements ~~be held~~ for the ~~purpose~~ of2011-12 ~~establishing a just~~ and ~~reasonable cost allocation methodology for~~2012-13 ~~inclusion~~delivery ~~in PJM’s tariff~~years.

~~On May~~FirstEnergy ~~18,~~successfully ~~2007,~~conducted ~~certain parties filed for rehearing of~~ the ~~FERC’s~~FRR ~~April~~auctions on March 19, ~~2007 order~~2010. ~~On January 31~~Moreover, ~~2008,~~ the ~~requests~~ATSI ~~for rehearing were denied. On February~~zone ~~11,~~loads ~~2008,~~participated ~~the~~in ~~FERC’s April 19, 2007, and January 31, 2008, orders were appealed to~~ the ~~federal~~PJM ~~Court~~base ofresidual ~~Appeals~~auction for the ~~D.C.~~2013 ~~Circuit~~delivery year. ~~The Illinois Commerce~~Successful ~~Commission,~~completion ~~the~~of ~~PUCO and another party have also appealed~~ these ~~orders~~steps tosecured the ~~Seventh~~ ~~Circuit~~capacity ~~Court~~necessary ~~of Appeals. The appeals of these parties and others were consolidated~~ for ~~argument in~~ the ~~Seventh~~ATSI ~~Circuit~~footprint ~~and~~to ~~the~~meet ~~Seventh Circuit Court~~PJM’s ofcapacity ~~Appeals~~requirements. ~~issued~~On ~~a decision on~~ August 25, 62010, ~~2009.~~the ~~The~~PUCO ~~court~~issued ~~found~~an ~~that~~order ~~FERC~~in ~~had not~~the ~~marshaled~~2010 ~~enough~~ESP ~~evidence~~Case ~~to support its decision to allocate cost for new~~approving ~~500+kV facilities on~~ a ~~postage-stamp~~settlement ~~basis and~~that, ~~based~~among onother ~~this finding~~things, ~~remanded the~~called ~~rate design issue back to FERC. A request~~ for ~~rehearing and rehearing en banc by two companies was denied by~~ the ~~Seventh~~PUCO ~~Circuit~~to onwithdraw ~~October 20, 2009. On October 28, 2009, the Seventh Circuit closed~~ its ~~case~~opposition ~~dockets and returned the case~~ to ~~FERC for further action on~~ the ~~remand order~~RTO consolidation. In ~~an order dated January 21~~addition, ~~2010, FERC set~~ the ~~matter for “paper hearings” – meaning that FERC called for parties to submit comments or written testimony pursuant to the schedule described in the~~ order. ~~FERC~~approved ~~identified~~a ~~nine~~wholesale ~~separate~~procurement ~~issues for comments~~process, and ~~directed~~certain ~~PJM~~“retail choice” ~~to file the first round of comments on February 22~~policies, ~~2010,~~ ~~with~~that ~~other~~reflected ~~parties~~ATSI’s ~~submitting~~entry ~~responsive~~into ~~comments~~PJM on ~~April 8~~June 1, ~~2010 and May 10, 2010~~2011.

~~The~~8 FERC’s orders on PJM rate design prevented the allocation of a portion of the revenue requirement of existing transmission facilities of other utilities to JCP&L, Met-Ed and Penelec. In addition, the FERC’s decision to allocate the cost of new 500 kV and above transmission facilities on a postage-stamp basis reduces the cost of future transmission to be recovered from the JCP&L, Met-Ed and Penelec zones. A partial settlement agreement addressing the “beneficiary pays” methodology for below 500 kV facilities, but excluding the issue of allocating new facilities costs to merchant transmission entities, was filed on September 14, 2007. The agreement was supported by the FERC’s Trial Staff, and was certified by the Presiding Judge to the FERC. On July 29, 2008, the FERC issued an order conditionally approving the settlement. On November 14, 2008, PJM submitted revisions to its tariff to incorporate cost responsibility assignments for below 500 kV upgrades included in PJM’s RTEP process in accordance with the settlement. The remaining merchant transmission cost allocation issues were the subject of a hearing at the FERC in May 2008. On November 19, 2009, FERC issued Opinion 503 agreeing that RTEP costs should be allocated on a pro-rata basis to merchant transmission companies. On December 22, 2009, a request for a rehearing of FERC’s Opinion No. 503 was made. On January 19, 2010, the FERC issued a procedural order noting that FERC would address the rehearing requests in a future order.

RTO ConsolidationTable of Contents

On ~~August~~ 17February 1, ~~2009~~2011, ~~FirstEnergy~~ATSI in conjunction with PJM filed anits ~~application~~proposal with ~~the~~ FERC ~~requesting~~for ~~to consolidate~~moving its transmission ~~assets~~rate ~~and operations~~ into PJM’s tariffs. ~~Currently,~~ FirstEnergy’s ~~transmission~~expects ~~assets~~ATSI ~~and~~to ~~operations~~enter ~~are~~PJM ~~divided~~on ~~between~~June 1, ~~PJM~~2011, and ~~MISO.~~that ~~The~~if ~~consolidation~~legal ~~would~~proceedings ~~make~~regarding ~~the~~its ~~transmission~~rate ~~assets~~are ~~that~~outstanding ~~are~~at ~~part~~that ~~of ATSI~~time, ~~whose~~ATSI ~~footprint~~will ~~includes~~be ~~the~~permitted to ~~Ohio~~start ~~Companies~~charging ~~and~~its ~~Penn~~proposed rates, ~~part~~subject ofto ~~PJM~~refund. ~~Most~~Additional ~~of FirstEnergy’s~~FERC ~~transmission~~proceedings ~~assets~~are ineither pending ~~Pennsylvania~~or ~~and~~expected ~~all~~in ofwhich the ~~transmission assets~~amount inof ~~New~~exit ~~Jersey~~fees, ~~already~~transmission ~~operate~~cost asallocations, aand ~~part of PJM. Key elements of the~~costs ~~filing~~associated ~~include~~with along ~~Fixed~~term ~~Resource~~firm ~~Requirement~~transmission ~~Plan~~rights ~~(FRR~~payable ~~Plan)~~by ~~that describes~~ the ~~means~~ ~~whereby~~ATSI ~~capacity~~zone ~~will~~upon beits ~~procured and administered as necessary to satisfy~~withdrawal ~~the~~from ~~PJM capacity requirements for~~ the ~~2011-12~~Midwest ~~and~~ISO ~~2012-13~~will ~~delivery years; and also a request that ATSI’s transmission customers~~ be ~~excused~~determined. ~~from~~In ~~the~~addition, ~~costs~~certain ~~for regional~~parties ~~transmission~~may ~~projects~~protest ~~that~~other ~~were~~aspects ~~approved through PJM’s RTEP process~~of ~~prior to~~ ATSI’s ~~entry~~integration into PJM ~~(legacy RTEP costs). The integration is expected to be complete on June 1~~, ~~2011,~~and tocertain ~~coincide with delivery~~ of ~~power~~these ~~under~~matters ~~the next~~remain ~~competitive~~outstanding ~~generation procurement process for the Ohio Companies~~ and ~~Penn. To~~will ~~ensure~~be ~~a definitive ruling at the same time the FERC rules on its request to~~resolved ~~integrate~~in ~~ATSI~~future ~~into PJM, on October 19, 2009, FirstEnergy filed a related complaint with the~~ FERC onproceedings. ~~the~~The ~~issue~~outcome of ~~exempting~~these ~~the~~proceedings ~~ATSI~~cannot ~~footprint~~be ~~from the legacy RTEP costs~~predicted.

10MISO Multi-Value Project Rule Proposal

On ~~September~~ 4July 15, ~~2009~~2010, ~~the~~MISO ~~PUCO~~and ~~opened~~certain aMISO ~~case~~transmission toowners ~~take~~jointly ~~comments~~filed ~~from~~with ~~Ohio’s~~FERC their proposed ~~stakeholders~~cost ~~regarding~~allocation ~~the~~methodology ~~RTO~~for ~~consolidation~~certain new transmission projects. ~~FirstEnergy~~The ~~filed~~new ~~extensive~~transmission ~~comments~~projects—described inas MVPs—are a class of MTEP projects. The filing parties proposed to allocate the ~~PUCO~~costs ~~case~~of onMVPs ~~September 25,~~by ~~2009,~~means ~~and~~of ~~reply~~a ~~comments~~usage-based oncharge that will be applied to all loads within the ~~October 13,~~MISO ~~2009~~footprint, and ~~attended~~to aenergy ~~public~~transactions ~~meeting~~that oncall ~~September 15,~~for ~~2009~~power to be “wheeled through” the MISO as well as to ~~answer~~energy ~~questions~~transactions ~~regarding~~that “source” in the ~~RTO~~MISO ~~consolidation~~but “sink” outside of MISO. ~~Several~~The filing parties ~~have intervened~~expect inthat the ~~regulatory~~MVP ~~dockets~~proposal atwill fund the ~~FERC~~costs ~~and~~of atlarge transmission projects designed to bring wind generation from the ~~PUCO~~upper Midwest to load centers in the east. ~~Certain~~The filing parties ~~interveners~~requested ~~have~~an ~~commented~~effective ~~and~~date ~~protested~~for ~~particular~~the ~~elements~~proposal of ~~the~~July 16, ~~proposed~~2011. ~~RTO consolidation~~On August 19, ~~including~~2010, anMISO’s ~~exit~~Board approved ~~fee~~the tofirst MVP project — the “Michigan Thumb Project.” Under MISO’s proposal, ~~integration~~the costs of MVP projects approved by MISO’s Board prior to ~~PJM~~the anticipated June 1, ~~and cost-allocations~~2011 ofeffective ~~future~~date ~~transmission~~of FirstEnergy’s ~~upgrades~~integration ininto PJM ~~and~~would continue to be allocated to FirstEnergy. MISO estimated that approximately $11 million in annual revenue requirements would be allocated to the ATSI zone associated with the Michigan Thumb Project upon its completion.

On ~~December~~ 17September 10, ~~2009~~2010, ~~FERC~~FirstEnergy ~~issued~~filed ana ~~order~~protest ~~approving,~~to ~~subject~~the toMVP ~~certain~~proposal ~~future compliance~~arguing ~~filings,~~that ~~ATSI~~MISO’s ~~move~~proposal to allocate costs of MVP projects across the entire MISO footprint does not align with the established rule that cost allocation is to ~~PJM~~be based on cost causation (the “beneficiary pays” approach). FirstEnergy’s ~~request~~also argued that, in light of progress to bedate ~~exempted~~in the ATSI integration into ~~from~~PJM, ~~legacy~~it ~~RTEP~~would be unjust and unreasonable to allocate any MVP costs ~~was~~to ~~rejected~~the ~~and~~ATSI ~~its~~zone, ~~complaint~~or ~~dismissed~~to ATSI. Numerous other parties filed pleadings on MISO’s MVP proposal.

On ~~December~~ 17December 16, ~~2009~~2010, ~~ATSI~~FERC ~~executed~~issued an order approving the ~~PJM~~MVP ~~Consolidated~~proposal ~~Transmission~~without ~~Owners Agreement~~significant change. FERC’s Onorder ~~December~~was 18not clear, ~~2009~~however, as to whether the ~~Ohio~~MVP ~~Companies~~costs ~~and~~would ~~Penn~~be ~~executed~~payable ~~the~~by ~~PJM Operating~~ATSI ~~Agreement~~or ~~and~~load in the ~~PJM~~ATSI ~~Reliability~~zone. ~~Assurance~~FERC ~~Agreement.~~stated ~~Execution~~that ~~of these~~the ~~agreements~~MISO’s ~~committed~~tariffs obligate ATSI ~~and~~to ~~the~~pay ~~Ohio~~all ~~Companies~~charges ~~and~~that ~~Penn~~attach prior to ATSI’s ~~load~~exit tobut ~~moving into~~ruled ~~PJM~~that onthe question of the ~~schedule~~amount ~~described~~of costs that are to be allocated to ATSI or to load in the ~~application~~ATSI ~~and~~zone ~~approved~~were inbeyond the scope of FERC ~~Order~~’s ~~(June~~order 1,and ~~2011)~~would be addressed in future proceedings.

On ~~January~~ 15January 18, 2010, the Ohio Companies and Penn submitted a compliance filing describing the process whereby ATSI-zone load serving entities (LSEs) can “opt out” of the Ohio Companies' and Penn's FRR Plan for the 2011~~-12 and 2012-13 Delivery Years. On January 16~~, ~~2010,~~ FirstEnergy filed for ~~clarification or~~ rehearing of ~~certain issues associated with implementing the FRR auctions on the proposed schedule. On January 19, 2010, FirstEnergy filed for rehearing of~~ FERC’s ~~decision to impose the legacy RTEP costs on ATSI’s transmission customers~~order. ~~Also~~In onits ~~January~~rehearing 19request, ~~2010, several parties, including the~~ ~~PUCO and~~ the ~~OCC~~Company ~~asked~~argued ~~for~~that ~~rehearing~~because ofthe ~~parts~~MVP ofrate ~~FERC’s~~is ~~order.~~usage-based, ~~None~~costs ofcould ~~the rehearing~~not ~~parties~~be ~~asked~~applied ~~FERC~~ to ~~rescind authorization for~~ ATSI ~~to enter PJM. Instead~~, which ~~parties~~is ~~focused~~a onstand-alone ~~questions~~transmission ofcompany ~~cost~~that ~~and~~does ~~cost~~not ~~allocation~~use ~~or on alleged errors in implementing~~ the ~~move~~transmission system. On ~~February 3, 2010,~~ FirstEnergy ~~filed~~also anrenewed ~~answer~~its toarguments ~~the~~regarding ~~January~~cost ~~19,~~causation ~~2010~~and ~~rehearing~~the ~~request~~impropriety of ~~other~~allocating ~~parties.~~costs ~~On February 16, 2010, FirstEnergy submitted a second compliance filing~~ to ~~FERC;~~ the ~~filing~~ATSI ~~describes~~zone ~~communications~~or ~~protocols~~to ~~and~~ATSI. ~~performance~~FirstEnergy ~~deficiency~~cannot ~~penalties for~~predict ~~capacity~~the ~~suppliers~~outcome ~~that~~of ~~are~~these ~~taken~~proceedings inat ~~FRR~~this ~~auctions~~time.

~~FirstEnergy will~~Sales conduct FRR auctions on March 15-19, 2010, for the 2011-12 and 2012-13 delivery years. LSE’s in the ATSI territory, including the Ohio Companies and Penn, will participate in PJM’s next base residual auction for capacity resources for the 2013-2014 delivery years. This auction will be conducted in May of 2010. FirstEnergy expects to ~~integrate into PJM effective June 1,~~Affiliates ~~2011.~~

~~Changes~~FES has received authorization from FERC to make wholesale power sales to the Utilities. FES ~~ordered~~actively participates in auctions conducted by or on behalf of the Utilities to obtain the power and related services necessary to meet the Utilities’ POLR obligations. Because of the merger with FirstEnergy, AS is considered an affiliate of the Utilities for ~~PJM~~purposes ~~Reliability~~of ~~Pricing~~FERC’s ~~Model~~affiliate restriction ~~(RPM)~~regulations. ~~Auction~~This requires AS to obtain prior FERC authorization to make sales to the Utilities when it successfully participates in the Utilities’ POLR auctions.

~~On May 30,~~FES ~~2008,~~currently asupplies ~~group~~the ofOhio ~~PJM~~Companies ~~load-serving~~with ~~entities,~~a ~~state~~portion ~~commissions~~of their capacity, ~~consumer~~ ~~advocates~~energy, ancillary services and ~~trade~~transmission ~~associations~~under ~~(referred~~a toMaster ~~collectively~~SSO asSupply ~~the~~Agreement ~~RPM Buyers)~~for ~~filed~~ a ~~complaint~~two-year atperiod ~~the~~ending ~~FERC against PJM alleging that~~May ~~three of~~31, ~~the~~2011. ~~four transitional~~FES ~~RPM~~won ~~auctions~~51 ~~yielded~~tranches ~~prices~~in ~~that~~a ~~are~~descending ~~unjust~~clock ~~and unreasonable~~auction ~~under~~for ~~the~~POLR ~~Federal~~service ~~Power~~administered ~~Act.~~by ~~On September 19, 2008,~~ the ~~FERC~~Ohio ~~denied~~Companies ~~the~~and ~~RPM~~their ~~Buyers’~~consultant, ~~complaint.~~CRA OnInternational ~~December~~on May 1213-14, ~~2008, PJM filed proposed tariff amendments that would adjust slightly the RPM program~~2009. ~~PJM~~Other ~~also~~winning ~~requested~~suppliers have ~~that~~assigned ~~the~~their ~~FERC~~Master ~~conduct~~SSO aSupply ~~settlement~~Agreements ~~hearing~~ to ~~address~~FES, ~~changes~~five toof ~~the~~which ~~RPM~~were ~~and suggested~~effective ~~that~~in ~~the~~June, ~~FERC~~two ~~should~~more in ~~rule~~July, onfour ~~the~~more ~~tariff~~in ~~amendments~~August ~~only~~and iften ~~settlement could~~more ~~not be reached~~ in ~~January~~September, 2009. ~~The~~FES ~~request~~also ~~for~~supplies ~~settlement~~power ~~hearings~~used ~~was granted. Settlement had not been reached~~ by ~~January 9, 2009 and, accordingly,~~ ~~FirstEnergy~~Constellation ~~and~~to ~~other~~serve ~~parties submitted comments on PJM’s proposed tariff amendments. On January 15, 2009, the Chief Judge issued~~ an ~~order~~additional ~~terminating settlement~~five ~~discussions~~tranches. OnAs ~~February 9, 2009, PJM and~~ a ~~group~~result of ~~stakeholders~~ ~~submitted~~these ~~an offer of settlement~~arrangements, ~~which~~FES ~~used the PJM~~serves ~~December 12,~~77 ~~2008 filing as its starting point~~tranches, ~~and~~or ~~stated~~77% ~~that~~of ~~unless otherwise~~the ~~specified,~~POLR ~~provisions~~load ~~filed~~of bythe ~~PJM~~Ohio onCompanies ~~December~~until May 1231, ~~2008 apply~~2011.

On ~~March 26~~October 20, ~~2009~~2010, ~~the~~FES ~~FERC~~participated ~~accepted~~ in ~~part,~~a descending clock auction for POLR service administered by the Ohio Companies and ~~rejected~~their inconsultant, ~~part~~CRA International, ~~tariff~~for ~~provisions~~the following periods: June 1, ~~submitted~~2011 bythrough ~~PJM~~May 31, ~~revising~~2012; ~~certain~~June 1, ~~parts~~2011, ofthrough ~~its~~May 31, ~~RPM.~~2013; Itand ~~ordered~~June 1, ~~changes~~2010 ~~included~~through May 31, ~~making~~2014. ~~incremental~~The ~~improvements~~Ohio toCompanies ~~RPM~~offered 17, 17, and ~~clarification~~ on16 ~~certain~~tranches ~~aspects~~for these periods, respectively. FES won of10, ~~the~~7, ~~March 26~~and 3 tranches, ~~2009~~respectively, ~~Order~~for these periods. On ~~April~~January 2725, ~~2009~~2011, ~~PJM~~the ~~submitted~~Ohio aCompanies ~~compliance~~conducted ~~filing~~a ~~addressing~~second ~~the~~auction ~~changes~~offering the ~~FERC~~same ~~ordered~~product infor ~~the~~identical ~~March 26~~time periods. FES won 3, 0, and ~~2009~~3 ~~Order;~~tranches, ~~subsequently~~respectively, ~~numerous~~for ~~parties~~these ~~filed~~periods. ~~requests~~FES ~~for~~entered ~~rehearing~~into ofa ~~the March 26,~~Master ~~2009~~SSO ~~Order.~~Supply OnAgreement ~~June~~to provide 18capacity, ~~2009~~energy, ancillary services, and congestion costs to the ~~FERC~~Ohio ~~denied~~Companies ~~rehearing~~for ~~and~~the ~~request~~tranches won. Under the ESP in effect for ~~oral~~these ~~argument~~time ofperiods, the ~~March~~Ohio ~~26,~~Companies ~~2009~~are ~~Order~~responsible for payment of noncontrollable transmission costs billed by PJM for POLR service.

~~PJM has~~9 reconvened the CMEC and has scheduled a CMEC Long-Term Issues Symposium to address near-term changes directed by the March 26, 2009 Order and other long-term issues not addressed in the February 2009 settlement. PJM made a compliance filing on September 1, 2009, incorporating tariff changes directed by the March 26, 2009 Order. The tariff changes were approved by the FERC in an order issued on October 30, 2009, and are effective November 1, 2009. The CMEC continues to work to address additional compliance items directed by the March 26, 2009 Order. On December 1, 2009, PJM informed FERC that PJM would file a scarcity-pricing design with the FERC on April 1, 2010.

11Table of Contents

~~MISO~~On October 18, 2010, FES participated in a descending clock auction for POLR service administered by both Met-~~PJM~~Ed and Penelec and their consultant, National Economic Research Associates (NERA) for ~~Billing~~the ~~Dispute~~following tranche products and delivery periods: Residential 5-month, Residential 24-month, Commercial 5-month, Commercial 12-month and Industrial 12-month. All 5-month delivery periods are from January 1, 2011 through May 31, 2011, all 12-month delivery periods are from June 1, 2011 through May 31, 2012 while all 24-month delivery periods are from June 1, 2011 through May 31, 2013. Met-Ed offered 7 Residential 5-month tranches, 4 Residential 24-month tranches, 6 Commercial 5-month tranches, 6 Commercial 12-month tranches and 1 Industrial tranche while Penelec offered 5 Residential 5-month tranches, 3 Residential 24-month tranches, 5 Commercial 5-month tranches, 5 Commercial 12-month tranches and 1 Industrial tranche.

~~In September~~For ~~2009~~Met-Ed offerings, ~~PJM~~FES ~~reported~~won ~~that~~4 itResidential ~~had~~5-month ~~discovered~~tranches, a2 ~~modeling~~Residential ~~error~~24-month intranches, ~~the~~1 ~~market~~Commercial 5-~~to-market~~month ~~power~~tranche, ~~flow~~1 ~~calculations~~Commercial ~~between~~12-month ~~PJM~~tranche and ~~the~~zero ~~MISO~~Industrial ~~under the Joint Operating Agreement~~tranches. ~~The~~For ~~error~~Penelec offerings, ~~which~~FES ~~dates~~won ~~back~~1 toResidential ~~2005~~5-month tranche, ~~was~~1 aResidential ~~result~~24-month ~~of the~~tranche, ~~incorrect~~zero ~~modeling of certain generation resources that have an impact on~~Commercial ~~power~~5-month ~~flows~~tranches, ~~across~~zero ~~the~~Commercial ~~PJM~~12-~~MISO~~month ~~border.~~tranches ~~FERC settlement discussions on this issue have commenced,~~ and ~~FirstEnergy~~zero isIndustrial ~~participating~~tranches. inFES ~~these~~entered ~~discussions. The~~into ~~next~~separate ~~settlement~~Supplier ~~conference~~Master isAgreements ~~set~~(SMA) to ~~for~~provide ~~February~~capacity, 25energy, ~~2010. Although~~ancillary ~~the amount of the error is subject to dispute~~services, ~~PJM has estimated the magnitude of~~and ~~the~~congestion ~~error~~costs towith beMet-Ed ~~approximately~~and ~~$77~~Penelec ~~million~~for ineach ~~total~~product ~~to all parties~~won. ~~Should~~Under ~~a payment by PJM to~~ the ~~MISO~~terms ~~relating~~and toconditions of the ~~modeling error be required~~SMA, ~~the method~~Met-Ed byand ~~which~~Penelec ~~PJM~~are ~~would~~responsible ~~collect~~for ~~such~~payment ~~payments~~of ~~from~~noncontrollable ~~PJM~~transmission ~~participants, and how~~costs ~~MISO~~billed ~~would~~by ~~allocate payments received to MISO participants, is uncertain at this time~~PJM.

~~MISO~~On January 18 to 20, 2011 FES participated in a descending clock auction for POLR service ~~Resource~~administered ~~Adequacy~~by ~~Proposal~~Met-Ed, Penelec, and Penn Power and their consultant, NERA for the following tranche products and delivery periods: Residential 12-month, Residential 24-month, Commercial 12-month and Industrial 12-month. All 12-month delivery periods are from June 1, 2011 through May 31, 2012 while all 24-month delivery periods are from June 1, 2011 through May 31, 2013. Met-Ed offered 3 Residential 12-month tranches, 4 Residential 24-month tranches, 6 Commercial 12-month tranches and 11 Industrial tranches. Penelec offered 3 Residential 12-month tranches, 2 Residential 24-month tranches, 5 Commercial 12-month tranches and 11 Industrial tranches. Penn Power offered 2 Residential 12-month tranches, 1 Residential 24-month tranche, 3 Commercial 12-month tranches and 3 Industrial tranches.

~~MISO made~~For aMet-Ed ~~filing on December 28~~offerings, ~~2007~~FES ~~that~~won ~~would~~1 ~~create~~Commercial ~~an enforceable planning reserve requirement in the MISO tariff for load~~12-~~serving~~month ~~entities~~tranche ~~such as the Ohio Companies, Penn~~ and ~~FES.~~zero ~~This requirement was proposed to become effective~~ for the ~~planning~~remaining ~~year beginning June 1, 2009~~products. ~~The filing would permit MISO to~~ ~~establish~~For ~~the~~Penelec ~~reserve~~and ~~margin~~Penn ~~requirement~~Power ~~for load-serving entities based upon a one day loss of load in ten years standard~~offerings, ~~unless~~FES ~~the~~won ~~state~~no ~~utility regulatory agency establishes a different planning reserve for load-serving entities in its state~~tranches. ~~FirstEnergy~~FES ~~believes~~entered ~~the~~into ~~proposal promotes~~ a ~~mechanism~~SMA ~~that~~to ~~will result~~provide incapacity, ~~commitments~~energy, ~~from~~ancillary ~~both load-serving entities and resources~~services, ~~including both generation~~ and ~~demand~~congestion ~~side~~costs ~~resources~~with ~~that~~Met-Ed ~~are necessary~~ for ~~reliable resource adequacy and planning in~~ the ~~MISO~~product ~~footprint~~won. ~~The FERC conditionally approved~~Under ~~MISO’s~~the ~~Resource~~terms ~~Adequacy~~and ~~proposal~~conditions onof ~~March~~the 26SMA, ~~2008.~~Met-Ed Onis ~~June 25,~~responsible ~~2008, MISO submitted a second compliance filing establishing the enforcement mechanism~~ for ~~the~~ ~~reserve~~payment ~~margin~~of ~~requirement which establishes deficiency payments for~~noncontrollable ~~load-serving~~transmission ~~entities~~costs ~~that~~billed doby ~~not meet the resource adequacy requirements~~PJM. ~~Numerous parties, including FirstEnergy, protested this filing.~~

~~On October~~Capital ~~20, 2008, the FERC issued three orders essentially permitting the MISO~~Requirements Resource Adequacy program to proceed with some modifications. First, the FERC accepted MISO's financial settlement approach for enforcement of Resource Adequacy subject to a compliance filing modifying the cost of new entry penalty. Second, the FERC conditionally accepted MISO's compliance filing on the qualifications for purchased power agreements to be capacity resources, load forecasting, loss of load expectation, and planning reserve zones. Additional compliance filings were directed on accreditation of load modifying resources and price responsive demand. Finally, the FERC largely denied rehearing of its March 26 order with the exception of issues related to behind the meter resources and certain ministerial matters. On April 16, 2009, the FERC issued an additional order on rehearing and compliance, approving MISO’s proposed financial settlement provision for Resource Adequacy. The MISO Resource Adequacy program was implemented as planned and became effective on June 1, 2009, the beginning of the MISO planning year. On June 17, 2009, MISO submitted a compliance filing in response to the FERC’s April 16, 2009 order directing it to address, among others, various market monitoring and mitigation issues. On July 8, 2009, various parties submitted comments on and protests to MISO’s compliance filing. FirstEnergy submitted comments identifying specific aspects of the MISO’s and Independent Market Monitor’s proposals for market monitoring and mitigation and other issues that it believes the FERC should address and clarify. On October 23, 2009, FERC issued an order approving a MISO compliance filing that revised its tariff to provide for netting of demand resources, but prohibiting the netting of behind-the-meter generation.

~~FES~~Our capital spending for 2011 is expected to be approximately $1.4 billion (excluding nuclear ~~Sales~~fuel). For 2012 and 2013 we anticipate average annual baseline capital expenditures of approximately $1.2 billion — that excludes currently unplanned investment opportunities or future mandated spending. Baseline capital initiatives promote reliability, improve operations, and support current environmental and energy efficiency directives. Our capital investments for additional nuclear fuel are expected to ~~Affiliates~~be $133 million, $300 million and $183 million in 2011, 2012 and 2013, respectively.

~~FES supplied~~Anticipated ~~all~~capital ofexpenditures ~~the power requirements~~ for the ~~Ohio Companies pursuant to a PSA that ended on December 31~~Utilities, ~~2008. On January 2, 2009,~~ FES ~~signed~~and ~~an agreement to provide 75% of the Ohio Companies~~FirstEnergy’s ~~power~~other ~~requirements~~subsidiaries for ~~the~~ ~~period January 5~~2011, ~~2009~~excluding ~~through~~nuclear ~~March 31~~fuel, ~~2009.~~are ~~Subsequently,~~shown ~~FES signed~~in ~~an agreement to provide 100% of~~ the ~~Ohio~~following ~~Companies’~~table. ~~power~~Such ~~requirements for~~costs ~~the~~include ~~period~~expenditures ~~April 1, 2009 through May 31, 2009. On March 4,~~for ~~2009,~~ the ~~PUCO~~betterment ~~issued~~of anexisting ~~order~~facilities ~~approving~~and ~~these two affiliate sales agreements. FERC authorization~~ for ~~these~~the ~~affiliate~~completion ~~sales was by means~~ of agenerating ~~December 23~~capacity, ~~2008~~ ~~waiver of restrictions on affiliate sales without prior approval of the~~construction, ~~FERC.~~transmission ~~Rehearing was denied on July 31~~lines, ~~2009.~~distribution ~~On October 19~~lines, ~~2009,~~substations ~~the~~and ~~FERC accepted~~other ~~FirstEnergy’s revised tariffs~~assets.

On May 13-14, 2009, FES participated in a descending clock auction for PLR service administered by the Ohio Companies and their consultant, CRA International. FES won 51 tranches in the auction, and entered into a Master SSO Supply Agreement to provide capacity, energy, ancillary services and transmission to the Ohio Companies for a two-year period beginning June 1, 2009. Other winning suppliers have assigned their Master SSO Supply Agreements to FES, five of which were effective in June, two more in July, four more in August and ten more in September, 2009. FES also supplies power used by Constellation to serve an additional five tranches. As a result of these arrangements, FES serves 77 tranches, or 77% of the PLR load of the Ohio Companies.


			Capital
	2010		Expenditures
	Actual⁽¹⁾		Forecast 2011
	*(In millions)*
OE	$	138	$	127
Penn		26		20
CEI		113		117
TE		46		37
JCP&L		190		181
Met-Ed		106		89
Penelec		135		121
ATSI		67		60
FGCO		581		215
NGC		333		393
Other subsidiaries		78		60

Total	$	1,813	$	1,420

12(1) Excludes nuclear fuel.

On10 November 3, 2009, FES, Met-Ed, Penelec and Waverly restated their partial requirements power purchase agreement for 2010. The Fourth Restated Partial Requirements Agreement (PRA) continues to limit the amount of capacity resources required to be supplied by FES to 3,544 MW, but requires FES to supply essentially all of Met-Ed, Penelec, and Waverly’s energy requirements in 2010. Under the Fourth Restated Partial Requirements Agreement, Met-Ed, Penelec, and Waverly (Buyers) assigned 1,300 MW of existing energy purchases to FES to assist it in supplying Buyers’ power supply requirements and managing congestion expenses. FES can either sell the assigned power from the third party into the market or use it to serve the Met-Ed/Penelec load. FES is responsible for obtaining additional power supplies in the event of failure of supply of the assigned energy purchase contracts. Prices for the power sold by FES under the Fourth Restated Partial Requirements Agreement were increased to $42.77 and $44.42, respectively for Met-Ed and Penelec. In addition, FES agreed to reimburse Met-Ed and Penelec, respectively, for congestion expenses and marginal losses in excess of $208 million and $79 million, respectively, as billed by PJM in 2010, and associated with delivery of power by FES under the Fourth Restated Partial Requirements Agreement. The Fourth Restated Partial Requirements Agreement terminates at the end of 2010.

The YardsTable Creek Pumped Storage Project is a 400 MW hydroelectric project located in Warren County, New Jersey. JCP&L owns an undivided 50% interest in the project, and JCP&L operates the project. PSEG Fossil, LLC, a subsidiary of Public Service Enterprise Group, owns the remaining interest in the plant. The project was constructed in the early 1960s, and became operational in 1965. Authorization to operate the project is by a license issued by the FERC. The existing license expires on February 28, 2013.Contents

~~FirstEnergy and~~During ~~PSEG desire to renew~~ the ~~license~~2011-2015 ~~and~~period, tomaturities ~~that end~~of, ~~on January 11, 2008, JCP&L~~ and ~~PSEG~~sinking ~~Fossil~~fund ~~submitted~~requirements ~~the initial documents necessary to obtain a new license~~ for the project. The process for relicensing (renewing the license for) a hydroelectric project is described in FERC’s Integrated Licensing Process (ILP) regulations. The ILP regulations call for numerous environmental, ~~operational,~~long-term ~~structural and safety and other studies to~~debt ~~be conducted as part~~ of ~~the~~FirstEnergy relicensing process. Although some of these studies were initiated in 2009, the bulk of the studies will be performed in 2010 – all for the purpose of submitting the application for a new license on February 28, 2011. The ILP regulations provide for opportunity for public notice and ~~comment~~its assubsidiaries ~~part of many of these study processes; meaning that~~are: federal and state regulatory agencies, as well as members of the public, will have amply opportunity to participate in the relicensing process. The ILP regulations provide significant discretion for FERC to set a procedural schedule to act on the license application; meaning that FirstEnergy is not able at this time to predict when FERC will take final action in issuing the new license for the Yards Creek project. To the extent, however that the license proceedings extend beyond the February 28, 2013 expiration date for the current license, the current license will be extended as necessary to permit FERC to issue the new license.

Capital Requirements


	Long-Term Debt Redemption Schedule
	2011			2012-2015		Total
	*(In millions)*
FirstEnergy	$	250		$	—	$	250
FES		163			692		855
OE		—			150		150
Penn		1			4		5
CEI		20			396		416
JCP&L		32			149		181
Met-Ed		—			400		400
Penelec		—			150		150
Other⁽¹⁾		(21	)		229		208

Total	$	445		$	2,170	$	2,615

~~Our capital spending for 2010 is expected to be approximately $1.65 billion~~ (~~excluding~~1) ~~nuclear~~Includes ~~fuel),~~elimination of ~~which~~certain ~~$241 million~~intercompany ~~relates to Sammis AQC system expenditures~~debt. Capital spending for 2011 and 2012 is expected to be approximately $1.0 billion to $1.2 billion each year. Our capital investments for additional nuclear fuel during 2010 are estimated to be approximately $203 million.

~~Anticipated capital~~The ~~expenditures for the Utilities, FES and FirstEnergy’s other subsidiaries for 2010, excluding nuclear fuel, are shown in the~~ following ~~table.~~tables ~~Such~~display ~~costs include~~consolidated ~~expenditures~~operating ~~for~~lease ~~the~~commitments ~~betterment~~as of ~~existing facilities and for the construction of generating capacity~~December 31, ~~facilities for environmental compliance, transmission lines, distribution lines, substations and other assets~~2010.

	2009		Capital Expenditures Forecast
	Lease		Capital
	Actual(1)		2010
Operating Leases	Payments		Trust		Net
	(In millions)
OE	$	131	$	116
2011	$	329	$	116	$	213
Penn		23		19
2012		365		125		240
CEI		111		108
2013		367		130		237
TE		46		48
2014		363		131		232
JCP&L		171		170
2015		365		91		274
Met-Ed		100		102
Years thereafter		2,150		32		2,118
Penelec		132		127
Total minimum lease payments	$	3,939	$	625	$	3,314
ATSI		34		49
FGCO		724		592
NGC		242		254
Other subsidiaries		56		66
Total	$	1,770	$	1,651
(1) Excludes nuclear fuel.


Operating Leases	FES		OE		CEI		TE		JCP&L		Met-Ed		Penelec
	*(In millions)*
2011	$	192	$	146	$	4	$	64	$	6	$	4	$	3
2012		230		147		3		64		5		4		3
2013		236		147		3		64		5		4		3
2014		234		146		3		64		5		4		2
2015		238		146		3		64		4		4		2
Years thereafter		1,895		166		6		79		48		40		23

Total minimum lease payments	$	3,025	$	898	$	22	$	399	$	73	$	60	$	36

~~During~~FirstEnergy expects its existing sources of liquidity to remain sufficient to meet its ~~the~~anticipated ~~2010-2014~~obligations ~~period,~~and ~~maturities~~those of its subsidiaries. FirstEnergy’s business is capital intensive, requiring ~~and~~significant ~~sinking~~resources to fund ~~requirements~~operating ~~for~~expenses, ~~long-term~~ construction expenditures, scheduled debt ofmaturities ~~FirstEnergy~~and interest and ~~its~~dividend ~~subsidiaries~~payments. ~~are:~~During 2011, FirstEnergy expects to satisfy these requirements with internal cash from operations — external funds may also be raised in the capital markets as market conditions warrant. FirstEnergy also expects that borrowing capacity under credit facilities will continue to be available to manage working capital requirements along with continued access to long-term capital markets.

	Long-Term Debt Redemption Schedule
	2010			2011-2014		Total
	(In millions)
FirstEnergy	$	1	$	256		$	257
FES		52		300			352
OE		1		-			1
Penn		1		5			6
CEI(1)		-		300			300
JCP&L		31		140			171
Met-Ed		100		400			500
Penelec		24		150			174
Other(2)		58		(28	)		30
Total	$	268	$	1,523		$	1,791
(1) CEI has an additional $110 million due to associated companies in 2010-2014.
(2) Includes elimination of certain intercompany debt.

FirstEnergy had approximately $700 million of short-term indebtedness as of December 31, 2010, comprised of borrowings under the $2.75 billion revolving line of credit described below. Total short-term bank lines of committed credit to FirstEnergy, FES and the Utilities as of January 31, 2011 were approximately $3.2 billion.

~~The~~11 ~~following table displays operating lease commitments, net of capital trust cash receipts for the 2010-2014 period.~~

	Net Operating Lease Commitments
	2010				2011-2014		Total
	(In millions)
OE	$	104		$	403		$	507
CEI(1)		(40	)		(194	)		(234	)
TE		35			138			173
JCP&L		6			19			25
Met-Ed		7			13			20
Penelec		3			9			12
FESC		14			39			53
FGCO		199			888			1,087
NGC(2)		(103	)		(414	)		(517	)
Total	$	225		$	901		$	1,126
(1) Reflects CEI's investment in Shippingport that purchased lease obligations bonds issued on behalf of lessors in Bruce Mansfield Units 1, 2 and 3 sale and leaseback transactions. Effective October 16, 2007, CEI and TE assigned their leasehold interests in the Bruce Mansfield Plant to FGCO.
(2) Reflects NGC’s purchase of lessor equity interests in Beaver Valley Unit 2 and Perry in the second quarter of 2008.

FirstEnergy ~~expects~~, ~~its~~along ~~existing~~with ~~sources~~certain of ~~liquidity~~its tosubsidiaries, ~~remain~~are ~~sufficient~~party to ~~meet~~a ~~its~~$2.75 billion five-year ~~anticipated~~revolving ~~obligations~~credit ~~and~~facility. ~~those~~FirstEnergy ofhas ~~its~~the ~~subsidiaries.~~ability ~~FirstEnergy~~to ~~and~~request ~~its subsidiaries'~~an ~~business~~increase isin ~~capital~~the ~~intensive,~~total commitments ~~requiring~~available ~~significant~~under ~~resources~~this facility up to ~~fund~~ ~~operating~~a ~~expenses,~~maximum ~~construction~~of ~~expenditures~~$3.25 billion, ~~scheduled~~subject ~~debt~~to ~~maturities~~the ~~and~~discretion ~~interest~~of ~~and~~each ~~dividend~~lender ~~payments~~to provide additional commitments. ~~During~~Commitments ~~2009~~under ~~and~~the infacility ~~subsequent~~are available ~~years~~until August 24, ~~FirstEnergy~~ ~~expects~~2012, tounless ~~satisfy~~the ~~these~~lenders ~~requirements~~agree, ~~with~~at athe ~~combination~~request of ~~cash from~~the ~~operations~~borrowers, ~~and~~to ~~funds~~an unlimited ~~from~~number ~~the~~of ~~capital~~additional ~~markets~~one-year extensions. ~~FirstEnergy~~Generally, ~~also~~borrowings ~~expects~~under the facility must ~~that~~be ~~borrowing~~repaid ~~capacity~~within ~~under~~364 days. ~~credit~~Available ~~facilities~~amounts ~~will~~for ~~continue~~each toborrower beare ~~available~~subject to a specified ~~manage~~sub-limit, ~~working~~as ~~capital~~well ~~requirements~~as ~~during~~applicable ~~those~~regulatory ~~periods~~and other limitations. The annual facility fee is 0.125%.

~~FirstEnergy had~~As ~~approximately~~of ~~$1.2~~January ~~billion~~31, of2011, ~~short-term~~FES ~~indebtedness~~had asa ~~of December~~$100 ~~31,~~million ~~2009,~~term ~~comprised~~loan ofin addition to a $1.1 billion incredit ~~borrowings~~limit associated ~~under~~with ~~the~~ FirstEnergy’s $2.75 billion revolving ~~line of~~ credit ~~described~~facility. ~~below~~Also, an aggregate of $~~100 million~~395 million of ~~other~~accounts ~~bank~~receivable ~~borrowings~~financing ~~and~~facilities ~~$31~~through ~~million~~the ofOhio ~~currently~~and ~~payable~~Pennsylvania ~~notes.~~Companies ~~Total~~may ~~short-term~~be ~~bank~~accessed ~~lines~~to ofmeet ~~committed~~working ~~credit~~capital torequirements ~~FirstEnergy,~~and ~~FES~~for ~~and~~other ~~the~~general ~~Utilities~~corporate purposes. FirstEnergy’s available liquidity as of January 31, ~~2010~~2011, ~~were~~is ~~approximately~~described $3in the following table.~~4 billion.~~

FirstEnergy, along with certain of its subsidiaries, are party to a $2.75 billion five-year revolving credit facility. FirstEnergy has the ability to request an increase in the total commitments available under this facility up to a maximum of $3.25 billion, subject to the discretion of each lender to provide additional commitments. Commitments under the facility are available until August 24, 2012, unless the lenders agree, at the request of the borrowers, to an unlimited number of additional one-year extensions. Generally, borrowings under the facility must be repaid within 364 days. Available amounts for each borrower are subject to a specified sub-limit, as well as applicable regulatory and other limitations. The annual facility fee is 0.125%.


						Available
Company	Type	Maturity		Commitment		Liquidity
				(In millions)
FirstEnergy⁽¹⁾	Revolving	Aug. 2012		$	2,750	$	2,245
FES	Term loan	Mar. 2011			100		—
Ohio and Pennsylvania Companies	Receivables financing	Various	⁽²⁾		395		237

		Subtotal		$	3,245	$	2,482
		Cash			—		668

		Total		$	3,245	$	3,150


⁽¹⁾		FirstEnergy Corp. and subsidiary borrowers.

⁽²⁾		Ohio — $250 million matures March 30, 2011; Pennsylvania — $145 million matures June 17, 2011 with optional extension terms.

AsFirstEnergy’s ~~of January 31,~~primary ~~2010,~~source ~~FES~~of ~~had~~cash afor ~~$100~~continuing ~~million~~operations ~~bank~~as ~~credit~~a ~~facility~~holding incompany ~~addition~~is cash tofrom athe ~~$1 billion~~operations ~~credit~~of ~~limit~~its ~~associated with FirstEnergy's $2~~subsidiaries.~~75 billion~~ ~~revolving~~During ~~credit~~2010, ~~facility.~~the ~~Also,~~holding ancompany ~~aggregate~~received of $~~515~~850 million of ~~accounts receivable financing facilities through the Ohio~~ ~~and~~cash ~~Pennsylvania~~dividends ~~Companies~~on ~~may~~common bestock ~~accessed~~from toits ~~meet~~subsidiaries ~~working capital requirements~~ and ~~for~~paid ~~other general corporate purposes. FirstEnergy's available liquidity as of January~~$670 ~~31,~~million ~~2010, is described~~ in ~~the~~cash ~~following~~dividends ~~table~~to common shareholders.

Company	Type	Maturity	Commitment		Available Liquidity as of January 31, 2010
			(In millions)
FirstEnergy(1)	Revolving	Aug. 2012	$	2,750	$	1,387
FirstEnergy Solutions	Bank line	Mar. 2011		100		-
Ohio and Pennsylvania Companies	Receivables financing	Various(2)		515		308
		Subtotal	$	3,365	$	1,695
		Cash		-		764
		Total	$	3,365	$	2,459

As of December 31, 2010, the Ohio Companies and Penn had the aggregate capability to issue approximately $2.4 billion of additional FMBs on the basis of property additions and retired bonds under the terms of their respective mortgage indentures. The issuance of FMBs by the Ohio Companies is also subject to provisions of their senior note indentures generally limiting the incurrence of additional secured debt, subject to certain exceptions that would permit, among other things, the issuance of secured debt (including FMBs) supporting pollution control notes or similar obligations, or as an extension, renewal or replacement of previously outstanding secured debt. In addition, these provisions would permit OE and CEI to incur additional secured debt not otherwise permitted by a specified exception of up to $124 million and $26 million, respectively, as of December 31, 2010. As a result of the indenture provisions, TE cannot incur any additional secured debt. Met-Ed and Penelec had the capability to issue secured debt of approximately $394 million and $343 million, respectively, under provisions of their senior note indentures as of December 31, 2010.

(Based upon FGCO’s FMB indenture, net earnings and available bondable property additions as of December 31, 2010, FGCO had the capability to issue $1).7 billion ~~FirstEnergy~~of ~~Corp~~additional FMBs under the terms of that indenture. Based upon NGC’s FMB indenture, net earnings and ~~subsidiary~~available ~~borrowers~~bondable property additions, NGC had the capability to issue $695 million of additional FMBs as of December 31, 2010.

~~(2)~~To ~~$370~~the ~~million~~extent ~~expires~~that ~~February~~coverage ~~22,~~requirements ~~2010;~~or ~~$145~~market ~~million~~conditions ~~expires~~restrict ~~December~~the 17subsidiaries’ abilities to issue desired amounts of FMBs or preferred stock, ~~2010~~they may seek other methods of financing. ~~The~~Such financings ~~Ohio~~could include the sale of preferred and/or ~~Pennsylvania~~preference ~~Companies~~stock ~~have~~or ~~typically~~of ~~renewed~~such ~~expiring~~other ~~receivables~~types ~~facilities~~of securities onas anmight ~~annual~~be ~~basis~~authorized ~~and~~by ~~expect~~applicable toregulatory ~~continue~~authorities ~~that~~which ~~practice~~would asnot ~~market~~otherwise ~~conditions~~be sold and ~~the~~could ~~continued~~result ~~quality~~in annual interest charges and/or dividend requirements in excess of ~~receivables~~those that ~~permit~~would otherwise be incurred.

~~FirstEnergy's~~On September 22, 2008, the Shelf Registrants filed an automatically effective shelf registration ~~primary~~statement ~~source~~with ofthe ~~cash~~SEC for ~~continuing~~an ~~operations~~unspecified asnumber aand ~~holding~~amount ~~company~~of issecurities ~~cash~~to be offered thereon. ~~from~~The shelf registration provides FirstEnergy the ~~operations~~flexibility to issue and sell various types of securities, ~~its~~including ~~subsidiaries.~~common ~~During~~stock, ~~2009~~preferred stock, ~~the~~debt ~~holding~~securities, ~~company~~warrants, share purchase ~~received~~contracts, ~~$972 million~~and ofshare ~~cash~~purchase ~~dividends~~units. onThe ~~common~~Shelf ~~stock~~Registrants ~~from~~may ~~its~~utilize the shelf registration ~~subsidiaries~~statement to offer and ~~paid~~sell ~~$670 million~~unsecured, and in ~~cash~~some ~~dividends~~cases, tosecured ~~common shareholders~~debt securities.

~~As of~~12 December 31, 2009, the Ohio Companies and Penn had the aggregate capability to issue approximately $1.4 billion of additional FMBs on the basis of property additions and retired bonds under the terms of their respective mortgage indentures. The issuance of FMBs by the Ohio Companies is also subject to provisions of their senior note indentures generally limiting the incurrence of additional secured debt, subject to certain exceptions that would permit, among other things, the issuance of secured debt (including FMBs) supporting pollution control notes or similar obligations, or as an extension, renewal or replacement of previously outstanding secured debt. In addition, these provisions would permit OE and CEI to incur additional secured debt not otherwise permitted by a specified exception of up to $127 million and $36 million, respectively, as of December 31, 2009. In April 2009, TE issued $300 million of new senior secured notes backed by FMBs. Concurrently with that issuance, and in order to satisfy the limitation on secured debt under its senior note indenture, TE issued an additional $300 million of FMBs to secure $300 million of its outstanding unsecured senior notes originally issued in November 2006. As a result, the provisions for TE to incur additional secured debt do not apply. In August 2009 CEI issued $300 million of FMBs. CEI restricted $150 million of the proceeds to fund the redemption of $150 million of secured notes that were paid in November 2009. Based upon FGCO's FMB indenture, net earnings and available bondable property additions as of December 31, 2009, FGCO had the capability to issue $2.2 billion of additional FMBs under the terms of that indenture. Met-Ed and Penelec had the capability to issue secured debt of approximately $379 million and $319 million, respectively, under provisions of their senior note indentures as of December 31, 2009.

ToTable the extent that coverage requirements or market conditions restrict the subsidiaries’ abilities to issue desired amounts of FMBs or preferred stock, they may seek other methods of financing. Such financings could include the sale of preferred and/or preference stock or of such other types of securities as might be authorized by applicable regulatory authorities which would not otherwise be sold and could result in annual interest charges and/or dividend requirements in excess of those that would otherwise be incurred.Contents

~~On September~~Nuclear ~~22,~~Operating ~~2008, the Shelf Registrants filed an automatically effective shelf~~Licenses registration statement with the SEC for an unspecified number and amount of securities to be offered thereon. The shelf registration provides FirstEnergy the flexibility to issue and sell various types of securities, including common stock, preferred stock, debt securities, warrants, share purchase contracts, and share purchase units. The Shelf Registrants may utilize the shelf registration statement to offer and sell unsecured, and in some cases, secured debt securities.

On August 27, 2010, FENOC submitted an application to the NRC for renewal of the Davis-Besse Nuclear Power Station operating license for an additional twenty years, until 2037. On December 27 ~~Operating~~and ~~Licenses~~28, 2010, a group of petitioners filed a request for hearing, contending that FENOC failed to adequately consider wind or solar generation, or some combination thereof, as an alternative to license extension at Davis Besse. They further argued FENOC had failed to adequately assess the cost of a severe accident at Davis Besse. FENOC and the NRC staff responded to this pleading on January 21, 2011, demonstrating that none of the petitioners’ arguments were admissible contentions under the National Environmental Policy Act or NRC regulations. An Atomic Safety and Licensing Board panel is expected to determine whether a hearing is necessary in this matter.

~~In August~~The ~~2007,~~following ~~FENOC~~table ~~submitted~~summarizes ~~an application to~~ the ~~NRC~~current ~~to renew the~~ operating ~~licenses~~ ~~for~~license ~~the~~expiration ~~Beaver~~dates ~~Valley Power Station (Units 1 and 2)~~ for anFES’ ~~additional~~nuclear ~~20 years. On November 5, 2009, the NRC issued a renewed operating license for Beaver Valley Power Station, Units 1 and 2. The operating licenses for these~~ facilities ~~were~~in ~~extended until 2036 and 2047 for Units 1 and 2, respectively~~service.


			Current License
Station	In-Service Date		Expiration
Beaver Valley Unit 1		1976		2036
Beaver Valley Unit 2		1987		2047
Perry		1986		2026
Davis-Besse		1977		2017

~~Each~~Nuclear ofRegulation the nuclear units in the FES portfolio operates under a 40-year operating license granted by the NRC. The following table summarizes the current operating license expiration dates for FES’ nuclear facilities in service.

Station	In-Service Date	Current License Expiration
Beaver Valley Unit 1	1976	2036
Beaver Valley Unit 2	1987	2047
Perry	1986	2026
Davis-Besse	1977	2017

Under NRC regulations, FirstEnergy must ensure that adequate funds will be available to decommission its nuclear facilities. As of December 31, 2010, FirstEnergy had approximately $2 billion invested in external trusts to be used for the decommissioning and environmental remediation of Davis-Besse, Beaver Valley, Perry and TMI-2. FirstEnergy provides an additional $15 million parental guarantee associated with the funding of decommissioning costs for these units. As required by the NRC, FirstEnergy annually recalculates and adjusts the amount of its parental guarantee, as appropriate. The values of FirstEnergy’s nuclear decommissioning trusts fluctuate based on market conditions. If the value of the trusts decline by a material amount, FirstEnergy’s obligation to fund the trusts may increase. Disruptions in the capital markets and its effects on particular businesses and the economy could also affect the values of the nuclear decommissioning trusts. The NRC recently issued guidance anticipating an increase in low-level radioactive waste disposal costs associated with the decommissioning of FirstEnergy’s nuclear facilities. As a result, FirstEnergy’s decommissioning funding obligations are expected to increase. FirstEnergy continues to evaluate the status of its funding obligations for the decommissioning of these nuclear facilities.

Nuclear Insurance ~~Regulation~~

~~Under NRC~~The ~~regulations,~~Price-Anderson ~~FirstEnergy~~Act ~~must~~limits ~~ensure~~the ~~that~~public ~~adequate~~liability ~~funds~~which ~~will~~can be ~~available to~~assessed ~~decommission~~with ~~its~~respect ~~nuclear~~to ~~facilities.~~a ~~As of December 31, 2009,~~nuclear ~~FirstEnergy~~power ~~had~~plant ~~approximately~~to $112.96 billion ~~invested~~(assuming in104 ~~external~~units ~~trusts~~licensed to be ~~used~~operate) for ~~the~~a ~~decommissioning~~single ~~and environmental remediation of Davis-Besse,~~nuclear ~~Beaver Valley~~incident, ~~Perry~~which ~~and~~amount ~~TMI-2.~~is Ascovered ~~part~~by: of(i) private ~~the~~insurance ~~application~~amounting to ~~the NRC to transfer the ownership of Davis-Besse, Beaver Valley and Perry to NGC in 2005, FirstEnergy provided an additional~~ $80 375 million; ~~parental guarantee associated with the funding of decommissioning costs for these units~~ and ~~indicated that it~~(ii) ~~planned~~$12.2 billion toprovided ~~contribute~~by an ~~additional~~industry ~~$80~~retrospective ~~million~~rating toplan ~~these trusts by 2010. As~~ required by the NRC, ~~FirstEnergy annually recalculates and adjusts the amount of~~pursuant ~~its parental guarantee, as appropriate~~thereto. ~~The~~Under ~~values~~such ofretrospective ~~FirstEnergy’s~~rating ~~nuclear decommissioning~~plan, ~~trusts~~in ~~fluctuate based on market conditions. If~~ the ~~value~~event of ~~the trusts decline by~~ a ~~material~~nuclear ~~amount,~~incident ~~FirstEnergy’s~~at ~~obligation~~any tounit ~~fund~~ in the ~~trusts~~ ~~may~~United ~~increase.~~States ~~Disruptions~~resulting in ~~the~~losses ~~capital~~in ~~markets~~excess ~~and~~of ~~its~~private ~~effects~~insurance, onup ~~particular businesses~~to ~~and~~$118 million ~~the~~(but ~~economy~~not inmore than ~~general~~$18 million ~~also~~per ~~affects~~unit ~~the~~per ~~values~~year ofin the ~~nuclear decommissioning~~event ~~trusts.~~of Onmore ~~June~~than ~~18,~~one ~~2009,~~incident) ~~the~~must ~~NRC~~be ~~informed~~contributed ~~FENOC that its review~~for ~~tentatively~~each ~~concluded~~nuclear ~~that~~unit alicensed ~~shortfall~~to ~~existed~~operate in the ~~decommissioning~~country ~~trust~~by ~~fund for~~the ~~Beaver~~licensees ~~Valley~~thereof ~~Unit~~to 1.cover ~~On November 24, 2009, FENOC submitted a revised~~liabilities ~~decommissioning~~arising ~~funding~~out ~~calculation~~of ~~using~~ the ~~NRC~~incident. ~~formula~~Based ~~method based~~ on ~~the renewed~~their ~~license~~present ~~for~~nuclear ~~Beaver~~ownership ~~Valley~~and ~~Unit~~leasehold 1interests, ~~which extended operations until 2036.~~ ~~FENOC~~FirstEnergy’s ~~submittal~~maximum ~~demonstrated~~potential ~~that~~assessment ~~there~~under ~~was~~these aprovisions dewould ~~minimis~~be ~~shortfall.~~$470 million On(OE-$40 ~~December 11~~million, ~~2009~~NGC-$408 million, ~~the~~and ~~NRC’s~~TE-$22 million) ~~review~~per ofincident ~~FirstEnergy’s~~but ~~methodology~~not ~~for~~more ~~the funding~~than of$70 million ~~decommissioning of this facility concluded that there was reasonable~~(OE-$6 ~~assurance~~million, ofNGC-$61 million, ~~adequate~~and ~~decommissioning~~TE-$3 million) ~~funding~~in atany ~~the~~one ~~time~~year ~~permanent termination of operations is expected. FirstEnergy continues to evaluate the status of its funding obligations~~ for ~~the~~each ~~decommissioning of these nuclear facilities~~incident.

~~Nuclear~~In addition to the public liability insurance provided pursuant to the Price-Anderson Act, ~~Insurance~~FirstEnergy has also obtained insurance coverage in limited amounts for economic loss and property damage arising out of nuclear incidents. FirstEnergy is a member of NEIL which provides coverage (NEIL I) for the extra expense of replacement power incurred due to prolonged accidental outages of nuclear units. Under NEIL I, FirstEnergy’s subsidiaries have policies, renewable yearly, corresponding to their respective nuclear interests, which provide an aggregate indemnity of up to approximately $1.4 billion (OE-$120 million, NGC-$1.22 billion, TE-$64 million) for replacement power costs incurred during an outage after an initial 26-week waiting period. Members of NEIL I pay annual premiums and are subject to assessments if losses exceed the accumulated funds available to the insurer. FirstEnergy’s present maximum aggregate assessment for incidents at any covered nuclear facility occurring during a policy year would be approximately $9 million (OE-$1 million, NGC-$8 million, and TE-less than $1 million).

~~The~~13 Price-Anderson Act limits the public liability which can be assessed with respect to a nuclear power plant to $12.6 billion (assuming 104 units licensed to operate) for a single nuclear incident, which amount is covered by: (i) private insurance amounting to $375 million; and (ii) $12.2 billion provided by an industry retrospective rating plan required by the NRC pursuant thereto. Under such retrospective rating plan, in the event of a nuclear incident at any unit in the United States resulting in losses in excess of private insurance, up to $118 million (but not more than $18 million per unit per year in the event of more than one incident) must be contributed for each nuclear unit licensed to operate in the country by the licensees thereof to cover liabilities arising out of the incident. Based on their present nuclear ownership and leasehold interests, FirstEnergy’s maximum potential assessment under these provisions would be $470 million (OE-$40 million, NGC-$408 million, and TE-$22 million) per incident but not more than $70 million (OE-$6 million, NGC-$61 million, and TE-$3 million) in any one year for each incident.

In additionTable to the public liability insurance provided pursuant to the Price-Anderson Act, FirstEnergy has also obtained insurance coverage in limited amounts for economic loss and property damage arising out of nuclear incidents. FirstEnergy is a member of NEIL which provides coverage (NEIL I) for the extra expense of replacement power incurred due to prolonged accidental outages of nuclear units. Under NEIL I, FirstEnergy’s subsidiaries have policies, renewable yearly, corresponding to their respective nuclear interests, which provide an aggregate indemnity of up to approximately $560 million (OE-$48 million, NGC-$486 million, TE-$26 million) for replacement power costs incurred during an outage after an initial 20-week waiting period. Members of NEIL I pay annual premiums and are subject to assessments if losses exceed the accumulated funds available to the insurer. FirstEnergy’s present maximum aggregate assessment for incidents at any covered nuclear facility occurring during a policy year would be approximately $3 million (NGC-$3 million).Contents

FirstEnergy is insured as to its respective nuclear interests under property damage ~~insurance~~ insurance provided by NEIL to the operating company for each plant. Under these arrangements, up to $2.8 billion of coverage for decontamination costs, decommissioning costs, debris removal and repair and/or replacement of property is provided. FirstEnergy pays annual premiums for this coverage and is liable for retrospective assessments of up to approximately $6061 million (OE-$65 million, NGC-$51 52 million, TE-$2 million, Met Ed, Penelec, and JCP&L- less than $1 million ~~in total~~each) during a policy year.

16FirstEnergy intends to maintain insurance against nuclear risks as described above as long as it is available. To the extent that replacement power, property damage, decontamination, decommissioning, repair and replacement costs and other such costs arising from a nuclear incident at any of FirstEnergy’s plants exceed the policy limits of the insurance in effect with respect to that plant, to the extent a nuclear incident is determined not to be covered by FirstEnergy’s insurance policies, or to the extent such insurance becomes unavailable in the future, FirstEnergy would remain at risk for such costs.

~~FirstEnergy intends~~The NRC requires nuclear power plant licensees to ~~maintain~~obtain minimum property insurance ~~against~~coverage ~~nuclear~~of $1.1 billion ~~risks~~or asthe ~~described~~amount ~~above~~generally asavailable ~~long as~~from itprivate sources, whichever is ~~available~~less. ToThe proceeds ~~the~~of ~~extent~~this insurance are required to be used first to ensure that ~~replacement~~the ~~power,~~licensed ~~property~~reactor ~~damage,~~is in ~~decontamination,~~a ~~decommissioning,~~safe ~~repair~~ and ~~replacement~~stable ~~costs~~condition and ~~other~~can ~~such costs~~be ~~arising~~maintained ~~from~~in athat ~~nuclear~~condition ~~incident~~to atprevent any ofsignificant ~~FirstEnergy’s~~risk to ~~plants~~the ~~exceed~~public health and safety. Within 30 days of stabilization, the licensee is required to ~~policy~~prepare ~~limits~~and ofsubmit to the ~~insurance~~NRC ina ~~effect~~cleanup ~~with~~plan ~~respect~~for approval. The plan is required to ~~that~~identify ~~plant,~~all cleanup operations necessary to decontaminate the reactor sufficiently to permit the resumption of ~~extent~~operations aor ~~nuclear~~to ~~incident~~commence isdecommissioning. ~~determined~~Any property insurance proceeds not already expended to place the reactor in a safe and stable condition must be ~~covered~~used byfirst ~~FirstEnergy’s~~to complete those ~~insurance~~decontamination ~~policies,~~operations orthat toare ordered by the ~~extent~~NRC. ~~such~~FirstEnergy ~~insurance~~is ~~becomes~~unable ~~unavailable~~to inpredict ~~the~~what ~~future,~~effect ~~FirstEnergy~~these ~~would~~requirements ~~remain~~may athave ~~risk~~on ~~for~~the ~~such~~availability ~~costs~~of insurance proceeds.

~~The~~Hydro ~~NRC~~Relicensing requires nuclear power plant licensees to obtain minimum property insurance coverage of $1.1 billion or the amount generally available from private sources, whichever is less. The proceeds of this insurance are required to be used first to ensure that the licensed reactor is in a safe and stable condition and can be maintained in that condition so as to prevent any significant risk to the public health and safety. Within 30 days of stabilization, the licensee is required to prepare and submit to the NRC a cleanup plan for approval. The plan is required to identify all cleanup operations necessary to decontaminate the reactor sufficiently to permit the resumption of operations or to commence decommissioning. Any property insurance proceeds not already expended to place the reactor in a safe and stable condition must be used first to complete those decontamination operations that are ordered by the NRC. FirstEnergy is unable to predict what effect these requirements may have on the availability of insurance proceeds.

~~Environmental~~Yards Creek ~~Matters~~

~~Various federal,~~The ~~state~~Yards ~~and~~Creek ~~local~~Pumped ~~authorities~~Storage ~~regulate~~Project ~~FirstEnergy~~is ~~with~~a ~~regard~~400 toMW ~~air~~hydroelectric ~~and water~~project ~~quality~~located ~~and~~in ~~other~~Warren ~~environmental~~County, New ~~matters~~Jersey. ~~The~~JCP&L ~~effects~~owns ofan ~~compliance~~undivided ~~on FirstEnergy~~50% ~~with~~interest ~~regard~~in tothe ~~environmental~~project, ~~matters~~and ~~could~~operates ~~have~~the aproject. ~~material adverse~~PSEG ~~effect~~Fossil, onLLC, ~~FirstEnergy's~~a ~~earnings~~subsidiary ~~and~~of ~~competitive~~Public ~~position~~Service toEnterprise Group, owns the ~~extent~~remaining ~~that~~interest itin the ~~competes~~plant. ~~with~~The ~~companies~~project ~~that~~was ~~are~~constructed ~~not~~in ~~subject~~the toearly ~~such~~1960s, ~~regulations~~ and, ~~therefore,~~became operational in 1965. doAuthorization ~~not~~to ~~bear~~operate the ~~risk~~project ofis ~~costs~~by ~~associated~~a ~~with~~license ~~compliance,~~issued orby ~~failure~~the toFERC. ~~comply,~~The existing license ~~with~~expires ~~such~~on ~~regulations~~February 28, 2013.

In February 2011 FirstEnergy and PSEG filed a joint application with FERC to renew the license ~~accrues~~for ~~environmental~~an ~~liabilities~~additional ~~only~~fifty ~~when~~years. itThe ~~concludes~~companies ~~that~~are itpursuing isrelicensure ~~probable~~through FERC’s Integrated ~~that~~License itApplication ~~has~~Process an(ILP). ~~obligation~~Under ~~for~~the ~~such~~ILP ~~costs~~process FERC will assess the license applications, issue draft and ~~can~~final ~~reasonably~~Environmental ~~estimate~~Assessments/Environmental ~~the~~Impact ~~amount~~Studies (as ofrequired ~~such~~by ~~costs~~NEPA), and provide opportunity for intervention and protests by affected third parties. FERC ~~Unasserted~~may ~~claims~~hold ~~are~~hearings ~~reflected~~during inthe 2-year ILP licensure period. FirstEnergy’s ~~determination~~expects ofFERC to issue ~~environmental~~the ~~liabilities~~new ~~and~~license ~~are~~within ~~accrued~~the inremaining portion of the 2-year ILP period. To the extent, however that the ~~they~~license ~~become~~proceedings ~~both~~extend beyond the February 28, 2013 expiration date for the current ~~probable~~license, ~~and~~the ~~reasonably~~current ~~estimable~~license will be extended yearly as necessary to permit FERC to issue the new license.

~~Clean~~Seneca ~~Air Act Compliance~~

~~FirstEnergy is~~The ~~required~~Seneca to(Kinzua) ~~meet~~Pumped ~~federally-approved~~Storage ~~SO2~~Project ~~emissions regulations.~~is ~~Violations~~a of451 ~~such~~MW ~~regulations~~hydroelectric ~~can~~project ~~result~~located in ~~the shutdown of the~~Warren ~~generating~~County, ~~unit~~Pennsylvania. ~~involved~~FGCO owns and~~/or~~ ~~civil~~operates ~~or criminal penalties of up to $37,500 for each day~~ the ~~unit is in violation~~project. The ~~EPA~~current ~~has~~FERC anlicense ~~interim~~was ~~enforcement~~issued ~~policy for~~on ~~SO2 regulations~~December 1, in1965, ~~Ohio~~and ~~that~~will ~~allows~~expire ~~for compliance based~~ on a November 30~~-day~~, ~~averaging period~~2015. FGCO ~~FirstEnergy~~expects ~~believes~~to itfile isits ~~currently~~new inlicense application ~~compliance~~on ~~with~~or ~~this~~before ~~policy~~November 30, ~~but cannot predict what action the EPA may take in the future with respect to the interim enforcement policy~~2013.

~~FirstEnergy complies~~On ~~with~~November 23, ~~SO2~~2010, ~~reduction requirements~~FGCO ~~under~~filed ~~the~~its ~~Clean~~notice ~~Air Act Amendments~~ of ~~1990~~intent byto ~~burning~~relicense ~~lower-sulfur fuel,~~and ~~generating more electricity from lower~~pre-~~emitting~~application ~~plants, and/or using~~document ~~emission allowances~~(PAD). ~~NOX~~On ~~reductions required~~November 30, by2010, the ~~1990~~Seneca ~~Amendments~~Nation ~~are being achieved through combustion controls, the generation~~ of ~~more~~Indians ~~electricity at lower-emitting plants~~(Salamanca, ~~and/or~~NY) ~~using emission~~filed ~~allowances.~~a Incompeting ~~September 1998, the EPA finalized regulations requiring~~notice ~~additional NOX reductions at FirstEnergy's facilities. The EPA's NOX Transport Rule imposes uniform reductions~~ of ~~NOX~~intent ~~emissions (an~~to ~~approximate~~file ~~85%~~a ~~reduction~~new inlicense ~~utility~~application ~~plant~~and ~~NOX~~PAD. ~~emissions from~~On ~~projected~~January 28, ~~2007~~2011, ~~emissions)~~FERC ~~across~~issued a ~~region~~notice of ~~nineteen states (including~~ ~~Michigan,~~the ~~New~~competing ~~Jersey,~~notices ~~Ohio~~of ~~and~~intent ~~Pennsylvania)~~ and ~~the~~PADs; ~~District~~commencement of ~~Columbia~~prefiling ~~based on~~process aand ~~conclusion~~scoping; ~~that such NOX emissions~~request ~~are~~for ~~contributing~~comments ~~significantly~~on ~~to ozone levels in~~ the ~~eastern~~PADs; ~~United States. FirstEnergy believes its facilities are also complying with the NOX budgets established under SIPs through combustion controls~~ and ~~post-combustion~~identification ~~controls, including~~of ~~Selective~~issues ~~Catalytic Reduction~~ and ~~SNCR~~associated ~~systems,~~study ~~and/or using emission allowances~~requests.

InFERC’s ~~1999 and~~ILP ~~2000,~~provides ~~the EPA issued an NOV and the DOJ filed~~ a ~~civil~~5 year ~~complaint~~period ~~against~~for ~~OE and~~preparation, ~~Penn~~submission ~~based on operation~~ and ~~maintenance~~adjudication of the Wlicenses. ~~H. Sammis Plant (Sammis~~ ~~NSR~~The ~~Litigation)~~first ~~and~~part ~~filed~~is ~~similar~~a ~~complaints~~3-year ~~involving~~period 44during ~~other~~which ~~U.S.~~each ~~power plants.~~of ~~This~~FirstEnergy ~~case~~ and ~~seven~~the ~~other~~Seneca ~~similar~~Nation ~~cases~~ are ~~referred~~ to collect as the ~~NSR cases.~~information ~~OE’s~~ and ~~Penn’s~~conduct ~~settlement with~~ the ~~EPA,~~studies ~~the~~necessary ~~DOJ and three states (Connecticut, New Jersey and New York) that resolved all issues related~~ to ~~the Sammis~~support ~~NSR~~license ~~litigation was approved by the Court on July 11, 2005~~applications. ~~This~~The ~~settlement~~second ~~agreement,~~part inis the ~~form~~same ofas ~~a consent decree, requires reductions of NOX and SO2 emissions at~~ the ~~Sammis,~~licensing ~~Burger,~~process ~~Eastlake~~described ~~and~~above ~~Mansfield coal-fired plants through the installation of pollution control devices or repowering and provides~~ for ~~stipulated~~ ~~penalties~~Yards ~~for failure to install and operate such pollution controls or complete repowering in accordance with that agreement~~Creek. ~~Capital expenditures~~ necessary to complete requirements of the Sammis NSR Litigation consent decree, including repowering Burger Units 4 and 5 for biomass fuel consumption, are currently estimated to be $399 million for 2010-2012.

17Section 15 of the Federal Power Act provides that when there are competing license applications, insignificant differences between competing applications are not determinative and shall not result in transfer of the license for the project. Based on the facts and the law, FirstEnergy believes it qualifies for this “incumbent preference”. The timetable for a FERC decision cannot be predicted at this time.

In14 October 2007, PennFuture and three of its members filed a citizen suit under the federal CAA, alleging violations of air pollution laws at the Bruce Mansfield Plant, including opacity limitations, in the United States District Court for the Western District of Pennsylvania. In July 2008, three additional complaints were filed against FGCO in the U.S. District Court for the Western District of Pennsylvania seeking damages based on Bruce Mansfield Plant air emissions. In addition to seeking damages, two of the three complaints seek to enjoin the Bruce Mansfield Plant from operating except in a “safe, responsible, prudent and proper manner”, one being a complaint filed on behalf of twenty-one individuals and the other being a class action complaint, seeking certification as a class action with the eight named plaintiffs as the class representatives. On October 16, 2009, a settlement reached with PennFuture and one of the three individual complainants was approved by the Court, which dismissed the claims of PennFuture and of the settling individual. The other two non-settling individuals are now represented by counsel handling the three cases filed in July 2008. FGCO believes those claims are without merit and intends to defend itself against the allegations made in those three complaints. The Pennsylvania Department of Health, under a Cooperative Agreement with the Agency for Toxic Substances and Disease Registry, completed a Health Consultation regarding the Mansfield Plant and issued a report dated March 31, 2009, which concluded there is insufficient sampling data to determine if any public health threat exists for area residents due to emissions from the Mansfield Plant. The report recommended additional air monitoring and sample analysis in the vicinity of the Mansfield Plant, which the Pennsylvania Department of Environmental Protection has completed.

In DecemberTable 2007, the state of New Jersey filed a CAA citizen suit alleging NSR violations at the Portland Generation Station against Reliant (the current owner and operator), Sithe Energy (the purchaser of the Portland Station from Met-Ed in 1999), GPU and Met-Ed. On October 30, 2008, the state of Connecticut filed a Motion to Intervene, which the Court granted on March 24, 2009. Specifically, Connecticut and New Jersey allege that "modifications" at Portland Units 1 and 2 occurred between 1980 and 2005 without preconstruction NSR or permitting under the CAA's PSD program, and seek injunctive relief, penalties, attorney fees and mitigation of the harm caused by excess emissions. The scope of Met-Ed’s indemnity obligation to and from Sithe Energy is disputed. Met-Ed filed a Motion to Dismiss the claims in New Jersey’s Amended Complaint and Connecticut’s Complaint in February and September of 2009, respectively. The Court granted Met-Ed's motion to dismiss New Jersey’s and Connecticut’s claims for injunctive relief against Met-Ed, but denied Met-Ed’s motion to dismiss the claims for civil penalties on statute of limitations grounds in order to allow the states to prove either that the application of the discovery rule or the doctrine of equitable tolling bars application of the statute of limitations.Contents

~~In January 2009,~~Environmental ~~the EPA issued a NOV to Reliant alleging NSR violations at~~Matters the Portland Generation Station based on “modifications” dating back to 1986. Met-Ed is unable to predict the outcome of this matter. The EPA’s January 2009, NOV also alleged NSR violations at the Keystone and Shawville Stations based on “modifications” dating back to 1984. JCP&L, as the former owner of 16.67% of the Keystone Station, and Penelec, as former owner and operator of the Shawville Station, are unable to predict the outcome of this matter.

InVarious ~~June 2008~~federal, ~~the~~state ~~EPA issued a Notice~~ and ~~Finding~~local ofauthorities ~~Violation~~regulate toFirstEnergy ~~Mission~~with ~~Energy Westside,~~regard ~~Inc. alleging that "modifications" at the Homer City Power Station occurred since 1988~~ to ~~the~~air ~~present~~and ~~without preconstruction NSR or permitting~~water ~~under~~quality ~~the~~and ~~CAA's~~other ~~PSD~~environmental ~~program~~matters. ~~Mission~~Compliance ~~Energy~~with isenvironmental ~~seeking~~regulations ~~indemnification~~could ~~from~~have a ~~Penelec,~~material ~~the~~adverse ~~co-owner~~effect ~~(along~~on ~~with~~FirstEnergy’s ~~New~~earnings ~~York~~and ~~State~~competitive ~~Electric~~position ~~and~~to ~~Gas~~the ~~Company)~~extent ~~and~~that ~~operator~~FirstEnergy ofcompetes ~~the~~with ~~Homer~~companies ~~City~~that ~~Power~~are ~~Station~~not ~~prior~~subject to ~~its~~such ~~sale~~regulations inand, ~~1999.~~therefore, ~~The~~do ~~scope of~~not ~~Penelec’s~~bear ~~indemnity~~the ~~obligation~~risk toof ~~and~~costs ~~from~~associated ~~Mission~~with ~~Energy~~compliance, isor ~~disputed.~~failure ~~Penelec is unable~~ to ~~predict~~comply, ~~the~~with ~~outcome~~such ~~of this matter~~regulations.

~~In August~~Clean ~~2009,~~Air ~~the~~Act ~~EPA issued a Finding of Violation and NOV alleging violations~~Compliance of the CAA and Ohio regulations, including the PSD, NNSR, and Title V regulations at the Eastlake, Lakeshore, Bay Shore, and Ashtabula generating plants. The EPA’s NOV alleges equipment replacements occurring during maintenance outages dating back to 1990 triggered the pre-construction permitting requirements under the PSD and NNSR programs. In September 2009, FGCO received an information request pursuant to Section 114(a) of the CAA requesting certain operating and maintenance information and planning information regarding the Eastlake, Lake Shore, Bay Shore and Ashtabula generating plants. On November 3, 2009, FGCO received a letter providing notification that the EPA is evaluating whether certain scheduled maintenance at the Eastlake generating plant may constitute a major modification under the NSR provision of the CAA. On December 23, 2009, FGCO received another information request regarding emission projections for the Eastlake generating plant pursuant to Section 114(a) of the CAA. FGCO intends to comply with the CAA, including EPA’s information requests, but, at this time, is unable to predict the outcome of this matter. A June 2006 finding of violation and NOV in which EPA alleged CAA violations at the Bay Shore Generating Plant remains unresolved and FGCO is unable to predict the outcome of such matter.

~~In August~~FirstEnergy ~~2008,~~is ~~FirstEnergy~~required ~~received~~to ameet ~~request~~federally-approved ~~from~~SO2 ~~the~~and ~~EPA~~NOx ~~for~~emissions ~~information~~regulations ~~pursuant~~under ~~to Section 114(a) of~~ the CAA. ~~for~~FirstEnergy ~~certain~~complies ~~operating~~with SO2 and ~~maintenance information~~NOx ~~regarding~~reduction ~~its~~requirements ~~formerly-owned~~under ~~Avon~~the CAA ~~Lake~~ and ~~Niles~~SIP(s) ~~generating~~under ~~plants, as~~the ~~well~~CAA asby aburning ~~copy~~lower-sulfur offuel, acombustion ~~nearly~~controls ~~identical~~and ~~request directed to the current owner,~~post-combustion ~~Reliant Energy~~controls, togenerating ~~allow~~more ~~the~~electricity ~~EPA~~from tolower-emitting ~~determine~~plants ~~whether~~and/or ~~these~~using ~~generating~~emission ~~sources~~allowances. ~~are~~Violations ~~complying~~can ~~with~~result in the ~~NSR~~shutdown ~~provisions~~ of the ~~CAA.~~generating ~~FirstEnergy~~unit ~~intends~~involved toand/or ~~fully comply~~civil ~~with~~or ~~the EPA’s information request, but, at this time, is unable to~~criminal ~~predict the outcome of this matter~~penalties.

18The Sammis, Eastlake and Mansfield coal-fired plants are operated under a consent decree with the EPA and DOJ that requires reductions of NOx and SO2 emissions through the installation of pollution control devices or repowering. OE and Penn are subject to stipulated penalties for failure to install and operate such pollution controls or complete repowering in accordance with that agreement.

~~National~~In July 2008, three complaints were filed against FGCO in the U.S. District Court for the Western ~~Ambient~~District ~~Air~~of ~~Quality~~Pennsylvania ~~Standards~~seeking damages based on Bruce Mansfield Plant air emissions. Two of these complaints also seek to enjoin the Bruce Mansfield Plant from operating except in a “safe, responsible, prudent and proper manner”, one being a complaint filed on behalf of twenty-one individuals and the other being a class action complaint seeking certification as a class action with the eight named plaintiffs as the class representatives. FGCO believes the claims are without merit and intends to defend itself against the allegations made in those three complaints.

~~In March 2005,~~The ~~the~~states ~~EPA finalized CAIR, covering a total~~ of ~~28 states (including Michigan,~~ New Jersey, ~~Ohio~~ and ~~Pennsylvania)~~Connecticut ~~and~~filed ~~the~~CAA ~~District~~citizen ~~of Columbia,~~suits ~~based~~in on2007 ~~proposed~~alleging ~~findings~~NSR ~~that~~violations ~~air emissions from 28 eastern states~~at ~~and~~ the ~~District~~Portland ofGeneration ~~Columbia~~Station ~~significantly~~against ~~contribute~~GenOn toEnergy, ~~non-attainment~~Inc. of (the ~~NAAQS~~ ~~for~~current ~~fine~~owner ~~particles~~ and~~/or~~ ~~the~~operator), ~~"8-hour" ozone NAAQS in other states. CAIR~~Sithe ~~requires~~Energy ~~reductions~~(the purchaser of ~~NOX~~the ~~and SO2 emissions~~Portland inStation ~~two~~from ~~phases~~Met-Ed ~~(Phase I~~ in ~~2009~~1999) ~~for~~and ~~NOX~~Met-Ed. Specifically, ~~2010 for~~these ~~SO2 and~~suits ~~Phase~~allege IIthat in“modifications” ~~2015~~at ~~for~~Portland ~~both~~Units ~~NOX~~1 and ~~SO2), ultimately~~ ~~capping SO2 emissions in affected states to~~ 2~~.5 million~~ ~~tons~~occurred ~~annually~~between 1980 and ~~NOX~~2005 ~~emissions~~without topreconstruction ~~1.3~~NSR ~~million~~permitting ~~tons annually. CAIR was challenged~~ in ~~the~~violation ~~U.S. Court~~ of ~~Appeals for~~ the ~~District~~CAA’s ofPSD ~~Columbia~~program, and onseek ~~July~~injunctive 11relief, ~~2008~~ penalties, ~~the~~attorney ~~Court~~fees ~~vacated CAIR “in its entirety”~~ and ~~directed~~mitigation of the ~~EPA~~harm tocaused ~~“redo~~by ~~its~~excess ~~analysis from the ground up~~emissions.” In ~~September~~ ~~2008~~September 2009, ~~the EPA, utility, mining and certain environmental advocacy~~ ~~organizations petitioned~~ the Court ~~for~~granted aMet-Ed’s ~~rehearing~~motion to ~~reconsider~~dismiss ~~its~~New ~~ruling vacating~~Jersey’s ~~CAIR. In December 2008, the Court reconsidered its prior ruling~~ and ~~allowed~~ ~~CAIR to remain in effect to “temporarily preserve its environmental values” until the EPA replaces CAIR with a new rule consistent with the Court~~Connecticut’s ~~July~~ ~~11,~~claims ~~2008 opinion. On July 10, 2009, the U.S. Court of Appeals~~ for ~~the~~injunctive ~~District~~relief ofagainst ~~Columbia~~Met-Ed, ~~ruled~~but indenied ~~a different case that a cap~~Met-~~and-trade~~Ed’s ~~program similar~~motion to ~~CAIR,~~dismiss ~~called~~ the ~~“NOX~~claims ~~SIP Call,” cannot be used to satisfy certain CAA requirements (known as reasonably available control technology)~~ for ~~areas~~civil ~~in non-attainment under the "8-hour" ozone NAAQS~~penalties. ~~FGCO's future cost of compliance with these regulations may be~~The ~~substantial~~parties ~~and~~dispute ~~will depend, in part, on~~ the ~~action~~scope ~~taken~~of byMet-Ed’s ~~the~~indemnity ~~EPA~~obligation ~~in response~~ to ~~the~~and ~~Court’s~~from ~~ruling~~Sithe Energy.

~~Mercury~~In January 2009, the EPA issued a NOV to GenOn alleging NSR violations at the Portland Generation ~~Emissions~~Station based on “modifications” dating back to 1986 and also alleged NSR violations at the Keystone and Shawville Stations based on “modifications” dating back to 1984. Met-Ed, JCP&L, as the former owner of 16.67% of the Keystone Station, and Penelec, as former owner and operator of the Shawville Station, are unable to predict the outcome of this matter.

In ~~December~~ ~~2000~~June 2008, the EPA ~~announced~~issued ita ~~would~~Notice ~~proceed~~and ~~with~~Finding ~~the~~of ~~development~~Violation ofto Mission Energy Westside, Inc. ~~regulations~~alleging ~~regarding~~that ~~hazardous~~“modifications” ~~air~~at ~~pollutants~~the ~~from~~Homer ~~electric~~City ~~power~~Power ~~plants, identifying~~Station ~~mercury~~occurred assince 1988 to the ~~hazardous~~present without ~~air~~preconstruction ~~pollutant~~NSR permitting in violation of ~~greatest~~the ~~concern~~CAA’s PSD program. In ~~March 2005~~May 2010, the EPA issued ~~finalized~~a ~~the~~second ~~CAMR,~~NOV ~~which~~to ~~provides~~Mission aEnergy ~~cap-and-trade~~Westside, ~~program~~Inc., ~~to reduce~~Penelec, ~~mercury~~NYSEG ~~emissions~~and ~~from~~others ~~coal-fired~~that ~~power~~have ~~plants~~had inan ownership ~~two~~interest ~~phases;~~in ~~initially, capping~~the ~~national~~Homer ~~mercury~~City ~~emissions~~Power atStation ~~38 tons~~containing byin ~~2010~~all ~~(as~~material arespects ~~"co-benefit"~~identical ~~from~~allegations ~~implementation~~as ofthe ~~SO2~~June 2008 ~~and NOX emission~~NOV. ~~caps~~On ~~under~~July 20, 2010, the ~~EPA's~~states ~~CAIR~~of ~~program)~~New York and 15Pennsylvania provided ~~tons~~Mission ~~per~~Energy ~~year~~Westside, ~~by 2018~~Inc. ~~Several~~, ~~states~~Penelec, NYSEG and ~~environmental~~others ~~groups~~that ~~appealed~~have ~~the~~had ~~CAMR~~an toownership interest in the ~~U.S.~~Homer ~~Court~~City ~~of Appeals~~Power ~~for~~Station ~~the~~a ~~District~~notification ofthat ~~Columbia.~~was Onrequired ~~February~~60 8,days ~~2008,~~prior ~~the~~to ~~Court~~filing a ~~vacated~~citizen ~~the~~suit ~~CAMR,~~under ~~ruling that~~ the CAA. ~~EPA~~In ~~failed~~January, to2011, ~~take~~ the ~~necessary~~DOJ ~~steps~~filed ~~to “de-list”~~a ~~coal-fired~~complaint ~~power~~against ~~plants~~Penelec ~~from~~in ~~its~~the ~~hazardous~~U.S. ~~air~~District ~~pollutant~~Court ~~program~~for ~~and,~~the ~~therefore,~~Western ~~could~~District ~~not~~of ~~promulgate~~Pennsylvania aseeking ~~cap-and-trade~~damages ~~program.~~based ~~The~~on ~~EPA~~alleged ~~petitioned~~“modifications” ~~for~~at the Homer City ~~rehearing~~Power byStation ~~the~~between ~~entire~~1991 ~~Court,~~to ~~which~~1994 ~~denied~~without ~~the~~preconstruction ~~petition~~NSR permitting in ~~May~~violation ~~2008.~~of ~~In October 2008,~~ the ~~EPA~~CAA’s PSD (and anTitle ~~industry~~V ~~group)~~permitting ~~petitioned~~programs. ~~the~~The ~~U.S.~~complaint ~~Supreme Court~~was ~~for~~also ~~review~~filed ofagainst the ~~Court’s~~former ~~ruling~~co-owner, NYSEG, ~~vacating~~and ~~CAMR.~~various Oncurrent ~~February 6,~~owners ~~2009,~~ of the ~~EPA~~Homer ~~moved~~City toStation, ~~dismiss~~including ~~its~~EME ~~petition~~Homer ~~for~~City ~~certiorari~~Generation L.P. Onand ~~February~~affiliated 23companies, ~~2009,~~including ~~the Supreme~~Edison ~~Court~~International. ~~dismissed~~In addition, the ~~EPA’s~~Commonwealth ~~petition~~of Pennsylvania and ~~denied~~ the ~~industry~~State ~~group’s petition.~~of OnNew ~~October 21,~~York ~~2009,~~intervened ~~the~~and ~~EPA~~have ~~opened~~filed a ~~30-day~~separate ~~comment~~complaint ~~period~~regarding ~~on a~~the ~~proposed~~Homer ~~consent~~City ~~decree~~Station. ~~that~~Mission ~~would~~Energy ~~obligate~~Westside, ~~the~~Inc. ~~EPA~~is toseeking ~~propose~~indemnification ~~MACT~~from ~~regulations~~Penelec, the ~~for~~co-owner ~~mercury~~ and ~~other~~operator ~~hazardous~~of ~~air~~the ~~pollutants~~Homer byCity ~~March 16,~~Power ~~2011,~~Station ~~and~~prior to ~~finalize~~ ~~the~~its ~~regulations~~sale byin ~~November 16, 2011~~1999. ~~FGCO’s~~The ~~future~~scope ~~cost~~ of ~~compliance~~Penelec’s ~~with MACT~~indemnity ~~regulations~~obligation ~~may~~to ~~be substantial~~ and ~~will~~from ~~depend~~Mission onEnergy ~~the action~~Westside, ~~taken~~Inc. byis ~~the~~under ~~EPA~~dispute and Penelec onis ~~how~~unable ~~any~~to ~~future~~predict ~~regulations~~the ~~are~~outcome ~~ultimately implemented~~of this matter.

~~Pennsylvania has~~In ~~submitted~~January 2011, a ~~new~~complaint ~~mercury~~was ~~rule~~filed ~~for~~against ~~EPA~~Penelec ~~approval~~in ~~that~~the ~~does~~U.S. ~~not~~District ~~provide~~Court afor the Western ~~cap-and-trade~~District ~~approach~~of asPennsylvania inseeking damages based on the ~~CAMR,~~Homer ~~but~~City ~~rather~~Station’s ~~follows~~air aemissions. ~~command~~The complaint was also filed against the former co-owner, NYSEG and~~-control~~ various current owners of the Homer ~~approach~~City ~~imposing~~Station, ~~emission~~including ~~limits~~EME onHomer ~~individual~~City ~~sources~~Generation L.P. Onand ~~December~~affiliated 23companies, ~~2009,~~including Edison ~~the~~International. ~~Supreme~~The ~~Court~~complaint ofalso ~~Pennsylvania~~seeks ~~affirmed~~certification ~~the~~as ~~Commonwealth~~a ~~Court~~class ofaction and to enjoin the Homer ~~Pennsylvania~~City ~~ruling~~Station ~~that~~from ~~Pennsylvania’s~~operating ~~mercury~~except ~~rule~~in isa “~~unlawful~~safe, ~~invalid~~responsible, prudent and ~~unenforceable~~ proper manner.” Penelec believes the claims are without merit and ~~enjoined~~intends ~~the~~to ~~Commonwealth~~defend ~~from~~itself ~~continued~~against ~~implementation~~the ~~or enforcement~~allegations ofmade ~~that~~in the ~~rule~~complaint.

~~Climate~~15 ~~Change~~

In DecemberTable 1997, delegates to the United Nations' climate summit in Japan adopted an agreement, the Kyoto Protocol, to address global warming by reducing, by 2012, the amount of man-made GHG, including CO2, emitted by developed countries. The United States signed the Kyoto Protocol in 1998 but it was never submitted for ratification by the United States Senate. The EPACT established a Committee on Climate Change Technology to coordinate federal climate change activities and promote the development and deployment of GHG reducing technologies. President Obama has announced his Administration’s “New Energy for America Plan” that includes, among other provisions, ensuring that 10% of electricity used in the United States comes from renewable sources by 2012, increasing to 25% by 2025, and implementing an economy-wide cap-and-trade program to reduce GHG emissions by 80% by 2050.Contents

19In August 2009, the EPA issued a Finding of Violation and NOV alleging violations of the CAA and Ohio regulations, including the PSD, NNSR, and Title V regulations at the Eastlake, Lakeshore, Bay Shore and Ashtabula generating plants. The EPA’s NOV alleges equipment replacements occurring during maintenance outages dating back to 1990 triggered the pre-construction permitting requirements under the PSD and NNSR programs. FGCO received a request for certain operating and maintenance information and planning information for these same generating plants and notification that the EPA is evaluating whether certain maintenance at the Eastlake generating plant may constitute a major modification under the NSR provision of the CAA. Later in 2009, FGCO also received another information request regarding emission projections for the Eastlake generating plant. FGCO intends to comply with the CAA, including the EPA’s information requests, but, at this time, is unable to predict the outcome of this matter.

~~There are~~National aAmbient ~~number~~Air ofQuality ~~initiatives to reduce GHG emissions under consideration at the~~Standards federal, state and international level. At the international level, the December 2009 U.N. Climate Change Conference in Copenhagen did not reach a consensus on a successor treaty to the Kyoto Protocol, but did take note of the Copenhagen Accord, a non-binding political agreement which recognized the scientific view that the increase in global temperature should be below two degrees Celsius, included a commitment by developed countries to provide funds, approaching $30 billion over the next three years with a goal of increasing to $100 billion by 2020, and established the “Copenhagen Green Climate Fund” to support mitigation, adaptation, and other climate-related activities in developing countries. Once they have become a party to the Copenhagen Accord, developed economies, such as the European Union, Japan, Russia, and the United States, would commit to quantified economy-wide emissions targets from 2020, while developing countries, including Brazil, China, and India, would agree to take mitigation actions, subject to their domestic measurement, reporting, and verification. At the federal level, members of Congress have introduced several bills seeking to reduce emissions of GHG in the United States, and the House of Representatives passed one such bill, the American Clean Energy and Security Act of 2009, on June 26, 2009. The Senate continues to consider a number of measures to regulate GHG emissions. State activities, primarily the northeastern states participating in the Regional Greenhouse Gas Initiative and western states, led by California, have coordinated efforts to develop regional strategies to control emissions of certain GHGs.

OnThe ~~April 2,~~EPA’s ~~2007,~~CAIR ~~the~~requires ~~United~~reductions ~~States~~of ~~Supreme~~NOx ~~Court~~and ~~found~~SO2 ~~that~~emissions ~~the~~in ~~EPA~~two ~~has~~phases ~~the~~(2009/2010 ~~authority to~~and ~~regulate~~2015), ~~CO2~~ultimately ~~emissions from~~capping ~~automobiles~~SO2 asemissions ~~“air~~in ~~pollutants”~~affected ~~under~~states ~~the~~to ~~CAA~~2.5 million ~~Although~~tons ~~this~~annually and ~~decision~~NOx ~~did not~~emissions ~~address~~to ~~CO2~~1.3 million ~~emissions from~~tons ~~electric~~annually. ~~generating~~In ~~plants~~2008, the ~~EPA~~U.S. ~~has~~Court ~~similar~~of ~~authority~~Appeals ~~under~~for the ~~CAA to~~District ~~regulate~~of Columbia vacated CAIR “~~air~~in ~~pollutants~~its entirety” ~~from~~and ~~those~~directed ~~and~~the ~~other~~EPA ~~facilities~~to “redo its analysis from the ground up.” In December ~~2009~~2008, the ~~EPA~~Court ~~released~~reconsidered its ~~final~~prior ~~“Endangerment~~ruling and ~~Cause~~allowed ~~or Contribute~~CAIR ~~Findings~~to ~~for~~remain ~~Greenhouse~~in effect ~~Gases~~to ~~under~~“temporarily ~~the~~preserve ~~Clean~~its ~~Air~~environmental ~~Act.~~values” ~~The~~until the EPA~~’s finding~~ ~~concludes~~replaces ~~that~~CAIR ~~the~~with ~~atmospheric~~a ~~concentrations~~new rule ofconsistent ~~several~~with ~~key~~the ~~GHG threaten~~Court’s ~~the~~opinion. ~~health~~The ~~and~~Court ~~welfare~~ruled ofin ~~future~~a ~~generations~~different ~~and~~case that ~~the~~a ~~combined~~cap-and-trade ~~emissions~~program ofsimilar ~~these~~to ~~gases~~CAIR, bycalled ~~motor~~the ~~vehicles~~“NOx ~~contribute~~SIP toCall,” ~~the~~cannot ~~atmospheric concentrations~~be ofused ~~these~~to ~~key~~satisfy ~~GHG~~certain ~~and~~CAA requirements ~~hence~~(known toas ~~the~~reasonably ~~threat~~available ofcontrol ~~climate~~technology) ~~change. Although~~for ~~the~~areas ~~EPA’s~~in ~~finding~~non-attainment ~~does~~under the ~~not~~“8-hour” ~~establish~~ozone ~~emission~~NAAQS. ~~requirements~~In ~~for motor vehicles~~July 2010, ~~such~~the ~~requirements~~EPA ~~are~~proposed ~~expected~~the CATR to ~~occur~~replace ~~through~~CAIR, ~~further~~which ~~rulemakings.~~remains in ~~Additionally,~~effect ~~while~~until the EPA’s ~~endangerment~~finalizes ~~findings~~CATR. doCATR ~~not~~requires ~~specifically~~reductions ~~address stationary~~of ~~sources,~~NOx ~~including~~and ~~electric~~SO2 ~~generating plants EPA’s~~emissions ~~expected~~in ~~establishment~~two ofphases ~~emission~~(2012 ~~requirements~~and ~~for~~2014), ~~motor~~ultimately ~~vehicles~~capping ~~would~~SO2 ~~be expected~~emissions toin ~~support~~affected ~~the~~states ~~establishment~~to 2.6 million oftons ~~future~~annually ~~emission~~and ~~requirements~~NOx byemissions ~~the~~to ~~EPA for~~1.3 million ~~stationary~~tons ~~sources~~annually. InThe ~~September 2009, the~~ EPA ~~finalized~~proposed a ~~national GHG~~ ~~emissions~~preferred ~~collection~~regulatory ~~and~~approach ~~reporting~~that ~~rule~~allows ~~that~~trading ~~will~~of ~~require~~NOx ~~FirstEnergy~~and toSO2 ~~measure~~emission allowances ~~GHG~~between ~~emissions~~power ~~commencing~~plants located in ~~2010~~the same state and ~~submit~~severely ~~reports~~limits ~~commencing~~interstate intrading ~~2011.~~of ~~Also~~NOx inand ~~September~~SO2 ~~2009,~~emission allowances. The EPA ~~proposed~~also ~~new~~requested ~~thresholds~~comment ~~for~~on ~~GHG~~two ~~emissions~~alternative approaches—the ~~that~~first ~~define~~eliminates ~~when CAA~~interstate ~~permits~~trading ~~under~~of ~~the~~NOx ~~NSR~~and SO2 emission allowances and ~~Title~~the Vsecond ~~operating~~eliminates ~~permits~~trading ~~programs~~of ~~would~~NOx ~~be required.~~and ~~EPA~~SO2 isemission ~~proposing~~allowances ain ~~major~~its ~~source~~entirety. Depending ~~emissions~~on ~~applicability~~the ~~threshold~~actions ~~of 25,000~~taken ~~tons~~by ~~per~~the ~~year~~EPA ~~(tpy)~~with ofrespect ~~carbon~~to ~~dioxide~~CATR, ~~equivalents~~the ~~(CO2e)~~proposed ~~for~~MACT ~~existing~~regulations ~~facilities~~discussed ~~under~~below ~~the~~and ~~Title~~any Vfuture ~~operating~~regulations ~~permits~~that ~~program~~are ~~and~~ultimately ~~the~~implemented, ~~Prevention~~FGCO’s future cost of ~~Significant~~compliance ~~Determination~~may ~~(PSD)~~be ~~portion~~substantial. ofManagement ~~NSR.~~continues ~~EPA~~to isassess ~~also~~the ~~proposing~~impact aof these environmental ~~significance~~proposals ~~level~~and ~~between~~other ~~10,000~~factors ~~and~~on 25FGCO’s facilities,~~000~~ ~~tpy~~particularly ~~CO2e~~on tothe ~~determine~~operation ifof ~~existing~~its smaller, ~~major~~non-supercritical ~~sources~~units. ~~making~~In ~~modifications~~August 2010, ~~that~~for ~~result~~example, inmanagement andecided ~~increase~~to ofidle ~~emissions~~certain ~~above~~units or ~~the~~operate ~~significance~~them ~~level~~on ~~would~~a beseasonal ~~required~~basis tountil ~~obtain~~developments ~~a PSD permit~~clarify.

~~On September~~Hazardous ~~21,~~Air ~~2009,~~Pollutant ~~the U.S. Court of Appeals for the Second Circuit and on~~Emissions October 16, 2009, the U.S. Court of Appeals for the Fifth Circuit, reversed and remanded lower court decisions that had dismissed complaints alleging damage from GHG emissions on jurisdictional grounds. These cases involve common law tort claims, including public and private nuisance, alleging that GHG emissions contribute to global warming and result in property damages. While FirstEnergy is not a party to either litigation, should the courts of appeals decisions be affirmed or not subjected to further review, FirstEnergy and/or one or more of its subsidiaries could be named in actions making similar allegations.

~~FirstEnergy~~The EPA’s CAMR provides for a cap-and-trade program to reduce mercury emissions from coal-fired ~~cannot~~power ~~currently~~plants ~~estimate~~in two phases; initially, capping nationwide emissions of mercury at 38 tons by 2010 (as a “co-benefit” from implementation of SO2 and NOx emission caps under the ~~financial~~EPA’s ~~impact~~CAIR program) and 15 tons per year by 2018. The U.S. Court of ~~climate~~Appeals ~~change~~for ~~policies~~the District of Columbia, at ~~although~~the ~~potential~~urging ~~legislative~~of orseveral ~~regulatory~~states ~~programs~~and ~~restricting~~environmental ~~CO2~~groups, ~~emissions~~vacated the CAMR, ruling that the EPA failed orto ~~litigation~~take ~~alleging~~the ~~damages~~necessary steps to “de-list” coal-fired power plants from ~~GHG~~its ~~emissions~~hazardous air pollutant program and, therefore, could ~~require~~not ~~significant~~promulgate a cap-and-trade program. On April 29, 2010, the EPA ~~capital~~issued proposed MACT regulations requiring emissions reductions of mercury and other ~~expenditures~~hazardous orair pollutants ~~result~~from innon-electric ~~changes~~generating unit boilers. If finalized, the non-electric generating unit MACT regulations could also provide precedent for MACT standards applicable to ~~its~~electric ~~operations~~generating units. ~~The~~On January 20, 2011, the U.S. District Court for the ~~CO2 emissions~~District ~~per~~of ~~KWH~~Columbia denied a motion by the EPA for an extension of ~~electricity~~the ~~generated~~deadline to issue final rules, ordering the EPA to issue such rules by ~~FirstEnergy~~February 21, is2011. ~~lower~~The ~~than~~EPA ~~many~~also entered into a ~~regional~~consent ~~competitors~~decree ~~due~~requiring it to ~~its~~propose ~~diversified~~MACT ~~generation~~regulations ~~sources~~for mercury and other hazardous air pollutants from electric generating units by March 16, ~~which~~2011, ~~include~~and to finalize the regulations by ~~low~~November 16, or2011. Depending ~~non-CO2~~on ~~emitting~~the action taken by the EPA and on how any future regulations are ultimately ~~gas-fired~~implemented, FGCO’s future cost of compliance with MACT regulations may be substantial and ~~nuclear~~changes to ~~generators~~FGCO’s operations may result.

~~Clean Water~~Climate ~~Act~~Change

~~Various water~~There ~~quality~~are ~~regulations~~a number of initiatives to reduce GHG emissions under consideration at the federal, state and international level. At the ~~majority~~federal level, members of ~~which~~Congress ~~are~~have ~~the~~introduced ~~result~~several bills seeking to reduce emissions of GHG in the ~~federal~~United States, and the House of Representatives passed one such bill, the American Clean ~~Water~~Energy and Security Act ~~and~~of ~~its~~2009, ~~amendments~~on June 26, ~~apply~~2009. The Senate continues to ~~FirstEnergy's~~consider ~~plants~~a number of measures to regulate GHG emissions. InPresident ~~addition,~~Obama has announced ~~Ohio,~~his Administration’s “New ~~Jersey~~Energy ~~and~~for ~~Pennsylvania~~America ~~have~~Plan” ~~water~~that ~~quality~~includes, ~~standards~~among ~~applicable~~other toprovisions, ensuring ~~FirstEnergy's~~that ~~operations.~~10% Asof ~~provided~~electricity used in the ~~Clean~~United ~~Water~~States ~~Act,~~comes ~~authority~~from torenewable ~~grant~~sources by 2012, increasing ~~federal~~to ~~National~~25% ~~Pollutant~~by ~~Discharge~~2025, ~~Elimination~~and ~~System~~implementing ~~water~~an ~~discharge~~economy-wide ~~permits can~~cap-and-trade beprogram ~~assumed~~to reduce GHG emissions by 80% aby ~~state~~2050. ~~Ohio~~State activities, ~~New~~primarily ~~Jersey~~the northeastern states participating in the Regional Greenhouse Gas Initiative and ~~Pennsylvania~~western states, led by California, have ~~assumed~~coordinated ~~such~~efforts to ~~authority~~develop regional strategies to control emissions of certain GHGs.

2016

On September 7,Table 2004, the EPA established new performance standards under Section 316(b) of the Clean Water Act for reducing impacts on fish and shellfish from cooling water intake structures at certain existing large electric generating plants. The regulations call for reductions in impingement mortality (when aquatic organisms are pinned against screens or other parts of a cooling water intake system) and entrainment (which occurs when aquatic life is drawn into a facility's cooling water system). On January 26, 2007, the United States Court of Appeals for the Second Circuit remanded portions of the rulemaking dealing with impingement mortality and entrainment back to the EPA for further rulemaking and eliminated the restoration option from the EPA’s regulations. On July 9, 2007, the EPA suspended this rule, noting that until further rulemaking occurs, permitting authorities should continue the existing practice of applying their best professional judgment to minimize impacts on fish and shellfish from cooling water intake structures. On April 1, 2009, the Supreme Court of the United States reversed one significant aspect of the Second Circuit Court’s opinion and decided that Section 316(b) of the Clean Water Act authorizes the EPA to compare costs with benefits in determining the best technology available for minimizing adverse environmental impact at cooling water intake structures. EPA is developing a new regulation under Section 316(b) of the Clean Water Act consistent with the opinions of the Supreme Court and the Court of Appeals which have created significant uncertainty about the specific nature, scope and timing of the final performance standard. FirstEnergy is studying various control options and their costs and effectiveness. Depending on the results of such studies and the EPA’s further rulemaking and any action taken by the states exercising best professional judgment, the future costs of compliance with these standards may require material capital expenditures.Contents

~~The~~In ~~U.S.~~September 2009, the EPA finalized a national GHG emissions collection and reporting rule that ~~Attorney's~~will ~~Office~~require FirstEnergy to measure GHG emissions commencing in ~~Cleveland~~2010 and submit reports commencing in 2011. In December 2009, ~~Ohio~~the ~~has~~EPA ~~advised~~released ~~FGCO~~its ~~that~~final it“Endangerment isand ~~considering~~Cause or Contribute ~~prosecution~~Findings for Greenhouse Gases under the Clean ~~Water~~Air Act.” ~~and~~The EPA’s finding concludes that concentrations of several key GHGs increase the ~~Migratory~~threat ~~Bird~~of ~~Treaty~~climate ~~Act~~change ~~for~~and may be regulated as ~~three~~“air ~~petroleum~~pollutants” ~~spills~~under atthe CAA. In April 2010, the ~~Edgewater~~EPA finalized new GHG standards for model years 2012 to 2016 passenger cars, ~~Lakeshore~~light-duty trucks and ~~Bay~~medium-duty ~~Shore~~passenger vehicles and clarified that GHG regulation under the CAA would not be triggered for electric generating plants ~~which~~and other ~~occurred~~stationary onsources ~~November~~until January 12, ~~2005~~2011, ~~January~~at ~~26,~~the ~~2007~~earliest. ~~and~~In ~~February~~May 272010, ~~2007.~~the EPA finalized new ~~FGCO~~thresholds isfor ~~unable~~GHG toemissions ~~predict~~that define when permits under the ~~outcome~~CAA’s NSR program would be required. The EPA established an emissions applicability threshold of ~~this~~75,000 ~~matter~~tons per year (tpy) of carbon dioxide equivalents (CO2e) effective January 2, 2011 for existing facilities under the CAA’s PSD program, but until July 1, 2011 that emissions applicability threshold will only apply if PSD is triggered by non-carbon dioxide pollutants.

~~Regulation~~At the international level, the Kyoto Protocol, signed by the U.S. in 1998 but never submitted for ratification by the U.S. Senate, was intended to address global warming by reducing the amount of man-made ~~Waste~~GHG, ~~Disposal~~including CO2, emitted by developed countries by 2012. A December 2009 U.N. Climate Change Conference in Copenhagen did not reach a consensus on a successor treaty to the Kyoto Protocol, but did take note of the Copenhagen Accord, a non-binding political agreement which recognized the scientific view that the increase in global temperature should be below two degrees Celsius; include a commitment by developed countries to provide funds, approaching $30 billion over the next three years with a goal of increasing to $100 billion by 2020; and establish the “Copenhagen Green Climate Fund” to support mitigation, adaptation, and other climate-related activities in developing countries. Once they have become a party to the Copenhagen Accord, developed economies, such as the European Union, Japan, Russia and the United States, would commit to quantified economy-wide emissions targets from 2020, while developing countries, including Brazil, China and India, would agree to take mitigation actions, subject to their domestic measurement, reporting and verification.

AsOn ~~a result~~September 21, of2009, the ~~Resource~~U.S. ~~Conservation~~Court ~~and Recovery Act~~ of ~~1976,~~Appeals asfor ~~amended, and~~ the ~~Toxic~~Second ~~Substances~~Circuit ~~Control Act of 1976, federal~~ and ~~state~~on ~~hazardous waste regulations have been promulgated. Certain fossil-fuel combustion waste products~~October 16, ~~such as coal ash~~2009, ~~were exempted from hazardous waste disposal~~ ~~requirements pending~~ the ~~EPA's~~U.S. ~~evaluation~~Court of ~~the~~Appeals ~~need~~ for ~~future regulation. In February 2009,~~ the ~~EPA~~Fifth ~~requested~~Circuit ~~comments~~reversed ~~from~~and ~~the~~remanded ~~states~~lower oncourt ~~options~~decisions ~~for~~that ~~regulating~~had ~~coal~~dismissed ~~combustion~~complaints ~~wastes,~~alleging ~~including~~damage ~~regulation~~from asGHG ~~non-hazardous~~emissions ~~waste or~~on ~~regulation~~jurisdictional ~~as a hazardous waste~~grounds. ~~In March and June 2009~~However, ~~the EPA requested~~a ~~information~~subsequent ruling from ~~FGCO’s Bruce Mansfield Plant regarding~~ the ~~management of coal combustion wastes~~U.S. InCourt ~~December~~of ~~2009,~~Appeals ~~EPA~~for ~~provided~~the toFifth ~~FGCO~~Circuit reinstated the ~~findings~~lower ~~of its~~court ~~review~~dismissal of ~~the~~a ~~Bruce~~complaint ~~Mansfield~~alleging ~~Plant’s~~damage ~~coal~~from ~~combustion~~GHG ~~waste management practices~~emissions. ~~EPA~~ ~~observed~~These ~~that~~cases ~~the~~involve ~~waste~~common ~~management~~law ~~structures and the~~tort ~~Plant~~claims, ~~“appeared~~including topublic beand ~~well~~private ~~maintained~~nuisance, ~~and~~alleging inthat ~~good~~GHG ~~working~~emissions ~~order”~~contribute ~~and~~to ~~recommended~~global ~~only~~warming ~~that FGCO “seal~~ and ~~maintain~~result ~~all~~in ~~asphalt~~property ~~surfaces~~damages.” On December 30 6, ~~2009~~2010, in ~~an advanced notice of public rulemaking,~~ the ~~EPA~~U.S. ~~said~~Supreme ~~that~~Court ~~the~~granted ~~large~~a ~~volumes~~writ of ~~coal~~certiorari ~~combustion~~to ~~residuals~~the ~~produced~~Second byCircuit ~~electric~~in ~~utilities~~Connecticut ~~pose~~v. ~~significant financial~~AEP. ~~risk~~Briefing toand ~~the~~oral ~~industry. Additional~~argument ~~regulations~~are ~~of fossil-fuel~~expected ~~combustion~~to ~~waste~~be ~~products~~completed ~~could~~in ~~have~~early a2011 ~~significant~~and ~~impact~~a ondecision ~~our~~issued ~~management, beneficial~~in ~~use,~~or ~~and~~around ~~disposal, of coal ash~~June 2011. ~~FGCO's~~While ~~future~~FirstEnergy ~~cost of compliance with~~is ~~any~~not ~~coal~~a ~~combustion~~party ~~waste~~to ~~regulations~~this ~~which~~litigation, ~~may~~FirstEnergy ~~be promulgated could be substantial~~ and/or ~~would~~one ~~depend,~~or inmore ~~part,~~of onits ~~the~~subsidiaries ~~regulatory~~could ~~action~~be ~~taken by the EPA~~named ~~and~~in ~~implementation~~actions bymaking ~~the~~similar ~~states~~allegations.

~~The Utilities~~FirstEnergy ~~have~~cannot ~~been~~currently ~~named~~estimate ~~as potentially responsible parties at waste disposal sites, which may require cleanup under~~ the ~~Comprehensive~~financial ~~Environmental~~impact ~~Response, Compensation, and Liability Act~~ of ~~1980.~~climate ~~Allegations~~change ofpolicies, ~~disposal of hazardous~~although ~~substances~~potential atlegislative ~~historical~~or ~~sites~~regulatory ~~and~~programs ~~the~~restricting ~~liability~~CO2 ~~involved~~emissions, ~~are~~or ~~often~~litigation ~~unsubstantiated~~alleging ~~and~~damages ~~subject~~from toGHG ~~dispute; however~~emissions, ~~federal~~could ~~law~~require ~~provides~~significant ~~that~~capital ~~all potentially responsible parties for a particular site may be liable on a joint~~ and ~~several~~other ~~basis.~~expenditures ~~Environmental liabilities that are considered probable have~~or ~~been~~result ~~recognized~~in onchanges ~~the~~to ~~consolidated~~its ~~balance~~operations. ~~sheet~~The asCO2 ofemissions ~~December~~per ~~31,~~KWH ~~2009, based on estimates~~ of ~~the~~electricity ~~total costs of cleanup, the Utilities' proportionate~~generated ~~responsibility~~by ~~for~~FirstEnergy ~~such~~is ~~costs~~lower ~~and~~than ~~the~~many ~~financial~~regional ~~ability~~competitors ofdue ~~other unaffiliated entities~~ to ~~pay.~~its ~~Total~~diversified ~~liabilities~~generation ~~of approximately $101 million (JCP&L~~sources, -which ~~$74 million,~~include TElow -or ~~$1 million, CEI~~ non-CO2 ~~$1 million,~~emitting ~~FGCO~~ gas- ~~$1 million~~fired and ~~FirstEnergy~~nuclear ~~- $24 million) have been accrued through December 31, 2009~~generators. ~~Included in the total are accrued liabilities of~~ ~~approximately $67 million for environmental remediation of former manufactured gas plants and gas holder facilities in New Jersey, which are being recovered by JCP&L through a non-bypassable SBC.~~

~~Fuel~~Clean Water Act ~~Supply~~

~~FES currently~~Various ~~has~~water ~~long-term~~quality ~~coal~~regulations, ~~contracts~~the ~~with~~majority ~~various~~of ~~terms~~which ~~to acquire approximately~~are ~~22.7 million~~the ~~tons~~result of ~~coal for~~ the ~~year~~federal ~~2010,~~Clean ~~approximately~~Water ~~109%~~Act ofand its ~~2010~~amendments, ~~coal~~apply ~~requirements~~to ofFirstEnergy’s 20plants.8 ~~million~~In ~~tons.~~addition, ~~This contract coal is produced primarily from mines located in~~ Ohio, ~~Pennsylvania,~~New ~~Kentucky,~~Jersey ~~West Virginia, Montana~~ and ~~Wyoming. The contracts expire at various times through~~ ~~December 31,~~Pennsylvania ~~2030.~~have ~~See~~water ~~“Environmental~~quality ~~Matters”~~standards ~~for~~applicable ~~factors pertaining~~ to ~~meeting~~ ~~environmental~~FirstEnergy’s ~~regulations affecting coal-fired generating units~~operations.

21The EPA established new performance standards under Section 316(b) of the Clean Water Act for reducing impacts on fish and shellfish from cooling water intake structures at certain existing electric generating plants. The regulations call for reductions in impingement mortality (when aquatic organisms are pinned against screens or other parts of a cooling water intake system) and entrainment (which occurs when aquatic life is drawn into a facility’s cooling water system). The EPA has taken the position that until further rulemaking occurs, permitting authorities should continue the existing practice of applying their best professional judgment to minimize impacts on fish and shellfish from cooling water intake structures. On April 1, 2009, the U.S. Supreme Court reversed one significant aspect of the Second Circuit’s opinion and decided that Section 316(b) of the Clean Water Act authorizes the EPA to compare costs with benefits in determining the best technology available for minimizing adverse environmental impact at cooling water intake structures. The EPA is developing a new regulation under Section 316(b) of the Clean Water Act consistent with the opinions of the Supreme Court and the Court of Appeals which have created significant uncertainty about the specific nature, scope and timing of the final performance standard. FirstEnergy is studying various control options and their costs and effectiveness, including pilot testing of reverse louvers in a portion of the Bay Shore power plant’s water intake channel to divert fish away from the plant’s water intake system. On November 19, 2010, the Ohio EPA issued a permit for the Bay Shore power plant requiring installation of reverse louvers in its entire water intake channel by December 31, 2014. Depending on the results of such studies and the EPA’s further rulemaking and any final action taken by the states exercising best professional judgment, the future costs of compliance with these standards may require material capital expenditures.

~~In July~~17 2008, FEV entered into a joint venture with the Boich Companies, a Columbus, Ohio-based coal company, to acquire a majority stake in the Bull Mountain Mine Operations, now called Signal Peak, near Roundup, Montana. This joint venture is part of FirstEnergy’s strategy to secure high-quality fuel supplies at attractive prices to maximize the capacity of its fossil generating plants. In a related transaction, FGCO entered into a 15-year agreement to purchase up to 10 million tons of bituminous western coal annually from the mine. FirstEnergy also entered into agreements with the rail carriers associated with transporting coal from the mine to its generating stations, and began taking delivery of the coal in late 2009. The joint venture has the right to resell Signal Peak coal tonnage not used at FirstEnergy facilities and has call rights on such coal above certain levels.

FirstEnergy hasTable contracts for all uranium requirements through 2011 and a portion of uranium material requirements through 2016. Conversion services contracts fully cover requirements through 2011 and partially fill requirements through 2016. Enrichment services are contracted for essentially all of the enrichment requirements for nuclear fuel through 2017. A portion of enrichment requirements is also contracted for through 2024. Fabrication services for fuel assemblies are contracted for both Beaver Valley units and Davis Besse through 2013 and through the current operating license period for Perry (through approximately 2026). The Davis-Besse fabrication contract also has an extension provision for services for additional consecutive reload batches through the current operating license period (approximately 2017). In addition to the existing commitments, FirstEnergy intends to make additional arrangements for the supply of uranium and for the subsequent conversion, enrichment, fabrication, and waste disposal services.Contents

~~On-site spent~~In ~~fuel storage facilities are expected to be adequate for Perry through 2010; facilities at Beaver Valley Units~~June ~~1 and 2 are expected to be adequate through 2015 and 2010~~2008, ~~respectively.~~the ~~Davis-Besse has adequate storage through 2017~~U.S. ~~After~~Attorney’s ~~current~~Office ~~on-site~~in ~~storage capacity at the plants is exhausted~~Cleveland, ~~additional~~ ~~storage~~Ohio ~~capacity~~advised ~~will~~FGCO ~~have~~that toit beis ~~obtained either through plant~~considering ~~modifications,~~prosecution ~~interim~~under ~~off-site disposal, or permanent waste disposal facilities. FENOC is currently taking actions to extend~~ the ~~spent~~Clean ~~fuel~~Water ~~storage capacity~~Act ~~for Perry~~ and ~~Beaver Valley. Plant modifications to increase~~ the ~~storage~~ ~~capacity~~Migratory ofBird ~~the~~Treaty ~~existing~~Act ~~spent fuel storage pool at Beaver Valley Unit 2 were submitted to the NRC~~ for ~~approval~~three ~~during~~petroleum ~~the second quarter of 2009. The~~spills ~~NRC~~at ~~has requested additional information to complete~~ the ~~license~~Edgewater, ~~review~~Lakeshore ~~process~~ and ~~this~~Bay ~~information~~Shore ~~will~~plants bewhich ~~provided~~occurred inon ~~early~~November 1, ~~2010.~~2005, ~~Dry fuel storage is also~~January 26, ~~being~~2007 ~~pursued at Perry~~ and ~~Beaver Valley~~February 27, ~~with~~2007. ~~Perry~~FGCO ~~implementation~~is ~~scheduled~~unable to ~~complete~~ bypredict the ~~end~~outcome of ~~2010~~this ~~and Beaver Valley to be complete by the end of 2014~~matter.

~~The Federal~~Regulation ~~Nuclear~~of Waste ~~Policy Act of 1982 provided for the construction of~~Disposal facilities for the permanent disposal of high-level nuclear wastes, including spent fuel from nuclear power plants operated by electric utilities. NGC has contracts with the DOE for the disposal of spent fuel for Beaver Valley, Davis-Besse and Perry. Yucca Mountain was approved in 2002 as a repository for underground disposal of spent nuclear fuel from nuclear power plants and high level waste from U.S. defense programs. The DOE submitted the license application for Yucca Mountain to the NRC on June 3, 2008. However, the current Administration has stated the Yucca Mountain repository will not be completed and a Federal review of potential alternative strategies will be performed. FirstEnergy intends to make additional arrangements for storage capacity as a contingency for the continuing delays with the DOE acceptance of spent fuel for disposal.

~~Fuel~~Federal ~~oil~~ and ~~natural~~state ~~gas~~hazardous ~~are~~waste ~~used~~regulations ~~primarily~~have tobeen ~~fuel~~promulgated ~~peaking~~as ~~units~~a ~~and/or~~result toof ~~ignite~~ the ~~burners~~ ~~prior to burning coal when a coal-fired plant is restarted. Fuel oil~~Resource ~~requirements~~Conservation ~~have historically been low~~ and ~~are~~Recovery ~~forecasted~~Act toof ~~remain~~1976, ~~so; requirements~~as ~~are~~amended, ~~expected~~and ~~to average approximately 5 million gallons per year over~~ the ~~next~~Toxic ~~five~~Substances ~~years.~~Control ~~Due~~Act ~~to the volatility~~ of ~~fuel oil prices,~~1976. ~~FirstEnergy~~Certain ~~has adopted a strategy of either purchasing fixed~~fossil-~~priced~~fuel ~~oil~~combustion ~~for inventory~~residuals, orsuch ~~using~~as ~~financial~~coal ~~instruments~~ash, towere ~~hedge~~exempted ~~against~~from ~~price~~hazardous ~~risk. Natural~~waste ~~gas~~disposal isrequirements ~~currently~~pending ~~consumed~~the ~~primarily~~EPA’s byevaluation ~~peaking~~of ~~units,~~the ~~and~~need nofor ~~natural~~future ~~gas demand is forecasted in 2010~~regulation. ~~First~~In ~~Energy purchased a partially completed combined~~February ~~cycle~~2009, ~~combustion~~the ~~turbine~~EPA ~~plant~~requested incomments ~~Fremont~~from ~~Ohio.~~the ~~Construction~~states ison ~~scheduled~~options ~~to be completed in late 2010 and generation is forecasted~~ for ~~2011.~~regulating ~~Because~~coal ~~of high~~combustion ~~price volatility and the unpredictability of unit dispatch~~residuals, ~~natural~~including ~~gas~~whether ~~futures are~~they ~~purchased~~should ~~based~~be onregulated ~~forecasted~~as ~~demand~~hazardous toor ~~hedge~~non-hazardous ~~against price movements~~waste.

~~System~~On December 30, 2009, in an advanced notice of public rulemaking, the EPA said that the large ~~Demand~~volumes of coal combustion residuals produced by electric utilities pose significant financial risk to the industry. On May 4, 2010, the EPA proposed two options for additional regulation of coal combustion residuals, including the option of regulation as a special waste under the EPA’s hazardous waste management program which could have a significant impact on the management, beneficial use and disposal of coal combustion residuals. FGCO’s future cost of compliance with any coal combustion residuals regulations which may be promulgated could be substantial and would depend, in part, on the regulatory action taken by the EPA and implementation by the EPA or the states.

The ~~2009~~Utilities have been named as potentially responsible parties at waste disposal sites, which may ~~net~~require ~~maximum~~cleanup ~~hourly~~under ~~demand~~the Comprehensive Environmental Response, Compensation, and Liability Act of 1980. Allegations of disposal of hazardous substances at historical sites and the liability involved are often unsubstantiated and subject to dispute; however, federal law provides that all potentially responsible parties for ~~each~~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 sheet as of December 31, 2010, based on estimates of the total costs of cleanup, the Utilities’ ~~was:~~proportionate responsibility for such costs and the financial ability of other unaffiliated entities to pay. Total liabilities of approximately $104 million (JCP&L — $69 million, TE — $1 million, CEI — $1 million, FGCO — $1 million and FirstEnergy — $32 million) have been accrued through December 31, 2010. Included in the total are accrued liabilities of approximately $64 million for environmental remediation of former MGPs and gas holder facilities in New Jersey, which are being recovered by JCP&L through a non-bypassable SBC.

·Fuel ~~OE–5,156 MW on June 25, 2009;~~Supply

·FES ~~Penn–879~~currently MWhas onlong-term ~~June~~coal 25contracts with various terms to acquire approximately 19.2 million tons of coal for the year 2011, ~~2009;~~approximately 116% of its 2011 coal requirements of 16.6 million tons. This contract coal is produced primarily from mines located in Ohio, Pennsylvania, West Virginia, Montana and Wyoming. The contracts expire at various times through December 31, 2030. FES has contracted sufficient storage to manage the coal inventory should that be necessary. See “Environmental Matters” for factors pertaining to meeting environmental regulations affecting coal-fired generating units.

·In ~~CEI–3~~July 2008,~~843~~ MWFEV onentered ~~June~~into 25a joint venture with WMB Loan Ventures LLC and WMB Loan Ventures II LLC, to acquire a majority stake in the Bull Mountain Mine Operations, now called Signal Peak, near Roundup, Montana. This joint venture is part of FirstEnergy’s strategy to secure high-quality fuel supplies at attractive prices to maximize the capacity of its fossil generating plants. In a related transaction, FGCO entered into a 15-year agreement to purchase up to 10 million tons of bituminous western coal annually from the mine. FirstEnergy also entered into agreements with the rail carriers associated with transporting coal from the mine to its generating stations, and began taking delivery of the coal in late 2009;. The joint venture has the right to resell Signal Peak coal tonnage not used at FirstEnergy facilities and has call rights on such coal above certain levels.

·FirstEnergy ~~TE–2~~has contracts for all uranium requirements through 2012 and a portion of uranium material requirements through 2024. Conversion services contracts fully cover requirements through 2011 and partially fill requirements through 2024. Enrichment services are contracted for essentially all of the enrichment requirements for nuclear fuel through 2020. A portion of enrichment requirements is also contracted for through 2024. Fabrication services for fuel assemblies are contracted for both Beaver Valley units and Davis-Besse through 2013 and through the current operating license period for Perry. The Davis-Besse fabrication contract also has an extension provision for services for additional consecutive reload batches through the current operating license period. In addition to the existing commitments,~~009~~ MWFirstEnergy onintends ~~June~~to 25make additional arrangements for the supply of uranium and for the subsequent conversion, ~~2009;~~enrichment, fabrication, and waste disposal services.

2218

·Table JCP&L–5,738of MW on August 10, 2009;Contents

·On-site ~~Met~~spent fuel storage facilities are expected to be adequate for Beaver Valley Unit 1 through 2014. Davis-~~Ed–~~Besse has adequate storage through 2017. FENOC is taking actions to extend the spent fuel storage capacity for Beaver Valley Units 1 and 2~~,839~~ MWand Perry. Plant modifications to increase the storage capacity of the existing spent fuel storage pool at Beaver Valley Unit 2 are currently under NRC review with approval expected by mid-year 2011. Dry fuel storage is also being pursued at Beaver Valley with completion projected by the end of 2014. Perry dry fuel storage facilities have been completed with the initial dry fuel storage loading pending resolution of a technical issue with the NRC. The Perry initial dry fuel storage loading campaign is targeted for 2012. Both Beaver Valley 2 and Perry maintain sufficient fuel storage capability to continue operations through the targeted completion dates of their respective storage expansion projects. After current on-site ~~August~~storage 10capacity at the plants is exhausted, ~~2009;~~additional ~~and~~storage capacity will have to be obtained either through plant modifications, interim off-site disposal, or permanent waste disposal facilities.

·The ~~Penelec–2~~Federal Nuclear Waste Policy Act of 1982 provided for the construction of facilities for the permanent disposal of high-level nuclear wastes,~~679~~ MWincluding spent fuel from nuclear power plants operated by electric utilities. NGC has contracts with the DOE for the disposal of spent fuel for Beaver Valley, Davis-Besse and Perry. Yucca Mountain was approved in 2002 as a repository for underground disposal of spent nuclear fuel from nuclear power plants and high level waste from U.S. defense programs. The DOE submitted the license application for Yucca Mountain to the NRC on ~~August~~June 3, 102008. On March 3, ~~2009~~2010, the Department of Energy filed a motion to withdraw its Yucca Mountain license application with prejudice. The Atomic Safety and Licensing Board denied the Department’s withdrawal motion on June 29, 2010. That decision is on appeal to the Commission. However, the current Administration has stated the Yucca Mountain repository will not be completed and a Federal review of potential alternative strategies is being performed.

~~Supply~~In parallel, several parties filed actions in the U.S. Circuit Court of Appeals for the D.C. ~~Plan~~Circuit challenging the Department’s authority to withdraw the license application in light of its obligations under the Nuclear Waste Policy Act. The first case filed was In re: Aiken County, filed on February 19, 2010. Robert L. Ferguson, et al. filed a petition on February 25, 2010; State of South Carolina filed on March 26, 2010; and State of Washington filed on April 13, 2010. These cases have since been consolidated. Arguments in the case are scheduled for March 22, 2011. In light of this uncertainty, FirstEnergy intends to make additional arrangements for storage capacity as a contingency for the continuing delays of the DOE acceptance of spent fuel for disposal.

~~Regulated~~Fuel oil and natural gas are used primarily to fuel peaking units and/or to ignite the burners ~~Commodity~~prior ~~Sourcing~~to burning coal when a coal-fired plant is restarted. Fuel oil requirements have historically been low and are forecasted to remain so. Requirements are expected to average approximately 5 million gallons per year over the next five years. Natural gas is currently consumed primarily by peaking units and demand is forecasted at less than 1 million mcf in 2011. FirstEnergy purchased a partially completed combined cycle combustion turbine plant in Fremont Ohio. Construction is scheduled to be completed in 2011.

~~The Utilities~~System ~~have a default service obligation to provide the required power supply~~Demand to non-shopping customers who have elected to continue to receive service under regulated retail tariffs. The volume of these sales can vary depending on the level of shopping that occurs. Supply plans vary by state and by service territory. JCP&L’s default service supply is secured through a statewide competitive procurement process approved by the NJBPU. The Ohio Utilities and Penn’s default service supplies are provided through a competitive procurement process approved by the PUCO and PPUC, respectively. The default service supply for Met-Ed and Penelec is secured through a FERC-approved agreement with FES, but will move to a competitive procurement process in 2011. If any unaffiliated suppliers fail to deliver power to any one of the Utilities’ service areas, the Utility serving that area may need to procure the required power in the market in their role as a PLR.

~~Unregulated Commodity~~The ~~Sourcing~~2010 net maximum hourly demand for each of the Utilities was:

~~FES~~• ~~has retail~~OE—5,610 ~~and~~MW ~~wholesale~~on ~~competitive~~July ~~load-serving obligations in Ohio~~23, ~~New~~2010; ~~Jersey, Maryland,~~• ~~Pennsylvania~~Penn—1,028 ~~Michigan~~MW ~~and~~on ~~Illinois~~July ~~serving~~23, ~~both~~2010; ~~affiliated~~• ~~and non-affiliated~~CEI—4,418 ~~companies.~~MW ~~FES~~on ~~provides~~July ~~energy~~23, ~~products~~2010; ~~and~~• ~~services~~TE—2,122 toMW ~~customers under~~on ~~various~~July ~~PLR~~23, ~~shopping,~~2010; ~~competitive-bid~~• ~~and~~JCP&L—6,420 ~~non-affiliated~~MW ~~contractual obligations.~~on InJuly ~~2009~~6, ~~FES’~~2010; ~~generation~~• ~~was~~Met-Ed—2,932 ~~used~~MW toon ~~serve~~July ~~two main obligations. Affiliated companies utilized approximately 76% of FES’ total generation. Direct retail customers utilized approximately 18% of FES' total generation. Geographically~~6, ~~approximately~~2010; ~~67% of FES’ obligation is located in the MISO market area~~ and ~~33%~~• isPenelec—2,884 ~~located~~MW inon ~~the~~July ~~PJM~~6, ~~market area~~2010.

~~FES~~19 provides energy and energy related services, including the generation and sale of electricity and energy planning and procurement through retail and wholesale competitive supply arrangements. FES controls (either through ownership, lease, affiliated power contracts or participation in OVEC) 14,346 MW of installed generating capacity. FES supplies the power requirements of its competitive load-serving obligations through a combination of subsidiary-owned generation, non-affiliated contracts and spot market transactions.

Regional ReliabilityTable of Contents

~~FirstEnergy’s operating~~Supply ~~companies are located within MISO and PJM and operate under the~~Plan reliability oversight of a regional entity known as ReliabilityFirst. This regional entity operates under the oversight of the NERC in accordance with a Delegation Agreement approved by the FERC. ReliabilityFirst began operations under the NERC on January 1, 2006. On July 20, 2006, the NERC was certified by the FERC as the ERO in the United States pursuant to Section 215 of the FPA and ReliabilityFirst was certified as a regional entity. ReliabilityFirst represents the consolidation of the ECAR, Mid-Atlantic Area Council, and Mid-American Interconnected Network reliability councils into a single regional reliability organization.

~~Competition~~Regulated Commodity Sourcing

AsThe Utilities have a ~~result~~ ofdefault ~~actions~~service ~~taken~~obligation byto ~~state~~provide ~~legislative~~power ~~bodies,~~to ~~major~~non-shopping ~~changes~~customers inwho ~~the~~have ~~electric~~elected ~~utility~~to ~~business~~continue ~~have~~to ~~occurred~~receive inservice ~~portions~~under regulated retail tariffs. The volume of these sales can vary depending on the ~~United~~level ~~States, including~~of ~~Ohio,~~shopping ~~New~~that ~~Jersey~~occurs. Supply plans vary by state and ~~Pennsylvania~~by ~~where~~service territory. ~~FirstEnergy~~JCP&L’s ~~utility subsidiaries~~default ~~operate.~~service ~~These~~supply ~~changes~~is ~~have~~secured ~~altered~~through ~~the~~a ~~way~~statewide ~~traditional~~competitive ~~integrated~~procurement ~~utilities~~process ~~conduct~~approved ~~their~~by ~~business~~the NJBPU. ~~FirstEnergy~~The ~~has~~Ohio ~~aligned~~Companies ~~its~~and ~~business~~Penn’s ~~units~~default toservice supplies are provided ~~accommodate~~through ~~its~~a ~~retail~~competitive ~~strategy~~procurement ~~and~~process ~~participate~~approved inby the ~~competitive~~PUCO ~~electricity~~and PPUC, respectively. The default ~~marketplace~~service ~~(see~~supply ~~Management's~~for ~~Discussion~~Met-Ed and ~~Analysis).~~Penelec ~~FirstEnergy’s~~was secured through a FERC-approved agreement with FES ~~Competitive~~through ~~Energy~~2010, ~~Services~~transitioning ~~segment~~to ~~participates~~a PPUC-approved competitive procurement process in ~~deregulated~~2011. ~~energy~~If ~~markets~~any insupplier ~~Ohio,~~fails ~~Pennsylvania,~~to ~~Maryland,~~deliver ~~Michigan~~power to any one of the Utilities’ service areas, ~~and~~the ~~Illinois~~Utility ~~through~~serving ~~FES~~that area may need to procure the required power in the market in their role as a POLR.

InUnregulated ~~New Jersey,~~Commodity ~~JCP&L has procured electric generation supply to serve its BGS~~Sourcing customers since 2002 through a statewide auction process approved by the NJBPU. The auction is designed to procure supply for BGS customers at a cost reflective of market conditions. On May 1, 2008, the Governor of Ohio signed SB221 into law, which became effective July 31, 2008. The new law provides two options for pricing generation in 2009 and beyond – through a negotiated rate plan or a competitive bidding process (see PUCO Rate Matters above). In Pennsylvania, all electric distribution companies will be required to secure generation for customers in competitive markets by 2011.

23FES provides energy and energy related services, including the generation and sale of electricity and energy planning and procurement through retail and wholesale competitive supply arrangements. FES controls 13,236 MW of installed generating capacity. FES supplies the power requirements of its competitive load-serving obligations through a combination of subsidiary-owned generation, non-affiliated contracts and spot market transactions.

~~FirstEnergy~~FES has retail and wholesale competitive load-serving obligations in Ohio, Pennsylvania, Illinois, ~~remains~~Maryland, ~~focused~~Michigan onand ~~managing~~New ~~the~~Jersey ~~transition~~serving both affiliated and non-affiliated companies. FES provides energy products and services to ~~competitive~~customers ~~markets~~under ~~for~~various POLR, shopping, competitive-bid ~~electricity~~and innon-affiliated ~~Pennsylvania~~contractual obligations. OnIn ~~October 15~~2010, ~~2008,~~FES’ ~~the~~generation ~~Governor~~was ofused to serve two primary ~~Pennsylvania~~obligations ~~signed~~— ~~House~~affiliated ~~Bill~~companies ~~2200~~utilized ~~into~~approximately ~~law,~~43% ~~which~~of ~~became~~FES’ ~~effective~~total ~~on November 14,~~generation ~~2008,~~and asretail customers ~~Act~~utilized ~~129~~approximately 43% of ~~2008.~~FES’ ~~The~~total ~~new~~generation. ~~law~~Geographically, ~~outlines~~approximately a60% ~~competitive~~of ~~procurement~~FES’ ~~process~~obligation ~~and~~is ~~sets~~located ~~targets~~in ~~for~~the ~~energy~~MISO ~~efficiency~~market area and ~~conservation~~40% ~~(see PPUC~~is ~~Rate~~located ~~Matters~~in ~~above)~~the PJM market area.

~~Research and~~Regional ~~Development~~Reliability

~~The Utilities,~~FirstEnergy’s ~~FES,~~operating ~~and~~companies ~~FENOC~~are ~~participate~~located inwithin ~~the~~MISO ~~funding~~and ofPJM ~~EPRI,~~and ~~which~~operate ~~was~~under ~~formed for~~ the ~~purpose of expanding electric research and development (R&D) under~~reliability ~~the~~oversight ~~voluntary sponsorship~~ of ~~the~~a ~~nation’s~~regional ~~electric~~entity ~~utility industry - public,~~known ~~private~~as ~~and cooperative~~ReliabilityFirst. ~~Its~~This ~~goal~~regional isentity tooperates ~~mutually benefit~~under ~~utilities and their customers by promoting~~ the oversight ~~development~~ of ~~new and improved technologies to help~~ the ~~utility~~NERC ~~industry~~in ~~meet~~accordance ~~present~~with ~~and~~a ~~future electric~~Delegation ~~energy~~Agreement ~~needs~~approved inby ~~environmentally~~the ~~and economically acceptable ways~~FERC. ~~EPRI~~ ~~conducts~~ReliabilityFirst ~~research~~began onoperations ~~all~~under ~~aspects~~the ofNERC ~~electric~~on ~~power~~January 1, ~~production~~2006. ~~and~~On ~~use~~July 20, ~~including fuels~~2006, ~~generation,~~the ~~delivery,~~NERC ~~energy management and conservation, environmental~~was ~~effects~~certified ~~and~~by ~~energy~~the ~~analysis.~~FERC ~~The~~as ~~majority~~the ofERO ~~EPRI’s~~in ~~research~~the ~~and~~United ~~development projects~~States ~~are~~pursuant ~~directed~~to ~~toward~~Section 215 ~~practical~~of ~~solutions~~the ~~and~~FPA ~~their applications to~~and ~~problems~~ReliabilityFirst ~~currently~~was ~~facing~~certified ~~the~~as ~~electric~~a ~~utility~~regional ~~industry~~entity.

~~FirstEnergy~~Competition participates in other initiatives with industry R&D consortiums and universities to address technology needs for its various business units. Participation in these consortiums helps the company address research needs in areas such as plant operations and maintenance, major component reliability, environmental controls, advanced energy technologies, and T&D System infrastructure to improve performance, and develop new technologies for advanced energy and grid applications.

24As a result of actions taken by state legislative bodies, major changes in the electric utility business have occurred in portions of the United States, including Ohio, New Jersey and Pennsylvania, where FirstEnergy’s utility subsidiaries operate. These changes have altered the way traditional integrated utilities conduct their business. FirstEnergy has aligned its business units to participate in the competitive electricity marketplace (see Management’s Discussion and Analysis). FirstEnergy’s Competitive Energy Services segment participates in deregulated energy markets in Ohio, Pennsylvania, Maryland, Michigan, New Jersey, and Illinois through FES.

~~Executive~~In New Jersey, JCP&L has procured electric generation supply to serve its BGS customers since 2002 ~~Officers~~through a statewide auction process approved by the NJBPU. The auction is designed to procure supply for BGS customers at a cost reflective of market conditions. In Ohio, SB221 provides two options for pricing generation in 2009 and beyond — through a negotiated rate plan or a competitive bidding process (see Ohio Regulatory Matters above). In Pennsylvania, all electric distribution companies are required to secure generation for customers in competitive markets effective January 1, 2011.

Name	Age	Positions Held During Past Five Years	Dates
A. J. Alexander (A)(G)	58	President and Chief Executive Officer	*-present
W. D. Byrd (B)	55	Vice President, Corporate Risk & Chief Risk Officer	2007-present
L. M. Cavalier (B)	58	Senior Vice President – Human Resources Vice President	2005-present *-2005
M. T. Clark (A)(B)(C)(D)(F)(G)	59	Executive Vice President and Chief Financial Officer Executive Vice President – Strategic Planning & Operations Senior Vice President – Strategic Planning & Operations	2009-present 2008-2009 *-2008
D. S. Elliott (B)(D)	55	President – Pennsylvania Operations	2005-present
		Executive Vice President	2005-present
		Senior Vice President	*-2005
R. R. Grigg (A)(B)(C)(D)(H)	61	Executive Vice President and President-FirstEnergy Utilities Executive Vice President and Chief Operating Officer	2008-present *-2008
J. J. Hagan (G)	59	President and Chief Nuclear Officer Senior Vice President and Chief Operating Officer Senior Vice President	2007-present 2005-2007 *-2005
C. E. Jones (B)(C)(D)(I)	54	Senior Vice President – Energy Delivery & Customer Service President – FirstEnergy Solutions Senior Vice President – Energy Delivery & Customer Service	2009-present 2007-2009 *-2007
C. D. Lasky (F)	47	Vice President – Fossil Operations	2008-present
		Vice President – Fossil Operations & Air Quality Compliance	2007-2008
		Vice President	*-2007
G. R. Leidich (A)(B)	59	Executive Vice President & President – FirstEnergy Generation	2008-present
		Senior Vice President – Operations (B) President and Chief Nuclear Officer (G)	2007-2008 *-2007
D. C. Luff (B)	62	Senior Vice President – Governmental Affairs	2007-present
		Vice President	*-2007
D. M. Lynch (E)	55	President – JCP&L Regional President	2009-present *-2009
J. F. Pearson (A)(B)(C)(D)(F)(G)	55	Vice President and Treasurer	2006-present
		Treasurer Group Controller – Strategic Planning and Operations	2005-2006 *-2005
D. R. Schneider (F)	48	President Senior Vice President – Energy Delivery & Customer Service (B) Vice President (B) Vice President (F)	2009-present 2007-2009 2006-2007 *-2006
L.L. Vespoli (A)(B)(C)(D)(F)(G)	50	Executive Vice President and General Counsel	2008-present
		Senior Vice President and General Counsel	*-2008
H. L. Wagner (A)(B)(C)(D)(F)(G)	57	Vice President, Controller and Chief Accounting Officer	*-present

Seasonality

(A) Denotes executive officer of FE Corp.		(F) Denotes executive officer of FES.
(B) Denotes executive officer of FE Service		(G) Denotes executive officer of FENOC.
(C) Denotes executive officers of OE, CEI and TE.		(H) Retiring March 31, 2010.
(D) Denotes executive officer of Met-Ed, Penelec and Penn. (E) Denotes executive officer of JCP&L		(I) Named Senior Vice President and President, FirstEnergy Utilities, effective April 1, 2010
		* Indicates position held at least since January 1, 2005.

The sale of electric power is generally a seasonal business and weather patterns can have a material impact on FirstEnergy’s operating results. Demand for electricity in our service territories historically peaks during the summer and winter months, with market prices also generally peaking at that time. Accordingly, FirstEnergy’s annual results of operations and liquidity position may depend disproportionately on its operating performance during the summer and winter. Mild weather conditions may result in lower power sales and consequently lower earnings.

2520

EmployeesTable of Contents

AsResearch ~~of December~~and ~~31, 2009, FirstEnergy’s subsidiaries had a total of 13,379 employees~~Development ~~located in the United States as follows:~~

	Total		Bargaining Unit
	Employees		Employees
FESC		2,910		284
OE		1,191		709
CEI		873		584
TE		396		294
Penn		200		147
JCP&L		1,432		1,092
Met-Ed		706		509
Penelec		902		632
ATSI		38		-
FES		247		-
FGCO		1,784		1,154
FENOC		2,700		1,014
Total		13,379		6,419

The Utilities, FES, and FENOC participate in the funding of EPRI, which was formed for the purpose of expanding electric research and development (R&D) under the voluntary sponsorship of the nation’s electric utility industry — public, private and cooperative. Its goal is to mutually benefit utilities and their customers by promoting the development of new and improved technologies to help the utility industry meet present and future electric energy needs in environmentally and economically acceptable ways. EPRI conducts research on all aspects of electric power production and use, including fuels, generation, delivery, energy management and conservation, environmental effects and energy analysis. The majority of EPRI’s research and development projects are directed toward practical solutions and their applications to problems currently facing the electric utility industry.

~~JCP&L's bargaining~~FirstEnergy ~~unit~~participates ~~employees~~in ~~filed~~other ainitiatives ~~grievance~~with ~~challenging~~industry ~~JCP~~R&~~L's~~D ~~2002 call-out~~consortiums ~~procedure~~and ~~that~~universities ~~required bargaining unit employees~~ to ~~respond to~~ ~~emergency~~address ~~power~~technology ~~outages.~~needs Onfor ~~May 20,~~its ~~2004,~~various anbusiness ~~arbitration panel concluded that the call-out procedure violated the parties' collective bargaining agreement~~units. OnParticipation ~~September 9,~~in ~~2005,~~these ~~the~~consortiums ~~arbitration panel issued an opinion to~~helps ~~award approximately $16 million to~~ the ~~bargaining~~company ~~unit~~address ~~employees.~~research Aneeds ~~final order~~in ~~identifying~~areas ~~the~~such ~~individual~~as ~~damage~~plant ~~amounts~~operations ~~was~~and ~~issued on October 31~~maintenance, ~~2007~~ ~~and the award appeal process was initiated. The union filed a motion with~~major ~~the~~component ~~federal~~reliability, ~~Court~~environmental tocontrols, ~~confirm~~advanced ~~the~~energy ~~award and JCP&L filed its answer and counterclaim to vacate the award on December 31~~technologies, ~~2007. JCP&L~~ and ~~the union~~transmission ~~filed briefs in June~~ and ~~July of 2008 and oral arguments were held in the~~ ~~fall.~~distribution Onsystem ~~February 25,~~infrastructure ~~2009, the federal district court denied JCP&L’s motion~~ to ~~vacate~~improve ~~the arbitration decision and granted the union’s motion to confirm the award. JCP&L filed a Notice of Appeal to the Third Circuit and a Motion to Stay Enforcement of the Judgment on March 6~~performance, ~~2009. The appeal process could take as long as 24 months. The parties are participating in the federal court's mediation programs~~ and ~~have~~develop ~~held~~new ~~private~~technologies ~~settlement discussions. JCP&L recognized a liability~~ for ~~the potential $16 million award in~~ ~~2005.~~advanced ~~Post-judgment~~energy ~~interest began to accrue as of February 25, 2009,~~ and ~~the~~ ~~liability~~grid ~~will be adjusted accordingly~~applications.

~~FirstEnergy~~21 ~~Web Site~~

EachTable of the registrant’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are also made available free of charge on or through FirstEnergy’s internet Web site at www.firstenergycorp.com. These reports are posted on the Web site as soon as reasonably practicable after they are electronically filed with the SEC. Additionally, we routinely post important information on our Web site and recognize our Web site is a channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under SEC Regulation FD. Information contained on FirstEnergy’s Web site shall not be deemed incorporated into, or to be part of, this report.Contents

26Executive Officers

ITEM 1A. RISK FACTORS


Name	Age	Positions Held During Past Five Years	Dates
A. J. Alexander (A)(B)	59	President and Chief Executive Officer Chief Executive Officer (F)	-present -present

W. D. Byrd (B)	56	Vice President, Corporate Risk & Chief Risk Officer	2007-present
		Director — Rates Strategy	*-2007

L. M. Cavalier (B)	59	Senior Vice President — Human Resources	2005-present
		Vice President	*-2005

M. T. Clark (A)(B)(C)(D)(E)(F)	60	Executive Vice President and Chief Financial Officer	2009-present
		Executive Vice President — Strategic Planning & Operations	2008-2009
		Senior Vice President — Strategic Planning & Operations	*-2008

C. E. Jones (A)(B)	55	Senior Vice President & President — FirstEnergy Utilities	2010-present
		President (C) (D)	2010-present
		Senior Vice President — Energy Delivery & Customer Service	2009-2010
		President — FirstEnergy Solutions	2007-2009
		Senior Vice President — Energy Delivery & Customer Service	*-2007

J. H. Lash (F)	60	President and Chief Nuclear Officer	2010-present
		Senior Vice President and Chief Operating Officer	2007-2010
		Vice President, Beaver Valley	*-2007

C. D. Lasky (E)	48	Vice President — Fossil Operations	2008-present
		Vice President — Fossil Operations & Air Quality Compliance	2007-2008
		Vice President	*-2007

G. R. Leidich (A)(B)	60	Executive Vice President & President — FirstEnergy Generation	2008-present
		Senior Vice President — Operations (B)	2007-2008
		President and Chief Nuclear Officer (F)	*-2007

D. C. Luff (B)	63	Senior Vice President — Governmental Affairs	2007-present
		Vice President	*-2007

J. F. Pearson	56	Vice President and Treasurer	2006-present
(A)(B)(C)(D)(E)(F)		Treasurer	*-2006

D. R. Schneider (E)	49	President	2009-present
		Senior Vice President — Energy Delivery & Customer Service (B)	2007-2009
		Vice President (B)	2006-2007
		Vice President (E)	*-2006

L. L. Vespoli (A)(B)(C)(D)(E)(F)	51	Executive Vice President and General Counsel	2008-present
		Senior Vice President and General Counsel	*-2008

H. L. Wagner (A)(B)	58	Vice President, Controller and Chief Accounting Officer	*-present
		Vice President and Controller (C)(D)(E)(F)	*-present

We operate in a business environment that involves significant risks, many of which are beyond our control. Management of each Registrant regularly evaluates the most significant risks of the Registrant’s businesses and reviews those risks with the FirstEnergy Board of Directors or appropriate Committees of the Board. The following risk factors and all other information contained in this report should be considered carefully when evaluating FirstEnergy and our subsidiaries. These risk factors could affect our financial results and cause such results to differ materially from those expressed in any forward-looking statements made by or on behalf of us. Below, we have identified risks we currently consider material. However, our business, financial condition, cash flows or results of operations could be affected materially and adversely by additional risks not currently known to us or that we deem immaterial at this time. Additional information on risk factors is included in "Item 1. Business" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and in other sections of this Form 10-K that include forward-looking and other statements involving risks and uncertainties that could impact our business and financial results.


(A)		Denotes executive officer of FirstEnergy Corp.

(B)		Denotes executive officer of FESC

(C)		Denotes executive officer of OE, CEI and TE.

(D)		Denotes executive officer of Met-Ed, Penelec and Penn.

(E)		Denotes executive officer of FES

(F)		Denotes executive officer of FENOC

*		Indicates position held at least since January 1, 2006.

~~Risks Related to Business~~22 ~~Operations~~

Risks ArisingTable from the Reliability of Our Power Plants and Transmission and Distribution EquipmentContents

~~Operation~~Employees of generation, transmission and distribution facilities involves risk, including, the risk of potential breakdown or failure of equipment or processes, due to aging infrastructure, fuel supply or transportation disruptions, accidents, labor disputes or work stoppages by employees, acts of terrorism or sabotage, construction delays or cost overruns, shortages of or delays in obtaining equipment, material and labor, operational restrictions resulting from environmental limitations and governmental interventions, and performance below expected levels. In addition, weather-related incidents and other natural disasters can disrupt generation, transmission and distribution delivery systems. Because our transmission facilities are interconnected with those of third parties, the operation of our facilities could be adversely affected by unexpected or uncontrollable events occurring on the systems of such third parties.

~~Operation of~~As ~~our power plants below expected capacity levels could result in lost revenues and increased expenses, including higher maintenance costs. Unplanned outages~~ of ~~generating~~ units and extensions of scheduled outages due to mechanical failures or other problems occur from time to time and are an inherent risk of our business. Unplanned outages typically increase our operation and maintenance expenses and may reduce our revenues as a result of selling fewer MWH or may require us to incur significant costs as a result of operating our higher cost units or obtaining replacement power from third parties in the open market to satisfy our forward power sales obligations.December ~~Moreover~~31, ~~if we were unable to perform under contractual obligations~~2010, ~~penalties~~FirstEnergy’s orsubsidiaries ~~liability~~had ~~for damages~~a ~~could~~total ~~result. FES, FGCO and the Ohio Companies are exposed to losses under their applicable sale-leaseback arrangements for generating facilities upon the occurrence~~ of ~~certain contingent events that could render those facilities worthless. Although we believe these types of events are unlikely to occur~~13,330 ~~FES,~~employees ~~FGCO~~located ~~and~~in the ~~Ohio Companies have a maximum exposure to loss under~~ ~~those~~United ~~provisions~~States ~~of approximately $1.3 billion for FES, $800 million for OE and an aggregate of $700 million for TE and CEI~~ as ~~co-lessees.~~follows:

We remain obligated to provide safe and reliable service to customers within our franchised service territories. Meeting this commitment requires the expenditure of significant capital resources. Failure to provide safe and reliable service and failure to meet regulatory reliability standards due to a number of factors, including, but not limited to, equipment failure and weather, could adversely affect our operating results through reduced revenues and increased capital and operating costs and the imposition of penalties/fines or other adverse regulatory outcomes.


			Bargaining
	Total		Unit
	Employees		Employees
FESC		2,796		295
OE		1,227		750
CEI		916		615
TE		394		287
Penn		207		154
JCP&L		1,434		1,097
Met-Ed		706		509
Penelec		899		642
ATSI		39		—
FES		274		—
FGCO		1,751		1,140
FENOC		2,687		982

Total		13,330		6,471

~~Changes in~~FirstEnergy ~~Commodity~~Web ~~Prices Could Adversely Affect Our Profit Margins~~Site

~~We purchase~~Each ~~and~~of ~~sell~~the ~~electricity~~registrant’s inAnnual ~~the~~Reports ~~competitive~~on ~~wholesale~~Form ~~and~~10-K, ~~retail~~Quarterly ~~markets.~~Reports on Form 10-Q, Current ~~Increases~~Reports inon ~~the~~Form ~~costs~~8-K, ofand ~~fuel~~amendments ~~for~~to ~~our~~those ~~generation~~reports ~~facilities~~filed ~~(particularly~~with ~~coal,~~or furnished to the SEC pursuant to ~~uranium~~Section ~~and~~13(a) ~~natural~~or ~~gas~~15(d) ~~can~~of ~~affect~~the ~~our~~Securities ~~profit~~Exchange ~~margins.~~Act ~~Changes~~of in1934 ~~the~~are ~~market price~~also made available free of charge ~~electricity,~~on ~~which~~or ~~are~~through ~~affected~~FirstEnergy’s byinternet ~~changes~~Web insite ~~other~~at ~~commodity~~www.firstenergycorp.com. ~~costs~~These ~~and~~reports are ~~other~~posted ~~factors,~~on ~~may~~the ~~impact~~Web ~~our~~site ~~results~~as ofsoon ~~operations~~as ~~and~~reasonably ~~financial~~practicable ~~position~~after ~~by increasing~~they are electronically filed with the ~~amount~~SEC. Additionally, we ~~pay~~routinely topost ~~purchase~~important ~~power~~information toon ~~supply~~our ~~PLR~~Web site and ~~default~~recognize ~~service~~our ~~obligations~~Web insite ~~Ohio~~is ~~and~~a ~~Pennsylvania. In~~channel ~~addition,~~of ~~the~~distribution ~~weakening global~~to ~~economy~~reach ~~could~~public ~~lead~~investors toand ~~lower~~as ~~international~~a ~~demand~~means of disclosing material non-public information for ~~coal,~~complying ~~oil~~with ~~and~~disclosure obligations under SEC Regulation FD. ~~natural~~Information ~~gas,~~contained ~~which~~on ~~may~~FirstEnergy’s ~~lower~~Web ~~fossil~~site ~~fuel~~shall ~~prices~~not ~~and~~be ~~put~~deemed ~~downward~~incorporated ~~pressure~~into, onor to be ~~electricity~~part ~~prices~~of, this report.

~~Electricity and~~ITEM ~~fuel~~1A. ~~prices~~RISK ~~may fluctuate substantially over relatively short periods of time for a variety of reasons, including:~~FACTORS

▪We ~~changing~~operate ~~weather~~in ~~conditions~~a business environment that involves significant risks, many of which are beyond our control. Management of each Registrant regularly evaluates the most significant risks of the Registrant’s businesses and reviews those risks with the FirstEnergy Board of Directors or appropriate ~~seasonality;~~Committees of the Board. The following risk factors and all other information contained in this report should be considered carefully when evaluating FirstEnergy and our subsidiaries. These risk factors could affect our financial results and cause such results to differ materially from those expressed in any forward-looking statements made by or on behalf of us. Below, we have identified risks we currently consider material. Additional information on risk factors is included in “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other sections of this Form 10-K that include forward-looking and other statements involving risks and uncertainties that could impact our business and financial results.

▪Risks ~~changes~~Related into ~~electricity~~Business ~~usage by our customers;~~Operations

▪Risks ~~illiquidity~~Arising infrom ~~wholesale~~the ~~power~~Reliability of Our Power Plants and ~~other~~Transmission ~~markets;~~and Distribution Equipment

27Operation of generation, transmission and distribution facilities involves risk, including, the risk of potential breakdown or failure of equipment or processes, due to aging infrastructure, fuel supply or transportation disruptions, accidents, labor disputes or work stoppages by employees, acts of terrorism or sabotage, construction delays or cost overruns, shortages of or delays in obtaining equipment, material and labor, operational restrictions resulting from environmental limitations and governmental interventions, and performance below expected levels. In addition, weather-related incidents and other natural disasters can disrupt generation, transmission and distribution delivery systems. Because our transmission facilities are interconnected with those of third parties, the operation of our facilities could be adversely affected by unexpected or uncontrollable events occurring on the systems of such third parties.

~~▪ transmission congestion or transportation constraints, inoperability or inefficiencies;~~23

▪Table availability of competitively priced alternative energy sources;Contents

▪Operation ~~changes~~of our power plants below expected capacity could result in ~~supply~~lost revenues and ~~demand~~increased expenses, including higher operating and maintenance costs, purchased power costs and capital requirements. Unplanned outages of generating units and extensions of scheduled outages due to mechanical failures or other problems occur from time to time and are an inherent risk of our business. Unplanned outages typically increase our operation and maintenance expenses and may reduce our revenues as a result of selling fewer MWH or may require us to incur significant costs as a result of operating our higher cost units or obtaining replacement power from third parties in the open market to satisfy our forward power sales obligations. Moreover, if we were unable to perform under contractual obligations, penalties or liability for ~~energy~~damages ~~commodities;~~could result. FES, FGCO and the Ohio Companies are exposed to losses under their applicable sale-leaseback arrangements for generating facilities upon the occurrence of certain contingent events that could render those facilities worthless. Although we believe these types of events are unlikely to occur, FES, FGCO and the Ohio Companies have a maximum exposure to loss under those provisions of approximately $1.36 billion for FES, $666 million for OE and an aggregate of $622 million for TE and CEI as co-lessees.

▪We ~~changes~~remain inobligated ~~power~~to ~~production~~provide ~~capacity;~~safe and reliable service to customers within our franchised service territories. Meeting this commitment requires the expenditure of significant capital resources. Failure to provide safe and reliable service and failure to meet regulatory reliability standards due to a number of factors, including, but not limited to, equipment failure and weather, could adversely affect our operating results through reduced revenues and increased capital and operating costs and the imposition of penalties/fines or other adverse regulatory outcomes.

▪Changes ~~outages~~in atCommodity ~~our~~Prices ~~power~~Could ~~production~~Adversely ~~facilities~~Affect orOur ~~those~~Profit ~~of our competitors;~~Margins

▪We ~~changes~~purchase and sell electricity in ~~production~~the competitive wholesale and ~~storage~~retail ~~levels~~markets. Increases in the costs of fuel for our generation facilities (particularly coal, uranium and natural gas) can affect our profit margins. Changes in the market price of electricity, ~~lignite~~which are affected by changes in other commodity costs and other factors, ~~coal~~may impact our results of operations and financial position by increasing the amount we pay to purchase power to supply POLR and default service obligations in the states we do business. In addition, ~~crude~~the global economy could lead to lower international demand for coal, oil and ~~refined~~natural ~~products;~~gas, which may lower fossil fuel prices and put downward pressure on electricity prices.

▪Electricity ~~changes~~and infuel ~~legislation~~prices ~~and~~may ~~regulation;~~fluctuate ~~and~~substantially over relatively short periods of time for a variety of reasons, including:

▪• changing weather conditions or seasonality; • changes in electricity usage by our customers; • illiquidity and credit worthiness of participants in wholesale power and other markets; • transmission congestion or transportation constraints, inoperability or inefficiencies; • availability of competitively priced alternative energy sources; • changes in supply and demand for energy commodities; • changes in power production capacity; • outages at our power production facilities or those of our competitors; • changes in production and storage levels of natural gas, lignite, coal, crude oil and refined products; • changes in legislation and regulation; and • natural disasters, wars, acts of sabotage, terrorist acts, embargoes and other catastrophic events.

We Are Exposed to Operational, Price and Credit Risks Associated With Selling and ~~Marketing~~ Marketing Products in the Power Markets That We Do Not Always Completely Hedge Against

We purchase and sell power at the wholesale level under market-based tariffs authorized by the FERC, and also enter into ~~short-term~~ agreements to sell available energy and capacity from our generation assets. If we are unable to deliver firm capacity and energy under these agreements, we may be required to pay damages. These damages would generally be based on the difference between ~~the~~ the market price to acquire replacement capacity or energy and the contract price of the undelivered capacity or energy. Depending on price volatility in the wholesale energy markets, such damages could be significant. Extreme weather conditions, unplanned power plant outages, transmission disruptions, and other factors could affect our ability to meet our obligations, or cause increases in the market price of replacement capacity and energy.

We24 attempt to mitigate risks associated with satisfying our contractual power sales arrangements by reserving generation capacity to deliver electricity to satisfy our net firm sales contracts and, when necessary, by purchasing firm transmission service. We also routinely enter into contracts, such as fuel and power purchase and sale commitments, to hedge our exposure to fuel requirements and other energy-related commodities. We may not, however, hedge the entire exposure of our operations from commodity price volatility. To the extent we do not hedge against commodity price volatility, our results of operations and financial position could be negatively affected.

The UseTable of Derivative Contracts by Us to Mitigate Risks Could Result in Financial Losses That May Negatively Impact our Financial ResultsContents

We ~~use~~attempt ~~a variety~~to ofmitigate ~~non-derivative~~risks ~~and~~associated ~~derivative~~with ~~instruments,~~satisfying ~~such~~our ascontractual ~~swaps,~~power ~~options,~~sales arrangements by ~~futures~~reserving ~~and~~generation ~~forwards,~~capacity to ~~manage~~deliver ~~our~~electricity ~~commodity~~to ~~and~~satisfy ~~financial~~our ~~market~~net ~~risks.~~firm Insales ~~the~~contracts and, ~~absence~~when ofnecessary, ~~actively~~by ~~quoted~~purchasing ~~market~~firm ~~prices~~transmission ~~and~~service. ~~pricing~~We ~~information~~also ~~from~~routinely ~~external sources,~~enter ~~the~~into ~~valuation~~contracts, such ofas ~~some~~fuel ofand ~~these~~power ~~derivative~~purchase ~~instruments~~and ~~involves management's~~sale ~~judgment~~commitments, orto ~~use~~hedge ofour ~~estimates.~~exposure Asto afuel ~~result, changes in the~~requirements ~~underlying~~and ~~assumptions~~other orenergy-related ~~use~~commodities. ofWe ~~alternative~~may ~~valuation~~not, ~~methods~~however, ~~could~~hedge ~~affect~~ the ~~reported~~ ~~fair~~entire ~~value~~exposure of ~~some~~our operations offrom ~~these~~commodity ~~contracts~~price volatility. ~~Also,~~ weTo ~~could recognize~~the ~~financial~~extent ~~losses~~we asdo anot ~~result~~hedge ofagainst commodity price volatility, inour ~~the~~results ~~market values~~ of ~~these~~ ~~contracts~~operations orand iffinancial aposition ~~counterparty~~could ~~fails~~be tonegatively ~~perform~~affected.

~~Our Risk~~The ~~Management~~Use ~~Policies~~of ~~Relating~~Derivative toContracts ~~Energy~~by ~~and~~Us ~~Fuel~~to ~~Prices,~~Mitigate ~~and~~Risks ~~Counterparty Credit,~~Could ~~Are~~Result byin ~~Their~~Financial ~~Very~~Losses ~~Nature~~That ~~Risk~~May Negatively ~~Related,~~Impact ~~and~~Our WeFinancial ~~Could Suffer Economic~~Results ~~Losses Despite Such Policies~~

We ~~attempt~~ ~~to mitigate~~use ~~the~~a ~~market~~variety ~~risk~~of ~~inherent~~non-derivative inand ~~our~~derivative ~~energy~~instruments, ~~fuel~~such ~~and~~as ~~debt positions.~~swaps, ~~Procedures~~options, ~~have~~futures ~~been~~and forwards, ~~implemented~~ to ~~enhance~~manage ~~and~~our ~~monitor~~commodity ~~compliance with~~and ~~our~~financial ~~risk~~market ~~management~~risks. ~~policies,~~In ~~including~~the ~~validation~~absence of ~~transaction~~actively ~~and~~quoted market prices, ~~verification~~and ofpricing ~~risk~~information ~~and~~from ~~transaction~~external ~~limits~~sources, ~~sensitivity~~the ~~analysis and~~valuation ~~daily portfolio reporting~~ of ~~various~~some ~~risk measurement metrics. Nonetheless, we cannot economically hedge all~~ of ~~our exposures in~~ these derivative ~~areas~~instruments ~~and~~involves ~~our risk~~ management’s ~~program~~judgment ~~may~~or ~~not~~use ~~operate~~of ~~as planned~~estimates. ~~For~~As ~~example~~a result, ~~actual~~changes ~~electricity~~in ~~and fuel prices may be significantly different or more volatile than~~ the ~~historical~~ ~~trends~~underlying ~~and~~ assumptions ~~reflected~~or inuse ~~our analyses. Also, our power plants might not produce the expected amount~~ of ~~power~~alternative ~~during~~valuation amethods ~~given day or time period due to weather conditions, technical problems or other unanticipated events, which~~ could ~~require~~affect usthe toreported ~~make energy purchases at higher prices than~~fair ~~the~~value ~~prices~~of ~~under~~some ~~our~~of ~~energy~~these ~~supply~~ contracts. ~~In addition~~Also, ~~the~~we ~~amount of fuel required for our power plants during a given day or time period~~ could berecognize ~~more than~~financial ~~expected,~~losses ~~which~~as ~~could require us to buy additional fuel at prices less favorable than the prices under our fuel contracts. As~~ a result, ~~we cannot~~of ~~always~~volatility ~~predict~~in the ~~impact~~market ~~that~~values ~~our~~of ~~risk~~these ~~management~~contracts ~~decisions~~or ~~may have on us~~ if ~~actual~~ ~~events~~a ~~lead~~counterparty tofails ~~greater losses or costs than our risk management positions were intended~~ to ~~hedge~~perform.

28Financial Derivatives Reforms Could Increase Our Liquidity Needs and Collateral Costs

~~Our~~In ~~risk~~July 2010, federal legislation was enacted to reform financial markets that significantly alter ~~management~~how ~~activities,~~over-the-counter ~~including~~(OTC) derivatives ~~our~~are ~~power~~regulated. ~~sales~~The ~~agreements~~law ~~with~~increased ~~counterparties,~~regulatory oversight of ~~rely~~OTC onenergy ~~projections~~derivatives, ~~that~~including ~~depend~~(1) requiring ~~heavily~~standardized onOTC ~~judgments~~derivatives ~~and~~to ~~assumptions~~be bytraded on ~~management~~registered ofexchanges ~~factors~~regulated ~~such~~by asthe ~~future~~Commodity ~~market~~Futures ~~prices~~Trading Commission (CFTC), (2) imposing new and ~~demand~~potentially ~~for~~higher ~~power~~capital and ~~other~~ ~~energy-related~~margin ~~commodities. These~~requirements ~~factors~~and ~~become~~(3) authorizing ~~more~~the ~~difficult~~establishment of tooverall ~~predict~~volume and ~~the~~position ~~calculations~~limits. ~~become~~The ~~less~~law ~~reliable~~gives the ~~further~~CFTC ~~into~~authority ~~the~~to ~~future~~exempt end users of energy commodities which could reduce, but not eliminate, the applicability of these ~~estimates~~measures ~~are~~to ~~made~~us and other end users. ~~Even~~ ~~when~~These requirements could cause our ~~policies~~OTC transactions to be more costly and ~~procedures~~have ~~are~~an ~~followed~~adverse ~~and~~effect ~~decisions~~on ~~are~~our ~~made~~liquidity ~~based~~due onto ~~these~~additional ~~estimates~~capital requirements. In addition, ~~results~~as these reforms aim to standardize OTC products it could limit the effectiveness of ~~operations~~our hedging programs ~~may~~because bewe ~~diminished~~would ifhave ~~the~~less ~~judgments~~ability ~~and~~to ~~assumptions~~tailor ~~underlying~~OTC ~~those~~derivatives ~~calculations~~to match the precise risk we are ~~prove~~seeking to ~~be inaccurate~~protect.

WeOur ~~also face~~Risk ~~credit~~Management ~~risks~~Policies ~~from~~Relating ~~parties with whom we contract who could default in their performance, in which cases we could be forced~~ to ~~sell~~Energy ~~our power into a lower-priced market or make purchases in a higher-priced market than existed at the time of executing the contract. Although we have established risk management policies~~ and ~~programs,~~Fuel ~~including credit policies to evaluate counterparty credit risk~~Prices, ~~there~~and ~~can~~Counterparty ~~be no assurance that we will be able to fully meet our obligations~~Credit, ~~that~~Are ~~we will not be required to pay damages for failure to perform~~by orTheir ~~that~~Very weNature ~~will~~Risk ~~not experience counterparty non-performance or that we will collect for voided contracts. If counterparties to these arrangements fail to perform~~Related, weand ~~may~~We beCould ~~forced~~Suffer toEconomic ~~enter~~Losses ~~into~~Despite ~~alternative~~Such ~~hedging arrangements or~~Policies ~~honor underlying commitments at then-current market prices. In that event, our financial results could be adversely affected.~~

~~Nuclear Generation~~We ~~Involves~~attempt ~~Risks~~to ~~that~~mitigate ~~Include~~the ~~Uncertainties~~market ~~Relating~~risk inherent in our energy, fuel and debt positions. Procedures have been implemented to ~~Health~~enhance and monitor compliance with our risk management policies, ~~Safety~~including validation of transaction and market prices, ~~Additional~~verification ~~Capital~~of ~~Costs~~risk and transaction limits, sensitivity ~~the~~analysis ~~Adequacy~~and daily portfolio reporting of ~~Insurance~~various ~~Coverage~~risk measurement metrics. Nonetheless, we cannot economically hedge all of our exposures in these areas and ~~Nuclear~~our risk ~~Plant~~management ~~Decommissioning~~program may not operate as planned. For example, actual electricity and fuel prices may be significantly different or more volatile than the historical trends and assumptions reflected in our analyses. Also, our power plants might not produce the expected amount of power during a given day or time period due to weather conditions, technical problems or other unanticipated events, which could require us to make energy purchases at higher prices than the prices under our energy supply contracts. In addition, the amount of fuel required for our power plants during a given day or time period could be more than expected, which could require us to buy additional fuel at prices less favorable than the prices under our fuel contracts. As a result, we cannot always predict the impact that our risk management decisions may have on us if actual events lead to greater losses or costs than our risk management positions were intended to hedge.

WeOur ~~are~~risk management activities, including our power sales agreements with counterparties, rely on ~~subject~~projections that depend heavily on judgments and assumptions by management of factors such as future market prices and demand for power and other energy-related commodities. These factors become more difficult to predict and the ~~risks~~calculations ofbecome ~~nuclear~~less ~~generation~~reliable the further into the future these estimates are made. Even when our policies and procedures are followed and decisions are made based on these estimates, ~~including~~results ~~but~~of ~~not~~operations ~~limited~~may tobe diminished if the judgments and ~~following:~~assumptions underlying those calculations prove to be inaccurate.

▪We ~~the~~also ~~potential~~face ~~harmful~~credit ~~effects~~risks onfrom ~~the~~parties ~~environment~~with ~~and~~whom ~~human~~we ~~health~~contract ~~resulting~~who ~~from~~could ~~unplanned~~default ~~radiological~~in ~~releases~~their performance, ~~associated~~in ~~with~~which cases we could be forced to sell our power into a lower-priced market or make purchases in a higher-priced market than existed at the ~~operation~~time of ~~our~~executing ~~nuclear~~the ~~facilities~~contract. Although we have established risk management policies and ~~the~~programs, ~~storage~~including credit policies to evaluate counterparty credit risk, ~~handling~~there ~~and~~can ~~disposal~~be ofno ~~radioactive~~assurance ~~materials;~~that we will be able to fully meet our obligations, that we will not be required to pay damages for failure to perform or that we will not experience counterparty non-performance or that we will collect for voided contracts. If counterparties to these arrangements fail to perform, we may be forced to enter into alternative hedging arrangements or honor underlying commitments at then-current market prices. In that event, our financial results could be adversely affected.

~~▪ limitations on the amounts and types of insurance commercially available to cover losses that might arise in connection with our nuclear operations or those of others in the United States;~~25

▪Table uncertaintiesof with respect to contingencies and assessments if insurance coverage is inadequate; andContents

▪Nuclear ~~uncertainties~~Generation ~~with~~Involves ~~respect~~Risks tothat ~~the~~Include ~~technological~~Uncertainties ~~and~~Relating ~~financial~~to ~~aspects~~Health ofand ~~decommissioning~~Safety, Additional ~~nuclear~~Capital ~~plants~~Costs, at the ~~end~~Adequacy of ~~their~~Insurance ~~licensed~~Coverage ~~operation~~and ~~including~~Nuclear ~~increases~~Plant ~~in minimum funding requirements or costs of completion.~~Decommissioning

~~The~~We ~~NRC has~~are ~~broad~~subject ~~authority under federal law~~ to ~~impose licensing security and safety-related requirements for~~ the ~~operation~~risks of nuclear generation ~~facilities. In the event of non-compliance~~, the NRC has the authority to impose fines and/or shut down a unit, depending upon its assessment of the severity of the situation, until compliance is achieved. Revised safety requirements promulgated by the NRC could necessitate substantial capital expenditures at nuclear plants, including ~~ours. Also,~~but anot ~~serious~~limited ~~nuclear incident at a nuclear facility anywhere in the world could cause the NRC~~ to ~~limit or prohibit~~ the ~~operation~~ ~~or relicensing of any domestic nuclear unit.~~following:

~~Our nuclear~~• ~~facilities~~the ~~are~~potential ~~insured~~harmful ~~under~~effects ~~NEIL~~on ~~policies~~the ~~issued~~environment ~~for~~and ~~each~~human ~~plant.~~health ~~Under these~~resulting ~~policies,~~from upunplanned toradiological ~~$2.8 billion~~releases ofassociated ~~insurance~~with ~~coverage~~the isoperation ~~provided~~of ~~for property~~our ~~damage~~nuclear facilities and ~~decontamination~~the storage, handling and ~~decommissioning~~disposal ~~costs.~~of Weradioactive ~~have~~materials; ~~also obtained~~• ~~approximately~~limitations ~~$2.0~~on ~~billion~~the amounts and types of insurance ~~coverage~~commercially ~~for~~available ~~replacement~~to ~~power costs.~~cover ~~Under~~losses ~~these~~that ~~policies,~~might wearise ~~can~~in beconnection ~~assessed~~with aour ~~maximum~~nuclear operations or those of ~~approximately~~others ~~$79 million~~in ~~for~~the ~~incidents~~United atStates; ~~any~~• ~~covered~~uncertainties ~~nuclear~~with ~~facility~~respect ~~occurring~~to ~~during~~contingencies aand ~~policy year~~assessments ~~that~~if ~~are~~insurance incoverage ~~excess~~is ofinadequate; ~~accumulated~~and ~~funds~~• ~~available~~uncertainties with respect to the ~~insurer~~technological ~~for~~and ~~paying losses~~financial aspects of decommissioning nuclear plants at the end of their licensed operation including increases in minimum funding requirements or costs of completion.

The ~~Price-Anderson~~ ~~Act~~NRC ~~limits~~has ~~the~~broad ~~public~~authority ~~liability~~under ~~that~~federal ~~can~~law ~~be assessed with respect~~ to aimpose ~~nuclear~~licensing ~~power~~security ~~plant~~and ~~to $12.5 billion (assuming 104 units licensed to~~safety-related ~~operate~~requirements infor the ~~United~~operation ~~States)~~of ~~for~~nuclear ageneration ~~single~~facilities. ~~nuclear~~In ~~incident,~~the ~~which~~event ~~amount~~of isnon-compliance, ~~covered~~the ~~by: (i)~~NRC ~~private~~has ~~insurance~~the ~~amounting~~authority to ~~$300.0 million; and~~impose ~~(ii)~~fines ~~$12.2~~and/or ~~billion~~shut ~~provided~~down bya anunit, ~~industry~~depending ~~retrospective~~upon ~~rating~~its ~~plan.~~assessment ~~Under~~of ~~such~~the ~~retrospective~~severity ~~rating~~of ~~plan, in~~ the ~~event~~situation, ofuntil acompliance ~~nuclear~~is ~~incident~~achieved. atRevised ~~any~~safety ~~unit~~requirements inpromulgated by the ~~United~~NRC ~~States~~could ~~resulting~~necessitate insubstantial ~~losses~~capital inexpenditures ~~excess~~at ofnuclear ~~private insurance~~plants, ~~up to~~ ~~$117.5 million~~including ~~(but not more than $17~~ours.~~5 million~~ ~~per~~Also, ~~year)~~a ~~must~~serious ~~be contributed~~nuclear ~~for~~incident ~~each~~at a nuclear ~~unit~~facility ~~licensed~~anywhere ~~to operate~~ in the ~~country~~world bycould cause the ~~licensees~~ ~~thereof~~NRC to ~~cover~~limit ~~liabilities~~or ~~arising~~prohibit ~~out of~~ the ~~incident.~~operation ~~Our~~or ~~maximum potential~~relicensing ~~exposure~~of ~~under~~any ~~these~~domestic ~~provisions~~nuclear ~~would be $470~~unit.~~0 million per~~ ~~incident but not more than $70.0 million in any one year.~~

29Our nuclear facilities are insured under NEIL policies issued for each plant. Under these policies, up to $2.8 billion of insurance coverage is provided for property damage and decontamination and decommissioning costs. We have also obtained approximately $2.0 billion of insurance coverage for replacement power costs. Under these policies, we can be assessed a maximum of approximately $79 million for incidents at any covered nuclear facility occurring during a policy year that are in excess of accumulated funds available to the insurer for paying losses.

~~Capital~~The Price-Anderson Act limits the public liability that can be assessed with respect to a nuclear ~~Market~~power ~~Performance~~plant to $12.6 billion (assuming 104 units licensed to operate in the United States) for a single nuclear incident, which amount is covered by: (i) private insurance amounting to $375 million; and ~~Other~~(ii) ~~Changes~~$12.2 billion ~~May~~provided ~~Decrease~~by an industry retrospective rating plan. Under such retrospective rating plan, in the ~~Value~~event of ~~Decommissioning~~a nuclear incident at any unit in the United States ~~Trust~~resulting ~~Fund~~in losses in excess of private insurance, ~~Pension~~up ~~Fund~~to ~~Assets~~$118 million ~~and~~(but ~~Other~~not ~~Trust~~more ~~Funds~~than ~~Which~~$18 million ~~Then~~per ~~Could~~year) ~~Require~~must be contributed for each nuclear unit licensed to operate in the country by ~~Significant~~the ~~Additional~~licensees ~~Funding~~thereof to cover liabilities arising out of the incident. Our maximum potential exposure under these provisions would be $470 million per incident but not more than $70 million in any one year.

~~Our financial~~Capital ~~statements~~Market ~~reflect~~Performance ~~the values of the assets held in trust to satisfy our obligations to decommission our nuclear generation facilities~~ and ~~under pension~~Other ~~and other post-retirement benefit plans. The value of certain of the assets held in these trusts do not have readily determinable market values.~~ Changes inMay ~~the~~Decrease ~~estimates and assumptions inherent in~~ the ~~value~~Value of ~~these~~ ~~assets~~Decommissioning ~~could~~Trust ~~affect the value of the trusts. If the value of the assets held by the trusts declines by a material amount~~Fund, ~~our funding~~ ~~obligation~~Pension toFund ~~the~~Assets ~~trusts could materially increase. The recent disruption in the capital markets~~ and ~~its~~Other ~~effects~~Trust onFunds ~~particular~~Which ~~businesses~~Then ~~and~~Could ~~the~~Require ~~economy~~Significant ~~in general~~Additional ~~also affects the values of the assets that are held in trust to satisfy~~Funding future obligations to decommission our nuclear plants, to pay pensions to our retired employees and to pay other funded obligations. These assets are subject to market fluctuations and will yield uncertain returns, which may fall below our projected return rates. Forecasting investment earnings and costs to decommission nuclear generating stations, to pay future pensions and other obligations requires significant judgment, and actual results may differ significantly from current estimates. Capital market conditions that generate investment losses or greater liability levels can negatively impact our results of operations and financial position.

~~We Could~~Our befinancial ~~Subject~~statements reflect the values of the assets held in trust to ~~Higher~~satisfy ~~Costs~~our obligations to decommission our nuclear generation facilities and~~/or~~ ~~Penalties~~under ~~Related~~pension toand ~~Mandatory~~other post-retirement ~~Reliability~~benefit ~~Standards~~plans. ~~Set~~The byvalue ~~NERC/FERC~~of orcertain of the assets held in these trusts do not have readily determinable market values. Changes in the ~~Rules~~estimates and assumptions inherent in the value of ~~Organized~~these ~~Markets~~assets ~~and~~could affect the ~~States~~value inof ~~Which~~the wetrusts. doIf ~~Business~~the value of the assets held by the trusts declines by a material amount, our funding obligation to the trusts could materially increase. These assets are subject to market fluctuations and will yield uncertain returns, which may fall below our projected return rates. Forecasting investment earnings and costs to decommission nuclear generating stations, to pay future pensions and other obligations requires significant judgment, and actual results may differ significantly from current estimates. Capital market conditions that generate investment losses or greater liability levels can negatively impact our results of operations and financial position.

~~As a~~26 result of the EPACT, owners, operators, and users of the bulk electric system are subject to mandatory reliability standards promulgated by the NERC and approved by FERC as well as mandatory reliability standards imposed by each of the states in which we operate. The standards are based on the functions that need to be performed to ensure that the bulk electric system operates reliably. Compliance with modified or new reliability standards may subject us to higher operating costs and/or increased capital expenditures. If we were found not to be in compliance with the mandatory reliability standards, we could be subject to sanctions, including substantial monetary penalties.

Reliability standardsTable that were historically subject to voluntary compliance are now mandatory and could subject us to potential civil penalties for violations which could negatively impact our business. The FERC can now impose penalties of $1.0 million per day for failure to comply with these mandatory electric reliability standards.Contents

~~In addition~~We toCould ~~direct~~be ~~regulation~~Subject byto ~~the~~Higher ~~FERC~~Costs and/or ~~the~~Penalties ~~states,~~Related ~~we are also subject~~ to ~~rules and~~ ~~terms~~Mandatory ofReliability ~~participation~~Standards ~~imposed and administered by various RTOs~~Set ~~and ISOs. Although these entities are themselves ultimately regulated~~ by ~~the~~ NERC/FERC, ~~they~~or ~~can~~Changes ~~impose rules, restrictions and terms of service that are quasi-regulatory~~ in ~~nature and can have a material adverse impact on our business. For example,~~ the ~~independent~~Rules ~~market monitors~~ of ~~ISOs~~Organized ~~and~~Markets ~~RTOs may impose bidding~~ and ~~scheduling rules to curb~~ the ~~potential~~States ~~exercise~~in ofWhich ~~market power~~We ~~and~~Do ~~to ensure the market functions. Such actions may materially affect our~~Business ability to sell, and the price we receive for, our energy and capacity. In addition, the RTOs may direct our transmission owning affiliates to build new transmission facilities to meet the reliability requirements of the RTO or to provide new or expanded transmission service under the RTO tariffs.

WeAs a result of the EPACT, owners, operators, and users of the bulk electric system are subject to ~~Rely~~mandatory onreliability ~~Transmission~~standards promulgated by the NERC and ~~Distribution~~approved ~~Assets~~by ~~That~~FERC Weas Dowell ~~Not~~as ~~Own~~mandatory reliability orstandards ~~Control~~and energy efficiency requirements imposed by each of the states in which we operate. The standards are based on the functions that need to be performed to ensure that the bulk ~~Deliver~~electric ~~Our~~system ~~Wholesale~~operates ~~Electricity~~reliably. IfCompliance ~~Transmission~~with ismodified ~~Disrupted~~or ~~Including~~new ~~Our~~reliability standards may ~~Own~~subject ~~Transmission,~~us orto ~~Not~~higher ~~Operated~~operating ~~Efficiently,~~costs and/or ifincreased ~~Capacity~~capital isexpenditures. ~~Inadequate,~~If ~~Our Ability~~we were found not to be ~~Sell~~in ~~and~~compliance ~~Deliver~~with ~~Power~~the ~~May~~mandatory Bereliability ~~Hindered~~standards, we could be subject to sanctions, including substantial monetary penalties.

~~We depend~~Reliability onstandards ~~transmission~~that ~~and~~were ~~distribution~~historically ~~facilities~~subject ~~owned and operated by utilities and other energy companies~~ to ~~deliver~~voluntary ~~the~~compliance ~~electricity~~are wenow ~~sell.~~mandatory If transmission is disrupted (as a result of weather, natural disasters or other reasons) or not operated efficiently by independent system operators, in applicable markets, or if capacity is inadequate, our ability to sell and ~~deliver~~could ~~products~~subject ~~and~~us ~~satisfy our contractual obligations may be hindered, or we may be unable~~ to ~~sell~~potential ~~products~~civil onpenalties ~~the~~for ~~most~~violations ~~favorable terms. In addition, in certain of the markets in~~ which wecould ~~operate,~~negatively weimpact ~~may be required to pay for~~our ~~congestion~~business. ~~costs~~The ifFERC wecan ~~schedule~~now ~~delivery~~impose ofpenalties ~~power between congestion zones during periods~~ of ~~high demand~~$1. If0 million weper ~~are~~day ~~unable~~for failure to ~~hedge~~comply ~~or recover~~with ~~for~~these ~~such~~mandatory ~~congestion~~electric ~~costs~~reliability ~~in retail rates, our financial results could be adversely affected~~standards.

~~Demand~~In addition to direct regulation by the FERC and the states, we are also subject to rules and terms ~~for~~of ~~electricity~~participation ~~within~~imposed ~~our~~and ~~utilities’~~administered ~~service~~by ~~areas~~various ~~could~~RTOs ~~stress~~and ~~available~~ISOs. Although these entities are ~~transmission~~themselves ~~capacity~~ultimately ~~requiring~~regulated ~~alternative~~by ~~routing~~the orFERC, ~~curtailing~~they ~~electricity~~can impose rules, restrictions and terms of ~~usage~~service that ~~may~~are ~~increase~~quasi-regulatory ~~operating~~in ~~costs~~nature ~~or reduce~~and ~~revenues~~can ~~with~~have a material adverse impact on our business. ~~impacts~~For example, the independent market monitors of ISOs and RTOs may impose bidding and scheduling rules to ~~results~~curb the potential exercise of ~~operations~~market power and to ensure the market functions. InSuch actions ~~addition~~may materially affect our ability to sell, asand ~~with~~the ~~all~~price ~~utilities~~we receive for, ~~potential~~our energy and ~~concerns~~capacity. ~~over~~In ~~transmission~~addition, ~~capacity~~the ~~could~~RTOs ~~result~~may indirect ~~MISO,~~our ~~PJM~~transmission orowning ~~the~~affiliates ~~FERC~~to build new ~~requiring~~transmission usfacilities to ~~upgrade~~meet the reliability requirements of the RTO or ~~expand~~to ~~our~~provide new or expanded transmission ~~system,~~service ~~requiring~~under ~~additional capital~~the ~~expenditures~~RTO tariffs.

~~The~~We ~~FERC requires~~Rely ~~wholesale electric transmission services to be offered~~ on ~~an open-access,~~Transmission ~~non-discriminatory basis. Although these regulations are designed to encourage competition in wholesale market transactions for electricity, it is possible that fair~~ and ~~equal~~Distribution ~~access~~Assets toThat ~~transmission~~We ~~systems~~Do ~~will~~Not ~~not~~Own ~~be available~~ or ~~that~~Control ~~sufficient~~to ~~transmission~~Deliver ~~capacity will not be available to~~Our ~~transmit~~Wholesale ~~electricity as we desire~~Electricity. WeIf ~~cannot~~Transmission ~~predict~~is ~~the~~Disrupted ~~timing~~Including ofOur ~~industry changes~~Own asTransmission, ~~a result of these initiatives~~ or ~~the~~Not ~~adequacy of transmission~~Operated ~~facilities~~Efficiently, ~~in specific markets~~ or ~~whether~~if ~~independent~~Capacity ~~system~~is ~~operators~~Inadequate, ~~in applicable~~Our ~~markets~~Ability ~~will~~to ~~operate~~Sell ~~the~~and ~~transmission~~Deliver ~~networks,~~Power ~~and~~May ~~provide~~Be ~~related~~Hindered ~~services, efficiently.~~

30We depend on transmission and distribution facilities owned and operated by utilities and other energy companies to deliver the electricity we sell. If transmission is disrupted (as a result of weather, natural disasters or other reasons) or not operated efficiently by independent system operators, in applicable markets, or if capacity is inadequate, our ability to sell and deliver products and satisfy our contractual obligations may be hindered, or we may be unable to sell products on the most favorable terms. In addition, in certain of the markets in which we operate, we may be required to pay for congestion costs if we schedule delivery of power between congestion zones during periods of high demand. If we are unable to hedge or recover for such congestion costs in retail rates, our financial results could be adversely affected.

~~Disruptions~~Demand for electricity within our Utilities’ service areas could stress available transmission incapacity ~~Our~~requiring ~~Fuel~~alternative ~~Supplies~~routing ~~Could~~or ~~Occur,~~curtailing ~~Which~~electricity ~~Could~~usage ~~Adversely~~that ~~Affect~~may ~~Our~~increase ~~Ability~~operating costs or reduce revenues with adverse impacts to results of operations. In addition, as with all ~~Operate~~utilities, ~~Our~~potential ~~Generation~~concerns ~~Facilities~~over ~~and~~transmission ~~Impact~~capacity ~~Financial~~could ~~Results~~result in MISO, PJM or the FERC requiring us to upgrade or expand our transmission system, requiring additional capital expenditures.

~~We purchase fuel from a number of suppliers.~~ The ~~lack~~FERC ofrequires ~~availability~~wholesale ofelectric ~~fuel~~transmission ~~at expected~~services ~~prices,~~to orbe aoffered ~~disruption in the delivery of fuel which exceeds the duration of our~~ on~~-site~~ ~~fuel~~an ~~inventories~~open-access, ~~including disruptions as a result of~~ ~~weather,~~non-discriminatory ~~increased~~basis. ~~transportation~~Although ~~costs~~these ~~or other difficulties, labor relations or environmental or other~~ regulations ~~affecting~~are ~~our~~designed ~~fuel~~to ~~suppliers,~~encourage ~~could~~competition ~~cause~~in anwholesale ~~adverse~~market ~~impact~~transactions onfor ~~our ability to operate our facilities~~electricity, ~~possibly~~it ~~resulting in~~is ~~lower~~possible ~~sales~~that fair and~~/or~~ ~~higher~~equal ~~costs~~access ~~and~~to transmission ~~thereby~~systems ~~adversely~~will ~~affect~~not ~~our~~be ~~results~~available ~~of operations.~~or ~~Operation~~that ofsufficient ~~our~~transmission ~~coal-fired~~capacity ~~generation~~will ~~facilities~~not ~~is highly~~be ~~dependent~~available ~~on our ability~~ to ~~procure~~transmit ~~coal.~~electricity ~~Although~~as we ~~have~~desire. ~~long-term~~We ~~contracts in~~cannot ~~place~~predict ~~for~~the ~~our~~timing ~~coal~~of ~~and~~industry ~~coal~~changes ~~transportation~~as a ~~needs,~~result ~~power~~of ~~generators~~these ininitiatives ~~the Midwest~~or ~~and~~ the ~~Northeast~~adequacy ~~have~~of ~~experienced~~transmission ~~significant~~facilities ~~pressures~~in onspecific ~~available coal~~markets ~~supplies that are either transportation~~ or whether ~~supply~~independent ~~related.~~system Ifoperators ~~prices~~in ~~for physical~~applicable ~~delivery~~markets ~~are~~will ~~unfavorable,~~operate ~~our~~the ~~financial~~transmission ~~condition~~networks, ~~results of~~ ~~operations~~ and ~~cash~~provide ~~flows~~related ~~could~~services, ~~be materially adversely affected~~efficiently.

~~Temperature Variations~~Disruptions asin ~~well~~Our asFuel ~~Weather~~Supplies ~~Conditions~~Could orOccur, ~~other~~Which ~~Natural Disasters~~ Could ~~Have~~Adversely ~~a Negative~~Affect ~~Impact on~~ Our ~~Results~~Ability ofto ~~Operations and Demand Significantly Below or~~Operate ~~Above~~Our ~~our~~Generation ~~Forecasts~~Facilities ~~Could~~and ~~Adversely~~Impact ~~Affect~~Financial ~~our Energy Margins~~Results

~~Weather conditions~~We ~~directly~~purchase ~~influence~~fuel ~~the~~from ~~demand~~a ~~for~~number ~~electric~~of ~~power~~suppliers. ~~Demand~~The ~~for~~lack ~~power generally~~of ~~peaks~~availability ~~during~~of ~~the~~fuel ~~summer~~at ~~months~~expected prices, or ~~with~~a ~~market~~disruption ~~prices~~in ~~also~~the ~~typically peaking~~delivery atof ~~that~~fuel ~~time.~~which ~~Overall~~exceeds ~~operating~~the ~~results~~duration ~~may~~of ~~fluctuate~~our ~~based~~ on-site ~~weather conditions.~~fuel ~~In addition~~inventories, including wedisruptions ~~have~~as ~~historically~~a ~~sold~~result ~~less~~of ~~power~~weather, ~~and~~increased ~~consequently received~~transportation ~~less~~costs ~~revenue~~or other difficulties, labor ~~when~~relations ~~weather~~or ~~conditions~~environmental ~~are~~or ~~milder.~~other ~~Severe~~regulations ~~weather~~affecting our fuel suppliers, ~~such~~could cause an asadverse ~~tornadoes,~~impact ~~hurricanes,~~on ~~ice~~our orability ~~snow~~to ~~storms~~operate our facilities, orpossibly ~~droughts~~resulting orin ~~other~~lower ~~natural~~sales and/or ~~disasters,~~higher ~~may~~costs ~~cause~~and ~~outages~~thereby ~~and~~adversely ~~property~~affect ~~damage~~our ~~that~~results ~~may~~of ~~require~~operations. usOperation of our coal-fired generation facilities is highly dependent on our ability to ~~incur~~procure coal. Although we have ~~additional~~long-term ~~costs~~contracts ~~that~~in ~~are~~place ~~generally~~for ~~not~~our ~~insured~~coal and ~~that~~coal ~~may~~transportation ~~not~~needs, bepower ~~recoverable~~generators in the ~~from~~Midwest ~~customers.~~and ~~The~~the ~~effect~~Northeast ofhave ~~the~~experienced ~~failure~~significant ofpressures ~~our~~on ~~facilities~~available tocoal ~~operate~~supplies asthat ~~planned~~are ~~under~~either ~~these~~transportation ~~conditions~~or ~~would~~supply berelated. ~~particularly~~If ~~burdensome~~prices ~~during~~for aphysical ~~peak~~delivery are unfavorable, our ~~demand~~financial ~~period~~condition, results of operations and cash flows could be materially adversely affected.

~~Customer~~27 demand could change as a result of severe weather conditions or other circumstances over which we have no control. We satisfy our electricity supply obligations through a portfolio approach of providing electricity from our generation assets, contractual relationships and market purchases. A significant increase in demand could adversely affect our energy margins if we are required under the terms of the default service tariffs to provide the energy supply to fulfill this increased demand at capped rates, which we expect would remain below the wholesale prices at which we would have to purchase the additional supply if needed or, if we had available capacity, the prices at which we could otherwise sell the additional supply. Accordingly, any significant change in demand could have a material adverse effect on our results of operations and financial position.

We AreTable Subjectof to Financial Performance Risks Related to Regional and General Economic Cycles and also Related to Heavy Manufacturing Industries such as Automotive and SteelContents

~~Our business~~Temperature ~~follows~~Variations ~~the~~as ~~economic~~well ~~cycles~~as ofWeather ~~our~~Conditions ~~customers.~~or Asother ~~our~~Natural ~~retail~~Disasters ~~strategy~~Could ~~is centered~~Have ~~around the sale of output from our generating plants generally where~~a ~~that~~Negative ~~power~~Impact ~~will~~on ~~reach,~~Our ~~therefore,~~Results we are more directly impacted by the economic conditions in our primary markets (i.e., Western Pennsylvania, Ohio, Maryland, New Jersey, Michigan and Illinois). Declines in demand for electricity as a result of ~~a regional~~Operations ~~economic downturn would be expected to reduce overall electricity sales~~ and ~~reduce~~Demand ~~our~~Significantly ~~revenues.~~Below Aor ~~decrease~~Above inOur ~~electric generation sales volume has~~Forecasts ~~been,~~Could ~~and~~Adversely isAffect ~~expected~~Our toEnergy ~~continue to be, influenced by circumstances in~~Margins ~~automotive, steel and other heavy industries.~~

~~Increases~~Weather conditions directly influence the demand for electric power. Demand for power generally inpeaks ~~Customer~~during ~~Electric~~the ~~Rates~~summer and ~~the~~winter ~~Impact~~months, ofwith ~~the~~market ~~Economic~~prices ~~Downturn~~also ~~May~~typically ~~Lead~~peaking at that time. Overall operating results may fluctuate based on weather conditions. In addition, we have historically sold less power, and consequently received less revenue, when weather conditions are milder. Severe weather, such as tornadoes, hurricanes, ice or snow storms, or droughts or other natural disasters, may cause outages and property damage that may require us to aincur additional ~~Greater~~costs ~~Amount~~that are generally not insured and that may not be recoverable from customers. The effect of the ~~Uncollectible~~failure ~~Customer~~of ~~Accounts~~our facilities to operate as planned under these conditions would be particularly burdensome during a peak demand period.

~~Our operations are~~Customer ~~impacted~~demand bycould ~~the~~change ~~economic~~as a result of severe weather conditions inor other circumstances over which we have no control. We satisfy our ~~service~~electricity ~~territories~~supply obligations through a portfolio approach of providing electricity from our generation assets, contractual relationships and ~~those~~market ~~conditions~~purchases. A significant increase in demand could ~~negatively~~adversely ~~impact~~affect our energy margins if we are required under the ~~rate~~terms of ~~delinquent~~the ~~customer~~default ~~accounts~~service ~~and~~tariffs to provide the energy supply to fulfill ~~our~~this ~~collections~~increased ofdemand ~~accounts~~at ~~receivable~~capped rates, which ~~could~~we ~~adversely~~expect ~~impact~~would ~~our~~remain below the wholesale prices at ~~financial~~which ~~condition~~we would have to purchase the additional supply if needed or, if we had available capacity, the prices at which we could otherwise sell the additional supply. Accordingly, any significant change in demand could have a material adverse effect on our results of operations and ~~cash flows~~financial position.

~~The Goodwill~~We ofAre ~~One~~Subject orto ~~More~~Financial ofPerformance ~~Our~~Risks ~~Operating~~Related ~~Subsidiaries~~to ~~May~~Regional ~~Become~~and ~~Impaired,~~General ~~Which~~Economic Cycles and ~~Would~~also ~~Result~~Related into ~~Write-Offs~~Heavy ofManufacturing ~~the~~Industries ~~Impaired~~such ~~Amounts~~as Automotive and Steel

~~Goodwill could~~Our ~~become~~business ~~impaired~~follows atthe ~~one~~economic orcycles ~~more~~ of our ~~operating subsidiaries~~customers. ~~The~~As ~~actual~~our retail strategy is centered ~~timing~~around ~~and~~the ~~amounts~~sale of ~~any~~output ~~goodwill~~from ~~impairments~~our ingenerating ~~future~~plants ~~years~~generally ~~would~~where ~~depend~~that ~~on many~~power ~~uncertainties~~will reach, therefore, ~~including~~we ~~changing~~are ~~interest~~more ~~rates,~~directly ~~utility~~impacted ~~sector~~by ~~market~~the economic conditions in our primary markets (i.e., ~~performance~~Pennsylvania, ~~our~~Ohio, ~~capital~~Maryland, ~~structure~~New Jersey, ~~market~~Michigan ~~prices~~and Illinois). Declines in demand for ~~power,~~electricity ~~results~~as a result of ~~future~~a regional economic downturn would be expected to ~~rate~~reduce ~~proceedings,~~overall ~~operating~~electricity sales and ~~capital~~reduce ~~expenditure~~our ~~requirements,~~revenues. ~~the~~Electric ~~value~~generation ofsales volume has ~~comparable~~been, ~~utility~~and ~~acquisitions~~is expected to continue to be, ~~environmental~~influenced ~~regulations~~by circumstances in automotive, steel and other ~~factors~~heavy industries.

31Increases in Customer Electric Rates and Economic Uncertainty May Lead to a Greater Amount of Uncollectible Customer Accounts

~~We Face~~Our ~~Certain~~operations ~~Human~~are ~~Resource~~impacted ~~Risks~~by ~~Associated~~the ~~with~~economic conditions in our service territories and those conditions could negatively impact the ~~Availability~~rate of ~~Trained~~ delinquent customer accounts and ~~Qualified~~our ~~Labor~~collections toof accounts ~~Meet~~receivable ~~Our~~which ~~Future~~could ~~Staffing~~adversely ~~Requirements~~impact our financial condition, results of operations and cash flows.

~~We must find~~The ~~ways~~Goodwill toof ~~retain~~One ~~our~~or ~~aging~~More ~~skilled~~of ~~workforce~~Our ~~while~~Operating ~~recruiting~~Subsidiaries ~~new~~May ~~talent~~Become ~~to mitigate~~Impaired, ~~losses~~Which inWould ~~critical knowledge and skills due to retirements. Mitigating~~Result ~~these~~in ~~risks~~Write-Offs ~~could~~of ~~require~~the ~~additional~~Impaired ~~financial commitments.~~Amounts

~~Significant~~Goodwill could become impaired at one or more of our operating subsidiaries. The actual timing and ~~Increases~~amounts of any goodwill impairments in ~~Our~~future ~~Operation~~years ~~and~~would ~~Maintenance~~depend ~~Expenses~~on many uncertainties, ~~Including~~including changing ~~Our~~interest ~~Health~~rates, ~~Care~~utility sector market performance, our capital structure, market prices for power, results of future rate proceedings, operating and ~~Pension~~capital ~~Costs~~expenditure requirements, ~~Could~~the value ~~Adversely~~of ~~Affect~~comparable ~~Our~~utility ~~Future~~acquisitions, ~~Earnings~~environmental regulations and other factors. ~~Liquidity~~

We ~~continually~~ ~~focus~~Face onCertain ~~limiting,~~Human ~~and~~Resource ~~reducing~~Risks ~~where~~Associated ~~possible,~~with our operation and maintenance expenses. However, we expect cost pressures could increase as we continue to implement our retail sales strategy. We expect to continue to face increased cost pressures in the ~~areas~~Availability of ~~health~~Trained ~~care~~ and ~~pension costs. We have~~Qualified ~~experienced~~Labor ~~significant health care cost inflation in the last few years, and we expect our cash outlay for health care costs, including prescription drug coverage,~~ to ~~continue~~Meet toOur ~~increase~~Future ~~despite~~Staffing ~~measures that we have taken and expect~~Requirements to take requiring employees and retirees to bear a higher portion of the costs of their health care benefits. The measurement of our expected future health care and pension obligations and costs is highly dependent on a variety of assumptions, many of which relate to factors beyond our control. These assumptions include investment returns, interest rates, health care cost trends, benefit design changes, salary increases, the demographics of plan participants and regulatory requirements. If actual results differ materially from our assumptions, our costs could be significantly increased.

~~Our Business is~~We ~~Subject~~must find ways to ~~the~~retain ~~Risk~~our ~~that~~aging ~~Sensitive~~skilled ~~Customer~~workforce ~~Data~~while ~~May~~recruiting benew ~~Compromised,~~talent ~~Which~~to mitigate ~~Could~~losses ~~Result~~ in ancritical ~~Adverse~~knowledge ~~Impact~~and skills due to ~~Our~~retirements. ~~Reputation~~Mitigating ~~and/or~~these ~~Results~~risks ofcould require ~~Operations~~additional financial commitments.

~~Our~~28 business requires access to sensitive customer data, including personal and credit information, in the ordinary course of business. A security breach may occur, despite security measures taken by us and required of vendors. If a significant or widely publicized breach occurred, our business reputation may be adversely affected, customer confidence may be diminished, or we may become subject to legal claims, fines or penalties, any of which could have a negative impact on our business and/or results of operations.

Acts Table of War or Terrorism Could Negatively Impact Our BusinessContents

~~The possibility~~Significant ~~that~~Increases ~~our~~in ~~infrastructure,~~Our ~~such~~Operation ~~as electric generation, transmission~~ and ~~distribution~~Maintenance ~~facilities~~Expenses, orIncluding ~~that~~Our ofHealth anCare interconnected company, could be direct targets of, or indirect casualties of, an act of war or terrorism, could result in disruption of our ability to generate, purchase, transmit or distribute electricity. Any such disruption could result in a decrease in revenues and ~~additional costs to purchase electricity and to replace or repair~~ ~~our~~Pension ~~assets~~Costs, ~~which~~Could ~~could~~Adversely ~~have~~Affect aOur ~~material~~Future ~~adverse~~Earnings ~~impact on our results of operations~~ and ~~financial condition.~~Liquidity

~~Capital~~We continually focus on limiting, and reducing where possible, our operation and maintenance ~~Improvements~~expenses. However, we expect cost pressures could increase as we continue to implement our retail sales strategy. We expect to continue to face increased cost pressures in the areas of health care and ~~Construction~~pension ~~Projects~~costs. ~~May~~We ~~Not~~have beexperienced ~~Completed~~significant ~~Within~~health ~~Forecasted~~care cost inflation in the last few ~~Budget~~years, ~~Schedule~~and orwe ~~Scope~~expect ~~Parameters~~our cash outlay for health care costs, including prescription drug coverage, to continue to increase despite measures that we have taken and expect to take requiring employees and retirees to bear a higher portion of the costs of their health care benefits. The measurement of our expected future health care and pension obligations and costs is highly dependent on a variety of assumptions, many of which relate to factors beyond our control. These assumptions include investment returns, interest rates, health care cost trends, benefit design changes, salary increases, the demographics of plan participants and regulatory requirements. If actual results differ materially from our assumptions, our costs could be significantly increased.

Our ~~business~~ ~~plan~~Business ~~calls~~is ~~for~~Subject ~~extensive~~to ~~capital investments, including~~ the ~~installation~~ ofRisk ~~environmental~~that ~~control~~Sensitive ~~equipment,~~Customer asData ~~well~~May ~~as other initiatives. We may~~ be ~~exposed~~Compromised, toWhich ~~the risk of substantial price increases in the costs of~~Could ~~labor~~Result ~~and materials used~~ in ~~construction.~~an WeAdverse ~~have~~Impact ~~engaged numerous contractors and entered into a large number of agreements~~ to ~~acquire~~Our ~~the~~Reputation ~~necessary materials~~ and/or ~~obtain~~Results the required construction-related services. As a result, we are also exposed to the risk that these contractors and other counterparties could breach their obligations to us. Such risk could include our contractors’ inabilities to procure sufficient skilled labor as well as potential work stoppages by that labor force. Should the counterparties to these arrangements fail to perform, we may be forced to enter into alternative arrangements at then-current market prices that may exceed our contractual prices, with resulting delays in those and other projects. Although our agreements are designed to mitigate the consequences of ~~a potential default by the~~Operations ~~counterparty, our actual exposure may be greater than these mitigation provisions. This could have negative financial impacts such as incurring losses or delays in completing construction projects.~~

~~Changes~~Our business requires access to sensitive customer data, including personal and credit information, in ~~Technology~~the ~~May~~ordinary ~~Significantly~~course ~~Affect~~of ~~Our~~business. ~~Generation~~A ~~Business~~security breach may occur, despite security measures taken by us ~~Making~~and ~~Our~~required of vendors. If a significant or widely publicized breach occurred, our business ~~Generating~~reputation ~~Facilities~~may ~~Less~~be ~~Competitive~~adversely affected, customer confidence may be diminished, or we may become subject to legal claims, fines or penalties, any of which could have a negative impact on our business and/or results of operations.

~~We primarily~~Acts ~~generate electricity at large central facilities. This method results in economies~~ of ~~scale~~War and lower costs than newer technologies such as fuel cells, microturbines, windmills and photovoltaic solar cells. It is possible that advances in technologies will reduce their costs to levels that are equal to or ~~below~~Terrorism ~~that~~Could ofNegatively ~~most~~Impact ~~central~~Our ~~station electricity production, which could~~Business ~~have a material adverse effect on our results of operations.~~

32The possibility that our infrastructure, such as electric generation, transmission and distribution facilities, or that of an interconnected company, could be direct targets of, or indirect casualties of, an act of war or terrorism, could result in disruption of our ability to generate, purchase, transmit or distribute electricity. Any such disruption could result in a decrease in revenues and additional costs to purchase electricity and to replace or repair our assets, which could have a material adverse impact on our results of operations and financial condition.

~~We May~~Capital ~~Acquire Assets~~Improvements ~~That~~and ~~Could~~Construction ~~Present~~Projects ~~Unanticipated~~May ~~Issues~~Not ~~for~~be ~~our~~Completed ~~Business in~~Within ~~the~~Forecasted ~~Future~~Budget, ~~Which Could Adversely Affect Our Ability to Realize Anticipated~~ ~~Benefits~~Schedule ofor ~~Those~~Scope ~~Acquisitions~~Parameters

~~Asset~~Our business plan calls for extensive capital investments. We may be exposed to the risk of ~~acquisitions~~substantial ~~involve~~price aincreases ~~number~~in the costs of ~~risks~~labor and ~~challenges,~~materials ~~including:~~used ~~management~~in construction. We have ~~attention;~~engaged ~~integration~~numerous ~~with~~contractors ~~existing~~and ~~assets;~~entered ~~difficulty~~into ina ~~evaluating~~large number of agreements to acquire the necessary ~~requirements~~materials ~~associated~~and/or ~~with~~obtain the ~~assets~~required ~~prior~~construction-related toservices. ~~acquisition,~~As ~~operating~~a ~~costs~~result, we are also ~~potential~~exposed ~~environmental~~to ~~and~~the ~~other~~risk ~~liabilities,~~that these contractors and other ~~factors~~counterparties ~~beyond~~could ~~our~~breach their obligations ~~control;~~to ~~and~~us. anSuch ~~increase~~risk incould include our ~~expenses~~contractors’ ~~and~~inabilities ~~working~~to ~~capital~~procure sufficient skilled labor as ~~requirements~~well as potential work stoppages by that labor force. ~~Any~~ ofShould the counterparties to these arrangements ~~factors~~fail ~~could~~to ~~adversely~~perform, ~~affect~~we may be forced to enter into alternative arrangements at then-current market prices that may exceed our ~~ability~~contractual prices, with resulting delays in those and other projects. Although our agreements are designed to ~~achieve~~mitigate ~~anticipated~~the ~~levels~~consequences of ~~cash~~a potential ~~flows~~default orby ~~realize~~the ~~other~~counterparty, ~~anticipated~~our actual exposure may be greater than these mitigation ~~benefits~~provisions. ~~from~~This ~~any~~could have negative financial impacts such ~~asset~~as ~~acquisition~~incurring losses or delays in completing construction projects.

~~Ability of~~Changes ~~Certain~~in ~~FirstEnergy~~Technology ~~Companies~~May toSignificantly ~~Meet~~Affect ~~Their~~Our ~~Obligations~~Generation toBusiness ~~Other~~by ~~FirstEnergy~~Making Our Generating ~~Companies~~Facilities Less Competitive

~~Certain of~~We ~~the~~primarily ~~FirstEnergy~~generate ~~companies~~electricity ~~have~~at ~~obligations~~large tocentral ~~other~~facilities. ~~FirstEnergy~~This ~~companies because~~method ofresults ~~transactions~~in ~~involving~~economies ~~energy,~~of scale ~~coal, other commodities, services,~~ and ~~because~~ oflower ~~hedging~~costs ~~transactions.~~than Ifnewer ~~one~~technologies ~~FirstEnergy~~such ~~entity~~as ~~failed~~fuel tocells, ~~perform under any of these arrangements~~microturbines, ~~other~~windmills ~~FirstEnergy~~and photovoltaic ~~entities~~solar ~~could incur losses~~cells. ~~Their~~ ~~results~~It ofis ~~operations,~~possible ~~financial~~that ~~position,~~advances ~~or liquidity could be adversely affected, resulting~~ in ~~the~~technologies ~~nondefaulting~~will ~~FirstEnergy~~reduce ~~entity~~their ~~being~~costs ~~unable~~ to ~~meet~~ ~~its~~levels ~~obligations~~that ~~to unrelated third parties. Our hedging activities~~ are ~~generally undertaken~~equal ~~with a view~~ to ~~overall~~or ~~FirstEnergy~~below ~~exposures.~~that ~~Some~~of ~~FirstEnergy companies~~most ~~may~~central ~~therefore~~station beelectricity ~~more~~production, orwhich ~~less~~could have ~~hedged~~a ~~than~~material ifadverse ~~they~~effect ~~were~~on toour ~~engage~~results ~~in such~~of ~~transactions alone~~operations.

~~Risks~~We ~~Associated~~May ~~With~~Acquire ~~our~~Assets That Could Present Unanticipated Issues for Our Business in the Future, Which ~~Proposed~~Could ~~Merger~~Adversely ~~With~~Affect ~~Allegheny~~Our Ability to Realize Anticipated Benefits of Those Acquisitions

WeAsset acquisitions involve a number of risks and challenges, including: management attention; ~~May~~integration bewith ~~Unable~~existing toassets; ~~Obtain~~difficulty in evaluating the ~~Approvals~~requirements ~~Required~~associated with the assets prior to ~~Complete~~acquisition, ~~our~~operating ~~Merger~~costs, ~~with Allegheny~~potential orenvironmental and other liabilities, and other factors beyond our control; and an increase in ~~Order~~our toexpenses doand ~~so,~~working ~~the~~capital ~~Combined~~requirements. Any ~~Company~~of ~~May~~these befactors ~~Required~~could adversely affect our ability to ~~Comply With~~achieve ~~Material~~anticipated ~~Restrictions~~levels of cash flows or ~~Conditions~~realize other anticipated benefits from any such asset acquisition.

On29 February 11, 2010, we announced the execution of a merger agreement with Allegheny. Before the merger may be completed, shareholder approval will have to be obtained by us and by Allegheny. In addition, various filings must be made with the FERC and various state utility, regulatory, antitrust and other authorities in the United States. These governmental authorities may impose conditions on the completion, or require changes to the terms, of the merger, including restrictions or conditions on the business, operations, or financial performance of the combined company following completion of the merger. These conditions or changes could have the effect of delaying completion of the merger or imposing additional costs on or limiting the revenues of the combined company following the merger, which could have a material adverse effect on the financial results of the combined company and/or cause either us or Allegheny to abandon the merger.

IfTable Completed,of Our Merger with Allegheny May Not Achieve Its Intended Results.Contents

WeAbility and Allegheny entered into the merger agreement with the expectation that the merger would result in various benefits, including, among other things, cost savings and operating efficiencies relating to both the regulated utility operations and the generation business. Achieving the anticipated benefits of ~~the~~Certain ~~merger~~FirstEnergy ~~is subject~~Companies to aMeet ~~number~~Their ofObligations ~~uncertainties, including whether the business of Allegheny is integrated in an efficient and effective manner. Failure~~ to ~~achieve these~~Other ~~anticipated~~FirstEnergy ~~benefits could result in increased costs, decreases in the~~Companies amount of expected revenues generated by the combined company and diversion of management's time and energy and could have an adverse effect on the combined company's business, financial results and prospects.

~~We Will~~Certain beof ~~Subject~~the FirstEnergy companies have obligations to ~~Business~~other ~~Uncertainties~~FirstEnergy companies because of transactions involving energy, coal, other commodities, services, and ~~Contractual~~because ~~Restrictions~~of ~~While~~hedging transactions. If one FirstEnergy entity failed to perform under any of these arrangements, other FirstEnergy entities could incur losses. Their results of operations, financial position, or liquidity could be adversely affected, resulting in the nondefaulting FirstEnergy entity being ~~Merger~~unable ~~with~~to ~~Allegheny~~meet isits ~~Pending~~obligations ~~That~~to ~~Could~~unrelated ~~Adversely~~third ~~Affect~~parties. Our ~~Financial~~hedging activities are generally ~~Results~~undertaken with a view to overall FirstEnergy exposures. Some FirstEnergy companies may therefore be more or less hedged than if they were to engage in such transactions alone.

~~Uncertainty about~~Risks ~~the~~Associated ~~effect~~With ofOur ~~the~~Proposed ~~merger~~Merger ~~with~~With Allegheny ~~on employees and customers may~~ have an adverse effect on us. Although we intend to take steps designed to reduce any adverse effects, these uncertainties may impair our ability to attract, retain and motivate key personnel until the merger is completed and for a period of time thereafter, and could cause customers, suppliers and others that deal with us to seek to change existing business relationships.

~~Employee retention~~We ~~and~~May ~~recruitment may~~ be ~~particularly~~Unable ~~challenging prior~~ to ~~the completion~~Obtain of the ~~merger,~~Approvals asRequired ~~employees~~to ~~and~~Complete ~~prospective~~Our ~~employees~~Merger ~~may experience uncertainty about their future roles~~ with ~~the~~Allegheny ~~combined company. If~~or, ~~despite our~~in ~~retention~~Order ~~and~~to ~~recruiting~~do ~~efforts~~so, ~~key employees depart or fail to accept employment with us because of issues relating to~~ the ~~uncertainty~~Combined ~~and~~Company ~~difficulty of~~May ~~integration~~be orRequired ~~a desire not~~ to ~~remain~~Comply ~~with~~With ~~the~~Material ~~combined~~Restrictions ~~company, our~~or ~~financial results could be affected.~~Conditions

~~The~~On ~~pursuit~~February 11, of2010, we announced the execution of a merger agreement ~~and~~with Allegheny. The only regulatory approval pending is from the ~~preparation~~PPUC. ~~for~~The PPUC could impose conditions on the ~~integration~~completion, or require changes to the terms, of ~~Allegheny~~the ~~into~~merger, including ~~our~~restrictions ~~company~~or ~~may~~conditions ~~place~~on athe ~~significant~~business, ~~burden~~operations, onor ~~management~~financial ~~and~~performance ~~internal~~of ~~resources.~~the combined ~~The~~company ~~diversion~~following completion of ~~management~~the ~~attention~~merger. ~~away~~These ~~from~~conditions ~~day-to-day~~or ~~business~~changes ~~concerns~~could ~~and~~have the effect of ~~any~~delaying ~~difficulties~~completion ~~encountered~~of inthe merger or imposing additional costs on or limiting the ~~transition~~revenues ~~and~~of ~~integration~~the combined ~~process~~company following the merger, which could ~~affect~~ ~~our~~have ~~financial~~a material adverse effect on the financial results of the combined company and/or cause either us or Allegheny to abandon the merger.

33If Completed, Our Merger with Allegheny May Not Achieve Its Intended Results

~~In addition,~~We and Allegheny entered into the merger agreement ~~restricts~~with ~~us,~~the ~~without~~expectation ~~Allegheny‘s~~that ~~consent,~~the ~~from~~merger would ~~making~~result ~~certain~~in ~~acquisitions~~various ~~and~~benefits, ~~taking~~including, among other ~~specified~~things, ~~actions~~cost ~~until~~savings and operating efficiencies relating to both the ~~merger~~regulated utility operations and the generation business. Achieving the ~~occurs~~anticipated orbenefits of the merger ~~agreement~~is ~~terminates.~~subject ~~These~~to ~~restrictions~~a ~~may~~number ~~prevent~~of usuncertainties, including whether the ~~from~~business ~~pursuing~~of ~~otherwise~~Allegheny ~~attractive~~is ~~business~~integrated ~~opportunities~~in an efficient and ~~making~~effective ~~other changes~~manner. Failure to ~~our~~achieve ~~business~~these anticipated ~~prior~~benefits tocould ~~completion~~result in increased costs, decreases in the amount of expected revenues generated by the ~~merger~~combined orcompany ~~termination~~and diversion of ~~the~~management’s time and energy and could have an ~~merger~~adverse ~~agreement~~effect on the combined company’s business, financial results and prospects.

~~Failure to~~We ~~Complete~~Will ~~Our~~be ~~Merger~~Subject ~~with~~to ~~Allegheny~~Business ~~Could~~Uncertainties ~~Negatively~~and ~~Impact~~Contractual ~~Our~~Restrictions ~~Stock~~While ~~Price~~the Merger with ~~and~~Allegheny ~~Our~~is ~~Future~~Pending ~~Business~~That ~~and~~Could Adversely Affect Our Financial Results

IfUncertainty ~~our~~ about the effect of the merger with Allegheny ison ~~not~~employees ~~completed,~~and ~~our~~customers ~~ongoing~~may ~~business~~have ~~and~~an adverse ~~financial~~effect on us. Although we intend to take steps designed to reduce any adverse effects, ~~results~~these uncertainties may beimpair ~~adversely~~our ~~affected~~ability to attract, retain and wemotivate ~~will~~key bepersonnel ~~subject~~until tothe merger is completed and for a ~~number~~period of ~~risks~~time thereafter, and could cause customers, suppliers and ~~including~~others ~~the~~that ~~following:~~deal with us to seek to change existing business relationships.

•Employee Weretention and recruitment may be ~~required~~particularly challenging prior to the completion of the merger, ~~under~~as ~~specified~~employees ~~circumstances~~and ~~set~~prospective ~~forth~~employees inmay experience uncertainty about their future roles with the ~~Merger~~combined ~~Agreement~~company. If, despite our retention and recruiting efforts, key employees depart or fail to ~~pay~~accept ~~Allegheny~~employment awith ~~termination~~us ~~fee~~because of ~~$350~~issues ~~million~~relating ~~and/or~~to ~~Allegheny’s~~the ~~reasonable~~uncertainty ~~out-~~and difficulty of~~-pocket~~ ~~transaction~~integration ~~expenses~~or upa desire not to ~~$45~~remain ~~million;~~with the combined company, our financial results could be affected.

•The wepursuit ~~will~~of bethe ~~required~~merger toand ~~pay~~the ~~costs~~preparation ~~relating~~for to the ~~merger,~~integration ~~including~~of ~~legal,~~Allegheny ~~accounting,~~into ~~financial~~our ~~advisory,~~company ~~filing~~may place a significant burden on management and ~~printing~~internal ~~costs,~~resources. ~~whether~~The ordiversion ~~not~~of ~~the~~management attention ~~merger~~away isfrom ~~completed;~~day-to-day business concerns and any difficulties encountered in the transition and integration process could affect our financial results.

•In ~~matters~~addition, ~~relating~~the tomerger ~~our~~agreement ~~merger~~restricts ~~with~~us, without Allegheny‘s ~~(including~~consent, ~~integration~~from ~~planning)~~making certain ~~may~~acquisitions ~~require~~and ~~substantial~~taking ~~commitments~~other ofspecified ~~time~~actions ~~and~~until ~~resources~~the bymerger ~~our~~occurs ~~management,~~or ~~which~~the ~~could~~merger agreement ~~otherwise~~terminates. ~~have~~These ~~been~~restrictions ~~devoted~~may toprevent ~~other~~us from pursuing otherwise attractive business opportunities ~~that~~and ~~may~~making ~~have~~other ~~been~~changes ~~beneficial~~to our business prior to uscompletion of the merger or termination of the merger agreement.

WeFailure ~~could also be subject~~ to ~~litigation~~Complete ~~related~~Our toMerger ~~any failure to complete our merger~~ with Allegheny~~. If~~ ~~our~~Could ~~merger~~Negatively isImpact ~~not~~Our ~~completed,~~Stock ~~these~~Price ~~risks~~and ~~may~~Our ~~materialize~~Future ~~and~~Business ~~may adversely affect our business, financial results~~ and ~~stock~~Financial Results ~~price.~~

~~Risks~~If ~~Associated~~our ~~With~~merger with Allegheny is not completed, our ongoing business and financial results may be ~~Regulation~~adversely affected and we would be subject to a number of risks, including the following:

~~Complex and~~• ~~Changing~~We ~~Government~~may ~~Regulations~~be ~~Could~~required, ~~Have~~under specified circumstances set forth in the Merger Agreement, to pay Allegheny a ~~Negative~~termination ~~Impact~~fee onof ~~Our~~$350 ~~Results~~ million and/or Allegheny’s reasonable out-of-pocket ~~Operations~~transaction expenses up to $45 million; • we would be required to pay costs relating to the merger, including legal, accounting, financial advisory, filing and printing costs, whether or not the merger is completed; and • matters relating to our merger with Allegheny (including integration planning) may require substantial commitments of time and resources by our management, which could otherwise have been devoted to other opportunities that may have been beneficial to us.

We ~~are subject~~could toalso ~~comprehensive~~be ~~regulation~~subject byto ~~various~~litigation ~~federal,~~related ~~state~~to ~~and~~any ~~local regulatory~~failure ~~agencies~~to ~~that~~complete ~~significantly influence~~ our ~~operating~~merger ~~environment.~~with ~~Changes~~Allegheny. ~~in,~~If orour ~~reinterpretations~~merger ~~of,~~is ~~existing~~not ~~laws or regulations~~completed, orthese ~~the imposition~~risks ofmay ~~new~~materialize ~~laws~~and ormay ~~regulations,~~adversely ~~could require us to incur additional~~affect ~~costs or change the way we conduct~~ our business, ~~and~~financial ~~therefore could have an adverse impact on our~~ results ofand ~~operations~~stock price.

~~Our~~30 utility subsidiaries currently provide service at rates approved by one or more regulatory commissions. Thus, the rates a utility is allowed to charge may or may not be set to recover its expenses at any given time. Additionally, there may also be a delay between the timing of when costs are incurred and when costs are recovered. For example, we may be unable to timely recover the costs for our energy efficiency investments, expenses and additional capital or lost revenues resulting from the implementation of aggressive energy efficiency programs. While rate regulation is premised on providing an opportunity to earn a reasonable return on invested capital and recovery of operating expenses, there can be no assurance that the applicable regulatory commission will determine that all of our costs have been prudently incurred or that the regulatory process in which rates are determined will always result in rates that will produce full recovery of our costs in a timely manner. For example, our utility subsidiaries’ ability to timely recover rates and charges associated with integration of the ATSI footprint into PJM is uncertain.

Regulatory ChangesTable in the Electric Industry, Including a Reversal, Discontinuance or Delay of the Present Trend Toward Competitive Markets, Could Affect Our Competitive Position and Result in Unrecoverable Costs Adversely Affecting Our Business and Results of OperationsContents

AsRisks ~~a result~~Associated ofWith ~~restructuring initiatives, changes in the electric utility business~~Regulation have occurred, and are continuing to take place throughout the United States, including Ohio, Pennsylvania and New Jersey. These changes have resulted, and are expected to continue to result, in fundamental alterations in the way utilities conduct their business.

~~Some states~~Complex ~~that have deregulated generation service have experienced difficulty in transitioning to market-based pricing. In some instances, state~~ and ~~federal government~~Changing ~~agencies~~Government ~~and~~Regulations ~~other~~Could ~~interested~~Have ~~parties~~a ~~have~~Negative ~~made~~Impact ~~proposals~~on toOur ~~impose rate~~Results ~~cap extensions or otherwise delay market restructuring or even re-regulate areas~~ of ~~these markets that have previously been deregulated. Although we expect~~ ~~wholesale electricity markets to continue to be competitive, proposals to~~Operations re-regulate our industry may be made, and legislative or other action affecting the electric power restructuring process may cause the process to be delayed, discontinued or reversed in the states in which we currently, or may in the future, operate. Such delays, discontinuations or reversals of electricity market restructuring in the markets in which we operate could have an adverse impact on our results of operations and financial condition.

34We are subject to comprehensive regulation by various federal, state and local regulatory agencies that significantly influence our operating environment. Changes in, or reinterpretations of, existing laws or regulations, or the imposition of new laws or regulations, could require us to incur additional costs or change the way we conduct our business, and therefore could have an adverse impact on our results of operations.

~~The~~Our ~~FERC~~utility subsidiaries currently provide service at rates approved by one or more regulatory ~~and~~commissions. Thus, the ~~U.S.~~rates ~~Congress~~a ~~propose~~utility ~~changes~~is ~~from~~allowed ~~time~~to charge may or may not be set to recover its expenses at any given time. inAdditionally, there may also be a delay between the ~~structure~~timing ~~and~~of when ~~conduct~~costs ofare ~~the~~incurred ~~electric~~and ~~utility~~when ~~industry~~costs are recovered. IfFor example, we may be unable to timely recover the ~~restructuring~~costs for our energy efficiency investments, ~~deregulation~~expenses and additional capital or lost revenues ~~re-regulation~~resulting ~~efforts~~from ~~result~~the inimplementation ~~decreased~~of ~~margins~~aggressive orenergy ~~unrecoverable~~efficiency ~~costs,~~programs. ~~our~~While rate regulation ~~business~~is ~~and~~premised ~~results~~on providing an opportunity to earn a reasonable return on invested capital and recovery of ~~operations~~operating ~~would~~expenses, there can be ~~adversely~~no ~~affected.~~assurance Wethat ~~cannot~~the applicable regulatory commission will determine that all of our costs ~~predict~~have ~~the~~been ~~extent~~prudently incurred or ~~timing~~that the regulatory process in which rates are determined will always result in rates that will produce full recovery of ~~further~~our ~~efforts~~costs toin ~~restructure,~~a ~~deregulate~~timely ormanner. For ~~re-regulate~~example, our ~~business~~utility orsubsidiaries’ ability to timely recover rates and charges associated with integration of the ~~industry~~ATSI footprint into PJM is uncertain.

~~The Prospect~~Regulatory ofChanges ~~Rising~~in ~~Rates~~the ~~Could~~Electric ~~Prompt~~Industry, ~~Legislative~~Including ora ~~Regulatory~~Reversal, ~~Action~~Discontinuance ~~to Restrict~~ or ~~Control~~Delay ~~Such~~of ~~Rate~~the Present ~~Increases. This~~Trend InToward ~~Turn~~Competitive Markets, Could ~~Create Uncertainty~~Affect ~~Affecting~~Our ~~Planning,~~Competitive ~~Costs~~Position and ~~Results~~Result ofin Unrecoverable ~~Operations~~Costs ~~and May~~ Adversely ~~Affect~~Affecting ~~the~~Our ~~Utilities’~~Business ~~Ability to Recover Their Costs, Maintain Adequate Liquidity~~ and ~~Address~~Results ~~Capital~~of ~~Requirements~~Operations

~~Increases in~~As ~~utility rates, such as may follow~~ a ~~period~~result of ~~frozen~~restructuring ~~or capped rates~~initiatives, ~~can generate~~changes ~~pressure~~in onthe ~~legislators~~electric ~~and~~utility ~~regulators~~business tohave ~~take steps to control those increases. Such efforts can include some form of rate increase moderation~~occurred, ~~reduction or freeze. The public discourse~~ and ~~debate~~are ~~can~~continuing ~~increase~~to ~~uncertainty associated~~take ~~with~~place ~~the~~throughout ~~regulatory process,~~ the ~~level~~United ~~of rates and revenues~~States, ~~and~~including the ~~ability~~ tostates ~~recover~~in ~~costs.~~which ~~Such~~we ~~uncertainty restricts flexibility and resources,~~do ~~given the need to plan and ensure available financial resources. Such uncertainty also affects the costs of doing~~ business. ~~Such~~These ~~costs~~changes ~~could ultimately~~have ~~reduce liquidity~~resulted, asand ~~suppliers~~are ~~tighten~~expected ~~payment~~to ~~terms,~~continue ~~and~~to ~~increase costs of financing~~result, asin ~~lenders~~fundamental alterations ~~demand~~in ~~increased~~the ~~compensation~~way orutilities ~~collateral security~~conduct totheir ~~accept such risks~~business.

~~Our~~Some states that have deregulated generation service have experienced difficulty in transitioning ~~Profitability~~to ismarket-based ~~Impacted~~pricing. byIn ~~Our~~some ~~Affiliated~~instances, ~~Companies’~~state ~~Continued~~and ~~Authorization~~federal government agencies and other interested parties have made proposals to ~~Sell~~impose ~~Power~~rate atcap ~~Market~~extensions or otherwise delay market restructuring or even re-~~Based~~regulate ~~Rates~~areas of these markets that have previously been deregulated. Although we expect wholesale electricity markets to continue to be competitive, proposals to re-regulate our industry may be made, and legislative or other action affecting the electric power restructuring process may cause the process to be delayed, discontinued or reversed in the states in which we currently, or may in the future, operate. Such delays, discontinuations or reversals of electricity market restructuring in the markets in which we operate could have an adverse impact on our results of operations and financial condition.

The FERC ~~granted~~ ~~FES, FGCO~~ and ~~NGC~~the ~~authority to sell electricity at market-based rates~~U. ~~These orders also granted them waivers of certain FERC accounting, record-keeping and reporting requirements~~S. ~~The~~ ~~Utilities~~Congress ~~also~~propose ~~have market-based~~changes ~~rate~~from ~~authority. The~~time ~~FERC’s~~to ~~orders~~time ~~that~~in ~~grant this market-based rate authority reserve~~ the ~~right~~structure toand ~~revoke~~conduct ~~or revise that authority~~of if the ~~FERC~~electric ~~subsequently~~utility ~~determines that these companies can exercise market power in transmission or generation, create barriers to entry or engage in abusive affiliate transactions~~industry. AsIf ~~a condition to~~ the ~~orders granting the generating companies market-based rate authority~~restructuring, ~~every~~deregulation ~~three~~or years they are required to file a market power update to show that they continue to meet the FERC’s standards with respect to generation market power and other criteria used to evaluate whether entities qualify for marketre-~~based~~regulation ~~rates.~~efforts ~~FES, FGCO, NGC and~~result ~~the Utilities renewed this authority for PJM~~ in ~~2008~~decreased ~~and~~margins ~~MISO~~or inunrecoverable ~~2009. FES~~costs, ~~FGCO,~~ ~~NGC~~our business and ~~the~~results ~~Utilities must file to renew this authority for PJM in 2010. If any~~ of ~~these~~operations ~~companies were to lose their market-based rate authority, they~~ would be ~~required to obtain the FERC’s acceptance to sell power~~ atadversely ~~cost-based rates~~affected. ~~FES,~~We ~~FGCO~~cannot ~~and~~predict ~~NGC~~the ~~could~~extent ~~also~~or ~~lose~~timing ~~their~~of ~~waivers,~~further ~~and~~efforts ~~become subject~~ to ~~the accounting~~restructure, ~~record-keeping and reporting requirements that are~~ ~~imposed~~deregulate onor ~~utilities~~re-regulate ~~with~~our ~~cost-based~~business ~~rate~~or ~~schedules~~the industry.

~~There Are~~The ~~Uncertainties~~Prospect ~~Relating~~of Rising Rates Could Prompt Legislative or Regulatory Action to ~~Our~~Restrict ~~Participation~~or inControl Such ~~Regional~~Rate ~~Transmission~~Increases. This In Turn Could Create Uncertainty Affecting Planning, Costs and Results ~~Organizations~~of ~~(RTOs)~~Operations and May Adversely Affect the Utilities’ Ability to Recover Their Costs, Maintain Adequate Liquidity and Address Capital Requirements

~~RTO rules~~Increases ~~could~~in ~~affect~~utility ~~our~~rates, ~~ability~~such toas ~~sell~~may ~~power~~follow ~~produced~~a byperiod ~~our~~of ~~generating facilities~~frozen toor ~~users~~capped inrates, ~~certain~~can ~~markets due to transmission constraints and~~generate ~~attendant~~pressure ~~congestion~~on ~~costs.~~legislators ~~The prices in day-ahead~~ and ~~real-time~~regulators ~~energy~~to ~~markets and~~take ~~RTO~~steps ~~capacity~~to ~~markets~~control ~~have~~those ~~been~~increases. ~~subject~~Such toefforts ~~price volatility. Administrative~~can ~~costs~~include ~~imposed~~some byform ~~RTOs, including the cost~~ of ~~administering~~rate ~~energy~~increase ~~markets~~moderation, ~~have also~~reduction ~~increased~~or freeze. The ~~rules~~public ~~governing~~discourse ~~the~~and ~~various~~debate can ~~regional~~increase ~~power~~uncertainty ~~markets~~associated ~~may~~with ~~also change~~the ~~from~~regulatory ~~time to time~~process, ~~which could affect our costs or revenues. To~~ the ~~degree~~ welevel ~~incur~~of ~~significant~~rates ~~additional fees~~ and ~~increased costs to participate in an RTO~~revenues, and wethe ~~are~~ability ~~limited with respect~~ to ~~recovery~~recover ~~of such~~ costs ~~from retail customers, we may suffer financial harm~~. ~~While~~Such ~~RTO~~uncertainty ~~rates~~restricts ~~for~~flexibility ~~transmission service~~and ~~are cost based~~resources, ~~our~~given ~~revenues~~the need ~~from customers~~ to ~~whom~~plan ~~we currently provide transmission services may not reflect all of the administrative~~ and ~~market-related~~ ~~costs~~ensure ~~imposed~~available ~~under~~financial ~~the RTO tariff~~resources. InSuch ~~addition,~~uncertainty wealso ~~may~~affects ~~be allocated a portion of~~ the ~~cost~~costs of ~~transmission facilities built by others due~~ todoing ~~changes in RTO transmission rate design~~business. ~~Finally,~~Such wecosts ~~may~~could beultimately ~~required~~reduce ~~to expand our transmission system according to decisions made by an RTO rather than our internal planning process. As a member of an RTO~~liquidity, weas ~~are~~suppliers ~~subject~~tighten topayment ~~certain additional risks~~terms, ~~including those associated with the allocation among members~~ ofand ~~losses~~increase ~~caused~~costs ~~by unreimbursed defaults~~ of ~~other participants in that RTO’s market~~financing, ~~and~~as ~~those~~lenders ~~associated~~demand ~~with~~increased ~~complaint~~compensation ~~cases~~or ~~filed~~collateral ~~against~~security ~~the RTO that may~~to ~~seek~~accept ~~refunds~~such ~~of revenues previously earned by its members~~risks.

~~MISO~~31 implemented an ancillary services market for operating reserves that would be simultaneously co-optimized with MISO's existing energy markets. The implementation of these and other new market designs has the potential to increase our costs of transmission, costs associated with inefficient generation dispatching, costs of participation in the market and costs associated with estimated payment settlements.

Because itTable remainsof unclear which companies will be participating in the various regional power markets, or how RTOs will ultimately develop and operate, or what region they will cover, we cannot fully assess the impact that these power markets or other ongoing RTO developments may have.Contents

35Our Profitability is Impacted by Our Affiliated Companies’ Continued Authorization to Sell Power at Market-Based Rates

AThe FERC granted FES, FGCO and NGC authority to sell electricity at market-based rates. These ~~Significant Delay~~ orders also granted them waivers of certain FERC accounting, record-keeping and reporting requirements. The Utilities also have market-based rate authority. The FERC’s orders that grant this market-based rate authority reserve the right to revoke or revise that authority if the FERC subsequently determines that these companies can exercise market power in transmission or ~~Challenges~~ generation, create barriers to entry or engage in abusive affiliate transactions. As a condition to ~~Various~~the ~~Elements~~orders ofgranting ~~ATSI~~the generating companies market-based rate authority, every three years they are required to file a market power update to show that they continue to meet the FERC’s ~~Consolidation into PJM,~~standards ~~including~~with ~~but~~respect ~~not~~to ~~Limited~~generation market power and other criteria used to evaluate whether entities qualify for market-based rates. FES, FGCO, NGC and the ~~Intervention~~Utilities renewed this authority for PJM in 2008 and MISO in 2009. On December 30, 2010, FES, FGCO, NGC and the Utilities filed to renew this authority for operations within PJM. If any of ~~Parties~~ these companies were to ~~the~~lose ~~Regulatory~~their ~~Proceedings~~market-based rate authority, ~~Could~~they ~~have~~would abe required to obtain the FERC’s acceptance to sell power at cost-based ~~Negative~~rates. ~~Impact~~FES, onFGCO ~~Our~~and ~~Results~~NGC ofcould ~~Operations~~also lose their waivers, and ~~Financial~~become subject to the accounting, ~~Condition~~record-keeping and reporting requirements that are imposed on utilities with cost-based rate schedules.

OnThere ~~December~~Are ~~17, 2009,~~Uncertainties ~~FERC~~Relating ~~authorized, subject~~ to ~~certain~~Our ~~conditions,~~Participation ~~FirstEnergy to consolidate its transmission assets and operations that currently are located~~ in ~~MISO into~~ ~~PJM; such consolidation to be effective on June 1, 2011. The consolidation~~RTOs will make the transmission assets that are part of ATSI, whose footprint includes the Ohio Companies and Penn, part of PJM. Consolidation on June 1, 2011 will coincide with delivery of power under the next competitive generation procurement process for the Ohio Companies. On December 17, 2009, and after FERC issued the order, ATSI executed and delivered to PJM those legal documents necessary to implement its consolidation into PJM. On December 18, 2009, the Ohio Companies and Penn executed and delivered to PJM those legal documents necessary to follow ATSI into PJM. Currently, ATSI, the Ohio Companies and Penn are expected to consolidate into PJM as planned on June 1, 2011

~~Certain parties~~RTO ~~have~~rules ~~objected~~could affect our ability to ~~various~~sell ~~aspects~~power ofproduced ~~the~~by ~~planned~~our ~~consolidation~~generating ~~into~~facilities to users in ~~PJM. On~~certain ~~September~~markets 4,due ~~2009,~~to ~~the~~transmission ~~PUCO~~constraints ~~opened~~and aattendant ~~case~~congestion tocosts. ~~take~~The ~~comments~~prices in ~~from~~day-ahead ~~Ohio’s~~and ~~stakeholders~~real-time ~~regarding~~energy ~~the~~markets and RTO ~~consolidation~~capacity markets have been subject to price volatility. ~~Certain~~Administrative ~~parties~~costs ~~have~~imposed by RTOs, including the cost of administering energy ~~intervened~~markets, ~~and~~have ~~filed~~also ~~comments~~increased. orThe ~~protests~~rules ingoverning the ~~FERC~~various ~~and~~regional ~~PUCO~~power ~~dockets~~markets ~~regarding~~may also ~~particular~~change ~~elements~~from oftime ~~the~~to ~~proposed~~time, ~~RTO~~which ~~consolidation~~could affect our costs or revenues. ~~The~~To ~~disputed~~the ~~elements~~degree we incur ~~include~~significant additional fees and increased costs to participate in an RTO, ~~but~~and we are ~~not~~ limited with respect to, recovery of ~~integration~~such costs tofrom ~~PJM~~retail ~~and~~customers, ~~exit~~we may suffer financial harm. While RTO ~~fees~~rates tofor ~~MISO~~transmission ~~and~~service are cost~~-allocations~~ ofbased, ~~transmission~~our ~~upgrades~~revenues ~~that~~from ~~originate~~customers ~~under~~to whom we currently provide transmission services may not reflect all of the ~~PJM~~administrative and ~~MISO~~market-related ~~tariffs~~costs imposed under the RTO tariff. AIn ~~ruling~~addition, bywe ~~FERC~~may orbe allocated a portion of the ~~PUCO~~cost ~~or any~~of transmission ~~other~~facilities built by ~~regulator~~others ~~with~~due ~~jurisdiction~~to changes in ~~favor~~RTO oftransmission ~~one~~rate ordesign. ~~more~~Finally, ofwe ~~the intervening or protesting parties~~may ~~(and~~be ~~against~~required to expand our ~~FirstEnergy)~~transmission onsystem ~~one~~according orto decisions made by an RTO rather than our internal planning ~~more~~ process. As a member of ~~the disputed issues~~ ~~could~~an RTO, we are subject to certain additional risks, including those ~~result~~associated inwith athe ~~negative~~allocation ~~impact~~among onmembers ~~our~~of ~~results~~losses caused by unreimbursed defaults of ~~operations~~other participants in that RTO’s market and ~~financial~~those associated with complaint cases filed against the RTO ~~condition~~that may seek refunds of revenues previously earned by its members.

~~Energy~~The MISO has proposed changes to its rates and tariffs that may result or cause significant charges ~~Conservation~~to ATSI or the Ohio Companies or Penn upon their respective withdrawal from the MISO on May 31, 2011. The implementation of these and ~~Energy~~other ~~Price~~new ~~Increases~~market ~~Could~~designs ~~Negatively~~has ~~Impact~~the ~~Our~~potential ~~Financial~~to increase our ~~Results~~costs of transmission, costs associated with inefficient generation dispatching, costs of participation in the market and costs associated with estimated payment settlements.

ABecause ~~number of~~it ~~regulatory~~remains ~~and~~unclear ~~legislative~~which ~~bodies~~companies ~~have~~will ~~introduced~~be ~~requirements~~participating ~~and/or incentives to reduce energy consumption by certain dates. Conservation programs could impact our financial results~~ in ~~different ways. To~~ the ~~extent~~various ~~conservation~~regional power ~~resulted~~markets, ~~in reduced energy demand~~ or ~~significantly~~how ~~slowed~~RTOs ~~the~~will ~~growth~~ultimately indevelop ~~demand, the value of our merchant generation~~ and ~~other~~operate, ~~unregulated business activities could be adversely impacted. While we currently have energy efficiency riders in place to recover the cost of these programs either at~~ or ~~near~~what aregion ~~current~~they ~~recovery timeframe~~will ~~in all three states~~cover, ~~currently only Ohio allows us to recover lost revenues. In our regulated operations, conservation could negatively impact us depending on the regulatory treatment of the associated impacts. Should~~ we becannot ~~required~~fully toassess ~~invest in conservation measures that result in reduced sales from effective conservation, regulatory lag in adjusting rates for~~ the impact of that these ~~measures~~power ~~could~~markets ~~have~~or aother ~~negative~~ongoing ~~financial~~RTO ~~impact.~~developments Wemay could also be impacted if any future energy price increases result in a decrease in customer usage. Our results could be affected if we are unable to increase our customer’s participation in our energy efficiency programs. We are unable to determine what impact, if any, conservation and increases in energy prices will have ~~on our financial condition or results of operations~~.

~~Our~~32 ~~Business and Activities are Subject to Extensive Environmental Requirements and Could be Adversely Affected by such Requirements~~

WeTable may beof forced to shut down facilities, either temporarily or permanently, if we are unable to comply with certain environmental requirements, or if we make a determination that the expenditures required to comply with such requirements are uneconomical. In fact, we are exposed to the risk that such electric generating plants would not be permitted to continue to operate if pollution control equipment is not installed by prescribed deadlines.Contents

~~The EPA~~A isSignificant ~~Conducting~~Delay ~~NSR~~in ~~Investigations~~or atChallenges ato ~~Number~~Various Elements of ~~our~~ATSI’s ~~Generating~~Consolidation ~~Plants~~into PJM, including but not Limited to, the ~~Results~~ Intervention of ~~Which~~Parties to the Regulatory Proceedings Could have ~~Negatively~~a Negative Impact ~~our~~on Our Results of Operations and Financial Condition

~~In August~~On December 17, 2009, ~~the~~FERC ~~EPA~~authorized, ~~issued~~subject ato ~~Finding~~certain ofconditions, ~~Violation~~FirstEnergy ~~and~~to ~~NOV alleging violations~~consolidate ofits ~~the~~transmission ~~CAA~~assets and ~~Ohio~~operations ~~regulations,~~that ~~including~~currently ~~the~~are ~~PSD,~~located ~~NNSR,~~in ~~and~~MISO ~~Title~~into VPJM; such ~~regulations~~consolidation atto ~~the~~be ~~Eastlake,~~effective ~~Lakeshore,~~on ~~Bay Shore~~June 1, ~~and Ashtabula generating plants~~2011. The ~~EPA’s~~consolidation ~~NOV~~will ~~alleges~~make ~~equipment~~the ~~replacements~~transmission ~~occurring during~~assets ~~maintenance~~that ~~outages~~are ~~dating~~part ~~back~~of toATSI, ~~1990~~whose ~~triggered~~footprint includes the ~~pre-construction permitting~~Ohio ~~requirements~~Companies ~~under~~and ~~the~~Penn, ~~PSD~~part ~~and~~of ~~NNSR programs~~PJM. Consolidation Inon ~~September~~June ~~2009~~1, ~~FGCO~~ ~~received~~2011 anwill ~~information~~coincide ~~request~~with ~~pursuant~~delivery toof ~~Section~~power ~~114(a)~~under of the ~~CAA~~next competitive ~~requesting~~generation ~~certain~~procurement ~~operating~~process ~~and~~for ~~maintenance information and planning information regarding~~ the ~~Eastlake,~~Ohio ~~Lake Shore, Bay Shore and Ashtabula generating plants~~Companies. On ~~November~~December 317, 2009, ~~FGCO~~and ~~received~~after aFERC ~~letter providing~~issued ~~notification that~~ the ~~EPA~~order, isATSI ~~evaluating~~executed ~~whether~~and ~~certain~~delivered ~~scheduled maintenance at~~to ~~the~~PJM ~~Eastlake~~those ~~generating~~legal ~~plant~~documents ~~may~~necessary ~~constitute~~to ~~a major~~implement ~~modification~~its ~~under~~consolidation ~~the~~into ~~NSR provision of the CAA~~PJM. On December 23 18, 2009, ~~FGCO received~~the ~~another~~Ohio ~~information~~Companies ~~request~~and ~~regarding~~Penn ~~emission~~executed ~~projections for the~~and ~~Eastlake~~delivered ~~generating plant pursuant~~ to ~~Section~~PJM ~~114(a)~~those oflegal ~~the~~documents ~~CAA.~~necessary ~~FGCO intends~~ to ~~comply~~ ~~with~~follow ~~the~~ATSI ~~CAA,~~into ~~including~~PJM. ~~EPA’s information requests~~Currently, ~~but~~ATSI, ~~at this time, is unable to predict~~ the ~~outcome of this matter. A June 2006 finding of~~Ohio ~~violation~~Companies and ~~NOV~~Penn inare ~~which~~expected ~~EPA~~to ~~alleged~~consolidate ~~CAA~~into ~~violations~~PJM atas ~~the~~planned ~~Bay~~on ~~Shore Generating~~June 1, ~~Plant remains unresolved and FGCO is unable to predict the outcome of such matter~~2011.

36On February 1, 2011, ATSI filed its proposal with FERC for moving its transmission rate into PJM’s tariffs. Numerous parties are expected to intervene and file responsive comments. Our expectation is that ATSI will enter PJM as scheduled on June 1, 2011, and that if legal proceedings regarding its rate are outstanding at that time, ATSI will be permitted to start charging its proposed rates, subject to refund. Additional FERC proceedings are either pending or expected in which the amount of exit fees, transmission cost allocations, and costs associated with long term firm transmission rights payable by the ATSI zone upon its departure from the Midwest ISO will be determined. In addition, certain other parties continue to protest aspects of the move into PJM, and certain of these matters remain outstanding and will be resolved in future FERC proceedings. A ruling by FERC or any other regulator with jurisdiction in favor of one or more of the intervening or protesting parties (and against FirstEnergy) on one or more of the disputed issues could result in a negative impact on our results of operations and financial condition.

~~In August~~Energy ~~2008,~~Conservation ~~FirstEnergy received a request from the EPA for information pursuant to Section 114(a) of the CAA for certain operating~~ and ~~maintenance information regarding its formerly-owned Avon Lake and Niles generating plants, as well as a copy of a nearly identical request directed to the current owner, Reliant~~ Energy, toPrice ~~allow~~Increases ~~the~~Could ~~EPA~~Negatively toImpact ~~determine~~Our ~~whether~~Financial ~~these generating sources~~Results are complying with the NSR provisions of the CAA. FirstEnergy intends to fully comply with the Section 114(a) information request An adverse result in the above referenced matters could have a negative impact on our results of operations and financial condition.

~~Costs~~ A number of ~~Compliance~~regulatory ~~with~~and ~~Environmental~~legislative ~~Laws~~bodies ~~are~~have ~~Significant~~introduced requirements and/or incentives to reduce energy consumption by certain dates. Conservation programs could impact our financial results in different ways. To the extent conservation resulted in reduced energy demand or significantly slowed the growth in demand, the value of our merchant generation and other unregulated business activities could be adversely impacted. We currently have energy efficiency riders in place to recover the ~~Cost~~cost of these programs either at or near a current recovery ~~Compliance~~timeframe ~~with~~in ~~Future~~Ohio ~~Environmental~~and ~~Laws~~Pennsylvania. In New Jersey, ~~Including~~we ~~Limitations~~recover the costs for energy efficiency programs through the SBC. Currently only Ohio has provisions for recovery of lost revenues. In our regulated operations, conservation could negatively impact us depending on ~~GHG Emissions~~the regulatory treatment of the associated impacts. Should we be required to invest in conservation measures that result in reduced sales from effective conservation, regulatory lag in adjusting rates for the impact of these ~~Could~~measures ~~Adversely~~could ~~Affect~~have ~~Cash~~a ~~Flow~~negative financial impact. We could also be impacted if any future energy price increases result in a decrease in customer usage. Our results could be affected if we are unable to increase our customer’s participation in our energy efficiency programs. We are unable to determine what impact, if any, conservation and ~~Profitability~~increases in energy prices will have on our financial condition or results of operations.

Our ~~operations~~ ~~are~~Business ~~subject to extensive federal, state~~ and ~~local~~Activities ~~environmental statutes,~~are ~~rules~~Subject ~~and regulations. Compliance with these legal requirements requires us~~ to ~~incur~~Extensive ~~costs~~Environmental ~~for~~Requirements ~~environmental monitoring, installation of pollution control equipment, emission fees, maintenance, upgrading, remediation~~ and ~~permitting~~Could ~~at our facilities. These expenditures have been significant in~~be ~~the~~Adversely ~~past~~Affected and may increase in the future. If the cost of compliance with existing environmental laws and regulations does increase, it could adversely affect our business and results of operations, financial position and cash flows. Moreover, changes in environmental laws or regulations may materially increase our costs of compliance or accelerate the timing of capital expenditures. Because of the deregulation of generation, we may not directly recover through rates additional costs incurred for such compliance. Our compliance strategy, although reasonably based on available information, may not successfully address future relevant standards and interpretations. If we fail to comply with environmental laws and regulations, even if caused by factors beyond our control or new interpretations of longstanding requirements, that failure could result in the assessment of civil or criminal liability and fines. In addition, any alleged violation of environmental laws and regulations may require us to expend significant resources to defend against any such ~~alleged violations.~~Requirements

~~There are~~We amay ~~number~~be offorced ~~initiatives~~ to ~~reduce~~shut ~~GHG~~down ~~emissions under consideration at the federal~~facilities, ~~state~~either ~~and~~temporarily ~~international~~or ~~level. Environmental advocacy groups~~permanently, ~~other organizations~~if ~~and~~we ~~some agencies in the United States~~ are ~~focusing considerable~~unable ~~attention on carbon dioxide emissions from power generation~~to ~~facilities~~comply ~~and~~with ~~their~~certain ~~potential role in climate change. Many states and~~ environmental ~~groups have also challenged certain of the federal laws and regulations relating to air emissions as not being sufficiently strict. Also~~requirements, ~~claims have been made alleging that CO2 emissions from power generating facilities constitute a public nuisance under federal and/~~or ~~state~~ ~~common~~if ~~law. Private~~we ~~individuals~~make may seek to enforce environmental laws and regulations against us and could allege personal injury or property damage from exposure to hazardous materials. Recently the courts have begun to acknowledge these claims and may order us to reduce GHG emissions in the future. There is a ~~growing~~determination ~~consensus~~that in the ~~United States and~~expenditures ~~globally~~required ~~that~~to ~~GHG~~comply ~~emissions are a major cause of global warming and that some form of regulation will be forthcoming at the federal level~~ with ~~respect to GHG emissions (including carbon dioxide) and~~ such ~~regulation~~requirements could result in the creation of substantial additional costs in the form of taxes or emission allowances. As a result, it is possible that state and federal regulations will be developed that will impose more stringent limitations on emissions than are ~~currently in effect~~uneconomical. In ~~December 2009~~fact, ~~the~~we ~~EPA~~are ~~issued~~exposed ~~an “endangerment~~to ~~and cause or contributing finding” for GHG under~~ the ~~CAA, which~~risk ~~will allow the EPA to craft rules~~ that ~~directly~~such ~~regulate GHG. Although~~electric ~~several~~generating ~~bills~~plants ~~have been introduced at the state and federal level that~~ would ~~compel~~not ~~carbon~~be ~~dioxide~~permitted ~~emission reductions, none have advanced through the legislature. Due~~ to ~~the~~continue ~~uncertainty of control technologies available~~ to ~~reduce~~operate ~~greenhouse~~if ~~gas emissions including CO2, as well~~pollution ascontrol ~~the~~equipment ~~unknown~~is ~~nature~~not ofinstalled ~~potential~~by ~~compliance~~prescribed ~~obligations should climate change regulations be enacted, we cannot provide any assurance regarding the potential impacts these future regulations would have on our operations~~deadlines. ~~In addition, any~~ legal obligation that would require us to substantially reduce our emissions could require extensive mitigation efforts and, in the case of carbon dioxide legislation, would raise uncertainty about the future viability of fossil fuels, particularly coal, as an energy source for new and existing electric generation facilities. Until specific regulations are promulgated, the impact that any new environmental regulations, voluntary compliance guidelines, enforcement initiatives, or legislation may have on our results of operations, financial condition or liquidity is not determinable.

The ~~EPA’s~~ current CAIR and CAVR require significant reductions beginning in 2009 in air emissions from coal-fired power plants and the states have been given substantial discretion in developing their own rules to implement these programs. On December 23, 2008, the United States Court of Appeals for the District of Columbia remanded CAIR to EPA ~~but~~is ~~allowed~~Conducting ~~the~~NSR ~~current~~Investigations ~~CAIR regulations~~at ~~to remain in effect while EPA works to remedy flaws in the CAIR regulations identified by the court in~~ a ~~July~~Number ~~11,~~of ~~2008~~Our ~~opinion.~~Generating ~~As a result~~Plants, the ~~ultimate~~ ~~requirements~~Results under CAIR may not be known for several years and may differ significantly from the current CAIR regulations. If the EPA significantly changes CAIR, or if the states elect to impose additional requirements on individual units that are already subject to CAIR, the cost of ~~compliance could~~Which ~~increase~~Could ~~significantly~~Negatively ~~and~~Impact ~~could~~Our ~~have~~Results ~~an adverse effect on future results~~ of ~~operations,~~ ~~cash~~Operations ~~flows~~ and ~~financial~~Financial ~~condition.~~Condition

~~The EPA's~~We ~~final~~may ~~CAMR~~be ~~was~~subject ~~vacated~~to byrisks ~~the~~in ~~United~~connection ~~States~~with ~~Court~~changing ofor ~~Appeals~~conflicting ~~for~~interpretations ~~the~~of existing ~~District~~laws ~~Court~~and ofregulations. ~~Columbia~~For ~~on February 8~~example, ~~2008~~applicable ~~because~~standards under the EPA’s ~~failed~~NSR ~~to take~~initiatives ~~the~~remain ~~necessary steps to "de-list" coal-fired power plants from its hazardous~~in ~~air pollution program and therefore could not promulgate a cap and trade air emissions reduction program~~flux. OnUnder ~~October 21,~~the ~~2009~~CAA, ~~the~~modification ~~EPA~~of ~~opened~~our ageneration ~~30-day comment~~facilities ~~period~~in on a ~~proposed~~manner ~~consent decree~~ that ~~would~~causes ~~obligate the EPA to~~increased ~~propose~~emissions ~~MACT~~could ~~regulations~~subject ~~for~~our ~~mercury~~existing ~~and~~facilities ~~other hazardous air pollutants by March 16, 2011, and~~ to ~~finalize~~ the ~~regulations~~far bymore ~~November 16,~~stringent ~~2011. FGCO’s~~NSR ~~future~~standards ~~cost of compliance with MACT regulations may be substantial~~applicable ~~and~~to ~~could~~new ~~have a material adverse effect on future results of operations, cash flows and financial condition~~facilities.

3733

Various waterTable quality regulations, the majority of which are the result of the federal Clean Water Act and its amendments, apply to our generating plants. In addition, Ohio, New Jersey and Pennsylvania have water quality standards applicable to our operations. As provided in the Clean Water Act, authority to grant federal National Pollutant Discharge Elimination System water discharge permits can be assumed by a state. Ohio, New Jersey and Pennsylvania have assumed such authority.Contents

~~There~~The ~~is substantial~~EPA ~~uncertainty~~has ~~concerning~~taken the ~~final~~view ~~form~~that ofmany ~~federal~~companies, ~~and~~including ~~state regulations~~many toenergy ~~implement Section 316(b) of the Clean Water Act. On January 26~~producers, ~~2007,~~have ~~the United States Court of Appeals for the Second Circuit~~been ~~remanded~~modifying ~~back~~emissions tosources ~~the~~in ~~EPA~~violation ~~portions~~ of ~~its~~NSR ~~rulemaking~~standards ~~pursuant~~in toconnection ~~Section~~with ~~316(b). The~~work ~~EPA~~believed ~~subsequently~~by ~~suspended its rule, noting that until further rulemaking occurs, permitting authorities should continue~~ the ~~existing practice of applying~~ ~~their~~companies ~~best professional judgment~~ to ~~minimize~~be ~~impacts~~routine ~~on fish and shellfish from cooling water intake structures~~maintenance. OnWe ~~July~~are 9,currently ~~2007,~~involved ~~the~~in ~~EPA~~litigation ~~suspended this rule, noting that until further rulemaking occurs, permitting authorities should continue the existing practice of applying their best professional judgment to minimize impacts on fish~~ and ~~shellfish~~EPA ~~from cooling water intake structures. On~~investigations ~~April 1,~~concerning ~~2009,~~alleged ~~the~~violations ~~Supreme Court~~ of the ~~United~~NSR ~~States~~standards ~~reversed~~at ~~one significant~~certain ~~aspect~~ of ~~the~~our ~~Second~~existing ~~Circuit Court’s opinion~~ and ~~decided~~former ~~that~~generating ~~Section 316(b)~~facilities. ofWe ~~the~~intend ~~Clean~~to ~~Water~~vigorously ~~Act~~pursue ~~authorizes~~and ~~the~~defend ~~EPA~~our toposition ~~compare costs with benefits~~ in ~~determining~~these ~~the~~environmental ~~best technology available for minimizing~~matters ~~adverse~~but ~~environmental~~FGCO ~~impact~~is atunable ~~cooling~~to ~~water~~predict ~~intake~~their ~~structures~~outcomes. ~~The~~If ~~EPA~~NSR ~~is developing~~and asimilar ~~new~~requirements ~~regulation~~are ~~under~~imposed ~~Section~~on ~~316(b) of the Clean Water Act~~our ~~consistent~~generation ~~with~~facilities, ~~the~~in ~~opinions~~addition ofto the ~~Supreme~~possible ~~Court~~imposition ~~and the Court~~ of ~~Appeals which have created significant uncertainty about the specific nature~~fines, ~~scope~~compliance ~~and~~could ~~timing~~entail ~~of the final performance standard. We may incur~~ significant capital ~~costs~~investments ~~to comply~~in ~~with~~pollution ~~the~~control ~~final~~technology, ~~regulations. If~~which ~~either~~could ~~the~~have ~~federal~~an oradverse ~~state final~~impact ~~regulations~~on ~~require retrofitting of cooling water intake structures (cooling towers) at any of~~ our ~~power plants~~business, ~~and~~results ~~if installation~~ of ~~such~~operations, ~~cooling~~cash ~~towers is~~flows ~~not~~and ~~technically~~financial orcondition. ~~economically~~For ~~feasible,~~a wemore ~~may be forced to take actions~~complete ~~which~~discussion ~~could~~see ~~adversely~~“Environmental ~~impact our results of operations and financial condition~~Matters.”

~~Certain fossil-fuel~~Costs ~~combustion~~of ~~waste~~Compliance ~~products,~~with ~~such~~Environmental

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