FirstEnergy’s revenues are primarily derived from the sale of energy and related products and services by its unregulated competitive subsidiaries (FES and AE Supply), and electric service provided by its utility operating subsidiaries (OE, CEI, TE, Penn, JCP&L, ME, PN, MP, PE and WP) and its transmission subsidiaries (ATSI, MAIT and TrAIL).

AE Supply was organized under Delaware law in 1999. AE Supply provides energy-related products and services primarily to wholesale customers. AE Supply also owns and operates the Pleasants generating facility (1,300 MWs), ATSI and TrAIL,owns approximately 59% of AGC and a 50% interest in the Buchanan Generating facility.

AE Supply and AGC entered into an asset purchase agreement with a subsidiary of LS Power, as amended and restated in August 2017, to sell four natural gas generating plants, AE Supply's interest in the Buchanan Generating facility and approximately 59% of AGC’s interest in Bath County (1,615 MWs of combined capacity) for an all-cash purchase price of $825 million, subject to adjustments. On December 13, 2017, AE Supply completed the sale of energyits four natural gas generating plants and related productsexpects to complete the sale of approximately 59% of AGC’s interest in the Bath County hydroelectric power station and servicesBU Energy’s 50% interest in the Buchanan Generating facility in the first half of 2018. For additional information, see "Competitive Generation Asset Sale" below.

FES, FG, NG, AE Supply and AGC comply with the regulations, orders, policies and practices prescribed by its unregulated competitive subsidiaries, FESthe SEC, FERC, and AE Supply.applicable state regulatory authorities. In addition, NG and FENOC comply with the regulations, orders, policies and practices prescribed by the NRC.

The Utilities’ combined service areas encompass approximately 65,000 square miles in Ohio, Pennsylvania, West Virginia, Maryland, New Jersey and New York. The areas they serve have a combined population of approximately 13.513.3 million.

OE was organized under the laws of the State of Ohio law in 1930 and owns property and does 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 2.3 million. OE complies with the regulations, orders, policies and practices prescribed by the SEC, FERC and PUCO.

OE owns all of Penn’s outstanding common stock. Penn was organized under the laws of the Commonwealth of Pennsylvania law 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. Penn furnishes electric service to communities in 1,100 square miles of western Pennsylvania. The area it serves has a population of approximately 0.30.4 million. Penn complies with the regulations, orders, policies and practices prescribed by the SEC, FERC and PPUC.

CEI was organized under the laws of the State of Ohio law 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 1,600 square miles in northeastern Ohio. The area it serves has a population of approximately 1.71.6 million. CEI complies with the regulations, orders, policies and practices prescribed by the SEC, FERC and PUCO.

TE was organized under the laws of the State of Ohio law 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 2,300 square miles in northwestern Ohio. The area it serves has a population of approximately 0.7 million. TE complies with the regulations, orders, policies and practices prescribed by the SEC, FERC and PUCO.

JCP&L was organized under the laws of the State of New Jersey law 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 2.7 million. JCP&L also has a 50% ownership interest (210 MW)MWs) in a hydroelectric generating facility. JCP&L complies with the regulations, orders, policies and practices prescribed by the SEC, FERC and the NJBPU.

ME was organized under the laws of the Commonwealth of Pennsylvania law in 19221917 and owns property and does business as an electric public utility in that state. ME 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 1.2 million. Additionally, as discussed in "FERC Matters" below, ME complies with the regulations, orders, policies and practices prescribed by the SEC, FERC and PPUC.transferred its transmission assets to MAIT on January 31, 2017.

PN was organized under the laws of the Commonwealth of Pennsylvania law in 1919 and owns property and does business as an electric public utility in that state. PN 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 1.31.2 million. PN, as lessee of the property of its subsidiary, The Waverly Electric Light & Power Company, also serves customers in the Waverly, New York vicinity. Additionally, as discussed in "FERC Matters" below, PN complies with the regulations, orders, policies and practices prescribed by the SEC, FERC, NYPSC and PPUC.transferred its transmission assets to MAIT on January 31, 2017.

PE was organized under the laws of the State of Maryland law in 1923 and in the Commonwealth ofunder Virginia law in 1974. PE is authorized to do business in the Commonwealth of Virginia, and the States of West Virginia and Maryland. PE owns property and does business as an electric public utility in those states. PE provides transmission and distribution services in portions of Maryland and West Virginia and provides transmission services in Virginia in an area totaling approximately 5,500 square miles. The area it serves has a population of approximately 0.9 million. PE complies with the regulations, orders, policies and practices prescribed by the SEC, FERC, MDPSC, VSCC, and WVPSC.

MP was organized under the laws of the State of Ohio law in 1924 and owns property and does business as an electric public utility in the state of West Virginia. MP provides generation, transmission and distribution services in 13,000 square miles of northern West Virginia. The area it serves has a population of approximately 0.8 million. As of December 31, 2014,2017, MP owned or contractually controlled 3,580 MWs of generation capacity that is supplied to its electric utility business. In addition, MP is contractually obligated to provide power to PE to meet its load obligations in West Virginia. MP complies with the regulations, orders, policies and practices prescribed by the SEC, FERC and WVPSC.

WP was organized under the laws of the Commonwealth of Pennsylvania law in 1916 and owns property and does business as an electric public utility in that state. WP provides transmission and distribution services in 10,400 square miles of southwestern, south-central and northern Pennsylvania. The area it serves has a population of approximately 1.61.5 million. WP complies

The Utilities comply with the regulations, orders, policies and practices prescribed by the SEC, FERC, NERC, and PPUC.their respective state regulatory authorities (PUCO, PPUC, NJBPU, WVPSC, MDPSC, NYPSC, and VSCC).

ATSI was organized under the laws of the State of Ohio law in 1998. ATSI owns major, high-voltage transmission facilities, which consist of approximately 7,500 pole7,800 circuit miles of transmission lines with nominal voltages of 345 kV, 138 kV and 69 kV in the PJM Region. ATSI plans, operates, and maintains its transmission system in accordance with NERC reliability standards, and other applicable regulatory requirements. In addition, ATSI complies with the regulations, orders, policies and practices prescribed by the SEC, FERC and applicable state regulatory authorities.

TrAIL was organized under the laws of the State of Maryland law and the Commonwealth of Virginia law in 2006. TrAIL was formed to finance, construct, own, operate and maintain high-voltage transmission facilities in the PJM Region and has several transmission facilities in operation, including a 500 kV transmission line extending approximately 150 miles from southwestern Pennsylvania through West Virginia to a point of interconnection with Virginia Electric and Power CompanyVEPCO in northern Virginia. TrAIL plans, operates and maintains its transmission system and facilities in accordance with NERC reliability standards, and other applicable regulatory requirements. In addition, TrAIL complies with the regulations, orders, policies and practices prescribed by the SEC, FERC, and applicable state regulatory authorities.

FESMAIT was organized under Delaware law in 2015. As discussed in "FERC Matters" below, ME and PN transferred their transmission facilities to MAIT on January 31, 2017. The assets transferred consist of approximately 4,234 circuit miles of transmission lines with nominal voltages of 500 kV, 345 kV, 230 kV, 138 kV, 115 kV, 69 kV and 46 kV in the lawsPJM Region.

Each of the State of Ohio in 1997. FES provides energy-related productsATSI, MAIT and services to retail and wholesale customers. FES also owns and operates, through its FG subsidiary, fossil generating facilities and owns, through its NG subsidiary, nuclear generating facilities. FENOC, a separate subsidiary of FirstEnergy, organized under the laws of the State of Ohio in 1998,TrAIL plans, operates, and maintains NG’s nuclear generating facilities. FES purchases the entire outputits transmission system in accordance with NERC reliability standards, and other applicable regulatory requirements. In addition, each of the generation facilities owned by FGATSI, MAIT and NG, and purchases the uncommitted output of AE Supply, as well as the output relating to leasehold interests of OE and TE in certain of those facilities that are subject to sale and leaseback arrangements, and pursuant to full output, cost-of-service PSAs.

FESC provides legal, financial and other corporate support services at cost, in accordance with its cost allocation manual, to affiliated FirstEnergy companies.

FirstEnergy's reportable operating segments are as follows: Regulated Distribution, Regulated Transmission and CES.

Additional information regarding FirstEnergy’s reportable segments which information is incorporated herein by reference, is provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Note 18. Segment19, "Segment Information," of the Combined Notes to Consolidated Financial Statements. FES does not have separate reportable operating segments.

As of February 17, 2015,January 31, 2018, FirstEnergy’s competitive generating portfolio consists of 17,858 MW of diversified capacity (CES — 14,068 MW, including 88512,303 MWs of capacity scheduled to be deactivated by April 2015, and Regulated Distribution — 3,790 MW).electric generating capacity. Of the competitive generation asset portfolio, approximately 10,113 MW (56.5%6,136 MWs (49.9%) consist of coal-fired capacity; 4,048 MW (22.7%MWs (32.9%) consist of nuclear capacity; 1,410 MW (7.9%713 MWs (5.8%) consist of hydroelectric capacity; 1,603 MW (9.0%733 MWs (6.0%) consist of oil and natural gas units; 496 MW (2.8%MWs (4.0%) consist of wind and solar power arrangements; and 188 MW (1.1%177 MWs (1.4%) consist of capacity entitlements to output from generation assets owned by OVEC. All units are located within PJM and sell electric energy, capacity and other products into the wholesale markets that are operated by PJM. Within the CES segment'sCES' generation portfolio, 11,086 MW10,180 MWs consist of FES' facilities that are operated by FENOC and FG (including entitlements from OVEC, wind and solar power arrangements), and except for portions of certainBruce Mansfield facilities that are subject to the sale and leaseback arrangements with non-affiliates for which the corresponding output of these arrangements is available to FES through power sales agreements, are all owned directly by NG and FG. Another 2,982 MW2,123 MWs of the CES' portfolio consists of AE Supply's facilities, including AE Supply's entitlement to 713 MWMWs from AGC's interest in Bath County Virginia hydroelectric facility and 67 MWMWs of AE Supply's 3.01% entitlement from OVEC's generation output. As discussed below, AE Supply and AGC agreed to sell to a subsidiary of LS Power 1,615 MWs of electric generating capacity. On December 13, 2017, AE Supply completed the sale of its four natural gas generating plants (859 MWs). The sale of the remaining 756 MWs of generating capacity

is expected to close in the first half of 2018. FES' generating facilities are concentrated primarily in Ohio and Pennsylvania and AE Supply's generating facilities are primarily located in Pennsylvania, West Virginia, Virginia and Ohio.

As of January 31, 2018, FirstEnergy’s regulated generating portfolio consists of 3,790 MWs of diversified capacity contained within the Regulated Distribution segment's portfolio,segment: 210 MWMWs consist of JCP&L's 50% ownership interest in the YardsYard's Creek hydroelectric facility in New Jersey; and 3,580 MWMWs consist of MP's facilities, including 487 MWMWs from AGC's interest in Bath County Virginia hydroelectric facility that MP partially owns and 11 MWMWs of MP's 0.49% entitlement from OVEC's generation output. MP's facilities are concentrated primarily in West Virginia. On December 16, 2016, MP issued an RFP to address its generation shortfall previously identified in the IRP filed with the WVPSC. The IRP identified a capacity shortfall for MP starting in 2016 and exceeding 700 MWs by 2020 and 850 MWs by 2027. AE Supply was the winning bidder of the RFP to address MP’s generation shortfall and on March 6, 2017, MP and AE Supply signed an asset purchase agreement for MP to acquire AE Supply’s Pleasants Power Station (1,300 MW). As discussed in "Competitive Generation," above, based on the FERC ruling and the conditions included in the WVPSC order, MP and AE Supply terminated the asset purchase agreement.

Each of the Utilities' retail rates, conditions of service, issuance of securities and other matters are subject to regulation in the states in which it operates - in Maryland by the MDPSC, in Ohio by the PUCO, in New Jersey by the NJBPU, in Pennsylvania by the PPUC, in West Virginia by the WVPSC and in New York by the NYPSC. The transmission operations of PE in Virginia are subject to certain regulations of the VSCC. 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 competitive retail electric suppliers serving retail customers primarily in Ohio, Pennsylvania, Illinois,Maryland, Michigan, New Jersey and Maryland,Illinois, FES and AE Supply are subject to state laws applicable to competitive electric suppliers in those states, including affiliate codes of conduct that apply to FES, AE Supply and their public utility affiliates. In addition, if any of the FirstEnergy affiliates were to engage in the construction of significant new transmission or generation facilities, depending on the state, they may be required to obtain state regulatory authorization to site, construct and operate the new transmission or generation facility.

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

To date, FERC Matters below.has yet to issue guidance to address how to reflect the impacts resulting from the Tax Act in customer rates. Management continues to monitor and investigate the impact of changes to federal regulation resulting from the Tax Act.

FERC regulates the sale of power for resale in interstate commerce in part by granting authority to public utilities to sell wholesale power at market-based rates upon showing that the seller cannot exert market power in generation or transmission or erect barriers to entry into markets. The Utilities, AE Supply, FES FG, NG, FirstEnergy Generation Mansfield Unit 1 Corp.,and certain of its subsidiaries, Buchanan Generation LLC, and Green Valley Hydro, LLC each have been authorized by FERC to sell wholesale power in interstate commerce at market-based rates and have a market-based rate tariff on file with FERC;FERC, although major wholesale purchases remain subject to regulation by the relevant state commissions. As a condition to selling electricity on a wholesale basis at market-based rates, the Utilities, AE Supply, FES FG, NG, FirstEnergy Generation Mansfield Unit 1 Corp.,and certain of its subsidiaries, Buchanan Generation LLC, and Green Valley, Hydro, LLC, like other entities granted market-based rate authority, must file electronic quarterly reports with FERC listing their sales transactions for the prior

The nuclear generating facilities owned and leased by NG OE and TE, and operated by FENOC are subject to extensive regulation by the NRC. The NRC subjects nuclear generating stations to continuing review and regulation covering, among other things, operations, maintenance, emergency planning, security, and environmental and radiological aspects of those stations. The NRC may modify, suspend or revoke operating licenses and impose civil penalties for failure to comply with the Atomic Energy Act, the regulations under such Act or the terms of the licenses. FENOC is the licensee for the operating nuclear plants and has direct compliance responsibility for NRC matters. FES controls the economic dispatch of NG’s plants. See Nuclear Regulation"Nuclear Regulation" below.

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

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

The Utilities, AGC, ATSI, PATHMAIT and TrAIL recognize, as regulatory assets and regulatory liabilities, costs which FERC and the various state utility commissions, as applicable, have authorized for recovery/return from/to customers in future periods or for which authorization is probable. Without the probability of such authorization, costs currently recorded as regulatory assets and regulatory liabilities would have been charged to income as incurred. All regulatory assets and liabilities are expected to be recovered/returned from/to customers. Based on current ratemaking procedures, the Utilities, AGC, ATSI, PATHMAIT and TrAIL continue to collect cost-based rates for their transmission and distribution services and, in the case of PATH, for its abandoned plant, which remains regulated;services; accordingly, it is appropriate that the Utilities, AGC, ATSI, PATHMAIT and TrAIL continue the application of regulatory accounting to those operations.

requirements in the areas of storm response, feeder performance, estimates of restoration times, and regulatory reporting. The Staff also recommendedreporting, as well as the imposition of penalties, including customer rebates, for a utility's failure or inability to comply with the escalating standards of storm restoration speed proposed by the Staff.Staff of the MDPSC. In addition, the Staff of the MDPSC proposed that the Maryland utilities be required to develop and implement system hardening plans, up to a rate impact cap on cost. The MDPSC conducted a hearing September 15-18, 2014, to consider certain of these matters, and has not yet scheduled further proceedingsissued a ruling on any of those matters.

On March 20, 2013,January 31, 2018, the NJBPU ordered thatinstituted a generic proceeding be established to investigateexamine the prudenceimpacts of costs incurred by allthe Tax Act on the rates and charges of New Jersey utilitiesutilities. JCP&L must track and apply regulatory accounting treatment for service restoration efforts associated with the major storm events of 2011impacts effective January 1, 2018, and 2012. The Order provided that if any utility had already filedfile a proceeding for recovery of such storm costs, to the extent the amount of approved recovery had not yet been determined, the prudence of such costs would be reviewed in the generic proceeding. On May 31, 2013, the NJBPU clarified its earlier order to indicate that the 2011 major storm costs would be reviewed expeditiously in the generic proceeding,

The Pennsylvania Companies currently operate under DSPs that expire onfor the June 1, 2017 through May 31, 2015, and2019 delivery period, which provide for the competitive procurement of generation supply for customers thatwho do not choose an alternative EGS or for customers of alternative EGSs that fail to provide the contracted service. The default serviceUnder the DSPs, the supply is currentlywill be provided by wholesale suppliers through a mix of long-term and short-term contracts procured through descending clock auctions, competitive requests for proposals and spot market purchases. On July 24, 2014, the PPUC unanimously approved a settlement of the Pennsylvania Companies' DSPs for the period of June 1, 2015 through May 31, 2017, that provides for quarterly descending clock auctions to procure 3, 12 and 24-month energy contracts, as well as one RFP seekingfor 2-year SREC contracts to secure SRECs for ME, PN and Penn. The DSPs include modifications to the Pennsylvania Companies’ POR programs in order to reduce the level of uncollectible expense the Pennsylvania Companies experience associated with alternative EGS charges.

The Pennsylvania Companies operate under rates that were approved by the PPUC ME and PN refunded those amounts to customers over 29-months concludingon January 19, 2017, effective as of January 27, 2017. These rates provide annual increases in the second quarter of 2013. On appeal, the Commonwealth Court affirmed the PPUC's Order to the extent that it holds that line loss costs are not transmission costs and, therefore, the approximately $254 million in marginal transmission losses and associated carrying charges for the period prior to January 1, 2011, are not recoverable under ME's and PN's TSC riders. The Pennsylvania Supreme Court denied ME's and PN's Petition for Allowance of Appeal and the Supreme Court of the United States denied ME's and PN's Petition for Writ of Certiorari. The U.S. District Court for the Eastern District of Pennsylvania granted the PPUC's motion to dismiss the complaint filed by ME and PN to obtain an order that would enjoin enforcement of the PPUC and Pennsylvania court orders under a theory of federal preemption on the question of retail rate recovery of the marginal transmission loss charges. As a result of the U.S. District Court's decision, FirstEnergy recorded a regulatory asset impairment chargeoperating revenues of approximately $254$96 million (pre-tax) inat ME, $100 million at PN, $29 million at Penn, and $66 million at WP, and are intended to benefit customers by modernizing the quarter ended September 30, 2013. On appeal, on September 16, 2014, in a split decision, two judges of a three-judge panel of the United States Court of Appeals for the Third Circuit affirmed the U.S. District Court's dismissal of the complaint, agreeing that MEgrid with smart technologies, increasing vegetation management activities, and PN had litigated the issue in the state proceedings and thus were precluded from subsequent litigation in federal court. On September 30, 2014, ME and PN filed for rehearing and rehearing en banc before the Third Circuit and, on October 15, 2014, the Third Circuit rejected that rehearing request. ME and PN filed a Petition for Certiorari with the U.S. Supreme Court on February 12, 2015.continuing other customer service enhancements.

Pursuant to Act 11 of 2012, Pennsylvania EDCs may establish a DSIC to recover costs of infrastructure improvements and costs related to highway relocation projects with PPUC approval. Pennsylvania EDCs must file LTIIPs outlining infrastructure improvement plans for PPUC review and approval prior to approval of a DSIC. On August 4, 2014, the Pennsylvania Companies each filed tariffs withFebruary 11, 2016, the PPUC proposing general rate increases associated with their distribution operations. The filings request approval to increase operating revenues by approximately $151.9 million at ME, $119.8 million at PN, $28.5 million at Penn, and $115.5 million at WP based upon fully projected future test yearsapproved LTIIPs for the twelve months ending April 30, 2016 at each of the Pennsylvania Companies. On June 14, 2017, the PPUC approved modified LTIIPs for ME, PN and Penn for the remaining years of 2017 through 2020 to provide additional support for reliability and infrastructure investments. The LTIIPs estimated costs for the remaining period of 2018 to 2020, as modified, are: WP $50.1 million; PN $44.8 million; Penn $33.2 million; and ME $51.3 million.

On February 3, 2015, each of16, 2016, the Pennsylvania Companies filed DSIC riders for PPUC approval for quarterly cost recovery, which were approved by the PPUC on June 9, 2016, and went into effect July 1, 2016, subject to hearings and refund or reallocation among customer classes. On January 19, 2017, in the PPUC’s order approving the Pennsylvania Companies’ general rate cases, the PPUC added an additional issue to the DSIC proceeding to include whether ADIT should be included in DSIC calculations. On February 2, 2017, the parties to the DSIC proceeding submitted a Joint Petition for Settlement seekingto the ALJ that resolved the issues that were pending from the order issued on June 9, 2016, which is pending PPUC approval ofapproval. The ADIT issue is subject to further litigation and a hearing was held on May 12, 2017. On August 31, 2017, the agreements reached in each proceeding which included, among other things: 1) increases in current distribution revenues of $89.3 million for ME, $90.8 million for PN, $15.9 million for Penn and $96.8 million for WP; 2)ALJ issued a Universal Services Charge Rider to be established for WP; 3) storm reserve accounts for future storm recovery to be established for eachdecision recommending that the complaint of the Pennsylvania Companies;OCA be granted by the PPUC such that the Pennsylvania Companies reflect all federal and 4) certain other operational and customer service-related provisions.state income tax deductions related to DSIC-eligible property in the currently effective DSIC rates. If the decision is approved by the PPUC, the impact is not expected to be material to FirstEnergy. The sole issue reserved for briefing was with respectPennsylvania Companies filed exceptions to the scopedecision on September 20, 2017, and pricingreply exceptions on October 2, 2017.

On February 12, 2018, the PPUC initiated a proceeding to determine the effects of the Companies' proposed LED offerings. OrdersTax Act on the proposed increases are expectedtax liability of utilities and the feasibility of reflecting such impacts in May 2015.rates charged to customers. By March 9, 2018, the Pennsylvania Companies must submit information to the PPUC to calculate the net effect of the Tax Act on income tax expense and rate base, and comments addressing whether rates should be adjusted to reflect the tax rate changes, and if so, how and when such modifications should take effect.

On January 3, 2018, the WVPSC initiated a proceeding to recover allinvestigate the effects of the Tax Act on the revenue requirements of utilities. MP and PE must track the tax savings resulting from the Tax Act on a monthly basis, effective January 1, 2018, and file written testimony explaining the impact of the Tax Act on federal income tax and revenue requirements by May 30, 2018. On January 26, 2018, the WVPSC issued an order clarifying that regulatory accounting should be implemented as of January 1, 2018, including the recording of any regulatory liabilities resulting from the Tax Act.

PJM and its stakeholders have been debating the proper method to allocate costs for newcertain transmission facilities. While FirstEnergy and other parties advocate for a traditional "beneficiary pays" (or usage based) approach, others advocate for “socializing” the costs on a load-ratio share basis, where each customer in the zone would pay based on its total usage of energy within PJM. This question has been the subject of extensive litigation before FERC and the appellate courts, including most recently before the Seventh Circuit. On June 25, 2014, a divided three-judge panel of the Seventh Circuit ruled that FERC had not quantified the benefits that western PJM utilities would derive from certain new 500 kV or higher lines and thus had not adequately supported its decision to socialize the costs of these lines. The majority found that eastern PJM utilities are the primary beneficiaries of the lines, while western PJM utilities are only incidental beneficiaries, and that, while incidental beneficiaries should pay some share of the costs of the lines, that share should be proportionate to the benefit they derive from the lines, and not on load-ratio share in PJM as a whole. The court remanded the case to FERC, which issued an order setting the issue of cost allocation for hearing and settlement proceedings. Settlement discussions underOn June 15, 2016, various parties, including ATSI and the Utilities, filed a FERC-appointed settlement judge are ongoing.

On June 1, 2011, ATSI and the ATSI zone transferred from MISO to PJM. While many of the matters involved with the move have

the effective date of the formula rate. FERC's order on rehearing remains pending. JCP&L’s rates went into effect on June 1, 2017, subject to refund pending the outcome of the hearing and settlement procedures. On December 21, 2017, JCP&L and certain parties filed a settlement agreement with FERC. The settlement agreement provides for a $135 million stated annual revenue requirement for Network Integration Transmission Service and an average of $20 million stated annual revenue requirement for certain projects listed on the PJM Tariff where the costs are allocated in part beyond the JCP&L transmission zone within the PJM Region. The revenue requirements are subject to a moratorium on additional revenue requirements proceedings through December 31, 2019, other than limited filings to seek recovery for certain additional costs. Also on December 21, 2017, JCP&L filed a motion for authorization to implement the settlement rate on an interim basis. On December 27, 2017, FERC granted the motion authorizing JCP&L to implement the settlement rate effective January 12, 2015, for any refund resulting from1, 2018, pending a final commission order on the inquiry. A procedural schedule forsettlement agreement. The settlement agreement is pending at FERC. As a result of the Section 206 inquiry has not yet been established.settlement agreement, JCP&L recognized a pre-tax impairment charge of $28 million in the fourth quarter of 2017.