~~Distribution Rate Request~~

On February 25, 2008, evidentiary hearings concluded in the distribution rate requests for the Ohio Companies. The requests for $332 million in revenue increases were filed on June 7, 2007. Public hearings were held from March 5, 2008 through March 24, 2008. Main briefs were filed on March 28, 2008, and reply briefs were filed on April 18, 2008. The PUCO is expected to render its decision during the second or third quarter of 2008 (see Outlook – Ohio).

Regulatory Matters - Pennsylvania

Penn’s Interim Default Service Supply

~~On March 13,~~In April and May 2008, ~~the PPUC approved the residential procurement process in Penn’s Joint Petition for Settlement. This RFP process calls for load-following, full-requirements contracts~~Penn held RFPs to procure its power supply for default service ~~procurement~~ for residential customers for the period ~~covering~~ June 1, 2008 through May ~~31, 2011.~~2009 and a portion of the load for June 2009 through May 2010. The PPUC ~~had previously~~ approved the ~~default service procurement processes for commercial~~resulting bids and industrial customers. The default service procurement for small commercial customers was conducted through multiple RFPs, while the default service procurement for large commercial and industrial customers will utilize hourly pricing. Bids in the two RFPs for small commercial load were approved by the PPUC on ~~February 22, 2008, and March~~May 20, ~~2008. On March 28,~~ 2008, Penn filed compliance tariffs with the new default service generation rates ~~based on the approved RFP bids~~ for ~~small commercial~~residential customers, which the PPUC then certified on ~~April 4,~~May 21, 2008. ~~On April 14, 2008,~~Penn’s new default service rates were effective June 1, 2008. RFPs for the ~~first RFP for~~remainder of the June 2009 through May 2010 residential customers’ load ~~was held consisting of tranches~~are scheduled for ~~both 12~~October 2008 and 24-month supply. The PPUC approved the bids on April 16, 2008. The second RFP is scheduled to be held on May 14, 2008, after which time the PPUC is expected to approve the new rates to go into effect June 1, 2008.January 2009.

Met-Ed and Penelec Transmission Service Charge Filing

On ~~April 14,~~May 22, 2008, ~~Met-Ed~~the PPUC approved Met-Ed’s and ~~Penelec filed~~Penelec’s annual updates to ~~the~~their TSC ~~rider~~riders for the period June 1, 2008, through May 31, 2009. The ~~proposed~~approved TSCs include a component for under-recovery of actual transmission costs incurred during ~~the~~ prior ~~period (Met-Ed - $144 million and Penelec - $4 million)~~periods and future transmission cost projections for June 2008 through May ~~2009 (Met-Ed - $258 million and Penelec - $92 million). Met-Ed has proposed~~2009. Met-Ed’s TSC includes a transition approach that ~~would~~will recover past under-recovered costs plus carrying charges through the new TSC, ~~over thirty-one months and defer~~with deferral of a portion of the projected costs ~~($92 million)~~ plus carrying charges for recovery through future TSCs by December 31, 2010. Various intervenors filed complaints against Met-Ed’s and Penelec’s TSC filings. In addition, the PPUC ordered an investigation to review the reasonableness of Met-Ed’s TSC, while at the same time allowing the company to implement the rider June 1, 2008, subject to refund. On July 15, 2008, the PPUC directed the ALJ to consolidate the complaints against Met-Ed with its investigation, and a litigation schedule was adopted with hearings for both companies scheduled to begin in January 2009.

Generation

~~Generation Output Record~~Fremont Plant

~~FirstEnergy set~~In January 2008, FGCO acquired a ~~new first quarter generation output record~~partially complete 707-MW natural gas fired generating plant in Fremont, Ohio from Calpine Corporation for $253.6 million. FGCO completed an engineering study in June 2008, indicating an estimated additional $208 million of ~~20.4~~capital expenditures will be required to complete the project. Approximately $41 million ~~megawatt-hours, a 1.8% increase over~~of the ~~prior record established~~incremental capital is expected to be invested in 2008 with planned commercial operation of the ~~first quarter of 2006.~~plant expected to begin in December 2009.

Refueling Outage and Power Uprates

On ~~April 14,~~May 22, 2008, the 868-MW Beaver Valley Unit 2 ~~began~~returned to service following its regularly scheduled refueling ~~outage. During~~outage that began on April 14, 2008. Major work activities completed during the outage ~~several improvement projects will take place on~~included replacing approximately one-third of the ~~868-MW unit including replacing~~fuel assemblies in the reactor and the high pressure turbine ~~and inspecting~~rotor. During the ~~reactor vessel and other plant safety systems. Beaver Valley Unit 2 had operated for 520 consecutive days when it~~refueling outage, the final phase of an extended power uprate project was ~~taken off line for~~completed. This is the ~~outage.~~

~~Maintenance Outage~~unit’s second uprate in the past 19 months.

On ~~April 14,~~June 30, 2008, the ~~Perry~~NRC approved a 12 MW uprate at the 893-MW Davis-Besse Nuclear Power ~~Plant returned~~Station. These uprates were achieved in support of FirstEnergy’s strategy to ~~service following completion~~maximize the full potential of ~~a 10-day planned outage for valve work and other maintenance in preparation for the upcoming summer months.~~its existing generation assets.

Financial Matters

New Long-Term Fuel Supply Arrangements

On July 16, 2008, FirstEnergy Ventures Corp., a subsidiary of FirstEnergy, 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 near Roundup, Montana. This transaction is part of FirstEnergy’s strategy to secure high-quality fuel supplies at attractive prices to maximize the capacity of its existing fossil generating plants. FirstEnergy will make a $125 million equity investment in the joint venture. Under an acquisition and development agreement, the joint venture will acquire 80 percent of the Bull Mountain mining operations and 100 percent of the transportation operations, with FirstEnergy owning a 45 percent economic interest and an affiliate of the Boich Companies owning a 55 percent economic interest in the joint venture, with both parties having a 50 percent voting interest in the joint venture. After January 2010, the joint venture will have 18 months to exercise an option to acquire the remaining 20 percent stake in the mining operations. In a related transaction, FirstEnergy has entered into a 15-year agreement to purchase all production up to 10 million tons of bituminous western coal annually from the mine. FirstEnergy also reached tentative agreements with the rail carriers associated with transporting coal from the mine to its generating stations, and it expects to begin taking delivery of the coal in late 2009 or early 2010. The joint venture has the right to resell FirstEnergy’s Bull Mountain coal tonnage not used at FirstEnergy’s facilities and has call rights on such coal above certain levels.

Acquisition of Additional Equity Interests in Beaver Valley Unit 2 and Perry

On ~~March 3,~~May 30, 2008, ~~notice was given to~~NGC purchased 56.8 MW of lessor equity interests in the ~~nine owner trusts that are lessors under~~OE 1987 sale and leaseback ~~transactions, originally entered into by~~of the Perry Plant. On June 2, 2008, NGC purchased approximately 43.5 MW of lessor equity interests in the OE 1987 sale and leaseback of Beaver Valley Unit 2. Between June 2, 2008 and June 9, 2008, NGC purchased an additional 158.5 MW of additional lessor equity interests in the TE inand CEI 1987 ~~that NGC would acquire the related 18.26% undivided interest in~~sale and leaseback of Beaver Valley Unit 2, ~~through~~which purchases were undertaken in connection with the previously disclosed exercise of the periodic purchase option provided ~~for~~ in the ~~applicable facility leases.~~TE and CEI sale and leaseback arrangements. The ~~purchase price~~Ohio Companies continue to ~~be paid by NGC for the undivided interest will be equal to the higher of a specified casualty value~~lease these MW under the ~~applicable facility leases (approximately $239 million in the aggregate for the equity portion of all nine facility leases)~~respective sale and leaseback arrangements and the ~~fair market sales value of such undivided interests. Determination of the fair market sales value may become subject to an appraisal procedure provided for in the~~related lease documentation. An additional payment of approximately $236 million would be required to prepay in full the outstanding principal of, and accrued but unpaid interest on, the lessor notes of the nine owner trusts. Alternatively, this amount would not be paid as part of the aggregate purchase price if the lessor notes are instead assumed at the time of the exercise of the option. If NGC determines to prepay the notes, it is possible that the proceeds from such prepayment may not be sufficient to pay the principal of, and interest on, the bonds as they become due. If that is the case, NGC would provide a mechanism to address any such potential shortfall in a timely manner.debt remains outstanding.

~~Repurchase and Remarketing~~Refunding of Auction Rate Bonds

~~Between February 27,~~In June 2008, FGCO and ~~April 2, 2008, FirstEnergy’s subsidiaries repurchased~~NGC refunded all of the $455.7 million of PCRBs previously issued on their ~~tax-exempt long-term PCRBs originally sold at~~behalf as auction ~~rates ($530 million)~~rate securities and recently repurchased in response to disruptions in the auction rate securities market. ~~In February 2008, FGCO, NGC, Met-Ed and Penelec elected to convert all of their then outstanding~~The new PCRBs were issued in variable-rate modes supported by bank LOCs. FirstEnergy no longer holds auction rate PCRBs to a weekly rate mode, which required their mandatory purchase of these PCRBs on the applicable conversion dates. The companies initially funded the repurchase with short-term debt. On April 22, 2008, Met-Ed ($28.5 million) and Penelec ($45 million) successfully marketed their converted PCRBs in a variable-rate mode. Subject to market conditions, FGCO and NGC plan to remarket their converted PCRBs later in 2008, either in fixed-rate or variable-rate modes.securities.

~~Non-Core Asset Sale~~New Credit Facility

On ~~March 7,~~May 30, 2008, FirstEnergy ~~sold~~and FES entered into a new $300 million, 364-day revolving credit facility. The pricing, terms and conditions are substantially ~~all of~~similar to those contained in the ~~assets of~~current FirstEnergy Telecom Services, Inc. to FirstCom for $45 million in cash, with FirstCom also assuming related liabilities. The sale resulted in an after-tax gain of approximately $0.06 per share. FirstEnergy is a 15.6% shareholder in FirstCom.$2.75 billion revolving credit agreement.

FIRSTENERGY’S BUSINESS

FirstEnergy is a diversified energy company headquartered in Akron, Ohio, that operates primarily through three core business segments (see Results of Operations).

Energy Delivery Services transmits and distributes electricity through FirstEnergy’s eight utility operating companies, serving 4.5 million customers within 36,100 square miles of Ohio, Pennsylvania and New Jersey and purchases power for its PLR and default service requirements in Pennsylvania and New Jersey. This business segment derives its revenues principally from the delivery of electricity within FirstEnergy’s service areas at regulated rates, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (default service) in its Pennsylvania and New Jersey franchise areas. The segment’s net income reflects the commodity costs of securing electricity from FirstEnergy’s competitive energy services segment under partial requirements purchased power agreements with FES and from non-affiliated power suppliers, including, in each case, associated transmission costs.

Competitive Energy Services supplies the electric power needs of end-use customers through retail and wholesale arrangements, including associated company power sales to meet all or a portion of the PLR and default service requirements of FirstEnergy’s Ohio and Pennsylvania utility subsidiaries and competitive retail sales to customers primarily in Ohio, Pennsylvania, Maryland and Michigan. This business segment owns or leases and operates 19 generating facilities with a net demonstrated capacity of approximately 13,664 MW and also purchases electricity to meet sales obligations. The segment's net income is primarily derived from affiliated company power sales and non-affiliated electric generation sales revenues less the related costs of electricity generation, including purchased power and net transmission and ancillary costs charged by PJM and MISO to deliver energy to the segment’s customers.

Ohio Transitional Generation Services supplies the electric power needs of non-shopping customers under the default service requirements of the Ohio Companies. The segment's net income is primarily derived from electric generation sales revenues less the cost of power purchased from the competitive energy services segment through a full-requirements PSA arrangement with FES, including net transmission and ancillary costs charged by MISO to deliver energy to retail customers.

RESULTS OF OPERATIONS

The financial results discussed below include revenues and expenses from transactions among FirstEnergy's business segments. A reconciliation of segment financial results is provided in Note 13 to the consolidated financial statements. Net income by major business segment was as follows:

													Three Months Ended June 30									Six Months Ended June 30
	Three Months Ended																		Increase									Increase
	March 31,								Increase				2008			2007			(Decrease)			2008			2007			(Decrease)
	2008				2007				(Decrease)				(In millions, except per share data)
Net Income	(In millions, except per share data)
By Business Segment
By Business Segment:
Energy delivery services		$	179			$	218			$	(39	)	$	193		$	207		$	(14	)	$	372		$	425		$	(53	)
Competitive energy services			87				98				(11	)		66			142			(76	)		153			240			(87	)
Ohio transitional generation services			23				24				(1	)		20			30			(10	)		43			53			(10	)
Other and reconciling adjustments*			(13	)			(50	)			37			(16	)		(41	)		25			(29	)		(90	)		61
Total		$	276			$	290			$	(14	)	$	263		$	338		$	(75	)	$	539		$	628		$	(89	)

Basic Earnings Per Share		$	0.91			$	0.92			$	(0.01	)	$	0.86		$	1.11		$	(0.25	)	$	1.77		$	2.03		$	(0.26	)
Diluted Earnings Per Share		$	0.90			$	0.92			$	(0.02	)	$	0.85		$	1.10		$	(0.25	)	$	1.75		$	2.01		$	(0.26	)

* Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses, telecommunications services and elimination of intersegment transactions.

Summary of Results of Operations – ~~First~~Second Quarter 2008 Compared with ~~First~~Second Quarter 2007

Financial results for FirstEnergy's major business segments in the ~~first three months~~second quarter of 2008 and 2007 were as follows:

							Ohio
	Energy			Competitive			Transitional			Other and
	Delivery			Energy			Generation			Reconciling			FirstEnergy
Second Quarter 2008 Financial Results	Services			Services			Services			Adjustments			Consolidated
	(In millions)
Revenues:
External
Electric	$	2,030		$	324		$	670		$	-		$	3,024
Other		152			51			13			5			221
Internal		-			704			-			(704	)		-
Total Revenues		2,182			1,079			683			(699	)		3,245

Expenses:
Fuel and purchased power		998			537			555			(704	)		1,386
Other operating expenses		413			312			81			(25	)		781
Provision for depreciation		104			59			-			5			168
Amortization of regulatory assets		235			-			11			-			246
Deferral of new regulatory assets		(98	)		-			-			-			(98	)
General taxes		149			24			2			5			180
Total Expenses		1,801			932			649			(719	)		2,663

Operating Income		381			147			34			20			582
Other Income (Expense):
Investment income		40			(8	)		(1	)		(15	)		16
Interest expense		(100	)		(38	)		-			(50	)		(188	)
Capitalized interest		1			10			-			2			13
Total Other Expense		(59	)		(36	)		(1	)		(63	)		(159	)

Income Before Income Taxes		322			111			33			(43	)		423
Income taxes		129			45			13			(27	)		160
Net Income	$	193		$	66		$	20		$	(16	)	$	263

Ohio
Energy Competitive Transitional Other and
Delivery Energy Generation Reconciling FirstEnergy
First Quarter 2008 Financial Results Services Services Services Adjustments Consolidated
(In millions)
Revenues:
External
Electric $ 2,050 $ 289 $ 691 $ - $ 3,030
Other 162 40 16 29 247
Internal - 776 - (776 ) -
Total Revenues 2,212 1,105 707 (747 ) 3,277

Expenses:
Fuel and purchased power 983 533 588 (776 ) 1,328
Other operating expenses 445 309 77 (31 ) 800
Provision for depreciation 106 53 - 5 164
Amortization of regulatory assets 249 - 9 - 258
Deferral of new regulatory assets (100 ) - (5 ) - (105 )
General taxes 173 32 1 9 215
Total Expenses 1,856 927 670 (793 ) 2,660

Operating Income 356 178 37 46 617
Other Income (Expense):
Investment income 45 (6 ) 1 (23 ) 17
Interest expense (103 ) (34 ) - (42 ) (179 )
Capitalized interest - 7 - 1 8
Total Other Income (Expense) (58 ) (33 ) 1 (64 ) (154 )

Income Before Income Taxes 298 145 38 (18 ) 463
Income taxes 119 58 15 (5 ) 187
Net Income $ 179 $ 87 $ 23 $ (13 ) $ 276

							Ohio																Ohio
	Energy			Competitive			Transitional			Other and							Energy			Competitive			Transitional			Other and
	Delivery			Energy			Generation			Reconciling			FirstEnergy				Delivery			Energy			Generation			Reconciling			FirstEnergy
First Quarter 2007 Financial Results	Services			Services			Services			Adjustments			Consolidated
Second Quarter 2007 Financial Results																	Services			Services			Services			Adjustments			Consolidated
	(In millions)																(In millions)
Revenues:
External
Electric	$	1,875		$	276		$	613		$	-		$	2,764			$	1,933		$	359		$	612		$	-		$	2,904
Other		165			45			6			(7	)		209				162			39			13			(9	)		205
Internal		-			714			-			(714	)		-				-			691			-			(691	)		-
Total Revenues		2,040			1,035			619			(721	)		2,973				2,095			1,089			625			(700	)		3,109

Expenses:
Fuel and purchased power		844			447			544			(714	)		1,121				879			460			537			(691	)		1,185
Other operating expenses		408			300			49			(8	)		749				410			277			87			(24	)		750
Provision for depreciation		98			51			-			7			156				100			51			-			8			159
Amortization of regulatory assets		246			-			5			-			251				242			-			6			(2	)		246
Deferral of new regulatory assets		(124	)		-			(20	)		-			(144	)			(93	)		-			(55	)		-			(148	)
General taxes		165			28			2			8			203				155			26			1			7			189
Total Expenses		1,637			826			580			(707	)		2,336				1,693			814			576			(702	)		2,381

Operating Income		403			209			39			(14	)		637				402			275			49			2			728
Other Income (Expense):
Investment income		70			3			1			(41	)		33				62			5			-			(37	)		30
Interest expense		(109	)		(52	)		(1	)		(23	)		(185	)			(118	)		(47	)		-			(40	)		(205	)
Capitalized interest		2			3			-			-			5				2			5			-			-			7
Total Other income (Expense)		(37	)		(46	)		-			(64	)		(147	)
Total Other Expense																		(54	)		(37	)		-			(77	)		(168	)

Income Before Income Taxes		366			163			39			(78	)		490				348			238			49			(75	)		560
Income taxes		148			65			15			(28	)		200				141			96			19			(34	)		222
Net Income	$	218		$	98		$	24		$	(50	)	$	290			$	207		$	142		$	30		$	(41	)	$	338


Changes Between First Quarter 2008 and
First Quarter 2007 Financial Results
Changes Between Second Quarter 2008 and																Changes Between Second Quarter 2008 and
Second Quarter 2007 Financial Results
Increase (Decrease)

Revenues:
External
Electric	$	175		$	13		$	78		$	-		$	266			$	97		$	(35	)	$	58		$	-		$	120
Other		(3	)		(5	)		10			36			38				(10	)		12			-			14			16
Internal		-			62			-			(62	)		-				-			13			-			(13	)		-
Total Revenues		172			70			88			(26	)		304				87			(10	)		58			1			136

Expenses:
Fuel and purchased power		139			86			44			(62	)		207				119			77			18			(13	)		201
Other operating expenses		37			9			28			(23	)		51				3			35			(6	)		(1	)		31
Provision for depreciation		8			2			-			(2	)		8				4			8			-			(3	)		9
Amortization of regulatory assets		3			-			4			-			7				(7	)		-			5			2			-
Deferral of new regulatory assets		24			-			15			-			39				(5	)		-			55			-			50
General taxes		8			4			(1	)		1			12				(6	)		(2	)		1			(2	)		(9	)
Total Expenses		219			101			90			(86	)		324				108			118			73			(17	)		282

Operating Income		(47	)		(31	)		(2	)		60			(20	)			(21	)		(128	)		(15	)		18			(146	)
Other Income (Expense):
Investment income		(25	)		(9	)		-			18			(16	)			(22	)		(13	)		(1	)		22			(14	)
Interest expense		6			18			1			(19	)		6				18			9			-			(10	)		17
Capitalized interest		(2	)		4			-			1			3				(1	)		5			-			2			6
Total Other Income (Expense)		(21	)		13			1			-			(7	)
Total Other Expense																		(5	)		1			(1	)		14			9

Income Before Income Taxes		(68	)		(18	)		(1	)		60			(27	)			(26	)		(127	)		(16	)		32			(137	)
Income taxes		(29	)		(7	)		-			23			(13	)			(12	)		(51	)		(6	)		7			(62	)
Net Income	$	(39	)	$	(11	)	$	(1	)	$	37		$	(14	)		$	(14	)	$	(76	)	$	(10	)	$	25		$	(75	)

Energy Delivery Services – ~~First~~Second Quarter 2008 Compared with ~~First~~Second Quarter 2007

Net income decreased ~~$39~~$14 million to ~~$179~~$193 million in the ~~first three months~~second quarter of 2008 compared to ~~$218~~$207 million in the ~~first three months~~second quarter of 2007, primarily due to higher ~~operating~~fuel and purchased power expenses partially offset by increased ~~revenues.~~revenues.

Revenues –

The increase in total revenues resulted from the following sources:

	Three Months Ended							Three Months
	March 31,				Increase			Ended June 30				Increase
Revenues by Type of Service	2008		2007		(Decrease)			2008		2007		(Decrease)
	(In millions)							(In millions)
Distribution services	$	955	$	944	$	11		$	919	$	948	$	(29	)
Generation sales:
Retail		790		720		70			772		756		16
Wholesale		219		132		87			252		148		104
Total generation sales		1,009		852		157			1,024		904		120
Transmission		197		183		14			196		194		2
Other		51		61		(10	)		43		49		(6	)
Total Revenues	$	2,212	$	2,040	$	172		$	2,182	$	2,095	$	87

A utility ~~could~~ also ~~simultaneously~~may file an MRO in which it would have to ~~demonstrate~~prove the following objective market criteria:

·	the utility or its transmission service affiliate belongs to a FERC approved RTO, or there is comparable and nondiscriminatory access to the electric transmission grid;

·	the RTO has a market-monitor function and the ability to mitigate market power or the utility’s market conduct, or a similar market monitoring function exists with the ability to identify and monitor market conditions and conduct; and

·	a published source of information is available publicly or through subscription that identifies pricing information for traded electricity products, both on- and off-peak, scheduled for delivery two years into the future.

On July 31, 2008, the Ohio Companies filed with the PUCO a comprehensive ESP and MRO. The ~~utility or its transmission service affiliate belongs to~~MRO outlines a ~~FERC-approved RTO having a market-monitor function and the ability to mitigate market power, and a published source exists~~CBP that ~~identifies information for traded electricity and energy products that are contracted for delivery two years into the future. The PUCO~~ would ~~test~~be implemented if the ESP ~~and its pricing and all other terms and conditions against the MRO and may only approve the ESP if it~~ is found to be more favorable to customers. As part of an ESP with a plan period longer than three years, the PUCO shall prospectively determine every fourth year of the plan whether it is substantially likely the plan will provide the electric distribution utility a return on common equity significantly in excess of the return likely to be earned by publicly traded companies, including utilities, that face comparable business and financial risk (comparable companies). If so, the PUCO may terminate the ESP. Annually under an ESP, the PUCO shall determine whether an electric distribution utility's earned return on common equity is significantly in excess of returns earned on common equity during the same period by comparable companies, and if so, shall require the utility to return such excess to customers by prospective adjustments. Amended Substitute SB221 also includes provisions dealing with advanced and renewable energy standards that contemplate 25% of electrical usage from these sources by 2025. Energy efficiency measures in the bill require energy savings in excess of 22% by 2025. Requirements are in place to meet annual benchmarks for renewable energy resources and energy efficiency, subject to reviewnot approved by the PUCO. ~~FirstEnergy~~Under SB221, a PUCO ruling on the ESP filing is ~~currently evaluating this legislation~~required within 150 days and ~~expects~~an MRO decision is required within 90 days. The ESP proposes to ~~file~~phase in new generation rates for customers beginning in 2009 for up to a three-year period and would resolve the Ohio Companies’ collection of fuel costs deferred in 2006 and 2007, and the distribution rate request described above. Major provisions of the ESP include:

a phase-in of new generation rates for up to a three-year period, whereby customers would receive a 10% phase-in credit; related costs (expected to approximate $430 million in 2009, $490 million in 2010 and $550 million in 2011) would be deferred for future collection over a period not to exceed 10 years;

·	a reconcilable rider to recover fuel transportation cost surcharges in excess of $30 million in 2009, $20 million in 2010 and $10 million in 2011;

·	generation rate adjustments to recover any increase in fuel costs in 2011 over fuel costs incurred in 2010 for FES’ generation assets used to support the ESP;

·	generation rate adjustments to recover the costs of complying with new requirements for certain renewable energy resources, new taxes and new environmental laws or new interpretations of existing laws that take effect after January 1, 2008 and exceed $50 million during the plan period;

·	an RCP fuel rider to recover the 2006 and 2007 deferred fuel costs and carrying charges (described above) over a period not to exceed 25 years;

the resolution of outstanding issues pending in the Ohio Companies’ distribution rate case (described above), including annual electric distribution rate increases of $75 million for OE, $34.5 million for CEI and $40.5 million for TE. The new distribution rates would be effective January 1, 2009, for OE and TE and May 1, 2009 for CEI, with a commitment to maintain distribution rates through 2013. CEI also would be authorized to defer $25 million in distribution-related costs incurred from January 1, 2009, through April 30, 2009;

·	an adjustable delivery service improvement rider, effective January 1, 2009, through December 31, 2013, to ensure the Ohio Companies maintain customer standards for service and reliability;

·	the waiver of RTC charges for CEI’s customers as of January 1, 2009, which would result in CEI’s write-off of approximately $485 million of estimated unrecoverable transition costs ($1.01 per share of common stock);

the continued recovery of transmission costs, including MISO, ancillary services and congestion charges, through an annually adjusted transmission rider; a separate rider will be established to recover costs incurred annually between May 1st and September 30th for capacity purchases required to meet FERC, NERC, MISO and other applicable standards for planning reserve margin requirements;

a deferred transmission cost recovery rider effective January 1, 2009, through December 31, 2010 to recover transmission costs deferred by the Ohio Companies in 2005 and accumulated carrying charges through December 31, 2008; a deferred distribution cost recovery rider effective January 1, 2011, to recover distribution costs deferred under the RCP, CEI’s additional $25 million of cost deferrals in 2009, line extension deferrals and transition tax deferrals;

the deferral of annual storm damage expenses in excess of $13.9 million, certain line extension costs, as well as depreciation, property tax obligations and post in-service carrying charges on energy delivery capital investments for reliability and system efficiency placed in service after December 31, 2008. Effective January 1, 2014, a rider will be established to collect the deferred balance and associated carrying charges over a 10-year period; and

·	a commitment by the Ohio Companies to invest in aggregate at least $1 billion in capital improvements in their energy delivery systems through 2013 and fund $25 million for energy efficiency programs and $25 million for economic development and job retention programs through 2013.

The Ohio Companies’ MRO filing outlines a CBP for providing retail generation supply if the ESP is not approved and implemented. The CBP would use a “slice-of-system” approach where suppliers bid on tranches (approximately 100 MW) of the Ohio Companies’ total customer load. The Ohio Companies have requested PUCO approval of the MRO application by late October 2008, to allow for the necessary time to conduct the CBP in order for rates to be effective January 1, 2009. The Ohio Companies included an interim pricing proposal as part of their ESP infiling, if additional time is necessary for final PUCO approval of either the ~~second~~ESP or ~~third quarter of 2008.~~
MRO. FES will be required to obtain FERC authorization to sell electric capacity or energy to the Ohio Companies under the ESP or MRO, unless a waiver is obtained.

Pennsylvania

Met-Ed and Penelec purchase a portion of their PLR and default service requirements from FES through a fixed-price partial requirements wholesale power sales agreement. The agreement allows Met-Ed and Penelec to sell the output of NUG energy to the market and requires FES to provide energy at fixed prices to replace any NUG energy sold to the extent needed for Met-Ed and Penelec to satisfy their PLR and default service obligations. The fixed price under the agreement is expected to remain below wholesale market prices during the term of the agreement. If Met-Ed and Penelec were to replace the entire FES supply at current market power prices without corresponding regulatory authorization to increase their generation prices to customers, each company would likely incur a significant increase in operating expenses and experience a material deterioration in credit quality metrics. Under such a scenario, each company's credit profile would no longer be expected to support an investment grade rating for their fixed income securities. Based on the PPUC’s January 11, 2007 order described below, if FES ultimately determines to terminate, reduce, or significantly modify the agreement prior to the expiration of Met-Ed’s and Penelec’s generation rate caps in 2010, timely regulatory relief is not likely to be granted by the PPUC.

Met-Ed and Penelec made a comprehensive transition rate filing with the PPUC on April 10, 2006 to address a number of transmission, distribution and supply issues. If Met-Ed's and Penelec's preferred approach involving accounting deferrals had been approved, annual revenues would have increased by $216 million and $157 million, respectively. That filing included, among other things, a request to charge customers for an increasing amount of market-priced power procured through a CBP as the amount of supply provided under the then existing FES agreement was to be phased out. Met-Ed and Penelec also requested approval of a January 12, 2005 petition for the deferral of transmission-related costs incurred during 2006. In this rate filing, Met-Ed and Penelec requested recovery of annual transmission and related costs incurred on or after January 1, 2007, plus the amortized portion of 2006 costs over a ten-year period, along with applicable carrying charges, through an adjustable rider. Changes in the recovery of NUG expenses and the recovery of Met-Ed's non-NUG stranded costs were also included in the filing. On May 4, 2006, the PPUC consolidated the remand of the FirstEnergy and GPU merger proceeding, related to the quantification and allocation of merger savings, with the comprehensive transition rate filing case.

The PPUC entered its opinion and order in the comprehensive rate filing proceeding on January 11, 2007. The order approved the recovery of transmission costs, including the transmission-related deferral for January 1, 2006 through January 10, 2007, and determined that no merger savings from prior years should be considered in determining customers’ rates. The request for increases in generation supply rates was denied as were the requested changes to NUG expense recovery and Met-Ed’s non-NUG stranded costs. The order decreased Met-Ed’s and Penelec’s distribution rates by $80 million and $19 million, respectively. These decreases were offset by the increases allowed for the recovery of transmission costs. Met-Ed’s and Penelec’s request for recovery of Saxton decommissioning costs was granted and, in January 2007, Met-Ed and Penelec recognized income of $15 million and $12 million, respectively, to establish regulatory assets for those previously expensed decommissioning costs. Overall rates increased by 5.0% for Met-Ed ($59 million) and 4.5% for Penelec ($50 million).

On March 30, 2007, MEIUG and PICA filed a Petition for Review with the Commonwealth Court of Pennsylvania asking the court to review the PPUC’s determination on transmission (including congestion) and the transmission deferral. Met-Ed and Penelec filed a Petition for Review on April 13, 2007 on the issues of consolidated tax savings and the requested generation rate increase. The OCA filed its Petition for Review on April 13, 2007, on the issues of transmission (including congestion) and recovery of universal service costs from only the residential rate class. From June through October 2007, initial responsive and reply briefs were filed by various parties. Oral arguments are scheduled to take place in September 2008. If Met-Ed and Penelec do not prevail on the issue of congestion, it could have a material adverse effect on the results of operations of Met-Ed, Penelec and FirstEnergy.

On ~~April 14,~~May 22, 2008, the PPUC approved the Met-Ed and Penelec ~~filed~~ annual updates to the TSC rider for the period June 1, 2008, through May 31, 2009. Various intervenors filed complaints against Met-Ed’s and Penelec’s TSC filings. In addition, the PPUC ordered an investigation to review the reasonableness of Met-Ed’s TSC, while at the same time allowing the company to implement the rider June 1, 2008, subject to refund. On July 15, 2008, the PPUC directed the ALJ to consolidate the complaints against Met-Ed with its investigation and a litigation schedule was adopted with hearings for both companies scheduled to begin in January 2009. The ~~proposed~~ TSCs include a component for under-recovery of actual transmission costs incurred during the prior period (Met-Ed - $144 million and Penelec - $4 million) and future transmission cost projections for June 2008 through May 2009 (Met-Ed - $258 million and Penelec - $92 million). Met-Ed ~~has proposed~~received approval from the PPUC of a transition approach that would recover past under-recovered costs plus carrying charges through the new TSC over thirty-one months and defer a portion of the projected costs ($92 million) plus carrying charges for recovery through future TSCs by December 31, 2010.

On March 13, 2008, the PPUC approved the residential procurement process in Penn’s Joint Petition for Settlement. This RFP process calls for load-following, full-requirements contracts for default service procurement for residential customers for the period covering June 1, 2008 through May 31, 2011. The PPUC had previously approved the default service procurement processes for commercial and industrial customers. The default service procurement for small commercial customers was conducted through multiple RFPs, while the default service procurement for large commercial and industrial customers will utilize hourly pricing. Bids in the two RFPs for small commercial load were approved by the PPUC on February 22, 2008, and March 20, 2008. On March 28, 2008, Penn filed compliance tariffs with the new default service generation rates based on the approved RFP bids for small commercial customers which the PPUC then certified on April 4, 2008. ~~On April 14, 2008,~~Bids on the ~~first RFP~~two RFPs for residential customers’ load ~~was held consisting of tranches for both 12 and 24-month supply. The~~were approved by the PPUC ~~approved the bids~~ on April 16, 2008 and May 16, 2008. On May 20, 2008, Penn filed compliance tariffs with the new default service generation rates based on the approved RFP bids for residential customers which the PPUC certified on May 21, 2008. The ~~second RFP is scheduled to be held on May 14, 2008, after which time the PPUC is expected to approve the~~ new rates ~~to go into effect~~were effective June 1, 2008.

On February 1, 2007, the Governor of Pennsylvania proposed an EIS. The EIS includes four pieces of proposed legislation that, according to the Governor, is designed to reduce energy costs, promote energy independence and stimulate the economy. Elements of the EIS include the installation of smart meters, funding for solar panels on residences and small businesses, conservation and demand reduction programs to meet energy growth, a requirement that electric distribution companies acquire power that results in the “lowest reasonable rate on a long-term basis,” the utilization of micro-grids and a three year phase-in of rate increases. On July 17, 2007 the Governor signed into law two pieces of energy legislation. The first amended the Alternative Energy Portfolio Standards Act of 2004 to, among other things, increase the percentage of solar energy that must be supplied at the conclusion of an electric distribution company’s transition period. The second law allows electric distribution companies, at their sole discretion, to enter into long term contracts with large customers and to build or acquire interests in electric generation facilities specifically to supply long-term contracts with such customers. A special legislative session on energy was convened in mid-September 2007 to consider other aspects of the EIS. The Pennsylvania House and Senate on March 11, 2008 and December 12, 2007, respectively, passed different versions of bills to fund the Governor’s EIS proposal. Neither chamber has formally considered the other’s bill. On February 12, 2008, the Pennsylvania House passed House Bill 2200 which provides for energy efficiency and demand management programs and targets as well as the installation of smart meters within ten years. As part of the 2008 state budget negotiations, the Alternative Energy Investment Act was enacted creating a $650 million alternative energy fund to increase the development and use of alternative and renewable energy, improve energy efficiency and reduce energy consumption. Other legislation has been introduced to address generation procurement, expiration of rate caps, conservation and renewable ~~energy.~~energy; however, consideration of these issues was postponed until the legislature returns to session in fall 2008. The final form of this pending legislation is uncertain. Consequently, FirstEnergy is unable to predict what impact, if any, such legislation may have on its operations. However, Met-Ed and Penelec intend to file rate mitigation plans with the PPUC later this year.

New Jersey

JCP&L is permitted to defer for future collection from customers the amounts by which its costs of supplying BGS to non-shopping customers and costs incurred under NUG agreements exceed amounts collected through BGS and NUGC rates and market sales of NUG energy and capacity. As of ~~March 31,~~June 30, 2008, the accumulated deferred cost balance totaled approximately ~~$264~~$293 million.

In accordance with an April 28, 2004 NJBPU order, JCP&L filed testimony on June 7, 2004 supporting continuation of the current level and duration of the funding of TMI-2 decommissioning costs by New Jersey customers without a reduction, termination or capping of the funding. On September 30, 2004, JCP&L filed an updated TMI-2 decommissioning study. This study resulted in an updated total decommissioning cost estimate of $729 million (in 2003 dollars) compared to the estimated $528 million (in 2003 dollars) from the prior 1995 decommissioning study. The DRA filed comments on February 28, 2005 requesting that decommissioning funding be suspended. On March 18, 2005, JCP&L filed a response to those comments. JCP&L responded to additional NJBPU staff discovery requests in May and November 2007 and also submitted comments in the proceeding in November 2007. A schedule for further NJBPU proceedings has not yet been set.

On August 1, 2005, the NJBPU established a proceeding to determine whether additional ratepayer protections are required at the state level in light of the repeal of the PUHCA pursuant to the EPACT. The NJBPU approved regulations effective October 2, 2006 that prevent a holding company that owns a gas or electric public utility from investing more than 25% of the combined assets of its utility and utility-related subsidiaries into businesses unrelated to the utility industry. These regulations are not expected to materially impact FirstEnergy or JCP&L. Also, in the same proceeding, the NJBPU Staff issued an additional draft proposal on March 31, 2006 addressing various issues including access to books and records, ring-fencing, cross subsidization, corporate governance and related matters. With the approval of the NJBPU Staff, the affected utilities jointly submitted an alternative proposal on June 1, 2006. The NJBPU Staff circulated revised drafts of the proposal to interested stakeholders in November 2006 and again in February 2007. On February 1, 2008, the NJBPU accepted proposed rules for publication in the New Jersey Register on March 17, 2008. A public hearing on these proposed rules was held on April 23, 2008 ~~with~~and comments from interested parties ~~due on~~were submitted by May ~~16,~~19, 2008.

New Jersey statutes require that the state periodically undertake a planning process, known as the EMP, to address energy related issues including energy security, economic growth, and environmental impact. The EMP is to be developed with involvement of the Governor’s Office and the Governor’s Office of Economic Growth, and is to be prepared by a Master Plan Committee, which is chaired by the NJBPU President and includes representatives of several State departments. In October 2006, the current EMP process was initiated through the creation of a number of working groups to obtain input from a broad range of interested stakeholders including utilities, environmental groups, customer groups, and major customers. In addition, public stakeholder meetings were held in 2006, 2007 and the ~~fall~~first half of ~~2006 and in early 2007.~~2008.

On April 17, 2008, a draft EMP was released for public comment. The draft EMP establishes ~~four~~five major goals:

·	maximize energy efficiency to achieve a 20% reduction in energy consumption by 2020;

·	reduce peak demand for electricity by 5,700 MW by ~~2020 (amounting to about a 22% reduction in projected demand);~~2020;

·	meet 22.5% of the state’s electricity needs with renewable energy by 2020; ~~and~~

·	develop low carbon emitting, efficient power plants and close the gap between the supply and demand for ~~electricity.~~electricity; and

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

Following the public hearings and comment period which ~~is expected to extend~~extended into July 2008, a final EMP will be issued to be followed by appropriate legislation and regulation as necessary. At this time, FirstEnergy cannot predict the outcome of this process nor determine the impact, if any, such legislation or regulation may have ~~on its operations or those of JCP&L.~~

On February 13, 2007, the NJBPU Staff informally issued a draft proposal relating to changes to the regulations addressing electric distribution service reliability and quality standards. Meetings between the NJBPU Staff and interested stakeholders to discuss the proposal were held and additional, revised informal proposals were subsequently circulated by the Staff. On September 4, 2007, proposed regulations were published in the New Jersey Register, which proposal will be subsequently considered by the NJBPU following comments that were submitted in September and October 2007. Final regulations (effective upon publication) were published in the New Jersey Register March 17, 2008. Upon preliminary review of the new regulations, FirstEnergy does not expect a material impact on its operations or those of JCP&L.

FERC Matters

Transmission Service between MISO and PJM

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 was to eliminate ~~so-called “pancaking” of~~multiple transmission charges for a single transaction between the MISO and PJM regions. The FERC also ordered ~~the~~ 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 (referred to as the Seams Elimination Cost Adjustment or “SECA”) during a 16-month transition period. The FERC issued orders in 2005 setting the SECA for hearing. The presiding judge issued an initial decision on August 10, 2006, rejecting the compliance filings made by MISO, PJM, and the transmission owners, and directing new compliance filings. This decision is subject to review and approval by the FERC. Briefs addressing the initial decision were filed on September 11, 2006 and October 20, 2006. A final order could be issued by the FERC by year-end 2008. In the meantime, FirstEnergy affiliates have been negotiating and entering into settlement agreements with other parties in the ~~second quarter~~docket to mitigate the risk of ~~2008.~~lower transmission revenue collection associated with an adverse order.

PJM Transmission Rate Design

On January 31, 2005, certain PJM transmission owners made filings with the FERC pursuant to a settlement agreement previously approved by the FERC. JCP&L, Met-Ed and Penelec were parties to that proceeding and joined in two of the filings. In the first filing, the settling transmission owners submitted a filing justifying continuation of their existing rate design within the PJM RTO. Hearings were held and numerous parties appeared and litigated various issues concerning PJM rate design; notably AEP, which proposed to create a "postage stamp", or average rate for all high voltage transmission facilities across PJM and a zonal transmission rate for facilities below 345 kV. This proposal would have the effect of shifting recovery of the costs of high voltage transmission lines to other transmission zones, including those where JCP&L, Met-Ed, and Penelec serve load. On April 19, 2007, the FERC issued an order finding that the PJM transmission owners’ existing “license 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, the 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. Costs for new transmission facilities that are rated at less than 500 kV, however, are to be allocated on a “beneficiary pays” basis. The FERC found that PJM’s current beneficiary-pays cost allocation methodology is not sufficiently detailed and, in a related order that also was issued on April 19, 2007, directed that hearings be held for the purpose of establishing a just and reasonable cost allocation methodology for inclusion in PJM’s tariff.

On May 18, 2007, certain parties filed for rehearing of the FERC’s April 19, 2007 order. On January 31, 2008, the requests for rehearing were denied. The FERC’s orders on PJM rate design will prevent 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 PJM-wide basis will reduce the costs of future transmission ~~revenue recovery~~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. The FERC’s action on the settlement agreement is pending. The remaining merchant transmission cost allocation issues ~~will proceed to~~were the subject of a hearing at the FERC in May 2008. Reply briefs and briefs on exceptions are due in the merchant proceeding in July and August, respectively, with an initial decision by the Presiding Judge to follow. On February ~~13,~~11, 2008, AEP appealed the FERC’s April 19, 2007 and January 31, 2008 orders to the federal Court of Appeals for the D.C. Circuit. The Illinois Commerce Commission, the PUCO and Dayton Power & Light have also appealed these orders to the Seventh Circuit Court of Appeals. The appeals of these parties and others have been consolidated for argument in the Seventh Circuit.

Post Transition Period Rate Design

The FERC had directed MISO, PJM, and the respective transmission owners to make filings on or before August 1, 2007 to reevaluate transmission rate design within MISO, and between MISO and PJM. On August 1, 2007, filings were made by MISO, PJM, and the vast majority of transmission owners, including FirstEnergy affiliates, which proposed to retain the existing transmission rate design. These filings were approved by the FERC on January 31, 2008. As a result of the FERC’s approval, the rates charged to FirstEnergy’s load-serving affiliates for transmission service over existing transmission facilities in MISO and PJM are unchanged. In a related filing, MISO and MISO transmission owners requested that the current MISO pricing for new transmission facilities that spreads 20% of the cost of new 345 kV and higher transmission facilities across the entire MISO footprint (known as the RECB methodology) be retained.

On September 17, 2007, AEP filed a complaint under Sections 206 and 306 of the Federal Power Act seeking to have the entire transmission rate design and cost allocation methods used by MISO and PJM declared unjust, unreasonable, and unduly discriminatory, and to have the FERC fix a uniform regional transmission rate design and cost allocation method for the entire MISO and PJM “Super Region” that recovers the average cost of new and existing transmission facilities operated at voltages of 345 kV and above from all transmission customers. Lower voltage facilities would continue to be recovered in the local utility transmission rate zone through a license plate rate. AEP requested a refund effective October 1, 2007, or alternatively, February 1, 2008. On January 31, 2008, the FERC issued an order denying the complaint. A rehearing request by AEP is pending before the FERC.

Distribution of MISO Network Service Revenues

Effective February 1, 2008, the MISO Transmission Owners Agreement provides for a change in the method of distributing transmission revenues among the transmission owners. MISO and a majority of the MISO transmission owners filed on December 3, 2007 to change the MISO tariff to clarify, for purposes of distributing network transmission revenue to the transmission owners, that all network transmission service revenues, whether collected by MISO or directly by the transmission owner, are included in the revenue distribution calculation. This clarification was necessary because some network transmission service revenues are collected and retained by transmission owners in states where retail choice does not exist, and their “unbundled” retail load is currently exempt from MISO network service charges. The tariff changes filed with the FERC ensure that revenues collected by transmission owners from bundled load are taken into account in the revenue distribution calculation, and that transmission owners with bundled load do not collect more than their revenue requirements. Absent the changes, transmission owners, and ultimately their customers, with unbundled load or in retail choice states, such as ATSI, would subsidize transmission owners with bundled load, who would collect their revenue requirement from bundled load, plus share in revenues collected by MISO from unbundled customers. This would result in a large revenue shortfall for ATSI, which would eventually be passed on to customers in the form of higher transmission rates as calculated pursuant to ATSI’s Attachment O formula under the MISO tariff.

Numerous parties filed in support of the tariff changes, including the public service commissions of Michigan, Ohio and Wisconsin. Ameren filed a protest on December 26, 2007, arguing that the December 3, 2007 filing violates the MISO Transmission Owners’ Agreement as well as an agreement among Ameren (Union Electric), MISO, and the Missouri Public Service Commission, which provides that Union Electric’s bundled load cannot be charged by MISO for network service. On February 2,1, 2008, the FERC issued an order conditionally accepting the tariff amendment subject to a minor compliance filing, which was made on March 3, 2008. This order ensures that ATSI will continue to receive transmission revenues from MISO equivalent to its transmission revenue requirement. A rehearing request by Ameren is pending before the FERC.

On February 1, 2008, MISO filed a request to continue using the existing revenue distribution methodology on an interim basis pending amendment of the MISO Transmission Owners’ Agreement. This request was accepted by the FERC on March 13, 2008. On that same day, MISO and the MISO transmission owners made a filing to amend the Transmission Owners’ Agreement to effectively continue the distribution of transmission revenues that was in effect prior to February 1, 2008. ~~This matter is currently pending before~~On May 12, 2008, the ~~FERC.~~

FERC issued an order approving this amendment.

MISO Ancillary Services Market and Balancing Area Consolidation

MISO made a filing on September 14, 2007 to establish an ASM for regulation, spinning and supplemental reserves, to consolidate the existing 24 balancing areas within the MISO footprint, and to establish MISO as the NERC registered balancing authority for the region. This filing would permit load serving entities to purchase their operating reserve requirements in a competitive market. FirstEnergy supports the proposal to establish markets for Ancillary Services and consolidate existing balancing areas. On February 25, 2008, the FERC issued an order approving the ASM subject to certain compliance filings. Numerous parties filed requests for rehearing on March 26, 2008. On June 23, 2008, the FERC issued an order granting in part and denying in part rehearing. MISO has since notified the FERC that the start of its ASM iswill be delayed until September 9, 2008.

On February 29, 2008, MISO submitted a compliance filing setting forth MISO’s Readiness Advisor ASM and Consolidated Balancing Authority Initiative Verification plan and status and Real-Time Operations ASM Reversion plan. FERC action on this compliance filing remains pending. On March 26, 2008, MISO submitted a tariff filing in compliance with the FERC’s 30-day directives in the February 25 order. Numerous parties submitted comments and protests on April 16, 2008. The FERC issued an order accepting the revisions pending further compliance on June 23, 2008. On April 25, 2008, MISO submitted a tariff filing in compliance with the FERC’s 60-day directives in the February 25 order. FERC action on this compliance filing remains pending. On May 23, 2008, MISO submitted its amended Balancing Authority Agreement. On July 21, 2008, the FERC issued an order conditionally accepting the amended Balancing Authority Agreement and requiring a further compliance filing.

Interconnection Agreement with AMP-Ohio

On May 4, 2007, AMP-Ohio filed a complaint in Franklin County, Ohio Common Pleas Court against FirstEnergy and TE seeking a declaratory judgment that the defendants may not terminate certain portions of a wholesale power Interconnection Agreement dated May 1, 1989 between AMP-Ohio and TE, nor further modify the rates and charges for power under that agreement. TE has served notice of termination of the Interconnection Agreement on AMP-Ohio to be effective December 31, 2008. AMP-Ohio claims that FirstEnergy, on behalf of TE, waived any right to terminate the Interconnection Agreement according to the terms of a June 6, 1997 merger settlement agreement with AMP-Ohio. Both the Interconnection Agreement and merger settlement agreement were approved by the FERC. On June 15, 2007, TE filed notice of removal of the case to United States District Court for the Southern District of Ohio. On July 11, 2007, TE moved to dismiss on the grounds that the FERC has exclusive jurisdiction over the subject matter of the complaint, or alternatively, primary jurisdiction over this matter. Responsive pleadings were filed by both parties and on March 31, 2008, the district court issued an order dismissing the matter for lack of subject matter jurisdiction. However, AMP-Ohio informed TE that it continues to object to cancellation of the power sales provisions of the Interconnection Agreement.

On May 29, 2008, TE filed with the FERC a proposed Notice of Cancellation effective midnight December 31, 2008, of the Interconnection Agreement with AMP-Ohio. AMP-Ohio protested this filing. TE also filed a Petition for Declaratory Order seeking a FERC ruling, in the alternative if cancellation is not accepted, of TE's right to file for an increase in rates effective January 1, 2009, for power provided to AMP-Ohio under the Interconnection Agreement. AMP-Ohio filed a pleading agreeing that TE may seek an increase in rates, but arguing that any increase is limited to the cost of generation owned by TE affiliates. TE has requested FERC action on both filings and expects the FERC to act on this request in the third quarter of 2008.

Duquesne’s Request to Withdraw from PJM

On November 8, 2007, Duquesne Light Company (Duquesne) filed a request with the FERC to exit PJM and to join ~~the~~ MISO. In its filing, Duquesne asked the FERC to be relieved of certain capacity payment obligations to PJM for capacity auctions conducted prior to its departure from PJM, but covering service for planning periods through May 31, 2011. Duquesne asserted that its primary reason for exiting PJM is to avoid paying future obligations created by PJM’s forward capacity market. FirstEnergy believes that Duquesne’s filing did not identify or address numerous legal, financial or operational issues that are implicated or affected directly by Duquesne’s proposal. Consequently, FirstEnergy submitted responsive filings that, while conceding Duquesne’s rights to exit PJM, contested various aspects of Duquesne’s proposal. FirstEnergy particularly focused on Duquesne’s proposal that it be allowed to exit PJM without payment of its share of existing capacity market commitments. FirstEnergy also objected to Duquesne’s failure to address the firm transmission service requirements that would be necessary for FirstEnergy to continue to use the Beaver Valley Plant to meet existing commitments in the PJM capacity markets and to serve native load. Other market participants also submitted filings contesting Duquesne’s plans.

On January 17, 2008, the FERC conditionally approved Duquesne’s request to exit PJM. Among other conditions, the FERC obligated Duquesne to pay the PJM capacity obligations through May 31, 2011. The FERC’s order took notice of the numerous transmission and other issues raised by FirstEnergy and other parties to the proceeding, but did not provide any responsive rulings or other guidance. Rather, the FERC ordered Duquesne to make a compliance filing in forty-five days detailing how Duquesne will satisfy its obligations under the PJM Transmission Owners’ Agreement. The FERC likewise directed ~~the~~ MISO to submit detailed plans to integrate Duquesne into ~~the~~ MISO. Finally, the FERC directed MISO and PJM to work together to resolve the substantive and procedural issues implicated by Duquesne’s transition into ~~the~~ MISO. These issues remain unresolved. If Duquesne satisfies all of the obligations set by the FERC, its planned transition date is October 9,1, 2008. On July 3, 2008, Duquesne and MISO filed a proposed plan for integrating Duquesne into MISO. On July 24, 2008, numerous parties filed comments and protests to the proposed plan. FirstEnergy filed comments identifying numerous issues that must be addressed and resolved before Duquesne can transition to MISO. FirstEnergy continues to evaluate the impact of Duquesne’s withdrawal from PJM on its operations and financial condition; however, the full consequences cannot be determined until the FERC rules on the pending issues.

On March 18, 2008, the PJM Power Providers Group filed a request for emergency clarification regarding whether Duquesne-zone generators (including the Beaver Valley Plant) could participate in PJM’s May 2008 auction for the 2011-2012 RPM delivery year. FirstEnergy and the other Duquesne-zone generators filed responsive pleadings. On April 18, 2008, the FERC issued its Order on Motion for Emergency Clarification, wherein the FERC ruled that although the status of the Duquesne-zone generators will change to “External Resource” upon Duquesne’s exit from PJM, these generators ~~can~~could contract with PJM for the transmission reservations necessary to participate in the May 2008 auction. FirstEnergy has complied with the FERC’s order by obtaining executed transmission service agreements for firm point-to-point transmission service for the 2011-2012 delivery year and, as such, FirstEnergy ~~satisfies~~satisfied the criteria to bid the Beaver Valley Plant into the May 2008 RPM auction. Notwithstanding these events, on April 30, 2008 and May 1, 2008, certain members of the PJM Power Providers Group filed further pleadings on these issues. On May 2, 2008, FirstEnergy filed a responsive pleading. Given that the FERC outlined the conditions under which FirstEnergy ~~is participating~~could bid the unit into the auction and FirstEnergy complied with the FERC’s conditions, FirstEnergy does not anticipate that the FERC will grant the relief requested in the pleadings. Based on this expectation, FirstEnergy believes that the auction results would not be changed.

Complaint against PJM RPM Auction

On May 30, 2008, a group of PJM load-serving entities, state commissions, consumer advocates, and trade associations (referred to collectively as the RPM ~~auction~~Buyers) filed a complaint at the FERC against PJM alleging that three of the four transitional RPM auctions yielded prices that are unjust and unreasonable under the Federal Power Act. Most of the parties comprising the RPM Buyers group were parties to the settlement approved by the FERC that established the RPM. In the complaint, the RPM Buyers request that the total projected payments to RPM sellers for the ~~2011-2012~~three auctions at issue be materially reduced. On July 11, 2008, PJM filed its answer to the complaint, in which it denied the allegation that the rates are unjust and unreasonable. Also on that date, FirstEnergy filed a motion to intervene.

If the FERC were to rule unfavorably on this matter, the impact for the period ended June 30, 2008, would not be material to FirstEnergy’s results of operations, cash flows or financial position, as FES only began collecting RPM ~~delivery year.~~revenues for the Beaver Valley Power Station on June 1, 2008. However, such an unfavorable ruling by the FERC could have a material adverse impact on the revenues of the Beaver Valley Power Station in subsequent periods if these proceedings were to result in a significant loss of FES’ RPM revenues.

FES believes that the FERC is unlikely to grant the relief sought in the RPM Buyers’ complaint, since it largely deals with legal issues concerning the fundamentals of the RPM markets that are already at issue in a separate D.C. Circuit Court appellate proceeding. Nevertheless, FES is unable to predict the outcome of these proceedings or the resulting effect on FirstEnergy’s or FES’ results of operations, cash flows or financial position.

MISO Resource Adequacy Proposal

MISO made a filing on December 28, 2007 that would create an enforceable planning reserve requirement in the MISO tariff for load serving entities such as the Ohio Companies, Penn Power, and FES. This requirement is proposed to become effective for the planning year beginning June 1, 2009. The filing would permit MISO to establish the reserve margin requirement for load serving entities based upon a one day loss of load in ten years standard, unless the state utility regulatory agency establishes a different planning reserve for load serving entities in its state. FirstEnergy ~~generally supports~~believes the proposal ~~as it~~ promotes a mechanism that will result in ~~long-term~~ commitments from both load-serving entities and resources, including both generation and demand side resources, that are necessary for reliable resource adequacy and planning in the MISO footprint. Comments on the filing were filed on January 28, 2008. The FERC conditionally approved MISO’s Resource Adequacy proposal on March 26, ~~2008.~~2008, requiring MISO to submit to further compliance filings. Rehearing requests are pending on the FERC’s March 26 Order. AOn May 27, 2008, MISO submitted a compliance filing to address issues associated with planning reserve margins. On June 17, 2008, various parties submitted comments and protests to MISO’s compliance filing. FirstEnergy submitted comments identifying specific issues that must be clarified and addressed. On June 25, 2008, MISO submitted a second compliance filing establishing the enforcement mechanism for the reserve margin requirement which establishes deficiency payments for load serving entities that do not meet the resource adequacy requirements. Numerous parties, including FirstEnergy, protested this filing. A FERC decision on this filing is ~~due on or before June 25, 2008.~~

expected this fall.

Organized Wholesale Power Markets

On February 21, 2008, the FERC issued a NOPR through which it proposes to adopt new rules that it states will “improve operations in organized electric markets, boost competition and bring additional benefits to consumers.” The proposed rule addresses demand response and market pricing during reserve shortages, long-term power contracting, market-monitoring policies, and responsiveness of RTOs and ISOs to stakeholders and customers. FirstEnergy does not believe that the proposed rule will have a significant impact on its operations. Comments on the NOPR were filed on April ~~18,~~21, 2008.

Environmental Matters

Various federal, state and local authorities regulate FirstEnergy with regard to air and water quality and other environmental matters. The effects of compliance on FirstEnergy with regard to environmental matters could have a material adverse effect on FirstEnergy's earnings and competitive position to the extent that it competes with companies that are not subject to such regulations and, therefore, do not bear the risk of costs associated with compliance, or failure to comply, with such regulations. FirstEnergy estimates capital expenditures for environmental compliance of approximately $1.4 billion for the period 2008-2012.

FirstEnergy accrues environmental liabilities only when it concludes that it is probable that it has an obligation for such costs and can reasonably estimate the amount of such costs. Unasserted claims are reflected in FirstEnergy’s determination of environmental liabilities and are accrued in the period that they become both probable and reasonably estimable.

Clean Air Act Compliance

FirstEnergy is required to meet federally-approved SO2 emissions regulations. Violations of such regulations can result in the shutdown of the generating unit involved and/or civil or criminal penalties of up to $32,500 for each day the unit is in violation. The EPA has an interim enforcement policy for SO2 regulations in Ohio that allows for compliance based on a 30-day averaging period. FirstEnergy believes it is currently in compliance with this policy, but cannot predict what action the EPA may take in the future with respect to the interim enforcement policy.

The EPA Region 5 issued a Finding of Violation and NOV to the Bay Shore Power Plant dated June 15, 2006, alleging violations to various sections of the CAA. FirstEnergy has disputed those alleged violations based on its CAA permit, the Ohio SIP and other information provided to the EPA at an August 2006 meeting with the EPA. The EPA has several enforcement options (administrative compliance order, administrative penalty order, and/or judicial, civil or criminal action) and has indicated that such option may depend on the time needed to achieve and demonstrate compliance with the rules alleged to have been violated. On June 5, 2007, the EPA requested another meeting to discuss “an appropriate compliance program” and a disagreement regarding ~~the opacity limit~~emission limits applicable to the common stack for Bay Shore Units 2, 3 and 4.

FirstEnergy complies with SO2 reduction requirements under the Clean Air Act Amendments of 1990 by burning lower-sulfur fuel, generating more electricity from lower-emitting plants, and/or using emission allowances. NOX reductions required by the 1990 Amendments are being achieved through combustion controls and the generation of more electricity at lower-emitting plants. In September 1998, the EPA finalized regulations requiring additional NOX reductions at FirstEnergy's facilities. The EPA's NOX Transport Rule imposes uniform reductions of NOX emissions (an approximate 85% reduction in utility plant NOX emissions from projected 2007 emissions) across a region of nineteen states (including Michigan, New Jersey, Ohio and Pennsylvania) and the District of Columbia based on a conclusion that such NOX emissions are contributing significantly to ozone levels in the eastern United States. FirstEnergy believes its facilities are also complying with the NOX budgets established under SIPs through combustion controls and post-combustion controls, including Selective Catalytic Reduction and SNCR systems, and/or using emission allowances.

On April 2, 2007, the United States Supreme Court ruled that changes in annual emissions (in tons/year) rather than changes in hourly emissions rate (in kilograms/hour) must be used to determine whether an emissions increase triggers NSR. Subsequently, on May 8, 2007, the EPA proposed to revise the NSR regulations to utilize changes in the hourly emission rate (in kilograms/hour) to determine whether an emissions increase triggers NSR. The EPA has not yet issued a final regulation. FGCO’s future cost of compliance with those regulations may be substantial and will depend on how they are ultimately implemented.

On May 22, 2007, FirstEnergy and FGCO received a notice letter, required 60 days prior to the filing of a citizen suit under the federal CAA, alleging violations of air pollution laws at the Bruce Mansfield Plant, including opacity limitations. Prior to the receipt of this notice, the Plant was subject to a Consent Order and Agreement with the Pennsylvania Department of Environmental Protection concerning opacity emissions under which efforts to achieve compliance with the applicable laws will continue. On October 18, 2007, PennFuture filed a complaint, joined by three of its members, in the United States District Court for the Western District of Pennsylvania. On January 11, 2008, FirstEnergy filed a motion to dismiss claims alleging a public nuisance. On April 24, 2008, the Court denied the motion to dismiss, but also ruled that monetary damages could not be recovered under the public nuisance claim.

On December 18, 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, Inc. and Met-Ed. Specifically, New Jersey alleges that "modifications" at Portland Units 1 and 2 occurred between 1980 and 1995 without preconstruction NSR or permitting under the CAA's prevention of significant deterioration program, and seeks injunctive relief, penalties, attorney fees and mitigation of the harm caused by excess emissions. On March 14, 2008, Met-Ed filed a motion to dismiss the citizen suit claims against it and a stipulation in which the parties agreed that GPU, Inc. should be dismissed from this case. On March 26, 2008, GPU, Inc. was dismissed by the United States District Court. The scope of Met-Ed’s indemnity obligation to and from Sithe Energy is disputed. Met-Ed is unable to predict the outcome of this matter.

On June 11, 2008, the EPA issued a Notice and Finding of Violation to MEW alleging that "modifications" at the Homer City Power Station occurred since 1988 to the present without preconstruction NSR or permitting under the CAA's prevention of significant deterioration program. MEW is seeking indemnification from Penelec, which was the co-owner (along with New York State Electric and Gas Company) and operator of the Homer City Power Station prior to its sale in 1999. Although it remains liable for civil or criminal penalties and fines that may be assessed relating to events prior to the sale of the ~~Portland~~Homer City Power Station in 1999, ~~Met-Ed~~the scope of Penelec’s indemnity obligation to and from MEW is ~~indemnified by Sithe Energy against any other liability arising under~~disputed. Penelec is unable to predict the outcome of this matter.

On May 16, 2008, FGCO received a request from the EPA for information pursuant to Section 114(a) of the CAA for certain operating and maintenance information regarding the Eastlake, Lakeshore, Bay Shore and Ashtabula generating plants to allow the EPA to determine whether ~~it arises out~~these generating sources are complying with the NSR provisions of ~~pre-1999 or post-1999 events.~~the CAA. On July 10, 2008, FGCO and the EPA entered into an ACO modifying that request and setting forth a schedule for FGCO’s response. FGCO intends to fully comply with the ACO, but, at this time, is unable to predict the outcome of this matter.

National Ambient Air Quality Standards

In March 2005, the EPA finalized the CAIR covering a total of 28 states (including Michigan, New Jersey, Ohio and Pennsylvania) and the District of Columbia based on proposed findings that air emissions from 28 eastern states and the District of Columbia significantly contribute to non-attainment of the NAAQS for fine particles and/or the "8-hour" ozone NAAQS in other states. CAIR ~~requires~~would have required reductions of NOX and SO2 emissions in two phases (Phase I in 2009 for NOX, 2010 for SO2 and Phase II in 2015 for both NOX and SO2)~~. FirstEnergy's Michigan, Ohio and Pennsylvania fossil generation facilities will be subject to caps on SO~~2 ~~and NO~~X ~~emissions, whereas its New Jersey fossil generation facility will be subject to only a cap on NO~~X ~~emissions. According to the EPA, SO~~2 ~~emissions will be reduced by 45% (from 2003 levels) by 2010 across the states covered by the rule, with reductions reaching 73% (from 2003 levels) by 2015,~~, ultimately capping SO2 emissions in affected states to just 2.5 million tons ~~annually.~~annually and NOX emissions ~~will be reduced by 53% (from 2003 levels) by 2009 across the states covered by the rule, with reductions reaching 61% (from 2003 levels) by 2015, achieving a regional NO~~X ~~cap of~~to just 1.3 million tons annually. CAIR ~~has been~~was challenged in the United States Court of Appeals for the District of ~~Columbia.~~Columbia and on July 11, 2008, the Court vacated CAIR “in its entirety” and directed the EPA to “redo its analysis from the ground up.” The court ruling also vacated the CAIR regional cap-and-trade programs for SO2 and NOX, which is currently not expected to, but may, materially impair the value of emissions allowances obtained for future compliance. The future cost of compliance with these regulations may be substantial and ~~may~~will depend on the ~~outcome of this litigation and how CAIR is ultimately implemented.~~action taken by the EPA or Congress in response to the Court’s ruling.

Mercury Emissions

In December 2000, the EPA announced it would proceed with the development of regulations regarding hazardous air pollutants from electric power plants, identifying mercury as the hazardous air pollutant of greatest concern. In March 2005, the EPA finalized the CAMR, which provides a cap-and-trade program to reduce mercury emissions from coal-fired power plants in two phases; initially, capping national mercury emissions at 38 tons by 2010 (as a "co-benefit" from implementation of SO2 and NOX emission caps under the EPA's CAIR program) and 15 tons per year by 2018. Several states and environmental groups appealed the CAMR to the United States Court of Appeals for the District of Columbia. On February 8, 2008, the court vacated the CAMR ruling that the EPA failed to take the necessary steps to “de-list” coal-fired power plants from its hazardous air pollutant program and, therefore, could not promulgate a ~~cap and trade~~cap-and-trade program. The EPA petitioned for rehearing by the entire court, which denied the petition on May 20, 2008. The EPA must now ~~seek further judicial~~petition for United States Supreme Court review of that ruling or take regulatory action to promulgate new mercury emission standards for coal-fired power plants. FGCO’s future cost of compliance with mercury regulations may be substantial and will depend on the action taken by the EPA and on how they are ultimately implemented.

Pennsylvania has submitted a new mercury rule for EPA approval that does not provide a cap-and-trade approach as in the CAMR, but rather follows a command-and-control approach imposing emission limits on individual sources. It is anticipated that compliance with these regulations, if approved by the EPA and implemented, would not require the addition of mercury controls at the Bruce Mansfield Plant, FirstEnergy’s only Pennsylvania coal-fired power plant, until 2015, if at all.

W. H. Sammis Plant

In 1999 and 2000, the EPA issued an NOV and the DOJ filed a civil complaint against OE and Penn based on operation and maintenance of the W.H. Sammis Plant (Sammis NSR Litigation) and filed similar complaints involving 44 other U.S. power plants. This case, along with seven other similar cases, are referred to as the NSR cases.

On March 18, 2005, OE and Penn announced that they had reached a settlement with the EPA, the DOJ and three states (Connecticut, New Jersey and New York) that resolved all issues related to the Sammis NSR litigation. This settlement agreement, which is in the form of a consent decree, was approved by the court on July 11, 2005, and requires reductions of NOX and SO2 emissions at the Sammis, Burger, Eastlake and Mansfield coal-fired plants through the installation of pollution control devices and provides for stipulated penalties for failure to install and operate such pollution controls in accordance with that agreement. Consequently, if FirstEnergy fails to install such pollution control devices, for any reason, including, but not limited to, the failure of any third-party contractor to timely meet its delivery obligations for such devices, FirstEnergy could be exposed to penalties under the Sammis NSR Litigation consent decree. Capital expenditures necessary to complete requirements of the Sammis NSR Litigation consent decree are currently estimated to be $1.3 billion for 2008-2012 ($650 million of which is expected to be spent during 2008, with the largest portion of the remaining $650 million expected to be spent in 2009). This amount is included in the estimated capital expenditures for environmental compliance referenced above.

Climate Change

In December 1997, delegates to the United Nations' climate summit in Japan adopted an agreement, the Kyoto Protocol, to address global warming by reducing the amount of man-made GHG emitted by developed countries by 2012. The United States signed the Kyoto Protocol in 1998 but it ~~failed to receive the two-thirds vote required~~was never submitted for ratification by the United States Senate. However, the Bush administration has committed the United States to a voluntary climate change strategy to reduce domestic GHG intensity – the ratio of emissions to economic output – by 18% through 2012. Also, in an April 16, 2008 speech, President Bush set a policy goal of stopping the growth of GHG emissions by 2025, as the next step beyond the 2012 strategy. In addition, 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.

There are a number of initiatives to reduce GHG emissions under consideration at the federal, state and international level. At the international level, efforts to reach a new global agreement to reduce GHG emissions post-2012 have begun with the Bali Roadmap, which outlines a two-year process designed to lead to an agreement in 2009. At the federal level, members of Congress have introduced several bills seeking to reduce emissions of GHG in the United States, and the Senate Environmental and Public Works Committees have passed one such bill. 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.

On April 2, 2007, the United States Supreme Court found that the EPA has the authority to regulate CO2 emissions from automobiles as “air pollutants” under the CAA. Although this decision did not address CO2 emissions from electric generating plants, the EPA has similar authority under the CAA to regulate “air pollutants” from those and other facilities. On July 11, 2008, the EPA released an Advance Notice of Proposed Rulemaking, soliciting input from the public on the effects of climate change and the potential ramifications of regulation of CO2 under the CAA.

FirstEnergy cannot currently estimate the financial impact of climate change policies, although potential legislative or regulatory programs restricting CO2 emissions could require significant capital and other expenditures. The CO2 emissions per KWH of electricity generated by FirstEnergy is lower than many regional competitors due to its diversified generation sources, which include low or non-CO2 emitting gas-fired and nuclear generators.

Clean Water Act

Various water quality regulations, the majority of which are the result of the federal Clean Water Act and its amendments, apply to FirstEnergy's plants. In addition, Ohio, New Jersey and Pennsylvania have water quality standards applicable to FirstEnergy's 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.

On September 7, 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 ~~(BPJ)~~ to minimize impacts on fish and shellfish from cooling water intake structures. On April 14, 2008, the Supreme Court of the United States granted a petition for a writ of certiorari to review ~~certain aspects~~one significant aspect of the Second ~~Circuit’s decision.~~Circuit Court’s opinion which is whether 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. FirstEnergy is studying various control options and their costs and effectiveness. Depending on the results of such studies, the outcome of the Supreme Court’s review of the Second Circuit’s decision, the EPA’s further rulemaking and any action taken by the states exercising ~~BPJ,~~best professional judgment, the future ~~cost~~costs of compliance with these standards may require material capital expenditures.

Regulation of Hazardous Waste

As a result of the Resource Conservation and Recovery Act of 1976, as amended, and the Toxic Substances Control Act of 1976, federal and state hazardous waste regulations have been promulgated. Certain fossil-fuel combustion waste products, such as coal ash, were exempted from hazardous waste disposal requirements pending the EPA's evaluation of the need for future regulation. The EPA subsequently determined that regulation of coal ash as a hazardous waste is unnecessary. In April 2000, the EPA announced that it will develop national standards regulating disposal of coal ash under its authority to regulate non-hazardous waste.

Under NRC regulations, FirstEnergy must ensure that adequate funds will be available to decommission its nuclear facilities. As of ~~March 31,~~June 30, 2008, FirstEnergy had approximately $2.0 billion invested in external trusts to be used for the decommissioning and environmental remediation of Davis-Besse, Beaver Valley, Perry and TMI-2. As part of the application to the NRC to transfer the ownership of Davis-Besse, Beaver Valley and Perry to NGC in 2005, FirstEnergy agreed to contribute another $80 million to these trusts by 2010. Consistent with NRC guidance, utilizing a “real” rate of return on these funds of approximately 2% over inflation, these trusts are expected to exceed the minimum decommissioning funding requirements set by the NRC. Conservatively, these estimates do not include any rate of return that the trusts may earn over the 20-year plant useful life extensions that FirstEnergy (and Exelon for TMI-1 as it relates to the timing of the decommissioning of TMI-2) seeks for these facilities.

The Companies have been named as PRPs at waste disposal sites, which may require cleanup under 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 PRPs for a particular site may be liable on a joint and several basis. Therefore, environmental liabilities that are considered probable have been recognized on the Consolidated Balance Sheet as of ~~March 31,~~June 30, 2008, based on estimates of the total costs of cleanup, the Companies' proportionate responsibility for such costs and the financial ability of other unaffiliated entities to pay. Total liabilities of approximately ~~$92~~$95 million (JCP&L - ~~$65~~$68 million, TE - $1 million, CEI - $1 million and FirstEnergy Corp. - $25 million) have been accrued through ~~March 31,~~June 30, 2008. Included in the total for JCP&L are accrued liabilities of approximately ~~$56~~$57 million for environmental remediation of former manufactured gas plants in New ~~Jersey;~~Jersey, which are being recovered by JCP&L through a non-bypassable SBC.

Other Legal Proceedings

Power Outages and Related Litigation

In July 1999, the Mid-Atlantic States experienced a severe heat wave, which resulted in power outages throughout the service territories of many electric utilities, including JCP&L's territory. In an investigation into the causes of the outages and the reliability of the transmission and distribution systems of all four of New Jersey’s electric utilities, the NJBPU concluded that there was not a prima facie case demonstrating that, overall, JCP&L provided unsafe, inadequate or improper service to its customers. Two class action lawsuits (subsequently consolidated into a single proceeding) were filed in New Jersey Superior Court in July 1999 against JCP&L, GPU and other GPU companies, seeking compensatory and punitive damages arising from the July 1999 service interruptions in the JCP&L territory.

In August 2002, the trial court granted partial summary judgment to JCP&L and dismissed the plaintiffs' claims for consumer fraud, common law fraud, negligent misrepresentation, and strict product liability. In November 2003, the trial court granted JCP&L's motion to decertify the class and denied plaintiffs' motion to permit into evidence their class-wide damage model indicating damages in excess of $50 million. These class decertification and damage rulings were appealed to the Appellate Division. The Appellate Division issued a decision in July 2004, affirming the decertification of the originally certified class, but remanding for certification of a class limited to those customers directly impacted by the outages of JCP&L transformers in Red Bank, NJ, based on a common incident involving the failure of the bushings of two large transformers in the Red Bank substation resulting in planned and unplanned outages in the area during a 2-3 day period. In 2005, JCP&L renewed its motion to decertify the class based on a very limited number of class members who incurred damages and also filed a motion for summary judgment on the remaining plaintiffs’ claims for negligence, breach of contract and punitive damages. In July 2006, the New Jersey Superior Court dismissed the punitive damage claim and again decertified the class based on the fact that a vast majority of the class members did not suffer damages and those that did would be more appropriately addressed in individual actions. Plaintiffs appealed this ruling to the New Jersey Appellate Division which, in March 2007, reversed the decertification of the Red Bank class and remanded this matter back to the Trial Court to allow plaintiffs sufficient time to establish a damage model or individual proof of damages. JCP&L filed a petition for allowance of an appeal of the Appellate Division ruling to the New Jersey Supreme Court which was denied in May 2007. Proceedings are continuing in the Superior Court and a case management conference with the presiding Judge ~~is scheduled for~~was held on June 13, 2008. At that conference, the plaintiffs stated their intent to drop their efforts to create a class-wide damage model and, instead of dismissing the class action, expressed their desire for a bifurcated trial on liability and damages. The judge directed the plaintiffs to indicate, on or before August 22, 2008, how they intend to proceed under this scenario. Thereafter, the judge expects to hold another pretrial conference to address plaintiffs' proposed procedure. FirstEnergy is defending this ~~class~~ action but is unable to predict the outcome of this matter. No liability has been accrued as of ~~March 31,~~June 30, 2008.

Nuclear Plant Matters

On May 14, 2007, the Office of Enforcement of the NRC issued a DFI to FENOC, following FENOC’s reply to an April 2, 2007 NRC request for information about two reports prepared by expert witnesses for an insurance arbitration (the insurance claim was subsequently withdrawn by FirstEnergy in December 2007) related to Davis-Besse. The NRC indicated that this information was needed for the NRC “to determine whether an Order or other action should be taken pursuant to 10 CFR 2.202, to provide reasonable assurance that FENOC will continue to operate its licensed facilities in accordance with the terms of its licenses and the Commission’s regulations.” FENOC was directed to submit the information to the NRC within 30 days. On June 13, 2007, FENOC filed a response to the NRC’s DFI reaffirming that it accepts full responsibility for the mistakes and omissions leading up to the damage to the reactor vessel head and that it remains committed to operating Davis-Besse and FirstEnergy’s other nuclear plants safely and responsibly. FENOC submitted a supplemental response clarifying certain aspects of the DFI response to the NRC on July 16, 2007. On August 15, 2007, the NRC issued a confirmatory order imposing these commitments. FENOC must inform the NRC’s Office of Enforcement after it completes the key commitments embodied in the NRC’s order. FENOC has conducted the employee training required by one portion of the confirmatory order and a consultant has performed follow-up reviews to ensure the effectiveness of that training. The NRC continues to monitor FENOC’s compliance with ~~these~~all the commitments made in the confirmatory order.

In August 2007, FENOC submitted an application to the NRC to renew the operating licenses for the Beaver Valley Power Station (Units 1 and 2) for an additional 20 years. The NRC is ~~subject~~required by statute to ~~future~~provide an opportunity for members of the public to request a hearing on the application. No members of the public, however, requested a hearing on the Beaver Valley license renewal application. The NRC ~~review.~~is expected to issue its draft supplemental Environmental Impact Statement and Safety Evaluation Report with open items in 2008. FENOC will continue to work with the NRC Staff as it completes its environmental and technical reviews of the license renewal application, and expects to obtain renewed licenses for the Beaver Valley Power Station in 2009. If renewed licenses are issued by the NRC, the Beaver Valley Power Station’s licenses would be extended until 2036 and 2047 for Units 1 and 2, respectively.

Other Legal Matters

There are various lawsuits, claims (including claims for asbestos exposure) and proceedings related to FirstEnergy's normal business operations pending against FirstEnergy and its subsidiaries. The other potentially material items not otherwise discussed above are described below.

On August 22, 2005, a class action complaint was filed against OE in Jefferson County, Ohio Common Pleas Court, seeking compensatory and punitive damages to be determined at trial based on claims of negligence and eight other tort counts alleging damages from W.H. Sammis Plant air emissions. The two named plaintiffs are also seeking injunctive relief to eliminate harmful emissions and repair property damage and the institution of a medical monitoring program for class members. On April 5, 2007, the Court rejected the plaintiffs’ request to certify this case as a class action and, accordingly, did not appoint the plaintiffs as class representatives or their counsel as class counsel. On July 30, 2007, plaintiffs’ counsel voluntarily withdrew their request for reconsideration of the April 5, 2007 Court order denying class certification and the Court heard oral argument on the plaintiffs’ motion to amend their complaint, which OE opposed. On August 2, 2007, the Court denied the plaintiffs’ motion to amend their complaint. The plaintiffs have appealed the Court’s denial of the motion for certification as a class action and motion to amend their complaint.

On July 22, 2008 and July 23, 2008, three complaints were filed against FGCO in the United States District Court for the Western District of Pennsylvania as well as in the Beaver County Court of Common Pleas seeking damages based on Bruce Mansfield Plant air emissions. In addition to seeking damages, two of the 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. FGCO believes the claims are without merit and intends to defend itself against the allegations made in these complaints.

JCP&L's bargaining unit employees filed a grievance challenging JCP&L's 2002 call-out procedure that required bargaining unit employees to respond to emergency power outages. On May 20, 2004, an arbitration panel concluded that the call-out procedure violated the parties' collective bargaining agreement. At the conclusion of the June 1, 2005 hearing, the arbitration panel decided not to hear testimony on damages and closed the proceedings. On September 9, 2005, the arbitration panel issued an opinion to award approximately $16 million to the bargaining unit employees. On February 6, 2006, a federal district court granted a union motion to dismiss, as premature, a JCP&L appeal of the award filed on October 18, 2005. A final order identifying the individual damage amounts was issued on October 31, 2007. The award appeal process was initiated. The union filed a motion with the federal court to confirm the award and JCP&L filed its answer and counterclaim to vacate the award on December 31, 2007. ~~The court held a scheduling conference~~JCP&L and the union filed briefs in ~~April 2008 where it set a briefing schedule with all briefs~~June and July of 2008. Oral arguments have been requested and are expected to ~~be concluded by July~~take place in fall 2008. JCP&L recognized a liability for the potential $16 million award in 2005.

The union employees at the Bruce Mansfield Plant have been working without a labor contract since February 15, 2008. The parties are continuing to bargain with the assistance of a federal mediator. FirstEnergy has a strike mitigation plan ready in the event of a strike.

FirstEnergy accrues legal liabilities only when it concludes that it is probable that it has an obligation for such costs and can reasonably estimate the amount of such costs. If it were ultimately determined that FirstEnergy or its subsidiaries have legal liability or are otherwise made subject to liability based on the above matters, it could have a material adverse effect on FirstEnergy's or its subsidiaries' financial condition, results of operations and cash flows.

NEW ACCOUNTING STANDARDS AND INTERPRETATIONS

SFAS 141(R) – “Business Combinations”

In December 2007, the FASB issued SFAS 141(R), ~~which~~which: (i) requires the acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed in the transaction; (ii) establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and (iii) requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. ~~SFAS 141(R) attempts to reduce the complexity of existing GAAP related to business combinations.~~ The Standard includes both core principles and pertinent application guidance, eliminating the need for numerous EITF issues and other interpretative guidance. SFAS 141(R) will affect business combinations entered into by FirstEnergy that close after January 1, 2009. In addition, the Standard also affects the accounting for changes in tax valuation allowances made after January 1, 2009, that were established as part of a business combination prior to the implementation of this Standard. FirstEnergy is currently evaluating the impact of adopting this Standard on its financial statements.

SFAS 160 - ~~“Noncontrolling~~“Non-controlling Interests in Consolidated Financial Statements – an Amendment of ARB No. 51”

In December 2007, the FASB issued SFAS 160 that establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The Statement is not expected to have a material impact on FirstEnergy’s financial statements.

SFAS 161 - “Disclosures about Derivative Instruments and Hedging Activities – an Amendment of FASB Statement No. 133”

In March 2008, the FASB issued SFAS 161 ~~which~~that enhances the current disclosure framework for derivative instruments and hedging activities. The Statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. ~~This disclosure better conveys the purpose of derivative use in terms of the risks that the entity is intending to manage.~~ The FASB believes ~~disclosing~~that additional required disclosure of the fair values of derivative instruments and their gains and losses in a tabular format ~~is designed to~~will provide a more complete picture of the location in an entity’s financial statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Disclosing information about credit-risk-related contingent features is designed to provide information on the potential effect on an entity’s liquidity from using derivatives. ~~Finally, this~~This Statement also requires cross-referencing within the footnotes ~~which is intended~~ to help users of financial statements locate important information about derivative instruments. The Statement is effective for fiscal years beginning on or after December 15, 2008. FirstEnergy is currently evaluating the impact of adopting this Standard on its financial statements.

SFAS 162 - “The Hierarchy of Generally Accepted Accounting Principles”

In May 2008, the FASB issued SFAS 162, which is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with GAAP. The FASB believes that the GAAP hierarchy should be directed to reporting entities, not the independent auditors, because reporting entities are responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. This Statement is effective 60 days following the SEC’s approval of the PCAOB amendments to U.S. Auditing Standards Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles, which has not yet occurred. The Statement will not have an impact on FirstEnergy’s financial statements.

3242

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of

Directors of FirstEnergy Corp.:

We have reviewed the accompanying consolidated balance sheet of FirstEnergy Corp. and its subsidiaries as of ~~March 31,~~June 30, 2008 and the related consolidated statements of income and comprehensive income ~~and cash flows~~ for each of the three-month and six-month periods ended ~~March 31,~~June 30, 2008 and 2007 and the consolidated statement of cash flows for the six-month periods ended June 30, 2008 and 2007. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2007, and the related consolidated statements of income, capitalization, common stockholders’ equity, and cash flows for the year then ended (not presented herein), and in our report (which contained references to the Company’s change in its method of accounting for uncertain tax positions as of January 1, 2007, defined benefit pension and other postretirement plans as of December 31, 2006 and conditional asset retirement obligations as of December 31, 2005, as discussed in Note 9, Note 3, Note 2(G) and Note 12 to the consolidated financial statements) dated February 28, 2008, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2007, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

PricewaterhouseCoopers LLP

Cleveland, Ohio

~~May~~August 7, 2008

3343

FIRSTENERGY CORP.	FIRSTENERGY CORP.							FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF INCOME	CONSOLIDATED STATEMENTS OF INCOME							CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)	(Unaudited)							(Unaudited)

		Three Months Ended							Three Months						Six Months
		March 31,							Ended June 30						Ended June 30
		2008			2007				2008			2007			2008			2007
		(In millions except,							(In millions, except per share amounts)
		per share amounts)
REVENUES:
Electric utilities		$	2,913		$	2,659			$	2,865		$	2,718		$	5,778		$	5,377
Unregulated businesses			364			314				380			391			744			705
Total revenues*			3,277			2,973
Total revenues *										3,245			3,109			6,522			6,082

EXPENSES:
Fuel and purchased power			1,328			1,121				1,386			1,185			2,714			2,306
Other operating expenses			800			749				781			750			1,581			1,499
Provision for depreciation			164			156				168			159			332			315
Amortization of regulatory assets			258			251				246			246			504			497
Deferral of new regulatory assets			(105	)		(144	)			(98	)		(148	)		(203	)		(292	)
General taxes			215			203				180			189			395			392
Total expenses			2,660			2,336				2,663			2,381			5,323			4,717

OPERATING INCOME			617			637				582			728			1,199			1,365

OTHER INCOME (EXPENSE):
Investment income			17			33				16			30			33			63
Interest expense			(179	)		(185	)			(188	)		(205	)		(367	)		(390	)
Capitalized interest			8			5				13			7			21			12
Total other expense			(154	)		(147	)			(159	)		(168	)		(313	)		(315	)

INCOME BEFORE INCOME TAXES			463			490				423			560			886			1,050

INCOME TAXES			187			200				160			222			347			422

NET INCOME		$	276		$	290			$	263		$	338		$	539		$	628


BASIC EARNINGS PER SHARE OF COMMON STOCK		$	0.91		$	0.92			$	0.86		$	1.11		$	1.77		$	2.03


WEIGHTED AVERAGE NUMBER OF BASIC SHARES OUTSTANDING			304			314				304			304			304			309


DILUTED EARNINGS PER SHARE OF COMMON STOCK		$	0.90		$	0.92			$	0.85		$	1.10		$	1.75		$	2.01


WEIGHTED AVERAGE NUMBER OF DILUTED SHARES OUTSTANDING			307			316				307			308			307			313


DIVIDENDS DECLARED PER SHARE OF COMMON STOCK		$	0.55		$	0.50			$	-		$	-		$	0.55		$	0.50


* Includes $114 million and $108 million of excise tax collections in the first quarter of 2008 and 2007, respectively.
* Includes excise tax collections of $100 million and $101 million in the three months ended June 30, 2008 and 2007, respectively, and								* Includes excise tax collections of $100 million and $101 million in the three months ended June 30, 2008 and 2007, respectively, and
$214 million and $209 million in the six months ended June 2008 and 2007, respectively.								$214 million and $209 million in the six months ended June 2008 and 2007, respectively.

The accompanying Notes to Consolidated Financial Statements as they relate to FirstEnergy Corp. are an integral
part of these statements.
The accompanying Notes to Consolidated Financial Statements as they relate to FirstEnergy Corp. are an integral part of these statements.								The accompanying Notes to Consolidated Financial Statements as they relate to FirstEnergy Corp. are an integral part of these statements.

3444

FIRSTENERGY CORP.	FIRSTENERGY CORP.							FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME							CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)	(Unaudited)							(Unaudited)


		Three Months Ended
		March 31,							Three Months						Six Months
		2008			2007				Ended June 30						Ended June 30
									2008			2007			2008			2007
		(In millions)							(In millions)

NET INCOME		$	276		$	290			$	263		$	338		$	539		$	628

OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits			(20	)		(11	)			(20	)		(11	)		(40	)		(22	)
Unrealized gain (loss) on derivative hedges			(13	)		21				8			(1	)		(5	)		20
Change in unrealized gain on available-for-sale securities			(58	)		17
Change in unrealized gain on available for sale securities										(23	)		46			(81	)		63
Other comprehensive income (loss)			(91	)		27				(35	)		34			(126	)		61
Income tax expense (benefit) related to other comprehensive income			(33	)		9
Income tax expense (benefit) related to other
comprehensive income										(14	)		10			(47	)		19
Other comprehensive income (loss), net of tax			(58	)		18				(21	)		24			(79	)		42

COMPREHENSIVE INCOME		$	218		$	308			$	242		$	362		$	460		$	670


The accompanying Notes to Consolidated Financial Statements as they relate to FirstEnergy Corp. are an integral
part of these statements.
The accompanying Notes to Consolidated Financial Statements as they relate to FirstEnergy Corp. are an integral part of								The accompanying Notes to Consolidated Financial Statements as they relate to FirstEnergy Corp. are an integral part of
these statements.

FIRSTENERGY CORP.

CONSOLIDATED BALANCE SHEETS
(Unaudited)
	June 30,			December 31,
	2008			2007
	(In millions)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	70		$	129
Receivables-
Customers (less accumulated provisions of $29 million and
$36 million, respectively, for uncollectible accounts)		1,365			1,256
Other (less accumulated provisions of $3 million and
$22 million, respectively, for uncollectible accounts)		188			165
Materials and supplies, at average cost		583			521
Prepayments and other		629			159
		2,835			2,230
PROPERTY, PLANT AND EQUIPMENT:
In service		25,744			24,619
Less - Accumulated provision for depreciation		10,606			10,348
		15,138			14,271
Construction work in progress		1,565			1,112
		16,703			15,383
INVESTMENTS:
Nuclear plant decommissioning trusts		1,988			2,127
Investments in lease obligation bonds		675			717
Other		752			754
		3,415			3,598
DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		5,606			5,607
Regulatory assets		3,683			3,945
Pension assets		745			700
Other		558			605
		10,592			10,857
	$	33,545		$	32,068
LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt	$	2,508		$	2,014
Short-term borrowings		2,608			903
Accounts payable		930			777
Accrued taxes		231			408
Other		860			1,046
		7,137			5,148
CAPITALIZATION:
Common stockholders’ equity-
Common stock, $.10 par value, authorized 375,000,000 shares-
304,835,407 outstanding		31			31
Other paid-in capital		5,461			5,509
Accumulated other comprehensive loss		(129	)		(50	)
Retained earnings		3,858			3,487
Total common stockholders' equity		9,221			8,977
Long-term debt and other long-term obligations		8,603			8,869
		17,824			17,846
NONCURRENT LIABILITIES:
Accumulated deferred income taxes		2,724			2,671
Asset retirement obligations		1,307			1,267
Deferred gain on sale and leaseback transaction		1,043			1,060
Power purchase contract loss liability		644			750
Retirement benefits		919			894
Lease market valuation liability		330			663
Other		1,617			1,769
		8,584			9,074
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 10)
	$	33,545		$	32,068

The accompanying Notes to Consolidated Financial Statements as they relate to FirstEnergy Corp. are an integral part of these
balance sheets.

3546

FIRSTENERGY CORP.

CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2008
2007

(In millions)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 70 $ 129
Receivables-
Customers (less accumulated provisions of $34 million and
$36 million, respectively, for uncollectible accounts) 1,264 1,256
Other (less accumulated provisions of $24 million and
$22 million, respectively, for uncollectible accounts) 159 165
Materials and supplies, at average cost 570 521
Prepayments and other 307 159
2,370 2,230
PROPERTY, PLANT AND EQUIPMENT:
In service 24,894 24,619
Less - Accumulated provision for depreciation 10,454 10,348
14,440 14,271
Construction work in progress 1,465 1,112
15,905 15,383
INVESTMENTS:
Nuclear plant decommissioning trusts 2,025 2,127
Investments in lease obligation bonds 679 717
Other 714 754
3,418 3,598
DEFERRED CHARGES AND OTHER ASSETS:
Goodwill 5,606 5,607
Regulatory assets 3,797 3,945
Pension assets 723 700
Other 596 605
10,722 10,857
$ 32,415 $ 32,068
LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt $ 2,183 $ 2,014
Short-term borrowings 1,649 903
Accounts payable 754 777
Accrued taxes 416 408
Other 1,167 1,046
6,169 5,148
CAPITALIZATION:
Common stockholders’ equity-
Common stock, $.10 par value, authorized 375,000,000 shares-
304,835,407 shares outstanding. 31 31
Other paid-in capital 5,472 5,509
Accumulated other comprehensive loss (108 ) (50 )
Retained earnings 3,596 3,487
Total common stockholders' equity 8,991 8,977
Long-term debt and other long-term obligations 8,332 8,869
17,323 17,846
NONCURRENT LIABILITIES:
Accumulated deferred income taxes 2,717 2,671
Asset retirement obligations 1,287 1,267
Deferred gain on sale and leaseback transaction 1,052 1,060
Power purchase contract loss liability 682 750
Retirement benefits 911 894
Lease market valuation liability 643 663
Other 1,631 1,769
8,923 9,074
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 10)
$ 32,415 $ 32,068

The accompanying Notes to Consolidated Financial Statements as they relate to FirstEnergy Corp. are an integral part of these
balance sheets.

FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six Months
	Ended June 30
	2008			2007
	(In millions)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	539		$	628
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		332			315
Amortization of regulatory assets		504			497
Deferral of new regulatory assets		(203	)		(292	)
Nuclear fuel and lease amortization		51			50
Deferred purchased power and other costs		(119	)		(185	)
Deferred income taxes and investment tax credits, net		129			85
Investment impairment		38			12
Deferred rents and lease market valuation liability		(101	)		(92	)
Accrued compensation and retirement benefits		(140	)		(69	)
Stock-based compensation		(72	)		(37	)
Commodity derivative transactions, net		3			4
Gain on asset sales		(41	)		(12	)
Cash collateral		67			(19	)
Pension trust contribution		-			(300	)
Decrease (increase) in operating assets-
Receivables		(136	)		(282	)
Materials and supplies		(31	)		22
Prepayments and other current assets		(399	)		(157	)
Increase (decrease) in operating liabilities-
Accounts payable		152			28
Accrued taxes		(190	)		(17	)
Electric service prepayment programs		(39	)		(36	)
Other		(28	)		27
Net cash provided from operating activities		316			170

CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		549			800
Short-term borrowings, net		1,705			1,308
Redemptions and Repayments-
Common stock		-			(918	)
Long-term debt		(720	)		(471	)
Net controlled disbursement activity		8			32
Stock-based compensation tax benefit		23			14
Common stock dividend payments		(335	)		(311	)
Net cash provided from financing activities		1,230			454

CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(1,617	)		(697	)
Proceeds from asset sales		56			12
Sales of investment securities held in trusts		726			583
Purchases of investment securities held in trusts		(775	)		(630	)
Cash investments		65			54
Other		(60	)		1
Net cash used for investing activities		(1,605	)		(677	)

Net decrease in cash and cash equivalents		(59	)		(53	)
Cash and cash equivalents at beginning of period		129			90
Cash and cash equivalents at end of period	$	70		$	37

The accompanying Notes to Consolidated Financial Statements as they relate to FirstEnergy Corp. are an integral
part of these statements.

FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three Months Ended
March 31,
2008 2007
(In millions)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 276 $ 290
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation 164 156
Amortization of regulatory assets 258 251
Deferral of new regulatory assets (105 ) (144 )
Nuclear fuel and lease amortization 26 26
Deferred purchased power and other costs (59 ) (116 )
Deferred income taxes and investment tax credits, net 89 53
Investment impairment 16 5
Deferred rents and lease market valuation liability 4 (25 )
Accrued compensation and retirement benefits (142 ) (65 )
Commodity derivative transactions, net 8 1
Gain on asset sales (37 ) -
Cash collateral received 8 6
Pension trust contribution - (300 )
Decrease (increase) in operating assets-
Receivables (6 ) (155 )
Materials and supplies (17 ) 15
Prepayments and other current assets (115 ) (74 )
Increase (decrease) in operating liabilities-
Accounts payable (23 ) (108 )
Accrued taxes (5 ) 73
Accrued interest 91 86
Electric service prepayment programs (19 ) (17 )
Other (56 ) (15 )
Net cash provided from (used for) operating activities 356 (57 )

CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt - 250
Short-term borrowings, net 746 1,139
Redemptions and Repayments-
Common stock - (891 )
Long-term debt (368 ) (13 )
Net controlled disbursement activity 6 12
Stock-based compensation tax benefit 11 8
Common stock dividend payments (168 ) (159 )
Net cash provided from financing activities 227 346

CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (711 ) (296 )
Proceeds from asset sales 50 -
Sales of investment securities held in trusts 361 273
Purchases of investment securities held in trusts (384 ) (294 )
Cash investments 58 25
Other (16 ) 2
Net cash used for investing activities (642 ) (290 )

Net decrease in cash and cash equivalents (59 ) (1 )
Cash and cash equivalents at beginning of period 129 90
Cash and cash equivalents at end of period $ 70 $ 89

The accompanying Notes to Consolidated Financial Statements as they relate to FirstEnergy Corp. are an integral part of these statements.

3747

Lower purchased power costs in the first ~~three~~six months of 2008 primarily reflected the lower retail generation KWH sales ~~in Penn’s service territory described above, partially offset by higher unit prices as provided for under OE’s PSA with FES.~~requirements. The ~~increase~~decrease in other operating costs for the first ~~three~~six months of 2008 was primarily due to ~~higher~~lower MISO transmission expenses, ~~related~~partially offset by increased costs associated with OE’s leasehold interests in Beaver Valley Unit 2, due to ~~MISO operations.~~a refueling outage in the second quarter of 2008. Higher depreciation expense in the first ~~three~~six months of 2008 reflected capital additions subsequent to the ~~first~~second quarter of 2007. Higher amortization of regulatory assets in the first ~~three~~six months of 2008 was primarily due to increased amortization of MISO transmission deferrals. The decrease in the deferral of new regulatory assets for the first ~~three~~six months of 2008 was primarily due to lower MISO ~~costs deferred in excess of transmission revenues~~cost deferrals ($16 million) and lower RCP fuel deferrals ($19 million), as more transmission and ~~distribution cost deferrals.~~generation costs were recovered from customers through PUCO-approved riders.

Other Income

Other income decreased ~~$12~~$20 million in the first ~~three~~six months of 2008 as compared with the same period of 2007 primarily due to reductions in interest income on notes receivable ~~resulting from principal payments~~ from associated companies due to principal payments since the ~~first~~second quarter of 2007.

~~Income Taxes~~

In the first quarter of 2007, OE’s income taxes included an immaterial adjustment applicable to prior periods of $7.2 million related to an inter-company federal tax allocation arrangement between FirstEnergy and its subsidiaries.

Legal Proceedings

See the “Regulatory Matters,” “Environmental Matters” and “Other Legal Proceedings” sections within the Combined Management’s Discussion and Analysis of Registrant Subsidiaries for discussion of other legal proceedings applicable to OE.

New Accounting Standards and Interpretations

See the “New Accounting Standards and Interpretations” section within the Combined Management’s Discussion and Analysis of Registrant Subsidiaries for discussion of new accounting standards and interpretations applicable to OE.

4656

Report of Independent Registered Public Accounting Firm

To the Stockholder and Board of

Directors of Ohio Edison Company:

We have reviewed the accompanying consolidated balance sheet of Ohio Edison Company and its subsidiaries as of ~~March 31,~~June 30, 2008 and the related consolidated statements of income and comprehensive income ~~and cash flows~~ for each of the three-month and six-month periods ended ~~March 31,~~June 30, 2008 and 2007 and the consolidated statement of cash flows for the six-month periods ended June 30, 2008 and 2007. These interim financial statements are the responsibility of the Company’s management.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2007, and the related consolidated statements of income, capitalization, common ~~stockholders’~~stockholder’s equity, and cash flows for the year then ended (not presented herein), and in our report (which contained references to the Company’s change in its method of accounting for uncertain tax positions as of January 1, 2007, defined benefit pension and other postretirement plans as of December 31, 2006 and conditional asset retirement obligations as of December 31, 2005, as discussed in Note 8, Note 4, Note 2(G) and Note 11 to the consolidated financial statements) dated February 28, 2008, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2007, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

PricewaterhouseCoopers LLP

Cleveland, Ohio

~~May~~August 7, 2008

4757

OHIO EDISON COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

Three Months Ended
March 31,

2008 2007
(In thousands)

REVENUES:
Electric sales $ 622,271 $ 594,344
Excise tax collections 30,378 31,254
Total revenues 652,649 625,598

EXPENSES:
Fuel 3,170 3,015
Purchased power 340,186 349,852
Nuclear operating costs 43,021 41,514
Other operating costs 94,135 88,486
Provision for depreciation 21,493 18,848
Amortization of regulatory assets 48,538 45,417
Deferral of new regulatory assets (25,411 ) (36,649 )
General taxes 50,453 49,745
Total expenses 575,585 560,228

OPERATING INCOME 77,064 65,370

OTHER INCOME (EXPENSE):
Investment income 15,055 26,630
Miscellaneous income (expense) (3,806 ) 373
Interest expense (17,641 ) (21,022 )
Capitalized interest 110 110
Total other income (expense) (6,282 ) 6,091

INCOME BEFORE INCOME TAXES 70,782 71,461

INCOME TAXES 26,873 17,426

NET INCOME 43,909 54,035

OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits (3,994 ) (3,423 )
Change in unrealized gain on available-for-sale securities (7,571 ) (126 )
Other comprehensive loss (11,565 ) (3,549 )
Income tax benefit related to other comprehensive loss (4,262 ) (1,503 )
Other comprehensive loss, net of tax (7,303 ) (2,046 )

TOTAL COMPREHENSIVE INCOME $ 36,606 $ 51,989

The accompanying Notes to Consolidated Financial Statements as they relate to Ohio Edison Company are an integral part
of these statements.

OHIO EDISON COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2008 2007

(In thousands)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 732 $ 732
Receivables-
Customers (less accumulated provisions of $7,870,000 and $8,032,000,
respectively, for uncollectible accounts) 266,360 248,990
Associated companies 179,875 185,437
Other (less accumulated provisions of $5,638,000 and $5,639,000,
respectively, for uncollectible accounts) 16,474 12,395
Notes receivable from associated companies 589,790 595,859
Prepayments and other 17,785 10,341
1,071,016 1,053,754
UTILITY PLANT:
In service 2,804,505 2,769,880
Less - Accumulated provision for depreciation 1,106,174 1,090,862
1,698,331 1,679,018
Construction work in progress 60,617 50,061
1,758,948 1,729,079
OTHER PROPERTY AND INVESTMENTS:
Long-term notes receivable from associated companies 258,405 258,870
Investment in lease obligation bonds 253,747 253,894
Nuclear plant decommissioning trusts 119,948 127,252
Other 33,014 36,037
665,114 676,053
DEFERRED CHARGES AND OTHER ASSETS:
Regulatory assets 709,969 737,326
Pension assets 235,933 228,518
Property taxes 65,520 65,520
Unamortized sale and leaseback costs 43,882 45,133
Other 44,640 48,075
1,099,944 1,124,572
$ 4,595,022 $ 4,583,458
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt $ 334,656 $ 333,224
Short-term borrowings-
Associated companies 50,692 50,692
Other 2,609 2,609
Accounts payable-
Associated companies 155,654 174,088
Other 19,376 19,881
Accrued taxes 93,390 89,571
Accrued interest 16,459 22,378
Other 99,532 65,163
772,368 757,606
CAPITALIZATION:
Common stockholder's equity-
Common stock, without par value, authorized 175,000,000 shares -
60 shares outstanding 1,220,368 1,220,512
Accumulated other comprehensive income 41,083 48,386
Retained earnings 351,186 307,277
Total common stockholder's equity 1,612,637 1,576,175
Long-term debt and other long-term obligations 839,107 840,591
2,451,744 2,416,766
NONCURRENT LIABILITIES:
Accumulated deferred income taxes 783,777 781,012
Accumulated deferred investment tax credits 15,990 16,964
Asset retirement obligations 95,009 93,571
Retirement benefits 176,597 178,343
Deferred revenues - electric service programs 36,821 46,849
Other 262,716 292,347
1,370,910 1,409,086
COMMITMENTS AND CONTINGENCIES (Note 10)
$ 4,595,022 $ 4,583,458

The accompanying Notes to Consolidated Financial Statements as they relate to Ohio Edison Company are an integral part
of these balance sheets.

OHIO EDISON COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

	Three Months Ended							Six Months Ended
	June 30,							June 30,

		2008			2007			2008			2007

	(In thousands)

REVENUES:
Electric sales		$	583,268		$	569,430		$	1,205,539		$	1,163,774
Excise tax collections			26,287			27,351			56,665			58,605
Total revenues			609,555			596,781			1,262,204			1,222,379

EXPENSES:
Purchased power			308,049			322,639			648,235			672,491
Other operating costs			137,619			147,086			277,945			280,101
Provision for depreciation			21,414			19,110			42,907			37,958
Amortization of regulatory assets			47,856			46,126			96,394			91,543
Deferral of new regulatory assets			(25,901	)		(54,344	)		(51,312	)		(90,993	)
General taxes			44,389			45,393			94,842			95,138
Total expenses			533,426			526,010			1,109,011			1,086,238

OPERATING INCOME			76,129			70,771			153,193			136,141

OTHER INCOME (EXPENSE):
Investment income			11,488			21,346			26,543			47,976
Miscellaneous income (expense)			(285	)		2,319			(4,091	)		2,692
Interest expense			(16,901	)		(21,416	)		(34,542	)		(42,438	)
Capitalized interest			159			152			269			262
Total other income (expense)			(5,539	)		2,401			(11,821	)		8,492

INCOME BEFORE INCOME TAXES			70,590			73,172			141,372			144,633

INCOME TAXES			21,748			27,559			48,621			44,985

NET INCOME			48,842			45,613			92,751			99,648

OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirment benefits			(3,994	)		(3,424	)		(7,988	)		(6,847	)
Change in unrealized gain on available-for-sale securities			(2,803	)		5,099			(10,374	)		4,973
Other comprehensive income (loss)			(6,797	)		1,675			(18,362	)		(1,874	)
Income tax expense (benefit) related to other
comprehensive income			(2,564	)		388			(6,826	)		(1,115	)
Other comprehensive income (loss), net of tax			(4,233	)		1,287			(11,536	)		(759	)

TOTAL COMPREHENSIVE INCOME		$	44,609		$	46,900		$	81,215		$	98,889

The accompanying Notes to Consolidated Financial Statements as they relate to Ohio Edison Company are an integral part
of these statements.

4958

OHIO EDISON COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three Months Ended
March 31,

2008 2007
(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 43,909 $ 54,035
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation 21,493 18,848
Amortization of regulatory assets 48,538 45,417
Deferral of new regulatory assets (25,411 ) (36,649 )
Amortization of lease costs 32,934 32,934
Deferred income taxes and investment tax credits, net 6,866 (3,992 )
Accrued compensation and retirement benefits (19,482 ) (16,794 )
Pension trust contribution - (20,261 )
Increase in operating assets-
Receivables (27,496 ) (102,469 )
Prepayments and other current assets (7,451 ) (6,339 )
Increase (decrease) in operating liabilities-
Accounts payable (18,939 ) 42,095
Accrued taxes 2,991 (46,791 )
Accrued interest (5,919 ) (6,812 )
Electric service prepayment programs (10,028 ) (9,053 )
Other (2,066 ) (3,283 )
Net cash provided from (used for) operating activities 39,939 (59,114 )

CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Short-term borrowings, net - 77,473
Redemptions and Repayments-
Common stock - (500,000 )
Long-term debt (80 ) (72 )
Net cash used for financing activities (80 ) (422,599 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (49,011 ) (29,888 )
Sales of investment securities held in trusts 62,344 12,951
Purchases of investment securities held in trusts (63,797 ) (13,805 )
Loan repayments from associated companies, net 6,534 511,082
Cash investments 147 168
Other 3,924 1,187
Net cash provided from (used for) investing activities (39,859 ) 481,695

Net change in cash and cash equivalents - (18 )
Cash and cash equivalents at beginning of period 732 712
Cash and cash equivalents at end of period $ 732 $ 694

The accompanying Notes to Consolidated Financial Statements as they relate to Ohio Edison Company are an integral part
of these statements.

OHIO EDISON COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)
	June 30,		December 31,
	2008		2007
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	889	$	732
Receivables-
Customers (less accumulated provisions of $6,222,000 and $8,032,000,
respectively, for uncollectible accounts)		262,717		248,990
Associated companies		174,773		185,437
Other (less accumulated provisions of $30,000 and $5,639,000,
respectively, for uncollectible accounts)		10,094		12,395
Notes receivable from associated companies		472,884		595,859
Prepayments and other		15,833		10,341
		937,190		1,053,754
UTILITY PLANT:
In service		2,819,937		2,769,880
Less - Accumulated provision for depreciation		1,093,194		1,090,862
		1,726,743		1,679,018
Construction work in progress		40,065		50,061
		1,766,808		1,729,079
OTHER PROPERTY AND INVESTMENTS:
Long-term notes receivable from associated companies		257,940		258,870
Investment in lease obligation bonds		248,894		253,894
Nuclear plant decommissioning trusts		117,941		127,252
Other		32,205		36,037
		656,980		676,053
DEFERRED CHARGES AND OTHER ASSETS:
Regulatory assets		682,844		737,326
Pension assets		243,348		228,518
Property taxes		65,520		65,520
Unamortized sale and leaseback costs		42,632		45,133
Other		32,017		48,075
		1,066,361		1,124,572
	$	4,427,339	$	4,583,458
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	159,659	$	333,224
Short-term borrowings-
Associated companies		-		50,692
Other		122,874		2,609
Accounts payable-
Associated companies		112,484		174,088
Other		24,654		19,881
Accrued taxes		58,265		89,571
Accrued interest		21,126		22,378
Other		64,332		65,163
		563,394		757,606
CAPITALIZATION:
Common stockholder's equity-
Common stock, without par value, authorized 175,000,000 shares -
60 shares outstanding		1,220,424		1,220,512
Accumulated other comprehensive income		36,850		48,386
Retained earnings		400,028		307,277
Total common stockholder's equity		1,657,302		1,576,175
Long-term debt and other long-term obligations		838,283		840,591
		2,495,585		2,416,766
NONCURRENT LIABILITIES:
Accumulated deferred income taxes		779,427		781,012
Accumulated deferred investment tax credits		15,015		16,964
Asset retirement obligations		96,469		93,571
Retirement benefits		174,592		178,343
Deferred revenues - electric service programs		25,078		46,849
Other		277,779		292,347
		1,368,360		1,409,086
COMMITMENTS AND CONTINGENCIES (Note 10)
	$	4,427,339	$	4,583,458

The accompanying Notes to Consolidated Financial Statements as they relate to Ohio Edison Company are an integral part
of these balance sheets.

5059

OHIO EDISON COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six Months Ended
	June 30,
	2008			2007
	(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	92,751		$	99,648
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		42,907			37,958
Amortization of regulatory assets		96,394			91,543
Deferral of new regulatory assets		(51,312	)		(90,993	)
Amortization of lease costs		(4,399	)		(4,367	)
Deferred income taxes and investment tax credits, net		7,059			3,017
Accrued compensation and retirement benefits		(31,579	)		(25,829	)
Pension trust contribution		-			(20,261	)
Decrease (increase) in operating assets-
Receivables		30,159			(60,535	)
Prepayments and other current assets		(2,485	)		(3,162	)
Increase (decrease) in operating liabilities-
Accounts payable		(56,831	)		10,080
Accrued taxes		(31,306	)		(87,969	)
Accrued interest		(1,252	)		(1,306	)
Electric service prepayment programs		(21,771	)		(19,144	)
Other		2,671			4,545
Net cash provided from (used for) operating activities		71,006			(66,775	)

CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Short-term borrowings, net		69,573			2,859
Redemptions and Repayments-
Common stock		-			(500,000	)
Long-term debt		(175,577	)		(1,181	)
Dividend Payments-
Common stock		-			(50,000	)
Net cash used for financing activities		(106,004	)		(548,322	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(92,061	)		(66,607	)
Sales of investment securities held in trusts		79,613			22,225
Purchases of investment securities held in trusts		(84,130	)		(25,878	)
Loan repayments from associated companies, net		123,905			670,774
Cash investments		5,000			-
Other		2,828			14,770
Net cash provided from investing activities		35,155			615,284

Net increase in cash and cash equivalents		157			187
Cash and cash equivalents at beginning of period		732			712
Cash and cash equivalents at end of period	$	889		$	899

The accompanying Notes to Consolidated Financial Statements as they relate to Ohio Edison Company are an integral
part of these statements.

~~Lower~~

Higher purchased power costs primarily reflected higher unit prices as provided for under the PSA with FES. Other operating costs decreased primarily due to the reversal of the above-market lease liability ($15 million) associated with TE’s leasehold interest in Beaver Valley Unit 2 as a result of the termination of the CEI sale agreement described above and lower fuel costs ~~in the first three months of 2008 compared to the same period of 2007 were~~($18 million) and other operating costs ($19 million) due to the assignment of TE’s leasehold interests in the Mansfield Plant ~~to FGCO~~ in October 2007. ~~Higher purchased power~~These decreases were partially offset by increased costs ~~reflected higher unit prices as provided for under the PSA with FES and a 1.8% increase in KWH purchases. Nuclear operating expenses decreased primarily due to the reversal~~ ($87 million) ~~of the above-market lease liability~~ associated with TE’s leasehold ~~interest~~interests in Beaver Valley Unit 2, ~~related to the termination of the CEI sale agreement discussed above. Other operating costs were lower primarily~~ due to ~~the assignment of TE’s leasehold interests~~a refueling outage in the ~~Mansfield Plant ($9 million).~~second quarter of 2008. The change in the deferral of new regulatory assets was primarily due to lower deferred MISO transmission expenses ($5 million), RCP distribution costs ($3 million) and fuel costs ($16 million).

Other Expense

Other expense decreased $2$4 million in the first ~~three~~six months of 2008 compared to the same period of 2007 primarily due to lower interest expense, partially offset by lower investment income. The lower interest expense resulted from lower money pool borrowings from associated companies in the first six months of 2008 and the redemption of long-term debt ($85 million principal amount) since the ~~first~~second quarter of 2007. The decrease in investment income resulted primarily from the principal repayments since the ~~first~~second quarter of 2007 on notes receivable from associated companies.

Legal Proceedings

New Accounting Standards and Interpretations

5868

Report of Independent Registered Public Accounting Firm

To the Stockholder and Board of

Directors of The Toledo Edison Company:

We have reviewed the accompanying consolidated balance sheet of The Toledo Edison Company and its subsidiary as of ~~March 31,~~June 30, 2008 and the related consolidated statements of income and comprehensive income ~~and cash flows~~ for each of the three-month and six-month periods ended ~~March 31,~~June 30, 2008 and 2007 and the consolidated statement of cash flows for the six-month periods ended June 30, 2008 and 2007. These interim financial statements are the responsibility of the Company’s management.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2007, and the related consolidated statements of income, capitalization, common ~~stockholders’~~stockholder’s equity, and cash flows for the year then ended (not presented herein), and in our report (which contained references to the Company’s change in its method of accounting for uncertain tax positions as of January 1, 2007 and defined benefit pension and other postretirement plans as of December 31, 2006, as discussed in Note 8 and Note 4 to the consolidated financial statements) dated February 28, 2008, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2007, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

PricewaterhouseCoopers LLP

Cleveland, Ohio

~~May~~August 7, 2008

THE TOLEDO EDISON COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

Three Months Ended
March 31,

2008 2007
(In thousands)

REVENUES:
Electric sales $ 203,669 $ 233,056
Excise tax collections 8,025 7,400
Total revenues 211,694 240,456

EXPENSES:
Fuel 1,482 10,147
Purchased power 101,298 96,169
Nuclear operating costs 10,457 17,721
Other operating costs 33,390 42,921
Provision for depreciation 9,025 9,117
Amortization of regulatory assets 25,025 23,876
Deferral of new regulatory assets (9,494 ) (13,481 )
General taxes 14,377 13,734
Total expenses 185,560 200,204

OPERATING INCOME 26,134 40,252

OTHER INCOME (EXPENSE):
Investment income 6,481 7,225
Miscellaneous expense (1,514 ) (3,100 )
Interest expense (6,035 ) (7,503 )
Capitalized interest 37 83
Total other expense (1,031 ) (3,295 )

INCOME BEFORE INCOME TAXES 25,103 36,957

INCOME TAXES 8,088 11,097

NET INCOME 17,015 25,860

OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits (63 ) 573
Change in unrealized gain on available-for-sale securities 1,961 379
Other comprehensive income 1,898 952
Income tax expense related to other comprehensive income 728 334
Other comprehensive income, net of tax 1,170 618

TOTAL COMPREHENSIVE INCOME $ 18,185 $ 26,478

The accompanying Notes to Consolidated Financial Statements as they relate to The Toledo Edison Company
are an integral part of these statements.

THE TOLEDO EDISON COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2008 2007
(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 213 $ 22
Receivables-
Customers 966 449
Associated companies 42,232 88,796
Other (less accumulated provisions of $471,000 and $615,000,
respectively, for uncollectible accounts) 4,241 3,116
Notes receivable from associated companies 107,664 154,380
Prepayments and other 684 865
156,000 247,628
UTILITY PLANT:
In service 854,457 931,263
Less - Accumulated provision for depreciation 397,670 420,445
456,787 510,818
Construction work in progress 28,735 19,740
485,522 530,558
OTHER PROPERTY AND INVESTMENTS:
Investment in lessor notes 142,657 154,646
Long-term notes receivable from associated companies 37,457 37,530
Nuclear plant decommissioning trusts 69,491 66,759
Other 1,734 1,756
251,339 260,691
DEFERRED CHARGES AND OTHER ASSETS:
Goodwill 500,576 500,576
Regulatory assets 187,579 203,719
Pension assets 29,420 28,601
Property taxes 21,010 21,010
Other 28,959 20,496
767,544 774,402
$ 1,660,405 $ 1,813,279
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt $ 34 $ 34
Accounts payable-
Associated companies 56,448 245,215
Other 3,973 4,449
Notes payable to associated companies 66,217 13,396
Accrued taxes 37,085 30,245
Lease market valuation liability 36,900 36,900
Other 51,563 22,747
252,220 352,986
CAPITALIZATION:
Common stockholder's equity-
Common stock, $5 par value, authorized 60,000,000 shares -
29,402,054 shares outstanding 147,010 147,010
Other paid-in capital 173,141 173,169
Accumulated other comprehensive loss (9,436 ) (10,606 )
Retained earnings 192,633 175,618
Total common stockholder's equity 503,348 485,191
Long-term debt and other long-term obligations 303,392 303,397
806,740 788,588
NONCURRENT LIABILITIES:
Accumulated deferred income taxes 99,732 103,463
Accumulated deferred investment tax credits 9,967 10,180
Lease market valuation liability 300,775 310,000
Retirement benefits 64,422 63,215
Asset retirement obligations 28,744 28,366
Deferred revenues - electric service programs 9,969 12,639
Lease assignment payable to associated companies 28,835 83,485
Other 59,001 60,357
601,445 671,705
COMMITMENTS AND CONTINGENCIES (Note 10)
$ 1,660,405 $ 1,813,279

The accompanying Notes to Consolidated Financial Statements as they relate to The Toledo Edison Company
are an integral part of these balance sheets.

THE TOLEDO EDISON COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three Months Ended
March 31,
2008 2007
(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,015 $ 25,860
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation 9,025 9,117
Amortization of regulatory assets 25,025 23,876
Deferral of new regulatory assets (9,494 ) (13,481 )
Deferred rents and lease market valuation liability 6,099 (10,891 )
Deferred income taxes and investment tax credits, net (3,404 ) (3,639 )
Accrued compensation and retirement benefits (1,813 ) (756 )
Pension trust contribution - (7,659 )
Decrease in operating assets-
Receivables 45,738 158
Prepayments and other current assets 181 312
Increase (decrease) in operating liabilities-
Accounts payable (189,243 ) (17,533 )
Accrued taxes 6,840 9,379
Accrued interest 4,663 3,951
Electric service prepayment programs (2,670 ) (2,616 )
Other 991 (541 )
Net cash provided from (used for) operating activities (91,047 ) 15,537

CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Short-term borrowings, net 52,821 -
Redemptions and Repayments-
Long-term debt (9 ) -
Short-term borrowings, net - (46,518 )
Net cash provided from (used for) financing activities 52,812 (46,518 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (19,435 ) (6,064 )
Loans repayments from (loans to) associated companies, net 46,789 (8,583 )
Collection of principal on long-term notes receivable - 32,202
Redemption of lessor notes 11,989 14,804
Sales of investment securities held in trusts 3,908 16,863
Purchases of investment securities held in trusts (4,715 ) (17,642 )
Other (110 ) (420 )
Net cash provided from investing activities 38,426 31,160

Net increase in cash and cash equivalents 191 179
Cash and cash equivalents at beginning of period 22 22
Cash and cash equivalents at end of period $ 213 $ 201

The accompanying Notes to Consolidated Financial Statements as they relate to The Toledo Edison Company are an
integral part of these statements.

6269

THE TOLEDO EDISON COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
	(In thousands)

REVENUES:
Electric sales	$	214,353		$	233,637		$	418,022		$	466,693
Excise tax collections		7,153			6,700			15,178			14,100
Total revenues		221,506			240,337			433,200			480,793

EXPENSES:
Purchased power		102,850			96,276			204,148			192,445
Other operating costs		50,805			74,471			96,134			145,260
Provision for depreciation		7,941			9,127			16,966			18,244
Amortization of regulatory assets		25,360			24,948			50,385			48,824
Deferral of new regulatory assets		(8,929	)		(18,247	)		(18,423	)		(31,728	)
General taxes		12,605			13,000			26,982			26,734
Total expenses		190,632			199,575			376,192			399,779

OPERATING INCOME		30,874			40,762			57,008			81,014

OTHER INCOME (EXPENSE):
Investment income		5,224			7,309			11,705			14,534
Miscellaneous expense		(1,949	)		(2,056	)		(3,463	)		(5,156	)
Interest expense		(5,578	)		(8,916	)		(11,613	)		(16,419	)
Capitalized interest		88			164			125			247
Total other expense		(2,215	)		(3,499	)		(3,246	)		(6,794	)

INCOME BEFORE INCOME TAXES		28,659			37,263			53,762			74,220

INCOME TAXES		7,352			15,392			15,440			26,489

NET INCOME		21,307			21,871			38,322			47,731

OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		(64	)		573			(127	)		1,146
Change in unrealized gain on available-for-sale-securities		(2,481	)		(669	)		(520	)		(290	)
Other comprehensive income (loss)		(2,545	)		(96	)		(647	)		856
Income tax expense (benefit) related to other
comprehensive income		(914	)		(43	)		(186	)		291
Other comprehensive income (loss), net of tax		(1,631	)		(53	)		(461	)		565

TOTAL COMPREHENSIVE INCOME	$	19,676		$	21,818		$	37,861		$	48,296

The accompanying Notes to Consolidated Financial Statements as they relate to The Toledo Edison Company are an integral
part of these statements.

THE TOLEDO EDISON COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)
	June 30,				December 31,
		2008			2007
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	22		$	22
Receivables-
Customers			1,251			449
Associated companies			13,465			88,796
Other (less accumulated provisions of $174,000 and $615,000,
respectively, for uncollectible accounts)			9,901			3,116
Notes receivable from associated companies			56,912			154,380
Prepayments and other			1,157			865
			82,708			247,628
UTILITY PLANT:
In service			852,806			931,263
Less - Accumulated provision for depreciation			397,496			420,445
			455,310			510,818
Construction work in progress			6,111			19,740
			461,421			530,558
OTHER PROPERTY AND INVESTMENTS:
Investment in lessor notes			142,687			154,646
Long-term notes receivable from associated companies			37,384			37,530
Nuclear plant decommissioning trusts			68,002			66,759
Other			1,712			1,756
			249,785			260,691
DEFERRED CHARGES AND OTHER ASSETS:
Goodwill			500,576			500,576
Regulatory assets			171,030			203,719
Pension assets			30,240			28,601
Property taxes			21,010			21,010
Other			62,686			20,496
			785,542			774,402
		$	1,579,456		$	1,813,279
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt		$	34		$	34
Accounts payable-
Associated companies			44,205			245,215
Other			4,339			4,449
Notes payable to associated companies			34,954			13,396
Accrued taxes			22,322			30,245
Lease market valuation liability			36,900			36,900
Other			15,256			22,747
			158,010			352,986
CAPITALIZATION:
Common stockholder's equity-
Common stock, $5 par value, authorized 60,000,000 shares -
29,402,054 shares outstanding			147,010			147,010
Other paid-in capital			173,170			173,169
Accumulated other comprehensive loss			(11,067	)		(10,606	)
Retained earnings			213,940			175,618
Total common stockholder's equity			523,053			485,191
Long-term debt and other long-term obligations			303,386			303,397
			826,439			788,588
NONCURRENT LIABILITIES:
Accumulated deferred income taxes			100,308			103,463
Accumulated deferred investment tax credits			9,753			10,180
Lease market valuation liability			291,550			310,000
Retirement benefits			65,291			63,215
Asset retirement obligations			29,225			28,366
Deferred revenues - electric service programs			6,622			12,639
Lease assignment payable to associated companies			28,835			83,485
Other			63,423			60,357
			595,007			671,705
COMMITMENTS AND CONTINGENCIES (Note 10)
		$	1,579,456		$	1,813,279

The accompanying Notes to Consolidated Financial Statements as they relate to The Toledo Edison Company
are an integral part of these balance sheets.

THE TOLEDO EDISON COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six Months Ended
	June 30,
	2008			2007
	(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	38,322		$	47,731
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		16,966			18,244
Amortization of regulatory assets		50,385			48,824
Deferral of new regulatory assets		(18,423	)		(31,728	)
Deferred rents and lease market valuation liability		(39,045	)		(41,981	)
Deferred income taxes and investment tax credits, net		(3,113	)		(11,924	)
Accrued compensation and retirement benefits		(1,160	)		1,277
Pension trust contribution		-			(7,659	)
Decrease (increase) in operating assets-
Receivables		76,978			(21,594	)
Prepayments and other current assets		(292	)		59
Increase (decrease) in operating liabilities-
Accounts payable		(201,120	)		(56,784	)
Accrued taxes		(7,923	)		751
Electric service prepayment programs		(6,017	)		(5,334	)
Other		870			2,569
Net cash used for operating activities		(93,572	)		(57,549	)

CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Short-term borrowings, net		21,558			88,686
Redemptions and Repayments-
Long-term debt		(17	)		-
Dividend Payments-
Common stock		-			(40,000	)
Net cash provided from financing activities		21,541			48,686

CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(34,388	)		(19,804	)
Loan repayments from (loans to) associated companies, net		97,479			(19,546	)
Collection of principal on long-term notes receivable		135			32,327
Redemption of lessor notes		11,959			14,846
Sales of investment securities held in trusts		21,791			32,499
Purchases of investment securities held in trusts		(23,581	)		(34,271	)
Other		(1,364	)		2,812
Net cash provided from investing activities		72,031			8,863

Net change in cash and cash equivalents		-			-
Cash and cash equivalents at beginning of period		22			22
Cash and cash equivalents at end of period	$	22		$	22

The accompanying Notes to Consolidated Financial Statements as they relate to The Toledo Edison Company are an
integral part of these statements.

JERSEY CENTRAL POWER & LIGHT COMPANY

MANAGEMENT’S NARRATIVE

ANALYSIS OF RESULTS OF OPERATIONS

JCP&L is a wholly owned, electric utility subsidiary of FirstEnergy. JCP&L conducts business in New Jersey, providing regulated electric transmission and distribution services. JCP&L also provides generation services to those customers electing to retain JCP&L as their power supplier.

Results of Operations

Net income for the first ~~three~~six months of 2008 decreased to ~~$34~~$77 million from ~~$38~~$88 million in the same period in 2007. The decrease was primarily due to higher purchased power costs and other operating costs, partially offset by higher ~~non-generation revenues.~~revenues and lower amortization of regulatory assets.

Revenues

In the first ~~three~~six months of 2008, revenues increased ~~$111~~$165 million, or ~~16.5%~~11.3%, as compared with the same period of 2007. Retail and wholesale generation revenues increased by ~~$73~~$96 million and ~~$38~~$84 million, respectively, and distribution revenues decreased by $12 million in the first ~~three~~six months of 2008.

Retail generation revenues from all customer classes increased in the first ~~three~~six months of 2008 compared to the same period of 2007 due to higher unit prices resulting from the BGS ~~auction~~auctions effective June 1, 2007, and June 1, 2008, partially offset by ~~a slight decrease in~~decreased retail generation KWH sales. ~~Sales~~The decreased sales volume ~~decreased~~was primarily ~~due to~~caused by milder weather inand customer shopping. In the first ~~three~~six months of 2008, ~~(heating~~heating and cooling degree days ~~were 6.7% lower than~~decreased 7.9% and 1.7%, respectively, as compared to the first ~~three~~six months of ~~2007) and an increase in customer~~2007. Customer shopping in the commercial and industrial customer sectors increased by ~~3.6~~4.2 percentage points and ~~3.0~~1.8 percentage points, ~~respectively.~~respectively, in the first six months of 2008.

Wholesale generation revenues increased ~~$38~~$84 million in the first ~~three~~six months of 2008 due to higher market prices, partially offset by a slight decrease in sales volumes as compared to the first ~~three~~six months of 2007.

Changes in retail generation KWH sales and revenues by customer class in the first ~~three~~six months of 2008 compared to the same period of 2007 are summarized in the following tables:

Retail Generation KWH Sales	~~Increase~~ ~~(Decrease)~~Decrease

Residential		~~0.1~~(3.9	)%
Commercial		(~~3.4~~6.7	)%
Industrial		(~~12.4~~8.0	)%
~~Net~~ Decrease in Generation Sales		(~~1.9~~5.2	)%

Retail Generation Revenues	Increase		Increase
	(In millions)		(In millions)
Residential	$	43	$	55
Commercial		28		36
Industrial		2		5
Increase in Generation Revenues	$	73	$	96

Distribution revenues ~~increased~~decreased $12 million in the first ~~three~~six months of 2008 as compared to the same period of 2007 due to lower KWH deliveries, reflecting the weather impacts described above, partially offset by a slight ~~increases~~increase in composite unit ~~prices and KWH deliveries.~~prices.

Changes in distribution KWH deliveries and revenues by customer class in the first ~~three~~six months of 2008 compared to the same period in 2007 are summarized in the following ~~table:~~tables:

	~~Increase~~
Distribution KWH Deliveries	~~(Decrease)~~Decrease

Residential		(3.9	~~0.1~~	)%
Commercial		(1.5	~~1.2~~	)%
Industrial			(~~1.3~~0.7	)%
~~Net Increase~~Decrease in Distribution Deliveries		(2.4	~~0.4~~	)%

6373

Distribution Revenues	Decrease
	(In millions)
Residential	$	(9	)
Commercial		(3	)
Industrial		-
Decrease in Distribution Revenues	$	(12	)

Expenses

Total expenses increased by ~~$113~~$181 million in the first ~~three~~six months of 2008 as compared to the same period of 2007. The following table presents changes from the prior year period by expense category:

Expenses - Changes	Increase (Decrease)			Increase (Decrease)
	(In millions)			(In millions)
Purchased power costs	$	110		$	180
Other operating costs		4			7
Provision for depreciation		3			5
Amortization of regulatory assets		(4	)		(11	)
Net increase in expenses	$	113		$	181

A utility ~~could~~ also ~~simultaneously~~may file an MRO in which it would have to ~~demonstrate~~prove the following objective market criteria:

·	the utility or its transmission service affiliate belongs to a FERC approved RTO, or there is comparable and nondiscriminatory access to the electric transmission grid;

·	the RTO has a market-monitor function and the ability to mitigate market power or the utility’s market conduct, or a similar market monitoring function exists with the ability to identify and monitor market conditions and conduct; and

·	a published source of information is available publicly or through subscription that identifies pricing information for traded electricity products, both on- and off-peak, scheduled for delivery two years into the future.

·	a reconcilable rider to recover fuel transportation cost surcharges in excess of $30 million in 2009, $20 million in 2010 and $10 million in 2011;

·	generation rate adjustments to recover any increase in fuel costs in 2011 over fuel costs incurred in 2010 for FES’ generation assets used to support the ESP;

·	generation rate adjustments to recover the costs of complying with new requirements for certain renewable energy resources, new taxes and new environmental laws or new interpretations of existing laws that take effect after January 1, 2008 and exceed $50 million during the plan period;

·	an RCP fuel rider to recover the 2006 and 2007 deferred fuel costs and carrying charges (described above) over a period not to exceed 25 years;

·	an adjustable delivery service improvement rider, effective January 1, 2009, through December 31, 2013, to ensure the Ohio Companies maintain customer standards for service and reliability;

·	the waiver of RTC charges for CEI’s customers as of January 1, 2009, which would result in CEI’s write-off of approximately $485 million of estimated unrecoverable transition costs;

·	a commitment by the Ohio Companies to invest in aggregate at least $1 billion in capital improvements in their energy delivery systems through 2013 and fund $25 million for energy efficiency programs and $25 million for economic development and job retention programs through 2013.

Pennsylvania (Applicable to FES, Met-Ed, Penelec, OE and Penn)

8393

8494

On February 1, 2007, the Governor of Pennsylvania proposed an EIS. The EIS includes four pieces of proposed legislation that, according to the Governor, is designed to reduce energy costs, promote energy independence and stimulate the economy. Elements of the EIS include the installation of smart meters, funding for solar panels on residences and small businesses, conservation and demand reduction programs to meet energy growth, a requirement that electric distribution companies acquire power that results in the “lowest reasonable rate on a long-term basis,” the utilization of micro-grids and a three year phase-in of rate increases. On July 17, 2007 the Governor signed into law two pieces of energy legislation. The first amended the Alternative Energy Portfolio Standards Act of 2004 to, among other things, increase the percentage of solar energy that must be supplied at the conclusion of an electric distribution company’s transition period. The second law allows electric distribution companies, at their sole discretion, to enter into long term contracts with large customers and to build or acquire interests in electric generation facilities specifically to supply long-term contracts with such customers. A special legislative session on energy was convened in mid-September 2007 to consider other aspects of the EIS. The Pennsylvania House and Senate on March 11, 2008 and December 12, 2007, respectively, passed different versions of bills to fund the Governor’s EIS proposal. Neither chamber has formally considered the other’s bill. On February 12, 2008, the Pennsylvania House passed House Bill 2200 which provides for energy efficiency and demand management programs and targets as well as the installation of smart meters within ten years. As part of the 2008 state budget negotiations, the Alternative Energy Investment Act was enacted creating a $650 million alternative energy fund to increase the development and use of alternative and renewable energy, improve energy efficiency and reduce energy consumption. Other legislation has been introduced to address generation procurement, expiration of rate caps, conservation and renewable ~~energy.~~energy; however, consideration of these issues was postponed until the legislature returns to session in fall 2008. The final form of this pending legislation is uncertain. Consequently, Met-Ed and Penelec ~~OE and Penn~~ are is unable to predict what impact, if any, such legislation may have on their operations. However, Met-Ed and Penelec intend to file rate mitigation plans with the PPUC later this year.

New Jersey (Applicable to JCP&L)

On August 1, 2005, the NJBPU established a proceeding to determine whether additional ratepayer protections are required at the state level in light of the repeal of the PUHCA pursuant to the EPACT. The NJBPU approved regulations effective October 2, 2006 that prevent a holding company that owns a gas or electric public utility from investing more than 25% of the combined assets of its utility and utility-related subsidiaries into businesses unrelated to the utility industry. These regulations are not expected to materially impact JCP&L. Also, in the same proceeding, the NJBPU Staff issued an additional draft proposal on March 31, 2006 addressing various issues including access to books and records, ring-fencing, cross subsidization, corporate governance and related matters. With the approval of the NJBPU Staff, the affected utilities jointly submitted an alternative proposal on June 1, 2006. The NJBPU Staff circulated revised drafts of the proposal to interested stakeholders in November 2006 and again in February 2007. On February 1, 2008, the NJBPU accepted proposed rules for publication in the New Jersey Register on March 17, 2008. A public hearing on these proposed rules was held on April 23, 2008 ~~with~~and comments from interested parties ~~due on~~were submitted by May ~~16,~~19, 2008.

2008.

On April 17, 2008, a draft EMP was released for public comment. The draft EMP establishes ~~four~~five major goals:

·	maximize energy efficiency to achieve a 20% reduction in energy consumption by 2020;

·	reduce peak demand for electricity by 5,700 MW by ~~2020 (amounting to about a 22% reduction in projected demand);~~2020;

·	meet 22.5% of the state’s electricity needs with renewable energy by 2020; ~~and~~

·	develop low carbon emitting, efficient power plants and close the gap between the supply and demand for ~~electricity.~~electricity; and

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

Following the public hearings and comment period which ~~is expected to extend~~extended into July 2008, a final EMP will be issued to be followed by appropriate legislation and regulation as necessary. At this time, JCP&L cannot predict the outcome of this process nor determine the impact, if any, such legislation or regulation may have ~~on its operations.~~

On February 13, 2007, the NJBPU Staff informally issued a draft proposal relating to changes to the regulations addressing electric distribution service reliability and quality standards. Meetings between the NJBPU Staff and interested stakeholders to discuss the proposal were held and additional, revised informal proposals were subsequently circulated by the Staff. On September 4, 2007, proposed regulations were published in the New Jersey Register, which proposal will be subsequently considered by the NJBPU following comments that were submitted in September and October 2007. Final regulations (effective upon publication) were published in the New Jersey Register March 17, 2008. Upon preliminary review of the new regulations, JCP&L does not expect a material impact on its operations.

FERC Matters (Applicable to FES and each of the Companies)

Transmission Service between MISO and PJM

PJM Transmission Rate Design

Post Transition Period Rate Design

The FERC had directed MISO, PJM, and the respective transmission owners to make filings on or before August 1, 2007 to reevaluate transmission rate design within ~~the~~ MISO, and between MISO and PJM. On August 1, 2007, filings were made by MISO, PJM, and the vast majority of transmission owners, including FirstEnergy affiliates, which proposed to retain the existing transmission rate design. These filings were approved by the FERC on January 31, 2008. As a result of the FERC’s approval, the rates charged to FirstEnergy’s load-serving affiliates for transmission service over existing transmission facilities in MISO and PJM are unchanged. In a related filing, MISO and MISO transmission owners requested that the current MISO pricing for new transmission facilities that spreads 20% of the cost of new 345 kV and higher transmission facilities across the entire MISO footprint (known as the RECB methodology) be retained.

Distribution of MISO Network Service Revenues

FERC issued an order approving this amendment.

MISO Ancillary Services Market and Balancing Area Consolidation

MISO made a filing on September 14, 2007 to establish an ASM for regulation, spinning and supplemental reserves, to consolidate the existing 24 balancing areas within the MISO footprint, and to establish MISO as the NERC registered balancing authority for the region. This filing would permit load serving entities to purchase their operating reserve requirements in a competitive market. ~~FES, CEI, OE, Penn and TE support~~FirstEnergy supports the proposal to establish markets for Ancillary Services and consolidate existing balancing areas. On February 25, 2008, the FERC issued an order approving the ASM subject to certain compliance filings. Numerous parties filed requests for rehearing on March 26, 2008. On June 23, 2008, the FERC issued an order granting in part and denying in part rehearing. MISO has since notified the FERC that the start of its ASM iswill be delayed until September 9, 2008.

Interconnection Agreement with AMP-Ohio

Duquesne’s Request to Withdraw from PJM

On January 17, 2008, the FERC conditionally approved Duquesne’s request to exit PJM. Among other conditions, the FERC obligated Duquesne to pay the PJM capacity obligations through May 31, 2011. The FERC’s order took notice of the numerous transmission and other issues raised by ~~FES and the Companies~~FirstEnergy and other parties to the proceeding, but did not provide any responsive rulings or other guidance. Rather, the FERC ordered Duquesne to make a compliance filing in forty-five days detailing how Duquesne will satisfy its obligations under the PJM Transmission Owners’ Agreement. The FERC likewise directed ~~the~~ MISO to submit detailed plans to integrate Duquesne into ~~the~~ MISO. Finally, the FERC directed MISO and PJM to work together to resolve the substantive and procedural issues implicated by Duquesne’s transition into ~~the~~ MISO. These issues remain unresolved. If Duquesne satisfies all of the obligations set by the FERC, its planned transition date is October 9,1, 2008. On July 3, 2008, Duquesne and MISO filed a proposed plan for integrating Duquesne into MISO. On July 24, 2008, numerous parties filed comments and protests to the proposed plan. FirstEnergy filed comments identifying numerous issues that must be addressed and resolved before Duquesne can transition to MISO. FirstEnergy continues to evaluate the impact of Duquesne’s withdrawal from PJM on its operations and financial condition; however, the full consequences cannot be determined until the FERC rules on the pending issues.

Complaint against PJM RPM Auction

If the FERC were to rule unfavorably on this matter, the impact for the period ended June 30, 2008, would not be material to FES’ results of operations, cash flows or financial position, as FES only began collecting RPM ~~delivery year.~~revenues for the Beaver Valley Power Station on June 1, 2008. However, such an unfavorable ruling by the FERC could have a material adverse impact on the revenues of the Beaver Valley Power Station in subsequent periods if these proceedings were to result in a significant loss of FES’ RPM revenues.

MISO Resource Adequacy Proposal

expected this fall.

Organized Wholesale Power Markets

On February 21, 2008, the FERC issued a NOPR through which it proposes to adopt new rules that it states will “improve operations in organized electric markets, boost competition and bring additional benefits to consumers.” The proposed rule addresses demand response and market pricing during reserve shortages, long-term power contracting, market-monitoring policies, and responsiveness of RTOs and ISOs to stakeholders and customers. ~~FES and the Companies do~~FirstEnergy does not believe that the proposed rule will have a significant impact on ~~their~~its operations. Comments on the NOPR were filed on April ~~18,~~21, 2008.

Environmental Matters

Various federal, state and local authorities regulate FES and the Companies with regard to air and water quality and other environmental matters. The effects of compliance on FES and the Companies with regard to environmental matters could have a material adverse effect on their earnings and competitive position to the extent that they compete with companies that are not subject to such regulations and, therefore, do not bear the risk of costs associated with compliance, or failure to comply, with such regulations. FES ~~and the Companies estimate~~estimates capital expenditures for environmental compliance of approximately $1.4 billion for the period 2008-2012.

FES and the Companies accrue environmental liabilities only when they conclude that it is probable that they have an obligation for such costs and can reasonably estimate the amount of such costs. Unasserted claims are reflected in FES’ and the Companies’ determination of environmental liabilities and are accrued in the period that they become both probable and reasonably estimable.

Clean Air Act Compliance (Applicable to FES)

FES is required to meet federally-approved SO2 emissions regulations. Violations of such regulations can result in the shutdown of the generating unit involved and/or civil or criminal penalties of up to $32,500 for each day the unit is in violation. The EPA has an interim enforcement policy for SO2 regulations in Ohio that allows for compliance based on a 30-day averaging period. FES believes it is currently in compliance with this policy, but cannot predict what action the EPA may take in the future with respect to the interim enforcement policy.

The EPA Region 5 issued a Finding of Violation and NOV to the Bay Shore Power Plant dated June 15, 2006, alleging violations to various sections of the CAA. FES has disputed those alleged violations based on its CAA permit, the Ohio SIP and other information provided to the EPA at an August 2006 meeting with the EPA. The EPA has several enforcement options (administrative compliance order, administrative penalty order, and/or judicial, civil or criminal action) and has indicated that such option may depend on the time needed to achieve and demonstrate compliance with the rules alleged to have been violated. On June 5, 2007, the EPA requested another meeting to discuss “an appropriate compliance program” and a disagreement regarding ~~the opacity limit~~emission limits applicable to the common stack for Bay Shore Units 2, 3 and 4.

FES complies with SO2 reduction requirements under the Clean Air Act Amendments of 1990 by burning lower-sulfur fuel, generating more electricity from lower-emitting plants, and/or using emission allowances. NOX reductions required by the 1990 Amendments are being achieved through combustion controls and the generation of more electricity at lower-emitting plants. In September 1998, the EPA finalized regulations requiring additional NOX reductions at FES' facilities. The EPA's NOX Transport Rule imposes uniform reductions of NOX emissions (an approximate 85% reduction in utility plant NOX emissions from projected 2007 emissions) across a region of nineteen states (including Michigan, New Jersey, Ohio and Pennsylvania) and the District of Columbia based on a conclusion that such NOX emissions are contributing significantly to ozone levels in the eastern United States. FES believes its facilities are also complying with the NOX budgets established under SIPs through combustion controls and post-combustion controls, including Selective Catalytic Reduction and SNCR systems, and/or using emission allowances.

89100

National Ambient Air Quality Standards (Applicable to FES)

In March 2005, the EPA finalized the CAIR covering a total of 28 states (including Michigan, New Jersey, Ohio and Pennsylvania) and the District of Columbia based on proposed findings that air emissions from 28 eastern states and the District of Columbia significantly contribute to non-attainment of the NAAQS for fine particles and/or the "8-hour" ozone NAAQS in other states. CAIR ~~requires~~would have required reductions of NOX and SO2 emissions in two phases (Phase I in 2009 for NOX, 2010 for SO2 and Phase II in 2015 for both NOX and SO2)~~. FES' Michigan, Ohio and Pennsylvania fossil generation facilities will be subject to caps on SO~~2 ~~and NO~~X ~~emissions. According to the EPA, SO~~2 ~~emissions will be reduced by 45% (from 2003 levels) by 2010 across the states covered by the rule, with reductions reaching 73% (from 2003 levels) by 2015,~~, ultimately capping SO2 emissions in affected states to just 2.5 million tons ~~annually.~~annually and NOX emissions ~~will be reduced by 53% (from 2003 levels) by 2009 across the states covered by the rule, with reductions reaching 61% (from 2003 levels) by 2015, achieving a regional NO~~X ~~cap of~~to just 1.3 million tons annually. CAIR ~~has been~~was challenged in the United States Court of Appeals for the District of ~~Columbia.~~Columbia and on July 11, 2008, the Court vacated CAIR “in its entirety” and directed the EPA to “redo its analysis from the ground up.” The court ruling also vacated the CAIR regional cap and trade programs for SO2 and NOX, which is currently not expected to, but may, materially impair the value of emissions allowances obtained for future compliance. The future cost of compliance with these regulations may be substantial and ~~may~~will depend on the ~~outcome of this litigation and how CAIR is ultimately implemented.~~action taken by the EPA or Congress in response to the Court’s ruling.

Mercury Emissions (Applicable to FES)

Pennsylvania has submitted a new mercury rule for EPA approval that does not provide a cap-and-trade approach as in the CAMR, but rather follows a command-and-control approach imposing emission limits on individual sources. It is anticipated that compliance with these regulations, if approved by the EPA and implemented, would not require the addition of mercury controls at the Bruce Mansfield Plant, FES’ only Pennsylvania coal-fired power plant, until 2015, if at all.

101

W. H. Sammis Plant (Applicable to FES, OE and Penn)

On March 18, 2005, OE and Penn announced that they had reached a settlement with the EPA, the DOJ and three states (Connecticut, New Jersey and New York) that resolved all issues related to the Sammis NSR litigation. This settlement agreement, which is in the form of a consent decree, was approved by the court on July 11, 2005, and requires reductions of NOX and SO2 emissions at the Sammis, Burger, Eastlake and Mansfield coal-fired plants through the installation of pollution control devices and provides for stipulated penalties for failure to install and operate such pollution controls in accordance with that agreement. Consequently, if FirstEnergy fails to install such pollution control devices, for any reason, including, but not limited to, the failure of any third-party contractor to timely meet its delivery obligations for such devices, ~~FGCO, OE and Penn~~FirstEnergy could be exposed to penalties under the Sammis NSR Litigation consent decree. Capital expenditures necessary to complete requirements of the Sammis NSR Litigation consent decree are currently estimated to be $1.3 billion for ~~FGCO~~2008-2012 for ~~2008-2012~~FGCO ($650 million of which is expected to be spent during 2008, with the largest portion of the remaining $650 million expected to be spent in 2009). This amount is included in the estimated capital expenditures for environmental compliance referenced above.

Climate Change (Applicable to FES)

FES cannot currently estimate the financial impact of climate change policies, although potential legislative or regulatory programs restricting CO2 emissions could require significant capital and other expenditures. The CO2 emissions per KWH of electricity generated by FES is lower than many regional competitors due to its diversified generation sources, which include low or non-CO2 emitting gas-fired and nuclear generators.

Clean Water Act (Applicable to FES)

Various water quality regulations, the majority of which are the result of the federal Clean Water Act and its amendments, apply to ~~FES’~~FES' plants. In addition, Ohio, New Jersey and Pennsylvania have water quality standards applicable to FES' 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.

102

On September 7, 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 ~~(BPJ)~~ to minimize impacts on fish and shellfish from cooling water intake structures. On April 14, 2008, the Supreme Court of the United States granted a petition for a writ of certiorari to review ~~certain aspects~~one significant aspect of the Second ~~Circuit’s decision. FirstEnergy~~Circuit Court’s opinion which is whether 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. FES is studying various control options and their costs and effectiveness. Depending on the results of such studies, the outcome of the Supreme Court’s review of the Second Circuit’s decision, the EPA’s further rulemaking and any action taken by the states exercising ~~BPJ,~~best professional judgment, the future costs of compliance with these standards may require material capital expenditures.

Regulation of Hazardous Waste (Applicable to FES and each of the Companies)

Under NRC regulations, FES and the Companies must ensure that adequate funds will be available to decommission ~~its~~their nuclear facilities. As of ~~March 31,~~June 30, 2008, FES and the Companies had approximately $2.0 billion invested in external trusts to be used for the decommissioning and environmental remediation of Davis-Besse, Beaver Valley, Perry and TMI-2. As part of the application to the NRC to transfer the ownership of Davis-Besse, Beaver Valley and Perry to NGC in 2005, FirstEnergy agreed to contribute another $80 million to these trusts by 2010. Consistent with NRC guidance, utilizing a “real” rate of return on these funds of approximately 2% over inflation, these trusts are expected to exceed the minimum decommissioning funding requirements set by the NRC. Conservatively, these estimates do not include any rate of return that the trusts may earn over the 20-year plant useful life extensions that FirstEnergy ~~and FES~~ (and Exelon for TMI-1 as it relates to the timing of the decommissioning of TMI-2) seeks for these facilities.

Other Legal Proceedings

Power Outages and Related Litigation (Applicable to JCP&L)

103

In August 2002, the trial court granted partial summary judgment to JCP&L and dismissed the plaintiffs' claims for consumer fraud, common law fraud, negligent misrepresentation, and strict product liability. In November 2003, the trial court granted JCP&L's motion to decertify the class and denied plaintiffs' motion to permit into evidence their class-wide damage model indicating damages in excess of $50 million. These class decertification and damage rulings were appealed to the Appellate Division. The Appellate Division issued a decision in July 2004, affirming the decertification of the originally certified class, but remanding for certification of a class limited to those customers directly impacted by the outages of JCP&L transformers in Red Bank, NJ, based on a common incident involving the failure of the bushings of two large transformers in the Red Bank substation resulting in planned and unplanned outages in the area during a 2-3 day period. In 2005, JCP&L renewed its motion to decertify the class based on a very limited number of class members who incurred damages and also filed a motion for summary judgment on the remaining plaintiffs’ claims for negligence, breach of contract and punitive damages. In July 2006, the New Jersey Superior Court dismissed the punitive damage claim and again decertified the class based on the fact that a vast majority of the class members did not suffer damages and those that did would be more appropriately addressed in individual actions. Plaintiffs appealed this ruling to the New Jersey Appellate Division which, in March 2007, reversed the decertification of the Red Bank class and remanded this matter back to the Trial Court to allow plaintiffs sufficient time to establish a damage model or individual proof of damages. JCP&L filed a petition for allowance of an appeal of the Appellate Division ruling to the New Jersey Supreme Court which was denied in May 2007. Proceedings are continuing in the Superior Court and a case management conference with the presiding Judge ~~is scheduled for~~was held on June 13, 2008. At that conference, the plaintiffs stated their intent to drop their efforts to create a class-wide damage model and, instead of dismissing the class action, expressed their desire for a bifurcated trial on liability and damages. The judge directed the plaintiffs to indicate, on or before August 22, 2008, how they intend to proceed under this scenario. Thereafter, the judge expects to hold another pretrial conference to address plaintiffs' proposed procedure. JCP&L is defending this ~~class~~ action but is unable to predict the outcome of this matter. No liability has been accrued as of ~~March 31,~~June 30, 2008.

Nuclear Plant Matters (Applicable to FES)

Other Legal Matters (Applicable to OE, JCP&L and FES)

There are various lawsuits, claims (including claims for asbestos exposure) and proceedings related to ~~FirstEnergy's~~ normal business operations pending against ~~FirstEnergy~~FES and ~~its subsidiaries.~~the Companies. The other potentially material items not otherwise discussed above are described below.

104

~~FirstEnergy accrues~~FES and the Companies accrue legal liabilities only when ~~it concludes~~they conclude that it is probable that ~~it has~~they have an obligation for such costs and can reasonably estimate the amount of such costs. If it were ultimately determined that ~~FirstEnergy or its subsidiaries~~FES and the Companies have legal liability or are otherwise made subject to liability based on the above matters, it could have a material adverse effect ~~on FirstEnergy's or its subsidiaries'~~their financial condition, results of operations and cash flows.

New Accounting Standards and Interpretations (Applicable to FES and each of the Companies)

SFAS 141(R) – “Business Combinations”

In December 2007, the FASB issued SFAS 141(R), which requires the acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS 141(R) attempts to reduce the complexity of existing GAAP related to business combinations. The Standard includes both core principles and pertinent application guidance, eliminating the need for numerous EITF issues and other interpretative guidance. SFAS 141(R) will affect business combinations entered into by FES ~~or any of~~and the Companies that close after January 1, 2009. In addition, the Standard also affects the accounting for changes in tax valuation allowances made after January 1, 2009, that were established as part of a business combination prior to the implementation of this Standard. FES and the Companies are currently evaluating the impact of adopting this Standard on their financial statements.

105

SFAS 160 - “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB No. 51”

SFAS 161 - “Disclosures about Derivative Instruments and Hedging Activities – an Amendment of FASB Statement No. 133”

In March 2008, the FASB issued SFAS 161 ~~which~~that enhances the current disclosure framework for derivative instruments and hedging activities. The Statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. ~~This disclosure better conveys the purpose of derivative use in terms of the risks that the entity is intending to manage.~~ The FASB believes ~~disclosing~~that additional required disclosure of the fair values of derivative instruments and their gains and losses in a tabular format ~~is designed to~~will provide a more complete picture of the location in an entity’s financial statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Disclosing information about credit-risk-related contingent features is designed to provide information on the potential effect on an entity’s liquidity from using derivatives. ~~Finally, this~~This Statement also requires cross-referencing within the footnotes ~~which is intended~~ to help users of financial statements locate important information about derivative instruments. The Statement is effective for fiscal years beginning on or after December 15, 2008. FES and the Companies are currently evaluating the impact of adopting this Standard on their financial statements.

SFAS 162 - “The Hierarchy of Generally Accepted Accounting Principles”

94106

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. ORGANIZATION AND BASIS OF PRESENTATION

FirstEnergy is a diversified energy company that holds, directly or indirectly, all of the outstanding common stock of its principal subsidiaries: OE, CEI, TE, Penn (a wholly owned subsidiary of OE), ATSI, JCP&L, Met-Ed, Penelec, FENOC, FES and its subsidiaries FGCO and NGC, and FESC.

FirstEnergy and its subsidiaries follow GAAP and comply with the regulations, orders, policies and practices prescribed by the SEC, the FERC and, as applicable, the PUCO, the PPUC and the NJBPU. The preparation of financial statements in conformity with GAAP requires management to make periodic estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Actual results could differ from these estimates. The reported results of operations are not indicative of results of operations for any future period.

These statements should be read in conjunction with the financial statements and notes included in the combined Annual Report on Form 10-K for the year ended December 31, 2007 for FirstEnergy, FES and the Companies. The consolidated unaudited financial statements of FirstEnergy, FES and each of the Companies reflect all normal recurring adjustments that, in the opinion of management, are necessary to fairly present results of operations for the interim periods. Certain prior year amounts have been reclassified to conform to the current year presentation. Unless otherwise indicated, defined terms used herein have the meanings set forth in the accompanying Glossary of Terms.

FirstEnergy and its subsidiaries consolidate all majority-owned subsidiaries over which they exercise control and, when applicable, entities for which they have a controlling financial interest. Intercompany transactions and balances are eliminated in consolidation. FirstEnergy consolidates a VIE (see Note 8) when it is determined to be the VIE's primary beneficiary. Investments in non-consolidated affiliates over which FirstEnergy and its subsidiaries have the ability to exercise significant influence, but not control (20-50% owned companies, joint ventures and partnerships) follow the equity method of accounting. Under the equity method, the interest in the entity is reported as an investment in the Consolidated Balance Sheets and the percentage share of the entity’s earnings is reported in the Consolidated Statements of Income.

The consolidated financial statements as of ~~March 31,~~June 30, 2008 and for the three-month and six-month periods ended ~~March 31,~~June 30, 2008 and 2007, have been reviewed by PricewaterhouseCoopers LLP, an independent registered public accounting firm. Their report (dated ~~May~~August 7, 2008) is included herein. The report of PricewaterhouseCoopers LLP states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited financial information because that report is not a “report” or a “part” of a registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Securities Act of 1933.

2. EARNINGS PER SHARE

Basic earnings per share of common stock is computed using the weighted average of actual common shares outstanding during the respective period as the denominator. The denominator for diluted earnings per share of common stock reflects the weighted average of common shares outstanding plus the potential additional common shares that could result if dilutive securities and other agreements to issue common stock were exercised. The pool of stock-based compensation tax benefits is calculated in accordance with SFAS 123(R). On March 2, 2007, FirstEnergy repurchased approximately 14.4 million shares, or 4.5%, of its outstanding common stock through an accelerated share repurchase program at an initial price of approximately $900 million. A final purchase price adjustment of $51 million was settled in cash on December 13, 2007. The following table reconciles basic and diluted earnings per share of common stock:

Reconciliation of Basic and Diluted
Three Months Ended
March 31,

Earnings per Share of Common Stock 2008 2007

(In millions, except
per share amounts)
Net income $ 276 $ 290

Average shares of common stock outstanding – Basic 304 314
Assumed exercise of dilutive stock options and awards 3 2
Average shares of common stock outstanding – Dilutive 307 316

Basic earnings per share of common stock $ 0.91 $ 0.92
Diluted earnings per share of common stock $ 0.90 $ 0.92

95107

	Three Months				Six Months
	Ended June 30				Ended June 30
Reconciliation of Basic and Diluted Earnings per Share	2008		2007		2008		2007
	(In millions, except per share amounts)

Net income	$	263	$	338	$	539	$	628

Average shares of common stock outstanding – Basic		304		304		304		309
Assumed exercise of dilutive stock options and awards		3		4		3		4
Average shares of common stock outstanding – Dilutive		307		308		307		313

Basic earnings per share	$	0.86	$	1.11	$	1.77	$	2.03
Diluted earnings per share	$	0.85	$	1.10	$	1.75	$	2.01

3. DIVESTITURES AND DISCONTINUED OPERATIONS

On March 7, 2008, FirstEnergy sold certain telecommunication assets, resulting in a net after-tax gain of $19.3 million. As a result of the sale, FirstEnergy adjusted goodwill by $1 million for the former GPU companies due to the realization of tax benefits that had been reserved in purchase accounting. The sale of assets did not meet the criteria for classification as discontinued operations as of ~~March 31,~~June 30, 2008.

4. FAIR VALUE MEASURES

Effective January 1, 2008, FirstEnergy adopted SFAS 157, which provides a framework for measuring fair value under GAAP and, among other things, requires enhanced disclosures about assets and liabilities recognized at fair value. FirstEnergy also adopted SFAS 159 on January 1, 2008, which provides the option to measure certain financial assets and financial liabilities at fair value. FirstEnergy has analyzed its financial assets and financial liabilities within the scope of SFAS 159 and, as of ~~March 31,~~June 30, 2008, has elected not to record eligible assets and liabilities at fair value.

As defined in SFAS 157, fair value is the price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between willing market participants on the measurement date. SFAS 157 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy defined by SFAS 157 are as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those where transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. FirstEnergy’s Level 1 assets and liabilities primarily consist of exchange-traded derivatives and equity securities listed on active exchanges that are held in various trusts.

Level 2 – Pricing inputs are either directly or indirectly observable in the market as of the reporting date, other than quoted prices in active markets included in Level 1. FirstEnergy’s Level 2 consists primarily of investments in debt securities held in various trusts and commodity forwards. Additionally, Level 2 includes those financial instruments that are valued using models or other valuation methodologies based on assumptions that are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Instruments in this category include non-exchange-traded derivatives such as forwards and certain interest rate swaps.

Level 3 – Pricing inputs include inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. FirstEnergy develops its view of the future market price of key commodities through a combination of market observation and assessment (generally for the short term) and fundamental modeling (generally for the longer term). Key fundamental electricity model inputs are generally directly observable in the market or derived from publicly available historic and forecast data. Some key inputs reflect forecasts published by industry leading consultants who generally employ similar fundamental modeling approaches. Fundamental model inputs and results, as well as the selection of consultants, reflect the consensus of appropriate FirstEnergy management. Level 3 instruments include those that may be more structured or otherwise tailored to customers’ needs. FirstEnergy’s Level 3 instruments consist of NUG contracts.

108

FirstEnergy utilizes market data and assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. FirstEnergy primarily applies the market approach for recurring fair value measurements using the best information available. Accordingly, FirstEnergy maximizes the use of observable inputs and minimizes the use of unobservable inputs.

The following table sets forth FirstEnergy’s financial assets and financial liabilities that are accounted for at fair value by level within the fair value hierarchy as of ~~March 31,~~June 30, 2008. As required by SFAS 157, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. FirstEnergy’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

	March 31, 2008								June 30, 2008
Recurring Fair Value Measures	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(In millions)								(In millions)
Assets:
Derivatives	$	4	$	98	$	-	$	102	$	7	$	110	$	-	$	117
Nuclear decommissioning trusts(1)		1,070		953		-		2,023		1,040		950		-		1,990
Other investments(2)		21		303		-		324		21		309		-		330
Total	$	1,095	$	1,354	$	-	$	2,449	$	1,068	$	1,369	$	-	$	2,437

Liabilities:
Derivatives	$	-	$	98	$	-	$	98	$	-	$	123	$	-	$	123
NUG contracts(3)		-		-		682		682		-		-		644		644
Total	$	-	$	98	$	682	$	780	$	-	$	123	$	644	$	767

A utility ~~could~~ also ~~simultaneously~~may file an MRO in which it would have to ~~demonstrate~~prove the following objective market criteria:

·	the utility or its transmission service affiliate belongs to a FERC approved RTO, or there is comparable and nondiscriminatory access to the electric transmission grid;

·	the RTO has a market-monitor function and the ability to mitigate market power or the utility’s market conduct, or a similar market monitoring function exists with the ability to identify and monitor market conditions and conduct; and

·	a published source of information is available publicly or through subscription that identifies pricing information for traded electricity products, both on- and off-peak, scheduled for delivery two years into the future.

·	a reconcilable rider to recover fuel transportation cost surcharges in excess of $30 million in 2009, $20 million in 2010 and $10 million in 2011;

·	generation rate adjustments to recover any increase in fuel costs in 2011 over fuel costs incurred in 2010 for FES’ generation assets used to support the ESP;

·	generation rate adjustments to recover the costs of complying with new requirements for certain renewable energy resources, new taxes and new environmental laws or new interpretations of existing laws that take effect after January 1, 2008 and exceed $50 million during the plan period;

·	an RCP fuel rider to recover the 2006 and 2007 deferred fuel costs and carrying charges (described above) over a period not to exceed 25 years;

·	an adjustable delivery service improvement rider, effective January 1, 2009, through December 31, 2013, to ensure the Ohio Companies maintain customer standards for service and reliability;

·	the waiver of RTC charges for CEI’s customers as of January 1, 2009, which would result in CEI’s write-off of approximately $485 million of estimated unrecoverable transition costs ($1.01 per share of common stock);

122

·	a commitment by the Ohio Companies to invest in aggregate at least $1 billion in capital improvements in their energy delivery systems through 2013 and fund $25 million for energy efficiency programs and $25 million for economic development and job retention programs through 2013.

~~110~~

123

~~111~~

(D) NEW JERSEY

124

On April 17, 2008, a draft EMP was released for public comment. The draft EMP establishes ~~four~~five major goals:

·	maximize energy efficiency to achieve a 20% reduction in energy consumption by 2020;

·	reduce peak demand for electricity by 5,700 MW by ~~2020 (amounting to about a 22% reduction in projected demand);~~2020;

~~112~~

·	meet 22.5% of the state’s electricity needs with renewable energy by 2020; ~~and~~

·	develop low carbon emitting, efficient power plants and close the gap between the supply and demand for ~~electricity.~~electricity; and

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

(E) FERC MATTERS

Transmission Service between MISO and PJM

125

PJM Transmission Rate Design

~~113~~

Post Transition Period Rate Design

126

Distribution of MISO Network Service Revenues

MISO Ancillary Services Market and Balancing Area Consolidation

Interconnection Agreement with AMP-Ohio

~~114~~127

Duquesne’s Request to Withdraw from PJM

Complaint against PJM RPM Auction

128

MISO Resource Adequacy Proposal

Organized Wholesale Power Markets

~~115~~

12. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS

SFAS 141(R) – “Business Combinations”

SFAS 160 - ~~“Noncontrolling~~“Non-controlling Interests in Consolidated Financial Statements – an Amendment of ARB No. 51”

129

SFAS 161 - “Disclosures about Derivative Instruments and Hedging Activities – an Amendment of FASB Statement No. 133”

In March 2008, the FASB issued SFAS 161 ~~which requires~~ ~~enhancements to~~ that enhances the current disclosure framework for derivative instruments and hedging activities. The Statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. ~~This disclosure is intended to better convey the purpose of derivatives use in terms of the risks that the entity is intending to manage.~~ The FASB believes ~~disclosing~~that additional required disclosure of the fair values of derivative instruments and their gains and losses in a tabular format ~~is designed to~~will provide a more complete picture of the location in an entity’s financial statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Disclosing information about credit-risk-related contingent features is designed to provide ~~financial statement users~~ information on the potential effect on an entity’s liquidity from using derivatives. ~~Finally, this~~This Statement also requires cross-referencing within the footnotes ~~which is intended~~ to help users of financial statements locate important information about derivative instruments. The Statement is effective for fiscal years beginning on or after December 15, 2008. FirstEnergy is currently evaluating the impact of adopting this Standard on its financial statements.

SFAS 162 - “The Hierarchy of Generally Accepted Accounting Principles”

13. SEGMENT INFORMATION

FirstEnergy has three reportable operating segments: energy delivery services, competitive energy services and Ohio transitional generation services. The “Other” segment primarily consists of telecommunications services. The assets and revenues for the other business operations are below the quantifiable threshold for operating segments for separate disclosure as “reportable operating segments.”

The energy delivery services segment designs, constructs, operates and maintains FirstEnergy's regulated transmission and distribution systems and is responsible for the regulated generation commodity operations of FirstEnergy’s Pennsylvania and New Jersey electric utility subsidiaries. Its revenues are primarily derived from the delivery of electricity, cost recovery of regulatory assets and default service electric generation sales to non-shopping customers in its Pennsylvania and New Jersey franchise areas. Its results reflect the commodity costs of securing electric generation from FES under partial requirements purchased power agreements and from non-affiliated power suppliers as well as the net PJM transmission expenses related to the delivery of that generation load.

The competitive energy services segment supplies electric power to its electric utility affiliates, provides competitive ~~electric~~electricity sales primarily in Ohio, Pennsylvania, Maryland and Michigan, owns or leases and operates FirstEnergy’s generating facilities and purchases electricity to meet its sales obligations. The segment's net income is primarily derived from the affiliated company PSA sales and the non-affiliated electric generation sales revenues less the related costs of electricity generation, including purchased power and net transmission (including congestion) and ancillary costs charged by PJM and MISO to deliver electricity to the segment’s customers. The segment’s internal revenues represent the affiliated company PSA sales.

~~116~~

The Ohio transitional generation services segment represents the regulated generation commodity operations of FirstEnergy’s Ohio electric utility subsidiaries. Its revenues are primarily derived from electric generation sales to non-shopping customers under the PLR obligations of the Ohio Companies. Its results reflect the purchase of electricity from the competitive energy services segment through full-requirements PSA arrangements, the deferral and amortization of certain fuel costs authorized for recovery by the energy delivery services segment and the net MISO transmission revenues and expenses related to the delivery of generation load. This segment’s total assets consist of accounts receivable for generation revenues from retail customers.

Segment Financial Information
Ohio
Energy Competitive Transitional
Delivery Energy Generation Reconciling
Three Months Ended Services Services Services Other Adjustments Consolidated
(In millions)
March 31, 2008
External revenues $ 2,212 $ 329 $ 707 $ 40 $ (11 ) $ 3,277
Internal revenues - 776 - - (776 ) -
Total revenues 2,212 1,105 707 40 (787 ) 3,277
Depreciation and amortization 255 53 4 - 5 317
Investment income 45 (6 ) 1 - (23 ) 17
Net interest charges 103 27 - - 41 171
Income taxes 119 58 15 14 (19 ) 187
Net income 179 87 23 22 (35 ) 276
Total assets 23,211 8,108 257 281 558 32,415
Total goodwill 5,582 24 - - - 5,606
Property additions 255 462 - 12 (18 ) 711

March 31, 2007
External revenues $ 2,040 $ 321 $ 619 $ 12 $ (19 ) $ 2,973
Internal revenues - 714 - - (714 ) -
Total revenues 2,040 1,035 619 12 (733 ) 2,973
Depreciation and amortization 220 51 (15 ) 1 6 263
Investment income 70 3 1 - (41 ) 33
Net interest charges 107 49 1 2 21 180
Income taxes 148 65 15 5 (33 ) 200
Net income 218 98 24 1 (51 ) 290
Total assets 23,526 7,089 246 254 675 31,790
Total goodwill 5,874 24 - - - 5,898
Property additions 155 124 - 1 16 296
130

Segment Financial Information
						Ohio
	Energy		Competitive			Transitional
	Delivery		Energy			Generation						Reconciling
Three Months Ended	Services		Services			Services			Other			Adjustments			Consolidated
	(In millions)
June 30, 2008
External revenues	$	2,182	$	375		$	683		$	20		$	(15	)	$	3,245
Internal revenues		-		704			-			-			(704	)		-
Total revenues		2,182		1,079			683			20			(719	)		3,245
Depreciation and amortization		241		59			11			1			4			316
Investment income		40		(8	)		(1	)		6			(21	)		16
Net interest charges		99		28			-			-			48			175
Income taxes		129		45			13			(1	)		(26	)		160
Net income		193		66			19			26			(41	)		263
Total assets		23,423		9,240			266			281			335			33,545
Total goodwill		5,582		24			-			-			-			5,606
Property additions		196		683			-			9			18			906

June 30, 2007
External revenues	$	2,095	$	398		$	625		$	9		$	(18	)	$	3,109
Internal revenues		-		691			-			-			(691	)		-
Total revenues		2,095		1,089			625			9			(709	)		3,109
Depreciation and amortization		249		51			(49	)		1			5			257
Investment income		62		5			-			-			(37	)		30
Net interest charges		116		42			-			1			39			198
Income taxes		141		96			19			(3	)		(31	)		222
Net income		207		142			30			6			(47	)		338
Total assets		23,602		7,284			260			236			651			32,033
Total goodwill		5,874		24			-			-			-			5,898
Property additions		245		139			-			2			15			401

Six Months Ended

June 30, 2008
External revenues	$	4,394	$	704		$	1,390		$	60		$	(26	)	$	6,522
Internal revenues		-		1,480			-			-			(1,480	)		-
Total revenues		4,394		2,184			1,390			60			(1,506	)		6,522
Depreciation and amortization		496		112			15			1			9			633
Investment income		85		(14	)		-			6			(44	)		33
Net interest charges		202		55			-			-			89			346
Income taxes		248		103			28			13			(45	)		347
Net income		372		153			42			48			(76	)		539
Total assets		23,423		9,240			266			281			335			33,545
Total goodwill		5,582		24			-			-			-			5,606
Property additions		451		1,145			-			21			-			1,617

June 30, 2007
External revenues	$	4,135	$	719		$	1,245		$	20		$	(37	)	$	6,082
Internal revenues		-		1,404			-			-			(1,404	)		-
Total revenues		4,135		2,123			1,245			20			(1,441	)		6,082
Depreciation and amortization		469		102			(64	)		2			11			520
Investment income		132		8			1			-			(78	)		63
Net interest charges		223		92			1			2			60			378
Income taxes		289		160			35			2			(64	)		422
Net income		425		240			53			7			(97	)		628
Total assets		23,602		7,284			260			236			651			32,033
Total goodwill		5,874		24			-			-			-			5,898
Property additions		400		263			-			3			31			697

Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting primarily consist of interest expense related to holding company debt, corporate support services revenues and expenses and elimination of intersegment transactions.

~~14. SUPPLEMENTAL GUARANTOR INFORMATION~~

131

14. SUPPLEMENTAL GUARANTOR INFORMATION

On July 13, 2007, FGCO completed a sale and leaseback transaction for its 93.825% undivided interest in Bruce Mansfield Unit 1. FES has unconditionally and irrevocably guaranteed all of FGCO’s obligations under each of the leases. The related lessor notes and pass through certificates are not guaranteed by FES or FGCO, but the notes are secured by, among other things, each lessor trust’s undivided interest in Unit 1, rights and interests under the applicable lease and rights and interests under other related agreements, including FES’ lease guaranty. This transaction is classified as an operating lease under GAAP for FES and FirstEnergy and a financing for FGCO.

The consolidating statements of income for the ~~three months~~three-month and six-month periods ended ~~March 31,~~June 30, 2008 and 2007, consolidating balance sheets as of ~~March 31,~~June 30, 2008 and December 31, 2007 and condensed consolidating statements of cash flows for the ~~three months~~six-months ended ~~March 31,~~June 30, 2008 and 2007 for FES (parent and guarantor), FGCO and NGC (non-guarantor) are presented below. Investments in wholly owned subsidiaries are accounted for by FES using the equity method. Results of operations for FGCO and NGC are, therefore, reflected in FES’ investment accounts and earnings as if operating lease treatment was achieved. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions and reflect operating lease treatment associated with the 2007 Bruce Mansfield Unit 1 sale and leaseback transaction.

~~117~~132

FIRSTENERGY SOLUTIONS CORP.	FIRSTENERGY SOLUTIONS CORP.																FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATING STATEMENTS OF INCOME	CONSOLIDATING STATEMENTS OF INCOME																CONSOLIDATING STATEMENTS OF INCOME
(Unaudited)	(Unaudited)																(Unaudited)

For the Three Months Ended March 31, 2008		FES			FGCO			NGC			Eliminations			Consolidated
For the Three Months Ended June 30, 2008																		FES			FGCO			NGC			Eliminations			Consolidated
		(In thousands)																(In thousands)

REVENUES		$	1,099,848		$	567,701		$	325,684		$	(894,117	)	$	1,099,116			$	1,064,627		$	565,225		$	287,028		$	(845,602	)	$	1,071,278

EXPENSES:
Fuel			2,138			291,239			28,312			-			321,689				3,605			277,192			29,753			-			310,550
Purchased power from non-affiliates			206,724			-			-			-			206,724				220,339			-			-			-			220,339
Purchased power from affiliates			891,979			2,138			25,485			(894,117	)		25,485				842,670			2,932			34,528			(845,602	)		34,528
Other operating expenses			37,596			107,167			139,595			12,188			296,546				29,842			124,173			121,534			12,189			287,738
Provision for depreciation			307			26,599			24,194			(1,358	)		49,742				1,600			30,027			25,893			(1,360	)		56,160
General taxes			5,415			11,570			6,212			-			23,197				4,727			11,504			3,564			-			19,795
Total expenses			1,144,159			438,713			223,798			(883,287	)		923,383				1,102,783			445,828			215,272			(834,773	)		929,110

OPERATING INCOME (LOSS)			(44,311	)		128,988			101,886			(10,830	)		175,733				(38,156	)		119,397			71,756			(10,829	)		142,168

OTHER INCOME (EXPENSE):
Miscellaneous income (expense), including
net income from equity investees			121,725			(1,208	)		(6,537	)		(116,884	)		(2,904	)			98,590			489			(9,449	)		(91,704	)		(2,074	)
Interest expense to affiliates			(82	)		(5,289	)		(1,839	)		-			(7,210	)
Interest expense - affiliates																			(50	)		(7,920	)		(2,758	)		-			(10,728	)
Interest expense - other			(3,978	)		(25,968	)		(11,018	)		16,429			(24,535	)			(6,663	)		(23,697	)		(10,632	)		16,487			(24,505	)
Capitalized interest			21			6,228			414			-			6,663				28			9,856			657			-			10,541
Total other income (expense)			117,686			(26,237	)		(18,980	)		(100,455	)		(27,986	)			91,905			(21,272	)		(22,182	)		(75,217	)		(26,766	)

INCOME BEFORE INCOME TAXES			73,375			102,751			82,906			(111,285	)		147,747				53,749			98,125			49,574			(86,046	)		115,402

INCOME TAXES (BENEFIT)			(16,609	)		39,285			32,764			2,323			57,763				(14,345	)		38,467			20,838			2,348			47,308

NET INCOME		$	89,984		$	63,466		$	50,142		$	(113,608	)	$	89,984			$	68,094		$	59,658		$	28,736		$	(88,394	)	$	68,094

~~118~~

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATING STATEMENTS OF INCOME
(Unaudited)

For the Three Months Ended March 31, 2007 FES FGCO NGC Eliminations Consolidated
(In thousands)

REVENUES $ 1,019,387 $ 551,355 $ 234,091 $ (786,540 ) $ 1,018,293

EXPENSES:
Fuel 2,367 201,231 29,937 - 233,535
Purchased power from non-affiliates 186,203 2,367 - (2,367 ) 186,203
Purchased power from affiliates 784,172 59,069 17,415 (784,173 ) 76,483
Other operating expenses 51,249 99,095 113,252 - 263,596
Provision for depreciation 453 24,936 22,621 - 48,010
General taxes 4,934 10,568 6,216 - 21,718
Total expenses 1,029,378 397,266 189,441 (786,540 ) 829,545

OPERATING INCOME (LOSS) (9,991 ) 154,089 44,650 - 188,748

OTHER INCOME (EXPENSE):
Miscellaneous income (expense), including
net income from equity investees 113,948 916 5,200 (100,332 ) 19,732
Interest expense to affiliates - (24,331 ) (5,115 ) - (29,446 )
Interest expense - other (1,385 ) (6,760 ) (9,213 ) - (17,358 )
Capitalized interest 5 2,099 1,105 - 3,209
Total other income (expense) 112,568 (28,076 ) (8,023 ) (100,332 ) (23,863 )

INCOME BEFORE INCOME TAXES 102,577 126,013 36,627 (100,332 ) 164,885

INCOME TAXES 73 49,289 13,019 - 62,381

NET INCOME $ 102,504 $ 76,724 $ 23,608 $ (100,332 ) $ 102,504

~~119~~133

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATING BALANCE SHEETS
(Unaudited)

As of March 31, 2008 FES FGCO NGC Eliminations Consolidated
(In thousands)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 2 $ - $ - $ - $ 2
Receivables-
Customers 125,116 - - - 125,116
Associated companies 285,350 231,049 96,852 (295,511 ) 317,740
Other 1,174 1,050 - 2,224
Notes receivable from associated companies 668,376 - 69,011 - 737,387
Materials and supplies, at average cost 2,849 264,501 207,275 - 474,625
Prepayments and other 107,798 26,208 1,728 - 135,734
1,190,665 522,808 374,866 (295,511 ) 1,792,828

PROPERTY, PLANT AND EQUIPMENT:
In service 35,302 5,359,381 3,700,973 (391,896 ) 8,703,760
Less - Accumulated provision for depreciation 7,810 2,655,103 1,537,747 (168,115 ) 4,032,545
27,492 2,704,278 2,163,226 (223,781 ) 4,671,215
Construction work in progress 10,792 881,899 165,389 - 1,058,080
38,284 3,586,177 2,328,615 (223,781 ) 5,729,295

OTHER PROPERTY AND INVESTMENTS:
Nuclear plant decommissioning trusts - - 1,263,338 - 1,263,338
Long-term notes receivable from associated companies - - 62,900 - 62,900
Investment in associated companies 2,598,022 - - (2,598,022 ) -
Other 2,529 21,657 202 - 24,388
2,600,551 21,657 1,326,440 (2,598,022 ) 1,350,626

DEFERRED CHARGES AND OTHER ASSETS:
Accumulated deferred income taxes 10,518 495,131 - (248,666 ) 256,983
Lease assignment receivable from associated companies - 67,256 - - 67,256
Goodwill 24,248 - - 24,248
Property taxes - 25,007 22,767 - 47,774
Pension assets 3,214 12,856 - - 16,070
Unamortized sale and leaseback costs - 38,120 - 47,575 85,695
Other 18,177 49,393 5,188 (37,939 ) 34,819
56,157 687,763 27,955 (239,030 ) 532,845
$ 3,885,657 $ 4,818,405 $ 4,057,876 $ (3,356,344 ) $ 9,405,594

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt $ - $ 738,087 $ 887,265 $ (16,896 ) $ 1,608,456
Notes payable-
Associated companies - 885,760 260,199 - 1,145,959
Other 700,000 - - - 700,000
Accounts payable-
Associated companies 554,844 1,419 119,773 (270,368 ) 405,668
Other 55,614 130,090 - - 185,704
Accrued taxes 3,378 116,383 47,292 (24,219 ) 142,834
Other 85,100 107,791 9,731 45,484 248,106
1,398,936 1,979,530 1,324,260 (265,999 ) 4,436,727

CAPITALIZATION:
Common stockholder's equity 2,460,215 1,011,907 1,579,614 (2,591,521 ) 2,460,215
Long-term debt and other long-term obligations - 1,320,773 62,900 (1,305,717 ) 77,956
2,460,215 2,332,680 1,642,514 (3,897,238 ) 2,538,171

NONCURRENT LIABILITIES:
Deferred gain on sale and leaseback transaction - - - 1,051,871 1,051,871
Accumulated deferred income taxes - - 244,978 (244,978 ) -
Accumulated deferred investment tax credits - 35,350 24,619 - 59,969
Asset retirement obligations - 24,947 798,739 - 823,686
Retirement benefits 9,332 56,016 - - 65,348
Property taxes - 25,329 22,766 - 48,095
Lease market valuation liability - 341,881 - - 341,881
Other 17,174 22,672 - - 39,846
26,506 506,195 1,091,102 806,893 2,430,696
$ 3,885,657 $ 4,818,405 $ 4,057,876 $ (3,356,344 ) $ 9,405,594

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATING STATEMENTS OF INCOME
(Unaudited)

For the Three Months Ended June 30, 2007	FES			FGCO			NGC			Eliminations			Consolidated
	(In thousands)

REVENUES	$	1,074,858		$	453,553		$	279,092		$	(738,772	)	$	1,068,731

EXPENSES:
Fuel		7,513			235,653			25,714			-			268,880
Purchased power from non-affiliates		162,873			-			-			-			162,873
Purchased power from affiliates		731,260			57,291			20,806			(738,772	)		70,585
Other operating expenses		30,519			65,694			136,932			-			233,145
Provision for depreciation		469			25,239			22,812			-			48,520
General taxes		5,602			9,050			6,258			-			20,910
Total expenses		938,236			392,927			212,522			(738,772	)		804,913

OPERATING INCOME		136,622			60,626			66,570			-			263,818

OTHER INCOME (EXPENSE):
Miscellaneous income (expense), including
net income from equity investees		74,781			(622	)		4,215			(63,005	)		15,369
Interest expense - affiliates		-			(17,990	)		(4,827	)		-			(22,817	)
Interest expense - other		(5,773	)		(6,116	)		(9,804	)		-			(21,693	)
Capitalized interest		6			3,056			1,361			-			4,423
Total other income (expense)		69,014			(21,672	)		(9,055	)		(63,005	)		(24,718	)

INCOME BEFORE INCOME TAXES		205,636			38,954			57,515			(63,005	)		239,100

INCOME TAXES		54,220			12,892			20,572			-			87,684

NET INCOME	$	151,416		$	26,062		$	36,943		$	(63,005	)	$	151,416

~~120~~134

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATING BALANCE SHEETS
(Unaudited)

As of December 31, 2007 FES FGCO NGC Eliminations Consolidated
(In thousands)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 2 $ - $ - $ - $ 2
Receivables-
Customers 133,846 - - - 133,846
Associated companies 327,715 237,202 98,238 (286,656 ) 376,499
Other 2,845 978 - - 3,823
Notes receivable from associated companies 23,772 - 69,012 - 92,784
Materials and supplies, at average cost 195 215,986 210,834 - 427,015
Prepayments and other 67,981 21,605 2,754 - 92,340
556,356 475,771 380,838 (286,656 ) 1,126,309

PROPERTY, PLANT AND EQUIPMENT:
In service 25,513 5,065,373 3,595,964 (392,082 ) 8,294,768
Less - Accumulated provision for depreciation 7,503 2,553,554 1,497,712 (166,756 ) 3,892,013
18,010 2,511,819 2,098,252 (225,326 ) 4,402,755
Construction work in progress 1,176 571,672 188,853 - 761,701
19,186 3,083,491 2,287,105 (225,326 ) 5,164,456

OTHER PROPERTY AND INVESTMENTS:
Nuclear plant decommissioning trusts - - 1,332,913 - 1,332,913
Long-term notes receivable from associated companies - - 62,900 - 62,900
Investment in associated companies 2,516,838 - - (2,516,838 ) -
Other 2,732 37,071 201 - 40,004
2,519,570 37,071 1,396,014 (2,516,838 ) 1,435,817

DEFERRED CHARGES AND OTHER ASSETS:
Accumulated deferred income taxes 16,978 522,216 - (262,271 ) 276,923
Lease assignment receivable from associated companies - 215,258 - - 215,258
Goodwill 24,248 - - - 24,248
Property taxes - 25,007 22,767 - 47,774
Pension asset 3,217 13,506 - - 16,723
Unamortized sale and leaseback costs - 27,597 - 43,206 70,803
Other 22,956 52,971 6,159 (38,133 ) 43,953
67,399 856,555 28,926 (257,198 ) 695,682
TOTAL ASSETS $ 3,162,511 $ 4,452,888 $ 4,092,883 $ (3,286,018 ) $ 8,422,264

LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt $ - $ 596,827 $ 861,265 $ (16,896 ) $ 1,441,196
Short-term borrowings-
Associated companies - 238,786 25,278 - 264,064
Other 300,000 - - - 300,000
Accounts payable-
Associated companies 287,029 175,965 268,926 (286,656 ) 445,264
Other 56,194 120,927 - - 177,121
Accrued taxes 18,831 125,227 28,229 (836 ) 171,451
Other 57,705 131,404 11,972 36,725 237,806
719,759 1,389,136 1,195,670 (267,663 ) 3,036,902

CAPITALIZATION:
Common stockholder's equity 2,414,231 951,542 1,562,069 (2,513,611 ) 2,414,231
Long-term debt and other long-term obligations - 1,597,028 242,400 (1,305,716 ) 533,712
2,414,231 2,548,570 1,804,469 (3,819,327 ) 2,947,943

NONCURRENT LIABILITIES:
Deferred gain on sale and leaseback transaction - - - 1,060,119 1,060,119
Accumulated deferred income taxes - - 259,147 (259,147 ) -
Accumulated deferred investment tax credits - 36,054 25,062 - 61,116
Asset retirement obligations - 24,346 785,768 - 810,114
Retirement benefits 8,721 54,415 - - 63,136
Property taxes - 25,328 22,767 - 48,095
Lease market valuation liability - 353,210 - - 353,210
Other 19,800 21,829 - - 41,629
28,521 515,182 1,092,744 800,972 2,437,419
TOTAL LIABILITIES AND CAPITALIZATION $ 3,162,511 $ 4,452,888 $ 4,092,883 $ (3,286,018 ) $ 8,422,264

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATING STATEMENTS OF INCOME
(Unaudited)

For the Six Months Ended June 30, 2008	FES			FGCO			NGC			Eliminations			Consolidated
	(In thousands)

REVENUES	$	2,164,475		$	1,132,926		$	612,712		$	(1,739,719	)	$	2,170,394

EXPENSES:
Fuel		5,743			568,431			58,065			-			632,239
Purchased power from non-affiliates		427,063			-			-			-			427,063
Purchased power from affiliates		1,734,649			5,070			60,013			(1,739,719	)		60,013
Other operating expenses		67,438			231,340			261,129			24,377			584,284
Provision for depreciation		1,907			56,626			50,087			(2,718	)		105,902
General taxes		10,142			23,074			9,776			-			42,992
Total expenses		2,246,942			884,541			439,070			(1,718,060	)		1,852,493

OPERATING INCOME (LOSS)		(82,467	)		248,385			173,642			(21,659	)		317,901

OTHER INCOME (EXPENSE):
Miscellaneous income (expense), including
net income from equity investees		220,315			(719	)		(15,986	)		(208,588	)		(4,978	)
Interest expense - affiliates		(132	)		(13,209	)		(4,597	)		-			(17,938	)
Interest expense - other		(10,641	)		(49,665	)		(21,650	)		32,916			(49,040	)
Capitalized interest		49			16,084			1,071			-			17,204
Total other income (expense)		209,591			(47,509	)		(41,162	)		(175,672	)		(54,752	)

INCOME BEFORE INCOME TAXES		127,124			200,876			132,480			(197,331	)		263,149

INCOME TAXES (BENEFIT)		(30,954	)		77,752			53,602			4,671			105,071

NET INCOME	$	158,078		$	123,124		$	78,878		$	(202,002	)	$	158,078

~~121~~135

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATING STATEMENTS OF INCOME
(Unaudited)

For the Six Months Ended June 30, 2007	FES			FGCO			NGC			Eliminations			Consolidated
	(In thousands)

REVENUES	$	2,094,245		$	1,004,908		$	513,183		$	(1,525,312	)	$	2,087,024

EXPENSES:
Fuel		9,880			436,884			55,651			-			502,415
Purchased power from non-affiliates		349,076			-			-			-			349,076
Purchased power from affiliates		1,515,432			118,727			38,221			(1,525,312	)		147,068
Other operating expenses		81,768			164,789			250,184			-			496,741
Provision for depreciation		922			50,175			45,433			-			96,530
General taxes		10,536			19,618			12,474			-			42,628
Total expenses		1,967,614			790,193			401,963			(1,525,312	)		1,634,458

OPERATING INCOME		126,631			214,715			111,220			-			452,566

OTHER INCOME (EXPENSE):
Miscellaneous income, including
net income from equity investees		188,729			294			9,415			(163,337	)		35,101
Interest expense - affiliates		-			(42,321	)		(9,942	)		-			(52,263	)
Interest expense - other		(7,158	)		(12,876	)		(19,017	)		-			(39,051	)
Capitalized interest		11			5,155			2,466			-			7,632
Total other income (expense)		181,582			(49,748	)		(17,078	)		(163,337	)		(48,581	)

INCOME BEFORE INCOME TAXES		308,213			164,967			94,142			(163,337	)		403,985

INCOME TAXES		54,293			62,181			33,591			-			150,065

NET INCOME	$	253,920		$	102,786		$	60,551		$	(163,337	)	$	253,920

136

FIRSTENERGY SOLUTIONS CORP.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Unaudited)

For the Three Months Ended March 31, 2008 FES FGCO NGC Eliminations Consolidated
(In thousands)

NET CASH PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES $ 273,827 $ (122,171 ) $ 8,108 $ 188 $ 159,952

CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Short-term borrowings, net 400,000 646,975 234,921 - 1,281,896
Redemptions and Repayments-
Long-term debt - (135,063 ) (153,540 ) - (288,603 )
Common stock dividend payments (10,000 ) - - - (10,000 )
Net cash provided from financing activities 390,000 511,912 81,381 - 983,293

CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (19,406 ) (375,391 ) (81,545 ) (187 ) (476,529 )
Proceeds from asset sales - 5,088 - - 5,088
Sales of investment securities held in trusts - - 173,123 - 173,123
Purchases of investment securities held in trusts - - (181,079 ) - (181,079 )
Loans to associated companies, net (644,604 ) - - - (644,604 )
Other 183 (19,438 ) 12 (1 ) (19,244 )
Net cash used for investing activities (663,827 ) (389,741 ) (89,489 ) (188 ) (1,143,245 )

Net change in cash and cash equivalents - - - - -
Cash and cash equivalents at beginning of period 2 - - - 2
Cash and cash equivalents at end of period $ 2 $ - $ - $ - $ 2

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATING BALANCE SHEETS
(Unaudited)

As of June 30, 2008	FES		FGCO		NGC		Eliminations			Consolidated
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2	$	-	$	-	$	-		$	2
Receivables-
Customers		117,858		-		-		-			117,858
Associated companies		419,402		259,454		80,249		(285,131	)		473,974
Other		1,475		1,376		5,105		-			7,956
Notes receivable from associated companies		554,279		-		-		-			554,279
Materials and supplies, at average cost		2,942		281,275		205,327		-			489,544
Prepayments and other		141,414		30,300		695		-			172,409
		1,237,372		572,405		291,376		(285,131	)		1,816,022

PROPERTY, PLANT AND EQUIPMENT:
In service		82,280		5,385,410		4,666,202		(391,896	)		9,741,996
Less - Accumulated provision for depreciation		9,411		2,684,494		1,609,851		(169,476	)		4,134,280
		72,869		2,700,916		3,056,351		(222,420	)		5,607,716
Construction work in progress		11,373		1,064,083		145,833		-			1,221,289
		84,242		3,764,999		3,202,184		(222,420	)		6,829,005
OTHER PROPERTY AND INVESTMENTS:
Nuclear plant decommissioning trusts		-		-		1,234,635		-			1,234,635
Long-term notes receivable from associated companies		-		-		62,900		-			62,900
Investment in associated companies		2,677,674		-		-		(2,677,674	)		-
Other		2,323		63,467		202		-			65,992
		2,679,997		63,467		1,297,737		(2,677,674	)		1,363,527
DEFERRED CHARGES AND OTHER ASSETS:
Accumulated deferred income taxes		16,722		480,721		-		(249,475	)		247,968
Lease assignment receivable from associated companies		-		67,256		-		-			67,256
Goodwill		24,248		-		-		-			24,248
Property taxes		-		25,007		22,767		-			47,774
Pension assets		3,211		12,206		-		-			15,417
Unamortized sale and leaseback costs		-		23,282		-		50,096			73,378
Other		8,473		58,569		8,813		(47,063	)		28,792
		52,654		667,041		31,580		(246,442	)		504,833
	$	4,054,265	$	5,067,912	$	4,822,877	$	(3,431,667	)	$	10,513,387
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	4,679	$	873,562	$	1,077,289	$	(17,315	)	$	1,938,215
Short-term borrowings-
Associated companies		-		774,490		442,217		-			1,216,707
Other		1,000,000		-		-		-			1,000,000
Accounts payable-
Associated companies		275,820		253,818		93,599		(275,431	)		347,806
Other		81,252		133,486		-		-			214,738
Accrued taxes		1,162		58,976		19,393		(6,993	)		72,538
Other		116,036		98,885		14,607		34,697			264,225
		1,478,949		2,193,217		1,647,105		(265,042	)		5,054,229
CAPITALIZATION:
Common stockholder's equity		2,505,676		1,071,297		1,596,565		(2,667,862	)		2,505,676
Long-term debt and other long-term obligations		41,317		1,312,162		421,815		(1,296,982	)		478,312
		2,546,993		2,383,459		2,018,380		(3,964,844	)		2,983,988
NONCURRENT LIABILITIES:
Deferred gain on sale and leaseback transaction		-		-		-		1,043,442			1,043,442
Accumulated deferred income taxes		-		-		245,223		(245,223	)		-
Accumulated deferred investment tax credits		-		34,646		24,176		-			58,822
Asset retirement obligations		-		24,274		811,924		-			836,198
Retirement benefits		9,590		56,925		-		-			66,515
Property taxes		-		25,329		22,766		-			48,095
Lease market valuation liability		-		330,457		-		-			330,457
Other		18,733		19,605		53,303		-			91,641
		28,323		491,236		1,157,392		798,219			2,475,170
	$	4,054,265	$	5,067,912	$	4,822,877	$	(3,431,667	)	$	10,513,387

~~122~~137

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATING BALANCE SHEETS
(Unaudited)

As of December 31, 2007	FES		FGCO		NGC		Eliminations			Consolidated
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2	$	-	$	-	$	-		$	2
Receivables-
Customers		133,846		-		-		-			133,846
Associated companies		327,715		237,202		98,238		(286,656	)		376,499
Other		2,845		978		-		-			3,823
Notes receivable from associated companies		23,772		-		69,012		-			92,784
Materials and supplies, at average cost		195		215,986		210,834		-			427,015
Prepayments and other		67,981		21,605		2,754		-			92,340
		556,356		475,771		380,838		(286,656	)		1,126,309
PROPERTY, PLANT AND EQUIPMENT:
In service		25,513		5,065,373		3,595,964		(392,082	)		8,294,768
Less - Accumulated provision for depreciation		7,503		2,553,554		1,497,712		(166,756	)		3,892,013
		18,010		2,511,819		2,098,252		(225,326	)		4,402,755
Construction work in progress		1,176		571,672		188,853		-			761,701
		19,186		3,083,491		2,287,105		(225,326	)		5,164,456
OTHER PROPERTY AND INVESTMENTS:
Nuclear plant decommissioning trusts		-		-		1,332,913		-			1,332,913
Long-term notes receivable from associated companies		-		-		62,900		-			62,900
Investment in associated companies		2,516,838		-		-		(2,516,838	)		-
Other		2,732		37,071		201		-			40,004
		2,519,570		37,071		1,396,014		(2,516,838	)		1,435,817
DEFERRED CHARGES AND OTHER ASSETS:
Accumulated deferred income taxes		16,978		522,216		-		(262,271	)		276,923
Lease assignment receivable from associated companies		-		215,258		-		-			215,258
Goodwill		24,248		-		-		-			24,248
Property taxes		-		25,007		22,767		-			47,774
Pension asset		3,217		13,506		-		-			16,723
Unamortized sale and leaseback costs		-		27,597		-		43,206			70,803
Other		22,956		52,971		6,159		(38,133	)		43,953
		67,399		856,555		28,926		(257,198	)		695,682
	$	3,162,511	$	4,452,888	$	4,092,883	$	(3,286,018	)	$	8,422,264
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	-	$	596,827	$	861,265	$	(16,896	)	$	1,441,196
Short-term borrowings-
Associated companies		-		238,786		25,278		-			264,064
Other		300,000		-		-		-			300,000
Accounts payable-
Associated companies		287,029		175,965		268,926		(286,656	)		445,264
Other		56,194		120,927		-		-			177,121
Accrued taxes		18,831		125,227		28,229		(836	)		171,451
Other		57,705		131,404		11,972		36,725			237,806
		719,759		1,389,136		1,195,670		(267,663	)		3,036,902
CAPITALIZATION:
Common stockholder's equity		2,414,231		951,542		1,562,069		(2,513,611	)		2,414,231
Long-term debt and other long-term obligations		-		1,597,028		242,400		(1,305,716	)		533,712
		2,414,231		2,548,570		1,804,469		(3,819,327	)		2,947,943
NONCURRENT LIABILITIES:
Deferred gain on sale and leaseback transaction		-		-		-		1,060,119			1,060,119
Accumulated deferred income taxes		-		-		259,147		(259,147	)		-
Accumulated deferred investment tax credits		-		36,054		25,062		-			61,116
Asset retirement obligations		-		24,346		785,768		-			810,114
Retirement benefits		8,721		54,415		-		-			63,136
Property taxes		-		25,328		22,767		-			48,095
Lease market valuation liability		-		353,210		-		-			353,210
Other		19,800		21,829		-		-			41,629
		28,521		515,182		1,092,744		800,972			2,437,419
	$	3,162,511	$	4,452,888	$	4,092,883	$	(3,286,018	)	$	8,422,264

138

FIRSTENERGY SOLUTIONS CORP.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Unaudited)

For the Six Months Ended June 30, 2008	FES			FGCO			NGC			Eliminations			Consolidated
	(In thousands)

NET CASH PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES	$	(138,894	)	$	109,372		$	82,857		$	(8,316	)	$	45,019

CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		-			276,235			179,500			-			455,735
Short-term borrowings, net		700,000			535,705			416,938			-			1,652,643
Redemptions and Repayments-
Long-term debt		(792	)		(285,567	)		(180,334	)		8,316			(458,377	)
Common stock dividend payment		(10,000	)		-			-			-			(10,000	)
Net cash provided from financing activities		689,208			526,373			416,104			8,316			1,640,001

CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(20,176	)		(584,151	)		(548,175	)		-			(1,152,502	)
Proceeds from asset sales		-			10,875			-			-			10,875
Sales of investment securities held in trusts		-			-			384,692			-			384,692
Purchases of investment securities held in trusts		-			-			(404,502	)		-			(404,502	)
Loan repayments from (loans to) associated companies, net		(530,508	)		-			69,012			-			(461,496	)
Other		370			(62,469	)		12			-			(62,087	)
Net cash used for investing activities		(550,314	)		(635,745	)		(498,961	)		-			(1,685,020	)

Net change in cash and cash equivalents		-			-			-			-			-
Cash and cash equivalents at beginning of period		2			-			-			-			2
Cash and cash equivalents at end of period	$	2		$	-		$	-		$	-		$	2

139

FIRSTENERGY SOLUTIONS CORP.	FIRSTENERGY SOLUTIONS CORP.																FIRSTENERGY SOLUTIONS CORP.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS	CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS																CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Unaudited)	(Unaudited)																(Unaudited)

For the Three Months Ended March 31, 2007		FES			FGCO			NGC			Eliminations			Consolidated
For the Six Months Ended June 30, 2007																		FES			FGCO			NGC			Eliminations			Consolidated
		(In thousands)																(In thousands)

NET CASH PROVIDED FROM
NET CASH PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES		$	65,870		$	55,003		$	177,456		$	-		$	298,329			$	(77,782	)	$	255,301		$	33,686		$	-		$	211,205

CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Equity contribution from parent			700,000			700,000			-			(700,000	)		700,000				700,000			700,000			-			(700,000	)		700,000
Short-term borrowings, net			250,000			-			-			(52,269	)		197,731				500,000			-			-			(135,153	)		364,847
Redemptions and Repayments-
Long-term debt			-			(616,728	)		(128,716	)		-			(745,444	)			-			(616,792	)		(128,744	)		-			(745,536	)
Short-term borrowings, net			-			(52,269	)		-			52,269			-				-			(135,153	)		-			135,153			-
Common stock dividend payment																			(37,000	)		-			-			-			(37,000	)
Net cash provided from (used for) financing activities			950,000			31,003			(128,716	)		(700,000	)		152,287				1,163,000			(51,945	)		(128,744	)		(700,000	)		282,311

CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions			(214	)		(81,400	)		(35,892	)		-			(117,506	)			(9,466	)		(215,804	)		(77,154	)		-			(302,424	)
Proceeds from asset sales																			-			12,120			-			-			12,120
Sales of investment securities held in trusts			-			-			178,632			-			178,632				-			-			367,924			-			367,924
Purchases of investment securities held in trusts			-			-			(188,076	)		-			(188,076	)			-			-			(389,286	)		-			(389,286	)
Loans to associated companies, net			(316,003	)		-			(3,895	)		-			(319,898	)
Loan repayments from (loans to) associated companies, net																			(376,444	)		-			192,268			-			(184,176	)
Investment in subsidiary			(700,000	)		-			-			700,000			-				(700,000	)		-			-			700,000			-
Other			347			(4,606	)		491			-			(3,768	)			692			328			1,306			-			2,326
Net cash used for investing activities			(1,015,870	)		(86,006	)		(48,740	)		700,000			(450,616	)
Net cash provided from (used for) investing activities																			(1,085,218	)		(203,356	)		95,058			700,000			(493,516	)

Net change in cash and cash equivalents			-			-			-			-			-				-			-			-			-			-
Cash and cash equivalents at beginning of period			2			-			-			-			2				2			-			-			-			2
Cash and cash equivalents at end of period		$	2		$	-		$	-		$	-		$	2			$	2		$	-		$	-		$	-		$	2

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

Yes (X) No ( )	FirstEnergy Corp., Ohio Edison Company and Pennsylvania Electric Company
Yes ( ) No (X)	FirstEnergy Solutions Corp., The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company and Metropolitan Edison Company

Large Accelerated 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

	OUTSTANDING
CLASS	AS OF ~~MAY 8,~~AUGUST 6, 2008
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	14,421,637
Metropolitan Edison Company, no par value	859,500
Pennsylvania Electric Company, $20 par value	4,427,577

		Pages

Glossary of Terms		iii-v

Part I. Financial Information

Items 1. and 2. - Financial Statements and Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.

FirstEnergy Corp.

	Management's Discussion and Analysis of Financial Condition and	~~1-32~~
	Results of Operations	1-42
	Report of Independent Registered Public Accounting Firm	3343
	Consolidated Statements of Income	3444
	Consolidated Statements of Comprehensive Income	3545
	Consolidated Balance Sheets	3646
	Consolidated Statements of Cash Flows	3747

FirstEnergy Solutions Corp.

	Management's Narrative Analysis of Results of Operations	~~38-40~~48-50
	Report of Independent Registered Public Accounting Firm	4151
	Consolidated Statements of Income and Comprehensive Income	4252
	Consolidated Balance Sheets	4353
	Consolidated Statements of Cash Flows	4454

Ohio Edison Company

	Management's Narrative Analysis of Results of Operations	~~45-46~~55-56
	Report of Independent Registered Public Accounting Firm	4757
	Consolidated Statements of Income and Comprehensive Income	4858
	Consolidated Balance Sheets	4959
	Consolidated Statements of Cash Flows	5060

The Cleveland Electric Illuminating Company

	Management's Narrative Analysis of Results of Operations	~~51-52~~61-62
	Report of Independent Registered Public Accounting Firm	5363
	Consolidated Statements of Income and Comprehensive Income	5464
	Consolidated Balance Sheets	5565
	Consolidated Statements of Cash Flows	5666

The Toledo Edison Company

	Management's Narrative Analysis of Results of Operations	~~57-58~~67-68
	Report of Independent Registered Public Accounting Firm	5969
	Consolidated Statements of Income and Comprehensive Income	6070
	Consolidated Balance Sheets	6171
	Consolidated Statements of Cash Flows	6272

ATSI	American Transmission Systems, ~~Inc.,~~Incorporated, owns and operates transmission facilities
CEI	The Cleveland Electric Illuminating Company, an Ohio electric utility operating subsidiary
Companies	OE, CEI, TE, JCP&L, Met-Ed and Penelec
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
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
Shippingport	Shippingport Capital Trust, a special purpose entity created by CEI and TE in 1997
TE	The Toledo Edison Company, an Ohio electric utility operating subsidiary
~~TEBSA~~	~~Termobarranquila S.A. Empresa de Servicios Publicos~~

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

ACO	Administrative Consent Order
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
ARB	Accounting Research Bulletin
ARO	Asset Retirement Obligation
ASM	Ancillary Services Market
BGS	Basic Generation Service
~~BPJ~~	~~Best Professional Judgment~~
CAA	Clean Air Act
CAIR	Clean Air Interstate Rule
CAMR	Clean Air Mercury Rule
CBP	Competitive Bid Process
CO2	Carbon Dioxide
DFI	Demand for Information
DOJ	United States Department of Justice
DRA	Division of Ratepayer Advocate
EIS	Energy Independence Strategy
EITF	Emerging Issues Task Force
EMP	Energy Master Plan
EPA	United States Environmental Protection Agency
EPACT	Energy Policy Act of 2005
ESP	Electric Security Plan
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FIN	FASB Interpretation
FIN 46R	FIN 46 (revised December 2003), "Consolidation of Variable Interest Entities"
FIN 47	FIN 47, "Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB Statement No. 143"
FIN 48	FIN 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109”
~~FirstCom~~	~~First Communications, Inc.~~

FMB	First Mortgage Bonds
FSP	FASB Staff Position
FSP FAS 157-2	FSP FAS 157-2, “Effective Date of FASB Statement No. 157”
FTR	Financial Transmission Rights
GAAP	Accounting Principles Generally Accepted in the United States
GHG	Greenhouse Gases
ICE	Intercontinental Exchange
IRS	Internal Revenue Service
ISO	Independent System Operator
kV	Kilovolt
KWH	Kilowatt-hours
LIBOR	London Interbank Offered Rate
LOC	Letter of Credit
MEIUG	Met-Ed Industrial Users Group
MEW	Mission Energy Westside, Inc.
MISO	Midwest Independent Transmission System Operator, Inc.
Moody’s	Moody’s Investors Service
MRO	Market Rate Offer
MW	Megawatts
NAAQS	National Ambient Air Quality Standards
NERC	North American Electric Reliability Corporation
NJBPU	New Jersey Board of Public Utilities
NOPR	Notice of Proposed Rulemaking
NOV	Notice of Violation
NOX	Nitrogen Oxide
NRC	Nuclear Regulatory Commission
NSR	New Source Review
NUG	Non-Utility Generation
NUGC	Non-Utility Generation Charge
NYMEX	New York Mercantile Exchange
OCA	Office of Consumer Advocate
OTC	Over the Counter
OVEC	Ohio Valley Electric Corporation
PCAOB	Public Company Accounting Oversight Board
PCRB	Pollution Control Revenue Bond
PICA	Penelec Industrial Customer Alliance
PJM	PJM Interconnection L. L. C.
PLR	Provider of Last Resort
PPUC	Pennsylvania Public Utility Commission
PRP	Potentially Responsible Party
PSA	Power Supply Agreement
PUCO	Public Utilities Commission of Ohio
PUHCA	Public Utility Holding Company Act of 1935
RCP	Rate Certainty Plan
RECB	Regional Expansion Criteria and Benefits
RFP	Request for Proposal
RPM	Reliability Pricing Model
RSP	Rate Stabilization 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
SFAS	Statement of Financial Accounting Standards
SFAS 109	SFAS No. 109, “Accounting for Income Taxes”
SFAS 123(R)	SFAS No. 123(R), "Share-Based Payment"
SFAS 133	SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”
SFAS 141(R)	SFAS No 141(R), “Business Combinations”
SFAS 143	SFAS No. 143, “Accounting for Asset Retirement Obligations”
SFAS 157	SFAS No. 157, “Fair Value Measurements”
SFAS 159	SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”

SFAS 160	SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB No. 51”
SFAS 161	SFAS No 161, “Disclosure about Derivative Instruments and Hedging Activities – an Amendment of FASB Statement No. 133”
SFAS 162	SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”

SIP	State Implementation Plan(s) Under the Clean Air Act
SNCR	Selective Non-Catalytic Reduction
SO2	Sulfur Dioxide
TBC	Transition Bond Charge
TMI-1	Three Mile Island Unit 1
TMI-2	Three Mile Island Unit 2
TSC	Transmission Service Charge
VIE	Variable Interest Entity

~~Change in Basic Earnings Per Share~~ ~~From Prior Year First Quarter~~

~~Basic Earnings Per Share – First Quarter 2007~~	~~$ 0.92~~
~~Gain on non-core asset sales – 2008~~	~~0.06~~
~~Saxton decommissioning regulatory asset – 2007~~	~~(0.05)~~
~~Trust securities impairment~~	~~(0.02)~~
~~Revenues~~	~~0.55~~
~~Fuel and purchased power~~	~~(0.42)~~
~~Depreciation and amortization~~	~~(0.03)~~
~~Deferral of new regulatory assets~~	~~(0.03)~~
~~Energy Delivery O&M expenses~~	~~(0.03)~~
~~General taxes~~	~~(0.02)~~
~~Corporate-owned life insurance~~	~~(0.06)~~
~~Other expenses~~	~~0.01~~
~~Reduced common shares outstanding~~	~~0.03~~
~~Basic Earnings Per Share – First Quarter 2008~~	~~$ 0.91~~

Change in Basic Earnings Per Share From Prior Year Periods	Three Months Ended June 30			Six Months Ended June 30

Basic Earnings Per Share – 2007	$	1.11		$	2.03
Gain on non-core asset sales – 2008		-			0.06
Litigation settlement – 2008		0.03			0.03
Saxton decommissioning regulatory asset – 2007		-			(0.05	)
Trust securities impairment		(0.02	)		(0.04	)
Revenues		0.24			0.79
Fuel and purchased power		(0.40	)		(0.82	)
Depreciation and amortization		(0.02	)		(0.04	)
Deferral of new regulatory assets		(0.10	)		(0.13	)
General taxes		0.02			(0.01	)
Corporate-owned life insurance		(0.04	)		(0.09	)
Other expenses		0.04			0.01
Reduced common shares outstanding		-			0.03
Basic Earnings Per Share – 2008	$	0.86		$	1.77

Electric Distribution KWH Deliveries
Residential	~~2.4~~(5.0	)%
Commercial	~~1.9~~(2.1	)%
Industrial	(~~1.0~~0.3	)%
Total Distribution KWH Deliveries	~~1.2~~(2.4	)%

Sources of Change in Generation Revenues	Increase (Decrease)			Increase (Decrease)
	(In millions)			(In millions)
Retail:
Effect of 0.7% decrease in sales volumes	$	(5	)
Effect of 4.2% decrease in sales volumes				$	(32	)
Change in prices		75			48
		70			16
Wholesale:
Effect of 8.9% increase in sales volumes		12
Effect of 3.0% increase in sales volumes					5
Change in prices		75			99
		87			104
Net Increase in Generation Revenues	$	157		$	120

Source of Change in Purchased Power	Increase (Decrease)			Increase (Decrease)
	(In millions)			(In millions)
Purchases from non-affiliates:
Change due to increased unit costs	$	84		$	141
Change due to decreased volumes		(18	)		(22	)
		66			119
Purchases from FES:
Change due to decreased unit costs		(4	)		(2	)
Change due to increased volumes		17
Change due to decreased volumes					(7	)
		13			(9	)

Decrease in NUG costs deferred		60			12
Net Increase in Purchased Power Costs	$	139		$	122

Source of Change in Non-Affiliated Generation Revenues	Increase (Decrease)
	(In millions)
Retail:
Effect of 16.4% decrease in sales volumes	$	(30	)
Change in prices		(1	)
		(31	)
Wholesale:
Effect of 15.3% decrease in sales volumes		(27	)
Change in prices		23
		(4	)
Net Decrease in Non-Affiliated Generation Revenues	$	(35	)

Source of Change in Affiliated Generation Revenues	Increase (Decrease)
	(In millions)
Ohio Companies:
Effect of 2.6% decrease in sales volumes	$	(14	)
Change in prices		37
		23
Pennsylvania Companies:
Effect of 4.3% decrease in sales volumes		(7	)
Change in prices		(3	)
		(10	)
Net Increase in Affiliated Generation Revenues	$	13

Source of Change in Retail Generation Revenues	Increase (Decrease)
	(In millions)
Effect of 2.5% decrease in sales volumes	$	(14	)
Change in prices		57
Net Increase in Retail Generation Revenues	$	43

Electric Distribution KWH Deliveries
Residential	(1.0	)%
Commercial	(0.1	)%
Industrial	(0.7	)%
Total Distribution KWH Deliveries	(0.6	)%

Source of Change in Generation Revenues	Increase (Decrease)
	(In millions)
Retail:
Effect of 0.5% decrease in sales volumes	$	(5	)
Change in prices		108
Net Increase in Retail Generation Revenues	$	103

Borrowing Capability (In millions)
Short-term credit facilities(1)	$	2,870			$	3,170
Accounts receivable financing facilities		550				550
Utilized		(1,646	)			(2,606	)
LOCs		(60	)			(50	)
Net available capability	$	1,714			$	1,064

(1) Includes the $2.75 billion revolving credit facility described below, a $100 million revolving credit facility that expires in December 2009 and a $20 million uncommitted line of credit.
(1) Includes the $2.75 billion revolving credit facility described below, a $100 million revolving credit facility that expires in December 2009, a $300 million revolving credit facility that expires in May 2009 and a $20 million uncommitted line of credit.				(1) Includes the $2.75 billion revolving credit facility described below, a $100 million revolving credit facility that expires in December 2009, a $300 million revolving credit facility that expires in May 2009 and a $20 million uncommitted line of credit.

	Revolving			Regulatory and				Revolving			Regulatory and
	Credit Facility			Other Short-Term				Credit Facility			Other Short-Term
Borrower	Sub-Limit			Debt Limitations(1)				Sub-Limit			Debt Limitations(1)
	(In millions)							(In millions)
FirstEnergy	$	2,750		$	-	(2)		$	2,750		$	-	(2)
OE		500			500				500			500
Penn		50			39	(3)			50			39	(3)
CEI		250	(4)		500				250	(4)		500
TE		250	(4)		500				250	(4)		500
JCP&L		425			428	(3)			425			428	(3)
Met-Ed		250			300	(3)			250			300	(3)
Penelec		250			300	(3)			250			300	(3)
FES		1,000			-	(2)			1,000			-	(2)
ATSI		-	(5)		50				-	(5)		50

(1)As of March 31, 2008. (2)No regulatory approvals, statutory or charter limitations applicable. (3)Excluding amounts which may be borrowed under the regulated companies’ money pool. (4)Borrowing sub-limits for CEI and TE may be increased to up to $500 million by delivering notice to the administrative agent that such borrower has senior unsecured debt ratings of at least BBB by S&P and Baa2 by Moody’s. (5)The borrowing sub-limit for ATSI may be increased up to $100 million by delivering notice to the administrative agent that either (i) ATSI has senior unsecured debt ratings of at least BBB- by S&P and Baa3 by Moody’s or (ii) FirstEnergy has guaranteed ATSI’s obligations of such borrower under the facility.
(1)As of June 30, 2008. (2)No regulatory approvals, statutory or charter limitations applicable. (3)Excluding amounts which may be borrowed under the regulated companies’ money pool. (4)Borrowing sub-limits for CEI and TE may be increased to up to $500 million by delivering notice to the administrative agent that such borrower has senior unsecured debt ratings of at least BBB by S&P and Baa2 by Moody’s. (5)The borrowing sub-limit for ATSI may be increased up to $100 million by delivering notice to the administrative agent that either (i) ATSI has senior unsecured debt ratings of at least BBB- by S&P and Baa3 by Moody’s or (ii) FirstEnergy has guaranteed ATSI’s obligations of such borrower under the facility.							(1)As of June 30, 2008. (2)No regulatory approvals, statutory or charter limitations applicable. (3)Excluding amounts which may be borrowed under the regulated companies’ money pool. (4)Borrowing sub-limits for CEI and TE may be increased to up to $500 million by delivering notice to the administrative agent that such borrower has senior unsecured debt ratings of at least BBB by S&P and Baa2 by Moody’s. (5)The borrowing sub-limit for ATSI may be increased up to $100 million by delivering notice to the administrative agent that either (i) ATSI has senior unsecured debt ratings of at least BBB- by S&P and Baa3 by Moody’s or (ii) FirstEnergy has guaranteed ATSI’s obligations of such borrower under the facility.

Borrower
FirstEnergy	5860.0	%
OE	4340.3	%
Penn	2519.5	%
CEI	5756.5	%
TE	4239.3	%
JCP&L	3033.8	%
Met-Ed	4745.3	%
Penelec	4949.6	%
FES(1)	6164.9	%

(1) FES expects to remain in compliance with its debt covenant limitation.

Issuer	Securities	S&P	Moody’s

FirstEnergy	Senior unsecured	BBB-	Baa3

FES	Senior unsecured	BBB	Baa2

OE	Senior unsecured	BBB-	Baa2

CEI	Senior secured	BBB+	Baa2
	Senior unsecured	BBB-	Baa3

TE	Senior unsecured	BBB-	Baa3

Penn	Senior secured	A-	Baa1

JCP&L	Senior unsecured	BBB	Baa2

Met-Ed	Senior unsecured	BBB	Baa2

Penelec	Senior unsecured	BBB	Baa2

Summary of Cash Flows	Property
Provided from (Used for) Investing Activities	Additions			Investments			Other			Total
Sources (Uses)	(In millions)
Three Months Ended March 31, 2008
Energy delivery services	$	(255	)	$	33		$	2		$	(220	)
Competitive energy services		(462	)		(3	)		(19	)		(484	)
Other		(12	)		68			-			56
Inter-Segment reconciling items		18			(12	)		-			6
Total	$	(711	)	$	86		$	(17	)	$	(642	)

Three Months Ended March 31, 2007
Energy delivery services	$	(155	)	$	44		$	10		$	(101	)
Competitive energy services		(124	)		(9	)		(4	)		(137	)
Other		(1	)		(16	)		(4	)		(21	)
Inter-Segment reconciling items		(16	)		(15	)		-			(31	)
Total	$	(296	)	$	4		$	2		$	(290	)

Summary of Cash Flows	Property
Used for Investing Activities	Additions			Investments			Other			Total
Sources (Uses)	(In millions)
Six Months Ended June 30, 2008
Energy delivery services	$	(451	)	$	44		$	(4	)	$	(411	)
Competitive energy services		(1,145	)		(9	)		(62	)		(1,216	)
Other		(21	)		49			6			34
Inter-Segment reconciling items		-			(12	)		-			(12	)
Total	$	(1,617	)	$	72		$	(60	)	$	(1,605	)

Six Months Ended June 30, 2007
Energy delivery services	$	(400	)	$	67		$	(1	)	$	(334	)
Competitive energy services		(263	)		(9	)		2			(270	)
Other		(3	)		(25	)		-			(28	)
Inter-Segment reconciling items		(31	)		(14	)		-			(45	)
Total	$	(697	)	$	19		$	1		$	(677	)

	Maximum		Maximum
Guarantees and Other Assurances	Exposure		Exposure
	(In millions)		(In millions)
FirstEnergy Guarantees of Subsidiaries
Energy and Energy-Related Contracts (1)	$	441	$	402
LOC (long-term debt) – interest coverage (2)		6		6
Other (3)		503		503
		950		911

Subsidiaries’ Guarantees
Energy and Energy-Related Contracts		86		86
LOC (long-term debt) – interest coverage (2)		6		11
Other (4)		2,641
FES’ guarantee of FGCO’s sale and leaseback obligations				2,591
		2,733		2,688

Surety Bonds		66		74
LOC (long-term debt) – interest coverage (2)		5		5
LOC (non-debt) ~~(6)~~(5)		679		657
		750		736
Total Guarantees and Other Assurances	$	4,433	$	4,335

										Three Months									Six Months
Increase (Decrease) in the Fair Value										Ended June 30, 2008									Ended June 30, 2008
of Commodity Derivative Contracts	Non-Hedge			Hedge			Total			Non-Hedge			Hedge			Total			Non-Hedge			Hedge			Total
	(In millions)									(In millions)
Change in the Fair Value of
Commodity Derivative Contracts:
Outstanding net liability as of January 1, 2008	$	(713	)	$	(26	)	$	(739	)
Outstanding net liability at beginning of period										$	(655	)	$	(20	)	$	(675	)	$	(713	)	$	(26	)	$	(739	)
Additions/change in value of existing contracts		-			(11	)		(11	)		(33	)		(13	)		(46	)		(33	)		(24	)		(57	)
Settled contracts		58			17			75			72			(4	)		68			130			13			143
Outstanding net liability as of March 31, 2008 (1)	$	(655	)	$	(20	)	$	(675	)
Outstanding net liability at end of period (1)											(616	)		(37	)		(653	)		(616	)		(37	)		(653	)

Non-commodity Net Liabilities as of March 31, 2008:
Non-commodity Net Assets at End of Period:
Interest rate swaps (2)		-			(3	)		(3	)		-			3			3			-			3			3
Net Liabilities - Derivative Contracts as of March 31, 2008	$	(655	)	$	(23	)	$	(678	)
Net Liabilities - Derivative Contracts at End of Period										$	(616	)	$	(34	)	$	(650	)	$	(616	)	$	(34	)	$	(650	)

Impact of Changes in Commodity Derivative Contracts(3)
Income Statement effects (pre-tax)	$	-		$	-		$	-		$	1		$	-		$	1		$	1		$	-		$	1
Balance Sheet effects:
Other comprehensive income (pre-tax)	$	-		$	6		$	6		$	-		$	(17	)	$	(17	)	$	-		$	(11	)	$	(11	)
Regulatory assets (net)	$	(58	)	$	-		$	(58	)	$	(38	)	$	-		$	(38	)	$	(96	)	$	-		$	(96	)

Balance Sheet Classification	Non-Hedge			Hedge			Total			Non-Hedge			Hedge			Total
	(In millions)									(In millions)
Current-
Other assets	$	-		$	62		$	62		$	1		$	78		$	79
Other liabilities		-			(77	)		(77	)		-			(108	)		(108	)

Non-Current-
Other deferred charges		28			12			40			27			11			38
Other non-current liabilities		(683	)		(20	)		(703	)		(644	)		(15	)		(659	)

Net liabilities	$	(655	)	$	(23	)	$	(678	)	$	(616	)	$	(34	)	$	(650	)

Source of Information
- Fair Value by Contract Year	2008(1)			2009			2010			2011			2012			Thereafter			Total			2008(1)			2009			2010			2011			2012			Thereafter			Total
	(In millions)																					(In millions)
Prices actively quoted(2)	$	3		$	1		$	-		$	-		$	-		$	-		$	4		$	3		$	4		$	-		$	-		$	-		$	-		$	7
Other external sources(3)		(164	)		(192	)		(149	)		(92	)		-			-			(597	)		(102	)		(208	)		(159	)		(110	)		-			-			(579	)
Prices based on models		-			-			-			-			(30	)		(52	)		(82	)		-			-			-			-			(33	)		(48	)		(81	)
Total(4)	$	(161	)	$	(191	)	$	(149	)	$	(92	)	$	(30	)	$	(52	)	$	(675	)	$	(99	)	$	(204	)	$	(159	)	$	(110	)	$	(33	)	$	(48	)	$	(653	)

	March 31, 2008						December 31, 2007							June 30, 2008							December 31, 2007
	Notional		Maturity		Fair		Notional		Maturity		Fair			Notional		Maturity		Fair			Notional		Maturity		Fair
Interest Rate Swaps	Amount		Date		Value		Amount		Date		Value			Amount		Date		Value			Amount		Date		Value
	(In millions)													(In millions)
Fair value hedges	$	100		2008	$	1	$	100		2008	$	-									$	100		2008	$	-
		150		2015		4		150		2015		(3	)	$	150		2015	$	(3	)		150		2015		(3	)
	$	250			$	5	$	250			$	(3	)	$	150			$	(3	)	$	250			$	(3	)

·	restructuring the electric generation business and allowing the Companies' customers to select a competitive electric generation supplier other than the Companies;

·	establishing or defining the PLR obligations to customers in the Companies' service areas;

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

·	itemizing (unbundling) the price of electricity into its component elements – including generation, transmission, distribution and stranded costs recovery charges;

·	continuing regulation of the Companies' transmission and distribution systems; and

·	requiring corporate separation of regulated and unregulated business activities.

Source of Change in Fuel and Purchased Power	Increase (Decrease)			Increase (Decrease)
	(In millions)			(In millions)
Nuclear Fuel:
Fossil Fuel:
Change due to increased unit costs	$	1		$	68
Change due to volume consumed		(3	)		60
		(2	)		128
Fossil Fuel:
Nuclear Fuel:
Change due to increased unit costs		19			2
Change due to volume consumed		71			-
		90			2
Non-affiliated Purchased Power:
Change due to increased unit costs		55			120
Change due to volume purchased		(34	)		(42	)
		21			78
Affiliated Purchased Power:
Change due to decreased unit costs		(16	)
Change due to increased unit costs					7
Change due to volume purchased		(35	)		(94	)
		(51	)		(87	)
Net Increase in Fuel and Purchased Power Costs	$	58		$	121

Retail Generation KWH Sales	~~Increase (Decrease)~~Decrease

Residential		~~1.0~~(1.4)	%
Commercial		~~(2.5~~(2.7)	)%
Industrial		~~(4.1~~(4.9)	)%
~~Net~~ Decrease in Generation Sales		~~(1.5~~(2.9)	)%

Expenses – Changes	Increase (Decrease)			Increase (Decrease)
		(In millions)			(In millions)
Purchased power costs	$	(10	)	$	(24	)
Nuclear operating costs		1
Other operating costs		6			(3	)
Provision for depreciation		3			5
Amortization of regulatory assets		3			5
Deferral of new regulatory assets		11			40
General taxes		1
Net Increase in Expenses	$	15		$	23

Retail Generation KWH Sales	~~Increase~~ Decrease

Residential		~~3.0~~(0.4	)%
Commercial		~~1.8~~(0.7	)%
Industrial		~~1.0~~(0.1	)%
~~Increase~~Decrease in Retail Generation Sales		~~1.8~~(0.3	)%